<PAGE>
BEA Income Fund, Inc.
153 East 53rd Street
New York, NY 10022
---------------------------------------------
OFFICERS AND DIRECTORS
William W. Priest, Jr. Hal Liebes
CHAIRMAN OF THE BOARD SENIOR VICE PRESIDENT
Prof. Enrique R. Arzac Michael A. Pignataro
DIRECTOR SECRETARY
Lawrence J. Fox Wendy S. Setnicka
DIRECTOR VICE PRESIDENT
James S. Pasman, Jr. AND ASSISTANT SECRETARY
DIRECTOR Paul P. Stamler
Richard J. Lindquist TREASURER
PRESIDENT AND CHIEF Paul Roselli
INVESTMENT OFFICER ASSISTANT TREASURER
Suzanne E. Moran
INVESTMENT OFFICER
--------------------------------------------------------
INVESTMENT ADVISER
BEA Associates
153 East 53rd Street
New York, New York 10022
Phone 1-800-293-1232
--------------------------------------------------------
ADMINISTRATOR
Chase Global Funds Services Co.
73 Tremont Street
Boston, Massachusetts 02108
--------------------------------------------------------
CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
--------------------------------------------------------
SHAREHOLDER SERVICING AGENT
The Chase Manhattan Bank
4 New York Plaza
New York, New York 10004
Phone 1-800-428-8890
--------------------------------------------------------
LEGAL COUNSEL
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
--------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
--------------------------------------------------------
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 description of the Plan and additional information concerning
terms and conditions, and any applicable charges relating to the Plan, is
included at the back of this report.
--------------------------------------------------------
BEA Income Fund, Inc.
---------------------------------------------
THIRD QUARTER REPORT
September 30, 1997
<PAGE>
BEA INCOME FUND, INC.
- ----------
Dear Shareholders: November 11, 1997
We are pleased to report on the activities of the BEA Income Fund, Inc. ("the
Fund") for the quarter ended September 30, 1997 and discuss our investment
strategy.
At September 30, 1997, the Fund's net asset value ("NAV") was $8.42,
compared to an NAV of $8.19 at June 30, 1997. As a result, the Fund's total
return (based on NAV and assuming reinvestment of dividends of $0.18 per share)
for the period was 5.1%. The Fund returned 11.4% for the nine months ended
September 30, 1997.
THE MARKET
Despite a bumpy ride along the way, the broad fixed income market closed the
third quarter with a solid gain versus the second quarter. The yield on the
bellwether 30-year Treasury bond declined a total of 39 basis points, to 6.39%
from 6.78%. Thus far in 1997 as a whole, the long Treasury yield is down 25
basis points.
The market's strength is supported by the U.S. macroeconomic climate, which
remains a remarkable confluence of low inflation, stable interest rates and
moderate expansion. Among developed economies worldwide, the U.S. stands alone
as an engine of growth. Powerful factors overseas, furthermore, are exerting
considerable deflationary pressures on the economy and serve as an effective
counterweight to investor concern about a resurgence of inflation.
The quarter was a productive one for investors both in investment-grade and
high yield securities. As represented by the Lehman Brothers Aggregate Bond
Index, investment-grade debt returned 3.3% and raised its year-to-date return to
6.5% from 3.1% at the end of the second quarter. Within the investment-grade
universe, high-grade corporate bonds and mortgage-backed securities remained the
most successful subcategories.
High yield was even stronger, ending the third quarter as the
best-performing U.S. debt sector both on a quarterly and year-to-date basis. The
Salomon Brothers High-Yield Market Index returned 4.3% and 10.6% in the quarter
and nine months, respectively, versus the Lehman Aggregate's corresponding gains
listed above. Yield spreads between high yield and Treasury instruments remained
at all-time lows.
By several measures, high yield's strength is at record-breaking levels:
- - MUTUAL FUND INFLOWS. According to Chase Securities, individuals poured $6.1
billion of net new cash into high yield mutual funds during the quarter, up
from $5.1 billion in the second quarter. The year-to-date inflow of $15.4
billion is nearly equal to the record $15.8 billion taken in during all of
1996, meaning that 1997 is sure to be the best year ever for participation in
the high yield market by individual investors.
- - NEW ISSUES. Issuance of new high yield instruments continued to boom in the
third quarter. Chase Securities calculates total new supply at $37.3 billion,
compared to $31.6 billion in the second quarter, and year-to-date new
issuance of $94.9 billion already is 29% above the $73.6 billion recorded in
1996 as a whole.
- - MARKET SIZE. All those new issues are pushing the amount of total
outstanding high yield debt skyward. The size of the high yield market at
September 30 was estimated by Chase Securities at $429 billion, a 25% jump
over the same date a year ago and the highest such level ever.
- - INTERNATIONAL DIVERSIFICATION. Total issuance of dollar-denominated high
yield debt by companies domiciled outside the U.S. (excluding Canada) at
September 30 was $13.7 billion, an astounding 76% higher than 1996's total of
$7.8 billion.
- - YIELDS. Declining bond yields mean that bond prices are rising. The average
market-weighted new-issue offer yield in September was 9.21%, down from 9.86%
in August and 10.62% for all of 1996. The average yield for the overall high
yield market dropped to 8.84%, versus 9.03% on October 1, 1996.
PORTFOLIO REVIEW
The fundamental elements of our investment strategy are intact. We are
maintaining the Fund's existing positions and, with few exceptions, adjusting
the portfolio only as necessary. Outperformance of the broad high yield market
(as exemplified by the Salomon Brothers index) indicates that our emphasis on
individual security selection and sector weightings is succeeding.
2
<PAGE>
Within the portfolio's high yield component, the two most heavily weighted
sectors (telecommunications, cable and media) generated above-market returns.
Our telecom holdings particularly benefited from continuing investor
expectations of global industry consolidation. Such expectations were realized
in October, when long-distance giant MCI Communications became the subject of
competing takeover bids by Worldcom Inc. and GTE that topped an existing bid
from British Telecom. Worldcom also announced its intention to acquire Brooks
Fiber Properties, Inc., a major provider of local bypass service. The
attractiveness of the cable and media sector was reaffirmed by the June
announcement that Microsoft would make a $1 billion equity investment in Comcast
Corp.
Three other sectors in the portfolio (gaming, auto parts, energy) modestly
dampened relative performance during the quarter. Returns for gaming, which we
overweighed compared to the index, and auto parts, were below-market. By
contrast, we underweighted energy, which excelled as buying of oil and gas
companies' debt helped to drive up prices for the entire sector. We currently
consider oil and gas issues to be fully valued, but are more optimistic about
exploration and production companies.
OUTLOOK
Over the last few weeks, investors' fear that the Southeast Asian currency
turmoil would spread to Hong Kong and South Korea prompted a sell-off in
equities and bonds worldwide. The high yield sector sustained some price
declines as overall "spread product" (I.E., debt securities whose market
valuation is greatly driven by the spreads between their yields and those of
U.S. Treasury debt) and stocks of all quality levels were subject to increased
volatility. While our near-term view of the market has become much more cautious
as a result, we also sense that the heavy selling may have been overdone, and
are closely monitoring market conditions accordingly.
Looking further ahead, our longer-term perspective remains bright. We expect
to see periods of volatility in the direction of real interest rates, but
believe that the overall trend will continue to be downward. The combination of
increased savings levels tied to demographic shifts and a moderate inflation
environment should provide a favorable backdrop for financial assets.
In such an environment, investors should be biased toward "spread product"
(I.E., debt securities whose market valuation is greatly driven by the spreads
between their yields and those of U.S. Treasury debt) and, thus, will seek out
the best yields available in the marketplace. High yield should be a prime
beneficiary. We also continue to favor corporate bonds and securitized debt
(E.G., mortgage and asset-backed securities) in this regard and hope to raise
our exposure should we perceive any attractive buying opportunities.
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 management or allocations should 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 Fund's Shareholder Servicing Agent at (800) 428-8890.
Sincerely yours,
[SIGNATURE]
Richard J. Lindquist
PRESIDENT AND CHIEF INVESTMENT OFFICER
[SIGNATURE]
William W. Priest, Jr.
CHAIRMAN OF THE BOARD
3
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- ---------
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
DOMESTIC INCOME SECURITIES (100.4%)
- --------------------------------------------------------------------------------
- ----------------
CORPORATE OBLIGATIONS (76.8%)
- --------------------------------------------------------------------------------
- ----------------
AUTOMOTIVE (1.2%)
(3) Cambridge Industries, Inc.
Sr. Sub. Notes
10.25%, 7/15/07 B3 $ 500 $ 523,750
Collins & Aikman
Products Corp.
Sr. Sub. Notes
11.50%, 4/15/06 B3 650 742,625
Consorcio G Grupo
Dina S.A./MCII Holdings
(U.S.A.), Inc.
