<PAGE>
BEA Strategic Global Income Fund, Inc.
153 East 53rd Street
New York, NY 10022
- ---------------------------------------------
OFFICERS AND DIRECTORS
<TABLE>
<S> <C>
William W. Priest, Jr. Suzanne E. Moran
CHAIRMAN OF THE BOARD INVESTMENT OFFICER
Prof. Enrique R. Arzac Hal Liebes
DIRECTOR SENIOR VICE PRESIDENT
Lawrence J. Fox Michael A. Pignataro
DIRECTOR SECRETARY
James S. Pasman, Jr. Wendy S. Setnicka
DIRECTOR VICE PRESIDENT
Richard J. Lindquist AND ASSISTANT SECRETARY
PRESIDENT AND CHIEF INVESTMENT Paul P. Stamler
OFFICER TREASURER
Gregg M. Diliberto Paul Roselli
INVESTMENT OFFICER ASSISTANT TREASURER
</TABLE>
- --------------------------------------------------------
INVESTMENT ADVISER
BEA Associates
153 East 53rd Street
New York, New York 10022
Phone 1-800-293-1232
- --------------------------------------------------------
ADMINISTRATOR
Chase Global Funds Services Company
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 $1,000 (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 Strategic Global Income Fund, Inc.
- --------------------------------------------------------------------------------
THIRD QUARTER REPORT
September 30, 1997
<PAGE>
BEA STRATEGIC GLOBAL INCOME FUND, INC.
- ----------
Dear Shareholders: November 11, 1997
We are pleased to report on the activities of the BEA Strategic Global 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 $10.99,
compared to an NAV of $10.59 at June 30, 1997. As a result, the Fund's total
return for the period (based on NAV and assuming reinvestment of dividends of
$0.2025 per share) was 5.9%. The Fund's return based on NAV for the nine months
ended September 30, 1997 (assuming reinvestment of dividends of $.66 per share)
was 13.5%.
We also note that, on September 19, 1997, the Board of Directors increased
the monthly dividend to $.0725 per share. The increase was effective with the
October dividend payment.
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.
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, besting the 3.3% and 6.5% gains posted by the
Lehman Brothers Aggregate Bond Index during the same periods. 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.
As they have all year, returns on emerging market debt far exceeded those of
developed nations. Respective performance for the quarter and year-to-date
periods was 6.9% and 17.9% for the J.P. Morgan Emerging Markets Bond Index Plus,
versus 1.7% and 0.6% for Morgan's Global Government Bond Index. Investors have
flocked to emerging issues for a variety of reasons, including improvement in
sovereign and corporate fundamentals; opportunities for gains from a large
number of refinancings; availability of higher yields relative to most other
debt sectors; and a widening of asset allocation guidelines for many
institutional investors.
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
2
<PAGE>
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.
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
overweighted 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.
Performance also was enhanced by our ongoing commitment to emerging market
instruments. The Fund has had great success in exploiting the trend of emerging
debt refinancings, notably in the form of exchanging high-cost Brady bonds for
Eurobonds or other higher-quality debt. We expect the trend to continue for some
time and intend to take advantage accordingly. The long-awaited Russian loan
refinancing, for which we have beneficially positioned the Fund, now is
officially scheduled to occur by the end of the year. Our avoidance of exposure
to Southeast Asia additionally helped overall results.
OUTLOOK
HIGH YIELD. 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.
INTERNATIONAL. The onset of the Southeast Asian currency crisis has
painfully exposed the deep fundamental problems in several nations (I.E., large
current account deficits, overleveraged banking and corporate sectors). On this
basis, we anticipate that the region will undergo a long period of structural
adjustment. We see positive implications for other markets, though, mainly in
the form of deflation. Additionally, we believe fears that a "contagion effect"
will spread the crisis to Latin America to be unfounded. Our approach has been
to completely avoid Emerging Asia while building positions elsewhere, such as in
Brazil and Russia.
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,
[/S/ RICHARD J. LINDQUIST]
Richard J. Lindquist
PRESIDENT AND CHIEF INVESTMENT OFFICER
[/S/ WILLIAM W. PRIEST, JR.]
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 (72.4%)
- --------------------------------------------------------------------------------------------
- -----------------
CORPORATE OBLIGATIONS (62.6%)
- --------------------------------------------------------------------------------------------
- -----------------
AUTOMOTIVE (1.3%)
(3) Cambridge Industries, Inc.
Sr. Sub. Notes
10.25%, 7/15/07 B3 $ 250 $ 261,875
Collins & Aikman
Products Corp.
Sr. Sub. Notes
11.50%, 4/15/06 B3 250 285,625
Consorcio G Grupo
Dina S.A./MCII
Holdings (U.S.A.), Inc.
Sr. Secured Notes
Zero Coupon, 11/15/02 N/R 400 362,000
(3) Delco Remy International, Inc.
Gtd. Sr. Sub. Notes
10.625%, 8/1/06 B2 250 269,375
-----------
GROUP TOTAL 1,178,875
-----------
- --------------------------------------------------------------------------------------------
- -----------------
BROADCASTING (4.6%)
(3)(8) ACME Television, L.L.C./
ACME Financial Corp.
Gtd. Sr. Discount Notes
0.00%, 9/30/04 B3 500 367,500
(8) Australis Holdings Pty. Ltd.
