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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0001193125-03-051490.txt : 20030919
<SEC-HEADER>0001193125-03-051490.hdr.sgml : 20030919
<ACCEPTANCE-DATETIME>20030918193632
ACCESSION NUMBER:		0001193125-03-051490
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		6
FILED AS OF DATE:		20030919

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FLOATING RATE INCOME STRATEGIES FUND INC
		CENTRAL INDEX KEY:			0001259708

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-108051
		FILM NUMBER:		03901811

	BUSINESS ADDRESS:	
		STREET 1:		MERRILL LYNCH ASSET MANAGEMENT
		STREET 2:		800 SCUDDERS MILL ROAD
		CITY:			PLAINSBORO
		STATE:			NJ
		ZIP:			08536
		BUSINESS PHONE:		6092822000

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FLOATING RATE INCOME STRATEGIES FUND INC
		CENTRAL INDEX KEY:			0001259708

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-21413
		FILM NUMBER:		03901812

	BUSINESS ADDRESS:	
		STREET 1:		MERRILL LYNCH ASSET MANAGEMENT
		STREET 2:		800 SCUDDERS MILL ROAD
		CITY:			PLAINSBORO
		STATE:			NJ
		ZIP:			08536
		BUSINESS PHONE:		6092822000
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>dn2a.htm
<DESCRIPTION>FLOATING RATE INCOME STRATEGIES FUND INC.
<TEXT>
<HTML><HEAD>
<TITLE>Floating Rate Income Strategies Fund Inc.</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

  <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>As filed with the Securities and Exchange Commission on September 19, 2003 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>Securities Act File No. 333-108051 </B></FONT></P>   <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman"
SIZE="2"><B>Investment Company Act File No. 811-21413 </B></FONT></P> <HR SIZE="3" NOSHADE COLOR="#000000" ALIGN="left"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>SECURITIES AND EXCHANGE
COMMISSION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="3"><B>WASHINGTON, D.C. 20549 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P><HR
WIDTH="19%" SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>FORM N-2 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="80%" BORDER="0" ALIGN="center">

<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="97%"><FONT FACE="Times New Roman" SIZE="2"><B>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</B></FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2"><B><FONT FACE="WINGDINGS">&#120;</FONT><B></B></B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="97%"><FONT FACE="Times New Roman" SIZE="2"><B>Pre-Effective Amendment No. 1</B></FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2"><B><FONT FACE="WINGDINGS">&#120;</FONT><B></B></B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="97%"><FONT FACE="Times New Roman" SIZE="2"><B>Post-Effective Amendment No.</B></FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2"><B></B></FONT><FONT FACE="WINGDINGS" SIZE="2" COLOR="#000000"><B>&#168;</B></FONT><FONT FACE="Times New Roman" SIZE="2"><B><B></B></B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="97%"><FONT FACE="Times New Roman" SIZE="2"><B>and/or</B></FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="97%"><FONT FACE="Times New Roman" SIZE="2"><B>REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940</B></FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2"><B><FONT FACE="WINGDINGS">&#120;</FONT><B></B></B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="97%"><FONT FACE="Times New Roman" SIZE="2"><B>Amendment No. 1</B></FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2"><B><FONT FACE="WINGDINGS">&#120;</FONT><B></B></B></FONT></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="19%" SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>FLOATING RATE INCOME STRATEGIES FUND, INC. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Exact Name of Registrant as Specified in Charter) </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="19%" SIZE="1" NOSHADE COLOR="#000000">
<P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>800 Scudders Mill Road, Plainsboro, New Jersey 08536 </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Address of Principal Executive Offices) </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>(Registrant&#146;s Telephone Number, including Area Code): (609) 282-2800 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P><HR WIDTH="19%" SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><B>Terry K. Glenn </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Floating Rate Income Strategies Fund, Inc. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>800 Scudders Mill Road, Plainsboro, New Jersey 08536 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Mailing Address: P.O.
Box 9011, Princeton, New Jersey 08543-9011 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Name and Address of Agent for Service) </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="19%" SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><I>Copies to: </I></B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="32%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Bradley J. Lucido, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>FUND ASSET</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>MANAGEMENT, L.P.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>P.O. Box 9011</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Princeton, New Jersey 08543-9011</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="32%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Frank P. Bruno, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>SIDLEY AUSTIN</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>BROWN &amp; WOOD <SMALL>LLP</SMALL></B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>787 Seventh Avenue</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>New York, New York
10019-6018</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="32%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Leonard B. Mackey, Jr., Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>CLIFFORD CHANCE US <SMALL>LLP</SMALL></B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>200 Park Avenue</B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>New York, New York 10166-0153</B></FONT></P></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="19%" SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>Approximate date of proposed public offering:</B>&nbsp;&nbsp;&nbsp;&nbsp;As soon as practicable after the effective date
of this Registration Statement. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 &#147;Securities Act&#148;), other than securities offered in connection with dividend or interest
reinvestment plans, check the following box. <B></B>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT FACE="WINGDINGS" SIZE="2" COLOR="#000000">&#168;</FONT><FONT FACE="Times New Roman" SIZE="2"> </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P><HR WIDTH="19%" SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><B>CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P><HR SIZE="3" NOSHADE COLOR="#000000" ALIGN="left">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD VALIGN="bottom" WIDTH="38%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Title of</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="1"><B>Securities Being Registered</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="8%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Amount</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="1"><B>Being<BR>Registered(1)(2)</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="8%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Proposed<BR>Maximum<BR>Offering Price<BR>Per Unit(1)</B></FONT></TD>
<TD VALIGN="bottom" WIDTH="8%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Proposed<BR>Maximum<BR>Aggregate<BR>Offering&nbsp;Price(1)</B></FONT></TD>
<TD VALIGN="bottom" WIDTH="8%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Amount of<BR>Registration<BR>Fee(3)</B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom" COLSPAN="12"><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="38%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Common Stock ($.10 par value)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="8%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="13%"><FONT FACE="Times New Roman" SIZE="2">5,750,000&nbsp;shares</FONT></TD>
<TD VALIGN="bottom" WIDTH="8%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">20.00</FONT></TD>
<TD VALIGN="bottom" WIDTH="8%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="8%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">115,000,000</FONT></TD>
<TD VALIGN="bottom" WIDTH="8%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">9,304</FONT></TD></TR>
</TABLE> <HR SIZE="3" NOSHADE COLOR="#000000" ALIGN="left">
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(1)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Estimated solely for the purpose of calculating the registration fee. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(2)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Includes 750,000 shares subject to the underwriters&#146; overallotment option. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(3)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Transmitted prior to the filing date to the designated lockbox of the Securities and Exchange Commission at Mellon Bank in Pittsburgh, PA. $81 was previously paid, $9,223 was
transmitted in connection with this filing. </FONT></TD></TR></TABLE>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="19%" SIZE="1" NOSHADE COLOR="#000000"> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>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. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P><HR SIZE="3" NOSHADE COLOR="#000000" ALIGN="left">

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="ARIAL" SIZE="2" COLOR="#de1a1e"><B>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 is not soliciting an offer to buy these securities in any state where the offer or sale is not
permitted. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2" COLOR="#de1a1e"><B>Subject to Completion
&nbsp;<BR>Preliminary Prospectus dated September 19, 2003 </B></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><U>PROSPECTUS</U> </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="5"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="6"><B>Floating Rate Income Strategies Fund, Inc. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="4"><B>Common Stock </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="19%"
SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Floating Rate Income Strategies
Fund, Inc. is a newly organized, diversified, closed-end fund. The Fund&#146;s investment objective is to provide stockholders with high current income and such preservation of capital as is &nbsp;consistent with investment in a diversified,
leveraged portfolio consisting primarily of floating rate debt securities and instruments. Under normal market conditions and after the initial investment period of up to </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><I>(continued on following page) </I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>    <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:5%"><FONT FACE="Times New Roman" SIZE="3"><B>Investing in the Fund&#146;s common stock may be speculative and involves certain risks described in the &#147;Risk Factors and Special
Considerations&#148; section beginning on page 10 of this prospectus. </B></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="21%" SIZE="1" NOSHADE COLOR="#000000"> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="90%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="16%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Per Share</B></FONT><BR><HR WIDTH="50" SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="16%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Total (3)</B></FONT><BR><HR WIDTH="47" SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="62%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Public offering price</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="16%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">20.00</FONT></TD>
<TD VALIGN="bottom" WIDTH="16%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="62%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Underwriting discount (1)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="16%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">$.90</FONT></TD>
<TD VALIGN="bottom" WIDTH="16%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="62%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Proceeds, before expenses, to the Fund (2)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="16%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">19.10</FONT></TD>
<TD VALIGN="bottom" WIDTH="16%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
</TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(1)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">The Fund has agreed to pay the underwriters $.00667 per share of common stock as a partial reimbursement of expenses incurred in connection with the offering. See
&#147;Underwriting.&#148; </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(2)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;s investment adviser has agreed to pay all organizational expenses of the Fund. The investment adviser also agreed to pay the amount by which the offering costs of the
Fund (other than the underwriting discount, but including the $.00667 per share partial reimbursement of expenses to the underwriters) exceeds $.04 per share of common stock. The estimated offering expenses to be incurred by the Fund are
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(3)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">The underwriters may also purchase up to an additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares at the public offering price, less the
underwriting discount, within 45 days from the date of this prospectus to cover overallotments. If all such shares are purchased, the total public offering price will be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, the
total underwriting discount will be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and the total proceeds, before expenses, to the Fund will be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT></TD></TR></TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The shares will be ready for delivery on or about
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;, 2003. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="19%" SIZE="1"
NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="5"><B>Merrill Lynch &amp; Co. </B></FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; margin-left:10%"><FONT FACE="Times New Roman" SIZE="5"><B>Wachovia Securities </B></FONT></P>     <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:23%"><FONT FACE="Times New Roman"
SIZE="5"><B>McDonald Investments Inc. </B></FONT></P>   <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="5"><B>SunTrust Robinson Humphrey </B></FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="19%" SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">The date of this prospectus is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;, 2003. </FONT></P>

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<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><I>(continued from previous page) </I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">approximately six months following the completion of this offering, at least 80% of an aggregate of (i) the Fund&#146;s net assets
(including proceeds from the issuance of any preferred stock) and (ii) the proceeds of any outstanding borrowings for investment purposes, will be invested in floating rate debt securities and instruments. The Fund anticipates that a substantial
portion of such investments generally will consist of senior floating rate loans. The Fund may invest without limit and generally intends to invest a substantial portion of its assets in senior floating rate loans and other floating or fixed rate
debt securities and instruments that are rated below investment grade by the established rating services (Ba or lower by Moody&#146;s Investors Service, Inc. (&#147;Moody&#146;s&#148;) or BB or lower by Standard &amp; Poor&#146;s
(&#147;S&amp;P&#148;)) or, if unrated, are considered by the Fund&#146;s investment adviser to be of comparable quality. <B></B>The Fund may not, however, invest more than 10% of its total assets in securities and instruments that are rated Caa1 or
lower (if rated by Moody&#146;s) or CCC+ or lower (if rated by S&amp;P) by each agency rating such security or, if unrated, are considered by the Fund&#146;s investment adviser to be of comparable quality or are otherwise considered to be distressed
securities. Debt securities and instruments of below investment grade quality are regarded as having predominantly speculative characteristics with respect to capacity to pay interest and dividend income and to repay principal, and are commonly
referred to as &#147;high yield&#148; securities or &#147;junk bonds.&#148; There can be no assurance that the Fund&#146;s investment objective will be realized. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may leverage through borrowings, the issuance of debt securities, the issuance of preferred stock or a
combination thereof. The Fund currently intends to borrow money in an initial amount up to approximately 30% 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. Following the investment of the net proceeds of the offering, the Fund may, depending on market conditions and the relative costs and benefits associated with other types of leverage, choose to leverage through the issuance of preferred
stock rather than through borrowings or the Fund may choose to leverage through a combination of both. The use of leverage can create special risks. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 their net asset value. This is commonly referred to as &#147;trading at a discount.&#148; 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 of common stock on the New York Stock Exchange or another national securities exchange under the symbol &#147;FRA.&#148; </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">2 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>TABLE OF CONTENTS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Page</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Prospectus Summary</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">5</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Risk Factors and Special Considerations</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">10</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Fee Table</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">18</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">The Fund</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">19</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Use of Proceeds</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">19</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Investment Objective and Policies</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">20</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Other Investment Policies</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">33</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Investment Restrictions</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">50</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Directors and Officers</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">52</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Investment Advisory and Management Arrangements</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">58</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Portfolio Transactions</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">64</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Dividends and Distributions</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">67</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Taxes</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">68</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Automatic Dividend Reinvestment Plan</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">72</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Mutual Fund Investment Option</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">74</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Net Asset Value</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">74</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Description of Capital Stock</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">76</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Custodian</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">78</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Underwriting</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">79</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Transfer Agent, Dividend Disbursing Agent and Registrar</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">81</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Accounting Services Provider</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">81</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Legal Opinions</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">82</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Independent Auditors and Experts</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">82</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Additional Information</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">82</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Independent Auditors&#146; Report</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">83</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Statement of Assets and Liabilities</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">84</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="94%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Appendix A&#151;Ratings of Securities</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">A-1</FONT></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="21%" SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>Information about the Fund can be reviewed and copied at the SEC&#146;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&#146;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. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="21%" SIZE="1" NOSHADE COLOR="#000000"> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">3 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>PROSPECTUS SUMMARY </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>This summary is qualified in its entirety by reference to the detailed information included in this prospectus.
</I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD WIDTH="21%"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2"><B>The Fund </B></FONT></P></TD>
<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">Floating Rate Income Strategies Fund, Inc. is a newly organized, diversified, closed-end fund. </FONT></P></TD></TR></TABLE> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD WIDTH="21%"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2"><B>The Offering </B></FONT></P></TD>
<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">The Fund is offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock at an initial offering price
of $20.00 per share through a group of underwriters led by Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated. You must purchase at least 100 shares of common stock. The underwriters may purchase up to an additional
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock within 45 days from the date of this prospectus to cover overallotments, if any. </FONT></P></TD></TR></TABLE>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD WIDTH="21%"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2"><B>Investment Objective and Policies </B></FONT></P></TD>
<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;s investment objective is to provide stockholders with high current income and such preservation of capital as is consistent with
investment in a diversified, leveraged portfolio consisting primarily of floating rate debt securities and instruments. <B></B>The Fund seeks to achieve its objective by investing primarily in a diversified portfolio of floating rate debt securities
and instruments (&#147;floating rate debt securities&#148;). The Fund anticipates that a substantial portion of its investments in floating rate debt securities will consist of senior floating rate loans (&#147;senior loans&#148;) that are rated
below investment grade by the established rating services. Such senior loans may be either secured or unsecured. The Fund may also invest in investment grade securities. The Fund may invest in securities of any maturity, however, the Fund expects
that a majority of its senior loans will have stated maturities ranging from three to ten years. The Fund may invest without limit in illiquid securities. There can be no assurance that the Fund&#146;s investment objective will be realized.
</FONT></P></TD></TR></TABLE>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2"><I>Floating Rate Debt Securities.</I>&nbsp;&nbsp;&nbsp;&nbsp;Under normal market conditions and after the initial investment period of up to
approximately six months following the completion of this offering, at least 80% of an aggregate of (i) the Fund&#146;s net assets (including proceeds from the issuance of any preferred stock) and (ii) the proceeds of any outstanding borrowings for
investment purposes, will be invested in floating rate debt securities. Floating rate debt securities include floating or variable rate securities that pay interest at rates that adjust whenever a specified interest rate changes and/or which reset
on predetermined dates (such as the last day of a month or calendar quarter). Interest rates on floating rate loans generally float daily or adjust periodically at a margin above a generally recognized base lending rate such as the prime rate of a
designated U.S. bank, the Certificate of Deposit rate or the London InterBank Offered Rate (&#147;LIBOR&#148;).<I> </I></FONT></P></TD></TR></TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2"><I>Senior Loans.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund anticipates that a substantial portion of its investments in floating rate debt securities
will consist of senior loans. The Fund intends to invest in senior loans issued either directly by the borrower or in the form of participation or assignment interests purchased from banks and other financial institutions and institutional
investors. Senior loans are typically direct obligations of a borrower undertaken to finance the growth of the borrower&#146;s business or a capital restructuring. Such senior loans may be either secured or unsecured. A significant portion of such
senior loans are highly leveraged loans such as leveraged buy-out loans, leveraged recapitalization loans and other types of acquisition loans. Senior loans are normally accessible only to financial institutions and large corporate and institutional
investors and are not widely available to individual investors. </FONT></P></TD></TR></TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2"><I>High Yield Securities.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund may invest without limit and generally intends to invest a substantial portion of
its assets in below investment grade, high yield securities, including senior loans and other floating or fixed rate debt securities that are rated below investment grade by the established rating services (Ba or lower by Moody&#146;s Investors
Service, Inc. (&#147;Moody&#146;s&#148;) or BB or lower by Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;)) or, if unrated, are considered by the Investment Adviser to be of comparable quality. The Fund may not, however, invest more than 10% of its
total assets in securities that are rated Caa1 or lower (if rated by Moody&#146;s) or CCC+ or lower (if rated by S&amp;P) by each agency rating such security or, if unrated, are considered by the Investment Adviser to be of comparable quality or are
otherwise considered to be distressed securities. The Fund considers distressed securities to be high yield securities that are the subject of bankruptcy proceedings or otherwise in default as to the repayment of principal or interest at the time of
acquisition by the Fund or are rated in the lowest rating categories (Ca or lower by Moody&#146;s or CC or lower by S&amp;P) or, if unrated, are considered by the Investment Adviser to be of comparable quality (&#147;Distressed Securities&#148;).
High yield securities are generally regarded as having predominantly speculative characteristics with respect to capacity to pay interest and to repay principal and involve greater volatility of price than securities in the higher rating categories.
High yield bonds are commonly referred to as &#147;junk bonds.&#148; The Fund may also invest in investment grade securities. </FONT></P></TD></TR></TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2"><I>Credit Quality.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Investment Adviser performs its own analysis of the credit quality and risks associated with
individual debt securities considered as investments for the Fund, rather than relying exclusively on rating agencies or third-party research. In evaluating senior loans and other debt securities, the Investment Adviser analyzes and takes into
account the legal/protective features associated with the securities (such as their position in the borrower&#146;s capital structure and any security through collateral) in assessing their credit characteristics. </FONT></P></TD></TR></TABLE> <P
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<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2"><I>Other Investments.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund may invest up to 20% of its total assets in securities other than floating rate debt
securities, including, but not limited to, fixed rate debt securities such as convertible securities, bonds, notes, fixed rate loans and mortgage related and other asset backed securities issued on a public or private basis, collateralized debt
obligations, preferred securities, commercial paper, U.S. government securities, structured notes, credit linked notes, credit linked trust certificates and other hybrid instruments.<B></B> </FONT></P></TD></TR></TABLE>  <P
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<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">To a limited extent, incidental to and in connection with its investment activities or pursuant to a convertible feature in a security, the Fund
also may acquire warrants and other debt and equity securities. The Fund may also acquire other debt and equity securities of a borrower or issuer in connection with an amendment, waiver, conversion or exchange of a senior loan or other debt
security or in connection with a bankruptcy or workout of a borrower or issuer. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2"><I>Foreign Investments.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund may invest without limitation in debt securities of issuers domiciled outside the
United States. The Fund will not, however, invest more than 10% of its total assets in debt securities of issuers located in emerging market countries. The Fund will invest primarily in U.S. dollar-denominated debt securities. The Fund will not
invest more than 10% of its total assets in debt securities denominated in currencies other than the U.S. dollar or that do not provide for payment to the Fund in U.S. dollars. </FONT></P></TD></TR></TABLE>  <P
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<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2"><I>Portfolio Strategies.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund may use a variety of portfolio strategies both to seek to increase the return of the
Fund and to seek 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, interest rate transactions
(including interest rate swaps), credit default swaps, total return swaps, options, futures, options on futures, short sales and foreign exchange transactions. </FONT></P></TD></TR></TABLE>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P>
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<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;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&#146;s hedging activities
depends on the Investment Adviser&#146;s ability to forecast movements in securities prices and interest rates. The strategies the Fund uses to seek 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 enhance income or hedge its portfolio and may choose not to do so. The Fund cannot guarantee that any strategies it uses will work. </FONT></P></TD></TR></TABLE> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD WIDTH="21%"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2"><B>Use of Leverage by the Fund </B></FONT></P></TD>
<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">The Fund may leverage through borrowings, the issuance of debt securities, the issuance of shares of preferred stock or a combination thereof. The
Fund may </FONT>
</P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD ALIGN="left" VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:0%">
<FONT FACE="Times New Roman" SIZE="2">borrow money and issue debt securities in amounts up to 33<FONT SIZE="1"><SUP>&nbsp;1</SUP></FONT><FONT SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT
FACE="Times New Roman" SIZE="2" COLOR="#000000">%, 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 money in an initial amount up
to approximately <B></B><B></B>30% 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 Fund anticipates that it will take up to approximately six
months to invest the net proceeds of the offering. Following the investment of the net proceeds of the offering, the Fund may, depending on market conditions and the relative costs and benefits associated with other types of leverage, choose to
leverage through the issuance of preferred stock rather than through borrowings or the Fund may choose to leverage through a combination of both. 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 an aggregate of (i) the Fund&#146;s net assets (including proceeds from the issuance of any preferred stock) and (ii) the proceeds of any outstanding borrowings used for leverage.
</FONT></FONT></P></TD></TR></TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD WIDTH="21%"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2"><B>Listing </B></FONT></P></TD>
<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">Currently, there is no public market for the Fund&#146;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 &#147;FRA.&#148; </FONT></P></TD></TR></TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD WIDTH="21%"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2"><B>Investment Adviser </B></FONT></P></TD>
<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">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 <B></B><B></B>0.75% of an aggregate of (i) the Fund&#146;s average daily net assets (including proceeds from the issuance of any preferred stock) and (ii) the proceeds of any
outstanding borrowings used for leverage. </FONT></P></TD></TR></TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD WIDTH="21%"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2"><B>Dividends and Distributions </B></FONT></P></TD>
<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">The Fund intends to distribute dividends from its net investment income monthly, 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. Currently, in order to maintain a more stable level of monthly dividend distributions, the Fund intends to pay out less than all of its net investment
income or pay out accumulated undistributed income in addition to current net investment income. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD WIDTH="21%"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2"><B>Yield Considerations </B></FONT></P></TD>
<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">The yield on the Fund&#146;s common stock will vary from period to period depending on factors including, but not limited to, the length of the
initial investment period, market conditions, the timing of the Fund&#146;s investment in portfolio securities, the securities comprising the Fund&#146;s portfolio, the ability of the issuers or borrowers of the portfolio securities to pay dividends
or interest 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 borrowings and the issuance of the Fund&#146;s preferred stock or debt
securities, the effects of leverage on the common stock discussed above under &#147;&#151;Use of Leverage by the Fund,&#148; the timing of the investment of leverage proceeds in portfolio securities, the Fund&#146;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&#146;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 an estimated yield are based on certain assumptions and conditions and
are as of the date made, and no guarantee can be given that the Fund will achieve or maintain any particular yield level. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD WIDTH="21%"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2"><B>Automatic Dividend Reinvestment Plan </B></FONT></P></TD>
<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">Dividend and capital gains distributions generally are used to purchase additional shares of the Fund&#146;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.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD WIDTH="21%"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2"><B>Mutual Fund Investment Option </B></FONT></P></TD>
<TD> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5%"><FONT FACE="Times New Roman" SIZE="2">Investors who purchase shares in 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 at net asset value, without the imposition of the initial sales charge, with the proceeds from such sale. </FONT></P></TD></TR></TABLE> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">9 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>RISK FACTORS AND SPECIAL CONSIDERATIONS </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>An investment in the Fund&#146;s common stock may be speculative in that
it involves a high degree of risk and should not constitute a complete investment program. </I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><I>Liquidity and Market Price of Shares</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Fund is newly organized and has no operating history or history of public trading. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Shares of closed-end funds 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 &#147;trading at a discount.&#148; The risk may be greater for investors expecting to sell their shares in a relatively short period after completion of the public offering. 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.
</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Issuer Risk; Market Risk; and Selection
Risk</I>.&nbsp;&nbsp;&nbsp;&nbsp;The value of floating rate and other debt securities may decline for a number of reasons which directly relate to the issuer or borrower, such as a real or perceived management performance, financial leverage and
reduced demand for the issuer&#146;s or borrower&#146;s goods and services. Market risk is the risk that the market will go down in value, including the possibility that the market will go down sharply and unpredictably. Selection risk is the risk
that the securities that Fund management selects will underperform the relevant market indices or other funds with a similar investment objective and investment strategies. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Net Asset Value; Interest Rate Sensitivity; Credit Quality; and Other Market
Conditions</I>.&nbsp;&nbsp;&nbsp;&nbsp;Generally, when interest rates go up, the value of fixed rate debt securities goes down. Therefore, the net asset value of a fund that invests primarily in fixed rate securities changes in response to interest
rate fluctuations. Because the Fund invests primarily in floating rate debt securities, the Investment Adviser generally expects that the Fund will have less interest rate risk (<I>i.e.</I>, sensitivity to fluctuations in market interest rate) and
fluctuations in net asset value as a result of movements in interest rates than a fund that invests primarily in fixed rate securities. However, because floating rate debt securities may only reset periodically, the Fund&#146;s net asset value may
fluctuate from time to time due to interest rate movements when there is an imperfect correlation between the interest rates on the floating rate debt securities in the Fund&#146;s portfolio and prevailing interest rates. A real or perceived decline
in the credit quality or financial condition of an issuer or borrower in which the Fund invests may result in the value of the floating rate debt securities held by the Fund, the Fund&#146;s net asset value and potentially the market price of the
Fund&#146;s common stock, going down. A real or perceived serious deterioration in the credit quality or financial condition of an issuer or borrower could cause a permanent decrease in the Fund&#146;s net asset value. Furthermore, volatility in the
capital markets and other adverse market conditions may result in a decrease in the value of floating rate debt securities held by the Fund. Given that the Fund uses market prices to value many of its floating rate debt securities, any decrease in
the market value of the floating rate debt securities held by the Fund will result in a decrease in the Fund&#146;s net asset value and potentially the market price of the Fund&#146;s common stock. Moreover, up to 20% of the Fund&#146;s total assets
may be invested in debt securities with fixed rates of </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">interest, which generally will lose value in direct response to rising interest rates. The Fund&#146;s use of leverage, as described below under
&#147;&#151;Leverage,&#148; will tend to increase interest rate risk to the Fund&#146;s common stock. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Non-Payment.</I>&nbsp;&nbsp;&nbsp;&nbsp;The debt securities in which the Fund invests are subject to the risk of non-payment of interest and principal.
When a borrower or issuer fails to make scheduled interest or principal payments on a debt security, the value of the security, and hence the Fund&#146;s net asset value, and potentially the value of the Fund&#146;s shares of common stock, may go
down. While a senior position in the capital structure of a borrower may provide some protection with respect to the Fund&#146;s investments in senior loans, losses may still occur. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The senior loans in which the Fund invests can be expected to provide higher yields than certain investment grade
securities, but such loans may be subject to greater risk of loss of principal and income resulting from non-payment of interest and principal by the borrower. Senior loan obligations are frequently secured by pledges of liens and security interests
in the assets of the borrower, and the holders of senior loans are frequently the beneficiaries of debt service subordination provisions imposed on the borrower&#146;s bondholders. Such security and subordination arrangements are designed to give
senior loan investors preferential treatment over high yield bond investors in the event of a deterioration in the credit quality or default of the issuer. Even when these arrangements exist, however, there can be no assurance that the principal and
interest owed on the senior loan will be repaid in full or in a timely manner. When a borrower fails to make scheduled interest or principal payments on a debt security, the value of the instrument, and hence the Fund&#146;s net asset value, and
potentially the value of the Fund&#146;s shares of common stock, may go down. While collateral may provide some protection against devaluation due to a default on a collateralized loan, losses may not be completely covered by the liquidation or sale
of collateral. To the extent the senior loan is secured by stock of the borrower and/or its subsidiaries and affiliates, such stock may lose all of its value in the event of a bankruptcy or insolvency of the borrower. The Fund may invest in either
secured or unsecured senior loans. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Senior 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 periodically, typically 30 to 90 days
but generally not more than one year, in the case of LIBOR. Consequently, the value of senior loans held by the Fund may generally be expected to fluctuate less than the value of certain fixed rate securities as a result of changes in the interest
rate environment. On the other hand, the secondary dealer market for certain senior loans may not be as well developed as the secondary dealer market for certain fixed rate securities, including high yield bonds, and therefore present increased
market risk relating to liquidity and pricing concerns. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">The Fund has no minimum credit rating for the senior loans in which it invests. Investments rated below investment grade or, if unrated, are considered by the Investment Advisor to be of similar credit quality, have a higher risk of
non-payment than investment grade investments. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Senior loans
made in connection with highly leveraged transactions are subject to greater risks than other senior loans. For example, the risks of default or bankruptcy of the borrower or the risks that other creditors of the borrower may seek to nullify or
subordinate the Fund&#146;s claims on any collateral securing the loan are greater in highly leveraged transactions. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">11 </FONT></P>


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  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>High Yield Securities.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund may invest without limit and generally
intends to invest a substantial portion of its assets in below investment grade, high yield securities, including senior loans and other floating and fixed rate debt securities. The Fund may not, however, invest more than 10% of its total assets in
securities that are rated Caa1 or lower (if rated by Moody&#146;s) or CCC+ or lower (if rated by S&amp;P) by each agency rating such security or, if unrated, are considered by the Investment Adviser to be of comparable quality or are otherwise
considered to be Distressed Securities. Investments in high yield 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 debt 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&#146;s ability to service its debt obligations or make dividend payments may be adversely affected by business
developments unique to the issuer, the issuer&#146;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 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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">High yield securities also tend to be more sensitive to economic conditions than investment grade securities. The financial condition of a high yield issuer or borrower 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 or borrowers to become unable to make principal payments and interest or dividend payments during such time
periods. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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&#146;s net asset value. The combination of price volatility and the limited liquidity of high yield securities, and in particular senior loans, may have an adverse effect on the Fund&#146;s investment
performance. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;s net asset value, and potentially the market price of the Fund&#146;s shares of common stock. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">12 </FONT></P>


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  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;s net asset value, and potentially the market price of the Fund&#146;s shares of common
stock, will decrease. In addition, the Fund may incur additional expenses if it is forced to seek recovery upon a default or restructuring of a portfolio holding. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">High yield bonds (commonly referred to as &#147;junk&#148; 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Distressed Securities.</I>&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Intermediary Risk.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund may invest in senior loans either by participating as a co-lender at the time the loan is
originated or by buying a participation or assignment interest in the loan in the secondary market from a financial institution or an institutional investor. The financial status of the institutions interposed between the Fund and a borrower may
affect the ability of the Fund to receive principal and interest payments. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>    <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><I>Regulatory Changes</I>.&nbsp;&nbsp;&nbsp;&nbsp;To the extent that legislation or state or federal bank or other regulators impose additional requirements or restrictions on the ability of certain financial
institutions to make loans, particularly in connection with highly leveraged transactions, the availability of senior loans and other related investments sought after by the Fund may be reduced. Further, such legislation or regulation could depress
the market value of senior loans and other debt securities held by the Fund. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><I>Foreign Securities</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Fund may invest without limitation in debt securities of issuers domiciled outside the United States. The Fund will not, however, invest more than 10% of its total
assets in debt securities of issuers located in emerging market countries. The Fund will invest primarily in U.S. dollar-denominated securities. The Fund will not invest more than 10% of its total debt securities denominated in currencies other than
U.S. dollar or that do not provide for payment to the Fund in U.S. dollars. Investments in non-U.S. debt 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. In connection with the Fund&#146;s investments in foreign securities, the Fund may engage in foreign
exchange transactions to hedge the value of the Fund&#146;s portfolio against adverse currency movements. The Fund is not required to enter into foreign exchange transactions for hedging purposes and may choose not to do so. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">13 </FONT></P>


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  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Emerging Market Countries Risk.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund may invest up to 10% of its
total assets in debt securities of issuers located in emerging market countries. Investing in securities of issuers based in underdeveloped emerging market countries entails all of the risks of investing in securities of foreign issuers to a
heightened degree. These heightened risks include: (i) greater risks of expropriation, confiscatory taxation, nationalization, and less social, political and economic stability; (ii) the smaller size of the market for such securities and a lower
volume of trading, resulting in lack of liquidity and in price volatility; (iii) certain national policies which may restrict the Fund&#146;s investment opportunities, including restrictions on investing in issuers or industries deemed sensitive to
relevant national interests; and (iv) the limited legal rights and remedies available to holders following a default by the issuer. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Mortgage and Asset Backed Securities</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Fund may invest in a variety of mortgage related and other asset backed
securities, including both commercial and residential mortgage securities and other mortgage backed instruments issued on a public or private basis. Mortgage backed securities represent the right to receive a portion of principal and/or interest
payments made on a pool of residential or commercial mortgage loans. When interest rates fall, borrowers may refinance or otherwise repay principal on their mortgages earlier than scheduled. When this happens, certain types of mortgage backed
securities will be paid off more quickly than originally anticipated and the Fund will have to invest the proceeds in securities with lower yields. This risk is known as &#147;prepayment risk.&#148; When interest rates rise, certain types of
mortgage backed securities will be paid off more slowly than originally anticipated and the value of these securities will fall. This risk is known as &#147;extension risk.&#148; </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Because of prepayment risk and extension risk, mortgage backed securities react differently to changes in interest rates
than other fixed income securities. Small movements in interest rates (both increases and decreases) may quickly and significantly reduce the value of certain mortgage backed securities. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Like more traditional fixed income securities, the value of asset backed
securities typically increases when interest rates fall and decreases when interest rates rise. Certain asset backed securities may also be subject to the risk of prepayment. In a period of declining interest rates, borrowers may pay what they owe
on the underlying assets more quickly than anticipated. Prepayment reduces the yield to maturity and the average life of the asset backed securities. In addition, when the Fund reinvests the proceeds of a prepayment it may receive a lower interest
rate than the rate on the security that was prepaid. In a period of rising interest rates, prepayments may occur at a slower rate than expected. As a result, the average maturity of the Fund&#146;s portfolio will increase. The value of longer term
securities generally changes more widely in response to changes in interest rates than shorter term securities. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Leverage.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund may leverage through borrowings, the issuance of debt securities, the issuance of shares of preferred
stock or a combination thereof. The Fund may borrow money and issue debt securities in amounts up to 33<FONT SIZE="1"><SUP>&nbsp;1</SUP></FONT><FONT SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT FACE="Times New Roman" SIZE="2" COLOR="#000000">%, 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 money in an initial amount up to approximately 30% 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. Following the investment of the net proceeds of the offering, the Fund may, depending on market conditions and the relative costs and
benefits associated with other types of leverage, choose to leverage through the issuance of preferred stock rather than through borrowings or the Fund </FONT></FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">14 </FONT></P>