Sr. Secured Notes
Zero Coupon, 11/15/02 N/R 1,950 1,764,750
(3) Safety Components
International Inc.
Sr. Sub. Notes
10.125%, 7/15/07 B3 500 510,000
-------------
GROUP TOTAL 3,541,125
-------------
- --------------------------------------------------------------------------------
- ----------------
BROADCASTING (5.1%)
(8) Australis Holdings Pty. Ltd.
Yankee Sr. Secured
Discount Notes
0.00%, 11/1/02 N/R 2,250 1,321,677
(8) Capstar Broadcasting Partners,
Inc.
Sr. Discount Notes
0.00%, 2/1/09 N/R 2,000 1,380,000
(8) Commodore Media, Inc.
Gtd. Sr. Sub. Notes
7.50%, 5/1/03 B2 300 329,250
(3) Digital Television Services,
L.L.C./DTS Capital, Inc.
Gtd. Sr. Sub. Notes
12.50%, 8/1/07 B3 750 780,000
(8) EchoStar Communications Corp.
Gtd. Sr. Discount Notes
0.00%, 6/1/04 B2 450 416,250
Granite Broadcasting Corp.
Sr. Sub. Notes
9.375%, 12/1/05 B3 300 295,500
Pegasus Media &
Communications, Inc.
Series B, Notes
12.50%, 7/1/05 B2 250 283,125
SFX Broadcasting, Inc.
Series B, Sr. Sub. Notes
10.75%, 5/15/06 B3 650 713,375
Sinclair Broadcast Group
Sr. Sub. Notes
10.00%, 9/30/05 B2 900 945,000
(8) Spanish Broadcasting System,
Inc.
Sr. Notes
12.50%, 6/15/02 B3 500 572,500
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
Turner Broadcasting Systems,
Inc.
Sr. Notes
7.40%, 2/1/04 Ba1 $ 1,820 $ 1,860,950
(8) UIH Australia/Pacific, Inc.
Series B, Sr. Discount Notes
0.00%, 5/15/06 B3 1,500 1,083,750
United International Holdings,
Inc.:
Sr. Secured Discount Notes
Zero Coupon, 11/15/99 B3 2,200 1,793,000
Series B, Sr. Secured
Discount Notes
Zero Coupon, 11/15/99 B3 750 611,250
Univision Network Holding L.P.
Sub. Notes
Zero Coupon, 12/17/02 N/R 1,500 1,485,000
Young Broadcasting, Inc.
Series B, Gtd. Sr. Sub.
Notes:
8.75%, 6/15/07 B2 750 736,875
9.00%, 1/15/06 B2 300 301,500
-------------
GROUP TOTAL 14,909,002
-------------
- --------------------------------------------------------------------------------
- ----------------
CABLE (6.8%)
CCA Holdings Corp.
Sr. Sub. Notes
13.00%, 12/31/99 N/R 1,500 1,965,000
Cablevision System Corp.:
Sr. Sub. Debentures
9.875%, 2/15/13 B1 850 918,000
Sr. Sub. Notes
9.875%, 5/15/06 B1 400 432,000
Century Communications Corp.
Sr. Notes:
9.75%, 2/15/02 Ba3 500 527,500
8.75%, 10/1/07 Ba3 400 401,000
Charter Communications
Southeast L.P.
Series B, Sr. Notes
11.25%, 3/15/06 B3 450 495,000
Comcast Corp.
Sr. Sub. Notes:
9.375%, 5/15/05 Ba3 180 194,175
9.125%, 10/15/06 Ba3 750 802,500
Continental Cablevision, Inc.
Sr. Debentures
9.50%, 8/1/13 Baa2 600 701,250
(8) Diamond Cable Communications
plc
Yankee Discount Notes
0.00%, 12/15/05 B3 1,450 1,085,688
(3)(8) DIVA Systems Corp.
Units
0.00%, 5/15/06 N/R 1,925 1,155,000
(4) Falcon Holding Group L.P.
Sr. Sub. Notes
11.00%, 9/15/03 N/R 1,752 1,821,860
Helicon Group L.P.
Series B, Sr. Secured Notes
11.00%, 11/1/03 B1 500 531,250
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
InterMedia Capital Partners IV
L.P./InterMedia Partners IV
Capital Corp.
Sr. Notes
11.25%, 8/1/06 B2 $ 650 $ 715,000
Lenfest Communications, Inc.:
Sr. Notes
8.375%, 11/1/05 Ba3 250 251,250
Sr. Sub. Notes
10.50%, 6/15/06 B2 1,000 1,105,000
(8) Marcus Cable Co.
Sr. Discount Notes
0.00%, 12/15/05 Caa 1,600 1,328,000
NTL, Inc.:
(8) Series A, Sr. Deferred Coupon
Notes
0.00%, 4/15/05 B3 1,000 822,500
(8) Series B, Sr. Deferred Coupon
Notes
0.00%, 2/1/06 B3 700 523,250
Series B, Sr. Notes
10.00%, 2/15/07 B3 500 524,375
Olympus Communications,
L.P./Olympus Capital Corp.
Series B, Sr. Notes
10.625%, 11/15/06 B1 1,000 1,083,750
OpTel, Inc.
Series B, Sr. Notes
13.00%, 2/15/05 B3 500 498,750
(8) Telewest Communications plc
Yankee Sr. Sub. Discount
Debentures
0.00%, 10/1/07 B1 2,450 1,843,625
-------------
GROUP TOTAL 19,725,723
-------------
- --------------------------------------------------------------------------------
- ----------------
CHEMICALS (2.1%)
Harris Chemical N.A.
Sr. Secured Debentures
10.25%, 7/15/01 B2 1,050 1,092,000
Huntsman Polymers Corp.
Sr. Notes
11.75%, 12/1/04 B1 1,000 1,135,000
NL Industries Inc.:
Sr. Secured Notes
11.75%, 10/15/03 B1 250 274,375
(8) Sr. Secured Discount
Debentures
0.00%, 10/15/05 B2 800 778,000
(8) Sterling Chemical Holdings,
Inc.
Sr. Secured Discount Notes
0.00%, 8/15/08 Caa1 1,000 705,000
Texas Petrochemical Corp.
Series B, Sr. Sub. Notes
11.125%, 7/1/06 B3 350 383,687
UCC Investor's Holdings, Inc.
Sr. Sub. Notes
11.00%, 5/1/03 B3 1,500 1,612,500
-------------
GROUP TOTAL 5,980,562
-------------
</TABLE>
- --------------------------------------------------------------------
- -------------
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------
- ----------------
CONSTRUCTION & BUILDING MATERIALS (0.4%)
<C> <S> <C> <C> <C>
(8) Building Materials Corp.
Series B, Sr. Deferred Notes
0.00%, 7/1/04 Ba3 $ 200 $ 186,750
Collins & Aikman Floor
Coverings, Inc.
Series B, Sr. Sub. Notes
10.00%, 1/15/07 B3 550 569,250
(8) Waxman Industries Inc.
Series B, Sr. Secured
Deferred Notes
0.00%, 6/1/04 Caa1 600 522,750
-------------
GROUP TOTAL 1,278,750
-------------
- --------------------------------------------------------------------------------
- ----------------
CONSUMER PRODUCTS & SERVICES (1.7%)
(3)(8) Coinstar, Inc.
Sr. Discount Notes
0.00%, 10/1/06 N/R 1,700 1,330,250
(3) Doskocil Manufacturing Co.,
Inc.
Gtd. Sr. Sub. Notes
10.125%, 9/15/07 N/R 500 515,000
Jordan Industries, Inc.
Series B, Sr. Notes
10.375%, 8/1/07 B3 750 766,875
(3) Playtex Products, Inc.
Series A, Sr. Notes
8.875%, 7/15/04 B1 225 227,812
Renaissance Cosmetics, Inc.
Gtd. Sr. Notes
11.75%, 2/15/04 B3 650 659,750
Revlon Consumer Products, Inc.
Series B, Sr. Sub. Notes
10.50%, 2/15/03 B3 800 852,000
Town & Country Corp.
Sr. Sub. Notes
13.00%, 5/31/98 Ca 878 535,689
-------------
GROUP TOTAL 4,887,376
-------------
- --------------------------------------------------------------------------------
- ----------------
ELECTRONICS (1.7%)
Advanced Micro Devices, Inc.
Sr. Secured Notes
11.00%, 8/1/03 Ba1 850 960,500
Celestica International Inc.
Gtd. Sr. Sub. Yankee Notes
10.50%, 12/31/06 N/R 1,100 1,192,125
DecisionOne Corp.
Sr. Sub. Notes
9.75%, 8/1/07 B3 500 522,500
DecisionOne Holdings Corp.
