<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. Gregg M. Diliberto
CHAIRMAN OF THE BOARD INVESTMENT OFFICER
Prof. Enrique R. Arzac Suzanne E. Moran
DIRECTOR INVESTMENT OFFICER
Lawrence J. Fox Hal Liebes
DIRECTOR SENIOR VICE PRESIDENT
James S. Pasman, Jr. Michael A. Pignataro
DIRECTOR SECRETARY
Richard J. Lindquist Paul Roselli
PRESIDENT AND CHIEF INVESTMENT ASSISTANT TREASURER
OFFICER
</TABLE>
- --------------------------------------------------------
INVESTMENT ADVISER
BEA Associates
153 East 53rd Street
New York, New York 10022
Phone 1-800-293-1232
- --------------------------------------------------------
ADMINISTRATOR
Chase Global Funds Services Co.
73 Tremont Street
Boston, Massachusetts 02108
- --------------------------------------------------------
CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
- --------------------------------------------------------
SHAREHOLDER SERVICING AGENT
The Chase Manhattan Bank
4 New York Plaza
New York, New York 10004
Phone 1-800-428-8890
- --------------------------------------------------------
LEGAL COUNSEL
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
- --------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers 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, 1998
<PAGE>
BEA STRATEGIC GLOBAL INCOME FUND, INC.
- ----------
Dear Shareholders: October 20, 1998
We are pleased to report on the activities of the BEA Strategic Global Income
Fund, Inc. ("the Fund") for the quarter ended September 30, 1998 and to discuss
our investment strategy.
At September 30, 1998, the Fund's net asset value ("NAV") was $9.33,
compared to an NAV of $10.70 at June 30, 1998. The Fund's total return (based on
NAV and assuming reinvestment of dividends of $0.2175 per share) for the period
declined 10.80%. For the nine months ended September 30, 1998, the Fund's total
return declined 7.08% (based on NAV and assuming reinvestment of dividends of
$0.73 per share).
At September 30, 1998, $52.8 million was invested in high yield debt
securities; $2.4 million in investment-grade debt securities; $13.9 million in
emerging-market debt securities; $6.2 million in equity securities; and the
balance of $2.4 million in cash equivalents. Of the debt securities, the largest
concentration (52.5%) was invested in B-rated issues.
THE MARKET: STILL FLYING TO QUALITY
During the third quarter, global fixed income markets experienced yet
another "flight to quality" reaction in which sovereign securities -- notably
U.S. Treasury bonds -- became the favored asset. Much of the plunge in bond
prices occurred in the month of August alone, when market volatility was such
that many debt sectors generated their worst-ever relative returns for a single
month.
It's not surprising that high yield fared worse than investment-grade
securities in this kind of environment. As measured by the Salomon Smith Barney
High-Yield Market Index, the overall high yield market fell 4.8%. Aggregate
investment-grade securities (in the form of the Lehman Brothers Aggregate Bond
Index), by contrast, gained 4.2%.
Emerging markets were struck by the heaviest selling activity among all
fixed income sectors. J.P. Morgan's Emerging Markets Bond Index Plus (EMBI+),
for example, fell 21.2%, and only one individual market (Bulgaria) generated a
positive return. Another measure of the decline was the dramatic widening of the
difference, or "spread," between yields of emerging debt securities and those of
comparable U.S. Treasury bonds. EMBI+'s spread versus comparable Treasuries
doubled to a stunning 13.30 percentage points.
Developments overseas were most responsible both for the flight to quality
and the quarter's high volatility:
- - RUSSIA: The deterioration of political and economic conditions in Russia came
to a head in mid-August, when the government devalued the crumbling ruble and
rescheduled payment of ruble-denominated Treasury securities.
For investors, this was a major turning point in how they perceive risk and
their overall willingness to accept it. The world's bond and stock markets
subsequently plunged as investors sought to rid themselves of relatively risky
assets.
- - JAPAN: An unexpected outcome in July's parliamentary elections forced Prime
Minister Hashimoto to resign. The Japanese economy, meanwhile, remained mired
in its worst recession since World War II, while government gridlock prevented
any real progress toward a solution.
- - BRAZIL: Fueled by negative news from Asia and Russia, concern over Brazil's
fiscal deficit and overvalued currency prompted foreigners to withdraw an
alarmingly high amount of capital from the country. Expectations grew that the
International Monetary Fund would provide a financial aid package of some
kind. Investors began to contemplate with uneasiness the nation's prospects
following the presumed re-election of President Cardoso in October.
In the U.S., sentiment for a reduction in interest rates that would keep the
domestic economy humming and help ease macroeconomic conditions elsewhere rose
to a fever pitch. The Federal Reserve cut short-term rates by 25 basis points on
September 29th, an amount many considered too low. There also was the news that
a prominent hedge fund with major positions in fixed income, Long-Term Capital
Management, had racked up huge trading losses and would need to be bailed out by
its creditors and shareholders.
The negative effect of the flight to quality on high yield prices was
magnified by two factors. First was the heavy selling by hedge funds like
Long-Term Capital, which were forced to liquidate large positions to protect
performance as well as to meet margin calls and share redemptions; and brokerage
firms, which had to sell to offset losses in emerging market debt and were faced
with swelling inventories that they could not maintain. Second was the fact that
there were few buyers around, as most portfolio managers chose to simply
maintain existing holdings while prices fell.
PERFORMANCE: DAMPENED BY EMERGING MARKETS, SOME
SECTOR ALLOCATIONS
The Fund's holdings in emerging market debt had the biggest impact on
performance during the third quarter. Although exposure to the emerging sector
was relatively modest, the sector's weakness was sufficient to reduce
performance significantly below that of the Fund's high yield portion, which
accounted for about 75% of total assets at September 30th.
2
<PAGE>
Within the high yield portion, sector allocations relative to the overall
high yield market (as represented by the Salomon Smith Barney index) both helped
and hurt quarterly performance:
- - On the positive side were our overweight in cable/media, which performed much
better than the market; and underweights in energy and finance, both of which
were hit hard.
- - Our overweighting in telecommunications hurt returns, as telecom issues
performed poorly.
- - We were also more highly exposed than the market to deferred interest
instruments such as zero-coupon bonds, whose prices tend to fluctuate much
more like stocks than bonds. Zeros experienced particularly high volatility as
stocks sold off and fixed income investors flocked to the least risky
securities.
- - Our absence from utilities, which was among the best-performing high yield
sectors, was an additional negative.
OUTLOOK: CAUTIOUSLY OPTIMISTIC
HIGH YIELD. Our near-term view of the high yield market is one of caution,
as we expect activity to remain volatile through the fourth quarter and into
early 1999. Hedge funds and brokers still have substantial positions to sell,
and will have to do so during the fourth quarter in order to balance their books
by year-end. Investors also continue to grapple with important developments
overseas.
