Rmk Multi-Sector High Income Fund Inc-Quarterly Schedule of Portfolio Holdings of Registered Management Investment Company (N-Q)

 

 

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 811-21833

 

 

RMK MULTI-SECTOR HIGH INCOME FUND, INC.

(Exact name of registrant as specified in Charter)

 

 

THREE WORLD FINANCIAL CENTER

200 VESEY STREET, 10TH FLOOR

NEW YORK, NY 10281

(Address of principal executive offices) (Zip code)

 

 

JOHN J. FEENEY, JR., PRESIDENT

THREE WORLD FINANCIAL CENTER

200 VESEY STREET, 10TH FLOOR

NEW YORK, NEW YORK 10281-1010

(Name and address of agent for service)

Registrant’s telephone number, including area code: 1-800-HYPERION

Date of fiscal year end: March 31, 2008

Date of reporting period: June 30, 2008

 

 

 

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Item 1.

Schedule of Investments.

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RMK MULTI-SECTOR HIGH INCOME FUND, INC.

Portfolio of Investments

June 30, 2008 (Unaudited)

 

Notional Amount/ Shares		Description		Value ‡
ASSET-BACKED SECURITIES - INVESTMENT GRADE* - 15.1%
		Collateralized Debt Obligations (“CDO”) - 10.2%
3,000,000		CDO Repack SPC Ltd. 2006-BRGA, 12/5/51 #~		$	300
2,000,000		Kodiak CDO 2007-2A E, 6.020% 11/7/42 †#			40,000
4,074,975		Millstone III-A CDO Ltd., 7/5/46 #~			408
1,497,212		Preferred Term Securities XXVIII, Ltd., 4.526% 3/22/38 †#			898,326
9,000,000		Steers Delaware Business Trust 2007-A, 5.491% 6/20/18 †#			7,177,500
					8,116,534
		Home Equity Loans - 2.3%
1,502,111		Residential Funding Mortgage Securities II 2007-HI1 A1, 2.613% 3/25/37#			1,374,519
12,633,943		United Capital Markets, Inc. 2003-A, 2.300% 11/8/27 interest-only strips †#			427,027
					1,801,546
		Manufactured Housing Loans - 2.6%
2,711,913		Mid-State Trust 2005-1 B, 7.758% 1/15/40			2,038,867
Total Asset-Backed Securities - Investment Grade* (cost $23,396,807)					11,956,947
ASSET-BACKED SECURITIES - BELOW INVESTMENT GRADE OR UNRATED*- 25.5%
		Collateralized Debt Obligations (“CDO”) - 14.3%
2,000,000		801 Grand CDO 2006-1 LLC, 8.803% 9/20/16 †#			940,000
3,000,000		Aardvark Asset-Backed Securities CDO 2007-1A, Zero Coupon Bond 7/6/47 in default #~			300
4,000,000		Acacia CDO, Ltd. 10A, Zero Coupon Bond 9/7/46 †#~			400
6,000,000		Aladdin CDO I Ltd. 2006-3A, 7.803% 10/31/13 †#			420,000
380,481		Attentus CDO Ltd. 2006-2A E2, 8.395% 10/9/41 #			38
2,157,510		Attentus CDO Ltd. 2006-2A F1, 7.710% 10/9/41 †#			216
982,087		Attentus CDO Ltd. 2006-2A F2, 10.295% 10/9/41 #			98
4,192,911		Attentus CDO Ltd. 2007-3A F2, 9.532% 10/11/42 †#			419
