Edgar Filing: CORPORATE HIGH YIELD VI

As filed with the Securities and Exchange Commission on March 14, 2003

Securities Act File No. 333-________
Investment Company Act File No. 811-21318

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. /_/
Post-Effective Amendment No. /_/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. /_/
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Corporate High Yield Fund VI, Inc.
(Exact Name of Registrant as Specified In Charter)
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800 Scudders Mill Road, Plainsboro, New Jersey 08536
(Address of Principal Executive Offices)

(Registrant's Telephone Number, including Area Code): (609) 282-2800
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Terry K. Glenn
Corporate High Yield Fund VI, Inc.
800 Scudders Mill Road, Plainsboro, New Jersey 08536
Mailing Address: P.O. Box 9011, Princeton, New Jersey 08543-9011
(Name and Address of Agent for Service)
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Copies to:
Bradley J. Lucido, Esq. Frank P. Bruno, Esq.
FUND ASSET MANAGEMENT, L.P. SIDLEY AUSTIN BROWN & WOOD LLP
P.O. Box 9011 787 Seventh Avenue
Princeton, New Jersey 08543-9011 New York, New York 10019-6018

Approximate date of proposed public offering: As soon as practicable
after the effective date of this Registration Statement.

If any securities being registered on this form are to be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), other than securities offered in
connection with dividend or interest reinvestment plans, check the following
box. /_/

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT

========================================== ===================== ==================== ===================== ====================
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Being Offering Price Aggregate Registration
Securities Being Registered Registered(1)(2) Per Unit(1) Offering Price(1) Fee(3)
------------------------------------------ --------------------- -------------------- --------------------- --------------------

Common Stock ($.10 par value)......... 66,667 shares $15.00 $1,000,005 $81
========================================== ===================== ==================== ===================== ====================

(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes ___________ shares subject to the underwriters' overallotment
option.
(3) Transmitted prior to the filing date to the designated lockbox of the
Securities and Exchange Commission at Mellon Bank in Pittsburgh, PA.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment, which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

Subject to Completion
Preliminary Prospectus dated March 14, 2003

PROSPECTUS
----------
Shares
----------

Corporate High Yield Fund VI, Inc.
Common Stock

Corporate High Yield Fund VI, Inc. is a newly organized, diversified,
closed-end management investment company. The primary investment objective of
the Fund is to provide stockholders with current income. The secondary
investment objective of the Fund is to provide stockholders with capital
appreciation. The Fund seeks to achieve its objectives by investing primarily
in a diversified portfolio of fixed income securities which are rated below
investment grade by the established rating services (Ba or lower by Moody's
Investors Service, Inc., BB or lower by Standard & Poor's Rating Services or
BB or lower by Fitch, Inc.) or, if unrated, are considered by the Fund's
investment adviser to be of comparable quality. Under normal market
conditions, at least 80% of the Fund's assets will be invested in these below
investment grade, high yield securities, including high yield bonds, corporate
loans, convertible debt securities and preferred securities. There can be no
assurance that the Fund's investment objectives will be realized. The Fund may
leverage through borrowings, the issuance of debt securities or the sale of
preferred stock. The Fund currently intends to borrow in an initial amount up
to approximately 25% of the value of its total assets (including the amount
obtained from leverage) after the Fund has fully invested the net proceeds of
the offering. The use of leverage can create special risks.

Because the Fund is newly organized, its shares have no history of public
trading. Shares of closed-end investment companies frequently trade at a price
lower than ("at a discount to") their net asset value. The risk may be greater
for investors expecting to sell their shares in a relatively short period
after completion of the public offering. The Fund plans to apply to list its
shares on the New York Stock Exchange or another national securities exchange
under the symbol "____________." Trading of the Fund's common stock on the
exchange is expected to begin within two weeks of the date of this prospectus.
Before it begins trading, the underwriters do not intend to make a market in
the Fund's shares. Consequently, an investment in the Fund may be illiquid
during that time.

-------------------------

This prospectus contains information you should know before investing,
including information about risks. Please read it before you invest and keep
it for future reference.

-------------------------

Investing in the Fund's common stock involves certain risks that are
described in the "Risk Factors and Special Considerations" section beginning
on page __ of this prospectus.

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Per Share Total
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Public offering price..................... $15.00 $
Underwriting discount..................... $ $
Proceeds, before expenses, to the Fund.... $ $

The underwriters may also purchase up to an additional __________ shares
at the public offering price, less the underwriting discount, within 45 days
from the date of this prospectus to cover overallotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

The shares will be ready for delivery on or about April , 2003.

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Merrill Lynch & Co.
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The date of this prospectus is April , 2003.

TABLE OF CONTENTS

Page

Prospectus Summary..........................................................1

Risk Factors and Special Considerations.....................................4

Fee Table...................................................................8

The Fund....................................................................9

Use of Proceeds.............................................................9

Investment Objectives and Policies..........................................9

Other Investment Policies..................................................15

Investment Restrictions....................................................26

Directors and Officers.....................................................27

Investment Advisory and Management Arrangements............................29

Portfolio Transactions.....................................................32

Dividends and Distributions................................................33

Taxes......................................................................34

Automatic Dividend Reinvestment Plan.......................................37

Mutual Fund Investment Option..............................................39

Net Asset Value............................................................39

Description of Capital Stock...............................................40

Custodian..................................................................41

Underwriting...............................................................42

Transfer Agent, Dividend Disbursing Agent and Registrar....................44

Accounting Services Provider...............................................44

Legal Opinions.............................................................44

Independent Auditors and Experts...........................................44

Additional Information.....................................................44

Independent Auditors' Report...............................................46

Appendix A ...............................................................A-1

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Information about the Fund can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Call 1-202-942-8090 for information on the
operation of the public reference room. This information is also available on
the SEC's Internet site at http://www.sec.gov and copies may be obtained upon
payment of a duplicating fee by writing the Public Reference Section of the
SEC, Washington, D.C. 20549-0102.

-------------------------
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to
provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date
on the front cover of this prospectus. Our business, financial condition,
results of operations and prospects may have changed since that date.

PROSPECTUS SUMMARY

This summary is qualified in its entirety by reference to the detailed
information included in this prospectus.

The Fund Corporate High Yield Fund VI, Inc. is a newly
organized, diversified, closed-end management
investment company.

The Offering The Fund is offering ______________ shares of common
stock at an initial offering price of $15.00 per share
through a group of underwriters led by Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch").
You must purchase at least 100 shares of common stock.
The underwriters may purchase up to an additional
__________ shares of common stock within 45 days from
the date of this prospectus to cover overallotments,
if any.

Investment Objectives The primary investment objective of the Fund is to
and Policies provide stockholders with current income. The
secondary investment objective of the Fund is to
provide stockholders with capital appreciation. The
Fund seeks to achieve its objectives by investing
primarily in a diversified portfolio of fixed income
securities which are rated below investment grade by
the established rating services (Ba or lower by
Moody's Investors Service, Inc. ("Moody's"), BB or
lower by Standard & Poor's Rating Services ("Standard
& Poor's") or BB or lower by Fitch, Inc. ("Fitch"))
or, if unrated, are considered by the Investment
Adviser to be of comparable quality. Such securities
generally involve greater volatility of price and
risks to principal and income than securities in the
higher rating categories. There can be no assurance
that the Fund's investment objectives will be
realized.

High Yield Securities. Under normal market conditions,
at least 80% of the Fund's assets will be invested in
below investment grade, high yield securities,
including high yield bonds (commonly referred to as
"junk" bonds), corporate loans, convertible debt
securities and preferred securities. The Fund may
invest in securities of any maturity.

Corporate Loans. The Fund may invest up to 15% of its
total assets in corporate loans extended to borrowers
by commercial banks or other financial institutions.
The corporate loans in which the Fund may invest may
be rated below investment grade by the established
rating services (Ba or lower by Moody's, BB or lower
by Standard & Poor's or BB or lower by Fitch) or, if
unrated, are considered by the Investment Adviser to
be of comparable quality.

Convertible Debt Securities and Preferred Securities.
The Fund may invest up to 15% of its total assets in
convertible debt securities and up to 15% of its total
assets in preferred securities, including preferred
securities that may be converted into common stock or
other securities of the same or a different issuer,
and non-convertible preferred securities. The
convertible debt securities and preferred securities in
which the Fund may invest may be rated below
investment grade by the established rating services
(Ba or lower by Moody's, BB or lower by Standard &
Poor's or BB or lower by Fitch) or, if unrated, are
considered by the Investment Adviser to be of
comparable quality.

Distressed Securities. The Fund may invest up to 10%
of its total assets in high yield securities which
are the subject of bankruptcy proceedings or otherwise
in default as to the repayment of principal and/or
payment of interest at the time of acquisition by the
Fund or are rated in the lowest rating categories (Ca
or lower by Moody's, CC or lower by Standard & Poor's
or CC or lower by Fitch) or, if unrated, are
considered by

the Investment Adviser to be of comparable quality.

Portfolio Management Techniques. The Fund may use a
variety of portfolio strategies both to seek to increase
the return of the Fund and to hedge, or protect, its
exposure to interest rate movements and movements in
the securities markets. These strategies include the
use of derivatives, such as indexed securities,
inverse securities, options, futures, options on
futures, interest rate transactions, credit default
swaps and short sales.

The Fund's hedging transactions are designed to reduce
volatility but may come at some cost. For example, the
Fund may try to limit its risk of loss from a decline
in price of a portfolio security by purchasing a put
option. However, the Fund must pay for the option, and
the price of the security may not in fact drop. In
large part, the success of the Fund's hedging
activities depends on its ability to forecast
movements in securities prices and interest rates. The
strategies the Fund uses to enhance its return may be
riskier and have more speculative aspects than its
hedging strategies. The Fund is not required to use
derivatives to seek to enhance income or hedge its
portfolio and may choose not to do so. The Fund cannot
guarantee that any strategies it uses will work.

Use of Leverage by The Fund may borrow money, issue debt securities or
the Fund issue shares of preferred stock. The Fund may borrow
money and issue debt securities in amounts up to
33-1/3% and may issue shares of preferred stock in
amounts up to 50% of the value of its total assets to
finance additional investments. The Fund currently
intends to borrow in an initial amount up to
approximately 25% of the value of its total assets
(including the amount obtained from leverage) after
the Fund has fully invested the net proceeds of the
offering. While such leverage creates an opportunity
for increased net income, it also creates special
risks, including increased costs and greater
volatility in the net asset value and market price of
the common stock. The Fund may borrow to finance
additional investments when the Investment Adviser
believes that the potential return on such additional
investments will exceed the costs incurred in
connection with the borrowing. When the Fund is
utilizing leverage, the fees paid to the Investment
Adviser for investment advisory and management
services will be higher than if the Fund did not
utilize leverage because the fees paid will be
calculated based on the Fund's net assets, including
any assets acquired from the sale of preferred stock,
plus the proceeds of any outstanding borrowings used
for leverage.

Listing Currently, there is no public market for the Fund's
common stock. However, the Fund plans to apply to list
its shares of common stock on the New York Stock
Exchange or another national securities exchange under
the symbol "____". Trading of the Fund's common stock
on the exchange is expected to begin within two weeks
of the date of this prospectus. During that time, the
underwriters do not intend to make a market in the
Fund's common stock. Consequently, an investment in
the Fund may be illiquid during that time.

Investment Adviser Fund Asset Management, L.P., the Investment Adviser,
provides investment advisory and administrative
services to the Fund. For its services, the Fund pays
the Investment Adviser a monthly fee at the annual
rate of 0.___% of the Fund's average weekly net assets
(including assets acquired from the sale of any
preferred stock), plus the proceeds of any outstanding
borrowings used for leverage.

Dividends and The Fund intends to distribute all or a portion of its
net investment income monthly,

Distributions and net realized capital gains, if any, at least
annually. The Fund expects that it will commence
paying dividends within 90 days of the date of this
prospectus. At times, in order to maintain a stable
level of distributions, the Fund may pay out less than
all of its net investment income or pay out
accumulated undistributed income in addition to
current net investment income.

Yield Considerations The yield on the Fund's common stock will vary from
period to period depending on factors including, but
not limited to, market conditions, the timing of the
Fund's investment in portfolio securities, the
securities comprising the Fund's portfolio, the
ability of the issuer of the portfolio securities to
pay interest or dividends on such securities, changes
in interest rates, including changes in the
relationship between short term rates and long term
rates, the amount and timing of the use of borrowings
and other leverage by the Fund, the effects of
leverage on the common stock, the timing of the
investment of leverage proceeds in portfolio
securities and the Fund's net assets and its operating
expenses. Consequently, the Fund cannot guarantee any
particular yield on its shares, and the yield for any
given period is not an indication or representation of
future yields on Fund shares. The Fund's ability to
achieve any particular yield level after it commences
operations depends on future interest rates and other
factors mentioned above, and the initial yield and
later yields may be lower. Any statements as to the
estimated yield are as of the date made, and no
guarantee can be given that the Fund will achieve or
maintain any particular yield level.

Automatic Dividend Dividend and capital gains distributions generally are
Reinvestment Plan used to purchase additional shares of the Fund's
common stock. However, an investor can choose to
receive distributions in cash. Since not all investors
can participate in the automatic dividend reinvestment
plan, you should call your broker or nominee to
confirm that you are eligible to participate in the
plan.

Mutual Fund Investors who purchase shares through Merrill Lynch in
Investment Option this offering and later sell their shares have the
option, subject to certain conditions, to purchase
Class A shares of certain funds advised by the
Investment Adviser or its affiliates with the proceeds
from such sale.

RISK FACTORS AND SPECIAL CONSIDERATIONS

An investment in the Fund's common stock may be speculative in that it
involves a high degree of risk and should not constitute a complete investment
program.

Liquidity and Market Price of Shares. The Fund is newly organized and has
no operating history or history of public trading. Prior to the time the
Fund's common stock is listed on the New York Stock Exchange or another
national securities exchange, an investment in the Fund may be illiquid.

Shares of closed-end management investment companies that trade in a
secondary market frequently trade at a market price that is below their net
asset value. This is commonly referred to as "trading at a discount."
Investors who sell their shares within a relatively short period after
completion of the public offering are likely to be exposed to this risk.
Accordingly, the Fund is designed primarily for long term investors and should
not be considered a vehicle for trading purposes. Net asset value will be
reduced following the offering by the underwriting discount and the amount of
offering expenses paid by the Fund.

High Yield Securities. The Fund invests primarily in a portfolio of high
yield, below investment grade and unrated securities. Investments in high
yield securities, including high yield bonds (commonly referred to as "junk"
bonds), corporate loans, convertible debt securities and preferred securities,
entail a higher level of credit risk (loss of income and/or principal) and a
corresponding greater risk of loss than investments in investment grade
securities. Securities rated in the lower rating categories are considered to
be predominantly speculative with respect to capacity to pay interest and
dividend income and repay principal. Issuers of high yield securities may be
highly leveraged and may not have available to them more traditional methods of
financing. New issuers also may be inexperienced in managing their debt burden.
The issuer's ability to service its debt obligations may be adversely affected
by business developments unique to the issuer, the issuer's inability to meet
specific projected business forecasts, or the inability of the issuer to obtain
additional financing. Other than the distressed securities discussed below,
the high yield securities in which the Fund may invest do not include
instruments which, at the time of investment, are in default or the issuers of
which are in bankruptcy. However, there can be no assurance that such events
will not occur after the Fund purchases a particular security, in which case
the Fund may experience losses and incur costs.

High yield securities also tend to be more sensitive to economic
conditions than investment grade securities. The financial condition of a high
yield issuer is usually more susceptible to a general economic downturn or a
sustained period of rising interest rates and high yield issuers are more
likely than investment grade issuers to become unable to make principal
payments and interest payments during such time periods.

Like investment grade fixed income securities, high yield securities
generally are purchased and sold through dealers who make a market in such
securities for their own accounts. However, there are fewer dealers in the
high yield market, which market may be less liquid than the market for
investment grade fixed income securities, even under normal economic
conditions. Also, there may be significant disparities in the prices quoted
for high yield securities by various dealers and the spread between the bid
and asked price is generally much larger than for investment grade securities.
As a result, the Fund may experience difficulty acquiring appropriate high
yield securities for investment. Investments in high yield securities may,
from time to time, and especially in declining markets, become illiquid which
might impede the Fund's ability to dispose of a particular security, or force
the Fund to sell a security at a price lower than if the market were more
liquid. Prices realized upon such sales might be less than the prices used in
calculating the Fund's net asset value. The combination of price volatility
and the limited liquidity of high yield securities may have an adverse effect
on the Fund's investment performance.

High yield securities tend to be more volatile than investment grade
fixed income securities, so that adverse events may have a greater impact on
the prices of high yield securities than on investment grade fixed income
securities. Factors adversely affecting the market value of such securities
will adversely affect the Fund's net asset value.

Adverse publicity and negative investor perceptions of the high yield
market, which could last for an extended time period also may reduce the value
and liquidity of high yield securities. When the market value of high yield
securities goes down, the Fund's net asset value will decrease. In addition,
the Fund may incur additional expenses if it is forced to seek recovery upon a
default of a portfolio holding or if it participates in the restructuring of
the obligation.

Junk bonds are often unsecured and subordinated to other creditors of the
issuer. In addition, junk bonds may have call or redemption features that
permit an issuer to repurchase the securities from the Fund. If a call were
exercised by an issuer during a period of declining interest rates, the Fund
likely would have to replace such called securities with lower yielding
securities that would decrease the net investment income to the Fund and
dividends to stockholders.

Corporate Loans. As in the case of junk bonds, the corporate loans in
which the Fund may invest may be rated below investment grade by the
established rating services (Ba or lower by Moody's, BB or lower by Standard &
Poor's or BB or lower by Fitch) or, if unrated, are considered by the
Investment Adviser to be of comparable quality. Corporate loans can be
expected to provide higher yields than investment grade fixed income
securities, but may be subject to greater risk of loss of principal and
income. Corporate loan obligations are frequently secured by pledges of liens
and security interests in the assets of the borrower, and the holders of
corporate loans are frequently the beneficiaries of debt service subordination
provisions imposed on the borrower's bondholders. Such security and
subordination arrangements are designed to give corporate loan investors
preferential treatment over high yield bond investors in the event of a
deterioration in the credit quality of the issuer. Even when these
arrangements exist, however, there can be no assurance that the principal and
interest owed on the corporate loan will be repaid in full. Corporate loans
generally bear interest at rates set at a margin above a generally recognized
base lending rate that may fluctuate on a day-to-day basis, in the case of the
prime rate of a U.S. bank, or which may be adjusted on set dates, typically 30
days but generally not more than one year, in the case of the London Interbank
Offered Rate. Consequently, the value of corporate loans held by the Fund may
be expected to fluctuate less than the value of other fixed rate high yield
securities as a result of changes in the interest rate environment. On the
other hand, the secondary dealer market for certain corporate loans may not be
as well developed as the secondary dealer market for high yield bonds, and
therefore present increased market risk relating to liquidity and pricing
concerns.

Convertible Debt Securities and Preferred Securities. As in the case of
junk bonds and corporate loans, the convertible debt securities and preferred
securities in which the Fund may invest may be rated below investment grade by
the established rating services (Ba or lower by Moody's, BB or lower by
Standard & Poor's or BB or lower by Fitch) or, if unrated, are considered by
the Investment Adviser to be of comparable quality. Convertible securities,
including convertible preferred securities, generally offer lower interest or
dividend yields than non-convertible securities of similar quality.
As with all fixed income securities, the market values of the fixed convertible
securities that the Fund may invest in tend to decline as interest rates
increase and, conversely, to increase as interest rates decline. However, when
the market price of the common stock underlying a convertible security exceeds
the conversion price, the convertible security tends to reflect the market
price of the underlying common stock. As the market price of the underlying
common stock declines, the convertible security tends to trade increasingly on
a yield basis and thus may not decline in price to the same extent as the
underlying common stock.

Generally, preferred securities receive dividends in priority to
distributions on common stock and usually have a priority of claim over common
stockholders if the issuer of the stock is liquidated. Preferred shares are
equity securities, but they have many characteristics of fixed income
securities, such as a fixed dividend payment rate and/or a liquidity
preference over the issuer's common shares. However, because preferred shares
are equity securities, they may be more susceptible to risks traditionally
associated with equity investments than the Fund's other fixed income
securities. Investments in preferred securities entail a higher level of
credit risk than more senior debt instruments because preferred securities are
subordinated to bonds and other debt instruments in an issuer's capital
structure in terms of priority to corporate income and liquidation payments.
Holders of preferred securities usually have no voting rights with respect to
the issuing company, although certain types of preferred securities provide
their holders with the right to elect directors if preferred dividends have
been in arrears for a specified number of periods. When those voting rights
apply, once the issuer pays all the arrearages, the preferred security holders
no longer have voting rights. Certain preferred securities may contain special
redemption features that grant the issuer of the preferred securities a right
to redeem the securities prior to a specified date. As with all call
provisions, a special redemption by the issuer may negatively impact the
return of the security held by the Fund. Preferred securities also may include
provisions that require or permit the issuer, at its discretion, to defer
dividend

distributions for a stated period or periods without any adverse consequences
to the issuer. If the Fund owns a preferred security that is deferring its
dividend distributions, the Fund may be required to report and possibly
distribute income for tax purposes although it has not yet received such
income. Preferred securities may be substantially less liquid than many other
securities, such as common stocks.

Distressed Securities. An investment in distressed securities is
speculative and involves significant risk in addition to the risks discussed
above in connection with investments in high yield securities. Distressed
securities frequently do not produce income while they are outstanding. The
Fund may purchase distressed securities that are in default or the issuers of
which are in bankruptcy. The Fund may be required to bear certain
extraordinary expenses in order to protect and recover its investment.

Net Asset Value; Interest Rate Sensitivity; Credit Quality and Other
Market Conditions. Generally, when interest rates go up, the value of fixed
rate securities goes down. Therefore, the net asset value of a fund that
invests primarily in fixed rate securities changes as interest rates
fluctuate. A decline in the credit quality or financial condition of issuers
of the high yield securities in which the Fund invests may result in the value
of such high yield securities held by the Fund, and hence the Fund's net asset
value, going down. A serious deterioration in the credit quality or financial
condition of an issuer could cause a permanent decrease in the Fund's net
asset value. Furthermore, volatility in the capital markets and other adverse
market conditions may result in a decrease in the value of the high yield
securities held by the Fund. Given that the Fund uses market prices to value
many of its high yield investments, any decrease in the market value of the
high yield securities held by the Fund will result in a decrease in the Fund's
net asset value.

