UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 25, 2010
HELIOS STRATEGIC INCOME FUND, INC.
(Exact name of registrant as specified in its charter)
Maryland | 001-32016 | 27-0081847 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
Three World Financial Center 200 Vesey Street, 10th Floor New York, New York | 10281-1010 | |||
(Address of principal executive offices) | (Zip Code) |
(800) 497-3746
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
On August 25, 2010, Helios Strategic Income Fund, Inc. (the “Fund”) released restated financial statements for the fiscal year ended March 31, 2009. A copy of the Fund’s restated financial statements for the fiscal year ended March 31, 2009 is attached to this Current Report on Form 8-K as Exhibit 99.1, and is incorporated herein by reference solely for purposes of this Item 2.02 disclosure.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of (i) Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section; or (ii) the Investment Company Act of 1940, as amended (the “1940 Act”), and the rules thereunder. The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, the Exchange Act, or the 1940 Act, regardless of any incorporation by reference language in any such filing.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit No. | Description | |
99.1 | Amendment to the March 31, 2009 Annual Report. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
HELIOS STRATEGIC INCOME FUND, INC. | ||
By: | /s/ Steven M. Pires | |
Steven M. Pires | ||
Treasurer |
Date: August 25, 2010
HELIOS ADVANTAGE INCOME FUND, INC. (“HAV”)
HELIOS HIGH INCOME FUND, INC. (“HIH”)
HELIOS MULTI-SECTOR HIGH INCOME FUND, INC. (“HMH”)
HELIOS STRATEGIC INCOME FUND, INC. (“HSA”)
(collectively, the “Funds”)
Amendment to the March 31, 2009 Annual Report
As previously disclosed, on April 7, 2010, after an investigation by the Division of Enforcement, the Securities and Exchange Commission (“Commission”) issued an order (“Order”) instituting administrative and cease-and-desist proceedings (the “Administrative Proceeding”) pursuant to the federal securities laws and the Commission’s rules of practice against Morgan Asset Management, Inc. (“Morgan Asset”), Morgan Keegan & Company, Inc., James C. Kelsoe, Jr. and Joseph Thompson Weller, CPA (collectively, “Respondents”). As background, prior to July 29, 2008, Morgan Asset served as investment adviser to each of the Funds. Effective July 29, 2008, Brookfield Investment Management Inc. (the “Adviser”), a registered investment adviser and wholly-owned subsidiary of Brookfield Asset Management Inc., became the investment adviser to the Funds.
If certain allegations in the Order against the Respondents are found to be true at the conclusion of the Administrative Proceeding or otherwise, the financial statements and financial highlights for each Fund’s three fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006 may be impacted. The Funds are currently undertaking an investigation of the underlying allegations in the Order. It is unclear at this time, however, whether each Fund’s financial statements and financial highlights covering these fiscal periods are impacted and, if so, whether the impact is material.
By correspondence dated May 27, 2010, the Funds’ independent registered public accounting firm for the fiscal years ended March 31, 2008, 2007 and 2006, informed the Funds that its audit reports dated May 29, 2008, May 21, 2007 and May 22, 2006, on the Funds’ financial statements should no longer be relied upon.
In addition, by correspondence dated May 28, 2010, BBD, LLP (“BBD”), the Funds’ independent registered public accounting firm for the six-month period ended September 30, 2008 and the fiscal year ended March 31, 2009, informed the Funds that BBD’s audit reports dated November 26, 2008 and May 28, 2009, on the Funds’ financial statements should no longer be relied upon in view of the Funds’ former independent registered public accounting firm’s May 27, 2010 correspondence regarding non-reliance on its previously issued audit reports because BBD relied upon the Funds’ former independent registered public accounting firm’s audit report on the March 31, 2008 financial statements.
We were not the Funds’ investment adviser for the fiscal years ended March 31, 2008, 2007 and 2006, and have not attempted to review the Funds’ financial statements for those fiscal years. The information contained in this report for March 31, 2008, 2007 and 2006 is unaudited and should not be relied upon.
For the Funds’ fiscal year ended March 31, 2009, since we only assumed management of the Funds on July 29, 2008, we reviewed the Funds’ balance sheets as of March 31, 2008 so that we could establish opening valuations for April 1, 2008. Our review resulted in adjustments to portfolio valuations and accrued interest receivables. The Funds engaged BBD to re-audit their March 31, 2009 financial statements. On August 9, 2010, BBD issued a new audit report on the Funds’ March 31, 2009 financial statements. Attached for the fiscal year ended March 31, 2009, please find each Fund’s (i) Portfolio of Investments, (ii)Statement of Assets and Liabilities, restated Statement of Operations, restated Statement of Changes in Net Assets, restated Statement of Cash Flows and restated Financial Highlights, (iii) restated Notes to Financial Statements and (iv) a new Report of Independent Registered Public Accounting Firm.
As discussed above, based upon the actions of the Funds’ former independent registered public accounting firm, the financial statements and financial highlights for the fiscal years ended March 31, 2008, 2007 and 2006 should not be relied upon until such time that the Funds’ investigation of the underlying allegations in the Order has been completed and the issues surrounding the audit reports have been resolved.
HELIOS ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Interest Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
ASSET-BACKED SECURITIES – 3.7% | |||||||||||
Collateralized Debt Obligations – 3.7% | |||||||||||
Linker Finance PLC | 4.06 | %# | 05/19/45 | $ | 3,000 | $ | 30,000 | ||||
Steers Series 2007-A‡(a)(c) | 3.99 | † | 06/20/18 | 6,750 | 1,485,000 | ||||||
Total Collateralized Debt Obligations | 1,515,000 | ||||||||||
Collateralized Loan Obligation – 0.0% | |||||||||||
Credit Genesis CLO 2005‡(a)(c) | 0.00 | † | 06/23/10 | 3 | 18,000 | ||||||
Total ASSET-BACKED SECURITIES | 1,533,000 | ||||||||||
MORTGAGE-BACKED SECURITIES – 0.1% | |||||||||||
Collateralized Mortgage Obligations – 0.1% | |||||||||||
Countrywide Alternative Loan Trust NIM | |||||||||||
Series 2006-OA11, Class N3‡(a)(c) | 12.50 | # | 09/25/46 | 871 | 0 | ||||||
Sharp SP I LLC NIM Trust | |||||||||||
Series 2006-AHM3, Class N3‡(a)(c) | 12.50 | # | 10/25/46 | 736 | 50,462 | ||||||
Total Collateralized Mortgage Obligations | 50,462 | ||||||||||
Total MORTGAGE-BACKED SECURITIES | 50,462 | ||||||||||
INVESTMENT GRADE CORPORATE BONDS – 6.2% | |||||||||||
Consumer Non-Cyclical – 3.0% | |||||||||||
CVS Caremark Corp. | 5.75 | 06/01/17 | 1,000 | 975,162 | |||||||
McKesson Corp | 5.25 | 03/01/13 | 250 | 247,705 | |||||||
Total Consumer Non-Cyclical | 1,222,867 | ||||||||||
Telecommunications – 3.2% | |||||||||||
Comcast Cable Communications Holdings | 8.38 | 03/15/13 | 500 | 534,715 | |||||||
Rogers Communications Inc. | 6.80 | 08/15/18 | 750 | 749,609 | |||||||
Total Telecommunications | 1,284,324 | ||||||||||
Total INVESTMENT GRADE CORPORATE BONDS | 2,507,191 | ||||||||||
HIGH YIELD CORPORATE BONDS – 81.9% | |||||||||||
Basic Industry – 12.4% | |||||||||||
AK Steel Corp. | 7.75 | 06/15/12 | 500 | 392,500 | |||||||
Arch Western Finance LLC | 6.75 | 07/01/13 | 500 | 457,500 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
Brookfield Investment Management, Inc. |
1
HELIOS ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Interest Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
HIGH YIELD CORPORATE BONDS (continued) | |||||||||||
Buckeye Technologies Inc. | 8.50 | % | 10/01/13 | $ | 500 | $ | 437,500 | ||||
Freeport McMoRan Copper & Gold | 8.38 | 04/01/17 | 500 | 467,500 | |||||||
Georgia-Pacific Corp. | 8.13 | 05/15/11 | 1,000 | 993,750 | |||||||
Momentive Performance | 9.75 | 12/01/14 | 500 | 147,500 | |||||||
Steel Dynamics Inc. | 6.75 | 04/01/15 | 1,000 | 677,500 | |||||||
Tube City IMS Corp. | 9.75 | 02/01/15 | 500 | 76,250 | |||||||
US Steel Corp. | 7.00 | 02/01/18 | 1,250 | 853,020 | |||||||
Westlake Chemical Corp. | 6.63 | 01/15/16 | 750 | 525,000 | |||||||
Total Basic Industry | 5,028,020 | ||||||||||
Capital Goods – 8.5% | |||||||||||
Alliant Techsystems Inc. | 6.75 | 04/01/16 | 650 | 617,500 | |||||||
Case Corp. | 7.25 | 01/15/16 | 500 | 365,000 | |||||||
Crown Americas LLC | 7.75 | 11/15/15 | 500 | 502,500 | |||||||
Crown Cork & Seal Company Inc. | 8.00 | 04/15/23 | 250 | 222,500 | |||||||
Jefferson Smurfit Corp. | 8.25 | # | 10/01/12 | 750 | 93,750 | ||||||
L-3 Communications Corp. | 6.13 | 01/15/14 | 500 | 472,500 | |||||||
Mueller Water Products Inc. | 7.38 | 06/01/17 | 500 | 257,500 | |||||||
Owens-Illinois Inc. | 7.80 | 05/15/18 | 500 | 485,000 | |||||||
Terex Corp. | 7.38 | 01/15/14 | 500 | 432,500 | |||||||
Total Capital Goods | 3,448,750 | ||||||||||
Consumer Cyclical – 9.9% | |||||||||||
ACE Hardware Corp.‡(a) | 9.13 | 06/01/16 | 500 | 410,000 | |||||||
Collective Brands Inc. | 8.25 | 08/01/13 | 250 | 197,500 | |||||||
Couche-Tard U.S. LP | 7.50 | 12/15/13 | 1,000 | 982,500 | |||||||
Ford Motor Credit Co. | 7.00 | 10/01/13 | 250 | 167,165 | |||||||
GameStop Corp. | 8.00 | 10/01/12 | 1,000 | 1,010,000 | |||||||
General Motors Corp. | 7.13 | 07/15/13 | 250 | 35,625 | |||||||
Levi Strauss & Co. | 9.75 | 01/15/15 | 500 | 430,000 | |||||||
Phillips-Van Heusen Corp. | 7.25 | 02/15/11 | 500 | 481,250 | |||||||
TRW Automotive Inc.‡(a) | 7.25 | 03/15/17 | 750 | 311,250 | |||||||
Total Consumer Cyclical | 4,025,290 | ||||||||||
Consumer Non-Cyclical – 8.9% | |||||||||||
Church & Dwight Company Inc. | 6.00 | 12/15/12 | 500 | 497,500 | |||||||
Constellation Brands Inc. | 7.25 | 05/15/17 | 650 | 617,500 | |||||||
Delhaize Group | 6.50 | 06/15/17 | 750 | 724,991 | |||||||
Jarden Corp. | 7.50 | 05/01/17 | 1,000 | 805,000 | |||||||
Stater Brothers Holdings | 8.13 | 06/15/12 | 500 | 492,500 | |||||||
SUPERVALU Inc. | 7.50 | 05/15/12 | 500 | 491,250 | |||||||
Total Consumer Non-Cyclical | 3,628,741 | ||||||||||
See Notes to Portfolios of Investments and Notes to Financial Statements.
Brookfield Investment Management, Inc. |
2
HELIOS ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Interest Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
HIGH YIELD CORPORATE BONDS (continued) | |||||||||||
Energy – 13.9% | |||||||||||
Chesapeake Energy Corp. | 6.88 | % | 01/15/16 | $ | 500 | $ | 420,000 | ||||
El Paso Corp. | 6.88 | 06/15/14 | 500 | 445,359 | |||||||
Frontier Oil Corp. | 6.63 | 10/01/11 | 500 | 487,500 | |||||||
Newfield Exploration Co. | 6.63 | 09/01/14 | 500 | 452,500 | |||||||
Pioneer Natural Resource | 6.65 | 03/15/17 | 250 | 189,647 | |||||||
Range Resources Corp. | 7.50 | 05/15/16 | 500 | 461,250 | |||||||
SeaMetric International AS(c) | 11.63 | 05/25/12 | 1,700 | 680,000 | |||||||
SESI LLC | 6.88 | 06/01/14 | 750 | 607,500 | |||||||
Southwestern Energy Co.‡(a) | 7.50 | 02/01/18 | 166 | 160,190 | |||||||
Whiting Petroleum Corp. | 7.25 | 05/01/13 | 1,000 | 785,000 | |||||||
Williams Companies Inc.‡(a) | 6.38 | 10/01/10 | 1,000 | 983,980 | |||||||
Total Energy | 5,672,926 | ||||||||||
Media – 3.9% | |||||||||||
CCH I LLC / CCH I Capital Corp. | 11.00 | # | 10/01/15 | 250 | 26,875 | ||||||
Charter Communications Operating LLC‡(a)(e) | 8.38 | 04/30/14 | 1,000 | 880,000 | |||||||
Mediacom Broadband LLC | 8.50 | 10/15/15 | 750 | 675,000 | |||||||
Total Media | 1,581,875 | ||||||||||
Services Cyclical – 9.5% | |||||||||||
AMC Entertainment Inc. | 8.63 | 08/15/12 | 750 | 736,875 | |||||||
ARAMARK Corp. | 8.50 | 02/01/15 | 750 | 690,000 | |||||||
FireKeepers Development Authority‡(a) | 13.88 | 05/01/15 | 500 | 305,000 | |||||||
Iron Mountain Inc. | 8.75 | 07/15/18 | 1,000 | 992,500 | |||||||
Pokagon Gaming Authority‡(a) | 10.38 | 06/15/14 | 500 | 415,000 | |||||||
Seneca Gaming Corp. | 7.25 | 05/01/12 | 500 | 319,375 | |||||||
United Rentals North America Inc. | 6.50 | 02/15/12 | 500 | 400,000 | |||||||
Total Services Cyclical | 3,858,750 | ||||||||||
Services Non-Cyclical – 3.8% | |||||||||||
HCA Inc. | 9.25 | 11/15/16 | 1,000 | 910,000 | |||||||
Service Corp. International | 6.75 | 04/01/16 | 750 | 652,500 | |||||||
Total Services Non-Cyclical | 1,562,500 | ||||||||||
Technology & Electronics – 3.3% | |||||||||||
Flextronics International Limited | 6.25 | 11/15/14 | 750 | 633,750 | |||||||
Sungard Data Systems Inc. | 10.25 | 08/15/15 | 1,000 | 700,000 | |||||||
Total Technology & Electronics | 1,333,750 | ||||||||||
Telecommunications – 7.8% | |||||||||||
American Tower Corp. | 7.00 | 10/15/17 | 500 | 492,500 | |||||||
Cincinnati Bell Inc. | 8.38 | 01/15/14 | 1,000 | 940,000 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
2009 Annual Report (Amended) |
3
HELIOS ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Interest Rate | Maturity | Principal (000s) | Value (Note 2) | |||||||
HIGH YIELD CORPORATE BONDS (continued) | ||||||||||
CSC Holdings Inc.‡(a) | 8.50% | 04/15/14 | $ | 500 | $ | 492,500 | ||||
Frontier Communications Corp. | 6.25 | 01/15/13 | 650 | 589,062 | ||||||
Windstream Corp. | 7.00 | 03/15/19 | 750 | 660,000 | ||||||
Total Telecommunications | 3,174,062 | |||||||||
Total HIGH YIELD CORPORATE BONDS | 33,314,664 | |||||||||
MUNICIPAL SECURITIES – 0.2% | ||||||||||
Muni-Arizona – 0.2% | ||||||||||
Pima County Arizona Industrial Development Authority(d) | 13.10 | 06/01/09 | 31 | 30,523 | ||||||
Pima County Arizona Industrial Development Authority(d) | 12.10 | 06/01/10 | 44 | 38,445 | ||||||
Total Muni-Arizona | 68,968 | |||||||||
Total MUNICIPAL SECURITIES | 68,968 | |||||||||
Shares | ||||||||||
COMMON STOCKS – 2.6% | ||||||||||
Consumer Products – 0.3% | ||||||||||
The Coca-Cola Co. | 2,400 | 105,480 | ||||||||
Energy – 0.3% | ||||||||||
Southern Union Co. | 7,500 | 114,150 | ||||||||
Finance & Investment – 0.4% | ||||||||||
FSI Realty Trust(c) | 148,000 | 1 | ||||||||
FSI Realty Trust‡(a)(c) | 29,800 | 0 | ||||||||
Mid Country*‡(a)(c) | 50,000 | 164,000 | ||||||||
Total Finance & Investment | 164,001 | |||||||||
Industrials – 0.4% | ||||||||||
General Electric Co. | 7,500 | 75,825 | ||||||||
Port Townsend Company Inc.*(a)(c) | 1,200 | 0 | ||||||||
United States Steel Corp. | 4,000 | 84,520 | ||||||||
Total Industrials | 160,345 | |||||||||
Telecommunications – 1.2% | ||||||||||
AT&T Inc. | 5,000 | 126,000 | ||||||||
Frontier Communications Corp. | 10,000 | 71,800 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
Brookfield Investment Management, Inc. |
4
HELIOS ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Shares | Value (Note 2) | ||||||||||
COMMON STOCKS (continued) | |||||||||||
Qwest Communications International Inc. | 25,000 | $ | 85,500 | ||||||||
Verizon Communications Inc. | 4,000 | 120,800 | |||||||||
Windstream Corp. | 10,000 | 80,600 | |||||||||
Total Telecommunications | 484,700 | ||||||||||
Total COMMON STOCKS | 1,028,676 | ||||||||||
Interest Rate | Maturity | Principal (000s) | |||||||||
SHORT TERM INVESTMENT – 1.1% | |||||||||||
State Street Euro Dollar Time Deposit | 0.01 | % | 04/01/09 | $ | 458 | 458,230 | |||||
Total Investments – 95.8% | 38,961,191 | ||||||||||
Other Assets in Excess of Liabilities – 4.2% | 1,715,216 | ||||||||||
NET ASSETS – 100.0% | $ | 40,676,407 | |||||||||
See Notes to Portfolios of Investments and Notes to Financial Statements.
2009 Annual Report (Amended) |
5
HELIOS HIGH INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
ASSET-BACKED SECURITIES – 3.7% | |||||||||||
Collateralized Debt Obligations – 3.7% | |||||||||||
Linker Finance PLC | |||||||||||
Series 16A, Class E‡(a)(c) | 4.06 | %# | 05/19/45 | $ | 2,000 | $ | 20,000 | ||||
Steers Series 2007-A‡(a)(c) | 3.99 | † | 06/20/18 | 5,000 | 1,100,000 | ||||||
Total Collateralized Debt Obligations | 1,120,000 | ||||||||||
Collateralized Loan Obligation – 0.0% | |||||||||||
Credit Genesis CLO 2005‡(a)(c) | 0.00 | † | 06/23/10 | 1 | 6,000 | ||||||
Total ASSET-BACKED SECURITIES | 1,126,000 | ||||||||||
MORTGAGE-BACKED SECURITIES – 0.6% | |||||||||||
Collateralized Mortgage Obligations – 0.6% | |||||||||||
Countrywide Alternative Loan Trust NIM | 12.50 | # | 09/25/46 | 473 | 0 | ||||||
Sasco NIM Trust | 7.50 | # | 12/28/33 | 1,306 | 118,149 | ||||||
Sharp SP I LLC NIM Trust | 12.50 | # | 10/25/46 | 736 | 50,462 | ||||||
Total Collateralized Mortgage Obligations | 168,611 | ||||||||||
Total MORTGAGE-BACKED SECURITIES | 168,611 | ||||||||||
INVESTMENT GRADE CORPORATE BONDS – 1.7% | |||||||||||
Consumer Non-Cyclical – 0.8% | |||||||||||
CVS Caremark Corp. | 5.75 | 06/01/17 | 250 | 243,791 | |||||||
Telecommunications – 0.9% | |||||||||||
Comcast Cable Communications Holdings | 8.38 | 03/15/13 | 250 | 267,357 | |||||||
Total INVESTMENT GRADE CORPORATE BONDS | 511,148 | ||||||||||
HIGH YIELD CORPORATE BONDS – 84.7% | |||||||||||
Basic Industry – 12.7% | |||||||||||
AK Steel Corp. | 7.75 | 06/15/12 | 500 | 392,500 | |||||||
Arch Western Finance LLC | 6.75 | 07/01/13 | 500 | 457,500 | |||||||
Buckeye Technologies Inc. | 8.50 | 10/01/13 | 500 | 437,500 | |||||||
Freeport McMoRan Copper & Gold | 8.38 | 04/01/17 | 500 | 467,500 | |||||||
Georgia-Pacific Corp. | 8.13 | 05/15/11 | 750 | 745,313 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
Brookfield Investment Management, Inc. |
6
HELIOS HIGH INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
HIGH YIELD CORPORATE BONDS (continued) | |||||||||||
Momentive Performance | 9.75 | % | 12/01/14 | $ | 500 | $ | 147,500 | ||||
Steel Dynamics Inc. | 6.75 | 04/01/15 | 500 | 338,750 | |||||||
Tube City IMS Corp. | 9.75 | 02/01/15 | 500 | 76,250 | |||||||
US Steel Corp. | 7.00 | 02/01/18 | 500 | 341,208 | |||||||
Westlake Chemical Corp. | 6.63 | 01/15/16 | 625 | 437,500 | |||||||
Total Basic Industry | 3,841,521 | ||||||||||
Capital Goods – 10.5% | |||||||||||
Alliant Techsystems Inc. | 6.75 | 04/01/16 | 500 | 475,000 | |||||||
Case Corp. | 7.25 | 01/15/16 | 500 | 365,000 | |||||||
Crown Americas LLC | 7.75 | 11/15/15 | 500 | 502,500 | |||||||
Crown Cork & Seal Company Inc. | 8.00 | 04/15/23 | 125 | 111,250 | |||||||
Jefferson Smurfit Corp. | 8.25 | # | 10/01/12 | 500 | 62,500 | ||||||
L-3 Communications Corp. | 6.13 | 01/15/14 | 500 | 472,500 | |||||||
Mueller Water Products Inc. | 7.38 | 06/01/17 | 500 | 257,500 | |||||||
Owens-Illinois Inc. | 7.80 | 05/15/18 | 500 | 485,000 | |||||||
Terex Corp. | 7.38 | 01/15/14 | 500 | 432,500 | |||||||
Total Capital Goods | 3,163,750 | ||||||||||
Consumer Cyclical – 12.3% | |||||||||||
ACE Hardware Corp.‡(a) | 9.13 | 06/01/16 | 500 | 410,000 | |||||||
Church & Dwight Company Inc. | 6.00 | 12/15/12 | 500 | 497,500 | |||||||
Collective Brands Inc. | 8.25 | 08/01/13 | 250 | 197,500 | |||||||
Couche-Tard U.S. LP | 7.50 | 12/15/13 | 625 | 614,062 | |||||||
Ford Motor Credit Co. | 7.00 | 10/01/13 | 250 | 167,165 | |||||||
GameStop Corp. | 8.00 | 10/01/12 | 625 | 631,250 | |||||||
General Motors Corp. | 7.13 | 07/15/13 | 250 | 35,625 | |||||||
Levi Strauss & Co. | 9.75 | 01/15/15 | 500 | 430,000 | |||||||
Phillips-Van Heusen Corp. | 7.25 | 02/15/11 | 500 | 481,250 | |||||||
TRW Automotive Inc.‡(a) | 7.25 | 03/15/17 | 625 | 259,375 | |||||||
Total Consumer Cyclical | 3,723,727 | ||||||||||
Consumer Non-Cyclical – 8.1% | |||||||||||
Constellation Brands Inc. | 7.25 | 05/15/17 | 500 | 475,000 | |||||||
Delhaize Group | 6.50 | 06/15/17 | 500 | 483,327 | |||||||
Jarden Corp. | 7.50 | 05/01/17 | 625 | 503,125 | |||||||
Stater Brothers Holdings | 8.13 | 06/15/12 | 500 | 492,500 | |||||||
SUPERVALU Inc. | 7.50 | 05/15/12 | 500 | 491,250 | |||||||
Total Consumer Non-Cyclical | 2,445,202 | ||||||||||
Energy – 13.6% | |||||||||||
Chesapeake Energy Corp. | 6.88 | 01/15/16 | 500 | 420,000 | |||||||
El Paso Corp. | 6.88 | 06/15/14 | 500 | 445,359 | |||||||
Frontier Oil Corp. | 6.63 | 10/01/11 | 500 | 487,500 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
2009 Annual Report (Amended) |
7
HELIOS HIGH INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
HIGH YIELD CORPORATE BONDS (continued) | |||||||||||
Newfield Exploration Co. | 6.63 | % | 09/01/14 | $ | 500 | $ | 452,500 | ||||
Pioneer Natural Resource | 6.65 | 03/15/17 | 250 | 189,647 | |||||||
Range Resources Corp. | 7.50 | 05/15/16 | 500 | 461,250 | |||||||
SESI LLC | 6.88 | 06/01/14 | 625 | 506,250 | |||||||
Southwestern Energy Co.‡(a) | 7.50 | 02/01/18 | 167 | 161,155 | |||||||
Whiting Petroleum Corp. | 7.25 | 05/01/13 | 625 | 490,625 | |||||||
Williams Companies Inc.‡(a) | 6.38 | 10/01/10 | 500 | 491,990 | |||||||
Total Energy | 4,106,276 | ||||||||||
Media – 3.6% | |||||||||||
CCH I LLC / CCH I Capital Corp. | 11.00 | # | 10/01/15 | 250 | 26,875 | ||||||
Charter Communications Operating LLC‡(a)(e) | 8.38 | 04/30/14 | 700 | 616,000 | |||||||
Mediacom Broadband LLC | 8.50 | 10/15/15 | 500 | 450,000 | |||||||
Total Media | 1,092,875 | ||||||||||
Services Cyclical – 10.0% | |||||||||||
AMC Entertainment Inc. | 8.63 | 08/15/12 | 500 | 491,250 | |||||||
ARAMARK Corp. | 8.50 | 02/01/15 | 500 | 460,000 | |||||||
FireKeepers Development Authority‡(a) | 13.88 | 05/01/15 | 500 | 305,000 | |||||||
Iron Mountain Inc. | 8.75 | 07/15/18 | 625 | 620,313 | |||||||
Pokagon Gaming Authority‡(a) | 10.38 | 06/15/14 | 500 | 415,000 | |||||||
Seneca Gaming Corp. | 7.25 | 05/01/12 | 500 | 319,375 | |||||||
United Rentals North America Inc. | 6.50 | 02/15/12 | 500 | 400,000 | |||||||
Total Services Cyclical | 3,010,938 | ||||||||||
Services Non-Cyclical – 3.3% | |||||||||||
HCA Inc. | 9.25 | 11/15/16 | 625 | 568,750 | |||||||
Service Corp. International | 6.75 | 04/01/16 | 500 | 435,000 | |||||||
Total Services Non-Cyclical | 1,003,750 | ||||||||||
Technology & Electronics – 2.8% | |||||||||||
Flextronics International Limited | 6.25 | 11/15/14 | 500 | 422,500 | |||||||
Sungard Data Systems Inc. | 10.25 | 08/15/15 | 625 | 437,500 | |||||||
Total Technology & Electronics | 860,000 | ||||||||||
Telecommunications – 7.8% | |||||||||||
American Tower Corp. | 7.00 | 10/15/17 | 500 | 492,500 | |||||||
Cincinnati Bell Inc. | 8.38 | 01/15/14 | 500 | 470,000 | |||||||
CSC Holdings Inc.‡(a) | 8.50 | 04/15/14 | 500 | 492,500 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
Brookfield Investment Management, Inc. |
8
HELIOS HIGH INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Rate | Maturity | Principal (000s) | Value (Note 2) | |||||||
HIGH YIELD CORPORATE BONDS (continued) | ||||||||||
Frontier Communications Corp. | 6.25% | 01/15/13 | $ | 500 | $ | 453,125 | ||||
Windstream Corp. | 7.00 | 03/15/19 | 500 | 440,000 | ||||||
Total Telecommunications | 2,348,125 | |||||||||
Total HIGH YIELD CORPORATE BONDS | 25,596,164 | |||||||||
MUNICIPAL SECURITIES – 0.2% | ||||||||||
Muni-Arizona – 0.2% | ||||||||||
Pima County Arizona Industrial Development Authority(d) | 13.10 | 06/01/09 | 25 | 24,419 | ||||||
Pima County Arizona Industrial Development Authority(d) | 12.10 | 06/01/10 | 35 | 30,756 | ||||||
Total Muni-Arizona | 55,175 | |||||||||
Total MUNICIPAL SECURITIES | 55,175 | |||||||||
Shares | ||||||||||
COMMON STOCKS – 3.2% | ||||||||||
Consumer Products – 0.3% | ||||||||||
The Coca-Cola Co. | 1,750 | 76,912 | ||||||||
Energy – 0.4% | ||||||||||
Southern Union Co. | 7,500 | 114,150 | ||||||||
Finance & Investment – 0.4% | ||||||||||
FSI Realty Trust(c) | 72,000 | 1 | ||||||||
FSI Realty Trust‡(a)(c) | 26,200 | 0 | ||||||||
Mid Country*‡(a)(c) | 38,235 | 125,411 | ||||||||
Total Finance & Investment | 125,412 | |||||||||
Industrials – 0.5% | ||||||||||
General Electric Co. | 7,500 | 75,825 | ||||||||
Port Townsend Company Inc.*(a)(c) | 875 | 0 | ||||||||
United States Steel Corp. | 4,000 | 84,520 | ||||||||
Total Industrials | 160,345 | |||||||||
Telecommunications – 1.6% | ||||||||||
AT&T Inc. | 5,000 | 126,000 | ||||||||
Frontier Communications Corp. | 10,000 | 71,800 | ||||||||
Qwest Communications International Inc. | 25,000 | 85,500 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
2009 Annual Report (Amended) |
9
HELIOS HIGH INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Shares | Value (Note 2) | |||||||||
COMMON STOCKS (continued) | ||||||||||
Verizon Communications Inc. | 4,000 | $ | 120,800 | |||||||
Windstream Corp. | 10,000 | 80,600 | ||||||||
Total Telecommunications | 484,700 | |||||||||
Total COMMON STOCKS | 961,519 | |||||||||
Interest Rate | Maturity | Principal (000s) | ||||||||
SHORT TERM INVESTMENT – 4.1% | ||||||||||
State Street Euro Dollar Time Deposit | 0.01% | 04/01/09 | $ | 1,228 | 1,227,832 | |||||
Total Investments – 98.2% | 29,646,449 | |||||||||
Other Assets in Excess of Liabilities – 1.8% | 543,097 | |||||||||
NET ASSETS – 100.0% | $ | 30,189,546 | ||||||||
See Notes to Portfolios of Investments and Notes to Financial Statements.
