<PAGE>
BEA INCOME FUND, INC.
153 EAST 53RD STREET
NEW YORK, NY 10022
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Daniel H. Sigg Michael A. Pignataro
Chairman and Chief Vice President
Executive Officer
Richard J. Lindquist
Robert J. Moore Vice President
President and Chief
Investment Officer Hal Liebes
Secretary
Prof. Enrique R. Arzac
Director Harvey M. Rosen
Treasurer
Lawrence J. Fox
Director Paul P. Stamler
Assistant Treasurer
James S. Pasman, Jr.
Director John M. Corcoran
Assistant Treasurer
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
BEA Associates
153 East 53rd Street
New York, NY 10022
- --------------------------------------------------------------------------------
ADMINISTRATOR
Chase Global Funds Services Company
73 Tremont Street
Boston, Massachusetts 02108
- --------------------------------------------------------------------------------
CUSTODIAN
The Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT
The Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003
Phone 1-800-428-8890
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Willkie Farr & Gallagher
153 East 53rd Street
New York, NY 10022
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
- --------------------------------------------------------------------------------
INCREASE YOUR FUND HOLDINGS THROUGH DIVIDEND REINVESTMENT AND DIRECT CASH
PURCHASES
The Fund offers the opportunity for all shareholders to participate in the
Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan"). Under the
Plan, participating shareholders receive, in lieu of cash dividends, common
stock of the Fund. In addition, participants in the Plan have the option of
making voluntary cash payments of $100 to $3,000 (per investment period), plus
any dividends received in cash, to the Plan Agent to purchase Fund shares in
the open market. A brochure further describing the Plan and additional
information concerning terms and conditions, and any applicable charges
relating to the Plan, can be obtained from the Plan's agent at (800) 428-8890.
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
BEA INCOME FUND, INC.
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
THIRD QUARTER REPORT
SEPTEMBER 30, 1995
<PAGE>
BEA Income Fund, Inc.
- -------
Dear Shareholders:
We are pleased to report on the results of the BEA Income Fund, Inc. (the
"Fund") for the quarter ended September 30, 1995.
At September 30, 1995 the Fund's net asset value (NAV) was $8.52, compared to
an NAV of $8.47 at June 30, 1995. As a result, the Fund's total return
(assuming reinvestment of dividends) was 2.74%. For the 12-month period ended
September 30, 1995 the Fund posted a 14.31% return.
In an increasingly positive interest rate environment, and in the wake of
very strong performance during the first half of the year, the bond market in
the third quarter was notable mainly for its tranquillity. Quarterly returns
for all the domestic investment grade sectors were clustered quite close
together, ranging from 1.76% for government bonds to 2.36% for corporates, with
mortgages falling approximately in the middle. High yield bonds were the best
domestic performers during the quarter, returning 3.01%. In each of these
sectors, the return consisted almost entirely of coupon; there was little
opportunity for significant capital gain, as spreads were virtually unchanged
over the course of the quarter.
This reflects a settling in, as fixed income investors continue to perceive a
relatively benign investing environment. Recently released economic statistics
have served to reinforce this positive impression, showing continued slow and
steady growth with subdued inflation. The yield curve flattened during the
quarter, as the yield on the benchmark 30-year Treasury bond declined by about
14 basis points to just under 6.5%, while the yield on the 2-year Treasury note
was unchanged at 5.8%.
At the beginning of the third quarter, we perceived good value in the
mortgage market, as the effects of a continued rally were priced into the
market. As it has turned out thus far, the portfolio benefited from the excess
yield in this sector, but the anticipated capital gains have yet to develop. We
continue to believe that this sector will perform well and will maintain our
current allocation.
The U.S. High Yield market posted positive performance in the third quarter
of 1995 with new cash buyers continuing to enter the market and with high yield
spreads remaining unchanged versus Treasuries as interest rates drifted lower.
This resulted in principal price increases of 0.76% which combined with coupon
income of 2.25% for a 3.01% return as measured by the Salomon Brothers High
Yield Market Index. The high quality sectors of the high yield market
outperformed slightly during the quarter with BB-rated issues posting a total
return of 3.01% versus 2.96% for B-rated issues and 2.70% for CCC-rated issues.
During the quarter the cash pay sector posted a total return of 2.98% versus
3.32% for the deferred interest sector and 3.23% for the bankrupt sector. High
yield mutual fund investors continued to enter the market, with AMG Data
Services reporting inflows of $2.6 billion during the quarter. Net high yield
fund inflows of $7.9 billion for year-to-date 1995 can be compared with net
inflows of $1.8 billion for the year-to-date 1994. New issuance for the quarter
totaled $12.0 billion and for 1995 year-to-date totaled $29.9 billion versus
$32.0 billion for year-to-date 1994.
Our long term outlook continues to be positive for the credit fundamentals of
many high yield issuers, including cyclical sectors such as paper and
chemicals. We also remain positive on selected gaming companies, particularly
in Atlantic City and Las Vegas, and on industry sectors such as health care and
cable where we have seen continued merger activity. The expectation of lower
interest rates has also benefited the high yield sector as money has continued
to flow into the market from yield seeking investors. Our strategy continues to
be focused on opportunistically investing in companies that we believe offer
operating performance improvement and de-leveraging potential over the longer
term.
