helios-smi_nq.htm
As filed with the Securities and Exchange Commission on April 26, 2012



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 24th 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)



212-549-8400
Registrant's telephone number, including area code



Date of fiscal year end: November 30, 2012


Date of reporting period:  February 29, 2012


 
 
 

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, 450 Fifth Street, NW, 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 29, 2012
              
           
Principal
    
 
Interest
      
Amount
    
 
Rate
  
Maturity
  
(000s)
  
Value
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 20.5%
              
U.S. Government Agency Collateralized Mortgage Obligations - 0.8%
              
Federal Home Loan Mortgage Corporation
              
Series 3617, Class C 8
              
(Cost - $531,375)
4.50
%
12/15/39
$
              533
$
               546,318
U.S. Government Agency Pass-Through Certificates - 19.7%
              
Federal Home Loan Mortgage Corporation
              
Pool Q03049
4.50
  
08/01/41
  
              992
  
            1,062,477
Pool C69047 8
7.00
  
06/01/32
  
              485
  
               561,728
Pool H01847 8
7.00
  
09/01/37
  
           1,178
  
            1,339,182
Pool G01466 8
9.50
  
12/01/22
  
              310
  
               361,204
Pool 555559 8
10.00
  
03/01/21
  
              211
  
               243,422
Federal National Mortgage Association
              
Federal National Mortgage Association TBA
5.00
  
TBA
  
           1,000
  
            1,079,688
Pool 753914 8
5.50
  
12/01/33
  
           2,755
  
            3,010,535
Pool 761836 8
6.00
  
06/01/33
  
           1,170
  
            1,305,032
Pool 948362 8
6.50
  
08/01/37
  
           1,214
  
            1,355,357
Pool 650131 8
7.00
  
07/01/32
  
              681
  
               795,670
Pool 887431 8
7.50
  
08/01/36
  
              150
  
               172,379
Pool 398800
8.00
  
06/01/12
  
                  4
  
                   4,187
Pool 636449 8
8.50
  
04/01/32
  
              668
  
               824,513
Pool 458132 8
9.22
  
03/15/31
  
              491
  
               578,886
Total U.S. Government Agency Pass-Through Certificates
              
(Cost - $11,667,182)
            
          12,694,260
Total U.S. GOVERNMENT & AGENCY OBLIGATIONS
              
(Cost - $12,198,557)
            
          13,240,578
ASSET-BACKED SECURITIES - 18.4%
              
Housing Related Asset-Backed Securities - 18.4%
              
ACE Securities Corp.
              
Series 2003-MH1, Class A4 1,5,6,8
6.50
  
08/15/30
  
              670
  
               728,542
Asset-Backed Securities Corp. Home Equity
              
Series 2006-HE3, Class A4 2,4,11
0.41
  
03/25/36
  
              875
  
               621,584
Conseco Finance Securitizations Corp.
              
Series 2001-4, Class A4
7.36
  
08/01/32
  
              124
  
               132,030
Credit Suisse First Boston Mortgage Securities Corp.
              
Series 2002-MH3, Class A 3
6.70/7.20
  
12/25/31
  
                90
  
                 95,661
Green Tree
              
Series 2008-MH1, Class A3 1,5
8.97
  
04/25/38
  
              906
  
               964,349
Green Tree Financial Corp.
              
Series 1997-7, Class A7
6.96
  
07/15/29
  
              765
  
               830,010
Series 1997-2, Class A6 8
7.24
  
06/15/28
  
              243
  
               265,943
IXIS Real Estate Capital Trust
              
Series 2006-HE3, Class A2 2,4,11
0.34
  
01/25/37
  
              693
  
               201,437
Lehman ABS Manufactured Housing Contract Trust
              
Series 2001-B, Class A4
5.27
  
04/15/40
  
              230
  
               238,920
Series 2001-B, Class A5
5.87
  
04/15/40
  
              377
  
               388,252
Series 2001-B, Class A6
6.47
  
04/15/40
  
              327
  
               352,021
Mid-State Trust
              
Series 2010-1, Class M 1,5,8
5.25
  
12/15/45
  
              834
  
               833,886
Series 2005-1, Class A 8
5.75
  
01/15/40
  
           1,232
  
            1,253,832
Series 2004-1, Class A 8
6.01
  
08/15/37
  
              964
  
               973,917
Series 2004-1, Class M2
8.11
  
08/15/37
  
              884
  
               922,810
Morgan Stanley ABS Capital Inc.
              
Series 2006-WMC2, Class A2C 2,4,11
0.39
  
07/25/36
  
           1,701
  
               510,143
Series 2006-HE1, Class A3 2,4,11
0.42
  
01/25/36
  
              364
  
               331,805
Newcastle Investment Trust
              
Series 2010-MH1, Class A 1,5
4.50
  
07/10/35
  
              870
  
               886,219
Origen Manufactured Housing
              
Series 2005-B, Class A4
5.91
  
01/15/37
  
              439
  
               460,758
Residential Asset Securities Corp.
              
Series 2005-KS12, Class A2 2,4,11
0.49
  
01/25/36
  
              408
  
               388,102
Soundview Home Equity Loan Trust
              
Series 2006-EQ1, Class A3 2,4,11
0.40
  
10/25/36
  
              935
  
               480,567
Total Housing Related Asset-Backed Securities
              
(Cost - $12,725,624)
            
          11,860,788
Total ASSET-BACKED SECURITIES
              
(Cost - $12,725,624)
            
          11,860,788
 
 
 
 
 
HELIOS STRATEGIC MORTGAGE INCOME FUND, INC.
        
Portfolio of Investments (Unaudited)
              
February 29, 2012
              
           
Principal
    
 
Interest
      
Amount
    
 
Rate
  
Maturity
  
(000s)
  
Value
COMMERCIAL MORTGAGE-BACKED SECURITIES - 74.1%
              
Banc of America Commercial Mortgage, Inc.
              
