<PAGE>
[LOGO CS FIRST BOSTON INCOME FUND, INC.
APPEARS 599 LEXINGTON AVENUE
HERE] NEW YORK, NY 10022
================================================================================
OFFICERS AND DIRECTORS
Joseph F. Huber Richard J. Lindquist
Chairman and President Vice President
Prof. Enrique Arzac Robert R. Coby
Director Vice President
Lawrence J. Fox Hal Liebes
Director Secretary
James S. Pasman, Jr. Harvey M. Rosen
Director Treasurer
================================================================================
INVESTMENT ADVISER
CS First Boston Investment Management Corporation
599 Lexington Avenue
New York, New York 10022
- --------------------------------------------------------------------------------
ADMINISTRATOR
United States Trust Company of New York
73 Tremont Street Boston, Massachusetts 02108
- --------------------------------------------------------------------------------
CUSTODIAN
United States Trust Company of New York
770 Broadway
New York, New York 10003
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT
United States Trust Company of New York
770 Broadway
New York, New York 10003
Phone 1-800-428-8890
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
- --------------------------------------------------------------------------------
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
[LOGO APPEARS HERE] CS FIRST BOSTON INCOME FUND, INC.
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
FIRST QUARTER REPORT
MARCH 31, 1995
<PAGE>
CS First Boston Income Fund, Inc.
Chairman's Letter
=======
To Our Shareholders:
During the first quarter of 1995, the U.S. Treasury market posted its highest
positive quarterly return since the third quarter of 1992, 4.66%. The first
quarter ended with yields hovering near a six-month low. Yields on 2-year
Treasuries declined by 91 basis points, from 7.69% to 6.78%, while yields on
30-year Treasuries dropped by 45 basis points to 7.43%. The CS First Boston
Income Fund earned a net total return of 5.71% during the first quarter based
upon net asset value and reinvestment of dividends. As a result of the greater
drop in short-term yields, the yield curve steepened by 193 basis points during
the year, as measured by the differential between 2-year and 30-year
maturities.
This rally is attributable in part to the investment of the cash accumulated
in late 1993 and investors seeking an alternative to emerging markets. In
addition, recent economic and inflation data and comments by Federal Reserve
Chairman Greenspan have caused many participants to conclude that the cycle of
rising short- and long-term rates may be completed.
Recent reports indicated that sales of new homes fell a larger-than expected
14.0% in February to the lowest level in three years. Home construction is
losing steam, sales of existing homes have fallen for two consecutive months
and auto manufacturers are cutting back production targets for 1995 amid weaker
sales. In addition, a decline in durable goods orders and weak retail sales
figures in February were viewed as signals of a moderating pace of economic
acceleration. Leading indicators pointed to continued economic strength.
Payroll employment gains of 318,000 in February were stronger than expected and
the unemployment rate fell to 5.4%. Business confidence in the U.S. economy
rose in March as companies made plans to hire more workers. Consumer confidence
rose unexpectedly as more Americans planned to buy houses and cars amid lower
mortgage rates and steady employment.
Inflation data paints a similarly two-tone picture. Inflation at the finished
goods level has remained relatively subdued. The consumer and producer price
indices each rose 0.3% in February. However, indications of underlying price
pressures have become more widespread. Intermediate goods producer prices rose
9.6% for the three months ending in January. Capacity utilization rose to a
fifteen and a half year high of 85.7%. While a high level of plant usage
indicates economic strength, it also means that production costs may rise.
Finally the increase in the hourly earnings component of the employment data
reveals the early stages of wage inflation.
For the first quarter 1995, the U.S. high yield market saw strong positive
performance driven by gains in gaming, cable and telecommunications. The
Salomon Brothers High Yield Market Index posted a 5.91% return for the quarter
following 1994's negative performance. The high yield market outperformed all
other fixed income indices according to Salomon Brothers.
We are basing our investment strategy on the assumption that the recent
decline in short-term yields will be reversed. Forward looking measures such as
employment, factory utilization and consumer confidence remain very high.
Fourth quarter real GDP grew at 4.6% and final sales were up by 5.3%. These
factors combined with a weak U.S. dollar make it unlikely that inflation can
remain low in this environment. We believe the Fed is likely to respond by
further lifting the Fed funds target. The current level of interest rates does
not adequately reflect further Fed intervention, consequently, we are keeping
portfolio durations moderately short relative to their respective targets.
