<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1999
SECURITIES ACT FILE NO. 333-15973
INVESTMENT COMPANY ACT FILE NO. 811-5870
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
(Name of Issuer)
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
(Name of Person(s) Filing Statement)
SHARES OF COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class of Securities)
59019R 10 5
(CUSIP Number of Class of Securities)
TERRY K. GLENN
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(609) 282-2800
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Person(s) Filing Statement)
COPIES TO:
<TABLE>
<S> <C>
THOMAS R. SMITH, JR., ESQ. BRADLEY J. LUCIDO, ESQ.
BROWN & WOOD LLP MERRILL LYNCH ASSET MANAGEMENT, L.P.
ONE WORLD TRADE CENTER P.O. BOX 9011
NEW YORK, NEW YORK 10048-0557 PRINCETON, NEW JERSEY 08543-9011
DECEMBER 17, 1999
(Date Tender Offer First Published,
Sent or Given to Security Holders)
</TABLE>
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Transaction Valuation: $439,530,000(a) Amount of Filing Fee: $87,906(b)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) Calculated as the aggregate maximum purchase price to be paid for 45,500,000
shares in the offer, based upon the net asset value per share ($9.66) at
December 14, 1999.
(b) Calculated as 1/50th of 1% of the Transaction Valuation.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: ________________________________________________________
Form or Registration No.: ______________________________________________________
Filing Party: __________________________________________________________________
Date of Filing: ________________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Merrill Lynch Senior Floating Rate Fund, Inc.,
a closed-end investment company organized as a Maryland corporation (the
"Fund"). The principal executive offices of the Fund are located at
800 Scudders Mill Road, Plainsboro, New Jersey 08536.
(b) The title of the securities being sought is shares of common stock, par
value $0.10 per share (the "Shares"). As of November 30, 1999 there were
approximately 303.5 million Shares issued and outstanding.
The Fund is seeking tenders for 45,500,000 Shares (the "Offer"), at net
asset value per Share (the "NAV") calculated on the day the tender offer
terminates, less any "Early Withdrawal Charge," upon the terms and subject to
the conditions set forth in the Offer to Purchase dated December 17, 1999 (the
"Offer to Purchase"). A copy of each of the Offer to Purchase and the related
Letter of Transmittal is attached hereto as Exhibit (a)(1)(ii) and
Exhibit (a)(2), respectively. Reference is hereby made to the Cover Page and
Section 1 "Price; Number of Shares" of the Offer to Purchase, which are
incorporated herein by reference. The Fund has been informed that no Directors,
officers or affiliates of the Fund intend to tender Shares pursuant to the
Offer.
(c) The Shares are not currently traded on an established trading market.
(d) Not Applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is hereby made to Section 9 "Source and Amount of Funds"
of the Offer to Purchase, which is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
Reference is hereby made to Section 7 "Purpose of the Offer," Section 8
"Certain Effects of the Offer" and Section 9 "Source and Amount of Funds" of the
Offer to Purchase, which are incorporated herein by reference. The Fund is
currently engaged in a public offering, from time to time, of its Shares. The
Fund otherwise has no plans or proposals which relate to or would result in
(a) the acquisition by any person of additional securities of the Fund or the
disposition of securities of the Fund; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Fund; (c) a sale or transfer of a material amount of assets of the Fund;
(d) any change in the present Board of Directors or management of the Fund,
including, but not limited to, any plans or proposals to change the number or
the term of Directors, or to fill any existing vacancy on the Board or to change
any material term of the employment contract of any executive officer; (e) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Fund; (f) any other material change in the Fund's
corporate structure or business, including any plans or proposals to make any
changes in its investment policy for which a vote would be required by Section
13 of the Investment Company Act of 1940, as amended; or (g) changes in the
Fund's articles of incorporation, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of the Fund by any
person. Paragraphs (h) through (j) of this Item 3 are not applicable.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
There have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or Director of the Fund, any person controlling the Fund, any executive
officer or director of any corporation ultimately in control of the Fund or by
any associate or subsidiary of any of the foregoing including any executive
officer or director of any such subsidiary, except that within the past 40
business days pursuant to the public offering of its Shares the Fund has sold
approximately 3.5 million Shares at a price equal to the NAV of the Fund on the
date of each such sale.
i
<PAGE>
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
The Fund does not know of any contract, arrangement, understanding or
relationship relating directly or indirectly, to the Offer (whether or not
legally enforceable) between the Fund, any of the Fund's executive officers or
Directors, any person controlling the Fund or any executive officer or director
of any corporation ultimately in control of the Fund and any person with respect
to any securities of the Fund (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss, or the giving or
withholding of proxies, consents or authorizations).
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No persons have been employed, retained or are to be compensated by the Fund
to make solicitations or recommendations in connection with the Offer.
ITEM 7. FINANCIAL INFORMATION.
(a) Reference is hereby made to the financial statements included as
Exhibits (g)(1) and (g)(2) hereto, which are incorporated herein by reference.
(b) None.
ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) None.
(c) Not Applicable.
(d) None.
(e) The Offer to Purchase, attached hereto as Exhibit (a)(1)(ii), is
incorporated herein by reference in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
(a)(1) (i) Advertisement to be printed in THE WALL STREET JOURNAL.
(ii) Offer to Purchase.
(a)(2) Form of Letter of Transmittal.
(a)(3) Letter to Stockholders.
(b)(1) Form of Loan Agreement by and between The Bank of New York
and the Fund.*
(b)(2) Extension of Termination Date and Amendment No. 1 to the
Loan Agreement dated June 21, 1999.**
(c) Not Applicable.
(d)-(f) Not Applicable.
(g)(1) Audited Financial Statements of the Fund for the fiscal year
ended August 31, 1998.
(g)(2) Audited Financial Statements of the Fund for the fiscal year
ended August 31, 1999.
</TABLE>
- ------------------------
* Previously filed in the Fund's Tender Offer Statement as filed with the
Securities and Exchange Commission on June 23, 1998.
** Previously filed in the Fund's Tender Offer Statements as filed with the
Securities and Exchange Commission on June 22, 1999.
ii
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
MERRILL LYNCH SENIOR FLOATING RATE FUND,
INC.
By /s/ TERRY K. GLENN
...........................
(Terry K. Glenn,
President)
December 17, 1999
iii
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
- ----------
<S> <C>
(a)(1)(i) Advertisement to be printed in THE WALL STREET JOURNAL.
(a)(1)(ii) Offer to Purchase.
(a)(2) Form of Letter of Transmittal.
(a)(3) Letter to Stockholders.
(g)(1) Audited Financial Statements of the Fund for the fiscal year
ended August 31, 1998.
(g)(2) Audited Financial Statements of the Fund for the fiscal year
ended August 31, 1999.
</TABLE>
iv
<PAGE>
EXHIBIT (a)(1)(i)
<PAGE>
THIS ANNOUNCEMENT IS NOT AN OFFER TO PURCHASE OR A SOLICITATION OF AN OFFER TO
SELL SHARES. THE OFFER IS MADE ONLY BY THE OFFER TO PURCHASE DATED DECEMBER 17,
1999, AND THE RELATED LETTER OF TRANSMITTAL. THE OFFER IS NOT BEING MADE TO, NOR
WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF SHARES IN ANY
JURISDICTION IN WHICH MAKING OR ACCEPTING THE OFFER WOULD VIOLATE THAT
JURISDICTION'S LAWS.
[LOGO]
NOTICE OF OFFER TO PURCHASE FOR CASH 45,500,000 OF ITS
ISSUED AND OUTSTANDING SHARES AT NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE ARE 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JANUARY 18, 2000, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
Merrill Lynch Senior Floating Rate Fund, Inc. (the "Fund") is offering to
purchase 45,500,000 of its issued and outstanding shares of common stock par
value $.10 per share (the "Shares") at a price equal to their net asset value
("NAV") less any applicable early withdrawal charge as of the close of the New
York Stock Exchange on the Expiration Date, January 18, 2000, unless extended,
upon the terms and conditions set forth in the Offer to Purchase dated
December 17, 1999 (the "Offer"). The NAV on December 14, 1999, was $9.66 per
Share. The purpose of the Offer is to provide liquidity to stockholders since
the Fund is unaware of any secondary market which exists for the Shares. The
Offer is not conditioned upon the tender of any minimum number of Shares.
If more than 45,500,000 Shares are duly tendered prior to the expiration of
the Offer, assuming no changes in the factors originally considered by the Board
of Directors when it determined to make the Offer, the Fund will either extend
the Offer period, if necessary, and increase the number of Shares that the Fund
is offering to purchase to an amount which it believes will be sufficient to
accommodate the excess Shares tendered, as well as any Shares tendered during
the extended Offer period, or purchase 45,500,000 Shares (or such larger number
of Shares sought) on a pro rata basis.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
12:00 midnight, New York City time, on Tuesday, January 18, 2000, unless the
Offer is extended, and, if not yet accepted for payment by the Fund, Shares may
also be withdrawn after February 15, 2000.
The information required to be disclosed by paragraph (d)(1) of Rule 13e-4
under the Securities Exchange Act of 1934, as amended, is contained in the Offer
to Purchase and is incorporated herein by reference.
The Offer to Purchase and the related Letter of Transmittal contain
important information that should be read carefully before any decision is made
with respect to the Offer.
Questions and requests for assistance, for current NAV quotations or for
copies of the Offer to Purchase, Letter of Transmittal, and any other tender
offer documents, may be directed to the Merrill Lynch Response Center at the
address and telephone number below. Copies will be furnished promptly at no
expense to you and also may be obtained by completing and returning the coupon
below to the Merrill Lynch Response Center. Stockholders who do not own Shares
directly should effect a tender through their broker, dealer or nominee. For
example, stockholders who purchased Shares through Merrill Lynch, Pierce, Fenner
& Smith Incorporated should effect tenders through their Financial Consultant.
1-800-MERRILL, EXT. 4302
1-800-637-7455
<TABLE>
<S> <C>
- --------------------------------------------------
MAIL TO: MERRILL LYNCH RESPONSE CENTER,
P.O. BOX 30200, NEW BRUNSWICK, NJ
08989-0200
/ / PLEASE SEND ME MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC. TENDER OFFER MATERIALS
NAME ADDRESS
BUSINESS PHONE CITY
HOME PHONE STATE ZIP
MERRILL LYNCH CLIENTS, PLEASE GIVE THE NAME AND
OFFICE ADDRESS OF YOUR FINANCIAL CONSULTANT:
- --------------------------------------------------
4302
</TABLE>
December 17, 1999
[LOGO]
<PAGE>
EXHIBIT (a)(1)(ii)
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
OFFER TO PURCHASE FOR CASH 45,500,000
OF ITS ISSUED AND OUTSTANDING SHARES
AT NET ASSET VALUE PER SHARE
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON JANUARY 18, 2000, UNLESS EXTENDED.
To the Holders of Shares of
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.:
The Fund is offering to purchase up to 45,500,000 of its shares of common
stock, par value $.10 per share (the "Shares"), for cash at a price equal to
their net asset value ("NAV"), less any applicable Early Withdrawal Charge, as
of the close of the New York Stock Exchange on January 18, 2000, the Expiration
Date, unless extended, upon the terms and conditions set forth in this Offer to
Purchase (the "Offer") and the related Letter of Transmittal. The Shares are not
currently traded on an established secondary market. The NAV on December 14,
1999 was $9.66 per Share. You can obtain current NAV quotations from your
Merrill Lynch Financial Consultant or the Merrill Lynch, Pierce, Fenner & Smith
Incorporated Response Center (the "Merrill Lynch Response Center") (See Section
1). The Fund presently intends each quarter to consider making a tender offer
for its Shares at a price equal to their current NAV.
If more than 45,500,000 Shares are duly tendered prior to the expiration of
the Offer, assuming no changes in the factors originally considered by the Board
of Directors when it determined to make the Offer, the Fund will either
(1) extend the Offer period, if necessary, and increase the number of Shares
that the Fund is offering to purchase to an amount which it believes will be
sufficient to accommodate the excess Shares tendered as well as any Shares
tendered during the extended Offer period or (2) purchase 45,500,000 Shares (or
such greater number of Shares sought) on a pro rata basis.
THIS OFFER IS BEING MADE TO ALL STOCKHOLDERS OF THE FUND AND IS NOT
CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
IMPORTANT
If you desire to tender all or any portion of your Shares, you should either
(1) request your broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for you or (2) if you own your Shares directly,
complete and sign the Letter of Transmittal and mail or deliver it along with
any Share certificate(s) and any other required documents to the Fund's transfer
agent, Financial Data Services, Inc. (the "Transfer Agent"). If your Shares are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee, you must contact such broker, dealer, commercial bank, trust
company or other nominee if you desire to tender your Shares. Shares held in
your Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
brokerage account are registered in the name of Merrill Lynch and are not held
by you directly. Merrill Lynch may charge its customers a $5.35 processing fee
to confirm a repurchase of Shares from such customers pursuant to the Offer.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. EACH
STOCKHOLDER MUST MAKE HIS OWN DECISION WHETHER TO TENDER SHARES, AND IF SO, HOW
MANY SHARES TO TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
FUND AS TO WHETHER STOCKHOLDERS SHOULD TENDER SHARES PURSUANT TO THE OFFER. NO
PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND.
<PAGE>
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Questions and requests for assistance may be directed to your Merrill Lynch
Financial Consultant or other nominee, or to the Transfer Agent at the address
and telephone number set forth below. Requests for additional copies of this
Offer to Purchase and the Letter of Transmittal should be directed to the
Merrill Lynch Response Center.
<TABLE>
<S> <C>
December 17, 1999 MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
Merrill Lynch Response Center Transfer Agent: Financial Data
P.O. Box 30200 Services, Inc.
New Brunswick, New Jersey 08989-0200 Attn: Merrill Lynch Senior Floating Rate
Attn: Merrill Lynch Senior Floating Rate Fund, Inc.
Fund, Inc. P.O. Box 45289
(800) 637-7455, ext. 4302 Jacksonville, Florida 32232-5289
(800) 637-3863
</TABLE>
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTIONS PAGE
- --------------------- --------
<C> <S> <C>
1. Price; Number of Shares..................................... 3
2. Procedure for Tendering Shares.............................. 3
3. Early Withdrawal Charge..................................... 4
4. Withdrawal Rights........................................... 5
5. Payment for Shares.......................................... 5
6. Certain Conditions of the Offer............................. 5
7. Purpose of the Offer........................................ 6
8. Certain Effects of the Offer................................ 6
9. Source and Amount of Funds.................................. 6
10. Summary of Selected Financial Information................... 7
11. Certain Information About the Fund.......................... 8
12. Additional Information...................................... 8
13. Certain Federal Income Tax Consequences..................... 8
14. Extension of Tender Period; Termination; Amendments......... 9
15. Miscellaneous............................................... 10
</TABLE>
2
<PAGE>
1. PRICE; NUMBER OF SHARES. The Fund will, upon the terms and subject to
the conditions of the Offer, purchase up to 45,500,000 of its issued and
outstanding Shares which are tendered and not withdrawn prior to 12:00 midnight,
New York City time, on January 18, 2000 (such time and date being hereinafter
called the "Initial Expiration Date"), unless it determines to accept none of
them. The Fund reserves the right to extend the Offer (See Section 14). The
later of the Initial Expiration Date or the latest time and date to which the
Offer is extended is hereinafter called the "Expiration Date." The purchase
price of the Shares will be their NAV as of the close of the New York Stock
Exchange on the Expiration Date. An Early Withdrawal Charge to recover
distribution expenses will be assessed on Shares accepted for purchase which
have been held for less than the applicable holding period (See Section 3).
The Offer is being made to all stockholders of the Fund and is not
conditioned upon any number of Shares being tendered. If more than 45,500,000
Shares are duly tendered prior to the expiration of the Offer, assuming no
changes in the factors originally considered by the Board of Directors when it
initially determined to make the Offer, the Fund will either (1) extend the
Offer period, if necessary, and increase the number of Shares that the Fund is
offering to purchase to an amount which it believes will be sufficient to
accommodate the excess Shares tendered as well as any Shares tendered during the
extended Offer period or (2) purchase 45,500,000 Shares (or greater number of
Shares sought) on a pro rata basis.
As of November 30, 1999 there were approximately 305.5 million Shares issued
and outstanding and there were 3,157 holders of record of Shares (in addition,
Merrill Lynch maintains accounts for 92,957 beneficial owners of Shares). The
Fund has been informed that none of the Directors, officers or affiliates of the
Fund intends to tender any Shares pursuant to the Offer. The Shares currently
are not traded on any established secondary market. Current NAV quotations for
the Shares can be obtained from your Merrill Lynch Financial Consultant or from
the Merrill Lynch Response Center at (800) 637-7455, ext. 4302.
2. PROCEDURE FOR TENDERING SHARES. In order for you to tender any of your
Shares pursuant to the Offer, you may either: (a) request your broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
you, in which case a Letter of Transmittal is not required or (b) if the Shares
are registered in your name, send to the Transfer Agent, at the address set
forth on page 2, any certificates for such Shares, a properly completed and
executed Letter of Transmittal and any other documents required therein. Please
contact the Merrill Lynch Response Center at (800) 637-7455, ext. 4302 as to any
additional documents which may be required.
A. PROCEDURES FOR BENEFICIAL OWNERS HOLDING SHARES THROUGH MERRILL LYNCH OR
OTHER BROKERS OR NOMINEES.
If your Shares are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee, you must contact such broker, dealer,
commercial bank, trust company or other nominee if you desire to tender your
Shares. You should contact such broker, dealer, commercial bank, trust company
or other nominee in sufficient time to permit notification of your desire to
tender to reach the Transfer Agent by the Expiration Date. No brokerage
commission will be charged on the purchase of Shares by the Fund pursuant to the
Offer. However, a broker or dealer may charge a fee for processing the
transaction on your behalf. Merrill Lynch may charge its customers a $5.35
processing fee to confirm a purchase of Shares pursuant to the Offer.
B. PROCEDURES FOR REGISTERED STOCKHOLDERS.
If you will be mailing or delivering the Letter of Transmittal and any other
required documents to the Transfer Agent in order to tender your Shares, they
must be received on or prior to the Expiration Date by the Transfer Agent at its
address set forth on page 2 of this Offer to Purchase.
Signatures on the Letter of Transmittal MUST be guaranteed by an "eligible
guarantor institution" as such is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, the existence and validity of which may be verified by the
Transfer Agent through the use of industry publications. Notarized signatures
are not sufficient.
3
<PAGE>
Payment for Shares tendered and purchased will be made only after receipt by
the Transfer Agent on or before the Expiration Date of a properly completed and
duly executed Letter of Transmittal and any other required documents. If your
Shares are evidenced by certificates, those certificates must also be received
by the Transfer Agent on or prior to the Expiration Date.
THE METHOD OF DELIVERY OF ANY DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE PARTY TENDERING THE SHARES. IF DOCUMENTS ARE
SENT BY MAIL, IT IS RECOMMENDED THAT THEY BE SENT BY REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED.
C. DETERMINATIONS OF VALIDITY.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tenders will be determined by the Fund, in its sole
discretion, whose determination shall be final and binding. The Fund reserves
the absolute right to reject any or all tenders determined by it not to be in
appropriate form or the acceptance of or payment for which would, in the opinion
of counsel for the Fund, be unlawful. The Fund also reserves the absolute right
to waive any of the conditions of the Offer or any defect in any tender with
respect to any particular Shares or any particular stockholder, and the Fund's
interpretations of the terms and conditions of the Offer will be final and
binding. Unless waived, any defects or irregularities in connection with tenders
must be cured within such times as the Fund shall determine. Tenders will not be
deemed to have been made until the defects or irregularities have been cured or
waived. Neither the Fund, its investment adviser and administrator, Merrill
Lynch Asset Management, L.P. ("MLAM"), nor the Transfer Agent, nor any other
person shall be obligated to give notice of any defects or irregularities in
tenders, nor shall any of them incur any liability for failure to give such
notice.
