UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
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Investment Company Act file number
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811 - 21833
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RMK
MULTI-SECTOR HIGH INCOME FUND, INC.
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(Exact name of registrant as specified in charter)
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THREE WORLD FINANCIAL CENTER, 200 VESEY STREET, 10
TH
FLOOR
NEW YORK, NEW YORK
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10281-1010
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(Address of principal executive offices)
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(Zip code)
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JOHN J. FEENEY, JR., PRESIDENT
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
THREE WORLD FINANCIAL CENTER, 200 VESEY STREET, 10
TH
FLOOR
NEW YORK, NEW YORK 10281-1010
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(Name and address of agent for service)
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Registrant’s telephone number,
including area code: 1 (800) Hyperion
Date of fiscal year end: March 31
Date of reporting period: September 30, 2008
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Item 1.
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Reports to Shareholders.
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IN PROFILE
Hyperion Brookfield
Asset Management, Inc. is a registered investment advisor located in New York City. The firm was founded in 1989 to provide relative value
driven fixed income investment strategies, such as core fixed income, high yield, and specialized MBS. Hyperion Brookfield manages in excess of $19 billion for a client base including pension funds, financial institutions, mutual funds,
insurance companies and foundations. Hyperion Brookfield is a subsidiary of Brookfield Asset Management Inc., a global asset manager focused on property, power and other infrastructure assets with approximately $95 billion of assets under
management. For more information, please visit our website at www.hyperionbrookfield.com.
The Funds will file their complete
schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q will be available on the SEC’s website at http://www.sec.gov. In addition, the Funds’ Form N-Q may be
reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800.SEC.0330.
Investments in closed-end funds:
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NOT FDIC INSURED
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MAY LOSE VALUE
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NOT BANK GUARANTEED
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©
Copyright 2008. Hyperion Brookfield Asset Management, Inc.
LETTER TO
STOCKHOLDERS
Dear Stockholders,
We welcome this opportunity to provide the Semi-Annual Report for RMK Advantage Income Fund, Inc., RMK High Income Fund, Inc., RMK Multi-Sector High
Income Fund, Inc. and RMK Strategic Income Fund, Inc. (each a “Fund” and, collectively, the “Funds”) for the six-month period ended September 30, 2008.
On July 29, 2008, we assumed management of the Funds from their former investment adviser, Morgan Asset Management, Inc. Since taking over, we have formulated three key objectives that we believe are
crucial for the long-term performance of these Funds. Our first priority is to manage the Funds according to their stated investment objectives as outlined in the prospectuses. While there are some differences among the various Funds in terms of
asset mix, credit ratings and other measures, the primary objective of each of the Funds is to provide a high level of current income and the secondary objective is capital appreciation.
Secondly, for the past several months, we have been actively repositioning the Funds. When we took over the Funds, the ultimate principal recovery value for many of the Funds’ holdings was highly
uncertain. Thus, we strongly believe that the Funds’ survival is dependent on a repositioning of the Funds’ holdings. Accordingly, between July 29, 2008 and September 30, 2008, we have reduced the Funds’ allocation to
asset-backed securities (“ABS”) and collateralized debt obligations (“CDOs”) on average by 14% and 7%, respectively.
Lastly,
once the repositioning is complete, we expect that the core asset class of the Funds will be corporate high yield securities. So far, we have made significant progress in this regard. In the two months since taking over management, we have increased
the Funds’ allocation to corporate high yield securities on average by 23%. These measures are aimed at achieving our goal of better positioning the Funds to provide more stability to the net asset values (“NAVs”) and the dividends.
We would also like to point out that effective November 25, 2008, we have decided to use the Lehman Brothers U.S. Corporate High Yield Index as the
Funds’ new benchmark because it more accurately reflects the Funds’ expected investment profile than does the Lehman Brothers Ba U.S. High Yield Index.
This report provides information on each Fund’s performance during the six-month period ended September 30, 2008. The report also provides an overview of market conditions and a discussion of factors affecting the
investment performance of each Fund, together with each Fund’s audited financial statements and portfolio of investments as of September 30, 2008.
Please visit us at www.hyperionbrookfield.com for more information about these and other funds available to you. We are fully committed to working towards our near-term goal of stabilizing these Funds and creating stockholder value over the
long-term. Thank you for your support.
Sincerely,
John J. Feeney, Jr.
President
1
RMK
ADVANTAGE INCOME FUND, INC.
OBJECTIVE & STRATEGY
RMK Advantage Income Fund, Inc. seeks a high level of current income. The Fund seeks capital
growth as a secondary investment objective when consistent with its primary investment objective. The Fund invests a majority of its total assets in below investment grade debt securities (commonly referred to as “junk bonds”) that offer
attractive yield and capital appreciation potential. The Fund may also invest in investment grade debt securities, up to 15% of its total assets in foreign debt and foreign equity securities and up to 25% of its total assets in domestic equity
securities, including common and preferred stocks. The Fund invests in a wide range of below investment grade debt securities, including corporate bonds, mortgage-backed and asset-backed securities and municipal and foreign government obligations,
as well as securities of companies in bankruptcy reorganization proceedings or otherwise in the process of debt restructuring. (Below investment grade debt securities are rated Ba1 or lower by Moody’s Investors Service, Inc., BB+ or lower by
Standard & Poor’s Ratings Group, comparably rated by another nationally recognized statistical rating organization or, if unrated, determined by the Fund’s investment adviser to be of comparable quality.) The Fund may use leverage
through bank borrowings, reverse repurchase agreements or other transactions involving indebtedness or through the issuance of preferred shares. The Fund may leverage one third of its total assets (in each case including the amount borrowed.) The
Fund may vary its use of leverage in response to changing market conditions.
Investment Risks:
Investors in any bond fund should anticipate
fluctuations in price. Bond prices and the value of bond funds decline as interest rates rise. Bonds with longer-term maturities generally are more vulnerable to interest rate risk than bonds with shorter-term maturities. Below investment grade
bonds involve greater credit risk, which is the risk that the issuer will not make interest or principal payments when due. An economic downturn or period of rising interest rates could adversely affect the ability of issuers, especially issuers of
below investment grade debt, to service primary obligations and an unanticipated default could cause the Fund to experience a reduction in value of its shares. The Fund’s investments in mortgage-backed or asset-backed securities that are
“subordinated” to other interests in the same pool may increase credit risk to the extent that the Fund as a holder of those securities may only receive payments after the pool’s obligations to other investors have been satisfied.
Below investment grade bonds are also subject to greater price volatility and are less liquid, especially during periods of economic uncertainty or change, than higher-rated debt securities. The value of U.S. and foreign equity securities in which
the Fund invests will change based on changes in a company’s financial condition and in overall market and economic conditions. Leverage creates an opportunity for an increased return to common stockholders, but unless the income and capital
appreciation, if any, on securities acquired with leverage proceeds exceed the costs of the leverage, the use of leverage will diminish the investment performance of the Fund’s shares. Use of leverage may also increase the likelihood that the
net asset value of the Fund and market value of its common shares will be more volatile, and the yield and total return to common stockholders will tend to fluctuate more in response to changes in interest rates and creditworthiness.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
For the six month period ending September 30, 2008, RMK Advantage Income Fund, Inc. (the
“Fund”) had a total return of -64.92%, which assumes the reinvestment of dividends and is exclusive of brokerage commissions. Based on the NYSE closing price of $1.02 on September 30, 2008, the Fund’s shares have a dividend yield
of 17.65%. The dividend yield is calculated as the annualized amount of the reporting period’s most recent monthly dividend declared divided by the stated stock price. For the six months ended September 30, 2008, the Lehman Brothers U.S.
Corporate High Yield Index
1
had a total return of -7.28%. For the six months ended September 30, 2008, the previous benchmark, the Lehman Brothers Ba U.S. High
Yield Index
2
had a total return of -4.10%.
During much of this
year, the high yield market largely had been spared the pressure of forced selling, which has pushed prices lower. However, in September, Lehman’s bankruptcy filing was followed by widespread selling of below-investment-grade corporate credit.
Following other markets, both high yield bonds and leveraged loans traded lower. Despite the challenges that the market has experienced, we believe that the dramatic widening in yield spreads has created an opportunity. On September 30, 2008,
yield spreads were over 1,000 basis points, reaching levels normally seen at the bottom of a credit cycle. That is not to say that yield spreads could not widen
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Hyperion Brookfield
Asset Management, Inc.
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2
RMK ADVANTAGE INCOME FUND, INC.
in the near term. However, defaults are still running at one-third of their long-term average and in time could rise to their historical average, not to mention to
reach peak levels, which are typically around 10%. Meanwhile, yield spreads are implying a 12% to 14% default rate at a time when the actual default rate is between 1% and 2%. With today’s near-record yield spreads, high yield investors can
build a “cushion” against a rise in default losses later.
The well-publicized problems in the mortgage and credit markets have had a
significant impact on the Fund’s performance. Further, the high concentration of the Fund’s holdings in complex mortgage-backed securities and asset-backed securities jeopardized the Fund’s future earnings power. Upon taking over
management, we described a plan to reduce the Fund’s holdings in these types of securities and to increase the Fund’s overall credit quality. Since then, we have been executing this plan and have been successful at shifting the asset
allocation of the Fund toward high yield corporate bonds. We expect this allocation to form the core sector of the Fund in the long-term. We have actively increased the Fund’s allocation to high yield corporate bonds by 24% as of
September 30, 2008. Additionally, we have decreased the Fund’s allocation to lower rated (CCC rated through Unrated) securities by 30% in favor of BB rated and B rated securities.
While broad industry themes are in flux due to the credit markets’ problems and a slowing economy, we have been able to find opportunity within the high yield corporate market. Generally, we have
favored larger capitalization companies that do not have near-term needs to access the capital markets for liquidity. We have been screening companies for their ability to operate without being subject to new issuance markets or asset sales. We
believe that the corporate high yield holdings in the Fund are of higher average credit quality than the market. We have avoided companies in the consumer discretionary, financial and home-building related industries and have favored companies in
the aerospace, energy and consumer non-discretionary sectors. The unprecedented declines in home prices, coupled with high inventories of unsold homes, are likely to delay a rebound in housing and housing related industries for some time. An
overstretched consumer no longer has the ability to tap home equity in order to subsidize personal spending, and discretionary purchases are suffering. Financial companies are in the process of a massive leverage reduction that likely will impact
earnings for the foreseeable future. In the aerospace sector, many companies are skewed toward defense, and are seeing robust demand. Within the energy sector, we prefer companies with better-than-average cash flow, strong balance sheets and easily
saleable assets. Finally, the consumer non-discretionary sector has an element of recession resistance that makes it attractive given our current economic outlook. Longer-term, we believe that the high yield market offers attractive investment
opportunities based on the market’s overestimation of default losses. We continue to focus on our goal of better positioning the Fund to improve stability of the net asset value and to dividends.
Forward-Looking Information
This
management discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements
that are based on various assumptions (some of which are beyond our control) may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,”
“expect,” “anticipate,” “continue,” “should,” “intend,” or similar terms or variations on those terms or the negative of those terms. Although we believe that the expectations contained in any
forward-looking statement are based on reasonable assumptions, we can give no assurance that our expectations will be attained. We do not undertake, and specifically disclaim any obligation, to publicly release any update or supplement to any
forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
3
RMK ADVANTAGE INCOME FUND, INC.
Index Description
1
The Lehman Brothers U.S. Corporate High Yield Index covers the U.S. dollar denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield
if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging markets debt. The Lehman Brothers U.S. Corporate High Yield Index is part of the Lehman Brothers U.S. Universal and Global High Yield
Indices. The index is unmanaged and, unlike the Fund, is not affected by cash flows or trading and other expenses. It is not possible to invest directly in an index.
2
The Lehman Brothers Ba
U.S. High Yield Index is the Ba component of the U.S. Corporate High Yield Index, a broad-based unmanaged index of fixed-rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds and debt issues from countries designated as emerging
markets (
e.g.
, Argentina, Brazil and Venezuela) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-emerging countries are included. Original issue zeroes, step-up coupon structures and 144As are also included. The
index is unmanaged and, unlike the Fund, is not affected by cash flows or trading and other expenses. It is not possible to invest directly in an index.
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Hyperion Brookfield
Asset Management, Inc.
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4
RMK ADVANTAGE INCOME FUND, INC.
Portfolio Characteristics (Unaudited)
September 30, 2008
PORTFOLIO STATISTICS
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Annualized dividend yield
1
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17.65%
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Weighted average coupon
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6.44%
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Average effective maturity
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6.99 years
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Percentage of leveraged assets
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0.00%
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Total number of holdings
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154
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CREDIT QUALITY
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A and Above
2
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25
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%
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BBB
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4
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%
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BB
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23
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%
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B
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33
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%
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CCC
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4
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%
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Unrated
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11
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%
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Total
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100
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%
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ASSET ALLOCATION
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Asset-Backed Securities
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14
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%
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Mortgage-Backed Securities
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11
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%
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High Yield Corporate Bonds
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62
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%
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Common stocks
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2
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%
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Short-term investments
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11
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%
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Total
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100
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%
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1
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Dividends may include net investment income, capital gains and/or return of capital. The dividend yield referenced above is
calculated as the annualized amount of the most recent monthly dividend declared divided by the September 30, 2008 stock price.
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2
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Includes short-term investments.
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5
RMK ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
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Interest
Rate
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Maturity
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Principal
Amount
(000s)
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Value
(Note 2)
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ASSET-BACKED SECURITIES – 13.6%
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Certificate-Backed Obligations – 0.0%
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Helios Series I Multi-Asset CBO Limited
Series 1A, Class C‡(a)(c)
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5.90
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%†#
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12/13/36
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$
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2,421
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$
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6,051
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MKP CBO I Limited
Series 4A, Class CS‡(a)(c)
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0.00
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#
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10/01/12
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3,838
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0
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Total Certificate-Backed Obligations
(Cost – $4,832,954)
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6,051
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Collateralized Debt Obligations – 12.0%
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801 Grand CDO
Series 2006-1 LLC‡(a)(c)
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9.20
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†
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09/20/16
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2,000
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480,000
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Aardvark ABS CDO
Series 2007-1A, Class SUB(c)
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0.00
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#
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07/06/47
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2,000
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0
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Acacia CDO Limited
Series 10A, Class SUB‡(a)(c)
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0.00
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#
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09/07/46
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4,000
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1
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Aladdin CDO I Limited
Series 2006-3A, Class NOTE‡(a)(c)
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8.20
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†
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10/31/13
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4,000
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110,000
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Attentus CDO Limited
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Series 2006-2A, Class E2(c)
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0.00
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#
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10/09/41
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388
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0
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Series 2006-2A, Class F1‡(a)(c)
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0.00
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#
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10/09/41
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2,200
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0
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Series 2006-2A, Class F2(c)
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0.00
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#
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10/09/41
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1,007
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0
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Series 2007-3A, Class F‡(a)(c)
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0.00
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#
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10/11/42
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3,220
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0
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Broderick CDO Limited
Series 2007-3A, Class D‡(a)(c)
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0.00
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#
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12/06/50
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3,224
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0
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Cairn Mezzanine ABS CDO PLC
Series 2007-3A, Class SUB(c)
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0.00
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#
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08/13/47
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1,000
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0
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CDO Repack SPC Limited
Series 2006-BRGA, Class COM(c)
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0.00
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#
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12/05/51
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2,996
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0
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Dillon Read CMBS CDO Limited
Series 2006-1A, Class COM‡(a)(c)
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0.00
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#
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12/05/46
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5,000
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400,000
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Duane Park I Limited‡(a)(c)
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0.00
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06/27/16
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4,437
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221,826
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Gulf Stream Atlantic CDO Limited
Series 2007-1A, Class SUB‡(a)(c)
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0.00
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#
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07/13/47
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2,000
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0
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IXIS ABS CDO 1 Limited‡(a)(c)
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0.00
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12/12/46
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2,000
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20
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Kenmore Street Synthetic CDO
Series 2006-1A, Class NOTE‡(a)(c)
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8.20
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†
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04/30/14
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13,000
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520,000
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Knollwood CDO Limited
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Series 2006-2A, Class E‡(a)(c)
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0.00
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#
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07/13/46
|
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1,049
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0
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Series 2006-2A, Class SN(c)
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0.00
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#
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07/13/46
|
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|
2,000
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0
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|
Kodiak CDO
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|
|
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|
|
|
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Series 2006-1A, Class COMB‡(a)(c)
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0.00
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#
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|
08/07/37
|
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|
4,145
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|
|
1
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|
Series 2006-1A, Class G‡(a)(c)
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|
0.00
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#
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|
08/07/37
|
|
|
3,236
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|
|
0
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|
Lancer Funding Limited
Series 2007-2A, Class A3‡(a)(c)
|
|
0.00
|
#
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|
07/15/47
|
|
|
4,917
|
|
|
1
|
|
Linker Finance PLC
Series 16A, Class E‡(a)(c)
|
|
6.53
|
†
|
|
05/19/45
|
|
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3,000
|
|
|
30,000
|
|
Millstone CDO Limited
Series III-A, Class COMB(c)
|
|
0.00
|
#
|
|
07/05/46
|
|
|
1,988
|
|
|
0
|
See notes
to financial statements.
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Hyperion Brookfield
Asset Management, Inc.
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6
RMK ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
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|
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|
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|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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ASSET-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
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|
Newbury Street CDO Limited
Series 2007-1A, Class D‡(a)(c)
|
|
0.00
|
%#
|
|
03/04/53
|
|
$
|
3,224
|
|
$
|
0
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|
Norma CDO Limited
Series 2007-1A, Class E‡(a)(c)
|
|
0.00
|
#
|
|
03/11/49
|
|
|
1,962
|
|
|
0
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|
Palmer Square PLC
Series 2A, Class CN‡(a)(c)
|
|
0.00
|
#
|
|
11/02/45
|
|
|
6,104
|
|
|
1
|
|
Pasa Funding Limited
Series 2007-1A, Class D(c)
|
|
0.00
|
#
|
|
04/07/52
|
|
|
2,000
|
|
|
0
|
|
Preferred Term Securities XXII Limited(c)
|
|
0.00
|
#
|
|
09/22/36
|
|
|
4,000
|
|
|
1
|
|
Preferred Term Securities XXII Limited‡(a)(c)
|
|
10.25
|
#
|
|
10/01/12
|
|
|
2,000
|
|
|
100,000
|
|
Preferred Term Securities XXIII Limited(c)
|
|
0.00
|
#
|
|
12/22/36
|
|
|
3,800
|
|
|
1
|
|
Preferred Term Securities XXVII Limited(c)
|
|
0.00
|
#
|
|
03/22/38
|
|
|
3,500
|
|
|
35,000
|
|
Preferred Term Securities XXVIII Limited‡(a)(c)
|
|
4.53
|
†
|
|
03/22/38
|
|
|
1,497
|
|
|
59,889
|
|
Preferred Term Securities XXXI Limited(c)
|
|
0.00
|
#
|
|
03/22/38
|
|
|
3,000
|
|
|
0
|
|
Regional Diversified Funding‡(a)(c)(d)
|
|
0.00
|
#
|
|
01/25/36
|
|
|
1,250
|
|
|
0
|
|
Sharps CDO
Series 2006-1A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
05/08/46
|
|
|
1,924
|
|
|
0
|
|
Squared CDO Limited
Series 2007-1A, Class C‡(a)(c)
|
|
0.00
|
#
|
|
05/11/57
|
|
|
1,067
|
|
|
0
|
|
Steers Series 2007-A‡(a)(c)
|
|
5.90
|
†
|
|
06/20/18
|
|
|
8,000
|
|
|
4,080,000
|
|
Taberna Preferred Funding Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-6A, Class COM1‡(a)(c)
|
|
0.00
|
#
|
|
12/05/36
|
|
|
6,378
|
|
|
1
|
|
Series 2006-7A, Class C1‡(a)(c)
|
|
0.00
|
#
|
|
02/05/37
|
|
|
4,184
|
|
|
1
|
|
Tahoma CDO Limited
Series 2007-2A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
09/15/47
|
|
|
1,062
|
|
|
0
|
|
Trapeza CDO I LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-10A, Class D2‡(a)(c)
|
|
0.00
|
#
|
|
06/06/41
|
|
|
1,022
|
|
|
0
|
|
Series 2006-10A, Class SUB(c)
|
|
0.00
|
#
|
|
06/06/41
|
|
|
2,000
|
|
|
0
|
|
Series 2006-11A, Class F(c)
|
|
0.00
|
#
|
|
10/10/41
|
|
|
2,051
|
|
|
0
|
|
Series 2006-11A, Class SUB(c)
|
|
0.00
|
#
|
|
10/10/41
|
|
|
2,000
|
|
|
0
|
|
Tricadia CDO Limited
Series 2006-5A, Class SUB‡(a)(c)
|
|
0.00
|
#
|
|
06/19/46
|
|
|
2,500
|
|
|
0
|
|
Webster CDO Limited
Series 2006-1, Class PS‡(a)(c)
|
|
0.00
|
#
|
|
04/13/47
|
|
|
2
|
|
|
0
|
|
Witherspoon CDO Funding Ltd.
Series 2004-1A, Class COM(c)
|
|
0.00
|
#
|
|
09/15/39
|
|
|
4,385
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Collateralized Debt Obligations
(Cost – $124,427,653)
|
|
|
|
|
|
|
|
|
|
|
6,036,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Loan Obligation – 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Genesis CLO 2005‡(a)(c)
(Cost $3,000,000)
|
|
0.00
|
|
|
06/23/10
|
|
|
3
|
|
|
81,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity Loans – 1.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
ACE Securities Corp.
Series 2004-HE3, Class M11(b)
|
|
6.71
|
†
|
|
11/25/34
|
|
|
1,216
|
|
|
12,791
|
|
Equifirst Mortgage Loan Trust NIM Notes
Series 2004-3, Class B2‡(a)(b)(c)
|
|
6.71
|
†
|
|
12/25/34
|
|
|
2,807
|
|
|
79,429
|
See notes
to financial statements.
7
RMK ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fremont Home Loan Trust
Series 2004-4, Class M7(b)(c)
|
|
4.93
|
%†
|
|
03/25/35
|
|
$
|
341
|
|
$
|
44,386
|
|
Irwin Home Equity Corp.
Series 2005-C, Class 2M3(b)(c)
|
|
4.71
|
†
|
|
04/25/30
|
|
|
1,710
|
|
|
451,943
|
|
Meritage Asset Holdings NIM
Series 2005-2, Class N4‡(a)(b)(c)
|
|
0.00
|
#
|
|
11/25/35
|
|
|
4,000
|
|
|
1
|
|
Terwin Mortgage Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-7SL, Class B7‡(a)(b)(c)
|
|
0.00
|
#
|
|
07/25/35
|
|
|
1,072
|
|
|
0
|
|
Series 2005-11, Class 1B7‡(a)(b)(c)
|
|
0.00
|
#
|
|
11/25/36
|
|
|
1,451
|
|
|
225
|
|
Series 2006-2HGS, Class A2‡(a)(b)
|
|
4.50
|
†
|
|
03/25/37
|
|
|
1,023
|
|
|
113,110
|
|
Terwin Mortgage Trust NIM
Series 2005-R1, Class A‡(a)(b)(c)
|
|
0.00
|
#
|
|
12/28/36
|
|
|
4,000
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Home Equity Loans
(Cost – $13,287,672)
|
|
|
|
|
|
|
|
|
|
|
701,885
|
|
|
|
|
|
|
|
Total ASSET-BACKED SECURITIES
(Cost – $145,548,279)
|
|
|
|
|
|
|
|
|
|
|
6,825,680
|
|
|
|
|
|
|
|
MORTGAGE-BACKED SECURITIES – 10.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations – 10.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Citigroup Mortgage Loan Trust Inc.
Series 2006-AR9, Class 1M1(c)
|
|
3.55
|
†
|
|
11/25/36
|
|
|
2,000
|
|
|
379,400
|
|
Countrywide Alternative Loan Trust
Series 2005-56, Class M4(c)
|
|
4.13
|
†
|
|
11/25/35
|
|
|
4,212
|
|
|
429,161
|
|
Countrywide Alternative Loan Trust NIM
Series 2006-OA11, Class N3‡(a)(c)
|
|
12.50
|
|
|
09/25/46
|
|
|
871
|
|
|
122,641
|
|
Deutsche ALT-A Securities Incorporated Alternate Loan Trust
Series 2006-AF1, Class A5
|
|
3.49
|
†
|
|
04/25/36
|
|
|
588
|
|
|
177,303
|
|
Deutsche Mortgage Securities Inc.
Series 2006-RS1, Class N2‡(a)(c)
|
|
3.68
|
†
|
|
09/27/35
|
|
|
5,000
|
|
|
198,500
|
|
Greenwich Structured Adjustable Rate Mortgage Products
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-3A, Class N2‡(a)(c)
|
|
2.00
|
|
|
06/27/35
|
|
|
2,980
|
|
|
613,257
|
|
Series 2005-4A, Class N2‡(a)(c)
|
|
0.00
|
#
|
|
07/27/45
|
|
|
6,883
|
|
|
1,422,716
|
|
Harborview Mortgage Loan Trust
Series 2006-4, Class B11‡(a)(c)
|
|
4.78
|
†
|
|
05/19/47
|
|
|
2,318
|
|
|
14,604
|
|
Harborview NIM Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-8A, Class N5‡(a)(c)
|
|
0.00
|
#
|
|
07/21/36
|
|
|
2,000
|
|
|
0
|
|
Series 2006-8, Class PS(c)
|
|
0.00
|
|
|
07/22/36
|
|
|
0
|
|
|
0
|
|
Series 2006-14, Class PS(c)
|
|
0.00
|
|
|
12/19/36
|
|
|
6,000
|
|
|
60
|
|
Series 2006-14, Class N4‡(a)(c)
|
|
8.35
|
|
|
03/19/38
|
|
|
1,000
|
|
|
20,295
|
|
Indymac Index Mortgage Loan NIM Trust
Series 2006-AR6, Class PS‡(a)(b)(c)
|
|
0.00
|
|
|
06/25/46
|
|
|
67
|
|
|
1
|
|
Long Beach Asset Holdings Corp. NIM Trust
Series 2005-WL1, Class N4‡(a)(b)(c)
|
|
0.00
|
#
|
|
06/25/45
|
|
|
5,000
|
|
|
1
|
|
Long Beach Mortgage Loan Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2001-3, Class M3(b)
|
|
6.02
|
†
|
|
09/25/31
|
|
|
621
|
|
|
68,277
|
|
Series 2005-2, Class B2‡(a)(b)(c)
|
|
5.96
|
†
|
|
04/25/35
|
|
|
1,078
|
|
|
12,186
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
8
RMK ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MORTGAGE-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Park Place Securities Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-WHQ3, Class M11(b)
|
|
5.71
|
%†
|
|
06/25/35
|
|
$
|
2,000
|
|
$
|
35,628
|
|
Series 2005-WCW2, Class M10(b)
|
|
5.71
|
†#
|
|
07/25/35
|
|
|
3,000
|
|
|
37,655
|
|
Park Place Securities Inc. NIM Trust
Series 2005-WCW1, Class B‡(a)(b)(c)
|
|
0.00
|
#
|
|
09/25/35
|
|
|
2,043
|
|
|
0
|
|
Residential Accredit Loans Inc.
Series 2006-QO8, Class M4(c)
|
|
3.74
|
†
|
|
10/25/46
|
|
|
3,001
|
|
|
202,263
|
|
Residential Asset Mortgage Products Inc.
Series 2005-RS4, Class B2‡(a)(b)(c)
|
|
6.21
|
†
|
|
04/25/35
|
|
|
2,372
|
|
|
36,297
|
|
Sail Net Interest Margin Notes
Series 2004-7A, Class B‡(a)(b)(c)
|
|
0.00
|
#
|
|
08/27/34
|
|
|
2,394
|
|
|
0
|
|
Sharp SP I LLC NIM Trust
Series 2006-AHM3, Class N3‡(a)(c)
|
|
12.50
|
|
|
10/25/46
|
|
|
1,000
|
|
|
103,863
|
|
Soundview Home Equity Loan Trust
Series 2005-2, Class B3‡(a)(b)(c)
|
|
6.21
|
†
|
|
07/25/35
|
|
|
2,591
|
|
|
38,606
|
|
Structured Adjustable Rate Mortgage Loan Trust
Series 2006-8, Class 4A2
|
|
5.98
|
†
|
|
09/25/36
|
|
|
1,500
|
|
|
1,153,512
|
|
Structured Asset Mortgage Investments Inc.
Series 2006-AR3, Class 1B1(c)
|
|
3.61
|
†
|
|
04/25/36
|
|
|
5,219
|
|
|
336,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Collateralized Mortgage Obligations
(Cost – $46,380,264)
|
|
|
|
|
|
|
|
|
|
|
5,402,771
|
|
|
|
|
|
|
|
Total MORTGAGE-BACKED SECURITIES
(Cost – $46,380,264)
|
|
|
|
|
|
|
|
|
|
|
5,402,771
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS – 62.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive – 0.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Metaldyne Corp.(c)
(Cost $3,554,853)
|
|
11.00
|
|
|
06/15/12
|
|
|
4,000
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Industry – 12.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
ACE Hardware Corp. ‡(a)
|
|
9.13
|
|
|
06/01/16
|
|
|
500
|
|
|
427,500
|
|
Buckeye Technologies Inc.
|
|
8.50
|
|
|
10/01/13
|
|
|
500
|
|
|
465,000
|
|
Crown Americas LLC
|
|
7.75
|
|
|
11/15/15
|
|
|
500
|
|
|
487,500
|
|
FireKeepers Development Authority‡(a)
|
|
13.88
|
|
|
05/01/15
|
|
|
500
|
|
|
440,000
|
|
Freeport McMoRan Copper & Gold
|
|
8.38
|
|
|
04/01/17
|
|
|
500
|
|
|
492,500
|
|
Georgia-Pacific Corp.
|
|
8.13
|
|
|
05/15/11
|
|
|
1,000
|
|
|
990,000
|
|
Momentive Performance
|
|
9.75
|
|
|
12/01/14
|
|
|
500
|
|
|
395,000
|
|
Mueller Water Products Inc.
|
|
7.38
|
|
|
06/01/17
|
|
|
500
|
|
|
395,000
|
|
TRW Automotive Inc ‡(a)
|
|
7.25
|
|
|
03/15/17
|
|
|
750
|
|
|
592,500
|
|
Tube City IMS Corp.
|
|
9.75
|
|
|
02/01/15
|
|
|
500
|
|
|
445,000
|
|
U.S. Steel Corp.
|
|
7.00
|
|
|
02/01/18
|
|
|
500
|
|
|
451,380
|
|
Westlake Chemical Corp.
|
|
6.63
|
|
|
01/15/16
|
|
|
750
|
|
|
637,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Basic Industry
(Cost – $6,571,068)
|
|
|
|
|
|
|
|
|
|
|
6,218,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
9
RMK ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Goods – 3.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Alliant Techsystems Inc.
|
|
6.75
|
%
|
|
04/01/16
|
|
$
|
650
|
|
$
|
607,750
|
|
Case Corp.
|
|
7.25
|
|
|
01/15/16
|
|
|
500
|
|
|
452,500
|
|
Terex Corp.
|
|
7.38
|
|
|
01/15/14
|
|
|
500
|
|
|
455,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital Goods
(Cost – $1,620,533)
|
|
|
|
|
|
|
|
|
|
|
1,515,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Cyclical – 0.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford Motor Credit Co.
|
|
7.00
|
|
|
10/01/13
|
|
|
250
|
|
|
153,639
|
|
General Motors Corp.
|
|
7.13
|
|
|
07/15/13
|
|
|
250
|
|
|
115,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Cyclical
(Cost – $318,206)
|
|
|
|
|
|
|
|
|
|
|
268,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Non-Cyclical – 5.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellation Brands Inc.
|
|
7.25
|
|
|
05/15/17
|
|
|
650
|
|
|
598,000
|
|
Couche-Tard U.S. LP
|
|
7.50
|
|
|
12/15/13
|
|
|
1,000
|
|
|
920,000
|
|
Jarden Corp.
|
|
7.50
|
|
|
05/01/17
|
|
|
1,000
|
|
|
832,500
|
|
Stater Brothers Holdings
|
|
8.13
|
|
|
06/15/12
|
|
|
500
|
|
|
490,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Non-Cyclical
(Cost – $2,988,886)
|
|
|
|
|
|
|
|
|
|
|
2,840,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Products – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Products International Inc(c)
(Cost $373,492)
|
|
0.00
|
#
|
|
10/01/12
|
|
|
373
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy – 9.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Chesapeake Energy Corp.
|
|
6.88
|
|
|
01/15/16
|
|
|
500
|
|
|
456,250
|
|
MarkWest Energy Partners LP
|
|
8.75
|
|
|
04/15/18
|
|
|
500
|
|
|
475,000
|
|
National Oilwell Varco Inc. Series B
|
|
6.13
|
|
|
08/15/15
|
|
|
270
|
|
|
263,497
|
|
Newfield Exploration Company
|
|
6.63
|
|
|
09/01/14
|
|
|
500
|
|
|
450,000
|
|
Range Resources Corp.
|
|
7.50
|
|
|
05/15/16
|
|
|
500
|
|
|
477,500
|
|
SeaMetric International AS(c)
|
|
11.63
|
|
|
05/25/12
|
|
|
1,700
|
|
|
850,000
|
|
SESI LLC
|
|
6.88
|
|
|
06/01/14
|
|
|
750
|
|
|
652,500
|
|
Whiting Petroleum Corp.
|
|
7.25
|
|
|
05/01/13
|
|
|
1,000
|
|
|
927,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Energy
(Cost – $5,578,021)
|
|
|
|
|
|
|
|
|
|
|
4,552,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance & Investment – 6.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanta Capital Trust I
|
|
8.99
|
|
|
12/17/26
|
|
|
2,725
|
|
|
1,471,500
|
|
AssuranceAmerica Capital Trust I(c)
|
|
10.50
|
|
|
12/31/35
|
|
|
1,000
|
|
|
350,000
|
|
Catlin Insurance Company Limited‡(a)
|
|
7.25
|
†
|
|
12/31/49
|
|
|
3,000
|
|
|
1,339,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Finance & Investment
(Cost – $6,519,395)
|
|
|
|
|
|
|
|
|
|
|
3,160,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrials – 2.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Crown Cork & Seal Company Inc.
|
|
8.00
|
|
|
04/15/23
|
|
|
250
|
|
|
210,000
|
|
Jefferson Smurfit Corp.
|
|
8.25
|
|
|
10/01/12
|
|
|
500
|
|
|
417,500
|
|
Owens-Illinois Inc.
|
|
7.80
|
|
|
05/15/18
|
|
|
500
|
|
|
485,000
|
|
Payless Shoesource Inc.
|
|
8.25
|
|
|
08/01/13
|
|
|
250
|
|
|
220,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Industrials
(Cost – $1,400,659)
|
|
|
|
|
|
|
|
|
|
|
1,333,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
10
RMK ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Security Capital Assurance, Ltd
(Cost $253,157)
|
|
6.88
|
%†#
|
|
09/30/17
|
|
$
|
500
|
|
$
|
22,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media – 4.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
CCH I LLC/CCH I Capital Corp.
|
|
11.00
|
|
|
10/01/15
|
|
|
250
|
|
|
165,000
|
|
Charter Communications Operating LLC‡(a)
|
|
8.38
|
|
|
04/30/14
|
|
|
500
|
|
|
441,250
|
|
Lamar Media Corp.
|
|
6.63
|
|
|
08/15/15
|
|
|
1,000
|
|
|
827,500
|
|
Mediacom Broadband LLC
|
|
8.50
|
|
|
10/15/15
|
|
|
750
|
|
|
618,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Media
(Cost – $2,255,639)
|
|
|
|
|
|
|
|
|
|
|
2,052,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services Cyclical – 4.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
AMC Entertainment Inc.
|
|
8.63
|
|
|
08/15/12
|
|
|
500
|
|
|
495,000
|
|
Iron Mountain Inc.
|
|
8.75
|
|
|
07/15/18
|
|
|
1,000
|
|
|
1,015,000
|
|
Pokagon Gaming Authority‡(a)
|
|
10.38
|
|
|
06/15/14
|
|
|
500
|
|
|
506,250
|
|
Seneca Gaming Corp.
|
|
7.25
|
|
|
05/01/12
|
|
|
500
|
|
|
435,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Services Cyclical
(Cost – $2,521,530)
|
|
|
|
|
|
|
|
|
|
|
2,451,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services Non-Cyclical – 4.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
ARAMARK Corp.
|
|
8.50
|
|
|
02/01/15
|
|
|
750
|
|
|
705,000
|
|
Church & Dwight Company Inc.
|
|
6.00
|
|
|
12/15/12
|
|
|
500
|
|
|
472,500
|
|
HCA Inc.
|
|
9.25
|
|
|
11/15/16
|
|
|
1,000
|
|
|
972,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Services Non-Cyclical
(Cost – $2,273,385)
|
|
|
|
|
|
|
|
|
|
|
2,150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Purpose Entities – 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income Pass-Through Trust 2007
Series 2007-C JPM, Class B‡(a)(c)
(Cost $1,709,206)
|
|
0.00
|
#
|
|
05/15/77
|
|
|
1,675
|
|
|
62,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology & Electronics – 2.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Flextronics International Limited
|
|
6.25
|
|
|
11/15/14
|
|
|
500
|
|
|
422,500
|
|
Sungard Data Systems Inc.
|
|
10.25
|
|
|
08/15/15
|
|
|
1,000
|
|
|
867,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Technology & Electronics
(Cost – $1,480,142)
|
|
|
|
|
|
|
|
|
|
|
1,290,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications – 6.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
American Tower Corp.‡(a)
|
|
7.00
|
|
|
10/15/17
|
|
|
500
|
|
|
477,500
|
|
Cincinnati Bell Inc.
|
|
8.38
|
|
|
01/15/14
|
|
|
1,000
|
|
|
870,000
|
|
Citizens Communications Co.
|
|
6.25
|
|
|
01/15/13
|
|
|
650
|
|
|
608,562
|
|
L-3 Communications Corp.
|
|
6.13
|
|
|
01/15/14
|
|
|
500
|
|
|
462,500
|
|
Windstream Corp.
|
|
7.00
|
|
|
03/15/19
|
|
|
750
|
|
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Telecommunications
(Cost – $3,237,547)
|
|
|
|
|
|
|
|
|
|
|
3,018,562
|
|
Total HIGH YIELD CORPORATE BONDS
(Cost – $42,655,719)
|
|
|
|
|
|
|
|
|
|
|
31,336,993
|
See notes
to financial statements.