Barring a recession of some degree -- which we consider unlikely -- we're
more optimistic about high yield's prospects next year. The key to this thesis
is our sense that the Fed will continue to reduce interest rates, perhaps as
much as another 50-100 basis points over the next six months or so. [Indeed, the
Fed has already done so by unexpectedly cutting rates by 25 basis points on
October 15th.] This, in turn, should help to stabilize overall global market
conditions and maintain a comfortable level of liquidity, thus setting the stage
for most fixed income sectors to thrive. The benefits of further rate cuts
should be enough to offset any major potential negatives.
Our fundamental strategy is unchanged. We continue to favor issues at the
higher end of the high yield credit spectrum and are keeping the portfolio most
heavily weighted in the cable/media, telecommunications and gaming sectors, as
their positive industry and company fundamentals are intact. We also are
avoiding meaningful exposure to cyclical industries and those most vulnerable to
the severe economic problems in Asia. Should appropriate opportunities arise, we
will probably add to our holdings in cable/media and BB-rated bonds more
generally.
INTERNATIONAL. We remain cautious on emerging markets in the near term,
given overall market volatility and a relatively low level of liquidity. Global
factors will continue to drive trading activity. Adding to our caution is the
likelihood that, as is the case with high yield, many hedge funds and brokers
will seek to reduce their emerging debt inventories by the end of the year. We
are hopeful that the important elections in Brazil and Venezuela during the
fourth quarter will enable us to gain a clearer view of market direction heading
into 1999.
The Fund's emerging markets exposure remains conservatively positioned, in
more liquid assets. This should enable us to take greater advantage of market
conditions where appropriate. We continue to focus on higher-quality sovereign
credits like Poland, Morocco, Colombia, Panama and Mexico, as well as on
countries with relatively lower external financing needs. In our view, there are
limited opportunities in local-currency instruments at present due to their
higher volatility and the need for higher interest rates as a means of defending
weak currencies.
As developments occur that we believe would be of interest to you, we will
keep you informed. Meanwhile, if you have any questions about your portfolio or
the capital markets generally, please feel free to call upon us at any time.
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*
* Richard J. Lindquist, who is a member of the Executive Committee and is an
Executive Director of BEA Associates, is primarily responsible for management of
the Fund's assets. He has served in such capacity since November 21, 1996. Prior
to that date, he served as Vice President to the Fund, a position he assumed on
August 15, 1989. Mr. Lindquist joined BEA Associates on May 1, 1995 as a result
of BEA's acquisition of CS First Boston Investment Management Corporation
("CSFBIM"). Prior to joining BEA Associates and beginning in July, 1989, he held
various offices at CSFBIM. Mr. Lindquist is also President and Chief Investment
Officer of BEA Income Fund, Inc.
* William W. Priest, Jr., who is Chairman of the Executive Committee and
holds the offices of Executive Director and Chief Executive of BEA Associates,
joined BEA Associates in 1972. Mr. Priest is Director and President of The
Indonesia Fund, Inc. and Director and Chairman of the Board of BEA Income Fund,
Inc.; The Brazilian Equity Fund, Inc.; The Chile Fund, Inc.; The Emerging
Markets Infrastructure Fund, Inc.; The Emerging Markets Telecommunications Fund,
Inc.; The First Israel Fund, Inc.; The Latin America Equity Fund, Inc.; The
Latin America Investment Fund, Inc.; and The Portugal Fund, Inc.
3
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- ---------
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
DOMESTIC SECURITIES (80.8%)
- --------------------------------------------------------------------------------------------
- -----------------
CORPORATE OBLIGATIONS (66.9%)
- --------------------------------------------------------------------------------------------
- -----------------
AUTOMOTIVE (1.7%)
Cambridge Industries, Inc.
Series B, Gtd. Sr. Sub. Notes
10.25%, 7/15/07 B3 $ 250 $ 250,625
Collins & Aikman
Products Corp.
Gtd. Sr. Notes
11.50%, 4/15/06 B3 250 262,500
Consorcio G Grupo Dina S.A./ MCII Holdings
(U.S.A.), Inc.
Sr. Secured Discount Notes
Zero Coupon, 11/15/02 N/R 400 378,000
Delco Remy International, Inc.
Gtd. Sr. Sub. Notes
10.625%, 8/1/06 B2 250 254,375
Oxford Automotive, Inc.
Gtd. Sr. Sub. Notes
10.125%, 6/15/07 Caa1 250 229,375
-----------
GROUP TOTAL 1,374,875
-----------
- --------------------------------------------------------------------------------------------
- -----------------
BROADCASTING (5.6%)
(7) Acme Television, L.L.C./ACME Financial Corp.
Gtd. Sr. Discount Notes
0.00%, 9/30/04 B3 500 386,875
(7) Australis Holdings Pty. Ltd.
Yankee Sr. Secured
Discount Notes
0.00%, 11/1/02 N/R 650 32,500
(7) Australis Media Ltd.
0.00%, 5/15/03 C 729 10,647
Capstar Broadcasting Partners, Inc.
Sr. Discount Notes:
(7) 0.00%, 2/1/09 N/R 500 369,375
9.25%, 7/1/07 B2 200 204,000
Digital Television Services, Inc./
DTS Capital, Inc.
Series B, Gtd. Sr. Sub. Notes
12.50%, 8/1/07 B3 250 270,625
(7) EchoStar Communications Corp.
Gtd. Sr. Discount Notes
0.00%, 6/1/04 B2 300 291,750
Fox/Liberty Networks L.L.C.
Sr. Notes
8.875%, 8/15/07 B1 250 245,000
Pegasus Media & Communications, Inc.
Series B, Notes
12.50%, 7/1/05 B2 250 270,625
Sinclair Broadcast Group, Inc.:
Gtd. Sr. Sub. Notes
8.75%, 12/15/07 B2 250 245,000
Sr. Sub. Notes
10.00%, 9/30/05 B2 300 313,500
Spanish Broadcasting System, Inc.
Sr. Notes
12.50%, 6/15/02 B3 250 272,500
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
(7) United International
Holdings, Inc.,
Series B, Sr. Discount Notes
0.00%, 2/15/08 B3 $ 500 $ 238,750
Univision Network Holding L.P.
Sub. Notes
Zero Coupon, 12/17/02 N/R 573 653,305
Young Broadcasting, Inc.
Series B, Gtd. Sr. Discount Notes:
8.75%, 6/15/07 B2 450 436,500
9.00%, 1/15/06 B2 200 197,000
-----------
GROUP TOTAL 4,437,952
-----------
- --------------------------------------------------------------------------------------------
- -----------------
BUSINESS SERVICES & EQUIPMENT (0.6%)
General Binding Corp.
Gtd. Sr. Sub. Notes
9.375%, 6/1/08 B2 250 245,938
(3) Iron Mountain Inc.
Sr. Sub. Notes
8.75%, 9/30/09 B3 250 245,000
-----------
GROUP TOTAL 490,938
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CABLE (7.3%)
Adelphia Communications Corp.
Series B, Sr. Notes
8.375%, 2/1/08 B2 200 203,000
CSC Holdings, Inc.