D. TENDER CONSTITUTES AN AGREEMENT.
A tender of Shares made pursuant to any one of the procedures set forth
above will constitute an agreement between the tendering stockholder and the
Fund in accordance with the terms and subject to the conditions of the Offer.
3. EARLY WITHDRAWAL CHARGE. The Fund will assess an Early Withdrawal
Charge on Shares accepted for purchase which have been held for less than three
years. The charge will be paid to Merrill Lynch Funds Distributor, Inc. (the
"Distributor"), a wholly owned subsidiary of MLAM and the distributor of the
Shares, to recover distribution expenses. The Early Withdrawal Charge will be
imposed on those Shares accepted for tender based on an amount equal to the
lesser of the then current net asset value of the Shares or the cost of the
Shares being tendered. Accordingly, the Early Withdrawal Charge is not imposed
on increases in the net asset value above the initial purchase price. In
addition, the Early Withdrawal Charge is not imposed on Shares derived from
reinvestments of dividends or capital gains distributions. In determining
whether an Early Withdrawal Charge is payable, it is assumed that the acceptance
of an offer to purchase tendered Shares will be made first from Shares acquired
through dividend reinvestment and then from the earliest outright purchase of
Shares. The Early Withdrawal Charge imposed will vary depending on the length of
time the Shares have been owned since purchase (separate purchases shall not be
aggregated for these purposes), as set forth in the following table:
<TABLE>
<CAPTION>
EARLY
YEAR OF TENDER AFTER PURCHASE WITHDRAWAL CHARGE
- ----------------------------- -----------------
<S> <C>
First.................................................. 3.0%
Second................................................. 2.0%
Third.................................................. 1.0%
Fourth and following................................... 0.0%
</TABLE>
4
<PAGE>
In determining whether an Early Withdrawal Charge is applicable to a tender
of Shares, the calculation will be determined in the manner that results in the
lowest possible amount being charged. Therefore, it will be assumed that the
tender is first of Shares acquired through dividend reinvestment and of Shares
held for over three years and then of Shares held longest during the three-year
period. The Early Withdrawal Charge will not be applied to dollar amounts
representing an increase in the net asset value since the time of purchase. The
Early Withdrawal Charge may be waived on Shares tendered following the death of
all beneficial owners of such Shares, provided the Shares are tendered within
one year of death (a death certificate and other applicable documents may be
required) or if later, reasonably promptly following completion of probate, or
in connection with involuntary termination of an account in which Fund Shares
are held. At the time of acceptance of the Offer, the record or succeeding
beneficial owner must notify the Transfer Agent either directly or indirectly
through the Distributor that the Early Withdrawal Charge should be waived. Upon
confirmation of the owner's entitlement, the waiver will be granted; otherwise,
the waiver will be lost.
4. WITHDRAWAL RIGHTS. You may withdraw Shares tendered at any time prior
to the Expiration Date and, if the Shares have not yet been accepted for payment
by the Fund, at any time after February 15, 2000.
Stockholders whose accounts are maintained through Merrill Lynch should
notify their Financial Consultant prior to the Expiration Date if they wish to
withdraw Shares. Stockholders whose accounts are maintained through another
broker, dealer, commercial bank, trust company or other nominee should notify
such nominee prior to the Expiration Date. Shareholders whose accounts are
maintained directly through the Transfer Agent should submit written notice to
the Transfer Agent.
To be effective, any notice of withdrawal must be timely received by the
Transfer Agent at the address set forth on page 2 of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person having deposited the
Shares to be withdrawn, the number of Shares to be withdrawn, and, if the
certificates representing such Shares have been delivered or otherwise
identified to the Transfer Agent, the name of the registered holder(s) of such
Shares as set forth in such certificates and the number of Shares to be
withdrawn. If the certificates have been delivered to the Transfer Agent, then,
prior to the release of such certificate, you must also submit the certificate
numbers shown on the particular certificates evidencing such Shares and the
signature on the notice of the withdrawal must be guaranteed by an Eligible
Institution. All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by the Fund in its sole
discretion, whose determination shall be final and binding. Shares properly
withdrawn shall not thereafter be deemed to be tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by following one of the
procedures described in Section 2 prior to the Expiration Date.
5. PAYMENT FOR SHARES. For purposes of the Offer, the Fund will be deemed
to have accepted for payment (and thereby purchased) Shares which are tendered
as, if and when it gives oral or written notice to the Transfer Agent of its
election to purchase such Shares.
Payment for Shares will be made promptly by the Transfer Agent to tendering
stockholders as directed by the Fund. Certificates for Shares not purchased (see
Sections 1 and 6), or for Shares not tendered included in certificates forwarded
to the Transfer Agent, will be returned promptly following the termination,
expiration or withdrawal of the Offer, without expense to the tendering
stockholder.
The Fund will pay all transfer taxes, if any, payable on the transfer to it
of Shares purchased pursuant to the Offer. If tendered certificates are
registered in the name of any person other than the person signing the Letter of
Transmittal, the amount of any such transfer taxes (whether imposed on the
registered holder or such other person) payable on account of the transfer to
such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted. The
Fund will not pay any interest on the purchase price under any circumstances.
As noted above, Merrill Lynch may charge its customers a $5.35 processing
fee to confirm a purchase of Shares from such customers pursuant to the Offer.
6. CERTAIN CONDITIONS OF THE OFFER. The Fund shall not be required to
accept for payment or pay for any Shares tendered, and may terminate or amend
the Offer or may postpone the acceptance for payment
5
<PAGE>
of or payment for Shares tendered, if: (1) such purchases would impair the
Fund's status as a regulated investment company under the Internal Revenue Code
(which would make the Fund a taxable entity, causing the Fund's income to be
taxed at the corporate level in addition to the taxation of stockholders who
receive dividends from the Fund); (2) the Fund would not be able to liquidate
portfolio securities in a manner which is orderly and consistent with the Fund's
investment objective and policies in order to purchase Shares tendered pursuant
to the Offer; or (3) there is, in the Board's judgment, any (a) legal action or
proceeding instituted or threatened challenging the Offer or otherwise
materially adversely affecting the Fund, (b) declaration of a banking moratorium
by Federal or state authorities or any suspension of payment by banks in the
United States or New York State, which is material to the Fund, (c) limitation
imposed by Federal or state authorities on the extension of credit by lending
institutions, (d) commencement of war, armed hostilities or other international
or national calamity directly or indirectly involving the United States which is
material to the Fund, or (e) other event or condition which would have a
material adverse effect on the Fund or its stockholders if Shares tendered
pursuant to the Offer were purchased.
If the Fund determines to amend the Offer or to postpone the acceptance for
payment of or payment for Shares tendered, it will, to the extent necessary,
extend the period of time during which the Offer is open as provided in
Section 14. Moreover, in the event any of the foregoing conditions are modified
or waived in whole or in part at any time, the Fund will promptly make a public
announcement of such waiver and may, depending on the materiality of the
modification or waiver, extend the Offer period as provided in Section 14.
7. PURPOSE OF THE OFFER. The Fund does not currently believe there will be
an active secondary market for its Shares. The Board of Directors has determined
that it would be in the best interest of stockholders for the Fund to take
action to attempt to provide liquidity to stockholders. To that end, the
Directors presently intend each quarter to consider the making of a tender offer
to purchase the Shares at NAV. The Fund will at no time be required to make any
such tender offer.
8. CERTAIN EFFECTS OF THE OFFER. The Purchase of Shares pursuant to the
Offer will have the effect of increasing the proportionate interest in the Fund
of stockholders who do not tender their Shares. If you retain your Shares,
however, you will be subject to any increased risks that may result from the
reduction in the Fund's aggregate assets resulting from payment for the Shares,
including, for example, the potential for greater volatility due to decreased
diversification and higher expenses. However, the Fund believes that those risks
will be reduced to the extent new Shares of the Fund are sold. All Shares
purchased by the Fund pursuant to the Offer will be retired by the Board of
Directors of the Fund.
9. SOURCE AND AMOUNT OF FUNDS. The aggregate purchase price if 45,500,000
Shares are tendered and accepted for payment pursuant to the Offer will be
approximately $439,530,000. The Fund anticipates that the purchase price for any
Shares acquired pursuant to the Offer may be derived from (i) cash on hand,
(ii) the proceeds of the sale of cash equivalents held by the Fund, (iii) the
proceeds of sales of portfolio investments held by the Fund and/or
(iv) borrowings by the Fund. If, in the judgment of the Directors, there is not
sufficient liquidity of the assets of the Fund, or availability of funds from
borrowings, to pay for tendered Shares, the Fund may terminate the Offer.
The Fund entered into an agreement with The Bank of New York ("BONY"),
providing for an unsecured revolving credit facility (the "Facility"). Unless
otherwise extended, the Facility will terminate on June 19, 2000. The proceeds
of the Facility may be used to finance the payment for Shares tendered in a
tender offer by the Fund and to pay fees and expenses incurred in connection
with the Facility. The Facility enables the Fund to borrow up to $100,000,000 at
a rate of interest equal to, at the Fund's option, the sum of the federal funds
rate (i.e., the rate at which BONY is offered overnight Federal funds by a
Federal funds broker selected by BONY) plus the Applicable Margin (defined
below) or the sum of the Eurodollar rate (based on the rates quoted by BONY to
leading banks in the London interbank eurodollar market as the rate at which
BONY is offering dollar deposits) plus the Applicable Margin (defined below).
The Applicable Margin means 0.50% per annum. Interest on borrowings is
calculated on the basis of a year of 360 days for the actual number of days
elapsed and is payable in arrears on the last day of each month in the case of
borrowings that bear interest at the Federal funds rate, and at the end of the
interest period selected by the Fund in the case of borrowings that bear
interest at the Eurodollar rate. The Fund agrees to
6
<PAGE>
pay to the Bank a fee (the "commitment fee") for the period from and including
the effective date to but excluding the date of the expiration or other
termination of the commitment, equal to 0.08% per annum of the unused portion of
the commitment, payable quarterly in arrears on the last day of each June,
September, December and March of each year and on the date of the expiration or
other termination of the commitment. The commitment fee shall be calculated on
the basis of a 360-day year for the actual number of days elapsed. Each loan
must be repaid at the earlier of (i) 90 days from the borrowing date of such
loan and (ii) one business day prior to the date on which the Fund's next tender
offer expires. Borrowings under the Facility, if any, may be repaid with the
proceeds of portfolio investments sold by the Fund subsequent to the expiration
date of a tender offer.
The terms of the Facility may be modified by written agreement of the
parties thereto. The Facility requires the Fund to maintain a Borrowing Base
(defined as the sum of the value of all securities held by the Fund (less
liabilities) plus the debt outstanding under the Facility, less non-performing
assets) of not less than 300% of the outstanding principal balance of borrowings
under the Facility and accrued interest. During the term of the Facility, the
Fund may not incur indebtedness except for indebtedness incurred under the
Facility, in hedging transactions, for purchases of securities on short-term
credit as may be necessary for the clearance of sales or purchases of portfolio
securities and for overdrafts extended by the custodian. Additionally, during
the term of the Facility, the Fund is restricted with respect to the declaration
or payment of dividends and the repurchase of shares pursuant to tender offers.
Pursuant to such agreement, as long as certain defaults have not occurred and
are not continuing under the Facility, the Fund may (i) make its periodic
dividend payments to shareholders in an amount not in excess of its net
investment income (and net realized capital gains not previously distributed to
shareholders) for such period, (ii) distribute each year all of its net
investment income (including net realized capital gains) so that it will not be
subject to tax under the Federal tax laws and (iii) repurchase its shares
pursuant to tender offers.
Under the Investment Company Act of 1940 (the "1940 Act"), the Fund is not
permitted to incur indebtedness unless immediately after such incurrence the
Fund has an asset coverage of 300% of the aggregate outstanding principal
balance of indebtedness. Additionally, under the 1940 Act the Fund may not
declare any dividend or other distribution upon any class of its capital stock,
or purchase any such capital stock, unless the aggregate indebtedness of the
Fund has at the time of the declaration of any such dividend or distribution or
at the time of any such purchase an asset coverage of at least 300% after
deducting the amount of such dividend, distribution, or purchase price, as the
case may be.
10. SUMMARY OF SELECTED FINANCIAL INFORMATION. Set forth below is a
summary of selected financial information for the Fund for the fiscal years
ended 1998 and 1999. The information with respect to the fiscal years ended
August 31, 1998 and 1999 has been excerpted from the Fund's audited financial
statements. More comprehensive financial information is included in such reports
(copies of which have been filed as exhibits to the Schedule 13E-4 filed with
the Securities and Exchange Commission (the "SEC") in connection with the Offer
and may be obtained from the Transfer Agent) and the summary of selected
financial information set forth below is qualified in its entirety by reference
to such documents and the financial information, the notes thereto and related
matter contained therein.
7
<PAGE>
SUMMARY OF SELECTED FINANCIAL INFORMATION
(IN 000'S EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1998 1999
----------- -----------
<S> <C> <C>
INCOME STATEMENT
Investment income......................................... $ 256,022 $ 261,415
Expenses.................................................. 43,661 44,008
---------- ----------
Investment income--net.................................... $ 212,361 $ 217,407
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET
Realized gain (loss) on investments--net.................. (3,676) (21,657)
Change in unrealized appreciation on investments--net..... (9,911) (59,346)
FINANCIAL HIGHLIGHTS (AT END OF PERIOD)
Total assets.............................................. $3,376,918 $3,156,911
Total liabilities......................................... 11,886 11,045
---------- ----------
Net assets................................................ $3,365,032 $3,154,866
Net asset value per share................................. $ 9.97 9.73
Shares of common stock outstanding........................ 337,418 323,255
PER SHARE
Investment income--net.................................... $ .68 $ .65
Realized and unrealized gain (loss) on investments--net... $ (.05) $ (.24)
Dividends from net investment income to common
shareholders............................................ $ (.68) $ (.65)
RATIOS
Expenses, excluding interest expense...................... 1.35% 1.33%
Total expenses to average net assets...................... 1.40% 1.33%
Investment income--net, to average net assets............. 6.79% 6.59%
</TABLE>
- ------------------------------
11. CERTAIN INFORMATION ABOUT THE FUND. The Fund was incorporated under
the laws of the State of Maryland on July 17, 1989 and is a non-diversified,
closed-end, management investment company registered under the 1940 Act. The
Fund seeks as high a level of current income and such preservation of capital as
is consistent with investment in senior collateralized corporate loans
("Corporate Loans") made by banks and other financial institutions. The
Corporate Loans pay interest at rates which float or reset at a margin above a
generally-recognized base lending rate such as the prime rate of a designated
U.S. bank, the Certificate of Deposit rate or the London InterBank Offered Rate.
MLAM, an affiliate of Merrill Lynch, acts as investment adviser and
administrator for the Fund.
There have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or Director of the Fund, any person controlling the Fund, any executive
officer or director of any corporation ultimately in control of the Fund or by
any associate or subsidiary of any of the foregoing including any executive
officer or director of any such subsidiary, except that within the past 40
business days pursuant to the public offering of its Shares the Fund has sold
approximately 3.5 million Shares at a price equal to NAV on the date of each
such sale.
The principal executive offices of the Fund are located at 800 Scudders Mill
Road, Plainsboro, New Jersey 08536.
12. ADDITIONAL INFORMATION. The Fund has filed a statement on Schedule
13E-4 with the SEC which includes certain additional information relating to the
Offer. Such material may be inspected and copied at prescribed rates at the
SEC's public reference facilities at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Seven World Trade Center, New York, New York 10048; and
Room 3190, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material may also be obtained by mail at prescribed rates from the
Public Reference Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. The SEC maintains a web site (http://www.sec.gov) that contains the
Schedule 13E-4 and other information regarding the Fund.
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a
general summary of the Federal income tax consequences of a sale of Shares
pursuant to the Offer. You should consult your own tax adviser for a complete
description of the tax consequences to you of a sale of Shares pursuant to the
Offer.
The sale of Shares pursuant to the Offer will be a taxable transaction for
Federal income tax purposes, either as a "sale or exchange," or under certain
circumstances, as a "dividend." In general, the transaction should be treated as
a sale or exchange of the Shares under Section 302 of the Code, if the receipt
of cash
8
<PAGE>
(a) is "substantially disproportionate" with respect to the stockholder,
(b) results in a "complete redemption" of the stockholder's interest in the
Fund, or (c) is "not essentially equivalent to a dividend" with respect to the
stockholder. A "substantially disproportionate" distribution generally requires
a reduction of at least 20% in the stockholder's proportionate interest in the
Fund after all shares are tendered. A "complete redemption" of a stockholder's
interest generally requires that all Shares directly owned or attributed to such
stockholder under Section 318 of the Code be disposed of. A distribution "not
essentially equivalent to a dividend" requires that there be a "meaningful
reduction" in the stockholder's interest, which should be the case if the
stockholder has a minimal interest in the Fund, exercises no control over Fund
affairs and suffers a reduction in his proportionate interest in the Fund.
If the sale of your Shares meets any of these three tests for "sale or
exchange" treatment, you will recognize gain or loss equal to the difference
between the amount of cash received pursuant to the Offer and the adjusted tax
basis of the Shares sold. Such gain or loss will be a capital gain or loss if
the Shares sold have been held by you as a capital asset. In general, capital
gain or loss with respect to Shares sold will be long-term capital gain or loss
if the holding period for such Shares is more than one year. Under recent
legislation, the maximum capital gains rate applicable to such a sale of Shares
would be 20%.
If none of the Code Section 302 tests is met, you may be treated as having
received, in whole or in part, a dividend, return of capital or capital gain,
depending on (i) whether the Fund has sufficient earnings and profits to support
a dividend and (ii) your tax basis in the Shares. The tax basis in the Shares
tendered to the Fund will be transferred to any remaining Shares held by you. In
addition, if the sale of Shares pursuant to the Offer is treated as a "dividend"
to a tendering stockholder, a Code Section 305(c) constructive dividend may
result to a non-tendering stockholder whose proportionate interest in the
earnings and assets of the Fund has been increased as a result of such tender.
Accordingly, the differentiation between "dividend" and "sale or exchange"
treatment is important with respect to the amount and character of income that
tendering stockholders are deemed to receive. In addition, while the marginal
tax rates for dividends and capital gains remain the same for corporate
stockholders, under the Code the top income tax rate on ordinary income of
individuals (39.6%) will exceed the maximum tax rates on capital gains (20%).
In the event that the sale of Shares by a corporate stockholder pursuant to
the Offer is treated as a dividend, the corporate stockholder may be entitled to
claim a "dividends received deduction" on the cash received, which ordinarily
would be 70% of such dividend. However, corporate stockholders should consult
their tax advisers about certain provisions of the Code that may affect the
dividends received deduction.
The Transfer Agent will be required to withhold 31% of the gross proceeds
paid to a stockholder or other payee pursuant to the Offer unless either: (a)
the stockholder has provided the stockholder's taxpayer identification
number/social security number, and certifies under penalties of perjury: (i)
that such number is correct, and (ii) either that (A) the stockholder is exempt
from backup withholding, (B) the stockholder is not otherwise subject to backup
withholding as a result of a failure to report all interest or dividends, or (C)
the Internal Revenue Service has notified the stockholder that the stockholder
is no longer subject to backup withholding; or (b) an exception applies under
applicable law and Treasury regulations. Foreign stockholders may be required to
provide the Transfer Agent with a completed Form W-8, available from the
Transfer Agent, in order to avoid 31% backup withholding.
Unless a reduced rate of withholding or a withholding exemption is available
under an applicable tax treaty, a stockholder who is a nonresident alien or a
foreign entity may be subject to a 30% United States withholding tax on the
gross proceeds received by such stockholder, if the proceeds are treated as a
"dividend" under the rules described above. Foreign stockholders should consult
their tax advisers regarding application of these withholding rules.