1
<PAGE>
Our overall view on the market is essentially unchanged since our last
report. We continue to expect that liquidity in the market will be sufficient
to favor our portfolio structure. We will continue to focus on high yield
investments maintaining our current 70% allocation. Within the investment grade
sector, we will continue to focus on high yielding, short maturity mortgage and
asset backed securities.
We appreciate your interest in the Fund and would be pleased to respond to
your questions or comments. Any questions regarding net asset value,
performance, dividends, portfolio allocations, or management can be directed to
BEA Associates at (800) 293-1232. All other inquiries regarding account
information or requests for a prospectus or other reports should be directed to
the Shareholder Servicing Agent at (800) 428-8890.
Respectfully,
Robert J. Moore
President and Chief Investment Officer
November 6, 1995
2
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -------
September 30, 1995
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- ------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS (83.3%)
- ------------------------------------------------------------
- ------------
COMMUNICATIONS (14.7%)
Adelphia Communications:
Series B, Sr.
Notes
(/4/) 9.50%, 2/15/04 B3 $ 574 $ 482,097
Sr. Notes
12.50%, 5/15/02 B3 650 650,000
(/8/) American Telecasting,
Inc.
Sr. Discount
Notes 0.00%,
6/15/04 Caa 113 66,670
Cablevision Industries
Corp.
Sr. Debentures
9.25%, 4/1/08 B1 975 1,035,937
Cablevision System Corp.
Sr. Sub. Notes
9.875%, 2/15/13 B3 500 527,500
Chancellor Broadcasting
Co.
Gtd. Sr. Sub.
Notes 12.50%,
10/1/04 B3 1,000 1,055,000
Citicasters, Inc.,
Series B
Sr. Sub. Notes
9.75%, 2/15/04 N/R 1,500 1,500,000
(/8/) Commodore Media, Inc.
Sr. Sub. Notes
7.50%, 5/1/03 N/R 300 268,500
Continental Cablevision,
Inc.:
Sr. Debentures
9.50%, 8/1/13 Ba2 1,250 1,303,125
Sr. Sub
Debentures
11.00%, 6/1/07 B1 1,150 1,270,750
(/8/) Dial Call Communications
Sr. Discount
Notes 0.00%,
4/15/04 Caa 750 390,000
(/4/) Falcon Holdings Group
L.P.
Sr. Sub. Notes
11.00%, 9/15/03 N/R 1,597 1,500,723
Galaxy
Telecommunications L.P.
Sr. Sub. Notes
12.375%, 10/1/05 B3 300 299,250
General Media,
Inc.
Sr. Notes
10.625%,
12/31/00 B2 625 500,000
(/3/)(/6/) Granite Broadcasting
Corp.
Sr. Sub. Notes
10.375%, 5/15/05 B3 300 307,125
(/8/) Helicon Group
L.P.
Sr. Secured
Notes 9.00%,
11/1/03 Caa 2,000 1,880,000
Heritage Media
Corp.
Gtd. Sr. Sub.
Notes 11.00%,
10/1/02 B2 1,500 1,597,500
(/8/) Imax Corp.,
Series B
Yankee Sr.
Notes
7.00%, 3/1/01 B1 1,000 940,000
</TABLE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- ------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
Jones
Intercable,
Inc.
Sr. Sub.
Debentures
11.50%, 7/15/04 B1 $1,000 $ 1,092,500
Metrocall, Inc.
Sr. Sub. Notes
10.375%,
10/1/07 B2 500 507,500
(/8/) MFS Communications Co., Inc.
Discount Notes
0.00%, 1/15/04 B2 1,000 757,500
Mobile
Telecommunications
Technologies
Corp. Sr. Sub.
Notes 13.50%,
12/15/02 B2 500 560,000
(/8/) Nextel Communications
Sr. Notes
0.00%, 8/15/04 B3 2,300 1,132,750
NWCG Holding
Corp.
Sr. Discount
Notes
Zero Coupon, 6/15/99 Caa 900 598,500
(/8/) Pagemart Nationwide, Inc.
Sr. Disc. Notes
0.00%, 2/1/05 N/R 2,000 1,290,000
Paging Network,
Inc.
Sr. Sub. Notes
10.125%, 8/1/07 B2 1,000 1,040,000
(/8/) PriCellular Wireless
Corp.
Sr. Discount
Notes 0.00%,
10/1/03 B3 500 355,000
Rogers
Cablesystems
of America, Series A,
Yankee Sr.
Notes
10.00%, 3/15/05 Ba3 300 315,000
Scott Cable
Communications,
Inc. Sub.
Debentures
12.25%, 4/15/01 B3 500 335,000
(/2/)(/6/) Simmons Cable
Sr. Sub. Notes
15.747%,
4/30/96 N/R 750 390,000
Sinclair Broadcast Group
Sr. Sub. Notes
10.00%, 9/30/05 B1 500 508,750
Spanish Broadcasting
Systems
Sr. Notes
7.50%, 6/15/02 B3 1,500 1,473,750
Summit Communications
Sr. Sub.
Debentures
10.50%, 4/15/05 B3 500 550,000
United International
Holdings
Sr. Sec.
