UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21318
Name of Fund: Corporate High Yield Fund VI, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, Corporate High Yield Fund VI, Inc., 800 Scudders Mill Road,
Plainsboro, NJ 08536. Mailing address: P.O. Box 9011, Princeton, NJ
08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 08/31/05
Date of reporting period: 09/01/04 - 02/28/05
Item 1 - Report to Stockholders
Corporate High Yield
Fund VI, Inc.
Semi-Annual Report
February 28, 2005
Corporate High Yield Fund VI, Inc.
The Benefits and Risks of Leveraging
Corporate High Yield Fund VI, Inc. utilizes leveraging through borrowings or
issuance of short-term debt securities or shares of Preferred Stock. The concept
of leveraging is based on the premise that the cost of assets to be obtained
from leverage will be based on short-term interest rates, which normally will be
lower than the yield earned by the Fund on its longer-term portfolio
investments. Since the total assets of the Fund (including the assets obtained
from leverage) are invested in higher-yielding portfolio investments, the Fund's
Common Stock shareholders are the beneficiaries of the incremental yield.
Leverage creates risks for holders of Common Stock including the likelihood of
greater net asset value and market price volatility. In addition, there is the
risk that fluctuations in interest rates on borrowings (or in the dividend rates
on any Preferred Stock, if the Fund were to issue Preferred Stock) may reduce
the Common Stock's yield and negatively impact its net asset value and market
price. If the income derived from securities purchased with assets received from
leverage exceeds the cost of leverage, the Fund's net income will be greater
than if leverage had not been used. Conversely, if the income from the
securities purchased is not sufficient to cover the cost of leverage, the Fund's
net income will be less than if leverage had not been used, and therefore the
amount available for distribution to Common Stock shareholders will be reduced.
2 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005
A Letter From the President
Dear Shareholder
Financial markets broadly posted positive returns over the most recent reporting
period, with international equities providing some of the most impressive
results.
Total Returns as of February 28, 2005 6-month 12-month
============================================================================================
U.S. equities (Standard & Poor's 500 Index) + 9.99% + 6.98%
--------------------------------------------------------------------------------------------
International equities (MSCI Europe Australasia Far East Index) +21.18 +18.68
--------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) + 1.26 + 2.43
--------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 2.40 + 2.96
--------------------------------------------------------------------------------------------
High yield bonds (Credit Suisse First Boston High Yield Index) + 7.53 +11.21
--------------------------------------------------------------------------------------------
The U.S. economy has continued to show resilience in the face of the Federal
Reserve Board's (the Fed) continued interest rate hikes and, more recently,
higher oil prices. The Fed's measured tightening program recently brought the
federal funds rate to 2.75% en route to a more "neutral" short-term interest
rate target (relative to inflation). Since the U.S. presidential election,
progress has been monitored on many fronts in Washington, although concerns
remain about the structural problems of debt and deficits, as reflected by a
significant decline in the U.S. dollar.
U.S. equities ended 2004 in a strong rally, but remained in a fairly narrow
trading range for the first two months of 2005. Divergences were notable among
sectors, with energy emerging as a clear leader. On the positive side,
corporations have accelerated their hiring plans, capital spending remains
reasonably robust and merger-and-acquisition activity has increased. Offsetting
the positives are slowing corporate earnings growth, renewed energy price
concerns and the potential for an economic slowdown. International equities,
particularly in Asia, have benefited from higher economic growth rates (China
recorded growth of 9.3% in 2004), stronger currencies and relatively reasonable
valuations.
The major action in the bond market has been a flattening of the yield curve. As
short-term interest rates continued to rise, yields on the long end of the curve
remained relatively stable -- even declining at certain points since the Fed's
monetary tightening program began in June 2004. This phenomenon has been largely
attributed to continued foreign interest in U.S. bonds, which has served to
absorb much of the excess supply. By period-end, many believed long-term yields
were long overdue for a rise.
Looking ahead, the environment is likely to be a challenging one for investors,
with diversification and selectivity becoming increasingly important themes.
With this in mind, we encourage you to meet with your financial advisor to
review your goals and asset allocation and to rebalance your portfolio, as
necessary, to ensure it remains aligned with your objectives and risk tolerance.
As always, we thank you for trusting Merrill Lynch Investment Managers with your
investment assets, and we look forward to serving you in the months and years
ahead.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Director
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005 3
A Discussion With Your Fund's Portfolio Manager
The Fund outperformed the benchmark Credit Suisse First Boston (CSFB) High
Yield Index for the six-month period, reflecting the benefits of leverage in a
strengthening high yield market, as well as the strong returns of several
portfolio holdings.
How did the Fund perform during the period?
For the six-month period ended February 28, 2005, the Common Stock of Corporate
High Yield Fund VI, Inc. had net annualized yields of 10.31% and 11.12%, based
on a period-end per share net asset value of $15.66 and a per share market price
of $14.52, respectively, and $.801 per share income dividends. Over the same
period, the total investment return on the Fund's Common Stock was +10.01%,
based on a change in per share net asset value from $15.71 to $15.66, and
assuming reinvestment of all distributions.
The Fund's return exceeded that of the high yield market, as measured by the
CSFB High Yield Index, which returned +7.53% for the six-month period ended
February 28, 2005. Fund performance slightly lagged its comparable Lipper
category of High Current Yield Funds (Leveraged), which had an average return of
+10.78% for the same period. (Funds in this Lipper category aim for relatively
high current yield from investment in fixed income securities, have no quality
or maturity restrictions and tend to invest in lower-grade debt issues.)
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of dividends, please refer to the Financial Highlights section of
this report. As a closed-end fund, the Fund's shares may trade in the secondary
market at a premium or a discount to the Fund's net asset value. As a result,
total investment returns based on changes in the market value of the Fund's
Common Stock can vary significantly from total investment returns based on
changes in the Fund's net asset value.
What factors influenced the Fund's performance?
Investors were well compensated for taking risk in high yield investments during
the past six months, despite an increasingly skittish and unforgiving market as
the period ended. The high yield market, as measured by the CSFB High Yield
Index, outperformed Treasury issues for the period, with the spread, or
additional yield, paid for assuming more credit risk shrinking to an all-time
narrow level of 3.07%, or 307 basis points.
The Fund's outperformance relative to the CSFB High Yield Index reflected the
benefits of leverage in a strengthening high yield market, as well as the strong
returns of several portfolio holdings. Bond prices of Trico Marine Services,
Inc. a provider of supply boats for offshore drilling rigs; Calpine Corp., an
independent power producer; Cincinnati Bell, Inc., a local telephone operator;
and El Paso Coastal, a natural gas and energy company, rallied as prospects for
improving earnings and strengthening financial profiles led investors to become
more comfortable with these previously downtrodden names. Consistent with the
more nervous market in January and February, bonds of manufacturing company
EaglePicher Industries, Inc. plummeted on increasing concern about earnings
deterioration, as did those of Merisant Co., manufacturer of the retail packets
of sugar substitute, Equal, and its holding company, Tabletop Holdings, Inc. We
monitor these holdings closely, and we believe there is adequate asset coverage
to support our continued investment in these issues.
What changes were made to the portfolio during the period?
We continued to increase our holdings of convertible bonds to near 10% of
portfolio holdings and floating rate securities to just over 8% of portfolio
holdings. We continue to believe that convertible securities will add
incremental performance to the Fund in an environment where high yield bonds
appear to be fully valued, and that floating rate securities will cushion the
4 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005
downside in a rising interest rate environment. Convertible securities can be
volatile, reflecting movements in the underlying stocks; therefore, we
anticipate that our holdings will be subject to the same risks. However, we have
attempted to mitigate that risk by choosing higher-quality issues and by
purchasing bonds that are somewhat insulated from downside volatility while
benefiting from rising stock prices.
