Exhibit 99(a)(5)(iii)
(BULL LOGO)
Merrill Lynch Investment Managers
Semi-Annual Report
February 28, 2001
Merrill Lynch
Senior Floating
Rate Fund II, Inc.
www.mlim.ml.com
Merrill Lynch Senior Floating Rate Fund II, Inc. seeks as high a
level of current income and such preservation of capital as is
consistent with investment in senior collateralized corporate loans
made by banks and other financial institutions.
This report, including the financial information herein, is
transmitted for use to shareholders of Merrill Lynch Senior Floating
Rate Fund II, Inc. for their information. It is not a prospectus.
Past performance results shown in this report should not be
considered a representation of future performance. The Fund has the
ability to leverage its Common Stock to provide Common Stock
shareholders with a potentially higher rate of return. Leverage
creates risk for Common Stock shareholders, including the likelihood
of greater volatility of net asset value and market price of Common
Stock shares, and the risk that fluctuations in short-term interest
rates may reduce the Common Stock's yield. Statements and other
information herein are as dated and are subject to change.
Merrill Lynch Senior Floating
Rate Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Merrill Lynch Senior Floating Rate Fund II, Inc.
DEAR SHAREHOLDER
Investment Approach
Merrill Lynch Senior Floating Rate Fund II, Inc. consists largely of
participations in leveraged bank loans. These loans are generally
senior secured floating rate investments. In response to general
economic events and trends, the bank loan market tends to move in a
similar direction, but with less volatility, as the high-yield bond
market. The linkage between the two markets can be ascribed to the
fact that the issuers of debt, as well as the buyers of that debt,
tend to participate in both markets (based on similar credit rating
and risk/reward profiles of the markets). The lower price volatility
of bank loan investments can be attributed to two factors. First,
bank loans are usually senior secured obligations and, thus,
generally offer investors greater principal protection than
unsecured bonds. Second, bank loans are floating rate instruments
whose principal value does not move inversely with interest rate
movements, as is the case with fixed-income bonds.
Fund Performance
The Fund's effective net annualized yield for the six-month period
ended February 28, 2001 was 8.61%, compared to a yield of 7.48% for
the same period a year earlier. The Fund's net asset value decreased
from $9.87 per share to $9.65 per share during the period. During
the same period, the Fund earned $0.412 per share income dividends,
representing a net annualized yield of 8.61%, based on a per share
net asset value of $9.65 at February month-end. The Fund's total
investment return during the six-month period ended February 28,
2001 was +1.98%, based on a $0.22 per share decrease in net asset
value and assuming reinvestment of $0.418 per share income
dividends. Since inception (March 26, 1999) through February 28,
2001, the Fund's total investment return was +11.93%, based on a
change in per share net asset value from $10.00 to $9.65, and
assuming reinvestment of $1.456 per share income dividends.
The Fund's total return of +1.98% for the six-month period ended
February 28, 2001 underperformed the unmanaged CS First Boston
Leveraged Loan Index, which had a return of +2.79%. During this
period, the Fund was underweighted relative to the Index in energy
and healthcare issues, two sectors that outperformed. The energy
sector benefited from the dramatic rise in commodity prices, while
the healthcare sector rebounded from its earlier very depressed
levels. The Fund was only slightly underweighted in energy (0.33% of
total assets compared to 0.47% in the Index) but, reflecting our
unfavorable experience with that sector in recent years, was
significantly underweighted in healthcare (0.82% compared to 9.4% in
the Index).
Market Review
The six-month period ended February 28, 2001 was marked by two
distinct trends in the high-yield and leveraged loan markets. During
the second half of 2000, these markets operated in a very negative
credit environment, culminating in total withdrawals from high-yield
mutual funds in excess of $10 billion for the year 2000. In 2001,
the markets began to rally in response to the Federal Reserve
Board's early interest rate cuts. Flows into the high-yield market
reversed course after the interest rate cuts and, through February,
total year-to-date inflows amounted to $3.25 billion. Since many
investors in the high-yield market also participate in the bank loan
market, the increased demand for leveraged finance product caused by
this additional market liquidity resulted in an increase in market
prices. Additionally, during the first two months of 2001, high-
yield spreads rebounded from a near record of 959 basis points
(9.59%) at year-end 2000, as measured by the unmanaged CS First
Boston Global High Yield Index, to 830 basis points (considerably
higher than the historic average of 529 basis points and the year-
end 1999 figure of 549 basis points.)
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
Despite the improved tone of the market, there continues to be
concern about the overall default rate. During 1999, Moody's
Investors Service's dollar-weighted default rate for high-yield
bonds peaked at 7.8%, its highest level since 1991, before falling
back down to 6.2% by December 31, 2000. We believe that in 2001
default rates will yet again increase in response to the weakening
of certain sectors, including wired telecommunications and autos.
This expected increase is in line with historical trends, which show
that of the high-yield issues that eventually default, the majority
do so within three years - four years of issuance. Counting back
three years - four years from 2001 brings us back to the 1997 - 1998
period, which was generally characterized by lower credit standards
than existed in the years hence. Therefore, we believe that should
the historical trend hold, defaults could be expected to rise in
2001 from year-end 2000 levels, before falling back to more typical
levels in 2002.
Investment Activities
Pricing pressure in the apparel, computer-related products, and
automotive sectors had the greatest negative effect on the Fund
during the period. In both apparel and computer-related products,
the majority of the impact was primarily derived from one credit,
while the problems in the automotive sector stemmed from an
industrywide decline in revenues in a rising expense environment. In
apparel, the bulk of the losses stemmed from our position in Warnaco
Inc., a manufacturer of jeans, athletic wear and intimate apparel.
Warnaco, which had been facing a lawsuit with its licensor, Calvin
Klein, continues to feel the impact of a weak overall environment
for retail and apparel companies. In the computer-related sector,
Bridge Information Systems also endured a precipitous decline.