Units
11.50%, 8/1/08 N/R 700 465,500
Unisys Corp.:
Series B, Sr. Notes
12.00%, 4/15/03 B1 1,000 1,122,500
Sr. Notes
11.75%, 10/15/04 B1 225 254,250
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
(3) Viasystems, Inc.
Sr. Sub. Notes
9.75%, 6/1/07 B3 $ 400 $ 417,000
-------------
GROUP TOTAL 4,934,375
-------------
- --------------------------------------------------------------------------------
- ----------------
ENERGY (4.0%)
Abraxas Petroleum Corp.
Series B, Sr. Notes
11.50%, 11/1/04 B2 1,550 1,697,250
(3) Belden & Blake Energy Co.
Gtd. Sr. Sub. Notes
9.875%, 6/15/07 B3 200 201,500
Bellwether Exploration Co.
Gtd. Sr. Sub. Notes
10.875%, 4/1/07 B3 1,450 1,569,625
(3) Cliffs Drilling Co.
Series B, Sr. Notes
10.25%, 5/15/03 B1 1,100 1,196,250
Dawson Production Services,
Inc.
Sr. Notes
9.375%, 2/1/07 B1 150 157,125
Forcenergy Inc.
Series B, Sr. Sub. Notes
8.50%, 2/15/07 B2 725 723,187
(3) Giant Industries, Inc.
Sr. Sub. Notes
9.00%, 9/1/07 B2 1,500 1,515,000
Gulf Canada Resources Ltd.
Yankee Sr. Sub. Debentures
9.25%, 1/15/04 Ba2 650 689,000
H.S. Resources, Inc.:
Gtd. Sr. Sub. Notes
9.25%, 11/15/06 B2 600 618,000
Sr. Sub. Notes
9.875%, 12/1/03 B2 500 521,250
Maxus Energy Corp.
Notes
9.375%, 11/1/03 B1 250 269,758
(8) Mesa Operating Co.
Gtd. Sr. Sub. Discount Notes
0.00%, 7/1/06 Ba2 1,100 880,000
Noble Drilling Corp.
Sr. Notes
9.125%, 7/1/06 Baa2 100 109,000
(3) Panda Global Energy Co.
Yankee Gtd. Sr.
Secured Notes
12.50%, 4/15/04 N/R 550 535,562
Parker Drilling Co.
Series B, Gtd. Sr. Notes
9.75%, 11/15/06 B1 300 321,750
Plains Resources Inc.
Series B, Gtd. Sr. Sub. Notes
10.25%, 3/15/06 B2 375 405,000
(3) TransAmerican Energy Corp.
Sr. Secured Discount Notes
11.50%, 6/15/02 B3 350 350,000
-------------
GROUP TOTAL 11,759,257
-------------
</TABLE>
- --------------------------------------------------------------------
- -------------
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------
- ----------------
ENTERTAINMENT (1.2%)
<C> <S> <C> <C> <C>
American Skiing Co.
Series B, Sr. Sub. Notes
12.00%, 7/15/06 B3 $ 425 $ 477,062
Booth Creek Ski Holdings, Inc.
Series B, Sr. Notes
12.50%, 3/15/07 Caa1 1,000 1,025,000
(3) Cinemark USA, Inc.
Series C, Sr. Sub. Notes
9.625%, 8/1/08 B2 250 258,125
Genmar Holdings, Inc.
Series A, Sr. Sub. Notes
13.50%, 7/15/01 Caa2 500 511,875
Time Warner Inc.
Debentures
6.85%, 1/15/26 Ba1 1,095 1,119,638
-------------
GROUP TOTAL 3,391,700
-------------
- --------------------------------------------------------------------------------
- ----------------
FINANCIAL SERVICES (10.2%)
AT&T Capital Corp.
Series 4, Medium Term Notes:
6.26%, 2/18/99 Baa3 290 291,087
6.92%, 4/29/99 Baa3 1,100 1,113,750
American Banknote Corp.
Series B, Sr. Notes
11.625%, 8/1/02 B2 750 823,125
Arcadia Financial, Ltd.
Units
11.50%, 3/15/07 B2 475 496,375
Associates Corp. of North
America
Sr. Debentures
5.96%, 5/15/37 Aa3 1,150 1,161,500
BellSouth Capital Funding
Corp.
Debentures
6.04%, 11/15/26 Aa1 1,700 1,714,926
(9) Camden Property Trust
Remarketed Reset Notes
6.039%, 5/9/02 Baa3 600 600,612
Chase Manhattan Corp.
Sub. Notes
7.25%, 6/1/07 A1 800 827,000
Citicorp:
Sr. Notes
5.625%, 2/15/01 Aa3 1,500 1,471,875
Sub. Notes
7.20%, 6/15/07 A1 485 500,156
First Maryland Bancorp
Sub. Notes
7.20%, 7/1/07 A3 830 850,750
GMAC
Medium Term Notes
6.90%, 6/6/00 A3 2,000 2,033,000
(9) General Electric Capital Corp.
Remarketed Reset Notes
6.29%, 12/15/07 Aaa 2,150 2,142,604
(3) Goldman Sachs Group L.P.
Medium Term Notes
6.20%, 2/15/01 A1 3,000 2,970,000
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
L'Auxiliare du Credit Foncier
de France:
Sr. Unsub. Notes
8.00%, 1/14/02 A3 $ 320 $ 335,600
(9) Gtd. Sub. Notes
5.906%, 10/22/02 Baa3 680 655,758
Long Island Savings Bank
F.S.B.
Notes
7.00%, 6/13/02 Baa3 770 780,587
(9) Midland Bank plc
Series 1M Perpetual Primary
Capital Notes
6.125% Aa3 230 211,151
Norwest Financial Inc.
Sr. Notes
7.50%, 4/15/05 Aa3 1,100 1,156,969
(3)(8) PTC International Finance B.V.
Gtd. Notes
0.00%, 7/1/07 N/R 350 228,813
(9) Skandinaviska Enskilda Banken
AB
Perpetual Sub. Notes:
7.50% N/R 1,250 1,270,125
6.625% Baa1 400 397,000
Toyota Motor Credit Corp.
Sr. Unsecured Bonds
7.00%, 6/11/07 Aaa 1,050 1,080,555
Trans Financial Bank N.A.:
Notes
6.48%, 10/23/98 Baa3 1,250 1,251,050
Sr. Notes
6.32%, 10/17/97 Baa3 1,750 1,750,438
Travelers Group, Inc.
Sr. Notes
6.625%, 9/15/05 Aa3 500 495,535
Western Financial Bank, F.S.B.
Sub. Capital Debentures
8.875%, 8/1/07 B1 500 498,125
(2)(7) Westfed Holdings
Sr. Debentures
15.50%, 9/15/99 N/R 1,750 1,400,000
(3) Wilshire Financial Services
Group, Inc.
Unsecured Sr. Notes
13.00%, 8/15/04 N/R 1,250 1,267,188
-------------
GROUP TOTAL 29,775,654
-------------
- --------------------------------------------------------------------------------
- ----------------
FOOD & BEVERAGES (1.4%)
(3) Archibald Candy Corp.
Gtd. Sr. Secured Notes
10.25%, 7/1/04 B2 550 574,750
(3) Fleming Companies, Inc.
Gtd. Sr. Sub. Notes
10.50%, 12/1/04 B3 500 523,750
Fresh Del Monte Produce N.V.
Series B, Yankee Sr. Notes
10.00%, 5/1/03 B2 800 847,000
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
Gorges/Quick-To-Fix Foods,
Inc.
Series B, Sr. Sub. Notes
11.50%, 12/1/06 B3 $ 1,000 $ 1,052,500
International Home Foods, Inc.
Gtd. Sr. Sub. Notes
10.375%, 11/1/06 B2 1,000 1,102,500
-------------
GROUP TOTAL 4,100,500
-------------
- --------------------------------------------------------------------------------
- ----------------
HEALTH CARE (3.4%)
Health and Retirement Property
Trust
Remarketed Reset Notes
6.20%, 7/9/98 Baa2 1,050 1,049,475
ICON Health & Fitness, Inc.
Series B, Sr. Sub. Notes
13.00%, 7/15/02 B3 500 563,750
(3) Integrated Health Services,
Inc.
Sr. Sub. Notes:
10.25%, 4/30/06 B2 400 429,000
9.25%, 1/15/08 B2 350 356,563
Meditrust:
(9) Remarketed Reset Notes
6.169%, 8/15/02 Baa3 550 549,725
Conv. Debentures
7.50%, 3/1/01 Baa3 3,000 3,425,580
Merck & Co.
Series B, Medium
Term Notes
5.76%, 5/3/37 N/R 1,650 1,662,375
Paracelsus Healthcare
Sr. Sub. Notes
10.00%, 8/15/06 B1 1,250 1,290,625
Regency Health Services, Inc.
