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  811-8382

DWS Strategic Income Trust

(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:  11/30

Date of reporting period: 08/31/08

 

ITEM 1.  SCHEDULE OF INVESTMENTS

 

| Investment Portfolio | **as of August 31, 2008 (Unaudited)** |
|----------------------|---------------------------------------|

 

 

**DWS Strategic Income Trust**

 

 

|   | **Principal****Amount ($) (a)** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | **Value ($)** |
|--------|---------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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|        |
|   | **Corporate Bonds 64.3%**       |  
**Consumer Discretionary 9.8%**

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

 

 

165,000 

 

148,912 

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

 

 

25,000 

 

24,500 

American Achievement Group Holding Corp., 14.75%, 10/1/2012 (PIK) (b)

 

 

51,048 

 

48,623 

Asbury Automotive Group, Inc.:

 
 

7.625%, 3/15/2017 (b) 

 

 

55,000 

 

39,325 

 

8.0%, 3/15/2014 (b) 

 

 

55,000 

 

42,900 

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

 

 

120,000 

 

106,800 

Burlington Coat Factory Warehouse Corp., 11.125%, 4/15/2014  

 

 

35,000 

 

25,288 

Cablevision Systems Corp., Series B, 7.133% ***, 4/1/2009  

 

 

35,000 

 

35,175 

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

 

 

55,000 

 

42,900 

 

 

 

Carrols Corp., 9.0%, 1/15/2013 (b)

 

 

30,000 

 

25,350 

Charter Communications Operating LLC, 144A, 10.875%, 9/15/2014 

 

 

235,000 

 

246,750 

CSC Holdings, Inc.:

 
 

6.75%, 4/15/2012 (b) 

 

 

75,000 

 

73,125 

 

Series B, 7.625%, 4/1/2011 

 

 

60,000 

 

60,300 

 

Series B, 8.125%, 7/15/2009 

 

 

310,000 

 

314,262 

 

Series B, 8.125%, 8/15/2009 

 

 

130,000 

 

131,950 

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

 

 

20,000 

 

19,200 

DirecTV Holdings LLC, 144A, 7.625%, 5/15/2016  

 

 

190,000 

 

189,525 

Dollarama Group LP, 8.883% ***, 8/15/2012 (c)

 

 

57,000 

 

53,010 

EchoStar DBS Corp.:

 
 

6.375%, 10/1/2011 

 

 

100,000 

 

97,750 

 

6.625%, 10/1/2014 

 

 

95,000 

 

87,400 

 

7.125%, 2/1/2016 

 

 

90,000 

 

82,800 

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

 

 

70,000 

 

33,075 

General Motors Corp.:

 
 

7.4%, 9/1/2025 

 

 

40,000 

 

18,000 

 

8.375%, 7/15/2033 

 

 

110,000 

 

54,450 

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

 

 

50,000 

 

47,125 

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

 

 

35,000 

 

31,850 

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

 

 

205,000 

 

191,931 

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

 

 

160,000 

 

72,400 

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

 

 

45,000 

 

35,775 

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

 

 

65,000 

 

46,475 

Kabel Deutschland GmbH, 10.625%, 7/1/2014 (b)

 

 

150,000 

 

154,125 

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

 

 

45,000 

 

39,881 

Liberty Media LLC:

 
 

5.7%, 5/15/2013 (b) 

 

 

10,000 

 

8,819 

 

8.25%, 2/1/2030 

 

 

85,000 

 

71,837 

 

8.5%, 7/15/2029 (b) 

 

 

115,000 

 

98,058 

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

 

 

25,000 

 

25,000 

MGM MIRAGE:

 
 

6.0%, 10/1/2009 

 

 

50,000 

 

49,000 

 

6.625%, 7/15/2015 

 

 

45,000 

 

35,888 

 

6.75%, 9/1/2012 (b) 

 

 

90,000 

 

77,400 

 

8.375%, 2/1/2011 (b) 

 

 

75,000 

 

68,062 

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

 

 

80,000 

 

77,800 

Norcraft Holdings LP, Step-up Coupon, 0% to 9/1/2008, 9.75% to 9/1/2012    

 

 

185,000 

 

164,650 

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

 

 

145,000 

 

117,631 

Pinnacle Entertainment, Inc., 8.75%, 10/1/2013 (b)

 

 

70,000 

 

69,125 

Quebecor Media, Inc., 7.75%, 3/15/2016 (b)

 

 

45,000 

 

42,300 

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

 

 

55,000 

 

24,750 

Quiksilver, Inc., 6.875%, 4/15/2015 (b)

 

 

100,000 

 

80,250 

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

 

 

55,000 

 

32,588 

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

 

 

60,000 

 

40,800 

Seminole Hard Rock Entertainment, Inc., 144A, 5.276% ***, 3/15/2014  

 

 

80,000 

 

64,000 

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

 

 

205,000 

 

210,381 

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

 

 

55,000 

 

44,688 

Simmons Co.:

 
 

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

 

 

210,000 

 

132,300 

 

7.875%, 1/15/2014 

 

 

25,000 

 

19,875 

Sinclair Television Group, Inc., 8.0%, 3/15/2012 (b)

 

 

64,000 

 

62,560 

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

 

 

150,000 

 

117,375 

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

 

 

65,000 

 

50,050 

Time Warner, Inc., 9.125%, 1/15/2013  

 

 

270,000 

 

294,682 

Travelport LLC:

 
 

 

 

 

7.307% ***, 9/1/2014 

 

 

50,000 

 

39,375 

 
 

9.875%, 9/1/2014 

 

 

55,000 

 

44,963 

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

 

 

55,000 

 

25,163 

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

 

 

10,000 

 

8,900 

 
Unity Media GmbH, 144A, 8.75%, 2/15/2015  

EUR

 

205,000 

 