3,170,193		Broderick CDO Ltd. 2007-3A D, 9.422% 12/6/50 †#			317
1,000,000		Cairn Mezzanine Asset-Backed CDO PLC 2007-3A, 8/13/47 #~			100
5,000,000		Dillon Read CDO Ltd. 2006-1A, 11.674% 12/5/46 †#			1,050,000
2,500,000		Duane Park, 8.803% 6/27/16 †#			443,750
2,000,000		Gulf Stream Atlantic CDO Ltd. 2007-1A, Zero Coupon Bond 7/13/47 †#~			200
1,000		Ischus CDO III, 7/3/46 †#~			1,000
2,000,000		IXIS ABS 1 Ltd., Zero Coupon Bond 12/12/46 †#~			200
15,000,000		Kenmore Street Synthetic CDO 2006-1A, 7.803% 4/30/14 †#			1,200,000
2,053,255		Knollwood CDO Ltd. 2006-2A E, 8.710% 7/13/46 †#			205
3,000,000		Knollwood CDO Ltd. 2006-2A SN, Zero Coupon Bond 7/13/46 #~			300
6,218,120		Kodiak CDO 2006-1A, 2.891% 8/7/37 †#			622
3,185,273		Kodiak CDO 2006-1A G, 6.270% 8/7/37 †#			319
3,933,459		Lancer Funding Ltd. 2007-2A A3, 7/15/47 in default †#~			393
3,000,000		Lincoln Park Referenced Link Notes 2001-1, 6.319% 7/30/31 †#			1,747,500
5,000,000		Linker Finance PLC 16A E, 5.983% 5/19/45 † #			75,000
3,171,931		Newbury Street CDO Ltd. 2007-1A D, 6.476% 3/4/53 †#			317
1,961,789		Norma CDO Ltd. 2007-1A E, 7.091% 3/11/49 †#			196
2,000,000		Pasa Funding Ltd. 2007-1A D, 4/7/52 in default #~			200
3,000,000		Preferred Term Securities II, Ltd., 10.000% 5/22/33 †#			780,000
3,000,000		Preferred Term Securities XXI, Ltd., 10.000% 3/22/38 †#			217,500
995,820		Preferred Term Securities XXI-2TR, 1.956% 3/22/38 †#			248,955
4,600,000		Preferred Term Securities XXII, Ltd., Zero Coupon Bond 9/22/36 †~			920,000
3,800,000		Preferred Term Securities XXIII, Ltd., Zero Coupon Bond 12/22/36 †~			1,643,500
3,000,000		Preferred Term Securities XXVIII, Ltd., 10.000% 3/22/38 †#			1,590,000
1,923,503		Sharps CDO 2006-1A D, Zero Coupon Bond 5/8/46 †#~			192
1,046,400		Squared CDO Ltd. 2007-1A C, 7.638% 5/11/57 †#			105
6,278,467		Taberna Preferred Funding Ltd. 2006-6A, 6.096% 12/5/36 †#			628
5,171,455		Taberna Preferred Funding Ltd. 2006-7A C1, 1.000% 2/5/37 †#			517
1,042,886		Tahoma CDO Ltd. 2007-2A D, 7.276% 9/15/47 †#			104
2,000,000		Trapeza CDO I LLC 2006-10A, Zero Coupon Bond 6/6/41 #~			10,000
2,043,500		Trapeza CDO I LLC 2006-10A D2, 8.700% 6/6/41 †#			51,088
2,000,000		Trapeza CDO I LLC 2006-11A, Zero Coupon Bond10/10/41 #~			200
2,051,020		Trapeza CDO I LLC 2006-11A F, 10.204% 10/10/41 #			20,510
2,000,000		Tricadia CDO Ltd. 2006-5A, Zero Coupon Bond 6/19/46 †#~			200
3,500		WEBS CDO 2006-1 PS, 4/13/47 †#~			35
				$	11,365,624
		Collateralized Loan Obligations (“CLO”) - 4.7%
3,000		Credit Genesis CLO 2005, 6/23/10 †#~			1,950,000
4,000,000		Eirles Two Ltd. 262, 8.284% 8/3/21 #			1,760,000
					3,710,000