Leverage. The Fund may borrow money, issue debt securities or issue
shares of preferred stock. The Fund may borrow money and issue debt securities
in amounts up to 33-1/3% and may issue shares of preferred stock in amounts up
to 50% of the value of its total assets to finance additional investments. The
Fund currently intends to borrow in an initial amount up to approximately 25%
of the value of its total assets (including the amounts obtained from
leverage) after the Fund has fully invested the net proceeds of the offering.
However, leverage involves risks, which can be significant. These risks
include greater volatility in the Fund's net asset value, fluctuations in the
dividend paid by the Fund and the market price of the Fund's common stock, the
possibility that the value of the assets acquired with such borrowing
decreases although the Fund's liability is fixed and increased operating costs
which may reduce the Fund's total return. To the extent the income or capital
appreciation derived from securities purchased with funds received from
leverage exceeds the cost of leverage, the Fund's return will be greater than
if leverage had not been used. Conversely, if the income or capital
appreciation from the securities purchased with such funds is not sufficient
to cover the cost of leverage or if the Fund incurs capital losses, the return
of the Fund will be less than if leverage had not been used, and therefore the
amount available for distribution to stockholders as dividends and other
distributions will be reduced.

Portfolio Management Techniques. The Fund may engage in various portfolio
strategies both to seek to increase the return of the Fund and to hedge its
portfolio against adverse effects from movements in interest rates and in the
securities markets. These strategies include the use of derivatives, such as
indexed securities, inverse securities, options, futures, options on futures,
interest rate transactions, credit default swaps and short sales. Such
strategies subject the Fund to the risk that, if the Investment Adviser
incorrectly forecasts market values, interest rates or other applicable
factors, the Fund's performance could suffer. The Fund is not required to use
derivatives or other portfolio strategies to seek to enhance income or to
hedge its portfolio and may not do so. There can be no assurance that the
Fund's portfolio strategies will be effective. Some of the derivative
strategies that the Fund may use to seek to enhance its return are riskier
than its hedging transactions and have speculative characteristics. Such
strategies do not attempt to limit the Fund's risk of loss.

Options and Futures Transactions. The Fund may engage in options and
futures transactions to reduce its exposure to interest rate movements or to
seek to enhance its return. If the Fund incorrectly forecasts market values,
interest rates or other factors, the Fund's performance could suffer. The Fund
also may suffer a loss if the other party to the transaction fails to meet its
obligations. The Fund is not required to enter into options and futures
transactions for hedging purposes or to seek to enhance its return and may
choose not to do so.

Interest Rate Swaps. In order to hedge the value of the Fund's portfolio
against interest rate fluctuations or to seek to enhance the Fund's return the
Fund may enter into interest rate swap transactions. In swap transactions,
there is a

risk that yields will move in the direction opposite of the direction
anticipated by the Fund, which would cause the Fund to make payments to its
counterparty in the transaction that could adversely affect Fund performance.
The Fund is not required to enter into interest rate swaps for hedging
purposes or to seek to enhance its return and may choose not to do so.

Short Sales. The Fund may make short sales of securities. A short sale is
a transaction in which the Fund sells a security it does not own in
anticipation that the market price of that security will decline. When the
Fund makes a short sale, it must borrow the security sold short and deliver it
to the broker dealer through which it made the short sale as collateral for
its obligation to deliver the security upon conclusion of the sale. The Fund's
obligation to replace the borrowed security will be secured by collateral
deposited with the broker dealer, usually cash, U.S. government securities or
other liquid securities similar to those borrowed. The Fund also will be
required to deposit similar collateral with its custodian. If the price of the
security sold short increases between the time of the short sale and the time
the Fund replaces the borrowed security, the Fund will incur a loss. The Fund
also may make a short sale ("against the box") by selling a security that the
Fund owns or has the right to acquire without the payment of further
consideration. The Fund's potential for loss is greater if it does not own the
security that it is short selling.

Foreign Securities. The Fund may invest without limitation in securities
of issuers domiciled outside the United States or that are denominated in
various foreign currencies and multinational currency units. Investments in
non-U.S. securities may involve risks not typically involved in domestic
investment, including fluctuation in foreign interest rates, currency risk,
and future foreign political and economic developments and the possible
imposition of exchange controls or other governmental laws or regulations.

Liquidity of Investments. Certain high yield securities, in which the
Fund invests may lack an established secondary trading market or are otherwise
considered illiquid. Liquidity of a security relates to the ability to easily
dispose of the security and the price to be obtained and does not generally
relate to the credit risk or likelihood of receipt of cash at maturity.
Illiquid securities may be subject to wide fluctuations in market value. The
Fund may be subject to significant delays in disposing of certain high yield
securities. As a result, the Fund may be forced to sell these securities at
less than fair market value or may not be able to sell them when the
Investment Adviser believes that it is desirable to do so. Illiquid securities
also may entail registration expenses and other transaction costs that are
higher than those for liquid securities.

Antitakeover Provisions. The Fund's Articles of Incorporation and By-laws
and the General Corporation Law of the State of Maryland include provisions
that could limit the ability of other entities or persons to acquire control
of the Fund or to change the composition of its Board of Directors. Such
provisions could limit the ability of stockholders to sell their shares at a
premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the Fund.

Proposed Exclusion of Dividends. Proposals which would exclude all or a
portion of dividends paid by corporations from their previously taxed income
are currently being discussed by federal government officials. Under the
proposals, the Fund's distributions derived from interest income on debt
securities and on certain types of preferred securities which are treated as
debt for federal income tax purposes will not be excludable from taxable
income. The impact of the dividend exclusion proposals on the Fund and on its
stockholders cannot be predicted.

Market Disruption. The terrorist attacks in the United States on
September 11, 2001 have had a disruptive effect on the securities markets,
some of which were closed for a four-day period. These terrorist attacks and
related events, including potential U.S. military actions, have led to
increased short term market volatility and may have long term effects on U.S.
and world economies and markets. Similar disruptions of the financial markets
could impact interest rates, auctions, secondary trading, ratings, credit
risk, inflation and other factors relating to the Fund's common stock. High
yield securities tend to be more volatile than investment grade fixed income
securities so that these events and other market disruptions may have a
greater impact on the prices and volatility of high yield securities than on
investment grade fixed income securities. There can be no assurance that these
events and other market disruptions may not have other material and adverse
implications for the high yield securities markets.

FEE TABLE

Stockholder Transaction Fees:

Maximum Sales Load (as a percentage of offering price) %

Offering Expenses Borne by the Fund (as a percentage of offering price) (a) %

Dividend Reinvestment Plan Fees None

Annual Expenses (as a percentage of net assets attributable to
common stock):

Investment Advisory Fee (b)(c) 0. %

Interest Payments on Borrowed Funds %

Other Expenses (b)(c) %
-------------

Total Annual Expenses (b)(c) %
=============

-------------------

(a) The Investment Adviser has agreed to pay all of the Fund's organizational
expenses. Offering costs will be paid by the Fund. The offering costs to be
paid by the Fund are not included in the annual expenses shown in the table.
Offering costs borne by common stockholders will result in a reduction of
capital of the Fund attributable to common stock.
(b) See "Investment Advisory and Management Arrangements" -- page __.
(c) Assumes leverage by borrowing in an amount equal to approximately 25% of
the Fund's total assets (including the amount obtained from leverage) at an
interest rate of ____%. The Fund may borrow money and issue debt securities in
amounts up to 33-1/3% and may issue shares of preferred stock in amounts up to
50% of the value of its total assets to finance additional investments. The
Fund intends to utilize leverage only if the Investment Adviser believes that
it would result in a higher yield to stockholders over time. If the Fund does
not use leverage, it is estimated that, as a percentage of net assets
attributable to common stock, the Investment Advisory Fee would be ___%,
Interest Payments on Borrowed Funds would be 0.00%, Other Expenses would be
____% and Total Annual Expenses would be ____%. See "Risk Factors and Special
Considerations-- Leverage" and "Other Investment Policies-- Leverage."

1 3 5 10
Year Year Year Year

Example:
On a $1,000 investment, an Investor would pay the following expenses $ $ $ $
(including the sales load of $__ and estimated expenses of this
offering of $__), assuming total annual expenses of ____% (assuming
leverage of ___% of the Fund's total assets) and a 5% annual return
throughout the periods

The Fee Table is intended to assist investors in understanding the costs
and expenses that a stockholder in the Fund will bear directly or indirectly.
The expenses set forth under "Other Expenses" are based on estimated amounts
through the end of the Fund's first fiscal year. The Example set forth above
assumes reinvestment of all dividends and distributions and utilizes a 5%
annual rate of return as mandated by Securities and Exchange Commission (the
"Commission") regulations. The Example should not be considered a
representation of future expenses or annual rate of return, and actual
expenses, leverage amount or annual rate of return may be more or less than
those assumed for purposes of the Example.

THE FUND

Corporate High Yield Fund VI, Inc. (the "Fund") is a newly organized,
diversified, closed-end management investment company. The Fund was
incorporated under the laws of the State of Maryland on March 13, 2003, and
has registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Fund's principal office is located at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536, and its telephone number is (609) 282-2800.

The Fund is organized as a closed-end investment company. Closed-end
investment companies differ from open-end investment companies (commonly
referred to as mutual funds) in that closed-end investment companies do not
redeem their securities at the option of the stockholder, whereas open-end
investment companies issue securities redeemable at net asset value at any
time at the option of the stockholder and typically engage in a continuous
offering of their shares. Accordingly, open-end investment companies are
subject to continuous asset in-flows and out-flows that can complicate
portfolio management. However, shares of closed-end investment companies
frequently trade at a discount from net asset value. This risk may be greater
for investors expecting to sell their shares in a relatively short period
after completion of the public offering.

The Board of Directors of the Fund may at any time consider a merger,
consolidation or other form of reorganization of the Fund with one or more
other closed-end investment companies advised by the Fund's Investment Adviser
with similar investment objectives and policies as the Fund. Any such merger,
consolidation or other form of reorganization would require the prior approval
of the Board of Directors and the stockholders of the Fund. See "Description
of Capital Stock-- Certain Provisions of the Articles of Incorporation and
By-Laws."

USE OF PROCEEDS

The net proceeds of this offering will be approximately $_____________
(or approximately $________________ assuming the underwriters exercises the
overallotment option in full) after payment of offering costs estimated to be
approximately $____________ and the deduction of the underwriting discount.

Due to current illiquidity in the high yield markets, investments that,
in the judgment of the Investment Adviser, are appropriate investments for the
Fund may not be immediately available. Therefore, the Fund expects that there
will be an initial investment period of up to six months following the
completion of its common stock offering before it is invested in accordance
with its investment objectives and policies. Pending such investment, it is
anticipated that all or a portion of the proceeds will be invested in U.S.
Government securities or high grade, short term money market instruments. See
"Investment Objectives and Policies."

INVESTMENT OBJECTIVES AND POLICIES

The primary investment objective of the Fund is to provide stockholders
with current income. The secondary investment objective of the Fund is to
provide stockholders with capital appreciation. The Fund's investment
objectives are fundamental policies and may not be changed without the
approval of a majority of the outstanding voting securities of the Fund (as
defined in the 1940 Act).

The Fund seeks to achieve its objectives by investing primarily in a
diversified portfolio of fixed income securities which are rated below
investment grade by the established rating services (Ba or lower by Moody's
Investors Service, Inc. ("Moody's"), BB or lower by Standard & Poor's Rating
Services ("Standard & Poor's") or BB or lower by Fitch, Inc. ("Fitch")) or, if
unrated, are considered by Fund Asset Management, L.P. (the "Investment
Adviser") to be of comparable quality. Under normal market conditions, the
Fund will invest at least 80% of its assets in high yield securities,
including high yield bonds, corporate loans, convertible debt securities and
preferred securities. For this purpose, "assets" means net assets, including
assets acquired from the sale of preferred stock, plus the amount of any
borrowings for investment purposes. This is a non-fundamental policy and may
be changed by the Board of Directors of the Fund provided that stockholders
are provided with at least 60 days prior written notice of any change as
required by the rules under the 1940 Act. High yield securities include high
yield

bonds (commonly referred to as "junk bonds"), corporate loans, convertible debt
securities and preferred securities, which are rated below investment grade
or, if unrated, are considered by the Investment Adviser to be of comparable
quality. Such investments generally involve greater volatility of price and
risks to principal and income than securities in the higher rating categories.
There can be no assurance that the Fund's investment objectives will be
realized.

The Fund may invest without limitation in securities of issuers domiciled
outside the United States or that are denominated in various foreign
currencies and multinational currency units. The Fund does not currently
intend to hedge its non-U.S. dollar denominated investments.

The Fund may invest up to 15% of its total assets in corporate loans
extended to borrowers by commercial banks or other financial institutions
("Corporate Loans"). The Corporate Loans in which the Fund may invest may be
rated below investment grade (Ba or lower by Moody's, BB or lower by Standard
& Poor's or BB or lower by Fitch) or, if unrated, are considered by the
Investment Adviser to be of comparable quality. The Fund may invest up to 10%
of its total assets in high yield securities, which are the subject of
bankruptcy proceedings or otherwise in default as to the repayment of
principal and/or payment of interest at the time of acquisition by the Fund or
are rated in the lowest rating categories (Ca or lower by Moody's, CC or lower
by Standard & Poor's or CC or lower by Fitch) or, if unrated, are considered
by the Investment Adviser to be of comparable quality ("Distressed
Securities").

Securities rated Ba by Moody's, BB by Standard & Poor's and BB by Fitch
are considered to have speculative elements and a greater vulnerability to
default than higher rated securities. Below investment grade securities and
comparable unrated securities involve substantial risk of loss, are considered
speculative with respect to the issuer's ability to pay interest and any
required redemption or principal payments and are susceptible to default or
decline in market value due to adverse economic and business developments. The
descriptions of the investment grade rating categories by Moody's, Standard &
Poor's and Fitch, including a description of their speculative
characteristics, are set forth in Appendix A. All references to securities
ratings by Moody's, Standard & Poor's and Fitch in this prospectus shall,
unless otherwise indicated, include all securities within each such rating
category (i.e., Ba1, Ba2 and Ba3 in the case of Moody's, BB+ and BB- in the
case of Standard & Poor's and BB+ and BB- in the case of Fitch). All
percentage and ratings limitations on securities in which the Fund may invest
apply at the time of making an investment and shall not be considered violated
if an investment rating is subsequently downgraded to a rating that would have
precluded the Fund's initial investment in such security. In the event that
the Fund disposes of a portfolio security subsequent to its being downgraded,
the Fund may experience a greater risk of loss than if such security had been
sold prior to such downgrade.

The Fund may invest up to 15% of its total assets in convertible debt
securities and up to 15% of its total assets in preferred securities,
including preferred securities that may be converted into common stock or
other securities of the same or a different issuer, and non-convertible
preferred securities. The convertible debt securities and preferred securities
in which the Fund may invest may be rated below investment grade by the
established rating services (Ba or lower by Moody's, BB or lower by Standard &
Poor's or BB or lower by Fitch) or, if unrated, are considered by the
Investment Adviser to be of comparable quality.

An investment in the Fund may be speculative in that it involves a high
degree of risk and should not constitute a complete investment program. See
"Risk Factors and Special Considerations."

When changing economic conditions and other factors cause the yield
difference between lower rated and higher rated securities to narrow, the Fund
may purchase higher rated securities if the Investment Adviser believes that
the risk of loss of income and principal may be reduced substantially with
only a relatively small reduction in yield. In addition, under unusual market
or economic conditions or for temporary defensive purposes, the Fund may
invest up to 100% of its total assets in securities issued or guaranteed by
the U.S. Government or its instrumentalities or agencies, certificates of
deposit, bankers' acceptances and other bank obligations, commercial paper
rated in the highest category by an established rating agency, or other fixed
income securities deemed by the Investment Adviser to be consistent with a
defensive posture, or may hold investments in cash. The yield on such
securities may be lower than the yield on lower rated fixed income securities.
Although the Fund will invest primarily in below investment grade securities,
other than with respect to Distressed Securities (which are discussed below),
it will not invest in securities in the lowest rating categories (Ca or lower
by Moody's, CC or lower by Standard & Poor's or CC or lower by Fitch) unless
the Investment Adviser believes that the financial condition of

the issuer or the protection afforded to the particular securities is stronger
than would otherwise be indicated by such low ratings.

Investment in the common stock of the Fund offers the individual investor
several potential benefits. The Fund offers investors the opportunity to
receive current income by investing in a professionally managed portfolio
comprised primarily of high yield securities, some of which are a type of
investment typically not offered to individual investors. The Investment
Adviser provides professional management, which includes the extensive credit
analysis needed to invest in junk bonds, Corporate Loans, foreign securities,
Distressed Securities, convertible debt securities and preferred securities.
In addition to using the credit rating provided by independent rating
agencies, the Investment Adviser independently evaluates the creditworthiness
of the portfolio securities held by the Fund. The Fund also relieves the
investor of the burdensome administrative details involved in managing a
portfolio of such investments. These benefits are at least partially offset by
the expenses involved in running an investment company. Such expenses
primarily consist of advisory fees and operational costs. Additionally, the
Investment Adviser may seek to enhance the yield of the Fund's common stock by
leveraging the Fund's capital structure through the borrowing of money or the
issuance of short term debt securities or shares of preferred stock. The use
of leverage also involves certain expenses and risk considerations. See "Risk
Factors and Special Considerations--Leverage" and "Other Investment
Policies--Leverage."

The Fund may engage in various portfolio strategies to seek to enhance
its return and to hedge its portfolio against movements in interest rates
through the use of derivatives, such as indexed and inversed securities,
options, futures, options on futures, interest rate transactions, credit
default swaps and short selling. Each of these portfolio strategies is
described below. There can be no assurance that the Fund will employ these
strategies or that, if employed, they will be effective.

The Fund may invest in, among other things, the types of instruments
described below:

Description of High Yield Securities

Under normal market conditions, the Fund will invest at least 80% of its
assets in high yield securities, including high yield bonds (commonly referred
to as "junk" bonds), Corporate Loans, convertible debt securities and preferred
securities, as described below, which are rated below investment grade by the
established rating services (Ba or lower by Moody's, BB or lower by Standard &
Poor's or BB or lower by Fitch) or, if unrated, are considered by the
Investment Adviser to be of comparable quality. See Appendix A--"Ratings of
Securities" for information concerning rating categories. The Fund may invest
in securities of any maturity.

Selection and supervision of high yield securities by the Investment
Adviser involves continuous analysis of individual issuers, general business
conditions and other factors which may be too time-consuming or too costly for
the average investor. The furnishing of these services does not, of course,
guarantee successful results. The Investment Adviser's analysis of issuers
includes, among other things, historic and current financial conditions,
current and anticipated cash flow and borrowing requirements, value of assets
in relation to historical costs, strength of management, responsiveness to
business conditions, credit standing, and current and anticipated results of
operations. Analysis of general conditions and other factors may include
anticipated change in economic activity and interest rates, the availability
of new investment opportunities and the economic outlook for specific
industries. While the Investment Adviser considers as one factor in its credit
analysis the ratings assigned by the rating services, the Investment Adviser
performs its own independent credit analysis of issuers and, consequently, the
Fund may invest, without limit, in unrated securities. As a result, the Fund's
ability to achieve its investment objectives may depend to a greater extent on
the Investment Adviser's own credit analysis than investment companies which
invest in investment grade securities. Although the Fund will invest primarily
in below investment grade securities, other than with respect to Distressed
Securities (which are discussed below), it will not invest in securities in
the lowest rating categories (Ca or below for Moody's, CC or below for
Standard & Poor's or CC or below for Fitch) unless the Investment Adviser
believes that the financial condition of the issuer or the protection afforded
to the particular securities is stronger than would otherwise be indicated by
such ratings. The Fund may continue to hold securities that are downgraded
after the Fund purchases them and will sell such securities only if, in the
Investment Adviser's judgment, it is advantageous to sell such securities.

Investments in high yield securities generally provide greater income and
increased opportunity for capital appreciation than investments in investment
grade fixed income securities, but they also typically entail greater price
volatility and principal and income risk, including the possibility of issuer
default and bankruptcy. High yield securities are regarded as being
predominantly speculative as to the issuer's ability to make repayments of
principal and payments of interest. Investment in such securities involves
substantial risk. Issuers of high yield securities may be highly leveraged and
may not have available to them more traditional methods of financing.
Therefore, the risks associated with acquiring the securities of such issuers
generally are greater than is the case with investment grade securities. For
example, during an economic downturn or a sustained period of rising interest
rates, issuers of high yield securities may be more likely to experience
financial stress, especially if such issuers are highly leveraged. During
periods of economic downturn, such issuers may not have sufficient revenues to
meet their interest payment obligations. The issuer's ability to service its
debt obligations also may be adversely affected by specific issuer
developments, or the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. Therefore, there can
be no assurance that in the future there will not exist a higher default rate
relative to the rates currently existing in the high yield market. If an
issuer of high yield securities defaults, in addition to risking non-payment
of all or a portion of interest and principal, the Fund may incur additional
expenses to seek recovery. The market prices of high yield securities
structured as zero-coupon, step-up or payment-in-kind securities will normally
be affected to a greater extent by interest rate changes, and therefore tend
to be more volatile than the prices of securities that pay interest currently
and in cash. Other than with respect to Distressed Securities (which are
discussed below), the high yield securities in which the Fund may invest do
not include securities which, at the time of investment, are in default or the
issuers of which are in bankruptcy. However, there can be no assurance that
such events will not occur after the Fund purchases a particular security, in
which case the Fund may experience losses and incur costs.

Adverse conditions and investor perceptions thereof (whether or not based
on economic fundamentals) may impair liquidity in the high yield market and
may cause the prices the Fund receives for its high yield securities to be
reduced. In addition, the Fund may experience difficulty in liquidating a
portion of its portfolio when necessary to meet the Fund's liquidity needs or
in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. Under such conditions, judgment may play a
greater role in valuing certain of the Fund's portfolio securities than in the
case of securities trading in a more liquid market. In addition, the Fund may
incur additional expenses if it is forced to seek recovery upon a default of a
portfolio holding or if it participates in the restructuring of the
obligation.

