Helios High Income Fund, Inc.
The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of December 31, 2013:
|
Valuation Inputs
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Corporate Bonds
|
|
$
|
-
|
|
|
$
|
57,433,614
|
|
|
$
|
125
|
|
|
$
|
57,433,739
|
|
|
Term Loans
|
|
|
-
|
|
|
|
1,440,500
|
|
|
|
-
|
|
|
|
1,440,500
|
|
|
Common Stocks
|
|
|
796,298
|
|
|
|
-
|
|
|
|
-
|
|
|
|
796,298
|
|
|
Warrants
|
|
|
301,092
|
|
|
|
-
|
|
|
|
-
|
|
|
|
301,092
|
|
|
Total
|
|
$
|
1,097,390
|
|
|
$
|
58,874,114
|
|
|
$
|
125
|
|
|
$
|
59,971,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Inputs
|
|
|
|
|
|
|
|
|
|
|
Other Financial
Instruments*
|
|
|
Level 1 - Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
$
|
(44,486
|
)
|
|
Level 2 - Quoted Prices in Inactive Markets or Other Significant Observable Inputs
|
|
|
|
|
|
|
-
|
|
|
Level 3 - Significant Unobservable Inputs
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(44,486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Other financial instruments includes forward foreign currency contracts
|
|
|
|
|
|
|
|
|
|
The following table provides quantitative information about the Fund’s Level 3 values, as well as its inputs, as of December 31, 2013. The table is not all-inclusive, but provides information on the significant Level 3 inputs.
|
|
Quantitative Information about Level 3 Fair Value Measurements**
|
|
Assets
|
Fair Value as of
December 31, 2013
|
|
Valuation
Methodology
|
|
Significant
Unobservable
Input
|
|
Price
|
|
Corporate Bonds
|
$ 125
|
|
Market
Comparable
Companies
|
|
Discounted
Cash Flow
|
|
$0.01
|
** The table above does not include level 3 securities that are valued by brokers and pricing services. At December 31, 2013, the value of these securities was approximately $125. The inputs for these securities are not readily available or cannot be reasonably estimated and are generally those inputs described in Valuation of Investments Note. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, unchanged price review, results of broker and vendor due diligence and consideration of macro or security specific events.
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
|
Valuation Inputs
|
|
|
|
|
Residential
Mortgage-
Backed
Securities
|
|
|
Corporate
Bonds
|
|
|
Total
|
|
|
Balance as of March 31, 2013
|
|
|
|
|
$
|
37,162
|
|
|
$
|
150
|
|
|
$
|
37,312
|
|
|
Accrued Discounts (Premiums)
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Realized Gain/(Loss)
|
|
|
|
|
|
120,571
|
|
|
|
(25
|
)
|
|
|
120,546
|
|
|
Change in Unrealized Appreciation (Depreciation)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Purchases at cost
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Sales proceeds
|
|
|
|
|
|
(157,733
|
)
|
|
|
-
|
|
|
|
(157,733
|
)
|
|
Transfers out of Level 3
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance as of December 31, 2013
|
|
|
|
|
|
$
|
-
|
|
|
$
|
125
|
|
|
$
|
125
|
|
|
Change in unrealized gains or losses relating to assets still held
at reporting date
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helios Multi-Sector High Income, Inc.
The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of December 31, 2013:
|
Valuation Inputs
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Corporate Bonds
|
|
$
|
-
|
|
|
$
|
64,313,086
|
|
|
$
|
150
|
|
|
$
|
64,313,236
|
|
|
Term Loans
|
|
|
-
|
|
|
|
1,608,123
|
|
|
|
-
|
|
|
|
1,608,123
|
|
|
Common Stocks
|
|
|
896,670
|
|
|
|
-
|
|
|
|
-
|
|
|
|
896,670
|
|
|
Warrants
|
|
|
351,202
|
|
|
|
-
|
|
|
|
-
|
|
|
|
351,202
|
|
|
Total
|
|
$
|
1,247,872
|
|
|
$
|
65,921,209
|
|
|
$
|
150
|
|
|
$
|
67,169,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Inputs
|
|
|
|
|
|
|
|
|
|
|
Other Financial
Instruments*
|
|
|
Level 1 - Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
$
|
(51,997
|
)
|
|
Level 2 - Quoted Prices in Inactive Markets or Other Significant Observable Inputs
|
|
|
|
|
|
|
-
|
|
|
Level 3 - Significant Unobservable Inputs
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(51,997
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Other financial instruments includes forward foreign currency contracts
|
|
|
|
|
|
|
|
|
|
The following table provides quantitative information about the Fund’s Level 3 values, as well as its inputs, as of December 31, 2013. The table is not all-inclusive, but provides information on the significant Level 3 inputs.
|
|
Quantitative Information about Level 3 Fair Value Measurements**
|
|
Assets
|
Fair Value as of
December 31, 2013
|
|
Valuation
Methodology
|
|
Significant
Unobservable
Input
|
|
Price
|
|
Corporate Bonds
|
$ 150
|
|
Market
Comparable
Companies
|
|
Discounted
Cash Flow
|
|
$0.01
|
** The table above does not include level 3 securities that are valued by brokers and pricing services. At December 31, 2013, the value of these securities was approximately $150. The inputs for these securities are not readily available or cannot be reasonably estimated and are generally those inputs described in Valuation of Investments Note. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, unchanged price review, results of broker and vendor due diligence and consideration of macro or security specific events.
