UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-05870
811-10171
Name of Fund: Merrill Lynch Senior Floating Rate Fund, Inc.
Master Senior Floating Rate Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief
Executive Officer, Merrill Lynch Senior Floating Rate Fund,
Inc. and Master Senior Floating Rate Trust, 800 Scudders Mill
Road, Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011,
Princeton, NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 08/31/05
Date of reporting period: 09/01/04 - 02/28/05
Item 1 - Report to Stockholders
Merrill Lynch
Senior Floating Rate
Fund, Inc.
Semi-Annual Report
February 28, 2005
(BULL LOGO) Merrill Lynch Investment Managers
www.mlim.ml.com
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
Merrill Lynch Senior Floating Rate Fund, 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 only to the shareholders of Merrill Lynch
Senior Floating Rate Fund, Inc. for their information. It is not a
prospectus, circular or representation intended for use in the
purchase of shares of the Fund or any securities mentioned in this
report. Past performance results shown in this report should not be
considered a representation of future performance.
A description of the policies and procedures that the Fund uses
to determine how to vote proxies relating to portfolio securities
is available (1) without charge, upon request, by calling toll-free
1-800-MER-FUND (1-800-637-3863); (2) at www.mutualfunds.ml.com;
and (3) on the Securities and Exchange Commission's Web site at
http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the
most recent 12-month period ended June 30 is available (1) at
www.mutualfunds.ml.com and (2) on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
Merrill Lynch Senior Floating Rate Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
(GO PAPERLESS LOGO)
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Merrill Lynch Senior Floating Rate Fund, Inc.
Officers and Directors/Trustees
Robert C. Doll, Jr., President and Director/Trustee
Ronald W. Forbes, Director/Trustee
Cynthia A. Montgomery, Director/Trustee
Jean Margo Reid, Director/Trustee
Roscoe S. Suddarth, Director/Trustee
Richard R. West, Director/Trustee
Edward D. Zinbarg, Director/Trustee
Joseph P. Matteo, Vice President
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
Effective January 1, 2005, Terry K. Glenn, President and Director/
Trustee and Kevin A. Ryan, Director/ Trustee of Merrill Lynch Senior
Floating Rate Fund, Inc. and Master Senior Floating Rate Trust
retired. The Fund's Board of Directors/Trustees wishes Messrs. Glenn
and Ryan well in their retirements.
Effective January 1, 2005, Robert C. Doll, Jr. became President and
Director/Trustee of the Fund and the Trust.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
A Letter From the President
Dear Shareholder
Financial markets broadly posted positive returns over the most
recent reporting period, with international equities providing some
of the most impressive results.
Total Returns as of February 28, 2005 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) + 9.99% + 6.98%
International equities (MSCI Europe Australasia Far East Index) +21.18 +18.68
Fixed income (Lehman Brothers Aggregate Bond Index) + 1.26 + 2.43
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 2.40 + 2.96
High yield bonds (Credit Suisse First Boston High Yield Index) + 7.53 +11.21
The U.S. economy has continued to show resilience in the face of the
Federal Reserve Board's (the Fed) continued interest rate hikes and,
more recently, higher oil prices. The Fed's measured tightening
program recently brought the federal funds rate to 2.75% en route
to a more "neutral" short-term interest rate target (relative to
inflation). Since the U.S. presidential election, progress has been
monitored on many fronts in Washington, although concerns remain
about the structural problems of debt and deficits, as reflected by
a significant decline in the U.S. dollar.
U.S. equities ended 2004 in a strong rally, but remained in a fairly
narrow trading range for the first two months of 2005. Divergences
were notable among sectors, with energy emerging as a clear leader.
On the positive side, corporations have accelerated their hiring
plans, capital spending remains reasonably robust and merger-and-
acquisition activity has increased. Offsetting the positives are
slowing corporate earnings growth, renewed energy price concerns and
the potential for an economic slowdown. International equities,
particularly in Asia, have benefited from higher economic growth
rates (China recorded growth of 9.3% in 2004), stronger currencies
and relatively reasonable valuations.
The major action in the bond market has been a flattening of the
yield curve. As short-term interest rates continued to rise, yields
on the long end of the curve remained relatively stable - even
declining at certain points since the Fed's monetary tightening
program began in June 2004. This phenomenon has been largely
attributed to continued foreign interest in U.S. bonds, which has
served to absorb much of the excess supply. By period-end, many
believed long-term yields were long overdue for a rise.
Looking ahead, the environment is likely to be a challenging one
for investors, with diversification and selectivity becoming
increasingly important themes. With this in mind, we encourage you
to meet with your financial advisor to review your goals and asset
allocation and to rebalance your portfolio, as necessary, to ensure
it remains aligned with your objectives and risk tolerance. As
always, we thank you for trusting Merrill Lynch Investment Managers
with your investment assets, and we look forward to serving you in
the months and years ahead.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Director/Trustee
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
A Discussion With Your Fund's Portfolio Manager
The Fund slightly outperformed its benchmark for the period,
as security selection in the chemical, U.S. cable and services
sectors had a positive effect on the relative return.
Describe market conditions during the past six months.
Throughout the period, the leverage loan market continued to benefit
from the significant demand that it experienced since the beginning
of 2004. This created an excess cash imbalance that was left
virtually intact through the end of February 2005, as new inflows
have continued to match the value of new issues. Demand in the
marketplace has led to higher secondary-market loan prices and new
issues with generally lower interest spreads versus London InterBank
Offering Rate (LIBOR), and average new-issue allocation amounts per
investor that are lower than their historical levels.
A significant rise in LIBOR more than offset declines in the
interest rate spreads on BB-rated and B-rated new issues during the
period. Another positive development in the leveraged loan sector
has been the improving default rate. As of the end of February 2005,
the lagging 12-month institutional loan default rate stood at 1.36%
by number of loans and 1.37% of principal amount, according to
Standard & Poor's Leveraged Commentary & Data. Although this is a
12-month high due to the recent default of Tower Automotive Inc.,
the default rates are still well below the recent historical
averages (since 1998) of 3.87% by number of loans and 4.18% by
principal amount.
How did the Fund perform during the period in light of the existing
market conditions?
For the six-month period ended February 28, 2005, the Common Stock
of Merrill Lynch Senior Floating Rate Fund, Inc. had a net
annualized yield of 3.93%, based on a period-end per share net asset
value of $9.02 and $.176 per share income dividends. For the same
period, the total investment return on the Fund's Common Stock was
+3.13%, based on a change in per share net asset value from $8.91 to
$9.02, and assuming reinvestment of all distributions. For the same
period, the Fund's unmanaged benchmark index, the Credit Suisse
First Boston (CSFB) Leveraged Loan Index, recorded a total return of
+3.01%.
Security selection in chemicals, U.S. cable and services benefited
the Fund's performance during the period. However, the portfolio's
holdings in the energy-other, transportation and steel sectors had a
negative effect on the return.
The Fund's strong performance in the chemical sector resulted
primarily from our positions in Pioneer Cos., Inc. and GEO Specialty
Chemicals, Inc. The value of Pioneer Companies, a security we
acquired during a corporate restructuring, rose during the period on
the strength of the chlor-alkali industry. GEO Specialty Chemicals
experienced improved operating performance and reduced leverage,
leading to a rally in the company's bond and stock prices.
Our positions in the U.S. cable sector benefited from the strong
returns of Century Cable Holdings LLC (an Adelphia company) and
Charter Communications Operating LLC. The prices of securities of
Century Cable, as well as other Adelphia companies in the portfolio,
rallied as Adelphia nears the completion of its auction. Charter
Communications' bank loan issue rallied on the company's recent
refinancing to improve liquidity.