11
RMK ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MUNICIPAL SECURITIES – 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Muni-Arizona – 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Pima County Arizona Industrial Development Authority(d)
|
|
9.32
|
%
|
|
06/01/09
|
|
$
|
31
|
|
$
|
29,230
|
|
Pima County Arizona Industrial Development Authority(d)
|
|
10.29
|
|
|
06/01/10
|
|
|
44
|
|
|
37,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Muni-Arizona
(Cost – $68,813)
|
|
|
|
|
|
|
|
|
|
|
66,399
|
|
Total MUNICIPAL SECURITIES
(Cost – $68,813)
|
|
|
|
|
|
|
|
|
|
|
66,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Value
(Note 2)
|
|
COMMON STOCKS – 1.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Products – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Products International Inc.*(c)
(Cost $1,367,254)
|
|
|
14,940
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance & Investment – 1.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
FSI Realty Trust(c)
|
|
|
148,000
|
|
|
192,400
|
|
FSI Realty Trust‡(a)(c)
|
|
|
29,800
|
|
|
38,740
|
|
Mid Country‡(a)(c)
|
|
|
50,000
|
|
|
426,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Finance & Investment
(Cost – $2,544,439)
|
|
|
|
|
|
657,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrials – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Port Townsend Company Inc.‡(a)(c)
(Cost $667,311)
|
|
|
1,200
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications – 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Windstream Corp.(e)
(Cost $125,755)
|
|
|
10,000
|
|
|
109,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telephone-Integrated – 0.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
Frontier Communications Corp.
|
|
|
10,000
|
|
|
115,000
|
|
Qwest Communications International Inc.
|
|
|
25,000
|
|
|
80,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Telephone-Integrated
(Cost – $227,733)
|
|
|
|
|
|
195,750
|
|
Total COMMON STOCKS
(Cost – $4,932,492)
|
|
|
|
|
|
962,790
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
12
RMK ADVANTAGE INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
SHORT TERM INVESTMENT – 11.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
State Street Euro Dollar Time Deposit
(Cost $5,569,000)
|
|
1.35
|
%
|
|
10/01/08
|
|
$
|
5,569
|
|
$
|
5,569,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments – 99.6%
(Cost – $245,154,567)
|
|
|
50,163,633
|
|
Other Assets in Excess of Liabilities – 0.4%
|
|
|
220,646
|
|
|
|
|
|
|
NET ASSETS – 100.0%
|
|
$
|
50,384,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
—
|
|
Non-income producing security.
|
|
#
|
|
—
|
|
Issuer is currently in default on its regularly scheduled interest payment.
|
|
†
|
|
—
|
|
Variable Rate Security – Interest rate shown is the rate in effect as of September 30, 2008.
|
|
‡
|
|
—
|
|
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 September 30, 2008, the total value of all such investments was $13,616,804 or 27.03% of net assets.
|
|
(a)
|
|
—
|
|
Private Placement.
|
|
(b)
|
|
—
|
|
Investment in subprime security. As of September 30, 2008, the total value of all such investments was $930,536 or 1.85% of net assets.
|
|
(c)
|
|
—
|
|
Security valued in good faith pursuant to fair value procedures adopted by the Board of Directors. As of September 30, 2008, the total value of all such securities was $12,950,628 or
25.70% of net assets.
|
|
(d)
|
|
—
|
|
Zero Coupon Bond – Interest rate represents current yield to maturity.
|
|
CBO
|
|
—
|
|
Certificate-Backed Obligation.
|
|
CDO
|
|
—
|
|
Collateralized Debt Obligation.
|
|
NIM
|
|
—
|
|
Net Interest Margin.
|
See notes
to financial statements.
13
RMK HIGH
INCOME FUND, INC.
OBJECTIVE & STRATEGY
RMK High Income Fund, Inc. seeks a high level of current income. The Fund seeks capital growth
as a secondary investment objective when consistent with its primary investment objective. The Fund invests a majority of its total assets in below investment grade debt securities (commonly referred to as “junk bonds”) that offer
attractive yield and capital appreciation potential. The Fund may also invest in investment grade debt securities, up to 15% of its total assets in foreign debt and foreign equity securities and up to 25% of its total assets in domestic equity
securities, including common and preferred stocks. The Fund invests in a wide range of below investment grade debt securities, including corporate bonds, mortgage-backed and asset-backed securities and municipal and foreign government obligations,
as well as securities of companies in bankruptcy reorganization proceedings or otherwise in the process of debt restructuring. (Below investment grade debt securities are rated Ba1 or lower by Moody’s Investors Service, Inc., BB+ or lower by
Standard & Poor’s Ratings Group, comparably rated by another nationally recognized statistical rating organization or, if unrated, determined by the Fund’s investment adviser to be of comparable quality.) The Fund may use leverage
through bank borrowings, reverse repurchase agreements or other transactions involving indebtedness or through the issuance of preferred shares. The Fund may leverage one third of its total assets (in each case including the amount borrowed.) The
Fund may vary its use of leverage in response to changing market conditions.
Investment Risks:
Investors in any bond fund should anticipate
fluctuations in price. Bond prices and the value of bond funds decline as interest rates rise. Bonds with longer-term maturities generally are more vulnerable to interest rate risk than bonds with shorter-term maturities. Below investment grade
bonds involve greater credit risk, which is the risk that the issuer will not make interest or principal payments when due. An economic downturn or period of rising interest rates could adversely affect the ability of issuers, especially issuers of
below investment grade debt, to service primary obligations and an unanticipated default could cause the Fund to experience a reduction in value of its shares. The Fund’s investments in mortgage-backed or asset-backed securities that are
“subordinated” to other interests in the same pool may increase credit risk to the extent that the Fund as a holder of those securities may only receive payments after the pool’s obligations to other investors have been satisfied.
Below investment grade bonds are also subject to greater price volatility and are less liquid, especially during periods of economic uncertainty or change, than higher-rated debt securities. The value of U.S. and foreign equity securities in which
the Fund invests will change based on changes in a company’s financial condition and in overall market and economic conditions. Leverage creates an opportunity for an increased return to common stockholders, but unless the income and capital
appreciation, if any, on securities acquired with leverage proceeds exceed the costs of the leverage, the use of leverage will diminish the investment performance of the Fund’s shares. Use of leverage may also increase the likelihood that the
net asset value of the Fund and market value of its common shares will be more volatile, and the yield and total return to common stockholders will tend to fluctuate more in response to changes in interest rates and creditworthiness.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
For the six month period ending September 30, 2008, RMK High Income Fund, Inc. (the “Fund”)
had a total return of
-65.04%, which assumes the reinvestment of dividends and is exclusive of brokerage commissions. Based on the NYSE closing price of $1.07 on September 30, 2008, the Fund’s shares have a dividend yield of 16.82%.
The dividend yield is calculated as the annualized amount of the reporting period’s most recent monthly dividend declared divided by the stated stock price. For the six months ended September 30, 2008, the Lehman Brothers U.S. Corporate
High Yield Index
1
had a total return of -7.28%. For the six months ended September 30, 2008, the previous benchmark, the Lehman Brothers Ba U.S. High Yield Index
2
had a total return of -4.10%.
During much of this year, the high
yield market largely had been spared the pressure of forced selling, which has pushed prices lower. However, in September, Lehman’s bankruptcy filing was followed by widespread selling of below-investment-grade corporate credit. Following other
markets, both high yield bonds and leveraged loans traded lower. Despite the challenges that the market has experienced, we believe that the dramatic widening in yield spreads has created an opportunity. On September 30, 2008, yield spreads
were over 1,000 basis points, reaching levels normally seen at the bottom of a credit cycle. That is not to say that
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Hyperion Brookfield
Asset Management, Inc.
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14
RMK HIGH INCOME FUND, INC.
yield spreads could not widen in the near term. However, defaults are still running at one-third of their long-term average and in time could rise to their historical
average, not to mention to reach peak levels, which are typically around 10%. Meanwhile, yield spreads are implying a 12% to 14% default rate at a time when the actual default rate is between 1% and 2%. With today’s near-record yield spreads,
high yield investors can build a “cushion” against a rise in default losses later.
The well-publicized problems in the mortgage and credit
markets have had a significant impact on the Fund’s performance. Further, the high concentration of the Fund’s holdings in complex mortgage-backed securities and asset-backed securities jeopardized the Fund’s future earnings power.
Upon taking over management, we described a plan to reduce the Fund’s holdings in these types of securities and to increase the Fund’s overall credit quality. Since then, we have been executing this plan and have been successful at
shifting the asset allocation of the Fund toward high yield corporate bonds. We expect this allocation to form the core sector of the Fund in the long-term. We have actively increased the Fund’s allocation to high yield corporate bonds by 26%
as of September 30, 2008. Additionally, we have decreased the Fund’s allocation to lower rated (CCC rated through Unrated) securities by 33% in favor of BB rated and B rated securities.
While broad industry themes are in flux due to the credit markets’ problems and a slowing economy, we have been able to find opportunity within the high yield
corporate market. Generally, we have favored larger capitalization companies that do not have near-term needs to access the capital markets for liquidity. We have been screening companies for their ability to operate without being subject to new
issuance markets or asset sales. We believe that the corporate high yield holdings in the Fund are of higher average credit quality than the market. We have avoided companies in the consumer discretionary, financial and home-building related
industries and have favored companies in the aerospace, energy and consumer non-discretionary sectors. The unprecedented declines in home prices, coupled with high inventories of unsold homes, are likely to delay a rebound in housing and housing
related industries for some time. An overstretched consumer no longer has the ability to tap home equity in order to subsidize personal spending, and discretionary purchases are suffering. Financial companies are in the process of a massive leverage
reduction that likely will impact earnings for the foreseeable future. In the aerospace sector, many companies are skewed toward defense, and are seeing robust demand. Within the energy sector, we prefer companies with better-than-average cash flow,
strong balance sheets and easily saleable assets. Finally, the consumer non-discretionary sector has an element of recession resistance that makes it attractive given our current economic outlook. Longer-term, we believe that the high yield market
offers attractive investment opportunities based on the market’s overestimation of default losses. We continue to focus on our goal of better positioning the Fund to improve stability of the net asset value and to dividends.
Forward-Looking Information
This
management discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements
that are based on various assumptions (some of which are beyond our control) may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,”
“expect,” “anticipate,” “continue,” “should,” “intend,” or similar terms or variations on those terms or the negative of those terms. Although we believe that the expectations contained in any
forward-looking statement are based on reasonable assumptions, we can give no assurance that our expectations will be attained. We do not undertake, and specifically disclaim any obligation, to publicly release any update or supplement to any
forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
15
RMK HIGH INCOME FUND, INC.
Index Description
1
The Lehman Brothers U.S. Corporate High Yield Index covers the U.S. dollar denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield
if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging markets debt. The Lehman Brothers U.S. Corporate High Yield Index is part of the Lehman Brothers U.S. Universal and Global High Yield
Indices. The index is unmanaged and, unlike the Fund, is not affected by cash flows or trading and other expenses. It is not possible to invest directly in an index.
2
The Lehman Brothers Ba
U.S. High Yield Index is the Ba component of the U.S. Corporate High Yield Index, a broad-based unmanaged index of fixed-rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds and debt issues from countries designated as emerging
markets (
e.g.
, Argentina, Brazil and Venezuela) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-emerging countries are included. Original issue zeroes, step-up coupon structures and 144As are also included. The
index is unmanaged and, unlike the Fund, is not affected by cash flows or trading and other expenses. It is not possible to invest directly in an index.
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Hyperion Brookfield
Asset Management, Inc.
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16
RMK HIGH INCOME FUND, INC.
Portfolio Characteristics (Unaudited)
September 30, 2008
PORTFOLIO STATISTICS
|
|
|
|
|
Annualized dividend yield
1
|
|
16.82%
|
|
|
|
|
Weighted average coupon
|
|
6.68%
|
|
|
|
|
Average effective maturity
|
|
7.16 years
|
|
|
|
|
Percentage of leveraged assets
|
|
0.00%
|
|
|
|
|
Total number of holdings
|
|
153
|
CREDIT QUALITY
|
|
|
|
|
|
A and Above
2
|
|
19
|
%
|
|
|
|
|
BBB
|
|
3
|
%
|
|
|
|
|
BB
|
|
26
|
%
|
|
|
|
|
B
|
|
34
|
%
|
|
|
|
|
CCC
|
|
6
|
%
|
|
|
|
|
D
|
|
2
|
%
|
|
|
|
|
Unrated
|
|
10
|
%
|
|
Total
|
|
100
|
%
|
ASSET ALLOCATION
|
|
|
|
|
|
Asset-Backed Securities
|
|
12
|
%
|
|
|
|
|
Mortgage-Backed Securities
|
|
12
|
%
|
|
|
|
|
High Yield Corporate Bonds
|
|
66
|
%
|
|
|
|
|
Common stocks
|
|
2
|
%
|
|
|
|
|
Short-term investments
|
|
8
|
%
|
|
Total
|
|
100
|
%
|
|
1
|
Dividends may include net investment income, capital gains and/or return of capital. The dividend yield referenced above is
calculated as the annualized amount of the most recent monthly dividend declared divided by the September 30, 2008 stock price.
|
|
2
|
Includes short-term investments.
|
17
RMK HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET-BACKED SECURITIES – 12.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate-Backed Obligations – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Helios Series I Multi-Asset CBO Limited
Series 1A, Class C‡(a)(c)
|
|
5.90
|
%†#
|
|
12/13/36
|
|
$
|
1,614
|
|
$
|
4,035
|
|
MKP CBO I Limited
Series 4A, Class CS‡(a)(c)
|
|
0.00
|
#
|
|
10/01/12
|
|
|
1,919
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Certificate-Backed Obligations
(Cost – $2,582,383)
|
|
|
|
|
|
|
|
|
|
|
4,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Debt Obligations – 11.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
801 Grand CDO
Series 2006-1 LLC‡(a)(c)
|
|
9.20
|
†
|
|
09/20/16
|
|
|
1,000
|
|
|
240,000
|
|
Aardvark ABS CDO
Series 2007-1A, Class SUB(c)
|
|
0.00
|
#
|
|
07/06/47
|
|
|
1,000
|
|
|
0
|
|
Acacia CDO Limited
Series 10A, Class SUB‡(a)(c)
|
|
0.00
|
#
|
|
09/07/46
|
|
|
2,000
|
|
|
0
|
|
Aladdin CDO I Limited
Series 2006-3A, Class NOTE‡(a)(c)
|
|
8.20
|
†
|
|
10/31/13
|
|
|
4,000
|
|
|
110,000
|
|
Attentus CDO Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-2A, Class E2(c)
|
|
0.00
|
#
|
|
10/09/41
|
|
|
287
|
|
|
0
|
|
Series 2006-2A, Class F1‡(a)(c)
|
|
0.00
|
#
|
|
10/09/41
|
|
|
2,200
|
|
|
0
|
|
Series 2006-2A, Class F2(c)
|
|
0.00
|
#
|
|
10/09/41
|
|
|
753
|
|
|
0
|
|
Series 2007-3A, Class F‡(a)(c)
|
|
0.00
|
#
|
|
10/11/42
|
|
|
3,220
|
|
|
1
|
|
Broderick CDO Limited
Series 2007-3A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
12/06/50
|
|
|
2,149
|
|
|
0
|
|
Cairn Mezzanine ABS CDO PLC
Series 2007-3A, Class SUB(c)
|
|
0.00
|
#
|
|
08/13/47
|
|
|
1,000
|
|
|
0
|
|
CDO Repack SPC Limited
Series 2006-BRGA, Class COM(c)
|
|
0.00
|
#
|
|
12/05/51
|
|
|
1,997
|
|
|
0
|
|
Dillon Read CMBS CDO Limited
Series 2006-1A, Class COM‡(a)(c)
|
|
0.00
|
#
|
|
12/05/46
|
|
|
4,000
|
|
|
320,000
|
|
Duane Park I Limited‡(a)(c)
|
|
0.00
|
|
|
06/27/16
|
|
|
1,250
|
|
|
62,500
|
|
Gulf Stream Atlantic CDO Limited
Series 2007-1A, Class SUB‡(a)(c)
|
|
0.00
|
#
|
|
07/13/47
|
|
|
1,000
|
|
|
0
|
|
IXIS ABS CDO 1 Limited‡(a)(c)
|
|
0.00
|
|
|
12/12/46
|
|
|
1,000
|
|
|
10
|
|
Kenmore Street Synthetic CDO
Series 2006-1A, Class NOTE‡(a)(c)
|
|
8.20
|
†
|
|
04/30/14
|
|
|
12,000
|
|
|
480,000
|
|
Knollwood CDO Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-2A, Class E‡(a)(c)
|
|
0.00
|
#
|
|
07/13/46
|
|
|
1,049
|
|
|
0
|
|
Series 2006-2A, Class SN(c)
|
|
0.00
|
#
|
|
07/13/46
|
|
|
2,000
|
|
|
0
|
|
Kodiak CDO
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-1A, Class COMB‡(a)(c)
|
|
0.00
|
#
|
|
08/07/37
|
|
|
4,145
|
|
|
1
|
|
Series 2006-1A, Class G‡(a)(c)
|
|
0.00
|
#
|
|
08/07/37
|
|
|
3,236
|
|
|
1
|
|
Lancer Funding Limited
Series 2007-2A, Class A3‡(a)(c)
|
|
0.00
|
#
|
|
07/15/47
|
|
|
3,933
|
|
|
1
|
|
Linker Finance PLC
Series 16A, Class E‡(a)(c)
|
|
6.53
|
†
|
|
05/19/45
|
|
|
2,000
|
|
|
20,000
|
|
Millstone CDO Limited
Series III-A, Class COMB(c)
|
|
0.00
|
#
|
|
07/05/46
|
|
|
1,988
|
|
|
0
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
18
RMK HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Newbury Street CDO Limited
Series 2007-1A, Class D‡(a)(c)
|
|
0.00
|
%#
|
|
03/04/53
|
|
$
|
1,075
|
|
$
|
0
|
|
Norma CDO Limited
Series 2007-1A, Class E‡(a)(c)
|
|
0.00
|
#
|
|
03/11/49
|
|
|
1,962
|
|
|
0
|
|
Palmer Square PLC
Series 2A, Class CN‡(a)(c)
|
|
0.00
|
#
|
|
11/02/45
|
|
|
3,052
|
|
|
0
|
|
Pasa Funding Limited
Series 2007-1A, Class D(c)
|
|
0.00
|
#
|
|
04/07/52
|
|
|
1,000
|
|
|
0
|
|
Preferred Term Securities XXII Limited(c)
|
|
0.00
|
#
|
|
09/22/36
|
|
|
2,400
|
|
|
0
|
|
Preferred Term Securities XXII Limited‡(a)(c)
|
|
10.25
|
#
|
|
10/01/12
|
|
|
1,000
|
|
|
50,000
|
|
Preferred Term Securities XXIII Limited(c)
|
|
0.00
|
#
|
|
12/22/36
|
|
|
3,200
|
|
|
1
|
|
Preferred Term Securities XXVII Limited(c)
|
|
0.00
|
|
|
03/22/38
|
|
|
2,500
|
|
|
25,000
|
|
Preferred Term Securities XXVIII Limited‡(a)(c)
|
|
4.53
|
†
|
|
03/22/38
|
|
|
1,447
|
|
|
57,892
|
|
Preferred Term Securities XXXI Limited(c)
|
|
0.00
|
#
|
|
03/22/38
|
|
|
3,000
|
|
|
0
|
|
Sail Net Interest Margin Notes
Series 2004-5A, Class B‡(a)(b)(c)
|
|
6.75
|
#
|
|
06/27/34
|
|
|
117
|
|
|
467
|
|
Sharps CDO
Series 2006-1A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
05/08/46
|
|
|
1,924
|
|
|
0
|
|
Squared CDO Limited
Series 2007-1A, Class C‡(a)(c)
|
|
0.00
|
#
|
|
05/11/57
|
|
|
1,067
|
|
|
0
|
|
Steers Series 2007-A‡(a)(c)
|
|
5.90
|
†
|
|
06/20/18
|
|
|
6,000
|
|
|
3,060,000
|
|
Taberna Preferred Funding Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-6A, Class COM1‡(a)(c)
|
|
0.00
|
#
|
|
12/05/36
|
|
|
4,252
|
|
|
1
|
|
Series 2006-7A, Class C1‡(a)(c)
|
|
0.00
|
#
|
|
02/05/37
|
|
|
3,138
|
|
|
0
|
|
Tahoma CDO Limited
Series 2007-2A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
09/15/47
|
|
|
1,062
|
|
|
0
|
|
TPref Funding III Limited(a)(c)(d)
|
|
0.00
|
#
|
|
01/15/33
|
|
|
1,317
|
|
|
0
|
|
Trapeza CDO I LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-10A, Class D2‡(a)(c)
|
|
0.00
|
#
|
|
06/06/41
|
|
|
2,044
|
|
|
0
|
|
Series 2006-10A, Class SUB(c)
|
|
0.00
|
#
|
|
06/06/41
|
|
|
1,500
|
|
|
0
|
|
Series 2006-11A, Class F(c)
|
|
0.00
|
#
|
|
10/10/41
|
|
|
2,051
|
|
|
0
|
|
Series 2006-11A, Class SUB(c)
|
|
0.00
|
#
|
|
10/10/41
|
|
|
2,000
|
|
|
0
|
|
Webster CDO Limited
Series 2006-1, Class PS‡(a)(c)
|
|
0.00
|
#
|
|
04/13/47
|
|
|
2
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Collateralized Debt Obligations
(Cost – $92,067,667)
|
|
|
|
|
|
|
|
|
|
|
4,425,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Loan Obligation – 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Genesis CLO 2005‡(a)(c)
(Cost $1,000,000)
|
|
0.00
|
|
|
06/23/10
|
|
|
1
|
|
|
27,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity Loans – 0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Ameriquest Mortgage Securities Inc.
Series 2003-8, Class MV6(b)
|
|
6.96
|
†
|
|
10/25/33
|
|
|
536
|
|
|
36,981
|
|
Amresco Residential Securities Mortgage Loan Trust
Series 1999-1, Class B(b)
|
|
7.21
|
†
|
|
11/25/29
|
|
|
408
|
|
|
39,368
|
|
Fremont Home Loan Trust
Series 2004-4, Class M7(b)(c)
|
|
4.93
|
†
|
|
03/25/35
|
|
|
341
|
|
|
44,387
|
See notes
to financial statements.
19
RMK HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Meritage Asset Holdings NIM
Series 2005-2, Class N4‡(a)(b)(c)
|
|
0.00
|
%#
|
|
11/25/35
|
|
$
|
3,000
|
|
$
|
0
|
|
Terwin Mortgage Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-7SL, Class B7‡(a)(b)(c)
|
|
0.00
|
#
|
|
07/25/35
|
|
|
932
|
|
|
0
|
|
Series 2005-11, Class 1B7‡(a)(b)(c)
|
|
0.00
|
#
|
|
11/25/36
|
|
|
871
|
|
|
135
|
|
Terwin Mortgage Trust NIM
Series 2005-R1, Class A‡(a)(b)(c)
|
|
0.00
|
#
|
|
12/28/36
|
|
|
3,000
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Home Equity Loans
(Cost – $7,180,262)
|
|
|
|
|
|
|
|
|
|
|
120,871
|
|
|
|
|
|
|
|
Total ASSET-BACKED SECURITIES
(Cost – $102,830,312)
|
|
|
|
|
|
|
|
|
|
|
4,577,781
|
|
|
|
|
|
|
|
MORTGAGE-BACKED SECURITIES – 12.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations – 12.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Citigroup Mortgage Loan Trust Inc.
Series 2006-AR9, Class 1M1(c)
|
|
3.55
|
†
|
|
11/25/36
|
|
|
1,000
|
|
|
189,700
|
|
Countrywide Alternative Loan Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-56, Class M4(c)
|
|
4.13
|
†
|
|
11/25/35
|
|
|
1,454
|
|
|
148,191
|
|
Series 2006-6CB, Class B5(c)
|
|
5.57
|
†#
|
|
05/25/36
|
|
|
258
|
|
|
1,314
|
|
Countrywide Alternative Loan Trust NIM
Series 2006-OA11, Class N3‡(a)(c)
|
|
12.50
|
|
|
09/25/46
|
|
|
473
|
|
|
66,580
|
|
Deutsche Mortgage Securities Inc.
Series 2006-RS1, Class N2‡(a)(c)
|
|
3.68
|
†
|
|
09/27/35
|
|
|
3,000
|
|
|
119,100
|
|
Greenwich Structured Adjustable Rate Mortgage Products
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-3A, Class N2‡(a)(c)
|
|
2.00
|
|
|
06/27/35
|
|
|
2,980
|
|
|
613,257
|
|
Series 2005-4A, Class N2‡(a)(c)
|
|
0.00
|
#
|
|
07/27/45
|
|
|
5,162
|
|
|
1,067,037
|
|
Harborview Mortgage Loan Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2003-2, Class 1X(c)
|
|
2.45
|
†
|
|
10/19/33
|
|
|
4,739
|
|
|
117,250
|
|
Series 2006-4, Class B11‡(a)(c)
|
|
4.78
|
†
|
|
05/19/47
|
|
|
1,739
|
|
|
10,953
|
|
Harborview NIM Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-8A, Class N5‡(a)(c)
|
|
0.00
|
#
|
|
07/21/36
|
|
|
2,000
|
|
|
0
|
|
Series 2006-8, Class PS(c)
|
|
0.00
|
|
|
07/22/36
|
|
|
0
|
|
|
0
|
|
Series 2006-14, Class N4‡(a)(c)
|
|
8.35
|
|
|
03/19/38
|
|
|
1,000
|
|
|
20,295
|
|
Series 2006-14, Class PS(c)
|
|
0.00
|
|
|
12/19/36
|
|
|
5,000
|
|
|
50
|
|
Indymac Index Mortgage Loan NIM Trust
Series 2006-AR6, Class PS‡(a)(b)(c)
|
|
0.00
|
|
|
06/25/46
|
|
|
67
|
|
|
1
|
|
Long Beach Asset Holdings Corp. NIM Trust
Series 2005-WL1, Class N4‡(a)(b)(c)
|
|
0.00
|
#
|
|
06/25/45
|
|
|
5,000
|
|
|
1
|
|
Long Beach Mortgage Loan Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-A, Class A1(b)
|
|
3.30
|
†
|
|
05/25/36
|
|
|
3,225
|
|
|
419,531
|
|
Series 2006-A, Class A2(b)
|
|
5.55
|
†
|
|
05/25/36
|
|
|
1,963
|
|
|
280,053
|
|
Park Place Securities Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-WHQ3, Class M11(b)
|
|
5.71
|
†
|
|
06/25/35
|
|
|
2,000
|
|
|
35,628
|
|
Series 2005-WCW2, Class M10(b)
|
|
5.71
|
†#
|
|
07/25/35
|
|
|
2,000
|
|
|
25,103
|
|
Park Place Securities Inc. NIM Trust
Series 2005-WCW1, Class B‡(a)(b)(c)
|
|
0.00
|
#
|
|
09/25/35
|
|
|
1,022
|
|
|
0
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
20
RMK HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MORTGAGE-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Accredit Loans Inc.
Series 2006-QO8, Class M4(c)
|
|
3.74
|
%†
|
|
10/25/46
|
|
$
|
2,001
|
|
$
|
134,842
|
|
Sail NIM Notes
Series 2004-7A, Class B‡(a)(b)(c)
|
|
0.00
|
#
|
|
08/27/34
|
|
|
1,796
|
|
|
0
|
|
Sasco Net Interest Margin Trust
Series 2003-S, Class A‡(a)(c)
|
|
7.50
|
|
|
12/28/33
|
|
|
1,306
|
|
|
182,690
|
|
Sharp SP I LLC NIM Trust
Series 2006-AHM3, Class N3‡(a)(c)
|
|
12.50
|
|
|
10/25/46
|
|
|
1,000
|
|
|
103,863
|
|
Structured Adjustable Rate Mortgage Loan Trust
Series 2006-8, Class 4A2
|
|
5.98
|
†
|
|
09/25/36
|
|
|
1,000
|
|
|
769,008
|
|
Structured Asset Investment Loan Trust
Series 2004-8, Class B2(b)
|
|
5.00
|
|
|
09/25/34
|
|
|
788
|
|
|
4,031
|
|
Structured Asset Mortgage Investments Inc.
Series 2006-AR3, Class 1B1(c)
|
|
3.61
|
†
|
|
04/25/36
|
|
|
2,500
|
|
|
161,212
|
|
Structured Asset Securities Corp.
Series 2003-BC1, Class B2(b)
|
|
9.00
|
|
|
05/25/32
|
|
|
2,077
|
|
|
117,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Collateralized Mortgage Obligations
(Cost – $36,575,978)
|
|
|
|
|
|
|
|
|
|
|
4,587,666
|
|
|
|
|
|
|
|
Total MORTGAGE-BACKED SECURITIES
(Cost – $36,575,978)
|
|
|
|
|
|
|
|
|
|
|
4,587,666
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS – 66.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive – 0.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Metaldyne Corp.(c)
(Cost $2,844,189)
|
|
11.00
|
|
|
06/15/12
|
|
|
3,225
|
|
|
322,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Industry – 14.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
ACE Hardware Corp.‡(a)
|
|
9.13
|
|
|
06/01/16
|
|
|
500
|
|
|
427,500
|
|
Buckeye Technologies Inc.
|
|
8.50
|
|
|
10/01/13
|
|
|
500
|
|
|
465,000
|
|
Crown Americas LLC
|
|
7.75
|
|
|
11/15/15
|
|
|
500
|
|
|
487,500
|
|
FireKeepers Development Authority‡(a)
|
|
13.88
|
|
|
05/01/15
|
|
|
500
|
|
|
440,000
|
|
Freeport McMoRan Copper & Gold
|
|
8.38
|
|
|
04/01/17
|
|
|
500
|
|
|
492,500
|
|
Georgia-Pacific Corp.
|
|
8.13
|
|
|
05/15/11
|
|
|
500
|
|
|
495,000
|
|
Momentive Performance
|
|
9.75
|
|
|
12/01/14
|
|
|
500
|
|
|
395,000
|
|
Mueller Water Products Inc.
|
|
7.38
|
|
|
06/01/17
|
|
|
500
|
|
|
395,000
|
|
TRW Automotive Inc.‡(a)
|
|
7.25
|
|
|
03/15/17
|
|
|
625
|
|
|
493,750
|
|
Tube City IMS Corp.
|
|
9.75
|
|
|
02/01/15
|
|
|
500
|
|
|
445,000
|
|
U.S. Steel Corp.
|
|
7.00
|
|
|
02/01/18
|
|
|
500
|
|
|
451,380
|
|
Westlake Chemical Corp.
|
|
6.63
|
|
|
01/15/16
|
|
|
625
|
|
|
531,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Basic Industry
(Cost – $5,844,756)
|
|
|
|
|
|
|
|
|
|
|
5,518,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Goods – 3.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Alliant Techsystems Inc.
|
|
6.75
|
|
|
04/01/16
|
|
|
500
|
|
|
467,500
|
|
Case Corp.
|
|
7.25
|
|
|
01/15/16
|
|
|
500
|
|
|
452,500
|
|
Terex Corp.
|
|
7.38
|
|
|
01/15/14
|
|
|
500
|
|
|
455,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital Goods
(Cost – $1,471,653)
|
|
|
|
|
|
|
|
|
|
|
1,375,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
21
RMK HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Cyclical – 0.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford Motor Credit Co.
|
|
7.00
|
%
|
|
10/01/13
|
|
$
|
250
|
|
$
|
153,639
|
|
General Motors Corp.
|
|
7.13
|
|
|
07/15/13
|
|
|
250
|
|
|
115,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Cyclical
(Cost – $318,206)
|
|
|
|
|
|
|
|
|
|
|
268,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Non-Cyclical – 5.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellation Brands Inc.
|
|
7.25
|
|
|
05/15/17
|
|
|
500
|
|
|
460,000
|
|
Couche-Tard U.S. LP
|
|
7.50
|
|
|
12/15/13
|
|
|
625
|
|
|
575,000
|
|
Jarden Corp.
|
|
7.50
|
|
|
05/01/17
|
|
|
625
|
|
|
520,312
|
|
Stater Brothers Holdings
|
|
8.13
|
|
|
06/15/12
|
|
|
500
|
|
|
490,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Non-Cyclical
(Cost – $2,143,373)
|
|
|
|
|
|
|
|
|
|
|
2,045,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Products – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Products International Inc(c)
(Cost – $289,584)
|
|
0.00
|
#
|
|
10/01/12
|
|
|
290
|
|
|
0
|
|
Energy – 7.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Chesapeake Energy Corp.
|
|
6.88
|
|
|
01/15/16
|
|
|
500
|
|
|
456,250
|
|
MarkWest Energy Partners LP
|
|
8.75
|
|
|
04/15/18
|
|
|
500
|
|
|
475,000
|
|
Newfield Exploration Company
|
|
6.63
|
|
|
09/01/14
|
|
|
500
|
|
|
450,000
|
|
Range Resources Corp.
|
|
7.50
|
|
|
05/15/16
|
|
|
500
|
|
|
477,500
|
|
SESI LLC
|
|
6.88
|
|
|
06/01/14
|
|
|
625
|
|
|
543,750
|
|
Whiting Petroleum Corp.
|
|
7.25
|
|
|
05/01/13
|
|
|
625
|
|
|
579,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Energy
(Cost – $3,157,652)
|
|
|
|
|
|
|
|
|
|
|
2,982,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance & Investment – 6.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanta Capital Trust I
|
|
8.99
|
|
|
12/17/26
|
|
|
2,050
|
|
|
1,107,000
|
|
AssuranceAmerica Capital Trust I(c)
|
|
10.50
|
|
|
12/31/35
|
|
|
1,000
|
|
|
350,000
|
|
Catlin Insurance Company Limited ‡(a)
|
|
7.25
|
†
|
|
12/31/49
|
|
|
2,000
|
|
|
892,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Finance & Investment
(Cost – $4,910,221)
|
|
|
|
|
|
|
|
|
|
|
2,349,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrials – 3.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Crown Cork & Seal Company Inc.
|
|
8.00
|
|
|
04/15/23
|
|
|
125
|
|
|
105,000
|
|
Jefferson Smurfit Corp.
|
|
8.25
|
|
|
10/01/12
|
|
|
500
|
|
|
417,500
|
|
Owens-Illinois Inc.
|
|
7.80
|
|
|
05/15/18
|
|
|
500
|
|
|
485,000
|
|
Payless Shoesource Inc.
|
|
8.25
|
|
|
08/01/13
|
|
|
250
|
|
|
220,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Industrials
(Cost – $1,288,141)
|
|
|
|
|
|
|
|
|
|
|
1,228,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance – 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Security Capital Assurance, Ltd
(Cost $253,253)
|
|
6.88
|
†#
|
|
09/30/17
|
|
|
500
|
|
|
22,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media – 4.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
CCH I LLC / CCH I Capital Corp.
|
|
11.00
|
|
|
10/01/15
|
|
|
250
|
|
|
165,000
|
|
Charter Communications Operating LLC‡(a)
|
|
8.38
|
|
|
04/30/14
|
|
|
500
|
|
|
441,250
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
22
RMK HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Lamar Media Corp.
|
|
6.63
|
%
|
|
08/15/15
|
|
$
|
625
|
|
$
|
517,188
|
|
Mediacom Broadband LLC
|
|
8.50
|
|
|
10/15/15
|
|
|
500
|
|
|
412,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Media
(Cost – $1,691,010)
|
|
|
|
|
|
|
|
|
|
|
1,535,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resorts/Theme Parks – 1.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Flags Inc.
|
|
9.63
|
|
|
06/01/14
|
|
|
611
|
|
|
342,160
|
|
Six Flags Operations Inc.‡(a)
|
|
12.25
|
|
|
07/15/16
|
|
|
272
|
|
|
248,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Resorts/Theme Parks
(Cost – $895,836)
|
|
|
|
|
|
|
|
|
|
|
591,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services Cyclical – 5.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
AMC Entertainment Inc.
|
|
8.63
|
|
|
08/15/12
|
|
|
500
|
|
|
495,000
|
|
Iron Mountain Inc.
|
|
8.75
|
|
|
07/15/18
|
|
|
625
|
|
|
634,375
|
|
Pokagon Gaming Authority‡(a)
|
|
10.38
|
|
|
06/15/14
|
|
|
500
|
|
|
506,250
|
|
Seneca Gaming Corp.
|
|
7.25
|
|
|
05/01/12
|
|
|
500
|
|
|
435,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Services Cyclical
(Cost – $2,134,208)
|
|
|
|
|
|
|
|
|
|
|
2,070,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services Non-Cyclical – 4.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
ARAMARK Corp.
|
|
8.50
|
|
|
02/01/15
|
|
|
500
|
|
|
470,000
|
|
Church & Dwight Company Inc.
|
|
6.00
|
|
|
12/15/12
|
|
|
500
|
|
|
472,500
|
|
HCA Inc.
|
|
9.25
|
|
|
11/15/16
|
|
|
625
|
|
|
607,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Services Non-Cyclical
(Cost – $1,629,560)
|
|
|
|
|
|
|
|
|
|
|
1,550,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Purpose Entities – 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income Pass-Through Trust 2007
Series 2007-C JPM, Class B‡(a)(c)
(Cost $1,709,206)
|
|
0.00
|
#
|
|
05/15/77
|
|
|
1,675
|
|
|
62,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology & Electronics – 2.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
Flextronics International Limited
|
|
6.25
|
|
|
11/15/14
|
|
|
500
|
|
|
422,500
|
|
Sungard Data Systems Inc.
|
|
10.25
|
|
|
08/15/15
|
|
|
625
|
|
|
542,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Technology & Electronics
(Cost – $1,100,483)
|
|
|
|
|
|
|
|
|
|
|
964,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications – 5.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
American Tower Corp.‡(a)
|
|
7.00
|
|
|
10/15/17
|
|
|
500
|
|
|
477,500
|
|
Cincinnati Bell Inc.
|
|
8.38
|
|
|
01/15/14
|
|
|
500
|
|
|
435,000
|
|
Citizens Communications Co.
|
|
6.25
|
|
|
01/15/13
|
|
|
500
|
|
|
468,125
|
|
L-3 Communications Corp.
|
|
6.13
|
|
|
01/15/14
|
|
|
500
|
|
|
462,500
|
|
Windstream Corp.
|
|
7.00
|
|
|
03/15/19
|
|
|
500
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Telecommunications
(Cost – $2,397,526)
|
|
|
|
|
|
|
|
|
|
|
2,243,125
|
|
|
|
|
|
|
|
Total HIGH YIELD CORPORATE BONDS
(Cost – $34,078,857)
|
|
|
|
|
|
|
|
|
|
|
25,131,502
|
See notes
to financial statements.
23
RMK HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MUNICIPAL SECURITIES – 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Muni-Arizona – 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Pima County Arizona Industrial Development Authority(d)
|
|
9.32
|
%
|
|
06/01/09
|
|
$
|
25
|
|
$
|
23,385
|
|
Pima County Arizona Industrial Development Authority(d)
|
|
10.29
|
|
|
06/01/10
|
|
|
35
|
|
|
29,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Muni-Arizona
(Cost – $55,050)
|
|
|
|
|
|
|
|
|
|
|
53,120
|
|
Total MUNICIPAL SECURITIES
(Cost – $55,050)
|
|
|
|
|
|
|
|
|
|
|
53,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
COMMON STOCKS - 2.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Products - 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Products International Inc.*(c)
(Cost $1,061,596)
|
|
|
11,583
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance & Investment – 1.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
FSI Realty Trust(c)
|
|
|
72,000
|
|
|
93,600
|
|
FSI Realty Trust‡(a)(c)
|
|
|
26,200
|
|
|
34,060
|
|
Mid Country‡(a)(c)
|
|
|
38,235
|
|
|
326,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Finance & Investment
(Cost – $1,590,997)
|
|
|
|
|
|
453,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrials – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Port Townsend Company Inc.*‡(a)(c)
(Cost $486,581)
|
|
|
875
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications – 0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Windstream Corp.
(Cost $125,755)
|
|
|
10,000
|
|
|
109,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telephone-Integrated – 0.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
Frontier Communications Corp.
|
|
|
10,000
|
|
|
115,000
|
|
Qwest Communications International Inc.
|
|
|
25,000
|
|
|
80,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Telephone-Integrated
(Cost – $227,733)
|
|
|
|
|
|
195,750
|
|
|
|
|
|
Total COMMON STOCKS
(Cost – $3,492,662)
|
|
|
|
|
|
758,954
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
24
RMK HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHORT TERM INVESTMENT – 7.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
State Street Euro Dollar Time Deposit
(Cost $2,833,000)
|
|
0.85
|
%
|
|
10/01/08
|
|
$
|
2,833
|
|
$
|
2,833,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments – 99.6%
(Cost – $179,865,859)
|
|
|
37,942,023
|
|
Other Assets in Excess of Liabilities – 0.4%
|
|
|
171,486
|
|
|
|
|
|
|
NET ASSETS – 100.0%
|
|
$
|
38,113,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
—
|
|
Non-income producing security.
|
|
#
|
|
—
|
|
Issuer is currently in default on its regularly scheduled interest payment.
|
|
†
|
|
—
|
|
Variable Rate Security – Interest rate shown is the rate in effect as of September 30, 2008.
|
|
‡
|
|
—
|
|
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 September 30, 2008, the total value of all such investments was $10,966,786 or 28.77% of net assets.
|
|
(a)
|
|
—
|
|
Private Placement.
|
|
(b)
|
|
—
|
|
Investment in subprime security. As of September 30, 2008, the total value of all such investments was $1,003,662 or 2.63% of net assets.
|
|
(c)
|
|
—
|
|
Security valued in good faith pursuant to fair value procedures adopted by the Board of Directors. As of September 30, 2008, the total value of all such securities was $8,626,885 or 22.63% of net
assets.
|
|
(d)
|
|
—
|
|
Zero Coupon Bond – Interest rate represents current yield to maturity.
|
|
CBO
|
|
—
|
|
Certificate-Backed Obligation.
|
|
CDO
|
|
—
|
|
Collateralized Debt Obligation.
|
|
NIM
|
|
—
|
|
Net Interest Margin.
|
See notes
to financial statements.
