<PAGE> 1
HIGH INCOME ADVANTAGE TRUST Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS
DEAR SHAREHOLDER:
The fiscal year ended September 30, 1995 got off to a slow start, with most of
the fixed-income markets, including the high-yield market, reporting
disappointing performance results during the final three months of 1994.
Concerns over the strength of the economy, Federal Reserve Board actions and
inflation prospects created a great deal of uncertainty during 1994's weak
market environment.
In sharp contrast, however, the fixed-income markets have rebounded nicely
during the first nine months of 1995, as economic growth slowed and inflation
subsided. The high-yield market has had a strong 1995 thus far, benefiting from
the rally in the Treasury market, which has driven long-term interest rates
significantly lower, and from the continued strength in corporate earnings. As
is typical in a decelerating economic environment, however, high yield bonds
have lagged the 1995 rally in U.S. Treasuries a bit, as concerns over the
severity of the economic slowdown have offset some of the benefit of lower
interest rates.
Against this backdrop, High Income Advantage Trust produced a total return of
11.68 percent, for the twelve months ended September 30, 1995, based on its net
asset value of $5.30 per share. Based on its market price of $5.75 per share on
the New York Stock Exchange, the Trust produced a total return of 14.59 percent
during the same period. As of September 30, 1995, the Trust had net assets in
excess of $159 million. Over the past twelve months, the Trust continued to
distribute regular income dividends at a rate of $0.05 per share per month. For
the full fiscal year, income dividends totaled approximately $0.642 per share,
including an extra income dividend of $0.042 per share paid on December 23,
1995.
INVESTMENT STRATEGY
The Trust's overall investment strategy entering calendar year 1995 was to
capitalize on the opportunity created by the 1994 market correction by
positioning the Trust for an eventual rebound in the market. Despite the
<PAGE> 2
HIGH INCOME ADVANTAGE TRUST
LETTER TO THE SHAREHOLDERS, continued
fact that corporate credit quality remained strong, the 1994 market correction
pushed yields on many B rated issues 300-400 basis points higher (to the 13-14
percent range) and caused bond prices to decline by as much as 15-20 percent in
some cases.
In light of these opportunities, the Trust significantly increased its emphasis
on discounted issues (primarily B-rated) during the latter part of 1994 and
early part of 1995. This renewed focus on discounted issues helped to boost the
Trust's return in 1995 and should provide more long-term capital appreciation
potential in the future. While the Trust's portfolio is currently still
positioned for further upside in the high yield market, it does maintain a
sizable position in various defensive securities. These securities should
provide the Trust with the flexibility needed to take advantage of any interim
trading opportunities that may arise.
LOOKING AHEAD
Given our outlook for continued, albeit modest economic growth, we find that
many of today's B-rated issues -- still yielding more than 600 basis points (6
percentage points) above U.S. Treasury securities and trading at significant
discounts -- offer excellent long-term return potential. Over the near term, we
expect continued volatility in the financial markets as investors assess the
economy's strength, the level of interest rates and possible Federal Reserve
Board actions. However, despite any potential short-term weakness, we consider
today's high-yield market to be an attractive long-term opportunity for
investors, as many current high-yield issues provide an attractive yield
advantage over U.S. Treasuries and the opportunity for substantial capital
appreciation if the high-yield market continues its recovery.
We thank you for your continued support of High Income Advantage Trust and look
forward to continuing to serve your investment needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
- ----------------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE> 3
HIGH INCOME ADVANTAGE TRUST
PORTFOLIO OF INVESTMENTS September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (90.5%)
Aerospace (3.0%)
$ 5,000 Sabreliner Corp. (Series B)........... 12.50 % 04/15/03 $ 4,700,000
----------
Airlines (4.5%)
8,000 GPA Delaware, Inc. ................... 8.75 12/15/98 7,200,000
----------
Automotive (2.2%)
6,030 Envirotest Systems, Inc. ............. 9.625 04/01/03 3,557,700
----------
Cable & Telecommunications (2.8%)
2,095 Adelphia Communications Corp. (Series
B).................................... 9.50+ 02/15/04 1,754,563
6,500 In-Flight Phone Corp.
