MERRILL LYNCH
SENIOR FLOATING
RATE FUND, INC.
FUND LOGO
Semi-Annual Report
February 29, 1996
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. Statements and other
information herein are as dated and are subject to change.
<PAGE>
Merrill Lynch
Senior Floating
Rate Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch Senior Floating Rate Fund, Inc.
DEAR SHAREHOLDER
During the fiscal quarter ended February 29, 1996, Merrill Lynch
Senior Floating Rate Fund, Inc. continued to benefit from a
relatively flat yield curve. Moderate economic growth, coupled with
little sign of any inflationary pressure, has resulted in an
environment of lower short-term interest rates.
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 dollar-denominated deposits outside the United States.
LIBOR has historically tracked very closely with other short-term
interest rates in the United States, particularly the Federal Funds
rate. The Federal Reserve Board has continued its efforts to
generate greater economic growth by easing the target Federal Funds
rate by 25 basis points (0.25%), once in December and again at the
end of January 1996. LIBOR has come down in tandem with other short-
term interest rates. At February 29, 1996, three-month LIBOR was
5.25%, down from 5.8438% at the end of the November quarter and
6.25% at this time last year. The weighted average spread over LIBOR
on the portfolio is 2.5979%. Since the average reset on Fund
investments' underlying LIBOR rates is 45 days, the Fund's yield is
likely to reflect any easing of short-term interest rates as it
moves through its resets over the two months subsequent to the
easing.
Portfolio Performance
With this interest rate environment and moderate economic growth as
a backdrop, Merrill Lynch Senior Floating Rate Fund, Inc. ended its
fiscal quarter with approximately $2.36 billion out of $2.86
billion, or 79.7%, 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 $2.06 million, or 72%, of its net
assets invested in corporate loan interests.
<PAGE>
The Fund's effective net annualized yield for the 12-month period
ended February 29, 1996 was 7.35%, compared to a yield of 6.61% for
the prior year. The Fund's yield was partially affected by a 12.19%
increase in net assets during the February quarter as new
subscriptions continued at a steady pace. This increase led to a
higher cash position during the period. The Fund's net asset value
continued to remain relatively stable throughout the period. During
the February quarter, the Fund earned $0.169 per share income
dividends, representing a net annualized yield of 6.76%, based on a
month-end per share net asset value of $10.01. The Fund's total
investment return was +1.73%, based on a stable net asset value and
assuming reinvestment of $0.172 per share income dividends. Since
inception (November 3, 1989) through February 29, 1996, the Fund's
total investment return was +55.74%, based on no change in per share
net asset value, and assuming reinvestment of $4.416 per share
income dividends.
Investment Activities
Throughout the year our investment strategy was to invest in
leveraged transactions in which borrowers have strong market shares,
experienced managements, consistent cash flows and appropriate
risk/reward tradeoffs in the form of floating rate spread over the
prime rate or LIBOR. In addition, we 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 has to undergo a capital restructuring, we
hope to enhance our recovery rates as senior secured lenders versus
other levels of the capital structure.
The advantages of adhering to this strategy 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. As the
Fund continues to grow, we will seek to keep our holdings as
diversified as product supply will allow. However, we will also
continue to focus on credit quality and liquidity within the
noninvestment-grade sector. With liquidity in the market the
strongest it has ever been, we have taken the opportunity to pare
down positions and manage exposures in industries or sectors that
could be more susceptible to any real downturn in the economy. We
have also increased the portfolio's weighting in more stable cash
flow-oriented sectors such as supermarkets, healthcare, cable and
broadcasting.
<PAGE>
The leveraged loan market remained extremely strong throughout the
February quarter, with demand continuing to outstrip supply. The
fourth quarter of 1995 capped a year of explosive growth for the
secondary market. The $9.7 billion in volume brought the year's
total to $33.8 billion, an increase of more than 60% from 1994.
Several factors contributed to this growth, including a 25% increase
in leverage loan issuance to $101 billion. At the same time,
institutional investor demand continues to grow. Banks also are
increasing their trading activity, using the secondary market to
adjust exposures to sectors and selected credits.
However, contrary to expectations, there has not been much overhang
in early 1996 on the new-issue front, even as new-issue demand
remains strong and banks continue to compete for the fees and high
spreads on agenting and investing in leverage credits. Loan funds
continue to see substantial inflows, enhancing already solid demand
for funded term loans. At least once a quarter over the past year a
new participant has entered the institutional market with a newly
raised bank debt fund. With the lack of a sustained increase in new
supply, one new buyer can keep secondary prices for any given name
at firm levels, often pushing them above par. Based on the forward
calendar for leveraged loan new issues, we expect this supply/demand
imbalance to continue through the second quarter.