25
RMK
MULTI-SECTOR HIGH INCOME FUND, INC.
OBJECTIVE & STRATEGY
RMK Multi-Sector High Income Fund, Inc. seeks a high level of current income. The Fund seeks
capital growth as a secondary investment objective when consistent with its primary investment objective. The Fund invests in a diversified portfolio consisting primarily of debt securities that offer attractive yield and capital appreciation
potential. Under normal market conditions, the Fund invests a majority of its total assets in below investment grade debt securities, including up to 20% of the Fund’s total assets in distressed securities. The Fund maintains the flexibility to
invest up to 50% of its total assets in investment grade debt securities. The Fund invests up to 30% of its total assets in equity securities of both domestic and foreign issuers and up to 15% of its total assets in a combination of foreign debt and
foreign equity securities. The Fund invests in a wide range of debt securities including corporate bonds, mortgage-backed and asset-backed securities, convertible debt securities, distressed securities, including securities of companies in
bankruptcy reorganization proceedings or otherwise in the process of debt restructuring, U.S. government and municipal obligations and foreign government obligations. (Below investment grade debt securities are rated Ba1 or lower by Moody’s
Investors Service, Inc., BB+ or lower by Standard & Poor’s Ratings Group, comparably rated by another nationally recognized statistical rating organization or, if unrated, determined by the Fund’s investment adviser to be of
comparable quality.)
Investment Risks:
Investors in any bond fund should anticipate fluctuations in price. Bond prices and the value of bond
funds decline as interest rates rise. Bonds with longer-term maturities generally are more vulnerable to interest rate risk than bonds with shorter-term maturities. Below investment grade bonds involve greater credit risk, which is the risk that the
issuer will not make interest or principal payments when due. An economic downturn or period of rising interest rates could adversely affect the ability of issuers, especially issuers of below investment grade debt, to service primary obligations
and an unanticipated default could cause the Fund to experience a reduction in value of its shares. The Fund’s investments in mortgage-backed or asset-backed securities that are “subordinated” to other interests in the same pool may
increase credit risk to the extent that the Fund as a holder of those securities may only receive payments after the pool’s obligations to other investors have been satisfied. Below investment grade bonds are also subject to greater price
volatility and are less liquid, especially during periods of economic uncertainty or change, than higher-rated debt securities. The value of U.S. and foreign equity securities in which the Fund invests will change based on changes in a
company’s financial condition and in overall market and economic conditions. Leverage creates an opportunity for an increased return to common stockholders, but unless the income and capital appreciation, if any, on securities acquired with
leverage proceeds exceed the costs of the leverage, the use of leverage will diminish the investment performance of the Fund’s shares. Use of leverage may also increase the likelihood that the net asset value of the Fund and market value of its
common shares will be more volatile, and the yield and total return to common stockholders will tend to fluctuate more in response to changes in interest rates and creditworthiness.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
For the six month period ending September 30, 2008, RMK Multi-Sector High Income Fund, Inc. (the “Fund”) had a total return of -72.91%, which assumes the reinvestment of dividends and is exclusive of brokerage
commissions. Based on the NYSE closing price of $0.75 on September 30, 2008, the Fund’s shares have a dividend yield of 16.00%. The dividend yield is calculated as the annualized amount of the reporting period’s most recent monthly
dividend declared divided by the stated stock price. For the six months ended September 30, 2008, the Lehman Brothers U.S. Corporate High Yield Index
1
had a total
return of -7.28%. For the six months ended September 30, 2008, the previous benchmark, the Lehman Brothers Ba U.S. High Yield Index
2
had a total return of -4.10%.
During much of this year, the high yield market largely had been spared the pressure of forced selling, which has pushed prices lower. However, in
September, Lehman’s bankruptcy filing was followed by widespread selling of below-investment-grade corporate credit. Following other markets, both high yield bonds and leveraged loans traded lower. Despite the challenges that the market has
experienced, we believe that the dramatic widening in yield spreads has created an opportunity. On September 30, 2008, yield spreads were over 1,000 basis points, reaching levels normally seen at the bottom of a credit cycle. That is not to say
that yield spreads could not widen in the near
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
26
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
term. However, defaults are still running at one-third of their long-term average and in time could rise to their historical average, not to mention to reach peak
levels, which are typically around 10%. Meanwhile, yield spreads are implying a 12% to 14% default rate at a time when the actual default rate is between 1% and 2%. With today’s near-record yield spreads, high yield investors can build a
“cushion” against a rise in default losses later.
The well-publicized problems in the mortgage and credit markets have had a significant
impact on the Fund’s performance. Further, the high concentration of the Fund’s holdings in complex mortgage-backed securities and asset-backed securities jeopardized the Fund’s future earnings power. Upon taking over management, we
described a plan to reduce the Fund’s holdings in these types of securities and to increase the Fund’s overall credit quality. Since then, we have been executing this plan and have been successful at shifting the asset allocation of the
Fund toward high yield corporate bonds. We expect this allocation to form the core sector of the Fund in the long-term. We have actively increased the Fund’s allocation to high yield corporate bonds by 22% as of September 30, 2008.
Additionally, we have decreased the Fund’s allocation to lower rated (CCC rated through Unrated) securities by 37% in favor of BB rated and B rated securities.
While broad industry themes are in flux due to the credit markets’ problems and a slowing economy, we have been able to find opportunity within the high yield corporate market. Generally, we have favored larger
capitalization companies that do not have near-term needs to access the capital markets for liquidity. We have been screening companies for their ability to operate without being subject to new issuance markets or asset sales. We believe that the
corporate high yield holdings in the Fund are of higher average credit quality than the market. We have avoided companies in the consumer discretionary, financial and home-building related industries and have favored companies in the aerospace,
energy and consumer non-discretionary sectors. The unprecedented declines in home prices, coupled with high inventories of unsold homes, are likely to delay a rebound in housing and housing related industries for some time. An overstretched consumer
no longer has the ability to tap home equity in order to subsidize personal spending, and discretionary purchases are suffering. Financial companies are in the process of a massive leverage reduction that likely will impact earnings for the
foreseeable future. In the aerospace sector, many companies are skewed toward defense, and are seeing robust demand. Within the energy sector, we prefer companies with better-than-average cash flow, strong balance sheets and easily saleable assets.
Finally, the consumer non-discretionary sector has an element of recession resistance that makes it attractive given our current economic outlook. Longer-term, we believe that the high yield market offers attractive investment opportunities based on
the market’s overestimation of default losses. We continue to focus on our goal of better positioning the Fund to improve stability of the net asset value and to dividends.
Forward-Looking Information
This management discussion contains certain
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements that are based on various assumptions
(some of which are beyond our control) may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,”
“anticipate,” “continue,” “should,” “intend,” or similar terms or variations on those terms or the negative of those terms. Although we believe that the expectations contained in any forward-looking statement
are based on reasonable assumptions, we can give no assurance that our expectations will be attained. We do not undertake, and specifically disclaim any obligation, to publicly release any update or supplement to any forward-looking statements to
reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
27
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
Index Description
1
The Lehman Brothers U.S. Corporate High Yield Index covers the U.S. dollar denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield
if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging markets debt. The Lehman Brothers U.S. Corporate High Yield Index is part of the Lehman Brothers U.S. Universal and Global High Yield
Indices. The index is unmanaged and, unlike the Fund, is not affected by cash flows or trading and other expenses. It is not possible to invest directly in an index.
2
The Lehman Brothers Ba
U.S. High Yield Index is the Ba component of the U.S. Corporate High Yield Index, a broad-based unmanaged index of fixed-rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds and debt issues from countries designated as emerging
markets (
e.g.
, Argentina, Brazil and Venezuela) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-emerging countries are included. Original issue zeroes, step-up coupon structures and 144As are also included. The
index is unmanaged and, unlike the Fund, is not affected by cash flows or trading and other expenses. It is not possible to invest directly in an index.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
28
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio Characteristics (Unaudited)
September 30, 2008
PORTFOLIO STATISTICS
|
|
|
|
|
Annualized dividend yield
1
|
|
16.00%
|
|
|
|
|
Weighted average coupon
|
|
6.32%
|
|
|
|
|
Average effective maturity
|
|
6.32 years
|
|
|
|
|
Percentage of leveraged assets
|
|
0.42%
|
|
|
|
|
Total number of holdings
|
|
141
|
CREDIT QUALITY
|
|
|
|
|
|
A and Above
2
|
|
21
|
%
|
|
|
|
|
BBB
|
|
1
|
%
|
|
|
|
|
BB
|
|
24
|
%
|
|
|
|
|
B
|
|
31
|
%
|
|
|
|
|
CCC
|
|
6
|
%
|
|
|
|
|
Unrated
|
|
17
|
%
|
|
Total
|
|
100
|
%
|
ASSET ALLOCATION
|
|
|
|
|
|
Asset-Backed Securities
|
|
16
|
%
|
|
|
|
|
Mortgage-Backed Securities
|
|
14
|
%
|
|
|
|
|
High Yield Corporate Bonds
|
|
59
|
%
|
|
|
|
|
Common stocks
|
|
2
|
%
|
|
|
|
|
Short-term investments
|
|
9
|
%
|
|
Total
|
|
100
|
%
|
|
1
|
Dividends may include net investment income, capital gains and/or return of capital. The dividend yield referenced above is
calculated as the annualized amount of the most recent monthly dividend declared divided by the September 30, 2008 stock price.
|
|
2
|
Includes short-term investments.
|
29
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET-BACKED SECURITIES – 16.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Debt Obligations – 16.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
801 Grand CDO
Series 2006-1 LLC‡(a)(c)
|
|
9.20
|
%†
|
|
09/20/16
|
|
$
|
2,000
|
|
$
|
480,000
|
|
Aardvark ABS CDO
Series 2007-1A, Class SUB(c)
|
|
0.00
|
#
|
|
07/06/47
|
|
|
3,000
|
|
|
0
|
|
Acacia CDO Limited
Series 10A, Class SUB‡(a)(c)
|
|
0.00
|
#
|
|
09/07/46
|
|
|
4,000
|
|
|
0
|
|
Aladdin CDO I Limited
Series 2006-3A, Class NOTE‡(a)(c)
|
|
8.20
|
†
|
|
10/31/13
|
|
|
6,000
|
|
|
165,000
|
|
Attentus CDO Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-2A, Class E2(c)
|
|
0.00
|
#
|
|
10/09/41
|
|
|
388
|
|
|
0
|
|
Series 2006-2A, Class F1‡(a)(c)
|
|
0.00
|
#
|
|
10/09/41
|
|
|
2,200
|
|
|
0
|
|
Series 2006-2A, Class F2(c)
|
|
0.00
|
#
|
|
10/09/41
|
|
|
1,007
|
|
|
0
|
|
Series 2007-3A, Class F‡(a)(c)
|
|
0.00
|
#
|
|
10/11/42
|
|
|
4,293
|
|
|
1
|
|
Broderick CDO Limited
Series 2007-3A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
12/06/50
|
|
|
3,224
|
|
|
0
|
|
Cairn Mezzanine ABS CDO PLC
Series 2007-3A, Class SUB(c)
|
|
0.00
|
#
|
|
08/13/47
|
|
|
1,000
|
|
|
0
|
|
CDO Repack SPC Limited
Series 2006-BRGA, Class COM(c)
|
|
0.00
|
#
|
|
12/05/51
|
|
|
2,996
|
|
|
0
|
|
Dillon Read CMBS CDO Limited
Series 2006-1A, Class COM‡(a)(c)
|
|
0.00
|
#
|
|
12/05/46
|
|
|
5,000
|
|
|
400,000
|
|
Duane Park I Limited‡(a)(c)
|
|
0.00
|
|
|
06/27/16
|
|
|
2,500
|
|
|
125,000
|
|
Gulf Stream Atlantic CDO Limited
Series 2007-1A, Class SUB‡(a)(c)
|
|
0.00
|
#
|
|
07/13/47
|
|
|
2,000
|
|
|
0
|
|
Ischus CDO III Limited‡(a)(c)
|
|
0.00
|
#
|
|
07/03/46
|
|
|
1
|
|
|
0
|
|
IXIS ABS CDO 1 Limited‡(a)(c)
|
|
0.00
|
|
|
12/12/46
|
|
|
2,000
|
|
|
20
|
|
Kenmore Street Synthetic CDO
Series 2006-1A, Class NOTE‡(a)(c)
|
|
8.20
|
†
|
|
04/30/14
|
|
|
15,000
|
|
|
600,000
|
|
Knollwood CDO Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-2A, Class E‡(a)(c)
|
|
0.00
|
#
|
|
07/13/46
|
|
|
2,098
|
|
|
0
|
|
Series 2006-2A, Class SN(c)
|
|
0.00
|
#
|
|
07/13/46
|
|
|
3,000
|
|
|
0
|
|
Kodiak CDO
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-1A, Class COMB‡(a)(c)
|
|
0.00
|
#
|
|
08/07/37
|
|
|
6,218
|
|
|
1
|
|
Series 2006-1A, Class G‡(a)(c)
|
|
0.00
|
#
|
|
08/07/37
|
|
|
3,236
|
|
|
0
|
|
Lancer Funding Limited
Series 2007-2A, Class A3‡(a)(c)
|
|
0.00
|
#
|
|
07/15/47
|
|
|
3,933
|
|
|
1
|
|
Linker Finance PLC
Series 16A, Class E‡(a)(c)
|
|
6.53
|
†
|
|
05/19/45
|
|
|
5,000
|
|
|
50,000
|
|
Millstone CDO Limited
Series III-A, Class COMB(c)
|
|
0.00
|
#
|
|
07/05/46
|
|
|
4,075
|
|
|
1
|
|
Newbury Street CDO Limited
Series 2007-1A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
03/04/53
|
|
|
3,224
|
|
|
0
|
|
Norma CDO Limited
Series 2007-1A, Class E‡(a)(c)
|
|
0.00
|
#
|
|
03/11/49
|
|
|
1,962
|
|
|
0
|
|
Pasa Funding Limited
Series 2007-1A, Class D(c)
|
|
0.00
|
#
|
|
04/07/52
|
|
|
2,000
|
|
|
0
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
30
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Term Securities XXII Limited(c)
|
|
0.00
|
%#
|
|
09/22/36
|
|
$
|
4,600
|
|
$
|
1
|
|
Preferred Term Securities XXII Limited‡(a)(c)
|
|
10.25
|
#
|
|
10/01/12
|
|
|
3,000
|
|
|
150,000
|
|
Preferred Term Securities XXIII Limited(c)
|
|
0.00
|
#
|
|
12/22/36
|
|
|
3,800
|
|
|
1
|
|
Preferred Term Securities XXVII Limited(c)
|
|
0.00
|
|
|
03/22/38
|
|
|
3,000
|
|
|
30,000
|
|
Preferred Term Securities XXVIII Limited‡(a)(c)
|
|
4.53
|
†
|
|
03/22/38
|
|
|
1,497
|
|
|
59,889
|
|
Preferred Term Securities XXXI Limited(c)
|
|
0.00
|
#
|
|
03/22/38
|
|
|
3,000
|
|
|
0
|
|
Sharps CDO
Series 2006-1A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
05/08/46
|
|
|
1,924
|
|
|
0
|
|
Squared CDO Limited
Series 2007-1A, Class C‡(a)(c)
|
|
0.00
|
#
|
|
05/11/57
|
|
|
1,067
|
|
|
0
|
|
Steers Series 2007-A‡(a)(c)
|
|
5.90
|
†
|
|
06/20/18
|
|
|
9,000
|
|
|
4,590,000
|
|
Taberna Preferred Funding Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-6A, Class COM1‡(a)(c)
|
|
0.00
|
#
|
|
12/05/36
|
|
|
6,378
|
|
|
1
|
|
Series 2006-7A, Class C1‡(a)(c)
|
|
0.00
|
#
|
|
02/05/37
|
|
|
5,230
|
|
|
1
|
|
Tahoma CDO Limited
Series 2007-2A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
09/15/47
|
|
|
1,062
|
|
|
0
|
|
Trapeza CDO I LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-10A, Class D2‡(a)(c)
|
|
0.00
|
#
|
|
06/06/41
|
|
|
2,044
|
|
|
0
|
|
Series 2006-10A, Class SUB(c)
|
|
0.00
|
#
|
|
06/06/41
|
|
|
2,000
|
|
|
0
|
|
Series 2006-11A, Class F(c)
|
|
0.00
|
#
|
|
10/10/41
|
|
|
2,051
|
|
|
0
|
|
Series 2006-11A, Class SUB(c)
|
|
0.00
|
#
|
|
10/10/41
|
|
|
2,000
|
|
|
0
|
|
Tricadia CDO Limited
Series 2006-5A, Class SUB‡(a)(c)
|
|
0.00
|
#
|
|
06/19/46
|
|
|
2,000
|
|
|
0
|
|
Webster CDO Limited
Series 2006-1, Class PS‡(a)(c)
|
|
0.00
|
#
|
|
04/13/47
|
|
|
4
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Collateralized Debt Obligations
(Cost – $127,482,964)
|
|
|
|
|
|
|
|
|
|
|
6,649,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Loan Obligation – 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Genesis CLO 2005‡(a)(c)
(Cost $2,970,000)
|
|
0.00
|
|
|
06/23/10
|
|
|
3
|
|
|
81,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity Loans – 0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Equifirst Mortgage Loan Trust NIM Notes
Series 2004-3, Class N3‡(a)(b)(c)
|
|
0.00
|
#
|
|
12/25/34
|
|
|
2,597
|
|
|
0
|
|
Fremont Home Loan Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2004-4, Class M7(b)(c)
|
|
4.93
|
†
|
|
03/25/35
|
|
|
681
|
|
|
88,773
|
|
Series 2005-2, Class B3‡(a)(b)(c)
|
|
5.96
|
†
|
|
06/25/35
|
|
|
1,577
|
|
|
14,505
|
|
Meritage Asset Holdings NIM
Series 2004-2, Class N6‡(a)(b)(c)
|
|
0.00
|
#
|
|
01/25/35
|
|
|
197
|
|
|
0
|
|
Soundview NIM Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-1N, Class N2‡(a)(b)(c)
|
|
0.00
|
#
|
|
04/25/35
|
|
|
1,617
|
|
|
0
|
|
Series 2005-1N, Class N3‡(a)(b)(c)
|
|
0.00
|
#
|
|
04/25/35
|
|
|
1,500
|
|
|
0
|
|
Structured Asset Investment Loan Trust
Series 2005-HE1, Class B1(b)
|
|
5.71
|
†
|
|
07/25/35
|
|
|
273
|
|
|
1,130
|
See notes
to financial statements.
31
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Terwin Mortgage Trust NIM
Series 2006-R2, Class A‡(a)(b)(c)
|
|
0.00
|
%
|
|
12/25/36
|
|
$
|
12,798
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Home Equity Loans
(Cost – $18,795,745)
|
|
|
|
|
|
|
|
|
|
|
104,409
|
|
|
|
|
|
|
|
Total ASSET-BACKED SECURITIES
(Cost – $149,248,709)
|
|
|
|
|
|
|
|
|
|
|
6,835,326
|
|
|
|
MORTGAGE-BACKED SECURITIES – 14.2%
|
|
Collateralized Mortgage Obligations – 14.2%
|
|
Citigroup Mortgage Loan Trust Inc.
Series 2006-AR9, Class 1M1(c)
|
|
3.55
|
†
|
|
11/25/36
|
|
|
1,000
|
|
|
189,700
|
|
Countrywide Alternative Loan Trust
Series 2005-56, Class M4(c)
|
|
4.13
|
†
|
|
11/25/35
|
|
|
1,939
|
|
|
197,588
|
|
Deutsche ALT-A Securities Incorporated Alternate Loan Trust
Series 2006-AF1, Class A5
|
|
3.49
|
†
|
|
04/25/36
|
|
|
588
|
|
|
177,302
|
|
Deutsche Mortgage Securities Inc.
Series 2006-RS1, Class N2‡(a)(c)
|
|
3.68
|
†
|
|
09/27/35
|
|
|
7,000
|
|
|
277,900
|
|
First Franklin Mortgage Loan NIM
Series 2004-FFH4, Class N4‡(a)(b)(c)
|
|
0.00
|
#
|
|
01/21/35
|
|
|
3,100
|
|
|
0
|
|
Greenwich Structured Adjustable Rate Mortgage Products
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-3A, Class N2‡(a)(c)
|
|
2.00
|
|
|
06/27/35
|
|
|
6,407
|
|
|
1,318,503
|
|
Series 2005-4A, Class N2‡(a)(c)
|
|
0.00
|
#
|
|
07/27/45
|
|
|
12,045
|
|
|
2,489,753
|
|
Harborview Mortgage Loan Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-4, Class B11‡(a)(c)
|
|
4.78
|
†
|
|
05/19/47
|
|
|
2,318
|
|
|
14,604
|
|
Series 2006-CB1, Class 2B5(c)
|
|
4.96
|
†
|
|
03/25/36
|
|
|
2,299
|
|
|
31,490
|
|
Harborview NIM Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-8A, Class N5‡(a)(c)
|
|
0.00
|
#
|
|
07/21/36
|
|
|
5,000
|
|
|
1
|
|
Series 2006-8, Class PS(c)
|
|
0.00
|
|
|
07/22/36
|
|
|
0
|
|
|
0
|
|
Series 2006-14, Class N4‡(a)(c)
|
|
8.35
|
|
|
03/19/38
|
|
|
1,000
|
|
|
20,295
|
|
Series 2006-14, Class PS(c)
|
|
0.00
|
|
|
12/19/36
|
|
|
6,000
|
|
|
60
|
|
Indymac Index Mortgage Loan NIM Trust
Series 2006-AR6, Class PS‡(a)(b)(c)
|
|
0.00
|
|
|
06/25/46
|
|
|
67
|
|
|
1
|
|
Long Beach Asset Holdings Corp. NIM Trust
Series 2005-WL1, Class N4‡(a)(b)(c)
|
|
0.00
|
#
|
|
06/25/45
|
|
|
6,000
|
|
|
1
|
|
Long Beach Mortgage Loan Trust
Series 2005-2, Class B2‡(a)(b)(c)
|
|
5.96
|
†
|
|
04/25/35
|
|
|
1,078
|
|
|
12,186
|
|
Park Place Securities Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-WCW2, Class M11‡(a)(b)(c)
|
|
5.71
|
†
|
|
07/25/35
|
|
|
515
|
|
|
3,345
|
|
Series 2005-WCW2, Class M10(b)(c)
|
|
5.71
|
†#
|
|
07/25/35
|
|
|
4,000
|
|
|
316,000
|
|
Series 2005-WHQ3, Class M11(b)
|
|
5.71
|
†
|
|
06/25/35
|
|
|
3,000
|
|
|
53,442
|
|
Residential Accredit Loans Inc.
Series 2006-QO8, Class M4(c)
|
|
3.74
|
†
|
|
10/25/46
|
|
|
2,001
|
|
|
134,842
|
|
Sail Net Interest Margin Notes
Series 2004-7A, Class B‡(a)(b)(c)
|
|
0.00
|
#
|
|
08/27/34
|
|
|
4,788
|
|
|
0
|
|
Sharp SP I LLC NIM Trust
Series 2006-AHM3, Class N3‡(a)(c)
|
|
12.50
|
|
|
10/25/46
|
|
|
2,000
|
|
|
207,726
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
32
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MORTGAGE-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structured Asset Investment Loan Trust
Series 2004-8, Class B2(b)
|
|
5.00
|
%
|
|
09/25/34
|
|
$
|
788
|
|
|
$
|
4,031
|
|
Structured Asset Mortgage Investments Inc.
Series 2006-AR3, Class 1B1(c)
|
|
3.61
|
†
|
|
04/25/36
|
|
|
5,000
|
|
|
|
322,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Collateralized Mortgage Obligations
(Cost – $55,594,120)
|
|
|
|
|
|
|
|
|
|
|
|
5,771,193
|
|
|
|
|
|
|
|
Total MORTGAGE-BACKED SECURITIES
(Cost – $55,594,120)
|
|
|
|
|
|
|
|
|
|
|
|
5,771,193
|
|
|
|
HIGH YIELD CORPORATE BONDS – 60.8%
|
|
Automotive – 1.1%
|
|
Metaldyne Corp.(c)
(Cost $3,993,521)
|
|
11.00
|
|
|
06/15/12
|
|
|
4,472
|
|
|
|
447,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Industry – 12.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACE Hardware Corp. ‡(a)
|
|
9.13
|
|
|
06/01/16
|
|
|
500
|
|
|
|
427,500
|
|
Buckeye Technologies Inc.
|
|
8.50
|
|
|
10/01/13
|
|
|
500
|
|
|
|
465,000
|
|
Crown Americas LLC
|
|
7.75
|
|
|
11/15/15
|
|
|
500
|
|
|
|
487,500
|
|
FireKeepers Development Authority‡(a)
|
|
13.88
|
|
|
05/01/15
|
|
|
500
|
|
|
|
440,000
|
|
Freeport McMoRan Copper & Gold
|
|
8.38
|
|
|
04/01/17
|
|
|
500
|
|
|
|
492,500
|
|
Georgia-Pacific Corp.
|
|
8.13
|
|
|
05/15/11
|
|
|
500
|
|
|
|
495,000
|
|
Momentive Performance
|
|
9.75
|
|
|
12/01/14
|
|
|
500
|
|
|
|
395,000
|
|
Mueller Water Products Inc.
|
|
7.38
|
|
|
06/01/17
|
|
|
500
|
|
|
|
395,000
|
|
TRW Automotive Inc.‡(a)
|
|
7.25
|
|
|
03/15/17
|
|
|
500
|
|
|
|
395,000
|
|
Tube City IMS Corp.
|
|
9.75
|
|
|
02/01/15
|
|
|
500
|
|
|
|
445,000
|
|
U.S. Steel Corp.
|
|
7.00
|
|
|
02/01/18
|
|
|
250
|
|
|
|
225,690
|
|
Westlake Chemical Corp.
|
|
6.63
|
|
|
01/15/16
|
|
|
500
|
|
|
|
425,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Basic Industry
(Cost – $5,404,886)
|
|
|
|
|
|
|
|
|
|
|
|
5,088,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Goods – 4.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alliant Techsystems Inc.
|
|
6.75
|
|
|
04/01/16
|
|
|
500
|
|
|
|
467,500
|
|
Case Corp.
|
|
7.25
|
|
|
01/15/16
|
|
|
500
|
|
|
|
452,500
|
|
Terex Corp.
|
|
7.38
|
|
|
01/15/14
|
|
|
1,000
|
|
|
|
910,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital Goods
(Cost – $1,932,793)
|
|
|
|
|
|
|
|
|
|
|
|
1,830,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Cyclical – 0.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford Motor Credit Co.
|
|
7.00
|
|
|
10/01/13
|
|
|
250
|
|
|
|
153,639
|
|
General Motors Corp.
|
|
7.13
|
|
|
07/15/13
|
|
|
250
|
|
|
|
115,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Cyclical
(Cost – $318,206)
|
|
|
|
|
|
|
|
|
|
|
|
268,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Non-Cyclical – 4.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellation Brands Inc.
|
|
7.25
|
|
|
05/15/17
|
|
|
500
|
|
|
|
460,000
|
|
Couche-Tard U.S. LP
|
|
7.50
|
|
|
12/15/13
|
|
|
500
|
|
|
|
460,000
|
|
Jarden Corp.
|
|
7.50
|
|
|
05/01/17
|
|
|
500
|
@
|
|
|
416,250
|
See notes
to financial statements.
33
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stater Brothers Holdings
|
|
8.13
|
%
|
|
06/15/12
|
|
$
|
500
|
|
$
|
490,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Non-Cyclical
(Cost – $1,911,738)
|
|
|
|
|
|
|
|
|
|
|
1,826,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Products – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Products International Inc(c)
(Cost $393,957)
|
|
0.00
|
#
|
|
03/20/17
|
|
|
394
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy – 8.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Chesapeake Energy Corp.
|
|
6.88
|
|
|
01/15/16
|
|
|
500
|
|
|
456,250
|
|
MarkWest Energy Partners LP
|
|
8.75
|
|
|
04/15/18
|
|
|
500
|
|
|
475,000
|
|
Newfield Exploration Company
|
|
6.63
|
|
|
09/01/14
|
|
|
500
|
|
|
450,000
|
|
Range Resources Corp.
|
|
7.50
|
|
|
05/15/16
|
|
|
500
|
|
|
477,500
|
|
SeaMetric International AS(c)
|
|
11.63
|
|
|
05/25/12
|
|
|
800
|
|
|
400,000
|
|
SESI LLC
|
|
6.88
|
|
|
06/01/14
|
|
|
500
|
|
|
435,000
|
|
Whiting Petroleum Corp.
|
|
7.25
|
|
|
05/01/13
|
|
|
1,000
|
|
|
927,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Energy
(Cost – $4,182,006)
|
|
|
|
|
|
|
|
|
|
|
3,621,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance & Investment – 6.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanta Capital Trust I
|
|
8.99
|
|
|
12/17/26
|
|
|
3,065
|
|
|
1,655,100
|
|
AssuranceAmerica Capital Trust I(c)
|
|
10.50
|
|
|
12/31/35
|
|
|
2,000
|
|
|
700,000
|
|
Catlin Insurance Company Limited‡(a)
|
|
7.25
|
†
|
|
12/31/49
|
|
|
200
|
|
|
89,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Finance & Investment
(Cost – $5,235,472)
|
|
|
|
|
|
|
|
|
|
|
2,444,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrials – 2.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Jefferson Smurfit Corp.
|
|
8.25
|
|
|
10/01/12
|
|
|
500
|
|
|
417,500
|
|
Owens-Illinois Inc.
|
|
7.80
|
|
|
05/15/18
|
|
|
500
|
|
|
485,000
|
|
Payless Shoesource Inc.
|
|
8.25
|
|
|
08/01/13
|
|
|
250
|
|
|
220,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Industrials
(Cost – $1,175,624)
|
|
|
|
|
|
|
|
|
|
|
1,123,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance – 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Security Capital Assurance, Ltd
(Cost $253,157)
|
|
6.88
|
†#
|
|
09/30/17
|
|
|
500
|
|
|
22,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media – 3.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
CCH I LLC/CCH I Capital Corp.
|
|
11.00
|
|
|
10/01/15
|
|
|
500
|
|
|
330,000
|
|
Charter Communications Operating LLC‡(a)
|
|
8.38
|
|
|
04/30/14
|
|
|
500
|
|
|
441,250
|
|
Lamar Media Corp.
|
|
6.63
|
|
|
08/15/15
|
|
|
500
|
|
|
413,750
|
|
Mediacom Broadband LLC
|
|
8.50
|
|
|
10/15/15
|
|
|
500
|
|
|
412,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Media
(Cost – $1,713,560)
|
|
|
|
|
|
|
|
|
|
|
1,597,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
34
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Services Cyclical – 3.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
AMC Entertainment Inc.
|
|
8.63
|
%
|
|
08/15/12
|
|
$
|
500
|
|
$
|
495,000
|
|
Iron Mountain Inc.
|
|
8.75
|
|
|
07/15/18
|
|
|
500
|
|
|
507,500
|
|
Seneca Gaming Corp.
|
|
7.25
|
|
|
05/01/12
|
|
|
500
|
|
|
435,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Services Cyclical
(Cost – $1,478,163)
|
|
|
|
|
|
|
|
|
|
|
1,437,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services Non-Cyclical – 3.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
ARAMARK Corp.
|
|
8.50
|
|
|
02/01/15
|
|
|
500
|
|
|
470,000
|
|
Church & Dwight Company Inc.
|
|
6.00
|
|
|
12/15/12
|
|
|
500
|
|
|
472,500
|
|
HCA Inc.
|
|
9.25
|
|
|
11/15/16
|
|
|
500
|
|
|
486,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Services Non-Cyclical
(Cost – $1,500,357)
|
|
|
|
|
|
|
|
|
|
|
1,428,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Purpose Entities – 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income Pass-Through Trust 2007
Series 2007-C JPM, Class B‡(a)(c)
(Cost $2,576,561)
|
|
0.00
|
#
|
|
05/15/77
|
|
|
2,525
|
|
|
94,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology & Electronics – 3.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Flextronics International LTD
|
|
6.25
|
|
|
11/15/14
|
|
|
500
|
|
|
422,500
|
|
Sungard Data Systems Inc.
|
|
10.25
|
|
|
08/15/15
|
|
|
1,000
|
|
|
867,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Technology & Electronics
(Cost – $1,415,171)
|
|
|
|
|
|
|
|
|
|
|
1,290,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications – 5.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
American Tower Corp.‡(a)
|
|
7.00
|
|
|
10/15/17
|
|
|
500
|
|
|
477,500
|
|
Cincinnati Bell Inc.
|
|
8.38
|
|
|
01/15/14
|
|
|
500
|
|
|
435,000
|
|
Citizens Communications Co.
|
|
6.25
|
|
|
01/15/13
|
|
|
500
|
|
|
468,125
|
|
L-3 Communications Corp.
|
|
6.13
|
|
|
01/15/14
|
|
|
500
|
|
|
462,500
|
|
Windstream Corp.
|
|
7.00
|
|
|
03/15/19
|
|
|
500
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Telecommunications
(Cost – $2,392,532)
|
|
|
|
|
|
|
|
|
|
|
2,243,125
|
|
|
|
|
|
|
|
Total HIGH YIELD CORPORATE BONDS
(Cost – $35,877,704)
|
|
|
|
|
|
|
|
|
|
|
24,763,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
COMMON STOCKS – 2.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Products – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Products International Inc.*(c)
(Cost $1,442,643)
|
|
|
15,758
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance & Investment – 1.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
FSI Realty Trust(c)
|
|
|
200,000
|
|
|
260,000
|
|
FSI Realty Trust‡(a)(c)
|
|
|
35,000
|
|
|
45,500
|
|
Mid Country‡(a)(c)
|
|
|
52,941
|
|
|
451,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Finance & Investment
(Cost – $3,130,057)
|
|
|
|
|
|
757,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
35
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
COMMON STOCKS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrials – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Port Townsend Company Inc.*‡(a)(c)
(Cost $672,750)
|
|
|
1,300
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications – 0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Windstream Corp.
(Cost $125,755)
|
|
|
10,000
|
|
|
109,400
|
|
|
Telephone-Integrated – 0.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frontier Communications Corp.
|
|
|
10,000
|
|
|
115,000
|
|
|
Qwest Communications International Inc.
|
|
|
25,000
|
|
|
80,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Telephone-Integrated
(Cost – $227,733)
|
|
|
|
|
|
195,750
|
|
|
|
|
|
|
Total COMMON STOCKS
(Cost – $5,598,938)
|
|
|
|
|
|
1,062,237
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
SHORT TERM INVESTMENTS – 8.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State Street Euro Dollar Time Deposit
(Cost $3,609,000)
|
|
0.85
|
%
|
|
10/01/08
|
|
$
|
3,609
|
|
|
3,609,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments – 103.2%
(Cost – $249,928,471)
|
|
|
42,040,855
|
|
|
Liabilities in Excess of Other Assets – (3.2)%
|
|
|
(1,290,145
|
)
|
|
|
|
|
NET ASSETS – 100.0%
|
|
$
|
40,750,710
|
|
|
|
|
|
|
|
|
*
|
|
—
|
|
Non-income producing security.
|
|
@
|
|
—
|
|
Portion or entire principal amount delivered as collateral for reverse repurchase agreement.
|
|
#
|
|
—
|
|
Issuer is currently in default on its regularly scheduled interest payments.
|
|
†
|
|
—
|
|
Variable Rate Security – Interest rate shown is the rate in effect as of September 30, 2008.
|
|
‡
|
|
—
|
|
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 September 30, 2008 the total value of all such investments was $13,922,042 or 34.16% of net assets.
|
|
(a)
|
|
—
|
|
Private Placement.
|
|
(b)
|
|
—
|
|
Investment in subprime security. As of September 30, 2008, the total value of all such investments was $493,415 or 1.20% of net assets.
|
|
(c)
|
|
—
|
|
Security valued in good faith pursuant to fair value procedures adopted by the Board of Directors. As of September 30, 2008, the total value of all such securities was $14,769,589 or 36.24% of net
assets.
|
|
CDO
|
|
—
|
|
Collateralized Debt Obligation.
|
|
NIM
|
|
—
|
|
Net Interest Margin.
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
36
RMK
STRATEGIC INCOME FUND, INC.
OBJECTIVE & STRATEGY
RMK Strategic Income Fund, Inc. seeks a high level of current income. The Fund seeks capital
growth as a secondary investment objective when consistent with its primary investment objective. The Fund invests in a diversified portfolio of securities that offers attractive yield and capital appreciation potential and consists primarily of
debt securities and secondarily of equity securities. The Adviser will continually analyze the markets for income-producing securities and will periodically reallocate the Fund’s investments among various fixed-income and equity asset classes
and between investment grade and below investment grade debt securities (commonly referred to as “junk bonds”) to pursue its investment objectives. As a result, a majority of the Fund’s total assets may be invested in investment grade
debt securities at some times and in below investment grade debt securities at other times. The Fund invests in a wide range of debt securities, including corporate bonds, mortgage-backed and asset-backed securities, and municipal and foreign
government obligations, as well as securities of companies in bankruptcy reorganization proceedings or otherwise in the process of debt restructuring. The Fund also invests in other securities providing the potential for high income or a combination
of high income and capital growth. (Below investment grade debt securities are rated Ba1 or lower by Moody’s Investors Service, Inc., BB+ or lower by Standard & Poor’s Ratings Group, comparably rated by another nationally
recognized statistical rating organization or, if unrated, determined by the Fund’s investment adviser to be of comparable quality.) The Fund may use leverage through bank borrowings, reverse repurchase agreements or other transaction involving
indebtedness or through the issuance of preferred shares. The Fund may leverage up to one third of its total assets (in each case including the amount borrowed.) The Fund may vary its use of leverage in response to changing market conditions.
Investment Risks:
Investors in any bond fund should anticipate fluctuations in price. Bond prices and the value of bond funds decline as
interest rates rise. Bonds with longer-term maturities generally are more vulnerable to interest rate risk than bonds with shorter-term maturities. Below investment grade bonds involve greater credit risk, which is the risk that the issuer will not
make interest or principal payments when due. An economic downturn or period of rising interest rates could adversely affect the ability of issuers, especially issuers of below investment grade debt, to service primary obligations and an
unanticipated default could cause the Fund to experience a reduction in value of its shares. The Fund’s investments in mortgage-backed or asset-backed securities that are “subordinated” to other interests in the same pool may increase
credit risk to the extent that the Fund as a holder of those securities may only receive payments after the pool’s obligations to other investors have been satisfied. Below investment grade bonds are also subject to greater price volatility and
are less liquid, especially during periods of economic uncertainty or change, than higher-rated debt securities. The value of U.S. and foreign equity securities in which the Fund invests will change based on changes in a company’s financial
condition and in overall market and economic conditions. Leverage creates an opportunity for an increased return to common stockholders, but unless the income and capital appreciation, if any, on securities acquired with leverage proceeds exceed the
costs of the leverage, the use of leverage will diminish the investment performance of the Fund’s shares. Use of leverage may also increase the likelihood that the net asset value of the Fund and market value of its common shares will be more
volatile, and the yield and total return to common stockholders will tend to fluctuate more in response to changes in interest rates and creditworthiness.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
For the six month
period ending September 30, 2008, RMK Strategic Income Fund, Inc. (the “Fund”) had a total return of -63.94%, which assumes the reinvestment of dividends and is exclusive of brokerage commissions. Based on the NYSE closing price of
$0.97 on September 30, 2008, the Fund’s shares have a dividend yield of 18.56%. The dividend yield is calculated as the annualized amount of the reporting period’s most recent monthly dividend declared divided by the stated stock
price. For the six months ended September 30, 2008, the Lehman Brothers U.S. Corporate High Yield Index
1
had a total return of -7.28%. For the six months ended
September 30, 2008, the previous benchmark, the Lehman Brothers Ba U.S. High Yield Index
2
had a total return of -4.10%.