(Units)+++ - 144A**................... 14.00++ 05/15/02 2,665,000
----------
4,419,563
----------
Computer Equipment (8.2%)
6,000 IBM Credit Corp. ..................... 15.00 06/13/96 6,355,200
6,000 Unisys Corp. ......................... 13.50 07/01/97 6,697,500
----------
13,052,700
----------
Consumer Products (1.3%)
2,000 J.B. Williams Holdings, Inc. ......... 12.00 03/01/04 2,020,000
----------
Containers (2.4%)
6,500 Ivex Holdings Corp. (Series B)........ 13.25++ 03/15/05 3,770,000
----------
Electrical & Alarm Systems (2.3%)
4,500 Mosler, Inc. ......................... 11.00 04/15/03 3,645,000
----------
Entertainment/Gaming & Lodging (7.1%)
10,883 Days Inns of America, Inc. (c)........ 12.375 06/01/97 --
2,250 Fitzgeralds Gaming Corp. - 144A**..... 14.25* 03/15/96 1,777,500
4,000 Motels of America, Inc. (Series B).... 12.00 04/15/04 4,020,000
1,500 Six Flags Theme Parks
Corp. - 144A**........................ 12.25++ 06/15/05 1,121,250
13,514 Spectravision, Inc. (c)............... 11.65 12/01/02 1,290,826
4,000 Trump Castle Funding, Inc. ........... 11.75 11/15/03 3,120,000
----------
11,329,576
----------
Foods & Beverages (13.0%)
7,500 Envirodyne Industries, Inc. .......... 10.25 12/01/01 6,000,000
6,000 PepsiCo Inc........................... 15.00 06/14/96 6,360,120
4,000 Seven Up/RC Bottling Co. Southern
California, Inc. (d).................. 11.50 08/01/99 1,765,000
13,000 Specialty Foods Acquisition Corp.
(Series B)............................ 13.00++ 08/15/05 6,500,000
----------
20,625,120
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 4
HIGH INCOME ADVANTAGE TRUST
PORTFOLIO OF INVESTMENTS September 30, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
<C> <S> <C> <C> <C>
Industrials (1.0%)
$ 1,500 SC International Services, Inc. ...... 13.00 % 10/01/05 $ 1,515,000
----------
Manufacturing (4.7%)
1,500 Alpine Group, Inc. - 144A**........... 12.25 07/15/03 1,380,000
2,500 Berry Plastics Corp. ................. 12.25 04/15/04 2,631,250
1,500 Cabot Safety Corp. - 144A**........... 12.50 07/15/05 1,567,500
2,000 Uniroyal Technology Corp. ............ 11.75 06/01/03 1,880,000
----------
7,458,750
----------
Manufacturing - Diversified (7.3%)
3,000 Foamex L.P. .......................... 11.875 10/01/04 2,970,000
3,000 Interlake Corp. ...................... 12.125 03/01/02 2,910,000
2,000 J.B. Poindexter & Co., Inc. .......... 12.50 05/15/04 1,880,000
6,500 Jordan Industries, Inc. .............. 11.75++ 08/01/05 3,900,000
----------
11,660,000
----------
Oil & Gas (3.2%)
2,000 Deeptech International, Inc. ......... 12.00 12/15/00 1,700,000
4,000 Empire Gas Corp. ..................... 7.00 07/15/04 3,380,000
----------
5,080,000
----------
Publishing (8.0%)
7,000 Affiliated Newspapers Investments,
Inc. ................................. 13.25++ 07/01/06 3,920,000
4,800 BFP Holdings, Inc. (Series B)......... 13.50++ 04/15/04 3,576,000
2,000 Garden State Newspapers, Inc. ........ 12.00 07/01/04 1,960,000
4,000 United States Banknote Corp........... 10.375 06/01/02 3,300,000