Yankee Sr. Secured
Discount Notes
0.00%, 11/1/02 N/R 250 146,853
(8) Australis Media Ltd.
Yankee Units
0.00%, 5/15/03 Caa1 227 181,595
(8) Capstar Broadcasting
Partners, Inc.
Sr. Discount Notes
0.00%, 2/1/09 N/R 500 345,000
(3) Digital Television Services, L.L.C./DTS
Capital, Inc.
Gtd. Sr. Sub. Notes
12.50%, 8/1/07 B3 250 260,000
(8) EchoStar Communications Corp.
Gtd. Sr. Discount Notes
0.00%, 6/1/04 B2 300 277,500
Pegasus Media & Communications, Inc.
Series B, Notes
12.50%, 7/1/05 B2 250 283,125
Sinclair Broadcast Group
Sr. Sub. Notes
10.00%, 9/30/05 B2 300 315,000
(8) Spanish Broadcasting System, Inc.
Sr. Notes
12.50%, 6/15/02 B3 250 287,500
United International Holdings, Inc.
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 573 567,344
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
Young Broadcasting, Inc.
Series B, Gtd. Sr. Sub. Notes:
8.75%, 6/15/07 B2 $ 450 $ 442,125
9.00%, 1/15/06 B2 200 201,000
-----------
GROUP TOTAL 4,285,792
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CABLE (6.2%)
Cablevision System Corp.
Sr. Sub. Debentures
9.875%, 2/15/13 B1 250 270,000
Century Communications Corp.
Sr. Notes
8.75%, 10/1/07 Ba3 250 250,625
Charter Communications Southeast L.P.
Series B, Sr. Notes
11.25%, 3/15/06 B3 250 275,000
Comcast Corp.
Sr. Sub. Notes
9.125%, 10/15/06 Ba3 250 267,500
(8) Comcast UK Cable Partners Ltd.
Yankee Sr. Debentures
0.00%, 11/15/07 B2 500 392,500
(8) Diamond Cable Communications plc
Yankee Discount Notes
0.00%, 12/15/05 B3 800 599,000
(3)(8) DIVA Systems Corp.
Units
0.00%, 5/15/06 N/R 900 540,000
(4) Falcon Holding Group L.P.
Sr. Sub. Notes
11.00%, 9/15/03 N/R 465 483,680
Helicon Group L.P.
Series B, Sr. Secured Notes
11.00%, 11/1/03 B1 200 212,500
InterMedia Capital
Partners IV L.P./InterMedia
Partners IV Capital Corp.
Sr. Notes
11.25%, 8/1/06 B2 250 275,000
Lenfest Communications, Inc.
Sr. Sub. Notes
10.50%, 6/15/06 B2 500 552,500
(8) Marcus Cable Co.
Sr. Discount Notes
0.00%, 12/15/05 Caa1 350 290,500
NTL, Inc.:
(8) Series B, Sr. Deferred
Coupon Notes
0.00%, 2/1/06 B3 500 373,750
Series B, Sr. Notes
10.00%, 2/15/07 B3 250 262,188
OpTel, Inc.
Series B, Sr. Notes
13.00%, 2/15/05 B3 250 249,375
Rifkin Acquisitions Partners L.P.
Sr. Sub. Notes
11.125%, 1/15/06 B3 250 273,125
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
(8) Telewest Communications plc
Yankee Sr. Sub. Discount
Debentures
0.00%, 10/1/07 B1 $ 250 $ 188,125
-----------
GROUP TOTAL 5,755,368
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CHEMICALS (2.1%)
Harris Chemical N.A.
Sr. Secured Debentures
10.25%, 7/15/01 B2 300 312,000
Huntsman Polymers Corp.
Sr. Notes
11.75%, 12/1/04 B1 400 454,000
NL Industries Inc.:
Sr. Secured Notes
11.75%, 10/15/03 B1 150 164,625
(8) Sr. Secured Discount
Debentures
0.00%, 10/15/05 B2 250 243,125
Texas Petrochemical Corp.
Series B, Sr. Sub. Notes
11.125%, 7/1/06 B3 200 219,250
UCC Investor's Holdings, Inc.
Sr. Sub. Notes
11.00%, 5/1/03 B3 500 537,500
-----------
GROUP TOTAL 1,930,500
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CONSTRUCTION & BUILDING MATERIALS (0.3%)
Presley Companies
Sr. Notes
12.50%, 7/1/01 Caa3 250 237,500
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CONSUMER PRODUCTS & SERVICES (2.7%)
(3)(8) Coinstar, Inc.
Sr. Discount Notes
0.00%, 10/1/06 N/R 600 469,500
Jordan Industries, Inc.
Series B, Sr. Notes
10.375%, 8/1/07 B3 225 230,063
(3) Playtex Products, Inc.
Series A, Sr. Notes
8.875%, 7/15/04 B1 200 202,500
Renaissance Cosmetics, Inc.
Gtd. Sr. Notes
11.75%, 2/15/04 B3 250 253,750
Revlon Consumer Products, Inc.
Series B, Sr. Sub. Notes
10.50%, 2/15/03 B3 250 266,250
Revlon Worldwide
(Parent) Corp.