The Fund's positive return in the service sector was due mainly to
the robust performances of our holdings in Anthony Crane Rental LP
and The Shaw Group, Inc. The former company's term loan security
rallied as the company prepared to exit bankruptcy with a more
favorable capital structure and the commercial construction industry
showed signs of renewed vigor. Shaw Group, an engineering and
consulting firm, announced better-than-expected earnings, thereby
boosting the price of the company's stock, which we received as
part of the restructuring of IT Group. Shaw Group acquired all of
the assets and some liabilities of IT Group in 2002.
The Fund's weak performances in the energy-other and transportation
sectors resulted primarily from several companies calling at par
value loans that had been priced above par in the market. At the end
of the period, none of the Fund's holdings in the energy-other
sector were priced below par value.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Finally, the main contributor to the Fund's poor performance in the
steel sector was our position in Acme Package Corp. stock. The
shares of this distressed company declined in value as the Fund
received cash payments, which were classified for accounting
purposes as the return of principal.
What changes were made to the portfolio during the period?
During the period, the Master Senior Floating Rate Trust, of
which the Fund invests all of its assets, purchased assets of
approximately $282 million in par amount (face value), and
experienced $226 million in repayments from issuers. In addition,
we sold roughly $16 million in assets during the period because of
the Trust's relatively high cash position. We normally seek to
maintain a cash weighting of less than 5% of net assets; however,
issuer repayments, and the robust demand for paper in the leveraged
loan market made this an increasingly difficult task.
How would you characterize the portfolio's position at the close of
the period?
At the end of the period, the portfolio was composed of 156 issuers
spread among 26 industries. The Trust was underweight versus its
composite benchmark in securities rated Ba or better and credits
rated Caa or below, and was overweight in B-rated and unrated
securities.
Looking forward, we anticipate that many of the same factors
that had an impact on leveraged loan securities in the past six
months will continue to influence the fundamentals in the market. We
believe the trend of small allocation amounts for issuances of new
loans, lower interest rate spreads and above-par secondary market
prices will continue, especially given the benign credit environment
we expect over the next six months. A further benefit to the market
during the period would be an increase in LIBOR. Therefore, we plan
to continue to purchase assets predominately in the primary market,
while selectively participating in the secondary market.
Joseph P. Matteo
Vice President and Portfolio Manager
March 21, 2005
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Disclosure of Expenses
Shareholders of this Fund may incur the following charges:
(a) expenses related to transactions, including sales charges,
redemption fees and exchange fees; and (b) operating expenses,
including advisory fees, distribution fees including 12(b)-1 fees,
and other Fund expenses. The following example (which is based on a
hypothetical investment of $1,000 invested on September 1, 2004 and
held through February 28, 2005) is intended to assist shareholders
both in calculating expenses based on an investment in the Fund and
in comparing these expenses with similar costs of investing in other
mutual funds.
The first table below provides information about actual account
values and actual expenses. In order to estimate the expenses a
shareholder paid during the period covered by this report,
shareholders can divide their account value by $1,000 and then
multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before
expenses. In order to assist shareholders in comparing the ongoing
expenses of investing in this Fund and other funds, compare the 5%
hypothetical example with the 5% hypothetical examples that appear
in other funds' shareholder reports.
The expenses shown in the table are intended to highlight
shareholders ongoing costs only and do not reflect any transactional
expenses, such as sales charges, redemption fees or exchange fees.
Therefore, the second table is useful in comparing ongoing expenses
only, and will not help shareholders determine the relative total
expenses of owning different funds. If these transactional expenses
were included, shareholder expenses would have been higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value September 1, 2004
September 1, February 28, to February 28,
2004 2005 2005
Actual
Merrill Lynch Senior Floating Rate Fund, Inc. $1,000 $1,031.30 $7.25
Hypothetical (5% annual return before expenses)**
Merrill Lynch Senior Floating Rate Fund, Inc. $1,000 $1,017.65 $7.20
* Expenses are equal to the annualized expense ratio of 1.44%, multiplied by the average account value
over the period, multiplied by 181/365 (to reflect the one-half year period shown). Because the Fund
is a feeder fund, the expense table example reflects the expenses of both the feeder fund and the
master fund in which it invests.
** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the
most recent fiscal half-year divided by 365.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Statement of Assets and Liabilities Merrill Lynch Senior Floating Rate Fund, Inc.
As of February 28, 2005
Assets
Investment in Master Senior Floating Rate Trust (the "Trust"), at value
(identified cost--$753,468,511) $ 722,829,384
Prepaid expenses 283,837
---------------
Total assets 723,113,221
---------------
Liabilities
Payables:
Dividends to shareholders $ 487,131
Other affiliates 149,250
Administrator 108,312 744,693
---------------
Accrued expenses and other liabilities 123,054
---------------
Total liabilities 867,747
---------------
Net Assets
Net assets $ 722,245,474
==============
Net Assets Consist of
Common Stock, par value $.10 per share; 1,000,000,000 shares authorized $ 8,004,630
Paid-in capital in excess of par 1,079,864,974
Undistributed investment income--net $ 236,875
Accumulated realized capital losses allocated from the Trust--net (335,221,878)
Unrealized depreciation allocated from the Trust--net (30,639,127)
---------------
Total accumulated losses--net (365,624,130)
---------------
Net Assets--Equivalent to $9.02 per share based on 80,046,300 shares of
capital stock outstanding $ 722,245,474
===============
See Notes to Financial Statements.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Statement of Operations Merrill Lynch Senior Floating Rate Fund, Inc.
For the Six Months Ended February 28, 2005
Investment Income Allocated from the Trust--Net
Net investment income allocated from the Trust:
Interest (including $774,290 from affiliates) $ 18,336,305
Facility and other fees 356,286
Expenses (3,699,680)
---------------
Net investment income allocated from the Trust 14,992,911
---------------
Expenses
Administration fees $ 903,258
Transfer agent fees 327,184
Tender offer fees 165,392
Printing and shareholder reports 34,699
Registration fees 32,767
Professional fees 18,124
Other 9,041
---------------
Total expenses 1,490,465
---------------
Investment income--net 13,502,446
---------------
Realized & Unrealized Gain Allocated from the Trust--Net
Realized gain allocated from the Trust--net 464,803
Change in unrealized appreciation (depreciation) allocated from the Trust--net 9,055,143
---------------
Total realized and unrealized gain allocated from the Trust--net 9,519,946
---------------
Net Increase in Net Assets Resulting from Operations $ 23,022,392
===============
See Notes to Financial Statements.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Statements of Changes in Net Assets Merrill Lynch Senior Floating Rate Fund, Inc.
For the Six For the
Months Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 2005 2004
Operations
Investment income--net $ 13,502,446 $ 26,185,996
Realized gain (loss) allocated from the Trust--net 464,803 (64,296,777)
Change in unrealized appreciation (depreciation) allocated from the
Trust--net 9,055,143 109,360,252
--------------- ---------------
Net increase in net assets resulting from operations 23,022,392 71,249,471
--------------- ---------------
Dividends to Shareholders
Investment income--net (13,502,440) (26,185,993)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (13,502,440) (26,185,993)
--------------- ---------------
Capital Share Transactions
Net decrease in net assets derived from capital share transactions (44,069,223) (86,588,414)
--------------- ---------------
Net Assets
Total decrease in net assets (34,549,271) (41,524,936)
Beginning of period 756,794,745 798,319,681
--------------- ---------------
End of period* $ 722,245,474 $ 756,794,745
=============== ===============
* Undistributed investment income--net $ 236,875 $ 236,869
=============== ===============
See Notes to Financial Statements.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Financial Highlights Merrill Lynch Senior Floating Rate Fund, Inc.
