<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 21, 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. PATRICK D. SWEENEY, 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
SEPTEMBER 21, 1999
(Date Tender Offer First Published,
Sent or Given to Security Holders)
</TABLE>
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Transaction Amount of Filing
Valuation: $ 291,900,000(a) Fee: $ 58,380(b)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) Calculated as the aggregate maximum purchase price to be paid for 30,000,000
shares in the offer, based upon the net asset value per share ($9.73) at
September 16, 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 August 31, 1999 there were
approximately 323,095,392 million Shares issued and outstanding.
The Fund is seeking tenders for 30,000,000 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 September 21, 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 5.4 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), (g)(2) and (g)(3) 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, 1997.
(g)(2) Audited Financial Statements of the Fund for the fiscal year ended August
31, 1998.
(g)(3) Unaudited Financial Statements of the Fund for the six-month period ended
February 28, 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)
September 21, 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, 1997.
(g)(2) Audited Financial Statements of the Fund for the fiscal year ended
August 31, 1998.
(g)(3) Unaudited Financial Statements of the Fund for the six-month period ended February 28, 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 SEPTEMBER 21,
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 20,000,000 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, OCTOBER 19, 1999, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
Merrill Lynch Senior Floating Rate Fund, Inc. (the "Fund") is offering to
purchase 20,000,000 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, October 19, 1999, unless extended,
upon the terms and conditions set forth in the Offer to Purchase dated September
21, 1999 (the "Offer"). The NAV on September 16, 1999, was $9.73 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 30,000,000 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 20,000,000 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, October 19, 1999, unless the
Offer is extended, and, if not yet accepted for payment by the Fund, Shares may
also be withdrawn after November 16, 1999.
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>
September 21, 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 30,000,000
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 OCTOBER 19, 1999, UNLESS EXTENDED.
To the Holders of Shares of
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.:
The Fund is offering to purchase up to 30,000,000 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 October 19, 1999, 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 September 16,
1999 was $9.73 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 30,000,000 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 30,000,000 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>
September 21, 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................................................................. 6
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 30,000,000 of its issued and
outstanding Shares which are tendered and not withdrawn prior to 12:00 midnight,
New York City time, on October 19, 1999 (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 30,000,000
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 30,000,000 Shares (or greater number of
Shares sought) on a pro rata basis.
As of August 31, 1999 there were approximately 323,095,392 million Shares
issued and outstanding and there were 2,956 holders of record of Shares (in
addition, Merrill Lynch maintains accounts for 92,296 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 November 16, 1999.
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.
5
<PAGE>
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 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 30,000,000
Shares are tendered and accepted for payment pursuant to the Offer will be
approximately $291,900,000. 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
6
<PAGE>
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 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 August 31, 1997 and 1998; and the six-month period ending February 28,
1999. The information with respect to the fiscal years ended August 31, 1997 and
1998 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>
FOR THE SIX
MONTHS ENDED
YEAR ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, AUGUST 31, 1999
1997 1998 (UNAUDITED)
------------ ------------ ------------
INCOME STATEMENT
<S> <C> <C> <C>
Investment income.......................... $ 234,503 $ 256,022 $ 131,157
Expenses................................... 38,745 43,661 21,848
------------ ------------ ------------
Investment income--net..................... $ 195,758 $ 212,361 109,309
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS--NET
Realized gain (loss) on investments--net... 1,495 (3,676) (6,190)
Change in unrealized appreciation on
investments--net......................... 6,061 (9,911) (38,545)
FINANCIAL HIGHLIGHTS (AT END OF PERIOD)
Total assets............................... $ 3,007,667 $ 3,376,918 $ 3,341,414
Total liabilities.......................... 15,877 11,886 9,160
------------ ------------ ------------
Net assets................................. $ 2,991,790 $ 3,365,032 $ 3,332,254
Net asset value per share.................. $ 10.02 $ 9.97 9.84
Shares of common stock outstanding......... 298,711 337,418 338,570
PER SHARE
Investment income--net..................... $ .68 $ .68 $ .32
Realized and unrealized gain (loss) on
investments--net......................... $ .03 $ (.05) $ (.13)
Dividends from net investment income to
common shareholders...................... $ (.68) $ (.68) $ (.32)
RATIOS
Expenses, excluding interest expense....... 1.32% 1.35% 1.32%*
Total expenses to average net assets....... 1.33% 1.40% 1.32%*
Investment income--net, to average net
assets................................... 6.72% 6.79% 6.59%*
</TABLE>
- ------------------------------
* Annualized.
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 for the following: (1) within
the past 40 business days pursuant to the public offering of its Shares the Fund
has sold approximately 5.4 million Shares at a price equal to NAV on the date of
each such sale and (2) on June 22, 1999, Richard Kilbride, an officer of the
Fund, purchased 509 shares at a price of $9.81 per share through his broker on
the New York Stock Exchange.
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.
8
<PAGE>
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 (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
9
<PAGE>
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
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.
September 21, 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 SEPTEMBER 21, 1999
-------------------
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, OCTOBER 19, 1999, 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>
<CAPTION>
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 ................ , 1999
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 September 21, 1999
(the "Offer to Purchase") 30,000,000 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 July 27, 1999 through
August 23, 1999, based on the amounts actually distributed by the Fund, was
6.8%. The Fund's NAV on September 16, 1999 was $9.73 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, 1997, 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, 1997 by correspondence with the custodian and financial intermediaries. 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, 1997, 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 24, 1997
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
Face Loan S&P Moody's Stated Value
Industries Amount Borrower Type Rating Rating Maturity Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Senior Secured Floating Rate Loan Interests*
Advertising -- $ 471 Katz Media Corporation Reducing
0.7% Revolver NR+ Ba3 9/30/03 $ 472 $ 471
2,143 Katz Media Corporation Term A NR+ Ba3 9/30/03 2,140 2,146
6,633 Katz Media Corporation Term B NR+ Ba3 12/31/04 6,618 6,658
7,500 Outdoor Systems, Inc. Term NR+ NR+ 6/30/04 7,485 7,537
5,000 Outdoor Systems, Inc. Canadian
Term Loan NR+ NR+ 6/30/04 4,990 5,025
------- -------
Total Advertising 21,705 21,837
======= =======
Aerospace -- 0.3% 5,168 Whittaker Corporation Revolving
Credit NR+ NR+ 4/09/01 5,168 5,175
3,825 Whittaker Corporation Term NR+ NR+ 4/09/01 3,773 3,829
------- -------
Total Aerospace 8,941 9,004
======= =======
Air Transport -- 3,600 Continental Airlines, Inc. Term A BB- NR+ 7/31/02 3,595 3,586
0.3% 6,400 Continental Airlines, Inc. Term B BB- NR+ 7/31/04 6,400 6,396
------- -------
Total Air Transport 9,995 9,982
======= =======
Aircraft & 5,060 Aerostructures Hamble Holdings PLC Term B NR+ NR+ 9/30/03 5,037 5,089
Parts -- 2.2% 1,840 Aerostructures Hamble Holdings PLC Term C NR+ NR+ 9/30/04 1,832 1,850
9,783 Alliant Techsystems, Inc. Term NR+ Ba2 3/15/01 9,775 9,783
4,950 Banner Industries, Inc. Term B NR+ NR+ 6/30/03 4,928 4,941
7,494 Evergreen International Aviation, Inc. Term B NR+ Ba3 5/31/03 7,458 7,461
24,583 Gulfstream Aerospace Corp. Term NR+ NR+ 9/30/02 24,540 24,614
4,975 Mag Aerospace Term B NR+ NR+ 12/06/01 4,942 4,956
2,970 Technetics Term A NR+ NR+ 6/20/02 2,951 2,961
5,000 Tri Star Inc. Term NR+ NR+ 9/30/03 4,954 4,975
------- -------
Total Aircraft & Parts 66,417 66,630
======= =======
Amusement & 4,263 AMF Group, Inc. Revolving
Recreational Credit NR+ Ba3 3/31/02 4,263 4,263
Services -- 5.2% 9,929 AMF Group, Inc. Axel A NR+ Ba3 3/31/03 10,043 10,053
19,813 AMF Group, Inc. Axel B NR+ Ba3 3/31/04 19,844 20,110
2,453 AMF Group, Inc. Term NR+ Ba3 3/31/02 2,448 2,462
21,283 AMF Group, Inc. Term B NR+ Ba3 3/31/03 21,238 21,549
3,039 AMF Group, Inc. Term C1 NR+ Ba3 3/31/02 3,058 3,050
2,862 AMF Group, Inc. Term C1 NR+ Ba3 3/31/03 2,905 2,898
2,106 AMF Group, Inc. Term C2 NR+ Ba3 3/31/04 2,137 2,137
4,125 Amfac Parks, Inc. Term B NR+ NR+ 9/30/02 4,092 4,112
5,000 Fitness Holdings Term NR+ NR+ 12/31/00 4,971 4,981
7,143 KSL Recreation Group, Inc. Revolving
Credit NR+ B2 4/30/04 7,143 7,214
7,750 KSL Recreation Group, Inc. Term A NR+ B2 4/30/05 7,773 7,828
7,750 KSL Recreation Group, Inc. Term B NR+ B2 4/30/06 7,773 7,828
6,283 Kerastotes Revolving
Credit NR+ NR+ 12/31/03 6,283 6,251
3,677 Kerastotes Term NR+ NR+ 12/31/04 3,647 3,666
14,888 Metro Goldwyn Mayer Co. Term B NR+ Ba3 3/31/04 14,786 14,962
872 Six Flags Entertainment Corp. Term NR+ Ba3 10/28/01 872 873
5,496 Six Flags Entertainment Corp. Term A NR+ Ba3 10/28/01 5,510 5,510
17,473 Six Flags Entertainment Corp. Term B NR+ Ba3 6/23/03 17,404 17,604
7,500 Vail Corporation Term B NR+ NR+ 4/15/04 7,490 7,519
------- -------
Total Amusement & Recreational Services 153,680 154,870
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Loan S&P Moody's Stated Value
Industries Amount Borrower Type Rating Rating Maturity Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Apparel -- 1.2% 4,571 CS Brooks Canada Axel A NR+ NR+ 6/30/02 4,551 4,548
10,157 CS Brooks Canada Axel B NR+ NR+ 6/30/04 10,114 10,106
9,683 Humphreys Inc. Term B NR+ NR+ 1/15/03 9,683 9,683
5,000 Renfro Corp. Term B NR+ NR+ 1/15/03 4,977 4,994
6,237 William Carter Co. (The) Term BB- Ba3 10/31/03 6,209 6,237
------- -------
Total Apparel 35,534 35,568
======= =======
Automotive 4,000 American Bumper Term B NR+ NR+ 10/31/02 3,990 4,015
Equipment -- 23,731 Collins & Aikman Corp. Term B B+ B1 12/31/02 23,635 23,790
1.7% 385 Johnstown America Industrial Inc. Revolving
Credit NR+ B1 3/31/02 385 375
19,001 Johnstown America Industrial Inc. Term B NR+ B1 3/31/03 18,925 18,639