----------
12,756,000
----------
Restaurants (9.4%)
9,500 American Restaurant Group
Holdings, Inc. ....................... 14.00++ 12/15/05 4,465,000
4,000 Carrols Corp.......................... 11.50 08/15/03 3,980,000
8,500 Flagstar Corp......................... 11.25 11/01/04 6,566,250
----------
15,011,250
----------
Retail (4.8%)
4,000 Cort Furniture Rental Corp. .......... 12.00 09/01/00 4,160,000
2,000 County Seat Stores Co. ............... 12.00 10/01/02 1,900,000
1,500 Thrifty Payless, Inc. ................ 12.25 04/15/04 1,567,500
----------
7,627,500
----------
Textiles - Apparel Manufacturers (4.1%)
273 Farley Inc. (Conv.)................... 0.00 01/01/12 25,293
5,534 JPS Textile Group, Inc. .............. 10.85 06/01/99 5,257,300
1,500 U.S. Leather, Inc. ................... 10.25 07/31/03 1,252,500
----------
6,535,093
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
HIGH INCOME ADVANTAGE TRUST
PORTFOLIO OF INVESTMENTS September 30, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Transportation (1.2%)
$ 3,000 Transtar Holdings L.P. (Series B)..... .13375++% 12/15/03 $ 1,950,000
------------
TOTAL CORPORATE BONDS
(Identified Cost $164,208,649)................................. 143,913,252
-----------
U.S. GOVERNMENT OBLIGATION (0.8%)
1,250 U.S. Treasury Note (Identified Cost
$1,285,938)........................... 11.50 % 11/15/95 1,258,984
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (a) (5.8%)
Automotive (0.0%)
113 Northern Holdings Industrial Corp. (Restricted) (b)....... --
----------
Computer Equipment (0.2%)
191,107 Memorex Telex NV (ADR) (Netherlands) (b).................. 244,865
----------
Consumer Products (0.1%)
6,500 Thermoscan, Inc. (Class B) - 144A**....................... 104,000
----------
Entertainment/Gaming & Lodging (0.2%)
4,000 Motels of America, Inc. - 144A**.......................... 360,000
----------
Foods & Beverages (0.3%)
180,000 Specialty Foods Acquisition Corp. - 144A**................ 540,000
----------
Manufacturing - Diversified (3.9%)
346,812 Thermadyne Holdings Corp. (b)............................. 6,242,617
----------
Publishing (0.8%)
7,000 Affiliated Newspapers Investments, Inc. (Class B)......... 210,000
30,400 BFP Holdings, Inc. (Class D) - 144A**..................... 1,094,400
----------
1,304,400
----------
Restaurants (0.1%)
9,500 American Restaurant Group Holdings, Inc. - 144A**......... 142,500
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
HIGH INCOME ADVANTAGE TRUST
PORTFOLIO OF INVESTMENTS September 30, 1995, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
Retail (0.2%)
76,000 Thrifty Payless Holdings, Inc. (Class C).................. $ 323,000
------------
TOTAL COMMON STOCKS
(Identified Cost $18,776,244)............................. 9,261,382
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C>
WARRANTS (a) (0.5%)
Aerospace (0.0%)
5,000 Sabreliner Corp. (Restricted) - 144A**........ 04/15/03 50,000
----------
Containers (0.2%)
4,000 Crown Packaging Holdings, Ltd.