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  <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">may choose to leverage through a combination of both. It is currently anticipated that it will take up to approximately six months to invest the net proceeds
of the offering. However, leverage involves risks, which can be significant. These risks include greater volatility in the Fund&#146;s net asset value, fluctuations in the dividend paid by the Fund and the market price of the Fund&#146;s common
stock, the possibility that the value of the assets acquired with such borrowing will decrease although the Fund&#146;s liability is fixed and increased operating costs which may reduce the Fund&#146;s total return. To the extent the total return
derived from securities purchased with funds received from leverage exceeds the cost of leverage, the Fund&#146;s return will be greater than if leverage had not been used. Conversely, if the total return derived from 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.
</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Portfolio
Strategies</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Fund may engage in various portfolio strategies both to seek to increase the return of the Fund and to seek 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, interest rate swaps, total return swaps,
short sales and foreign exchange transactions. 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&#146;s performance could suffer.
Certain of these strategies such as inverse securities, credit default swaps, interest rate swaps, total return swaps and short sales may provide investment leverage to the Fund&#146;s portfolio and result in many of the same risks of leverage to
the holders of the Fund&#146;s common stock as discussed above under &#147;&#151;Leverage.&#148; The Fund is not required to use derivatives or other portfolio strategies to enhance income or to hedge its portfolio and may choose not to do so. There
can be no assurance that the Fund&#146;s portfolio strategies will be effective. Some of the derivative strategies that the Fund may use to enhance its return are riskier than its hedging transactions and have speculative characteristics. Such
strategies do not attempt to limit the Fund&#146;s risk of loss. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2"><I>Derivatives Risk</I>.&nbsp;&nbsp;&nbsp;&nbsp;Derivatives are financial contracts or instruments whose value depends on, or is derived from, the value of an underlying asset, reference rate or index (or relationship between two indexes).
The Fund may invest in a variety of derivative instruments for hedging purposes or to seek to enhance its return, such as options, futures contracts and swap agreements, and may engage in short sales. The Fund may also have exposure to derivatives
through investment in credit linked notes, credit linked trust certificates and other securities issued by special purpose or structured vehicles. The Fund may use derivatives as a substitute for taking a position in an underlying security or other
asset, as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. The Fund also may use derivatives to add leverage to the portfolio. The Fund&#146;s use of derivative instruments involves risks different from, and
possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of risks, such as liquidity risk, interest rate risk, credit risk, leverage risk, the risk of
ambiguous documentation and management risk. They also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. If the Fund
invests in a derivative instrument it could lose more than the principal amount invested. The use of derivatives also may increase the amount of taxes payable by stockholders. Also, suitable derivative transactions may not be available in all
circumstances and there can be no assurance that the Fund will engage in these transactions to reduce exposure to other risks when that would be beneficial. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">15 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Options and Futures Transactions</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Fund may engage in options and
futures transactions to reduce its exposure to interest rate movements or to enhance its return. If the Fund incorrectly forecasts market values, interest rates or other factors, the Fund&#146;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 enhance its return and may choose not to do so. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Swaps</I>.&nbsp;&nbsp;&nbsp;&nbsp;In order to seek to hedge the value
of the Fund&#146;s portfolio, or to seek to enhance the Fund&#146;s return, the Fund may enter into interest rate, credit default or total return swap transactions. In interest rate 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. In addition to the risks applicable to swaps generally,
credit default swap transactions involve special risks because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default
by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty). Total return swap transactions involve the risks that the counterparty will default on its payment obligation to the Fund in
the transaction and that the Fund will not be able to meet its obligation to the counterparty in the transaction. The Fund is not required to enter into interest rate, credit default or total return swap transactions for hedging purposes or to
enhance its return and may choose not to do so. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Short
Sales</I>.&nbsp;&nbsp;&nbsp;&nbsp;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 collateral to the broker dealer through which it made the short sale to cover its obligation to deliver the security upon conclusion of the sale. The Fund&#146;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 will also be required to segregate 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 (&#147;against the box&#148;)
by selling a security that the Fund owns or has the right to acquire without the payment of further consideration. The Fund&#146;s potential for loss is greater if it does not own the security that it is short selling. </FONT></P>   <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The success of the Fund depends, to a great degree, on the skill with which
an agent bank administers the terms of the senior loan agreements, monitors borrower compliance with covenants, collects principal, interest and fee payments from borrowers and, where necessary, enforces creditor remedies against borrowers. Agent
banks typically have broad discretion in enforcing senior loan agreements. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><I>Liquidity of Investments.</I>&nbsp;&nbsp;&nbsp;&nbsp;Certain debt securities, including in particular senior loans, 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 investments. As a result, the Fund may be forced to sell these investments at less than fair market value or may not be able to
</FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">16 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">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 investments. </FONT></P>     <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><I>Reinvestment Risk.</I>&nbsp;&nbsp;&nbsp;&nbsp;Reinvestment risk is the risk that income from the Fund&#146;s portfolio will decline if and when the Fund invests the proceeds from matured, traded, or called
securities at market interest or dividend rates that are below the portfolio&#146;s current earnings rate. A decline in income could affect the market price or the overall returns on the Fund&#146;s common stock. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Inflation Risk.</I>&nbsp;&nbsp;&nbsp;&nbsp;Inflation risk is the risk that
the value of assets or income from the Fund&#146;s investment will be worth less in the future as inflation decreases the value of money. As inflation increases, the real, or inflation adjusted, value of the Fund&#146;s common stock and
distributions can decline and the interest payments on Fund borrowings, if any, may increase or the value of dividend payments on the Fund&#146;s preferred stock, if any, may decline. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Dividend Risk.</I>&nbsp;&nbsp;&nbsp;&nbsp;Because most of the debt securities held by the Fund will have floating or
variable interest rates, the amounts of the Fund&#146;s monthly distributions to its stockholders are expected to vary with fluctuations in market interest rates. Generally, when market interest rates fall, the amount of the distributions to
stockholders will likewise decrease. </FONT></P>   <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Market
Disruption</I>.&nbsp;&nbsp;&nbsp;&nbsp;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 U.S. military actions in Iraq, 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&#146;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. </FONT></P>   <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><I>Antitakeover Provisions</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Fund&#146;s Charter, 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">17 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>FEE TABLE </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="93%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Stockholder Transaction Fees:</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="93%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Maximum Sales Load (as a percentage of offering price)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">4.50</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="93%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Offering Expenses Borne by the Fund (as a percentage of offering price)(a)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">0.16</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="93%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Dividend Reinvestment Plan Fees</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="93%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Annual Expenses</B> (as a percentage of net assets attributable to common stock):</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="93%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Investment Advisory Fee(b)(c)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">1.07</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="93%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Interest Payments on Borrowed Funds(c)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">0.67</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="93%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Other Expenses(c)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">0.17</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><HR WIDTH="0" SIZE="1" NOSHADE ALIGN="left" COLOR="#ffffff"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="93%"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Total Annual Expenses(c)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">1.91</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><HR SIZE="3" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><HR WIDTH="0" SIZE="3" NOSHADE ALIGN="left" COLOR="#ffffff"></TD></TR>
</TABLE> <HR WIDTH="10%" SIZE="1" NOSHADE COLOR="#000000" ALIGN="left">
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(a)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">The Investment Adviser has agreed to pay all of the Fund&#146;s organizational expenses. Offering costs will be paid by the Fund up to $.04 per share. The Investment Adviser has
agreed to pay the amount by which the offering costs (other than the sales load, but including the $.00667 per share partial reimbursement of expenses to the underwriters) exceeds $.04 per share of common stock (0.20% of the offering price). 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. </FONT></TD></TR></TABLE>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(b)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">See &#147;Investment Advisory and Management Arrangements&#148;&#151;page 58. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(c)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Assumes leverage by borrowing in an amount equal to approximately 30% of the Fund&#146;s total assets (including the amount obtained from leverage) at an interest rate of 1.57%. The
Fund may borrow money and issue debt securities in amounts up to 33<FONT SIZE="1"><SUP>&nbsp;1</SUP></FONT><FONT SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT FACE="Times New Roman" SIZE="2" COLOR="#000000">%, and may issue shares of preferred stock
in amounts up to 50%, of the value of its total assets to finance additional investments. 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
0.75%, Interest Payments on Borrowed Funds would be 0.00%, Other Expenses would be 0.17% and Total Annual Expenses would be 0.92%. See &#147;Risk Factors and Special Considerations&#151;Leverage&#148; and &#147;Other Investment
Policies&#151;Leverage.&#148; </FONT></FONT></TD></TR></TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR>
<TD VALIGN="bottom" WIDTH="65%"><FONT FACE="Times New Roman" SIZE="2"><B>EXAMPLE:</B></FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>1&nbsp;Year</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>3&nbsp;Years</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>5&nbsp;Years</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>10&nbsp;Years</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="65%"> <P STYLE="margin-left:2.00em"><FONT FACE="Times New Roman" SIZE="2">An investor would pay the following expenses (including the sales load of $45 and estimated offering expenses of this offering of $1.60) on a $1,000
investment, assuming total annual expenses of 1.91% (assuming leverage of 30% of the Fund&#146;s total assets) and a 5% annual return throughout the periods</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">65</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">104</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">145</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">259</FONT></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 &#147;Other Expenses&#148; are based on estimated amounts through the end of the
Fund&#146;s first fiscal year and assumes that the Fund issues approximately 12,500,000 shares of common stock. If the Fund issues fewer shares of common stock, all other things being equal, these expenses would increase. 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 &#147;Commission&#148;) regulations. <B>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. </B></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">18 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>THE FUND </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Floating Rate Income Strategies Fund, Inc. (the &#147;Fund&#148;) is a newly organized, diversified, closed-end management investment company. The Fund
was incorporated under the laws of the State of Maryland on August 14, 2003, and has registered under the Investment Company Act of 1940, as amended (the &#147;1940 Act&#148;). The Fund&#146;s principal office is located at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536, and its telephone number is (609) 282-2800. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;s Investment Adviser with a similar investment objective 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 &#147;Description of Capital Stock&#151;Certain Provisions of the Charter and By-laws.&#148; </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>USE OF PROCEEDS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The net proceeds of this offering will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (or approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; assuming the underwriters exercise the overallotment option in full) after payment of offering costs estimated to be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and the deduction of the underwriting discount. The Investment Adviser has agreed to pay the amount by which the offering costs (other than the underwriting discount, but
including the $.00667 per share partial reimbursement of expenses to the underwriters) exceeds $.04 per share of common stock. The Investment Adviser has agreed to pay all of the Fund&#146;s organizational expenses. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Due to current scarcity of available securities in the high yield
markets, and in particular the senior loan market, investments that in the judgment of the Investment Adviser are appropriate investments for the Fund may not be immediately available. The Fund expects that there will be an initial investment period
of up to approximately six months following the completion of its common stock offering, depending on market conditions and the availability of appropriate securities, before it is invested in accordance with its investment objective and policies.
Pending such investment, it is anticipated that all or a portion of the proceeds will be invested in high grade, short term debt securities (both fixed and floating rate), money market funds, credit linked notes, credit linked trust certificates
and/or index futures contracts or similar derivative instruments designed to give the Fund exposure to the markets in which it intends to invest while the Investment Adviser selects specific securities. A relatively long initial investment period
may negatively impact the yield on the Fund&#146;s common stock and the return to stockholders. See &#147;Investment Objective and Policies.&#148; </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">19 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>INVESTMENT OBJECTIVE AND POLICIES </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;s investment objective is to provide stockholders with high current income and such preservation of
capital as is consistent with investment in a diversified, leveraged portfolio consisting primarily of floating rate debt securities and instruments. The Fund&#146;s investment objective of high current income and preservation of capital is a
fundamental policy 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). <B></B>There can be no assurance that the Fund&#146;s investment objective will be
realized.<B></B> </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund seeks to achieve its
objective by investing primarily in floating rate debt securities and instruments (&#147;floating rate debt securities&#148;). Floating rate debt securities include floating or variable rate debt securities that pay interest at rates that adjust
whenever a specified interest rate changes and/or which reset on predetermined dates (such as the last day of a month or calendar quarter). The Fund anticipates that a substantial portion of its investments in floating rate debt securities will
consist of senior floating rate loans (&#147;senior loans&#148;) that are rated below investment grade by the established rating services. Such senior loans may be either secured or unsecured. The secured loans may be either fully or partially
secured at the time of investment. The Fund may invest without limit in illiquid securities. The Fund may also invest in investment grade securities. The Fund may invest in securities of any maturity. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Under normal market conditions and after the initial investment period of
up to approximately six months following the completion of this offering, the Fund will invest at least 80% of an aggregate of (i) the Fund&#146;s net assets (including proceeds from the issuance of any preferred stock) and (ii) the proceeds of any
outstanding borrowings for investment purposes, in floating rate debt securities. 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&#146; prior
notice of any change as required by the rules under the 1940 Act. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">The Fund may invest up to 20% of its total assets in securities other than floating rate debt securities, including, but not limited to, fixed rate debt securities such as convertible securities, bonds, notes, fixed
rate loans and mortgage related and other asset backed securities issued on a public or private basis, collateralized debt obligations, preferred securities, commercial paper, U.S. government securities, structured notes, credit linked notes, credit
linked trust certificates and other hybrid instruments. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">The Fund may invest without limit and generally intends to invest a substantial portion of its assets in high yield securities, including senior loans and other floating and fixed rate debt securities that are rated below investment grade
by the established rating services (Ba or lower by Moody&#146;s Investors Service, Inc. (&#147;Moody&#146;s&#148;) or BB or lower by Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;)) or, if unrated, are considered by the Investment Adviser to be of
comparable quality. Such securities are regarded as having predominantly speculative characteristics with respect to capacity to pay interest and to repay principal and are commonly referred to as &#147;high yield&#148; securities or &#147;junk
bonds.&#148; The Fund may not, however, invest more than 10% of its total assets in securities that are rated Caa1 or lower (if rated by Moody&#146;s) or CCC+ or lower (if rated by S&amp;P) by each agency rating such security or, if unrated, are
considered by the Investment Adviser to be of comparable quality or are otherwise considered to be distressed securities (&#147;Distressed Securities&#148;), as discussed below. Securities rated Ba or lower by Moody&#146;s, BB or lower by S&amp;P
and comparable unrated securities involve substantial risk of loss, are considered speculative with respect to the issuer&#146;s ability to pay interest and any required redemption or principal payments and are </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">susceptible to default or decline in market value due to adverse economic and business developments. Securities rated in the lowest rating categories (Ca or
lower by Moody&#146;s or CC or lower by S&amp;P) are regarded as having the highest degree of speculative characteristics and are often in default and can be regarded as having extremely poor prospects of ever attaining any real investment standing.
The descriptions of the investment rating categories by Moody&#146;s and S&amp;P, including a description of their speculative characteristics, are set forth in Appendix A. All references to securities ratings by Moody&#146;s and S&amp;P in this
prospectus shall, unless otherwise indicated, include all securities within each such rating category (<I>i.e.</I>, Ba1, Ba2 and Ba3 in the case of Moody&#146;s and BB+, BB and BB&#150; in the case of S&amp;P). </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P>   <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">To a limited extent, incidental to and in connection with its investment
activities or pursuant to a convertible feature in a security, the Fund also may acquire warrants and other debt and equity securities. The Fund may also acquire other debt and equity securities of a borrower or issuer in connection with an
amendment, waiver, conversion or exchange of a senior loan or other debt security or in connection with a bankruptcy or workout of a borrower or issuer. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may invest without limitation in debt securities of issuers domiciled outside the United States. The Fund, however, will not invest more than 10%
of its total assets in debt securities of issuers located in emerging market countries. The Fund will invest primarily in U.S. dollar-denominated debt securities. The Fund will not invest more than 10% of its total assets in debt securities
denominated in currencies other than the U.S. dollar or that do not provide for payment to the Fund in U.S. dollars, including obligations of non-U.S. governments and their respective subdivisions, agencies and government sponsored enterprises.
</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 floating rate debt securities, and in particular senior
loans, a type of investment typically not available to individual investors. The Investment Adviser provides professional management, which includes the extensive credit analysis needed to invest in senior loans, foreign securities, junk bonds,
Distressed Securities and other debt securities and instruments. 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. Additionally, the Investment Adviser may seek to enhance the yield of the Fund&#146;s common stock by
leveraging the Fund&#146;s capital structure through borrowings, the issuance of short term debt securities, the issuance of shares of preferred stock or a combination thereof. 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. The use of leverage also involves certain expenses and risk considerations. See &#147;Risk Factors and Special Considerations&#151;Leverage&#148;
and &#147;Other Investment Policies&#151;Leverage.&#148; </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">21 </FONT></P>


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  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may engage in various portfolio strategies to seek to enhance its return or to hedge its
portfolio against movements in interest rates through the use of derivatives, such as indexed and inverse securities, options, futures, options on futures, interest rate transactions, including interest rate swaps, total return swaps, credit default
swaps, short selling and foreign exchange transactions. 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. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may vary its investment objective and policies for temporary
defensive purposes during periods in which the Investment Adviser believes that conditions in the securities markets or other economic, financial or political conditions warrant and in order to keep the Fund&#146;s cash fully invested, including
during the period in which the net proceeds of the offering are being invested. Under such conditions, the Fund may invest up to 100% of its total assets in fixed rate investment grade debt securities, including high grade short term debt
securities, or may hold its assets in cash. The yield on such securities may be lower than the yield on the floating rate debt securities in which the Fund normally invests. The Fund may not achieve its investment objective when it does so.
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may invest in, among other things, the types of
securities and instruments described below: </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Description of Floating
Rate Debt Securities </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Under normal market conditions
and after the initial investment period of up to approximately six months following the completion of this offering, the Fund will invest at least 80% of an aggregate of (i) the Fund&#146;s net assets (including proceeds from the issuance of any
preferred stock) and (ii) the proceeds of any outstanding borrowings for investment purposes, in floating rate debt securities. Floating rate debt securities include floating or variable rate securities that pay interest at rates that adjust
whenever a specified interest rate changes and/or which reset on predetermined dates (such as the last day of a month or calendar quarter). In addition to senior loans, these floating rate debt securities may include, without limitation, instruments
such as catastrophe and other event linked bonds, bank capital securities, corporate bonds, notes, money market instruments and certain types of mortgage related and other asset backed securities. Due to their floating or variable rate features,
these instruments will generally pay higher levels of income in a rising interest rate environment and lower levels of income as interest rates decline. For the same reason, the market value of a floating rate debt security is generally expected to
have less sensitivity to fluctuations in market interest rates than a fixed rate debt instrument, although the value of a floating rate debt security may nonetheless decline as interest rates rise and due to other factors, such as real or perceived
changes in credit quality or financial condition of the issuer or borrower, volatility in the capital markets or other adverse market conditions. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Description of Senior Loans </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Under normal market conditions and after the initial investment period of up to approximately six months following the completion of this offering, the
Fund anticipates investing a substantial portion of its floating rate debt assets in senior loans. The senior loans in which the Fund invests primarily consist of direct obligations of a borrower undertaken to finance the growth of the
borrower&#146;s business, internally or externally, or to finance a capital restructuring. Senior loans may also include debtor in possession financings pursuant to Chapter 11 of the U.S. Bankruptcy Code and obligations of a borrower issued in
connection with a restructuring pursuant to </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">22 </FONT></P>


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<FONT FACE="Times New Roman" SIZE="2">Chapter 11 of the U.S. Bankruptcy Code. A significant portion of such senior loans are highly leveraged loans such as leveraged buy-out loans, leveraged
recapitalization loans and other types of acquisition loans. Such senior loans may be structured to include both term loans, which are generally fully funded at the time of the Fund&#146;s investment, and revolving credit facilities or delayed draw
term loans, which would require the Fund to make additional investments in the senior loans as required under the terms of the credit facility. Such senior loans may also include receivables purchase facilities, which are similar to revolving credit
facilities secured by a borrower&#146;s receivables. Senior loans generally are issued in the form of senior syndicated loans, but the Fund also may invest from time to time in privately placed notes, credit linked notes, structured notes or other
instruments with credit and pricing terms which are, in the opinion of the Investment Adviser, consistent with investments in senior loan obligations. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may invest without limitation in debt securities of issuers domiciled outside the United States. The Fund, however, will not, invest more than
10% of its total assets in debt securities of issuers located in emerging market countries. The Fund will not invest more than 10% of its total assets in debt securities denominated in currencies other than the U.S. dollar or that do not provide for
payment to the Fund in U.S. dollars. Investments in foreign securities involves certain risks not involved in domestic investments. Loans to such non-U.S. borrowers or U.S. borrowers may involve risks not typically involved in domestic investment,
including fluctuation in foreign exchange rates, future foreign political and economic developments, and the possible imposition of exchange controls or other foreign or U.S. governmental laws or restrictions applicable to such loans. With respect
to certain foreign countries, there is the possibility of expropriation or confiscatory taxation, political or social instability, or diplomatic developments which could affect the Fund&#146;s investments in those countries. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payment position. In addition,
information with respect to non-U.S. borrowers may differ from that available with respect to U.S. borrowers, since foreign companies are not generally subject to uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. borrowers. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">The senior loans in which the Fund invests generally hold a senior position in the capitalization structure of the borrower. Such loans may include loans that hold the most senior position, loans that hold an equal ranking with other senior
debt, or loans that are, in the judgement of the Investment Adviser, in the category of senior debt. A senior position in the borrower&#146;s capital structure generally gives the holder of the senior loan a claim on some or all of the
borrower&#146;s assets that is senior to that of subordinated debt, preferred stock and common stock in the event the borrower defaults or becomes bankrupt. The senior loans in which the Fund invests may be wholly or partially secured by collateral,
or may be unsecured. In the event of a default, the ability of an investor to have access to any collateral may be limited by bankruptcy and other insolvency laws. The value of the collateral also may decline subsequent to the Fund&#146;s investment
in the senior loan. Under certain circumstances, the collateral may be released with the consent of the Agent Bank and Co-Lenders (each as defined below), or pursuant to the terms of the underlying credit agreement with the borrower. There is no
assurance that the liquidation of the collateral will satisfy the borrower&#146;s obligation in the event of nonpayment of scheduled interest or principal, or that the collateral could be readily liquidated. As a result, the Fund might not receive
payments to which it is entitled and thereby may experience a decline in the value of the investment, and possibly, its net asset value. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">23 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In the case of highly leveraged senior loans, a borrower is often required to pledge collateral that may
include (i) working capital assets, such as accounts receivable and inventory, (ii) tangible fixed assets, such as real property, buildings and equipment, (iii) intangible assets, such as trademarks, copyrights and patent rights and/or (iv) security
interests in securities of subsidiaries or affiliates. Collateral also may include guarantees or other credit support by subsidiaries or affiliates. In some cases the only collateral for the senior loan is the stock of the borrower and/or its
subsidiaries and affiliates. To the extent a senior loan is secured by stock of the borrower and/or its subsidiaries and affiliates, such stock may lose all of its value in the event of a bankruptcy or insolvency of the borrower. In the case of
senior loans to privately held companies, the companies&#146; owners may provide additional credit support in the form of guarantees and/or pledges of other securities that they own. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In the case of project finance loans, the borrower is generally a special purpose entity that pledges undeveloped land and
other non-income producing assets as collateral and obtains construction completion guaranties from third parties, such as the project sponsor. Project finance credit facilities typically provide for payment of interest from escrowed funds during a
scheduled construction period, and for the pledge of current and fixed assets after the project is constructed and becomes operational. During the construction period, however, the lenders bear the risk that the project will not be constructed in a
timely manner, or will exhaust project funds prior to completion. In such an event, the lenders may need to take legal action to enforce the completion guaranties, or may need to lend more money to the project on less favorable financing terms, or
may need to liquidate the undeveloped project assets. There can be no assurance in any of such cases that the lenders will recover all of their invested capital. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The rate of interest payable on senior floating rate loans is established as the sum of a base lending rate plus a
specified margin. These base lending rates generally are the prime rate (&#147;Prime Rate&#148;) of a designated U.S. bank, London Interbank Offered Rate (&#147;LIBOR&#148;), the Certificate of Deposit (&#147;CD&#148;) rate or another base lending
rate used by commercial lenders. The interest rate on Prime Rate-based senior loans floats daily as the Prime Rate changes, while the interest rate on LIBOR-based and CD-based senior loans is reset periodically, typically every one, two, three or
six months. Certain of the senior floating rate loans in which the Fund invests permit the borrower to select an interest rate reset period of up to one year. A portion of the Fund&#146;s portfolio may be invested in senior loans with interest rates
that are fixed for the term of the loan. Investment in senior loans with longer interest rate reset periods or fixed interest rates may increase fluctuations in the Fund&#146;s net asset value, and potentially the market price of the Fund&#146;s
shares of common stock, as a result of changes in interest rates. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">The Fund may receive and/or pay certain fees in connection with its lending activities. These fees are in addition to interest payments received and may include facility fees, commitment fees, amendment and waiver
fees, commissions and prepayment fees. In certain circumstances, the Fund may receive a prepayment fee on the prepayment of a senior loan by a borrower. In connection with the acquisition of senior loans or other debt securities, the Fund also may
acquire warrants and other debt and equity securities of the borrower or issuer or its affiliates. The acquisition of such debt and equity securities will only be incidental to the Fund&#146;s purchase of an interest in a senior loan or other debt
security. The Fund may also acquire other debt and equity securities of the borrower or issuer in connection with an amendment, waiver, conversion or exchange of a senior loan or in connection with a bankruptcy or workout of the borrower or issuer.
</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">24 </FONT></P>


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  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In making an investment in a senior loan, the Investment Adviser will consider factors deemed by it
to be appropriate to the analysis of the borrower and the senior loan. The Investment Adviser performs its own independent credit analysis of the borrower in addition to utilizing information prepared and supplied by the Agent Bank, Co-Lender or
Participant (each defined below) from whom the Fund purchases its interest in a senior loan. Such factors include, but are not limited to, the legal/protective features associated with the securities (such as their position in the borrower&#146;s
capital structure and any security through collateral), financial ratios of the borrower such as pre-tax interest coverage, leverage ratios, and the ratios of cash flows to total debts and the ratio of tangible assets to debt. In its analysis of
these factors, the Investment Adviser also will be influenced by the nature of the industry in which the borrower is engaged, the nature of the borrower&#146;s assets and the Investment Adviser&#146;s assessments of the general quality of the
borrower. The Investment Adviser&#146;s analysis continues on an ongoing basis for any senior loans in which the Fund has invested. Although the Investment Adviser uses due care in making such analysis, there can be no assurance that such analysis
will disclose factors that may impair the value of the senior loan. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Senior loans made in connection with highly leveraged transactions are subject to greater credit risks than other senior loans in which the Fund may invest. These credit risks include a greater possibility of default
or bankruptcy of the borrower and the assertion that the pledging of collateral to secure the loan constituted a fraudulent conveyance or preferential transfer which can be nullified or subordinated to the rights of other creditors of the borrower
under applicable law. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The secondary market for trading of
senior loans continues to develop and mature. One of the effects of a more active and liquid secondary market, however, is that a senior loan may trade at a premium or discount to the principal amount, or par value, of the loan. There are many
factors that influence the market value of a senior loan, including technical factors relating to the operation of the loan market, supply and demand conditions, market perceptions about the credit quality or financial condition of the borrower or
more general concerns about the industry in which the borrower operates. The Fund participates in this secondary market for senior loans, purchasing and selling loans that may trade at a premium or discount to the par value of the loan. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund does not have a policy with regard to minimum ratings for
senior loans in which it may invest, except that the Fund may not invest more than 10% of its total assets in securities that are rated Caa1 or lower (if rated by Moody&#146;s) or CCC+ or lower (if rated by S&amp;P) by each agency rating such
security or, if unrated, are considered by the Investment Adviser to be of comparable quality or are otherwise considered to be Distressed Securities. Investments in senior loans are based primarily on the Investment Adviser&#146;s independent
credit analyses of a particular borrower. See &#147;Appendix A&#151;Ratings of Securities.&#148; </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">A borrower must comply with various restrictive covenants contained in any credit agreement between the borrower and the lending syndicate. Such
covenants, in addition to requiring the scheduled payment of interest and principal, may include restrictions on dividend payments and other distributions to stockholders, provisions requiring the borrower to maintain specific financial ratios or
relationships, limits on total debt and restrictions on the borrower&#146;s ability to pledge its assets. In addition, the loan agreement may contain a covenant requiring the borrower to prepay the senior loan with any excess cash flow. Excess cash
flow generally includes net cash flow after scheduled debt service payments and permitted capital expenditures, among other things, as well as the proceeds from asset dispositions or sales of securities. A breach of a covenant (after giving effect
to any cure </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">25 </FONT></P>


