MERRILL LYNCH
SENIOR FLOATING
RATE FUND, INC.
FUND LOGO
Quarterly Report
November 30, 1994
Officers and Directors
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
N. John Hewitt, Senior Vice President
Donald C. Burke, Vice President
John W. Fraser, Vice President
R. Douglas Henderson, Vice President
Gerald M. Richard, Treasurer
Patrick D. Sweeney, Secretary
<PAGE>
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
This report, including the financial information herein, is
transmitted to the shareholders of Merrill Lynch Senior Floating
Rate Fund, Inc. for their information. It is not a prospectus,
circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report. Past
performance results shown in this report should not be considered a
representation of future performance.
Merrill Lynch
Senior Floating
Rate Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
DEAR SHAREHOLDER
During the three months ended November 30, 1994, Merrill Lynch
Senior Floating Rate Fund, Inc. continued to benefit from a
strengthening economy both from a credit standpoint as well as in
yield as short-term interest rates rose. The steady rise in interest
rates that began in February and has been the over-riding factor in
the volatility in the US financial markets and the poor performance
of the fixed-income sector had a very positive effect on the Fund's
yield. On November 15, 1994, the Federal Reserve Board raised short-
term interest rates for the sixth time this year by increasing the
discount rate it charges on loans by 75 basis points (0.75%) to
4.75% and by pushing the Federal Funds target rate to 5.50% from
4.75%. This was clearly a break from Federal Reserve Board Chairman
Alan Greenspan's policy of gradualism in fighting inflationary
pressures. The five previous interest rate increases were either
quarter-point or half-point moves. This latest increase represents a
tacit admission by the central bank that it misjudged the strength
of the economic recovery now underway.
<PAGE>
Over 96% of the Fund's investments in corporate loans are currently
accruing interest at a spread above the London Interbank Offered
Rate (LIBOR), the rate that major international banks charge each
other for US dollar-denominated deposits outside the United States.
LIBOR has historically tracked very closely with other US short-term
interest rates, particularly the Federal Funds rate. Since the first
tightening of monetary policy by the Federal Reserve Board in
February, three-month LIBOR has risen from 3.25% to 6.375%, an
increase of 313 basis points. Since the average reset on the Fund's
investments underlying LIBOR rates is 46 days, the Fund's yield
should continue to benefit from this latest rate increase as it
moves through its resets over the next month. Any further increase
in short-term interest rates by the Federal Reserve Board should
have a positive impact on the Fund's yield.
Portfolio Performance
With this interest rate environment and economic growth as a
backdrop, Merrill Lynch Senior Floating Rate Fund, Inc. ended the
November quarter with approximately $1.13 billion out of $1.19
billion, or 95.1% of its net assets, committed for investment in
corporate loan interests. Assets not invested in loan interests were
invested in high-quality, short-term securities. Net of trades that
have not yet closed, the Fund had $993 million closed and invested
in corporate loan interests.
<PAGE>
The Fund's effective net yield for the 3-month period ended November
30, 1994 was 6.69%, compared to a yield of 6.47% for the August
quarter. The positive effect on the Fund's yield of an upward move
in short-term interest rates was partially offset by a 27% increase
in net assets during the quarter as new subscriptions continued at a
steady pace. This increase affected the Fund's cash position during
the quarter. The Fund's net asset value continued to remain
relatively stable throughout the period. During the quarter, the
Fund earned $0.167 per share income dividends, representing a net
annualized yield of 6.69%, based on a month-end per share net asset
value of $10.00. The Fund's total investment return for the same period
was +1.46%, based on a stable net asset value and assuming reinvestment
of $0.165 per share income dividends. Since inception (November 3,
1989) through November 30, 1994, the Fund's total investment return
was +41.84%, based on a per share net asset value of $10.00, and
assuming reinvestment of $3.487 per share income dividends.
Investment Activities
Our investment strategy during the November quarter remained
unchanged: to invest in leveraged transactions in which the
borrowers have strong market shares, experienced management, and
consistent cashflows. We also look for companies with significant
underlying asset and franchise value, strong capital structures, and
equity sponsors that support their investments. Thus, even if a
company undergoes a restructuring of its capital structure to
alleviate financial or other stress, we are negotiating from
strength as senior secured lenders. In addition, we seek those
investments that offer the appropriate risk/reward balance in the
form of their floating rate spread over the prime rate or LIBOR. The
advantages of adhering to these strategies are borne out by both the
relative stability of the Fund's asset value and the continued
flexibility of our borrowers as they access capital markets.