Among the Fund's most significant convertible positions are Liberty Media Corp.
(rated BBB-), which converts to shares of Time Warner, Inc. and Centerpoint
Energy, Inc. (BBB-), a power distributor. During the period, we sold our
position in Halliburton Co. convertible bonds for a solid profit and in Chiron
Corp. for a modest loss, as we found the increasing risk of unfavorable events
not consistent with the goals for our convertible holdings. We also sold our
holdings in Mission Energy Holding Co., Kabel Deutschland GmbH and Insight
Communications Co., Inc., as well as a portion of our holdings in Qwest
Communications and a number of emerging market holdings. Substantial price
increases left little upside potential for these bonds, and risk remains high.
The Fund's leverage position averaged 26.8% during the past six months. That is,
the Fund borrowed the equivalent of 26.8% of total assets invested, earning
incremental yield on the investments we made with the borrowed funds. As of
February 28, 2005, the Fund was 24.4% leveraged after borrowing $177.5 million
at a cost of 2.6%. Over the last six months, the average amount borrowed was
approximately $204.4 million, and the daily weighted average borrowing rate was
2.62%. While leveraging will hinder the Fund's total return in a weak market,
the converse also is true. We intend to maintain our leverage position in the
mid-20% range, although that level may vary somewhat as we adjust the
portfolio's holdings. (For a more complete discussion of the benefits and risks
of leveraging, see page 2 of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
Near term, the high yield market outlook is moderately favorable, despite
volatile Treasury yields, uncertainty regarding the extent of anticipated
Federal Reserve Board interest rate actions and "fallout" from the weak U.S.
dollar. Again in 2005, we expect the high yield market to provide a highly
competitive return within the fixed income sector, given favorable economic
fundamentals and continuing low default rates. Our convertible holdings,
floating rate securities and focus on the less interest rate-sensitive segment
of the market should position us to benefit from this environment.
Our largest industry exposures at period-end were in utilities, chemicals and
U.S. cable. Our utilities exposure represents an underweight position relative
to the CSFB High Yield Index, as we like the fundamentals, but find the bonds
rich. We have an overweight relative to the market in chemicals. A favorable
pricing environment supports earnings prospects in our largely specialty
chemical holdings, as well as in the more commodity-oriented chemical names. In
U.S. cable, we also are somewhat more heavily weighted than the Index. In this
sector, we have holdings that range from the "wired" cable companies to their
"unwired" satellite competitors to content providers. The average credit rating
for the Fund, like that of the CSFB High Yield Index, was single B at the close
of the period.
Elizabeth M. Phillips
Vice President and Portfolio Manager
March 18, 2005
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005 5
Schedule of Investments (in U.S. dollars)
Face
Industry+ Amount Corporate Bonds Value
==========================================================================================================================
Aerospace & $ 3,901,000 Alliant Techsystems, Inc., 3% due 8/15/2024 (a)(h) $ 4,388,625
Defense--5.2% 3,500,000 CPI Holdco, Inc., 8.83% due 2/01/2015 (a)(c) 3,517,500
3,650,000 DRS Technologies, Inc., 6.875% due 11/01/2013 (a) 3,832,500
1,600,000 Esterline Technologies Corp., 7.75% due 6/15/2013 1,740,000
1,300,000 K&F Acquisition, Inc., 7.75% due 11/15/2014 (a) 1,316,250
2,875,000 Standard Aero Holdings, Inc., 8.25% due 9/01/2014 (a) 3,090,625
3,300,000 Titan Corp., 8% due 5/15/2011 3,547,500
4,050,000 Transdigm, Inc., 8.375% due 7/15/2011 4,303,125
2,800,000 Vought Aircraft Industries, Inc., 8% due 7/15/2011 2,828,000
-------------
28,564,125
==========================================================================================================================
Airlines--2.4% 3,625,000 American Airlines, Inc. Series 2001-2, 7.80% due 4/01/2008 3,245,166
Continental Airlines, Inc.:
1,500,000 8% due 12/15/2005 1,466,250
3,454,647 Series 1997-4-B, 6.90% due 1/02/2017 2,774,428
245,973 Series 1998-1-C, 6.541% due 9/15/2009 224,989
1,300,000 Series 1998-3, 7.25% due 11/01/2005 1,214,780
1,773,019 Series 2001-1 Class C, 7.033% due 6/15/2011 1,480,258
Delta Air Lines, Inc.:
2,150,000 7.90% due 12/15/2009 1,010,500
3,260,000 2.875% due 2/18/2024 (a)(h) 1,682,975
-------------
13,099,346
==========================================================================================================================
Automotive--1.5% 3,025,000 Autocam Corp., 10.875% due 6/15/2014 2,904,000
Metaldyne Corp.:
4,300,000 11% due 6/15/2012 3,762,500
1,924,000 10% due 11/01/2013 (a) 1,895,140
-------------
8,561,640
==========================================================================================================================
Broadcasting--5.1% 4,325,000 Granite Broadcasting Corp., 9.75% due 12/01/2010 4,141,187
2,225,000 Nextmedia Operating, Inc., 10.75% due 7/01/2011 2,475,313
Paxson Communications Corp.:
3,425,000 10.75% due 7/15/2008 3,596,250
950,000 12.121* due 1/15/2009 928,625
2,800,000 Radio One, Inc., 6.375% due 2/15/2013 (a) 2,856,000
5,250,000 Salem Communications Corp., 7.75% due 12/15/2010 5,591,250
5,030,000 Sinclair Broadcast Group, Inc., 4.875% due 7/15/2018 (h) 4,665,325
3,775,000 Young Broadcasting, Inc., 8.75% due 1/15/2014 3,737,250
-------------
27,991,200
==========================================================================================================================
Cable-- 4,100,000 NTL Cable Plc, 7.66% due 10/15/2012 (a)(c) 4,228,125
International--0.8%
==========================================================================================================================
Cable--U.S.--9.3% 1,300,000 Adelphia Communications Corp., 6% due 2/15/2006 (b)(h) 100,750
456,902 Avalon Cable LLC, 11.875% due 12/01/2008 475,749
3,450,000 CSC Holdings, Inc. Series B, 7.625% due 4/01/2011 3,838,125
8,400,000 Century Cable Holdings LLC, Discretionary Term Loan, due12/31/2009 (e) 8,368,500
3,125,000 Century Communications Series B, 12.48%* due 1/15/2008 (b) 1,960,937
8,000,000 Charter Communications Holdings LLC, 10% due 4/01/2009 6,780,000
1,625,000 Charter Communications, Inc., 5.875% due 11/16/2009 (a)(h) 1,592,500
Intelsat Bermuda Ltd. (a):
4,200,000 7.805% due 1/15/2012 (c) 4,315,500
4,575,000 8.625% due 1/15/2015 4,883,812
5,975,000 Loral Cyberstar, Inc., 10% due 7/15/2006 (b) 4,443,906
6,225,000 Mediacom Broadband LLC, 11% due 7/15/2013 6,886,406
700,000 Mediacom LLC, 9.50% due 1/15/2013 729,750
New Skies Satellites NV (a):
1,325,000 7.438% due 11/01/2011 (c) 1,389,594
1,825,000 9.125% due 11/01/2012 1,898,000
325,000 Quebecor Media, Inc., 9.99%* due 7/15/2011 323,781
3,100,000 Rainbow National Services LLC, 10.375% due 9/01/2014 (a) 3,689,000
-------------
51,676,310
==========================================================================================================================
6 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005
Schedule of Investments (continued) (in U.S. dollars)
