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  811-2743

DWS Strategic Income Fund

(Exact name of registrant as specified in charter)

 

345 Park Avenue

New York, NY  10154

(Address of principal executive offices)             (Zip code)

 

Paul Schubert

345 Park Avenue

New York, NY  10154-0004

(Name and address of agent for service)

Registrant's telephone number, including area code:  (212) 454-7190

Date of fiscal year end:  10/31

Date of reporting period: 1/31/09

 

ITEM 1.  SCHEDULE OF INVESTMENTS

 

| Investment Portfolio | **as of January 31, 2009  (Unaudited)** |
|----------------------|-----------------------------------------|

 

 

**DWS Strategic Income Fund**

 

 

|   | **Principal****Amount ($) (a)** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | **Value ($)** |
|--------|---------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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|        |
|   | **Corporate Bonds 39.6%**       |  
**Consumer Discretionary 3.3%**

 
AMC Entertainment, Inc., 8.0%, 3/1/2014  

 

 

380,000 

 

285,000 

American Achievement Corp., 144A, 8.25%, 4/1/2012  

 

 

115,000 

 

92,000 

American Achievement Group Holding Corp., 16.75%, 10/1/2012 (PIK)

 

 

199,062 

 

47,775 

Asbury Automotive Group, Inc.:

 
 

7.625%, 3/15/2017  

 

 

270,000 

 

124,200 

 

8.0%, 3/15/2014  

 

 

115,000 

 

54,050 

Ashtead Holdings PLC, 144A, 8.625%, 8/1/2015  

 

 

295,000 

 

179,950 

Cablevision Systems Corp., Series B, 8.334% ***, 4/1/2009  

 

 

90,000 

 

90,450 

CanWest MediaWorks LP, 144A, 9.25%, 8/1/2015  

 

 

190,000 

 

27,550 

Carrols Corp., 9.0%, 1/15/2013  

 

 

120,000 

 

87,600 

 

 

 

Cox Communications, Inc., 144A, 9.375%, 1/15/2019  

 

 

1,600,000 

 

1,721,094 

CSC Holdings, Inc.:

 
 

6.75%, 4/15/2012 (b)

 

 

210,000 

 

202,125 

 

Series B, 7.625%, 4/1/2011  

 

 

395,000 

 

393,025 

 

Series B, 8.125%, 7/15/2009  

 

 

220,000 

 

221,100 

 

Series B, 8.125%, 8/15/2009  

 

 

435,000 

 

437,175 

 

144A, 8.5%, 6/15/2015  

 

 

215,000 

 

206,937 

Denny's Holdings, Inc., 10.0%, 10/1/2012  

 

 

80,000 

 

64,800 

DIRECTV Holdings LLC, 7.625%, 5/15/2016  

 

 

435,000 

 

427,387 

DISH DBS Corp.:

 
 

6.375%, 10/1/2011  

 

 

475,000 

 

456,000 

 

6.625%, 10/1/2014  

 

 

335,000 

 

304,850 

 

7.125%, 2/1/2016  

 

 

260,000 

 

239,200 

Dollarama Group Holdings LP, 8.073% ***, 8/15/2012 (c) 

 

 

196,000 

 

127,400 

Fontainebleau Las Vegas Holdings LLC, 144A, 10.25%, 6/15/2015  

 

 

270,000 

 

29,700 

Great Canadian Gaming Corp., 144A, 7.25%, 2/15/2015  

 

 

235,000 

 

162,150 

Group 1 Automotive, Inc., 8.25%, 8/15/2013  

 

 

115,000 

 

88,694 

Hertz Corp., 8.875%, 1/1/2014  

 

 

595,000 

 

388,237 

Idearc, Inc., 8.0%, 11/15/2016  

 

 

540,000 

 

16,875 

Indianapolis Downs LLC, 144A, 11.0%, 11/1/2012  

 

 

155,000 

 

82,925 

Inergy LP, 144A, 8.75%, 3/1/2015  

 

 

80,000 

 

75,600 

Isle of Capri Casinos, Inc., 7.0%, 3/1/2014  

 

 

265,000 

 

131,175 

Kabel Deutschland GmbH, 10.625%, 7/1/2014  

 

 

360,000 

 

347,400 

Lamar Media Corp., Series C, 6.625%, 8/15/2015  

 

 

155,000 

 

116,250 

MediMedia USA, Inc., 144A, 11.375%, 11/15/2014  

 

 

120,000 

 

78,000 

MGM MIRAGE, 6.625%, 7/15/2015  

 

 

295,000 

 

181,425 

MTR Gaming Group, Inc., Series B, 9.75%, 4/1/2010  

 

 

335,000 

 

254,600 

Norcraft Holdings LP, 9.75%, 9/1/2012  

 

 

565,000 

 

435,050 

Penske Automotive Group, Inc., 7.75%, 12/15/2016  

 

 

490,000 

 

235,200 

Pinnacle Entertainment, Inc., 8.75%, 10/1/2013  

 

 

155,000 

 

142,600 

Quebecor Media, Inc., 7.75%, 3/15/2016  

 

 

160,000 

 

125,600 

Quebecor World, Inc., 144A, 9.75%, 1/15/2015 ** 

 

 

180,000 

 

11,475 

Quiksilver, Inc., 6.875%, 4/15/2015  

 

 

230,000 

 

126,213 

Reader's Digest Association, Inc., 9.0%, 2/15/2017  

 

 

180,000 

 

16,425 

Sabre Holdings Corp., 8.35%, 3/15/2016  

 

 

200,000 

 

52,000 

Seminole Hard Rock Entertainment, Inc., 144A, 4.496% ***, 3/15/2014  

 

 

275,000 

 

130,625 

Shaw Communications, Inc., 8.25%, 4/11/2010  

 

 

310,000 

 

311,550 

Shingle Springs Tribal Gaming Authority, 144A, 9.375%, 6/15/2015  

 

 

190,000 

 

116,850 

Simmons Co., Step-up Coupon, 0% to 12/15/2009, 10.0% to 12/15/2014    

 

 

725,000 

 

18,125 

Sirius XM Radio, Inc., 9.625%, 8/1/2013  

 

 

345,000 

 

75,900 

Sonic Automotive, Inc., Series B, 8.625%, 8/15/2013  

 

 

225,000 

 

88,875 

Travelport LLC:

 
 

6.828% ***, 9/1/2014  

 

 

170,000 

 

51,000 

 

9.875%, 9/1/2014  

 

 

35,000 

 

13,825 

Trump Entertainment Resorts, Inc., 8.5%, 6/1/2015 ** 

 

 

55,000 

 

8,113 

United Components, Inc., 9.375%, 6/15/2013  

 

 

40,000 

 

12,400 

Unity Media GmbH:

 
 

144A, 8.75%, 2/15/2015  

EUR

 

575,000 

 

625,795 

 

144A, 10.375%, 2/15/2015  

 

 

175,000 

 

136,063 

UPC Holding BV:

 
 

144A, 7.75%, 1/15/2014  

EUR

 

235,000 

 

252,751 

 

144A, 8.0%, 11/1/2016  

EUR

 

120,000 

 

118,309 

Vertis, Inc., 13.5%, 4/1/2014 (PIK)

 

 

67,178 

 

336 

Young Broadcasting, Inc., 8.75%, 1/15/2014 ** 

 

 

1,165,000 

 

2,913 

 

**10,850,692**

 

 

 

**Consumer Staples 2.1%**

 
Alliance One International, Inc., 8.5%, 5/15/2012  

 

 

120,000 

 

94,800 

Altria Group, Inc.:

 
 

8.5%, 11/10/2013  

 

 

170,000 

 

186,925 

 

9.7%, 11/10/2018  

 

 

85,000 

 

93,016 

Bottling Group LLC, 5.125%, 1/15/2019  

 

 

1,050,000 

 

1,060,993 

Campbell Soup Co., 4.5%, 2/15/2019  

 

 

600,000 

 

583,904 

Delhaize America, Inc.:

 
 

8.05%, 4/15/2027  

 

 

75,000 

 

72,021 

 

9.0%, 4/15/2031  

 

 

510,000 

 

584,096 

General Mills, Inc., 5.65%, 2/15/2019  

 

 

705,000 

 

717,981 

General Nutrition Centers, Inc., 7.584% ***, 3/15/2014 (PIK)

 

 

145,000 

 

87,000 

North Atlantic Trading Co., 144A, 10.0%, 3/1/2012  

 

 

873,750 

 

436,875 

Reynolds American, Inc., 6.75%, 6/15/2017  

 

 

2,400,000 

 

2,098,469 

Viskase Companies, Inc., 11.5%, 6/15/2011  

 