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  <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">period) which is not waived by the Agent Bank and the lending syndicate normally is an event of default (<I>i.e.</I>, the Agent Bank has the right to call
the outstanding senior loan). </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">It is expected that a
majority of the senior loans will have stated maturities ranging from three to ten years. However, such senior loans usually require, in addition to scheduled payments of interest and principal, the prepayment of the senior loan from excess cash
flow, as discussed above, and typically permit the borrower to prepay at its election. The degree to which borrowers prepay senior loans, whether as a contractual requirement or at their election, may be affected by general business conditions, the
financial condition of the borrower and competitive conditions among lenders, among other factors. Accordingly, prepayments cannot be predicted with accuracy. Upon a prepayment, the Fund may receive both a prepayment fee from the prepaying borrower
and a facility fee on the purchase of a new senior loan with the proceeds from the prepayment of the former. Such fees may mitigate any adverse impact on the yield on the Fund&#146;s portfolio which may arise as a result of prepayments and the
reinvestment of such proceeds in senior loans bearing lower interest rates.<B></B> </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>    <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">A senior loan in which the Fund may invest typically is originated, negotiated and structured by a syndicate of lenders (&#147;Co-Lenders&#148;)
consisting of commercial banks, thrift institutions, insurance companies, finance companies, investment banking firms, securities brokerage houses or other financial institutions or institutional investors, one or more of which administers the loan
on behalf of the syndicate (the &#147;Agent Bank&#148;). Co-Lenders may sell senior loans to third parties called &#147;Participants.&#148; The Fund invests in a senior loan either by participating in the primary distribution as a Co-Lender at the
time the loan is originated or by buying an assignment or participation interest in the senior loan in the secondary market from a Co-Lender or a Participant. The Fund will not act as an Agent Bank, guarantor, sole negotiator or sole structurer with
respect to a senior loan. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may invest in a
senior loan at origination as a Co-Lender or by acquiring an assignment or participation interest in the secondary market from a Co-Lender or Participant. If the Fund purchases an assignment, the Fund typically accepts all of the rights of the
assigning lender in a senior loan, including the right to receive payments of principal and interest and other amounts directly from the borrower and to enforce its rights as a lender directly against the borrower and assumes all of the obligations
of the assigning lender, including any obligations to make future advances to the borrower. As a result, therefore, the Fund has the status of a Co-Lender. In some cases, the rights and obligations acquired by a purchaser of an assignment may differ
from, and may be more limited than, the rights and obligations of the assigning lender. The Fund also may purchase a participation in a portion of the rights of a Co-Lender or Participant in a senior loan by means of a participation agreement. A
participation is similar to an assignment in that the Co-Lender or Participant transfers to the Fund all or a portion of an interest in a senior loan. Unlike an assignment, however, a participation does not establish any direct relationship between
the Fund and the borrower. In such a case, the Fund is required to rely on the Co-Lender or Participant that sold the participation not only for the enforcement of the Fund&#146;s rights against the borrower but also for the receipt and processing
of payments due to the Fund under the senior loans. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Because it may be necessary to assert through a Co-Lender or Participant such rights as may exist against the borrower, in the event the borrower fails to pay principal and interest when due, the Fund may be subject to delays, expenses and
risks that are greater than those that would be involved if the Fund could enforce its rights directly against the borrower. Moreover, under the terms of a participation, the Fund may be regarded as a creditor of the Co-Lender or Participant that
sold the participation (rather than of the borrower), so that the Fund may also be subject to the risk that the Co-Lender or Participant may become insolvent. Similar risks may arise </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">with respect to the Agent Bank, as described below. Further, in the event of the bankruptcy or insolvency of the borrower, the obligation of the borrower to
repay the senior loan may be subject to certain defenses that can be asserted by such borrower as a result of improper conduct by the Agent Bank, Co-Lender or Participant. </FONT></P>    <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In a typical senior loan, the Agent Bank administers the terms of the credit agreement and is responsible for the
collection of principal and interest and fee payments from the borrower and the apportionment of these payments to the credit of all lenders which are parties to the credit agreement. The Fund generally relies on the Agent Bank (or the Co-Lender or
Participant that sold the Fund a participation interest) to collect its portion of the payments on the senior loan. Furthermore, the Fund generally relies on the Agent Bank to use appropriate creditor remedies against the borrower. Typically, under
credit agreements, the Agent Bank is given broad discretion in enforcing the credit agreement, and is obligated to use only the same care it would use in the management of its own property. The borrower compensates the Agent Bank for these services.
Such compensation may include special fees paid on structuring and funding the senior loan and other fees paid on a continuing basis. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In the event that an Agent Bank becomes insolvent, or has a receiver, conservator, or similar official appointed for it by the appropriate bank regulatory
authority or becomes a debtor in a bankruptcy proceeding, assets held by the Agent Bank under the credit agreement should remain available to holders of senior loans. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">If, however, assets held by the Agent Bank for the benefit of the Fund were determined by an appropriate regulatory
authority or court to be subject to the claims of the Agent Bank&#146;s general or secured creditors, the Fund might incur certain costs and delays in realizing payment on a senior loan or suffer a loss of principal and/or interest. In situations
involving a Co-Lender or Participant that sold the Fund a participation interest, similar risks may arise, as described above. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may have certain obligations pursuant to a credit agreement, which may include the obligation to make future advances to the borrower in
connection with revolving credit facilities in certain circumstances. These commitments may have the effect of requiring the Fund to increase its investment in a borrower at a time it might not be desirable to do so (including at a time when the
borrower&#146;s financial condition makes it unlikely that such amounts will be repaid). The Fund currently intends to reserve against such contingent obligations by segregating sufficient investments in liquid assets. The Fund will not invest in
senior loans that would require the Fund to make any additional investments in connection with such future advances if such commitments would cause the Fund to fail to meet the diversification requirements described under &#147;Investment
Restrictions.&#148; </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Description of High Yield Securities
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may invest without limit and generally
intends to invest a substantial portion of its assets in high yield securities, including senior loans and other floating or fixed rate debt securities, that are rated below investment grade by the established rating services (Ba or lower by
Moody&#146;s or BB or lower by S&amp;P) or, if unrated, are considered by the Investment Adviser to be of comparable quality. The Fund may not, however, invest more than 10% of its total assets (at the time of investment) in securities that are
rated Caa1 or lower (if rated by Moody&#146;s) or CCC+ or lower (if rated by S&amp;P) by each agency rating such security or, if unrated, are considered by the Investment Advisor to be of comparable quality or are otherwise considered to be
Distressed Securities. High yield bonds commonly are referred to as &#147;junk&#148; bonds. See &#147;Appendix A&#151;Ratings of Securities&#148; for information concerning rating categories. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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&#146;s ability to achieve its investment objective may depend to a greater extent on the Investment
Adviser&#146;s own credit analysis than investment companies which invest in investment grade securities. 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&#146;s judgment, it is advantageous to sell such securities. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Investments in high yield securities generally provide greater income than investments in investment grade 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&#146;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&#146;s ability to service its debt obligations also may be adversely affected by
specific issuer developments, or the issuer&#146;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. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">High yield securities tend to be more volatile than investment grade
securities, so that adverse events may have a greater impact on the prices of high yield securities than on investment grade securities. Factors adversely affecting the market value of such securities are likely to affect adversely the Fund&#146;s
net asset value, and potentially the market price of the Fund&#146;s shares of common stock. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Like investment grade 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 securities, even under normal economic conditions.
This is particularly the case in the senior loan market. 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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Adverse conditions and investor perceptions thereof (whether or not based on economic fundamentals) may impair liquidity in the high yield market, and in
particular the senior loan 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&#146;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&#146;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.
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The high yield securities in which
the Fund invests may include credit linked notes, structured notes, credit linked trust certificates or other instruments evidencing interests in special purpose vehicles or trusts that hold interests in high yield securities. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Description of Distressed Securities </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Distressed Securities are high yield/high risk securities, including
certain senior loans purchased in the secondary market, that 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&#146;s or CC or lower by S&amp;P) 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. 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 (<I>e.g.</I>, through a liquidation of the obligor&#146;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 </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Other Investments </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may invest up to 20% of its total assets in securities other than floating rate debt securities. These
securities include, but are not limited to, fixed rate debt securities such as convertible securities, bonds, notes, fixed rate loans and mortgage related and other asset backed securities issued on a public or private basis, collateralized debt
obligations, preferred securities, commercial paper, U.S. government securities, structured notes, credit linked notes, credit linked trust certificates and other hybrid instruments. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">To a limited extent, incidental to and in connection with its investment activities or pursuant to a convertible feature in
a security, the Fund may acquire warrants and other debt and equity securities. The Fund may also acquire other debt and equity securities of a borrower or issuer in connection with an amendment, waiver, conversion or exchange of a senior loan or
other debt security or in connection with a bankruptcy or workout of the borrower or issuer. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Bonds </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may
invest in bonds of varying maturities issued by U.S. and non-U.S. corporations and other business or governmental entities. Bonds can be variable or fixed rate debt obligations, including bills, notes, debentures, money market instruments and
similar instruments and securities. Bonds generally are used by corporations as well as governments and other issuers to borrow money from investors. The issuer pays the investor a variable or fixed rate of interest and normally must repay the
amount borrowed on or before maturity. Certain bonds are &#147;perpetual&#148; in that they have no maturity date. The Fund may also invest in catastrophe or other &#147;event linked&#148; bonds. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Zero-coupon bonds pay interest only at maturity rather than at intervals
during the life of the security. Like zero-coupon bonds, &#147;step up&#148; bonds pay no interest initially but eventually begin to pay a coupon rate prior to maturity, which rate may increase at stated intervals during the life of the security.
Payment-in-kind securities (&#147;PIKs&#148;) are debt obligations that pay &#147;interest&#148; in the form of other debt obligations, instead of in cash. Each of these instruments is normally issued and traded at a deep discount from face value.
Zero-coupon bonds, step-ups and PIKs allow an issuer to avoid or delay the need to generate cash to meet current interest payments and, as a result, may involve greater credit risk than bonds that pay interest currently or in cash. The Fund would be
required to distribute the income on these instruments as it accrues, even though the Fund will not receive the income on a current basis or in cash. Thus, the Fund may have to sell other investments, including when it may not be advisable to do so,
to make income distributions to its stockholders. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Preferred Securities
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may invest in preferred securities,
including preferred securities that may be converted into common stock or other securities of the same or a different issuer. Generally, preferred securities receive </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">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&#146; 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&#146;s capital structure and their value is heavily
dependent on the profitability of the issuer rather than on any legal claims to specific assets or cash flows. Certain preferred securities in which the Fund may invest have a variable dividend, generally determined on a quarterly or other periodic
basis, either according to a formula based upon a specified premium or discount to the yield on particular U.S. Treasury securities or based on an auction process, involving bids submitted by holders and prospective purchasers of such securities.
Some preferred securities in which the Fund may invest offer a fixed rate of return with no maturity date. Because they never mature, these preferred securities act like long term bonds, can be more volatile than other types of preferred securities
and may have heightened sensitivity to changes in interest rates. Because preferred securities represent an equity ownership interest in a company, their value usually will react more strongly than bonds and other debt securities to actual or
perceived changes in a company&#146;s financial condition or prospects, or to fluctuations in the equity markets. The types of preferred securities in which the Fund may invest include trust preferred securities. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Convertible Securities </B></FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may invest in convertible securities. A convertible security is
a bond, debenture, note or preferred security 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 security entitles the holder to receive interest or dividends generally paid or accrued 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 may be subject to redemption at the option of the issuer at a price established in the convertible security&#146;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. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Mortgage and Asset Backed Securities </B></FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Mortgage backed securities are &#147;pass through&#148; securities,
meaning that principal and interest payments made by the borrower on the underlying mortgages are passed through to the Fund. The value of mortgage backed securities, like that of traditional fixed rate securities, typically increases when interest
rates fall and decreases when interest rates rise. However, mortgage backed securities differ from traditional fixed rate securities because of their potential for prepayment without penalty. The price paid by the Fund for its mortgage backed
securities, the yield the Fund expects to receive from such securities and the average life of the securities </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">are based on a number of factors, including the anticipated rate of prepayment of the underlying mortgages. In a period of declining interest rates,
borrowers may prepay the underlying mortgages more quickly than anticipated, thereby reducing the yield to maturity and the average life of the mortgage backed securities. Moreover, when the Fund reinvests the proceeds of a prepayment in these
circumstances, it will likely receive a rate of interest that is lower than the rate on the security that was prepaid. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">To the extent that the Fund purchases mortgage backed securities at a premium, mortgage foreclosures and principal prepayments may result in a loss to the
extent of the premium paid. If the Fund buys such securities at a discount, both scheduled payments of principal and unscheduled prepayments will increase current and total returns and will accelerate the recognition of income which, when
distributed to shareholders, will be taxable as ordinary income. In a period of rising interest rates, prepayments of the underlying mortgages may occur at a slower than expected rate, creating maturity extension risk. This particular risk may
effectively change a security that was considered short or intermediate term at the time of purchase into a long term security. Since long term securities generally fluctuate more widely in response to changes in interest rates than short term
securities, maturity extension risk could increase the inherent volatility of the Fund. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">The mortgage backed securities in which the Fund may invest may be guaranteed by the Government National Mortgage Association (&#147;GNMA&#148;) or issued by the Federal National Mortgage Association
(&#147;FNMA&#148;) or the Federal Home Loan Mortgage Corporation (&#147;FHLMC&#148;). Certain of the asset backed securities in which the Fund will invest may be guaranteed by the Small Business Administration (&#147;SBA&#148;) or issued in programs
originated by the Resolution Trust Corporation (&#147;RTC&#148;). GNMA, FNMA, FHLMC and SBA are agencies or instrumentalities of the United States. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may invest in pass through mortgage backed securities that represent ownership interests in a pool of mortgages on single-family or multi-family
residences. Such securities represent interests in pools of residential mortgage loans originated by U.S. governmental or private lenders and guaranteed, to the extent provided in such securities, by the U.S. Government, one of its agencies or
instrumentalities or by private guarantors. Such securities, which are ownership interests in the underlying mortgage loans, differ from conventional debt securities, which provide for periodic payment of interest in fixed amounts (usually
semiannually) and principal payments at maturity or on specified call dates. Mortgage pass through securities provide for monthly payments that &#147;pass through&#148; the monthly interest and principal payments (including any prepayments) made by
the individual borrowers on the pooled mortgage loans, net of any fees paid to the guarantor of such securities and the servicer of the underlying mortgage loans. The Fund may also invest in collateralized mortgage obligations (&#147;CMOs&#148;)
which are debt obligations collateralized by mortgage loans or mortgage pass through securities. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Asset backed securities are &#147;pass through&#148; securities, meaning that principal and interest payments made by the borrower on the underlying
assets (such as credit card receivables) are passed through to the Fund. The value of asset backed securities, like that of traditional fixed rate securities, typically increases when interest rates fall and decreases when interest rates rise.
However, asset backed securities differ from traditional fixed rate securities because of their potential for prepayment. The price paid by the Fund for its asset backed securities, the yield the Fund expects to receive from such securities and the
average life of the securities are based on a number of factors, including the anticipated rate of prepayment of the underlying assets. In a period of declining interest rates, borrowers may prepay the underlying assets more quickly than
anticipated, thereby reducing the yield to </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">maturity and the average life of the asset backed securities. Moreover, when the Fund reinvests the proceeds of a prepayment in these circumstances, it will
likely receive a rate of interest that is lower than the rate on the security that was prepaid. To the extent that the Fund purchases asset backed securities at a premium, prepayments may result in a loss to the extent of the premium paid. If the
Fund buys such securities at a discount, both scheduled payments and unscheduled prepayments will increase current and total returns and will accelerate the recognition of income which, when distributed to shareholders, will be taxable as ordinary
income. In a period of rising interest rates, prepayments of the underlying assets may occur at a slower than expected rate, creating maturity extension risk. This particular risk may effectively change a security that was considered short or
intermediate term at the time of purchase into a long term security. Since long term securities generally fluctuate more widely in response to changes in interest rates than shorter term securities, maturity extension risk could increase the
inherent volatility of the Fund. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Illiquid Securities </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may invest in floating rate debt securities, senior loans, high
yield 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. Although senior loans are transferred among certain financial institutions, the senior loans in which the Fund invests may not have the liquidity of
conventional debt securities traded in the secondary market and may be considered illiquid. Although the market for senior loans has developed significantly during recent years, certain of the senior loans in which the Fund invests may still not
have the liquidity of conventional debt securities traded in the secondary market. 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&#146;s ability to realize the net asset value in the event of a voluntary or involuntary liquidation of its assets. See &#147;Net Asset Value&#148; for information with respect to the valuation of illiquid securities. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>OTHER INVESTMENT POLICIES </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund has adopted certain other policies as set forth below: </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Leverage </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">At times, the Fund expects to utilize leverage through borrowings, the issuance of short term debt securities, the
issuance of shares of preferred stock or a combination thereof. The Fund has the ability to utilize leverage through borrowings or the issuance of short term debt securities in an amount up to 33<FONT SIZE="1"><SUP>&nbsp;1</SUP></FONT><FONT
SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT FACE="Times New Roman" SIZE="2" COLOR="#000000">% 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 </FONT></FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">intends to utilize borrowings in an initial amount up to approximately <B></B>30% 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&#146;s assets such borrowings will
represent. Following the investment of the net proceeds of the offering, the Fund may, depending on market conditions and the relative costs and benefits associated with other types of leverage, choose to leverage through the issuance of preferred
stock rather than through borrowings or the Fund may choose to leverage through a combination of both. The Fund generally will not utilize leverage if it anticipates that the Fund&#146;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 for 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 an aggregate of (i) the Fund&#146;s net assets (including the proceeds from the issuance of any preferred stock) and
(ii) the proceeds of any outstanding borrowings used for leverage. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">The Fund&#146;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&#146;s borrowing compared to the longer term nature of its investments. Because the total assets of the Fund (including
the assets obtained from leverage) will generally be invested in the higher yielding portfolio investments, 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 &#147;pick up&#148; will be reduced. Furthermore, if long term rates rise, the common stock net asset value will reflect any decline in the value of portfolio holdings resulting therefrom. </FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Leverage creates certain 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&#146;s total return. To the extent the total return derived from securities purchased with funds
received from leverage exceeds the cost of leverage, the Fund&#146;s return will be greater than if leverage had not been used. Conversely, if the total return 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&#146;s leveraged position if it expects that the benefits to the Fund&#146;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 total return 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 </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">34 </FONT></P>


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<FONT FACE="Times New Roman" SIZE="2">maintain a line of credit. Either of these requirements will increase the cost of borrowing over the stated interest rate. The issuance of classes of
preferred stock involves offering expenses and other costs and may limit the Fund&#146;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 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&#146;s exposure to capital risk. Unless the total return on assets acquired with borrowed
funds or preferred stock offering proceeds exceed the cost of borrowing or issuing classes of preferred securities, the use of leverage will diminish the investment performance of the Fund compared with what it would have been without leverage.
</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;s ability to pay dividends and distributions on the
common stock in certain instances. The Fund also may be required to pledge its assets to the lenders in connection with certain types of borrowings. The Investment Adviser does not anticipate that these covenants or restrictions will adversely
affect its ability to manage the Fund&#146;s portfolio in accordance with the Fund&#146;s investment objective 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 securities 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&#146;s portfolio in accordance with the Fund&#146;s investment objective and policies. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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>i.e.</I>, such indebtedness may not exceed 33<FONT SIZE="1"><SUP>&nbsp;1</SUP></FONT><FONT
SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT FACE="Times New Roman" SIZE="2" COLOR="#000000">% of the value of the Fund&#146;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&#146;s portfolio is at least 200% of the liquidation value of the outstanding preferred stock (<I>i.e.</I>, such liquidation value may not exceed 50% of the value of the Fund&#146;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&#146;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%.
</FONT></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;s willingness to borrow money and issue
debt securities or preferred stock 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 </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">35 </FONT></P>


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<FONT FACE="Times New Roman" SIZE="2">Investment Adviser&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">As
discussed under &#147;Investment Advisory and Management Arrangements&#148; herein, during periods when the Fund has outstanding borrowings for leverage or preferred stock outstanding, the fees paid to the Investment Adviser for investment advisory
and management services will be higher than if the Fund did not borrow or issue preferred stock because the fees paid will be calculated on the basis of an aggregate of (i) the Fund&#146;s average daily net assets (including proceeds from the sale
of preferred stock) and (ii) 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&#146;s assets. The Board of
Directors will monitor this potential conflict. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Assuming the utilization of leverage by borrowings in the amount of approximately <B></B>30% of the Fund&#146;s total assets, and an annual interest rate of <B></B>1.57% payable on such leverage based on market rates as of the date of this
prospectus, the annual return that the Fund&#146;s portfolio must experience (net of expenses) in order to cover such interest payments would be <B></B>0.47%. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The following table is designed to illustrate the effect on the return to a holder of common stock of the leverage
obtained by borrowings in the amount of approximately <B></B>30% of the Fund&#146;s total assets, assuming hypothetical annual returns on the Fund&#146;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 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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="90%" BORDER="0" ALIGN="center">

<TR>
<TD VALIGN="top" WIDTH="74%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Assumed Portfolio Return (net of expenses)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">(10</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">)%</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">(5</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">)%</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">0</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;%</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">5</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">10</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="74%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Corresponding Common Stock Return</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">(15</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">)%</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">(8</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">)%</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">(1</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">)%</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">6</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">14</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Until the Fund
borrows or issues shares of preferred stock, the Fund&#146;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 accordance with the Fund&#146;s investment objective and policies. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Indexed and Inverse Floating Obligations </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 (&#147;inverse floaters&#148;). In general, inverse floaters change in value in a manner that is opposite to most bonds&#151;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&#146;s investment. Regardless of the effect, inverse floaters
represent a leveraged </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">36 </FONT></P>


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<FONT FACE="Times New Roman" SIZE="2">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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Interest Rate Transactions </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In order to seek
to hedge the value of the Fund&#146;s portfolio against interest rate fluctuations or to seek to enhance the Fund&#146;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 seek to preserve a return or spread on a particular investment or portion of its portfolio, to seek 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 seek to increase the Fund&#146;s yield, for example, during periods of steep interest
rate yield curves (<I>i.e.</I>, 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In an interest rate swap, the Fund exchanges with
another party their respective commitments to pay or receive interest (<I>e.g.</I>, 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 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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund usually will enter into interest rate swaps on a net basis
(<I>i.e.</I>, 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&#146;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. If the interest rate swap
transaction is entered into on other than a net basis, the full amount of the Fund&#146;s obligations will be accrued on a daily basis, and the full amount of the Fund&#146;s obligations will be segregated by the Fund. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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>i.e.</I>, 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 </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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 &#147;Taxes.&#148;
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Credit Default Swap Agreements </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may enter into credit default swap agreements for hedging
purposes or to seek to enhance its returns. The credit default swap agreement may have as reference obligations one or more securities that are not currently held by the Fund. The protection &#147;buyer&#148; in a credit default contract may be
obligated to pay the protection &#147;seller&#148; 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 &#147;par value&#148; (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 five 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. 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 five 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. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be
subject to investment exposure on the notional amount of the swap. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">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, </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">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 seller. The Fund&#146;s obligations under a credit default swap agreement will be accrued daily (offset against any amounts owing
to the Fund). In connection with each such transaction, the Fund will at all times segregate unencumbered liquid securities or cash with a value at least equal to the Fund&#146;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 limit any
potential leveraging of the Fund&#146;s portfolio. Such segregation will not limit the Fund&#146;s exposure to loss. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Total Return Swap Agreements </B></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may enter into total return swap agreements. Total return swap agreements are contracts in which one party agrees to make periodic payments based
on the change in market value of the underlying assets, which may include a specified security, basket of securities or securities indices during the specified period, in return for periodic payments based on a fixed or variable interest rate or the
total return from other underlying assets. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market. Total return swap agreements may effectively add
leverage to the Fund&#146;s portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the swap. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Total return swap agreements entail the risk that a party will default on its payment obligations to the Fund
thereunder. Swap agreements also bear the risk that the Fund will not be able to meet its obligation to the counterparty. Generally, the Fund will enter into total return swaps on a net basis (<I>i.e.</I>, 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&#146;s obligations over its entitlements with respect to each total return 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. If the total return swap transaction is entered into on other than a net basis, the full
amount of the Fund&#146;s obligations will be accrued on a daily basis, and the full amount of the Fund&#146;s obligations will be segregated by the Fund in an amount equal to or greater than the market value of the liabilities under the total
return swap agreement or the amount it would have cost the Fund initially to make an equivalent direct investment, plus or minus any amount the Fund is obligated to pay or is to receive under the total return swap agreement. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Credit Linked Trust Certificates </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Among the income producing securities in which the Fund may invest are
credit linked trust certificates, which are investments in a limited purpose trust or other vehicle which, in turn, invests in a basket of derivative </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">instruments, such as credit default swaps, interest rate swaps and other securities, in order to provide exposure to the high yield or another fixed income
market. For instance, the Fund may invest in credit linked trust certificates as a cash management tool in order to gain exposure to the high yield markets and/or to remain fully invested when more traditional income producing securities are not
available, including during the period when the net proceeds of this offering and any borrowings or offering of preferred stock are being invested. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Like an investment in a bond, investments in these credit linked trust certificates represent the right to receive periodic income payments (in the form
of distributions) and payment of principal at the end of the term of the certificate. However, these payments are conditioned on the trust&#146;s receipt of payments from, and the trust&#146;s potential obligations to, the counterparties to the
derivative instruments and other securities in which the trust invests. For instance, the trust may sell one or more credit default swaps, under which the trust would receive a stream of payments over the term of the swap agreements provided that no
event of default has occurred with respect to the referenced debt obligation upon which the swap is based. If a default occurs, the stream of payments may stop and the trust would be obligated to pay to the counterparty the par (or other agreed upon
value) of the referenced debt obligation. This, in turn, would reduce the amount of income and principal that the Fund would receive as an investor in the trust. The Fund&#146;s investments in these instruments are indirectly subject to the risks
associated with derivative instruments, including, among others, credit risk, default or similar event risk, counterparty risk, interest rate risk, leverage risk and management risk. It is also expected that the certificates will be exempt from
registration under the Securities Act of 1933. Accordingly, there may be no established trading market for the certificates and they may constitute illiquid investments. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Options </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Call Options</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Fund may purchase call options on any of the types of securities or instruments 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 also may 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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund also is authorized to write (<I>i.e.</I>, sell) covered call options on the securities or instruments 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&#146;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&#146;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 to the extent of the premium received against the price of the underlying security declining. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">40 </FONT></P>


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  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund also is authorized to write (<I>i.e.</I>, sell) uncovered call options on securities or
instruments 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 or instruments.
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, in connection with each such transaction the Fund will segregate unencumbered liquid securities or cash with a value at least equal to the Fund&#146;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&#146;s portfolio. Such segregation will not limit the Fund&#146;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&#146;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. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Put Options</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Fund is authorized to
purchase put options to seek to hedge against a decline in the value of its securities or to enhance its return. By buying a put option, the Fund acquires a right to sell such underlying securities or instruments at the exercise price, thus limiting
the Fund&#146;s risk of loss through a decline in the market value of the securities or instruments until the put option expires. The amount of any appreciation in the value of the underlying securities or instruments 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&#146;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 may purchase uncovered put options. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund also has authority to write (<I>i.e.</I>, sell) put options on the types of securities or instruments 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&#146;s return. The Fund will not sell puts if, as a result,
more than 50% of the Fund&#146;s assets would be required to cover its potential obligations under its hedging and other investment transactions. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund is also authorized to write (<I>i.e.</I>, sell) uncovered put options on securities or instruments 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 such securities or instruments at a net cost below the current market value. The Fund has the obligation to buy the securities or instruments at an agreed upon price if the securities or
instruments decrease below the exercise price. If the securities or instruments 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 or
instruments at the </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">exercise price. In connection with such transaction, the Fund will segregate unencumbered liquid securities or cash with a value at least equal to the
Fund&#146;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&#146;s portfolio. Such segregation will not limit the Fund&#146;s exposure to loss. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Financial Futures and Options Thereon </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund is authorized to engage in transactions in financial futures contracts (&#147;futures contracts&#148;) 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&#146;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>i.e.</I>, by entering into an offsetting transaction). Futures contracts have been designed by boards of trade which have been designated &#147;contract markets&#148; by the Commodities Futures Trading Commission (the &#147;CFTC&#148;).
Transactions by the Fund in futures contracts and financial futures are subject to limitations as described below under &#147;&#151;Restrictions on the Use of Futures Transactions.&#148; </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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&#146;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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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>i.e.</I>, 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may engage in options and
futures transactions on exchanges and options in the over-the-counter markets (&#147;OTC options&#148;). In general, exchange-traded contracts are third-party contracts (<I>i.e.</I>, performance of the </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">42 </FONT></P>


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<FONT FACE="Times New Roman" SIZE="2">parties&#146; 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 &#147;&#151;Restrictions on OTC Options&#148; below for information as to restrictions on the use of OTC options. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Restrictions on the Use of Futures
Transactions</I>.&nbsp;&nbsp;&nbsp;&nbsp;Under regulations of the CFTC, the futures trading activity described herein will not result in the Fund being deemed a &#147;commodity pool,&#148; 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 do not exceed 5% of the liquidation value of the Fund&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Restrictions on OTC Options</I>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Risk Factors in Interest Rate Transactions and
Options and Futures Transactions </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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&#146;s rights to receive interest on securities and its rights and obligations to receive and pay
interest pursuant to interest rate swaps. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Utilization 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&#146;s use of futures and options thereon when it uses such instruments as a
so-called &#147;cross-hedge,&#148; which means that the security that is the subject of the futures contract is different from the security being hedged by the contract. Utilization 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&#146;s losses will not be limited. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Short Sales </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">When the Fund makes a short sale, it must borrow the security sold short and
deliver collateral to the broker dealer through which it made the short sale to cover 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The
Fund&#146;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
segregate similar collateral with its custodian to the extent, if any, necessary so that the value of both collateral amounts 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;s gain is limited to the price at which it sold the security short, its potential loss is theoretically unlimited. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund also may make short sales &#147;against the box.&#148; These transactions will involve either
short sales of securities retained in the Fund&#146;s portfolio or securities which it has the right to acquire without the payment of further consideration. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Foreign Exchange Transactions </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may engage in spot and forward foreign exchange transactions and currency swaps, purchase and sell options on currencies and purchase and sell
currency futures and related options thereon (collectively, &#147;Currency Instruments&#148;) for purposes of hedging against the decline in the value of currencies in which its portfolio holdings are denominated against the U.S. dollar. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Forward Foreign Exchange
Transactions.</I>&nbsp;&nbsp;&nbsp;&nbsp;Forward foreign exchange transactions are OTC contracts to purchase or sell a specified amount of a specified currency or multinational currency unit at a price and future date set at the time of the
contract. Spot foreign exchange transactions are similar but require current, rather than future, settlement. The Fund will enter into foreign exchange transactions only for purposes of hedging either a specific transaction or a portfolio position.
The Fund may enter into a foreign exchange transaction for purposes of hedging a specific transaction by, for example, purchasing a currency needed to settle a security transaction or selling a currency in which the Fund has received or anticipates
receiving a dividend or distribution. The Fund may enter into a foreign exchange transaction for purposes of hedging a portfolio position by selling forward a currency in which a portfolio position of the Fund is denominated or by purchasing a
currency in which the Fund anticipates acquiring a portfolio position in the near future. The Fund may also hedge portfolio positions through currency swaps, which are transactions in which one currency is simultaneously bought for a second currency
on a spot basis and sold for the second currency on a forward basis. Forward foreign exchange transactions involve substantial currency risk, and also involve credit and liquidity risk. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Currency Futures.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund may also hedge against the decline in the value of a currency
against the U.S. dollar through use of currency futures or options thereon. Currency futures are similar to forward foreign exchange transactions except that futures are standardized, exchange-traded contracts. See &#147;&#151;Financial Futures and
Options Thereon&#148; above. Currency futures involve substantial currency risk, and also involve leverage risk. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Currency Options.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund may also hedge against the decline in the value of a currency against the U.S. dollar through the
use of currency options. Currency options are similar to options on securities, but in consideration for an option premium the writer of a currency option is obligated to sell (in the case of a call option) or purchase (in the case of a put option)
a specified amount of a specified currency on or before the expiration date for a specified amount of another currency. The Fund may engage in transactions in options on currencies either on exchanges or OTC markets. See &#147;&#151;Options&#148;
above. Currency options involve substantial currency risk, and may also involve credit, leverage or liquidity risk. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Limitations on Currency Hedging.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Fund will not speculate in Currency Instruments. Accordingly, the Fund will not hedge a
currency in excess of the aggregate market value of the securities which it owns (including receivables for unsettled securities sales), or has committed to or anticipates purchasing, which are denominated in such currency. The Fund may, however,
hedge a currency by entering into a transaction in a Currency Instrument denominated in a currency other than the currency being hedged (a &#147;cross-hedge&#148;). The Fund will only enter into a cross-hedge if the Manager believes that (i) there
is a demonstrable high correlation between the </FONT>
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<FONT FACE="Times New Roman" SIZE="2">currency in which the cross-hedge is denominated and the currency being hedged, and (ii) executing a cross-hedge through the currency in which the
cross-hedge is denominated will be significantly more cost-effective or provide substantially greater liquidity than executing a similar hedging transaction by means of the currency being hedged. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Investments in Foreign Securities </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may invest without limitation in debt securities of issuers
domiciled outside the United States. The Fund will not, however, invest more than 10% of its total assets in debt securities of issuers located in emerging market countries. The Fund will invest primarily in U.S. dollar-denominated debt securities.
The Fund will not invest more than 10% of its total assets in debt securities denominated in currencies other than the U.S. dollar or that do not provide for payment to the Fund in U.S. dollars. The Investment Adviser generally considers emerging
market countries to be any country that is defined as having an emerging or developing economy by the World Bank or its related organizations or the United Nations or its subsidiaries. Investments in foreign securities involves certain risks not
involved in domestic investments. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Public
Information</I>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Trading Volume, Clearance and
Settlement</I>.&nbsp;&nbsp;&nbsp;&nbsp;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.
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Government Supervision and
Regulation</I>.&nbsp;&nbsp;&nbsp;&nbsp;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 </FONT>
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<FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><I>Restrictions on Foreign Investment</I>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;s expenses (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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Foreign
Sub-Custodians and Securities Depositories</I>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Other Investment Strategies </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Repurchase Agreements and Purchase and Sale Contracts</I>.&nbsp;&nbsp;&nbsp;&nbsp;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
</FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">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&#146;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.
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Reverse Repurchase
Agreements</I>.&nbsp;&nbsp;&nbsp;&nbsp;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 &#147;Risk Factors and Special Considerations&#151;Leverage&#148; and &#147;&#151;Leverage&#148; 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&#146;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 files 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&#146;s obligation to repurchase the
securities, and the Fund&#146;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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><I>Lending of Portfolio Securities</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Fund may lend securities with a value not exceeding 33<FONT SIZE="1"><SUP>&nbsp;1</SUP></FONT><FONT SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT
FACE="Times New Roman" SIZE="2" COLOR="#000000">% 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 </FONT></FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">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&#146;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&#146;s, lending agent, administrative and custodial fees in connection with its loans. The Fund has received an exemptive order from the Commission permitting it to lend portfolio securities to Merrill
Lynch, Pierce, Fenner &amp; Smith Incorporated (&#147;Merrill Lynch&#148;) or its affiliates and to retain an affiliate of the Fund as lending agent. See &#147;Portfolio Transactions.&#148; </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>When-Issued and Forward Commitment
Securities</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Fund may purchase interests in senior loans and other portfolio securities on a &#147;when-issued&#148; basis and may purchase or sell such interests or securities on a &#147;forward commitment&#148; 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 such interests or 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 such interests or 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 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 such interests or 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. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Standby Commitment Agreements</I>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">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 </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">49 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">value of such security and may not benefit from an appreciation in the value of the security during the commitment period. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="21%" SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may in the future employ new or additional investment strategies and instruments if those strategies and instruments are consistent with the
Fund&#146;s investment objective and are permissible under applicable regulations governing the Fund. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Suitability </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The
economic benefit of an investment in the Fund depends upon many factors beyond the control of the Fund, the Investment Adviser and its affiliates. Because of its emphasis on high yield debt securities including senior loans, the Fund should be
considered speculative and not as a balanced investment program. The suitability for any particular investor of a purchase of shares in the Fund will depend upon, among other things, such investor&#146;s investment objectives and such
investor&#146;s ability to accept the risks associated with investing in high yield debt securities, including the risk of loss of principal. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>INVESTMENT RESTRICTIONS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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 as a class. The Fund may not: </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1.&nbsp;&nbsp;Make any investment inconsistent with the
Fund&#146;s classification as a diversified company under the 1940 Act. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">2.&nbsp;&nbsp;Make investments for the purpose of exercising control or management. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.&nbsp;&nbsp;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">50 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.&nbsp;&nbsp;Issue senior securities or borrow money except as permitted by Section 18
of the 1940 Act or otherwise as permitted by applicable law. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">5.&nbsp;&nbsp;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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">6.&nbsp;&nbsp;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 senior loans, as a Co-Lender or otherwise, or other debt securities or 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<FONT SIZE="1"><SUP>&nbsp;1</SUP></FONT><FONT SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT FACE="Times New Roman" SIZE="2" COLOR="#000000">% 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. </FONT></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">7.&nbsp;&nbsp;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. For purposes of this restriction, the term &#147;issuer&#148;
includes both a borrower and any lender selling a participation interest (as described under &#147;Investment Objectives and Policies&#151;Description of Senior Loans&#148; above) to the Fund together with any other person interpositioned between
the lender selling such participation interest and the Fund with respect to such participation interest. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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: </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">a.&nbsp;&nbsp;Purchase securities of
other investment companies, except to the extent that such purchases are permitted by applicable law. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">b.&nbsp;&nbsp;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 &#147;Other Investment Policies&#148; above. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">c.&nbsp;&nbsp;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). </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">d.&nbsp;&nbsp;Change its policy of investing, under normal circumstances, at least 80% of an aggregate of (i) the Fund&#146;s net assets (including proceeds from the issuance of preferred stock) and (ii) the proceeds
of any outstanding borrowings for investment purposes, in floating rate debt securities, unless the Fund provides its stockholders with at least 60 days&#146; prior written notice. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund interprets its policies with respect to borrowing and lending to permit such activities as may be lawful for the Fund, to the full extent
permitted by the 1940 Act or by exemption from the provisions therefrom pursuant to exemptive order of the Commission. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">51 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Investment Adviser of the Fund and Merrill Lynch are owned and controlled by Merrill Lynch &amp; Co.,
Inc. (&#147;ML &amp; Co.&#148;). 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
&#147;Portfolio Transactions.&#148; </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>DIRECTORS AND OFFICERS
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Directors of the Fund consist of <B></B>eight
individuals, <B></B>seven of whom are not &#147;interested persons&#148; of the Fund as defined in the 1940 Act (the &#147;non-interested Directors&#148;). 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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Each non-interested Director is a member of the Fund&#146;s Audit and Oversight Committee (the &#147;Committee&#148;). The principal responsibilities of
the Committee are the appointment, compensation and oversight of the Fund&#146;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 August 14, 2003. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Biographical Information </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. (&#147;MLIM&#148;) (&#147;FAM/MLIM-advised funds&#148;) and other public directorships. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR>
<TD VALIGN="bottom" WIDTH="20%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="1"><B>Name, Address* and Age</B></FONT></P><HR WIDTH="147" SIZE="1" NOSHADE ALIGN="left" COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Position(s)<BR>Held with<BR>the Fund</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="12%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Term of Office**<BR>and Length&nbsp;of<BR>Time&nbsp;Served</B></FONT></P><HR SIZE="1" NOSHADE
COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="29%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Principal Occupation(s)</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>During&nbsp;Past Five Years</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="12%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Number&nbsp;of&nbsp;FAM/<BR>MLIM-Advised<BR>Funds and<BR>Portfolios<BR>Overseen</B></FONT></P><HR
SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="10%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Public<BR>Directorships</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Ronald W. Forbes (62)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">Director since 2003</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="29%"><FONT FACE="Times New Roman" SIZE="2">Professor Emeritus of Finance School of Business, State University of New York at Albany since 2000 and Professor thereof from 1989 to 2000, International Consultant, Urban
Institute, Washington D.C. from 1995 to 1999.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">48 registered investment companies consisting of 49 portfolios</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="10%"><FONT FACE="Times New Roman" SIZE="2">None<BR></FONT></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><I>(continued
on next page) </I></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">52 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">



<TR>
<TD VALIGN="bottom" WIDTH="20%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="1"><B>Name, Address* and Age</B></FONT></P><HR WIDTH="136" SIZE="1" NOSHADE ALIGN="left" COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Position(s)<BR>Held with<BR>the Fund</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="12%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Term of Office**<BR>and Length&nbsp;of<BR>Time&nbsp;Served</B></FONT></P><HR SIZE="1" NOSHADE
COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="26%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Principal Occupation(s)</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>During&nbsp;Past Five Years</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="12%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Number&nbsp;of&nbsp;FAM/<BR>MLIM-Advised<BR>Funds and<BR>Portfolios<BR>Overseen</B></FONT></P><HR
SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="13%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Public<BR>Directorships</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>

<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Cynthia A. Montgomery (51)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">Director since 2003</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="26%"><FONT FACE="Times New Roman" SIZE="2">Professor, Harvard Business School since 1989; Associate Professor, J.L. Kellogg Graduate School of Management, Northwestern University from 1985 to 1989; Associate Professor,
Graduate School of Business Administration, University of Michigan from 1979 to 1985.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">48 registered investment companies consisting of 49 portfolios</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="13%"><FONT FACE="Times New Roman" SIZE="2">UnumProvident Corporation (insurance products); Newell Rubbermaid Inc. (manufacturing)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Charles C. Reilly (72)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">Director since 2003</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="26%"><FONT FACE="Times New Roman" SIZE="2">Self-employed financial consultant since 1990; President and Chief Investment Officer of Verus Capital, Inc. from 1979 to 1990; Senior Vice President of Arnold and S. Bleichroeder,
Inc. from 1973 to 1990; Adjunct Professor, Columbia University Graduate School of Business from 1990 to 1991; Adjunct Professor, Wharton School, University of Pennsylvania from 1989 to 1990; Columbia University Graduate School of Business from 1990
to 1991; Adjunct Professor, Partner, Small Cities Cable Television from 1986 to 1997.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">48 registered investment companies consisting of 49 portfolios</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="13%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Kevin A. Ryan (70)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">Director since 2003</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="26%"><FONT FACE="Times New Roman" SIZE="2">Founder and currently Director Emeritus of the Boston University Center for the Advancement of Ethics and Character and Director thereof from 1989 to 1999; Professor from 1982 to
1999; and currently Professor Emeritus of Education of Boston University formerly taught on the faculties of The University of Chicago, Stanford University and Ohio State University.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">48 registered investment companies consisting of 49 portfolios</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="13%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD></TR>
</TABLE>   <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><I>(continued on next page) </I></FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">53 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">



