<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 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 INVESTMENT John M. Corcoran
OFFICER ASSISTANT TREASURER
Gregg M. Diliberto
INVESTMENT OFFICER
</TABLE>
- --------------------------------------------------------
INVESTMENT ADVISER
BEA Associates
153 East 53rd Street
New York, New York 10022
- --------------------------------------------------------
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.
[LOGO]
BEA Strategic Global Income Fund, Inc.
[LOGO]
FIRST QUARTER REPORT
March 31, 1997
<PAGE>
BEA STRATEGIC GLOBAL INCOME FUND, INC.
- ----------
Dear Shareholders: May 13, 1997
We are pleased to report on the activities of the BEA Strategic Global Income
Fund, Inc. ("the Fund"), formerly BEA Strategic Income Fund, Inc., for the
quarter ended March 31, 1997. Please note, the Fund recently revised its
investment policies to allow investment in emerging market debt securities.
Accordingly, shareholders approved changing the Fund's name at its meeting held
on May 12, 1997 in order to reflect its enlarged capacity to invest on a
worldwide basis.
At March 31, 1997, the Fund's net asset value ("NAV") was $10.29, compared
to an NAV of $10.37 at December 31, 1996. As a result, the Fund's total return
(based on NAV and assuming reinvestment of dividends of $0.255 per share) for
the period was 1.93%. At March 31, 1997, $53.8 million was invested in
high-yield debt securities; $7.7 million was invested in emerging-market debt
securities; $12.7 million was invested in domestic, investment-grade debt
securities; $7.8 million was invested in international, investment-grade
securities; and the balance of the Fund's investments, $5.8 million, was
invested in equity securities. The investment-grade component consisted of
domestic government obligations, short and intermediate-term mortgages,
asset-backed securities, global government bonds and corporate bonds of
intermediate maturity. Of the debt securities, the largest concentration (38.6%)
was in B-rated issues.
THE MARKET
The first quarter was a tale of two markets for U.S. fixed income sectors
generally. In the first, which lasted roughly through mid-March, bond prices
mostly reflected jitters about a possible increase in interest rates by the
Federal Reserve. The jitters were intensified in February by comments from Fed
chairman Alan Greenspan to the effect that equities and high yield securities
were overvalued. The second phase comprised the last two-three weeks in March,
in which the jitters strengthened into fears. Such fears were realized on March
25th, when the Fed hiked short-term rates by 25 basis points (the first increase
since early 1995).
Performance both of the investment-grade and high yield sectors reflected
the shift in investor attitude from the first market phase to the second. As
represented by the Lehman Brothers Aggregate Bond Index, investment-grade's
0.55% gain through February was more than wiped out by its 1.11% drop in March.
Furthermore, after generating positive returns through February, all of the
Index's subsectors posted negative results in March. Only mortgage-backed and
asset-backed securities showed gains for the quarter as a whole.
High yield instruments followed a similar pattern. The Salomon Brothers
High-Yield Market Index, for example, fell 1.03% in March after rising 2.47%
through February. We note that, despite the March decline, the Salomon index's
1.41% return for the entire quarter is considerably better than the quarterly
results posted by most other taxable fixed income sectors.
The high yield market continued to enjoy strong demand, both from
individuals and institutions. According to Chase Securities, individuals
invested $4.2 billion in high yield mutual funds, an increase of about 70% over
the $2.5 billion invested in the first quarter of 1996. Fund flow trends
dramatically changed in March, however, as $335 million was withdrawn, following
an inflow of well over $4 billion in January and February combined.
As measured by the level of new issues, institutional appetite for high
yield was more consistent. Aggregate new issuance for the quarter was $25.8
billion, up about 40% vs. the $18.4 billion issued in the same period last year,
and rose monthly in January, February and March.
Among international debt markets, the first quarter was difficult for those
of developed-nations, as the impact of two of 1996's primary market influences
intensified. The latter were the fear of higher U.S. interest rates and the
continuing strength of the dollar. On a local-currency basis, most developed-
nation returns within the J.P. Morgan Global Government Bond Index ("GBI") were
positive or marginally negative, while all were decidedly negative when
expressed in dollar terms.
By contrast, the strong dollar did not hurt most emerging debt markets as
much, whether collectively or individually. J.P. Morgan's Emerging Market Bond
Index ("EMBI") rose 1.4% and EMBI nations accounted for seven of the quarter's
10 best-performing world debt markets when GBI and EMBI markets are combined.
2
<PAGE>
PORTFOLIO REVIEW
The factor primarily responsible for the Fund's outperformance of the broad
high yield market in the first quarter was the strength of its international
holdings which, in turn, was mainly attributable to country selection and our
view on world currencies. More specifically:
- - We took profits in markets whose prices, we felt, had reached unsustainable
levels. Most notable among these were the higher-yielding European nations
(particularly Italy, Spain and Sweden).
- - In what can be considered an inverse form of country selection, we chose not
to reinvest much of the proceeds from these and other sales and held it as
cash instead.
- - We began reallocating the Fund's international sector to emerging markets,
most prominently Mexico and Russia.
- - We overweighted the Fund's dollar position based on our belief that the
dollar would significantly appreciate against the yen and deutschemark (which
did occur) and realized some of the resulting gains. Despite the dollar's
early-May weakness, we continue to be optimistic about its strength over the
next few months.