Sr. Sub. Notes
9.875%, 2/15/13 B1 250 276,875
Century Communications Corp.
Sr. Notes
8.75%, 10/1/07 Ba3 250 264,375
Charter Communications Southeast L.P.
Series B, Sr. Notes
11.25%, 3/15/06 B3 250 272,500
Comcast Corp.
Sr. Sub. Notes
9.125%, 10/15/06 Ba3 250 265,000
(7) Comcast UK Cable
Partners Ltd.
Yankee Sr. Debentures
0.00%, 11/15/07 B2 500 405,000
(3)(7) DIVA Systems Corp.
Units
0.00%, 3/1/08 N/R 810 275,400
(7) Diamond Cable Communications plc
Yankee Discount Notes
0.00%, 12/15/05 Caa1 300 240,750
(7) Falcon Holdings Group L.P./ Falcon Funding
Corp.
Series B, Sr. Discount Debentures
0.00%, 4/15/10 B2 500 339,375
Helicon Group L.P.
Series B, Sr. Secured Notes
11.00%, 11/1/03 B1 200 210,500
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
InterMedia Capital Partners IV
L.P./InterMedia Partners IV Capital Corp.
Sr. Notes
11.25%, 8/1/06 B2 $ 250 $ 270,313
James Cable Partners L.P./ James Cable
Finance Corp.
Series B, Gtd. Sr. Notes
10.75%, 8/15/04 B2 100 105,000
Lenfest Communications, Inc.
Sr. Sub. Notes
10.50%, 6/15/06 B2 350 397,250
(7) Marcus Cable Co., L.P./Marcus Cable Capital
Corp. III
Sr. Discount Notes
0.00%, 12/15/05 B3 350 327,688
NTL, Inc.:
(7) Series B, Sr. Deferred Coupon Notes
0.00%, 2/1/06 B3 500 407,500
Series B, Sr. Notes
10.00%, 2/15/07 B3 250 252,500
OpTel Inc.:
(3) Sr. Notes
11.50%, 7/1/08 B3 500 501,875
Series B, Sr. Notes
13.00%, 2/15/05 B3 250 250,937
Rifkin Acquisitions
Partners L.P.
Sr. Sub. Notes
11.125%, 1/15/06 B3 250 267,500
(7) Telewest Communications plc
Yankee Sr. Sub. Discount Debentures
0.00%, 10/1/07 B1 250 205,625
-----------
GROUP TOTAL 5,738,963
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CHEMICALS (1.7%)
Applied Extrusion Technologies, Inc.
Series B, Sr. Notes
11.50%, 4/1/02 B2 250 264,063
Huntsman Polymers Corp.
Sr. Notes
11.75%, 12/1/04 B1 400 438,500
NL Industries Inc.:
Sr. Secured Notes
11.75%, 10/15/03 B1 150 162,000
(7) Sr. Secured Discount Debentures
0.00%, 10/15/05 B2 250 261,250
Texas Petrochemicals Corp.
Series B, Sr. Sub. Notes
11.125%, 7/1/06 B3 200 188,250
-----------
GROUP TOTAL 1,314,063
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CONSTRUCTION & BUILDING MATERIALS (0.8%)
American Architectural Products Corp.
Gtd. Sr. Notes
11.75%, 12/1/07 Caa1 250 233,125
(3) Brand Scaffold Services, Inc.
Sr. Notes
10.25%, 2/15/08 B3 150 148,500
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
Presley Companies
Sr. Notes
12.50%, 7/1/01 Caa3 $ 250 $ 222,500
-----------
GROUP TOTAL 604,125
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CONSUMER PRODUCTS & SERVICES (2.7%)
(7) Coinstar Inc.
Sr. Discount Notes
0.00%, 10/1/06 N/R 350 283,500
Holmes Products Corp.
Series B, Gtd. Sr. Sub. Notes
9.875%, 11/15/07 B3 200 184,250
Jordan Industries, Inc.
Series B, Sr. Notes
10.375%, 8/1/07 B3 225 216,563
Playtex Products, Inc.
Series B, Gtd. Sr. Notes
8.875%, 7/15/04 B1 200 202,500
Revlon Consumer Products Corp.
Series B, Sr. Sub. Notes
8.625%, 2/1/08 B3 250 245,625
Revlon Worldwide (Parent) Corp.
Series B, Sr. Secured Discount Notes
Zero Coupon, 3/15/01 B3 300 230,250
Signature Brands USA, Inc.
Gtd. Sr. Sub. Notes
13.00%, 8/15/02 B3 500 556,874
(2) Town & Country Corp.
Sr. Sub. Notes
13.00%, 5/31/98 N/R 616 244,887
-----------
GROUP TOTAL 2,164,449
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ELECTRONICS (1.3%)
Details, Inc.
Series B. Sr. Sub Notes
10.00%, 11/15/05 N/R 250 242,188
Unisys Corp.
Sr. Notes
11.75%, 10/15/04 Ba3 100 112,500
Verio, Inc.
Sr. Notes
13.50%, 6/15/04 B3 400 439,000
Viasystems, Inc.
Sr. Sub. Notes
9.75%, 6/1/07 B3 250 213,125
-----------
GROUP TOTAL 1,006,813
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ENERGY (3.4%)
Belden & Blake Energy Co.
Series B, Gtd. Sr. Sub. Notes
9.875%, 6/15/07 N/R 200 166,500
Bellwether Exploration Co.
Gtd. Sr. Sub. Notes
10.875%, 4/1/07 B3 250 238,125
Canadian Forest Oil Ltd.
Yankee Gtd. Sr. Sub. Notes
8.75%, 9/15/07 B2 250 226,875
Cliffs Drilling Co.
Series D, Gtd. Sr. Notes
10.25%, 5/15/03 B1 250 264,688
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
(3) Continental Resources, Inc.
Gtd. Sr. Sub. Notes
10.25%, 8/1/08 B3 $ 150 $ 125,625
Dawson Production Services, Inc.
Sr. Notes
9.375%, 2/1/07 B1 450 444,375
Dual Drilling Co.
Gtd. Sr. Sub. Notes
9.875%, 1/15/04 Baa3 250 265,000
Energy Corp. of America
Series A, Sr. Sub. Notes
9.50%, 5/15/07 B2 250 237,188
H.S. Resources, Inc.
Gtd. Sr. Sub. Notes
9.25%, 11/15/06 B2 250 232,500
Southwest Royalties, Inc.
Series B, Gtd. Sr. Notes
10.50%, 10/15/04 Caa2 250 136,875
TransAmerican Energy Corp.
Series B, Sr. Secured Notes
11.50%, 6/15/02 Caa2 200 119,750
Wiser Oil Co.
Gtd. Sr. Sub. Notes
9.50%, 5/15/07 B3 250 195,624
-----------
GROUP TOTAL 2,653,125
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ENTERTAINMENT (3.2%)
American Skiing Co.
Series B, Sr. Sub. Notes
12.00%, 7/15/06 B3 200 204,500
Bally Total Fitness
Holding Corp.
