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 811-21318
Name of Fund: Corporate High Yield Fund VI, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Corporate High
Yield Fund VI, Inc., 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: 08/31/04
Date of reporting period: 09/01/03 - 02/29/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Corporate High Yield
Fund VI, Inc.
Semi-Annual Report
February 29, 2004
[LOGO] Merrill Lynch Investment Managers
Corporate High Yield Fund VI, Inc.
The Benefits and Risks of Leveraging
Corporate High Yield Fund VI, Inc. utilizes leveraging through 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 yield earned by the Fund on its longer-term portfolio
investments. Since the total assets of the Fund (including the assets obtained
from leverage) are invested in higher-yielding portfolio investments, the Fund's
Common Stock shareholders are the beneficiaries of the incremental yield.
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 Preferred Stock) may reduce
the Common Stock's yield and negatively impact its net asset value and 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.
2 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004
A Letter From the President
Dear Shareholder
As I write to you at February month-end, fixed income markets in the United
States continued to reward those investors willing to accept greater risk. The
high yield market, as measured by the Credit Suisse First Boston High Yield
Index, provided a return of +10.88% over the past six months and +25.17% for the
12-month period ended February 29, 2004. In other areas of fixed income,
investment grade corporate bonds, as measured by the Merrill Lynch Corporate
Master Index, returned +6.59% and +8.11% for the six-month and 12-month periods
ended February 29, 2004, respectively. U.S. Treasury issues, as measured by the
Merrill Lynch U.S. Treasuries 1 - 10 Years Index, returned +3.16% and +2.73% for
the six-month and 12-month periods ended February 29, 2004, respectively.
At this time, equity markets maintained their positive momentum from year-end
2003. For the six-month and 12-month periods ended February 29, 2004, the
Standard & Poor's (S&P) 500 Index returned +14.59% and +38.52%, respectively.
Much of the boost came from improving economic conditions in the United States.
The major signposts indicate that we are seeing a shift from economic growth
fueled primarily by fiscal and monetary stimulus to a broader-based,
self-sustaining economic expansion. Gross domestic product growth, which peaked
at an annualized rate of 8.2% in the third quarter of 2003, was 4.1% in the
fourth quarter. A similar level of growth is expected in the first quarter of
2004. For its part, the Federal Reserve Board has reiterated its willingness to
keep short-term interest rates at current low levels to ensure the economy's
strength.
Accompanying the increase in economic activity was an improvement in corporate
earnings. By February 10, 2004, 392 of the S&P 500 companies had reported their
fourth-quarter 2003 results, and 67.6% of those exceeded expectations. In the
meantime, the American consumer, who continued to spend despite the faltering
economy, may get further incentive from another round of Federal tax refunds
this year.
At Merrill Lynch Investment Managers, we believe the events and efforts of 2003
leave us with a much stronger economy and that recent optimism suggests it is
time for investors to consider what can go right in 2004. We encourage you to
revisit your portfolio and your asset allocation strategy to ensure you are well
positioned to take advantage of the opportunities that lie ahead.
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,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Managers
Fund performance benefited during the period from favorable security
selection and our use of leverage, a strategy that enhances returns in a rising
market.
How did the Fund perform during the period?
For the six-month period ended February 29, 2004, the Common Stock of Corporate
High Yield Fund VI, Inc. had net annualized yields of 9.08% and 9.77%, based on
a period-end per share net asset value of $15.74 and a per share market price of
$14.63, respectively, and $.713 per share income dividends. Over the same
period, the total investment return of the Fund's Common Stock was +15.04%,
based on a change in per share net asset value from $14.39 to $15.74, and
assuming reinvestment of $.713 per share ordinary income dividends and $.024 per
share capital gains distributions.
The Fund's return significantly exceeded that of the high yield market, as
measured by the Credit Suisse First Boston (CSFB) High Yield Index, which
returned +10.88% for the six-month period ended February 29, 2004. The Fund
underperformed its comparable Lipper category of High Current Yield Funds
(Leveraged), which had an average return of +15.36% for the same period. (Funds
in this Lipper category aim for relatively high current yield from investment in
fixed income securities, have no quality or maturity restrictions and tend to
invest in lower-grade debt issues.)
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of dividends, please refer to the Financial Highlights section
included in this report. As a closed-end fund, the Fund's shares may trade in
the secondary market at a premium or a discount to the Fund's net asset value.
As a result, total investment returns based on changes in the market value of
the Fund's Common Stock can vary significantly from total investment returns
based on changes in the Fund's net asset value.
What factors contributed to the Fund's performance?
Fund performance benefited from the use of leverage and positive results from
several holdings that rebounded during the period. Expectations of economic
recovery and improving corporate earnings supported a continued strong high
yield market during the past six months. The riskier, previously downtrodden
sectors and credits were the market's best performers during the period. Within
these categories, Fund performance benefited from our holdings in two
independent power producers, Calpine Corporation and Mission Energy Holding
Company. Our positions in the chemical and airlines sectors also enhanced the
Fund's return.
Toward the end of the period, the high yield market softened as investors became
concerned about the momentum of economic growth. Consequently, the prices of
riskier credits, particularly those with larger issues, as well as securities of
companies that announced earnings disappointments, fell considerably. This led
to significant declines in the values of several portfolio holdings, including
El Paso Corporation's Coastal subsidiary, which announced large oil and gas
reserve write-downs; Time Warner Telecom Inc. which cancelled a bond
refinancing; and Charter Communications Holdings, LLC, a highly leveraged cable
television provider. We believe these bonds have adequate asset protection, and
we intend to maintain our positions. We also believe the market will be choppy
in the near term, as investors reassess their expectations for earnings growth
and reposition their portfolios defensively in anticipation of rising interest
rates.
What changes were made to the portfolio during the period?
During the period, we allocated approximately 6.5% of the Fund's net assets to
convertible securities in an effort to capture the potential upside in the
equity markets. The goal also was to diversify the portfolio amid what we
believe is an increasingly skittish and fully valued high yield market.
Convertibles can be volatile, reflecting movements in the underlying stocks;
therefore, we anticipate that our holdings will be subject to the same risks.
However, we have attempted to mitigate that risk by choosing higher-quality
issues and by purchasing bonds that are somewhat insulated from downside
volatility while benefiting from rising stock prices. Among the Fund's most
significant convertible positions are Tyco International Group SA (rated BBB-),
General Motors Corporation (BBB), Liberty Media Corporation (BBB-) and the
securities of Citizens Utilities Trust (BB+), a telephone service provider.
4 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004
We also temporarily increased our holdings in the riskier CCC-rated credits. The
strong performance of several of our downtrodden credits -- most notably Mission
Energy and Calpine -- increased the Fund's weighting in the CCC sector, as we
did not reduce our holdings when the prices of these securities rose. Our
overweight position in this rating category also reflects our view that the
underlying credit quality of several companies with CCC-rated securities is
better than the credit quality implied by the rating. We believe the low rating
may reflect recently resolved financial difficulties (as is the case with Qwest
Communications International, Inc., a telecommunications provider), or high
financial leverage on what we consider to be sound and improving fundamentals
(for example, American Tower Corporation).
