UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21487
HELIOS STRATEGIC INCOME FUND, INC.
(Exact name of registrant as specified in charter)
BROOKFIELD PLACE, 250 VESEY STREET, 15TH FLOOR
NEW YORK, NEW YORK 10281-1023
(Address of principal executive offices) (Zip code)
BRIAN F. HURLEY, PRESIDENT
HELIOS STRATEGIC INCOME FUND, INC.
BROOKFIELD PLACE, 250 VESEY STREET, 15TH FLOOR
NEW YORK, NEW YORK 10281-1023
(Name and address of agent for service)
Registrant’s telephone number, including area code: 1-855-777-8001
Date of fiscal year end: March 31, 2014
Date of reporting period: March 31, 2014
Item 1. Reports to Shareholders.
![](https://capedge.com/proxy/N-CSR/0001193125-14-227968/g717281imge5778f4b1.jpg)
NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED |
![](https://capedge.com/proxy/N-CSR/0001193125-14-227968/g717281img251e65132.jpg)
1 | J.P. Morgan, Default Monitor, April 1, 2014, page 2. |
2 | J.P. Morgan, Default Monitor, April 1, 2014, page 12. |
3 | J.P. Morgan, Default Monitor, April 1, 2014, page 13. |
4 | J.P. Morgan, High Yield Market Monitor, April 1, 2014, page 16. |
Portfolio Characteristics (Unaudited)
PORTFOLIO STATISTICS | |
Annualized dividend yield1 | 9.30% |
Weighted average coupon | 7.49% |
Weighted average life | 4.26 years |
Percentage of leveraged assets | 24.61% |
Total number of holdings | 135 |
CREDIT QUALITY2 | |
BBB | 1.5% |
BB | 16.9% |
B | 48.2% |
CCC | 24.1% |
Unrated | 7.1% |
Cash | 2.2% |
Total | 100.0% |
ASSET ALLOCATION | |
Residential Mortgage Related Holdings | 3.5% |
Corporate Bonds | 122.5% |
Term Loans | 3.5% |
Common Stocks | 2.4% |
Warrants | 0.5% |
Liabilities in Excess of Other Assets | (32.4)% |
Total | 100.0% |
1 | Dividends may include net investment income, capital gains and/or return of capital. The dividend yield referenced above is calculated as the annualized amount of the most recent monthly dividend declared divided by March 31, 2014 stock price. |
2 | Includes only invested assets and cash. |
Schedule of Investments
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
RESIDENTIAL MORTGAGE RELATED HOLDINGS – 3.5% | ||||
Non-Agency Mortgage-Backed Securities – 3.5% | ||||
Alternative Loan Trust | ||||
Series 2007-OA3, Class 1A1 1 | 0.29% | 04/25/47 | $ 531 | $ 444,853 |
Home Equity Asset Trust | ||||
Series 2006-7, Class 2A3 1,2 | 0.30 | 01/25/37 | 552 | 371,185 |
Nomura Resecuritization Trust | ||||
Series 2014-1R, Class 2A6 1,3,4 | 0.00 | 02/25/37 | 363 | — |
Series 2014-1R, Class 2A11 1,3,4 | 0.34 | 02/25/37 | 1,205 | 533,213 |
Securitized Asset Backed Receivables LLC | ||||
Series 2007-BR4, Class A2B 1,2,5 | 0.35 | 05/25/37 | 610 | 371,951 |
Series 2007-BR3, Class A2B 1,2,5 | 0.37 | 04/25/37 | 800 | 491,366 |
Total Non-Agency Mortgage-Backed Securities | 2,212,568 | |||
Total RESIDENTIAL MORTGAGE RELATED HOLDINGS (Cost $2,209,330) | 2,212,568 | |||
CORPORATE BONDS – 122.5% | ||||
Automotive – 6.8% | ||||
American Axle & Manufacturing, Inc. 6 | 6.25 | 03/15/21 | 1,025 | 1,091,625 |
Chrysler Group LLC 6 | 8.25 | 06/15/21 | 800 | 905,000 |
Ford Motor Co. 6 | 6.50 | 08/01/18 | 650 | 747,594 |
Jaguar Land Rover Automotive PLC 3,4,7 | 8.13 | 05/15/21 | 575 | 652,625 |
Motors Liquidation Co. 8,9 | 8.38 | 07/15/33 | 1,750 | 175 |
Servus Luxembourg Holding SCA 3,4,7 | 7.75 | 06/15/18 | 600 | 882,472 |
Total Automotive | 4,279,491 | |||
Banking – 0.7% | ||||
Bilbao Luxembourg SA 7,10 | 10.50 | 12/01/18 | 300 | 427,763 |
Basic Industry – 19.2% | ||||
Alpha Natural Resources, Inc. 6 | 6.25 | 06/01/21 | 900 | 677,250 |
Arch Coal, Inc. 6 | 7.25 | 06/15/21 | 1,400 | 1,057,000 |
Associated Materials LLC 6 | 9.13 | 11/01/17 | 775 | 815,686 |
Building Materials Corporation of America 3,4 | 6.75 | 05/01/21 | 375 | 406,875 |
Cascades, Inc. 7 | 7.75 | 12/15/17 | 275 | 286,687 |
Cascades, Inc. 7 | 7.88 | 01/15/20 | 500 | 535,000 |
FMG Resources August 2006 Property Ltd. 3,4,7 | 6.88 | 04/01/22 | 500 | 538,750 |
Hexion US Finance Corp. 6 | 9.00 | 11/15/20 | 1,000 | 990,000 |
Huntsman International LLC 6 | 8.63 | 03/15/21 | 1,000 | 1,120,000 |
INEOS Group Holdings SA 3,4,6,7 | 6.13 | 08/15/18 | 875 | 907,813 |
Masonite International Corp. 3,4,6,7 | 8.25 | 04/15/21 | 775 | 855,406 |
Millar Western Forest Products Ltd. 7 | 8.50 | 04/01/21 | 200 | 210,500 |
Steel Dynamics, Inc. | 7.63 | 03/15/20 | 425 | 460,062 |
Tembec Industries, Inc. 6,7 | 11.25 | 12/15/18 | 775 | 846,688 |
Trinseo Materials Operating SCA 7 | 8.75 | 02/01/19 | 650 | 697,938 |
USG Corp. 6 | 9.75 | 01/15/18 | 800 | 966,000 |
Xerium Technologies, Inc. | 8.88 | 06/15/18 | 650 | 693,875 |
Total Basic Industry | 12,065,530 | |||
Capital Goods – 9.6% | ||||
AAR Corp. | 7.25 | 01/15/22 | 425 | 460,063 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
Ardagh Packaging Finance PLC 3,4,6,7 | 6.75% | 01/31/21 | $ 825 | $ 862,125 |
Berry Plastics Corp. 6 | 9.50 | 05/15/18 | 775 | 819,562 |
Crown Cork & Seal Company, Inc. 6 | 7.38 | 12/15/26 | 975 | 1,082,250 |
Mueller Water Products, Inc. 6 | 7.38 | 06/01/17 | 775 | 792,437 |
Reynolds Group Issuer, Inc. 6 | 9.00 | 04/15/19 | 775 | 829,250 |
Tekni-Plex, Inc. 3,4 | 9.75 | 06/01/19 | 308 | 349,580 |
Terex Corp. | 6.00 | 05/15/21 | 500 | 535,000 |
Terex Corp. | 6.50 | 04/01/20 | 300 | 326,250 |
Total Capital Goods | 6,056,517 | |||
Consumer Cyclical – 8.4% | ||||
ACCO Brands Corp. 6 | 6.75 | 04/30/20 | 800 | 821,000 |
DineEquity, Inc. 6 | 9.50 | 10/30/18 | 750 | 817,500 |
Levi Strauss & Co. 6 | 7.63 | 05/15/20 | 750 | 814,687 |
Limited Brands, Inc. | 7.60 | 07/15/37 | 475 | 505,875 |
Limited Brands, Inc. | 8.50 | 06/15/19 | 300 | 363,000 |
New Albertsons, Inc. | 7.75 | 06/15/26 | 750 | 615,000 |
Roundy's Supermarkets, Inc. 3,4 | 10.25 | 12/15/20 | 800 | 852,000 |
Sally Holdings LLC | 6.88 | 11/15/19 | 475 | 520,125 |
Total Consumer Cyclical | 5,309,187 | |||
Consumer Non-Cyclical – 4.3% | ||||
C&S Group Enterprises LLC 3,4 | 8.38 | 05/01/17 | 633 | 661,485 |
Easton-Bell Sports, Inc. 6 | 9.75 | 12/01/16 | 650 | 684,950 |
Jarden Corp. 6 | 7.50 | 05/01/17 | 500 | 575,625 |
Post Holdings, Inc. | 7.38 | 02/15/22 | 750 | 806,250 |
Total Consumer Non-Cyclical | 2,728,310 | |||
Energy – 17.1% | ||||
AmeriGas Partners LP | 7.00 | 05/20/22 | 400 | 437,000 |
Atlas Pipeline Partners LP 6 | 5.88 | 08/01/23 | 900 | 888,750 |
BreitBurn Energy Partners LP 6 | 8.63 | 10/15/20 | 775 | 847,656 |
Calfrac Holdings LP 3,4,6 | 7.50 | 12/01/20 | 825 | 866,250 |
EV Energy Partners LP 6 | 8.00 | 04/15/19 | 775 | 802,125 |
Hilcorp Energy I LP 3,4 | 8.00 | 02/15/20 | 550 | 595,375 |
Key Energy Services, Inc. | 6.75 | 03/01/21 | 500 | 525,625 |
Linn Energy LLC 6 | 8.63 | 04/15/20 | 800 | 869,000 |
Pioneer Natural Resources Co. | 6.65 | 03/15/17 | 500 | 569,069 |
Precision Drilling Corp. 6,7 | 6.63 | 11/15/20 | 750 | 802,500 |
RKI Exploration & Production LLC 3,4 | 8.50 | 08/01/21 | 550 | 594,000 |
Thunderbird Resource Equity I 9 | 11.00 | 12/01/17 | 292 | 257,009 |
Trinidad Drilling Ltd. 3,4,6,7 | 7.88 | 01/15/19 | 760 | 813,200 |
Venoco, Inc. 6 | 8.88 | 02/15/19 | 750 | 757,500 |
W&T Offshore, Inc. | 8.50 | 06/15/19 | 255 | 275,400 |
Total Energy | 9,900,459 | |||
Finance & Investment – 1.4% | ||||
Numericable Finance & Company SCA 7 | 12.38 | 02/15/19 | 341 | 577,667 |
Puma International Financing SA 3,4,7 | 6.75 | 02/01/21 | 300 | 303,750 |
Total Finance & Investment | 881,417 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
Healthcare – 9.4% | ||||
CHS/Community Health Systems, Inc. 6 | 7.13% | 07/15/20 | $ 825 | $ 895,125 |
DJO Finance LLC | 9.88 | 04/15/18 | 575 | 626,750 |
HCA, Inc. 6 | 8.00 | 10/01/18 | 775 | 918,375 |
inVentiv Health, Inc. 3,4 | 11.00 | 08/15/18 | 300 | 276,750 |
Jaguar Holding Company II 3,4,6 | 9.50 | 12/01/19 | 775 | 862,188 |
Kindred Healthcare, Inc. 3,4 | 6.38 | 04/15/22 | 850 | 852,125 |
Kindred Healthcare, Inc. 6 | 8.25 | 06/01/19 | 800 | 857,000 |
Polymer Group, Inc. 6 | 7.75 | 02/01/19 | 750 | 802,500 |
Service Corporation International 6 | 6.75 | 04/01/16 | 600 | 652,500 |
Total Healthcare | 6,743,313 | |||
Media – 9.0% | ||||
Cablevision Systems Corp. 6 | 8.63 | 09/15/17 | 800 | 950,000 |
CCO Holdings LLC 6 | 8.13 | 04/30/20 | 975 | 1,067,625 |
Cenveo Corp. 6 | 8.88 | 02/01/18 | 825 | 841,500 |
Clear Channel Communications, Inc. 6 | 9.00 | 03/01/21 | 800 | 835,000 |
Cumulus Media Holdings, Inc. 6 | 7.75 | 05/01/19 | 800 | 852,000 |
Mediacom LLC 6 | 9.13 | 08/15/19 | 775 | 829,250 |
National CineMedia LLC | 6.00 | 04/15/22 | 275 | 290,125 |
Total Media | 5,665,500 | |||
Real Estate – 1.3% | ||||
Realogy Corp. 3,4,6 | 7.88 | 02/15/19 | 775 | 836,031 |
Services – 19.0% | ||||
Avis Budget Car Rental LLC | 5.50 | 04/01/23 | 400 | 403,000 |
Avis Budget Car Rental LLC 6 | 8.25 | 01/15/19 | 775 | 831,187 |
Boyd Gaming Corp. 6 | 9.00 | 07/01/20 | 800 | 885,000 |
Casella Waste Systems, Inc. 6 | 7.75 | 02/15/19 | 1,000 | 1,037,500 |
Chester Downs & Marina LLC 3,4,6 | 9.25 | 02/01/20 | 850 | 845,750 |
GLP Capital LP 3,4 | 5.38 | 11/01/23 | 650 | 667,875 |
Iron Mountain, Inc. | 6.00 | 08/15/23 | 625 | 664,063 |
Iron Mountain, Inc. | 8.38 | 08/15/21 | 325 | 344,500 |
Isle of Capri Casinos, Inc. | 5.88 | 03/15/21 | 500 | 507,500 |
Jurassic Holdings III, Inc. 3,4 | 6.88 | 02/15/21 | 100 | 103,000 |
KM Germany Holdings GmbH 7 | 8.75 | 12/15/20 | 350 | 540,119 |
MGM Resorts International 6 | 7.63 | 01/15/17 | 775 | 884,469 |
MTR Gaming Group, Inc. 6 | 11.50 | 08/01/19 | 803 | 907,362 |
Palace Entertainment Holdings LLC 3,4,6 | 8.88 | 04/15/17 | 775 | 804,062 |
PulteGroup, Inc. 6 | 6.38 | 05/15/33 | 750 | 735,000 |
RPG Byty, s.r.o 7 | 6.75 | 05/01/20 | 300 | 421,563 |
Sotheby's 3,4 | 5.25 | 10/01/22 | 400 | 391,000 |
United Rentals North America, Inc. | 7.63 | 04/15/22 | 425 | 476,531 |
United Rentals North America, Inc. | 8.25 | 02/01/21 | 450 | 503,438 |
Total Services | 11,952,919 | |||
Technology & Electronics – 3.2% | ||||
First Data Corp. 6 | 11.25 | 01/15/21 | 1,000 | 1,141,250 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
Freescale Semiconductor, Inc. 6 | 8.05% | 02/01/20 | $ 397 | $ 436,204 |
ION Geophysical Corp. 3,4 | 8.13 | 05/15/18 | 450 | 423,000 |
Total Technology & Electronics | 2,000,454 | |||
Telecommunications – 13.1% | ||||
CenturyLink, Inc. 6 | 7.65 | 03/15/42 | 800 | 755,000 |
Cincinnati Bell, Inc. 6 | 8.75 | 03/15/18 | 825 | 863,156 |
CyrusOne LP | 6.38 | 11/15/22 | 225 | 237,375 |
Fairpoint Communications, Inc. 3,4 | 8.75 | 08/15/19 | 500 | 535,000 |
Frontier Communications Corp. | 7.13 | 03/15/19 | 1,300 | 1,439,750 |
Intelsat Luxembourg SA 3,4,6,7 | 7.75 | 06/01/21 | 800 | 842,000 |
Level 3 Communications, Inc. 6 | 8.88 | 06/01/19 | 800 | 879,000 |
Level 3 Financing, Inc. 3,4 | 6.13 | 01/15/21 | 200 | 211,000 |
PAETEC Holding Corp. | 9.88 | 12/01/18 | 500 | 548,750 |
Qwest Capital Funding, Inc. | 6.88 | 07/15/28 | 225 | 214,875 |
T-Mobile USA, Inc. 6 | 6.63 | 04/01/23 | 825 | 874,500 |
Windstream Corp. 6 | 7.50 | 06/01/22 | 800 | 844,000 |
Total Telecommunications | 8,244,406 | |||
Total CORPORATE BONDS (Cost $72,674,728) | 77,091,297 | |||
TERM LOANS – 3.5% | ||||
Albertson, Inc. 1,4 | 4.75 | 03/21/19 | 298 | 299,490 |
Fairpoint Communications, Inc. 1,4 | 7.50 | 02/14/19 | 446 | 459,106 |
Four Seasons Holdings, Inc. 1,4 | 6.25 | 12/13/20 | 375 | 380,156 |
inVentiv Health, Inc. 1,4 | 7.50 | 08/04/16 | 575 | 574,425 |
Roundy's Supermarkets, Inc. 1,4 | 5.75 | 02/21/21 | 225 | 225,094 |
Texas Competitive Electric Holdings Company LLC 1,4 | 4.74 | 10/10/17 | 42 | 29,958 |
Texas Competitive Electric Holdings Company LLC 1,4 | 4.74 | 10/10/17 | 292 | 210,449 |
Total TERM LOANS (Cost $2,185,599) | 2,178,678 |
Shares | Value (Note 2) | |||
COMMON STOCKS – 2.4% | ||||
Automotive – 0.3% | ||||
Ford Motor Co. | 14,000 | 218,400 | ||
Capital Goods – 0.3% | ||||
General Electric Co. | 8,500 | 220,065 | ||
Services – 0.2% | ||||
Iron Mountain, Inc. | 5,650 | 155,770 | ||
Telecommunications – 1.6% | ||||
AT&T, Inc. | 6,430 | 225,500 | ||
CenturyLink, Inc. | 6,360 | 208,863 |
Schedule of Investments (continued)
Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | ||||
Frontier Communications Corp. 6 | 89,559 | $ 510,486 | ||
Windstream Holdings, Inc. | 11,050 | 91,052 | ||
Total Telecommunications | 1,035,901 | |||
Total COMMON STOCKS (Cost $1,553,455) | 1,630,136 | |||
WARRANTS – 0.5% | ||||
Automotive – 0.5% | ||||
General Motors Financial Company, Inc. 11 Expiration: July 2016 Exercise Price: $10.00 | 7,393 | 183,642 | ||
General Motors Financial Company, Inc. 11 Expiration: July 2019 Exercise Price: $18.33 | 7,393 | 128,712 | ||
Total Automotive | 312,354 | |||
Total WARRANTS (Cost $432,026) | 312,354 | |||
Total Investments – 132.4% (Cost $79,055,138) | 83,425,033 | |||
Liabilities in Excess of Other Assets – (32.4)% | (20,406,958) | |||
TOTAL NET ASSETS – 100.0% | $ 63,018,075 |
The following notes should be read in conjunction with the accompanying Schedule of Investments. |
1 | — Variable rate security – Interest rate shown is the rate in effect as of March 31, 2014. | |
2 | — Investment in subprime security. As of March 31, 2014, the total value of all such securities was $1,234,502 or 2.0% of net assets. | |
3 | — 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, 2014, the total value of all such securities was $18,324,700 or 29.1% of net assets. | |
4 | — Private Placement. | |
5 | — Security is a “step up” bond where the coupon increases or steps up at a predetermined date. At that date, the coupon increases to LIBOR plus a predetermined margin. | |
6 | — All or a portion of the principal amount is pledged as collateral for credit facility. | |
7 | — Foreign security or a U.S. security of a foreign company. | |
8 | — Security fair valued in good faith pursuant to the fair value procedures adopted by the Board of Directors. As of March 31, 2014, the total value of all such securities was $175 or 0.0% of net assets. | |
9 | — Issuer is currently in default on its regularly scheduled interest payment. | |
10 | — Payment in kind security. | |
11 | — Non-income producing security. |
1 | J.P. Morgan, Default Monitor, April 1, 2014, page 2. |
2 | J.P. Morgan, Default Monitor, April 1, 2014, page 12. |
3 | J.P. Morgan, Default Monitor, April 1, 2014, page 13. |
4 | J.P. Morgan, High Yield Market Monitor, April 1, 2014, page 16. |
Portfolio Characteristics (Unaudited)
PORTFOLIO STATISTICS | |
Annualized dividend yield1 | 9.04% |
Weighted average coupon | 7.50% |
Weighted average life | 4.15 years |
Percentage of leveraged assets | 26.66% |
Total number of holdings | 133 |
CREDIT QUALITY2 | |
BBB | 2.6% |
BB | 15.0% |
B | 48.2% |
CCC | 24.8% |
Unrated | 7.1% |
Cash | 2.3% |
Total | 100.0% |
ASSET ALLOCATION | |
Residential Mortgage Related Holdings | 3.6% |
Corporate Bonds | 125.0% |
Term Loans | 3.6% |
Common Stocks | 2.7% |
Warrants | 0.5% |
Liabilities in Excess of Other Assets | (35.4)% |
Total | 100.0% |
1 | Dividends may include net investment income, capital gains and/or return of capital. The dividend yield referenced above is calculated as the annualized amount of the most recent monthly dividend declared divided by March 31, 2014 stock price. |
2 | Includes only invested assets and cash. |
Schedule of Investments
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
RESIDENTIAL MORTGAGE RELATED HOLDINGS – 3.6% | ||||
Non-Agency Mortgage-Backed Securities – 3.6% | ||||
Alternative Loan Trust | ||||
Series 2007-OA3, Class 1A1 1 | 0.29% | 04/25/47 | $ 386 | $ 323,216 |