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS. The Fund reserves
the right, at any time and from time to time, to extend the period of time
during which the Offer is pending by making a public announcement thereof. In
the event that the Fund so elects to extend the tender period, the NAV for the
Shares tendered will be determined as of the close of the New York Stock
Exchange on the Expiration Date, as extended. During any such extension, all
Shares previously tendered and not purchased or withdrawn will remain subject to
the Offer. The Fund also reserves the right, at any time and from time to time
up to and including the Expiration Date, to (a) terminate the Offer and not to
purchase or pay for any
9
<PAGE>
Shares, and (b) amend the Offer in any respect by making a public announcement.
Such public announcement will be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date
and will disclose the approximate number of Shares tendered as of that date.
Without limiting the manner in which the Fund may choose to make a public
announcement of extension, termination or amendment, except as provided by
applicable law (including Rule 13e-4(e)(2)), the Fund shall have no obligation
to publish, advertise or otherwise communicate any such public announcement,
other than by making a release to the Dow Jones News Service.
15. MISCELLANEOUS. The Offer is not being made to, nor will tenders be
accepted from, stockholders in any jurisdiction in which the Offer or its
acceptance would not comply with the securities laws of such jurisdiction. The
Fund is not aware of any jurisdiction in which the Offer or tenders pursuant
thereto would not be in compliance with the laws of such jurisdiction. However,
the Fund reserves the right to exclude stockholders from the Offer in any
jurisdiction in which it is asserted that the Offer cannot lawfully be made. The
Fund believes such exclusion is permissible under applicable tender offer rules,
provided the Fund makes a good faith effort to comply with any state law deemed
applicable to the Offer. In any jurisdiction the securities laws of which
require the Offer to be made by a licensed broker or dealer the Offer shall be
deemed to be made on the Fund's behalf by Merrill Lynch.
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
December 17, 1999
10
<PAGE>
EXHIBIT (a)(2)
<PAGE>
LETTER OF TRANSMITTAL
TO BE USED TO TENDER SHARES OF
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 17, 1999
-------------------
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JANUARY 18, 2000, UNLESS EXTENDED
-------------------
TRANSFER AGENT:
FINANCIAL DATA SERVICES, INC.
ATTENTION: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
P.O. BOX 45289
JACKSONVILLE, FLORIDA 32232-5289
TELEPHONE INFORMATION NUMBER: (800) 637-3863
DELIVERY TO AN ADDRESS OTHER THAN THAT SHOWN ABOVE DOES NOT CONSTITUTE VALID
DELIVERY.
THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY IF THE STOCKHOLDER IS A RECORD
OWNER OF SHARES WHO DESIRES TO EFFECT THE TENDER OFFER TRANSACTION HIMSELF OR
HERSELF BY TRANSMITTING THE NECESSARY DOCUMENTS TO THE FUND'S TRANSFER AGENT AND
DOES NOT INTEND TO REQUEST HIS OR HER BROKER OR DEALER TO EFFECT THE TRANSACTION
FOR HIM OR HER. A STOCKHOLDER WHO HOLDS SHARES IN A MERRILL LYNCH ACCOUNT OR
THROUGH ANOTHER BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE
IS NOT THE RECORD OWNER AND SHOULD INSTRUCT HIS OR HER MERRILL LYNCH FINANCIAL
CONSULTANT OR SUCH OTHER NOMINEE TO EFFECT THE TENDER ON HIS OR HER BEHALF.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Merrill Lynch Senior Floating Rate
Fund, Inc., a closed-end investment company incorporated under the laws of the
State of Maryland (the "Fund"), the shares described below of its common stock,
par value $.10 per share (the "Shares"), at a price equal to the net asset value
per Share ("NAV") calculated on the Expiration Date (as defined in the Offer to
Purchase), in cash, less any applicable Early Withdrawal Charge, upon the terms
and conditions set forth in the Offer to Purchase dated September 21, 1999,
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Offer").
The undersigned hereby sells to the Fund all Shares tendered hereby that are
purchased pursuant to the Offer and hereby irrevocably constitutes and appoints
the Transfer Agent as attorney in fact of the undersigned, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to present such Shares and any Share certificates for
cancellation of such Shares on the Fund's books. The undersigned hereby warrants
that the undersigned has full authority to sell the Shares tendered hereby and
that the Fund will acquire good title thereto, free and clear of all liens,
charges, encumbrances, conditional sales agreements or other obligations
relating to the sale thereof, and not subject to any adverse claim, when and to
the extent the same are purchased by it. Upon request, the undersigned will
execute and deliver any additional documents necessary to complete the sale in
accordance with the terms of the Offer.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Fund may not be required to purchase any of the Shares
tendered hereby. In that event, the undersigned understands that, in the case of
Shares evidenced by certificates, certificate(s) for any Shares not purchased
will be returned to the undersigned at the address indicated above. In the case
of Shares not evidenced by certificates and held in an Investment Account, the
Transfer Agent will cancel the tender order and no Shares will be withdrawn from
the Account.
The check for the purchase price for the tendered Shares purchased will be
issued to the order of the undersigned and mailed to the address indicated in
the "Description of Shares Tendered" table below.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and the obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
<PAGE>
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<TABLE>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY THE NAME(S) IN WHICH SHARES ARE SHARES TENDERED
REGISTERED) (ATTACH ADDITIONAL SCHEDULE IF NECESSARY)
NO. OF SHARES
CERTIFICATE LISTED NO. OF SHARES
NO.(S)* ON CERTIFICATE* TENDERED**
<S> <C> <C> <C>
Account No. Total Shares Tendered..........
</TABLE>
* Need not be completed by stockholders whose Shares are not evidenced by
certificates.
** To be completed by all tendering stockholders, whether or not your Shares
are evidenced by certificates. If you desire to tender fewer than all
Shares held in your account or evidenced by a certificate listed above,
please indicate in this column the number you wish to tender. Otherwise all
Shares evidenced by such certificate or held in your account will be deemed
to have been tendered.
SIGNATURE FORM
--SIGN HERE--
(SEE INSTRUCTIONS 1, 5 AND 8)
Social Security No.
or Taxpayer Identification No. ................
Under penalty of perjury, I certify (1) that the number set forth above is
my correct Social Security No. or Taxpayer Identification No. and (2) that I
am not subject to backup withholding either because (a) I am exempt from
backup withholding, (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject thereto as a result of failure to
report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject thereto. INSTRUCTION: You must strike out the language in
(2) above if you have been notified that you are subject to backup
withholding due to underreporting and you have not received a notice from
the IRS that backup withholding has been terminated.
...........................................................................
...........................................................................
(SIGNATURE(S) OF OWNER(S) EXACTLY AS REGISTERED)
Date ................ ,
Name(s) ....................................................................
Address(es) ................................................................
(PLEASE PRINT)
Telephone Number ( ) ................
Signature(s) Guaranteed ....................................................
....................................................
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a member firm of a registered national securities
exchange, or a commercial bank or trust company having an office, branch or
agency in the United States. This Letter of Transmittal is to be used only if
you may effect the tender offer transaction yourself and do not intend to
request your broker or dealer to effect the transaction for you.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates for all
tendered Shares, together with a properly completed and duly executed Letter of
Transmittal, should be mailed or delivered to the Transfer Agent on or prior to
the Expiration Date at the appropriate address set forth herein and must be
received by the Transfer Agent prior to the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER.
3. INADEQUATE SPACE. If the space provided is inadequate, the certificate
numbers and number of Shares should be listed on a separate signed schedule
attached hereto.
4. PARTIAL TENDERS. If fewer than all of the Shares in your Investment
Account or evidenced by any certificate submitted are to be tendered, fill in
the number of Shares which are to be tendered in the column entitled "No. of
Shares Tendered." If applicable, a new certificate for the remainder of the
Shares evidenced by your old certificate(s) will be sent to you as soon as
practicable after the Expiration Date of the Offer. All Shares represented by
certificate(s) listed or in your Investment Account are deemed to have been
tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, AUTHORIZATION AND ENDORSEMENTS.
(a) If the Letter of Transmittal is signed by the registered holder of the
Shares tendered hereby, the signature(s) must correspond with the name(s) in
which the Shares are registered.
(b) If the Shares are held of record by two or more joint holders, all such
holders must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different registrations of Shares.
(d) When this Letter of Transmittal is signed by the registered holder(s) of
the Shares listed and, if applicable, of the certificates transmitted hereby, no
endorsements of certificates or separate authorizations are required.
(e) If this Letter of Transmittal or any certificates or authorizations are
signed by trustees, executors, administrators, guardians, attorneys in fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and must submit proper
evidence satisfactory to the Fund of their authority so to act.
6. TRANSFER TAXES. The Fund will pay all the taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer. If tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any transfer taxes (whether
imposed on the registered holder or such other person) payable on account of the
transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted.
<PAGE>
7. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any tender of Shares will be
determined by the Fund, whose determinations shall be final and binding. The
Fund reserves the absolute right to reject any or all tenders determined by it
not to be in appropriate form or the acceptance of or payment for which would,
in the opinion of counsel for the Fund, be unlawful. The Fund also reserves the
absolute right to waive any of the conditions of the Offer or any defect in any
tender with respect to any particular Shares or any particular stockholder, and
the Fund's interpretations of the terms and conditions of the Offer (including
these instructions) will be final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within such time as the
Fund shall determine. Tenders will not be deemed to have been made until all
defects and irregularities have been cured or waived. Neither the Fund, Merrill
Lynch Asset Management, L.P. nor the Transfer Agent, nor any other person shall
be obligated to give notice of defects or irregularities in tenders, nor shall
any of them incur any liability for failure to give any such notice.
8. IMPORTANT TAX INFORMATION. Under Federal income tax law, a stockholder
whose tendered Shares are accepted for payment is required by law to provide the
Transfer Agent (as payer) with his correct taxpayer identification number, which
is accomplished by completing and signing the Signature Form.
<PAGE>
EXHIBIT (a)(3)
<PAGE>
MERRILL LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED
RESPONSE CENTER
P.O. BOX 30200
NEW BRUNSWICK, NJ
08989-0200
[LOGO]
Dear Stockholder:
As you requested, we are enclosing a copy of the Merrill Lynch Senior
Floating Rate Fund, Inc. (the "Fund") Offer to Purchase dated December 17, 1999
(the "Offer to Purchase") 45,500,000 Issued and Outstanding Shares (the
"Shares"). The Offer to Purchase is for cash at Net Asset Value ("NAV") per
share as of the expiration date of the Offer, less any Early Withdrawal Charge.
Together with the Offer to Purchase we are sending you a Form Letter of
Transmittal (the "Letter") for use by holders of record of Shares which you
should read carefully. Certain selected financial information with respect to
the Fund is set forth in the Offer to Purchase.
If, after reviewing the information set forth in the Offer to Purchase and
Letter, you wish to tender Shares for purchase by the Fund, please either
contact your Merrill Lynch Financial Consultant or other broker, dealer or
nominee to effect the tender for you or, if you are the record owner of the
Shares, you may follow the instructions contained in the Offer to Purchase and
Letter.
Neither the Fund nor its Board of Directors is making any recommendation to
any holder of Shares as to whether to tender Shares. Each stockholder is urged
to consult his or her broker or tax adviser before deciding whether to tender
any Shares.
The Fund's annualized distribution rate for the period October 26, 1999
through November 22, 1999, based on the amounts actually distributed by the
Fund, was 7.76%. The Fund's NAV on December 14, 1999 was $9.66 per Share. The
Fund publishes its NAV each week in BARRON'S. It appears in the "Investment
Company Institute List" under the sub-heading "Loan Participation Funds" within
the listings of mutual funds and closed-end funds.
Requests for current NAV quotations or for additional copies of the Offer to
Purchase, the Letter and any other tender offer documents may be directed to the
Merrill Lynch Response Center at (800) 637-7455, ext. 4302.
Should you have any other questions on the enclosed material, please do not
hesitate to contact your Merrill Lynch Financial Consultant or other broker or
dealer or call the Fund's Transfer Agent, Financial Data Services, Inc., at
(800) 637-3863. We appreciate your continued interest in Merrill Lynch Senior
Floating Rate Fund, Inc.
Yours truly,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<PAGE>
EXHIBIT (g)(1)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Senior Floating Rate Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Senior Floating Rate Fund, Inc. as of August 31, 1998, the related
statements of operations and cash flows for the year then ended, the
statements of changes in net assets for each of the years in the two-
year period then ended, and the financial highlights for each of the
years in the five-year period then ended. These financial statements
and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at August
31, 1998 by correspondence with the custodian and financial
intermediaries or other alternative procedures. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Senior Floating Rate Fund, Inc. as of August 31, 1998,
the results of its operations, its cash flows, the changes in its
net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
October 22, 1998
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Advertising-- NR++ Ba2 $12,033,333 Outdoor Systems, Inc., Term,
0.4% due 6/30/2004 $ 12,010,770 $ 12,025,813
Aerospace-- NR++ Ba3 4,618,566 K & F Industries, Term B, due
0.1% 10/15/2005 4,618,566 4,630,113
Agriculture-- NR++ NR++ 5,495,875 Purina Mills Inc., Term B,
0.5% due 3/31/2007 5,489,252 5,516,485
NR++ NR++ 9,980,000 Seminis, Term B, due 12/31/2003 9,980,000 9,980,000
-------------- --------------
15,469,252 15,496,485
Air Transpor- Continental Airlines, Inc.:
tation--0.4% BB- NR++ 8,258,819 Term A, due 7/31/2002 8,222,845 8,186,555
BB- NR++ 6,314,667 Term B, due 7/31/2002 6,314,667 6,263,360
-------------- --------------
14,537,512 14,449,915
Aircraft & NR++ Ba2 3,972,003 Alliant Techsystems, Inc.,
Parts--1.2% Term, due 3/15/2001 3,969,540 3,972,003
NR++ Ba3 7,355,501 Evergreen International Aviation,
Inc., Term B, due 5/31/2003 7,325,126 7,355,501
NR++ NR++ 21,406,250 Gulfstream Aerospace Corp., Term,
due 9/30/2002 21,375,110 21,218,945
NR++ NR++ 2,359,849 Technetics, Term, due 6/20/2002 2,347,435 2,352,474
NR++ NR++ 6,250,000 WesternSky Industries, Term, due
7/31/2003 6,244,056 6,257,813
-------------- --------------
41,261,267 41,156,736
Amusement & AMF Group, Inc.:
Recreational NR++ B+ 18,521,998 Axel A, due 5/03/2003 18,706,731 18,541,106
Services--5.4% NR++ B+ 25,546,140 Axel B, due 5/01/2004 25,627,160 25,530,053
NR++ B+ 3,052,525 Term, due 3/31/2002 3,046,123 3,056,340
NR++ B+ 23,448,943 Term A, due 3/31/2002 23,409,097 23,389,571
B1 NR++ 2,000,000 ASC East Inc., Term, due 5/31/2006 1,998,131 2,003,750
B1 NR++ 5,000,000 ASC West Inc., Term, due 5/31/2006 4,995,328 5,009,375
Amfac Resorts, Inc.:
NR++ NR++ 2,500,000 Term B, due 9/30/2004 2,496,532 2,500,000
NR++ NR++ 2,500,000 Term C, due 9/30/2005 2,496,483 2,503,125
KSL Recreation Group, Inc.:
NR++ B2 11,960,000 Revolving Credit, due 4/30/2004 11,960,000 11,997,375
NR++ B2 10,890,000 Term A, due 4/30/2005 10,929,493 10,924,032
NR++ B2 10,890,000 Term B, due 4/30/2006 10,930,154 10,924,032