Sectorwise, we will continue to focus on high yield investments. It is our
intent to maintain a relatively high allocation to the high yield market in
anticipation of improving fundamental and technical conditions. We expect the
high yield market to track
1
<PAGE>
the directional movements of the debt and equity
markets, albeit with less volatility for the market as a whole near-term than
it has experienced in the past year. However, we do expect the market to
continue to be volatile on an individual credit basis as earnings releases are
made. On the technical side, the high yield market has benefited from $2.6
billion that has flowed into high yield mutual funds during the first quarter
of 1995 versus only $14.0 million that flowed into these funds in the first
quarter of 1994. Other participants in the marketplace, pension funds,
insurance companies and former emerging markets players, are also adding demand
to a market that currently does not have a great deal of supply. We continue to
find value in new issues and selected secondary issues. Holdings continue to be
diversified.
Finally, as recently announced, the Fund's adviser CS First Boston Investment
Management Corporation has agreed to transfer its business to its affiliate BEA
Associates ("BEA"). Accordingly, the Fund will be sending proxy material to its
stockholders asking them to approve, among other things, a new advisory
agreement with BEA and a name change of the fund to BEA Income Fund at your
upcoming shareholder meeting. A further result of this change is the addition
of BEA representatives to the Fund's Board of Directors and senior management.
Going forward it is proposed that Daniel Sigg and Robert Moore will be the
Fund's senior executives with Mr. Sigg joining the Board, and Joseph Huber will
resign.
/s/ Joseph F. Huber
Joseph F. Huber
Chairman
2
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
=======
March 31, 1995
<TABLE>
<CAPTION>
Face
Moody's Amount Value
Ratings (000) (000)
=======-------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS (83.1%)
=======-------------------------------------------------------------------
COMMUNICATIONS (11.1%)
Adelphia Communications, Series B
Sr. Notes
(/4/) 9.50%, 2/15/04 B3 $ 548 $ 408
12.50%, 5/15/02 B3 650 622
(/8/) American Telecasting, Inc. Sr.
Discount Notes
0.00%, 6/15/04 Caa 1,500 675
Cablevision Industry Corp. Sr.
Sub. Notes
9.25%, 4/1/08 B1 975 960
Cablevision System Corp.
Sr. Sub. Notes
9.875%, 2/15/13 B3 500 480
Chancellor
12.50%, 10/1/04 B3 1,000 1,000
Continental Cablevision, Inc. Sr.
Sub. Notes
11.00%, 6/1/07 B1 1,650 1,749
(/8/) Dial Call Communications Sr.
Discount Notes
0.00%, 4/15/04 Caa 750 281
(/4/) Falcon Holdings Group L.P. Sr.
Sub. Notes
11.00%, 9/15/03 N/R 1,263 1,099
General Media, Series B 10.625%,
12/31/00 B2 625 522
(/8/) Helicon Group
Sr. Secured Notes
9.00%, 11/1/03 Caa 2,000 1,750
Heritage Media
Sr. Sub. Notes
11.00%, 10/1/02 B2 1,500 1,538
(/8/) Imax Corp.
Sr. Notes
7.00%, 3/1/01 B1 1,000 870
Jones Intercable, Inc.
Sr. Sub. Notes
10.50%, 3/1/08 B1 500 506
11.50%, 7/15/04 B1 1,000 1,055
(/8/) MFS Communications
Sr. Notes
0.00%, 1/15/04 B2 500 316
Mobile Telecommunications
Technologies Corp. 13.50%,
12/15/02 B2 500 519
(/8/) Nextel Communications
Sr. Notes
0.00%, 9/1/03 B3 1,500 664
0.00%, 8/15/04 B3 600 246
(/6/)(/8/) Pagemart, Inc.
0.00%, 2/1/05 N/R 2,000 1,080
(/3/) Rogers Cablesystems of America
Sr. Notes
10.00%, 3/15/05 Ba3 300 301
Scott Cable Communications, Inc.
Sr. Sub. Notes
12.25%, 4/15/01 B3 $ 500 $ 400
(/6/) Simmons Cable
Sr. Sub. Notes
15.747%, 4/30/96 N/R 750 390
(/8/) Spanish Broadcasting System
7.50%, 6/15/02 B3 1,500 1,358
Summit Communications
Sr. Sub. Notes
10.50%, 4/15/05 B3 500 520
Telemundo Group
Sr. Notes
10.25%, 12/30/01 N/R 500 425
United International Holdings
Zero Coupon, 11/15/99 B3 2,950 1,645
Univision Network Holding Sub.