 

1,330,000 

 

864,500 

 

**6,880,580**

**Energy 5.5%**

 
Atlas Energy Resources LLC, 144A, 10.75%, 2/1/2018  

 

 

515,000 

 

412,000 

Belden & Blake Corp., 8.75%, 7/15/2012  

 

 

1,150,000 

 

833,750 

Bristow Group, Inc., 7.5%, 9/15/2017  

 

 

260,000 

 

189,800 

Chaparral Energy, Inc.:

 
 

8.5%, 12/1/2015  

 

 

375,000 

 

82,500 

 

8.875%, 2/1/2017  

 

 

140,000 

 

30,800 

Chesapeake Energy Corp.:

 
 

6.25%, 1/15/2018  

 

 

270,000 

 

217,350 

 

6.875%, 1/15/2016  

 

 

635,000 

 

544,512 

 

7.25%, 12/15/2018  

 

 

435,000 

 

364,312 

 

7.5%, 6/15/2014  

 

 

110,000 

 

99,550 

 

9.5%, 2/15/2015  

 

 

25,000 

 

24,500 

Cimarex Energy Co., 7.125%, 5/1/2017  

 

 

185,000 

 

160,025 

Colorado Interstate Gas Co., 6.8%, 11/15/2015  

 

 

115,000 

 

107,238 

ConocoPhillips:

 
 

4.75%, 2/1/2014  

 

 

80,000 

 

80,121 

 

5.75%, 2/1/2019  

 

 

1,600,000 

 

1,602,720 

 

6.5%, 2/1/2039  

 

 

800,000 

 

796,862 

Delta Petroleum Corp., 7.0%, 4/1/2015  

 

 

420,000 

 

151,200 

Devon Energy Corp., 6.3%, 1/15/2019  

 

 

85,000 

 

85,056 

Dynegy Holdings, Inc., 6.875%, 4/1/2011  

 

 

75,000 

 

69,000 

El Paso Corp.:

 
 

7.25%, 6/1/2018  

 

 

505,000 

 

462,075 

 

7.75%, 6/15/2010  

 

 

85,000 

 

84,150 

 

9.625%, 5/15/2012  

 

 

180,000 

 

169,483 

EXCO Resources, Inc., 7.25%, 1/15/2011  

 

 

355,000 

 

298,200 

Forest Oil Corp., 144A, 7.25%, 6/15/2019  

 

 

130,000 

 

108,225 

Frontier Oil Corp.:

 
 

6.625%, 10/1/2011  

 

 

180,000 

 

171,900 

 

8.5%, 9/15/2016  

 

 

330,000 

 

313,500 

GulfSouth Pipeline Co., LP, 144A, 5.75%, 8/15/2012  

 

 

55,000 

 

48,950 

Hess Corp., 8.125%, 2/15/2019  

 

 

510,000 

 

521,054 

KCS Energy, Inc., 7.125%, 4/1/2012  

 

 

945,000 

 

822,150 

Mariner Energy, Inc.:

 
 

7.5%, 4/15/2013  

 

 

215,000 

 

161,250 

 

8.0%, 5/15/2017  

 

 

265,000 

 

169,600 

Newfield Exploration Co., 7.125%, 5/15/2018  

 

 

390,000 

 

344,175 

OPTI Canada, Inc.:

 
 

 

 

 

7.875%, 12/15/2014  

 

 

325,000 

 

144,625 

 

8.25%, 12/15/2014  

 

 

630,000 

 

289,800 

Pemex Project Funding Master Trust:

 
 

5.75%, 3/1/2018  

 

 

1,570,000 

 

1,334,500 

 

REG S, 6.375%, 8/5/2016  

EUR

 

100,000 

 

110,114 

Petrohawk Energy Corp.:

 
 

144A, 7.875%, 6/1/2015  

 

 

115,000 

 

96,313 

 

9.125%, 7/15/2013  

 

 

250,000 

 

230,000 

Petroleos Mexicanos, REG S, 8.0%, 5/3/2019 (d) 

 

 

1,200,000 

 

1,196,400 

Petronas Capital Ltd., REG S, 7.875%, 5/22/2022  

 

 

290,000 

 

314,761 

Plains Exploration & Production Co.:

 
 

7.0%, 3/15/2017  

 

 

220,000 

 

183,975 

 

7.625%, 6/1/2018  

 

 

435,000 

 

371,925 

Quicksilver Resources, Inc., 7.125%, 4/1/2016  

 

 

640,000 

 

441,600 

SandRidge Energy, Inc., 144A, 8.0%, 6/1/2018  

 

 

170,000 

 

134,300 

Southwestern Energy Co., 144A, 7.5%, 2/1/2018  

 

 

320,000 

 

302,400 

Stallion Oilfield Services, 144A, 9.75%, 2/1/2015  

 

 

140,000 

 

29,400 

Stone Energy Corp.:

 
 

6.75%, 12/15/2014  

 

 

430,000 

 

232,200 

 

8.25%, 12/15/2011  

 

 

685,000 

 

527,450 

Tennessee Gas Pipeline Co., 7.625%, 4/1/2037  

 

 

90,000 

 

79,637 

TEPPCO Partners LP, 7.625%, 2/15/2012  

 

 

205,000 

 

195,463 

Tesoro Corp., 6.5%, 6/1/2017  

 

 

220,000 

 

163,900 

TransCanada PipeLines Ltd.:

 
 

7.125%, 1/15/2019  

 

 

125,000 

 

132,493 

 

7.625%, 1/15/2039  

 

 

80,000 

 

83,260 

Whiting Petroleum Corp.:

 
 

7.25%, 5/1/2012  

 

 

450,000 

 

382,500 

 

7.25%, 5/1/2013  

 

 

70,000 

 

57,750 

Williams Companies, Inc.:

 
 

8.125%, 3/15/2012  

 

 

695,000 

 

688,050 

 

8.75%, 3/15/2032  

 

 

415,000 

 

379,725 

Williams Partners LP, 7.25%, 2/1/2017  

 

 

190,000 

 

169,100 

 

**17,797,649**

**Financials 12.2%**

 
Algoma Acquisition Corp., 144A, 9.875%, 6/15/2015  

 

 

540,000 

 

207,900 

Ashton Woods USA LLC, 9.5%, 10/1/2015 ** 

 

 

540,000 

 

81,000 

Buffalo Thunder Development Authority, 144A, 9.375%, 12/15/2014  

 

 

115,000 

 

10,350 

CIT Group, Inc., 5.4%, 2/13/2012  

 

 

1,600,000 

 

1,299,373 

Citigroup, Inc., 6.5%, 8/19/2013  

 

 

305,000 

 

291,430 

Commonwealth Bank of Australia, 8.7% ***, 7/21/2016  

 

 

4,000,000 

 

3,900,360 

Conproca SA de CV, REG S, 12.0%, 6/16/2010  

 

 

611,535 

 

622,237 

Depfa ACS Bank, 144A, 9.5% ***, 10/6/2023  

 

 

4,000,000 

 

3,090,000 

Ford Motor Credit Co., LLC:

 
 

7.25%, 10/25/2011  

 

 

1,395,000 

 

993,233 

 

7.875%, 6/15/2010  

 

 

335,000 

 

276,712 

Fresenius US Finance II, Inc., 144A, 9.0%, 7/15/2015 (b) 

 

 

210,000 

 

211,050 

GMAC LLC:

 
 

3.399% ***, 5/15/2009  

 

 

260,000 

 

243,100 

 

4.241% ***, 6/30/2009  

EUR

 

65,000 

 

74,903 

 

144A, 6.875%, 9/15/2011  

 

 

1,185,000 

 

932,941 

 

7.75%, 1/19/2010 (b)

 

 

130,000 

 

112,486 

 

144A, 7.75%, 1/19/2010  

 

 

595,000 

 

538,415

Hawker Beechcraft Acquisition Co., LLC:

 
 

8.5%, 4/1/2015  

 

 

535,000 

 

171,200 

 

8.875%, 4/1/2015 (PIK) 

 

 

350,000 

 

87,500 

 

 

 

Hexion US Finance Corp., 9.75%, 11/15/2014  

 

 

125,000 

 

15,000 

Inmarsat Finance PLC, 10.375%, 11/15/2012  

 

 

750,000 

 

742,500 

iPayment, Inc., 9.75%, 5/15/2014  

 

 

165,000 

 

99,000 

Kreditanstalt fuer Wiederaufbau:

 
 

2.05%, 2/16/2026  

JPY

 

1,000,000,000 

 

10,620,582 

 

5.0%, 7/4/2011  

EUR

 

7,000,000 

 