Series 2006-6, Class A4 8
5.36
%
10/10/45
$
              790
$
               874,198
Series 2007-2, Class A4 8
5.66
  
04/10/49
  
           1,170
  
            1,290,990
Series 2006-1, Class J 1,5,10
5.59
  
09/10/45
  
           1,000
  
                   7,600
Series 2007-2, Class K 1,5,9,10
5.67
  
04/10/49
  
              648
  
                      130
Bear Stearns Commercial Mortgage Securities
              
Series 2006-PW11, Class H 1,5
5.45
  
03/11/39
  
           1,100
  
               156,943
Series 2007-PW16, Class B 1,5
5.72
  
06/11/40
  
           1,030
  
               446,536
Series 2007-PW16, Class C 1,5
5.72
  
06/11/40
  
           1,290
  
               466,958
Series 2007-PW16, Class D 1,5
5.72
  
06/11/40
  
              910
  
               236,153
Series 2007-PW17, Class AM 8
5.90
  
06/13/50
  
           1,400
  
            1,486,458
Citigroup Commercial Mortgage Trust
              
Series 2007-C6, Class AM
5.70
  
12/10/49
  
           1,820
  
            1,909,844
Citigroup/Deutsche Bank Commercial Mortgage Trust
              
Series 2007-CD4, Class A4 8
5.32
  
12/11/49
  
           1,580
  
            1,734,053
Series 2006-CD2, Class J 1,5,10
5.43
  
01/15/46
  
           1,000
  
                      200
Commercial Mortgage Pass Through Certificates
              
Series 2007-C9, Class J 1,5
5.81
  
12/10/49
  
              350
  
                 91,564
Credit Suisse Mortgage Capital Certificates
              
Series 2006-C4, Class L 1,5,10
5.15
  
09/15/39
  
              420
  
                        84
Series 2006-C5, Class AM
5.34
  
12/15/39
  
           1,860
  
            1,861,583
Series 2006-C1, Class K 1,5
5.42
  
02/15/39
  
           2,358
  
               444,334
Series 2006-C5, Class E
5.54
  
12/15/39
  
           4,510
  
               684,356
Series 2007-C2, Class A3 8
5.54
  
01/15/49
  
           1,570
  
            1,709,363
Series 2007-C5, Class A4 8
5.70
  
09/15/40
  
              340
  
               372,386
Series 2006-C3, Class AJ
5.81
  
06/15/38
  
              460
  
               388,178
Series 2006-C4, Class K 1,5,10
6.06
  
09/15/39
  
           2,970
  
                      594
GE Capital Commercial Mortgage Corp.
              
Series 2002-2A, Class G 1,5
6.04
  
08/11/36
  
           3,000
  
            3,026,766
Series 2002-2A, Class H 1,5
6.31
  
08/11/36
  
           2,000
  
            2,008,796
GMAC Commercial Mortgage Securities, Inc.
              
Series 2004-C3, Class B
4.97
  
12/10/41
  
              450
  
               385,701
Greenwich Capital Commercial Funding Corp.
              
Series 2007-GG9, Class A4 8
5.44
  
03/10/39
  
           1,655
  
            1,837,383
Series 2007-GG11, Class AJ
6.00
  
12/10/49
  
              270
  
               183,600
Series 2007-GG11, Class E
6.09
  
12/10/49
  
           5,560
  
               892,936
GS Mortgage Securities Trust
              
Series 2007-GG10, Class A4
5.79
  
08/10/45
  
           1,270
  
            1,419,849
JP Morgan Chase Commercial Mortgage Securities Corp.
              
Series 2003-LN1, Class G 1,5
5.48
  
10/15/37
  
           1,600
  
            1,302,240
Series 2007-CB18, Class G 1,5
5.72
  
06/12/47
  
              600
  
                 24,000
Series 2007-LD11, Class K 1,5,10
5.82
  
06/15/49
  
           1,879
  
                      376
Series 2007-CB20, Class AM
5.89
  
02/12/51
  
           1,180
  
            1,252,064
Series 2009-IWST, Class D 1,5,9
7.45
  
12/05/27
  
           2,000
  
            2,139,688
LB-UBS Commercial Mortgage Trust
              
Series 2007-C1, Class A4 8
5.42
  
02/15/40
  
           1,510
  
            1,704,903
Series 2007-C1, Class C
5.53
  
02/15/40
  
           1,960
  
            1,029,000
Series 2007-C1, Class D
5.56
  
02/15/40
  
              360
  
               163,799
Series 2007-C7, Class A3 8
5.87
  
09/15/45
  
           1,130
  
            1,283,685
Morgan Stanley Capital I, Inc.
              
Series 2004-HQ4, Class G 1,5
5.30
  
04/14/40
  
           1,000
  
               587,261
Series 2007-IQ13, Class A4 8
5.36
  
03/15/44
  
              950
  
            1,046,705
Series 2007-IQ13, Class B 1,5
5.52
  
03/15/44
  
              860
  
               377,196
Series 2007-IQ13, Class C 1,5
5.56
  
03/15/44
  
              560
  
               190,400
Series 2007-HQ13, Class A3 8
5.57
  
12/15/44
  
           1,580
  
            1,717,749
Series 2007-IQ14, Class A4 8
5.69
  
04/15/49
  
           1,740
  
            1,907,270
Morgan Stanley Dean Witter Capital I
              
Series 2003-TOP9, Class F 1,5
5.92
  
11/13/36
  
              729
  
               677,516
Series 2003-TOP9, Class G 1,5
6.19
  
11/13/36
  
           1,165
  
               989,955
Vornado DP LLC
              
Series 2010-VN0, Class D 1,5,9
6.36
  
09/13/28
  
              240
  
               254,720
 
 
 
 
 
HELIOS STRATEGIC MORTGAGE INCOME FUND, INC.
        