Notes
Zero Coupon, 12/17/02 N/R 1,500 885
--------
GROUP TOTAL 22,264
--------
=======-------------------------------------------------------------------
CONSUMER PRODUCTS (5.1%)
Cinemark USA, Inc.
Sr. Sub. Notes
12.00%, 6/1/02 B1 500 528
Doskocil Cos.
Sr. Sub. Notes
9.75%, 7/15/00 B2 500 460
Fresh Del Monte Produce Series B
Sr. Notes
10.00%, 5/1/03 B3 500 385
Jordan Industries
Sr. Notes
10.375%, 8/1/03 B3 1,200 1,107
Mail-Well Envelope
Sr. Sub. Notes
10.50%, 2/15/04 B3 1,500 1,343
(/3/)(/8/) Mail-Well Holdings
Sr. Notes
0.00%, 2/15/06 N/R 500 215
Marvel III Holdings, Inc. Series
B Sr. Secured Notes 9.125%,
2/15/98 Caa 1,100 976
Pilgrim's Pride Corp.
Sr. Sub. Notes
10.875%, 8/1/03 B3 1,000 910
(/3/) Renaissance Cosmetics 13.75%,
8/15/01 N/R 1,500 1,418
Revlon Consumer Products, Inc.
Sr. Sub. Notes
10.50%, 2/15/03 B3 1,450 1,359
Seven Up/RC Bottling Co. Sr.
Secured Notes
11.50%, 8/1/99 Caa 500 432
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount Value
Ratings (000) (000)
=======-------------------------------------------------------------------
<S> <C> <C> <C>
(/8/) Specialty Foods Acquisition Corp.
Series B
Sr. Secured Notes
0.00%, 8/15/05 Caa $ 2,000 $ 1,000
--------
GROUP TOTAL 10,133
--------
=======-------------------------------------------------------------------
FINANCE (7.1%)
American Express
Zero Coupon, 12/12/00 N/R 5,000 3,271
(/1//1/) GMAC
5.95%, 12/14/98 Baa1 4,000 3,776
(/3/) Goldman Sachs & Co.
6.20%, 2/15/01 A1 3,000 2,734
GPA Holland
(/3/) 8.50%, 3/3/97 A 550 482
(/3/) 8.625%, 1/15/99 N/R 750 560
(/3/) 9.12%, 2/24/99 A 250 189
Tiphook Financial Corp. 8.00%,
3/15/00 Caa 697 530
Western National Corp. 7.125%,
2/15/04 Baa1 3,000 2,780
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GROUP TOTAL 14,322
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=======-------------------------------------------------------------------
INDUSTRIAL (14.5%)
Adience Enterprises, Inc.
Sr. Secured Notes
11.00%, 6/15/02 N/R 2,000 1,500
AK Steel Corp.
Sr. Notes
10.75%, 4/1/04 B1 950 957
(/6/) Alpine Group
13.50%, 12/22/95 N/R 1,000 990
Arcadian Partners L.P., Series B
Sr. Notes
10.75%, 5/1/05 B2 500 491
Armco, Inc.
Sr. Notes
11.375%, 10/15/99 B2 815 803
Bayou Steel Corp.
10.25%, 3/1/01 B2 500 440
Berg Electronics
Sr. Sub. Notes
11.375%, 5/1/03 B3 1,000 1,030
Boise Cascade Co.
9.85%, 6/15/02 Baa3 3,000 3,199
Chatwins Group, Inc.
Sr. Notes
13.00%, 5/1/03 B2 1,000 825
Container Corp. of America Sr.
Notes
9.75%, 4/1/03 B2 500 490
Easco Corp., Series B
Sr. Notes
10.00%, 3/15/01 B1 500 490
Fairfield Manufacturing Co. Sr.
Sub. Notes
11.375%, 7/1/01 Caa 500 472
Fort Howard Corp.
Sub. Notes
10.00%, 3/15/03 B2 1,250 1,194
Geneva Steel Co.
Sr. Notes
9.50%, 1/15/04 B1 400 324
Genmar Holdings, Series A 13.50%,
7/15/01 B3 $ 500 $ 487
(/3/) Hanson America, Inc.
2.39%, 3/1/01 A3 2,000 1,495
Harris Chemical
(/8/) Sr. Secured Notes
0.00%, 7/15/01 B2 1,125 973
Sr. Sub. Notes
10.75%, 10/15/03 B3 1,250 1,209
Huntsman Corp.