5,000 Safelite Glass Corp. Term B BB- Ba3 9/08/04 4,982 5,028
------- -------
Total Automotive Equipment 51,917 51,847
======= =======
Broadcast -- 5,593 American Radio Systems Corp. Revolving
Radio & TV -- Credit B+ Ba2 12/31/04 5,593 5,588
6.2% 3,905 Benedek Broadcasting Corp. Axel A B+ Ba3 5/01/01 3,894 3,896
4,200 Benedek Broadcasting Corp. Axel B B+ Ba3 11/01/02 4,187 4,190
480 Chancellor Broadcasting, Inc. Revolving
Credit NR+ Ba2 6/26/04 480 479
12,000 Chancellor Broadcasting, Inc. Term NR+ Ba2 6/26/04 11,956 11,985
4,613 Citicasters Inc. (Jacor) Term B BB- Ba2 9/17/04 4,592 4,608
7,371 Evergreen Media Corp. Revolving
Credit NR+ NR+ 6/30/05 7,371 7,325
53,571 Evergreen Media Corp. Term NR+ NR+ 6/30/05 53,391 53,471
8,261 Latin Communications Term NR+ NR+ 3/31/04 8,211 8,235
10,000 Sinclair Broadcasting Group Inc. Term B NR+ Ba2 12/31/04 9,985 10,000
9,193 Sullivan Broadcasting Term B NR+ Ba3 12/31/03 9,164 9,175
46,682 Viacom, Inc. Term NR+ Ba2 7/01/02 46,622 46,639
20,000 Western Wireless Corp. Term B B+ B1 3/31/05 20,000 20,119
------- -------
Total Broadcast -- Radio & TV 185,446 185,710
======= =======
Building & Con- 4,447 Fenway Holdings, Inc. Term B NR+ NR+ 9/15/02 4,421 4,395
struction -- 0.1% ------- -------
Total Building & Construction 4,421 4,395
======= =======
Building 3,750 Amerimax Term C NR+ NR+ 6/30/04 3,745 3,750
Materials -- 3.0% 4,190 Behr Process Term B NR+ NR+ 3/31/04 4,184 4,190
2,793 Behr Process Term C NR+ NR+ 3/31/05 2,789 2,796
3,695 Dal Tile International Inc. Revolving
Credit NR+ NR+ 12/31/02 3,695 3,665
4,143 Dal Tile International Inc. Term NR+ NR+ 12/31/02 4,138 4,121
27,000 Dal Tile International Inc. Term B NR+ NR+ 12/31/03 26,868 26,916
2,521 Euramax Holdings Term B NR+ NR+ 6/30/04 2,518 2,521
5,000 Falcon Building Products, Inc. Term NR+ B1 6/30/05 4,980 5,006
29,875 National Gypsum Co. Term B NR+ Ba3 9/20/03 29,824 29,987
8,248 Walter Industrials, Inc. Term B NR+ NR+ 2/22/03 8,234 8,263
------- -------
Total Building Materials 90,975 91,215
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Loan S&P Moody's Stated Value
Industries Amount Borrower Type Rating Rating Maturity Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cable TV 6,000 Cablevision of Ohio Term NR+ Ba2 12/31/05 5,987 5,992
Services -- 5.4% 24,375 Chelsea Communications Term B NR+ NR+ 12/31/04 24,278 24,322
17,081 Classic Cable Inc. Term B NR+ B1 6/30/05 16,911 16,568
18,683 Coaxial Communications Term B NR+ NR+ 12/31/99 18,627 18,497
5,000 FrontierVision Operating Partners L.P. Term B NR+ Ba3 6/30/05 4,972 5,000
10,000 Intermedia Communications, Inc. Term NR+ Ba3 1/01/05 9,977 10,038
3,193 Marcus Cable Operating Co. Revolving
Credit NR+ NR+ 4/30/14 3,193 3,177
30,625 Marcus Cable Operating Co. Term A NR+ NR+ 12/31/02 30,521 30,644
35,750 Marcus Cable Operating Co. Term B NR+ NR+ 4/30/04 35,483 35,951
10,000 Triax Midwest Term B NR+ NR+ 6/30/05 9,942 9,997
------- -------
Total Cable TV Services 159,891 160,186
======= =======
Casinos -- 0.2% 5,293 Alliance Gaming Corp. Term B NR+ NR+ 1/31/05 5,294 5,336
1,392 Alliance Gaming Corp. Term C NR+ NR+ 7/31/05 1,392 1,404
------- -------
Total Casinos 6,686 6,740
======= =======
Chemicals -- 5.3% 8,890 Aztar Corporation Revolving
Credit NR+ NR+ 12/31/99 8,890 8,890
4,140 Aztar Corporation Term NR+ NR+ 12/31/99 4,142 4,137
11,396 Cedar Chemical Term B NR+ NR+ 10/31/03 11,321 11,368
4,988 Exide Corporation Term D NR+ NR+ 6/15/01 4,988 4,994
2,189 HSC Holdings Revolving
Credit NR+ NR+ 12/31/99 2,189 2,184
3,350 HSC Holdings Term NR+ NR+ 12/31/99 3,335 3,342
2,886 Harris Specialty Chemicals Revolving
Credit NR+ NR+ 12/30/01 2,886 2,897
219 Harris Specialty Chemicals Term A NR+ NR+ 12/30/00 219 220
226 Harris Specialty Chemicals Term A NR+ NR+ 12/30/01 226 227
602 Harris Specialty Chemicals Term B NR+ NR+ 12/30/99 601 605
2,447 Harris Specialty Chemicals Term B NR+ NR+ 12/30/01 2,437 2,457
35,990 Huntsman Corp. Term A NR+ NR+ 12/31/02 35,962 35,934
5,000 Huntsman Corp. Term B NR+ NR+ 3/15/04 4,995 5,050
14,850 Huntsman Corp. Term B NR+ NR+ 12/31/05 14,800 14,850
15,000 Huntsman Corp. Term B NR+ NR+ 6/30/04 15,000 15,103
5,000 Huntsman Corp. Term C NR+ NR+ 3/15/05 4,995 5,050
8,000 Pioneer Americas Acquisition Corp. Term NR+ NR+ 12/5/06 8,069 8,077
24,143 Sterling Chemicals, Inc. Term B NR+ Ba3 9/30/04 24,033 24,173
6,611 Texas Petrochemicals Corp. Term B NR+ Ba3 6/30/04 6,589 6,595
1,047 Thoro World Systems, Inc. Term A NR+ NR+ 12/30/00 1,042 1,051
1,422 Thoro World Systems, Inc. Term B NR+ NR+ 12/30/01 1,413 1,427
------- -------
Total Chemicals 158,132 158,631
======= =======
Computer-Related 7,000 Anacomp, Inc. Term NR+ B2 3/31/01 6,969 7,057
Services & 11,000 DecisionOne Corp. Term B NR+ B1 8/07/05 10,983 10,986
Products -- 1.4% 7,417 Fairchild Semiconductors Corp. Term B NR+ Ba3 3/11/03 7,399 7,473
12,438 Phase Metrics Term NR+ NR+ 11/12/01 12,383 12,189
5,000 Triad Systems Corp. Term NR+ NR+ 2/27/03 4,971 4,953
------- -------
Total Computer-Related Services & Products 42,705 42,658
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Loan S&P Moody's Stated Value
Industries Amount Borrower Type Rating Rating Maturity Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consumer 615 E & S Holdings Corp. Revolving
Products -- Credit NR+ B1 9/30/03 615 615
1.8% 2,059 E & S Holdings Corp. Term NR+ B1 9/30/03 2,059 2,059
5,172 Hedstrom Corp. Term A NR+ B1 6/30/03 5,147 5,153
15,000 Playtex Family Products Inc. Term B NR+ Ba2 9/15/03 14,926 15,112
7,228 RTI Funding Corp. (Ritvik Toys) Term B NR+ NR+ 2/07/03 7,168 7,255
7,228 RTI Funding Corp. (Ritvik Toys) Term C NR+ NR+ 2/07/04 7,165 7,255
15,000 Revlon Consumer Products Corp. Term NR+ NR+ 5/30/02 14,988 15,007
------- -------
Total Consumer Products 52,068 52,456
======= =======
Diversified 1,712 Ameriserve Food Corp. Term A NR+ NR+ 6/30/03 1,721 1,722
Manufacturing -- 5,000 Sarah Michael Term B NR+ NR+ 6/30/04 5,000 5,000
0.5% 7,490 Thermadyne Industries, Inc. Revolving
Credit NR+ Ba3 6/30/01 7,490 7,490
------- -------
Total Diversified Manufacturing 14,211 14,212
======= =======
Drilling -- 0.3% 4,676 IRI International Term A NR+ NR+ 3/31/02 4,660 4,702
4,846 Rigco North America Term NR+ NR+ 9/30/98 4,832 4,871
------- -------
Total Drilling 9,492 9,573
======= =======
Drug/Proprietary 204 Duane Reade Co. Term A NR+ NR+ 9/30/98 204 204
Stores -- 0.9% 10,000 Duane Reade Co. Term B NR+ NR+ 9/30/99 9,953 9,987
8,366 Smith's Food & Drug Centers, Inc. Term A NR+ NR+ 3/31/05 8,356 8,369
9,574 Smith's Food & Drug Centers, Inc. Term B NR+ NR+ 3/31/05 9,563 9,586
------- -------
Total Drug/Proprietary Stores 28,076 28,146
======= =======
Electronics/ 7,275 Amphenol Corp. Term B NR+ Ba3 3/31/02 7,390 7,364
Electrical 6,911 Amphenol Corp. Term C NR+ Ba3 3/31/03 7,021 7,000
Components -- 2,986 Circo Craft Co. (Viasystems) Term B NR+ NR+ 6/30/04 2,976 2,997
2.2% 1,800 Circo Craft Co. (Viasystems) Term C NR+ NR+ 6/30/05 1,794 1,807
5,550 Communications & Power Industries Inc. Term B NR+ NR+ 8/11/02 5,507 5,564
4,089 Details, Inc. Term A NR+ NR+ 1/31/01 4,066 4,076
2,957 Dictaphone Corp. Revolving
Credit B- B1 3/31/01 2,957 2,817
2,870 Dictaphone Corp. Term A B- B1 3/31/01 2,818 2,769
20,000 International Wire Group, Inc. Term B NR+ B1 9/30/03 19,981 20,040
1,364 L-3 Communications Corp. Term A NR+ Ba3 3/31/03 1,361 1,381
2,494 L-3 Communications Corp. Term B NR+ Ba3 3/31/05 2,490 2,526
1,645 L-3 Communications Corp. Term C NR+ Ba3 3/31/06 1,641 1,665
7,000 Telex Communications, Inc. Term B NR+ Ba3 11/30/04 6,983 7,048
------- -------
Total Electronics/Electrical Components 66,985 67,054
======= =======
Entertainment -- 4,500 Moovies Inc. Term A NR+ NR+ 3/31/02 4,500 4,500
0.2% ------- -------
Total Entertainment 4,500 4,500
======= =======
Financial 14,842 Outsourcing Solutions Inc. Term B NR+ B1 10/15/03 14,774 14,888
Services -- 0.5% ------- -------
Total Financial Services 14,774 14,888
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Loan S&P Moody's Stated Value
Industries Amount Borrower Type Rating Rating Maturity Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Food & Kindred 7,369 American Italian Pasta Company Term C NR+ NR+ 2/26/04 7,303 7,378
Products -- 2,945 Del Monte Corp. Revolving
4.7% Credit NR+ B2 3/31/03 2,945 2,945
3,273 Del Monte Corp. Term A NR+ B2 3/31/03 3,273 3,285
5,100 Del Monte Corp. Term B NR+ B2 3/31/05 5,095 5,145
17,418 Favorite Brands International Term B NR+ NR+ 8/30/04 17,345 17,461
163 International Homefoods, Inc. Revolving
Credit NR+ Ba3 3/31/03 163 163
3,983 International Homefoods, Inc. Term A NR+ Ba3 3/31/03 4,003 3,994
15,000 International Homefoods, Inc. Term B NR+ Ba3 9/30/04 14,940 15,088
2,500 Mistic Beverage, Inc. Term B NR+ NR+ 6/01/04 2,488 2,513
2,500 Mistic Beverage, Inc. Term C NR+ NR+ 6/01/05 2,488 2,513
4,609 President Baking Co., Inc. Term B NR+ NR+ 9/30/00 4,590 4,616
3,358 Rykoff-Sexton, Inc. Term B BB- Ba3 10/31/02 3,358 3,364
1,611 Rykoff-Sexton, Inc. Term C BB- Ba3 4/30/03 1,611 1,614
1,960 Select Beverages Inc. Term B NR+ NR+ 6/30/01 1,946 1,963
2,910 Select Beverages Inc. Term C NR+ NR+ 6/30/02 2,890 2,919
7,500 Snapple Beverage Corp. Term B NR+ NR+ 6/01/04 7,463 7,537
7,500 Snapple Beverage Corp. Term C NR+ NR+ 6/01/05 7,463 7,537
23,057 Specialty Foods Inc. Term B NR+ B3 4/30/01 22,958 23,005
7,062 Van De Kamps Inc. Term B NR+ Ba3 4/30/03 7,031 7,097
4,431 Van De Kamps Inc. Term C NR+ Ba3 9/30/03 4,411 4,453
6,617 Volume Services Term B NR+ B2 12/31/02 6,563 6,617
3,312 Volume Services Term C NR+ B2 12/31/03 3,284 3,312
4,844 Windsor Quality Food Term B NR+ NR+ 12/31/02 4,823 4,783
--------- ---------
Total Food & Kindred Products 138,434 139,302
========= =========
Funeral Homes & 15,448 Loewen Group Inc. Revolving
Parlors -- 1.3% Credit NR+ Ba1 5/29/01 15,448 15,410
14,833 Prime Succession International Group Axel A BB- NR+ 8/01/03 14,784 15,019
6,907 Rose Hills Acquisition Corp. Axel A BB NR+ 12/01/03 6,891 7,010
--------- ---------
Total Funeral Homes & Parlors 37,123 37,439
========= =========
Furniture & 9,978 Lifestyle Furnishings International
Fixtures -- 0.3% Ltd. Term NR+ Ba2 6/27/07 9,978 10,028
--------- ---------
Total Furniture & Fixtures 9,978 10,028
========= =========
General 8,458 CSK Auto Inc. Term NR+ Ba3 10/31/03 8,409 8,513
Merchandise 1,000 Kmart Corp. Revolving
Stores -- 0.7% Credit BB+ B1 1/06/00 1,000 999
1,938 Music Acquisition Term B NR+ NR+ 8/31/01 1,912 1,288
7,500 Music Acquisition Term C NR+ NR+ 8/31/02 7,400 4,988
5,000 Sneaker Stadium Term NR+ NR+ 12/31/02 5,000 5,000
--------- ---------
Total General Merchandise Stores 23,721 20,788
========= =========
Grocery -- 1.6% 10,400 Big V Supermarkets Inc. Term B NR+ NR+ 3/15/00 10,326 10,296
3,120 Bruno's, Inc. Revolving
Credit NR+ B1 6/02/03 3,120 3,038
4,000 Bruno's, Inc. Term B NR+ B1 6/02/05 3,990 3,980
806 Carr Gottstein Foods Co. Revolving
Credit NR+ NR+ 6/30/01 806 806
2,499 Carr Gottstein Foods Co. Term A NR+ B1 6/30/01 2,503 2,509
3,546 Carr Gottstein Foods Co. Term B NR+ B1 12/31/02 3,553 3,572
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Loan S&P Moody's Stated Value
Industries Amount Borrower Type Rating Rating Maturity Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Grocery 2,971 Ralph's Grocery Company Revolving
(concluded) Credit NR+ Ba3 2/15/03 2,971 2,964
4,952 Ralph's Grocery Company Term A NR+ Ba3 2/15/03 4,941 4,969
6,983 Ralph's Grocery Company Term B NR+ Ba3 2/15/04 6,974 7,044
4,184 Star Markets Co., Inc. Term B NR+ Ba3 12/31/01 4,170 4,174
3,132 Star Markets Co., Inc. Term C NR+ Ba3 12/31/02 3,120 3,120
--------- ---------
Total Grocery 46,474 46,472
========= =========
Health 16,212 Community Health Systems, Inc. Term B NR+ NR+ 12/31/03 16,140 16,263
Services -- 5.9% 16,212 Community Health Systems, Inc. Term C NR+ NR+ 12/31/04 16,139 16,263
12,205 Community Health Systems, Inc. Term D NR+ NR+ 12/31/05 12,149 12,259
5,001 Corning/Quest Term A NR+ NR+ 12/06/02 4,989 5,007
3,252 Dade International, Inc. Term B NR+ B1 12/31/02 3,235 3,256
