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

As filed with the Securities and Exchange Commission on February 16, 2011

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 811-21487

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: December 31, 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”)(17 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)

December 31, 2010

 

 

      Interest
Rate		     Maturity      Principal
Amount
(000s)		      Value  

COMMERCIAL MORTGAGE-BACKED SECURITIES - 13.5%

  

        

Bear Stearns Commercial Mortgage Securities

           

Series 2006-PW14, Class A4

      5.20   %      12/11/38        $ 625         $ 660,174    

Series 2007-T28, Class A4

      5.74        09/11/42         670         725,307    

Commercial Mortgage Pass Through Certificates

           

Series 2007-C9, Class A4

      5.81        12/10/49         500         537,960    

JP Morgan Chase Commercial Mortgage Securities Corp.

           

Series 2006-LDP7, Class A4

      5.87        04/15/45         650         710,846    

LB-UBS Commercial Mortgage Trust

           

Series 2006-C1, Class A4

      5.16        02/15/31         670         715,679    

Series 2006-C6, Class A4

      5.37        09/15/39         670         716,826    

Morgan Stanley Capital I

           

Seies 2007-T27, Class A4

      5.65        06/11/42         660         716,731    

Total COMMERCIAL MORTGAGE-BACKED SECURITIES
    (Cost - $4,900,112)

                                4,783,523    

INVESTMENT GRADE CORPORATE BONDS - 28.1%

           

Basic Industry - 9.1%

           

Alcoa Inc. 2

      5.55        02/01/17         1,000         1,038,596    

ArcelorMittal

      6.13        06/01/18         500         532,744    

Newmont Mining Corp.

      5.13        10/01/19         500         549,610    

The Dow Chemical Co. 2

      5.70        05/15/18         1,000         1,081,728    

Total Basic Industry
    (Cost - $2,711,419)

              3,202,678    

Capital Goods - 1.7%

           

International Paper Co.
    (Cost $604,328 )

      7.50        08/15/21         500         590,582    

Consumer Non-Cyclical - 10.4%

           

Altria Group Inc. 2

      9.70        11/10/18         1,000         1,319,226    

Anheuser-Busch InBev Worldwide Inc. 2,3,4

      7.75        01/15/19         1,000         1,244,348    

Covidien International Finance S.A.

      6.00        10/15/17         500         568,254    

CVS Caremark Corp.

      5.75        06/01/17         500         556,325    

Total Consumer Non-Cyclical
    (Cost - $3,148,857)

              3,688,153    

Industrials - 1.6%

           

Tyco Electronics Group S.A.
    (Cost $464,868 )

      6.55        10/01/17         500         568,208    

Services - 0.8%

           

International Game Technology
    (Cost $292,706 )

      7.50        06/15/19         250         281,416    

Telecommunications - 4.5%

           

Qwest Corp. 2

      6.88        09/15/33         1,000         982,500    

Time Warner Cable Inc. 2

      8.25        04/01/19         500         621,086    

Total Telecommunications
    (Cost - $1,462,403)

              1,603,586    

Total INVESTMENT GRADE CORPORATE BONDS
    (Cost - $8,684,581)

                                9,934,623    

HIGH YIELD CORPORATE BONDS - 93.8%

           

Basic Industry - 7.0%

           

AK Steel Corp.

      7.63        05/15/20         200         200,500    

Arch Coal Inc. 2

      8.75        08/01/16         475         517,750    

Domtar Corp. 2

      10.75        06/01/17         250         315,000    

Hexion Finance Escrow LLC/Hexion Escrow Corp.

      8.88        02/01/18         500         534,375    

Millar Western Forest Products Limited

      7.75        11/15/13         250         236,875    

PE Paper Escrow GmbH 3,4

      12.00        08/01/14         150         173,543    

 

 

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

 

1

HELIOS STRATEGIC INCOME FUND, INC.

Portfolio of Investments (Unaudited)

December 31, 2010

 

 

      Interest
Rate		     Maturity      Principal
Amount
(000s)		      Value  

HIGH YIELD CORPORATE BONDS (continued)

  

Westlake Chemical Corp. 2

      6.63   %      01/15/16       $ 500         $ 516,875    

Total Basic Industry
    (Cost - $2,232,337)

              2,494,918    

Capital Goods - 11.2%

           

Associated Materials LLC 3,4

      9.13        11/01/17         500         522,500    

BE Aerospace Inc.