Portfolio of Investments (Unaudited)
              
February 29, 2012
              
           
Principal
    
 
Interest
      
Amount
    
 
Rate
  
Maturity
  
(000s)
  
Value
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued)
              
Wachovia Bank Commercial Mortgage Trust
              
Series 2007-C31, Class L 1,5,10
5.13
%
04/15/47
$
           1,788
$
                      358
Series 2005-C20, Class F 1,5
5.26
  
07/15/42
  
           4,000
  
               720,000
Series 2005-C16, Class H 1,5
5.52
  
10/15/41
  
           2,000
  
            1,139,356
Series 2007-C31, Class A4 8
5.51
  
04/15/47
  
           1,960
  
            2,141,637
Series 2004-C14, Class G 1,5
5.65
  
08/15/41
  
              800
  
               692,000
Series 2007-C32, Class A3 8
5.74
  
06/15/49
  
           2,320
  
            2,554,081
Total COMMERCIAL MORTGAGE-BACKED SECURITIES
              
(Cost - $59,568,403)
            
          47,813,495
NON-AGENCY RESIDENTIAL MORTGAGE-BACKED SECURITIES - 29.1%
              
Subordinated Collateralized Mortgage Obligations - 29.1%
              
American Home Mortgage Investment Trust
              
Series 2005-2, Class 5A3 3,8
5.08/5.58
  
09/25/35
  
              118
  
               119,555
Banc of America Mortgage Securities, Inc.
              
Series 2004-A, Class B4 2
2.93
  
02/25/34
  
              726
  
                   9,942
Series 2003-10, Class 1B4
5.50
  
01/25/34
  
              310
  
               209,403
Citicorp Mortgage Securities, Inc.
              
Series 2007-2, Class 1A3
6.00
  
02/25/37
  
           1,064
  
            1,022,236
Series 2007-8, Class 1A3
6.00
  
09/25/37
  
              175
  
               172,654
Citicorp Residential Mortgage Securities, Inc.
              
Series 2007-1, Class A5 3
6.05/6.55
  
03/25/37
  
           1,289
  
               878,514
Citigroup Mortgage Loan Trust, Inc.
              
Series 2004-NCM2, Class 1CB2
6.75
  
08/25/34
  
              165
  
               172,673
Countrywide Alternative Loan Trust
              
Series 2007-2CB, Class 1A15
5.75
  
03/25/37
  
              399
  
               271,711
Series 2006-25CB, Class A2
6.00
  
10/25/36
  
              531
  
               378,056
Series 2006-41CB, Class 2A14
6.00
  
01/25/37
  
              249
  
               162,240
Countrywide Home Loan Mortgage Pass Through Trust
              
Series 2003-J13, Class B3 2
5.23
  
01/25/34
  
              264
  
               152,290
Series 2003-J13, Class B5 2,9
5.23
  
01/25/34
  
              160
  
                   9,579
Series 2005-27, Class 2A1
5.50
  
12/25/35
  
                33
  
                 30,230
Series 2007-5, Class A29
5.50
  
05/25/37
  
              455
  
               410,913
Series 2006-21, Class A11
5.75
  
02/25/37
  
           1,031
  
               835,110
Series 2004-18, Class A1
6.00
  
10/25/34
  
              125
  
               123,409
Series 2004-21, Class A10
6.00
  
11/25/34
  
              208
  
               210,725
Series 2006-1, Class A2
6.00
  
03/25/36
  
                62
  
                 48,313
Series 2007-18, Class 1A1
6.00
  
11/25/37
  
              172
  
               155,323
First Horizon Asset Securities, Inc.
              
Series 2006-2, Class 1A3
6.00
  
08/25/36
  
              770
  
               719,257
GSR Mortgage Loan Trust
              
Series 2005-6F, Class 1A6 8
5.25
  
07/25/35
  
              433
  
               423,251
Series 2005-AR4, Class 6A1
5.25
  
07/25/35
  
           1,044
  
            1,000,565
Harborview Mortgage Loan Trust
              
Series 2005-9, Class B11 1,2,4,5,10  
1.99
  
06/20/35
  
              430
  
                   7,480
JP Morgan Mortgage Trust
              
Series 2003-A1, Class B4 2
3.16
  
10/25/33
  
              432
  
               161,195
Series 2006-S3, Class 1A10
6.50
  
08/25/36
  
              514
  
               449,338
RAAC Series
              
Series 2005-SP1, Class M3 2
5.53
  
09/25/34
  
              239
  
                 18,925
Residential Accredit Loans, Inc.
              
Series 2005-QS17, Class A10
6.00
  
12/25/35
  
              268
  
               188,038
Residential Asset Securitization Trust
              
Series 2005-A8CB, Class A11
6.00
  
07/25/35
  
           1,153
  
               968,935
Residential Funding Mortgage Securities I, Inc.
              
Series 2004-S1, Class B2 9
5.25
  
02/25/34
  
              274
  
                 76,105
Series 2003-S7, Class A7
5.50
  
05/25/33
  
              287
  
               296,357
Series 2003-S7, Class B2 6
5.50
  
05/25/33
  
              150
  
                 57,742
Series 2003-S7, Class B3 9  
5.50
  
05/25/33
  
              233
  
                 46,980
                 
 
 
 
 
 
HELIOS STRATEGIC MORTGAGE INCOME FUND, INC.
        
Portfolio of Investments (Unaudited)
              
February 29, 2012
              
           
Principal
    
 
Interest
      
Amount
    
 
Rate
  
Maturity
  
(000s)
  
Value
NON-AGENCY RESIDENTIAL MORTGAGE-BACKED SECURITIES (continued)
              
Resix Finance Limited Credit-Linked Notes
              
Series 2005-C, Class B7 1,2,5  
3.34
%
09/10/37
$
              791
$
                   7,906
Series 2004-C, Class B7 1,2,5  
3.74
  
09/10/36
  
              621
  
               263,409
Series 2004-B, Class B8 1,2,5  
4.99
  
02/10/36
  
              444
  
               159,848
Series 2003-CB1, Class B8 1,2,5  
6.99
  
06/01/35
  
              438
  
               271,175
Series 2004-B, Class B9 1,2,5
8.49
  
02/10/36
  
              680
  
               238,409
Series 2004-A, Class B10 1,2,5,6
11.74
  
02/10/36
  
              273
  
               108,324
Structured Asset Securities Corp.
              
