July 23, 1996
Dear Shareholder:
While returns for the high yield market were modestly positive during the
first six months of 1996, they were measurably stronger than the returns for
the investment grade and Treasury bond market. The bond market was surprised
by the renewed fortitude in the overall US economy, which drove interest
rates upward as the market priced in expectations for a potential increase in
short term rates by the Federal Reserve Board. For reference, the yield on
the 10-year Treasury Note increased from 5.6% to 6.7%. In contrast, the high
yield market benefited by the reversal in expectations for the economy.
Generally speaking, a stronger economy should allow most high yield issuers
to meet their financial goals and service their debt more readily. In
addition, the equity market has shown strong performance in the first six
months of the year. Buoyant equity valuations tend to support stronger high
yield valuations, as issuers are more apt to raise capital through equity
issuance when valuations are attractive. Thus, even with the negative
interest rate pressures in the marketplace, the high yield market remained
fairly resilient to these rate increases given otherwise positive market
fundamentals, including strong demand in general for high yield securities.
Total return of the Fund, based on net asset value and reinvestment of
dividends, is shown below for the periods ended June 30, 1996. (We also
include performance of the shares based on stock price and dividend income.)
We would remind shareholders that the Fund remains highly leveraged. Leverage
amplifies the Fund's returns both on the upside and on the downside: holding
other factors constant, a leveraged portfolio should outperform in a strong
market environment and underperform in a weak market environment. The Fund's
leverage had a negligible impact on the Fund's performance during the six
months ended June 30, 1996. Performance year-to-date lagged the average
closed end, leveraged high yield bond fund, as measured by Lipper Analytical
Services, due to the slightly higher quality mix within the Portfolio
relative to some of the other Funds in the average. (The lowest quality
instruments, including issues in default, have generally shown the strongest
performance this year, driven by the strong equity market, a healthy merger
and acquisition market, and the economic factors discussed above.)
Total Returns for the Periods
Ended June 30, 1996
----------------------------------
Six One
Months Year Two Years
--------- ------- ----------
New America High Income Fund
(NAV and Dividends) 4.1% 15.4% 36.7%
Lipper Closed-End Fund
Leveraged High Yield Average 5.2 13.0 26.8
New America High Income Fund
(Stock and Dividends) 9.8 17.4 47.9
1
<PAGE>
The Fund's stock closed the quarter at $5.00 per share. This price
represented a premium of 6.4% to the Fund's net asset value of $4.70 per
share. The Fund's present monthly dividend of $0.04 annualized represents a
yield of 9.6% relative to the June 30, 1996 stock price; this yield is 290
basis points in excess of the 10-year Treasury rate.
The Fund remains highly diversified with debt holdings in 129 different
corporate issuers. The Fund's five largest corporate holdings include issues
of Fort Howard Corporation, the nation's leading producer of commercial
tissue paper; Container Corporation of America, a major producer of
containerboard; K & F Industries, an aircraft braking system producer; Young
Broadcasting, a rapidly growing operator of television stations; and Bell &
Howell, a provider of information access and retrieval systems as well as a
producer of mail processing equipment. The average quality of the Fund's
investment portfolio, B1/B+, remained unchanged during the six month period.
The average effective yield, maturity and duration (all of which incorporate
call expectations) of the Fund's holdings were 10.2%, 6.5 years and 4.4
respectively.
Thank you for your interest in The New America High Income Fund.
Sincerely yours,
/s/ Catherine A. Smith /s/ Robert F. Birch
Catherine A. Smith Robert F. Birch
Senior Vice President President
Wellington Management Company The New America High Income Fund, Inc.
2
<PAGE>
The New America High Income Fund, Inc.