3,252 Dade International, Inc. Term C NR+ B1 12/31/03 3,235 3,256
3,433 Dade International, Inc. Term D NR+ B1 12/31/04 3,413 3,451
7,500 Endo Pharmaceuticals Term B NR+ NR+ 6/30/04 7,485 7,533
5,000 FPA Medical Management, Inc. Term NR+ NR+ 9/30/01 4,993 5,000
8,069 Horizons/CMS Revolving
Credit NR+ NR+ 3/31/03 8,069 8,067
2,447 Imed Corp. (Alaris) Term B BB- B1 11/30/03 2,441 2,472
2,447 Imed Corp. (Alaris) Term C BB- B1 11/30/04 2,441 2,473
2,303 Imed Corp. (Alaris) Term D BB- B1 11/30/05 2,297 2,327
9,905 MEDIQ, Inc. Term B B+ NR+ 9/30/04 9,850 9,911
13,009 Medical Specialties Axel NR+ NR+ 6/30/04 12,935 12,977
4,786 Medical Specialties Term NR+ NR+ 6/30/01 4,762 4,774
6,491 Merit Behavioral Care Corp. Term A NR+ B2 6/01/03 6,451 6,485
15,849 Merit Behavioral Care Corp. Term B NR+ B2 4/06/02 15,783 15,893
35,000 National Medical Care Inc. Term BB Ba1 9/30/03 34,888 34,869
5,000 Prime Medical Services, Inc. Term B NR+ NR+ 4/30/03 4,982 5,005
--------- ---------
Total Health Services 176,677 177,541
========= =========
Hotels & 3,125 Capstar Hotel Company Term B NR+ NR+ 6/30/04 3,125 3,142
Motels -- 0.8% 5,130 Doubletree Corporation Term B NR+ NR+ 5/15/04 5,112 5,159
2,424 Westin Hotels Ltd. Revolving
Credit NR+ NR+ 2/08/02 2,424 2,429
13,576 Westin Hotels Ltd. Term NR+ NR+ 2/08/02 13,544 13,601
--------- ---------
Total Hotels & Motels 24,205 24,331
========= =========
Industrial 8,955 Elis/Omni Axel NR+ NR+ 10/30/05 8,944 9,179
Services -- 0.3% --------- ---------
Total Industrial Services 8,944 9,179
========= =========
Leasing & Rental 2,978 Brand Scaffold Term B NR+ NR+ 9/30/03 2,964 2,987
Services -- 0.6% 1,985 Brand Scaffold Term C NR+ NR+ 9/30/04 1,975 1,993
12,959 Coinmachine Corp. Term B NR+ NR+ 6/30/04 12,923 13,056
--------- ---------
Total Leasing & Rental Services 17,862 18,036
========= =========
Manufacturing -- 10,386 Calmar Inc. Axel A NR+ B1 9/15/03 10,344 10,374
2.0% 7,790 Calmar Inc. Axel B NR+ B1 3/15/04 7,757 7,809
10,000 Polyfibron Technologies Term B NR+ NR+ 12/28/03 10,000 10,000
2,757 Rayovac Corp. Term B NR+ Ba3 9/30/03 2,751 2,776
2,757 Rayovac Corp. Term C NR+ Ba3 9/30/04 2,751 2,779
5,000 Russell Stanley Term B NR+ NR+ 6/30/05 4,981 5,050
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Loan S&P Moody's Stated Value
Industries Amount Borrower Type Rating Rating Maturity Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Manufacturing 701 Trans Technology Corp. Revolving
(concluded) Credit NR+ NR+ 3/31/02 701 698
1,715 Trans Technology Corp. Term A NR+ NR+ 3/31/02 1,715 1,715
14,400 Trans Technology Corp. Term B NR+ NR+ 6/30/02 14,282 14,418
1,277 Walls Industries Term B NR+ NR+ 2/28/05 1,277 1,277
1,723 Walls Industries Term C NR+ NR+ 2/28/06 1,723 1,723
--------- ---------
Total Manufacturing 58,282 58,619
========= =========
Measuring, 9,331 CHF/Ebel USA Inc. Term B NR+ NR+ 9/30/01 9,331 9,331
Analyzing & 10,840 Graphic Controls Corp. Term B NR+ B1 9/28/03 10,794 10,867
Controlling 5,000 Packard Bioscience Co. Term NR+ Ba3 3/31/03 4,982 5,013
Instruments --
0.8% --------- ---------
Total Measuring, Analyzing & Controlling Instruments 25,107 25,211
========= =========
Metals & 5,059 Adience, Inc. Term B NR+ NR+ 4/15/05 5,040 5,084
Mining -- 1.2% 4,767 Alliance Coal Term B NR+ B1 12/31/02 4,746 4,770
4,955 Anker Coal Group, Inc. Term B NR+ NR+ 6/30/04 4,952 4,943
2,192 Centennial Resources Term A NR+ NR+ 3/31/02 2,172 2,181
5,163 Centennial Resources Term B NR+ NR+ 12/31/03 5,114 5,151
2,400 Northwestern Steel & Mining Revolving
Credit NR+ B2 12/31/00 2,400 2,400
10,171 UCAR International Inc. Term B NR+ Ba2 12/31/02 10,162 10,179
--------- ---------
Total Metals & Mining 34,586 34,708
========= =========
Packaging -- 7,875 IPC, Inc. Term NR+ B1 9/30/01 7,853 7,895
0.7% 2,716 Mail-Well, Inc./Supremex Term A NR+ Ba2 3/31/03 2,713 2,709
3,870 Mail-Well, Inc./Supremex Term A NR+ Ba3 3/31/03 3,866 3,867
1,207 Mail-Well, Inc./Supremex Term B NR+ Ba2 7/31/03 1,207 1,204
1,941 Silgan Corp. Revolving
Credit NR+ Ba2 12/31/03 1,941 1,937
2,813 Silgan Corp. Term A NR+ Ba2 12/31/03 2,812 2,807
--------- ---------
Total Packaging 20,392 20,419
========= =========
Paper -- 9.4% 4,764 Crown Paper Co. Term B BB Ba3 8/22/03 4,715 4,794
828 Jefferson Smurfit Company/ Revolving
Container Corp. of America Credit BB Ba3 4/30/01 828 826
24,191 Jefferson Smurfit Company/
Container Corp. of America Term A BB Ba3 4/30/01 24,135 24,214
6,564 Jefferson Smurfit Company/
Container Corp. of America Term B BB Ba3 4/30/01 6,558 6,621
47,905 Jefferson Smurfit Company/
Container Corp. of America Term B BB Ba3 4/30/02 47,840 48,324
12,776 Jefferson Smurfit Company/
Container Corp. of America Term C BB Ba3 10/31/02 12,749 12,888
5,620 Riverwood International Corp. Term A B+ B1 2/28/03 5,451 5,634
63,415 Riverwood International Corp. Term B B+ B1 2/28/04 62,591 63,930
24,368 Riverwood International Corp. Term C B+ B1 8/28/04 24,046 24,566
1,147 S.D. Warren Co. Term A NR+ Ba2 12/31/01 1,147 1,149
19,301 S.D. Warren Co. Term B NR+ Ba2 6/30/02 19,261 19,373
2,423 St. Laurent Paperboard, Inc. Term B NR+ NR+ 5/31/03 2,416 2,453
2,577 St. Laurent Paperboard, Inc. Term C NR+ NR+ 5/31/04 2,570 2,610
13,930 Stone Container Corp. Term B NR+ Ba3 4/01/00 13,833 14,043
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Loan S&P Moody's Stated Value
Industries Amount Borrower Type Rating Rating Maturity Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paper 20,117 Stone Container Corp. Term C NR+ Ba3 4/01/00 20,091 20,287
(concluded) 20,000 Stone Container Corp. Term E NR+ Ba3 10/01/03 20,119 20,200
9,451 Stronghaven Term B NR+ NR+ 5/15/04 9,407 9,475
--------- ---------
Total Paper 277,757 281,387
========= =========
Printing & 7,187 Advanstar Communications Term B NR+ NR+ 12/21/03 7,148 7,178
Publishing -- 21,097 American Media Term B BB- Ba2 9/30/02 21,028 21,071
3.9% 8,789 Garden State Newspapers, Inc. Revolving
Credit 'A' NR+ NR+ 6/30/03 8,789 8,773
1,740 Garden State Newspapers, Inc. Term A NR+ NR+ 3/31/04 1,737 1,737
4,000 Garden State Newspapers, Inc. Term B NR+ NR+ 3/31/04 3,985 3,992
8,762 Journal News Co. Term NR+ NR+ 12/31/01 8,746 8,751
2,948 K-III Communications Corp. Revolving
Credit NR+ Ba3 12/31/00 2,948 2,931
12,620 K-III Communications Corp. Revolving
Credit 'A' NR+ Ba3 12/31/00 12,620 12,549
5,000 K-III Communications Corp. Revolving
Credit 'C' NR+ Ba3 12/31/00 5,000 4,972
6,000 K-III Communications Corp. Term NR+ Ba3 6/30/04 5,995 5,974
10,000 Morris Communications Term B NR+ NR+ 6/30/05 9,981 10,000
14,000 Newsquest Capital PLC Term 2 NR+ NR+ 12/31/04 13,934 14,017
6,213 Petersen Publishing Co. Term 3 B+ B1 9/30/04 6,191 6,228
3,571 Von Hoffmann Press Inc. Term B NR+ B1 5/22/05 3,563 3,603
3,571 Von Hoffmann Press Inc. Term C NR+ B1 5/22/06 3,563 3,603
--------- ---------
Total Printing & Publishing 115,228 115,379
========= =========
Rendering -- 0.2% 4,956 CBP Resources Inc. Term B NR+ NR+ 9/30/03 4,924 4,943
--------- ---------
Total Rendering 4,924 4,943
========= =========
Restaurants -- 0.1% 4,000 AFC Enterprises Term NR+ Ba3 6/30/02 3,981 4,005
--------- ---------
Total Restaurants 3,981 4,005
========= =========
Retail -- 0.1% 2,500 Murray's Discount Auto Stores Term NR+ NR+ 6/30/03 2,500 2,500
--------- ---------
Total Retail 2,500 2,500
========= =========
Telephone 8,000 Arch Communications Group, Inc. Term B NR+ B1 12/31/03 7,972 7,975
Communications -- 8,368 MobileMedia Corp. Term A NR+ Caa 6/30/02 8,339 7,447
5.5% 1,667 MobileMedia Corp. Term B1 NR+ Caa 6/30/02 1,667 1,485
8,000 MobileMedia Corp. Term B2 NR+ Caa 6/30/03 7,980 7,130
1,989 Nextel Communications, Inc. Revolving
Credit NR+ B1 3/31/03 1,989 1,970
10,348 Nextel Communications, Inc. Revolving
Credit 'B' NR+ B1 3/31/03 10,348 10,248
8,427 Nextel Communications, Inc. Term C NR+ B1 3/31/03 8,295 8,391
35,000 Nextel Communications, Inc. Term D NR+ B1 6/30/03 34,404 35,339
17,888 Paging Network Inc. Revolving
Credit NR+ Ba3 12/31/04 17,888 17,636
4,821 Shared Technologies Cellular, Inc. Term B NR+ B1 3/31/03 4,796 4,828
25,000 Sprint Spectrum L.P./Nortel Term NR+ B1 6/29/01 24,918 25,125
17,775 Sprint Spectrum L.P. Term 1 NR+ B1 7/04/05 17,636 17,875
17,776 Sprint Spectrum L.P. Term 2 NR+ B1 7/04/05 17,634 17,875
--------- ---------
Total Telephone Communications 163,866 163,324
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Face Loan S&P Moody's Stated Value
Industries Amount Borrower Type Rating Rating Maturity Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Textiles/Mill 4,267 Ithaca Industries, Inc. Revolving
Products -- Credit NR+ NR+ 8/31/99 4,267 4,245
0.7% 12,237 Ithaca Industries, Inc. Term NR+ NR+ 8/31/99 12,202 12,176
3,289 Joan Fabrics Term B NR+ NR+ 6/30/05 3,285 3,328
1,711 Joan Fabrics Term C NR+ NR+ 6/30/06 1,708 1,731
--------- ---------
Total Textiles/Mill Products 21,462 21,480
========= =========
Transportation 28,107 Atlas Air, Inc. Revolving
Services -- 1.8% Credit NR+ NR+ 6/30/98 28,107 28,142
10,000 Atlas Freight Term NR+ NR+ 5/29/04 9,976 10,031
7,469 International Logistics Term B NR+ NR+ 12/31/03 7,435 7,455
3,333 Petro Stopping Centers Term B BB- Ba3 12/31/03 3,325 3,327
3,994 Travel Centers Term B NR+ B2 3/27/05 3,979 4,021
--------- ---------
Total Transportation Services 52,822 52,976
========= =========
Waste 11,000 American Disposal Services, Inc. Term NR+ NR+ 5/31/04 10,984 11,014
Management -- 2,500 Laidlaw Environmental Services, Inc. Term B NR+ NR+ 5/15/05 2,494 2,547
0.5% 2,500 Laidlaw Environmental Services, Inc. Term C NR+ NR+ 5/15/04 2,494 2,548
--------- ---------
Total Waste Management 15,972 16,109
========= =========
Total Senior Secured Floating Rate Loan Securities -- 82.7% 2,466,848 2,474,278
========= =========
<CAPTION>
Shares
Held Equity Investments
<S> <C> <C> <C> <C>
Cable TV 1 Classic Cable, Inc. (Warrants) (a) 0 0
Services -- 0.0%
Drilling -- 0.0% 12 Rigco North America (Warrants) (a) 0 0
Restaurants -- 0.0% 44 Flagstar Companies, Inc. 0 12
--------- ---------
Total Equity Investments -- 0.0% 0 12
========= =========
Total Long-Term Investments -- 82.7% 2,466,848 2,474,290
========= =========
<CAPTION>
Short-Term Investments
<S> <C> <C> <C>
Commercial Countrywide Home Loans, Inc. ($14,000 par, maturing 9/18/1997, yielding
Paper** -- 14.2% 5.52%) 13,966 13,966
GTE Funding Inc. ($48,000 par, maturing 10/06/1997, yielding 5.50%) 47,751 47,751
General Motors Acceptance Corp. ($57,368 par, maturing 9/02/1997, yielding
5.69%) 57,368 57,368
Goldman Sachs Group ($50,000 par, maturing 9/16/1997, yielding 5.53%) 49,892 49,892
Goldman Sachs Group ($26,000 par, maturing 9/18/1997, yielding 5.52%) 25,936 25,936
Morgan (J.P.) & Company, Inc. ($37,870 par, maturing 9/08/1997, yielding
5.49%) 37,835 37,835
Morgan Stanley Group, Inc. ($50,000 par, maturing 10/07/1997, yielding
5.50%) 49,732 49,732
National Fleet Funding Corp. ($15,275 par, maturing 9/11/1997, yielding
5.53%) 15,254 15,254
Riverwoods Funding Corp. ($50,000 par, maturing 9/02/1997, yielding 5.50%) 50,000 50,000
Xerox Corp. ($32,000 par, maturing 9/10/1997, yielding 5.50%) 31,961 31,961
Xerox Corp. ($46,000 par, maturing 9/23/1997, yielding 5.48%) 45,853 45,853
---------- ----------
Total Commercial Paper 425,548 425,548
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Short-Term Investments
<S> <C> <C> <C>
US Government Agency Federal Home Loan Mortgage Corporation ($20,000 par, maturing 9/05/1997,
Obligations** -- 2.4% yielding 5.46%) 19,991 19,991
Federal Home Loan Mortgage Corporation
($50,000 par, maturing 9/12/1997, yielding 5.41%) 49,925 49,925
---------- ----------
Total US Government Agency Obligations 69,916 69,916
========== ==========
Total Short-Term Investments -- 16.6% 495,464 495,464
========== ==========
Total Investments -- 99.3% $2,962,312 2,969,754
========== ==========
22,036
----------
Other Assets Less Liabilities -- 0.7% $2,991,790
==========
Net Assets -- 100.0%
</TABLE>
(a) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock. The purchase price and numbers of shares are subject to
adjustment under certain conditions until expiration date.