For the Six
The following per share data and ratios Months Ended
have been derived from information February 28, For the Year Ended August 31,
provided in the financial statements. 2005 2004 2003+++++ 2002 2001
Per Share Operating Performance
Net asset value, beginning of period $ 8.91 $ 8.40 $ 8.05 $ 8.82 $ 9.45
------------ ------------ ------------ ------------ ------------
Investment income--net .17*** .30*** .38 .43 .79
Realized and unrealized gain (loss)
allocated from the Trust--net .11 .51 .36 (.77) (.62)
------------ ------------ ------------ ------------ ------------
Total from investment operations .28 .81 .74 (.34) .17
------------ ------------ ------------ ------------ ------------
Less dividends from investment
income--net (.17) (.30) (.39) (.43) (.80)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 9.02 $ 8.91 $ 8.40 $ 8.05 $ 8.82
============ ============ ============ ============ ============
Total Investment Return**
Based on net asset value per share 3.13%+++ 9.73% 9.61% (4.09%) 1.52%
============ ============ ============ ============ ============
Ratios to Average Net Assets
Expenses, excluding interest expense++ 1.44%* 1.44% 1.45% 1.41% 1.36%
============ ============ ============ ============ ============
Expenses++ 1.44%* 1.44% 1.46% 1.41% 1.36%
============ ============ ============ ============ ============
Investment income--net 3.74%* 3.41% 4.81% 5.07% 8.39%
============ ============ ============ ============ ============
Leverage
Average amount of borrowings during the
period (in thousands) -- -- $ 8,138++++ $ 3,374 --
============ ============ ============ ============ ============
Average amount of borrowings per share
during the period -- -- $ .07++++ $ .02 --
============ ============ ============ ============ ============
Supplemental Data
Net assets, end of period
(in thousands) $ 722,245 $ 756,795 $ 798,320 $ 1,063,983 $ 1,778,295
============ ============ ============ ============ ============
Portfolio turnover 25.40%+++++++ 76.45%+++++++ 56.56%+++++++ 89.46% 50.82%
============ ============ ============ ============ ============
* 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. No secondary market
for the Fund's shares exists.
*** Based on average shares outstanding.
++ Includes the Fund's share of the Trust's allocated expenses.
++++ Reflects the average amount of borrowings of the Fund prior to the Fund's conversion from a
stand-alone investment company to a "feeder" fund on February 10, 2003.
+++ Aggregate total investment return.
+++++ On February 10, 2003, 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,
which has the same investment objective as the Fund. All investments are made at the Trust level.
This structure is sometimes called a "master/feeder" structure.
+++++++ Portfolio turnover for the Trust.
See Notes to Financial Statements.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Notes to Financial Statements
Merrill Lynch Senior Floating Rate Fund, Inc.
1. Significant Accounting Policies:
Merrill Lynch Senior Floating Rate Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940, as amended,
as a continuously offered, non-diversified, closed-end management
investment company. The Fund seeks to achieve its investment
objective by investing all of its assets in the Master Senior
Floating Rate Trust (the "Trust"), which has the same investment
objective and strategies as the Fund. 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 U.S. generally
accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ
from these estimates. These unaudited financial statements reflect
all adjustments, which are, in the opinion of management, necessary
to present a fair statement of the results for the interim period.
All such adjustments are of a normal, recurring nature. The
percentage of the Trust owned by the Fund at February 28, 2005
was 68.0%. 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 1b 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 Administration 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. The Fund pays a monthly fee at an annual rate of
..25% of the Fund's average daily net assets 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"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
For the six months ended February 28, 2005, FAM Distributors, Inc.
("FAMD"), a wholly-owned subsidiary of Merrill Lynch Group, Inc.,
earned early withdrawal charges of $47,387 relating to the tender
of the Fund's shares.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, FAMD, FDS, and/or ML & Co.
3. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Dollar
Ended February 28, 2005 Shares Amount
Shares sold 2,396,674 $ 21,490,518
Shares issued to shareholders
in reinvestment of dividends 720,287 6,466,811
-------------- ---------------
Total issued 3,116,961 27,957,329
Shares tendered (8,046,496) (72,026,552)
-------------- ---------------
Net decrease (4,929,535) $ (44,069,223)
============== ===============
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Notes to Financial Statements (concluded)
Merrill Lynch Senior Floating Rate Fund, Inc.
For the Year Ended Dollar
August 31, 2004 Shares Amount
Shares sold 7,763,845 $ 68,254,923
Shares issued to shareholders
in reinvestment of dividends 1,421,989 12,467,518
-------------- ---------------
Total issued 9,185,834 80,722,441
Shares tendered (19,207,557) (167,310,855)
-------------- ---------------
Net decrease (10,021,723) $ (86,588,414)
============== ===============
4. Capital Loss Carryforward:
On August 31, 2004, the Fund had a net capital loss carryforward of
$279,684,820, of which $3,278,446 expires in 2005; $4,468,275
expires in 2006; $3,365,959 expires in 2007; $28,290,011 expires in
2008; $64,746,799 expires in 2009; $87,904,309 expires in 2010;
$53,409,203 expires in 2011 and $34,221,818 expires in 2012. This
amount will be available to offset like amounts of any future
taxable gains.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Schedule of Investments Master Senior Floating Rate Trust (in U.S. dollars)