37
RMK STRATEGIC INCOME FUND, INC.
During much of this year, the high yield market largely had been spared the pressure of forced selling, which has pushed prices lower. However, in September, Lehman’s bankruptcy filing was followed by widespread selling of
below-investment-grade corporate credit. Following other markets, both high yield bonds and leveraged loans traded lower. Despite the challenges that the market has experienced, we believe that the dramatic widening in yield spreads has created an
opportunity. On September 30, 2008, yield spreads were over 1,000 basis points, reaching levels normally seen at the bottom of a credit cycle. That is not to say that yield spreads could not widen in the near term. However, defaults are still
running at one-third of their long-term average and in time could rise to their historical average, not to mention to reach peak levels, which are typically around 10%. Meanwhile, yield spreads are implying a 12% to 14% default rate at a time when
the actual default rate is between 1% and 2%. With today’s near-record yield spreads, high yield investors can build a “cushion” against a rise in default losses later.
The well-publicized problems in the mortgage and credit markets have had a significant impact on the Fund’s performance. Further, the high concentration of the Fund’s holdings in complex
mortgage-backed securities and asset-backed securities jeopardized the Fund’s future earnings power. Upon taking over management, we described a plan to reduce the Fund’s holdings in these types of securities and to increase the
Fund’s overall credit quality. Since then, we have been executing this plan and have been successful at shifting the asset allocation of the Fund toward high yield corporate bonds. We expect this allocation to form the core sector of the Fund
in the long-term. We have actively increased the Fund’s allocation to high yield corporate bonds by 21% as of September 30, 2008. Additionally, we have decreased the Fund’s allocation to lower rated (CCC rated through Unrated)
securities by 33% in favor of BB rated and B rated securities.
While broad industry themes are in flux due to the credit markets’ problems and
a slowing economy, we have been able to find opportunity within the high yield corporate market. Generally, we have favored larger capitalization companies that do not have near-term needs to access the capital markets for liquidity. We have been
screening companies for their ability to operate without being subject to new issuance markets or asset sales. We believe that the corporate high yield holdings in the Fund are of higher average credit quality than the market. We have avoided
companies in the consumer discretionary, financial and home-building related industries and have favored companies in the aerospace, energy and consumer non-discretionary sectors. The unprecedented declines in home prices, coupled with high
inventories of unsold homes, are likely to delay a rebound in housing and housing related industries for some time. An overstretched consumer no longer has the ability to tap home equity in order to subsidize personal spending, and discretionary
purchases are suffering. Financial companies are in the process of a massive leverage reduction that likely will impact earnings for the foreseeable future. In the aerospace sector, many companies are skewed toward defense, and are seeing robust
demand. Within the energy sector, we prefer companies with better-than-average cash flow, strong balance sheets and easily saleable assets. Finally, the consumer non-discretionary sector has an element of recession resistance that makes it
attractive given our current economic outlook. Longer-term, we believe that the high yield market offers attractive investment opportunities based on the market’s overestimation of default losses. We continue to focus on our goal of better
positioning the Fund to improve stability of the net asset value and to dividends.
Forward-Looking Information
This management discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements that are based on various assumptions (some of which are beyond our control) may be identified by reference to a future period or periods or by the use
of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” “should,” “intend,” or similar terms or variations on those terms
or the negative of those terms. Although we believe that the expectations contained in any forward-looking statement are based on reasonable assumptions, we can give no assurance that our expectations will be attained. We do not undertake, and
specifically disclaim any obligation, to publicly release any update or supplement to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
38
RMK STRATEGIC INCOME FUND, INC.
Index Description
1
The Lehman Brothers U.S. Corporate High Yield Index covers the U.S. dollar denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield
if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging markets debt. The Lehman Brothers U.S. Corporate High Yield Index is part of the Lehman Brothers U.S. Universal and Global High Yield
Indices. The index is unmanaged and, unlike the Fund, is not affected by cash flows or trading and other expenses. It is not possible to invest directly in an index.
2
The Lehman Brothers Ba
U.S. High Yield Index is the Ba component of the U.S. Corporate High Yield Index, a broad-based unmanaged index of fixed-rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds and debt issues from countries designated as emerging
markets (
e.g.
, Argentina, Brazil and Venezuela) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-emerging countries are included. Original issue zeroes, step-up coupon structures and 144As are also included. The
index is unmanaged and, unlike the Fund, is not affected by cash flows or trading and other expenses. It is not possible to invest directly in an index.
39
RMK STRATEGIC INCOME FUND, INC.
Portfolio Characteristics (Unaudited)
September 30, 2008
PORTFOLIO STATISTICS
|
|
|
|
|
Annualized dividend yield
1
|
|
18.56%
|
|
|
|
|
Weighted average coupon
|
|
6.48%
|
|
|
|
|
Average effective maturity
|
|
5.73 years
|
|
|
|
|
Percentage of leveraged assets
|
|
0.00%
|
|
|
|
|
Total number of holdings
|
|
155
|
CREDIT QUALITY
|
|
|
|
|
|
A and Above
2
|
|
16
|
%
|
|
|
|
|
BBB
|
|
5
|
%
|
|
|
|
|
BB
|
|
23
|
%
|
|
|
|
|
B
|
|
34
|
%
|
|
|
|
|
CCC
|
|
5
|
%
|
|
|
|
|
D
|
|
5
|
%
|
|
|
|
|
Unrated
|
|
12
|
%
|
|
Total
|
|
100
|
%
|
ASSET ALLOCATION
|
|
|
|
|
|
Asset-Backed Securities
|
|
16
|
%
|
|
|
|
|
Mortgage-Backed Securities
|
|
15
|
%
|
|
|
|
|
High Yield Corporate Bonds
|
|
61
|
%
|
|
|
|
|
Common stocks
|
|
2
|
%
|
|
|
|
|
Short-term investments
|
|
6
|
%
|
|
Total
|
|
100
|
%
|
|
1
|
Dividends may include net investment income, capital gains and/or return of capital. The dividend yield referenced above is
calculated as the annualized amount of the most recent monthly dividend declared divided by the September 30, 2008 stock price.
|
|
2
|
Includes short-term investments.
|
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
40
RMK STRATEGIC INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET-BACKED SECURITIES – 16.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate-Backed Obligations – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Helios Series I Multi-Asset CBO Limited
Series 1A, Class C‡(a)(c)
|
|
5.90
|
%†#
|
|
12/13/36
|
|
$
|
2,421
|
|
$
|
6,052
|
|
MKP CBO I Limited
Series 4A, Class CS‡(a)(c)
|
|
0.00
|
#
|
|
07/12/40
|
|
|
1,919
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Certificate-Backed Obligations
(Cost – $2,914,195)
|
|
|
|
|
|
|
|
|
|
|
6,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Debt Obligations – 12.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
801 Grand CDO
Series 2006-1 LLC‡(a)(c)
|
|
9.20
|
†
|
|
09/20/16
|
|
|
1,000
|
|
|
240,000
|
|
Aardvark ABS CDO
Series 2007-1A, Class SUB(c)
|
|
0.00
|
#
|
|
07/06/47
|
|
|
1,000
|
|
|
0
|
|
Acacia CDO Limited
Series 10A, Class SUB‡(a)(c)
|
|
0.00
|
#
|
|
09/07/46
|
|
|
3,000
|
|
|
0
|
|
Aladdin CDO I Limited
Series 2006-3A, Class NOTE‡(a)(c)
|
|
8.20
|
†
|
|
10/31/13
|
|
|
4,000
|
|
|
110,000
|
|
Asset Backed Securities Corp. Home Equity
Series 2002-HE3, Class M4(b)
|
|
6.99
|
†
|
|
10/15/32
|
|
|
2,326
|
|
|
476,192
|
|
Attentus CDO Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-2A, Class E2(c)
|
|
0.00
|
#
|
|
10/09/41
|
|
|
287
|
|
|
0
|
|
Series 2006-2A, Class F1‡(a)(c)
|
|
0.00
|
#
|
|
10/09/41
|
|
|
2,200
|
|
|
0
|
|
Series 2006-2A, Class F2(c)
|
|
0.00
|
#
|
|
10/09/41
|
|
|
753
|
|
|
0
|
|
Series 2007-3A, Class F‡(a)(c)
|
|
0.00
|
#
|
|
10/11/42
|
|
|
3,220
|
|
|
1
|
|
Broderick CDO Limited
Series 2007-3A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
12/06/50
|
|
|
2,149
|
|
|
0
|
|
Cairn Mezzanine ABS CDO PLC
Series 2007-3A, Class SUB(c)
|
|
0.00
|
#
|
|
08/13/47
|
|
|
1,000
|
|
|
0
|
|
CDO Repack SPC Limited
Series 2006-BRGA, Class COM(c)
|
|
0.00
|
#
|
|
12/05/51
|
|
|
1,997
|
|
|
0
|
|
Dillon Read CMBS CDO Limited
Series 2006-1A, Class COM‡(a)(c)
|
|
0.00
|
#
|
|
12/05/46
|
|
|
4,000
|
|
|
320,000
|
|
Duane Park I Limited‡(a)(c)
|
|
0.00
|
|
|
06/27/16
|
|
|
1,750
|
|
|
87,500
|
|
Fiorente Funding Limited
Series 2006-1A, Class M1‡(a)(c)
|
|
0.00
|
#
|
|
11/04/56
|
|
|
4,083
|
|
|
1
|
|
Fort Duquesne CDO Limited
Series 2006-1A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
10/26/46
|
|
|
1,491
|
|
|
0
|
|
Gulf Stream Atlantic CDO Limited
Series 2007-1A, Class SUB‡(a)(c)
|
|
0.00
|
#
|
|
07/13/47
|
|
|
1,000
|
|
|
0
|
|
IXIS ABS CDO 1 Limited‡(a)(c)
|
|
0.00
|
|
|
12/12/46
|
|
|
1,000
|
|
|
10
|
|
Kenmore Street Synthetic CDO
Series 2006-1A, Class NOTE‡(a)(c)
|
|
8.20
|
†
|
|
04/30/14
|
|
|
13,000
|
|
|
520,000
|
|
Knollwood CDO Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-2A, Class E‡(a)(c)
|
|
0.00
|
#
|
|
07/13/46
|
|
|
1,049
|
|
|
0
|
|
Series 2006-2A, Class SN(c)
|
|
0.00
|
#
|
|
07/13/46
|
|
|
3,000
|
|
|
0
|
See notes
to financial statements.
41
RMK STRATEGIC INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Kodiak CDO
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-1A, Class COMB‡(a)(c)
|
|
0.00
|
%#
|
|
08/07/37
|
|
$
|
4,145
|
|
$
|
1
|
|
Series 2006-1A, Class G‡(a)(c)
|
|
0.00
|
#
|
|
08/07/37
|
|
|
3,236
|
|
|
1
|
|
Lancer Funding Limited
Series 2007-2A, Class A3‡(a)(c)
|
|
0.00
|
#
|
|
07/15/47
|
|
|
4,917
|
|
|
1
|
|
Lincoln Avenue ABS CDO Limited
Series 1-A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
07/05/46
|
|
|
2,695
|
|
|
0
|
|
Linker Finance PLC
Series 16A, Class E‡(a)(c)
|
|
6.53
|
†
|
|
05/19/45
|
|
|
2,000
|
|
|
20,000
|
|
Millstone CDO Limited
Series III-A, Class COMB(c)
|
|
0.00
|
#
|
|
07/05/46
|
|
|
2,982
|
|
|
0
|
|
Newbury Street CDO Limited
Series 2007-1A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
03/04/53
|
|
|
1,075
|
|
|
0
|
|
Norma CDO Limited
Series 2007-1A, Class E‡(a)(c)
|
|
0.00
|
#
|
|
03/11/49
|
|
|
1,962
|
|
|
0
|
|
Orchid Structured Finance CDO Limited
Series 2006-3A, Class E‡(a)(c)
|
|
0.00
|
#
|
|
01/06/46
|
|
|
2,057
|
|
|
0
|
|
Palmer Square PLC
Series 2A, Class CN‡(a)(c)
|
|
0.00
|
#
|
|
11/02/45
|
|
|
3,052
|
|
|
0
|
|
Pasa Funding Limited
Series 2007-1A, Class D(c)
|
|
0.00
|
#
|
|
04/07/52
|
|
|
1,000
|
|
|
0
|
|
Preferred Term Securities XXII Limited(c)
|
|
0.00
|
#
|
|
09/22/36
|
|
|
2,400
|
|
|
0
|
|
Preferred Term Securities XXII Limited‡(a)(c)
|
|
10.25
|
#
|
|
10/01/12
|
|
|
1,000
|
|
|
50,000
|
|
Preferred Term Securities XXIII Limited(c)
|
|
0.00
|
#
|
|
12/22/36
|
|
|
3,200
|
|
|
0
|
|
Preferred Term Securities XXVII Limited(c)
|
|
0.00
|
|
|
03/22/38
|
|
|
2,000
|
|
|
20,000
|
|
Preferred Term Securities XXVIII Limited‡(a)(c)
|
|
4.53
|
†
|
|
03/22/38
|
|
|
998
|
|
|
39,926
|
|
Preferred Term Securities XXXI Limited(c)
|
|
0.00
|
#
|
|
03/22/38
|
|
|
3,000
|
|
|
0
|
|
Regional Diversified Funding‡(a)(c)(d)
|
|
0.00
|
#
|
|
01/25/36
|
|
|
1,000
|
|
|
0
|
|
Sail Net Interest Margin Notes
Series 2004-5A, Class B‡(a)(b)(c)
|
|
6.75
|
#
|
|
06/27/34
|
|
|
117
|
|
|
467
|
|
Sharps CDO
Series 2006-1A, Class D‡(a)(c)
|
|
0.00
|
#
|
|
05/08/46
|
|
|
2,885
|
|
|
0
|
|
Squared CDO Limited
Series 2007-1A, Class C‡(a)(c)
|
|
0.00
|
#
|
|
05/11/57
|
|
|
1,067
|
|
|
0
|
|
Steers Series 2007-A‡(a)(c)
|
|
5.90
|
†
|
|
06/20/18
|
|
|
6,000
|
|
|
3,060,000
|
|
Taberna Preferred Funding Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-6A, Class COM1‡(a)(c)
|
|
0.00
|
#
|
|
12/05/36
|
|
|
4,252
|
|
|
1
|
|
Series 2006-7A, Class C1‡(a)(c)
|
|
0.00
|
#
|
|
02/05/37
|
|
|
3,138
|
|
|
0
|
|
Trapeza CDO I LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-10A, Class D2‡(a)(c)
|
|
0.00
|
#
|
|
06/06/41
|
|
|
2,044
|
|
|
0
|
|
Series 2006-10A, Class SUB(c)
|
|
0.00
|
#
|
|
06/06/41
|
|
|
1,500
|
|
|
0
|
|
Series 2006-11A, Class F(c)
|
|
0.00
|
#
|
|
10/10/41
|
|
|
2,051
|
|
|
0
|
|
Series 2006-11A, Class SUB(c)
|
|
0.00
|
#
|
|
10/10/41
|
|
|
2,000
|
|
|
0
|
|
Webster CDO Limited
Series 2006-1, Class PS‡(a)(c)
|
|
0.00
|
#
|
|
04/13/47
|
|
|
2
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Collateralized Debt Obligations
(Cost – $106,402,728)
|
|
|
|
|
|
|
|
|
|
|
4,944,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
42
RMK STRATEGIC INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Loan Obligation – 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Genesis CLO 2005‡(a)(c)
(Cost $1,000,000)
|
|
0.00
|
%
|
|
06/23/10
|
|
$
|
1
|
|
$
|
27,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity Loans – 3.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Amresco Residential Securities Mortgage Loan Trust
Series 1999-1, Class B(b)
|
|
7.21
|
†
|
|
11/25/29
|
|
|
763
|
|
|
73,684
|
|
Fremont Home Loan Trust
Series 2004-4, Class M7(b)(c)
|
|
4.93
|
†
|
|
03/25/35
|
|
|
341
|
|
|
44,387
|
|
Lake Country Mortgage Loan Trust
Series 2006-HE1, Class M8‡(a)(b)(c)
|
|
5.96
|
†
|
|
07/25/34
|
|
|
3,915
|
|
|
1,339,247
|
|
Meritage Asset Holdings NIM
Series 2005-2, Class N4‡(a)(b)(c)
|
|
0.00
|
#
|
|
11/25/35
|
|
|
3,000
|
|
|
0
|
|
Terwin Mortgage Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-7SL, Class B7‡(a)(b)(c)
|
|
0.00
|
#
|
|
07/25/35
|
|
|
932
|
|
|
0
|
|
Series 2005-11, Class 1B7‡(a)(b)(c)
|
|
0.00
|
#
|
|
11/25/36
|
|
|
871
|
|
|
135
|
|
Terwin Mortgage Trust NIM
Series 2005-R1, Class A‡(a)(b)(c)
|
|
0.00
|
#
|
|
12/28/36
|
|
|
3,000
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Home Equity Loans
(Cost – $10,384,191)
|
|
|
|
|
|
|
|
|
|
|
1,457,453
|
|
Total ASSET-BACKED SECURITIES
(Cost – $120,701,114)
|
|
|
|
|
|
|
|
|
|
|
6,434,606
|
|
|
|
|
|
|
|
MORTGAGE-BACKED SECURITIES – 14.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations – 14.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Citigroup Mortgage Loan Trust Inc.
Series 2006-AR9, Class 1M1(c)
|
|
3.55
|
†
|
|
11/25/36
|
|
|
1,000
|
|
|
189,700
|
|
Countrywide Alternative Loan Trust
|
|
|
|
Series 2005-56, Class M4(c)
|
|
4.13
|
†
|
|
11/25/35
|
|
|
1,939
|
|
|
197,588
|
|
Series 2006-6CB, Class B4(c)
|
|
5.57
|
†#
|
|
05/25/36
|
|
|
2,501
|
|
|
52,496
|
|
Countrywide Alternative Loan Trust NIM
Series 2006-OA11, Class N3‡(a)(c)
|
|
12.50
|
|
|
09/25/46
|
|
|
945
|
|
|
133,161
|
|
Deutsche ALT-A Securities Incorporated Alternate Loan Trust
Series 2006-AF1, Class A5
|
|
3.49
|
†
|
|
04/25/36
|
|
|
577
|
|
|
173,756
|
|
Deutsche Mortgage Securities Inc.
Series 2006-RS1, Class N2‡(a)(c)
|
|
3.68
|
†
|
|
09/27/35
|
|
|
3,000
|
|
|
119,100
|
|
Greenwich Structured Adjustable Rate Mortgage Products
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-3A, Class N2‡(a)(c)
|
|
2.00
|
|
|
06/27/35
|
|
|
2,980
|
|
|
613,257
|
|
Series 2005-4A, Class N2‡(a)(c)
|
|
0.00
|
#
|
|
07/27/45
|
|
|
5,162
|
|
|
1,067,037
|
|
Harborview Mortgage Loan Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2004-1, Class X(c)
|
|
1.74
|
†
|
|
04/19/34
|
|
|
4,536
|
|
|
119,557
|
|
Series 2006-4, Class B11‡(a)(c)
|
|
4.78
|
†
|
|
05/19/47
|
|
|
1,739
|
|
|
10,953
|
|
Series 2006-5, Class B11(c)
|
|
4.78
|
†
|
|
07/19/47
|
|
|
874
|
|
|
2,273
|
|
Harborview NIM Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-8A, Class N5‡(a)(c)
|
|
0.00
|
#
|
|
07/21/36
|
|
|
2,000
|
|
|
0
|
|
Series 2006-8, Class PS(c)
|
|
0.00
|
|
|
07/22/36
|
|
|
0
|
|
|
0
|
|
Series 2006-14, Class N4‡(a)(c)
|
|
8.35
|
|
|
03/19/38
|
|
|
1,000
|
|
|
20,295
|
|
Series 2006-14, Class PS(c)
|
|
0.00
|
|
|
12/19/36
|
|
|
5,000
|
|
|
50
|
See notes
to financial statements.
43
RMK STRATEGIC INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MORTGAGE-BACKED SECURITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Indymac Index Mortgage Loan NIM Trust
Series 2006-AR6, Class PS‡(a)(b)(c)
|
|
0.00
|
%
|
|
06/25/46
|
|
$
|
67
|
|
$
|
1
|
|
Long Beach Asset Holdings Corp. NIM Trust
Series 2005-WL1, Class N4‡(a)(b)(c)
|
|
0.00
|
#
|
|
06/25/45
|
|
|
5,000
|
|
|
1
|
|
Long Beach Mortgage Loan Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2006-A, Class A1(b)
|
|
3.30
|
†
|
|
05/25/36
|
|
|
7,257
|
|
|
943,945
|
|
Series 2006-A, Class A2(b)
|
|
5.55
|
|
|
05/25/36
|
|
|
7,853
|
|
|
1,120,211
|
|
Mellon Residential Funding Corp.
Series 2004-TBC1, Class X‡(a)
|
|
0.27
|
†
|
|
02/26/34
|
|
|
12,833
|
|
|
72,996
|
|
Park Place Securities Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2005-WCW2, Class M10(b)
|
|
5.71
|
†#
|
|
07/25/35
|
|
|
5,000
|
|
|
62,758
|
|
Series 2005-WHQ3, Class M11(b)
|
|
5.71
|
†
|
|
06/25/35
|
|
|
3,000
|
|
|
53,443
|
|
Park Place Securities Inc. NIM Trust
Series 2005-WCW1, Class B‡(a)(b)(c)
|
|
0.00
|
#
|
|
09/25/35
|
|
|
1,022
|
|
|
0
|
|
Residential Accredit Loans Inc.
Series 2006-QO8, Class M4(c)
|
|
3.74
|
†
|
|
10/25/46
|
|
|
3,001
|
|
|
202,263
|
|
Sharp SP I LLC NIM Trust
Series 2006-AHM3, Class N3‡(a)(c)
|
|
12.50
|
|
|
10/25/46
|
|
|
1,000
|
|
|
103,863
|
|
Structured Asset Mortgage Investments Inc.
Series 2006-AR3, Class 1B1(c)
|
|
3.61
|
†
|
|
04/25/36
|
|
|
3,000
|
|
|
193,454
|
|
Structured Asset Securities Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2003-BC1, Class B2(b)
|
|
9.00
|
|
|
05/25/32
|
|
|
1,364
|
|
|
77,471
|
|
Series 1999-SP1, Class B(c)
|
|
9.00
|
†
|
|
05/25/29
|
|
|
733
|
|
|
154,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Collateralized Mortgage Obligations
(Cost – $43,411,775)
|
|
|
|
|
|
|
|
|
|
|
5,683,929
|
|
|
|
|
|
|
|
Total MORTGAGE-BACKED SECURITIES
(Cost – $43,411,775)
|
|
|
|
|
|
|
|
|
|
|
5,683,929
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS – 58.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive – 0.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Metaldyne Corp.(c)
(Cost $3,163,609)
|
|
11.00
|
|
|
06/15/12
|
|
|
3,575
|
|
|
357,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Industry – 12.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
ACE Hardware Corp.‡(a)
|
|
9.13
|
|
|
06/01/16
|
|
|
500
|
|
|
427,500
|
|
Buckeye Technologies Inc.
|
|
8.50
|
|
|
10/01/13
|
|
|
500
|
|
|
465,000
|
|
Crown Americas LLC
|
|
7.75
|
|
|
11/15/15
|
|
|
500
|
|
|
487,500
|
|
FireKeepers Development Authority‡(a)
|
|
13.88
|
|
|
05/01/15
|
|
|
500
|
|
|
440,000
|
|
Freeport McMoRan Copper & Gold
|
|
8.38
|
|
|
04/01/17
|
|
|
500
|
|
|
492,500
|
|
Georgia-Pacific Corp.
|
|
8.13
|
|
|
05/15/11
|
|
|
500
|
|
|
495,000
|
|
Momentive Performance
|
|
9.75
|
|
|
12/01/14
|
|
|
500
|
|
|
395,000
|
|
Mueller Water Products Inc.
|
|
7.38
|
|
|
06/01/17
|
|
|
500
|
|
|
395,000
|
|
TRW Automotive Inc.‡(a)
|
|
7.25
|
|
|
03/15/17
|
|
|
625
|
|
|
493,750
|
|
Tube City IMS Corp.
|
|
9.75
|
|
|
02/01/15
|
|
|
500
|
|
|
445,000
|
|
Westlake Chemical Corp.
|
|
6.63
|
|
|
01/15/16
|
|
|
500
|
|
|
425,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Basic Industry
(Cost – $5,280,894)
|
|
|
|
|
|
|
|
|
|
|
4,961,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
44
RMK STRATEGIC INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Goods – 3.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
Alliant Techsystems Inc.
|
|
6.75
|
%
|
|
04/01/16
|
|
$
|
500
|
|
$
|
467,500
|
|
Case Corp.
|
|
7.25
|
|
|
01/15/16
|
|
|
500
|
|
|
452,500
|
|
Terex Corp.
|
|
7.38
|
|
|
01/15/14
|
|
|
500
|
|
|
455,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital Goods
(Cost – $1,471,653)
|
|
|
|
|
|
|
|
|
|
|
1,375,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Cyclical – 0.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford Motor Credit Co.
|
|
7.00
|
|
|
10/01/13
|
|
|
250
|
|
|
153,639
|
|
General Motors Corp.
|
|
7.13
|
|
|
07/15/13
|
|
|
250
|
|
|
115,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Cyclical
(Cost – $318,206)
|
|
|
|
|
|
|
|
|
|
|
268,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Non-Cyclical – 4.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellation Brands Inc.
|
|
7.25
|
|
|
05/15/17
|
|
|
500
|
|
|
460,000
|
|
Couche-Tard U.S. LP
|
|
7.50
|
|
|
12/15/13
|
|
|
625
|
|
|
575,000
|
|
Jarden Corp.
|
|
7.50
|
|
|
05/01/17
|
|
|
500
|
|
|
416,250
|
|
Stater Brothers Holdings
|
|
8.13
|
|
|
06/15/12
|
|
|
500
|
|
|
490,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Non-Cyclical
(Cost – $2,029,588)
|
|
|
|
|
|
|
|
|
|
|
1,941,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Products – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Products International Inc(c)
(Cost $341,566)
|
|
0.00
|
#
|
|
03/20/17
|
|
|
342
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy – 9.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Chesapeake Energy Corp.
|
|
6.88
|
|
|
01/15/16
|
|
|
500
|
|
|
456,250
|
|
MarkWest Energy Partners LP
|
|
8.75
|
|
|
04/15/18
|
|
|
500
|
|
|
475,000
|
|
National Oilwell Varco Inc. Series B
|
|
6.13
|
|
|
08/15/15
|
|
|
270
|
|
|
263,497
|
|
Newfield Exploration Company
|
|
6.63
|
|
|
09/01/14
|
|
|
500
|
|
|
450,000
|
|
Range Resources Corp.
|
|
7.50
|
|
|
05/15/16
|
|
|
500
|
|
|
477,500
|
|
SeaMetric International AS(c)
|
|
11.63
|
|
|
05/25/12
|
|
|
1,500
|
|
|
750,000
|
|
SESI LLC
|
|
6.88
|
|
|
06/01/14
|
|
|
625
|
|
|
543,750
|
|
Whiting Petroleum Corp.
|
|
7.25
|
|
|
05/01/13
|
|
|
625
|
|
|
579,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Energy
(Cost – $4,900,007)
|
|
|
|
|
|
|
|
|
|
|
3,995,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance & Investment – 4.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanta Capital Trust I
|
|
8.99
|
|
|
12/17/26
|
|
|
2,450
|
|
|
1,323,000
|
|
AssuranceAmerica Capital Trust I(c)
|
|
10.50
|
|
|
12/31/35
|
|
|
1,000
|
|
|
350,000
|
|
Catlin Insurance Company Limited‡(a)
|
|
7.25
|
†
|
|
12/31/49
|
|
|
150
|
|
|
66,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Finance & Investment
(Cost – $3,573,813)
|
|
|
|
|
|
|
|
|
|
|
1,739,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
45
RMK STRATEGIC INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrials – 3.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Crown Cork & Seal Company Inc.
|
|
8.00
|
%
|
|
04/15/23
|
|
$
|
125
|
|
$
|
105,000
|
|
Jefferson Smurfit Corp.
|
|
8.25
|
|
|
10/01/12
|
|
|
500
|
|
|
417,500
|
|
Owens-Illinois Inc.
|
|
7.80
|
|
|
05/15/18
|
|
|
500
|
|
|
485,000
|
|
Payless Shoesource Inc.
|
|
8.25
|
|
|
08/01/13
|
|
|
250
|
|
|
220,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Industrials
(Cost – $1,288,141)
|
|
|
|
|
|
|
|
|
|
|
1,228,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance – 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Security Capital Assurance, Limited
(Cost $253,253)
|
|
6.88
|
†#
|
|
09/30/17
|
|
|
500
|
|
|
22,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media – 3.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
CCH I LLC/CCH I Capital Corp.
|
|
11.00
|
|
|
10/01/15
|
|
|
250
|
|
|
165,000
|
|
Charter Communications Operating LLC‡(a)
|
|
8.38
|
|
|
04/30/14
|
|
|
500
|
|
|
441,250
|
|
Lamar Media Corp.
|
|
6.63
|
|
|
08/15/15
|
|
|
625
|
|
|
517,187
|
|
Mediacom Broadband LLC
|
|
8.50
|
|
|
10/15/15
|
|
|
500
|
|
|
412,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Media
(Cost – $1,685,389)
|
|
|
|
|
|
|
|
|
|
|
1,535,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services Cyclical – 4.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
AMC Entertainment Inc.
|
|
8.63
|
|
|
08/15/12
|
|
|
500
|
|
|
495,000
|
|
Iron Mountain Inc.
|
|
8.75
|
|
|
07/15/18
|
|
|
500
|
|
|
507,500
|
|
Pokagon Gaming Authority‡(a)
|
|
10.38
|
|
|
06/15/14
|
|
|
500
|
|
|
506,250
|
|
Seneca Gaming Corp.
|
|
7.25
|
|
|
05/01/12
|
|
|
500
|
|
|
435,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Services Cyclical
(Cost – $2,005,469)
|
|
|
|
|
|
|
|
|
|
|
1,943,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services Non-Cyclical – 2.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
ARAMARK Corp.
|
|
8.50
|
|
|
02/01/15
|
|
|
500
|
|
|
470,000
|
|
HCA Inc.
|
|
9.25
|
|
|
11/15/16
|
|
|
625
|
|
|
607,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Services Non-Cyclical
(Cost – $1,152,060)
|
|
|
|
|
|
|
|
|
|
|
1,077,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Purpose Entities – 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income Pass-Through Trust 2007
Series 2007-C JPM, Class B‡(a)(c)
(Cost $1,708,961)
|
|
0.00
|
#
|
|
05/15/77
|
|
|
1,675
|
|
|
62,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology & Electronics – 2.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
Flextronics International Limited
|
|
6.25
|
|
|
11/15/14
|
|
|
500
|
|
|
422,500
|
|
Sungard Data Systems Inc.
|
|
10.25
|
|
|
08/15/15
|
|
|
625
|
|
|
542,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Technology & Electronics
(Cost – $1,100,476)
|
|
|
|
|
|
|
|
|
|
|
964,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
46
RMK STRATEGIC INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIGH YIELD CORPORATE BONDS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications – 5.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
American Tower Corp.‡(a)
|
|
7.00
|
%
|
|
10/15/17
|
|
$
|
500
|
|
$
|
477,500
|
|
Cincinnati Bell Inc.
|
|
8.38
|
|
|
01/15/14
|
|
|
500
|
|
|
435,000
|
|
Citizens Communications Co.
|
|
6.25
|
|
|
01/15/13
|
|
|
500
|
|
|
468,125
|
|
L-3 Communications Corp.
|
|
6.13
|
|
|
01/15/14
|
|
|
500
|
|
|
462,500
|
|
Windstream Corp.
|
|
7.00
|
|
|
03/15/19
|
|
|
500
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Telecommunications
(Cost – $2,397,526)
|
|
|
|
|
|
|
|
|
|
|
2,243,125
|
|
Total HIGH YIELD CORPORATE BONDS
(Cost – $32,670,611)
|
|
|
|
|
|
|
|
|
|
|
23,718,035
|
|
|
|
|
|
|
|
MUNICIPAL SECURITIES – 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Muni-Arizona – 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Pima County Arizona Industrial Development Authority(d)
|
|
9.32
|
|
|
06/01/09
|
|
|
25
|
|
|
23,385
|
|
Pima County Arizona Industrial Development Authority(d)
|
|
10.29
|
|
|
06/01/10
|
|
|
35
|
|
|
29,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Muni-Arizona
(Cost – $55,050)
|
|
|
|
|
|
|
|
|
|
|
53,120
|
|
Total MUNICIPAL SECURITIES
(Cost – $55,050)
|
|
|
|
|
|
|
|
|
|
|
53,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
COMMON STOCKS – 2.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Products – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Products International Inc.*(c)
(Cost $1,251,710)
|
|
|
13,663
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance & Investment – 1.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
FSI Realty Trust(c)
|
|
|
92,000
|
|
|
119,600
|
|
FSI Realty Trust‡(a)(c)
|
|
|
26,200
|
|
|
34,060
|
|
Mid Country‡(a)(c)
|
|
|
42,647
|
|
|
363,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Finance & Investment
(Cost – $1,854,586)
|
|
|
|
|
|
517,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrials – 0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Port Townsend Company Inc.*‡(a)(c)
(Cost $583,898)
|
|
|
1,050
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications – 0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Windstream Corp.
(Cost $125,755)
|
|
|
10,000
|
|
|
109,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
47
RMK STRATEGIC INCOME FUND, INC.
Portfolio of Investments
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON STOCKS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Telephone-Integrated – 0.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
Frontier Communications Corp.
|
|
|
10,000
|
|
$
|
115,000
|
|
Qwest Communications International Inc.
|
|
|
25,000
|
|
|
80,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Telephone-Integrated
(Cost – $227,733)
|
|
|
|
|
|
195,750
|
|
|
|
|
|
|
|
Total COMMON STOCKS
(Cost – $4,043,682)
|
|
|
|
|
|
|
|
|
|
|
822,589
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Maturity
|
|
Principal
Amount
(000s)
|
|
Value
(Note 2)
|
|
|
|
|
|
|
|
SHORT TERM INVESTMENT – 5.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
State Street Euro Dollar Time Deposit
(Cost $2,315,000)
|
|
0.85
|
%
|
|
10/01/08
|
|
$
|
2,315
|
|
|
2,315,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments – 96.9%
(Cost – $203,197,232)
|
|
|
39,027,279
|
|
Other Assets in Excess of Liabilities – 3.1%
|
|
|
1,232,344
|
|
|
|
|
NET ASSETS – 100.0%
|
|
$
|
40,259,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
—
|
|
Non-income producing security.
|
|
#
|
|
—
|
|
Issuer is currently in default on its regularly scheduled interest payment.
|
|
†
|
|
—
|
|
Variable Rate Security – Interest rate shown is the rate in effect as of September 30, 2008.
|
|
‡
|
|
—
|
|
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 September 30, 2008, the total value of all such investments was $11,274,870 or 28.01% of net assets.
|
|
(a)
|
|
—
|
|
Private Placement.
|
|
(b)
|
|
—
|
|
Investment in subprime security. As of September 30, 2008, the total value of all such investments was $4,191,942 or 10.41% of net assets.
|
|
(c)
|
|
—
|
|
Security valued in good faith pursuant to fair value procedures adopted by the Board of Directors. As of September 30, 2008, the total value of all such securities was $11,101,831 or
27.58% of net assets.
|
|
(d)
|
|
—
|
|
Zero Coupon Bond – Interest rate represents current yield to maturity.
|
|
CBO
|
|
—
|
|
Certificate-Backed Obligation.
|
|
CDO
|
|
—
|
|
Collateralized Debt Obligation.
|
|
NIM
|
|
—
|
|
Net Interest Margin.
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
48
RMK FUNDS
Statements of Assets and Liabilities
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Advantage
Income Fund, Inc.
|
|
|
RMK High Income
Fund, Inc.
|
|
|
RMK Multi-Sector
High Income Fund, Inc.
|
|
|
RMK Strategic
Income Fund, Inc.
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in securities, at market (Note 2)
|
|
$
|
44,594,633
|
|
|
$
|
35,109,023
|
|
|
$
|
38,431,855
|
|
|
$
|
36,712,279
|
|
|
Investment in time deposit, at market
|
|
|
5,569,000
|
|
|
|
2,833,000
|
|
|
|
3,609,000
|
|
|
|
2,315,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
|
50,163,633
|
|
|
|
37,942,023
|
|
|
|
42,040,855
|
|
|
|
39,027,279
|
|
|
Cash
|
|
|
47,026
|
|
|
|
67,218
|
|
|
|
108,207
|
|
|
|
269,810
|
|
|
Interest and dividends receivable
|
|
|
1,374,933
|
|
|
|
1,095,332
|
|
|
|
1,202,098
|
|
|
|
1,130,396
|
|
|
Receivable for investments sold
|
|
|
165,000
|
|
|
|
129,167
|
|
|
|
168,333
|
|
|
|
250,847
|
|
|
Prepaid expenses and other assets
|
|
|
164,145
|
|
|
|
134,652
|
|
|
|
163,106
|
|
|
|
144,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
51,914,737
|
|
|
|
39,368,392
|
|
|
|
43,682,599
|
|
|
|
40,823,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse repurchase agreements (Note 6)
|
|
|
—
|
|
|
|
—
|
|
|
|
178,500
|
|
|
|
—
|
|
|
Interest payable for reverse repurchase agreements (Note 6)
|
|
|
—
|
|
|
|
—
|
|
|
|
643
|
|
|
|
—
|
|
|
Payable for investments purchased
|
|
|
1,437,085
|
|
|
|
1,181,080
|
|
|
|
2,670,502
|
|
|
|
484,557
|
|
|
Investment advisory fee payable (Note 4)
|
|
|
12,272
|
|
|
|
3,076
|
|
|
|
1,950
|
|
|
|
3,004
|
|
|
Administration fee payable (Note 4)
|
|
|
7,854
|
|
|
|
6,129
|
|
|
|
6,542
|
|
|
|
6,396
|
|
|
Accrued expenses
|
|
|
73,247
|
|
|
|
64,598
|
|
|
|
73,752
|
|
|
|
69,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,530,458
|
|
|
|
1,254,883
|
|
|
|
2,931,889
|
|
|
|
563,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets
|
|
$
|
50,384,279
|
|
|
$
|
38,113,509
|
|
|
$
|
40,750,710
|
|
|
$
|
40,259,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock, at par value ($.0001 par value, 1,000,000,000 shares authorized) (Note 7)
|
|
$
|
3,268
|
|
|
$
|
2,419
|
|
|
$
|
3,791
|
|
|
$
|
2,947
|
|
|
Additional paid-in capital (Note 7)
|
|
|
457,505,965
|
|
|
|
338,884,698
|
|
|
|
494,909,751
|
|
|
|
403,812,928
|
|
|
Distributions in excess of net investment income
|
|
|
(1,000,825
|
)
|
|
|
(698,590
|
)
|
|
|
(1,025,886
|
)
|
|
|
(710,087
|
)
|
|
Accumulated net realized loss on investments
|
|
|
(211,133,195
|
)
|
|
|
(158,151,182
|
)
|
|
|
(245,249,330
|
)
|
|
|
(198,676,212
|
)
|
|
Net unrealized depreciation on investments
|
|
|
(194,990,934
|
)
|
|
|
(141,923,836
|
)
|
|
|
(207,887,616
|
)
|
|
|
(164,169,953
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to capital stock outstanding
|
|
$
|
50,384,279
|
|
|
$
|
38,113,509
|
|
|
$
|
40,750,710
|
|
|
$
|
40,259,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments, at identified cost
|
|
$
|
245,154,567
|
|
|
$
|
179,865,859
|
|
|
$
|
249,928,471
|
|
|
$
|
203,197,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Outstanding and Net Asset Value Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding
|
|
|
32,682,733
|
|
|
|
24,181,420
|
|
|
|
37,904,329
|
|
|
|
29,476,068
|
|
|
Net asset value per share
|
|
$
|
1.54
|
|
|
$
|
1.58
|
|
|
$
|
1.08
|
|
|
$
|
1.37
|
|
See notes
to financial statements.
