SENIOR HIGH INCOME PORTFOLIO INC, DEFR14A, 1999-04-14

SENIOR HIGH INCOME PORTFOLIO INC
DEFR14A, 1999-04-14

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 1999

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement

[ ] Confidential, For Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))

[X] Definitive proxy statement
[ ] Definitive additional materials

[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

DEBT STRATEGIES FUND, INC.
DEBT STRATEGIES FUND II, INC.
DEBT STRATEGIES FUND III, INC.
SENIOR HIGH INCOME PORTFOLIO, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

Same as above
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of filing fee (Check the appropriate box):
[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):

- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
(5) Total fee paid:

<PAGE> 2

- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.

- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount previously paid:

- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:

- --------------------------------------------------------------------------------
(3) Filing Party:

- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------

<PAGE> 3

DEBT STRATEGIES FUND, INC.
DEBT STRATEGIES FUND II, INC.
DEBT STRATEGIES FUND III, INC.
SENIOR HIGH INCOME PORTFOLIO, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
------------------------

NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 1999
------------------------

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Meeting") of each of the above-listed investment companies (each a "Fund" and,
collectively, the "Funds") will be held at the offices of Merrill Lynch Asset
Management, L.P., 800 Scudders Mill Road, Plainsboro, New Jersey, on Wednesday,
May 26, 1999 at the time specified in Exhibit A hereto for the following
purposes:

(1) To elect members of the Board of Directors of each Fund to serve
for the ensuing year;

(2) To consider and act upon a proposal to ratify the selection of
Deloitte & Touche LLP to serve as independent auditors of the Fund for its
current fiscal year; and

(3) To transact such other business as may properly come before the
Meeting or any adjournment thereof.

The Board of Directors of each Fund has fixed the close of business on
March 31, 1999 as the record date for the determination of stockholders entitled
to notice of and to vote at the Meeting or any adjournment thereof.

A complete list of the stockholders of each Fund entitled to vote at the
Meeting will be available and open to the examination of any stockholder of the
Fund for any purpose germane to the Meeting during ordinary business hours from
and after May 12, 1999 at the offices of the Funds, 800 Scudders Mill Road,
Plainsboro, New Jersey 08536. You are cordially invited to attend the Meeting.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO
COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED FOR THIS PURPOSE. The enclosed proxy is being solicited on
behalf of the Board of Directors of the respective Fund.

By Order of the Boards of Directors
PATRICK D. SWEENEY
Secretary of the Funds

Plainsboro, New Jersey
Dated: April 14, 1999
<PAGE> 4

COMBINED PROXY STATEMENT
---------------------------

DEBT STRATEGIES FUND, INC.
DEBT STRATEGIES FUND II, INC.
DEBT STRATEGIES FUND III, INC.
SENIOR HIGH INCOME PORTFOLIO, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
---------------------------

1999 ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 1999

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of each of the above-listed
investment companies (each a "Fund" and, collectively, the "Funds") to be voted
at the 1999 Annual Meeting of Stockholders of each Fund (the "Meeting"), to be
held at the offices of Merrill Lynch Asset Management, L.P. ("MLAM"), 800
Scudders Mill Road, Plainsboro, New Jersey, on Wednesday, May 26, 1999 at the
time specified in Exhibit A hereto. The approximate mailing date of this Proxy
Statement is April 14, 1999.

All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Unless instructions to the contrary are marked, proxies
will be voted for the election of each Fund's Board of Directors and for the
ratification of the selection of independent auditors to serve for that Fund's
current fiscal year. Any proxy may be revoked at any time prior to the exercise
thereof by giving written notice to the Secretary of the applicable Fund at that
Fund's address indicated above or by voting in person at the Meeting.

The Board of each Fund has fixed the close of business on March 31, 1999 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Meeting and at any adjournment thereof.
Stockholders on the Record Date will be entitled to one vote for each share
held, with no shares having cumulative voting rights. As of the Record Date,
each Fund had outstanding the number of shares of common stock ("Common Stock")
indicated in Exhibit A. To the knowledge of each Fund, as of the Record Date, no
person is the beneficial owner of more than five percent of its outstanding
shares of Common Stock at such date.

The Board of each Fund knows of no business other than that mentioned in
Items 1 and 2 of the Notice of Meeting that will be presented for consideration
at the Meeting. If any other matter is properly presented, it is the intention
of the persons named in the enclosed proxy to vote in accordance with their best
judgment.