Schedule of Investments--June 30, 1996 (Unaudited)
(Dollar Amounts in Thousands)
Value
Principal Moody's (Note
Amount Rating 1(a))
------------------------------------------ ----- --------
CORPORATE DEBT SECURITIES -- 92.17% (e)
Aerospace and Defense -- 7.62%
$3,000 Howmet Corporation, Senior
Subordinated Notes, 10%,
12/01/03 (i) B3 $ 3,158
1,250 K&F Industries, Inc., Senior
Secured Notes, 11.875%,
12/01/03 B1 1,338
4,286 K&F Industries, Inc., Senior
Subordinated Debentures,
13.75%, 08/01/01 B2 4,457
2,500 Moog, Inc., Senior Subordinated
Notes, 10%, 05/01/06 (i) B2 2,500
1,460 Northrop Grumman Corporation,
Debentures, 9.375%, 10/15/24 Baa3 1,570
3,000 Rohr, Inc., Senior Notes,
11.625%, 05/15/03 Ba3 3,255
4,245 Wyman-Gordon Company, Senior
Notes, 10.75%, 03/15/03 B1 4,415
------
20,693
------
Automobile -- 4.32%
3,000 Collins & Aikman Products Co.,
Senior Subordinated Notes,
11.50%, 04/15/06 B3 3,038
500 Exide Corporation, Senior Notes,
10%, 04/15/05 B1 488
1,900 Exide Corporation, Senior Notes,
10.75%, 12/15/02 B1 1,938
960 Hayes Wheels International,
Inc., Senior Subordinated
Notes, 11%, 07/15/06 B3 970
1,000 Lear Seating Corporation, Senior
Subordinated Notes, 11.25%,
07/15/00 B1 1,030
750 Lear Seating Corporation,
Subordinated Notes, 8.25%,
02/01/02 B2 713
2,000 Penda Corp., Senior Notes,
Series B, 10.75%, 03/01/04 B2 1,845
1,750 Walbro Corporation, Senior
Notes, 9.875%, 07/15/05 Ba3 1,715
------
11,737
------
Banking -- 2.00%
$ 500 Anchor Bancorp, Inc., Senior
Notes, 8.9375%, 07/09/03 Ba3 $ 495
1,250 Dime Bancorp, Senior Notes,
10.50%, 11/15/05 Ba3 1,350
2,000 First Nationwide Parent, Senior
Exchangeable Notes, 12.50%,
04/15/03 B2 2,090
1,500 FirstFed Financial Corp., Notes,
11.75%, 10/01/04 B2 1,485
2,064 WestFed Holdings, Inc., Split
Coupon Senior Debentures,
15.50%, 09/15/99 (a)(c)(d) (f) 0
------
5,420
------
Beverages, Food and Tobacco -- .51%
1,350 GRUMA, S.A. de C.V., Notes,
9.75%, 03/09/98 (f) 1,377
------
Buildings and Real Estate -- 3.21%
1,170 Associated Materials
Incorporated, Senior
Subordinated Notes 11.50%,
08/15/03 B3 1,003
1,750 Del Webb Corporation, Senior
Subordinated Debentures, 9%,
02/15/06 B2 1,575
500 Del Webb Corporation, Senior
Notes, 10.875%, 03/31/00 Ba3 516
2,500 Overhead Door Corporation,
12.25%, 02/01/00 B1 2,519
3,000 Toll Corp., Senior Subordinated
Notes, 10.50%, 03/15/02 Ba3 3,105
------
8,718
------
Chemicals, Plastics and Rubber -- 2.47%
1,000 General Chemical, Senior
Subordinated Notes, 9.25%,
08/15/03 B2 990
2,500 Great Lakes Carbon Corporation,
Senior Secured Notes, 10%,
01/01/06 Ba3 2,575
1,000 Harris Chemical North America,
Inc., Senior Secured Discount
Notes, 07/15/01 B2 1,003
The accompanying notes are an integral
part of these financial statements.