Home Equity Asset Trust | ||||
Series 2006-7, Class 2A3 1,2 | 0.30 | 01/25/37 | 401 | 269,647 |
Nomura Resecuritization Trust | ||||
Series 2014-1R, Class 2A6 1,3,4 | 0.00 | 02/25/37 | 264 | — |
Series 2014-1R, Class 2A11 1,3,4 | 0.34 | 02/25/37 | 875 | 387,188 |
Securitized Asset Backed Receivables LLC | ||||
Series 2007-BR4, Class A2B 1,2,5 | 0.35 | 05/25/37 | 443 | 269,990 |
Series 2007-BR3, Class A2B 1,2,5 | 0.37 | 04/25/37 | 581 | 356,881 |
Total Non-Agency Mortgage-Backed Securities | 1,606,922 | |||
Total RESIDENTIAL MORTGAGE RELATED HOLDINGS (Cost $1,604,278) | 1,606,922 | |||
CORPORATE BONDS – 125.0% | ||||
Automotive – 6.8% | ||||
American Axle & Manufacturing, Inc. | 6.25 | 03/15/21 | 465 | 495,225 |
American Axle & Manufacturing, Inc. | 7.75 | 11/15/19 | 200 | 231,000 |
Chrysler Group LLC 6 | 8.25 | 06/15/21 | 600 | 678,750 |
Ford Motor Co. 6 | 6.50 | 08/01/18 | 475 | 546,319 |
Jaguar Land Rover Automotive PLC 3,4,7 | 8.13 | 05/15/21 | 400 | 454,000 |
Motors Liquidation Co. 8,9 | 8.38 | 07/15/33 | 1,250 | 125 |
Servus Luxembourg Holding SCA 3,4,7 | 7.75 | 06/15/18 | 425 | 625,084 |
Total Automotive | 3,030,503 | |||
Banking – 0.6% | ||||
Bilbao Luxembourg SA 7,10 | 10.50 | 12/01/18 | 200 | 285,175 |
Basic Industry – 18.8% | ||||
Alpha Natural Resources, Inc. 6 | 6.25 | 06/01/21 | 700 | 526,750 |
Arch Coal, Inc. 6 | 7.25 | 06/15/21 | 1,000 | 755,000 |
Associated Materials LLC 6 | 9.13 | 11/01/17 | 550 | 578,874 |
Building Materials Corporation of America 3,4 | 6.75 | 05/01/21 | 275 | 298,375 |
Cascades, Inc. 6,7 | 7.75 | 12/15/17 | 550 | 573,375 |
FMG Resources August 2006 Property Ltd. 3,4,7 | 6.88 | 04/01/22 | 375 | 404,062 |
Hexion US Finance Corp. 6 | 9.00 | 11/15/20 | 750 | 742,500 |
Huntsman International LLC 6 | 8.63 | 03/15/21 | 500 | 560,000 |
INEOS Group Holdings SA 3,4,6,7 | 6.13 | 08/15/18 | 625 | 648,438 |
Masonite International Corp. 3,4,6,7 | 8.25 | 04/15/21 | 575 | 634,656 |
Steel Dynamics, Inc. 6 | 7.63 | 03/15/20 | 300 | 324,750 |
Tembec Industries, Inc. 6,7 | 11.25 | 12/15/18 | 550 | 600,875 |
Trinseo Materials Operating SCA 7 | 8.75 | 02/01/19 | 450 | 483,188 |
USG Corp. 6 | 9.75 | 01/15/18 | 600 | 724,500 |
Xerium Technologies, Inc. | 8.88 | 06/15/18 | 460 | 491,050 |
Total Basic Industry | 8,346,393 | |||
Capital Goods – 10.0% | ||||
AAR Corp. | 7.25 | 01/15/22 | 300 | 324,750 |
Ardagh Packaging Finance PLC 3,4,6,7 | 6.75 | 01/31/21 | 600 | 627,000 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
Berry Plastics Corp. 6 | 9.50% | 05/15/18 | $ 550 | $ 581,625 |
Crown Cork & Seal Company, Inc. 6 | 7.38 | 12/15/26 | 700 | 777,000 |
Mueller Water Products, Inc. 6 | 7.38 | 06/01/17 | 625 | 639,062 |
Reynolds Group Issuer, Inc. 6 | 9.00 | 04/15/19 | 550 | 588,500 |
Tekni-Plex, Inc. 3,4 | 9.75 | 06/01/19 | 217 | 246,295 |
Terex Corp. | 6.00 | 05/15/21 | 400 | 428,000 |
Terex Corp. | 6.50 | 04/01/20 | 200 | 217,500 |
Total Capital Goods | 4,429,732 | |||
Consumer Cyclical – 8.7% | ||||
ACCO Brands Corp. 6 | 6.75 | 04/30/20 | 600 | 615,750 |
DineEquity, Inc. 6 | 9.50 | 10/30/18 | 525 | 572,250 |
Levi Strauss & Co. 6 | 7.63 | 05/15/20 | 500 | 543,125 |
Limited Brands, Inc. | 7.60 | 07/15/37 | 300 | 319,500 |
Limited Brands, Inc. | 8.50 | 06/15/19 | 250 | 302,500 |
Michael's Stores, Inc. | 7.75 | 11/01/18 | 450 | 480,937 |
New Albertsons, Inc. | 7.75 | 06/15/26 | 550 | 451,000 |
Roundy's Supermarkets, Inc. 3,4 | 10.25 | 12/15/20 | 550 | 585,750 |
Total Consumer Cyclical | 3,870,812 | |||
Consumer Non-Cyclical – 3.6% | ||||
C&S Group Enterprises LLC 3,4 | 8.38 | 05/01/17 | 476 | 497,420 |
Easton-Bell Sports, Inc. 6 | 9.75 | 12/01/16 | 475 | 500,541 |
Post Holdings, Inc. | 7.38 | 02/15/22 | 550 | 591,250 |
Total Consumer Non-Cyclical | 1,589,211 | |||
Energy – 17.5% | ||||
AmeriGas Partners LP | 7.00 | 05/20/22 | 300 | 327,750 |
Atlas Pipeline Partners LP 6 | 5.88 | 08/01/23 | 650 | 641,875 |
BreitBurn Energy Partners LP 6 | 8.63 | 10/15/20 | 550 | 601,563 |
Calfrac Holdings LP 3,4,6 | 7.50 | 12/01/20 | 600 | 630,000 |
EV Energy Partners LP 6 | 8.00 | 04/15/19 | 550 | 569,250 |
Hilcorp Energy I LP 3,4,6 | 8.00 | 02/15/20 | 500 | 541,250 |
Key Energy Services, Inc. | 6.75 | 03/01/21 | 400 | 420,500 |
Linn Energy LLC 6 | 8.63 | 04/15/20 | 600 | 651,750 |
Pioneer Natural Resources Co. | 6.65 | 03/15/17 | 350 | 398,348 |
Precision Drilling Corp. 7 | 6.63 | 11/15/20 | 450 | 481,500 |
RKI Exploration & Production LLC 3,4 | 8.50 | 08/01/21 | 400 | 432,000 |
Thunderbird Resource Equity I 6,9 | 11.00 | 12/01/17 | 206 | 180,896 |
Trinidad Drilling Ltd. 3,4,6,7 | 7.88 | 01/15/19 | 550 | 588,500 |
Venoco, Inc. 6 | 8.88 | 02/15/19 | 525 | 530,250 |
W&T Offshore, Inc. | 8.50 | 06/15/19 | 190 | 205,200 |
Total Energy | 7,200,632 | |||
Finance & Investment – 1.4% | ||||
Numericable Finance & Company SCA 7 | 12.38 | 02/15/19 | 244 | 412,619 |
Puma International Financing SA 3,4,7 | 6.75 | 02/01/21 | 225 | 227,813 |
Total Finance & Investment | 640,432 | |||
Healthcare – 10.0% | ||||
CHS/Community Health Systems, Inc. 6 | 7.13 | 07/15/20 | 575 | 623,875 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
DJO Finance LLC | 9.88% | 04/15/18 | $ 400 | $ 436,000 |
HCA, Inc. 6 | 8.00 | 10/01/18 | 550 | 651,750 |
inVentiv Health, Inc. 3,4 | 11.00 | 08/15/18 | 215 | 198,337 |
Jaguar Holding Company II 3,4,6 | 9.50 | 12/01/19 | 500 | 556,250 |
Kindred Healthcare, Inc. 3,4 | 6.38 | 04/15/22 | 600 | 601,500 |
Kindred Healthcare, Inc. 6 | 8.25 | 06/01/19 | 575 | 615,969 |
Polymer Group, Inc. 6 | 7.75 | 02/01/19 | 525 | 561,750 |
Service Corporation International 6 | 6.75 | 04/01/16 | 750 | 815,625 |
Total Healthcare | 5,061,056 | |||
Media – 9.8% | ||||
Cablevision Systems Corp. 6 | 8.63 | 09/15/17 | 750 | 890,625 |
CCO Holdings LLC 6 | 8.13 | 04/30/20 | 750 | 821,250 |
Cenveo Corp. 6 | 8.88 | 02/01/18 | 575 | 586,500 |
Clear Channel Communications, Inc. 6 | 9.00 | 03/01/21 | 600 | 626,250 |
Cumulus Media Holdings, Inc. 6 | 7.75 | 05/01/19 | 575 | 612,375 |
Mediacom LLC 6 | 9.13 | 08/15/19 | 550 | 588,500 |
National CineMedia LLC | 6.00 | 04/15/22 | 200 | 211,000 |
Total Media | 4,336,500 | |||
Real Estate – 1.3% | ||||
Realogy Corp. 3,4,6 | 7.88 | 02/15/19 | 550 | 593,313 |
Services – 19.6% | ||||
Avis Budget Car Rental LLC | 5.50 | 04/01/23 | 300 | 302,250 |
Avis Budget Car Rental LLC 6 | 8.25 | 01/15/19 | 550 | 589,875 |
Boyd Gaming Corp. 6 | 9.00 | 07/01/20 | 600 | 663,750 |
Casella Waste Systems, Inc. 6 | 7.75 | 02/15/19 | 775 | 804,063 |
Chester Downs & Marina LLC 3,4,6 | 9.25 | 02/01/20 | 600 | 597,000 |
GLP Capital LP 3,4 | 5.38 | 11/01/23 | 450 | 462,375 |
Iron Mountain, Inc. | 6.00 | 08/15/23 | 450 | 478,125 |
Iron Mountain, Inc. 6 | 8.38 | 08/15/21 | 250 | 265,000 |
Isle of Capri Casinos, Inc. | 5.88 | 03/15/21 | 350 | 355,250 |
Jurassic Holdings III, Inc. 3,4 | 6.88 | 02/15/21 | 100 | 103,000 |
KM Germany Holdings GmbH 7 | 8.75 | 12/15/20 | 250 | 385,799 |
Legrand France SA 6,7 | 8.50 | 02/15/25 | 500 | 664,524 |
MGM Resorts International 6 | 7.63 | 01/15/17 | 550 | 627,687 |
MTR Gaming Group, Inc. | 11.50 | 08/01/19 | 553 | 624,838 |
Palace Entertainment Holdings LLC 3,4,6 | 8.88 | 04/15/17 | 550 | 570,625 |
RPG Byty, s.r.o 7 | 6.75 | 05/01/20 | 200 | 281,042 |
Sotheby's 3,4 | 5.25 | 10/01/22 | 300 | 293,250 |
United Rentals North America, Inc. | 7.63 | 04/15/22 | 275 | 308,344 |
United Rentals North America, Inc. | 8.25 | 02/01/21 | 300 | 335,625 |
Total Services | 8,712,422 | |||
Technology & Electronics – 3.2% | ||||
First Data Corp. 6 | 11.25 | 01/15/21 | 700 | 798,875 |
Freescale Semiconductor, Inc. 6 | 8.05 | 02/01/20 | 283 | 310,946 |
ION Geophysical Corp. 3,4 | 8.13 | 05/15/18 | 325 | 305,500 |
Total Technology & Electronics | 1,415,321 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
Telecommunications – 13.7% | ||||
CenturyLink, Inc. 6 | 7.65% | 03/15/42 | $ 600 | $ 566,250 |
Cincinnati Bell, Inc. 6 | 8.75 | 03/15/18 | 600 | 627,750 |
CyrusOne LP | 6.38 | 11/15/22 | 150 | 158,250 |
Fairpoint Communications, Inc. 3,4 | 8.75 | 08/15/19 | 375 | 401,250 |
Frontier Communications Corp. 6 | 7.13 | 03/15/19 | 950 | 1,052,125 |
Intelsat Luxembourg SA 3,4,6,7 | 7.75 | 06/01/21 | 600 | 631,500 |
Level 3 Communications, Inc. 6 | 8.88 | 06/01/19 | 600 | 659,250 |
Level 3 Financing, Inc. 3,4 | 6.13 | 01/15/21 | 150 | 158,250 |
PAETEC Holding Corp. | 9.88 | 12/01/18 | 300 | 329,250 |
T-Mobile USA, Inc. 6 | 6.63 | 04/01/23 | 575 | 609,500 |
Windstream Corp. 6 | 7.50 | 06/01/22 | 575 | 606,625 |
Zayo Group LLC | 10.13 | 07/01/20 | 250 | 290,000 |
Total Telecommunications | 6,090,000 | |||
Total CORPORATE BONDS (Cost $52,461,435) | 55,601,502 | |||
TERM LOANS – 3.6% | ||||
Albertson, Inc. 1,4 | 4.75 | 03/21/19 | 199 | 199,660 |
Fairpoint Communications, Inc. 1,4 | 7.50 | 02/14/19 | 322 | 331,576 |
Four Seasons Holdings, Inc. 1,4 | 6.25 | 12/13/20 | 300 | 304,125 |
inVentiv Health, Inc. 1,4 | 7.50 | 08/04/16 | 425 | 424,575 |
Roundy's Supermarkets, Inc. 1,4 | 5.75 | 02/21/21 | 150 | 150,063 |
Texas Competitive Electric Holdings Company LLC 1,4 | 4.74 | 10/10/17 | 33 | 23,538 |
Texas Competitive Electric Holdings Company LLC 1,4 | 4.74 | 10/10/17 | 230 | 165,353 |
Total TERM LOANS (Cost $1,606,461) | 1,598,890 |
Shares | Value (Note 2) | |||
COMMON STOCKS – 2.7% | ||||
Automotive – 0.4% | ||||
Ford Motor Co. | 10,000 | 156,000 | ||
Capital Goods – 0.4% | ||||
General Electric Co. | 6,150 | 159,224 | ||
Services – 0.2% | ||||
Iron Mountain, Inc. | 4,000 | 110,280 | ||
Telecommunications – 1.7% | ||||
AT&T, Inc. | 4,590 | 160,971 | ||
CenturyLink, Inc. | 4,530 | 148,765 | ||
Frontier Communications Corp. | 65,161 | 371,418 | ||
Windstream Holdings, Inc. | 8,300 | 68,392 | ||
Total Telecommunications | 749,546 | |||
Total COMMON STOCKS (Cost $1,145,264) | 1,175,050 |
Schedule of Investments (continued)
Shares | Value (Note 2) | |||
WARRANTS – 0.5% | ||||
Automotive – 0.5% | ||||
General Motors Financial Company, Inc. 11 Expiration: July 2016 Exercise Price: $10.00 | 5,546 | $ 137,763 | ||
General Motors Financial Company, Inc. 11 Expiration: July 2019 Exercise Price: $18.33 | 5,546 | 96,556 | ||
Total Automotive | 234,319 | |||
Total WARRANTS (Cost $336,206) | 234,319 | |||
Total Investments – 135.4% (Cost $57,153,644) | 60,216,683 | |||
Liabilities in Excess of Other Assets – (35.4)% | (15,748,047) | |||
TOTAL NET ASSETS – 100.0% | $ 44,468,636 |
The following notes should be read in conjunction with the accompanying Schedule of Investments. |
1 | — Variable rate security – Interest rate shown is the rate in effect as of March 31, 2014. | |
2 | — Investment in subprime security. As of March 31, 2014, the total value of all such securities was $896,518 or 2.0% of net assets. | |
3 | — 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, 2014, the total value of all such securities was $13,299,981 or 29.9% of net assets. | |
4 | — Private Placement. | |
5 | — Security is a “step up” bond where the coupon increases or steps up at a predetermined date. At that date, the coupon increases to LIBOR plus a predetermined margin. | |
6 | — All or a portion of the principal amount is pledged as collateral for credit facility. | |
7 | — Foreign security or a U.S. security of a foreign company. | |
8 | — Security fair valued in good faith pursuant to the fair value procedures adopted by the Board of Directors. As of March 31, 2014, the total value of all such securities was $125 or 0.0% of net assets. | |
9 | — Issuer is currently in default on its regularly scheduled interest payment. | |
10 | — Payment in kind security. | |
11 | — Non-income producing security. |
1 | J.P. Morgan, Default Monitor, April 1, 2014, page 2. |
2 | J.P. Morgan, Default Monitor, April 1, 2014, page 12. |
3 | J.P. Morgan, Default Monitor, April 1, 2014, page 13. |
4 | J.P. Morgan, High Yield Market Monitor, April 1, 2014, page 16. |
Portfolio Characteristics (Unaudited)
PORTFOLIO STATISTICS | |
Annualized dividend yield1 | 9.26% |
Weighted average coupon | 7.54% |
Weighted average life | 4.33 years |
Percentage of leveraged assets | 25.45% |
Total number of holdings | 136 |
CREDIT QUALITY2 | |
BBB | 2.5% |
BB | 16.1% |
B | 47.6% |
CCC | 24.6% |
Unrated | 7.2% |
Cash | 2.0% |
Total | 100.0% |
ASSET ALLOCATION | |
Residential Mortgage Related Holdings | 3.6% |
Corporate Bonds | 124.5% |
Term Loans | 3.6% |
Common Stocks | 2.6% |
Warrants | 0.5% |
Liabilities in Excess of Other Assets | (34.8)% |
Total | 100.0% |
1 | Dividends may include net investment income, capital gains and/or return of capital. The dividend yield referenced above is calculated as the annualized amount of the most recent monthly dividend declared divided by March 31, 2014 stock price. |
2 | Includes only invested assets and cash. |
Schedule of Investments
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
RESIDENTIAL MORTGAGE RELATED HOLDINGS – 3.6% | ||||
Non-Agency Mortgage-Backed Securities – 3.6% | ||||
Alternative Loan Trust | ||||
Series 2007-OA3, Class 1A1 1 | 0.29% | 04/25/47 | $ 386 | $ 361,849 |
Home Equity Asset Trust | ||||
Series 2006-7, Class 2A3 1,2 | 0.30 | 01/25/37 | 448 | 301,251 |
Nomura Resecuritization Trust | ||||
Series 2014-1R, Class 2A6 1,3,4 | 0.00 | 02/25/37 | 295 | — |
Series 2014-1R, Class 2A11 1,3,4 | 0.34 | 02/25/37 | 980 | 433,650 |
Securitized Asset Backed Receivables LLC | ||||
Series 2007-BR4, Class A2B 1,2,5 | 0.35 | 05/25/37 | 497 | 302,763 |
Series 2007-BR3, Class A2B 1,2,5 | 0.37 | 04/25/37 | 651 | 399,791 |
Total Non-Agency Mortgage-Backed Securities | 1,799,304 | |||
Total RESIDENTIAL MORTGAGE RELATED HOLDINGS (Cost $1,796,344) | 1,799,304 | |||
CORPORATE BONDS – 124.5% | ||||
Automotive – 6.7% | ||||
American Axle & Manufacturing, Inc. | 6.25 | 03/15/21 | 475 | 505,875 |
American Axle & Manufacturing, Inc. | 7.75 | 11/15/19 | 275 | 317,625 |
Chrysler Group LLC 6 | 8.25 | 06/15/21 | 625 | 707,031 |
Ford Motor Co. 6 | 6.50 | 08/01/18 | 525 | 603,826 |
Jaguar Land Rover Automotive PLC 3,4,7 | 8.13 | 05/15/21 | 475 | 539,125 |
Motors Liquidation Co. 8,9 | 8.38 | 07/15/33 | 1,500 | 150 |
Servus Luxembourg Holding SCA 3,4,7 | 7.75 | 06/15/18 | 475 | 698,624 |
Total Automotive | 3,372,256 | |||
Banking – 0.7% | ||||
Bilbao Luxembourg SA 7,10 | 10.50 | 12/01/18 | 250 | 356,469 |
Basic Industry – 19.3% | ||||
Alpha Natural Resources, Inc. 6 | 6.25 | 06/01/21 | 750 | 564,375 |
Arch Coal, Inc. 6 | 7.25 | 06/15/21 | 1,100 | 830,500 |
Associated Materials LLC 6 | 9.13 | 11/01/17 | 625 | 657,812 |
Building Materials Corporation of America 3,4 | 6.75 | 05/01/21 | 300 | 325,500 |
Cascades, Inc. 6,7 | 7.75 | 12/15/17 | 625 | 651,562 |
FMG Resources August 2006 Property Ltd. 3,4,7 | 6.88 | 04/01/22 | 400 | 431,000 |
Hexion US Finance Corp. 6 | 9.00 | 11/15/20 | 850 | 841,500 |
Huntsman International LLC 6 | 8.63 | 03/15/21 | 550 | 616,000 |
INEOS Group Holdings SA 3,4,6,7 | 6.13 | 08/15/18 | 700 | 726,250 |
Masonite International Corp. 3,4,6,7 | 8.25 | 04/15/21 | 625 | 689,844 |
Millar Western Forest Products Ltd. 7 | 8.50 | 04/01/21 | 325 | 342,063 |
Steel Dynamics, Inc. 6 | 7.63 | 03/15/20 | 325 | 351,812 |
Tembec Industries, Inc. 6,7 | 11.25 | 12/15/18 | 625 | 682,812 |
Trinseo Materials Operating SCA 7 | 8.75 | 02/01/19 | 525 | 563,719 |
USG Corp. 6 | 9.75 | 01/15/18 | 675 | 815,063 |
Xerium Technologies, Inc. | 8.88 | 06/15/18 | 525 | 560,438 |
Total Basic Industry | 9,650,250 | |||
Capital Goods – 9.8% | ||||
AAR Corp. | 7.25 | 01/15/22 | 350 | 378,875 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