Bridge, a provider of proprietary financial information services to
the equity markets, filed for bankruptcy during the period as a
result of poor billing and collection practices, and acquisition
integration issues. As for the automotive equipment suppliers in our
portfolio, their use of aggressive pricing coupled with a business
model using lower production volumes left them unprepared for
overtime and adequate maintenance. The problems were further
aggravated by demands for price cuts by their customers, the
original equipment manufacturers.
On the positive side, the Fund continues to be anchored by
substantial investment in wireless telecommunications (13.2% of
total assets), broadcasting (11.5%), cable television services (10%)
and hotels and motels (4.6%). These sectors are characterized by
significant asset values and strong cashflow. At February 28, 2001,
the Fund's largest holdings were comprised largely of
representatives from these sectors, including VoiceStream PCS
Holdings Corp., Nextel Communications, Inc., Entravision, Charter
Communications Holdings, Century Cable LLC and Wyndham
International, Inc. (For complete details of the Fund's largest
holdings and industries, see the "Portfolio Profile" section of this
report to shareholders on page 9.)
Investment Strategy
Thus far in 2001, we have seen some relief from the technical
aspects of the pricing pressure that had impacted the market so
significantly in 2000. This occurrence has allowed us to set the
course toward a reversal of the downward trend in the net asset
value by creating the liquidity needed to participate in a market
rally. Specifically, during this period, we have exited certain
lower-coupon issues that have regained par or near-par pricing
levels after a prolonged period of sub-par market values. Any
liquidity created in excess of what was needed to meet redemption
demand will allow for new, value-additive investment. We have begun
to redeploy some of the funds into the new-issue market, which
continues to offer attractive spreads and original issue discounts,
as well as in certain secondary situations where we still see value.
We believe the Fund continues to be well-balanced with 84 issuers
spread across 33 industries. The Fund also has an attractive ratings
profile as compared to the Index. The Fund was overweighted relative
to the Index in Ba-rated securities (55.7% of total assets compared
to 48.6%), overweighted in B-rated securities (28.5% compared to
25.4%), underweighted in Caa-rated securities (1.1% compared to
4.4%) and underweighted in securities not rated (14.7% compared to
19.3%).
In Conclusion
We believe that, with adequate diversification and a solid credit
profile as its base, we can better position the Fund to take greater
advantage of any sustained reversal of technical price pressures on
the leveraged finance market. Our ability to bring this to fruition
will be challenged, as always, by any significant changes in
fundamental credit aspects of its issuers as well as the need to
meet future shareholder redemptions.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
We thank you for your investment in Senior Floating Rate Fund II,
Inc. and we look forward to reviewing our outlook and strategy with
you again in our next report to shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director/Trustee
(Kevin J. Booth)
Kevin J. Booth
Vice President and Portfolio Manager
(Joseph Matteo)
Joseph Matteo
Vice President and Portfolio Manager
April 10, 2001
We are pleased to announce that Kevin J. Booth and Joseph Matteo are
responsible for the day-to-day management of Merrill Lynch Senior
Floating Rate Fund II, Inc. Mr. Booth has been employed by Merrill
Lynch Investment Managers, L.P. ("MLIM") as Director since 1998 and
Vice President from 1991 to 1998. Mr. Matteo has been employed by
MLIM as Director since 2001 and as Vice President from 1997 to 2001.
Prior to that, Mr. Matteo was Vice President at The Bank of New York
from 1994 to 1997.
The Benefits and Risks of Leveraging
Merrill Lynch Senior Floating Rate Fund II, Inc. has the ability to
utilize leverage through the borrowings or issuance of short-term
debt securities or shares of Preferred Stock. The concept of
leveraging is based on the premise that the cost of assets to be
obtained from leverage will be based on short-term interest rates,
which normally will be lower than the return earned by the Fund on
its longer-term portfolio investments. To the extent that the total
assets of the Fund (including the assets obtained from leverage) are
invested in higher-yielding portfolio investments, the Fund's Common
Stock shareholders will benefit from the incremental yield.
Leverage creates risks for holders of Common Stock including the
likelihood of greater net asset value and market price volatility.
In addition, there is the risk that fluctuations in interest rates
on borrowings (or in the dividend rates on any Preferred Stock, if
the Fund were to issue the Preferred Stock) may reduce the Common
Stock's yield and negatively impact its market price. If the income
derived from securities purchased with assets received from leverage
exceeds the cost of leverage, the Fund's net income will be greater
than if leverage had not been used. Conversely, if the income from
the securities purchased is not sufficient to cover the cost of
leverage, the Fund's net income will be less than if leverage had
not been used, and therefore the amount available for distribution
to Common Stock shareholders will be reduced. In this case, the Fund
may nevertheless decide to maintain its leveraged position in order
to avoid capital losses on securities purchased with leverage.
However, the Fund will not generally utilize leverage if it
anticipates that its leveraged capital structure would result in a
lower rate of return for its Common Stock than would be obtained if
the Common Stock were unleveraged for any significant amount of
time.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
FINANCIAL INFORMATION
Statement of Assets and Liabilities Merrill Lynch Senior Floating Rate Fund II, Inc.
As of February 28, 2001
Assets: Investment in Master Senior Floating Rate Trust, at value
(identified cost--$435,004,508) $ 422,632,807
Prepaid registration fees and expenses 194,241
---------------
Total assets 422,827,048
---------------
Liabilities: Payables:
Distributions to shareholders $ 745,015
Administrator 114,204 859,219
---------------
Accrued expenses and other liabilities 230,136
---------------
Total liabilities 1,089,355
---------------
Net Assets: Net assets $ 421,737,693
===============
Net Assets Common Stock, par value $.10 per share; 1,000,000,000 shares
Consist of: authorized $ 4,371,464
Paid-in capital in excess of par 432,667,457
Accumulated realized capital losses on investments from the
Trust--net (2,929,527)
Unrealized depreciation on investments from the Trust--net (12,371,701)
---------------
Net Assets--Equivalent to $9.65 per share based on shares of
43,714,642 capital stock outstanding $ 421,737,693
===============
See Notes to Financial Statements.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
FINANCIAL INFORMATION (CONTINUED)
Statement of Operations Merrill Lynch Senior Floating Rate Fund II, Inc.