Series B, Sr. Sub. Notes
9.875%, 10/15/07 B3 250 233,750
Booth Creek Ski Holdings, Inc.
Series B, Gtd. Sr. Sub. Notes
12.50%, 3/15/07 Caa1 250 246,875
Cinemark U.S.A., Inc.
Series D, Sr. Sub. Notes
9.625%, 8/1/08 N/R 200 204,500
Genmar Holdings, Inc.
Series A, Sr. Sub. Notes
13.50%, 7/15/01 Caa2 500 500,000
(7) IHF Holdings, Inc.
Series B, Sr. Sec. Discount Notes
0.00%, 11/15/04 Caa2 300 59,625
(3) Production Resource Group, L.L.C./PRG Finance
Group
Gtd. Sr. Sub. Notes
11.50%, 1/15/08 Caa2 250 237,188
PTI Holding, Inc.
Sub. Notes
Zero Coupon, 12/17/02 N/R 507 577,883
(3) Premier Cruises, Ltd.
Gtd. Sr. Notes
11.00%, 3/15/08 Caa2 250 149,375
(3) Regal Cinemas Inc.
Sr. Sub. Notes
9.50%, 6/1/08 B3 100 101,000
-----------
GROUP TOTAL 2,514,696
-----------
- --------------------------------------------------------------------------------------------
- -----------------
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
FINANCIAL SERVICES (0.2%)
(2) Westfed Holdings
Sr. Debentures
15.50%, 9/15/99 N/R $ 250 $ 190,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FOOD & BEVERAGES (0.8%)
AmeriServ Food Distribution, Inc.
Gtd. Sr. Notes
8.875%, 10/15/06 B1 250 227,188
Archibald Candy Corp.
Gtd. Sr. Secured Notes
10.25%, 7/1/04 B2 250 255,625
Fleming Companies, Inc.
Series B, Gtd. Sr. Sub. Notes
10.50%, 12/1/04 B3 200 191,500
-----------
GROUP TOTAL 674,313
-----------
- --------------------------------------------------------------------------------------------
- -----------------
HEALTH CARE (0.8%)
(3) ICN Pharmaceuticals, Inc.
Sr. Notes
8.75%, 11/15/08 Ba3 250 247,500
(3) Insight Health Services Corp.
Gtd. Sr. Sub. Notes
9.625%, 6/15/08 B3 200 192,000
Integrated Health Services, Inc.
Sr. Sub. Notes
9.25%, 1/15/08 B2 250 238,750
-----------
GROUP TOTAL 678,250
-----------
- --------------------------------------------------------------------------------------------
- -----------------
INDUSTRIAL GOODS & MATERIALS (3.1%)
Atlantis Group, Inc.
Sr. Notes
11.00%, 2/15/03 B2 250 255,000
Golden Ocean Group, Ltd.
Gtd. Sr. Notes
10.00%, 8/31/01 B3 513 256,500
Haynes International, Inc.
Sr. Notes
11.625%, 9/1/04 B3 250 277,812
MVE, Inc.
Sr. Secured Debentures
12.50%, 2/15/02 B3 440 440,550
Park-Ohio Industries, Inc.
Sr. Sub. Notes
9.25%, 12/1/07 B2 200 200,000
SRI Receivables Purchase Co., Inc.
Series B, Notes
12.50%, 12/15/00 N/R 500 500,000
Specialty Equipment Companies, Inc.
Sr. Sub. Notes
11.375%, 12/1/03 B3 450 475,875
-----------
GROUP TOTAL 2,405,737
-----------
- --------------------------------------------------------------------------------------------
- -----------------
METALS & MINING (2.4%)
Algoma Steel, Inc.
Yankee First Mortgage Notes
12.375%, 7/15/05 B1 250 187,500
Gulf States Steel, Inc.
First Mortgage Notes
13.50%, 4/15/03 B3 250 161,875
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
Metallurg, Inc.
Series B, Gtd. Sr. Notes
11.00%, 12/1/07 B3 $ 250 $ 255,938
NS Group, Inc.
Gtd. Sr. Secured Debentures
13.50%, 7/15/03 Ba2 150 162,375
Republic Engineered Steel, Inc.
First Mortgage Bonds
9.875%, 12/15/01 Caa1 250 245,000
Sheffield Steel Corp.
Series B, First Mortgage Bonds
11.50%, 12/1/05 N/R 250 209,375
WCI Steel, Inc.
Series B, Sr. Secured Notes
10.00%, 12/1/04 B2 250 239,375
Weirton Steel Corp.
Sr. Notes
11.375%, 7/1/04 B2 200 180,000
Wheeling-Pittsburgh Corp.
Sr. Notes
9.25%, 11/15/07 B2 250 231,250
-----------
GROUP TOTAL 1,872,688
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PACKAGING/CONTAINERS (2.7%)
AEP Industries, Inc.
Sr. Sub. Notes
9.875%, 11/15/07 B2 400 387,000
BWAY Corp.
Series B, Gtd. Sr. Sub. Notes
10.25%, 4/15/07 B2 150 158,063
Container Corp. of America
Gtd. Sr. Notes
9.75%, 4/1/03 B1 250 247,500
(7) Crown Packaging Enterprises Ltd.
Yankee Sr. Secured Discount Notes
0.00%, 8/1/06 Ca1 925 10,406
Gaylord Container Corp.
Series B, Sr. Notes
9.75%, 6/15/07 Caa1 250 204,375
Plastic Containers, Inc.
Series B, Sr. Secured Notes
10.00%, 12/15/06 B1 250 257,500
Radnor Holdings, Inc.
Series B, Gtd. Sr. Notes
10.00%, 12/1/03 B2 400 397,000
Riverwood International Corp.
Gtd. Sr. Sub. Notes
10.875%, 4/1/08 Caa1 250 205,625
Stone Container Finance Co.
Yankee Gtd. Sr. Notes
11.50%, 8/15/06 B2 250 262,500
-----------
GROUP TOTAL 2,129,969
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PAPER & FOREST PRODUCTS (1.3%)
Ainsworth Lumber Co. Ltd.
Yankee Sr. Secured Notes
12.50%, 7/15/07 B3 250 249,375
Crown Paper Co.
Sr. Sub. Notes
11.00%, 9/1/05 B3 100 73,750
Mail-Well Corp.
Sr. Sub. Notes
10.50%, 2/15/04 B2 500 517,500
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
Malette, Inc.
Yankee Sr. Secured Debentures
12.25%, 7/15/04 Ba3 $ 150 $ 163,125
-----------
GROUP TOTAL 1,003,750
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PUBLISHING & INFORMATION SERVICES (2.1%)
Ampex Corp.
Series B, Sr. Notes
12.00%, 3/15/03 N/R 250 250,000
(7) InterAct Systems, Inc.
Sr. Discount Notes
0.00%, 8/1/03 N/R 400 155,500
Level 3 Communications, Inc.