49
RMK FUNDS
Statements of Operations
For the Six Months Ended September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Advantage
Income Fund, Inc.
|
|
|
RMK High Income
Fund, Inc.
|
|
|
RMK Multi-Sector
High Income Fund, Inc.
|
|
|
RMK Strategic
Income Fund, Inc.
|
|
|
Investment Income (Note 2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
7,449,167
|
|
|
$
|
5,822,350
|
|
|
$
|
7,092,814
|
|
|
$
|
9,160,328
|
|
|
Dividends
|
|
|
30,010
|
|
|
|
20,104
|
|
|
|
29,322
|
|
|
|
23,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,479,177
|
|
|
|
5,842,454
|
|
|
|
7,122,136
|
|
|
|
9,183,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment advisory fee (Note 4)
|
|
|
270,614
|
|
|
|
202,220
|
|
|
|
252,102
|
|
|
|
234,888
|
|
|
Administration fees (Note 4)
|
|
|
63,453
|
|
|
|
47,670
|
|
|
|
59,182
|
|
|
|
55,209
|
|
|
Debt issue expense
|
|
|
268,284
|
|
|
|
31,844
|
|
|
|
269,240
|
|
|
|
25,618
|
|
|
Audit and tax services
|
|
|
59,609
|
|
|
|
59,609
|
|
|
|
59,609
|
|
|
|
59,609
|
|
|
Insurance
|
|
|
27,641
|
|
|
|
20,397
|
|
|
|
27,466
|
|
|
|
24,409
|
|
|
Legal
|
|
|
68,663
|
|
|
|
79,011
|
|
|
|
70,711
|
|
|
|
81,093
|
|
|
Directors’ fees
|
|
|
14,607
|
|
|
|
14,607
|
|
|
|
14,607
|
|
|
|
14,607
|
|
|
Custodian
|
|
|
13,922
|
|
|
|
13,213
|
|
|
|
13,258
|
|
|
|
13,881
|
|
|
Transfer agency
|
|
|
12,669
|
|
|
|
13,083
|
|
|
|
12,605
|
|
|
|
12,916
|
|
|
Registration fees
|
|
|
5,515
|
|
|
|
4,479
|
|
|
|
6,284
|
|
|
|
4,788
|
|
|
Valuation consultant fees
|
|
|
76,179
|
|
|
|
56,538
|
|
|
|
71,937
|
|
|
|
61,178
|
|
|
Miscellaneous
|
|
|
11,593
|
|
|
|
9,008
|
|
|
|
11,488
|
|
|
|
12,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
892,749
|
|
|
|
551,679
|
|
|
|
868,489
|
|
|
|
600,240
|
|
|
Interest expense on borrowings and reverse repurchase agreement (Note 6)
|
|
|
21,455
|
|
|
|
19,938
|
|
|
|
26,086
|
|
|
|
102,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
914,204
|
|
|
|
571,617
|
|
|
|
894,575
|
|
|
|
703,208
|
|
|
Less expenses waived by the investment adviser (Note 4)
|
|
|
(162,758
|
)
|
|
|
(175,465
|
)
|
|
|
(173,267
|
)
|
|
|
(169,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expenses
|
|
|
751,446
|
|
|
|
396,152
|
|
|
|
721,308
|
|
|
|
533,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
6,727,731
|
|
|
|
5,446,302
|
|
|
|
6,400,828
|
|
|
|
8,650,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and Unrealized Gain (Loss) on Investments (Note 2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized loss on investment transactions
|
|
|
(87,715,839
|
)
|
|
|
(69,304,863
|
)
|
|
|
(100,670,947
|
)
|
|
|
(82,477,326
|
)
|
|
Net change in unrealized depreciation on investments
|
|
|
31,129,893
|
|
|
|
27,110,695
|
|
|
|
36,694,104
|
|
|
|
32,221,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized loss on investments
|
|
|
(56,585,946
|
)
|
|
|
(42,194,168
|
)
|
|
|
(63,976,843
|
)
|
|
|
(50,255,390
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
$
|
(49,858,215
|
)
|
|
$
|
(36,747,866
|
)
|
|
|
$(57,576,015
|
)
|
|
$
|
(41,605,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
50
RMK FUNDS
Statements of Changes in Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Advantage Income Fund, Inc.
|
|
|
RMK High Income Fund, Inc.
|
|
|
|
|
For the Six Months
Ended
September 30, 2008
|
|
|
For the Year
Ended
March 31, 2008
|
|
|
For the Six Months
Ended
September 30, 2008
|
|
|
For the Year
Ended
March 31, 2008
|
|
|
Increase (Decrease) in Net Assets Resulting from Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
6,727,731
|
|
|
$
|
43,564,505
|
|
|
$
|
5,446,302
|
|
|
$
|
30,325,908
|
|
|
Net realized loss on investment transactions
|
|
|
(87,715,839
|
)
|
|
|
(125,370,763
|
)
|
|
|
(69,304,863
|
)
|
|
|
(89,524,052
|
)
|
|
Net change in unrealized appreciation (depreciation) on investments
|
|
|
31,129,893
|
|
|
|
(188,194,389
|
)
|
|
|
27,110,695
|
|
|
|
(135,395,493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
|
(49,858,215
|
)
|
|
|
(270,000,647
|
)
|
|
|
(36,747,866
|
)
|
|
|
(194,593,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Stockholders (Note 2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(6,347,468
|
)
|
|
|
(42,440,232
|
)
|
|
|
(5,283,341
|
)
|
|
|
(30,061,517
|
)
|
|
Net realized gains on investments
|
|
|
—
|
|
|
|
(2,248,438
|
)
|
|
|
—
|
|
|
|
(1,476,321
|
)
|
|
Return of capital
|
|
|
(5,207,891
|
)
|
|
|
(1,260,966
|
)
|
|
|
(3,248,589
|
)
|
|
|
(2,127,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions paid
|
|
|
(11,555,359
|
)
|
|
|
(45,949,636
|
)
|
|
|
(8,531,930
|
)
|
|
|
(33,665,138
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Stock Transactions (Note 7):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value of shares issued through dividend reinvestment (386,661, 928,527, 324,893, and 854,103 shares, respectively)
|
|
|
1,183,983
|
|
|
|
9,565,512
|
|
|
|
984,261
|
|
|
|
7,408,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total decrease in net assets
|
|
|
(60,229,591
|
)
|
|
|
(306,384,771
|
)
|
|
|
(44,295,535
|
)
|
|
|
(220,849,860
|
)
|
|
|
|
|
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
110,613,870
|
|
|
|
416,998,641
|
|
|
|
82,409,044
|
|
|
|
303,258,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
50,384,279
|
|
|
$
|
110,613,870
|
|
|
$
|
38,113,509
|
|
|
$
|
82,409,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(including distributions in excess of net investment income of)
|
|
$
|
(1,000,825
|
)
|
|
$
|
(403,258
|
)
|
|
$
|
(698,590
|
)
|
|
$
|
(353,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
51
RMK FUNDS
Statements of Changes in Net Assets (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
|
RMK Strategic Income Fund, Inc.
|
|
|
|
|
For the Six Months
Ended
September 30, 2008
|
|
|
For the Year
Ended
March 31, 2008
|
|
|
For the Six Months
Ended
September 30, 2008
|
|
|
For the Year
Ended
March 31, 2008
|
|
|
Increase (Decrease) in Net Assets Resulting from Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
6,400,828
|
|
|
$
|
45,835,880
|
|
|
$
|
8,650,347
|
|
|
$
|
37,132,486
|
|
|
Net realized loss on investment transactions
|
|
|
(100,670,947
|
)
|
|
|
(145,636,930
|
)
|
|
|
(82,477,326
|
)
|
|
|
(111,667,096
|
)
|
|
Net change in unrealized appreciation (depreciation) on investments
|
|
|
36,694,104
|
|
|
|
(218,139,646
|
)
|
|
|
32,221,936
|
|
|
|
(160,715,334
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
|
(57,576,015
|
)
|
|
|
(317,940,696
|
)
|
|
|
(41,605,043
|
)
|
|
|
(235,249,944
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Stockholders (Note 2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(7,397,329
|
)
|
|
|
(59,306,111
|
)
|
|
|
(8,199,600
|
)
|
|
|
(36,808,696
|
)
|
|
Net realized gains on investments
|
|
|
—
|
|
|
|
(2,434,955
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Return of capital
|
|
|
(7,390,574
|
)
|
|
|
—
|
|
|
|
(3,025,419
|
)
|
|
|
(3,929,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions paid
|
|
|
(14,787,903
|
)
|
|
|
(61,741,066
|
)
|
|
|
(11,225,019
|
)
|
|
|
(40,738,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Stock Transactions (Note 7):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value of shares issued through dividend reinvestment (1,506,514, 3,141,378, 624,790, and 989,582 shares, respectively)
|
|
|
3,482,113
|
|
|
|
20,435,595
|
|
|
|
1,608,909
|
|
|
|
8,239,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total decrease in net assets
|
|
|
(68,881,805
|
)
|
|
|
(359,246,167
|
)
|
|
|
(51,221,153
|
)
|
|
|
(267,749,166
|
)
|
|
|
|
|
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
109,632,515
|
|
|
|
468,878,682
|
|
|
|
91,480,776
|
|
|
|
359,229,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
40,750,710
|
|
|
$
|
109,632,515
|
|
|
$
|
40,259,623
|
|
|
$
|
91,480,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(including undistributed (distributions in excess of) net investment income of)
|
|
$
|
(1,025,886
|
)
|
|
$
|
828,595
|
|
|
$
|
(710,087
|
)
|
|
$
|
(382,866
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
52
RMK ADVANTAGE INCOME FUND, INC.
Statement of Cash Flows
For the Six Months Ended September 30, 2008
|
|
|
|
|
|
|
Increase (Decrease) in Cash:
|
|
|
|
|
|
|
|
|
Cash flows provided by (used for) operating activities:
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
$
|
(49,858,215
|
)
|
|
Adjustments to reconcile net decrease in net assets from operations to net cash provided by operating activities:
|
|
|
|
|
|
Purchases of long-term portfolio investments
|
|
|
(36,679,370
|
)
|
|
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses
|
|
|
52,813,997
|
|
|
Purchases of short-term portfolio investments, net
|
|
|
(3,244,790
|
)
|
|
Decrease in interest and dividends receivable
|
|
|
3,737,154
|
|
|
Decrease in receivable for investments sold
|
|
|
1,999,085
|
|
|
Decrease in prepaid expenses
|
|
|
78,182
|
|
|
Increase in payable for investments purchased
|
|
|
1,437,085
|
|
|
Decrease in interest payable on loans outstanding
|
|
|
(96,848
|
)
|
|
Decrease in investment advisory fee payable
|
|
|
(71,325
|
)
|
|
Decrease in administration fee payable
|
|
|
(11,438
|
)
|
|
Decrease in accrued expenses
|
|
|
(36,881
|
)
|
|
Net amortization and paydown gain on investments
|
|
|
(1,234,180
|
)
|
|
Unrealized depreciation on investments
|
|
|
(31,129,893
|
)
|
|
Net realized loss on investment transactions
|
|
|
87,715,839
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
25,418,402
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used for financing activities:
|
|
|
|
|
|
Decrease in loan payable
|
|
|
(15,000,000
|
)
|
|
Dividends paid to stockholders, net of reinvestments
|
|
|
(10,371,376
|
)
|
|
|
|
|
|
|
|
Net cash used for financing activities
|
|
|
(25,371,376
|
)
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
47,026
|
|
|
Cash at beginning of period
|
|
|
0
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
47,026
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Interest payments for the period ended September 30, 2008 totaled $118,303
|
|
|
|
|
|
Noncash financing activities not included herein consist of:
|
|
|
|
|
|
Reinvestment of dividends of
|
|
$
|
1,183,983
|
|
See notes
to financial statements.
53
RMK HIGH INCOME FUND, INC.
Statement of Cash Flows
For the Six Months Ended September 30, 2008
|
|
|
|
|
|
|
Increase (Decrease) in Cash:
|
|
|
|
|
|
|
|
|
Cash flows provided by (used for) operating activities:
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
$
|
(36,747,866
|
)
|
|
Adjustments to reconcile net decrease in net assets from operations to net cash provided by operating activities:
|
|
|
|
|
|
Purchases of long-term portfolio investments
|
|
|
(29,067,642
|
)
|
|
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses
|
|
|
36,898,504
|
|
|
Sales of short-term portfolio investments, net
|
|
|
1,365,329
|
|
|
Decrease in interest and dividends receivable
|
|
|
2,945,852
|
|
|
Decrease in receivable for investments sold
|
|
|
2,009,043
|
|
|
Increase in prepaid expenses
|
|
|
(101,078
|
)
|
|
Increase in payable for investments purchased
|
|
|
878,101
|
|
|
Decrease in interest payable on loans outstanding
|
|
|
(21,150
|
)
|
|
Decrease in investment advisory fee payable
|
|
|
(51,995
|
)
|
|
Decrease in administration fee payable
|
|
|
(6,580
|
)
|
|
Decrease in accrued expenses.
|
|
|
(24,077
|
)
|
|
Net amortization and paydown gain on investments
|
|
|
(655,722
|
)
|
|
Unrealized appreciation on investments
|
|
|
(27,110,695
|
)
|
|
Net realized loss on investment transactions
|
|
|
69,304,863
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
19,614,887
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used for financing activities:
|
|
|
|
|
|
Decrease in loan payable
|
|
|
(12,000,000
|
)
|
|
Dividends paid to stockholders, net of reinvestments
|
|
|
(7,547,669
|
)
|
|
|
|
|
|
|
|
Net cash used for financing activities
|
|
|
(19,547,669
|
)
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
67,218
|
|
|
Cash at beginning of period
|
|
|
0
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
67,218
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Interest payments for the period ended September 30, 2008 totaled $41,088
|
|
|
|
|
|
Noncash financing activities not included herein consist of:
|
|
|
|
|
|
Reinvestment of dividends of
|
|
$
|
984,261
|
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
54
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
Statement of Cash Flows
For the Six Months Ended September 30, 2008
|
|
|
|
|
|
|
Increase (Decrease) in Cash:
|
|
|
|
|
|
|
|
|
Cash flows provided by (used for) operating activities:
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
$
|
(57,576,015
|
)
|
|
Adjustments to reconcile net decrease in net assets from operations to net cash provided by operating activities:
|
|
|
|
|
|
Purchases of long-term portfolio investments
|
|
|
(28,121,675
|
)
|
|
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses
|
|
|
42,465,054
|
|
|
Purchases of short-term portfolio investments, net
|
|
|
(2,198,670
|
)
|
|
Decrease in interest and dividends receivable
|
|
|
3,752,392
|
|
|
Decrease in receivable for investments sold
|
|
|
4,489,849
|
|
|
Decrease in prepaid expenses
|
|
|
79,221
|
|
|
Increase in interest payable for reverse repurchase agreements
|
|
|
643
|
|
|
Increase in payable for investments purchased
|
|
|
2,670,502
|
|
|
Decrease in interest payable on loans outstanding
|
|
|
(97,557
|
)
|
|
Decrease in investment advisory fee payable
|
|
|
(81,638
|
)
|
|
Decrease in administration fee payable
|
|
|
(12,747
|
)
|
|
Decrease in accrued expenses.
|
|
|
(36,376
|
)
|
|
Net amortization and paydown gain on investments
|
|
|
(1,074,329
|
)
|
|
Unrealized appreciation on investments
|
|
|
(36,694,104
|
)
|
|
Net realized loss on investment transactions
|
|
|
100,670,947
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
28,235,497
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used for financing activities:
|
|
|
|
|
|
Decrease in loan payable
|
|
|
(17,000,000
|
)
|
|
Net cash used for reverse repurchase agreements
|
|
|
178,500
|
|
|
Dividends paid to stockholders, net of reinvestments
|
|
|
(11,305,790
|
)
|
|
|
|
|
|
|
|
Net cash used for financing activities
|
|
|
(28,127,290
|
)
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
108,207
|
|
|
Cash at beginning of period
|
|
|
0
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
108,207
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Interest payments for the period ended September 30, 2008 totaled $123,643
|
|
|
|
|
|
Noncash financing activities not included herein consist of:
|
|
|
|
|
|
Reinvestment of dividends of
|
|
$
|
3,482,113
|
|
See notes
to financial statements.
55
RMK STRATEGIC INCOME FUND, INC.
Statement of Cash Flows
For the Six Months Ended September 30, 2008
|
|
|
|
|
|
|
Increase (Decrease) in Cash:
|
|
|
|
|
|
|
|
|
Cash flows provided by (used for) operating activities:
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
$
|
(41,605,043
|
)
|
|
Adjustments to reconcile net decrease in net assets from operations to net cash provided by operating activities:
|
|
|
|
|
|
Purchases of long-term portfolio investments
|
|
|
(26,665,618
|
)
|
|
Proceeds from disposition of long-term portfolio investments, principal paydowns, net of losses
|
|
|
56,384,963
|
|
|
Sales of short-term portfolio investments, net
|
|
|
1,378,476
|
|
|
Decrease in interest and dividends receivable
|
|
|
3,772,692
|
|
|
Decrease in receivable for investments sold
|
|
|
2,106,985
|
|
|
Increase in prepaid expenses
|
|
|
(124,345
|
)
|
|
Increase in payable for investments purchased
|
|
|
484,557
|
|
|
Decrease in interest payable on loans outstanding
|
|
|
(113,594
|
)
|
|
Decrease in investment advisory fee payable
|
|
|
(71,624
|
)
|
|
Decrease in administration fee payable
|
|
|
(10,826
|
)
|
|
Decrease in accrued expenses
|
|
|
(17,031
|
)
|
|
Net amortization and paydown gain on investments
|
|
|
(889,062
|
)
|
|
Unrealized appreciation on investments
|
|
|
(32,221,936
|
)
|
|
Net realized loss on investment transactions
|
|
|
82,477,326
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
44,885,920
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used for financing activities:
|
|
|
|
|
|
Decrease in loan payable
|
|
|
(35,000,000
|
)
|
|
Dividends paid to stockholders, net of reinvestments
|
|
|
(9,616,110
|
)
|
|
|
|
|
|
|
|
Net cash used for financing activities
|
|
|
(44,616,110
|
)
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
269,810
|
|
|
Cash at beginning of period
|
|
|
0
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
269,810
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Interest payments for the period ended September 30, 2008 totaled $216,562
|
|
|
|
|
|
Noncash financing activities not included herein consist of:
|
|
|
|
|
|
Reinvestment of dividends of
|
|
$
|
1,608,909
|
|
See notes
to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
56
RMK ADVANTAGE INCOME FUND, INC.
Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Six Months Ended
September 30, 2008
|
|
|
For the
Year Ended
March 31, 2008
|
|
|
For the
Year Ended
March 31, 2007
|
|
|
For the
Year Ended
March 31, 2006
|
|
|
For the
Period Ended
March 31, 2005(a)
|
|
|
Per Share Operating Performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
3.42
|
|
|
$
|
13.29
|
|
|
$
|
13.95
|
|
|
$
|
14.37
|
|
|
$
|
14.33
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.19
|
|
|
|
1.30
|
|
|
|
1.66
|
|
|
|
1.90
|
|
|
|
0.57
|
|
|
Net realized and unrealized loss on investments
|
|
|
(1.71
|
)
|
|
|
(9.73
|
)
|
|
|
(0.56
|
)
|
|
|
(0.22
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net asset value resulting from operations
|
|
|
(1.52
|
)
|
|
|
(8.43
|
)
|
|
|
1.10
|
|
|
|
1.68
|
|
|
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from net investment income
|
|
|
(0.20
|
)
|
|
|
(1.31
|
)
|
|
|
(1.70
|
)
|
|
|
(1.86
|
)
|
|
|
(0.48
|
)
|
|
Distributions from capital gains
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.24
|
)
|
|
|
—
|
|
|
Return of capital
|
|
|
(0.16
|
)
|
|
|
(0.13
|
)
|
|
|
(0.06
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions.
|
|
|
(0.36
|
)
|
|
|
(1.44
|
)
|
|
|
(1.76
|
)
|
|
|
(2.10
|
)
|
|
|
(0.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering costs charged to additional paid in capital
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$
|
1.54
|
|
|
$
|
3.42
|
|
|
$
|
13.29
|
|
|
$
|
13.95
|
|
|
$
|
14.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
$
|
1.02
|
|
|
$
|
3.34
|
|
|
$
|
15.30
|
|
|
$
|
16.80
|
|
|
$
|
15.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Return†
|
|
|
(64.92
|
%)
|
|
|
(73.61
|
%)
|
|
|
1.53
|
%
|
|
|
23.28
|
%
|
|
|
7.30
|
%
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets/ Supplementary Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000s)
|
|
$
|
50,384
|
|
|
$
|
110,614
|
|
|
$
|
416,999
|
|
|
$
|
417,229
|
|
|
$
|
403,663
|
|
|
Operating expenses
|
|
|
2.18
|
%(c)
|
|
|
3.66
|
%
|
|
|
3.23
|
%
|
|
|
2.62
|
%
|
|
|
0.94
|
%(c)
|
|
Interest expense
|
|
|
.05
|
%(c)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
Total
|
|
|
2.23
|
%(c)
|
|
|
3.66
|
%
|
|
|
3.23
|
%
|
|
|
2.62
|
%
|
|
|
0.94
|
%(c)
|
|
Total expenses, including fee waiver and excluding interest expense, debt issuance costs and extraordinary expenses
|
|
|
1.13
|
%(c)
|
|
|
3.49
|
%
|
|
|
3.23
|
%
|
|
|
2.62
|
%
|
|
|
0.94
|
%
|
|
Net investment income
|
|
|
16.44
|
%(c)
|
|
|
16.56
|
%
|
|
|
12.14
|
%
|
|
|
13.45
|
%
|
|
|
10.52
|
%(c)
|
|
Net investment income, excluding the effect of waivers and reimbursement
|
|
|
16.04
|
%(c)
|
|
|
16.39
|
%
|
|
|
12.14
|
%
|
|
|
13.45
|
%
|
|
|
10.52
|
%(c)
|
|
Portfolio turnover rate
|
|
|
47
|
%(d)
|
|
|
76
|
%
|
|
|
94
|
%
|
|
|
104
|
%
|
|
|
57
|
%(d)
|
† Total investment return is computed based upon the New York Stock Exchange market price of the Fund’s shares and excludes the effect of brokerage commissions. Dividends and distributions are assumed to be reinvested at the
prices obtained under the Fund’s dividend reinvestment plan.
|
(a)
|
From the commencement of investment operations on November 8, 2004.
|
|
(b)
|
Net of sales load of $0.675 on initial shares issued.
|
|
(e)
|
Not available. During this period, interest expense was not reported separately from operating expenses.
|
See notes to financial statements.
57
RMK HIGH INCOME FUND, INC.
Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Six Months Ended
September 30, 2008
|
|
|
For the
Year Ended
March 31, 2008
|
|
|
For the
Year Ended
March 31, 2007
|
|
|
For the
Year Ended
March 31, 2006
|
|
|
For the
Year Ended
March 31, 2005
|
|
|
For the
Period Ended
March 31, 2004(a)
|
|
|
Per Share Operating Performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
3.45
|
|
|
$
|
13.18
|
|
|
$
|
13.85
|
|
|
$
|
15.03
|
|
|
$
|
15.32
|
|
|
$
|
14.33
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.22
|
|
|
|
1.25
|
|
|
|
1.76
|
|
|
|
1.98
|
|
|
|
2.15
|
|
|
|
1.11
|
|
|
Net realized and unrealized gain (loss) on investments
|
|
|
(1.73
|
)
|
|
|
(9.54
|
)
|
|
|
(0.67
|
)
|
|
|
(0.58
|
)
|
|
|
0.24
|
|
|
|
1.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net asset value resulting from operations
|
|
|
(1.51
|
)
|
|
|
(8.29
|
)
|
|
|
1.09
|
|
|
|
1.40
|
|
|
|
2.39
|
|
|
|
2.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from net investment income
|
|
|
(0.22
|
)
|
|
|
(1.26
|
)
|
|
|
(1.73
|
)
|
|
|
(1.90
|
)
|
|
|
(2.07
|
)
|
|
|
(1.01
|
)
|
|
Distributions from capital gains
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.68
|
)
|
|
|
(0.61
|
)
|
|
|
(0.17
|
)
|
|
Return of capital
|
|
|
(0.14
|
)
|
|
|
(0.18
|
)
|
|
|
(0.03
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions.
|
|
|
(0.36
|
)
|
|
|
(1.44
|
)
|
|
|
(1.76
|
)
|
|
|
(2.58
|
)
|
|
|
(2.68
|
)
|
|
|
(1.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering costs charged to additional paid in capital
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$
|
1.58
|
|
|
$
|
3.45
|
|
|
$
|
13.18
|
|
|
$
|
13.85
|
|
|
$
|
15.03
|
|
|
$
|
15.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
$
|
1.07
|
|
|
$
|
3.51
|
|
|
$
|
15.20
|
|
|
$
|
17.51
|
|
|
$
|
16.50
|
|
|
$
|
16.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Return
†
|
|
|
(65.04
|
%)
|
|
|
(72.40
|
%)
|
|
|
(3.26
|
%)
|
|
|
24.15
|
%
|
|
|
16.49
|
%
|
|
|
20.06
|
%
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets/ Supplementary Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000s)
|
|
$
|
38,114
|
|
|
$
|
82,409
|
|
|
$
|
303,259
|
|
|
$
|
306,699
|
|
|
$
|
313,731
|
|
|
$
|
299,772
|
|
|
Operating expenses
|
|
|
1.81
|
%(c)
|
|
|
3.73
|
%
|
|
|
3.47
|
%
|
|
|
2.92
|
%
|
|
|
2.12
|
%
|
|
|
1.11
|
%(c)
|
|
Interest expense
|
|
|
.07
|
%(c)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
Total
|
|
|
1.88
|
%(c)
|
|
|
3.73
|
%
|
|
|
3.47
|
%
|
|
|
2.92
|
%
|
|
|
2.12
|
%
|
|
|
1.11
|
%(c)
|
|
Total expenses including fee waiver and excluding interest expense, debt issuance costs and extraordinary expenses
|
|
|
1.06
|
%(c)
|
|
|
3.56
|
%
|
|
|
3.47
|
%
|
|
|
2.92
|
%
|
|
|
2.12
|
%
|
|
|
1.11
|
%(c)
|
|
Net investment income
|
|
|
17.84
|
%(c)
|
|
|
15.89
|
%
|
|
|
12.89
|
%
|
|
|
13.66
|
%
|
|
|
14.08
|
%
|
|
|
10.15
|
%(c)
|
|
Net investment income, excluding the effect of waivers and reimbursement.
|
|
|
17.27
|
%(c)
|
|
|
15.72
|
%
|
|
|
12.89
|
%
|
|
|
13.66
|
%
|
|
|
14.08
|
%
|
|
|
10.15
|
%(c)
|
|
Portfolio turnover rate
|
|
|
50
|
%(d)
|
|
|
74
|
%
|
|
|
100
|
%
|
|
|
97
|
%
|
|
|
73
|
%
|
|
|
76
|
%(d)
|
† Total investment return is computed based upon the New York Stock Exchange market price of the Fund’s shares and excludes the effect of brokerage commissions. Dividends and distributions are assumed to be reinvested at the
prices obtained under the Fund’s dividend reinvestment plan.
|
(a)
|
From the commencement of investment operations on June 24, 2003.
|
|
(b)
|
Net of sales load of $0.675 on initial shares issued.
|
|
(e)
|
Not available. During this period, interest expense was not reported separately from operating expenses.
|
See notes to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
58
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Six Months Ended
September 30, 2008
|
|
|
For the
Year Ended
March 31, 2008
|
|
|
For the
Year Ended
March 31, 2007
|
|
|
For the
Period Ended
March 31, 2006(a)
|
|
|
Per Share Operating Performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
3.01
|
|
|
$
|
14.10
|
|
|
$
|
14.54
|
|
|
$
|
14.33
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.20
|
|
|
|
1.34
|
|
|
|
1.81
|
|
|
|
0.21
|
|
|
Net realized and unrealized gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(loss) on investments
|
|
|
(1.73
|
)
|
|
|
(10.63
|
)
|
|
|
(0.36
|
)
|
|
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net asset value resulting from operations
|
|
|
(1.53
|
)
|
|
|
(9.29
|
)
|
|
|
1.45
|
|
|
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from net investment income
|
|
|
(0.20
|
)
|
|
|
(1.55
|
)
|
|
|
(1.66
|
)
|
|
|
(0.12
|
)
|
|
Distributions from capital gains
|
|
|
—
|
|
|
|
(0.07
|
)
|
|
|
(0.23
|
)
|
|
|
—
|
|
|
Return of capital
|
|
|
(0.20
|
)
|
|
|
(0.18
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions.
|
|
|
(0.40
|
)
|
|
|
(1.80
|
)
|
|
|
(1.89
|
)
|
|
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering costs charged to additional paid in capital
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$
|
1.08
|
|
|
$
|
3.01
|
|
|
$
|
14.10
|
|
|
$
|
14.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
$
|
0.75
|
|
|
$
|
3.33
|
|
|
$
|
15.71
|
|
|
$
|
15.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Return
†
|
|
|
(72.91
|
%)
|
|
|
(72.67
|
%)
|
|
|
10.96
|
%
|
|
|
7.38
|
%
|
|
|
|
|
|
|
|
Ratios to Average Net Assets/ Supplementary Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000s)
|
|
$
|
40,751
|
|
|
$
|
109,633
|
|
|
$
|
468,879
|
|
|
$
|
453,523
|
|
|
Operating expenses
|
|
|
2.29
|
%(c)
|
|
|
3.71
|
%
|
|
|
2.83
|
%
|
|
|
0.71
|
%(c)
|
|
Interest expense
|
|
|
0.07
|
%(c)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
Total
|
|
|
2.36
|
%(c)
|
|
|
(3.71
|
%)
|
|
|
2.83
|
%
|
|
|
0.71
|
%(c)
|
|
Total expenses, including fee waiver and excluding interest expense, debt issuance costs and extraordinary expenses
|
|
|
1.12
|
%(c)
|
|
|
3.55
|
%
|
|
|
2.83
|
%
|
|
|
0.71
|
%
|
|
Net investment income
|
|
|
16.87
|
%(c)
|
|
|
16.03
|
%
|
|
|
12.46
|
%
|
|
|
6.72
|
%(c)
|
|
Net investment income, excluding the effect of waiver and reimbursement
|
|
|
16.42
|
%(c)
|
|
|
15.87
|
%
|
|
|
12.46
|
%
|
|
|
6.72
|
%(c)
|
|
Portfolio turnover rate
|
|
|
36
|
%(d)
|
|
|
68
|
%
|
|
|
85
|
%
|
|
|
131
|
%(d)
|
† Total investment return is computed based upon the New York Stock Exchange market price of the Fund’s shares and excludes the effect of brokerage commissions. Dividends and distributions are assumed to be reinvested at the
prices obtained under the Fund’s dividend reinvestment plan.
|
(a)
|
From the commencement of investment operations on January 19, 2006.
|
|
(b)
|
Net of sales load of $0.675 on initial shares issued.
|
|
(e)
|
Not available. During this period, interest expense was not reported separately from operating expenses.
|
See notes to financial statements.
59
RMK STRATEGIC INCOME FUND, INC.
Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Six Months Ended
September 30, 2008
|
|
|
For the
Year Ended
March 31, 2008
|
|
|
For the
Year Ended
March 31, 2007
|
|
|
For the
Year Ended
March 31, 2006
|
|
|
For the
Year Ended
March 31, 2005
|
|
|
For the
Period Ended
March 31, 2004(a)
|
|
|
Per Share Operating Performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
3.17
|
|
|
$
|
12.89
|
|
|
$
|
13.54
|
|
|
$
|
14.23
|
|
|
$
|
14.31
|
|
|
$
|
14.33
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.28
|
|
|
|
1.27
|
|
|
|
1.63
|
|
|
|
1.78
|
|
|
|
1.76
|
|
|
|
0.02
|
|
|
Net realized and unrealized loss on investments
|
|
|
(1.69
|
)
|
|
|
(9.55
|
)
|
|
|
(0.52
|
)
|
|
|
(0.20
|
)
|
|
|
(0.16
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net asset value resulting from operations
|
|
|
(1.41
|
)
|
|
|
(8.28
|
)
|
|
|
1.11
|
|
|
|
1.58
|
|
|
|
1.60
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from net investment income
|
|
|
(0.30
|
)
|
|
|
(1.28
|
)
|
|
|
(1.71
|
)
|
|
|
(1.89
|
)
|
|
|
(1.68
|
)
|
|
|
—
|
|
|
Distributions from capital gains
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.38
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Return of capital
|
|
|
(0.09
|
)
|
|
|
(0.16
|
)
|
|
|
(0.05
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions.
|
|
|
(0.39
|
)
|
|
|
(1.44
|
)
|
|
|
(1.76
|
)
|
|
|
(2.27
|
)
|
|
|
(1.68
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering costs charged to additional paid in capital
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$
|
1.37
|
|
|
$
|
3.17
|
|
|
$
|
12.89
|
|
|
$
|
13.54
|
|
|
$
|
14.23
|
|
|
$
|
14.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
$
|
0.97
|
|
|
$
|
3.18
|
|
|
$
|
14.81
|
|
|
$
|
16.70
|
|
|
$
|
15.74
|
|
|
$
|
16.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Return
†
|
|
|
(63.94
|
%)
|
|
|
(74.01
|
%)
|
|
|
(1.09
|
%)
|
|
|
22.60
|
%
|
|
|
9.68
|
%
|
|
|
6.67
|
%
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets/Supplementary Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000s)
|
|
$
|
40,260
|
|
|
$
|
91,481
|
|
|
$
|
359,230
|
|
|
$
|
362,768
|
|
|
$
|
359,781
|
|
|
$
|
300,547
|
|
|
Operating expenses
|
|
|
1.81
|
%(c)
|
|
|
3.86
|
%
|
|
|
3.50
|
%
|
|
|
2.94
|
%
|
|
|
1.70
|
%
|
|
|
0.87
|
%(c)
|
|
Interest expense
|
|
|
0.31
|
%(c)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
|
N/A
|
(e)
|
|
Total
|
|
|
2.12
|
%(c)
|
|
|
3.86
|
%
|
|
|
3.50
|
%
|
|
|
2.94
|
%
|
|
|
1.70
|
%
|
|
|
0.87
|
%(c)
|
|
Total expenses, net of fee waivers and excluding interest expense, debt issuance costs and extraordinary expenses
|
|
|
1.16
|
%(c)
|
|
|
3.69
|
%
|
|
|
3.50
|
%
|
|
|
2.94
|
%
|
|
|
1.70
|
%
|
|
|
0.87
|
%(c)
|
|
Net investment income
|
|
|
26.15
|
%(c)
|
|
|
16.64
|
%
|
|
|
12.17
|
%
|
|
|
12.80
|
%
|
|
|
12.47
|
%
|
|
|
3.87
|
%(c)
|
|
Net investment income, excluding the effect of waivers and reimbursement
|
|
|
25.64
|
%(c)
|
|
|
16.47
|
%
|
|
|
12.17
|
%
|
|
|
12.80
|
%
|
|
|
12.47
|
%
|
|
|
3.87
|
%(c)
|
|
Portfolio turnover rate
|
|
|
38
|
%(d)
|
|
|
73
|
%
|
|
|
106
|
%
|
|
|
101
|
%
|
|
|
69
|
%
|
|
|
0
|
%
|
† Total investment return is computed based upon the New York Stock Exchange market price of the Fund’s shares and excludes the effect of brokerage commissions. Dividends and distributions are assumed to be reinvested at the
prices obtained under the Fund’s dividend reinvestment plan.
|
(a)
|
From the commencement of investment operations on March 18, 2004.
|
|
(b)
|
Net of sales load of $0.675 on initial shares issued.
|
|
(e)
|
Not available. During this period, interest expense was not reported separately from operating expenses.
|
See notes to financial statements.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
60
RMK FUNDS
Notes to Financial Statements
September 30, 2008
1. Organization
RMK Advantage Income Fund, Inc., RMK High Income Fund, Inc., RMK Multi-Sector High
Income Fund, Inc. and RMK Strategic Income Fund, Inc. (each a “Fund” and, collectively, the “Funds” or the “RMK Funds”) were organized as separate Maryland corporations on September 7, 2004, April 16,
2003, November 14, 2005 and January 16, 2004, respectively. Each Fund is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, closed-end management investment company with its
own investment objective.
Effective July 29, 2008, Hyperion Brookfield Asset Management, Inc. (“HBAM” or “Adviser”), a
wholly owned subsidiary of Brookfield Asset Management Inc. and a registered investment adviser, became investment adviser to the Funds. Prior to July 29, 2008, Morgan Asset Management, Inc. (“MAM” or “Former Adviser”)
served as investment adviser to the Funds.
2. Significant Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
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 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 Adviser’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 Adviser’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 Adviser, those securities will be valued at “fair value”
as determined in good faith by the Adviser’s Valuation Committee using procedures established 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 Adviser 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.
61
RMK FUNDS
Notes to Financial Statements
September 30, 2008
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 have adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”), effective April 1, 2008. In accordance with FAS 157, fair value is defined as the price that the 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. FAS 157 established a three-tier hierarchy 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 -
|
|
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 securities 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 September 30, 2008 in valuing the
Funds’ investments carried at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Securities
|
|
Valuation Inputs
|
|
RMK
Advantage Income
Fund, Inc.
|
|
RMK
High Income
Fund, Inc.
|
|
RMK
Multi-Sector
High Income
Fund, Inc.
|
|
RMK
Strategic Income
Fund, Inc.
|
|
Level 1 — Quoted Prices
|
|
$
|
305,150
|
|
$
|
305,150
|
|
$
|
305,150
|
|
$
|
305,150
|
|
Level 2 — Other Significant Observable Inputs
|
|
|
7,238,122
|
|
|
3,778,937
|
|
|
3,698,281
|
|
|
2,698,543
|
|
Level 3 — Significant Unobservable Inputs
|
|
|
42,620,361
|
|
|
33,857,936
|
|
|
38,037,424
|
|
|
36,023,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
50,163,633
|
|
$
|
37,942,023
|
|
$
|
42,040,855
|
|
$
|
39,027,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Instruments*
|
|
Valuation Inputs
|
|
RMK
Advantage Income
Fund, Inc.
|
|
RMK
High Income
Fund, Inc.
|
|
RMK
Multi-Sector
High Income
Fund, Inc.
|
|
RMK
Strategic Income
Fund, Inc.
|
|
Level 1 — Quoted Prices
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Level 2 — Other Significant Observable Inputs
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Level 3 — Significant Unobservable Inputs
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Other financial instruments include options, futures, forwards and swap contracts.
|
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
62
RMK FUNDS
Notes to Financial Statements
September 30, 2008
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Securities
|
|
|
|
|
RMK
Advantage Income
Fund, Inc.
|
|
|
RMK
High Income
Fund, Inc.
|
|
|
RMK
Multi-Sector
High Income
Fund, Inc.
|
|
|
RMK
Strategic Income
Fund, Inc.
|
|
|
Balance as of April 1, 2008
|
|
$
|
64,930,271
|
|
|
$
|
42,248,380
|
|
|
$
|
69,393,904
|
|
|
$
|
55,312,805
|
|
|
Net purchases at cost
|
|
|
9,261,054
|
|
|
|
13,075,377
|
|
|
|
6,179,505
|
|
|
|
4,377,322
|
|
|
Realized (loss)
|
|
|
(55,252,681
|
)
|
|
|
(42,570,234
|
)
|
|
|
(68,092,484
|
)
|
|
|
(47,147,682
|
)
|
|
Change in unrealized appreciation/(depreciation)
|
|
|
15,637,941
|
|
|
|
13,662,183
|
|
|
|
23,510,549
|
|
|
|
14,109,942
|
|
|
Accretion/(amortization)
|
|
|
12,216
|
|
|
|
(10,975
|
)
|
|
|
17,707
|
|
|
|
(19,570
|
)
|
|
Transfers in and/or out of Level 3
|
|
|
8,031,560
|
|
|
|
7,453,205
|
|
|
|
7,028,243
|
|
|
|
9,390,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2008
|
|
$
|
42,620,361
|
|
|
$
|
33,857,936
|
|
|
$
|
38,037,424
|
|
|
$
|
36,023,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Transactions and Investment Income:
Securities transactions are recorded on the trade
date. Realized gains and losses from securities transactions are calculated on the identified cost basis. Interest income is recorded on the accrual basis. Discounts and premiums on securities are accreted and amortized, respectively on a daily
basis, using the effective yield to maturity method adjusted based on management’s assessment of the collectability of such interest. Dividend income is recorded on the ex-dividend date.
