<PAGE>
BEA STRATEGIC INCOME FUND, INC.
153 EAST 53RD STREET
NEW YORK, NY 10022
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Daniel H. Sigg Michael A. Pignataro
Chairman and Chief Vice President
Executive Officer Richard J. Lindquist
Robert J. Moore Vice President
President and Chief Hal Liebes
Investment Officer Secretary
Prof. Enrique R. Arzac Harvey M. Rosen
Director Treasurer
Lawrence J. Fox Paul P. Stamler
Director Assistant Treasurer
James S. Pasman, Jr. John M. Corcoran
Director Assistant Treasurer
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
BEA Associates
153 East 53rd Street
New York, NY 10022
- --------------------------------------------------------------------------------
ADMINISTRATOR
Chase Global Funds Services Company
73 Tremont Street
Boston, Massachusetts 02108
- --------------------------------------------------------------------------------
CUSTODIAN
The Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT
The Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003
Phone 1-800-428-8890
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Willkie Farr & Gallagher
153 East 53rd Street
New York, NY 10022
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
- --------------------------------------------------------------------------------
INCREASE YOUR FUND HOLDINGS THROUGH DIVIDEND REINVESTMENT AND DIRECT CASH
PURCHASES
The Fund offers the opportunity for all shareholders to participate in the
Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan"). Under the
Plan, participating shareholders receive, in lieu of cash dividends, common
stock of the Fund. In addition, participants in the Plan have the option of
making voluntary cash payments of $100 to $3,000 (per investment period), plus
any dividends received in cash, to the Plan Agent to purchase Fund shares in
the open market. A brochure further describing the Plan and additional
information concerning terms and conditions, and any applicable charges
relating to the Plan, can be obtained from the Plan's agent at (800) 428-8890.
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
BEA STRATEGIC INCOME FUND, INC.
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
THIRD QUARTER REPORT
SEPTEMBER 30, 1995
<PAGE>
BEA Strategic Income Fund, Inc.
- -------
To Our Shareholders:
We are pleased to report on the results of the BEA Strategic Income Fund, Inc.
(the "Fund") for the quarter ended September 30, 1995.
At September 30, 1995 the Fund's net asset value (NAV) was $9.82, compared to
an NAV of $9.69 at June 30, 1995. As a result, the Fund's total return
(assuming reinvestment of dividends) was 3.45%. For the 12-month period ended
September 30, 1995 the Fund posted a 13.47% return.
In an increasingly positive interest rate environment, and in the wake of
very strong performance during the first half of the year, the bond market in
the third quarter was notable mainly for its tranquillity. Quarterly returns
for all the domestic investment grade sectors were clustered quite close
together, ranging from 1.76% for government bonds to 2.36% for corporates, with
mortgages falling approximately in the middle. High yield bonds were the best
domestic performers during the quarter, returning 3.01%. In each of these
sectors, the return consisted almost entirely of coupon; there was little
opportunity for significant capital gain, as spreads were virtually unchanged
over the course of the quarter.
This reflects a settling in, as fixed income investors continue to perceive a
relatively benign investing environment. Recently released economic statistics
have served to reinforce this positive impression, showing continued slow and
steady growth with subdued inflation. The yield curve flattened during the
quarter, as the yield on the benchmark 30-year Treasury bond declined by about
14 basis points to just under 6.5%, while the yield on the 2-year Treasury note
was unchanged at 5.8%.
At the beginning of the third quarter, we perceived good value in the
mortgage market, as the effects of a continued rally were priced into the
market. As it has turned out thus far, the portfolio benefited from the excess
yield in this sector, but the anticipated capital gains have yet to develop. We
continue to believe that this sector will perform well and will maintain our
current allocation.
The U.S. High Yield market posted positive performance in the third quarter
of 1995 with new cash buyers continuing to enter the market and with high yield
spreads remaining unchanged versus Treasuries as interest rates drifted lower.
This resulted in principal price increases of 0.76% which combined with coupon
income of 2.25% for a 3.01% return as measured by the Salomon Brothers High
Yield Market Index. The high quality sectors of the high yield market
outperformed slightly during the quarter with BB-rated issues posting a total
return of 3.01% versus 2.96% for B-rated issues and 2.70% for CCC-rated issues.
During the quarter the cash pay sector posted a total return of 2.98% versus
3.32% for the deferred interest sector and 3.23% for the bankrupt sector. High
yield mutual fund investors continued to enter the market, with AMG Data
Services reporting inflows of $2.6 billion during the quarter. Net high yield
fund inflows of $7.9 billion for year-to-date 1995 can be compared with net
inflows of $1.8 billion for the year-to-date 1994. New issuance for the quarter
totaled $12.0 billion and for 1995 year-to-date totaled $29.9 billion versus
$32.0 billion for year-to-date 1994.
