MERRILL LYNCH
SENIOR FLOATING
RATE FUND, INC.
FUND LOGO
Annual Report
August 31, 1999
This report, including the financial information herein, is
transmitted to the shareholders of Merrill Lynch Senior Floating
Rate Fund, Inc. for their information. It is not a prospectus,
circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report. Past
performance results shown in this report should not be considered a
representation of future performance. The Fund has the ability to
leverage its Common Stock to provide Common Stock shareholders with
a potentially higher rate of return. Leverage creates risk for
Common Stock shareholders, including the likelihood of greater
volatility of net asset value and market price of Common Stock
shares, and the risk that fluctuations in short-term interest rates
may reduce the Common Stock's yield. Statements and other
information herein are as dated and are subject to change.
Merrill Lynch
Senior Floating
Rate Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Merrill Lynch Senior Floating Rate Fund, Inc.
DEAR SHAREHOLDER
The Fund's effective net yield for the fiscal year ended August 31,
1999 was 6.66%, compared to a yield of 6.82% for the same period a
year earlier. The Fund's net asset value declined from $9.97 per
share to $9.73 per share during the fiscal year. During the same
period, the Fund earned $0.648 per share income dividends,
representing a net annualized yield of 6.66%, based on a year-end
per share net asset value of $9.73. For the 12-month period ended
August 31, 1999, the Fund's total investment return was +4.23%,
based on the $0.24 per share decrease in net asset value and
assuming reinvestment of $0.646 per share income dividends. Since
inception (November 3, 1989) through August 31, 1999, the Fund's
total investment return was +90.83%, based on a change in per share
net asset value from $10.00 to $9.73, and assuming reinvestment of
$6.729 per share income dividends.
Investment Approach
The Fund's performance reflects the ongoing difficulties experienced
since 1998 in the markets in which the Fund invests. We would like
to remind shareholders that Merrill Lynch Senior Floating Rate Fund,
Inc. is a continuously offered non-diversified, closed-end Fund. The
Fund seeks to provide shareholders with as high a level of current
income and such preservation of capital as is consistent with
investment in senior collateralized corporate loans that are rated
in the lower rating categories of established rating services, or
unrated corporate loans of comparable quality. The leveraged bank
loans in which the Fund primarily invests are senior secured
obligations that offer investors greater principal protection than
unsecured debt obligations. In addition, these bank loans are
floating rate instruments whose principal value generally does not
move conversely with interest rate fluctuations, as is the case with
fixed-income securities.
Market Review
Late in the summer of 1998, the high-yield bond market was pressured
by disruptions in the equity and emerging markets, which resulted in
a marked decrease in liquidity and, in turn, a decrease in prices in
all three markets virtually across the board. These events
negatively impacted the leveraged bank loan market as well.
After a brief period in early 1999 when the high-yield bond and bank
loan markets had begun to stabilize, a combination of rising
interest rates and widening credit spreads (that is, the spread over
a risk-free investment that an investor requires to invest in high-
yield bonds or leveraged loans) pushed the price of existing high-
yield bond issues and bank loans (which were issued at narrower
spreads) down. In addition, certain sectors experienced extreme
difficulties.
During the three-month period ended August 31, 1999, the interest
rate environment dominated the US capital markets. Investors were
concerned that the ongoing strength in the economy would prompt the
Federal Reserve Board into a round of increasing of the Federal
Funds rate. At the end of June, there was relief when the Federal
Reserve Board only raised interest rates by 25 basis points (0.25%).
However, there were continued signs of strength in the economy, and
the Federal Reserve Board raised short-term interest rates another
0.25% on August 24, 1999.
Correlation Between Markets
For the fiscal year ended August 31, 1999, Merrill Lynch Senior
Floating Rate Fund, Inc. had a total return of +4.23%. This compares
to a +3.98% total return for the unmanaged Merrill Lynch High Yield
Bond Index, a +0.14% total return for the unmanaged Merrill Lynch US
Treasury/Agency Master Index, a +0.90% total return for the
unmanaged Merrill Lynch US Corporate Bond Master Index and a +4.77%
total return for the unmanaged Merrill Lynch Three-Month Treasury
Bill Index.
There is a growing correlation between the leveraged loan market and
the high-yield bond market. This correlation can be explained by the
fact that high-yield bond and bank loan markets are comprised of
similar industry sectors and often contain overlapping issuers. As a
result, general economic events and trends tend to move the two
markets in the same direction, although the bonds typically move to
a greater degree than the bank loans.
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
In fact, an analysis by Donaldson, Lufkin and Jenrette suggests that
the correlation is approximately 25% and that over time the loan
market has produced 80% of the return of the high-yield bond market
with only 30% of the volatility. That same study suggests that the
leveraged loan market has virtually no correlation to any other
major asset class (equities, investment-grade corporate bonds,
government securities or emerging market bonds), thus providing
investors with an interesting investment diversification
alternative.