During the February quarter, we invested $345.6 million in new
purchases, of which over $182.5 million were new primary
transactions, such as: the refinancing of Classic Cable Inc., Ivex
Packaging Corp., OrNda Health Corp. and Act III Broadcasting, Inc.;
the leveraged buyouts of Volume Services, Merit Behavioral Corp.,
and Amfac Parks; the financing of the acquisition and merger
activity by Ampad/Williamhouse Regency, Inc., Cedar Chemical and
Westinghouse Electric Corp.; and the financing for add-on
acquisitions and build outs for names such as Western Wireless and
Comcast Cellular Corp.
We supplemented investment in new issues with the purchase of $163.1
million of secondary paper in existing loans such as Marcus Cable
Operating Co., Johnstown America Industrial Inc., Northwest
Airlines. Thermadyne Industries, Inc., UCAR International Inc. and
WorldCom/LDDS. These purchases were offset by the sale of $203.3
million in the secondary market, the partial prepayment of $33.0
million across 32 investments and the full prepayment of Fund
investments totaling $78.8 million, including Waters Corp., Eckerd
Corp., Exide Corp. and Northwest Airlines.
The Fund's industry diversification is reflected in 97 investments
across 31 industries. The average loan size is $24.0 million, or
0.8% of net assets, just slightly below the November quarter's 0.9%.
As the assets under management in the Fund grow, we will continue to
reduce average exposure to any one name, when possible, and focus on
achieving greater diversification across the portfolio.
<PAGE>
The largest industry concentrations were in broadcast/media (12.78%
of net assets), paper (10.4%), retail specialty (4.31%), food and
beverage (5.18%), and grocery (2.88%). The largest individual credit
exposures are Federated Department Stores Inc. ($68.0 million/2.38%
of net assets); Jefferson Smurfit Company/Container Corp. of America
($88.7 million/ 3.10%); Stone Container Corp. ($61.3 million/2.15%);
and Marcus Cable Operating Co. ($80.4 million/2.82%).
The Fund completed its latest quarterly tender offer on January 19,
1996 with 4.58 million shares tendered and accepted for repurchase.
The next tender began on March 20, 1996 and will conclude on April
16, 1996.
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 1, 1996
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Face Loan Stated Value
Industry Amount Borrower Type Maturity* (Note 1b)
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <C> <C>
Aerospace-- $ 7,687 Gulfstream Aerospace Corp. Term 3/31/97 $ 7,687
0.59% 9,260 Gulfstream Aerospace Corp. Term 3/31/98 9,260
Total Aerospace (Cost--$16,947) 16,947
Apparel--0.35% 9,950 Humphreys Term B 1/15/03 9,950
Total Apparel (Cost--$9,950) 9,950
Automobile 25,000 Collins & Aikman Corp. Term B 12/31/02 25,000
Products--1.58% 20,000 Johnstown America Industrial Inc. Term B 3/31/03 20,000
Total Automobile Products (Cost--$45,000) 45,000
Broadcast/ 10,000 Act III Broadcasting, Inc. Term B 12/31/03 10,000
Media--12.78% 21,532 American Media Term B 9/30/02 21,532
4,000 Chancellor Broadcasting Inc. Term B 9/01/03 4,000
5,000 Charter Communications L.P. Term C 12/31/04 5,000
20,000 Classic Cable Inc. Term B 6/30/05 20,000
18,873 Coaxial Communications Term 12/31/99 18,873