First Mortgage Notes
11.00%, 4/15/04 B1 750 801
(/8/) Indspec Chemical
Sr. Sub. Notes
0.00%, 12/1/03 B3 1,496 883
Malette, Inc.
12.25%, 7/15/04 Ba3 1,000 1,040
NL Industries
11.75%, 10/15/03 B1 500 513
Repap Wisconsin
Sr. Notes
9.875%, 5/1/06 B3 650 595
Trans Resources, Inc.
Sr. Sub. Notes
11.875%, 7/1/02 B2 1,500 1,350
Uniroyal Chemical Acquisitions
Sr. Sub. Notes
11.00%, 5/1/03 B3 2,000 2,010
Uniroyal Technology Corp. Sr.
Notes
11.75%, 6/1/03 B2 500 410
USX Corp.
9.625%, 8/15/03 Baa3 3,000 3,188
WCI Steel, Inc., Series B
Sr. Notes
10.50%, 3/1/02 B1 450 433
Wheeling-Pittsburgh Corp. Sr.
Notes
9.375%, 11/15/03 B1 500 432
--------
GROUP TOTAL 29,024
--------
=======-------------------------------------------------------------------
MANUFACTURING (15.6%)
(/8/) American Standard Cos.
Sr. Sub. Notes
0.00%, 6/1/05 B1 1,450 986
Associated Materials, Inc.
Sr. Sub. Notes
11.50%, 8/15/03 B3 1,000 910
Atlantis Group, Inc.
Sr. Notes
11.00%, 2/15/03 B2 1,740 1,688
(/8/) Building Materials Corp. 0.00%,
7/1/04 B1 1,000 535
Comdata Network, Inc.
Sr. Sub. Notes
13.25%, 12/15/02 B3 1,000 1,090
Consoltex Group, Inc.
Sr. Sub. Notes
11.00%, 10/1/03 B2 1,000 890
(/3/)(/8/) Crown Packaging Holdings Sr. Sub.
Notes
0.00%, 11/1/03 Caa 2,000 970
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount Value
Ratings (000) (000)
=======---------------------------------------------------------------------
<S> <C> <C> <C>
Data Documents Inc.
Sr. Notes
13.50%, 7/15/02 B2 $ 750 $ 750
Domtar, Inc.
11.25%, 9/15/17 Ba1 1,500 1,575
(/8/) Exide Corp.
Sr. Sub. Notes
0.00%, 12/15/04 B2 1,000 715
Gaylord Container Corp.
Sr. Notes
11.50%, 5/15/01 B3 1,700 1,785
(/8/) Sr. Sub. Notes
0.00%, 5/15/05 Caa 1,000 950
Giant Industries
Sr. Sub. Notes
9.75%, 11/15/03 B2 500 455
G.I. Holdings, Inc., Series B
Sr. Notes
Zero Coupon, 10/1/98 Ba3 1,500 967
(/3/) Icon Health
13.00%, 7/15/02 B3 500 530
Interlake Corp.
Sr. Sub. Notes
12.125%, 3/1/02 B3 1,000 975
Ithaca Industries, Inc.
Sr. Sub. Notes
11.125%, 12/15/02 B2 1,000 910
Ivex Holdings Corp.
Sr. Sub. Notes
12.50%, 12/15/02 B3 500 522
(/8/) 0.00%, 3/15/05 Caa 1,500 720
Mafco, Inc.
Sr. Sub. Notes
11.875%, 11/15/02 B3 550 531
MVE Inc.
Sr. Notes
12.50%, 2/15/02 B3 650 666
Plastic Specialties & Technology
Sr. Secured Notes
11.25%, 12/1/03 B3 500 442
Rexene Corp.
Sr. Notes
11.75%, 12/1/04 B1 500 510
Riverwood International
10.375%, 6/30/04 B1 500 512
(/5/)(/6/)(/7/) Rotor Tool
Sr. Sub. Notes
12.375%, 4/1/97
(acquired 1/26/93,
cost $172,100) N/R 956 574
Sheffield Steel Corp.
12.00%, 11/1/01 N/R 1,250 1,188
(/8/) Silgan Holdings, Inc.
Sr. Disc. Notes
0.00%, 12/15/02 B3 1,000 890
Specialty Equipment Co., Inc.
Sr. Sub. Notes
11.375%, 12/1/03 B3 1,500 1,478
Stone Container Corp.