Taxes:
Each Fund intends to qualify and meet the requirements of the Internal Revenue Code applicable to regulated investment companies and distribute substantially all of its taxable income to its
stockholders. Therefore, no federal income or excise tax provision is required.
The Financial Accounting Standards Board (“FASB”) has
issued FASB Interpretation 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”. FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements.
FIN 48 requires the evaluation of tax positions taken in the course of preparing the Funds’ tax returns to determine whether the tax positions are “more-likely-than-not’ of being sustained by the taxing authority. Tax benefits of
positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits; a reduction of an income tax refund receivable; a reduction of
deferred tax asset; an increase in deferred tax liability; or a combination thereof. As of September 30, 2008, the Funds have implemented FIN 48 and have determined that there is no impact on their financial statements.
Expenses:
Expenses directly attributable to a Fund are charged directly to that Fund, while expenses which are attributable to more than one Fund are
allocated among the respective Funds based upon relative net assets.
Distributions to Stockholders:
Distributions from net investment income
(including net short term capital gains), if any, are declared and paid monthly to stockholders. Each Fund also pays distributions at least annually from its net realized capital gains, if any. Distributions to stockholders are recorded on the
ex-dividend date. All common shares have equal dividend and other distribution rights.
Income dividends and capital gain distributions are
determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatment of income and gains on various investment
securities held by the Funds, timing differences and differing characterization of distributions made by each Fund.
Restricted Securities:
The Funds own investment securities which are unregistered and thus restricted as to resale. These securities are valued by the Funds after giving due consideration to pertinent factors including recent private sales, market conditions and the
issuer’s financial performance. Where future disposition of these securities requires registration under the Securities Act of 1933, the Funds have the right to include these securities in such registration, generally without cost to the Funds.
The Funds have no right to require registration of unregistered securities.
63
RMK FUNDS
Notes to Financial Statements
September 30, 2008
At September 30, 2008:
|
|
|
|
|
|
|
|
|
Fund
|
|
Restricted
Securities
Aggregated
Value
|
|
Restricted
Securities
Percentage
of Net
Assets
|
|
|
RMK Advantage Income Fund, Inc.
|
|
$
|
13,616,804
|
|
27.03
|
%
|
|
RMK High Income Fund, Inc.
|
|
|
10,966,786
|
|
28.77
|
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
|
13,922,042
|
|
34.16
|
|
|
RMK Strategic Income Fund, Inc.
|
|
|
11,274,870
|
|
28.01
|
|
Repurchase Agreements:
Each Fund may invest in repurchase agreements. A repurchase agreement is an
agreement by which the Funds purchase securities from a third party with the commitment that they will be repurchased by the seller at a fixed price on an agreed upon future date. The Funds, through their custodian, receive delivery of the
underlying collateral, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. The Adviser is responsible for determining that the value of these underlying
securities is sufficient at all times. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings commence with respect to the seller of the security, realization of the collateral by the Fund may be delayed or
limited.
Options Writings:
When a Fund writes an option, an amount equal to the premium received by the Fund is included in the Statement of
Assets and Liabilities as a liability. The amount of the liability is subsequently marked to market to reflect the current value of the option written in accordance with the Fund’s policies on investment valuations discussed above. Premiums
received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the
realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, may have no control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the securities underlying the written option in excess of the amounts recorded in the Statements of Assets and Liabilities. The Funds had no
transactions in written options during the six months ended September 30, 2008.
When-Issued and Delayed Delivery Transactions:
The Funds may
engage in when-issued or delayed delivery transactions. The Funds record when-issued securities on the trade date and maintain security positions such that sufficient liquid assets will be available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties
to perform under the contract.
Cash Flow Information:
Each Fund invests in securities and distributes dividends and distributions which are
paid in cash or are reinvested at the discretion of stockholders. These activities are reported in the Statement of Changes in Net Assets. Additional information on cash receipts and cash payments is presented in the Statement of Cash Flows. Cash,
as used in the Statement of Cash Flows, is the amount reported as “Cash” in the statement of Assets and Liabilities, and does not include short-term investments.
Accounting practices that do not affect reporting activities on a cash basis include carrying investments at value and accreting discounts and amortizing premiums on debt obligations.
3. Risks of Investing in Asset-Backed Securities and Below Investment Grade Securities
The value of asset-backed securities may be affected by, among other factors, changes in: interest rates, the market’s assessment of the quality of underlying
assets, the creditworthiness of the servicer for the underlying assets, information concerning the originator of the underlying assets, or the creditworthiness or rating of the entities that provide any supporting letters of credit, surety bonds,
derivative instruments, or other credit
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
64
RMK FUNDS
Notes to Financial Statements
September 30, 2008
enhancement. The value of asset-backed securities also will be affected by the exhaustion, termination or expiration of any credit enhancement.
The Funds have significant investments in below investment grade debt securities, including mortgage-backed and asset-backed securities. Below investment grade
securities, commonly known as “junk bonds,” involve a higher degree of credit risk than investment grade debt securities. In the event of an unanticipated default, a Fund would experience a reduction in its income, a decline in the market
value of the securities so affected and a decline in the NAV of its shares. During an economic downturn or period of rising interest rates, highly leveraged and other below investment grade issuers have experienced financial stress that could
adversely affect their ability to service principal and interest payment obligations, to meet projected business goals and to obtain additional financing. The market prices of below investment grade debt securities are generally less sensitive to
interest rate changes than higher-rated investments but are more sensitive to adverse economic or political changes or individual developments specific to the issuer than higher-rated investments. Periods of economic or political uncertainty and
change can be expected to result in significant volatility of prices for these securities. Rating services consider these securities to be speculative in nature.
Below investment grade securities may be subject to market conditions, events of default or other circumstances which cause them to be considered “distressed securities.” Distressed securities frequently do not
produce income while they are outstanding. The Funds may be required to bear certain extraordinary expenses in order to protect and recover its investment in certain distressed securities. Therefore, to the extent the Funds seek capital growth
through investment in such securities, a Fund’s ability to achieve current income for its stockholders may be diminished. The Funds also are subject to significant uncertainty as to when and in what manner and for what value the obligations
evidenced by distressed securities will eventually be satisfied (e.g., through a liquidation of the obligor’s assets, an exchange offer or plan of reorganization involving the securities or a payment of some amount in satisfaction of the
obligation). In addition, even if an exchange offer is made or a plan of reorganization is adopted with respect to distressed securities held by the Funds, there can be no assurance that the securities or other assets received by the Funds in
connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made. Moreover, any securities received by the Funds upon completion of an exchange
offer or plan of reorganization may be restricted as to resale. As a result of the Funds’ participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of such securities, the Funds may be
restricted from disposing of distressed securities.
Mortgage-backed and asset-backed securities are subject to the credit risk associated with the
performance of the underlying mortgage properties or other assets. In certain instances, third-party guarantees or other forms of credit support can reduce the credit risk.
4. Investment Advisory Agreements and Affiliated Transactions
Effective
July 29, 2008, the Funds entered into Investment Advisory Agreements with the Adviser under which the Adviser is responsible for the management of each Fund’s portfolio and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of each Fund. The Advisory Agreement provides, among other things, that the Adviser will bear all expenses of its employees and overhead incurred in connection with its duties under the Investment
Advisory Agreements, and will pay all salaries of the Funds’ directors and officers who are affiliated persons (as such term is defined in the 1940 Act) of the Adviser. The Investment Advisory Agreements provide that each Fund shall pay the
Adviser a monthly fee for its services an annual rate of 0.65% of each Fund’s average daily total assets minus liabilities (other than aggregate indebtedness entered into for purposes of leverage).
The Adviser has contractually agreed to waive its fees and/or reimburse each Fund for its expenses to the extent necessary to ensure each Fund’s annual
operating expenses (excluding brokerage, interest expense and taxes, and acquired fund fees and expenses) do not exceed 1.30% of average annual assets of each Fund.
65
RMK FUNDS
Notes to Financial Statements
September 30, 2008
Each contractual waiver will remain in effect until July 28, 2010. In addition, the contractual waivers shall continue indefinitely, unless sooner terminated by the Board of Directors of a Fund, or the Adviser, upon sixty
(60) days written notice to the other party.
During the period between July 29, 2008 and September 30, 2008, the Adviser earned and
waived the following in Investment Advisory fees:
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Advisory Fee
|
|
Waiver
|
|
|
RMK Advantage Income Fund, Inc.
|
|
$
|
64,697
|
|
$
|
(27,414
|
)
|
|
RMK High Income Fund, Inc.
|
|
|
47,979
|
|
|
(32,078
|
)
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
|
53,607
|
|
|
(36,486
|
)
|
|
RMK Strategic Income Fund, Inc.
|
|
|
51,249
|
|
|
(33,883
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
217,532
|
|
$
|
(129,861
|
)
|
|
|
|
|
|
|
|
|
|
Prior to July 29, 2008, the Funds were party to Investment Advisory Agreements with the Former Adviser.
Under the terms of the prior agreements, the Funds were charged an annual advisory fee of 0.65% based on a percentage of each Fund’s average daily total assets minus the sum of accrued liabilities other than debt entered into for purposes of
leverage. The Former Adviser also contractually agreed to waive its fee and, if necessary, reimburse each Fund to the extent each Fund’s annual operating expenses (excluding brokerage, interest expense and taxes) exceeded 1.30% of net assets of
each Fund. In addition, the Former Adviser voluntarily agreed to pay certain extraordinary expenses of the Funds, including legal expenses of pending litigation and the external valuation consultant fees.
For the period April 1, 2008 through July 28, 2008, the Former Adviser earned and waived Investment Advisory fees and reimbursed extraordinary expenses in the
following amounts:
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Advisory Fee
|
|
Waiver
|
|
|
RMK Advantage Income Fund, Inc.
|
|
$
|
205,917
|
|
$
|
(135,344
|
)
|
|
RMK High Income Fund, Inc.
|
|
|
154,241
|
|
|
(143,387
|
)
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
|
198,495
|
|
|
(136,781
|
)
|
|
RMK Strategic Income Fund, Inc.
|
|
|
183,639
|
|
|
(135,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
742,292
|
|
$
|
(551,451
|
)
|
|
|
|
|
|
|
|
|
|
Effective July 29, 2008, the Funds have entered into an Administration Agreement with the Adviser. The
Adviser entered into a sub-administration agreement with State Street Bank and Trust Company (the “Sub-Administrator”). The Adviser and Sub-Administrator perform administrative services necessary for the operation of the Funds, including
maintaining certain books and records of the Funds and preparing reports and other documents required by federal, state, and other applicable laws and regulations, and providing the Funds with administrative office facilities. For these services,
each Fund pays to the Adviser a monthly fee at an annual rate of 0.15% of each Fund’s average daily total assets minus liabilities (other than the aggregate indebtedness entered into for purposes of leverage). The Adviser is responsible for any
fees due the Sub-Administrator, except for N-Q filing fees.
During the period between July 29, 2008 and September 30, 2008, the Adviser earned
the following in Administration fees:
|
|
|
|
|
|
Fund
|
|
Administration Fee
|
|
RMK Advantage Income Fund, Inc.
|
|
$
|
15,934
|
|
RMK High Income Fund, Inc.
|
|
|
12,076
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
|
13,376
|
|
RMK Strategic Income Fund, Inc.
|
|
|
12,831
|
|
|
|
|
|
|
|
|
$
|
54,217
|
|
|
|
|
|
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
66
RMK FUNDS
Notes to Financial Statements
September 30, 2008
Prior to July 29, 2008 the Funds were party to an Accounting and Administration Services Agreement with the Former Adviser. Under the terms of the prior agreements the Funds were charged an annual fee 0.15% based on a
percentage of each Fund’s average daily total assets minus the sum of accrued liabilities other than debt entered into for purposes of leverage.
|
|
|
|
|
|
Fund
|
|
Administration Fee
|
|
RMK Advantage Income Fund, Inc.
|
|
$
|
47,519
|
|
RMK High Income Fund, Inc.
|
|
|
35,594
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
|
45,806
|
|
RMK Strategic Income Fund, Inc.
|
|
|
42,378
|
|
|
|
|
|
|
|
|
$
|
171,297
|
|
|
|
|
|
For the period April 1, 2008 through July 28, 2008, the Adviser earned the following fees as the external
valuation consultant to the Funds:
|
|
|
|
|
|
Fund
|
|
Valuation Fee
|
|
RMK Advantage Income Fund, Inc.
|
|
$
|
76,179
|
|
RMK High Income Fund, Inc.
|
|
|
56,538
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
|
71,937
|
|
RMK Strategic Income Fund, Inc.
|
|
|
61,178
|
|
|
|
|
|
|
|
|
|
265,832
|
|
|
|
|
|
Certain officers and/or directors of the Funds are officers and/or directors of the Adviser.
5. Purchases and Sales of Investments
Purchases and sales of investments, excluding short-term securities and U.S. Government securities, for the six months ended September 30, 2008 were as follows:
|
|
|
|
|
|
|
|
|
Fund
|
|
Purchases
|
|
Sales
|
|
RMK Advantage Income Fund, Inc.
|
|
$
|
34,367,030
|
|
$
|
48,585,197
|
|
RMK High Income Fund, Inc.
|
|
|
27,081,281
|
|
|
36,004,080
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
|
25,749,249
|
|
|
41,321,851
|
|
RMK Strategic Income Fund, Inc.
|
|
|
24,934,351
|
|
|
55,345,319
|
For the six months ended September 30, 2008 there were no transactions in U.S. Government securities.
6. Borrowings
Reverse
Repurchase Agreements:
Under reverse repurchase agreements, 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 the Funds 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). The Funds have 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 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 Fund would bear the risk of loss to the extent that the proceeds of the reverse repurchase agreement are less than the
value of the securities subject to such agreement.
67
RMK FUNDS
Notes to Financial Statements
September 30, 2008
At September 30, 2008, the RMK Multi-Sector High Income Fund, Inc. had the following reverse repurchase agreement outstanding:
|
|
|
|
|
|
|
|
Face Value
|
|
Description
|
|
Maturity
Amount
|
|
$178,500
|
|
Goldman Sachs, 4.99%, dated 09/05/08, maturity date 10/06/08
|
|
$
|
179,267
|
|
|
|
|
|
|
|
|
|
|
Maturity Amount, Including Interest Payable
|
|
$
|
179,267
|
|
|
|
|
|
|
|
|
|
|
Market value of Assets Sold Under Agreements
|
|
$
|
416,250
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Interest Rate
|
|
|
4.99%
|
|
|
|
|
|
|
|
The RMK Multi-Sector High Income Fund Inc.’s average daily balance of reverse repurchase agreements
outstanding during the six months ended September 30, 2008, was $178,500 at a weighted average interest rate of 4.99%. The maximum amount of reverse repurchase agreements outstanding at any time during the six month period was $178,500 as of
September 30, 2008, which was 0.44% of total assets.
Credit Facilities:
Each Fund is permitted to borrow up to one-third of the value of
its total assets, including such borrowings, for investment purposes. Such borrowing is referred to as leveraging and each Fund utilized collateralized bank lines of credit in the beginning of the fiscal year. The RMK High Income Fund, Inc., RMK
Advantage Income Fund, Inc., RMK Multi-Sector High Income Fund, Inc. and the RMK Strategic Income Fund, Inc. repaid the outstanding balance of each Fund’s bank line of credit on April 22, 2008, May 1, 2008, May 5, 2008 and June
10, 2008, respectively, and each Fund irrevocably terminated its credit facility. As of September 30, 2008, the Funds’ had no outstanding loan amounts open.
For the six months ended September 30, 2008, the Funds use of their facility was as follows:
|
|
|
|
|
|
|
|
|
Fund
|
|
Average
Daily
Balance
|
|
Average
Interest
Rate
|
|
|
RMK Advantage Income Fund, Inc.
|
|
$
|
1,355,191
|
|
3.11
|
%
|
|
RMK High Income Fund, Inc.
|
|
|
1,109,290
|
|
3.54
|
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
|
1,612,022
|
|
3.18
|
|
|
RMK Strategic Income Fund, Inc.
|
|
|
5,997,268
|
|
3.38
|
|
The maximum amount of borrowings outstanding under this facility during the six months ended
September 30, 2008 was $15,000,000 for the RMK Advantage Income Fund, Inc., $12,000,000 for the RMK High Income Fund, Inc., $17,000,000 for the RMK Multi-Sector High Income Fund, Inc. and $35,000,000 for the RMK Strategic Income Fund, Inc.,
respectively.
7. Capital Stock
Each Fund is authorized to issue 1,000,000,000 shares of capital stock with a par value of $0.0001 per share. The Funds’ Boards of Directors are authorized to classify and reclassify any unissued shares of capital stock from time to
time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or terms and conditions of redemption of such shares by the Funds. The common shares have no preemptive, conversion,
exchange or redemption rights. All common shares have equal voting, dividend, distribution and liquidation rights. The common shares, when issued, will be fully paid and non-assessable. Common stockholders are entitled to one vote per share and all
voting rights for the election of directors are non-cumulative. The Funds have no present intentions of offering additional shares, except as described in the Dividend Reinvestment Plan.
8. Federal Income Tax Information
Income and capital gain distributions are
determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
68
RMK FUNDS
Notes to Financial Statements
September 30, 2008
The tax character of distributions paid for the six months ended September 30, 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK
Advantage
Income Fund,
Inc.
|
|
RMK
High
Income Fund,
Inc.
|
|
RMK
Multi-Sector High
Income Fund,
Inc.
|
|
RMK
Strategic
Income Fund,
Inc.
|
|
Ordinary income
|
|
$
|
6,347,468
|
|
$
|
5,283,341
|
|
$
|
7,397,329
|
|
$
|
8,199,600
|
|
Return of capital
|
|
|
5,207,891
|
|
|
3,248,589
|
|
|
7,390,574
|
|
|
3,025,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions
|
|
$
|
11,555,359
|
|
$
|
8,531,930
|
|
$
|
14,787,903
|
|
$
|
11,225,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax character of distributions paid for the year ended March 31, 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK
Advantage
Income Fund,
Inc.
|
|
RMK
High
Income Fund,
Inc.
|
|
RMK
Multi-Sector High
Income Fund,
Inc.
|
|
RMK
Strategic
Income Fund,
Inc.
|
|
Ordinary income
(1)
|
|
$
|
44,688,670
|
|
$
|
31,537,838
|
|
$
|
59,396,292
|
|
$
|
36,808,696
|
|
Long-term capital gains
|
|
|
—
|
|
|
—
|
|
|
2,344,774
|
|
|
—
|
|
Return of capital
|
|
|
1,260,966
|
|
|
2,127,300
|
|
|
—
|
|
|
3,929,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions
|
|
$
|
45,949,636
|
|
$
|
33,665,138
|
|
$
|
61,741,066
|
|
$
|
40,738,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For tax purposes, short-term capital gain distributions are considered ordinary income distributions.
|
At September 30, 2008, the components of net assets (excluding paid-in capital) on a tax basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK
Advantage
Income Fund,
Inc.
|
|
|
RMK
High
Income Fund,
Inc.
|
|
|
RMK
Multi-Sector High
Income Fund,
Inc.
|
|
|
RMK
Strategic
Income Fund,
Inc.
|
|
|
Capital loss carryforward
(1)
|
|
$
|
(211,133,195
|
)
|
|
$
|
(158,130,006
|
)
|
|
$
|
(245,249,133
|
)
|
|
$
|
(198,676,212
|
)
|
|
Unrealized depreciation
|
|
|
(195,991,759
|
)
|
|
|
(142,643,602
|
)
|
|
|
(208,913,699
|
)
|
|
|
(164,880,040
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(407,124,954
|
)
|
|
$
|
(300,773,608
|
)
|
|
$
|
(454,162,832
|
)
|
|
$
|
(363,556,252
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. Such capital loss carryforwards will expire as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Expiring in
2014
|
|
Expiring in
2015
|
|
Expiring in
2016
|
|
RMK Advantage Income Fund, Inc.
|
|
$
|
0
|
|
$
|
0
|
|
$
|
63,416,568
|
|
RMK High Income Fund, Inc.
|
|
|
0
|
|
|
0
|
|
|
47,702,451
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
|
0
|
|
|
0
|
|
|
67,821,037
|
|
RMK Strategic Income Fund, Inc.
|
|
|
5,339,876
|
|
|
193,592
|
|
|
59,889,208
|
The table above includes only those capital loss carryforwards recognized through to the Funds’ most
recently completed tax year end.
Because federal income tax regulations differ in certain respects from generally accepted accounting principles,
income and capital gain distributions, if any, determined in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. These differences are primarily due to differing
treatments for gains/losses on principal payments of mortgage-backed and asset-backed securities, distribution reclassifications and return of capital.
Permanent book and tax differences, if any, relating to stockholder distributions will result in reclassifications to paid-in-capital or to undistributed capital gains. These reclassifications have no effect on net assets or NAVs per share.
Any undistributed net income and realized gain remaining at fiscal year-end is distributed in the following year.
69
RMK FUNDS
Notes to Financial Statements
September 30, 2008
Federal Income Tax Basis:
The federal income tax basis of the Funds’ investments at September 30, 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Cost of
Investments
|
|
Gross
Unrealized
Appreciation
|
|
Gross
Unrealized
Depreciation
|
|
Net
Unrealized
Depreciation
|
|
RMK Advantage Income Fund, Inc.
|
|
$246,155,392
|
|
$9,697
|
|
$(196,001,456)
|
|
$(195,991,759)
|
|
RMK High Income Fund, Inc.
|
|
180,585,625
|
|
0
|
|
(142,643,602)
|
|
(142,643,602)
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
250,954,554
|
|
5,000
|
|
(208,918,699)
|
|
(208,913,699)
|
|
RMK Strategic Income Fund, Inc.
|
|
203,907,319
|
|
9,697
|
|
(164,889,737)
|
|
(164,880,040)
|
Capital Account Reclassifications:
At September 30, 2008, each Fund’s distributions in
excess of net investment income was increased and accumulated net realized loss on investments was (decreased) by the amounts shown in the table below. These adjustments were primarily the result of the reclassification of net gains on security
paydowns in order to account for permanent book/tax differences and to present distributions in excess of net investment income and accumulated realized loss on investments on a tax basis.
|
|
|
|
|
|
|
Fund
|
|
Distributions in
Excess of Net
Investment
Income
|
|
Accumulated
Realized
Loss in
Investments
|
|
RMK Advantage Income Fund, Inc.
|
|
$977,830
|
|
$(977,830)
|
|
RMK High Income Fund, Inc.
|
|
508,064
|
|
(508,064)
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
857,980
|
|
(857,980)
|
|
RMK Strategic Income Fund, Inc.
|
|
777,968
|
|
(777,968)
|
9. Contractual Obligations
Under each Fund’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to each Fund. In addition, in the
normal course of business, the Funds enter into contracts with their vendors and others that provide for general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, since this would involve the resolution of
certain claims, as well as future claims that may be made, against the Funds. Thus, an estimate of the financial impact, if any, of these arrangements cannot be made at this time.
10. Designation of Restricted Illiquid Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Advantage Income Fund, Inc.
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
801 Grand CDO
Series 2006-1 LLC
|
|
9.20
|
%
|
|
09/20/16
|
|
05/23/07-
07/24/07
|
|
$
|
1,945,896
|
|
$
|
480,000
|
|
1.0
|
%
|
|
Acacia CDO Limited
Series 10A, Class SUB
|
|
0.00
|
|
|
09/07/46
|
|
07/21/06
|
|
|
1,914,575
|
|
|
1
|
|
0.0
|
|
|
Aladdin CDO I Limited
Series 2006-3A, Class NOTE
|
|
8.20
|
|
|
10/31/13
|
|
09/1/06-
06/27/07
|
|
|
2,284,447
|
|
|
110,000
|
|
0.2
|
|
|
Attentus CDO Limited
Series 2006-2A, Class F1
|
|
0.00
|
|
|
10/09/41
|
|
10/06/06
|
|
|
2,151,659
|
|
|
—
|
|
0.0
|
|
|
Attentus CDO Limited
Series 2007-3A, Class F
|
|
0.00
|
|
|
10/11/42
|
|
01/03/07
|
|
|
3,103,818
|
|
|
—
|
|
0.0
|
|
|
Broderick CDO Limited
Series 2007-3A, Class D
|
|
0.00
|
|
|
12/06/50
|
|
03/05/07
|
|
|
3,112,119
|
|
|
—
|
|
0.0
|
|
|
Catlin Insurance Company Limited
|
|
7.25
|
|
|
12/31/49
|
|
11/01/07
|
|
|
2,832,712
|
|
|
1,339,227
|
|
2.7
|
|
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
70
RMK FUNDS
Notes to Financial Statements
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Advantage Income Fund, Inc. (continued)
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
Countrywide Alternative Loan Trust NIM
Series 2006-OA11, Class N3
|
|
12.50
|
%
|
|
09/25/46
|
|
10/04/06
|
|
$
|
883,299
|
|
$
|
122,641
|
|
0.2
|
%
|
|
Credit Genesis CLO 2005
|
|
0.00
|
|
|
06/23/10
|
|
06/17/05
|
|
|
3,000,000
|
|
|
81,000
|
|
0.2
|
|
|
Deutsche Mortgage Securities, Inc.
Series 2006-RS1, Class N2
|
|
3.68
|
|
|
09/27/35
|
|
01/31/07
|
|
|
5,023,994
|
|
|
198,500
|
|
0.4
|
|
|
Dillon Read CMBS CDO
Series 2006-1A, Class COM
|
|
0.00
|
|
|
12/05/46
|
|
10/05/06
|
|
|
4,392,828
|
|
|
400,000
|
|
0.8
|
|
|
Duane Park I Limited
|
|
0.00
|
|
|
06/27/16
|
|
12/11/07
|
|
|
1,777,006
|
|
|
221,826
|
|
0.4
|
|
|
Equifirst Mortgage Loan NIM Trust
Series 2004-3, Class B2
|
|
6.71
|
|
|
12/25/34
|
|
11/17/04
|
|
|
2,256,119
|
|
|
79,429
|
|
0.2
|
|
|
Fixed Income Pass-Through Trust 2007
Series 2007-C JPM, Class B
|
|
0.00
|
|
|
05/15/77
|
|
05/31/07
|
|
|
1,708,752
|
|
|
62,813
|
|
0.1
|
|
|
FSI Realty Trust
|
|
0.00
|
|
|
—
|
|
04/26/07
|
|
|
298,000
|
|
|
38,740
|
|
0.1
|
|
|
Greenwich Structured Adjustable Rate Mortgage Products
Series 2005-3A, Class N2
|
|
2.00
|
|
|
06/27/35
|
|
07/21/05
|
|
|
1,947,881
|
|
|
613,257
|
|
1.2
|
|
|
Greenwich Structured Adjustable Rate Mortgage Products
Series 2005-4A, Class N2
|
|
0.00
|
|
|
07/27/45
|
|
09/22/05
|
|
|
3,755,365
|
|
|
1,422,716
|
|
2.8
|
|
|
Gulf Stream Atlantic CDO Limited
Series 2007-1A, Class SUB
|
|
0.00
|
|
|
07/13/47
|
|
02/01/07
|
|
|
1,688,637
|
|
|
—
|
|
0.0
|
|
|
Harborview Mortgage Loan Trust
Series 2006-4, Class B11
|
|
4.78
|
|
|
05/19/47
|
|
05/18/06
|
|
|
1,466,192
|
|
|
14,604
|
|
0.0
|
|
|
Harborview NIM Corp.
Series 2006-8A, Class N5
|
|
0.00
|
|
|
07/21/36
|
|
10/05/06
|
|
|
885,501
|
|
|
—
|
|
0.0
|
|
|
Harborview NIM Corp.
Series 2006-14, Class N4
|
|
8.35
|
|
|
03/19/38
|
|
02/21/07
|
|
|
847,352
|
|
|
20,295
|
|
0.0
|
|
|
Helios Series I Multi
Asset CBO Limited Series 1A, Class C
|
|
5.90
|
|
|
12/13/36
|
|
10/25/06
|
|
|
1,044,007
|
|
|
6,051
|
|
0.0
|
|
|
Indymac Index Mortgage Loan NIM Trust
Series 2006-AR6, Class PS
|
|
0.00
|
|
|
06/25/46
|
|
07/17/06
|
|
|
1,820,859
|
|
|
1
|
|
0.0
|
|
|
IXIS ABS CDO 1 Limited
|
|
0.00
|
|
|
12/12/46
|
|
11/09/06
|
|
|
1,575,120
|
|
|
20
|
|
0.0
|
|
|
Kenmore Street Synthetic CDO
Series 2006-1A, Class NOTE
|
|
8.20
|
|
|
04/30/14
|
|
08/22/06-
12/28/06
|
|
|
7,381,885
|
|
|
520,000
|
|
1.0
|
|
|
Knollwood CDO Limited
Series 2006-2A, Class E
|
|
0.00
|
|
|
07/13/46
|
|
08/01/06
|
|
|
1,049,231
|
|
|
—
|
|
0.0
|
|
|
Kodiak CDO
Series 2006-1A, Class COMB
|
|
0.00
|
|
|
08/07/37
|
|
09/18/06
|
|
|
3,764,934
|
|
|
1
|
|
0.0
|
|
|
Kodiak CDO
Series 2006-1A, Class G
|
|
0.00
|
|
|
08/04/37
|
|
12/7/06-
02/5/07
|
|
|
3,103,576
|
|
|
—
|
|
0.0
|
|
|
Lancer Funding Limited
Series 2007-2A, Class A3
|
|
0.00
|
|
|
07/15/47
|
|
04/25/07
|
|
|
4,491,518
|
|
|
1
|
|
0.0
|
|
|
Linker Finance PLC
Series 16A, Class E
|
|
6.53
|
|
|
05/19/45
|
|
05/05/06
|
|
|
2,914,316
|
|
|
30,000
|
|
0.1
|
|
|
Long Beach Asset Holdings Corp. NIM Trust Series 2005-WL1, Class N4
|
|
0.00
|
|
|
06/25/45
|
|
10/28/05-
01/24/06
|
|
|
4,608,640
|
|
|
1
|
|
0.0
|
|
|
Long Beach Mortgage Loan Trust
Series 2005-2, Class B2
|
|
5.96
|
|
|
04/25/35
|
|
04/19/06
|
|
|
960,145
|
|
|
12,186
|
|
0.0
|
|
|
Meritage Asset Holdings NIM
Series 2005-2, Class N4
|
|
0.00
|
|
|
11/25/35
|
|
10/21/05
|
|
|
3,115,314
|
|
|
1
|
|
0.0
|
|
|
Mid Country
|
|
0.0
|
|
|
—
|
|
05/22/07
|
|
|
850,000
|
|
|
426,500
|
|
1.0
|
|
|
MKP CBO I Limited
Series 4A, Class CS
|
|
0.00
|
|
|
10/01/12
|
|
07/12/08
|
|
|
3,837,516
|
|
|
—
|
|
0.0
|
|
71
RMK FUNDS
Notes to Financial Statements
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Advantage Income Fund, Inc. (continued)
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
Newbury Street CDO Limited
Series 2007-1A, Class D
|
|
0.00
|
%
|
|
03/04/53
|
|
02/22/07
|
|
$
|
3,128,277
|
|
$
|
—
|
|
0.0
|
%
|
|
Norma CDO Limited
Series 2007-1A, Class E
|
|
0.00
|
|
|
03/11/49
|
|
02/06/07
|
|
|
1,942,678
|
|
|
—
|
|
0.0
|
|
|
Palmer Square PLC
Series 2A, Class CN
|
|
0.00
|
|
|
11/02/45
|
|
10/21/05
|
|
|
6,075,547
|
|
|
1
|
|
0.0
|
|
|
Park Place Securities Inc. NIM Trust
Series 2005-WCW1, Class B
|
|
0.00
|
|
|
09/25/35
|
|
08/01/05
|
|
|
1,901,613
|
|
|
—
|
|
0.0
|
|
|
Preferred Term Securities XXII Limited
|
|
10.25
|
|
|
10/01/12
|
|
08/22/07
|
|
|
2,171,007
|
|
|
100,000
|
|
0.0
|
|
|
Preferred Term Securities XXVIII Limited
|
|
4.53
|
|
|
03/22/38
|
|
11/30/07
|
|
|
1,369,001
|
|
|
59,889
|
|
0.1
|
|
|
Regional Diversified Funding
|
|
0.00
|
|
|
01/25/36
|
|
04/11/05
|
|
|
1,250,000
|
|
|
—
|
|
0.0
|
|
|
Residential Asset Mortgage Products Inc.
Series 2005-RS4, Class B2
|
|
6.21
|
|
|
04/25/35
|
|
04/29/05
|
|
|
2,014,167
|
|
|
36,297
|
|
0.1
|
|
|
Sail Net Interest Margin Notes
Series 2004-7A, Class B
|
|
0.00
|
|
|
08/27/34
|
|
01/24/06
|
|
|
2,359,925
|
|
|
—
|
|
0.0
|
|
|
Sharp SP I LLC NIM Trust,
Series 2006-AHM3, Class N3
|
|
12.50
|
|
|
10/25/46
|
|
08/02/05
|
|
|
2,065,591
|
|
|
103,863
|
|
0.2
|
|
|
Sharps CDO Series 2006-1A, Class D
|
|
0.00
|
|
|
05/08/46
|
|
01/22/07
|
|
|
1,825,560
|
|
|
—
|
|
0.0
|
|
|
Soundview Home Equity Loan Trust
Series 2005-2, Class B3
|
|
6.21
|
|
|
07/25/35
|
|
08/02/05
|
|
|
2,065,591
|
|
|
38,606
|
|
0.1
|
|
|
Squared CDO Limited
Series 2007-1A, Class C
|
|
0.00
|
|
|
05/11/57
|
|
04/19/07
|
|
|
1,021,840
|
|
|
—
|
|
0.0
|
|
|
Steers
Series 2007-A
|
|
5.90
|
|
|
06/20/18
|
|
02/05/07-
08/23/07
|
|
|
7,986,448
|
|
|
4,080,000
|
|
8.1
|
|
|
Taberna Preferred Funding Limited
Series 2006-7A, Class C1
|
|
0.00
|
|
|
02/05/37
|
|
08/30/06
|
|
|
4,080,491
|
|
|
1
|
|
0.0
|
|
|
Taberna Preferred Funding Limited
Series 2006-6A, Class COM1
|
|
0.00
|
|
|
12/05/36
|
|
06/07/06
|
|
|
6,246,812
|
|
|
1
|
|
0.0
|
|
|
Tahoma CDO Limited
Series 2007-2A, Class D
|
|
0.00
|
|
|
09/15/47
|
|
02/27/07
|
|
|
974,639
|
|
|
—
|
|
0.0
|
|
|
Terwin Mortgage Trust NIM
Series 2005-7SL, Class B7
|
|
0.00
|
|
|
07/25/35
|
|
07/01/05
|
|
|
935,908
|
|
|
—
|
|
0.0
|
|
|
Terwin Mortgage Trust
Series 2005-11, Class IB7
|
|
0.00
|
|
|
11/25/36
|
|
10/04/05
|
|
|
1,210,036
|
|
|
225
|
|
0.0
|
|
|
Terwin Mortgage Trust
Series 2005-R1, Class A
|
|
0.00
|
|
|
12/28/36
|
|
12/20/06
|
|
|
2,962,244
|
|
|
—
|
|
0.0
|
|
|
Terwin Mortgage Trust,
Series 2006-2HGS, Class A2
|
|
4.50
|
|
|
03/25/37
|
|
12/14/07
|
|
|
617,505
|
|
|
113,110
|
|
0.2
|
|
|
Trapeza CDO I LLC
Series 2006-10A, Class D2
|
|
0.00
|
|
|
06/06/41
|
|
06/02/06
|
|
|
1,022,037
|
|
|
—
|
|
0.0
|
|
|
Tricadia CDO Limited
Series 2006-5A, Class SUB
|
|
0.00
|
|
|
06/19/46
|
|
02/28/07
|
|
|
1,928,589
|
|
|
—
|
|
0.0
|
|
|
Webster CDO Limited
Series 2006-1, Class PS
|
|
0.00
|
|
|
04/13/47
|
|
11/28/06
|
|
|
1,800,000
|
|
|
—
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,731,804
|
|
21.2
|
%
|
|
|
|
RMK High Income Fund, Inc.
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
801 Grand CDO
Series 2006-1 LLC
|
|
9.20
|
|
|
09/20/16
|
|
07/20/06
|
|
|
985,677
|
|
|
240,000
|
|
0.6
|
|
|
Acacia CDO Limited
Series 10A, Class SUB
|
|
0.00
|
|
|
09/07/46
|
|
07/21/06
|
|
|
957,287
|
|
|
—
|
|
0.0
|
|
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
72
RMK FUNDS
Notes to Financial Statements
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK High Income Fund, Inc. (continued)
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
Aladdin CDO I Limited
Series 2006-3A, Class NOTE
|
|
8.20
|
%
|
|
10/31/13
|
|
07/31/06-
06/27/07
|
|
$
|
2,303,854
|
|
$
|
110,000
|
|
0.3
|
%
|
|
Attentus CDO Limited
Series 2006-2A, Class F1
|
|
0.00
|
|
|
10/09/41
|
|
10/12/06
|
|
|
2,151,659
|
|
|
—
|
|
0.0
|
|
|
Attentus CDO Limited
Series 2007-3A, Class F
|
|
0.00
|
|
|
10/11/42
|
|
01/18/07
|
|
|
3,103,819
|
|
|
1
|
|
0.0
|
|
|
Broderick CDO Limited
Series 2007-3A, Class D
|
|
0.00
|
|
|
12/06/50
|
|
03/08/07
|
|
|
2,074,746
|
|
|
—
|
|
0.0
|
|
|
Catlin Insurance Company Limited
|
|
7.25
|
|
|
12/31/49
|
|
11/01/07
|
|
|
1,888,475
|
|
|
892,818
|
|
2.3
|
|
|
Countrywide Alternative Loan Trust NIM
Series 2006-OA11, Class N3
|
|
12.50
|
|
|
09/25/46
|
|
10/04/06
|
|
|
479,532
|
|
|
66,580
|
|
0.2
|
|
|
Credit Genesis CLO 2005
|
|
0.00
|
|
|
06/23/10
|
|
06/17/05
|
|
|
1,000,000
|
|
|
27,000
|
|
0.1
|
|
|
Deutsche Mortgage Securities, Inc.