18,316 Comcast Corp. Term 9/30/04 18,316
7,500 Eller Industries, Inc. Term A 6/30/02 7,500
14,327 Eller Industries, Inc. Term B 12/21/03 14,327
4,950 Ellis Communications Term B 3/31/03 4,950
10,000 Journal News Inc. Term 12/31/01 10,000
3,500 Marcus Cable Operating Co. Revolving Credit 4/30/14 3,500
33,937 Marcus Cable Operating Co. Term A 12/31/02 33,937
43,000 Marcus Cable Operating Co. Term B 4/30/04 43,000
28,000 QVC, Inc. Term B 1/31/04 28,000
17,248 Silver King Communications, Inc. Term B 7/31/02 17,248
2,504 US Radio Inc. Term A 12/31/01 2,504
5,042 US Radio Inc. Term B 9/23/03 5,042
10,720 Western Wireless Revolving Credit 12/31/03 10,720
5,800 Westinghouse Electric Corp. Revolving Credit 5/26/98 5,800
65,919 Westinghouse Electric Corp. Term I 5/26/98 65,919
15,000 Westinghouse Electric Corp. Term II 11/25/02 15,000
Total Broadcast/Media (Cost--$365,168) 365,168
Building 4,989 Fenway Holdings, Inc. Term B 9/15/02 4,989
Products--2.40% 19,600 MTF Acquisition Term B 12/31/02 19,600
24,977 National Gypsum Co. Term B 9/20/03 24,977
2,864 Overhead Door Corp. Revolving Credit 8/18/99 2,864
7,536 Overhead Door Corp. Term 8/18/99 7,536
8,667 RSI Home Products Term 11/30/99 8,667
Total Building Products (Cost--$68,633) 68,633
Carbon & Graphite 330 UCAR International Inc. Revolving Credit 12/31/01 330
Products--0.51% 1,473 UCAR International Inc. Term A 12/31/01 1,473
12,857 UCAR International Inc. Term B 12/31/02 12,857
Total Carbon & Graphite Products (Cost--$14,660) 14,660
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan Stated Value
Industry Amount Borrower Type Maturity* (Note 1b)
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <C> <C>
Chemicals-- $ 9,250 Cedar Chemical Term B 10/31/03 $ 9,250
2.23% 27,000 Freedom Chemical Company Term B 6/30/02 27,000
1,274 Harris Specialty Chemicals Term A 12/30/99 1,274
10,397 Harris Specialty Chemicals Term B 12/30/01 10,397
5,000 Hydrochem Term B 7/01/02 5,000
3,806 Inspec Chemical Corp. Term B 12/02/00 3,806
2,217 Thoro World Systems, Inc. Term A 12/31/00 2,217
4,874 Thoro World Systems, Inc. Term B 12/31/02 4,874
Total Chemicals (Cost--$63,818) 63,818
Consumer 10,032 CHF/Ebel USA Inc. Term B 9/28/01 10,032
Products--2.61% 3,387 Playtex Family Products Inc. Term 1 6/30/02 3,387
31,613 Playtex Family Products Inc. Term 2 6/30/02 31,613
7,250 RTI Funding Corp. Term B 2/07/03 7,250
7,250 RTI Funding Corp. Term C 2/07/04 7,250
15,000 Revlon Consumer Products Corp. Term B 6/30/97 15,000
Total Consumer Products (Cost--$74,532) 74,532
Containers--0.90% 9,000 Ivex Packaging Corp. Term 9/30/01 9,000
16,794 Silgan Corp. Term B 3/15/02 16,794
Total Containers (Cost--$25,794) 25,794
Diversified 9,203 InterMetro Industries Term B 6/30/01 9,203
Manufacturing-- 13,390 InterMetro Industries Term C 12/31/02 13,390
2.49% 4,410 The Pullman Co., Inc. Revolving Credit 12/31/99 4,410
8,909 The Pullman Co., Inc. Term A 12/31/99 8,909
618 The Pullman Co., Inc. Term B 12/31/99 618
2,784 Thermadyne Industries, Inc. Revolving Credit 12/02/99 2,784
3,250 Thermadyne Industries, Inc. Term A 12/02/98 3,250
23,668 Thermadyne Industries, Inc. Term B 2/01/01 23,668
Total Diversified Manufacturing (Cost--$66,232) 66,232
<PAGE>
Drug Stores-- 7,711 Duane Reade Co. Term A 9/30/97 7,711