B+ NR++ 4,987,500 Kerastotes, Term B, due 12/31/2004 4,980,614 4,987,500
Metro Goldwyn Mayer Co.:
B1 Ba2 5,170,000 Revolving Credit, due 9/30/2003 5,170,000 5,040,750
B1 Ba2 4,000,000 Term A, due 12/31/2005 3,981,565 3,985,000
B1 Ba2 10,000,000 Term B, due 12/31/2006 9,976,651 9,981,250
NR++ NR++ 19,991,667 Patroit American Hospitality, Term B,
due 3/31/2003 19,954,896 19,991,667
B1 Ba2 4,527,163 Premier Parks Inc., Term C,
due 3/31/2006 4,524,984 4,538,481
NR++ Ba3 13,472,837 Six Flags Entertainment Corp., Term B,
due 11/03/2004 13,466,418 13,540,201
NR++ NR++ 4,200,000 Video Update Inc., Term B,
due 4/30/2003 4,161,119 4,158,000
-------------- --------------
182,811,479 182,601,608
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Apparel--1.2% Arena Brands, Inc.:
NR++ NR++ $ 936,666 Revolving Credit, due 6/01/2002 $ 936,666 $ 940,179
NR++ NR++ 3,882,200 Term A, due 6/01/2002 3,887,052 3,896,758
NR++ NR++ 7,218,465 Term B, due 6/01/2002 7,227,488 7,245,534
NR++ NR++ 5,000,000 Cluett American Corp., Term B,
due 5/18/2005 4,995,107 5,009,375
NR++ NR++ 9,700,000 Humphreys Inc., Term B, due 1/15/2003 9,700,000 9,700,000
NR++ NR++ 4,800,000 Renfro Corp., Term B, due 11/15/2003 4,781,477 4,800,000
Walls Industries:
NR++ NR++ 1,244,681 Term B, due 2/28/2005 1,244,681 1,244,681
NR++ NR++ 1,707,447 Term C, due 2/28/2006 1,707,447 1,707,447
BB- Ba3 6,111,000 William Carter Co. (The), Term,
due 10/31/2003 6,086,846 6,091,903
-------------- --------------
40,566,764 40,635,877
Automotive American Axel:
Equipment-- NR++ NR++ 2,560,000 Revolving Credit, due 10/31/2005 2,560,000 2,534,400
3.5% NR++ NR++ 1,829,333 Revolving Credit, due 10/31/2005 1,829,333 1,779,027
NR++ NR++ 21,000,000 Term B, due 3/31/2007 21,033,664 20,842,500
NR++ NR++ 10,000,000 Breed Technologies, Inc., Term B,
due 4/27/2006 9,975,765 10,006,250
NR++ Ba3 8,376,000 CSK Automotive, Term, due 10/31/2003 8,368,470 8,378,618
B+ B1 11,000,000 Collins & Aikman Corp., Term B,
due 6/30/2005 10,994,646 11,027,500
Federal Mogul Corp.:
NR++ NR++ 328,205 Revolving Credit, due 12/30/2003 328,205 326,154
NR++ NR++ 4,403,733 Term A, due 12/31/2003 4,392,870 4,403,733
NR++ NR++ 37,500,000 Term B, due 12/31/2005 37,500,000 37,406,250
NR++ B1 15,335,000 Johnstown America Industrial, Inc.,
Term B, due 3/31/2003 15,280,722 15,219,988
Safelite Glass Corp.:
BB- B2 3,750,000 Term B, due 12/31/2004 3,744,802 3,754,688
BB- B2 3,750,000 Term C, due 12/31/2005 3,744,730 3,754,688
-------------- --------------
119,753,207 119,433,796
Broadcast-- Chancellor Media Corp.:
Radio & TV--4.1% BB- Ba2 5,259,425 Revolving Credit, due 6/26/2004 5,259,425 5,193,682
BB- Ba2 51,891,429 Term, due 6/26/2004 51,735,698 51,502,243
NR++ NR++ 10,000,000 Channel Master, Term, due 10/10/2005 9,981,605 10,000,000
NR++ NR++ 10,000,000 Emmis Communications, Term, due
2/28/2007 10,000,000 10,000,000
NR++ NR++ 8,260,870 Latin Communications, Term,
due 3/31/2004 8,216,896 8,178,261
NR++ NR++ 4,625,000 Retlaw Broadcasting, Term,
due 3/31/2006 4,613,774 4,620,375
NR++ Ba3 5,000,000 Sinclair Broadcast, Term,
due 12/31/2004 4,990,219 4,975,000
NR++ NR++ 3,750,000 Spartan Communications, Term B,
due 6/30/2005 3,750,000 3,750,000
NR++ Ba2 38,958,819 Viacom, Inc., Term, due 7/01/2002 38,914,702 38,630,103
-------------- --------------
137,462,319 136,849,664
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Building & NR++ NR++ 2,509,281 Fenway Holdings, Inc., Term B,
Construction--0.1% due 9/15/2002 2,496,955 2,468,505
Building NR++ Ba3 3,218,540 Amerimax, Term C, due 6/30/2004 3,215,025 3,218,540
Materials--2.2% Behr Process Corp.:
NR++ NR++ 4,147,500 Term B, due 3/31/2004 4,142,679 4,147,500
NR++ NR++ 2,765,000 Term C, due 3/31/2005 2,761,700 2,768,456
NR++ NR++ 16,932,000 Dal Tile International, Inc., Term B,
due 12/31/2003 16,859,625 16,625,108
NR++ NR++ 5,000,000 Dayton Superior Corp., Term,
due 9/30/2005 5,000,000 5,031,250
NR++ Ba3 2,052,281 Euramax Holdings Ltd., Term B,
due 6/30/2004 2,050,040 2,052,281
NR++ B1 4,971,429 Falcon Building Products, Inc., Term,
due 6/30/2005 4,953,708 4,983,857
NR++ Ba3 29,774,623 National Gypsum Co., Term B,
due 9/20/2003 29,730,413 29,774,623
Panolam Industries:
NR++ NR++ $ 459,281 Term A, due 11/01/2002 $ 459,281 $ 459,281
NR++ NR++ 2,811,659 Term B, due 11/01/2005 2,811,659 2,811,659
NR++ NR++ 1,606,662 Term C, due 11/01/2006 1,606,662 1,606,662
-------------- --------------
73,590,792 73,479,217
Cable TV NR++ NR++ 24,314,062 Chelsea Communications, Term B,
Services--4.4% due 9/30/2004 24,227,982 24,329,259
NR++ B1 5,000,000 Classic Cable, Inc., Term, due
10/31/2007 4,995,003 4,993,750
NR++ Ba3 4,000,000 FrontierVision Operating Partners
L.P., Term B, due 3/31/2006 3,994,367 3,997,500
Intermedia Partners, Inc.:
B+ Ba3 10,000,000 Term, due 1/01/2005 9,979,890 9,981,250
B+ Ba3 7,500,000 Term B, due 12/31/2007 7,492,676 7,509,375
Marcus Cable Operating Co.:
B+ Ba3 26,343,750 Term A, due 12/31/2002 26,267,262 26,277,891
B+ Ba3 12,526,875 Term B1, due 4/30/2004 12,353,293 12,515,131
B+ Ba3 22,597,500 Term B2, due 4/30/2004 22,538,919 22,597,500
NR++ NR++ 20,073,850 NTL Group, Term, due 1/31/1999 20,073,850 20,061,303
B+ NR++ 17,000,000 Triax Midwest, Term B, due 6/30/2007 16,974,858 17,021,250
-------------- --------------
148,898,100 149,284,209
Casino--0.4% Alliance Gaming Corp.:
NR++ B1 10,633,929 Term B, due 1/31/2005 10,633,929 10,687,098
NR++ B1 4,242,857 Term C, due 7/31/2005 4,242,857 4,264,071
-------------- --------------
14,876,786 14,951,169
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Chemicals--7.3% NR++ NR++ 7,500,000 AOC LLC, Term B, due 9/30/2006 7,481,250 7,481,250
NR++ NR++ 4,500,000 CII Carbon LLC, Term, due 6/25/2008 4,495,537 4,511,250
NR++ NR++ 11,283,142 Cedar Chemical, Term B, due
10/31/2003 11,217,782 11,254,934
NR++ NR++ 10,000,000 Epsillon, Term B, due 12/31/2005 10,000,000 10,000,000
NR++ Ba2 11,964,000 Exide Corporation, Term B, due
3/19/2005 11,964,000 11,978,955
NR++ Ba3 3,777,778 Foamex International PLC, Revolving
Credit, due 6/30/2003 3,777,778 3,782,500
NR++ NR++ 6,000,000 General Chemical Group, Term B,
due 6/15/2006 5,994,090 5,996,250
NR++ NR++ 10,000,000 HSC Holdings, Term B, due 3/31/2006 9,985,358 10,025,000
Huntsman Corp.:
NR++ Ba2 20,738,584 Term, due 12/31/2002 20,723,027 20,738,584
NR++ Ba2 4,900,000 Term A, due 9/30/2003 4,900,000 4,900,000
NR++ Ba2 14,850,000 Term B, due 6/30/2004 14,850,000 14,850,000
NR++ Ba2 14,700,000 Term C, due 12/31/2005 14,656,681 14,810,250
Huntsman Specialty Chemicals:
NR++ Ba2 4,950,000 Term B, due 3/15/2004 4,946,278 4,962,375
NR++ Ba2 4,950,000 Term C, due 3/15/2005 4,946,272 4,962,375
Lyondell Petrochemical Co.:
NR++ NR++ 15,000,000 Term A, due 6/30/2003 14,992,500 14,992,500
NR++ NR++ 41,900,000 Term B, due 6/30/2005 41,862,197 42,083,313
NR++ NR++ 16,615,385 Octel Corp., Term A, due 12/31/2001 16,559,441 16,521,923
NR++ B1 7,920,000 Pioneer Americas Acquisition Corp.,
Term, due 12/05/2006 7,988,063 7,910,100
BB- Ba3 4,980,000 Polymer Group, Inc., Term B, due
12/20/2005 4,980,000 4,997,119
NR++ Ba3 23,981,281 Sterling Chemicals, Inc., Term B,
due 9/30/2004 23,883,231 23,876,363
NR++ Ba3 6,373,806 Texas Petrochemicals Corp., Term B,
due 6/30/2004 6,354,552 6,357,871
-------------- --------------
246,558,037 246,992,912
Computer-Related NR++ Ba3 17,027,500 Fairchild Semiconductors Corp.,
Services & Term C, due 3/11/2003 17,027,500 17,027,500
Products--0.5%
Consumer NR++ B1 $ 8,412,272 Amscan Holdings, Inc., Axel,
Products--2.3% due 12/31/2004 $ 8,412,272 $ 8,412,272
B+ Ba3 4,738,889 Boyds Collection Ltd., Term B,
due 4/21/2005 4,727,442 4,747,774
E & S Holdings Corp.:
NR++ B1 3,505,882 Revolving Credit, due 9/30/2003 3,505,882 3,339,353
NR++ B1 912,941 Term A, due 9/30/2003 880,412 865,012
Hedstrom Corp.:
NR++ B1 1,241,379 Revolving Credit, due 6/30/2003 1,241,379 1,236,724
NR++ B1 4,844,828 Term A, due 6/30/2003 4,823,783 4,844,828
Pillowtex:
B+ Ba2 3,980,000 Term B, due 12/31/2004 3,976,321 3,987,463
B+ Ba2 3,500,000 Term B, due 12/31/2004 3,496,500 3,496,500
BB- Ba2 14,850,150 Playtex Family Products Inc., Term B,
due 9/15/2003 14,786,502 14,924,401
RTI Funding Corp. (Ritvik Toys):
NR++ NR++ 7,209,568 Term B, due 2/07/2003 7,158,585 6,272,324
NR++ NR++ 7,209,568 Term C, due 2/07/2004 7,154,743 6,272,324
BB- Ba3 14,925,000 Revlon Consumer Products Corp., Term,
due 5/30/2002 14,914,886 14,859,703
NR++ NR++ 4,500,000 Samsonite Corp., Term, due 6/24/2005 4,494,437 4,443,750
-------------- --------------
79,573,144 77,702,428
Defense--0.3% United Defense Industries, Inc.:
NR++ B1 1,707,473 Term A, due 10/06/2003 1,721,671 1,696,801
NR++ B1 4,378,808 Term B, due 10/06/2005 4,378,808 4,365,124
NR++ B1 4,253,111 Term C, due 10/06/2006 4,253,111 4,245,137
-------------- --------------
10,353,590 10,307,062
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Diversified--1.5% NR++ NR++ 30,000,000 Bridge Inform, Term B,
due 5/29/2005 29,927,008 30,075,000
NR++ NR++ 6,000,000 Handy & Harman, Term B,
due 7/30/2006 5,985,111 5,992,500
NR++ NR++ 4,980,000 Sarah Michael's Inc., Term B,
due 6/30/2004 4,980,000 4,980,000
Thermadyne Industries, Inc.:
NR++ NR++ 3,500,000 Term B, due 7/16/2004 3,496,615 3,513,125
NR++ NR++ 3,500,000 Term C, due 7/16/2005 3,496,593 3,513,125
-------------- --------------
47,885,327 48,073,750
Drilling--0.1% BB+ Ba3 3,759,930 Rigco North America, Term,
due 9/30/1998 3,759,068 3,769,330
Drug/Proprietary NR++ NR++ 4,975,000 Duane Reade Co., Term B,
Stores--0.2% due 2/15/2005 4,960,355 5,012,313
Electronics/ NR++ Ba3 13,458,750 Amphenol Corp., Term B,
Electrical due 5/19/2006 13,672,569 13,538,662
Components-- NR++ NR++ 5,483,333 Communications & Power II
2.2% Acquisition Corp., Term B,
due 8/11/2002 5,448,270 5,469,625
NR++ NR++ 5,500,000 Details Dynamic, Term B,
due 4/22/2005 5,493,131 5,493,125
Dictaphone Corp.:
B- B1 796,937 Revolving Credit, due 3/31/2001 796,937 777,013
B- B1 7,750,000 Term C, due 6/30/2003 7,680,912 7,691,875
Dynatech Corporation:
NR++ NR++ 1,660,714 Term B, due 3/31/2005 1,660,714 1,660,714
NR++ NR++ 1,660,714 Term C, due 3/31/2006 1,660,714 1,660,714
NR++ NR++ 1,660,714 Term D, due 3/31/2007 1,660,714 1,660,714
BB- Ba3 19,875,389 International Wire Group, Inc.,
Term B, due 9/30/2003 19,858,613 19,925,078
NR++ NR++ 3,577,500 Mitel Corporation, Axel B,
due 2/26/2003 3,570,873 3,573,028
NR++ Ba3 6,872,838 Neopost, Term C, due 6/24/2006 6,856,957 6,855,656
NR++ Ba3 6,973,077 Telex Communications, Inc., Term B,
due 11/30/2004 6,957,833 6,554,692
-------------- --------------
75,318,237 74,860,896
Energy--0.5% NR++ Ba2 $11,000,000 Clark Refining & Marketing,
Term, due 11/15/2004 $ 11,000,000 $ 10,848,750
NR++ NR++ 5,000,000 Plains All American, Term,
due 6/30/2005 4,987,614 5,021,875
-------------- --------------
15,987,614 15,870,625
Financial Outsourcing Solutions, Inc.:
Services--1.2% NR++ B1 4,015,118 Term B, due 10/15/2003 4,011,860 4,012,608
NR++ B1 37,416,658 Term C, due 10/15/2004 37,416,658 37,393,273
-------------- --------------
41,428,518 41,405,881
Food & Kindred Del Monte Corp.:
Products--2.9% NR++ B2 1,636,364 Revolving Credit, due 3/31/2003 1,636,364 1,620,000
NR++ B2 3,272,727 Term A, due 3/31/2003 3,272,727 3,272,727
NR++ B2 7,620,065 Term B, due 3/31/2005 7,615,606 7,639,115
NR++ NR++ 5,000,000 Dr. Pepper, Term B, due 12/31/2005 4,992,974 5,009,375
Imperial Holly Corp.:
BB- Ba3 6,594,786 Term A, due 12/31/2003 6,588,807 6,528,838
BB- Ba3 5,279,536 Term B, due 12/31/2005 5,274,594 5,239,939
International Homefoods, Inc.:
BB- Ba3 3,278,226 Term A, due 11/21/2001 3,276,187 3,270,030
BB- Ba3 21,970,667 Term B, due 10/31/2005 22,000,832 21,915,740
Mistic Beverage, Inc.:
BB- Ba3 2,451,875 Term B, due 6/01/2004 2,441,057 2,461,069
BB- Ba3 2,451,875 Term C, due 6/01/2005 2,440,802 2,461,069
Snapple Beverage Corp.:
BB- Ba3 7,355,624 Term B, due 6/01/2004 7,323,172 7,392,403
BB- Ba3 7,355,624 Term C, due 6/01/2005 7,322,406 7,392,403
NR++ Ba3 5,400,000 Southern Foods Group, Term B,
due 2/28/2006 5,393,806 5,406,750
NR++ Ba3 9,520,548 Specialty Foods, Inc., Term,
due 1/31/2000 9,446,874 9,520,548
Volume Services:
NR++ B2 6,595,333 Term B, due 12/31/2002 6,549,177 6,595,333
NR++ B2 3,297,500 Term C, due 12/31/2003 3,272,906 3,297,500
-------------- --------------
98,848,291 99,022,839
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Funeral Homes & NR++ Ba1 21,671,764 Loewen Group Capital, Term,
Parlors--1.3% due 7/15/2000 21,671,764 21,590,496
BB- NR++ 14,666,667 Prime Succession Inc., Axel,
due 8/01/2003 14,624,376 14,749,167
BB NR++ 6,813,647 Rose Hills Co., Axel A,
due 12/01/2003 6,799,986 6,839,198
-------------- --------------
43,096,126 43,178,861
Furniture & NR++ NR++ 10,000,000 Furniture Brands, Term,
Fixtures--0.3% due 6/27/2007 10,000,000 10,000,000
Grocery--2.1% NR++ NR++ 10,400,000 Big V Supermarkets, Inc.,
Term B, due 3/15/2000 10,353,305 10,270,000
NR++ B1 9,948,980 Carr Gottstein Foods Co.,
Term B, due 12/31/2002 9,946,429 9,961,416
NR++ NR++ 39,846,155 Fred Meyer, Term, due 2/28/2003 39,580,219 39,547,308
NR++ NR++ 4,500,000 LCP Grand Union Co., Term,
due 8/17/2003 4,495,512 4,500,000
Star Acquisition Co., Inc.:
B Ba3 3,455,179 Term B, due 12/31/2001 3,445,930 3,442,222
B Ba3 2,588,164 Term C, due 12/31/2002 2,580,198 2,575,223
-------------- --------------
70,401,593 70,296,169
Health Alaris Medical Systems, Inc.:
Services-- NR++ B1 3,763,200 Term A, due 8/01/2002 3,777,838 3,763,200
7.7% NR++ B1 3,166,428 Term B, due 11/01/2003 3,163,335 3,174,344
NR++ B1 3,166,428 Term C, due 11/01/2004 3,163,152 3,174,344
NR++ B1 2,980,216 Term D, due 5/01/2005 2,978,397 2,987,667
NR++ NR++ $10,000,000 Columbia Healthcare Corp, Term A,
due 6/16/1999 $ 9,975,170 $ 9,943,750
Community Health Systems, Inc.:
NR++ NR++ 16,089,041 Term B, due 12/31/2003 16,026,350 16,094,069
NR++ NR++ 16,089,041 Term C, due 12/31/2004 16,023,236 16,094,069
NR++ NR++ 12,082,192 Term D, due 12/31/2005 12,031,010 12,093,519
NR++ NR++ 6,374,296 CONMED Corp., Term B, due 12/30/2004 6,374,296 6,370,312
Dade International, Inc.:
NR++ B1 2,961,970 Term B, due 12/31/2002 2,948,674 2,958,268
NR++ B1 2,961,970 Term C, due 12/31/2003 2,947,933 2,961,970
NR++ B1 3,125,627 Term D, due 12/31/2004 3,110,004 3,127,581
NR++ NR++ 7,357,143 Endo Pharmaceuticals, Term B,
due 6/30/2004 7,344,108 7,370,937
NR++ NR++ 9,950,000 Extendicare Health, Inc., Term B,
due 12/31/2004 9,940,812 9,943,781
FHC Health Systems:
NR++ NR++ 2,743,125 Axel B, due 4/30/2005 2,737,265 2,746,554
NR++ NR++ 2,743,125 Axel C, due 4/30/2006 2,737,238 2,746,554
Genesis Health Ventures, Inc.:
NR++ Ba3 6,285,833 Term B, due 9/30/2004 6,274,451 6,287,798
NR++ Ba3 6,270,000 Term C, due 6/01/2005 6,258,553 6,271,959
Integrated Health Services, Inc.:
NR++ Ba3 22,500,000 Term B, due 9/15/2003 22,585,383 22,429,687
NR++ Ba3 10,000,000 Term C, due 9/15/2003 10,000,000 9,993,750
Kinetic Concepts, Inc.:
BB Ba2 5,970,000 Term B, due 12/31/2004 5,970,000 5,973,731
BB Ba2 5,970,000 Term C, due 12/31/2005 5,970,000 5,973,731
NR++ NR++ 7,000,000 MEDIQ PRN Life Support Services,
Term, due 6/30/2006 6,993,155 7,010,937
Magellen Health Services:
NR++ Ba3 5,000,000 Term B, due 2/12/2005 4,992,945 4,962,500
NR++ Ba3 5,000,000 Term C, due 2/12/2006 4,992,869 4,962,500
Medical Specialties:
NR++ NR++ 12,845,455 Axel, due 6/30/2004 12,780,325 12,460,091
NR++ NR++ 4,418,182 Term, due 6/30/2001 4,400,621 4,351,909
Multicare Companies, Inc.:
NR++ B1 4,714,375 Term B, due 9/30/2004 4,705,721 4,715,848
NR++ B1 1,567,500 Term C, due 6/01/2005 1,564,619 1,567,990
Paracelsus HealthCare Corp.:
NR++ NR++ 1,381,333 Term A, due 3/31/2003 1,374,674 1,379,607
NR++ NR++ 2,000,000 Term B, due 3/31/2004 1,990,281 1,998,750
Paragon Health Network, Inc.:
NR++ Ba3 7,500,000 Term B, due 3/31/2005 7,493,127 7,443,750
NR++ Ba3 7,500,000 Term C, due 3/31/2006 7,493,023 7,443,750
Sun Healthcare Group, Inc.:
NR++ Ba3 5,518,637 Term B, due 11/12/2004 5,511,150 5,515,188
NR++ Ba3 5,518,637 Term C, due 11/12/2005 5,511,015 5,515,188
NR++ NR++ 22,500,000 Total Renal Care, Term,
due 3/31/2008 22,472,523 22,507,031
NR++ NR++ 4,912,688 Wilson Great Batch, Term B,
due 7/10/2004 4,901,675 4,900,406
-------------- --------------
259,514,928 259,217,020
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Hotels & NR++ NR++ 7,125,000 Meristar Hospitality, Term B,
Motels--2.4% due 1/31/2004 7,116,192 7,107,187
NR++ NR++ 75,000,000 Starwood Hotels & Resorts Trust,
Term, due 2/23/2003 74,930,430 75,000,000
-------------- --------------
82,046,622 82,107,187
Industrial NR++ NR++ $ 26,177,876 Elis/Omni Services, Inc.,
Services--0.8% Axel, due 10/30/2005 $ 26,324,969 $ 26,128,793
Insurance--0.2% BRW Acquisition:
NR++ NR++ 2,500,000 Term B, due 7/09/2006 2,496,914 2,492,187
NR++ NR++ 2,500,000 Term C, due 7/09/2007 2,496,908 2,492,187
-------------- --------------
4,993,822 4,984,374
Leasing & NR++ NR++ 7,250,000 Panavision, Term B, due 3/31/2005 7,230,097 7,240,937
Rental Perf-O-Log:
Services--1.4% NR++ NR++ 1,560,341 Term, due 8/11/2003 1,557,004 1,556,440
NR++ NR++ 4,150,454 Term B, due 8/11/2003 4,141,579 4,140,078
NR++ NR++ 1,246,875 Term C, due 8/11/2003 1,245,026 1,248,434
NR++ NR++ 1,785,714 Term D, due 12/31/2004 1,779,030 1,781,250
NR++ NR++ 714,286 Term E, due 12/31/2004 711,612 712,500
Renters Choice:
NR++ NR++ 4,473,125 Term B, due 1/31/2006 4,468,680 4,464,738
NR++ NR++ 5,467,153 Term C, due 1/31/2007 5,461,714 5,456,902
NR++ NR++ 20,000,000 United Rentals Inc., Term,
due 6/30/2005 19,980,292 20,012,500
-------------- --------------
46,575,034 46,613,779
Manufacturing-- B3 B+ 4,750,000 Alliance Laundry Systems, Term,
1.6% due 6/30/2005 4,745,407 4,761,875
NR++ NR++ 9,500,000 Goodman Manufacturing, Term B,
due 7/31/2005 9,490,608 9,488,125
BB- Ba2 7,500,000 Grove Worldwide, Term B,
due 4/28/2006 7,492,726 7,523,437