Gtd. Sr. Sub. Notes
9.875%, 10/15/02 B2 500 547,500
(3) UROHEALTH Systems, Inc.
Units
12.50%, 4/1/04 B3 150 149,250
-------------
GROUP TOTAL 10,023,843
-------------
- --------------------------------------------------------------------------------
- ----------------
INDUSTRIAL GOODS & MATERIALS (5.1%)
AMTROL Acquisition Inc.
Sr. Sub. Notes
10.625%, 12/31/06 B3 400 415,000
Alpine Group, Inc.
Series B, Gtd. Sr. Secured
Notes
12.25%, 7/15/03 B3 500 552,500
Atlantis Group, Inc.
Sr. Notes
11.00%, 2/15/03 B2 585 625,950
CLARK Material Handling Co.
Gtd. Sr. Notes
10.75%, 11/15/06 B1 550 584,375
(3) Golden Ocean Group, Ltd.
Units
10.00%, 8/31/01 B3 1,032 755,940
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
Haynes International, Inc.
Sr. Notes
11.625%, 9/1/04 B3 $ 500 $ 555,000
(8) IHF Holdings Inc.
Series B, Sr. Sub. Discount
Notes
0.00%, 11/15/04 Caa2 1,250 1,075,000
Interlake Corp.
Sr. Sub. Debentures
12.125%, 3/1/02 B3 1,000 1,050,000
International Knife & Saw,
Inc.
Sr. Sub. Notes
11.375%, 11/15/06 B3 750 815,625
MVE Inc.
Sr. Secured Debentures
12.50%, 2/15/02 B3 850 868,063
Motors and Gears, Inc.
Series B, Sr. Notes
10.75%, 10/15/06 B3 1,500 1,605,000
(3) Neenah Corp.
Sr. Sub. Notes
11.125%, 5/1/07 B3 500 541,250
Plastic Specialties &
Technologies, Inc.
Sr. Secured Debentures
11.25%, 12/1/03 B3 500 532,500
SRI Receivables Purchase Co.,
Inc.
Series B, Notes
12.50%, 12/15/00 N/R 1,500 1,560,000
Seagate Technology, Inc.
Sr. Debentures
7.45%, 3/1/37 Baa3 900 928,125
Specialty Equipment Companies,
Inc.
Sr. Sub. Notes
11.375%, 12/1/03 B3 1,000 1,085,000
Terex Corp.
Series B, Sr. Secured Notes
13.25%, 5/15/02 Caa1 1,000 1,152,500
-------------
GROUP TOTAL 14,701,828
-------------
- --------------------------------------------------------------------------------
- ----------------
METALS & MINING (3.1%)
AK Steel Corp.
Gtd. Sr. Notes
10.75%, 4/1/04 Ba2 1,200 1,305,000
Algoma Steel, Inc.
Yankee First Mortgage Notes
12.375%, 7/15/05 B1 500 583,750
Armco, Inc.
Sr. Notes
11.375%, 10/15/99 B2 415 425,375
Bayou Steel Corp.
First Mortgage Notes
10.25%, 3/1/01 B2 400 414,000
Gulf States Steel, Inc.
First Mortgage Notes
13.50%, 4/15/03 B1 1,200 1,242,000
Kaiser Aluminum & Chemical
Corp.:
Series D, Sr. Notes
10.875%, 10/15/06 B1 875 955,938
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
Sr. Sub. Notes
12.75%, 2/1/03 B2 $ 850 $ 922,250
Republic Engineered Steel,
Inc.
First Mortgage Bonds
9.875%, 12/15/01 Caa1 500 482,500
Sheffield Steel Corp.
First Mortgage Notes
12.00%, 11/1/01 Caa3 1,250 1,293,750
WCI Steel Inc.
Series B, Sr. Secured Notes
10.00%, 12/1/04 B2 725 773,031
Weirton Steel Corp.
Sr. Notes
11.375%, 7/1/04 B2 700 759,500
-------------
GROUP TOTAL 9,157,094
-------------
- --------------------------------------------------------------------------------
- ----------------
PACKAGING/CONTAINERS (2.6%)
BPC Holding Corp.
Series B, Sr. Secured Notes
12.50%, 6/15/06 Caa 950 1,045,000
Container Corp. of America
Gtd. Sr. Notes
9.75%, 4/1/03 B1 500 540,000
(8) Crown Packaging Enterprises
Ltd.
Sr. Secured Discount Notes
0.00%, 8/1/06 Ca 1,950 429,000
Four M Corp.
Series B, Sr. Secured Notes
12.00%, 6/1/06 B3 500 536,250
Gaylord Container Corp.:
(3) Sr. Notes
9.75%, 6/15/07 B3 1,000 1,017,500
Sr. Sub. Discount Debentures
12.75%, 5/15/05 Caa1 775 847,656
(8) Ivex Holdings Corp.
Series B, Sr. Discount
Debentures
0.00%, 3/15/05 Caa1 1,500 1,248,750
Radnor Holdings, Corp.
Sr. Notes
10.00%, 12/1/03 B2 250 258,438
Stone Container Corp.
Units
12.25%, 4/1/02 B3 500 520,625
(3) Stone Container Finance Co.
Yankee Gtd. Sr. Notes
11.50%, 8/15/06 B2 1,000 1,051,250
-------------
GROUP TOTAL 7,494,469
-------------
- --------------------------------------------------------------------------------
- ----------------
PAPER & FOREST PRODUCTS (1.7%)
(3) Ainsworth Lumber Co. Ltd.
Yankee Sr. Secured Notes
12.50%, 7/15/07 B3 400 396,000
Crown Paper Co.
Sr. Sub. Notes
11.00%, 9/1/05 B3 550 591,250
Fort Howard Corp.
Sub. Notes
10.00%, 3/15/03 Ba2 1,250 1,337,500
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
Mail-Well Corp.
Sr. Sub. Notes
10.50%, 2/15/04 B1 $ 1,500 $ 1,616,250
Malette, Inc.
Yankee Sr. Secured Debentures
12.25%, 7/15/04 Ba3 180 204,750
QUNO Corp.
Yankee Sr. Notes
9.125%, 5/15/05 Baa3 315 329,962
Repap Wisconsin, Inc.
2nd Priority Sr.
Secured Notes
9.875%, 5/1/06 Ba3 400 435,000
-------------
GROUP TOTAL 4,910,712
-------------
- --------------------------------------------------------------------------------
- ----------------
PUBLISHING & INFORMATION SERVICES (1.1%)
Belo (A.H.) Corp.
Sr. Notes
6.875%, 6/1/02 Baa2 750 765,000
General Media, Inc.
Sr. Notes
10.625%, 12/31/00 Caa2 625 542,969
(8) InterAct Systems, Inc.
Sr. Discount Notes
0.00%, 8/1/03 N/R 750 347,812
Lamar Advertising Co.
Gtd. Sr. Sub. Notes
9.625%, 12/1/06 B1 250 264,375
Peterson Publishing Co.,
L.L.C./Peterson Capital Corp.
Series B, Gtd. Sr. Sub. Notes
11.125%, 11/15/06 B3 450 507,375
Universal Outdoor, Inc.
Series B, Sr. Sub. Notes
9.75%, 10/15/06 B1 750 800,625
-------------
GROUP TOTAL 3,228,156
-------------
- --------------------------------------------------------------------------------
- ----------------
RESTAURANTS, HOTELS & GAMING (6.2%)
(3) Boyd Gaming Corp.
Sr. Sub. Notes
9.50%, 7/15/07 B1 150 153,750
(2) Capital Gaming International,
Inc.
Promissory Notes
10.125%, 8/1/95 N/R 1 63
(3) CapStar Hotel Co.
Sr. Sub. Notes
8.75%, 8/15/07 B1 375 378,750
Casino America, Inc.
Gtd. Sr. Notes
12.50%, 8/1/03 B1 1,400 1,505,000
Casino Magic of Louisiana,
Corp.
Series B, First Mortgage
Notes
13.00%, 8/15/03 B3 2,900 2,805,750
Colorado Gaming &
Entertainment, Co.
Gtd. Sr. Notes
12.00%, 6/1/03 N/R 1,480 1,596,949
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
(2) Elsinore Corp.
First Mortgage Notes
12.50%, 10/1/00 N/R $ 1,500 $ 780,000
Empress River Casino Finance
Corp.
Gtd. Sr. Notes
10.75%, 4/1/02 Ba3 500 540,000
G.B. Property Funding Corp.
Gtd. First Mortgage Notes
10.875%, 1/15/04 B3 1,100 987,250
HMC Acquisition Properties,
Series B, Gtd. Sr. Notes
9.00%, 12/15/07 Ba3 450 465,188
(3) Hollywood Park, Inc.