The "Risk/Reward of Various Assets" graph that appears below plots
the annualized return and volatility experienced by several asset
classes averaged over the last seven years, eight months. Asset
classes resting on the line experienced a proportionate amount of
return for the corresponding amount of risk. Asset classes falling
below the capital markets line endured a disproportionate amount of
risk relative to the return they achieved. Finally, asset classes
lying above the line achieved higher returns than justified by the
risk they experienced. Leveraged bank loans are the only asset class
to fall above the line, which illustrates that, compared to other
asset classes, the bank loan market provides superior risk/reward
characteristics. In addition, as demonstrated by the graph, high-
yield bonds provide slightly above-average risk/reward tradeoffs.
For these reasons, we are optimistic about the Fund's investment
potential.
Investment Strategy
Merrill Lynch Senior Floating Rate Fund, Inc. ended the fiscal year
with approximately $2.9 billion out of $3.2 billion, or 91%, of its
total assets committed for investment in corporate loans. Assets not
invested in corporate loans were invested in high-quality, short-
term securities. As of August 31, 1999, more than 98% of the Fund's
investments in corporate loans were accruing interest at a yield
spread above the London Interbank Offered Rate (LIBOR), the rate
that major banks charge each other for US dollar-denominated
deposits outside of the United States. LIBOR tracks very closely
with other short-term interest rates, such as the Federal Funds
rate. Since the reset period on the Fund's floating rate investments
is between 30 days and 90 days, the yield on the bank loan portion
of the Fund is likely to move in the same direction within a short
period of time after any change in the Federal Funds rate.
ML Senior Floating Rate Fund, Inc. Risk/Reward of Various Assets
A line graph depicting the annualized return and volatility for
various assets from 1992 to July 1999.
Volatility Return
Broad Equity Market 14.68% 19.98%
Emrging Market Bonds 20.61% 14.08%
High Yield Bonds 5.78% 10.56%
Leveraged Loans 1.92% 8.44%
U.S. Long-Term Treasury Bonds 9.17% 8.81%
Investment Grade Bonds 5.13% 7.73%
U.S. Intermediate Trasury Bonds 4.81% 6.25%
Mortgage Secs 3.27% 6.85%
Money Market Secs .30% 4.46%
U.S. Inflation .56% 2.57%
Source: Calculated by Merrill Lynch using information and data
presented in Ibbotson Investment Analysis Software, c1999 Ibbotson
Associates, Inc. All rights reserved. Used with permission.
The assets used in the above analysis are represented by the
following indexes: US 30-day Treasury Bill Index (Money Market
Securities); Merrill Lynch Mortgage Index (Mortgage Securities);
Ibbotson's U.S. IT (Intermediate Treasuries); Ibbotson's U.S.
LT Index (Long-Term Treasuries); Merrill Lynch Corporate Index
(Investment Grade Bonds); Donaldson, Lufkin & Jenrette HY Index
(High Yield Bonds); Donaldson, Lufkin & Jenrette Leveraged Loan Index
(Leveraged Loans); EMBI Fixed Rate Index (Emerging Market Bonds);
and Standard & Poor's 500 Index (Broad Equity Market).
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
Throughout the six months ended August 31, 1999, the Fund's
investment philosophy remained unchanged: to invest in leveraged
transactions in which borrowers have strong market shares,
experienced managements, consistent cash flows and appropriate
risk/reward characteristics in the form of its floating rate spreads
over LIBOR. In addition, we look for companies with significant
underlying asset and franchise value, strong capital structures and
equity sponsors that support their investments. It is these
characteristics that we believe provide optimal downside protection
to the Fund's net asset value.
During the three months ended August 31, 1999, we focused on the new-
issue market. These new issues were clearing the market at spreads
higher than those required by investors earlier in the year. The new-
issue transactions were also much more conservatively structured,
with lower leverage and higher interest coverage as investors became
more demanding. Some of these leveraged bank loans recently brought
to market are trading above issue price.
Additionally, as we have mentioned in previous reports to
shareholders, we have intensified our analysis of "out-of-favor"
cyclical sectors. We believe there is value in certain secondary
issues within those sectors. In some cases, we see opportunities to
purchase bank loans that have been marked down to levels below our
estimation of their true economic value. The Fund benefited from
improvement in certain cyclical sectors such as energy, steel and
paper. On the other hand, the healthcare industry remains out of
favor. We believe there may be some relief in this sector in the
next 12 months--18 months.
The Fund's investments were spread across 212 borrowers in 50
industries. See the "Portfolio Information" section on page 4 of
this report to shareholders, which provides listings of the Fund's
ten largest issuers and five largest industries at August 31, 1999.
In Conclusion
As difficult as the fiscal year was for the high-yield bond and
leveraged loan markets and the Fund, their performances illustrate
the bank loan market's ability to weather market fluctuations with
less volatility than the high-yield bond market. This attribute
continues to draw many new institutional buyers to the bank loan
market. When there was almost no liquidity in high-yield securities
during the most difficult periods of the past 12 months and many
markets lost their ability to price transactions, the bank loan
market maintained liquidity for most generally syndicated
transactions, although at lower levels. We believe that both the
technical and fundamental aspects are improving in the bank loan
sector. We also believe we have positively positioned the Fund to
follow further expected improvements in the marketplace in an effort
to seek to enhance performance over the coming months.