Face
Industry+ Amount Corporate Bonds Value
==========================================================================================================================
Chemicals--9.1% $ 2,434,000 BCP Caylux Holdings Luxembourg SCA, 9.625% due 6/15/2014 (a) $ 2,811,270
Crompton Corp.:
3,125,000 8.71% due 8/01/2010 (c) 3,390,625
2,225,000 9.875% due 8/01/2012 2,514,250
3,355,000 Huntsman International LLC, 10.125% due 7/01/2009 3,526,944
3,575,000 ISP Holdings, Inc. Series B, 10.625% due 12/15/2009 3,896,750
3,225,000 Innophos, Inc., 8.875% due 8/15/2014 (a) 3,466,875
3,750,000 Millennium America, Inc., 7% due 11/15/2006 3,862,500
Nalco Co.:
800,000 7.75% due 11/15/2011 856,000
1,825,000 8.875% due 11/15/2013 2,016,625
2,143,000 Nalco Finance Holdings, Inc., 9.11%* due 2/01/2014 1,639,395
4,750,000 Omnova Solutions, Inc., 11.25% due 6/01/2010 5,082,500
1,200,000 PCI Chemicals Canada, Inc., 10% due 12/31/2008 1,284,000
1,000,000 PQ Corp., 7.50% due 2/15/2013 (a) 1,036,250
PolyOne Corp.:
4,475,000 10.625% due 5/15/2010 5,101,500
675,000 8.875% due 5/01/2012 752,625
3,171,000 Terra Capital, Inc., 11.50% due 6/01/2010 3,694,215
4,870,000 Wellman, Inc., Second Lien Term, due 2/10/2010 (e) 5,131,763
-------------
50,064,087
==========================================================================================================================
Consumer-- 2,275,000 Sealy Mattress Co., 8.25% due 6/15/2014 2,383,063
Durables--0.7% 1,300,000 Tempur-Pedic, Inc. and Tempur Production USA, Inc., 10.25% due 8/15/2010 1,482,000
-------------
3,865,063
==========================================================================================================================
Consumer-- Chattem, Inc.:
Non-Durables--2.4% 1,100,000 5.91% due 3/01/2010 (c) 1,122,000
950,000 7% due 3/01/2014 978,500
1,925,000 Church & Dwight Co., Inc., 6% due 12/15/2012 (a) 1,958,687
5,125,000 Hines Nurseries, Inc., 10.25% due 10/01/2011 5,599,062
3,575,000 Samsonite Corp., 8.875% due 6/01/2011 3,852,063
-------------
13,510,312
==========================================================================================================================
Diversified 3,500,000 CBD Media, Inc., 8.625% due 6/01/2011 3,718,750
Media--7.0% 3,625,000 CanWest Media, Inc., 8% due 9/15/2012 (a) 3,905,938
2,856,000 Dex Media West LLC Series B, 9.875% due 8/15/2013 3,277,260
4,300,000 Houghton Mifflin Co., 8.25% due 2/01/2011 4,536,500
9,300,000 Liberty Media Corp., 0.75% due 3/30/2023 (h) 10,102,125
Primedia, Inc.:
1,050,000 7.625% due 4/01/2008 1,065,750
2,375,000 8.875% due 5/15/2011 2,565,000
Universal City Florida Holding Co. I/II (a):
1,850,000 7.493% due 5/01/2010 (c) 1,937,875
1,375,000 8.375% due 5/01/2010 1,447,188
900,000 WDAC Subsidiary Corp., 8.375% due 12/01/2014 (a) 915,750
5,474,000 Yell Finance BV, 9.79%* due 8/01/2011 5,460,315
-------------
38,932,451
==========================================================================================================================
Energy--Exploration & 4,250,000 Plains Exploration & Production Co. Series B, 8.75% due 7/01/2012 4,738,750
Production--0.9%
==========================================================================================================================
Energy-- 2,125,000 Aventine Renewable Energy Holdings, Inc., 8.501% due 12/15/2011 (a)(c) 2,188,750
Other--3.7% 3,975,000 Dresser, Inc., 9.375% due 4/15/2011 4,293,000
1,127,000 Energy Corp. of America Series A, 9.50% due 5/15/2007 1,125,591
2,250,000 Inergy LP, 6.875% due 12/15/2014 (a) 2,283,750
6,075,000 Ocean Rig Norway AS, 10.25% due 6/01/2008 6,242,063
1,550,000 Star Gas Partners LP, 10.25% due 2/15/2013 (a) 1,414,375
3,400,000 Trico Marine Services, Inc., 8.875% due 5/15/2012 (b) 3,060,000
-------------
20,607,529
==========================================================================================================================
Financial--0.9% 4,625,000 Refco Finance Holdings LLC, 9% due 8/01/2012 (a) 5,041,250
==========================================================================================================================
Food & Drug--0.4% 2,250,000 Duane Reade, Inc., 7.01% due 12/15/2010 (a)(c) 2,250,000
==========================================================================================================================
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005 7
Schedule of Investments (continued) (in U.S. dollars)
Face
Industry+ Amount Corporate Bonds Value
==========================================================================================================================
Food/Tobacco--5.2% Commonwealth Brands, Inc. (a):
$ 1,000,000 9.75% due 4/15/2008 $ 1,070,000
4,750,000 10.625% due 9/01/2008 5,058,750
950,000 Cosan SA Industria e Comercio, 9% due 11/01/2009 (a) 988,000
4,475,000 Cott Beverages USA, Inc., 8% due 12/15/2011 4,805,031
Del Monte Corp.:
1,950,000 8.625% due 12/15/2012 2,174,250
800,000 6.75% due 2/15/2015 (a) 822,000
3,725,000 Doane Pet Care Co., 10.75% due 3/01/2010 3,957,812
2,075,000 Merisant Co., 10.25% due 7/15/2013 (a) 1,836,375
3,475,000 New World Pasta Co., 9.25% due 2/15/2009 (b) 243,250
3,550,000 Smithfield Foods, Inc. Series B, 8% due 10/15/2009 3,931,625
2,150,000 Tabletop Holdings, Inc., 12.25%* due 5/15/2014 (a) 860,000
2,625,000 The Wornick Co., 10.875% due 7/15/2011 2,835,000
-------------
28,582,093
==========================================================================================================================
Gaming--6.7% 5,275,000 Boyd Gaming Corp., 8.75% due 4/15/2012 5,815,687
3,900,000 Caesars Entertainment, Inc., 7.875% due 3/15/2010 4,387,500
3,100,000 Inn of the Mountain Gods Resort & Casino, 12% due 11/15/2010 3,673,500
2,575,000 MGM Mirage, 9.75% due 6/01/2007 2,851,812
5,925,000 Majestic Star Casino LLC, 9.50% due 10/15/2010 6,273,094
1,500,000 Penn National Gaming, Inc., 6.75% due 3/01/2015 (a) 1,530,000
2,425,000 Pinnacle Entertainment, Inc., 8.25% due 3/15/2012 2,588,688
4,350,000 Poster Financial Group, Inc., 8.75% due 12/01/2011 4,627,313
4,400,000 Resorts International Hotel and Casino, Inc., 11.50% due 3/15/2009 5,192,000
-------------
36,939,594
==========================================================================================================================
Government-- 2,075,000 Brazilian Government International Bond, 10.50% due 7/14/2014 2,430,862
Foreign--0.4%
==========================================================================================================================
Health Care--7.4% Alpharma, Inc.:
4,775,000 3% due 6/01/2006 (h) 6,052,313
3,500,000 8.625% due 5/01/2011 (a) 3,570,000
Elan Finance Plc (a):
3,100,000 6.49% due 11/15/2011 (c) 2,697,000
3,100,000 7.75% due 11/15/2011 2,759,000
Fisher Scientific International:
3,871,000 8.125% due 5/01/2012 4,248,422
1,000,000 8% due 9/01/2013 1,112,500
6,150,000 Fresenius Medical Care Capital Trust II, 7.875% due 2/01/2008 6,580,500
4,625,000 Healthsouth Corp., 8.375% due 10/01/2011 4,844,687
2,400,000 Select Medical Corp., 7.625% due 2/01/2015 (a) 2,481,000
4,425,000 U.S. Oncology, Inc., 9% due 8/15/2012 (a) 4,834,313
1,575,000 Vanguard Health Holding Co. II LLC, 9% due 10/01/2014 1,732,500
-------------
40,912,235
==========================================================================================================================