Ardagh Packaging Finance PLC 3,4,6,7 | 6.75% | 01/31/21 | $ 675 | $ 705,375 |
Berry Plastics Corp. 6 | 9.50 | 05/15/18 | 625 | 660,937 |
Crown Cork & Seal Company, Inc. 6 | 7.38 | 12/15/26 | 775 | 860,250 |
Mueller Water Products, Inc. 6 | 7.38 | 06/01/17 | 625 | 639,062 |
Reynolds Group Issuer, Inc. 6 | 9.00 | 04/15/19 | 625 | 668,750 |
Tekni-Plex, Inc. 3,4 | 9.75 | 06/01/19 | 253 | 287,155 |
Terex Corp. | 6.00 | 05/15/21 | 425 | 454,750 |
Terex Corp. | 6.50 | 04/01/20 | 225 | 244,688 |
Total Capital Goods | 4,899,842 | |||
Consumer Cyclical – 9.4% | ||||
ACCO Brands Corp. 6 | 6.75 | 04/30/20 | 675 | 692,719 |
DineEquity, Inc. 6 | 9.50 | 10/30/18 | 600 | 654,000 |
Levi Strauss & Co. 6 | 7.63 | 05/15/20 | 675 | 733,219 |
Limited Brands, Inc. | 7.60 | 07/15/37 | 375 | 399,375 |
Limited Brands, Inc. | 8.50 | 06/15/19 | 250 | 302,500 |
Michael's Stores, Inc. | 7.75 | 11/01/18 | 475 | 507,656 |
New Albertsons, Inc. 6 | 7.75 | 06/15/26 | 600 | 492,000 |
Roundy's Supermarkets, Inc. 3,4 | 10.25 | 12/15/20 | 625 | 665,625 |
Sally Holdings LLC | 6.88 | 11/15/19 | 250 | 273,750 |
Total Consumer Cyclical | 4,720,844 | |||
Consumer Non-Cyclical – 3.5% | ||||
C&S Group Enterprises LLC 3,4 | 8.38 | 05/01/17 | 534 | 558,030 |
Easton-Bell Sports, Inc. 6 | 9.75 | 12/01/16 | 525 | 553,229 |
Post Holdings, Inc. 6 | 7.38 | 02/15/22 | 625 | 671,875 |
Total Consumer Non-Cyclical | 1,783,134 | |||
Energy – 17.0% | ||||
AmeriGas Partners LP | 7.00 | 05/20/22 | 325 | 355,062 |
Atlas Pipeline Partners LP 6 | 5.88 | 08/01/23 | 725 | 715,938 |
BreitBurn Energy Partners LP 6 | 8.63 | 10/15/20 | 625 | 683,594 |
Calfrac Holdings LP 3,4,6 | 7.50 | 12/01/20 | 650 | 682,500 |
EV Energy Partners LP 6 | 8.00 | 04/15/19 | 625 | 646,875 |
Hilcorp Energy I LP 3,4,6 | 8.00 | 02/15/20 | 675 | 730,687 |
Key Energy Services, Inc. | 6.75 | 03/01/21 | 375 | 394,219 |
Linn Energy LLC 6 | 8.63 | 04/15/20 | 660 | 716,925 |
Pioneer Natural Resources Co. | 6.65 | 03/15/17 | 400 | 455,255 |
Precision Drilling Corp. 7 | 6.63 | 11/15/20 | 225 | 240,750 |
RKI Exploration & Production LLC 3,4 | 8.50 | 08/01/21 | 450 | 486,000 |
Thunderbird Resource Equity I 6,9 | 11.00 | 12/01/17 | 233 | 205,084 |
Trinidad Drilling Ltd. 3,4,6,7 | 7.88 | 01/15/19 | 625 | 668,750 |
Venoco, Inc. 6 | 8.88 | 02/15/19 | 600 | 606,000 |
W&T Offshore, Inc. | 8.50 | 06/15/19 | 220 | 237,600 |
Total Energy | 7,825,239 | |||
Finance & Investment – 1.4% | ||||
Numericable Finance & Company SCA 7 | 12.38 | 02/15/19 | 276 | 467,635 |
Puma International Financing SA 3,4,7 | 6.75 | 02/01/21 | 225 | 227,812 |
Total Finance & Investment | 695,447 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
Healthcare – 9.2% | ||||
CHS/Community Health Systems, Inc. 6 | 7.13% | 07/15/20 | $ 675 | $ 732,375 |
DJO Finance LLC | 9.88 | 04/15/18 | 475 | 517,750 |
HCA, Inc. 6 | 8.00 | 10/01/18 | 625 | 740,625 |
inVentiv Health, Inc. 3,4 | 11.00 | 08/15/18 | 245 | 226,012 |
Jaguar Holding Company II 3,4,6 | 9.50 | 12/01/19 | 625 | 695,312 |
Kindred Healthcare, Inc. 3,4 | 6.38 | 04/15/22 | 700 | 701,750 |
Kindred Healthcare, Inc. 6 | 8.25 | 06/01/19 | 650 | 696,313 |
Polymer Group, Inc. 6 | 7.75 | 02/01/19 | 600 | 642,000 |
Service Corporation International 6 | 6.75 | 04/01/16 | 325 | 353,438 |
Total Healthcare | 5,305,575 | |||
Media – 9.2% | ||||
Cablevision Systems Corp. 6 | 8.63 | 09/15/17 | 750 | 890,625 |
CCO Holdings LLC 6 | 8.13 | 04/30/20 | 675 | 739,125 |
Cenveo Corp. 6 | 8.88 | 02/01/18 | 675 | 688,500 |
Clear Channel Communications, Inc. 6 | 9.00 | 03/01/21 | 650 | 678,438 |
Cumulus Media Holdings, Inc. 6 | 7.75 | 05/01/19 | 650 | 692,250 |
Mediacom LLC 6 | 9.13 | 08/15/19 | 625 | 668,750 |
National CineMedia LLC | 6.00 | 04/15/22 | 225 | 237,375 |
Total Media | 4,595,063 | |||
Real Estate – 1.3% | ||||
Realogy Corp. 3,4,6 | 7.88 | 02/15/19 | 625 | 674,219 |
Services – 20.4% | ||||
Avis Budget Car Rental LLC | 5.50 | 04/01/23 | 350 | 352,625 |
Avis Budget Car Rental LLC 6 | 8.25 | 01/15/19 | 625 | 670,312 |
Boyd Gaming Corp. 6 | 9.00 | 07/01/20 | 650 | 719,063 |
Casella Waste Systems, Inc. 6 | 7.75 | 02/15/19 | 825 | 855,938 |
Chester Downs & Marina LLC 3,4,6 | 9.25 | 02/01/20 | 700 | 696,500 |
GLP Capital LP 3,4 | 5.38 | 11/01/23 | 550 | 565,125 |
Iron Mountain, Inc. | 6.00 | 08/15/23 | 500 | 531,250 |
Iron Mountain, Inc. 6 | 8.38 | 08/15/21 | 275 | 291,500 |
Isle of Capri Casinos, Inc. | 5.88 | 03/15/21 | 350 | 355,250 |
Jurassic Holdings III, Inc. 3,4 | 6.88 | 02/15/21 | 100 | 103,000 |
KM Germany Holdings GmbH 7 | 8.75 | 12/15/20 | 300 | 462,959 |
Legrand France SA 6,7 | 8.50 | 02/15/25 | 500 | 664,524 |
MGM Resorts International 6 | 7.63 | 01/15/17 | 475 | 542,094 |
MTR Gaming Group, Inc. 6 | 11.50 | 08/01/19 | 628 | 710,013 |
Palace Entertainment Holdings LLC 3,4,6 | 8.88 | 04/15/17 | 625 | 648,437 |
PulteGroup, Inc. 6 | 6.38 | 05/15/33 | 600 | 588,000 |
RPG Byty, s.r.o 7 | 6.75 | 05/01/20 | 250 | 351,303 |
Sotheby's 3,4 | 5.25 | 10/01/22 | 350 | 342,125 |
United Rentals North America, Inc. | 7.63 | 04/15/22 | 325 | 364,406 |
United Rentals North America, Inc. | 8.25 | 02/01/21 | 350 | 391,562 |
Total Services | 10,205,986 | |||
Technology & Electronics – 3.2% | ||||
First Data Corp. 6 | 11.25 | 01/15/21 | 800 | 913,000 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
Freescale Semiconductor, Inc. 6 | 8.05% | 02/01/20 | $ 321 | $ 352,699 |
ION Geophysical Corp. 3,4 | 8.13 | 05/15/18 | 350 | 329,000 |
Total Technology & Electronics | 1,594,699 | |||
Telecommunications – 13.4% | ||||
CenturyLink, Inc. 6 | 7.65 | 03/15/42 | 650 | 613,438 |
Cincinnati Bell, Inc. 6 | 8.75 | 03/15/18 | 650 | 680,062 |
CyrusOne LP | 6.38 | 11/15/22 | 175 | 184,625 |
Fairpoint Communications, Inc. 3,4 | 8.75 | 08/15/19 | 425 | 454,750 |
Frontier Communications Corp. 6 | 7.13 | 03/15/19 | 1,050 | 1,162,875 |
Intelsat Luxembourg SA 3,4,6,7 | 7.75 | 06/01/21 | 650 | 684,125 |
Level 3 Communications, Inc. 6 | 8.88 | 06/01/19 | 650 | 714,188 |
Level 3 Financing, Inc. 3,4 | 6.13 | 01/15/21 | 150 | 158,250 |
PAETEC Holding Corp. | 9.88 | 12/01/18 | 375 | 411,562 |
T-Mobile USA, Inc. 6 | 6.63 | 04/01/23 | 650 | 689,000 |
Windstream Corp. 6 | 7.50 | 06/01/22 | 650 | 685,750 |
Zayo Group LLC | 10.13 | 07/01/20 | 250 | 290,000 |
Total Telecommunications | 6,728,625 | |||
Total CORPORATE BONDS (Cost $58,835,824) | 62,407,648 | |||
TERM LOANS – 3.6% | ||||
Albertson, Inc. 1,4 | 4.75 | 03/21/19 | 223 | 224,617 |
Fairpoint Communications, Inc. 1,4 | 7.50 | 02/14/19 | 371 | 382,588 |
Four Seasons Holdings, Inc. 1,4 | 6.25 | 12/13/20 | 325 | 329,469 |
inVentiv Health, Inc. 1,4 | 7.50 | 08/04/16 | 475 | 474,525 |
Roundy's Supermarkets, Inc. 1,4 | 5.75 | 02/21/21 | 175 | 175,074 |
Texas Competitive Electric Holdings Company LLC 1,4 | 4.74 | 10/10/17 | 36 | 25,678 |
Texas Competitive Electric Holdings Company LLC 1,4 | 4.74 | 10/10/17 | 251 | 180,384 |
Total TERM LOANS (Cost $1,799,220) | 1,792,335 |
Shares | Value (Note 2) | |||
COMMON STOCKS – 2.6% | ||||
Automotive – 0.3% | ||||
Ford Motor Co. | 11,300 | 176,280 | ||
Capital Goods – 0.4% | ||||
General Electric Co. | 6,900 | 178,641 | ||
Services – 0.2% | ||||
Iron Mountain, Inc. | 4,500 | 124,065 | ||
Telecommunications – 1.7% | ||||
AT&T, Inc. | 5,200 | 182,364 | ||
CenturyLink, Inc. | 5,140 | 168,798 |
Schedule of Investments (continued)
Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | ||||
Frontier Communications Corp. | 73,148 | $ 416,943 | ||
Windstream Holdings, Inc. | 9,200 | 75,808 | ||
Total Telecommunications | 843,913 | |||
Total COMMON STOCKS (Cost $1,270,219) | 1,322,899 | |||
WARRANTS – 0.5% | ||||
Automotive – 0.5% | ||||
General Motors Financial Company, Inc. 11 Expiration: July 2016 Exercise Price: $10.00 | 6,469 | 160,690 | ||
General Motors Financial Company, Inc. 11 Expiration: July 2019 Exercise Price: $18.33 | 6,469 | 112,626 | ||
Total Automotive | 273,316 | |||
Total WARRANTS (Cost $384,116) | 273,316 | |||
Total Investments – 134.8% (Cost $64,085,723) | 67,595,502 | |||
Liabilities in Excess of Other Assets – (34.8)% | (17,468,951) | |||
TOTAL NET ASSETS – 100.0% | $ 50,126,551 |
The following notes should be read in conjunction with the accompanying Schedule of Investments. |
1 | — Variable rate security – Interest rate shown is the rate in effect as of March 31, 2014. | |
2 | — Investment in subprime security. As of March 31, 2014, the total value of all such securities was $1,003,805 or 2.0% of net assets. | |
3 | — 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, 2014, the total value of all such securities was $15,134,532 or 30.2% of net assets. | |
4 | — Private Placement. | |
5 | — Security is a “step up” bond where the coupon increases or steps up at a predetermined date. At that date, the coupon increases to LIBOR plus a predetermined margin. | |
6 | — All or a portion of the principal amount is pledged as collateral for credit facility. | |
7 | — Foreign security or a U.S. security of a foreign company. | |
8 | — Security fair valued in good faith pursuant to the fair value procedures adopted by the Board of Directors. As of March 31, 2014, the total value of all such securities was $150 or 0.0% of net assets. | |
9 | — Issuer is currently in default on its regularly scheduled interest payment. | |
10 | — Payment in kind security. | |
11 | — Non-income producing security. |
1 | J.P. Morgan, Default Monitor, April 1, 2014, page 2. |
2 | J.P. Morgan, Default Monitor, April 1, 2014, page 12. |
3 | J.P. Morgan, Default Monitor, April 1, 2014, page 13. |
4 | J.P. Morgan, High Yield Market Monitor, April 1, 2014, page 16. |
Portfolio Characteristics (Unaudited)
PORTFOLIO STATISTICS | |
Annualized dividend yield1 | 8.85% |
Weighted average coupon | 7.18% |
Weighted average life | 5.73 years |
Percentage of leveraged assets | 25.97% |
Total number of holdings | 123 |
CREDIT QUALITY2 | |
BBB | 25.6% |
BB | 11.2% |
B | 32.2% |
CCC | 21.2% |
Unrated | 8.2% |
Cash | 1.6% |
Total | 100.0% |
ASSET ALLOCATION | |
Commercial Mortgage Related Holdings | 3.6% |
Corporate Bonds | 120.8% |
Term Loans | 2.9% |
Common Stocks | 6.7% |
Warrants | 0.6% |
Liabilities in Excess of Other Assets | (34.6)% |
Total | 100.0% |
1 | Dividends may include net investment income, capital gains and/or return of capital. The dividend yield referenced above is calculated as the annualized amount of the most recent monthly dividend declared divided by March 31, 2014 stock price. |
2 | Includes only invested assets and cash. |
Schedule of Investments
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
COMMERCIAL MORTGAGE RELATED HOLDINGS – 3.6% | ||||
Commercial Mortgage-Backed Securities – 3.6% | ||||
Commercial Mortgage Pass Through Certificates | ||||
Class A4, Series 2007-C9 1 | 5.80% | 12/10/49 | $ 500 | $ 561,612 |
Wachovia Bank Commercial Mortgage Trust | ||||
Class A5, Series 2007-C30 2 | 5.34 | 12/15/43 | 890 | 974,809 |
Total Commercial Mortgage-Backed Securities | 1,536,421 | |||
Total COMMERCIAL MORTGAGE RELATED HOLDINGS (Cost $1,457,749) | 1,536,421 | |||
CORPORATE BONDS – 120.8% | ||||
Automotive – 5.4% | ||||
American Axle & Manufacturing, Inc. | 6.63 | 10/15/22 | 475 | 514,781 |
American Axle & Manufacturing, Inc. | 7.75 | 11/15/19 | 175 | 202,125 |
Chrysler Group LLC 2 | 8.25 | 06/15/21 | 525 | 593,906 |
Ford Motor Co. 2 | 6.50 | 08/01/18 | 450 | 517,566 |
Jaguar Land Rover Automotive PLC 2,3,4,5 | 8.13 | 05/15/21 | 400 | 454,000 |
Motors Liquidation Co. 6,7 | 8.38 | 07/15/33 | 1,250 | 125 |
Total Automotive | 2,282,503 | |||
Banking – 1.3% | ||||
The Goldman Sachs Group, Inc. 2 | 3.63 | 01/22/23 | 575 | 565,631 |
Basic Industry – 16.4% | ||||
Alcoa, Inc. 2 | 5.55 | 02/01/17 | 1,000 | 1,093,373 |
Alpha Natural Resources, Inc. 2 | 6.25 | 06/01/21 | 625 | 470,313 |
Arch Coal, Inc. 2 | 7.25 | 06/15/21 | 950 | 717,250 |
Associated Materials LLC 2 | 9.13 | 11/01/17 | 525 | 552,562 |
Cascades, Inc. 2,5 | 7.88 | 01/15/20 | 525 | 561,750 |
Hexion US Finance Corp. 2 | 9.00 | 11/15/20 | 700 | 693,000 |
INEOS Group Holdings SA 2,3,4,5 | 6.13 | 08/15/18 | 600 | 622,500 |
Masonite International Corp. 2,3,4,5 | 8.25 | 04/15/21 | 530 | 584,987 |
Tembec Industries, Inc. 5 | 11.25 | 12/15/18 | 375 | 409,687 |
The Dow Chemical Co. | 5.70 | 05/15/18 | 287 | 326,181 |
Trinseo Materials Operating SCA 5 | 8.75 | 02/01/19 | 450 | 483,188 |
Xerium Technologies, Inc. 2 | 8.88 | 06/15/18 | 425 | 453,688 |
Total Basic Industry | 6,968,479 | |||
Capital Goods – 14.0% | ||||
AGCO Corp. 2 | 5.88 | 12/01/21 | 525 | 570,943 |
Ardagh Packaging Finance PLC 2,3,4,5 | 6.75 | 01/31/21 | 550 | 574,750 |
Bank of America Corp. 2 | 3.30 | 01/11/23 | 575 | 554,351 |
Berry Plastics Corp. 2 | 9.50 | 05/15/18 | 525 | 555,187 |
Crown Cork & Seal Company, Inc. 2 | 7.38 | 12/15/26 | 500 | 555,000 |
DP World Sukuk Ltd. 3,4,5 | 6.25 | 07/02/17 | 400 | 443,520 |
General Electric Capital Corp. 1,2 | 5.25 | 06/29/49 | 1,000 | 972,700 |
Mueller Water Products, Inc. 2 | 7.38 | 06/01/17 | 350 | 357,875 |
Reynolds Group Issuer, Inc. 2 | 9.00 | 04/15/19 | 525 | 561,750 |
Tekni-Plex, Inc. 3,4 | 9.75 | 06/01/19 | 198 | 224,730 |
Tyco Electronics Group S.A. 2,5 | 6.55 | 10/01/17 | 500 | 578,188 |
Total Capital Goods | 5,948,994 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
Consumer Cyclical – 10.1% | ||||
ACCO Brands Corp. | 6.75% | 04/30/20 | $ 500 | $ 513,125 |
International Game Technology | 7.50 | 06/15/19 | 250 | 293,492 |
Levi Strauss & Co. 2 | 7.63 | 05/15/20 | 475 | 515,969 |
Limited Brands, Inc. 2 | 7.60 | 07/15/37 | 350 | 372,750 |
Macy's Retail Holdings, Inc. 2 | 2.88 | 02/15/23 | 575 | 538,391 |
New Albertsons, Inc. | 7.75 | 06/15/26 | 500 | 410,000 |
Newell Rubbermaid, Inc. | 4.00 | 06/15/22 | 525 | 535,961 |
Roundy's Supermarkets, Inc. 3,4 | 10.25 | 12/15/20 | 525 | 559,125 |
Wyndham Worldwide Corp. | 4.25 | 03/01/22 | 525 | 531,019 |
Total Consumer Cyclical | 4,269,832 | |||
Consumer Non-Cyclical – 4.8% | ||||
Altria Group, Inc. | 9.70 | 11/10/18 | 111 | 145,700 |
Anheuser-Busch InBev Worldwide, Inc. 2 | 7.75 | 01/15/19 | 1,000 | 1,238,740 |
C&S Group Enterprises LLC 2,3,4 | 8.38 | 05/01/17 | 400 | 418,000 |
DP World Ltd. 3,4,5 | 6.85 | 07/02/37 | 200 | 216,300 |
Total Consumer Non-Cyclical | 2,018,740 | |||
Energy – 13.5% | ||||
Atlas Pipeline Partners LP 2 | 5.88 | 08/01/23 | 625 | 617,188 |
BreitBurn Energy Partners LP 2 | 8.63 | 10/15/20 | 525 | 574,219 |
Calfrac Holdings LP 2,3,4 | 7.50 | 12/01/20 | 550 | 577,500 |
EV Energy Partners LP 2 | 8.00 | 04/15/19 | 525 | 543,375 |
Hilcorp Energy I LP 2,3,4 | 8.00 | 02/15/20 | 475 | 514,187 |
Linn Energy LLC | 8.63 | 04/15/20 | 140 | 152,075 |
RKI Exploration & Production LLC 3,4 | 8.50 | 08/01/21 | 375 | 405,000 |
SESI LLC | 7.13 | 12/15/21 | 500 | 557,500 |
Thunderbird Resource Equity I 2,7 | 11.00 | 12/01/17 | 194 | 171,041 |
Trinidad Drilling Ltd. 2,3,4,5 | 7.88 | 01/15/19 | 310 | 331,700 |
Venoco, Inc. 2 | 8.88 | 02/15/19 | 500 | 505,000 |
W&T Offshore, Inc. | 8.50 | 06/15/19 | 185 | 199,800 |
Total Energy | 5,148,585 | |||
Finance & Investment – 4.4% | ||||
HCP, Inc. | 3.15 | 08/01/22 | 550 | 526,017 |
KKR Group Finance Company LLC 3,4 | 6.38 | 09/29/20 | 475 | 548,250 |
Morgan Stanley | 4.88 | 11/01/22 | 550 | 577,931 |
Puma International Financing SA 3,4,5 | 6.75 | 02/01/21 | 225 | 227,812 |
Total Finance & Investment | 1,880,010 | |||
Healthcare – 4.9% | ||||
DJO Finance LLC | 9.88 | 04/15/18 | 300 | 327,000 |
HCA, Inc. 2 | 8.00 | 10/01/18 | 525 | 622,125 |
