N-Q 1 dnq.htm HELIOS STRATEGIC INCOME FUND, INC. Helios Strategic Income Fund, Inc.

As filed with the Securities and Exchange Commission on August 9, 2010

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act File number 81 1-21487

HELIOS STRATEGIC INCOME FUND, INC.

(Exact name of registrant as specified in Charter)

THREE WORLD FINANCIAL CENTER

200 VESEY STREET, 10TH FLOOR

NEW YORK, NY 10281

(Address of principal executive offices) (Zip code)

KIM G. REDDING, PRESIDENT

THREE WORLD FINANCIAL CENTER

200 VESEY STREET, 10TH FLOOR

NEW YORK, NEW YORK 10281-1010

(Name and address of agent for service)

Registrant’s telephone number, including area code: 1-800-497-3746

Date of fiscal year end: March 31, 2011

Date of reporting period: June 30, 2010

Form N-Q is to be used by management investment companies to file reports with the Commission not later than 60 days after the close of their first and third fiscal quarters, pursuant to Rule 30b1-5 under the Investment Company Act of 1940 (“1940 Act”) (l7 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1. Schedule of Investments.

HELIOS STRATEGIC INCOME FUND, INC.

Portfolio of Investments (Unaudited)

June 30, 2010

 

 

      Interest
Rate		     Maturity    Principal
Amount
(000s)		    Value

INVESTMENT GRADE CORPORATE BONDS - 33.8%

           

Basic Industry - 12.3%

           

Alcoa Inc. 2

   5.55   %    02/01/17    $ 1,000      $ 983,364  

ArcelorMittal

    6.13      06/01/18      500      522,941  

Newmont Mining Corp. 2

    5.13      10/01/19      1,000      1,071,527  

Packaging Corp. of America

    5.75      08/01/13      500      539,016  

The Dow Chemical Co.

    5.70      05/15/18      1,000      1,054,204  
              

Total Basic Industry
    (Cost - $3,690,608)

              4,171,052  
              

Consumer Cyclical - 3.1%

           

Yum! Brands Inc.
    (Cost $1,032,046 )

    8.88      04/15/11      1,000      1,056,455  
              

Consumer Non-Cyclical - 11.5%

           

Altria Group Inc. 2

    9.70      11/10/18      1,000      1,266,380  

Anheuser-Busch InBev Worldwide Inc. 3,4

    7.75      01/15/19      1,000      1,213,762  

Covidien International Finance SA

    6.00      10/15/17      500      580,233  

CVS Caremark Corp.

    5.75      06/01/17      500      556,241  

McKesson Corp.

    5.25      03/01/13      250      269,819  
              

Total Consumer Non-Cyclical
    (Cost - $3,394,318)

              3,886,435  
              

Industrials - 1.7%

           

Tyco Electronics Group S.A.
    (Cost $462,909 )

    6.55      10/01/17      500      574,206  
              

Telecommunications - 5.2%

           

Rogers Communications Inc.

    6.38      03/01/14      1,000      1,135,368  

Time Warner Cable Inc. 2

    8.25      04/01/19      500      614,901  
              

Total Telecommunications
    (Cost - $1,483,911)

                        1,750,269  

Total INVESTMENT GRADE CORPORATE BONDS
    (Cost - $10,063,792)

                        11,438,417  

HIGH YIELD CORPORATE BONDS - 84.7%

           

Basic Industry - 7.9%

           

AK Steel Corp.

    7.63      05/15/20      200      194,000  

Appleton Papers Inc. 3,4

    10.50      06/15/15      240      226,800  

Domtar Corp. 2

   10.75      06/01/17      250      300,000  

Edgen Murray Corp. 3,4

    12.25      01/15/15      170      143,650  

Millar Western Forest Products Limited

    7.75      11/15/13      450      387,000  

PE Paper Escrow GmbH 3,4

    12.00      08/01/14      150      164,812  

RBS Global & Rexnord Corp. 3,4

    8.50      05/01/18      290      281,300  

Verso Paper Holdings LLC/Verso Paper Inc.

    11.50      07/01/14      450      484,875  

Westlake Chemical Corp. 2

    6.63      01/15/16      500      480,000  
              

Total Basic Industry
    (Cost - $2,577,752)

              2,662,437  
              

Capital Goods - 9.2%

           

BE Aerospace Inc. 2

    8.50      07/01/18      475      498,750  

Berry Plastics Corp. 3,4

    9.50      05/15/18      115      105,225  

Bombardier Inc. 3,4

    7.75      03/15/20      200      207,500  

Crown Cork & Seal Company Inc.

    7.38      12/15/26      475      432,250  

Mueller Water Products Inc.