The risk of loss due to default by an issuer is significantly greater for
the holders of junk bonds because such securities are often unsecured and
subordinated to other creditors of the issuer. In addition, junk bonds may
have call or redemption features that permit an issuer to repurchase the
securities from the Fund. If a call were exercised by an issuer during a
period of declining interest rates, the Fund likely would have to replace such
called securities with lower yielding securities, thus decreasing the net
investment income to the Fund and dividends to stockholders.

The high yield securities in which the Fund invests may include credit
linked notes, structured notes or other instruments evidencing interests in
special purpose vehicles or trusts that hold interests in high yield
securities.

The Fund may receive warrants or other non-income producing equity
securities in connection with its investments in high yield securities,
including in unit offerings, in an exchange offer, upon the conversion of a

convertible security, or upon the restructuring or bankruptcy of investments
owned by the Fund. The Fund may continue to hold such securities until, in the
Investment Adviser's judgment in light of current market conditions, it is
advantageous to effect a disposition of such securities.

Description of Corporate Loans

The Fund may invest up to 15% of its total assets in Corporate Loans. The
Fund considers Corporate Loans to be high yield securities, and includes
Corporate Loans (along with convertible debt securities and preferred
securities described below) in determining whether at least 80% of its assets
are invested in high yield securities. The Corporate Loans in which the Fund
invests primarily consist of direct obligations of a borrower and may include
debtor in possession financings pursuant to Chapter 11 of the U.S. Bankruptcy
Code, obligations of a borrower issued in connection with a restructuring
pursuant to Chapter 11 of the U.S. Bankruptcy Code, leveraged buy-out loans,
leveraged recapitalization loans, receivables purchase facilities, and
privately placed notes. The Fund may invest in a Corporate Loan at origination
as a co-lender or by acquiring in the secondary market participations in,
assignments of or novations of a Corporate Loan. By purchasing a
participation, the Fund acquires some or all of the interest of a bank or
other lending institution in a loan to a borrower. The participations
typically will result in the Fund having a contractual relationship only with
the lender, not the borrower. The Fund will have the right to receive payments
of principal, interest and any fees to which it is entitled only from the
lender selling the participation and only upon receipt by the lender of the
payments from the borrower. Loan participations therefore involve a risk of
insolvency of the lending bank or other financial intermediary. Many such
loans are secured, although some may be unsecured. Corporate Loans that are
fully secured offer the Fund more protection than an unsecured loan or high
yield bond in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a
secured loan would satisfy the borrower's obligation, or that the collateral
can be liquidated. The markets in loans are not regulated by federal
securities laws or the Commission.

As in the case of junk bonds, such Corporate Loans may be rated below
investment grade or, if unrated, are considered by the Investment Adviser to
be of comparable quality. As in the case of junk bonds, such Corporate Loans
can be expected to provide higher yields than lower yielding, investment grade
fixed income securities, but may be subject to greater risk of loss of
principal and income. There are, however, some significant differences between
Corporate Loans and junk bonds. Corporate Loan obligations are frequently
secured by pledges of liens and security interests in the assets of the
borrower, and the holders of Corporate Loans are frequently the beneficiaries
of debt service subordination provisions imposed on the borrower's
bondholders. Such security and subordination arrangements are designed to give
Corporate Loan investors preferential treatment over high yield bond investors
in the event of a deterioration in the credit quality of the issuer. Even when
these arrangements exist, however, there can be no assurance that the
principal and interest owed on the Corporate Loan will be repaid in full.
Corporate Loans generally bear interest at rates set at a margin above a
generally recognized base lending rate that may fluctuate on a day-to-day
basis, in the case of the prime rate of a U.S. bank, or which may be adjusted
on set dates, typically 30 days but generally not more than one year, in the
case of the London Interbank Offered Rate. Consequently, the value of
Corporate Loans held by the Fund may be expected to fluctuate less than the
value of other fixed rate high yield instruments as a result of changes in the
interest rate environment. On the other hand, the secondary dealer market for
certain Corporate Loans may not be as well developed as the secondary dealer
market for high yield bonds, and therefore present increased market risk
relating to liquidity and pricing concerns.

Description of Convertible Debt Securities and Preferred Securities

The Fund may invest up to 15% of its total assets in convertible debt
securities. A convertible debt security is a bond, debenture or note that may
be converted into or exchanged for a prescribed amount of common stock or
other securities of the same or a different issuer within a particular period
of time at a specified price or formula. A convertible debt security entitles
the holder to receive interest generally paid or accrued on debt until the
convertible security matures or is redeemed, converted or exchanged.
Convertible securities, including convertible preferred securities, have
several unique investment characteristics such as (i) higher yields than
common stocks, but lower yields than comparable nonconvertible securities,
(ii) a lesser degree of fluctuation in value than the underlying stock since
they have fixed income characteristics, and (iii) the potential for capital
appreciation if the market price of the underlying common stock increases.
Holders of convertible securities have a claim on the assets of the issuer
prior to the common stockholders but may be subordinated to similar
non-convertible securities of the same issuer. A convertible security might be
subject to redemption at the option of the issuer at a price established in
the convertible security's

governing instrument. If a convertible security held by the Fund is called for
redemption, the Fund may be required to permit the issuer to redeem the
security, convert it into the underlying common stock or other securities or
sell it to a third party.

The Fund may invest up to 15% of its total assets in preferred
securities, including preferred securities that may be converted into common
stock or other securities of the same or a different issuer, and
non-convertible preferred securities. Generally, preferred securities receive
dividends in priority to distributions on common stock and usually have a
priority of claim over common stockholders if the issuer of the stock is
liquidated. Preferred securities have certain characteristics of both debt and
equity securities. Like debt securities, preferred securities' rate of income
is generally contractually fixed. Like equity securities, preferred securities
do not have rights to precipitate bankruptcy filings or collection activities
in the event of missed payments. Furthermore, preferred securities are
generally in a subordinated position in an issuer's capital structure and
their value are heavily dependent on the profitability of the issuer rather
than on any legal claims to specific assets or cash flows.

The Fund considers below investment grade convertible debt securities and
preferred securities to be high yield securities, and includes convertible
debt securities and preferred securities (along with Corporate Loans described
above) in determining whether at least 80% of its assets are invested in high
yield securities.

Description of Distressed Securities

The Fund may invest up to 10% of its total assets in Distressed
Securities, which are the subject of bankruptcy proceedings or otherwise in
default as to the repayment of principal and/or payment of interest at the
time of acquisition by the Fund or are rated in the lowest rating categories
(Ca or lower by Moody's, CC or lower by Standard & Poor's or CC or lower by
Fitch) or, if unrated, are considered by the Investment Adviser to be of
comparable quality. Investment in Distressed Securities is speculative and
involves significant risk. Distressed Securities frequently do not produce
income while they are outstanding and may require the Fund to bear certain
extraordinary expenses in order to protect and recover its investment.
Therefore, to the extent the Fund seeks its secondary objective of capital
appreciation through investment in Distressed Securities, the Fund's ability
to achieve current income for its stockholders may be diminished. The Fund
also will be subject to significant uncertainty as to when and in what manner
and for what value the obligations evidenced by the Distressed Securities will
eventually be satisfied ( e.g., through a liquidation of the obligor's assets,
an exchange offer or plan of reorganization involving the Distressed
Securities or a payment of some amount in satisfaction of the obligation). In
addition, even if an exchange offer is made or a plan of reorganization is
adopted with respect to Distressed Securities held by the Fund, there can be
no assurance that the securities or other assets received by the Fund in
connection with such exchange offer or plan of reorganization will not have a
lower value or income potential than may have been anticipated when the
investment was made. Moreover, any securities received by the Fund upon
completion of an exchange offer or plan of reorganization may be restricted as
to resale. As a result of the Fund's participation in negotiations with
respect to any exchange offer or plan of reorganization with respect to an
issuer of Distressed Securities, the Fund may be restricted from disposing of
such securities.

Illiquid Securities

The Fund may invest in junk bonds, Corporate Loans, convertible debt
securities, preferred securities and other securities that lack a secondary
trading market or are otherwise considered illiquid. Liquidity of a security
relates to the ability to easily dispose of the security and the price to be
obtained upon disposition of the security, which may be less than would be
obtained for a comparable more liquid security. The Fund has no limitation on
the amount of its investments that are not readily marketable or are subject
to restrictions on resale. Illiquid securities may be subject to wide
fluctuations in market value. The Fund may be subject to significant delays in
disposing of certain high yield securities. As a result, the Fund may be
forced to sell these securities at less than fair market value or may not be
able to sell them when the Investment Adviser believes that it is desirable to
do so. Illiquid securities also may entail registration expenses and other
transaction costs that are higher than those for liquid securities. Such
investments may affect the Fund's ability to realize the net asset value in
the event of a voluntary or involuntary liquidation of its assets. See "Net
Asset Value" for information with respect to the valuation of illiquid
securities.

OTHER INVESTMENT POLICIES

The Fund has adopted certain other policies as set forth below:

Leverage

At times, the Fund expects to utilize leverage through borrowings or
issuance of short term debt securities or shares of preferred stock. The Fund
has the ability to utilize leverage through borrowing or the issuance of short
term debt securities in an amount up to 33-1/3% of the value of its total
assets (including the amount obtained from such borrowings or debt issuance).
The Fund also has the ability to utilize leverage through the issuance of
shares of preferred stock in an amount up to 50% of the value of its total
assets (including the amount obtained from such issuance). Under current
market conditions, the Fund intends to utilize borrowings in an initial amount
up to approximately 25% of the value of its total assets (including the amount
obtained from leverage) after the Fund has fully invested the net proceeds of
the offering. There can be no assurance, however, that the Fund will borrow in
order to leverage its assets or if it does what percentage of the Fund's
assets such borrowings will represent. The Fund generally will not utilize
leverage if it anticipates that the Fund's leveraged capital structure would
result in a lower return to common stockholders than that obtainable if the
common stock were unleveraged for any significant amount of time. The Fund
also may borrow money as a temporary measure for extraordinary or emergency
purposes, including the payment of dividends and the settlement of securities
transactions which otherwise might require untimely dispositions of Fund
securities. The Fund at times may borrow from affiliates of the Investment
Adviser, provided that the terms of such borrowings are no less favorable than
those available from comparable sources of funds in the marketplace from
borrowings for leverage and the issuance of preferred stock. When the Fund is
utilizing leverage, the fees paid to the Investment Adviser for investment
advisory and management services will be higher than if the Fund did not
utilize leverage because the fees paid will be calculated based on the Fund's
net assets plus the proceeds of any outstanding borrowings used for leverage
and the issuance of preferred stock.

The Fund's use of leverage is premised upon the expectation that the cost
of the leverage used to purchase additional assets will be lower than the
return the Fund achieves on its investments with the proceeds of the borrowings
or the issuance of preferred stock. Such difference in return may result from
the short-term nature of the Fund's borrowing compared to the long-term nature
of its investments. Because the total assets of the Fund (including the assets
obtained from leverage) will be invested in the higher yielding portfolio
investments or portfolio investments with the potential for capital
appreciation, the holders of common stock will be the beneficiaries of the
incremental return. Should the differential between the underlying assets and
cost of leverage narrow, the incremental return "pick up" will be reduced.
Furthermore, if long term rates rise, the common stock net asset value will
reflect the decline in the value of portfolio holdings resulting therefrom.

Leverage creates risks for holders of common stock, including the
likelihood of greater volatility of net asset value and market price of shares
of common stock or fluctuations in dividends paid on common stock, the risk
that fluctuations in interest rates on borrowings and short term debt or in
the dividend rates on any preferred stock may affect the return to the holders
of common stock and increased operating costs which may reduce the Fund's
total return. To the extent the income or capital appreciation derived from
securities purchased with funds received from leverage exceeds the cost of
leverage, the Fund's return will be greater than if leverage had not been
used. Conversely, if the income or capital appreciation from the securities
purchased with such funds is not sufficient to cover the cost of leverage, the
return of the Fund will be less than if leverage had not been used, and
therefore the amount available for distribution to stockholders as dividends
and other distributions will be reduced. In the latter case, the Investment
Adviser in its best judgment nevertheless may determine to maintain the Fund's
leveraged position if it expects that the benefits to the Fund's stockholders
of maintaining the leveraged position will outweigh the current reduced
return. Capital raised through leverage will be subject to interest costs or
dividend payments that may or may not exceed the income and appreciation on
the assets purchased. The Fund also may be required to maintain minimum
average balances in connection with borrowings or to pay a commitment or other
fee to maintain a line of credit; either of these requirements will increase
the cost of borrowing over the stated interest rate. The issuance of
additional classes of preferred stock involves offering expenses and other
costs and may limit the Fund's freedom to pay dividends on shares of common
stock or to engage in other activities. Borrowings and the issuance of a class
of preferred stock having priority over the Fund's common stock create an
opportunity for greater return per share of common stock, but at the same time
such borrowing is a speculative technique in that it will increase the Fund's
exposure to capital risk. Unless the income and appreciation, if any, on
assets acquired with borrowed funds

or offering proceeds exceed the cost of borrowing or issuing additional
classes of securities, the use of leverage will diminish the investment
performance of the Fund compared with what it would have been without
leverage.

Certain types of borrowings may result in the Fund being subject to
covenants in credit agreements, including those relating to asset coverage,
borrowing base and portfolio composition requirements and additional covenants
that may affect the Fund's ability to pay dividends and distributions on the
common stock in certain instances. The Fund may also be required to pledge its
assets to the lenders in connection with certain types of borrowing. The
Investment Adviser does not anticipate that these covenants or restrictions
will adversely affect its ability to manage the Fund's portfolio in accordance
with the Fund's investment objectives and policies. However, due to these
covenants or restrictions, the Fund may be forced to liquidate investments at
times and at prices that are not favorable to the Fund, or the Fund may be
forced to forgo investments that the Investment Adviser otherwise views as
favorable. The Fund may be subject to certain restrictions on investments
imposed by guidelines of one or more nationally recognized rating
organizations which may issue ratings for the short term debt instruments or
preferred stock issued by the Fund. These guidelines may impose asset coverage
or portfolio composition requirements that are more stringent than those
imposed by the 1940 Act. It is not anticipated that these covenants or
guidelines will impede the Investment Adviser from managing the Fund's
portfolio in accordance with the Fund's investment objectives and policies.

Under the 1940 Act, the Fund is not permitted to incur indebtedness
unless immediately after such incurrence the Fund has an asset coverage of at
least 300% of the aggregate outstanding principal balance of indebtedness
(i.e., such indebtedness may not exceed 33-1/3% of the value of the Fund's
total assets). Additionally, under the 1940 Act, the Fund may not declare any
dividend or other distribution upon any class of its capital stock, or
purchase any such capital stock, unless the aggregate indebtedness of the Fund
has, at the time of the declaration of any such dividend or distribution or at
the time of any such purchase, an asset coverage of at least 300% after
deducting the amount of such dividend, distribution, or purchase price, as the
case may be. Under the 1940 Act, the Fund is not permitted to issue shares of
preferred stock unless immediately after such issuance the net asset value of
the Fund's portfolio is at least 200% of the liquidation value of the
outstanding preferred stock (i.e., such liquidation value may not exceed 50%
of the value of the Fund's total assets). In addition, the Fund is not
permitted to declare any cash dividend or other distribution on its common
stock unless, at the time of such declaration, the net asset value of the
Fund's portfolio (determined after deducting the amount of such dividend or
distribution) is at least 200% of such liquidation value. In the event shares
of preferred stock are issued, the Fund intends, to the extent possible, to
purchase or redeem shares of preferred stock from time to time to maintain
coverage of any preferred stock of at least 200%.

The Fund's willingness to borrow money and issue new securities for
investment purposes, and the amount it will borrow or issue, will depend on
many factors, the most important of which are investment outlook, market
conditions and interest rates. Successful use of a leveraging strategy depends
on the Investment Adviser's ability to predict correctly interest rates and
market movements, and there is no assurance that a leveraging strategy will be
successful during any period in which it is employed.

As discussed under "Investment Advisory and Management Arrangements,"
during periods when the Fund has preferred stock outstanding or outstanding
borrowings for leverage, the fees paid to the Investment Adviser for
investment advisory and management services will be higher than if the Fund
did not issue preferred stock or borrow because the fees paid will be
calculated on the basis of the Fund's average weekly net assets, including
proceeds from the sale of preferred stock, plus the proceeds of any
outstanding borrowings used for leverage. Consequently, the Fund and the
Investment Adviser may have differing interests in determining whether to
leverage the Fund's assets. The Board of Directors will monitor this potential
conflict.

Assuming the utilization of leverage by borrowings in the amount of
approximately 25% of the Fund's total assets, and an annual interest rate of
____% payable on such leverage based on market rates as of the date of this
prospectus, the annual return that the Fund's portfolio must experience (net
of expenses) in order to cover such interest payments would be _____%.

The following table is designed to illustrate the effect on the return to
a holder of the Fund's common stock of the leverage obtained by borrowings in
the amount of approximately 25% of the Fund's total assets, assuming
hypothetical annual returns of the Fund's portfolio of minus 10% to plus 10%.
As the table shows, leverage

generally increases the return to stockholders when portfolio return is
positive and greater than the cost of leverage and decreases the return when
the portfolio return is negative or less than the cost of leverage. The
figures appearing in the table are hypothetical and actual returns may be
greater or less than those appearing in the table.

Assumed Portfolio Return (net of expenses) (10)% (5)% 0% 5% 10%

Corresponding Common Stock Return % % % % %

Until the Fund borrows or issues shares of preferred stock, the Fund's
common stock will not be leveraged, and the risks and special considerations
related to leverage described in this prospectus will not apply. Such
leveraging of the common stock cannot be fully achieved until the proceeds
resulting from the use of leverage have been invested in longer term
securities in accordance with the Fund's investment objectives and policies.

Indexed and Inverse Floating Obligations

The Fund may invest in securities whose potential returns are directly
related to changes in an underlying index or interest rate, known as indexed
securities. The return on indexed securities will rise when the underlying
index or interest rate rises and fall when the index or interest rate falls.
The Fund also may invest in securities whose return is inversely related to
changes in an interest rate ("inverse floaters"). In general, inverse floaters
change in value in a manner that is opposite to most bonds--that is, interest
rates on inverse floaters will decrease when short term rates increase and
increase when short term rates decrease. Investments in indexed securities and
inverse floaters may subject the Fund to the risk of reduced or eliminated
interest payments. Investments in indexed securities also may subject the Fund
to loss of principal. In addition, certain indexed securities and inverse
floaters may increase or decrease in value at a greater rate than the
underlying interest rate, which effectively leverages the Fund's investment.
As a result, the market value of such securities will generally be more
volatile than that of fixed rate securities. Both indexed securities and
inverse floaters can be derivative securities and can be considered
speculative.

Interest Rate Transactions

In order to hedge the value of the Fund's portfolio against interest rate
fluctuations or to seek to enhance the Fund's return, the Fund may enter into
various interest rate transactions such as interest rate swaps and the
purchase or sale of interest rate caps and floors. The Fund may enter into
these transactions to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date or to seek to
enhance its return. However, the Fund also may invest in interest rate swaps
to seek to enhance income or to increase the Fund's yield, for example, during
periods of steep interest rate yield curves (i.e., wide differences between
short term and long term interest rates). The Fund is not required to pursue
these portfolio strategies and may choose not to do so. The Fund cannot
guarantee that any strategies it uses will work.

In an interest rate swap, the Fund exchanges with another party their
respective commitments to pay or receive interest (e.g., an exchange of fixed
rate payments for floating rate payments). For example, if the Fund holds a
debt instrument with an interest rate that is reset only once each year, it
may swap the right to receive interest at this fixed rate for the right to
receive interest at a rate that is reset every week. This would enable the
Fund to offset a decline in the value of the debt instrument due to rising
interest rates but would also limit its ability to benefit from falling
interest rates. Conversely, if the Fund holds a debt instrument with an
interest rate that is reset every week and it would like to lock in what it
believes to be a high interest rate for one year, it may swap the right to
receive interest at this variable weekly rate for the right to receive
interest at a rate that is fixed for one year. Such a swap would protect the
Fund from a reduction in yield due to falling interest rates and may permit
the Fund to seek to enhance its income through the positive differential
between one week and one year interest rates, but would preclude it from
taking full advantage of rising interest rates.

The Fund usually will enter into interest rate swaps on a net basis
(i.e., the two payment streams are netted out with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). The net
amount of the excess, if any, of the Fund's obligations over its entitlements
with respect to each interest rate swap

will be accrued on a daily basis, and an amount of cash or liquid instruments
having an aggregate net asset value at least equal to the accrued excess will
be segregated by the Fund's custodian. If the interest rate swap transaction
is entered into on other than a net basis, the full amount of the Fund's
obligations will be accrued on a daily basis, and the full amount of the
Fund's obligations will be segregated by the Fund's custodian.

The Fund also may engage in interest rate transactions in the form of
purchasing or selling interest rate caps or floors. The purchase of an
interest rate cap entitles the purchaser, to the extent that a specified index
exceeds a predetermined interest rate, to receive payments of interest equal
to the difference of the index and the predetermined rate on a notional
principal amount (i.e., the reference amount with respect to which interest
obligations are determined although no actual exchange of principal occurs)
from the party selling such interest rate cap. The purchase of an interest
rate floor entitles the purchaser, to the extent that a specified index falls
below a predetermined interest rate, to receive payments of interest at the
difference of the index and the predetermined rate on a notional principal
amount from the party selling such interest rate floor. The Fund will not
enter into caps or floors if, on a net basis, the aggregate notional principal
amount with respect to such agreements exceeds the net assets of the Fund.

Typically, the parties with which the Fund will enter into interest rate
transactions will be broker-dealers and other financial institutions. The Fund
will not enter into any interest rate swap, cap or floor transaction unless
the unsecured senior debt or the claims-paying ability of the other party
thereto is rated investment grade quality by at least one nationally
recognized statistical rating organization at the time of entering into such
transaction or whose creditworthiness is believed by the Investment Adviser to
be equivalent to such rating. If there is a default by the other party to such
a transaction, the Fund will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms
acting both as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become relatively liquid in
comparison with other similar instruments traded in the interbank market. Caps
and floors, however, are more recent innovations and are less liquid than
swaps. Certain Federal income tax requirements may limit the Fund's ability to
engage in interest rate swaps. Payments from transactions in interest rate
swaps generally will be taxable as ordinary income to stockholders. See
"Taxes."