ITEM 1. ELECTION OF DIRECTORS

At the Meetings, the Directors of each Fund will be elected to serve until
the next Annual Meeting of Stockholders for such Fund and until their successors
are elected and qualified. It is intended that all properly
<PAGE> 5

executed proxies will be voted (unless such authority has been withheld in the
proxy) in favor of the seven (7) persons designated as Directors to be elected
by holders of Common Stock.

The Directors of each Fund knows of no reason why any of these nominees
will be unable to serve, but in the event of any such unavailability, the
proxies received will be voted for such substitute nominee or nominees as the
Board of Directors for such Fund may recommend.

Certain information concerning the nominees is set forth below. Additional
information concerning the nominees and other information relevant to the
election of Board members is set forth in Exhibit A.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING PAST
NAME AND ADDRESS AGE FIVE YEARS AND PUBLIC DIRECTORSHIP(1)
- ----------------------------------------------- --- -----------------------------------------------
<S> <C> <C>
Terry K. Glenn(1)*............................. 58 Executive Vice President of MLAM and its
P.O. Box 9011 affiliate Fund Asset Management, L.P. ("FAM")
Princeton, New Jersey 08593-9011 since 1983 (the terms MLAM and FAM, as used
herein, include their corporate predecessors);
Executive Vice President and Director of
Princeton Services, Inc. ("Princeton Services")
since 1993; President of Princeton Funds
Distributor, Inc. ("PFD") since 1986 and
Director thereof since 1991; President of
Princeton Administrators, L.P., since 1988.
Ronald W. Forbes(1)(2)......................... 58 Professor of Finance, School of Business, State
1400 Washington Avenue University of New York at Albany, since 1989;
Albany, New York 12222 Consultant, Urban Institute, Washington, D.C.,
since 1995.
Cynthia A. Montgomery(1)(2).................... 46 Professor, Harvard Business School, since 1989;
Harvard Business School Associate Professor, J.L. Kellogg Graduate
Soldiers Field Road School of Management, Northwestern University,
Boston, Massachusetts 02163 from 1985 to 1989; Assistant Professor,
Graduate School of Business Administration, The
University of Michigan, from 1979 to 1985;
Director, UNUM Corporation since 1990;
Director, Newell Co. since 1995.
Charles C. Reilly(1)(2)........................ 67 Self-employed financial consultant since 1990;
9 Hampton Harbor Road President and Chief Investment Officer of Verus
Hampton Bays, New York 11946 Capital, Inc., from 1979 to 1990; Senior Vice
President of Arnhold and S. Bleichroeder, Inc.,
from 1973 to 1990; Adjunct Professor, Columbia
University Graduate School of Business, from
1990 to 1991; Adjunct Professor, Wharton
School, The University of Pennsylvania, from
1989 to 1990; Partner, Small Cities Cable
Television, from 1986 to 1997.
Kevin A. Ryan(1)(2)............................ 66 Founder and current Director of The Boston
127 Commonwealth Avenue University Center for the Advancement of Ethics
Chestnut Hill, Massachusetts 02167 and Character, Professor of Education at Boston
University since 1982; formerly taught on the
faculties of The University of Chicago,
Stanford University and Ohio State University.
</TABLE>

2
<PAGE> 6

- ---------------
(1) Each of the nominees is a director, trustee or member of an advisory board
of one or more additional investment companies for which FAM, MLAM or their
affiliates act as investment adviser. See "Compensation of Directors" below.

(2) Member of Audit Committee of the Board of Directors.

* Interested person, as defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"), each of the Funds.

Committee and Board of Directors Meetings. The Board of Directors of each
Fund has a standing Audit Committee, which consists of Directors who are not
"interested persons" of the Fund within the meaning of the Investment Company
Act. The principal purpose of the Audit Committee is to review the scope of the
annual audit conducted by the Fund's independent auditors and the evaluation by
such auditors of the accounting procedures followed by the Fund. The
non-interested Directors have retained independent legal counsel to assist them
in connection with these duties. No Fund's Board of Directors has a nominating
committee.

During each Fund's last fiscal year, each of the Directors then in office
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors held during the last fiscal year and, if a member, the total
number of meetings of the Audit Committee held during such period for which he
or she served.