inVentiv Health, Inc. 3,4 | 11.00 | 08/15/18 | 205 | 189,112 |
Jaguar Holding Company II 2,3,4 | 9.50 | 12/01/19 | 300 | 333,750 |
Kindred Healthcare, Inc. 3,4 | 6.38 | 04/15/22 | 600 | 601,500 |
Kindred Healthcare, Inc. 2 | 8.25 | 06/01/19 | 550 | 589,188 |
Total Healthcare | 2,662,675 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
Media – 9.3% | ||||
Cablevision Systems Corp. 2 | 8.63% | 09/15/17 | $ 475 | $ 564,063 |
CCO Holdings LLC 2 | 8.13 | 04/30/20 | 550 | 602,250 |
Cenveo Corp. | 8.88 | 02/01/18 | 550 | 561,000 |
Clear Channel Communications, Inc. 2 | 9.00 | 03/01/21 | 500 | 521,875 |
Cumulus Media Holdings, Inc. 2 | 7.75 | 05/01/19 | 475 | 505,875 |
Mediacom LLC 2 | 9.13 | 08/15/19 | 525 | 561,750 |
Time Warner Cable, Inc. 2 | 8.25 | 04/01/19 | 500 | 622,978 |
Total Media | 3,939,791 | |||
Real Estate – 2.6% | ||||
Realogy Corp. 2,3,4 | 7.88 | 02/15/19 | 525 | 566,344 |
Ventas Realty LP 2 | 3.25 | 08/15/22 | 575 | 554,087 |
Total Real Estate | 1,120,431 | |||
Services – 15.1% | ||||
Avis Budget Car Rental LLC 2 | 8.25 | 01/15/19 | 525 | 563,062 |
Boyd Gaming Corp. 2 | 9.00 | 07/01/20 | 575 | 636,094 |
Casella Waste Systems, Inc. 2 | 7.75 | 02/15/19 | 725 | 752,187 |
Chester Downs & Marina LLC 2,3,4 | 9.25 | 02/01/20 | 575 | 572,125 |
Iron Mountain, Inc. | 6.00 | 08/15/23 | 275 | 292,188 |
Iron Mountain, Inc. | 8.38 | 08/15/21 | 225 | 238,500 |
Legrand France SA 2,5 | 8.50 | 02/15/25 | 450 | 598,072 |
MGM Resorts International 2 | 7.63 | 01/15/17 | 400 | 456,500 |
MTR Gaming Group, Inc. 2 | 11.50 | 08/01/19 | 528 | 596,419 |
Palace Entertainment Holdings LLC 2,3,4 | 8.88 | 04/15/17 | 525 | 544,687 |
Sotheby's 3,4 | 5.25 | 10/01/22 | 300 | 293,250 |
United Rentals North America, Inc. | 8.25 | 02/01/21 | 275 | 307,656 |
Wynn Las Vegas LLC 2,3,4 | 4.25 | 05/30/23 | 600 | 577,500 |
Total Services | 6,428,240 | |||
Technology & Electronics – 3.2% | ||||
First Data Corp. 2 | 11.25 | 01/15/21 | 700 | 798,875 |
Freescale Semiconductor, Inc. 2 | 8.05 | 02/01/20 | 268 | 294,465 |
ION Geophysical Corp. 3,4 | 8.13 | 05/15/18 | 300 | 282,000 |
Total Technology & Electronics | 1,375,340 | |||
Telecommunications – 15.8% | ||||
Cincinnati Bell, Inc. 2 | 8.75 | 03/15/18 | 575 | 601,594 |
DIRECTV Holdings LLC | 3.80 | 03/15/22 | 550 | 544,246 |
Fairpoint Communications, Inc. 3,4 | 8.75 | 08/15/19 | 350 | 374,500 |
Frontier Communications Corp. 2 | 7.13 | 03/15/19 | 725 | 802,937 |
Intelsat Luxembourg SA 3,4,5 | 7.75 | 06/01/21 | 550 | 578,875 |
Level 3 Communications, Inc. 2 | 8.88 | 06/01/19 | 525 | 576,844 |
PAETEC Holding Corp. | 9.88 | 12/01/18 | 250 | 274,375 |
Qwest Corp. 2 | 6.88 | 09/15/33 | 1,000 | 986,143 |
Symantec Corp. | 3.95 | 06/15/22 | 550 | 545,245 |
T-Mobile USA, Inc. | 6.63 | 04/01/23 | 290 | 307,400 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value (Note 2) | |
CORPORATE BONDS (continued) | ||||
Windstream Corp. | 7.50% | 06/01/22 | $ 550 | $ 580,250 |
WPP Finance 2010 5 | 3.63 | 09/07/22 | 550 | 540,983 |
Total Telecommunications | 6,713,392 | |||
Total CORPORATE BONDS (Cost $48,757,175) | 51,322,643 | |||
TERM LOANS – 2.9% | ||||
Albertson, Inc. 1,4 | 4.75 | 03/21/19 | 199 | 199,660 |
Fairpoint Communications, Inc. 1,4 | 7.50 | 02/14/19 | 297 | 306,070 |
inVentiv Health, Inc. 1,4 | 7.50 | 08/04/16 | 400 | 399,600 |
Roundy's Supermarkets, Inc. 1,4 | 5.75 | 02/21/21 | 150 | 150,063 |
Texas Competitive Electric Holdings Company LLC 1,4 | 4.74 | 10/10/17 | 30 | 21,398 |
Texas Competitive Electric Holdings Company LLC 1,4 | 4.74 | 10/10/17 | 209 | 150,321 |
Total TERM LOANS (Cost $1,240,224) | 1,227,112 |
Shares | Value (Note 2) | |||
COMMON STOCKS – 6.7% | ||||
Automotive – 0.3% | ||||
Ford Motor Co. | 9,500 | 148,200 | ||
Basic Industry – 0.6% | ||||
EnLink Midstream Partners LP | 7,800 | 237,276 | ||
Capital Goods – 0.4% | ||||
General Electric Co. | 5,800 | 150,162 | ||
Consumer Staples – 1.0% | ||||
B&G Foods, Inc. | 13,810 | 415,819 | ||
Energy – 0.6% | ||||
BreitBurn Energy Partners LP | 13,075 | 261,108 | ||
Services – 0.2% | ||||
Iron Mountain, Inc. | 3,800 | 104,766 | ||
Telecommunications – 3.6% | ||||
AT&T, Inc. | 8,500 | 298,095 | ||
CenturyLink, Inc. | 9,500 | 311,980 | ||
Frontier Communications Corp. | 61,585 | 351,034 | ||
Verizon Communications, Inc. | 7,500 | 356,775 | ||
Windstream Holdings, Inc. | 26,350 | 217,124 | ||
Total Telecommunications | 1,535,008 | |||
Total COMMON STOCKS (Cost $2,407,832) | 2,852,339 |
Schedule of Investments (continued)
Shares | Value (Note 2) | |||
WARRANTS – 0.6% | ||||
Automotive – 0.6% | ||||
General Motors Financial Company, Inc. 8 Expiration: July 2016 Exercise Price: $10.00 | 5,546 | $ 137,763 | ||
General Motors Financial Company, Inc. 8 Expiration: July 2019 Exercise Price: $18.33 | 5,546 | 96,556 | ||
Total Automotive | 234,319 | |||
Total WARRANTS (Cost $336,206) | 234,319 | |||
Total Investments – 134.6% (Cost $54,199,186) | 57,172,834 | |||
Liabilities in Excess of Other Assets – (34.6)% | (14,697,044) | |||
TOTAL NET ASSETS – 100.0% | $ 42,475,790 |
The following notes should be read in conjunction with the accompanying Schedule of Investments. |
1 | — Variable rate security – Interest rate shown is the rate in effect as of March 31, 2014. | |
2 | — All or a portion of the principal amount is pledged as collateral for credit facility. | |
3 | — 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, 2014, the total value of all such securities was $11,616,004 or 27.3% of net assets. | |
4 | — Private Placement. | |
5 | — Foreign security or a U.S. security of a foreign company. | |
6 | — Security fair valued in good faith pursuant to the fair value procedures adopted by the Board of Directors. As of March 31, 2014, the total value of all such securities was $125 or 0.0% of net assets. | |
7 | — Issuer is currently in default on its regularly scheduled interest payment. | |
8 | — Non-income producing security. |
Statements of Assets and Liabilities
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) | $ 83,425,033 | $ 60,216,683 | $ 67,595,502 | $ 57,172,834 | |||
Cash | 1,896,407 | 1,419,682 | 1,391,042 | 951,927 | |||
Interest and dividends receivable | 1,621,194 | 1,165,537 | 1,319,300 | 972,363 | |||
Dividend reinvestment receivable | — | — | 3,258 | — | |||
Receivable for open forward currency contracts | 16,345 | 11,421 | 13,439 | — | |||
Principal paydown receivable | 1,871 | 1,310 | 1,497 | 1,248 | |||
Prepaid expenses | 3,122 | 2,207 | 2,503 | 2,105 | |||
Total assets | 86,963,972 | 62,816,840 | 70,326,541 | 59,100,477 | |||
Liabilities: | |||||||
Payable for credit facility (Note 6) | 21,400,000 | 16,750,000 | 17,900,000 | 15,350,000 | |||
Payable for credit facility interest (Note 6) | 2,751 | 2,064 | 2,251 | 1,934 | |||
Payable for investments purchased | 1,299,212 | 926,287 | 1,065,452 | 603,329 | |||
Investment advisory fee payable (Note 4) | 47,201 | 34,109 | 38,185 | 32,217 | |||
Administration fee payable (Note 4) | 10,893 | 7,871 | 8,812 | 7,435 | |||
Directors' fee payable | 3,819 | 3,819 | 3,819 | 3,819 | |||
Other current liabilities | 1,182,021 | 624,054 | 1,181,471 | 625,953 | |||
Total liabilities | 23,945,897 | 18,348,204 | 20,199,990 | 16,624,687 | |||
Net Assets | $ 63,018,075 | $ 44,468,636 | $ 50,126,551 | $ 42,475,790 | |||
Composition of Net Assets: | |||||||
Capital stock, at par value ($0.0001 par value, 1,000,000,000 shares authorized) (Note 7) | $ 655 | $ 486 | $ 760 | $ 593 | |||
Additional paid-in capital (Note 7) | 455,810,012 | 338,159,660 | 493,876,680 | 402,152,944 | |||
Undistributed net investment income | 597,175 | 260,535 | 597,223 | 580,490 | |||
Accumulated net realized loss on investments, foreign currency transactions and forward currency contracts | (397,776,411) | (297,026,781) | (447,871,664) | (363,231,885) | |||
Net unrealized appreciation on investments, foreign currency translations and forward currency contracts | 4,386,644 | 3,074,736 | 3,523,552 | 2,973,648 | |||
Net assets applicable to capital stock outstanding | $ 63,018,075 | $ 44,468,636 | $ 50,126,551 | $ 42,475,790 | |||
Total investments at cost | $ 79,055,138 | $ 57,153,644 | $ 64,085,723 | $ 54,199,186 | |||
Shares Outstanding and Net Asset Value Per Share: | |||||||
Shares outstanding | 6,553,393 | 4,856,958 | 7,595,497 | 5,930,400 | |||
Net asset value per share | $ 9.62 | $ 9.16 | $ 6.60 | $ 7.16 |
Statements of Operations
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 | $6,394,422 | $4,586,746 | $5,184,446 | $3,871,469 | |||
Dividends | 73,638 | 52,584 | 59,548 | 110,781 | |||
Total investment income | 6,468,060 | 4,639,330 | 5,243,994 | 3,982,250 | |||
Expenses: | |||||||
Investment advisory fees (Note 4) | 553,239 | 397,299 | 449,368 | 379,397 | |||
Administration fees (Note 4) | 127,670 | 91,684 | 103,700 | 87,553 | |||
Legal fees | 187,206 | 126,832 | 144,724 | 122,769 | |||
Fund accounting fees | 52,886 | 52,269 | 52,918 | 49,675 | |||
Audit and tax services | 44,700 | 44,700 | 44,700 | 44,700 | |||
Directors' fees | 39,362 | 39,362 | 39,362 | 39,362 | |||
Reports to stockholders | 33,062 | 30,028 | 32,613 | 30,414 | |||
Transfer agent fees | 26,212 | 26,370 | 26,566 | 26,315 | |||
Registration fees | 23,743 | 23,756 | 22,455 | 23,684 | |||
Custodian fees | 16,801 | 16,573 | 18,963 | 10,762 | |||
Insurance | 14,783 | 10,419 | 11,814 | 10,055 | |||
Miscellaneous | 8,447 | 5,992 | 9,393 | 9,355 | |||
Total operating expenses | 1,128,111 | 865,284 | 956,576 | 834,041 | |||
Interest expense on credit facility (Note 6) | 271,234 | 196,370 | 222,527 | 190,477 | |||
Total expenses | 1,399,345 | 1,061,654 | 1,179,103 | 1,024,518 | |||
Other income from litigation settlement1 | 499,622 | 361,405 | 404,435 | 347,673 | |||
Net investment income | 5,568,337 | 3,939,081 | 4,469,326 | 3,305,405 | |||
Realized and Unrealized Gain (Loss) on Investments, Foreign Currency Transaction and Forward Currency Contracts (Note 2): | |||||||
Net realized gain (loss) on: | |||||||
Investments | 2,258,891 | 1,319,982 | 1,445,685 | 915,618 | |||
Litigation settlement1,2 | (410,507) | (50,228) | (307,597) | 55,197 | |||
Foreign currency transactions | (14,013) | (9,782) | (11,315) | — | |||
Forward currency contracts | (104,618) | (74,108) | (84,572) | — | |||
Net realized gain | 1,729,753 | 1,185,864 | 1,042,201 | 970,815 | |||
Net change in unrealized appreciation (depreciation) on: | |||||||
Investments | (815,803) | (571,551) | (581,571) | (612,551) | |||
Foreign currency translations | 404 | 276 | 334 | — | |||
Forward currency contracts | 16,345 | 11,421 | 13,439 | — | |||
Net change in unrealized depreciation | (799,054) | (559,854) | (567,798) | (612,551) | |||
Net realized and unrealized gain on investments | 930,699 | 626,010 | 474,403 | 358,264 | |||
Net increase in net assets resulting from operations | $6,499,036 | $4,565,091 | $4,943,729 | $3,663,669 |
1 | The Funds received a litigation settlement after attorney’s fees of $4.2 million. Of this $4.2 million, a portion was for reimbursement of $1,613,135 in expenses and is included in the other income from litigation settlement line above. The remaining amount $2,586,865 was allocated pro rata based on each Fund’s losses as a percentage of total losses incurred by all four funds. These amounts were $689,493 for Helios Advantage Income Fund, Inc., $499,772 for Helios High Income Fund, Inc., $792,403 for Helios Multi-Sector High Income Fund, Inc., and $605,197 for Helios Strategic Income Fund, Inc. and are included in the realized gain on litigation settlement line above. (Note 11) | |||
2 | This amount also includes an accrual that was booked by the Funds for potential costs and expenses related to the class action lawsuit filed against the Funds by Lehman Brothers Special Finance, Inc. The accrual booked for each Fund was follows: $1,100,000 for Helios Advantage Income Fund, Inc., $550,000 for Helios High Income Fund, Inc., $1,100,000 for Helios Multi-Sector High Income Fund, Inc. and $550,000 for Helios Strategic Income Fund, Inc. for a total of $3.3 million. (Note 12) | |||
Statements of Changes in Net Assets
Helios Advantage Income Fund, Inc. | Helios High Income Fund, Inc. | ||||||
Year Ended March 31, 2014 | Year Ended March 31, 2013 | Year Ended March 31, 2014 | Year Ended March 31, 2013 | ||||
Increase (Decrease) in Net Assets Resulting from Operations: | |||||||
Net investment income | $ 5,568,337 | $ 4,864,329 | $ 3,939,081 | $ 3,430,802 | |||
Net realized gain on investments, foreign currency transactions and forward currency contracts | 1,729,753 | 1,385,779 | 1,185,864 | 1,078,304 | |||
Net change in unrealized appreciation (depreciation) on investments, foreign currency translations and forward currency contracts | (799,054) | 1,958,453 | (559,854) | 1,295,471 | |||
Net increase in net assets resulting from operations | 6,499,036 | 8,208,561 | 4,565,091 | 5,804,577 | |||
Distributions to Stockholders (Note 2): | |||||||
Net investment income | (5,177,180) | (4,911,337) | (3,594,149) | (3,464,450) | |||
Return of capital | — | — | — | (28,702) | |||
Total distributions paid | (5,177,180) | (4,911,337) | (3,594,149) | (3,493,152) | |||
Capital Stock Transactions (Note 7): | |||||||
Reinvestment of distributions | — | 119,536 | — | 117,071 | |||
Total increase in net assets | 1,321,856 | 3,416,760 | 970,942 | 2,428,496 | |||
Net Assets: | |||||||
Beginning of year | 61,696,219 | 58,279,459 | 43,497,694 | 41,069,198 | |||
End of year | $63,018,075 | $61,696,219 | $44,468,636 | $43,497,694 | |||
(including undistributed net investment income of) | $ 597,175 | $ 326,058 | $ 260,535 | $ 500 | |||
Share Transactions (Note 7): | |||||||
Reinvested shares | — | 13,262 | — | 13,611 |
Statements of Changes in Net Assets (continued)
Helios Multi-Sector High Income Fund, Inc. | Helios Strategic Income Fund, Inc. | ||||||
Year Ended March 31, 2014 | Year Ended March 31, 2013 | Year Ended March 31, 2014 | Year Ended March 31, 2013 | ||||
Increase (Decrease) in Net Assets Resulting from Operations: | |||||||
Net investment income | $ 4,469,326 | $ 3,897,739 | $ 3,305,405 | $ 2,812,307 | |||
Net realized gain on investments, foreign currency transactions and forward currency contracts | 1,042,201 | 1,088,811 | 970,815 | 1,164,477 | |||
Net change in unrealized appreciation (depreciation) on investments, foreign currency translations and forward currency contracts | (567,798) | 1,718,954 | (612,551) | 1,294,723 | |||
Net increase in net assets resulting from operations | 4,943,729 | 6,705,504 | 3,663,669 | 5,271,507 | |||
Distributions to Stockholders (Note 2): | |||||||
Net investment income | (4,177,260) | (3,872,058) | (3,083,808) | (2,609,376) | |||
Total distributions paid | (4,177,260) | (3,872,058) | (3,083,808) | (2,609,376) | |||
Capital Stock Transactions (Note 7): | |||||||
Reinvestment of distributions | 3,258 | 40,192 | — | — | |||
Total increase in net assets | 769,727 | 2,873,638 | 579,861 | 2,662,131 | |||
Net Assets: | |||||||
Beginning of year | 49,356,824 | 46,483,186 | 41,895,929 | 39,233,798 | |||
End of year | $50,126,551 | $49,356,824 | $42,475,790 | $41,895,929 | |||
(including undistributed net investment income of) | $ 597,223 | $ 402,186 | $ 580,490 | $ 477,217 | |||
Share Transactions (Note 7): | |||||||
Reinvested shares | 479 | 6,480 | — | — |
Statement of Cash Flows
Increase (Decrease) in Cash: | |
Cash flows provided by (used for) operating activities: | |