Brookfield Investment Management, Inc. |
10
HELIOS MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
ASSET-BACKED SECURITIES – 3.7% | |||||||||||
Collateralized Debt Obligations – 3.6% | |||||||||||
Linker Finance PLC | 4.06 | %# | 05/19/45 | $ | 5,000 | $ | 50,000 | ||||
Steers Series 2007-A‡(a)(c) | 3.99 | † | 06/20/18 | 5,250 | 1,155,000 | ||||||
Total Collateralized Debt Obligations | 1,205,000 | ||||||||||
Collateralized Loan Obligation – 0.1% | |||||||||||
Credit Genesis CLO 2005‡(a)(c) | 0.00 | † | 06/23/10 | 3 | 18,000 | ||||||
Total ASSET-BACKED SECURITIES | 1,223,000 | ||||||||||
MORTGAGE-BACKED SECURITIES – 0.3% | |||||||||||
Collateralized Mortgage Obligations – 0.3% | |||||||||||
Sharp SP I LLC NIM Trust | 12.50 | # | 10/25/46 | 1,471 | 100,924 | ||||||
Total MORTGAGE-BACKED SECURITIES | 100,924 | ||||||||||
INVESTMENT GRADE CORPORATE BONDS – 5.3% | |||||||||||
Consumer Non-Cyclical – 1.5% | |||||||||||
CVS Caremark Corp. | 5.75 | 06/01/17 | 500 | 487,581 | |||||||
Telecommunications – 3.8% | |||||||||||
Comcast Cable Communications Holdings | 8.38 | 03/15/13 | 500 | 534,715 | |||||||
Rogers Communications Inc. | 6.80 | 08/15/18 | 500 | 499,739 | |||||||
Rogers Wireless Inc. | 6.38 | 03/01/14 | 250 | 253,095 | |||||||
Total Telecommunications | 1,287,549 | ||||||||||
Total INVESTMENT GRADE CORPORATE BONDS | 1,775,130 | ||||||||||
HIGH YIELD CORPORATE BONDS – 81.4% | |||||||||||
Basic Industry – 11.5% | |||||||||||
AK Steel Corp. | 7.75 | 06/15/12 | 500 | 392,500 | |||||||
Arch Western Finance LLC | 6.75 | 07/01/13 | 500 | 457,500 | |||||||
Buckeye Technologies Inc. | 8.50 | 10/01/13 | 500 | 437,500 | |||||||
Freeport McMoRan Copper & Gold | 8.38 | 04/01/17 | 500 | 467,500 | |||||||
Georgia-Pacific Corp. | 8.13 | 05/15/11 | 500 | 496,875 | |||||||
Momentive Performance | 9.75 | 12/01/14 | 500 | 147,500 | |||||||
Steel Dynamics Inc. | 6.75 | 04/01/15 | 500 | 338,750 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
2009 Annual Report (Amended) |
11
HELIOS MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
HIGH YIELD CORPORATE BONDS (continued) | |||||||||||
Tube City IMS Corp. | 9.75 | % | 02/01/15 | $ | 500 | $ | 76,250 | ||||
US Steel Corp. | 7.00 | 02/01/18 | 1,000 | 682,416 | |||||||
Westlake Chemical Corp. | 6.63 | 01/15/16 | 500 | 350,000 | |||||||
Total Basic Industry | 3,846,791 | ||||||||||
Capital Goods – 11.1% | |||||||||||
Alliant Techsystems Inc. | 6.75 | 04/01/16 | 500 | 475,000 | |||||||
Case Corp. | 7.25 | 01/15/16 | 500 | 365,000 | |||||||
Crown Americas LLC | 7.75 | 11/15/15 | 500 | 502,500 | |||||||
Crown Cork & Seal Company Inc. | 8.00 | 04/15/23 | 250 | 222,500 | |||||||
Jefferson Smurfit Corp. | 8.25 | # | 10/01/12 | 500 | 62,500 | ||||||
L-3 Communications Corp. | 6.13 | 01/15/14 | 500 | 472,500 | |||||||
Mueller Water Products Inc. | 7.38 | 06/01/17 | 500 | 257,500 | |||||||
Owens-Illinois Inc. | 7.80 | 05/15/18 | 500 | 485,000 | |||||||
Terex Corp. | 7.38 | 01/15/14 | 1,000 | 865,000 | |||||||
Total Capital Goods | 3,707,500 | ||||||||||
Consumer Cyclical – 11.7% | |||||||||||
ACE Hardware Corp.‡(a) | 9.13 | 06/01/16 | 500 | 410,000 | |||||||
Collective Brands Inc. | 8.25 | 08/01/13 | 250 | 197,500 | |||||||
Couche-Tard U.S. LP | 7.50 | 12/15/13 | 1,000 | 982,500 | |||||||
Ford Motor Credit Co. | 7.00 | 10/01/13 | 250 | 167,166 | |||||||
GameStop Corp. | 8.00 | 10/01/12 | 1,000 | 1,010,000 | |||||||
General Motors Corp. | 7.13 | 07/15/13 | 250 | 35,625 | |||||||
Levi Strauss & Co. | 9.75 | 01/15/15 | 500 | 430,000 | |||||||
Phillips-Van Heusen Corp. | 7.25 | 02/15/11 | 500 | 481,250 | |||||||
TRW Automotive Inc.‡(a) | 7.25 | 03/15/17 | 500 | 207,500 | |||||||
Total Consumer Cyclical | 3,921,541 | ||||||||||
Consumer Non-Cyclical – 8.5% | |||||||||||
Church & Dwight Company Inc. | 6.00 | 12/15/12 | 500 | 497,500 | |||||||
Constellation Brands Inc. | 7.25 | 05/15/17 | 500 | 475,000 | |||||||
Delhaize Group | 6.50 | 06/15/17 | 500 | 483,327 | |||||||
Jarden Corp. | 7.50 | @ | 05/01/17 | 500 | 402,500 | ||||||
Stater Brothers Holdings | 8.13 | 06/15/12 | 500 | 492,500 | |||||||
SUPERVALU Inc. | 7.50 | 05/15/12 | 500 | 491,250 | |||||||
Total Consumer Non-Cyclical | 2,842,077 | ||||||||||
Energy – 13.8% | |||||||||||
Chesapeake Energy Corp. | 6.88 | 01/15/16 | 500 | 420,000 | |||||||
El Paso Corp. | 6.88 | 06/15/14 | 500 | 445,359 | |||||||
Frontier Oil Corp | 6.63 | 10/01/11 | 500 | 487,500 | |||||||
Newfield Exploration Co. | 6.63 | 09/01/14 | 500 | 452,500 | |||||||
Pioneer Natural Resource | 6.65 | 03/15/17 | 250 | 189,647 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
Brookfield Investment Management, Inc. |
12
HELIOS MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
HIGH YIELD CORPORATE BONDS (continued) | |||||||||||
Range Resources Corp. | 7.50 | % | 05/15/16 | $ | 500 | $ | 461,250 | ||||
SeaMetric International AS(c) | 11.63 | 05/25/12 | 800 | 320,000 | |||||||
SESI LLC | 6.88 | 06/01/14 | 500 | 405,000 | |||||||
Southwestern Energy Co.‡(a) | 7.50 | 02/01/18 | 167 | 161,155 | |||||||
Whiting Petroleum Corp. | 7.25 | 05/01/13 | 1,000 | 785,000 | |||||||
Williams Companies Inc.‡(a) | 6.38 | 10/01/10 | 500 | 491,990 | |||||||
Total Energy | 4,619,401 | ||||||||||
Media – 3.6% | |||||||||||
CCH I LLC/CCH I Capital Corp. | 11.00 | # | 10/01/15 | 500 | 53,750 | ||||||
Charter Communications Operating LLC‡(a)(e) | 8.38 | 04/30/14 | 800 | 704,000 | |||||||
Mediacom Broadband LLC | 8.50 | 10/15/15 | 500 | 450,000 | |||||||
Total Media | 1,207,750 | ||||||||||
Services Cyclical – 8.1% | |||||||||||
AMC Entertainment Inc. | 8.63 | 08/15/12 | 500 | 491,250 | |||||||
ARAMARK Corp. | 8.50 | 02/01/15 | 500 | 460,000 | |||||||
FireKeepers Development Authority‡(a) | 13.88 | 05/01/15 | 500 | 305,000 | |||||||
Iron Mountain Inc. | 8.75 | 07/15/18 | 750 | 744,375 | |||||||
Seneca Gaming Corp. | 7.25 | 05/01/12 | 500 | 319,375 | |||||||
United Rentals North America Inc. | 6.50 | 02/15/12 | 500 | 400,000 | |||||||
Total Services Cyclical | 2,720,000 | ||||||||||
Services Non-Cyclical – 2.7% | |||||||||||
HCA Inc. | 9.25 | 11/15/16 | 500 | 455,000 | |||||||
Service Corp. International | 6.75 | 04/01/16 | 500 | 435,000 | |||||||
Total Services Non-Cyclical | 890,000 | ||||||||||
Technology & Electronics – 3.4% | |||||||||||
Flextronics International Limited | 6.25 | 11/15/14 | 500 | 422,500 | |||||||
Sungard Data Systems Inc. | 10.25 | 08/15/15 | 1,000 | 700,000 | |||||||
Total Technology & Electronics | 1,122,500 | ||||||||||
Telecommunications – 7.0% | |||||||||||
American Tower Corp. | 7.00 | 10/15/17 | 500 | 492,500 | |||||||
Cincinnati Bell Inc. | 8.38 | 01/15/14 | 500 | 470,000 | |||||||
CSC Holdings Inc.‡(a) | 8.50 | 04/15/14 | 500 | 492,500 | |||||||
Frontier Communications Corp. | 6.25 | 01/15/13 | 500 | 453,125 | |||||||
Windstream Corp. | 7.00 | 03/15/19 | 500 | 440,000 | |||||||
Total Telecommunications | 2,348,125 | ||||||||||
Total HIGH YIELD CORPORATE BONDS | 27,225,685 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
2009 Annual Report (Amended) |
13
HELIOS MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Shares | Value (Note 2) | |||||||||
COMMON STOCKS – 3.0% | ||||||||||
Consumer Products – 0.3% | ||||||||||
The Coca-Cola Co. | 2,000 | $ | 87,900 | |||||||
Energy – 0.3% | ||||||||||
Southern Union Co. | 7,500 | 114,150 | ||||||||
Finance & Investment – 0.5 % | ||||||||||
FSI Realty Trust(c) | 200,000 | 2 | ||||||||
FSI Realty Trust‡(a)(c) | 35,000 | 0 | ||||||||
Mid Country*‡(a)(c) | 52,941 | 173,646 | ||||||||
Total Finance & Investment | 173,648 | |||||||||
Industrials – 0.5% | ||||||||||
General Electric Co. | 7,500 | 75,825 | ||||||||
Port Townsend Company Inc.*(a)(c) | 1,300 | 0 | ||||||||
United States Steel Corp. | 4,000 | 84,520 | ||||||||
Total Industrials | 160,345 | |||||||||
Telecommunications – 1.4% | ||||||||||
AT&T Inc. | 5,000 | 126,000 | ||||||||
Frontier Communications Corp. | 10,000 | 71,800 | ||||||||
Qwest Communications International Inc. | 25,000 | 85,500 | ||||||||
Verizon Communications Inc. | 4,000 | 120,800 | ||||||||
Windstream Corp. | 10,000 | 80,600 | ||||||||
Total Telecommunications | 484,700 | |||||||||
Total COMMON STOCKS | 1,020,743 | |||||||||
Interest Rate | Maturity | Principal (000s) | ||||||||
SHORT TERM INVESTMENT – 4.3% | ||||||||||
State Street Euro Dollar Time Deposit | 0.01% | 04/01/09 | $ | 1,452 | 1,451,692 | |||||
Total Investments – 98.0% | 32,797,174 | |||||||||
Other Assets in Excess of Liabilities – 2.0% | 663,051 | |||||||||
NET ASSETS – 100.0 % | $ | 33,460,225 | ||||||||
See Notes to Portfolios of Investments and Notes to Financial Statements.
Brookfield Investment Management, Inc. |
14
HELIOS STRATEGIC INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Interest Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
ASSET-BACKED SECURITIES – 5.0% | |||||||||||
Collateralized Debt Obligations – 3.8% | |||||||||||
Linker Finance PLC | |||||||||||
Series 16A, Class E‡(a)(c) | 4.06 | %# | 05/19/45 | $ | 2,000 | $ | 20,000 | ||||
Steers Series 2007-A‡(a)(c) | 3.99 | † | 06/20/18 | 5,000 | 1,100,000 | ||||||
Total Collateralized Debt Obligations | 1,120,000 | ||||||||||
Collateralized Loan Obligation – 0.0% | |||||||||||
Credit Genesis CLO 2005‡(a)(c) | 0.00 | † | 06/23/10 | 1 | 6,000 | ||||||
Home Equity Loan – 1.2% | |||||||||||
Lake Country Mortgage Loan Trust | 3.27 | †# | 07/25/34 | 3,915 | 354,621 | ||||||
Total ASSET-BACKED SECURITIES | 1,480,621 | ||||||||||
MORTGAGE-BACKED SECURITIES – 0.2% | |||||||||||
Collateralized Mortgage Obligations – 0.2% | |||||||||||
Countrywide Alternative Loan Trust NIM | 12.50 | # | 09/25/46 | 945 | 0 | ||||||
Sharp SP I LLC NIM Trust | 12.50 | # | 10/25/46 | 736 | 50,462 | ||||||
Total Collateralized Mortgage Obligations | 50,462 | ||||||||||
Total MORTGAGE-BACKED SECURITIES | 50,462 | ||||||||||
INVESTMENT GRADE CORPORATE BONDS – 7.7% | |||||||||||
Consumer Non-Cyclical – 2.5% | |||||||||||
CVS Caremark Corp. | 5.75 | 06/01/17 | 500 | 487,581 | |||||||
McKesson Corp. | 5.25 | 03/01/13 | 250 | 247,705 | |||||||
Total Consumer Non-Cyclical | 735,286 | ||||||||||
Telecommunications – 5.2% | |||||||||||
Comcast Cable Communications Holdings | 8.38 | 03/15/13 | 500 | 534,714 | |||||||
Rogers Wireless Inc. | 6.38 | 03/01/14 | 500 | 506,190 | |||||||
Time Warner Cable Inc. | 8.25 | 04/01/19 | 500 | 513,811 | |||||||
Total Telecommunications | 1,554,715 | ||||||||||
Total INVESTMENT GRADE CORPORATE BONDS | 2,290,001 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
2009 Annual Report (Amended) |
15
HELIOS STRATEGIC INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Interest Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
HIGH YIELD CORPORATE BONDS – 71.4% | |||||||||||
Basic Industry – 6.6% | |||||||||||
Buckeye Technologies Inc. | 8.50 | % | 10/01/13 | $ | 500 | $ | 437,500 | ||||
Freeport McMoRan Copper & Gold | 8.38 | 04/01/17 | 500 | 467,500 | |||||||
Georgia-Pacific Corp. | 8.13 | 05/15/11 | 500 | 496,875 | |||||||
Momentive Performance | 9.75 | 12/01/14 | 500 | 147,500 | |||||||
Tube City IMS Corp. | 9.75 | 02/01/15 | 500 | 76,250 | |||||||
Westlake Chemical Corp. | 6.63 | 01/15/16 | 500 | 350,000 | |||||||
Total Basic Industry | 1,975,625 | ||||||||||
Capital Goods – 10.6% | |||||||||||
Alliant Techsystems Inc. | 6.75 | 04/01/16 | 500 | 475,000 | |||||||
Case Corp. | 7.25 | 01/15/16 | 500 | 365,000 | |||||||
Crown Americas LLC | 7.75 | 11/15/15 | 500 | 502,500 | |||||||
Crown Cork & Seal Company Inc. | 8.00 | 04/15/23 | 125 | 111,250 | |||||||
Jefferson Smurfit Corp. | 8.25 | # | 10/01/12 | 500 | 62,500 | ||||||
L-3 Communications Corp. | 6.13 | 01/15/14 | 500 | 472,500 | |||||||
Mueller Water Products Inc. | 7.38 | 06/01/17 | 500 | 257,500 | |||||||
Owens-Illinois Inc. | 7.80 | 05/15/18 | 500 | 485,000 | |||||||
Terex Corp. | 7.38 | 01/15/14 | 500 | 432,500 | |||||||
Total Capital Goods | 3,163,750 | ||||||||||
Consumer Cyclical – 7.8% | |||||||||||
ACE Hardware Corp.‡(a) | 9.13 | 06/01/16 | 500 | 410,000 | |||||||
Collective Brands Inc. | 8.25 | 08/01/13 | 250 | 197,500 | |||||||
Couche-Tard U.S. LP | 7.50 | 12/15/13 | 625 | 614,062 | |||||||
Ford Motor Credit Co. | 7.00 | 10/01/13 | 250 | 167,166 | |||||||
GameStop Corp. | 8.00 | 10/01/12 | 625 | 631,250 | |||||||
General Motors Corp. | 7.13 | 07/15/13 | 250 | 35,625 | |||||||
TRW Automotive Inc.‡(a) | 7.25 | 03/15/17 | 625 | 259,375 | |||||||
Total Consumer Cyclical | 2,314,978 | ||||||||||
Consumer Non-Cyclical – 7.8% | |||||||||||
Constellation Brands Inc. | 7.25 | 05/15/17 | 500 | 475,000 | |||||||
Delhaize Group | 6.50 | 06/15/17 | 1,000 | 966,654 | |||||||
Jarden Corp. | 7.50 | 05/01/17 | 500 | 402,500 | |||||||
Stater Brothers Holdings | 8.13 | 06/15/12 | 500 | 492,500 | |||||||
Total Consumer Non-Cyclical | 2,336,654 | ||||||||||
Energy – 14.7% | |||||||||||
Chesapeake Energy Corp. | 6.88 | 01/15/16 | 500 | 420,000 | |||||||
El Paso Corp. | 6.88 | 06/15/14 | 500 | 445,359 | |||||||
Newfield Exploration Co. | 6.63 | 09/01/14 | 500 | 452,500 | |||||||
Range Resources Corp. | 7.50 | 05/15/16 | 500 | 461,250 | |||||||
SeaMetric International AS(c) | 11.63 | 05/25/12 | 1,500 | 600,000 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
Brookfield Investment Management, Inc. |
16
HELIOS STRATEGIC INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Interest Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
HIGH YIELD CORPORATE BONDS (continued) | |||||||||||
SESI LLC | 6.88 | % | 06/01/14 | $ | 625 | $ | 506,250 | ||||
Whiting Petroleum Corp. | 7.25 | 05/01/13 | 625 | 490,625 | |||||||
Williams Companies Inc.‡(a) | 6.38 | 10/01/10 | 1,035 | 1,018,419 | |||||||
Total Energy | 4,394,403 | ||||||||||
Media – 3.1% | |||||||||||
CCH I LLC/CCH I Capital Corp. | 11.00 | # | 10/01/15 | 250 | 26,875 | ||||||
Charter Communications Operating LLC‡(a)(e) | 8.38 | 04/30/14 | 500 | 440,000 | |||||||
Mediacom Broadband LLC | 8.50 | 10/15/15 | 500 | 450,000 | |||||||
Total Media | 916,875 | ||||||||||
Services Cyclical – 8.3% | |||||||||||
AMC Entertainment Inc. | 8.63 | 08/15/12 | 500 | 491,250 | |||||||
ARAMARK Corp. | 8.50 | 02/01/15 | 500 | 460,000 | |||||||
FireKeepers Development Authority‡(a) | 13.88 | 05/01/15 | 500 | 305,000 | |||||||
Iron Mountain Inc. | 8.75 | 07/15/18 | 500 | 496,250 | |||||||
Pokagon Gaming Authority‡(a) | 10.38 | 06/15/14 | 500 | 415,000 | |||||||
Seneca Gaming Corp. | 7.25 | 05/01/12 | 500 | 319,375 | |||||||
Total Services Cyclical | 2,486,875 | ||||||||||
Services Non-Cyclical – 3.4% | |||||||||||
HCA Inc. | 9.25 | 11/15/16 | 625 | 568,750 | |||||||
Service Corp. International | 6.75 | 04/01/16 | 500 | 435,000 | |||||||
Total Services Non-Cyclical | 1,003,750 | ||||||||||
Technology & Electronics – 2.9% | |||||||||||
Flextronics International Limited | 6.25 | 11/15/14 | 500 | 422,500 | |||||||
Sungard Data Systems Inc. | 10.25 | 08/15/15 | 625 | 437,500 | |||||||
Total Technology & Electronics | 860,000 | ||||||||||
Telecommunications – 6.2% | |||||||||||
American Tower Corp. | 7.00 | 10/15/17 | 500 | 492,500 | |||||||
Cincinnati Bell Inc. | 8.38 | 01/15/14 | 500 | 470,000 | |||||||
Frontier Communications Corp. | 6.25 | 01/15/13 | 500 | 453,125 | |||||||
Windstream Corp. | 7.00 | 03/15/19 | 500 | 440,000 | |||||||
Total Telecommunications | 1,855,625 | ||||||||||
Total HIGH YIELD CORPORATE BONDS | 21,308,535 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
2009 Annual Report (Amended) |
17
HELIOS STRATEGIC INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Interest Rate | Maturity | Principal (000s) | Value (Note 2) | |||||||
MUNICIPAL SECURITIES – 0.2% | ||||||||||
Muni-Arizona – 0.2% | ||||||||||
Pima County Arizona Industrial Development Authority(d) | 13.10% | 06/01/09 | $ | 25 | $ | 24,419 | ||||
Pima County Arizona Industrial Development Authority(d) | 12.10 | 06/01/10 | 35 | 30,756 | ||||||
Total Muni-Arizona | 55,175 | |||||||||
Total MUNICIPAL SECURITIES | 55,175 | |||||||||
Shares | ||||||||||
COMMON STOCKS – 3.3% | ||||||||||
Consumer Products – 0.3% | ||||||||||
The Coca-Cola Co. | 1,825 | 80,209 | ||||||||
Energy – 0.4 % | ||||||||||
Southern Union Co. | 7,500 | 114,150 | ||||||||
Finance & Investment – 0.5% | ||||||||||
FSI Realty Trust(c) | 92,000 | 1 | ||||||||
FSI Realty Trust‡(a)(c) | 26,200 | 0 | ||||||||
Mid Country*‡(a)(c) | 42,647 | 139,882 | ||||||||
Total Finance & Investment | 139,883 | |||||||||
Industrials – 0.5% | ||||||||||
General Electric Co. | 7,500 | 75,825 | ||||||||
Port Townsend Company Inc.*(a)(c) | 1,050 | 0 | ||||||||
United States Steel Corp. | 4,000 | 84,520 | ||||||||
Total Industrials | 160,345 | |||||||||
Telecommunications – 1.6% | ||||||||||
AT&T Inc. | 5,000 | 126,000 | ||||||||
Frontier Communications Corp. | 10,000 | 71,800 | ||||||||
Qwest Communications International Inc. | 25,000 | 85,500 | ||||||||
Verizon Communications Inc. | 4,000 | 120,800 | ||||||||
Windstream Corp. | 10,000 | 80,600 | ||||||||
Total Telecommunications | 484,700 | |||||||||
Total COMMON STOCKS | 979,287 |
See Notes to Portfolios of Investments and Notes to Financial Statements.
Brookfield Investment Management, Inc. |
18
HELIOS STRATEGIC INCOME FUND, INC.
Portfolio of Investments
March 31, 2009
Interest Rate | Maturity | Principal (000s) | Value (Note 2) | ||||||||
SHORT TERM INVESTMENT – 6.9% | |||||||||||
State Street Euro Dollar Time Deposit | 0.01 | % | 04/01/09 | $ | 2,069 | $ | 2,068,650 | ||||
Total Investments – 94.7% | 28,232,731 | ||||||||||
Other Assets in Excess of Liabilities – 5.3% | 1,582,773 | ||||||||||
NET ASSETS – 100.0% | $ | 29,815,504 | |||||||||
See Notes to Portfolios of Investments and Notes to Financial Statements.