Sr. Notes
9.875%, 2/1/01 B1 1,250 1,213
</TABLE>
<TABLE>
<CAPTION>
Face
Moody's Amount Value
Ratings (000) (000)
=======------------------------------------------------------------------
<S> <C> <C> <C>
Synthetic Industries, Inc.
Sr. Sub. Notes
12.75%, 12/1/02 B3 $ 1,450 $ 1,392
Tracor, Inc.
Sr. Sub. Notes
10.875%, 8/15/01 B2 500 502
USG Corp., Series B
Sr. Notes
9.25%, 9/15/01 B1 500 495
U.S. Leather, Inc.
Sr. Notes
10.25%, 7/31/03 B2 1,750 1,453
Westpoint Stevens, Inc.
Sr. Sub. Notes
9.375%, 12/15/05 B3 500 457
Williamhouse Regency, Inc.
11.50%, 6/15/05 B2 1,000 965
--------
GROUP TOTAL 31,191
--------
=======------------------------------------------------------------------
OIL, GAS & ELECTRIC (4.3%)
Energy Ventures
Sr. Notes
10.25%, 3/15/04 B1 500 489
Falcon Drilling, Inc.
Sr. Sub. Notes
9.75%, 1/15/01 B2 1,000 945
Forest Oil, Inc.
Sr. Sub. Notes
11.25%, 9/1/03 B3 500 420
Gulf Canada Resources
Sr. Sub. Notes
9.25%, 1/15/04 B2 900 855
H.S. Resources
Sr. Sub. Notes
9.875%, 12/1/03 B1 500 477
(/8/) Mesa Capital Corp.
0.00%, 6/30/98 B3 1,725 1,665
Oryx Energy Co.
9.75%, 9/15/98 Ba3 1,000 1,005
Petroleum Heat & Power 12.25%,
2/1/05 B2 200 208
Southeastern Public Service Co.
Sr. Sub. Notes
11.875%, 2/1/98 Caa 628 628
Tesoro Petroleum Corp. 13.00%,
12/1/00 B2 1,000 1,000
Wilrig
Sr. Notes
11.25%, 3/15/04 B2 1,000 960
--------
GROUP TOTAL 8,652
--------
=======------------------------------------------------------------------
RETAIL TRADE (6.6%)
Big V Supermarkets, Inc. 11.00%,
2/15/04 B3 1,675 1,390
Brylane Capital Corp.
Sr. Sub. Notes
10.00%, 9/1/03 B2 500 488
Central Rents Inc., Series B
12.875%, 12/15/03 N/R 1,500 1,369
County Seat Stores
Sr. Sub. Notes
12.00%, 10/1/01 B3 1,520 1,512
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount Value
Ratings (000) (000)
=======---------------------------------------------------------------------
<S> <C> <C> <C>
Dairy Mart Convenience Stores, Inc.
Sr. Sub. Notes
10.25%, 3/15/04 B3 $ 1,750 $ 1,365
Farm Fresh, Inc.
Sr. Notes
12.25%, 10/1/00 B2 1,360 1,265
Finlay Fine Jewelry
Sr. Notes
10.625%, 5/1/03 B1 500 465
(/2/) Grand Union Capital, Series A
12.25%, 7/15/02 Ca 1,400 476
(/2/) Grand Union Co., Series A Sr.
Sub. Notes
11.375%, 2/15/99 B3 1,000 1,030
Great American Cookie 10.875%,
1/15/01 B3 1,250 1,106
Hill Stores
Sr. Notes
10.25%, 9/30/03 Ba3 1,000 970
Pathmark Stores
(/8/) Jr. Sub. Notes
0.00%, 11/1/03 B3 1,450 776
Sr. Sub. Notes
9.625%, 5/1/03 B2 250 233
(/4/) Town & Country Corp.
Sr. Sub. Notes
13.00%, 5/31/98 B3 825 330
Waban, Inc.
Sr. Sub. Notes
11.00%, 5/15/04 Ba3 500 503
--------
GROUP TOTAL 13,278
--------
=======---------------------------------------------------------------------
SERVICES (16.5%)
(/2/) Acme Holdings
Sr. Sub. Notes
11.75%, 6/1/00 Ca 1,000 370
Allied Waste Industries
Sr. Sub. Notes
12.00%, 2/1/04 B3 400 396
American Restaurant Group, Inc.
Sr. Secured Notes
12.00%, 9/15/98 B2 1,500 1,365
Bally's Casino Holdings, Inc.