Our long term outlook continues to be positive for the credit fundamentals of
many high yield issuers, including cyclical sectors such as paper and
chemicals. We also remain positive on selected gaming companies, particularly
in Atlantic City and Las Vegas, and on industry sectors such as health care and
cable where we have seen continued merger activity. The expectation of lower
interest rates has also benefited the high yield sector as money has continued
to flow into the market from yield seeking investors. Our strategy continues to
be focused on opportunistically investing in companies that we believe offer
operating performance improvement and de-leveraging potential over the longer
term.
1
<PAGE>
Our overall view on the market is essentially unchanged since our last
report. We continue to expect that liquidity in the market will be sufficient
to favor our portfolio structure. We will continue to focus on high yield
investments maintaining our current 70% allocation. We will maintain our
current allocation to non-U.S. dollar investments. The benign economic
environment and moderate inflation levels in Europe suggest a favorable
interest rate outlook. We will continue to hedge our currency exposure in
expectation of continued strength in the dollar. In addition, hedged European
bonds offers substantial yield enhancement. Within the investment grade sector,
we will continue to focus on high yielding, short maturity mortgage and asset
backed securities.
We appreciate your interest in the Fund and would be pleased to respond to
your questions or comments. Any questions regarding net asset value,
performance, dividends, portfolio allocations, or management can be directed to
BEA Associates at (800) 293-1232. All other inquiries regarding account
information or requests for a prospectus or other reports should be directed to
the Shareholder Servicing Agent at (800) 428-8890.
Respectfully,
Robert J. Moore
President and Chief Investment Officer
November 6, 1995
2
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -------
September 30, 1995
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- ---------------------------------------------------------------------------
- ------------
<S> <C> <C> <C>
DOMESTIC SECURITIES (84.1%)
- ---------------------------------------------------------------------------
- ------------
CORPORATE OBLIGATIONS (66.9%)
- ---------------------------------------------------------------------------
- ------------
COMMUNICATIONS (14.0%)
(/4/) Adelphia Communications
Series B, Sr.
Notes
9.50%, 2/15/04 B3 $ 574 $ 482,097
(/8/) American Telecasting, Inc.
Sr. Discount
Notes
0.00%, 6/15/04 Caa 75 44,250
(/8/) Australis Media
Ltd.
Yankee Sr. Sub. Disc. Notes
0.00%, 5/15/03 B3 225 134,437
(/11/) Cablevision Industries Corp.
Sr. Debentures
9.25%, 4/1/08 B1 500 531,250
(/11/) Chancellor Broadcasting Co.
Gtd. Sr. Sub.
Notes
12.50%, 10/1/04 B3 500 527,500
Citicasters, Inc., Series B
Sr. Sub. Notes
9.75%, 2/15/04 N/R 500 500,000
(/11/) Continental Cablevision, Inc.
Sr. Sub.
Debentures
11.00%, 6/1/07 B1 500 552,500
(/8/) Dial Call Communications
Sr. Discount
Notes
0.00%, 4/15/04 Caa 500 260,000
(/4/) (/11/) Falcon Holdings Group L.P.
Sr. Sub. Notes
11.00%, 9/15/03 N/R 649 610,393
Galaxy Telecommunications L.P.
Sr. Sub. Notes
12.375%, 10/1/05 B3 200 199,500
(/8/) Helicon Group
L.P.
Sr. Secured
Notes
9.00%, 11/1/03 Caa 650 611,000
(/8/) Imax Corp.,
Series B
Yankee Sr. Notes
7.00%, 3/1/01 B1 250 235,000
Intermedia Communications
of Florida,
Inc.
Series B, Sr.
Notes
13.50%, 6/1/05 B3 300 319,500
Jones
Intercable,
Inc.
Sr. Sub.
Debentures
11.50%, 7/15/04 B1 500 546,250
Metrocall, Inc.
Sr. Sub. Notes
10.375%, 10/1/07 B2 250 253,750
(/8/) (/11/) MFS Communications Co.,
Inc.
Discount Notes
0.00%, 1/15/04 B2 500 378,750
Mobile
Telecommunications
Technologies Corp.
Sr. Sub. Notes
13.50%, 12/15/02 B2 250 280,000
(/8/) Nextel
Communications
Sr. Notes
0.00%, 8/15/04 B3 500 246,250
NWCG Holding Corp.
Sr. Discount
Notes
Zero Coupon,
6/15/99 Caa $ 400 $ 266,000
(/8/) Pagemart Nationwide,
Inc.