3
<PAGE>
CORPORATE DEBT SECURITIES -- continued
$ 628 Rexene Corp., Senior Notes,
11.75%, 12/01/04 B1 $ 650
535 Texas Petrochemicals
Corporation, Senior
Subordinated Notes, 11.125%,
07/01/05, (i) B3 546
825 UCAR Global Enterprises, Inc.,
Senior Subordinated Notes,
12%, 01/15/05 B2 936
------
6,700
------
Containers, Packaging and Glass -- 7.37%
1,250 Container Corp., Guaranteed
Senior Notes, Series B,
10.75%, 05/01/02 B1 1,288
5,000 Container Corp., Senior Notes,
9.75%, 04/01/03 B1 4,913
1,500 Owens Illinois, Inc., Senior
Debentures, 11%, 12/01/03 Ba3 1,613
500 Portola Packaging, Inc., Senior
Notes, 10.75%, 10/01/05 B2 509
1,750 Rainy River Forest Products,
Inc., Senior Secured Notes,
10.75%, 10/15/01 Ba1 1,829
2,000 Repap New Brunswick, Inc., First
Priority Senior Secured Notes,
9.875%, 07/15/00 Ba3 1,970
1,750 Repap New Brunswick, Inc.,
Second Priority Senior Secured
Notes, 10.625%, 04/15/05 B2 1,645
1,000 Repap Wisconsin, Inc., First
Priority Senior Secured Notes,
9.25%, 02/01/02 B1 935
300 Silgan Corp., Senior
Subordinated Notes, 11.75%,
06/15/02 B3 305
459 Silgan Holdings Inc., Senior
Discount Debentures, 13.25%,
12/15/02 (g) B3 465
2,000 Stone Container Corp., Senior
Notes, 9.875%, 02/01/01 B1 1,940
1,500 Tembec Finance Corp., Guaranteed
Senior Notes, 9.875%, 09/30/05 B1 1,395
$1,150 S.D. Warren Company, Senior
Subordinated Notes, Series B,
12%, 12/15/04 B1 $ 1,213
------
20,020
------
Diversified/Conglomerate Manufacturing -- 6.08%
1,000 American Standard Inc., Senior
Debentures, 11.375%, 05/15/04 Ba3 1,080
1,750 American Standard Inc., Senior
Subordinated Discount
Debentures, 10.50%, 06/01/05,
(g) B1 1,527
2,500 Bell & Howell Company, Senior
Notes, 9.25%, 07/15/00 B1 2,525
3,915 Bell & Howell Holdings Company,
Series B, Senior Discount
Debentures, 03/01/05, (g) B3 2,682
3,500 Essex Group, Inc., Senior Notes,
10%, 05/01/03 B1 3,552
2,000 Specialty Equipment Companies,
Inc., Senior Subordinated
Notes, 11.375%, 12/01/03 B3 2,065
1,250 Thermadyne Holdings Corp.,
Senior Notes, 10.25%, 05/01/02 B3 1,228
800 Westinghouse Electric
Corporation, Notes, 8.375%,
06/15/02 Ba1 797
1,025 Westinghouse Electric
Corporation, Notes, 8.875%,
06/01/01 Ba1 1,045
------
16,501
------
Diversified Conglomerate Service -- .20%
500 Heritage Media Services, Inc.,
Senior Secured Notes, 11%,
06/15/02 Ba1 531
------
Diversified Natural Resources, Metals and Minerals -- .56%
1,500 Haynes International, Inc.,
Senior Subordinated Notes,
13.50%, 08/15/99 Ca 1,522
------
Ecological -- .59%
1,750 Envirosource, Inc., Senior
Notes, 9.75%, 06/15/03 B3 1,593
------
4
<PAGE>
CORPORATE DEBT SECURITIES -- continued
Electronics -- 2.24%
$2,250 Digital Equipment Corp.,
Debentures, 7.75%, 04/01/23 Ba1 $ 2,034
1,500 Remington Products Company,
L.L.C., Senior Subordinated
Notes, 11%, 05/15/06 (i) B3 1,493
2,500 Unisys Corporation, Senior
Notes, 12%, 04/15/03 (i) B1 2,556
------
6,083
------
Farming and Agriculture -- 3.26%
500 Agriculture Minerals and
Chemicals, Senior Notes,
10.75%, 09/30/03 Ba3 525
3,000 Arcadian Partners, L.P., Senior
Notes, Series B, 10.75%,
05/01/05 B2 3,240
2,000 PMI Acquisition Corp., Senior
Subordinated Notes, 10.25%,
09/01/03 B2 1,960
3,000 Viridian, Inc., Debentures,
10.50%, 03/31/14 Ba3 3,135
------
8,860