1.04% 10,000 Duane Reade Co. Term B 9/30/99 10,000
1,930 Thrifty Payless Inc. Term B 9/30/01 1,930
9,975 Thrifty Payless Inc. Term C 6/30/02 9,975
Total Drug Stores (Cost--$29,616) 29,616
Electrical 10,511 Berg Electronics Inc. Term A 3/31/00 10,511
Instruments-- 959 Berg Electronics Inc. Term B 6/30/01 959
2.52% 5,650 Communications & Power Industries Inc. Term B 8/11/02 5,650
5,000 Details, Inc. Term A 1/31/01 5,000
9,985 International Wire Corp. Term B 9/30/02 9,985
12,947 Reliance Communications Technology Term B 2/01/03 12,947
11,951 Reliance Communications Technology Term C 2/01/04 11,951
7,500 Tracor Inc. Term B 10/31/00 7,500
7,500 Tracor Inc. Term C 4/30/01 7,500
Total Electrical Instruments (Cost--$72,003) 72,003
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan Stated Value
Industry Amount Borrower Type Maturity* (Note 1b)
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <C> <C>
Food & $ 7,500 Amerifoods Term B 6/30/99 $ 6,600
Beverage-- 7,500 Amerifoods Term C 6/30/01 6,600
5.18% 14,850 Labatt Brewing Co. Term B 10/01/03 14,850
9,900 MAFCO Worldwide Corp. Term B 6/30/01 9,900
4,932 President Baking Co., Inc. Term B 9/30/00 4,932
15,200 SC International Corp., Inc. Caterair 'A' 9/15/00 15,200
11,098 SC International Corp., Inc. Caterair 'B' 9/15/01 11,098
14,982 SC International Corp., Inc. SCI 'A2' 9/15/00 14,982
1,798 SC International Corp., Inc. SCI 'A' 9/15/00 1,798
13,831 SC International Corp., Inc. SCI 'B' 9/15/02 13,831
3,051 SC International Corp., Inc. SCI 'C' 9/15/03 3,051
2,000 Select Beverages Inc. Term B 6/30/01 2,000
3,000 Select Beverages Inc. Term C 6/30/01 3,000
40,139 Specialty Foods Corp. Term 4/30/01 40,139
Total Food & Beverage (Cost--$149,781) 147,981
Food 6,667 Volume Services Term B 12/31/02 6,667
Services--0.35% 3,333 Volume Services Term C 12/31/03 3,333
Total Food Services (Cost--$10,000) 10,000
<PAGE>
Furniture--0.44% 5,000 Furniture Brands International Term B 3/29/03 5,000
12,500 Knoll, Inc. Term B 8/31/03 12,500
Total Furniture (Cost--$17,500) 17,500
Grocery--2.88% 10,400 Big V Supermarkets Inc. Term B 3/15/00 10,400
4,316 Dominick's Finer Foods Inc. Term B 3/31/02 4,316
4,675 Dominick's Finer Foods Inc. Term C 3/31/03 4,675
4,675 Dominick's Finer Foods Inc. Term D 9/30/03 4,675
4,530 Pathmark Stores Inc. Term B 10/31/99 4,530
11,954 Ralph's Grocery Company Revolving Credit 6/15/01 11,954
13,361 Ralph's Grocery Company Term A 6/15/01 13,361
6,965 Ralph's Grocery Company Term B 6/15/02 6,965
6,965 Ralph's Grocery Company Term C 6/15/03 6,965
6,965 Ralph's Grocery Company Term D 2/15/04 6,965
4,197 Star Markets Co., Inc. Term B 12/31/01 4,197
3,145 Star Markets Co., Inc. Term C 12/31/02 3,145
Total Grocery--(Cost--$82,148) 82,148
Health 6,491 Medco Behavioral Care Corp. Term A 4/06/02 6,491
Services--2.28% 12,009 Medco Behavioral Care Corp. Term B 10/06/03 12,009
464 OrNda Health Corp. Revolving Credit 10/30/01 464
4,773 OrNda Health Corp. Term A 10/30/01 4,773
41,479 Tenet Healthcare Corp./N.M.E.(a) Term 8/31/01 41,479
Total Health Services (Cost--$65,216) 65,216
Leasing & Rental 19,840 Prime Acquisition Term 12/31/00 19,840
Services--0.69%
Total Leasing & Rental Services (Cost--$19,840) 19,840