Net increase in net assets resulting from operations | $ 6,499,036 |
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities | |
Purchases of long-term investments | (26,964,531) |
Proceeds from disposition of long-term investments | 28,353,351 |
Return of capital distributions from investments | 17,430 |
Decrease in interest and dividends receivable | 60,465 |
Increase in receivable for open forward currency contracts | (16,345) |
Increase in principal paydown receivable | (1,871) |
Decrease in prepaid expenses | 6,410 |
Decrease in payable for credit facility interest | (1,186) |
Increase in payable for investments purchased | 425,712 |
Increase in investment advisory fee payable | 135 |
Increase in administration fee payable | 32 |
Increase in directors' fee payable | 239 |
Increase in other current liabilities | 1,093,375 |
Net amortization on investments | (16,105) |
Unrealized depreciation on investments | 815,803 |
Net realized gain on investments | (2,258,891) |
Net cash provided by operating activities | 8,013,059 |
Cash flows used for financing activities: | |
Decrease in payable for credit facility | (2,300,000) |
Distributions paid to stockholders, net of reinvestments | (5,177,180) |
Net cash used for financing activities | (7,477,180) |
Net increase in cash | 535,879 |
Cash at the beginning of year | 1,360,528 |
Cash at the end of year | $ 1,896,407 |
Supplemental Disclosure of Cash Flow Information: | |
Interest payments for the year ended March 31, 2014, totaled $272,420. |
Statement of Cash Flows
Increase (Decrease) in Cash: | |
Cash flows provided by (used for) operating activities: | |
Net increase in net assets resulting from operations | $ 4,565,091 |
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities | |
Purchases of long-term investments | (19,350,658) |
Proceeds from disposition of long-term investments | 19,520,026 |
Return of capital distributions from investments | 12,809 |
Decrease in interest and dividends receivable | 39,149 |
Increase in receivable for open forward currency contracts | (11,421) |
Increase in principal paydown receivable | (1,310) |
Decrease in prepaid expenses | 4,503 |
Decrease in payable for credit facility interest | (736) |
Increase in payable for investments purchased | 302,287 |
Increase in investment advisory fee payable | 568 |
Increase in administration fee payable | 131 |
Increase in directors' fee payable | 239 |
Increase in other current liabilities | 548,831 |
Net amortization on investments | (2,632) |
Unrealized depreciation on investments | 571,551 |
Net realized gain on investments | (1,319,982) |
Net cash provided by operating activities | 4,878,446 |
Cash flows used for financing activities: | |
Decrease in payable for credit facility | (675,000) |
Distributions paid to stockholders, net of reinvestments | (3,594,149) |
Net cash used for financing activities | (4,269,149) |
Net increase in cash | 609,297 |
Cash at the beginning of year | 810,385 |
Cash at the end of year | $ 1,419,682 |
Supplemental Disclosure of Cash Flow Information: | |
Interest payments for the year ended March 31, 2014, totaled $197,106. |
Statement of Cash Flows
Increase (Decrease) in Cash: | |
Cash flows provided by (used for) operating activities: | |
Net increase in net assets resulting from operations | $ 4,943,729 |
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities | |
Purchases of long-term investments | (21,902,223) |
Proceeds from disposition of long-term investments | 22,866,704 |
Return of capital distributions from investments | 14,324 |
Decrease in interest and dividends receivable | 65,263 |
Increase in dividend reinvestment receivable | (3,258) |
Increase in receivable for open forward currency contracts | (13,439) |
Increase in principal paydown receivable | (1,497) |
Decrease in prepaid expenses | 5,101 |
Decrease in payable for credit facility interest | (976) |
Increase in payable for investments purchased | 366,577 |
Increase in investment advisory fee payable | 104 |
Increase in administration fee payable | 24 |
Increase in directors' fee payable | 239 |
Increase in other current liabilities | 1,101,678 |
Net accretion on investments | 7,015 |
Unrealized depreciation on investments | 581,571 |
Net realized gain on investments | (1,445,685) |
Net cash provided by operating activities | 6,585,251 |
Cash flows used for financing activities: | |
Decrease in payable for credit facility | (1,900,000) |
Distributions paid to stockholders, net of reinvestments | (4,174,002) |
Net cash used for financing activities | (6,074,002) |
Net increase in cash | 511,249 |
Cash at the beginning of year | 879,793 |
Cash at the end of year | $ 1,391,042 |
Supplemental Disclosure of Cash Flow Information: | |
Interest payments for the year ended March 31, 2014, totaled $223,503. | |
Non-cash financing activities included reinvestment of distributions of $3,258. |
Statement of Cash Flows
Increase (Decrease) in Cash: | |
Cash flows provided by (used for) operating activities: | |
Net increase in net assets resulting from operations | $ 3,663,669 |
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities | |
Purchases of long-term investments | (14,551,294) |
Proceeds from disposition of long-term investments | 14,183,180 |
Return of capital distributions from investments | 81,392 |
Decrease in interest and dividends receivable | 34,003 |
Increase in principal paydown receivable | (1,248) |
Decrease in prepaid expenses | 4,408 |
Decrease in payable for credit facility interest | (699) |
Decrease in payable for investments purchased | (147,931) |
Increase in investment advisory fee payable | 363 |
Increase in administration fee payable | 84 |
Increase in directors' fee payable | 239 |
Increase in other current liabilities | 547,248 |
Net amortization on investments | (11,333) |
Unrealized depreciation on investments | 612,551 |
Net realized gain on investments | (915,618) |
Net cash provided by operating activities | 3,499,014 |
Cash flows used for financing activities: | |
Decrease in payable for credit facility | (600,000) |
Distributions paid to stockholders, net of reinvestments | (3,083,808) |
Net cash used for financing activities | (3,683,808) |
Net decrease in cash | (184,794) |
Cash at the beginning of year | 1,136,721 |
Cash at the end of year | $ 951,927 |
Supplemental Disclosure of Cash Flow Information: | |
Interest payments for the year ended March 31, 2014, totaled $191,176. |
Financial Highlights
For the Fiscal Year Ended March 31, | |||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||
Per Share Operating Performance: | |||||||||
Net asset value, beginning of year | $ 9.41 | $ 8.91 | $ 8.45 | $ 7.50 | $ 6.20 | ||||
Net investment income | 0.85 1 | 0.74 | 0.76 | 0.74 | 0.70 | ||||
Net realized and unrealized gain on investments, foreign currency transactions and forward currency contracts | 0.15 1 | 0.51 | 0.42 | 0.93 | 1.40 | ||||
Net increase in net asset value resulting from operations | 1.10 | 1.25 | 1.18 | 1.67 | 2.10 | ||||
Distributions from net investment income | (0.79) | (0.75) | (0.72) | (0.72) | (0.70) | ||||
Return of capital distributions | — | — | — | — | (0.10) | ||||
Total distributions paid | (0.79) | (0.75) | (0.72) | (0.72) | (0.80) | ||||
Net asset value, end of year | $ 9.62 | $ 9.41 | $ 8.91 | $ 8.45 | $ 7.50 | ||||
Market price, end of year | $ 9.35 | $ 9.09 | $ 9.30 | $ 7.70 | $ 7.00 | ||||
Total Investment Return† | 12.49% | 6.22% | 32.08% | 21.39% | 58.73% | ||||
Ratios to Average Net Assets/Supplementary Data: | |||||||||
Net assets, end of year (000s) | $63,018 | $61,696 | $58,279 | $55,243 | $49,017 | ||||
Operating expenses | 1.81% | 1.87% | 1.93% | 2.30% | 2.22% | ||||
Interest expense | 0.44% | 0.52% | 0.55% | 0.37% | 0.52% | ||||
Total expenses | 2.25% | 2.39% | 2.48% | 2.67% | 2.74% | ||||
Net expenses, including fee waivers and reimbursement and excluding interest expense | 1.81% | 1.87% | 1.93% | 2.24% | 1.40% | ||||
Net investment income | 8.95% 1 | 8.17% | 8.89% | 9.44% | 9.97% | ||||
Net investment income, excluding the effect of fee waivers and reimbursement | 8.95% 1 | 8.17% | 8.89% | 9.38% | 9.15% | ||||
Portfolio turnover rate | 33% | 28% | 29% | 62% | 45% | ||||
Credit Facility, end of year (000s) | $21,400 | $23,700 | $23,700 | $22,000 | $18,331 | ||||
Asset Coverage per $1,000 unit of senior indebtedness2 | $ 3,945 | $ 3,603 | $ 3,459 | $ 3,511 | $ 3,674 |
† | Total investment return is computed based upon the New York Stock Exchange market price of the Fund's shares and excludes the effect of broker commissions. Distributions are assumed to be reinvested at the prices obtained under the Fund's dividend reinvestment plan. | ||||
1 | Amounts include litigation settlements. | ||||
2 | Calculated by subtracting the Fund's total liabilities (not including borrowings) from the Fund's total assets and dividing by the total number of senior indebtedness units, where one unit equals $1,000 of senior indebtedness. |
Financial Highlights
For the Fiscal Year Ended March 31, | |||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||
Per Share Operating Performance: | |||||||||
Net asset value, beginning of year | $ 8.96 | $ 8.48 | $ 8.03 | $ 7.66 | $ 6.25 | ||||
Net investment income | 0.81 1 | 0.70 | 0.73 | 0.69 | 0.72 | ||||
Net realized and unrealized gain on investments, foreign currency transactions and forward currency contracts | 0.13 1 | 0.50 | 0.44 | 0.40 | 1.49 | ||||
Net increase in net asset value resulting from operations | 0.94 | 1.20 | 1.17 | 1.09 | 2.21 | ||||
Distributions from net investment income | (0.74) | (0.71) | (0.72) | (0.69) | (0.72) | ||||
Return of capital distributions | — | (0.01) | — | (0.03) | (0.08) | ||||
Total distributions paid | (0.74) | (0.72) | (0.72) | (0.72) | (0.80) | ||||
Net asset value, end of year | $ 9.16 | $ 8.96 | $ 8.48 | $ 8.03 | $ 7.66 | ||||
Market price, end of year | $ 8.63 | $ 8.77 | $ 8.90 | $ 7.62 | $ 7.19 | ||||
Total Investment Return† | 7.52% | 7.10% | 27.89% | 17.00% | 64.29% | ||||
Ratios to Average Net Assets/Supplementary Data: | |||||||||
Net assets, end of year (000s) | $44,469 | $43,498 | $41,069 | $38,829 | $37,040 | ||||
Operating expenses | 1.97% | 2.00% | 2.13% | 2.51% | 2.28% | ||||
Interest expense | 0.45% | 0.52% | 0.57% | 0.38% | 0.49% | ||||
Total expenses | 2.42% | 2.52% | 2.70% | 2.89% | 2.77% | ||||
Net expenses, including fee waivers and reimbursement and excluding interest expense | 1.97% | 2.00% | 2.13% | 2.36% | 1.30% | ||||
Net investment income | 8.96% 1 | 8.18% | 8.92% | 8.91% | 10.10% | ||||
Net investment income, excluding the effect of fee waivers and reimbursement | 8.96% 1 | 8.18% | 8.92% | 8.75% | 9.12% | ||||
Portfolio turnover rate | 33% | 28% | 29% | 60% | 48% | ||||
Credit Facility, end of year (000s) | $16,750 | $17,425 | $17,425 | $16,900 | $12,426 | ||||
Asset Coverage per $1,000 unit of senior indebtedness2 | $ 3,655 | $ 3,496 | $ 3,357 | $ 3,298 | $ 3,981 |
† | Total investment return is computed based upon the New York Stock Exchange market price of the Fund's shares and excludes the effect of broker commissions. Distributions are assumed to be reinvested at the prices obtained under the Fund's dividend reinvestment plan. | ||||
1 | Amounts include litigation settlements. | ||||
2 | Calculated by subtracting the Fund's total liabilities (not including borrowings) from the Fund's total assets and dividing by the total number of senior indebtedness units, where one unit equals $1,000 of senior indebtedness. |
Financial Highlights
For the Fiscal Year Ended March 31, | |||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||
Per Share Operating Performance: | |||||||||
Net asset value, beginning of year | $ 6.50 | $ 6.13 | $ 5.68 | $ 5.38 | $ 4.40 | ||||
Net investment income | 0.59 1 | 0.51 | 0.52 | 0.49 | 0.50 | ||||
Net realized and unrealized gain on investments, foreign currency transactions and forward currency contracts | 0.06 1 | 0.37 | 0.41 | 0.29 | 1.01 | ||||
Net increase in net asset value resulting from operations | 0.65 | 0.88 | 0.93 | 0.78 | 1.51 | ||||
Distributions from net investment income | (0.55) | (0.51) | (0.48) | (0.48) | (0.50) | ||||
Return of capital distributions | — | — | — | — | (0.03) | ||||
Total distributions paid | (0.55) | (0.51) | (0.48) | (0.48) | (0.53) | ||||
Net asset value, end of year | $ 6.60 | $ 6.50 | $ 6.13 | $ 5.68 | $ 5.38 | ||||
Market price, end of year | $ 6.80 | $ 6.26 | $ 6.07 | $ 5.15 | $ 5.00 | ||||
Total Investment Return† | 18.90% | 11.99% | 28.69% | 13.33% | 58.59% | ||||
Ratios to Average Net Assets/Supplementary Data: | |||||||||
Net assets, end of year (000s) | $50,127 | $49,357 | $46,483 | $43,120 | $40,852 | ||||
Operating expenses | 1.91% | 1.96% | 2.06% | 2.43% | 2.23% | ||||
Interest expense | 0.45% | 0.53% | 0.57% | 0.39% | 0.51% | ||||
Total expenses | 2.36% | 2.49% | 2.63% | 2.82% | 2.74% | ||||
Net expenses, including fee waivers and reimbursement and excluding interest expense | 1.91% | 1.96% | 2.06% | 2.32% | 1.30% | ||||
Net investment income | 8.94% 1 | 8.20% | 8.90% | 9.00% | 10.03% | ||||
Net investment income, excluding the effect of fee waivers and reimbursement | 8.94% 1 | 8.20% | 8.90% | 8.89% | 9.10% | ||||
Portfolio turnover rate | 33% | 26% | 30% | 64% | 49% | ||||
Credit Facility, end of year (000s) | $17,900 | $19,800 | $19,800 | $19,150 | $14,431 | ||||
Asset Coverage per $1,000 unit of senior indebtedness2 | $ 3,800 | $ 3,493 | $ 3,348 | $ 3,252 | $ 3,831 |
† | Total investment return is computed based upon the New York Stock Exchange market price of the Fund's shares and excludes the effect of broker commissions. Distributions are assumed to be reinvested at the prices obtained under the Fund's dividend reinvestment plan. | ||||
1 | Amounts include litigation settlements. | ||||
2 | Calculated by subtracting the Fund's total liabilities (not including borrowings) from the Fund's total assets and dividing by the total number of senior indebtedness units, where one unit equals $1,000 of senior indebtedness. |
Financial Highlights
For the Fiscal Year Ended March 31, | |||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||
Per Share Operating Performance: | |||||||||
Net asset value, beginning of year | $ 7.06 | $ 6.62 | $ 6.07 | $ 5.90 | $ 5.05 | ||||
Net investment income | 0.56 1 | 0.47 | 0.47 | 0.48 | 0.51 | ||||
Net realized and unrealized gain on investments | 0.06 1 | 0.41 | 0.50 | 0.17 | 1.00 | ||||
Net increase in net asset value resulting from operations | 0.62 | 0.88 | 0.97 | 0.65 | 1.51 | ||||
Distributions from net investment income | (0.52) | (0.44) | (0.42) | (0.45) | (0.51) | ||||
Return of capital distributions | — | — | — | (0.03) | (0.15) | ||||
Total distributions paid | (0.52) | (0.44) | (0.42) | (0.48) | (0.66) | ||||
Net asset value, end of year | $ 7.16 | $ 7.06 | $ 6.62 | $ 6.07 | $ 5.90 | ||||
Market price, end of year | $ 6.78 | $ 6.44 | $ 5.94 | $ 5.31 | $ 5.46 | ||||
Total Investment Return† | 14.04% | 16.22% | 20.55% | 6.24% | 51.23% | ||||
Ratios to Average Net Assets/Supplementary Data: | |||||||||
Net assets, end of year (000s) | $42,476 | $41,896 | $39,234 | $35,983 | $34,970 | ||||
Operating expenses | 1.98% | 2.03% | 2.14% | 2.54% | 2.34% | ||||
Interest expense | 0.45% | 0.51% | 0.55% | 0.37% | 0.47% | ||||
Total expenses | 2.43% | 2.54% | 2.69% | 2.91% | 2.81% | ||||