An additional factor in the Fund's outperformance was its emphasis on
generating income rather than price appreciation. Principally, the Fund had
relatively larger holdings of conventional cash-paying debt and smaller holdings
of deferred-interest securities ("DIS"). As most typically represented by
zero-coupon bonds, DIS tend to perform worse than cash-paying debt when interest
rates are rising and better when rates fall. This pattern applied in March, when
DIS performed far worse than the cash-pay sector. Chase Securities calculates
that the yield spread between DIS and cash-pay widened by 45 basis points. Since
only a small portion of total portfolio assets is invested in DIS, the Fund
benefited accordingly.
Our high yield industry allocations remained essentially unchanged during
the quarter, as did our views on individual-industry fundamentals.
Telecommunications and gaming continued as the portfolio's largest overweights
relative to the broad market, while the utilities group was the most significant
underweight.
The positive performance achieved by the domestic and international
investment-grade portions of the Fund was attributable to the overall approach
of favoring certain "spread products" (I.E., debt securities whose market
valuation is greatly driven by the spreads between their yields and those of
U.S. Treasury debt) versus Treasuries that had proven successful in 1996. Three
sectors were most significant in this regard:
- - We maintained a defensive posture toward corporate debt by focusing on bonds
consistent with our themes of balance-sheet deleveraging and company
restructuring.
- - We increased the allocation to conventional pass-through mortgage-backed
securities ("MBS") in the portfolio in late 1996 in the belief that
yield-hungry and value-conscious investors would opt to increase their
exposure. This approach proved effective, as MBS enjoyed a solid rally in
December and January. We chose to realize some of the resulting gains in the
Fund's pass-through allocation by selling a modest portion into the market's
strength.
- - The Fund's investment policies were amended during the quarter to allow
investment in emerging market debt. We have gradually reallocated assets into
below-investment-grade securities of emerging nations, thus increasing the
Fund's yield and diversification.
OUTLOOK
HIGH YIELD. Like most fixed income sectors, high yield became increasingly
volatile as 1997 began, in anticipation of a long-expected increase in interest
rates by the Federal Reserve. Such volatility continued even after the Fed
finally raised rates in late March. Our near-term view, therefore, is one of
caution, and we are closely monitoring economic and financial news accordingly.
A cautious approach is particularly appropriate in light of high yield
instruments' sensitivity not only to the interest-rate environment, but also to
investor perceptions of corporate earnings as reflected by fluctuations in the
prices of specific equities. With this in mind, we note that near-term
volatility on an individual-credit basis should also be driven by the high
seasonal level of equity-related earnings announcements.
The longer-term picture for high yield remains bright. The macroeconomic
climate continues to be favorable, default risk should stay low and general
corporate performance is expected to stay positive. We consider two other
factors notably auspicious, as well. First, the rapid growth of retirement plan
assets is compelling institutions to seek new ways of diversifying their
portfolios' overall risk. Second, many institutions have already added emerging
markets debt (whose credit quality is similar to that of high yield) to their
asset mixes and, therefore, are becoming more comfortable with the concept of
below-investment-grade fixed income.
INVESTMENT-GRADE. We also are maintaining a watchful view on the domestic
investment-grade sector. Going
3
<PAGE>
forward, then, we have positioned our holdings in a generally defensive manner
by raising the portfolio's allocation to relatively low-risk, liquid government
securities; adhering to our preference in corporate debt for individual issues
rather than industry bets; and keeping the MBS allocation duration-neutral.
INTERNATIONAL. Looking ahead, it appears unlikely that the strong
performance of global fixed income in 1996 will persist throughout 1997. This
scenario is even more probable now that the Fed has altered the investment
landscape by raising short-term U.S. interest rates and moving toward a
generally pro-tightening stance. For the time being, then, we feel it is most
appropriate to exercise caution in reallocating assets from investment-grade,
international bonds into emerging market debt 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 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,
[SIG]
Richard J. Lindquist
PRESIDENT AND CHIEF INVESTMENT OFFICER
[SIG]
William W. Priest, Jr.
CHAIRMAN OF THE BOARD
4
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- ---------
MARCH 31, 1997
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
DOMESTIC SECURITIES (83.2%)
- --------------------------------------------------------------------------------------------
- -----------------
CORPORATE OBLIGATIONS (61.9%)
- --------------------------------------------------------------------------------------------
- -----------------
AEROSPACE/DEFENSE (0.6%)
(3) GPA Holland B.V.
Series C, Medium Term Notes
8.625%, 1/15/99 N/R $ 500 $ 501,250
-----------
- --------------------------------------------------------------------------------------------
- -----------------
BROADCASTING (4.6%)
(8) Australis Media Ltd.
Yankee Units
0.00%, 5/15/03 Caa 225 137,062
(3)(8) Capstar Broadcasting Partners, Inc.
Sr. Discount Notes
0.00%, 2/1/09 N/R 500 273,750
Chancellor Radio Broadcasting Co.
Gtd. Sr. Sub. Notes
12.50%, 10/1/04 B3 375 419,531
(8) EchoStar Communications Corp.
Gtd. Sr. Discount Notes
0.00%, 6/1/04 B2 750 641,250
Pegasus Media & Communications, Inc.
Series B, Notes
12.50%, 7/1/05 B3 500 547,500
Sinclair Broadcast Group
Sr. Sub. Notes
10.00%, 9/30/05 B2 300 298,500
(8) Spanish Broadcasting
System, Inc.
Sr. Notes
7.50%, 6/15/02 B3 250 263,750
United International Holdings
Sr. Secured Discount Notes
Zero Coupon, 11/15/99 B3 1,000 715,000
Univision Network Holding L.P.