Debentures
Zero Coupon, 1/15/99 B3 3,000 1,920,000
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- -----------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
Univision Network Holding
Sub. Notes
Zero Coupon, 12/17/02 N/R $ 1,500 $ 900,000
(/8/) Videotron
Holdings plc
Yankee Discount Notes
0.00%, 8/15/05 B3 2,000 1,320,000
------------
GROUP TOTAL 30,620,427
------------
- -----------------------------------------------------------------------
- ------------
CONSUMER PRODUCTS (5.0%)
American Rice,
Inc.
Secured Mortgage Notes
13.00%, 7/31/02 B3 500 472,500
Doskocil
Companies
Sr. Sub. Notes
9.75%, 7/15/00 B2 250 245,625
Fort Howard
Corp.
Sub. Notes
10.00%, 3/15/03 B2 1,250 1,237,500
Jordan
Industries
Sr. Notes
10.375%, 8/1/03 B3 1,200 1,122,000
Mail-Well Corp.
Sr. Sub. Notes
10.50%, 2/15/04 B3 1,500 1,455,000
(/8/) Mail-Well Holdings, Inc.
Sr. Deferred
Notes
0.00%, 2/15/06 Caa 500 300,000
Marvel III Holdings, Inc.:
Series B
Sr. Secured Debentures
9.125%, 2/15/98 Caa 1,100 1,023,000
(/3/)(/6/) Renaissance
Cosmetics
Sr. Notes
13.75%, 8/15/01 N/R 1,500 1,492,500
Revlon Consumer
Products, Inc., Series B
Sr. Sub. Notes
10.50%, 2/15/03 B3 1,000 1,010,000
Revlon Worldwide
Sr. Secured
Notes
Zero Coupon, 3/15/98 B3 700 511,875
(/8/) Specialty Foods
Acquisition
Corp.
Series B
Sr. Secured Debentures
0.00%, 8/15/05 Ca 2,000 1,040,000
(/9/) Thermoscan, Inc.
Sr. Sub. Notes
13.5625%,
8/15/01 N/R 500 515,000
------------
GROUP TOTAL 10,425,000
------------
- -----------------------------------------------------------------------
- ------------
FINANCE (7.5%)
American Express
Eurobond
Zero Coupon, 12/12/00 N/R 5,000 3,565,000
Comcast Corp.
Sr. Sub. Notes
9.375%, 5/15/05 B1 300 303,750
</TABLE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- ------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
GMAC
Medium Term
Notes
5.95%, 12/14/98 A3 $ 4,000 $ 3,938,560
(/3/) Goldman Sachs & Co.
Medium Term
Notes 6.20%,
2/15/01 A1 3,000 2,893,800
GPA Holland B.V.:
Medium Term Notes
(/3/) 8.50%, 3/3/97 N/R 550 522,500
(/3/) 8.625%, 1/15/99 Caa 750 645,938
(/3/) 9.12%, 2/24/99 Caa 250 217,500
Tiphook
Financial Corp.
Gtd. Notes
8.00%, 3/15/00 Caa 697 557,600
Western National Corp.
Sr. Notes
7.125%, 2/15/04 Baa1 3,000 2,979,510
-------------
GROUP TOTAL 15,624,158
-------------
- ------------------------------------------------------------------------
- ------------
INDUSTRIAL (13.8%)
AK Steel Corp.
Gtd. Sr. Notes
10.75%, 4/1/04 Ba3 950 1,014,125
(/3/) Alpine Group,
Inc.
Gtd. Sr. Notes
12.25%, 7/15/03 B3 2,500 2,293,750
Arcadian Partners L.P.
Series B, Sr.
Notes
10.75%, 5/1/05 B2 900 945,000
Armco, Inc.
Sr. Notes
11.375%,
10/15/99 B2 815 843,525
Bayou Steel
Corp.
First Mortgage Notes
10.25%, 3/1/01 B2 500 473,750
Berg
Electronics,
Inc.
Gtd. Sub. Debentures
11.375%, 5/1/03 B3 1,000 1,060,000
Boise Cascade
Co.
Notes
9.85%, 6/15/02 Baa3 3,000 3,378,750
Container Corp. of America
Gtd. Notes
9.75%, 4/1/03 B2 500 502,500
Crown Paper Co.
Sr. Sub. Notes
11.00%, 9/1/05 B3 500 492,500
Doman Industries Ltd.
Yankee Gtd. Sr. Notes
8.75%, 3/15/04 Ba3 650 630,500
Easco Corp.,
Series B Sr.
Notes
10.00%, 3/15/01 B1 500 490,000
Geneva Steel Co.
Sr. Notes
9.50%, 1/15/04 B1 250 186,250
Genmar Holdings, Series A
Sr. Sub. Notes
13.50%, 7/15/01 B3 500 487,500
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- -----------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
Grupo Industrial Durango
Yankee Notes
12.00%, 7/15/01 B1 $ 325 $ 296,563
Gulf States
Steel Corp.
First Mortgage Notes
13.50%, 4/15/03 B1 400 378,000
(/3/) Hanson America,
Inc.
