Edgar Filing: HELIOS STRATEGIC MORTGAGE INCOME FUND, INC.

Helios Strategic Mortgage Income Fund, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-21102

Helios Strategic Mortgage Income Fund, Inc.

(Exact name of registrant as specified in charter)

Three World Financial Center, 200 Vesey Street, 10th Floor, New York, NY 10281-1010

(Address of principal executive offices) (Zip code)

Steven M. Pires, Three World Financial Center, 200 Vesey Street, New York, NY 10281-1010

(Name and address of agent for service)

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

Date of fiscal year end: November 30, 2011

Date of reporting period: February 28, 2011

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (Sections 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.

Item 1. Schedule of Investments

HELIOS STRATEGIC MORTGAGE INCOME FUND, INC.

Portfolio of Investments (Unaudited)

February 28, 2011


	Interest Rate			Maturity		Principal Amount (000s)		Value
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 22.7%
U.S. Government Agency Collateralized Mortgage Obligations - 1.4%
Federal Home Loan Mortgage Corporation
Series 3617, Class C ⁸
(Cost - $1,077,903)		4.50	%		12/15/39	$	1,080	$	1,053,442

U.S. Government Agency Pass-Through Certificates - 21.3%
Federal Home Loan Mortgage Corporation
Pool C69047 ⁸		7.00			06/01/32		500		573,295
Pool H01847 ⁸		7.00			09/01/37		1,380		1,562,854
Pool G01466 ⁸		9.50			12/01/22		419		481,407
Pool 555559 ⁸		10.00			03/01/21		280		314,630
Federal National Mortgage Association		5.00			TBA		2,000		2,094,062
Pool 753914 ⁸		5.50			12/01/33		3,268		3,522,810
Pool 761836 ⁸		6.00			06/01/33		1,980		2,183,538
Pool 948362 ⁸		6.50			08/01/37		1,899		2,104,000
Pool 650131 ⁸		7.00			07/01/32		749		860,338
Pool 887431 ⁸		7.50			08/01/36		150		170,689
Pool 398800		8.00			06/01/12		53		53,765
Pool 636449 ⁸		8.50			04/01/32		796		934,444
Pool 458132 ⁸		9.34			03/15/31		611		721,668

Total U.S. Government Agency Pass-Through Certificates
(Cost - $14,439,736)									15,577,500

Total U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost - $15,517,639)									16,630,942

ASSET-BACKED SECURITIES - 22.2%
Housing Related Asset-Backed Securities - 22.2%
ACE Securities Corp.
Series 2003-MH1, Class A4 ^{1, 5}		6.50			08/15/30		670		726,950
Asset-Backed Securities Corp. Home Equity
Series 2006-HE3, Class A4 ^{2, 4, 12}		0.43			03/25/36		372		293,363
Carrington Mortgage Loan Trust
Series 2006-FRE2, Class A2 ^{2, 4, 12}		0.38			10/25/36		585		488,188
Citicorp Residential Mortgage Securities, Inc.
Series 2007-1, Class A5 ^{3, 6}		6.05/6.55			03/25/37		1,289		1,070,476
Conseco Finance Securitizations Corp.
Series 2001-4, Class A4		7.36			09/01/33		146		157,478
Countrywide Asset-Backed Certificates
Series 2006-26, Class 2A1 ^{2, 4, 12}		0.34			06/25/37		2		1,823
Credit-Based Asset Servicing and Securitization LLC
Series 2005-CB8, Class AF2 ^{3, 12}		5.30/5.80			12/25/35		181		177,248
Credit Suisse First Boston Mortgage Securities Corp.
Series 2002-MH3, Class A ³		6.70/7.20			12/25/31		104		107,918
Fieldstone Mortgage Investment Corp.
Series 2006-3, Class 2A3 ^{2, 4, 12}		0.42			11/25/36		1,105		465,328
Green Tree
Series 2008-MH1, Class A3 ^{1, 5}		8.97			04/25/38		1,109		1,235,705
Green Tree Financial Corp.
Series 1997-7, Class A7		6.96			07/15/29		699		747,597
Series 1996-2, Class A4		7.20			04/15/26		9		9,376
GSAMP Trust
Series 2007-NC1, Class A2A ^{2, 4, 12}		0.31			12/25/46		118		112,108
Home Equity Loan Trust
Series 2007-FRE1, Class 2AV1 ^{2, 4, 12}		0.39			04/25/37		852		705,525
IXIS Real Estate Capital Trust
Series 2006-HE3, Class A2 ^{2, 4, 12}		0.36			01/25/37		727		312,925

See Notes to Portfolios of Investments.

HELIOS STRATEGIC MORTGAGE INCOME FUND, INC.

Portfolio of Investments (Unaudited)

February 28, 2011


	Interest Rate			Maturity		Principal Amount (000s)		Value
ASSET-BACKED SECURITIES (continued)
JP Morgan Mortgage Acquisition Corp.
Series 2006-HE2, Class A3 ^{2, 4, 12}		0.36	%		07/25/36	$	256	$	248,219
Series 2006-CW2, Class AF5 ^{3, 12}		6.34/6.84			08/25/36		109		62,130
Lehman ABS Manufactured Housing Contract Trust
Series 2001-B, Class A4		5.27			09/15/18		109		113,915
Series 2001-B, Class A5		5.87			05/15/22		205		218,499
Series 2001-B, Class A6		6.47			08/15/28		178		192,628
Long Beach Mortgage Loan Trust
Series 2005-3, Class 2A2 ^{2, 4, 12}		0.54			08/25/45		181		176,343
Mid-State Trust
Series 2010-1, Class M ^{1, 5}		5.25			12/15/45		886		896,853
Series 2005-1, Class A		5.75			01/15/40		152		156,236
Series 2004-1, Class A ⁸		6.01			08/15/37		1,026		1,048,319
Series 2004-1, Class M2 ⁶		8.11			08/15/37		940		995,266
Series 4, Class A ⁸		8.33			04/01/30		1,142		1,180,756
Morgan Stanley ABS Capital I, Inc.
Series 2006-WMC2, Class A2C ^{2, 4, 12}		0.41			07/25/36		1,818		648,769
Series 2006-HE1, Class A3 ^{2, 4, 12}		0.44			01/25/36		502		474,834
Newcastle Investment Trust
Series 2010-MH1, Class A ^{1, 5}		4.50			07/10/35		1,135		1,165,647
Option One Mortgage Loan Trust
Series 2005-4, Class A3 ^{2, 4, 8, 12}		0.52			11/25/35		820		781,765
Residential Asset Securities Corp.
Series 2005-KS12, Class A2 ^{2, 4, 12}		0.51			01/25/36		598		562,107
Soundview Home Equity Loan Trust
Series 2006-EQ1, Class A3 ^{2, 4, 12}		0.42			10/25/36		935		613,807
Structured Asset Securities Corp.
Series 2006-BC3, Class A2 ^{2, 4, 12}		0.31			10/25/36		52		51,469