<TR>
<TD VALIGN="bottom" WIDTH="20%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="1"><B>Name, Address* and Age</B></FONT></P><HR WIDTH="136" SIZE="1" NOSHADE ALIGN="left" COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Position(s)<BR>Held with<BR>the Fund</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="12%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Term of Office**<BR>and Length&nbsp;of<BR>Time&nbsp;Served</B></FONT></P><HR SIZE="1" NOSHADE
COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="24%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Principal Occupation(s)</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>During&nbsp;Past Five Years</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="12%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Number&nbsp;of&nbsp;FAM/<BR>MLIM-Advised<BR>Funds and<BR>Portfolios<BR>Overseen</B></FONT></P><HR
SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="15%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Public<BR>Directorships</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>

<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Roscoe S. Suddarth (67)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">Director since 2003</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="24%"><FONT FACE="Times New Roman" SIZE="2">President, Middle East Institute, from 1995 to 2001; Foreign Service Officer, United States Foreign Service, from 1961 to 1995; Career Minister, from 1989 to 1995; Deputy Inspector
General, U.S. Department of State, from 1991 to 1994; U. S. Ambassador to the Hashemite Kingdom of Jordan, from 1987 to 1990.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">48 registered investment companies consisting of 49 portfolios</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="15%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Richard R. West (65)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">Director since 2003</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="24%"><FONT FACE="Times New Roman" SIZE="2">Professor of Finance since 1984, Dean from 1984 to 1993 and currently Dean Emeritus of New York University Leonard N. Stern School of Business Administration.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">48 registered investment companies consisting of 49 portfolios</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="15%"><FONT FACE="Times New Roman" SIZE="2">Bowne&nbsp;&amp;&nbsp;Co.,&nbsp;Inc. (financial&nbsp;printers); Vornado&nbsp;Realty Trust, Inc. (real estate holding company); Vornado Operating Company&nbsp;(real estate company);
Alexander&#146;s Inc. (real estate company)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Edward D. Zinbarg (68)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">Director since 2003</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="24%"><FONT FACE="Times New Roman" SIZE="2">Self-employed financial consultant since 1994; Executive Vice President of the Prudential Insurance Company of America from 1988 to 1994; Former Director of Prudential Reinsurance
Company and former Trustee of the Prudential Foundation.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="12%"><FONT FACE="Times New Roman" SIZE="2">48 registered investment companies consisting of 49 portfolios</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="15%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD></TR>
</TABLE> <HR WIDTH="10%" SIZE="1" NOSHADE COLOR="#000000" ALIGN="left">
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">The address of each non-interested Director is P.O. Box 9095, Princeton, New Jersey 08543-9095. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">**</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Each Director serves until his or her successor is elected and qualified or until his or her death, resignation, or removal as provided in the Fund&#146;s By-laws, Charter or by
statute or until December 31 of the year in which he or she turns 72. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">54 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Certain biographical and other information relating to the Director who is an &#147;interested
person&#148; of the Fund as defined in the 1940 Act (the &#147;interested Director&#148;) 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR>
<TD VALIGN="bottom" WIDTH="20%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="1"><B>Name, Address&#134;&nbsp;and Age</B></FONT></P><HR WIDTH="136" SIZE="1" NOSHADE ALIGN="left" COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="8%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Position(s)<BR>Held with<BR>the Fund</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="11%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Term of Office<BR>and Length of<BR>Time Served</B></FONT></P><HR SIZE="1" NOSHADE
COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="31%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Principal Occupation(s)</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>During Past Five Years</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="11%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Number&nbsp;of&nbsp;FAM/<BR>MLIM-Advised<BR>Funds and<BR>Portfolios<BR>Overseen</B></FONT></P><HR
SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Public<BR>Directorships</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Terry K. Glenn* (62)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="8%"><FONT FACE="Times New Roman" SIZE="2">President** and Director***</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="11%"><FONT FACE="Times New Roman" SIZE="2">President and Director of the Fund since 2003</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="31%"><FONT FACE="Times New Roman" SIZE="2">Chairman of the FAM/MLIM-advised funds; Chairman (Americas Region) of the Investment Adviser from 2000 to 2002; Executive Vice President of the Investment Adviser and MLIM (which
terms as used herein include their corporate predecessors) from 1983 to 2002; President of FAM Distributors, Inc. (&#147;FAMD&#148;) from 1986 to 2002 and Director thereof from 1991 to 2002; Executive Vice President and Director of Princeton
Services, Inc. (&#147;Princeton Services&#148;) from 1993 to 2002; President of Princeton Administrators, L.P. from 1988 to 2002; Director of Financial Data Services, Inc. from 1985 to 2002.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="11%"><FONT FACE="Times New Roman" SIZE="2">120 registered investment companies consisting of 165 portfolios</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="9%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Donald C. Burke (43)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="8%"><FONT FACE="Times New Roman" SIZE="2">Vice President and Treasurer</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="11%"><FONT FACE="Times New Roman" SIZE="2">Vice President and Treasurer of the Fund since 2003**</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="31%"><FONT FACE="Times New Roman" SIZE="2">First Vice President of the Investment Adviser and MLIM since 1997 and Treasurer thereof since 1999; Senior Vice President and Treasurer of Princeton Services since 1999; Vice
President of FAMD since 1999; Vice President of the Investment Adviser and MLIM from 1990 to 1997; Director of Taxation of MLIM since 1990.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="11%"><FONT FACE="Times New Roman" SIZE="2">119 registered investment companies consisting of 164 portfolios</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="9%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Kevin Booth (48)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="8%"><FONT FACE="Times New Roman" SIZE="2">Vice President and Co-Portfolio Manager</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="11%"><FONT FACE="Times New Roman" SIZE="2">Vice President and Co-Portfolio Manager since 2003**</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="31%"><FONT FACE="Times New Roman" SIZE="2">Director of MLIM since 1998; Vice President of MLIM from 1991 to 1998.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="11%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">5 Registered investment companies consisting of</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">3 portfolios</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="9%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><I>(continued
on next page) </I></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">55 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">



<TR>
<TD VALIGN="bottom" WIDTH="20%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="1"><B>Name, Address&#134;&nbsp;and Age</B></FONT></P><HR WIDTH="136" SIZE="1" NOSHADE ALIGN="left" COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="8%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Position(s)<BR>Held with<BR>the Fund</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="11%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Term of Office<BR>and Length of<BR>Time Served</B></FONT></P><HR SIZE="1" NOSHADE
COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="31%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Principal Occupation(s)</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>During Past Five Years</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="11%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Number&nbsp;of&nbsp;FAM/<BR>MLIM-Advised<BR>Funds and<BR>Portfolios<BR>Overseen</B></FONT></P><HR
SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Public<BR>Directorships</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>

<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Joseph P. Matteo (39)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="8%"><FONT FACE="Times New Roman" SIZE="2">Vice President and Co-Portfolio Manager</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="11%"><FONT FACE="Times New Roman" SIZE="2">Vice President and Co-Portfolio Manager since 2003**</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="31%"><FONT FACE="Times New Roman" SIZE="2">Director of MLIM since 2001; Vice President of MLIM from 1997 to 2000; Vice President of The Bank of New York from 1994 to 1997.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="11%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">5 Registered investment companies consisting of</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">3 portfolios</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="9%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="20%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Bradley J. Lucido (37)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="8%"><FONT FACE="Times New Roman" SIZE="2">Secretary</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="11%"><FONT FACE="Times New Roman" SIZE="2">Secretary of the Fund since 2003**</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="31%"><FONT FACE="Times New Roman" SIZE="2">Director of MLIM since 2002; Vice President of MLIM from 1999 to 2002; attorney with the Investment Adviser since 1995; attorney in private practice from 1991 to 1995.</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="11%"><FONT FACE="Times New Roman" SIZE="2">10 registered investment companies consisting of 10 portfolios</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="9%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD></TR>
</TABLE> <HR WIDTH="10%" SIZE="1" NOSHADE COLOR="#000000" ALIGN="left">
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#134;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">The address of Mr. Glenn and each officer listed is P.O. Box 9011, Princeton, New Jersey 08543-9011. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Mr. Glenn is a director, trustee or member of an advisory board of certain other FAM/MLIM-advised funds. Mr. Glenn is an &#147;interested person,&#148; as defined in the 1940 Act,
of the Fund based on his former positions with FAM, MLIM, FAMD, Princeton Services and Princeton Administrators, L.P. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">**</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Elected by and serves at the pleasure of the Board of Directors of the Fund. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">***</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">As Director, Mr. Glenn serves until his successor is elected and qualified or until his death or resignation, or removal as provided in the Fund&#146;s By-laws or Charter or by
statute, or until December 31 of the year in which he turns 72. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">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&#146;s Directors, and the remaining Directors will be
elected by all holders of capital stock, voting as a single class. See &#147;Description of Capital Stock.&#148; </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Share Ownership </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Information relating to each Director&#146;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 (&#147;Supervised Merrill Lynch Funds&#148;) as of December 31, 2002 is set forth in the chart below. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">56 </FONT></P>


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<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR>
<TD VALIGN="bottom" WIDTH="57%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="1"><B>Name</B></FONT></P><HR WIDTH="30" SIZE="1" NOSHADE ALIGN="left" COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="17%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Aggregate&nbsp;Dollar&nbsp;Range<BR>of Equity in the Fund</B></FONT></P><HR SIZE="1" NOSHADE
COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="7%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Aggregate&nbsp;Dollar&nbsp;Range<BR>of Securities in<BR>Supervised Merrill<BR>Lynch Funds*</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="57%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><I>Interested Director:</I></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="57%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Terry K. Glenn</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="17%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="16%"><FONT FACE="Times New Roman" SIZE="2">Over&nbsp;$100,000</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="57%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><I>Non-interested Director:</I></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="57%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Ronald W. Forbes</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="17%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="16%"><FONT FACE="Times New Roman" SIZE="2">Over&nbsp;$100,000</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="57%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Cynthia A. Montgomery</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="17%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="16%"><FONT FACE="Times New Roman" SIZE="2">$50,001&nbsp;-&nbsp;$100,000</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="57%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Charles C. Reilly</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="17%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="16%"><FONT FACE="Times New Roman" SIZE="2">Over&nbsp;$100,000</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="57%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Kevin A. Ryan</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="17%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="16%"><FONT FACE="Times New Roman" SIZE="2">Over&nbsp;$100,000</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="57%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Roscoe S. Suddarth</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="17%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="16%"><FONT FACE="Times New Roman" SIZE="2">Over&nbsp;$100,000</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="57%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Richard R. West</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="17%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="16%"><FONT FACE="Times New Roman" SIZE="2">Over&nbsp;$100,000</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="57%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Edward D. Zinbarg</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="17%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="7%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="16%"><FONT FACE="Times New Roman" SIZE="2">Over&nbsp;$100,000</FONT></TD></TR>
</TABLE> <HR WIDTH="10%" SIZE="1" NOSHADE COLOR="#000000" ALIGN="left">
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">For the number of FAM/MLIM-advised funds from which each Director receives compensation, see the table above under &#147;&#151;Biographical Information.&#148;
</FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 any 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 &amp; Co. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Compensation of Directors </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Pursuant to its investment advisory agreement with the Fund (the &#147;Investment Advisory Agreement&#148;), 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 &amp; Co. or its subsidiaries. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund pays each non-interested Director a combined fee of $<B></B>4,400 per year for service on the Board and on the Committee, plus $<B></B>325 per
in-person Board meeting attended and $<B></B>325 per in-person Committee meeting attended. Each of the Co-Chairmen of the Committee receives an additional annual fee of $<B></B>1,000 per year. The Fund reimburses each non-interested Director for his
or her out-of-pocket expenses relating to attendance at Board and Committee meetings. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">57 </FONT></P>


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<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR>
<TD VALIGN="bottom" WIDTH="28%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="1"><B>Name</B></FONT></P><HR WIDTH="30" SIZE="1" NOSHADE ALIGN="left" COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP WIDTH="7%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Position<BR>with&nbsp;Fund</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Estimated<BR>Aggregate<BR>Compensation<BR>from Fund</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Pension Retirement<BR>Benefits&nbsp;Accrued&nbsp;as<BR>Part&nbsp;of&nbsp;Fund&nbsp;Expense</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Estimated<BR>Annual&nbsp;Benefits<BR>upon&nbsp;Retirement</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Aggregate<BR>Compensation from<BR>Fund and other<BR>FAM/MLIM-Advised<BR>Funds</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="28%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Ronald W. Forbes*</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="7%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">8,000</FONT></TD>
<TD NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">308,400</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="28%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Cynthia A. Montgomery</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,000</FONT></TD>
<TD NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">266,400</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="28%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Charles C. Reilly*</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">8,000</FONT></TD>
<TD NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">308,400</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="28%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Kevin A. Ryan</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,000</FONT></TD>
<TD NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">266,400</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="28%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Roscoe S. Suddarth</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,000</FONT></TD>
<TD NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">266,400</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="28%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Richard R. West</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,000</FONT></TD>
<TD NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">275,400</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="28%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Edward D. Zinbarg</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,000</FONT></TD>
<TD NOWRAP VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">None</FONT></TD>
<TD VALIGN="bottom" WIDTH="9%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">266,400</FONT></TD></TR>
</TABLE> <HR WIDTH="10%" SIZE="1" NOSHADE COLOR="#000000" ALIGN="left">
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">*&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Co-Chairman of the Committee. </FONT></TD></TR></TABLE>    <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>INVESTMENT ADVISORY AND MANAGEMENT ARRANGEMENTS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Investment Adviser, which is owned and controlled by ML &amp; 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 June 2003, the Investment Adviser and its affiliates, including MLIM, had a total of approximately $471 billion in investment company and other portfolio assets under management, including approximately $10 billion in the senior loan market. 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 &amp; Co. and Princeton Services. The principal business address of the Investment Adviser
is 800 Scudders Mill Road, Plainsboro, New Jersey 08536. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">The Investment Advisory Agreement provides that, subject to the direction of the Fund&#146;s Board of Directors, the Investment Adviser is responsible for the actual management of the Fund&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;s portfolio managers will consider analyses from various sources, make the necessary investment decisions, and place orders for transactions
accordingly. The Investment Adviser will also be responsible for the performance of certain management services for the Fund. The Fund will be managed by a team of investment professionals from the Investment Adviser. The co-portfolio managers
primarily responsible for the Fund&#146;s day-to-day management are Kevin Booth and Joseph P. Matteo, who together have more than 41 years of investment experience, including the analysis and management of senior floating rate loans and the use of
leverage techniques to manage portfolios. The portfolio managers will be supported by a team of 15 analysts, who will independently evaluate, rate and monitor the portfolio securities and senior loans held by the Fund. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">58 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Kevin Booth is a Director of MLIM. Mr. Booth joined MLIM in 1991 and has experience in a wide range
of fixed income products. Mr. Booth earned a bachelor&#146;s degree from the State University of New York at Binghampton and an MBA from New York University. He is a Chartered Financial Analyst. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Joseph P. Matteo is a Director of MLIM. Mr. Matteo joined MLIM in 1997
and has core experience in bank loans, high yield and distressed investing. Mr. Matteo earned a bachelor&#146;s degree from the College of William and Mary and an MBA from the Fuqua School of Business at Duke University. </FONT></P>    <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">For its services, the Fund pays the Investment Adviser a monthly fee at
the annual rate of <B></B>0.75% of an aggregate of (i) the Fund&#146;s average daily net assets and (ii) the proceeds of any outstanding borrowings used for leverage (&#147;average daily net assets&#148; means the average daily 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 daily net assets is determined at the end of each month on the basis of the average net assets of the Fund for each day during the month. The liquidation
preference of any outstanding preferred stock (other than accumulated dividends) is not considered a liability in determining the Fund&#146;s average daily net assets. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 (&#147;State Street&#148;) 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146; written notice at the option of either party thereto or by the vote of the stockholders of the Fund. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In connection with the Board of Director&#146;s consideration of the Investment Advisory Agreement, the Board of Directors reviewed information reasonably
necessary to evaluate the terms of the Investment Advisory Agreement derived from a number of sources and covering a range of issues relating to, among other things, </FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">59 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

  <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">alternatives to the Investment Advisory Agreement. <B></B>The Board of Directors considered the amount of money paid to the Investment Adviser and 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 the investment advisory services to be provided to the Fund, the Investment Adviser and its affiliates will provide administrative services, stockholder 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&#146;s Board of Directors also considered the anticipated costs and the direct and indirect benefits to the Investment
Adviser from its relationship with the Fund. The benefits considered by the Board of Directors included not only the Investment Adviser&#146;s compensation for investment advisory services but also compensation paid to the Investment Adviser and its
affiliates for the non-advisory services provided to the Fund, as described above. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">In considering the Investment Advisory Agreement, the Board of Directors reviewed the nature of the services to be provided by the Investment Adviser and its affiliates, particularly in light of the experience,
resources and strengths of the Investment Adviser and its affiliates in managing investment companies that invest in senior loans and other high yield securities as well as investment companies that utilize leverage. The Board of Directors noted
that in connection with the Fund&#146;s investment in such senior loans and other high yield securities, the Investment Adviser will perform an independent credit analysis of issuers and borrowers. Also, the Board of Directors noted that investments
by the Fund in senior loans and other high yield securities that are rated in the lowest rating categories or in Distressed Securities may involve the Investment Adviser in workouts, restructurings and bankruptcies of the issuers of such securities.
The Board of Directors considered that as a consequence, management of the Fund&#146;s portfolio is considerably more involved and expensive than management of a more traditional portfolio of fixed rate debt securities or equity securities. The
Board of Directors also took into account as a favorable factor their experience as directors of other leveraged, closed-end investment companies managed by the Investment Adviser that invest in senior loans and other high yield securities and the
performance of those funds as compared to similar leveraged, closed-end investment companies investing in similar securities and managed by other investment advisers (&#147;comparable funds&#148;). The Board of Directors, based on their experience
as directors of other investment companies managed by the Investment Adviser and its affiliates, also focused on the quality of the compliance and administrative staff at the Investment Adviser. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In connection with its consideration of the Investment Advisory
Agreement, the Board of Directors also reviewed the expenses of comparable funds, particularly information on the Fund&#146;s advisory fee rate as compared to those of comparable leveraged, closed-end funds that invest primarily in senior loans as
provided by Lipper Inc. The Board of Directors noted that the Fund would have the lowest contractual advisory fee rate at the estimated asset level for the Fund among the comparable funds. The Board of Directors further noted that the Fund would
have the second lowest actual advisory fee as a percentage of total assets (after giving effect to one comparable fund&#146;s fee waiver and/or expense reimbursement) and the second lowest actual advisory fee as a percentage of assets attributable
to common stock assuming the Fund&#146;s anticipated level of borrowings (after giving effect to one comparable fund&#146;s fee waiver and/or expense reimbursement). The Board of Directors 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&#146;s assets. The Fund&#146;s Board of Directors also reviewed materials
supplied by counsel that were prepared for use by the Board of Directors in fulfilling its duties under the 1940 Act. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">60 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Based on the foregoing and such other matters as were deemed relevant, the Board of Directors,
including a majority of the non-interested Directors, concluded that the advisory fee rate was reasonable in relation to services to be rendered and approved the Investment Advisory Agreement. The non-interested Directors were represented by
independent counsel who assisted them in their deliberations. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Code of
Ethics </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;s Board of Directors approved a Code
of Ethics under Rule 17j-1 of the 1940 Act that covers the Fund and the Investment Adviser. 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Proxy Voting Procedures </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;s Board of Directors has delegated to the Investment Adviser authority to vote all proxies relating to the Fund&#146;s portfolio securities.
The Investment Adviser has adopted policies and procedures (&#147;Proxy Voting Procedures&#148;) with respect to the voting of proxies related to the portfolio securities held in the account of one or more of its clients, including the Fund.
Pursuant to these Proxy Voting Procedures, the Investment Adviser&#146;s primary objective when voting proxies is to make proxy voting decisions solely in the best interests of the Fund and its stockholders, and to act in a manner that the
Investment Adviser believes is most likely to enhance the economic value of the securities held by the Fund. The Proxy Voting Procedures are designed to ensure that the Investment Adviser considers the interests of its clients, including the Fund,
and not the interests of the Investment Adviser, when voting proxies and that real (or perceived) material conflicts that may arise between the Investment Adviser&#146;s interest and those of the Investment Adviser&#146;s clients are properly
addressed and resolved. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In order to implement the Proxy Voting
Procedures, the Investment Adviser has formed a Proxy Voting Committee (the &#147;Proxy Committee&#148;). The Proxy Committee is comprised of the Investment Adviser&#146;s Chief Investment Officer (the &#147;CIO&#148;), one or more other senior
investment professionals appointed by the CIO, portfolio managers and investment analysts appointed by the CIO and any other personnel the CIO deems appropriate. The Proxy Committee will also include two non-voting representatives from the
Investment Adviser&#146;s legal department appointed by the Investment Adviser&#146;s General Counsel. The Proxy Committee&#146;s membership shall be limited to full-time employees of the Investment Adviser. No person with any investment banking,
trading, retail brokerage or research responsibilities for the Investment Adviser&#146;s affiliates may serve as a member of the Proxy Committee or participate in its decision making (except to the extent such person is asked by the Proxy Committee
to present information to the Proxy Committee, on the same basis as other interested, knowledgeable parties not affiliated with the Investment Adviser might be asked to do so). The Proxy Committee determines how to vote the proxies of all clients,
including the Fund, that have delegated proxy voting authority to the Investment Adviser and seeks to ensure that all votes are consistent with the best interests of those clients and are free from unwarranted and inappropriate influences. The Proxy
Committee establishes general proxy voting policies for the Investment Adviser and is responsible for determining how those policies are applied to specific proxy votes, in light of each issuer&#146;s unique structure, management, strategic options
and, in certain circumstances, probable economic and other anticipated consequences of alternate actions. In so doing, the Proxy Committee may determine to vote a particular proxy in a manner contrary to its generally stated policies. In addition,
the Proxy Committee will be responsible for ensuring that all reporting and recordkeeping requirements related to proxy voting are fulfilled. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">61 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Proxy Committee may determine that the subject matter of a recurring proxy issue is not suitable for
general voting policies and requires a case-by-case determination. In such cases, the Proxy Committee may elect not to adopt a specific voting policy applicable to that issue. The Investment Adviser believes that certain proxy voting issues require
investment analysis&#151;such as approval of mergers and other significant corporate transactions&#151;akin to investment decisions, and are, therefore, not suitable for general guidelines. The Proxy Committee may elect to adopt a common position
for the Investment Adviser on certain proxy votes that are akin to investment decisions, or determine to permit the portfolio manager to make individual decisions on how best to maximize economic value for the Fund (similar to normal buy/sell
investment decisions made by such portfolio manager). While it is expected that the Investment Adviser will generally seek to vote proxies over which the Investment Adviser exercises voting authority in a uniform manner for all the Investment
Adviser&#146;s clients, the Proxy Committee, in conjunction with the Fund&#146;s portfolio manager, may determine that the Fund&#146;s specific circumstances require that its proxies be voted differently. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">To assist the Investment Adviser in voting proxies, the Proxy Committee has
retained Institutional Shareholder Services (&#147;ISS&#148;). ISS is an independent adviser that specializes in providing a variety of fiduciary- level proxy-related services to institutional investment managers, plan sponsors, custodians,
consultants, and other institutional investors. The services provided to the Investment Adviser by ISS include in-depth research, voting recommendations (although the Investment Adviser is not obligated to follow such recommendations), vote
execution, and recordkeeping. ISS will also assist the Fund in fulfilling its reporting and recordkeeping obligations under the 1940 Act. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Investment Adviser&#146;s Proxy Voting Procedures also address special circumstances that can arise in connection with proxy voting. For instance,
under the Proxy Voting Procedures, the Investment Adviser generally will not seek to vote proxies related to portfolio securities that are on loan, although it may do so under certain circumstances. In addition, the Investment Adviser will vote
proxies related to securities of foreign issuers only on a best efforts basis and may elect not to vote at all in certain countries where the Proxy Committee determines that the costs associated with voting generally outweigh the benefits. The Proxy
Committee may at any time override these general policies if it determines that such action is in the best interests of the Fund. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">From time to time, the Investment Adviser may be required to vote proxies in respect of an issuer where an affiliate of the Investment Adviser (each, an
&#147;Affiliate&#148;), or a money management or other client of the Investment Adviser (each, a &#147;Client&#148;) is involved. The Proxy Voting Procedures and the Investment Adviser&#146;s adherence to those procedures are designed to address
such conflicts of interest. The Proxy Committee intends to strictly adhere to the Proxy Voting Procedures in all proxy matters, including matters involving Affiliates and Clients. If, however, an issue representing a non-routine matter that is
material to an Affiliate or a widely known Client is involved such that the Proxy Committee does not reasonably believe it is able to follow its guidelines (or if the particular proxy matter is not addressed by the guidelines) and vote impartially,
the Proxy Committee may, in its discretion for the purposes of ensuring that an independent determination is reached, retain an independent fiduciary to advise the Proxy Committee on how to vote or to cast votes on behalf of the Investment
Adviser&#146;s clients. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In the event that the Proxy Committee
determines not to retain an independent fiduciary, or it does not follow the advice of such an independent fiduciary, the powers of the Proxy Committee shall pass to a </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">subcommittee, appointed by the CIO (with advice from the Secretary of the Proxy Committee), consisting solely of Proxy Committee members selected by the CIO.
The CIO shall appoint to the subcommittee, where appropriate, only persons whose job responsibilities do not include contact with the Client and whose job evaluations would not be affected by the Investment Adviser&#146;s relationship with the
Client (or failure to retain such relationship). The subcommittee shall determine whether and how to vote all proxies on behalf of the Investment Adviser&#146;s clients or, if the proxy matter is, in their judgment, akin to an investment decision,
to defer to the applicable portfolio manager, provided that, if the subcommittee determines to alter the Investment Adviser&#146;s normal voting guidelines or, on matters where the Investment Adviser&#146;s policy is case-by-case, does not follow
the voting recommendation of any proxy voting service or other independent fiduciary that may be retained to provide research or advice to the Investment Adviser on that matter, no proxies relating to the Client may be voted unless the Secretary, or
in the Secretary&#146;s absence, the Assistant Secretary of the Proxy Committee concurs that the subcommittee&#146;s determination is consistent with the Investment Adviser&#146;s fiduciary duties. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In addition to the general principles outlined above, the Investment Adviser
has adopted voting guidelines with respect to certain recurring proxy issues that are not expected to involve unusual circumstances. These policies are guidelines only, and the Investment Adviser may elect to vote differently from the recommendation
set forth in a voting guideline if the Proxy Committee determines that it is in the Fund&#146;s best interest to do so. In addition, the guidelines may be reviewed at any time upon the request of a Proxy Committee member and may be amended or
deleted upon the vote of a majority of Proxy Committee members present at a Proxy Committee meeting at which there is a quorum. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Investment Adviser has adopted specific voting guidelines with respect to the following proxy issues: </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Proposals related to the composition of the Board of Directors of issuers other than investment companies. As a general matter, the Proxy Committee believes that a company&#146;s
Board of Directors (rather than stockholders) is most likely to have access to important, nonpublic information regarding a company&#146;s business and prospects, and is therefore best-positioned to set corporate policy and oversee management. The
Proxy Committee, therefore, believes that the foundation of good corporate governance is the election of qualified, independent corporate directors who are likely to diligently represent the interests of stockholders and oversee management of the
corporation in a manner that will seek to maximize stockholder value over time. In individual cases, the Proxy Committee may look at a nominee&#146;s history of representing stockholder interests as a director of other companies or other factors, to
the extent the Proxy Committee deems relevant. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Proposals related to the selection of an issuer&#146;s independent auditors. As a general matter, the Proxy Committee believes that corporate auditors have a responsibility to
represent the interests of stockholders and provide an independent view on the propriety of financial reporting decisions of corporate management. While the Proxy Committee will generally defer to a corporation&#146;s choice of auditor, in
individual cases, the Proxy Committee may look at an auditor&#146;s history of representing stockholder interests as auditor of other companies, to the extent the Proxy Committee deems relevant. </FONT></TD></TR></TABLE> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">Proposals related to management compensation and employee benefits. As a general matter, the Proxy Committee favors disclosure of an issuer&#146;s compensation and
benefit policies and opposes excessive compensation, but believes that compensation matters are normally best determined by an issuer&#146;s board of directors, rather than stockholders. Proposals to &#147;micro-manage&#148; an issuer&#146;s
compensation </FONT>
</P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:0%">
<FONT FACE="Times New Roman" SIZE="2">practices or to set arbitrary restrictions on compensation or benefits will, therefore, generally not be supported. </FONT></P></TD></TR></TABLE> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Proposals related to requests, principally from management, for approval of amendments that would alter an issuer&#146;s capital structure. As a general matter, the Proxy Committee
will support requests that enhance the rights of common stockholders and oppose requests that appear to be unreasonably dilutive. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Proposals related to requests for approval of amendments to an issuer&#146;s charter or by-laws. As a general matter, the Proxy Committee opposes poison pill provisions.
</FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Routine proposals related to requests regarding the formalities of corporate meetings. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Proposals related to proxy issues associated solely with holdings of investment company shares. As with other types of companies, the Proxy Committee believes that a fund&#146;s
Board of Directors (rather than its stockholders) is best-positioned to set fund policy and oversee management. However, the Proxy Committee opposes granting Boards of Directors authority over certain matters, such as changes to a fund&#146;s
investment objective, that the 1940 Act envisions will be approved directly by stockholders. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Proposals related to limiting corporate conduct in some manner that relates to the stockholder&#146;s environmental or social concerns. The Proxy Committee generally believes that
annual stockholder meetings are inappropriate forums for discussion of larger social issues, and opposes stockholder resolutions &#147;micromanaging&#148; corporate conduct or requesting release of information that would not help a stockholder
evaluate an investment in the corporation as an economic matter. While the Proxy Committee is generally supportive of proposals to require corporate disclosure of matters that seem relevant and material to the economic interests of stockholders, the
Proxy Committee is generally not supportive of proposals to require disclosure of corporate matters for other purposes. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>PORTFOLIO TRANSACTIONS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Subject to policies established by the Board of Directors, the Investment Adviser is primarily responsible for the execution of the Fund&#146;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&#146;s general execution and operations facilities and the firm&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">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 </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">The Fund purchases senior loans in individually negotiated transactions with commercial banks, thrifts, insurance companies, finance companies and other financial institutions and institutional investors. In selecting
such institutions, the Investment Adviser may consider, among other factors, the financial strength, professional ability, level of service and research capability of the institution. See &#147;Investment Objective and Policies&#151;Description of
Senior Loans.&#148; While such institutions generally are not required to repurchase interests in senior loans which they have sold, they may act as principal or on an agency basis in connection with the Fund&#146;s disposition of senior loans.
</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">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 </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">65 </FONT></P>


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<FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Securities, including senior loans, 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 investment 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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Investments in high yield securities, including high yield bonds, senior loans or other privately placed securities, may result in the Fund receiving material nonpublic information (&#147;inside information&#148;) 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund may from time to time
participate on committees formed by creditors to negotiate with the management of financially troubled issuers of securities held by the Fund, or to otherwise enforce the Fund&#146;s rights as a creditor or to protect the value of securities held by
the Fund. Such participation may subject the Fund to expenses such as legal fees and may make the Fund an &#147;insider&#148; of the issuer for purposes of the federal securities laws, and therefore may restrict the Fund&#146;s ability to trade in
or acquire additional positions in a particular security when it might otherwise desire to do so. Participation by the Fund on such committees also may expose the Fund to potential liabilities under the federal bankruptcy laws or other laws
governing the rights of creditors and debtors. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Portfolio Turnover
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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 </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">66 </FONT></P>


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<FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>DIVIDENDS AND DISTRIBUTIONS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">The Fund intends to distribute dividends from 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. From and after issuance of any preferred stock, monthly dividends to holders of common stock normally will consist of net investment income remaining after the payment of dividends on the preferred stock. The Fund currently intends
either to pay out less than the entire amount of net investment income earned in any particular period or 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 dividend 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 attempt to maintain a more 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 <I>pro rata</I> at least annually to holders of common stock and any preferred stock. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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, (1) all accumulated preferred stock dividends have been paid and (2) the net asset value of the Fund&#146;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). </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">See &#147;Automatic Dividend Reinvestment Plan&#148; 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The yield on the Fund&#146;s common stock
will vary from period to period depending on factors including, but not limited to, the length of the initial investment period, market conditions, the timing of the Fund&#146;s investment in portfolio securities, the securities comprising the
Fund&#146;s portfolio, the ability of the issuers of the portfolio securities to pay dividends or interest 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 borrowings and the issuance </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">of the Fund&#146;s preferred stock or debt securities, the effects of leverage on the common stock discussed above under &#147;Risk Factors and Special
Considerations&#151;Leverage,&#148; the timing of the investment of leverage proceeds in portfolio securities, the Fund&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>TAXES </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>General
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund intends to elect and to qualify for the special
tax treatment afforded regulated investment companies (&#147;RICs&#148;) under the Code. As long as it so qualifies, in any taxable year in which it distributes at least 90% of its income, 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, the Fund would be taxed in the same manner as an ordinary corporation and all distributions from earnings and profits to its stockholders would be taxable as ordinary income. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 &#147;ordinary income dividends&#148;) are taxable to stockholders as ordinary income. Distributions, if any, from the excess of net long term capital gains over net short term capital losses derived from the sale of securities or
from certain transactions in interest rate swaps (&#147;capital gain dividends&#148;) are taxable as long term capital gains, regardless of the length of time the stockholder has owned Fund shares. 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 capital gain dividends. Any loss upon the sale or exchange of Fund shares held for six months or less is treated as long term capital loss
to the extent of any capital gain dividends received by the stockholder. Distributions in excess of the Fund&#146;s earnings and profits first reduce the adjusted tax basis of a holder&#146;s common stock and, after such adjusted tax basis is
reduced to zero, constitute capital gains to such holder (assuming such common stock is held as a capital asset). </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Dividends are taxable to stockholders even though they are reinvested in additional shares of the Fund. Distributions by the Fund, whether from ordinary
income or capital gains, generally are not eligible for the dividends received deduction allowed to corporations under the Code. 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 </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">date in one of such months, then such dividend is treated for tax purposes as being paid and received on December 31 of the year in which the dividend was
declared. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Internal Revenue Service (the
&#147;IRS&#148;) has taken the position in a revenue ruling that if a RIC has two or more classes of shares, it may designate distributions made to each class in any year as consisting of no more than such class&#146;s proportionate share of
particular types of income, including the different categories of capital gains, discussed above. A class&#146;s proportionate share of a particular type of income is determined according to the percentage of total dividends paid by the RIC during
the 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&#146; proportionate shares of such income. Thus, capital gain dividends, as discussed above, will be allocated among the holders of common stock and any series of preferred stock in proportion to the total dividends paid to each class during
the taxable year, or otherwise as required by applicable law. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Recently enacted legislation reduces the tax rate for individuals on certain dividend income and net capital gain. Distribution allocable to such dividend income and net capital gain received by individual stockholders of the Fund may be
subject to the reduced tax rate. However, to the extent the Fund&#146;s distributions are derived from interest income on debt securities or certain types of preferred securities which are treated as debt for federal income tax purposes and from
short term capital gain, the Fund&#146;s distributions will not be eligible for this reduced dividend tax rate. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 &#147;Risk Factors and Special Considerations&#151; Leverage.&#148; 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 &#147;Dividends and Distributions.&#148; Limits on the Fund&#146;s payment of dividends may prevent the Fund from distributing at least
90% of its net investment income and may therefore jeopardize the Fund&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 &#147;preferential&#148; 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Upon the sale or exchange of Fund shares held as a capital asset, a stockholder may realize a capital
gain or loss which will be long term or short term depending on the stockholder&#146;s holding period for the shares. Generally, gain or loss will be long term if the shares have been held for more than one year. 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 a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Under certain Code provisions, some stockholders may be subject to a withholding tax on ordinary income dividends, capital gain dividends and redemption
payments (&#147;backup withholding&#148;). 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&#146;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 tax. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Interest income from non-U.S. securities may be subject to withholding and other taxes imposed by the country in which the issuer is located. Tax
conventions between certain countries and the United States may reduce or eliminate such taxes. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 &#147;pass through&#148; 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 IRS 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&#146;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
</FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>   <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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
another entity having significant passive income or assets) organized under foreign law, the Fund may be treated as owning shares in a passive foreign investment company (&#147;PFIC&#148;) 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 &#147;interest charge&#148;), 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 &#147;excess distributions&#148;), 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
&#147;mark to market&#148; 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>    <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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, (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 stockholders. Special tax rules also will require the Fund to mark-to-market certain types of
positions in it 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 transactions, make appropriate tax elections and
make appropriate entries in it 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. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Under recently promulgated Treasury Regulations, if a stockholder recognizes
a loss with respect to shares of $2 million or more for an individual stockholder, or $10 million or more for a corporate stockholder, in any single taxable year (or a greater amount over a combination of years), the stockholder must file with the
IRS a disclosure statement on Form 8886. Direct holders of portfolio securities are, in many cases, exempted from this reporting requirement, but under current guidance stockholders of regulated investment companies are not exempted. The fact that a
loss is reportable under these regulations does not affect the legal determination of whether or not the taxpayer&#146;s treatment of the loss is proper. Stockholders should consult with their tax advisers to determine the applicability of these
regulations in light of their individual circumstances. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">71 </FONT></P>