Housing--3.8% 2,725,000 Asia Aluminum Holdings Ltd., 8% due 12/23/2011 (a) 2,759,062
Building Materials Corp. of America:
2,500,000 8% due 10/15/2007 2,587,500
8,750,000 8% due 12/01/2008 9,034,375
Goodman Global Holding Co., Inc. (a):
775,000 5.76% due 6/15/2012 (c) 794,375
2,825,000 7.875% due 12/15/2012 2,761,437
2,525,000 Texas Industries, Inc., 10.25% due 6/15/2011 2,929,000
-------------
20,865,749
==========================================================================================================================
Information 2,600,000 Advanced Micro Devices, Inc., 7.75% due 11/01/2012 (a) 2,652,000
Technology--5.1% Amkor Technology, Inc.:
975,000 9.25% due 2/15/2008 955,500
3,225,000 7.125% due 3/15/2011 2,805,750
4,950,000 Cypress Semiconductor Corp., 1.25% due 6/15/2008 (h) 5,618,250
3,200,000 Freescale Semiconductor, Inc., 5.41% due 7/15/2009 (c) 3,340,000
1,050,000 MagnaChip SemiConductor SA, 5.78% due 12/15/2011 (a)(c) 1,081,500
3,130,000 Quantum Corp., 4.375% due 8/01/2010 (h) 3,063,488
8 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005
Schedule of Investments (continued) (in U.S. dollars)
Face
Industry+ Amount Corporate Bonds Value
==========================================================================================================================
Information $ 950,000 TTI Holding Corp., 8.875% due 3/01/2013 (a) $ 980,875
Technology 1,925,000 UGS Corp., 10% due 6/01/2012 (a) 2,175,250
(concluded) 5,600,000 Viasystems, Inc., 10.50% due 1/15/2011 5,516,000
-------------
28,188,613
==========================================================================================================================
Leisure--2.0% Felcor Lodging LP:
4,850,000 6.874% due 6/01/2011 (c) 5,147,062
2,500,000 9% due 6/01/2011 2,828,125
1,250,000 Intrawest Corp., 7.50% due 10/15/2013 1,326,562
1,625,000 True Temper Sports, Inc., 8.375% due 9/15/2011 1,564,063
-------------
10,865,812
==========================================================================================================================
Manufacturing--6.3% 1,275,000 Columbus McKinnon Corp., 8.50% due 4/01/2008 1,294,125
1,575,000 EaglePicher Holdings, Inc., Tranche B Term Loan, due 8/07/2009 (e) 1,572,374
6,050,000 EaglePicher Industries, Inc., 9.75% due 9/01/2013 4,961,000
5,700,000 Invensys Plc, 9.875% due 3/15/2011 (a) 6,156,000
4,175,000 Johnsondiversey, Inc. Series B, 9.625% due 5/15/2012 4,676,000
2,000,000 Mueller Group, Inc., 10% due 5/01/2012 2,200,000
1,500,000 Rexnord Corp., 10.125% due 12/15/2012 1,695,000
2,875,000 Superior Essex Communications LLC, 9% due 4/15/2012 3,061,875
5,150,000 Trimas Corp., 9.875% due 6/15/2012 5,330,250
2,550,000 Tyco International Group SA, 2.75% due 1/15/2018 (h) 3,777,188
-------------
34,723,812
==========================================================================================================================
Metal--Other--1.9% 3,050,000 Century Aluminum Co., 7.50% due 8/15/2014 (a) 3,278,750
3,250,000 Foundation PA Coal Co., 7.25% due 8/01/2014 3,445,000
3,450,000 Novelis, Inc., 7.25% due 2/15/2015 (a) 3,570,750
-------------
10,294,500
==========================================================================================================================
Packaging--4.7% 2,225,000 Consolidated Container Co. LLC, 10.75%* due 6/15/2009 1,946,875
1,250,000 Crown European Holdings SA, 10.875% due 3/01/2013 1,484,375
5,550,000 Owens-Brockway, 8.875% due 2/15/2009 5,994,000
Pliant Corp.:
3,875,000 11.125%* due 6/15/2009 3,642,500
2,200,000 13% due 6/01/2010 2,150,500
Tekni-Plex, Inc.:
3,900,000 12.75% due 6/15/2010 3,471,000
650,000 8.75% due 11/15/2013 (a) 637,000
U.S. Can Corp.:
1,625,000 10.875% due 7/15/2010 1,755,000
3,675,000 12.375% due 10/01/2010 3,583,125
1,150,000 Wise Metals Group LLC, 10.25% due 5/15/2012 1,173,000
-------------
25,837,375
==========================================================================================================================
Paper--6.4% 5,875,000 Abitibi-Consolidated, Inc., 5.99% due 6/15/2011 (c) 6,051,250
Ainsworth Lumber Co. Ltd. (a):
3,250,000 6.30% due 10/01/2010 (c) 3,347,500
1,875,000 7.25% due 10/01/2012 1,921,875
450,000 Boise Cascade LLC, 5.535% due 10/15/2012 (a)(c) 464,625
5,200,000 Bowater, Inc., 5.49% due 3/15/2010 (c) 5,369,000
3,450,000 Caraustar Industries, Inc., 9.875% due 4/01/2011 3,777,750
Graphic Packaging International Corp.:
1,875,000 8.50% due 8/15/2011 2,039,062
2,050,000 9.50% due 8/15/2013 2,321,625
3,125,000 JSG Funding Plc, 9.625% due 10/01/2012 3,460,938
1,500,000 Jefferson Smurfit Corp. US, 8.25% due 10/01/2012 1,620,000
Norske Skog Canada Ltd.:
1,000,000 7.375% due 3/01/2014 1,050,000
2,000,000 Series D, 8.625% due 6/15/2011 2,140,000
1,716,000 Western Forest Products, Inc., 15% due 7/28/2009 (a)(f) 1,870,677
-------------
35,434,302
==========================================================================================================================
Retail--0.4% 2,125,000 Jean Coutu Group, Inc., 8.50% due 8/01/2014 2,178,125
==========================================================================================================================
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005 9
Schedule of Investments (continued) (in U.S. dollars)
Face
Industry+ Amount Corporate Bonds Value
==========================================================================================================================
Services--6.1% $ 3,600,000 Allied Waste North America Series B, 8.875% due 4/01/2008 $ 3,879,000
1,823,000 Coinmach Corp., 9% due 2/01/2010 1,905,035
4,500,000 Corrections Corp. of America, 7.50% due 5/01/2011 4,770,000
1,750,000 Knowledge Learning Corp., Inc., 7.75% due 2/01/2015 (a) 1,758,750
1,550,000 MSW Energy Holdings II LLC, 7.375% due 9/01/2010 1,619,750
2,400,000 MSW Energy Holdings LLC, 8.50% due 9/01/2010 2,616,000
5,125,000 United Rentals North America, Inc., 7.75% due 11/15/2013 5,137,813
5,150,000 Waste Services, Inc., 9.50% due 4/15/2014 (a) 5,291,625
Williams Scotsman, Inc.:
6,100,000 9.875% due 6/01/2007 6,115,250
650,000 10% due 8/15/2008 710,125
-------------
33,803,348
==========================================================================================================================
Steel--0.1% 700,000 Ucar Finance, Inc., 10.25% due 2/15/2012 778,750
==========================================================================================================================
Telecommunications-- ADC Telecommunications, Inc. (h):
5.2% 4,000,000 1% due 6/15/2008 3,760,000
1,025,000 3.065% due 6/15/2013 (c) 986,563
2,726,000 Alaska Communications Systems Holdings, Inc., 9.875% due 8/15/2011 2,950,895
4,625,000 Cincinnati Bell, Inc., 8.375% due 1/15/2014 4,781,094
5,100,000 LCI International, Inc., 7.25% due 6/15/2007 4,972,500
600,000 Qwest Capital Funding, Inc., 7.25% due 2/15/2011 588,000
1,600,000 Terremark Worldwide, Inc., 9% due 6/15/2009 (a)(h) 1,484,000
1,450,000 Time Warner Telecom Holdings, Inc., 6.794% due 2/15/2011 (c) 1,504,375
6,375,000 Time Warner Telecom, Inc., 10.125% due 2/01/2011 6,518,438
1,300,000 Time Warner Telecom LLC, 9.75% due 7/15/2008 1,329,250
-------------
28,875,115
==========================================================================================================================
Transportation--1.2% 3,050,000 Laidlaw International, Inc., 10.75% due 6/15/2011 3,496,062