The quarter ended November 30, 1994 was the most active of the year
in terms of new transaction volume. This can be attributed to a
number of factors including a strong pick up in mergers and
acquisition activity as well as the fact that the high-yield bond
market has priced itself out of the market versus senior secured
floating rate bank loans. Lower equity prices, coupled with a large
amount of equity sponsor money raised in the last two years, resulted
in a number of new transactions that supplemented the refinancings
that were a staple for bank lenders during the first eight months of
the year. The Fund invested in acquisitions such as the purchase of
Star Markets Co., Inc. and CHF/Ebel USA by Investcorp; the purchase
of US Radio Inc. by the Blackstone Group; and the buyout of the Waters
Corporation by Bain Capital. In addition, the Fund also invested in
the recapitalizations and refinancings of a number of companies
including Stone Container; Coaxial Communications and Formica
Corporation.
<PAGE>
During the November quarter, the Fund experienced far less turnover
as the public markets continued to be depressed by the rise in
interest rates. The Fund purchased over $225.7 million in new loans
with relatively few major prepayments. The purchases were offset with
very little in the way of sales during the period as secondary trading
took a back seat to investing in primary syndications in the leveraged
bank loan market.
As of November 30, 1994, the Fund was invested in 57 different
borrowers across 23 industries. The largest industry concentrations
were in paper (11.42% of net assets), diversified manufacturing
(10.37%), grocery (7.18%), food and beverage (6.17%), and aerospace
(5.89%). The average loan size equaled $17.4 million, or 1.46% of
net assets.
The Fund completed its latest quarterly tender offer on October 15,
1994 with 2.5 million shares tendered and accepted for repurchase.
The next tender began on December 15, 1994 and concluded on January
12, 1995. The Fund remains open for new shareholder purchases.
In Conclusion
In light of the recent volatility in the fixed-income markets, the
Fund is well positioned not only to benefit from the improving
credit environment as the economy expands, but also to provide
shareholders the upside yield potential from investing in floating
rate senior collateralized loans.
We thank you for your investment in Merrill Lynch Senior Floating
Rate Fund, Inc., and we look forward to reviewing our outlook and
strategy with you again in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(R. Douglas Henderson)
R. Douglas Henderson
Vice President and Portfolio Manager
January 13, 1995
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Face
Industry Senior Secured Floating Rate Loan Interests* Amount Value
<S> <S> <C> <C>
Aerospace--5.89% Allison Engine Co., Term Loan B, due 12/31/98, 8.07% to 12/14/94 $ 25,000 $ 25,000
Aviall Inc., Term Loan B, due 11/30/00:
8.19% to 12/07/94 12,132 12,132
8.38% to 12/07/94 4,853 4,853
8.57% to 3/07/95 3,640 3,640
Gulfstream Aerospace Corp., Revolving Credit Loan, due 3/31/98:
9.75%(1) 2,077 2,077
7.81% to 1/23/95 1,923 1,923
Gulfstream Aerospace Corp., Term Loan, due 3/31/97, 7.63% to
1/13/95 11,373 11,373
Gulfstream Aerospace Corp., Term Loan, due 3/31/98, 8.00% to
12/08/94 9,260 9,260
-------- ----------
70,258 70,258
Airlines--1.15% Northwest Airlines, Inc., Term Loan, due 6/15/97:
8.062% to 12/10/94 1,165 1,165
7.625% to 12/21/94 3,052 3,052
8.562% to 4/20/95 9,516 9,516