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<FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Ordinary income and capital gain dividends also may 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>AUTOMATIC DIVIDEND REINVESTMENT PLAN </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Pursuant to the Fund&#146;s Automatic Dividend Reinvestment Plan (the &#147;Plan&#148;), unless a stockholder is ineligible or elects otherwise, all dividend and capital gains distributions are automatically
reinvested by EquiServe Trust Company, N.A. (&#147;EquiServe&#148;), as agent for stockholders in administering the Plan (the &#147;Plan Agent&#148;), in additional shares of common stock of the Fund. Stockholders whose shares are held in the name
of a broker or nominee should contact such broker or nominee to confirm that they are eligible to participate in the Plan. 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 EquiServe, 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 EquiServe, 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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Whenever the Fund declares an
ordinary income dividend or a capital gain dividend (collectively referred to as &#147;dividends&#148;) 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&#146;s account, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized shares of common stock from the
Fund (&#147;newly issued shares&#148;) or (ii) by purchase of outstanding shares of common stock on the open market (&#147;open-market purchases&#148;) on the 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 &#147;market premium&#148;), 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&#146;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 &#147;market discount&#148;), the Plan Agent will invest the dividend amount in shares acquired on behalf of the participant in open-market purchases. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">72 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 &#147;ex-dividend&#148; basis or in no event more than 30 days after the dividend payment date (the &#147;last purchase date&#148;) 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
&#147;ex-dividend&#148; 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&#146;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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Plan Agent maintains all stockholders&#146; 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&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">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&#146;s name and held for the account of beneficial owners who are to participate in the Plan. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 <I>pro rata</I> share of brokerage commissions incurred with respect to the Plan Agent&#146;s open-market purchases in connection with the reinvestment of
dividends. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 &#147;Taxes.&#148; </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">73 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">All correspondence concerning the Plan should be directed to the Plan
Agent at P.O. Box 43011, Providence, RI 02940-3011. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><B>MUTUAL FUND INVESTMENT OPTION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Purchasers of
shares of common stock of the Fund in this offering will have an investment option consisting of the right to reinvest the net proceeds from a sale of such shares (the &#147;Original Shares&#148;) in Class A initial sales charge shares of certain
FAM/MLIM advised open-end mutual funds (&#147;Eligible Class A Shares&#148;) 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 Fund shares must be made
through Merrill Lynch or another broker-dealer or other financial intermediary (&#147;Selected Dealer&#148;) that maintains an arrangement with the open-end fund&#146;s distributor for the purchase of Eligible Class A Shares, and the net proceeds
therefrom must be immediately reinvested in Eligible Class A Shares. Second, the Fund shares must either have been acquired in the Fund&#146;s initial public offering or represent dividends paid on shares of common stock acquired in such offering.
Third, the Fund shares must have been continuously maintained in a securities account held at Merrill Lynch or another Selected Dealer. Fourth, there must be a minimum purchase of $250 to be eligible for the investment option. 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>NET ASSET VALUE </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Net asset value per share of common stock is determined Monday through Friday as of the close of business on the NYSE (generally, the NYSE closes at 4:00
p.m., Eastern time), on each business day during which the NYSE is open for trading. 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">The Fund makes available for publication the net asset value of its shares of common stock determined as of the last business day each week. Currently, the net asset values of shares of publicly traded closed-end
investment companies investing in debt securities are published in <I>Barron&#146;s</I>, the Monday edition of <I>The Wall Street Journal</I> and the Monday and Saturday editions of <I>The New York Times</I>. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;s senior loans will be valued by an independent third-party
pricing service approved by the Board of Directors. The pricing service typically values senior loans for which the pricing service can obtain at least two price quotations from banks or dealers in senior loans by calculating the mean of the last
available bid and asked prices in the market for such senior loans, and then using the mean of those two means. For those senior loans for which the pricing service can obtain only one price quote, the pricing service will value the senior loan
</FONT>
</P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">74 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">at the mean between the bid and asked price for such senior loan. For the limited number of senior loans for which no reliable price quotes are available,
such senior loans may be valued by the pricing service through the use of pricing matrices to determine valuations. If the pricing service does not provide a value for a senior loan, the Investment Adviser will value the senior loan at fair value,
which is intended to be market value. In valuing a senior loan at fair value, the Investment Adviser will consider, among other factors (i) the creditworthiness of the borrower and any Intermediate Participants, (ii) the current interest rate period
until the next interest rate resets and maturity of the senior loan, (iii) recent prices in the market for similar senior loans, if any, and (iv) recent prices in the market for instruments of similar quality, rate period until the next interest
rate reset and maturity. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Generally, other portfolio
securities that are traded on stock exchanges are valued at the last sale price on the exchange on which such securities are traded as of the close of business on the day the securities are being valued or, lacking any sales, at the last available
bid price for long positions, and at the last available ask price for short positions. In cases where securities are traded on more than one exchange, the securities are valued on the exchange designated by or under the authority of the Directors as
the primary market. Long positions in securities traded in the over-the-counter (&#147;OTC&#148;) market are valued at the last available bid price or yield equivalent obtained from one or more dealers or pricing services approved by the Directors.
Portfolio securities that are traded in both the OTC market and on a stock exchange are valued according to the broadest and most representative market. Short positions in securities traded in the OTC market are valued at the last available ask
price. When the Fund writes an option, the amount of the premium received is recorded on the books of the Fund as an asset and an equivalent liability. The amount of the liability is subsequently valued to reflect the current market value of the
option written, based upon the last sale price in the case of exchange-traded options or, in the case of options traded in the OTC market, the last asked price. Options purchased by the Fund are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC market, the last bid price. The value of swaps, including interest rate swaps, caps and floors, will be determined by obtaining dealer quotations. Other investments, including
futures contracts and related options, are stated at market value. Obligations with remaining maturities of 60 days or less are valued at amortized cost unless this method no longer produces fair valuations. Repurchase agreements will be valued at
cost plus accrued interest. The Fund employs certain pricing services to provide securities prices for the Fund. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including valuations furnished by the pricing services retained by the Fund which may use a matrix system for valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Fund under the general supervision of the Directors. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Generally trading in non-U.S. securities, as well as mortgage-backed or other securities issued or guaranteed by U.S. Government agencies or money market instruments is substantially completed each day at various
times prior to the close of business on the NYSE. The values of such securities used in computing the net asset value of the Fund&#146;s shares are determined as of such times. Foreign currency exchange rates are also 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&#146;s net asset value. If events occur during such periods, that are expected to materially affect the value of such securities, then those securities may be valued at their fair value as determined in good faith by the
Board of Directors of the Fund or by the Investment Adviser using a pricing service and/or procedures approved by the Directors. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">75 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>DESCRIPTION OF CAPITAL STOCK </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 &#147;Risk Factors and Special Considerations&#151;Leverage.&#148; </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Common Stock </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Shares of common stock, when
issued and outstanding, will be fully paid and non-assessable. Stockholders are entitled to share <I>pro rata</I> 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In the event that the Fund issues
preferred stock and so long as any shares of the Fund&#146;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 &#147;Risk Factors and Special
Considerations&#151;Leverage.&#148; </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund will send
unaudited reports at least semi-annually and audited annual financial statements to all of its stockholders. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Investment Adviser provided the initial capital for the Fund by purchasing
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock of the Fund for $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. 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. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Certain Provisions of the Charter and By-laws </B></FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;s Charter includes 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<FONT
SIZE="1"><SUP>&nbsp;2</SUP></FONT><FONT SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT FACE="Times New Roman" SIZE="2" COLOR="#000000">% of the shares entitled to vote in an election to fill that directorship. </FONT></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In addition, the Charter requires the favorable vote of the holders of at
least 66<FONT SIZE="1"><SUP>&nbsp;2</SUP></FONT><FONT SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT FACE="Times New Roman" SIZE="2" COLOR="#000000">% of the Fund&#146;s shares to approve, adopt or authorize the following: </FONT></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">a merger or consolidation or statutory share exchange of the Fund with any other corporation; </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">76 </FONT></P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">a sale of all or substantially all of the Fund&#146;s assets (other than in the regular course of the Fund&#146;s investment activities); or </FONT></TD></TR></TABLE> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">a liquidation or dissolution of the Fund; </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">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&#146;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&#146;s shares of preferred stock then entitled to be voted, voting as a separate class. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In addition, conversion of the Fund to an open-end investment company would require an amendment to the Fund&#146;s Charter. 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<FONT SIZE="1"><SUP>&nbsp;2</SUP></FONT><FONT SIZE="2">/</FONT><FONT
SIZE="1">3</FONT><FONT FACE="Times New Roman" SIZE="2" COLOR="#000000">% of the Fund&#146;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.
</FONT></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Conversion to an open-end investment company would also
require changes in certain of the Fund&#146;s investment policies and restrictions, such as those relating to the borrowing of money and the purchase of illiquid securities. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Charter 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 Charter, nor any of the foregoing provisions of the Charter
requiring the affirmative vote of 66<FONT SIZE="1"><SUP>&nbsp;2</SUP></FONT><FONT SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT FACE="Times New Roman" SIZE="2" COLOR="#000000">% of shares of capital stock of the Fund, can be amended or repealed
except by the vote of such required number of shares. </FONT></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">The Board of Directors has determined that the 66<FONT SIZE="1"><SUP>&nbsp;2</SUP></FONT><FONT SIZE="2">/</FONT><FONT SIZE="1">3</FONT><FONT FACE="Times New Roman" SIZE="2" COLOR="#000000">% 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 Charter on file with the Commission for the full text of these provisions.
</FONT></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;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, </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">77 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>CUSTODIAN </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;s securities and cash are held under a custodian agreement with State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">78 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>UNDERWRITING </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund intends to offer the shares through the underwriters. Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated is
acting 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
each underwriter named below has severally agreed to purchase from the Fund, the number of shares listed opposite their names below. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="90%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR>
<TD VALIGN="bottom" WIDTH="31%" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Underwriter</B></FONT><BR><HR WIDTH="62" SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Number<BR>of&nbsp;Shares</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" COLSPAN="5" WIDTH="31%"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:5.15em; text-indent:-5.15em"><FONT FACE="Times New Roman" SIZE="2">Merrill Lynch, Pierce, Fenner &amp; Smith<BR></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; margin-left:5.15em; text-indent:-5.15em"><FONT FACE="Times New Roman"
SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="5" WIDTH="31%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Wachovia Capital Markets, LLC</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" COLSPAN="5" WIDTH="31%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">McDonald Investments Inc., a KeyCorp Company</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="5" WIDTH="31%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">SunTrust Capital Markets, Inc.</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD COLSPAN="5" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" COLSPAN="5" WIDTH="31%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman"
SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD COLSPAN="5" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><HR SIZE="3" NOSHADE COLOR="#000000"></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Commissions and Discounts </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 $<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
per share. The underwriters may allow, and the dealers may reallow, a discount not in excess of $<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B> per share to other dealers. There is a sales charge or underwriting
discount of $<B></B>.90 per share, which is equal to <B></B>4.5% 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 <B></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;, 2003. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">79 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="90%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Per&nbsp;Share</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Without<BR>Option</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>With<BR>Option</B></FONT><BR><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="60%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Public offering price</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">20.00</FONT></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="60%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Underwriting discount</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">$.90</FONT></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="60%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Proceeds, before expenses, to the Fund</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">19.10</FONT></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="11%" ><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The expenses
of the offering, excluding underwriting discount, are estimated at $<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B> and are payable by the Fund. The Fund has agreed to pay the underwriters $<B></B>.00667 per share of
common stock as a partial reimbursement of expenses incurred in connection with the offering. The Investment Adviser has agreed to pay the amount by which the offering costs (other than the underwriting discount, but including the $<B></B>.00667 per
share partial reimbursement of expenses to the underwriters) exceeds $<B></B>.04 per share of common stock. The Investment Adviser has agreed to pay all of the Fund&#146;s organizational expenses. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Overallotment Option </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund has granted the underwriters an option to purchase up to
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; additional shares at the public offering price less the underwriting discount. The underwriters may exercise the option from time to time 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&#146;s initial amount reflected in the above table. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Price
Stabilization, Short Positions and Penalty Bids </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">If the underwriters create a short position in the shares in connection with the offering, <I>i.e.</I>, 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146; short position or to stabilize the price of such shares, they may reclaim the amount of the selling concession from the underwriters and the 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">80 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Stock Exchange Listing </B></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 &#147;FRA.&#148; 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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Other Relationships </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">The Investment Adviser (and not the Fund) has agreed to pay a fee to Merrill Lynch quarterly at the annual rate of 0.15% of an aggregate of (i) the Fund&#146;s average daily net assets (including proceeds from the issuance of any preferred
stock) and (ii) the proceeds of any outstanding borrowings used for leverage, during the continuance of the Investment Advisory Agreement. The maximum amount of this fee, plus the amount of the $.00667 per share of common stock partial reimbursement
of expenses paid by the Fund to the underwriters, will not exceed 4.5% of the aggregate initial offering price of the common stock offered hereby. In addition to acting as lead underwriter in the initial public offering of the Fund&#146;s common
stock, Merrill Lynch has agreed to provide, upon request, certain after-market services to the Investment Adviser designed to maintain the visibility of the Fund and to provide relevant information, studies or reports regarding the Fund and the
closed-end investment company industry on an as-needed basis. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">The Fund anticipates that Merrill Lynch and the other underwriters may from time to time act as brokers in connection with the execution of its portfolio transactions, and after they have ceased to be underwriters, the Fund anticipates that
underwriters other than Merrill Lynch may from time to time act as dealers in connection with the execution of portfolio transactions. See &#147;Portfolio Transactions.&#148; Merrill Lynch is an affiliate of the Investment Adviser. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The address of Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated is 4
World Financial Center, New York, New York 10080. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>TRANSFER
AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The
transfer agent, dividend disbursing agent and registrar for the Fund&#146;s shares is EquiServe Trust Company, N.A., 150 Royall Street, Canton, Massachusetts 02021. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>ACCOUNTING SERVICES PROVIDER </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">State Street Bank and Trust Company, 500 College Road East, Princeton, New Jersey 08540, provides certain accounting services for the Fund. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">81 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>LEGAL OPINIONS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Certain legal matters in connection with the shares of common stock offered hereby are passed on for the Fund by Sidley
Austin Brown &amp; Wood <SMALL>LLP</SMALL>, New York, New York. Certain legal matters will be passed on for the underwriters by Clifford Chance US <SMALL>LLP</SMALL>, New York, New York. Clifford Chance US <SMALL>LLP</SMALL> may rely on the opinion
of Sidley Austin Brown &amp; Wood <SMALL>LLP</SMALL> as to certain matters of Maryland law. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>INDEPENDENT AUDITORS AND EXPERTS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The statement of assets and liabilities of the Fund as of October &nbsp;&nbsp;&nbsp;&nbsp; , 2003 included in this prospectus has been audited by
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 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. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>ADDITIONAL
INFORMATION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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
the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock Exchange, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">82 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

  <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>INDEPENDENT AUDITORS&#146; REPORT </B></FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2">To Stockholder and Board of Directors, </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2">Floating Rate Income Strategies Fund, Inc. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We have audited the accompanying statement of assets and liabilities of Floating Rate Income Strategies Fund, Inc. (the &#147;Fund&#148;) as of
October &nbsp;&nbsp;&nbsp;&nbsp;, 2003. This financial statement is the responsibility of the Fund&#146;s management. Our responsibility is to express an opinion on this financial statement based on our audit. </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 statement of assets and liabilities is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the statement of assets and liabilities. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall statement of assets and liabilities. We believe that our audit provides a reasonable basis for our opinion. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In our opinion, the statement of assets and liabilities presents fairly, in all material respects, the financial position of the Fund as of October
&nbsp;&nbsp;&nbsp;&nbsp;, 2003 in conformity with accounting principles generally accepted in the United States of America. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2">Princeton, New Jersey </FONT></P>   <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT
FACE="Times New Roman" SIZE="2">October &nbsp;&nbsp;&nbsp;&nbsp;, 2003 </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">83 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>FLOATING RATE INCOME STRATEGIES FUND, INC. </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>STATEMENT OF ASSETS AND LIABILITIES &nbsp;</B></FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>October &nbsp;&nbsp;&nbsp;&nbsp;, 2003 </B></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="90%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>ASSETS:</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="90%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Cash</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="90%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Deferred offering costs (Note 1)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="90%"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Total assets</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="90%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>LIABILITIES:</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="90%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Liabilities and accrued expenses (Note 1)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="90%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>NET ASSETS:</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="90%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>NET ASSETS CONSIST OF:</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="90%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Common Stock, par value $.10 per share; 200,000,000 shares authorized;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares issued and outstanding (Note 1)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="90%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Paid-in Capital in excess of par</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="90%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Net Assets-Equivalent to $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; net asset value per share based
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of capital stock outstanding (Note 1)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="4%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><HR SIZE="3" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD VALIGN="bottom"><HR SIZE="3" NOSHADE COLOR="#000000"></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>NOTES TO
STATEMENT OF ASSETS AND LIABILITIES </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Note
1.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Organization</I></B><B> </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">The Fund was incorporated under the laws of the State of Maryland on August 14, 2003 and is registered under the Investment Company Act of 1940, as a closed-end, diversified management investment company and has had no operations other than
the sale to Fund Asset Management, L.P. (the &#147;Investment Adviser&#148;) of an aggregate of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares for
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; on October &nbsp;&nbsp;&nbsp;&nbsp;, 2003. The General Partner of the Investment Adviser is an indirect wholly-owned subsidiary of Merrill Lynch &amp; Co., Inc. Certain
officers and/or directors of the Fund are officers of the Investment Adviser. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">The Investment Adviser, on behalf of the Fund, will incur organizational costs estimated at $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. The Investment Adviser also has agreed to pay the
amount by which the offering costs of the Fund (other than the underwriting discount, but including the $.00667 per share partial reimbursement of expenses to the underwriters) exceeds $.04 per share of common stock. Offering costs relating to the
public offering of the Fund&#146;s shares will be charged to capital at the time of issuance of shares. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Note 2.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Investment Advisory Arrangements</I></B><B> </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 0.75% of an aggregate of (i) the Fund&#146;s average daily net assets (including the proceeds from the issuance of any preferred stock), and (ii) the proceeds of any
outstanding borrowings used for leverage. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">84 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Note 3.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Federal Income Taxes</I></B><B> </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund intends to qualify as a &#147;regulated investment company&#148;
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.
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Note 4.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Accounting
Principles</I></B><B> </B></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Fund&#146;s statement
of assets and liabilities is prepared in conformity with accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. Actual results may differ from these statements.
</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">85 </FONT></P>


<p Style='page-break-before:always'>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>APPENDIX A </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>RATINGS OF SECURITIES </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Description of Moody&#146;s Investors Service, Inc.&#146;s (&#147;Moody&#146;s&#148;) Long Term Ratings </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">Aaa</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="92%"><FONT FACE="Times New Roman" SIZE="2">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 &#147;gilt
edged.&#148; 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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">Aa</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="92%"><FONT FACE="Times New Roman" SIZE="2">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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">A</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="92%"><FONT FACE="Times New Roman" SIZE="2">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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">Baa</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="92%"><FONT FACE="Times New Roman" SIZE="2">Bonds and preferred stock which are rated Baa are considered as medium grade obligations (<I>i.e</I>., 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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">Ba</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="92%"><FONT FACE="Times New Roman" SIZE="2">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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">B</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="92%"><FONT FACE="Times New Roman" SIZE="2">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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">Caa</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="92%"><FONT FACE="Times New Roman" SIZE="2">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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">Ca</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="92%"><FONT FACE="Times New Roman" SIZE="2">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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">C</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="92%"><FONT FACE="Times New Roman" SIZE="2">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.</FONT></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Moody&#146;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 </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">A-1 </FONT></P>


<p Style='page-break-before:always'>
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 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Unless noted as an exception, Moody&#146;s rating on a bank&#146;s ability to repay senior obligations extends only to branches located in countries which
carry a Moody&#146;s Sovereign Rating for Bank Deposits. Such branch obligations are rated at the lower of the bank&#146;s rating or Moody&#146;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&#146;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 denomination. In addition, risk associated with bilateral conflicts between an investor&#146;s home country and either the issuer&#146;s home country or the country where an issuer branch is
located are not incorporated into Moody&#146;s ratings. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Moody&#146;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&#146;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Note: </I>Moody&#146;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. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Moody&#146;s Short Term Ratings </B></FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Moody&#146;s short term ratings are opinions of the ability of issuers
to honor senior financial obligations and contracts. Such obligations generally have an original maturity not exceeding one year, unless explicitly noted. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Moody&#146;s employs the following designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Prime-1</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="88%"><FONT FACE="Times New Roman" SIZE="2">Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced
by many of the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structure with moderate reliance on debt and ample asset protection; broad margins
in earnings coverage of fixed financial charges and high internal cash generation; well-established access to a range of financial markets and assured sources of alternate liquidity.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="7%"><FONT FACE="Times New Roman" SIZE="2">Prime-2</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="88%"><FONT FACE="Times New Roman" SIZE="2">Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay senior short-term debt obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">A-2 </FONT></P>


<p Style='page-break-before:always'>
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<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="9%"><FONT FACE="Times New Roman" SIZE="2">Prime-3</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="86%"><FONT FACE="Times New Roman" SIZE="2">Issuers (or supporting institutions) rated Prime-3 have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt-protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is
maintained.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="9%"><FONT FACE="Times New Roman" SIZE="2">Not&nbsp;Prime</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="86%"><FONT FACE="Times New Roman" SIZE="2">Issuers rated Not Prime do not fall within any of the Prime rating categories.</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Note:</I> In
addition, in certain countries the prime rating may be modified by the issuer&#146;s or guarantor&#146;s senior unsecured long-term debt rating. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Description of Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;) Long Term Issue Credit Ratings </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">A S&amp;P 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Issue credit ratings are based on current information furnished by the obligors or obtained by S&amp;P from other sources it considers reliable. S&amp;P 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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 &#151; 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Issue credit ratings are based in varying degrees, on the following considerations: </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1.&nbsp;&nbsp;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; </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">2.&nbsp;&nbsp;Nature of and provisions of the obligation; and </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.&nbsp;&nbsp;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&#146; rights. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">A-3 </FONT></P>


<p Style='page-break-before:always'>
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<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">AAA</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">An obligation rated &#145;AAA&#146; has the highest rating assigned by S&amp;P. The obligor&#146;s capacity to meet its financial commitment on the obligation is extremely
strong.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">AA</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">An obligation rated &#145;AA&#146; differs from the highest rated obligations only in small degree. The obligor&#146;s capacity to meet its financial commitment on the obligation
is very strong.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">A</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">An obligation rated &#145;A&#146; is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated
categories. However, the obligor&#146;s capacity to meet its financial commitment on the obligation is still strong.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">BBB</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">An obligation rated &#145;BBB&#146; 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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="4%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">BB</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">B</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">CCC</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">CC</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">C</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">Obligations rated &#145;BB&#146;, &#145;B&#146;, &#145;CCC&#146;, &#145;CC&#146;, and &#145;C&#146; are regarded as having significant speculative characteristics. &#145;BB&#146;
indicates the least degree of speculation and &#145;C&#146; the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse
conditions.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">BB</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">An obligation rated &#145;BB&#146; 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&#146;s inadequate capacity to meet its financial commitment on the obligation.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">B</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">An obligation rated &#145;B&#146; is more vulnerable to nonpayment than obligations rated &#145;BB&#146;, 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&#146;s capacity or willingness to meet its financial commitment on the obligation.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">CCC</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">An obligation rated &#145;CCC&#146; 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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">CC</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">An obligation rated &#145;CC&#146; is currently highly vulnerable to nonpayment.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">C</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">The &#145;C&#146; 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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="4%"><FONT FACE="Times New Roman" SIZE="2">D</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">An obligation rated &#145;D&#146; is in payment default. The &#145;D&#146; 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 S&amp;P believes that such payments will be made during such grace period. The &#145;D&#146; 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 will also 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.</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>Plus</I> (+) or
<I>minus</I> (&#150;): The ratings from &#145;AA&#146; to &#145;CCC&#146; may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">A-4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Description of S&amp;P Short Term Issue Credit Ratings </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">A-1</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="91%"><FONT FACE="Times New Roman" SIZE="2">A short-term obligation rated A-1 is rated in the highest category by S&amp;P. The obligor&#146;s capacity to meet its financial commitment on the obligation is strong. Within
this category, certain obligations are designated with a plus sign (+). This indicates that the obligor&#146;s capacity to meet its financial commitment on these obligations is extremely strong.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">A-2</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="91%"><FONT FACE="Times New Roman" SIZE="2">A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor&#146;s capacity to meet its financial commitment on the obligation is satisfactory.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">A-3</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="91%"><FONT FACE="Times New Roman" SIZE="2">A short-term obligation rated A-3 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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">B</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="91%"><FONT FACE="Times New Roman" SIZE="2">A short-term obligation rated B is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the
obligation; however, it faces major ongoing uncertainties which could lead to the obligor&#146;s inadequate capacity to meet its financial commitment on the obligation.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">C</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="91%"><FONT FACE="Times New Roman" SIZE="2">A short-term obligation rated C 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.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="2">D</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="91%"><FONT FACE="Times New Roman" SIZE="2">A short-term 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 S&amp;P 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.</FONT></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Country risk
considerations are a standard part of S&amp;P analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor&#146;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&#146;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 also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.<B></B> </FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Local Currency and Foreign Currency Risks </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Country risk considerations are a standard part of S&amp;P analysis for
credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An insurer&#146;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&#146;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 also
distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">A-5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

<HR SIZE="3" NOSHADE COLOR="#000000" ALIGN="left"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Through and including &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;, 2003 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers&#146; obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="5"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Shares </B></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>Floating Rate Income Strategies Fund, Inc. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="4"><B>Common Stock </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P><HR WIDTH="19%" SIZE="1" NOSHADE
COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>PROSPECTUS </B></FONT></P><HR WIDTH="19%" SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>Merrill Lynch &amp; Co. </B></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="5"><B>Wachovia Securities </B></FONT></P>     <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>McDonald Investments Inc. </B></FONT></P>   <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>SunTrust Robinson Humphrey </B></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; , 2003
</B></FONT></P>   <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">19144-0903 </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P><HR SIZE="3" NOSHADE
COLOR="#000000" ALIGN="left"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>PART C.&nbsp;&nbsp;&nbsp;&nbsp;OTHER INFORMATION </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Item 24.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Financial Statements And Exhibits.</I></B><B>
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(1)&nbsp;&nbsp;Financial Statements </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Report of Independent Auditors </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Statement of Assets and Liabilities as of October
&nbsp;&nbsp;&nbsp;&nbsp;, 2003. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Exhibits</B></FONT><BR><HR WIDTH="45" SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="1"><B>Description</B></FONT></P><HR WIDTH="61" SIZE="1" NOSHADE ALIGN="left" COLOR="#000000"></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(a)(1)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Articles of Incorporation of the Registrant.(a)</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(b)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">By-laws of the Registrant.(a)</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(c)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Not applicable.</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(d)(1)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">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.(b)</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(d)(2)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Form of specimen certificate for shares of common stock of the Registrant.</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(e)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Form of Automatic Dividend Reinvestment Plan.</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(f)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Not applicable.</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(g)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Form of Investment Advisory Agreement between the Registrant and Fund Asset Management, L.P. (&#147;FAM&#148; or the &#147;Investment Adviser&#148;).</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(h)(1)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Form of Purchase Agreement between the Registrant and the Investment Adviser and Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated (&#147;Merrill
Lynch&#148;).</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(h)(2)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Form of Merrill Lynch Standard Dealer Agreement.(c)</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(h)(3)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Form of Master Agreement Among Underwriters.(d)</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(i)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Not applicable.</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(j)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Form of Custodian Agreement between the Registrant and State Street Bank and Trust Company (&#147;State Street&#148;).(e)</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(k)(l)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Form of Transfer Agency and Service Agreement between the Registrant and EquiServe Trust Company, N.A. and EquiServe L.P.(f)</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(k)(2)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Form of Administrative Services Agreement between the Registrant and State Street .(g)</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(k)(3)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Form of Additional Compensation Agreement between FAM and Merrill Lynch.</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(k)(4)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Form of Securities Lending Agency Agreement.(h)</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(l)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Opinion and Consent of Sidley Austin Brown &amp; Wood <SMALL>LLP</SMALL>.*</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(m)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Not applicable.</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(n)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Consent of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, independent auditors for the Registrant.*</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(o)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Not applicable.</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(p)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Certificate of FAM.*</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(q)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Not applicable.</FONT></TD></TR>
<TR>
<TD HEIGHT="6"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD>
<TD HEIGHT="6" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right" WIDTH="5%"><FONT FACE="Times New Roman" SIZE="2">(r)</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="2%"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="87%"><FONT FACE="Times New Roman" SIZE="2">Code of Ethics.(i)</FONT></TD></TR>
</TABLE> <HR WIDTH="10%" SIZE="1" NOSHADE COLOR="#000000" ALIGN="left">
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(a)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Filed on August 18, 2003 as an exhibit to the Registrant&#146;s Registration Statement (the &#147;Registration Statement&#148;) on Form N-2 (333-108051). </FONT></TD></TR></TABLE>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">C-1 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(b)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Reference is made to Article IV (sections 2, 3, 4, 5, 6, 7 and 8), Article V (sections 3, 6 and 7), Article VI, Article VIII, Article IX, Article X, and Article XII of the
Registrant&#146;s Articles of Incorporation, filed as &nbsp;Exhibit (a) to this Registration Statement; and to Article II, Article III (sections 3.01, 3.03, 3.05 and 3.17), Article VI (section 6.02), Article VII, Article XII, Article XIII and
Article XIV of the Registrant&#146;s By-laws, filed as Exhibit (b) to this Registration Statement. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(c)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Incorporated by reference to Exhibit (h)(2) to Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 Preferred Income Strategies Fund, Inc. (File No. 333-102712),
filed March 25, 2003 (the &#147;Preferred Fund Registration Statement&#148;). </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(d)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Incorporated by reference to Exhibit (h)(3) to the Preferred Fund Registration Statement. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(e)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Incorporated by reference to Exhibit 7 to Post-Effective Amendment No. 10 to the Registration Statement on Form N-1A of Merrill Lynch Municipal Bond Fund of Merrill Lynch
Multi-State Municipal Series Trust (File No. 33-49873), filed on October 30, 2001. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(f)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Incorporated by reference to Exhibit 13 to Pre-Effective Amendment No. 2 to the Registration Statement on Form N-14 of Corporate High Yield Fund, Inc. (File No. 333-10193), filed on
December 31, 2002. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(g)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Incorporated by reference to Exhibit 8(d) to Post-Effective Amendment No. 1 to the Registration Statement on Form N-1A of Merrill Lynch Focus Twenty Fund, Inc. (File No. 333-89775)
filed on March 20, 2001. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(h)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Incorporated by reference to Exhibit 8(f) to Post-Effective Amendment No. 5 to the Registration Statement on Form N-1A of Merrill Lynch Global Technology Fund, Inc. (File No.
333-48929), filed on July 24, 2002. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(i)</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Incorporated by reference to Exhibit 15 to Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A of Merrill Lynch Multi-State Limited Maturities Municipal Series
Trust (File No. 33-50417), filed on November 22, 2000. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">To be provided by amendment. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Item 25.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Marketing Arrangements.</I></B><B> </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">See Exhibits (h)(1), (h)(2) and (h)(3). </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Item 26.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Other Expenses of Issuance and Distribution.</I></B><B> </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The following table sets forth the estimated expenses to be incurred in connection with the offering described in this
Registration Statement: </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="90%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="91%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Registration fees</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="91%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Stock Exchange listing fee</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="91%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Printing (other than stock certificates)</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="91%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Engraving and printing stock certificates</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="91%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Legal fees and expenses</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="91%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">NASD fees</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="91%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Underwriters expense reimbursement</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="91%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Miscellaneous</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD VALIGN="bottom"><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="91%"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="5%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><HR SIZE="3" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD VALIGN="bottom"><HR SIZE="3" NOSHADE COLOR="#000000"></TD></TR>
</TABLE><HR WIDTH="10%" SIZE="1" NOSHADE COLOR="#000000" ALIGN="left">
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">To be provided by amendment. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Item 27.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Persons Controlled by or Under Common Control with Registrant.</I></B><B> </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The information in the prospectus under the captions &#147;Investment Advisory and Management Arrangements&#148; and &#147;Description of Capital
Stock&#151;Common Stock&#148; and in Note 1 to the Statement of Assets and Liabilities is incorporated herein by reference. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Item 28.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Number of Holders of Securities.</I></B><B> </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">C-2 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Item 29.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Indemnification.</I></B><B> </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Reference is made to Section 2-418 of the General Corporation Law of the
State of Maryland, Article V of the Registrant&#146;s Articles of Incorporation, Article VI of the Registrant&#146;s By-laws and Section 6 of the Purchase Agreement, which provide for indemnification. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 Corporation Law, 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 or her 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 or her office, the decision by the Registrant to indemnify
such person must be based upon the reasonable determination of independent legal counsel or the vote of a majority of a quorum of 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 or her office. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Each officer and director of the Registrant claiming indemnification within the scope of Article VI of the By-laws shall be entitled to advances from the
Registrant for payment of the reasonable expenses incurred by him or her in connection with proceedings to which he or she is a party in the manner and to the full extent permitted under the Maryland General Corporation Law; provided, however, that
the person seeking indemnification shall provide to the Registrant a written affirmation of his or her good faith belief that the standard of conduct necessary for the indemnification by the Registrant has been met and a written undertaking to repay
any such advance, if it ultimately should be determined that the standard of conduct has not been met, and provided further that at least one of the following additional conditions is met: (i) the person seeking indemnification shall provide a
security in form and amount acceptable to the Registrant for his or her undertaking; (ii) the Registrant is insured against losses arising by reason of the advance; or (iii) a majority of a quorum of non-party independent directors, or independent
legal counsel in a written opinion shall determine, based on a review of facts readily available to the Registrant at the time the advance is proposed to be made, that there is reason to believe that the person seeking indemnification will
ultimately be found to be entitled to indemnification. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The
Registrant may purchase insurance on behalf of an officer or director protecting such person to the full extent permitted under the Maryland General Corporation Law from liability arising from his or her 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 or her office. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In Section 7 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 &#147;1933 Act&#148;) against certain types of civil liabilities arising in connection with the Registration Statement or
Prospectus. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">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 </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">C-3 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">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. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Item 30.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Business And Other Connections Of The Investment
Adviser.</I></B><B> </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">FAM (the &#147;Investment
Adviser&#148;), acts as the investment adviser for a number of affiliated open-end and closed-end registered investment companies. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Merrill Lynch Investment Managers, L.P. (&#147;MLIM&#148;), 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The address of
the Investment Adviser, MLIM, Princeton Services, Inc. (&#147;Princeton Services&#148;) and Princeton Administrators, L.P. (&#147;Princeton Administrators&#148;) is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch
and Merrill Lynch &amp; Co., Inc. (&#147;ML &amp; Co.&#148;) is World Financial Center, North Tower, 250 Vesey Street, New York, New York 10080. The address of the Fund&#146;s transfer agent, Financial Data Services, Inc. (&#147;FDS&#148;), is 4800
Deer Lake Drive East, Jacksonville, Florida 32246-6484. </FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">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 fiscal 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 such companies. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">