+ 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. The interest rates shown are those in effect
at August 31, 1997.
** Commercial Paper and certain US Government Agency Obligations are traded
on a discount basis; the interest rates shown are the discount rates paid
at the time of purchase by the Fund. Ratings of issues shown have not
been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of August 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $2,962,312,311) (Note 1b) $2,969,754,258
Cash 3,333,212
Receivables:
Interest $23,156,172
Capital shares sold 6,864,898
Principal paydowns 1,323,008
Commitment fees 407,651 31,751,729
-----------
Prepaid registration fees and other assets (Note 1f) 2,827,494
--------------
Total assets 3,007,666,693
--------------
Liabilities: Payables:
Securities purchased 5,040,176
Dividends to shareholders (Note 1g) 3,944,807
Investment adviser (Note 2) 2,458,075
Administrator (Note 2) 646,862
Interest expense (Note 6) 256,210 12,346,130
-----------
Deferred income (Note 1e) 2,620,628
Accrued expenses and other liabilities. 910,294
--------------
Total liabilities 15,877,052
--------------
Net Assets: Net assets $2,991,789,641
==============
Net Assets Common Stock, par value $0.10 per share; 1,000,000,000 shares
Consist of: authorized $29,871,117
Paid-in capital in excess of par 2,960,840,225
Accumulated realized capital losses on investments -- net (Note 7) (6,363,648)
Unrealized appreciation on investments -- net 7,441,947
--------------
Net Assets -- Equivalent to $10.02 per share based on 298,711,170
shares of capital stock outstanding $2,991,789,641
==============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
FINANCIAL INFORMATION (continued)
Statement of Operations For the Year Ended
August 31, 1997
<S> <C> <C> <C>
Investment Income Interest and discount earned $231,932,345
(Note 1e): Facility and other fees 2,570,817
------------
Total income 234,503,162
------------
Expenses: Investment advisory fees (Note 2) $27,674,808
Administrative fees (Note 2) 7,282,844
Transfer agent fees (Note 2) 1,688,406
Professional fees 595,135
Accounting services (Note 2) 373,370
Custodian fees 300,414
Loan interest expense (Note 6) 256,210
Tender offer costs 189,018
Printing and shareholder reports 152,575
Borrowing costs (Note 6) 74,125
Registration fees (Note 1f) 66,689
Directors' fees and expenses 48,329
Other 42,802
-----------
Total expenses 38,744,725
------------
Investment income -- net 195,758,437
------------
Realized & Realized gain on investments -- net 1,494,764
Unrealized Gain on Change in unrealized appreciation on investments -- net 6,060,630
Investments -- Net ------------
(Notes 1c, 1e & 3): Net Increase in Net Assets Resulting from Operations $203,313,831
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
For the Year Ended August 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $195,758,437 $178,696,222
Realized gain (loss) on investments -- net 1,494,764 (8,718,939)
Change in unrealized appreciation/depreciation on
investments -- net. 6,060,630 1,207,962
-------------- --------------
Net increase in net assets resulting from operations 203,313,831 171,185,245
-------------- --------------
Dividends to Investment income -- net (195,758,437) (178,696,222)
-------------- --------------
(Note 1g): Net decrease in net assets resulting from dividends to shareholders (195,758,437) (178,696,222)
-------------- --------------
Capital Share Net increase in net assets resulting from capital share transactions 38,706,901 789,568,710
-------------- --------------
(Note 4):
Net Assets: Total increase in net assets 46,262,295 782,057,733
Beginning of year 2,945,527,346 2,163,469,613
-------------- --------------
End of year $2,991,789,641 $2,945,527,346
============== ==============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
FINANCIAL INFORMATION (continued)
Statement of Cash Flows
For the Year Ended
August 31, 1997
<S> <C> <C>
Cash Provided by Net increase in net assets resulting from operations $203,313,831
Operating Activities: Adjustments to reconcile net increase in net assets resulting from operations to net
cash provided by operating activities:
Increase in receivables (5,855,760)
Increase in other assets (1,147,020)
Decrease in other liabilities (2,250,790)
Realized and unrealized gain on investments -- net (7,555,394)
Amortization of discount (27,355,717)
----------------
Net cash provided by operating activities 159,149,150
----------------
Cash Provided by Proceeds from principal payments and sales of loan interests 1,961,516,374
Investing Activities: Purchases of loan interests (2,268,240,139)
Purchases of short-term investments (21,312,835,470)
Proceeds from sales and maturities of short-term investments 21,621,740,112
----------------
Net cash provided by investing activities 2,180,877
----------------
Cash Used for Cash receipts from borrowings 50,000,000
Financing Activities: Cash payments from borrowings (50,000,000)
Cash receipts on capital shares sold 426,269,518
Cash payments on capital shares tendered (486,786,078)
Dividends paid to shareholders (100,140,743)
----------------
Net cash used for financing activities (160,657,303)
----------------
Cash: Net increase in cash 672,724
Cash at beginning of year 2,660,488
----------------
Cash at end of year $3,333,212
================
Non-Cash Capital shares issued in reinvestment of dividends paid to shareholders $95,204,864
Financing Activities: ================
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
FINANCIAL INFORMATION (concluded)
Financial Highlights
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended August 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Net asset value, beginning of year $9.99 $10.02 $10.02 $10.02 $9.99
Operating -------- -------- -------- -------- --------
Performance: Investment income -- net .68 .66 .75 .59 .53
Realized and unrealized gain (loss) on
investments -- net .03 (.03) --+ --+ .03
-------- -------- -------- -------- --------
Total from investment operations .71 .63 .75 .59 .56
-------- -------- -------- -------- --------
Less dividends from investment income -- net (.68) (.66) (.75) (.59) (.53)
-------- -------- -------- -------- --------
Net asset value, end of year $10.02 $9.99 $10.02 $10.02 $10.02
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 7.23% 6.53% 7.68% 5.94% 5.74%
Return:* ======== ======== ======== ======== ========
Ratio to Average Expenses, excluding interest expense 1.32% -- -- -- --
Net Assets: ======== ======== ======== ======== ========
Expenses 1.33% 1.34% 1.34% 1.43% 1.47%
======== ======== ======== ======== ========
Investment income -- net 6.72% 6.54% 7.45% 5.75% 5.27%
======== ======== ======== ======== ========
Leverage: Amount of borrowings (in thousands) -- -- -- -- --
======== ======== ======== ======== ========
Average amount of borrowings outstanding
during the period (in thousands) $4,409 -- -- -- --
======== ======== ======== ======== ========
Average amount of borrowings outstanding
per share during the period $.02 -- -- -- --
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in millions) $2,992 $2,946 $2,163 $934 $713
Data: ======== ======== ======== ======== ========
Portfolio turnover 74.00% 80.20% 55.23% 61.31% 90.36%
======== ======== ======== ======== ========
</TABLE>
* 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.
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
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,
1997 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.
[bullet] Interest rate transactions -- The Fund is authorized to enter
into interest rate swaps and purchase or sell interest rate caps and
floors. In an interest rate swap, the Fund exchanges with another party
their respective commitments to pay or receive interest on a specified
notional principal amount. The purchase of an interest rate cap (or
floor) entitles the purchaser, to the extent that a specified index
exceeds (or falls below) a predetermined interest rate, to receive
payments of interest equal to the difference between the index and the
predetermined rate on a notional principal amount from the party selling
such interest rate cap (or floor).
(d) Income taxes -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its taxable
income to its shareholders. Therefore, no Federal income tax provision
is required.
(e) Security transactions and investment income -- Security transactions
are recorded on the dates the transactions are entered into (the trade
dates). Interest is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified cost
basis. Facility fees are accreted into income over the term of the
related loan.
(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.
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
NOTES TO FINANCIAL STATEMENTS (concluded)
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, 1997, Merrill Lynch Funds Distributor,
Inc. ("MLFD") earned early withdrawal charges of $4,868,307 relating to
the tender of the Fund's shares.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
The Fund's credit facility is currently provided by Merrill Lynch
International Bank Limited, an affiliate of MLAM (see Note 6).
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the year ended August 31, 1997 were $2,273,069,862 and $1,962,839,382,
respectively.
Net realized and unrealized gains as of August 31, 1997 were as follows:
<TABLE>
<CAPTION>
Realized Unrealized
Gains Gains
<S> <C> <C>
Long-term investments $1,487,434 $7,441,947
Short-term investments 7,330 --
----------- -----------
Total $1,494,764 $7,441,947
=========== ===========
</TABLE>
As of August 31, 1997, net unrealized appreciation for financial
reporting and Federal income tax purposes aggregated $7,441,947, of
which $14,800,526 is related to appreciated securities and $7,358,579 is
related to depreciated securities. The aggregate cost of investments at
August 31, 1997 for Federal income tax purposes was $2,962,312,311.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
For the Year Ended Dollar
August 31, 1997 Shares Amount
<S> <C> <C>
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
============= =============
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended Dollar
August 31, 1996 Shares Amount
<S> <C> <C>
Shares sold 97,262,448 $973,004,146
Shares issued to share-
holders in reinvestment
of dividends 9,032,914 90,287,773
------------- -------------
Total issued 106,295,362 1,063,291,919
Shares tendered (27,418,447) (273,723,209)
------------- -------------
Net increase 78,876,915 $789,568,710
============= =============
</TABLE>
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc. August 31, 1997
5. Unfunded Loan Interests:
As of August 31, 1997, the Fund had unfunded loan commitments of
$342,215,631, which would be extended at the option of the borrower,
pursuant to the following loan agreements:
<TABLE>
<CAPTION>
Unfunded
Commitment
Borrower (in thousands)
<S> <C>
AFC Enterprises $10,000
AMF Group, Inc. 383
Alliance Gaming Corp. 15,000
American Radio Systems Corp. 4,407
Ameriserve Financial Corp. 3,288
Arch Communications Group, Inc. 3,125
Aztar Corporation 1,738
Bruno's, Inc. 1,947
Capstar Hotel Company 3,125
Carr Gottstein Foods Co. 2,294
Chancellor Broadcasting Inc. 12,569
Continental Airlines, Inc. 6,400
Corning/Quest 1,667
Dal Tile International Inc. 1,409
Del Monte Corp. 2,782
Dictaphone Corp. 328
E&S Holdings Corp. 2,287
Evergreen Media Corp. 14,057
Fort Howard Corp. 11,409
Garden State Newspapers, Inc. 1,421
HSC Holdings 5,131
Hedstrom Corp. 4,710
Horizons/CMS 1,813
Huntsman Corp. 9,581
IMO Industries, Inc. 3,813
International Homefoods, Inc. 1,355
Ithaca Industries, Inc. 12,216
Jefferson Smurfit Company/Container
Corp. of America 2,230
Johnstown America Industrial Inc. 3,115
K-III Communications Corp. 3,307
KSL Recreation Group, Inc. 5,357
Kmart Corp. 9,000
Katz Media Corporation 2,386
Kerastotes 7,022
Loewen Group Inc. 17,052
Marcus Cable Operating Co. 10,369
Nextel Communications, Inc. 17,090
Northwestern Steel & Mining 12,600
Paging Network Inc. 16,446
Ralph's Grocery Company 4,903
Riverwood International Corp. 5,000
SC International Corp., Inc. 18,000
S.D. Warren Co. 1,897
Silgan Corp. 16,197
Six Flags Entertainment Corp. 1,787
Smith's Food & Drug Centers, Inc. 3,273
Sprint Spectrum L.P. 15,000
Thermadyne Industries, Inc. 7,510
Trans Technology Corp. 1,422
UCAR International Inc. 7,126
Viasystems Technologies, Inc. 5,000
Whittaker Corporation 872
Worldcom Inc. 10,000
</TABLE>
6. Short-Term Borrowings:
On June 13, 1997, the Fund extended its credit agreement with Merrill
Lynch International Bank Limited, an affiliate of MLAM, through June 12,
1998. The agreement is a $100,000,000 credit facility bearing interest
at the Federal Funds rate plus 0.25% and/or LIBOR plus 0.25%. For the
year ended August 31, 1997, the maximum amount borrowed was $50,000,000,
the average amount borrowed was approximately $4,409,000, and the daily
weighted average interest rate was 5.81%. For the year ended August 31,
1997, facility and commitment fees aggregated approximately $74,125.
7. Capital Loss Carryforward:
At August 31, 1997, the Fund had a net capital loss carryforward of
approximately $4,752,000, of which $1,471,000 expires in 2004 and
$3,281,000 expires in 2005. 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 23, 1997 which
concludes on October 21, 1997.