Conv. Sr. Discount Notes
2.39%, 3/1/01 A3 2,000 1,595,000
Harris Chemical
N.A.:
(/8/) Sr. Secured Debentures
0.00%, 7/15/01 B2 1,425 1,261,125
Notes
10.75%, 10/15/03 B3 1,000 840,000
Huntsman Corp.
First Mortgage Notes
11.00%, 4/15/04 B1 750 813,750
(/8/) INDSPEC Chemical
Corp. Sr. Sub.
Notes
0.00%, 12/1/03 B3 1,496 1,009,800
Malette, Inc.
Sr. Secured Debentures
12.25%, 7/15/04 Ba3 1,000 1,110,000
NL Industries:
Sr. Secured
Debentures
11.75%,
10/15/03 B1 500 527,500
(/8/) Secured Debentures
10.00%, 10/15/05 B2 1,000 742,500
Repap Wisconsin,
Inc.
Sr. Secured
Debentures
9.875%, 5/1/06 B3 400 386,000
Trans-Resources,
Inc.
Sr. Sub. Notes
11.875%, 7/1/02 B2 500 470,000
UCC Investor
Holdings, Inc.
Sr. Sub. Notes
11.00%, 5/1/03 B3 1,500 1,533,750
Uniroyal Technology Corp.
Sr. Secured Debentures
11.75%, 6/1/03 B2 500 460,000
USX Corp.
Notes
9.625%, 8/15/03 Baa3 3,000 3,399,150
WCI Steel, Inc.,
Series B
Sr. Notes
10.50%, 3/1/02 B1 600 585,000
WHX Corp.
Sr. Notes
9.375%,
11/15/03 B1 500 457,500
------------
GROUP TOTAL 28,663,788
------------
- -----------------------------------------------------------------------
- ------------
MANUFACTURING (14.1%)
(/8/) American Standard Inc.
Sr. Sub.
Debentures
0.00%, 6/1/05 B1 2,100 1,706,250
Associated Materials, Inc.
Sr. Sub. Notes
11.50%, 8/15/03 B3 500 460,000
Atlantis Group,
Inc.
Sr. Notes
11.00%, 2/15/03 B2 1,235 1,136,200
</TABLE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
(/8/) Building Materials Corp.
Series B, Notes
0.00%, 7/1/04 B1 $ 1,200 $ 750,000
Consoltex Group,
Inc.
Series B
Gtd. Sr. Sub.
Notes
11.00%, 10/1/03 B2 1,000 940,000
(/8/) Crown Packaging Holdings
Series B, Sr.
Sub. Notes
0.00%, 11/1/03 Caa 2,550 1,160,250
Domtar, Inc.
Yankee
Debentures
11.25%, 9/15/17 Ba1 1,250 1,325,000
(/8/) Exide Corp.
Sr. Sub.
Debentures
0.00%, 12/15/04 B2 1,000 790,000
Gaylord Container Corp.:
Sr. Notes
11.50%, 5/15/01 B3 1,700 1,768,000
(/8/) Sr. Sub.
Debentures
0.00%, 5/15/05 Caa 1,000 985,000
G.I. Holdings, Inc., Series B
Sr. Deferred
Notes
Zero Coupon,
10/1/98 Ba3 1,000 725,000
Interlake Corp.
Sr. Sub.
Debentures
12.125%, 3/1/02 B3 1,000 980,000
Ithaca
Industries,
Inc.
Sr. Sub. Notes
11.125%,
12/15/02 B3 900 855,000
Ivex Holdings
Corp.
Sr. Debentures
(/8/) 0.00%, 3/15/05 Caa 1,500 870,000
IVEX Packaging
Corp.
Sr. Sub Notes
12.50%,
12/15/02 B3 500 542,500
Mafco, Inc.
Sr. Sub. Notes
11.875%,
11/15/02 B3 550 566,500
MVE, Inc.
Sr. Secured
Debentures
12.50%, 2/15/02 B3 650 689,000
Plastic
Specialties &
Technology
Sr. Secured
Debentures
11.25%, 12/1/03 B3 500 457,500
Rexene Corp.
Sr. Notes
11.75%, 12/1/04 B1 1,000 1,072,500
Riverwood
International
Corp.
Sr. Sub. Notes
10.375%,
6/30/04 B1 500 550,000
(/6/) Rotor Tool
Company
Sr. Sub. Notes
12.375%, 4/1/97 N/R 912 820,800
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
Sheffield Steel
Corp.
First Mortgage
Notes
12.00%, 11/1/01 N/R $ 1,250 $ 1,150,000
(/8/) Silgan Holdings,
Inc.
Sr. Debentures
0.00%, 12/15/02 B3 1,000 935,000
Sherritt, Inc.
Debentures
10.50%, 3/31/14 B1 375 382,500
Specialty Equipment Co., Inc.
Sr. Sub. Notes
11.375%,
12/1/03 B3 1,500 1,563,750
Stone Container
Corp.
Sr. Notes
9.875%, 2/1/01 B1 1,450 1,431,875
Synthetic
Industries, Inc.
Sr. Sub. Notes
12.75%, 12/1/02 B3 1,450 1,406,500
Tracor, Inc.,
Series A
Gtd. Sr. Sub.
Notes
10.875%,
8/15/01 B2 500 520,000
U.S. Leather,
Inc.