The Fund's leverage position averaged 26.3% during the six-month period. That
is, the Fund borrowed the equivalent of 26.3% of total assets invested, earning
incremental yield on the investments we made with the borrowed funds. As of
February 29, 2004, the Fund was 26.2% leveraged after borrowing $196.7 million
at a cost of 1.03%. For the six-month period, the average amount borrowed was
approximately $175.9 million and the daily weighted average borrowing rate was
1.37%. While leveraging will hinder the Fund's total return in a weak market,
the converse also is true. We intend to maintain our leverage position in the
mid-20% range, although that level may vary somewhat as we adjust the
portfolio's holdings. (For a more complete discussion of the benefits and risks
of leveraging, see page 2 of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
The attractive valuations found in the market during 2003 have largely
evaporated, leaving more limited potential for strong upward momentum in the
high yield market. We expect increasing market volatility in the near term, but
believe high yield securities will continue to find support from a gradually
improving economy and the resultant positive corporate earnings. We believe that
increasing pressure for higher interest rates will have a greater effect on the
high yield market toward the end of 2004.
Within this broad picture, we believe certain industries, such as the utility
and independent power producer sector, represent good relative value. As of
February 29, 2004, two of the Fund's largest industry allocations were in
utilities, at 10.1% of total market value, and wireless telecommunications, at
6.7%. In our opinion, the utility sector has exhibited favorable fundamentals,
and the independent power producer subsector offers attractive valuations. We
also believe there is strong underlying fundamental growth in the wireless
telecommunications sector, particularly the communications tower companies.
The Fund is underweight in the leisure sector, based on our belief that these
securities already have priced in the upside potential. We maintain an
underweight in information technology, given our perception of high valuations
and volatile earnings. We have limited exposure to the retail, food and drug,
and finance sectors based on what we believe is inadequate and uncertain asset
protection in these areas of the market. Similar to the CSFB High Yield Index,
the Fund had an average credit rating of B at the close of the period.
B. Daniel Evans
Vice President and Portfolio Manager
Elizabeth M. Phillips
Vice President and Portfolio Manager
March 15, 2004
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004 5
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (in U.S. dollars)
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
===================================================================================================================================
Aerospace & Defense-- B B2 $ 3,900,000 Alliant Techsystems Inc., 2.75% due 2/15/2024
3.3% (Convertible) (a) $ 4,007,250
B+ B1 2,000,000 Esterline Technologies Corporation, 7.75%
due 6/15/2013 2,140,000
K & F Industries, Inc.:
B B3 1,200,000 9.25% due 10/15/2007 1,239,000
B B3 1,500,000 9.625% due 12/15/2010 1,676,250
L-3 Communications Corporation:
BB- Ba3 1,500,000 7.625% due 6/15/2012 1,665,000
BB- Ba3 2,000,000 6.125% due 7/15/2013 2,055,000
B- B3 3,500,000 TD Funding Corp., 8.375% due 7/15/2011 3,692,500
B B2 1,750,000 The Titan Corporation, 8% due 5/15/2011 (a) 1,995,000
-------------
18,470,000
===================================================================================================================================
Airlines--1.8% BB B1 3,625,000 American Airlines, Inc., 7.80% due 10/01/2006 3,505,064
Continental Airlines, Inc.:
CCC+ Caa2 975,000 8% due 12/15/2005 945,750
B+ B2 354,023 6.541% due 9/15/2008 337,626
BB- B2 2,005,386 7.033% due 6/15/2011 1,834,708
BB+ Ba2 3,796,951 6.90% due 1/02/2017 3,361,203
-------------
9,984,351
===================================================================================================================================
Automotive--1.9% B B3 2,125,000 Asbury Automotive Group Inc., 8% due 3/15/2014 (a) 2,130,312
BBB Baa1 975,000 General Motors Corporation, 8.25% due 7/15/2023 1,090,789
Metaldyne Corporation:
B Caa1 4,125,000 11% due 6/15/2012 3,867,188
B B3 1,725,000 10% due 11/01/2013 (a) 1,785,375
B B3 1,500,000 United Auto Group, Inc., 9.625% due 3/15/2012 1,657,500
-------------
10,531,164
===================================================================================================================================
Broadcasting--3.9% CCC B3 3,900,000 Granite Broadcasting Corporation, 9.75%
due 12/01/2010 (a) 3,831,750
B B2 3,750,000 LIN Television Corporation, 6.50% due 5/15/2013 3,825,000
B- B3 3,500,000 NextMedia Operating, Inc., 10.75% due 7/01/2011 3,928,750
Salem Communications Holding Corporation:
B- B3 6,375,000 7.75% due 12/15/2010 6,757,500
B- B3 125,000 9% due 7/01/2011 136,406
Young Broadcasting Inc. (a):
B B2 1,150,000 8.50% due 12/15/2008 1,236,250
CCC+ Caa1 2,125,000 8.75% due 1/15/2014 2,199,375
-------------
21,915,031
===================================================================================================================================
Cable-- C Caa2 1,525,000 Diamond Holdings PLC, 9.125% due 2/01/2008 1,572,656
International--3.3% C Caa2 8,000,000 NTL Incorporated, 11.20% due 11/15/2007 8,050,000
Telewest Communications PLC (b):
D Ca 12,500,000 11% due 10/01/2007 8,312,500
C Ca 650,000 9.282%** due 2/01/2010 320,125
-------------
18,255,281
===================================================================================================================================
Cable--U.S.--6.9% NR* NR* 1,300,000 Adelphia Communications Corporation, 6%
due 2/15/2006 (Convertible) (b) 507,000
CCC- Caa1 456,902 Avalon Cable LLC, 11.875% due 12/01/2008 482,603
BB- B1 5,000,000 CSC Holdings, Inc., 7.625% due 4/01/2011 5,400,000
D Caa1 3,650,000 Century Cable Holdings LLC, Term,
due 12/31/2009 (e) 3,466,361
CCC- Ca 8,000,000 Charter Communications Holdings, LLC, 10%
due 4/01/2009 6,960,000
B- Caa2 4,000,000 Insight Communications Company, Inc., 10.291%**
due 2/15/2011 3,440,000
Insight Midwest, LP:
B+ B2 3,000,000 9.75% due 10/01/2009 3,157,500
B+ B2 1,550,000 10.50% due 11/01/2010 1,674,000
NR* NR* 6,500,000 Loral Cyberstar, Inc., 10% due 7/15/2006 (b) 5,037,500
NR* NR* 3,175,000 Loral Space & Communications Ltd., 9.50%
due 1/15/2006 (b) 1,365,250
B+ B2 6,425,000 Mediacom Broadband LLC, 11% due 7/15/2013 6,971,125
-------------
38,461,339
6 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004
