<PAGE> 1
HIGH INCOME ADVANTAGE TRUST Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS March 31, 1996
DEAR SHAREHOLDER:
The six-month period ended March 31, 1996 has been somewhat volatile as the
fixed-income markets first continued their rally into late 1995 before
retreating during the first quarter of 1996 as economic signals began to show
signs of a recovery. The high-yield market held up relatively well during this
period, even as interest rates increased. Though recent signs of an economic
recovery has led to a sharp increase in interest rates in the first quarter,
this recovery bodes well for the future prospects of many corporate issuers in
the high-yield marketplace and helps erase some of the recession fears that had
plagued the high-yield market in late 1995. Overall, the high-yield market is
off to a relatively good start in early 1996, following up on the strong year
the market had in 1995.
For the six-month period ended March 31, 1996, High Income Advantage Trust
produced a total return of 7.53 percent, based on its closing market price on
the New York Stock Exchange (NYSE) of $5.875 per share. Based on its net asset
value (NAV) of $5.28 per share, the Trust's total return for the same period was
4.84 percent. As of March 31, 1996, the Trust had net assets in excess of $158
million. Over the past six months, the Trust continued to distribute regular
income dividends at a rate of $0.05 per share per month. For the full six-month
period, income dividends totaled approximately $0.30 per share.
INVESTMENT STRATEGY
The Trust's investment strategy throughout 1995 and early 1996 has been to
capitalize on the opportunity created by the 1994 market correction by
positioning the portfolio for a continued rebound in the market. Despite the
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 in some cases to decline by as much as
15-20 percent. Following the correction, the Trust increased its emphasis on
discounted issues during the second half of 1994, which helped to provide more
capital appreciation potential
<PAGE> 2
HIGH INCOME ADVANTAGE TRUST
LETTER TO THE SHAREHOLDERS March 31, 1996, continued
for the Trust during 1995 and into 1996. While the Trust's portfolio is still
positioned for further upside in the high-yield market, it continues to maintain
a sizable position in various defensive securities, in order to provide the
flexibility needed to take advantage of any interim opportunities that may
arise.
MARKET OUTLOOK
Given our outlook for continued, albeit moderate economic growth, we find that
many of today's B rated issues -- still yielding more than 500 basis points (5
percent) above U.S. Treasury securities and trading at significant
discounts -- offer excellent long-term total return potential. Over the near
term, we expect continued volatility in the financial markets as investors
assess the economy's strength, possible Federal Reserve Board actions and
ongoing budget negotiations in Washington. However, despite any potential
short-term weakness, we consider today's high-yield market to be an attractive
long-term opportunity for investors.
We would like to remind you that the Trustees have approved a procedure whereby
the Trust, when appropriate, may repurchase shares in the open market or in
privately negotiated transactions at a price not above market value or net asset
value, whichever is lower at the time of purchase.
We appreciate 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
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On December 20, 1995, an annual meeting of the shareholders of the Trust was
held for the purpose of voting on three separate matters, the results of which
were as follows:
(1) ELECTION OF TRUSTEES BY ALL SHAREHOLDERS:
<TABLE>
<S> <C>
Jack F. Bennett
For................................................................ 22,016,323
Withheld........................................................... 312,081
Michael Bozic
For................................................................ 22,028,496
Withheld........................................................... 299,908
Charles A. Fiumefreddo
For................................................................ 22,028,703
Withheld........................................................... 299,701
</TABLE>
The following Trustees were not standing for reelection at this meeting: Edward
J. Garn, John R. Haire, Dr. Manuel H. Johnson, Paul Kolton, Michael E. Nugent,
Philip J. Purcell and John L. Schroeder.
(2) CONTINUANCE OF CURRENTLY EFFECTIVE INVESTMENT MANAGEMENT AGREEMENT WITH DEAN
WITTER INTERCAPITAL INC.:
<TABLE>
<S> <C>
For................................................................ 21,662,500
Against............................................................ 293,251
Abstain............................................................ 372,653
</TABLE>
(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS FOR THE
FISCAL YEAR ENDING SEPTEMBER 30, 1996:
<TABLE>
<S> <C>
For................................................................ 21,902,428
Against............................................................ 171,895
Abstain............................................................ 254,081
</TABLE>
<PAGE> 4
HIGH INCOME ADVANTAGE TRUST
PORTFOLIO OF INVESTMENTS March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (90.1%)
Aerospace (2.9%)
$ 5,000 Sabreliner Corp. (Series B)......... 12.50 % 04/15/03 $ 4,675,000
----------
Automotive (3.4%)
800 APS, Inc. - 144A*................... 11.875 01/15/06 820,000
6,030 Envirotest Systems, Inc. ........... 9.625 04/01/03 4,643,100
----------
5,463,100
----------
Broadcast Media (2.0%)
1,500 Paxson Communications............... 11.625 10/01/02 1,605,000
1,500 Spanish Broadcasting System,
Inc. ............................... 7.50 06/15/02 1,500,000
----------
3,105,000
----------
Cable & Telecommunications (10.1%)
2,933 Adelphia Communications Corp.