      8.50        07/01/18         475         520,125    

Berry Plastics Corp.

      9.50        05/15/18         500         501,250    

Bombardier Inc. 3,4

      7.75        03/15/20         200         215,500    

Crown Cork & Seal Co. Inc.

      7.38        12/15/26         475         471,437    

Mueller Water Products Inc.

      7.38        06/01/17         250         241,250    

Owens-Illinois Inc. 2

      7.80        05/15/18         400         425,000    

RBS Global & Rexnord Corp.

      8.50        05/01/18         290         308,125    

Terex Corp. 2

      7.38        01/15/14         500         506,250    

Trimas Corp.

      9.75        12/15/17         245         268,275    

Total Capital Goods
    (Cost - $3,783,219)

              3,979,712    

Consumer Cyclical - 9.6%

           

ACE Hardware Corp. 2,3,4

      9.13        06/01/16         500         535,000    

American Axle & Manufacturing Inc.

      7.88        03/01/17         500         511,875    

Cedar Fair LP/Canada’s Wonderland Co/Magnum Management Corp. 3,4

      9.13        08/01/18         100         107,625    

DineEquity Inc. 3,4

      9.50        10/30/18         85         90,100    

Ford Motor Co.

      6.50        08/01/18         450         465,750    

General Motors Corp.

      7.13        07/15/13         250         83,750    

Levi Strauss & Co. 2

      7.63        05/15/20         475         490,437    

Motors Liquidation Co. 1

      8.38        07/15/33         1,250         446,875    

Reynolds Group Inc./Reynolds Group LLC 3,4

      9.00        04/15/19         430         445,587    

Tenneco Inc. 3,4

      6.88        12/15/20         215         219,838    

Total Consumer Cyclical
    (Cost - $3,161,735)

              3,396,837    

Consumer Non-Cyclical - 3.5%

           

C&S Group Enterprises LLC 2,3,4

      8.38        05/01/17         500         477,500    

Constellation Brands Inc. 2

      7.25        05/15/17         500         529,375    

Rite Aid Corp.

      8.63        03/01/15         250         218,750    

Total Consumer Non-Cyclical
    (Cost - $1,164,354)

              1,225,625    

Energy - 15.5%

           

Chaparral Energy Inc.

      8.88        02/01/17         125         126,875    

Consol Energy Inc. 3,4

      8.25        04/01/20         500         540,000    

Crosstex Energy LP/Crosstex Energy Finance Corp.

      8.88        02/15/18         475         508,844    

Edgen Murray Corp.

      12.25        01/15/15         170         147,900    

El Paso Corp. 2

      7.00        06/15/17         475         501,275    

Frac Tech Services LLC/Frac Tech Finance Inc. 3,4

      7.13        11/15/18         325         329,875    

Hercules Offshore Inc. 3,4

      10.50        10/15/17         300         248,250    

Hilcorp Energy I LP/Hilcorp Finance Co. 2,3,4

      8.00        02/15/20         475         502,906    

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

      8.63        04/15/20         140         150,850    

McJunkin Red Man Corp. 3,4

      9.50        12/15/16         450         425,250    

Niska Gas Storage US LLC/Niska Gas Storage Canada ULC 2,3,4

      8.88        03/15/18         250         267,500    

Quicksilver Resources Inc.

      11.75        01/01/16         325         378,625    

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

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

SESI LLC 2

      6.88        06/01/14         425         431,375    

Trinidad Drilling Limited 3,4

      7.88        01/15/19         310         313,100    

Williams Partners LP/Williams Partners Finance Corp.

      7.25        02/01/17         500         581,260    

Total Energy
    (Cost - $6,689,250)

              5,467,354    

 

 

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

 

2

HELIOS STRATEGIC INCOME FUND, INC.

Portfolio of Investments (Unaudited)

December 31, 2010

 

 

      Interest
Rate		     Maturity      Principal
Amount
(000s)		      Value  

HIGH YIELD CORPORATE BONDS (continued)

           

Media - 7.2%

           

Cablevision Systems Corp.