Total Housing Related Asset-Backed Securities
(Cost - $17,378,591)									16,199,570

Total ASSET-BACKED SECURITIES
(Cost - $17,378,591)									16,199,570

COMMERCIAL MORTGAGE-BACKED SECURITIES - 70.0%
Banc of America Commercial Mortgage, Inc.
Series 2005-6, Class AJ ²		5.20			09/10/47		1,090		1,143,049
Series 2006-6, Class A4 ⁸		5.36			10/10/45		790		841,547
Series 2007-2, Class L ^{1, 5}		5.37			04/10/49		1,127		9,579
Series 2006-1, Class J ^{1, 2, 5}		5.59			09/10/45		1,000		132,365
Series 2007-2, Class A4 ^{2, 8}		5.69			04/10/49		1,170		1,255,444
Series 2007-2, Class K ^{1, 2, 5}		5.70			04/10/49		3,000		42,000
Bear Stearns Commercial Mortgage Securities
Series 2006-PW11, Class H ^{1, 2, 5}		5.45			03/11/39		1,100		465,595
Series 2007-PW16, Class B ^{1, 2, 5}		5.72			06/11/40		1,030		724,081
Series 2007-PW16, Class C ^{1, 2, 5}		5.72			06/11/40		1,290		757,253
Series 2007-PW16, Class D ^{1, 2, 5}		5.72			06/11/40		910		473,473
Series 2007-PW17, Class AM ⁸		5.92			06/11/50		1,400		1,450,908
Citigroup Commercial Mortgage Trust
Series 2007-C6, Class AM ^{2, 8}		5.70			12/10/49		1,700		1,766,774
Citigroup/Deutsche Bank Commercial Mortgage Trust
Series 2007-CD4, Class A4 ⁸		5.32			12/11/49		1,580		1,665,317
Series 2006-CD2, Class J ^{1, 2, 5, 6}		5.45			01/15/46		1,000		50,000
Commercial Mortgage Pass Through Certificates
Series 2007-C9, Class J ^{1, 2, 5}		5.81			12/10/49		350		112,000
Credit Suisse Mortgage Capital Certificates
Series 2006-C4, Class L ^{1, 5}		5.15			09/15/39		513		2,052
Series 2006-C4, Class M ^{1, 5}		5.15			09/15/39		565		1,413
Series 2006-C5, Class AM		5.34			12/15/39		1,860		1,893,108
Series 2006-C1, Class K ^{1, 2, 5}		5.44			02/15/39		2,358		719,190
Series 2006-C5, Class E		5.54			12/15/39		4,510		1,326,179

See Notes to Portfolios of Investments.

HELIOS STRATEGIC MORTGAGE INCOME FUND, INC.

Portfolio of Investments (Unaudited)

February 28, 2011


	Interest Rate			Maturity		Principal Amount (000s)		Value
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued)
Series 2007-C2, Class A3 ⁸		5.54	%		01/15/49	$	1,570	$	1,649,009
Series 2006-C3, Class AJ ²		5.83			06/15/38		460		458,866
Series 2006-C4, Class K ^{1, 2, 5}		6.09			09/15/39		2,970		20,790
CW Capital Cobalt Ltd.
Series 2007-C3, Class AM ²		5.82			05/15/46		200		203,406
FREMF Mortgage Trust
Series 2010-K9, Class B ^{1, 5}		5.16			09/25/45		1,320		1,302,378
GE Capital Commercial Mortgage Corp.
Series 2002-2A, Class G ^{1, 5}		6.04			08/11/36		3,000		3,079,698
Series 2002-2A, Class H ^{1, 5}		6.31			08/11/36		2,000		2,019,210
GMAC Commercial Mortgage Securities, Inc.
Series 2004-C3, Class B		4.97			12/10/41		450		362,250
Greenwich Capital Commercial Funding Corp.
Series 2007-GG9, Class A4 ⁸		5.44			03/10/39		1,655		1,768,619
Series 2006-GG7, Class AJ ²		5.89			07/10/38		165		167,173
Series 2006-GG7, Class AM ^{2, 8}		5.89			07/10/38		1,580		1,667,000
Series 2007-GG11, Class AJ ²		6.00			12/10/49		270		250,683
Series 2007-GG11, Class E ²		6.10			12/10/49		5,560		2,511,791
JP Morgan Chase Commercial Mortgage Securities Corp.
Series 2003-LN1, Class G ^{1, 2, 5}		5.48			10/15/37		1,600		1,121,120
Series 2007-CB18, Class G ^{1, 2, 5}		5.72			06/12/47		600		70,860
Series 2007-LD11, Class K ^{1, 2, 5}		5.82			06/15/49		1,879		37,580
Series 2007-CB20, Class AM ²		5.90			02/12/51		1,180		1,230,746
Series 2009-IWST, Class D ^{1, 2, 5}		7.45			12/05/27		2,000		2,265,178
LB-UBS Commercial Mortgage Trust
Series 2007-C1, Class A4 ⁸		5.42			02/15/40		1,510		1,620,148
Series 2007-C1, Class C		5.53			02/15/40		1,960		1,643,154
Series 2007-C1, Class D		5.56			02/15/40		360		269,127
Series 2007-C7, Class A3 ⁸		5.87			09/15/45		1,130		1,219,484
Morgan Stanley Capital I, Inc.
Series 2004-HQ4, Class G ^{1, 2, 5}		5.35			04/14/40		1,000		566,703
Series 2007-IQ13, Class A4 ⁸		5.36			03/15/44		950		991,624
Series 2007-IQ13, Class B ^{1, 5}		5.52			03/15/44		860		490,200
Series 2007-IQ13, Class C ^{1, 5}		5.56			03/15/44		560		275,100
Series 2007-HQ13, Class A3 ⁸		5.57			12/15/44		1,580		1,679,872
Series 2007-IQ14, Class A4 ⁸		5.69			04/15/49		1,740		1,843,154
Morgan Stanley Dean Witter Capital I
Series 2003-TOP9, Class F ^{1, 2, 5, 6}		5.94			11/13/36		729		684,790
Series 2003-TOP9, Class G ^{1, 2, 5, 6}		6.21			11/13/36		1,165		1,060,150
Morgan Stanley Reremic Trust
Series 2010-GG10, Class A4B ^{1, 2, 5}		5.81			08/15/45		310		322,418
Vornado DP LLC
Series 2010-VNO, Class D ^{1, 5}		6.36			09/13/28		240		252,469
Wachovia Bank Commercial Mortgage Trust
Series 2007-C31, Class L ^{1, 5}		5.13			04/15/47		1,788		17,880
Series 2005-C20, Class F ^{1, 2, 5}		5.24			07/15/42		4,000		1,499,076
Series 2005-C16, Class H ^{1, 2, 5}		5.50			10/15/41		2,000		1,015,656
Series 2004-C14, Class G ^{1, 2, 5}		5.51			08/15/41		800		692,000