2,500,000 Teekay Shipping Corp., 8.875% due 7/15/2011 2,881,250
-------------
6,377,312
==========================================================================================================================
Utility--11.4% The AES Corp.:
5,048,000 8.50% due 11/01/2007 5,123,720
4,000,000 9.375% due 9/15/2010 4,660,000
11,675,000 Calpine Canada Energy Finance Ulc, 8.50% due 5/01/2008 8,756,250
Calpine Corp.:
2,375,000 8.25% due 8/15/2005 2,398,750
1,625,000 8.75% due 7/15/2007 1,365,000
7,550,000 Centerpoint Energy, Inc., 3.75% due 5/15/2023 (h) 8,607,000
3,435,000 ESI Tractebel Acquisition Corp. Series B, 7.99% due 12/30/2011 3,638,744
3,125,000 Edison Mission Energy, 9.875% due 4/15/2011 3,734,375
3,825,000 El Paso CGP Co., 7.75% due 6/15/2010 4,025,813
Nevada Power Co.:
1,150,000 9% due 8/15/2013 1,328,250
3,750,000 Series A, 8.25% due 6/01/2011 4,284,375
1,575,000 Series E, 10.875% due 10/15/2009 1,799,438
2,750,000 Reliant Energy, Inc., 6.75% due 12/15/2014 2,729,375
3,950,000 Sierra Pacific Power Co. Series A, 8% due 6/01/2008 4,295,625
875,000 Sierra Pacific Resources, 8.625% due 3/15/2014 966,875
1,650,000 Southern Natural Gas Co., 8.875% due 3/15/2010 1,827,375
3,450,000 Texas Genco LLC, 6.875% due 12/15/2014 (a) 3,682,875
-------------
63,223,840
==========================================================================================================================
Wireless 3,300,000 Centennial Cellular Operating Co., 10.125% due 6/15/2013 3,828,000
Communications-- 4,875,000 Crown Castle International Corp., 9.375% due 8/01/2011 5,411,250
4.4% 1,600,000 Iwo Escrow Co., 6.32% due 1/15/2012 (a)(c) 1,656,000
Rogers Wireless Communications, Inc.:
600,000 5.525% due 12/15/2010 (c) 633,000
250,000 8% due 12/15/2012 270,938
5,600,000 6.375% due 3/01/2014 5,747,000
1,075,000 Rural Cellular Corp., 6.99% due 3/15/2010 (c) 1,128,750
10 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005
Schedule of Investments (continued) (in U.S. dollars)
Face
Industry+ Amount Corporate Bonds Value
==========================================================================================================================
Wireless $ 2,250,000 SBA Communications Corp., 8.50% due 12/01/2012 (a) $ 2,430,000
Communications 3,450,000 SBA Telecommunications, Inc., 7.43%* due 12/15/2011 3,018,750
(concluded) -------------
24,123,688
--------------------------------------------------------------------------------------------------------------------------
Total Investments in Corporate Bonds (Cost--$679,533,282)--128.1% 707,565,313
==========================================================================================================================
Shares
Held Common Stocks
==========================================================================================================================
Airlines--0.2% 133,624 ABX Air, Inc. (g) 1,077,009
==========================================================================================================================
Cable-- 288,254 Telewest Global, Inc. (g) 4,810,959
International--0.9%
==========================================================================================================================
Paper--0.1% 78,039 Western Forest Products, Inc. (a)(g) 501,552
==========================================================================================================================
Telecommunications-- 27,927 MCI, Inc. 635,339
0.1%
--------------------------------------------------------------------------------------------------------------------------
Total Investments in Common Stocks (Cost--$4,171,638)--1.3% 7,024,859
==========================================================================================================================
Preferred Stocks
==========================================================================================================================
Automotive--1.0% 230,000 General Motors Corp. Series C (h) 5,630,400
--------------------------------------------------------------------------------------------------------------------------
Total Investments in Preferred Stocks (Cost--$5,748,900)--1.0% 5,630,400
==========================================================================================================================
Warrants (d)
==========================================================================================================================
Health Care--0.0% 54,577 HealthSouth Corp. (expires 1/16/2014) 136,443
--------------------------------------------------------------------------------------------------------------------------
Total Investments in Warrants (Cost--$0)--0.0% 136,443
==========================================================================================================================
Total Investments (Cost--$689,453,820**)--130.4% 720,357,015
Liabilities in Excess of Other Assets--(30.4%) (167,781,396)
-------------
Net Assets--100.0% $ 552,575,619
=============
* Represents a zero coupon or step bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
** The cost and unrealized appreciation (depreciation) of investments as of
February 28, 2005, as computed for federal income tax purposes, were as
follows:
Aggregate cost ......................................... $690,298,765
============
Gross unrealized appreciation .......................... $ 37,976,555
Gross unrealized depreciation .......................... (7,918,305)
------------
Net unrealized appreciation ............................ $ 30,058,250
============
+ For Fund compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report which may
combine such industry sub-classifications for reporting ease.
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(b) Non-income producing security; issuer filed for bankruptcy or is in
default of interest payments.
(c) Floating rate note.
(d) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(e) Floating rate corporate debt in which the Fund invests generally pays
interest at rates that are periodically predetermined by reference to a
base lending rate plus a premium. The base lending rates are generally (i)
the lending rate offered by one or more major European banks, such as
LIBOR (London InterBank Offered Rate), (ii) the prime rate offered by one
or more major U.S. banks or (iii) the certificate of deposit rate.
Corporate loans represent 2.7% of the Fund's net assets.
(f) Represents a pay-in-kind security which may pay interest/dividends in
additional face/shares.
(g) Non-income producing security.
(h) Convertible security.
Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) were as follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series 1 $(6,541,525) $4,053
--------------------------------------------------------------------------
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005 11
Schedule of Investments (concluded) (in U.S. dollars)
Swaps outstanding as of February 28, 2005 were as follows:
-------------------------------------------------------------------------
Notional Unrealized
Amount Depreciation
-------------------------------------------------------------------------
Sold a credit default protection on
Dow Jones CDX North America
Series 3 High Yield Single B and
receive 4%
Broker, Morgan Stanley Capital
Services Inc.