    7.38      06/01/17      500      438,750  

Owens-Illinois Inc. 2

    7.80      05/15/18      400      416,500  

Solo Cup Co./Solo Cup Operating Corp.

    10.50      11/01/13      250      258,437  

Terex Corp. 2

   7.38      01/15/14      500      503,750  

 

 

See Notes to Portfolio of Investments and Notes to Financial Statements.

 

1

HELIOS STRATEGIC INCOME FUND, INC.

Portfolio of Investments (Unaudited)

June 30, 2010

 

 

      Interest
Rate		     Maturity    Principal
Amount
(000s)		    Value  

HIGH YIELD CORPORATE BONDS (continued)

           

Trimas Corp. 3,4

   9.75   %    12/15/17     $ 245      $ 248,063    
                

Total Capital Goods
    (Cost - $3,061,773)

              3,109,225    
                

Consumer Cyclical - 15.3%

           

ACE Hardware Corp. 2,3,4

    9.13      06/01/16      500      523,750    

American Axle & Manufacturing Inc.

    7.88      03/01/17      500      433,750    

Beazer Homes USA Inc.

    9.13      06/15/18      350      323,750    

Couche-Tard U.S. LP

    7.50      12/15/13      475      477,375    

FireKeepers Development Authority 3,4

    13.88      05/01/15      500      577,500    

Ford Motor Co.

    6.50      08/01/18      450      414,000    

General Motors Corp.

    7.13      07/15/13      250      74,375    

Harrah’s Escrow LLC/Harrah's Escrow Corp.

    11.25      06/01/17      225      236,813    

KAR Auction Services Inc.

    10.00      05/01/15      250      255,000    

Levi Strauss & Co. 3,4

    7.63      05/15/20      475      465,500    

MGM Mirage, Inc.

    5.88      02/27/14      475      376,437    

Pokagon Gaming Authority 3,4

    10.38      06/15/14      500      517,500    

Seneca Gaming Corp. 2

    7.25      05/01/12      500      488,750    
                

Total Consumer Cyclical
    (Cost - $4,972,470)

              5,164,500    
                

Consumer Non-Cyclical - 2.6%

           

Constellation Brands Inc. 2

    7.25      05/15/17      500      506,875    

Rite Aid Corp.

    8.63      03/01/15      475      387,125    
                

Total Consumer Non-Cyclical
    (Cost - $812,212)

              894,000    
                

Energy - 23.2%

           

Arch Coal Inc. 3,4

    8.75      08/01/16      475      495,188    

Chesapeake Energy Corp.

    6.88      11/15/20      475      479,156    

Crosstex Energy/Crosstex Energy Finance Corp.

    8.88      02/15/18      475      474,406    

Dynegy Holdings Inc.

    7.75      06/01/19      475      328,344    

Edison Mission Energy

    7.00      05/15/17      475      304,000    

El Paso Corp.

    7.00      06/15/17      475      472,325    

Hercules Offshore LLC 3,4

    10.50      10/15/17      300      266,250    

Hexion Finance Escrow LLC/Hexion Escrow Corp.

    8.88      02/01/18      345      311,363    

Linn Energy LLC/Linn Energy Finance Corp. 3,4

    8.63      04/15/20      140      143,325    

McJunkin Red Man Corp. 3,4

    9.50      12/15/16      450      436,500    

Newfield Exploration Co. 2

    6.88      02/01/20      475      460,750    

Niska Gas Storage US LLC/Niska Gas Storage Canada ULC 3,4

    8.88      03/15/18      200      203,000    

NRG Energy Inc.

    8.50      06/15/19      475      482,719    

Quicksilver Resources Inc.

    11.75      01/01/16      325      358,313    

Range Resources Corp. 2

    7.50      05/15/16      500      504,375    

SeaMetric International AS 1,3,4,5,7,8

    11.63      05/25/12      1,347      13,469    

SESI LLC 2

    6.88      06/01/14      425      414,375    

Texas Competitive Electric Term Loan 362672

    3.85      10/10/14      21      15,498    

Texas Competitive Electric Term Loan 362672 Tranche B2

    4.07      10/10/14      134      98,687    

Texas Competitive Electric Term Loan 363465 Tranche B3

    3.79      10/10/14      1      946    

Texas Competitive Electric Holdings Company LLC

    3.87      10/10/14      93      68,957    

Texas Competitive Electric Holdings Company LLC

    10.25      11/01/15      250      165,000    

The Williams Companies Inc. Credit Linked Certificate Trust V 2,3,4

    6.38      10/01/10      1,035      1,043,961    

Whiting Petroleum Corp. 2

    7.25      05/01/13      325      327,438    
                

Total Energy
    (Cost - $9,331,331)

              7,868,345    
                

Media - 4.4%

           

Cablevision Systems Corp. 3,4

    8.63      09/15/17      475      484,500    

 

 

See Notes to Portfolios of Investments and Notes to Financial Statements.