Credit Default Swap Agreements

The Fund may enter into credit default swap agreements. The credit
default swap agreement may have as reference obligations one or more
securities that are not currently held by the Fund. The protection "buyer" in
a credit default contract may be obligated to pay the protection "seller" an
upfront or a periodic stream of payments over the term of the contract
provided that no credit event on a reference obligation has occurred. If a
credit event occurs, the seller generally must pay the buyer the "par value"
(full notional value) of the swap in exchange for an equal face amount of
deliverable obligations of the reference entity described in the swap, or the
seller may be required to deliver the related net cash amount, if the swap is
cash settled. The Fund may be either the buyer or seller in the transaction.
If the Fund is a buyer and no credit event occurs, the Fund may recover
nothing if the swap is held through its termination date. However, if a credit
event occurs, the buyer generally may elect to receive the full notional value
of the swap in exchange for an equal face amount of deliverable obligations of
the reference entity that may have little or no value. As a seller, the Fund
generally receives an upfront payment or a fixed rate of income throughout the
term of the swap, which typically is between six months and three years,
provided that there is no credit event. If a credit event occurs, generally
the seller must pay the buyer the full notional value of the swap in exchange
for an equal face amount of deliverable obligations of the reference entity
that may have little or no value.

Credit default swap agreements involve greater risks than if the Fund had
invested in the reference obligation directly since, in addition to general
market risks, credit default swaps are subject to illiquidity risk,
counterparty risk and credit risks. The Fund will enter into credit default
swap agreements only with counterparties who are rated investment grade
quality by at least one nationally recognized statistical rating organization
at the time of entering into such transaction or whose creditworthiness is
believed by the Investment Adviser to be equivalent to such rating. A buyer
generally also will lose its investment and recover nothing should no credit
event occur and the swap is held to its termination date. If a credit event
were to occur, the value of any deliverable obligation received by the seller,
coupled with the upfront or periodic payments previously received, may be less
than the full notional

value it pays to the buyer, resulting in a loss of value to the Fund. The
Fund's obligations under a credit default swap agreement will be accrued daily
(offset against any amounts owing to the Fund). The Fund will at all times
segregate with its custodian in connection with each such transaction
unencumbered liquid securities or cash with a value at least equal to the
Fund's exposure (any accrued but unpaid net amounts owed by the Fund to any
counterparty), on a marked-to-market basis (as calculated pursuant to
requirements of the Commission). Such segregation will ensure that the Fund
has assets available to satisfy its obligations with respect to the
transaction and will avoid any potential leveraging of the Fund's portfolio.
Such segregation will not limit the Fund's exposure to loss.

Options

Call Options. The Fund may purchase call options on any of the types of
securities in which it may invest. A purchased call option gives the Fund the
right to buy, and obligates the seller to sell, the underlying security at the
exercise price at any time during the option period. The Fund may also
purchase and sell call options on indices. Index options are similar to
options on securities except that, rather than taking or making delivery of
securities underlying the option at a specified price upon exercise, an index
option gives the holder the right to receive cash upon exercise of the option
if the level of the index upon which the option is based is greater than the
exercise price of the option.

The Fund also is authorized to write (i.e., sell) covered call options
on the securities in which it may invest and to enter into closing purchase
transactions with respect to certain of such options. A covered call option is
an option in which the Fund, in return for a premium, gives another party a
right to buy specified securities owned by the Fund at a specified future date
and price set at the time of the contract. The principal reason for writing
call options is the attempt to realize, through the receipt of premiums, a
greater return than would be realized on the securities alone. By writing
covered call options, the Fund gives up the opportunity, while the option is
in effect, to profit from any price increase in the underlying security above
the option exercise price. In addition, the Fund's ability to sell the
underlying security will be limited while the option is in effect unless the
Fund enters into a closing purchase transaction. A closing purchase
transaction cancels out the Fund's position as the writer of an option by
means of an offsetting purchase of an identical option prior to the expiration
of the option it has written. Covered call options also serve as a partial
hedge against the price of the underlying security declining.

The Fund also is authorized to write (i.e., sell) uncovered call options
on securities in which it may invest but that are not currently held by the
Fund. The principal reason for writing uncovered call options is to realize
income without committing capital to the ownership of the underlying
securities. When writing uncovered call options, the Fund must deposit and
maintain sufficient margin with the broker dealer through which it made the
uncovered call option as collateral to ensure that the securities can be
purchased for delivery if and when the option is exercised. In addition, the
Fund will segregate with its custodian in connection with each such
transaction unencumbered liquid securities or cash with a value at least equal
to the Fund's exposure (the difference between the unpaid amounts owed by the
Fund on such transaction minus any collateral deposited with the broker
dealer), on a marked-to-market basis (as calculated pursuant to requirements
of the Commission). Such segregation will ensure that the Fund has assets
available to satisfy its obligations with respect to the transaction and will
avoid any potential leveraging of the Fund's portfolio. Such segregation will
not limit the Fund's exposure to loss. During periods of declining securities
prices or when prices are stable, writing uncovered calls can be a profitable
strategy to increase the Fund's income with minimal capital risk. Uncovered
calls are riskier than covered calls because there is no underlying security
held by the Fund that can act as a partial hedge. Uncovered calls have
speculative characteristics and the potential for loss is unlimited. When an
uncovered call is exercised, the Fund must purchase the underlying security to
meet its call obligation. There is also a risk, especially with less liquid
preferred and debt securities, that the securities may not be available for
purchase. If the purchase price exceeds the exercise price, the Fund will lose
the difference.

Put Options. The Fund is authorized to purchase put options to hedge
against a decline in the value of its securities or to seek to enhance its
return. By buying a put option, the Fund acquires a right to sell the
underlying security at the exercise price, thus limiting the Fund's risk of
loss through a decline in the market value of the security until the put
option expires. The amount of any appreciation in the value of the underlying
security will be partially offset by the amount of the premium paid for the
put option and any related transaction costs. Prior to its expiration, a put
option may be sold in a closing sale transaction and profit or loss from the
sale will depend on whether the amount

received is more or less than the premium paid for the put option plus the
related transaction costs. A closing sale transaction cancels out the Fund's
position as the purchaser of an option by means of an offsetting sale of an
identical option prior to the expiration of the option it has purchased.

The Fund also has authority to write (i.e., sell) put options on the
types of securities that may be held by the Fund, provided that such put
options are covered, meaning that such options are secured by segregated,
liquid instruments. The Fund will receive a premium for writing a put option,
which increases the Fund's return. The Fund will not sell puts if, as a
result, more than 50% of the Fund's assets would be required to cover its
potential obligations under its hedging and other investment transactions.

The Fund is also authorized to write (i.e., sell) uncovered put options
on securities in which it may invest but that the Fund does not currently have
a corresponding short position or has not deposited cash equal to the exercise
value of the put option with the broker dealer through which it made the
uncovered put option as collateral. The principal reason for writing uncovered
put options is to receive premium income and to acquire a security at a net
cost below the current market value. The Fund has the obligation to buy the
securities at an agreed upon price if the securities decrease below the
exercise price. If the securities price increases during the option period,
the option will expire worthless and the Fund will retain the premium and will
not have to purchase the securities at the exercise price. The Fund will
segregate with its custodian in connection with such transaction unencumbered
liquid securities or cash with a value at least equal to the Fund's exposure,
on a marked-to-market basis (as calculated pursuant to requirements of the
Commission). Such segregation will ensure that the Fund has assets available
to satisfy its obligations with respect to the transaction and will avoid any
potential leveraging of the Fund's portfolio. Such segregation will not limit
the Fund's exposure to loss. The Fund also may purchase uncovered put options.

Financial Futures and Options Thereon

The Fund is authorized to engage in transactions in financial futures
contracts ("futures contracts") and related options on such futures contracts
either as a hedge against adverse changes in the market value of its portfolio
securities or to seek to enhance the Fund's income. A futures contract is an
agreement between two parties which obligates the purchaser of the futures
contract, to buy and the seller of a futures contract to sell a security for a
set price on a future date or, in the case of an index futures contract, to
make and accept a cash settlement based upon the difference in value of the
index between the time the contract was entered into and the time of its
settlement. A majority of transactions in futures contracts, however, do not
result in the actual delivery of the underlying instrument or cash settlement,
but are settled through liquidation (i.e., by entering into an offsetting
transaction). Futures contracts have been designed by boards of trade which
have been designated "contract markets" by the Commodities Futures Trading
Commission (the "CFTC"). Transactions by the Fund in futures contracts and
financial futures are subject to limitations as described below under "--
Restrictions on the Use of Futures Transactions."

The Fund may sell financial futures contracts in anticipation of an
increase in the general level of interest rates. Generally, as interest rates
rise, the market values of securities that may be held by the Fund will fall,
thus reducing the net asset value of the Fund. However, as interest rates
rise, the value of the Fund's short position in the futures contract also will
tend to increase, thus offsetting all or a portion of the depreciation in the
market value of the Fund's investments which are being hedged. While the Fund
will incur commission expenses in selling and closing out futures positions,
these commissions are generally less than the transaction expenses which the
Fund would have incurred had the Fund sold portfolio securities in order to
reduce its exposure to increases in interest rates. The Fund also may purchase
financial futures contracts in anticipation of a decline in interest rates
when it is not fully invested in a particular market in which it intends to
make investments to gain market exposure that may in part or entirely offset
an increase in the cost of securities it intends to purchase. It is
anticipated that, in a substantial majority of these transactions, the Fund
will purchase securities upon termination of the futures contract.

The Fund also has authority to purchase and write call and put options on
futures contracts. Generally, these strategies are utilized under the same
market and market sector conditions (i.e., conditions relating to specific
types of investments) in which the Fund enters into futures transactions. The
Fund may purchase put options or write call options on futures contracts
rather than selling the underlying futures contract in anticipation of a
decrease in the market value of securities or an increase in interest rates.
Similarly, the Fund may purchase call options, or

write put options on futures contracts, as a substitute for the purchase of
such futures to hedge against the increased cost resulting from an increase in
the market value or a decline in interest rates of securities which the Fund
intends to purchase.

The Fund may engage in options and futures transactions on exchanges and
options in the over-the-counter markets ("OTC options"). In general,
exchange-traded contracts are third-party contracts (i.e., performance of the
parties' obligation is guaranteed by an exchange or clearing corporation) with
standardized strike prices and expiration dates. OTC options transactions are
two-party contracts with price and terms negotiated by the buyer and seller.
See "-- Restrictions on OTC Options" below for information as to restrictions
on the use of OTC options.

Restrictions on the Use of Futures Transactions. Under regulations of the
CFTC, the futures trading activity described herein will not result in the
Fund being deemed a "commodity pool," as defined under such regulations,
provided that the Fund adheres to certain restrictions. In particular, the
Fund may purchase and sell futures contracts and options thereon (i) for bona
fide hedging purposes and (ii) for non-hedging purposes, if the aggregate
initial margin and premiums required to establish positions in such contracts
and options does not exceed 5% of the liquidation value of the Fund's
portfolio, after taking into account unrealized profits and unrealized losses
on any such contracts and options. Margin deposits may consist of cash or
securities acceptable to the broker and the relevant contract market.

When the Fund purchases a futures contract or writes a put option or
purchases a call option thereon, an amount of cash or liquid instruments will
be segregated with the Fund's custodian so that the amount so segregated, plus
the amount of variation margin held in the account of its broker, equals the
market value of the futures contract, thereby ensuring that the use of such
futures is unleveraged.

Restrictions on OTC Options. The Fund will engage in transactions in OTC
options only with banks or dealers which have capital of at least $50 million
or whose obligations are guaranteed by an entity having capital of at least
$50 million. OTC options and assets used to cover OTC options written by the
Fund are considered by the staff of the Commission to be illiquid. The
illiquidity of such options or assets may prevent a successful sale of such
options or assets, result in a delay of sale, or reduce the amount of proceeds
that might otherwise be realized.

Risk Factors in Interest Rate Transactions and Options and Futures Transactions

The use of interest rate transactions is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. Interest rate transactions
involve the risk of an imperfect correlation between the index used in the
hedging transaction and that pertaining to the securities that are the subject
of such transaction. If the Investment Adviser is incorrect in its forecasts
of market values, interest rates and other applicable factors, the investment
performance of the Fund would diminish compared with what it would have been
if these investment techniques were not used. In addition, interest rate
transactions that may be entered into by the Fund do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk
of loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Fund is contractually obligated to make. If the
security underlying an interest rate swap is prepaid and the Fund continues to
be obligated to make payments to the other party to the swap, the Fund would
have to make such payments from another source. If the other party to an
interest rate swap defaults, the Fund's risk of loss consists of the net
amount of interest payments that the Fund contractually is entitled to
receive. In the case of a purchase by the Fund of an interest rate cap or
floor, the amount of loss is limited to the fee paid. Since interest rate
transactions are individually negotiated, the Investment Adviser expects to
achieve an acceptable degree of correlation between the Fund's rights to
receive interest on securities and its rights and obligations to receive and
pay interest pursuant to interest rate swaps.

Use of options and futures transactions to hedge the portfolio involves
the risk of imperfect correlation in movements in the price of options and
futures and movements in the prices of the securities that are the subject of
the hedge. If the price of the options or futures moves more or less than the
price of the subject of the hedge, the Fund will experience a gain or loss
which will not be completely offset by movements in the price of the subject
of the hedge. The risk particularly applies to the Fund's use of futures and
options thereon when it uses generally use such instruments as a so-called
"cross-hedge," which means that the security that is the subject of the
futures contract is different from the security being hedged by the contract.
Use of options and futures and options thereon

through uncovered call options and uncovered put options are highly
speculative strategies. If the price of the uncovered option moves in the
direction not anticipated by the Fund, the Fund's losses will not be limited.

Prior to exercise or expiration, an exchange-traded option position can
only be terminated by entering into a closing purchase or sale transaction.
This requires a secondary market on an exchange for call or put options of the
same series. The Fund intends to enter into options and futures transactions,
on an exchange or in the over-the-counter market, only if there appears to be
a liquid secondary market for such options and futures. However, there can be
no assurance that a liquid secondary market will exist at any specific time.
Thus, it may not be possible to close an options or futures position. The
inability to close options and futures positions also could have an adverse
impact on the Fund's ability to effectively hedge its portfolio. There is also
the risk of loss by the Fund of margin deposits or collateral in the event of
bankruptcy of a broker with whom the Fund has an open position in an option, a
futures contract or an option related to a futures contract.

Short Sales

The Fund may make short sales of securities. A short sale is a
transaction in which the Fund sells a security it does not own in anticipation
that the market price of that security will decline. The Fund may make short
sales both as a form of hedging to offset potential declines in long positions
in similar securities and in order to seek to enhance return.

When the Fund makes a short sale, it must borrow the security sold short
and deliver it to the broker dealer through which it made the short sale as
collateral for its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.

The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker dealer, usually cash, U.S. government
securities or other liquid securities similar to those borrowed. The Fund also
will be required to deposit similar collateral with its custodian to the
extent, if any, necessary so that the value of both collateral deposits in the
aggregate is at all times equal to at least 100% of the current market value
of the security sold short. Depending on arrangements made with the broker
dealer from which it borrowed the security regarding payment over of any
payments received by the Fund on such security, the Fund may not receive any
payments (including interest) on its collateral deposited with such broker
dealer.

If the price of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security, the Fund will
incur a loss. Conversely, if the price declines, the Fund will realize a gain.
Any gain will be decreased, and any loss increased, by the transaction costs
described above. Although the Fund's gain is limited to the price at which it
sold the security short, its potential loss is theoretically unlimited.

The Fund also may make short sales "against the box." These transactions
will involve either short sales of securities retained in the Fund's portfolio
or securities which it has the right to acquire without the payment of further
consideration.

Investments in Foreign Securities

The Fund may invest without limitation in securities of issuers domiciled
outside of the United States or that are denominated in various foreign
currencies and multinational foreign currency units. Investment in such
securities involves certain risks not involved in domestic investments.

Public Information. Many of the foreign securities held by the Fund will
not be registered with the Commission nor will the issuers thereof be subject
to the reporting requirements of such agency. Accordingly, there may be less
publicly available information about the foreign issuer of such securities
than about a U.S. issuer, and such foreign issuers may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to those of U.S. issuers. Traditional investment measurements, such
as price/earnings ratios, as used in the United States, may not be applicable
to such securities, particularly those issued in certain smaller, emerging
foreign capital markets. Foreign issuers, and issuers in smaller, emerging
capital markets in particular, generally are

not subject to uniform accounting, auditing and financial reporting standards
or to practices and requirements comparable to those applicable to domestic
issuers.

Trading Volume, Clearance and Settlement. Foreign financial markets,
while often growing in trading volume, have, for the most part, substantially
less volume than U.S. markets, and securities of many foreign companies are
less liquid and their prices may be more volatile than securities of
comparable domestic companies. Foreign markets also have different clearance
and settlement procedures, and in certain markets there have been times when
settlements have failed to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Further,
satisfactory custodial services for investment securities may not be available
in some countries having smaller, emerging capital markets, which may result
in the Fund incurring additional costs and delays in transporting and
custodying such securities outside such countries. Delays in settlement could
result in periods when assets of the Fund are uninvested and no return is
earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems or the risk of intermediary counterparty failures
could cause the Fund to miss attractive investment opportunities. The
inability to dispose of a portfolio security due to settlement problems could
result either in losses to the Fund due to subsequent declines in the value of
such portfolio security or, if the Fund has entered into a contract to sell
the security, could result in possible liability to the purchaser.

Government Supervision and Regulation. There generally is less
governmental supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States. For example, there may
be no comparable provisions under certain foreign laws to insider trading and
similar investor protection securities laws that apply with respect to
securities transactions consummated in the United States. Further, brokerage
commissions and other transaction costs on foreign securities exchanges
generally are higher than in the United States.

Restrictions on Foreign Investment. Some countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as the Fund. As illustrations,
certain countries require governmental approval prior to investments by
foreign persons, or limit the amount of investment by foreign persons in a
particular company, or limit the investment by foreign persons in a company to
only a specific class of securities that may have less advantageous terms than
securities of the company available for purchase by nationals. Certain
countries may restrict investment opportunities in issuers or industries
deemed important to national interests.

A number of countries have authorized the formation of closed-end
investment companies to facilitate indirect foreign investment in their
capital markets. In accordance with the 1940 Act, the Fund may invest up to
10% of its total assets in securities of closed-end investment companies, not
more than 5% of which may be invested in any one such company. This
restriction on investments in securities of closed-end investment companies
may limit opportunities for the Fund to invest indirectly in certain smaller
capital markets. Shares of certain closed-end investment companies may at
times be acquired only at market prices representing premiums to their net
asset values. If the Fund acquires shares in closed-end investment companies,
stockholders would bear both their proportionate share of the Fund's
(including investment advisory fees) and, indirectly, the expenses of such
closed-end investment companies. The Fund also may seek, at its own cost, to
create its own investment entities under the laws of certain countries.

In some countries, banks or other financial institutions may constitute
a substantial number of the leading companies or companies with the most
actively traded securities. The 1940 Act limits the Fund's ability to invest
in any security of an issuer which, in its most recent fiscal year, derived
more than 15% of its revenues from "securities related activities," as defined
by the rules thereunder. These provisions may also restrict the Fund's
investments in certain foreign banks and other financial institutions.

Foreign Sub-Custodians and Securities Depositories. Rules adopted under
the 1940 Act permit the Fund to maintain its foreign securities and cash in
the custody of certain eligible non-U.S. banks and securities depositories.
Certain banks in foreign countries may not be eligible sub-custodians for the
Fund, in which event the Fund may be precluded from purchasing securities in
certain foreign countries in which it otherwise would invest or the Fund may
incur additional costs and delays in providing transportation and custody
services for such securities outside of such countries. The Fund may encounter
difficulties in effecting on a timely basis portfolio transactions with
respect to any securities of issuers held outside their countries. Other banks
that are eligible foreign sub-custodians may be

recently organized or otherwise lack extensive operating experience. In
addition, in certain countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by foreign
sub-custodians in the event of the bankruptcy of the sub-custodian.

Other Investment Strategies

Repurchase Agreements and Purchase and Sale Contracts. The Fund may
invest in securities pursuant to repurchase agreements and purchase and sale
contracts. Repurchase agreements and purchase and sale contracts may be
entered into only with a member bank of the Federal Reserve System or primary
dealer in U.S. Government securities. Under such agreements, the bank or
primary dealer agrees, upon entering into the contract, to repurchase the
security at a mutually agreed upon time and price, thereby determining the
yield during the term of the agreement. This results in a fixed rate of return
insulated from market fluctuations during such period. In the case of
repurchase agreements, the prices at which the trades are conducted do not
reflect accrued interest on the underlying obligations; whereas, in the case
of purchase and sale contracts, the prices take into account accrued interest.
Such agreements usually cover short periods, such as under one week.
Repurchase agreements may be construed to be collateralized loans by the
purchaser to the seller secured by the securities transferred to the
purchaser. In the case of a repurchase agreement, the Fund will require the
seller to provide additional collateral if the market value of the securities
falls below the repurchase price at any time during the term of the repurchase
agreement; the Fund does not have the right to seek additional collateral in
the case of purchase and sale contracts. In the event of default by the seller
under a repurchase agreement construed to be a collateralized loan, the
underlying securities are not owned by the Fund but only constitute collateral
for the seller's obligation to pay the repurchase price. Therefore, the Fund
may suffer time delays and incur costs or possible losses in connection with
the disposition of the collateral. A purchase and sale contract differs from a
repurchase agreement in that the contract arrangements stipulate that the
securities are owned by the Fund. In the event of a default under such a
repurchase agreement or a purchase and sale contract, instead of the
contractual fixed rate of return, the rate of return to the Fund shall be
dependent upon intervening fluctuations of the market value of such security
and the accrued interest on the security. In such event, the Fund would have
rights against the seller for breach of contract with respect to any losses
arising from market fluctuations following the failure of the seller to
perform.

Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements with respect to its portfolio investments subject to the investment
restrictions set forth herein. Reverse repurchase agreements involve the sale
of securities held by the Fund with an agreement by the Fund to repurchase the
securities at an agreed upon price, date and interest payment. The use by the
Fund of reverse repurchase agreements involves many of the same risks of
leverage described under "Risk Factors and Special Considerations--Leverage"
and "--Leverage" above since the proceeds derived from such reverse repurchase
agreements may be invested in additional securities. At the time the Fund
enters into a reverse repurchase agreement, it may segregate with the
custodian liquid instruments having a value not less than the repurchase price
(including accrued interest). If the Fund segregates such liquid instruments,
a reverse repurchase agreement will not be considered a borrowing by the Fund;
however, under circumstances in which the Fund does not segregate such liquid
instruments, such reverse repurchase agreement will be considered a borrowing
for the purpose of the Fund's limitation on borrowings. Reverse repurchase
agreements involve the risk that the market value of the securities acquired
in connection with the reverse repurchase agreement may decline below the
price of the securities the Fund has sold but is obligated to repurchase.
Also, reverse repurchase agreements involve the risk that the market value of
the securities retained in lieu of sale by the Fund in connection with the
reverse repurchase agreement may decline in price. In the event the buyer of
securities under a reverse repurchase agreement file for bankruptcy or becomes
insolvent, such buyer or its trustee or receiver may receive an extension of
time to determine whether to enforce the Fund's obligation to repurchase the
securities, and the Fund's use of the proceeds of the reverse repurchase
agreement may effectively be restricted pending such decision. Also, the Fund
would bear the risk of loss to the extent that the proceeds of the reverse
repurchase agreement are less than the value of the securities subject to such
agreement.

Lending of Portfolio Securities. The Fund may lend securities with a
value not exceeding 33-1/3% of its total assets or the limit prescribed by
applicable law to banks, brokers and other financial institutions. In return,
the Fund receives collateral in cash or securities issued or guaranteed by the
U.S. Government, 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 Fund maintains the ability to obtain the right to vote or consent on
proxy proposals involving material events affecting securities loaned. The
Fund receives the income on the loaned securities. Where the Fund receives
securities as collateral, the Fund receives a fee for its loans from the
borrower and does not receive the income on the collateral. Where the Fund
receives cash collateral, it may invest such collateral and retain the amount
earned, net of any amount rebated to the borrower. As a result, the Fund's
yield may increase. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within the
standard time period for settlement of securities transactions. The Fund is
obligated to return the collateral to the borrower at the termination of the
loan. The Fund could suffer a loss in the event the Fund must return the cash
collateral and there are losses on investments made, with the cash collateral.
In the event the borrower defaults on any of its obligations with respect to a
securities loan, the Fund could suffer a loss where there are losses on
investments made with the cash collateral or, where the value of the
securities collateral falls below the market value of the borrowed securities.
The Fund could also experience delays and costs in gaining access to the
collateral. The Fund may pay reasonable finder's, lending agent,
administrative and custodial fees in connections with its loans. The Fund has
received an exemptive order from the Commission permitting it to lend
portfolio securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") or its affiliates and to retain an affiliate of the Fund as
lending agent. See "Portfolio Transactions."

When-Issued and Forward Commitment Securities. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis. When such transactions are negotiated, the price,
which generally is expressed in yield terms, is fixed at the time the
commitment is made, but delivery and payment for the securities take place at
a later date. When-issued securities and forward commitments may be sold prior
to the settlement date, but the Fund will enter into when-issued and forward
commitment transactions only with the intention of actually receiving or
delivering the securities, as the case may be. If the Fund disposes of the
right to acquire a when-issued security prior to its acquisition or disposes
of its right to deliver or receive against a forward commitment, it can incur
a gain or loss. At the time the Fund enters into a transaction on a
when-issued or forward commitment basis, it will segregate with the custodian
cash or other liquid instruments with a value not less than the value of the
when-issued or forward commitment securities. The value of these assets will
be monitored daily to ensure that their marked to market value at all times
will exceed the corresponding obligations of the Fund. There is always a risk
that the securities may not be delivered, and the Fund may incur a loss.
Settlements in the ordinary course, which may take substantially more than
five business days for mortgage-related securities, are not treated by the
Fund as when-issued or forward commitment transactions and accordingly are not
subject to the foregoing restrictions.

Standby Commitment Agreements. The Fund from time to time may enter into
standby commitment agreements. Such agreements commit the Fund, for a stated
period of time, to purchase a stated amount of a fixed income security that
may be issued and sold to the Fund at the option of the issuer. The price and
coupon of the security is fixed at the time of the commitment. At the time of
entering into the agreement the Fund may be paid a commitment fee, regardless
of whether or not the security ultimately is issued. The Fund will enter into
such agreements only for the purpose of investing in the security underlying
the commitment at a yield and price which is considered advantageous to the
Fund. The Fund at all times will segregate with the custodian cash or other
liquid instruments with a value equal to the purchase price of the securities
underlying the commitment.

There can be no assurance that the securities subject to a standby
commitment will be issued and the value of the security, if issued, on the
delivery date may be more or less than its purchase price. Since the issuance
of the security underlying the commitment is at the option of the issuer, the
Fund may bear the risk of decline in the value of such security and may not
benefit from an appreciation in the value of the security during the
commitment period.

The purchase of a security subject to a standby commitment agreement and
the related commitment fee will be recorded on the date on which the security
reasonably can be expected to be issued and the value of the security
thereafter will be reflected in the calculation of the Fund's net asset value.
The cost basis of the security will be adjusted by the amount of the
commitment fee. In the event the security is not issued, the commitment fee
will be recorded as income on the expiration date of the standby commitment.

----------------------

The Fund may in the future employ new or additional investment strategies
and hedging instruments if those strategies and instruments are consistent
with the Fund's investment objectives and are permissible under applicable
regulations governing the Fund.

INVESTMENT RESTRICTIONS

The following are fundamental investment restrictions of the Fund and,
prior to the issuance of any preferred stock, may not be changed without the
approval of the holders of a majority of the Fund's outstanding shares of
common stock (which for this purpose and under the 1940 Act means the lesser
of (i) 67% of the shares of common stock represented at a meeting at which
more than 50% of the outstanding shares of common stock are represented or
(ii) more than 50% of the outstanding shares). Subsequent to the issuance of a
class of preferred stock, the following investment restrictions may not be
changed without the approval of a majority of the outstanding shares of common
stock and of preferred stock, voting together as a class, and the approval of
a majority of the outstanding shares of preferred stock, voting separately by
class. The Fund may not:

1. Make any investment inconsistent with the Fund's classification
as a diversified company under the 1940 Act.

2. Make investments for the purpose of exercising control or
management.

3. Purchase or sell real estate, commodities or commodity contracts,
except that, to the extent permitted by applicable law, the Fund may
invest in securities directly or indirectly secured by real estate or
interests therein or issued by entities that invest in real estate or
interests therein, and the Fund may purchase and sell financial futures
contracts and options thereon.

4. Issue senior securities or borrow money except as permitted by
Section 18 of the 1940 Act.

5. Underwrite securities of other issuers, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933, as
amended, in selling portfolio securities.

6. Make loans to other persons, except (i) the Fund shall not be
deemed to be making a loan to the extent that the Fund purchases Corporate
Loans or other debt instruments and enters into repurchase agreements or
any similar instruments and (ii) the Fund may lend its portfolio
securities in an amount not in excess of 33-1/3% of its total assets,
taken at market value, provided that such loans shall be made in
accordance with the guidelines set forth in this prospectus.

7. Invest more than 25% of its total assets (taken at market value
at the time of each investment) in the securities of issuers in any one
industry; provided that this limitation shall not apply with respect to
obligations issued or guaranteed by the U.S. Government or by its
agencies or instrumentalities.

Additional investment restrictions adopted by the Fund, which may be
changed by the Board of Directors without stockholder approval, provide that
the Fund may not:

b. Purchase securities of other investment companies, except to the
extent that such purchases are permitted by applicable law.

c. Mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the Fund
except as may be necessary in connection with borrowings mentioned in
investment restriction (4) above or except as may be necessary in
connection with transactions described under "Other Investment Policies"
above.

d. Purchase any securities on margin, except that the Fund may
obtain such short term credit as may be necessary for the clearance of
purchases and sales of portfolio securities (the deposit or payment

by the Fund of initial or variation margin in connection with financial
futures contracts and options thereon is not considered the purchase of a
security on margin).

e. Change its policy of investing, under normal circumstances, at
least 80% of the value of its assets in high yield securities, unless the
Fund provides its stockholders with at least 60 days' prior written
notice of such change. For these purposes, "assets" means net assets,
including assets acquired from the sale of preferred stock, plus the
amount of any borrowings for investment purposes.

If a percentage restriction on investment policies or the investment or
use of assets set forth above is adhered to at the time a transaction is
effected, later changes in percentage resulting from changing values will not
be considered a violation.

The Investment Adviser of the Fund and Merrill Lynch are owned and
controlled by Merrill Lynch & Co., Inc. ("ML & Co."). Because of the
affiliation of Merrill Lynch with the Investment Adviser, the Fund is
prohibited from engaging in certain transactions involving Merrill Lynch
except pursuant to an exemptive order or otherwise in compliance with the
provisions of the 1940 Act and the rules and regulations thereunder. Included
among such restricted transactions will be purchases from or sales to Merrill
Lynch of securities in transactions in which it acts as principal. See
"Portfolio Transactions."

DIRECTORS AND OFFICERS

The Directors of the Fund consist of ____ individuals, ____ of whom are
not "interested persons" of the Fund as defined in the 1940 Act (the
"non-interested Directors"). The Directors are responsible for the overall
supervision of the operations of the Fund and perform the various duties
imposed on the directors of investment companies by the 1940 Act.

Each non-interested Director is a member of the Fund's Audit and
Nominating Committee (the "Committee"). The principal responsibilities of the
Committee are the appointment, compensation and oversight of the Fund's
independent auditors, including resolution of disagreements regarding
financial reporting between Fund management and such auditors. The Board of
the Fund has adopted a written charter for the Committee. The Committee also
reviews and nominates candidates to serve as non-interested Directors. The
Committee has retained independent legal counsel to assist them in connection
with these duties. The Committee has not held any meetings since the Fund was
incorporated on March 13, 2003.

Biographical Information. Certain biographical and other information
relating to the non-interested Directors of the Fund is set forth below,
including their ages, their principal occupations for at least the last five
years, the length of time served, the total number of portfolios overseen in
the complex of funds advised by the Investment Adviser and its affiliate,
Merrill Lynch Investment Managers, L.P. ("MLIM"), ("FAM/MLIM-advised funds")
and other public directorships.

Number of
Term of FAM/MLIM-
Position(s) Office** and Advised Funds
Held Length of Principal Occupation(s) and Portfolios Public
Name, Address* and Age with the Fund Time Served During Past Five Years Overseen Directorships
----------------------- ------------- ------------- ---------------------- -------------- -------------

[TO BE PROVIDED BY AMENDMENT]

* The address of each Director is P.O. Box 9095, Princeton, New Jersey
08543-9095.
** Each Director serves until his or her successor is elected and qualified,
or until his or her death or resignation, or removal as provided in the
Fund's By-laws, Charter or by statute.

Certain biographical and other information relating to the Director who
is an "interested person" of the Fund as defined in the 1940 Act (the
"interested Director") and to the other officers of the Fund is set forth
below, including their ages, their principal occupations for at least the last
five years, the length of time served, the total number of portfolios overseen
in FAM/MLIM-advised funds and public directorships held.

Number of
Term of FAM/MLIM-
Position(s) Office and Advised Funds
Held Length of Principal Occupation(s) and Portfolios Public
Name, Address+ and Age with the Fund Time Served During Past Five Years Overseen Directorships
------------------------ ------------- ----------- ---------------------- -------------- -------------

[TO BE PROVIDED BY AMENDMENT]

B. Daniel Evans (58) Vice Vice Director of MLIM since 18 registered None
President and President 2000; Vice President of investment
Co-Portfolio and MLIM from 1995 to 2000. companies
Manager Co-Portfolio consisting of
Manager 15 portfolios
since 2003

Elizabeth M. Phillips Vice Vice Director of MLIM since 8 registered None
(52) President and President 2001; Vice President of investment
Co-Portfolio and MLIM from 1990 to 2001; companies
Manager Co-Portfolio Portfolio Manager of FAM consisting of 8
Manager and MLIM since 1993. portfolios
since 2003

David Clayton (35) Secretary Secretary Vice President of MLIM 14 registered None
of the Fund since 2000; Attorney in investment
since 2003 private practice from companies
1995 to 2000. consisting of
16 portfolios

-------------------------
+ The address of each Officer listed is P.O. Box 9095, Princeton, New Jersey
08543-9095.
* ____________ is a director, trustee or member of an advisory board of
certain other FAM/MLIM-advised funds. ___________is an "interested
person," as defined in the 1940 Act, of the Fund based on
--------------------------------.
** Elected by and serves at the pleasure of the Board of Directors of the
Fund.
*** As Director, _______________ serves until his successor is elected and
qualified or until his death or resignation, or removal as provided in
the Fund's by-laws, Charter or by statute, or until December 31, of the
year in which he or she turns 72.

In the event that the Fund issues preferred stock, holders of shares of
preferred stock, voting as a separate class, will be entitled to elect two of
the Fund's Directors, and the remaining Directors will be elected by all
holders of capital stock, voting as a single class. See "Description of
Capital Stock."

Share Ownership. Information relating to each Director's share ownership
in the Fund and in all registered funds in the Merrill Lynch family of funds
that are overseen by the respective Director ("Supervised Merrill Lynch
Funds") as of December 31, 2002 is set forth in the chart below.

Aggregate Dollar Range of
Aggregate Dollar Range Securities in Supervised
Name of Equity in the Fund Merrill Lynch Funds*
---------- ----------------------------------- ---------------------------------

Interested Director:
[TO BE PROVIDED BY AMENDMENT]
Non-Interested Directors:
[TO BE PROVIDED BY AMENDMENT]

-------------------------
* For the number of FAM/MLIM-advised funds from which each Director
receives compensation, see the table above under "Directors and
Officers-- Biographical Information."

As of the date of this prospectus, the Investment Adviser owned all of
the outstanding shares of common stock of the Fund; none of the Directors and
officers of the Fund owned outstanding shares of the Fund. As of the date of
this prospectus, none of the non-interested Directors of the Fund nor any of
their immediate family members owned beneficially or of record any securities
in ML & Co.

Compensation of Directors

Pursuant to its investment advisory agreement with the Fund (the
"Investment Advisory Agreement"), the Investment Adviser pays all compensation
of officers and employees of the Fund as well as the fees of all Directors of
the Fund who are affiliated persons of ML & Co. or its subsidiaries as well as
such Directors' actual out-of-pocket expenses relating to attendance at
meetings.

Each non-interested Director receives an aggregate annual retainer of
$________ for his or her services to FAM/MLIM-advised funds, including the
Fund. The portion of the annual retainer allocated to each FAM/MLIM-advised
fund is determined quarterly based on the relative net assets of each such
fund. In addition, each non-interested Director receives a fee per in-person
Board meeting attended and per in-person Committee meeting attended. The
annual per meeting fees paid to each non-interested Director aggregate
$_______ for all FAM/MLIM-advised funds for which that Director serves and are
allocated equally among those funds.

The following table sets forth the estimated compensation to be paid by
the Fund to the non-interested Directors projected through the end of the
Fund's first full fiscal year and the aggregate compensation paid to them from
all registered FAM/MLIM-advised funds for the calendar year ended December 31,
2002.

Aggregate
Estimated Compensation from
Aggregate Pension or Retirement Estimated Fund and other
Position Compensation Benefits Accrued as Annual Benefits FAM/MLIM-Advised
Name with Fund from Fund Part of Fund Expense upon Retirement Funds
----------------------- ---------------- -------------- ----------------------- ----------------- --------------------

[TO BE PROVIDED BY AMENDMENT]

INVESTMENT ADVISORY AND MANAGEMENT ARRANGEMENTS

The Investment Adviser, which is owned and controlled by ML & Co., a
financial services holding company and the parent of Merrill Lynch, provides
the Fund with investment advisory and administrative services. The Investment
Adviser acts as the investment adviser to more than 100 registered investment
companies and offers investment advisory services to individuals and
institutional accounts. As of December 2002, the Investment

Adviser and its affiliates, including MLIM, had a total of approximately $462
billion in investment company and other portfolio assets under management,
including approximately $290 billion in fixed income assets. This amount
includes assets managed by certain affiliates of the Investment Adviser. The
Investment Adviser is a limited partnership, the partners of which are ML &
Co. and Princeton Services, Inc. The principal business address of the
Investment Adviser is 800 Scudders Mill Road, Plainsboro, New Jersey 08536.

The Investment Advisory Agreement provides that, subject to the direction
of the Fund's Board of Directors, the Investment Adviser is responsible for
the actual management of the Fund's portfolio. The responsibility for making
decisions to buy, sell or hold a particular security rests with the Investment
Adviser, subject to review by the Board of Directors.

The Fund's portfolio managers will consider analyses from various
sources, make the necessary investment decisions, and place orders for
transactions accordingly. The Investment Adviser also will be responsible for
the performance of certain management services for the Fund. B. Daniel Evans
and Elizabeth M. Phillips are the portfolio managers for the Fund and are
primarily responsible for the Fund's day-to-day management.

For its services, the Fund pays the Investment Adviser a monthly fee at
the annual rate of 0.___% of the Fund's average weekly net assets plus the
proceeds of any outstanding borrowings used for leverage ("average weekly net
assets" means the average weekly value of the total assets of the Fund,
including the amount obtained from leverage and any proceeds from the issuance
of preferred stock, minus the sum of (i) accrued liabilities of the Fund, (ii)
any accrued and unpaid interest on outstanding borrowings and (iii)
accumulated dividends on shares of preferred stock). For purposes of this
calculation, average weekly net assets is determined at the end of each month
on the basis of the average net assets of the Fund for each week during the
month. The assets for each weekly period are determined by averaging the net
assets at the last business day of a week with the net assets at the last
business day of the prior week.

The Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of and
furnish office space for officers and employees of the Fund connected with
investment and economic research, trading and investment management of the
Fund, as well as the compensation of all Directors of the Fund who are
affiliated persons of the Investment Adviser or any of its affiliates. The
Fund pays all other expenses incurred in the operation of the Fund, including,
among other things, expenses for legal and auditing services, taxes, costs of
preparing, printing and mailing proxies, listing fees, stock certificates and
stockholder reports, charges of the custodian and the transfer agent, dividend
disbursing agent and registrar, Commission fees, fees and expenses of
non-interested Directors, accounting and pricing costs, insurance, interest,
brokerage costs, litigation and other extraordinary or non-recurring expenses,
mailing and other expenses properly payable by the Fund. Certain accounting
services are provided to the Fund by State Street Bank and Trust Company
("State Street") pursuant to an agreement between State Street and the Fund.
The Fund will pay the costs of these services. In addition, the Fund will
reimburse the Investment Adviser for certain additional accounting services.

Unless earlier terminated as described below, the Investment Advisory
Agreement will remain in effect for a period of two years from the date of
execution and will remain in effect from year to year thereafter if approved
annually (a) by the Board of Directors of the Fund or by a majority of the
outstanding shares of the Fund and (b) by a majority of the Directors who are
not parties to such contract or interested persons (as defined in the 1940
Act) of any such party. Such contract is not assignable and may be terminated
without penalty on 60 days' written notice at the option of either party
thereto or by the vote of the stockholders of the Fund.

The Investment Adviser has also entered into a sub-advisory agreement
(the "Sub-Advisory Agreement") with Merrill Lynch Asset Management U.K.
Limited ("MLAM U.K."), an affiliate of the Investment Adviser, pursuant to
which the Investment Adviser pays MLAM U.K. a fee for providing investment
advisory services to the Investment Adviser with respect to the Fund in an
amount to be determined from time to time by the Investment Adviser and MLAM
U.K., but in no event in excess of the amount the Investment Adviser actually
receives pursuant to the Investment Advisory Agreement. MLAM U.K. has offices
at Milton Gate, 1 Moor Lane, London EC2Y 9HA, England. The following entities
may be considered "controlling persons" of MLAM U.K.: Merrill Lynch Europe PLC
(MLAM U.K.'s parent), a subsidiary of Merrill Lynch International Holdings,
Inc., a subsidiary of Merrill Lynch International, Inc., a subsidiary of ML &
Co.

In connection with the Board of Director's consideration of the
Investment Advisory Agreement, the Board reviewed information derived from a
number of sources and covering a range of issues relating to, among other
things, alternatives to the Investment Advisory Agreement. The Board of
Directors considered the services to be provided to the Fund by the Investment
Adviser under the Investment Advisory Agreement, as well as other services to
be provided by the Investment Adviser and its affiliates under other
agreements, and the personnel who will provide these services. In addition to
investment advisory services to be provided to the Fund, the Investment
Adviser and its affiliates will provide administrative services, shareholder
services, oversight of fund accounting, marketing services, assistance in
meeting legal and regulatory requirements, and other services necessary for
the operation of the Fund. The Fund's Board of Directors also considered the
Investment Adviser's costs of providing such services, and the direct and
indirect benefits to the Investment Adviser from its relationship with the
Fund. The benefits considered by the Board included not only the Investment
Adviser's compensation for investment advisory services, but also compensation
paid to the Investment Adviser or its affiliates for other, non-advisory,
services provided to the Fund. In connection with its consideration of the
Investment Advisory Agreement, the Board of Directors also compared the Fund's
advisory fee rate and anticipated expense ratios to those of comparable
leveraged, closed-end funds ("comparable funds") investing in high yield
securities. [It was noted that the Fund's advisory fee rate is lower than the
advisory fee rate of some of the comparable funds and higher than the advisory
fee rate of some of the other comparable funds]. Based in part on this
comparison, and taking into account the various services to be provided to the
Fund by the Investment Adviser and its affiliates, the Fund's Board of
Directors concluded that the advisory fee rate was reasonable. The Board
considered whether there should be changes in the advisory fee rate or
structure in order to enable the Fund to participate in any economies of scale
that the Investment Adviser may experience as a result of growth in the Fund's
assets. The Fund's Board of Directors also reviewed materials supplied by
counsel that were prepared for use by the Board in fulfilling its duties under
the 1940 Act.

In connection with the Board of Director's consideration of the
Sub-Advisory Agreement, the Board reviewed information derived from a number
of sources and covering a range of issues relating to, among other things,
alternatives to the Sub-Advisory Agreement. The Board of Directors considered
the services to be provided by MLAM U.K. to the Investment Adviser for the
Fund and the personnel who will provide these services. The Fund's Board of
Directors considered the direct and indirect benefits to MLAM U.K. from its
relationship to the Investment Adviser and the Fund. The benefits considered
by the Board included not only compensation to MLAM U.K. for sub-advisory
services but also compensation paid to the Investment Adviser or its other
affiliates for other non-advisory services provided to the Fund. In connection
with its consideration of the Sub-Advisory Agreement, the Board of Directors
also compared the advisory fee rate (including any sub-advisory fee) and
anticipated expense ratios to those of comparable funds. [It was noted that
the Fund's advisory fee rate (including any sub-advisory fee) is lower than
the advisory fee rate of some of the comparable funds and higher than the
advisory fee of some of the other comparable funds]. Based in part on this
comparison, and taking into account the services to be provided to the
Investment Adviser and the Fund by MLAM U.K., the Fund's Board of Directors
concluded that the terms of the Sub-Advisory Agreement were reasonable.

