MERRILL LYNCH
SENIOR FLOATING
RATE FUND, INC.
FUND LOGO
Semi-Annual Report
February 28, 1995
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 six months ended February 28, 1995, Merrill Lynch Senior
Floating Rate Fund, Inc. continued to benefit from a strengthening
economy both from a credit standpoint and in its rising yield as the
Federal Reserve Board again raised short-term interest rates. The
economy ended 1994 with its strongest growth in a decade, with gross
domestic product at 4%. At the same time, the Government's fixed-
rate price index, which measures prices paid by US residents for a
specific list of goods, rose 2.6% for the year, indicating that
inflation remains under control. However, with the strong, broad-
based economic expansion in the fourth quarter of 1994, the Federal
Reserve Board continued its policy of raising interest rates before
seeing any real evidence of inflation. On February 1, 1995, the
Federal Reserve Board raised short-term interest rates for the
seventh time since the beginning of 1994. It raised the discount
rate it charges on loans to its member banks by 50 basis points
(0.50%) to 5.25%, and pushed the target Federal Funds rate to 6.0%
from 5.5%.
Over 98% 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 of 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 over one year ago, the three-month LIBOR has risen from 3.25%
to 6.20%, an increase of 295 basis points. Since the average reset
on the Fund's underlying LIBOR rates is 50 days, the impact of the
latest interest rate increase will not be fully reflected in the
Fund's overall yield until yields on the Fund's LIBOR-priced
investments reset over a comparable period following the latest
increase.
Portfolio Performance
Merrill Lynch Senior Floating Rate Fund, Inc. ended the February
period with approximately $1.28 billion out of $1.36 billion, or
94.1% of 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 not yet closed,
the Fund had $1.17 billion, or 86.0% of net assets, closed and
invested in corporate loan interests.
<PAGE>
The Fund's effective net annualized yield for the three-month and
six-month periods ended February 28, 1995 was 7.71% and 7.19%,
respectively. Higher short-term interest rates positively affected
the Fund's yield, but this was partially offset by a 45.9% increase
in net assets during the February period as new subscriptions
continued at a steady pace. Although this affected the Fund's cash
position, the higher volume of leveraged transactions during the
latter half of 1994 provided us with attractive higher-yielding
investment opportunities. The Fund's net asset value continued to
remain relatively stable throughout the period. During the quarter
ended February 28, 1995, the Fund earned $0.190 per share income
dividends, representing a net annualized yield of 7.71%, based on a
month-end per share net asset value of $10.01. The Fund's total
investment return for the same period was +1.83%, based on a stable
net asset value and assuming reinvestment of $0.193 per share income
dividends. Since inception (November 3, 1989) through February 28,
1995, the Fund's total investment return was +44.44%, based on an
increase in per share net asset value from $10.00 to $10.01, and
assuming reinvestment of $3.679 per share income dividends.
Investment Activities
Our investment strategy during the February quarter remained
unchanged: to focus on leveraged transactions in which the borrowers
have strong market shares in their respective industries,
experienced management, and consistent cashflows. We also look for
companies with significant underlying asset and franchise value,
strong capital structures and equity sponsors with proven track
records. The Fund's largest investment, Jefferson Smurfit
Company/Container Corp. of America, is an example of just such a
borrower. Its leading worldwide market share, strong sponsorship and
substantial operating leverage make it an attractive investment
within the rebounding paper industry. We also seek those investments
that offer the appropriate risk/reward balance in the form of their
floating rate spread over LIBOR or the prime rate. The advantages of
adhering to these strategies are born out by both the relative
stability of the Fund's net asset value and the continued
flexibility of our borrowers as they access the capital markets.
The quarter ended February 28, 1995 saw some slowdown in the new-
issue calendar for leveraged loans compared to the large volume of
transactions last fall. However, we managed to employ cash by being
opportunistic in the secondary trading market since the beginning of
the new year. New primary transactions in which the Fund invested
included the acquisitions of Thompson Miniwax and Ziff Davis by the
leveraged buyout firm, Forstman Little and Co.; the acquisition of
Kraft Foods by Clayton Dublier & Rice; and the acquisition of UCAR
International by the Blackstone Group. We expect transaction flow to
improve during the course of the year as a result of the large
amount of equity sponsor money that was raised during the last
eighteen months and the continuing trend of companies divesting
themselves of non-core divisions or subsidiaries in order to focus
on their primary businesses.