Total COMMERCIAL MORTGAGE-BACKED SECURITIES
(Cost - $60,813,280)									51,160,689

NON-AGENCY RESIDENTIAL MORTGAGE-BACKED SECURITIES - 24.4%
Subordinated Collateralized Mortgage Obligations - 24.4%
American Home Mortgage Investment Trust
Series 2005-2, Class 5A3 ^{3, 8}		5.08/5.58			09/25/35		226		228,978
Banc of America Alternative Loan Trust
Series 2004-3, Class 30B4		5.50			04/25/34		929		5,481
Series 2004-3, Class 30B5		5.50			04/25/34		62		12
Series 2006-5, Class CB17		6.00			06/25/46		122		92,265

See Notes to Portfolios of Investments.

HELIOS STRATEGIC MORTGAGE INCOME FUND, INC.

Portfolio of Investments (Unaudited)

February 28, 2011


	Interest Rate			Maturity		Principal Amount (000s)		Value
NON-AGENCY RESIDENTIAL MORTGAGE-BACKED SECURITIES (continued)
Banc of America Funding Corp.
Series 2005-2, Class B4 ²		5.67	%		04/25/35	$	197	$	2
Banc of America Mortgage Securities, Inc.
Series 2004-A, Class B4 ²		2.85			02/25/34		897		22,883
Series 2003-10, Class 1B4		5.50			01/25/34		385		220,574
Series 2007-4, Class B3 ²		6.18			12/28/37		198		20
Citicorp Mortgage Securities, Inc.
Series 2007-2, Class 1A3		6.00			02/25/37		1,064		1,044,125
Series 2007-8, Class 1A3		6.00			09/25/37		241		239,614
Citigroup Mortgage Loan Trust, Inc.
Series 2004-NCM2, Class 1CB2 ⁶		6.75			08/25/34		183		188,695
Countrywide Alternative Loan Trust
Series 2007-2CB, Class 1A15		5.75			03/25/37		439		353,310
Series 2005-28CB, Class 3A5 ⁶		6.00			08/25/35		307		286,678
Series 2006-25CB, Class A2		6.00			10/25/36		670		560,827
Series 2006-41CB, Class 2A14 ¹²		6.00			01/25/37		312		251,352
Countrywide Home Loan Mortgage Pass Through Trust
Series 2003-J13, Class B3		5.23			01/25/34		322		142,313
Series 2003-J13, Class B5		5.23			01/25/34		193		12,529
Series 2005-27, Class 2A1		5.50			12/25/35		40		36,076
Series 2007-5, Class A29		5.50			05/25/37		632		573,265
Series 2006-21, Class A11		5.75			02/25/37		1,031		895,339
Series 2006-1, Class A2		6.00			03/25/36		70		63,078
Series 2007-18, Class 1A1		6.00			11/25/37		207		189,580
Series 2008-2R, Class A1		6.00			12/25/36		129		124,561
First Horizon Mortgage Pass-Through Trust
Series 2005-4, Class B4 ^{1, 2, 5}		5.46			07/25/35		374		4
GSR Mortgage Loan Trust
Series 2005-6F, Class 1A6 ⁸		5.25			07/25/35		488		458,526
Harborview Mortgage Loan Trust
Series 2005-9, Class B11 ^{1, 2, 4, 5}		2.01			06/20/35		440		11,194
JP Morgan Mortgage Trust
Series 2003-A1, Class B4 ²		3.23			10/25/33		520		101,295
Series 2006-S4, Class A6		6.00			01/25/37		10		9,899
Series 2006-S3, Class 1A10		6.50			08/25/36		529		476,973
RAAC Series
Series 2005-SP1, Class M3 ^{2, 6}		5.51			09/25/34		261		61,100
Residential Accredit Loans, Inc.
Series 2005-QS17, Class A10 ¹²		6.00			12/25/35		298		235,642
Residential Asset Securitization Trust
Series 2005-A8CB, Class A11		6.00			07/25/35		1,272		1,168,870
Residential Funding Mortgage Securities I, Inc.
Series 2004-S1, Class B2		5.25			02/25/34		339		179,893
Series 2003-S7, Class A7		5.50			05/25/33		362		372,155
Series 2003-S7, Class B2		5.50			05/25/33		190		88,160
Series 2003-S7, Class B3 ⁹		5.50			05/25/33		294		57,415
Resix Finance Limited Credit-Linked Notes
Series 2005-C, Class B7 ^{1, 2, 5}		3.36			09/10/37		1,827		91,349
Series 2004-C, Class B7 ^{1, 2, 5}		3.76			09/10/36		735		398,707
Series 2004-B, Class B8 ^{1, 2, 5}		5.01			02/10/36		546		236,789
Series 2003-CB1, Class B8 ^{1, 2, 5}		7.01			06/10/35		485		354,941
Series 2004-B, Class B9 ^{1, 2, 5}		8.51			02/10/36		837		410,863
Series 2004-A, Class B10 ^{1, 2, 5}		11.76			02/10/36		334		166,646
Structured Asset Securities Corp.
Series 2003-10, Class A		6.00			04/25/33		131		137,239
WaMu Mortgage Pass Through Certificates
Series 2002-AR12, Class B4 ²		2.49			10/25/32		63		4,987
Series 2002-AR12, Class B5 ²		2.49			10/25/32		47		2,462
Series 2002-AR12, Class B6 ²		2.49			10/25/32		79		690
Series 2007-HY3, Class 1A1 ²		5.37			03/25/37		128		98,871

See Notes to Portfolios of Investments.