283,452 

 
Univision Communications, Inc., 144A, 9.75%, 3/15/2015 (PIK) 

 

 

55,000 

 

39,325 

 
UPC Holding BV:

 
 

144A, 7.75%, 1/15/2014 

EUR

 

105,000 

 

140,947 

 
 

144A, 8.0%, 11/1/2016 

EUR

 

50,000 

 

64,550 

 
Videotron Ltd., 144A, 9.125%, 4/15/2018  

 

 

45,000 

 

47,306 

 
Vitro SAB de CV:

 
 

9.125%, 2/1/2017 

 

 

200,000 

 

155,000 

 
 

11.75%, 11/1/2013 

 

 

25,000 

 

23,313 

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

 

 

319,000 

 

104,472 

 
 
 

**5,677,567**

 
**Consumer Staples 2.0%**

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

 

 

35,000 

 

32,813 

 
Delhaize America, Inc.:

 
 

8.05%, 4/15/2027 

 

 

15,000 

 

15,991 

 
 

9.0%, 4/15/2031 

 

 

156,000 

 

180,896 

 
General Nutrition Centers, Inc., 7.199% ***, 3/15/2014 (PIK) 

 

 

55,000 

 

47,781 

 
Harry & David Operations Corp., 7.682% ***, 3/1/2012  

 

 

50,000 

 

31,500 

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

 

 

253,750 

 

195,387 

 
Smithfield Foods, Inc., 7.75%, 7/1/2017  

 

 

45,000 

 

40,275 

 
Tyson Foods, Inc., 8.25%, 10/1/2011  

 

 

120,000 

 

121,368 

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

 

 

630,000 

 

510,300 

 
 
 

**1,176,311**

 
**Energy 10.1%**

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

 

 

160,000 

 

160,800 

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

 

 

300,000 

 

305,250 

 
Chaparral Energy, Inc.:

 
 

8.5%, 12/1/2015 

 

 

100,000 

 

87,000 

 
 

8.875%, 2/1/2017 

 

 

65,000 

 

56,388 

 
Chesapeake Energy Corp.:

 
 

6.25%, 1/15/2018 

 

 

40,000 

 

36,600 

 
 

6.875%, 1/15/2016 

 

 

260,000 

 

249,600 

 
 

7.25%, 12/15/2018 

 

 

130,000 

 

126,750 

 
 

7.5%, 6/15/2014 (b) 

 

 

30,000 

 

30,150 

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

 

 

45,000 

 

43,875 

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

 

 

170,000 

 

171,765 

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

 

 

145,000 

 

113,825 

 
Dynegy Holdings, Inc.:

 
 

6.875%, 4/1/2011 (b) 

 

 

15,000 

 

14,775 

 

8.375%, 5/1/2016 

 

 

110,000 

 

107,662 

El Paso Corp.:

 
 

7.25%, 6/1/2018 (b) 

 

 

110,000 

 

108,075 

 

9.625%, 5/15/2012 

 

 

45,000 

 

48,071 

Energy Transfer Partners LP, 6.0%, 7/1/2013  

 

 

205,000 

 

206,942 

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

 

 

94,000 

 

93,060 

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

 

 

40,000 

 

36,800 

Frontier Oil Corp., 6.625%, 10/1/2011 (b)

 

 

40,000 

 

38,900 

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

 

 

300,000 

 

254,220 

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

 

 

210,000 

 

210,986 

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

 

 

355,000 

 

335,475 

Mariner Energy, Inc.:

 
 

 

 

 

7.5%, 4/15/2013 

 

 

70,000 

 

65,450 

 

8.0%, 5/15/2017 

 

 

70,000 

 

64,050 

Newfield Exploration Co., 7.125%, 5/15/2018 (b)

 

 

115,000 

 

108,387 

OPTI Canada, Inc.:

 
 

7.875%, 12/15/2014 

 

 

90,000 

 

88,987 

 

8.25%, 12/15/2014 

 

 

225,000 

 

224,719 

Pemex Project Funding Master Trust, 144A, 5.75%, 3/1/2018  

 

 

200,000 

 

196,491 

Petrobras International Finance Co., 5.875%, 3/1/2018  

 

 

120,000 

 

117,115 

Petrohawk Energy Corp.:

 
 

144A, 7.875%, 6/1/2015  

 

 

75,000 

 

69,937 

 

9.125%, 7/15/2013  

 

 

65,000 

 

64,675 

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

 

 

145,000 

 

177,225 

Plains Exploration & Production Co.:

 
 

7.0%, 3/15/2017 

 

 

55,000 

 

49,500 

 

7.625%, 6/1/2018 

 

 

140,000 

 

131,950 

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

 

 

165,000 

 

143,550 

Range Resources Corp., 7.25%, 5/1/2018  

 

 

10,000 

 

9,700 

Sabine Pass LNG LP, 7.5%, 11/30/2016  

 

 

105,000 

 

91,875 

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

 

 

55,000 

 

51,563 

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

 

 

80,000 

 

81,800 

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

 

 

65,000 

 

48,425 

Stone Energy Corp.:

 
 

6.75%, 12/15/2014 

 

 

135,000 

 

115,425 

 

8.25%, 12/15/2011 (b) 

 

 

200,000 

 

194,000 

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

 

 

45,000 

 

46,095 

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

 

 

85,000 

 

71,187 

Whiting Petroleum Corp.:

 
 

7.0%, 2/1/2014 

 

 

65,000 

 

61,750 

 

7.25%, 5/1/2012 

 

 

125,000 

 

120,625 

 

7.25%, 5/1/2013 

 

 

30,000 

 

28,800 

Williams Companies, Inc.:

 
 

8.125%, 3/15/2012 

 

 

235,000 

 

249,687 

 

8.75%, 3/15/2032 

 

 