      8.63   %      09/15/17        $ 475         $ 517,156    

CCO Holdings LLC/Cap. Corp. 2,6

      8.13        04/30/20         550         578,875    

DISH DBS Corp. 2

      7.88        09/01/19         475         496,375    

Insight Communications Co., Inc. 3,4

      9.38        07/15/18         475         505,875    

Mediacom LLC/Mediacom Capital Corp.

      9.13        08/15/19         450         459,000    

Total Media
    (Cost - $2,518,477)

              2,557,281    

Services - 16.4%

           

AMC Entertainment Inc.

      8.75        06/01/19         600         640,500    

Avis Budget Car Rental LLC

      9.63        03/15/18         475         511,812    

Beazer Homes USA Inc.

      9.13        06/15/18         250         242,500    

FireKeepers Development Authority 3,4

      13.88        05/01/15         500         591,250    

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

      11.25        06/01/17         225         253,125    

HCA Inc. 2

      9.25        11/15/16         500         533,437    

Iron Mountain Inc.

      8.38        08/15/21         225         241,313    

Iron Mountain Inc. 2

      8.75        07/15/18         500         525,000    

Maxim Crane Works LP 3,4

      12.25        04/15/15         500         485,625    

MGM Mirage Inc.

      5.88        02/27/14         500         461,250    

MGM Resorts International

      10.38        05/15/14         225         252,563    

Pokagon Gaming Authority 3,4

      10.38        06/15/14         500         521,250    

RSC Equipment Rental Inc/RSC Holdings III LLC

      10.25        11/15/19         250         278,750    

United Rentals North America Inc.

      8.38        09/15/20         250         254,375    

Total Services
    (Cost - $5,490,690)

              5,792,750    

Technology & Electronics - 6.0%

           

American Tower Corp. 2

      7.00        10/15/17         1,000         1,124,064    

First Data Corp. 3,4

      8.25        01/15/21         224         215,040    

First Data Corp.

      9.88        09/24/15         51         48,578    

First Data Corp. 3,4

      12.63        01/15/21         224         213,920    

Freescale Semiconductor Inc. 3,4

      9.25        04/15/18         475         522,500    

Total Technology & Electronics
    (Cost - $1,918,948)

              2,124,102    

Telecommunications - 13.1%

           

AT&T Inc.

      5.50        02/01/18         500         555,441    

Cincinnati Bell Inc.

      8.25        10/15/17         240         237,600    

Cincinnati Bell Inc.

      8.38        10/15/20         235         225,600    

Citizens Communications Co. 2

      7.13        03/15/19         900         924,750    

Global Crossing Ltd.

      12.00        09/15/15         600         676,500    

Nextel Communications Inc. 2

      7.38        08/01/15         475         475,594    

PAETEC Holding Corp.

      8.88        06/30/17         250         266,875    

PAETEC Holding Corp.

      9.50        07/15/15         250         258,750    

Sprint Capital Corp. 2

      8.75        03/15/32         500         505,000    

Windstream Corp. 2

      7.00        03/15/19         500         492,500    

Total Telecommunications
    (Cost - $4,529,932)

              4,618,610    

Utility - 4.3%

           

Calpine Corp. 3,4

      7.25        10/15/17         475         475,000    

Dynegy Holdings Inc.

      7.75        06/01/19         250         166,875    

Edison Mission Energy

      7.00        05/15/17         250         198,125    

NRG Energy Inc. 2

      8.50        06/15/19         475         490,437    

Texas Competitive Electric Holdings Co. LLC 4,8

      3.75        10/10/14         124         96,034    

 

 

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

 

3

HELIOS STRATEGIC INCOME FUND, INC.

Portfolio of Investments (Unaudited)

December 31, 2010

 

 

      Interest
Rate		     Maturity      Principal
Amount
(000s)		      Value  

HIGH YIELD CORPORATE BONDS (continued)

  

Texas Competitive Electric Holdings Co. LLC 4,8

      3.76   %      10/10/14       $ 124       $ 95,606    

Total Utility
    (Cost - $1,550,437)

                                1,522,077    

Total HIGH YIELD CORPORATE BONDS
    (Cost - $33,039,379)

                                33,179,266    
                     Shares      Value  

COMMON STOCKS - 5.9%

           

Consumer Cyclical - 0.5%

           

DR Horton Inc.