HELIOS STRATEGIC MORTGAGE INCOME FUND, INC.

Portfolio of Investments (Unaudited)

February 28, 2011


	Interest Rate			Maturity		Principal Amount (000s)		Value
NON-AGENCY RESIDENTIAL MORTGAGE-BACKED SECURITIES (continued)
Series 2007-HY1, Class 1A1 ²		5.44	%		02/25/37	$	459	$	342,699
Washington Mutual Alternative Mortgage Pass-Through
Certificates Series 2006-5, Class 3A3 ³		6.22/6.72			07/25/36		336		202,235
Wells Fargo Mortgage-Backed Securities Trust
Series 2003-N, Class 1A1 ^{2, 8}		4.57			12/25/33		367		375,152
Series 2004-K, Class 2A1 ²		4.71			07/25/34		229		237,978
Series 2006-AR1, Class 2A2 ²		5.38			03/25/36		478		483,382
Series 2006-3, Class A11		5.50			03/25/36		856		844,933
Series 2007-12, Class A6		5.50			09/25/37		835		786,778
Series 2007-4, Class A21		5.50			04/25/37		793		721,367
Series 2007-5, Class 1A1		5.50			05/25/37		131		130,751
Series 2007-9, Class 1A3		5.50			07/25/37		118		109,652
Series 2007-9, Class 1A5		5.50			07/25/37		688		666,070
Series 2006-2, Class 3A1		5.75			03/25/36		246		242,394
Series 2006-AR4, Class 1A1 ²		5.77			04/25/36		98		90,610
Series 2002-10, Class B5		6.00			06/25/32		182		168,559
Series 2006-10, Class A19		6.00			08/25/36		167		165,104
Series 2006-11, Class A8		6.00			09/25/36		450		429,551
Series 2006-8, Class A15		6.00			07/25/36		300		284,502
Series 2007-6, Class A6		6.00			05/25/37		181		165,195
Series 2007-7, Class A6		6.00			06/25/37		142		139,160
Series 2007-8, Class 2A2		6.00			07/25/37		427		412,572
Series 2007-8, Class 2A9		6.00			07/25/37		184		177,309

Total Subordinated Collateralized Mortgage Obligations
(Cost - $23,733,409)									17,832,180

Total NON-AGENCY RESIDENTIAL MORTGAGE-BACKED SECURITIES
(Cost - $23,733,409)									17,832,180

SHORT TERM INVESTMENTS - 0.1%
United States Treasury Bill ^{7, 13}
(Cost $99,982 )		0.15			04/14/11		100		99,982

Total Investments - 139.4%
(Cost - $117,542,901)									101,923,363
Liabilities in Excess of Other Assets - (39.4)%									(28,808,167	)

NET ASSETS - 100.0%								$	73,115,196

See Notes to Portfolios of Investments.

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

February 28, 2011

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


1	—	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 February 28, 2011, the total values of all such investments were as follows:

		Fund	Value		% of Net Assets
		Helios Strategic Mortgage Income Fund, Inc.	$	25,977,904		35.53	%
		Helios Total Return Fund, Inc.		69,177,915		33.99

2	—	Variable Rate Security - Interest rate shown is the rate in effect as of February 28, 2011.

3	—	Security is a “step up” bond where the coupon increases or steps up at a predetermined date. Rates shown are current coupon and next coupon rate when security steps up.

4	—	Security is a “step up” bond where the coupon increases or steps up at a predetermined date. At that date, the coupon increases to LIBOR plus a predetermined margin.

5	—	Private Placement.

6	—	Security is valued in good faith pursuant to the fair value procedures adopted by the Board of Directors. As of February 28, 2011, the total values of all such securities were:

		Fund	Value		% of Net Assets
		Helios Strategic Mortgage Income Fund, Inc.	$	4,397,155		6.01	%
		Helios Total Return Fund, Inc.		19,959,722		9.81

7	—	Zero-Coupon Note - Interest rate represents current yield to maturity.

8	—	Portion or entire principal amount delivered as collateral for reverse repurchase agreements.

9	—	Represents a class of subordinated mortgage-backed securities (First Loss Bonds) that are the first to receive credit losses on the underlying mortgage pools and will continue to receive the credit losses until the subordinated class is paid off.

10	—	Interest rate is based on the notional amount of the underlying mortgage pools.

11	—	Issuer is currently in default on its regularly scheduled interest payment.

12	—	Investment in subprime security. As of February 28, 2011, the total values of all such investments were:

		Fund	Value		% of Net Assets
		Helios Strategic Mortgage Income Fund, Inc.	$	6,662,946		9.11	%
		Helios Total Return Fund, Inc.		11,155,718		5.48

13	—	Portion or entire principal amount delivered as collateral for open futures contracts.

TBA	—	To Be Announced.

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

February 28, 2011

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 Advisor’s Valuation Committee, does not represent fair market value.

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

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

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

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

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

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

The Funds have established methods of fair value measurements in accordance with accounting principles generally accepted in the United States of America. Fair value denotes the price that a Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy has been established to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

February 28, 2011

example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.


• Level 1 –		quoted prices in active markets for identical investments

• Level 2 –		quoted prices in markets that are not active or other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

• Level 3 –		significant unobservable inputs (including each 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 February 28, 2011 in valuing the Funds’ investments carried at fair value:

Helios Strategic Mortgage Income Fund, Inc.