Sr. Disc. Notes
0.00%, 2/1/05 N/R 1,000 645,000
Paging Network,
Inc.
Sr. Sub. Notes
10.125%, 8/1/07 B2 500 520,000
(/8/) PriCellular Wireless
Corp.
Sr. Discount
Notes
0.00%, 10/1/03 B3 350 248,500
PTI Holdings
Sub. Notes
Zero Coupon, 12/17/02 N/R 507 304,149
Scott Cable
Communications, Inc.
Sub. Debentures
12.25%, 4/15/01 B3 500 335,000
(/2/) (/6/) Simmons Cable
Sr. Sub. Notes
15.747%, 4/30/96 N/R 500 260,000
Sinclair
Broadcast Group
Sr. Sub. Notes
10.00%, 9/30/05 B1 250 254,375
Spanish Broadcasting Systems
Sr. Notes
7.50%, 6/15/02 B3 500 491,250
(/11/) United International Holdings
Sr. Sec. Debentures
Zero Coupon, 1/15/99 B3 1,000 640,000
Univision
Network Holding
Sub. Notes
Zero Coupon, 12/17/02 N/R 573 343,845
(/8/) Videotron Holdings plc
Yankee Discount Notes
0.00%, 8/15/05 B3 1,000 660,000
-----------
GROUP TOTAL 11,680,546
-----------
- --------------------------------------------------------------------------------
- ------------
CONSUMER PRODUCTS (6.5%)
American Rice,
Inc.
Secured Mortgage Notes
13.00%, 7/31/02 B3 250 236,250
Fort Howard
Corp.
Sub. Notes
10.00%, 3/15/03 B2 500 495,000
Health O Meter,
Inc.
Gtd. Sr. Sub
Notes
13.00%, 8/15/02 B3 500 455,000
Jordan
Industries
Sr. Notes
10.375%, 8/1/03 B3 500 467,500
(/11/) Mail-Well Corp.
Sr. Sub. Notes
10.50%, 2/15/04 B3 500 485,000
(/8/) Mail-Well Holdings, Inc.
Sr. Deferred
Notes
0.00%, 2/15/06 N/R 250 150,000
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- ------------------------------------------------------------------------
- ------------
Marvel III Holdings,
(/11/) Inc.
Series B
Sr. Secured Debentures
9.125%, 2/15/98 Caa $ 700 $ 651,000
(/3/) (/6/) Renaissance Cosmetics
Sr. Notes
13.75%, 8/15/01 N/R 500 497,500
Revlon Consumer
Products, Inc., Series B
Sr. Sub. Notes
10.50%, 2/15/03 B3 450 454,500
Revlon Worldwide
Sr. Secured
Notes
Zero Coupon, 3/15/98 B3 250 182,812
(/8/) (/11/) Specialty Foods
Acquisition
Corp.
Series B
Sr. Secured Debentures
0.00%, 8/15/05 Ca 1,500 780,000
(/9/) Thermoscan, Inc.
Sr. Sub. Notes
13.5625%,
8/15/01 N/R 500 515,000
-----------
GROUP TOTAL 5,369,562
------------
- -------------------------------------------------------------------------
- ------------
FINANCE (0.5%)
(/3/) GPA Holland B.V.
Medium Term Notes
8.625%, 1/15/99 Caa 500 430,625
------------
- -------------------------------------------------------------------------
- ------------
INDUSTRIAL (11.8%)
(/3/) Alpine Group,
Inc.
Gtd. Sr. Notes
12.25%, 7/15/03 B3 750 688,125
(/11/) Arcadian Partners L.P.
Series B, Sr.
Notes
10.75%, 5/1/05 B2 500 526,250
(/11/) Armco, Inc.
Sr. Notes
11.375%,
10/15/99 B2 500 517,500
Bayou Steel
Corp.
First Mortgage Notes
10.25%, 3/1/01 B2 300 284,250
Berg
Electronics,
Inc.
Gtd. Sub. Debentures
11.375%, 5/1/03 B3 500 530,000
Container Corp.
of America
Gtd. Notes
9.75%, 4/1/03 B2 250 251,250
(/11/) Doman Industries Ltd.
Yankee Gtd. Sr. Notes
8.75%, 3/15/04 Ba3 650 630,500
Geneva Steel Co.
Sr. Notes
9.50%, 1/15/04 B1 250 186,250
(/11/) Genmar Holdings, Series A
Sr. Sub. Notes
13.50%, 7/15/01 B3 500 487,500
GNF Corp.
First Mortgage Notes
10.625%, 4/1/03 B2 500 437,500
(/8/) (/11/) Harris Chemical N.A.