 

2

HELIOS STRATEGIC INCOME FUND, INC.

Portfolio of Investments (Unaudited)

June 30, 2010

 

 

      Interest
Rate		     Maturity    Principal
Amount
(000s)		    Value  

HIGH YIELD CORPORATE BONDS (continued)

           

Charter Communications Operating LLC 2,3,4,6

    8.13   %    04/30/20     $ 550      $ 562,375    

Mediacom Broadband LLC

    9.13      08/15/19      450      434,250    
                

Total Media
    (Cost - $1,511,066)

              1,481,125    
                

Services Cyclical - 8.6%

           

AMC Entertainment Inc.

    8.75      06/01/19      600      603,000    

Avis Budget Car Rental 3,4

    9.63      03/15/18      475      479,750    

Iron Mountain Inc. 2

    8.75      07/15/18      500      516,250    

Maxim Crane Works LP 3,4

    12.25      04/15/15      330      322,987    

RSC Equipment Rental Inc./RSC Holdings III LLC 3,4

    10.25      11/15/19      475      479,750    

United Rentals North America Inc.

    9.25      12/15/19      500      503,750    
                

Total Services Cyclical
    (Cost - $2,909,360)

              2,905,487    
                

Services Non-Cyclical - 1.6%

           

HCA Inc. 2
    (Cost $512,863 )

    9.25      11/15/16      500      530,000    
                

Technology & Electronics - 1.9%

           

First Data Corp.

    9.88      09/24/15      450      342,000    

Freescale Semiconductor Inc. 3,4

    9.25      04/15/18      325      320,938    
                

Total Technology & Electronics
    (Cost - $736,191)

              662,938    
                

Telecommunications - 10.0%

           

American Tower Corp. 2

    7.00      10/15/17      1,000      1,115,000    

Frontier Communications Corp. 2

    7.13      03/15/19      900      832,500    

Global Crossing Limited 3,4

    12.00      09/15/15      450      477,000    

PAETEC Holding Corp.

    9.50      07/15/15      500      486,250    

Windstream Corp. 2

    7.00      03/15/19      500      461,250    
                

Total Telecommunications
    (Cost - $3,255,114)

                        3,372,000    

Total HIGH YIELD CORPORATE BONDS
    (Cost - $29,680,132)

                        28,650,057    
                   Shares    Value  

COMMON STOCKS - 8.0%

           

Consumer Cyclical - 0.6%

           

Beazer Homes USA Inc.

           5,900      21,417    

DR Horton Inc.

           5,200      51,116    

Hovnanian Enterprises Inc.

           5,400      19,872    

MDC Holdings Inc.

           1,900      51,205    

Ryland Group Inc.

           2,900      45,878    
                

Total Consumer Cyclical
    (Cost - $286,074)

              189,488    
                

Consumer Products - 0.1%

           

B&G Foods Inc.
    (Cost $37,874 )

           4,900      52,822    
                

Energy - 1.0%

           

Huntsman Corp.

           5,400      46,818    

Southern Union Co.

           13,300      290,738    
                

Total Energy
    (Cost - $240,505)

              337,556    
                

Industrials - 1.8%

           

General Electric Co.

           20,850      300,657    

 

 

See Notes to Portfolios of Investments and Notes to Financial Statements.

 

3

HELIOS STRATEGIC INCOME FUND, INC.

Portfolio of Investments (Unaudited)

June 30, 2010

 

 

      Shares    Value

COMMON STOCKS (continued)

      

United States Steel Corp.

    7,700      $ 296,835  
         

Total Industrials
    (Cost - $582,111)

         597,492  
         

Telecommunications - 4.5%

      

AT&T Inc.

    16,225      392,483  

Frontier Communications Corp.

    39,500      280,845  

Global Crossing Limited

    9,000      95,130  

PAETEC Holding Corp.

    15,000      51,150  

Qwest Communications International Inc.

    47,800      250,950  

Verizon Communications Inc.

    7,000      196,140  

Windstream Corp.