<PAGE>
During the three-month period ended February 28, 1995, the Fund
experienced little turnover from alternative financing as the public
markets remained relatively depressed by the rise in short-term
interest rates. The Fund purchased over $365.4 million in loans in
both the primary and secondary markets. This was offset by the sale
of $56.9 million in investments and full prepayment of the Fund's
investment in American Standard, Inc. and Formica Corporation,
aggregating $88.9 million and partial prepayments of $28.2 million.
As of February 28, 1995, the Fund was invested in 62 different
borrowers across 26 industries. The largest industry concentrations
were in paper (17.3% of net assets), food and beverage (9%),
specialty retail (7.1%), diversified manufacturing (5.3%) and
grocery (4.9%). The average loan size equaled $18.9 million, or
1.39% of net assets.
The Fund completed its latest quarterly tender offer on January 12,
1995 with 3.1 million shares tendered and accepted for repurchase.
The next tender began on March 17, 1995 and will conclude on April
13, 1995. The Fund remains open for new shareholder purchases.
In Conclusion
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
April 7, 1995
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Aerospace--4.85% Allison Engine Co., Term Loan B, due 12/31/98, 8.88% to 3/17/95 $ 25,000 $ 25,000
Aviall Inc., Term Loan B, due 11/30/00:
8.57% to 3/07/95 3,640 3,640
9.38% to 3/07/95 1,698 1,698
10.00% to 6/07/95 15,287 15,287
Gulfstream Aerospace Corp., Term Loan, due 3/31/97:
10.25%(1) 612 612
9.13% to 7/13/95 10,761 10,761
Gulfstream Aerospace Corp., Term Loan, due 3/31/98, 9.88% to 6/08/95 9,260 9,260
---------- ----------
66,258 66,258
Airlines--1.12% Northwest Airlines, Inc., Term Loan, due 6/15/97, 8.5625% to 4/20/95 15,310 15,310
Analytical Elsag Bailey, Term Loan, due 8/30/02, 8.50% to 3/23/95 13,942 13,942
Instruments--1.95% Waters Corp., Term Loan B, due 8/31/01, 9.875% to 3/15/95 5,629 5,629
Waters Corp., Term Loan C, due 8/31/02, 10.25% to 3/15/95 3,940 3,940
Waters Corp., Term Loan D, due 2/28/03, 10.625% to 3/15/95 3,167 3,167
---------- ----------
26,678 26,678
Broadcast/Media Coaxial Communications, Term Loan, due 12/31/99:
- --5.10% 9.38% to 3/15/95 1,298 1,298
9.44% to 4/17/95 3,768 3,768
9.57% to 5/15/95 4,433 4,433
10.19% to 6/15/95 9,500 9,500
Enquirer/Star, Term Loan B, due 9/30/02:
10.50%(1) 268 268
8.75% to 5/22/95 26,532 26,532
Silver King Communications, Term Loan B, due 7/31/02, 9.3125% to 4/28/95 17,910 17,910
US Radio Inc., Term Loan A, due 12/31/01:
9.13% to 3/30/95 1,298 1,298
9.3125% to 4/28/95 1,298 1,298
US Radio Inc., Term Loan B, due 9/23/03:
9.69% to 3/30/95 1,695 1,695
10.3125% to 4/28/95 1,709 1,709
---------- ----------
69,709 69,709
Building Overhead Door Corp., Revolving Credit Loan, due 8/18/99:
Products--2.64% 9.00%(1) 1,705 1,705
8.625% to 3/23/95 341 341
Overhead Door Corp., Term Loan, due 8/18/99, 9.99%(1) 9,214 9,214
RSI Home Products, Term Loan, due 11/30/99:
8.625% to 3/31/95 1,417 1,417