Sr. Notes
9.125%, 5/1/08 B3 275 259,188
(7) Liberty Group Publishing, Inc.
Sr. Discount Debentures
0.00%, 2/1/09 Caa1 300 167,625
(4) Mentus Media Corp.
Series B, Sr. Secured PIK Notes
12.00%, 2/1/03 N/R 369 369,000
T/SF Communications Corp.,
Series B Gtd. Sr. Sub. Notes
10.375%, 11/1/07 B3 200 197,000
(3) Tri-State Outdoor Media Group, Inc.
Sr. Notes
11.00%, 5/15/08 N/R 300 288,750
-----------
GROUP TOTAL 1,687,063
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RESTAURANTS, HOTELS & GAMING (4.9%)
American Restaurant Group, Inc.
Series B, Gtd. Sr. Secured Notes
11.50%, 2/15/03 B3 250 242,188
Casino America, Inc.
Gtd. Sr. Notes
12.50%, 8/1/03 B1 250 270,625
Casino Magic of
Louisiana Corp.
Series B, Gtd. First Mortgage Notes
13.00%, 8/15/03 B3 500 548,750
Colorado Gaming & Entertainment, Co.
Gtd. Sr. Secured Notes
12.00%, 6/1/03 N/R 443 468,582
Friendly Ice Cream Corp.
Gtd. Sr. Notes
10.50%, 12/1/07 B1 250 221,875
HMH Properties, Inc.
Series B, Gtd. Sr. Notes
7.875%, 8/1/08 Ba2 250 246,875
Hollywood Park, Inc.
Series B, Gtd. Sr. Sub. Notes
9.50%, 8/1/07 B2 200 190,000
Horseshoe Gaming L.L.C.:
Series B, Sr. Sub. Notes
9.375%, 6/15/07 B3 300 288,750
Series B, Gtd. Sr. Notes
12.75%, 9/30/00 B1 375 403,125
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
Mohegan Tribal Gaming Authority
Series B, Sr. Secured Notes
13.50%, 11/15/02 Ba1 $ 200 $ 257,750
Prime Hospitality Corp.
Secured First Mortgage Notes
9.25%, 1/15/06 Ba2 250 245,000
(3) Romacorp, Inc.
Gtd. Sr. Notes
12.00%, 7/1/06 B3 250 246,250
Waterford Gaming L.L.C./ Waterford Gaming
Finance Corp.
Sr. Notes
12.75%, 11/15/03 N/R 189 204,592
-----------
GROUP TOTAL 3,834,362
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RETAIL (2.7%)
(3)(7) Advance Holding Corp.
Sr. Discount Debentures
0.00%, 4/15/09 Caa2 350 202,563
(3) Advance Stores Co.
Gtd. Sr. Sub. Notes
10.25%, 4/15/08 Caa1 150 146,625
(3) County Seat Stores, Inc.
Units
12.75%, 11/1/04 N/R 250 247,500
Dairy Mart Convenience Stores, Inc.
Sr. Sub. Notes
10.25%, 3/15/04 B3 251 232,175
Jitney-Jungle Stores of America, Inc.:
Gtd. Sr. Notes
12.00%, 3/1/06 B2 250 275,000
Gtd. Sr. Sub. Notes
10.375%, 9/15/07 N/R 250 253,125
K Mart Corp.
Debentures
7.75%, 10/1/12 Ba2 200 192,000
(3)(7) Mrs. Fields' Holding Co.
Units
0.00%, 12/1/05 Caa2 500 278,750
Pantry, Inc.
Gtd. Sr. Sub. Notes
10.25%, 10/15/07 B3 200 194,000
Pathmark Stores, Inc.
Sr. Sub. Notes
9.625%, 5/1/03 Caa1 100 96,750
-----------
GROUP TOTAL 2,118,488
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TELECOMMUNICATIONS (15.2%)
Advanced Radio Telecommunications Corp.
Sr. Notes
14.00%, 2/15/07 Caa2 250 194,375
Bell Technology Group
Units
13.00%, 5/1/05 N/R 250 212,188
Concentric Network Corp.
Sr. Notes
12.75%, 12/15/07 N/R 250 230,625
(3) Convergent Communications Inc.
Units
13.00%, 4/1/08 N/R 250 237,500
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
(3)(7) DTI Holdings, Inc.
Units
0.00%, 3/1/08 N/R $ 300 $ 117,375
(3)(7) Dolphin Telecom plc
Sr. Discount Notes
0.00%, 6/1/08 Caa1 250 122,188
(7) E. Spire Communications, Inc.:
Sr. Discount Notes.
0.00%, 11/1/05 N/R 750 602,813
(3) 0.00%, 7/1/08 N/R 400 205,500
(3) Exodus Communications, Inc.
Sr. Notes
11.25%, 7/1/08 N/R 50 45,063
(7) Echostar Satellite Broadcasting Corp.
Sr. Secured Discount Notes
0.00%, 3/15/04 B3 150 132,563
(3)(7) Focal Communications Corp.
Sr. Discount Notes
0.00%, 2/15/08 N/R 200 97,750
(7) GST USA, Inc.
Gtd. Sr. Exchange Discount Notes
0.00%, 12/15/05 N/R 600 444,750
(3) Global Crossing Holdings Ltd.
Gtd. Sr. Notes
9.625%, 5/15/08 N/R 250 245,000
Globalstar, L.P./Globalstar Capital Corp.
Sr. Notes
10.75%, 11/1/04 Caa1 300 191,250
(7) ICG Holdings, Inc.:
Gtd. Sr. Discount Notes
0.00%, 9/15/05 N/R 350 273,000
Gtd. Sr. Exchange Discount Notes
0.00%, 3/15/07 N/R 750 498,750
(7) ICG Services, Inc.
Sr. Discount Notes
0.00%, 5/1/08 N/R 250 125,313
ICO Global Communications (Holdings) Ltd.
Units
15.00%, 8/1/05 N/R 250 198,750
Intermedia Communications, Inc.:
Series B, Sr. Notes
8.875%, 11/1/07 B2 150 151,875
(7) Series B, Sr. Discount Notes
0.00%, 7/15/07 B2 300 215,625
Iridium Operating L.L.C./ Iridium Capital
Corp.
Series C/EN, Gtd. Sr. Notes
11.25%, 7/15/05 B3 250 200,625
Jacor Communications, Inc.
Gtd. Sr. Sub. Notes
8.00%, 2/15/10 B2 250 250,000
(7) Jordan Telecommunications Products, Inc.
Series B, Sr. Discount Notes
0.00%, 8/1/07 N/R 250 182,188
(3) Long Distance International, Inc.
Units
12.25%, 4/15/08 N/R 500 502,500
(3)(7) McCaw International Ltd.
Sr. Discount Notes
0.00%, 4/15/07 Caa1 500 249,375
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
McLeod USA, Inc.:
(7) Sr. Discount Notes
9.25%, 7/15/07 B2 $ 200 $ 205,500
Sr. Notes
0.00%, 3/1/07 B2 100 72,875
(3)(7) MetroNet Communications Corp.:
Yankee Sr. Discount Notes
0.00%, 6/15/08 B3 250 147,813
0.00%, 11/1/07 B3 350 210,000
(3)(7) Nextel Communications, Inc.