Sub. Notes
Zero Coupon, 12/17/02 N/R 573 521,498
Young Broadcasting, Inc.
Series B, Gtd. Sr. Sub. Notes
9.00%, 1/15/06 B2 200 190,000
-----------
GROUP TOTAL 4,007,841
-----------
- --------------------------------------------------------------------------------------------
- -----------------
BUSINESS SERVICES (0.3%)
(3)(8) Real Time Data, Inc.
Units
0.00%, 8/15/06 N/R 500 270,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CABLE (5.1%)
(3) Adelphia Communications Corp.
Sr. Notes
9.875%, 3/1/07 N/R 250 231,875
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
(3)(8) Australis Holdings Pty Ltd.
Yankee Units
0.00%, 11/1/02 B2 $ 250 $ 154,063
Cablevision System Corp.
Sr. Sub. Debentures
9.875%, 2/15/13 B2 250 245,312
Charter Communications Southeast L.P.
Series B, Sr. Notes
11.25%, 3/15/06 B3 250 258,750
Comcast Corp.
Sr. Sub. Notes
9.125%, 10/15/06 B1 250 247,500
(8) Comcast UK Cable Partners Ltd.
Yankee Sr. Debentures
0.00%, 11/15/07 B2 500 325,000
(3)(8) DIVA Systems Corp.
Units
0.00%, 5/15/06 N/R 900 482,625
(4) Falcon Holding Group L.P.
Sr. Sub. Notes
11.00%, 9/15/03 N/R 441 383,525
Helicon Group L.P.
Series B, Sr. Secured Notes
11.00%, 11/1/03 B1 650 657,312
Lenfest Communications, Inc.
Sr. Sub. Notes
10.50%, 6/15/06 B2 500 510,000
NTL, Inc.:
(3) Sr. Notes
10.00%, 2/15/07 N/R 250 240,625
(8) Series B, Sr. Deferred Coupon Notes
0.00%, 2/1/06 B3 500 310,000
(3) OpTel, Inc.
Units
13.00%, 2/15/05 B3 250 239,375
(8) Telewest Communications plc
Yankee Sr. Sub. Discount Debentures
0.00%, 10/1/07 B1 250 167,500
-----------
GROUP TOTAL 4,453,462
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CHEMICALS (2.9%)
(8) Harris Chemical N.A.
Sr. Secured Debentures
10.25%, 7/15/01 B2 300 300,000
(3) ISP Holdings Inc.
Sr. Notes
9.75%, 2/15/02 Ba3 433 450,320
NL Industries Inc.:
Sr. Secured Debentures
11.75%, 10/15/03 B1 250 262,500
(8) Sr. Secured Discount Debentures
0.00%, 10/15/05 B2 400 359,000
Rexene Corp.
Sr. Notes
11.75%, 12/1/04 B1 400 448,000
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
(3) Texas Petrochemicals Corp.
Series B, Sr. Sub. Notes
11.125%, 7/1/06 N/R $ 200 $ 210,000
UCC Investor's Holdings, Inc.
Sr. Sub. Notes
11.00%, 5/1/03 B3 500 530,000
-----------
GROUP TOTAL 2,559,820
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CONSTRUCTION & BUILDING MATERIALS (0.3%)
Presley Companies
Sr. Notes
12.50%, 7/1/01 B3 250 243,125
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CONSUMER PRODUCTS & SERVICES (2.6%)
(3)(8) Coinstar Inc.
Units
0.00%, 10/1/06 N/R 600 435,000
Jordan Industries, Inc.
Sr. Notes
10.375%, 8/1/03 B3 500 492,500
(2) Marvel III Holdings, Inc.
Series B, Sr. Secured Debentures
9.125%, 2/15/98 C 700 133,000
(3) Renaissance Cosmetics, Inc.
Sr. Notes
11.75%, 2/15/04 B3 250 251,562
Revlon Consumer Products, Inc.
Series B, Sr. Sub. Notes
10.50%, 2/15/03 B3 250 263,750
(3) Revlon Worldwide (Parent) Corp.
Sr. Secured Discount Notes
Zero Coupon, 3/15/01 B3 500 316,250
(4) Town & Country Corp.
Sr. Sub. Notes
13.00%, 5/31/98 Caa 616 378,882
-----------
GROUP TOTAL 2,270,944
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ELECTRONICS (0.9%)
Advanced Micro Devices, Inc.
Sr. Secured Notes
11.00%, 8/1/03 Ba1 250 274,375
(6) Unisys Corp.
Sr. Notes
11.75%, 10/15/04 B1 500 522,500
-----------
GROUP TOTAL 796,875
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ENERGY (2.4%)
Dual Drilling Co.
Gtd. Sr. Sub. Notes
9.875%, 1/15/04 B1 250 270,000
Falcon Drilling Co., Inc.
Series B, Sr. Notes
9.75%, 1/15/01 Ba3 375 388,125
(3) Forcenergy Inc.
Sr. Sub. Notes
8.50%, 2/15/07 B2 250 232,500
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
Gulf Canada Resources Ltd.
Yankee Sr. Sub. Debentures
9.25%, 1/15/04 Ba2 $ 450 $ 465,750
(3) H.S. Resources, Inc.
Sr. Sub. Notes
9.25%, 11/15/06 B2 250 235,000
Maxus Energy Corp.:
Notes
9.375%, 11/1/03 B1 100 102,000
Series B, Notes
9.375%, 11/1/03 B1 250 255,000
(8) Mesa Operating Co.