2009 Annual Report (Amended) |
19
HELIOS FUNDS
Notes to Portfolios of Investments
March 31, 2009
The following notes should be read in conjunction with the accompanying Portfolios of Investments.
* | — | Non-income producing security. | ||
# | — | Issuer is currently in default on its regularly scheduled interest payment. | ||
@ | — | Portion or entire principal amount delivered as collateral for reverse repurchase agreement. (Note 6) | ||
† | — | Variable Rate Security – Interest rate shown is the rate in effect as of March 31, 2009. | ||
‡ | — | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold in transactions exempt from registration, normally to qualified institutional buyers. As of March 31, 2009, the total values of all such investments were as follows: |
Fund | Value | % of Net Assets | ||||
Helios Advantage Income Fund, Inc. | $ | 5,705,382 | 14.03 | % | ||
Helios High Income Fund, Inc. | 4,571,042 | 15.14 | ||||
Helios Multi-Sector High Income Fund, Inc. | 4,269,715 | 12.76 | ||||
Helios Strategic Income Fund, Inc. | 4,518,759 | 15.16 |
(a) | — | Private Placement. | ||
(b) | — | Investment in subprime security. As of March 31, 2009, the total values of all such investments were as follows: |
Fund | Value | % of Net Assets | ||||
Helios High Income Fund, Inc. | $ | 118,149 | 0.39 | % | ||
Helios Strategic Income Fund, Inc. | 354,621 | 1.19 |
(c) | — | Security valued in good faith pursuant to fair value procedures adopted by the Board of Directors. As of March 31, 2009, the total values of all such securities were as follows: |
Fund | Value | % of Net Assets | ||||
Helios Advantage Income Fund, Inc. | $ | 2,427,463 | 5.97 | % | ||
Helios High Income Fund, Inc. | 1,420,023 | 4.70 | ||||
Helios Multi-Sector High Income Fund, Inc. | 1,817,572 | 5.43 | ||||
Helios Strategic Income Fund, Inc. | 2,270,966 | 7.62 |
(d) | — | Zero-coupon bond – Interest rate represents current yield to maturity. | ||
(e) | — | Company filed for Chapter 11 bankruptcy protection and has defaulted on regularly scheduled interest payments on subordinated debt. The Funds own senior debt issued by this company that continues to receive income payments.
| ||
ABS | — | Asset-Backed Security. | ||
CBO | — | Certificate-Backed Obligation. | ||
CDO | — | Collateralized Debt Obligation. | ||
CLO | — | Collateralized Loan Obligation. | ||
NIM | — | Net Interest Margin. |
Brookfield Investment Management, Inc. |
20
HELIOS FUNDS
Statements of Assets and Liabilities
March 31, 2009
Helios Advantage Income Fund, Inc. | Helios High Income Fund, Inc. | Helios Multi- Sector High Income Fund, Inc. | Helios Strategic Income Fund, Inc. | |||||||||||||
Assets: | ||||||||||||||||
Investments in securities, at value (Note 2) | $ | 38,502,961 | $ | 28,418,617 | $ | 31,345,482 | $ | 26,164,081 | ||||||||
Investment in time deposit, at value | 458,230 | 1,227,832 | 1,451,692 | 2,068,650 | ||||||||||||
Total investments | 38,961,191 | 29,646,449 | 32,797,174 | 28,232,731 | ||||||||||||
Cash | 101 | 101 | 100 | 101 | ||||||||||||
Net receivable from advisor (Note 4) | 47,122 | 35,063 | 54,545 | 44,389 | ||||||||||||
Interest and dividends receivable | 1,019,754 | 726,963 | 798,316 | 688,533 | ||||||||||||
Receivable for investments sold | 877,998 | 3,851 | 438,998 | 885,204 | ||||||||||||
Prepaid expenses and other assets | 54,835 | 53,981 | 54,478 | 48,414 | ||||||||||||
Total assets | 40,961,001 | 30,466,408 | 34,143,611 | 29,899,372 | ||||||||||||
Liabilities: | ||||||||||||||||
Reverse repurchase agreements (Note 6) | — | — | 150,000 | — | ||||||||||||
Interest payable for reverse repurchase agreements (Note 6) | — | — | 433 | — | ||||||||||||
Payable for investments purchased | 195,785 | 195,785 | 449,153 | — | ||||||||||||
Administration fee payable (Note 4) | 5,458 | 4,127 | 4,550 | 4,118 | ||||||||||||
Accrued expenses | 83,351 | 76,950 | 79,250 | 79,750 | ||||||||||||
Total liabilities | 284,594 | 276,862 | 683,386 | 83,868 | ||||||||||||
Net Assets | $ | 40,676,407 | $ | 30,189,546 | $ | 33,460,225 | $ | 29,815,504 | ||||||||
Composition of Net Assets: | ||||||||||||||||
Capital stock, at par value ($.0001 par value, 1,000,000,000 shares authorized) (Note 7) | $ | 3,268 | $ | 2,419 | $ | 3,791 | $ | 2,947 | ||||||||
Additional paid-in capital (Note 7) | 456,279,779 | 338,533,603 | 494,012,531 | 403,018,378 | ||||||||||||
Accumulated net realized loss on investments | (394,962,880 | ) | (293,558,775 | ) | (439,882,241 | ) | (355,183,396 | ) | ||||||||
Net unrealized depreciation on investments | (20,643,760 | ) | (14,787,701 | ) | (20,673,856 | ) | (18,022,425 | ) | ||||||||
Net assets applicable to capital stock outstanding | $ | 40,676,407 | $ | 30,189,546 | $ | 33,460,225 | $ | 29,815,504 | ||||||||
Investments, at identified cost | $ | 59,604,951 | $ | 44,434,150 | $ | 53,471,030 | $ | 46,255,156 | ||||||||
Shares Outstanding and Net Asset Value Per Share: | ||||||||||||||||
Common shares outstanding | 32,682,733 | 24,181,420 | 37,904,329 | 29,476,068 | ||||||||||||
Net asset value per share | $ | 1.24 | $ | 1.25 | $ | 0.88 | $ | 1.01 |
See Notes to Financial Statements.
2009 Annual Report (Amended) |
21
HELIOS FUNDS
Statements of Operations
For the Fiscal Year Ended March 31, 2009
Helios Advantage Income Fund, Inc. | Helios High Income Fund, Inc. | Helios Multi- Sector High Income Fund, Inc. | Helios Strategic Income Fund, Inc. | |||||||||||||
Investment Income (Note 2): | ||||||||||||||||
Interest | $ | 12,666,221 | $ | 10,318,079 | $ | 11,887,271 | $ | 13,599,670 | ||||||||
Dividends | 58,184 | 46,812 | 57,332 | 50,144 | ||||||||||||
Total investment income | 12,724,405 | 10,364,891 | 11,944,603 | 13,649,814 | ||||||||||||
Expenses: | ||||||||||||||||
Investment advisory fees (Note 4) | 405,861 | 302,089 | 361,173 | 338,039 | ||||||||||||
Administration fees (Note 4) | 97,656 | 73,709 | 87,344 | 82,005 | ||||||||||||
Debt issuance costs | 268,284 | 31,844 | 269,240 | 25,618 | ||||||||||||
Audit and tax services | 146,255 | 146,255 | 146,255 | 146,255 | ||||||||||||
Legal fees | 121,068 | 104,756 | 111,717 | 109,243 | ||||||||||||
Insurance | 109,310 | 80,671 | 108,628 | 96,539 | ||||||||||||
Valuation consultant fees (Note 4) | 76,179 | 56,538 | 71,937 | 61,178 | ||||||||||||
Custodian | 62,437 | 61,917 | 60,236 | 61,723 | ||||||||||||
Reports to stockholders | 51,168 | 41,867 | 46,190 | 47,082 | ||||||||||||
Directors’ fees | 39,088 | 39,088 | 39,088 | 39,088 | ||||||||||||
Transfer agent fees | 30,826 | 31,590 | 30,638 | 30,888 | ||||||||||||
Registration fees | 30,228 | 25,550 | 44,526 | 29,189 | ||||||||||||
Miscellaneous | 11,471 | 7,264 | 10,480 | 10,144 | ||||||||||||
Total operating expenses | 1,449,831 | 1,003,138 | 1,387,452 | 1,076,991 | ||||||||||||
Interest expense on borrowings and reverse repurchase agreements (Note 6) | 21,455 | 19,938 | 31,675 | 102,968 | ||||||||||||
Total expenses | 1,471,286 | 1,023,076 | 1,419,127 | 1,179,959 | ||||||||||||
Less expenses waived and reimbursed by the investment advisor (Note 4) | (449,345 | ) | (427,184 | ) | (474,090 | ) | (440,270 | ) | ||||||||
Net expenses | 1,021,941 | 595,892 | 945,037 | 739,689 | ||||||||||||
Net investment income | 11,702,464 | 9,768,999 | 10,999,566 | 12,910,125 | ||||||||||||
Realized and Unrealized Gain (Loss) on Investments | ||||||||||||||||
Net realized loss on investment transactions | (271,508,158 | ) | (204,453,115 | ) | (295,344,355 | ) | (238,784,098 | ) | ||||||||
Net change in unrealized depreciation on investments | 213,496,101 | 160,058,310 | 232,758,334 | 185,224,421 | ||||||||||||
Net realized and unrealized loss on investments | (58,012,057 | ) | (44,394,805 | ) | (62,586,021 | ) | (53,559,677 | ) | ||||||||
Net decrease in net assets resulting from operations | $ | (46,309,593 | ) | $ | (34,625,806 | ) | $ | (51,586,455 | ) | $ | (40,649,552 | ) | ||||
See Notes to Financial Statements.
Brookfield Investment Management, Inc. |
22
HELIOS FUNDS
Statements of Changes in Net Assets
For the Fiscal Years Ended March 31,
Helios Advantage Income Fund, Inc. | Helios High Income Fund, Inc. | |||||||||||||||
2009 | (Unaudited) 2008 | 2009 | (Unaudited) 2008 | |||||||||||||
Increase (Decrease) in Net Assets Resulting from Operations: | ||||||||||||||||
Net investment income | $ | 11,702,464 | $ | 41,268,490 | $ | 9,768,999 | $ | 28,267,693 | ||||||||
Net realized loss on investment transactions | (271,508,158 | ) | (125,370,763 | ) | (204,453,115 | ) | (89,524,052 | ) | ||||||||
Net change in unrealized appreciation/(depreciation) on investments | 213,496,101 | (196,213,423 | ) | 160,058,310 | (141,206,973 | ) | ||||||||||
Net decrease in net assets resulting from operations | (46,309,593 | ) | (280,315,696 | ) | (34,625,806 | ) | (202,463,332 | ) | ||||||||
Distributions to Stockholders (Note 2): | ||||||||||||||||
Net investment income | (7,792,400 | ) | (42,440,232 | ) | (6,693,644 | ) | (30,061,517 | ) | ||||||||
Net realized gains on investments | — | (2,248,438 | ) | — | (1,476,321 | ) | ||||||||||
Return of capital | (6,704,405 | ) | (1,260,966 | ) | (4,014,614 | ) | (2,127,300 | ) | ||||||||
Total distributions paid | (14,496,805 | ) | (45,949,636 | ) | (10,708,258 | ) | (33,665,138 | ) | ||||||||
Capital Stock Transactions (Note 7): | ||||||||||||||||
Reinvestment of dividends and distributions | 1,183,984 | 9,565,512 | 984,261 | 7,408,915 | ||||||||||||
Total decrease in net assets | (59,622,414 | ) | (316,699,820 | ) | (44,349,803 | ) | (228,719,555 | ) | ||||||||
Net Assets: | ||||||||||||||||
Beginning of year | 100,298,821 | 416,998,641 | 74,539,349 | 303,258,904 | ||||||||||||
End of year | $ | 40,676,407 | $ | 100,298,821 | $ | 30,189,546 | $ | 74,539,349 | ||||||||
(including distributions in excess of net investment income of) | $ | — | $ | (2,699,273 | ) | $ | — | $ | (2,411,702 | ) | ||||||
Share Transactions: | ||||||||||||||||
Reinvested shares | 386,661 | 928,527 | 324,893 | 854,103 | ||||||||||||
See Notes to Financial Statements.
2009 Annual Report (Amended) |
23
HELIOS FUNDS
Statements of Changes in Net Assets (continued)
For the Fiscal Years Ended March 31,
Helios Multi-Sector High Income Fund, Inc. | Helios Strategic Income Fund, Inc. | |||||||||||||||
2009 | (Unaudited) 2008 | 2009 | (Unaudited) 2008 | |||||||||||||
Increase (Decrease) in Net Assets Resulting from Operations: | ||||||||||||||||
Net investment income | $ | 10,999,566 | $ | 43,680,564 | $ | 12,910,125 | $ | 35,240,678 | ||||||||
Net realized loss on investment transactions | (295,344,355 | ) | (145,636,930 | ) | (238,784,098 | ) | (111,667,096 | ) | ||||||||
Net change in unrealized appreciation/(depreciation) on investments | 232,758,334 | (226,990,116 | ) | 185,224,421 | (167,570,291 | ) | ||||||||||
Net decrease in net assets resulting from operations | (51,586,455 | ) | (328,946,482 | ) | (40,649,552 | ) | (243,996,709 | ) | ||||||||
Distributions to Stockholders (Note 2): | ||||||||||||||||
Net investment income | (8,774,368 | ) | (59,306,111 | ) | (9,717,511 | ) | (36,808,696 | ) | ||||||||
Net realized gains on investments | — | (2,434,955 | ) | — | — | |||||||||||
Return of capital | (8,287,794 | ) | — | (4,160,354 | ) | (3,929,720 | ) | |||||||||
Total distributions paid | (17,062,162 | ) | (61,741,066 | ) | (13,877,865 | ) | (40,738,416 | ) | ||||||||
Capital Stock Transactions (Note 7): | ||||||||||||||||
Reinvestment of dividends and distributions | 3,482,113 | 20,435,595 | 1,608,910 | 8,239,194 | ||||||||||||
Total decrease in net assets | (65,166,504 | ) | (370,251,953 | ) | (52,918,507 | ) | (276,495,931 | ) | ||||||||
Net Assets: | ||||||||||||||||
Beginning of year | 98,626,729 | 468,878,682 | 82,734,011 | 359,229,942 | ||||||||||||
End of year | $ | 33,460,225 | $ | 98,626,729 | $ | 29,815,504 | $ | 82,734,011 | ||||||||
(including distributions in excess of net investment income of) | $ | — | $ | (1,326,721) | $ | — | $ | (2,274,674) | ||||||||
Share Transactions: | ||||||||||||||||
Reinvested shares | 1,506,514 | 3,141,378 | 624,790 | 989,582 | ||||||||||||
See Notes to Financial Statements.
Brookfield Investment Management, Inc. |
24
HELIOS ADVANTAGE INCOME FUND, INC.
Statement of Cash Flows
For the Fiscal Year Ended March 31, 2009
Increase (Decrease) in Cash: | ||||
Cash flows provided by (used for) operating activities: | ||||
Net decrease in net assets resulting from operations | $ | (46,309,593 | ) | |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities: | ||||
Purchases of long-term portfolio investments | (49,743,904 | ) | ||
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses | 62,929,794 | |||
Sales of short-term portfolio investments, net | 1,865,980 | |||
Decrease in dividends and interest receivable | 1,796,318 | |||
Decrease in receivable for investments sold | 1,286,087 | |||
Decrease in prepaid expenses | 187,492 | |||
Increase in payable for investments purchased | 195,785 | |||
Decrease in interest payable on loans outstanding | (96,848 | ) | ||
Increase in receivable from advisor | (47,122 | ) | ||
Decrease in investment advisory fee payable | (83,597 | ) | ||
Decrease in administration fee payable | (13,834 | ) | ||
Decrease in accrued expenses | (26,777 | ) | ||
Net amortization and paydown gains on investments | (1,638,916 | ) | ||
Unrealized appreciation on investments | (213,496,101 | ) | ||
Net realized loss on investment transactions | 271,508,158 | |||
Net cash provided by operating activities | 28,312,922 | |||
Cash flows used for financing activities: | ||||
Decrease in loan payable | (15,000,000 | ) | ||
Dividends paid to stockholders, net of reinvestments | (13,312,821 | ) | ||
Net cash used for financing activities | (28,312,821 | ) | ||
Net increase in cash | 101 | |||
Cash at beginning of year | — | |||
Cash at end of year | $ | 101 | ||
Supplemental Disclosure of Cash Flow Information: | ||||
Interest payments for the year ended March 31, 2009 totaled $118,303 | ||||
Non-cash financing activities included reinvestment of dividends of $1,183,984 |
See Notes to Financial Statements.
2009 Annual Report (Amended) |
25
HELIOS HIGH INCOME FUND, INC.
Statement of Cash Flows
For the Fiscal Year Ended March 31, 2009
Increase (Decrease) in Cash: | ||||
Cash flows provided by (used for) operating activities: | ||||
Net decrease in net assets resulting from operations | $ | (34,625,806 | ) | |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities: | ||||
Purchases of long-term portfolio investments | (36,936,716 | ) | ||
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses | 43,743,117 | |||
Sales of short-term portfolio investments, net | 2,970,497 | |||
Decrease in dividends and interest receivable | 1,256,006 | |||
Decrease in receivable for investments sold | 2,134,359 | |||
Increase in prepaid expenses | (20,407 | ) | ||
Decrease in payable for investments purchased | (107,194 | ) | ||
Decrease in interest payable on loans outstanding | (21,150 | ) | ||
Increase in receivable from advisor | (35,063 | ) | ||
Decrease in investment advisory fee payable | (55,071 | ) | ||
Decrease in administration fee payable | (8,582 | ) | ||
Decrease in accrued expenses | (11,725 | ) | ||
Net amortization and paydown gains on investments | (952,972 | ) | ||
Unrealized appreciation on investments | (160,058,310 | ) | ||
Net realized loss on investment transactions | 204,453,115 | |||
Net cash provided by operating activities | 21,724,098 | |||
Cash flows used for financing activities: | ||||
Decrease in loan payable | (12,000,000 | ) | ||
Dividends paid to stockholders, net of reinvestments | (9,723,997 | ) | ||
Net cash used for financing activities | (21,723,997 | ) | ||
Net increase in cash | 101 | |||
Cash at beginning of year | — | |||
Cash at end of year | $ | 101 | ||
Supplemental Disclosure of Cash Flow Information: | ||||
Interest payments for the year ended March 31, 2009 totaled $41,088 | ||||
Non-cash financing activities included reinvestment of dividends of $984,261 |
See Notes to Financial Statements.
Brookfield Investment Management, Inc. |
26
HELIOS MULTI-SECTOR HIGH INCOME FUND, INC.
Statement of Cash Flows
For the Fiscal Year Ended March 31, 2009
Increase (Decrease) in Cash: | ||||
Cash flows provided by (used for) operating activities: | ||||
Net decrease in net assets resulting from operations | $ | (51,586,455 | ) | |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities: | ||||
Purchases of long-term portfolio investments | (39,173,855 | ) | ||
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses | 53,658,648 | |||
Purchases of short-term portfolio investments, net | (41,362 | ) | ||
Decrease in dividends and interest receivable | 2,000,858 | |||
Decrease in receivable for investments sold | 4,219,184 | |||
Decrease in prepaid expenses | 187,849 | |||
Increase in interest payable for reverse repurchase agreements | 433 | |||
Increase in payable for investments purchased | 449,153 | |||
Decrease in interest payable on loans outstanding | (97,557 | ) | ||
Increase in receivable from advisor | (54,545 | ) | ||
Decrease in investment advisory fee payable | (83,588 | ) | ||
Decrease in administration fee payable | (14,739 | ) | ||
Decrease in accrued expenses | (31,704 | ) | ||
Net amortization and paydown gains on investments | (1,588,192 | ) | ||
Unrealized appreciation on investments | (232,758,334 | ) | ||
Net realized loss on investment transactions | 295,344,355 | |||
Net cash provided by operating activities | 30,430,149 | |||
Cash flows used for financing activities: | ||||
Decrease in loan payable | (17,000,000 | ) | ||
Net cash provided by reverse repurchase agreements | 150,000 | |||
Dividends paid to stockholders, net of reinvestments | (13,580,049 | ) | ||
Net cash used for financing activities | (30,430,049 | ) | ||
Net increase in cash | 100 | |||
Cash at beginning of year | — | |||
Cash at end of year | $ | 100 | ||
Supplemental Disclosure of Cash Flow Information: | ||||
Interest payments for the year ended March 31,2009 totaled $128,799 | ||||
Non-cash financing activities included reinvestment of dividends of $3,482,113 |
See Notes to Financial Statements.
2009 Annual Report (Amended) |
27
HELIOS STRATEGIC INCOME FUND, INC.
Statement of Cash Flows
For the Fiscal Year Ended March 31, 2009
Increase (Decrease) in Cash: | ||||
Cash flows provided by (used for) operating activities: | ||||
Net decrease in net assets resulting from operations | $ | (40,649,552 | ) | |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities: | ||||
Purchases of long-term portfolio investments | (33,893,400 | ) | ||
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses | 64,240,609 | |||
Sales of short-term portfolio investments, net | 1,624,826 | |||
Decrease in dividends and interest receivable | 2,322,747 | |||
Decrease in receivable for investments sold | 1,472,628 | |||
Increase in prepaid expenses | (27,806 | ) | ||
Decrease in interest payable on loans outstanding | (113,594 | ) | ||
Increase in receivable from advisor | (44,389 | ) | ||
Decrease in investment advisory fee payable | (74,628 | ) | ||
Decrease in administration fee payable | (13,104 | ) | ||
Decrease in accrued expenses | (6,986 | ) | ||
Net amortization and paydown gains on investments | (1,127,972 | ) | ||
Unrealized appreciation on investments | (185,224,421 | ) | ||
Net realized loss on investment transactions | 238,784,098 | |||
Net cash provided by operating activities | 47,269,056 | |||
Cash flows used for financing activities: | ||||
Decrease in loan payable | (35,000,000 | ) | ||
Dividends paid to stockholders, net of reinvestments | (12,268,955 | ) | ||
Net cash used for financing activities | (47,268,955 | ) | ||
Net increase in cash | 101 | |||
Cash at beginning of year | — | |||
Cash at end of year | $ | 101 | ||
Supplemental Disclosure of Cash Flow Information: | ||||
Interest payments for the year ended March 31, 2009 totaled $216,562 | ||||
Non-cash financing activities included reinvestment of dividends of $1,608,910 |
See Notes to Financial Statements.
Brookfield Investment Management, Inc. |
28
HELIOS ADVANTAGE INCOME FUND, INC.
Financial Highlights
For the Fiscal Year Ended March 31, | For the Period Ended March 31, 2005(a) | |||||||||||||||||||
2009 | 2008* | 2007* | 2006* | |||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net asset value, beginning of period | $ | 3.11 | $ | 13.29 | $ | 13.95 | $ | 14.37 | $ | 14.33 | (b) | |||||||||
Net investment income | 0.35 | 1.23 | 1.66 | 1.90 | 0.57 | |||||||||||||||
Net realized and unrealized loss on investments | (1.77 | ) | (9.97 | ) | (0.56 | ) | (0.22 | ) | (0.03 | ) | ||||||||||
Net increase (decrease) in net asset value resulting from operations | (1.42 | ) | (8.74 | ) | 1.10 | 1.68 | 0.54 | |||||||||||||
Dividends from net investment income | (0.24 | ) | (1.31 | ) | (1.70 | ) | (1.86 | ) | (0.48 | ) | ||||||||||
Distributions from capital gains | — | — | — | (0.24 | ) | — | ||||||||||||||
Return of capital | (0.21 | ) | (0.13 | ) | (0.06 | ) | — | — | ||||||||||||
Total distributions | (0.45 | ) | (1.44 | ) | (1.76 | ) | (2.10 | ) | (0.48 | ) | ||||||||||
Offering costs charged to additional paid in capital | — | — | — | — | (0.02 | ) | ||||||||||||||
Net asset value, end of period | $ | 1.24 | $ | 3.11 | $ | 13.29 | $ | 13.95 | $ | 14.37 | ||||||||||
Market price, end of period | $ | 1.00 | $ | 3.34 | $ | 15.30 | $ | 16.80 | $ | 15.59 | ||||||||||
Total Investment Return† | (61.80 | )% | (73.61 | )% | 1.53 | % | 23.28 | % | 7.30 | % | ||||||||||
Ratios to Average Net Assets/Supplementary Data: | ||||||||||||||||||||
Net assets, end of period (000s) | $ | 40,676 | $ | 100,299 | $ | 416,999 | $ | 417,229 | $ | 403,663 | ||||||||||
Gross operating expenses | 2.44 | % | 3.66 | % | 3.23 | % | 2.62 | % | 0.94 | %(c) | ||||||||||
Interest expense | 0.03 | % | N/A | (e) | N/A | (e) | N/A | (e) | N/A | (e) | ||||||||||
Total expenses | 2.47 | % | 3.66 | % | 3.23 | % | 2.62 | % | 0.94 | %(c) | ||||||||||
Net expenses, including fee waivers and reimbursement and excluding interest expense, debt issuance costs and extraordinary expenses | 1.23 | % | 3.49 | % | 3.23 | % | 2.62 | % | 0.94 | % | ||||||||||
Net investment income | 19.66 | % | 15.69 | % | 12.14 | % | 13.45 | % | 10.52 | %(c) | ||||||||||
Net investment income, excluding the effect of fee waivers and reimbursement | 18.91 | % | 15.52 | % | 12.14 | % | 13.45 | % | 10.52 | %(c) | ||||||||||
Portfolio turnover rate | 89 | % | 76 | % | 94 | % | 104 | % | 57 | %(d) |
* | By correspondence dated May 27, 2010, the Fund’s independent registered public accounting firm for the fiscal years ended March 31, 2008, 2007 and 2006, informed the Fund that its audit reports dated May 29, 2008, May 21, 2007 and May 22, 2006, on the Fund’s financial statements for these fiscal years should no longer be relied upon. Based upon the actions of the Fund’s former independent registered public accounting firm, the financial statements and financial highlights for the fiscal years ended March 31, 2008, 2007 and 2006 should not be relied upon. Please see Notes 15 and 16 in the Notes to Financial Statements for additional information. |
† | Total investment return is computed based upon the New York Stock Exchange market price of the Fund’s shares and excludes the effect of brokerage commissions. Dividends and distributions are assumed to be reinvested at the prices obtained under the Fund’s dividend reinvestment plan. |
(a) | From the commencement of investment operations on November 8, 2004. |
(b) | Net of sales load of $0.675 on initial shares issued. |
(c) | Annualized. |
(d) | Not Annualized. |
(e) | Not available. During this period, interest expense was not reported separately from operating expenses. |
See Notes to Financial Statements.
2009 Annual Report (Amended) |
29
HELIOS HIGH INCOME FUND, INC.