Gtd. Sr. Sub. Notes
9.50%, 8/1/07 B2 675 735,750
Horseshoe Gaming L.L.C.:
Series B, Gtd. Sr. Notes
12.75%, 9/30/00 B1 750 842,812
(3) Gtd. Sr. Sub. Notes
9.375%, 6/15/07 B3 1,500 1,554,375
Majestic Star Casino L.L.C.
Sr. Exchange Secured Notes
12.75%, 5/15/03 B2 200 220,750
Mohegan Tribal Gaming
Authority
Series B, Sr. Secured Notes
13.50%, 11/15/02 Ba1 900 1,179,000
Prime Hospitality Corp.
Secured First Mortgage Notes
9.25%, 1/15/06 Ba2 975 1,023,750
Red Roof Inns, Inc.
Sr. Exchange Notes
9.625%, 12/15/03 B2 900 929,250
Santa Fe Hotel, Inc.
Gtd. First Mortgage Notes
11.00%, 12/15/00 Caa2 354 291,607
Waterford Gaming L.L.C./
Waterford Gaming Finance
Corp.
Sr. Notes
12.75%, 11/15/03 N/R 1,600 1,776,000
Wyndham Hotel Corp.
Gtd. Sr. Sub. Notes
10.50%, 5/15/06 B2 300 339,000
-------------
GROUP TOTAL 18,104,994
-------------
- --------------------------------------------------------------------------------
- ----------------
RETAIL (3.1%)
Brylane L.P.
Gtd. Sr. Sub. Notes
10.00%, 9/1/03 B1 500 532,500
(2) County Seat Stores, Inc.
Sr. Sub. Notes
12.00%, 10/1/02 Ca 1,520 684,000
Dairy Mart Convenience Stores,
Inc.
Sr. Sub. Notes
10.25%, 3/15/04 B3 750 761,250
Farm Fresh, Inc.
Sr. Notes
12.25%, 10/1/00 Caa2 960 873,600
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
Great American Cookie Co.
Series B, Sr. Secured
Debentures
10.875%, 1/15/01 B3 $ 1,250 $ 1,275,000
Hills Stores Co.
Gtd. Sr. Notes
12.50%, 7/1/03 B2 500 415,000
(3) Jitney-Jungle Stores of
America, Inc.:
Gtd. Sr. Notes
12.00%, 3/1/06 B2 250 281,875
Gtd. Sr. Sub. Notes
10.375%, 9/15/07 B3 500 516,875
K Mart Corp.
Debentures
7.75%, 10/1/12 Ba3 1,175 1,113,312
Parisian, Inc.
Sr. Sub. Notes
9.875%, 7/15/03 B1 1,200 1,272,000
Pathmark Stores, Inc.
Sr. Sub. Notes
9.625%, 5/1/03 B3 650 643,500
(3) Shoppers Food Warehouse Corp.
Gtd. Sr. Secured Notes
9.75%, 6/15/04 B1 500 511,250
-------------
GROUP TOTAL 8,880,162
-------------
- --------------------------------------------------------------------------------
- ----------------
TELECOMMUNICATIONS (11.9%)
Advanced Radio
Telecommunications Corp.
Sr. Notes
14.00%, 2/15/07 Caa2 900 756,000
American Communications
(8) Services, Inc.
Sr. Discount Notes
0.00%, 11/1/05 N/R 1,700 1,253,750
Brooks Fiber Properties, Inc.:
(8) Sr. Discount Notes:
0.00%, 3/1/06 N/R 1,000 800,000
0.00%, 11/1/06 N/R 2,375 1,828,750
Sr. Notes
10.00%, 6/1/07 N/R 1,050 1,183,875
(8) COLT Telecom Group plc
Yankee Units
0.00%, 12/15/06 N/R 400 299,000
Cellular Communications
International, Inc.
Units
Zero Coupon, 8/15/00 B3 2,000 1,560,000
(8) Dial Call Communications
Sr. Discount Notes
0.00%, 4/15/04 B3 1,100 1,025,750
(8) EchoStar Satellite
Broadcasting Corp.
Sr. Discount Notes
0.00%, 3/15/04 Caa1 750 631,875
(3)(8) Fox/Liberty Networks L.L.C.
Sr. Discount Notes
0.00%, 8/15/07 B1 400 257,000
Sr. Notes
8.875%, 8/15/07 B1 500 505,000
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
(3)(8) GST Telecommunications, Inc.
Conv. Sr. Sub. Discount Notes
0.00%, 12/15/05 N/R $ 200 $ 151,000
(8) GST USA, Inc.
Gtd. Sr. Discount Notes
0.00%, 12/15/05 N/R 1,700 1,283,500
Geotek Communications, Inc.
Conv. Sr. Sub. Notes
12.00%, 12/15/01 Caa2 1,100 935,000
(8) ICG Holdings, Inc.:
Gtd. Sr. Discount Notes:
0.00%, 9/15/05 N/R 650 516,750
0.00%, 3/15/07 N/R 2,000 1,320,000
Gtd. Sr. Exchange Discount
Notes
0.00%, 5/1/06 N/R 600 447,000
(3) Iridium L.L.C./Iridium Capital
Corp.
Series B, Sr. Notes
14.00%, 7/15/05 B3 500 541,250
(3)(8) Jordan Telecommunication
Products, Inc.
Sr. Discount Notes
0.00%, 8/1/07 B3 625 489,062
(8) McCaw International Ltd.
Sr. Discount Notes
0.00%, 4/15/07 N/R 1,000 605,000
McLeodUSA, Inc.:
(8) Sr. Discount Notes
0.00%, 3/1/07 B3 300 213,750
(3) Sr. Notes
9.25%, 7/15/07 B3 400 423,000
(8) Microcell Telecommunications,
Inc.
Series B, Yankee Sr. Discount
Notes
0.00%, 6/1/06 N/R 400 272,000
NEXTLINK Communications, Inc.
Sr. Notes
12.50%, 4/15/06 N/R 350 404,250
(3)(8) Nextel Communications, Inc.
Sr. Discount Notes
0.00%, 8/15/04 B3 2,800 2,422,000
Orion Network Systems, Inc.
Gtd. Sr. Notes
11.25%, 1/15/07 B2 500 547,500
(8) Pagemart Nationwide, Inc.
Sr. Discount Notes
0.00%, 2/1/05 N/R 1,750 1,452,500
(3) Petersburg Long Distance Inc.:
Conv. Sub. Notes
9.00%, 6/1/06 N/R 230 303,600
(8) Units
0.00%, 6/1/04 N/R 1,610 1,529,500
(3)(8) Price Communications Corp./
Price Communications Cellular
Holdings, Inc.
Units
0.00%, 8/1/07 Caa1 1,150 618,125
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
PriCellular Wireless Corp.:
(8) Discount Notes
0.00%, 10/1/03 B3 $ 650 $ 643,500
Sr. Notes
10.75%, 11/1/04 B1 250 270,000
Rogers Cablesystems Ltd.
Series B, Yankee Sr. Secured
2nd Priority Notes
10.00%, 3/15/05 Ba3 300 329,250
Rogers Cantel Inc.
Yankee Sr. Secured Debentures
9.375%, 6/1/08 Ba3 350 375,375
Sprint Spectrum L.P./Sprint
Spectrum Finance Corp.
Sr. Notes
11.00%, 8/15/06 B2 1,400 1,571,500
(3) TCI Satellite Entertainment,
Inc.:
(8) Sr. Sub. Discount Notes
0.00%, 2/15/07 B3 250 163,125
Sr. Sub. Notes
10.875%, 2/15/07 B3 700 735,000
(3) Talton Holdings Inc.
Gtd. Sr. Notes
11.00%, 6/30/07 B2 500 538,750
Teleport Communications Group,
Inc.:
(8) Sr. Discount Notes
0.00%, 7/1/07 B1 1,150 891,250
Sr. Notes
9.875%, 7/1/06 B1 750 815,625
(3)(8) Telesystem International
Wireless, Inc.
Sr. Discount Notes
0.00%, 6/30/07 Caa1 400 250,000
(3) Teletrac, Inc./Teletrac
Holdings, Inc.
Units
14.00%, 8/1/07 Caa2 350 367,500
UNIFI Communications, Inc.
Sr. Notes
14.00%, 3/1/04 N/R 1,000 990,000
(3) USN Communications, Inc.
Units
14.625%, 8/15/04 Caa1 760 520,600
(8) Videotron Holdings plc
Yankee Discount Notes
0.00%, 8/15/05 Baa3 1,500 1,293,750
Western Wireless Corp.