           5,200         62,036    

M.D.C. Holdings Inc.

           1,900         54,663    

The Ryland Group, Inc.

           2,900         49,387    

Total Consumer Cyclical
    (Cost - $214,166)

              166,086    

Consumer Products - 0.8%

           

B&G Foods Inc.
    (Cost - $247,294)

           20,000         274,600    

Energy - 0.7%

           

Niska Gas Storage Partners LLC
    (Cost - $251,396)

           12,500         249,375    

Services - 0.1%

           

Hovnanian Enterprises Inc.
    (Cost - $36,201)

           5,400         22,086    

Telecommunications - 3.8%

           

AT&T Inc.

           8,500         249,730    

Frontier Communications Corp.

           41,180         400,681    

Global Crossing Limited

           9,000         116,280    

PAETEC Holding Corp.

           15,000         56,100    

Verizon Communications Inc.

           7,500         268,350    

Windstream Corp.

           19,450         271,133    

Total Telecommunications
    (Cost - $1,272,666)

                                1,362,274    

Total COMMON STOCKS
    (Cost - $2,021,723)

                                2,074,421    

Total Investments - 141.3%
    (Cost - $48,645,795)

              49,971,833    

Liabilities in Excess of Other Assets - (41.3)%

              (14,599,360 )   

NET ASSETS - 100.0%

            $ 35,372,473    

 

 

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

 

4

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

December 31, 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 December 31, 2010, the total values of all such investments were as follows:

 

Fund    Value      % of Net Assets    

Helios Advantage Income Fund, Inc.

    $         20,571,338       38.29%

Helios High Income Fund, Inc.

      13,463,165       35.56  

Helios Multi-Sector High Income Fund, Inc.

      15,468,619       36.84  

Helios Strategic Income Fund, Inc.

      10,353,202       29.27  

 

4    —    Private Placement.
5    —      Security valued in good faith pursuant to fair value procedures adopted by the Board of Directors. As of December 31, 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    $     1,521,503       0.03%

Helios Multi-Sector High Income Fund, Inc.

    05/02/07      715,067       0.02  

Helios Strategic Income Fund, Inc.

    05/02/07      1,342,490       0.04  

 

8    —    Term Loan.

HELIOS FUNDS

Notes to Financial Statements

December 31, 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 or a broker-dealer. 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 each Fund. 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 a broker-dealer or independent pricing service 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 the following guidelines, 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. This update applies to the Funds’ disclosures about transfers in and out of Level 1 and Level 2 of the fair value hierarchy.

The Funds have established methods of fair value measurements in accordance with generally accepted accounting principles. Fair value denotes the price that a Fund would receive upon

HELIOS FUNDS

Notes to Financial Statements

December 31, 2010 (Unaudited)

 

 

 

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 December 31, 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

      Total  

  Level 1 — Quoted Prices

      $ -       $ -       $ 628,196       $ 628,196     

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

      2,105,257         42,342,718         -         44,447,975     

  Level 3 — Significant Unobservable Inputs

      -         29,831,138         -         29,831,138     
        

 

  Total

      $   2,105,257       $ 72,173,856       $ 628,196       $ 74,907,309     
        

For the nine month period ended December 31, 2010, there was no significant security transfer activity between Level 1 and Level 2.

Helios High Income Fund, Inc.

 

  Valuation Inputs   

Investment

Grade

Corporate

Bonds

     

High Yield

Corporate

Bonds

     

Common

Stocks

      Total  

  Level 1 — Quoted Prices

      $ -       $ -       $ 465,856       $ 465,856     

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

        1,203,563         31,402,059         -         32,605,622     

  Level 3 — Significant Unobservable Inputs

      -         20,336,630         -         20,336,630     
        

 

  Total

      $ 1,203,563       $ 51,738,689       $ 465,856       $ 53,408,108     
        

HELIOS FUNDS

Notes to Financial Statements

December 31, 2010 (Unaudited)

 

 

 

For the nine month period ended December 31, 2010, there was no significant security transfer activity between Level 1 and Level 2.