Schedule of Investments (continued) (in U.S. dollars)
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
===================================================================================================================================
Chemicals--9.1% BB- B3 $ 1,650,000 Geon Company, 6.875% due 12/15/2005 $ 1,633,500
CCC+ NR* 3,500,000 HMP Equity Holdings Corporation, 15.382%**
due 5/15/2008 (a) 1,855,000
CCC+ Caa2 4,000,000 Huntsman International Holdings LLC, 15.243%**
due 12/31/2009 1,880,000
CCC+ Caa1 5,500,000 Huntsman International LLC, 10.125% due 7/01/2009 5,610,000
B+ B2 4,700,000 ISP Holdings, Inc., 10.625% due 12/15/2009 5,193,500
BB- B1 4,500,000 Millennium America Inc., 7% due 11/15/2006 4,545,000
Nalco Company (a):
B- B2 800,000 7.75% due 11/15/2011 832,000
B- Caa1 1,350,000 8.875% due 11/15/2013 1,417,500
B- Caa2 6,250,000 Nalco Finance Holdings Inc., 9.036%**
due 2/01/2014 (a) 3,781,250
BB- B2 4,750,000 Omnova Solutions Inc., 11.25% due 6/01/2010 5,296,250
BB- B3 4,925,000 PolyOne Corporation, 10.625% due 5/15/2010 5,072,750
CCC+ Caa1 5,575,000 Rhodia SA, 8.875% due 6/01/2011 (a) 4,989,625
B- B3 3,025,000 Rockwood Specialties Group, Inc., 10.625%
due 5/15/2011 3,357,750
B- Caa1 4,500,000 Terra Capital, Inc., 11.50% due 6/01/2010 4,927,500
-------------
50,391,625
===================================================================================================================================
Consumer Chattem, Inc. (a):
Products--2.3% B+ Ba3 1,100,000 4.12% due 3/01/2010 (c) 1,111,000
B- B2 675,000 7% due 3/01/2014 675,844
B B3 2,450,000 Hines Nurseries, Inc., 10.25% due 10/01/2011 2,670,500
CCC+ Caa1 7,000,000 Samsonite Corporation, 10.75% due 6/15/2008 7,297,500
B- B3 975,000 Tempur-Pedic, Inc., 10.25% due 8/15/2010 (a) 1,094,438
-------------
12,849,282
===================================================================================================================================
Diversified B- B3 3,575,000 CBD Media LLC, 8.625% due 6/01/2011 3,914,625
Media--8.6% B- B3 1,000,000 Cinemark USA, Inc., 8.50% due 8/01/2008 1,040,000
B Caa2 2,325,000 Dex Media, Inc., 8% due 11/15/2013 (a) 2,325,000
B Caa1 2,975,000 Dex Media West LLC, 9.875% due 8/15/2013 (a) 3,339,437
Houghton Mifflin Company:
B B2 950,000 8.25% due 2/01/2011 1,007,000
B B3 2,950,000 9.875% due 2/01/2013 3,230,250
BBB- Baa3 6,500,000 Liberty Media Corporation, 0.75% due 3/30/2023
(Convertible) 7,418,125
CCC+ Caa1 1,350,000 Nebraska Book Company, Inc., 8.625%
due 3/15/2012 (a) 1,350,000
Primedia Inc.:
B B3 1,250,000 7.625% due 4/01/2008 1,250,000
B B3 3,825,000 8.875% due 5/15/2011 3,949,313
B+ B1 1,500,000 R.H. Donnelley Financial Corporation I, 8.875%
due 12/15/2010 1,695,000
B- B2 3,075,000 Six Flags, Inc., 9.50% due 2/01/2009 3,221,063
Vivendi Universal SA:
BB Ba3 3,275,000 6.25% due 7/15/2008 3,512,438
BB Ba3 6,000,000 9.25% due 4/15/2010 7,065,000
BB- NR* 3,949,000 Yell Finance BV, 9.95%** due 8/01/2011 3,672,570
-------------
47,989,821
===================================================================================================================================
Energy--Exploration & CCC+ Caa1 1,750,000 Continental Resources, Inc., 10.25% due 8/01/2008 1,802,500
Production--3.5% B B2 650,000 EXCO Resources, Inc., 7.25% due 1/15/2011 (a) 667,875
B B2 4,900,000 Nuevo Energy Company, 9.375% due 10/01/2010 5,426,750
B B2 4,250,000 Plains Exploration & Production Company, 8.75%
due 7/01/2012 4,749,375
BB- Ba3 1,750,000 Vintage Petroleum, Inc., 8.25% due 5/01/2012 1,933,750
B+ Ba3 4,600,000 Westport Resources Corporation, 8.25%
due 11/01/2011 5,083,000
-------------
19,663,250
===================================================================================================================================
Energy--Other--4.5% BB Ba3 3,500,000 CITGO Petroleum Corporation, 11.375% due 2/01/2011 4,165,000
B B2 4,500,000 Dresser, Inc., 9.375% due 4/15/2011 4,860,000
BBB Baa2 3,800,000 Halliburton Company, 3.125% due 7/15/2023
(Convertible)(a) 4,294,000
CCC B3 4,100,000 Ocean Rig Norway AS, 10.25% due 6/01/2008 3,854,000
Star Gas Partners, LP:
B B3 3,000,000 10.25% due 2/15/2013 3,330,000
B B3 2,000,000 10.25% due 2/15/2013 (a) 2,220,000
CCC Caa2 3,400,000 Trico Marine Services, Inc., 8.875% due 5/15/2012 2,227,000
-------------
24,950,000
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004 7
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in U.S. dollars)
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
===================================================================================================================================
Food/Tobacco--5.7% Commonwealth Brands, Inc. (a):
B- NR* $ 1,000,000 9.75% due 4/15/2008 $ 1,095,000
B- B3 4,850,000 10.625% due 9/01/2008 5,310,750
B+ B2 5,500,000 Cott Beverages, Inc., 8% due 12/15/2011 6,008,750
B B2 2,250,000 Del Monte Corporation, 8.625% due 12/15/2012 2,486,250
CCC B2 4,125,000 Doane Pet Care Company, 10.75% due 3/01/2010 4,279,687
B- B3 4,250,000 Merisant Company, 9.50% due 7/15/2013 (a) 4,335,000
NR* NR* 2,500,000 New World Pasta Company, 9.25% due 2/15/2009 (b) 425,000
Smithfield Foods, Inc.:
BB- Ba3 2,250,000 7.625% due 2/15/2008 2,373,750
NR* Ba2 3,750,000 8% due 10/15/2009 4,092,188
B- Caa1 2,150,000 Tabletop Holdings, Inc., 12.25%** due 5/15/2014 (a) 1,182,500
-------------
31,588,875
===================================================================================================================================
Gaming--8.0% B+ B3 2,075,000 Argosy Gaming Company, 7% due 1/15/2014 (a) 2,124,281
B+ B1 5,750,000 Boyd Gaming Corporation, 8.75% due 4/15/2012 6,353,750
B B2 2,425,000 Isle of Capri Casinos, Inc., 7% due 3/01/2014 (a) 2,425,000
B B2 1,500,000 Jacobs Entertainment, Inc., 11.875% due 2/01/2009 1,605,000
BB- Ba2 3,500,000 MGM Mirage Inc., 9.75% due 6/01/2007 4,025,000
B B2 5,075,000 The Majestic Star Casino, LLC, 9.50% due 10/15/2010 5,316,062
BB- Ba2 4,000,000 Park Place Entertainment Corporation, 7.875%
due 3/15/2010 4,440,000
CCC+ Caa1 2,425,000 Pinnacle Entertainment, Inc., 8.25% due 3/15/2012 (a) 2,407,589
B B2 4,300,000 Resorts International Hotel and Casino, Inc., 11.50%
due 3/15/2009 4,751,500
B+ B2 4,000,000 Sun International Hotels, 8.875% due 8/15/2011 4,420,000
B Caa1 4,850,000 Trump Casino Holdings, LLC, 11.625% due 3/15/2010 4,813,625
CCC+ B3 1,500,000 Wynn Las Vegas, LLC, 12% due 11/01/2010 1,800,000
-------------
44,481,807
===================================================================================================================================
Health Care--7.2% B B2 2,700,000 Alaris Medical Systems, Inc., 7.25% due 7/01/2011 2,848,500
B B3 3,600,000 Alpharma Inc., 8.625% due 5/01/2011 (a) 3,744,000