Sr. Sub. Notes
10.50%, 2/1/07 B3 350 368,375
-------------
GROUP TOTAL 34,699,387
-------------
- --------------------------------------------------------------------------------
- ----------------
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
TEXTILES/APPAREL (0.4%)
Pillowtex Corp.
Gtd. Sr. Sub. Notes
10.00%, 11/15/06 B2 $ 500 $ 528,750
William Carter Co.
Series A, Sr. Sub. Notes
10.375%, 12/1/06 B3 500 525,000
-------------
GROUP TOTAL 1,053,750
-------------
- --------------------------------------------------------------------------------
- ----------------
TRANSPORTATION (2.2%)
CHC Helicopter Corp.
Yankee Sr. Sub. Notes
11.50%, 7/15/02 B3 750 804,375
(3) Global Ocean Carriers Ltd.
Gtd. Sr. Notes
10.25%, 7/15/07 B2 750 746,250
Norfolk Southern Corp.:
Notes:
6.95%, 5/1/02 Baa1 450 460,688
7.875%, 2/15/04 Baa1 700 742,000
7.05%, 5/1/37 Baa1 815 847,600
Series A, Medium Term Notes
7.40%, 9/15/06 Baa1 260 270,400
USAir, Inc.
Gtd. Sr. Notes
10.00%, 7/1/03 B3 1,500 1,567,500
(3) ValueJet, Inc.
Sr. Notes
10.50%, 4/15/01 N/R 1,000 1,005,000
-------------
GROUP TOTAL 6,443,813
-------------
- --------------------------------------------------------------------------------
- ----------------
WASTE MANAGEMENT (0.2%)
Allied Waste North
America, Inc.
Gtd. Sr. Sub. Notes
10.25%, 12/1/06 B2 550 603,625
-------------
- --------------------------------------------------------------------------------
- ----------------
TOTAL CORPORATE OBLIGATIONS
(Cost $214,422,432) 223,585,857
-------------
- --------------------------------------------------------------------------------
- ----------------
MUNICIPAL SECURITIES (0.6%)
--------------------------------------------------------------------------------
- ----------------
New Jersey Economic
Development Authority
Series B, Revenue Bonds:
Zero Coupon, 2/15/03 Aaa 1,605 1,148,747
Zero Coupon, 2/15/07 Aaa 1,280 692,313
-------------
- --------------------------------------------------------------------------------
- ----------------
TOTAL MUNICIPAL SECURITIES
(Cost $1,790,747) 1,841,060
-------------
- --------------------------------------------------------------------------------
- ----------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
GOVERNMENT & AGENCY SECURITIES (7.9%)
- --------------------------------------------------------------------------------
- ----------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (4.4%)
30-Year TBA
7.00%, 10/1/27 Aaa $ 7,055 $ 7,037,362
Various Pools:
7.00%, 3/1/11-5/1/12 Aaa 2,103 2,125,830
8.50%, 9/1/20-9/1/27 Aaa 1,301 1,372,304
REMIC-PAC Series 1660, Class E
6.00%, 1/15/07 Aaa 1,370 1,363,575
REMIC-PAC Series 1262, Class H
4.50%, 11/15/20 Aaa 850 760,750
-------------
GROUP TOTAL 12,659,821
-------------
- --------------------------------------------------------------------------------
- ----------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (1.8%)
Pool #303784
7.00%, 3/1/11 Aaa 1,911 1,931,547
REMIC-PAC Series 1989-23,
Class D
10.20%, 9/25/18 Aaa 2,133 2,211,006
STRIPS, Series H, Class 2
11.50%, 5/1/09 Aaa 931 1,033,869
-------------
GROUP TOTAL 5,176,422
-------------
- --------------------------------------------------------------------------------
- ----------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (0.1%)
Various Pools:
10.50%, 9/15/15-8/15/16 Aaa 258 289,123
-------------
- --------------------------------------------------------------------------------
- ----------------
TENNESSEE VALLEY AUTHORITY (0.5%)
Power Bonds, 1996 Series A
5.88%, 4/1/36 Aaa 1,530 1,533,825
-------------
- --------------------------------------------------------------------------------
- ----------------
UNITED STATES DEPARTMENT OF VETERANS AFFAIRS (0.1%)
Vendee Mortgage Trust
REMIC Series 1994-2, Class 3F
6.50%, 10/15/15 N/R 400 391,372
-------------
- --------------------------------------------------------------------------------
- ----------------
UNITED STATES TREASURY NOTE (1.0%)
U.S. Treasury Note
7.875%, 11/15/04 Aaa 2,540 2,792,806
-------------
- --------------------------------------------------------------------------------
- ----------------
TOTAL GOVERNMENT & AGENCY SECURITIES
(Cost $22,617,062) 22,843,369
-------------
- --------------------------------------------------------------------------------
- ----------------
COLLATERALIZED MORTGAGE OBLIGATIONS (2.6%)
- --------------------------------------------------------------------------------
- ----------------
Asset Securitization Corp.
Series 1996-MD6, Class A6
7.108%, 11/13/26 Baa2 420 437,065
Chase Commercial Mortgage
Securities Corp.
Series 1996-2, Class A2
6.90%, 9/19/06 N/R 550 557,733
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
Drexel, Burnham & Lambert
Trust
REMIC-PAC, Series S, Class 2
9.00%, 8/1/18 Aaa $ 4,644 $ 4,645,839
Fleetwood Credit Corp. Grantor
Trust
Series 1997-B, Class A
6.40%, 5/15/13 Aaa 970 973,182
Kidder Peabody Acceptance
Corp.
Series 1994-C1, Class B
6.85%, 2/1/06 N/R 910 923,468
-------------
- --------------------------------------------------------------------------------
- ----------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $7,820,756) 7,537,287
-------------
- --------------------------------------------------------------------------------
- ----------------
ASSET BACKED OBLIGATIONS (5.2%)
--------------------------------------------------------------------------------
- ----------------
Advanta Credit Card Master
Trust, Visa/MasterCard Credit
Card Receivables
Series 1995-F, Class A2
5.842%, 8/1/03 Aaa 1,600 1,600,496
Capita Equipment Receivables
Trust,
Series 1996-1, Class A3
6.11%, 7/15/99 Aaa 1,250 1,254,688
Green Tree Financial Corp.
Manufactured Housing
Installment Sale Contracts:
Series 1993-4, Class B1
7.20%, 1/15/19 Baa3 2,000 2,025,620
Series 1995-4, Class A3
6.30%, 7/15/25 Aaa 350 350,763
Series 1995-7, Class A2
6.15%, 11/15/26 Aaa 1,062 1,062,223
Series 1995-7, Class A3
6.35%, 11/15/26 Aaa 1,300 1,306,044
Series 1997-3, Class B1
6.73%, 7/15/28 Aaa 1,650 1,668,563
Green Tree Recreational,
Equipment & Consumer Trust
Series 1997-C, Class A-1
6.49%, 2/15/18 N/R 1,100 1,103,126
Merrill Lynch Home Equity
Acceptance Trust,
Series 1994-A, Class A-2
6.44%, 7/17/22 A3 1,325 1,320,239
Metris Master Trust,
MasterCard Credit Card
Receivables
Series 1997-1, Class A
6.87%, 10/20/05 Aaa 900 916,173
Nationscredit Grantor Trust,
Boat Retail Installment Sale
Contracts,
Series 1996-1, Class A
5.85%, 9/15/11 Aaa 857 846,757
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
Sears Credit Account Master
Trust, Credit Card
Receivables
Series 1996-1, Class A
6.20%, 2/16/06 Aaa $ 1,750 $ 1,748,598
-------------
- --------------------------------------------------------------------------------
- ----------------
TOTAL ASSET BACKED OBLIGATIONS
(Cost $14,946,229) 15,203,290
-------------
- --------------------------------------------------------------------------------
- ----------------
</TABLE>
<TABLE>
<CAPTION>
Shares/ Units
<C> <S> <C> <C>
- -------------------------------------------------------------------------
- ----------------
COMMON STOCKS (0.8%)
- -------------------------------------------------------------------------
- ----------------
BROADCASTING (0.0%)
(1) Pegasus Communications Corp. 564 12,126
-------------
- -------------------------------------------------------------------------
- ----------------
CABLE (0.0%)
(1) OpTel, Inc. 500 5
-------------
- -------------------------------------------------------------------------
- ----------------
CONSUMER PRODUCTS & SERVICES (0.0%)
(1)(5) Applause Enterprises, Inc.
(acquired 11/8/91, cost
$144,400) 3,800 11,400
-------------
- -------------------------------------------------------------------------
- ----------------
FINANCIAL SERVICES (0.0%)
(1)(5) Westfed Holdings Inc.
Class B (acquired 9/20/88,
cost $383) 12,670 0
-------------
- -------------------------------------------------------------------------
- ----------------
FOOD & BEVERAGE (0.5%)
(1)(5) Dr. Pepper Bottling Holdings,
Inc.