Series 2003-10, Class A
6.00
  
04/25/33
  
              100
  
               104,654
Thornburg Mortgage Securities Trust
              
Series 2007-1, Class A2B 2
5.80
  
03/25/37
  
           2,435
  
            2,109,282
WaMu Mortgage Pass Through Certificates
              
Series 2002-AR12, Class B4 2
2.33
  
10/25/32
  
                61
  
                   6,122
Series 2002-AR12, Class B5 2
2.33
  
10/25/32
  
                46
  
                   1,828
Series 2002-AR12, Class B6 9
2.33
  
10/25/32
  
                76
  
                   2,061
Series 2007-HY3, Class 1A1 2
2.68
  
03/25/37
  
              113
  
                 70,720
Washington Mutual Alternative Mortgage Pass-Through Certificates
              
Series 2006-5, Class 3A3 3
6.22/6.72
  
07/25/36
  
              317
  
               156,210
Wells Fargo Mortgage Backed Securities Trust
              
Series 2005-AR16, Class 7A1 2  
5.20
  
10/25/35
  
              375
  
               359,295
Series 2006-3, Class A11
5.50
  
03/25/36
  
           1,211
  
            1,209,900
Series 2007-4, Class A21
5.50
  
04/25/37
  
              639
  
               582,149
Series 2007-5, Class 1A1
5.50
  
05/25/37
  
                99
  
                 96,149
Series 2007-9, Class 1A5
5.50
  
07/25/37
  
              688
  
               671,902
Series 2007-12, Class A6
5.50
  
09/25/37
  
              835
  
               839,173
Series 2006-2, Class 3A1
5.75
  
03/25/36
  
              204
  
               201,974
Series 2006-AR4, Class 1A1
5.77
  
04/25/36
  
              276
  
               235,000
Series 2006-8, Class A15
6.00
  
07/25/36
  
              286
  
               261,225
Series 2006-11, Class A8
6.00
  
09/25/36
  
              359
  
               337,712
Series 2007-6, Class A6
6.00
  
05/25/37
  
              146
  
               130,887
Series 2007-7, Class A6
6.00
  
06/25/37
  
              142
  
               140,628
Series 2007-8, Class 2A2
6.00
  
07/25/37
  
              427
  
               416,552
Total Subordinated Collateralized Mortgage Obligations
              
(Cost - $23,031,653)
            
          18,769,538
Total NON-AGENCY RESIDENTIAL MORTGAGE-BACKED SECURITIES
              
(Cost - $23,031,653)
            
          18,769,538
SHORT TERM INVESTMENTS - 0.2%
              
United States Treasury Bill 7,12
              
(Cost - $99,998)
0.06
  
04/12/12
  
       100,000
  
                 99,998
Total Investments - 142.3%
              
(Cost - $107,624,235)
            
          91,784,397
Liabilities in Excess of Other Assets - (42.3)%
            
        (27,290,564)
NET ASSETS - 100.0%
            
$        64,493,833
 
 
 
 
 
 
HELIOS FUNDS
        
Notes to Portfolio of Investments (Unaudited)
              
February 29, 2012
              
                 
The following notes should be read in conjunction with the accompanying Portfolio 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 29, 2012, the total value of all such investments were as follows:  
 
Fund
  
Value
  
% of Net Assets
  
 
Helios Strategic Mortgage Income Fund, Inc.
  
$
20,451,271
  
31.71
%
  
 
Helios Total Return Fund, Inc.
    
45,402,124
  
24.51
    
                 
2
- Variable Rate Security - Interest rate shown is the rate in effect as of February 29, 2012.
            
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 29, 2012, the total values of all such securities were:  
 
Fund
  
Value
  
% of Net Assets
  
 
Helios Strategic Mortgage Income Fund, Inc.
  
$
894,608
  
1.39
%
  
 
Helios Total Return Fund, Inc.
    
1,527,656
  
0.82
    
                 
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 the most subordinated class in a trust of mortgage-backed securities that is the next to receive allocation of principal loss. Such classes will continue to receive all principal loss until its balance is zero.  
10
- Issuer is currently in default on its regularly scheduled interest payment.
  
11
- Investment in subprime security. As of February 29, 2012, the total values of all such investments were:
  
 
Fund
  
Value
  
% of Net Assets
  
 
Helios Strategic Mortgage Income Fund, Inc.
  
$
2,533,638
  
3.93
%
  
 
Helios Total Return Fund, Inc.
    
6,676,372
  
3.60
    
                 
12
- Portion or entire principal amount delivered as collateral for open futures contracts.
  
TBA
- To Be Announced.
  


 
 
 
 
 
HELIOS FUNDS
Notes to Financial Statements
February 29, 2012 (Unaudited)
 
Valuation of Investments: Debt securities, including U.S. government securities, listed corporate bonds, other fixed income and asset-backed securities, and unlisted securities and private placement securities, are generally valued at the latest price furnished by an independent pricing service or, if not valued by an independent pricing service, using prices obtained from at least two active and reliable market makers in any such security or a broker-dealer. Short-term debt securities with remaining maturities of sixty days or less are valued at cost with interest accrued or discount accreted to the date of maturity, unless such valuation, in the judgment of the Advisor’s Valuation Committee, does not represent market value.
 
Investments in equity securities listed or traded on any securities exchange or traded in the over-the-counter market are valued at the last quoted price as of the close of business on the valuation date. Equity securities for which no sales were reported for that date are valued at “fair value” as determined in good faith by the Advisor’s Valuation Committee. Investments in open-end registered investment companies, if any, are valued at the net asset value (“NAV”) as reported by those investment companies.
 