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan Stated Value
Industry Amount Borrower Type Maturity* (Note 1b)
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <C> <C>
Leisure/ $ 4,167 Amfac Parks Term B 9/30/02 $ 4,167
Entertainment-- 10,000 Metro Goldwyn Mayer Co. Term 4/15/97 10,000
1.30% 3,955 Orion Pictures Corp. Term 12/31/00 3,955
18,948 Six Flags Entertainment Corp. Term B 6/23/03 18,948
Total Leisure/Entertainment (Cost--$37,070) 37,070
<PAGE>
Manufacturing-- 10,545 Calmar Inc. Axel A 9/15/03 10,545
1.45% 7,909 Calmar Inc. Axel B 3/15/04 7,909
5,148 Howmet Term B 11/20/02 5,148
2,832 Howmet Term C 5/20/03 2,832
15,000 Trans Technology Corp. Term B 6/30/02 15,000
Total Manufacturing (Cost--$41,434) 41,434
Materials, 9,462 Pierce Leahy Corp. Term B 10/27/02 9,462
Handling 5,538 Pierce Leahy Corp. Term C 10/27/03 5,538
& Storage--0.52%
Total Materials, Handling & Storage (Cost--$15,000) 15,000
Medical 1,823 Deknatel Holdings Corp. Term A 4/20/99 1,823
Devices--0.97% 15,000 Deknatel Holdings Corp. Term B 4/20/01 15,000
11,000 Graphic Controls Corp. Term B 9/28/03 11,000
Total Medical Devices (Cost--$27,823) 27,823
Message 5,000 Dictaphone Co. Term B 6/30/02 5,000
Communications--
0.18%
Total Message Communications (Cost--$5,000) 5,000
Nautical 10,394 Sperry Marine, Inc. Term B 11/15/00 10,394
Systems--0.36%
Total Nautical Systems (Cost--$10,394) 10,394
Paper--10.40% 4,333 Ampad/Williamhouse Regency, Inc. Term B 10/31/02 4,333
3,000 Ampad/Williamhouse Regency, Inc. Term C 10/31/03 3,000
2,667 Ampad/Williamhouse Regency, Inc. Term D 4/30/04 2,667
19,950 Crown Paper Co. Term B 8/22/03 19,950
450 Fort Howard Corp. Revolving Credit 3/16/02 450
11,297 Fort Howard Corp. Term A 3/16/02 11,297
43,209 Fort Howard Corp. Term B 12/31/02 43,209
375 Jefferson Smurfit Company/Container Corp.
of America Revolving Credit 4/30/01 375
38,949 Jefferson Smurfit Company/Container Corp.
of America Term A 4/30/01 38,949
49,386 Jefferson Smurfit Company/Container Corp.
of America Term B 4/30/02 49,386
13,309 Mail-Well, Inc./Supremex Term B 7/31/03 13,309
8,801 S.D. Warren Co. Term A 12/31/01 8,801
40,098 S.D. Warren Co. Term B 12/09/02 40,098
6,778 Stone Container Corp. Revolving Credit 4/01/00 6,778
37,014 Stone Container Corp. Term B 4/01/00 37,014
17,500 Stone Container Corp. Term C 4/01/00 17,500
Total Paper (Cost--$297,116) 297,116
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan Stated Value
Industry Amount Borrower Type Maturity* (Note 1b)
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <C> <C>
Printing & $ 6,000 K-III Communications Corp. Term 12/31/00 $ 6,000
Publishing-- 3,801 Print Tech International PLC Term B 12/28/01 3,801
0.34%
Total Printing & Publishing (Cost--$9,801) 9,801
Rendering--0.18% 5,000 CBP Resources Inc. Term B 9/30/03 5,000
Total Rendering (Cost--$5,000) 5,000
Retail-- 17,969 Federated Department Stores Inc. Revolving Credit 3/31/00 17,969
Specialty--4.31% 50,000 Federated Department Stores Inc. Term 3/31/00 50,000
21,938 Music Acquisition Term B 8/31/01 21,499
7,500 Music Acquisition Term C 2/28/02 7,350
3,750 Saks & Co. Term A 6/30/98 3,750
22,469 Saks & Co. Term B 6/30/00 22,469
Total Retail--Specialty (Cost--$123,626) 123,037
Telephone 13,034 MobileMedia Corp. Term A 6/30/02 13,034