Gtd. Sr. Sub. Discount Notes
0.00%, 7/1/06 B2 250 168,750
-----------
GROUP TOTAL 2,117,125
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ENTERTAINMENT (1.9%)
American Skiing Company
Series B, Sr. Sub. Notes
12.00%, 7/15/06 B3 200 204,000
(3) Booth Creek Ski Holdings, Inc.
Sr. Notes
12.50%, 3/15/07 Caa 250 245,312
Genmar Holdings, Inc.
Series A, Sr. Sub. Notes
13.50%, 7/15/01 Caa 500 503,750
(8) Imax Corp.,
Yankee Sr. Notes
7.00%, 3/1/01 B1 250 245,938
PTI Holdings, Inc.
Sub. Notes
Zero Coupon, 12/17/02 N/R 507 461,293
-----------
GROUP TOTAL 1,660,293
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FINANCIAL SERVICES (0.9%)
American Banknote Corp.
Series B, Sr. Notes
11.625%, 8/1/02 B2 250 249,688
Consorcio G Grupo Dina S.A./ MCII Holdings
(U.S.A.), Inc. Sr. Secured Notes
Zero Coupon, 11/15/02 N/R 400 344,500
(2) Westfed Holdings
Sr. Debentures
15.50%, 9/15/99 N/R 250 170,000
-----------
GROUP TOTAL 764,188
-----------
- --------------------------------------------------------------------------------------------
- -----------------
HEALTH CARE (1.8%)
(4) General Medical Corp.
Series A, Sub. Debentures
12.125%, 8/15/05 Caa 633 702,630
Health O Meter, Inc.
Units
13.00%, 8/15/02 B3 500 562,500
Regency Health Services, Inc.
Gtd Sr. Sub. Notes
9.875%, 10/15/02 B2 300 303,000
-----------
GROUP TOTAL 1,568,130
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
INDUSTRIAL GOODS & MATERIALS (4.1%)
Atlantis Group, Inc.
Sr. Notes
11.00%, 2/15/03 B2 $ 250 $ 255,000
(3) CSK Auto Inc.
Sr. Sub. Notes
11.00%, 11/1/06 B3 400 413,000
(3) Delco Remy International, Inc.
Gtd. Sr. Sub. Notes
10.625%, 8/1/06 B2 250 262,500
Haynes International, Inc.
Sr. Notes
11.625%, 9/1/04 B3 250 269,063
MVE Inc.
Sr. Secured Debentures
12.50%, 2/15/02 B3 500 523,125
(3) SRI Receivables
Purchase Co., Inc.
Trust Certificate-Backed Notes
12.50%, 12/15/00 N/R 500 517,500
Specialty Equipment Companies, Inc.
Sr. Sub. Notes
11.375%, 12/1/03 B3 700 745,500
Terex Corp.
Series B, Sr. Secured Notes
13.25%, 5/15/02 Caa 500 546,875
-----------
GROUP TOTAL 3,532,563
-----------
- --------------------------------------------------------------------------------------------
- -----------------
METALS & MINING (3.4%)
Algoma Steel, Inc.
Yankee First Mortgage Notes
12.375%, 7/15/05 B1 500 532,500
Armco, Inc.
Sr. Notes
11.375%, 10/15/99 B2 250 255,000
Bayou Steel Corp.
First Mortgage Notes
10.25%, 3/1/01 B2 300 288,000
Gulf States Steel, Inc.
First Mortgage Notes
13.50%, 4/15/03 B1 250 242,500
NS Group Inc.
Sr. Secured Debentures
13.50%, 7/15/03 B3 250 275,000
Republic Engineered Steel, Inc.
First Mortgage Bonds
9.875%, 12/15/01 Caa 350 311,500
Sheffield Steel Corp.
First Mortgage Notes
12.00%, 11/1/01 Caa 500 470,625
WCI Steel Inc.
Series B, Sr. Notes
10.00%, 12/1/04 B2 250 254,375
Weirton Steel Corp.
Sr. Notes
11.375%, 7/1/04 B2 300 300,000
-----------
GROUP TOTAL 2,929,500
-----------
- --------------------------------------------------------------------------------------------
- -----------------
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
PACKAGING/CONTAINERS (3.7%)
Container Corp. of America
Gtd. Sr. Notes
9.75%, 4/1/03 B1 $ 250 $ 260,000
(3)(8) Crown Packaging Enterprises Ltd.
Units
0.00%, 8/1/06 Ca 775 143,375
(6)(8) Crown Packaging Holdings Ltd.
Series B, Sr. Sub.
Discount Notes
0.00%, 11/1/03 Ca 1,050 378,000
Four M Corp.
Series B, Sr. Secured Notes
12.00%, 6/1/06 B2 350 357,000
(8) Gaylord Container Corp.
Sr. Sub. Discount Debentures
12.75%, 5/15/05 Caa 500 545,000
(8) Ivex Holdings Corp.
Series B, Sr. Discount Debentures
0.00%, 3/15/05 Caa 1,250 1,028,125
(3) Spinnaker Industries Inc.
Sr. Secured Notes
10.75%, 10/15/06 B3 250 251,875
(3) Stone Container Finance Co.
Yankee Gtd. Sr. Notes
11.50%, 8/15/06 B1 250 252,188
-----------
GROUP TOTAL 3,215,563
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PAPER & FOREST PRODUCTS (2.3%)
Fort Howard Corp.