275,000 

 

309,375 

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

 

 

40,000 

 

40,100 

 

**5,859,412**

**Financials 8.1%**

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

 

 

170,000 

 

163,200 

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

 

 

165,000 

 

90,750 

Bank of America Corp., 5.75%, 12/1/2017  

 

 

170,000 

 

158,587 

Bank of New York Mellon Corp., 5.125%, 8/27/2013 (b)

 

 

305,000 

 

305,865 

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

 

 

35,000 

 

19,600 

Citigroup, Inc., 6.5%, 8/19/2013 (b)

 

 

285,000 

 

285,311 

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

 

 

267,000 

 

293,700 

 

 
Ford Motor Credit Co., LLC:

 
 

7.25%, 10/25/2011 

 

 

450,000 

 

344,718 

 

7.375%, 10/28/2009 

 

 

420,000 

 

390,358 

 

7.875%, 6/15/2010 

 

 

220,000 

 

189,646 

General Electric Capital Corp., 5.625%, 5/1/2018 (b)

 

 

190,000 

 

184,722 

GMAC LLC, 6.875%, 9/15/2011  

 

 

950,000 

 

589,513 

Hawker Beechcraft Acquisition Co., LLC:

 
 

8.5%, 4/1/2015 

 

 

135,000 

 

136,013 

 

8.875%, 4/1/2015 (PIK) (b) 

 

 

90,000 

 

89,775 

 

9.75%, 4/1/2017 

 

 

150,000 

 

147,000 

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

 

 

30,000 

 

24,975 

Inmarsat Finance II PLC, Step-up Coupon, 0% to 11/15/2008, 10.375% to 11/15/2012    

 

 

195,000 

 

198,656 

 

 

 

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

 

 

60,000 

 

50,250 

JPMorgan Chase Bank NA, 6.0%, 10/1/2017  

 

 

250,000 

 

241,999 

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

 

 

55,000 

 

40,700 

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

 

 

90,000 

 

57,375 

NiSource Finance Corp., 6.15%, 3/1/2013  

 

 

210,000 

 

208,581 

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

 

 

75,000 

 

74,906 

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

 

 

10,000 

 

10,638 

Sprint Capital Corp.:

 
 

7.625%, 1/30/2011 (b) 

 

 

80,000 

 

80,000 

 

8.375%, 3/15/2012 

 

 

30,000 

 

30,225 

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

 

 

190,000 

 

60,800 

UCI Holdco, Inc., 10.276% ***, 12/15/2013 (PIK) (b)

 

 

59,681 

 

45,954 

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

 

 

200,000 

 

202,500 

 

**4,716,317**

**Health Care 3.2%**

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

 

 

150,000 

 

134,250 

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

 

 

85,000 

 

84,363 

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

 

 

605,000 

 

611,050 

HCA, Inc.:

 
 

9.125%, 11/15/2014 (b) 

 

 

90,000 

 

92,475 

 

9.25%, 11/15/2016 

 

 

270,000 

 

277,762 

 

9.625%, 11/15/2016 (PIK)

 

 

90,000 

 

90,787 

HEALTHSOUTH Corp., 10.75%, 6/15/2016 (b)

 

 

50,000 

 

53,750 

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

 

 

70,000 

 

70,175 

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

 

 

65,000 

 

63,050 

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

 

 

65,000 

 

56,550 

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

 

 

80,000 

 

76,800 

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

 

 

75,000 

 

67,313 

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

 

 

180,000 

 

176,850 

 

**1,855,175**

**Industrials 6.8%**

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

 

 

50,000 

 

49,000 

Allied Security Escrow Corp., 11.375%, 7/15/2011  

 

 

70,000 

 

73,937 

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

 

 

95,000 

 

95,475 

American Color Graphics, Inc., 10.0%, 6/15/2010 **

 

 

90,000 

 

16,200 

American Color Graphics, Inc., 144A, Promissory Note due 9/15/2008 (d)

 

 

5,400 

 

0 

ARAMARK Corp.:

 
 

6.301% ***, 2/1/2015 

 

 

75,000 

 

69,750 

 

8.5%, 2/1/2015 

 

 

30,000 

 

30,225 

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

 

 

60,000 

 

60,750 

BE Aerospace, Inc., 8.5%, 7/1/2018 (b)

 

 

150,000 

 

156,375 

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

 

 

40,000 

 

37,800 

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

 

 

220,000 

 

218,900 

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

 

 

75,000 

 

72,000 

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

 

 

130,000 

 

118,300 

Building Materials Corp. of America, 7.75%, 8/1/2014  

 

 

75,000 

 

61,875 

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

 

 

65,000 

 

63,537 

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

 

 

100,000 

 

75,000 

DRS Technologies, Inc.:

 
 

6.625%, 2/1/2016 

 

 

40,000 

 

41,200 

 

6.875%, 11/1/2013 

 

 

225,000 

 

227,812 

 

7.625%, 2/1/2018 

 

 

185,000 

 

194,712 

Education Management LLC, 8.75%, 6/1/2014  

 

 

50,000 

 

45,563 

Esco Corp., 144A, 8.625%, 12/15/2013  

 

 

245,000 

 

246,225 

 

 

 

General Cable Corp.:

 
 

5.166% ***, 4/1/2015 

 

 

65,000 

 

56,225 

 

7.125%, 4/1/2017 (b) 

 

 

55,000 

 

52,250 

Gibraltar Industries, Inc., Series B, 8.0%, 12/1/2015  

 

 

35,000 

 

29,838 

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

 

 

50,000 

 

46,375 

Harland Clarke Holdings Corp., 9.5%, 5/15/2015  

 

 

55,000 

 

43,175 

K. Hovnanian Enterprises, Inc.:

 
 

8.875%, 4/1/2012 

 

 

220,000 

 