Compliance with Section 16(a) of the Securities Exchange Act of
1934. Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the officers and directors of each Fund and persons
who own more than ten percent of a registered class of such Fund's equity
securities, to file reports of ownership and changes in ownership on Forms 3, 4
and 5 with the Securities and Exchange Commission ("SEC") and the New York Stock
Exchange. Officers, directors and greater than ten percent stockholders are
required by SEC regulations to furnish each Fund with copies of all Forms 3, 4
and 5 they file.

Based solely on each Fund's review of the copies of such forms, and
amendments thereto, furnished to it during or with respect to its most recent
fiscal year, and written representations from certain reporting persons that
they were not required to file Form 5 with respect to the most recent fiscal
year, each Fund believes that, except as noted below, all of its officers,
directors, greater than ten percent beneficial owners and other persons subject
to Section 16 of the Exchange Act due to the requirements of Section 30 of the
Investment Company Act, i.e., any advisory board member, investment adviser or
affiliated person of the Fund's investment adviser, have complied with all
filing requirements applicable to them with respect to transactions during the
Fund's most recent fiscal year, except that Charles C. Reilly inadvertently made
a late Form 3 filing with respect to

3
<PAGE> 7

Debt Strategies Fund II, Inc., reporting his election as Director of the Fund,
and Michael Quinn inadvertently made a late Form 3 filing with respect to Debt
Strategies Fund II, Inc. and Debt Strategies III, Inc., reporting his election
as Senior Vice President of FAM.

Interested Persons. Each Fund considers Mr. Glenn and Mr. Zeikel to be
"interested persons" of such Fund within the meaning of Section 2(a)(19) of the
Investment Company Act due to the positions each holds or has held with FAM and
its affiliates and/or due to their ownership of securities issued by ML & Co.
Mr. Glenn is the President of each Fund.

Compensation of Directors. FAM, the investment adviser of each Fund, pays
all compensation to all officers of the Fund and all Directors of the Fund who
are affiliated with ML & Co. or its subsidiaries. Each Fund pays each Director
not affiliated with FAM (each a "non-interested Director") an annual fee plus a
fee for each meeting attended, and each Fund also pays each member of its Audit
Committee, which consists of all of the non-interested Directors, an annual fee
plus a fee for each meeting attended, together with such Director's
out-of-pocket expenses relating to attendance at meetings. Information with
respect to fees and expenses paid to the non-interested Directors for each
Fund's most recently completed fiscal year is set forth in Exhibit A.

Officers of the Funds. Information regarding the officers of each Fund is
set forth in Exhibit A. Officers of the Funds are elected and appointed by the
Boards and hold office until they resign, are removed or are otherwise
disqualified to serve.

Stock Ownership. As of the Record Date, none of the nominees held shares
of the Funds except as set forth in the table below:

<TABLE>
<CAPTION>
NOMINEE FUND CLASS OF SHARES NO. OF SHARES HELD*
------- ---- --------------- -------------------
<S> <C> <C> <C>
Ronald W. Forbes........ Debt Strategies Fund Common Stock 160
Debt Strategies Fund II Common Stock 500
Senior High Income Portfolio Common Stock 414
Charles C. Reilly....... Senior High Income Portfolio Common Stock 19,412
Kevin A. Ryan........... Senior High Income Portfolio Common Stock 7
</TABLE>

- ---------------
* These holdings represent less than 1% of the shares of Common Stock
outstanding.

At the Record Date, the Directors and officers of each Fund as a group
owned an aggregate of less than 1% of the Common Stock of the Fund outstanding
at such date. At such date, Mr. Zeikel, a Director of each Fund, Mr. Glenn, an
officer and a Director of each Fund, and the other officers of each Fund owned
an aggregate of less than 1% of the outstanding shares of common stock of ML &
Co.

ITEM 2. RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS

The Board of Directors of each Fund, including a majority of the Directors
who are not interested persons of the Fund, has selected the firm of Deloitte &
Touche LLP ("D&T"), independent auditors, to examine the financial statements of
the Fund for the current fiscal year. No Fund knows of any direct or indirect
financial interest of such auditors in the Fund. Such appointment is subject to
ratification or rejection by the stockholders of the Fund. Unless a contrary
specification is made, the accompanying proxy will be voted in favor of
ratifying the selection of such auditors.