Face
Industry++ Amount Senior Secured Floating Rate Loan Interests* Value
Aerospace & KF Industries, Inc., Term Loan:
Defense--2.0% $2,028,711 due 11/18/2012 $ 2,065,270
3,713,646 due 11/18/2013 3,780,569
2,076,923 Standard Aero Holdings Term Loan, due 8/24/2012 2,110,025
4,974,490 Titan Corp. Term Loan B, due 6/30/2009 5,045,222
Vought Aircraft Industries, Inc:
6,300,000 Term Loan, due 12/22/2011 6,398,438
1,200,000 Tranche B L/C Deposit, due 12/22/2010 1,219,500
---------------
20,619,024
Automotive--2.6% 3,980,000 Grand Vehicle, First Lien Term Loan, due 7/23/2010 3,860,600
5,044,255 Metaldyne Corp. Term Loan D, due 12/31/2009 5,093,436
NFIL Holdings Corp.:
5,475,234 Term Loan, due 3/31/2010 5,560,785
762,186 Term Loan B, due 2/27/2010 774,095
TRW Automotive Inc.:
4,250,000 Term Loan B, due 6/30/2012 4,275,678
3,500,000 Term Loan E, due 11/02/2010 3,524,063
Tenneco Automotive, Inc.:
2,215,862 Term Loan B, due 12/12/2010 2,259,255
1,111,035 Tranche B-1 Credit Linked, due 12/12/2010 1,132,792
1,546,667 United Components, Inc. Term Loan C, due 6/30/2010 1,570,833
---------------
28,051,537
Broadcasting--2.9% Cumulus Media Inc.:
1,704,643 Term Loan A, due 3/28/2009 1,724,354
2,643,857 Term Loan E, due 3/28/2010 2,684,617
1,995,000 Term Loan F, due 3/28/2010 2,006,637
6,982,500 Emmis Operating Company Term Loan B, due 11/10/2011 7,081,240
6,500,000 Entravision Communications Corp. Term Loan B, due 2/24/2012 6,600,210
5,000,000 Raycom Media, Inc. Term Loan B, due 3/22/2012 5,062,500
Sinclair Television Group:
700,000 Term Loan A, due 6/30/2009 703,282
1,050,000 Term Loan C, due 12/31/2009 1,059,844
4,000,000 Susquehanna Media Co. Term Loan B, due 3/31/2012 4,068,752
---------------
30,991,436
Cable-- 50,000,000 Century Cable Holdings LLC Term Loan, due 6/30/2009 49,835,146
U.S.--18.0% 41,790,000 Charter Communications Operating LLC Tranche B Term Loan, due 4/07/2011 41,985,034
Frontiervision Operating Partners LP:
3,582,057 Term Loan A, due 9/30/2005 3,605,566
15,668,000 Term Loan B, due 3/31/2006 15,770,829
9,975,000 Hilton Head/UCA Inc. Term Loan B, due 3/31/2008 9,847,819
Inmarsat Facility:
4,240,451 Term Loan B, due 1/08/2011 4,263,167
4,250,418 Term Loan C, due 1/08/2012 4,288,217
Insight Midwest Holdings, LLC:
3,960,000 Term Loan, due 12/31/2009 4,033,323
5,445,000 Term Loan B, due 12/31/2009 5,547,094
6,125,000 Mediacom Broadband Group Tranche A Term Loan, due 3/31/2010 6,098,203
3,200,000 Mediacom Communications, LLC Tranche B Term Loan, due 3/31/2013 3,243,715
23,500,000 Olympus Cable Holdings, LLC Term Loan B, due 9/30/2010 23,404,543
16,871,988 PanAmSat Corp. Tranche B Term Loan, due 8/20/2011 17,158,322
1,990,000 Persona Cable Term Loan B, due 3/31/2011 2,013,010
---------------
191,093,988
Chemicals--6.8% 9,753,963 CII Carbon, LLC Term Loan, due 6/25/2008 9,662,520
7,182,700 Cedar Chemical Corp., Term Loan B, due 10/31/2003 (d) 395,048
10,000,000 Cognis Deutschland GmbH & Co. KG Term Loan B, due 11/15/2013 10,437,500
19,139,617 Huntsman International LLC Term Loan B, due 12/31/2010 19,508,054
Invista B.V. Term Loan:
3,364,412 New Tranche B-1, due 4/29/2011 3,421,186
1,517,941 New Tranche B-2, due 4/29/2011 1,543,556
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Schedule of Investments (continued) Master Senior Floating Rate Trust (in U.S. dollars)
Face
Industry++ Amount Senior Secured Floating Rate Loan Interests* Value
Chemicals $ 737,064 Kraton Polymers Term Loan, due 12/16/2010 $ 749,655
(concluded) 1,492,500 Lyondell-Citgo Refining Term Loan, due 5/21/2007 1,509,291
5,160,610 Nalco Co. Tranche B Term Loan, due 11/04/2010 5,263,105
2,001,190 Pinnacle Polymers (Epsilon Products) Term Loan, due 12/15/2006 2,031,008
1,876,667 Polymer Group, Inc. First Lien Term Loan, due 4/27/2010 1,903,644
4,000,000 Rockwood Specialties Group, Inc. Tranche D Term Loan, due 12/10/2012 4,068,572
Wellman, Inc.:
4,000,000 First Lien Term Loan, due 2/10/2009 4,066,668
7,000,000 Second Lien Term Loan, due 2/10/2010 7,376,250
---------------
71,936,057
Consumer 2,796,245 American Achievement Corp. Term Loan B, due 3/22/2011 2,841,684
Non-Durables--1.2% 3,000,000 Camelbak Products, LLC First Lien Term Loan, due 8/04/2011 3,035,625
1,990,000 Holmes Group, Inc. Term Loan, due 11/08/2010 2,012,387
4,850,000 Josten's Inc. Term Loan B, due 10/04/2011 4,929,821
---------------
12,819,517
Diversified 4,000,000 Advertising Directory Solutions Holdings, Inc. Second Lien
Media--3.2% Term Loan, due 10/01/2011 4,058,332
3,243,881 Dex Media West Inc. Term Loan B, due 3/09/2010 3,293,091
4,000,000 Freedom Communications, Inc. Term Loan B, due 5/18/2012 4,066,500
2,985,000 MediaNews Group, Inc. Term Loan C, due 12/15/2010 3,006,767
9,476,250 Metro-Goldwyn-Mayer Studios Inc. Term Loan B, due 4/30/2011 9,501,419
1,898,970 PRIMEDIA Inc. Term Loan B, due 6/30/2009 1,901,047
2,185,006 RH Donnelley Tranche D Term Loan, due 8/30/2011 2,220,637
3,153,204 Six Flags Entertainment Corp. Term Loan B, due 6/30/2009 3,208,385
942,857 Yankee Holdings Term Loan, due 5/01/2007 959,946
2,057,143 Yankee-Nets LLC Term Loan, due 5/01/2007 2,094,429
---------------
34,310,553
Energy--1.4% 574,430 Dresser, Inc. Term Loan C, due 4/10/2009 581,970
5,000,000 Ocean Rig Norway AS Term Loan, due 6/01/2008 5,000,000
6,260,625 Pride Offshore Inc. Term Loan, due 7/07/2011 6,372,797
2,412,500 Tesoro Petroleum Corp. Term Loan, due 4/15/2008 2,471,305
---------------
14,426,072
Energy--Exploration 1,970,100 Williams Production RMT Company Term Loan, due 5/31/2007 2,002,936
& Production--0.2%
Food & Drug--0.4% 3,628,986 Pantry, Inc. Term Loan B, due 3/12/2011 3,691,361
Food & 876,629 American Seafood Term Loan B, due 3/31/2009 889,778
Tobacco--2.0% 1,500,000 Del Monte Term Loan B, due 2/08/2012 1,519,875
6,733,125 Doane Pet Care Enterprises, Inc. Term Loan, due 11/05/2009 6,855,163
3,105,601 Domino's Pizza Term Loan, due 6/25/2010 3,156,713
5,675,522 Dr. Pepper/Seven Up Bottling Group, Inc. Tranche B Term Loan, due