Expires December 2009 $4,800,000 $(12,000)
Sold a credit default protection on
Dow Jones CDX North America
Series 3 High Yield Single B and
receive 4%
Broker, JPMorgan Chase Bank
Expires December 2009 $3,200,000 (8,000)
-------------------------------------------------------------------------
Total $(20,000)
========
Financial futures contracts sold as of February 28, 2005 were as follows:
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Appreciation
--------------------------------------------------------------------------
80 Ten-Year March
U.S. Treasury 2005
Notes $9,067,277 $197,277
--------------------------------------------------------------------------
See Notes to Financial Statements.
12 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005
Statement of Assets, Liabilities and Capital
As of February 28, 2005
==========================================================================================================================
Assets
--------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified
cost--$689,453,820) .............................................. $720,357,015
Swap premiums paid ................................................ 237,296
Receivables:
Interest ....................................................... $ 13,180,508
Securities sold ................................................ 1,983,968
Swaps .......................................................... 63,111
Variation margin ............................................... 42,500
Dividends ...................................................... 11,171 15,281,258
------------
Prepaid expenses .................................................. 17,710
------------
Total assets ...................................................... 735,893,279
------------
==========================================================================================================================
Liabilities
--------------------------------------------------------------------------------------------------------------------------
Loans ............................................................. 173,300,000
Unrealized depreciation on swaps .................................. 20,000
Payables:
Securities purchased ........................................... 5,122,043
Custodian bank ................................................. 4,074,159
Dividends to shareholders ...................................... 323,673
Investment adviser ............................................. 308,613
Interest on loans .............................................. 74,241
Other affiliates ............................................... 4,955 9,907,684
------------
Accrued expenses and other liabilities ............................ 89,976
------------
Total liabilities ................................................. 183,317,660
------------
==========================================================================================================================
Net Assets
--------------------------------------------------------------------------------------------------------------------------
Net Assets ........................................................ $552,575,619
============
==========================================================================================================================
Capital
--------------------------------------------------------------------------------------------------------------------------
Common Stock, $.10 par value, 200,000,000 shares authorized ....... $ 3,528,198
Paid-in capital in excess of par .................................. 501,434,012
Undistributed investment income--net .............................. $ 3,430,491
Undistributed realized capital gains--net ......................... 13,102,446
Unrealized appreciation--net ...................................... 31,080,472
------------
Total accumulated earnings--net ................................... 47,613,409
------------
Total--Equivalent to $15.66 per share based on 35,281,981 shares of
capital stock outstanding (market price--$14.52) ................. $552,575,619
============
See Notes to Financial Statements.
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005 13
Statement of Operations
For the Six Months Ended February 28, 2005
==========================================================================================================================
Investment Income
--------------------------------------------------------------------------------------------------------------------------
Interest (including $4,053 from affiliates) ....................... $ 30,854,117
Dividends ......................................................... 179,688
Other ............................................................. 31,390
------------
Total income ...................................................... 31,065,195
------------
==========================================================================================================================
Expenses
--------------------------------------------------------------------------------------------------------------------------
Investment advisory fees .......................................... $ 2,656,609
Loan interest expense ............................................. 2,413,846
Borrowing costs ................................................... 175,972
Accounting services ............................................... 95,113
Professional fees ................................................. 63,808
Transfer agent fees ............................................... 31,303
Custodian fees .................................................... 21,903
Printing and shareholder reports .................................. 20,824
Listing fees ...................................................... 13,938
Pricing services .................................................. 13,419
Directors' fees and expenses ...................................... 12,085
Other ............................................................. 18,921
------------
Total expenses .................................................... 5,537,741
------------
Investment income--net ............................................ 25,527,454
------------
==========================================================================================================================
Realized & Unrealized Gain--Net
--------------------------------------------------------------------------------------------------------------------------
Realized gain on:
Investments--net ............................................... 16,128,958
Swaps--net ..................................................... 169,418 16,298,376
------------
Change in unrealized appreciation (depreciation) on:
Investments--net ............................................... 9,001,028
Futures contracts and swaps--net ............................... 177,277 9,178,305
----------------------------
Total realized and unrealized gain--net ........................... 25,476,681
------------
Net Increase in Net Assets Resulting from Operations .............. $ 51,004,135
============
See Notes to Financial Statements.
14 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 2005 2004
==========================================================================================================================
Operations
--------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................ $ 25,527,454 $ 52,783,189
Realized gain--net ................................................ 16,298,376 21,577,039
Change in unrealized appreciation (depreciation)--net ............. 9,178,305 23,571,047
----------------------------
Net increase in net assets resulting from operations .............. 51,004,135 97,931,275
----------------------------
==========================================================================================================================
Dividends & Distributions to Shareholders
--------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................ (28,176,543) (50,276,838)
Realized gain--net ................................................ (24,641,888) (852,413)
----------------------------
Net decrease in net assets resulting from dividends and
distributions to shareholders .................................... (52,818,431) (51,129,251)
----------------------------
==========================================================================================================================
Net Assets
--------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ........................... (1,814,296) 46,802,024
Beginning of period ............................................... 554,389,915 507,587,891
----------------------------
End of period* .................................................... $552,575,619 $554,389,915
============================
* Undistributed investment income--net ........................... $ 3,430,491 $ 6,079,580
============================
See Notes to Financial Statements.
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005 15
Statement of Cash Flows
For the Six Months Ended February 28, 2005
==========================================================================================================
Cash Provided by Operating Activities
----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations ............. $ 51,004,135
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activities:
Decrease in receivables ....................................... 1,750,449
Increase in other liabilities ................................. 4,381,961
Realized and unrealized gain--net ............................. (25,476,681)
Realized gain on swaps ........................................ 169,418
Amortization of discount ...................................... (1,373,277)
Proceeds from sales and paydown of long-term investments ......... 249,947,132
Purchases of long-term investments ............................... (201,688,829)
Proceeds from sales and maturities of short-term investments--net 6,541,525
-------------
Net cash provided by operating activities ........................ 85,255,833
-------------
==========================================================================================================
Cash Used for Financing Activities
----------------------------------------------------------------------------------------------------------
Cash receipts from borrowings .................................... 165,100,000
Cash payments on borrowings ...................................... (198,900,000)
Dividends and distributions paid to shareholders ................. (52,839,716)
-------------
Net cash used for financing activities ........................... (86,639,716)
-------------
==========================================================================================================
Cash
----------------------------------------------------------------------------------------------------------
Net decrease in cash ............................................. (1,383,883)
Cash at beginning of period ...................................... 1,383,883
-------------
Cash at end of period ............................................ $ --
=============
==========================================================================================================
Cash Flow Information
----------------------------------------------------------------------------------------------------------
Cash paid for interest ........................................... $ 2,422,134
=============
See Notes to Financial Statements.