4
<PAGE> 8

D&T acts as independent auditor for each of the Funds. D&T also acts as
independent auditors for ML & Co. and all of its subsidiaries and for most other
investment companies for which FAM or MLAM acts as investment adviser. The fees
received by the independent auditors from these other entities are substantially
greater, in the aggregate, than the total fees received by the independent
auditors from each applicable Fund. The Board of Directors of each Fund
considered the fact that D&T has been retained as the independent auditors for
such other entities in its evaluation of the independence of D&T with respect to
the Fund.

Representatives of D&T are expected to be present at the Meeting and will
have the opportunity to make a statement if they so desire and to respond to
questions from stockholders.

ADDITIONAL INFORMATION

The expenses of preparation, printing and mailing of the enclosed form of
proxy and accompanying Notice and Proxy Statement will be borne by the Funds in
proportion to their respective net assets. The Funds will reimburse banks,
brokers and others for their reasonable expenses in forwarding proxy
solicitation material to the beneficial owners of the shares of the Funds.

In order to obtain the necessary quorum at the Meeting (i.e., a majority of
the shares of each class of securities of each Fund entitled to vote at the
Meeting, present in person or by proxy), supplementary solicitation may be made
by mail, telephone, telegraph or personal interview by officers of the Fund. It
is anticipated that the cost of such supplementary solicitation, if any, will be
nominal.

All shares represented by properly executed proxies, unless such proxies
have previously been revoked, will be voted at the Meetings in accordance with
the directions on the proxies; if no direction is indicated, the shares will be
voted "FOR" the Director nominees and "FOR" the ratification of D&T as
independent auditors.

With respect to Item 1. "Election of Directors," assuming a quorum is
present, election of Directors will require the affirmative vote of a plurality
of the votes cast by the holders of Common Stock represented at the Meeting and
entitled to vote. With respect to Item 2. "Ratification of the Selection of
Independent Auditors," assuming a quorum is present, ratification of the
selection of independent auditors will require the affirmative vote of a
majority of the votes cast by the holders of shares of Common Stock represented
at the Meeting and entitled to vote.

Broker-dealer firms, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), holding shares of each Fund in "street name" for the
benefit of their customers and clients, will request the instructions of such
customers and clients on how to vote their shares on each Item before the
Meetings. The Funds understand that, under the rules of the New York Stock
Exchange, such broker-dealer firms may, without instructions from their
customers and clients, grant authority to the proxies designated to vote on the
election of Directors (Item 1) and ratification of the selection of independent
auditors (Item 2) if no instructions have been received prior to the date
specified in the broker-dealer firm's request for voting instructions.
Accordingly, the Funds will include shares held of record by broker-dealers as
to which such authority has been granted in their tabulation of the total number
of votes present for purposes of determining whether the necessary quorum of
stockholders exists. Proxies that are returned to a Fund but that are marked
"abstain" or on which a broker-dealer has declined to vote on any proposal
("broker non-votes") will be counted as present for purposes of a quorum. MLPF&S
has advised each Fund that it intends to vote shares held in its name for which
no instructions are received, except as limited by agreement or applicable law,
on Items 1 and 2 in the same proportion as the votes received from beneficial
owners of those shares for which

5
<PAGE> 9

instructions have been received, whether or not held in nominee name.
Abstentions and broker non-votes will not be counted as votes cast. Abstentions
and broker non-votes, therefore, will not have an effect on the vote on Item 1
or Item 2.

Management knows of no other matters to be presented at the annual meeting.
However, if other matters are presented for a vote at the meeting or any
adjournments thereof, the proxy holders will vote the shares represented by
properly executed proxies according to their judgment on those matters.

ADDRESS OF INVESTMENT ADVISER

The principal office of FAM is located at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536.

ANNUAL REPORT DELIVERY

EACH FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR THE
FUND'S LAST FISCAL YEAR TO ANY STOCKHOLDER UPON REQUEST. Such requests should be
directed to the applicable Fund, P.O. Box 9011, Princeton, New Jersey
08543-9011, Attention: Patrick D. Sweeney, or to 1-800-456-4587 ext. 123.

STOCKHOLDER PROPOSALS

If a stockholder of a Fund intends to present a proposal at the 2000 Annual
Meeting of Stockholders of that Fund, which is anticipated to be held in May
2000, and desires to have the proposal included in the Fund's proxy statement
and form of proxy for that meeting, the stockholder must deliver the proposal to
the offices of the Fund by December 16, 1999.