For the Six Months Ended February 28, 2001++
Investment Interest and discount earned $ 4,312,706
Income: Facility and other fees 25,910
Investment income allocated from the Trust 17,878,723
Expenses allocated from the Trust (1,888,854)
---------------
Total income and net investment income from the Trust 20,328,485
---------------
Expenses: Administration fee $ 875,757
Investment advisory fees 406,561
Registration fees 82,285
Tender offer fees 76,810
Transfer agent fees 74,590
Professional fees 61,471
Printing and shareholder reports 39,282
Accounting services 24,711
Directors' fees and expenses 14,701
Assignment fees 2,667
Custodian fees 1,084
Other 4,564
---------------
Total expenses 1,664,483
---------------
Investment income--net 18,664,002
---------------
Realized & Realized gain:
Unrealized Gain On investments--net 38,989
(Loss) on From the Trust--net 210,381 249,370
Investments ---------------
and from Change in unrealized appreciation/depreciation:
the Trust--Net: On investments--net (2,442,826)
From the Trust--net (7,859,192) (10,302,018)
--------------- ---------------
Net Increase in Net Assets Resulting from Operations $ 8,611,354
===============
++On October 6, 2000, the Fund converted from a stand-alone
investment company to a "feeder" fund that seeks to achieve its
investment objective by investing all of its assets in the Trust, a
mutual fund that has the same investment objective as the Fund. All
investments will be made at the Trust level. This structure is
sometimes called a "master/feeder" structure.
See Notes to Financial Statements.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
FINANCIAL INFORMATION (CONTINUED)
Statements of Changes in Net Assets Merrill Lynch Senior Floating Rate Fund II, Inc.
For the Six For the
Months Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 2001++ 2000
Operations: Investment income--net $ 18,664,002 $ 27,549,122
Realized gain (loss)on investments from the Trust--net 249,370 (3,173,858)
Change in unrealized appreciation/depreciation on
investments from the Trust--net (10,302,018) (2,119,451)
--------------- ---------------
Net increase in net assets resulting from operations 8,611,354 22,255,813
--------------- ---------------
Dividends Investment income--net (18,664,002) (27,549,122)
to Shareholders: --------------- ---------------
Net decrease in net assets resulting from dividends
to shareholders (18,664,002) (27,549,122)
--------------- ---------------
Capital Share Net increase (decrease) in net assets derived from
Transactions: capital share transactions (10,217,998) 217,875,943
--------------- ---------------
Net Assets: Total increase (decrease) in net assets (20,270,646) 212,582,634
Beginning of period 442,008,339 229,425,705
--------------- ---------------
End of period $ 421,737,693 $ 442,008,339
=============== ===============
++On October 6, 2000, the Fund converted from a stand-alone
investment company to a "feeder" fund that seeks to achieve its
investment objective by investing all of its assets in the Trust, a
mutual fund that has the same investment objective as the Fund. All
investments will be made at the Trust level. This structure is
sometimes called a "master/feeder" structure.
See Notes to Financial Statements.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
FINANCIAL INFORMATION (CONCLUDED)
Financial Highlights Merrill Lynch Senior Floating Rate Fund II, Inc.
For the
For the For the Period
Six Months Year March 26,
The following per share data and ratios have been derived Ended Ended 1999++ to
from information provided in the financial statements February 28, August 31, August 31,
Increase (Decrease) in Net Asset Value: 2001+++++ 2000 1999
Per Share Net asset value, beginning of period $ 9.87 $ 10.01 $ 10.00
Operating -------- -------- --------
Performance: Investment income--net .41 .77 .27
Realized and unrealized gain (loss) on
investments from the Trust--net (.22) (.14) .01
-------- -------- --------
Total from investment operations .19 .63 .28
Less dividends from investment income--net (.41) (.77) (.27)
-------- -------- --------
Net asset value, end of period $ 9.65 $ 9.87 $ 10.01
======== ======== ========
Total Investment Based on net asset value per share 1.98%+++ 6.54% 3.02%+++
Return:** ======== ======== ========
Ratio to Average Expenses, net of reimbursement++++ 1.62%* 1.58% .55%*
Net Assets: ======== ======== ========
Expenses++++ 1.62%* 1.68% 1.77%*
======== ======== ========
Investment income--net 8.52%* 7.80% 6.77%*
======== ======== ========
Supplemental Net assets, end of period (in millions) $ 422 $ 442 $ 229
Data: ======== ======== ========
Portfolio turnover -- 46.95% 28.49%
======== ======== ========
*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. The Fund's investment adviser waived a portion of its
management fee. Without such waiver, the Fund's returns would have
been lower.
++Commencement of operations.
++++Includes the Fund's share of the Trust's allocated expenses.
+++Aggregrate total investment return.
+++++On October 6, 2000, the Fund converted from a stand-alone
investment company to a "feeder" fund that seeks to achieve its
investment objective by investing all of its assets in the Trust, a
mutual fund that has the same investment objective as the Fund. All
investments will be made at the Trust level. This structure is
sometimes called a "master/feeder" structure.
See Notes to Financial Statements.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
NOTES TO FINANCIAL STATEMENTS
Merrill Lynch Senior Floating Rate Fund II, Inc.
1. Significant Accounting Policies:
Merrill Lynch Senior Floating Rate Fund II, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a
continuously offered, non-diversified, closed-end management
investment company. On October 6, 2000, the Fund converted from a
stand-alone investment company to a "feeder" fund that seeks to
achieve its investment objective by investing all of its assets in
the Master Senior Floating Rate Trust (the "Trust"), a mutual fund
that has the same investment objective as the Fund. All investments
will be made at the Trust level. This structure is sometimes called
a "master/feeder" structure. The value of the Fund's investment in
the Trust reflects the Fund's proportionate interest in the net
assets of the Trust. The performance of the Fund is directly
affected by the performance of the Trust. The financial statements
of the Trust, including the Schedule of Investments, are included
elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The Fund's financial statements are
prepared in conformity with accounting principles generally accepted
in the United States of America, 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. The percentage of the Trust owned by the Fund at
February 28, 2001 was 99.9%. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--The Fund records its investment in the
Trust at fair value. Valuation of securities held by the Trust is
discussed in Note 1a of the Trust's Notes to Financial Statements,
which are included elsewhere in this report.