-------- ----------
13,733 13,733
Analytical Elsag Bailey, Term Loan, due 8/30/02, 8.00% to 12/21/94 13,971 13,971
Instruments--2.24% Waters Corp., Term Loan B, due 8/31/01, 8.75% to 12/15/94 5,644 5,644
Waters Corp., Term Loan C, due 8/31/02, 9.125% to 12/15/94 3,950 3,950
Waters Corp., Term Loan D, due 2/28/03, 9.50% to 12/15/94 3,175 3,175
-------- ----------
26,740 26,740
Broadcast/Media--5.09% Coaxial Communications, Term Loan, due 12/31/99:
8.57% to 12/15/94 7,500 7,500
9.07% to 2/15/95 7,500 7,500
Enquirer/Star, Term Loan B, due 9/30/02, 8.44% to 2/21/95 21,800 21,800
Silver King Communications, Term Loan B, due 7/31/02, 8.625%
to 1/31/95 17,955 17,955
US Radio Inc., Term Loan A, due 12/31/01:
8.25% to 12/30/94 1,298 1,298
8.69% to 3/30/95 1,298 1,298
US Radio Inc., Term Loan B, due 9/23/03:
9.25% to 12/30/94 1,708 1,708
9.69% to 3/30/95 1,695 1,695
-------- ----------
60,754 60,754
<PAGE>
Building Materials-- Formica Corp., Term Loan B, due 11/30/01:
4.34% 9.00% to 1/17/95 8,571 8,571
9.0625% to 2/17/95 16,429 16,429
MTF Acquisition, Term Loan B, due 12/31/02, 10.50%(1) 15,000 15,000
Overhead Door Corp., Revolving Credit Loan, due 8/18/99, 7.75%
to 12/30/94 2,114 2,114
Overhead Door Corp., Term Loan, due 8/18/99:
10.00%(1) 35 35
7.75% to 12/30/94 9,682 9,682
-------- ----------
51,831 51,831
Chemicals--3.01% Freedom Chemical Company, Term Loan B, due 6/30/02, 9.25% to
12/30/94 20,000 20,000
Harris Specialty Chemicals, Term Loan A, due 12/30/99, 10.00%(1) 247 247
Harris Specialty Chemicals, Term Loan B, due 12/30/99, 10.50%(1) 1,059 1,059
Harris Specialty Chemicals, Venture A, due 12/30/01, 10.00%(1) 395 395
Harris Specialty Chemicals, Venture B, due 12/30/01, 10.50%(1) 1,831 1,831
Inspec Technologies, Term Loan B, due 2/12/00, 7.875% to 12/30/94 5,000 5,000
Thoro PCR, Inc., Term Loan A, due 12/30/99:
7.75% to 12/28/94 46 46
8.38% to 12/28/94 39 39
8.38% to 1/25/95 1,107 1,107
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face
Industry Senior Secured Floating Rate Loan Interests* Amount Value
<S> <S> <C> <C>
Chemicals Thoro PCR, Inc., Term Loan B, due 12/30/99, 10.50%(1) $ 16 $ 16
(concluded) Thoro PCR, Inc., Term Loan B, due 12/30/01, 8.88% to 1/25/95 2,390 2,390
Thoro Systems Products, Inc., Term Loan A, due 12/30/99:
7.75% to 12/28/94 29 29
8.38% to 12/28/94 24 24
8.38% to 1/25/95 670 670
Thoro Systems Products, Inc., Term Loan B, due 12/30/01:
10.50% to 12/30/94 10 10
8.88% to 1/25/95 1,502 1,502
Thoro Worldwide, Inc., Term Loan A, due 12/30/99:
7.75% to 12/28/94 20 20
8.38% to 1/25/95 491 491
Thoro Worldwide, Inc., Term Loan B, due 12/30/01:
10.50% to 12/30/94 7 7
8.88% to 1/25/95 1,024 1,024
-------- ----------
35,907 35,907
<PAGE>
Computing Lexmark Holdings, US, Term Loan, due 3/27/98:
Equipment--1.13% 7.75% to 12/30/94 7,320 7,320
8.187% to 1/31/95 6,106 6,106
-------- ----------
13,426 13,426
Consumer Products-- CHF/Ebel USA Term Loan B, due 9/30/01, 9.25% to 4/28/95 10,032 10,032
2.50% Playtex Family Products Inc., Term Loan B, due 6/01/01, 8.38%
to 12/12/94 19,762 19,762
-------- ----------
29,794 29,794
Containers--2.26% Ivex Packaging Corp., Term Loan B, due 12/31/99:
10.75%(1) 84 84
8.75% to 12/28/94 1,429 1,429
9.82% to 12/28/94 1,429 1,429
8.82% to 2/24/95 2,714 2,714
9.19% to 3/27/95 4,000 4,000
Portola Packaging, Inc., Term Loan B, due 7/01/99, 8.89% to
12/07/94 7,250 7,250
Silgan Corp., Term Loan B, due 9/15/96:
8.188% to 12/07/94 5,000 5,000
8.125% to 12/09/94 5,000 5,000
-------- ----------
26,906 26,906