Zero Coupon, 6/15/98 B3 1,500 983
Bally's Health & Tennis
Sr. Sub. Notes
13.00%, 1/15/03 B3 1,000 790
Boomtown, Inc.
11.50%, 11/1/03 B1 500 480
Capital Gaming International
(/5/)(/6/) Zero Coupon, 8/1/95 N/R 1 1
(acquired 7/20/94, cost $900)
(/3/) Series B
11.50%, 2/1/01 Caa 250 190
Casino America Corp. 11.50%,
11/15/01 B1 1,000 972
CCP Insurance Inc.
10.50%, 12/15/04 Ba1 3,000 2,997
Charter Medical Corp.
Sr. Sub. Notes
11.25%, 4/15/04 B2 550 572
</TABLE>
<TABLE>
<CAPTION>
Face
Moody's Amount Value
Ratings (000) (000)
=======--------------------------------------------------------------------
<S> <C> <C> <C>
Community Health Systems
Sr. Sub. Notes
10.25%, 11/30/03 B2 $ 500 $ 510
Continental Medical Systems, Inc.
Sr. Sub Notes
10.375%, 4/1/03 B2 1,200 1,092
10.875%, 8/15/02 B2 950 893
Elsinore Corp.
12.50%, 10/1/00 N/R 1,500 750
G.B. Property Funding 10.875%,
1/15/04 B2 1,250 1,053
(/4/) General Medical
Sub. Notes
12.125%, 8/15/05 B3 1,780 1,753
Gillett Holdings, Inc.
Sr. Sub. Notes
12.25%, 6/30/02 N/R 1,000 1,030
GNF Corp., Series B 10.625%,
4/1/03 B2 1,000 775
Grand Casinos, Inc., Series B
12.50%, 2/1/00 Ba3 1,000 1,020
(/4/)(/6/) Hemmeter
12.00%, 12/15/00 N/R 841 631
Hollywood Casino Corp., Series B
Sr. Secured Notes
14.00%, 4/1/98 N/R 1,000 1,063
Kloster Cruise Ltd.
Sr. Notes
13.00%, 5/1/03 B2 1,250 1,006
(/1//1/) Meditrust
Convertible Debentures
7.50%, 3/1/01 Ba2 3,000 2,820
Mid-American Waste Systems
Sr. Sub. Notes
12.25%, 2/15/03 B3 1,950 1,989
Motels of America, Inc.
Sr. Sub. Notes
12.00%, 4/15/04 B3 500 505
Ornda Health Corp.
Sr. Sub. Notes
12.25%, 5/15/02 B2 1,000 1,090
Red Roof Inns, Inc.
Sr. Notes
9.625%, 12/15/03 B3 900 864
Sea Containers
Sr. Sub. Notes
12.50%, 12/1/04 B1 500 534
Solon Automated
12.75%, 7/15/01 B1 1,000 982
Station Casinos, Inc.
Sr. Sub. Notes
9.625%, 6/1/03 B2 450 396
Trump Plaza
Mortgage Notes
10.875%, 6/15/01 B3 700 567
(/4/)(/1//2/) Trump Taj Mahal Funding 11.35%,
11/15/99 Caa 1,573 1,192
U.S. Bank Note Corp., Series B
Sr. Notes
11.625%, 8/1/02 B1 750 555
Wright Medical Technology, Series
B
Sr. Notes
10.75%, 7/1/00 B3 1,000 980
--------
GROUP TOTAL 33,166
--------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount Value
Ratings (000) (000)
=======-------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION (2.3%)
CHC Helicopter
Sr. Sub. Notes
11.50%, 7/15/02 B3 $ 750 $ 622
Ferrov del Stato
9.125%, 7/6/09 N/R 3,000 3,200
USAir, Inc.