When price quotations for certain securities are not readily available, or if the available quotations are not believed to be reflective of market value by the Advisor, those securities will be valued at “fair value” as determined in good faith by the Advisor’s Valuation Committee using procedures adopted by, and under the supervision of, each Fund’s Board of Directors. There can be no assurance that a Fund could purchase or sell a portfolio security at the price used to calculate a Fund’s NAV.
 
Fair valuation procedures may be used to value a substantial portion of the assets of each Fund. A Fund may use the fair value of a security to calculate its NAV when, for example, (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and not resumed prior to the normal market close, (3) a portfolio security is not traded in significant volume for a substantial period, or (4) the Advisor determines that the quotation or price for a portfolio security provided by a broker-dealer or independent pricing service is inaccurate.
 
The “fair value” of securities may be difficult to determine and thus judgment plays a greater role in the valuation process. The fair valuation methodology may include or consider the following guidelines, as appropriate: (1) evaluation of all relevant factors, including but not limited to, pricing history, current market level, supply and demand of the respective security; (2) comparison to the values and current pricing of securities that have comparable characteristics; (3) knowledge of historical market information with respect to the security; (4) other factors relevant to the security which would include, but not be limited to, duration, yield, fundamental analytical data, the Treasury yield curve, and credit quality.
 
 
 
 
 
The values assigned to fair valued investments are based on available information and do not necessarily represent amounts that might ultimately be realized, since such amounts depend on future developments inherent in long-term investments. Changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, by an independent pricing service, or based on market quotations. Imprecision in estimating fair value can also impact the amount of unrealized appreciation or depreciation recorded for a particular portfolio security and differences in the assumptions used could result in a different determination of fair value, and those differences could be material.
 
The Funds have established methods of fair value measurements in accordance with GAAP. Fair value denotes the price that a Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy has been established to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

•
Level 1 -
quoted prices in active markets for identical investments
•
Level 2 -
quoted prices in markets that are not active or other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
•
Level 3 -
significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)
 
The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those securities.

 
The following is a summary of the inputs used as of February 29, 2012 in valuing the Fund’s 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
12,160,890
3,634,970
-
-
99,998
15,895,858
Level 3 - Significant
Unobservable Inputs
1,079,688
8,225,818
47,813,495
18,769,538
-
75,888,539
Total
$13,240,578
$11,860,788
$47,813,495
$18,769,538
$99,998
$91,784,397
 
 
 
 
 

Assets
Other Financial Instruments*
Description
  
Level 1 - Quoted Prices
$-
Level 2 - Quoted Prices in
Inactive Markets or Other
Significant
Observable Inputs
12,779
Level 3 - Significant
Unobservable Inputs
-
Total
$12,779
 

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

Investments in Securities
U.S.
Government
& Agency
Obligations
Asset-
Backed
Securities
Commercial
Mortgage-
Backed
Securities
Non-Agency
Residential
Mortgage-
Backed
Securities
Total
  
Balance as of November 30, 2011
$-
$6,241,357
$43,125,788
$17,180,985
$66,548,130
  
Accrued Discounts (Premiums)
-
(3,076)
(524,508)
(43,313)
(570,897)
  
Realized Gain (Loss)
-
17,197
1,050,770
431,741
1,499,708
  
Change in Unrealized Appreciation
(Depreciation)
782
105,011
3,272,989
1,511,110
4,889,892
  
Purchases at Cost
-
543,385
4,898,383
2,110,887
7,552,655
  
Sales Proceeds
-
(236,413)
(4,009,927)
(2,421,872)
(6,668,212)
  
Transfers into Level 3
1,078,906
2,019,115
-
-
3,098,021
 
(a)
Transfers out of Level 3
-
(460,758)
-
-
(460,758)
 
(a)
Balance as of February 29, 2012
$1,079,688
$8,225,818
$47,813,495
$18,769,538
$75,888,539
  
Change in unrealized gains or losses
relating to assets still held at
reporting date
 $        782
 $        94,715
 $ 3,434,926
 $     1,121,627
 $4,652,050
  

 
*Other financial instruments include futures which are valued at the unrealized appreciation (depreciation) on the instrument.
 
(a) Transferred due to increase of observable market data for these securities.
 
 
 
 
 
 
 
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
20,190,043
18,174,809
-
-
-
31,650,271
499,991
70,515,114
Level 3 -
Significant
Unobservable
Inputs
3,587,590
14,789,640
118,474,196
51,898,733
2,906,844
-
-
191,657,003
Total
$23,777,633
$32,964,449
$118,474,196
$51,898,733
$2,906,844
$31,650,271
$499,991
$262,172,117
 

Assets
Other Financial Instruments*
Description:
  
Level 1 - Quoted Prices
$-
Level 2 - Quoted Prices in Inactive Markets or Other Significant Observable Inputs
88,228
Level 3 - Significant Unobservable Inputs
-
Total
$88,228
 

Liabilities
Other Financial Instruments*
Description:
  
Level 1 - Quoted Prices
$-
Level 2 - Quoted Prices in Inactive Markets or Other Significant Observable Inputs
(1,950)
Level 3 - Significant Unobservable Inputs
-
Total
$(1,950)
 
 
 
 
 
 
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
 

Investments in Securities
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
Total
  
Balance as of
November 30,
2011
$-
$15,037,895
$114,402,067
$44,449,937
$3,435,739
$7,993,287
$185,318,925
  
Accrued Discounts (Premiums)
738
353,550
(463,902)
(281,452)
(691,713)
(866)
(1,083,645)
  
Realized Gain (Loss)
3,303
(588,212)
2,365,350
317,922
4,928,071
40,174
7,066,608
  
Change in Unrealized Appreciation (Depreciation)
20,679
476,190
5,770,238
3,064,025
207,936
343,232
9,882,300
  
Purchases at Cost
3,236,719
812,549
9,426,586
8,238,108
-
-
21,713,962
  
Sales Proceeds
(22,375)
(523,417)
(13,026,143)
(3,889,807)
(4,973,189)
(520,356)
(22,955,287)
  
Transfers into
Level 3
348,526
1,845,620
-
-
-
-
2,194,146
 
  (a)
Transfers out of
Level 3
-
(2,624,535)
-
-
-
(7,855,471)
(10,480,006)
 
  (a)
Balance as of
February 29, 2012
$3,587,590
$14,789,640
$118,474,196
$51,898,733
$2,906,844
$-
$191,657,003
  
Change in
unrealized gains or
losses relating to
assets still held at reporting date
 $       20,679
 $    (201,099)
 $        6,556,028
 $      3,062,816
 $   207,936
 $   -
 $9,646,360
  

 
*Other financial instruments include futures which are valued at the unrealized appreciation (depreciation) on the instrument.
 