Net expenses, including fee waivers and reimbursement and excluding interest expense | 1.98% | 2.03% | 2.14% | 2.38% | 1.30% | ||||
Net investment income | 7.85% 1 | 6.95% | 7.38% | 7.60% | 9.05% | ||||
Net investment income, excluding the effect of fee waivers and reimbursement | 7.85% 1 | 6.95% | 7.38% | 7.44% | 8.02% | ||||
Portfolio turnover rate | 25% | 36% | 36% | 55% | 43% | ||||
Credit Facility, end of year (000s) | $15,350 | $15,950 | $15,950 | $14,950 | $11,568 | ||||
Asset Coverage per $1,000 unit of senior indebtedness2 | $ 3,767 | $ 3,627 | $ 3,460 | $ 3,407 | $ 4,023 |
† | Total investment return is computed based upon the New York Stock Exchange market price of the Fund's shares and excludes the effect of broker commissions. Distributions are assumed to be reinvested at the prices obtained under the Fund's dividend reinvestment plan. | ||||
1 | Amounts include litigation settlements. | ||||
2 | Calculated by subtracting the Fund's total liabilities (not including borrowings) from the Fund's total assets and dividing by the total number of senior indebtedness units, where one unit equals $1,000 of senior indebtedness. |
Notes to Financial Statements
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
• | 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 each Fund’s own assumptions in determining the fair value of investments) |
Valuation Inputs | Level 1 | Level 2 | Level 3 | Total | |||
Residential Mortgage Related Holdings | $ — | $ — | $ 2,212,568 | $ 2,212,568 | |||
Corporate Bonds | — | 77,091,122 | 175 | 77,091,297 | |||
Term Loans | — | 2,178,678 | — | 2,178,678 | |||
Common Stocks | 1,630,136 | — | — | 1,630,136 | |||
Warrants | 312,354 | — | — | 312,354 | |||
Total | $ 1,942,490 | $ 79,269,800 | $ 2,212,743 | $ 83,425,033 |
Valuation Inputs | Other Financial Instruments* |
Level 1 — Quoted Prices | $16,345 |
Level 2 — Quoted Prices in Inactive Markets or Other Significant Observable Inputs | — |
Level 3 — Significant Unobservable Inputs | — |
Total | $16,345 |
Notes to Financial Statements (continued)
Quantitative Information about Level 3 Fair Value Measurements(1) | ||||
Assets | Fair Value as of March 31, 2014 | Valuation Methodology | Significant Unobservable Input | Price |
Corporate Bonds | $175 | Discounted Cash Flow | Market Comparable Companies | $0.01 |
(1) | The table above does not include level 3 securities that are valued by brokers and pricing services. At March 31, 2014, the value of these securities was approximately $2,212,568. The inputs for these securities are not readily available or cannot be reasonably estimated and are generally those inputs described in Valuation of Investments note above. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, unchanged price review, results of broker and vendor due diligence and consideration of macro or security specific events. |
Investments in Securities | Residential Mortgage Related Holdings | Corporate Bonds | Total | ||
Balance as of March 31, 2013 | $ — | $200 | $ 200 | ||
Accrued Discounts (Premiums) | — | — | — | ||
Realized Gain/(Loss) | — | (25) | (25) | ||
Change in Unrealized Appreciation (Depreciation) | 3,238 | — | 3,238 | ||
Purchases at cost | 2,209,330 | — | 2,209,330 | ||
Sales proceeds | — | — | — | ||
Transfers into Level 3 | — | — | — | ||
Balance as of March 31, 2014 | $2,212,568 | $175 | $2,212,743 | ||
Change in unrealized gains or losses relating to assets still held at reporting date | $ 3,238 | $ — | $ 3,238 |
Valuation Inputs | Level 1 | Level 2 | Level 3 | Total | |||
Residential Mortgage Related Holdings | $ — | $ — | $ 1,606,922 | $ 1,606,922 | |||
Corporate Bonds | — | 55,601,377 | 125 | 55,601,502 | |||
Term Loans | — | 1,598,890 | — | 1,598,890 | |||
Common Stocks | 1,175,050 | — | — | 1,175,050 | |||
Warrants | 234,319 | — | — | 234,319 | |||
Total | $ 1,409,369 | $ 57,200,267 | $ 1,607,047 | $ 60,216,683 |
Valuation Inputs | Other Financial Instruments* |
Level 1 — Quoted Prices | $11,421 |
Level 2 — Quoted Prices in Inactive Markets or Other Significant Observable Inputs | — |
Level 3 — Significant Unobservable Inputs | — |
Total | $11,421 |
Notes to Financial Statements (continued)
Quantitative Information about Level 3 Fair Value Measurements(1) | ||||
Assets | Fair Value as of March 31, 2014 | Valuation Methodology | Significant Unobservable Input | Price |
Corporate Bonds | $125 | Discounted Cash Flow | Market Comparable Companies | $0.01 |
(1) | The table above does not include level 3 securities that are valued by brokers and pricing services. At March 31, 2014, the value of these securities was approximately $1,606,922. The inputs for these securities are not readily available or cannot be reasonably estimated and are generally those inputs described in Valuation of Investments note above. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, unchanged price review, results of broker and vendor due diligence and consideration of macro or security specific events. |
Investments in Securities | Residential Mortgage Related Holdings | Corporate Bonds | Total | ||
Balance as of March 31, 2013 | $ 37,162 | $150 | $ 37,312 | ||
Accrued Discounts (Premiums) | — | — | — | ||
Realized Gain/(Loss) | 120,571 | (25) | 120,546 | ||
Change in Unrealized Appreciation (Depreciation) | 2,644 | — | 2,644 | ||
Purchases at cost | 1,604,278 | — | 1,604,278 | ||
Sales proceeds | (157,733) | — | (157,733) | ||
Transfers into Level 3 | — | — | — | ||
Balance as of March 31, 2014 | $1,606,922 | $125 | $1,607,047 | ||
Change in unrealized gains or losses relating to assets still held at reporting date | $ 2,644 | $ — | $ 2,644 |
Valuation Inputs | Level 1 | Level 2 | Level 3 | Total | |||
Residential Mortgage Related Holdings | $ — | $ — | $ 1,799,304 | $ 1,799,304 | |||
Corporate Bonds | — | 62,407,498 | 150 | 62,407,648 | |||
Term Loans | — | 1,792,335 | — | 1,792,335 | |||
Common Stocks | 1,322,899 | — | — | 1,322,899 | |||
Warrants | 273,316 | — | — | 273,316 | |||
Total | $ 1,596,215 | $ 64,199,833 | $ 1,799,454 | $ 67,595,502 |
Notes to Financial Statements (continued)
Valuation Inputs | Other Financial Instruments* |
Level 1 — Quoted Prices | $13,439 |
Level 2 — Quoted Prices in Inactive Markets or Other Significant Observable Inputs | — |
Level 3 — Significant Unobservable Inputs | — |
Total | $13,439 |
Quantitative Information about Level 3 Fair Value Measurements(1) | ||||
Assets | Fair Value as of March 31, 2014 | Valuation Methodology | Significant Unobservable Input | Price |
Corporate Bonds | $150 | Discounted Cash Flow | Market Comparable Companies | $0.01 |
(1) | The table above does not include level 3 securities that are valued by brokers and pricing services. At March 31, 2014, the value of these securities was approximately $1,799,304. The inputs for these securities are not readily available or cannot be reasonably estimated and are generally those inputs described in Valuation of Investments note above. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, unchanged price review, results of broker and vendor due diligence and consideration of macro or security specific events. |
Investments in Securities | Residential Mortgage Related Securities | Corporate Bonds | Total | ||
Balance as of March 31, 2013 | $ 37,162 | $175 | $ 37,337 | ||
Accrued Discounts (Premiums) | — | — | — | ||
Realized Gain/(Loss) | 120,571 | (25) | 120,546 | ||
Change in Unrealized Appreciation (Depreciation) | 2,960 | — | 2,960 | ||
Purchases at cost | 1,796,344 | — | 1,796,344 | ||
Sales proceeds | (157,733) | — | (157,773) | ||
Transfers into Level 3 | — | — | — | ||
Balance as of March 31, 2014 | $1,799,304 | $150 | $1,799,454 | ||
Change in unrealized gains or losses relating to assets still held at reporting date | $ 2,960 | $ — | $ 2,960 |
Notes to Financial Statements (continued)
Valuation Inputs | Level 1 | Level 2 | Level 3 | Total | |||
Commercial Mortgage Related Holdings | $ — | $ — | $ 1,536,421 | $ 1,536,421 | |||
Corporate Bonds | — | 51,322,518 | 125 | 51,322,643 | |||
Term Loans | — | 1,227,112 | — | 1,227,112 | |||
Common Stocks | 2,852,339 | — | — | 2,852,339 | |||
Warrants | 234,319 | — | — | 234,319 | |||
Total | $ 3,086,658 | $ 52,549,630 | $ 1,536,546 | $ 57,172,834 |
Quantitative Information about Level 3 Fair Value Measurements(1) | ||||
Assets | Fair Value as of March 31, 2014 | Valuation Methodology | Significant Unobservable Input | Price |
Corporate Bonds | $125 | Discounted Cash Flow | Market Comparable Companies | $0.01 |
(1) | The table above does not include level 3 securities that are valued by brokers and pricing services. At March 31, 2014, the value of these securities was approximately $1,536,421. The inputs for these securities are not readily available or cannot be reasonably estimated and are generally those inputs described in Valuation of Investments note above. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, unchanged price review, results of broker and vendor due diligence and consideration of macro or security specific events. |
Investments in Securities | Commercial Mortgage Related Holdings | Corporate Bonds | Total | ||
Balance as of March 31, 2013 | $ — | $150 | $ 150 | ||
Accrued Discounts (Premiums) | — | — | — | ||
Realized Gain/(Loss) | — | (25) | (25) | ||
Change in Unrealized Appreciation (Depreciation) | — | — | — | ||
Purchases at cost | — | — | — | ||
Sales proceeds | — | — | — | ||
Transfers into Level 3 | 1,536,421 | — | 1,536,421 (a) | ||
Balance as of March 31, 2014 | $1,536,421 | $125 | $1,536,546 | ||
Change in unrealized gains or losses relating to assets still held at reporting date | $ — | $ — | $ — |
(a) | Transfers into Level 3 are due to a decline or an increase in market activity (e.g. frequency of trades), which resulted in a lack of or an increase in available market inputs to determine price. |
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
Fund | Settlement Date | Currency to be Delivered | U.S. $ Value at March 31, 2014 | Currency to be Received | Unrealized Appreciation | ||
Helios Advantage Income Fund, Inc. | 05/12/14 | 2,025,000 | Euros | $2,789,517 | $2,805,862 | U.S. Dollars | $16,345 |
Helios High Income Fund, Inc. | 05/12/14 | 1,415,000 | Euros | 1,949,218 | 1,960,639 | U.S. Dollars | 11,421 |
Helios Multi-Sector High Income Fund, Inc. | 05/12/14 | 1,665,000 | Euros | 2,293,603 | 2,307,042 | U.S. Dollars | 13,439 |
Fund | Derivatives Not Accounted for as Hedging Instruments | Statement of Assets and Liabilities | Fair Value as of March 31, 2014 |
Helios Advantage Income Fund, Inc. | Forward contracts | Receivable for open forward currency contracts | $16,345 |
Helios High Income Fund, Inc. | Forward contracts | Receivable for open forward currency contracts | 11,421 |
Helios Multi-Sector High Income Fund, Inc. | Forward contracts | Receivable for open forward currency contracts | 13,439 |
Notes to Financial Statements (continued)
Fund | Derivatives Not Accounted for as Hedging Instruments | Location of Gain (Losses) on Derivatives Recognized in Income | Net Realized Loss on Forward Currency Contracts | Net Change in Unrealized Appreciation on Forward Currency Contracts |
Helios Advantage Income Fund, Inc. | Forward contracts | Forward currency contracts | $(104,618) | $16,345 |
Helios High Income Fund, Inc. | Forward contracts | Forward currency contracts | (74,108) | 11,421 |
Helios Multi-Sector High Income Fund, Inc. | Forward contracts | Forward currency contracts | (84,572) | 13,439 |
Gross Amounts not offset in the Statement of Assets and Liabilities | ||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts Presented in the Statement of Assets and Liabilities | Financial Instruments | Collateral Pledged (Received) | Net Amount | |
Description | ||||||
Forward Contracts | $16,345 | $— | $16,345 | $16,345 | $— | $16,345 |
Gross Amounts not offset in the Statement of Assets and Liabilities | ||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts Presented in the Statement of Assets and Liabilities | Financial Instruments | Collateral Pledged (Received) | Net Amount | |
Description | ||||||
Forward Contracts | $11,421 | $— | $11,421 | $11,421 | $— | $11,421 |
Gross Amounts not offset in the Statement of Assets and Liabilities | ||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts Presented in the Statement of Assets and Liabilities | Financial Instruments | Collateral Pledged (Received) | Net Amount | |
Description | ||||||
Forward Contracts | $13,439 | $— | $13,439 | $13,439 | $— | $13,439 |
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
Fund | Investment Advisory Fees |
Helios Advantage Income Fund, Inc. | $553,239 |
Helios High Income Fund, Inc. | 397,299 |
Helios Multi-Sector High Income Fund, Inc. | 449,368 |
Helios Strategic Income Fund, Inc. | 379,397 |
Fund | Administration Fees |
Helios Advantage Income Fund, Inc. | $127,670 |
Helios High Income Fund, Inc. | 91,684 |
Helios Multi-Sector High Income Fund, Inc. | 103,700 |
Helios Strategic Income Fund, Inc. | 87,553 |
Fund | Purchases | Sales |
Helios Advantage Income Fund, Inc. | $26,964,531 | $28,353,351 |
Helios High Income Fund, Inc. | 19,350,658 | 19,520,026 |
Helios Multi-Sector High Income Fund, Inc. | 21,902,223 | 22,866,704 |
Helios Strategic Income Fund, Inc. | 14,551,294 | 14,183,180 |
Notes to Financial Statements (continued)
Helios Advantage Income Fund, Inc. | Helios High Income Fund, Inc. | Helios Multi-Sector High Income Fund, Inc. | Helios Strategic Income Fund, Inc. | |
Total line of credit amount available | $27,000,000 | $19,000,000 | $22,000,000 | $18,000,000 |
Line of credit outstanding at March 31, 2014 | 21,400,000 | 16,750,000 | 17,900,000 | 15,350,000 |
Line of credit amount unused at March 31, 2014 | 5,600,000 | 2,250,000 | 4,100,000 | 2,650,000 |
Average balance outstanding during the year | 22,887,945 | 17,185,205 | 19,159,726 | 16,260,411 |
Interest expense incurred on line of credit during the year | 271,234 | 196,370 | 222,527 | 190,477 |
Notes to Financial Statements (continued)
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) | $5,177,180 | $3,594,149 | $4,177,260 | $3,083,808 | |||
Return of Capital | — | — | — | — | |||
Total distributions | $5,177,180 | $3,594,149 | $4,177,260 | $3,083,808 |
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) | $4,911,337 | $3,464,450 | $3,872,058 | $2,609,376 | |||
Return of Capital | — | 28,702 | — | — | |||
Total distributions | $4,911,337 | $3,493,152 | $3,872,058 | $2,609,376 |
Helios Advantage Income Fund, Inc. | Helios High Income Fund, Inc. | Helios Multi-Sector High Income Fund, Inc. | Helios Strategic Income Fund, Inc. | ||||
Undistributed ordinary income | $ 613,520 | $ 271,956 | $ 610,662 | $ 630,862 | |||
Capital loss carryforward (1) | (397,526,293) | (296,700,618) | (447,029,269) | (363,059,296) | |||
Post-October capital loss deferral | (250,118) | (326,163) | (842,395) | (244,674) | |||
Unrealized appreciation | 4,370,299 | 3,063,315 | 3,510,113 | 2,995,361 | |||
$(392,792,592) | $(293,691,510) | $(443,750,889) | $(359,677,747) |
Fund | Expiring in 2016 | Expiring in 2017 | Expiring in 2018 |
Helios Advantage Income Fund, Inc. | $50,821,411 | $175,931,140 | $170,773,742 |
Helios High Income Fund, Inc. | 39,671,548 | 130,227,458 | 126,801,612 |
Helios Multi-Sector High Income Fund, Inc. | 58,429,737 | 205,725,327 | 182,874,205 |
Helios Strategic Income Fund, Inc. | 59,012,864 | 152,878,554 | 151,167,878 |