9,474,647 

Local TV Finance LLC, 144A, 9.25%, 6/15/2015 (PIK)

 

 

185,000 

 

22,431 

New ASAT (Finance) Ltd., 9.25%, 2/1/2011

 

 

340,000 

 

10,200 

NiSource Finance Corp.:

 
 

6.15%, 3/1/2013  

 

 

30,000 

 

24,627 

 

7.875%, 11/15/2010  

 

 

360,000 

 

342,148 

Orascom Telecom Finance SCA, 144A, 7.875%, 2/8/2014  

 

 

240,000 

 

141,600 

Qwest Capital Funding, Inc., 7.0%, 8/3/2009  

 

 

210,000 

 

209,213 

Rainbow National Services LLC, 144A, 10.375%, 9/1/2014  

 

 

39,000 

 

39,488 

Sprint Capital Corp.:

 
 

7.625%, 1/30/2011  

 

 

210,000 

 

174,825 

 

8.375%, 3/15/2012  

 

 

85,000 

 

68,000 

The Goldman Sachs Group, Inc., 7.5%, 2/15/2019 (d)

 

 

2,145,000 

 

2,119,423 

Tropicana Entertainment LLC, 9.625%, 12/15/2014 ** 

 

 

660,000 

 

8,250 

UCI Holdco, Inc., 9.996% ***, 12/15/2013 (PIK)

 

 

288,325 

 

31,716 

Universal City Development Partners Ltd., 11.75%, 4/1/2010  

 

 

955,000 

 

735,350 

Wachovia Corp., 3.625%, 2/17/2009  

 

 

1,000,000 

 

1,000,068 

Williams Companies, Inc., Credit Linked Certificate Trust, 144A, 6.75%, 4/15/2009  

 

 

10,000 

 

9,950 

Wind Acquisition Finance SA:

 
 

144A, 9.75%, 12/1/2015  

EUR

 

480,000 

 

540,841 

 

144A, 10.75%, 12/1/2015  

 

 

75,000 

 

66,750 

 

**39,640,799**

**Health Care 1.8%**

 
Advanced Medical Optics, Inc., 7.5%, 5/1/2017  

 

 

480,000 

 

532,800 

Boston Scientific Corp., 6.0%, 6/15/2011  

 

 

295,000 

 

284,675 

Community Health Systems, Inc., 8.875%, 7/15/2015  

 

 

1,670,000 

 

1,607,375 

HCA, Inc.:

 
 

9.125%, 11/15/2014  

 

 

305,000 

 

292,800 

 

9.25%, 11/15/2016  

 

 

1,050,000 

 

1,002,750 

 

9.625%, 11/15/2016 (PIK) 

 

 

395,000 

 

331,800 

HEALTHSOUTH Corp., 10.75%, 6/15/2016  

 

 

180,000 

 

177,750 

IASIS Healthcare LLC, 8.75%, 6/15/2014  

 

 

295,000 

 

259,600 

Psychiatric Solutions, Inc., 7.75%, 7/15/2015  

 

 

220,000 

 

180,400 

Surgical Care Affiliates, Inc., 144A, 8.875%, 7/15/2015 (PIK)

 

 

225,000 

 

146,250 

The Cooper Companies, Inc., 7.125%, 2/15/2015  

 

 

385,000 

 

327,250 

Vanguard Health Holding Co. I, LLC, Step-up Coupon, 0% to 10/1/2009, 11.25% to 10/1/2015    

 

 

270,000 

 

228,150 

Vanguard Health Holding Co. II, LLC, 9.0%, 10/1/2014  

 

 

590,000 

 

525,100 

 

**5,896,700**

**Industrials 2.3%**

 
Actuant Corp., 6.875%, 6/15/2017  

 

 

150,000 

 

123,000 

Allied Waste North America, Inc., 6.5%, 11/15/2010  

 

 

155,000 

 

155,000 

ARAMARK Corp., 8.5%, 2/1/2015  

 

 

85,000 

 

82,662 

Baldor Electric Co., 8.625%, 2/15/2017 (b) 

 

 

195,000 

 

163,800 

BE Aerospace, Inc., 8.5%, 7/1/2018  

 

 

435,000 

 

408,900 

Belden, Inc., 7.0%, 3/15/2017  

 

 

195,000 

 

148,200 

Bombardier, Inc., 144A, 6.75%, 5/1/2012  

 

 

100,000 

 

89,750 

Browning-Ferris Industries, Inc., 7.4%, 9/15/2035  

 

 

540,000 

 

491,400 

Cenveo Corp., 144A, 10.5%, 8/15/2016  

 

 

215,000 

 

134,106 

Congoleum Corp., 8.625%, 8/1/2008 ** 

 

 

480,000 

 

360,000 

 

 

 

Esco Corp.:

 
 

144A, 5.871% ***, 12/15/2013  

 

 

285,000 

 

185,250 

 

144A, 8.625%, 12/15/2013  

 

 

360,000 

 

280,800 

General Cable Corp.:

 
 

3.81% ***, 4/1/2015  

 

 

305,000 

 

204,350 

 

7.125%, 4/1/2017  

 

 

195,000 

 

156,000 

Great Lakes Dredge & Dock Co., 7.75%, 12/15/2013  

 

 

175,000 

 

147,219 

K. Hovnanian Enterprises, Inc., 8.875%, 4/1/2012  

 

 

220,000 

 

81,400 

Kansas City Southern de Mexico SA de CV:

 
 

7.375%, 6/1/2014  

 

 

360,000 

 

309,600 

 

7.625%, 12/1/2013  

 

 

520,000 

 

436,800 

 

9.375%, 5/1/2012  

 

 

650,000 

 

619,125 

Kansas City Southern Railway Co., 8.0%, 6/1/2015  

 

 

395,000 

 

355,500 

Mobile Mini, Inc., 9.75%, 8/1/2014  

 

 

255,000 

 

188,700 

Moog, Inc., 144A, 7.25%, 6/15/2018  

 

 

85,000 

 

76,075 

Navios Maritime Holdings, Inc., 9.5%, 12/15/2014  

 

 

290,000 

 

169,650 

Ply Gem Industries, Inc., 11.75%, 6/15/2013 (b) 

 

 

155,000 

 

86,025 

R.H. Donnelley Corp., Series A-4, 8.875%, 10/15/2017  

 

 

695,000 

 

69,500 

RBS Global & Rexnord Corp., 9.5%, 8/1/2014  

 

 

170,000 

 

146,200 

Seitel, Inc., 9.75%, 2/15/2014  

 

 

130,000 

 

45,338 

Titan International, Inc., 8.0%, 1/15/2012  

 

 

730,000 

 

613,200 

TransDigm, Inc., 7.75%, 7/15/2014  

 

 

115,000 

 

103,500 

United Rentals North America, Inc.:

 
 

6.5%, 2/15/2012  

 

 

455,000 

 

373,100 

 

7.0%, 2/15/2014  

 

 

570,000 

 

359,100 

US Concrete, Inc., 8.375%, 4/1/2014  

 

 

210,000 

 

115,500 

Vought Aircraft Industries, Inc., 8.0%, 7/15/2011  

 

 

140,000 

 

85,400 

 

**7,364,150**

**Information Technology 0.8%**

 
Alion Science & Technology Corp., 10.25%, 2/1/2015  

 

 

205,000 

 

61,500 

L-3 Communications Corp.:

 
 

5.875%, 1/15/2015  

 

 

625,000 

 

571,875 

 

Series B, 6.375%, 10/15/2015  

 

 

270,000 

 

253,125 

 

7.625%, 6/15/2012  

 

 

755,000 

 

750,281 

Lucent Technologies, Inc., 6.45%, 3/15/2029  

 

 

695,000 

 

232,825 

MasTec, Inc., 7.625%, 2/1/2017  

 

 

270,000 

 

216,000 

Seagate Technology HDD Holdings, 6.8%, 10/1/2016 (b) 

 

 

180,000 

 

95,400 

SunGard Data Systems, Inc., 10.25%, 8/15/2015  

 

 

525,000 

 

357,000 

Vangent, Inc., 9.625%, 2/15/2015  

 

 

155,000 

 

97,650 

 

**2,635,656**

**Materials 2.7%**

 
Appleton Papers, Inc., Series B, 8.125%, 6/15/2011  

 

 

110,000 

 

73,975 

ARCO Chemical Co., 9.8%, 2/1/2020 ** 

 

 

1,740,000 

 

435,000 

Cascades, Inc., 7.25%, 2/15/2013  

 

 

415,000 

 

234,475 

Chemtura Corp., 6.875%, 6/1/2016  

 

 

450,000 

 