149,600 

 

144A, 11.5%, 5/1/2013 

 

 

10,000 

 

10,213 

Kansas City Southern de Mexico SA de CV:

 
 

7.375%, 6/1/2014 

 

 

160,000 

 

156,000 

 

7.625%, 12/1/2013 (b) 

 

 

110,000 

 

107,800 

 

9.375%, 5/1/2012 

 

 

185,000 

 

193,325 

Kansas City Southern Railway Co.:

 
 

7.5%, 6/15/2009 (b) 

 

 

75,000 

 

75,844 

 

8.0%, 6/1/2015 (b) 

 

 

115,000 

 

117,587 

Mobile Services Storage Group, Inc., 9.75%, 8/1/2014  

 

 

70,000 

 

66,500 

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

 

 

25,000 

 

24,500 

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

 

 

70,000 

 

66,850 

Ply Gem Industries, Inc., 144A, 11.75%, 6/15/2013  

 

 

45,000 

 

40,950 

R.H. Donnelley Corp., Series A, 8.875%, 10/15/2017 (b)

 

 

210,000 

 

108,150 

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

 

 

55,000 

 

53,625 

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

 

 

35,000 

 

31,063 

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

 

 

205,000 

 

202,950 

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

 

 

55,000 

 

53,487 

United Rentals North America, Inc.:

 
 

6.5%, 2/15/2012 (b) 

 

 

120,000 

 

107,100 

 

7.0%, 2/15/2014 

 

 

150,000 

 

113,250 

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

 

 

60,000 

 

49,800 

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

 

 

35,000 

 

32,288 

 

**3,943,381**

**Information Technology 2.8%**

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

 

 

95,000 

 

65,075 

Freescale Semiconductor, Inc., 8.875%, 12/15/2014  

 

 

195,000 

 

157,950 

L-3 Communications Corp.:

 
 

5.875%, 1/15/2015 

 

 

180,000 

 

169,650 

 

Series B, 6.375%, 10/15/2015 (b) 

 

 

175,000 

 

167,562 

 

7.625%, 6/15/2012 

 

 

360,000 

 

366,300 

Lucent Technologies, Inc., 6.45%, 3/15/2029 (b)

 

 

205,000 

 

142,475 

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

 

 

115,000 

 

98,325 

NXP BV, 7.713% ***, 10/15/2013  

EUR

 

105,000 

 

117,841 

Sanmina-SCI Corp., 144A, 5.526% ***, 6/15/2010  

 

 

27,000 

 

26,730 

Seagate Technology HDD Holdings, 6.8%, 10/1/2016  

 

 

115,000 

 

102,638 

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

 

 

140,000 

 

141,050 

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

 

 

45,000 

 

38,250 

 

**1,593,846**

**Materials 7.2%**

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

 

 

25,000 

 

22,875 

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

 

 

385,000 

 

279,125 

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

 

 

161,000 

 

136,045 

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

 

 

130,000 

 

109,850 

Clondalkin Acquisition BV, 144A, 4.776% ***, 12/15/2013  

 

 

75,000 

 

62,250 

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

 

 

120,000 

 

92,400 

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

 

 

175,000 

 

153,563 

Freeport-McMoRan Copper & Gold, Inc.:

 
 

 

 

 

8.25%, 4/1/2015 

 

 

360,000 

 

378,000 

 

8.375%, 4/1/2017 

 

 

500,000 

 

530,000 

GEO Specialty Chemicals, Inc.:

 
 

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

 

 

97,048 

 

72,665 

 

144A, 10.698% ***, 12/31/2009 

 

 

163,000 

 

122,046 

Georgia-Pacific LLC:

 
 

144A, 7.125%, 1/15/2017 

 

 

40,000 

 

37,100 

 

9.5%, 12/1/2011 

 

 

45,000 

 

45,675 

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

 

 

250,000 

 

242,500 

Huntsman LLC, 11.625%, 10/15/2010  

 

 

201,000 

 

208,035 

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

 

 

25,000 

 

25,625 

Jefferson Smurfit Corp., 8.25%, 10/1/2012  

 

 

140,000 

 

121,800 

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

 

 

165,000 

 

146,850 

Metals USA Holding Corp., 8.791% ***, 7/1/2012 (PIK) 

 

 

40,000 

 

36,100 

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

 

 

30,000 

 

18,300 

Momentive Performance Materials, Inc., 9.75%, 12/1/2014  

 

 

160,000 

 

144,400 

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

 

 

135,000 

 

130,950 

NewPage Corp., 10.0%, 5/1/2012 (b)

 

 

105,000 

 

101,850 

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

EUR

 

50,000 

 

67,484 

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

 

 

10 

 

9 

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

 

 

20,000 

 

25 

Rhodia SA, 144A, 7.713% ***, 10/15/2013  

EUR

 

50,000 

 

67,118 

Smurfit-Stone Container Enterprises, Inc.:

 
 

8.0%, 3/15/2017 (b) 

 

 

120,000 

 

96,000 

 

8.375%, 7/1/2012 

 

 

50,000 

 

43,875 

Steel Dynamics, Inc.:

 
 

6.75%, 4/1/2015 

 

 

50,000 

 

46,625 

 

7.375%, 11/1/2012 

 

 

20,000 

 

19,800 

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

 

 

130,000 

 

126,425 

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

 

 

395,000 

 

408,482 

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

 

 

45,000 

 

28,800 

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

 

 

70,000 

 

64,400 

 

**4,187,047**

**Telecommunication Services 7.1%**

 
BCM Ireland Preferred Equity Ltd., 144A, 11.964% ***, 2/15/2017 (PIK) 

EUR

 

59,285 

 

42,151 

Centennial Communications Corp.:

 
 

10.0%, 1/1/2013 

 

 

45,000 

 

46,800 

 