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RMK MULTI-SECTOR HIGH INCOME FUND, INC.

Portfolio of Investments

June 30, 2008 (Unaudited)

 

Notional Amount/ Shares		Description		Value ‡
		Equipment Leases - 6.1%
8,480,190		Aerco Limited 1X C1, Zero Coupon Bond 7/15/23 #~			84,802
7,498,556		Aerco Limited 2A B2, Zero Coupon Bond 7/15/25 †#~			223,457
6,341,287		Aerco Limited 2A C2, Zero Coupon Bond 7/15/25 †#~			634
3,585,627		Aviation Capital Group Trust 2000-1A C1, 4.768% 11/15/25 †#			242,030
2,043,812		Aviation Capital Group Trust 2000-1I D1, 8.500% 11/15/25 †#			256,703
1,881,847		DVI Receivables Corp. 1999-2 A4, 11/13/08 #~			313,290
1,902,788		DVI Receivables Corp. 2001-2 A4, 4.613% 11/11/09 #			388,530
3,246,147		Guggenheim Equipment Trust 2007-1A, 11.193% 7/15/31 †#			1,710,785
63,000,000		United Capital Aviation Trust 2005-1 B2, Zero Coupon Bond 7/15/31 †#~			1,638,000
					4,858,231
		Home Equity Loans - 0.4%
2,596,878		Equifirst Mortgage Loan Trust 2004-3 N3, 12/25/34 †#~			260
681,424		Fremont Home Loan Trust 2004-4 M7, 4.203% 3/25/35			195,414
3,000,000		Fremont Home Loan Trust 2005-2 B3, 5.349% 6/25/35 †#			49,200
197,358		Meritage Asset Holdings 2004-2 N6, 9.000% 1/25/35 †#~			20
1,617,062		Soundview Trust 2005-1N N2, Zero Coupon Bond 4/25/35 †#~			11,319
1,500,000		Soundview Trust 2005-1N N3, Zero Coupon Bond 4/25/35 †#~			150
12,798,000		Terwin Mortgage Trust 2006-R2 A, 1.075% 12/25/36 †#			38,394
					294,757
Total Asset-Backed Securities - Below Investment Grade or Unrated* (cost $168,602,397)					20,228,612
CORPORATE BONDS - INVESTMENT GRADE* - 1.4%
		Finance - 0.2%
200,000		Catlin Insurance Company Ltd., 7.249% 12/31/49 †			145,986
		Special Purpose Entities - 1.2%
3,000,000		Fixed Income Pass-Through Trust 2007-C JPM Class B, Zero Coupon Bond 5/15/77 †#~			990,000
Total Corporate Bonds - Investment Grade* (cost $3,249,292)					1,135,986
CORPORATE BONDS - BELOW INVESTMENT GRADE OR UNRATED* - 29.6%
		Apparel - 3.2%
4,343,000		Rafaella Apparel Group Inc., 11.250% 6/15/11			2,540,655
		Automotives - 2.4%
1,175,000		General Motors, 8.375% 7/15/33			696,188
4,472,000		Metaldyne Corp., 11.000% 6/15/12			1,207,440
					1,903,628
		Communications - 1.1%
1,500,000		CCH I Holdings LLC, 11.750% 5/15/14			915,000
		Consulting Services - 3.9%
4,000,000		MSX International Inc., 12.500% 4/1/12 †			3,080,000
		Finance - 4.9%
3,065,000		Advanta Capital Trust I, 8.990% 12/17/26			1,915,625
2,000,000		Assurance America, 10.500% 12/31/35 †#			1,960,000
500,000		Security Capital Assurance Ltd., 6/17/49 in default ~			2,500
					3,878,125
		Industrials - 2.0%
393,958		Home Products Inc., pays-in-kind 3/20/17 #~			38,568
2,575,000		Terphane Holding Corp., 12.500% 6/15/09 †			1,538,563
					1,577,131
		Manufacturing - 3.4%
4,750,000		MAAX Corp., 6/15/12 in default ~			95,000
2,850,000		Wolverine Tube, Inc., 10.500% 4/1/09			2,650,500
					2,745,500
		Oil & Natural Gas - 0.9%
800,000		Seametric International, 11.625% 5/25/12 †#			704,000
		Paper Products - 0.6%
925,000		Corp Durango SAB de CV, 10.500% 10/5/17 †		$	487,938
		Real Estate Management - 0.4%
750,000		Realogy Corp., 12.375% 4/15/15			367,500
		Retail - 1.4%
1,579,000		Lazydays RV Center Inc., 11.750% 5/15/12			1,089,510
		Special Purpose Entities - 0.4%
761,000		Interactive Health LLC, 7.250% 4/1/11 †			304,400
		Telecommunications - 2.6%

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RMK MULTI-SECTOR HIGH INCOME FUND, INC.

Portfolio of Investments

June 30, 2008 (Unaudited)

 