------
Finance -- .60%
1,750 Imperial Credit Industries,
Inc., Senior Notes, 9.75%,
01/15/04 B1 1,628
------
Grocery -- 2.74%
4,000 Big V Supermarkets, Inc. Senior
Subordinated Notes, Series B,
11%, 02/15/04 B3 3,710
1,000 Bruno's, Senior Subordinated
Notes, 10.50%, 08/01/05 B3 986
750 Dominicks Finer Foods, Inc.,
Senior Subordinated Notes,
10.875%, 05/01/05 B3 789
500 Eagle Food Centers, Inc., Senior
Notes, 8.625%, 04/15/00 B1 435
1,500 Smith's Food & Drug Centers,
Inc., Senior Subordinated
Notes, 11.25%, 05/15/07 B3 1,511
------
7,431
------
Healthcare, Education and Childcare -- 4.91%
$ 750 Beverly Enterprises, Inc.,
Senior Notes, 9%, 02/15/06 B1 $ 694
975 Dade International Inc., Senior
Subordinated Notes, 11.125%,
05/01/06 (i) B3 1,009
1,050 Graphic Controls Corporation,
Senior Subordinated Notes,
12%, 09/15/05 B3 1,113
1,500 Integrated Health Services,
Inc., Senior Subordinated
Notes, 10.25%, 04/30/06 (i) B1 1,485
3,500 OrNda Healthcorp, Senior
Subordinated Notes, 11.375%,
08/15/04 B2 3,859
2,675 Owens & Minor, Inc., Senior
Subordinated Notes, 10.875%,
06/01/06 B1 2,712
500 Quorum Health Group, Inc.,
Senior Subordinated Notes,
8.75%, 11/1/05 B1 490
650 Tenet Healthcare Corp., Senior
Notes, 9.625%, 09/01/02 Ba1 691
1,200 Tenet Healthcare Corp., Senior
Subordinated Notes, 10.125%,
03/01/05 Ba3 1,266
------
13,319
------
Hotels, Motels, Inns and Gaming -- 1.32%
1,500 GB Property Funding Corp., First
Mortgage Notes, 10.875%,
01/15/04 B2 1,350
1,000 Harrah's Operating Inc., Senior
Subordinated Notes, 10.875%,
4/15/02 Ba3 1,072
1,150 Trump Atlantic City Associates,
First Mortgage Notes, 11.25%,
05/01/06 B1 1,156
------
3,578
------
Leisure, Amusement, Pictures, and Entertainment -- 1.09%
750 Cobb Theatres, Senior Secured
Notes, 10.625%, 03/01/03 (i) B2 761
5
<PAGE>
CORPORATE DEBT SECURITIES -- continued
$1,225 Plitt Theatres, Inc., Senior
Subordinated Notes, 10.875%,
06/15/04 B3 $ 1,237
1,000 Turner Broadcasting Systems,
Inc., Senior Notes, 7.40%,
02/01/04 Ba2 960
------
2,958
------
Machinery -- 2.26%
1,500 Coltec Industries, Inc., Senior
Notes, 9.75%, 04/01/00 B1 1,530
1,000 Coltec Industries, Inc., Senior
Subordinated Notes, 10.25%,
04/01/02 B3 1,015
525 Idex Corporation, Senior
Subordinated Notes, 9.75%,
09/15/02 Ba3 541
1,000 The Interlake Corporation,
Senior Notes, 12%, 11/15/01 B2 1,050
2,000 The Interlake Corporation,
Senior Subordinated
Debentures, 12.125%, 03/01/02 B3 2,000
------
6,136
------
Mining, Steel, Iron, Non-Precious Metals -- 7.76%
2,500 AK Steel Corporation, Senior
Notes, 10.75%, 04/01/04 Ba2 2,694
4,500 Armco Inc., Senior Notes,
9.375%, 11/01/00 B2 4,365
3,000 Bethlehem Steel Corporation,
Senior Notes, 10.375%,
09/01/03 B1 3,180
2,000 Companhia Vale do Rio Doce,
Notes, 10%, 04/02/04 (i) (f) 1,995
725 Metalurgica Gerdau SA, Notes,
11.125%, 05/24/04 (i) (f) 723
1,000 Northwestern Steel & Wire
Company, Senior Notes, 9.50%,
06/15/01 B1 970
1,690 NS Group, Inc., Senior Secured
Notes, 13.50%, 07/15/03 B3 1,639
715 Oregon Steel Mills, Inc., First
Mortgage Notes, 11%,
06/15/03 B1 736
1,400 Weirton Steel Corporation,
Senior Notes, 11.375%,
07/01/04 (i) B2 1,375
$1,750 Weirton Steel Corporation,
Senior Notes, 10.875%,
10/15/99 B2 $ 1,829
1,685 Wheeling-Pittsburgh Corporation,