8.8125% to 5/30/95 8,333 8,333
Thompson Miniwax, Term Loan B, due 12/31/02, 11.00%(1) 15,000 15,000
---------- ----------
36,010 36,010
<PAGE>
Carbon & Graphite UCAR International, Term Loan B, due 1/31/03, 9.3125% to 5/08/95 7,328 7,328
Products--1.10% UCAR International, Term Loan C, due 7/31/03, 9.8125% to 5/08/95 3,836 3,836
UCAR International, Term Loan D, due 1/31/04, 10.0625% to 5/08/95 3,836 3,836
---------- ----------
15,000 15,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Chemicals--3.13% Freedom Chemical Company, Term Loan B, due 6/30/02:
11.00%(1) $ 7,000 $ 7,000
9.625% to 4/27/95 20,000 20,000
Harris Specialty Chemicals, Term Loan A, due 12/30/99:
9.19% to 3/16/95 2 2
10.00% to 3/16/95 641 641
8.82% to 3/28/95 2,346 2,346
Harris Specialty Chemicals, Term Loan B, due 12/30/01:
9.69% to 3/16/95 5 5
10.50% to 3/16/95 2,884 2,884
9.32% to 3/28/95 4,948 4,948
Inspec Technologies, Term Loan B, due 12/02/00, 9.125% to 3/30/95 5,000 5,000
---------- ----------
42,826 42,826
Consumer Products CHF/Ebel USA, Term Loan B, due 9/30/01, 9.25% to 4/28/95 10,032 10,032
- --2.18% Playtex Family Products Inc., Term Loan B, due 6/01/01, 9.38% to 3/13/95 19,762 19,762
---------- ----------
29,794 29,794
Containers--2.70% Ivex Packaging Corp., Term Loan B, due 12/31/99:
11.25%(1) 60 60
9.19% to 3/27/95 4,000 4,000
9.69% to 3/30/95 571 571
10.32% to 3/30/95 857 857
9.82% to 5/30/95 1,429 1,429
10.00% to 8/24/95 2,714 2,714
Portola Packaging, Inc., Term Loan B, due 7/01/99, 9.6875% to 5/08/95 7,250 7,250
Silgan Corp., Term Loan B, due 9/15/96:
9.688% to 3/07/95 9,886 9,886
10.00% to 6/09/95 10,038 10,038
---------- ----------
36,805 36,805
<PAGE>
Diversified Desa International Inc., Term Loan B, due 11/30/00, 10.0625% to 6/27/95 10,000 10,000
Manufacturing InterMetro Industries, Term Loan B, due 6/30/01, 10.00% to 7/03/95 9,825 9,825
- --5.32% InterMetro Industries, Term Loan C, due 12/31/02, 10.50% to 7/03/95 14,295 14,295
The Pullman Co., Inc., Revolving Credit Loan, due 12/31/99 :
10.50%(1) 494 494
9.8125% to 6/23/95 3,915 3,915
The Pullman Co., Inc., Term Loan A, due 12/31/99, 9.8125% to 6/23/95 9,359 9,359
The Pullman Co., Inc., Term Loan B, due 12/31/99, 10.3125% to 6/23/95 650 650
Thermadyne Company, Term Loan B, due 2/01/01:
10.25%(1) 4 4
8.3125% to 3/02/95 21,125 21,125
9.3125% to 5/03/95 3,000 3,000
---------- ----------
72,667 72,667
Drug Stores--3.02% Duane Reade Co., Term Loan A, due 9/30/97:
9.0625% to 3/31/95 833 833
9.25% to 5/30/95 10,722 10,722
Duane Reade Co., Term Loan B, due 9/30/99, 9.75% to 5/30/95 10,000 10,000
Eckerd Corp., Term Loan, Series C, due 7/31/00, 7.625% to 3/07/95 11,462 11,462
Thrifty Payless, Term Loan B, due 9/30/01:
11.00%(1) 21 21
9.375% to 5/24/95 8,200 8,200
---------- ----------
41,238 41,238
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Electrical Berg Electronics Inc., Term Loan A, due 3/31/00:
Instruments--2.04% 8.82% to 3/30/95 $ 255 $ 255
9.125% to 5/25/95 11,591 11,591
Berg Electronics Inc., Term Loan B, due 6/30/01:
9.07% to 3/30/95 25 25
9.375% to 5/25/95 5,950 5,950
Tracor Inc., Term Loan B, due 2/28/01:
10.25%(1) 86 86
9.3125% to 5/22/95 9,889 9,889
---------- ----------
27,796 27,796
Fertilizer--1.46% Terra Industries, Term Loan B, due 10/20/01, 8.8125% to 4/20/95 20,000 20,000
<PAGE>
Food & Beverage American Italian Pasta, Term Loan C, due 12/31/00, 10.00% to 5/17/95 5,000 5,000
- --9.00% Amerifoods, Term Loan B, due 6/30/01, 8.9375% to 4/11/95 7,500 7,500
Amerifoods, Term Loan C, due 6/30/02, 9.4375% to 4/11/95 7,500 7,500
Domino's Pizza, Inc., Term Loan B, due 7/27/00:
8.3125% to 3/06/95 6,000 6,000
9.039% to 5/08/95 2,087 2,087
9.75% to 6/06/95 3,000 3,000
9.6875% to 8/07/95 3,000 3,000
Heileman Acquisition Company, Term Loan B, due 12/31/00, 9.125% to 4/13/95 10,000 10,000
Kraft Foods, Term Loan B, due 3/31/02, 9.32% to 8/21/95 30,000 30,000
MAFCO Worldwide, Term Loan B, due 6/30/01, 9.50% to 4/05/95 10,000 10,000
President Baking Co., Inc., Term Loan B, due 9/30/00, 8.9375% to 3/31/95 4,974 4,974
Specialty Foods Corp., Term Loan B, due 8/31/99:
11.00%(1) 5,000 5,000
9.13% to 4/18/95 13,673 13,673
10.00% to 7/18/95 15,150 15,150
---------- ----------
122,884 122,884
Fuel Petrolane, Inc., Term Loan B, due 12/31/99:
Distribution 8.3125% to 3/30/95 28,888 28,888
- --2.20% 8.3125% to 4/03/95 1,105 1,105
---------- ----------
29,993 29,993
Grocery--4.92% Big V Supermarkets Inc., Term Loan B, due 3/15/00:
9.25% to 3/20/95 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:
8.125% to 3/28/95 24,766 24,766
9.75% to 3/31/95 67 67
Pathmark Stores Inc., Term Loan B, due 10/31/99, 9.25% to 5/30/95 9,900 9,900
Ralph's Grocery Company, Term Loan, due 6/30/98:
9.00% to 3/06/95 518 518
8.9375% to 3/30/95 301 301
8.8125% to 3/31/95 301 301
8.9375% to 3/31/95 603 603
8.9375% to 4/10/95 13,043 13,043
Star Markets Co., Inc., Term Loan B, due 12/31/01, 9.125% to 3/15/95 4,211 4,211
Star Markets Co., Inc., Term Loan C, due 12/31/02, 9.625% to 3/15/95 3,158 3,158
---------- ----------
67,268 67,268
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
High Technology Anacomp, Inc., Term Loan C, due 3/31/96, 9.0625% to 4/26/95 $ 4,598 $ 4,598
- --0.34%
Leasing & Rental Prime Acquisition, Term Loan, due 12/31/00:
Services--1.10% 9.25% to 3/06/95 4,800 4,800
9.50% to 4/06/95 5,400 5,400
9.375% to 5/08/95 4,800 4,800
---------- ----------
15,000 15,000
Medical Devices Deknatel Holdings Corp., Term Loan A, due 4/20/99, 9.3125% to 4/25/95 2,250 2,250
- --0.71% Deknatel Holdings Corp., Term Loan B, due 4/20/01, 9.8125% to 4/25/95 7,500 7,500
---------- ----------
9,750 9,750
Nautical Systems Sperry Marine, Inc., Term Loan, due 11/15/00:
- --0.65% 9.5625% to 3/23/95 3,901 3,901
10.0625% to 6/23/95 4,947 4,947
---------- ----------
8,848 8,848
Office Machines Lexmark Holdings, US, Term Loan, due 3/27/98, 8.5859% to 3/31/95 8,784 8,784
- --0.64%
Paper--17.33% ++Fort Howard Corp., Senior Secured B Notes, due 9/11/98, 9.38% to 3/13/95 5,000 5,000
++Fort Howard Corp., Senior Secured D Notes, due 9/11/00, 9.88% to 3/13/95 20,000 20,000