Sr. Discount Notes
0.00%, 2/15/08 B2 900 542,250
NEXTLINK Communications, Inc.
Sr. Notes
12.50%, 4/15/06 B3 100 108,000
Orion Network Systems, Inc.
Gtd. Sr. Notes
11.25%, 1/15/07 B2 250 272,188
(7) Pinnacle Holdings, Inc.
Sr. Discount Notes
0.00%, 3/15/08 N/R 100 53,000
(4) Price Communications Cellular Holdings, Inc.
Sr. Exchangeable PIK Notes
11.25%, 8/15/08 Caa1 200 202,000
(7) Pagemart Nationwide, Inc.
Sr. Discount Notes
0.00%, 2/1/05 B3 750 675,000
Petersburg Long Distance, Inc.:
(3)(7) Units
0.00%, 6/1/04 N/R 560 470,400
(3) Conv. Sr. Sub. Notes
9.00%, 6/1/06 N/R 80 21,400
(7) Qwest Communications International, Inc.
Sr. Discount Notes
0.00%, 10/15/07 Ba1 250 191,563
(7) RCN Corp.
Series B, Sr. Discount Notes
0.00%, 2/15/08 B3 300 155,625
RSL Communications plc
Gtd. Sr. Notes
9.125%, 3/1/08 B3 250 215,000
(3)(7) Rhythms Netconnections
Units
0.00%, 5/15/08 N/R 500 225,000
Sprint Spectrum L.P./Sprint Spectrum Finance
Corp.
Sr. Notes
11.00%, 8/15/06 Ba2 450 506,250
Star Choice Communications, Inc.
Yankee Sr. Notes.
13.00%, 12/15/05 B3 200 186,000
(3) Startec Global Communications Corp.
Units
12.00%, 5/15/08 N/R 350 336,000
TCI Satellite Entertainment, Inc.:
(7) Sr. Sub. Discount Notes
0.00%, 2/15/07 Caa1 150 91,313
Sr. Sub. Notes
10.875%, 2/15/07 Caa1 300 275,250
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
Talton Holdings, Inc.
Series B, Gtd. Sr. Notes
11.00%, 6/30/07 B2 $ 250 $ 250,000
(7) USN Communications, Inc.
Series B, Sr. Discount Notes
0.00%, 8/15/04 Caa1 205 133,250
Western Wireless Corp.
Sr. Sub. Notes
10.50%, 2/1/07 B3 250 252,181
(7) WinStar Communications, Inc.
Sr. Discount Notes
0.00%, 10/15/05 Caa1 400 263,500
-----------
GROUP TOTAL 11,988,299
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TEXTILES/APPAREL (0.3%)
Maxim Group, Inc.
Series B, Gtd. Sr. Sub. Notes
9.25%, 10/15/07 B2 250 251,563
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TRANSPORTATION (1.8%)
AirTran Airlines, Inc.
Series B, Gtd. Sr. Secured Notes
10.50%, 4/15/01 B2 500 497,500
Canadian Airlines Corp.
Yankee Sr. Notes
12.25%, 8/1/06 Caa2 300 286,125
(3) Cenargo International plc
First Priority Ship Mortgage Notes
9.75%, 6/15/08 Ba3 100 102,875
Ermis Maritime Holdings, Ltd.
Units
12.50%, 3/15/06 B3 275 266,750
Trans World Airlines, Inc.
Sr. Notes
11.375%, 3/1/06 Caa1 250 242,188
-----------
GROUP TOTAL 1,395,438
-----------
- --------------------------------------------------------------------------------------------
- -----------------
WASTE MANAGEMENT (0.3%)
Allied Waste North America, Inc.
Gtd. Sr. Sub. Notes
10.25%, 12/1/06 B2 250 272,809
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL CORPORATE OBLIGATIONS
(Cost $55,790,664) 52,802,728
-----------
- --------------------------------------------------------------------------------------------
- -----------------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.9%)
- --------------------------------------------------------------------------------------------
- -----------------
Asset Securitization Corp.
Series 1996-MD6, Class A6
7.106%, 11/13/26 Baa2 230 248,736
Drexel, Burnham & Lambert Trust REMIC-PAC,
Series S, Class 2
9.00%, 8/1/18 Aaa 464 465,016
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $712,419) 713,752
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
ASSET BACKED OBLIGATIONS (2.1%)
- --------------------------------------------------------------------------------------------
- -----------------
Green Tree Financial Corp. Manufactured
Housing Installment Sale Contracts:
Series 1995-6, Class A3,
6.65%, 9/15/26 Aaa $ 315 $ 316,035
Series 1993-4, Class B1,
7.20%, 1/15/19 Baa3 1,043 1,032,893
Merrill Lynch Home Equity Acceptance Trust,
Series 1994-A, Class A-2
6.438%, 7/17/22 A3 212 210,639
Nationscredit Grantor Trust,
Boat Retail Installment Sale Contracts,
Series 1996-1, Class A
5.85%, 9/15/11 Aaa 123 124,799
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL ASSET BACKED OBLIGATIONS
(Cost $1,705,021) 1,684,366
-----------
- --------------------------------------------------------------------------------------------
- -----------------
<CAPTION>
Shares/Units
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
COMMON STOCKS (2.0%)
- --------------------------------------------------------------------------------------------
- -----------------
CABLE (0.0%)
OpTel, Inc. 250 3
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CONSUMER PRODUCTS & SERVICES (0.0%)
(1) Coinstar, Inc. 4,196 25,701
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FINANCIAL SERVICES (0.0%)
(1)(5) Westfed Holdings, Inc.
Class B (acquired 9/20/88, $127) 4,223 0
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FOOD & BEVERAGES (1.5%)
(1)(5) Dr. Pepper Bottling Holdings, Inc.