<PAGE>
EXHIBIT (g)(2)
<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)(3)
<PAGE>
<TABLE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C>
ADVERTISING--0.3% BB- Ba2 $ 11,566,667 Outdoor Systems,Inc., Term, due 6/30/2004 $ 11,546,481 $ 11,508,833
-------------- --------------
AEROSPACE--0.3% BB NR+ 6,357,160 Hexcel Corp., Term B, due 6/30/2005 6,349,635 6,317,428
B+ Ba3 4,113,051 K & F Industries, Term B, due 10/15/2005 4,113,051 4,105,339
-------------- --------------
10,462,686 10,422,767
AGRICULTURE--0.3% NR+ NR+ 9,960,000 Seminis Inc., Term B, due 12/31/2003 9,960,000 9,960,000
AIR Continental Airlines, Inc.:
TRANSPORTATION -- BB Ba1 7,753,177 Term A, due 7/31/2002 7,753,177 7,753,177
0.4% BB Ba1 6,272,000 Term B, due 7/31/2003 6,272,000 6,272,000
-------------- --------------
14,025,177 14,025,177
AIRCRAFT & NR+ Ba3 7,255,501 Evergreen International Aviation,Inc.,
PARTS--1.0% Term B, due 5/31/2003 7,228,260 7,219,223
NR+ NR+ 19,062,500 Gulfstream Aerospace Corp., Term,
due 9/30/2002 19,037,710 18,967,188
NR+ NR+ 2,143,349 Technetics Corp., Term A, due 6/20/2002 2,143,349 2,143,349
NR+ NR+ 5,281,690 WesternSky Industries, Term, due 7/31/2003 5,281,690 5,281,690
-------------- --------------
33,691,009 33,611,450
AMUSEMENT & AMF Group, Inc.:
RECREATIONAL NR+ B+ 39,408,063 Axel A, due 5/03/2003 39,562,127 36,846,539
SERVICES--5.0% NR+ B+ 25,334,578 Axel B, due 5/01/2004 25,415,267 23,687,831
NR+ B+ 2,599,835 Term, due 3/31/2002 2,595,055 2,417,846
NR+ B+ 2,198,676 Term A, due 3/31/2002 2,194,466 2,044,769
NR+ B1 3,428,571 ASC East Inc., Term, due 5/31/2006 3,418,025 3,411,429
NR+ B1 8,571,429 ASC West Inc., Term, due 5/31/2006 8,566,978 8,528,572
Amfac Resorts, Inc.:
NR+ NR+ 2,475,000 Term B, due 9/30/2004 2,475,000 2,475,000
NR+ NR+ 2,475,000 Term C, due 9/30/2005 2,475,000 2,475,000
KSL Recreation Group, Inc.:
NR+ B2 12,454,545 Revolving Credit, due 4/30/2004 12,454,545 12,306,648
BB- NR+ 10,890,000 Term A, due 4/30/2005 10,930,046 10,767,488
B+ B1 10,890,000 Term B, due 4/30/2006 10,930,625 10,842,356
B+ NR+ 4,962,500 Kerastotes, Term B, due 12/31/2004 4,962,500 4,962,500
Metro Goldwyn Mayer Co.:
NR+ Ba2 2,650,000 Revolving Credit, due 6/01/2002 2,650,000 2,562,219
NR+ Ba2 4,000,000 Term A, due 3/31/2005 3,982,549 3,927,500
BB+ Ba2 17,500,000 Term B, due 3/31/2006 17,477,700 17,259,375
NR+ Ba3 4,527,163 Premier Parks Inc., Term C, due 3/21/2006 4,525,098 4,493,209
NR+ Ba3 13,454,728 Six Flags Entertainment Corp., Term B,
due 11/03/2004 13,448,729 13,425,296
NR+ NR+ 4,200,000 Video Update Inc., Term B, due 4/30/2003 4,200,000 4,200,000
-------------- --------------
172,263,710 166,633,577
APPAREL--1.4% Arena Brands, Inc.:
NR+ NR+ 972,222 Revolving Credit, due 6/01/2002 972,222 972,222
NR+ NR+ 3,578,903 Term A, due 6/01/2002 3,578,903 3,578,903
NR+ NR+ 7,142,641 Term B, due 6/01/2002 7,142,641 7,142,641
NR+ NR+ 3,250,000 CS Brooks Canada, Inc., Term, due 6/25/2006 3,234,196 3,225,625
NR+ NR+ 4,975,000 Cluett American Corp., Term B, due 5/18/2005 4,975,000 4,975,000
NR+ NR+ 9,500,000 Humphreys Inc., Term B, due 1/15/2003 9,500,000 9,500,000
NR+ NR+ 4,987,500 Norcross Safety Products, Term, due 12/31/2005 4,987,500 4,987,500
NR+ NR+ 4,600,000 Renfro Corp., Term B, due 11/15/2003 4,600,000 4,600,000
</TABLE>
<PAGE>
<TABLE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<C> <C> <C> <C> <C> <C> <C>
APPAREL Walls Industries:
(CONCLUDED) NR+ NR+ $ 1,212,766 Term B, due $ 1,212,766 $ 1,212,766
NR+ NR+ 1,691,490 Term C, due 2/28/2006 1,691,490 1,691,490
BB- Ba3 6,048,000 The William Carter Co., Term, due 10/31/2003 6,026,136 6,040,440
-------------- --------------
47,920,854 47,926,587
AUTOMOTIVE NR+ NR+ 21,000,000 American Axel, Term B, due 3/31/2007 21,000,000 21,000,000
EQUIPMENT--3.1% Breed Technologies, Inc.:
NR+ NR+ 5,000,000 Term A, due 4/27/2004 4,815,051 4,175,000
NR+ NR+ 9,625,247 Term B, due 4/27/2006 9,625,247 9,625,247
NR+ Ba3 14,291,390 CSK Automotive, Inc., Term, due 10/31/2003 14,241,239 14,224,399
BB- B1 11,000,000 Collins & Aikman Corp., Term B, due 6/30/2005 10,994,961 10,924,375
NR+ Ba2 11,880,000 Exide Corporation, Term B, due 3/19/2005 11,880,000 11,686,950
NR+ NR+ 10,000,000 Federal-Mogul Corp., Term B, due 2/24/2005 9,987,520 10,012,500
NR+ B1 9,560,995 Johnstown America Industrial, Inc., Term B,
due 3/31/2003 9,535,694 9,513,190
Safelite Glass Corp.:
BB- B2 3,092,143 Term B, due 12/31/2004 3,088,150 3,031,266
BB- B2 3,092,143 Term C, due 12/31/2005 3,088,046 3,031,266
NR+ NR+ 5,000,000 Stone Ridge, Term B, due 12/31/2005 4,981,427 5,031,250
-------------- --------------
103,237,335 102,255,443
BROADCAST -- Benedek Broadcasting:
RADIO & TV-- NR+ NR+ 4,791,589 Term A, due 12/31/2004 4,785,744 4,791,589
3.2% NR+ NR+ 2,128,552 Term B, due 12/31/2004 2,125,954 2,128,551
NR+ NR+ 5,000,000 Capstar Radio Broadcasting, Term A, due
11/30/2004 4,975,052 4,985,938
Chancellor Media Corp.:
BB- Ba2 4,750,602 Revolving Credit, due 6/26/2004 4,750,602 4,673,405
BB- Ba2 51,891,429 Term, due 6/30/2005 51,742,068 51,404,946
NR+ NR+ 9,685,714 Channel Master, Term, due 10/10/2005 9,685,714 9,685,714
NR+ NR+ 10,000,000 Emmis Communications, Term, due 2/28/2007 10,000,000 10,012,500
NR+ NR+ 5,228,261 Latin Communications, Term, due 3/31/2004 5,228,261 5,228,261
NR+ NR+ 4,601,875 Retlaw Broadcasting, Term, due 3/31/2006 4,591,248 4,597,273
NR+ Ba3 5,000,000 Sinclair Broadcasting, Term, due 12/31/2004 4,990,865 4,925,000
NR+ NR+ 3,740,625 Spartan Communications, Term B, due 6/30/2005 3,740,625 3,740,625
-------------- --------------
106,616,133 106,173,802
BUILDING & NR+ NR+ 2,192,395 Fenway Holdings, Inc., Term B, due 9/15/2002 2,192,395 2,192,395
CONSTRUCTION--
0.1%
BUILDING NR+ Ba3 3,044,433 Amerimax, Term C, due 6/30/2004 3,044,433 3,044,433
MATERIALS--2.1% Behr Process Corp.:
NR+ NR+ 4,077,996 Term B, due 3/31/2004 4,073,612 4,067,801
NR+ NR+ 2,718,664 Term C, due 3/31/2005 2,715,617 2,711,867
NR+ NR+ 11,874,060 Dal-Tile International Inc., Term B,
due 12/31/2003 11,827,285 11,488,153
NR+ NR+ 5,000,000 Dayton Superior Corp., Term, due 9/30/2005 5,000,000 4,987,500
NR+ Ba3 2,052,281 Euramax Holdings Ltd., Term B, due 6/30/2004 2,052,281 2,052,281
NR+ B1 13,307,143 Falcon Building Products, Inc., Term,
due 6/30/2005 13,290,483 13,290,509
NR+ Ba3 24,728,749 National Gypsum Co., Term B, due 9/20/2003 24,695,321 24,481,461
NR+ NR+ 4,000,000 Panolam Industries, Term B, due 12/31/2005 3,985,024 4,015,000
-------------- --------------
70,684,056 70,139,005
</TABLE>
<PAGE>
<TABLE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
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> <C> <C> <C> <C> <C> <C>
CABLE TV NR+ NR+ $ 5,000,000 Avalon Cable, Term B, due 10/31/2006 $ 4,963,540 $ 5,037,500
SERVICES--5.5% NR+ NR+ 4,900,000 Bresnan Telecommunications, Term B,
due 1/29/2008 4,881,735 4,922,969
NR+ NR+ 24,192,187 Chelsea Communications, Term B, due 9/30/2004 24,112,153 24,071,227
NR+ B1 5,000,000 Classic Cable, Inc., Term, due 10/31/2007 4,995,194 4,996,875
NR+ B1 5,000,000 Falcon Holdings, Term C, due 12/31/2007 4,982,695 4,993,750
B+ Ba3 9,478,409 Intermedia Partners IV, Inc., Term,
due 1/01/2005 9,460,568 9,442,865
B+ Ba3 7,500,000 Intermedia Partners VI, Inc., Term B,
due 12/31/2007 7,492,951 7,490,625
Marcus Cable Operating Co.:
NR+ NR+ 24,250,000 Term A, due 12/31/2002 24,188,543 24,204,531
NR+ NR+ 12,463,125 Term B1, due 4/30/2004 12,303,085 12,470,914
NR+ NR+ 22,482,500 Term B2, due 4/30/2004 22,428,513 22,496,552
NR+ NR+ 7,000,000 TW Fanch-One Co., Term B, due 12/31/2007 6,991,258 7,024,063
NR+ NR+ 17,000,000 Triax Midwest, Term B, due 6/30/2007 17,000,000 17,000,000
NR+ Ba2 38,958,818 Viacom, Inc., Term, due 7/01/2002 38,958,818 38,958,818
-------------- --------------
182,759,053 183,110,689
CASINO--0.7% Alliance Gaming Corp.:
NR+ B1 10,385,027 Term B, due 1/31/2005 10,385,027 10,385,027
NR+ B1 4,147,445 Term C, due 7/31/2005 4,147,445 4,147,445
NR+ NR+ 10,000,000 Palace Station, Term, due 12/31/2005 10,000,000 10,000,000
-------------- --------------
24,532,472 24,532,472
CHEMICALS--6.7% NR+ NR+ 12,205,013 AOC LLC, Term B, due 9/30/2006 12,205,013 12,205,013
NR+ NR+ 4,477,500 CII Carbon LLC, Term, due 6/25/2008 4,473,212 4,480,298
NR+ NR+ 11,226,596 Cedar Chemical, Term B, due 10/31/2003 11,167,262 11,198,529
NR+ NR+ 10,000,000 Epsillon, Term B, due 12/31/2005 10,000,000 10,000,000
NR+ Ba3 3,777,778 Foamex International PLC, Revolving Credit,
due 6/12/2003 3,777,778 3,740,000
NR+ NR+ 5,970,000 General Chemical Group, Term B, due 6/15/2006 5,970,000 5,970,000
NR+ NR+ 10,000,000 HSC Holdings, Term B, due 3/31/2006 9,986,101 9,950,000
Huntsman Corp.:
NR+ Ba2 14,422,479 Term, due 12/31/2002 14,412,729 14,206,142
NR+ Ba2 3,407,665 Term A, due 12/31/2002 3,405,418 3,373,589
NR+ Ba2 5,227,409 Term B, due 6/30/2004 5,223,902 5,175,135
NR+ Ba2 9,063,925 Term C, due 9/30/2005 9,039,344 8,973,286
Huntsman Specialty Chemicals:
NR+ Ba2 4,787,566 Term B, due 3/15/2002 4,784,466 4,775,597
NR+ Ba2 4,787,566 Term C, due 3/15/2002 4,776,271 4,778,590
Lyondell Petrochemical Co.:
NR+ NR+ 13,878,646 Term A, due 6/30/2003 13,872,317 13,158,691
NR+ NR+ 60,022,521 Term B, due 6/30/2005 60,096,667 58,296,873
NR+ B1 7,880,000 Pioneer Americas Acquisition Corp., Term,
due 12/05/2006 7,880,000 7,880,000
BB- Ba3 4,960,000 Polymer Group, Inc., Term B, due 12/20/2005 4,960,000 4,956,900
NR+ Ba3 23,900,468 Sterling Chemicals, Inc., Term B,
due 9/30/2004 23,809,088 23,809,088
NR+ NR+ 9,875,000 Sybron Chemical, Term B, due 7/31/2004 9,875,000 9,875,000
NR+ Ba3 6,304,712 Texas Petrochemicals Corp., Term B,
due 6/30/2004 6,286,800 6,288,950
-------------- --------------
226,001,368 223,091,681
COMPUTER-RELATED NR+ Ba3 16,795,833 Fairchild Semiconductors Corp., Term C,
SERVICES & due 12/31/2003 16,795,833 16,795,833
PRODUCTS--0.6% NR+ NR+ 3,750,000 Stratus Computer, Inc., Term B,
due 2/26/2005 3,731,264 3,731,250
-------------- --------------
20,527,097 20,527,083
</TABLE>
<PAGE>
<TABLE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
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> <C> <C> <C> <C> <C> <C>
CONSUMER NR+ B1 $ 8,370,000 Amscan Holdings, Inc., Axel, due 12/31/2004 $ 8,370,000 $ 8,338,612
PRODUCTS--2.2% B Ba3 7,922,222 Boyds Collection Ltd., Term B,
due 4/21/2006 7,913,305 7,907,368
Hedstrom Corp.:
NR+ B1 2,089,655 Revolving Credit, due 6/30/2003 2,089,655 2,089,655
B Ba3 4,586,207 Term A, due 6/30/2003 4,586,207 4,586,207
NR+ NR+ 4,250,000 Holmes Products, Term B, due 2/05/2007 4,228,877 4,259,297
BB- Ba2 14,775,301 Playtex Family Products Inc., Term B,
due 9/15/2003 14,717,161 14,516,733
NR+ NR+ 7,209,568 RTI Funding Corp. (Ritvik Toys), Term B,
due 2/07/2003 7,163,586 5,947,894
NR+ NR+ 14,925,000 Revlon Consumer Products Corp., Term,
due 5/30/2002 14,925,000 14,925,000
NR+ NR+ 4,500,000 Samsonite Corp., Term, due 6/24/2005 4,494,748 4,342,500
Scotts Company:
NR+ NR+ 2,546,012 Term B, due 6/04/2006 2,536,660 2,565,107
NR+ NR+ 2,453,988 Term C, due 6/04/2007 2,444,942 2,472,393
-------------- --------------
73,470,141 71,950,766
DEFENSE--0.0% United Defense Industries, Inc.:
NR+ B1 725,867 Term B, due 10/06/2005 725,867 720,423
NR+ B1 650,602 Term C, due 10/06/2006 650,603 645,723
-------------- --------------
1,376,470 1,366,146
DIVERSIFIED--1.4% NR+ NR+ 25,000,000 Bridge Information, Term B, due 5/29/2003 24,942,670 24,953,125
NR+ NR+ 6,000,000 Handy & Harman, Term B, due 7/30/2006 6,000,000 6,000,000
Superior Telecom:
NR+ NR+ 10,000,000 Term A, due 5/27/2004 10,000,000 10,012,500