Based on the information reviewed and the discussions, the Board of
Directors, including a majority of the non-interested Directors, concluded
that it was satisfied with the nature and quality of the services to be
provided by the Investment Adviser and the Sub-Adviser to the Fund and that
the advisory fee rate was reasonable in relation to such services. The
non-interested Directors were represented by independent counsel who assisted
them in their deliberations.

Securities held by the Fund may also be held by, or be appropriate
investments for, other funds or investment advisory clients for which the
Investment Adviser or its affiliates act as an adviser. Because of different
investment objectives or other factors, a particular security may be bought
for an advisory client when other clients are selling the same security. If
purchases or sales of securities by the Investment Adviser for the Fund or
other funds for which it acts as investment adviser or for advisory clients
arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective funds and
clients in a manner deemed equitable to all. Transactions effected by the
Investment Adviser (or its affiliates) on behalf of more than one of its
clients during the same period may increase the demand for securities being
purchased or the supply of securities being sold, causing an adverse effect on
price.

Code of Ethics

The Fund's Board of Directors approved a Code of Ethics under Rule 17j-1
of the 1940 Act that covers the Fund, the Investment Adviser and MLAM U.K. The
Code of Ethics establishes procedures for personal investing and restricts
certain transactions. Employees subject to the Code of Ethics may invest in
securities for their personal investment accounts, including securities that
may be purchased or held by the Fund.

PORTFOLIO TRANSACTIONS

Subject to policies established by the Board of Directors, the Investment
Adviser is primarily responsible for the execution of the Fund's portfolio
transactions and the allocation of brokerage. The Fund has no obligation to
deal with any dealer or group of dealers in the execution of transactions in
portfolio securities of the Fund. Where possible, the Fund deals directly with
the dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere. It is
the policy of the Fund to obtain the best results in conducting portfolio
transactions for the Fund, taking into account such factors as price
(including the applicable dealer spread or commission), the size, type and
difficulty of the transaction involved, the firm's general execution and
operations facilities and the firm's risk in positioning the securities
involved. The cost of portfolio securities transactions of the Fund primarily
consists of dealer or underwriter spreads and brokerage commissions. While
reasonable competitive spreads or commissions are sought, the Fund will not
necessarily be paying the lowest spread or commission available.

Subject to obtaining the best net results, dealers who provide
supplemental investment research (such as quantitative and modeling
information assessments and statistical data and provide other similar
services) to the Investment Adviser may receive orders for transactions by the
Fund. Information so received will be in addition to and not in lieu of the
services required to be performed by the Investment Adviser under the
Investment Advisory Agreement and the expense of the Investment Adviser will
not necessarily be reduced as a result of the receipt of such supplemental
information. Supplemental investment research obtained from such dealers might
be used by the Investment Adviser in servicing all of its accounts and such
research might not be used by the Investment Adviser in connection with the
Fund.

Under the 1940 Act, persons affiliated with the Fund and persons who are
affiliated with such persons are prohibited from dealing with the Fund as
principal in the purchase and sale of securities unless a permissive order
allowing such transactions is obtained from the Commission. Since transactions
in the over-the-counter market usually involve transactions with dealers
acting as principal for their own accounts, affiliated persons of the Fund,
including Merrill Lynch and any of its affiliates, will not serve as the
Fund's dealer in such transactions. However, affiliated persons of the Fund
may serve as its broker in listed or over-the-counter transactions conducted
on an agency basis provided that, among other things, the fee or commission
received by such affiliated broker is reasonable and fair compared to the fee
or commission received by non-affiliated brokers in connection with comparable
transactions. In addition, the Fund may not purchase securities during the
existence of any underwriting syndicate for such securities of which Merrill
Lynch is a member or in a private placement in which Merrill Lynch serves as
placement agent except pursuant to procedures adopted by the Board of
Directors of the Fund that either comply with rules adopted by the Commission
or with interpretations of the Commission staff.

Certain court decisions have raised questions as to the extent to which
investment companies should seek exemptions under the 1940 Act in order to
seek to recapture underwriting and dealer spreads from affiliated entities.
The Directors have considered all factors deemed relevant and have made a
determination not to seek such recapture at this time. The Directors will
reconsider this matter from time to time.

Section 11(a) of the Securities Exchange Act of 1934 generally prohibits
members of the U.S. national securities exchanges from executing exchange
transactions for their affiliates and institutional accounts that they manage
unless the member (i) has obtained prior express authorization from the
account to effect such transactions, (ii) at least annually furnishes the
account with a statement setting forth the aggregate compensation received by
the member in effecting such transactions, and (iii) complies with any rules
the Commission has prescribed with respect to the requirements of clauses (i)
and (ii). To the extent Section 11(a) would apply to Merrill Lynch acting as a
broker for the Fund in any of its portfolio transactions executed on any such
securities exchange of which it is a

member, appropriate consents have been obtained from the Fund and annual
statements as to aggregate compensation will be provided to the Fund.

The Fund has received an exemptive order from the Commission permitting
it to lend portfolio securities to Merrill Lynch or its affiliates. Pursuant
to that order, the Fund also has retained an affiliated entity of the
Investment Adviser as the securities lending agent for a fee, including a fee
based on a share of the returns on investment of cash collateral. That entity
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
that entity or in registered money market funds advised by the Investment
Adviser or its affiliates.

Because of the affiliation of Merrill Lynch with the Investment Adviser,
the Fund is prohibited from engaging in certain transactions involving Merrill
Lynch except pursuant to an exemptive order or otherwise in compliance with
the provisions of the 1940 Act and the rules and regulations thereunder.
Included among such restricted transactions will be purchases from or sales to
Merrill Lynch of securities in transactions in which it acts as principal.

Securities may be held by, or be appropriate investments for, the Fund as
well as other funds or investment advisory clients of the Investment Adviser
or its affiliates. Because of different objectives or other factors, a
particular security may be bought for one or more clients of the Investment
Adviser or an affiliate when one or more clients of the Investment Adviser or
an affiliate are selling the same security. If purchases or sales of
securities arise for consideration at or about the same time that would
involve the Fund or other clients or funds for which the Investment Adviser or
an affiliate act as investment adviser, transactions in such securities will
be made, insofar as feasible, for the respective funds and clients in a manner
deemed equitable to all. To the extent that transactions on behalf of more
than one client of the Investment Adviser or an affiliate during the same
period may increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price.

Investments in high yield securities, including high yield bonds,
Corporate Loans or other privately placed securities, may result in the Fund
receiving material nonpublic information ("inside information") concerning the
borrower or issuer. Accordingly, the Fund has established certain procedures
reasonably designed to prevent the unauthorized access, dissemination or use
of such inside information. Receipt of inside information concerning a
borrower or issuer may, under certain circumstances, prohibit the Fund, or
other funds or accounts managed by the same portfolio managers, from trading
in the public securities of the borrower or issuer. Conversely, the portfolio
managers for the Fund may, under certain circumstances, decline to receive
inside information made available by the borrower or issuer in order to allow
the Fund, or other funds or accounts managed by the same portfolio managers,
to continue to trade in the public securities of such borrower or issuer.

Portfolio Turnover

Generally, the Fund does not purchase securities for short term trading
profits. However, the Fund may dispose of securities without regard to the
time they have been held when such actions, for defensive or other reasons,
appear advisable to the Investment Adviser. While it is not possible to
predict turnover rates with any certainty, at present it is anticipated that
the Fund's annual portfolio turnover rate, under normal circumstances, should
be less than 100%. (The portfolio turnover rate is calculated by dividing the
lesser of purchases or sales of portfolio securities for the particular fiscal
year by the monthly average of the value of the portfolio securities owned by
the Fund during the particular fiscal year. For purposes of determining this
rate, all securities whose maturities at the time of acquisition are one year
or less are excluded.) A high portfolio turnover rate results in greater
transaction costs, which are borne directly by the Fund and also has certain
tax consequences for stockholders.

DIVIDENDS AND DISTRIBUTIONS

The Fund intends to distribute dividends of all or a portion of its net
investment income monthly to holders of common stock. It is expected that the
Fund will commence paying dividends to holders of common stock within
approximately 90 days of the date of this prospectus. The Fund may at times in
its discretion pay out less than the entire amount of net investment income
earned in any particular period and may at times pay out such accumulated

undistributed income in addition to net investment income earned in other
periods in order to permit the Fund to maintain a more stable level of
distributions. As a result, the dividend paid by the Fund to holders of common
stock for any particular period may be more or less than the amount of net
investment income earned by the Fund during such period. The Fund is not
required to maintain a stable level of distributions to stockholders and may
choose not to do so. For Federal tax purposes, the Fund is required to
distribute substantially all of its net investment income for each calendar
year. All net realized capital gains, if any, will be distributed to the
Fund's stockholders at least annually.

While any indebtedness is outstanding the Fund may not declare any cash
dividend or other distribution upon any class of its capital stock, or
purchase any such capital stock, unless the aggregate indebtedness of the Fund
has, at the time of the declaration of any such dividend or distribution or at
the time of any such purchase, an asset coverage of at least 300% after
deducting the amount of such dividend, distribution, or purchase price, as the
case may be.

While any shares of preferred stock are outstanding, the Fund may not
declare any cash dividend or other distribution on its common stock, or
purchase any such capital stock unless at the time of such declaration, (i)
all accumulated preferred stock dividends have been paid and (ii) the net
asset value of the Fund's portfolio (determined after deducting the amount of
such dividend or other distribution) is at least 200% of the liquidation value
of the outstanding preferred stock (expected to be equal to the original
purchase price per share plus any accumulated and unpaid dividends thereon).

See "Automatic Dividend Reinvestment Plan" for information concerning the
manner in which dividends and distributions to common stockholders may be
automatically reinvested in shares of common stock. Dividends and
distributions may be taxable to stockholders whether they are reinvested in
shares of the Fund or received in cash.

The yield on the Fund's common stock will vary from period to period
depending on factors including, but not limited to, market conditions, the
timing of the Fund's investment in portfolio securities, the securities
comprising the Fund's portfolio, the ability of the issuer of the portfolio
securities to pay interest or dividends on such securities, changes in
interest rates including changes in the relationship between short term rates
and long term rates, the amount and timing of the use of borrowings and other
leverage by the Fund, the effects of leverage on the common stock discussed
above under "Other Investment Policies -- Leverage", the timing of the
investment of leverage proceeds in portfolio securities and the Fund's net
assets and its operating expenses. Consequently, the Fund cannot guarantee any
particular yield on its shares and the yield for any given period is not an
indication or representation of future yields on Fund shares.

TAXES

General

The Fund intends to elect and to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Code. As long as it
so qualifies, in any taxable year in which it distributes at least 90% of its
net income (see below), the Fund (but not its stockholders) will not be
subject to Federal income tax to the extent that it distributes its net
investment income and net realized capital gains. The Fund intends to
distribute substantially all of such income. If, in any taxable year, the Fund
fails to qualify as a RIC under the Code, it would be taxed in the same manner
as a corporation and all distributions from earnings and profits to its
shareholders would be taxable as ordinary income.

The Code requires a RIC to pay a nondeductible 4% excise tax to the
extent the RIC does not distribute, during each calendar year, 98% of its
ordinary income, determined on a calendar year basis, and 98% of its capital
gains, determined, in general, on an October 31 year end, plus certain
undistributed amounts from previous years. While the Fund intends to
distribute its income and capital gains in the manner necessary to minimize
imposition of the 4% excise tax, there can be no assurance that sufficient
amounts of the Fund's taxable income and capital gains

will be distributed to avoid entirely the imposition of the tax. In such
event, the Fund will be liable for the tax only on the amount by which it does
not meet the foregoing distribution requirements.

Dividends paid by the Fund from its ordinary income or from an excess of
net short term capital gains over net long term capital losses (together
referred to hereafter as "ordinary income dividends") are taxable to
stockholders as ordinary income. Distributions made from an excess of net long
term capital gains over net short term capital losses (including gains or
losses from certain transactions in futures and options) ("capital gain
dividends") are taxable to stockholders as long term capital gains, regardless
of the length of time the stockholder has owned Fund shares. Any loss upon the
sale or exchange of Fund shares held for six months or less will be treated as
long term capital loss to the extent of any capital gain dividends received by
the stockholder. Distributions in excess of the Fund's earnings and profits
will first reduce the adjusted tax basis of a holder's shares and, after such
adjusted tax basis is reduced to zero, will constitute capital gains to such
holder (assuming the shares are held as a capital asset). Generally not later
than 60 days after the close of its taxable year, the Fund will provide its
stockholders with a written notice designating the amounts of any ordinary
income dividends or capital gain dividends, as well as dividends eligible for
the dividends received deduction, if any.

Dividends are taxable to stockholders even though they are reinvested in
additional shares of the Fund. Distributions attributable to any dividend
income earned by the Fund will be eligible for the dividends received
deduction allowed to corporations under the Code, if certain requirements are
met. If the Fund pays a dividend in January which was declared in the previous
October, November or December to stockholders of record on a specified date in
one of such months, then such dividend will be treated for tax purposes as
being paid by the Fund and received by its stockholders on December 31 of the
year in which the dividend was declared.

The IRS has taken the position in a revenue ruling that if a RIC has two
classes of shares, it may designate distributions made to each class in any
year as consisting of no more than such class's proportionate share of
particular types of income, including net long term capital gains. A class's
proportionate share of a particular type of income is determined according to
the percentage of total dividends paid by the RIC during such year that was
paid to such class. Consequently, if both common stock and preferred stock are
outstanding, the Fund intends to designate distributions made to the classes
as consisting of particular types of income in accordance with the classes'
proportionate shares of such income. Thus, capital gain dividends will be
allocated between the holders of common stock and any preferred stock in
proportion to the total dividends paid to each class during the taxable year,
or otherwise as required by applicable law.

If the Fund utilizes leverage through borrowings, it may be restricted by
loan covenants with respect to the declaration and payment of dividends in
certain circumstances. See "Other Investment Policies-- Leverage."
Additionally, if any time when shares of preferred stock are outstanding the
Fund does not meet the asset coverage requirements of the 1940 Act, the Fund
will be required to suspend distributions to holders of common stock until the
asset coverage is restored. See "Dividends and Distributions." Limits on the
Fund's payment of dividends may prevent the Fund from distributing at least
90% of its net income and may therefore jeopardize the Fund's qualification
for taxation as a RIC and/or may subject the Fund to the 4% excise tax
described above. Upon any failure to meet the asset coverage requirements of
the 1940 Act, the Fund may, in its sole discretion, redeem shares of preferred
stock in order to maintain or restore the requisite asset coverage and avoid
the adverse consequences to the Fund and its stockholders of failing to
qualify as a RIC. There can be no assurance, however, that any such action
would achieve these objectives. The Fund will endeavor to avoid restriction of
its dividend payments.

As noted above, the Fund must distribute annually at least 90% of its net
investment income. A distribution will only be counted for this purpose if it
qualifies for the dividends paid deduction under the Code. Some types of
preferred stock that the Fund has the authority to issue may raise an issue as
to whether distributions on such preferred stock are "preferential" under the
Code and therefore not eligible for the dividends paid deduction. In the event
the Fund determines to issue preferred stock, the Fund intends to issue
preferred stock that counsel advises will not result in the payment of a
preferential dividend. If the Fund ultimately relies on a legal opinion in the
event it issues such preferred stock, there is no assurance that the IRS would
agree that dividends on the preferred stock are not preferential. If the IRS
successfully disallowed the dividends paid deduction for dividends on the
preferred stock, the Fund could lose the benefit of the special treatment
afforded RICs under the Code.

A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.

Ordinary income dividends paid to stockholders who are nonresident aliens
or foreign entities will be subject to a 30% U.S. withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Nonresident stockholders are urged to consult
their own tax advisers concerning the applicability of the U.S. withholding
tax.

Under certain Code provisions, some stockholders may be subject to a
withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, stockholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.

Dividends and interest received by the Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
Stockholders may be able to claim U.S. foreign tax credits with respect to
such taxes, subject to certain conditions and limitations contained in the
Code. For example, certain retirement accounts cannot claim foreign tax
credits on investments in foreign securities held in the Fund. In addition, a
foreign tax credit may be claimed with respect to withholding tax on a
dividend only if the stockholder meets certain holding period requirements.
The Fund also must meet these holding period requirements, and if the Fund
fails to do so, it will not be able to "pass through" to stockholders the
ability to claim a credit or a deduction for the related foreign taxes paid by
the Fund. If the Fund satisfies the holding period requirements and more than
50% in value of its total assets at the close of its taxable year consists of
securities of foreign corporations, the Fund will be eligible, and intends, to
file an election with the Internal Revenue Service pursuant to which
stockholders of the Fund will be required to include their proportionate
shares of such withholding taxes in their U.S. income tax returns as gross
income, treat such proportionate shares as taxes paid by them, and deduct
their proportionate shares in computing their taxable incomes or,
alternatively, use them as foreign tax credits against their U.S. income
taxes. No deductions for foreign taxes, moreover, may be claimed by
noncorporate stockholders who do not itemize deductions. A stockholder that is
a nonresident alien individual or a foreign corporation may be subject to U.S.
withholding tax on the income resulting from the Fund's election described in
this paragraph but may not be able to claim a credit or deduction against such
U.S. tax for the foreign taxes treated as having been paid by such
stockholder. The Fund will report annually to its stockholders the amount per
share of such withholding taxes and other information needed to claim the
foreign tax credit. For this purpose, the Fund will allocate foreign taxes and
foreign source income between common stock and any preferred shares according
to a method similar to that described above for the allocation of capital
gains and other types of income.

The Fund may invest up to 10% of its total assets in securities of other
investment companies. If the Fund purchases shares of an investment company
(or similar investment entity) organized under foreign law, the Fund will be
treated as owning shares in a passive foreign investment company ("PFIC") for
U.S. Federal income tax purposes. The Fund may be subject to U.S. Federal
income tax, and an additional tax in the nature of interest (the "interest
charge"), on a portion of the distributions from such a company and on gain
from the disposition of the shares of such a company (collectively referred to
as "excess distributions"), even if such excess distributions are paid by the
Fund as a dividend to its stockholders. The Fund may be eligible to make an
election with respect to certain PFICs in which it owns shares that will allow
it to avoid the taxes on excess distributions. However, such election may
cause the Fund to recognize income in a particular year in excess of the
distributions received from such PFICs. Alternatively, the Fund could elect to
"mark to market" at the end of each taxable year all shares that it holds in
PFICs. If it made this election, the Fund would recognize as ordinary income
any increase in the value of such shares over their adjusted basis and as
ordinary loss any decrease in such value to the extent it did not exceed prior
increases. By making the mark-to-market election, the Fund could avoid
imposition of the interest charge with respect to excess distributions from
PFICs, but in any particular year might be required to recognize income in
excess of the distributions it received from PFICs.

Certain transactions of the Fund are subject to special tax rules of the
Code that may, among other things, a) affect the character of gains and losses
realized (with capital gains generally subject to tax at lower rates than
ordinary income), b) disallow, suspend or otherwise limit the allowance of
certain losses or deductions, and c) accelerate the recognition of income
without a corresponding receipt of cash (with which to make the necessary
distributions to satisfy distribution requirements applicable to RICs).
Operation of these rules could, therefore, affect the character, amount and
timing of distributions to shareholders. Special tax rules also will require
the Fund to mark to market certain types of positions in its portfolio (i.e.,
treat them as sold on the last day of the taxable year), and may result in the
recognition of income without a corresponding receipt of cash. The Fund
intends to monitor its transactions, make appropriate tax elections and make
appropriate entries in its books and records to lessen the effect of these tax
rules and avoid any possible disqualification for the special treatment
afforded RICs under the Code.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury Regulations promulgated thereunder. The Code and the Treasury
Regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.

Ordinary income and capital gain dividends may also be subject to state
and local taxes.

Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on U.S. Government obligations. State law
varies as to whether dividend income attributable to U.S. Government
obligations is exempt from state income tax.

Stockholders are urged to consult their own tax advisers regarding
specific questions as to Federal, foreign, state or local taxes. Foreign
investors should consider applicable foreign taxes in their evaluation of an
investment in the Fund.

AUTOMATIC DIVIDEND REINVESTMENT PLAN

Pursuant to the Fund's Automatic Dividend Reinvestment Plan (the "Plan"),
unless a stockholder is ineligible or elects otherwise, all dividend and
capital gains distributions are automatically reinvested by
_______________________________, as agent for stockholders in administering
the Plan (the "Plan Agent"), in additional shares of common stock of the Fund.
Stockholders who are ineligible or who elect not to participate in the Plan
will receive all dividends and distributions in cash paid by check mailed
directly to the stockholder of record (or, if the shares are held in street or
other nominee name, then to such nominee) by _____________________, as
dividend paying agent. Such stockholders may elect not to participate in the
Plan and to receive all distributions of dividends and capital gains in cash
by sending written instructions to __________________________, as dividend
paying agent, at the address set forth below. Participation in the Plan is
completely voluntary and may be terminated or resumed at any time without
penalty by written notice if received by the Plan Agent not less than ten days
prior to any dividend record date; otherwise, such termination will be
effective with respect to any subsequently declared dividend or capital gains
distribution.

Whenever the Fund declares an ordinary income dividend or a capital gain
dividend (collectively referred to as "dividends") payable either in shares or
in cash, non-participants in the Plan will receive cash, and participants in
the Plan will receive the equivalent in shares of common stock. The shares are
acquired by the Plan Agent for the participant's account, depending upon the
circumstances described below, either (i) through receipt of additional
unissued but authorized shares of common stock from the Fund ("newly issued
shares") or (ii) by purchase of outstanding shares of common stock on the open
market ("open-market purchases") on the New York Stock Exchange ("NYSE") or
elsewhere. If, on the dividend payment date, the net asset value per share of
the common stock is equal to or less than the market price per share of the
common stock plus estimated brokerage commissions (such condition being
referred to herein as "market premium"), the Plan Agent will invest the
dividend amount in newly issued shares on behalf of the participant. The
number of newly issued shares of common stock to be credited to the
participant's account will be determined by dividing the dollar amount of the
dividend by the net asset value per share on the date the shares are issued,
provided that the maximum discount from the then current market price per
share on the date of issuance may not exceed 5%. If on the dividend payment
date the net asset value per share

is greater than the market value (such condition being referred to herein as
"market discount"), the Plan Agent will invest the dividend amount in shares
acquired on behalf of the participant in open-market purchases. Prior to the
time the shares of common stock commence trading on the NYSE or another
national securities exchange, participants in the Plan will receive any
dividends in newly issued shares.