Helios Multi-Sector High Income Fund, Inc.

 

  Valuation Inputs   

Investment

Grade

Corporate

Bonds

     

High Yield

Corporate

Bonds

     

Common

Stocks

      Total  

  Level 1 — Quoted Prices

      $ -       $ -       $ 520,623       $ 520,623     

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

        982,500         35,482,976         -         36,465,476     

  Level 3 — Significant Unobservable Inputs

      -         22,771,826         -         22,771,826     
        

 

  Total

      $ 982,500       $   58,254,802       $ 520,623       $   59,757,925     
        

For the nine month period ended December 31, 2010, there was no significant security transfer activity between Level 1 and Level 2.

Helios Strategic Income Fund, Inc.

 

  Valuation Inputs   

Commercial

Mortgage-

Backed

Securities

     

Investment

Grade

Corporate

Bonds

     

High Yield

Corporate

Bonds

     

Common

Stocks

      Total  

  Level 1 — Quoted Prices

      $ .-       $ -       $ -       $ 2,074,421       $ 2,074,421     

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

      -           9,934,623         18,265,645         -         28,200,268     

  Level 3 — Significant Unobservable Inputs

        4,783,523         -         14,913,621         -         19,697,144     
        

 

  Total

      $ 4,783,523       $ 9,934,623       $ 33,179,266       $ 2,074,421       $ 49,971,833     
        

For the nine month period ended December 31, 2010, there was no significant security transfer activity between Level 1 and Level 2.

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

      119,827     

Realized Gain

      303,960     

Change in Unrealized Appreciation (Depreciation)

      (130,948)     

Net Purchases (Sales)

      9,726,839     

Transfers into Level 3

      1,859,325     

Transfers out of Level 3

      (617,500)     
        

Balance as of December 31, 2010

        $     29,831,138     
        

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

        $ 264,277     
        

HELIOS FUNDS

Notes to Financial Statements

December 31, 2010 (Unaudited)

 

 

 

Helios High Income Fund, Inc.

 

  Investments in Securities   

High Yield

Corporate

Bonds

  

  Balance as of March 31, 2010

        $ 13,882,594     

  Amortized Discounts

      98,233     

  Realized Gain

      264,544     

  Change in Unrealized Appreciation (Depreciation)

      (201,202)     

  Net Purchases (Sales)

      5,724,836     

  Transfers into Level 3

      1,018,875     

  Transfers out of Level 3

      (451,250)     
        

  Balance as of December 31, 2010

        $     20,336,630     
        

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

        $ 156,438     
        
Helios Multi-Sector High Income Fund, Inc.   
  Investments in Securities   

High Yield

Corporate

Bonds

  

  Balance as of March 31, 2010

        $ 14,519,190     

  Amortized Discounts

      107,108     

  Realized Gain

      253,935     

  Change in Unrealized Appreciation (Depreciation)

      (190,710)     

  Net Purchases (Sales)

      7,451,365     

  Transfers into Level 3

      1,129,688     

  Transfers out of Level 3

      (498,750)     
        

  Balance as of December 31, 2010

        $ 22,771,826     
        

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

        $ 267,509     
        

 

Helios Strategic Income Fund, Inc.   
Investments in Securities    Commercial
Mortgage-
Backed
Securities		     

High Yield

Corporate

Bonds

      Total  

  Balance as of March 31, 2010

        $ -           $     11,418,579           $     11,418,579     

  Accrued Discounts (Premiums)

      (3,815)         108,428         104,613     

  Realized Loss

      -         183,277         183,277     

  Change in Unrealized Appreciation (Depreciation)

      (116,589)         (150,076)         (266,665)     

  Net Purchases (Sales)

      4,903,927         2,941,538         7,845,465     

  Transfers into Level 3

      -         839,375         839,375     

  Transfers out of Level 3

      -         (427,500)         (427,500)     
                          

  Balance as of December 31, 2010

        $     4,783,523           $     14,913,621           $     19,697,144     
                          

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

        $ (116,589)           $     127,213           $     10,624     
                          

Each Fund may enter into reverse repurchase agreements. Under a reverse repurchase agreement, a Fund sells securities and agrees 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 the Funds unless, at the time they enter into a reverse repurchase agreement, they establish and maintain a segregated account with their custodian containing securities from their portfolios having a value not less than the repurchase price (including accrued interest). Each