146,250 

Clondalkin Acquisition BV, 144A, 3.996% ***, 12/15/2013  

 

 

215,000 

 

124,700 

CPG International I, Inc., 10.5%, 7/1/2013  

 

 

490,000 

 

274,400 

Exopack Holding Corp., 11.25%, 2/1/2014  

 

 

580,000 

 

336,400 

Freeport-McMoRan Copper & Gold, Inc.:

 
 

6.875%, 2/1/2014  

 

 

45,000 

 

41,625 

 

8.25%, 4/1/2015  

 

 

580,000 

 

493,725 

 

8.375%, 4/1/2017  

 

 

1,140,000 

 

946,200 

GEO Specialty Chemicals, Inc.:

 
 

144A, 7.5% ***, 3/31/2015 (PIK) 

 

 

448,030 

 

322,582 

 

144A, 9.968% ***, 12/31/2009  

 

 

719,000 

 

517,680 

 

 

 

Georgia-Pacific LLC:

 
 

144A, 7.125%, 1/15/2017  

 

 

180,000 

 

164,250 

 

9.5%, 12/1/2011  

 

 

185,000 

 

180,375 

Hexcel Corp., 6.75%, 2/1/2015  

 

 

790,000 

 

679,400 

Huntsman LLC, 11.625%, 10/15/2010  

 

 

892,000 

 

856,320 

Innophos, Inc., 8.875%, 8/15/2014  

 

 

100,000 

 

78,000 

Koppers Holdings, Inc., Step-up Coupon, 0% to 11/15/2009, 9.875% to 11/15/2014    

 

 

540,000 

 

446,175 

Metals USA Holdings Corp., 7.435% ***, 7/1/2012 (PIK)

 

 

143,808 

 

38,109 

Millar Western Forest Products Ltd., 7.75%, 11/15/2013  

 

 

110,000 

 

57,475 

NewMarket Corp., 7.125%, 12/15/2016  

 

 

455,000 

 

352,625 

NewPage Corp., 10.0%, 5/1/2012  

 

 

405,000 

 

155,925 

OI European Group BV, 144A, 6.875%, 3/31/2017  

EUR

 

220,000 

 

230,984 

Pliant Corp., 11.85%, 6/15/2009 (PIK)

 

 

5 

 

3 

Radnor Holdings Corp., 11.0%, 3/15/2010 ** 

 

 

100,000 

 

125 

Rhodia SA, 144A, 5.362% ***, 10/15/2013  

EUR

 

280,000 

 

170,293 

Steel Dynamics, Inc., 7.375%, 11/1/2012  

 

 

40,000 

 

36,000 

Terra Capital, Inc., Series B, 7.0%, 2/1/2017  

 

 

440,000 

 

400,400 

The Mosaic Co., 144A, 7.375%, 12/1/2014  

 

 

625,000 

 

600,000 

Witco Corp., 6.875%, 2/1/2026  

 

 

135,000 

 

31,050 

Wolverine Tube, Inc., 10.5%, 4/1/2009  

 

 

325,000 

 

273,812 

 

**8,698,333**

**Telecommunication Services 2.8%**

 
AT&T, Inc.:

 
 

4.85%, 2/15/2014  

 

 

80,000 

 

80,364 

 

6.55%, 2/15/2039  

 

 

528,000 

 

526,057 

BCM Ireland Preferred Equity Ltd., 144A, 11.245% ***, 2/15/2017 (PIK)

EUR

 

232,564 

 

22,522 

Centennial Communications Corp.:

 
 

10.0%, 1/1/2013  

 

 

155,000 

 

163,525 

 

10.125%, 6/15/2013  

 

 

325,000 

 

335,562 

Cincinnati Bell, Inc.:

 
 

7.25%, 7/15/2013  

 

 

600,000 

 

573,000 

 

8.375%, 1/15/2014  

 

 

220,000 

 

196,900 

Cricket Communications, Inc.:

 
 

9.375%, 11/1/2014  

 

 

475,000 

 

432,250 

 

144A, 10.0%, 7/15/2015  

 

 

430,000 

 

397,750 

Crown Castle International Corp., 9.0%, 1/15/2015  

 

 

385,000 

 

372,487 

Frontier Communications Corp.:

 
 

6.25%, 1/15/2013  

 

 

205,000 

 

192,700 

 

9.25%, 5/15/2011  

 

 

130,000 

 

130,975 

Grupo Iusacell Celular SA de CV, 10.0%, 3/31/2012  

 

 

112,247 

 

72,961 

Hellas Telecommunications Luxembourg V, 144A, 6.112% ***, 10/15/2012  

EUR

 

200,000 

 

149,807 

Intelsat Corp.:

 
 

144A, 9.25%, 8/15/2014  

 

 

90,000 

 

84,150 

 

144A, 9.25%, 6/15/2016  

 

 

1,015,000 

 

928,725 

Intelsat Subsidiary Holding Co., Ltd., 144A, 8.875%, 1/15/2015  

 

 

520,000 

 

478,400 

iPCS, Inc., 5.318% ***, 5/1/2013  

 

 

110,000 

 

78,100 

MetroPCS Wireless, Inc.:

 
 

9.25%, 11/1/2014  

 

 

565,000 

 

523,331 

 

144A, 9.25%, 11/1/2014  

 

 

65,000 

 

59,638 

Millicom International Cellular SA, 10.0%, 12/1/2013  

 

 

1,010,000 

 

964,550 

Qwest Corp.:

 
 

7.25%, 9/15/2025  

 

 

70,000 

 

51,450 

 

7.875%, 9/1/2011  

 

 

585,000 

 

579,150 

 

8.875%, 3/15/2012  

 

 

130,000 

 

129,350 

Sprint Nextel Corp., 6.0%, 12/1/2016  

 

 

275,000 

 

184,250 

Stratos Global Corp., 9.875%, 2/15/2013  

 

 

150,000 

 

138,000 

 

 

 

Telesat Canada, 144A, 11.0%, 11/1/2015  

 

 

620,000 

 

474,300 

Virgin Media Finance PLC:

 
 

8.75%, 4/15/2014  

 

 

475,000 

 

403,750 

 

8.75%, 4/15/2014  

EUR

 

335,000 

 

345,292 

Windstream Corp.:

 
 

7.0%, 3/15/2019  

 

 

255,000 

 

225,675 

 

8.625%, 8/1/2016  

 

 

40,000 

 

39,400 

 

**9,334,371**

**Utilities 6.1%**

 
AES Corp.:

 
 

8.0%, 10/15/2017  

 

 

395,000 

 

371,300 

 

144A, 8.0%, 6/1/2020  

 

 

425,000 

 

386,750 

 

144A, 8.75%, 5/15/2013  

 

 

1,372,000 

 

1,375,430 

 

9.5%, 6/1/2009  

 

 

275,000 

 

276,375 

Allegheny Energy Supply Co., LLC, 144A, 8.25%, 4/15/2012  

 

 

1,840,000 

 

1,844,600 

CenterPoint Energy Houston Electric LLC, Series U, 7.0%, 3/1/2014  

 

 

85,000 

 

87,500 

CMS Energy Corp., 8.5%, 4/15/2011  

 

 

880,000 

 

886,185 

Dominion Resources, Inc., Series D, 8.875%, 1/15/2019  

 

 

2,000,000 

 

2,269,200 

Duke Energy Corp., 6.3%, 2/1/2014  

 

 

1,300,000 

 

1,333,353 

Edison Mission Energy, 7.0%, 5/15/2017  

 

 

450,000 

 

418,500 

Electricite de France, 144A, 6.5%, 1/26/2019  

 

 

1,720,000 

 

1,784,619 

Energy Future Holdings Corp., 10.875%, 11/1/2017  

 

 

280,000 

 

221,200 

Indiana Michigan Power Co., Series I, 7.0%, 3/15/2019  

 

 

1,920,000 

 

1,927,526 

Intergas Finance BV, REG S, 6.875%, 11/4/2011  

 

 

1,145,000 

 

904,550 

IPALCO Enterprises, Inc., 144A, 7.25%, 4/1/2016  

 

 

205,000 

 

189,625 

Knight, Inc., 6.5%, 9/1/2012  

 

 

340,000 

 

317,900 

Metropolitan Edison Co., 7.7%, 1/15/2019  

 

 

1,550,000 

 

1,588,369 

Mirant Americas Generation LLC, 8.3%, 5/1/2011  

 

 

485,000 

 

476,512 

Mirant North America LLC, 7.375%, 12/31/2013  

 

 

150,000 

 

144,750 

NRG Energy, Inc.:

 
 

7.25%, 2/1/2014  

 

 

495,000 

 

472,725 

 