Communications-- 9,667 MobileMedia Corp. Term B 6/30/03 9,667
0.79%
Total Telephone Communications (Cost--$22,701) 22,701
Telecommun- 29,333 Paging Network Inc. Term B 3/31/02 29,333
ications--2.08% 30,000 WorldCom/LDDS Term 12/31/00 30,000
Total Telecommunications (Cost--$59,333) 59,333
Textiles--0.87% 24,812 Chicopee, Inc. Term B 3/31/03 24,812
Total Textiles (Cost--$24,812) 24,812
<PAGE>
Transportation 8,551 Petro PSC Properties Term B 5/24/01 8,551
Services--0.30%
Total Transportation Services (Cost--$8,551) 8,551
Total Senior Secured Floating Rate Loan
Interests (Cost--$1,884,499)--65.87% 1,882,110
Shares
Held Equity Investments
Restaurants--0.01% 44 Flagstar Companies, Inc. 124
Total Equity Investments 124
Total Long-Term Investments
(Cost--$1,884,499)--65.88% 1,882,234
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Value
Short-Term Investments (Note 1b)
<S> <S> <C>
Commercial Associates Corp. of North America ($76,219 par, maturing
Paper**--24.94% 3/01/96, yielding 5.40%) $ 76,219
CS First Boston, Inc. ($20,000 par, maturing 4/08/96, yielding 5.23%) 19,890
Ciesco L.P. ($50,000 par, maturing 4/01/96, yielding 5.20%) 49,776
Ciesco L.P. ($40,000 par, maturing 4/04/96, yielding 5.15%) 39,805
Corporate Asset Funding Co. ($50,000 par, maturing 3/11/96,
yielding 5.18%) 49,928
Corporate Asset Funding Co. ($25,000 par, maturing 3/18/96,
yielding 5.18%) 24,939
Corporate Asset Funding Co. ($40,000 par, maturing 4/10/96,
yielding 5.14%) 39,771
Daimler-Benz AG ($41,700 par, maturing 3/04/96, yielding 5.35%) 41,681
Deutsche Bank Finance AG ($50,000 par, maturing 3/22/96, yielding 5.20%) 49,848
du Pont (E.I.) de Nemours & Company ($50,000 par, maturing 3/07/96,
yielding 5.16%) 49,957
du Pont (E.I.) de Nemours & Company ($25,000 par, maturing 3/22/96,
yielding 5.17%) 24,925
Ford Motor Credit Co. ($35,000 par, maturing 4/11/96, yielding 5.14%) 34,795
Morgan (J.P.) & Co. ($31,950 par, maturing 3/20/96, yielding 5.22%) 31,862
National Australia Funding, Inc. ($50,000 par, maturing 4/15/96,
yielding 5.11%) 49,681
National Fleet Fund, Inc. ($30,000 par, maturing 3/08/96, yielding 5.48%) 29,968
National Fleet Fund, Inc. ($25,000 par, maturing 4/03/96, yielding 5.20%) 24,881
Preferred Receivables Funding, Inc. ($30,000 par, maturing 4/03/96,
yielding 5.25%) 29,856
UBS Finance, Inc. (Delaware) ($45,000 par, maturing 3/13/96,
yielding 5.18%) 44,922
<PAGE>
Total Commercial Paper (Cost--$712,704) 712,704
US Government Federal Home Loan Bank ($30,000 par, maturing 3/04/96, yielding 5.08%) 29,987
& Agency Federal Home Loan Bank ($30,000 par, maturing 3/22/96, yielding 5.11%) 29,911
Obligations**--8.80% Federal Home Loan Bank ($62,000 par, maturing 3/29/96, yielding 5.12%) 61,753
Federal National Mortgage Association ($100,000 par, maturing 3/05/96,
yielding 5.08%) 99,944
Federal National Mortgage Association ($30,000 par, maturing 3/27/96,
yielding 5.16%) 29,888
Total US Government & Agency Obligations (Cost--$251,483) 251,483
Total Short-Term Investments (Cost--$964,187)--33.74% 964,187
Total Investments (Cost--$2,848,686)--99.62% 2,846,421
Other Assets Less Liabilities--0.38% 10,753
----------
Net Assets--100.00% $2,857,174
==========
<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 29, 1996.