    23,250      245,520  
         

Total Telecommunications
    (Cost - $1,649,039)

           1,512,218  

Total COMMON STOCKS
    (Cost - $2,795,603)

           2,689,576  
      Interest
Rate		     Maturity    Principal
Amount
(000s)		    Value

SHORT TERM INVESTMENT - 3.6%

           

State Street Euro Dollar Time Deposit
    (Cost $1,228,966 )

    0.01   %    07/01/10    $ 1,229      $ 1,228,966  
              

Total Investments - 130.1%
    (Cost - $43,768,493)

              44,007,016  

Liabilities in Excess of Other Assets - (30.1)%

                        (10,184,213)  

NET ASSETS - 100.0%

                        $ 33,822,803  
 

 

 

See Notes to Portfolios of Investments and Notes to Financial Statements.

 

4

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

June 30, 2010

 

The following notes should be read in conjunction with the accompanying Portfolios of Investments.

 

1    —    Issuer is currently in default on its regularly scheduled interest payment.
2    —    Portion or entire principal amount delivered as collateral for reverse repurchase agreement.
3    —    Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold in transactions exempt from registration, normally to qualified institutional buyers. As of June 30, 2010, the total values of all such investments were as follows:

 

  Fund    Value    % of Net Assets    

  Helios Advantage Income Fund, Inc.

    $   13,789,740    29.27%

  Helios High Income Fund, Inc.

             9,805,339    27.54  

  Helios Multi-Sector High Income Fund, Inc.

           10,710,373    27.23  

  Helios Strategic Income Fund, Inc.

           10,404,355    30.76  

 

4    —    Private Placement.
5    —    Security valued in good faith pursuant to fair value procedures adopted by the Board of Directors. As of June 30, 2010, the total values of all such securities were as follows:

 

  Fund        Value        % of Net Assets    

  Helios Advantage Income Fund, Inc.

    $   15,265    0.03%

  Helios Multi-Sector High Income Fund, Inc.

             7,184    0.02  

  Helios Strategic Income Fund, Inc.

           13,469    0.04  

 

6    —    Company filed for Chapter 11 bankruptcy protection and has defaulted on regularly scheduled interest payments on subordinated debt. The Funds own senior debt issued by this company that continues to receive income payments.
7    —    Restricted Illiquid Security – Security is not actively traded and would be difficult to sell in a current sale thus causing it to be not readily convertible into cash. The details of the acquisition of this security is as follows:

 

  Fund    Acquisition Date    Cost   

Market Value as a    

% of Net Assets    

  Helios Advantage Income Fund, Inc.

    05/02/07    $     1,519,884    0.03%

  Helios Multi-Sector High Income Fund, Inc.

    05/02/07              714,005    0.02  

  Helios Strategic Income Fund, Inc.

    05/02/07           1,341,058    0.04  

 

8    —    Company announced a three month postponement of the interest payment due November 25, 2009 until February 25, 2010. The company also announced as compensation for the postponed interest payment a postponement fee which will be converted into new SeaMetric shares. On February 24, 2010, the Company announced it had entered bankruptcy proceedings and defaulted on its February 25, 2010 and November 25, 2009 interest payments.

HELIOS FUNDS

Notes to Financial Statements

June 30, 2010 (Unaudited)

 

 

Valuation of Investments: Debt securities, including U.S. government securities, listed corporate bonds, other fixed income and asset-backed securities, and unlisted securities and private placement securities, are generally valued at the latest price furnished by an independent pricing service or, if not valued by an independent pricing service, using prices obtained from at least two active and reliable market makers in any such security. A security may, however, be priced using a quote obtained from a single active market maker, as the case may be. Short-term debt securities with remaining maturities of sixty days or less are valued at cost with interest accrued or discount accreted to the date of maturity, unless such valuation, in the judgment of the Advisor’s Valuation Committee, does not represent market value.

Investments in equity securities listed or traded on any securities exchange or traded in the over-the-counter market are valued at the last quoted price as of the close of business on the valuation date. Equity securities for which no sales were reported for that date are valued at “fair value” as determined in good faith by the Advisor’s Valuation Committee. Investments in open-end registered investment companies, if any, are valued at the net asset value (“NAV”) as reported by those investment companies.

When price quotations for certain securities are not readily available, or if the available quotations are not believed to be reflective of market value by the Advisor, those securities will be valued at “fair value” as determined in good faith by the Advisor’s Valuation Committee using procedures adopted by, and under the supervision of each Fund’s Board of Directors. There can be no assurance that a Fund could purchase or sell a portfolio security at the price used to calculate a Fund’s NAV.

Fair valuation procedures may be used to value a substantial portion of the assets of the Funds. A Fund may use the fair value of a security to calculate its NAV when, for example, (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and not resumed prior to the normal market close, (3) a portfolio security is not traded in significant volume for a substantial period, or (4) the Advisor determines that the quotation or price for a portfolio security provided by an independent pricing service, or other source(s) of information for securities valuations (including, but not limited to, broker-dealers, Bloomberg or Reuters) is inaccurate.