BBB- Ba1 3,800,000 Apogent Technologies Inc., 0% due 12/15/2033
(Convertible) (a)(f) 4,210,780
BB- B2 1,625,000 Biovail Corporation, 7.875% due 4/01/2010 1,641,250
Fisher Scientific International Inc.:
B+ B2 2,823,000 8.125% due 5/01/2012 3,055,897
B+ B2 2,150,000 8% due 9/01/2013 2,359,625
BB- Ba2 6,250,000 Fresenius Medical Care Capital Trust II, 7.875%
due 2/01/2008 6,765,625
B- B3 5,300,000 InSight Health Services Corp., 9.875%
due 11/01/2011 (a) 5,419,250
NR* NR* 1,028,000 InterMune Inc., 5.75% due 7/15/2006 (Convertible) 1,054,985
Tenet Healthcare Corporation:
B- B3 2,500,000 5.375% due 11/15/2006 2,375,000
B- B3 2,850,000 6.375% due 12/01/2011 2,529,375
B B3 3,650,000 Triad Hospitals, Inc., 7% due 11/15/2013 (a) 3,777,750
-------------
39,782,037
===================================================================================================================================
Housing--4.9% Building Materials Corporation of America:
B+ B2 6,750,000 7.75% due 7/15/2005 6,901,875
B+ B2 2,500,000 8% due 10/15/2007 2,500,000
B+ B2 1,500,000 8% due 12/01/2008 1,500,000
BB- Ba3 3,700,000 Forest City Enterprises, Inc., 7.625% due 6/01/2015 3,959,000
Nortek Holdings, Inc.:
B+ B1 750,000 9.25% due 3/15/2007 761,565
B+ B1 1,000,000 8.875% due 8/01/2008 1,045,000
B+ B1 3,850,000 4.17% due 12/31/2010 (a)(c) 3,859,625
B- Caa1 3,100,000 10%** due 5/15/2011 (a) 2,286,250
B- B3 1,000,000 9.875% due 6/15/2011 1,115,000
BB- B1 2,700,000 Texas Industries, Inc., 10.25% due 6/15/2011 3,064,500
-------------
26,992,815
===================================================================================================================================
Information ADC Telecommunications, Inc. (Convertible):
Technology--0.9% NR* NR* 4,000,000 1% due 6/15/2008 4,300,000
NR* NR* 500,000 1.605% due 6/15/2013 (c) 550,000
-------------
4,850,000
8 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004
Schedule of Investments (continued) (in U.S. dollars)
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
===================================================================================================================================
Leisure--0.9% B- B1 $ 2,500,000 FelCor Lodging LP, 9% due 6/01/2011 $ 2,637,500
B+ B1 2,000,000 Intrawest Corporation, 7.50% due 10/15/2013 2,075,000
-------------
4,712,500
===================================================================================================================================
Manufacturing--6.2% CCC+ Caa1 1,375,000 Columbus McKinnon Corporation, 8.50% due 4/01/2008 1,313,125
B- B3 5,500,000 EaglePicher Incorporated, 9.75% due 9/01/2013 6,050,000
B- B3 4,625,000 Invensys PLC, 9.875% due 3/15/2011 (a) 4,539,299
B B2 4,500,000 JohnsonDiversey, Inc., 9.625% due 5/15/2012 4,905,000
B- B3 1,500,000 Rexnord Corporation, 10.125% due 12/15/2012 1,672,500
B B3 5,150,000 TriMas Corporation, 9.875% due 6/15/2012 5,562,000
Tyco International Group SA (Convertible):
BBB- Ba2 900,000 2.75% due 1/15/2018 1,212,750
BBB- Ba2 7,000,000 2.75% due 1/15/2018 (a) 9,432,500
-------------
34,687,174
===================================================================================================================================
Metal--Other--0.1% NR* Ba2 650,000 Vale Overseas Ltd., 8.25% due 1/17/2034 575,250
===================================================================================================================================
Packaging--5.1% B B2 1,250,000 Crown Euro Holdings SA, 10.875% due 3/01/2013 1,456,250
CCC+ Caa1 1,625,000 Graham Packaging Company, 8.75% due 1/15/2008 1,641,250
CCC+ Caa2 4,500,000 Graham Packaging Holdings Company, 10.75%
due 1/15/2009 4,635,000
BB- B2 2,000,000 Owens-Brockway Glass Container, Inc., 8.875%
due 2/15/2009 2,175,000
B Caa1 3,000,000 Owens-Illinois, Inc., 7.15% due 5/15/2005 3,090,000
Pliant Corporation:
B B3 3,875,000 11.125%** due 6/15/2009 (a) 3,100,000
B- Caa2 5,500,000 13% due 6/01/2010 4,675,000
B- B3 1,725,000 Tekni-Plex, Inc., 12.75% due 6/15/2010 1,863,000
U.S. Can Corporation:
CCC+ B3 2,150,000 10.875% due 7/15/2010 2,257,500
CCC+ Caa1 3,675,000 12.375% due 10/01/2010 3,399,375
-------------
28,292,375
===================================================================================================================================
Paper--4.7% B+ B2 3,450,000 Caraustar Industries, Inc., 9.875% due 4/01/2011 3,553,500
BB+ Ba2 6,000,000 Georgia-Pacific Corporation, 9.375% due 2/01/2013 6,915,000
Graphic Packaging International Inc.:
B- B2 1,875,000 8.50% due 8/15/2011 2,067,187
B- B3 2,200,000 9.50% due 8/15/2013 2,475,000
B B2 4,275,000 Jefferson Smurfit Corporation, 8.25% due 10/01/2012 4,638,375
B B3 4,000,000 MDP Acquisitions PLC, 9.625% due 10/01/2012 4,500,000
BB Ba3 2,000,000 Norske Skog Canada Ltd., 8.625% due 6/15/2011 2,110,000
-------------
26,259,062
===================================================================================================================================
Services--4.5% BB- Ba3 6,000,000 Allied Waste North America, Inc., 8.875%
due 4/01/2008 6,690,000
B B2 5,025,000 The Coinmach Corporation, 9% due 2/01/2010 5,364,187
B B1 4,500,000 Corrections Corporation of America, 7.50%
due 5/01/2011 4,736,250
BB- B2 575,000 NationsRent, Inc., 9.50% due 10/15/2010 (a) 621,000
Williams Scotsman, Inc.:
B- B3 6,500,000 9.875% due 6/01/2007 6,386,250
B B2 850,000 10% due 8/15/2008 926,500
-------------
24,724,187
===================================================================================================================================
Steel--1.3% B+ B3 2,700,000 AK Steel Corporation, 7.875% due 2/15/2009 2,389,500
B+ B1 2,450,000 CSN Islands VIII Corp., 9.75% due 12/16/2013 (a) 2,321,375
B B2 2,000,000 UCAR Finance Inc., 10.25% due 2/15/2012 2,280,000
-------------
6,990,875
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in U.S. dollars)
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
===================================================================================================================================
Telecommunications-- B- B2 $ 4,175,000 Alaska Communications System Holdings, Inc., 9.875%
7.5% due 8/15/2011 $ 4,404,625
Fairpoint Communications:
B- Caa1 3,750,000 9.50% due 5/01/2008 3,712,500
B- Caa1 2,000,000 12.50% due 5/01/2010 2,160,000
Qwest Capital Funding, Inc.:
CCC+ Caa2 1,600,000 6.25% due 7/15/2005 1,608,000
CCC+ Caa2 7,000,000 7.25% due 2/15/2011 6,265,000
CCC+ B3 4,100,000 Qwest Communications International Inc., 4.63%
due 2/15/2009 (a)(c) 3,874,500
CCC+ NR* 2,000,000 Qwest Services Corp., 13.50% due 12/15/2010 (a) 2,345,000
B B1 1,450,000 Time Warner Telecom Holdings, Inc., 5.12%
due 2/15/2011 (a)(c) 1,439,125
Time Warner Telecom, Inc.