By Order of the Boards of Directors
PATRICK D. SWEENEY
Secretary of the Funds

Dated: April 14, 1999

6
<PAGE> 10

EXHIBIT A

INFORMATION PERTAINING TO EACH FUND

- - GENERAL INFORMATION PERTAINING TO THE FUNDS

<TABLE>
<CAPTION>
DEFINED TERM STATE OF
FUND USED IN EXHIBIT A FISCAL YEAR END ORGANIZATION MEETING TIME
- -------------------------------- ------------------ --------------- ------------ --------------
<S> <C> <C> <C> <C>
DEBT STRATEGIES FUND, INC....... Debt Strategies 2/28 MD 9:30 a.m.
DEBT STRATEGIES FUND II, INC.... Debt Strategies II 2/28 MD 10:30 a.m.
DEBT STRATEGIES FUND III, Debt Strategies
INC........................... III 2/28 MD 10:45 a.m.
SENIOR HIGH INCOME PORTFOLIO, Senior High Income
INC........................... 2/28 MD 9:15 a.m.
</TABLE>

<TABLE>
<CAPTION>
SHARES OF COMMON STOCK OUTSTANDING AS OF THE RECORD DATE
--------------------------------------------------------
FUND SHARES
- ------------------------------------------------------------ ------
<S> <C>
DEBT STRATEGIES............................................. 31,425,226
DEBT STRATEGIES II.......................................... 62,610,000
DEBT STRATEGIES III......................................... 11,010,000
SENIOR HIGH INCOME.......................................... 53,870,134
</TABLE>

- - INFORMATION PERTAINING TO OFFICERS AND DIRECTORS

<TABLE>
<CAPTION>
YEAR IN WHICH EACH NOMINEE BECAME A MEMBER OF THE BOARD
-----------------------------------------------------------
FUND GLENN FORBES MONTGOMERY REILLY RYAN WEST ZEIKEL
- ----------------------------------------- ----- ------ ---------- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
DEBT STRATEGIES.......................... 1999 1997 1997 1997 1997 1997 1997
DEBT STRATEGIES II....................... 1999 1997 1997 1997 1997 1997 1997
DEBT STRATEGIES III...................... 1999 1998 1998 1998 1998 1998 1998
SENIOR HIGH INCOME....................... 1999 1993 1993 1993 1993 1993 1993
</TABLE>

Set forth in the table below is information regarding board and committee
meetings held and the aggregate fees and expenses paid by the Fund to
non-interested Directors during each Fund's most recently completed fiscal year.

<TABLE>
<CAPTION>
AUDIT COMMITTEE
BOARD -----------------------------------
---------------------------------- AGGREGATE
# MEETINGS ANNUAL PER MEETING # MEETINGS ANNUAL FEES AND
FUND HELD* FEE ($) FEE ($)** HELD FEE ($) EXPENSES ($)
- --------------------------------- ---------- ------- ----------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
DEBT STRATEGIES.................. 7 3,000 300 4 900 38,044
DEBT STRATEGIES II............... 6 3,000 300 3 900 35,687
DEBT STRATEGIES III.............. 5 3,000 300 2 900 23,929
SENIOR HIGH INCOME............... 7 3,000 300 4 900 38,125
</TABLE>

- ---------------
* Includes meetings held via teleconferencing equipment.

** The fee is payable for each meeting attended in person. A fee is not paid
for telephonic meetings.

*** Directors receive out-of-pocket expenses relating to attendance at Audit
Committee meetings. The Chairman of the Audit Committee receives an
additional annual fee of $1,000 (not included in Aggregate Fees and
Expenses).

7
<PAGE> 11

Set forth in the table below is information regarding compensation paid by
the Fund to the non-interested Directors for the most recently completed fiscal
year.

<TABLE>
<CAPTION>
COMPENSATION FROM FUND ($)*
--------------------------------------------
FUND FORBES MONTGOMERY REILLY RYAN WEST
- ----------------------------------------------------- ------ ---------- ------ ----- -----
<S> <C> <C> <C> <C> <C>
DEBT STRATEGIES...................................... 7,300 7,300 8,300 7,300 7,300
DEBT STRATEGIES II................................... 7,300 7,300 8,300 7,300 7,300
DEBT STRATEGIES III.................................. 4,800 4,800 5,800 4,800 4,800
SENIOR HIGH INCOME................................... 7,300 7,300 8,300 7,300 7,300
</TABLE>

- ---------------
* No pension or retirement benefits are accrued as part of Fund expenses.