(Series B).......................... 9.50+ 02/15/04 2,610,047
4,000 AT&T Capital Corp. ................. 15.00 05/05/97 4,376,594
1,500 Charter Communication South East
L.P. - 144A*........................ 11.25 03/15/06 1,507,500
13,500 In-Flight Phone Corp. (Series B).... 14.00++ 05/15/02 4,185,000
1,500 Peoples Telephone Co., Inc. ........ 12.25 07/15/02 1,380,000
2,000 Rifkin Acquisition Partners L.P. -
144A*............................... 11.125 01/15/06 2,020,000
----------
16,079,141
----------
Computer Equipment (2.4%)
1,500 Unisys Corp. ....................... 13.50 07/01/97 1,601,250
2,000 Unisys Corp. (Conv.)................ 8.25 03/15/06 2,205,000
----------
3,806,250
----------
Consumer Products (1.2%)
2,000 J.B. Williams Holdings, Inc. ....... 12.00 03/01/04 1,980,000
----------
Containers (3.0%)
5,250 Ivex Holdings Corp. (Series B)...... 13.25++ 03/15/05 3,255,000
1,500 Mail-Well Corp. .................... 10.50 02/15/04 1,458,750
----------
4,713,750
----------
Electrical & Alarm Systems (2.2%)
4,500 Mosler, Inc. ....................... 11.00 04/15/03 3,465,000
----------
Entertainment/Gaming & Lodging (9.9%)
2,000 AMF Group Inc. - 144A*.............. 10.875 03/15/06 1,992,500
10,883 Days Inns of America, Inc. (a)...... 12.375 06/01/97 --
2,000 Fitzgeralds Gaming Corp.
(Units)+++.......................... 13.00 12/31/02 1,880,000
1,500 Lady Luck Gaming Finance Corp.
(Series B).......................... 10.50 03/01/01 1,350,000
4,000 Motels of America, Inc. (Series
B).................................. 12.00 04/15/04 3,940,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
HIGH INCOME ADVANTAGE TRUST
PORTFOLIO OF INVESTMENTS March 31, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
<C> <S> <C> <C> <C>
$ 1,500 Plitt Theaters, Inc. ............... 10.875% 06/15/04 $ 1,522,500
13,514 Spectravision, Inc. (a)............. 11.65 12/01/02 1,392,181
3,500 Trump Taj Mahal (Series A).......... 11.35+ 11/15/99 3,675,000
----------
15,752,181
----------
Foods & Beverages (14.5%)
8,300 Envirodyne Industries, Inc. ........ 10.25 12/01/01 6,494,750
6,000 PepsiCo Inc. ....................... 15.00 06/14/96 6,108,660
1,500 SC International Services, Inc. .... 13.00 10/01/05 1,620,000
4,000 Seven Up/RC Bottling Co. Southern
California, Inc. (b)................ 11.50 08/01/99 2,295,000
13,500 Specialty Foods Acquisition Corp.