Financial Highlights
For the Fiscal Year Ended March 31, | ||||||||||||||||||||
2009 | 2008* | 2007* | 2006* | 2005 | ||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 3.12 | $ | 13.18 | $ | 13.85 | $ | 15.03 | $ | 15.32 | ||||||||||
Net investment income | 0.39 | 1.16 | 1.76 | 1.98 | 2.15 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.81 | ) | (9.78 | ) | (0.67 | ) | (0.58 | ) | 0.24 | |||||||||||
Net increase (decrease) in net asset value resulting from operations | (1.42 | ) | (8.62 | ) | 1.09 | 1.40 | 2.39 | |||||||||||||
Dividends from net investment income | (0.28 | ) | (1.26 | ) | (1.73 | ) | (1.90 | ) | (2.07 | ) | ||||||||||
Distributions from capital gains | — | — | — | (0.68 | ) | (0.61 | ) | |||||||||||||
Return of capital | (0.17 | ) | (0.18 | ) | (0.03 | ) | — | — | ||||||||||||
Total distributions | (0.45 | ) | (1.44 | ) | (1.76 | ) | (2.58 | ) | (2.68 | ) | ||||||||||
Net asset value, end of year | $ | 1.25 | $ | 3.12 | $ | 13.18 | $ | 13.85 | $ | 15.03 | ||||||||||
Market price, end of year | $ | 0.99 | $ | 3.51 | $ | 15.20 | $ | 17.51 | $ | 16.50 | ||||||||||
Total Investment Return† | (64.25 | )% | (72.40 | )% | (3.26 | )% | 24.15 | % | 16.49 | % | ||||||||||
Ratios to Average Net Assets/Supplementary Data: | ||||||||||||||||||||
Net assets, end of year (000s) | $ | 30,190 | $ | 74,539 | $ | 303,259 | $ | 306,699 | $ | 313,731 | ||||||||||
Gross operating expenses | 2.30 | % | 3.73 | % | 3.47 | % | 2.92 | % | 2.12 | % | ||||||||||
Interest expense | 0.04 | % | N/A | (a) | N/A | (a) | N/A | (a) | N/A | (a) | ||||||||||
Total expenses | 2.34 | % | 3.73 | % | 3.47 | % | 2.92 | % | 2.12 | % | ||||||||||
Net expenses, including fee waivers and reimbursement and excluding interest expense, debt issuance costs and extraordinary expenses | 1.24 | % | 3.56 | % | 3.47 | % | 2.92 | % | 2.12 | % | ||||||||||
Net investment income | 22.35 | % | 14.81 | % | 12.89 | % | 13.66 | % | 14.08 | % | ||||||||||
Net investment income, excluding the effect of fee waivers and reimbursement | 21.37 | % | 14.64 | % | 12.89 | % | 13.66 | % | 14.08 | % | ||||||||||
Portfolio turnover rate | 88 | % | 74 | % | 100 | % | 97 | % | 73 | % |
* | By correspondence dated May 27, 2010, the Fund’s independent registered public accounting firm for the fiscal years ended March 31, 2008, 2007 and 2006, informed the Fund that its audit reports dated May 29, 2008, May 21, 2007 and May 22, 2006, on the Fund’s financial statements for these fiscal years should no longer be relied upon. Based upon the actions of the Fund’s former independent registered public accounting firm, the financial statements and financial highlights for the fiscal years ended March 31, 2008, 2007 and 2006 should not be relied upon. Please see Notes 15 and 16 in the Notes to Financial Statements for additional information. |
† | Total investment return is computed based upon the New York Stock Exchange market price of the Fund’s shares and excludes the effect of brokerage commissions. Dividends and distributions are assumed to be reinvested at the prices obtained under the Fund’s dividend reinvestment plan. |
(a) | Not available. During this period, interest expense was not reported separately from operating expenses. |
See Notes to Financial Statements.
Brookfield Investment Management, Inc. |
30
HELIOS MULTI-SECTOR HIGH INCOME FUND, INC.
Financial Highlights
For the Fiscal Year Ended March 31, | For the Period Ended March 31, 2006(a)* | |||||||||||||||
2009 | 2008* | 2007* | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Per Share Operating Performance: | ||||||||||||||||
Net asset value, beginning of period | $ | 2.71 | $ | 14.10 | $ | 14.54 | $ | 14.33 | (b) | |||||||
Net investment income | 0.30 | 1.28 | 1.81 | 0.21 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (1.67 | ) | (10.87 | ) | (0.36 | ) | 0.14 | |||||||||
Net increase (decrease) in net asset value resulting from operations | (1.37 | ) | (9.59 | ) | 1.45 | 0.35 | ||||||||||
Dividends from net investment income | (0.24 | ) | (1.55 | ) | (1.66 | ) | (0.12 | ) | ||||||||
Distributions from capital gains | — | (0.07 | ) | (0.23 | ) | — | ||||||||||
Return of capital | (0.22 | ) | (0.18 | ) | — | — | ||||||||||
Total distributions | (0.46 | ) | (1.80 | ) | (1.89 | ) | (0.12 | ) | ||||||||
Offering costs charged to additional paid in capital | — | — | — | (0.02 | ) | |||||||||||
Net asset value, end of period | $ | 0.88 | $ | 2.71 | $ | 14.10 | $ | 14.54 | ||||||||
Market price, end of period | $ | 0.71 | $ | 3.33 | $ | 15.71 | $ | 15.98 | ||||||||
Total Investment Return† | (72.05 | )% | (72.67 | )% | 10.96 | % | 7.38 | % | ||||||||
Ratios to Average Net Assets/Supplementary Data: | ||||||||||||||||
Net assets, end of period (000s) | $ | 33,460 | $ | 98,627 | $ | 468,879 | $ | 453,523 | ||||||||
Gross operating expenses | 2.59 | % | 3.71 | % | 2.83 | % | 0.71 | %(c) | ||||||||
Interest expense | 0.06 | % | N/A | (e) | N/A | (e) | N/A | (e) | ||||||||
Total expenses | 2.65 | % | 3.71 | % | 2.83 | % | 0.71 | %(c) | ||||||||
Net expenses, including fee waivers and reimbursement and excluding interest expense, debt issuance costs and extraordinary expenses | 1.20 | % | 3.55 | % | 2.83 | % | 0.71 | % | ||||||||
Net investment income | 20.53 | % | 15.28 | % | 12.46 | % | 6.72 | %(c) | ||||||||
Net investment income, excluding the effect of fee waivers and reimbursement | 19.65 | % | 15.11 | % | 12.46 | % | 6.72 | %(c) | ||||||||
Portfolio turnover rate | 75 | % | 68 | % | 85 | % | 131 | %(d) |
* | By correspondence dated May 27, 2010, the Fund’s independent registered public accounting firm for the fiscal years ended March 31, 2008, 2007 and period ended 2006, informed the Fund that its audit reports dated May 29, 2008, May 21, 2007 and May 22, 2006, on the Fund’s financial statements for these fiscal years or period should no longer be relied upon. Based upon the actions of the Fund’s former independent registered public accounting firm, the financial statements and financial highlights for the fiscal years ended March 31, 2008, 2007 and period ended 2006 should not be relied upon. Please see Notes 15 and 16 in the Notes to Financial Statements for additional information. |
† | Total investment return is computed based upon the New York Stock Exchange market price of the Fund’s shares and excludes the effect of brokerage commissions. Dividends and distributions are assumed to be reinvested at the prices obtained under the Fund’s dividend reinvestment plan. |
(a) | From the commencement of investment operations on January 19, 2006. |
(b) | Net of sales load of $0.675 on initial shares issued. |
(c) | Annualized. |
(d) | Not Annualized. |
(e) | Not available. During this period, interest expense was not reported separately from operating expenses. |
See Notes to Financial Statements.
2009 Annual Report (Amended) |
31
HELIOS STRATEGIC INCOME FUND, INC.
Financial Highlights
For the Fiscal Year Ended March 31, | ||||||||||||||||||||
2009 | 2008* | 2007* | 2006* | 2005 | ||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 2.87 | $ | 12.89 | $ | 13.54 | $ | 14.23 | $ | 14.31 | ||||||||||
Net investment income | 0.44 | 1.20 | 1.63 | 1.78 | 1.76 | |||||||||||||||
Net realized and unrealized loss on investments | (1.82 | ) | (9.78 | ) | (0.52 | ) | (0.20 | ) | (0.16 | ) | ||||||||||
Net increase (decrease) in net asset value resulting from operations | (1.38 | ) | (8.58 | ) | 1.11 | 1.58 | 1.60 | |||||||||||||
Dividends from net investment income | (0.34 | ) | (1.28 | ) | (1.71 | ) | (1.89 | ) | (1.68 | ) | ||||||||||
Distributions from capital gains | — | — | — | (0.38 | ) | — | ||||||||||||||
Return of capital | (0.14 | ) | (0.16 | ) | (0.05 | ) | — | — | ||||||||||||
Total distributions | (0.48 | ) | (1.44 | ) | (1.76 | ) | (2.27 | ) | (1.68 | ) | ||||||||||
Net asset value, end of year | $ | 1.01 | $ | 2.87 | $ | 12.89 | $ | 13.54 | $ | 14.23 | ||||||||||
Market price, end of year | $ | 0.82 | $ | 3.18 | $ | 14.81 | $ | 16.70 | $ | 15.74 | ||||||||||
Total Investment Return† | (65.85 | )% | (74.01 | )% | (1.09 | )% | 22.60 | % | 9.68 | % | ||||||||||
Ratios to Average Net Assets/Supplementary Data: | ||||||||||||||||||||
Net assets, end of year (000s) | $ | 29,816 | $ | 82,734 | $ | 359,230 | $ | 362,768 | $ | 359,781 | ||||||||||
Gross operating expenses | 2.24 | % | 3.86 | % | 3.50 | % | 2.94 | % | 1.70 | % | ||||||||||
Interest expense | 0.21 | % | N/A | (a) | N/A | (a) | N/A | (a) | N/A | (a) | ||||||||||
Total expenses | 2.45 | % | 3.86 | % | 3.50 | % | 2.94 | % | 1.70 | % | ||||||||||
Net expenses, including fee waivers and reimbursement and excluding interest expense, debt issuance costs and extraordinary expenses | 1.27 | % | 3.69 | % | 3.50 | % | 2.94 | % | 1.70 | % | ||||||||||
Net investment income | 26.85 | % | 15.79 | % | 12.17 | % | 12.80 | % | 12.47 | % | ||||||||||
Net investment income, excluding the effect of fee waivers and reimbursement | 25.93 | % | 15.62 | % | 12.17 | % | 12.80 | % | 12.47 | % | ||||||||||
Portfolio turnover rate | 71 | % | 73 | % | 106 | % | 101 | % | 69 | % |
* | By correspondence dated May 27, 2010, the Fund’s independent registered public accounting firm for the fiscal years ended March 31, 2008, 2007 and 2006, informed the Fund that its audit reports dated May 29, 2008, May 21, 2007 and May 22, 2006, on the Fund’s financial statements for these fiscal years should no longer be relied upon. Based upon the actions of the Fund’s former independent registered public accounting firm, the financial statements and financial highlights for the fiscal years ended March 31, 2008, 2007 and 2006 should not be relied upon. Please see Notes 15 and 16 in the Notes to Financial Statements for additional information. |
† | Total investment return is computed based upon the New York Stock Exchange market price of the Fund’s shares and excludes the effect of brokerage commissions. Dividends and distributions are assumed to be reinvested at the prices obtained under the Fund’s dividend reinvestment plan. |
(a) | Not available. During this period, interest expense was not reported separately from operating expenses. |
See Notes to Financial Statements.
Brookfield Investment Management, Inc. |
32
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
1. Organization
Helios Advantage Income Fund, Inc. (formerly RMK Advantage Income Fund, Inc.), Helios High Income Fund, Inc. (formerly RMK High Income Fund, Inc.), Helios Multi-Sector High Income Fund, Inc. (formerly RMK Multi-Sector High Income Fund, Inc.) and Helios Strategic Income Fund, Inc. (formerly RMK Strategic Income Fund, Inc.) (each a “Fund” and, collectively, the “Funds” or the “Helios Funds”) were organized as separate Maryland corporations on September 7, 2004, April 16, 2003, November 14, 2005 and January 16, 2004, respectively. Each Fund is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, closed-end management investment company with its own investment objective.
Effective July 29, 2008, Brookfield Investment Management, Inc. formerly Hyperion Brookfield Asset Management, Inc. (“HBAM” or “Advisor”), a wholly owned subsidiary of Brookfield Asset Management Inc. and a registered investment advisor, became investment advisor to the Funds. Prior to July 29, 2008, Morgan Asset Management, Inc. (“MAM” or “Former Advisor”) served as investment advisor to the Funds.
Each Fund’s primary investment objective is to seek a high level of current income with capital growth as a secondary investment objective.
2. Significant Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Valuation of Investments: Debt securities, including U. S. government securities, listed corporate bonds, other fixed income and asset-backed securities, and unlisted securities and private placement securities, are generally valued at the latest price furnished by an independent pricing service or a broker-dealer. Short-term debt securities with remaining maturities of sixty days or less are valued at cost with interest accrued or discount accreted to the date of maturity, unless such valuation, in the judgment of the Advisor’s Valuation Committee, does not represent market value.
Investments in equity securities listed or traded on any securities exchange or traded in the over-the-counter market are valued at the last quoted price as of the close of business on the valuation date. Equity securities for which no sales were reported for that date are valued at “fair value” as determined in good faith by the Advisor’s Valuation Committee. Investments in open-end registered investment companies, if any, are valued at the net asset value (“NAV”) as reported by those investment companies.
When price quotations for certain securities are not readily available, or if the available quotations are not believed to be reflective of market value by the Advisor, those securities will be valued at “fair value” as determined in good faith by the Advisor’s Valuation Committee using procedures established by and under the supervision of each Fund’s Board of Directors. There can be no assurance that a Fund could purchase or sell a portfolio security at the price used to calculate a Fund’s NAV.
Fair valuation procedures may be used to value a substantial portion of the assets of the Funds. A Fund may use the fair value of a security to calculate its NAV when, for example, (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and not resumed prior to the normal market close, (3) a portfolio security is not traded in significant volume for a substantial period, or (4) the Advisor determines that the quotation or price for a portfolio security provided by a broker-dealer or independent pricing service is inaccurate.
2009 Annual Report (Amended) |
33
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
The “fair value” of securities may be difficult to determine and thus judgment plays a greater role in the valuation process. The fair valuation methodology may include or consider the following guidelines, as appropriate: (1) evaluation of all relevant factors, including but not limited to, pricing history, current market level, supply and demand of the respective security; (2) comparison to the values and current pricing of securities that have comparable characteristics; (3) knowledge of historical market information with respect to the security; (4) other factors relevant to the security which would include, but not be limited to, duration, yield, fundamental analytical data, the Treasury yield curve, and credit quality.
The values assigned to fair valued investments are based on available information and do not necessarily represent amounts that might ultimately be realized, since such amounts depend on future developments inherent in long-term investments. Changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, by an independent pricing service, or based on market quotations. Imprecision in estimating fair value can also impact the amount of unrealized appreciation or depreciation recorded for a particular portfolio security and differences in the assumptions used could result in a different determination of fair value, and those differences could be material.
The Funds have adopted Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”), effective April 1, 2008. In accordance with FAS 157, fair value is defined as the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. FAS 157 established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
• | Level 1 - | quoted prices in active markets for identical investments | ||
• | Level 2 - | quoted prices in markets that are not active or other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) | ||
• | Level 3 - | significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of March 31, 2009 in valuing the Funds’ investments carried at fair value:
Investments in Securities | ||||||||||||
Valuation Inputs | Helios Advantage Income Fund, Inc. | Helios High Income Fund, Inc. | Helios Multi- Income Fund, | Helios Strategic Income Fund, Inc. | ||||||||
Level 1 — Quoted Prices | $ | 864,674 | $ | 836,107 | $ | 847,095 | $ | 839,404 | ||||
Level 2 — Other Significant Observable Inputs | 24,186,697 | 18,475,373 | 21,420,810 | 17,510,195 | ||||||||
Level 3 — Significant Unobservable Inputs | 13,909,820 | 10,334,969 | 10,529,269 | 9,883,132 | ||||||||
Total | $ | 38,961,191 | $ | 29,646,449 | $ | 32,797,174 | $ | 28,232,731 | ||||
Brookfield Investment Management, Inc. |
34
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Investments in Securities | ||||||||||||||||
Valuation Inputs | Helios Advantage Income Fund, Inc. | Helios High Income Fund, Inc. | Helios Multi- Sector High Income Fund, Inc. | Helios Strategic Income Fund, Inc. | ||||||||||||
Balance as of April 1, 2008 | $ | 60,284,056 | $ | 39,370,596 | $ | 64,235,293 | $ | 52,253,792 | ||||||||
Net sales at cost | (40,315,297 | ) | (18,312,208 | ) | (34,031,080 | ) | (35,141,313 | ) | ||||||||
Realized loss | (189,627,626 | ) | (141,978,362 | ) | (224,892,149 | ) | (156,862,960 | ) | ||||||||
Change in unrealized appreciation/(depreciation) | 183,535,614 | 131,205,394 | 205,172,205 | 149,593,579 | ||||||||||||
Accretion/(amortization) | 33,073 | 49,549 | 45,000 | 40,034 | ||||||||||||
Transfers in and/or out of Level 3 | — | — | — | — | ||||||||||||
Balance as of March 31, 2009 | $ | 13,909,820 | $ | 10,334,969 | $ | 10,529,269 | $ | 9,883,132 | ||||||||
Investment Transactions and Investment Income: Securities transactions are recorded on the trade date. Realized gains and losses from securities transactions are calculated on the identified cost basis. Interest income is recorded on the accrual basis. Discounts and premiums on securities are accreted and amortized, respectively on a daily basis, using the effective yield to maturity method adjusted based on management’s assessment of the collectability of such interest. Dividend income is recorded on the ex-dividend date.
Taxes: Each Fund intends to qualify and meet the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and distribute substantially all of its taxable income to its stockholders. Therefore, no federal income or excise tax provision is required.
The FASB has issued FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Funds’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the taxing authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits; a reduction of an income tax refund receivable; a reduction of a deferred tax asset; an increase in deferred tax liability; or a combination thereof. As of March 31, 2009, the Funds have implemented FIN 48 and have determined that there is no impact on their financial statements.
The Funds have reviewed all taxable years that are open for examination (i.e., not barred by the applicable statute of limitations) by taxing authorities of all major jurisdictions, including the Internal Revenue Service. As of March 31, 2009, open taxable years consisted of the taxable years ended March 31, 2006 through March 31, 2009. No examination of any Fund is currently in progress.
Expenses: Expenses directly attributable to a Fund are charged directly to that Fund, while expenses which are attributable to more than one Fund are allocated among the respective Funds based upon relative net assets.
Dividend and Other Distributions to Stockholders: Distributions from net investment income (including net short term capital gains), if any, are declared and paid monthly to stockholders. Each Fund also pays distributions at least annually from its net realized capital gains, if any. Dividends and other distributions to stockholders are recorded on the ex-dividend date. All common shares have equal dividend and other distribution rights. A notice disclosing the source(s) of a distribution will be provided if payment is made from any source other than net investment income. Any such notice would be provided only for informational purposes in order to comply with the requirements of Section 19(a) of the 1940 Act and not for tax reporting purposes. The tax composition of each Fund’s distributions for each calendar year is reported on IRS Form 1099-DIV.
2009 Annual Report (Amended) |
35
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Income dividends and capital gain distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatment of income and gains on various investment securities held by the Funds, timing differences and differing characterization of distributions made by each Fund.
Restricted Securities: The Funds own investment securities which are unregistered and thus restricted as to resale. These securities are valued by the Funds after giving due consideration to pertinent factors including recent private sales, market conditions and the issuer’s financial performance. Where future disposition of these securities requires registration under the Securities Act of 1933, the Funds have the right to include these securities in such registration, generally without cost to the Funds. The Funds have no right to require registration of unregistered securities.
At March 31, 2009:
Fund | Restricted Securities Aggregated Value | Restricted Securities Percentage of Net Assets | ||||
Helios Advantage Income Fund, Inc. | $ | 5,705,382 | 14.03 | % | ||
Helios High Income Fund, Inc. | 4,571,042 | 15.14 | ||||
Helios Multi-Sector High Income Fund, Inc. | 4,269,715 | 12.76 | ||||
Helios Strategic Income Fund, Inc. | 4,518,759 | 15.16 |
Repurchase Agreements: Each Fund may invest in repurchase agreements. A repurchase agreement is an agreement by which the Funds purchase securities from a third party with the commitment that they will be repurchased by the seller at a fixed price on an agreed upon future date. The Funds, through their custodian, receive delivery of the underlying collateral, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. The Advisor is responsible for determining that the value of these underlying securities is sufficient at all times. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings commence with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. The Funds had no repurchase agreements outstanding as of March 31, 2009.
Options Writing: When a Fund writes an option, an amount equal to the premium received by the Fund is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked to market to reflect the current value of the option written in accordance with the Fund’s policies on investment valuations discussed above. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the securities underlying the written option in excess of the amounts recorded in the Statements of Assets and Liabilities. The Funds had no transactions in written options during the fiscal year ended March 31, 2009.
When-Issued and Delayed Delivery Transactions:The Funds may engage in when-issued or delayed delivery transactions. The Funds record when-issued securities on the trade date and maintain security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Cash Flow Information: Each Fund invests in securities and distributes dividends and distributions which are paid in cash or are reinvested at the discretion of stockholders. These activities are reported in the Statement of Changes in Net Assets. Additional information on cash receipts and cash payments is presented in the Statement
Brookfield Investment Management, Inc. |
36
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
of Cash Flows. Cash, as used in the Statement of Cash Flows, is the amount reported as “Cash” in the Statement of Assets and Liabilities, and does not include short-term investments.
Accounting practices that do not affect reporting activities on a cash basis include carrying investments at value and accreting discounts and amortizing premiums on debt obligations.
3. Risks of Investing in Asset-Backed Securities and Below-Investment Grade Securities
The value of asset-backed securities may be affected by, among other factors, changes in: interest rates, the market’s assessment of the quality of the underlying assets, the creditworthiness of the servicer for the underlying assets, information concerning the originator of the underlying assets, or the creditworthiness or rating of the entities that provide any supporting letters of credit, surety bonds, derivative instruments, or other credit enhancement. The value of asset-backed securities also will be affected by the exhaustion, termination or expiration of any credit enhancement.
The Funds have significant investments in below-investment grade debt securities, including mortgage-backed and asset-backed securities. Below-investment grade securities involve a higher degree of credit risk than investment grade debt securities. In the event of an unanticipated default, the Funds would experience a reduction in their income, a decline in the market value of the securities so affected and a decline in the NAV of their shares. During an economic downturn or period of rising interest rates, highly leveraged and other below-investment grade issuers have experienced financial stress that could adversely affect their ability to service principal and interest payment obligations, to meet projected business goals and to obtain additional financing. The market prices of below-investment grade debt securities generally are less sensitive to interest rate changes than higher-rated investments but are more sensitive to adverse economic or political changes or individual developments specific to the issuer than higher-rated investments. Periods of economic or political uncertainty and change can be expected to result in significant volatility of prices for these securities. Rating services consider these securities to be speculative in nature.
Below-investment grade securities may be subject to market conditions, events of default or other circumstances which cause them to be considered “distressed securities.” Distressed securities frequently do not produce income while they are outstanding. The Funds may be required to bear certain extraordinary expenses in order to protect and recover their investments in certain distressed securities. Therefore, to the extent the Funds seek capital growth through investment in such securities, the Funds’ ability to achieve current income for its stockholders may be diminished. The Funds also are subject to significant uncertainty as to when and in what manner and for what value the obligations evidenced by distressed securities will eventually be satisfied (e.g., through a liquidation of the obligor’s assets, an exchange offer or plan of reorganization involving the 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 Funds, there can be no assurance that the securities or other assets received by the Funds in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made. Moreover, any securities received by the Funds upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of the Funds’ participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of such securities, the Funds may be restricted from disposing of distressed securities.
Mortgage-backed and asset-backed securities are subject to the credit risk associated with the performance of the underlying mortgage properties or other assets. In certain instances, third-party guarantees or other forms of credit support can reduce the credit risk.
4. Investment Advisory Agreements and Affiliated Transactions
Effective July 29, 2008, each of the Funds entered into separate Investment Advisory Agreements (the “Advisory Agreements”) with the Advisor under which the Advisor is responsible for the management of each Fund’s
2009 Annual Report (Amended) |
37
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Fund. Each Advisory Agreement provides, among other things, that the Advisor will bear all expenses of its employees and overhead incurred in connection with the performance of its duties under the Advisory Agreements, and will pay all salaries of the Funds’ directors and officers who are affiliated persons (as such term is defined in the 1940 Act) of the Advisor. The Advisory Agreements provide that each Fund shall pay the Advisor a monthly fee for its services an annual rate of 0.65% of each Fund’s average daily total assets minus liabilities (other than aggregate indebtedness entered into for purposes of leverage).
Effective July 29, 2008, each of the Funds entered into separate expense limitation agreements (the “Expense Limitation Agreements”) under which the Advisor has contractually agreed to waive its fees and/or reimburse each Fund for its expenses to the extent necessary to ensure each Fund’s annual operating expenses (excluding brokerage, interest expenses and taxes, and acquired fund fees and expenses) do not exceed 1.30% of average annual assets of each Fund. Each contractual waiver will remain in effect until July 28, 2010. In addition, thereafter, the contractual waivers shall continue indefinitely, unless sooner terminated by the Board of Directors of a Fund, or the Advisor, upon sixty (60) days written notice to the other party. Pursuant to the Expense Limitation Agreements, the Advisor retains its right to receive reimbursement of any payments made by it, or to recoup any fees waived by it during the prior three fiscal years, provided that after giving effect to such repayment or recoupment, such adjusted total annual operating expenses (expressed as a percentage of average net assets) for each Fund would not exceed the percentage limitations listed above.
During the period between July 29, 2008 and March 31, 2009, the Advisor earned the following in investment advisory fees under the Advisory Agreements. Further, under the Expense Limitation Agreements, the Advisor was required to waive its investment advisory fees and/or reimburse the following costs to the Funds:
Fund | Investment Advisory Fees | Waiver and/or Expense | |||||
Helios Advantage Income Fund, Inc. | $ | 199,944 | $ | (314,001 | ) | ||
Helios High Income Fund, Inc. | 147,848 | (283,797 | ) | ||||
Helios Multi-Sector High Income Fund, Inc. | 162,678 | (337,309 | ) | ||||
Helios Strategic Income Fund, Inc. | 154,400 | (304,331 | ) | ||||
$ | 664,870 | $ | (1,239,438 | ) | |||
Prior to July 29, 2008, each of the Funds were party to separate Investment Advisory Agreements with the Former Advisor. Under the terms of the prior agreements, the Funds were charged an annual advisory fee of 0.65% based on a percentage of each Fund’s average daily total assets minus the sum of accrued liabilities other than debt entered into for purposes of leverage. The Former Advisor contractually agreed to waive its fees and/or reimburse each Fund for its expenses to the extent necessary to ensure each Fund’s annual operating expenses (excluding brokerage, interest expenses and taxes, and acquired fund fees and expenses) exceeded 1.30% of net assets of each Fund. In addition, the Former Advisor voluntarily agreed to pay certain extraordinary expenses of the Funds, including legal expenses of pending litigation and the external valuation consultant fees.
For the period April 1, 2008 through July 28, 2008, the Former Advisor earned and waived Investment Advisory fees and reimbursed extraordinary expenses in the following amounts:
Fund | Investment Advisory Fees | Waiver and/or Expense | |||||
Helios Advantage Income Fund, Inc. | $ | 205,917 | $ | (135,344 | ) | ||
Helios High Income Fund, Inc. | 154,241 | (143,387 | ) | ||||
Helios Multi-Sector High Income Fund, Inc. | 198,495 | (136,781 | ) | ||||
Helios Strategic Income Fund, Inc. | 183,639 | (135,939 | ) | ||||
$ | 742,292 | $ | (551,451 | ) | |||
Brookfield Investment Management, Inc. |
38
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Effective July 29, 2008, the Funds have entered into an Administration Agreement with the Advisor. The Advisor entered into a sub-administration agreement with State Street Bank and Trust Company (the “Sub-Administrator”). The Advisor and Sub-Administrator perform administrative services necessary for the operation of the Funds, including maintaining certain books and records of the Funds and preparing reports and other documents required by federal, state, and other applicable laws and regulations, and providing the Funds with administrative office facilities. For these services, each Fund pays to the Advisor a monthly fee at an annual rate of 0.15% of each Fund’s average daily total assets minus liabilities (other than the aggregate indebtedness entered into for purposes of leverage). The Advisor is responsible for any fees due the Sub-Administrator, except for N-Q filing fees.