Fort Howard Corp., Term Loan, due 12/31/96:
10.50%(1) 472 472
10.375%(1) 1,741 1,741
Jefferson Smurfit Company/Container Corp. of America, Term Loan A,
due 4/30/01:
8.5625% to 3/28/95 10,500 10,500
8.6875% to 3/30/95 7,000 7,000
8.50% to 4/28/95 770 770
8.6875% to 5/18/95 3,500 3,500
8.8125% to 5/30/95 9,730 9,730
Jefferson Smurfit Company/Container Corp. of America, Term Loan B,
due 4/30/02:
9.1875% to 3/24/95 4,733 4,733
9.3125% to 4/24/95 66,267 66,267
Mail Well, Term Loan B, due 12/31/00, 9.625% to 3/31/95 5,000 5,000
Mail Well, Term Loan C, due 12/31/01, 9.625% to 3/31/95 5,000 5,000
S.D. Warren Co., Term Loan B, due 12/19/02, 9.50% to 8/23/95 52,000 52,000
Stone Container, Term Loan B, due 4/01/00:
9.3125% to 3/14/95 22,500 22,500
9.25% to 3/17/95 22,500 22,500
---------- ----------
236,713 236,713
<PAGE>
Printing & Print Tech International, Term Loan B, due 12/28/01, 8.94% to 3/03/95 5,000 5,000
Publishing--2.34% Ziff Davis, Term Loan B, due 12/31/01, 9.38% to 3/28/95 13,897 13,897
Ziff Davis, Term Loan C, due 12/31/02, 9.88% to 3/28/95 13,103 13,103
---------- ----------
32,000 32,000
Retail-- Federated Department Stores, Term Loan, due 3/31/00:
Specialty--7.12% 7.375% to 3/29/95 25,000 25,000
7.25% to 5/30/95 15,000 15,000
Music Acquisition Corp., Term Loan B, due 8/31/01:
8.875% to 4/19/95 14,063 14,063
9.5625% to 8/17/95 8,156 8,156
Music Acquisition Corp., Term Loan C, due 8/31/02, 10.3125% to 6/20/95 7,500 7,500
Saks & Co., Term Loan B, due 6/30/00, 9.13% to 5/09/95 27,469 27,469
---------- ----------
97,188 97,188
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Transportation Petro Properties, Term Loan B, due 5/24/01, 9.75% to 3/31/95 $ 9,000 $ 9,000
Services--0.66%
Warehousing Pierce Leahy Corp., Term Loan B, due 6/30/01:
& Storage--1.10% 9.5625% to 4/28/95 9,545 9,545
9.9375% to 7/31/95 5,455 5,455
---------- ----------
15,000 15,000
Total Senior Secured Floating Rate Loan Interests
(Cost--$1,157,117)--84.72% 1,157,117 1,157,117
Short-Term Securities
Commercial Cargill Inc., 5.95% due 3/24/95 25,000 24,905
Paper**--11.08% Du Pont (E.I.) de Nemours & Co., 5.94% due 4/11/95 25,000 24,831
General Electric Capital Corp., 6.00% due 3/01/95 4,750 4,750
Matterhorn Capital Corp.:
5.93% due 3/10/95 17,000 16,975
5.96% due 3/15/95 30,000 29,930
Xerox Corp., 5.95% due 3/20/95 50,000 49,843
---------- ----------
151,750 151,234
<PAGE>
US Government Federal Home Loan Bank, 5.87% due 4/17/95 25,655 25,458
& Agency Federal National Mortgage Association, 5.89% due 4/13/95 14,820 14,716
Obligations**-- ---------- ----------
2.94% 40,475 40,174
Total Short-Term Securities (Cost--$191,408)--14.02% 192,225 191,408
Shares
Common Stock Held
Restaurants--0.02% TW Services, Inc. 44 218
Total Common Stock (Cost--$0)--0.02% 44 218
Total Investments (Cost--$1,348,525)--98.76% 1,348,743
Other Assets Less Liabilities--1.24% 16,953
----------
Net Assets--100.00% $1,365,696
==========
<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 February 28, 1995.