16 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005
Financial Highlights
For the Six For the For the Period
Months Ended Year Ended May 30, 2003+
The following per share data and ratios have been derived February 28, August 31, to August 31,
from information provided in the financial statements. 2005 2004 2003
=============================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ......................... $ 15.71 $ 14.39 $ 14.33
--------------------------------------------
Investment income--net .................................... .73 1.50 .30
Realized and unrealized gain (loss)--net .................. .72 1.27 (.03)
--------------------------------------------
Total from investment operations ............................. 1.45 2.77 .27
--------------------------------------------
Less dividends and distributions:
Investment income--net .................................... (.80) (1.43) (.20)
Realized gain--net ........................................ (.70) (.02) --
--------------------------------------------
Total dividends and distributions ............................ (1.50) (1.45) (.20)
--------------------------------------------
Offering costs resulting from the issuance of Common Stock ... -- -- (.01)
--------------------------------------------
Net asset value, end of period ............................... $ 15.66 $ 15.71 $ 14.39
============================================
Market price per share, end of period ........................ $ 14.52 $ 14.52 $ 13.61
============================================
=============================================================================================================================
Total Investment Return**
-------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ........................... 10.01%@ 20.70% 1.91%@
============================================
Based on market price per share .............................. 10.37%@ 17.95% (7.92%)@
============================================
=============================================================================================================================
Ratios to Average Net Assets
-----------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and excluding interest expense ....... 1.12%* 1.09% .45%*
============================================
Expenses, net of waiver ...................................... 1.99%* 1.56% .52%*
============================================
Expenses ..................................................... 1.99%* 1.57% .91%*
============================================
Investment income--net ....................................... 9.18%* 9.76% 8.22%*
============================================
=============================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------
Amount of borrowings outstanding, end of period (in thousands) $ 173,300 $ 207,100 $ 113,300
============================================
Average amount of borrowings outstanding during the period
(in thousands) .............................................. $ 204,386 $ 178,605 $ 24,585
============================================
Average amount of borrowings outstanding per share during the
period*** ................................................... $ 5.79 $ 5.06 $ .71
============================================
=============================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ..................... $ 552,576 $ 554,390 $ 507,588
============================================
Portfolio turnover ........................................... 25.65% 81.43% 59.69%
============================================
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
*** Based on average shares outstanding.
+ Commencement of operations.
@ Aggregate total investment return.
See Notes to Financial Statements.
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005 17
Notes to Financial Statements
1. Significant Accounting Policies:
Corporate High Yield Fund VI, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Fund's financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. These unaudited financial statements reflect all adjustments,
which are, in the opinion of management, necessary to present a fair statement
of the results for the interim period. All such adjustments are of a normal,
recurring nature. The Fund determines and makes available for publication the
net asset value of its Common Stock on a daily basis. The Fund's Common Stock is
listed on the New York Stock Exchange ("NYSE") under the symbol HYT. The
following is a summary of significant accounting policies followed by the Fund.
(a) Valuation of investments -- Debt securities are traded primarily in the
over-the-counter markets and are valued at the last available bid price in the
over-the-counter market or on the basis of values obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the general direction
of the Board of Directors. Such valuations and procedures will be reviewed
periodically by the Board of Directors of the Fund. Financial futures contracts
and options thereon, which are traded on exchanges, are valued at their closing
prices as of the close of such exchanges. Options written or purchased are
valued at the last sale price in the case of exchange-traded options. In the
case of options traded in the over-the-counter ("OTC") market, valuation is the
last asked price (options written) or the last bid price (options purchased).
Swap agreements are valued by quoted fair valuations received daily by the Fund
from the counterparty. Short-term investments with a remaining maturity of 60
days or less are valued at amortized cost which approximates market value, under
which method the investment is valued at cost and any premium or discount is
amortized on a straight line basis to maturity. Repurchase agreements are valued
at cost plus accrued interest. Investments in open-end investment companies are
valued at their net asset value each business day. Securities and other assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by or under the direction of the Board of Directors
of the Fund.
Equity securities that are held by the Fund, which are traded on stock exchanges
or the Nasdaq National Market, are valued at the last sale price or official
close price on the exchange, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price for long positions, and at the last available ask price for short
positions. In cases where equity securities are traded on more than one
exchange, the securities are valued on the exchange designated as the primary
market by or under the authority of the Board of Directors of the Fund. Long
positions traded in the OTC market, Nasdaq Small Cap or Bulletin Board are
valued at the last available bid price obtained from one or more dealers or
pricing services approved by the Board of Directors of the Fund. Short positions
traded in the OTC market are valued at the last available ask price. Portfolio
securities that are traded both in the OTC market and on a stock exchange are
valued according to the broadest and most representative market.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of business on the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates also are generally
determined prior to the close of business on the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of business on the
NYSE that may not be reflected in the computation of the Fund's net asset value.
If events (for example, a company announcement, market volatility or a natural
disaster) occur during such periods that are expected to materially affect the
value of such securities, those securities may be valued at their fair value as
determined in good faith by the Fund's Board of Directors or by the Investment
Adviser using a pricing service and/or procedures approved by the Fund's Board
of Directors.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
o Options -- The Fund may write and purchase call and put options. When the
Fund writes an option, an amount equal to the premium received by the Fund
is reflected as an asset and an equivalent liability. The amount of the
18 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005
Notes to Financial Statements (continued)
liability is subsequently marked-to-market to reflect the current market
value of the option written. When a security is purchased or sold through
an exercise of an option, the related premium paid (or received) is added
to (or deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option expires
(or the Fund enters into a closing transaction), the Fund realizes a gain
or loss on the option to the extent of the premiums received or paid (or
gain or loss to the extent the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required by
the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time it was
closed.
o Swaps -- The Fund may enter into swap agreements, which are
over-the-counter contracts in which the Fund and a counterparty agree to
make periodic net payments on a specified notional amount. The net
payments can be made for a set period of time or may be triggered by a
predetermined credit event. The net periodic payments may be based on a
fixed or variable interest rate; the change in market value of a specified
security, basket of securities, or index; or the return generated by a
security. These periodic payments received or made by the Fund are
recorded in the accompanying Statement of Operations as realized gains or
losses, respectively. Gains or losses are also realized upon termination
of the swap agreements. Swaps are marked-to-market daily based on
dealer-supplied valuations and changes in value are recorded as unrealized
appreciation (depreciation). Risks include changes in the returns of the
underlying instruments, failure of the counterparties to perform under the
contracts' terms and the possible lack of liquidity with respect to the
swap agreements.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
(f) Securities lending -- The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. The market value of
the loaned securities is determined at the close of business of the Fund and any
additional required collateral is delivered to the Fund on the next business
day. Where the Fund receives securities as collateral for the loaned securities,
it collects a fee from the borrower. The Fund typically receives the income on
the loaned securities but does not receive the income on the collateral. Where
the Fund receives cash collateral, it may invest such collateral and retain the
amount earned on such investment, net of any amount rebated to the borrower.
Loans of securities are terminable at any time and the borrower, after notice,
is required to return borrowed securities within five business days. The Fund
may pay reasonable finder's, lending agent, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or for any other
reason, the Fund could experience delays and costs in gaining access to the
collateral. The Fund also could suffer a loss where the value of the collateral
falls below the market value of the borrowed securities, in the event of
borrower default or in the event of losses on investments made with cash
collateral.
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005 19
Notes to Financial Statements (concluded)
(g) Custodian bank -- The Fund recorded an amount payable to the custodian bank
reflecting an overnight overdraft, which resulted from management estimates of
available cash.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operation of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .70% of the Fund's average weekly net assets plus the proceeds
of any outstanding principal borrowed.
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, or its affiliates.
Pursuant to that order, the Fund also has retained Merrill Lynch Investment
Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the securities lending
agent for a fee based on a share of the returns on investment of cash
collateral. MLIM, LLC may, on behalf of the Fund, invest cash collateral
received by the Fund for such loans, among other things, in a private investment
company managed by MLIM, LLC or in registered money market funds advised by FAM
or its affiliates.
In addition, MLPF&S received $5,813 in commissions on the execution of portfolio
security transactions for the Fund for the six months ended February 28, 2005.
For the six months ended February 28, 2005, the Fund reimbursed FAM $5,906 for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales (including paydowns) of investments, excluding short-term
securities, for the six months ended February 28, 2005 were $193,906,028 and
$237,825,313, respectively.
4. Capital Share Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, par value
$.10, all of which were initially classified as Common Stock. The Board of
Directors is authorized, however, to classify and reclassify any unissued shares
of capital stock without approval of the holders of Common Stock.
5. Short-Term Borrowings:
The Fund has entered into a revolving credit and security agreement funded by a
commercial paper asset securitization program with Citicorp North America, Inc.