(a) Transferred due to increase of observable market data for these securities.
Federal Income Tax Basis: The federal income tax basis of the Funds’ investments at February 29, 2012.

 
 
Fund
Cost of
Investments
Gross
Unrealized
Appreciation
Gross Unrealized
Depreciation
Net Unrealized
Appreciation
Helios Strategic Mortgage Income Fund, Inc.
107,624,235
6,011,655
(21,851,493)
(15,839,838)
Helios Total Return Fund, Inc.
281,933,058
18,317,320
(38,078,261)
(19,760,941)

 
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. 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 29, 2012, the Funds had the following reverse repurchase agreements outstanding:
 
Helios Strategic Mortgage Income Fund, Inc.
 
Face Value
  
Description
  
Maturity Amount
  
$ 8,928,000  
Goldman Sachs, 0.42%, dated 12/08/11, maturity date 03/08/12
   $ 8,937,479  
  494,500  
BNP Paribas, 0.38%, dated 02/13/12, maturity date 03/14/12
     494,657  
  1,853,000  
Credit Suisse, 1.85%, dated 01/13/12, maturity date 04/13/12
     1,861,665  
  1,209,000  
Credit Suisse, 0.32%, dated 01/13/12, maturity date 04/13/12
     1,209,978  
  4,830,000  
Credit Suisse, 1.55%, dated 01/18/12, maturity date 04/18/12
     4,848,924  
  4,667,000  
JP Morgan Chase, 1.56%, dated 01/18/12, maturity date 04/18/12
     4,685,418  
  1,191,000  
Credit Suisse, 1.75%, dated 02/14/12, maturity date 05/14/12
     1,196,211  
  3,032,000  
JP Morgan Chase, 1.50%, dated 02/14/12, maturity date 05/14/12
     3,043,352  
  1,615,283  
Credit Suisse, 1.75%, dated 02/22/12, maturity date 05/22/12
     1,622,349  
  2,022,000  
JP Morgan Chase, 1.90%, dated 02/14/12, maturity date 05/14/12
     2,031,592  
$ 29,841,783  
Maturity Amount, Including Interest Payable
   $ 29,931,625  
     
Maturity Value of Assets Sold Under Agreements
   $ 35,151,715  
     
Weighted Average Interest Rate
     1.17 %

 
Helios Total Return Fund, Inc.
 
Face Value
  
Description
  
Maturity Amount
  
$ 7,910,000  
Goldman Sachs, 0.42%, dated 12/08/11, maturity date 03/08/12
   $ 7,918,398  
  1,382,100  
JP Morgan Chase, 0.90%, dated 02/21/12, maturity date 03/22/12
     1,383,137  
  3,252,499  
Barclays, 1.00%, dated 02/23/12, maturity date 03/23/12
     3,255,119  
  5,827,000  
Credit Suisse, 0.32%, dates 01/13/12, maturity date 04/13/12
     5,831,713  
  13,468,000  
Credit Suisse, 1.55%, dates 01/18/12, maturity date 04/18/12
     13,520,768  
  23,338,000  
JP Morgan Chase, 1.56%, dated 01/18/12, maturity date 04/18/12
     23,430,100  
  201,600  
Barclays, 0.25%, dated 02/21/12, maturity date 04/23/12
     201,513  
  3,247,950  
Barclays, 1.00%, dated 02/21/12, maturity date 04/23/12
     3,253,544  
  4,523,000  
JP Morgan Chase, 1.50%, dated 02/14/12, maturity date 05/14/12
     4,539,934  
  2,544,000  
JP Morgan Chase, 1.90%, dated 02/14/12, maturity date 05/14/12
     2,556,069  
  16,053,656  
Credit Suisse, 1.75%, dates 02/22/12, maturity date 05/22/2012
     16,123,891  
$ 81,747,805  
Maturity Amount, Including Interest Payable
   $ 82,014,186  
     
Maturity Value of Assets Sold Under Agreements
   $ 91,458,490  
     
Weighted Average Interest Rate
     1.35 %
 
The average daily balances of reverse repurchase agreements outstanding during the period ended February 29, 2012, was approximately $29,930,719 at a weighted average interest rate of 1.14% for Helios Strategic Mortgage Income Fund, Inc. and approximately $80,501,623 at a weighted average interest rate of 1.33% for Helios Total Return Fund, Inc.
 
The maximum amount of reverse repurchase agreements outstanding at any time during the period was $29,961,768, which was 31.44% of total assets for Helios Strategic Mortgage Income Fund, Inc. and $82,020,428, which was 30.29% of total assets for Helios Total Return Fund, Inc.
 