Sub. Notes
10.00%, 3/15/03 B2 500 525,000
Mail-Well Corp.
Sr. Sub. Notes
10.50%, 2/15/04 B2 500 522,500
Malette, Inc.
Yankee Sr. Secured Debentures
12.25%, 7/15/04 Ba3 150 165,000
(6) Repap New Brunswick, Inc.
Yankee Sr. Secured Debentures
10.625%, 4/15/05 Caa 250 247,813
Repap Wisconsin, Inc.
Sr. Secured Debentures
9.875%, 5/1/06 B2 250 243,750
Stone-Consolidated Corp.
Yankee Sr. Secured Debentures
10.25%, 12/15/00 Ba1 250 265,625
-----------
GROUP TOTAL 1,969,688
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PUBLISHING & INFORMATION SERVICES (0.3%)
(8) InterAct Systems, Inc.
Units
0.00%, 8/1/03 N/R 400 220,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
RESTAURANTS, HOTELS & GAMING (4.7%)
Boomtown, Inc.
First Mortgage Notes
11.50%, 11/1/03 B1 $ 500 $ 536,250
Casino America, Inc.
Gtd. Sr. Notes
12.50%, 8/1/03 B1 250 240,625
(3) Casino Magic of Louisiana, Corp.
First Mortgage Notes
13.00%, 8/15/03 B3 600 582,000
(4) Colorado Gaming & Entertainment, Co.
Gtd. Sr. Notes
12.00%, 6/1/03 N/R 343 338,386
(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 450 369,000
HMC Acquisition Properties
Series B, Gtd. Sr. Notes
9.00%, 12/15/07 Ba3 450 443,250
Horseshoe Gaming L.L.C.
Series B, Sr. Notes
12.75%, 9/30/00 B1 375 406,875
Mohegan Tribal Gaming Authority
Series B, Sr. Secured Notes
13.50%, 11/15/02 Ba1 200 263,250
Prime Hospitality Corp.
Secured First Mortgage Notes
9.25%, 1/15/06 Ba2 250 254,375
Trump Atlantic City Associates
Secured First Mortgage Notes
11.25%, 5/1/06 B1 250 227,500
Trump's Castle Funding, Inc.
Mortgage Bonds
11.75%, 11/15/03 Caa 250 192,500
(3) Waterford Gaming L.L.C./ Waterford Gaming
Finance Corp.
Sr. Notes
12.75%, 11/15/03 N/R 200 213,250
-----------
GROUP TOTAL 4,119,261
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RETAIL (5.3%)
(6) Brylane L.P.
Gtd. Sr. Sub. Notes
10.00%, 9/1/03 B1 500 525,000
(2) County Seat Stores, Inc.
Sr. Sub. Notes
12.00%, 10/1/02 Ca 500 150,000
Dairy Mart Convenience Stores, Inc.
Sr. Sub. Notes
10.25%, 3/15/04 B3 376 370,360
Duane Reade Corp.
Sr. Notes
12.00%, 9/15/02 B3 150 158,625
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
Farm Fresh, Inc.:
Series A, Sr. Notes
12.25%, 10/1/00 Caa $ 150 $ 126,000
Sr. Notes
12.25%, 10/1/00 Caa 500 420,000
Great American Cookie Co.
Series B, Sr. Secured Debentures
10.875%, 1/15/01 B3 500 482,500
Hills Stores Co.
Gtd. Sr. Notes
12.50%, 7/1/03 B2 350 301,000
K Mart Corp.
Debentures
7.75%, 10/1/12 Ba3 200 176,750
Parisian, Inc.
Sr. Sub. Notes
9.875%, 7/15/03 B1 250 257,500
Pathmark Stores, Inc.:
(8) Jr. Sub. Notes
0.00%, 11/1/03 Caa 850 565,250
Sr. Sub. Notes
9.625%, 5/1/03 B3 500 471,250
Waban, Inc.
Sr. Sub. Notes
11.00%, 5/15/04 Ba3 550 613,250
-----------
GROUP TOTAL 4,617,485
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TELECOMMUNICATIONS (12.6%)
(8) American Communications Services, Inc.
Sr. Discount Notes
0.00%, 11/1/05 N/R 1,000 603,750
Brooks Fiber Properties, Inc.
Sr. Discount Notes:
(8) 0.00%, 3/1/06 N/R 450 279,000
(8) 0.00%, 11/1/06 N/R 300 178,500
Cellular Communications International, Inc.
Units
Zero Coupon, 8/15/00 B3 700 497,000
(8) Dial Call Communications
Sr. Discount Notes
0.00%, 4/15/04 B3 700 519,750
(8) Diamond Cable Communications plc
Yankee Discount Notes
0.00%, 12/15/05 B3 800 512,000
(3)(8) GST Telecommunications, Inc.
Conv. Sr. Sub. Discount Notes
0.00%, 12/15/05 N/R 100 60,000
(8) GST USA, Inc.
Gtd. Sr. Discount Notes
0.00%, 12/15/05 N/R 800 512,000
(3) Geotek Communications, Inc.
Conv. Sr. Sub. Notes
12.00%, 12/15/01 Caa 350 280,000
(8) Hyperion Telecommunications, Inc.
Series B, Sr. Discount Notes
0.00%, 4/15/03 N/R 750 405,000
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
ICG Holdings, Inc.
Sr. Discount Notes
(8) 0.00%, 9/15/05 N/R $ 350 $ 234,500
(3)(8) 0.00%, 3/15/07 N/R 1,000 560,000
InterMedia Capital Partners IV
L.P./InterMedia Partners IV Capital Corp.