Senior Notes, 9.375%,
11/15/03 B1 1,567
------
21,073
------
Oil and Gas -- 3.73%
1,500 Energy Ventures, Inc., Senior
Notes, 10.25%, 03/15/04 B1 1,549
500 Global Marine Inc., Senior
Notes, 12.75%, 12/15/99 B1 541
625 Mesa Operating, Co., Senior
Subordinated Discount Notes,
11.625%, 07/01/06 (g) B2 364
1,050 Mesa Operating Co., Senior
Subordinated Notes, 10.625%,
07/01/06 B2 1,066
2,500 Plains Resources Inc., Senior
Subordinated Notes, 10.25%,
03/15/06 (i) B2 2,469
3,000 Santa Fe Energy Resources, Inc.,
Senior Subordinated
Debentures, 11%, 05/15/04 B1 3,210
1,000 Seagull Energy Corp., Senior
Subordinated Notes, 8.625%,
08/01/05 B2 940
------
10,139
------
Personal Transportation -- 0.00%
5,000 Braniff, Inc., Senior Reset
Notes, 15%, 04/01/99
(a)(b)(c)(d) (f) 0
------
Personal and Non-Durable Consumer Products -- 6.04%
1,000 American Safety Razor Company,
Series B, Senior Notes,
9.875%, 08/01/05 B1 1,010
1,700 Cabot Safety Acquisition Co.,
Senior Subordinated Notes,
12.50%, 07/15/05 B3 1,874
400 Fort Howard Corp., Senior Notes,
8.25%, 02/01/02 B1 384
5,000 Fort Howard Corp., Senior Notes,
9.25%, 03/15/01 B1 5,000
1,000 Fort Howard Corp., Senior
Subordinated Notes, 9%,
02/01/06 B2 960
6
<PAGE>
CORPORATE DEBT SECURITIES -- continued
$5,000 Sweetheart Cup, Inc., Guaranteed
Senior Subordinated Notes,
10.50%, 09/01/03 B3 $ 4,950
2,250 Westpoint Stevens, Inc., Senior
Notes, 8.75%, 12/15/01 Ba3 2,222
------
16,400
------
Printing, Publishing and Broadcasting -- 12.19%
3,800 Benedek Communications
Corporation, Senior
Subordinated Discount Notes,
05/15/06 (g)(i) B3 1,938
1,000 Cablevision Industries
Corporation, Senior
Debentures, Series B, 9.25%,
04/01/08 Ba2 1,025
1,000 Cablevision Systems Corporation,
Senior Subordinated
Debentures, 10.75%, 04/01/04. B2 1,030
2,250 Cablevision Systems Corporation,
Senior Subordinated Notes,
9.25%, 11/01/05 B2 2,092
715 Cablevision Systems Corporation,
Senior Subordinated Notes,
9.875%, 05/15/06 B2 690
2,500 Chancellor Broadcasting Company,
Senior Subordinated Notes,
9.375%, 10/01/04 B3 2,362
1,500 Comcast Corporation, Senior
Subordinated Debentures,
9.125%, 10/15/06 B1 1,414
850 Comcast Corporation, Senior
Subordinated Debentures,
9.375%, 05/15/05 B1 818
1,500 EZ Communications, Inc., Senior
Subordinated Notes, 9.75%,
12/01/05 B2 1,417
1,000 Granite Broadcasting
Corporation, Senior
Subordinated Debentures,
12.75%, 09/01/02 B3 1,096
1,700 Granite Broadcasting
Corporation, Senior
Subordinated Notes, Series B,
10.375%, 05/15/05 B3 1,666
750 JCAC, Inc., Senior Subordinated
Notes, 10.125%, 06/15/06 B2 742
$1,000 Lenfest Communications, Inc.,
Senior Notes, 8.375%, 11/01/05 Ba3 $ 912
500 Marcus Cable Operating Company,
L.P., Senior Subordinated
Guaranteed Discount Notes,
08/01/04, (g) B3 357
750 Marcus Cable Company, L.P.
Senior Discount Notes,
12/15/05, (g) Caa 461
1,625 Rifkin Acquisition Partners,
L.L.L.P., Senior Subordinated
Notes, 11.125%, 01/15/06 B3 1,588
2,000 Telecommunications, Inc., Senior
Debentures, 9.25%, 01/15/23 Ba1 1,972
3,000 Videotron Ltd., Senior
Subordinated Notes, 10.25%,
10/15/02 Ba3 3,090
3,000 World Color Press, Senior
Subordinated Notes, 9.125%,
03/15/03 B1 2,940
3,500 Young Broadcasting, Inc.,
Guaranteed Senior Subordinated
Notes, 11.75%, 11/15/04 B2 3,675