We thank you for your investment in Merrill Lynch Senior Floating
Rate Fund, Inc., and we look forward to reviewing our outlook and
strategy with you again in our next report to shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Richard C. Kilbride)
Richard C. Kilbride
Vice President and Co-Portfolio Manager
(Gilles Marchand)
Gilles Marchand
Vice President and Co-Portfolio Manager
(Paul Travers)
Paul Travers
Vice President and Co-Portfolio Manager
October 15, 1999
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
THE BENEFITS AND RISKS OF LEVERAGING
Merrill Lynch Senior Floating Rate Fund, Inc. (the "Fund") has the
ability to utilize leverage through the borrowings or issuance of
short-term debt securities or shares of Preferred Stock. The concept
of leveraging is based on the premise that the cost of assets to be
obtained from leverage will be based on short-term interest rates,
which normally will be lower than the return earned by the Fund on
its longer-term portfolio investments. Since the total assets of the
Fund (including the assets obtained from leverage) are invested in
higher-yielding portfolio investments, the Fund's Common Stock
shareholders are the beneficiaries of the incremental yield. Should
the differential between the underlying interest rates narrow, the
incremental yield "pick up" will be reduced. Furthermore, if
long-term interest rates rise, the Common Stock's net asset value
will reflect the full decline in the entire portfolio holdings
resulting therefrom since the assets obtained from leverage do not
fluctuate.
Leverage creates risks for holders of Common Stock including the
likelihood of greater net asset value and market price volatility.
In addition, there is the risk that fluctuations in interest rates
on borrowings (or in the dividend rates on any Preferred Stock, if
the Fund were to issue the Preferred Stock) may reduce the Common
Stock's yield and negatively impact its market price. If the income
derived from securities purchased with assets received from leverage
exceeds the cost of leverage, the Fund's net income will be greater
than if leverage had not been used. Conversely, if the income from
the securities purchased is not sufficient to cover the cost of
leverage, the Fund's net income will be less than if leverage had
not been used, and therefore the amount available for distribution
to Common Stock shareholders will be reduced. In this case, the Fund
may nevertheless decide to maintain its leveraged position in order
to avoid capital losses on securities purchased with leverage.
However, the Fund will not generally utilize leverage if it
anticipates that its leveraged capital structure would result in a
lower rate of return for its Common Stock than would be obtained if
the Common Stock were unleveraged for any significant amount of
time.
PORTFOLIO INFORMATION
As of August 31, 1999
Quality Rating* Percent of
S&P/Moody's Long-Term Investments
BBB/Baa 2.4%
BB/Ba 46.0
B/B 29.7
NR (Not Rated) 21.9
[FN]
*In cases where bonds are rated differently by Standard & Poor's
Corp. and Moody's Investors Services, Inc., bonds are categorized
according to the higher of the two ratings.
Percent of
Five Largest Industries Total Assets
Paper 7.9%
Wireless Telecommunications 7.7
Hotels & Motels 6.7
Chemicals 6.5
Electronics/Electrical Components 5.0
Percent of
Ten Largest Holdings Total Assets
Wyndam International Inc. 3.8%
Riverwood International Corp. 3.3
Starwood Hotels & Resorts Trust 2.9
Allied Waste North American Inc. 2.2
Lyondell Petrochemical Co. 1.9
Jefferson Smurfit Company/Container
Corp. of America 1.8
Ziff-Davis Inc. 1.7
Nextel Communications Inc. 1.6
Omnipoint Communications Corp. 1.6
Chancellor Media Corp. 1.5
Breakdown of Investments Percent of
by Country Long-Term Investments
United States 98.8%
United Kingdom 1.1
Canada 0.1
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, due 6/30/2004 $ 11,074,561 $ 11,057,713
- --0.4%
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>
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>
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>
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>
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>
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>
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>
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>
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>
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>
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
==============
<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 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>
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>
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
=============== ===============
<FN>
*Undistributed investment income--net $ 652 $ 71,750
=============== ===============
See Notes to Financial Statements.
</TABLE>
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>
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%
======== ======== ======== ======== ========
<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>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
NOTES TO FINANCIAL STATMENTS
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).
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
NOTES TO FINANCIAL STATMENTS (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.
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.
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
<AUDIT-REPORT>
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
</AUDIT-REPORT>
Merrill Lynch Senior Floating Rate Fund, Inc.
August 31, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Joseph T. Monagle Jr., Senior Vice President
Richard C. Kilbride, Vice President
Gilles Marchand, Vice President
Paul Travers, Vice President
Donald C. Burke, Vice President and Treasurer
Patrick D. Sweeney, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