**Commercial Paper and certain US Government & Agency Obligations
are 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.
++Restricted security as to resale. The value of the Fund's
investment in restricted securities was $25,000,000, representing
1.83% of net assets.
(in Thousands)
Acquisition Value
Senior Secured Notes Date Cost (Note 1b)
Fort Howard Corp. 9/11/91 $25,000 $25,000
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of February 28, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,348,524,991)
(Note 1b) $1,348,742,797
Cash 743,614
Receivables:
Capital shares sold $ 19,435,087
Interest 10,782,416 30,217,503
------------
Deferred facility fees (Note 6) 1,398
Deferred organization expense (Note 1f) 29,912
Prepaid registration fees and other assets (Note 1f) 979,008
--------------
Total assets 1,380,714,232
--------------
Liabilities: Payables:
Dividends to shareholders (Note 1g) 1,993,281
Investment adviser (Note 2) 966,754
Administrator (Note 2) 254,409
Commitment fees 5,409
Securities purchased 767 3,220,620
------------
Deferred income (Note 1e) 11,723,797
Accrued expenses and other liabilities 73,688
--------------
Total liabilities 15,018,105
--------------
Net Assets: Net assets $1,365,696,127
==============
Net Assets Common Stock, par value $0.10 per share; 1,000,000,000 shares
Consist of: authorized $ 13,640,589
Paid-in capital in excess of par 1,352,141,480
Accumulated investment loss--net (321,494)
Undistributed realized capital gains on investments--net (Note 7) 17,746
Unrealized appreciation on investments--net (Note 3) 217,806
--------------
Net Assets--Equivalent to $10.01 per share based on 136,405,885 shares of
beneficial interest outstanding $1,365,696,127
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
February 28, 1995
<S> <S> <C> <C>
Investment Interest and discount earned $ 47,707,014
Income Facility and other fees 1,285,310
(Note 1e): ------------
Total income 48,992,324
------------
Expenses: Investment advisory fees (Note 2) $ 5,480,559
Administrative fees (Note 2) 1,442,252
Transfer agent fees (Note 2) 376,737
Professional fees 125,153
Borrowing costs (Note 6) 100,696
Accounting services (Note 2) 68,190
Registration fees (Note 1f) 55,557
Custodian fees 49,587
Printing and shareholder reports 47,731
Tender offer costs 36,420
Amortization of organization expenses (Note 1f) 26,673
Directors' fees and expenses 20,783
Other 31,931
------------
Total expenses 7,862,269
------------
Investment income--net 41,130,055
------------
Realized & Realized gain on investments--net 58,501
Unrealized Change in unrealized appreciation on investments--net (57,784)
Gain (Loss) ------------
on Investments Net Increase in Net Assets Resulting from Operations $ 41,130,772
- --Net (Notes ============
1c, 1e & 3):
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 41,130,055 $ 43,213,412
Realized gain (loss) on investments--net 58,501 (13,985)
Change in unrealized appreciation/depreciation on invest-
ments--net (57,784) (124,460)
-------------- ------------
Net increase in net assets resulting from operations 41,130,772 43,074,967
-------------- ------------
Dividends to Investment income--net (41,451,549) (43,213,412)
Shareholders -------------- ------------
(Note 1g): Net decrease in net assets resulting from dividends to
shareholders (41,451,549) (43,213,412)
-------------- ------------
Capital Share Net increase in net assets resulting from capital share
Transactions transactions 431,554,207 221,301,485
(Note 4): -------------- ------------
Net Assets: Total increase in net assets 431,233,430 221,163,040
Beginning of period 934,462,697 713,299,657
-------------- ------------
End of period $1,365,696,127 $934,462,697
============== ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Cash Flows
For the Six Months Ended
February 28, 1995
<S> <S> <C>
Cash Provided by Net increase in net assets resulting from operations $ 41,130,772
Operating Adjustments to reconcile net increase in net assets resulting from
Activities: operations to net cash provided by operating activities:
Increase in receivables (4,274,252)
Increase in other assets (874,426)
Increase in other liabilities 3,915,744
Realized and unrealized gain on investments--net (717)
Amortization of premium and discount (11,748,771)
---------------
Net cash provided by operating activities 28,148,350
---------------
<PAGE>
Cash Used for Proceeds from principal payments and sales of loan interests 239,964,403
Investing Purchases of loan interests (597,748,295)
Activities: Purchases of short-term investments--net (4,659,306,580)