<TR>
<TD VALIGN="bottom" WIDTH="19%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Name</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="21%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Position(s) with FAM</B></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="54%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Other Substantial Business, Profession, Vocation Or Employment</B></FONT></P><HR SIZE="1" NOSHADE
COLOR="#000000"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="19%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">ML &amp; Co.</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">Limited Partner</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="54%"><FONT FACE="Times New Roman" SIZE="2">Financial Services Holding Company; Limited Partner of MLIM</FONT></TD></TR>
<TR>
<TD HEIGHT="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="19%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Princeton Services</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">General Partner</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="54%"><FONT FACE="Times New Roman" SIZE="2">General Partner of MLIM</FONT></TD></TR>
<TR>
<TD HEIGHT="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="19%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Robert C. Doll, Jr.</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">President</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="54%"><FONT FACE="Times New Roman" SIZE="2">President of MLIM; Co-Head (Americas Region) of MLIM from 2000 to 2001 and Senior Vice President thereof from 1999 to 2000; Director of Princeton Services; Chief Investment Officer
of OppenheimerFunds, Inc. in 1999 and Executive Vice President thereof from 1991 to 1999</FONT></TD></TR>
<TR>
<TD HEIGHT="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="19%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Donald C. Burke</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">First Vice President, Treasurer and Director of Taxation</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="54%"><FONT FACE="Times New Roman" SIZE="2">First Vice President, Treasurer and Director of Taxation of MLIM; Treasurer of Princeton Services; 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</FONT></TD></TR>
<TR>
<TD HEIGHT="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="19%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Lawrence D. Haber</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">First Vice President</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="54%"><FONT FACE="Times New Roman" SIZE="2">First Vice President of MLIM; Senior Vice President and Treasurer of Princeton Services</FONT></TD></TR>
<TR>
<TD HEIGHT="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="19%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Brian A. Murdock</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">Senior Vice President and Chief Operating Officer</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="54%"><FONT FACE="Times New Roman" SIZE="2">Senior Vice President of MLIM and Chief Operating Officer of MLIM Americas; Chief Investment Officer of EMEA Pacific Region and Global CIO for Fixed Income and Alternative
Investments; Head of MLIM Pacific Region and President of MLIM Japan, Australia and Asia</FONT></TD></TR>
<TR>
<TD HEIGHT="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD>
<TD HEIGHT="2" COLSPAN="2"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="19%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Andrew J. Donohue</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">General Counsel</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="54%"><FONT FACE="Times New Roman" SIZE="2">General Counsel of MLIM and Princeton Services</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">C-4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Item 31.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Location of Account and Records.</I></B><B> </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940, as amended, 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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Item
32.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Management Services.</I></B><B> </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Not applicable. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Item
33.&nbsp;&nbsp;&nbsp;&nbsp;</B><B><I>Undertakings.</I></B><B> </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">(a) The Registrant undertakes to suspend the offering of the shares of common stock covered hereby until it amends its prospectus contained herein (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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) The
Registrant undertakes that: </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">(1)&nbsp;&nbsp;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(2)&nbsp;&nbsp;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. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">C-5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>SIGNATURES </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>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 19th day of September, 2003. </B></FONT></P>  <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD VALIGN="top" COLSPAN="3" WIDTH="90%"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">F<SMALL>LOATING</SMALL> R<SMALL>ATE</SMALL> I<SMALL>NCOME</SMALL> S<SMALL>TRATEGIES</SMALL> F<SMALL>UND</SMALL>,
I<SMALL>NC</SMALL>.</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">(Registrant)</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" WIDTH="8%"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;Terry K. Glenn&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2"><HR SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR>
<TD VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="2%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="90%"><FONT FACE="Times New Roman" SIZE="1"><B>(Terry K. Glenn, President)</B></FONT></TD></TR>
</TABLE></DIV>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>Each
person whose signature appears below hereby authorizes Bradley J. Lucido, Alice A. Pellegrino and Brian D. Stewart 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. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated. </B></FONT></P>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0">

<TR>
<TD VALIGN="bottom" WIDTH="39%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Signature</B></FONT></P><HR WIDTH="50" SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="34%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Title</B></FONT></P><HR WIDTH="26" SIZE="1" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="21%" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Date</B></FONT></P><HR WIDTH="23" SIZE="1" NOSHADE COLOR="#000000"></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="39%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;T<SMALL>ERRY</SMALL> K.
G<SMALL>LENN&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Terry K.
Glenn)</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="34%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">President (Principal Executive Officer) and Director</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">September 19, 2003</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="39%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;D<SMALL>ONALD</SMALL> C.
B<SMALL>URKE&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Donald C.
Burke)</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="34%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Treasurer (Principal Financial and Accounting Officer) and Director</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">September 19, 2003</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="39%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;R<SMALL>ONALD</SMALL> W.
F<SMALL>ORBES&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Ronald W.
Forbes)</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="34%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">September 19, 2003</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="39%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;C<SMALL>YNTHIA</SMALL> A.
M<SMALL>ONTGOMERY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Cynthia A.
Montgomery)</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="34%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">September 19, 2003</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="39%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;C<SMALL>HARLES</SMALL> C.
R<SMALL>EILLY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Charles C.
Reilly)</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="34%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">September 19, 2003</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="39%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;K<SMALL>EVIN</SMALL> A.
R<SMALL>YAN&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Kevin A.
Ryan)</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="34%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">September 19, 2003</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="39%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;R<SMALL>OSCOE</SMALL> S.
S<SMALL>UDDARTH&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Roscoe S.
Suddarth)</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="34%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">September 19, 2003</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="39%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;R<SMALL>ICHARD</SMALL> R.
W<SMALL>EST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Richard R.
West)</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="34%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">September 19, 2003</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="39%"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;E<SMALL>DWARD</SMALL> D.
Z<SMALL>INBARG&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P><HR SIZE="1" NOSHADE COLOR="#000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Edward D.
Zinbarg)</B></FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="34%"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom" WIDTH="3%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" WIDTH="21%"><FONT FACE="Times New Roman" SIZE="2">September 19, 2003</FONT></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">C-6 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>EXHIBIT INDEX </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD ALIGN="right" COLSPAN="1" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">(d</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="top" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">)(2)</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="93%"><FONT FACE="Times New Roman" SIZE="2">Form of specimen certificate for shares of common stock of the Registrant.</FONT></TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD ALIGN="right" COLSPAN="1" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">(e</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="top" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="93%"><FONT FACE="Times New Roman" SIZE="2">Form of Automatic Dividend Reinvestment Plan.</FONT></TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD ALIGN="right" COLSPAN="1" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">(g</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="top" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="93%"><FONT FACE="Times New Roman" SIZE="2">Form of Investment Advisory Agreement between the Registrant and Fund Asset Management, L.P. (&#147;FAM&#148;).</FONT></TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD ALIGN="right" COLSPAN="1" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">(h</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="top" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">)(1)</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="93%"><FONT FACE="Times New Roman" SIZE="2">Form of Purchase Agreement between the Registrant and FAM and Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated (&#147;Merrill Lynch&#148;).</FONT></TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD ALIGN="right" COLSPAN="1" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">(k</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="top" WIDTH="1%"><FONT FACE="Times New Roman" SIZE="2">)(3)</FONT></TD>
<TD VALIGN="bottom" WIDTH="6%" ><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="93%"><FONT FACE="Times New Roman" SIZE="2">Form of Additional Compensation Agreement between FAM and Merrill Lynch.</FONT></TD></TR>
</TABLE>  <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>


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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.D(2)
<SEQUENCE>3
<FILENAME>dex99d2.txt
<DESCRIPTION>FORM OF SPECIMEN CERTIFICATE FOR SHARES OF COMMON STOCK
<TEXT>
<PAGE>

COMMON STOCK                                 CUSIP 339735 10 2
PAR VALUE $.10                               See Reverse For Certain Definitions

                                                                  Exhibit (d)(2)


                   FLOATING RATE INCOME STRATEGIES FUND, INC.

              INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

This certifies that

is the registered holder of

     FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF Floating Rate
Income Strategies Fund, Inc. transferable on the books of the Corporation by the
holder in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be subject to all of the provisions of the Articles
of Incorporation and of the By-Laws of the Corporation, and of all the
amendments from time to time made thereto. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.

     Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

Dated:

                                President                          Secretary



Countersigned and Registered:





Transfer Agent and Registrar
Authorized Signature

<PAGE>

                   FLOATING RATE INCOME STRATEGIES FUND, INC.

     The Corporation has the authority to issue stock of more than one class. A
full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the shares of each class of stock
which the Corporation is authorized to issue and the differences in the relative
rights and preferences between the shares of each class to the extent that they
have been set, and the authority of the Board of Directors to set the relative
rights and preferences of subsequent classes and series, will be furnished by
the Corporation to any stockholder, without charge, upon request to the
Secretary of the Corporation.

     The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM--as tenants in common         UNIF GIFT MIN ACT--       Custodian
                                                         -------         -------
                                                           (Cust)        (Minor)

TEN ENT--as tenants by the entireties   under Uniform Gifts to Minors Act
                                                                         -------
                                                                         (State)

JT TEN --as joint tenants with right
              of survivorship and not as
              tenants in common

    Additional abbreviations may also be used though not in the above list.


  For value received, .............. hereby sell, assign and transfer unto

  PLEASE INSERT SOCIAL SECURITY OR OTHER
      IDENTIFYING NUMBER OF ASSIGNEE

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

Please print or typewrite name and address including zip code of assignee


                                                                  Shares
- ------------------------------------------------------------------

represented by the within Certificate, and do hereby irrevocably constitute and
appoint


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

Attorney to transfer the said shares on the books of the within-named
Corporation with full power of substitution in the premises.

Dated:
      ------------------

                                      Signature:
                                                --------------------------------


                                       2

<PAGE>




          NOTICE: The signature to this assignment must correspond with the name
          as written upon the face of the certificate, in every particular,
          without alteration or enlargement, or any change whatever.

     Signature Guaranteed:
                          ------------------------------------

     Signatures must be guaranteed by an "eligible guarantor institution" as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934.


                                       3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.E
<SEQUENCE>4
<FILENAME>dex99e.txt
<DESCRIPTION>FORM OF AUTOMATIC DIVIDEND REINVESTMENT PLAN
<TEXT>
<PAGE>
                                                                     Exhibit (e)

                   FLOATING RATE INCOME STRATEGIES FUND, INC.

                             Terms and Conditions of
                      Automatic Dividend Reinvestment Plan

     1.   Appointment of Agent. You,            , will act as Agent for me, and
will open an account for me under the Dividend Reinvestment Plan (the "Plan") in
the same name as my present shares of common stock, par value $.10 per share
("Common Stock"), of FLOATING RATE INCOME STRATEGIES FUND, INC. (the "Fund") are
registered, and will automatically put into effect for me the dividend
reinvestment option of the Plan as of the first record date for a dividend or
capital gains distribution (collectively referred to herein as a "dividend"),
payable at the election of shareholders in cash or shares of Common Stock.

     2.   Dividends Payable in Common Stock. My participation in the Plan
constitutes an election by me to receive dividends in shares of Common Stock
whenever the Fund declares a dividend. In such event, the dividend amount shall
automatically be made payable to me entirely in shares of Common Stock which
shall be acquired by the Agent for my account, depending upon the circumstances
described in paragraph 3, either (i) through receipt of additional shares of
unissued but authorized shares of Common Stock from the Fund ("newly-issued
shares") as described in paragraph 6 or (ii) by purchase of outstanding shares
of Common Stock on the open market ("open-market purchases") as described in
paragraph 7.

     3.   Determination of Whether Newly-Issued Shares or Open-Market Purchases.
If on the payment date for the dividend (the "valuation date"), the net asset
value per share of the Common Stock, as defined in paragraph 8, is equal to or
less than the market price per share of the Common Stock, as defined in
paragraph 8, plus estimated brokerage commissions (such condition being referred
to herein as "market premium"), the Agent shall invest the dividend amount in
newly-issued shares on my behalf as described in paragraph 6. If on the
valuation date, the net asset value per share is greater than the market value
(such condition being referred to herein as "market discount"), the Agent shall
invest the dividend amount in shares acquired on my behalf in open-market
purchases as described in paragraph 7.

     4.   Purchase Period for Open-Market Purchases. In the event of a market
discount on the valuation date, the Agent shall have until the last business day
before the next ex-dividend date with respect to the shares of Common Stock or
in no event more than 30 days after the valuation date (the "last purchase
date") to invest the dividend amount in shares acquired in open-market purchases
except where temporary curtailment or suspension of purchases is necessary to
comply with applicable provisions of federal securities laws.

     5.   Failure to Complete Open-Market Purchases During Purchase Period. If
the Agent is unable to invest the full dividend amount in open-market purchases
during the purchase period because the market discount has shifted to a market
premium or otherwise, the Agent will invest the uninvested portion of the
dividend amount in newly-issued shares at the close of business on the last
purchase date as described in paragraph 4; except that the Agent may not acquire
newly-issued shares after the valuation date under the foregoing circumstances
unless it has received a legal opinion that registration of such shares is not
required under the Securities Act of 1933, as amended, or unless the shares to
be issued are registered under such Act.

<PAGE>

     6.   Acquisition of Newly-Issued Shares. In the event that all or part of
the dividend amount is to be invested in newly-issued shares, you shall
automatically receive such newly-issued shares of Common Stock, including
fractions, for my account, and the number of additional newly-issued shares of
Common Stock to be credited to my account shall be determined by dividing the
dollar amount of the dividend on my shares to be invested in newly-issued shares
by the net asset value per share of Common Stock on the date the shares are
issued (the valuation date in the case of an initial market premium or the last
purchase date in case the Agent is unable to complete open-market purchases
during the purchase period); provided, that the maximum discount from the then
current market price per share on the date of issuance shall not exceed 5%.

     7.   Manner of Making Open-Market Purchases. In the event that the dividend
amount is to be invested in shares of Common Stock acquired in open-market
purchases, you shall apply the amount of such dividend on my shares (less my pro
rata share of brokerage commissions incurred with respect to your open-market
purchases) to the purchase on the open-market of shares of the Common Stock for
my account. Open-market purchases may be made on any securities exchange where
the Common Stock is traded, in the over-the-counter market or in negotiated
transactions and may be on such terms as to price, delivery and otherwise as you
shall determine. My funds held by you uninvested will not bear interest, and it
is understood that, in any event, you shall have no liability in connection with
any inability to purchase shares within 30 days after the initial date of such
purchase as herein provided, or with the timing of any purchases affected. You
shall have no responsibility as to the value of the Common Stock acquired for my
account. For the purposes of cash investments you may commingle my funds with
those of other shareholders of the Fund for whom you similarly act as Agent, and
the average price (including brokerage commissions) of all shares purchased by
you as Agent in the open market shall be the price per share allocable to me in
connection with open-market purchases.

     8.   Meaning of Market Price and Net Asset Value. For all purposes of the
Plan: (a) the market price of the Common Stock on a particular date shall be the
last sales price on the New York Stock Exchange (the "Exchange") on that date,
or, if there is no sale on the Exchange on that date, then the mean between the
closing bid and asked quotations for such stock on the Exchange on such date and
(b) net asset value per share of the Common Stock on a particular date shall be
as determined by or on behalf of the Fund.

     9.   Registration of Shares Acquired Pursuant to the Plan. You may hold my
shares of Common Stock acquired pursuant to the Plan, together with the shares
of other shareholders of the Fund acquired pursuant to the Plan, in
noncertificated form in your name or that of your nominee. You will forward to
me any proxy solicitation material and will vote any shares so held for me only
in accordance with the proxy returned by me to the Fund. Upon my written
request, you will deliver to me, without charge, a certificate or certificates
for the full shares held by you for my account.

     10.  Confirmations. You will confirm to me each acquisition made for my
account as soon as practicable but not later than 60 days after the date
thereof.

<PAGE>

     11.  Fractional Interests. Although I may from time to time have an
undivided fractional interest (computed to three decimal places) in a share of
the Fund, no certificates for a fractional share will be issued. However,
dividends and distributions on fractional shares will be credited to my account.
In the event of termination of my account under the Plan, you will adjust for
any such undivided fractional interest in cash at the market value of the Fund's
shares at the time of termination less the pro rata expense of any sale required
to make such an adjustment.

     12.  Stock Dividends or Share Purchase Rights. Any stock dividends or split
shares distributed by the Fund on shares held by you for me will be credited to
my account. In the event that the Fund makes available to its shareholders
rights to purchase additional shares or other securities, the shares held for me
under the Plan will be added to other shares held by me in calculating the
number of rights to be issued to me.

     13.  Service Fee. Your service fee for handling capital gains distributions
or income dividends will be paid by the Fund. I will be charged for my pro rata
share of brokerage commissions on all open market purchases.

     14.  Termination of Account. I may terminate my account under the Plan by
notifying you in writing. Such termination will be effective immediately if my
notice is received by you not less than ten days prior to any dividend or
distribution record date; otherwise such termination will be effective on the
first trading day after the payment date for such dividend or distribution with
respect to any subsequent dividend or distribution. The Plan may be terminated
by you or the Fund upon notice in writing mailed to me at least 90 days prior to
any record date for the payment of any dividend or distribution by the Fund.
Upon any termination you will cause a certificate or certificates for the full
shares held for me under the Plan and cash adjustment for any fraction to be
delivered to me without charge. If I elect by notice to you in writing in
advance of such termination to have you sell part or all of my shares and remit
the proceeds to me, you are authorized to deduct brokerage commissions for this
transaction from the proceeds.

     15.  Amendment of Plan. These terms and conditions may be amended or
supplemented by you or the Fund at any time or times but, except when necessary
or appropriate to comply with applicable law or the rules or policies of the
Securities and Exchange Commission or any other regulatory authority, only by
mailing to me appropriate written notice at least 90 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by me
unless, prior to the effective date, thereof, you receive written notice of the
termination of my account under the Plan. Any such amendment may include an
appointment by you in your place and stead of a successor Agent under these
terms and conditions, with full power and authority to perform all or any of the
acts to be performed by the Agent under these terms and conditions. Upon any
such appointment of an Agent for the purpose of receiving dividends and
distributions, the Fund will be authorized to pay to such successor Agent, for
my account, all dividends and distributions payable on Common Stock of the Fund
held in my name or under the Plan for retention or application by such successor
Agent as provided in these terms and conditions.

     16.  Extent of Responsibility of Agent. You shall at all times act in good
faith and agree to use your best efforts within reasonable limits to insure the
accuracy of all services performed under this Agreement and to comply with
applicable law, but assume no responsibility and shall

<PAGE>

not be liable for loss or damage due to errors unless such error is caused by
your negligence, bad faith, or willful misconduct or that of your employees.

     17.  Governing Law. These terms and conditions shall be governed by the
laws of the State of New York without regard to its conflicts of laws
provisions.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.G
<SEQUENCE>5
<FILENAME>dex99g.txt
<DESCRIPTION>FORM OF INVESTMENT ADVISORY AGREEMENT
<TEXT>
<PAGE>
                                                                     Exhibit (g)

                          INVESTMENT ADVISORY AGREEMENT

     AGREEMENT, made as of the         day of       , 2003, by and between
FLOATING RATE INCOME STRATEGIES FUND, INC., a Maryland corporation (the "Fund"),
and FUND ASSET MANAGEMENT, L.P., a Delaware limited partnership (the "Investment
Adviser").

                                   WITNESSETH:
                                   ----------

     WHEREAS, the Fund is engaged in business as a closed-end, diversified,
management investment company registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"); and

     WHEREAS, the Investment Adviser is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and

     WHEREAS, the Fund desires to retain the Investment Adviser to provide
management and investment advisory services to the Fund in the manner and on the
terms hereinafter set forth; and

     WHEREAS, the Investment Adviser is willing to provide management and
investment advisory services to the Fund on the terms and conditions hereinafter
set forth;

     NOW, THEREFORE, in consideration of the promises and the covenants
hereinafter contained, the Fund and the Investment Adviser hereby agree as
follows:

                                   ARTICLE I.

                        Duties of the Investment Adviser

     The Fund hereby employs the Investment Adviser to act as a manager and
investment adviser of the Fund and to furnish, or arrange for its affiliates to
furnish, the management and investment advisory services described below,
subject to the policies of, review by and overall control of the Board of
Directors of the Fund, for the period and on the terms and conditions set forth
in this Agreement. The Investment Adviser hereby accepts such employment and
agrees during such period, at its own expense, to render, or arrange for the
rendering of, such services and to assume the obligations herein set forth for
the compensation provided for herein. The Investment Adviser and its affiliates
for all purposes herein shall be deemed to be independent contractors and,
unless otherwise expressly provided or authorized, shall have no authority to
act for or represent the Fund in any way or otherwise be deemed agents of the
Fund.

     (a)   Management and Administrative Services. The Investment Adviser shall
perform, or arrange for its affiliates to perform, the management and
administrative services necessary for the operation of the Fund, including
administering shareholder accounts and handling shareholder relations. The
Investment Adviser shall provide the Fund with office space, facilities,
equipment and necessary personnel and such other services as the Investment

<PAGE>

Adviser, subject to review by the Board of Directors, from time to time shall
determine to be necessary or useful to perform its obligations under this
Agreement. The Investment Adviser, also on behalf of the Fund, shall conduct
relations with custodians, depositories, transfer agents, pricing agents,
dividend disbursing agents, other shareholder servicing agents, accountants,
attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers,
banks and such other persons in any such other capacity deemed to be necessary
or desirable. The Investment Adviser generally shall monitor the Fund's
compliance with investment policies and restrictions as set forth in filings
made by the Fund under the federal securities laws. The Investment Adviser shall
make reports to the Board of Directors of its performance of obligations
hereunder and furnish advice and recommendations with respect to such other
aspects of the business and affairs of the Fund as it shall determine to be
desirable.

     (b)   Investment Advisory Services. The Investment Adviser shall provide,
or arrange for its affiliates to provide, the Fund with such investment
research, advice and supervision as the latter from time to time may consider
necessary for the proper supervision of the assets of the Fund, shall furnish
continuously an investment program for the Fund and shall determine from time to
time which securities shall be purchased, sold or exchanged and what portion of
the assets of the Fund shall be held in the various securities in which the Fund
invests, options, futures, options on futures or cash, subject always to the
restrictions of the Articles of Incorporation and the By-Laws of the Fund, as
amended from time to time, the provisions of the Investment Company Act and the
statements relating to the Fund's investment objective, investment policies and
investment restrictions as the same are set forth in filings made by the Fund
under the federal securities laws. The Investment Adviser shall make decisions
for the Fund as to the manner in which voting rights, rights to consent to
corporate action and any other rights pertaining to the Fund's portfolio
securities shall be exercised. Should the Board of Directors at any time,
however, make any definite determination as to investment policy and notify the
Investment Adviser thereof in writing, the Investment Adviser shall be bound by
such determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Investment
Adviser shall take, on behalf of the Fund, all actions which it deems necessary
to implement the investment policies determined as provided above, and in
particular to place all orders for the purchase or sale of portfolio securities
for the Fund's account with brokers or dealers selected by it, and to that end,
the Investment Adviser is authorized as the agent of the Fund to give
instructions to the custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers or dealers and the placing of such orders with respect to assets
of the Fund, the Investment Adviser is directed at all times to seek to obtain
execution and prices within the policy guidelines determined by the Board of
Directors and set forth in filings made by the Fund under the federal securities
laws. Subject to this requirement and the provisions of the Investment Company
Act, the Securities Exchange Act of 1934, as amended, and other applicable
provisions of law, the Investment Adviser may select brokers or dealers with
which it or the Fund is affiliated.

     (c)   Affiliated Sub-Advisers. In carrying out its responsibilities
hereunder, the Investment Adviser may employ, retain or otherwise avail itself
of the services of other persons or entities including without limitation,
affiliates of the Investment Adviser, on such terms as the Investment Adviser
shall determine to be necessary, desirable or appropriate. However, if the
Investment Adviser chooses to retain or avail itself of the services of another
person or entity to


                                       2

<PAGE>

manage assets of the Fund, such other person or entity must be (i) an affiliate
of the Investment Adviser, (ii) retained at the Investment Adviser's own cost
and expense, and (iii) retained subject to the requirements of Section 15 of the
Investment Company Act. Retention of one or more affiliated sub-advisers, or the
employment or retention of other persons or entities to perform services, shall
in no way reduce the responsibilities or obligations of the Investment Adviser
under this Agreement and the Investment Adviser shall be responsible for all
acts and omissions of such affiliated sub-advisers, or other persons or
entities, in connection with the performance of the Investment Advisers' duties
hereunder.

     (d)   Notice Upon Change in Partners of the Investment Adviser. The
Investment Adviser is a limited partnership and its limited partner is Merrill
Lynch & Co., Inc. and its general partner is Princeton Services, Inc. The
Investment Adviser will notify the Fund of any change in the membership of the
partnership within a reasonable time after such change.

                                  ARTICLE II.

                       Allocation of Charges and Expenses

     (a)   The Investment Adviser. The Investment Adviser shall provide the
staff and personnel necessary to perform its obligations under this Agreement,
shall assume and pay or cause to be paid all expenses incurred in connection
with the maintenance of such staff and personnel, and, at its own expense, shall
provide the office space, facilities, equipment and necessary personnel which it
is obligated to provide under Article I hereof. The Investment Adviser shall
pay, or cause affiliates to pay, compensation of all officers of the Fund and
all Directors of the Fund who are affiliated persons of the Investment Adviser
or any sub-adviser, or an affiliate of the Investment Adviser or any
sub-adviser.

     (b)   The Fund. The Fund assumes, and shall pay or cause to be paid, all
other expenses of the Fund including, without limitation: taxes, expenses for
legal and auditing services, costs of printing proxies, stock certificates,
shareholder reports and prospectuses, charges of the custodian, any
sub-custodian and transfer agent, charges of any auction agent and broker
dealers in connection with preferred stock of the Fund, expenses of portfolio
transactions, Securities and Exchange Commission fees, expenses of registering
the shares of common stock and preferred stock under federal, state and foreign
laws, fees and actual out-of-pocket expenses of Directors who are not affiliated
persons of the Investment Adviser or any sub-adviser, or of an affiliate of the
Investment Adviser or any sub-adviser, accounting and pricing costs (including
the daily calculation of the net asset value), insurance, interest, brokerage
costs, litigation and other extraordinary or non-recurring expenses, and other
expenses properly payable by the Fund. It also is understood that if the
Investment Adviser or any of its affiliates provide accounting services to the
Fund, the Fund will reimburse the Investment Adviser and its affiliates for
their costs in providing such accounting services to the Fund.


                                       3

<PAGE>


                                  ARTICLE III.

                     Compensation of the Investment Adviser

     For the services rendered, the facilities furnished and the expenses
assumed by the Investment Adviser, the Fund shall pay to the Investment Adviser
at the end of each calendar month a fee based upon the average daily value of
the net assets of the Fund at the annual rate of 0.75 of 1.0% (0.75%) of (i) the
Fund's average daily net assets and (ii) the proceeds of any outstanding
borrowings used for leverage ("average daily net assets" means the average daily
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 borrowing and (iii) accumulated dividends on shares of outstanding
preferred stock), commencing on the day following effectiveness hereof. For
purposes of this calculation, average daily net assets is determined at the end
of each month on the basis of the average net assets of the Fund for each day
during the month. It is understood that the liquidation preference of any
outstanding preferred stock (other than accumulated dividends) is not considered
a liability in determining the Fund's average daily net assets. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fee as set forth above. Payment of the Investment
Adviser's compensation for the preceding month shall be made as promptly as
possible after completion of the computations contemplated herein. During any
period when the determination of net asset value is suspended by the Board of
Directors, the average net asset value of a share for the day prior to such
suspension shall for this purpose be deemed to be the net asset value of each
succeeding day until it is again determined.

                                  ARTICLE IV.

                Limitation of Liability of the Investment Adviser

     The Investment Adviser shall not be liable 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 Fund, 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 hereunder. As used in this
Article IV, the term "Investment Adviser" shall include any affiliates of the
Investment Adviser performing services for the Fund contemplated hereby and
partners, directors, officers and employees of the Investment Adviser and of
such affiliates.

                                   ARTICLE V.

                      Activities of the Investment Adviser

     The services of the Investment Adviser to the Fund are not to be deemed to
be exclusive; the Investment Adviser and any person controlled by or under
common control with the Investment Adviser (for purposes of this Article V
referred to as "affiliates") are free to render services to others. It is
understood that Directors, officers, employees and shareholders of the


                                       4

<PAGE>

Fund are or may become interested in the Investment Adviser and its affiliates,
as directors, officers, employees, partners and shareholders or otherwise, and
that directors, officers, employees, partners and shareholders of the Investment
Adviser and of its affiliates are or may become similarly interested in the
Fund, and that the Investment Adviser and directors, officers, employees,
partners and shareholders of its affiliates may become interested in the Fund as
shareholders or otherwise.

                                  ARTICLE VI.

                   Duration and Termination of this Agreement

     This Agreement shall become effective as of the date first above written
and shall remain in force for a period of two years thereafter and thereafter
continue from year to year, but only so long as such continuance specifically is
approved at least annually by (i) the Board of Directors of the Fund, or by the
vote of a majority of the outstanding voting securities of the Fund, and (ii) a
majority of those Directors who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.

     This Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Directors or by vote of a majority of the outstanding
voting securities of the Fund, or by the Investment Adviser, on sixty (60) days'
written notice to the other party. This Agreement shall terminate automatically
in the event of its assignment.

                                  ARTICLE VII.

                           Amendment of this Agreement

     This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of the Board of Directors of the Fund,
including a majority of those Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such approval and, where required by the Investment Company
Act, by the vote of a majority of the outstanding voting securities of the Fund.

                                 ARTICLE VIII.

                          Definitions of Certain Terms

     The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.


                                       5

<PAGE>

                                   ARTICLE IX.

                                  Governing Law

     This Agreement shall be governed by and construed in accordance with the
laws of the State of New York and the applicable provisions of the Investment
Company Act. To the extent that the applicable laws of the State of New York, or
any of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.


                                       6

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.

                                      FLOATING RATE INCOME STRATEGIES FUND, INC.



                                      By:
                                         ---------------------------------------
                                            Name:
                                            Title:


                                      FUND ASSET MANAGEMENT, L.P.

                                      By:   PRINCETON SERVICES, INC.,
                                            General Partner

                                      By:
                                         ---------------------------------------
                                            Name:
                                            Title:


                                       7

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.H(1)
<SEQUENCE>6
<FILENAME>dex99h1.txt
<DESCRIPTION>FORM OF PURCHASE AGREEMENT
<TEXT>
<PAGE>

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                   FLOATING RATE INCOME STRATEGIES FUND, Inc.

                            (a Maryland corporation)

                           [ ] Shares of Common Stock

                               PURCHASE AGREEMENT

                                Dated: [ ], 2003

================================================================================


<PAGE>

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>                                                                                       <C>
SECTION 1.  Representations and Warranties .............................................   3
            (a) Representations and Warranties by the Fund and the Investment Adviser ..   3
            (b) Additional Representations of the Investment Adviser ...................   8
            (c) Officer's Certificates .................................................   9

SECTION 2.  Sale and Delivery to the Underwriters; Closing .............................   9
            (a) Initial Shares .........................................................   9
            (b) Option Shares ..........................................................   9
            (c) Payment ................................................................  10
            (d) Denominations; Registration ............................................  10

SECTION 3.  Covenants of the Fund ......................................................  10
            (a) Compliance with Securities Regulations and Commission Requests .........  10
            (b) Filing of Amendments ...................................................  11
            (c) Delivery of Registration Statement .....................................  11
            (d) Delivery of Prospectus .................................................  11
            (e) Continued Compliance with Securities Laws ..............................  11
            (f) Blue Sky Qualifications ................................................  12
            (g) Rule 158 ...............................................................  12
            (h) Use of Proceeds ........................................................  12
            (i) Subchapter M ...........................................................  12
            (j) Listing ................................................................  12
            (k) Restrictions on Sale of Shares .........................................  12
            (l) Reporting Requirements .................................................  13
            (m) No Manipulation of Market for Securities. ..............................  13
            (n) Rule 462(b) Registration Statement. ....................................  13

SECTION 4.  Payment of Expenses ........................................................  13
            (a) Expenses ...............................................................  13
            (b) Termination of Agreement ...............................................  14

SECTION 5.  Conditions of Underwriters' Obligations ....................................  14
            (a) Effectiveness of Registration Statement ................................  14
            (b) Opinion of Counsel for the Fund ........................................  14
            (c) Opinion of a Senior Counsel of the Investment Adviser ..................  14
            (d) Opinion of Counsel for Underwriters. ...................................  14
</TABLE>

                                      -i-

<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                       <C>
            (e) Officers' Certificates .................................................  15
            (f) Accountant's Comfort Letter ............................................  15
            (g) Bring-down Comfort Letter ..............................................  15
            (h) Approval of Listing ....................................................  15
            (i) No Objection ...........................................................  15
            (j) Conditions to Purchase Option Shares ...................................  15
            (k) Additional Documents ...................................................  16
            (l) Termination of Agreement. ..............................................  16
            (m) Execution of Additional Compensation Agreement .........................  16

SECTION 6.  Indemnification ............................................................  16
            (a) Indemnification of the Underwriters ....................................  16
            (b) Indemnification of Fund, Investment Adviser, Directors,
                General Partner and Officers ...........................................  17
            (c) Indemnification for Marketing Materials. ...............................  17
            (d) Actions against Parties, Notification ..................................  17
            (e) Settlement without Consent if Failure to Reimburse .....................  18

SECTION 7.  Contribution ...............................................................  18

SECTION 8.  Representations, Warranties and Agreements to Survive Delivery .............  19

SECTION 9.  Termination of Agreement ...................................................  19
            (a) Termination; General ...................................................  19
            (b) Liabilities ............................................................  20

SECTION 10. Default by One or More of the Underwriters. ................................  20

SECTION 11. Notices ....................................................................  21

SECTION 12. Parties ....................................................................  21

SECTION 13. GOVERNING LAW AND TIME .....................................................  21

SECTION 14. Effect of Headings .........................................................  21
</TABLE>

                                      -ii-

<PAGE>


EXHIBITS

Exhibit A  - Form of Opinion of Fund's Counsel
Exhibit B  - Form of Opinion of Counsel of the Investment Adviser
Exhibit C  - Form of Accountant's Comfort Letter

<PAGE>

                   FLOATING RATE INCOME STRATEGIES FUND, INC.
                            (a Maryland corporation)

                           [ ] Shares of Common Stock
                           (Par Value $.10 Per Share)

                           FORM OF PURCHASE AGREEMENT

                                                               [         ], 2003



Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
               Incorporated
[other co-managers]

c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
4 World Financial Center
New York, New York 10080
Ladies and Gentlemen:

     Floating Rate Income Strategies Fund, Inc., a Maryland corporation (the
"Fund"), and Fund Asset Management, L.P., a Delaware limited partnership (the
"Investment Adviser"), each confirms its agreement with Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of
the other Underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any Underwriters substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch is acting as
representative (in such capacity, the "Representative") with respect to the
issue and sale by the Fund and the purchase by the Underwriters, acting
severally and not jointly, of the respective number of shares of common stock,
par value $.10 per share, of the Fund (the "Common Stock") set forth in said
Schedule A, and with respect to the grant by the Fund to the Underwriters,
acting severally and not jointly, of the option described in Section 2(b) hereof
to purchase all or any part of [ ] additional shares of Common Stock to cover
overallotments, if any. The aforesaid [ ] shares of Common Stock (the "Initial
Shares") to be purchased by the Underwriters and all or any part of the [ ]
shares of Common Stock subject to the option described in Section 2(b) hereof
(the "Option Shares"), are hereinafter called, collectively, the "Shares."