Sr. Notes
10.25%, 7/31/03 B2 1,750 1,470,000
USG Corp.,
Series B
Sr. Sec.
Debentures
9.25%, 9/15/01 Ba3 500 528,750
(/3/) Walbro Corp.
Gtd. Sr. Notes
9.875%, 7/15/05 Ba3 250 246,250
Westpoint
Stevens, Inc.
Sr. Sub.
Debentures
9.375%,
12/15/05 B3 500 486,250
------------
GROUP TOTAL 29,270,375
------------
- --------------------------------------------------------------------------
- ------------
OIL, GAS & ELECTRIC (4.3%)
Energy Ventures,
Inc.
Series B
Gtd. Sr. Notes
10.25%, 3/15/04 B1 500 520,000
Forest Oil Corp.
Sr. Sub. Notes
11.25%, 9/1/03 B3 500 470,000
Giant
Industries,
Inc.
Sr. Sub. Notes
9.75%, 11/15/03 B2 500 485,000
Gulf Canada Resources Ltd.
Sr. Sub.
Debentures
9.25%, 1/15/04 Ba3 850 843,625
HS Resources,
Inc.
Sr. Sub. Notes
9.875%, 12/1/03 B1 500 486,250
Mesa, Inc.
Secured Notes
12.75%, 6/30/98 Caa 1,725 1,591,313
Oryx Energy Co.
Notes
9.75%, 9/15/98 Ba3 1,000 1,005,000
Petro PSC
Properties L.P.
Senior Notes
12.50%, 6/1/02 B3 500 492,500
</TABLE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- -----------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
Petroleum Heat & Power Co.
Sr. Sub
Debentures
12.25%, 2/1/05 B2 $ 200 $ 216,000
Southeastern
Public Services
Co.
Sr. Sub.
Debentures
11.875%, 2/1/98 Caa 628 624,075
Tesoro Petroleum Corp.
Notes
13.00%, 12/1/00 B2 1,000 1,020,000
Wilrig A/S
Sr. Secured Debentures
11.25%, 3/15/04 B2 1,000 1,080,000
------------
GROUP TOTAL 8,833,763
------------
- -----------------------------------------------------------------------
- ------------
RETAIL TRADE (5.9%)
Big V Supermarkets, Inc.
Sr. Sub. Notes
11.00%, 2/15/04 B3 1,675 1,356,750
Brylane L.P.
Gtd. Sr. Sub.
Notes
10.00%, 9/1/03 B2 500 465,000
County Seat Stores, Inc.
Sr. Sub. Notes
12.00%, 10/1/02 B3 1,520 1,421,200
Dairy Mart Conveniences
Stores, Inc.
Sr. Sub. Notes
10.25%, 3/15/04 B3 1,750 1,470,000
Duane Reade
Corp.
Sr. Notes
12.00%, 9/15/02 B3 1,500 1,320,000
Farm Fresh, Inc.
Sr. Notes
12.25%, 10/1/00 B2 1,360 1,176,400
Finlay Fine Jewelry Corp.
Sr. Notes
10.625%, 5/1/03 B1 500 495,000
Great American Cookie
Series B
Sr. Sec.
Debentures
10.875%,
1/15/01 B3 1,250 1,075,000
Hills Stores
Company
Sr. Notes
10.25%, 9/30/03 B1 1,250 1,162,500
Pathmark Stores,
Inc.:
(/8/) Jr. Sub. Notes
0.00%, 11/1/03 B3 1,650 1,068,375
Sr. Sub. Notes
9.625%, 5/1/03 B2 250 246,250
(/4/) Town & Country Corp.
Sr. Sub. Notes
13.00%, 5/31/98 Caa 878 412,744
Waban, Inc.
Sr. Sub. Notes
11.00%, 5/15/04 Ba3 500 511,250
------------
GROUP TOTAL 12,180,469
------------
- -----------------------------------------------------------------------
- ------------
SERVICES (15.6%)
Allied Waste Industries
Sr. Sub. Notes
12.00%, 2/1/04 B3 400 416,000
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- -------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
American Banknote Corp.
Series B, Sr.
Notes
11.625%, 8/1/02 B2 $ 750 $ 487,500
American
Restaurant
Group, Inc.,
Series A Notes
12.00%, 9/15/98 B2 1,500 1,095,000
Bally's Casino Holdings, Inc.
Sr. Discount
Notes
Zero Coupon, 6/15/98 B2 1,500 1,140,000
Bally's Health &
Tennis Sr. Sub.
Notes
13.00%, 1/15/03 B3 1,000 870,000
Bally's Park
Place Funding,
Inc.
First Mortgage Notes
9.25%, 3/15/04 Ba3 400 388,000
Boomtown, Inc.
First Mortgage Notes
11.50%, 11/1/03 B1 500 457,500
Casino America,
Inc.
First Mortgage Bonds
11.50%,
11/15/01 B1 1,000 960,000
CCP Insurance,
Inc.
Sr. Notes
10.50%,
12/15/04 Ba2 3,000 3,180,000
Charter Medical
Corp.
Sr. Sub. Notes
11.25%, 4/15/04 B2 250 268,125
Cinemark USA,
Inc.