Sr. Secured Debentures
0.00%, 7/15/01 B2 500 442,500
Huntsman Corp.
First Mortgage Notes
11.00%, 4/15/04 B1 500 542,500
- ------------
(/8/) INDSPEC Chemical Corp.
Sr. Sub. Notes
0.00%, 12/1/03 B3 $ 750 $ 506,250
Malette, Inc.
Sr. Secured Debentures
12.25%, 7/15/04 Ba3 250 277,500
NL Industries
Sr. Secured Debentures
11.75%, 10/15/03 B1 250 263,750
(/8/) 0.00%, 10/15/05 B2 400 297,000
Presley
Companies
Sr. Notes
12.50%, 7/1/01 B3 250 208,750
Repap Wisconsin,
Inc.
Sr. Secured Debentures
9.875%, 5/1/06 B3 250 241,250
Republic
Engineered Steel
First Mortgage Bonds
9.875%, 12/15/01 B2 350 326,375
(/11/) Stone-Consolidated Corp.
Sr. Secured Debentures
10.25%, 12/15/00 B1 500 527,500
Trans-Resources,
Inc.
Sr. Sub. Notes
11.875%, 7/1/02 B2 500 470,000
UCC Investor Holdings, Inc.
Sr. Sub. Notes
11.00%, 5/1/03 B3 500 511,250
WCI Steel, Inc., Series B
Sr. Notes
10.50%, 3/1/02 B1 200 195,000
(/11/) WHX Corp.
Sr. Notes
9.375%, 11/15/03 B1 500 457,500
-----------
GROUP TOTAL 9,806,250
-----------
- --------------------------------------------------------------------------
- ------------
MANUFACTURING (12.6%)
(/8/) (/11/) American Standard, Inc.
Sr. Sub.
Debentures
0.00%, 6/1/05 B1 500 406,250
(/11/) Associated
Materials, Inc.
Sr. Sub. Notes
11.50%, 8/15/03 B3 500 460,000
Atlantis Group,
Inc.
Sr. Notes
11.00%, 2/15/03 B2 500 460,000
(/11/) Consoltex Group,
Inc.
Series B
Gtd. Sr. Sub. Notes
11.00%, 10/1/03 B2 500 470,000
(/8/) Crown Packaging Holdings
Series B, Sr. Sub. Notes
0.00%, 11/1/03 Caa 1,300 591,500
(/11/) Domtar, Inc.
Yankee
Debentures
11.25%, 9/15/17 Ba1 500 530,000
(/11/) Gaylord
Container Corp.
Sr. Notes
11.50%, 5/15/01 B3 250 260,000
(/8/) Sr. Sub. Debentures
0.00%, 5/15/05 Caa 500 492,500
(/11/) G.I. Holdings, Inc., Series B
Sr. Deferred
Notes
Zero Coupon, 10/1/98 Ba3 1,000 725,000
(/8/) (/11/) Ivex Holdings
Corp.
Sr. Debentures
0.00%, 3/15/05 Caa 1,250 725,000
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- -------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
MVE Inc.
Sr. Secured Debentures
12.50%, 2/15/02 B3 $ 500 $ 530,000
Rexene Corp.
Sr. Notes
11.75%, 12/1/04 B1 400 429,000
(/6/) Rotor Tool
Company
Sr. Sub. Notes
12.375%, 4/1/97 N/R 438 394,200
Selmer Company, Inc.
Sr. Sub. Notes
11.00%, 5/5/05 N/R 500 485,000
Sheffield Steel
Corp.
First Mortgage Notes
12.00%, 11/1/01 N/R 500 460,000
(/8/) Silgan Holdings,
Inc.
Sr. Debentures
0.00%, 12/15/02 B3 500 467,500
Specialty Equipment Co., Inc.
Sr. Sub. Notes
11.375%, 12/1/03 B3 700 729,750
Stone Container Corp.
Sr. Notes
9.875%, 2/1/01 B1 250 246,875
Synthetic
Industries, Inc.
Sr. Sub. Notes
12.75%, 12/1/02 B3 500 485,000
Tracor, Inc.,
Series A
Gtd. Sr. Sub. Notes
10.875%, 8/15/01 B2 250 260,000
(/11/) U.S. Leather,
Inc.
Sr. Notes
10.25%, 7/31/03 B2 700 588,000
(/3/) Walbro Corp.
Gtd. Sr. Notes
9.875%, 7/15/05 Ba3 250 246,250
-----------
GROUP TOTAL 10,441,825
-----------
- --------------------------------------------------------------------------
- ------------
OIL, GAS & ELECTRIC (3.2%)
(/11/) Falcon Drilling Co.,
Inc.