Class A (acquired 2/25/97,
cost $1,181,250) 75,000 1,443,750
(1)(3) Specialty Foods Corp. 30,000 7,500
-------------
GROUP TOTAL 1,451,250
-------------
- -------------------------------------------------------------------------
- ----------------
INDUSTRIAL GOODS & MATERIALS (0.1%)
(1)(5)(7) CIC I Acquisition Corp.
(acquired 10/18/89, cost
$1,076,715) 2,944 200,192
-------------
- -------------------------------------------------------------------------
- ----------------
PACKAGING/CONTAINERS (0.0%)
(1) Crown Packaging Enterprises
Ltd. 253,500 2,535
-------------
- -------------------------------------------------------------------------
- ----------------
PAPER & FOREST PRODUCTS (0.1%)
(1) Mail-Well, Inc. 10,653 288,963
-------------
- -------------------------------------------------------------------------
- ----------------
RESTAURANTS, HOTELS & GAMING (0.1%)
(1) Casino America Inc. 14,947 51,836
(1) Colorado Gaming &
Entertainment, Co. 26,465 135,633
(1) Motels of America, Inc. 500 25,000
-------------
GROUP TOTAL 212,469
-------------
- -------------------------------------------------------------------------
- ----------------
RETAIL (0.0%)
(1)(5) Jewel Recovery L.P.
(acquired 7/30/93, cost $0) 45,044 0
-------------
- -------------------------------------------------------------------------
- ----------------
<CAPTION>
Shares/ Units Value
<C> <S> <C> <C>
- -------------------------------------------------------------------------
- ----------------
TELECOMMUNICATIONS (0.0%)
(1) Pagemart Nationwide, Inc. 7,000 $ 73,500
-------------
- -------------------------------------------------------------------------
- ----------------
TOTAL COMMON STOCKS
(Cost $2,959,244) 2,252,440
-------------
- -------------------------------------------------------------------------
- ----------------
PREFERRED STOCKS (4.5%)
- -------------------------------------------------------------------------
- ----------------
AEROSPACE/DEFENSE (0.5%)
(1) GPA Group plc
7% Second Preference Cum.
Conv. 2,875,000 1,538,125
-------------
- -------------------------------------------------------------------------
- ----------------
BROADCASTING (0.7%)
(1) Pegasus Communications Corp.
12.75% Units 250 265,000
Spanish Broadcasting System,
Inc.
14.25% Cumulative
Exchangeable 16,003 1,676,346
-------------
1,941,346
-------------
- -------------------------------------------------------------------------
- ----------------
CABLE (1.3%)
(3) Adelphia Communications Corp.
13.00% Cumulative
Exchangeable, Series A 5,000 556,250
(1) DIVA Systems Corp. 56,913 651,085
NTL Inc.
13% Exchangeable 2,134 2,432,976
-------------
GROUP TOTAL 3,640,311
-------------
- -------------------------------------------------------------------------
- ----------------
CONSUMER PRODUCTS & SERVICES (0.1%)
Renaissance Cosmetics, Inc.
14% Cumulative 343 239,779
-------------
- -------------------------------------------------------------------------
- ----------------
ENERGY (0.0%)
(7) Consolidated Hydro, Inc.
13.50% Series H, Conv. 3,000 30,000
-------------
- -------------------------------------------------------------------------
- ----------------
FINANCIAL SERVICES (0.2%)
Chevy Chase Preferred Capital
Corp.
10.375% Noncumulative
Exchangeable, Series A, Conv. 10,000 537,500
(5)(7) West Fed Holdings, Inc.
Class A (acquired
9/20/88-6/18/93, cost
$3,611,992) 42,759 42,759
-------------
GROUP TOTAL 580,259
-------------
- -------------------------------------------------------------------------
- ----------------
PAPER & FOREST PRODUCTS (0.3%)
(1) SD Warren Co.
14% Cumulative Exchangeable,
Series B 21,459 997,843
-------------
- -------------------------------------------------------------------------
- ----------------
PUBLISHING & INFORMATION SERVICES (0.2%)
K-III Communications Corp.
10% Cumulative Exchangeable,
Series D 5,000 513,750
-------------
- -------------------------------------------------------------------------
- ----------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Shares/ Units Value
<C> <S> <C> <C>
- -------------------------------------------------------------------------
- ----------------
RESTAURANTS, HOTELS & GAMING (0.1%)
(1) AmeriKing, Inc.
13% Cumulative Exchangeable 15,000 $ 420,000
-------------
- -------------------------------------------------------------------------
- ----------------
RETAIL (0.5%)
(1) Jitney-Jungle Stores of
America, Inc.
15.00% Class A 9,250 1,369,000
-------------
- -------------------------------------------------------------------------
- ----------------
TELECOMMUNICATIONS (0.6%)
(1) Intermedia Communications,
Inc.
13.5% Exchangeable, Series B 2,600 312,000
(1) NEXTLINK Communications, Inc.
14% Cumulative Exchangeable 10,180 636,250
Nextel Communications, Inc.
13.00% Exchangeable, Series D 800 912,000
-------------
GROUP TOTAL 1,860,250
-------------
- -------------------------------------------------------------------------
- ----------------
TOTAL PREFERRED STOCKS
(Cost $16,120,304) 13,130,663
-------------
- -------------------------------------------------------------------------
- ----------------
RIGHTS (0.0%)
- -------------------------------------------------------------------------
- ----------------
(1) Terex Corp.,
expiring 5/15/02
(Cost $0) 6,000 120,000
-------------
- -------------------------------------------------------------------------
- ----------------
WARRANTS (0.6%)
- -------------------------------------------------------------------------
- ----------------
(1) Advanced Radio
Telecommunications Corp.,
expiring 2/15/07 13,500 162,000
(1) America Communications
Services, Inc.
expiring 11/1/05 2,000 200,000
(1) American Telecasting, Inc.
expiring 6/23/99 525 263
(1) Australis Holdings Pty Ltd.
expiring 10/1/01 2,250 16
(1) Boomtown, Inc.
expiring 11/1/98 500 5
(1) CHC Helicopter Corp.
expiring 12/15/00 6,000 21,000
(1)(3) Capital Gaming International,
Inc.
expiring 2/1/99 5,687 0
(1) Casino America, Inc.
expiring 5/3/01 2,646 26
(1) Coinstar, Inc.
expiring 10/1/06 1,700 13,430
(1)(7) Consolidated Hydro, Inc.
expiring 12/31/03 5,400 0
(1) County Seat Stores, Inc.
expiring 10/15/98 1,520 15
(1) Crown Packaging Holdings, Ltd.
expiring 11/1/03 2,000 250
(1) Dairy Mart Convenience Stores,
Inc.
expiring 5/13/98 11,665 23,330
(1) Elsinore Corp.
expiring 10/8/98 79,941 0
<CAPTION>
Shares/ Units Value
<C> <S> <C> <C>
- -------------------------------------------------------------------------
- ----------------
(1) General Media Inc.:
expiring 12/22/00 500 $ 500
expiring 12/31/00 625 625
(1) Golden Ocean Group, Ltd.
expiring 8/31/01 1,032 1,032
(1) Great American Cookie Co.
expiring 1/30/00 225 2,250
(1) Hemmeter Enterprises, Inc.
expiring 12/15/99 9,000 0
(1) IHF Capital, Inc.
expiring 11/14/99 500 27,500
(1) In-Flight Phone Corp.
expiring 8/31/02 1,000 0
(1) IntelCom Group, Inc.
expiring 9/1/05 2,145 31,103
(1) Interact Systems, Inc.
expiring 8/1/03 750 0
(1) McCaw International Ltd.
expiring 4/15/07 1,000 250
(1)(3) Microcell Telecommunications:
expiring 12/31/97 1,600 16
expiring 12/31/97 1,600 14,400
(1) NEXTLINK Communications
expiring 2/1/09 9,500 95
(1) Nextel Communications, Inc.
expiring 4/25/99 750 8
(1) Purity Supreme
expiring 8/1/97 5,198 0
(1) Renaissance Cosmetics, Inc.:
expiring 4/3/01 300 30,000
expiring 8/31/06 3,000 150,000
(1) SD Warren Co.
expiring 12/15/06 12,000 60,000
(1) Sheffield Steel Corp.
expiring 11/1/01 6,250 25,000
(1) Spanish Broadcasting Systems:
expiring 6/29/99 1,500 285,000
expiring 6/29/99 1,500 495,000
(1) UNIFI Communications, Inc.