Class A (acquired 10/21/88, cost $40,500) 45,000 1,170,000
(1) Specialty Foods Corp. 22,500 1,125
-----------
GROUP TOTAL 1,171,125
-----------
- --------------------------------------------------------------------------------------------
- -----------------
INDUSTRIAL GOODS & MATERIALS (0.3%)
(1)(5)(6) CIC I Acquisition Corp. (acquired 10/18/89,
cost $1,076,715) 2,944 200,192
-----------
- --------------------------------------------------------------------------------------------
- -----------------
METALS & MINING (0.0%)
Sheffield Steel Corp. 2,500 10,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PACKAGING\CONTAINERS (0.0%)
(1) Crown Packaging Enterprises Ltd. 100,848 1,008
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PAPER & FOREST PRODUCTS (0.1%)
(1) Mail-Well, Inc. 3,550 30,397
(1)(3) Mail-Well, Inc. 7,102 60,811
-----------
GROUP TOTAL 91,208
-----------
- --------------------------------------------------------------------------------------------
- -----------------
<CAPTION>
Shares/Units Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
RESTAURANTS, HOTELS & GAMING (0.0%)
- --------------------------------------------------------------------------------------------
- -----------------
(1) Casino America Inc. 4,982 $ 12,766
Elsinore Corp. 6,178 1,544
(1) Motels of America, Inc. 250 4,250
-----------
GROUP TOTAL 18,560
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TELECOMMUNICATIONS (0.1%)
Intermedia Communications, Inc. 548 13,426
(1) Pagemart Nationwide, Inc. 3,500 27,125
-----------
GROUP TOTAL 40,551
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL COMMON STOCKS
(Cost $1,309,193) 1,558,348
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PREFERRED STOCKS (4.6%)
- --------------------------------------------------------------------------------------------
- -----------------
AEROSPACE/DEFENSE (0.4%)
(1) GPA Group plc 7% Second Preference Cum. Conv. 650,000 344,500
-----------
- --------------------------------------------------------------------------------------------
- -----------------
BROADCASTING (0.9%)
Granite Broadcasting Corp.
12.75% Cum. Exchangeable 12 13,397
Source Media Inc 4,410 83,790
(1) Spanish Broadcasting System, Inc.
14.25% Cum. Exchangeable 6,110 614,055
-----------
GROUP TOTAL 711,242
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CABLE (0.4%)
Adelphia
Communications Corp.
13% Cum. Exchangeable, Series B 2,500 281,875
NTL, Inc.
13% Exchangeable 1 1,119
-----------
GROUP TOTAL 282,994
-----------
- --------------------------------------------------------------------------------------------
- -----------------
CONSUMER PRODUCTS & SERVICES (0.0%)
Renaissance Cosmetics, Inc.
14% Cumulative 4 39
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FINANCIAL SERVICES (0.0%)
(1)(5)(6) West Fed Holdings, Inc. Class A (acquired
9/20/88-6/18/93, cost $1,203,480) 14,246 14,246
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PAPER & FOREST PRODUCTS (0.8%)
(1) SD Warren Co.
14% Cum. Exchangeable, Series B 13,000 615,875
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Shares/Units Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
PUBLISHING & INFORMATION SERVICES (0.5%)
Primedia, Inc.
10% Cum. Exchangeable, Series D 3,500 $ 363,124
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RESTAURANTS, HOTELS & GAMING (0.2%)
AmeriKing, Inc.
13% Cum. Exchangable 6,055 163,485
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TELECOMMUNICATIONS (1.4%)
Intermedia Communications, Inc.
7% Jr. Convertable, Series E 15,000 360,000
NEXTLINK Communications, Inc.
14% Cum. Exchangeable 7,376 435,184
Nextel Communications, Inc.
13% Exchangeable, Series D 282 309,352
-----------
GROUP TOTAL 1,104,536
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL PREFERRED STOCKS
(Cost $4,014,175) 3,600,041
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RIGHTS (0.0%)
- --------------------------------------------------------------------------------------------
- -----------------
(1) Terex Corp. expiring 5/15/02
(Cost $0) 2,000 32,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
WARRANTS (1.2%)
- --------------------------------------------------------------------------------------------
- -----------------
(1) Advanced Radio Telecommunications Corp.
expiring 2/15/07 3,750 20,175
(1) American Telecasting, Inc.
expiring 6/23/99 350 0
(1) Ampex Corp.
expiring 3/15/03 8,500 6,375
(1) Australis Holdings Pty Ltd.
expiring 10/30/01 250 1
(1) Australis Media Ltd.
expiring 5/15/00 225 1
(1) Bell Technology Group
expiring 5/1/05 250 3
(1) Boomtown, Inc.
expiring 11/1/98 500 5
(1) CHC Helicopter Corp.
expiring 12/15/00 2,000 6,000
(1) Casino America, Inc.
expiring 5/3/01 882 9
(1) Central Bank of Nigeria
expiring 5/15/99 250 0
(1) Chi Energy, Inc.:
Series C, expiring 11/8/05 2,459 5,904
(1) Chi Energy, Inc.:
Series B, expiring 11/8/03 3,790 9,100
(1) Concentric Network Corp.
expiring 12/15/07 250 625
(1) 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 1,000 500
<CAPTION>
Shares/Units Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
(1) DIVA Systems Corp.
expiring 5/15/06 900 $ 198,000
(1) DTI Holdings
expiring 3/1/08 1,500 1,500
(1) Dairy Mart Convenience Stores, Inc.
expiring 12/1/01 4,172 1,711
(1) E. Spire Communications, Inc.
expiring 11/1/05 1,000 110,000
(1) Elsinore Corp.
expiring 10/8/98 5,329 0
(1) Golden Ocean Group, Ltd.
expiring 8/31/01 342 1,539
(1) Great American Cookie Co.
expiring 1/30/00 90 900
(1) Hemmeter Enterprises, Inc.
expiring 12/15/99 3,000 0
(1) IntelCom Group, Inc.
expiring 9/1/05 1,155 17,325
(1) Interact Systems, Inc.
expiring 8/1/03 400 0
(1) Intermedia Communications, Inc.
expiring 6/1/00 300 31,137
(1) Mentus Media Corp.
expiring 2/1/08 974 0
(1) Mentus Media Corp.
expiring 2/1/08 60 1
(1) McCaw International Ltd.
expiring 4/15/07 750 3,750
(1) NEXTLINK Communications, Inc.
expiring 2/1/09 6,000 0
(1) Nextel Communications, Inc.
expiring 4/25/99 500 5
(1) Orion Network Systems, Inc
expiring 1/31/07 250 2,750
(1) Price Communications Corp.
expiring 8/1/07 1,204 12,040
(1) SD Warren Co.
expiring 12/15/06 8,000 40,000
(1) Signature Brands Ltd.
expiring 8/15/02 500 0
(1) Source Media, Inc.
expiring 11/1/07 2,235 17,321
(1) Spanish Broadcasting System
expiring 6/30/99 500 245,000
(1)(3) Spanish Broadcasting Systems
expiring 6/30/99 500 105,000
(1) Star Choice Communications, Inc.
expiring 12/15/05 4,632 5,314
(1) USN Communications, Inc.
expiring 10/15/04 3,050 5,887
(1) United International Holdings
expiring 11/15/99 600 3,000
(1) Verio, Inc.
expiring 6/15/04 3,200 96,000
(1) Wright Medical Technology
expiring 6/30/03 206 13,381
-----------
GROUP TOTAL 960,264
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL WARRANTS
(Cost $869,639) 960,264
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
SHORT-TERM INVESTMENTS (3.1%)
FHLB DISCOUNT NOTE
Zero Coupon, 10/1/98 (Cost $2,439,000) N/R $ 2,439 $ 2,439,000
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL DOMESTIC SECURITIES
(Cost $66,840,111) 63,790,499
-----------
- --------------------------------------------------------------------------------------------
- -----------------
FOREIGN SECURITIES (17.6%)
- --------------------------------------------------------------------------------------------
- -----------------
CORPORATE OBLIGATIONS (1.9%)
- --------------------------------------------------------------------------------------------
- -----------------
ARGENTINA (0.1%)
Cia Internacional Telecomunicacoes S.A.