NR++ NR++ 8,986,141 Polyfibron Technologies, Term B,
due 12/29/2003 8,986,141 8,986,141
NR++ NR++ 4,991,072 Russell Stanley, Term B,
due 6/30/2005 4,974,032 5,003,549
Sealy Mattress:
B+ Ba3 3,023,030 Axel B, due 12/15/2004 3,019,541 3,034,367
B+ Ba3 2,176,970 Axel C, due 12/15/2005 2,174,421 2,185,133
B+ Ba3 2,781,818 Axel D, due 12/15/2006 2,778,526 2,792,250
B+ Ba3 10,000,000 Term A, due 12/15/2003 10,062,500 10,003,125
-------------- --------------
53,723,902 53,778,002
Measuring, NR++ NR++ 9,330,624 CHF/Ebel USA, Inc., Term B,
Analyzing & due 9/30/2001 9,330,624 9,330,624
Controlling NR++ B1 10,630,866 Graphic Controls Corp., Term B,
Instruments--0.7% due 9/28/2003 10,591,201 10,624,222
NR++ Ba3 4,950,000 Packard Bioscience Co., Term,
due 3/31/2003 4,935,146 4,956,187
-------------- --------------
24,856,971 24,911,033
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Metals & B+ Ba3 9,971,429 Acme Metals, Inc., Term,
Mining--3.9% due 12/01/2005 9,971,429 9,522,714
B+ NR++ 5,008,036 Adience, Inc., Term B,
due 4/15/2005 4,991,394 5,020,556
NR++ Caa 4,657,582 Alliance Coal, Term B,
due 12/31/2002 4,640,220 4,654,671
Centennial Resources:
NR++ NR++ 1,961,538 Term A, due 3/31/2002 1,946,486 1,765,384
NR++ NR++ 5,105,770 Term B, due 3/31/2004 5,062,435 4,595,193
Ispat Inland LP:
NR++ NR++ 17,000,000 Term B, due 7/15/2005 16,979,039 16,978,750
NR++ NR++ 17,000,000 Term C, due 7/15/2006 16,978,987 16,978,750
NR++ Ba3 14,884,615 Koppers Industries, Term B,
due 11/30/2004 14,867,068 14,866,010
NR++ Ba3 8,500,000 Neenah Foundry, Term B,
due 9/30/2005 8,491,842 8,489,375
NR++ NR++ 31,000,000 Ormet Corporation, Term,
due 8/15/2008 30,922,639 31,000,000
NR++ NR++ 9,230,769 P & L Coal Holdings, Term B,
due 6/30/2006 9,230,769 9,253,846
NR++ Ba2 10,129,048 UCAR Global Enterprises, Term B, due
12/31/2002 10,121,076 9,875,821
-------------- --------------
134,203,384 133,001,070
Packaging--0.8% NR++ NR++ $ 4,250,000 Ball Corporation, Term B,
due 2/10/2005 $ 4,245,778 $ 4,260,625
NR++ NR++ 4,339,286 Graham Packaging, Term D,
due 1/31/2007 4,339,286 4,339,286
NR++ BB 3,750,000 Huntsman Packaging Corp., Term B,
due 6/30/2006 3,746,344 3,750,000
NR++ B1 14,887,500 Ivex Packaging Corp., Term B,
due 10/02/2004 14,870,749 14,896,805
-------------- --------------
27,202,157 27,246,716
Paper--8.1% NR++ NR++ 4,975,000 Bear Island Paper Co., Term,
due 12/31/2005 4,965,706 4,990,547
BB Ba3 4,715,152 Crown Paper Co., Term B,
due 8/22/2003 4,673,444 4,706,311
BB Ba3 35,000,000 Jefferson Smurfit Company/Container
Corp. of America, Term B,
due 3/24/2006 35,000,000 35,000,000
NR++ NR++ 5,000,000 Le Groupe Forex, Term B,
due 6/30/2005 4,993,862 5,000,000
NR++ NR++ 25,000,000 Paper Acquisition, Term,
due 6/08/2001 24,964,761 24,996,875
NR++ NR++ 6,500,000 Repap Brunswick, Term B,
due 6/01/2004 6,515,000 6,565,000
Riverwood International Corp.:
B+ B1 5,620,011 Term A, due 2/28/2003 5,454,420 5,607,717
B+ B1 66,465,370 Term B, due 2/28/2004 65,749,524 66,756,156
B+ B1 25,602,280 Term C, due 8/31/2004 25,318,553 25,714,290
Stone Container Corp.:
NR++ Ba3 28,030,332 Term B, due 4/01/2000 28,068,721 28,065,370
NR++ Ba3 19,913,262 Term C, due 10/01/2003 19,896,428 19,938,153
NR++ Ba3 29,153,298 Term E, due 10/01/2003 29,382,401 29,226,181
Stronghaven:
NR++ NR++ 9,352,586 Term B, due 5/15/2004 9,314,248 9,305,823
NR++ NR++ 1,705,714 Term C, due 5/15/2004 1,705,714 1,697,186
WEC Company:
NR++ NR++ 2,916,667 Term B, due 9/30/2005 2,913,031 2,916,667
NR++ NR++ 2,083,333 Term C, due 9/30/2006 2,080,735 2,083,333
-------------- --------------
270,996,548 272,569,609
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Petroleum BB- Ba3 3,242,602 Petro Shopping Centers, Term B,
Refineries--0.1% due 12/31/2003 3,235,921 3,244,628
Printing & 21st Century:
Publishing--3.0% NR++ B3 85,714 Revolving Credit, due 9/15/2003 85,714 84,857
NR++ B3 5,515,714 Term A, due 9/15/2003 5,543,293 5,460,557
NR++ B1 15,000,000 Advanstar Communications, Term B,
due 4/30/2005 14,985,507 15,011,250
NR++ NR++ 8,375,000 Journal Register Co., Term B,
due 9/30/2006 8,364,650 8,354,062
K-III Communications Corp.:
NR++ Ba3 6,640,000 Revolving Credit, due 12/31/2000 6,640,000 6,598,500
NR++ Ba3 4,000,000 Term 2, due 6/30/2004 4,000,000 3,982,500
NR++ Ba3 4,000,000 Term 3, due 12/31/2000 4,000,000 3,977,500
NR++ Ba3 9,950,000 Morris Communications, Term B,
due 6/30/2005 9,932,901 9,918,906
RH Donnolley Inc.:
NR++ NR++ 3,372,995 Term B, due 12/05/2005 3,369,702 3,366,671
NR++ NR++ 3,877,005 Term C, due 12/05/2006 3,873,205 3,869,736
Von Hoffmann Press, Inc.:
NR++ B1 3,335,714 Term B, due 5/22/2005 3,328,352 3,360,732
NR++ B1 10,828,571 Term C, due 5/22/2006 10,809,094 10,909,786
Ziff-Davis Inc.:
NR++ Ba2 5,000,000 Term A, due 3/31/2005 4,991,479 5,003,125
NR++ Ba2 22,500,000 Term B, due 3/31/2006 22,477,988 22,415,625
-------------- --------------
102,401,885 102,313,807
Restaurants-- AFC Enterprises:
0.4% NR++ Ba3 $ 5,440,000 Acquisition Term, due 6/30/2002 $ 5,440,000 $ 5,402,600
NR++ Ba3 560,000 Revolving Credit, due 3/30/2002 560,000 556,850
NR++ Ba3 3,640,000 Term, due 6/30/2002 3,625,591 3,628,625
NR++ Ba3 4,670,724 Shoney's, Inc., Term B, due 4/30/2002 4,645,572 4,600,663
-------------- --------------
14,271,163 14,188,738
Retail NR++ NR++ 5,750,000 Advance Store, Term B, due 4/15/2006 5,741,666 5,760,781
Specialty--0.4% NR++ NR++ 2,461,539 Murray's Discount Auto Stores, Term,
due 6/30/2003 2,461,539 2,461,539
NR++ Ba2 3,968,750 Travel Centers of America, Term B,
due 3/27/2005 3,955,841 3,978,672
-------------- --------------
12,159,046 12,200,992
Shipping--0.5% American Commercial Lines, LLC:
NR++ NR++ 6,349,693 Term B, due 6/26/2006 6,343,431 6,345,725
NR++ NR++ 8,650,305 Term C, due 6/26/2007 8,641,764 8,644,900
-------------- --------------
14,985,195 14,990,625
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Telephone Cellular, Inc.:
Communica- NR++ B1 13,985,692 Term B, due 9/30/2006 13,975,885 14,029,397
tions--11.0% NR++ B1 8,130,081 Term C, due 3/31/2007 8,110,582 8,160,569
NR++ B1 22,764,227 Term D, due 9/30/2007 22,709,402 22,849,593
NR++ NR++ 25,000,000 Cox Communications, Inc., Term B,
due 12/31/2006 24,939,988 24,953,125
NR++ Ba2 17,425,000 Flag Ltd., Term, due 1/30/2005 17,343,537 17,359,656
Iridium Operating LLC:
B2 B2 2,445,013 Term, due 12/31/1998 2,433,386 2,435,844
B2 B2 2,774,936 Term, due 12/31/1998 2,772,628 2,754,124
NR++ NR++ 25,000,000 Lucent Technologies, Term,
due 5/29/2004 24,938,243 25,015,625
MobileMedia Corp.:
NR++ Caa 8,367,347 Term A, due 6/30/2002 8,344,941 8,189,541
NR++ Caa 2,366,667 Term B2, due 6/30/2003 2,361,618 2,316,375
NR++ B1 40,000,000 Nextel Communications, Inc., Term B,
due 9/30/2006 39,951,894 40,087,500
NR++ B1 27,500,000 Nortel, Term A, due 3/31/2006 27,528,125 27,508,594
Omnipoint Communications Corp.:
BB- Ba2 6,792,172 Term A, due 2/17/2006 6,785,687 6,809,152
BB- Ba2 1,938,479 Term B, due 2/17/2006 1,936,628 1,943,325
BB- Ba2 43,640,625 Term C, due 2/17/2006 43,640,625 43,749,727
Pacific Coin:
NR++ NR++ 4,552,727 Acquisition Term, due 12/31/2003 4,534,896 4,552,727
NR++ NR++ 2,213,115 Term A, due 12/31/2002 2,205,331 2,213,115
NR++ NR++ 2,740,833 Term B, due 12/31/2004 2,730,961 2,740,833
NR++ Ba3 7,598,000 PageNet Finance, Inc., Revolving
Credit, due 12/31/2004 7,598,000 7,408,050
NR++ NR++ 15,000,000 PowerTel PCS, Inc., Term, due
3/04/2001 15,000,000 14,943,750
Sprint Spectrum L.P:
NR++ B1 17,775,000 Term 1, due 1/02/2006 17,638,596 17,819,438
NR++ B1 17,775,000 Term 2, due 1/02/2006 17,638,487 17,819,438
NR++ NR++ 15,000,000 TeleCorp PCS, Term B, due 1/15/2008 14,970,245 14,925,000
NR++ NR++ 10,000,000 Triton PCS, Term B, due 4/30/2007 9,976,474 9,962,500
NR++ NR++ 10,000,000 Western PCS, Term B, due 6/30/2007 9,980,266 10,037,500
B+ B2 20,000,000 Western Wireless Corp., Term B,
due 3/31/2005 20,000,000 20,018,750
-------------- --------------
370,046,425 370,603,248
Textiles/Mill Joan Fabrics:
Products--0.5% NR++ NR++ $ 3,271,053 Term B, due 6/30/2005 $ 3,266,606 $ 3,269,008
NR++ NR++ 1,700,000 Term C, due 6/30/2006 1,697,648 1,698,937
NR++ NR++ 10,500,000 Tartan Textiles, Term B,
due 5/01/2005 10,474,586 10,500,000
-------------- --------------
15,438,840 15,467,945
Transportation NR++ Ba3 14,132,432 Atlas Freighter Leasing I,
Services--1.1% Term, due 5/29/2004 14,126,427 14,150,098
NR++ Ba3 14,132,432 Atlas Freighter Leasing II,
Term, due 5/29/2004 14,123,057 14,150,098
NR++ NR++ 7,500,000 North American Van Lines, Term B,
due 3/30/2006 7,490,974 7,500,000
-------------- --------------
35,740,458 35,800,196
Total Senior Secured Floating Rate
Loan Interests--91.2% 3,072,268,439 3,070,351,435
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Shares
Held Warrants & Agreements
Cable TV Services--0.0% 707 Classic Cable, Inc. (Warrants)(a) 0 0
Drilling--0.0% 12,250 Rigco North America (Warrants)(a) 0 0
General Merchandise Stores--0.1% 2,288,402 Just For Feet, Inc. (Agreement)(b) 2,288,402 1,736,916
Total Investments in Warrants &
Agreements--0.1% 2,288,402 1,736,916
Face
Amount Short-Term Securities
Commercial $50,000,000 Countrywide Home Loans, Inc.,
Paper**--7.8% 5.54% due 9/16/1998 49,884,583 49,884,583
50,000,000 Finova Capital Corp., 5.52%
due 10/05/1998 49,739,333 49,739,333
57,672,000 General Motors Acceptance Corp.,
5.81% due 9/01/1998 57,672,000 57,672,000
15,000,000 Knight-Ridder, Inc., 5.54% due
9/08/1998 14,983,842 14,983,842
15,000,000 Rank Xerox Capital, 5.53% due
9/11/1998 14,976,958 14,976,958
Republic Industries, Inc.:
14,000,000 5.50% due 9/02/1998 13,997,842 13,997,842
25,000,000 5.53% due 10/05/1998 24,869,431 24,869,431
25,000,000 Transamerica Finance Corp., 5.51%
due 9/01/1998 25,000,000 25,000,000
11,160,000 Xerox Corp., 5.50% due 9/04/1998 11,154,885 11,154,885
Total Investments in Short-Term
Securities--7.8% 262,278,874 262,278,874
Total Investments--99.1% $3,336,835,715 3,334,367,225
==============
Other Assets Less Liabilities--0.9% 30,664,967
--------------
Net Assets--100.0% $3,365,032,192
==============
<FN>
(a)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock and are non-income producing. The purchase
price and numbers of shares are subject to adjustment under certain
conditions until the expiration date.
(b)Represents an obligation by Just For Feet, Inc. to pay an amount
to the Fund on April 30, 2002, contingent upon the earnings before
income taxes and depreciation of Just For Feet, Inc. as of January
31, 2002.
++Not Rated.
*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.
**Commercial Paper is traded on a discount basis; the interest rates
shown reflect the discount rates paid at the time of purchase by the
Fund.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of August 31, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$3,336,835,715)
(Note 1b) $ 3,334,367,225
Cash 5,040,725
Receivables:
Interest $ 25,785,874
Capital shares sold 10,819,389
Commitment fees 169,232 36,774,495
---------------
Prepaid registration fees and other assets (Note 1f) 735,226
---------------
Total assets 3,376,917,671
---------------
Liabilities: Payables:
Dividends to shareholders (Note 1g) 4,346,520
Investment adviser (Note 2) 2,492,689
Administrator (Note 2) 655,971
Interest expense (Note 6) 90,461 7,585,641
---------------
Deferred income (Note 1e) 971,098
Accrued expenses and other liabilities 3,328,740
---------------
Total liabilities 11,885,479
---------------
Net Assets: Net assets $ 3,365,032,192
===============
Net Assets Common Stock, par value $0.10 per share; 1,000,000,000
Consist of: shares authorized $ 33,741,754
Paid-in capital in excess of par 3,343,726,905
Undistributed investment income--net 71,750
Accumulated realized capital losses on investments--net
(Note 7) (10,039,727)
Unrealized depreciation on investments--net (2,468,490)
---------------
Net Assets--Equivalent to $9.97 per share based on shares of
337,417,538 capital stock outstanding $ 3,365,032,192
===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
FINANCIAL INFORMATION (continued))
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
August 31, 1998
<S> <S> <C> <C>
Investment Income Interest and discount earned $ 252,610,169
(Note 1e): Facility and other fees 3,411,440
---------------
Total income 256,021,609
---------------
Expenses: Investment advisory fees (Note 2) $ 29,695,074
Administrative fees (Note 2) 7,814,493
Transfer agent fees (Note 2) 1,763,950
Loan interest expense (Note 6) 1,411,904
Registration fees (Note 1f) 1,400,803
Accounting services (Note 2) 403,737
Professional fees 380,295
Tender offer costs (Note 8) 239,636
Printing and shareholder reports 114,289
Custodian fees 90,711
Borrowing costs (Note 6) 65,611
Directors' fees and expenses 36,061
Other 244,358
---------------
Total expenses 43,660,922
---------------
Investment income--net 212,360,687
---------------
Realized & Realized loss on investments--net (3,676,079)
Unrealized Change in unrealized appreciation/depreciation on
Loss on investments--net (9,910,437)
Investments--Net ---------------
(Notes 1c, 1e Net Increase in Net Assets Resulting from Operations $ 198,774,171
& 3): ===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
FINANCIAL INFORMATION (continued))
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
August 31,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 212,360,687 $ 195,758,437
Realized gain (loss) on investments--net (3,676,079) 1,494,764
Change in unrealized appreciation/depreciation on
investments--net (9,910,437) 6,060,630
---------------- ----------------
Net increase in net assets resulting from operations 198,774,171 203,313,831
---------------- ----------------
Dividends to Investment income--net (212,288,937) (195,758,437)
Shareholders ---------------- ----------------
(Note 1g): Net decrease in net assets resulting from dividends
to shareholders (212,288,937) (195,758,437)
---------------- ----------------
Capital Share Net increase in net assets resulting from capital
Transactions share transactions 386,757,317 38,706,901
(Note 4): ---------------- ----------------
Net Assets: Total increase in net assets 373,242,551 46,262,295
Beginning of year 2,991,789,641 2,945,527,346
---------------- ----------------
End of year* $ 3,365,032,192 $ 2,991,789,641
================ ================
<FN>
*Undistributed investment income--net $ 71,750 --
================ ================
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Cash Flows
<CAPTION>
For the Year Ended
August 31, 1998
<S> <S> <C>
Cash Provided by Net increase in net assets resulting from operations $ 198,774,171
Operating Adjustments to reconcile net increase in net assets resulting from
Activities: operations to net cash provided by operating activities:
Increase in receivables (2,391,283)
Decrease in other assets 2,092,268
Increase in other liabilities 646,890
Realized and unrealized loss on investments--net 13,586,516
Amortization of discount (23,142,195)
----------------
Net cash provided by operating activities 189,566,367
----------------
Cash Used for Proceeds from principal payments and sales of loan interests 1,933,726,438
Investing Purchases of loan interests (2,548,414,584)
Activities: Purchases of short-term investments (24,225,359,835)
Proceeds from sales and maturities of short-term investments 24,481,273,524
----------------
Net cash used for investing activities (358,774,457)
----------------
Cash Provided by Cash receipts from borrowings 290,000,000
Financing Cash payments from borrowings (290,000,000)
Activities: Cash receipts on capital shares sold 876,459,595
Cash payments on capital shares tendered (595,698,442)
Dividends paid to shareholders (109,845,550)
----------------
Net cash provided by financing activities 170,915,603
----------------
Cash: Net increase in cash 1,707,513
Cash at beginning of year 3,333,212
----------------
Cash at end of year $ 5,040,725
================
Cash Flow Cash paid for interest $ 1,577,653
Information: ================
Non-Cash Capital shares issued in reinvestment of dividends paid to shareholders $ 102,041,674
Financing ================
Activities:
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
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 Year Ended August 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.02 $ 9.99 $ 10.02 $ 10.02 $ 10.02
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .68 .68 .66 .75 .59
Realized and unrealized gain (loss) on
investments--net (.05) .03 (.03) --++ --++
-------- -------- -------- -------- --------
Total from investment operations .63 .71 .63 .75 .59
-------- -------- -------- -------- --------
Less dividends from investment
income--net (.68) (.68) (.66) (.75) (.59)
-------- -------- -------- -------- --------
Net asset value, end of year $ 9.97 $ 10.02 $ 9.99 $ 10.02 $ 10.02
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 6.47% 7.23% 6.53% 7.68% 5.94%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses, excluding interest expense 1.35% 1.32% -- -- --
Net Assets: ======== ======== ======== ======== ========
Expenses 1.40% 1.33% 1.34% 1.34% 1.43%
======== ======== ======== ======== ========
Investment income--net 6.79% 6.72% 6.54% 7.45% 5.75%
======== ======== ======== ======== ========
Leverage: Average amount of borrowings outstanding
during the year (in thousands) $ 24,299 $ 4,409 -- -- --
======== ======== ======== ======== ========
Average amount of borrowings outstanding
per share during the year $ .08 $ .02 -- -- --
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in millions) $ 3,365 $ 2,992 $ 2,946 $ 2,163 $ 934
Data: ======== ======== ======== ======== ========
Portfolio turnover 69.59% 74.00% 80.20% 55.23% 61.31%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the early withdrawal charge, if
any. 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.