HELIOS FUNDS

Notes to Financial Statements

December 31, 2010 (Unaudited)

 

 

 

Fund has established and maintained such accounts 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 a Fund may decline below the price of the securities the Fund has sold but is 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 December 31, 2010, Helios Advantage Income Fund, Inc. had the following reverse repurchase agreements outstanding:

 

Face Value      Description   

Maturity

Amount

  
      $ 723,750        

Barclays, -0.25%, dated 11/16/10, maturity date 01/18/11

      $ 723,433           
  2,196,238        

Barclays, 1.00%, dated 11/16/10, maturity date 01/18/11

      2,200,081           
  507,196        

Barclays, 1.00%, dated 11/17/10, maturity date 01/19/11

      508,084           
  457,875        

Barclays, 1.00%, dated 11/18/10, maturity date 01/20/11

      458,676           
  1,963,100        

Barclays, 1.00%, dated 11/09/10, maturity date 01/18/11

      1,966,917           
  522,375        

Barclays, 1.00%, dated 12/06/10, maturity date 01/18/11

      522,999           
  1,171,875        

JP Morgan Chase, 0.95%, dated 11/16/10, maturity date 01/18/11

      1,173,823           
  6,170,484        

JP Morgan Chase, 0.95%, dated 11/17/10, maturity date 01/19/11

      6,180,742           
  6,942,062        

JP Morgan Chase, 0.95%, dated 11/18/10, maturity date 01/20/11

      6,953,604           
  2,888,555        

JP Morgan Chase, 0.98%, dated 11/09/10, maturity date 01/18/11

      2,894,059           
                 
      $ 23,543,510        

Maturity Amount, Including Interest Payable

      $ 23,582,418           
                 
  

Market Value of Assets Sold Under Agreements

      $ 28,216,682           
           
  

Weighted Average Interest Rate

      0.93%           
           

At December 31, 2010, Helios High Income Fund, Inc. had the following reverse repurchase agreements outstanding:

 

Face Value      Description   

Maturity

Amount

  
      $ 379,969        

Barclays, -0.25%, dated 11/16/10, maturity date 01/18/11

      $ 379,803           
  2,081,063        

Barclays, 1.00%, dated 11/16/10, maturity date 01/18/11

      2,084,704           
  374,884        

Barclays, 1.00%, dated 11/17/10, maturity date 01/19/11

      375,540           
  416,250        

Barclays, 1.00%, dated 11/18/10, maturity date 01/20/11

      416,978           
  1,030,406        

Barclays, 1.00%, dated 11/09/10, maturity date 01/18/11

      1,032,410           
  391,781        

Barclays, 1.00%, dated 12/02/10, maturity date 01/18/11

      392,249           
  1,213,967        

JP Morgan Chase, 0.95%, dated 11/16/10, maturity date 01/18/11

      1,215,985           
  4,237,794        

JP Morgan Chase, 0.95%, dated 11/17/10, maturity date 01/19/11

      4,244,839           
  4,761,617        

JP Morgan Chase, 0.95%, dated 11/18/10, maturity date 01/20/11

      4,769,534           
  2,367,675        

JP Morgan Chase, 0.98%, dated 11/09/10, maturity date 01/18/11

      2,372,187           
                 
      $ 17,255,406        

Maturity Amount, Including Interest Payable

      $ 17,284,229           
                 
  

Market Value of Assets Sold Under Agreements

      $ 20,806,136           
           
  

Weighted Average Interest Rate

      0.94%           
           

HELIOS FUNDS

Notes to Financial Statements

December 31, 2010 (Unaudited)

 

 

 

At December 31, 2010, Helios Multi-Sector High Income Fund, Inc. had the following reverse repurchase agreements outstanding:

 