(b) Investment income and expenses--The Fund records daily its
proportionate share of the Trust's income, expenses and realized and
unrealized gains and losses. In addition, the Fund accrues its own
expenses.
(c) 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 shareholders. Therefore, no Federal income tax
provision is required.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) 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.
(f) Investment transactions--Investment transactions in the Trust
are accounted for on a trade date basis.
2. Transactions with Affiliates:
The Fund has entered into an Administrative Services Agreement with
Fund Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), a wholly-owned subsidiary of
Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited
partner. The Fund has an Administrative Services Agreement with FAM
whereby FAM will receive a fee equal to an annual rate of .40% 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.
Financial Data Services, Inc. ("FDS"), an indirect, wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services were provided to the Fund by FAM or its
affiliates through December 31, 2000. Up to this date, the Fund
reimbursed FAM or its affiliates $17,168 for these services. As of
January 1, 2001, accounting services are provided for the Fund by
State Street Bank and Trust Company ("State Street") pursuant to an
agreement between State Street and the Fund. The Fund will pay the
cost of these services. In addition, the Fund will reimburse FAM for
the cost of certain additional accounting services.
For the six months ended February 28, 2001, FAM Distributors, Inc.
("FAMD"), a wholly-owned subsidiary of Merrill Lynch Group, Inc.,
earned early withdrawal charges of $137,948 relating to the tender
of the Fund's shares.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, FDS, and/or ML & Co.
3. Investments:
Increases and decreases in the Fund's investment in the Trust for
the period October 6, 2000 to February 28, 2001 were $505,881,416
and $88,170,287, respectively.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Ended Dollar
February 28, 2001 Shares Amount
Shares sold 5,880,922 $ 57,297,100
Shares issued to share-
holders in reinvestment
of dividends 953,316 9,289,449
------------ ------------
Total issued 6,834,238 66,586,549
Shares redeemed (7,899,392) (76,804,547)
------------ ------------
Net decrease (1,065,154) $ (10,217,998)
============ ============
For the Year Ended Dollar
August 31, 2000 Shares Amount
Shares sold 27,234,679 $271,213,209
Shares issued to share-
holders in reinvestment
of dividends 1,438,383 14,304,352
------------ ------------
Total issued 28,673,062 285,517,561
Shares redeemed (6,818,025) (67,641,618)
------------ ------------
Net increase 21,855,037 $217,875,943
============ ============
5. Capital Loss Carryforward:
At August 31, 2000, the Fund had a net capital loss carryforward of
approximately $63,000, of which $5,000 expires in 2007 and $58,000
expires in 2008. This amount will be available to offset like
amounts of any future taxable gains.
6. Subsequent Events:
The Fund began a quarterly tender offer on April 17, 2001 that
concludes on May 15, 2001.
Merrill Lynch Senior Floating Rate Fund II, Inc.
PORTFOLIO PROFILE
As of February 28, 2001
Percent of
Ten Largest Holdings Total Assets
VoiceStream PCS Holdings Corp. 3.5%
Nextel Communications, Inc. 3.4
Wyndam International, Inc. 2.5
Entravision 2.4
Global Crossing Holdings Ltd. 2.4
Century Cable LLC 2.4
Charter Communications Holdings 2.4
Isle of Capri Casinos, Inc. 2.4
Huntsman ICI Chemical LLC 2.3
Stone Container Corp. 2.0
Percent of
Five Largest Industries Total Assets
Wireless Telecommunications 13.2%
Broadcasting--Radio & Television 11.5
Cable Television Services 10.0
Electronics / Electrical Components 5.8
Chemicals 4.6
Percent of
Quality Rating Long-Term
S&P/Moody's Investments
BBB/Baa 2.6%
BB/Ba 56.1
B/B 29.5
CCC/Caa 1.9
NR (Not Rated) 9.9
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
SCHEDULE OF INVESTMENTS MASTER SENIOR FLOATING RATE TRUST
S&P Moody's Face Senior Secured
Industries Rating Rating Amount Floating Rate Loan Interests* Value
Air NR++ NR++ $ 1,498,125 Gemini Air Cargo, Term A, due 8/12/2005 $ 1,499,998
Transportation--
0.4%
Aircraft & BB- Ba3 648,627 Fairchild Semiconductors Corp., Term, due 4/30/2006 605,656
Parts--0.1%
Amusement & NR++ NR++ 5,000,000 Metro-Goldwyn-Mayer Co., Term B, due 3/31/2006 4,967,970
Recreational
Services--1.2%
Apparel--0.5% BB B1 4,600,000 Warnaco Inc., Term, due 8/12/2002 2,150,500
Automotive B+ NR++ 4,994,048 Citation Corporation, Term B, due 12/01/2007 4,145,060
Equipment--2.4% BB- Ba3 2,340,000 Collins & Aikman Corp., Term B, due 6/30/2005 2,234,700
Tenneco Automotive Inc.:
BB- B2 2,254,762 Term B, due 11/02/2007 1,880,221
BB- B2 2,254,762 Term C, due 5/02/2008 1,880,221