Series B, Sr. Secured Discount Notes
Zero Coupon, 3/15/01 B3 300 217,875
Signature Brands USA Inc.
Units
13.00%, 8/15/02 B3 500 539,375
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
Town & Country Corp.
Sr. Sub. Notes
13.00%, 5/31/98 Ca $ 616 $ 375,801
-----------
GROUP TOTAL 2,555,114
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ELECTRONICS (1.7%)
Advanced Micro Devices, Inc.
Sr. Secured Notes
11.00%, 8/1/03 Ba1 250 282,500
DecisionOne Corp.
Sr. Sub. Notes
9.75%, 8/1/07 B3 250 261,250
Unisys Corp.
Sr. Notes
11.75%, 10/15/04 B1 300 339,000
(3) Verio Inc.
Units
13.50%, 6/15/04 N/R 400 469,000
(3) Viasystems, Inc.
Sr. Sub. Notes
9.75%, 6/1/07 B3 250 260,625
-----------
GROUP TOTAL 1,612,375
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ENERGY (4.2%)
(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 350 378,875
(3) Cliffs Drilling Co.
Series B, Sr. Notes
10.25%, 5/15/03 B1 250 271,875
Dawson Production Services, Inc.
Sr. Notes
9.375%, 2/1/07 B1 150 157,125
Dual Drilling Co.
Gtd. Sr. Sub. Notes
9.875%, 1/15/04 B1 250 271,250
Energy Corp. of America
Series A, Sr. Sub. Notes
9.50%, 5/15/07 B2 250 251,250
Falcon Drilling Co., Inc.
Series B, Sr. Notes
9.75%, 1/15/01 Ba3 375 394,688
Forcenergy Inc.
Series B, Sr. Sub. Notes
8.50%, 2/15/07 B2 250 249,375
(3) Giant Industries, Inc.
Sr. Sub. Notes
9.00%, 9/1/07 B2 500 505,000
Gulf Canada Resources Ltd.
Yankee Sr. Sub. Debentures
9.25%, 1/15/04 Ba2 300 318,000
H.S. Resources, Inc.
Gtd. Sr. Sub. Notes
9.25%, 11/15/06 B2 250 257,500
(8) Mesa Operating Co.
Gtd. Sr. Sub. Discount Notes
0.00%, 7/1/06 Ba2 250 200,000
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
(3) Panda Global Energy Co.
Yankee Gtd. Sr. Secured Notes
12.50%, 4/15/04 N/R $ 250 $ 243,437
(3) TransAmerican Energy
Sr. Secured Discount Notes
11.50%, 6/15/02 B3 200 200,000
-----------
GROUP TOTAL 3,899,875
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ENTERTAINMENT (1.8%)
American Skiing Co.
Series B, Sr. Sub. Notes
12.00%, 7/15/06 B3 200 224,500
Booth Creek Ski Holdings, Inc.
Series B, Sr. Notes
12.50%, 3/15/07 Caa1 250 256,250
(3) Cinemark USA, Inc.
Series C, Sr. Sub. Notes
9.625%, 8/1/08 B2 200 206,500
Genmar Holdings, Inc.
Series A, Sr. Sub. Notes
13.50%, 7/15/01 Caa2 500 511,875
PTI Holdings, Inc.
Sub. Notes
Zero Coupon, 12/17/02 N/R 507 501,846
-----------
GROUP TOTAL 1,700,971
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FINANCIAL SERVICES (1.0%)
American Banknote Corp.
Series B, Sr. Notes
11.625%, 8/1/02 B2 250 274,375
Western Financial Bank F.S.B.
Sub. Capital Debentures
8.875%, 8/1/07 B1 250 249,063
(2)(7) Westfed Holdings
Sr. Debentures
15.50%, 9/15/99 N/R 250 200,000
(3) Wilshire Financial Services Group, Inc.
Unsecured Sr. Notes
13.00%, 8/15/04 N/R 250 253,437
-----------
GROUP TOTAL 976,875
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FOOD & BEVERAGES (0.5%)
(3) Archibald Candy Corp.
Gtd. Sr. Secured Notes
10.25%, 7/1/04 B2 250 261,250
(3) Fleming Companies, Inc.
Gtd. Sr. Sub. Notes
10.50%, 12/1/04 B3 200 209,500
-----------
GROUP TOTAL 470,750
-----------
- --------------------------------------------------------------------------------------------
- -----------------
HEALTH CARE (0.7%)
(3) Integrated Health Services, Inc.
Sr. Sub. Notes
9.25%, 1/15/08 B2 250 254,688
Regency Health Services, Inc.
Gtd. Sr. Sub. Notes
9.875%, 10/15/02 B2 300 328,500
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
(3) UROHEALTH Systems, Inc.
Units
12.50%, 4/1/04 B3 $ 100 $ 99,500
-----------
GROUP TOTAL 682,688
-----------
- --------------------------------------------------------------------------------------------
- -----------------
INDUSTRIAL GOODS & MATERIALS (3.4%)
Atlantis Group, Inc.
Sr. Notes
11.00%, 2/15/03 B2 250 267,500
Exide Corp.
Sr. Notes
10.75%, 12/15/02 B1 190 201,400
(3) Golden Ocean Group, Ltd.
Units
10.00%, 8/31/01 B3 342 250,515
Haynes International, Inc.