1,500 Young Broadcasting, Inc., Senior
Subordinated Notes, 9%,
01/15/06 B2 1,339
500 Young Broadcasting, Inc., Senior
Subordinated Notes, 10.125%,
02/15/05 B2 477
------
33,101
------
Retail Stores -- .80%
2,000 Brylane Capital Corp., Senior
Subordinated Notes, Series B,
10%, 09/01/03 B2 1,940
220 Guitar Center Management Co.,
Inc., Senior Notes, 11%,
07/01/06 (i) B2 223
------
2,163
------
Telecommunications -- 4.55%
2,500 Arch Communications Group, Inc.,
Senior Discount Notes,
10.875%, 03/15/08 (g) B3 1,287
7
<PAGE>
CORPORATE DEBT SECURITIES -- continued
$ 3,000 MobileMedia Communications,
Inc., Senior Subordinated
Notes, 9.375%, 11/01/07 B3 $ 2,685
525 Paging Network, Inc., Senior
Subordinated Notes, 10.125%,
8/1/07 B2 516
1,500 Paging Network, Inc., Senior
Subordinated Notes, 11.75%,
05/15/02 B2 1,612
1,500 Pronet Communications, Senior
Subordinated Notes, 10.875%,
09/15/06 B3 1,451
1,000 Rogers Cantel Mobile Inc.,
Senior Subordinated Guaranteed
Notes, 11.125%, 07/15/02 B2 1,057
3,000 Telefonica de Argentina, Notes,
11.875%, 11/01/04 B1 3,240
500 Western Wireless Corporation,
Senior Subordinated Notes,
10.50%, 06/01/06 B3 495
------
12,343
------
Textiles and Leather -- .58%
750 Dominion Textile (USA) Inc.,
Guaranteed Senior Notes,
8.875%, 11/01/03 Ba2 720
885 Dominion Textile (USA) Inc.,
Guaranteed Senior Notes,
9.25%, 04/01/06 Ba2 850
------
1,570
------
Utilities -- 3.17%
1,000 Cleveland Electric Illuminating
Company, First Mortgage Bonds,
Series B, 9.50%, 05/15/05 Ba2 986
875 El Paso Electric Company, First
Mortgage Bonds, Series C,
8.25%, 02/01/03 Ba3 849
1,500 El Paso Electric Company, First
Mortgage Bonds, Series D,
8.90%, 02/01/06 Ba3 1,474
$ 3,000 Texas-New Mexico Power Company,
Secured Debentures, 10.75%,
09/15/03 B1 $ 3,127
1,200 Transportadora de Gas del Sur
S.A., Medium Term Notes,
7.75%, 12/23/98 (f) 1,170
1,000 Transportadora de Gas del Sur
S.A., Notes, 10.25%, 4/25/01 B1 1,006
------
8,612
------
Total Corporate Debt Securities
(Total cost of $248,865) 250,206
------
- ---------------------------------------------------------------
GOVERNMENT OBLIGATIONS (FOREIGN) -- 1.42%(e)
Sovereigns -- 1.42%
2,500 Federal Republic of Brazil,
Bonds, 6%, 09/15/13 B1 1,572
2,000 Republic of Argentina, Bonds,
8.375%, 12/20/03 B1 1,740
1,000 Republic of Argentina, Par
Bonds, 5.25%, 03/31/23 B1 550
------
Total Government Obligations
(Foreign) (Total cost of
$3,456) $ 3,862
------
Shares
- ---------------------------------------------------------------
PREFERRED STOCK -- .65% (e)
Banking -- .09%
2,200 California Federal Bank,
Noncumulative Perpetual
Preferred Stock, Series B,
10.625% $ 241
62,935 WestFed Holdings, Inc., Senior,
15.50% (a)(d)(h) 0
------
241
------
Diversified/Conglomerate Manufacturing -- .10%
10,673 BCP/Essex Holdings Inc.,
Cumulative Redeemable
Exchangeable Preferred Stock,
Series B, 15% 277
------
Printing, Publishing and Broadcasting -- .46%
1,250 Benedek Communications
Corporation, Units (b) 1,250
------
Total Preferred Stock
(Total cost of $6,660) $ 1,768
------
8
<PAGE>
Shares Value
Moody's (Note
Rating 1(a))
------ -------------------------------- --- ------
COMMON STOCK -- .05% (e)
17,431 Haynes Acquisition Corp. (b)(h) $ 70
42,222 Triangle Wire & Cable, Inc.