Sr. Secured Debentures
12.00%, 6/1/02 B1 500 545,000
Comdata Network,
Inc.
Sr. Sub.
Debentures
13.25%,
12/15/02 B3 1,000 1,180,000
Community Health Systems
Sr. Sub.
Debentures
10.25%,
11/30/03 B2 500 535,000
Elsinore Corp.
First Mortgage Notes
12.50%, 10/1/00 N/R 1,500 750,000
G.B. Property
Funding
First Mortgage Notes
10.875%,
1/15/04 B2 1,100 926,750
(/4/) General Medical
Corp.
Series A, Sub.
Debentures
12.125%,
8/15/05 B3 1,887 1,953,045
Gillett
Holdings, Inc.
Sr. Sub. Notes
12.25%, 6/30/02 N/R 1,000 1,050,000
GNF Corp.,
Series B
First Mortgage Notes
10.625%, 4/1/03 B2 1,200 1,050,000
Grand Casinos,
Inc., Series B
First Mortgage Notes
12.50%, 2/1/00 Ba3 1,000 1,080,000
Griffin Gaming &
Entertainment
Mortgage Notes
11.00%, 9/15/03 N/R 975 887,250
</TABLE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- ------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
(/4/)(/6/) Hemmeter Enterprises, Inc.
Sr. Notes
12.00%,
12/15/00 N/R $ 892 $ 356,630
ICON Health & Fitness, Inc.
Series B
Sr. Sub. Notes
13.00%, 7/15/02 B3 500 525,000
Kloster Cruise
Ltd.
Secured Notes
13.00%, 5/1/03 Caa 1,250 900,000
Meditrust
Convertible
Debentures
7.50%, 3/1/01 Baa3 3,000 3,030,000
Motels of
America, Inc.
Series B
Sr. Sub. Notes
12.00%, 4/15/04 B3 500 500,000
OrNda
HealthCorp.
Sr. Sub. Notes
12.25%, 5/15/02 B2 1,000 1,105,000
Red Roof Inns,
Inc.
Sr. Exchange
Notes
9.625%,
12/15/03 B3 900 875,250
Santa Fe Hotel,
Inc.
First Mortgage Notes
11.00%,
12/15/00 B2 363 268,620
Sea Containers
Ltd.
Sr. Sub.
Debentures
12.50%, 12/1/04 B1 500 535,000
Solon Automated
Services
Sr. Notes
12.75%, 7/15/01 B1 1,000 1,000,000
Station Casinos,
Inc.
Sr. Sub. Notes
9.625%, 6/1/03 B2 450 429,187
Trump Castle Funding, Inc.
Sub. Notes
11.75%,
11/15/03 Caa 400 309,000
Trump Plaza Funding, Inc.
First Mortgage Notes
10.875%,
6/15/01 B3 850 778,813
(/4/)(/10/)Trump Taj Mahal Funding
Debentures
11.35%,
11/15/99 Caa 1,804 1,601,353
Wright Medical Technology
Series B
Sr. Secured Debentures
10.75%, 7/1/00 B3 1,000 1,005,000
------------
GROUP TOTAL 32,438,023
------------
- ------------------------------------------------------------------------
- ------------
TRANSPORTATION (2.4%)
CHC Helicopter
Corp.
Sr. Sub. Notes
11.50%, 7/15/02 B3 750 656,250
Ferrovie dello
Stato Notes
9.125%, 7/6/09 N/R 3,000 3,515,850
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- ----------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
USAir, Inc.
Gtd. Sr. Notes
10.00%, 7/1/03 B3 $1,000 $ 825,000
------------
GROUP TOTAL 4,997,100
------------
- ----------------------------------------------------------------------
- ------------
TOTAL CORPORATE OBLIGATIONS
(Cost $174,719,698) 173,053,103
------------
- ----------------------------------------------------------------------
- ------------
GOVERNMENT & AGENCY SECURITIES (3.3%)
- ----------------------------------------------------------------------
- ------------
COLLATERALIZED MORTGAGE OBLIGATIONS (2.9%)
Federal National Mortgage Association
REMIC Series 89-
23D
10.20%, 9/25/18 Aaa 4,348 4,557,226
Strip Series H-2
11.50%, 5/1/09 Aaa 1,409 1,526,661
------------
GROUP TOTAL 6,083,887
------------
- ----------------------------------------------------------------------
- ------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (0.2%)
Various Pools:
10.50%,
9/15/15-
8/15/16 Aaa 359 397,407
------------
- ----------------------------------------------------------------------
- ------------
U.S. TREASURY BOND (0.2%)
7.125%, 2/15/23 Aaa 290 307,809
------------
- ----------------------------------------------------------------------
- ------------
TOTAL GOVERNMENT & AGENCY SECURITIES
(Cost $6,769,704) 6,789,103
------------
- ----------------------------------------------------------------------
- ------------
COLLATERALIZED SECURITY (3.8%)
- ----------------------------------------------------------------------
- ------------
COLLATERALIZED MORTGAGE OBLIGATIONS (3.8%)
Drexel, Burnham & Lambert Trust
REMIC-PAC, Series S-2
9.00%, 8/1/18 Aaa 7,801 7,925,686
------------
- ----------------------------------------------------------------------
- ------------
TOTAL COLLATERALIZED SECURITY
(Cost $8,318,253) 7,925,686
------------
- ----------------------------------------------------------------------
- ------------
ASSET BACKED OBLIGATIONS (3.3%)
- ----------------------------------------------------------------------
- ------------
Green Tree Financial Corp.