10.125%, 6/15/2013 

 

 

195,000 

 

203,288 

Cincinnati Bell, Inc.:

 
 

7.25%, 7/15/2013 

 

 

120,000 

 

115,350 

 

8.375%, 1/15/2014 (b) 

 

 

65,000 

 

61,506 

Cricket Communications, Inc.:

 
 

9.375%, 11/1/2014 

 

 

115,000 

 

113,994 

 

144A, 10.0%, 7/15/2015 

 

 

130,000 

 

130,650 

Embratel, Series B, 11.0%, 12/15/2008  

 

 

44,000 

 

44,825 

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

 

 

19,232 

 

17,116 

Hellas Telecommunications Luxembourg V, 144A, 8.463% ***, 10/15/2012  

EUR

 

200,000 

 

259,668 

 

 

 

 

 

 

 

Intelsat Corp.:

 
 

144A, 9.25%, 8/15/2014 

 

 

25,000 

 

24,938 

 

144A, 9.25%, 6/15/2016 

 

 

365,000 

 

361,350 

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

 

 

155,000 

 

153,256 

iPCS, Inc., 4.926% ***, 5/1/2013  

 

 

30,000 

 

26,625 

MetroPCS Wireless, Inc., 9.25%, 11/1/2014  

 

 

160,000 

 

158,600 

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

 

 

530,000 

 

559,150 

 

 

 

Nortel Networks Ltd.:

 
 

7.041% ***, 7/15/2011 

 

 

90,000 

 

83,475 

 

144A, 10.75%, 7/15/2016 

 

 

90,000 

 

83,250 

Orascom Telecom Finance, 144A, 7.875%, 2/8/2014 (b)

 

 

100,000 

 

91,620 

Qwest Corp.:

 
 

7.25%, 9/15/2025 

 

 

20,000 

 

16,100 

 

7.875%, 9/1/2011 

 

 

210,000 

 

208,425 

 

8.875%, 3/15/2012 

 

 

40,000 

 

40,300 

Rogers Communications, Inc., 6.8%, 8/15/2018  

 

 

185,000 

 

187,604 

Rural Cellular Corp., 9.875%, 2/1/2010  

 

 

170,000 

 

174,250 

Sprint Nextel Corp., 6.0%, 12/1/2016 (b)

 

 

65,000 

 

59,313 

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

 

 

30,000 

 

31,200 

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

 

 

160,000 

 

147,200 

US Unwired, Inc., Series B, 10.0%, 6/15/2012 (b)

 

 

90,000 

 

94,500 

Verizon Communications, Inc., 5.5%, 2/15/2018  

 

 

210,000 

 

200,841 

Virgin Media Finance PLC:

 
 

8.75%, 4/15/2014 

 

 

150,000 

 

143,250 

 

8.75%, 4/15/2014 

EUR

 

90,000 

 

119,491 

West Corp., 9.5%, 10/15/2014  

 

 

65,000 

 

55,413 

Windstream Corp., 7.0%, 3/15/2019  

 

 

90,000 

 

78,750 

 

**4,134,249**

**Utilities 7.2%**

 
AES Corp.:

 
 

8.0%, 10/15/2017 

 

 

150,000 

 

147,750 

 

144A, 8.0%, 6/1/2020 

 

 

125,000 

 

119,687 

 

144A, 8.75%, 5/15/2013 

 

 

393,000 

 

406,755 

 

9.5%, 6/1/2009 

 

 

105,000 

 

107,362 

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

 

 

550,000 

 

577,500 

CenterPoint Energy, Inc., Series B, 7.25%, 9/1/2010  

 

 

125,000 

 

128,570 

CMS Energy Corp., 8.5%, 4/15/2011 (b)

 

 

285,000 

 

299,709 

Edison Mission Energy, 7.0%, 5/15/2017 (b)

 

 

160,000 

 

153,200 

Energy Future Holdings Corp., 144A, 10.875%, 11/1/2017  

 

 

170,000 

 

174,037 

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

 

 

425,000 

 

410,125 

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

 

 

50,000 

 

50,125 

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

 

 

55,000 

 

54,450 

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

 

 

195,000 

 

198,900 

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

 

 

35,000 

 

34,738 

NRG Energy, Inc.:

 
 

7.25%, 2/1/2014 

 

 

140,000 

 

138,075 

 

7.375%, 2/1/2016 

 

 

100,000 

 

98,750 

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

 

 

45,000 

 

44,339 

Orion Power Holdings, Inc., 12.0%, 5/1/2010  

 

 

330,000 

 

356,400 

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

 

 

85,000 

 

86,700 

Reliant Energy, Inc., 7.875%, 6/15/2017 (b)

 

 

155,000 

 

149,575 

Sierra Pacific Resources:

 
 

6.75%, 8/15/2017 

 

 

140,000 

 

136,212 

 

8.625%, 3/15/2014 

 

 

33,000 

 

34,515 

Texas Competitive Electric Holdings Co., LLC, 144A, 10.25%, 11/1/2015  

 

 

250,000 

 

249,375 

 

**4,156,849**

**Total Corporate Bonds** (Cost $40,682,805)

 

**37,300,154**

 

**Government & Agency Obligations 48.1%**

 
**Sovereign Bonds**

 
Dominican Republic:

 
 

144A, 8.625%, 4/20/2027 

 

 

115,000 

 

106,950 

 

 

 

 

Series REG S, 9.5%, 9/27/2011 

 

 

230,548 

 

235,159 

Federative Republic of Brazil:

 
 

6.0%, 1/17/2017 

 

 

2,300,000 

 

2,355,200 

 

7.125%, 1/20/2037 

 

 

570,000 

 

634,695 

 

7.875%, 3/7/2015 

 

 

540,000 

 

613,494 

 

8.75%, 2/4/2025 

 