Assets	U.S. Government & Agency Obligations		Asset-Backed Securities		Commercial Mortgage- Backed Securities		Non-Agency Residential Mortgage- Backed Securities		Short Term Investments		Total
Description:
Level 1 – Quoted Prices	$	—	$	—	$	—	$	—	$	—	$	—
Level 2 – Quoted Prices in Inactive Markets or Other Significant Observable Inputs		16,630,942		7,230,927		—		—		99,982		23,961,851
Level 3 – Significant Unobservable Inputs		—		8,968,643		51,160,689		17,832,180		—		77,961,512

Total	$	16,630,942	$	16,199,570	$	51,160,689	$	17,832,180	$	99,982	$	101,923,363


Liabilities	Other Financial Instruments*
Description:
Level 1 – Quoted Prices	$	(51,840	)
Level 2 – Quoted Prices in Inactive Markets or Other Significant Observable Inputs		—
Level 3 – Significant Unobservable Inputs		—

Total	$	(51,840	)

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

February 28, 2011

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


Investments in Securities	Asset-Backed Securities			Commercial Mortgage- Backed Securities			Non-Agency Residential Mortgage- Backed Securities			Total
Balance as of November 30, 2010	$	10,945,811		$	46,277,362		$	12,980,059		$	70,203,232
Accrued Discounts (Premiums)		43,655			119,947			(488,604	)		(325,002	)
Realized Gain (Loss)		(381,937	)		362,409			(184,969	)		(204,497	)
Change in Unrealized Appreciation (Depreciation)		356,530			5,364,606			1,715,157			7,436,293
Net Purchases (Sales)		289,444			(963,635	)		3,810,538			3,136,347
Transfers into Level 3		964,163			—			—			964,163
Transfers out of Level 3		(3,249,023	)		—			—			(3,249,023	)

Balance as of February 28, 2011	$	8,968,643		$	51,160,689		$	17,832,181		$	77,961,513

Change in unrealized gains or losses relating to assets still held at reporting date	$	29,992		$	4,589,062		$	1,712,182		$	6,331,236

*	Other financial instruments include futures and swap contracts, which are valued at the unrealized depreciation on the instrument.

For the period ended February 28, 2011, there was no significant security transfer activity between Level 1 and Level 2.

Helios Total Return Fund, Inc.


Assets	U.S. Government & Agency Obligations		Asset-Backed Securities		Commercial Mortgage- Backed Securities		Non-Agency Residential Mortgage- Backed Securities		Interest Only Securities		High Yield Corporate Bonds		Short Term Investments		Total
Description:
Level 1 – Quoted Prices	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Level 2 – Quoted Prices in Inactive Markets or Other Significant Observable Inputs		31,181,769		22,679,620		—		—		51,469		22,194,049		149,973		76,256,880
Level 3 – Significant Unobservable Inputs		—		19,743,804		133,923,165		43,776,829		5,188,479		12,250,443		—		214,882,720

Total	$	31,181,769	$	42,423,424	$	133,923,165	$	43,776,829	$	5,239,948	$	34,444,492	$	149,973	$	291,139,600


Liabilities	Other Financial Instruments*
Description:
Level 1 – Quoted Prices	$	(218,308	)
Level 2 – Quoted Prices in Inactive Markets or Other Significant Observable Inputs		—
Level 3 – Significant Unobservable Inputs		—

Total	$	(218,308	)

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

February 28, 2011

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


Investments in Securities	Asset-Backed Securities			Commercial Mortgage- Backed Securities			Non-Agency Residential Mortgage- Backed Securities			Interest Only Securities			High Yield Corporate Bonds			Total
Balance as of November 30, 2010	$	17,299,132		$	125,341,550		$	35,271,080		$	5,944,974		$	8,732,050		$	192,588,786
Accrued Discount (Premium)		41,453			576,760			(592,937	)		(589,746	)		(2,080	)		(566,550	)
Realized Gain (Loss)		(753,306	)		(1,754,462	)		(178,346	)		24,112			(5,738	)		(2,667,740	)
Change in Unrealized Appreciation (Depreciation)		2,277,765			11,223,724			3,058,858			(113,153	)		428,481			16,875,675
Net Purchases (Sales)		743,111			(1,476,682	)		6,218,174			(43,645	)		667,068			6,108,026
Transfers into Level 3		1,928,326			12,275			—			—			2,430,662			4,371,263
Transfers out of Level 3.		(1,792,677	)		—			—			(34,063	)		—			(1,826,740	)

Balance as of February 28, 2011	$	19,743,804		$	133,923,165		$	43,776,829		$	5,188,479		$	12,250,443		$	214,882,720

Change in unrealized gains or losses relating to assets still held at reporting date	$	1,565,304		$	8,980,258		$	2,599,055		$	(113,997	)	$	433,467		$	13,464,087

*	Other financial instruments include futures and swap contracts, which are valued at the unrealized depreciation on the instrument.

For the period ending February 28, 2011, there was no significant security transfer activity between Level 1 and Level 2.

Federal Income Tax Basis: The federal income tax basis of each Fund’s investments at February 28, 2011 was as follows:


Fund	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation			Net Unrealized Depreciation
Helios Strategic Mortgage Income Fund, Inc.	$	117,542,901	$	9,573,834	$	(25,193,372	)	$	(15,619,538	)
Helios Total Return Fund, Inc.		308,226,327		25,581,558		(42,668,285	)		(17,086,727	)

Reverse Repurchase Agreements: Each Fund may enter into reverse repurchase agreements. Under a reverse repurchase agreement, a Fund sells securities and agrees to repurchase them at a mutually agreed upon date and price. Under the 1940 Act, reverse repurchase agreements will be regarded as a form of borrowing by the Funds unless, at the time they enter into a reverse repurchase agreement, they establish and maintain a segregated account with their custodian containing securities from their portfolios having a value not less than the repurchase price (including accrued interest). Each Fund has established and maintained such accounts for each of its reverse repurchase agreements.

Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale by a Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund’s obligation to repurchase the securities, and the Fund’s use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision.

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

February 28, 2011

Also, the Funds 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 agreements.

At February 28, 2011, the Funds had the following reverse repurchase agreements outstanding:

Helios Strategic Mortgage Income Fund, Inc.