Sr. Notes
11.625%, 9/1/04 B3 250 277,500
(8) IHF Holdings Inc.
Series B, Sr. Sub.
Discount Notes
0.00, 11/15/04 Caa2 250 215,000
MVE Inc.
Sr. Secured Debentures
12.50%, 2/15/02 B3 500 510,625
SRI Receivables Purchase Co., Inc.
Series B, Notes
12.50%, 12/15/00 N/R 500 520,000
Specialty Equipment Companies, Inc.
Sr. Sub. Notes
11.375%, 12/1/03 B3 450 488,250
Terex Corp.
Series B, Sr. Secured Notes
13.25%, 5/15/02 Caa1 334 384,935
-----------
GROUP TOTAL 3,115,725
-----------
- --------------------------------------------------------------------------------------------
- -----------------
METALS & MINING (3.4%)
Algoma Steel, Inc.
Yankee First Mortgage Notes
12.375%, 7/15/05 B1 500 583,750
(3) Armco, Inc.
Sr. Notes:
11.375%, 10/15/99 B2 250 256,250
9.00%, 9/15/07 B2 150 151,875
Bayou Steel Corp.
First Mortgage Notes
10.25%, 3/1/01 B2 250 258,750
Gulf States Steel, Inc.
First Mortgage Notes
13.50%, 4/15/03 B1 250 258,750
NS Group Inc.
Gtd. Sr. Secured Debentures
13.50%, 7/15/03 B3 250 291,250
Republic Engineered Steel, Inc.
First Mortgage Bonds
9.875%, 12/15/01 Caa1 250 241,250
Sheffield Steel Corp.
First Mortgage Notes
12.00%, 11/1/01 Caa3 500 517,500
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
WCI Steel Inc.
Series B, Sr. Secured Notes
10.00%, 12/1/04 B2 $ 250 $ 266,562
Weirton Steel Corp.
Sr. Notes
11.375%, 7/1/04 B2 300 325,500
-----------
GROUP TOTAL 3,151,437
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PACKAGING/CONTAINERS (3.3%)
(3) BWAY Corp.
Gtd. Sr. Sub. Notes
10.25%, 4/15/07 B2 150 162,000
Container Corp. of America
Gtd. Sr. Notes
9.75%, 4/1/03 B1 250 270,000
(8) Crown Packaging Enterprises Ltd.
Sr. Secured Discount Notes
0.00%, 8/1/06 Ca 775 170,500
Four M Corp.
Series B, Sr. Secured Notes
12.00%, 6/1/06 B3 350 375,375
(3) Gaylord Container Corp.:
Sr. Notes
9.75%, 6/15/07 B3 250 254,375
Sr. Sub. Discount Debentures
12.75%, 5/15/05 Caa1 250 273,438
(8) Ivex Holdings Corp.
Series B,
Sr. Discount
Debentures
0.00%, 3/15/05 Caa1 1,250 1,040,625
Plastic Containers Inc.
Series B, Sr. Secured Notes
10.00%, 12/15/06 B1 250 266,250
(3) Stone Container Finance Co.
Yankee Gtd. Sr. Notes
11.50%, 8/15/06 B2 250 262,812
-----------
GROUP TOTAL 3,075,375
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PAPER & FOREST PRODUCTS (1.9%)
(3) Ainsworth Lumber Co. Ltd.
Yankee Sr. Secured Notes
12.50%, 7/15/07 B3 250 247,500
Fort Howard Corp.
Sub. Notes
10.00%, 3/15/03 Ba2 500 535,000
(3) Mail-Well Corp.
Sr. Sub. Notes
10.50%, 2/15/04 B1 500 538,750
Malette, Inc.
Yankee Sr. Secured
Debentures
12.25%, 7/15/04 Ba3 150 170,625
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
Repap Wisconsin, Inc.
2nd Priority Sr. Secured Notes
9.875%, 5/1/06 Ba3 $ 250 $ 271,875
-----------
GROUP TOTAL 1,763,750
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PUBLISHING & INFORMATION SERVICES (0.2%)
(8) InterAct Systems, Inc.
Sr. Discount Notes
0.00%, 8/1/03 N/R 400 185,500
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RESTAURANTS, HOTELS & GAMING (4.5%)
Casino America, Inc.
Gtd. Sr. Notes
12.50%, 8/1/03 B1 250 268,750
Casino Magic of Louisiana, Corp.
Series B, First Mortgage Notes
13.00%, 8/15/03 B3 600 580,500
Colorado Gaming & Entertainment, Co.
Gtd. Sr. Notes
12.00%, 6/1/03 N/R 443 477,998
(2) Elsinore Corp.
First Mortgage Notes
12.50%, 10/1/00 N/R 100 52,000
G.B. Property Funding Corp.
Gtd. First Mortgage Notes
10.875%, 1/15/04 B3 450 403,875
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 200 218,000
(3) Horseshoe Gaming L.L.C.:
Series B, Gtd. Sr. Notes
12.75%, 9/30/00 B1 375 421,406
Gtd. Sr. Sub. Notes
9.375%, 6/15/07 B3 500 518,125
Mohegan Tribal Gaming Authority
Series B, Sr. Secured Notes
13.50%, 11/15/02 Ba1 200 262,000
Prime Hospitality Corp.