7.375%, 1/15/2017  

 

 

340,000 

 

318,750 

 

7.375%, 2/1/2016  

 

 

390,000 

 

371,475 

NV Energy, Inc.:

 
 

6.75%, 8/15/2017  

 

 

470,000 

 

345,814 

 

8.625%, 3/15/2014  

 

 

100,000 

 

92,586 

Oncor Electric Delivery Co., 7.0%, 9/1/2022  

 

 

185,000 

 

177,524 

PacifiCorp:

 
 

5.5%, 1/15/2019  

 

 

40,000 

 

41,097 

 

6.0%, 1/15/2039  

 

 

20,000 

 

20,200 

Regency Energy Partners LP, 8.375%, 12/15/2013  

 

 

293,000 

 

227,075 

Reliant Energy, Inc., 7.875%, 6/15/2017  

 

 

495,000 

 

400,950 

Texas Competitive Electric Holdings Co., LLC, Series A, 10.25%, 11/1/2015  

 

 

1,005,000 

 

743,700 

 

**20,016,140**

**Total Corporate Bonds** (Cost $153,088,002)

 

**129,115,070**

 

**Asset-Backed 0.6%**

 
**Credit Card Receivables**

 
Washington Mutual Master Note Trust, "C1", Series 2007-C1, 144A, 0.733% ***, 5/15/2014  (Cost $3,625,734)

 

 

3,800,000 

 

**1,941,564**

 

**Commercial and Non-Agency Mortgage-Backed Securities 1.8%**

 
Credit Suisse Mortgage Capital Certificates, "A2", Series 2007-C1, 5.268%, 2/15/2040  

 

 

3,719,000 

 

2,800,124 

JPMorgan Chase Commercial Mortgage Securities Corp., "F", Series 2004-LN2, 144A, 5.448% ***, 7/15/2041  

 

 

2,000,000 

 

544,393 

 

 

 

Wachovia Bank Commercial Mortgage Trust, "A2", Series 2007-C32, 5.736% ***, 6/15/2049  

 

 

3,600,000 

 

2,601,703 

**Total Commercial and Non-Agency Mortgage-Backed Securities** (Cost $8,759,064)

 

**5,946,220**

 

**Collateralized Mortgage Obligations 1.2%**

 
FannieMae Grantor Trust, "1A4", Series 2004-T2, 7.5%, 11/25/2043  (Cost $3,836,446)

 

 

3,697,779 

 

**3,918,492**

 

**Mortgage-Backed Securities Pass-Throughs 5.0%**

 
Federal Home Loan Mortgage Corp., 4.5%, 9/1/2018 (d) 

 

 

4,000,000 

 

4,041,250 

Government National Mortgage Association:

 
 

4.5%, 9/1/2034 (d)

 

 

4,000,000 

 

4,028,750 

 

5.0%, 10/1/2035 (d)

 

 

4,000,000 

 

4,074,375 

 

5.5%, 4/1/2036 (d)

 

 

4,000,000 

 

4,096,876 

**Total Mortgage-Backed Securities Pass-Throughs** (Cost $16,363,750)

 

**16,241,251**

 

**Government & Agency Obligations 42.1%**

 
**Sovereign Bonds 30.3%**

 
Aries Vermogensverwaltung GmbH, Series C, REG S, 9.6%, 10/25/2014  

 

 

2,250,000 

 

2,767,500 

Dominican Republic:

 
 

144A, 8.625%, 4/20/2027  

 

 

125,000 

 

80,000 

 

REG S, 9.5%, 9/27/2011  

 

 

638,947 

 

594,221 

Federal Republic of Germany, Series 06, 4.0%, 7/4/2016  

EUR

 

5,000,000 

 

6,774,212 

Federal Republic of Nigeria, Promissory Note, Series RC, 5.092%, 1/5/2010  

 

 

32,000 

 

4,160 

Federative Republic of Brazil:

 
 

7.875%, 3/7/2015  

 

 

1,045,000 

 

1,149,500 

 

8.875%, 10/14/2019  

 

 

950,000 

 

1,109,125 

 

11.0%, 1/11/2012  

 

 

2,270,000 

 

2,701,300 

 

12.5%, 1/5/2016  

BRL

 

1,155,000 

 

518,243 

Government of Canada, 4.5%, 6/1/2015  

CAD

 

3,250,000 

 

2,965,935 

Government of Ukraine, REG S, 7.65%, 6/11/2013  

 

 

785,000 

 

392,500 

Kingdom of Spain, 3.15%, 1/31/2016  

EUR

 

4,600,000 

 

5,527,791 

Province of Quebec, Series PO, 1.6%, 5/9/2013  

JPY

 

2,292,000,000 

 

26,342,347 

Republic of Argentina, 5.83%, 12/31/2033 (PIK)

ARS

 

438 

 

66

Republic of Bulgaria, 144A, 8.25%, 1/15/2015  

 

 

825,000 

 

845,625 

Republic of Colombia:

 
 

8.25%, 12/22/2014  

 

 

85,000 

 

92,650 

 

10.0%, 1/23/2012 (b)

 

 

1,245,000 

 

1,398,135 

 

10.75%, 1/15/2013  

 

 

335,000 

 

392,788 

Republic of El Salvador, 144A, 7.65%, 6/15/2035  

 

 

2,245,000 

 

1,706,200 

Republic of Ghana, 144A, 8.5%, 10/4/2017  

 

 

125,000 

 

82,500 

Republic of Greece:

 
 

3.6%, 7/20/2016  

EUR

 

5,500,000 

 

6,172,277 

 

4.5%, 9/20/2037  

EUR

 

7,750,000 

 

7,750,238 

Republic of Indonesia, 144A, 6.875%, 3/9/2017  

 

 

1,470,000 

 

1,153,950 

Republic of Panama:

 
 

7.125%, 1/29/2026  

 

 

630,000 

 

609,525 

 

9.375%, 1/16/2023  

 

 

2,075,000 

 

2,230,625 

Republic of Peru:

 
 

6.55%, 3/14/2037  

 

 

1,600,000 

 

1,424,000 

 

7.35%, 7/21/2025  

 

 

3,805,000 

 

3,824,025 

Republic of Philippines, 8.375%, 2/15/2011  

 

 

465,000 

 

491,737 

Republic of Turkey:

 
 

7.0%, 9/26/2016  

 

 

875,000 

 

848,750 

 

7.25%, 3/15/2015  

 

 

360,000 

 

356,400 

 

11.75%, 6/15/2010  

 

 

2,045,000 

 

2,198,375 

 

 

 

 

12.375%, 6/15/2009  

 

 

1,020,000 

 

1,044,276 

Republic of Uruguay:

 
 

7.625%, 3/21/2036  

 

 

605,000 

 

497,612 

 

9.25%, 5/17/2017  

 

 

735,000 

 

764,400 

Republic of Venezuela, 10.75%, 9/19/2013  

 

 

3,250,000 

 

2,193,750 

Russian Federation, REG S, 7.5%, 3/31/2030  

 

 

2,440,200 

 

2,256,917 

Socialist Republic of Vietnam, 144A, 6.875%, 1/15/2016  

 

 

2,050,000 

 

1,783,500 

United Kingdom Treasury Bond, 4.75%, 9/7/2015  

GBP

 

4,100,000 

 

6,445,042 

United Mexican States:

 
 

5.625%, 1/15/2017  

 

 

499,000 

 

485,028 

 

Series A, 5.875%, 1/15/2014  

 

 

1,025,000 

 

1,043,962 

 

**99,019,187**

**US Government Sponsored Agencies 1.0%**

 
Federal Home Loan Bank, 7.45% ***, 10/16/2023  

 

 

2,400,000 

 

2,400,000 

Federal National Mortgage Association, 8.45% ***, 2/27/2023  

 

 

750,000 

 

750,000 

 

**3,150,000**

**US Treasury Obligations 10.8%**

 
US Treasury Bills:

 
 

0.13% ****, 6/11/2009 (e)

 

 

2,692,000 

 

2,689,512 

 

0.16% ****, 5/21/2009 (e)

 

 

340,000 

 

339,746 

US Treasury Bonds:

 
 

4.375%, 2/15/2038 (f) 

 

 

952,000 

 

1,079,033 

 

5.25%, 11/15/2028  

 

 

3,490,000 

 

4,128,014 

US Treasury Inflation-Indexed Notes:

 
 

0.625%, 4/15/2013

 

 

4,022,560 

 

3,888,054 

 

2.0%, 4/15/2012  

 

 

4,189,960 

 

4,203,054 

US Treasury Notes:

 
 

0.875%, 12/31/2010  

 

 

9,750,000 

 

9,744,667 

 