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
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.
(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 August 31, 1998 could be considered
to be concentrated in commercial banking.
(b) Valuation of investments--The Loan Interests will be valued in
accordance with guidelines established by the Fund's Board of
Directors. Under the Fund's current guidelines, Loan Interests will
be valued at the average of the mean between the bid and asked
quotes received from one or more brokers, if available.
Other portfolio securities may be valued on the basis of prices
furnished by one or more pricing services which determine prices for
normal, institutional-size trading units of such securities using
market information, transactions for comparable securities and
various relationships between securities which are generally
recognized by institutional traders. In certain circumstances,
portfolio securities are valued at the last sale price on the
exchange that is the primary market for such securities, or the last
quoted bid price for those securities for which the over-the-counter
market is the primary market or for listed securities in which there
were no sales during the day. 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.
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
(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.
(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
Merrill Lynch Asset Management, L.P. ("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 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.
For the year ended August 31, 1998, Merrill Lynch Funds Distributor
("MLFD") earned early withdrawal charges of $3,175,705 relating
to the tender of the Fund's shares.
For the year ended August 31, 1998, the Fund paid Merrill Lynch
International Bank Limited ("MLIB"), an affiliate of MLAM,
$1,411,904 for interest pursuant to a credit agreement with MLIB
that expired on June 12, 1998.
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, FDS, MLFD, and/or ML & Co.
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended August 31, 1998 were $2,543,374,408 and
$1,932,403,430, respectively.
Net realized losses for the year ended August 31, 1998 and net
unrealized losses as of August 31, 1998 were as follows:
Realized Unrealized
Losses Losses
Long-term investments $ (3,672,662) $ (2,468,490)
Short-term investments (3,417) --
------------ ------------
Total $ (3,676,079) $ (2,468,490)
============ ============
As of August 31, 1998, net unrealized depreciation for financial
reporting and Federal income tax purposes aggregated $2,468,490, of
which $7,205,939 is related to appreciated securities and $9,674,429
is related to depreciated securities. The aggregate cost of
investments at August 31, 1998 for Federal income tax purposes was
$3,336,835,715.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Year Ended Dollar
August 31, 1998 Shares Amount
Shares sold 88,083,898 $880,414,085
Shares issued to share-
holders in reinvestment
of dividends 10,206,064 102,041,674
------------ ------------
Total issued 98,289,962 982,455,759
Shares tendered (59,583,594) (595,698,442)
------------ ------------
Net increase 38,706,368 $386,757,317
============ ============
For the Year Ended Dollar
August 31, 1997 Shares Amount
Shares sold 43,063,467 $430,288,115
Shares issued to share-
holders in reinvestment
of dividends 9,529,624 95,204,864
------------ ------------
Total issued 52,593,091 525,492,979
Shares tendered (48,731,298) (486,786,078)
------------ ------------
Net increase 3,861,793 $ 38,706,901
============ ============
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
5. Unfunded Loan Interests:
As of August 31, 1998, the Fund had unfunded loan commitments of
$156,683,506, which would be extended at the option of the borrower,
pursuant to the following loan agreements:
Unfunded
Commitment
Borrower (in thousands)
21st Century $ 3,343
AFC Enterprises 4,000
American Axel 4,201
Arena Brands, Inc. 2,459
Cellular, Inc. 8,034
Chancellor Media Corp. 7,849
Continental Airlines, Inc. 4,639
Del Monte Corp. 4,173
Dictaphone Corp. 570
E&S Holdings Corp. 2,377
FHC Health Systems 31
Federal Mogul Corp. 4,048
Foamex International PLC 4,692
Graham Packaging 5,786
Hedstrom Corp. 3,414
International Homefoods, Inc. 1,613
Iridium Operating LLC 7,780
K-III Communications Corp. 5,360
KSL Recreation Group, Inc. 8,224
Kmart Corp. 10,000
Loewen Group Capital 528
Metro Goldwyn Mayer Co. 1,020
NTL Group 14,599
Nextel Communications, Inc. 4,960
Northwestern Steel & Mining 15,000
Pacific Coin 447
PageNet Finance, Inc. 7,161
Teligent Delayed Draw 18,334
Trans Technology Corp. 2,042
6. Short-Term Borrowings:
On June 22, 1998, the Fund entered into a one-year credit agreement
with Bank of New York. The agreement is a $100,000,000 credit
facility bearing interest at the Federal Funds rate plus 0.25%--
0.40% and/or the Eurodollar rate plus 0.25%--0.40%. For the year
ended August 31, 1998, the average amount borrowed was approximately
$24,299,451, and the daily weighted average interest rate was 5.83%.
For the year ended August 31, 1998, facility and commitment fees
aggregated approximately $65,611.
7. Capital Loss Carryforward:
At August 31, 1998, the Fund had a net capital loss carryforward of
approximately $9,218,000, of which $1,471,000 expires in 2004,
$3,279,000 expires in 2005 and $4,468,000 expires in 2006. 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 September 22, 1998 which
concludes on October 20, 1998.
<PAGE>
EXHIBIT (g)(2)
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Senior Floating Rate Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Senior Floating Rate Fund, Inc. as
of August 31, 1999, the related statements of operations and cash flows for the
year then ended, the statements of changes in net assets for each of the years
in the two-year period then ended, and the financial highlights for each of the
years in the five-year period then ended. These financial statements and the
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at August
31, 1999 by correspondence with the custodian and financial intermediaries or
other alternative procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch Senior
Floating Rate Fund, Inc. as of August 31, 1999, the results of its operations,
its cash flows, the changes in its net assets, and the financial highlights for
the respective stated periods in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
October 20, 1999
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Advertising BB- Ba2 $11,092,376 Outdoor Systems, Inc., Term, $ 11,074,561 $ 11,057,713
- --0.4% due 6/30/2004
Air NR++ Ba3 12,300,000 Atlas Freighter Leasing I, Term, due 5/29/2004 12,293,003 12,279,496
Transpor- NR++ Ba3 12,300,000 Atlas Freighter Leasing II, Term, due
tation 5/29/2004 12,297,892 12,279,496
- --0.9% BB Ba1 5,377,970 Continental Airlines, Inc., Term A, due
7/31/2002 5,353,021 5,277,133
-------------- --------------
29,943,916 29,836,125
Aircraft & Evergreen International Aviation, Inc.:
Parts--0.4% B+ Ba3 2,118,925 Term B, due 5/31/2002 2,112,510 2,116,717
B+ Ba3 600,656 Term B, due 5/19/2003 600,656 600,030
B+ Ba3 4,223,594 Term B, due 5/31/2003 4,209,249 4,219,193
B+ Ba3 3,938,134 Fairchild Semiconductors Corp., Term, due
4/30/2006 3,930,556 3,950,440
NR++ NR++ 1,905,199 Technetics Corp., Term, due 6/20/2002 1,897,591 1,859,950
-------------- --------------
12,750,562 12,746,330
Amusement & AMF Group, Inc.:
Recreational NR++ B 28,422,736 Axel A, due 3/31/2003 28,558,346 27,079,760
Services--4.2% NR++ B 15,912,337 Axel B, due 3/31/2004 15,974,453 15,179,700
B1 B 4,164,745 Term, due 3/31/2002 4,157,992 3,909,654
NR++ B1 2,121,429 ASC East Inc., Term, due 5/31/2006 2,119,021 2,036,572
NR++ B1 5,307,144 ASC West Inc., Term, due 5/31/2006 5,302,896 5,094,858
Amfac Resorts, Inc.:
NR++ NR++ 2,475,000 Term B, due 9/30/2004 2,472,035 2,451,797
NR++ NR++ 2,475,000 Term C, due 9/30/2005 2,471,907 2,451,797
KSL Recreation Group, Inc.:
B+ B2 10,778,182 Revolving Credit, due 4/30/2004 10,778,182 10,647,949
B+ B2 5,780,000 Term A, due 4/30/2005 5,818,922 5,736,650
B+ B2 5,780,000 Term B, due 4/30/2006 5,818,510 5,755,915
B+ NR++ 4,937,500 Kerastotes, Term B, due 12/31/2004 4,931,535 4,925,156
Metro Goldwyn Mayer Co.:
NR++ NR++ 3,690,000 Revolving Credit, due 9/30/2003 3,690,000 3,550,474
NR++ NR++ 4,000,000 Term A, due 3/31/2005 3,983,481 3,865,000
BB++ NR++ 17,500,000 Term B, due 3/31/2006 17,478,677 17,084,375
NR++ NR++ 20,000,000 SFX Entertainment Inc., Term B, due 6/30/2006 19,875,177 19,862,500
NR++ NR++ 4,162,941 Video Update Inc., Term B, due 4/30/2003 4,131,066 2,237,581
-------------- --------------
137,562,200 131,869,738
Apparel--1.3% Arena Brands, Inc.:
NR++ NR++ 1,302,361 Revolving Credit, due 6/01/2002 1,302,361 1,264,918
NR++ NR++ 3,275,606 Term A, due 6/01/2002 3,279,700 3,228,519
NR++ NR++ 7,066,816 Term B, due 6/01/2002 7,075,650 6,969,648
NR++ NR++ 3,250,000 CS Brooks Canada, Inc., Term, due 6/25/2006 3,234,968 3,225,625
B+ B2 9,500,000 Humphreys Inc., Term B, due 1/15/2003 9,442,513 8,217,500
NR++ NR++ 4,962,500 Norcross Safety Products, Term, due 9/30/2005 4,921,921 4,863,250
NR++ NR++ 4,600,000 Renfro Corp., Term B, due 1/15/2003 4,585,793 4,594,250
Walls Industries:
NR++ NR++ 1,212,766 Term B, due 2/28/2005 1,210,435 1,208,976
NR++ NR++ 1,691,490 Term C, due 2/28/2006 1,688,081 1,686,204
BB- Ba3 5,985,000 The William Carter Co., Term, due 10/31/2003 5,965,242 5,982,504
-------------- --------------
42,706,664 41,241,394
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Automotive B+ Ba3 $ 3,000,000 Accuride Corp., Term C, due 1/21/2007 $ 2,992,765 $ 2,999,100
Equipment-- BB- NR++ 16,000,000 American Axel, Term B, due 3/31/2007 16,052,430 15,960,000
2.4% NR++ NR++ 7,000,000 Americanbumper, Term B, due 10/31/2002 6,983,652 7,006,566
Breed Technologies, Inc.:
B- Caa1 4,947,407 Term A, due 4/27/2004 4,778,203 2,094,401
B- Caa1 9,524,002 Term B, due 4/27/2006 9,504,175 4,035,796
BB- Ba3 16,728,000 Collins & Aikman Corp., Term B, due 6/30/2005 16,656,071 16,647,840
Mueller Industries Inc.:
NR++ NR++ 7,500,000 Term B, due 8/16/2006 7,490,638 7,514,062
NR++ NR++ 7,500,000 Term C, due 8/16/2007 7,490,636 7,514,062
Safelite Glass Corp.:
BB- B1 3,092,143 Term B, due 12/31/2003 3,088,419 3,076,682
BB- B1 3,092,143 Term C, due 12/31/2004 3,088,269 3,076,682
NR++ Ba3 4,975,000 Stone Ridge, Term B, due 12/31/2005 4,957,513 5,015,422
-------------- --------------
83,082,771 74,940,613
Broadcasting NR++ NR++ 19,500,000 Benedek Broadcasting Corp., Term, due
- --Radio & 11/20/2007 19,471,225 19,475,625
Television Chancellor Media Corp.:
- --3.1% BB- Ba1 5,970,170 Revolving Credit, due 1/31/2003 5,970,170 5,880,619
BB- Ba1 41,315,082 Term, due 6/26/2004 41,174,583 41,203,201
Cumulus Media Inc.:
NR++ B1 3,000,000 Term B, due 9/30/2007 2,987,500 2,987,500
NR++ B1 2,000,000 Term C, due 2/28/2008 2,000,000 2,000,000
NR++ Ba2 10,000,000 Emmis Communications, Term, due 2/28/2007 10,000,000 10,000,000
NR++ NR++ 4,509,783 Latin Communications, Term, due 3/31/2004 4,488,654 4,447,773
NR++ NR++ 4,500,000 Quoram Broadcasting, Term B, due 9/30/2007 4,489,066 4,505,625
NR++ Ba2 4,833,333 Sinclair Bradcasting, Term, due 12/31/2004 4,825,141 4,763,854
NR++ NR++ 3,721,875 Spartan Communications, Term B, due
6/30/2005 3,715,380 3,721,875
-------------- --------------
99,121,719 98,986,072
Building NR++ NR++ 11,826,181 Dal-Tile International Inc., Term B, due
Materials 12/31/2003 11,783,731 11,624,154
- --1.6% NR++ NR++ 5,000,000 Dayton Superior Corp., Term, due 9/30/2005 5,000,000 4,978,125
B+ B1 13,268,794 Falcon Building Products, Inc., Term, due
6/30/2005 13,253,281 13,180,331
NR++ B1 4,000,000 Juno Lighting Inc., Term B, due 11/30/2006 3,990,171 4,005,000
Panolam Industries:
B+ B1 1,990,000 Term B, due 12/31/2005 (CAN) 1,982,951 1,996,219
B+ B1 1,990,000 Term B, due 12/31/2005 (US) 1,982,951 1,996,219
NR++ B1 11,750,000 Trussway Industries, Term B, due 7/28/2005 11,725,369 11,750,000
-------------- --------------
49,718,454 49,530,048
Business NR++ B1 6,500,000 Muzak Audio, Term B, due 12/31/2006 6,484,202 6,516,250
Services
- --0.2%
Cable B+ Ba3 5,000,000 Avalon Cable, Term B, due 10/31/2006 4,965,219 5,025,000
Television BB+ Ba3 4,900,000 Bresnan Telecommunications, Term B, due
Services 1/29/2008 4,882,445 4,909,187
- --3.5% BB- Ba1 25,000,000 Charter Communications, Term B, due 3/18/2008 24,963,835 24,965,625
NR++ Ba2 24,070,312 Chelsea Communications, Term B, due 9/30/2004 23,996,481 24,025,181
NR++ Ba3 4,975,000 Falcon Cable, Term C, due 12/31/2007 4,958,422 4,961,528
NR++ Ba3 9,456,818 Intermedia Partners IV, Inc., Term, due
1/01/2005 9,440,274 9,456,818
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Cable NR++ Ba3 $ 7,500,000 Intermedia Partners VI, Inc., Term B, due
Television 12/31/2007 $ 7,493,243 $ 7,469,535
Services NR++ NR++ 11,000,000 TW Fanch-One Co., Term B, due 12/31/2007 10,991,606 11,013,750
(concluded) NR++ NR++ 17,000,000 Triax Midwest, Term B, due 6/30/2007 16,976,925 16,978,750
-------------- --------------
108,668,450 108,805,374
Chemicals NR++ NR++ 12,120,798 AOC LLC, Term B, due 9/30/2006 12,093,260 11,992,015
- --6.6% NR++ NR++ 3,828,913 CII Carbon LLC, Term, due 6/25/2008 3,825,381 3,824,127
NR++ NR++ 11,170,049 Cedar Chemical, Term B, due 10/31/2003 11,115,777 11,002,499
NR++ NR++ 10,000,000 Epsillon, Term B, due 12/31/2005 9,979,047 9,979,047
Huntsman Corp.:
BB Ba2 3,407,665 Term A, due 9/30/2003 3,405,671 3,399,146
BB Ba2 5,227,409 Term B, due 6/30/2004 5,224,198 5,207,806
BB Ba2 9,063,925 Term C, due 12/31/2005 9,037,778 9,029,936
BB Ba2 14,422,479 Term D, due 12/31/2002 14,413,842 14,386,423
Huntsman ICI Chemical LLC.:
NR++ Ba3 13,500,000 Term B, due 6/30/2007 13,463,001 13,544,995
NR++ Ba3 13,500,000 Term C, due 6/30/2008 13,462,920 13,544,996
Illiad Limited:
NR++ NR++ 2,965,969 Term B, due 7/01/2006 2,958,789 2,958,554
NR++ NR++ 9,886,563 Term C, due 7/01/2007 9,862,559 9,861,846
NR++ Ba2 14,653,846 Koppers Industries, Term B, due 11/30/2004 14,638,804 14,589,736
Lyondell Petrochemical Co.:
Ba3 NR++ 8,211,125 Term A, due 6/30/2003 8,109,503 8,132,676
Ba3 NR++ 37,448,716 Term B, due 6/30/2005 37,448,716 37,304,951
Ba3 NR++ 14,962,500 Term E, due 5/17/2006 14,944,334 15,021,722
NR++ B2 7,840,000 Pioneer Americas Acquisition Corp., Term,
due 12/05/2006 7,907,203 6,546,400
NR++ NR++ 9,625,000 Sybron Chemical, Term B, due 7/31/2004 9,614,530 9,616,982
NR++ Ba3 6,230,539 Texas Petrochemicals Corp., Term B, due
6/30/2004 6,214,159 6,214,963
-------------- --------------
207,719,472 206,158,820
Computer- Bridge Information:
Related NR++ NR++ 2,500,000 Term, due 7/07/2003 2,498,780 2,489,845
Products NR++ NR++ 27,500,000 Term B, due 5/29/2005 27,445,048 27,517,187
- --1.1% NR++ NR++ 3,738,281 Stratus Computer, Inc., Term B, due
2/26/2005 3,720,800 3,756,973
-------------- --------------
33,664,628 33,764,005
Consumer B+ B1 5,225,000 American Safety Razor Co., Term B, due
Products 4/30/2007 5,222,913 5,225,000
- --1.7% NR++ B1 8,327,727 Amscan Holdings, Inc., Axel, due 12/19/2004 8,327,727 7,786,425
B+ B1 4,250,000 Holmes Products, Term B, due 2/05/2007 4,229,813 4,259,299
BB- Ba3 14,850,000 Revlon Consumer Products Corp., Term, due
5/30/2002 14,842,253 14,757,188
NR++ NR++ 7,209,568 Ritvik Holdings, Term B, due 2/07/2003 7,168,496 5,947,894
B Ba3 4,455,000 Samsonite Corporation, Term, due 6/24/2005 4,112,261 4,313,924
Scotts Company:
BB+ Ba3 2,541,466 Term B, due 6/04/2006 2,532,604 2,556,557
BB+ Ba3 2,448,875 Term C, due 6/04/2007 2,440,226 2,463,417
B+ B1 4,987,500 United Industries, Term B, due 1/20/2006 4,981,564 4,956,328
-------------- --------------
53,857,857 52,266,032
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Diversified B+ B1 $10,000,000 Blount International Inc., Term B, due
- --1.0% 6/30/2006 $ 9,975,049 $ 9,987,500
BB Ba3 22,865,000 SPX Corporation, Term B, due 9/30/2006 22,832,886 23,007,906
-------------- --------------
32,807,935 32,995,406
Drilling B- B1 19,486,820 Key Energy Services Inc., Term B, due 9/14/2004 19,223,721 19,340,669
- --0.7% NR++ NR++ 3,695,862 Rigco North America, Term, due 9/30/1999 3,695,862 3,603,466