Sr. Notes
10.375%, 8/1/04 N/R ARP 145 73,236
-----------
- --------------------------------------------------------------------------------------------
- -----------------
BRAZIL (0.8%)
(7) Cia. Petroleo Ipiranga S.A.
Sr. Unsub. Notes
10.625%, 2/25/02 N/R USD 600 483,683
Petroleo Brasileiro S.A.
Debentures
8.25%, 4/6/01 B2 USD 220 171,600
-----------
GROUP TOTAL 655,283
-----------
- --------------------------------------------------------------------------------------------
- -----------------
MEXICO (0.0%)
(3) Petroleos Mexicanos S.A.
Daily Adjusted Yield Securities
8.656%, 7/15/05 Ba2 USD 20 17,350
-----------
- --------------------------------------------------------------------------------------------
- -----------------
RUSSIA (1.0%)
(3)(8) AO Sibneft
Loan Participation Notes
9.688%, 8/15/00 N/R USD 1,675 749,563
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL CORPORATE OBLIGATIONS
(Cost $2,691,717) 1,495,432
-----------
- --------------------------------------------------------------------------------------------
- -----------------
GOVERNMENT OBLIGATIONS (15.7%)
- --------------------------------------------------------------------------------------------
- -----------------
ALGERIA (0.4%)
Republic of Algeria:
Loan Participation Agreements:
6.25%, 5/4/00 N/R USD 28,036 149,934
6.06%, 3/4/00 N/R USD 235 171,550
-----------
GROUP TOTAL 321,484
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ARGENTINA (3.8%)
Republic of Argentina:
Debentures
9.75%, 9/19/27 Ba3 USD 370 301,550
(8) 6.188%, 3/31/05 Ba3 USD 1,563 1,265,087
(7) Secured Par Bonds, Series L-GP
5.75%, 3/31/23 Ba3 USD 2,110 1,421,613
-----------
GROUP TOTAL 2,988,250
-----------
- --------------------------------------------------------------------------------------------
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
- -----------------
BRAZIL (2.4%)
(3)(8) Banco Nacional de Desenvolvimento Economico e
Social
Notes
10.30%, 6/16/08 B2 $ 150 $ 103,500
Federal Republic of Brazil:
(3)(8) MYDFA Trust Certificates
6.25%, 9/15/07 N/R USD 909 483,059
(7) Par Bonds Series Z-L
5.25%, 4/15/24 B2 USD 550 319,000
(8) Eligible Interest Bonds
6.625%, 4/15/06 B2 USD 1,688 993,692
-----------
GROUP TOTAL 1,899,251
-----------
- --------------------------------------------------------------------------------------------
- -----------------
BULGARIA (1.4%)
(3)(7) Republic of Bulgaria:
Front Loaded Interest Reduction Bond, Series
A
2.50%, 7/28/12 B2 USD 250 114,375
(8) Discount Bonds, Series A
6.688%, 7/28/24 B2 USD 1,550 988,125
-----------
GROUP TOTAL 1,102,500
-----------
- --------------------------------------------------------------------------------------------
- -----------------
COLOMBIA (0.7%)
Republic of Colombia:
Notes
8.625%, 4/1/08 Baa3 USD 340 238,850
(8) Yankee Notes
8.82%, 8/13/05 Baa3 USD 335 290,613
-----------
GROUP TOTAL 529,463
-----------
- --------------------------------------------------------------------------------------------
- -----------------
ECUADOR (0.5%)
(7) Republic of Ecuador
Par Bonds
3.50%, 2/28/25 B3 USD 1,025 417,688
-----------
- --------------------------------------------------------------------------------------------
- -----------------
GREECE (0.3%)
Hellenic Republic
Bonds
7.50%, 5/20/13 N/R GRD 85,500 288,873
-----------
- --------------------------------------------------------------------------------------------
- -----------------
IVORY COAST (0.5%)
(7) Republic of the Ivory Coast
Past Due Interest Bonds
2.00%, 3/29/18 N/R USD 1,320 361,416
-----------
- --------------------------------------------------------------------------------------------
- -----------------
MEXICO (3.9%)
United Mexican States:
Global Bonds
11.50%, 5/15/26 Ba2 USD 240 236,400
(8) Discount Bonds, Series C
6.617%, 12/31/19 Ba2 USD 500 391,875
Secured Par Bonds, Series W-A,
6.25%, 12/31/19 Ba2 USD 2,730 1,886,588
Secured Par Bonds, Series W-B,
6.25%, 12/31/19 Ba2 USD 770 532,115
-----------
GROUP TOTAL 3,046,978
-----------
- --------------------------------------------------------------------------------------------
- -----------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Face
Moody's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------
NIGERIA (0.2%)
Central Bank of Nigeria
Par Bonds
6.25%, 11/15/20 N/R USD 250 $ 142,500
-----------
- --------------------------------------------------------------------------------------------
- -----------------
PANAMA (0.3%)
(7) Republic of Panama
Interest Reduction Bonds
4.00%, 7/17/14 Ba1 USD 335 236,175
-----------
- --------------------------------------------------------------------------------------------
- -----------------
POLAND (1.1%)
Republic of Poland:
(7) Par Bonds
3.00%, 10/27/24 Baa3 USD 1,020 668,100
(7) Past Due Interest Bonds
4.00%, 10/27/14 Baa3 USD 250 215,625
-----------
GROUP TOTAL 883,725
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TURKEY (0.2%)
Republic of Turkey
Treasury Bills
Zero Coupon, 1/13/99 N/R TRL 57,000,000 160,129
-----------
- --------------------------------------------------------------------------------------------
- -----------------
<CAPTION>
Value
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL GOVERNMENT OBLIGATIONS
(Cost $13,473,459) $12,378,432
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL FOREIGN SECURITIES
(Cost $16,165,176) 13,873,864
-----------
- --------------------------------------------------------------------------------------------
- -----------------
TOTAL INVESTMENTS (98.4%)
(Cost $83,005,287) 77,664,363
-----------
- --------------------------------------------------------------------------------------------
- -----------------
LIABILITIES IN EXCESS OF OTHER
ASSETS (1.6%)
1,248,969
-----------
- --------------------------------------------------------------------------------------------
- -----------------
NET ASSETS (100%)
Applicable to 8,454,140 issued and outstanding $.001 par value shares (authorized
100,000,000 shares) $78,913,332
-----------
-----------
- --------------------------------------------------------------------------------------------
- -----------------
N/R--Not Rated.
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,
1998 aggregated $2,320,822. Total market value of restricted securities owned at September 30, 1998
was $1,384,438 or 1.75% of net assets.
(6) Securities for which market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Directors.
(7) 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.
(8) 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, 1998.
</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"), 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
14
<PAGE>
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.
15