**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.
(a)Name changed from National Medical Enterprises Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of February 29, 1996
<S> <S> <C> <C>
Assets: Investments, at value
(identified cost--$2,848,685,675) (Note 1b) $ 2,846,421,385
Receivables:
Capital shares sold $ 17,618,944
Interest 14,740,870
Commitment fees 177,443
Facility fees 93,750 32,631,007
----------------
Prepaid registration fees and other assets (Note 1f) 1,391,541
----------------
Total assets 2,880,443,933
----------------
<PAGE>
Liabilities: Payables:
Dividends to shareholders (Note 1g) 4,559,894
Investment adviser (Note 2) 2,093,737
Administrator (Note 2) 550,983 7,204,614
----------------
Deferred income (Note 1e) 14,766,489
Accrued expenses and other liabilities 1,298,819
----------------
Total liabilities 23,269,922
----------------
Net Assets: Net assets $ 2,857,174,011
================
Net Assets Common Stock, par value $0.10 per share; 1,000,000,000 shares
Consist of: authorized $ 28,550,733
Paid-in capital in excess of par 2,829,947,116
Accumulated investment loss--net (82,541)
Undistributed realized capital gains on investments--net 1,022,993
Unrealized depreciation on investments--net (Note 3) (2,264,290)
----------------
Net Assets--Equivalent to $10.01 per share based on 285,507,330
shares of beneficial interest outstanding $ 2,857,174,011
================
<CAPTION>
Statement of Operations
For the Six Months Ended February 29, 1996
<S> <S> <C> <C>
Investment Income Interest and discount earned $ 100,131,506
(Note 1e): Facility and other fees 2,195,043
----------------
Total income 102,326,549
----------------
Expenses: Investment advisory fees (Note 2) $ 11,786,225
Administrative fees (Note 2) 3,101,638
Transfer agent fees (Note 2) 615,035
Registration fees (Note 1f) 230,632
Accounting services (Note 2) 147,960
Professional fees 82,154
Custodian fees 72,705
Borrowing costs (Note 6) 69,513
Tender offer costs 59,768
Printing and shareholder reports 48,569
Directors' fees and expenses 17,790
Other 16,666
----------------
Total expenses 16,248,655
----------------
Investment income--net 86,077,894
----------------
<PAGE>
Realized & Realized gain on investments--net 162,466
Unrealized Change in unrealized appreciation/depreciation on
Gain (Loss) on investments--net (2,437,645)
Investments--Net ----------------
(Notes 1c, 1e & 3): Net Increase in Net Assets Resulting from Operations $ 83,802,715
================
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: February 29, 1996 August 31, 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 86,077,894 $ 107,081,243
Realized gain on investments--net 162,466 901,282
Change in unrealized appreciation/depreciation on
investments--net (2,437,645) (102,235)
---------------- ----------------
Net increase in net assets resulting from operations 83,802,715 107,880,290
---------------- ----------------
Dividends to Investment income--net (86,160,436) (107,081,243)
Shareholders ---------------- ----------------
(Note 1g): Net decrease in net assets resulting from dividends
to shareholders (86,160,436) (107,081,243)
---------------- ----------------
Capital Share Net increase in net assets resulting from capital
Transactions share transactions 696,062,119 1,228,207,869
(Note 4): ---------------- ----------------
Net Assets: Total increase in net assets 693,704,398 1,229,006,916
Beginning of period 2,163,469,613 934,462,697
---------------- ----------------
End of period $ 2,857,174,011 $ 2,163,469,613
================ ================
<PAGE>
<CAPTION>
Statement of Cash Flows
For the Six Months Ended
February 29, 1996
<S> <S> <C>
Cash Provided by Net increase in net assets resulting from operations $ 83,802,715
Operating Adjustments to reconcile net increase (decrease) in net assets resulting
Activities: from operations to net cash provided by operating activities:
Decrease in receivables 359,128
Decrease in other assets 227,924
Increase in other liabilities 2,692,567
Realized and unrealized loss on investments--net 2,275,179
Amortization of discount (18,718,422)
----------------
Net cash provided by operating activities 70,639,091
----------------
Cash Used for Proceeds from principal payments and sales of loan interests 612,900,587
Investing Purchases of loan interests (828,429,639)
Activities: Purchases of short-term investments--net (12,533,019,368)
Proceeds from sales and maturities of short-term investments--net 12,062,197,600
----------------
Net cash used for investing activities (686,350,820)
----------------
Cash Provided by Cash receipts on capital shares sold 741,844,219
Financing Cash payments on capital shares tendered (83,857,741)
Activities: Dividends paid to shareholders (42,274,749)
----------------
Net cash provided by financing activities 615,711,729
----------------
Cash: Net decrease in cash 0
Cash at beginning of period 0
----------------
Cash at end of period $ 0
================
Non-Cash Capital shares issued in reinvestment of dividends paid to shareholders $ 43,546,736
Financing ================
Activities:
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Six
Months Ended For the Year Ended August 31,
Increase (Decrease) in Net Asset Value: Feb. 29, 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.02 $ 10.02 $ 10.02 $ 9.99 $ 9.99
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .35 .75 .59 .53 .64
Realized and unrealized gain (loss) on
investments--net (.01) --++ --++ .03 --
-------- -------- -------- -------- --------
Total from investment operations .34 .75 .59 .56 .64
-------- -------- -------- -------- --------
Less dividends from investment income--net (.35) (.75) (.59) (.53) (.64)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.01 $ 10.02 $ 10.02 $ 10.02 $ 9.99
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.46%+++ 7.68% 5.94% 5.74% 6.58%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.31%* 1.34% 1.43% 1.47% 1.39%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.31%* 1.34% 1.43% 1.47% 1.41%
======== ======== ======== ======== ========
Investment income--net 6.92%* 7.45% 5.75% 5.27% 6.58%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in millions) $ 2,857 $ 2,163 $ 934 $ 713 $ 834
Data: ======== ======== ======== ======== ========
Portfolio turnover 34.43% 55.23% 61.31% 90.36% 46.48%
======== ======== ======== ======== ========
<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.