 

460,000 

 

575,000 

 

8.875%, 10/14/2019 

 

 

660,000 

 

819,060 

 

11.0%, 8/17/2040 (b) 

 

 

1,245,000 

 

1,644,645 

 

12.5%, 1/5/2016 

BRL

 

625,000 

 

395,152 

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

 

 

460,000 

 

441,513 

Republic of Argentina:

 
 

3.127% ***, 8/3/2012 (PIK)

 

 

867,500 

 

688,523 

 

5.83%, 12/31/2033 (PIK)

ARS

 

551 

 

168

Republic of Colombia:

 
 

7.375%, 1/27/2017 (b) 

 

 

270,000 

 

297,000 

 

8.25%, 12/22/2014 

 

 

80,000 

 

91,200 

 

10.0%, 1/23/2012 

 

 

665,000 

 

771,400 

 

10.75%, 1/15/2013 

 

 

200,000 

 

242,200 

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

 

 

885,000 

 

911,550 

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

 

 

100,000 

 

99,500 

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

 

 

625,000 

 

628,125 

Republic of Panama:

 
 

7.125%, 1/29/2026 

 

 

407,000 

 

435,490 

 

9.375%, 1/16/2023 

 

 

665,000 

 

844,550 

Republic of Peru, 7.35%, 7/21/2025 (b)

 

 

2,015,000 

 

2,256,800 

Republic of Philippines:

 
 

7.75%, 1/14/2031 (b) 

 

 

215,000 

 

235,425 

 

8.0%, 1/15/2016 

 

 

1,055,000 

 

1,163,137 

 

8.375%, 2/15/2011 

 

 

205,000 

 

217,567 

 

9.375%, 1/18/2017 

 

 

325,000 

 

388,375 

Republic of South Africa, 6.5%, 6/2/2014  

 

 

1,960,000 

 

2,013,900 

Republic of Turkey:

 
 

7.0%, 9/26/2016 

 

 

815,000 

 

834,356 

 

7.25%, 3/15/2015 

 

 

180,000 

 

187,200 

 

11.75%, 6/15/2010 

 

 

1,175,000 

 

1,316,000 

Republic of Uruguay:

 
 

7.625%, 3/21/2036 

 

 

120,000 

 

121,500 

 

8.0%, 11/18/2022 

 

 

385,000 

 

410,025 

 

9.25%, 5/17/2017 

 

 

415,000 

 

487,625 

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

 

 

1,645,000 

 

1,686,125 

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

 

 

965,000 

 

938,462 

United Mexican States:

 
 

5.625%, 1/15/2017 (b) 

 

 

870,000 

 

878,265 

 

Series A, 5.875%, 1/15/2014 

 

 

1,700,000 

 

1,757,800 

 

Series A, 6.75%, 9/27/2034 

 

 

161,000 

 

173,075 

**Total Government & Agency Obligations** (Cost $27,403,178)

 

**27,896,211**

 

**Loan Participations and Assignments 7.2%**

 
**Senior Loans*** 6.7%**

 
Advanced Medical Optics, Inc., Term Loan B, LIBOR plus 1.75%, 4.957%, 4/2/2014

 

 

29,624 

 

27,069

Algoma Steel, Inc., Term Loan, LIBOR plus 2.5%, 5.707%, 6/30/2013  

 

 

57,760 

 

54,944 

Alltel Communication, Inc., Term Loan B1, LIBOR plus 2.75%, 5.957%, 5/15/2015

 

 

445,000

 

444,350

Aspect Software, Inc., Term Loan B, LIBOR plus 2.5%, 5.707%, 6/29/2011  

 

 

118,778 

 

110,909 

Bausch & Lomb, Inc.:

 
 

Term Delay Draw, LIBOR plus 3.25%, 6.457%, 4/11/2015 

 

 

12,000 

 

11,711

 

Term Loan B, LIBOR plus 3.25%, 6.457%, 4/11/2015 

 

 

84,575 

 

82,535 

 

 

 

Buffets, Inc.:

 
 

Letter of Credit, 4.73%, 5/1/2013 

 

 

14,686 

 

7,282 

 

Term Loan, 9.719%, 5/1/2013 

 

 

4,692 

 

2,327 

 

Term Loan B, 9.719%, 11/1/2013 

 

 

145,068 

 

71,930

Charter Communications Operations:

 
 

Term Loan, LIBOR plus 2.0%, 5.207%, 3/6/2014 

 

 

104,738 

 

103,603 

 

Term Loan B, LIBOR plus 3.25%, 6.457%, 4/27/2011 

 

 

284,049 

 

249,146 

Community Health Systems, Inc.:

 
 

Term Delay Draw, LIBOR plus 2.25%, 5.457%, 7/25/2014 

 

 

9,045 

 

8,571 

 

Term Loan, LIBOR plus 2.25%, 5.457%, 7/25/2014 

 

 

176,861 

 

167,588 

Cricket Communications, Inc., Term Loan B, LIBOR plus 3.0%, 6.207%, 6/16/2013  

 

 

159,593 

 

157,997 

Energy Future Holdings Corp.:

 
 

Term Loan B1, LIBOR plus 3.5%, 6.707%, 10/10/2014 

 

 

491,288 

 

458,403 

 

Term Loan B3, LIBOR plus 3.5%, 6.707%, 10/10/2014 

 

 

312,638 

 

291,144 

Ford Motor Co., Term Loan, LIBOR plus 3.0%, 6.207%, 12/16/2013  

 

 

65,000 

 

50,664 

General Nutrition Centers, Inc., Term Loan B, LIBOR plus 2.25%, 5.457%, 9/16/2013  

 

 

29,774 

 

27,243 

Georgia-Pacific Corp., Term Loan B1, LIBOR plus 2.0%, 5.207%, 12/20/2012  

 