Secured First Mortgage Notes
9.25%, 1/15/06 Ba2 250 262,500
Waterford Gaming L.L.C./
Waterford Gaming Finance Corp.
Sr. Notes
12.75%, 11/15/03 N/R 200 222,000
-----------
GROUP TOTAL 4,152,342
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RETAIL (3.9%)
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 500 225,000
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
Dairy Mart Convenience Stores, Inc.
Sr. Sub. Notes
10.25%, 3/15/04 B3 $ 301 $ 305,515
Farm Fresh, Inc.:
Sr. Notes
12.25%, 10/1/00 Caa2 300 273,000
Series A, Sr. Notes
12.25%, 10/1/00 Caa2 150 136,313
Great American Cookie Co.
Series B, Sr. Secured Debentures
10.875%, 1/15/01 B3 500 510,000
Hills Stores Co.
Gtd. Sr. Notes
12.50%, 7/1/03 B2 250 207,500
(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 250 258,437
K Mart Corp.
Debentures
7.75%, 10/1/12 Ba3 200 189,500
Parisian, Inc.
Sr. Sub. Notes
9.875%, 7/15/03 B1 150 159,000
Pathmark Stores, Inc.
Sr. Sub. Notes
9.625%, 5/1/03 B3 250 247,500
(3) Shoppers Food Warehouse Corp.
Gtd. Sr. Secured Notes
9.75%, 6/15/04 B1 250 255,625
-----------
GROUP TOTAL 3,581,765
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TELECOMMUNICATIONS (13.1%)
Advanced Radio
Telecommunications Corp.
Sr. Notes
14.00%, 2/15/07 Caa2 250 210,000
(8) American Communications Services, Inc.
Sr. Discount Notes
0.00%, 11/1/05 N/R 1,000 737,500
Brooks Fiber Properties, Inc.:
(8) Sr. Discount Notes:
0.00%, 3/1/06 N/R 450 360,000
0.00%, 11/1/06 N/R 500 385,000
Sr. Notes
10.00%, 6/1/07 N/R 250 281,875
Cellular Communications International, Inc.
Units
Zero Coupon, 8/15/00 B3 700 546,000
(8) Dial Call Communications
Sr. Discount Notes
0.00%, 4/15/04 B3 700 652,750
(8) EchoStar Satellite
Broadcasting Corp.
Sr. Discount Notes
0.00%, 3/15/04 Caa1 250 210,625
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
(3) Fox/Liberty Networks L.L.C.:
(8) Sr. Discount Notes
0.00%, 8/15/07 B1 $ 250 $ 160,625
Sr. Notes
8.875%, 8/15/07 B1 250 252,500
(3)(8) GST Telecommunications, Inc.
Conv. Sr. Sub.
Discount Notes
0.00%, 12/15/05 N/R 100 75,500
(8) GST USA, Inc.
Gtd. Sr. Discount Notes
0.00%, 12/15/05 N/R 800 604,000
Geotek Communications, Inc.
Conv. Sr. Sub. Notes
12.00%, 12/15/01 Caa2 350 297,500
(8) ICG Holdings, Inc.:
Gtd. Sr. Discount Notes
0.00%, 9/15/05 N/R 350 278,250
0.00%, 3/15/07 N/R 1,000 660,000
(3)(8) Intermedia Communications, Inc.
Sr. Discount Notes
0.00%, 7/15/07 B2 200 134,500
(3)(8) Jordan Telecommunication Products, Inc.
Sr. Discount Notes
0.00%, 8/1/07 B3 250 195,625
(8) McCaw International Ltd.
Sr. Discount Notes
0.00%, 4/15/07 N/R 750 453,750
McLeodUSA, Inc.:
(8) Sr. Discount Notes
0.00%, 3/1/07 B3 100 71,250
(3) Sr. Notes
9.25%, 7/15/07 B3 200 211,500
NEXTLINK Communications, Inc.
Sr. Notes
12.50%, 4/15/06 N/R 100 115,500
(3)(8) Nextel Communications, Inc.
Sr. Discount Notes
0.00%, 8/15/04 B3 500 432,500
Orion Network Systems, Inc.
Gtd. Sr. Notes
11.25%, 1/15/07 B2 250 273,750
(8) Pagemart Nationwide, Inc.
Sr. Discount Notes
0.00%, 2/1/05 N/R 750 622,500
(3) Petersburg Long Distance Inc.:
Conv. Sub. Notes
9.00%, 6/1/06 N/R 80 105,600
(8) Units
0.00%, 6/1/04 N/R 560 532,000
(3)(8) Price Communications Corp./
Price Communications Cellular
Holdings, Inc.
Units
0.00%, 8/1/07 Caa1 350 188,125
(8) PriCellular Wireless Corp.
Discount Notes
0.00%, 10/1/03 B3 300 297,000
Sprint Spectrum L.P./Sprint
Spectrum Finance Corp.
Sr. Notes
11.00%, 8/15/06 B2 450 505,125
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
(3)(8) TCI Satellite Entertainment, Inc.:
Sr. Sub. Discount Notes
0.00%, 2/15/07 B3 $ 150 $ 97,875
Sr. Sub. Notes
10.875%, 2/15/07 B3 300 315,000
(3) Talton Holdings Inc.