12/19/2010 5,783,357
3,338,848 Merisant Company Term Loan B, due 3/31/2007 3,345,108
---------------
21,549,994
Gaming--2.0% 5,079,064 Ameristar Casinos Inc. Term Loan B, due 12/31/2006 5,163,717
3,980,000 Boyd Gaming Corp. Term Loan, due 6/30/2011 4,037,212
2,105,048 Global Cash Access LLC Term Loan B, due 3/10/2010 2,120,836
4,000,000 Marina District Finance Co., Inc. Term Loan, due 10/20/2011 4,045,000
5,300,000 Pinnacle Entertainment, Inc. Term Loan, due 8/27/2010 5,379,500
---------------
20,746,265
Health Care--3.4% 775,970 Advanced Medical Term Loan, due 6/26/2009 784,943
4,987,500 Ardent Health Services, Inc. Term Loan, due 6/28/2011 5,057,639
1,995,000 Community Health Systems, Inc. Term Loan, due 8/19/2011 2,020,093
6,394,949 Davita Term Loan B, due 3/31/2009 6,418,931
2,016,250 Kinetic Concepts, Inc. Term Loan B, due 8/11/2010 2,036,412
Medical Specialties (d):
12,845,455 Axel, due 6/30/2004 3,211,364
4,418,182 Term Loan, due 9/23/2003 1,104,545
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Schedule of Investments (continued) Master Senior Floating Rate Trust (in U.S. dollars)
Face
Industry++ Amount Senior Secured Floating Rate Loan Interests* Value
Health Care $ 4,165,946 Medpointe Capital Partners, LLC Tranche B Term Loan, due 9/30/2008 $ 4,186,776
(concluded) 1,744,318 Orthofix International NV Term Loan B, due 12/15/2008 1,769,393
427,912 Rotech Healthcare, Inc. Term Loan B, due 3/31/2008 433,172
7,980,000 Vanguard Health Systems, Inc. Term Loan, due 9/30/2010 8,142,098
1,000,000 Vanguard Health Tl Ba Pr, due 9/30/2010 1,014,375
---------------
36,179,741
Housing--3.6% General Growth Properties, Inc., Term Loan:
6,820,379 Tranche A, due 11/12/2007 6,889,360
9,650,000 Tranche B, due 11/12/2008 9,811,744
3,250,000 Goodman Global Holdings Term Loan, due 12/23/2011 3,308,906
6,222,656 Headwaters, Inc. Term Loan B, due 4/30/2011 6,313,401
1,972,841 Juno Lighting, Inc. First Lien Term Loan, due 11/21/2010 2,012,298
5,119,583 Lake at Las Vegas Joint Venture First Lien Term Loan, due 11/01/2009 5,198,512
4,975,000 Nortek, Inc. Term Loan, due 8/27/2011 5,067,246
---------------
38,601,467
Information 5,118,850 VUTEK Inc. Term Loan, due 6/25/2010 5,144,444
Technology--0.5%
Leisure--2.7% 3,710,455 True Temper Sports, Inc. Term Loan B, due 3/15/2011 3,696,540
Wyndham International, Inc.:
13,963,968 Term Loan I, due 6/30/2006 14,043,968
10,996,133 Term Loan II, due 4/01/2006 11,044,241
---------------
28,784,749
Manufacturing--4.2% 7,517,441 Amsted Industries, Inc. Term Loan B-1, due 10/15/2010 7,665,445
1,950,000 Bucyrus International, Inc. Term Loan, due 7/01/2010 1,989,000
ChannelMaster Holdings, Inc. (d):
128,199 Revolving Credit, due 11/15/2004 24,358
2,309,504 Term Loan, due 11/15/2004 438,806
5,771,246 EaglePicher Holdings, Inc. Tranche B Term Loan, due 8/07/2009 5,761,625
4,375,000 High Voltage Engineering Corp.Term Loan A, due 7/31/2006 4,353,125
Invensys International Holdings Ltd.:
3,954,314 First Lien Term Loan, due 9/04/2009 4,025,986
2,000,000 Second Lien Term Loan, due 12/04/2009 2,058,750
2,190,405 Itron, Inc. Tranche B, due 12/17/2010 2,214,134
11,150,459 Mueller Group, Inc. Initial Term Loan, due 4/23/2011 11,282,870
1,316,854 SPX Corp. Term Loan B, due 9/30/2009 1,325,414
3,451,952 Trimas Corporation Term Loan B, due 12/31/2009 3,508,046
---------------
44,647,559
Packaging--2.2% 1,736,000 BWAY Corporation Term Loan B, due 6/30/2011 1,764,210
11,000,000 Graham Packaging Co. LP Term Loan B, due 10/07/2011 11,214,500
Owens-Illinois Group Inc.:
4,841,371 French Tranche C-1 Term Loan, due 4/01/2008 4,932,147
750,000 Term Loan A, due 4/01/2007 763,219
404,959 Term Loan B, due 4/01/2008 412,501
4,104,433 Tekni-Plex, Inc. Term Loan B, due 6/21/2008 4,160,869
---------------
23,247,446
Paper--1.2% 3,054,012 Boise Cascade Holdings, LLC Tranche B Term Loan, due 10/28/2011 3,113,757
3,422,057 Graphic Packaging Term Loan B, due 8/08/2010 3,486,648
Smurfit Stone Container Corp.:
2,008,590 Deposit Account, due 11/01/2010 2,044,369
3,434,608 Tranche B, due 11/01/2011 3,493,281
1,056,802 Tranche C, due 11/01/2011 1,075,032
---------------
13,213,087
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Schedule of Investments (continued) Master Senior Floating Rate Trust (in U.S. dollars)
Face
Industry++ Amount Senior Secured Floating Rate Loan Interests* Value
Retail--1.1% $ 1,670,000 Advanced Stores Delay Draw Term Loan, due 9/30/2010 $ 1,695,573
2,450,000 American Reprographics Co. LLC Second Lien Term Loan, due 12/18/2009 2,609,250
4,000,000 Dollarama Group Term Loan B, due 11/18/2011 4,066,252
3,732,339 General Nutrition Centers, Inc. Tranche B Term Loan, due 12/05/2009 3,788,324
---------------
12,159,399
Services--3.9% 2,400,000 Alliance Laundry Systems Term Loan, due 1/27/2012 2,431,001
Allied Waste North America, Inc. Term Loan:
10,300,212 due 1/15/2010 10,335,624
3,535,714 Tranche D, due 1/15/2010 3,545,660
5,940,150 Buhrmann US, Inc. Term Loan C-1 Facility, due 12/23/2010 6,070,091
3,929,243 Corrections Corp. of America Term Loan C, due 3/31/2008 3,995,549
6,106,136 Great Lakes Term Loan, due 12/23/2010 6,106,136
7,682,418 Prime Succession Inc. Term Loan, due 8/01/2003 (d) 1
5,254,236 URS Corp. Term Loan B, due 7/01/2008 5,285,436
United Rentals, Inc.:
3,308,333 Term Loan, due 2/14/2011 3,368,297
666,667 Tranche B, Credit-Linked Deposit, due 2/14/2011 677,292
---------------
41,815,087
Steel--0.0% 9,920,779 Acme Metals, Inc. Term Loan, due 12/01/2005 (d) 1
Telecommunications-- 2,000,000 Alaska Communications Systems Holdings, Inc. Term Loan, due
2.1% 2/01/2012 2,021,562
8,046,000 Consolidated Communications, Inc. Term Loan C, due 10/14/2011 8,126,460
WilTel Communications, LLC:
8,976,316 First Lien Term Loan, due 6/30/2011 8,892,163
3,500,000 Second Lien Term Loan, due 12/31/2010 3,327,188
---------------
22,367,373
Transportation--0.5% 5,194,118 Sirva Worldwide Tranche B Term Loan, due 12/01/2010 5,135,684
Utilities--8.0% 2,000,000 The AES Corp. Term Loan, due 4/30/2008 2,046,250