Notional Amount/ Shares		Description		Value ‡
3,000,000		Primus Telecommunications GP, 8.000% 1/15/14			960,000
1,425,000		Securus Technologies Inc., 11.000% 9/1/11			1,068,750
					2,028,750
		Tobacco - 2.4%
3,075,000		North Atlantic Trading Co., 9.250% 3/1/12			1,868,063
Total Corporate Bonds - Below Investment Grade or Unrated* (cost $40,154,009)					23,490,200
MORTGAGE-BACKED SECURITIES - INVESTMENT GRADE* - 5.0% OF NET ASSETS
		Collateralized Mortgage Obligations - 5.0%
872,165		Countrywide Alternative Loan Trust 2005-49CB A5, 5.500% 11/25/35			703,109
1,961,683		Countrywide Alternative Loan Trust 2005-56 M4, 3.403% 11/25/35 #			213,647
611,946		Deutsche Alt-A Securities Inc. Mortgage Loan 2006-AF1 A5, 2.763% 4/25/36			231,124
7,000,000		Deutsche Mortgage Securities, Inc. 2006-RS1 N2, 4.241% 9/27/35 †#			2,003,400
4,788,346		Structured Asset Investment Loan Trust 2004-7A B, Zero Coupon Bond 8/27/34 †#~			479
5,000,000		Structured Asset Mortgage Investments Inc. 2006-AR3 1B1, 2.883% 4/25/36			851,705
Total Mortgage-Backed Securities - Investment Grade* (cost $18,017,819)					4,003,464
MORTGAGE-BACKED SECURITIES - BELOW INVESTMENT GRADE OR UNRATED* - 13.3%
		Collateralized Mortgage Obligations - 13.3%
3,100,000		First Franklin Trust 2004-FFH4 N4, 1/21/35 †#~			310
6,450,000		Greenwich Structured Adjustable Rate Mortgage Products 2005-3A N2, 2.000% 6/27/35 †#			2,696,745
12,739,369		Greenwich Structured Adjustable Rate Mortgage Products 2005-4A N-2, 7/27/45 †#~			4,810,386
5,000,000		Harborview Corp. 2006-8A N5, Zero Coupon Bond 7/21/36 †#~			72,500
1,000,000		Harborview Corp. 2006-14 N4, 8.350% 3/19/38 †#			98,130
6,000,000		Harborview Corp. 2006-14 PS, Zero Coupon Bond 12/19/36 †#~			600
3,946,080		Harborview Mortgage Loan Trust 2006-4 B11, 4.233% 5/19/47 †#			95,022
4,121,946		Harborview Mortgage Loan Trust 2006-CB1 2B5, 4.349% 3/25/36 #			101,812
6,000,000		Long Beach Asset Holdings Corp. 2005-WL1 N4, 7.500% 6/25/45 †#			600
2,000,000		Long Beach Mortgage Loan Trust 2005-2 B2, 5.233% 4/25/35 †#			50,780
1,244,149		Long Beach Mortgage Loan Trust 2005-WL2 B3, 4.983% 8/25/35 †#			7,154
2,466,708		Park Place Securities Inc. 2005-WCW2 M11, 4.981% 7/25/35 †#			48,101
4,000,000		Park Place Securities Inc. 2005-WCW3 M10, 4.983% 8/25/35 #			475,520
3,000,000		Park Place Securities Inc. 2005-WHQ3 M11, 4.983% 6/25/35 #			147,000
2,000,628		Residential Accredit Loans Inc. 2006-Q08 M4, 3.013% 10/25/46 #			151,627
2,000,000		Sharp SP I LLC Trust 2006-A HM3 N3, 12.500% 10/25/46 †#			1,738,440
1,306,114		Structured Asset Investment Loan Trust 2004-8 B2, 5.000% 9/25/34			29,219
2,262,241		Structured Asset Investment Loan Trust 2005-HE1 B1, 5.099% 7/25/35 #			31,671
					10,555,617
		Residential Mortgage-Backed Securities - 0.0%
9		Harborview 2006-8, 7/22/36 †#~			1
67,000		Indymac Indx CI-1 Corp., 6/25/46 †#~			670
					671
Total Mortgage-Backed Securities - Below Investment Grade or Unrated* (cost $47,070,057)					10,556,288
COMMON STOCKS - 2.5%
		Consumer Products - 0.1%
15,758		Home Products #~			473
213,297		Insight Health Services Holdings Corp ~			85,319
					85,792
		Energy - 0.8%
188,350		Pinnacle Gas Resources, Inc. ~			678,060
		Financials - 1.2%
35,000		FSI Realty Trust †~		$	43,750
200,000		FSI Realty Trust Regulation D †~			250,000
52,941		Mid Country †#~			688,232
					981,982
		Industrials - 0.3%
1,300		Port Townsend Paper Corp. ~			203,775
		Technology - 0.1%
3,462		Taiwan Semiconductor Manufacturing Company Ltd.			37,770
Total Common Stocks (cost $10,296,692)					1,987,379

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RMK MULTI-SECTOR HIGH INCOME FUND, INC.