("Citicorp") as Agent, certain secondary backstop lenders, and certain asset
securitization conduits as lenders (the "Lenders"). The credit facility has a
maximum limit of $250,000,000. Under the Citicorp program, the conduits will
fund advances to the Fund through the issuance of highly rated commercial paper.
As security for its obligations to the Lenders under the revolving
securitization facility, the Fund has granted a security interest in
substantially all of its assets to and in favor of the Lenders. The interest
rate on the Fund's borrowings is based on the interest rate carried by the
commercial paper plus a program fee. The Fund pays additional borrowing costs
including a backstop commitment fee.
The weighted average annual interest rate was 2.62% and the average borrowing
was approximately $204,386,000 for the six months ended February 28, 2005.
6. Distributions to Shareholders:
The Fund paid an ordinary income dividend in the amount of $.121000 per share on
March 31, 2005 to shareholders of record on March 15, 2005.
20 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005
Portfolio Information
Percent of
As of February 28, 2005 Total Assets
====================================================================================================================================
Ten Largest Holdings
------------------------------------------------------------------------------------------------------------------------------------
Sierra Pacific Resources* Sierra Pacific Resources is the holding company for two utilities,
Nevada Power Company and Sierra Pacific Power Company. Both utilities
primarily serve the State of Nevada. 1.8%
------------------------------------------------------------------------------------------------------------------------------------
Calpine Corp.* Calpine owns, develops and operates power generation facilities, as well
as sells electricity in the United States. The company also provides
thermal energy for industrial customers. 1.8
------------------------------------------------------------------------------------------------------------------------------------
Building Materials Corp. of America* Building Materials is a manufacturer of residential roofing products,
with Timberline as its major brand. 1.6
------------------------------------------------------------------------------------------------------------------------------------
Adelphia Communications Corp.* Adelphia is a cable television operator, with systems in suburban areas
of large- and medium-sized cities in the United States. Our holdings are
primarily in loans to Adelphia's Century Cable subsidiary that have
continued to pay interest through the bankruptcy proceedings. 1.4
------------------------------------------------------------------------------------------------------------------------------------
Liberty Media Corp. These convertible bonds are an obligation of Liberty Media, but upon
conversion are exchangeable into shares of media giant Time Warner
common stock. 1.4
------------------------------------------------------------------------------------------------------------------------------------
The AES Corp.* AES is a worldwide power producer with operations in the United States,
Europe, Latin America and Asia. Electricity generation and sales are
primarily to wholesale customers, although the company has a direct
distribution business to end users. 1.4
------------------------------------------------------------------------------------------------------------------------------------
Alpharma, Inc.* Alpharma manufactures generic and proprietary human pharmaceutical and
animal health products. Products include liquid and topical
pharmaceuticals, specialty antibiotics, animal health feed additives for
poultry and livestock, as well as vaccines for farmed fish. 1.3
------------------------------------------------------------------------------------------------------------------------------------
Time Warner Telecom* Time Warner Telecom offers local telephone service and a wide range of
telephony products to large- and medium-sized businesses in selected
metropolitan areas. The company operates a fiber optic network. 1.3
------------------------------------------------------------------------------------------------------------------------------------
Intelsat* Intelsat owns and operates a global communications satellite system that
offers satellite service for voice, data, video and Internet
communications to over 200 countries and territories. 1.3
------------------------------------------------------------------------------------------------------------------------------------
Charter Communications* Controlled by Microsoft co-founder Paul Allen, Charter is a provider of
cable television services throughout the United States. 1.3
------------------------------------------------------------------------------------------------------------------------------------
* Includes combined holdings and/or affiliates.
Portfolio Profile
Percent of
Five Largest Industries* Net Assets
--------------------------------------------------------------------------------
Utility .......................................................... 11.4%
Cable--U.S. ...................................................... 10.0
Chemicals ........................................................ 9.1
Health Care ...................................................... 7.4
Diversified Media ................................................ 7.1
--------------------------------------------------------------------------------
* For Fund compliance purposes, "Industries" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report which may
combine such industry sub-classifications for reporting ease.
--------------------------------------------------------------------------------
Quality Ratings by Percent of
S&P/Moody's Total Investments
--------------------------------------------------------------------------------
BBB/Baa .......................................................... 3.1%
BB/Ba ............................................................ 17.8
B/B .............................................................. 58.7
CCC/Caa .......................................................... 14.2
CC/Ca ............................................................ 0.4
NR (Not Rated) ................................................... 4.0
Other* ........................................................... 1.8
--------------------------------------------------------------------------------
* Includes portfolio holdings in common stocks, preferred stocks and
warrants.
Percent of
Five Largest Foreign Countries* Total Investments
--------------------------------------------------------------------------------
Canada ........................................................... 8.1%
Bermuda .......................................................... 2.2
Brazil ........................................................... 1.6
Norway ........................................................... 1.1
Luxembourg ....................................................... 0.8
--------------------------------------------------------------------------------
* All holdings are denominated in U.S. dollars.
--------------------------------------------------------------------------------
Average Portfolio Maturity 6.6 years
--------------------------------------------------------------------------------
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005 21
Officers and Directors
Robert C. Doll, Jr., President and Director
James H. Bodurtha, Director
Joe Grills, Director
Herbert I. London, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Stephen B. Swensrud, Director
Elizabeth M. Phillips, Vice President
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
EquiServe
P.O. Box 43010
Providence, RI 02940-3010
NYSE Symbol
HYT
--------------------------------------------------------------------------------
Andre F. Perold resigned as a Director of Corporate High Yield Fund VI, Inc.
effective October 22, 2004.
Effective January 1, 2005, Terry K. Glenn retired as President and Director of
the Fund. The Fund's Board of Directors wishes Mr. Glenn well in his retirement.
Effective January 1, 2005, Robert C. Doll, Jr. became President and Director of
the Fund.
--------------------------------------------------------------------------------
22 CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions. When you
visit this site, you will obtain a personal identification number (PIN). You
will need this PIN should you wish to update your e-mail address, choose to
discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
CORPORATE HIGH YIELD FUND VI, INC. FEBRUARY 28, 2005 23
[LOGO] Merrill Lynch Investment Managers
www.mlim.ml.com
--------------------------------------------------------------------------------
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
Corporate High Yield Fund VI, Inc. seeks to provide shareholders with current
income by investing primarily in a diversified portfolio of fixed income
securities that are rated in the lower rating categories of the established
rating services (Ba or lower by Moody's Investors Service, Inc. or BB or lower
by Standard & Poor's Corporation) or are unrated securities of comparable
quality.
This report, including the financial information herein, is transmitted to
shareholders of Corporate High Yield Fund VI, Inc. for their information. It is
not a prospectus. The Fund has leveraged its Common Stock to provide Common
Stock shareholders with a potentially higher rate of return. Leverage creates
risk for Common Stock shareholders, including the likelihood of greater
volatility of net asset value and market price of Common Stock shares, and the
risk that fluctuations in short-term interest rates may reduce the Common
Stock's yield. Past performance results shown in this report should not be
considered a representation of future performance. Statements and other
information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Corporate High Yield Fund VI, Inc.
Box 9011
Princeton, NJ
08543-9011
#COYVI -- 2/05
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this
semi-annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable to this semi-annual report
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Corporate High Yield Fund VI, Inc.
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Corporate High Yield Fund VI, Inc.
Date: April 22, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Corporate High Yield Fund VI, Inc.
Date: April 22, 2005
By: /s/ Donald C. Burke
-----------------------
Donald C. Burke,
Chief Financial Officer of
Corporate High Yield Fund VI, Inc.
Date: April 22, 2005