CCC+ B3 4,300,000 9.75% due 7/15/2008 4,063,500
CCC+ B3 6,375,000 10.125% due 2/01/2011 5,992,500
WorldCom, Inc. (b):
NR* NR* 1,625,000 7.50% due 8/20/2004 1,283,750
NR* NR* 4,850,000 7.125% due 6/15/2027 3,831,500
NR* NR* 2,575,000 8.25% due 5/15/2031 920,563
-------------
41,900,563
===================================================================================================================================
Transportation--1.6% NR* B2 3,050,000 Laidlaw International Inc., 10.75% due 6/15/2011 (a) 3,499,875
B+ B1 875,000 OMI Corporation, 7.625% due 12/01/2013 912,188
Teekay Shipping Corporation:
BB+ Ba1 1,471,000 8.32% due 2/01/2008 1,544,550
BB- Ba2 2,500,000 8.875% due 7/15/2011 2,850,000
-------------
8,806,613
===================================================================================================================================
Utilities--13.4% The AES Corporation:
B- Caa1 7,000,000 8.375% due 8/15/2007 7,105,000
B- Caa1 3,000,000 8.50% due 11/01/2007 3,067,500
B- B3 2,000,000 9.375% due 9/15/2010 2,185,000
CCC+ Caa1 13,625,000 Calpine Canada Energy Finance ULC, 8.50%
due 5/01/2008 10,525,312
CCC+ Caa1 2,250,000 Calpine Corporation, 8.25% due 8/15/2005 2,165,625
CCC+ Caa1 7,550,000 Coastal Corporation, 7.75% due 6/15/2010 6,606,250
BB Ba1 2,241,000 ESI Tractebel Acquisition Corp., 7.99%
due 12/30/2011 2,330,640
BB- Ba2 1,550,000 MSW Energy Finance Co. II, Inc., 7.375%
due 9/01/2010 (a) 1,612,000
BB Ba1 2,400,000 MSW Energy Holdings LLC, 8.50% due 9/01/2010 2,616,000
CCC Caa2 8,350,000 Mission Energy Holding Company, 13.50% due 7/15/2008 8,663,125
Nevada Power Company:
NR* Ba2 1,575,000 10.875% due 10/15/2009 1,842,750
BB Ba2 3,750,000 8.25% due 6/01/2011 4,068,750
BB Ba2 1,150,000 9% due 8/15/2013 (a) 1,276,500
B+ B1 3,000,000 Northwest Pipeline Corporation, 6.625%
due 12/01/2007 3,142,500
BB Ba2 4,000,000 Sierra Pacific Power Company, 8% due 6/01/2008 4,340,000
B- B1 1,650,000 Southern Natural Gas Company, 8.875% due 3/15/2010 1,815,000
The Williams Companies, Inc.:
B+ B3 4,000,000 6.50% due 8/01/2006 4,120,000
B+ B3 6,625,000 7.125% due 9/01/2011 6,890,000
-------------
74,371,952
===================================================================================================================================
Wireless--8.9% American Tower Corporation:
CCC Caa1 7,000,000 9.375% due 2/01/2009 7,420,000
CCC Caa1 2,309,000 5% due 2/15/2010 (Convertible) 2,277,251
CCC B3 2,200,000 American Towers, Inc., 7.25% due 12/01/2011 (a) 2,249,500
CCC Caa1 1,625,000 Centennial Cellular Operating Co. LLC, 8.125%
due 2/01/2014 (a) 1,527,500
CCC Caa1 4,150,000 Centennial Communications Corp., 10.125%
due 6/15/2013 4,357,500
CCC B3 5,000,000 Crown Castle International Corp., 9.375%
due 8/01/2011 5,500,000
B- B3 3,650,000 Millicom International Cellular SA, 10%
due 12/01/2013 (a) 3,832,500
CCC+ B3 2,400,000 MobiFon Holdings B.V., 12.50% due 7/31/2010 2,808,000
NR* NR* 2,000,000 NII Holdings, Ltd., 10.729%** due 11/01/2009 2,330,000
CCC- Caa2 8,525,000 SBA Communications Corporation, 10.25% due 2/01/2009 8,546,313
CCC- Caa1 750,000 SBA Telecommunications, Inc., 9.75%** due 12/15/2011 (a) 517,500
10 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004
Schedule of Investments (concluded) (in U.S. dollars)
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
===================================================================================================================================
Wireless CCC+ B3 $ 5,000,000 SpectraSite, Inc., 8.25% due 5/15/2010 $ 5,262,500
(concluded) CCC Caa1 2,475,000 Western Wireless Corporation, 9.25% due 7/15/2013 2,598,750
-------------
49,227,314
---------------------------------------------------------------------------------------------------------
Total Investments in Corporate Bonds
(Cost--$686,861,024)--130.0% 721,704,543
=========================================================================================================
Shares
Held Common Stock
===================================================================================================================================
Airlines--0.2% 133,624 ABX Air, Inc. (b) 975,455
---------------------------------------------------------------------------------------------------------
Total Investments in Common Stock
(Cost--$506,435)--0.2% 975,455
=========================================================================================================
Preferred Stock
===================================================================================================================================
Automotive--1.3% 230,000 General Motors Corporation (Convertible) 7,047,200
---------------------------------------------------------------------------------------------------------
Total Investments in Preferred Stock
(Cost--$5,748,900)--1.3% 7,047,200
=========================================================================================================
Face
Amount Trust Preferred
===================================================================================================================================
Telecommunications-- $ 7,310,000 Citizen Utilities Trust, 5% due 1/15/2036
1.3% (Convertible) 7,535,397
---------------------------------------------------------------------------------------------------------
Total Investments in Trust Preferred
(Cost--$7,331,296)--1.3% 7,535,397
=========================================================================================================
Shares
Held Warrants (d)
===================================================================================================================================
Chemicals--0.1% 3,500 Huntsman Company LLC (a) 525,000
===================================================================================================================================
Health Care--0.0% 54,578 HealthSouth Corporation 122,799
---------------------------------------------------------------------------------------------------------
Total Investments in Warrants (Cost--$361,108)--0.1% 647,799
===================================================================================================================================
Total Investments (Cost--$700,808,763)--132.9% 737,910,394
Liabilities in Excess of Other Assets--(32.9%) (182,669,040)
-------------
Net Assets--100.0% $ 555,241,354
=============
+ For Fund 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 Fund management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
* Not Rated.