Sr. Notes
10.00%, 7/1/03 B3 1,000 760
--------
GROUP TOTAL 4,582
--------
=======-------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $175,290,187) 166,612
--------
=======-------------------------------------------------------------------
AGENCY SECURITIES (4.4%)
=======-------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (3.7%)
FEDERAL HOME LOAN MORTGAGE CORPORATION
REMIC 32-C
9.50%, 3/15/20 Aaa 1,000 1,076
FEDERAL NATIONAL MORTGAGE ASSOCIATION
REMIC Series 89-23D 10.20%,
9/25/18 Aaa 4,348 4,633
Strip Series H-2
11.50%, 5/1/09 Aaa 1,526 1,659
--------
GROUP TOTAL 7,368
--------
=======-------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (0.5%)
April 30 yr TBA
8.50%, 4/1/25 Aaa 1,000 1,010
--------
=======-------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (0.2%)
Various Pools:
10.50%, 9/15/15-8/15/16 Aaa 386 420
--------
=======-------------------------------------------------------------------
TOTAL AGENCY SECURITIES
(Cost $8,697,728) 8,798
--------
=======-------------------------------------------------------------------
AGENCY COLLATERALIZED SECURITIES (4.3%)
=======-------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (4.3%)
Drexel, Burnham, & Lambert Trust
Series S-2
9.00%, 8/1/18 Aaa 8,357 8,686
--------
=======-------------------------------------------------------------------
TOTAL AGENCY COLLATERALIZED SECURITIES (Cost $8,910,152) 8,686
--------
=======-------------------------------------------------------------------
ASSET BACKED OBLIGATIONS (4.1%)
=======-------------------------------------------------------------------
FINANCE (4.1%)
Green Tree Financial Corp. 7.20%,
1/15/19 Baa3 2,000 1,812
Household Affinity Credit Card
Master Trust I Series 93-B
4.95%, 3/15/99 A2 2,500 2,404
(/1//0/) Merrill Lynch Home Equity
Acceptance Trust Series 94-A2
6.875%, 7/17/22 A3 2,555 2,563
(/3/) Resolution Trust Co.
6.00%, 1/15/04 Baa2 1,531 1,527
--------
GROUP TOTAL 8,306
--------
=======-------------------------------------------------------------------
TOTAL ASSET BACKED OBLIGATIONS
(Cost $8,428,254) 8,306
--------
=======-------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (000)
=======--------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (1.1%)
=======--------------------------------------------------
COMMUNICATIONS (0.0%)
Pagemart, Inc. 7,000 $ 0
--------
=======--------------------------------------------------
CONSUMER PRODUCTS (0.6%)
(/1/)(/5/)(/6/) Applause
Enterprises,
Inc.
(acquired
11/8/91, cost
$144,400) 3,800 9
(/1/)(/6/) Mail-Well, Inc. 2,500 0
(/1/) Specialty Foods,
Inc. 30,000 75
(/1/)(/5/)(/6/) TLC Beatrice
Enterprises,
Inc. (acquired
11/19/91-
11/26/91,
cost
$1,018,800) 25,000 1,075
--------
GROUP TOTAL 1,159
--------
=======--------------------------------------------------
FINANCE (0.0%)
Capital Holding
Corp. 6,667 34
(/1/)(/5/)(/6/)(/7/) Westfed
Holdings, Inc.,
Series B
(acquired
9/20/88, cost
$400) 12,670 0
--------
GROUP TOTAL 34
--------
=======--------------------------------------------------
MANUFACTURING (0.5%)
(/1/) Adience, Inc. 167,572 168
(/5/)(/6/)(/7/) CIC Acquisition
Corp.
(acquired
10/18/89, cost
$1,076,700) 2,944 200
Harvard
Industries,
Class B 30,000 525
--------
GROUP TOTAL 893
--------
=======--------------------------------------------------
RETAIL TRADE (0.0%)
(/1/)(/5/) Jewel Recovery
L.P.