During the period between July 29, 2008 and March 31, 2009, the Advisor earned the following in Administration fees:
Fund | Administration Fee | ||
Helios Advantage Income Fund, Inc. | $ | 46,141 | |
Helios High Income Fund, Inc. | 34,119 | ||
Helios Multi-Sector High Income Fund, Inc. | 37,542 | ||
Helios Strategic Income Fund, Inc. | 35,631 | ||
$ | 153,433 | ||
The Administration fees shown in the Statement of Operations includes expenses incurred for the N-Q filing, which amounted to $3,996 for each of the Funds.
Prior to July 29, 2008, the Funds were party to an Accounting and Administration Services Agreement with the Former Advisor. Under the terms of the prior agreements the Funds were charged a monthly fee at an annual rate of 0.15% of each Fund’s average daily total assets minus liabilities (other than the aggregate indebtedness entered into for purposes of leverage).
Fund | Administration Fee | ||
Helios Advantage Income Fund, Inc. | $ | 47,519 | |
Helios High Income Fund, Inc. | 35,594 | ||
Helios Multi-Sector High Income Fund, Inc. | 45,806 | ||
Helios Strategic Income Fund, Inc. | 42,378 | ||
$ | 171,297 | ||
For the period April 1, 2008 through July 28, 2008, the Advisor earned the following fees as the external valuation consultant to the Funds:
Fund | Valuation Fee | ||
Helios Advantage Income Fund, Inc. | $ | 76,179 | |
Helios High Income Fund, Inc. | 56,538 | ||
Helios Multi-Sector High Income Fund, Inc. | 71,937 | ||
Helios Strategic Income Fund, Inc. | 61,178 | ||
$ | 265,832 | ||
Certain officers and/or directors of the Funds are officers and/or directors of the Advisor.
2009 Annual Report (Amended) |
39
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
During the fiscal year ended March 31, 2009, the Former Advisor reimbursed the Funds the following amounts for errors when applying cross-trading policies under the applicable regulations:
Helios Advantage Income Fund, Inc. | $ | 559,860 | |
Helios High Income Fund, Inc. | 373,865 | ||
Helios Multi-Sector High Income Fund, Inc. | 866,129 | ||
Helios Strategic Income Fund, Inc. | 298,592 | ||
$ | 2,098,446 | ||
These amounts are included in net realized loss on investment transactions in the Statements of Operations.
5. Purchases and Sales of Investments
Purchases and sales of investments, excluding short-term securities and U.S. Government securities, for the fiscal year ended March 31, 2009 were as follows:
Fund | Purchases | Sales | ||||
Helios Advantage Income Fund, Inc. | $ | 49,743,904 | $ | 99,490,590 | ||
Helios High Income Fund, Inc. | 36,936,716 | 64,757,278 | ||||
Helios Multi-Sector High Income Fund, Inc. | 39,173,855 | 82,269,108 | ||||
Helios Strategic Income Fund, Inc. | 33,893,400 | 93,788,794 |
For the fiscal year ended March 31, 2009 there were no transactions in U.S. Government securities.
6. Borrowings
Reverse Repurchase Agreements: Under reverse repurchase agreements, the Funds sell securities and agree to repurchase them at a mutually agreed upon date and price. Under the 1940 Act, reverse repurchase agreements will be regarded as a form of borrowing by each Fund unless, at the time it enters into a reverse repurchase agreement, it establishes and maintains a segregated account with its custodian containing securities from its portfolio having a value not less than the repurchase price (including accrued interest). Each Fund has established and maintained such an account for each of its reverse repurchase agreements.
Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale by the Funds may decline below the price of the securities a Fund has sold but is obligated to repurchase. 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 Funds’ obligation to repurchase the securities, and the Funds’ use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision. Also, the Funds would bear the risk of loss to the extent that the proceeds of the reverse repurchase agreements are less than the value of the securities subject to such agreements.
At March 31, 2009, Helios Multi-Sector High Income Fund, Inc. had the following reverse repurchase agreement outstanding:
Face Value | Description | Maturity Amount | ||||
$150,000 | Goldman Sachs, 6.50%, dated 03/16/09, maturity date 04/15/09 | $ | 150,813 | |||
Maturity Amount, Including Interest Payable | $ | 150,813 | ||||
Market value of Assets Sold Under Agreements | $ | 402,500 | ||||
Weighted Average Interest Rate | 6.50 | % | ||||
Brookfield Investment Management, Inc. |
40
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
The Helios Multi-Sector High Income Fund’s average daily balance of reverse repurchase agreements outstanding during the fiscal year ended March 31, 2009 was $89,949 at a weighted average interest rate of 6.21%. The maximum amount of reverse repurchase agreements outstanding at any time during the fiscal year was $178,500, which was 0.45% of total assets.
Credit Facilities: Each Fund is permitted to borrow up to one-third of the value of its total assets, including such borrowings, for investment purposes. Such borrowing is referred to as leveraging and each Fund utilized collateralized bank lines of credit in the beginning of the fiscal year. The Helios Advantage Income Fund, Inc., Helios High Income Fund, Inc., Helios Multi-Sector High Income Fund, Inc. and the Helios Strategic Income Fund, Inc. repaid the outstanding balance of each Fund’s bank line of credit on May 1, 2008, April 22, 2008, May 5, 2008 and June 10, 2008, respectively, and each Fund irrevocably terminated its credit facility. As of March 31, 2009, the Funds’ had no outstanding loan amounts open.
For the fiscal year ended March 31, 2009, the Funds use of their facility was as follows:
Fund | Average Daily Balance | Average Interest Rate | ||||
Helios Advantage Income Fund, Inc. | $ | 679,452 | 3.16 | % | ||
Helios High Income Fund, Inc. | 556,164 | 3.58 | ||||
Helios Multi-Sector High Income Fund, Inc. | 808,219 | 3.23 | ||||
Helios Strategic Income Fund, Inc. | 3,006,849 | 3.42 |
The maximum amount of borrowings outstanding under this facility during the fiscal year ended March 31, 2009 was $15,000,000 for the Helios Advantage Income Fund, Inc., $12,000,000 for the Helios High Income Fund, Inc., $17,000,000 for the Helios Multi-Sector High Income Fund, Inc. and $35,000,000 for the Helios Strategic Income Fund, Inc., respectively.
7. Capital Stock
Each Fund is authorized to issue 1,000,000,000 shares of capital stock with a par value of $0.0001 per share. The Funds’ Boards of Directors are authorized to classify and reclassify any unissued shares of capital stock from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or terms and conditions of redemption of such shares by the Funds. The common shares have no preemptive, conversion, exchange or redemption rights. All common shares have equal voting, dividend, distribution and liquidation rights. The common shares, when issued, will be fully paid and non-assessable. Common stockholders are entitled to one vote per share and all voting rights for the election of directors are non-cumulative. The Funds have no present intentions of offering additional shares, except as described in the Dividend Reinvestment Plan.
8. Federal Income Tax Information
Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
The tax character of distributions paid for the fiscal year ended March 31, 2009 was as follows:
Helios Advantage Income Fund, Inc. | Helios High Income Fund, Inc. | Helios Multi- Sector High Income Fund, Inc. | Helios Strategic Income Fund, Inc. | |||||||||
Ordinary income(1) | $ | 7,792,400 | $ | 6,693,644 | $ | 8,774,368 | $ | 9,717,511 | ||||
Return of capital | 6,704,405 | 4,014,614 | 8,287,794 | 4,160,354 | ||||||||
Total distributions | $ | 14,496,805 | $ | 10,708,258 | $ | 17,062,162 | $ | 13,877,865 | ||||
2009 Annual Report (Amended) |
41
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
The tax character of distributions paid for the fiscal year ended March 31, 2008 (unaudited) was as follows:
Helios Advantage Income Fund, Inc. | Helios High Income Fund, Inc. | Helios Multi- Sector High Income Fund, Inc. | Helios Strategic Income Fund, Inc. | |||||||||
Ordinary income(1) | $ | 44,688,670 | $ | 31,537,838 | $ | 59,396,292 | $ | 36,808,696 | ||||
Long-term capital gains | — | — | 2,344,774 | — | ||||||||
Return of capital | 1,260,966 | 2,127,300 | — | 3,929,720 | ||||||||
Total distributions | $ | 45,949,636 | $ | 33,665,138 | $ | 61,741,066 | $ | 40,738,416 | ||||
(1) | For tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
At March 31, 2009, the components of net assets (excluding paid-in capital) on a tax basis were as follows:
Helios Advantage Income Fund, Inc. | Helios High Income Fund, Inc. | Helios Multi- Sector High Income Fund, Inc. | Helios Strategic Income Fund, Inc. | |||||||||||||
Capital loss carryforward(1) | $ | (239,347,708 | ) | $ | (177,929,909 | ) | $ | (273,546,362 | ) | $ | (218,301,229 | ) | ||||
Post-October losses(2) | (155,615,172 | ) | (115,628,866 | ) | (166,335,879 | ) | (136,882,167 | ) | ||||||||
Unrealized depreciation | (20,643,760 | ) | (14,787,701 | ) | (20,673,856 | ) | (18,022,425 | ) | ||||||||
$ | (415,606,640 | ) | $ | (308,346,476 | ) | $ | (460,556,097 | ) | $ | (373,205,821 | ) | |||||
(1) | To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. |
(2) | Capital losses incurred after October 31 (“post-October losses”) within the taxable year are deemed to arise on the first business day of each Fund’s next taxable year. Capital losses can be carried forward for a period of eight years. |
As of March 31, 2009, the Funds’ capital loss carryforwards were as follows:
Fund | Expiring in 2014 | Expiring in 2015 | Expiring in 2016 | Expiring in 2017 | ||||||||
Helios Advantage Income Fund, Inc. | $ | — | $ | — | $ | 63,416,568 | $ | 175,931,140 | ||||
Helios High Income Fund, Inc. | — | — | 47,702,451 | 130,227,458 | ||||||||
Helios Multi-Sector High Income Fund, Inc. | — | — | 67,821,037 | 205,725,325 | ||||||||
Helios Strategic Income Fund, Inc. | 5,339,876 | 193,592 | 59,889,208 | 152,878,553 |
Because federal income tax regulations differ in certain respects from generally accepted accounting principles, income and capital gain distributions, if any, determined in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. These differences are primarily due to differing treatments for gains/losses on principal payments of mortgage-backed and asset-backed securities, distribution reclassifications and return of capital. Permanent book and tax differences, if any, relating to stockholder distributions will result in reclassifications to paid-in-capital or to undistributed capital gains. These reclassifications have no effect on net assets or NAVs per share. Any undistributed net income and realized gain remaining at fiscal year-end is distributed in the following year.
Federal Income Tax Basis: The federal income tax basis of the Funds’ investments at March 31, 2009 was as follows:
Fund | Cost of Investments | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Depreciation | ||||||||||
Helios Advantage Income Fund, Inc. | $ | 59,604,951 | $ | 473,776 | $ | (21,117,536 | ) | $ | (20,643,760 | ) | ||||
Helios High Income Fund, Inc. | 44,434,150 | 281,016 | (15,068,717 | ) | (14,787,701 | ) | ||||||||
Helios Multi-Sector High Income Fund, Inc | 53,471,030 | 406,795 | (21,080,651 | ) | (20,673,856 | ) | ||||||||
Helios Strategic Income Fund, Inc. | 46,255,156 | 276,830 | (18,299,255 | ) | (18,022,425 | ) |
Brookfield Investment Management, Inc. |
42
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Capital Account Reclassifications: At March 31, 2009, each Fund’s components of net assets were increased or (decreased) by the amounts shown in the table below. These adjustments were primarily the result of the reclassification of net gains on security paydowns and partnership income in order to account for permanent book/tax differences and to present components of net assets on a tax basis. These adjustments have no effect on net assets or net asset value per share.
Fund | Distributions in Excess of Net Investment Income | Accumulated Net Realized Loss in Investments | Paid-In Capital | |||||||
Helios Advantage Income Fund, Inc. | $ | (1,210,791 | ) | $ | 940,464 | $ | 270,327 | |||
Helios High Income Fund, Inc. | (663,653 | ) | 248,723 | 414,930 | ||||||
Helios Multi-Sector High Income Fund, Inc. | (898,477 | ) | 898,477 | — | ||||||
Helios Strategic Income Fund, Inc. | (917,940 | ) | 577,556 | 340,384 |
9. Indemnification
Under each Fund’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to each Fund. In addition, in the normal course of business, the Funds enter into contracts with their vendors and others that provide for general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, since this would involve the resolution of certain claims, as well as future claims that may be made, against the Funds. Thus, an estimate of the financial impact, if any, of these arrangements cannot be made at this time.
10. Designation of Restricted Illiquid Securities
Helios Advantage Income Fund, Inc. | ||||||||||||||||
Restricted Securities | Interest Rate | Maturity | Acquisition Date | Acquisition Cost | Market Value | Percentage of Net Assets | ||||||||||
Countrywide Alternative Loan Trust NIM | 12.50 | % | 09/25/46 | 10/04/06 | $ | 883,991 | $ | 0 | 0.0 | % | ||||||
Credit Genesis CLO 2005 | 0.00 | 06/23/10 | 06/17/05 | 3,000,000 | 18,000 | 0.0 | ||||||||||
FSI Realty Trust | — | — | 04/26/07 | 283,100 | 0 | 0.0 | ||||||||||
Linker Finance PLC | 4.06 | 05/19/45 | 05/05/06 | 2,912,003 | 30,000 | 0.1 | ||||||||||
Mid Country | — | — | 05/22/07 | 850,000 | 164,000 | 0.4 | ||||||||||
Port Townsend Company Inc. | — | — | 10/18/07 | 667,311 | 0 | 0.0 | ||||||||||
Sharp SP I LLC NIM Trust | 12.50 | 10/25/46 | 08/02/05 | 735,600 | 50,462 | 0.1 | ||||||||||
Steers | 3.99 | 06/20/18 | 02/05/07- 08/23/07 | 6,530,633 | 1,485,000 | 3.7 | ||||||||||
$ | 1,747,462 | 4.3 | % |
Helios High Income Fund, Inc. | ||||||||||||||||
Restricted Securities | Interest Rate | Maturity | Acquisition Date | Acquisition Cost | Market Value | Percentage of Net Assets | ||||||||||
Countrywide Alternative Loan Trust NIM | 12.50 | % | 09/25/46 | 10/04/06 | $ | 479,908 | $ | 0 | 0.0 | % | ||||||
Credit Genesis CLO 2005 | 0.00 | 06/23/10 | 06/17/05 | 1,000,000 | 6,000 | 0.0 | ||||||||||
FSI Realty Trust | — | — | 04/26/07 | 248,900 | 0 | 0.0 | ||||||||||
Linker Finance PLC | 4.06 | 05/19/45 | 05/05/06 | 1,941,335 | 20,000 | 0.1 | ||||||||||
Mid Country | — | — | 05/22/07 | 649,995 | 125,411 | 0.4 | ||||||||||
Port Townsend Company Inc. | — | — | 10/18/07 | 486,581 | 0 | 0.0 |
2009 Annual Report (Amended) |
43
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Helios High Income Fund, Inc. | ||||||||||||||||
Restricted Securities | Interest Rate | Maturity | Acquisition Date | Acquisition Cost | Market Value | Percentage of Net Assets | ||||||||||
Sasco NIM Trust | 7.50 | % | 12/28/33 | 12/18/03 | $ | 1,294,011 | $ | 118,149 | 0.4 | % | ||||||
Sharp SP I LLC NIM Trust | 12.50 | 10/25/46 | 10/12/06 | 735,600 | 50,462 | 0.2 | ||||||||||
Steers | 3.99 | 06/20/18 | 02/05/07- 08/23/07 | 4,855,106 | 1,100,000 | 3.6 | ||||||||||
$ | 1,420,022 | 4.7 | % |
Helios Multi-Sector High Income Fund, Inc. | ||||||||||||||||
Restricted Securities | Interest Rate | Maturity | Acquisition Date | Acquisition Cost | Market Value | Percentage of Net Assets | ||||||||||
Credit Genesis CLO 2005 | 0.00 | % | 06/23/10 | 07/20/06 | $ | 2,970,000 | $ | 18,000 | 0.1 | % | ||||||
FSI Realty Trust | — | — | 04/26/07 | 332,500 | 0 | 0.0 | ||||||||||
Linker Finance PLC | 4.06 | 05/19/45 | 05/05/06 | 4,853,338 | 50,000 | 0.1 | ||||||||||
Mid Country | — | — | 05/22/07 | 899,997 | 173,646 | 0.5 | ||||||||||
Port Townsend Company Inc. | — | — | 10/18/07 | 672,750 | 0 | 0.0 | ||||||||||
Sharp SP I LLC NIM Trust | 12.50 | 10/25/46 | 10/12/06 | 1,471,200 | 100,924 | 0.3 | ||||||||||
Steers | 3.99 | 06/20/18 | 02/05/07- 08/23/07 | 5,095,120 | 1,155,000 | 3.5 | ||||||||||
$ | 1,497,570 | 4.5 | % |
Helios Strategic Income Fund, Inc. | ||||||||||||||||
Restricted Securities | Interest Rate | Maturity | Acquisition Date | Acquisition Cost | Market Value | Percentage of Net Assets | ||||||||||
Countrywide Alternative Loan Trust NIM | 12.50 | % | 09/25/46 | 10/04/06 | $ | 959,817 | $ | 0 | 0.0 | % | ||||||
Credit Genesis CLO 2005 | 0.00 | 06/23/10 | 06/17/05 | 1,000,000 | 6,000 | 0.0 | ||||||||||
FSI Realty Trust | — | — | 04/26/07 | 248,900 | 0 | 0.0 | ||||||||||
Lake Country Mortgage Loan Trust | 3.27 | 07/25/34 | 10/31/06 | 3,271,466 | 354,621 | 1.2 | ||||||||||
Linker Finance PLC | 4.06 | 05/19/45 | 05/05/06 | 1,941,335 | 20,000 | 0.1 | ||||||||||
Mid Country | — | — | 05/22/07 | 724,999 | 139,882 | 0.5 | ||||||||||
Port Townsend Company Inc. | — | — | 10/18/07 | 583,898 | 0 | 0.0 | ||||||||||
Sharp SP I LLC NIM Trust | 12.50 | 10/25/46 | 10/12/06 | 735,600 | 50,462 | 0.2 | ||||||||||
Steers | 3.99 | 06/20/18 | 02/05/07- 08/23/07 | 4,855,106 | 1,100,000 | 3.6 | ||||||||||
$ | 1,670,965 | 5.6 | % |
11. New Accounting Pronouncements
In March 2008, FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal periods and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about each Fund’s derivative and hedging activities. FAS 161 was adopted for the fiscal year ended March 31, 2010 and had no impact on the financial statements or disclosures.
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44
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
In April 2009, FASB issued FASB Staff Position No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (FSP 157-4” or the “Position”). FSP 157-4 provides additional guidance for estimating fair value when the volume and level of activity has significantly decreased in relation to normal market activity for the asset or liability. The Position also provides additional guidance on circumstances that may indicate that a transaction is not orderly and requires additional disclosures in annual and interim reporting periods. FSP 157-4 is effective for fiscal periods and interim periods beginning after June 15, 2009. FSP 157-4 was adopted for the fiscal year ended March 31, 2010 and had no impact on the financial statements but resulted in enhanced disclosure in the notes to the financial statements.
In May 2009, the FASB issued FAS No. 165,Subsequent Events (“FAS 165”). The Fund has adopted FAS 165 with these financial statements FAS 165 requires the Fund to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the Statement of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Fund is required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. Management has evaluated subsequent events through the issuance of the Funds’ financial statements and has noted no such events except those disclosed in Notes 12,14,15 and 16.
In June 2009, an accounting standards codification (“Codification”) was established as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under federal securities laws are also sources of authoritative GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. As of the effective date, the Codification has superseded all then-existing non-SEC accounting and reporting standards. Concurrently, all nongrandfathered, non-SEC accounting literature not included in the Codification has been deemed nonauthoritative. This Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Funds adopted the Codification for their fiscal year ended March 31, 2010.
In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about Fair Value Measurements.” ASU No. 2010-06 clarifies existing disclosures and requires additional disclosures regarding fair value measurements. Effective for interim and annual reporting periods beginning after December 15, 2009, entities will be required to disclose significant transfers into and out of Level 1 and 2 measurements in the fair value hierarchy and the reasons for those transfers. Effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years, entities will need to disclose information about purchases, sales, issuances and settlements of Level 3 securities on a gross basis, rather than as a net number as currently required. Management is currently evaluating the impact ASU No. 2010-06 will have on the Fund’s financial statement disclosures.
12. Pending Litigation
Beginning in late 2007, lawsuits were filed in state and federal courts in Tennessee, Alabama, Arkansas, Indiana, Mississippi, Louisiana, New York and Texas relating to certain fixed income funds managed by the Advisor, including the Funds. Certain of the cases were filed as putative class actions on behalf of investors who purchased shares of the Funds from December 2004 through February 2008 and other cases were filed as actions on behalf of one or more individuals or trusts. The complaints name various entities and individuals as defendants including, among others, the Funds, the former advisor, Morgan Asset Management, Inc. (“MAM”), Morgan Keegan & Company, Inc. (“Morgan Keegan”), Regions Financial Corporation and several affiliates (“Regions”), certain former directors and former officers of the Funds and the Funds’ former portfolio managers. The complaints generally allege that the defendants misrepresented or failed to disclose material facts relating to portfolio composition, fair valuation, liquidity and risk in Fund registration statements and other documents. The
2009 Annual Report (Amended) |
45
plaintiffs seek damages in amounts to be determined at trial and reasonable costs and, in some cases, attorneys’ fees. Each of the cases is at a preliminary stage. An answer was filed in a state court case,Burke v. Citigroup Global Markets, Inc. pending in the circuit court of Jefferson County, Alabama, on behalf of Helios Multi-Sector High Income Fund, Inc. and Helios Strategic Income Fund, Inc. which was later settled. Other than the Burke case and the motions to dismiss filed in the derivative action discussed below, no responses to the complaints have been filed in the actions pending against the Funds, and no classes have been certified in any of the putative class actions filed against the Funds.
On March 13, 2008, a derivative action was filed in the United States District Court for the Western District of Tennessee seeking damages on behalf of Helios Multi-Sector High Income Fund, Inc. against MAM and certain former directors of the Fund. The complaint in this action alleged, among other things, that defendants MAM and certain former directors of the Fund breached their fiduciary duties and mismanaged the Fund in connection with portfolio composition, fair valuation, liquidity, risk management and disclosure. The complaint sought damages in an amount to be determined at trial and reasonable costs and attorneys’ fees. Motions to dismiss the complaint were filed by the respective defendants. The Board of the Fund is currently undertaking an investigation of the underlying allegations in the complaint to determine whether pursuit of such claims is in the best interest of the Fund. The Fund moved to dismiss the action without prejudice, or alternatively, to stay the action pending the completion of the Board’s investigation of the underlying allegations and its determination as to proceeding on behalf of the Fund. On March 10, 2010, the court granted the defendants’ motions to dismiss and dismissed the action without prejudice to the Fund’s right to seek remuneration for any perceived wrongs on the completion of its Board’s investigation.
Subsequently, on March 18, 2010, four derivative actions were filed on behalf of each of the Funds. The complaints in these actions allege, among other things, that defendants MAM, and certain former officers and directors of the Funds breached their fiduciary duties and mismanaged the Funds in connection with portfolio composition, fair valuation, liquidity, risk management and disclosure. The complaints seek equitable relief, damages in an amount to be determined at trial and reasonable costs and attorneys’ fees. The proceedings are at a preliminary stage and no responses to the complaints have been filed by the respective defendants. Plaintiffs have filed an unopposed motion for consolidation of these actions. Should the court grant such motion, a consolidated amended complaint will be filed. The Boards of the Funds are currently undertaking an investigation of the underlying allegations in the complaints to determine whether pursuit of such claims is in the best interest of the Funds.
Claims substantially similar to those described above have been made in lawsuits filed in the United States Federal and state courts concerning certain open-end funds formerly managed by the Advisor. Motions to dismiss the open-end derivative and open-end class actions have been filed by the respective defendants. The open-end fund defendants have moved to dismiss the open-end derivative action without prejudice, or alternatively, to stay such action pending the completion of the Board investigation described above. The open-end fund defendants have separately moved to dismiss the open-end class actions for failure to state a claim.
On September 23, 2008, most of the cases pending in federal court in the Western District of Tennessee in which the Funds are defendants, and other cases pending in that court involving the same or similar claims against other defendants, were consolidated into a single proceeding encaptionedIn re Regions Morgan Keegan Closed End Fund Litigation.
On February 12, 2009, the Judicial Panel on Multidistrict Litigation (“Judicial Panel”) issued an order transferring related actions pending in other federal courts to the United States District Court for the Western District of Tennessee and directing that the transferred cases be coordinated or consolidated with the above-described actions relating to the Funds (the “MDL Proceeding”).
On June 18 and June 23, 2010, respectively, two actions were filed in the Northern District of Alabama against Morgan Keegan, MK Holding, Inc., the Funds, and certain other defendants. These complaints generally allege that the defendants misrepresented or failed to disclose material facts relating to portfolio composition, fair
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46
valuation, liquidity and risk in Fund prospectuses and registration statements. The plaintiffs seek damages in amounts to be determined at trial and attorneys’ fees. On July 28, 2010, joint motions were filed by plaintiffs, Morgan Keegan and MK Holding, Inc. in these proceedings for temporary stays pending transfer to the Western District of Tennessee for consolidated or coordinated pretrial proceedings as part of the MDL proceeding.
On July 12, 2010, a putative class action was filed in the Western District of Tennessee against MAM, Morgan Keegan, Regions, MK Holding, Inc., the Funds, and certain other defendants. The action purports to assert claims under the Employee Retirement Income Security Act of 1974 (“ERISA”), on behalf of all ERISA plans for which Regions Bank serves or served as trustee, custodian or agent that owned or held shares of certain investment funds, which are subject of the multidistrict litigation discussed above. The Funds, together with certain open-end funds formerly managed by the Advisor, are sued as Nonfiduciary Parties in Interest, and are alleged to be liable, and subject to equitable remedies, for allegedly knowingly participating in breaches of ERISA fiduciary duties by other defendants, or wrongfully obtaining or receiving assets from the Regions ERISA Trusts. Plaintiffs also allege that the Funds are liable for the conduct of certain other defendants who allegedly acted as agents of the Funds. The action seeks equitable remedies, including a constructive trust and/or restitution of assets allegedly wrongfully obtained or received, as well as fees, profits, bonuses, dividends or other remuneration, together with damages in an amount to be determined at trial and reasonable costs and attorneys’ fees.
No estimate of the effect, if any, of these lawsuits on the Funds can be made at this time.