** Represents a zero coupon or step bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(b) Non-income producing security.
(c) Floating rate note.
(d) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(e) Floating rate corporate debt in which the Fund 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 United States banks or (iii) the certificate of deposit
rate. Floating rate corporate debt is generally considered to be
restricted in that the Fund ordinarily is contractually obligated to
receive approval from the agent bank and/or borrower prior to its
disposition. Corporate loans represent 0.6% of the Fund's net assets.
(f) Interest rate adjusts quarterly and is based on 3-month US$ LIBOR, minus
0.125%.
See Notes to Financial Statements.
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004 11
[LOGO] Merrill Lynch Investment Managers
Statement of Assets, Liabilities and Capital
As of February 29, 2004
====================================================================================================================================
Assets
------------------------------------------------------------------------------------------------------------------------------------
Investments, at value (identified cost--$700,808,763) ............... $737,910,394
Cash ................................................................ 5,526,468
Receivables:
Securities sold .................................................. $ 18,289,138
Interest ......................................................... 13,235,714 31,524,852
--------------------------------
Total assets ........................................................ 774,961,714
------------
====================================================================================================================================
Liabilities
------------------------------------------------------------------------------------------------------------------------------------
Loans ............................................................... 196,700,000
Payables:
Securities purchased ............................................. 22,100,259
Dividends to shareholders ........................................ 419,182
Investment adviser ............................................... 392,139
Interest on loans ................................................ 52,376
Offering costs ................................................... 7,394
Other affiliates ................................................. 4,497 22,975,847
------------
Accrued expenses and other liabilities .............................. 44,513
------------
Total liabilities ................................................... 219,720,360
------------
====================================================================================================================================
Net Assets
------------------------------------------------------------------------------------------------------------------------------------
Net Assets .......................................................... $555,241,354
============
====================================================================================================================================
Capital
------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.10 par value, 200,000,000 shares authorized ......... $ 3,528,198
Paid-in capital in excess of par .................................... 501,435,319
Undistributed investment income--net ................................ $ 4,175,792
Undistributed realized capital gains on investments--net ............ 9,000,414
Unrealized appreciation on investments--net ......................... 37,101,631
------------
Total accumulated earnings--net ..................................... 50,277,837
------------
Total--Equivalent to $15.74 per share based on 35,281,981
shares of capital stock outstanding (market price--$14.63) ......... $555,241,354
============
See Notes to Financial Statements.
12 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004
Statement of Operations
For the Six Months Ended February 29, 2004
====================================================================================================================================
Investment Income
------------------------------------------------------------------------------------------------------------------------------------
Interest ................................................................ $ 29,693,091
Dividends ............................................................... 192,665
Other ................................................................... 17,867
------------
Total income ............................................................ 29,903,623
------------
====================================================================================================================================
Expenses
------------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ................................................ $ 2,486,445
Loan interest expense ................................................... 1,195,672
Borrowing costs ......................................................... 175,972
Accounting services ..................................................... 83,193
Professional fees ....................................................... 41,861
Printing and shareholder reports ........................................ 27,671
Transfer agent fees ..................................................... 23,448
Listing fees ............................................................ 14,372
Custodian fees .......................................................... 14,181
Pricing services ........................................................ 12,454
Directors' fees and expenses ............................................ 11,917
Other ................................................................... 10,443
-----------
Total expenses before waiver ............................................ 4,097,629
Waiver of expenses ...................................................... (50,722)
-----------
Total expenses after waiver ............................................. 4,046,907
------------
Investment income--net .................................................. 25,856,716
------------
====================================================================================================================================
Realized & Unrealized Gain on Investments--Net
------------------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net ....................................... 9,017,075
Change in unrealized appreciation/depreciation on investments--net ...... 38,770,511
------------
Total realized and unrealized gain on investments--net .................. 47,787,586
------------
Net Increase in Net Assets Resulting from Operations .................... $ 73,644,302
============
See Notes to Financial Statements.
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004 13
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets
For the Six For the Period
Months Ended May 30, 2003+
February 29, to August 31,
Increase (Decrease) in Net Assets: 2004 2003
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................................ $ 25,856,716 $ 10,580,942
Realized gain on investments--net ..................................... 9,017,075 835,752
Change in unrealized appreciation/depreciation on investments--net .... 38,770,511 (1,668,880)
--------------------------------
Net increase in net assets resulting from operations .................. 73,644,302 9,747,814
--------------------------------
===================================================================================================================================
Dividends & Distributions to Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................................ (25,138,426) (7,123,440)
Realized gain on investments--net ..................................... (852,413) --
--------------------------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ........................................ (25,990,839) (7,123,440)
--------------------------------
===================================================================================================================================
Capital Stock Transactions
-----------------------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of Common Stock ................................ -- 505,314,375
Offering costs resulting from the issuance of Common Stock ............ -- (450,861)
--------------------------------
Net increase in net assets derived from capital stock transactions .... -- 504,863,514
--------------------------------
===================================================================================================================================
Net Assets
-----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets .......................................... 47,653,463 507,487,888
Beginning of period ................................................... 507,587,891 100,003
--------------------------------
End of period* ........................................................ $ 555,241,354 $ 507,587,891
================================
* Undistributed investment income--net ............................... $ 4,175,792 $ 3,457,502
================================
+ Commencement of operations.
See Notes to Financial Statements.
14 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004
Statement of Cash Flows
For the Six Months Ended February 29, 2004
===================================================================================================================================
Cash Used for Operating Activities
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations ................................... $ 73,644,302
Adjustments to reconcile net increase in net assets resulting from operations
to net cash provided by operating activities:
Increase in receivables ............................................................. (463,509)
Decrease in other liabilities ....................................................... (5,521,299)
Realized and unrealized gain on investments--net .................................... (47,787,586)
Amortization of discount ............................................................ (1,163,010)
Proceeds from sales and paydowns of long-term investments .............................. 232,505,282
Purchases of long-term investments ..................................................... (303,404,314)
-------------
Net cash used for operating activities ................................................. (52,190,134)
-------------
===================================================================================================================================
Cash Provided by Financing Activities
-----------------------------------------------------------------------------------------------------------------------------------
Cash receipts from borrowings .......................................................... 262,300,000
Cash payments on borrowings ............................................................ (178,900,000)
Dividends paid to shareholders ......................................................... (25,683,398)
-------------
Net cash provided by financing activities .............................................. 57,716,602
-------------
===================================================================================================================================
Cash
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash ................................................................... 5,526,468
Cash at beginning of period ............................................................ --
-------------
Cash at end of period .................................................................. $ 5,526,468
=============
===================================================================================================================================
Cash Flow Information
-----------------------------------------------------------------------------------------------------------------------------------
Cash paid for interest ................................................................. $ 1,196,335
=============
See Notes to Financial Statements.