1.5%, 12/31/2013  

 

 

5,575,000 

 

5,493,555 

 

3.75%, 11/15/2018 (f) 

 

 

3,363,000 

 

3,621,547 

 

**35,187,182**

**Total Government & Agency Obligations** (Cost $145,539,118)

 

**137,356,369**

 

**Loan Participations and Assignments 2.0%**

 
**Senior Loans*** 1.8%**

 
Advanced Medical Optics, Inc., Term Loan B, LIBOR plus 1.75%, 3.725%, 4/2/2014  

 

 

107,287

 

102,995

Buffets, Inc.:

 
 

DIP Term Loan, LIBOR plus 7.25%, 9.225%, 11/12013  

 

 

176,659 

 

33,565 

 

Letter of Credit, LIBOR plus 7.25%, 9.225%, 5/1/2013  

 

 

70,993

 

13,489

 

Term Loan B, LIBOR plus 7.25%, 9.225%, 11/1/2013  

 

 

365,121 

 

69,373 

Charter Communications Operating LLC:

 
 

Incremental Term Loan, LIBOR plus 5.0%, 6.975%, 3/6/2014  

 

 

936,850 

 

819,744 

 

Term Loan, LIBOR plus 2.0%, 3.975%, 3/6/2014  

 

 

589,534 

 

455,188 

Energy Future Holdings Corp.:

 
 

Term Loan B2, LIBOR plus 3.5%, 5.475%, 10/10/2014  

 

 

1,807,125 

 

1,260,750 

 

Term Loan B3, LIBOR plus 3.5%, 5.475%, 10/10/2014  

 

 

97,802 

 

68,413 

Essar Steel Algoma, Inc., Term Loan B, LIBOR plus 2.5%, 4.475%, 6/20/2013  

 

 

166,641 

 

109,983 

Ford Motor Co., Term Loan B, LIBOR plus 3.0%, 4.975%, 12/16/2013  

 

 

218,883 

 

80,531 

General Nutrition Centers, Inc., Term Loan B, LIBOR plus 2.25%, 4.225%, 9/16/2013  

 

 

118,492 

 

79,390 

Golden Nugget, Second Lien Term Loan, LIBOR plus 3.25%, 5.225%, 12/31/2014  

 

 

230,000 

 

31,050 

Hawker Beechcraft, Inc.:

 
 

Letter of Credit, LIBOR plus 2.1%, 4.075%, 3/26/2014  

 

 

7,214 

 

3,963 

 

Term Loan B, LIBOR plus 2.0%, 3.975%, 3/26/2014  

 

 

122,856 

 

67,483 

HCA, Inc., Term Loan A, LIBOR plus 1.5%, 3.475%, 11/17/2012  

 

 

1,518,402 

 

1,311,785 

Hexion Specialty Chemicals:

 
 

 

 

 

Term Loan C1, LIBOR plus 2.25%, 4.225%, 5/6/2013  

 

 

575,155 

 

250,673 

 

Term Loan C2, LIBOR plus 2.25%, 4.225%, 5/6/2013  

 

 

157,080 

 

68,461 

IASIS Healthcare LLC, Term Loan, LIBOR plus 5.25%, 7.225%, 6/15/2014 (PIK)  

 

 

282,138 

 

124,846 

Longview Power LLC:

 
 

Delayed Draw, LIBOR plus 2.25%, 4.225%, 2/28/2014  

 

 

53,667 

 

38,103 

 

Letter of Credit, LIBOR plus 2.25%, 4.225%, 2/28/2014  

 

 

15,333 

 

10,887 

 

Term Loan B, LIBOR plus 2.25%, 4.225%, 2/28/2014  

 

 

46,000 

 

32,660 

NewPage Corp., Term Loan, LIBOR plus 3.75%, 5.725%, 12/19/2014  

 

 

49,500 

 

28,561 

Sabre, Inc., Term Loan B, LIBOR plus 2.0%, 3.975%, 9/30/2014  

 

 

179,784 

 

82,791 

Symbion, Inc.:

 
 

Term Loan A, LIBOR plus 3.25%, 5.225%, 8/23/2013  

 

 

94,350 

 

56,610 

 

Term Loan B, LIBOR plus 3.25%, 5.225%, 8/23/2014  

 

 

94,350 

 

56,610 

Telesat Canada:

 
 

Delayed Draw Term Loan, LIBOR plus 3.0%, 4.975%, 10/31/2014  

 

 

46,608 

 

37,778 

 

Term Loan B, LIBOR plus 3.0%, 4.975%, 10/31/2014  

 

 

542,668 

 

439,851 

Tribune Co., Tranche B, LIBOR plus 3.0%, 4.975%, 5/19/2014 ** 

 

 

365,375 

 

101,278 

 

**5,836,811**

**Sovereign Loans 0.2%**

 
CSFB International (Exim Ukraine), 6.8%, 10/4/2012  

 

 

690,000 

 

240,672****

Gaz Capital (Gazprom), 144A, 6.51%, 3/7/2022  

 

 

785,000 

 

478,850 

 

 

 

 

 

**719,522**

**Total Loan Participations and Assignments** (Cost $10,089,806)

 

**6,556,333**

 

**Municipal Bonds and Notes 1.3%**

 
Tacoma, WA, Electric Systems Revenue, Series A, Prerefunded, 5.75%, 1/1/2020 (g) (Cost $4,303,160)

 

4,000,000

 

**4,392,640**

 

**Preferred Securities 0.5%**

 
**Financials**

 
Citigroup, Inc., Series E, 8.4%, 4/30/2018 (h) 

 

 

340,000 

 

124,178 

HSBC Capital Funding LP, Series 1, 144A, 9.547%, 6/30/2010 (h) 

 

 

800,000 

 

615,871 

ING Capital Funding Trust III, 8.439%, 12/31/2010 (h) 

 

 

1,600,000 

 

720,606 

Xerox Capital Trust I, 8.0%, 2/1/2027 (b) 

 

 

120,000 

 

87,950 

**Total Preferred Securities** (Cost $1,953,088)

 

**1,548,605**

 

 

 

 

 

**Units**

 

**Value ($)**

 

**Other Investments 0.0%**

 
**Materials**

 

 

 

 

Hercules, Inc., (Bond Unit), 6.5%, 6/30/2029  (Cost $271,810)

 

315,000 

 

**138,600**

 

 

 

 

 

**Shares**

 

**Value ($)**

 

**Common Stocks 0.0%**

 
**Consumer Discretionary 0.0%**

 
Vertis Holdings, Inc.*  

 

3,350 

 

**0**

**Materials 0.0%**

 
GEO Specialty Chemicals, Inc.*  

 

10,608 

 

9,017 

GEO Specialty Chemicals, Inc. 144A*  

 

966 

 

821 

**Total Common Stocks** (Cost $131,040)

 

**9,838**

 

 

 

 

**Convertible Preferred Stocks 0.0%**

 
**Consumer Discretionary**

 
ION Media Networks, Inc. 144A, 12.0%*  (Cost $13,911)

 

1 

 

**0**

 

**Warrants 0.0%**

 
**Financials 0.0%**

 
New ASAT (Finance) Ltd., Expiration Date 2/1/2011*  

 

52,000 

 

**3,757**

**Industrials 0.0%**

 
Dayton Superior Corp., 144A, Expiration Date 6/15/2009*  

 

40 

 

**0**

**Total Warrants** (Cost $0)

 

**3,757**

 

**Open End Investment Company 1.1%**

 
DWS Floating Rate Plus Fund, "Institutional" (i) (Cost $5,239,065)

 

539,137 

 

**3,666,132**

 

**Securities Lending Collateral 0.7%**

 
Daily Assets Fund Institutional, 1.25% (j) (k)(Cost $2,180,445)

 

 

2,180,445

 

**2,180,445**

 

**Cash Equivalents 9.0%**

 
Cash Management QP Trust, 1.12% (j)(Cost $29,393,279)

 

 

29,393,279

 

**29,393,279**

 

 

 

 

 

**% of****Net Assets**

 

**Value ($)**

**Total Investment Portfolio** (Cost $384,787,718) †

104.9

 

**342,408,595**

**Other Assets and Liabilities, Net**(b)

(4.9)

 

**(16,034,885)**

**Net Assets**

100.0

 

**326,373,710**

*For information on the Fund's policies regarding the valuation of investments and other significant accounting policies, please refer to the Fund's most recent semi-annual or annual financial statements.*

***

*Non-income producing security.*

****

*Non-income producing security.  Issuer has defaulted on the payment of principal or interest or has filed for bankruptcy.  The following table represents bonds that are in default:*

**Security**

 

**Coupon**

 

**Maturity****Date**

 

**Principal Amount ($)**

**Acquisition****Cost ($)**

 

**Value ($)**

 
ARCO Chemical Co.