NR+ NR+ 5,000,000 Term B, due 11/27/2005 5,000,000 5,015,625
-------------- --------------
45,942,670 45,981,250
DRILLING--0.3% NR+ NR+ 5,000,000 Key Energy Services Inc., Term B,
due 9/14/2004 5,000,000 5,000,000
BB+ Ba3 3,695,862 Rigco North America, Term, due 3/30/1999 3,695,862 3,695,862
-------------- --------------
8,695,862 8,695,862
DRUG/PROPRIETARY NR+ NR+ 4,950,000 Duane Reade Co., Term B, due 2/15/2005 4,936,321 4,931,438
STORES--0.1%
ELECTRONICS/ NR+ Ba3 6,458,750 Amphenol Corp., Term B, due 5/19/2006 6,562,142 6,450,677
ELECTRICAL NR+ NR+ 5,450,000 Communications & Power II Acquisition Corp.,
COMPONENTS--2.2% Term B, due 8/11/2002 5,419,110 5,402,312
B+ NR+ 5,500,000 Details Dynamic, Term B, due 4/22/2005 5,493,537 5,445,000
Dynatech Corporation:
NR+ NR+ 1,636,948 Term B, due 3/31/2005 1,636,948 1,638,994
NR+ NR+ 1,636,948 Term C, due 3/31/2006 1,636,948 1,638,994
NR+ NR+ 1,636,948 Term D, due 3/31/2007 1,636,948 1,638,994
BB- Ba3 19,813,084 International Wire Group, Inc., Term B,
due 9/30/2003 19,797,809 19,664,486
NR+ Ba3 6,838,301 Neopost, Term C, due 6/24/2006 6,838,301 6,838,301
NR+ NR+ 17,955,000 SPX Corporation, Term B, due 9/30/2006 17,868,406 18,089,663
NR+ Ba3 6,946,154 Telex Communications, Inc., Term B,
due 11/30/2004 6,931,888 6,546,750
-------------- --------------
73,822,037 73,354,171
</TABLE>
<PAGE>
<TABLE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
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> <C> <C> <C> <C> <C> <C>
ENERGY--0.6% NR+ Ba2 $ 11,000,000 Clark Refining & Marketing, Term,
due 11/15/2004 $ 11,000,000 $ 10,120,000
Perf-O-Log Inc.:
NR+ NR+ 3,797,386 Term, due 8/11/2003 3,797,386 3,797,386
NR+ NR+ 1,884,659 Term B, due 8/11/2003 1,884,659 1,884,659
NR+ NR+ 1,240,625 Term C, due 8/11/2003 1,240,625 1,240,625
NR+ NR+ 1,781,250 Term D, due 12/31/2004 1,781,250 1,781,250
NR+ NR+ 712,500 Term E, due 12/31/2004 712,500 712,500
-------------- --------------
20,416,420 19,536,420
FINANCIAL Outsourcing Solutions, Inc.:
SERVICES--2.0% NR+ B1 3,986,128 Term B, due 10/15/2003 3,983,146 3,926,336
NR+ B1 37,333,325 Term C, due 10/15/2004 37,333,325 36,773,325
Willis Corroon Group PLC:
NR+ NR+ 12,500,000 Term B, due 11/19/2006 12,453,244 12,535,156
NR+ NR+ 6,250,000 Term C, due 11/19/2007 6,226,613 6,273,438
NR+ NR+ 6,250,000 Term D, due 5/19/2008 6,226,608 6,281,250
-------------- --------------
66,222,936 65,789,505
FOOD & KINDRED Del Monte Corp.:
PRODUCTS--1.7% NR+ B2 490,909 Revolving Credit, due 3/31/2003 490,909 485,386
NR+ B2 2,547,416 Term A, due 3/31/2003 2,547,416 2,531,495
NR+ B2 10,582,319 Term B, due 3/31/2005 10,576,219 10,608,776
Imperial Holly Corp.:
BB- Ba3 6,471,624 Term A, due 12/31/2003 6,471,624 6,471,624
BB- Ba3 5,277,021 Term B, due 12/31/2005 5,277,021 5,277,021
International Homefoods, Inc.:
BB- Ba3 3,169,355 Term A, due 11/21/2001 3,167,694 3,158,460
BB- Ba3 6,941,333 Term B, due 10/31/2005 6,950,864 6,871,920
NR+ NR+ 3,000,000 New World Pasta, Term B, due 1/28/2006 2,985,144 3,017,813
NR+ NR+ 5,000,000 The Pantry Inc., Term B, due 1/31/2008 4,968,948 5,006,250
Specialty Foods, Inc.:
NR+ Ba3 4,286,613 Revolving Credit, due 1/31/2000 4,286,614 4,265,180
NR+ Ba3 7,391,713 Term, due 1/31/2000 7,338,466 7,350,134
-------------- --------------
55,060,919 55,044,059
FUNERAL HOMES & NR+ Ba1 20,054,136 Loewen Group Capital, Term, due 7/15/2000 20,054,136 20,054,136
PARLORS--1.2% BB- NR+ 14,583,333 Prime Succession Inc., Axel, due 8/01/2003 14,545,363 14,473,958
BB NR+ 6,767,295 Rose Hills Co., Axel A, due 12/01/2003 6,754,838 6,746,147
-------------- --------------
41,354,337 41,274,241
FURNITURE & NR+ NR+ 10,000,000 Furniture Brands, Term, due 6/27/2007 10,000,000 9,900,000
FIXTURES--0.5% Simmons Co.:
NR+ NR+ 2,136,735 Term B, due 10/29/2005 2,126,425 2,142,077
NR+ NR+ 5,343,750 Term C, due 10/29/2006 5,317,800 5,357,109
-------------- --------------
17,444,225 17,399,186
GROCERY-- 1.5% NR+ NR+ 33,927,830 Fred Meyer, Term, due 2/28/2003 33,724,061 33,546,141
NR+ NR+ 10,000,000 Grand Union Co., Term, due 8/17/2003 9,975,399 10,037,500
Star Acquisition Co., Inc.:
B Ba3 3,444,279 Term B, due 12/31/2001 3,436,283 3,442,126
B Ba3 2,582,218 Term C, due 12/31/2002 2,575,040 2,580,605
-------------- --------------
49,710,783 49,606,372
</TABLE>
<PAGE>
<TABLE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
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> <C> <C> <C> <C> <C> <C>
HEALTH SERVICES-- Alaris Medical Systems, Inc.:
6.7% NR+ B1 $ 3,460,800 Term A, due 8/01/2002 $ 3,474,261 $ 3,437,007
NR+ B1 1,675,494 Term B, due 11/01/2003 1,673,991 1,675,494
NR+ B1 1,675,494 Term C, due 11/01/2004 1,673,875 1,675,494
NR+ B1 594,624 Term D, due 5/01/2005 594,299 594,624
Community Health Systems, Inc.:
NR+ NR+ 15,965,753 Term B, due 12/31/2003 15,908,456 15,885,925
NR+ NR+ 15,965,753 Term C, due 12/31/2004 15,904,575 15,885,925
NR+ NR+ 11,958,904 Term D, due 12/31/2005 11,910,874 11,899,110
Dade International, Inc.:
NR+ B1 4,059,977 Term A, due 12/31/2001 4,070,127 4,047,290
NR+ B1 9,163,917 Term B, due 12/31/2002 9,138,187 9,158,190
NR+ B1 4,179,818 Term C, due 12/31/2003 4,170,997 4,177,206
NR+ B1 2,734,210 Term D, due 12/31/2004 2,721,381 2,732,501
NR+ NR+ 7,357,143 Endo Pharmaceuticals, Term B, due 6/30/2004 7,357,143 7,357,143
NR+ NR+ 5,566,632 Extendicare Health Services Inc., Term B,
due 12/31/2004 5,566,632 5,566,632
FHC Health Systems:
NR+ NR+ 2,729,375 Axel B, due 4/30/2005 2,723,891 2,715,728
NR+ NR+ 2,729,375 Axel C, due 4/30/2006 2,723,806 2,715,728
Genesis Health Ventures, Inc.:
NR+ Ba3 4,976,526 Term B, due 9/30/2004 4,968,143 4,541,080
NR+ Ba3 4,964,979 Term C, due 6/01/2005 4,956,411 4,530,543
Integrated Health Services, Inc.:
NR+ Ba3 17,500,000 Term, due 9/15/2003 17,596,250 15,793,750
NR+ Ba3 4,775,000 Term B, due 9/15/2004 4,765,061 4,213,938
NR+ Ba3 9,900,000 Term C, due 12/31/2005 9,900,000 8,860,500
NR+ NR+ 7,000,000 MEDIQ PRN Life Support Services, Term,
due 6/30/2006 6,993,482 6,991,250
Magellen Health Services:
NR+ Ba3 5,000,000 Term B, due 2/12/2005 4,993,384 4,612,500
NR+ Ba3 5,000,000 Term C, due 2/12/2006 4,993,235 4,612,500
Medical Specialties:
NR+ NR+ 12,845,455 Axel, due 6/30/2004 12,845,455 12,845,455
NR+ NR+ 4,418,182 Term, due 6/30/2001 4,418,182 4,418,182
Multicare Companies, Inc.:
NR+ B1 4,690,625 Term B, due 9/30/2004 4,682,577 4,198,109
NR+ B1 1,559,583 Term C, due 6/01/2005 1,556,877 1,395,827
Paracelsus HealthCare Corp.:
NR+ NR+ 1,344,000 Term A, due 3/31/2003 1,344,000 1,344,000
NR+ NR+ 2,000,000 Term B, due 3/31/2004 2,000,000 2,000,000
Paragon Health Network, Inc.:
NR+ Ba3 7,485,000 Term B, due 3/31/2005 7,478,548 5,913,150
NR+ Ba3 7,485,000 Term C, due 3/31/2006 7,478,378 5,913,150
Stryker Corporation:
NR+ NR+ 1,971,831 Term B, due 12/04/2004 1,959,868 1,981,690
NR+ NR+ 8,028,169 Term C, due 12/04/2005 7,979,175 8,083,363
Sun Healthcare Group, Inc.:
NR+ Ba3 5,490,905 Term B, due 11/12/2004 5,483,919 4,186,815
NR+ Ba3 5,490,905 Term C, due 11/12/2005 5,483,704 4,186,815
NR+ NR+ 22,275,000 Total Renal Care, Term, due 3/31/2008 22,248,825 21,801,656
-------------- --------------
233,737,969 221,948,270
</TABLE>
<PAGE>
<TABLE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
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> <C> <C> <C> <C> <C> <C>
HOTELS & NR+ NR+ $ 7,089,375 Meristar Hospitality, Term B, due 1/31/2004 $ 7,081,287 $ 7,018,481
MOTELS--3.9% Patriot American Hospitality:
NR+ NR+ 12,160,927 Revolving Credit, due 7/18/2000 11,963,083 12,027,917
NR+ NR+ 19,975,000 Term B, due 3/31/2003 19,892,453 19,900,094
NR+ NR+ 90,000,000 Starwood Hotels & Resorts Trust, Term,
due 2/23/2003 89,930,722 89,971,876
-------------- --------------
128,867,545 128,918,368
INDUSTRIAL Elis/Omni Service, Inc.:
SERVICES--0.7% NR+ NR+ 8,860,188 Axel, due 10/30/2005 8,851,001 8,782,662
NR+ NR+ 10,220,339 Term C, due 10/30/2005 10,391,390 10,130,911
NR+ NR+ 4,500,000 Volume Services America, Term B,
due 12/03/2007 4,477,891 4,515,469
-------------- --------------
23,720,282 23,429,042
INSURANCE--0.2% BRW Acquisition:
NR+ NR+ 2,500,000 Term B, due 7/09/2006 2,500,000 2,500,000
NR+ NR+ 2,500,000 Term C, due 7/09/2007 2,500,000 2,500,000
-------------- --------------
5,000,000 5,000,000
LEASING & NR+ NR+ 7,250,000 Panavision, Term B, due 3/31/2005 7,250,000 7,250,000
RENTAL Renters Choice:
SERVICES--1.2% NR+ NR+ 5,735,954 Term B, due 1/31/2006 5,722,031 5,735,954
NR+ NR+ 7,116,818 Term C, due 1/31/2007 7,099,097 7,116,818
NR+ NR+ 20,000,000 United Rentals Inc., Term, due 6/30/2005 20,000,000 20,000,000
-------------- --------------
40,071,128 40,102,772
MANUFACTURING-- B3 B+ 4,750,000 Alliance Laundry Systems, Term, due 6/30/2005 4,750,000 4,750,000
2.2% NR+ NR+ 7,500,000 Environmental, Term B, due 9/30/2005 7,475,793 7,537,500
NR+ NR+ 9,452,500 Goodman Manufacturing, Term B, due 7/31/2005 9,443,686 9,387,514
BB- Ba2 6,900,000 Grove Worldwide, Term B, due 4/28/2006 6,900,000 6,900,000
NR+ NR+ 5,000,000 Metokote Corp., Term B, due 11/02/2005 4,963,619 5,031,250
NR+ NR+ 7,959,788 Polyfibron Technologies, Term B,
due 12/28/2003 7,959,788 7,959,788
Sealy Mattress:
NR+ NR+ 3,015,758 Axel B, due 12/15/2004 3,012,494 3,017,642
NR+ NR+ 2,172,121 Axel C, due 12/15/2005 2,169,708 2,173,479
NR+ NR+ 2,775,758 Axel D, due 12/15/2006 2,772,612 2,777,492
NR+ NR+ 10,666,667 Term A, due 12/15/2003 10,710,080 10,626,667
NR+ NR+ 4,962,500 Terex Corp., Term B, due 3/06/2005 4,944,249 4,940,789
NR+ NR+ 3,500,000 Tokheim Corporation, Term, due 9/30/2004 3,482,942 3,508,750
WEC Company:
NR+ NR+ 2,909,375 Term B, due 9/30/2005 2,909,375 2,909,375
NR+ NR+ 2,078,125 Term C, due 9/30/2006 2,078,125 2,078,125
-------------- --------------
73,572,471 73,598,371
MEASURING, NR+ NR+ 7,398,389 CHF/Ebel USA, Inc., Term B, due 9/30/2001 7,398,389 7,398,389
ANALYZING &
CONTROLLING
INSTRUMENTS --
0.2%
METALS & B+ Ba3 9,752,671 Acme Metals, Inc., Term, due 12/01/2005 9,752,671 7,338,885
MINING--3.6% B+ NR+ 4,982,679 Adience, Inc., Term B, due 4/15/2005 4,982,679 4,982,679
Centennial Resources:
NR+ NR+ 1,033,004 Revolving Credit, due 6/30/1999 1,033,004 1,027,839
NR+ NR+ 1,961,538 Term A, due 3/31/2002++ 1,946,578 367,788
NR+ NR+ 5,105,770 Term B, due 12/31/2003++ 5,062,590 957,332
Ispat Inland LP:
NR+ NR+ 19,402,500 Term B, due 7/15/2005 19,262,305 18,650,653
NR+ NR+ 19,402,500 Term C, due 7/15/2006 19,261,338 18,650,653
</TABLE>
<PAGE>
<TABLE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
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> <C> <C> <C> <C> <C> <C>
METALS & NR+ Ba3 $ 14,769,231 Koppers Industries, Term B, due 12/01/2004 $ 14,752,964 $ 14,695,385
MINING NR+ Ba3 8,461,364 Neenah Foundry, Term B, due 9/30/2005 8,453,693 8,482,517
(CONCLUDEd) NR+ NR+ 31,000,000 Ormet Corporation, Term, due 8/15/2008 31,000,000 31,000,000
NR+ NR+ 5,000,000 P & L Coal Holdings, Term B, due 6/30/2006 5,000,000 5,000,000
NR+ Ba2 10,086,667 UCAR Global Enterprises, Term B,
due 12/31/2002 10,079,439 10,061,450
-------------- --------------
130,587,261 121,215,181
PACKAGING--0.7% NR+ NR+ 15,000,000 Graham Packaging, Term D, due 1/31/2007 14,994,873 15,018,750
NR+ BB 3,712,500 Huntsman Packaging Corp., Term B,
due 6/30/2006 3,709,058 3,689,297
NR+ B1 4,862,878 Ivex Packaging Corp., Term B, due 10/02/2004 4,857,775 4,789,935
-------------- --------------
23,561,706 23,497,982
PAPER--8.7% NR+ NR+ 6,500,000 Cellular Tissue, Term C, due 3/24/2005 6,500,000 6,500,000
BB Ba3 4,650,909 Crown Paper Co., Term B, due 8/22/2003 4,613,298 4,627,655
BB Ba3 52,000,000 Jefferson Smurfit Company/Container Corp.