Gtd. Sr. Notes
11.00%, 6/30/07 B2 250 269,375
Teleport Communications Group, Inc.:
(8) Sr. Discount Notes
0.00%, 7/1/07 B1 550 426,250
Sr. Notes
9.875%, 7/1/06 B1 250 271,875
(3) Teletrac, Inc./Teletrac Holdings, Inc.
Units
14.00%, 8/1/07 Caa2 200 210,000
UNIFI Communications, Inc.
Sr. Notes
14.00%, 3/1/04 N/R 250 247,500
(3) USN Communications, Inc.
Units
14.625%, 8/15/04 Caa1 305 208,925
Western Wireless Corp.
Sr. Sub. Notes
10.50%, 2/1/07 B3 250 263,125
-----------
GROUP TOTAL 12,160,775
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TRANSPORTATION (1.5%)
CHC Helicopter Corp.
Yankee Sr. Sub. Notes
11.50%, 7/15/02 B3 250 268,125
(3) Global Ocean Carriers Ltd.
Gtd. Sr. Notes
10.25%, 7/15/07 B2 250 248,750
USAir, Inc.
Gtd. Sr. Notes
10.00%, 7/1/03 B3 400 418,000
(3) ValueJet, Inc.
Sr. Notes
10.50%, 4/15/01 N/R 500 502,500
-----------
GROUP TOTAL 1,437,375
-----------
- --------------------------------------------------------------------------------------------
- -----------------
WASTE MANAGEMENT (0.3%)
Allied Waste North America, Inc.
Sr. Sub. Notes
10.25%, 12/1/06 B2 250 274,375
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL CORPORATE OBLIGATIONS
(Cost $55,431,014) 58,185,102
-----------
- --------------------------------------------------------------------------------------------
- -----------------
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.9%)
- --------------------------------------------------------------------------------------------
- -----------------
Asset Securitization Corp.
Series 1996-MD6, Class A6
7.10%, 11/13/26 Baa2 $ 230 $ 239,345
Drexel, Burnham & Lambert Trust REMIC-PAC,
Series S, Class 2
9.00%, 8/1/18 Aaa 619 619,445
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $872,915) 858,790
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ASSET BACKED OBLIGATIONS (2.7%)
- --------------------------------------------------------------------------------------------
- -----------------
Green Tree Financial Corp. Manufactured
Housing
Installment Sale Contracts:
Series 1993-4, Class B1
7.20%, 1/15/19 Baa3 1,043 1,056,361
Series 1995-6, Class A3
6.65%, 9/15/26 Aaa 410 412,817
Merrill Lynch Home Equity Acceptance Trust,
Series 1994-A, Class A-2
6.44%, 7/17/22 A3 883 880,160
Nationscredit Grantor Trust, Boat Retail
Installment Sale Contracts,
Series 1996-1, Class A
5.85%, 9/15/11 Aaa 171 169,351
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL ASSET BACKED OBLIGATIONS
(Cost $2,519,221) 2,518,689
-----------
- --------------------------------------------------------------------------------------------
- -----------------
COMMON STOCKS (1.5%)
- --------------------------------------------------------------------------------------------
- -----------------
BROADCASTING (0.0%)
(1) Pegasus Communications Corp. 1,128 24,252
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CABLE (0.0%)
(1) OpTel, Inc. 250 3
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CONSUMER PRODUCTS & SERVICES (0.0%)
(1)(5) Applause Enterprises, Inc.
(acquired 11/8/91, cost $72,200) 1,900 5,700
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FINANCIAL SERVICES (0.0%)
(1)(5)(7) Westfed Holdings Inc.
Class B (acquired 9/20/88, cost $100) 4,223 0
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Shares/
Units Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
FOOD & BEVERAGES (0.9%)
(1)(5) Dr. Pepper Bottling Holdings, Inc.
Class A (acquired 10/21/88, cost $49,500) 45,000 $ 866,250
(1)(3) Specialty Foods Corp. 22,500 5,625
-----------
GROUP TOTAL 871,875
-----------
- --------------------------------------------------------------------------------------------
- -----------------
INDUSTRIAL GOODS & MATERIALS (0.2%)
(1)(5)(7) CIC I Acquisition Corp.
(acquired 10/18/89, cost $1,076,700) 2,944 200,192
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PACKAGING/CONTAINERS (0.0%)
(1) Crown Packaging Enterprises Ltd. 100,750 1,007
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PAPER & FOREST PRODUCTS (0.2%)
(1) Mail-Well, Inc. 5,326 144,468
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RESTAURANTS, HOTELS & GAMING (0.1%)
(1) Casino America Inc. 4,982 17,277
(1) Colorado Gaming & Entertainment, Co. 8,822 45,213
(1) Motels of America, Inc. 250 12,500
-----------
GROUP TOTAL 74,990
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RETAIL (0.0%)
(1)(5) Jewel Recovery L.P.
(acquired 7/30/93, cost $0) 30,030 0
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TELECOMMUNICATIONS (0.1%)
(1) Pagemart Nationwide, Inc. 3,500 36,750
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL COMMON STOCKS
(Cost $1,412,322) 1,359,237
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PREFERRED STOCKS (4.0%)
- --------------------------------------------------------------------------------------------
- -----------------
AEROSPACE/DEFENSE (0.4%)
(1) GPA Group plc
7% Second Preference Cum. Conv. 650,000 347,750
-----------
- --------------------------------------------------------------------------------------------
- -----------------
BROADCASTING (0.6%)
Granite Broadcasting Corp.