(Canada) - 144A**............................. 11/01/03 220,000
----------
Entertainment/Gaming & Lodging (0.0%)
3,263 Casino America, Inc........................... 11/15/96 2,039
7,000 Fitzgeralds Gaming Corp. - 144A**............. 03/15/99 70,000
----------
72,039
----------
Manufacturing (0.1%)
4,000 BPC Holdings Corp. ........................... 04/15/04 50,000
20,000 Uniroyal Technology Corp. .................... 06/01/03 50,000
----------
100,000
----------
Oil & Gas (0.0%)
5,520 Empire Gas Corp............................... 07/15/04 55,200
----------
Retail (0.2%)
4,000 County Seat Holdings Co. ..................... 10/15/98 90,000
132,000 New Cort Holdings Corp. ...................... 09/01/98 247,500
----------
337,500
----------
Retail - Food Chains (0.0%)
16,031 Grand Union Co. (Series 1) (b)................ 06/16/00 16,031
32,063 Grand Union Co. (Series 2) (b)................ 06/16/00 16,032
----------
32,063
----------
TOTAL WARRANTS
(Identified Cost $612,601)................................. 866,802
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
HIGH INCOME ADVANTAGE TRUST
PORTFOLIO OF INVESTMENTS September 30, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (0.1%)
REPURCHASE AGREEMENT
$ 220 The Bank of New York (dated 09/29/95;
proceeds $220,272; collateralized by
$231,870 U.S. Treasury Note 7.25% due
05/15/04 valued at $253,155)
(Identified Cost $220,173)............ 5.735% 10/02/95 $ 220,173
------------
TOTAL INVESTMENTS
(Identified Cost $185,103,605) (e).................... 97.7% 155,520,593
OTHER ASSETS IN EXCESS OF LIABILITIES................. 2.3 3,646,555
------ ------------
NET ASSETS............................................ 100.0% $159,167,148
====== ============
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Adjustable rate. Rate shown is the rate in effect at September 30, 1995.
** Resale is restricted to qualified institutional investors.
+++ Consists of one or more class of securities traded together as a unit;
generally bonds with attached stocks/warrants.
+ Payment-in-kind security.
++ Currently a zero coupon bond and will pay interest at the rate shown at a
future specified date.
(a) Non-income producing security.
(b) Acquired through exchange offer.
(c) Non-income producing security, issuer in bankruptcy.
(d) Non-income producing security, bond in default.
(e) The aggregate cost for federal income tax purposes is $185,338,503; the
aggregate gross unrealized appreciation is $6,417,511 and the aggregate
gross
unrealized depreciation is $36,235,421, resulting in net unrealized
depreciation of $29,817,910.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
HIGH INCOME ADVANTAGE TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
ASSETS:
Investments in securities, at value
(identified cost $185,103,605).......... $155,520,593
Receivable for:
Interest............................. 4,303,228
Investments sold..................... 523,853
Prepaid expenses and other assets........ 7,079
----------
TOTAL ASSETS......................... 160,354,753
----------
LIABILITIES:
Payable for:
Investments purchased................ 928,271
Investment management fee............ 117,845
Accrued expenses and other payables...... 141,489
----------
TOTAL LIABILITIES.................... 1,187,605
----------
NET ASSETS:
Paid-in-capital.......................... 288,883,672
Net unrealized depreciation.............. (29,583,013)
Accumulated undistributed net investment
income.................................. 2,767,470
Accumulated net realized loss............ (102,900,981)
----------
NET ASSETS........................... $159,167,148
----------
----------
NET ASSET VALUE PER SHARE,
30,017,252 shares outstanding (unlimited
shares authorized of $.01 par value).... $5.30
----
----
STATEMENT OF OPERATIONS
For the year ended September 30, 1995
NET INVESTMENT INCOME:
INTEREST INCOME.......................... $20,002,935
---------
EXPENSES
Investment management fee................ 1,175,209
Transfer agent fees and expenses......... 143,682
Professional fees........................ 105,091
Shareholder reports and notices.......... 42,630
Registration fees........................ 42,163
Custodian fees........................... 30,641
Trustees' fees and expenses.............. 23,737
Other.................................... 10,405
---------
TOTAL EXPENSES....................... 1,573,558
---------
NET INVESTMENT INCOME................ 18,429,377
---------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................ (2,741,117)
Net change in unrealized depreciation.... 2,914,528
---------
NET GAIN............................. 173,411
---------
NET INCREASE............................. $18,602,788
---------
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
HIGH INCOME ADVANTAGE TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
<S> <C> <C>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER SEPTEMBER
30, 1995 30, 1994
------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................. $ 18,429,377 $ 18,775,523
Net realized loss................................. (2,741,117) (26,559,960)
Net change in unrealized depreciation............. 2,914,528 8,035,914
---------- ----------
NET INCREASE.................................. 18,602,788 251,477
Dividends from net investment income.............. (19,271,076) (20,162,588)
---------- ----------
TOTAL DECREASE................................ (668,288) (19,911,111)
NET ASSETS:
Beginning of period............................... 159,835,436 179,746,547
---------- ----------
END OF PERIOD
(Including undistributed net investment income
of $2,767,470 and $3,609,169, respectively)... $159,167,148 $159,835,436
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
HIGH INCOME ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
High Income Advantage Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as a diversified, closed-end management
investment company. The Trust was organized as a Massachusetts business trust on
June 17, 1987 and commenced operations on October 29, 1987.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or American Stock Exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued; if there were no sales that
day, the security is valued at the latest bid price (in cases where a security
is traded on more than one exchange, the security is valued on the exchange
designated as the primary market by the Trustees); (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest available bid price prior to the time of valuation; (3)
when market quotations are not readily available, including circumstances under
which it is determined by the Investment Manager that sale and bid prices are
not reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Trustees; (4) certain of the Trust's
portfolio securities may be valued by an outside pricing service approved by the
Trustees. The pricing service utilizes a matrix system incorporating security
quality, maturity and coupon as the evaluation model parameters, and/or research
and evaluations by its staff, including review of broker-dealer market price
quotations, if available, in determining what it believes is the fair valuation
of the portfolio securities valued by such pricing service; and (5) short-term
debt securities having a maturity date of more than sixty days at time of
purchase are valued on a mark-to-market basis until sixty days prior to maturity
and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily except where collection is not expected.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
<PAGE> 11
HIGH INCOME ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1995, continued
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Trust pays a management fee, accrued weekly
and payable monthly, by applying the following annual rates to the Trust's
average weekly net assets: 0.75% to the portion of average weekly net assets not
exceeding $250 million; 0.60% to the portion of average weekly net assets
exceeding $250 million but not exceeding $500 million; 0.50% to the portion of
average weekly net assets exceeding $500 million but not exceeding $750 million;
0.40% to the portion of average weekly net assets exceeding $750 million but not
exceeding $1 billion; and 0.30% to the portion of average weekly net assets
exceeding $1 billion.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Trust who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Trust.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended September 30, 1995 aggregated
$92,480,802 and $91,447,262, respectively.
<PAGE> 12
HIGH INCOME ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1995, continued
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At September 30, 1995, the Trust had transfer agent fees
and expenses payable of approximately $15,000.
The Trust has established an unfunded noncontributory defined benefit pension
plan covering all independent Trustees of the Trust who will have served as
independent Trustees for at least five years at the time of retirement. Benefits
under this plan are based on years of service and compensation during the last
five years of service. Aggregate pension costs for the year ended September 30,
1995 included in Trustees' fees and expenses in the Statement of Operations
amounted to $7,585. At September 30, 1995, the Trust had an accrued pension
liability of $50,977 which is included in accrued expenses in the Statement of
Assets and Liabilities.
4. SHARES OF BENEFICIAL INTEREST
<TABLE>
<CAPTION>
CAPITAL PAID
PAR VALUE OF IN EXCESS OF
SHARES SHARES PAR VALUE
---------- ------------ ------------
<S> <C> <C> <C>
Balance, September 30, 1993, 1994 and 1995................................... 30,017,252 $300,172 $288,583,500
-------- --------- ----------
-------- --------- ----------
</TABLE>
5. DIVIDENDS
The Trust has declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- ------------------- --------- ------------------ ------------------
<S> <C> <C> <C>
September 26, 1995 $0.05 October 6, 1995 October 20, 1995
October 31, 1995 $0.05 November 10, 1995 November 24, 1995
</TABLE>
6. FEDERAL INCOME TAX STATUS
At September 30, 1995, the Trust had a net capital loss carryover of
approximately $99,916,000 to offset future capital gains to the extent provided
by regulations available through September 30 of the following years:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- --------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 TOTAL
- ------ ------ ------- ------- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$1,114 $5,723 $27,616 $23,411 $ 95 $15,205 $26,752 $99,916
--
--
----- ----- ------ ------ ------ ------ ------
----- ----- ------ ------ ------ ------ ------
</TABLE>
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Trust's next
taxable year. The Trust incurred and will elect to defer net capital losses of
approximately $2,750,000 during fiscal 1995.