Sr. Notes
11.25%, 8/1/06 B2 250 261,250
Intermedia Communications, Inc.
Series B, Sr. Notes
13.50%, 6/1/05 B3 300 338,250
(8) MFS Communications Co., Inc.
Discount Notes
0.00%, 1/15/04 Ba3 350 315,000
(3)(8) McCaw International Ltd.
Units
0.00%, 4/15/07 N/R 750 360,000
(8) Nextel Communications, Inc.
Sr. Notes
0.00%, 8/15/04 B3 500 340,000
Orbcomm Global L.P./ Orbcomm Global Capital
Corp.
Series B, Gtd. Sr. Notes
14.00%, 8/15/04 B3 250 250,000
Orion Network Systems, Inc.
Units
11.25%, 1/15/07 B2 250 247,500
(8) Pagemart Nationwide, Inc.
Sr. Discount Notes
0.00%, 2/1/05 N/R 750 533,437
Petersburg Long Distance Inc.:
(3) Conv. Sub. Notes
9.00%, 6/1/06 N/R 80 80,400
(3)(8) Units
0.00%, 6/1/04 N/R 560 483,000
(8) PriCellular Wireless Corp.
Discount Notes
0.00%, 10/1/03 B3 450 400,500
Sprint Spectrum L.P./Sprint Spectrum Finance
Corp.
Sr. Notes
11.00%, 8/15/06 B2 450 477,000
TCI Satellite Entertainment, Inc.:
(3)(8) Sr. Sub. Discount Notes
0.00%, 2/15/07 B3 150 68,250
(3) Sr. Sub. Notes
10.875%, 2/15/07 N/R 200 180,000
Teleport Communications Group, Inc.:
(8) Sr. Discount Notes
0.00%, 7/1/07 B1 550 368,500
Sr. Notes
9.875%, 7/1/06 B1 250 258,750
(3) UNIFI Communications, Inc.
Units
14.00%, 3/1/04 N/R 250 257,500
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
(8) Videotron Holdings plc
Yankee Discount Notes
0.00%, 8/15/05 B3 $ 1,000 $ 790,000
Western Wireless Corp.
Sr. Sub. Notes
10.50%, 2/1/07 B3 250 250,625
(8) Wireless One, Inc.
Units
0.00%, 8/1/06 B3 250 67,500
-----------
GROUP TOTAL 10,968,962
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TEXTILES/APPAREL (0.3%)
Collins & Aikman Products
Sr. Sub. Notes
11.50%, 4/15/06 B3 250 276,250
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TRANSPORTATION (0.9%)
CHC Helicopter Corp.
Yankee Sr. Sub. Notes
11.50%, 7/15/02 B3 250 258,750
USAir, Inc.
Gtd. Sr. Notes
10.00%, 7/1/03 B3 500 504,375
-----------
GROUP TOTAL 763,125
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL CORPORATE OBLIGATIONS
(Cost $54,477,623) 53,825,450
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
GOVERNMENT & AGENCY SECURITIES (2.3%)
- --------------------------------------------------------------------------------------------
- -----------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (0.7%)
15-Year TBA
6.50%, 4/1/12 Aaa $ 650 $ 625,625
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (1.2%)
30-Year TBA
7.50%, 4/1/27 Aaa 510 500,438
Various Pools:
11/1/25-12/1/25 Aaa 531 509,028
-----------
GROUP TOTAL 1,009,466
-----------
- --------------------------------------------------------------------------------------------
- -----------------
UNITED STATES DEPARTMENT OF VETERANS AFFAIRS (0.4%)
Vendee Mortgage Trust
REMIC, Series 1995-2B, Class 2D
7.50%, 10/15/17 N/R 350 345,187
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL GOVERNMENT & AGENCY SECURITIES
(Cost $2,025,066) 1,980,278
-----------
- --------------------------------------------------------------------------------------------
- -----------------
COLLATERALIZED MORTGAGE OBLIGATIONS (1.3%)
- --------------------------------------------------------------------------------------------
- -----------------
Asset Securitization Corp.:
Series 1995-MD4, Class A1
7.10%, 8/13/29 N/R 191 188,458
Series 1996-MD6, Class A6
7.10%, 11/13/26 Baa2 230 225,651
Drexel, Burnham & Lambert Trust REMIC-PAC,
Series S, Class 2
9.00%, 8/1/18 Aaa 685 686,500
Kidder Peabody Acceptance Corp.