Manufactured Housing
Installment Sale Contracts
Series 1993-4, Class B1
7.20%, 1/15/19 Baa3 2,000 1,960,000
Household
Affinity Credit
Card Master
Trust I Series
93-B, Class B
4.95%, 3/15/99 A2 2,500 2,461,700
(/9/) Merrill Lynch
Home Equity
Acceptance
Trust
Series 1994-A,
Class A2
6.625%, 7/17/22 A3 2,311 2,307,758
(/3/) Resolution Trust
Co.
Series 1994-N1A, Class 2
6.00%, 1/15/04 Baa2 194 193,266
------------
- ----------------------------------------------------------------------
- ------------
TOTAL ASSET BACKED OBLIGATIONS
(Cost $6,848,198) 6,922,724
------------
- ----------------------------------------------------------------------
- ------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
COMMON STOCKS (0.6%)
- ----------------------------------------------------------------------
- ------------
COMMUNICATIONS (0.0%)
Pagemart, Inc. 7,000 $ 0
-----------
- ----------------------------------------------------------------------
- ------------
CONSUMER PRODUCTS (0.4%)
(/1/)(/5/)(/6/) Applause Enterprises, Inc.
(acquired 11/8/91, cost
$144,400) 3,800 13,300
(/1/) Mail-Well, Inc. 2,500 0
(/1/) Specialty Foods, Inc. 30,000 37,500
(/1/)(/5/)(/6/) TLC Beatrice International
Holdings, Inc.
(acquired 11/19/91-
11/26/91,
cost $1,018,750) 25,000 750,000
-----------
GROUP TOTAL 800,800
-----------
- ----------------------------------------------------------------------
- ------------
FINANCE (0.0%)
Capital Holding Corp. 6,667 1,667
(/1/)(/5/)(/6/)(/7/) Westfed Holdings, Inc.,
Series B (acquired
9/20/88, cost $383) 12,670 0
-----------
GROUP TOTAL 1,667
-----------
- ----------------------------------------------------------------------
- ------------
MANUFACTURING (0.2%)
(/5/)(/6/)(/7/) CIC I Acquisition Corp.
(acquired 10/18/89,
cost $1,076,715) 2,944 200,192
(/1/) Polyvision Corp. 6,731 21,034
Thermoscan Inc., Class B 6,500 104,000
-----------
GROUP TOTAL 325,226
-----------
- ----------------------------------------------------------------------
- ------------
RETAIL TRADE (0.0%)
(/1/)(/5/)(/6/) Jewel Recovery L.P.
(acquired 7/30/93, cost
$0) 49,559 0
-----------
- ----------------------------------------------------------------------
- ------------
SERVICES (0.0%)
(/1/)(/5/)(/6/) Lady Luck Gaming Corp.
(acquired 2/15/94-2/18/94,
cost $144,532) 11,040 4,416
(/1/)(/3/) Motels of America, Inc. 500 37,500
-----------
GROUP TOTAL 41,916
-----------
- ----------------------------------------------------------------------
- ------------
TOTAL COMMON STOCKS
(Cost $2,578,200) 1,169,609
- ----------------------------------------------------------------------
- ------------
PREFERRED STOCKS (1.2%)
- ----------------------------------------------------------------------
- ------------
COMMUNICATIONS (0.4%)
Cablevision Systems Corp.,
Class G 4,075 411,575
(/3/) SD Warren Co. 12,000 372,000
-----------
GROUP TOTAL 783,575
-----------
- ----------------------------------------------------------------------
- ------------
FINANCE (0.0%)
(/1/)(/5/)(/6/)(/7/) Westfed Holdings, Inc.,
Class A (acquired 9/20/88-
6/18/93,
cost $3,611,992) 42,759 0
-----------
- ----------------------------------------------------------------------
- ------------
MANUFACTURING (0.0%)
Alpine Group, Inc. 3,696 166,320
-----------
- ----------------------------------------------------------------------
- ------------
OIL, GAS & ELECTRIC (0.8%)
(/1/) Consolidated Hydro, Inc.,
Class H 3,000 1,635,000
-----------
- ----------------------------------------------------------------------
- ------------
TOTAL PREFERRED STOCKS
(Cost $5,923,138) 2,584,895
-----------
- ----------------------------------------------------------------------
- ------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
WARRANTS (0.3%)
- -----------------------------------------------------------------------------------
- ------------
(/1/) American Telecasting, Inc., expiring 6/23/99 540 $ 540
(/1/)(/3/) Boomtown, Inc., expiring 11/1/98 500 0
(/1/)(/3/)(/6/) Capital Gaming International, expiring
2/1/99 5,687 74
(/1/) Casino America Corp., expiring 11/15/95 3,263 0
(/1/) Casino Magic Corp., expiring 10/14/96 9,000 450
(/1/) CHC Helicopter,
expiring 12/15/00 6,000 6,000
(/1/) Commodore Media, Inc., expiring 5/1/00 300 2,400
(/1/) Consolidated Hydro, Inc., expiring 12/31/03 5,400 27,000
(/1/) County Seat Stores, expiring 10/15/98 1,520 2,280
(/1/)(/6/) Crown Packaging Holdings, expiring 11/1/03 2,000 50,000