Portfolio of Investments

June 30, 2008 (Unaudited)

 

Notional Amount/ Shares		Description		Value ‡
EURODOLLAR TIME DEPOSITS - 6.5%
5,188,000		State Street Bank & Trust Company Eurodollar time deposits dated June 30, 2008 1.350% maturing at $5,188,195 on July 1, 2008			5,188,000
Total Investments - 98.9% (cost $315,975,073)					78,546,876
Other Assets and Liabilities, net - 1.1%					853,000
Net Assets				$	79,399,876

 

†	Securities sold within the terms of a private placement memorandum, exempt from registration under Rule 144A under the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration, normally to qualified institutional buyers.

‡	See Note 2 of the accompanying Notes to the Financial Statements regarding investment valuations.

~	Non-income producing security. In the case of bonds, they missed their last coupon payment.

#	Security valued at fair value— See Note 2 of the accompanying Notes to the Financial Statements regarding investment valuations.

*	Ratings are Unaudited

The Notes to the Financial Statements are an integral part of, and should be read in conjunction with, the Financial Statements.

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Valuation of Investments: Where market quotations are readily available, securities held by the Fund are valued based upon the current bid price, except preferred stocks, which are valued based upon the closing price. Securities may be valued by independent pricing services that have been approved by the Board of Directors. The prices provided by a pricing service take into account broker dealer market price quotations for institutional size trading in similar groups of securities, security quality, maturity, coupon and other security characteristics as well as any developments related to the specific securities. The Fund values mortgage-backed securities (“MBS”) and other debt securities for which market quotations are not readily available at their fair value as determined in good faith, utilizing procedures approved by the Board of Directors of the Fund, on the basis of information provided by dealers in such securities. Some of the general factors which may be considered in determining fair value include the fundamental analytic data relating to the investment and an evaluation of the forces which influence the market in which these securities are purchased and sold. Determination of fair value involves subjective judgment, as the actual market value of a particular security can be established only by negotiations between the parties in a sales transaction. Debt securities having a remaining maturity of sixty days or less when purchased and debt securities originally purchased with maturities in excess of sixty days but which currently have maturities of sixty days or less are valued at amortized cost.

The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry or region. The values of MBS can be significantly affected by changes in interest rates or in the financial condition of an issuer or market.

FAS 157 : Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:

 

•

Level 1 — quoted prices in active markets for identical securities

 

•

Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.

 

•

Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used as of June 30, 2008, in valuing the Fund’s assets carried at fair value:

 

		Investments in Securities
Valuation Inputs		RMK Advantage Income Fund			RMK High Income Fund			RMK Multi-Sector High Income Fund			RMK Strategic Income Fund
Level 1 - Quoted Prices		$	30,573,345		$	24,176,440		$	21,365,879		$	20,797,683
Level 2 - Other Significant Observable Inputs			18,922,583			13,673,810			14,534,344			16,999,711
Level 3 - Significant Unobservable Inputs			36,620,936			23,865,398			42,646,653			28,677,735
Total		$	86,116,864		$	61,715,648		$	78,546,876		$	66,475,129

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Level 3 Reconciliation

 

		Investments in Securities
		RMK Advantage Income Fund				RMK High Income Fund				RMK Multi-Sector High Income Fund				RMK Strategic Income Fund
Balance as of March 31, 2008		$	64,930,271			$	42,248,380			$	69,393,904			$	55,312,805
Net purchases/(sales) at cost			(8,798,339	)			(3,834,035	)			(4,401,763	)			(9,099,336	)
Realized gain/(loss)			(31,206,464	)			(25,506,501	)			(35,237,192	)			(25,428,591	)
Change in unrealized appreciation/(depreciation)			12,374,999				11,467,578				13,894,304				8,425,479
Accretion/(amortization)			(19,531	)			(2,244	)			(12,600	)			(17,144	)
Transfers in and/or out of Level 3			(660,000	)			(507,780	)			(990,000	)			(515,478	)
Balance as of June 30, 2008		$	36,620,936			$	23,865,398			$	42,646,653			$	28,677,735

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Item 2.

Controls and Procedures.

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

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

 

Item 3.

Exhibits.

The certifications required by Rule 30a-2(a) of the 1940 Act are attached hereto.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, the Fund has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Fund): RMK Multi-Sector High Income Fund, Inc.
by (Signature and Title):		/s/ John J. Feeney, Jr.
		John J. Feeney, Jr.
		President and Principal Executive Officer
Date: August 27, 2008

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

 

by (Signature and Title):		/s/ John J. Feeney, Jr.
		John J. Feeney, Jr.
		President and Principal Executive Officer
Date: August 27, 2008
by (Signature and Title):		/s/ Thomas F. Doodian
		Thomas F. Doodian,
		Treasurer and Principal Financial Officers
Date: August 27, 2008