(Series B).......................... 13.00++ 08/15/05 6,480,000
----------
22,998,410
----------
Manufacturing (8.2%)
3,250 Alpine Group, Inc. ................. 12.25 07/15/03 3,185,000
1,500 Berry Plastics Corp. ............... 12.25 04/15/04 1,657,500
1,500 Cabot Safety Corp. ................. 12.50 07/15/05 1,661,250
1,500 Exide Electronics Group - 144A*..... 11.50 03/15/06 1,533,750
1,500 International Wire Group............ 11.75 06/01/05 1,466,250
1,500 Knoll Inc. - 144A*.................. 10.875 03/15/06 1,545,000
2,000 Uniroyal Technology Corp. .......... 11.75 06/01/03 1,895,000
----------
12,943,750
----------
Manufacturing - Diversified (7.9%)
3,000 Foamex L.P. ........................ 11.875 10/01/04 2,865,000
3,250 Interlake Corp. .................... 12.125 03/01/02 3,030,625
2,000 J.B. Poindexter & Co., Inc. ........ 12.50 05/15/04 1,680,000
2,000 Jordan Industries, Inc. ............ 10.375 08/01/03 1,865,000
4,500 Jordan Industries, Inc. ............ 11.75++ 08/01/05 3,015,000
----------
12,455,625
----------
Oil & Gas (1.1%)
2,000 Empire Gas Corp. ................... 7.00 07/15/04 1,805,000
----------
Publishing (5.0%)
7,000 Affiliated Newspapers Investments,
Inc. ............................... 13.25++ 07/01/06 4,725,000
4,000 United States Banknote Corp. ....... 10.375 06/01/02 3,180,000
----------
7,905,000
----------
Restaurants (8.0%)
9,500 American Restaurant Group
Holdings, Inc. ..................... 14.00++ 12/15/05 4,037,500
1,500 Carrols Corp. ...................... 11.50 08/15/03 1,548,750
9,550 Flagstar Corp. ..................... 11.25 11/01/04 7,043,125
----------
12,629,375
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
HIGH INCOME ADVANTAGE TRUST
PORTFOLIO OF INVESTMENTS March 31, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Retail (3.1%)
$ 1,671 Cort Furniture Rental Corp. ........ 12.00 % 09/01/00 $ 1,787,970
2,000 County Seat Stores Co. ............. 12.00 10/01/02 1,500,000
1,587 Thrifty Payless Holdings, Inc. ..... 11.625+ 04/15/06 1,555,444
-----------
4,843,414
-----------
Retail - Food Chains (1.9%)
1,500 Jitney-Jungle Stores................ 12.00 03/01/06 1,492,500
1,500 Ralphs Grocery Co. ................. 10.45 06/15/04 1,443,750
-----------
2,936,250
-----------
Textiles (0.0%)
273 Farley Inc. (Conv.)................. 0.00 01/01/12 27,270
-----------
Textiles - Apparel Manufacturers
(3.3%)
5,534 JPS Textile Group, Inc. ............ 10.85 06/01/99 4,039,820
1,500 U.S. Leather, Inc. ................. 10.25 07/31/03 1,252,500
-----------
5,292,320
-----------
TOTAL CORPORATE BONDS
(Identified Cost $165,620,587)................................ 142,875,836
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (c) (0.9%)
Automotive (0.0%)
113 Northern Holdings Industrial Corp. (Restricted) (d)....... --
----------
Computer Equipment (0.1%)
191,107 Memorex Telex NV (ADR) (Netherlands) (d).................. 191,107
----------
Entertainment/Gaming & Lodging (0.2%)
4,000 Motels of America, Inc. - 144A*........................... 300,000
----------
Foods & Beverages (0.2%)
180,000 Specialty Foods Acquisition Corp. (Restricted) - 144A*.... 360,000
----------
Publishing (0.1%)
7,000 Affiliated Newspapers Investments, Inc. (Class B)......... 210,000
----------
Restaurants (0.1%)
9,500 American Restaurant Group Holdings, Inc. - 144A*.......... 142,500
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
HIGH INCOME ADVANTAGE TRUST
PORTFOLIO OF INVESTMENTS March 31, 1996 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
Retail (0.2%)
76,000 Thrifty Payless Holdings, Inc. (Class C).................. $ 370,500
----------
TOTAL COMMON STOCKS
(Identified Cost $13,494,207)............................. 1,574,107
----------
PREFERRED STOCK (1.3%)
Entertainment/Gaming & Lodging
80,000 Fitzgeralds Gaming Corp. (Units)+++ $3.75
(Identified Cost $2,000,000).............................. 2,020,000
----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C>
WARRANTS (c) (0.7%)
Aerospace (0.0%)
5,000 Sabreliner Corp. (Restricted) - 144A*......... 04/15/03 50,000
----------
Cable & Telecommunications (0.1%)
10,000 In-Flight Phone Corp. - 144A*................. 08/31/02 100,000
----------
Containers (0.1%)
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 --
----------
Manufacturing (0.1%)
4,000 BPC Holdings Corp. ........................... 04/15/04 50,000
20,000 Uniroyal Technology Corp. .................... 06/01/03 30,000
----------
80,000
----------
Oil & Gas (0.0%)
5,520 Empire Gas Corp. ............................. 07/15/04 55,200
----------
Retail (0.4%)
132,000 Cort Business Services Corp. ................. 09/07/98 528,000
4,000 County Seat Holdings Co. ..................... 10/15/98 40,000
----------
568,000
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
HIGH INCOME ADVANTAGE TRUST
PORTFOLIO OF INVESTMENTS March 31, 1996 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Retail - Food Chains (0.0%)
16,031 Grand Union Co. (Series 1) (d)................ 06/16/00 $ --
32,063 Grand Union Co. (Series 2) (d)................ 06/16/00 --
----------
--
----------
TOTAL WARRANTS
(Identified Cost $1,064,506)............................... 1,073,200
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (e) (5.5%)
U.S. GOVERNMENT AGENCY
$8,745 Federal Home Loan Mortgage Corp.