In the event of a market discount on the dividend payment date, the Plan
Agent has until the last business day before the next date on which the shares
trade on an "ex-dividend" basis or in no event more than 30 days after the
dividend payment date (the "last purchase date") to invest the dividend amount
in shares acquired in open-market purchases. It is contemplated that the Fund
will pay monthly income dividends. Therefore, the period during which
open-market purchases can be made will exist only from the payment date on the
dividend through the date before the next "ex-dividend" date, which typically
will be approximately ten days. If, before the Plan Agent has completed its
open-market purchases, the market price of a share of common stock exceeds the
net asset value per share, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Fund's shares, resulting in
the acquisition of fewer shares than if the dividend had been paid in newly
issued shares on the dividend payment date. Because of the foregoing
difficulty with respect to open-market purchases, the Plan provides that if
the Plan Agent is unable to invest the full dividend amount in open-market
purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Agent will cease making
open-market purchases and will invest the uninvested portion of the dividend
amount in newly issued shares at the close of business on the last purchase
date.

The Plan Agent maintains all stockholders' accounts in the Plan and
furnishes written confirmation of all transactions in the account, including
information needed by stockholders for tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in non-certificated form
in the name of the participant, and each stockholder's proxy will include
those shares purchased or received pursuant to the Plan. The Plan Agent will
forward all proxy solicitation materials to participants and vote proxies for
shares held pursuant to the Plan in accordance with the instructions of the
participants.

In the case of stockholders such as banks, brokers or nominees which hold
shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time
to time by the record stockholders as representing the total amount registered
in the record stockholder's name and held for the account of beneficial owners
who are to participate in the Plan.

There will be no brokerage charges with respect to shares issued directly
by the Fund as a result of dividends or capital gains distributions payable
either in shares or in cash. However, each participant will pay a pro rata
share of brokerage commissions incurred with respect to the Plan Agent's
open-market purchases in connection with the reinvestment of dividends.

The automatic reinvestment of dividends and distributions will not
relieve participants of any Federal, state or local income tax that may be
payable (or required to be withheld) on such dividends. See "Taxes."

Stockholders participating in the Plan may receive benefits not available
to stockholders not participating in the Plan. If the market price plus
commissions of the Fund's shares is higher than the net asset value,
participants in the Plan will receive shares of the Fund at less than they
could otherwise purchase them and will have shares with a cash value greater
than the value of any cash distribution they would have received on their
shares. If the market price plus commissions is below the net asset value,
participants receive distributions of shares with a net asset value greater
than the value of any cash distribution they would have received on their
shares. However, there may be insufficient shares available in the market to
make distributions in shares at prices below the net asset value. Also, since
the Fund does not redeem its shares, the price on resale may be more or less
than the net asset value.

Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan. There
is no direct service charge to participants in the Plan; however, the Fund
reserves the right to amend the Plan to include a service charge payable by
the participants.

All correspondence concerning the Plan should be directed to the Plan
Agent at ________________________________.

MUTUAL FUND INVESTMENT OPTION

Purchasers of shares of common stock of the Fund through Merrill Lynch in
this offering will have an investment option consisting of the right to
reinvest the net proceeds from a sale of such shares (the "Original Shares")
in Class A initial sales charge shares of certain FAM/MLIM advised open-end
mutual funds ("Eligible Class A Shares") at their net asset value, without the
imposition of the initial sales charge, if the conditions set forth below are
satisfied. First, the sale of the Original Shares must be made through Merrill
Lynch, and the net proceeds therefrom must be immediately reinvested in
Eligible Class A Shares. Second, the Original Shares must either have been
acquired in this offering or be shares representing reinvested dividends from
shares of common stock acquired in this offering. Third, the Original Shares
must have been continuously maintained in a Merrill Lynch securities account.
Fourth, there must be a minimum purchase of $250 to be eligible for the
investment option. Class A shares of certain of the mutual funds are subject
to an account maintenance fee at an annual rate of up to 0.25% of the average
daily net asset value of such mutual fund. The Eligible Class A Shares may be
redeemed at any time at the next determined net asset value, subject in
certain cases to a redemption fee. Prior to the time the shares commence
trading on the NYSE, the distributor for the mutual funds will advise Merrill
Lynch Financial Advisors as to those mutual funds that offer the investment
option described above.

NET ASSET VALUE

Net asset value per share is determined as of the close of business on
the NYSE (generally, the NYSE closes at 4:00 p.m., Eastern time), on the last
business day in each week. For purposes of determining the net asset value of
a share of common stock, the value of the securities held by the Fund plus any
cash or other assets (including interest accrued but not yet received) minus
all liabilities (including accrued expenses) and the aggregate liquidation
value of any outstanding shares of preferred stock is divided by the total
number of shares of common stock outstanding at such time. Expenses, including
the fees payable to the Investment Adviser, are accrued daily.

The Fund determines and makes available for publication the net asset
value of its shares of common stock weekly. Currently, the net asset values of
shares of publicly traded closed-end investment companies investing in debt
securities are published in Barron's, the Monday edition of The Wall Street
Journal and the Monday and Saturday editions of The New York Times.

Portfolio securities (other than short term obligations but including
listed issues) may be valued on the basis of prices furnished by one or more
pricing services which determine prices for normal, institutional-size trading
units of such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. In certain circumstances, portfolio
securities are valued at the last sale price on the exchange that is the
primary market for such securities, or the last quoted bid price for those
securities for which the over-the-counter market is the primary market or for
listed securities in which there were no sales during the day.

The value of interest rate swaps, caps and floors is determined in
accordance with a formula and then confirmed periodically by obtaining a bank
quotation. Positions in options are valued at the last sale price on the
market where any such option is principally traded. Positions in futures
contracts are valued at closing prices for such contracts established by the
exchange on which they are traded. Obligations with remaining maturities of 60
days or less are valued at amortized cost unless this method no longer
produces fair valuations. Repurchase agreements are valued at cost plus
accrued interest. Rights or warrants to acquire stock, or stock acquired
pursuant to the exercise of a right or warrant, may be valued taking into
account various factors such as original cost to the Fund, earnings and net
worth of the issuer, market prices for securities of similar issuers,
assessment of the issuer's future prosperity, liquidation value or third party
transactions involving the issuer's securities. Securities for which there
exist no price quotations or valuations and all other assets are valued at
fair value as determined in good faith by or on behalf of the Board of
Directors of the Fund.

DESCRIPTION OF CAPITAL STOCK

The Fund is authorized to issue 200,000,000 shares of capital stock, par
value $.10 per share, all of which shares initially are classified as common
stock. The Board of Directors is authorized, however, to classify and
reclassify any unissued shares of capital stock into one or more additional or
other classes or series as may be established from time to time by setting or
changing in any one or more respects the designations, preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of such shares of stock
and pursuant to such classification or reclassification to increase or
decrease the number of authorized shares of any existing class or series. The
Fund may reclassify an amount of unissued common stock as preferred stock and
at that time offer shares of preferred stock. See "Other Investment Policies
-- Leverage." The Fund does not currently anticipate issuing any preferred
stock.

Common Stock

Shares of common stock, when issued and outstanding, will be fully paid
and non-assessable. Stockholders are entitled to share pro rata in the net
assets of the Fund available for distribution to stockholders upon liquidation
of the Fund. Stockholders are entitled to one vote for each share held.

In the event that the Fund issues preferred stock and so long as any
shares of the Fund's preferred stock are outstanding, holders of common stock
will not be entitled to receive any net income of or other distributions from
the Fund unless all accumulated dividends on preferred stock have been paid,
and unless asset coverage (as defined in the 1940 Act) with respect to
preferred stock would be at least 200% after giving effect to such
distributions. See "Other Investment Policies--Leverage."

The Fund will send unaudited reports at least semi-annually and audited
annual financial statements to all of its stockholders.

The Investment Adviser provided the initial capital for the Fund by
purchasing ______ shares of common stock of the Fund for $_________. As of the
date of this prospectus, the Investment Adviser owned 100% of the outstanding
shares of common stock of the Fund. The Investment Adviser may be deemed to
control the Fund until such time as it owns less than 25% of the outstanding
shares of the Fund.

Certain Provisions of the Articles of Incorporation and By-Laws

The Fund's Articles of Incorporation include provisions that could have
the effect of limiting the ability of other entities or persons to acquire
control of the Fund or to change the composition of its Board of Directors and
could have the effect of depriving stockholders of an opportunity to sell
their shares at a premium over prevailing market prices by discouraging a
third party from seeking to obtain control of the Fund. A Director may be
removed from office with or without cause but only by vote of the holders of
at least 66 2/3% of the shares entitled to be voted on the matter.

In addition, the Articles of Incorporation require the favorable vote of
the holders of at least 66 2/3% of the Fund's shares to approve, adopt or
authorize the following:

o a merger or consolidation or statutory share exchange of the Fund
with any other corporation;

o a sale of all or substantially all of the Fund's assets (other than
in the regular course of the Fund's investment activities); or

o a liquidation or dissolution of the Fund,

unless such action has been approved, adopted or authorized by the affirmative
vote of at least two-thirds of the total number of Directors fixed in
accordance with the By-laws, in which case the affirmative vote of a majority
of the Fund's shares of capital stock is required. Following any issuance of
preferred stock by the Fund, it is anticipated

that the approval, adoption or authorization of the foregoing also would
require the favorable vote of a majority of the Fund's shares of preferred
stock then entitled to be voted, voting as a separate class.

In addition, conversion of the Fund to an open-end investment company
would require an amendment to the Fund's Articles of Incorporation. The
amendment would have to be declared advisable by the Board of Directors prior
to its submission to stockholders. Such an amendment would require the
favorable vote of the holders of at least 66 2/3% of the Fund's outstanding
shares of capital stock (including any preferred stock) entitled to be voted
on the matter, voting as a single class (or a majority of such shares if the
amendment was previously approved, adopted or authorized by two-thirds of the
total number of Directors fixed in accordance with the By-laws), and, assuming
preferred stock is issued, the affirmative vote of a majority of outstanding
shares of preferred stock of the Fund, voting as a separate class. Such a vote
also would satisfy a separate requirement in the 1940 Act that the change be
approved by the stockholders. Stockholders of an open-end investment company
may require the company to redeem their shares of common stock at any time
(except in certain circumstances as authorized by or under the 1940 Act) at
their net asset value, less such redemption charge, if any, as might be in
effect at the time of a redemption. All redemptions will be made in cash. If
the Fund is converted to an open-end investment company, it could be required
to liquidate portfolio securities to meet requests for redemption, and the
common stock would no longer be listed on a stock exchange.

Conversion to an open-end investment company would also require changes
in certain of the Fund's investment policies and restrictions, such as those
relating to the borrowing of money and the purchase of illiquid securities.

The Articles of Incorporation and By-laws provide that the Board of
Directors has the power, to the exclusion of stockholders, to make, alter or
repeal any of the By-laws (except for any By-law specified not to be amended
or repealed by the Board), subject to the requirements of the 1940 Act.
Neither this provision of the Articles of Incorporation, nor any of the
foregoing provisions of the Articles requiring the affirmative vote of 66 2/3%
of shares of capital stock of the Fund, can be amended or repealed except by
the vote of such required number of shares.

The Board of Directors has determined that the 66 2/3% voting
requirements described above, which are greater than the minimum requirements
under Maryland law or the 1940 Act, are in the best interests of stockholders
generally. Reference should be made to the Articles of Incorporation on file
with the Commission for the full text of these provisions.

The Fund's By-laws generally require that advance notice be given to the
Fund in the event a stockholder desires to nominate a person for election to
the Board of Directors or to transact any other business at an annual meeting
of stockholders. With respect to an annual meeting following the first annual
meeting of stockholders, notice of any such nomination or business must be
delivered to or received at the principal executive offices of the Fund not
less than 60 calendar days nor more than 90 calendar days prior to the
anniversary date of the prior year's annual meeting (subject to certain
exceptions). In the case of the first annual meeting of stockholders, the
notice must be given no later than the tenth calendar day following the day
upon which public disclosure of the date of the meeting is first made. Any
notice by a stockholder must be accompanied by certain information as provided
in the By-laws.

CUSTODIAN

The Fund's securities and cash are held under a custodian agreement with
___________.

UNDERWRITING

The Fund intends to offer the shares through the underwriters. Merrill
Lynch, Pierce, Fenner & Smith Incorporated acts as representative of the
underwriters named below. Subject to the terms and conditions contained in a
purchase agreement between the Fund and the Investment Adviser and the
underwriters, the Fund has agreed to sell to the underwriters, and the
underwriters severally have agreed to purchase from the Fund, the number of
shares listed opposite their names below.

Underwriters Number of Shares
------------ ----------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..............

...............................

--------------------------
Total

The underwriters have agreed to purchase all of the shares sold pursuant
to the purchase agreement if any of these shares are purchased. If an
underwriter defaults, the purchase agreement provides that the purchase
commitments of the nondefaulting underwriters may be increased or the purchase
agreement may be terminated.

The Fund and the Investment Adviser have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the
underwriters may be required to make in respect of those liabilities.

The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreement, such as the receipt by the underwriters
of officer's certificates and legal opinions. The underwriters reserve the
right to withdraw, cancel or modify offers to the public and to reject orders
in whole or in part.

Commissions and Discounts

The underwriters have advised the Fund that they propose initially to
offer the shares to the public at the initial public offering price on the
cover page of this prospectus and to dealers at that price less a concession
not in excess of $_________ per share. The underwriters may allow, and the
dealers may reallow, a discount not in excess of $_________ per share to other
dealers. There is a sales charge or underwriting discount of $_________ per
share, which is equal to ____% of the initial public offering price per share.
After the initial public offering, the public offering price, concession and
discount may be changed. Investors must pay for the shares of common stock
purchased in the offering on or before ___________, 2003.

The following table shows the public offering price, underwriting
discount and proceeds before expenses to the Fund. The information assumes
either no exercise or full exercise by the underwriters of their overallotment
option.

Per Share Without Option With Option
--------- -------------- -----------

Public offering price $15.00 $ $

Underwriting discount $ $ $

Proceeds, before expenses, to the Fund $ $ $

The expenses of the offering, excluding underwriting discount, are
estimated at $___________ and are payable by the Fund.

Overallotment Option

The Fund has granted the underwriters an option to purchase up to
____________ additional shares at the public offering price less the
underwriting discount. The underwriters may exercise the option for 45 days
from the date of this prospectus solely to cover any overallotments. If the
underwriters exercise this option, each will be obligated, subject to
conditions contained in the purchase agreement, to purchase a number of
additional shares proportionate to that underwriter's initial amount reflected
in the above table.

Price Stabilization, Short Positions and Penalty Bids

Until the distribution of the shares is completed, Commission rules may
limit the underwriters and selling group members from bidding for and
purchasing the Fund's shares. However, the representative may engage in
transactions that stabilize the price of the shares, such as bids or purchases
to peg, fix or maintain that price.

If the underwriters create a short position in the shares in connection
with the offering, i.e., if they sell more shares than are listed on the cover
of this prospectus, the representative may reduce that short position by
purchasing shares in the open market. The representative also may elect to
reduce any short position by exercising all or part of the overallotment
option described above. Purchases of the shares to stabilize its price or to
reduce a short position may cause the price of the shares to be higher than it
might be in the absence of such purchases.

The representative also may impose a penalty bid on underwriters and
selling group members. This means that if the representative purchases shares
in the open market to reduce the underwriters' short position or to stabilize
the price of such shares, it may reclaim the amount of the selling concession
from the underwriters and selling group members who sold those shares. The
imposition of a penalty bid also may affect the price of the shares in that it
discourages resales of those shares.

Neither the Fund nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the shares. In addition,
neither the Fund nor any of the underwriters makes any representation that the
representative will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.

Stock Exchange Listing

Prior to this offering, there has been no public market for the shares.
The Fund plans to apply to list its shares on the NYSE or another national
securities exchange under the symbol "____". However, during an initial period
that is not expected to exceed two weeks from the date of this prospectus, the
Fund's shares will not be listed on any securities exchange. Additionally,
before it begins trading, the underwriters do not intend to make a market in
the Fund's shares, although a limited market may develop. Thus, it is
anticipated that investors may not be able to buy and sell shares of the Fund
during such period. In order to meet the requirements for listing, the
underwriters have undertaken to sell lots of 100 or more shares to a minimum
of 2,000 beneficial owners.

Other Relationships

The Investment Adviser (and not the Fund) also has agreed to pay a fee to
Merrill Lynch quarterly at the annual rate of 0.10% of the Fund's average
weekly net assets, plus the proceeds of any outstanding borrowings used for
leverage, during the continuance of the Investment Advisory Agreement. The
maximum amount of this fee will not exceed 4.5% of the aggregate initial
offering price of the common stock offered hereby; provided, that in
determining when the maximum amount has been paid the value of each of the
quarterly payments shall be discounted at the annual rate of 10% back to the
closing date of this offering. Merrill Lynch has agreed to provide

certain after-market services to the Investment Adviser designed to maintain
the visibility of the Fund on an ongoing basis and to provide relevant
information, studies or reports regarding the Fund and the closed-end
investment company industry.

The Fund anticipates that Merrill Lynch may from time to time act as a
broker in connection with the execution of its portfolio transactions. See
"Portfolio Transactions." Merrill Lynch is an affiliate of the Investment
Adviser.

The address of Merrill Lynch, Pierce, Fenner & Smith Incorporated is 4
World Financial Center, New York, New York 10080.

TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR

The transfer agent, dividend disbursing agent and registrar for the
Fund's shares is _____________________________.

ACCOUNTING SERVICES PROVIDER

State Street Bank and Trust Company, 500 College Road East, Princeton,
New Jersey 08540, provides certain accounting services for the Fund.

LEGAL OPINIONS

Certain legal matters in connection with the shares of common stock
offered hereby are passed on for the Fund by Sidley Austin Brown & Wood LLP,
New York, New York. Certain legal matters will be passed on for the
underwriters by __________________________.

INDEPENDENT AUDITORS AND EXPERTS

The statement of assets and liabilities of the Fund as of ____________,
2003 included in this prospectus has been audited by _______________________,
independent auditors, as stated in their report appearing herein, and is
included in reliance upon the report of such firm given as experts in
accounting and auditing.

ADDITIONAL INFORMATION

The Fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act and in accordance therewith is required
to file reports and other information with the Commission. Any such reports
and other information, including the Fund's Code of Ethics, can be inspected
and copied at the public reference facilities of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: Pacific Regional Office, at 5670
Wilshire Boulevard, 11th Floor, Los Angeles, California 90036; and Midwest
Regional Office, at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such materials can be obtained
from the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web
site at http://www.sec.gov containing reports and information statements and
other information regarding registrants, including the Fund, that file
electronically with the Commission. Reports, proxy statements and other
information concerning the Fund can also be inspected at the offices of
__________ Stock Exchange, _________.

Additional information regarding the Fund is contained in the
Registration Statement on Form N-2, including amendments, exhibits and
schedules thereto, relating to such shares filed by the Fund with the

Commission in Washington, D.C. This prospectus does not contain all of the
information set forth in the Registration Statement, including any amendments,
exhibits and schedules thereto. For further information with respect to the
Fund and the shares offered hereby, reference is made to the Registration
Statement. Statements contained in this prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the Registration
Statement may be inspected without charge at the Commission's principal office
in Washington, D.C., and copies of all or any part thereof may be obtained
from the Commission upon the payment of certain fees prescribed by the
Commission.

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholder,
Corporate High Yield Fund VI, Inc.:

We have audited the accompanying statement of assets and liabilities of
Corporate High Yield Fund VI, Inc. (the "Fund"), as of ____________, 2003.
This financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, such statement of assets and liabilities presents fairly,
in all material respects, the financial position of Corporate High Yield Fund
VI, Inc., as of ______________, 2003, in conformity with accounting principles
generally accepted in the United States of America.

------------------
New York, New York
___________, 2003

Corporate High Yield Fund VI, Inc.

Statement of Assets and Liabilities

_________________, 2003

ASSETS:

Cash $

Prepaid registration fees and Offering Costs (Note 1)

Total assets

LIABILITIES:

Liabilities and accrued expenses (Note 1)

NET ASSETS: $

NET ASSETS CONSIST OF:

Common Stock, par value $.10 per share; 200,000,000
shares authorized; shares issued and
outstanding (Note 1) $

Paid-in Capital in excess of par $

Net Assets-Equivalent to $ net asset value
per share based on shares of capital stock
outstanding (Note 1) $

Notes to Statement of Assets and Liabilities

Note 1. Organization

The Fund was incorporated under the laws of the State of Maryland on
March 13, 2003, as a closed-end, diversified management investment company
and has had no operations other than the sale to Fund Asset Management, L.P.
(the "Investment Adviser") of an aggregate of shares for $
on ______________, 2003. The General Partner of the Investment Adviser is an
indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. Certain officers
and/or directors of the Fund are officers of the Investment Adviser.

The Investment Adviser, on behalf of the Fund, will incur organization
costs estimated at $ . Direct costs relating to the public offering of
the Fund's shares will be charged to Capital at the time of issuance of shares.

Note 2. Investment Advisory Arrangements

The Fund has engaged the Investment Adviser to provide investment
advisory and management services to the Fund. The Investment Adviser will
receive a monthly fee for advisory and management services at an annual rate
equal to 0.___% of the Fund's average weekly net assets, plus the proceeds of
any outstanding borrowings used for leverage.

Note 3. Federal Income Taxes

The Fund intends to qualify as a "regulated investment company" and as
such (and by complying with the applicable provisions of the Internal Revenue
Code of 1986, as amended) will not be subject to Federal income tax on taxable
income (including realized capital gains) that is distributed to stockholders.

APPENDIX A

RATINGS OF SECURITIES

Description of Moody's Investors Service, Inc.'s ("Moody's") Long Term Ratings

Aaa Bonds and preferred stock which are rated Aaa are judged to
be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa Bonds and preferred stock which are rated Aa are judged to be
of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade Bonds.
They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long term risk appear somewhat larger than in Aaa
securities.