     The Fund understands that the Underwriters propose to make a public
offering of the Shares as soon as the Underwriters deem advisable after this
Agreement has been executed and delivered.

     The Fund has filed with the Securities and Exchange Commission (the
"Commission") a notification on Form N-8A of registration of the Fund as an
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and a registration statement on Form N-2 (Nos.
333-108051, 811-21413), including the related preliminary prospectus, for the
registration of the Shares under the Securities Act of 1933, as amended (the
"1933 Act"), the Investment Company Act, and the rules and regulations of the
Commission under the 1933 Act and the Investment Company Act (together, the
"Rules and Regulations"), and has filed such amendments to such registration
statement on Form N-2, if any, and such amended preliminary prospectuses as may
have been required to

<PAGE>

the date hereof. Promptly after execution and delivery of this Agreement, the
Fund will either (i) prepare and file a prospectus in accordance with the
provisions of paragraph (c) of Rule 497 ("Rule 497(c)") of the rules and
regulations of the Commission under the 1933 Act (the "1933 Act Regulations") or
a certificate in accordance with the provisions of paragraph (j) of Rule 497
("Rule 497(j)") of the 1933 Act Regulations, (ii) prepare and file a prospectus
in accordance with the provisions of Rule 430A ("Rule 430A") of the 1933 Act
Regulations and paragraph (h) of Rule 497 ("Rule 497(h)") of the 1933 Act
Regulations, or (iii) if the Fund has elected to rely upon Rule 434 ("Rule 434")
of the 1933 Act Regulations, prepare and file a term sheet (a "Term Sheet") in
accordance with the provisions of Rule 434 and Rule 497(h). The information
included in any such prospectus or in any such Term Sheet, as the case may be,
that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, including in each case any statement of additional information
incorporated therein by reference, is herein called a "preliminary prospectus."
Such registration statement, including the exhibits thereto and schedules
thereto, if any, at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final prospectus in
the form first furnished to the Underwriters for use in connection with the
offering of the Shares, including the statement of additional information
incorporated therein by reference, is herein called the "Prospectus." If Rule
434 is relied on, the term "Prospectus" shall refer to the preliminary
prospectus dated , 2003, together with the applicable Term Sheet and all
references in this Agreement to the date of such Prospectus shall mean the date
of the applicable Term Sheet. For purposes of this Agreement, all references to
the Registration Statement, any preliminary prospectus, the Prospectus, or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").

     All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934, as amended (the "1934
Act"), which is incorporated by reference in the Registration Statement, such
preliminary prospectus or the Prospectus, as the case may be.

     SECTION 1. Representations and Warranties.

     (a) Representations and Warranties by the Fund and the Investment Adviser.
The Fund and the Investment Adviser each severally represents and warrants to
each Underwriter as of the date hereof, as of the Closing Time referred to in
Section 2(c) hereof and as of the Date of Delivery (if any) referred to in
Section 2(b) hereof, and agree with each Underwriter, as follows:

          (i) Compliance with Registration Requirements. The Fund meets the
     requirements for use of Form N-2 under the 1933 Act. Each of the
     Registration Statement and any Rule 462(b) Registration Statement has
     become effective under the 1933 Act and no stop order suspending the


                                       -2-

<PAGE>


     effectiveness of the Registration Statement or any Rule 462(b) Registration
     Statement has been issued under the 1933 Act and no proceedings for that
     purpose have been instituted or are pending or, to the knowledge of the
     Fund or the Investment Adviser, are contemplated by the Commission, and any
     request on the part of the Commission for additional information has been
     complied with. If required, the Fund has received any orders exempting the
     Fund from any provisions of the Investment Company Act.

          At the respective times the Registration Statement, any Rule 462(b)
     Registration Statement and any post-effective amendments thereto became
     effective and at the Closing Time (and, if any Option Shares are purchased,
     at the Date of Delivery) the Registration Statement, the Rule 462(b)
     Registration Statement and any amendments or supplements thereto complied
     and will comply in all material respects with the requirements of the 1933
     Act, the Investment Company Act and the Rules and Regulations and did not
     and will not contain an untrue statement of a material fact or omit to
     state a material fact required to be stated therein or necessary to make
     the statements therein not misleading. Neither the Prospectus, nor any
     amendments or supplements thereto, at the time the Prospectus or any
     amendments or supplements thereto were issued and at the Closing Time (and,
     if any Option Shares are purchased, at the Date of Delivery) included or
     will include an untrue statement of a material fact or omitted or will omit
     to state a material fact necessary in order to make the statements therein,
     in the light of the circumstances under which they were made, not
     misleading. The representations and warranties in this subsection shall not
     apply to statements in or omissions from the Registration Statement or the
     Prospectus made in reliance upon and in conformity with information
     furnished to the Fund in writing by the Underwriters expressly for use in
     the Registration Statement or in the Prospectus. If Rule 434 is used, the
     Fund will comply with the requirements of Rule 434 and the Prospectus shall
     not be "materially different," as such term is used in Rule 434, from the
     prospectus included in the Registration Statement at the time it became
     effective.

          Each preliminary prospectus and the prospectus filed as part of the
     Registration Statement as originally filed or as part of any amendment
     thereto, or filed pursuant to Rule 497(c) or Rule 497(h) under the 1933
     Act, complied when so filed in all material respects with the Rules and
     Regulations and each preliminary prospectus and the Prospectus delivered to
     the Underwriters for use in connection with this offering was identical to
     the electronically transmitted copies thereof filed with the Commission
     pursuant to EDGAR, except to the extent permitted by Regulation S-T.

          If a Rule 462(b) Registration Statement is required in connection with
     the offering and sale of the Shares, the Fund has complied or will comply
     with the requirements of Rule 111 under the 1933 Act Regulations relating
     to the payment of filing fees thereof.

          (ii) Independent Accountants. The accountants who certified the
     financial statements and supporting schedules, if any, included in the
     Registration Statement are independent public accountants as required by
     the 1933 Act and the Rules and Regulations.

          (iii) Financial Statements. The financial statements, included in the
     Registration Statement and Prospectus, together with the related schedules
     and notes, present fairly the financial position of the Fund at the date
     indicated and said statements have been prepared in conformity with
     generally accepted accounting principles ("GAAP") applied on a consistent
     basis throughout the period involved. The supporting schedules, if any,
     included in the Registration Statement present fairly in accordance with
     GAAP the information required to be stated therein.

                                       -3-

<PAGE>
          (iv) No Material Adverse Change in Business. Since the respective
     dates as of which information is given in the Registration Statement and in
     the Prospectus, except as otherwise stated therein, (A) there has been no
     material adverse change in the condition, financial or otherwise, or in the
     earnings, business affairs or business prospects of the Fund, whether or
     not arising in the ordinary course of business (a "Material Adverse
     Effect"), (B) there have been no transactions entered into by the Fund,
     other than those in the ordinary course of business, which are material
     with respect to the Fund and (C) there has been no dividend or distribution
     of any kind declared, paid or made by the Fund on any class of its capital
     stock.

          (v) Good Standing of the Fund. The Fund has been duly organized and is
     validly existing as a corporation in good standing under the laws of the
     State of Maryland and has corporate power and authority to own, lease and
     operate its properties and to conduct its business as described in the
     Prospectus and to enter into and perform its obligations under this
     Agreement; and the Fund is duly qualified as a foreign corporation to
     transact business and is in good standing in each jurisdiction in which
     such qualification is required, whether by reason of the ownership or
     leasing of property or the conduct of business, except where the failure so
     to qualify or to be in good standing would not result in a Material Adverse
     Effect.

          (vi) Subsidiaries. The Fund has no subsidiaries.

          (vii) Officers and Directors. No person is serving or acting as an
     officer, director or investment adviser of the Fund except in accordance
     with the provisions of the Investment Company Act and the Rules and
     Regulations and the Investment Advisers Act of 1940, as amended (the
     "Advisers Act"), and the rules and regulations of the Commission
     promulgated under the Advisers Act (the "Advisers Act Rules and
     Regulations"). Except as disclosed in the Registration Statement and the
     Prospectus (or any amendment or supplement to either of them), no director
     of the Fund is an "interested person" (as defined in the Investment Company
     Act) of the Fund or an "affiliated person" (as defined in the Investment
     Company Act) of any Underwriter.

          (viii) Capitalization. The authorized, issued and outstanding capital
     stock of the Fund is as set forth in the Prospectus under the caption
     "Description of Capital Stock." All issued and outstanding shares of common
     stock of the Fund have been duly authorized and validly issued and are
     fully paid and non-assessable, except as provided for in the Fund's
     charter, and have been offered and sold or exchanged by the Fund in
     compliance with all applicable laws (including, without limitation, federal
     and state securities laws); none of the outstanding shares of common stock
     of the Fund was issued in violation of preemptive or other similar rights
     of any securityholder of the Fund.

          (ix) Investment Company Act. The Fund is registered with the
     Commission under the Investment Company Act as a closed-end, diversified,
     management investment company, and no order of suspension or revocation of
     such registration has been issued or proceedings therefor initiated, to the
     knowledge of the Fund and the Investment Adviser, or threatened by the
     Commission.

          (x) Authorization of Agreement. This Agreement been duly authorized,
     executed and delivered by the Fund.

          (xi) Authorization and Description of Shares. The Shares to be
     purchased by the Underwriters from the Fund have been duly authorized for
     issuance and sale to the Underwriters pursuant to this Agreement, and, when
     issued and delivered by the Fund pursuant to this

                                       -4-

<PAGE>
     Agreement against payment of the consideration set forth in this Agreement
     will be validly issued, fully paid and non-assessable; the Shares conform
     to all statements relating thereto contained in the Prospectus and such
     description conforms to the rights set forth in the instruments defining
     the same; no holder of the Shares will be subject to personal liability by
     reason of being such a holder; and the issuance of the Shares is not
     subject to preemptive or other similar rights of any securityholder of the
     Fund.

          (xii) Absence of Defaults and Conflicts. The Fund is not in violation
     of its charter or by-laws or in default in the performance or observance of
     any obligation, agreement, covenant or condition contained in any material
     contract, indenture, mortgage, deed of trust, loan or credit agreement,
     note, lease or other agreement or instrument to which the Fund is a party
     or by which it or its properties may be bound, or to which any of the
     property or assets of the Fund is subject (collectively, "Agreements and
     Instruments"), except for such defaults that would not result in a Material
     Adverse Effect; and the execution, delivery and performance of this
     Agreement, the Investment Advisory Agreement, the Custody Agreement
     referred to in the Registration Statement (as used herein, the "Advisory
     Agreement" and the "Custody Agreement," respectively) and the consummation
     of the transactions contemplated in this Agreement and in the Registration
     Statement (including the issuance and sale of the Shares and the use of the
     proceeds from the sale of the Shares as described in the Prospectus under
     the caption "Use of Proceeds") and compliance by the Fund with its
     obligations under this Agreement have been duly authorized by all necessary
     corporate action and do not and will not, whether with or without the
     giving of notice or passage of time or both, conflict with or constitute a
     breach of, or a default or Repayment Event (as defined below) under, or
     result in the creation or imposition of any lien, charge or encumbrance
     upon any property or assets of the Fund pursuant to the Agreements and
     Instruments (except for such conflicts, breaches or defaults or liens,
     charges or encumbrances that would not result in a Material Adverse
     Effect), nor will such action result in any violation of the provisions of
     the charter or the by-laws of the Fund, or any applicable law, statute,
     rule, regulation, judgment, order, writ or decree of any government,
     government instrumentality or court, domestic or foreign, having
     jurisdiction over the Fund or any of its assets, properties or operations.
     As used herein, a "Repayment Event" means any event or condition which
     gives the holder of any note, debenture or other evidence of indebtedness
     (or any person acting on such holder's behalf) the right to require the
     repurchase, redemption or repayment of all or a portion of such
     indebtedness by the Fund.

          (xiii) Absence of Proceedings. There is no action, suit, proceeding,
     inquiry or investigation before or brought by any court or governmental
     agency or body, domestic or foreign, now pending, or, to the knowledge of
     the Fund or the Investment Adviser, threatened against or affecting, the
     Fund, which is required to be disclosed in the Registration Statement
     (other than as disclosed therein), or which might reasonably be expected to
     result in a Material Adverse Effect, or which might reasonably be expected
     to materially and adversely affect the properties or assets of the Fund or
     the consummation of the transactions contemplated in this Agreement or the
     performance by the Fund of its obligations hereunder; the aggregate of all
     pending legal or governmental proceedings to which the Fund is a party or
     of which any of its respective property or assets is the subject which are
     not described in the Registration Statement, including ordinary routine
     litigation incidental to the business, could not reasonably be expected to
     result in a Material Adverse Effect.

          (xiv) Subchapter M Compliance. The Fund intends to, and will, direct
     the investment of proceeds of the offering described in the Registration
     Statement in such a manner as to comply with the requirements of Subchapter
     M of the Internal Revenue Code of 1986, as amended

                                       -5-

<PAGE>
     ("Subchapter M of the Code"), and intends to qualify as a regulated
     investment company under Subchapter M of the Code.

          (xv) Distribution of Offering Materials. The Fund has not distributed
     and, prior to the later to occur of (A) the Closing Time and (B) completion
     of the distribution of the Shares, will not distribute any offering
     material in connection with the offering and sale of the Shares other than
     the Registration Statement, a preliminary prospectus, the Prospectus or
     other materials, if any, permitted by the 1933 Act or the Investment
     Company Act or the Rules and Regulations.

          (xvi) Accounting Controls. The Fund maintains a system of internal
     accounting controls sufficient to provide reasonable assurances that (A)
     transactions are executed in accordance with management's general or
     specific authorization and with the applicable requirements of the
     Investment Company Act, the Rules and Regulations and the Code; (B)
     transactions are recorded as necessary to permit preparation of financial
     statements in conformity with generally accepted accounting principles and
     to maintain accountability for assets and to maintain compliance with the
     books and records requirements under the Investment Company Act and the
     Rules and Regulations; (C) access to assets is permitted only in accordance
     with the management's general or specific authorization; and (D) the
     recorded accountability for assets is compared with existing assets at
     reasonable intervals and appropriate action is taken with respect to any
     differences.

          (xvii) Absence of Undisclosed Payments. To the Fund's knowledge,
     neither the Fund nor any employee or agent of the Fund has made any payment
     of funds of the Fund or received or retained any funds, which payment,
     receipt or retention of funds is of a character required to be disclosed in
     the Prospectus.

          (xviii) Material Agreements. This Agreement, the Advisory Agreement,
     the Custody Agreement and the Transfer Agency and Service Agreement have
     each been duly authorized by all requisite action on the part of the Fund
     and executed and delivered by the Fund, as of the dates noted therein, and
     each complies with all applicable provisions of the Investment Company Act
     in all material respects. Assuming due authorization, execution and
     delivery by the other parties thereto with respect to the Advisory
     Agreement, the Custody Agreement and the Transfer Agency and Service
     Agreement, each of the Advisory Agreement, the Custody Agreement and the
     Transfer Agency and Service Agreement constitutes a valid and binding
     agreement of the Fund, enforceable in accordance with its terms, except as
     affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
     moratorium and other similar laws relating to or affecting creditors'
     rights generally, general equitable principles (whether considered in a
     proceeding in equity or at law) and an implied covenant of good faith and
     fair dealing and except as rights to indemnification or contribution
     thereunder may be limited by federal or state laws.

          (xix) Registration Rights. There are no persons with registration
     rights or other similar rights to have any securities registered pursuant
     to the Registration Statement or otherwise registered by the Fund under the
     1933 Act.

          (xx) Accuracy of Exhibits. There are no contracts or documents which
     are required to be described in the Registration Statement or the
     Prospectus or to be filed as exhibits thereto by the 1933 Act, the
     Investment Company Act or the Rules and Regulations which have not been so
     described and filed as required.

          (xxi) Possession of Intellectual Property. The Fund owns or possesses,
     has the right to use or can acquire on reasonable terms, adequate patents,
     patent rights, licenses, inventions,

                                       -6-

<PAGE>
     copyrights, know-how (including trade secrets and other unpatented and/or
     unpatentable proprietary or confidential information, systems or
     procedures), trademarks, service marks, trade names or other intellectual
     property (collectively, "Intellectual Property") necessary to carry on the
     business now operated by the Fund, and the Fund has not received any notice
     or is not otherwise aware of any infringement of or conflict with asserted
     rights of others with respect to any Intellectual Property or of any facts
     or circumstances which would render any Intellectual Property invalid or
     inadequate to protect the interest of the Fund therein, and which
     infringement or conflict (if the subject of any unfavorable decision,
     ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
     would result in a Material Adverse Effect.

          (xxii) Absence of Further Requirements. No filing with, or
     authorization, approval, consent, license, order, registration,
     qualification or decree of, any court or governmental authority or agency
     is necessary or required for the performance by the Fund of its obligations
     hereunder, in connection with the offering, issuance or sale of the Shares
     under this Agreement or the consummation of the transactions contemplated
     by this Agreement, except such as have been already obtained or as may be
     required under the 1933 Act, the 1934 Act or the Investment Company Act or
     the Rules and Regulations or foreign or state securities laws or under the
     rules of the NASD (formerly, the National Association of Securities
     Dealers, Inc.).

          (xxiii) Possession of Licenses and Permits. The Fund possesses such
     permits, licenses, approvals, consents and other authorizations
     (collectively, "Governmental Licenses") issued by the appropriate federal,
     state, local or foreign regulatory agencies or bodies necessary to conduct
     the business now operated by it; the Fund is in compliance with the terms
     and conditions of all such Governmental Licenses, except where the failure
     so to comply would not, singly or in the aggregate, have a Material Adverse
     Effect; all of the Governmental Licenses are valid and in full force and
     effect, except when the invalidity of such Governmental Licenses or the
     failure of such Governmental Licenses to be in full force and effect would
     not have a Material Adverse Effect; and the Fund has not received any
     notice of proceedings relating to the revocation or modification of any
     such Governmental Licenses which, singly or in the aggregate, if the
     subject of an unfavorable decision, ruling or finding, would result in a
     Material Adverse Effect.

          (xxiv) Advertisements. Any advertising, sales literature or other
     promotional material (including "prospectus wrappers," "broker kits," "road
     show slides" and "road show scripts" and "electronic road show
     presentations") authorized in writing by or prepared by the Fund or the
     Investment Adviser used in connection with the public offering of the
     Shares (collectively, "sales material") does not contain an untrue
     statement of a material fact or omit to state a material fact required to
     be stated therein or necessary to make the statements therein not
     misleading. Moreover, all sales material complied and will comply in all
     material respects with the applicable requirements of the 1933 Act, the
     Investment Company Act, the Rules and Regulations and the rules and
     interpretations of the National Association of Securities Dealers, Inc.
     ("NASD").

          (xxv) NYSE Listing. The Shares have been approved for listing, upon
     notice of issuance, on the New York Stock Exchange ("NYSE").

     (b) Additional Representations of the Investment Adviser. The Investment
Adviser represents and warrants to the Underwriters as of the date hereof and as
of the Closing Time as follows:

          (i) Organization and Authority of Investment Adviser. The Investment
     Adviser has been duly organized as a limited partnership under the laws of
     the State of Delaware, with power and authority to conduct its business as
     described in the Registration Statement and the Prospectus.

                                       -7-

<PAGE>
          (ii) Investment Advisers Act. The Investment Adviser is duly
     registered as an investment adviser under the Investment Advisers Act of
     1940, as amended (the "Investment Advisers Act"), and is not prohibited by
     the Investment Advisers Act or the Investment Company Act, or the rules and
     regulations under such acts, from acting under the Advisory Agreement for
     the Fund as contemplated by the Registration Statement and the Prospectus.

          (iii) Description of Investment Adviser. The description of the
     Investment Adviser in the Registration Statement and the Prospectus (and
     any amendment or supplement to either of them) complied and complies in all
     material respects with the provisions of the 1933 Act, the Investment
     Company Act, the Advisers Act, the Rules and Regulations and the Advisers
     Act Rules and Regulations and is true and correct and does not contain any
     untrue statement of a material fact or omit to state any material fact
     required to be stated therein or necessary in order to make the statements
     therein, in light of the circumstances under which they were made, not
     misleading.

          (iv) Capitalization. The Investment Adviser has the financial
     resources available to it necessary for the performance of its services and
     obligations as contemplated in the Registration Statement, the Prospectus,
     this Agreement and under the Advisory Agreement.

          (v) Authorization of Agreements. This Agreement has been duly
     authorized, executed and delivered by the Investment Adviser; the Advisory
     Agreement has been duly authorized, executed and delivered by the
     Investment Adviser and the Additional Compensation Agreement between the
     Investment Adviser and Merrill Lynch (the "Additional Compensation
     Agreement") has been duly authorized, executed and delivered by the
     Investment Adviser, and each constitutes a valid and binding obligation of
     the Investment Adviser, enforceable in accordance with its terms, subject,
     as to enforcement, to bankruptcy, insolvency, reorganization or other laws
     relating to or affecting creditors' rights and to general equitable
     principles; and neither the execution and delivery of this Agreement, the
     Advisory Agreement or the Additional Compensation Agreement nor the
     performance by the Investment Adviser of its obligations hereunder or
     thereunder will conflict with, or result in a breach of any of the terms
     and provisions of, or constitute, with or without the giving of notice or
     lapse of time or both, a default under, any agreement or instrument to
     which the Investment Adviser is a party or by which it is bound, the
     certificate of formation, the operating agreement, or other organizational
     documents of the Investment Adviser, or to the Investment Adviser's
     knowledge, by any law, order, decree, rule or regulation applicable to it
     of any jurisdiction, court, federal or state regulatory body,
     administrative agency or other governmental body, stock exchange or
     securities association having jurisdiction over the Investment Adviser or
     its respective properties or operations; and no consent, approval,
     authorization or order of any court or governmental authority or agency is
     required for the consummation by the Investment Adviser of the transactions
     contemplated by this Agreement, the Advisory Agreement and the Additional
     Compensation Agreement, except as have been obtained or may be required
     under the 1933 Act, the Investment Company Act, the 1934 Act or state
     securities laws.

          (vi) No Material Adverse Change. Since the respective dates as of
     which information is given in the Registration Statement and the
     Prospectus, except as otherwise stated therein, there has not occurred any
     event which should reasonably be expected to have a material adverse effect
     on the ability of the Investment Adviser to perform its respective
     obligations under this Agreement and the Advisory Agreement.

          (vii) Absence of Proceedings. There is no action, suit, proceeding,
     inquiry or investigation before or brought by any court or governmental
     agency or body, domestic or

                                       -8-

<PAGE>
     foreign, now pending, or, to the knowledge of the Investment Adviser,
     threatened against or affecting the Investment Adviser or any "affiliated
     person" of the Investment Adviser (as such term is defined in the
     Investment Company Act) or any partners, trustees, officers or employees of
     the foregoing, whether or not arising in the ordinary course of business,
     which might reasonably be expected to result in any material adverse change
     in the condition, financial or otherwise, or earnings, business affairs or
     business prospects of the Investment Adviser, materially and adversely
     affect the properties or assets of the Investment Adviser or materially
     impair or adversely affect the ability of the Investment Adviser to
     function as an investment adviser or perform its obligations under the
     Advisory Agreement, or which is required to be disclosed in the
     Registration Statement and the Prospectus.

          (viii) Absence of Violation or Default. The Investment Adviser is not
     in violation of its certificate of limited partnership, its limited
     partnership agreement or other organizational documents or in default under
     any agreement, indenture or instrument, where such violation or default
     would reasonably be expected to have a Material Adverse Effect on the
     Investment Adviser's ability to function as an investment adviser or
     perform its obligations under the Advisory Agreement.

          (ix) Rule 482 Compliance. Any advertisement approved by the Investment
     Adviser for use in the public offering of the Shares pursuant to Rule 482
     under the 1933 Act Regulations (an "Omitting Prospectus") complies with the
     requirements of such Rule 482.

     (c) Officer's Certificates. Any certificate signed by any officer of the
Fund or any officer of the Investment Adviser delivered to the Representative or
to counsel for the Fund and the Underwriters shall be deemed a representation
and warranty by the Fund or the Investment Adviser, as the case may be, to each
Underwriter as to the matters covered thereby.

     SECTION 2. Sale and Delivery to the Underwriters; Closing.

     (a) Initial Shares. On the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set forth, the
Fund agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Fund, at the
price per share set forth in Schedule B, the number of Initial Shares set forth
in Schedule A opposite the name of such Underwriter, plus any additional number
of Initial Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 10 hereof.

     (b) Option Shares. In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Fund hereby grants an option to the Underwriters to purchase up to an
additional [ ] shares of Common Stock at the price per share set forth in
Schedule B, less an amount per share equal to any dividends or distributions
declared by the Fund and payable on the Initial Shares but not payable on the
Option Shares. The option hereby granted will expire 45 days after the date
hereof and may be exercised in whole or in part from time to time only for the
purpose of covering overallotments which may be made in connection with the
offering and distribution of the Initial Shares upon notice by the
Representative to the Fund setting forth the number of Option Shares as to which
the several Underwriters are then exercising the option and the time, date and
place of payment and delivery for such Option Shares. Any such time and date of
delivery for the Option Shares (a "Date of Delivery") shall be determined by the
Representative, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to Closing Time, as hereinafter
defined. If the option is exercised as to all or any portion of the Option
Shares, each of the Underwriters, acting severally and not jointly, will
purchase that proportion of the total number of Option Shares then being
purchased which the number of Initial Shares set forth in Schedule A opposite
the name of such

                                       -9-

<PAGE>
Underwriter bears to the total number of Initial Shares, subject in each
case to such adjustments as the Representative in its discretion shall make to
eliminate any sales or purchases of a fractional number of Option Shares plus
any additional number of Option Shares which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.

     (c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Shares shall be made at the offices of Sidley
Austin Brown & Wood LLP, 787 Seventh Avenue, New York, New York 10019, or at
such other place as shall be agreed upon by the Representative and the Fund, at
9:00 A.M. (Eastern time) on the third business day following the date hereof, or
such other time not later than ten business days after such date as shall be
agreed upon by the Representative and the Fund (such time and date of payment
and delivery herein being referred to as "Closing Time").

     In addition, in the event that any or all of the Option Shares are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Shares shall be made at the above-mentioned
offices of Sidley Austin Brown & Wood LLP, or at such other place as shall be
agreed upon by the Representative and the Fund, on each Date of Delivery as
specified in the notice from the Representative to the Fund. Payment shall be
made to the Fund by wire transfer of immediately available funds to a bank
account designated by the Fund, against delivery to the Representative of
certificates for the Shares to be purchased by the Underwriters. It is
understood that each Underwriter has authorized the Representative, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial Shares and the Option Shares, if any, which it has agreed
to purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Shares or the Option Shares, if any, to be purchased by
any Underwriter whose funds have not been received by the Closing Time or the
relevant Date of Delivery, as the case may be, but such payment shall not
relieve such Underwriter from its obligations hereunder.

     (d) Denominations; Registration. Certificates for the Initial Shares and
the Option Shares, if any, shall be in such denominations and registered in such
names as the Representative may request in writing at least one full business
day before the Closing Time or the relevant Date of Delivery, as the case may
be. The certificates for the Initial Shares and the Option Shares will be made
available by the Fund for examination by the Representative not later than 10:00
A.M. on the last business day prior to Closing Time or the Date of Delivery, as
the case may be.

     SECTION 3. Covenants of the Fund. The Fund covenants with each Underwriter
as follows:

     (a) Compliance with Securities Regulations and Commission Requests. The
Fund, subject to Section 3(b), will comply with the requirements of Rule 430A or
Rule 434, as applicable, and will notify the Representative immediately, and
confirm the notice in writing, (i) if any post-effective amendment to the
Registration Statement shall have become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt
of any comments from the Commission, (iii) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes, and (v) of the issuance by the Commission
of an order of suspension or revocation of the notification on Form N-8A of
registration of the Fund as an investment company under the Investment Company
Act or the initiation of any proceeding for that purpose. The Fund will make
every reasonable effort to prevent the issuance of any stop order described in
subsection (iv) hereunder or any order of suspension or revocation described in
subsection (v) hereunder and, if any such stop order or order of suspension or
revocation is issued, to obtain the lifting thereof at the earliest possible
moment.

                                      -10-

<PAGE>
The Fund will promptly effect the filings necessary pursuant to Rule 497(c),
Rule 497(j) or Rule 497(h) and will take such steps as it deems necessary to
ascertain promptly whether the certificate transmitted for filing under Rule
497(j) or the form of prospectus transmitted for filing under Rule 497(c) or
Rule 497(h) was received for filing by the Commission and, in the event that it
was not, it will promptly file such certificate or prospectus.

     (b) Filing of Amendments. The Fund will give the Representative notice of
its intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment or filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus included
in the Registration Statement at the time it became effective or to the
Prospectus, whether pursuant to the Investment Company Act, the 1933 Act, or
otherwise, and will furnish the Representative with copies of any such documents
a reasonable amount of time prior to such proposed filing or use, as the case
may be, and will not file or use any such document to which the Representative
or counsel to the Underwriters and the Fund shall object.

     (c) Delivery of Registration Statement. The Fund has furnished or will
deliver to the Representative and counsel to the Underwriters and the Fund,
without charge, signed copies of the notification of registration on Form N-8A
and Registration Statement as originally filed and of each amendment thereto,
(including exhibits filed therewith, or incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will also deliver
to the Representative a conformed copy, without charge, of the Registration
Statement as originally filed and of each amendment thereto (without exhibits)
for each of the Underwriters. The copies of the Registration Statement and each
amendment thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.

     (d) Delivery of Prospectus. The Fund has delivered to each Underwriter,
without charge, as many copies of each preliminary prospectus as such
Underwriter reasonably requested, and the Fund hereby consents to the use of
such copies for purposes permitted by the 1933 Act. The Fund will furnish to
each Underwriter, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act, such number of copies of the
Prospectus (as amended or supplemented) as such Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto furnished to
the Underwriters will be identical to the electronically transmitted copies
thereof field with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.

     (e) Continued Compliance with Securities Laws. The Fund will comply with
the 1933 Act, the Investment Company Act and the Rules and Regulations so as to
permit the completion of the distribution of the Shares as contemplated in this
Agreement and in the Prospectus. If at any time when a prospectus is required by
the 1933 Act to be delivered in connection with sales of the Shares, any event
shall occur or condition shall exist as a result of which it is necessary, in
the opinion of counsel to the Underwriters and the Fund, to amend the
Registration Statement or amend or supplement any Prospectus in order that the
Prospectus will not include any untrue statements of material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement any Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Fund will promptly prepare and file with
the Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Fund will
furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.

                                       -11-

<PAGE>
     (f) Blue Sky Qualifications. The Fund will use its best efforts, in
cooperation with the Underwriters, to qualify the Shares for offering and sale
under the applicable securities laws of such states and other jurisdictions as
the Representative may designate and to maintain such qualifications in effect
for a period of not less than one year from the later of the effective date of
the Registration Statement and any Rule 462(b) Registration Statement; provided,
however, that the Fund shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. In each jurisdiction in which the Shares have been
so qualified, the Fund will file such statements and reports as may be required
by the laws of such jurisdiction to continue such qualification in effect for a
period of not less than one year from the effective date of the Registration
Statement and any Rule 462(b) Registration Statement.

     (g) Rule 158. The Fund will timely file such reports pursuant to the 1934
Act as are necessary in order to make generally available to its securityholders
as soon as practicable an earnings statement for the purposes of, and to provide
the benefits contemplated by, the last paragraph of Section 11(a) of the 1933
Act.

     (h) Use of Proceeds. The Fund will use the net proceeds received by it from
the sale of the Shares in the manner specified in the Prospectus under "Use of
Proceeds."

     (i) Subchapter M. The Fund will use its best efforts to maintain its
qualification as a regulated investment company under Subchapter M of the Code.

     (j) Listing. The Fund will use its best efforts to effect the listing of
the Shares on the New York Stock Exchange or another national securities
exchange so that trading on such Exchange will begin no later than two weeks
from the date of the Prospectus.

     (k) Restrictions on Sale of Shares. During a period of 180 days from the
date of the Prospectus, the Fund will not, without the prior written consent of
Merrill Lynch, (i) directly or indirectly offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of any share of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or file any registration statement
under the 1933 Act with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock of such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Shares to be sold hereunder or (B) any shares or Common Stock issued
pursuant to any dividend reinvestment plan.

     (l) Reporting Requirements. The Fund, during the period when the Prospectus
is required to be delivered under the 1933 Act or the 1934 Act, will file all
documents required to be filed with the Commission pursuant to the Investment
Company Act and the 1934 Act within the time periods required by the Investment
Company Act and the Rules and Regulations and the 1934 Act and the rules and
regulations of the Commission thereunder, respectively.

     (m) No Manipulation of Market for Securities. The Fund will not (a) take,
directly or indirectly, any action designed to cause or to result in, or that
might reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Fund to facilitate the sale or resale of the
Shares in violation of federal or state securities laws, and (b) until the
Closing Time, or the Date of Delivery, if any, (i) except for share repurchases
permitted in accordance with applicable laws and purchases of Shares in the open
market pursuant to the Fund's dividend reinvestment plan, sell, bid for or

                                       -12-

<PAGE>
purchase the Shares or pay any person any compensation for soliciting purchases
of the Shares or (ii) pay or agree to pay to any person any compensation for
soliciting another to purchase any other securities of the Fund.

     (n) Rule 462(b) Registration Statement. If the Fund elects to rely upon
Rule 462(b), the Fund shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time,
on the date of this Agreement, and the Fund shall at the time of filing either
pay to the Commission the filing fee for the Rule 462(b) Registration Statement
or give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the 1933 Act.

     SECTION 4. Payment of Expenses.

         4.01. Expenses. The Fund will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale issuance or delivery of
the Shares, (iii) the preparation, issuance and delivery of the certificates for
the Shares to the Underwriters, including any stock or other transfer taxes and
any stamp or other duties payable upon the sale, issuance or delivery of the
Shares to the Underwriters, (iv) the fees and disbursements of the Fund's
counsel, accountants and other advisors, (v) the qualification of the Shares
under the securities laws in accordance with the provisions of Section 3(f)
hereof, including filing fees and the reasonable fees and disbursements of
counsel to the Underwriters and the Fund in connection therewith and in
connection with the preparation of the Blue Sky Survey, if any, and any
supplement thereto, (vi) the printing and delivery to the Underwriters of copies
of each preliminary prospectus, any Term Sheet and of the Prospectus and any
amendments or supplements thereto, (vii) the preparation, printing and delivery
to the Underwriters of copies of the Blue Sky Survey, if any, and any supplement
thereto, (viii) the fees and expenses of any transfer agent or registrar for the
Shares, (ix) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Underwriters and the Fund in connection with the
review by the NASD of the terms of the sale of the Shares, (x) the printing of
any sales material and (xi) the fees and expenses incurred in connection with
the listing of the Shares on the New York Stock Exchange or another national
securities exchange. Also, the Fund shall pay to Merrill Lynch $.00667 per share
of the Shares purchased pursuant to this Agreement as partial reimbursement of
expenses incurred in connection with the offering. The Investment Adviser has
agreed to pay all organizational expenses of the Fund. The Adviser also has
agreed that the amount by which the Fund's offering costs (other than the
underwriting discount, but including the $.00667 per share partial reimbursement
of expenses to the underwriters) exceeds $.04 per share of common stock.