Proceeds from sales and maturities of short-term investments--net 4,598,153,246
---------------
Net cash used for investing activities (418,937,226)
---------------
Cash Provided by Cash receipts on capital shares sold 465,842,231
Financing Cash payments on capital shares tendered (56,250,237)
Activities: Dividends paid to shareholders (18,269,533)
---------------
Net cash provided by financing activities 391,322,461
---------------
Cash: Net increase in cash 533,585
Cash at beginning of period 210,029
---------------
Cash at end of period $ 743,614
===============
Non-Cash Capital shares issued in reinvestment of dividends paid to
Financing shareholders $ 22,608,418
Activities: ===============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended,
February 28, For the Year Ended August 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.02 $ 10.02 $ 9.99 $ 9.99 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .36 .59 .53 .64 .85
Realized and unrealized gain (loss) on
investments--net (.01) --++++ .03 -- (.01)
-------- -------- -------- -------- --------
Total from investment operations .35 .59 .56 .64 .84
-------- -------- -------- -------- --------
Less dividends from investment income--net (.36) (.59) (.53) (.64) (.85)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.01 $ 10.02 $ 10.02 $ 9.99 $ 9.99
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 3.32%++ 5.94% 5.74% 6.58% 8.79%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.36%* 1.43% 1.47% 1.39% 1.27%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.36%* 1.43% 1.47% 1.41% 1.33%
======== ======== ======== ======== ========
Investment income--net 7.13%* 5.75% 5.27% 6.58% 8.44%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in millions) $ 1,366 $ 934 $ 713 $ 834 $ 1,705
Data: ======== ======== ======== ======== ========
Portfolio turnover 24.72% 61.31% 90.36% 46.48% 58.22%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads. The
Fund is a continuously offered closed-end fund, the shares of which
are offered at net asset value. Therefore, no separate market
exists.
++Aggregate total investment return.
++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Senior Floating Rate Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a
continuously offered non-diversified, closed-end management
investment company. These unaudited financial statements reflect all
adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period represented.
All such adjustments are of a normal recurring nature.
(a) Loan participation interests--The Fund invests in senior secured
floating rate loan interests ("Loan Interests") with collateral
having a market value, at time of acquisition by the Fund, which
Fund management believes equals or exceeds the principal amount of
the corporate loan. The Fund may invest up to 20% of its total
assets in loans made on an unsecured basis. Depending on how the
loan was acquired, the Fund will regard the issuer as including the
corporate borrower along with an agent bank for the syndicate of
lenders and any intermediary of the Fund's investment. Because
agents and intermediaries are primarily commercial banks, the Fund's
investment in corporate loans at February 28, 1995 could be
considered to be concentrated in commercial banking.
<PAGE>
(b) Valuation of investments--Loan interests and common stocks are
valued at fair value. Fair value is determined in good faith by or
under the direction of the Board of Directors of the Fund. Since
Loan Interests are purchased and sold primarily at par value, the
Fund values the Loan Interests at par, unless Merrill Lynch Asset
Management, L.P. ("MLAM") determines par does not represent fair
value. In the event such a determination is made, fair value will be
determined in accordance with guidelines approved by the Fund's
Board of Directors. Short-term securities with remaining maturities
of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Directors of the Fund.
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Interest rate transactions--The Fund is authorized to enter into
interest rate swaps and purchase or sell interest rate caps and
floors. In an interest rate swap, the Fund exchanges with another
party their respective commitments to pay or receive interest on a
specified notional principal amount. The purchase of an interest
rate cap (or floor) entitles the purchaser, to the extent that a
specified index exceeds (or falls below) a predetermined interest
rate, to receive payments of interest equal to the difference
between the index and the predetermined rate on a notional principal
amount from the party selling such interest rate cap (or floor).