-------------- --------------
22,919,583 22,944,135
Drug/ B+ B1 4,925,000 Duane Reade Co., Term B, due 2/13/2005 4,912,328 4,926,024
Proprietary
Stores--0.2%
Electronics NR++ NR++ 5,416,667 Communications & Power II Acquisition Corp.,
/Electrical Term B, due 8/11/2002 5,389,860 5,369,271
Components B+ B1 8,483,000 DD Inc., Term B, due 4/22/2005 8,435,230 8,260,555
- --5.0% Dynatech Corporation:
B+ NR++ 1,625,006 Term B, due 3/31/2005 1,625,006 1,627,037
B+ NR++ 1,625,006 Term C, due 3/31/2006 1,625,006 1,627,037
B+ NR++ 1,625,006 Term D, due 3/31/2007 1,625,006 1,627,037
NR++ NR++ 10,000,000 General Cable, Term B, due 6/30/2007 9,985,346 10,018,750
NR++ NR++ 10,000,000 International Rectifier, Term B, due 9/30/2003 9,901,345 9,912,500
NR++ B1 14,750,779 International Wire Group, Inc., Term B, due
9/30/2003 14,740,460 14,640,148
NR++ NR++ 25,000,000 Intersil Corp., Term, due 6/30/2005 24,906,795 25,000,000
NR++ NR++ 5,000,000 Knowles Electricity, Term B, due 6/29/2007 4,993,811 5,007,815
Semiconductor:
BB- Ba3 14,444,444 Term B, due 8/04/2005 14,408,660 14,421,882
BB- Ba3 15,555,556 Term C, due 8/04/2007 15,516,902 15,531,258
Superior Telecom:
B+ Ba3 9,475,104 Term A, due 5/27/2004 9,475,104 9,476,582
B+ Ba3 7,867,190 Term B, due 11/27/2005 7,862,814 7,894,238
B Ba3 6,656,442 Telex Communications, Inc., Term B, due
11/30/2004 6,643,698 6,223,774
B+ B2 19,800,000 ViaSystems Inc., Term C, due 6/30/2005 19,652,824 19,725,750
-------------- --------------
156,787,867 156,363,634
Energy--0.5% Perf-O-Log Inc.:
NR++ NR++ 1,544,659 Term, due 8/11/2003 1,541,918 1,463,564
NR++ NR++ 4,108,627 Term B, due 8/11/2003 4,101,390 3,892,924
NR++ NR++ 1,234,375 Term C, due 8/11/2003 1,232,852 1,169,570
NR++ NR++ 1,772,321 Term D, due 12/31/2004 1,766,489 1,679,275
NR++ NR++ 708,929 Term E, due 12/31/2004 706,596 671,710
NR++ NR++ 6,000,000 Plains Scurlock, Term B, due 5/12/2004 5,970,848 5,986,878
-------------- --------------
15,320,093 14,863,921
Environmental URS Corp.:
Services BB Ba3 2,500,000 Term B, due 6/09/2006 2,497,543 2,512,500
- --0.2% BB Ba3 2,500,000 Term C, due 6/09/2007 2,497,535 2,512,500
-------------- --------------
4,995,078 5,025,000
Financial Outsourcing Solutions, Inc.:
Services NR++ B2 3,957,138 Term B, due 10/15/2003 3,954,454 3,863,156
- --1.9% NR++ B2 37,249,992 Term C, due 10/15/2004 37,249,992 36,365,304
Willis Corroon Group PLC:
BB Ba2 12,257,692 Term B, due 11/19/2006 12,081,811 12,128,795
BB Ba2 4,056,154 Term C, due 11/19/2007 4,107,690 4,126,367
B+ Ba2 4,056,154 Term D, due 5/19/2008 4,107,634 4,126,367
-------------- --------------
61,501,581 60,609,989
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Food & B1 B+ $ 5,000,000 B & G Foods, Term B, due 3/15/2006 $ 4,990,486 $ 5,000,000
Kindred NR++ Ba2 3,750,000 Canandaigua Brands, Term, due 12/01/2005 3,745,445 3,751,174
Products BB- Ba3 4,969,323 Imperial Holly Corp., Term A, due 12/31/2003 4,909,095 4,938,265
- --2.0% International Homefoods, Inc.:
BB- Ba3 609,319 Revolving Credit, due 11/21/2004 609,319 600,941
BB- Ba3 3,008,065 Term A, due 5/31/2004 3,006,757 2,981,118
BB- Ba3 3,500,000 Pabst Brewing Company, Term B, due 4/30/2003 3,490,234 3,500,000
Snapple:
NR++ NR++ 7,249,273 Term B, due 2/25/2006 7,223,429 7,271,927
NR++ NR++ 17,688,227 Term C, due 2/25/2007 17,624,574 17,747,181
Specialty Foods, Inc.:
NR++ B3 6,391,033 Revolving Credit, due 1/31/2000 6,391,033 6,379,050
NR++ B3 10,963,742 Term, due 1/31/2000 10,977,447 10,943,185
-------------- --------------
62,967,819 63,112,841
Funeral B- Caa3 17,087,833 Loewen Group Capital, Term, due 7/15/2000 (c) 16,994,346 10,081,822
Homes & B- B3 14,500,000 Prime Succession Inc., Axel, due 8/01/2003 14,465,191 14,355,000
Parlors--1.0% BB- NR++ 6,720,944 Rose Hills Co., Axel A, due 12/01/2003 6,709,670 6,683,139
-------------- --------------
38,169,207 31,119,961
Furniture & Sealy Mattress:
Fixtures--0.8% B+ Ba3 3,008,485 Axel B, due 12/15/2004 3,005,459 3,010,365
B+ Ba3 2,167,273 Axel C, due 12/15/2005 2,165,003 2,168,627
B+ Ba3 2,769,697 Axel D, due 12/15/2006 2,766,708 2,770,996
B+ Ba3 10,284,722 Term A, due 12/15/2003 10,326,978 10,223,661
Simmons Co.:
NR++ Ba3 2,136,735 Term B, due 6/28/2005 2,127,023 2,138,515
NR++ Ba3 5,343,750 Term C, due 10/27/2006 5,319,042 5,348,201
-------------- --------------
25,710,213 25,660,365
Gaming--0.7% Alliance Gaming Corp.:
B+ B1 10,347,733 Term B, due 1/31/2005 10,347,733 9,856,216
B+ B1 4,130,833 Term C, due 7/31/2005 4,130,833 3,934,619
NR++ NR++ 10,000,000 Palace Station, Term, due 12/31/2005 10,000,000 10,000,000
-------------- --------------
24,478,566 23,790,835
Grocery B+ B1 4,975,000 Big V Super, Term B, due 8/10/2003 4,952,110 4,937,687
- --1.0% BBB- Ba2 1,287,809 Fred Meyer, Term, due 2/28/2003 1,280,939 1,276,943
B B2 21,000,000 Grand Union Co., Term, due 8/17/2003 21,003,952 20,947,500
BB- B1 4,974,804 The Pantry Inc., Term B, due 1/31/2006 4,945,079 4,984,132
-------------- --------------
32,182,080 32,146,262
Health Community Health Systems, Inc.:
Services-- NR++ NR++ 14,038,324 Term B, due 12/31/2003 13,992,221 14,003,228
4.2% NR++ NR++ 14,038,324 Term C, due 12/31/2004 13,988,089 14,003,228
NR++ NR++ 10,486,038 Term D, due 12/31/2005 10,446,165 10,464,196
B+ Ba3 5,459,575 Extendicare Health Services, Inc., Term B, due
12/31/2004 5,455,183 5,186,597
Genesis Health Ventures, Inc.:
B+ Ba3 4,951,328 Term B, due 9/30/2004 4,943,579 4,204,504
B+ Ba3 4,939,776 Term C, due 6/01/2005 4,931,772 4,194,694
Integrated Health Services, Inc.:
B+ Ba3 22,162,500 Term B, due 9/15/2003 22,131,000 18,655,507
B+ Ba3 9,850,000 Term C, due 12/31/2005 9,850,000 8,290,420
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Health Magellen Health Services:
Services B+ B2 $ 4,620,107 Term B, due 2/12/2005 $ 4,614,413 $ 4,344,347
(concluded) B+ B2 4,620,107 Term C, due 2/12/2006 4,614,207 4,344,347
Mariner Post-Acute Network:
B+ Caa2 7,149,146 Term B, due 3/31/2005 7,143,369 3,529,891
B+ Caa2 7,149,146 Term C, due 3/31/2006 7,143,140 3,529,891
NR++ B1 4,226,196 MedPartners Inc., Term A, due 6/09/2001 4,077,739 3,937,407
Multicare Companies, Inc.:
B+ B1 4,666,875 Term B, due 9/30/2004 4,659,438 4,001,845
B+ B1 1,551,667 Term C, due 6/01/2005 1,549,139 1,330,554
Paracelsus HealthCare Corp.:
NR++ B1 1,300,444 Term A, due 3/31/2003 1,295,351 1,235,422
NR++ B1 1,985,714 Term B, due 3/31/2004 1,977,468 1,886,429
NR++ Ba2 27,200,000 Total Renal Care, Term, due 9/31/2006 26,927,213 25,840,000
-------------- --------------
149,739,486 132,982,507
Hotels & NR++ Ba1 91,000,000 Starwood Hotels & Resorts Trust, Term, due
Motels--6.7% 2/23/2003 90,759,541 90,843,935
Wyndam International Inc.:
B+ B3 51,000,000 Term, due 6/30/2004 50,749,801 50,711,268
B+ B3 69,000,000 Term, due 6/30/2006 68,830,464 68,644,236
-------------- --------------
210,339,806 210,199,439
Industrial NR++ B1 4,444,888 Volume Services America, Term B, due
Services 12/03/2007 4,423,898 4,456,000
- --0.1%
Insurance--0.2% BRW Acquisition:
NR++ NR++ 2,475,000 Term B, due 7/10/2006 2,472,241 2,450,250
NR++ NR++ 2,475,000 Term C, due 7/10/2007 2,472,189 2,450,250
-------------- --------------
4,944,430 4,900,500
Leasing & BB- B1 12,000,000 Anthony Crane Rental L.P., Term, due 7/20/2006 11,970,151 11,880,000
Rental Avis Rent A Car Inc.:
Services BB+ Ba3 12,500,000 Term B, due 6/30/2006 12,469,297 12,406,250
- --2.4% BB+ B3 12,500,000 Term C, due 6/30/2007 12,469,202 12,414,063
B B1 7,000,000 MEDIQ PRN Life Support Services, Term, due
6/30/2006 6,993,817 6,912,500
Medical Specialties:
NR++ NR++ 12,845,455 Axel, due 6/30/2004 12,789,234 11,560,909
NR++ NR++ 4,418,182 Term, due 6/30/2001 4,406,315 3,976,364
NR++ Ba3 8,500,000 Nations Rent, Term B, due 7/20/2006 8,478,956 8,502,661
NR++ B1 7,237,917 Panavision Inc., Term B, due 3/31/2005 7,025,483 6,912,210
-------------- --------------
76,602,455 74,564,957
Manu- NR++ NR++ 9,371,428 Channel Master, Term, due 10/10/2005 9,332,855 9,336,286
facturing BB- B1 7,462,500 Enviromental Systems, Term B, due 9/30/2005 7,439,745 7,387,875
- --1.3% NR++ NR++ 5,000,000 Metokote Corp., Term B, due 11/02/2005 4,965,642 5,009,375
NR++ NR++ 7,959,788 Polyfibron Technologies, Term B, due
12/28/2003 7,944,554 7,800,592
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Manufacturing Terex Corp.:
(concluded) NR++ B1 $ 4,900,000 Term B, due 3/06/2005 $ 4,883,168 $ 4,879,582
NR++ B1 5,852,000 Term C, due 2/05/2006 5,846,045 5,855,657
Thermadyne:
NR++ B1 990,000 Term B, due 5/22/2005 992,475 987,216
NR++ B1 990,000 Term C, due 5/22/2006 992,475 987,216
-------------- --------------
42,396,959 42,243,799
Measuring, NR++ NR++ 7,398,389 Chronograph Ltd., Term B, due 9/28/2001 7,344,856 7,344,856
Analyzing &
Controlling
Instruments
- --0.2%
Medical Alaris Medical Systems, Inc.:
Equipment B+ B1 3,147,200 Term A, due 8/01/2002 3,159,442 3,127,530
- --0.7% B+ B1 4,217,296 Term B, due 11/01/2003 4,219,140 4,222,568
B+ B1 4,217,296 Term C, due 11/01/2004 4,219,005 4,222,568
B+ B1 2,016,479 Term D, due 5/01/2005 2,017,958 2,019,000
Stryker Corporation:
BB Ba2 1,961,972 Term B, due 12/04/2004 1,950,903 1,968,103
BB Ba2 7,988,028 Term C, due 12/04/2005 7,942,067 8,012,991
-------------- --------------
23,508,515 23,572,760
Metals & NR++ NR++ 20,000,000 AEI Resources Inc., Term B, due 12/31/2004 19,855,032 19,750,000
Mining--4.0% NR++ B3 10,188,203 Acme Metals, Inc., Term, due 12/01/2005 (c) 10,188,203 8,188,768
NR++ NR++ 5,940,000 Handy & Harman, Term B, due 7/30/2006 5,926,664 5,915,872
Ispat Inland LP:
BB Ba3 19,305,000 Term B, due 7/15/2005 19,177,476 19,166,255
BB Ba3 19,305,000 Term C, due 7/15/2006 19,175,250 19,166,255
BB- Ba3 8,369,260 Neenah Foundry, Term B, due 9/30/2005 8,362,112 8,390,183
NR++ B2 2,940,000 North Western, Revolving Credit, due
12/31/2000 2,940,000 2,921,625
BB- B1 31,000,000 Ormet Corporation, Term, due 8/15/2008 30,927,361 30,927,361
NR++ Ba3 10,044,286 UCAR Global Enterprises, Term B, due
12/31/2002 10,037,899 10,069,396
-------------- --------------
126,589,997 124,495,715
Other Pacific Coin:
Telecommuni- NR++ NR++ 3,916,364 Acquisition Term, due 12/31/2003 3,903,226 3,524,727
cations--0.2% NR++ NR++ 1,973,361 Term A, due 12/31/2002 1,967,701 1,815,492
NR++ NR++ 2,708,750 Term B, due 12/31/2004 2,700,055 2,492,050
-------------- --------------
8,570,982 7,832,269
Packaging NR++ NR++ 1,101,562 CB Aquisition, Term B, due 11/20/2005 1,096,134 1,104,316
- --1.1% B+ B1 14,925,000 Graham Packaging, Term D, due 1/31/2007 14,929,131 14,939,001
NR++ B1 4,838,256 Ivex Packaging Corp., Term B, due 10/02/2003 4,833,555 4,806,507
Packaging Co.:
BB Ba3 4,881,198 Term B, due 4/12/2007 4,863,522 4,898,741
BB Ba3 4,881,198 Term C, due 4/12/2008 4,863,421 4,902,554
NR++ NR++ 2,640,625 Packaging Dynamics, Term B, due 11/20/2005 2,627,621 2,647,227
-------------- --------------
33,213,384 33,298,346
Paging--0.3% NR++ Ba3 9,604,666 PageNet Finance, Inc., Revolving Credit, due
12/31/2004 9,604,666 8,780,269
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Paper--8.0% NR++ NR++ $ 6,479,687 Cellular Tissue, Term C, due 3/24/2005 $ 6,458,272 $ 6,398,691
B+ B2 7,920,644 Crown Paper Co., Term B, due 8/22/2003 7,789,327 7,841,437
B+ Ba3 56,740,000 Jefferson Smurfit Company/Container Corp. of
America, Term B, due 3/24/2006 56,661,322 56,828,685
BB NR++ 4,950,000 Le Groupe Forex, Term B, due 6/30/2005 4,944,640 4,956,187
NR++ Ba2 7,250,000 Pacifica, Term B, due 12/31/2006 7,241,324 7,268,125
NR++ NR++ 6,500,000 Repap Brunswick, Term B, due 6/01/2004 6,515,000 6,288,750
Riverwood International Corp.:
B+ B1 14,381,313 Term A, due 2/28/2003 14,097,145 14,264,783
B+ B1 65,802,924 Term B, due 2/28/2004 65,201,526 66,007,151
B+ B1 25,343,694 Term C, due 8/31/2004 25,100,243 25,416,557
Stone Container Corp.:
B+ Ba3 27,899,729 Term C, due 10/01/2003 27,879,145 27,938,090
B+ Ba3 17,920,018 Term E, due 10/01/2003 18,071,619 17,942,418
Stronghaven:
NR++ NR++ 9,146,375 Term B, due 5/15/2004 9,114,165 7,774,419
NR++ NR++ 1,669,269 Term C, due 5/15/2004 1,669,269 1,418,879
-------------- --------------
250,742,997 250,344,172
Petroleum BB Ba3 11,000,000 Clark Refining & Marketing, Inc., Term, due
Refineries--0.3% 11/15/2004 11,000,000 10,450,000
Pharma- Dade Behring Inc.:
ceuticals-- B+ Ba3 7,500,000 Term B, due 6/30/2006 7,463,173 7,524,997
0.7% B+ Ba3 7,500,000 Term C, due 6/30/2007 7,463,056 7,524,997
NR++ NR++ 7,357,143 Endo Pharmaceuticals, Term B, due 6/30/2004 7,345,950 7,329,554
-------------- --------------
22,272,179 22,379,548
Printing & 21st Century:
Publishing NR++ B3 180,000 Revolving Credit, due 9/15/2003 180,000 178,087
- --3.9% NR++ B3 5,125,714 Term A, due 9/15/2003 5,151,343 5,090,475
Advanstar Communications:
B+ Ba3 14,940,000 Term B, due 4/30/2005 14,927,326 14,902,650
B+ Ba3 6,000,000 Term C, due 6/30/2007 5,991,073 6,000,000
NR++ NR++ 14,697,123 Enterprise, Term B, due 6/30/2005 14,555,608 14,623,637
NR++ Ba3 2,968,624 Penton Media, Term B, due 5/31/2006 2,954,765 2,969,862
Primedia:
NR++ Ba3 8,320,000 Revolving Credit, due 12/31/2000 8,320,000 8,174,400
NR++ Ba3 8,000,000 Term, due 12/31/2000 8,000,000 7,870,000
BB- Ba3 5,000,000 Term, due 7/31/2004 4,988,389 4,997,915
B+ B1 4,000,000 Reiman Publications, Term B, due 12/01/2005 4,020,000 4,009,168
Ziff-Davis Inc.:
NR++ Ba2 147,059 Revolving Credit, due 3/31/2005 147,059 143,995
BB Ba2 7,647,059 Term A, due 3/31/2005 7,621,226 7,576,958
BB Ba2 47,500,000 Term B, due 3/31/2006 47,340,007 47,455,492
-------------- --------------
124,196,796 123,992,639
Property NR++ NR++ 18,000,000 Prison Realty Trust Inc., Term C, due
- --0.6% 12/31/2002 17,889,541 17,924,994
Restaurants Domino & Bluefence:
- --0.5% B+ B1 6,690,394 Term B, due 12/21/2006 6,627,573 6,707,120
B+ B1 6,690,394 Term C, due 12/21/2007 6,626,901 6,707,120
NR++ B1 3,448,254 Shoney's, Inc., Term B, due 4/30/2002 3,434,064 3,318,945
-------------- --------------
16,688,538 16,733,185
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Retail NR++ B1 $ 5,750,000 Advance Store Company, Term B, due
Specialty 4/15/2006 $ 5,742,499 $ 5,730,237
- --0.6% BB- Ba2 14,250,323 CSK Automotive, Inc., Term, due 10/31/2003 14,205,008 14,165,718
-------------- --------------
19,947,507 19,895,955
Textile Joan Fabrics Corp.:
Mill Products NR++ NR++ 3,165,748 Term B, due 6/30/2005 3,161,938 3,157,834
- --0.5% NR++ NR++ 1,642,684 Term C, due 6/30/2006 1,640,624 1,638,577
NR++ NR++ 10,395,000 Tartan Textiles, Term B, due 5/01/2005 10,372,744 10,369,012
-------------- --------------
15,175,306 15,165,423
Tower NR++ NR++ 10,000,000 Spectracite, Term B, due 6/30/2006 10,025,470 10,021,880
Construction
& Leasing
- --0.3%
Transpor- NR++ NR++ 4,312,954 Petro Stopping Centers, Term B, due 7/23/2006 4,307,622 4,283,302
tation BB- Ba3 25,000,000 Transport Manufacturing, Term B, due 6/15/2006 24,938,824 25,000,000
Services TravelCenters of America Inc.:
- --1.2% NR++ Ba2 3,502,011 Term A, due 3/27/2005 3,497,848 3,528,483
NR++ Ba2 3,962,500 Term B, due 3/27/2005 3,939,283 3,967,133
-------------- --------------
36,683,577 36,778,918
Waste Manage- Allied Waste North America Inc.:
ment--2.2% BBB- Baa3 31,818,182 Term B, due 6/30/2006 31,637,890 31,597,777
BBB- Ba3 38,181,818 Term C, due 6/30/2007 37,965,117 37,923,289
-------------- --------------
69,603,007 69,521,066
Wired Telecom- NR++ Ba2 14,000,000 Flag Ltd., Term, due 1/30/2005 13,942,905 13,685,000
munications-- BB Ba2 17,500,000 Global Crossing Holding Ltd., Term B, due
1.7% 7/02/2007 17,456,399 17,401,562
NR++ NR++ 5,000,000 IDT Corporation, Term B, due 5/10/2004 4,982,046 4,998,440
NR++ B3 18,333,333 Teligent Inc., Term, due 7/01/2002 18,234,983 17,531,250
-------------- --------------
54,616,333 53,616,252
Wireless American Cellular Corp.:
Telecom- NR++ B2 2,493,750 Term B, due 6/30/2007 2,479,022 2,488,451
munications NR++ B2 2,493,750 Term C, due 9/30/2007 2,478,980 2,488,451
- --7.7% Cellular Financial, Inc.:
NR++ B1 13,985,692 Term B, due 9/30/2006 13,976,809 14,001,426
NR++ B1 8,130,081 Term C, due 3/31/2007 8,112,259 8,139,227
NR++ B1 22,764,227 Term D, due 9/30/2007 22,713,667 22,804,064
Centennial Cellular Operating Co.:
B B2 2,743,056 Term Loan A (PR), due 11/30/2006 2,746,484 2,742,628
B B2 2,256,944 Term Loan A (US), due 11/30/2006 2,259,766 2,256,592
Dobson/Sygnet Operating Co.:
NR++ NR++ 2,500,000 Term B, due 3/23/2007 2,491,079 2,502,082