6,895,000 Calpine Corp. Second Lien Term Loan, due 7/15/2007 6,169,591
Calpine Generating Co. LLC Term Loan:
4,875,000 First Priority, due 4/01/2009 5,007,030
8,125,000 Second Priority, due 3/11/2010 7,964,531
11,910,000 Cogentrix Delaware Holdings, Inc. Term Loan, due 2/25/2009 11,939,775
5,771,000 Dynegy Holdings Inc. Term Loan, due 5/27/2010 5,879,206
El Paso Corp.:
3,937,500 Deposit Account, due 11/23/2009 4,005,485
6,536,250 Term Loan, due 11/23/2009 6,658,805
9,975,000 KGEN Term Loan, due 6/17/2011 10,099,687
NRG Energy:
1,050,000 Credit Linked Deposit, due 12/24/2007 1,065,094
1,350,000 Term Loan, due 12/24/2011 1,369,912
6,700,000 Reliant Energy, Inc. Term Loan, due 4/30/2010 6,810,671
2,364,000 TNP Enterprises, Inc. Term Loan, due 12/31/2006 2,396,505
9,907,692 Texas Genco Initial Term Loan, due 12/14/2011 10,077,639
3,500,000 Tucson Electric Power Company Term Loan, due 6/30/2009 3,536,460
---------------
85,026,641
Wireless 3,000,000 American Towers Term Loan B, due 8/31/2011 3,043,827
Communications-- 4,257,000 Centennial Cellular Operating Co. Term Loan, due 2/09/2011 4,331,498
3.4% 4,500,000 Nextel Partners Operating Corp. Tranche C Term Loan, due 5/31/2011 4,567,900
12,641,487 SBA Senior Finance, Inc. Tranche C Term Loan, due 10/31/2008 12,841,640
11,500,000 SpectraSite Communications Term Loan B, due 5/01/2012 11,628,179
---------------
36,413,044
Total Investments in Senior Secured Floating Rate
Loan Interests (Cost--$873,063,958)--79.5% 844,974,462
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Schedule of Investments (continued) Master Senior Floating Rate Trust (in U.S. dollars)
Face
Industry++ Amount Corporate Debt Value
Broadcasting--0.6% $6,000,000 Paxson Communications Corp., 5.41% due 1/15/2010 (a)(b) $ 6,135,000
250,000 XM Satellite Radio, Inc., 8.243% due 5/01/2009 (a) 257,188
---------------
6,392,188
Cable--U.S.--0.1% 500,000 Intelsat Bermuda Ltd., 7.794% due 1/15/2012 (a)(b) 513,750
Chemicals--1.0% 1,100,000 Crompton Corp., 8.71% due 8/01/2010 (a) 1,193,500
6,525,000 GEO Speciality Chemicals, Inc., 11.064% due 12/31/2009 (h) 6,965,438
1,662,678 PCI Chemicals Canada, Inc., 10% due 12/31/2008 1,779,065
269,797 Pioneer Cos., Inc., 6.05% due 12/31/2006 (a) 284,636
---------------
10,222,639
Diversified 250,000 Universal City Florida Holding Co. I/II, 7.493% due 5/01/2010 (a)(b) 261,875
Media--0.0%
Food & Drug--0.0% 250,000 Duane Reade Inc., 7.51% due 12/15/2010 (a)(b) 250,000
Leisure--0.9% 9,200,000 Felcor Lodging LP, 6.874% due 6/01/2011 (a) 9,763,500
Paper--0.0% 250,000 Boise Cascade LLC, 5.535% due 10/15/2012 (a)(b) 258,125
Telecommunications-- 9,500,000 Qwest Communications International, 6.294% due 2/15/2009 (a)(b) 9,690,000
1.6% 7,000,000 Time Warner Telecom Holdings, Inc., 6.794% due 2/15/2011 (a) 7,262,500
---------------
16,952,500
Wireless 250,000 Rogers Wireless Communications, Inc., 6.135% due 12/15/2010 (a) 263,750
Communications--
0.0%
Total Investments in Corporate Debt
(Cost--$47,435,294)--4.2% 44,878,327
Shares
Held Common Stocks
Chemicals--0.1% 39,151 GEO Specialty Chemicals, Inc. (g) 587,265
22,595 Pioneer Cos., Inc. (g) 601,479
---------------
1,188,744
Consumer 6,306 Holmes Products Corporation (g) 0
Non-Durables--0.0%
Metals & Mining--0.0% 51,714 Acme Package Corp. Senior Holdings (g) 142,214
Services--0.1% 44,744 The Shaw Group, Inc. (g) 930,675
Total Investments in Common Stocks
(Cost--$641,868)--0.2% 2,261,633
Warrants (c)
Paper--0.0% 57 Cellu Tissue Holdings, Inc. Series A (expires 9/28/2011) 0
Total Investments in Warrants (Cost--$1)--0.0% 0
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Schedule of Investments (concluded) Master Senior Floating Rate Trust (in U.S. dollars)
Beneficial
Industry++ Interest Other Interests (e) Value
Health Care--0.0% $ 14,398 MEDIQ Incorporated (Preferred Stock Escrow due 2/01/2006) $ 0
17,263,637 Medical Specialties Acquisition LLC 0
17,263,637 Medical Specialties Mezzanine LLC 0
---------------
0
Total Investments in Other Interests (Cost--$0)--0.0% 0
Face
Amount Short-Term Securities
$152,752,954 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (f) 152,752,954
Total Investments in Short-Term Securities
(Cost--$152,752,954)--14.4% 152,752,954
Total Investments (Cost--$1,073,894,075+++)--98.3% 1,044,867,376
Other Assets Less Liabilities--1.7% 17,706,502
---------------
Net Assets--100.0% $ 1,062,573,878
===============
(a) Floating rate note.
(b) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(c) Warrants entitle the Trust to purchase a predetermined number
of shares of common stock and are non-income producing. The
purchase price and number of shares are subject to adjustment
under certain conditions until the expiration date.
(d) Non-income producing security; issuer filed for bankruptcy or is in
default of interest payments.
(e) Other Interests represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
(f) Investments in companies considered to be an affiliate of the Trust
(such companies are defined as "Affiliated Companies" in Section
2(a)(3) of the Investment Company Act of 1940) were as follows:
Net Interest
Affiliate Activity Income
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $(41,581,561) $1,107,171
(g) Non-income producing security.
(h) Convertible security.
* Senior secured floating rate loan interests in which the Trust invests
generally pay interest at rates that are periodically redetermined by
reference to a base lending rate plus a premium. These base lending
rates are generally (i) the lending rate offered by one or more major
European banks, such as LIBOR (London InterBank Offered Rate), (ii)
the prime rate offered by one or more major U.S. banks or (iii) the
certificate of deposit rate.
++ For Trust compliance purposes, "Industry" means any one or more of
the industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by Trust
management. This definition may not apply for purposes of this report,
which may combine industry sub-classifications for reporting ease.