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 29, 2012, 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 29,
2012
  
Unrealized
Appreciation
$1,700,000
  
5 Year U.S.
Treasury Note
  
June 2012
  
$2,096,849
  
$2,093,922
  
$2,927
2,800,000
  
10 Year U.S.
Treasury Note
  
June 2012
  
3,676,540
  
3,666,688
  
9,852
$4,500,000
          
$5,773,389
  
$5,760,610
  
$12,779
 
Helios Total Return Fund, Inc.
    Short:

Notional Amount
  
Type
  
Expiration
Date
  
Cost at
Trade Date
  
Value at
February 29,
2012
  
Unrealized
Appreciation
$20,500,000
  
10 Year U.S.
Treasury Note
  
June 2012
  
$26,917,525
  
$26,845,392
  
$72,133
2,900,000
  
30 Year U.S.
Treasury Bond
  
June 2012
  
4,124,126
  
4,108,031
  
16,095
$23,400,000
          
$31,041,651
  
$30,953,423
  
$88,228

    Long:

Notional Amount
  
Type
  
Expiration
Date
  
Cost at
Trade Date
  
Value at
February 29,
2012
  
Unrealized
Depreciation
$1,000,000
  
5 Year U.S.
Treasury Note
  
June 2012
  
$1,233,669
  
$1,231,719
  
$(1,950)
$1,000,000
          
$1,233,669
  
$1,231,719
  
$(1,950)
 
 
 
 
 

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 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 29, 2012 were as follows:
 
Helios Strategic Mortgage Income Fund, Inc.
    Purchases:

Security Name
  
Interest Rate
  
Principal Amount
  
Current
Payable
Federal National Mortgage Association
  
5.00%
  
$1,000,000
  
$1,080,434

 
Helios Total Return Fund, Inc.
    Purchases:

Security Name
  
Interest Rate
  
Principal Amount
  
Current
Payable
Federal National Mortgage Association
  
5.00%
  
$3,000,000
  
$3,241,302
 
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 29, 2012, 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 investments 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
  
$969,602
  
$7,600
  
0.01%
Banc of America Commercial
Mortgage, Inc.
Series 2007-2, Class K
  
5.67
  
04/10/49
  
05/24/07
  
-
  
130
  
0.00
Bear Stearns Commercial
Mortgage Securities
Series 2006-PW11, Class H
  
5.45
  
03/11/39
  
03/08/06
  
1,054,754
  
156,943
  
0.24
Bear Stearns Commercial
Mortgage Securities
Series 2007-PW16, Class B
  
5.72
  
06/11/40
  
09/22/10
  
452,954
  
446,536
  
0.69
Bear Stearns Commercial
Mortgage Securities
Series 2007-PW16, Class C
  
5.72
  
06/11/40
  
09/22/10
  
513,766
  
466,958
  
0.72
Bear Stearns Commercial
Mortgage Securities
Series 2007-PW16, Class D
  
5.72
  
06/11/40
  
09/22/10
  
320,433
  
236,153
  
0.37
Citigroup/Deutsche Bank
Commercial Mortgage Trust
Series 2006-CD2, Class J
  
5.43
  
01/15/46
  
02/27/06
  
1,003,730
  
200
  
0.00
Commercial Mortgage Pass
Through Certificates
Series 2007-C9, Class J
  
5.81
  
12/10/49
  
12/17/10
  
100,513
  
91,564
  
0.14
Credit Suisse Mortgage Capital
Certificates
Series 2006-C4, Class L
  
5.15
  
09/15/39
  
09/21/06
  
-
  
84
  
0.00
Credit Suisse Mortgage Capital
Certificates
Series 2006-C1, Class K
  
5.42
  
02/15/39
  
03/07/06
  
2,192,544
  
444,334
  
0.69
Credit Suisse Mortgage Capital
Certificates
Series 2006-C4, Class K
  
6.06
  
09/15/39
  
09/21/06
  
2,470,764
  
594
  
0.00
Harborview Mortgage Loan
Trust
Series 2005-9, Class B11
  
1.99
  
06/20/35
  
10/03/07
  
367,373
  
7,480
  
0.01
JP Morgan Chase Commercial
Mortgage Securities Corp.
Series 2007-CB18, Class G
  
5.72
  
06/12/47
  
10/11/07
  
530,686
  
24,000
  
0.04
JP Morgan Chase Commercial
Mortgage Securities Corp.
Series 2007-LD11, Class K
  
5.82
  
06/15/49
  
06/28/07
  
1,892,942
  
376
  
0.00
Morgan Stanley Capital I, Inc.
Series 2004-HQ4, Class G
  
5.30
  
04/14/40
  
03/01/06
  
985,697
  
587,261
  
0.91
Morgan Stanley Capital I, Inc.
Series 2007-IQ13, Class B
  
5.52
  
03/15/44
  
01/07/11
  
492,519
  
377,196
  
0.59
Morgan Stanley Capital I, Inc.
Series 2007-IQ13, Class C
  
5.56
  
03/15/44
  
01/07/11
  
271,628
  
190,400
  
0.30
 
 
 
 

 
Restricted Securities
  
Interest
Rate
  
Maturity
  
Acquisition
Date
  
Cost
  
Value
  
Percentage
of Net
Assets
Resix Finance Limited Credit-
Linked Notes
Series 2005-C, Class B7
  