13. Change of Independent Registered Public Accounting Firm
On June 25, 2008, the Boards of Directors determined not to retain PricewaterhouseCoopers LLP (“PwC”) as the Funds’ Independent Registered Public Accounting Firm. The Audit Committee of the Funds then submitted a recommendation to the Board of Directors to engage BBD, LLP, formerly Briggs, Bunting & Dougherty, LLP (“BBD”) as the Funds’ Independent Registered Public Accounting Firm for the fiscal year ended March 31, 2009. During the two most recent fiscal years and through June 25, 2008, the date the Board of Directors notified PwC of their decision not to retain them as the Funds’ auditor, PwC’s audit reports contained no adverse opinion or disclaimer of opinion; nor were their reports qualified as to uncertainty, audit scope or accounting principles. Further, there were no disagreements between the Funds and PwC on accounting principles, financial statements disclosure or audit scope, which, if not resolved to the satisfaction of PwC, would have caused them to make reference to the disagreement in their reports. By correspondence dated May 27, 2010, PwC, the Funds’ independent registered public accounting firm for the fiscal years ended March 31, 2008, 2007 and 2006, informed the Funds that its audit reports dated May 29, 2008, May 21, 2008 and May 22, 2006, on the Funds’ financial statements for these fiscal years should no longer be relied upon. Please see Notes 15 and 16 in the Notes to Financial Statements for additional information.
During the two most recent fiscal years and through June 25, 2008, the date the Board of Directors approved BBD as the Funds’ auditor, the Funds did not consult BBD regarding either (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Funds’ financial statements, or (2) any matter that was either the subject of a disagreement or a reportable event, as such terms are defined in Item 304 of Regulation S-K.
The Funds provided PwC with a copy of these disclosures and PwC furnished the Funds with a letter addressed to the commission stating that it agrees with the statements made by the Funds herein.
14. Subsequent Events
Effective September 1, 2009, each Fund effected a 1 for 5 reverse stock split for its respective shares.
2009 Annual Report (Amended) |
47
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
15. Administrative Proceeding and Non-Reliance on Certain Prior Financial Statements
On April 7, 2010, after an investigation by the Division of Enforcement, the Securities and Exchange Commission (“Commission”) issued an order (“Order”) instituting administrative and cease-and-desist proceedings (the “Administrative Proceeding”) pursuant to the federal securities laws and the Commission’s rules of practice against Morgan Asset Management, Inc. (“Morgan Asset”), Morgan Keegan & Company, Inc., James C. Kelsoe, Jr. and Joseph Thompson Weller, CPA (collectively, “Respondents”). Prior to July 29, 2008, Morgan Asset served as investment advisor to the Funds.
If certain allegations in the Order against the Respondents are found to be true at the conclusion of the Administrative Proceeding or otherwise, the financial statements and financial highlights for each Fund’s three fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006 may be impacted. The Funds are currently undertaking an investigation of the underlying allegations in the Order. It is unclear at this time, however, whether each Fund’s financial statements and financial highlights covering these fiscal periods are impacted and, if so, whether the impact is material.
By correspondence dated May 27, 2010, the Funds’ independent registered public accounting firm for the fiscal years ended March 31, 2008, 2007 and 2006, informed the Funds that its audit reports dated May 29, 2008, May 21, 2007 and May 22, 2006, on the Funds’ financial statements should no longer be relied upon. Certain of the Funds’ authorized officers have discussed the foregoing matters with the Funds’ former independent registered public accounting firm.
In addition, by correspondence dated May 28, 2010, BBD, LLP (“BBD”), the Funds’ independent registered public accounting firm for the six-month period ended September 30, 2008 and the fiscal year ended March 31, 2009, informed the Funds that BBD’s audit reports dated November 26, 2008 and May 28, 2009, on the Funds’ financial statements should no longer be relied upon in view of the Funds’ former independent registered public accounting firm’s May 27, 2010 correspondence regarding non-reliance on its previously issued audit reports because BBD relied upon the Funds’ former independent registered public accounting firm’s audit report on the March 31, 2008 financial statements. The Funds’ Audit Committees, Boards of Directors and authorized officers have discussed the foregoing matters with BBD.
Since the Advisor was not the Funds’ investment adviser for the fiscal years ended March 31, 2008, 2007 and 2006, the Advisor has not attempted to review the Funds’ financial statements for those fiscal years. The information contained in this report for March 31, 2008, 2007 and 2006 is unaudited and should not be relied upon.
For the Funds’ fiscal year ended March 31, 2009, since the Advisor only assumed management of the Funds on July 29, 2008, the Advisor reviewed the Funds’ balance sheets as of March 31, 2008 so that it could establish opening valuations for April 1, 2008. The Advisor’s review resulted in adjustments to portfolio valuations and accrued interest receivables. The Funds engaged BBD to re-audit their March 31, 2009 financial statements.
As discussed above, based upon the actions of the Funds’ former independent registered public accounting firm, the financial statements and financial highlights for the fiscal years ended March 31, 2008, 2007 and fiscal years/period ended 2006 should not be relied upon until such time that the Funds’ investigation of the underlying allegations in the Order has been completed and the issues surrounding the audit reports have been resolved.
16. Restatement Information
As a result of BBD’s correspondence regarding non-reliance on its previously issued audit reports because BBD relied upon the Funds’ former independent registered public accounting firm’s audit report on the March 31, 2008 financial statements, the Advisor reviewed the Funds’ balance sheets as of March 31, 2008, which resulted in adjustments to portfolio valuations and accrued interest receivables. Since the Advisor was not the Funds’ investment advisor on March 31, 2008, the Advisor had to review each portfolio holding in the Funds to establish the opening valuations for April 1, 2008. In determining the valuation for each portfolio holding, the Advisor considered various factors, including prices provided by an independent pricing service or consultant, which included prices provided by the Advisor since it
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48
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
served as external valuation consultant to the Funds at that time, and sale prices for securities that were sold between March 31, 2008 and July 29, 2008. The Advisor also wrote off interest receivables to the extent that amounts actually collected were not equal to the March 31, 2008 accruals. In establishing valuations on the date hereof that reflect values as of April 1, 2008 for securities that the Advisor did not provide valuations on at that time as external valuation consultant, the Advisor did not research the underlying characteristics or consider the market environment for such securities as of April 1, 2008. The Advisor’s methodology for establishing valuations as of April 1, 2008 for purposes of preparing this report included reviewing sale prices for securities that were sold prior to the Advisor assuming management of the Funds, reviewing prices provided by an independent pricing service at that time and reviewing a Fund’s pricing of a security when the Advisor assumed management of the Funds on July 29, 2008. For these securities, the Advisor may have used a different methodology than that which was used by Morgan Asset or which would have been used by the Advisor on March 31, 2008 had it priced the securities on such date because these were complex securities and the necessary information that would have been used in March/April 2008 to price these securities is no longer available. The impact of the adjustments to the Funds’ portfolio valuations and accrued interest receivables on each Fund’s financial statements and financial highlights is reflected in the tables that follow:
2009 Annual Report (Amended) |
49
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Assets and Liabilities
Helios Advantage Income Fund, Inc | |||||||||||||||||||||||
2008 | 2009 | ||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | ||||||||||||||||||
Assets: | |||||||||||||||||||||||
Investments in securities, at value (Note 2) | $ | 118,405,236 | $ | (8,019,034 | ) | $ | 110,386,202 | $ | 38,502,961 | $ | — | $ | 38,502,961 | ||||||||||
Investment in time deposit, at value | — | — | — | 458,230 | — | 458,230 | |||||||||||||||||
Total investments | 118,405,236 | (8,019,034 | ) | 110,386,202 | 38,961,191 | — | 38,961,191 | ||||||||||||||||
Cash | — | — | — | 101 | — | 101 | |||||||||||||||||
Net receivable from advisor (Note 4) | — | — | — | 47,122 | — | 47,122 | |||||||||||||||||
Interest and dividends receivable | 5,112,087 | (2,296,015 | ) | 2,816,072 | 1,019,754 | — | 1,019,754 | ||||||||||||||||
Receivable for investments sold | 2,164,085 | — | 2,164,085 | 877,998 | — | 877,998 | |||||||||||||||||
Prepaid expenses and other assets | 242,327 | — | 242,327 | 54,835 | — | 54,835 | |||||||||||||||||
Total assets | 125,923,735 | (10,315,049 | ) | 115,608,686 | 40,961,001 | — | 40,961,001 | ||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Loan payable | 15,000,000 | — | 15,000,000 | — | — | — | |||||||||||||||||
Interest due on loan payable | 96,848 | — | 96,848 | — | — | — | |||||||||||||||||
Payable for investments purchased | — | — | — | 195,785 | — | 195,785 | |||||||||||||||||
Administration fee payable (Note 4) | 19,292 | — | 19,292 | 5,458 | — | 5,458 | |||||||||||||||||
Accrued expenses | 193,725 | — | 193,725 | 83,351 | — | 83,351 | |||||||||||||||||
Total liabilities | 15,309,865 | — | 15,309,865 | 284,594 | — | 284,594 | |||||||||||||||||
Net Assets | $ | 110,613,870 | $ | (10,315,049 | ) | $ | 100,298,821 | $ | 40,676,407 | $ | — | $ | 40,676,407 | ||||||||||
Composition of Net Assets: | |||||||||||||||||||||||
Capital stock, ($.0001 par value, 1,000,000,000 shares authorized) (Note 7) | $ | 3,230 | $ | — | $ | 3,230 | $ | 3,268 | $ | — | $ | 3,268 | |||||||||||
Additional paid-in capital (Note 7) | 461,529,911 | — | 461,529,911 | 456,279,779 | — | 456,279,779 | |||||||||||||||||
Distributions in excess of net investment income | (403,258 | ) | (2,296,015 | ) | (2,699,273 | ) | — | — | — | ||||||||||||||
Accumulated net realized loss on investments | (124,395,186 | ) | — | (124,395,186 | ) | (394,962,880 | ) | — | (394,962,880 | ) | |||||||||||||
Net unrealized depreciation on investments | (226,120,827 | ) | (8,019,034 | ) | (234,139,861 | ) | (20,643,760 | ) | — | (20,643,760 | ) | ||||||||||||
Net assets applicable to capital stock outstanding | $ | 110,613,870 | $ | (10,315,049 | ) | $ | 100,298,821 | $ | 40,676,407 | $ | — | $ | 40,676,407 | ||||||||||
Investments, at identified cost | $ | 344,526,063 | $ | — | $ | 344,526,063 | $ | 59,604,951 | $ | — | $ | 59,604,951 | |||||||||||
Shares Outstanding and Net Asset Value Per Share: |
| ||||||||||||||||||||||
Common shares outstanding | 32,296,072 | — | 32,296,072 | 32,682,733 | — | 32,682,733 | |||||||||||||||||
Net asset value per share | $ | 3.42 | $ | (0.31 | ) | $ | 3.11 | $ | 1.24 | $ | — | $ | 1.24 |
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50
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Operations
Helios Advantage Income Fund, Inc | |||||||||||||||||||||||
2008 | 2009 | ||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | ||||||||||||||||||
Investment Income (Note 2): | |||||||||||||||||||||||
Interest | $ | 50,748,756 | $ | (2,296,015 | ) | $ | 48,452,741 | $ | 10,370,206 | $ | 2,296,015 | $ | 12,666,221 | ||||||||||
Dividends | 2,005,439 | — | 2,005,439 | 58,184 | — | 58,184 | |||||||||||||||||
Total investment income | 52,754,195 | (2,296,015 | ) | 50,458,180 | 10,428,390 | 2,296,015 | 12,724,405 | ||||||||||||||||
Expenses: | |||||||||||||||||||||||
Investment advisory fees (Note 4) | 2,367,493 | — | 2,367,493 | 405,861 | — | 405,861 | |||||||||||||||||
Administration fees (Note 4) | 885,254 | — | 885,254 | 97,656 | — | 97,656 | |||||||||||||||||
Debt issuance costs | 577,142 | — | 577,142 | 268,284 | — | 268,284 | |||||||||||||||||
Legal fees | 209,162 | — | 209,162 | 121,068 | — | 121,068 | |||||||||||||||||
Audit and tax services | 53,250 | — | 53,250 | 146,255 | — | 146,255 | |||||||||||||||||
Transfer agent fees | 25,490 | — | 25,490 | 30,826 | — | 30,826 | |||||||||||||||||
Custodian | 35,831 | — | 35,831 | 62,437 | — | 62,437 | |||||||||||||||||
Registration fees | 33,002 | — | 33,002 | 30,228 | — | 30,228 | |||||||||||||||||
Directors’ fees | 49,554 | — | 49,554 | 39,088 | — | 39,088 | |||||||||||||||||
Insurance | 15,272 | — | 15,272 | 109,310 | — | 109,310 | |||||||||||||||||
Valuation consultant fees (Note 4)* | — | — | — | 76,179 | — | 76,179 | |||||||||||||||||
Reports to stockholders | — | — | — | 51,168 | — | 51,168 | |||||||||||||||||
Miscellaneous | 55,309 | — | 55,309 | 11,471 | — | 11,471 | |||||||||||||||||
Total operating expenses | 4,306,759 | — | 4,306,759 | 1,449,831 | — | 1,449,831 | |||||||||||||||||
Interest expense on borrowings and reverse repurchase agreements (Note 6) | 5,332,436 | — | 5,332,436 | 21,455 | — | 21,455 | |||||||||||||||||
Total expenses | 9,639,195 | — | 9,639,195 | 1,471,286 | — | 1,471,286 | |||||||||||||||||
Less expenses waived and reimbursed by the investment advisor (Note 4) | (449,505 | ) | — | (449,505 | ) | (449,345 | ) | — | (449,345 | ) | |||||||||||||
Net expenses | 9,189,690 | — | 9,189,690 | 1,021,941 | — | 1,021,941 | |||||||||||||||||
Net investment income | 43,564,505 | (2,296,015 | ) | 41,268,490 | 9,406,449 | 2,296,015 | 11,702,464 | ||||||||||||||||
Realized and Unrealized Gain (Loss) on Investments (Note 2): | |||||||||||||||||||||||
Net realized loss on investment transactions | (125,370,763 | ) | — | (125,370,763 | ) | (271,508,158 | ) | — | (271,508,158 | ) | |||||||||||||
Net change in unrealized depreciation on investments | (188,194,389 | ) | (8,019,034 | ) | (196,213,423 | ) | 205,477,067 | 8,019,034 | 213,496,101 | ||||||||||||||
Net realized and unrealized loss on investments | (313,565,152 | ) | (8,019,034 | ) | (321,584,186 | ) | (66,031,091 | ) | 8,019,034 | (58,012,057 | ) | ||||||||||||
Net decrease in net assets resulting from operations | $ | (270,000,647 | ) | $ | (10,315,049 | ) | $ | (280,315,696 | ) | $ | (56,624,642 | ) | $ | 10,315,049 | $ | (46,309,593 | ) | ||||||
* | Paid valuation consultant fees in 2008 lumped with another category. |
2009 Annual Report (Amended) |
51
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Changes in Net Assets
Helios Advantage Income Fund, Inc | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Increase (Decrease) in Net Assets Resulting from Operations: | ||||||||||||||||||||||||
Net investment income | $ | 43,564,505 | $ | (2,296,015 | ) | $ | 41,268,490 | $ | 9,406,449 | $ | 2,296,015 | $ | 11,702,464 | |||||||||||
Net realized loss on investment transactions | (125,370,763 | ) | — | (125,370,763 | ) | (271,508,158 | ) | — | (271,508,158 | ) | ||||||||||||||
Net change in unrealized appreciation/(depreciation) on investments | (188,194,389 | ) | (8,019,034 | ) |
| (196,213,423 | ) | 205,477,067 | 8,019,034 |
| 213,496,101 |
| ||||||||||||
Net decrease in net assets resulting from operations | (270,000,647 | ) | (10,315,049 | ) | (280,315,696 | ) | (56,624,642 | ) | 10,315,049 | (46,309,593 | ) | |||||||||||||
Distributions to Stockholders (Note 2): | ||||||||||||||||||||||||
Net investment income | (42,440,232 | ) | — | (42,440,232 | ) | (7,792,400 | ) | — | (7,792,400 | ) | ||||||||||||||
Net realized gains on investments | (2,248,438 | ) | — | (2,248,438 | ) | — | — | — | ||||||||||||||||
Return of capital | (1,260,966 | ) | — | (1,260,966 | ) | (6,704,405 | ) | — | (6,704,405 | ) | ||||||||||||||
Total distributions paid | (45,949,636 | ) | — | (45,949,636 | ) | (14,496,805 | ) | — | (14,496,805 | ) | ||||||||||||||
Capital Stock Transactions (Note 7): | ||||||||||||||||||||||||
Reinvestment of dividends and distributions | 9,565,512 | — | 9,565,512 | 1,183,984 | — | 1,183,984 | ||||||||||||||||||
Total decrease in net assets | (306,384,771 | ) | (10,315,049 | ) | (316,699,820 | ) | (69,937,463 | ) | 10,315,049 | (59,622,414 | ) | |||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of year | 416,998,641 | — | 416,998,641 | 110,613,870 | (10,315,049 | ) | 100,298,821 | |||||||||||||||||
End of year | $ | 110,613,870 | $ | (10,315,049 | ) | $ | 100,298,821 | $ | 40,676,407 | $ | — | $ | 40,676,407 | |||||||||||
(including distributions in excess of net investment income of) | $ | (403,258 | ) | $ | (2,296,015 | ) | $ | (2,699,273 | ) | $ | — | $ | — | $ | — | |||||||||
Share Transactions: | ||||||||||||||||||||||||
Reinvested shares | 928,527 | — | 928,527 | 386,661 | — | 386,661 | ||||||||||||||||||
Brookfield Investment Management, Inc. |
52
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Cash Flows
Helios Advantage Income Fund, Inc | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Increase (Decrease) in Cash: | ||||||||||||||||||||||||
Cash flows provided by (used for) operating activities: | ||||||||||||||||||||||||
Net decrease in net assets resulting from operations | $ | (270,000,647 | ) | $ | (10,315,049 | ) | $ | (280,315,696 | ) | $ | (56,624,642 | ) | $ | 10,315,049 | $ | (46,309,593 | ) | |||||||
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by net operating activities | ||||||||||||||||||||||||
Purchases of long-term portfolio investments | (263,426,467 | ) | — | (263,426,467 | ) | (49,743,904 | ) | — | (49,743,904 | ) | ||||||||||||||
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses | 374,950,005 | — | 374,950,005 | 62,929,794 | — | 62,929,794 | ||||||||||||||||||
Purchases of short-term portfolio investments, net | 11,283,567 | — | 11,283,567 | 1,865,980 | — | 1,865,980 | ||||||||||||||||||
Unrealized appreciation on investments | 188,194,389 | 8,019,034 | 196,213,423 | (205,477,067 | ) | (8,019,034 | ) | (213,496,101 | ) | |||||||||||||||
Net amortization and paydown gains on investments | (2,161,836 | ) | — | (2,161,836 | ) | (1,638,916 | ) | — | (1,638,916 | ) | ||||||||||||||
Net realized loss on investment transactions | 125,370,763 | — | 125,370,763 | 271,508,158 | — | 271,508,158 | ||||||||||||||||||
Decrease in dividends and interest receivable | 2,877,037 | 2,296,015 | 5,173,052 | 4,092,333 | (2,296,015 | ) | 1,796,318 | |||||||||||||||||
Decrease in receivable for investments sold | 10,443,923 | — | 10,443,923 | 1,286,087 | — | 1,286,087 | ||||||||||||||||||
Decrease in prepaid expenses | — | — | — | 187,492 | — | 187,492 | ||||||||||||||||||
Decrease in interest payable | (590,286 | ) | — | (590,286 | ) | — | — | — | ||||||||||||||||
Increase/(Decrease) in payable for investments purchased | (4,494,669 | ) | — | (4,494,669 | ) | 195,785 | — | 195,785 | ||||||||||||||||
Decrease in interest payable on loans outstanding | — | — | — | (96,848 | ) | — | (96,848 | ) | ||||||||||||||||
Increase in receivable from advisor | — | — | — | (47,122 | ) | — | (47,122 | ) | ||||||||||||||||
Decrease in investment advisory fee payable | (234,497 | ) | — | (234,497 | ) | (83,597 | ) | — | (83,597 | ) | ||||||||||||||
Decrease in accounting & administration fee payable | (54,115 | ) | — | (54,115 | ) | (13,834 | ) | — | (13,834 | ) | ||||||||||||||
Decrease in accrued expenses | (1,763 | ) | — | (1,763 | ) | (26,777 | ) | — | (26,777 | ) | ||||||||||||||
Net cash provided by operating activities | 172,155,404 | — | 172,155,404 | 28,312,922 | — | 28,312,922 | ||||||||||||||||||
Cash flows used for financing activities: | ||||||||||||||||||||||||
Decrease in loan payable | (135,000,000 | ) | — | (135,000,000 | ) | (15,000,000 | ) | — | (15,000,000 | ) | ||||||||||||||
Cash paid for debt issue costs | (771,280 | ) | — | (771,280 | ) | — | — | — | ||||||||||||||||
Dividends paid to stockholders, net of reinvestments | (36,384,124 | ) | — | (36,384,124 | ) | (13,312,821 | ) | — | (13,312,821 | ) | ||||||||||||||
Net cash used for financing activities | (172,155,404 | ) | — | (172,155,404 | ) | (28,312,821 | ) | — | (28,312,821 | ) | ||||||||||||||
Net increase in cash | — | — | — | 101 | — | 101 | ||||||||||||||||||
Cash at beginning of year | — | — | — | — | — | — | ||||||||||||||||||
Cash at end of year | $ | — | $ | — | $ | — | $ | 101 | $ | — | $ | 101 | ||||||||||||
2009 Annual Report (Amended) |
53
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Financial Highlights
Helios Advantage Income Fund, Inc | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Per Share Operation Performance: | ||||||||||||||||||||||||
Net asset value, beginning of year | $ | 13.29 | $ | — | $ | 13.29 | $ | 3.42 | $ | (0.31 | ) | $ | 3.11 | |||||||||||
Net investment income | 1.30 | $ | (0.07 | ) | 1.23 | 0.28 | 0.07 | 0.35 | ||||||||||||||||
Net realized and unrealized loss on investments | (9.73 | ) | $ | (0.24 | ) | (9.97 | ) | (2.01 | ) | 0.24 | (1.77 | ) | ||||||||||||
Net increase (decrease) in net asset value resulting from operations | (8.43 | ) | (0.31 | ) | (8.74 | ) | (1.73 | ) | 0.31 | (1.42 | ) | |||||||||||||
Dividends from net investment income | (1.31 | ) | (1.31 | ) | (0.24 | ) | — | (0.24 | ) | |||||||||||||||
Distribution from capital gains | — | — | — | — | — | |||||||||||||||||||
Return of capital | (0.13 | ) | — | (0.13 | ) | (0.21 | ) | — | (0.21 | ) | ||||||||||||||
Total distribution | (1.44 | ) | — | (1.44 | ) | (0.45 | ) | — | (0.45 | ) | ||||||||||||||
Offering costs charged to additional paid in capital | — | — | — | — | ||||||||||||||||||||
Net asset value, end of year | $ | 3.42 | $ | (0.31 | ) | $ | 3.11 | $ | 1.24 | — | $ | 1.24 | ||||||||||||
Market price, end of year | $ | 3.34 | — | $ | 3.34 | $ | 1.00 | — | $ | 1.00 | ||||||||||||||
Total Investment Return | (73.61 | )% | — | (73.61 | )% | (61.80 | )% | — | (61.80 | )% | ||||||||||||||
Ratios to Average Net Assets/Supplementary Data: | ||||||||||||||||||||||||
Net assets, end of year(000s) | $ | 110,614 | (10,315 | ) | $ | 100,299 | $ | 40,676 | — | $ | 40,676 | |||||||||||||
Gross operating expenses | 3.66 | % | — | 3.66 | % | 2.35 | % | 0.09 | % | 2.44 | % | |||||||||||||
Interest expense | N/A | (a) | N/A | (a) | 0.03 | % | — | 0.03 | % | |||||||||||||||
Total expenses | 3.66 | % | — | 3.66 | % | 2.38 | % | 0.09 | % | 2.47 | % | |||||||||||||
Net expenses, including fee waivers and reimbursement and excluding interest expense, debt issuance costs and extraordinary expenses | 3.49 | % | — | 3.49 | % | 1.19 | % | 0.04 | % | 1.23 | % | |||||||||||||
Net investment income | 16.56 | % | (0.87 | )% | 15.69 | % | 15.24 | % | 4.42 | % | 19.66 | % | ||||||||||||
Net investment income, excluding the effect of fee waivers and reimbursement | 16.39 | % | (0.87 | )% | 15.52 | % | 14.51 | % | 4.40 | % | 18.91 | % | ||||||||||||
Portfolio turnover rate | 76 | % | — | 76 | % | 87 | % | 2 | % | 89 | % |
(a) | Not available. During this period, interest expense was not reported separately from the operating expenses. |
Brookfield Investment Management, Inc. |
54
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Assets and Liabilities
Helios High Income Fund, Inc | |||||||||||||||||||||||
2008 | 2009 | ||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | ||||||||||||||||||
Assets: | |||||||||||||||||||||||
Investments in securities, at value (Note 2) | $ | 88,676,660 | $ | (5,811,480 | ) | $ | 82,865,180 | $ | 28,418,617 | $ | — | $ | 28,418,617 | ||||||||||
Investment in time deposit, at value | — | — | — | 1,227,832 | — | 1,227,832 | |||||||||||||||||
Total investments | 88,676,660 | (5,811,480 | ) | 82,865,180 | 29,646,449 | — | 29,646,449 | ||||||||||||||||