     (a) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section 9(a)
hereof, the Investment Adviser shall reimburse, or arrange for an affiliate to
reimburse, the Underwriters for all of its out-of-pocket expenses, including the
reasonable fees and disbursements of counsel to the Underwriters. In the event
the transactions contemplated hereunder are not consummated, the Investment
Adviser agrees to pay. or arrange for an affiliate to pay, all of the costs and
expenses set forth in paragraph (a) of this Section 4.

     SECTION 5. Conditions of Underwriters' Obligations.

     The obligations of the several Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Fund and the Investment
Adviser contained in Section 1 hereof, or in the certificates of any officer of
the Fund and the Investment Adviser delivered pursuant to the

                                       -13-

<PAGE>
provisions hereof, to the performance by the Fund and the Investment Adviser of
their respective covenants and obligations hereunder, and to the following
further conditions:

     (a) Effectiveness of Registration Statement. The Registration Statement
including any Rule 462(b) Registration Statement has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters and the Fund. Either (i)
a certificate has been filed with the Commission in accordance with Rule 497(j)
or a prospectus has been filed with the Commission in accordance with Rule
497(c), or (ii) a prospectus containing the Rule 430A Information shall have
been filed with the Commission in accordance with Rule 497(h) (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if the
Fund has elected to rely upon Rule 434, a Term Sheet shall have been filed with
the Commission in accordance with Rule 497(h).

     (b) Opinion of Counsel for the Fund. At Closing Time, the Representative
shall have received the favorable opinion, dated as of Closing Time, of Sidley
Austin Brown & Wood LLP, counsel to the Fund to the effect set forth in Exhibit
A hereto.

     (c) Opinion of a Senior Counsel of the Investment Adviser. At Closing Time,
the Representative shall have received the favorable opinion, dated as of
Closing Time, of Bradley J. Lucido, Esq., or another senior attorney of the
Investment Adviser, in form and substance satisfactory to counsel to the
Underwriters, to the effect set forth in Exhibit B hereto and to such further
effect as counsel to the Underwriters may reasonably request.

     (d) Opinion of Counsel for Underwriters. At Closing Time, the
Representative shall have received the favorable opinion, dated as of Closing
Time, of Clifford Chance US LLP, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in Exhibit A clauses (i), (ii), (vi),
(vii) (solely as to preemptive or other similar rights arising by operation of
law or under the charter or by-laws of the Fund), (viii) through (x), inclusive,
(xiv) (solely as to the information in the Prospectus under "Description of
Capital Stock") and the penultimate paragraph of Exhibit A hereto. In giving
such opinion such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of New York and the federal law of
the United States, upon the opinions of counsel satisfactory to the
Representative. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Fund and certificates of public officials.

     (e) Officers' Certificates. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Fund, whether or not arising in the ordinary course of business, and the
Representative shall have received (A) a certificate of the President or a Vice
President of the Fund, dated as of Closing Time, to the effect that (i) there
has been no such material adverse change, (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same force and
effect as though expressly made at and as of Closing Time, (iii) the Fund has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or are
contemplated by the Commission and (B) a certificate of the President or a Vice
President of the Investment Adviser, dated as of Closing Time, to the effect
that (i) the representations and warranties in Sections 1(a) and 1(b) hereof are
true and correct with the same force and effect as

                                       -14-

<PAGE>
though expressly made at and as of Closing Time, and (ii) the Investment Adviser
has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time.

     (f) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representative shall have received from Deloitte & Touche LLP, a
letter, dated such date, in form and substance satisfactory to the
Representative containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus, to the effect set forth in Exhibit C
hereto and to such further effect as counsel to the Underwriters may reasonably
request.

     (g) Bring-down Comfort Letter. At Closing Time, the Representative shall
have received from Deloitte & Touche LLP a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter, furnished
pursuant to subsection (f) of this Section, except that the "specified date"
referred to shall be a date not more than three business days prior to Closing
Time.

     (h) Approval of Listing. At Closing Time, the Shares shall have been
approved for listing on the New York Stock Exchange or another national
securities exchange, subject only to official notice of issuance.

     (i) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.

     (j) Conditions to Purchase Option Shares. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Shares, the representations and warranties of
the Fund and the Investment Adviser contained herein and the statements in any
certificates furnished by the Fund and the Investment Adviser hereunder shall be
true and correct as of each Date of Delivery and, at the relevant Date of
Delivery, the Representative shall have received:

          (i) Officers' Certificates. Certificates, dated such Date of Delivery,
     of the President or a Vice President of the Fund and of the President or a
     Vice President of the Investment Adviser confirming that the respective
     certificates delivered at the Closing Time pursuant to Section 5(e) hereof
     remains true and correct as of such Date of Delivery.

          (ii) Opinions of Counsel. The favorable opinions of Sidley Austin
     Brown & Wood LLP, counsel to the Fund, and of Bradley J. Lucido, Esq., or
     another senior attorney of the Investment Adviser, each in form and
     substance satisfactory to the counsel for the Underwriters, dated such Date
     of Delivery, relating to the Option Shares to be purchased on such Date of
     Delivery and otherwise to the same effect as the opinions required by
     Sections 5(b) and 5(c) hereof, respectively.

          (iii) Opinion of Counsel for the Underwriters. The favorable opinion
     of Clifford Chance US LLP, counsel for the Underwriters, dated such Date of
     Delivery, relating to the Option Shares to be purchased on such Date of
     Delivery and otherwise to the same effect as the opinion required by
     Section 5(d) hereof.

          (iv) Bring-down Comfort Letter. A letter from Deloitte & Touche LLP in
     form and substance satisfactory to the Representative and dated such Date
     of Delivery, substantially the same in form and substance as the letter
     furnished to the Representative pursuant to Section 5(g), except that the
     "specified date" in the letter furnished pursuant to this paragraph shall
     be a date not more than five days prior to such Date of Delivery.

                                       -15-

<PAGE>
     (k) Additional Documents. At Closing Time and at each Date of Delivery,
counsel to the Underwriters shall have been furnished with such documents and
opinions as it may require for the purpose of enabling it to pass upon the
issuance and sale of the Shares as herein contemplated, or in order to evidence
the accuracy of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all proceedings taken by the Fund
in connection with the issuance and sale of the Shares as herein contemplated
shall be satisfactory in form and substance to the Representative and counsel to
the Underwriters.

     (l) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option Shares on
a Date of Delivery which is after the Closing Time, the obligations of the
Underwriters to purchase the relevant Option Shares, may be terminated by the
Representative by notice to the Fund at any time at or prior to Closing Time or
such Date of Delivery, as the case may be, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 6, 7, 8 and 12 shall survive any such termination and
remain in full force and effect.

     (m) Execution of Additional Compensation Agreement. At Closing Time, the
Underwriters shall have received the Additional Compensation Agreement, dated
the date of the Closing Time, as executed by the Investment Adviser.

     SECTION 6. Indemnification.

     (a) Indemnification of the Underwriters. The Fund and the Investment
Adviser jointly and severally agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and any
director, officer, employee or affiliate thereof as follows:

          (i) against any and all loss, liability, claim, damage and expense
     whatsoever, as incurred, arising out of any untrue statement or alleged
     untrue statement of a material fact contained in the Registration Statement
     (or any amendment thereto), including the Rule 430A Information and the
     Rule 434 Information, if applicable, or the omission or alleged omission
     therefrom of a material fact required to be stated therein or necessary to
     make the statements therein not misleading or arising out of any untrue
     statement or alleged untrue statement of a material fact included in any
     preliminary prospectus, any Omitting Prospectus or the Prospectus (or any
     amendment or supplement thereto), or the omission or alleged omission
     therefrom of a material fact necessary in order to make the statements
     therein, in the light of the circumstances under which they were made, not
     misleading;

          (ii) against any and all loss, liability, claim, damage and expense
     whatsoever, as incurred, to the extent of the aggregate amount paid in
     settlement of any litigation, or any investigation or proceeding by any
     governmental agency or body, commenced or threatened, or of any claim
     whatsoever based upon any such untrue statement or omission, provided that
     (subject to Section 6(d) below) any such settlement is effected with the
     written consent of the indemnifying party; and

          (iii) against any and all expense whatsoever, as incurred (including
     the fees and disbursements of counsel chosen by Merrill Lynch) reasonably
     incurred in investigating, preparing or defending against any litigation,
     or any investigation or proceeding by any governmental agency or body,
     commenced or threatened, or any claim whatsoever based upon

                                       -16-

<PAGE>
     any such untrue statement or omission, or any such alleged untrue statement
     or omission, to the extent that any such expense is not paid under (i) or
     (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Fund by any
Underwriter expressly for use in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus, any Omitting Prospectus or the
Prospectus (or any amendment or supplement thereto).

     (b) Indemnification of Fund, Investment Adviser, Directors, General Partner
and Officers. Each Underwriter severally agrees to indemnify and hold harmless
the Fund, the Investment Adviser, the directors of the Fund, the general partner
of the Investment Adviser, each of the Fund's officers who signed the
Registration Statement, and each person, if any, who controls the Fund or the
Investment Adviser within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act, against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) including the Rule 430A Information and the Rule 434
Information, if applicable, or in any preliminary prospectus, or the Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Fund by such Underwriter through Merrill
Lynch expressly for use in the Registration Statement (or any amendment
thereto), or any preliminary prospectus, or the Prospectus (or any amendment or
supplement thereto).

     (c) Indemnification for Marketing Materials. In addition to the foregoing
indemnification, the Fund and the Investment Adviser also, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability,
claim, damage and expense described in the indemnity contained in Section 6(a),
as limited by the proviso set forth therein, with respect to any sales material.

     (d) Actions against Parties, Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by the Underwriters, and,
in the case of parties indemnified pursuant to Section 6(b) above, counsel to
the indemnified parties shall be selected by the Fund and the Investment
Adviser. An indemnifying party may participate at its own expense in the defense
of any such action; provided, however, that counsel to the indemnifying party
shall not (except with the consent of the indemnified party) also be counsel to
the indemnified party. In no event shall the indemnifying parties be liable for
the fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of

                                       -17-

<PAGE>
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.

     (e) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6 (a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.

     SECTION 7. Contribution.

     If the indemnification provided for in Section 6 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Fund and the Investment Adviser on the one
hand and the Underwriters on the other hand from the offering of the Shares
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Fund and the Investment Adviser on the one hand and of the
Underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.

     The relative benefits received by the Fund and the Investment Adviser on
the one hand and the Underwriters on the other hand in connection with the
offering of the Shares pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Shares pursuant to this Agreement (before deducting expenses) received by the
Fund, and the total underwriting commission received by the Underwriters, in
each case as set forth on the cover of the Prospectus, or, if Rule 434 is used,
the corresponding location on the Term Sheet, bear to the aggregate initial
public offering price of the Shares as set forth on such cover.

     The relative fault of the Fund and the Investment Adviser on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Fund and the Investment Adviser or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

     The Fund, the Investment Adviser and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.

                                       -18-

<PAGE>
     Notwithstanding the provisions of this Section 7, the Underwriters shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which the
Underwriters have otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.

     No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

     For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution of such Underwriter, and
each director of the Fund and the Investment Adviser, respectively, each officer
of the Fund who signed the Registration Statement and each person, if any, who
controls the Fund and the Investment Adviser within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, shall have the same rights to
contribution as the Fund and the Investment Adviser. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Shares set forth opposite their respective
names in Schedule A hereto and not joint.

     SECTION 8. Representations, Warranties and Agreements to Survive Delivery.

     All representations, warranties and agreements contained in this Agreement
or in certificates of officers of the Fund or of the Investment Adviser
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the Underwriters or
controlling person, or by or on behalf of the Fund or the Investment Adviser and
shall survive delivery of the Shares to the Underwriters.

     SECTION 9. Termination of Agreement.

     (a) Termination; General. The Representative may terminate this Agreement
by notice to the Fund, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Fund or the Investment Adviser, whether or
not arising in the ordinary course of business, or (ii) if there has occurred
any material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representative, impracticable or inadvisable to market the
Shares or to enforce contracts for the sale of the Shares, or (iii) if trading
in any securities of the Fund has been suspended or materially limited by the
Commission or the New York Stock Exchange or such other national securities
exchange upon which the Fund's securities trade, or if trading generally on the
New York Stock Exchange or the American Stock Exchange or in the Nasdaq National
Market System has been suspended or materially limited, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices for securities
have been required, by any of said exchanges or by such system or by order of
the Commission, the NASD or any other governmental authority, or a material
disruption has occurred in commercial banking or securities settlement or
clearance services in the United States or (iv) if a banking moratorium has been
declared by either Federal or New York authorities.

     (b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and

                                       -19-

<PAGE>
provided further that Sections 1, 6, 7 and 8 shall survive such termination
and remain in full force and effect.

     SECTION 10. Default by One or More of the Underwriters.

     If one or more of the Underwriters shall fail at closing Time or a Date of
Delivery to purchase the Shares which it or they are obligated to purchase under
this Agreement (the "Defaulted Shares"), the Representative shall have the
right, within 24 hours thereafter, to make arrangements for one or more the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Shares in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, the Representative shall not have
completed such arrangements within such 24-hour period, then:

     (a) if the number of Defaulted Shares does not exceed 10% of the number of
Shares to be purchased on such date, each of the non-defaulting Underwriters
shall be obligated, severally and not jointly, to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or

     (b) if the number of Defaulted Shares exceeds 10% of the number of Shares
to be purchased on such date, this Agreement or, with respect to any Date of
Delivery which occurs after the Closing Time, the obligation of the Underwriters
to purchase and of the Fund to sell the Option Shares to be purchased and sold
on such Date of Delivery shall terminate without liability on the part of any
non-defaulting Underwriter.

     No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.

     In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Fund to sell the relevant Option Shares, as the
case may be, either the Representative or the Fund shall have the right to
postpone Closing Time or the relevant Date of Delivery, as the case may be, for
a period not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
As used herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10.

     SECTION 11. Notices.

     All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to
Representative c/o Merrill Lynch & Co. Inc., 4 World Financial Center, New York,
N.Y. 10080, Attention: Richard Bruce, Vice President; notices to the Fund and
the Investment Adviser shall be directed to 800 Scudders Mill Road, Plainsboro,
New Jersey 08536, Attention: Donald C. Burke.

     SECTION 12. Parties.

     This Agreement shall inure to the benefit of and be binding upon the
Underwriters, the Fund, the Investment Adviser and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the Underwriters,
the Fund, the Investment Adviser and their respective successors and the
controlling persons and officers, directors and general partner referred to in
Sections 6 and 7 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein

                                       -20-

<PAGE>
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Underwriters, the Fund and the
Investment Adviser and their respective successors, and said controlling persons
and officers and directors and their heirs and legal representatives, and for
the benefit of no other person, firm or corporation. No purchaser of Shares from
the Underwriters shall be deemed to be a successor merely by reason of such
purchase.

     SECTION 13. GOVERNING LAW AND TIME.

     THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY
TIME.

     SECTION 14. Effect of Headings.

     The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.


                                       -21-

<PAGE>

     If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Fund a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Underwriters and the Fund and the Investment Adviser in accordance with its
terms.

                                     Very truly yours,

                                     FLOATING RATE INCOME STRATEGIES FUND, INC.

                                     By:      _________________________________
                                              Name:
                                              Title:

                                     FUND ASSET MANAGEMENT, L.P.

                                     By:      PRINCETON SERVICES, INC.,
                                              General Partner

                                     By:      __________________________________
                                              Name:
                                              Title:



CONFIRMED AND ACCEPTED,
    as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED
[other co-managers]


By:      MERRILL LYNCH, PIERCE, FENNER & SMITH
                     INCORPORATED

By:     ________________________________
        Authorized Signatory

For itself and as Representative of the
other Underwriters named
in Schedule A hereto.
   ----------


                                       -22-

<PAGE>

                                   SCHEDULE A



                                                                 Number of
      Name of Underwriter                                      Initial Shares
      -------------------                                      --------------
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated ....................................

<PAGE>


                                                                 Number of
      Name of Underwriter                                      Initial Shares
      -------------------                                      --------------

<PAGE>


                                                                 Number of
      Name of Underwriter                                      Initial Shares
      -------------------                                      --------------

         Total ...............................................

<PAGE>



                                   SCHEDULE B

                   FLOATING RATE INCOME STRATEGIES FUND, INC.
                            (a Maryland corporation)

                           [ ] Shares of Common Stock
                           (Par Value $.10 Per Share)

     1. The initial public offering price per share for the Shares, determined
as provided in Section 2, shall be $20.00.

     2. The purchase prices per share for the Shares to be paid by the
Underwriters shall be $19.10, being an amount equal to the initial public
offering price set forth above less $.90 per share; provided that the purchase
price per share for any Option Shares purchased upon the exercise of the
overallotment option described in Section 2(b) shall be reduced by an amount per
share equal to any dividends or distributions declared by the Fund and payable
on the Initial Shares but not payable on the Option Shares.

<PAGE>

                                                                       Exhibit A

                        FORM OF OPINION OF FUND'S COUNSEL
                           TO BE DELIVERED PURSUANT TO
                                  SECTION 5(b)

     1. The Fund has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland.

     2. The Fund has the corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under the Purchase Agreement.

     3. The Fund is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify or to be in good
standing would not result in a material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Fund, whether or not arising in the ordinary course of business
(a "Material Adverse Effect").

     4. The authorized, issued and outstanding capital stock of the Fund is as
set forth in the Prospectus under the caption "Description of Capital Stock."

     5. The Shares to be purchased by the Underwriters from the Fund pursuant to
the Purchase Agreement have been duly authorized for issuance and sale to the
Underwriters and, when issued and delivered by the Fund to the Underwriters
pursuant to the Purchase Agreement against payment of the consideration set
forth in the Purchase Agreement, will be validly issued and fully paid and
non-assessable and no holder of the Shares is or will be subject to personal
liability by reason of being such a holder.

     6. The issuance of the Shares is not subject to the preemptive or other
similar rights of any securityholder of the Fund.

     7. To the best of our knowledge, the Fund does not have any subsidiaries.

     8. The Purchase Agreement has been duly authorized, executed and delivered
by the Fund and complies with all applicable provisions of the Investment
Company Act.

     9. The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the certificate pursuant to Rule 497(j) or the Prospectus pursuant to Rule
497(c) or Rule 497(h), as the case may be, has been made in the manner and
within the time period required by Rule 497(j), Rule 497(c) or Rule 497(h), as
the case may be; and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that purpose
have been instituted or are pending or threatened by the Commission.

     10. The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectus, and each amendment

<PAGE>
or supplement to the Registration Statement and the Prospectus, as of their
respective effective or issue dates, complied as to form in all material
respects (other than the financial statements and supporting schedules included
or incorporated by reference therein or omitted therefrom, as to which we need
express no opinion) with the requirements of the 1933 Act, the Investment
Company Act and the Rules and Regulations.

     11. The form of certificate used to evidence the Common Stock complies in
all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Fund and the
requirements of the New York Stock Exchange.

     12. To the best of our knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Fund is a
party, or to which the property of the Fund is subject, before or brought by any
court or governmental agency or body, domestic or foreign, which might
reasonably be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the properties or
assets thereof or the consummation of the transactions contemplated in the
Purchase Agreement or the performance by the Fund of its obligations thereunder,
other than those disclosed in the Prospectus.

     13. The information in the Prospectus under "Description of Capital Stock"
and "Taxes" and in the Registration Statement under Item 29, to the extent that
it constitutes matters of law, summaries of legal matters, the Fund's charter
and bylaws or legal proceedings, or legal conclusions, has been reviewed by us
and is correct in all material respects.

     14. To the best of our knowledge, there are no statutes or regulations that
are required to be described in the Prospectus that are not described as
required.

     15. All descriptions in the Prospectus of contracts and other documents to
which the Fund is a party are accurate in all material respects; to the best of
our knowledge, there are no franchises, contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments of the Fund required to be
described or referred to in the Registration Statement or to be filed as
exhibits thereto other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto, and the descriptions thereof or
references thereto are correct in all material respects.

     16. To the best of our knowledge, the Fund is not in violation of its
charter or by-laws and no default by the Fund exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed or incorporated by reference
as an exhibit to the Registration Statement.

     17. No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than under the 1933 Act, the 1934 Act, the
Investment Company Act, the Rules and Regulations, which have been obtained, or
as may be required under the rules of the NASD (formerly, the National
Association of Securities Dealers, Inc.) or under the securities or blue sky
laws of the various states, as to which we need express no opinion) is necessary
or required in connection with the due authorization, execution and delivery of
the Purchase Agreement, the Advisory Agreement and the Custody Agreement or for
the offering, issuance, sale or delivery of the Shares.

     18. The Advisory Agreement and the Custody Agreement have each been duly
authorized and approved by the Fund and comply as to form in all material
respects with all applicable provisions of the Investment Company Act, and each
has been duly executed and delivered by the Fund.

<PAGE>
     19. The Fund is registered with the Commission under the Investment Company
Act as a closed-end, non-diversified management investment company, and all
required action has been taken by the Fund under the 1933 Act, the Investment
Company Act and the Rules and Regulations to make the public offering and
consummate the sale of the Shares pursuant to the Purchase Agreement; the
provisions of the charter and the by-laws of the Fund comply as to form in all
material respects with the requirements of the Investment Company Act; and, to
the best of their knowledge and information, no order of suspension or
revocation of such registration under the Investment Company Act, pursuant to
Section 8(e) of the Investment Company Act, has been issued or proceedings
therefor initiated or threatened by the Commission.

     20. The execution, delivery and performance of the Purchase Agreement and
the consummation of the transactions contemplated in the Purchase Agreement and
in the Registration Statement (including the issuance and sale of the Shares,
and the use of the proceeds from the sale of the Shares as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the Fund with
its obligations under the Purchase Agreement do not and will not, whether with
or without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
1(a)(xi) of the Purchase Agreement) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Fund pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreement or instrument, known to us,
to which the Fund is a party or by which it may be bound, or to which any of the
property or assets of the Fund is subject (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Fund, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Fund or any of its properties, assets or operations.

     Nothing has come to our attention that has caused us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no statement),
at the time such Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus or any amendment or supplement thereto
(except for financial statements and schedules and other financial data included
or incorporated by reference therein or omitted therefrom, as to which we need
make no statement), at the time the Prospectus was issued, at the time any such
amended or supplemented prospectus was issued or at the Closing Time, included
or includes an untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

     In rendering such opinion, we may rely as to matters of fact (but not as to
legal conclusions), to the extent we deem proper, on certificates and written
statements of responsible officers of and accountants for the Fund and the
Investment Adviser and public officials. Such letter shall not state that it is
to be governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).

<PAGE>

                                                                       Exhibit B

                        FORM OF OPINION OF COUNSEL TO THE
                       INVESTMENT ADVISER TO BE DELIVERED
                            PURSUANT TO SECTION 5(c)

     (1) The Investment Adviser has been duly organized as a limited partnership
under the laws of the State of Delaware, with power and authority to conduct its
business as described in the Registration Statement and in the Prospectus.

     (2) The Investment Adviser is duly registered as an investment adviser
under the Investment Advisers Act and is not prohibited by the Investment
Advisers Act or the Investment Company Act, or the rules and regulations under
such Acts, from acting under the Advisory Agreement for the Fund as contemplated
by the Prospectus.

     (3) This Agreement, the Advisory Agreement and the Additional Compensation
Agreement have been duly authorized, executed and delivered by the Investment
Adviser, and the Advisory Agreement and the Additional Compensation Agreement
constitute valid and binding obligations of the Investment Adviser, enforceable
in accordance with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization or other laws relating to or affecting creditors'
rights and to general equity principles; and, to the best of my knowledge and
information, neither the execution and delivery of this Agreement, the Advisory
Agreement or the Additional Compensation Agreement nor the performance by the
Investment Adviser of its obligations hereunder or thereunder will conflict
with, or result in a breach of, any of the terms and provisions of, or
constitute, with or without the giving of notice or the lapse of time or both, a
default under, any agreement or instrument to which the Investment Adviser is a
party or by which the Investment Adviser is bound, or any law, order, rule or
regulation applicable to the Investment Adviser of any jurisdiction, court,
Federal or state regulatory body, administrative agency or other governmental
body, stock exchange or securities association having jurisdiction over the
Investment Adviser or its properties or operations.

     (4) To the best of my knowledge and information, the description of the
Investment Adviser in the Registration Statement and in the Prospectus (in light
of the circumstances under which they were made) does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.

<PAGE>

                                                                       Exhibit C

                              FORM OF ACCOUNTANTS'
                     COMFORT LETTER PURSUANT TO SECTION 5(f)

     (1) We are independent public accountants with respect to the Fund within
the meaning of the 1933 Act and Investment Company Act, and the applicable rules
and regulations thereunder adopted by the Commission;

     (2) In our opinion the financial statements audited by us and included in
the Registration Statement and the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and
Investment Company Act and the related rules and regulations adopted by the
Commission;

     (3) On the basis of procedures (but not an audit in accordance with
generally accepted auditing standards) consisting of:

          a. Reading the minutes of meetings of the Board of Directors of the
     Fund as set forth in the minute books through a specified date not more
     than three business days prior to the date of delivery of such letter;

          b. Making inquiries of certain officials of the Fund who have
     responsibility for financial and accounting matters regarding changes in
     the capital stock, net assets or long-term liabilities of the Fund as
     compared with the amounts shown in the latest balance sheet included in the
     Registration Statement or for the period from the date of the latest income
     statement included in the Registration Statement to a specified date not
     more than three business days prior to the delivery of such letter;

     the letter shall also state that the information set forth under the
captions "Fee Table", "Risks and Special Considerations of Leverage" and
"Description of Capital Stock" which is expressed in dollars (or percentages
derived from such dollar amounts) and has been obtained from accounting records
which are subject to controls over financial reporting or which has been derived
directly from such accounting records by analysis or computation, is in
agreement with such records or computations made therefrom, and such other
procedures as the Representative may request and Deloitte & Touche LLP is
willing to perform and report upon.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.K(3)
<SEQUENCE>7
<FILENAME>dex99k3.txt
<DESCRIPTION>FORM OF ADDITIONAL COMPENSATION AGREEMENT
<TEXT>
<PAGE>

                        ADDITIONAL COMPENSATION AGREEMENT

     ADDITIONAL COMPENSATION AGREEMENT (the "Agreement"), dated as of [ ], 2003,
between Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and Fund Asset Management, L.P. (the "Investment Adviser").

     WHEREAS, Floating Rate Income Strategies Fund, Inc. (including any
successor by merger or otherwise, the "Fund") is a newly organized, diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), and its shares of common stock, par
value $.10 per share ("Common Stock") are registered under the Securities Act of
1933, as amended; and

     WHEREAS, the Investment Adviser is the investment adviser of the Fund;

     WHEREAS, Merrill Lynch is acting as lead underwriter in an offering of the
Common Stock;

     WHEREAS, the Investment Adviser desires to provide additional compensation
to Merrill Lynch for acting as lead underwriter in an offering of the Common
Stock; and

     WHEREAS, the Investment Adviser desires to retain Merrill Lynch to provide
after-market support services designed to maintain the visibility of the Fund on
an ongoing basis, and Merrill Lynch is willing to render such services;

     NOW, THEREFORE, in consideration of the mutual terms and conditions set
forth below, the parties hereto agree as follows:

1.   (a) The Investment Adviser hereby employs Merrill Lynch, for the period and
     on the terms and conditions set forth herein, to provide the following
     services at the reasonable request of the Investment Adviser:

          (1)  after-market support services designed to maintain the visibility
               of the Fund on an ongoing basis;

          (2)  relevant information, studies or reports regarding general trends
               in the closed-end investment company and asset management
               industries, if reasonably obtainable, and consult with
               representatives of the Investment Adviser in connection
               therewith; and

          (3)  information to and consult with the Investment Adviser with
               respect to applicable strategies designed to address market value
               discounts, if any.

     (b)  At the request of the Investment Adviser, Merrill Lynch shall limit or
          cease any action or service provided hereunder to the extent and for
          the time period requested by the Investment Adviser; provided,
          however, that pending termination of this Agreement as provided for in
          Section 5 hereof, any such limitation or cessation shall not relieve
          the Investment Adviser of its payment obligations pursuant to Section
          2 hereof.

     (c)  Merrill Lynch will promptly notify the Investment Adviser if it learns
          of any material inaccuracy or misstatement in, or material omission
          from, any written information, as of the date such information was
          published, provided by Merrill Lynch to the Investment Adviser in
          connection with the performance of services by Merrill Lynch under
          this Agreement.

<PAGE>

2.   The Investment Adviser shall pay Merrill Lynch a fee computed weekly and
     payable quarterly in arrears commencing [ ], 2003 at an annualized rate of
     .15% of the Fund's average daily net assets (including any assets
     attributable to any preferred stock that may be outstanding), as defined in
     the Fund's prospectus dated October [ ], 2003 (the "Prospectus"), plus the
     proceeds of any outstanding borrowings used for leverage for a term as
     described in Section 5 hereof; provided that the sum total amount of the
     fee hereunder plus the amount of the expense reimbursement of $0.00667 per
     share of common stock payable by the Fund to the underwriters pursuant to
     the Purchase Agreement, dated [ ], 2003, by and among the Fund, the
     Investment Adviser and each of the Underwriters named therein (the
     "Purchase Agreement"), shall not exceed 4.5% of the total price (including
     all Initial Securities and Option Securities as such terms are described in
     the Purchase Agreement) to the public of the Common Stock offered by the
     Prospectus. All quarterly fees payable hereunder shall be paid to Merrill
     Lynch within 15 days following the end of each calendar quarter.

3.   The Investment Adviser acknowledges that the services of Merrill Lynch
     provided for hereunder do not include any advice as to the value of
     securities or regarding the advisability of purchasing or selling any
     securities for the Fund's portfolio. No provision of this Agreement shall
     be considered as creating, nor shall any provision create, any obligation
     on the part of Merrill Lynch, and Merrill Lynch is not hereby agreeing, to:
     (i) furnish any advice or make any recommendations regarding the purchase
     or sale of portfolio securities or (ii) render any opinions, valuations or
     recommendations of any kind or to perform any such similar services in
     connection with providing the services described in Section 1 hereof.

4.   Nothing herein shall be construed as prohibiting Merrill Lynch or its
     affiliates from providing similar or other services to any other clients
     (including other registered investment companies or other investment
     managers), so long as Merrill Lynch's services to the Investment Adviser
     are not impaired thereby.

5.   The term of this Agreement shall commence upon the date referred to above
     and shall be in effect so long as the Investment Adviser acts as the
     investment manager to the Fund pursuant to the Advisory Agreement (as such
     term is defined in the Purchase Agreement) or other subsequent advisory
     agreement.

6.   The Investment Adviser will furnish Merrill Lynch with such information as
     Merrill Lynch believes appropriate to its assignment hereunder (all such
     information so furnished being the "Information"). The Investment Adviser
     recognizes and confirms that Merrill Lynch (a) will use and rely primarily
     on the Information and on information available from generally recognized
     public sources in performing the services contemplated by this Agreement
     without having independently verified the same and (b) does not assume
     responsibility for the accuracy or completeness of the Information and such
     other information. To the best of the Investment Adviser's knowledge, the
     Information to be furnished by the Investment Adviser when delivered, will
     be true and correct in all material respects and will not contain any
     material misstatement of fact or omit to state any material fact necessary
     to make the statements contained therein not misleading. The Investment
     Adviser will promptly notify Merrill Lynch if it learns of any material
     inaccuracy or misstatement in, or material omission from, any Information
     delivered to Merrill Lynch.

7.   It is understood that Merrill Lynch is being engaged hereunder solely to
     provide the services described above to the Investment Adviser and that
     Merrill Lynch is not acting as an agent or fiduciary of, and shall have no
     duties or liability to the current or future shareholders of the Fund

                                       2

<PAGE>

or any other third party in connection with its engagement hereunder, all of
which are hereby expressly waived.

8.   The Investment Adviser agrees that Merrill Lynch shall have no liability to
     the Investment Adviser or the Fund for any act or omission to act by
     Merrill Lynch in the course of its performance under this Agreement, in the
     absence of gross negligence or willful misconduct on the part of Merrill
     Lynch.

9.   This Agreement and any claim, counterclaim or dispute of any kind or nature
     whatsoever arising out of or in any way relating to this Agreement
     ("Claim") shall be governed by and construed in accordance with the laws of
     the State of New York.

10.  No Claim may be commenced, prosecuted or continued in any court other than
     the courts of the State of New York located in the City and County of New
     York or in the United States District Court for the Southern District of
     New York, which courts shall have exclusive jurisdiction over the
     adjudication of such matters, and the Investment Adviser and Merrill Lynch
     consent to the jurisdiction of such courts and personal service with
     respect thereto. Each of Merrill Lynch and the Investment Adviser waives
     all right to trial by jury in any proceeding (whether based upon contract,
     tort or otherwise) in any way arising out of or relating to this Agreement.
     The Investment Adviser agrees that a final judgment in any proceeding or
     counterclaim brought in any such court shall be conclusive and binding upon
     the Investment Adviser and may be enforced in any other courts to the
     jurisdiction of which the Investment Adviser is or may be subject, by suit
     upon such judgment.

11.  This Agreement may not be assigned by either party without the prior
     written consent of the other party.

12.  This Agreement embodies the entire agreement and understanding between the
     parties hereto and supersedes all prior agreements and understandings
     relating to the subject matter hereof. If any provision of this Agreement
     is determined to be invalid or unenforceable in any respect, such
     determination will not affect such provision in any other respect or any
     other provision of this Agreement, which will remain in full force and
     effect. This Agreement may not be amended or otherwise modified or waived
     except by an instrument in writing signed by both Merrill Lynch and the
     Investment Adviser.

13.  All notices required or permitted to be sent under this Agreement shall be
     sent, if to the Investment Adviser:

     Fund Asset Management, L.P.
     P.O. Box 9011
     Princeton, New Jersey 08543-9011
     Attention: Robert C. Doll, Jr., President

     or if to Merrill Lynch:

     Merrill Lynch & Co.
     Merrill Lynch, Pierce, Fenner & Smith
                    Incorporated
     Debt and Equity New Issues
     4 World Financial Center
     New York, New York 10080

     Attention:  Doug Bond

     or such other name or address as may be given in writing to the other
     parties. Any notice shall be deemed to be given or received on the third
     day after deposit in the US mail with certified postage prepaid or when
     actually received, whether by hand, express delivery service or facsimile
     transmission, whichever is earlier.

14.  This Agreement may be executed in separate counterparts, each of which is
     deemed to be an original and all of which taken together constitute one and
     the same agreement.

                                       3

<PAGE>

     IN WITHESS WHEREOF, the parties hereto have duly executed this Additional
Compensation Agreement as of the date first above written.

FUND ASSET MANAGEMENT, L.P.                MERRILL LYNCH & CO.
                                           MERRILL LYNCH, PIERCE, FENNER & SMITH
                                                          INCORPORATED


By:  PRINCETON SERVICES, INC.
       General Partner

By: _____________________________          By: ________________________________
     Name:                                      Name:
     Title:                                     Title:

                                       4

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