Face Value		Description	Maturity Amount
$	943,000	BNP Paribas, 0.30%, dated 02/09/11, maturity date 03/10/11	$	943,220
	1,445,000	Credit Suisse, 0.32%, dated 01/11/11, maturity date 04/13/11		1,446,182
	1,549,000	Credit Suisse, 1.50%, dated 01/11/11, maturity date 04/13/11		1,554,938
	4,735,000	Credit Suisse, 1.50%, dated 01/12/11, maturity date 04/19/11		4,753,940
	857,475	Credit Suisse, 1.75%, dated 02/16/11, maturity date 05/16/11		861,185
	1,792,315	Credit Suisse, 1.75%, dated 02/24/11, maturity date 05/25/11		1,800,156
	11,159,000	Goldman Sachs, 0.30%, dated 01/12/11, maturity date 03/10/11		11,164,301
	4,699,371	JP Morgan Chase, 1.30%, dated 01/12/11, maturity date 04/19/11		4,715,700
	1,395,511	JP Morgan Chase, 1.31%, dated 02/16/11, maturity date 05/16/11		1,400,043
	3,333,631	JP Morgan Chase, 1.71%, dated 02/16/11, maturity date 05/16/11		3,347,753

$	31,909,303	Maturity Amount, Including Interest Payable	$	31,987,418

		Market Value of Assets Sold Under Agreements	$	37,277,788

		Weighted Average Interest Rate		1.00	%

Helios Total Return Fund, Inc.


Face Value		Description	Maturity Amount
$	218,400	Barclays, 0.25%, dated 02/22/11, maturity date 03/22/11	$	218,442
	3,134,044	Barclays, 1.00%, dated 02/22/11, maturity date 03/22/11		3,136,481
	1,355,435	Barclays, 1.00%, dated 02/23/11, maturity date 03/23/11		1,356,490
	1,746,056	Barclays, 1.00%, dated 02/24/11, maturity date 03/24/11		1,747,414
	3,633,178	Barclays, 1.31%, dated 02/17/11, maturity date 05/17/11		3,644,976
	5,209,411	Barclays, 1.81%, dated 02/17/11, maturity date 05/17/11		5,232,767
	2,290,144	Barclays, 2.06%, dated 02/17/11, maturity date 05/17/11		2,301,828
	7,344,000	Credit Suisse, 0.32%, dated 01/11/11, maturity date 04/13/11		7,350,006
	13,206,000	Credit Suisse, 1.50%, dated 01/12/11, maturity date 04/19/11		13,258,824
	1,315,350	Credit Suisse, 1.75%, dated 02/16/11, maturity date 05/16/11		1,321,041
	1,480,598	Credit Suisse, 1.75%, dated, 02/24/11, maturity date 05/25/11		1,487,075
	9,499,000	Goldman Sachs, 0.30%, dated 01/12/11, maturity date 03/10/11		9,503,512
	1,013,000	Goldman Sachs, 0.35%, dated 02/07/11, maturity date 03/10/11		1,013,305
	479,925	JP Morgan Chase, 0.96%, dated 02/22/11, maturity date 03/22/11		480,283
	749,531	JP Morgan Chase, 0.96%, dated 02/23/11, maturity date 03/23/11		750,091
	20,205,798	JP Morgan Chase, 1.30%, dated 01/12/11, maturity date 04/19/11		20,276,006
	3,093,309	JP Morgan Chase, 1.30%, dated 01/13/11, maturity date 04/19/11		3,104,057
	9,467,263	JP Morgan Chase, 1.71%, dated 02/16/11, maturity date 05/16/11		9,507,367

$	85,440,442	Maturity Amount, Including Interest Payable	$	85,689,965

		Market Value of Assets Sold Under Agreements	$	104,186,966

		Weighted Average Interest Rate		1.21	%

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

February 28, 2011

The average daily balances of reverse repurchase agreements outstanding during the period ended February 28, 2011, was approximately $30,363,171 at a weighted average interest rate of 0.94% for Helios Strategic Mortgage Income Fund and approximately $82,198,840 at a weighted average interest rate of 1.19% for Helios Total Return Fund.

The maximum amounts of reverse repurchase agreements outstanding at any time during the period was $31,939,656, which was 30.89% of total assets for Helios Strategic Mortgage Income Fund, and $85,527,816, which was 29.63% of total assets for Helios Total Return Fund.

Financial Futures Contracts: A futures contract is an agreement between two parties to buy and sell a financial instrument for a set price on a future date. Initial margin deposits are made upon entering into futures contracts and can be either cash or securities. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by “marking-to-market” on a daily basis to reflect the market value of the contract at the end of each day’s trading. Variation margin payments are made or received, depending upon whether unrealized gains or losses are incurred. When the contract is closed, a Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.

Each Fund invests in financial futures contracts to hedge against fluctuations in the value of portfolio securities caused by changes in prevailing market interest rates. Should interest rates move unexpectedly, a Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. A Fund is at risk that it may not be able to close out a transaction because of an illiquid market.

As of February 28, 2011, the following futures contracts were outstanding:

Helios Strategic Mortgage Income Fund, Inc.

Short:


Notional Amount		Type	Expiration Date		Cost at Trade Date		Value at February 28, 2011		Unrealized Depreciation
$	4,000,000	5 Year U.S. Treasury Note		June 2011	$	4,664,700	$	4,677,500	$	(12,800	)
	12,200,000	10 Year U.S. Treasury Note		June 2011		14,484,679		14,523,719		(39,040	)

$	16,200,000				$	19,149,379	$	19,201,219	$	(51,840	)

Helios Total Return Fund, Inc.