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights
The following per share data and ratios have been derived For the Six For the Period
from information provided in the financial statements. Months Ended May 30, 2003+
February 29, to August 31,
Increase (Decrease) in Net Asset Value: 2004 2003
================================================================================================================================
Per Share Operating Performance
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................................. $ 14.39 $ 14.33
------------------------------
Investment income--net ............................................. .73 .30
Realized and unrealized gain (loss) on investments--net ............ 1.35 (.03)
------------------------------
Total from investment operations ...................................... 2.08 .27
------------------------------
Less dividends and distributions:
Investment income--net ............................................. (.71) (.20)
Realized gain on investments--net .................................. (.02) --
------------------------------
Total dividends and distributions ..................................... (.73) (.20)
------------------------------
Offering costs resulting from the issuance of Common Stock ............ -- (.01)
------------------------------
Net asset value, end of period ........................................ $ 15.74 $ 14.39
==============================
Market price per share, end of period ................................. $ 14.63 $ 13.61
==============================
================================================================================================================================
Total Investment Return**
--------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................................... 15.04%@ 1.91%@
==============================
Based on market price per share ....................................... 13.06%@ (7.92%)@
==============================
================================================================================================================================
Ratios to Average Net Assets
--------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and excluding interest expense ................ 1.07%* .45%*
==============================
Expenses, net of waiver ............................................... 1.51%* .52%*
==============================
Expenses .............................................................. 1.53%* .91%*
==============================
Investment income--net ................................................ 9.67%* 8.22%*
==============================
================================================================================================================================
Leverage
--------------------------------------------------------------------------------------------------------------------------------
Amount of borrowings outstanding, end of period (in thousands) ........ $ 196,700 $ 113,300
==============================
Average amount of borrowings outstanding during the period
(in thousands) ....................................................... $ 175,861 $ 24,585
==============================
Average amount of borrowings outstanding per share during the period .. $ 4.98 $ .71
==============================
================================================================================================================================
Supplemental Data
--------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............................. $ 555,241 $ 507,588
==============================
Portfolio turnover ............................................. 35.64% 59.69%
==============================
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges. The Fund's Investment Adviser waived a portion of its management
fee. Without such waiver, the Fund's performance would have been lower.
+ Commencement of operations.
@ Aggregate total investment return.
See Notes to Financial Statements.
16 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004
Notes to Financial Statements
1. Significant Accounting Policies:
Corporate High Yield Fund VI, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. 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 Fund determines and makes available for publication the net asset
value of its Common Stock on a weekly basis. The Fund's Common Stock is listed
on the New York Stock Exchange ("NYSE") under the symbol HYT. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments -- Equity securities that are held by the Fund 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, 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 equity 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 Directors of the Fund.
Long positions 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
Directors of the Fund. Short positions 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.
Options written are valued at 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 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. Swap agreements are valued daily based upon quotations from
market makers. Financial futures contracts and options thereon, which are traded
on exchanges, are valued at their last sale price as of the close of such
exchanges. 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 are valued at cost plus accrued interest. The Fund employs
pricing services to provide certain securities prices for the Fund. Securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors of the Fund, including valuations furnished by the pricing services
retained by the Fund, which may use a matrix system for valuations. The
procedures of a pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Fund's Board of Directors. Such
valuations and procedures will be reviewed periodically by the Board of
Directors of the Fund.
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 NYSE. The values of such securities
used in computing the net asset value of the Fund's shares 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 Fund's net asset value. 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 Fund's Board of Directors or by the Investment Adviser using a
pricing service and/or procedures approved by the Fund's Board of Directors.
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004 17
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued)
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund 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.
o Options -- The Fund may write and purchase call and put options. When the
Fund writes an option, an amount equal to the premium received by the Fund
is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current market
value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the
basis of the security acquired or deducted from (or added to) the proceeds
of the security sold. When an option expires (or the Fund enters into a
closing transaction), the Fund realizes a gain or loss on the option to
the extent of the premiums received or paid (or gain or loss to the extent
the cost of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required by
the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time it was
closed.
o Swaps -- The Fund may enter into swap agreements, which are
over-the-counter contracts in which the Fund and a 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.
(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 its shareholders.
Therefore, no Federal income tax provision is required.
(d) 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 amortizes all
premiums and discounts on debt securities.
(e) Offering expenses -- Direct expenses relating to the public offering of the
Fund's Common Stock were charged to capital at the time of issuance of the
shares.
(f) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
(g) Securities lending -- The Fund 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 Fund and any
additional required collateral is delivered to the Fund on the next business
day. Where the Fund receives securities as collateral for the loaned securities,
it collects a fee from the borrower. The Fund typically receives the income on
the loaned securities but does not receive the income on the collateral. Where
the
18 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004
Notes to Financial Statements (continued)
Fund 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 Fund
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 Fund could experience delays and costs in gaining access to the
collateral. The Fund 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.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund 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 Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operation of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .70% of the Fund's average weekly net assets plus the proceeds
of any outstanding principal borrowed. For the six months ended February 29,
2004, FAM earned fees of $2,486,445, of which $50,722 was waived.
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., or its
affiliates. Pursuant to that order, the Fund 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 Fund, invest cash collateral
received by the Fund 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.
In addition, MLPF&S received $11,625 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended February
29, 2004.
For the six months ended February 29, 2004, the Fund reimbursed FAM $5,049 for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended February 29, 2004 were $325,504,573 and $249,247,325, respectively.
Net realized gains for the six months ended February 29, 2004 and net unrealized
gains as of February 29, 2004 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
--------------------------------------------------------------------------------
Long-term investments ................ $ 9,017,075 $37,101,631
--------------------------------
Total ................................ $ 9,017,075 $37,101,631
================================
As of February 29, 2004, net unrealized appreciation for Federal income tax
purposes aggregated $37,025,416, of which $42,400,118 related to appreciated
securities and $5,374,702 related to depreciated securities. The aggregate cost
of investments at February 29, 2004 for Federal income tax purposes was
$700,884,978.
4. Capital Share Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, par value
$.10, all of which were initially classified as Common Stock. The Board of
Directors is authorized, however, to classify and reclassify any unissued shares
of capital stock without approval of the holders of Common Stock.
Shares issued and outstanding during the six months ended February 29, 2004
remained constant and during the period May 30, 2003 to August 31, 2003
increased 35,275,000 from shares sold.