--------------
10,140,202
Broadcasting-- NR++ NR++ 3,000,000 Bahakel Communications Ltd., Term B, due 6/30/2008 2,992,500
Radio & B1 B 5,500,000 Benedek Broadcasting Corporation, Term B, due 11/20/2007 5,417,500
Television-- B+ Ba3 7,000,000 Citadel Communications, Term B, due 3/31/2007 7,013,125
11.5% NR++ NR++ 5,940,000 Corus Entertainment Inc., Tranche II, due 8/31/2007 5,954,850
Cumulus Media Inc.:
B1 B 1,800,000 Term B, due 9/30/2007 1,787,251
B1 B 1,200,000 Term C, due 2/28/2008 1,191,500
B+ Ba3 10,000,000 Entravision, Term B, due 12/31/2008 10,090,000
B+ Ba3 7,000,000 Gray Communications Systems, Term B, due 12/31/2005 7,032,816
NR++ NR++ 990,000 VHR Broadcasting, Term B, due 9/30/2007 991,856
BB Ba2 6,000,000 Young Broadcasting Inc., Term B, due 12/31/2006 6,051,378
--------------
48,522,776
Building B+ Ba3 2,952,632 Better Minerals, Term B, due 9/30/2007 2,870,513
Materials--1.4% B+ B1 2,926,000 Panolam Industries, Term B, due 12/31/2005 2,929,657
--------------
5,800,170
Cable Television BB Ba3 5,000,000 CC VI Operating Company LLC, Term B, due 11/12/2008 5,003,125
Services--10.1% BB Ba3 4,000,000 CC VIII Operating Company LLC, Term B, due 2/02/2008 4,004,000
BB Ba3 10,000,000 Century Cable LLC, Term, due 6/30/2009 9,999,040
BB+ Ba3 10,000,000 Charter Communications Holdings, Term B, due 3/18/2008 9,996,550
CCC+ NR++ 5,210,526 Classic Cable Inc., Term B, due 1/31/2008 4,969,539
BB+ Ba3 3,500,000 Insight Midwest, Term B, due 1/05/2010 3,518,375
B+ B1 5,000,000 Pegasus Media & Communications, Term, due 4/30/2005 5,002,085
--------------
42,492,714
Chemicals--4.6% BB Ba3 5,000,000 Huntsman Corp., Term C, due 12/31/2005 4,679,165
Huntsman ICI Chemicals LLC:
BB Ba3 4,900,000 Term B, due 6/30/2007 4,928,175
BB Ba3 4,900,000 Term C, due 6/30/2008 4,928,175
NR++ Ba3 4,912,493 Lyondell Petrochemical Co., Term E, due 5/17/2006 5,069,079
--------------
19,604,594
Computer-Related Bridge Information Systems:
Products--0.2% NR++ NR++ 1,846,334 Term, due 5/29/2003 253,871
NR++ NR++ 3,652,470 Term B, due 5/29/2005 496,736
--------------
750,607
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
SCHEDULE OF INVESTMENTS (CONTINUED) MASTER SENIOR FLOATING RATE TRUST
S&P Moody's Face Senior Secured
Industries Rating Rating Amount Floating Rate Loan Interests* Value
Consumer Simmons Co.:
Products--1.3% B+ Ba3 $ 2,427,325 Term B, due 10/29/2005 $ 2,433,696
B+ Ba3 3,222,290 Term C, due 10/29/2006 3,230,749
--------------
5,664,445
Drilling--0.3% B+ Ba3 1,267,222 Key Energy Group Inc., Term B, due 9/14/2004 1,269,003
Electronics/ B+ NR++ 4,941,176 Acterna Corporation, Term B, due 9/30/2007 4,918,941
Electrical BB Ba2 4,962,500 Amkor Technology Inc., Term B, due 9/30/2005 4,986,280
Components-- B B2 5,000,000 Cook Inlet, Term A, due 12/31/2007 4,987,500
5.8% B+ B1 1,185,246 DD Inc., Term B, due 4/22/2005 1,180,060
Semiconductor Components:
BB- Ba3 1,444,444 Term B, due 8/04/2006 1,442,639
BB- Ba3 1,555,556 Term C, due 8/04/2007 1,553,611
BB- Ba3 2,000,000 Term D, due 8/04/2007 1,998,334
B+ B2 3,824,520 Superior Telecom, Term A, due 5/27/2004 3,458,800
--------------
24,526,165
Environmental IT Group Inc.:
Services--0.7% BB B1 1,485,000 Term, due 6/08/2007 1,470,150
BB B1 1,469,491 Term B, due 6/11/2006 1,447,449
--------------
2,917,599
Financial NR++ Ba3 3,500,000 Sovereign Bancorp Inc., Term, due 11/17/2003 3,512,033
Services--0.8%
Food & Kindred BB- Ba3 1,930,122 Merisant Company, Term B, due 3/30/2007 1,928,515
Products--0.5%
Gaming--4.0% Ameristar:
B+ Ba3 3,417,160 Term B, due 12/31/2006 3,423,567
B+ Ba3 2,928,994 Term C, due 12/31/2007 2,934,486
B+ B1 500,000 Autotote Corporation, Term B, due 9/30/2007 481,250
Isle of Capri Casinos, Inc.:
BB- Ba2 5,293,333 Term B, due 3/01/2006 5,314,422
BB- Ba2 4,631,667 Term C, due 3/01/2007 4,650,119
--------------
16,803,844
Health Services-- Dade Behring Inc.:
0.4% B Caa1 1,231,250 Term B, due 6/30/2006 824,058
B Caa1 1,231,250 Term C, due 6/30/2007 824,058
--------------
1,648,116
Hotels & Motels-- B NR++ 1,397,681 Lodgian Financing Corp., Term B, due 7/15/2006 1,399,428
4.2% NR++ NR++ 5,888,987 Strategic Hotels Inc., Term, due 11/16/2004 5,925,793
Wyndam International, Inc.:
NR++ NR++ 6,644,616 Term, due 6/30/2004 6,626,157
NR++ NR++ 4,000,000 Term, due 6/30/2006 3,970,248
--------------
17,921,626
Industrial BB- Ba3 6,818,182 Key3Media, Term B, due 6/30/2006 6,839,489
Services--2.3% B+ B1 2,970,000 Muzak Audio, Term B, due 12/31/2006 2,921,738
--------------
9,761,227
Leasing & Rental BB- B2 1,969,990 Anthony Crane Rental L.P., Term, due 7/20/2006 1,605,542
Services--1.5% BB- B2 2,970,000 Nations Rent Inc., Term B, due 7/20/2006 2,093,850
B NR++ 2,962,552 Rent Way Inc., Term B, due 9/30/2006 2,740,361
--------------
6,439,753
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
SCHEDULE OF INVESTMENTS (CONTINUED) MASTER SENIOR FLOATING RATE TRUST