 

9.8%

 

2/1/2020

 

1,740,000

 

USD

 

1,951,838

 

435,000

 
Ashton Woods USA LLC

 

9.5%

 

10/1/2015

 

540,000

 

USD

 

510,181

 

81,000

 
Congoleum Corp.

 

8.625%

 

8/1/2008

 

480,000

 

USD

 

451,750

 

360,000

 
Quebecor World, Inc.

 

9.75%

 

1/15/2015

 

180,000

 

USD

 

180,000

 

11,475

 
Radnor Holdings Corp.

 

11.0%

 

3/15/2010

 

100,000

 

USD

 

88,363

 

125

 
Tribune Co.

 

4.975%

 

5/24/2014

 

365,375

 

USD

 

365,147

 

101,278

 
Tropicana Entertainment LLC

 

9.625%

 

12/15/2014

 

660,000

 

USD

 

520,338

 

8,250

 
Trump Entertainment Resorts, Inc.

 

8.5%

 

6/1/2015

 

55,000

 

USD

 

56,100

 

8,113

 
Young Broadcasting, Inc.

 

8.75%

 

1/15/2014

 

1,165,000

 

USD

 

1,079,224

 

2,913

 
 

 

 

 

 

 

 

 

**5,202,941**

 

**1,008,154**

 
*****

*Floating rate notes are securities whose yields vary with a designated market index or market rate, such as the coupon-equivalent of the US Treasury bill rate.  These securities are shown at their current rate as of January 31, 2009.*

******

*Annualized yield at time of purchase; not a coupon rate.*

*†*

*The cost for federal income tax purposes was $387,129,665.  At January 31, 2009, net unrealized depreciation for all securities based on tax cost was $44,721,070.  This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $8,049,500 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $52,770,570.*

 

 

 

 
*(a)*

*Principal amount stated in US dollars unless otherwise noted.*

 
*(b)*

*All or a portion of these securities were on loan amounting to $2,079,815. In addition, included in other assets and liabilities, net is a pending sale, amounting to $7,920, that is also on loan. The value of all securities loaned at January 31, 2009 amounted to $2,087,735 which is 0.6% of net assets.*

 
*(c)*

*Security has deferred its 6/15/2008 interest payment until 6/30/2009.*

 
*(d)*

*When-issued or delayed delivery security included.*

 
*(e)*

*At January 31, 2009, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.*

 
*(f)*

*At January 31, 2009, this security has been pledged, in whole or in part, as collateral for open written options.*

 
 

 

 
*(g)*

*Bond is insured by this company:*

**Insurance Coverage**

**As a % of Total****Investment Portfolio**

 
Financial Security Assurance, Inc. 

1.3

 
 
*(h)*

*Date shown is call date; not a maturity date for the perpetual preferred securities.*

 
*(i)*

*Affiliated fund managed by Deutsche Investment Management Americas Inc.*

 
*(j)*

*Affiliated fund managed by Deutsche Investment Management Americas Inc.  The rate shown is the annualized seven-day yield at period end.*

 
*(k)*

*Represents collateral held in connection with securities lending.  Income earned by the Fund is net of borrower rebates.*

 
*144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.*

 
*LIBOR: Represents the London InterBank Offered Rate.*

 
*PIK: Denotes that all or a portion of the income is paid in kind.*

 
*Prerefunded: Bonds which are prerefunded are collateralized usually by US Treasury securities which are held in escrow and used to pay principal and interest on tax-exempt issues and to retire the bonds in full at the earliest refunding date.*

 
*REG S: Securities sold under Regulation S may not be offered, sold or delivered within the United States or to, or for the account or benefit of, US persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.*

 
 

 
*At January 31, 2009, open futures contracts purchased were as follows:*

 
**Futures**

 

**Expiration****Date**

 

**Contracts**

 

**Aggregated****Face****Value ($)**

 

**Value ($)**

 

**Unrealized****Appreciation/****(Depreciation) ($)**

 
 
 

 
10 Year Australian Treasury Bond 

 

3/16/2009 

 

26 

 

1,857,185 

 

1,908,165 

 

50,980

 
 
2 Year US Treasury Note 

 

3/31/2009 

 

63 

 

13,653,689 

 

13,710,375 

 

56,686

 
 
AEX Index 

 

2/20/2009 

 

33 

 

2,104,332 

 

2,094,069 

 

(10,263)

 
 
ASX SPI 200 Index 

 

3/19/2009 

 

19 

 

1,077,214 

 

1,054,240 

 

(22,974)

 
 
DAX Index 

 

3/20/2009 

 

3 

 

455,880 

 

416,818 

 

(39,062)

 
 
DJ Euro Stoxx 50 Index 

 

3/20/2009 

 

5 

 

155,969 

 

142,701 

 

(13,268)

 
 
Federal Republic of Germany Euro-Bund 

 

3/6/2009 

 

140 

 

22,336,597 

 

21,935,555 

 

(401,042)

 
 
Federal Republic of Germany Euro-Schatz 

 

3/6/2009 

 

151 

 

20,746,667 

 

20,842,094 

 

95,427

 
 
Hang Seng Index 

 

2/26/2009 

 

7 

 

576,628 

 

596,434 

 

19,806

 
 

 

 

S&P MIB Index 

 

3/20/2009 

 

4 

 

497,650 

 

459,459 

 

(38,191)

 
Swiss Market Index 

 

3/20/2009 

 

53 

 

2,524,201 

 

2,391,146 

 

(133,055)

 
**Total net unrealized depreciation**

**(434,956)**

 
 

 

 

 

 

 

 

 

*At January 31, 2009, open futures contracts sold were as follows:*

**Futures**

 

 

**Expiration****Date**

 

**Contracts**

 

**Aggregated****Face****Value ($)**

 

**Value ($)**

 

**Unrealized****Appreciation/****(Depreciation) ($)**

 

10 Year Canadian Government Bond 

 

3/20/2009 

 

34 

 

3,479,818 

 

3,438,679 

 

41,139

 
10 Year Japanese Government Bond 

 

3/11/2009 

 

11 

 

17,085,609 

 

17,009,072

 

76,537

 
10 Year US Treasury Note 

 

3/20/2009 

 

94 

 

11,489,315

 

11,531,157

 

(41,842)

 
CAC 40 Index 

 

2/20/2009 

 

42 

 

1,661,327 

 

1,597,440 

 

63,887

 
FTSE 100 Index 

 

3/20/2009 

 

10 

 

618,120

 

594,752

 

23,368

 
IBEX 35 Index 

 

2/20/2009 

 

1 

 

111,536 

 

107,912 

 

3,624

 
NASDAQ E-Mini 100 Index 

 

3/20/2009 

 

42 

 

1,020,483 

 

990,570 

 

29,913

 
Russell E-Mini 2000 Index 

 

3/20/2009 

 

30 

 

1,462,955 

 

1,327,800 

 

135,155

 
S&P E-Mini 500 Index 

 

3/20/2009 

 

8 

 

348,901 

 

329,000

 

19,901

 
TOPIX Index 

 

3/13/2009 

 

30 

 

2,709,301 

 

2,638,170 

 

71,131

 
United Kingdom Long Gilt Bond 

 

3/27/2009 

 

4 

 

711,188 

 

680,660 

 

30,528

 
**Total net unrealized appreciation**

**453,341**

 
 

*At January 31, 2009, open written option contracts were as follows:*

**Written Options**

 

**Contract****Amount**

 

**Expiration****Date**

 

**Value ($)***

 
**Call Options**

 
Option on an interest rate swap for the obligation to receive a fixed rate of 2.7% versus the one-year LIBOR expiring on October 13, 2010 

 

12,000,000 

 

10/13/2009

 

128,404 

 
Option on an interest rate swap for the obligation to receive a fixed rate of 3.12% versus the one-year LIBOR expiring on September 18, 2010 

 

12,000,000 

 

9/18/2009 

 

6,714 

 
**Total Call Options (Premiums received $141,900)**

 

**135,118**

 
**Put Options**

 
Option on an interest rate swap for the obligation to pay a fixed rate of 2.7% versus the one-year LIBOR expiring on October 13, 2010 

 

12,000,000 

 

10/13/2009

 

14,033 

 
 

 

 

Option on an interest rate swap for the obligation to pay a fixed rate of 3.12% versus the one-year LIBOR expiring on September 18, 2010 

 

12,000,000 

 

9/18/2009 

 

291,113 

 
**Total Put Options (Premiums received $141,900)**

 