(/1/) Dial Call Communications, expiring 4/25/99 750 1,500
(/1/)(/3/) Elsinore Corp.,
expiring 10/8/98 79,941 0
General Media,
(/1/) expiring 12/22/00 500 5,000
(/1/) expiring 12/31/00 625 6,250
(/1/)(/3/) Great American Cookie, expiring 1/30/00 225 0
(/1/) Gulf States Steel Acquisition Corp, expiring
4/15/00 400 0
(/1/) Hemmeter, expiring 12/15/99 9,000 0
(/1/) Icon Health Fitness, Inc., expiring 11/14/99 500 0
(/1/) MVE Inc., expiring 2/15/02 650 0
(/1/) Petro Shopping Centers L.P., expiring 6/1/97 500 17,000
(/1/) Presidential Riverboat Casinos, expiring
9/23/96 6,000 0
(/1/)(/3/) Purity Supreme, expiring 8/1/97 5,198 0
(/1/)(/3/) Renaissance Cosmetics, expiring 4/3/01 3,000 52,500
(/1/) SD Warren Co., expiring 12/15/06 12,000 84,000
(/1/) Sheffield Steel Corp.,
expiring 11/1/01 6,250 31,250
(/1/) Spanish Broadcasting,
expiring 6/29/99 1,500 300,000
(/1/) Uniroyal Technology Corp., expiring 6/1/03 5,000 12,500
(/1/) United International Holdings, expiring
11/15/99 2,950 0
(/1/)(/3/) Wright Medical Technology, Inc. expiring
6/30/03 618 101,911
------------
- -----------------------------------------------------------------------------------
- ------------
TOTAL WARRANTS
(Cost $435,674) 700,655
------------
- -----------------------------------------------------------------------------------
- ------------
</TABLE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
UNITS (2.0%)
- --------------------------------------------------------------------------
- ------------
Cellular
Communications, Inc.
Zero Coupon, 8/15/00 B3 $ 2,000 $ 1,100,000
(/3/)(/6/) Decorative Home
13.00%, 6/30/02 N/R 500 502,500
Horseshoe Gaming
12.75%, 9/15/00 N/R 500 490,000
(/3/)(/6/)(/8/) In-Flight Phone Corp.
0.00%, 5/15/02 Caa 1,000 400,000
(/3/)(/8/) Intelcom Group,
Inc. 0.00%,
9/15/05 N/R 650 364,000
(/3/) Terex Corp.
13.75%, 5/15/02 Caa 1,500 1,230,000
------------
- --------------------------------------------------------------------------
- ------------
TOTAL UNITS
(Cost $4,601,152) 4,086,500
------------
- --------------------------------------------------------------------------
- ------------
SHORT-TERM INVESTMENT (1.1%)
- --------------------------------------------------------------------------
- ------------
REPURCHASE AGREEMENT (1.1%)
Sanwa Securities,
6.20%, dated 9/29/95,
due 10/2/95, to be
repurchased at
$2,279,177,
collateralized by
$2,236,000 U.S.
Treasury Notes 6.50%,
due 9/30/96, valued at
$2,323,820
(Cost $2,278,000) $2,278 2,278,000
------------
- --------------------------------------------------------------------------
- ------------
TOTAL INVESTMENTS (98.9%)
(Cost $212,472,017) 205,510,275
------------
- --------------------------------------------------------------------------
- ------------
OTHER ASSETS IN EXCESS OF
LIABILITIES (1.1%) 2,308,744
------------
- --------------------------------------------------------------------------
- ------------
NET ASSETS (100%)
- --------------------------------------------------------------------------
- ------------
Applicable to 24,385,367 issued and outstanding
$ .001 par value shares (authorized 100,000
shares) $207,819,019
------------
- --------------------------------------------------------------------------
- ------------
NET ASSET VALUE PER SHARE $8.52
-----
- --------------------------------------------------------------------------
- ------------
</TABLE>
N/R--Not Rated
PAC--Planned Amortization Class
REMIC--Real Estate Mortgage Investment Conduit.
(/1/) Non-income producing security.
(/2/) Defaulted)security.
(/3/) 144A Security. Certain conditions for public sale may exist.
(/4/) Payment in kind bond. Market value includes accrued interest.
(/5/) Restricted as to private and public resale. Total cost of restricted
securities at September 30, 1995 aggregated $5,996,772. Total market value
of restricted securities owned at September 30, 1995 was $967,908 or 0.5%
of net assets.
9
<PAGE>
(/6/) Private Placement.
(/7/) Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by the Board of
Directors.
(/8/) Step Bond--Coupon rate is low or zero for an initial period and then
increases to a higher coupon rate thereafter.
(/9/) Floating Rate--The interest rate changes on these instruments based upon
a designated base rate. The rates shown are those in effect at September
30, 1995.
(/10/) 9.375% of 11.35% represents amount paid in cash, the remainder is payment
in kind.
10