As of September 30, 1995, the Trust had temporary book/tax differences primarily
attributable to post-October losses and capital loss deferrals on wash sales.
<PAGE> 13
HIGH INCOME ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1995, continued
7. SELECTED QUARTERLY FINANCIAL DATA -- (unaudited)
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------------------
9/30/95 6/30/95 3/31/95 12/31/94
------------------- ------------------- ------------------ -------------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
-------- ------ -------- ------ ------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income............ $ 4,924 $ 0.16 $ 5,064 $ 0.17 $ 4,680 $ 0.15 $ 5,335 $ 0.18
Net investment income.............. 4,526 0.15 4,647 0.15 4,302 0.14 4,954 0.17
Net realized and unrealized gain
(loss)............................ 15,169 0.50 (11,230) (0.37) 17,841 0.60 (21,607) (0.72)
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------------------
9/30/94 6/30/94 3/31/94 12/31/93
------------------- ------------------- ------------------ -------------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
-------- ------ -------- ------ ------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income............ $ 5,277 $ 0.18 $ 5,137 $ 0.17 $ 5,117 $ 0.17 $ 4,998 $ 0.17
Net investment income.............. 4,861 0.16 4,685 0.16 4,672 0.15 4,558 0.15
Net realized and unrealized gain
(loss)............................ (12,366) (0.41) (12,517) (0.42) (1,030) (0.04) 7,389 0.25
</TABLE>
- ---------------------
* Amounts in thousands.
<PAGE> 14
HIGH INCOME ADVANTAGE TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
------------------------------------------------------------
FOR THE YEAR ENDED SEPTEMBER 30
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE
OPERATING PERFORMANCE:
Net asset value, beginning of period............................. $ 5.32 $ 5.99 $ 5.81 $ 5.23 $ 4.96
---- ----- ----- ---- -----
Net investment income............................................ 0.61 0.62 0.70 0.84 0.69
Net realized and unrealized gain (loss).......................... 0.01 (0.62) 0.30 0.33 0.27
----- ----- ----- ----- -----
Total from investment operations................................. 0.62 -- 1.00 1.17 0.96
Dividends from net investment income............................. (0.64) (0.67) (0.82) (0.59) (0.69)
----- ----- ----- ----- -----
Net asset value, end of period................................... $ 5.30 $ 5.32 $ 5.99 $ 5.81 $ 5.23
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Market value, end of period...................................... $ 5.75 $5.625 $6.125 $ 5.75 $4.625
----- ----- ----- ----- -----
----- ----- ----- ----- -----
TOTAL INVESTMENT RETURN+......................................... 14.59% 2.56% 22.41% 38.06% 50.89%
RATIOS TO AVERAGE NET ASSETS:
Expenses......................................................... 1.01% 0.98% 0.97% 1.00% 1.07%
Net investment income............................................ 11.79% 10.52% 12.14% 14.72% 14.80%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.......................... $159,167 $159,835 $179,747 $174,713 $162,002
Portfolio turnover rate.......................................... 63% 102% 140% 108% 149%
</TABLE>
- ---------------------
+ Total investment return is based upon the current market value on the last
day of each period reported. Dividends are assumed to be reinvested at the
prices obtained under the Trust's dividend reinvestment plan. Total
investment return does not reflect sales charges or brokerage commissions.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 15
HIGH INCOME ADVANTAGE TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF HIGH INCOME ADVANTAGE TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of High Income Advantage Trust
("Trust") at September 30, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 10, 1995
<PAGE> 16
TRUSTEES
- ----------------------------------------------
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- ----------------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Peter M. Avelar
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- ----------------------------------------------
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- ----------------------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- ----------------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
HIGH
INCOME
ADVANTAGE
TRUST
ANNUAL REPORT
SEPTEMBER 30, 1995