**305,146**

 
**Total Written Options (Premiums received $283,800)**

 

**440,264**

 
 

**Unrealized depreciation at January 31, 2009 was ($156,464).*

 

 

 

*At January 31, 2009, open credit default swap contracts purchased were as follows:*

**Effective/****Expiration****Dates**

**Notional****Amount ($)**

**Fixed****Cash****Flows****Paid**

**Underlying Debt****Obligation/****Quality Rating (l)**

**Value ($)**

**Upfront Premiums****Paid/****(Received) ($)**

**Unrealized****Appreciation/****(Depreciation) ($)**

 

8/14/2008

9/20/2013

800,0001

3.0%

Expedia, Inc.,7.456%, 8/15/2018, BB

70,800

—

70,800

 
11/21/2008

12/20/2013

1,280,0002

3.5%

Kohl's Corp.,6.25%, 12/15/2017, BBB+

(56,848)

—

(56,848)

 
11/20/2008

12/22/2013

640,0003

3.15%

Allstate Corp.,6.75%, 5/15/2018, A-

(17,402)

—

(17,402)

 
12/31/2008

3/20/2014

640,0001

5.5%

Limited Brands, Inc.,6.9%, 7/15/2017, BB+

2,689

—

2,689

 
2/2/2009

3/20/2014

1,650,0001

1.15%

News America, Inc.,7.25%, 5/18/2018, BBB+

0

—

0

 
12/31/2008

3/20/2014

640,0002

7.0%

Macy's Retail Holdings, Inc.,7.45%, 7/15/2017, BBB-

(14,796)

—

(14,796)

 
12/31/2008

3/20/2014

640,0001

5.25%

Nordstrom, Inc.,6.95%, 5/15/2028, A-

22,380

—

22,380

 
1/16/2009

3/20/2014

640,0002

6.5%

Starwood Hotels & Resorts Worldwide, Inc.,7.875%, 5/1/2012, BB+

1,425

—

1,425

 
**Total net unrealized appreciation**

**8,248**

 
 

*At January 31, 2009, open credit default swap contracts sold were as follows:*

**Effective/****Expiration****Dates**

**Notional****Amount ($) (m)**

**Fixed****Cash****Flows****Received**

**Underlying Debt****Obligation/****Quality Rating (l)**

**Value ($)**

**Upfront Premiums****Paid/****(Received) ($)**

**Unrealized****Appreciation  ($)**

 

2/14/2008

3/20/2009

225,0004

3.8%

HCA, Inc.,6.375%, 1/15/2015, B-

267

—

267

 
2/26/2008

3/20/2009

275,0004

5.0%

Tenet Healthcare Corp.,7.375%, 2/1/2013, B

628

—

628

 
**Total unrealized appreciation**

**895**

 
*(l)*

*The quality ratings represent the lower of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings.*

*(m)*

*The maximum potential amount of future undiscounted payments that the Fund could be required to make under a credit default swap contract would be the notional amount of the contract.  These potential amounts would be partially offset by any recovery values of the referenced debt obligation or net amounts received from the settlement of buy protection credit default swap contracts entered into by the Fund for the same referenced debt obligation.*

*At January 31, 2009, open total return swap contracts were as follows:*

 

 

 

**Effective/****Expiration****Dates**

**Notional****Amount ($)**

**Fixed****Cash****Flows****Paid**

**Reference Entity**

**Value ($)**

**Upfront Premiums****Paid/****(Received) ($)**

**Unrealized****Appreciation  ($)**

 

12/1/2008 1/12/2010

8,200,0002

0.35%

Citi Global Interest Rate Strategy Index

722,476

16,400

**706,076**

 
 

*Counterparties:*

*1*

*JPMorgan Chase Securities, Inc.*

*2*

*Citigroup, Inc.*

*3*

*Bank of America Securities LLC*

*4*

*Merrill Lynch, Pierce, Fenner & Smith, Inc.*

 

 

*As of January 31, 2009, the Fund had the following open forward foreign currency exchange contracts:*

**Contracts to Deliver**

 

**In Exchange For**

 

**Settlement****Date**

 

**Unrealized****Appreciation ($)**

 
 
USD

255,783

 

CAD

319,000

 

2/18/2009

 

2,153

 
GBP

897,000

 

USD

1,311,311

 

2/18/2009

 

18,454

 
EUR

1,917,800

 

USD

2,519,117

 

2/20/2009

 

64,269

 
EUR

87,800

 

USD

115,329

 

2/20/2009

 

2,942

 
EUR

50,500

 

USD

65,021

 

2/20/2009

 

380

 
EUR

9,800

 

USD

12,715

 

2/20/2009

 

171

 
USD

3,577,300

 

GBP

2,500,000

 

2/27/2009

 

25,473

 
JPY

700,000,000

 

USD

7,840,072

 

2/27/2009

 

45,827

 
**Total unrealized appreciation**

 

 

 

 

 

**159,669**

 
 
**Contracts to Deliver**

 

**In Exchange For**

 

**Settlement****Date**

 

**Unrealized****Depreciation ($)**

 
 
USD

6,067,259

 

SEK

50,769,000

 

2/18/2009

 

(844)

 
USD

2,876,042

 

AUD

4,334,000

 

2/18/2009

 

(115,914)

 
USD

2,372,872

 

NZD

4,427,000

 

2/18/2009

 

(126,395)

 
USD

1,004,637

 

JPY

89,700,000

 

2/18/2009

 

(6,007)

 
USD

6,300,802

 

SGD

9,426,000

 

2/18/2009

 

(62,844)

 
USD

30,360

 

EUR

23,000

 

2/18/2009

 

(920)

 
NOK

51,987,000

 

USD

7,243,263

 

2/18/2009

 

(262,791)

 
USD

1,328,764

 

EUR

1,000,000

 

2/27/2009

 

(48,944)

 
**Total unrealized depreciation**

 

 

 

 

 

**(624,659)**

 
 
 

***Currency Abbreviations*****

 **

 **

*ARS***

*Argentine Peso***

*JPY***

*Japanese Yen***

*AUD***

*Australian Dollar***

*NOK***

*Norwegian Krone***

*BRL***

*Brazilian Real***

*NZD***

*New Zealand Dollar***

*CAD***

*Canadian Dollar***

*SEK***

*Swedish Krona***

*EUR***

*Euro***

*SGD***

*Singapore Dollar***

*GBP***

*British Pound***

*USD*

*United States Dollar***

 

 

***Fair Value Measurements***

 

*Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, “Fair Value Measurements," establishes a three-tier hierarchy for measuring fair value and requires additional disclosure about the classification of fair value measurements.*

 

*Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.*

 

*The following is a summary of the inputs used as of January 31, 2009 in valuing the Fund's investments. Please see below for information on the Fund’s policy regarding valuation inputs, and their aggregate levels used in the table below:*

 

 

**Valuation Inputs**

**Investments in  Securities**

**Options Written, at Value**

**Other Financial Instruments***††*

Level 1 

$                 5,846,577   

$                (440,264)      

$                    18,385   

Level 2 

329,414,374   

-                    

250,229  

Level 3 

7,147,644   

-                      

-   

**Total**

**$              342,408,595**

**$               (440,264)**

**$                 268,614**

 

*†† Other financial instruments are derivative instruments not reflected in the Investment Portfolio, such as futures contracts, forward foreign currency exchange contracts, credit default and total return swap contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.*

 

*The following is a reconciliation of the Fund's Level 3 investments for which significant unobservable inputs were used in determining the value at January 31, 2009:*

 

 

 

**Investments in  Securities**

**Balance as of  November 1, 2008**

$                  7,137,248

Total realized gain (loss)

(17,040)

Change in unrealized appreciation (depreciation)

(349,586)   

Amortization Premium/Discount

3,263

Net purchases (sales)

15,662   

Net transfers in (out) of Level 3 

358,097   

**Balance as of January 31, 2009**

**$                 7,147,644**

 

 

**ITEM 2.**

**CONTROLS AND PROCEDURES**

 

 

 

(a)          The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

 

 

 

(b)          There have been 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 controls over financial reporting.

 

 

**ITEM 3.**

**EXHIBITS**

 

 

 

Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.

 

 

**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: 

DWS Strategic Income Fund

 

By:

/s/Michael G. Clark

 

Michael G. Clark

President

 

Date:

March 23, 2009

 

 

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.

 

Registrant: 

DWS Strategic Income Fund

 

By:

/s/Michael G. Clark

 

Michael G. Clark

President

 

Date:

March 23, 2009

 

 

By:

/s/Paul Schubert

 

Paul Schubert

Chief Financial Officer and Treasurer

 

Date:                                        March 23, 2009

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