12.75% Cumulative Exchangeable 11 11,332
Spanish Broadcasting System, Inc.
14.25% Cumulative Exchangeable 5,334 558,732
-----------
GROUP TOTAL 570,064
-----------
- --------------------------------------------------------------------------------------------
- -----------------
<CAPTION>
Shares/
Units Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
CABLE (0.6%)
(3) Adelphia Communications Corp.
13% Cumulative Exchangeable Series A 2,500 $ 278,125
NTL Inc.
13% Exchangeable 266 303,685
-----------
GROUP TOTAL 581,810
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CONSUMER PRODUCTS & SERVICES (0.2%)
Renaissance Cosmetics, Inc.
14% Cumulative 229 160,095
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ENERGY (0.0%)
(7) Consolidated Hydro, Inc.
13.50% Series H, Conv. 1,500 15,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FINANCIAL SERVICES (0.0%)
(1)(5)(7) West Fed Holdings, Inc.
Class A (acquired 9/20/88-6/18/93, cost
$1,203,500) 14,246 14,246
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PAPER & FOREST PRODUCTS (0.6%)
(1) SD Warren Co.
14% Cumulative Exchangeable, Series B 13,000 604,500
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PUBLISHING & INFORMATION SERVICES (0.4%)
K-III Communications Corp.
10% Cumulative Exchangeable, Series D 3,500 359,625
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RESTAURANTS, HOTELS & GAMING (0.2%)
AmeriKing, Inc.
13% Cumulative Exchangeable 5,000 140,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RETAIL (0.3%)
(1) Jitney-Jungle Stores of America, Inc.
15.00% Class A 1,750 259,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TELECOMMUNICATIONS (0.7%)
NEXTLINK Communications, Inc.
14% Cumulative Exchangeable 6,429 401,812
Nextel Communications, Inc.
13% Series D Exchangeable 250 285,000
-----------
686,812
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL PREFERRED STOCKS
(Cost $4,989,713) 3,738,902
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RIGHTS (0.0%)
- --------------------------------------------------------------------------------------------
- -----------------
(1) Terex Corp.
expiring 5/15/02
(Cost $0) 2,000 40,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Shares/
Units Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
WARRANTS (0.7%)
- --------------------------------------------------------------------------------------------
- -----------------
(1) Advanced Radio Telecommunications Corp.
expiring 2/15/07 3,750 $ 45,000
(1) American Communications Services, Inc.
expiring 11/1/05 1,000 100,000
(1) American Telecasting, Inc.
expiring 6/23/99 350 175
(1) Australis Holdings Pty Ltd.
expiring 10/30/01 250 2
(1) Australis Media Ltd.
expiring 5/15/00 225 0
(1) Boomtown, Inc.
expiring 11/1/98 500 5
(1) CHC Helicopter Corp.
expiring 12/15/00 2,000 7,000
(1) Casino America, Inc.
expiring 5/3/01 882 9
(1) Coinstar, Inc.
expiring 12/6/99 600 4,740
(1)(7) Consolidated Hydro, Inc.
expiring 12/31/03 2,700 0
(1) County Seat Stores, Inc.
expiring 10/15/98 500 5
(1) Crown Packaging Holdings, Ltd.
expiring 11/1/03 1,000 125
(1) Dairy Mart Convenience Stores, Inc.
expiring 5/13/98 4,172 8,344
(1) Elsinore Corp.
expiring 10/8/98 5,329 0
(1) Golden Ocean Group, Ltd.
expiring 8/31/01 342 342
(1) Great American Cookie Co.
expiring 1/30/00 90 900
(1) Hemmeter Enterprises, Inc.
expiring 12/15/99 3,000 0
(1) In-Flight Phone Corp.
expiring 8/31/02 500 0
(1) IntelCom Group, Inc.
expiring 9/1/05 1,155 16,747
(1) Interact Systems, Inc.
expiring 8/1/03 400 0
(1) Intermedia Communications, Inc.
expiring 6/1/00 300 20,100
(1) McCaw International Ltd.
expiring 4/15/07 750 187
(1) NEXTLINK Communications, Inc.
expiring 2/1/09 6,000 60
(1) Nextel Communications, Inc.
expiring 4/25/99 500 5
(1) Purity Supreme
expiring 8/1/97 1,733 0
(1) Renaissance Cosmetics, Inc.:
(3) expiring 4/3/01 200 20,000
expiring 8/31/06 1,000 50,000
(1) SD Warren Co.
expiring 12/15/06 8,000 40,000
(1) Sheffield Steel Corp.
expiring 11/1/01 2,500 10,000
<CAPTION>
Shares/
Units Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
(1) Signature Brands Ltd.
expiring 8/15/02 500 $ 0
(1) Spanish Broadcasting Systems:
expiring 6/29/99 500 165,000
expiring 6/30/99 500 95,000
(1) UNIFI Communications
expiring 3/1/07 250 0
(1) United International Holdings
expiring 11/15/99 600 6,000
(1) Wright Medical Technology
expiring 6/30/03 206 20,588
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL WARRANTS
(Cost $167,161) 610,334
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL DOMESTIC INCOME SECURITIES
(Cost $65,392,346) 67,311,054
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000)
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
FOREIGN SECURITIES (24.6%)
- --------------------------------------------------------------------------------------------
- -----------------
CORPORATE OBLIGATIONS (3.3%)
- --------------------------------------------------------------------------------------------
- -----------------
ARGENTINA
Industrias Metalurgicas Pescarmona S.A.