S&P Moody's Face Senior Secured
Industries Rating Rating Amount Floating Rate Loan Interests* Value
Manufacturing-- B B1 $ 2,962,500 Blount International Inc., Term B, due 6/30/2006 $ 2,906,953
2.8% Mueller Industries, Inc.:
B+ B1 2,462,500 Term B, due 8/16/2006 2,472,505
B+ B1 2,462,500 Term C, due 8/16/2007 2,472,889
BB- Ba3 4,095,248 Terex Corp., Term C, due 3/06/2006 4,096,956
--------------
11,949,303
Medical B B1 1,980,000 Hanger Orthopedic Group, Inc., Term B, due 12/30/2006 1,442,099
Equipment--0.3%
Metals & Mining-- CCC- Caa2 950,000 AEI Resources Inc., Term B, due 12/31/2004 522,500
0.6% D Caa3 2,585,000 LTV Corporation, Term, due 11/10/2004 2,029,225
--------------
2,551,725
Paper--2.8% B B1 3,208,029 Riverwood International Inc., Term B, due 2/28/2004 3,221,881
Stone Container Corp.:
B+ Ba3 2,395,022 Term E, due 10/01/2003 2,406,186
B+ Ba3 2,473,913 Term F, due 3/31/2006 2,484,736
B+ Ba3 1,967,778 Term G, due 3/31/2006 1,971,877
B+ Ba3 1,598,500 Term H, due 3/31/2006 1,601,830
--------------
11,686,510
Printing & B+ B1 4,975,000 Liberty Group Operating, Term B, due 3/31/2007 4,978,109
Publishing--3.0% NR++ NR++ 923,854 Reiman Publications, Term B, due 12/01/2005 929,436
Trader.com:
NR++ NR++ 1,045,399 Term B, due 12/31/2006 1,037,558
NR++ NR++ 704,601 Term C, due 12/31/2007 699,317
BB- B1 2,975,726 Vertis, Inc., Term B, due 12/06/2008 2,890,174
NR++ NR++ 2,030,623 Ziff-Davis Inc., Term B, due 3/31/2007 2,019,518
--------------
12,554,112
Property Corrections Corporation of America:
Management-- B B3 717,397 Term B, due 12/31/2002 616,962
2.2% B B3 4,719,370 Term C, due 12/31/2002 4,042,928
NR++ Ba3 4,975,000 NRT Inc., Term, due 7/31/2004 4,800,875
--------------
9,460,765
Restaurants & Domino's & Bluefence:
Food Service-- B+ B1 952,879 Term B, due 12/21/2006 957,908
0.5% B+ B1 954,875 Term C, due 12/21/2007 959,915
--------------
1,917,823
Retail & Retail B+ B1 2,425,000 Duane Reade Co., Term B, due 2/15/2005 2,431,063
Specialty--0.6%
Tower Construction BB Ba3 5,000,000 American Towers, Inc., Term B, due 12/31/2007 5,031,920
& Leasing--3.9% BB- Ba3 3,896,000 Crown Castle International Corporation,
Term B, due 3/31/2008 3,919,267
B+ B1 7,500,000 Spectracite Communications, Term B, due 12/31/2007 7,548,045
--------------
16,499,232
Transportation BB+ Ba1 5,000,000 Kansas City Southern Railroad, Term B, due 12/29/2006 5,038,540
Services--1.6% B+ B1 1,980,000 North American Van Lines Inc., Term B, due 11/18/2007 1,843,875
--------------
6,882,415
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
SCHEDULE OF INVESTMENTS (CONCLUDED) MASTER SENIOR FLOATING RATE TRUST
S&P Moody's Face Senior Secured
Industries Rating Rating Amount Floating Rate Loan Interests* Value
Utilities--2.6% BB Ba1 $ 2,500,000 AES Texas Funding II, Term, due 3/31/2002 $ 2,496,875
BB+ Ba2 4,962,500 TNP Enterprises, Inc., Term, due 6/30/2006 4,984,211
BB+ Ba1 3,482,500 Western Resources Inc., Term B, due 3/17/2003 3,514,424
--------------
10,995,510
Waste Allied Waste North America Inc.:
Management-- BB Ba3 1,969,955 Term B, due 6/30/2006 1,950,562
1.0% BB Ba3 2,363,944 Term C, due 6/30/2007 2,340,673
--------------
4,291,235
Wired BBB- Ba1 10,000,000 Global Crossing Holdings Ltd., Term B, due 6/30/2006 10,044,440
Telecommuni-
cations--2.4%
Wireless American Cellular Corp.:
Telecommuni- BB- Ba3 3,500,000 Term B, due 3/31/2008 3,494,166
cations--13.2% BB- Ba3 4,000,000 Term C, due 3/31/2009 3,993,332
B+ B1 4,398,750 Centennial Cellular Operating Co., Term B,
due 11/30/2007 4,405,854
Dobson/Sygnet Operating Co.:
NR++ B3 1,624,581 Term B, due 3/23/2007 1,613,074
NR++ B3 1,686,120 Term C, due 12/23/2007 1,674,528
Nextel Communications, Inc.:
BB+ Ba2 2,500,000 Term B, due 6/30/2008 2,507,310
BB+ Ba2 2,500,000 Term C, due 12/31/2008 2,507,310
BB+ Ba2 9,438,000 Term D, due 3/31/2009 9,379,551
B B2 5,000,000 PowerTel PCS, Inc., Term B, due 2/06/2003 4,975,000
Rural Cellular Corp.:
B+ B1 2,750,000 Term B, due 10/03/2008 2,744,844
B+ B1 2,750,000 Term C, due 4/03/2009 2,744,844
NR++ B2 1,000,000 Tritel PCS Inc., Term B, due 12/31/2007 1,002,188
VoiceStream PCS Holdings Corp.:
B+ B1 5,000,000 Term B, due 2/25/2009 4,974,310
B+ B1 10,000,000 Vendor A Facility, due 6/30/2009 9,889,900
--------------
55,906,211
Total Senior Secured Floating Rate Loan Interests
(Cost--$399,914,618)--91.7% 387,539,956
Short-Term Securities
Commercial 21,017,000 General Motors Acceptance Corp., 5.56% due 3/01/2001 21,017,000
Paper**--5.0%
US Government 10,000,000 Freddie Mac, 5.35% due 3/06/2001 9,992,569
Agency
Obligations**--2.3%
Total Short-Term Securities
(Cost--$31,009,569)--7.3% 31,009,569
Total Investments (Cost--$430,924,187)--99.0% 418,549,525
Other Assets Less Liabilities--1.0% 4,184,624
--------------
Net Assets--100.0% $ 422,734,149
==============
*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 Trust.