Short:


Notional Amount		Type	Expiration Date		Cost at Trade Date		Value at February 28, 2011		Unrealized Depreciation
$	36,900,000	5 Year U.S. Treasury Note		June 2011	$	43,028,975	$	43,149,938	$	(120,963	)
	26,600,000	10 Year U.S. Treasury Note		June 2011		31,581,349		31,666,469		(85,120	)
	2,900,000	30 Year U.S. Treasury Note		June 2011		3,477,744		3,489,969		(12,225	)

$	66,400,000				$	78,088,068	$	78,306,376	$	(218,308	)

TBA Transactions: Each Fund may enter into to-be-announced (“TBA”) transactions to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. A TBA transaction is a purchase or sale of a U.S. government agency mortgage pass-through security for future settlement at an agreed upon date. The term “U.S. government agency mortgage pass-through security” refers to a category of pass-through securities backed by pools of mortgages and issued by one of several U.S. government-sponsored enterprises: the Government National Mortgage Association (Ginnie

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

February 28, 2011

Mae), Federal National Mortgage Association (Fannie Mae), or Federal Home Loan Mortgage Corporation (Freddie Mac). In the basic pass-through structure, mortgages with similar issuer, term and coupon characteristics are collected and aggregated into a pool. The pool is assigned a CUSIP number and undivided interests in the pool are traded and sold as pass-through securities. The holder of the security is entitled to a pro rata share of principal and interest payments (including unscheduled prepayments) from the pool of mortgage loans. TBA transactions increase the liquidity and pricing efficiency of transactions in such mortgage-backed securities since they permit similar mortgage-backed securities to be traded interchangeably pursuant to commonly observed settlement and delivery requirements. Proceeds of TBA transactions are not received until the contractual settlement date. Each Fund may use TBA transactions to acquire and maintain exposure to mortgage-backed securities in either of two ways. Typically, a Fund will enter into TBA agreements and “roll over” such agreements prior to the settlement date stipulated in such agreements.

This type of TBA transaction is commonly known as a “TBA roll.” In a “TBA roll,” the Fund generally will sell the obligation to purchase the pools stipulated in the TBA agreement prior to the stipulated settlement date and will enter into a new TBA agreement for future delivery of pools of mortgage pass-through securities. Alternatively, a Fund will enter into TBA agreements and settle such transactions on the stipulated settlement date by actual receipt or delivery of the pools of mortgage pass-through securities stipulated in the TBA agreement. Unsettled TBA agreements are valued at the current market value of the underlying securities, according to the procedures described above under “Valuation of Investments.” Each TBA position is marked-to-market daily and the change in market value is recorded by the Fund as an unrealized gain or loss.

TBA transactions outstanding at February 28, 2011 were as follows:

Helios Strategic Mortgage Income Fund, Inc.

Purchases:


Security Name	Interest Rate			Principal Amount		Current Payable
Federal National Mortgage Association		5.00	%	$	2,000,000	$	2,076,563

Helios Total Return Fund, Inc.

Purchases:


Security Name	Interest Rate			Principal Amount		Current Payable
Federal National Mortgage Association		5.00	%	$	21,600,000	$	22,343,063

Sales:


Security Name	Interest Rate			Principal Amount		Current Receivable
Federal National Mortgage Association		5.00	%	$	14,400,000	$	14,880,375

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

February 28, 2011

Designation of Restricted Illiquid Securities

The Funds invest in restricted securities, which are securities that may be offered for public sale without first being registered under the Securities Act of 1933, as amended (the “1933 Act”). Prior to registration, restricted securities may only be resold in transactions exempt from registration under Rule 144A under the 1933 Act, normally to qualified institutional buyers. As of February 28, 2011, the Funds held restricted securities as shown in the tables below that the Advisor has deemed illiquid pursuant to procedures adopted by the Funds’ Boards of Directors. Although recent instability in the markets has resulted in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors. The Funds do not have the right to demand that such securities be registered. These securities are valued according to the valuation procedures as stated in the valuation of investment and are not expressed as a discount to the carrying value of a comparable unrestricted security. There are no unrestricted securities with the same maturity dates and yields for these issuers.

Helios Strategic Mortgage Income Fund, Inc.


Restricted Securities	Interest Rate			Maturity		Acquisition Date		Cost		Value		Percentage of Net Assets
Banc of America Commercial Mortgage, Inc. Series 2006-1, Class J		5.59	%		09/10/45		04/06/06	$	1,027,040	$	132,365		0.18	%
Banc of America Commercial Mortgage, Inc. Series 2007-2, Class K		5.70			04/10/49		05/24/07		2,582,676		42,000		0.06
Banc of America Commercial Mortgage, Inc. Series 2007-2, Class L		5.37			04/10/49		05/24/07		972,601		9,579		0.01
Bear Stearns Commercial Mortgage Securities Series 2006-PW11, Class H		5.45			03/11/39		03/08/06		1,046,762		465,595		0.64
Bear Stearns Commercial Mortgage Securities Series 2007-PW16, Class D		5.72			06/11/40		09/22/10		285,301		473,473		0.65
Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2006-CD2, Class J		5.45			01/15/46		02/27/06		975,622		50,000		0.07
Commercial Mortgage Pass Through Certificates Series 2007-C9, Class J		5.81			12/10/49		12/17/10		87,920		112,000		0.15
Credit Suisse Mortgage Capital Certificates Series 2006-C1, Class K		5.44			02/15/39		03/07/06		2,172,579		719,190		0.98
Credit Suisse Mortgage Capital Certificates Series 2006-C4, Class K		6.09			09/15/39		09/21/06		3,094,859		20,790		0.03
Credit Suisse Mortgage Capital Certificates Series 2006-C4, Class L		5.15			09/15/39		09/21/06		478,458		2,052		0.00
Credit Suisse Mortgage Capital Certificates Series 2006-C4, Class M		5.15			09/15/39		09/21/06		513,465		1,413		0.00
First Horizon Mortgage Pass-Through Trust Series 2005-4, Class B4		5.46			07/25/35		06/28/05		160,644		4		0.00
Harborview Mortgage Loan Trust Series 2005-9, Class B11		2.01			06/20/35		10/03/07		376,810		11,194		0.02
JP Morgan Chase Commercial Mortgage Securities Corp. Series 2007-CB18, Class G		5.72			06/12/47		10/11/07		518,863		70,860		0.10
JP Morgan Chase Commercial Mortgage Securities Corp. Series 2007-LD11, Class K		5.82			06/15/49		06/28/07		1,783,118		37,580		0.05

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

February 28, 2011

Helios Strategic Mortgage Income Fund, Inc. (continued)