(b)(h) 63
27,474 WestFed Holdings, Inc., Series B
(a)(d)(h) 0
------
Total Common Stock
(Total cost of $618) $ 133
------
Units
- ---------------------------------------------------------------
PARTNERSHIP AND TRUST INTEREST -- .00% (e)
1,000 Thompson Capital Partners, L.P.
(b)(d)(h) $ 0
------
Total Partnership And Trust
Interest (Total Cost of $440) $ 0
------
Principal Value
Amount (Note 1(a))
- ---------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.71% (e)
7,353 Paine Webber Repurchase
Agreement, 5.45%, 07/01/96,
(Collateral U.S. Treasury
Notes, 7.75%, 02/15/01,
$6,955,000 principal) $ 7,353
------
Total Short-Term Investments
(Total cost of $7,353) $ 7,353
------
Total Investments (Total cost of $267,392) $263,322
======
(a) Denotes issuer is in bankruptcy proceedings.
(b) Restricted as to public resale. At the date of acquisition, these
securities were valued at cost. The total value of restricted securities
owned at June 30, 1996 was $1,383 or .51% of total assets.
(c) Nonincome producing security which is on nonaccrual and which has
defaulted on interest payments.
(d) Security is valued at fair value using methods determined by the Board of
Directors. The total value of these securities at June 30, 1996 was $0.
(e) Percentages indicated are based on total assets of $271,469.
(f) Not rated.
(g) Security is a step interest bond. Interest on this bond accrues based
upon the effective interest rate.
(h) Nonincome producing.
(i) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. Such securities may be resold, normally to qualified
institutional buyers in transactions exempt from registration. See Note
1-a of the Notes to Financial Statements for valuation policy. Total
market value of Rule 144A securities amounted to $22,231 as of June 30,
1996.
9
<PAGE>
Balance Sheet
June 30, 1996 (Unaudited)
Assets (Dollars in thousands, except per share amounts)
INVESTMENTS IN SECURITIES, at value (Identified
cost of $267,392, see Schedule of Investments
and Notes 1 and 2) $ 263,322
RECEIVABLES:
Investment securities sold 1,802
Interest and dividends 6,290
OTHER ASSETS 8
PREPAID EXPENSES 47
-------
Total assets $ 271,469
-------
Liabilities
PAYABLES:
Investment securities purchased $ 4,494
Dividend payable on common stock 290
Other payables 288
ACCRUED EXPENSES (Note 3) 245
-------
Total liabilities $ 5,317
-------
Net Assets
AUCTION TERM PREFERRED STOCK:
$1.00 par value, 1,000,000 shares authorized,
2,000 shares issued and outstanding,
liquidation preference of $50,000 per share
(Notes 4, 5, and 6) $ 100,000
-------
COMMON STOCK:
$0.01 par value, 200,000,000 shares authorized,
35,364,004 shares issued and outstanding $ 354
CAPITAL IN EXCESS OF PAR VALUE 268,599
UNDISTRIBUTED NET INVESTMENT INCOME (Note 2) 1,592
ACCUMULATED NET REALIZED LOSS FROM SECURITIES
TRANSACTIONS (Note 2) (100,323)
NET UNREALIZED DEPRECIATION ON INVESTMENTS (4,070)
-------
Net assets applicable to Common Stock (Equivalent
to $4.70 per share, based on 35,364,004 shares
outstanding) $ 166,152
-------
Total Net Assets $ 266,152
=======
Statement of Operations
For the Year Ended
June 30, 1996 (Unaudited)
Investment Income: (Note 1) (Dollars in thousands, except per
share amounts)
Interest income $13,229
Dividend income 56
Other Income 34
-------
Total investment income $13,319
-------
Expenses:
Cost of Leverage:
Preferred and auction fees $ 134
-------
Total cost of leverage $ 134
-------
Professional services expenses:
Management fees (Note 3) $ 416
Custodian and transfer agent fees 122
Legal fees 61
Audit fees 36
Litigation fees (Note 11) 16
Total professional services expenses $ 651
-------
Administrative expenses:
General administrative fees $ 113
Directors' fees 90
Miscellaneous expenses 72
-------
Total administrative expenses $ 275
-------
Total expenses $ 1,060
-------
Net investment income $12,259
-------
Realized and Unrealized Gain on Investments:
Realized loss on investments, net $ (120)
Change in net unrealized depreciation on
investments (2,837)
-------
Net loss on investments $(2,957)
-------
Net increase in net assets resulting from
operations $ 9,302
-------
Cost of Preferred Leverage:
Distributions to preferred stockholders $(2,828)
Net swap settlement receipts (Note 7) 64
-------
Total cost of preferred leverage $(2,764)
-------
Net increase in net assets resulting from
operations less distributions to preferred
stockholders $ 6,538
=======
----------------------------------------------------------------
Amount Available for Distribution to Common Stockholders
Net investment income $12,259
Total cost of preferred leverage (2,764)
-------
Net amount available for distribution to common
stockholders $ 9,495
=======
10
<PAGE>
Statements of Changes in Net Assets
Six Months
Ended For the Year
June 30, Ended
1996 December 31,
(Unaudited) 1995
------------ -------------
From Operations: (Dollars in thousands, except per share amounts)
Net investment income $ 12,259 $ 22,802
Realized gain (loss) on
investments (120) 565
Change in net unrealized
depreciation on investments (2,837) 21,138
---------- -----------
Net increase in net assets
resulting from operations $ 9,302 $ 44,505
---------- -----------
From Fund Share Transactions:
Net asset value of 386,039 shares
and 705,577 shares issued to
common
shareholders for reinvestment of
dividends in 1996 and 1995,
respectively 1,843 3,230
---------- -----------
Increase in net assets resulting
from fund share transactions $ 1,843 $ 3,230
---------- -----------
Distributions to Stockholders:
Preferred dividends ($1,414 and
$3,126 per share, respectively) $ (2,828) $ (6,252)
Net swap settlement receipts 64 464
Common Dividends:
From net investment income ($.20
and $.50 per share, respectively) (7,052) (17,410)
In excess of net investment
income ($0 and $.04 per share,