Cash | — | — | — | 101 | — | 101 | |||||||||||||||||
Net receivable from advisor (Note 4) | — | — | — | 35,063 | — | 35,063 | |||||||||||||||||
Interest and dividends receivable | 4,041,184 | (2,058,215 | ) | 1,982,969 | 726,963 | — | 726,963 | ||||||||||||||||
Receivable for investments sold | 2,138,210 | — | 2,138,210 | 3,851 | — | 3,851 | |||||||||||||||||
Prepaid expenses and other assets | 33,574 | — | 33,574 | 53,981 | — | 53,981 | |||||||||||||||||
Total assets | 94,889,628 | (7,869,695 | ) | 87,019,933 | 30,466,408 | — | 30,466,408 | ||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Loan payable | 12,000,000 | — | 12,000,000 | — | — | — | |||||||||||||||||
Interest due on loan payable | 21,150 | — | 21,150 | — | — | — | |||||||||||||||||
Payable for investments purchased | 302,979 | — | 302,979 | 195,785 | — | 195,785 | |||||||||||||||||
Administration fee payable (Note 4) | 12,709 | — | 12,709 | 4,127 | — | 4,127 | |||||||||||||||||
Accrued expenses | 143,746 | — | 143,746 | 76,950 | — | 76,950 | |||||||||||||||||
Total liabilities | 12,480,584 | — | 12,480,584 | 276,862 | — | 276,862 | |||||||||||||||||
Net Assets | $ | 82,409,044 | $ | (7,869,695 | ) | $ | 74,539,349 | $ | 30,189,546 | $ | — | $ | 30,189,546 | ||||||||||
Composition of Net Assets: | |||||||||||||||||||||||
Capital stock ($.0001 par value, 1,000,000,000 shares authorized) (Note 7) | $ | 2,386 | $ | — | $ | 2,386 | $ | 2,419 | $ | — | $ | 2,419 | |||||||||||
Additional paid-in capital (Note 7) | 341,149,059 | — | 341,149,059 | 338,533,603 | — | 338,533,603 | |||||||||||||||||
Distributions in excess of net investment income | (353,487 | ) | (2,058,215 | ) | (2,411,702 | ) | — | — | — | ||||||||||||||
Accumulated net realized loss on investments | (89,354,383 | ) | — | (89,354,383 | ) | (293,558,775 | ) | — | (293,558,775 | ) | |||||||||||||
Net unrealized depreciation on investments | (169,034,531 | ) | (5,811,480 | ) | (174,846,011 | ) | (14,787,701 | ) | — | (14,787,701 | ) | ||||||||||||
Net assets applicable to capital stock outstanding | $ | 82,409,044 | $ | (7,869,695 | ) | $ | 74,539,349 | $ | 30,189,546 | $ | — | $ | 30,189,546 | ||||||||||
Investments, at identified cost | $ | 257,711,191 | $ | — | $ | 257,711,191 | $ | 44,434,150 | $ | — | $ | 44,434,150 | |||||||||||
Shares Outstanding and Net Asset Value Per Share: | |||||||||||||||||||||||
Common shares outstanding | 23,856,527 | — | 23,856,527 | 24,181,420 | — | 24,181,420 | |||||||||||||||||
Net asset value per share | $ | 3.45 | $ | (0.33 | ) | $ | 3.12 | $ | 1.25 | $ | — | $ | 1.25 |
2009 Annual Report (Amended) |
55
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Operations
Helios High Income Fund, Inc | |||||||||||||||||||||||
2008 | 2009 | ||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | ||||||||||||||||||
Investment Income (Note 2): | |||||||||||||||||||||||
Interest | $ | 35,627,859 | $ | (2,058,215 | ) | $ | 33,569,644 | $ | 8,259,864 | $ | 2,058,215 | $ | 10,318,079 | ||||||||||
Dividends | 1,492,701 | — | 1,492,701 | 46,812 | — | 46,812 | |||||||||||||||||
Total investment income | 37,120,560 | (2,058,215 | ) | 35,062,345 | 8,306,676 | 2,058,215 | 10,364,891 | ||||||||||||||||
Expenses: | |||||||||||||||||||||||
Investment advisory fees (Note 4) | 1,703,488 | — | 1,703,488 | 302,089 | — | 302,089 | |||||||||||||||||
Administration fees (Note 4) | 638,156 | — | 638,156 | 73,709 | — | 73,709 | |||||||||||||||||
Debt issuance costs | 255,368 | — | 255,368 | 31,844 | — | 31,844 | |||||||||||||||||
Legal fees | 171,151 | — | 171,151 | 104,756 | — | 104,756 | |||||||||||||||||
Audit and tax services | 52,500 | — | 52,500 | 146,255 | — | 146,255 | |||||||||||||||||
Transfer agent fees | 26,007 | — | 26,007 | 31,590 | — | 31,590 | |||||||||||||||||
Custodian | 34,251 | — | 34,251 | 61,917 | — | 61,917 | |||||||||||||||||
Registration fees | 26,811 | — | 26,811 | 25,550 | — | 25,550 | |||||||||||||||||
Directors’ fees | 52,555 | — | 52,555 | 39,088 | — | 39,088 | |||||||||||||||||
Insurance | 11,140 | — | 11,140 | 80,671 | — | 80,671 | |||||||||||||||||
Valuation consultant fees (Note 4)* | — | — | — | 56,538 | — | 56,538 | |||||||||||||||||
Reports to stockholders | — | — | — | 41,867 | — | 41,867 | |||||||||||||||||
Miscellaneous | 50,487 | — | 50,487 | 7,264 | — | 7,264 | |||||||||||||||||
Total operating expenses | 3,021,914 | — | 3,021,914 | 1,003,138 | — | 1,003,138 | |||||||||||||||||
Interest expense on borrowings and reverse repurchase agreements (Note 6) | 4,097,363 | — | 4,097,363 | 19,938 | — | 19,938 | |||||||||||||||||
Total expenses | 7,119,277 | — | 7,119,277 | 1,023,076 | — | 1,023,076 | |||||||||||||||||
Less expenses waived and reimbursed by the investment advisor (Note 4) | (324,625 | ) | — | (324,625 | ) | (427,184 | ) | — | (427,184 | ) | |||||||||||||
Net expenses | 6,794,652 | — | 6,794,652 | 595,892 | — | 595,892 | |||||||||||||||||
Net investment income | 30,325,908 | (2,058,215 | ) | 28,267,693 | 7,710,784 | 2,058,215 | 9,768,999 | ||||||||||||||||
Realized and Unrealized Gain (Loss) on Investments (Note 2): | |||||||||||||||||||||||
Net realized loss on investment transactions | (89,524,052 | ) | — | (89,524,052 | ) | (204,453,115 | ) | — | (204,453,115 | ) | |||||||||||||
Net change in unrealized depreciation on investments | (135,395,493 | ) | (5,811,480 | ) | (141,206,973 | ) | 154,246,830 | 5,811,480 | 160,058,310 | ||||||||||||||
Net realized and unrealized loss on investments | (224,919,545 | ) | (5,811,480 | ) | (230,731,025 | ) | (50,206,285 | ) | 5,811,480 | (44,394,805 | ) | ||||||||||||
Net decrease in net assets resulting from operations | $ | (194,593,637 | ) | $ | (7,869,695 | ) | $ | (202,463,332 | ) | $ | (42,495,501 | ) | $ | 7,869,695 | $ | (34,625,806 | ) | ||||||
* | Paid valuation consultant fees in 2008 lumped with another category. |
Brookfield Investment Management, Inc. |
56
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Changes in Net Assets
Helios High Income Fund, Inc | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Increase (Decrease) in Net Assets Resulting from Operations: | ||||||||||||||||||||||||
Net investment income | $ | 30,325,908 | $ | (2,058,215 | ) | $ | 28,267,693 | $ | 7,710,784 | $ | 2,058,215 | $ | 9,768,999 | |||||||||||
Net realized loss on investment transactions | (89,524,052 | ) | — | (89,524,052 | ) | (204,453,115 | ) | — | (204,453,115 | ) | ||||||||||||||
Net change in unrealized appreciation/(depreciation) on investments | (135,395,493 | ) | (5,811,480 | ) | (141,206,973 | ) | 154,246,830 | 5,811,480 | 160,058,310 | |||||||||||||||
Net decrease in net assets resulting from operations | (194,593,637 | ) | (7,869,695 | ) | (202,463,332 | ) | (42,495,501 | ) | 7,869,695 | (34,625,806 | ) | |||||||||||||
Distributions to Stockholders (Note 2): | ||||||||||||||||||||||||
Net investment income | (30,061,517 | ) | — | (30,061,517 | ) | (6,693,644 | ) | — | (6,693,644 | ) | ||||||||||||||
Net realized gains on investments | (1,476,321 | ) | — | (1,476,321 | ) | — | — | — | ||||||||||||||||
Return of capital | (2,127,300 | ) | — | (2,127,300 | ) | (4,014,614 | ) | — | (4,014,614 | ) | ||||||||||||||
Total distributions paid | (33,665,138 | ) | — | (33,665,138 | ) | (10,708,258 | ) | — | (10,708,258 | ) | ||||||||||||||
Capital Stock Transactions (Note 7): | ||||||||||||||||||||||||
Reinvestment of dividends and distributions | 7,408,915 | — | 7,408,915 | 984,261 | — | 984,261 | ||||||||||||||||||
Total decrease in net assets | (220,849,860 | ) | (7,869,695 | ) | (228,719,555 | ) | (52,219,498 | ) | 7,869,695 | (44,349,803 | ) | |||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of year | 303,258,904 | — | 303,258,904 | 82,409,044 | (7,869,695 | ) | 74,539,349 | |||||||||||||||||
End of year | $ | 82,409,044 | $ | (7,869,695 | ) | $ | 74,539,349 | $ | 30,189,546 | $ | — | $ | 30,189,546 | |||||||||||
(including distributions in excess of net investment income of) | $ | (353,487 | ) | $ | (2,058,215 | ) | $ | (2,411,702 | ) | $ | — | $ | — | $ | — | |||||||||
Share Transactions: | ||||||||||||||||||||||||
Reinvested shares | 854,103 | — | 854,103 | 324,893 | — | 324,893 | ||||||||||||||||||
2009 Annual Report (Amended) |
57
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statement of Cash Flows
Helios High Income Fund, Inc | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Increase (Decrease) in Cash: | ||||||||||||||||||||||||
Cash flows provided by (used for) operating activities: | ||||||||||||||||||||||||
Net decrease in net assets resulting from operations | $ | (194,593,637 | ) | $ | (7,869,695 | ) | $ | (202,463,332 | ) | $ | (42,495,501 | ) | $ | 7,869,695 | $ | (34,625,806 | ) | |||||||
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by net operating activities | ||||||||||||||||||||||||
Purchases of long-term portfolio investments | (184,205,412 | ) | — | (184,205,412 | ) | (36,936,716 | ) | — | (36,936,716 | ) | ||||||||||||||
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses | 271,166,306 | — | 271,166,306 | 43,743,117 | — | 43,743,117 | ||||||||||||||||||
Sales of short-term portfolio investments, net | 5,847,927 | — | 5,847,927 | 2,970,497 | — | 2,970,497 | ||||||||||||||||||
Unrealized appreciation on investments | 135,395,493 | 5,811,480 | 141,206,973 | (154,246,830 | ) | (5,811,480 | ) | (160,058,310 | ) | |||||||||||||||
Net amortization and paydown gains on investments | (1,214,637 | ) | — | (1,214,637 | ) | (952,972 | ) | — | (952,972 | ) | ||||||||||||||
Net realized loss on investment transactions | 89,524,052 | — | 89,524,052 | 204,453,115 | — | 204,453,115 | ||||||||||||||||||
Decrease in dividends and interest receivable | 2,139,106 | 2,058,215 | 4,197,321 | 3,314,221 | (2,058,215 | ) | 1,256,006 | |||||||||||||||||
Decrease in receivable for investments sold | 8,651,038 | 8,651,038 | 2,134,359 | — | 2,134,359 | |||||||||||||||||||
Increase in prepaid expenses | — | — | — | (20,407 | ) | — | (20,407 | ) | ||||||||||||||||
Decrease in interest payable for reverse repurchase agreements | (208,850 | ) | — | (208,850 | ) | — | — | — | ||||||||||||||||
Decrease in payable for investments purchased | (2,817,495 | ) | — | (2,817,495 | ) | (107,194 | ) | — | (107,194 | ) | ||||||||||||||
Decrease in interest payable on loans outstanding | — | — | — | (21,150 | ) | — | (21,150 | ) | ||||||||||||||||
Increase in receivable from advisor | — | — | — | (35,063 | ) | — | (35,063 | ) | ||||||||||||||||
Decrease in investment advisory fee payable | (180,051 | ) | — | (180,051 | ) | (55,071 | ) | — | (55,071 | ) | ||||||||||||||
Decrease in accounting & administration fee payable | (41,550 | ) | — | (41,550 | ) | (8,582 | ) | — | (8,582 | ) | ||||||||||||||
Increase/(Decrease) in accrued expenses | 17,959 | — | 17,959 | (11,725 | ) | — | (11,725 | ) | ||||||||||||||||
Net cash provided by operating activities | 129,480,249 | — | 129,480,249 | 21,724,098 | — | 21,724,098 | ||||||||||||||||||
Cash flows used for financing activities: | ||||||||||||||||||||||||
Decrease in loan payable | (103,000,000 | ) | — | (103,000,000 | ) | (12,000,000 | ) | — | (12,000,000 | ) | ||||||||||||||
Cash paid for debt issue costs | (224,026 | ) | — | (224,026 | ) | — | — | — | ||||||||||||||||
Dividends paid to stockholders, net of reinvestments | (26,256,223 | ) | — | (26,256,223 | ) | (9,723,997 | ) | — | (9,723,997 | ) | ||||||||||||||
Net cash used for financing activities | (129,480,249 | ) | — | (129,480,249 | ) | (21,723,997 | ) | — | (21,723,997 | ) | ||||||||||||||
Net increase in cash | — | — | — | 101 | — | 101 | ||||||||||||||||||
Cash at beginning of year | — | — | — | — | — | — | ||||||||||||||||||
Cash at end of year | $ | — | $ | — | $ | — | $ | 101 | $ | — | $ | 101 | ||||||||||||
Brookfield Investment Management, Inc. |
58
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Financial Highlights
Helios High Income Fund, Inc | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Per Share Operation Performance: | ||||||||||||||||||||||||
Net asset value, beginning of year | $ | 13.18 | $ | — | $ | 13.18 | $ | 3.45 | $ | (0.33 | ) | $ | 3.12 | |||||||||||
Net investment income | 1.25 | (0.09 | ) | 1.16 | 0.31 | 0.08 | 0.39 | |||||||||||||||||
Net realized and unrealized loss on investments | (9.54 | ) | (0.24 | ) | (9.78 | ) | (2.06 | ) | 0.25 | (1.81 | ) | |||||||||||||
Net increase (decrease) in net asset value resulting from operations | (8.29 | ) | (0.33 | ) | (8.62 | ) | (1.75 | ) | 0.33 | (1.42 | ) | |||||||||||||
Dividends from net investment income | (1.26 | ) | — | (1.26 | ) | (0.28 | ) | — | (0.28 | ) | ||||||||||||||
Distribution from capital gains | — | — | — | — | — | — | ||||||||||||||||||
Return of capital | (0.18 | ) | — | (0.18 | ) | (0.17 | ) | — | (0.17 | ) | ||||||||||||||
Total distribution | (1.44 | ) | — | (1.44 | ) | (0.45 | ) | — | (0.45 | ) | ||||||||||||||
Offering costs charged to additional paid in capital | — | — | — | — | — | — | ||||||||||||||||||
Net asset value, end of year | $ | 3.45 | $ | (0.33 | ) | $ | 3.12 | $ | 1.25 | — | $ | 1.25 | ||||||||||||
Market price, end of year | $ | 3.51 | — | $ | 3.51 | $ | 0.99 | — | $ | 0.99 | ||||||||||||||
Total Investment Return | (72.40 | )% | — | (72.40 | )% | (64.25 | )% | — | (64.25 | )% | ||||||||||||||
Ratios to Average Net Assets/Supplementary Data: | ||||||||||||||||||||||||
Net assets, end of year(000s) | $ | 82,409 | (7,870 | ) | $ | 74,539 | $ | 30,190 | — | $ | 30,190 | |||||||||||||
Gross operating expenses | 3.73 | % | — | 3.73 | % | 2.19 | % | 0.11 | % | 2.30 | % | |||||||||||||
Interest expense | N/A | (a) | — | N/A | (a) | 0.04 | % | — | 0.04 | % | ||||||||||||||
Total expenses | 3.73 | % | — | 3.73 | % | 2.23 | % | 0.11 | % | 2.34 | % | |||||||||||||
Net expenses, including fee waivers and reimbursement and excluding interest expense, debt issuance costs and extraordinary expenses | 3.56 | % | — | 3.56 | % | 1.18 | % | 0.06 | % | 1.24 | % | |||||||||||||
Net investment income | 15.89 | % | (1.08 | )% | 14.81 | % | 16.83 | % | 5.52 | % | 22.35 | % | ||||||||||||
Distributions in excess of net investment income | 15.72 | % | (1.08 | )% | 14.64 | % | 15.89 | % | 5.48 | % | 21.37 | % | ||||||||||||
Portfolio turnover rate | 74 | % | — | 74 | % | 87 | % | 1 | % | 88 | % |
(a) | Not available. During this period, interest expense was not reported separately from the operating expenses. |
2009 Annual Report (Amended) |
59
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Assets and Liabilities
Helios Multi-Sector High Income Fund, Inc | |||||||||||||||||||||||
2008 | 2009 | ||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | ||||||||||||||||||
Assets: | |||||||||||||||||||||||
Investments in securities, at value (Note 2) | $ | 117,088,904 | $ | (8,850,470 | ) | $ | 108,238,434 | $ | 31,345,482 | $ | — | $ | 31,345,482 | ||||||||||
Investment in time deposit, at value | — | — | — | 1,451,692 | — | 1,451,692 | |||||||||||||||||
Total investments | 117,088,904 | (8,850,470 | ) | 108,238,434 | 32,797,174 | — | 32,797,174 | ||||||||||||||||
Cash | — | — | — | 100 | — | 100 | |||||||||||||||||
Net receivable from advisor (Note 4) | — | — | — | 54,545 | — | 54,545 | |||||||||||||||||
Interest and dividends receivable | 4,954,490 | (2,155,316 | ) | 2,799,174 | 798,316 | — | 798,316 | ||||||||||||||||
Receivable for investments sold | 4,658,182 | — | 4,658,182 | 438,998 | — | 438,998 | |||||||||||||||||
Prepaid expenses and other assets | 242,327 | — | 242,327 | 54,478 | — | 54,478 | |||||||||||||||||
Total assets | 126,943,903 | (11,005,786 | ) | 115,938,117 | 34,143,611 | — | 34,143,611 | ||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Loan payable | 17,000,000 | — | 17,000,000 | — | — | — | |||||||||||||||||
Interest due on loan payable | 97,557 | — | 97,557 | — | — | �� | — | ||||||||||||||||
Reverse repurchase agreements (Note 6) | — | — | — | 150,000 | — | 150,000 | |||||||||||||||||
Interest payable for reverse repurchase agreements (Note 6) | — | — | — | 433 | — | 433 | |||||||||||||||||
Payable for investments purchased | — | — | — | 449,153 | — | 449,153 | |||||||||||||||||
Administration fee payable (Note 4) | 19,289 | — | 19,289 | 4,550 | — | 4,550 | |||||||||||||||||
Accrued expenses | 194,542 | — | 194,542 | 79,250 | — | 79,250 | |||||||||||||||||
Total liabilities | 17,311,388 | — | 17,311,388 | 683,386 | — | 683,386 | |||||||||||||||||
Net Assets | $ | 109,632,515 | $ | (11,005,786 | ) | $ | 98,626,729 | $ | 33,460,225 | $ | — | $ | 33,460,225 | ||||||||||
Composition of Net Assets: | |||||||||||||||||||||||
Capital stock, ($.0001 par value, 1,000,000,000 shares authorized) (Note 7) | $ | 3,640 | $ | — | $ | 3,640 | $ | 3,791 | $ | — | $ | 3,791 | |||||||||||
Additional paid-in capital (Note 7) | 498,818,363 | — | 498,818,363 | 494,012,531 | — | 494,012,531 | |||||||||||||||||
Distributions in excess of net investment income | 828,595 | (2,155,316 | ) | (1,326,721 | ) | — | — | — | |||||||||||||||
Accumulated net realized loss on investments | (145,436,363 | ) | — | (145,436,363 | ) | (439,882,241 | ) | — | (439,882,241 | ) | |||||||||||||
Net unrealized depreciation on investments | (244,581,720 | ) | (8,850,470 | ) | (253,432,190 | ) | (20,673,856 | ) | — | (20,673,856 | ) | ||||||||||||
Net assets applicable to capital stock outstanding | $ | 109,632,515 | $ | (11,005,786 | ) | $ | 98,626,729 | $ | 33,460,225 | $ | — | $ | 33,460,225 | ||||||||||
Investments, at identified cost | $ | 361,670,624 | $ | — | $ | 361,670,624 | $ | 53,471,030 | $ | — | $ | 53,471,030 | |||||||||||
Shares Outstanding and Net Asset Value Per Share: | |||||||||||||||||||||||
Common shares outstanding | 36,397,815 | — | 36,397,815 | 37,904,329 | — | 37,904,329 | |||||||||||||||||
Net asset value per share | $ | 3.01 | $ | (0.30 | ) | $ | 2.71 | $ | 0.88 | $ | — | $ | 0.88 |
Brookfield Investment Management, Inc. |
60
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Operations
Helios Multi-Sector High Income Fund, Inc | |||||||||||||||||||||||
2008 | 2009 | ||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | ||||||||||||||||||
Investment Income (Note 2): | |||||||||||||||||||||||
Interest | $ | 53,305,428 | $ | (2,155,316 | ) | $ | 51,150,112 | $ | 9,731,955 | $ | 2,155,316 | $ | 11,887,271 | ||||||||||
Dividends | 2,681,001 | — | 2,681,001 | 57,332 | — | 57,332 | |||||||||||||||||
Total investment income | 55,986,429 | (2,155,316 | ) | 53,831,113 | 9,789,287 | 2,155,316 | 11,944,603 | ||||||||||||||||
Expenses: | |||||||||||||||||||||||
Investment advisory fees (Note 4) | 2,595,194 | — | 2,595,194 | 361,173 | — | 361,173 | |||||||||||||||||
Administration fees (Note 4) | 947,781 | — | 947,781 | 87,344 | — | 87,344 | |||||||||||||||||
Debt issuance costs | 623,700 | — | 623,700 | 269,240 | — | 269,240 | |||||||||||||||||
Legal fees | 194,981 | — | 194,981 | 111,717 | — | 111,717 | |||||||||||||||||
Audit and tax services | 53,250 | — | 53,250 | 146,255 | — | 146,255 | |||||||||||||||||
Transfer agent fees | 25,172 | — | 25,172 | 30,638 | — | 30,638 | |||||||||||||||||
Custodian | 34,655 | — | 34,655 | 60,236 | — | 60,236 | |||||||||||||||||
Registration fees | 37,557 | — | 37,557 | 44,526 | — | 44,526 | |||||||||||||||||
Directors’ fees | 49,554 | — | 49,554 | 39,088 | — | 39,088 | |||||||||||||||||
Insurance | 16,183 | — | 16,183 | 108,628 | — | 108,628 | |||||||||||||||||
Valuation consultant fees (Note 4)* | — | — | — | 71,937 | — | 71,937 | |||||||||||||||||
Reports to stockholders | — | — | — | 46,190 | — | 46,190 | |||||||||||||||||
Miscellaneous | 51,748 | — | 51,748 | 10,480 | — | 10,480 | |||||||||||||||||
Total operating expenses | 4,629,775 | — | 4,629,775 | 1,387,452 | — | 1,387,452 | |||||||||||||||||
Interest expense on borrowings and reverse repurchase agreements (Note 6) | 5,982,859 | — | 5,982,859 | 31,675 | — | 31,675 | |||||||||||||||||
Total expenses | 10,612,634 | — | 10,612,634 | 1,419,127 | — | 1,419,127 | |||||||||||||||||
Less expenses waived and reimbursed by the investment advisor (Note 4) | (462,085 | ) | — | (462,085 | ) | (474,090 | ) | — | (474,090 | ) | |||||||||||||
Net expenses | 10,150,549 | — | 10,150,549 | 945,037 | — | 945,037 | |||||||||||||||||
Net investment income | 45,835,880 | (2,155,316 | ) | 43,680,564 | 8,844,250 | 2,155,316 | 10,999,566 | ||||||||||||||||
Realized and Unrealized Gain (Loss) on Investments (Note 2): | |||||||||||||||||||||||
Net realized loss on investment transactions | (145,636,930 | ) | — | (145,636,930 | ) | (295,344,355 | ) | — | (295,344,355 | ) | |||||||||||||
Net change in unrealized depreciation on investments | (218,139,646 | ) | (8,850,470 | ) | (226,990,116 | ) | 223,907,864 | 8,850,470 | 232,758,334 | ||||||||||||||
Net realized and unrealized loss on investments | (363,776,576 | ) | (8,850,470 | ) | (372,627,046 | ) | (71,436,491 | ) | 8,850,470 | (62,586,021 | ) | ||||||||||||
Net decrease in net assets resulting from operations | $ | (317,940,696 | ) | $ | (11,005,786 | ) | $ | (328,946,482 | ) | $ | (62,592,241 | ) | $ | 11,005,786 | $ | (51,586,455 | ) | ||||||
* | Paid valuation consultant fees in 2008 lumped with another category. |
2009 Annual Report (Amended) |
61
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Changes in Net Assets
Helios Multi-Sector High Income Fund, Inc | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Increase (Decrease) in Net Assets Resulting from Operations: | ||||||||||||||||||||||||
Net investment income | $ | 45,835,880 | $ | (2,155,316 | ) | $ | 43,680,564 | $ | 8,844,250 | $ | 2,155,316 | $ | 10,999,566 | |||||||||||
Net realized loss on investment transactions | (145,636,930 | ) | — | (145,636,930 | ) | (295,344,355 | ) | — | (295,344,355 | ) | ||||||||||||||
Net change in unrealized appreciation/(depreciation) on investments | (218,139,646 | ) | (8,850,470 | ) | (226,990,116 | ) | 223,907,864 | 8,850,470 | 232,758,334 | |||||||||||||||
Net decrease in net assets resulting from operations | (317,940,696 | ) | (11,005,786 | ) | (328,946,482 | ) | (62,592,241 | ) | 11,005,786 | (51,586,455 | ) | |||||||||||||
Distributions to Stockholders (Note 2): | ||||||||||||||||||||||||
Net investment income | (59,306,111 | ) | — | (59,306,111 | ) | (8,774,368 | ) | — | (8,774,368 | ) | ||||||||||||||
Net realized gains on investments | (2,434,955 | ) | — | (2,434,955 | ) | — | — | — | ||||||||||||||||
Return of capital | — | — | — | (8,287,794 | ) | — | (8,287,794 | ) | ||||||||||||||||
Total distributions paid | (61,741,066 | ) | — | (61,741,066 | ) | (17,062,162 | ) | — | (17,062,162 | ) | ||||||||||||||
Capital Stock Transactions (Note 7): | ||||||||||||||||||||||||
Reinvestment of dividends and distributions | 20,435,595 | — | 20,435,595 | 3,482,113 | — | 3,482,113 | ||||||||||||||||||
Total decrease in net assets | (359,246,167 | ) | (11,005,786 | ) | (370,251,953 | ) | (76,172,290 | ) | 11,005,786 | (65,166,504 | ) | |||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of year | 468,878,682 | — | 468,878,682 | 109,632,515 | (11,005,786 | ) | 98,626,729 | |||||||||||||||||
End of year | $ | 109,632,515 | $ | (11,005,786 | ) | $ | 98,626,729 | $ | 33,460,225 | $ | — | $ | 33,460,225 | |||||||||||
(including distributions in excess of net investment income of) | $ | 828,595 | $ | (2,155,316 | ) | $ | (1,326,721 | ) | $ | — | $ | — | $ | — | ||||||||||
Share Transactions: | ||||||||||||||||||||||||
Reinvested shares | 3,141,378 | — | 3,141,378 | 1,506,514 | — | 1,506,514 | ||||||||||||||||||
Brookfield Investment Management, Inc. |
62
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statement of Cash Flows
Helios Multi-Sector High Income Fund, Inc | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Increase (Decrease) in Cash: | ||||||||||||||||||||||||
Cash flows provided by (used for) operating activities: | ||||||||||||||||||||||||
Net decrease in net assets resulting from operations | $ | (317,940,696 | ) | $ | (11,005,786 | ) | $ | (328,946,482 | ) | $ | (62,592,241 | ) | $ | 11,005,786 | $ | (51,586,455 | ) | |||||||
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by net operating activities | ||||||||||||||||||||||||
Purchases of long-term portfolio investments | (257,917,295 | ) | — | (257,917,295 | ) | (39,173,855 | ) | — | (39,173,855 | ) | ||||||||||||||
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses | 397,468,850 | — | 397,468,850 | 53,658,648 | — | 53,658,648 | ||||||||||||||||||