+++ The cost and unrealized appreciation (depreciation) of investments
as of February 28, 2005, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 1,074,023,067
================
Gross unrealized appreciation $ 13,592,985
Gross unrealized depreciation (42,748,676)
----------------
Net unrealized depreciation $ (29,155,691)
================
See Notes to Financial Statements.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Statement of Assets and Liabilities Master Senior Floating Rate Trust
As of February 28, 2005
Assets
Investments in unaffiliated securities, at value (identified cost--$921,141,121) $ 892,114,422
Investments in affiliated securities, at value (identified cost--$152,752,954) 152,752,954
Cash 4,447,460
Unfunded loan commitment 15,457
Receivables:
Securities sold $ 19,276,576
Interest (including $10,257 from affiliates) 5,855,446
Contributions 1,802,109
Commitment fees 93,959
Principal paydowns 5,625 27,033,715
---------------
Prepaid expenses 14,503
---------------
Total assets 1,076,378,511
---------------
Liabilities
Payables:
Securities purchased 8,056,493
Investment adviser 605,084
Other affiliates 9,150 8,670,727
---------------
Deferred income 3,031
Accrued expenses and other liabilities 5,130,875
---------------
Total liabilities 13,804,633
---------------
Net Assets
Net assets $ 1,062,573,878
===============
Net Assets Consist of
Investors' capital $ 1,091,585,120
Unrealized depreciation--net (29,011,242)
---------------
Net Assets $ 1,062,573,878
===============
See Notes to Financial Statements.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Statement of Operations Master Senior Floating Rate Trust
For the Six Months Ended February 28, 2005
Investment Income
Interest (including $1,107,171 from affiliates) $ 26,234,896
Facility and other fees 509,858
---------------
Total income 26,744,754
---------------
Expenses
Investment advisory fees $ 4,915,511
Accounting services 181,233
Professional fees 100,390
Custodian fees 40,895
Trustees' fees and expenses 26,723
Pricing fees 5,747
Printing and shareholder reports 1,320
Other 15,105
---------------
Total expenses 5,286,924
---------------
Investment income--net 21,457,830
---------------
Realized & Unrealized Gain--Net
Realized gain on investments--net 696,962
Change in unrealized appreciation (depreciation) on:
Investments--net 12,673,008
Unfunded corporate loans--net 226,190 12,899,198
--------------- ---------------
Total realized and unrealized gain--net 13,596,160
---------------
Net Increase in Net Assets Resulting from Operations $ 35,053,990
===============
See Notes to Financial Statements.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Statements of Changes in Net Assets Master Senior Floating Rate Trust
For the Six For the
Months Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 2005 2004
Operations
Investment income--net $ 21,457,830 $ 36,846,436
Realized gain (loss)--net 696,962 (66,942,419)
Change in unrealized appreciation (depreciation)--net 12,899,198 121,530,179
--------------- ---------------
Net increase in net assets resulting from operations 35,053,990 91,434,196
--------------- ---------------
Capital Transactions
Proceeds from contributions 82,495,978 250,140,432
Fair value of withdrawals (107,857,198) (231,571,350)
--------------- ---------------
Net increase (decrease) in net assets derived from capital transactions (25,361,220) 18,569,082
--------------- ---------------
Net Assets
Total increase in net assets 9,692,770 110,003,278
Beginning of period 1,052,881,108 942,877,830
--------------- ---------------
End of period $ 1,062,573,878 $ 1,052,881,108
=============== ===============
See Notes to Financial Statements.
Statement of Cash Flows Master Senior Floating Rate Trust
For the Six
Months Ended
February 28,
2005
Cash Provided by Operating Activities
Net increase in net assets resulting from operations $ 35,053,990
Adjustments to reconcile net increase in net assets resulting from operations to net cash
provided by operating activities:
Increase in receivables (1,651,576)
Decrease in other assets 158,853
Increase in other liabilities 5,610,945
Realized and unrealized gain--net (13,596,160)
Amortization of premium and discount 97,907
Proceeds from sales and paydowns of long-term securities 206,038,341
Purchases of long-term securities (314,944,954)
Purchases of short-term investments (461,693,253)
Proceeds from sales and maturities of short-investments 553,511,092
---------------
Net cash provided by operating activities 8,585,185
---------------
Cash Used for Financing Activities
Cash receipts on capital contributions 85,737,097
Cash payments on capital withdrawals (107,857,198)
---------------
Net cash used for financing activities (22,120,101)
---------------
Cash
Net decrease in cash (13,534,916)
Cash at beginning of period 17,982,376
---------------
Cash at end of period $ 4,447,460
===============
See Notes to Financial Statements.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Financial Highlights Master Senior Floating Rate Trust
For the Period
For the Six October 6,
Months Ended 2000++ to
The following ratios have been derived from February 28, For the Year Ended August 31, August 31,
from information provided in the financial statements. 2005 2004 2003 2002 2001
Total Investment Return**
Total investment return 3.34%+++ 10.15% 11.07% (4.66%) --
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses, excluding interest expense 1.02%* 1.02% 1.04% 1.09% 1.06%*
========== ========== ========== ========== ==========
Expenses 1.02%* 1.02% 1.05% 1.12% 1.06%*
========== ========== ========== ========== ==========
Investment income--net 4.15%* 3.81% 4.80% 5.31% 7.92%*
========== ========== ========== ========== ==========
Leverage
Amount of borrowings outstanding, end of period
(in thousands) -- -- -- $ 13,000 --
========== ========== ========== ========== ==========
Average amount of borrowings outstanding during
the period (in thousands) -- -- $ 3,187 $ 3,959 --
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $1,062,574 $1,052,881 $ 942,878 $ 182,205 $ 376,931
========== ========== ========== ========== ==========
Portfolio turnover 25.40% 76.45% 56.56% 36.77% 19.53%
========== ========== ========== ========== ==========
* Annualized.
** Total investment return is required to be disclosed for fiscal years beginning after December 15, 2000.
++ Commencement of operations.
+++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
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, as amended, and is organized as
a Delaware statutory 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 U.S. generally accepted accounting
principles, which may require the use of management accruals and
estimates. Actual results may differ from these estimates. These
unaudited financial statements reflect all adjustments, which are,
in the opinion of management, necessary to present a fair statement
of the results for the interim period. 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 primarily invests in
senior secured floating rate loan interests ("Loan Interests") with
collateral having a market value, at the 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. Because
agents, banks and intermediate participants from whom the Trust
purchases the loan interest are primarily financial institutions,
the Trust's investment in Corporate Loans at February 28, 2005 could
be considered to be concentrated in the industry group consisting of
financial institutions.
(b) Valuation of investments--Loan Interests are valued in
accordance with guidelines established by the Board of Trustees.
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 matrixes to determine valuations. If the pricing
service does not provide a value for the loan interests, the
Investment Adviser will value the Loan Interests at fair value,
which is intended to approximate market value.
Securities that are held by the Trust that are traded on stock
exchanges or the Nasdaq National Market are valued at the last
sale price or official close price on the exchange on which such
securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last
available bid price for long positions, and at the last available
ask price for short positions. In cases where securities are traded
on more than one exchange, the securities are valued on the exchange
designated as the primary market by or under the authority of the
Board of Trustees of the Trust. Long positions in securities traded
in the over-the-counter ("OTC") market, Nasdaq Small Cap or Bulletin
Board are valued at the last available bid price or yield equivalent
obtained from one or more dealers or pricing services approved by
the Board of Trustees of the Trust. Short positions in securities
traded in the OTC market are valued at the last available ask price.
Portfolio securities that are traded both in the OTC market and
on a stock exchange are valued according to the broadest and most
representative market. When the Trust writes an option, the amount
of the premium received is recorded on the books of the Trust as
an asset and an equivalent liability. The amount of the liability
is subsequently valued to reflect the current market value of
the option written, based on the last sale price in the case of
exchange-traded options or, in the case of options traded in the
OTC market, the last ask price. Options purchased by the Trust are
valued at their last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the
last bid price. The value of swaps, including interest rate swaps,
caps and floors, will be determined by obtaining dealer quotations.
Other investments, including futures contracts and related options,
are stated at market value. Obligations with remaining maturities of
60 days or less are valued at amortized cost unless the Investment
Adviser believes that this method no longer produces fair
valuations. Repurchase agreements will be valued at cost plus
accrued interest. The Trust employs certain pricing services to
provide securities prices for the Trust. 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, including valuations furnished
by the pricing services retained by the Trust, which may use a
matrix system for valuations. The procedures of a pricing service
and its valuations are reviewed by the officers of the Trust under
the general supervision of the Board of Trustees. Such valuations
and procedures will be reviewed periodically by the Trustees.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Notes to Financial Statements (continued)
Master Senior Floating Rate Trust
Generally, trading in foreign securities, as well as U.S. government
securities and money market instruments, is substantially completed
each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in
computing the net assets of the Trust are determined as of such
times. Foreign currency exchange rates also are generally determined
prior to the close of business on the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may
occur between the times at which they are determined and the close
of business on the NYSE that may not be reflected in the computation
of the Trust's net assets. If events (for example, a company
announcement, market volatility or a natural disaster) occur during
such periods that are expected to materially affect the value of
such securities, those securities may be valued at their fair value
as determined in good faith by the Board of Trustees or by the
Investment Adviser using a pricing service and/or procedures
approved by the Board of Trustees.