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004 19
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded)
5. Short-Term Borrowings:
On July 11, 2003, the Fund entered into its $250,000,000 revolving credit and
security agreement with Citibank, N.A. and other lenders (the "Lenders"). Under
the revolving credit and security agreement, the Fund may borrow money through
(i) a line of credit from certain Lenders at the eurodollar rate plus .75% or
the highest of the Federal Funds rate plus .50%, a base rate as determined by
Citibank, N.A. and/or the latest three-week moving average of secondary market
morning offering rates in the United States for three-month certificates of
deposit of major U.S. money market banks plus .50%, or (ii) the issuance of
commercial paper notes by certain Lenders at rates of interest based upon the
weighted average of the per annum rates paid or payable by such Lenders in
respect of those commercial paper notes. As security for its obligations to the
Lenders under the revolving credit and security agreement, the Fund has granted
a security interest in substantially all of its assets to and in favor of the
Lenders.
For the six months ended February 29, 2004, the average amount borrowed was
approximately $175,861,000 and the daily weighted average borrowing rate was
1.37%.
6. Subsequent Event:
The Fund paid an ordinary income dividend in the amount of $.118750 per share on
March 31, 2004 to shareholders of record on March 15, 2004.
20 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004
Portfolio Information
Percent of
As of February 29, 2004 Total Assets
====================================================================================================================================
Ten Largest Holdings
------------------------------------------------------------------------------------------------------------------------------------
The Williams Companies Inc.* Williams is involved in a number of energy-related businesses. Activities
include transport and storage of natural gas and other petroleum products,
as well as oil and gas exploration and production. The company is also a
refiner of petroleum products and trades energy and related commodities. 1.8%
------------------------------------------------------------------------------------------------------------------------------------
Qwest* Qwest provides a broad range of telecommunications services, including
broadband Internet-based data, voice and image communication, local exchange
services, and data and long-distance services to residential and business
customers. The company also provides Web hosting, high-speed Internet access
and private networks. 1.8
------------------------------------------------------------------------------------------------------------------------------------
Calpine Corporation* Calpine owns, develops and operates power generation facilities in addition
to selling electricity in the United States. The company also provides
thermal energy for industrial customers. 1.7
------------------------------------------------------------------------------------------------------------------------------------
The AES Corporation* AES is a worldwide power producer with operations in the United States,
Europe, Latin America and Asia. Electricity generation and sales are
primarily to wholesale customers, although the company has a direct
distribution business to end users. 1.6
------------------------------------------------------------------------------------------------------------------------------------
American Tower Corporation* American Tower owns and operates wireless communications and broadcast
towers in the United States. The company leases antenna sites on these
towers to a range of wireless communications companies, including those
offering cellular telephone, paging and personal communications services. 1.5
------------------------------------------------------------------------------------------------------------------------------------
Sierra Pacific Resources* Sierra Pacific Resources is the holding company for two utilities, Nevada
Power Company and Sierra Pacific Power Company. Both utilities primarily
serve the state of Nevada. 1.5
------------------------------------------------------------------------------------------------------------------------------------
Time Warner Telecom, Inc.* Time Warner Telecom offers local telephone service and a wide range of
telephony products to medium- and large-sized businesses in selected
metropolitan areas. The company operates a fiber optic network. 1.5
------------------------------------------------------------------------------------------------------------------------------------
Building Materials Corporation of America* Building Materials is a manufacturer of residential roofing products, with
Timberline as its major brand. 1.4
------------------------------------------------------------------------------------------------------------------------------------
Vivendi Universal* Vivendi is a diversified media company. The company records and publishes
music, produces and distributes television programming and movies, publishes
interactive games and offers communications services. 1.4
------------------------------------------------------------------------------------------------------------------------------------
Tyco International Group SA* Tyco is a diversified manufacturing and service company with a global
footprint. The company's businesses include electrical and electronics
components, undersea telecommunications systems, fire protection and
security systems, flow control products, health care products and specialty
products. 1.4
------------------------------------------------------------------------------------------------------------------------------------
* Includes combined holdings and/or affiliates, where applicable.
Portfolio Profile
Quality Rating by Percent of
Standard & Poor's Total Market Value
--------------------------------------------------------------------------------
BBB ..................................................................... 5%
BB ...................................................................... 17
B ....................................................................... 50
CCC ..................................................................... 26
NR (Not Rated) .......................................................... 2
--------------------------------------------------------------------------------
Percent of
Five Largest Industries* Total Market Value
--------------------------------------------------------------------------------
Utilities ................................................ 10.1%
Chemicals ................................................ 6.8
Telecommunications ....................................... 6.7
Wireless ................................................. 6.7
Diversified Media ........................................ 6.5
--------------------------------------------------------------------------------
* For Fund 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 Fund management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
Percent of
Five Largest Foreign Countries* Total Market Value
--------------------------------------------------------------------------------
France ................................................................. 2.3%
Canada ................................................................. 2.2
Luxembourg ............................................................. 2.0
United Kingdom ......................................................... 1.4
Bermuda ................................................................ 1.3
--------------------------------------------------------------------------------
* All holdings are denominated in U.S. dollars.
--------------------------------------------------------------------------------
Average Portfolio Maturity 7.2 years
--------------------------------------------------------------------------------
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004 21
[LOGO] Merrill Lynch Investment Managers
Officers and Directors
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Joe Grills, Director
Herbert I. London, Director
Andre F. Perold, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Stephen B. Swensrud, Director
B. Daniel Evans, Vice President
Elizabeth M. Phillips, Vice President
Donald C. Burke, Vice President and Treasurer
Phillip S. Gillespie, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
EquiServe
P.O. Box 43010
Providence, RI 02940-3010
NYSE Symbol
HYT
22 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004
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 website
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.
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 29, 2004 23
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Corporate High Yield Fund VI, Inc. seeks to provide shareholders with current
income by investing primarily in a diversified portfolio of fixed income
securities that are rated in the lower rating categories of the established
rating services (Ba or lower by Moody's Investors Service, Inc. or BB or lower
by Standard & Poor's Corporation) or are unrated securities of comparable
quality.
This report, including the financial information herein, is transmitted to
shareholders of Corporate High Yield Fund VI, Inc. for their information. It is
not a prospectus. The Fund has leveraged 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. Past performance results shown in this report should not be
considered a representation of future performance. Statements and other
information herein are as dated and are subject to change.
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)
on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
website at http://www.sec.gov.
Corporate High Yield Fund VI, Inc.
Box 9011
Princeton, NJ
08543-9011
#COYVI -- 2/04
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 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 10 - Controls and Procedures
10(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.
10(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 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(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.
Corporate High Yield Fund VI, Inc.
By: /s/ Terry K. Glenn
------------------------------
Terry K. Glenn,
President of
Corporate High Yield Fund VI, Inc.
Date: April 16, 2004
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/ Terry K. Glenn
------------------------------
Terry K. Glenn,
President of
Corporate High Yield Fund VI, Inc.
Date: April 16, 2004
By: /s/ Donald C. Burke
------------------------------
Donald C. Burke,
Chief Financial Officer of
Corporate High Yield Fund VI, Inc.
Date: April 16, 2004