Diversified American Standard, Inc., Term Loan A, due 6/01/00:
Manufacturing--10.37% 8.00% to 12/02/94 22,222 22,222
8.0625% to 12/02/94 2,472 2,472
American Standard, Inc., Term Loan D, due 2/28/01, 8.94% to
2/07/95 25,000 25,000
Desa International Inc., Term Loan B, due 11/30/00, 8.50% to
1/25/95 10,000 10,000
InterMetro Industries, Term Loan B, due 6/30/01, 8.32% to
1/03/95 10,164 10,164
InterMetro Industries, Term Loan C, due 12/31/02, 8.82% to
1/03/95 14,788 14,788
The Pullman Co., Inc., Term Loan, due 9/30/96:
9.75%(1) 4,695 4,417
10.00%(1) 11,171 10,505
TDII Company, Term Loan B, due 2/01/01:
10.25%(1) 64 64
8.6875% to 2/03/95 3,000 3,000
8.3125% to 3/02/95 21,125 21,125
-------- ----------
124,701 123,757
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face
Industry Senior Secured Floating Rate Loan Interests* Amount Value
<S> <S> <C> <C>
Drug Stores--4.01% Duane Reade Co., Term Loan A, due 9/30/97:
8.625% to 12/30/94 $ 512 $ 512
9.00% to 12/30/94 11,554 11,554
Duane Reade Co., Term Loan B, due 9/30/99, 9.50% to 12/30/94 10,000 10,000
Eckerd Corp., Term Loan, Series C, due 7/31/00, 6.625% to
12/07/94 12,521 12,521
Thrifty Payless, Term Loan B, due 9/30/01, 8.75% to 12/23/94 13,242 13,242
-------- ----------
47,829 47,829
Electrical Berg Electronics Inc., Term Loan A, due 3/31/00:
Instruments--2.35% 8.375% to 12/27/94 242 242
9.125% to 12/27/94 11,591 11,591
8.75% to 2/27/95 255 255
Berg Electronics Inc., Term Loan B, due 6/30/01:
10.25%(1) 25 25
9.375% to 12/27/94 5,950 5,950
9.00% to 2/27/95 25 25
Tracor Inc., Term Loan B, due 2/28/01:
8.937% to 1/23/95 111 111
9.312% to 5/22/95 9,889 9,889
-------- ----------
28,088 28,088
Fertilizer--1.68% Terra Industries, Term Loan B, due 10/20/01, 7.625% to 1/20/95 20,000 20,000
Food & Beverage--6.17% American Italian Pasta, Term Loan C, due 12/31/00, 9.0625% to
12/14/94 5,000 5,000
Domino's Pizza, Inc., Term Loan B, due 7/27/00:
8.00% to 12/06/94 3,000 3,000
8.726% to 2/07/94 3,000 3,000
8.312% to 3/06/95 6,000 6,000
9.039% to 5/08/95 2,087 2,087
Heileman Acquisition Company, Term Loan B, due 12/31/00, 9.125%
to 4/13/95 10,000 10,000
MAFCO Worldwide, Term Loan B, due 6/30/01, 8.63% to 1/05/95 10,000 10,000
President Baking Co., Inc., Term Loan B, due 9/30/00, 8.3125% to
12/30/94 4,983 4,983
Specialty Foods Corp., Term Loan B3, due 8/31/99:
8.88% to 1/18/95 11,126 11,126
9.13% to 4/18/95 18,416 18,416
-------- ----------
73,612 73,612
<PAGE>
Fuel Distribution-- Petrolane, Inc., Term Loan B, due 12/31/99:
2.53% 7.75% to 12/29/94 1,263 1,263
7.8125% to 1/30/95 28,888 28,888
-------- ----------
30,151 30,151
Grocery--7.18% Amerifoods, Term Loan B, due 6/30/01, 8.937% to 4/11/95 7,500 7,500
Amerifoods, Term Loan C, due 6/30/02, 9.437% to 4/11/95 7,500 7,500
Big V Supermarkets Inc., Term Loan B, due 3/15/00:
8.187% to 12/19/94 5,200 5,200
9.00% to 5/15/95 5,200 5,200
Circle K Acquisitions Corp., Term Loan B, due 7/31/01, 7.625%
to 12/30/94 14,950 14,950
Grand Union Company, Term Loan B, due 6/30/98:
10.50%(1) 48 45
8.50% to 12/09/94 6,666 6,278
8.812% to 3/16/95 6,333 5,964
Pathmark Stores Inc., Term Loan, due 10/31/99, 8.625% to
12/28/94 5,000 5,000
Pathmark Stores Inc., Term Loan B, due 10/31/99, 8.625% to
12/28/94 5,000 5,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face
Industry Senior Secured Floating Rate Loan Interests* Amount Value
<S> <S> <C> <C>
Grocery Ralph's Grocery Company, Term Loan, due 6/30/98:
(concluded) 7.937% to 12/05/94 $ 518 $ 518
7.75% to 12/07/94 7,715 7,715