 

140,000 

 

132,511 

Golden Nugget, 5.73%, 6/16/2014  

 

 

60,000 

 

37,800 

Graphic Packaging International, Inc., Term Loan, LIBOR plus 2.75%, 5.957%, 5/16/2014  

 

 

140,000 

 

135,547 

Hawker Beechcraft, Inc.:

 
 

Letter of Credit, LIBOR plus 2.0%, 5.207%, 3/26/2014 

 

 

12,600 

 

11,808 

 

Term Loan B, LIBOR plus 2.0%, 5.207%, 3/26/2014 

 

 

215,671 

 

202,108 

HCA, Inc., Term Loan A1, 4.301%, 11/18/2012  

 

 

464,997 

 

435,776 

Hexion Specialty Chemicals:

 
 

Term Loan C1, LIBOR plus 2.25%, 5.457%, 5/5/2013 

 

 

216,114 

 

186,567 

 

Term Loan C2, LIBOR plus 2.25%, 5.457%, 5/5/2013 

 

 

63,691 

 

54,983 

IASIS Healthcare LLC, 8.043%, 6/15/2014  

 

 

81,651 

 

71,853 

Longview Power LLC:

 
 

Demand Draw, 5.063%, 4/1/2014 

 

 

14,000 

 

12,460 

 

Letter of Credit, 5.063%, 4/1/2014 

 

 

4,000 

 

3,560 

 

Term Loan B, 5.063%, 4/1/2014 

 

 

12,000 

 

10,680 

NewPage Corp., Term Loan B, LIBOR plus 3.0%, 6.207%, 11/5/2014  

 

 

14,925 

 

14,613 

Sabre, Inc., Term Loan B, LIBOR plus 2.25%, 5.457%, 9/30/2014  

 

 

53,449 

 

40,956 

Symbion, Inc.:

 
 

Term Loan A, 6.149%, 8/23/2013 

 

 

23,713 

 

21,341 

 

Term Loan B, 6.149%, 8/23/2014 

 

 

23,713 

 

21,341 

Telesat Canada, Inc.:

 
 

Term Loan, 5.9%, 9/1/2014 

 

 

37,795 

 

36,385 

 

Term Loan B, LIBOR plus 3.0%, 6.207%, 10/31/2014 

 

 

121,456 

 

116,922

Tribune Co., Term Loan B, 5.786%, 5/24/2014  

 

 

108,900 

 

75,359 

 

**3,949,986**

**Sovereign Loans 0.5%**

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

 

 

290,000 

 

**260,652**

**Total Loan Participations and Assignments** (Cost $4,462,182)

 

**4,210,638**

 

**Preferred Securities 0.2%**

 
**Financials**

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

 

 

110,000 

 

93,392 

Xerox Capital Trust I, 8.0%, 2/1/2027  

 

 

30,000 

 

28,565 

**Total Preferred Securities** (Cost $141,275)

 

**121,957**

 

**Units**

 

**Value ($)**

 

**Other Investments 0.1%**

 
Hercules, Inc., (Bond Unit), 6.5%, 6/30/2029 (Cost $81,111)

 

95,000 

 

**76,000**

 

 

 

 
 

**Shares**

 

**Value ($)**

 
 
 

**Common Stocks 0.0%**

 
 
**Materials**

 
 
GEO Specialty Chemicals, Inc.* (Cost $19,453)

 

1,741 

 

**1,480**

 
 

**Warrants 0.0%**

 
**Financials**

 
 
New ASAT (Finance) LLC, Expiration Date 2/1/2011* (Cost $0)

 

11,700 

 

**3,892**

 
 

**Convertible Preferred Stocks 0.0%**

 
 
**Consumer Discretionary**

 
 
ION Media Networks, Inc.:

 
 
 

144A, 12.0% * 

 

 

10,000 

 

65

 
 

Series AI, 144A, 12.0%*  

 

 

25,000

 

162

 
 
**Total Convertible Preferred Stocks** (Cost $4,905)

 

**227**

 
 

**Securities Lending Collateral 13.5%**

 
 
Daily Assets Fund Institutional, 2.65% (f) (g)(Cost $7,798,337)

 

 

7,798,337

 

**7,798,337**

 
 

**Cash Equivalents 0.1%**

 
 
Cash Management QP Trust, 2.44% (f)(Cost $51,706)

 

 

51,706

 

**51,706**

 
 

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

 

**Value ($)**

 
 
**Total Investment Portfolio** (Cost $80,644,952) †

133.5

 

**77,460,602**

 
**Notes Payable**

(20.7)

 

**(12,000,000)**

 
**Other Assets and Liabilities, Net**

(12.8)

 

**(7,438,383)**

 
 
**Net Assets**

100.0

 

**58,022,219**

 
*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 ($)**

 
 
American Color Graphics, Inc.

10.0%

6/15/2010

90,000

USD

66,938

16,200

 
 
Congoleum Corp.

8.625%

8/1/2008

100,000

USD

86,244

75,000

 
 
Quebecor World, Inc.

9.75%

1/15/2015

55,000

USD

55,975

24,750

 
 
Radnor Holdings Corp.