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
|
Valuation Inputs
|
|
|
|
|
Residential
Mortgage-
Backed
Securities
|
|
|
Corporate
Bonds
|
|
|
Total
|
|
|
Balance as of March 31, 2013
|
|
|
|
|
$
|
37,162
|
|
|
$
|
175
|
|
|
$
|
37,337
|
|
|
Accrued Discounts (Premiums)
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Realized Gain/(Loss)
|
|
|
|
|
|
120,571
|
|
|
|
(25
|
)
|
|
|
120,546
|
|
|
Change in Unrealized Appreciation (Depreciation)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Purchases at cost
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Sales proceeds
|
|
|
|
|
|
(157,733
|
)
|
|
|
-
|
|
|
|
(157,733
|
)
|
|
Transfers out of Level 3
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance as of December 31, 2013
|
|
|
|
|
|
$
|
-
|
|
|
$
|
150
|
|
|
$
|
150
|
|
|
Change in unrealized gains or losses relating to assets still held
at reporting date
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helios Strategic Income Fund, Inc.
The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of December 31, 2013:
|
Valuation Inputs
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Commercial Mortgage-Backed Securities
|
|
$
|
-
|
|
|
$
|
1,542,552
|
|
|
$
|
-
|
|
|
$
|
1,542,552
|
|
|
Corporate Bonds
|
|
|
-
|
|
|
|
50,751,023
|
|
|
|
125
|
|
|
|
50,751,148
|
|
|
Term Loans
|
|
|
-
|
|
|
|
1,066,978
|
|
|
|
-
|
|
|
|
1,066,978
|
|
|
Common Stocks
|
|
|
2,925,884
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,925,884
|
|
|
Warrants
|
|
|
301,092
|
|
|
|
-
|
|
|
|
-
|
|
|
|
301,092
|
|
|
Total
|
|
$
|
3,226,976
|
|
|
$
|
53,360,553
|
|
|
$
|
125
|
|
|
$
|
56,587,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides quantitative information about the Fund’s Level 3 values, as well as its inputs, as of December 31, 2013. The table is not all-inclusive, but provides information on the significant Level 3 inputs.
|
|
Quantitative Information about Level 3 Fair Value Measurements**
|
|
Assets
|
Fair Value as of
December 31, 2013
|
|
Valuation
Methodology
|
|
Significant
Unobservable
Input
|
|
Price
|
|
Corporate Bonds
|
$ 125
|
|
Market
Comparable
Companies
|
|
Discounted
Cash Flow
|
|
$0.01
|
** The table above does not include level 3 securities that are valued by brokers and pricing services. At December 31, 2013, the value of these securities was approximately $125. The inputs for these securities are not readily available or cannot be reasonably estimated and are generally those inputs described in Valuation of Investments Note. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, unchanged price review, results of broker and vendor due diligence and consideration of macro or security specific events.
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
|
Valuation Inputs
|
|
|
|
|
|
|
|
Corporate
Bonds
|
|
|
Total
|
|
|
Balance as of March 31, 2013
|
|
|
|
|
|
|
|
$
|
150
|
|
|
$
|
150
|
|
|
Accrued Discounts (Premiums)
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
Realized Gain/(Loss)
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
(25
|
)
|
|
Change in Unrealized Appreciation (Depreciation)
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
Purchases at cost
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
Sales proceeds
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
Transfers out of Level 3
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance as of December 31, 2013
|
|
|
|
|
|
|
|
|
|
$
|
125
|
|
|
$
|
125
|
|
|
Change in unrealized gains or losses relating to assets still held
at reporting date
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended December 31, 2013, there was no security transfer activity between Level 1 and Level 2. The basis for recognizing and valuing transfers is as of the end of the period in which transfers occur.
Forward Foreign Currency Contracts: A forward foreign currency contract (“forward contract”) is an agreement between two parties to buy or sell a currency at an agreed upon price for settlement at a future date. During the period the forward contract is in existence changes in the value of the forward contract will fluctuate with changes in the currency exchange rates. The forward contract is marked to market daily and these changes are recorded as an unrealized gain or loss. Gain or loss on the purchase or sale of a forward contract is realized on the settlement date.