++Not Rated.
See Notes to Financial Statements.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
FINANCIAL INFORMATION
Statement of Assets and Liabilities Master Senior Floating Rate Trust
As of February 28, 2001
Assets: Investments, at value (identified cost--$430,924,187) $ 418,549,525
Receiveables:
Interest $ 3,201,690
Contributions 1,331,125 4,532,815
---------------
Other assets 80,727
---------------
Total assets 423,163,067
---------------
Liabilities: Payables:
Investment adviser 270,814
Custodian bank 75,936 346,750
---------------
Accrued expenses and other liabilities 82,168
---------------
Total liabilities 428,918
---------------
Net Assets: Net assets $ 422,734,149
===============
Net Assets Partners' capital $ 435,107,311
Consist of: Unrealized depreciation on investments--net (12,373,162)
---------------
Net assets $ 422,734,149
===============
See Notes to Financial Statements.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
Financial Information (CONTINUED)
Statement of Operations Master Senior Floating Rate Trust
For the Period October 6, 2000++ to February 28, 2001
Investment Interest and discount earned $ 17,647,757
Income: Facility and other fees 210,307
---------------
Total income 17,858,064
---------------
Expenses: Investment advisory fees $ 1,679,727
Accounting services 70,887
Professional fees 33,506
Reorganization costs 28,000
Custodian fees 18,071
Borrowing fees 14,333
Assignment fees 10,317
Trustees' fees and expenses 3,340
Other 6,893
---------------
Total expenses 1,865,074
---------------
Investment income--net 15,992,990
---------------
Realized & Realized gain on investments--net 210,386
Unrealized Unrealized depreciation on investments--net (7,860,653)
Gain (Loss) on ---------------
Investments--Net: Net Increase in Net Assets Resulting from Operations $ 8,342,723
===============
Statements of Changes in Net Assets Master Senior Floating Rate Trust
For the Period
October 6, 2000++
Increase (Decrease) in Net Assets: to February 28, 2001
Operations: Investment income--net $ 15,992,990
Realized gain on investments--net 210,386
Unrealized depreciation on investments--net (7,860,653)
---------------
Net increase in net assets resulting from operations 8,342,723
---------------
Net Capital Increase in net assets derived from net capital contributions 414,291,326
---------------
Contributions:
Net Assets: Total increase in net assets 422,634,049
Beginning of period 100,100
---------------
End of period $ 422,734,149
===============
++Commencement of operations.
See Notes to Financial Statements.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
FINANCIAL INFORMATION (CONCLUDED)
Statement of Cash Flows Master Senior Floating Rate Trust
For the Period
October 6, 2000++
Increase (Decrease) in Net Assets: to February 28, 2001
Cash Provided by Net increase in net assets resulting from operations $ 8,342,723
Operating Adjustments to reconcile net increase in net assets resulting from operations
Activities: to net cash provided by operating activities:
Decrease in receivables 882,539
Increase in other assets (80,727)
Decrease in other liabilities (221,881)
Realized and unrealized loss on investments--net 7,650,267
Amortization of discount (1,060,009)
---------------
Net cash provided by operating activities 15,512,912
---------------
Cash Provided by Proceeds from principal payments and sales of loan interests 79,034,992
Investing Purchases of loan interests (50,215,679)
Activities: Purchases of short-term investments (1,883,492,352)
Proceeds from sales and maturities of short-term investments 1,877,997,888
---------------
Net cash provided by investing activities 23,324,849
---------------
Cash Used for Cash receipts on capital contributions 46,906,450
Financing Cash payments on capital withdrawals (85,744,211)
Activities: ---------------
Net cash used for financing activities (38,837,761)
---------------
Cash: Net increase in cash --
Cash at beginning of period --
---------------
Cash at end of period --
===============
++Commencement of operations.
See Notes to Financial Statements.
Financial Highlights Master Senior Floating Rate Trust
For the Period
The following ratios have been derived from October 6, 2000++
information provided in the financial statements. to February 28, 2001
Ratios to Average Expenses 1.05%*
Net Assets: ===============
Investment income--net 9.05%*
===============
Supplemental Net assets, end of period (in millions) $ 423
Data: ===============
Portfolio turnover 12.39%
===============
*Annualized.
++Commencement of operations.
See Notes to Financial Statements.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
NOTES TO FINANCIAL STATEMENTS
Master Senior Floating Rate Trust
1. Significant Accounting Policies:
Master Senior Floating Rate Trust (the "Trust") is registered under
the Investment Company Act of 1940 and is organized as a Delaware
business trust. The Declaration of Trust permits the Trustees to
issue nontransferable interests in the Trust, subject to certain
limitations. The Trust's financial statements are prepared in
conformity with accounting principles generally accepted in the
United States of America, 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. The
following is a summary of significant accounting policies followed
by the Trust.
(a) Loan participation interests--The Trust invests in senior
secured floating rate loan interests ("Loan Interests") with
collateral having a market value, at time of acquisition by the
Trust, which Trust management believes equals or exceeds the
principal amount of the corporate loan. The Trust may invest up to
20% of its total assets in loans made on an unsecured basis.