A Bonds and preferred stock which are rated A possess many
favorable investment attributes and are to be considered as
upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment
sometime in the future.

Baa Bonds and preferred stock which are rated Baa are considered
as medium grade obligations (i.e., they are neither highly
protected nor poorly secured). Interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba Bonds and preferred stock which are rated Ba are judged to
have speculative elements; their future cannot be considered
as well assured. Often the protection of interest and
principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B Bonds and preferred stock which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payment or of maintenance of other
terms of the contract over any long period of time may be
small.

Caa Bonds and preferred stock which are rated Caa are of poor
standing. Such issues may be in default or there may be
present elements of danger with respect to principal or
interest.

Ca Bonds and preferred stock which are rated Ca represent
obligations which are speculative in a high degree. Such
issues are often in default or have other marked
shortcomings.

C Bonds and preferred stock which are rated C are the lowest
rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real
investment standing.

Moody's bond ratings, where specified, are applicable to preferred stock,
financial contracts, senior bank obligations and insurance company senior
policyholder and claims obligations with an original maturity in excess of one
year. Obligations relying upon support mechanisms such as letters-of-credit
and bonds of indemnity are excluded unless explicitly rated. Obligations of a
branch of a bank are considered to be domiciled in the country in which the
branch is located.

Unless noted as an exception, Moody's rating on a bank's ability to repay
senior obligations extends only to branches located in countries which carry a
Moody's Sovereign Rating for Bank Deposits. Such branch obligations are rated
at the lower of the bank's rating or Moody's Sovereign Rating for the Bank
Deposits for the country in which the branch is located. When the currency in
which an obligation is denominated is not the same as the currency of the
country in which the obligation is domiciled, Moody's ratings do not
incorporate an opinion as to whether payment of the obligation will be
affected by the actions of the government controlling the currency of

A-1

denomination. In addition, risk associated with bilateral conflicts between an
investor's home country and either the issuer's home country or the country
where an issuer branch is located are not incorporated into Moody's ratings.

Moody's makes no representation that rated bank obligations or insurance
company obligations are exempt from registration under the Securities Act of
1933, as amended, or issued in conformity with any other applicable law or
regulation. Moody's makes no representation that any specific bank or
insurance company obligation is a legally enforceable or a valid senior
obligation of a rated issuer.

Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a
ranking in the lower end of that generic rating category.

Description of Standard & Poor's ("Standard & Poor's") Long Term Issue
Credit Ratings

A Standard & Poor's issue credit rating is a current opinion of the
creditworthiness of an obligor with respect to a specific financial
obligation, a specific class of financial obligations, or a specific financial
program (including ratings on medium term note programs and commercial paper
programs). It takes into consideration the creditworthiness of guarantors,
insurers, or other forms of credit enhancement on the obligation and takes
into account the currency in which the obligation is denominated. The issue
credit rating is not a recommendation to purchase, sell, or hold a financial
obligation, inasmuch as it does not comment as to market price or suitability
for a particular investor.

Issue credit ratings are based on current information furnished by the
obligors or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
credit rating and may, on occasion, rely on unaudited financial information.
Credit ratings may be changed, suspended, or withdrawn as a result of changes
in, or unavailability of, such information, or based on other circumstances.

Issue credit ratings can be either long term or short term. Short term
ratings are generally assigned to those obligations considered short term in
the relevant market. In the U.S., for example, that means obligations with an
original maturity of no more than 365 days -- including commercial paper.
Short term ratings are also used to indicate the creditworthiness of an
obligor with respect to put features on long term obligations. The result is a
dual rating, in which the short term rating addresses the put feature, in
addition to the usual long term rating. Medium term notes are assigned long
term ratings.

Issue credit ratings are based in varying degrees, on the following
considerations:

1. Likelihood of payment-capacity and willingness of the obligor to
meet its financial commitment on an obligation in accordance with the
terms of the obligation;

2. Nature of and provisions of the obligation; and

3. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization, or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.

The issue rating definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority
in bankruptcy, as noted above. (Such differentiation applies when an entity
has both senior and subordinated obligations, secured and unsecured
obligations, or operating company and holding company obligations.)
Accordingly, in the case of junior debt, the rating may not conform exactly
with the category definition.

A-2

AAA An obligation rated 'AAA' has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.

AA An obligation rated 'AA' differs from the highest rated
obligations only in small degree. The obligor's capacity to
meet its financial commitment on the obligation is very
strong.

A An obligation rated 'A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB An obligation rated 'BBB' exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
of the obligor to meet its financial commitment on the
obligation.

BB Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are
B regarded as having significant speculative characteristics.
CCC 'BB' indicates the least degree of speculation and 'C' the
CC highest. While such B obligations will likely have some
C quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to
adverse conditions.

BB An obligation rated 'BB' is less vulnerable to nonpayment
than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial
commitment on the obligation.

B An obligation rated 'B' is more vulnerable to nonpayment than
obligations rated 'BB', but the obligor currently has the
capacity to meet its financial commitment on the obligation.
Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet
its financial commitment on the obligation.

CCC An obligation rated 'CCC' is currently vulnerable to
nonpayment, and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its
financial commitment on the obligation.

CC An obligation rated 'CC' is currently highly vulnerable to
nonpayment.

C The 'C' rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been
taken, but payments on this obligation are being continued.

D An obligation rated 'D' is in payment default. The 'D' rating
category is used when payments on an obligation are not made
on the date due even if the applicable grace period has not
expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The 'D' rating also
will be used upon the filing of a bankruptcy petition or the
taking of a similar action if payments on an obligation are
jeopardized. Such rating also will be used upon the
completion of a tender or exchange offer, whereby some or all
of an issue is either repurchased for an amount of cash or
replaced by other securities having a total value that is
clearly less than par; or in the case of preferred stock or
deferrable payment securities, upon non-payment of the
dividend or deferral of the interest payments.

Plus (+) or minus (-): The ratings from 'AA' to 'CCC' may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.

Local Currency and Foreign Currency Risks

Currency risk considerations are a standard part of Standard & Poor's
analysis for credit ratings on any issuer or issue. Currency of repayment is a
key factor in this analysis. An insurer's capacity to repay foreign currency
obligations may be lower than its capacity to repay obligations in its local
currency due to the sovereign government's own relatively lower capacity to
repay external versus domestic debt. These sovereign risk considerations are
incorporated in the debt ratings assigned to specific issues. Foreign currency
issuer ratings are

A-3

also distinguished from local currency issuer ratings to identify those
instances where sovereign risks make them different for the same issuer.

Description of Fitch, Inc.'s ("Fitch") Long Term Credit Ratings

Investment Grade

AAA Highest credit quality. 'AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.

AA Very high credit quality. 'AA' ratings denote a very low
expectation of credit risk. They indicate very strong
capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable
events.

A High credit quality. 'A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances
or in economic conditions than is the case for higher
ratings.

BBB Good credit quality. 'BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered
adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity.
This is the lowest investment-grade category.

Speculative Grade

BB Speculative. 'BB' ratings indicate that there is a
possibility of credit risk developing, particularly as the
result of adverse economic change over time; however,
business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this
category are not investment grade.

B Highly speculative. 'B' ratings indicate that significant
credit risk is present, but a limited margin of safety
remains. Financial commitments are currently being met;
however, capacity for continued payment is contingent upon a
sustained, favorable business and economic environment.

CCC, High default risk. Default is a real possibility. Capacity
CC, for meeting financial commitments is solely reliant upon
C sustained, favorable business or economic developments. A
'CC' rating indicates that default of some kind appears
probable. 'C' ratings signal imminent default.

DDD, The ratings of obligations in this category are based on
DD, and their prospects for achieving partial or full recovery in a
D Default reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be
estimated with any precision, the following serve as general
guidelines. 'DDD' obligations have the highest potential for
recovery, around 90%-100% of outstanding amounts and accrued
interest. 'DD' indicates potential recoveries in the range of
50%-90%, and 'D' the lowest recovery potential, i.e., below
50%. Entities rated in this category have defaulted on some
or all of their obligations. Entities rated 'DDD' have the
highest prospect for resumption of performance or continued
operation with or without a formal reorganization process.
Entities rated 'DD' and 'D' are generally undergoing a formal
reorganization or liquidation process; those rated 'DD' are
likely to satisfy a higher portion of their outstanding
obligations, while entities rated 'D' have a poor prospect
for repaying all obligations.

Notes to Long term ratings:

Plus "(+)" or Minus "(-)" may be appended to a rating to denote relative
status within major rating categories. Such suffixes are not added to the
'AAA' Long-term rating category, to categories below 'CCC', or to Short-term
ratings other than 'F1'.

A-4

'NR' indicates that Fitch does not rate the issuer or issue in question.

'Withdrawn': A rating is withdrawn when Fitch deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.

Rating Watch: Ratings are placed on Rating Watch to notify investors that
there is a reasonable probability of a rating change and the likely direction
of such change. These are designated as "Positive", indicating a potential
upgrade, "Negative", for a potential downgrade, or "Evolving", if ratings may
be raised, lowered or maintained. Rating Watch is typically resolved over a
relatively short period.

A Rating Outlook indicates the direction a rating is likely to move over
a one to two year period. Outlooks may be positive, stable, or negative. A
positive or negative Rating Outlook does not imply a rating change is
inevitable. Similarly, ratings for which outlooks are 'stable' could be
downgraded before an outlook moves to positive or negative if circumstances
warrant such an action. Occasionally, Fitch may be unable to identify the
fundamental trend. In these cases, the Rating Outlook may be described as
evolving.

A-5

____________________ Shares

Corporate High Yield Fund VI, Inc.

Common Stock

PROSPECTUS

Merrill Lynch & Co.

April ___, 2003

-0403

A-6

PART C. OTHER INFORMATION

ITEM 24. Financial Statements And Exhibits.

(1) Financial Statements

Independent Auditors' Report

Statement of Assets and Liabilities as of ____________, 2003.

Exhibits

Exhibits Description

(a) -- Articles of Incorporation of the Registrant.

(b) -- By-Laws of the Registrant.

(d)(1) -- Portions of the Articles of Incorporation and By-Laws
of the Registrant defining the rights of holders of
shares of common stock of the Registrant.(a)

(d)(2) -- Form of specimen certificate for shares of common stock
of the Registrant.*

(e) -- Form of Dividend Reinvestment Plan.*

(f) -- Not applicable.

(g)(1) -- Form of Investment Advisory Agreement between the
Registrant and Fund Asset Management, L.P. ("FAM") or
the Investment Adviser.*

(g)(2) -- Form of Sub-Advisory Agreement between FAM and Merrill
Lynch Asset Management U.K. Limited ("MLAM U.K.").*

(h)(1) -- Form of Purchase Agreement between the Registrant
and Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and other underwriters.

(h)(2) -- Form of Merrill Lynch Standard Dealer Agreement.

(h)(3) -- Form of Master Agreement Among Underwriters.

(i) -- Not applicable.

(j) -- Form of Custodian Contract between the Registrant
and State Street Bank and Trust Company.(b)

(k)(l) -- Form of Registrar, Transfer Agency, Dividend Disbursing
Agency and Shareholder Servicing Agency Agreement
between the Registrant and _____________________.*

(k)(2) -- Form of Administrative Services Agreement between the
Registrant and ______________________.*

(k)(3) -- Form of Additional Compensation Agreement between
FAM and Merrill Lynch.*

C-1

(l) -- Opinion and Consent of Sidley Austin Brown & Wood LLP.*

(m) -- Not applicable.

(n) -- Consent of ______________, independent auditors for
the Registrant.*

(o) -- Not applicable.

(p) -- Certificate of FAM.*

(q) -- Not applicable.

(r) -- Code of Ethics.*

(a) Reference is made to Article IV (sections 2, 3, 4, 5, 6 and 7),
Article V (sections 3, 6 and 7), Article VI, Article VIII, Article
IX, Article X, and Article XII of the Registrant's Articles of
Incorporation, filed as Exhibit (a) to this Registration Statement;
and to Article II, Article III (sections 1, 3, 5 and 17), Article VI
(section 2), Article VII, Article XII, Article XIII and Article XIV
of the Registrant's By-laws, filed as Exhibit (b) to this
Registration Statement.

* To be provided by Amendment

ITEM 25. Marketing Arrangements.

See Exhibits (h)(1) and (2).

ITEM 26. Other Expenses of Issuance and Distribution.

The following table sets forth the estimated expenses to be incurred
in connection with the offering described in this Registration Statement:

Registration fees $*
_________ Stock Exchange listings fee *
Printing (other than stock certificates) *
Engraving and printing stock certificates *
Legal fees and expenses *
Accounting fees and expenses *
NASD fees *
Miscellaneous *
Total $*

ITEM 27. Persons Controlled by or Under Common Control with Registrant.

The information in the prospectus under the captions "Investment Advisory
and Management Arrangements" and "Description of Capital Stock--Common Stock"
and in Note 1 to the Statement of Assets and Liabilities is incorporated
herein by reference.

ITEM 28. Number of Holders of Securities.

There will be one record holder of the Common Stock, par value $0.10 per
share, as of the effective date of this Registration Statement.

ITEM 29. Indemnification.

C-2

Reference is made to Section 2-418 of the General Corporation Law of the
State of Maryland, Article V of the Registrant's Articles of Incorporation,
Article VI of the Registrant's By-laws, Article IV of the Investment Advisory
Agreement and Section 6 of the Purchase Agreement, which provide for
indemnification.

Article VI of the By-laws provides that each officer and director of the
Registrant shall be indemnified by the Registrant to the full extent permitted
under the Maryland General Laws of the State of Maryland, except that such
indemnity shall not protect any such person against any liability to the
Registrant or any stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office. Absent
a court determination that an officer or director seeking indemnification was
not liable on the merits or guilty of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, the decision by the Registrant to indemnify such person must be based
upon the reasonable determination of independent counsel or non-party
independent directors, after review of the facts, that such officer or
director is not guilty of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.

The Registrant may purchase insurance on behalf of an officer or director
protecting such person to the full extent permitted under the General Laws of
the State of Maryland from liability arising from his activities as officer or
director of the Registrant. The Registrant, however, may not purchase
insurance on behalf of any officer or director of the Registrant that protects
or purports to protect such person from liability to the Registrant or to its
stockholders to which such officer or director would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.

Insofar as the conditional advancing of indemnification moneys for
actions based upon the Investment Company Act of 1940, as amended (the "1940
Act"), may be concerned, such payments will be made only on the following
conditions: (i) the advances must be limited to amounts used, or to be used,
for the preparation or presentation of a defense to the action, including
costs connected with the preparation of a settlement; (ii) advances may be
made only upon receipt of a written promise by, or on behalf of, the recipient
to repay that amount of the advance which exceeds the amount to which it is
ultimately determined that he is entitled to receive from the Registrant by
reason of indemnification; and (iii) (a) such promise must be secured by a
surety bond, other suitable insurance or an equivalent form of security which
assures that any repayments may be obtained by the Registrant without delay or
litigation, which bond, insurance or other form of security must be provided
by the recipient of the advance, or (b) a majority of a quorum of the
Registrant's disinterested, non-party Directors, or an independent legal
counsel in a written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.

In Section 6 of the Purchase Agreement relating to the securities being
offered hereby, the Registrant agrees to indemnify Merrill Lynch and each
person, if any, who controls Merrill Lynch within the meaning of the
Securities Act of 1933 (the "1933 Act") against certain types of civil
liabilities arising in connection with the Registration Statement or
Prospectus and Statement of Additional Information.

In Section IV of the Investment Advisory Agreement, the Registrant agrees
to indemnify the Investment Adviser for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission
in the management of the Registrant, except for willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties thereunder.

Insofar as indemnification for liabilities arising under the 1933 Act may
be provided to directors, officers and controlling persons of the Registrant
and Merrill Lynch, pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with any successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

C-3

ITEM 30. Business And Other Connections Of The Investment Adviser.

FAM (the "Investment Adviser"), acts as the investment adviser for a
number of affiliated open-end and closed-end registered investment companies.

Merrill Lynch Investment Managers, L.P. ("MLIM"), acts as the investment
adviser for a number of affiliated open-end and closed-end registered
investment companies, and also acts as sub-adviser to certain other
portfolios.

The address of each of these registered investment companies is P.O. Box
9011, Princeton, New Jersey 08543-9011, except that the address of Merrill
Lynch Funds for Institutions Series is One Financial Center, 23rd Floor,
Boston, Massachusetts 02111-2665.

The address of the Investment Adviser, MLIM, Princeton Services, Inc.
("Princeton Services") and Princeton Administrators, L.P. ("Princeton
Administrators") is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The
address of FAM Distributors, Inc., ("FAMD") is P.O. Box 9081, Princeton, New
Jersey 08543-9081. The Address of MLAM UK is 33 King William Street, London
EC4R 9AS, England. The address of Merrill Lynch and Merrill Lynch & Co., Inc.
("ML & Co.") is World Financial Center, North Tower, 250 Vesey Street, New
York, New York 10080. The address of the Fund's transfer agent, Financial Data
Services, Inc. ("FDS"), is 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484.

Set forth below is a list of each executive officer and partner of the
Investment Adviser indicating each business, profession, vocation or
employment of a substantial nature in which each such person or entity has
been engaged for the past two years for his, her or its own account or in the
capacity of director, officer, employee, partner or trustee. Mr. Burke is Vice
President and Treasurer of all or substantially all of the investment
companies advised by FAM or its affiliates, and Mr. Doll is an officer of one
or more of such companies.

Position(s) with Other Substantial Business,
Name Investment Adviser Profession, Vocation Or Employment
---- ------------------ ----------------------------------

ML & Co. Limited Partner Financial Services Holding Company; Limited Partner
of MLIM

Princeton Services General Partner General Partner of MLIM

Robert C. Doll, Jr. President President of MLIM; President of Princeton Services;
Chief Investment Officer of OppenheimerFunds, Inc.
in 1999 and Executive Vice President thereof from
1991 to 1999

Donald C. Burke First Vice President, First Vice President, Treasurer and Director of
Treasurer and Director of Taxation of MLIM; Treasurer of Princeton Services;
Taxation Senior Vice President and Treasurer of Princeton
Services from 1997 to 2002; Vice President of
FAMD; Senior Vice President of MLIM from 1999 to
2000; First Vice President of MLIM from
1997 to 1999

Lawrence D. Haber First Vice President First Vice President of MLIM; Senior Vice President
and Treasurer of Princeton Services

Brian A. Murdock Senior Vice President and Senior Vice President of MLIM and Chief Operating
Chief Operating Officer Officer of MLIM Americas; Chief

C-4

Position(s) with Other Substantial Business,
Name Investment Adviser Profession, Vocation Or Employment
---- ------------------ ----------------------------------

Investment Officer of EMEA Pacific Region and Global
CIO for Fixed Income and Alternative Investments;
Head of MLIM's Pacific Region and President of MLIM
Japan, Australia and Asia

Philip L. Kirstein General Counsel General Counsel of MLIM; Senior Vice President of
Princeton Services; Vice President of FAMD

Set forth below is a list of each executive officer and director of MLAM
U.K. indicating each business, profession, vocation or employment of a
substantial nature in which each such person has been engaged since January 1,
2001, for his or her own account or in the capacity of director, officer,
partner or trustee. In addition, Mr. Burke is an officer of one or more of the
registered investment companies advised by FAM or its affiliates:

Position(s) with Other Substantial Business,
Name MLAM U.K. Profession, Vocation Or Employment
---- --------- ----------------------------------

Nicholas C.D. Hall Director Director of Mercury Asset Management Ltd. and the
Institutional Liquidity Fund PLC; First Vice
President and General Counsel for Merrill Lynch
Mercury Asset Management

James T. Stratford Director Director of Mercury Asset Management Group Ltd.;
Head of Compliance, Merrill Lynch Mercury Asset
Management

Donald C. Burke Treasurer First Vice President and Treasurer of MLIM and
FAM; Director of Taxation of MLIM; Senior Vice
President and Treasurer of Princeton Services;
Vice President of FAMD

Carol Ann Langham Company Secretary None

Debra Anne Searle Assistant Company None
Secretary

ITEM 31. Location of Account and Records.

All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the Rules promulgated thereunder are
maintained at the offices of the Registrant (800 Scudders Mill Road,
Plainsboro, New Jersey 08536), its investment adviser (800 Scudders Mill Road,
Plainsboro, New Jersey 08536), and its custodian and transfer agent.

ITEM 32. Management Services.

Not applicable.

ITEM 33. Undertakings.

C-5

(a) The Registrant undertakes to suspend the offering of the shares of
common stock covered hereby until it amends its prospectus contained herein if
(1) subsequent to the effective date of this Registration Statement, its net
asset value per share of common stock declines more than 10% from its net
asset value per share of common stock as of the effective date of this
Registration Statement, or (2) its net asset value per share of common stock
increases to an amount greater than its net proceeds as stated in the
prospectus contained herein.

(b) The Registrant undertakes that:

(1) For purposes of determining any liability under the 1933
Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the registrant pursuant
to Rule 497(h) under the 1933 Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the
1933 Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

C-6

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Township of Plainsboro, and State of New
Jersey, on the 14th day of March, 2003.

CORPORATE HIGH YIELD FUND VI, INC.
(Registrant)

By: /s/ BRADLEY J. LUCIDO
---------------------------------------
(Bradley J. Lucido, President)

Each person whose signature appears below hereby authorizes Bradley J.
Lucido, Brian D. Stewart or David Clayton, or any of them, as
attorney-in-fact, to sign on his behalf, individually and in each capacity
stated below, any amendments to this Registration Statement (including any
Post-Effective Amendments) and to file the same, with all exhibits thereto,
with the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacities and on the dates indicated.

Signatures Title Date
--------------------------- ----------------------------------------------- ------------------

/s/ BRADLEY J. LUCIDO
(Bradley J. Lucido) President (Principal Executive Officer) and March 14, 2003
Director
/s/ BRIAN D. STEWART
(Brian D. Stewart) Treasurer (Principal Financial and Accounting March 14, 2003
Officer) and Director
/s/ DAVID CLAYTON
(David Clayton) Director March 14, 2003

C-7

Exhibit Index

Exhibit Description

(a) -- Articles of Incorporation of the Registrant.

(b) -- By-Laws of the Registrant.

(h)(1) -- Form of Purchase Agreement between the Registrant and
Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and other underwriters.

(h)(2) -- Form of Merrill Lynch Standard Dealer Agreement.

(h)(3) -- Form of Master Agreement Among Underwriters.

C-8