Series 1993-M3, Class A
6.50%, 11/25/25 Aaa 59 58,477
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $1,192,877) 1,159,086
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ASSET BACKED OBLIGATIONS (4.9%)
- --------------------------------------------------------------------------------------------
- -----------------
Green Tree Financial Corp. Manufactured
Housing Installment Sale Contracts:
Series 1993-4, Class B1
7.20%, 1/15/19 Baa3 1,043 1,028,002
Series 1995-4, Class A3
6.30%, 7/15/25 Aaa 1,650 1,630,398
Series 1995-6, Class A3
6.65%, 9/15/26 Aaa 410 408,589
(9) Merrill Lynch Home Equity Acceptance Trust,
Series 1994-A, Class A-2
6.25%, 7/17/22 A3 1,022 1,021,718
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
Nationscredit Grantor Trust, Boat Retail
Installment Sales Contracts, Series 1996-1,
Class A
5.85%, 9/15/11 Aaa $ 204 $ 197,573
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL ASSET BACKED OBLIGATIONS
(Cost $4,314,275) 4,286,280
-----------
- --------------------------------------------------------------------------------------------
- -----------------
<CAPTION>
Shares/
Units
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
COMMON STOCKS (2.4%)
- --------------------------------------------------------------------------------------------
- -----------------
BROADCASTING (0.0%)
(1) Pegasus Communications Corp., Inc. Class B 1,128 12,408
-----------
- --------------------------------------------------------------------------------------------
- -----------------
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
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FOOD & BEVERAGES (1.0%)
(1)(5) Dr. Pepper Bottling Holdings, Inc. Class A
(acquired 10/21/88, cost $49,500) 55,000 866,250
(1)(3) Specialty Foods Acquisition 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
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PAPER & FOREST PRODUCTS (0.1%)
(1)(3) Mail-Well, Inc. 3,551 69,688
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RESTAURANTS, HOTELS & GAMING (1.1%)
(1) Casino America Inc. 4,982 12,455
(1)(4) Colorado Gaming & Entertainment Co. 8,822 26,466
(1)(3) Motels of America, Inc. 250 17,000
(1) Vail Resorts Inc. 45,000 877,500
-----------
GROUP TOTAL 933,421
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RETAIL (0.0%)
(1)(5) Jewel Recovery L.P.
(acquired 7/30/93, cost $0) 33,040 0
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TELECOMMUNICATIONS (0.0%)
(1) Pagemart Nationwide, Inc. 3,500 19,250
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Shares/
Units Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL COMMON STOCKS
(Cost $1,899,447) $ 2,112,534
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PREFERRED STOCKS (3.9%)
- --------------------------------------------------------------------------------------------
- -----------------
AEROSPACE/DEFENSE (0.4%)
(1) GPA Group plc
7% Second Preference Cum. Conv. 650,000 313,950
-----------
- --------------------------------------------------------------------------------------------
- -----------------
BROADCASTING (1.1%)
(1)(3) Granite Broadcasting Corp.
12.75% Cumulative Exchangeable 500 473,750
(1)(3) Spanish Broadcasting System, Inc. Units 500 500,000
-----------
GROUP TOTAL 973,750
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CABLE (0.3%)
(3) NTL, Inc.
13.00% Sr. Redeemable Exchangeable 250 237,500
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CONSUMER PRODUCTS & SERVICES (0.2%)
Renaissance Cosmetics, Inc.:
(1)(3) 14% Sr. Redeemable, Series B 14 12,285
(1)(3) Units 200 201,000
-----------
GROUP TOTAL 213,285
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ENERGY (0.2%)
(1)(7) Consolidated Hydro, Inc.
13.50% Series H, Conv. 1,500 150,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FINANCIAL SERVICES (0.0%)
(1)(5)(7) WestFed 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% Exchangeable 13,000 494,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PUBLISHING & INFORMATION SERVICES (0.4%)
K-III Communications Corp.
10% Exchangeable, Series D 3,500 343,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RESTAURANTS, HOTELS & GAMING (0.4%)
(1) Lady Luck Gaming Corp.
Series A 10,000 320,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TELECOMMUNICATIONS (0.3%)
(1) NEXTLINK Communications, Inc., Units 6,000 282,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL PREFERRED STOCKS
(Cost $4,882,845) 3,341,731
-----------
- --------------------------------------------------------------------------------------------
- -----------------
<CAPTION>
Shares/
Units Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
RIGHTS (0.0%)
- --------------------------------------------------------------------------------------------
- -----------------
(1) Mexico Value Recovery Rights
expiring 6/30/03 3,076,000 $ 0
(1) Terex Corp.
expiring 5/15/02 2,000 10,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL RIGHTS
(Cost $4,019) 10,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
WARRANTS (0.4%)
- --------------------------------------------------------------------------------------------
- -----------------
(1) America Communications Services, Inc.
expiring 11/1/05 1,000 60,000
(1) American Telecasting, Inc.
expiring 6/23/99 350 175
(1) Australis Holdings Pty Ltd.
expiring 10/30/01 250 0
(1) Australis Media Ltd.
expiring 5/15/00 225 0
(1)(3) Boomtown, Inc.
expiring 11/1/98 500 10
(1) CHC Helicopter Corp.
expiring 12/15/00 2,000 1,000
(1) Casino America, Inc.
expiring 5/3/01 882 772
(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)(3) Elsinore Corp.
expiring 10/8/98 5,329 0
(1) Great American Cookie Co.
expiring 1/30/00 90 900
(1) Hemmeter Enterprises, Inc.
expiring 12/15/99 3,000 0
(1) Hyperion Telecommunications, Inc.
expiring 4/15/01 750 22,500
(1) In-Flight Phone Corp.
expiring 8/31/02 500 0
(1) IntelCom Group, Inc.
expiring 9/1/05 1,155 11,550
(1) InterAct Systems, Inc.
expiring 8/1/03 400 0
(1) Intermedia Communications, Inc.
expiring 6/1/00 300 6,000
(1) Nextel Communications, Inc.
expiring 4/25/99 500 5
(1) Purity Supreme
expiring 8/1/97 1,733 0
(1)(3) Renaissance Cosmetics, Inc.
expiring 8/31/06 1,000 50,000
(1) SD Warren Co.
expiring 12/15/06 8,000 34,000
(1) Sheffield Steel Corp.