Depending on how the loan was acquired, the Trust will regard the
issuer as including the corporate borrower along with an agent bank
for the syndicate of lenders and any intermediary of the Trust's
investment. Because agents and intermediaries are primarily
commercial banks, the Trust's investment in corporate loans at
February 28, 2001 could be considered to be concentrated in
commercial banking.
(b) Valuation of investments--Loan Interests are valued in
accordance with guidelines established by the Board of Directors.
Loan Interests are valued at the mean between the last available bid
and asked prices from one or more brokers or dealers as obtained
from Loan Pricing Corporation. For the limited number of Loan
Interests for which no reliable price quotes are available, such
Loan Interests will be valued by Loan Pricing Corporation through
the use of pricing matrices to determine valuations. 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
Trustees of the Trust.
(c) Derivative financial instruments--The Trust may engage in
various portfolio investment strategies to increase or decrease the
level of risk to which the Trust is exposed more quickly and
efficiently than transactions in other types of instruments. 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 Trust is authorized to enter into
interest rate swaps and purchase or sell interest rate caps and
floors. In an interest rate swap, the Trust exchanges with another
party their respective commitments to pay or receive interest on a
specified notional principal amount. The purchase of an interest
rate cap (or floor) entitles the purchaser, to the extent that a
specified index exceeds (or falls below) a predetermined interest
rate, to receive payments of interest equal to the difference
between the index and the predetermined rate on a notional principal
amount from the party selling such interest rate cap (or floor).
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Master Senior Floating Rate Trust
(d) Income taxes--The Trust is classified as a partnership for
Federal income tax purposes. As a partnership for Federal income tax
purposes, the Trust will not incur Federal income tax liability.
Items of partnership income, gain, loss and deduction will pass
through to investors as partners in the Trust. Therefore, no Federal
income tax provision is required. It is intended that the Trust's
assets will be managed so an investor in the Trust can satisfy the
requirements of subchapter M of the Internal Revenue Code.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Realized gains and losses on security
transactions are determined on the identified cost basis. Dividend
income is recorded on the ex-dividend dates. Interest income is
recognized on the accrual basis. The Fund will adopt the provisions
to amortize all premiums and discounts on debt securities effective
September 1, 2001, as now required under the new AICPA Audit and
Accounting Guide for Investment Companies. The cumulative effect of
this accounting change will have no impact on the total net assets
of the Trust. The impact of this accounting change has not been
determined, but will result in an adjustment to the cost of
securities and a corresponding adjustment to net unrealized
appreciation/depreciation, based on securities held as of August 31,
2001.
(f) Custodian bank--The Trust recorded an amount payable to the
Custodian Bank as a result of the stated overdrawn balance. This
overdrawn balance was due to an overprojected corporate event.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect, wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Trust's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Trust. For such
services, the Trust pays a monthly fee at an annual rate of .95% of
the average daily value of the Trust's net assets.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Trust's transfer agent.
Accounting services were provided to the Trust by FAM and its
affiliates through December 31, 2000. Up to this date, the Trust
reimbursed FAM $39,648 for these services. As of January 1, 2001,
accounting services are provided for the Trust by State Street Bank
and Trust Company ("State Street") pursuant to an agreement between
State Street and the Trust. The Trust will pay the cost of these
services. In addition, the Trust will reimburse FAM for the cost of
certain additional accounting services.
Certain officers and/or trustees of the Trust are officers and/or
directors of FAM, PSI, FDS, FAMD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period October 6, 2000 to February 28, 2001 were $50,215,679
and $78,714,479, respectively.
Net realized gains (losses) for the period October 6, 2000 to
February 28, 2001 and net unrealized gains (losses) as of February
28, 2001 were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Loan interests $ 210,514 $(12,374,662)
Short-term investments (128) --
Unfunded loan interests -- 1,500
----------- ------------
Total $ 210,386 $(12,373,162)
=========== ============
As of February 28, 2001, net unrealized depreciation for Federal
income tax purposes aggregated $12,374,662, of which $1,786,885
related to appreciated securities and $14,161,547 related to
depreciated securities. At February 28, 2001, the aggregate cost of
investments for Federal income tax purposes was $430,924,187.
Merrill Lynch Senior Floating Rate Fund II, Inc.
February 28, 2001
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Master Senior Floating Rate Trust
4. Short-Term Borrowings:
On December 1, 2000, the Trust, along with certain other funds
managed by FAM and its affiliates, renewed and amended a
$1,000,000,000 credit agreement with Bank One, N.A. and certain
other lenders. The Trust may borrow under the credit agreement to
fund shareholder redemptions and for other lawful purposes other
than for leverage. The Trust may borrow up to the maximum amount
allowable under the Trust's current prospectus and statement of
additional information, subject to various other legal, regulatory
or contractual limits. The Trust pays a commitment fee of .09% per
annum based on the Trust's pro rata share of the unused portion of
the facility. Amounts borrowed under the facility bear interest at a
rate equal to, at each fund's election, the Federal Funds rate plus
.50% or a base rate as determined by Bank One, N.A. The Trust did
not borrow under the facility during the period October 6, 2000 to
February 28, 2001.
OFFICERS AND DIRECTORS/TRUSTEES
Terry K. Glenn, President and Director/Trustee
Ronald W. Forbes, Director/Trustee
Cynthia A. Montgomery, Director/Trustee
Charles C. Reilly, Director/Trustee
Kevin A. Ryan, Director/Trustee
Roscoe S. Suddarth, Director/Trustee
Richard R. West, Director/Trustee
Edward D. Zinbarg, Director/Trustee
Kevin J. Booth, Vice President
Joseph Matteo, Vice President
Donald C. Burke, Vice President and Treasurer
Bradley J. Lucido, Secretary
Arthur Zeikel, Director/Trustee and Joseph T. Monagle Jr., Senior
Vice President of Merrill Lynch Senior Floating Rate Fund II, Inc.,
have recently retired. The Fund's Board of Directors wishes Messrs.
Zeikel and Monagle well in their retirements.
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863