Series B, Sr.
Notes
9.75%, 1/15/01 B2 375 375,000
Forest Oil Corp.
Sr. Sub. Notes
11.25%, 9/1/03 B3 500 470,000
(/11/) Gulf Canada Resources
Ltd.
Sr. Sub. Debentures
9.25%, 1/15/04 Ba3 500 496,250
Mesa, Inc.
Secured Notes
12.75%, 6/30/98 Caa 500 461,250
Southeastern
Public Services
Co.
Sr. Sub. Debentures
11.875%, 2/1/98 Caa 314 312,038
(/11/) Wilrig A/S
Sr. Secured Debentures
11.25%, 3/15/04 B2 500 540,000
-----------
GROUP TOTAL 2,654,538
-----------
- --------------------------------------------------------------------------
- ------------
RETAIL TRADE (8.2%)
Big V
(/11/) Supermarkets, Inc.
Sr. Sub. Notes
11.00%, 2/15/04 B3 500 405,000
(/11/) Brylane L.P.
Gtd. Sr. Sub.
Notes
10.00%, 9/1/03 B2 $ 500 $ 465,000
County Seat
Stores, Inc.
Sr. Sub. Notes
12.00%, 10/1/02 B3 500 467,500
(/11/) Dairy Mart Conveniences
Stores, Inc.
Sr. Sub. Notes
10.25%, 3/15/04 B3 626 525,840
Duane Reade
Corp.
Sr. Notes
12.00%, 9/15/02 B3 500 440,000
(/11/) Farm Fresh, Inc.
Series A, Sr.
Notes
12.25%, 10/1/00 B2 150 129,750
Sr. Notes
12.25%, 10/1/00 B2 500 432,500
Finlay Fine Jewelry Corp.
Sr. Notes
10.625%, 5/1/03 B1 500 495,000
(/11/) Great American Cookie
Series B
Sr. Sec.
Debentures
10.875%, 1/15/01 B3 500 430,000
Hills Stores
Company
Sr. Notes
10.25%, 9/30/03 B1 700 651,000
Pathmark Stores
(/8/) (/11/) Jr. Sub. Notes
0.00%, 11/1/03 B3 850 550,375
Sr. Sub. Notes
9.625%, 5/1/03 B2 500 492,500
Ralphs Grocery
Co.
Sr. Sub. Notes
11.00%, 6/15/05 B3 500 467,500
(/4/) Town & Country Corp.
Sr. Sub. Notes
13.00%, 5/31/98 Caa 616 289,552
Waban, Inc.
Sr. Sub. Notes
11.00%, 5/15/04 Ba3 550 562,375
-----------
GROUP TOTAL 6,803,892
-----------
- ---------------------------------------------------------------------------
- ------------
SERVICES (9.4%)
American
Banknote Corp.
Series B, Sr.
Notes
11.625%, 8/1/02 B2 250 162,500
(/11/) American
Restaurant
Group, Inc.,
Series A
Notes
12.00%, 9/15/98 B2 500 365,000
(/11/) Bally's Casino Holdings, Inc.
Sr. Discount
Notes
Zero Coupon,
6/15/98 B2 600 456,000
Bally's Park
Place Funding,
Inc.
First Mortgage
Notes
9.25%, 3/15/04 Ba3 250 242,500
(/11/) Boomtown, Inc.
First Mortgage
Notes
11.50%, 11/1/03 B1 500 457,500
Casino America,
Inc.
First Mortgage
Bonds
11.50%, 11/15/01 B1 500 480,000
Comdata Network,
Inc.
Sr. Sub.
Debentures
13.25%, 12/15/02 B3 500 590,000
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- ------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
(/11/) Community Health
Systems
Sr. Sub.
Debentures
10.25%, 11/30/03 B2 $ 250 $ 267,500
Elsinore Corp.
First Mortgage
Notes
12.50%, 10/1/00 N/R 100 50,000
G.B. Property
Funding,
First Mortgage
Notes
10.875%, 1/15/04 B2 500 421,250
(/4/) (/11/) General Medical
Corp.
Series A
Sub. Debentures
12.125%, 8/15/05 B3 626 647,910
(/11/) Grand Casinos,
Inc.,
Series B
First Mortgage
Notes
12.50%, 2/1/00 Ba3 500 540,000
Griffin Gaming &
Entertainment
Mortgage Notes
11.00%, 9/15/03 N/R 500 455,000
(/4/) (/6/) Hemmeter Enterprises, Inc.
Sr. Notes
12.00%, 12/15/00 N/R 297 118,877
Kloster Cruise
Ltd.