Notes to Financial Statements (continued)
Fund | Cost of Investments | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation |
Helios Advantage Income Fund, Inc. | $79,055,138 | $5,244,521 | $(874,626) | $4,369,895 |
Helios High Income Fund, Inc. | 57,153,644 | 3,737,419 | (674,380) | 3,063,039 |
Helios Multi-Sector High Income Fund, Inc. | 64,085,723 | 4,231,873 | (722,094) | 3,509,779 |
Helios Strategic Income Fund, Inc. | 54,127,101 | 3,916,937 | (871,204) | 3,045,733 |
Fund | Undistributed Net Investment Income | Accumulated Net Realized Loss | Additional Paid-in Capital |
Helios Advantage Income Fund, Inc. | $(120,040) | $120,549 | $(509) |
Helios High Income Fund, Inc. | (84,897) | 85,261 | (364) |
Helios Multi-Sector High Income Fund, Inc. | (97,029) | 97,441 | (412) |
Helios Strategic Income Fund, Inc. | (118,324) | 118,773 | (449) |
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
Fund | Dividend Per Share | Record Date | Payable Date |
Helios Advantage Income Fund, Inc. | $0.0725 | April 17, 2014 | April 24, 2014 |
Helios High Income Fund, Inc. | $0.0650 | April 17, 2014 | April 24, 2014 |
Helios Multi-Sector High Income Fund, Inc. | $0.0525 | April 17, 2014 | April 24, 2014 |
Helios Strategic Income Fund, Inc. | $0.0500 | April 17, 2014 | April 24, 2014 |
Fund | Dividend Per Share | Record Date | Payable Date |
Helios Advantage Income Fund, Inc. | $0.0725 | May 15, 2014 | May 29, 2014 |
Helios High Income Fund, Inc. | $0.0650 | May 15, 2014 | May 29, 2014 |
Helios Multi-Sector High Income Fund, Inc. | $0.0525 | May 15, 2014 | May 29, 2014 |
Helios Strategic Income Fund, Inc. | $0.0500 | May 15, 2014 | May 29, 2014 |
Notes to Financial Statements (continued)
Report of Independent Registered Public Accounting Firm
Tax Information (Unaudited)
Fund | Percentage |
Helios Advantage Income Fund, Inc. | 1.30% |
Helios High Income Fund, Inc. | 1.36% |
Helios Multi-Sector High Income Fund, Inc. | 1.30% |
Helios Strategic Income Fund, Inc. | 3.63% |
Fund | Percentage |
Helios Advantage Income Fund, Inc. | 1.56% |
Helios High Income Fund, Inc. | 1.36% |
Helios Multi-Sector High Income Fund, Inc. | 1.30% |
Helios Strategic Income Fund, Inc. | 3.63% |
Compliance Certification (Unaudited)
Information Concerning Directors and Officers (Unaudited)
Name, Address and Year of Birth | Position(s) Held with Funds and Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years and Other Directorships Held by Director | Number of Portfolios in Fund Complex Overseen by Director | |||
Independent Directors Class I Director to serve until 2015 Annual Meeting of Stockholders: | ||||||
Stuart A. McFarland c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1947 | Director, Member of the Audit Committee, Member of the Nominating and Compensation Committee Since 2008 | Director/Trustee of several investment companies advised by the Adviser (2006-Present); Director of United Guaranty Corporation (2011-Present); Director of Brandywine Funds (2003-2013); Director of New Castle Investment Corp. (2000-Present); Managing Partner of Federal City Capital Advisors (1997-Present). | 11 | |||
Edward A. Kuczmarski c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1949 | Director, Member of the Audit Committee, Chairman of the Nominating and Compensation Committee Since 2013 | Director/Trustee of several investment companies advised by the Adviser (2011-Present); Certified Public Accountant and Retired Partner of Crowe Horwath LLP (formerly Hays & Company LLP before merger in 2009) (1980- 2013); Director of ISI Funds (2007-Present); Trustee of the Daily Income Fund (2006- Present); Director of the California Daily Tax Free Income Fund, Inc. (2006-Present); Trustee of teh Stralem Funds (2014-Present). | 11 | |||
Independent Director Class II Director to serve until 2016 Annual Meeting of Stockholders: | ||||||
Rodman L. Drake c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1943 | Director and Chairman of the Board, Member of the Audit Committee, Member of the Nominating and Compensation Committee Since 2008 | Chairman (since 2003) and Director/Trustee of several investment companies advised by the Adviser (1989-Present); Chairman of the Board, Director and/or Lead Director of Crystal River Capital, Inc. (2005-2010); Interim President and Chief Executive Officer of Crystal River Capital, Inc. (2009-2010); Director of Celgene Corporation (2006-Present); Director of Chimerix Corporation (2013-Present); Director of Student Loan Corporation (2005-2010); Director of Apex Silver Mines Limited (2007-2009); Co-founder of Baringo Capital LLC (2002-Present); Director of Jackson Hewitt Tax Services Inc. (2004-2011); Director of Animal Medical Center (2002-Present); Trustee of Columbia Atlantic Funds (2007-2009); Chairman of Columbia Atlantic Funds (2009- Present). | 11 |
Name, Address and Year of Birth | Position(s) Held with Funds and Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years and Other Directorships Held by Director | Number of Portfolios in Fund Complex Overseen by Director | |||
Interested Director Class II Director to serve until 2016 Annual Meeting of Stockholders: | ||||||
Heather Goldman c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1967 | Director Since 2013 | Director/Trustee of several investment companies advised by the Adviser (2013-Present); Global Head of Marketing and Business Development of the Adviser (2011-2013); Managing Partner of Brookfield Financial (2009-2011); Head of Investor Relations of Starwood Capital Group Global (2007-2009); Director and immediate past Board Chair of University Settlement House (2003-2013). | 11 | |||
Independent Director Class III Director to serve until 2014 Annual Meeting of Stockholders: | ||||||
Louis P. Salvatore c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1946 | Director, Chairman of the Audit Committee, Member of the Nominating and Compensation Committee Since 2008 | Director/Trustee of several investment companies advised by the Adviser (2005-Present); Director of SP Fiber Technologies, Inc. (2012-Present); Director of Chambers Street Properties (2012-Present); Director of Crystal River Capital, Inc. (2005-2010); Director of Turner Corp. (2003-Present); Director of Jackson Hewitt Tax Services, Inc. (2004-2011); Employee of Arthur Andersen LLP (2002-Present). | 11 | |||
Interested Director Class III Director to serve until 2014 Annual Meeting of Stockholders: | ||||||
Jonathan C. Tyras c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1968 | Director Since 2014 | Director/Trustee of several investment companies advised by the Adviser (2014-Present); Managing Director and Chief Financial Officer of the Adviser (2010-Present); General Counsel of the Adviser (2006-Present); Secretary of the Adviser (2006-2014); Vice President and General Counsel (2006-2010) and Secretary (2007-2010) of Crystal River Capital, Inc.; Secretary of several investment companies advised by the Adviser (2006-2014); Vice President of Brookfield Investment Funds (2011-2014); Chief Financial Officer of Brookfield Investment Management (UK) Limited (2011-Present); Director of Brookfield Investment Management (UK) Limited (2013-Present); Chief Financial Officer of Brookfield Investment Management (Canada) Inc. (2011-Present); Chief Executive Officer of Brookfield Investment Management (US) LLC (2011-Present); Managing Director of AMP Capital Brookfield Pty Limited (2011-2012). | 11 |
Name, Address and Year of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years |
Brian F. Hurley* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1977 | President | Since 2014 | Managing Director (2014-present) and Assistant General Counsel (2010-present) of the Adviser; Director of the Adviser (2010-2014); Secretary of Brookfield Investment Funds (2011-2014); Associate at Paul, Hastings, Janofsky & Walker LLP (2002-2010). |
Kim G. Redding*,** c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1955 | President | Since 2010 | President of several investment companies advised by the Adviser (2010-2014); Chief Investment Strategist of Brookfield Asset Management Inc. (2013-2014); Co-Chief Investment Officer of the Adviser (2010-2014); Director of Brookfield Investment Management (UK) Limited (2011-2014); Director and Chairman of the Board of Directors of Brookfield Investment Management (Canada) Inc. (2011- 2014); Chief Executive Officer of the Adviser (2009-2013); Director of Brookfield Investment Funds (UCITS) plc (2011-2014); Director of Brookfield Investment Funds (QIF) PLC (2011-2014); Founder and Chief Executive Officer of Brookfield Redding LLC (2007-2009). |
Dana E. Erikson* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1965 | Vice President | Since 2008 | Senior Portfolio Manager/Managing Director of the Adviser (2006-Present); Vice President of one other investment company advised by the Adviser (2009-Present). |
Richard M. Cryan* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1956 | Vice President | Since 2011 | Vice President of several investment companies advised by the Adviser (2011-present); Senior Portfolio Manager of the Adviser (2006-Present); Managing Director of the Adviser (2006-Present). |
Mark Shipley* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1971 | Vice President | Since 2011 | Vice President of several investment companies advised by the Adviser (2011-present); Portfolio Manager of the Adviser (2011-Present); Managing Director of the Adviser (2011-Present); Director of the Adviser (2006-2010). |
Angela W. Ghantous* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1975 | Treasurer | Since 2013 | Treasurer of several investment companies advised by the Adviser (2012-Present); Director of the Adviser (2012- Present); Vice President of the Adviser (2009-2012); Controller of Brookfield Redding LLC (2007-2009). |
Name, Address and Year of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years |
Alexis I. Rieger* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1980 | Secretary | Since 2014 | Vice President and Associate General Counsel of the Adviser (2011-present); Associate at Kleinberg, Kaplan, Wolff & Cohen P.C. (2009-2011); Associate at Alston & Bird (2007-2009). |
Jonathan C. Tyras*,*** c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1968 | Secretary | Since 2009 | Director/Trustee of several investment companies advised by the Adviser (2014-Present); Managing Director and Chief Financial Officer of the Adviser (2010-Present); General Counsel of the Adviser (2006-Present); Secretary of the Adviser (2006-2014); Vice President and General Counsel (2006-2010) and Secretary (2007-2010) of Crystal River Capital, Inc.; Secretary of several investment companies advised by the Adviser (2006-2014); Vice President of Brookfield Investment Funds (2011-2014); Chief Financial Officer of Brookfield Investment Management (UK) Limited (2011-Present); Director of Brookfield Investment Management (UK) Limited (2013-Present); Chief Financial Officer of Brookfield Investment Management (Canada) Inc. (2011-Present); Chief Executive Officer of Brookfield Investment Management (US) LLC (2011-Present); Managing Director of AMP Capital Brookfield Pty Limited (2011-2012). |
Seth Gelman* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1975 | Chief Compliance Officer (“CCO”) | Since 2009 | CCO of several investment companies advised by the Adviser (2009-Present); Director and CCO of the Adviser (2009-Present); Vice President of Oppenheimer Funds, Inc. (2004-2009). |
* | Interested person as defined by the Investment Company Act of 1940, as amended (the “1940 Act”) because of affiliations with Brookfield Investment Management Inc., Adviser of the Fund. |
** | Mr. Redding resigned as an Interested Director and President effective April 21, 2014. |
*** | Mr. Tyras resigned as Secretary effective April 21, 2014. |
Dividend Reinvestment Plan (Unaudited)
• | If, on the payment date, the NAV is equal to or less than the market price per share plus estimated brokerage commissions, the Plan Agent will invest the distribution amount in newly-issued shares on behalf of the participants. The number of newly-issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the distribution by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the payment date, the dollar amount of the distribution will be divided by 95% of the market price on the payment date. Because common shares may be issued at less than their market price, Plan participants may get a benefit that non-participants do not. |
• | If, on the payment date, the NAV is greater than the market value per share plus estimated brokerage commissions, the Plan Agent will invest the distribution amount in shares acquired on behalf of the participants in open-market purchases, which may be made on the New York Stock Exchange (“NYSE”), in the over-the-counter market or in negotiated transactions and may be on such terms as to price, delivery and otherwise as the Plan Agent shall determine. It is possible that the market price for the shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share the Plan Agent pays may exceed the market price thereof on the payment date. If the market price per share increases so that it equals or exceeds the NAV per share (minus estimated brokerage commissions), the Plan Agent will cease its purchases. Otherwise, the Plan Agent will use all distributions received in cash to purchase shares in the open market on or shortly after the payment date, but in no event more than thirty (30) days after the payment date, except where temporary curtailment or suspension of purchases is necessary to comply with applicable provisions of the federal securities laws. If the Plan Agent is unable to invest the full amount through open-market purchases during the purchase period, the Plan Agent will request that, with respect to the uninvested portion of such amount, the Fund issue new shares at the close of business on the earlier of the last day of the purchase period or the first day during the purchase period on which the NAV per share (minus estimated brokerage commissions) equals or is less than the market price per share. |
Joint Notice of Privacy Policy (Unaudited)
• | Information we receive from you in applications or other forms, correspondence or conversations, including but not limited to name, address, phone number, social security number, assets, income and date of birth. |
• | Information about transactions with us, our affiliates, or others, including but not limited to account number, balance and payment history, parties to transactions, cost basis information, and other financial information. |
• | Information we may receive from our due diligence, such as your creditworthiness and your credit history. |
• | Unaffiliated service providers (e.g. transfer agents, securities broker-dealers, administrators, investment advisors or other firms that assist us in maintaining and supporting financial products and services provided to you); |
• | Government agencies, other regulatory bodies and law enforcement officials (e.g. for reporting suspicious transactions); |
• | Other organizations, with your consent or as directed by you; and |
• | Other organizations, as permitted or required by law (e.g. for fraud protection) |
![](https://capedge.com/proxy/N-CSR/0001193125-14-227968/g717281imge658389e3.jpg)
Item 2. Code of Ethics.