Set forth in the table below is information regarding the aggregate
compensation paid by all registered investment companies advised by FAM and its
affiliate, MLAM ("FAM/MLAM Advised Funds"), to the non-interested Directors for
the year ended December 31, 1998.

<TABLE>
<CAPTION>
AGGREGATE COMPENSATION FROM FUND AND OTHER
NAME OF BOARD MEMBER FAM/MLAM ADVISED FUNDS PAID TO BOARD MEMBERS ($)(1)
- ----------------------------------------------- ---------------------------------------------------
<S> <C>
Ronald W. Forbes............................... 192,567
Cynthia A. Montgomery.......................... 192,567
Charles C. Reilly.............................. 362,858
Kevin A. Ryan.................................. 192,567
Richard R. West................................ 346,125
</TABLE>

- ---------------
(1) The Directors serve on the boards of FAM/MLAM Advised Funds as follows: Mr.
Forbes (38 registered investment companies consisting of 51 portfolios); Ms.
Montgomery (38 registered investment companies consisting of 51 portfolios);
Mr. Reilly (57 registered investment companies consisting of 70 portfolios);
Mr. Ryan (38 registered investment companies consisting of 51 portfolios);
and Mr. West (58 registered investment companies consisting of 79
portfolios).

Set forth in the table below is information about the officers of each of
the Funds.

<TABLE>
<CAPTION>
OFFICER SINCE
----------------------------------------------------
SENIOR
DEBT DEBT DEBT HIGH
NAME AND BIOGRAPHY AGE OFFICE STRATEGIES STRATEGIES II STRATEGIES III INCOME
------------------ --- -------------- ---------- ------------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Terry K. Glenn............................. 58 President 1997 1997 1998 1993
Executive Vice President of FAM and MLAM
since 1983; President of Princeton Funds
Distributor, Inc. ("PFD") since 1986 and
Director thereof since 1991; Executive
Vice President and Director of Princeton
Services since 1993; President of
Princeton Administrators, L.P. since
1998.
Joseph T. Monagle, Jr...................... 50 Senior Vice 1997 1997 1998 1996
Senior Vice President of FAM and MLAM President
since 1990; Department Head of the Global
Fixed Income Division of FAM and MLAM
since 1997; Senior Vice President of
Princeton Services since 1993.
R. Douglas Henderson....................... 41 Senior Vice 1997 1997 1998 1993
First Vice President of MLAM since 1997; President
Vice President of MLAM from 1989 to 1997.
</TABLE>

8
<PAGE> 12

<TABLE>
<CAPTION>
OFFICER SINCE
----------------------------------------------------
SENIOR
DEBT DEBT DEBT HIGH
NAME AND BIOGRAPHY AGE OFFICE STRATEGIES STRATEGIES II STRATEGIES III INCOME
------------------ --- -------------- ---------- ------------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Donald C. Burke............................ 38 Vice President 1997 1997 1998 1993
Senior Vice President and Treasurer of and Treasurer
FAM and MLAM since 1999; Senior Vice
President and Treasurer of Princeton
Services since 1999; Vice President of
PFD since 1999; First Vice President of
MLAM from 1997 to 1999; Vice President of
MLAM from 1990 to 1997; Director of
Taxation of MLAM since 1990.
Patrick D. Sweeney......................... 45 Secretary 1997 1998 1998 1993
First Vice President of MLAM since 1997;
Vice President of MLAM from 1990 to 1997.
</TABLE>

9
<PAGE> 13

DEBT STRATEGIES FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011

PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Arthur Zeikel, Terry K. Glenn and
Patrick D. Sweeney as proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and to vote,
as designated on the reverse hereof, all the shares of Common Stock of
Debt Strategies Fund, Inc. (the "Fund") held of record by the undersigned
on March 31, 1999 at the annual meeting of stockholders of the Fund to be
held on May 26, 1999 or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
---

By signing and dating the reverse side of this card, you authorize
the proxies to vote each proposal as marked, or if not marked, to vote
"FOR" each proposal, and to use their discretion to vote for any other
matter as may properly come before the meeting or any adjournment
thereof. If you do not intend to personally attend the meeting, please
complete and return this card at once in the enclosed envelope.