Face Value      Description   

Maturity

Amount

  
      $ 434,250        

Barclays, -0.25%, dated 11/16/10, maturity date 01/18/11

    $ 434,060           
  1,074,769        

Barclays, 1.00%, dated 11/09/10, maturity date 01/18/11

      1,076,859           
  3,050,616        

Barclays, 1.00%, dated 11/16/10, maturity date 01/18/11

      3,055,954           
  418,988        

Barclays, 1.00%, dated 11/17/10, maturity date 01/19/11

      419,721           
  561,937        

Barclays, 1.00%, dated 11/18/10, maturity date 01/20/11

      562,921           
  1,242,081        

JP Morgan Chase, 0.95%, dated 11/16/10, maturity date 01/18/11

      1,244,146           
  5,743,317        

JP Morgan Chase, 0.95%, dated 11/17/10, maturity date 01/19/11

      5,752,865           
  4,344,205        

JP Morgan Chase, 0.95%, dated 11/18/10, maturity date 01/20/11

      4,351,427           
  2,582,884        

JP Morgan Chase, 0.98%, dated 11/09/10, maturity date 01/18/11

      2,587,806           
                 
      $ 19,453,047        

Maturity Amount, Including Interest Payable

    $ 19,485,759           
                 
  

Market Value of Assets Sold Under Agreements

    $ 23,398,004           
           
  

Weighted Average Interest Rate

      0.94%           
           

At December 31, 2010, Helios Strategic Income Fund, Inc. had the following reverse repurchase agreements outstanding:

 

Face Value      Description   

Maturity

Amount

  
      $ 351,619        

Barclays, 1.00%, dated 11/09/10, maturity date 01/18/11

      $ 352,302           
  1,804,866        

Barclays, 1.00%, dated 11/16/10, maturity date 01/18/11

      1,808,024           
  352,832        

Barclays, 1.00%, dated 11/17/10, maturity date 01/19/11

      353,449           
  395,437        

Barclays, 1.00%, dated 11/18/10, maturity date 01/20/11

      396,130           
  373,125        

Barclays, 1.00%, dated 12/02/10, maturity date 01/18/11

      373,571           
  384,375        

JP Morgan Chase, 0.95%, dated 11/16/10, maturity date 01/18/11

      385,014           
  5,496,556        

JP Morgan Chase, 0.95%, dated 11/17/10, maturity date 01/19/11

      5,505,694           
  4,764,555        

JP Morgan Chase, 0.95%, dated 11/18/10, maturity date 01/20/11

      4,772,476           
  1,743,403        

JP Morgan Chase, 0.98%, dated 11/09/10, maturity date 01/18/11

      1,746,725           
                 
      $ 15,666,768        

Maturity Amount, Including Interest Payable

      $ 15,693,385           
                 
  

Market Value of Assets Sold Under Agreements

      $ 18,396,261           
           
  

Weighted Average Interest Rate

      0.95%           
           

The average daily balances of reverse repurchase agreements outstanding during the period ended December 31, 2010, was approximately $18,814,646, $13,746,616, $15,867,473 and $12,458,186 at a weighted average interest rate of 0.96%, 0.97%, 0.97% and 0.98% 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 December 31, 2010, was $23,616,996, $18,317,395, $20,449,979 and $15,712,436, which was 30,68%, 32.63%, 32.92% and 30.79% 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

December 31, 2010 (Unaudited)

 

 

 

Federal Income Tax Basis: The federal income tax basis of the Funds’ investments at December 31, 2010 was as follows:

 

  Fund   

Cost of

Investments

      Gross
Unrealized
Appreciation		      Gross
Unrealized
Depreciation		     Net  
Unrealized  
Appreciation)  		  

  Helios Advantage Income Fund, Inc.

    $ 72,515,691       $ 4,498,463       $ (2,106,845 )    $ 2,391,618     

  Helios High Income Fund, Inc.

      50,614,753         3,289,392         (496,037 )      2,793,355     

  Helios Multi-Sector High Income Fund, Inc

      57,470,110         3,571,379         (1,283,564 )      2,287,815     

  Helios Strategic Income Fund, Inc.

      48,645,795         3,270,960         (1,944,922 )      1,326,038     

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: February 16, 2011

Pursuant to the requirements of the 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: February 16, 2011

 

by (Signature and Title):     

/s/ Steven M. Pires

   
     Steven M. Pires   
     Treasurer   

Date: February 16, 2011