Sales of short-term portfolio investments, net | 2,792,060 | — | 2,792,060 | (41,362 | ) | — | (41,362 | ) | ||||||||||||||||
Unrealized appreciation on investments | 218,139,646 | 8,850,470 | 226,990,116 | (223,907,864 | ) | (8,850,470 | ) | (232,758,334 | ) | |||||||||||||||
Net amortization and paydown gains on investments | (1,406,207 | ) | — | (1,406,207 | ) | (1,588,192 | ) | — | (1,588,192 | ) | ||||||||||||||
Net realized loss on investment transactions | 145,636,930 | — | 145,636,930 | 295,344,355 | — | 295,344,355 | ||||||||||||||||||
Decrease in dividends and interest receivable | 3,194,915 | 2,155,316 | 5,350,231 | 4,156,174 | (2,155,316 | ) | 2,000,858 | |||||||||||||||||
Decrease in receivable for investments sold | 10,867,068 | — | 10,867,068 | 4,219,184 | — | 4,219,184 | ||||||||||||||||||
Decrease in prepaid expenses | — | — | — | 187,849 | — | 187,849 | ||||||||||||||||||
Increase/(Decrease) in interest payable for reverse repurchase agreements | (681,195 | ) | — | (681,195 | ) | 433 | — | 433 | ||||||||||||||||
Increase/(Decrease) in payable for investments purchased | (4,682,672 | ) | — | (4,682,672 | ) | 449,153 | — | 449,153 | ||||||||||||||||
Decrease in interest payable on loans outstanding | — | — | — | (97,557 | ) | — | (97,557 | ) | ||||||||||||||||
Increase in receivable from advisor | — | — | — | (54,545 | ) | — | (54,545 | ) | ||||||||||||||||
Decrease in investment advisory fee payable | (275,114 | ) | — | (275,114 | ) | (83,588 | ) | — | (83,588 | ) | ||||||||||||||
Decrease in accounting & administration fee payable | (63,488 | ) | — | (63,488 | ) | (14,739 | ) | — | (14,739 | ) | ||||||||||||||
Decrease in accrued expenses | (9,493 | ) | — | (9,493 | ) | (31,704 | ) | — | (31,704 | ) | ||||||||||||||
Net cash provided by operating activities | 195,123,309 | — | 195,123,309 | 30,430,149 | — | 30,430,149 | ||||||||||||||||||
Cash flows used for financing activities: | ||||||||||||||||||||||||
Decrease in loan payable | (153,000,000 | ) | — | (153,000,000 | ) | (17,000,000 | ) | — | (17,000,000 | ) | ||||||||||||||
Cash paid for debt issue costs | (817,838 | ) | — | (817,838 | ) | — | — | — | ||||||||||||||||
Net cash provided by reverse repurchase agreements | — | — | — | 150,000 | — | 150,000 | ||||||||||||||||||
Dividends paid to stockholders, net of reinvestments | (41,305,471 | ) | — | (41,305,471 | ) | (13,580,049 | ) | — | (13,580,049 | ) | ||||||||||||||
Net cash used for financing activities | (195,123,309 | ) | — | (195,123,309 | ) | (30,430,049 | ) | — | (30,430,049 | ) | ||||||||||||||
Net increase in cash | — | — | — | 100 | — | 100 | ||||||||||||||||||
Cash at beginning of year | — | — | — | — | — | — | ||||||||||||||||||
Cash at end of year | $ | — | $ | — | $ | — | $ | 100 | $ | — | $ | 100 | ||||||||||||
2009 Annual Report (Amended) |
63
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Financial Highlights
Helios Multi-Sector High Income Fund, Inc | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Per Share Operation Performance: | ||||||||||||||||||||||||
Net asset value, beginning of year | $ | 14.10 | $ | — | $ | 14.10 | $ | 3.01 | $ | (0.30 | ) | $ | 2.71 | |||||||||||
Net investment income | 1.34 | (0.06 | ) | 1.28 | 0.24 | 0.06 | 0.30 | |||||||||||||||||
Net realized and unrealized loss on investments | (10.63 | ) | (0.24 | ) | (10.87 | ) | (1.91 | ) | 0.24 | (1.67 | ) | |||||||||||||
Net increase (decrease) in net asset value resulting from operations | (9.29 | ) | (0.30 | ) | (9.59 | ) | (1.67 | ) | 0.30 | (1.37 | ) | |||||||||||||
Dividends from net investment income | (1.55 | ) | — | (1.55 | ) | (0.24 | ) | — | (0.24 | ) | ||||||||||||||
Distribution from capital gains | (0.07 | ) | (0.07 | ) | — | — | ||||||||||||||||||
Return of capital | (0.18 | ) | — | (0.18 | ) | (0.22 | ) | — | (0.22 | ) | ||||||||||||||
Total distribution | (1.80 | ) | — | (1.80 | ) | (0.46 | ) | — | (0.46 | ) | ||||||||||||||
Offering costs charged to additional paid in capital | — | — | — | — | — | — | ||||||||||||||||||
Net asset value, end of year | $ | 3.01 | $ | (0.30 | ) | $ | 2.71 | $ | 0.88 | — | $ | 0.88 | ||||||||||||
Market price, end of year | $ | 3.33 | — | $ | 3.33 | $ | 0.71 | — | $ | 0.71 | ||||||||||||||
Total Investment Return | (72.67 | )% | — | (72.67 | )% | (72.05 | )% | — | (72.05 | )% | ||||||||||||||
Ratios to Average Net Assets/Supplementary Data: | ||||||||||||||||||||||||
Net assets, end of year(000s) | $ | 109,633 | (11,006 | ) | $ | 98,627 | $ | 33,460 | — | $ | 33,460 | |||||||||||||
Gross operating expenses | 3.71 | % | — | 3.71 | % | 2.54 | % | 0.05 | % | 2.59 | % | |||||||||||||
Interest expense | N/A | (a) | — | N/A | (a) | 0.06 | % | — | 0.06 | % | ||||||||||||||
Total expenses | 3.71 | % | — | 3.71 | % | 2.60 | % | 0.05 | % | 2.65 | % | |||||||||||||
Net expenses, including fee waivers and reimbursement and excluding interest expense, debt issuance costs and extraordinary expenses | 3.55 | % | — | 3.55 | % | 1.18 | % | 0.02 | % | 1.20 | % | |||||||||||||
Net investment income | 16.03 | % | (0.75 | )% | 15.28 | % | 16.18 | % | 4.35 | % | 20.53 | % | ||||||||||||
Net investment income, excluding the effect of fee waivers and reimbursement | 15.87 | % | (0.76 | )% | 15.11 | % | 15.31 | % | 4.34 | % | 19.65 | % | ||||||||||||
Portfolio turnover rate | 68 | % | — | 68 | % | 74 | % | 1 | % | 75 | % |
(a) | Not available. During this period, interest expense was not reported separately from the operating expenses. |
Brookfield Investment Management, Inc. |
64
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Assets and Liabilities
Helios Strategic Income Fund, Inc. | |||||||||||||||||||||||
2008 | 2009 | ||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | ||||||||||||||||||
Assets: | |||||||||||||||||||||||
Investments in securities, at value (Note 2) | $ | 119,491,428 | $ | (6,854,957 | ) | $ | 112,636,471 | $ | 26,164,081 | $ | — | $ | 26,164,081 | ||||||||||
Investment in time deposit, at value | — | — | — | 2,068,650 | — | 2,068,650 | |||||||||||||||||
Total investments | 119,491,428 | (6,854,957 | ) | 112,636,471 | 28,232,731 | — | 28,232,731 | ||||||||||||||||
Cash | — | — | — | 101 | — | 101 | |||||||||||||||||
Net receivable from advisor (Note 4) | — | — | — | 44,389 | — | 44,389 | |||||||||||||||||
Interest and dividends receivable | 4,903,088 | (1,891,808 | ) | 3,011,280 | 688,533 | — | 688,533 | ||||||||||||||||
Receivable for investments sold | 2,357,832 | — | 2,357,832 | 885,204 | — | 885,204 | |||||||||||||||||
Prepaid expenses and other assets | 20,608 | — | 20,608 | 48,414 | — | 48,414 | |||||||||||||||||
Total assets | 126,772,956 | (8,746,765 | ) | 118,026,191 | 29,899,372 | — | 29,899,372 | ||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Loan payable | 35,000,000 | — | 35,000,000 | — | — | — | |||||||||||||||||
Interest due on loan payable | 113,594 | — | 113,594 | — | — | — | |||||||||||||||||
Payable for investments purchased | — | — | — | — | — | — | |||||||||||||||||
Administration fee payable (Note 4) | 17,222 | — | 17,222 | 4,118 | — | 4,118 | |||||||||||||||||
Accrued expenses | 161,364 | — | 161,364 | 79,750 | — | 79,750 | |||||||||||||||||
Total liabilities | 35,292,180 | — | 35,292,180 | 83,868 | — | 83,868 | |||||||||||||||||
Net Assets | $ | 91,480,776 | $ | (8,746,765 | ) | $ | 82,734,011 | $ | 29,815,504 | $ | — | $ | 29,815,504 | ||||||||||
Composition of Net Assets: | |||||||||||||||||||||||
Capital stock, ($.0001 par value, 1,000,000,000 shares authorized) (Note 7) | $ | 2,885 | $ | — | $ | 2,885 | $ | 2,947 | $ | — | $ | 2,947 | |||||||||||
Additional paid-in capital (Note 7) | 405,229,500 | — | 405,229,500 | 403,018,378 | — | 403,018,378 | |||||||||||||||||
Distributions in excess of net investment income | (382,866 | ) | (1,891,808 | ) | (2,274,674 | ) | — | — | — | ||||||||||||||
Accumulated net realized loss on investments | (116,976,854 | ) | — | (116,976,854 | ) | (355,183,396 | ) | — | (355,183,396 | ) | |||||||||||||
Net unrealized depreciation on investments | (196,391,889 | ) | (6,854,957 | ) | (203,246,846 | ) | (18,022,425 | ) | — | (18,022,425 | ) | ||||||||||||
Net assets applicable to capital stock outstanding | $ | 91,480,776 | $ | (8,746,765 | ) | $ | 82,734,011 | $ | 29,815,504 | $ | — | $ | 29,815,504 | ||||||||||
Investments, at identified cost | $ | 315,883,317 | $ | — | $ | 315,883,317 | $ | 46,255,156 | $ | — | $ | 46,255,156 | |||||||||||
Shares Outstanding and Net Asset Value Per Share: | |||||||||||||||||||||||
Common shares outstanding | 28,851,278 | — | 28,851,278 | 29,476,068 | — | 29,476,068 | |||||||||||||||||
Net asset value per share | $ | 3.17 | $ | (0.30 | ) | $ | 2.87 | $ | 1.01 | $ | — | $ | 1.01 |
2009 Annual Report (Amended) |
65
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Operations
Helios Strategic Income Fund, Inc. | |||||||||||||||||||||||
2008 | 2009 | ||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | ||||||||||||||||||
Investment Income (Note 2): | |||||||||||||||||||||||
Interest | $ | 43,742,237 | $ | (1,891,808 | ) | $ | 41,850,429 | $ | 11,707,862 | $ | 1,891,808 | $ | 13,599,670 | ||||||||||
Dividends | 1,620,370 | — | 1,620,370 | 50,144 | — | 50,144 | |||||||||||||||||
Total investment income | 45,362,607 | (1,891,808 | ) | 43,470,799 | 11,758,006 | 1,891,808 | 13,649,814 | ||||||||||||||||
Expenses: | |||||||||||||||||||||||
Investment advisory fees (Note 4) | 2,050,892 | — | 2,050,892 | 338,039 | — | 338,039 | |||||||||||||||||
Administration fees (Note 4) | 757,415 | — | 757,415 | 82,005 | — | 82,005 | |||||||||||||||||
Debt issuance costs | 193,822 | — | 193,822 | 25,618 | — | 25,618 | |||||||||||||||||
Legal fees | 182,543 | — | 182,543 | 109,243 | — | 109,243 | |||||||||||||||||
Audit and tax services | 52,500 | — | 52,500 | 146,255 | — | 146,255 | |||||||||||||||||
Transfer agent fees | 25,974 | — | 25,974 | 30,888 | — | 30,888 | |||||||||||||||||
Custodian | 36,003 | — | 36,003 | 61,723 | — | 61,723 | |||||||||||||||||
Registration fees | 28,640 | — | 28,640 | 29,189 | — | 29,189 | |||||||||||||||||
Directors’ fees | 49,554 | — | 49,554 | 39,088 | — | 39,088 | |||||||||||||||||
Insurance | 13,200 | — | 13,200 | 96,539 | — | 96,539 | |||||||||||||||||
Valuation consultant fees (Note 4)* | — | — | — | 61,178 | — | 61,178 | |||||||||||||||||
Reports to stockholders | — | — | — | 47,082 | — | 47,082 | |||||||||||||||||
Miscellaneous | 55,987 | — | 55,987 | 10,144 | — | 10,144 | |||||||||||||||||
Total operating expenses | 3,446,530 | — | 3,446,530 | 1,076,991 | — | 1,076,991 | |||||||||||||||||
Interest expense on borrowings and reverse repurchase agreements (Note 6) | 5,159,708 | — | 5,159,708 | 102,968 | — | 102,968 | |||||||||||||||||
Total expenses | 8,606,238 | — | 8,606,238 | 1,179,959 | — | 1,179,959 | |||||||||||||||||
Less expenses waived and reimbursed by the investment advisor (Note 4) | (376,117 | ) | — | (376,117 | ) | (440,270 | ) | — | (440,270 | ) | |||||||||||||
Net expenses | 8,230,121 | — | 8,230,121 | 739,689 | — | 739,689 | |||||||||||||||||
Net investment income | 37,132,486 | (1,891,808 | ) | 35,240,678 | 11,018,317 | 1,891,808 | 12,910,125 | ||||||||||||||||
Realized and Unrealized Gain (Loss) on Investments (Note 2): | |||||||||||||||||||||||
Net realized loss on investment transactions | (111,667,096 | ) | — | (111,667,096 | ) | (238,784,098 | ) | — | (238,784,098 | ) | |||||||||||||
Net change in unrealized depreciation on investments | (160,715,334 | ) | (6,854,957 | ) | (167,570,291 | ) | 178,369,464 | 6,854,957 | 185,224,421 | ||||||||||||||
Net realized and unrealized loss on investments | (272,382,430 | ) | (6,854,957 | ) | (279,237,387 | ) | (60,414,634 | ) | 6,854,957 | (53,559,677 | ) | ||||||||||||
Net decrease in net assets resulting from operations | $ | (235,249,944 | ) | $ | (8,746,765 | ) | $ | (243,996,709 | ) | $ | (49,396,317 | ) | $ | 8,746,765 | $ | (40,649,552 | ) | ||||||
* | Paid valuation consultant fees in 2008 lumped with another category. |
Brookfield Investment Management, Inc. |
66
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statements of Changes in Net Assets
Helios Strategic Income Fund, Inc. | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Increase (Decrease) in Net Assets Resulting from Operations: | ||||||||||||||||||||||||
Net investment income | $ | 37,132,486 | $ | (1,891,808 | ) | $ | 35,240,678 | $ | 11,018,317 | $ | 1,891,808 | $ | 12,910,125 | |||||||||||
Net realized loss on investment transactions | (111,667,096 | ) | — | (111,667,096 | ) | (238,784,098 | ) | — | (238,784,098 | ) | ||||||||||||||
Net change in unrealized appreciation/(depreciation) on investments | (160,715,334 | ) | (6,854,957 | ) |
| (167,570,291 | ) | 178,369,464 | 6,854,957 | 185,224,421 | ||||||||||||||
Net decrease in net assets resulting from operations | (235,249,944 | ) | (8,746,765 | ) | (243,996,709 | ) | (49,396,317 | ) | 8,746,765 | (40,649,552 | ) | |||||||||||||
Distributions to Stockholders (Note 2): | ||||||||||||||||||||||||
Net investment income | (36,808,696 | ) | — | (36,808,696 | ) | (9,717,511 | ) | — | (9,717,511 | ) | ||||||||||||||
Net realized gains on investments | — | — | — | — | — | — | ||||||||||||||||||
Return of capital | (3,929,720 | ) | — | (3,929,720 | ) | (4,160,354 | ) | — | (4,160,354 | ) | ||||||||||||||
Total distributions paid | (40,738,416 | ) | — | (40,738,416 | ) | (13,877,865 | ) | — | (13,877,865 | ) | ||||||||||||||
Capital Stock Transactions (Note 7): | ||||||||||||||||||||||||
Reinvestment of dividends and distributions | 8,239,194 | — | 8,239,194 | 1,608,910 | — | 1,608,910 | ||||||||||||||||||
Total decrease in net assets | (267,749,166 | ) | (8,746,765 | ) | (276,495,931 | ) | (61,665,272 | ) | 8,746,765 | (52,918,507 | ) | |||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of year | 359,229,942 | — | 359,229,942 | 91,480,776 | (8,746,765 | ) | 82,734,011 | |||||||||||||||||
End of year | $ | 91,480,776 | $ | (8,746,765 | ) | $ | 82,734,011 | $ | 29,815,504 | $ | — | $ | 29,815,504 | |||||||||||
(including distributions in excess of net investment income of) | $ | (382,866 | ) | $ | (1,891,808 | ) | $ | (2,274,674 | ) | $ | — | $ | — | $ | — | |||||||||
Share Transactions: | ||||||||||||||||||||||||
Reinvested shares | 989,582 | — | 989,582 | 624,790 | — | 624,790 | ||||||||||||||||||
2009 Annual Report (Amended) |
67
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Statement of Cash Flows
Helios Strategic Income Fund, Inc. | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Increase (Decrease) in Cash: | ||||||||||||||||||||||||
Cash flows provided by (used for) operating activities: | ||||||||||||||||||||||||
Net decrease in net assets resulting from operations | $ | (235,249,944 | ) | $ | (8,746,765 | ) | $ | (243,996,709 | ) | $ | (49,396,317 | ) | $ | 8,746,765 | $ | (40,649,552 | ) | |||||||
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by net operating activities | ||||||||||||||||||||||||
Purchases of long-term portfolio investments | (220,026,366 | ) | — | (220,026,366 | ) | (33,893,400 | ) | — | (33,893,400 | ) | ||||||||||||||
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses | 306,222,409 | — | 306,222,409 | 64,240,609 | — | 64,240,609 | ||||||||||||||||||
Sales of short-term portfolio investments, net | 10,617,431 | — | 10,617,431 | 1,624,826 | — | 1,624,826 | ||||||||||||||||||
Unrealized appreciation on investments | 160,715,334 | 6,854,957 | 167,570,291 | (178,369,464 | ) | (6,854,957 | ) | (185,224,421 | ) | |||||||||||||||
Net amortization and paydown gains on investments | (1,336,314 | ) | — | (1,336,314 | ) | (1,127,972 | ) | — | (1,127,972 | ) | ||||||||||||||
Net realized loss on investment transactions | 111,667,096 | — | 111,667,096 | 238,784,098 | — | 238,784,098 | ||||||||||||||||||
Decrease in dividends and interest receivable | 2,367,333 | 1,891,808 | 4,259,141 | 4,214,555 | (1,891,808 | ) | 2,322,747 | |||||||||||||||||
Decrease in receivable for investments sold | 7,762,327 | — | 7,762,327 | 1,472,628 | — | 1,472,628 | ||||||||||||||||||
Increase in prepaid expenses | — | — | — | (27,806 | ) | — | (27,806 | ) | ||||||||||||||||
Decrease in interest payable for reverse repurchase agreements | (1,435,712 | ) | — | (1,435,712 | ) | — | — | — | ||||||||||||||||
Decrease in payable for investments purchased | (3,384,810 | ) | — | (3,384,810 | ) | — | — | — | ||||||||||||||||
Decrease in interest payable on loans outstanding | — | — | — | (113,594 | ) | — | (113,594 | ) | ||||||||||||||||
Increase in receivable from advisor | — | — | — | (44,389 | ) | — | (44,389 | ) | ||||||||||||||||
Decrease in investment advisory fee payable | (204,885 | ) | — | (204,885 | ) | (74,628 | ) | — | (74,628 | ) | ||||||||||||||
Decrease in accounting & administration fee payable | (47,281 | ) | — | (47,281 | ) | (13,104 | ) | — | (13,104 | ) | ||||||||||||||
Increase/(Decrease) in accrued expenses | 18,020 | — | 18,020 | (6,986 | ) | — | (6,986 | ) | ||||||||||||||||
Net cash provided by operating activities | 137,684,638 | — | 137,684,638 | 47,269,056 | — | 47,269,056 | ||||||||||||||||||
Cash flows used for financing activities: | ||||||||||||||||||||||||
Decrease in loan payable | (105,000,000 | ) | — | (105,000,000 | ) | (35,000,000 | ) | — | (35,000,000 | ) | ||||||||||||||
Cash paid for debt issue costs | (185,416 | ) | — | (185,416 | ) | — | — | — | ||||||||||||||||
Dividends paid to stockholders, net of reinvestments | (32,499,222 | ) | — | (32,499,222 | ) | (12,268,955 | ) | — | (12,268,955 | ) | ||||||||||||||
Net cash used for financing activities | (137,684,638 | ) | — | (137,684,638 | ) | (47,268,955 | ) | — | (47,268,955 | ) | ||||||||||||||
Net increase in cash | — | — | — | 101 | — | 101 | ||||||||||||||||||
Cash at beginning of year | — | — | — | — | — | — | ||||||||||||||||||
Cash at end of year | $ | — | $ | — | $ | — | $ | 101 | $ | — | $ | 101 | ||||||||||||
Brookfield Investment Management, Inc. |
68
HELIOS FUNDS
Notes to Financial Statements
March 31, 2009
Financial Highlights
Helios Strategic Income Fund, Inc. | ||||||||||||||||||||||||
2008 | 2009 | |||||||||||||||||||||||
(Unaudited) 3/31/08 As Originally Stated | (Unaudited) Adjustments | (Unaudited) 3/31/08 As Restated | 3/31/09 As Originally Stated | Adjustments | 3/31/09 As Restated | |||||||||||||||||||
Per Share Operation Performance: | ||||||||||||||||||||||||
Net asset value, beginning of year | $ | 12.89 | $ | — | $ | 12.89 | $ | 3.17 | $ | (0.30 | ) | $ | 2.87 | |||||||||||
Net investment income | 1.27 | (0.07 | ) | 1.20 | 0.36 | 0.08 | 0.44 | |||||||||||||||||
Net realized and unrealized loss on investments | (9.55 | ) | (0.23 | ) | (9.78 | ) | (2.04 | ) | 0.22 | (1.82 | ) | |||||||||||||
Net increase (decrease) in net asset value resulting from operations | (8.28 | ) | (0.30 | ) | (8.58 | ) | (1.68 | ) | 0.30 | (1.38 | ) | |||||||||||||
Dividends from net investment income | (1.28 | ) | — | (1.28 | ) | (0.34 | ) | — | (0.34 | ) | ||||||||||||||
Distribution from capital gains | — | — | — | — | ||||||||||||||||||||
Return of capital | (0.16 | ) | — | (0.16 | ) | (0.14 | ) | — | (0.14 | ) | ||||||||||||||
Total distribution | (1.44 | ) | — | (1.44 | ) | (0.48 | ) | — | (0.48 | ) | ||||||||||||||
Offering costs charged to additional paid in capital | — | — | — | — | — | — | ||||||||||||||||||
Net asset value, end of year | $ | 3.17 | $ | (0.30 | ) | $ | 2.87 | $ | 1.01 | — | $ | 1.01 | ||||||||||||
Market price, end of year | $ | 3.18 | — | $ | 3.18 | $ | 0.82 | — | $ | 0.82 | ||||||||||||||
Total Investment Return | (74.01 | )% | — | (74.01 | )% | (65.85 | )% | — | (65.85 | )% | ||||||||||||||
Ratios to Average Net Assets/Supplementary Data: | ||||||||||||||||||||||||
Net assets, end of year(000s) | $ | 91,481 | $ | (8,747 | ) | $ | 82,734 | $ | 29,816 | — | $ | 29,816 | ||||||||||||
Gross operating expenses | 3.86 | % | — | 3.86 | % | 2.20 | % | 0.04 | % | 2.24 | % | |||||||||||||
Interest expense | N/A | (a) | — | N/A | (a) | 0.21 | % | — | 0.21 | % | ||||||||||||||
Total expenses | 3.86 | % | — | 3.86 | % | 2.41 | % | 0.04 | % | 2.45 | % | |||||||||||||
Net expenses, including fee waivers and reimbursement and excluding interest expense, debt issuance costs and extraordinary expenses | 3.69 | % | — | 3.69 | % | 1.25 | % | 0.02 | % | 1.27 | % | |||||||||||||
Net investment income | 16.64 | % | (0.85 | )% | 15.79 | % | 22.51 | % | 4.34 | % | 26.85 | % | ||||||||||||
Net investment income, excluding the effect of fee waivers and reimbursement | 16.47 | % | (0.85 | )% | 15.62 | % | 21.61 | % | 4.32 | % | 25.93 | % | ||||||||||||
Portfolio turnover rate | 73 | % | — | 73 | % | 70 | % | 1 | % | 71 | % |
(a) | Not available. During this period, interest expense was not reported separately from the operating expenses. |
2009 Annual Report (Amended) |
69
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Helios Advantage Income Fund, Inc., Helios High Income Fund, Inc.,
Helios Multi-Sector High Income Fund, Inc. and Helios Strategic Income Fund, Inc.
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the Helios Advantage Income Fund, Inc., Helios High Income Fund, Inc., Helios Multi-Sector High Income Fund, Inc. and Helios Strategic Income Fund, Inc. (formerly RMK Advantage Income Fund, Inc., RMK High Income Fund, Inc., RMK Multi-Sector High Income Fund, Inc. and RMK Strategic Income Fund, Inc., respectively) as of March 31, 2009, and the related statements of operations, changes in net assets and cash flows and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We were not engaged to audit nor have we audited the statements of changes in net assets for the year ended March 31, 2008 and the financial highlights for each of the years and the period presented in the three-year period ended March 31, 2008. Accordingly, we express no opinion or any other form of assurance on the statements of changes in net assets for the year ended March 31, 2008 and the financial highlights for each of the years and the period presented in the three-year period ended March 31, 2008. The financial highlights for the year and period ended March 31, 2005 have been audited by other auditors, whose report dated May 23, 2005 expressed an unqualified opinion on such financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2009, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of theHelios Advantage Income Fund, Inc., Helios High Income Fund, Inc., Helios Multi-Sector High Income Fund, Inc. and Helios Strategic Income Fund, Inc. as of March 31, 2009, the results of their operations, changes in their net assets, their cash flows and their financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
As explained in Note 2, the financial statements include securities valued at $2,427,463 (5.97% of net assets), $1,420,023 (4.70% of net assets), $1,817,572 (5.43% of net assets) and $2,270,966 (7.62% percent of net assets) of the Helios Advantage Income Fund, Inc., Helios High Income Fund, Inc., Helios Multi-Sector High Income Fund, Inc., and Helios Strategic Income Fund, Inc., respectively, whose fair values have been estimated under procedures established by the Funds’ Board of Directors, in the absence of readily ascertainable market values. These estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material.
BBD, LLP
Philadelphia, Pennsylvania
August 9, 2010
[Letterhead of Paul, Hastings, Janofsky & Walker LLP]
(212) 318-6063
thomaspeeney@paulhastings.com
August 25, 2010 | 75302.00001 |
VIA EDGAR
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Re: | Helios Advantage Income Fund, Inc. (File No. 001-32339) |
Helios High Income Fund, Inc. (File No. 001-31691) |
Helios Multi-Sector High Income Fund, Inc. (File No. 001-32719) |
Helios Strategic Income Fund, Inc. (File No. 001-32016) |
Ladies and Gentlemen:
On behalf of each of Helios Advantage Income Fund, Inc., Helios High Income Fund, Inc., Helios Multi-Sector High Income Fund, Inc. and Helios Strategic Income Fund, Inc. (collectively, the “Funds”), each a Maryland corporation, registered under the Investment Company Act of 1940, as amended, as a closed-end management investment company, we transmit herewith for filing each Fund’s Current Report on Form 8-K as of the date hereof.
Please contact the undersigned with any comments or questions.
Sincerely,
/s/ Thomas D. Peeney |
Thomas D. Peeney |
for PAUL, HASTINGS, JANOFSKY & WALKER LLP
TDP