Series 2, Medium Term Notes
9.50%, 5/31/02 B1 USD 1,450 1,453,625
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RUSSIA
(3) AO Sibneft
Sr. Unsecured Bonds
9.75%, 8/15/00 N/R USD 1,590 1,590,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL CORPORATE OBLIGATIONS
(Cost $3,042,175) 3,043,625
-----------
- --------------------------------------------------------------------------------------------
- -----------------
GOVERNMENT OBLIGATIONS (18.6%)
- --------------------------------------------------------------------------------------------
- -----------------
ARGENTINA
(9) Republic of Argentina:
BOCON PRE4 Notes
5.625%, 9/1/02 B1 USD 1,000 1,208,000
Debentures
6.688%, 3/31/05 B1 USD 1,213 1,153,694
-----------
2,361,694
-----------
- --------------------------------------------------------------------------------------------
- -----------------
BRAZIL
Federal Republic of Brazil:
(9) Eligible Interest Bonds
6.875%, 4/15/06 B1 USD 1,733 1,623,144
Capitalization Bonds
8.00%, 4/15/04 B1 USD 2,786 2,369,741
-----------
3,992,885
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
BULGARIA
(9) Republic of Bulgaria
Interest Arrears Bonds,
Series PDI
6.688%, 7/28/11 B3 USD 1,775 $ 1,431,094
-----------
- --------------------------------------------------------------------------------------------
- -----------------
MEXICO
United Mexican States
Secured Par Bonds,
Series W-A
6.25%, 12/31/19 Ba2 MXP 2,250 1,864,688
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PANAMA
(8) Republic of Panama
Interest Reduction Bonds
3.75%, 7/17/14 Ba1 USD 1,000 778,750
-----------
- --------------------------------------------------------------------------------------------
- -----------------
POLAND
(8) Republic of Poland
Past Due Interest Bonds
4.00%, 10/27/14 Baa3 USD 2,000 1,700,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RUSSIA
Bank of Foreign Economic
Affairs of the USSR
(Vnesheconombank)
(When Issued)
13.00%, 1/15/21 N/R USD 2,200 1,628,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
VENEZUELA
Republic of Venezuela:
Sr. Unsub. Notes
9.125%, 6/18/07 Ba2 USD 2,000 2,045,000
Unsecured Bonds
9.25%, 9/15/27 Ba2 USD 1,565 1,486,750
-----------
3,531,750
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL GOVERNMENT OBLIGATIONS
(Cost $16,688,202) 17,288,861
-----------
- --------------------------------------------------------------------------------------------
- -----------------
STRUCTURED INVESTMENTS (2.7%)
- --------------------------------------------------------------------------------------------
- -----------------
(10) Deutsche Morgan Grenfell Inc.
Emerging Market Currency
Basket Structured Notes
Zero Coupon,10/2/97 (Cost $2,598,849) N/R USD 2,600 2,503,020
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL FOREIGN SECURITIES
(Cost $22,329,226) 22,835,506
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL INVESTMENTS (97.0%)
(Cost $87,721,572) 90,146,560
-----------
- --------------------------------------------------------------------------------------------
- -----------------
<CAPTION>
Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
ASSETS IN EXCESS OF
OTHER LIABILITIES (3.0%) $2,730,948
-----------
- --------------------------------------------------------------------------------------------
- -----------------
NET ASSETS (100%)
Applicable to $8,454,140 issued and outstanding $.001 par value shares
(authorized 100,000,000 shares) $92,877,508
-----------
-----------
- --------------------------------------------------------------------------------------------
- -----------------
NET ASSET VALUE PER SHARE
$ 10.99
-----------
-----------
- --------------------------------------------------------------------------------------------
- -----------------
MARKET PRICE PER SHARE
$ 10.00
-----------
-----------
- --------------------------------------------------------------------------------------------
- -----------------
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 $2,393,033. Total market value of restricted securities
owned at September 30, 1997 was $1,086,388 or 1.2% 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.
(10) Structured Investments--The Fund may invest in structured investments whose values are
linked either directly or inversely to changes in foreign currencies, interest rates,
commodities, indicies, or other underlying instruments. The Fund uses these securities
to increase or decrease its exposure to different underlying instruments and to gain
exposure to markets that might be difficult to invest in through conventional
securities. Structured investments may be more volatile than their underlying
instruments, but any loss is limited to the amount of the original investment.
</TABLE>
12
<PAGE>
DESCRIPTION OF DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN
- ---------
Pursuant to the BEA Strategic Global Income Fund, Inc.'s (the "Fund") Dividend
Reinvestment and Cash Purchase Plan (the "Plan"), shareholders may elect to have
all dividends and distributions, net of any 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 do not 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 10004. 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 common 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 $1,000, 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 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 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
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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 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 Strategic
Global Income Fund, Inc. or you may call (800) 428-8890.
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