The “fair value” of securities may be difficult to determine and thus judgment plays a greater role in the valuation process. The fair valuation methodology may include or consider, among other things, the following factors, as appropriate: (1) evaluation of all relevant factors, including but not limited to, pricing history, current market level, supply and demand of the respective security; (2) comparison to the values and current pricing of securities that have comparable characteristics; (3) knowledge of historical market information with respect to the security; (4) other factors relevant to the security which would include, but not be limited to, duration, yield, fundamental analytical data, the Treasury yield curve, and credit quality.

The values assigned to fair valued investments are based on available information and do not necessarily represent amounts that might ultimately be realized, since such amounts depend on future developments inherent in long-term investments. Changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, by an independent pricing service, or based on market quotations. Imprecision in estimating fair value can also impact the amount of unrealized appreciation or depreciation recorded for a particular portfolio security and differences in the assumptions used could result in a different determination of fair value, and those differences could be material.

The Funds adopted updated provisions surrounding fair value measurements and disclosures effective June 30, 2010. This update applies to the Funds’ disclosures about transfers in and out of Level 1 and Level 2 of the fair value hierarchy.

HELIOS FUNDS

Notes to Financial Statements

June 30, 2010 (Unaudited)

 

 

 

The Funds have established methods of fair value measurements in accordance with generally accepted accounting priniciples. Fair value denotes the price that a Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy has been established to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

 

•  Level 1

   –    quoted prices in active markets for identical investments

•  Level 2

   –    quoted prices in markets that are not active or other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

•  Level 3

   –    significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used as of June 30, 2010 in valuing the Funds’ investments carried at fair value:

Helios Advantage Income Fund, Inc.

 

  Valuation Inputs   

Investment

Grade

Corporate

Bonds

   

High Yield

Corporate

Bonds

   

Common

Stocks

   

Short Term

Investments

    Total

  Level 1 — Quoted Prices

      $ -    $ -    $ 2,275,412    $ -    $ 2,275,412  

  Level 2 — Quoted Prices in Inactive Markets or Other Significant Observable Inputs

      2,010,517      35,097,814      -      708,025      37,816,356  

  Level 3 — Significant Unobservable Inputs

      -      20,514,128      -      -      20,514,128  
      

 

  Total

      $   2,010,517    $ 55,611,942    $ 2,275,412    $ 708,025    $ 60,605,896  
      

For the 3 month period ended June 30, 2010, there was no significant security transfer activity from Level 1 to Level 2 and no significant security transfer activity from Level 2 to Level 1.

Helios High Income Fund, Inc.

 

  Valuation Inputs    Investment
Grade
Corporate
Bonds		    High Yield
Corporate
Bonds		    Common
Stocks		    Short Term
Investments		    Total

  Level 1 — Quoted Prices

      $ -    $ -    $ 1,539,229    $ -    $ 1,539,229  

  Level 2 — Quoted Prices in Inactive Markets or Other Significant Observable Inputs

        1,123,938      27,083,550      -      761,940      28,969,428  

  Level 3 — Significant Unobservable Inputs

      -      15,410,898      -      -      15,410,898  
      

 

  Total

      $ 1,123,938    $ 42,494,448    $ 1,539,229    $ 761,940    $ 45,919,555  
      

HELIOS FUNDS

Notes to Financial Statements

June 30, 2010 (Unaudited)

 

 

 

For the 3 month period ended June 30, 2010, there was no significant security transfer activity from Level 1 to Level 2 and no significant security transfer activity from Level 2 to Level 1.

Helios Multi-Sector High Income Fund, Inc.

 

  Valuation Inputs   

Investment

Grade

Corporate

Bonds

   

High Yield

Corporate

Bonds

   

Common

Stocks

   

Short Term

Investments

    Total

  Level 1 — Quoted Prices

      $ -    $ -    $ 1,891,267    $ -    $ 1,891,267  

  Level 2 — Quoted Prices in Inactive Markets or Other Significant Observable Inputs

        917,500        31,337,042      -      553,380      32,807,922  

  Level 3 — Significant Unobservable Inputs

      -      16,289,166      -      -      16,289,166  
      

 

  Total

      $ 917,500    $ 47,626,208    $   1,891,267    $   553,380    $   50,988,355  
      

For the 3 month period ended June 30, 2010, there was no significant security transfer activity from Level 1 to Level 2 and no significant security transfer activity from Level 2 to Level 1.

Helios Strategic Income Fund, Inc.