NR++ NR++ 2,500,000 Term C, due 12/23/2007 2,491,017 2,506,770
B NR++ 8,934,000 Iridium Operating LLC, Term, due 12/29/2000 8,812,732 2,657,865
Nextel Communications Inc.:
B Ba3 4,270,000 Term A, due 3/31/2003 4,142,507 4,175,705
B Ba3 40,000,000 Term B, due 9/30/2006 39,956,321 39,842,840
B Ba3 7,500,000 Term C, due 3/31/2007 7,440,692 7,495,312
Omnipoint Communications Corp.:
NR++ Ba2 5,772,653 Term A, due 2/17/2006 5,747,157 5,717,334
NR++ Ba2 1,922,276 Term B, due 2/17/2006 1,920,624 1,903,855
NR++ Ba2 43,235,523 Term C, due 2/17/2006 43,057,967 42,821,197
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Wireless PowerTel PCS, Inc.:
Telecom- NR++ NR++ $15,000,000 Term, due 3/04/2001 $ 15,000,000 $ 14,892,195
munications NR++ NR++ 3,000,000 Term B, due 2/06/2003 3,000,000 2,978,439
(concluded) NR++ B2 15,000,000 TeleCorp PCS, Term B, due 1/15/2008 14,972,418 14,868,750
NR++ B2 5,000,000 Tritel Holdings, Term B, due 12/31/2007 4,939,408 4,994,790
NR++ NR++ 20,000,000 VoiceStream PCS, Term B, due 6/30/2007 19,938,862 19,941,660
NR++ B1 20,000,000 Western Wireless, Term B, due 3/31/2006 20,000,000 19,945,840
-------------- --------------
248,677,771 242,165,473
Total Senior Secured Floating Rate
Loan Interests--92.0% 2,953,906,262 2,894,937,809
Shares
Held Warrants & Agreements
Cable Television Services--0.0% 707 Classic Cable, Inc. (a) 0 0
Drilling--0.0% 12,250 Rigco North America (a) 0 0
General Merchandise 2,288,402 Just For Feet, Inc. (b) 2,288,402 497,916
Stores--0.0%
Total Investments in Warrants &
Agreements--0.0% 2,288,402 497,916
Face
Amount Short-Term Securities
Commercial $ 11,900,000 Bell South Telecom Corp., 5.09% due 9/16/1999 11,874,762 11,874,762
Paper**--6.7% 50,000,000 The CIT Group Holdings, Inc., 5.25% due
9/23/1999 49,839,584 49,839,584
112,406,000 General Electric Capital Corp., 5.53% due
9/01/1999 112,406,000 112,406,000
35,000,000 Vodafone AirTouch PLC, 5.12% due 9/10/1999 34,955,200 34,955,200
-------------- --------------
209,075,546 209,075,546
US Government Agency 22,613,000 Federal Home Loan Mortgage Corporation
Obligations**--0.7% Participating Certificates, 5.16% due 9/15/1999 22,567,623 22,567,623
Total Investments in Short-Term
Securities--7.4% 231,643,169 231,643,169
Total Investments--99.4% $3,187,837,833 3,127,078,894
==============
Other Assets Less Liabilities--0.6% 18,787,510
--------------
Net Assets--100.0% $3,145,866,404
==============
(a)Warrants entitle the Fund to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number of
shares are subject to adjustment under certain conditions until the
expiration date.
(b)Agreement represents an obligation by Just For Feet, Inc. to pay an amount to
the Fund on April 30, 2002, contingent upon the earnings before income taxes
and depreciation of Just For Feet, Inc.
as of January 31, 2002.
(c)Non-income producing.
++Not Rated.
*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.
**Commercial Paper and certain US Government Agency Obligations are traded on a
discount basis; the interest rates shown reflect the discount rates paid at
the time of purchase by the Fund.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of August 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$3,187,837,833)
(Note 1b) $ 3,127,078,894
Cash 2,319,078
Receivables:
Interest $ 23,048,441
Capital shares sold 3,900,562
Commitment fees 42,770 26,991,773
---------------
Prepaid registration fees and other assets (Note 1f) 521,545
---------------
Total assets 3,156,911,290
---------------
Liabilities: Payables:
Dividends to shareholders (Note 1g) 4,840,167
Investment adviser (Note 2) 2,450,962
Administrator (Note 2) 644,990 7,936,119
---------------
Deferred income (Note 1e) 1,497,992
Accrued expenses and other liabilities 1,610,775
---------------
Total liabilities 11,044,886
---------------
Net Assets: Net assets $ 3,145,866,404
===============
Net Assets Common Stock, par value $.10 per share; 1,000,000,000 shares
Consist of: authorized $ 32,325,514
Paid-in capital in excess of par 3,207,050,882
Undistributed investment income--net 652
Accumulated realized capital losses on investments--net (Note 7) (31,696,532)
Unrealized depreciation on investments--net (61,814,112)
---------------
Net Assets--Equivalent to $9.73 per share based on shares of
323,255,136 capital stock outstanding $ 3,145,866,404
===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
August 31, 1999
<S> <S> <C> <C>
Investment Income Interest and discount earned $ 257,838,035
(Note 1e): Facility and other fees 3,577,087
---------------
Total income 261,415,122
---------------
Expenses: Investment advisory fees (Note 2) $ 31,347,494
Administrative fees (Note 2) 8,249,340
Transfer agent fees (Note 2) 1,871,653
Professional fees 686,689
Accounting services (Note 2) 476,395
Registration fees (Note 1f) 289,945
Tender offer costs (Note 8) 267,671
Assignment fees 257,371
Custodian fees 243,819
Printing and shareholder reports 220,458
Borrowing costs (Note 6) 30,361
Directors' fees and expenses 25,645
Other 41,639
---------------
Total expenses 44,008,480
---------------
Investment income--net 217,406,642
---------------
Realized & Realized loss on investments--net (21,656,805)
Unrealized Change in unrealized depreciation on investments--net (59,345,622)
Loss on ---------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 136,404,215
(Notes 1c, ===============
1e & 3):
See Notes to Financial Statements.
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
August 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 217,406,642 $ 212,360,687
Realized loss on investments--net (21,656,805) (3,676,079)
Change in unrealized appreciation/depreciation on
investments--net (59,345,622) (9,910,437)
--------------- ---------------
Net increase in net assets resulting from operations 136,404,215 198,774,171
--------------- ---------------
Dividends to Investment income--net (217,477,740) (212,288,937)
Shareholders --------------- ---------------
(Note 1g): Net decrease in net assets resulting from dividends
to shareholders (217,477,740) (212,288,937)
--------------- ---------------
Capital Share Net increase (decrease)in net assets resulting from
Transactions capital share transactions (138,092,263) 386,757,317
(Note 4): --------------- ---------------
Net Assets: Total increase (decrease) in net assets (219,165,788) 373,242,551
Beginning of year 3,365,032,192 2,991,789,641
--------------- ---------------
End of year* $ 3,145,866,404 $ 3,365,032,192
=============== ===============
*Undistributed investment income--net $ 652 $ 71,750
=============== ===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Cash Flows
<CAPTION>
For the Year Ended
August 31, 1999
<S> <S> <C>
Cash Provided Net increase in net assets resulting from operations $ 136,404,215
by Operating Adjustments to reconcile net increase in net assets resulting from
Activities: operations to net cash provided by operating activities:
Decrease in receivables 2,863,895
Decrease in other assets 213,681
Decrease in other liabilities (1,334,240)
Realized and unrealized loss on investments--net 81,002,427
Amortization of discount (23,967,146)
---------------
Net cash provided by operating activities 195,182,832
---------------
Cash Provided Proceeds from principal payments and sales of loan interests 1,822,042,097
by Investing Purchases of loan interests (1,723,975,575)
Activities: Purchases of short-term investments (24,180,317,792)
Proceeds from sales and maturities of short-term investments 24,232,504,320
---------------
Net cash provided by investing activities 150,253,050
---------------
Cash Used for Cash receipts on capital shares sold 502,352,642
Financing Cash payments on capital shares tendered (736,897,258)
Activities: Dividends paid to shareholders (113,612,913)
---------------
Net cash used for financing activities (348,157,529)
---------------
Cash: Net decrease in cash (2,721,647)
Cash at beginning of year 5,040,725
---------------
Cash at end of year $ 2,319,078
===============
Cash Flow Cash paid for interest $ 90,461
Information: ===============
Non-Cash
Financing Capital shares issued in reinvestment of dividends paid to shareholders $ 103,371,180
Activities: ===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
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 Year Ended August 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.97 $ 10.02 $ 9.99 $ 10.02 $ 10.02
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .65 .68 .68 .66 .75
Realized and unrealized gain (loss) on
investments--net (.24) (.05) .03 (.03) --++
-------- -------- -------- -------- --------
Total from investment operations .41 .63 .71 .63 .75
-------- -------- -------- -------- --------
Less dividends from investment income--net (.65) (.68) (.68) (.66) (.75)
-------- -------- -------- -------- --------
Net asset value, end of year $ 9.73 $ 9.97 $ 10.02 $ 9.99 $ 10.02
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 4.23% 6.47% 7.23% 6.53% 7.68%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses, excluding interest expense 1.33% 1.35% 1.32% 1.34% 1.34%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.33% 1.40% 1.33% 1.34% 1.34%
======== ======== ======== ======== ========
Investment income--net 6.59% 6.79% 6.72% 6.54% 7.45%
======== ======== ======== ======== ========
Leverage: Average amount of borrowings outstanding
during the year (in thousands) -- $ 24,299 $ 4,409 -- --
======== ======== ======== ======== ========
Average amount of borrowings outstanding
per share during the year -- $ .08 $ .02 -- --
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in millions) $ 3,146 $ 3,365 $ 2,992 $ 2,946 $ 2,163
Data: ======== ======== ======== ======== ========
Portfolio turnover 60.06% 69.59% 74.00% 80.20% 55.23%
======== ======== ======== ======== ========
*Total investment returns exclude the early withdrawal
charge, if any. 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.
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
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. The Fund's financial statements are
prepared in accordance with generally accepted accounting principles, which may
require the use of management accruals and estimates.
(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 August
31, 1999 could be considered to be concentrated in commercial banking.
(b) Valuation of investments--Loan Interests are valued in accordance with
guidelines established by the Board of Directors. Until July 9, 1999, Loan
Interests for which an active secondary market exists and for which the
Investment Adviser can obtain at least two quotations from banks or dealers in
Loan Interests were valued by calculating the mean of the last available bid and
asked prices in the markets for such Loan Interests, and then using the mean of
those two means. If only one quote for a particular Loan Interest was available,
such Loan Interest was valued on the basis of the mean of the last available bid
and asked prices in the market. As of July 12, 1999, pursuant to the approval of
the Board of Directors, the Loan Interests are valued at the mean between the
last available bid and asked prices from one or more brokers or dealers as
obtained from Loan Pricing Corporation. For Loan Interests for which an active
secondary market does not exist to a reliable degree in the opinion of the
Investment Adviser, such Loan Interests will be valued by the Investment Adviser
at fair value, which is intended to approximate market value.
Other portfolio securities may be valued on the basis of prices furnished by one
or more pricing services, which determine prices for normal, institutional-size
trading units of such securities using market information, transactions for
comparable securities and various relationships between securities that are
generally recognized by institutional traders. In certain circumstances,
portfolio securities are valued at the last sale price on the exchange that is
the primary market for such securities, or the last quoted bid price for those
securities for which the over-the-counter market is the primary market or for
listed securities in which there were no sales during the day. 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).
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
(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.
(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
Merrill Lynch Asset Management, L.P. ("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
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 .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
.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.
For the year ended August 31, 1999, Merrill Lynch Funds Distributor, Inc.
("MLFD"), a division of Princeton Funds Distributor, Inc. ("PFD"), a
wholly-owned subsidiary of Merrill Lynch Group, Inc., earned early withdrawal
charges of $3,182,556 relating to the tender of the Fund's shares.
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, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended August 31, 1999 were $1,723,975,576 and $1,822,042,096, respectively.
Net realized gains (losses) for the year ended August 31, 1999 and net
unrealized losses as of August 31, 1999 were as follows:
Realized Unrealized
Gains (Losses) Losses
Loan interests $(21,662,211) $(61,814,112)
Short-term investments 5,406 --
------------ ------------
Total $(21,656,805) $(61,814,112)
============ ============
As of August 31, 1999, net unrealized depreciation for financial reporting and
Federal income tax purposes aggregated $60,778,883, of which $5,653,682 is
related to appreciated securities and $66,432,515 is related to depreciated
securities. The net unrealized loss on loan interests includes $1,055,179 of
unfunded loan interests. The aggregate cost of investments at August 31, 1999
for Federal income tax purposes was $3,187,857,727.
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
4. Capital Share Transactions: Transactions in capital shares were as follows:
For the Year Ended Dollar
August 31, 1999 Shares Amount
Shares sold 50,310,746 $ 495,433,815
Shares issued to share-
holders in reinvestment
of dividends 10,519,160 103,371,180
------------ -------------
Total issued 60,829,906 598,804,995
Shares tendered (74,992,308) (736,897,258)
------------ -------------
Net decrease (14,162,402) $(138,092,263)
============ =============
For the Year Ended Dollar
August 31, 1998 Shares Amount
Shares sold 88,083,898 $ 880,414,085
Shares issued to share-
holders in reinvestment
of dividends 10,206,064 102,041,674
------------ -------------
Total issued 98,289,962 982,455,759
Shares tendered (59,583,594) (595,698,442)
------------ -------------
Net increase 38,706,368 $ 386,757,317
============ =============
5. Unfunded Loan Interests:
As of August 31, 1999, the Fund had unfunded loan commitments of $77,030,687,
which would be extended at the option of the borrower, pursuant to the following
loan agreements:
Unfunded
Commitment
Borrower (in thousands)
21st Century $ 3,248
American Axel 8,500
Arena Brands, Inc. 2,170
Chancellor Media Corp. 9,225
Continental Airlines, Inc. 4,639
International Homefoods, Inc. 1,004
KSL Recreation Group, Inc. 9,222
Metro Goldwyn Mayer Co. 2,310
Nextel Communications Inc. 12,810
North Western Steel & Mining 12,060
PageNet Finance, Inc. 4,729
Primedia 3,680
Speciality Foods, Inc. 80
Terex Corp. 1,148
Ziff-Davis Inc. 2,206
6. Short-Term Borrowings:
On June 21, 1999, the Fund extended its one-year credit agreement with Bank of
New York. The agreement is a $100,000,000 credit facility bearing interest at
the Federal Funds rate plus .50% and/or the Eurodollar rate plus .50%. The Fund
had no borrowings under this commitment during the year ended August 31, 1999.
For the year ended August 31, 1999, facility and commitment fees aggregated
approximately $30,361.
7. Capital Loss Carryforward:
At August 31, 1999, the Fund had a net capital loss carryforward of
approximately $12,584,000 of which $1,471,000 expires in 2004, $3,279,000
expires in 2005, $4,468,000 expires in 2006 and $3,366,000 expires in 2007. 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 September 21, 1999 which concludes on
October 22, 1999.