expiring 3/1/07 1,000 0
(1) United International Holdings
expiring 11/15/99 2,950 29,500
(1) Wright Medical Technology
expiring 6/30/03 618 61,765
-------------
- -------------------------------------------------------------------------
- ----------------
TOTAL WARRANTS
(Cost $445,422) 1,634,379
-------------
- -------------------------------------------------------------------------
- ----------------
</TABLE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000)
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
- ----------------
SHORT-TERM INVESTMENTS (1.4%)
--------------------------------------------------------------------------------
- ----------------
Federal Home Loan Bank
Discount Note
Zero Coupon, 10/1/97
(Cost $4,101,000) N/R $ 4,101 4,101,000
-------------
</TABLE>
- --------------------------------------------------------------------
- -------------
14
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------
- ----------------
TOTAL DOMESTIC SECURITIES
<C> <S> <C> <C> <C>
(Cost $285,223,196) $ 292,249,345
-------------
- --------------------------------------------------------------------------------
- ----------------
FOREIGN SECURITIES (0.1%)
--------------------------------------------------------------------------------
- ----------------
GOVERNMENT OBLIGATIONS (0.1%)
--------------------------------------------------------------------------------
- ----------------
POLAND
Republic of Poland
Past Due Interest Bonds
4.00%, 10/27/14
(Cost $436,621) Baa3 USD 500 425,000
-------------
- --------------------------------------------------------------------------------
- ----------------
TOTAL INVESTMENTS (100.5%)
(Cost $285,659,817) 292,674,345
-------------
- --------------------------------------------------------------------------------
- ----------------
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.5%)
(1,501,394)
-------------
- --------------------------------------------------------------------------------
- ----------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
NET ASSETS (100%)
Applicable to 34,590,237 issued and
outstanding $.001 par value shares
(authorized 100,000,000 shares) $ 291,172,951
-------------
-------------
- -------------------------------------------------------------------------
- ----------------
NET ASSET VALUE PER SHARE $ 8.42
-------------
-------------
- -------------------------------------------------------------------------
- ----------------
MARKET PRICE PER SHARE $ 8.50
-------------
-------------
- -------------------------------------------------------------------------
- ----------------
</TABLE>
N/R--Not Rated
PERL--Principle Exchange Rate Linked Security
PAC--Planned Amortization Class
REMIC--Real Estate Mortgage Investment Conduit
STRIPS--Separate Trading of Registered Interest and Principal Securities
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 September 30, 1997 aggregated $6,014,740. Total market value
of restricted securities owned at September 30, 1997 was $1,698,101 or
0.6% of net assets.
(6) All or a portion of this security was pledged as collateral for delayed
delivery securities.
(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. Maturity date disclosed is
the ultimate maturity.
(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,
1997.
15
<PAGE>
DESCRIPTION OF DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN
- ---------
Pursuant to the BEA Income Fund, Inc.'s (the "Fund") Dividend Reinvestment and
Cash Purchase Plan (the "Plan"), each shareholder may elect to have all
dividends and distibutions, net of any applicable U.S. withholding tax,
automatically reinvested in additional shares of the Fund by the Chase Manhattan
Bank, as the plan agent (the "Plan Agent"). Shareholders who do not make this
election will receive all dividends and distributions in cash, net of any
applicable U.S. withholding tax, paid in dollars by check mailed directly to the
shareholder by the Plan Agent, as dividend-paying agent. Shareholders who wish
to have dividends and distributions automatically reinvested should notify the
Plan Agent for the Fund, at Dividend Reinvestment Department -- Retail,
4 New York Plaza, New York, NY 1004. A shareholder whose shares are held by a
broker or nominee that does not provide a dividend reinvestment program may be
required to have his shares registered in his own name to participate in the
Plan. Investors who own shares of the Fund's common stock registered in street
name should contact the broker or nominee for details concerning participation
in the Plan.
Certain distributions of cash attributable to (a) some of the dividends and
interest amounts paid to the Fund and (b) certain capital gains earned by the
Fund that are derived from securities of certain foreign issuers are subject to
taxes payable by the Fund at the time amounts are remitted. Such taxes, if any,
will be borne by the Fund and allocated to all shareholders in proportion to
their interests in the Fund.
The Plan Agent serves as agent for the shareholders in administering the
Plan. If the Board of Directors of the Fund declares an income dividend or a
capital gains distribution payable either in the Fund's common stock or in cash,
as shareholders may have elected, nonparticipants in the Plan will receive cash
and participants in the Plan will receive the equivalent in shares of the Fund
valued at the lower of market price or net asset value as determined at the time
of purchase (generally on the payable date of the dividend) as set forth below.
Whenever market price is equal to or exceeds net asset value at the time shares
are valued for the purpose of determining the number of shares equivalent to the
cash dividend or distribution, participants will be issued shares of the Fund at
a price equal to net asset value but not less than 95% of the then current
market price of the Fund shares. The Fund will not issue shares under the Plan
below net asset value. If net asset value determined as at the time of purchase
exceeds the market price of Fund shares at such time, or if the Fund should
declare a dividend or other distribution payable only in cash (i.e., if the
Board of Directors should preclude reinvestment at net asset value), the Agent
will, as agent for the participants, endeavor to buy Fund shares in the open
market, on the New York Stock Exchange or elsewhere, on behalf of all
participants, and will allocate to you your pro rata portion based on the
average price paid (including brokerage commissions) for all shares purchased.
Shares acquired on behalf of participants in the open market will be purchased
at the prevailing market price. Fractions of a share allocated to you will be
computed to four decimal places. If, before the Agent has completed its
purchases, the market price exceeds the net asset value of a Fund share, the
average per share purchase price paid by the Agent may exceed the net asset
value of the Fund's shares, resulting in the acquisition of fewer shares than if
the dividend or distribution had been paid in shares issued by the Fund.
For all purposes of the Plan: (a) the market price of the Fund's common
stock on a dividend payment date shall be the last sale price on the New York
Stock Exchange on that date, or, if there is no such sale, then the mean between
the closing bid and asked quotations for such stock, and (b) net asset value per
share of the Fund's commons stock on a particular date shall be as determined by
or on behalf of the Fund.
Participants in the Plan have the option of making additional cash payments
to the Plan Agent, monthly, in any amount from $100 to $3,000, for investment in
the Fund's common stock. Shareholders should be aware that cash contributions
will be used to purchase shares of the Fund in the open market regardless of
whether such shares are selling above, at or below the net asset value of the
Fund. As a result, shareholders may be purchasing shares at a market price that
reflects a premium to the Fund's net asset value.
Cash contributions should be in the form of a check or money order and made
payable in U.S. dollars and directed to The Chase Manhattan Bank, Dividend
Reinvestment Department -- Retail, 4 New York Plaza, New York, NY 10004.
Deliveries to any other address do not constitute valid delivery.
A detachable form for use in making voluntary cash payments will be attached
to each Dividend Reinvestment Plan statement you receive. The same amount of
money need not be sent each month and there is no obligation to make an optional
cash payment each month.
Payments received by the Agent will be used to purchase stock under the
Plan. Prior to such purchase of stock by the Agent, no interest will be paid on
such funds sent to the Agent. Therefore, voluntary cash payments should be sent
to reach the Agent shortly (but at least five business days) before the dividend
payment date. Voluntary cash payments received after the five business day
deadline will be invested by the Agent on the next succeeding dividend payment
date. Dividend payment dates are expected to be the 15th (or next business day)
of each month.
You may obtain a refund of any voluntary cash payment if a request for such
a refund is received in writing by the Agent not less than 48 hours before the
next succeeding dividend payment.
There is no charge to participants for reinvesting dividends or capital
gains distributions. The Agent's fees for the handling of reinvestment of
dividends and distributions will be paid by the Fund. There will be no brokerage
charges with respect to shares issued directly by the Fund as a result of
dividends or capital gains distributions payable either in
16
<PAGE>
shares or in cash. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Agent's open market purchases
in connection with the reinvestment of dividends, capital gains distributions,
or voluntary cash payments.
Brokerage charges for purchasing small amounts of stock for individual
accounts through the Plan are expected to be less than the usual brokerage
charges for such transactions because the Agent will be purchasing stock for all
participants in blocks and pro rating the lower commissions thus attainable.
The receipt of dividends and distributions in stock under the Plan will not
relieve participants of any income tax (including withholding tax) that may be
payable on such dividends and distributions.
While the Fund presently intends to continue the Plan indefinitely,
experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
notice of the change sent to all shareholders of the Fund at least 30 days
before the record date for such dividend or distribution. The Plan also may be
amended or terminated by the Agent by at least 30 days' written notice to all
shareholders of the Fund.
Any notices, questions or other correspondence regarding the Plan should be
addressed to The Chase Manhattan Bank, Customer Service Department, 4 New York
Plaza, New York, NY 10004. Be sure to include a reference to BEA Income Fund,
Inc. or you may call (800) 428-8890.
17