 

  Valuation Inputs    Investment
Grade
Corporate
Bonds		    High Yield
Corporate
Bonds		    Common
Stocks		    Short Term
Investments		    Total

  Level 1 — Quoted Prices

      $ -    $ -    $   2,689,576    $ -    $ 2,689,576  

  Level 2 — Quoted Prices in Inactive Markets or Other Significant Observable Inputs

        11,438,417        16,048,325      -      1,228,966      28,715,708  

  Level 3 — Significant Unobservable Inputs

      -      12,601,732      -      -      12,601,732  
      

 

  Total

      $ 11,438,417    $ 28,650,057    $ 2,689,576    $   1,228,966    $   44,007,016  
      

For the 3 month period ended June 30, 2010, there was no significant security transfer activity from Level 1 to Level 2 and no significant security transfer activity from Level 2 to Level 1.

The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:

Helios Advantage Income Fund, Inc.

 

  Investments in Securities   

High Yield

Corporate

Bonds

  Balance as of March 31, 2010

        $ 18,569,635  

  Accrued Discounts

      817  

  Realized Gain

      215,563  

  Change in Unrealized Appreciation (Depreciation)

      (986,053)  

  Net Purchases (Sales)

      2,781,841  

  Net transfers out of Level 3

      (67,675)  
      

  Balance as of June 30, 2010

        $     20,514,128  
      

   Change in unrealized gains or losses relating to assets still held at reporting date

        $ (686,067)  
      

HELIOS FUNDS

Notes to Financial Statements

June 30, 2010 (Unaudited)

 

 

 

Helios High Income Fund, Inc.

 

  Investments in Securities   

High Yield

Corporate

Bonds

  Balance as of March 31, 2010

        $ 13,882,594  

  Amortized Premiums

      (4,554)  

  Realized Gain

      180,547  

  Change in Unrealized Appreciation (Depreciation)

      (753,797)  

  Net Purchases (Sales)

      2,511,046  

  Net transfers out of Level 3

      (404,938)  
      

  Balance as of June 30, 2010

        $     15,410,898  
      

   Change in unrealized gains or losses relating to assets still held at reporting date

        $ (486,444)  
      
Helios Multi-Sector High Income Fund, Inc.
  Investments in Securities   

High Yield

Corporate

Bonds

  Balance as of March 31, 2010

        $ 14,519,190  

  Amortized Premiums

      (1,082)  

  Realized Gain

      173,463  

  Change in Unrealized Appreciation (Depreciation)

      (874,468)  

  Net Purchases (Sales)

      2,919,626  

  Net transfers out of Level 3

      (447,563)  
      

  Balance as of June 30, 2010

        $ 16,289,166  
      

   Change in unrealized gains or losses relating to assets still held at reporting date

        $ (579,756)  
      
Helios Strategic Income Fund, Inc.
  Investments in Securities   

High Yield

Corporate

Bonds

  Balance as of March 31, 2010

        $ 11,418,579  

  Accrued Discounts

      1,142  

  Realized Gain

      157,037  

  Change in Unrealized Appreciation (Depreciation)

      (616,700)  

  Net Purchases (Sales)

      2,025,299  

  Net transfers out of Level 3

      (383,625)  
      

  Balance as of June 30, 2010

        $ 12,601,732  
      

   Change in unrealized gains or losses relating to assets still held at reporting date

        $ (475,741)  
      

The Funds may enter into reverse repurchase agreements with the same parties with whom it may enter into repurchase agreements. Under a reverse repurchase agreement, the Funds sell securities and agree to repurchase them at a mutually agreed upon date and price. Under the 1940 Act, reverse repurchase agreements will be regarded as a form of borrowing by each Fund unless, at the time it enters into a reverse repurchase agreement, it establishes and maintains a segregated account with its custodian containing securities from its portfolio having a value not less than the repurchase price (including accrued interest). Each Fund has established and maintained such an account for each of its reverse repurchase agreements.

Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale by the Funds may decline below the price of the securities a Fund has sold but is

HELIOS FUNDS

Notes to Financial Statements

June 30, 2010 (Unaudited)

 

 

 

obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its Trustee or receiver may receive an extension of time to determine whether to enforce the Funds’ obligation to repurchase the securities, and the Funds’ use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision. Also, the Funds would bear the risk of loss to the extent that the proceeds of the reverse repurchase agreements are less than the value of the securities subject to such agreements.