(c) Derivative financial instruments--The Trust may engage in
various portfolio investment strategies both to increase the return
of the Trust and to hedge, or protect, its exposure to interest rate
movements and movements in the securities markets. Losses may arise
due to changes in the value of the contract or if the counterparty
does not perform under the contract.
* Swaps--The Trust may enter into swap agreements, which are over-
the-counter contracts in which the Trust and counterparty agree to
make periodic net payments on a specified notional amount. The net
payments can be made for a set period of time or may be triggered by
a predetermined credit event. The net periodic payments may be based
on a fixed or variable interest rate; the change in market value of
a specified security, basket of securities, or index; or the return
generated by a security. These periodic payments received or made by
the Fund are recorded in the accompanying Statement of Operations as
realized gains or losses, respectively. Gains or losses are also
realized upon termination of the swap agreements. Swaps are marked-
to-market daily based on dealer-supplied valuations and changes in
value are recorded as unrealized appreciation (depreciation). Risks
include changes in the returns of the underlying instruments,
failure of the counterparties to perform under the contracts' terms
and the possible lack of liquidity with respect to the swap
agreements.
(d) Income taxes--The Trust is classified as a partnership for
federal income tax purposes. As such, each investor in the Trust
is treated as owner of its proportionate share of the net assets,
income, expenses and realized and unrealized gains and losses of 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 Trust amortizes
all premiums and discounts on debt securities.
(f) Securities lending--The Trust may lend securities to financial
institutions that provide cash or securities issued or guaranteed
by the U.S. government as collateral, which will be maintained at
all times in an amount equal to at least 100% of the current market
value of the loaned securities. The market value of the loaned
securities is determined at the close of business of the Trust and
any additional required collateral is delivered to the Trust on the
next business day. Where the Trust receives securities as collateral
for the loaned securities, it receives a fee from the borrower. The
Trust typically receives the income on the loaned securities, but
does not receive the income on the collateral. Where the Trust
receives cash collateral, it may invest such collateral and retain
the amount earned on such investment, net of any amount rebated to
the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities
within five business days. The Trust may pay reasonable finder's,
lending agent, administrative and custodial fees in connection with
its loans. In the event that the borrower defaults on its obligation
to return borrowed securities because of insolvency or for any other
reason, the Trust could experience delays and costs in gaining
access to the collateral. The Trust also could suffer a loss where
the value of the collateral falls below the market value of the
borrowed securities, in the event of borrower default or in the
event of losses on investments made with cash collateral.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Notes to Financial Statements (concluded)
Master Senior Floating Rate Trust
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.
The Trust has received an exemptive order from the Securities and
Exchange Commission permitting it to lend portfolio securities to
Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of
FAM, or its affiliates. Pursuant to that order, the Trust also has
retained Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an
affiliate of FAM, as the securities lending agent for a fee based on
a share of the returns on investment of cash collateral. MLIM, LLC
may, on behalf of the Trust, invest cash collateral received by the
Trust for such loans, among other things, in a private investment
company managed by MLIM, LLC or in registered money market funds
advised by FAM or its affiliates.
For the six months ended February 28, 2005, the Trust reimbursed FAM
$12,592 for certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or
directors of FAM, PSI and/or ML & Co.
3. Investments:
Purchases and sales (including paydowns) of investments, excluding
short-term securities, for the six months ended February 28, 2005
were $311,153,670 and $225,306,906, respectively.
4. Unfunded Loan Interests:
As of February 28, 2005, the Trust had unfunded loan commitments of
approximately $31,102,000 which would be extended at the option of
the borrower, pursuant to the following loan agreement:
Unfunded
Commitment
Borrower (In Thousands)
Advanced Medical $1,000
Celaneses Holdings TLC $1,916
Pinnacle Entertainment,Inc. $4,594
NFIL Holdings Corp. $5,000
Saguaro Utility Group $7,500
Texas Genco $4,092
Vanguard Health Systems, Inc. $1,000
Vought Aircraft Industries, Inc. $6,000
5. Short-Term Borrowings:
The Trust, along with certain other funds managed by FAM and its
affiliates, is a party to a $500,000,000 credit agreement with a
group of 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 .07% per
annum based on the Trust's pro rata share of the unused portion of
the credit agreement. Amounts borrowed under the credit agreement
bear interest at a rate equal to, at each Trust's election, the
federal funds rate plus .50% or a base rate as defined in the credit
agreement. The Trust did not borrow under the credit agreement
during the six months ended February 28, 2005. On November 26, 2004,
the credit agreement was renewed for one year under substantially
the same terms.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Portfolio Information
Master Senior Floating Rate Trust
As of February 28, 2005
Percent of
Ten Largest Holdings Net Assets
Century Cable Holdings LLC 4.7%
Charter Communications Operating LLC 4.0
Wyndham International, Inc.* 2.4
Olympus Cable Holdings, LLC 2.2
Huntsman International LLC 1.8
PanAmSat Corp. Tranche B 1.6
Frontiervision Operating Partners LP* 1.8
Allied Waste North America, Inc.* 1.3
SBA Senior Finance, Inc. 1.2
Calpine Generating Co. LLC* 1.2
*Includes combined holdings and/or affiliates, where applicable.
Percent of
Five Largest Industries* Net Assets
Cable--U.S. 18.1%
Chemicals 7.9
Utilities 8.0
Manufacturing 4.2
Health Care 3.4
* For Trust compliance purposes, "Industries" means any one or
more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes,
and/or as defined by Trust management. This definition may
not apply for purposes of this report, which may combine
industry sub-classifications for reporting ease.
Percent of
Quality Ratings by Total
S&P/Moody's Investments
BBB/Baa 0.1%
BB/Ba 27.7
B/B 43.8
CCC/Caa 6.9
NR (Not Rated) 6.7
Other* 14.8
* Includes portfolio holdings in common stocks, warrants, other
interests and short-term investments.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third
quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are
available on the SEC's Web site at http://www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its
shareholders. In order to receive this service, you must
register your account and provide us with e-mail information.
To sign up for this service, simply access this Web site at
http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification
number (PIN). You will need this PIN should you wish to update your
e-mail address, choose to discontinue this service and/or make any
other changes to the service. This service is not available for
certain retirement accounts at this time.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., FEBRUARY 28, 2005
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this
semi-annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to
this semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to
this semi-annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies - Not Applicable to this
semi-annual report
Item 8 - Portfolio Managers of Closed-End Management Investment
Companies - Not Applicable to this semi-annual report
Item 9 - Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not
Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably
designed such disclosure controls and procedures to ensure material
information relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
11(b) - There were no changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year
of the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual
report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Merrill Lynch Senior Floating Rate Fund, Inc. and Master Senior
Floating Rate Trust
By: _/s/ Robert C. Doll, Jr._______
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Senior Floating Rate Fund, Inc. and
Master Senior Floating Rate Trust
Date: April 22, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Robert C. Doll, Jr.________
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Senior Floating Rate Fund, Inc. and
Master Senior Floating Rate Trust
Date: April 22, 2005
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Senior Floating Rate Fund, Inc. and
Master Senior Floating Rate Trust
Date: April 22, 2005