of America, Term B, due 3/24/2006 51,915,732 52,195,000
NR+ NR+ 4,975,000 Le Groupe Forex, Term B, due 6/30/2005 4,969,246 4,900,375
NR+ NR+ 25,000,000 Paper Acquisition, Term, due 6/08/2001 24,913,622 24,875,000
NR+ NR+ 6,500,000 Rapap Brunswick, Term B, due 6/01/2004 6,515,000 6,223,750
Riverwood International Corp.:
B+ B1 14,381,313 Term A, due 2/28/2003 14,063,890 14,331,877
B+ B1 66,134,147 Term B, due 2/28/2004 65,474,174 66,382,150
B+ B1 25,472,987 Term C, due 8/31/2004 25,208,985 25,568,510
Stone Container Corp.:
NR+ Ba3 24,803,870 Term B, due 4/01/2000 24,860,837 24,865,880
NR+ Ba3 29,516,510 Term C, due 10/01/2003 29,491,395 29,590,301
NR+ Ba3 18,796,001 Term E,due 10/01/2003 18,950,033 18,842,992
Stronghaven:
NR+ NR+ 9,303,448 Term B, due 5/15/2004 9,267,799 8,373,103
NR+ NR+ 1,697,143 Term C, due 5/15/2004 1,697,143 1,527,429
-------------- --------------
288,441,154 288,804,022
PETROLEUM BB- Ba3 3,214,824 Petro Stopping Centers, Term B,
REFINERIES--0.1% due 12/31/2003 3,208,718 3,192,722
PRINTING & NR+ B3 5,404,286 21st Century, Term A, due 9/15/2003 5,404,286 5,404,286
PUBLISHING--3.8% NR+ B1 14,970,000 Advanstar Communications, Term B,
due 4/30/2005 14,970,000 14,970,000
NR+ NR+ 8,375,000 Journal Register Co., Term B, due 9/30/2006 8,365,155 8,312,188
K-III Communications Corp.:
NR+ Ba3 10,880,000 Revolving Credit, due 12/31/2000 10,880,000 10,635,200
NR+ Ba3 4,000,000 Term, due 12/31/2000 4,000,000 3,910,000
NR+ Ba3 4,000,000 Term, due 6/30/2004 4,000,000 3,920,000
NR+ Ba3 9,900,000 Morris Communications, Term B, due 6/30/2005 9,883,989 9,838,125
NR+ NR+ 4,000,000 Penton Media, Term B, due 5/31/2006 3,980,436 3,990,000
RH Donnolley Inc.:
NR+ NR+ 3,356,130 Term B, due 12/05/2005 3,353,034 3,346,691
NR+ NR+ 3,857,620 Term C, due 12/05/2006 3,854,014 3,846,770
Ziff-Davis Inc.:
NR+ Ba2 1,529,412 Revolving Credit, due 3/31/2005 1,518,749 1,507,427
NR+ Ba2 7,647,059 Term A, due 3/31/2005 7,619,437 7,650,460
NR+ Ba2 47,500,000 Term B, due 3/31/2006 47,331,378 47,485,156
-------------- --------------
125,160,478 124,816,303
RENTAL NR+ NR+ 8,000,000 Nationsrent Inc., Term, due 9/24/2004 7,960,265 7,990,000
SERVICES--0.2
</TABLE>
<PAGE>
<TABLE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
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> <C> <C> <C> <C> <C> <C>
RESTAURANTS--0.8% NR+ Ba3 $ 9,520,000 AFC Enterprises, Term, due 6/30/2002 $ 9,508,015 $ 9,414,475
Domino & Bluefence:
NR+ NR+ 6,712,500 Term B, due 12/21/2006 6,646,497 6,725,086
NR+ NR+ 6,712,500 Term C, due 12/21/2007 6,646,313 6,716,695
NR+ Ba3 3,976,097 Shoney's, Inc., Term B, due 4/30/2002 3,957,160 3,957,160
-------------- --------------
26,757,985 26,813,416
RETAIL NR+ NR+ 5,750,000 Advanced Store Company, Term B,
SPECIALTY--0.4% due 4/15/2006 5,750,000 5,750,000
Travel Centers of America:
NR+ Ba2 3,525,670 Term A, due 3/27/200 3,525,670 3,525,6705
NR+ Ba2 3,962,500 Term B, due 3/27/2005 3,962,500 3,962,500
-------------- --------------
13,238,170 13,238,170
TEXTILES/MILL Joan Fabrics:
PRODUCTS--0.5% NR+ NR+ 3,178,983 Term B, due 6/30/2005 3,174,922 3,175,009
NR+ NR+ 1,650,856 Term C, due 6/30/2006 1,648,686 1,657,047
NR+ NR+ 10,447,500 Tartan Textiles, Term B, due 5/01/2005 10,423,683 10,382,203
-------------- --------------
15,247,291 15,214,259
TRANSPORTATION NR+ Ba3 13,216,216 Atlas Freighter Leasing I, Term,
SERVICES--1.0% due 5/29/2004 13,210,998 13,203,826
NR+ Ba3 13,216,216 Atlas Freighter Leasing II, Term,
due 5/29/2004 13,208,097 13,203,826
NR+ NR+ 7,425,000 North American Van Lines, Term B,
due 3/30/2006 7,416,509 7,425,484
-------------- --------------
33,835,604 33,833,136
WIRELESS Cellular Inc.:
TELECOMMUN- NR+ B1 13,985,692 Term B, due 9/30/2006 13,976,346 14,020,656
ICATIONS-- 8.5% NR+ B1 8,130,081 Term C, due 3/31/2007 8,111,419 8,150,406
NR+ B1 22,764,227 Term D, due 9/30/2007 22,711,531 22,821,138
NR+ NR+ 25,000,000 Cox Communications, Inc.,Term B,
due 1/31/2007 25,000,000 25,000,000
NR+ Ba2 16,031,250 Flag Ltd., Term, due 1/30/2005 16,031,250 16,031,250
B2 B2 8,934,000 Iridium Operating LLC, Term, due 12/29/2000 8,831,679 8,732,985
Nextel Communications Inc.:
NR+ B1 3,138,750 Revolving Credit, due 6/30/2003 3,138,750 2,977,889
NR+ B1 3,375,000 Term A, due 3/31/2003 2,882,598 3,235,781
NR+ B1 40,000,000 Term B, due 9/30/2006 39,954,132 39,825,000
NR+ B1 5,000,000 Term C, due 3/31/2007 4,938,019 5,012,500
Omnipoint Communications Corp.:
BB- Ba2 775,797 Term A, due 2/17/2006 775,094 698,217
BB- Ba2 1,930,184 Term B, due 2/17/2006 1,928,435 1,737,166
BB- Ba2 43,421,875 Term C, due 2/17/2006 43,421,875 39,079,687
Pacific Coin:
NR+ NR+ 3,916,364 Acquisition Term, due 12/31/2003 3,916,364 3,916,364
BB- Ba2 2,139,344 Term A, due 12/31/2002 2,139,344 2,139,344
NR+ NR+ 2,715,625 Term B, due 12/31/2004 2,715,625 2,715,625
NR+ Ba3 8,716,000 PageNet Finance, Inc., Revolving Credit,
due 12/31/2004 8,716,000 8,443,625
NR+ NR+ 15,000,000 PowerTel PCS, Inc., Term, due 3/04/2001 15,000,000 14,925,000
NR+ NR+ 15,000,000 TeleCorp PCS, Term B, due 1/15/2008 14,971,315 14,850,000
NR+ NR+ 10,000,000 Triton PCS, Term B, due 4/30/2007 9,977,423 9,878,125
NR+ NR+ 20,000,000 Western PCS, Term B, due 6/30/2007 19,936,073 19,981,250
B+ B1 20,000,000 Western Wireless Corp., Term B, due 3/31/2005 20,000,000 20,062,500
-------------- --------------
289,073,272 284,234,508
</TABLE>
<PAGE>
<TABLE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
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> <C> <C> <C> <C> <C> <C>
WIRELESS American Cellular Corp.:
TELECOMMUNICATION NR+ NR+ $ 2,500,000 Term B, due 6/30/2007 $ 2,500,000 $ 2,500,000
SERVICES--0.3% NR+ NR+ 2,500,000 Term C, due 9/30/2007 2,500,000 2,500,000
Dobson/Sygnet Operating Co.:
NR+ NR+ 2,500,000 Term B, due 3/23/2007 2,490,671 2,509,375
NR+ NR+ 2,500,000 Term C, due 12/23/2007 2,490,665 2,515,625
-------------- --------------
9,981,336 10,025,000
TOTAL SENIOR SECURED FLOATING RATE
LOAN INTERESTS--88.1% 2,974,293,971 2,934,310,288
<CAPTION>
Shares Held Warrants & Agreements
<S> <C> <C> <C> <C>
CABLE TV SERVICES--0.0% 707 Classic Cable, Inc.(a) 0 0
DRILLING--0.0% 12,250 Rigco North America(a) 0 0
GENERAL MERCHANDISE STORES--0.0% 2,288,402 Just For Feet, Inc.(b) 2,288,402 1,258,299
TOTAL INVESTMENTS IN WARRANTS &
AGREEMENTS--0.0% 2,288,402 1,258,299
<CAPTION>
Face Amount Short-Term Securities
<S> <C> <C> <C> <C>
COMMERCIAL PAPER**--8.2% $ 50,000,000 AT&T Capital Corp., 4.82% due 3/31/1999 49,799,167 49,799,167
20,000,000 CSW Credit, Inc., 4.82% due 3/02/1999 19,997,322 19,997,322
20,000,000 Du Pont (E.I.) de Nemours & Co., 4.80%
due 4/12/1999 19,888,000 19,888,000
55,000,000 General Electric Capital Corp., 4.875%
due 3/01/1999 55,000,000 55,000,000
37,793,000 General Motors Acceptance Corp., 4.88%
due 3/01/1999 37,793,000 37,793,000
17,000,000 MetLife Funding Inc., 4.84% due 3/31/1999 16,931,433 16,931,433
50,000,000 Rank Xerox Capital (Europe)PLC, 4.80%
due 3/09/1999 49,946,667 49,946,667
25,000,000 USAA Capital Corp., 4.81% due 3/04/1999 24,989,979 24,989,979
-------------- --------------
274,345,568 274,345,568
REPURCHASE AGREEMENTS***--0.8% 25,000,000 Lucent Technologies, Inc., purchased on
2/26/1999 to yield 4.83% to 3/30/1999 24,902,729 24,902,729
US GOVERNMENT AGENCY Federal Home Loan Mortgage Corp.:
OBLIGATIONS**--2.3% 46,233,000 4.75% due 3/15/1999 46,147,597 46,147,597
30,000,000 4.75% due 3/25/1999 29,905,000 29,905,000
-------------- --------------
76,052,597 76,052,597
TOTAL INVESTMENTS IN SHORT-TERM
SECURITIES--11.3% 375,300,894 375,300,894
TOTAL INVESTMENTS--99.4% $3,351,883,267 3,310,869,481
--------------
--------------
OTHER ASSETS LESS LIABILITIES--0.6% 21,384,849
NET ASSETS--100.0% $3,332,254,330
--------------
--------------
</TABLE>
(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) 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.
+ NOT RATED.
++ NON-INCOME PRODUCING SECURITY.
* 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.
*** REPURCHASE AGREEMENTS ARE FULLY COLLATERALIZED BY US GOVERNMENT
OBLIGATIONS.