11.0%

3/15/2010

20,000

USD

17,688

25

 
 
Tropicana Entertainment LLC

9.625%

12/15/2014

190,000

USD

142,075

60,800

 
 
 

 

 

 

 

**368,920**

**176,775**

 
 
*****

*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 August 31, 2008.*

 
*†*

*The cost for federal income tax purposes was $81,222,465.  At August 31, 2008, net unrealized depreciation for all securities based on tax cost was $3,761,863.  This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $726,285 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $4,488,148.*

 

 

 

 
*(a)*

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

 
*(b)*

*All or a portion of these securities were on loan.  The value of all securities loaned at August 31, 2008 amounted to $7,522,238 which is 13.0% of net assets.*

 
*(c)*

*Security has deferred its 6/15/2008 interest payment until 12/15/2008.*

 
*(d)*

*Security issued in lieu of interest payment due 12/15/2007, which has been deferred until 9/15/2008.  This security is deemed to be non-income producing.*

 
*(e)*

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

 
*(f)*

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

 
*(g)*

*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.*

 
*At August 31, 2008 the Fund had an unfunded loan commitment of $7,980 which could be extended at the option of the borrower, pursuant to the following loan agreement:*

 
 

**Unfunded Loan**

 

**Unrealized**

 
**Borrower**

**Commitment ($)**

**Value ($)**

**Depreciation ($)**

 
Bausch & Lomb, Inc., Term Delay Draw, 4/11/2015  

7,980

7,807

**(173)**

 
 
* *

 
 
*At August 31, 2008, open credit default swap contracts sold were as follows:***

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

 

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

 

**Cash Flows****Received by****the Fund**

 

**Underlying Debt Obligation**

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

 
 
 
 
 

 
 
10/3/2007

12/20/2008

 

55,0002

 

Fixed — 3.2%

 

General Motors Corp.,

7.125%, 7/15/2013 

(1,148)

 
 
10/4/2007

12/20/2008

 

55,0001

 

Fixed — 3.1%

 

Ford Motor Co.,

6.5%, 8/1/2018

(774)

 
 
10/5/2007

12/20/2008

 

30,0002

 

Fixed — 3.15%

 

Ford Motor Co.,

6.5%, 8/1/2018

(418)

 
 
10/23/2007

12/20/2008

 

115,0003

 

Fixed — 3.4%

 

Ford Motor Co.,

6.5%, 8/1/2018

(1,511)

 
 
10/23/2007

12/20/2008

 

110,0003

 

Fixed — 3.0%

 

General Motors Corp.,

7.125%, 7/15/2013

(2,365)

 
 
11/20/2007

12/20/2008

 

60,0004

 

Fixed — 4.02%

 

Tenet Healthcare Corp.,

7.375%, 2/1/2013

337

 
 
2/14/2008

3/20/2009

 

170,0004

 

Fixed — 3.8%

 

HCA, Inc.,

3.8%, 3/20/2009

1,568

 
 
2/26/2008

3/20/2009

 

130,0004

 

Fixed — 5.0%

 

Tenet Healthcare Corp.,

7.375%, 2/1/2013

1,970

 
 
10/13/2007

12/20/2009

 

60,0004

 

Fixed — 3.85%

 

Ford Motor Co.,

6.5%, 8/1/2018

(10,097)

 
 
12/10/2007

12/20/2009

 

55,0004

 

Fixed — 5.05%

 

Ford Motor Co.,

6.5%, 8/1/2018 

(5,001)

 
 
3/11/2007

12/20/2012

 

1,500,0002

 

Fixed — 0.77%    

 

Government of Russia,

7.75%, 3/31/2030

(29,134)

 
 
**Total net unrealized depreciation**

**(46,573)**

 
 

 

 

 

 

 

*At August 31,2008, open credit default swap contracts purchased were as follows:***

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

 

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

 

**Cash Flows****Paid by****the Fund**

 

**Underlying Debt Obligation**

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

 
 
 

 
5/2/2008

6/20/2013

 

60,0001

 

Fixed — 7.25%

 

ARCO Chemical Co.,

9.8%, 2/1/2020

**5,046**

 
 

*Counterparties:*

 
*1*

*The Goldman Sachs & Co.*

*2*

*JPMorgan Chase Securities, Inc.*

*3*

*Morgan Stanley Co., Inc.*

*4*

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

 

*As of August 31, 2008, the Fund had the following open forward foreign currency exchange contracts:***

**Contracts to Deliver**

**In Exchange For**

**Settlement****Date**

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

 
EUR

745,300

USD

1,141,166

9/18/2008

48,794

 
EUR

56,200

USD

82,472

9/18/2008

100

 
**Total unrealized appreciation**

 

 

**48,894**

 
* *

* *

* *

* *

* *

* *

***Currency Abbreviations*****

 **

 **

 **

 **

*ARS***

*Argentine Peso***

* *

*EUR***

*Euro***

* *

*BRL***

*Brazilian Real***

* *

*USD***

*United States Dollar***

 

***Fair Value Measurements***

 

*The following is a summary of the inputs used as of August 31, 2008 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**

**Other Financial Instruments***††*

Level 1 

$                  7,850,043   

$                              -   

Level 2

69,253,875

7,194

Level 3

356,684

-

**Total**

**$                77,460,602**

**$                      7,194**

 

*†† Other financial instruments are derivative instruments not reflected in the Investment Portfolio, such as forward foreign currency exchange contracts, unfunded loan commitments and 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 August 31, 2008.*

 

 

**Investments in  Securities**

**Balance as of December 1, 2007**

$                      146,964

Total realized gain (loss)

382   

Change in unrealized appreciation (depreciation)

(53,726)   

Amortization Premium/Discount

702

Net purchases (sales)

181,612   

Net transfers in (out) of Level 3 

80,750   

**Balance as of August 31, 2008**

**$                      356,684**

**

*The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS* *157"), effective at the beginning of the Fund’s fiscal year. FAS* *157 establishes a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs 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, credit risk, etc.).  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.*

 

**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 Trust

 

By:

/s/Michael G. Clark

 

Michael G. Clark

President

 

Date:

October 22, 2008

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Registrant: 

DWS Strategic Income Trust

 

By:

/s/Michael G. Clark

 

Michael G. Clark

President

 

Date:

October 22, 2008

 

 

By:

/s/Paul Schubert

 

Paul Schubert

Chief Financial Officer and Treasurer

 

Date:                                        October 22, 2008

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