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on
the identified cost basis. Facility fees are accreted into income
over the term of the related loan. For income tax purposes, as of
September 1, 1994, the corporate loans are treated as discount
obligations.
(f) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are amortized on a straight-line
basis over a five-year period. Prepaid registration fees are charged
to expense as the related shares are issued.
<PAGE>
(g) Dividends and distributions--Dividends from net investment
income is declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory and Administrative Services Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
MLAM. The general partner of MLAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch and
Co., Inc. ("ML & Co."), which is the limited partner.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to perform this investment advisory
function.
For such services, the Fund pays a monthly fee at an annual rate of
0.95% of the Fund's average daily net assets. The Fund also has an
Administrative Services Agreement with MLAM whereby MLAM will
receive a fee equal to an annual rate of 0.25% of the Fund's average
daily net assets on a monthly basis, in return for the performance
of administrative services (other than investment advice and related
portfolio activities) necessary for the operation of the Fund. The
Investment Advisory Agreement obligates MLAM to reimburse the Fund
to the extent the Fund's expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and extraordinary
items) exceed the lesser of (a) 2.0% of the Fund's average daily net
assets or (b) 2.5% of the Fund's first $30 million of average daily
net assets, 2.0% of the Fund's next $70 million of average daily net
assets, and 1.5% of the average daily net assets in excess thereof.
No fee payment will be made to the Investment Adviser during any
fiscal year which will cause such expenses to exceed the most
restrictive expense limitation at the time of such payment.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, Merrill Lynch, Pierce, Fenner, & Smith Inc.,
FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended February 28, 1995 were $601,541,180 and
$240,187,477, respectively.
<PAGE>
Net realized and unrealized gains (losses) as of February 28, 1995
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 60,765 $ 217,806
Short-term investments (2,264) --
---------- -----------
Total $ 58,501 $ 217,806
========== ===========
As of February 28, 1995, net unrealized appreciation for financial
reporting and Federal income tax purposes aggregated $217,806, all
of which related to appreciated securities. The aggregate cost of
investments at February 28, 1995 for Federal income tax purposes was
$1,348,524,991.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Ended Dollar
February 28,1995 Shares Amount
Shares sold 46,467,447 $465,196,026
Shares issued to shareholders
in reinvestment of dividends 2,258,255 22,608,418
----------- ------------
Total issued 48,725,702 487,804,444
Shares tendered (5,619,404) (56,250,237)
----------- ------------
Net increase 43,106,298 $431,554,207
=========== ============
For the Year Ended Dollar
August 31, 1994 Shares Amount
Shares sold 35,126,101 $351,960,677
Shares issued to shareholders
in reinvestment dividends 2,309,056 23,136,748
----------- ------------
Total issued 37,435,157 375,097,425
Shares tendered (15,348,896) (153,795,940)
----------- ------------
Net increase 22,086,261 $221,301,485
----------- ------------
<PAGE>
5. Unfunded Loan Interests:
As of February 28, 1995, the Fund had unfunded loan commitments of
$19,248,199, which would be extended at the option of the borrower,
pursuant to the following loan agreements:
Unfunded
Commitment
Borrower (in thousands)
Gulfstream Corp. $10,192
Northwest Airlines, Inc. 2,660
Overhead Door Corp. 3,068
Petrolane, Inc. 1,212
The Pullman Co., Inc. 2,116
6. Short-Term Borrowings:
On March 20, 1995, the Fund extended its loan commitment. The
commitment is for $100,000,000, bearing interest at the Federal
Funds Rate plus 0.75%--2% on the outstanding balance. The Fund had
no borrowings under this commitment during the six months ended
February 28, 1995. For the six months ended February 28, 1995,
facility and commitment fees aggregated approximately $101,000.
7. Capital Loss Carryforward:
At August 31, 1994, the Fund had a net capital loss carryforward of
approximately $34,000, all of which expires in 2001. This amount
will be available to offset like amounts of any future taxable
gains.
8. Subsequent Event:
The Fund began a quarterly tender offer on March 17, 1995.
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, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