(Amortized Cost $8,745,000).......... 5.30% 04/01/96 8,745,000
-----------
TOTAL INVESTMENTS
(Identified Cost $190,924,300) (f)..................... 98.5% 156,288,143
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES......... 1.5 2,362,537
---- -----------
NET ASSETS............................................ 100.0% $158,650,680
---- -----------
---- -----------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* 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, issuer in bankruptcy.
(b) Non-income producing security, bond in default.
(c) Non-income producing securities.
(d) Acquired through exchange offer.
(e) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(f) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation was $4,045,620 and the
aggregate gross unrealized depreciation was $38,681,777, resulting in net
unrealized depreciation of $34,636,157.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
HIGH INCOME ADVANTAGE TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $190,924,300)....................................... $156,288,143
Cash.................................................................. 7,757
Interest receivable................................................... 4,001,503
Prepaid expenses and other assets..................................... 27,337
-----------
TOTAL ASSETS...................................................... 160,324,740
-----------
LIABILITIES:
Payable for:
Investments purchased............................................. 1,416,917
Investment management fee......................................... 120,705
Accrued expenses...................................................... 136,438
-----------
TOTAL LIABILITIES................................................. 1,674,060
-----------
NET ASSETS:
Paid-in-capital....................................................... 288,883,672
Net unrealized depreciation........................................... (34,636,157)
Accumulated undistributed net investment income....................... 3,856,596
Accumulated net realized loss......................................... (99,453,431)
-----------
NET ASSETS........................................................ $158,650,680
-----------
-----------
NET ASSET VALUE PER SHARE,
30,017,252 shares outstanding
(unlimited shares authorized of $.01 par value)...................... $5.29
----
----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
HIGH INCOME ADVANTAGE TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended March 31, 1996 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME........................................................ $10,834,590
----------
EXPENSES
Investment management fee.............................................. 595,088
Transfer agent fees and expenses....................................... 66,179
Custodian fees......................................................... 18,326
Professional fees...................................................... 16,317
Shareholder reports and notices........................................ 16,061
Registration fees...................................................... 13,104
Trustees' fees and expenses............................................ 11,374
Other.................................................................. 3,839
----------
TOTAL EXPENSES..................................................... 740,288
----------
NET INVESTMENT INCOME.............................................. 10,094,302
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain...................................................... 3,447,550
Net change in unrealized depreciation.................................. (5,053,144)
----------
NET LOSS........................................................... (1,605,594)
----------
NET INCREASE........................................................... $ 8,488,708
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
HIGH INCOME ADVANTAGE TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR
FOR THE SIX ENDED
MONTHS ENDED SEPTEMBER 30,
MARCH 31, 1996 1995
- ---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................ $ 10,094,302 $ 18,429,377
Net realized gain (loss)......................... 3,447,550 (2,741,117)
Net change in unrealized
appreciation/depreciation....................... (5,053,144) 2,914,528
----------- -----------
NET INCREASE................................. 8,488,708 18,602,788
Dividends from net investment income............. (9,005,176) (19,271,076)
----------- -----------
TOTAL DECREASE............................... (516,468) (668,288)
NET ASSETS:
Beginning of period.............................. 159,167,148 159,835,436
----------- -----------
END OF PERIOD
(Including undistributed net investment
income of $3,856,596 and $2,767,470,
respectively................................. $ 158,650,680 $ 159,167,148
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 12
HIGH INCOME ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1996 (unaudited)
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 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> 13
HIGH INCOME ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1996 (unaudited) 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
weekly net assets: 0.75% to the portion of weekly net assets not exceeding $250
million; 0.60% to the portion of weekly net assets exceeding $250 million but
not exceeding $500 million; 0.50% to the portion of weekly net assets exceeding
$500 million but not exceeding $750 million; 0.40% to the portion of weekly net
assets exceeding $750 million but not exceeding $1 billion; and 0.30% to the
portion of 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 six months ended March 31, 1996 aggregated
$73,010,019 and $81,413,792, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At March 31, 1996, the Trust had transfer agent fees and
expenses payable of approximately $7,000.