As of the end of the period covered by this period, the Registrant had adopted a Code of Ethics for Principal Executive and Principal Financial Officers (the “Code”). There were no amendments to or waivers from the Code during the period covered by this report. A copy of the Registrant’s Code will be provided upon request to any person without charge by contacting Registrant Secretary at 1-888-777-8001 or by writing to Registrant Secretary at Brookfield Place, 250 Vesey Street, 15th Floor, New York, NY 10281-1023.
Item 3. Audit Committee Financial Expert.
The Registrant’s Board of Directors has determined that three members serving on the Registrant’s audit committee are audit committee financial experts. Their names are Messrs. Rodman L. Drake, Edward A. Kuczmarski, Stuart A. McFarland and Louis P. Salvatore. Messrs. Rodman L. Drake, Edward A. Kuczmarski, Stuart A. McFarland and Louis P. Salvatore are each independent.
Item 4. Principal Accountant Fees and Services.
Audit Fees
For each fiscal year ended March 31, 2014 and March 31, 2013, BBD, LLP (“BBD”) billed the Registrant aggregate fees of $40,500 and $40,500 respectively. Each bill is for professional services rendered for the audit of the Registrant’s annual financial statements and the review of financial statements that are included in the Registrant’s annual and semi-annual reports to stockholders.
Tax Fees
For each fiscal year ended March 31, 2014 and March 31, 2013, BBD billed the Registrant aggregate fees of $4,200 and $4,200, respectively. Each bill is for professional services rendered for tax compliance, tax advice and tax planning. The nature of the services comprising the Tax Fees was the review of the Registrant’s income tax returns and tax distribution requirements.
Audit-Related Fees
For the fiscal year ended March 31, 2014 and March 31, 2013, there were no Audit-related fees.
All Other Fees
For the fiscal years ended March 31, 2014 and March 31, 2013, there were no Other Fees.
Item 5. Audit Committee of Listed Registrant.
The Registrant has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Registrant’s Audit Committee members include Messrs. Rodman L. Drake, Edward A. Kuczmarski and Louis P. Salvatore.
Item 6. Schedule of Investments.
Please see Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
BROOKFIELD INVESTMENT MANAGEMENT INC.
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES
The Portfolio Proxy Voting Policies and Procedures (the “Policies and Procedures”) set forth the proxy voting policies, procedures and guidelines to be followed by Brookfield Investment Management Inc. and its subsidiaries and affiliates (collectively, “BIM”) in voting portfolio proxies relating to securities that are held in the portfolios of the investment companies or other clients (“Clients”) for which BIM has been delegated such proxy voting authority.
A. Proxy Voting Committee
BIM’s internal proxy voting committee (the “Committee”) is responsible for overseeing the proxy voting process and ensuring that BIM meets its regulatory and corporate governance obligations in voting of portfolio proxies.
The Committee shall oversee the proxy voting agent’s compliance with these Policies and Procedures, including any deviations by the proxy voting agent from the proxy voting guidelines (“Guidelines”).
B. Administration and Voting of Portfolio Proxies
1. Fiduciary Duty and Objective
As an investment adviser that has been granted the authority to vote on portfolio proxies, BIM owes a fiduciary duty to its Clients to monitor corporate events and to vote portfolio proxies consistent with the best interests of its Clients. In this regard, BIM seeks to ensure that all votes are free from unwarranted and inappropriate influences. Accordingly, BIM generally votes portfolio proxies in a uniform manner for its Clients and in accordance with these Policies and Procedures and the Guidelines.
In meeting its fiduciary duty, BIM generally view proxy voting as a way to enhance the value of the company’s stock held by the Clients. Similarly, when voting on matters for which the Guidelines dictate a vote be decided on a case-by-case basis, BIM’s primary consideration is the economic interests of its Clients.
2. Proxy Voting Agent
BIM may retain an independent third party proxy voting agent to assist BIM in its proxy voting responsibilities in accordance with these Policies and Procedures and in particular, with the Guidelines. As discussed above, the Committee is responsible for monitoring the proxy voting agent.
In general, BIM may consider the proxy voting agent’s research and analysis as part of BIM’s own review of a proxy proposal in which the Guidelines recommend that the vote be considered on a case-by-case basis. BIM bears ultimate responsibility for how portfolio proxies are voted. Unless instructed otherwise by BIM, the proxy voting agent, when retained, will vote each portfolio proxy in accordance with the Guidelines. The proxy voting agent also will assist BIM in maintaining records of BIM’s portfolio proxy votes, including the appropriate records necessary for registered investment companies to meet their regulatory obligations regarding the annual filing of proxy voting records on Form N-PX with the Securities and Exchange Commission (“SEC”).
3. Material Conflicts of Interest
BIM votes portfolio proxies without regard to any other business relationship between BIM and the company to which the portfolio proxy relates. To this end, BIM must identify material conflicts of interest that may arise between a Client and BIM, such as the following relationships:
• | BIM provides significant investment advisory or other services to a portfolio company or its affiliates (the “Company”) whose management is soliciting proxies or BIM is seeking to provide such services; |
• | BIM serves as an investment adviser to the pension or other investment account of the Company or BIM is seeking to serve in that capacity; or |
• | BIM and the Company have a lending or other financial-related relationship. |
In each of these situations, voting against the Company management’s recommendation may cause BIM a loss of revenue or other benefit.
BIM generally seeks to avoid such material conflicts of interest by maintaining separate investment decision-making and proxy voting decision-making processes. To further minimize possible conflicts of interest, BIM and the Committee employ the following procedures, as long as BIM determines that the course of action is consistent with the best interests of the Clients:
• | If the proposal that gives rise to a material conflict is specifically addressed in the Guidelines, BIM will vote the portfolio proxy in accordance with the Guidelines, provided that the Guidelines do not provide discretion to BIM on how to vote on the matter (i.e., case-by-case); or |
• | If the previous procedure does not provide an appropriate voting recommendation, BIM may retain an independent fiduciary for advice on how to vote the proposal or the Committee may direct BIM to abstain from voting because voting on the particular proposal is impracticable and/or is outweighed by the cost of voting. |
4. Certain Foreign Securities
Portfolio proxies relating to foreign securities held by Clients are subject to these Policies and Procedures. In certain foreign jurisdictions, however, the voting of portfolio proxies can result in additional restrictions that have an economic impact to the security, such as “share-blocking.” If BIM votes on the portfolio proxy, share-blocking may prevent BIM from selling the shares of the foreign security for a period of time. In determining whether to vote portfolio proxies subject to such restrictions, BIM, in consultation with the Committee, considers whether the vote, either in itself or together with the votes of other shareholders, is expected to affect the value of the security that outweighs the cost of voting. If BIM votes on a portfolio proxy and during the “share-blocking period,” BIM would like to sell the affected foreign security, BIM, in consultation with the Committee, will attempt to recall the shares (as allowable within the market time-frame and practices).
C. Fund Board Reporting and Recordkeeping
BIM will prepare periodic reports for submission to the Boards of Directors of its affiliated funds (the “Funds”) describing:
• | any issues arising under these Policies and Procedures since the last report to the Funds’ Boards of Directors/Trustees and the resolution of such issues, including but not limited to, information about conflicts of interest not addressed in the Policies and Procedures; and |
• | any proxy votes taken by BIM on behalf of the Funds since the last report to such Funds’ Boards of Directors/Trustees that deviated from these Policies and Procedures, with reasons for any such deviations. |
In addition, no less frequently than annually, BIM will provide the Boards of Directors/Trustees of the Funds with a written report of any recommended changes based upon BIM’s experience under these Policies and Procedures, evolving industry practices and developments in the applicable laws or regulations.
BIM will maintain all records that are required under, and in accordance with, all applicable regulations, including the Investment Company Act of 1940, as amended, and the Investment Advisers Act of 1940, which include, but not limited to:
• | these Policies and Procedures, as amended from time to time; |
• | records of votes cast with respect to portfolio proxies, reflecting the information required to be included in Form N-PX, as applicable; |
• | records of written client requests for proxy voting information and any written responses of BIM to such requests; and |
• | any written materials prepared by BIM that were material to making a decision in how to vote, or that memorialized the basis for the decision. |
D. Amendments to these Procedures
The Committee shall periodically review and update these Policies and Procedures as necessary. Any amendments to these Procedures and Policies (including the Guidelines) shall be provided to the Board of Directors of BIM and to the Boards of Directors of the Funds for review and approval.
E. Proxy Voting Guidelines
Guidelines are available upon request.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Portfolio Managers
Dana E. Erikson, CFA – Mr. Erikson is the lead portfolio manager and the Head of the Global High Yield Team, is responsible for the firm’s corporate high yield exposures and the establishment of portfolio objectives and strategies. Mr. Erikson has 28 years of investment experience. Prior to joining the firm, he was with Evergreen Investments or one of its predecessor firms since 1996. He was a senior portfolio manager and the Head of the High Yield team. Prior to that, he was Head of High Yield Research. Mr. Erikson received a BA in Economics from Brown University and an MBA, with honors, from Northeastern University and holds the Chartered Financial Analyst designation. Mr. Erikson is a member of the Boston Security Analysts Society.
Richard M. Cryan – Mr. Cryan serves as co-portfolio manager for the Registrant since May 2011. Mr. Cryan is based in Boston and is responsible for the firm’s corporate high yield exposures and the establishment of portfolio objectives and strategies. Mr. Cryan has 35 years of investment experience. Mr. Cryan received a Bachelor of Science degree in Business from the University of Colorado and an MBA from Columbia University.
Mark Shipley, CFA – Mr. Shipley serves as co-portfolio manager for the Registrant since May 2011. Mr. Shipley has over 25 years of investment experience. He is responsible for the firm’s corporate high yield exposures and the establishment of portfolio objectives and strategies. Mr. Shipley has 25 years of investment experience. He is responsible for the implementation of Brookfield Investment Management’s corporate high yield portfolio objectives and strategies, managing the credit research process and company research. Mr. Shipley received a Bachelor of Arts degree in Finance from Northeastern University and holds the Chartered Financial Analyst designation. Mr. Shipley is a member of the Boston Security Analysts Society.
Mr. Erikson leads the management of the Fund and Messrs. Cryan and Shipley share equally the day-to-day portfolio management responsibilities.
Management of Other Accounts
The portfolio managers listed below manage other investment companies and/or investment vehicles and accounts in addition to the Registrant. The tables below show the number of other accounts managed by Messrs. Erikson, Cryan and Shipley and the total assets in each of the following categories: (a) registered investment companies; (b) other pooled investment vehicles; and (c) other accounts. For each category, the table also shows the number of accounts and the total assets in the accounts with respect to which the advisory fee is based on account performance.
The following table provides information about the accounts managed by Dana E. Erikson, CFA, Lead Portfolio Manager for the Registrant, as of March 31, 2014:
Registered Investment Companies
| Other Pooled Investment Vehicles
| Other Accounts | ||||||||||
Number of Accounts Managed | 6 | 5 | 5 | |||||||||
Number of Accounts Managed with Performance-Based Advisory Fees | 0 | 1 | 0 | |||||||||
Assets Managed | $750 million | $275 million | $335 million | |||||||||
Assets Managed with Performance-Based Advisory Fees | $0 | $124 million | $0 | |||||||||
The following table provides information about the accounts managed by Richard Cryan, Co-Portfolio Manager for the Registrant, as of March 31, 2014:
Registered Investment Companies
| Other Pooled Investment Vehicles
| Other Accounts | ||||||||||
Number of Accounts Managed | 6 | 5 | 5 | |||||||||
Number of Accounts Managed with Performance-Based Advisory Fees | 0 | 1 | 0 | |||||||||
Assets Managed | $750 million | $275 million | $335 million | |||||||||
Assets Managed with Performance-Based Advisory Fees | $0 | $124 million | $0 | |||||||||
The following table provides information about the accounts managed by Mark Shipley, Co-Portfolio Manager for the Registrant, as of March 31, 2014:
Registered Investment Companies
| Other Pooled Investment Vehicles
| Other Accounts | ||||||||||
Number of Accounts Managed | 6 | 5 | 5 | |||||||||
Number of Accounts Managed with Performance-Based Advisory Fees | 0 | 1 | 0 | |||||||||
Assets Managed | $750 million | $275 million | $335 million | |||||||||
Assets Managed with Performance-Based Advisory Fees | $0 | $124 million | $0 | |||||||||
Share Ownership
The following table indicates the dollar range of securities of the Registrant owned by the Registrant’s portfolio managers as March 31, 2014.
Dollar Range of Securities Owned | ||
Dana E. Erikson | $10,001 - $50,000 | |
Richard Cryan | $0 - $10,000 | |
Mark Shipley | $0 - $10,000 |
Portfolio Manager Material Conflict of Interest
Potential conflicts of interest may arise when a fund’s portfolio manager has day-to-day management responsibilities with respect to one or more other funds or other accounts, as is the case for the portfolio managers of the Registrant.
These potential conflicts include:
Allocation of Limited Time and Attention. A portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. As a result, the portfolio manager may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those accounts as the case may be if he or she were to devote substantially more attention to the management of a single fund. The effects of this potential conflict may be more pronounced where funds and/or accounts overseen by a particular portfolio manager have different investment strategies.
Allocation of Limited Investment Opportunities. If a portfolio manager identifies a limited investment opportunity that may be suitable for multiple funds and/or accounts, the opportunity may be allocated among these several funds or accounts, which may limit a client’s ability to take full advantage of the investment opportunity.
Pursuit of Differing Strategies. At times, a portfolio manager may determine that an investment opportunity may be appropriate for only some of the funds and/or accounts for which he or she exercises investment responsibility, or may decide that certain of the funds and/or accounts should take differing positions with respect to a particular security. In these cases, the portfolio manager may place separate transactions for one or more funds or accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other funds and/or accounts.
Variation in Compensation. A conflict of interest may arise where the financial or other benefits available to the portfolio manager differ among the funds and/or accounts that he or she manages. If the structure of the investment adviser’s management fee and/or the portfolio manager’s compensation differs among funds and/or accounts (such as where certain funds or accounts pay higher management fees or performance-based management fees), the portfolio manager might be motivated to help certain funds and/or
accounts over others. The portfolio manager might be motivated to favor funds and/or accounts in which he or she has an interest or in which the investment advisor and/or its affiliates have interests. Similarly, the desire to maintain or raise assets under management or to enhance the portfolio manager’s performance record or to derive other rewards, financial or otherwise, could influence the portfolio manager to lend preferential treatment to those funds and/or accounts that could most significantly benefit the portfolio manager.
Related Business Opportunities. The investment adviser or its affiliates may provide more services (such as distribution or recordkeeping) for some types of funds or accounts than for others. In such cases, a portfolio manager may benefit, either directly or indirectly, by devoting disproportionate attention to the management of fund and/or accounts that provide greater overall returns to the investment manager and its affiliates.
The Adviser and the Registrant have adopted compliance policies and procedures that are designed to address the various conflicts of interest that may arise for the Adviser and the individuals that it employs. For example, the Adviser seeks to minimize the effects of competing interests for the time and attention of portfolio managers by assigning portfolio managers to manage funds and accounts that share a similar investment style. The Adviser has also adopted trade allocation procedures that are designed to facilitate the fair allocation of limited investment opportunities among multiple funds and accounts. There is, however, no guarantee that such policies and procedures will be able to detect and prevent every situation in which an actual or potential conflict may appear.
Portfolio Manager Compensation
The Adviser compensates its portfolio managers based on the scale and complexity of their portfolio responsibilities, the total return performance of funds and accounts managed by the portfolio manager on an absolute basis and versus appropriate peer groups of similar size and strategy, as well as the management skills displayed in managing their subordinates and the teamwork displayed in working with other members of the Adviser. Since the portfolio managers are responsible for multiple funds and accounts, investment performance is evaluated on an aggregate basis almost equally weighted among performance, management and teamwork. Base compensation for the Adviser’s portfolio managers varies in line with a portfolio manager’s seniority and position. The compensation of portfolio managers with other job responsibilities (such as acting as an executive officer of the Adviser or supervising various departments) includes consideration of the scope of such responsibilities and the portfolio manager’s performance in meeting them. The Adviser seeks to compensate portfolio managers commensurate with their responsibilities and performance, and competitive with other firms within the investment management industry. Salaries, bonuses and stock-based compensation also are influenced by the operating performance of the Adviser and its parent company. While the salaries of the Adviser’s portfolio managers are comparatively fixed, cash bonuses and stock-based compensation may fluctuate significantly from year to year. Bonuses are determined on a discretionary basis by the senior executives of the Adviser and measured by individual and team-oriented performance guidelines. The amount of the Long Term Incentive Plan (LTIP) is approved by the board of directors annually and there is a rolling vesting schedule to aid in retention of key people. A key component of this program is achievement of client objectives in order to properly align interests with our clients. Further, the incentive compensation of all investment personnel who work on each strategy is directly tied to the relative performance of the strategy and its clients.
The compensation structure of the Adviser’s portfolio managers and other investment professionals has three primary components:
• | A base salary, |
• | An annual cash bonus; and |
• | If applicable, long-term compensation consisting of restricted stock units or stock options of the Adviser’s ultimate parent company. |
• | If applicable, long-term compensation consisting of interests in hedge funds managed by the investment professional. |
The portfolio managers also receive certain retirement, insurance and other benefits that are broadly available to all of the Adviser’s employees. Compensation of the portfolio managers is reviewed on an annual basis by senior management.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not Applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 11. Controls and Procedures.
(a) The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s Disclosure Controls and Procedures are effective, based on their evaluation of such Disclosure Controls and Procedures as of a date within 90 days of the filing of this report on Form N-CSR.
(b) As of the date of filing this Form N-CSR, the Registrant’s principal executive officer and principal financial officer are aware of no changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected or is reasonably likely to materially affect the Registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) None.
(2) A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached as an exhibit to this Form N-CSR.
(3) None.
(b) A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(b) under the Investment Company Act of 1940 is attached as an exhibit to this Form N-CSR.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HELIOS STRATEGIC INCOME FUND, INC. | ||
By: | /s/ Brian F. Hurley | |
Brian F. Hurley | ||
President and Principal Executive Officer |
Date: June 6, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: | /s/ Brian F. Hurley | |
Brian F. Hurley | ||
President and Principal Executive Officer |
Date: June 6, 2014
By: | /s/ Angela W. Ghantous | |
Angela W. Ghantous | ||
Treasurer and Principal Financial Officer |
Date: June 6, 2014