++Amount is less than $.01 per share.
+++Aggregrate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
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 presented. 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 29, 1996 could be
considered to be concentrated in commercial banking.
(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.
<PAGE>
* 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 Loan Interests are treated as discount
obligations.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends from net investment
income are 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 & Co.,
Inc. ("ML & Co."), which is the limited partner.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessarypersonnel, facilities, equipment and certain
other services necessary to perform this investment advisory
function.
NOTES TO FINANCIAL STATEMENTS (concluded)
<PAGE>
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 during any fiscal year which will cause
such expenses to exceed the most restrictive expense limitation at
the time of such payment.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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.,
MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended February 29, 1996 were $828,429,639 and
$612,900,587, respectively.
Net realized and unrealized gains (losses) as of February 29, 1996
were as follows:
Realized Unrealized
Gains Losses
Long-term investments $ 162,466 $ (2,264,290)
------------- -------------
Total $ 162,466 $ (2,264,290)
------------- -------------
As of February 29, 1996, net unrealized depreciation for financial
reporting and Federal income tax purposes aggregated $2,264,290, of
which $124,460 is related to appreciated securities, and $2,388,750
is related to depreciated securities. The aggregate cost of
investments at February 29, 1996 for Federal income tax purposes was
$2,848,685,675.
<PAGE>
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Dollar
Ended February 29, 1996 Shares Amount
Shares sold 73,561,942 $ 736,373,124
Shares issued to share-
holders in reinvestment
of dividends 4,350,323 43,546,736
-------------- --------------
Total issued 77,912,265 779,919,860
Shares tendered (8,377,397) (83,857,741)
-------------- --------------
Net increase 69,534,868 $ 696,062,119
============== ==============
For the Year Ended Dollar
August 31, 1995 Shares Amount
Shares sold 129,276,626 $1,294,302,365
Shares issued to share-
holders in reinvestment
of dividends 5,015,241 50,211,612
-------------- --------------
Total issued 134,291,867 1,344,513,977
Shares tendered (11,618,992) (116,306,108)
-------------- --------------
Net increase 122,672,875 $1,228,207,869
============== ==============
5. Unfunded Loan Interests:
As of February 29, 1996, the Fund had unfunded loan commitments of
$173,461,573, which would be extended at the option of the borrower,
pursuant to the following loan agreements:
<PAGE>
Unfunded
Commitment
Borrower (in thousands)
Jefferson Smurfit Company/
Container Corp. of America $ 2,683
Federated Department Stores Inc. 43,817
Fort Howard Corp. 2,252
Gulfstream Aerospace Corp. 10,192
Marcus Cable Operating Co. 10,063
MobileMedia Corp. 1,633
OrNda Health Corp. 4,643
Overhead Door Corp. 2,250
The Pullman Co., Inc. 2,116
Ralph's Grocery Company 14,296
SC International Corp., Inc. 18,000
Stone Container Corp. 23,222
Tenet Healthcare Corp./N.M.E. 5,000
Thermadyne Industries, Inc. 2,219
UCAR International Inc. 6,796
Western Wireless 9,280
Westinghouse Electric Corp. 15,000
6. Short-Term Borrowings:
On March 14, 1996, the Fund extended its loan commitment from a
commercial bank. The commitment is for $100,000,000 bearing interest
at the Federal Funds Rate plus 0.50%--1.5% on the outstanding
balance. The Fund had no borrowings under this commitment during the
six months ended February 29, 1996. For the six months ended
February 29, 1996, facility and commitment fees aggregated
approximately $70,000.
7. Subsequent Event:
The Fund began a quarterly tender offer on March 20, 1996 which
concludes on April 16, 1996.
<PAGE>
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
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