8.375% to 12/14/94 301 301
8.375% to 12/21/94 603 603
8.00% to 12/30/94 1,130 1,130
8.50% to 1/09/95 5,328 5,328
Star Markets Co., Inc., Term Loan B, due 12/31/01, 8.32% to 12/13/94 4,211 4,211
Star Markets Co., Inc., Term Loan C, due 12/31/02, 8.82% to 12/13/94 3,158 3,158
-------- ----------
86,361 85,601
High Technology--0.46% Anacomp, Inc., Term Loan, due 3/31/96, 8.375% to 1/26/95 5,480 5,480
Medical Devices--0.82% Deknatel Holdings Corp., Term Loan A, due 4/20/99, 8.625% to
1/25/95 2,333 2,333
Deknatel Holdings Corp., Term Loan B, due 4/20/01, 9.125% to
1/25/95 7,500 7,500
-------- ----------
9,833 9,833
<PAGE>
Nautical Systems-- Sperry Marine, Inc., Term Loan, due 11/15/00:
0.77% 8.25% to 12/23/94 4,947 4,947
8.375% to 12/23/94 3,645 3,645
8.875% to 12/27/94 615 615
-------- ----------
9,207 9,207
Paper--11.42% Container Corp. of America, Term Loan B, due 4/30/02, 8.562%
to 1/24/95 54,000 54,000
Fort Howard Corp., Senior Secured B Notes, due 9/11/98, 8.00%
to 12/12/94 5,000 5,000
Fort Howard Corp., Senior Secured D Notes, due 9/11/00,
8.50% to 12/12/94 20,000 20,000
Fort Howard Corp., Term Loan, due 12/31/96:
9.875%(1) 6 6
10.00%(1) 16 16
8.065% to 12/30/94 1,735 1,735
8.19% to 12/30/94 456 456
Stone Container, Term Loan B, due 4/01/00:
8.437% to 12/14/94 27,500 27,500
8.875% to 1/17/95 27,500 27,500
-------- ----------
136,213 136,213
Retail--Specialty-- Music Acquisition Corp., Term Loan B, due 8/31/01:
4.40% 8.375% to 2/17/95 8,297 8,297
8.875% to 4/19/95 14,063 14,063
Music Acquisition Corp., Term Loan C, due 8/31/02,
8.562% to 12/20/94 7,500 7,500
Saks & Co., Term Loan B, due 6/30/00, 9.13% to 5/09/95 22,662 22,662
-------- ----------
52,522 52,522
Transportation Petro Properties, Term Loan B, due 5/24/01, 8.50% to 12/30/94 9,000 9,000
Services--0.75%
Warehousing & Pierce Leahy Corp., Term Loan B, due 6/30/01, 8.875% to
Storage--1.68% 11/30/94 20,000 20,000
Total Senior Secured Floating Rate Loan Interests
(Cost--$982,344)--82.20% 982,346 980,642
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Face
Industry Short Term Securities Amount Value
<S> <S> <C> <C>
Commercial AT&T Capital Corp., 5.53% due 1/05/95 $ 30,000 $ 29,839
Paper**--16.86% CSW Credit Inc., 5.20% due 12/08/94 15,000 14,985
CXC Inc.:
5.00% due 12/07/94 10,000 9,991
5.58% due 1/05/95 25,000 24,864
Cargill Inc., 5.12% due 12/12/94 22,000 21,965
Corporate Receivable, 5.72% due 1/13/95 10,000 9,932
General Electric Capital Corp., 5.70% due 12/01/94 44,707 44,707
Procter & Gamble Co.:
5.00% due 12/16/94 25,000 24,948
5.67% due 1/12/95 20,000 19,868
Total Short-Term Securities (Cost--$201,099)--16.86% 201,707 201,099
<CAPTION>
Shares
Common Stock Held
<S> <S> <C> <C>
Restaurants--0.02% TW Services, Inc. (Cost--$0)--0.02% 44 253
Total Common Stock (Cost--$0)--0.02% 44 253
Total Investments (Cost--$1,183,443)--99.08% 1,181,994
Other Assets Less Liabilities--0.92% 10,940
----------
Net Assets (Equivalent to $10.00 per share based on
119,284,253 shares outstanding)--100.00% $1,192,934
==========
<PAGE>
<FN>
*The interest rates on senior secured floating rate loan interests
are subject to change periodically based on the change in the prime
rate of a US Bank, LIBOR (London Interbank Offered Rate), or, in
some cases, another base lending rate. The interest rates shown are
those in effect at November 30, 1994.
**Commercial Paper is traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the
Fund.
(1)Index is based on the prime rate of a US bank, which is subject
to change daily.
</TABLE>