Series 2006-RS1, Class N2
|
|
3.68
|
|
|
09/27/35
|
|
01/31/07
|
|
|
3,014,397
|
|
|
119,100
|
|
0.3
|
|
|
Dillon Read CMBS CDO
Series 2006-1A, Class COM
|
|
0.00
|
|
|
12/05/46
|
|
10/05/06
|
|
|
3,514,261
|
|
|
320,000
|
|
0.8
|
|
|
Duane Park I Limited
|
|
0.00
|
|
|
06/27/16
|
|
12/11/07
|
|
|
500,675
|
|
|
62,500
|
|
0.2
|
|
|
Fixed Income Pass-Through Trust 2007
Series 2007-C JPM, Class B
|
|
0.00
|
|
|
05/15/77
|
|
05/31/07
|
|
|
1,708,752
|
|
|
62,813
|
|
0.2
|
|
|
FSI Realty Trust
|
|
0.00
|
|
|
—
|
|
04/26/07
|
|
|
262,000
|
|
|
34,060
|
|
0.1
|
|
|
Greenwich Structured Adjustable Rate Mortgage Products
Series 2005-3A, Class N2
|
|
2.00
|
|
|
06/27/35
|
|
07/21/05
|
|
|
1,947,881
|
|
|
613,257
|
|
1.6
|
|
|
Greenwich Structured Adjustable Rate Mortgage Products
Series 2005-4A, Class N2
|
|
0.00
|
|
|
07/27/45
|
|
09/22/05
|
|
|
2,816,523
|
|
|
1,067,037
|
|
2.8
|
|
|
Gulf Stream Atlantic CDO Limited
Series 2007-1A, Class SUB
|
|
0.00
|
|
|
07/13/47
|
|
02/01/07
|
|
|
844,318
|
|
|
—
|
|
0.0
|
|
|
Harborview Mortgage Loan Trust
Series 2006-4, Class B11
|
|
4.78
|
|
|
05/19/47
|
|
05/18/06
|
|
|
1,099,644
|
|
|
10,953
|
|
0.0
|
|
|
Harborview NIM Corp.
Series 2006-8A, Class N5
|
|
0.00
|
|
|
07/21/36
|
|
10/11/06
|
|
|
885,501
|
|
|
—
|
|
0.0
|
|
|
Harborview NIM Corp.
Series 2006-14, Class N4
|
|
8.35
|
|
|
03/19/38
|
|
02/21/07
|
|
|
847,378
|
|
|
20,295
|
|
0.1
|
|
|
Helios Series I Multi Trust CBO Limited
Series 1A, Class C
|
|
5.90
|
|
|
12/13/36
|
|
10/25/06
|
|
|
696,004
|
|
|
4,034
|
|
0.0
|
|
|
Indymac Index Mortgage Loan NIM Trust
Series 2006-AR6, Class PS
|
|
0.00
|
|
|
06/25/46
|
|
07/20/06
|
|
|
1,820,859
|
|
|
1
|
|
0.0
|
|
|
IXIS ABS CDO 1 Limited
|
|
0.00
|
|
|
12/12/46
|
|
11/15/06
|
|
|
787,560
|
|
|
10
|
|
0.0
|
|
|
Kenmore Street Synthetic CDO
Series 2006-1A, Class NOTE
|
|
8.20
|
|
|
04/30/14
|
|
08/22/06-
12/28/06
|
|
|
6,277,481
|
|
|
480,000
|
|
1.3
|
|
|
Knollwood CDO Limited
Series 2006-2A, Class E
|
|
0.00
|
|
|
07/13/46
|
|
08/24/06
|
|
|
1,049,231
|
|
|
—
|
|
0.0
|
|
|
Kodiak CDO Series 2006-1A, Class COMB
|
|
0.00
|
|
|
08/07/37
|
|
09/29/06
|
|
|
3,764,934
|
|
|
1
|
|
0.0
|
|
|
Kodiak CDO
Series 2006-1A, Class G
|
|
0.00
|
|
|
08/07/37
|
|
12/07/06-
02/05/07
|
|
|
3,103,576
|
|
|
1
|
|
0.0
|
|
|
Lancer Funding Limited
Series 2007-2A, Class A3
|
|
0.00
|
|
|
07/15/47
|
|
05/24/07
|
|
|
3,593,214
|
|
|
1
|
|
0.0
|
|
|
Linker Finance PLC
Series 16A, Class E
|
|
6.53
|
|
|
05/19/45
|
|
05/05/06
|
|
|
1,942,876
|
|
|
20,000
|
|
0.1
|
|
|
Long Beach Asset Holdings Corp. NIM Trust
Series 2005-WL1, Class N4
|
|
0.00
|
|
|
06/25/45
|
|
11/07/05-
12/07/06
|
|
|
4,610,552
|
|
|
1
|
|
0.0
|
|
|
Meritage Asset Holdings NIM
Series 2005-2, Class N4
|
|
0.00
|
|
|
11/25/35
|
|
10/21/05
|
|
|
2,336,490
|
|
|
—
|
|
0.0
|
|
|
Mid Country
|
|
0.00
|
|
|
—
|
|
05/22/07
|
|
|
649,995
|
|
|
326,144
|
|
1.0
|
|
73
RMK FUNDS
Notes to Financial Statements
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK High Income Fund, Inc. (continued)
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
MKP CBO I Limited
Series 4A, Class CS
|
|
0.00
|
%
|
|
10/01/12
|
|
03/09/05
|
|
$
|
1,918,758
|
|
$
|
—
|
|
0.0
|
%
|
|
Newbury Street CDO Limited
Series 2007-1A, Class D
|
|
0.00
|
|
|
03/04/53
|
|
03/08/07
|
|
|
1,042,782
|
|
|
—
|
|
0.0
|
|
|
Norma CDO Limited
Series 2007-1A, Class E
|
|
0.00
|
|
|
03/11/49
|
|
03/01/07
|
|
|
1,942,679
|
|
|
—
|
|
0.0
|
|
|
Palmer Square PLC
Series 2A, Class CN
|
|
0.00
|
|
|
11/02/45
|
|
10/25/05
|
|
|
3,037,776
|
|
|
—
|
|
0.0
|
|
|
Park Place Securities Inc. NIM Trust
Series 2005-WCW1, Class B
|
|
0.00
|
|
|
09/25/35
|
|
08/04/05
|
|
|
950,806
|
|
|
—
|
|
0.0
|
|
|
Preferred Term Securities XXII Limited
|
|
10.25
|
|
|
10/01/12
|
|
02/22/07
|
|
|
1,085,503
|
|
|
50,000
|
|
0.1
|
|
|
Preferred Term Securities XXVIII Limited
|
|
4.53
|
|
|
03/22/38
|
|
11/30/07
|
|
|
1,323,368
|
|
|
57,892
|
|
0.1
|
|
|
Sail Net Interest Margin Notes
Series 2004-5A, Class B
|
|
6.75
|
|
|
06/27/34
|
|
07/02/04
|
|
|
114,058
|
|
|
467
|
|
0.0
|
|
|
Sail Net Interest Margin Notes
Series 2004-7A, Class B
|
|
0.00
|
|
|
08/27/34
|
|
01/24/06
|
|
|
1,769,935
|
|
|
—
|
|
0.0
|
|
|
Sasco NIM Trust
Series 2003-S, Class A
|
|
7.50
|
|
|
12/28/33
|
|
12/18/03
|
|
|
1,294,447
|
|
|
182,690
|
|
0.5
|
|
|
Sharps CDO
Series 2006-1A, Class D
|
|
0.00
|
|
|
05/08/46
|
|
01/25/07
|
|
|
1,825,560
|
|
|
—
|
|
0.0
|
|
|
Sharp SP I LLC NIM Trust
Series 2006-AHM3, Class N3
|
|
12.50
|
|
|
10/25/46
|
|
10/12/06
|
|
|
1,000,000
|
|
|
103,863
|
|
0.3
|
|
|
Squared CDO Limited
Series 2007-1A, Class C
|
|
0.00
|
|
|
05/11/57
|
|
05/11/07
|
|
|
1,021,840
|
|
|
—
|
|
0.0
|
|
|
Steers Series 2007-A
|
|
5.90
|
|
|
06/20/18
|
|
02/05/07-
08/23/07
|
|
|
5,990,966
|
|
|
3,060,000
|
|
8.0
|
|
|
Taberna Preferred Funding Limited
Series 2006-7A, Class C1
|
|
0.00
|
|
|
02/05/37
|
|
09/28/06
|
|
|
3,060,368
|
|
|
—
|
|
0.0
|
|
|
Taberna Preferred Funding Limited
Series 2006-6A, Class COM1
|
|
0.00
|
|
|
12/05/36
|
|
06/27/06
|
|
|
4,164,540
|
|
|
1
|
|
0.0
|
|
|
Tahoma CDO Limited
Series 2007-2A, Class D
|
|
0.00
|
|
|
09/15/47
|
|
03/28/07
|
|
|
974,639
|
|
|
—
|
|
0.0
|
|
|
Terwin Mortgage Trust
Series 2005-7SL, Class B7
|
|
0.00
|
|
|
07/25/35
|
|
07/01/05
|
|
|
813,842
|
|
|
—
|
|
0.0
|
|
|
Terwin Mortgage Trust
Series 2005-11, Class IB7
|
|
0.00
|
|
|
11/25/36
|
|
10/31/05
|
|
|
641,587
|
|
|
135
|
|
0.0
|
|
|
Terwin Mortgage Trust NIM
Series 2005-R1, Class A
|
|
0.00
|
|
|
12/28/36
|
|
12/20/05
|
|
|
2,221,685
|
|
|
—
|
|
0.0
|
|
|
Trapeza CDO I LLC
Series 2006-10A, Class D2
|
|
0.00
|
|
|
06/06/41
|
|
06/15/06
|
|
|
2,044,075
|
|
|
—
|
|
0.0
|
|
|
Webster CDO Limited
Series 2006-1, Class PS
|
|
0.00
|
|
|
04/13/47
|
|
12/07/06
|
|
|
1,800,000
|
|
|
—
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,931,655
|
|
21.0
|
%
|
|
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
801 Grand CDO
Series 2006-1 LLC
|
|
9.20
|
|
|
09/20/16
|
|
07/20/06
|
|
|
1,971,354
|
|
|
480,000
|
|
1.2
|
|
|
Acacia CDO Limited
Series 10A, Class SUB
|
|
0.00
|
|
|
09/07/46
|
|
07/21/06
|
|
|
1,914,575
|
|
|
—
|
|
0.0
|
|
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
74
RMK FUNDS
Notes to Financial Statements
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Multi-Sector High Income Fund, Inc. (continued)
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
Aladdin CDO I Limited
Series 2006-3A, Class NOTE
|
|
8.20
|
%
|
|
10/31/13
|
|
07/31/06-
06/27/07
|
|
$
|
3,470,236
|
|
$
|
165,000
|
|
0.4
|
%
|
|
Attentus CDO Limited
Series 2006-2A, Class F1
|
|
0.00
|
|
|
10/09/41
|
|
10/06/06
|
|
|
2,151,659
|
|
|
—
|
|
0.0
|
|
|
Attentus CDO Limited
Series 2007-3A, Class F2
|
|
0.00
|
|
|
10/11/42
|
|
01/03/07
|
|
|
4,139,030
|
|
|
1
|
|
0.0
|
|
|
Broderick CDO Limited
Series 2007-3A, Class D
|
|
0.00
|
|
|
12/06/50
|
|
03/05/07
|
|
|
3,112,119
|
|
|
—
|
|
0.0
|
|
|
Catlin Insurance Company Limited
|
|
7.25
|
|
|
12/31/49
|
|
11/01/07
|
|
|
188,847
|
|
|
89,282
|
|
0.2
|
|
|
Credit Genesis CLO 2005
|
|
0.00
|
|
|
06/23/10
|
|
07/20/06
|
|
|
2,970,000
|
|
|
81,000
|
|
0.2
|
|
|
Deutsche Mortgage Securities, Inc.
Series 2006-RS1, Class N2
|
|
3.68
|
|
|
09/27/35
|
|
01/31/07
|
|
|
7,033,590
|
|
|
277,900
|
|
0.7
|
|
|
Dillon Read CMBS CDO Limited,
Series 2006-1A, Class COM
|
|
0.00
|
|
|
12/05/46
|
|
10/05/06
|
|
|
4,392,828
|
|
|
400,000
|
|
1.0
|
|
|
Duane Park I Limited
|
|
0.00
|
|
|
06/27/16
|
|
12/11/07
|
|
|
1,001,350
|
|
|
125,000
|
|
0.3
|
|
|
Equifirst Mortgage Loan Trust NIM Notes
Series 2004-3, Class N3
|
|
0.00
|
|
|
12/25/34
|
|
01/24/06
|
|
|
2,543,224
|
|
|
—
|
|
0.0
|
|
|
First Franklin Mortgage Loan NIM
Series 2004-FFH4, Class N4
|
|
0.00
|
|
|
01/21/35
|
|
01/24/06
|
|
|
3,037,282
|
|
|
—
|
|
0.0
|
|
|
Fixed Income Pass-Through Trust 2007
Series 2007-C JPM, Class B
|
|
0.00
|
|
|
05/15/77
|
|
05/31/07
|
|
|
2,575,882
|
|
|
94,688
|
|
0.2
|
|
|
Freemont Home Loan Trust, Series 2005-2,
Class B3
|
|
5.96
|
|
|
06/25/35
|
|
02/08/06
|
|
|
1,264,492
|
|
|
14,505
|
|
0.0
|
|
|
FSI Realty Trust
|
|
0.00
|
|
|
—
|
|
04/26/07
|
|
|
350,000
|
|
|
45,500
|
|
0.1
|
|
|
Greenwich Structured Adjustable Rate Mortgage Products
Series 2005-3A, Class N2
|
|
2.00
|
|
|
06/27/35
|
|
02/10/06
|
|
|
4,088,902
|
|
|
1,318,503
|
|
3.2
|
|
|
Greenwich Structured Adjustable Rate Mortgage Products
Series 2005-4A, Class N2
|
|
0.00
|
|
|
07/27/45
|
|
02/10/06
|
|
|
6,460,960
|
|
|
2,489,753
|
|
6.1
|
|
|
Gulf Stream Atlantic CDO Limited
Series 2007-1A
|
|
0.00
|
|
|
07/13/47
|
|
02/01/07
|
|
|
1,688,637
|
|
|
—
|
|
0.0
|
|
|
Harborview Mortgage Loan Trust
Series 2006-4, Class B11
|
|
4.78
|
|
|
05/19/47
|
|
05/18/06
|
|
|
1,466,192
|
|
|
14,604
|
|
0.1
|
|
|
Harborview NIM Corp.
Series 2006-8A, Class N5
|
|
0.00
|
|
|
07/21/36
|
|
10/05/06
|
|
|
2,213,751
|
|
|
1
|
|
0.0
|
|
|
Harborview NIM Corp.
Series 2006-14, Class N4
|
|
8.35
|
|
|
03/19/38
|
|
02/21/07
|
|
|
847,352
|
|
|
20,295
|
|
0.1
|
|
|
Indymac Index Mortgage Loan NIM Trust
Series 2006-AR6, Class PS
|
|
0.00
|
|
|
06/25/46
|
|
07/17/06
|
|
|
1,820,859
|
|
|
1
|
|
0.0
|
|
|
Ischus CDO III Limited
|
|
0.00
|
|
|
07/03/46
|
|
06/13/07
|
|
|
610,000
|
|
|
—
|
|
0.0
|
|
|
IXIS ABS CDO 1 Limited
|
|
0.00
|
|
|
12/12/46
|
|
11/09/06
|
|
|
1,575,120
|
|
|
20
|
|
0.0
|
|
|
Kenmore Street Synthetic CDO
Series 2006-1A, Class NOTE
|
|
8.20
|
|
|
04/30/14
|
|
08/22/06-
12/28/06
|
|
|
8,524,153
|
|
|
600,000
|
|
1.5
|
|
|
Knollwood CDO Limited
Series 2006-2A, Class E
|
|
0.00
|
|
|
07/13/46
|
|
08/01/06
|
|
|
2,098,462
|
|
|
—
|
|
0.0
|
|
|
Kodiak CDO
Series 2006-1A, Class COMB
|
|
0.00
|
|
|
08/07/37
|
|
09/18/06
|
|
|
5,647,402
|
|
|
1
|
|
0.0
|
|
|
Kodiak CDO
Series 2006-1A, Class G
|
|
0.00
|
|
|
08/07/37
|
|
12/07/06
|
|
|
3,103,576
|
|
|
—
|
|
0.0
|
|
|
Lancer Funding Limited
Series 2007-2A, Class A3
|
|
0.00
|
|
|
07/15/47
|
|
04/25/07
|
|
|
3,593,214
|
|
|
1
|
|
0.0
|
|
|
Linker Finance PLC
Series 16A, Class E
|
|
6.53
|
|
|
05/19/45
|
|
05/05/06
|
|
|
4,857,192
|
|
|
50,000
|
|
0.1
|
|
|
Long Beach Asset Holdings Corp. NIM Trust
Series 2005-WL1, Class N4
|
|
0.00
|
|
|
06/25/45
|
|
01/24/06
|
|
|
5,523,482
|
|
|
1
|
|
0.0
|
|
75
RMK FUNDS
Notes to Financial Statements
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Multi-Sector High Income Fund, Inc. (continued)
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
Long Beach Mortgage Loan Trust
Series 2005-2, Class B2
|
|
5.96
|
%
|
|
04/25/35
|
|
04/19/06
|
|
$
|
960,145
|
|
$
|
12,186
|
|
0.0
|
%
|
|
Meritage Asset Holdings
Series 2004-2, Class N6
|
|
0.00
|
|
|
01/25/35
|
|
01/24/06
|
|
|
195,647
|
|
|
—
|
|
0.0
|
|
|
Mid Country
|
|
0.00
|
|
|
—
|
|
05/22/07
|
|
|
899,997
|
|
|
451,587
|
|
1.1
|
|
|
Newbury Street CDO Limited
Series 2007-1A, Class D
|
|
0.00
|
|
|
03/04/53
|
|
02/22/07
|
|
|
3,128,278
|
|
|
—
|
|
0.0
|
|
|
Norma CDO Limited
Series 2007-1A, Class E
|
|
0.00
|
|
|
03/11/49
|
|
02/06/07
|
|
|
1,942,679
|
|
|
—
|
|
0.0
|
|
|
Park Place Securities, Inc.
Series 2005-WCW2, Class M11
|
|
5.71
|
|
|
07/25/35
|
|
02/07/06
|
|
|
395,296
|
|
|
3,345
|
|
0.0
|
|
|
Preferred Term Securities XXII Limited
|
|
10.25
|
|
|
10/01/12
|
|
08/22/07
|
|
|
1,978,762
|
|
|
150,000
|
|
0.4
|
|
|
Preferred Term Securities XXVIII Limited
|
|
4.53
|
|
|
03/22/38
|
|
11/30/07
|
|
|
1,369,001
|
|
|
59,889
|
|
0.1
|
|
|
Sail Net Interest Margin Notes
Series 2004-7A, Class B
|
|
0.00
|
|
|
08/27/34
|
|
01/24/06
|
|
|
4,719,829
|
|
|
—
|
|
0.0
|
|
|
Sharps CDO
Series 2006-1A, Class D
|
|
0.00
|
|
|
05/08/46
|
|
01/22/07
|
|
|
1,825,560
|
|
|
—
|
|
0.0
|
|
|
Sharp SP I LLC NIM Trust
Series 2006-AHM3, Class N3
|
|
12.50
|
|
|
10/25/46
|
|
10/12/06
|
|
|
2,000,000
|
|
|
207,726
|
|
0.5
|
|
|
Soundview NIM Trust
Series 2005, Class 1N N2
|
|
0.00
|
|
|
04/25/35
|
|
01/24/06
|
|
|
1,555,324
|
|
|
—
|
|
0.0
|
|
|
Soundview NIM Trust
Series 2005, Class 1N N3
|
|
0.00
|
|
|
04/25/35
|
|
01/24/06
|
|
|
1,477,656
|
|
|
—
|
|
0.0
|
|
|
Squared CDO Limited
Series 2007-1A, Class C
|
|
0.00
|
|
|
05/11/57
|
|
04/19/07
|
|
|
1,021,840
|
|
|
—
|
|
0.0
|
|
|
Steers Series 2007-A
|
|
5.90
|
|
|
06/20/18
|
|
02/05/07-
08/23/07
|
|
|
8,986,448
|
|
|
4,590,000
|
|
11.2
|
|
|
Taberna Preferred Funding Limited
Series 2006-7A, Class C1
|
|
0.00
|
|
|
02/05/37
|
|
08/30/06
|
|
|
5,100,603
|
|
|
1
|
|
0.0
|
|
|
Taberna Preferred Funding Limited
Series 2006-6A, Class COMB
|
|
0.00
|
|
|
12/05/36
|
|
06/07/06
|
|
|
6,246,812
|
|
|
1
|
|
0.0
|
|
|
Tahoma CDO Limited
Series 2007-2A, Class D
|
|
0.00
|
|
|
09/15/47
|
|
02/27/07
|
|
|
974,639
|
|
|
—
|
|
0.0
|
|
|
Terwin Mortgage Trust NIM
Series 2006-R2, Class A
|
|
0.00
|
|
|
12/25/36
|
|
03/07/06
|
|
|
10,969,418
|
|
|
1
|
|
0.0
|
|
|
Trapeza CDO I LLC
Series 2006-10A, Class D2
|
|
0.00
|
|
|
06/06/41
|
|
06/02/06
|
|
|
2,044,075
|
|
|
—
|
|
0.0
|
|
|
Tricadia CDO Limited
Series 2006-5A, Class SUB
|
|
0.00
|
|
|
06/19/46
|
|
02/28/07
|
|
|
1,542,871
|
|
|
—
|
|
0.0
|
|
|
Webster CDO Limited
Series 2006-1, Class PS
|
|
0.00
|
|
|
04/13/47
|
|
11/28/06
|
|
|
3,150,000
|
|
|
—
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,740,792
|
|
28.7
|
%
|
|
|
|
RMK Strategic Income Fund, Inc.
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
801 Grand CDO
Series 2006-1 LLC
|
|
9.20
|
|
|
09/20/16
|
|
08/16/07
|
|
|
734,216
|
|
|
240,000
|
|
0.6
|
|
|
Acacia CDO Limited
Series 10A, Class SUB
|
|
0.00
|
|
|
09/07/46
|
|
07/21/06
|
|
|
1,435,931
|
|
|
—
|
|
0.0
|
|
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
76
RMK FUNDS
Notes to Financial Statements
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Strategic Income Fund, Inc. (continued)
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
Aladdin CDO I Limited
Series 2006-3A, Class NOTE
|
|
8.20
|
%
|
|
10/31/13
|
|
07/31/06
|
|
$
|
2,291,306
|
|
$
|
110,000
|
|
0.3
|
%
|
|
Attentus CDO Limited
Series 2006-2A, Class F1
|
|
0.00
|
|
|
10/09/41
|
|
10/06/06
|
|
|
2,151,659
|
|
|
—
|
|
0.0
|
|
|
Attentus CDO Limited
Series 2007-3A, Class F
|
|
0.00
|
|
|
10/11/42
|
|
01/03/07
|
|
|
3,103,750
|
|
|
1
|
|
0.0
|
|
|
Broderick CDO Limited
Series 2007-3A, Class D
|
|
0.00
|
|
|
12/06/50
|
|
03/05/07
|
|
|
2,074,746
|
|
|
—
|
|
0.0
|
|
|
Catlin Insurance Company Limited
|
|
7.25
|
|
|
12/31/49
|
|
11/01/07
|
|
|
141,636
|
|
|
66,961
|
|
0.1
|
|
|
Countrywide Alternative Loan Trust NIM
Series 2006-OA11, Class N3
|
|
12.50
|
|
|
09/25/46
|
|
10/04/06
|
|
|
959,064
|
|
|
133,161
|
|
0.3
|
|
|
Credit Genesis CLO 2005
|
|
0.00
|
|
|
06/23/10
|
|
06/17/05
|
|
|
1,000,000
|
|
|
27,000
|
|
0.1
|
|
|
Deutsche Mortgage Securities, Inc.
Series 2006-RS1, Class N2
|
|
3.68
|
|
|
09/27/35
|
|
01/31/07
|
|
|
3,014,267
|
|
|
119,100
|
|
0.3
|
|
|
Dillon Read CMBS CDO
Series 2006-1A, Class COM
|
|
0.00
|
|
|
12/05/46
|
|
11/01/06
|
|
|
3,514,261
|
|
|
320,000
|
|
0.8
|
|
|
Duane Park I Limited
|
|
0.00
|
|
|
06/27/16
|
|
12/11/07
|
|
|
700,945
|
|
|
87,500
|
|
0.2
|
|
|
Fiorente Funding Limited
Series 2006-1A, Class M1
|
|
0.00
|
|
|
11/04/56
|
|
12/01/06
|
|
|
3,634,446
|
|
|
1
|
|
0.0
|
|
|
Fixed Income Pass-Through Trust 2007
Series 2007-C JPM, Class B
|
|
0.00
|
|
|
05/15/77
|
|
05/31/07
|
|
|
1,708,507
|
|
|
62,813
|
|
0.2
|
|
|
Fort Duquesne CDO Limited
Series 2006-1A, Class D
|
|
0.00
|
|
|
10/26/46
|
|
03/05/07
|
|
|
1,169,473
|
|
|
—
|
|
0.0
|
|
|
FSI Realty Trust
|
|
0.00
|
|
|
—
|
|
04/26/07
|
|
|
262,000
|
|
|
34,060
|
|
0.1
|
|
|
Greenwich Structured Adjustable Rate Mortgage Products
Series 2005-3A, Class N2
|
|
2.00
|
|
|
07/27/35
|
|
07/21/05
|
|
|
1,947,881
|
|
|
613,257
|
|
1.5
|
|
|
Greenwich Structured Adjustable Rate Mortgage Products
Series 2005-4A, Class N2
|
|
0.00
|
|
|
06/27/45
|
|
09/22/05
|
|
|
2,816,523
|
|
|
1,067,037
|
|
2.6
|
|
|
Gulf Stream Atlantic CDO Limited
Series 2007-1A, Class SUB
|
|
0.00
|
|
|
07/13/47
|
|
02/01/07
|
|
|
844,318
|
|
|
—
|
|
0.0
|
|
|
Harborview Mortgage Loan Trust
Series 2006-4, Class B11
|
|
4.78
|
|
|
05/19/47
|
|
05/18/06
|
|
|
1,099,644
|
|
|
10,953
|
|
0.0
|
|
|
Harborview NIM Corp.
Series 2006-8A, Class N5
|
|
0.00
|
|
|
07/21/36
|
|
10/05/06
|
|
|
885,501
|
|
|
—
|
|
0.0
|
|
|
Harborview NIM Corp.
Series 2006-14, Class N4
|
|
8.35
|
|
|
03/19/38
|
|
02/21/07
|
|
|
848,621
|
|
|
20,295
|
|
0.1
|
|
|
Helios Series I Multi-Asset CBO Limitied
Series 1A, Class C
|
|
5.90
|
|
|
12/13/36
|
|
10/25/06
|
|
|
1,044,006
|
|
|
6,052
|
|
0.0
|
|
|
Indymac Index Mortgage Loan NIM Trust
Series 2006-AR6, Class PS
|
|
0.00
|
|
|
06/25/46
|
|
07/17/06
|
|
|
1,820,859
|
|
|
1
|
|
0.0
|
|
|
IXIS ABS CDO 1 Limited
|
|
0.00
|
|
|
12/12/46
|
|
11/09/06
|
|
|
787,560
|
|
|
10
|
|
0.0
|
|
|
Kenmore Street Synthetic CDO
Series 2006-1A, Class NOTE
|
|
8.20
|
|
|
04/30/14
|
|
08/22/06
|
|
|
7,387,248
|
|
|
520,000
|
|
1.3
|
|
|
Knollwood CDO Limited
Series 2006-2A, Class E
|
|
0.00
|
|
|
07/13/46
|
|
08/01/06
|
|
|
1,049,231
|
|
|
—
|
|
0.0
|
|
77
RMK FUNDS
Notes to Financial Statements
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Strategic Income Fund, Inc. (continued)
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
Kodiak CDO
Series 2006-1A, Class COMB
|
|
0.00
|
%
|
|
08/07/37
|
|
09/18/06
|
|
$
|
3,764,934
|
|
$
|
1
|
|
0.0
|
%
|
|
Kodiak CDO
Series 2006-1A, Class G
|
|
0.00
|
|
|
08/07/37
|
|
11/08/06
|
|
|
3,113,635
|
|
|
1
|
|
0.0
|
|
|
Lake Country Mortgage Loan Trust
Series 2006-HE1, Class M8
|
|
5.96
|
|
|
07/25/34
|
|
10/31/06
|
|
|
3,295,072
|
|
|
1,339,247
|
|
3.3
|
|
|
Lancer Funding Limited
Series 2007-2A, Class A3
|
|
0.00
|
|
|
07/15/47
|
|
04/25/07
|
|
|
4,491,517
|
|
|
1
|
|
0.0
|
|
|
Lincoln Avenue ABS CDO Limited
Series 1-A, Class D
|
|
0.00
|
|
|
07/05/46
|
|
07/05/06
|
|
|
2,642,103
|
|
|
—
|
|
0.0
|
|
|
Linker Finance PLC
Series 16A, Class E
|
|
6.53
|
|
|
05/19/45
|
|
05/05/06
|
|
|
1,942,876
|
|
|
20,000
|
|
0.1
|
|
|
Long Beach Asset Holdings Corp. NIM Trust
Series 2005-WL1, Class N4
|
|
0.00
|
|
|
06/25/45
|
|
10/28/05
|
|
|
4,610,552
|
|
|
1
|
|
0.0
|
|
|
Meritage Asset Holdings NIM
Series 2005-2, Class N4
|
|
0.00
|
|
|
11/25/35
|
|
10/21/08
|
|
|
2,336,485
|
|
|
—
|
|
0.0
|
|
|
Mid Country
|
|
0.00
|
|
|
—
|
|
05/22/07
|
|
|
724,999
|
|
|
363,779
|
|
0.9
|
|
|
Newbury Street CDO Limited
Series 2007-1A, Class D
|
|
0.00
|
|
|
03/04/53
|
|
02/22/05
|
|
|
1,042,759
|
|
|
—
|
|
0.0
|
|
|
Norma CDO Limited
Series 2007-1A, Class E
|
|
0.00
|
|
|
03/11/49
|
|
02/06/07
|
|
|
1,942,678
|
|
|
—
|
|
0.0
|
|
|
Orchid Structured Finance CDO Limited
Series 2006-3A, Class E
|
|
0.00
|
|
|
01/06/46
|
|
03/07/06
|
|
|
2,056,557
|
|
|
—
|
|
0.0
|
|
|
Palmer Square PLC
Series 2A, Class CN
|
|
0.00
|
|
|
11/02/45
|
|
10/21/05
|
|
|
3,037,776
|
|
|
—
|
|
0.0
|
|
|
Park Place Securities Inc. NIM Trust
Series 2005-WCW1, Class B
|
|
0.00
|
|
|
09/25/35
|
|
08/01/05
|
|
|
950,807
|
|
|
—
|
|
0.0
|
|
|
Preferred Term Securities XXII Limited
|
|
10.25
|
|
|
10/01/12
|
|
07/22/05
|
|
|
1,085,503
|
|
|
50,000
|
|
0.1
|
|
|
Preferred Term Securities XXVIII Limited
|
|
4.53
|
|
|
03/22/38
|
|
11/30/07
|
|
|
913,691
|
|
|
39,926
|
|
0.1
|
|
|
Regional Diversified Funding
|
|
0.00
|
|
|
01/25/36
|
|
04/11/05
|
|
|
1,000,000
|
|
|
—
|
|
0.0
|
|
|
Sail Net Interest Margin Notes
Series 2004-5A, Class B
|
|
6.75
|
|
|
06/27/34
|
|
07/02/04-
07/06/04
|
|
|
114,057
|
|
|
467
|
|
0.0
|
|
|
Sharps CDO
Series 2006-1A, Class D
|
|
0.00
|
|
|
05/08/46
|
|
06/22/07
|
|
|
2,738,340
|
|
|
—
|
|
0.0
|
|
|
Sharp SP I LLC NIM Trust
Series 2006-AHM3, Class N3
|
|
12.50
|
|
|
10/25/46
|
|
10/12/06
|
|
|
1,000,000
|
|
|
103,863
|
|
0.3
|
|
|
Squared CDO Limited
Series 2007-1A, Class C
|
|
0.00
|
|
|
05/11/57
|
|
04/19/07
|
|
|
1,021,840
|
|
|
—
|
|
0.0
|
|
|
Steers
Series 2007-A
|
|
5.90
|
|
|
06/20/18
|
|
02/05/07
|
|
|
5,990,966
|
|
|
3,060,000
|
|
7.6
|
|
|
Taberna Preferred Funding Limited
Series 2006-7A, Class C1
|
|
0.00
|
|
|
02/05/37
|
|
08/30/06
|
|
|
3,060,368
|
|
|
—
|
|
0.0
|
|
|
Taberna Preferred Funding Limited
Series 2006-6A, Class COMB
|
|
0.00
|
|
|
12/05/36
|
|
06/07/06
|
|
|
4,164,540
|
|
|
1
|
|
0.0
|
|
|
Terwin Mortgage Trust
Series 2005-7SL, Class B7
|
|
0.00
|
|
|
07/25/35
|
|
07/01/05
|
|
|
813,842
|
|
|
—
|
|
0.0
|
|
|
Terwin Mortgage Trust
Series 2005-11, Class IB7
|
|
0.00
|
|
|
11/25/36
|
|
10/04/05
|
|
|
694,353
|
|
|
135
|
|
0.0
|
|
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
78
RMK FUNDS
Notes to Financial Statements
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Strategic Income Fund, Inc. (continued)
|
|
|
|
|
|
|
|
|
|
|
Restricted Securities
|
|
Interest
Rate
|
|
|
Maturity
|
|
Acquisition
Date
|
|
Acquisition
Cost
|
|
Market Value
|
|
Percentage
of Net
Assets
|
|
|
Terwin Mortgage Trust NIM
Series 2005-R1, Class A
|
|
0.00
|
%
|
|
12/28/36
|
|
12/20/05
|
|
$
|
2,221,685
|
|
$
|
—
|
|
0.0
|
%
|
|
Trapeza CDO I LLC
Series 2006-10A, Class D2
|
|
0.00
|
|
|
06/06/41
|
|
06/02/06
|
|
|
2,044,075
|
|
|
—
|
|
0.0
|
|
|
Webster CDO Limited
Series 2006-1, Class PS
|
|
0.00
|
|
|
04/13/47
|
|
11/28/06
|
|
|
1,800,000
|
|
|
—
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,415,624
|
|
20.9
|
%
|
11. New Accounting Pronouncements
In March 2008, FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities”
(“FAS 161”). FAS 161 is effective for fiscal periods and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about each Fund’s derivative and hedging activities. The Adviser is currently
evaluating the impact the adoption of FAS 161 will have on each Fund’s financial statements and disclosures.
12. Pending
Litigation
Beginning in late 2007, lawsuits were filed in state and federal courts in Tennessee and Alabama relating to certain fixed income
funds managed by the Adviser, including the Funds. Certain of the cases were filed as putative class actions on behalf of investors who purchased shares of the Funds from December 2004 through February 2008 and other cases were filed as actions on
behalf of one or more individuals or trusts. The complaints name various entities and individuals as defendants including, among others, the Funds, the former Adviser, Morgan Asset Management, Inc., Morgan Keegan & Company, Inc., Regions
Financial Corporation and several affiliates, certain former directors and former officers of the Funds and the Funds’ former portfolio managers. The complaints generally allege that the defendants misrepresented or failed to disclose material
facts relating to portfolio composition, fair valuation, liquidity and risk in Fund registration statements and other documents. The plaintiffs seek unspecified damages and reasonable costs and, in some cases, attorneys’ fees. Each of the cases
is at a preliminary stage. No responses to the complaints have been filed and no classes have been certified in any of the putative class actions.
In addition, on March 12, 2008, a derivative action was filed in the United States District Court for the Western District of Tennessee seeking damages on behalf of RMK Multi-Sector High Income Fund, Inc. The complaint in this action
alleges, among other things, that defendants MAM, Morgan Keegan, Regions, and certain former directors and officers of the Fund breached duties of care and mismanaged the Fund in connection with portfolio composition, fair valuation, liquidity, risk
management and disclosure. The complaint seeks unspecified damages and reasonable costs and attorneys’ fees. The proceeding is at a preliminary stage and no responses to the complaint have been filed.
Claims substantially similar to those described above have been made in lawsuits filed in the United States District Court for the Western District of Tennessee
and state court concerning certain open-end funds also managed by the Adviser.
On September 23, 2008, most of the cases pending in federal court in
the Western District of Tennessee in which the Funds are defendants, and other cases pending in that court involving the same or similar claims against other defendants, were consolidated into a single proceeding encaptioned
In re Regions Morgan
Keegan Closed End Fund Litigation
.
On October 17, 2008, the Funds and other defendants in the above-referenced cases that had been filed at such
date filed a motion with the Judicial Panel on Multidistrict Litigation to consolidate in the United States District Court for the Western District of Tennessee the cases in which the Funds are defendants and other cases involving the same or
similar claims, including cases involving the open-end funds managed by the Adviser.
No estimate of the effect, if any, of these lawsuits on the
Funds can be made at this time.
79
RMK FUNDS
Notes to Financial Statements
September 30, 2008
13. Subsequent Events
The Funds’ Board of Directors declared the following monthly dividends:
|
|
|
|
|
|
|
|
|
|
Fund Name
|
|
Dividend
Per Share
|
|
Record
Date
|
|
Payable
Date
|
|
RMK Advantage Income Fund, Inc
|
|
$
|
0.015
|
|
10/14/2008
|
|
10/30/2008
|
|
RMK High Income Fund, Inc
|
|
$
|
0.015
|
|
10/14/2008
|
|
10/30/2008
|
|
RMK Multi-Sector High Income Fund, Inc
|
|
$
|
0.010
|
|
10/14/2008
|
|
10/30/2008
|
|
RMK Strategic Income Fund, Inc
|
|
$
|
0.015
|
|
10/14/2008
|
|
10/30/2008
|
|
|
|
|
|
|
Fund Name
|
|
Dividend
Per Share
|
|
Record
Date
|
|
Payable
Date
|
|
RMK Advantage Income Fund, Inc
|
|
$
|
0.015
|
|
11/18/2008
|
|
11/26/2008
|
|
RMK High Income Fund, Inc
|
|
$
|
0.015
|
|
11/18/2008
|
|
11/26/2008
|
|
RMK Multi-Sector High Income Fund, Inc
|
|
$
|
0.010
|
|
11/18/2008
|
|
11/26/2008
|
|
RMK Strategic Income Fund, Inc
|
|
$
|
0.015
|
|
11/18/2008
|
|
11/26/2008
|
Effective November 25, 2008, management decided to use the Lehman Brothers U.S. Corporate High
Yield Index as each Fund or one Fund’s benchmark because it more accurately reflects each Fund’s expected investment profile than does the Lehman Brothers Ba U.S. High Yield Index.
14. Change of Independent Registered Public Accounting Firm
On June 25, 2008, the
Board of Directors determined not to retain PricewaterhouseCoopers LLP (“PwC”) as the Funds’ Independent Registered Public Accounting Firm. The Audit Committee of the Funds then submitted a recommendation to the Board of Directors to
engage Briggs, Bunting & Dougherty, LLP (“BBD”) as the Funds’ Independent Registered Public Accounting Firm for the fiscal year ended March 31, 2009. During the two most recent fiscal years and through June 25, 2008, the date the
Board of Directors notified PwC of their decision not to retain them as the Funds’ auditor, PwC’s audit reports contained no adverse opinion or disclaimer of opinion; nor were their reports qualified as to uncertainty, audit scope or
accounting principles. Further, there were no disagreements between the Funds and PwC on accounting principles, financial statements disclosure or audit scope, which, if not resolved to the satisfaction of PwC, would have caused them to make
reference to the disagreement in their reports.