<PAGE> 14
HIGH INCOME ADVANTAGE TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1996 (unaudited) continued
The Trust has 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 six months ended March 31, 1996
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,227. At March 31, 1996, the Trust had an accrued pension liability of
$52,144 which is included in accrued expenses in the Statement of Assets and
Liabilities.
4. SHARES OF BENEFICIAL INTEREST
<TABLE>
<CAPTION>
CAPITAL PAID
PAR VALUE IN EXCESS OF
SHARES OF SHARES PAR VALUE
---------- ---------- ------------
<S> <C> <C> <C>
Balance, September 30, 1994 and 1995 and March 31, 1996......................... 30,017,252 $300,172 $288,583,500
========== ======== ===========
</TABLE>
5. DIVIDENDS
The Trust declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- --------------- --------- -------------- ---------------
<S> <C> <C> <C>
March 26, 1996 $0.05 April 4, 1996 April 19, 1996
April 23, 1996 $0.05 May 3, 1996 May 17, 1996
</TABLE>
6. FEDERAL INCOME TAX STATUS
At September 30, 1995, the Trust had a net capital loss carryover of
approximately $99,916,000, which may be used to offset future capital gains to
the extent provided by regulations, which are available through September 30 in
the following years:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
--------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 TOTAL
------ ------ ------- ------- ---- ------- ------- -------
<S> <C> <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
during such 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> 15
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 SIX
MONTHS ENDED FOR THE YEAR ENDED SEPTEMBER 30
MARCH 31, ----------------------------------------------
1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....................... $ 5.30 $ 5.32 $ 5.99 $ 5.81
------ ------ ------ ------
Net investment income...................................... 0.34 0.61 0.62 0.70
Net realized and unrealized gain (loss).................... (0.05) 0.01 (0.62) 0.30
------ ------ ------ ------
Total from investment operations........................... 0.29 0.62 -- 1.00
------ ------ ------ ------
Dividends from net investment income....................... (0.30) (0.64) (0.67) (0.82)
------ ------ ------ ------
Net asset value, end of period............................. $ 5.29 $ 5.30 $ 5.32 $ 5.99
------ ------ ------ ------
------ ------ ------ ------
Market value, end of period................................ $5.875 $ 5.75 $5.625 $6.125
------ ------ ------ ------
------ ------ ------ ------
TOTAL INVESTMENT RETURN+................................... 7.53%(1) 14.59% 2.56% 22.41%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................... 0.93%(2) 1.01% 0.98% 0.97%
Net investment income...................................... 12.72%(2) 11.79% 10.52% 12.14%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................... $158,651 $159,167 $159,835 $179,747
Portfolio turnover rate.................................... 49%(1) 63% 102% 140%
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30
-------------------------------
1992 1991
- -------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....................... $ 5.23 $ 4.96
------ ------
Net investment income...................................... 0.84 0.69
Net realized and unrealized gain (loss).................... 0.33 0.27
------ ------
Total from investment operations........................... 1.17 0.96
------ ------
Dividends from net investment income....................... (0.59) (0.69)
------ ------
Net asset value, end of period............................. $ 5.81 $ 5.23
------ ------
------ ------
Market value, end of period................................ $ 5.75 $4.625
------ ------
------ ------
TOTAL INVESTMENT RETURN+................................... 38.06% 50.89%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................... 1.00% 1.07%
Net investment income...................................... 14.72% 14.80%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................... $174,713 $162,002
Portfolio turnover rate.................................... 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 brokerage commissions.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 16
TRUSTEES
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
The financial statements included herein have been taken from the records of
the Trust without examination by the independent accountants and accordingly
they do not express an opinion thereon.
HIGH
INCOME
ADVANTAGE
TRUST
SEMIANNUAL REPORT
MARCH 31, 1996