Secured Notes
13.00%, 5/1/03 Caa 500 360,000
Motels of
America, Inc.
Series B
Sr. Sub. Notes
12.00%, 4/15/04 B3 250 250,000
Solon Automated
Services
Sr. Notes
12.75%, 7/15/01 B1 500 500,000
Trump Plaza Funding, Inc.
First Mortgage
Notes
10.875%, 6/15/01 B3 500 458,125
(/4/) (/10/) Trump Taj Mahal Funding
Debentures
11.35%, 11/15/99 Caa 510 452,514
Wright Medical Technology
Series B
Sr. Secured Debentures
10.75%, 7/1/00 B3 500 502,500
-----------
GROUP TOTAL 7,777,176
-----------
- ------------------------------------------------------------------------
- ------------
TRANSPORTATION (0.7%)
CHC Helicopter
Corp.
Sr. Sub. Notes
11.50%, 7/15/02 B3 250 218,750
USAir, Inc.
Gtd. Sr. Notes
10.00%, 7/1/03 B3 500 412,500
-----------
GROUP TOTAL 631,250
-----------
- ------------------------------------------------------------------------
- ------------
TOTAL CORPORATE OBLIGATIONS
(Cost $56,597,025) 55,595,664
-----------
- ------------------------------------------------------------------------
- ------------
GOVERNMENT & AGENCY SECURITIES (2.5%)
- ------------------------------------------------------------------------
- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (2.5%)
October 30 yr. TBA
8.00%, 3/15/25 Aaa 2,000 2,045,620
-----------
- ------------------------------------------------------------------------
- ------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (0.0%)
Graduated Payment
12.75%, 11/15/13 Aaa 28 31,595
-----------
- ------------------------------------------------------------------------
- ------------
TOTAL GOVERNMENT & AGENCY SECURITIES
(Cost $2,062,532) $2,077,215
-----------
- ------------------------------------------------------------------------
- ------------
COLLATERALIZED SECURITY (1.3%)
- ------------------------------------------------------------------------
- ------------
COLLATERALIZED MORTGAGE OBLIGATIONS (1.3%)
(/11/) Drexel, Burnham, & Lambert Trust
REMIC-PAC, Series S-2
9.00%, 8/1/18 Aaa $ 1,040 1,056,758
-----------
- ------------------------------------------------------------------------
- ------------
TOTAL COLLATERALIZED SECURITY
(Cost $1,074,319) 1,056,758
-----------
- ------------------------------------------------------------------------
- ------------
ASSET BACKED OBLIGATIONS (7.7%)
- ------------------------------------------------------------------------
- ------------
(/11/) Green Tree Financial Corp.
Manufactured Housing
Installment Sale Contracts
Series 1993-4, Class B1
7.20%, 1/15/19 Baa3 1,768 1,732,640
(/9/) Merrill Lynch Home Equity
Acceptance Trust
Series 1994-A, Class A2
6.625%, 7/17/22 A3 1,541 1,538,506
Merrill Lynch Home
Equity Loan Corp.,
Series 1991-1 Class B
9.30%, 5/15/16 N/R 3,000 2,903,430
(/3/) (/11/) Resolution Trust Co.
Series 1994-N1A, Class 2
6.00%, 1/15/04 Baa2 194 193,265
- ------------------------------------------------------------------------
- ------------
TOTAL ASSET BACKED OBLIGATIONS
(Cost $6,680,977) 6,367,841
-----------
- ------------------------------------------------------------------------
- ------------
<CAPTION>
Shares
- ------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
COMMON STOCKS (1.0%)
- ------------------------------------------------------------------------
- ------------
COMMUNICATIONS (0.0%)
Pagemart, Inc. 3,500 0
-----------
- ------------------------------------------------------------------------
- ------------
CONSUMER PRODUCTS (0.6%)
(/1/)(/5/)(/6/) Applause Enterprises, Inc.
(acquired 11/8/91, cost $72,200) 1,900 6,650
(/1/)(/5/)(/6/) Dr. Pepper Bottling Holdings, Inc.
(acquired 10/21/88,
cost $54,000) 60,000 210,000
(/1/) Mail-Well, Inc. 1,250 0
(/1/) Specialty Foods, Inc. 22,500 28,125
(/1/)(/5/)(/6/) TLC Beatrice International Holdings, Inc.
(acquired 11/26/91,
cost $307,500) 7,500 225,000
-----------
GROUP TOTAL 469,775
-----------
- ------------------------------------------------------------------------
- ------------
FINANCE (0.0%)
(/1/)(/5/)(/6/)(/7/) Westfed Holdings, Inc., Series B
(acquired 9/20/88, cost $127) 4,223 0
-----------
- ------------------------------------------------------------------------
- ------------
MANUFACTURING (0.4%)
(/5/)(/6/)(/7/) CIC I Acquisition Corp.