During the two most recent fiscal years and through June 25, 2008, the date the Board of Directors
approved BBD as the Funds’ auditor, the Funds did not consult BBD regarding either (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the
Funds’ financial statements, or (2) any matter that was either the subject of a disagreement or a reportable event, as such terms are defined in Item 304 of Regulation S-K.
The Funds provided PwC with a copy of these disclosures and has requested PwC to furnish the Funds with a letter addressed to the commission stating whether it agrees with the statements made by the Funds
herein and, if not, detailing the particular statements with which it does not agree.
15. Indemnification
Under each Fund’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Funds enter into contracts with their vendors and others that provide for general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, since
this would involve the resolution of certain claims, as well as future claims that may be made, against the Funds. Thus, an estimate of the financial impact, if any, of these arrangements cannot be made at this time.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
80
RMK FUNDS
Report of Independent Registered Public Accounting Firm
September 30, 2008
To the Stockholders and Board of Directors of
RMK Advantage Income Fund, Inc., RMK High Income Fund, Inc.,
RMK Multi-Sector High Income Fund, Inc. and RMK Strategic Income Fund, Inc.
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the RMK Advantage Income Fund, Inc., RMK High Income Fund, Inc., RMK Multi-Sector High Income Fund, Inc. and RMK Strategic
Income Fund, Inc. as of September 30, 2008, and the related statements of operations, changes in net assets and cash flows and the financial highlights for the six months then ended. These financial statements and financial highlights are the
responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of changes in net assets for the year ended March 31, 2008 and the
financial highlights for each of the years and periods in the five-year period ended March 31, 2008, have been audited by other auditors, whose report dated May 29, 2008 expressed an unqualified opinion on such financial statements and financial
highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2008, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the RMK Advantage Income Fund, Inc., RMK High Income
Fund, Inc., RMK Multi-Sector High Income Fund, Inc. and RMK Strategic Income Fund, Inc. as of September 30, 2008, the results of their operations, changes in their net assets, their cash flows and their financial highlights for the six months then
ended, in conformity with accounting principles generally accepted in the United States of America.
As explained in Note 2, the financial statements
include securities valued at $12,950,628 (25.70% of net assets), $8,626,885 (22.63% of net assets), $14,769,589 (36.24% of net assets) and $11,101,831 (27.58% percent of net assets) of the RMK Advantage Income Fund, Inc., RMK High Income Fund, Inc.,
RMK Multi-Sector High Income Fund, Inc., and RMK Strategic Income Fund, Inc., respectively, whose fair values have been estimated under procedures established by the Funds’ Board of Directors, in the absence of readily ascertainable market
values. These estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia,
Pennsylvania
November 26, 2008
81
RMK FUNDS
Compliance Certifications (Unaudited)
On August 12, 2008 the Fund submitted a CEO annual certification to the New York Stock
Exchange (“NYSE”) on which the Fund’s principal executive officer certified that he was not aware, as of that date, of any violation by the Fund of the NYSE’s Corporation Governance listing standards. In addition, as required by
Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Fund’s principal executive and principal financial officers have made quarterly certifications, included in filings with the SEC on Forms N-CSR and N-Q relating to, among
other things, the Fund’s disclosure controls and procedures and internal control over financial reporting, as applicable.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
82
RMK FUNDS
Proxy Results (Unaudited)
At a Special Meeting of stockholders held on July 11, 2008, the following votes were recorded for RMK Advantage Income Fund, Inc., RMK
High Income Fund, Inc., RMK Multi-Sector High Income Fund, Inc., and RMK Strategic Income Fund, Inc. The proposals, which stockholders were asked to vote on, are explained in further detail in the proxy statement dated May 20, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Advantage Income Fund, Inc.
|
|
Shares Voted
For
|
|
|
Shares Voted
Against
|
|
Shares Voted
Abstain
|
|
1.
|
|
Approval of a new investment advisory agreement between Hyperion Brookfield Asset Management, Inc. and RMK Advantage Income Fund, Inc.
|
|
14,558,888
|
|
|
1,191,993
|
|
1,120,268
|
|
2.
|
|
To elect to the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shares
|
|
32,481,735
|
|
|
|
|
|
|
|
|
Shares Voted
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
29,524,461
|
|
|
|
|
|
|
|
|
% of Total
|
|
90.8956
|
%
|
|
|
|
|
|
|
|
BIRCH
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
27,775,650
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
94.0767
|
%
|
|
|
|
|
|
|
|
DRAKE
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
27,774,590
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
94.0731
|
%
|
|
|
|
|
|
|
|
LAI
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
27,775,787
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
94.0772
|
%
|
|
|
|
|
|
|
|
MCFARLAND
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
27,786,264
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
94.1127
|
%
|
|
|
|
|
|
|
|
SALVATORE
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
27,773,037
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
94.0679
|
%
|
|
|
|
|
|
|
|
RMK High Income Fund, Inc.
|
|
Shares Voted
For
|
|
|
Shares Voted
Against
|
|
Shares Voted
Abstain
|
|
1.
|
|
Approval of a new investment advisory agreement between Hyperion Brookfield Asset Management, Inc. and RMK High Income Fund, Inc.
|
|
11,194,550
|
|
|
607,313
|
|
329,919
|
|
2.
|
|
To elect to the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shares
|
|
23,972,004
|
|
|
|
|
|
|
|
|
Shares Voted
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
22,375,241
|
|
|
|
|
|
|
|
|
% of Total
|
|
93.3391
|
%
|
|
|
|
|
|
|
|
BIRCH
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
21,345,037
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
95.3958
|
%
|
|
|
|
|
|
|
|
DRAKE
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
21,346,917
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
95.4042
|
%
|
|
|
|
|
|
|
|
LAI
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
21,344,460
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
95.3932
|
%
|
|
|
|
|
|
|
|
MCFARLAND
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
21,348,517
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
95.4113
|
%
|
|
|
|
|
|
|
|
SALVATORE
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
21,335,852
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
95.3547
|
%
|
|
|
|
|
83
RMK FUNDS
Proxy Results (continued) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMK Multi-Sector High Income Fund, Inc.
|
|
Shares Voted
For
|
|
|
Shares Voted
Against
|
|
Shares Voted
Abstain
|
|
1.
|
|
Approval of a new investment advisory agreement between Hyperion Brookfield Asset Management, Inc. and RMK Multi-Sector High Income Fund, Inc.
|
|
16,805,254
|
|
|
1,374,619
|
|
668,301
|
|
2.
|
|
To elect to the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shares
|
|
36,662,828
|
|
|
|
|
|
|
|
|
Shares Voted
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
32,071,182
|
|
|
|
|
|
|
|
|
% of Total
|
|
87.4760
|
%
|
|
|
|
|
|
|
|
BIRCH
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
31,021,637
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
96.7275
|
%
|
|
|
|
|
|
|
|
DRAKE
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
31,022,997
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
96.7317
|
%
|
|
|
|
|
|
|
|
LAI
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
31,037,343
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
96.7764
|
%
|
|
|
|
|
|
|
|
MCFARLAND
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
31,026,087
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
96.7413
|
%
|
|
|
|
|
|
|
|
SALVATORE
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
31,008,061
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
96.6851
|
%
|
|
|
|
|
|
|
|
RMK Strategic Income Fund, Inc.
|
|
Shares Voted
For
|
|
|
Shares Voted
Against
|
|
Shares Voted
Abstain
|
|
1.
|
|
Approval of a new investment advisory agreement between Hyperion Brookfield Asset Management, Inc. and RMK Strategic Income Fund, Inc.
|
|
13,203,357
|
|
|
809,784
|
|
697,662
|
|
2.
|
|
To elect to the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shares
|
|
28,992,070
|
|
|
|
|
|
|
|
|
Shares Voted
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
26,651,824
|
|
|
|
|
|
|
|
|
% of Total
|
|
91.9280
|
%
|
|
|
|
|
|
|
|
BIRCH
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
24,435,276
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
91.6833
|
%
|
|
|
|
|
|
|
|
DRAKE
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
24,444,549
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
91.7181
|
%
|
|
|
|
|
|
|
|
LAI
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
24,442,776
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
91.7115
|
%
|
|
|
|
|
|
|
|
MCFARLAND
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
24,445,625
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
91.7221
|
%
|
|
|
|
|
|
|
|
SALVATORE
|
|
|
|
|
|
|
|
|
|
|
Shares For
|
|
24,438,460
|
|
|
|
|
|
|
|
|
% of Votes Cast
|
|
91.6953
|
%
|
|
|
|
|
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
84
RMK FUNDS
Board Considerations Relating to the Investment Advisory Agreements (Unaudited)
In approving the Advisory Agreements, the Boards determined that the terms of the
Advisory Agreements are fair and reasonable and that approval of the Advisory Agreement on behalf of each Fund is in the best interests of that Fund. In their deliberations, the Boards did not identify any single factor or information as
all-important or controlling, and each director may have attributed different weights to the various factors. Among other things, the directors considered:
(1) The qualifications of HBAM, including the nature, extent and quality of the services to be provided.
The Boards
first considered whether HBAM was qualified to assume the management of the Funds. The Boards considered the reputation, financial strength, key services and operations, resources and expertise of HBAM as a firm, including the structure of its
organization, its relationships, its historical expertise in the asset-backed securities market, coupled with expanding capabilities in the core fixed income and high yield sectors, and its ability to attract and maintain highly qualified,
professional talent. The Boards noted particularly that HBAM’s research team has designed advanced proprietary investment technology platforms for the monitoring, analysis and management of risk/reward attributes across all sectors of the fixed
income market. Further, the Boards noted that HBAM manages in excess of $21 billion for a client base including, but not limited to, insurance companies, pension funds, financial institutions, registered investment companies and foundations. The
Boards considered the quality and nature of the proposed investment advisory services to be provided to the Funds by HBAM as compared to those provided by MAM.
Next, the Boards considered the qualifications and experience of the investment advisory personnel at HBAM. In particular, the Boards considered the background and expertise of Mr. Dana Erikson, the head of HBAM’s High
Yield Team, as the proposed lead portfolio manager of the Funds, with the day-to-day responsibility for the management of the Funds. The Boards noted that Mr. Erikson is responsible for HBAM’s corporate high yield exposures and the
establishment of portfolio objectives and strategies. The Boards also noted the experience of the other members of HBAM’s High Yield Team, as well as that of Mr. Anthony Breaks and his team, and considered that HBAM applies a team-oriented
approach to the fundamental analysis that drives its relative value-oriented investment decision-making process. This process contemplates a relative valuation of the entire capital structure of a potential investment, which includes valuation of
the equity, bonds and bank debt, to determine the optimal way to gain exposure to the issuing company. The Boards concluded that HBAM’s experience and personnel made HBAM well-qualified to manage each Fund’s portfolio in accordance with
its investment objectives and strategies, and that there was potential that shareholders would benefit from HBAM’s management of the Funds.
The
Boards further considered HBAM’s methodology for compensating the Funds’ portfolio manager and the rest of the portfolio management, trading and research team. The Boards also considered HBAM’s investment philosophy and its investment
outlook for the Funds. The Boards noted that HBAM’s commitment to a relative value investment philosophy has continued throughout its history. Additionally, the Boards considered whether HBAM would be able to meet the compliance demands set
forth under various regulations. The Boards reviewed materials regarding HBAM’s compliance program and code of ethics and discussed the compliance program with HBAM’s Chief Compliance Officer.
The Boards concluded that the intended scope of HBAM’s services was satisfactory and comparable to those currently provided by MAM and that there should be no
diminution of the scope or quality of the advisory services provided to the Funds under the Advisory Agreements.
(2) The investment performance of HBAM.
The Boards considered the investment performance of HBAM’s registered investment companies and the performance
record of the High Yield Team. The Boards compared the long-term performance of the High Yield Team’s composite to its benchmark and to the performance of the Funds. Based on these factors the Boards concluded that the overall performance
results supported the approval of the Advisory Agreements.
(3) The reasonableness of the
advisory fees.
In evaluating the costs of the services to be provided by HBAM under the Advisory Agreements and the profitability of HBAM with respect to each Fund, the Boards
considered, among other things, whether advisory fees or other expenses would change as a result of the new arrangements.
85
RMK FUNDS
Board Considerations Relating to the Investment Advisory Agreements (Unaudited)
The Boards noted that the fees payable under the Advisory Agreements would be the same as those payable under the Current Advisory Agreements. As part of their
analysis, the Boards examined the fees payable under the Advisory Agreements and the total expense ratio of each Fund in comparison to the fees and total expense ratios for its peer group. The Boards noted that the advisory fees and the total
expense ratios for each Fund were near the mean of figures provided by an independent data service for other leveraged high current yield funds while the advisory fees were at, and the total expense ratios were slightly above, the median of figures
for the other leveraged high current yield funds. The Boards further noted that pursuant to the Expense Limitation Agreements (defined below), HBAM would agree to waive a portion of its fees and reimburse certain expenses of the Funds for a period
of two years after each Advisory Agreement takes effect so that the maximum annual operating expense ratio of each Fund does not exceed the maximum annual operating expense ratio under the current contractual expense limitation arrangement between
MAM and the Fund.
The Boards then considered HBAM’s management of other registered investment companies and similarly managed accounts. The
Boards noted that the advisory fees paid by the other registered investment companies and similarly managed accounts were comparable to the advisory fees proposed to be paid by each Fund. The Boards concluded that the level of advisory fee to be
charged to each Fund was reasonable in light of these factors.
(4) The profitability of HBAM
with respect to its relationship with each Fund.
The Boards considered what benefits HBAM would derive from the management of the Funds and whether it would have a financial interest in the matters that were
being considered. The Boards reviewed information regarding the estimated profitability to HBAM of its relationship with the Funds and considered whether the profits would be reasonable. The profitability analysis took into consideration fall-out
benefits from HBAM’s relationship with the Funds. The Boards found that the estimated profits to be realized by HBAM from its relationship with the Funds were likely to be reasonable.
(5) The extent to which economies of scale might be realized as each Fund grows.
The
Boards considered whether economies of scale would be realized by the Funds at higher asset levels. The Boards also assessed whether certain of HBAM’s costs would increase if asset levels rise. The Boards considered each Fund’s current
asset size and concluded that under foreseeable conditions, they were unable to assess at the present time whether economies of scale would be realized if the Funds were to experience significant asset growth. The Boards noted that HBAM has
represented that it expects to analyze whether economies of scale can be recognized in the future should the Funds’ assets under management grow and, should economies of scale emerge, would recommend an appropriate arrangement to share the
benefits of such economies with Fund shareholders.
(6) Possible conflicts of
interest.
The Boards also discussed HBAM’s methods of dealing with conflicts of interest. The Boards noted that HBAM has adopted compliance policies and procedures that
are designed to address the various conflicts of interest that may arise for HBAM and the individuals that it employs. For example, the Boards noted that HBAM seeks to minimize the effects of competing interests for the time and attention of
portfolio managers by assigning portfolio managers to manage funds and accounts that share a similar investment style. The Boards further noted that HBAM also has adopted trade allocation procedures that are designed to facilitate the fair
allocation of limited investment opportunities among multiple funds and accounts.
Board
Approval and Recommendation of the Advisory Agreements.
As a result of the considerations described above, the Boards, including all of the Independent Directors, determined
to approve the Advisory Agreements with HBAM. Based on these considerations, the Boards were satisfied that: (1) the Funds were likely to benefit from the nature, quality and extent of HBAM’s services; and (2) HBAM has the resources to provide
the services and to carry out its responsibilities under the Advisory Agreements. The Boards, including all of the Independent Directors, concluded that the terms of the Advisory Agreements are fair and reasonable, that the fees stated therein,
including ancillary benefits, are reasonable in light of the services to be provided to the Funds, and for these reasons the Boards approved the Advisory Agreements and concluded that the Advisory Agreement should be recommended to each Fund’s
shareholders for their approval. Based on the foregoing, the Boards, including all of the Independent Directors, who were present at the meeting held in person on April 21, 2008, unanimously voted to approve and to recommend to the shareholders of
each Fund that they approve the Advisory Agreement.
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
86
RMK FUNDS
Information Concerning Directors and Officers (Unaudited)
The following tables provide the information concerning the directors and officers of the RMK Funds (the “Funds”).
|
|
|
|
|
|
|
|
|
Name, Address and Age
|
|
Position(s) Held with
Funds and Term of Office
and Length of Time Served
|
|
Principal Occupation(s) During Past 5 Years and
Other Directorships Held by Director
|
|
Number of Portfolios
in Fund Complex
Overseen by Director
|
|
|
|
Class I Disinterested Directors to serve until 2009 Annual Meeting of Shareholders
|
|
|
|
|
|
|
Robert F. Birch
c/o Three World
Financial Center,
200 Vesey Street,
10
th
floor,
New York, New York
10281-1010
Age 72
|
|
Director, Member of the Audit Committee, Member of the Nominating and Compensation Committee
Elected Since July 2008
|
|
Director of several investment companies advised by the Advisor (1998-Present); President and Director of New America High Income Fund (1992-Present); Director of Brandywine Funds (3)
(2001-2008).
|
|
11
|
|
|
|
|
|
|
Stuart A. McFarland
c/o Three World
Financial Center,
200 Vesey Street,
10
th
floor,
New York, New York 10281-1010
Age 61
|
|
Director, Member of the Audit Committee, Member of the Nominating and Compensation Committee
Elected Since July 2008
|
|
Director of several investment companies advised by the Advisor (2006-Present); Director of Brandywine Funds (2003-Present); Director of New Castle Investment Corp. (2000-Present); Chairman and Chief
Executive Officer of Federal City Bancorp, Inc. (2005-2007); Managing Partner of Federal City Capital Advisors (1997-Present).
|
|
11
|
|
|
|
Class II Disinterested Directors to serve until 2010 Annual Meeting of Shareholders
|
|
|
|
|
|
|
Rodman L. Drake
c/o Three World
Financial Center,
200 Vesey Street,
10
th
floor,
New York, New York
10281-1010
Age 65
|
|
Director and Chairman of the Board, Member of the Audit Committee, Chairman of the Nominating and Compensation Committee
Elected Since July 2008
|
|
Chairman (since 2003) and Director of several investment companies advised by the Advisor (1989-Present); Director, and/or Lead Director of Crystal River Capital, Inc. (“CRZ”) (2005-Present);
Director of Celgene Corporation (“CELG”) (2006-Present); Director of Student Loan Corporation (“STU”) (2005-Present); Director of Apex Silver Corp. (“SIL”) (2007-Present); General Partner of Resource Capital Fund II
& III CIP L.P. (1998-2006); Co-founder, Baringo Capital LLC (2002-Present); Director of Jackson Hewitt Tax Services Inc. (“JTX”) (2004-Present); Director of Animal Medical Center (2002-Present); Director and/or Lead Director of Parsons
Brinckerhoff, Inc. (1995-2008); Trustee and Chairman of Excelsior Funds (1994-2007); Trustee of Columbia Atlantic Funds (2007-Present).
|
|
11
|
|
|
|
Class III Disinterested Directors to serve until 2011 Annual Meeting of Shareholders
|
|
|
|
|
|
|
Louis P. Salvatore
c/o Three World
Financial Center,
200 Vesey Street,
10
th
floor,
New York, New York
10281-1010
Age 62
|
|
Director, Chairman of the Audit Committee, Member of the Nominating and Compensation Committee
Elected Since July 2008
|
|
Director of several investment companies advised by the Advisor (2005-Present); Director of Crystal River Capital, Inc. (“CRZ”) (2005-Present); Director of Turner Corp. (2003-Present); Director
of Jackson Hewitt Tax Services, Inc. (“JTX”) (2004-Present); Employee of Arthur Andersen LLP (2002-Present); Partner of Arthur Andersen LLP (1977- 2002).
|
|
11
|
87
RMK FUNDS
Information Concerning Directors and Officers (Unaudited)
|
|
|
|
|
|
|
|
|
Name, Address and Age
|
|
Position(s) Held with
Funds and Term of Office
and Length of Time Served
|
|
Principal Occupation(s) During Past 5 Years and
Other Directorships Held by Director
|
|
Number of Portfolios
in Fund Complex
Overseen by Director
|
|
|
|
Class III Interested Director to serve until 2011 Annual Meeting of Shareholders
|
|
|
|
|
|
|
Clifford E. Lai*
c/o Three World
Financial Center,
200 Vesey Street,
10
th
floor,
New York, New York
10281-1010
Age 55
|
|
Director
Elected Since July 2008
|
|
Managing Partner of Brookfield Asset Management, Inc. (2006-Present); Chairman (2005-Present); Chief Executive Officer (1998-2007); President (1998-2006) and Chief Investment Officer (1993-2002) of the
Advisor; President (2005-2008), Chief Executive Officer (2005-2008) and Director of Crystal River Capital, Inc., (“CRZ”) (2005-Present); President and Director of several investment companies advised by the Advisor (1995-Present); and
Co-Chairman (2003-2006) and Board of Managers (1995-2006) of Hyperion GMAC Capital Advisors, LLC (formerly Lend Lease Hyperion Capital, LLC).
|
|
11
|
|
*
|
Interested person as defined in the 1940 Act, as amended (“the 1940 Act”), because of affiliations with Hyperion Brookfield Management, Inc., each Fund’s
Advisor.
|
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
88
RMK FUNDS
Information Concerning Directors and Officers (Unaudited)
Officers of the Funds
|
|
|
|
|
|
|
|
|
Name, Address and Age
|
|
Position (s)
Held with Funds
|
|
Term of Office and
Length of Time Served
|
|
Principal Occupation (s) During Past 5 Years
|
|
|
|
|
|
|
John J. Feeney, Jr.*
c/o Three World
Financial Center,
200 Vesey Street,
10
th
floor,
New York, New York 10281-1010
Age 49
|
|
President
|
|
Elected Annually Since July 2008
|
|
Member of the Board of Directors (2002-Present), Chief Executive Officer (2007-Present), President (2006-Present) and Director of Marketing (1997-2006) of the Advisor; President (2008-Present) or Vice
President (2007-Present) of several investment companies advised by the Advisor; Executive Vice President and Secretary of Crystal River Capital, Inc. (“CRZ”) (2005-2007).
|
|
|
|
|
|
|
Dana E. Erikson*
c/o Three World
Financial Center,
200 Vesey Street,
10
th
floor,
New York, New York
10281-1010
Age 43
|
|
Vice President
|
|
Elected Annually Since July 2008
|
|
Senior Portfolio Manager/Managing Director of the Advisor (2006-Present); Senior Portfolio Manager/Managing Director of Evergreen Investment Management
Company, LLC
(1996-2006).
|
|
|
|
|
|
|
Thomas F. Doodian*
c/o Three World
Financial Center,
200 Vesey Street,
10
th
floor,
New York, New York
10281-1010
Age 49
|
|
Treasurer
|
|
Elected Annually Since July 2008
|
|
Managing Director (2007-Present) of Brookfield Operations & Management Services LLC; Managing Director, Chief Operating Officer (1998-2006) and Chief Financial Officer (2000-2006) of the Advisor;
Treasurer of several investment companies advised by the Advisor (1996-Present); Treasurer of Hyperion GMAC Capital Advisors, LLC (formerly Lend Lease Hyperion Capital, LLC) (1996-2006).
|
|
|
|
|
|
|
Josielyne K. Pacifico*
c/o Three World
Financial Center,
200 Vesey Street,
10
th
floor,
New York, New York
10281-1010
Age 36
|
|
Secretary and Chief Compliance Officer (“CCO”)
|
|
Elected Annually Since July 2008
|
|
Director, and CCO, Assistant General Counsel (2006-Present) and Compliance Officer (2005-2006) of the Advisor; Secretary of several investment companies advised by the Advisor (2008-Present); CCO of
several investment companies advised by the Advisor (2006-Present); Compliance Manager of Marsh & McLennan Companies (2004-2005); Staff Attorney at the United States Securities and Exchange Commission (2001-2004).
|
|
*
|
Interested person as defined in the 1940 Act, as amended (the “1940 Act”), because of affiliations with Hyperion Brookfield Asset Management, Inc., each
Fund’s Adviser.
|
Each Fund’s Statement of Additional Information includes additional information about the directors and
is available, without charge, upon request by calling 1-800-497-3746.
89
RMK FUNDS
Supplemental Information (Unaudited)
DIVIDEND REINVESTMENT PLAN
The Funds offer a dividend reinvestment plan (the “Plan”) pursuant to which stockholders, unless they elect otherwise, automatically have dividends and
other distributions reinvested in common shares of the Fund by Computershare Trust Company, N.A. and Computershare Shareholder Services, Inc. (together, the “Plan Agent”). Stockholders who elect not to participate in the Plan receive all
distributions in cash paid by wire or check mailed directly to the recordholder by the Plan Agent.
How the Plan Works
After a Fund declares a dividend or determines to make other distributions, the Plan Agent will acquire shares for the participants’ accounts, depending upon
the circumstances described below, either (i) through receipt of newly-issued shares of the Fund or (ii) by open-market purchases as follows:
|
•
|
|
If, on the payment date, the NAV is equal to or less than the market price per share plus estimated brokerage commissions, the Plan Agent will invest the distribution
amount in newly-issued shares on behalf of the participants. The number of newly-issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the distribution by the NAV on the date the shares
are issued. However, if the NAV is less than 95% of the market price on the payment date, the dollar amount of the distribution will be divided by 95% of the market price on the payment date. Because common shares may be issued at less than their
market price, Plan participants may get a benefit that non-participants do not.
|
|
•
|
|
If, on the payment date, the NAV is greater than the market value per share plus estimated brokerage commissions, the Plan Agent will invest the distribution amount in
shares acquired on behalf of the participants in open-market purchases, which may be made on the New York Stock Exchange (“NYSE”), in the over-the-counter market or in negotiated transactions and may be on such terms as to price, delivery
and otherwise as the Plan Agent shall determine. It is possible that the market price for the shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share the Plan Agent pays may exceed the
market price thereof on the payment date. If the market price per share increases so that it equals or exceeds the NAV per share (minus estimated brokerage commissions), the Plan Agent will crease its purchases. Otherwise, the Plan Agent will use
all distributions received in cash to purchase shares in the open market on or shortly after the payment date, but in no event more than thirty (30) days after the payment date, except where temporary curtailment or suspension of purchases is
necessary to comply with applicable provisions of the federal securities laws. If the Plan Agent is unable to invest the full amount through open-market purchases during the purchase period, the Plan Agent will request that, with respect to the
uninvested portion of such amount, the Fund issue new shares at the close of business on the earlier of the last day of the purchase period or the first day during the purchase period on which the NAV per share (minus estimated brokerage
commissions) equals or is less than the market price per share.
|
Costs of the Plan
The Plan Agent’s fees for the handling of the reinvestment of dividends and other distributions will be paid by the Funds. However, each participant will pay
a pro rata share of brokerage commissions incurred with respect to the Plan Agent’s open-market purchases in connection with the reinvestment of dividends and other distributions. If a participant elects to have the Plan Agent sell part or all
of his or her shares and remit the proceeds, the participant will be subject to a $15.00 service fee and a $0.12 per share sold processing fee (which includes applicable brokerage commissions the Plan Agent is required to pay). The participant will
not be charged any other fees for this service. However, each Fund reserves the right to amend the Plan to include a service fee payable by the participant.
Tax-Implications
The automatic reinvestment of dividends or other distributions does not relieve participants of any taxes that may
be payable on such distributions. Participants will receive tax information annually for their personal records and to help them prepare their federal income tax returns. For further information as to the tax consequences of participation in the
Plan, participants should consult with their own tax advisors.
|
|
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|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
90
RMK FUNDS
Supplemental Information (continued) (Unaudited)
Right to Withdraw
Participants may withdraw from the Plan by calling the Plan Agent at 800-426-5523, writing to the Plan Agent at 250 Royall Street, Canton, Massachusetts 02021 or completing and returning the transaction form attached to each Plan statement.
The withdrawal will be effective immediately if the participant’s notice is received by the Plan Agent not less than ten days prior to any dividend or other distribution record date. Otherwise, the withdrawal will be effective the first trading
day after the payment date for the dividend or other distribution with respect to any subsequent dividend or other distribution.
91
RMK FUNDS
Additional Information
Held for Additional Information
|
|
|
|
|
Hyperion Brookfield
Asset Management, Inc.
|
|
|
92
CORPORATE
INFORMATION
Investment Advisor and
Administrator
Hyperion Brookfield Asset Management, Inc.
Three World
Financial Center
200 Vesey Street, 10th Floor
New York, New York 10281-1010
www.hyperionbrookfield.com
Please direct your inquiries to:
Investor Relations
Phone: 1-800 HYPERION
E-mail: funds@hyperionbrookfield.com
Transfer Agent
Stockholder inquiries relating to distributions, address changes and stockholder account information should be directed to the Funds’ transfer agent:
Computershare Shareholder Services, Inc.
250 Royall Street
Canton, Massachusetts 02021
Sub-Administrator
State Street Bank and Trust Company
801 Pennsylvania Avenue
Kansas City, Missouri 64105
Independent Registered Public Accounting Firm
Briggs, Bunting & Dougherty, LLP
1835 Market Street, 26th Floor
Philadelphia, Pennsylvania 19103
Legal Counsel
Paul, Hastings, Janofsky and Walker LLP
75 East 55th Street
New York, New York 10022
Custodian and Fund Accounting Agent
State Street Bank and Trust Company
2 Avenue De Lafayette
Lafayette Corporate Center
Boston, Massachusetts 02116
Not Applicable.
|
Item 3.
|
Audit Committee Financial Expert.
|
Not Applicable.
|
Item 4.
|
Principal Accountant Fees and Services.
|
Not
Applicable.
|
Item 5.
|
Audit Committee of Listed Registrant.
|
Not
Applicable.
|
Item 6.
|
Schedule of Investments.
|
Please see Item 1.
|
Item 7.
|
Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
|
Not Applicable.
|
Item 8.
|
Portfolio Managers of Closed-End Management Investment Companies.
|
Portfolio Managers
Dana E. Erikson, CFA
– Mr. Erikson is the lead portfolio manager for the
Registrants and is supported by a team of investment professionals. Mr. Erikson has over 20 years of investment experience in the high yield business, including management of multiple closed- and open-end high yield and multi-sector funds.
Mr. Erikson, who joined the Hyperion Brookfield Asset Management, Inc. (the “Adviser”) in 2006, leads a team of five investment professionals focusing on high yield assets, including bank debt, corporate high yield, equities, private
placements and distressed debt. Prior to joining the Adviser, Mr. Erikson was with Evergreen Investments or one of its predecessor firms since 1996 where he was a senior portfolio manager and the Head of the High Yield team. Prior to serving as
Head of the High Yield team, Mr. Erikson was Head of High Yield Research. Prior to Evergreen, Mr. Erikson was an Associate Portfolio Manager for Prospect Street Investment Management Company. Additionally, he was an Analyst with the
Kellett Group and a Research Assistant with Robert R. Nathan Associates.
Anthony Breaks, CFA
–
Mr. Breaks serves as co-portfolio manager for the Registrants. Mr. Breaks has over 11 years of investment experience, primarily in the area of structured finance investments. Mr. Breaks is part of a separate team of fifteen investment
professionals focusing on structured mortgage-related investment
products. Mr. Breaks joined the Adviser in 2005. Prior to that, Mr. Breaks was with Brookfield Asset Management Inc. since 2002, where he was
responsible for portfolio investments and credit analysis for a reinsurance affiliate, execution and management of a synthetic collateralized debt obligation (“CDO”), and development of insurance related investment products. Prior to
joining Brookfield, Mr. Breaks was a Director at Liberty Hampshire and was responsible for structuring, restructuring and executing several CDOs, as well as ongoing monitoring and credit analysis for the CDO assets. Mr. Breaks began his
career at Merrill Lynch where he worked in trading and structuring capacities in CDOs, adjustable rate mortgages and medium-term notes.
Messrs. Erikson and Breaks have equal discretion with respect to the management of the Registrants and share equally in the day-to-day portfolio management responsibilities.
Management of Other Accounts
The portfolio managers listed below manage other investment companies and/or investment
vehicles and accounts in addition to the Registrants. The tables below show the number of other accounts managed by Messrs. Erikson and Breaks and the total assets in each of the following categories: (a) registered investment companies;
(b) other pooled investment vehicles; and (c) other accounts. For each category, the table also shows the number of accounts and the total assets in the accounts with respect to which the advisory fee is based on account performance.
The following table provides information about the accounts managed by
Dana E. Erikson, CFA
, Lead Portfolio Manager for the Registrants as
of September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment
Companies
|
|
Other
Pooled
Investment
Vehicles
|
|
Other Accounts
|
|
Number of Accounts Managed
|
|
|
6
|
|
|
0
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Accounts Managed with Performance-Based Advisory Fees
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Managed
|
|
$
|
210 million
|
|
$
|
0
|
|
$
|
17 million
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Managed with Performance-Based Advisory Fees
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides information about the accounts managed by
Anthony Breaks
, Co-Portfolio
Manager for the Registrants, as of September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment
Companies
|
|
Other
Pooled
Investment
Vehicles
|
|
Other Accounts
|
|
Number of Accounts Managed
|
|
|
4
|
|
|
0
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Accounts Managed with Performance-Based Advisory Fees
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Managed
|
|
$
|
173 million
|
|
$
|
0
|
|
$
|
948 million
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Managed with Performance-Based Advisory Fees
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Share Ownership
The
dollar range of shares of the funds beneficially owned by
Dana E. Erikson
as of September 30, 2008 is as follows:
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RMK Advantage Income Fund, Inc.:
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$
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0
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RMK High Income Fund, Inc.:
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$
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0
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RMK Multi-Sector High Income Fund, Inc.:
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$
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0
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RMK Strategic Income Fund, Inc:
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$
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0
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The dollar range of shares of the funds beneficially owned by
Anthony Breaks
as of
September 30, 2008 is as follows:
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RMK Advantage Income Fund, Inc.:
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$
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0
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RMK High Income Fund, Inc.:
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$
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0
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RMK Multi-Sector High Income Fund, Inc.:
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$
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0
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RMK Strategic Income Fund, Inc:
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$
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0
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Portfolio Manager Material Conflict of Interest
Potential conflicts of interest may arise when a fund’s portfolio manager has day-to-day management responsibilities with respect to one or more other funds or other
accounts, as is the case for the portfolio managers of the Registrants.
These potential conflicts include:
Allocation of Limited Time and Attention
. A portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention
to the management of those funds and/or accounts. As a result, the portfolio manager may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those accounts as the case may be if he or
she were to devote substantially more attention to the management of a single fund. The effects of this potential conflict may be more pronounced where funds and/or accounts overseen by a particular portfolio manager have different investment
strategies.
Allocation of Limited Investment Opportunities
. If a portfolio manager identifies a limited investment opportunity that may be suitable
for multiple funds and/or accounts, the opportunity may be allocated among these several funds or accounts, which may limit a fund’s ability to take full advantage of the investment opportunity.
Pursuit of Differing Strategies
. At times, a portfolio manager may determine that an investment opportunity may be
appropriate for only some of the funds and/or accounts for which he or she exercises investment responsibility, or may decide that certain of the funds and/or accounts should take differing positions with respect to a particular security. In these
cases, the portfolio manager may place separate transactions for one or more funds or accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other funds
and/or accounts.
Variation in Compensation
. A conflict of interest may arise where the financial or other benefits available to the portfolio
manager differ among the funds and/or accounts that he or she manages. If the structure of the investment adviser’s management fee and/or the portfolio manager’s compensation differs among funds and/or accounts (such as where certain funds
or accounts pay higher management fees or performance-based management fees), the portfolio manager might be motivated to help certain funds and/or accounts over others. The portfolio manager might be motivated to favor funds and/or accounts in
which he or she has an interest or in which the investment adviser and/or its affiliates have interests. Similarly, the desire to maintain or raise assets under management or to enhance the portfolio manager’s performance record or to derive
other rewards, financial or otherwise, could influence the portfolio manager to lend preferential treatment to those funds and/or accounts that could most significantly benefit the portfolio manager.
Related Business Opportunities
. The investment adviser or its affiliates may provide more services (such as distribution or recordkeeping) for some types of funds
or accounts than for others. In such cases, a portfolio manager may benefit, either directly or indirectly, by devoting disproportionate attention to the management of fund and/or accounts that provide greater overall returns to the investment
manager and its affiliates.
The Adviser and the Registrants have adopted compliance policies and procedures that are designed to address the various
conflicts of interest that may arise for the Adviser and the individuals that it employs. For example, the Adviser seeks to minimize the effects of competing interests for the time and attention of portfolio managers by assigning portfolio managers
to manage funds and accounts that share a similar investment style. The Adviser has also adopted trade allocation procedures that are designed to facilitate the fair allocation of limited investment opportunities among multiple funds and accounts.
There is, however, no guarantee that such policies and procedures will be able to detect and prevent every situation in which an actual or potential conflict may appear.
Portfolio Manager Compensation
The Registrants’ portfolio managers are compensated by the Adviser. The
compensation structure of the Adviser’s portfolio managers and other investment professionals has three primary components: (1) a base salary, (2) an annual cash bonus, and (3) if applicable, long-term stock-based compensation
consisting generally of restricted stock units of the Adviser’s indirect parent company, Brookfield Asset Management, Inc. The portfolio managers also receive certain retirement, insurance and other benefits that are broadly available to all of
the Adviser’s employees. Compensation of the portfolio managers is reviewed on an annual basis by senior management.
The Adviser compensates its
portfolio managers based primarily on the scale and complexity of their portfolio responsibilities, the total return performance of funds and accounts managed by the portfolio manager on an absolute basis and versus appropriate peer groups of
similar size and strategy, as well as the management skills displayed in managing their subordinates and the teamwork displayed in working with other members of the firm. Since the portfolio managers are responsible for multiple funds and accounts,
investment performance is
evaluated on an aggregate basis almost equally weighted among performance, management and teamwork. Base compensation for the Adviser’s portfolio
managers varies in line with the portfolio manager’s seniority and position. The compensation of portfolio managers with other job responsibilities (such as acting as an executive officer of the Adviser and supervising various departments) will
include consideration of the scope of such responsibilities and the portfolio manager’s performance in meeting them. The Adviser seeks to compensate portfolio managers commensurate with their responsibilities and performance, and competitive
with other firms within the investment management industry. Salaries, bonuses and stock-based compensation are also influenced by the operating performance of the Adviser and its indirect parent. While the salaries of the Adviser’s portfolio
managers are comparatively fixed, cash bonuses and stock-based compensation may fluctuate significantly from year to year, based on changes in the portfolio manager’s performance and other factors as described herein.
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Item 9.
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Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
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Not Applicable.
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Item 10.
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Submission of Matters to a Vote of Security Holders.
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The Registrants expect to hold their next annual meeting of shareholders in July 2009. The bylaws of each Registrant require advance notice be given to the Registrant in the event a shareholder desires to nominate directors
or make proposals to be voted on at the Registrant’s annual meeting of shareholders. Nominations and proposals of shareholders intended to be presented at the meeting must be received by the Registrant by January 31, 2009 and
must satisfy the other requirements of the federal securities laws. Timely submission does not guarantee that such nominations or proposals will be included. Notice of any such business must be in writing and sent to Registrant Secretary,
addressed c/o the applicable Registrant, Three World Financial Center, 200 Vesey Street, 10[th] Floor, New York, New York 10281.
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Item 11.
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Controls and Procedures.
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(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-CSR.
(b) As of the date of filing this Form N-CSR, 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 second fiscal quarter of the period covered by this report that has materially affected or is
reasonably likely to materially affect the Registrant’s internal control over financial reporting.
(a) (1) None.
(2) A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940 is attached as an exhibit to this Form N-CSR.
(3) None.
(b) A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(b) under the Investment
Company Act of 1940 is attached as an exhibit to this Form N-CSR.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RMK MULTI-SECTOR HIGH INCOME FUND, INC.
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By:
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/s/ John J. Feeney, Jr.
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John J. Feeney, Jr.
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President
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Date: December 10, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
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By:
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/s/ John J. Feeney, Jr.
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John J. Feeney, Jr.
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President
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Date: December 10, 2008
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By:
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/s/ Thomas F. Doodian
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Thomas F. Doodian
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Treasurer
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Date: December 10, 2008
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