At June 30, 2010, Helios Advantage Income Fund, Inc. had the following reverse repurchase agreements outstanding:

 

Face Value    Description   

Maturity

Amount

      $ 1,960,188     

Barclays, 1.05%, dated 05/11/10, maturity date 07/13/10

      $ 1,963,789        
  410,281     

Barclays, 1.00%, dated 05/19/10, maturity date 07/13/10

      410,908        
  451,375     

Barclays, 1.00%, dated 05/17/10, maturity date 07/14/10

      452,102        
  700,000     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/13/10

      701,089        
  369,250     

JP Morgan Chase, 1.00%, dated 05/19/10, maturity date 07/13/10

      369,814        
  1,453,200     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/14/10

      1,455,500        
  818,125     

JP Morgan Chase, 1.00%, dated 05/19/10, maturity date 07/14/10

      819,398        
  1,605,625     

JP Morgan Chase, 1.00%, dated 05/20/10, maturity date 07/14/10

      1,608,077        
  1,051,500     

JP Morgan Chase, 1.00%, dated 05/24/10, maturity date 07/14/10

      1,052,990        
  757,487     

JP Morgan Chase, 1.00%, dated 06/18/10, maturity date 07/14/10

      758,035        
  1,247,225     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/15/10

      1,249,234        
  2,716,088     

JP Morgan Chase, 1.00%, dated 05/20/10, maturity date 07/15/10

      2,720,312        
  970,000     

JP Morgan Chase, 1.00%, dated 05/20/10, maturity date 07/15/10

      971,509        
  692,250     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/16/10

      693,385        
             
      $ 15,202,594     

Maturity Amount, Including Interest Payable

      $ 15,226,142        
             
  

Market Value of Assets Sold Under Agreements

      $ 20,588,266        
         
  

Weighted Average Interest Rate

      1.01%        
         

At June 30, 2010, Helios High Income Fund, Inc. had the following reverse repurchase agreements outstanding:

 

Face Value    Description   

Maturity

Amount

      $ 1,572,125     

Barclays, 1.05%, dated 05/11/10, maturity date 07/13/10

      $ 1,575,014        
  431,875     

Barclays, 1.00%, dated 05/19/10, maturity date 07/13/10

      432,535        
  333,625     

Barclays, 1.00%, dated 05/17/10, maturity date 07/14/10

      334,163        
  702,608     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/13/10

      703,701        
  369,250     

JP Morgan Chase, 1.00%, dated 05/19/10, maturity date 07/13/10

      369,814        
  919,974     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/14/10

      921,432        
  1,029,675     

JP Morgan Chase, 1.00%, dated 05/19/10, maturity date 07/14/10

      1,031,277        
  1,312,369     

JP Morgan Chase, 1.00%, dated 05/20/10, maturity date 07/14/10

      1,314,373        
  514,063     

JP Morgan Chase, 1.00%, dated 06/18/10, maturity date 07/14/10

      514,434        
  898,450     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/15/10

      899,898        
  2,941,362     

JP Morgan Chase, 1.00%, dated 05/20/10, maturity date 07/15/10

      2,945,937        
             
      $ 11,025,376     

Maturity Amount, Including Interest Payable

      $ 11,042,578        
             
  

Market Value of Assets Sold Under Agreements

      $ 14,927,265        
         
  

Weighted Average Interest Rate

      1.01%        
         

HELIOS FUNDS

Notes to Financial Statements

June 30, 2010 (Unaudited)

 

 

 

At June 30, 2010, Helios Multi-Sector High Income Fund, Inc. had the following reverse repurchase agreements outstanding:

 

Face Value    Description   

Maturity

Amount

      $   1,694,000     

Barclays, 1.05%, dated 05/11/10, maturity date 07/13/10

      $ 1,697,112        
  583,031     

Barclays, 1.00%, dated 05/19/10, maturity date 07/13/10

      583,922        
  372,875     

Barclays, 1.00%, dated 05/17/10, maturity date 07/14/10

      373,476        
  723,503     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/13/10

      724,628        
  369,250     

JP Morgan Chase, 1.00%, dated 05/19/10, maturity date 07/13/10

      369,814        
  1,204,962     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/14/10

      1,206,870        
  1,388,875     

JP Morgan Chase, 1.00%, dated 05/19/10, maturity date 07/14/10

      1,391,036        
  1,391,906     

JP Morgan Chase, 1.00%, dated 05/20/10, maturity date 07/14/10

      1,394,033        
  650,344     

JP Morgan Chase, 1.00%, dated 06/18/10, maturity date 07/14/10

      650,813        
  1,009,125     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/15/10

      1,010,751        
  3,121,175     

JP Morgan Chase, 1.00%, dated 05/20/10, maturity date 07/15/10

      3,126,030        
             
      $ 12,509,046   

Maturity Amount, Including Interest Payable

      $ 12,528,485        
             
  