(acquired 10/18/89,
cost $1,076,725) 2,944 200,192
(/1/) Polyvision Corp. 3,211 10,034
Thermoscan Inc., Class B 6,500 104,000
-----------
GROUP TOTAL 314,226
-----------
- ------------------------------------------------------------------------
- ------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------------------------
- ------------
<C> <S> <C> <C>
RETAIL TRADE (0.0%)
(/1/)(/5/)(/6/) Jewel Recovery L.P.
(acquired 7/30/93, cost $0) 33,040 $ 0
----------
- -----------------------------------------------------------------------
- ------------
SERVICES (0.0%)
(/1/) (/3/) Motels of America, Inc. 250 18,750
----------
- -----------------------------------------------------------------------
- ------------
TOTAL COMMON STOCKS
(Cost $1,620,461) 802,751
----------
- -----------------------------------------------------------------------
- ------------
PREFERRED STOCKS (1.9%)
- -----------------------------------------------------------------------
- ------------
COMMUNICATIONS (0.3%)
(/3/) SD Warren Co. 8,000 248,000
----------
- -----------------------------------------------------------------------
- ------------
FINANCE (0.0%)
(/1/)(/5/)(/6/)(/7/) Westfed Holdings, Inc., Class
A (acquired 9/20/88-6/18/93,
cost $1,203,480) 14,246 0
----------
- -----------------------------------------------------------------------
- ------------
MANUFACTURING (0.6%)
Alpine Group, Inc. 1,664 74,880
(/3/) (/6/) BCP/Essex Holdings, Series A 15,562 400,722
----------
GROUP TOTAL 475,602
----------
- -----------------------------------------------------------------------
- ------------
OIL, GAS & ELECTRIC (1.0%)
(/1/) Consolidated Hydro, Inc.,
Class H 1,500 817,500
----------
- -----------------------------------------------------------------------
- ------------
TOTAL PREFERRED STOCKS
(Cost $2,586,619) 1,541,102
----------
- -----------------------------------------------------------------------
- ------------
WARRANTS (0.3%)
- -----------------------------------------------------------------------
- ------------
(/1/) American Telecasting, Inc.,
expiring 6/23/99 360 360
(/1/) Australia Media Ltd.,
expiring 5/15/00 225 0
(/1/) (/3/) Boomtown, Inc., expiring
11/1/98 500 0
(/1/) Casino America Corp.,
expiring 11/15/95 1,632 0
(/1/) Casino Magic Corp.,
expiring 10/14/96 3,000 150
(/1/) CHC Helicopter,
expiring 12/15/00 2,000 2,000
(/1/) Consolidated Hydro, Inc.,
expiring 12/31/03 2,700 13,500
(/1/) County Seat Stores,
expiring 10/15/98 500 750
(/1/) (/6/) Crown Packaging Holdings Ltd.,
expiring 11/1/03 1,000 25,000
(/1/) Dial Call Communications,
expiring 4/25/99 500 1,000
(/1/) (/3/) Elsinore Corp., expiring
10/8/98 5,329 0
(/1/) (/3/) Great American Cookie,
expiring 1/30/00 90 0
(/1/) Health O Meter, expiring
8/15/02 500 0
(/1/) Hemmeter, expiring 12/15/99 3,000 0
(/1/) Intermedia Communications of
Florida, Inc., expiring
6/1/00 300 3,000
(/1/) MVE Inc., expiring 2/15/02 500 0
(/1/) Presidential Riverboat
Casinos,
expiring 9/23/96 3,000 0
(/1/) (/3/) Purity Supreme, expiring
8/1/97 1,733 0
(/1/) (/3/) Renaissance Cosmetics,
expiring 4/3/01 1,000 17,500
(/1/) SD Warren Co., expiring
12/15/06 8,000 56,000
- ------------
(/1/) Sheffield Steel Corp.,
expiring 11/1/01 2,500 $ 12,500
(/1/) Spanish Broadcasting
System, expiring 6/29/99 500 100,000
(/1/) United International Holdings,
expiring 11/15/99 600 0
(/1/) (/3/) Wright Medical Technology,
expiring 6/30/03 206 33,971
- ---------------------------------------------------------------------------
- ------------
TOTAL WARRANTS
(Cost $177,321) 265,731
----------
- ---------------------------------------------------------------------------
- ------------
<CAPTION>
Face
Moody's Amount
Ratings (000)
- ---------------------------------------------------------------------------
- ------------
<C> <S> <C> <C> <C>
UNITS (2.5%)
- ---------------------------------------------------------------------------
- ------------
Cellular
Communications, Inc.