(Continued and to be signed on the reverse side)

<PAGE> 14

Please mark boxes [-] or [X] in blue or black ink.

1. ELECTION OF FOR all nominees listed below WITHHOLD AUTHORITY
DIRECTORS (except as marked to to vote for all
the contrary below) [ ] nominees listed below [ ]

(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.) TERRY K. GLENN, RONALD W.
FORBES, CYNTHIA A. MONTGOMERY, CHARLES C. REILLY, KEVIN A. RYAN, RICHARD R. WEST
AND ARTHUR ZEIKEL

2. Proposal to ratify the selection of Deloitte & Touche LLP as the independent
auditors of the Fund to serve for the current fiscal year.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

3. In the discretion of such proxies, upon such other business as may properly
come before the meeting or any adjournment thereof.

Please sign exactly as name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as attorney or as
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name by president or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.

Dated: , 1999
--------------------------

X
---------------------------------
Signature

X
---------------------------------
Signature, if held jointly

SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

<PAGE> 15

DEBT STRATEGIES FUND II, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011

PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Arthur Zeikel, Terry K. Glenn and
Patrick D. Sweeney as proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and to vote,
as designated on the reverse hereof, all the shares of Common Stock of
Debt Strategies Fund II, Inc. (the "Fund") held of record by the
undersigned on March 31, 1999 at the annual meeting of stockholders of
the Fund to be held on May 26, 1999 or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
---

(Continued and to be signed on the reverse side)

<PAGE> 16

Please mark boxes [-] or [X] in blue or black ink.

1. ELECTION OF FOR all nominees listed below WITHHOLD AUTHORITY
DIRECTORS (except as marked to to vote for all
the contrary below) [ ] nominees listed below [ ]

2. Proposal to ratify the selection of Deloitte & Touche LLP as the independent
auditors of the Fund to serve for the current fiscal year.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

3. In the discretion of such proxies, upon such other business as may properly
come before the meeting or any adjournment thereof.

Dated: , 1999
-------------------------

X
-----------------------------------
Signature

X
-----------------------------------
Signature, if held jointly

SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

<PAGE> 17

DEBT STRATEGIES FUND III, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011

PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Arthur Zeikel, Terry K. Glenn and
Patrick D. Sweeney as proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and to vote,
as designated on the reverse hereof, all the shares of Common Stock of
Debt Strategies Fund III, Inc. (the "Fund") held of record by the
undersigned on March 31, 1999 at the annual meeting of stockholders of
the Fund to be held on May 26, 1999 or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
---

(Continued and to be signed on the reverse side)

<PAGE> 18

Please mark boxes [-] or [X] in blue or black ink.

1. ELECTION OF FOR all nominees listed below WITHHOLD AUTHORITY
DIRECTORS (except as marked to to vote for all nominees
the contrary below) [ ] listed below [ ]

2. Proposal to ratify the selection of Deloitte & Touche LLP as the independent
auditors of the Fund to serve for the current fiscal year.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

3. In the discretion of such proxies, upon such other business as may properly
come before the meeting or any adjournment thereof.

Dated: , 1999
--------------------------

X
-----------------------------------
Signature

X
-----------------------------------
Signature, if held jointly

SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

<PAGE> 19

SENIOR HIGH INCOME PORTFOLIO, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011

PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Arthur Zeikel, Terry K. Glenn and
Patrick D. Sweeney as proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and to vote,
as designated on the reverse hereof, all the shares of Common Stock of
Senior High Income Portfolio, Inc. (the "Fund") held of record by the
undersigned on March 31, 1999 at the annual meeting of stockholders of
the Fund to be held on May 26, 1999 or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
---

(Continued and to be signed on the reverse side)

<PAGE> 20

Please mark boxes [-] or [X] in blue or black ink.

1. ELECTION OF FOR all nominees listed below WITHHOLD AUTHORITY
DIRECTORS (except as marked to the to vote for all nominees
contrary below) [ ] listed below [ ]

2. Proposal to ratify the selection of Deloitte & Touche LLP as the independent
auditors of the Fund to serve for the current fiscal year.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

3. In the discretion of such proxies, upon such other business as may properly
come before the meeting or any adjournment thereof.

Dated: , 1999
-------------------------

X
-----------------------------------
Signature

X
-----------------------------------
Signature, if held jointly

SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.