Market Value of Assets Sold Under Agreements

      $ 16,900,387        
         
  

Weighted Average Interest Rate

      1.01%        
         

At June 30, 2010, Helios Strategic Income Fund, Inc. had the following reverse repurchase agreements outstanding:

 

Face Value    Description   

Maturity

Amount

      $ 442,937     

Barclays, 1.05%, dated 05/11/10, maturity date 07/13/10

      $ 443,751        
  695,594     

Barclays, 1.00%, dated 05/18/10, maturity date 07/13/10

      696,675        
  314,000     

Barclays, 1.00%, dated 05/17/10, maturity date 07/14/10

      314,506        
  844,313     

JP Morgan Chase, 1.00%, dated 05/19/10, maturity date 07/13/10

      845,602        
  1,499,250     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/14/10

      1,501,624        
  1,982,550     

JP Morgan Chase, 1.00%, dated 05/19/10, maturity date 07/14/10

      1,985,634        
  583,625     

JP Morgan Chase, 1.00%, dated 05/20/10, maturity date 07/14/10

      584,517        
  169,750     

JP Morgan Chase, 1.00%, dated 06/18/10, maturity date 07/14/10

      169,873        
  229,775     

JP Morgan Chase, 1.00%, dated 05/18/10, maturity date 07/15/10

      230,145        
  2,141,460     

JP Morgan Chase, 1.00%, dated 05/19/10, maturity date 07/15/10

      2,144,851        
  1,379,000     

JP Morgan Chase, 1.00%, dated 05/20/10, maturity date 07/15/10

      1,381,145        
             
      $   10,282,254     

Maturity Amount, Including Interest Payable

      $ 10,298,323        
             
  

Market Value of Assets Sold Under Agreements

      $ 13,571,381        
         
  

Weighted Average Interest Rate

      1.00%        

The average daily balances of reverse repurchase agreements outstanding during the period ended June 30, 2010, was approximately $18,057,600, $12,459,245, $14,354,917 and $11,113,845 at a weighted average interest rate of 0.93%, 0.94%, 0.94% and 0.97% for Helios Advantage Income Fund, Inc., Helios High Income Fund, Inc., Helios Multi-Sector High Income Fund, Inc., and Helios Strategic Income Fund, Inc., respectively.

The maximum amount of reverse repurchase agreements outstanding at any time during the period ended June 30, 2010, was $20,743,565, $14,338,295, $16,563,552 and $12,352,342, which was 29.94%, 28.16%, 29.05% and 26.21% of total assets for Helios Advantage Income Fund, Inc., Helios High Income Fund, Inc., Helios Multi-Sector High Income Fund, Inc., and Helios Strategic Income Fund, Inc., respectively.

HELIOS FUNDS

Notes to Financial Statements

June 30, 2010 (Unaudited)

 

 

 

Federal Income Tax Basis: The federal income tax basis of the Funds’ investments at June 30, 2010 was as follows:

 

  Fund   

Cost of

Investments

    Gross
Unrealized
Appreciation		    Gross
Unrealized
Depreciation		   

Net  

Unrealized  
Appreciation  

(Depreciation)  

  Helios Advantage Income Fund, Inc.

    $ 60,909,623    $ 2,463,578    $ (2,767,305)    $ (303,727)  

  Helios High Income Fund, Inc.

      44,993,599      1,920,740      (994,784)      925,956  

  Helios Multi-Sector High Income Fund, Inc

      50,624,011      2,184,306      (1,819,962)      364,344  

  Helios Strategic Income Fund, Inc.

      43,768,493      2,516,091      (2,277,568)      238,523  

Item 2. Controls and Procedures.

(a) The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s Disclosure Controls and Procedures are effective, based on their evaluation of such Disclosure Controls and Procedures as of a date within 90 days of the filing of this report on Form N-Q.

(b) As of the date of filing this Form N-Q, the Registrant’s principal executive officer and principal financial officer are aware of no changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s last fiscal quarter that has materially affected or is reasonably likely to materially affect the Registrant’s internal control over financial reporting.

Item 3. Exhibits.

The certifications required by Rule 30a-2(a) of the 1940 Act are attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant): Helios Strategic Income Fund, Inc.

 

by (Signature and Title):     

/s/ Kim G. Redding

   
     Kim G. Redding   
     President   

Date: August 9, 2010

Pursuant to the requirements Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

by (Signature and Title):     

/s/ Kim G. Redding

   
     Kim G. Redding   
     President   

Date: August 9, 2010

 

by (Signature and Title):     

/s/ Steven M. Pires

   
     Steven M. Pires   
     Treasurer   

Date: August 9, 2010