Zero Coupon, 8/15/00 B3 $1,000 550,000
Horseshoe Gaming
12.75%, 9/15/00 N/R 250 245,000
(/3/)(/6/)(/8/) In-Flight Phone Corp.
0.00%, 5/15/02 Caa 500 200,000
(/3/) (/8/) Intelcom Group, Inc.
0.00%, 9/15/05 N/R 350 196,000
Pegasus Media &
Communications
12.50%, 7/1/05 B3 500 502,500
(/3/) Terex Corp.
13.75%, 5/15/02 Caa 500 410,000
- ---------------------------------------------------------------------------
- ------------
TOTAL UNITS
(Cost $2,304,805) 2,103,500
----------
- ---------------------------------------------------------------------------
- ------------
TOTAL DOMESTIC SECURITIES
(Cost $73,104,059) 69,810,562
----------
- ---------------------------------------------------------------------------
- ------------
FOREIGN INCOME SECURITIES (15.0%)
- ---------------------------------------------------------------------------
- ------------
GOVERNMENT OBLIGATIONS (15.0%)
- ---------------------------------------------------------------------------
- ------------
DENMARK
Kingdom of Denmark
8.00%, 3/15/06 Aaa DK 5200 928,625
FRANCE
Government of France
Debenture
7.50%, 4/25/05 Aaa FF 7,000 1,447,691
Government of France
Treasury Bill
4.75%, 4/12/99 Aaa 7,000 1,336,313
GERMANY
Deutsche Bondesbank
Debentures
6.75%, 7/15/04 Aaa DM 6,000 4,225,159
SWEDEN
Kingdom of Sweden
11.00%, 1/21/99 Aa1 SK 10,000 1,506,286
UNITED KINGDOM
United Kingdom Treasury
6.00%, 8/10/99 A (L) 2,000 2,996,509
- ---------------------------------------------------------------------------
- ------------
TOTAL GOVERNMENT OBLIGATIONS
(Cost $11,320,029) 12,440,583
----------
- ---------------------------------------------------------------------------
- ------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- ----------------------------------------------------------
- ------------
<S> <C> <C> <C>
TOTAL FOREIGN INCOME SECURITIES
(Cost $11,320,029) $12,440,583
-----------
- ----------------------------------------------------------
- ------------
SHORT-TERM INVESTMENT (2.3%)
- ----------------------------------------------------------
- ------------
REPURCHASE AGREEMENT (2.3%)
Sanwa Securities,
6.20%, dated 9/29/95,
due 10/2/95, to be
repurchased at
$1,952,008,
collateralized by
$1,844,000 U.S. Treasury
Notes 7.75%, due
12/31/99,
valued at $1,990,123
(Cost $1,951,000) $1,951 1,951,000
-----------
- ----------------------------------------------------------
- ------------
TOTAL INVESTMENTS (101.4%)
(Cost $86,375,088) 84,202,145
-----------
- ----------------------------------------------------------
- ------------
LIABILITIES IN EXCESS OF
OTHER ASSETS (-1.4%) (1,178,166)
-----------
- ----------------------------------------------------------
- ------------
NET ASSETS (100%)
Applicable to 8,454,140 issued and
outstanding $.001 par value shares
(authorized 100,000,000 shares) $83,023,979
-----------
- ----------------------------------------------------------
- ------------
NET ASSET VALUE PER SHARE $9.82
-----
- ----------------------------------------------------------
- ------------
</TABLE>
(L)--British Pound.
DK--Danish Krone.
DM--Deutsche Mark.
FF--French Franc.
SK--Swedish Krona.
N/R--Not Rated.
PAC--Planned Amortization Class
REMIC--Real Estate Mortgage Investment Conduit.
(/1/) Non-income producing security.
(/2/) Defaulted security.
(/3/) 144ASecurity. Certain conditions for public sale may exist.
(/4/) Payment in kind bond. Market value includes accrued interest.
(/5/) Restricted as to private and public resale. Total cost of restricted
securities at September 30, 1995 aggregated $2,714,032. Total market
value of restricted securities owned at September 30, 1995 was $641,842
or 0.8% 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/) Floating Rate--The interest rate changes on these instruments based upon
a designated base rate. The rates shown are those in effect at September
30, 1995.
(/10/) 9.375% of 11.35%represents amount paid in cash, the remainder is payment
in kind.
(/11/) A portion of this security was pledged as collateral for delayed delivery
securities.
8