expiring 11/1/01 2,500 7,500
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Shares/
Units Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
(1) Spanish Broadcasting Systems
expiring 6/29/99 500 $ 97,500
(1) United International Holdings
expiring 11/15/99 600 3,000
(1)(3) Wright Medical Technology
expiring 6/30/03 206 24,706
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL WARRANTS
(Cost $166,820) 328,092
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000)
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
SHORT-TERM INVESTMENTS (6.1%)
- --------------------------------------------------------------------------------------------
- -----------------
FEDERAL HOME LOAN BANK DISCOUNT NOTE (6.1%)
0.00%, 4/1/97 (Cost $5,274,000) N/R $ 5,274 5,274,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL DOMESTIC SECURITIES
(Cost $74,236,972) 72,317,451
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FOREIGN SECURITIES (17.8%)
- --------------------------------------------------------------------------------------------
- -----------------
CORPORATE OBLIGATIONS (1.1%)
- --------------------------------------------------------------------------------------------
- -----------------
MEXICO (1.1%)
Colombia Holdings
Gtd. Sr. Notes
10.00%, 5/1/99
(Cost $1,006,250) N/R USD 1,000 1,006,250
-----------
- --------------------------------------------------------------------------------------------
- -----------------
GOVERNMENT OBLIGATIONS (16.7%)
- --------------------------------------------------------------------------------------------
- -----------------
BRAZIL
(9) Federal Republic of Brazil
MYDFA Trust Certificates
6.563%, 9/15/07 N/R USD 1698 1,505,077
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CANADA
Government of Canada
Debentures
8.75%, 12/1/05 Aa1 CAD 825 677,598
-----------
- --------------------------------------------------------------------------------------------
- -----------------
DENMARK
Kingdom of Denmark
Bonds
8.00%, 3/15/06 N/R DKK 5,200 889,312
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FRANCE
Government of France
Debentures
7.50%, 4/25/05 Aaa FRF 7,000 1,404,115
-----------
- --------------------------------------------------------------------------------------------
- -----------------
MEXICO
(9) United Mexican States
Discount Bonds Series B
6.375%, 12/31/19 Ba2 USD 2,000 1,750,000
-----------
</TABLE>
- --------------------------------------------------------------------
- -------------
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
- -----------------
PANAMA
<C> <S> <C> <C> <C>
(9) Republic of Panama
Interest Reduction Bond
3.50%, 7/17/14 Ba1 USD 2,000 $ 1,459,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RUSSIA
Bank of Foreign Economic Affairs of the USSR
(Vnesneconombank) (When Issued)
13.00%, 1/15/21 N/R USD 2,000 1,170,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
SOUTH AFRICA
Republic of South Africa
Consolidation Bonds, Series 153
13.00%, 8/31/10 Baa1 ZAR 4,200 826,159
-----------
- --------------------------------------------------------------------------------------------
- -----------------
SPAIN
Kingdom of Spain
Debentures
10.10%, 2/28/01 Aa2 ESP 47,000 374,736
-----------
- --------------------------------------------------------------------------------------------
- -----------------
SUPRANATIONAL
International Bank for Reconstruction &
Development
Japanese Yen Global Bonds
5.25%, 3/20/02 Aaa JPY 90,000 854,603
-----------
- --------------------------------------------------------------------------------------------
- -----------------
SWEDEN
Kingdom of Sweden
Debentures
11.00%, 1/21/99 Aa1 SEK 2,500 366,210
-----------
- --------------------------------------------------------------------------------------------
- -----------------
UNITED KINGDOM
United Kingdom
Treasury Bonds
6.00%, 8/10/99 Aaa GBP 2,000 3,220,123
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL GOVERNMENT OBLIGATIONS
(Cost $14,328,416) 14,496,933
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL FOREIGN SECURITIES
(Cost $15,334,666) 15,503,183
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL INVESTMENTS (101.0%)
(Cost $89,571,638) 87,820,634
-----------
- --------------------------------------------------------------------------------------------
- -----------------
LIABILITIES IN EXCESS OF OTHER
ASSETS (-1.0%) (834,661)
-----------
- --------------------------------------------------------------------------------------------
- -----------------
NET ASSETS (100%)
Applicable to 8,454,140 issued and outstanding $.001 par value shares
(authorized 100,000,000 shares) $86,985,973
-----------
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
NET ASSET VALUE PER SHARE
$ 10.29
-----------
-----------
- --------------------------------------------------------------------------------------------
- -----------------
MARKET PRICE PER SHARE
$ 9.125
-----------
-----------
- --------------------------------------------------------------------------------------------
- -----------------
GBP--British Pound.
CAD--Canadian Dollar.
DKK--Danish Krone.
FRF--French Franc.
JPY--Japanese Yen.
ZAR--South African Rand.
ESP--Spanish Peseta.
SEK--Swedish Krona.
USD--United States Dollar.
N/R--Not Rated.
PAC--Planned Amortization Class.
REMIC--Real Estate Mortgage Investment Conduit.
TBA--To Be Announced. Security is subject to delayed delivery.
(1) Non-income producing security.
(2) Defaulted security.
(3) 144A Security. Certain conditions for public sale may exist.
(4) Payment in kind bond. Market value includes accrued interest.
(5) Restricted as to private and public resale. Total cost of restricted securities at
March 31, 1997 aggregated $2,402,000. Total market value of restricted securities
owned at March 31, 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 March 31, 1997.
</TABLE>
13
<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"), each shareholder may elect to
have all dividends and distributions, 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 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 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
14
<PAGE>
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 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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