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES AS OF FEBRUARY 28, 1999
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS: Investments, at value (identified cost--$3,351,883,267) (Note 1b) $ 3,310,869,481
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,553,018
Receivables:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,527,861
Capital shares sold . . . . . . . . . . . . . . . . . . . . . . 4,608,684
Commitment fees . . . . . . . . . . . . . . . . . . . . . . . . 120,205 27,256,750
------------
Prepaid registration fees and other assets (Note 1f). . . . . . . 735,227
----------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,341,414,476
----------------
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES: Payables:
Dividends to shareholders (Note 1g) . . . . . . . . . . . . . . 3,562,633
Investment adviser (Note 2) . . . . . . . . . . . . . . . . . . 2,406,574
Administrator (Note 2). . . . . . . . . . . . . . . . . . . . . 633,309 6,602,516
------------
Deferred income (Note 1e) . . . . . . . . . . . . . . . . . . . . 1,077,956
Accrued expenses and other liabilities. . . . . . . . . . . . . . 1,479,674
----------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 9,160,146
----------------
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS: Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,332,254,330
----------------
----------------
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS Common Stock, par value $0.10 per share; 1,000,000,000 shares
CONSIST OF: authorized. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,856,968
Paid-in capital in excess of par. . . . . . . . . . . . . . . . . 3,355,640,726
Accumulated realized capital losses on investments--net (Note 7). (16,229,578)
Unrealized depreciation on investments--net . . . . . . . . . . . (41,013,786)
----------------
NET ASSETS--Equivalent to $9.84 per share based on shares of
338,569,675 capital stock outstanding . . . . . . . . . . . . . . $ 3,332,254,330
----------------
----------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended
February 28, 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C>
INVESTMENT INCOME Interest and discount earned . . . . . . . . . . . . . . . $ 128,996,687
(NOTE 1e): Facility and other fees . . . . . . . . . . . . . . . . . 2,160,237
---------------
Total income . . . . . . . . . . . . . . . . . . . . . . . 131,156,924
---------------
- ------------------------------------------------------------------------------------------------------------------------
EXPENSES: Investment advisory fees (Note 2) . . . . . . . . . . . . $ 15,760,175
Administrative fees (Note 2). . . . . . . . . . . . . . . 4,147,415
Transfer agent fees (Note 2) . . . . . . . . . . . . . . . 940,471
Professional fees. . . . . . . . . . . . . . . . . . . . . 267,690
Accounting services (Note 2) . . . . . . . . . . . . . . . 206,853
Tender offer costs (Note 8) . . . . . . . . . . . . . . . 153,700
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 125,927
Registration fees (Note 1f). . . . . . . . . . . . . . . . 109,828
Printing and shareholder reports . . . . . . . . . . . . . 66,970
Directors' fees and expenses . . . . . . . . . . . . . . . 18,808
Borrowing costs (Note 6) . . . . . . . . . . . . . . . . 13,718
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 35,939
---------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . 21,847,494
---------------
Investment income--net . . . . . . . . . . . . . . . . . . 109,309,430
---------------
- ------------------------------------------------------------------------------------------------------------------------
REALIZED & Realized loss on investments--net. . . . . . . . . . . . . (6,189,851)
UNREALIZED Change in unrealized depreciation on
LOSS ON investments--net . . . . . . . . . . . . . . . . . . . . . (38,545,296)
INVESTMENTS--NET ---------------
(NOTES 1c, 1e NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . $ 64,574,283
& 3): ---------------
---------------
- ------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
For the Six For the
Months Ended Year Ended
February 28, August 31,
INCREASE (DECREASE) IN NET ASSETS: 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C>
OPERATIONS: Investment income--net . . . . . . . . . . . . . . . . . $ 109,309,430 $ 212,360,687
Realized loss on investments--net . . . . . . . . . . . (6,189,851) (3,676,079)
Change in unrealized depreciation on investments--net. . (38,545,296) (9,910,437)
---------------- ---------------
Net increase in net assets resulting from operations . . 64,574,283 198,774,171
---------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO Investment income--net . . . . . . . . . . . . . . . . . (109,381,180) (212,288,937)
SHAREHOLDERS ---------------- ---------------
(NOTE 1g): Net decrease in net assets resulting from dividends
to shareholders . . . . . . . . . . . . . . . . . . . . (109,381,180) (212,288,937)
---------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE Net increase in net assets resulting from capital
TRANSACTIONS share transactions . . . . . . . . . . . . . . . . . . . 12,029,035 386,757,317
(NOTE 4): ---------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS: Total increase (decrease) in net assets. . . . . . . . . (32,777,862) 373,242,551
Beginning of period . . . . . . . . . . . . . . . . . . 3,365,032,192 2,991,789,641
---------------- ---------------
End of period* . . . . . . . . . . . . . . . . . . . . . $ 3,332,254,330 $ 3,365,032,192
---------------- ---------------
---------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------
*UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . $ -- $ 71,750
---------------- ---------------
---------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
- -----------------------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------------------
For the Six Months Ended
February 28, 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY Net increase in net assets resulting from operations.................... $ 64,574,283
OPERATING ACTIVITIES: Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activities:
Decrease in receivables............................................. 3,307,040
Decrease in other liabilities....................................... (1,941,445)
Realized and unrealized loss on investments--net.................... 44,735,147
Amortization of discount............................................ (12,675,229)
----------------
Net cash provided by operating activities............................... 97,999,796
----------------
- -----------------------------------------------------------------------------------------------------------------------
CASH USED FOR Proceeds from principal payments and sales of loan interests............ 696,459,483
INVESTING ACTIVITIES: Purchases of loan interests............................................. (603,049,865)
Purchases of short-term investments .................................... (11,778,796,515)
Proceeds from sales and maturities of short-term investments............ 11,676,824,721
----------------
Net cash used for investing activities.................................. (8,562,176)
----------------
- -----------------------------------------------------------------------------------------------------------------------
CASH USED FOR Cash receipts on capital shares sold.................................... 323,843,147
FINANCING ACTIVITIES: Cash payments on capital shares tendered................................ (358,453,475)
Dividends paid to shareholders.......................................... (57,314,999)
----------------
Net cash used for financing activities.................................. (91,925,327)
----------------
- -----------------------------------------------------------------------------------------------------------------------
CASH: Net decrease in cash.................................................... (2,487,707)
Cash at beginning of period............................................. 5,040,725
----------------
Cash at end of period................................................... $ 2,553,018
----------------
----------------
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOW Cash paid for interest ................................................. $ 90,461
INFORMATION: ----------------
----------------
- -----------------------------------------------------------------------------------------------------------------------
NON-CASH Capital shares issued in reinvestment of dividends paid to shareholders. $ 52,850,068
FINANCING ACTIVITIES: ----------------
----------------
- -----------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. FEBRUARY 28, 1999
- -----------------------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION (CONCLUDED)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------
For the Six
The following per share data and ratios have been derived Months Ended For the Year Ended August 31,
from information provided in the financial statements. February 28, -----------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE Net asset value, beginning of period........... $ 9.97 $ 10.02 $ 9.99 $ 10.02 $ 10.02
OPERATING --------- ------- ------- ------- --------
PERFORMANCE: Investment income--net......................... .32 .68 .68 .66 .75
Realized and unrealized gain (loss) on
investments--net............................... (.13) (.05) .03 (.03) --+
--------- ------- ------- ------- --------
Total from investment operations............... .19 .63 .71 .63 .75
--------- ------- ------- ------- --------
Less dividends from investment income--net..... (.32) (.68) (.68) (.66) (.75)
--------- ------- ------- ------- --------
Net asset value, end of period ................ $ 9.84 $ 9.97 $ 10.02 $ 9.99 $ 10.02
--------- ------- ------- ------- --------
--------- ------- ------- ------- --------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL Based on net asset value per share............. 1.97%++ 6.47% 7.23% 6.53% 7.68%
INVESTMENT --------- ------- ------- ------- --------
RETURN:** --------- ------- ------- ------- --------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO Expenses, excluding interest expense........... 1.32%* 1.35% 1.32% -- --
AVERAGE --------- ------- ------- ------- --------
NET ASSETS: --------- ------- ------- ------- --------
Expenses....................................... 1.32%* 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 period (in thousands)............... -- $24,299 $ 4,409 -- --
--------- ------- ------- ------- --------
--------- ------- ------- ------- --------
Average amount of borrowings outstanding
per share during the period.................... -- $ .08 $ .02 -- --
--------- ------- ------- ------- --------
--------- ------- ------- ------- --------
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL Net assets, end of period (in millions)........ $ 3,332 $ 3,365 $ 2,992 $ 2,946 $ 2,163
DATA: --------- ------- ------- ------- --------
--------- ------- ------- ------- --------
Portfolio turnover............................. 21.22% 69.59% 74.00% 80.20% 55.23%
--------- ------- ------- ------- --------
--------- ------- ------- ------- --------
- -----------------------------------------------------------------------------------------------------------------------
* ANNUALIZED.
** 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.
++ AGGREGATE TOTAL INVESTMENT RETURN.
</TABLE>
See Notes to Financial Statements.
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
February 28,1999
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. These unaudited financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the
results for the interim period presented. All such adjustments are of a
normal recurring nature.
(a) LOAN PARTICIPATION INTERESTS -- The Fund invests in senior secured
floating rate loan interests ("Loan Interests") with collateral having a
market value, at time of acquisition by the Fund, which Fund management
believes equals or exceeds the principal amount of the corporate loan. The
Fund may invest up to 20% of its total assets in loans made on an unsecured
basis. Depending on how the loan was acquired, the Fund will regard the
issuer as including the corporate borrower along with an agent bank for the
syndicate of lenders and any intermediary of the Fund's investment. Because
agents and intermediaries are primarily commercial banks, the Fund's
investment in corporate loans at February 28, 1999 could be considered to be
concentrated in commercial banking.
(b) VALUATION OF INVESTMENTS -- Loan Interests will be valued in accordance
with guidelines established by the Board of Directors. Under the Fund's
current guidelines, 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 will be 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 is available, such Loan
Interest will be valued on the basis of the mean of the last available bid
and asked price in the market. 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 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.
(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.
<PAGE>
Merrill Lynch Senior Floating Rate Fund, Inc.
February 28,1999
(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 six months ended February 28, 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 $1,348,575 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.
The Fund's credit facility is currently provided by Merrill Lynch
International Bank Limited, an affiliate of MLAM (See Note 6).
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 six
months ended February 28, 1999 were $603,049,865 and $696,459,483, respectively.
Net realized gains (losses) for the six months ended February 28, 1999 and net
unrealized losses as of February 28, 1999 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Realized
Gains Unrealized
(Losses) Losses
- -------------------------------------------------------------------------------
<S> <C> <C>
Long-term investments...... $ (6,198,594) $(41,013,786)
Short-term investments..... 8,743 --
------------ -------------
Total..................... $ (6,189,851) $(41,013,786)
------------ -------------
------------ -------------
</TABLE>
As of February 28, 1999, net unrealized depreciation for financial reporting and
Federal income tax purposes aggregated $41,013,786, of which $5,347,670 is
related to appreciated securities and $46,361,456 is related to depreciated
securities. The aggregate cost of investments at February 28, 1999 for Federal
income tax purposes was $3,351,883,267.
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
For the Six
Months Ended Dollar
February 28, 1999 Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C>
Shares sold. . . . . . . . . . . . . . 32,182,558 $317,632,442
Shares issued to share-
holders in reinvestment
of dividends. . . . . . . . . . . . . 5,365,719 52,850,068
------------ -------------
Total issued. . . . . . . . . . . . . 37,548,277 370,482,510
Shares tendered. . . . . . . . . (36,396,140) (358,453,475)
------------ -------------
------------ -------------
Net increase . . . . . . . . . . . . 1,152,137 $ 12,029,035
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
For the
Year Ended Dollar
August 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C>
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
------------ -------------
------------ -------------
</TABLE>
<PAGE>
5. UNFUNDED LOAN INTERESTS:
As of February 28, 1999, the Fund had unfunded loan commitments of $115,857,729,
which would be extended at the option of the borrower, pursuant to the following
loan agreements:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Unfunded
Commitment
Borrower (in thousands)
- -------------------------------------------------------------------------------
<S> <C>
21st Century. . . . . . . . . . . . . . . . . . . . . . . . . $ 3,386
AFC Enterprises . . . . . . . . . . . . . . . . . . . . . . . 3,920
American Axel . . . . . . . . . . . . . . . . . . . . . . . . 8,500
Arena Brands, Inc . . . . . . . . . . . . . . . . . . . . . . 2,370
Centenial Resources Inc . . . . . . . . . . . . . . . . . . . 368
Chancellor Media Corp . . . . . . . . . . . . . . . . . . . . 8,358
Continental Airlines, Inc . . . . . . . . . . . . . . . . . . 4,639
Del Monte Corp. . . . . . . . . . . . . . . . . . . . . . . . 5,233
Exide Corporation . . . . . . . . . . . . . . . . . . . . . . 42
FHC Health Systems. . . . . . . . . . . . . . . . . . . . . . 59
Foamex International PLC. . . . . . . . . . . . . . . . . . . 4,692
Hedstrom Corp . . . . . . . . . . . . . . . . . . . . . . . . 2,738
International Homefoods, Inc. . . . . . . . . . . . . . . . . 1,613
Iridium Operating LLC . . . . . . . . . . . . . . . . . . . . 7,780
K-III Communications Corp . . . . . . . . . . . . . . . . . . 800
KSL Recreation Group, Inc . . . . . . . . . . . . . . . . . . 7,473
Loewen Group Capital. . . . . . . . . . . . . . . . . . . . . 2,146
Metro Goldwyn Mayer Co. . . . . . . . . . . . . . . . . . . . 3,350
Nextel Communications Inc . . . . . . . . . . . . . . . . . . 6,986
Northwestern Steel & Mining . . . . . . . . . . . . . . . . . 15,000
Omnipoint . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Pacific Coin Acquisition . . . . . . . . . . . . . . . . . . 1,084
PageNet Finance, Inc. . . . . . . . . . . . . . . . . . . . . 5,617
Patriot American Hospitality. . . . . . . . . . . . . . . . . 339
Specialty Foods II. . . . . . . . . . . . . . . . . . . . . . 80
Teligent Delayed Draw . . . . . . . . . . . . . . . . . . . . 18,334
Ziff-Davis Inc. . . . . . . . . . . . . . . . . . . . . . . . 824
</TABLE>
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%. The Fund had no borrowings under commitment during the six months ended
February 28, 1999. For the six months ended February 28, 1999, facility and
commitment fees aggregated approximately $13,718.
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 March 24, 1999 which concludes on
April 23, 1999.