(acquired
7/30/93, cost
$0) 49,559 0
--------
=======--------------------------------------------------
SERVICES (0.0%)
(/1/)(/5/)(/6/) Lady Luck Gaming
(acquired
2/15/94-
2/18/94,
cost $144,500) 11,040 4
(/3/) Motels of
America, Inc. 500 42
--------
GROUP TOTAL 46
--------
=======--------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,124,938) 2,132
--------
=======--------------------------------------------------
PREFERRED STOCKS (0.8%)
=======--------------------------------------------------
FINANCE (0.0%)
(/1/)(/5/)(/6/)(/7/) Westfed
Holdings, Inc.,
Class A
(acquired
9/20/88-
6/18/93,
cost
$3,612,000) 42,759 0
--------
=======--------------------------------------------------
OIL, GAS & ELECTRIC (0.8%)
(/1/) Consolidated
Hydro, Inc.,
Class H 3,000 1,635
--------
=======--------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $5,097,952) 1,635
--------
=======--------------------------------------------------
WARRANTS (0.3%)
=======--------------------------------------------------
(/1/) American
Telecasting,
Inc.,
expiring
6/23/99 7,500 26
(/1/)(/3/) Boomtown, Inc.,
expiring
11/1/98 500 0
(/1/)(/3/) Capital Gaming
International,
expiring 2/1/99 5,687 14
(/1/) Casino America,
expiring
11/15/96 3,263 0
(/1/) Casino Magic
Corp., expiring
10/14/96 9,000 0
(/1/)(/3/) Central Rents,
expiring
1/30/04 1,500 41
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Value
Shares (000)
=======---------------------------------------------------------------------
<S> <C> <C>
(/1/) Chatwins Group, expiring 5/3/03 1,000 $ 0
(/1/) CHC Helicopter, expiring 12/15/00 6,000 6
(/1/) Consolidated Hydro, Inc.,
expiring 12/31/03 5,400 27
(/1/) County Seat Stores, expiring 10/15/98 1,520 3
(/1/)(/6/) Crown Packaging Holdings,
expiring 11/1/03 2,000 60
(/1/) Data Documents, Inc., expiring 7/15/02 750 0
(/1/) Dial Call Communications,
expiring 4/25/99 750 1
(/1/)(/3/) Elsinore, expiring 10/8/98 79,941 0
General Media,
(/1/) expiring 12/22/00 500 5
(/1/) expiring 12/31/00 625 6
(/1/)(/3/) Great American Cookie, expiring 1/30/00 225 0
(/1/) Hemmeter, expiring 12/15/99 9,000 0
(/1/)(/3/) Icon Health, expiring 11/14/99 500 0
(/1/) MVE Inc., expiring 2/15/02 1,415 0
(/1/) Presidential Riverboat Casino,
expiring 4/3/95 6,000 2
(/1/)(/3/) Purity Supreme, expiring 8/1/97 5,198 0
(/1/)(/3/) Renaissance Cosmetics, expiring 4/3/01 3,000 0
(/1/) Sheffield Steel Corp., expiring 11/1/01 6,250 38
(/1/) Spanish Broadcasting, expiring 6/29/99 1,500 180
(/1/) Uniroyal Technology Corp.,
expiring 6/1/03 5,000 11
(/1/) United International Holdings, expiring
11/15/99 2,950 0
(/1/)(/3/) Wright Medical Technology,
expiring 6/30/03 618 102
=======---------------------------------------------------------------------
TOTAL WARRANTS
(Cost $291,096) 522
--------
=======---------------------------------------------------------------------
<CAPTION>
Moody's Face
Ratings Amount (000)
=======---------------------------------------------------------------------
<S> <C> <C> <C>
UNITS (0.7%)
=======---------------------------------------------------------------------
CORPORATE OBLIGATIONS (0.5%)
Petro PSC Properties/Petro
Finance
12.50%, 6/1/02 B3 $ 500 512
(/3/) Thermoscan, Inc.
11.50%, 8/15/01 N/R 500 500
--------
GROUP TOTAL 1,012
--------
=======---------------------------------------------------------------------
Shares
=======---------------------------------------------------------------------
PREFERRED STOCKS (0.2%)
(/3/) SD Warren Co. 12,000 366
--------
=======---------------------------------------------------------------------
TOTAL UNITS
(Cost $1,300,000) 1,378
--------
=======---------------------------------------------------------------------
TOTAL INVESTMENTS (98.8%)
(Cost $211,140,307) 198,069
--------
=======---------------------------------------------------------------------
OTHER ASSETS IN EXCESS OF
LIABILITIES (1.2%) 2,444
--------
=======---------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 24,385,367 issued and
outstanding $.001 par value shares
(authorized 100,000,000 shares) $200,513
--------
=======---------------------------------------------------------------------
NET ASSET VALUE PER SHARE $ 8.22
--------
=======---------------------------------------------------------------------
</TABLE>
N/R--Not Rated.
REMIC--Real Estate Mortgage Investment Conduit.
TBA--Security is subject to delayed delivery.
(/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 March 31, 1995 aggregated $6,169,800. Total market value of
restricted securities owned at March 31, 1995 was $1,863,000 or 0.9% of
net assets.
(/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/) The interest rate disclosed represents the current yield at March 31,
1995.
(/10/) Floating Rate--The interest rate changes on these instruments based upon
a designated base rate. The rates shown are those in effect at March 31,
1995.
(/11/) A portion ofthis security was pledged as collateral for delayed delivery
transactions.
(/12/) 9.375% of 11.35% represents amount paid in cash. The remainder is payment
in kind.
8