The Helios Advantage Income Fund, Inc., Helios High Income Fund, Inc. and Helios Multi-Sector High Income Fund, Inc. invest in forward contracts to hedge against fluctuations in the value of foreign currencies caused by changes in the prevailing currency exchange rates. The use of forward contracts involves the risk that the counterparties may be unable to meet the terms of their contracts and may be negatively impacted from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
All contracts were done with Bank of New York Mellon as the counterparty. As of December 31, 2013, the following forward contracts were outstanding:
Helios Advantage Income Fund, Inc.
|
Settlement
Date
|
|
Currency to
be Delivered
|
|
U.S. $
Value at
December 31, 2013
|
|
|
Currency to
be Received
|
|
U.S. $
Value at
December 31, 2013
|
|
|
Unrealized
Depreciation
|
|
|
01/13/14
|
|
|
2,185,000
|
|
Euros
|
|
$
|
3,005,869
|
|
|
|
2,943,331
|
|
U.S. Dollars
|
|
$
|
2,943,331
|
|
|
$
|
(62,538
|
)
|
|
01/13/14
|
|
|
282,965
|
|
U.S. Dollars
|
|
|
282,965
|
|
|
|
205,000
|
|
Euros
|
|
|
282,015
|
|
|
|
(950
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(63,488
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helios High Income Fund, Inc.
|
Settlement
Date
|
|
Currency to
be Delivered
|
|
U.S. $
Value at
December 31, 2013
|
|
|
Currency to
be Received
|
|
U.S. $
Value at
December 31, 2013
|
|
|
Unrealized
Depreciation
|
|
|
01/13/14
|
|
|
1,530,000
|
|
Euros
|
|
$
|
2,104,796
|
|
|
|
2,061,005
|
|
U.S. Dollars
|
|
$
|
2,061,005
|
|
|
$
|
(43,791
|
)
|
|
01/13/14
|
|
|
207,047
|
|
U.S. Dollars
|
|
|
207,047
|
|
|
|
150,000
|
|
Euros
|
|
|
206,352
|
|
|
|
(695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(44,486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helios Multi-Sector High Income Fund, Inc.
|
Settlement
Date
|
|
Currency to
be Delivered
|
|
U.S. $
Value at
December 31, 2013
|
|
|
Currency to
be Received
|
|
U.S. $
Value at
December 31, 2013
|
|
|
Unrealized
Depreciation
|
|
|
01/13/14
|
|
|
1,790,000
|
|
Euros
|
|
$
|
2,462,474
|
|
|
|
2,411,241
|
|
U.S. Dollars
|
|
$
|
2,411,241
|
|
|
$
|
(51,233
|
)
|
|
01/13/14
|
|
|
227,752
|
|
U.S. Dollars
|
|
|
227,752
|
|
|
|
165,000
|
|
Euros
|
|
|
226,988
|
|
|
|
(764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(51,997
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit facility:
The Funds established a line of credit with BNP Paribas for investment purposes subject to the limitations of the 1940 Act for borrowings by registered investment companies. Each Fund pays interest in the amount of 0.80% plus the 3-month London Interbank Offered Rate on the amount outstanding and 0.80% on the line of credit that is unused. For the period ended December 31, 2013, the average interest rate paid on the amounts outstanding under the line of credit was 1.03% for Helios Advantage Income Fund, Inc., 1.05% for the Helios High Income Fund, Inc., 1.04% for the Helios Multi-Sector High Income Fund, Inc. and 1.08% for Helios Strategic Income Fund, Inc.
|
|
Helios
Advantage
Income Fund,
Inc.
|
Helios High
Income Fund,
Inc.
|
Helios Multi-
Sector High
Income Fund, Inc.
|
Helios Strategic
Income Fund,
Inc.
|
|
Total line of credit amount available
|
$27,000,000
|
$19,000,000
|
$22,000,000
|
$18,000,000
|
|
Line of credit outstanding at December 31, 2013
|
21,100,000
|
16,650,000
|
17,900,000
|
15,250,000
|
|
Line of credit amount unused at December 31, 2013
|
5,900,000
|
2,350,000
|
4,100,000
|
2,750,000
|
|
Average balance outstanding during the period
|
23,369,091
|
17,326,364
|
19,558,182
|
16,599,091
|
|
Interest expense incurred on line of credit during the period
|
209,240
|
149,832
|
171,727
|
146,819
|
Federal Income Tax Basis
: The federal income tax basis of the Funds’ investments at December 31, 2013
|
Fund
|
Cost of
Investments
|
Gross Unrealized
Appreciation
|
Gross Unrealized
Depreciation
|
Net Unrealized
Appreciation
|
|
Helios Advantage Income Fund, Inc.
|
$ 78,547,602
|
$ 4,840,138
|
$ (811,041)
|
$ 4,029,097
|
|
Helios High Income Fund, Inc.
|
57,096,339
|
3,514,561
|
(639,271)
|
2,875,290
|
|
Helios Multi-Sector High Income Fund, Inc.
|
63,939,613
|
3,908,222
|
(678,604)
|
3,229,618
|
|
Helios Strategic Income Fund, Inc.
|
53,930,072
|
3,721,998
|
(1,064,416)
|
2,657,582
|
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 Advantage Income Fund, Inc.
By (Signature and Title)
/s/
Kim G. Redding
Kim G. Redding
President and Principal Executive Officer
Date: February 26, 2014
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
President and Principal Executive Officer
Date: February 26, 2014
By (Signature and Title)*
/s/
Angela W. Ghantous
Angela W. Ghantous
Treasurer and Principal Financial Officer
Date: February 26, 2014
* Print the name and title of each signing officer under his or her signature.