3.34%
  
09/10/37
  
09/09/05
  
$790,612
  
$7,906
  
0.01%
Resix Finance Limited Credit-
Linked Notes
Series 2004-C, Class B7
  
3.74
  
09/10/36
  
09/23/04
  
620,954
  
263,409
  
0.41
Resix Finance Limited Credit-
Linked Notes
Series 2003-CB1, Class B8
  
6.99
  
06/01/35
  
12/22/04
  
438,015
  
271,175
  
0.42
Resix Finance Limited Credit-
Linked Notes
Series 2004-B, Class B9
  
8.49
  
02/10/36
  
05/21/04
  
679,614
  
238,409
  
0.37
Resix Finance Limited Credit-
Linked Notes
Series 2004-A, Class B10
  
11.74
  
02/10/36
  
03/09/04
  
273,103
  
108,324
  
0.17
Wachovia Bank Commercial
Mortgage Trust
Series 2007-C31, Class L
  
5.13
  
04/15/47
  
05/11/07
  
1,497,743
  
358
  
0.00
Wachovia Bank Commercial
Mortgage Trust
Series 2005-C20, Class F
  
5.26
  
07/15/42
  
10/15/10
  
1,265,936
  
720,000
  
1.12
Wachovia Bank Commercial
Mortgage Trust
Series 2005-C16, Class H
  
5.52
  
10/15/41
  
01/19/05
  
1,990,124
  
1,139,356
  
1.77
                   
$5,786,746
  
   8.97%
 
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
  
$310,133
  
$7,366
  
0.00%
Banc of America Commercial
Mortgage, Inc.
Series 2007-2, Class K
  
5.67
  
04/10/49
  
05/24/07
  
-
  
216
  
0.00
Bear Stearns Commercial
Mortgage Securities
Series 2006-PW11, Class H
  
5.45
  
03/11/39
  
03/08/06
  
1,632,746
  
242,548
  
0.13
Bear Stearns Commercial
Mortgage Securities
Series 2007-PW16, Class B
  
5.72
  
06/11/40
  
09/22/10-03/03/11
  
2,898,676
  
2,154,644
  
1.16
Bear Stearns Commercial
Mortgage Securities
Series 2007-PW16, Class C
  
5.72
  
06/11/40
  
09/22/10
  
1,477,574
  
1,342,957
  
0.73
Bear Stearns Commercial
Mortgage Securities
Series 2007-PW16, Class D
  
5.72
  
06/11/40
  
09/22/10
  
912,003
  
672,128
  
0.37
Bear Stearns Commercial
Mortgage Securities
Series 2007-T28, Class F
  
5.98
  
09/11/42
  
10/11/07
  
229,129
  
65,000
  
0.00
 
 
 
 
 
 
Restricted Securities
    
Interest
Rate
    
Maturity
    
Acquisition
Date
    
Cost
    
Value
    
Percentage
of Net
Assets
Citigroup/Deutsche Bank
Commercial Mortgage Trust
Series 2006-CD2, Class J
  
5.40%
  
01/15/46
  
02/27/06
  
$1,003,730
  
$200
  
0.00%
Credit Suisse First Boston
Mortgage Securities Corp.
Series 2004-C5, Class J
  
4.65
  
11/15/37
  
12/16/04
  
942,464
  
278,665
  
0.16
Credit Suisse Mortgage
Capital Certificates
Series 2006-C4, Class L
  
5.15
  
09/15/39
  
09/21/06
  
-
  
112
  
0.00
Credit Suisse Mortgage
Capital Certificates
Series 2006-C1, Class K
  
5.42
  
02/15/39
  
03/07/06
  
4,384,158
  
888,480
  
0.49
Credit Suisse Mortgage
Capital Certificates
Series 2006-C4, Class K
  
6.06
  
09/15/39
  
09/21/06
  
4,117,940
  
990
  
0.00
Federal National Mortgage
Association
Series 1998-W6, Class B3
  
7.09
  
10/25/28
  
12/22/98
  
507,876
  
348,526
  
0.19
Harborview Mortgage Loan
Trust
Series 2005-9, Class B11
  
1.99
  
06/20/35
  
10/03/07
  
613,823
  
12,497
  
0.00
JP Morgan Chase Commercial
Mortgage Securities Corp.
Series 2007-CB18, Class G
  
5.72
  
06/12/47
  
10/11/07
  
1,061,371
  
48,000
  
0.00
JP Morgan Chase Commercial
Mortgage Securities Corp.
Series 2007-LD11, Class J
  
5.82
  
06/15/49
  
06/28/07
  
505,522
  
2,279
  
0.00
JP Morgan Chase Commercial
Mortgage Securities Corp.
Series 2007-LD11, Class K
  
5.82
  
06/15/49
  
06/28/07
  
945,967
  
188
  
0.00
LB-UBS Commercial Mortgage
Trust
Series 2002-C2, Class L
  
5.68
  
07/15/35
  
06/26/02
  
5,244,869
  
5,163,705
  
2.80
LNR CDO V Limited
Series 2007-1A, Class F
  
1.69
  
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
  
248,461
  
2,897
  
0.00
Morgan Stanley Capital I, Inc.
Series 2006-T21, Class H
  
5.36
  
10/12/52
  
04/06/06
  
1,406,594
  
300,000
  
0.17
RESI Finance LP
Series 2004-B, Class B5
  
1.79
  
02/10/36
  
05/21/04
  
1,938,804
  
872,462
  
0.48
Resix Finance Limited Credit-
Linked Notes
Series 2005-C, Class B7
  
3.34
  
09/10/37
  
09/09/05
  
1,581,223
  
15,812
  
0.00
Resix Finance Limited Credit-
Linked Notes
Series 2004-C, Class B7
  
3.74
  
09/10/36
  
09/23/04
  
931,431
  
395,113
  
0.21
Resix Finance Limited Credit-
Linked Notes
Series 2003-D, Class B7
    
5.99
    
12/10/35
    
11/19/03
    
933,147
    
407,225
    
0.22
Resix Finance Limited Credit-
Linked Notes
Series 2003-CB1, Class B8
    
6.99
    
06/10/35
    
12/22/04
    
880,411
    
542,350
    
0.30
Resix Finance Limited Credit-
Linked Notes
Series 2004-A, Class B10
    
11.74
    
02/10/36
    
03/09/04
    
477,931
    
189,566
     0.11
Wachovia Bank Commercial
Mortgage Trust
Series 2005-C16, Class H
   5.52   10/15/41    
01/19/05
    
3,980,248
   2,278,712    
1.24
                    $16,232,638   8.76%
 
 
 
 
 
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.


(Registrant)  Helios Strategic Mortgage Income Fund, Inc.                              

 
By (Signature and Title)              /s/ Kim G. Redding                                            
Kim G. Redding
Principal Executive Officer

Date           April 26, 2012                                                                                         



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 (Signature and Title)*           /s/ Kim G. Redding                                            
Kim G. Redding
Principal Executive Officer

Date           April 26, 2012                                                                                          

 
By (Signature and Title)*            /s/ Steven M. Pires                                           
Steven M. Pires
Treasurer and Principal Financial Officer

Date           April 26, 2012                                                                                          

* Print the name and title of each signing officer under his or her signature.