Restricted Securities	Interest Rate			Maturity		Acquisition Date		Cost		Value		Percentage of Net Assets
Morgan Stanley Capital I, Inc. Series 2004-HQ4, Class G		5.35	%		04/14/40		03/01/06	$	982,221	$	566,703		0.78	%
Morgan Stanley Capital I, Inc. Series 2007-IQ13, Class B		5.52			03/15/44		01/07/11		453,238		490,200		0.67
Morgan Stanley Capital I, Inc. Series 2007-IQ13, Class C		5.56			03/15/44		01/07/11		244,831		275,100		0.38
Resix Finance Limited Credit-Linked Notes Series 2003-CB1, Class B8		7.01			06/10/35		12/22/04		484,628		354,941		0.49
Resix Finance Limited Credit-Linked Notes Series 2004-A, Class B10		11.76			02/10/36		03/09/04		334,430		166,646		0.23
Resix Finance Limited Credit-Linked Notes Series 2004-B, Class B9		8.51			02/10/36		05/21/04		837,130		410,863		0.56
Resix Finance Limited Credit-Linked Notes Series 2004-C, Class B7		3.76			09/10/36		09/23/04		735,079		398,707		0.54
Resix Finance Limited Credit-Linked Notes Series 2005-C, Class B7		3.36			09/10/37		09/09/05		1,826,983		91,349		0.12
Wachovia Bank Commercial Mortgage Trust Series 2005-C20, Class F		5.24			07/15/42		10/15/10		988,968		1,499,076		2.05
Wachovia Bank Commercial Mortgage Trust Series 2007-C31, Class L		5.13			04/15/47		05/11/07		1,547,911		17,880		0.02

										$	6,419,560		8.78	%


Helios Total Return Fund, Inc.

Restricted Securities	Interest Rate			Maturity		Acquisition Date		Cost		Value		Percentage of Net Assets
Banc of America Commercial Mortgage, Inc. Series 2006-2, Class J		5.48	%		05/10/45		06/12/06	$	301,163	$	17,732		0.01	%
Banc of America Commercial Mortgage, Inc. Series 2007-2, Class K		5.70			04/10/49		05/24/07		4,304,460		70,000		0.03
Bear Stearns Commercial Mortgage Securities Series 2006-PW11, Class H		5.45			03/11/39		03/08/06		1,617,929		719,556		0.35
Bear Stearns Commercial Mortgage Securities Series 2007-PW16, Class D		5.72			06/11/40		09/22/10		812,012		1,347,577		0.66
Bear Stearns Commercial Mortgage Securities Series 2007-T28, Class F		5.99			09/11/42		10/11/07		226,471		106,281		0.05
Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2006-CD2, Class J		5.45			01/15/46		02/27/06		975,622		50,000		0.03
Credit Suisse First Boston Mortgage Securities Corp. Series 2004-C5, Class J		4.65			11/15/37		12/16/04		925,578		270,982		0.13
Credit Suisse Mortgage Capital Certificates Series 2006-C1, Class K		5.44			02/15/39		03/07/06		4,344,236		1,438,075		0.71

HELIOS FUNDS

Notes to Portfolios of Investments (Unaudited)

February 28, 2011

Helios Total Return Fund, Inc. (continued)


Restricted Securities	Interest Rate			Maturity		Acquisition Date		Cost		Value		Percentage of Net Assets
Credit Suisse Mortgage Capital Certificates Series 2006-C4, Class K		6.09	%		09/15/39		09/21/06	$	5,158,098	$	34,650		0.02	%
Credit Suisse Mortgage Capital Certificates Series 2006-C4, Class L		5.15			09/15/39		09/21/06		637,944		2,736		0.00
Credit Suisse Mortgage Capital Certificates Series 2006-C4, Class M		5.15			09/15/39		09/21/06		685,225		1,885		0.00
Federal National Mortgage Association Series 1998-W6, Class B3		7.09			10/25/28		12/22/98		553,166		443,768		0.22
Franchisee Loan Receivable Trust Series 1995-B, Class A		9.63			01/15/11		12/20/95		677,199		43,747		0.02
Harborview Mortgage Loan Trust Series 2005-9, Class B11		2.01			06/20/35		10/03/07		629,590		18,704		0.01
JP Morgan Chase Commercial Mortgage Securities Corp. Series 2007-CB18, Class G		5.72			06/12/47		10/11/07		1,037,725		141,720		0.07
JP Morgan Chase Commercial Mortgage Securities Corp. Series 2007-LD11, Class J		5.82			06/15/49		06/28/07		484,424		25,550		0.01
JP Morgan Chase Commercial Mortgage Securities Corp. Series 2007-LD11, Class K		5.82			06/15/49		06/28/07		891,085		18,780		0.01
LNR CDO V Limited Series 2007-1A, Class F		1.71			12/26/49		02/27/07		3,750,000		—		0.00
Morgan Stanley Capital I, Inc. Series 2006-IQ11, Class J		5.53			10/15/42		05/24/06		234,259		4,864		0.00
Morgan Stanley Capital I, Inc. Series 2006-T21, Class H		5.36			10/12/52		04/06/06		1,401,794		825,000		0.41
Resix Finance Limited Credit-Linked Notes Series 2003-CB1, Class B8		7.01			06/10/35		12/22/04		974,101		709,882		0.35
Resix Finance Limited Credit-Linked Notes Series 2003-D, Class B7		6.01			12/10/35		11/19/03		1,191,939		760,815		0.37
Resix Finance Limited Credit-Linked Notes Series 2004-A, Class B10		11.76			02/10/36		03/09/04		585,252		291,631		0.14
Resix Finance Limited Credit-Linked Notes Series 2004-C, Class B7		3.76			09/10/36		09/23/04		1,102,618		598,060		0.30

										$	7,941,995		3.90	%

Item 2. Controls and Procedures.

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

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

Item 3. Exhibits

(a) Certifications for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act. Filed herewith.

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.


HELIOS STRATEGIC MORTGAGE INCOME FUND, INC.

By:		/s/ Kim G. Redding
		Kim G. Redding
		Principal Executive Officer

Date: April 6, 2011

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.


By:		/s/ Kim G. Redding
		Kim G. Redding
		Principal Executive Officer

Date: April 6, 2011


By:		/s/ Steven M. Pires
		Steven M. Pires
		Treasurer and Principal Financial Officer

Date: April 6, 2011