respectively) -- (1,304)
---------- -----------
Decrease in net assets resulting
from distributions to
stockholders $ (9,816) $(24,502)
---------- -----------
Total net increase in net assets $ 1,329 $ 23,233
---------- -----------
Net Assets Applicable to Common and
Preferred Stock:
Beginning of period $264,823 $241,590
---------- -----------
End of period (Including $1,592
and $(851) of undistributed net
investment
income at June 30, 1996 and
December 31, 1995, respectively) $266,152 $264,823
========== ===========
11
<PAGE>
Financial Highlights
Selected Per Share Data and Ratios
For Each Share of Common Stock Outstanding Throughout the Period
For the
Six Months
Ended
June 30,
1996 For the Years Ended December 31,
(Unaudited) 1995 1994(c) 1993 1992(a)
------------ ----- ------- ----- -------
NET ASSET VALUE:
Beginning of period $4.71 $ 4.13 $ 5.15 $ 4.32 $ 3.79
---------- --- ----- --- -----
NET INVESTMENT INCOME .37 .67 .72# .59 .57
NET REALIZED AND
UNREALIZED
GAIN (LOSS) ON
INVESTMENTS (.10) .62 (.82)# .89 .57
---------- --- ----- --- -----
TOTAL FROM INVESTMENT
OPERATIONS .27 1.29 (.10) 1.48 1.14
---------- --- ----- --- -----
DISTRIBUTIONS:
Dividends from net
investment
income:
To preferred
stockholders
(including swap
settlement
payments) (.08) (.17) (.17) (.05) (.06)
To common stockholders (.20) (.50) (.53) (.53) (.55)
Dividends in excess of
net investment
income:
To common
stockholders -- (.04) -- (.07) --
Returns of capital:
To common
stockholders -- -- -- -- --
---------- --- ----- --- -----
TOTAL DISTRIBUTIONS $(.28) (.71) (.70) (.65) (.61)
---------- --- ----- --- -----
Effect of rights
offering and related
expenses; and Auction
Term Preferred Stock
offering costs and
sales load -- -- (.22) -- --
---------- --- ----- --- -----
NET ASSET VALUE:
End of period $4.70 $ 4.71 $ 4.13 $ 5.15 $ 4.32
========== === ===== === =====
PER SHARE MARKET VALUE:
End of period $5.00 $ 4.75 $ 4.00 $ 5.13 $ 4.13
========== === ===== === =====
TOTAL INVESTMENT RETURN+ 9.78% 33.50% (11.88)% 40.08% 29.70%
========== === ===== === =====
<PAGE>
For the
Period From
February 26,
1988
(Commencement
of
Operations)
to
December 31,
1991 1990 1989 1988
------------- ------- ------- -------------
NET ASSET VALUE:
Beginning of period $ 3.42 $ 6.23 $ 8.60 $ 9.25
----------- ----- ----- -----------
NET INVESTMENT INCOME .65 .92 1.54 1.42
NET REALIZED AND
UNREALIZED
GAIN (LOSS) ON
INVESTMENTS .38 (2.82) (2.26) (.66)
----------- ----- ----- -----------
TOTAL FROM INVESTMENT
OPERATIONS 1.03 (1.90) (.72) .76
----------- ----- ----- -----------
DISTRIBUTIONS:
Dividends from net
investment
income:
To preferred
stockholders
(including swap
settlement
payments) (.10) (.16) (.30) (.23)
To common stockholders (.56) (.75) (1.25) (1.18)
Dividends in excess of
net investment
income:
To common
stockholders -- -- -- --
Returns of capital:
To common
stockholders -- -- (.10) --
----------- ----- ----- -----------
TOTAL DISTRIBUTIONS (.66) (.91) (1.65) (1.41)
----------- ----- ----- -----------
Effect of rights
offering and related
expenses; and Auction
Term Preferred Stock
offering costs and
sales load -- -- -- --
----------- ----- ----- -----------
NET ASSET VALUE:
End of period $ 3.79 $ 3.42 $ 6.23 $ 8.60
=========== ===== ===== ===========
PER SHARE MARKET VALUE:
End of period $ 3.63 $ 2.50 $ 5.88 $10.00
=========== ===== ===== ===========
TOTAL INVESTMENT RETURN+ 70.77% (47.94)% (30.04)% 13.28%
=========== ===== ===== ===========
12
<PAGE>
Financial Highlights
Selected Per Share Data and Ratios
For Each Share of Common Stock Outstanding Throughout the Period (continued)
For the
Six
Months
Ended
June 30, For the Years Ended December 31,
1996
Unaudited 1995 1994(c) 1993 1992(a)
--------- --------- --------- --------- ---------
NET ASSETS,
END OF
PERIOD,
APPLICABLE
TO COMMON
STOCK (b) $166,152 $164,823 $141,590 $130,673 $107,897
========= ========= ======== ======== ========
NET ASSETS,
END OF
PERIOD,
APPLICABLE
TO PREFERRED
STOCK (b) $100,000 $100,000 $100,000 $ 35,000 $ 35,000
========= ========= ======== ======== ========
TOTAL NET
ASSETS, END
OF
PERIOD (b) $266,152 $264,823 $241,590 $165,673 $142,897
========= ========= ======== ======== ========
EXPENSE RATIOS
Ratio of
interest
expense to
average net
assets** -- -- .01% 1.42% 2.95%
Ratio of
preferred and
other debt
expenses to
average net
assets** .10%* .11% .13% .40% .65%
Ratio of
operating
expenses to
average net
assets** .70%* .84% .75% 1.56% 1.22%
Ratio of
litigation
settlement
expense to
average net
assets** -- .49% -- -- --
------- ------- ------- ------- -------
RATIO OF TOTAL
EXPENSES TO
AVERAGE NET
ASSETS** .80%* 1.44% .89% 3.38% 4.82%
======= ======= ======= ======= =======
RATIO OF NET
INVESTMENT
INCOME TO
AVERAGE NET
ASSETS** 9.22%* 8.90% 9.06% 9.21% 10.09%
PORTFOLIO
TURNOVER RATE 60.70%* 62.66% 58.56% 85.76% 129.86%
For the
Period From
February 26,
1988
(Commencement
of
Operations)
to
December 31,
1991 1990 1989 1988
------------- --------- --------- --------------
NET ASSETS,
END OF
PERIOD,
APPLICABLE
TO COMMON
STOCK (b) $ 93,227 $ 83,813 $152,156 $202,363
=========== ======= ======= =============
NET ASSETS,
END OF
PERIOD,
APPLICABLE
TO PREFERRED
STOCK (b) $ 35,000 $ 35,000 $ 58,500 $ 79,000
=========== ======= ======= =============
TOTAL NET
ASSETS, END
OF
PERIOD (b) $128,227 $118,813 $210,656 $281,363
=========== ======= ======= =============
EXPENSE RATIOS
Ratio of
interest
expense to
average net
assets** 3.25% 4.17% 3.56% 3.29%*
Ratio of
preferred and
other debt
expenses to
average net
assets** .78% .62% .24% .23%*
Ratio of
operating
expenses to
average net
assets** 1.19% 1.10% .69% .70%*
Ratio of
litigation
settlement
expense to
average net
assets** -- -- -- --
----------- ------- ------- -------------
RATIO OF TOTAL
EXPENSES TO
AVERAGE NET
ASSETS** 5.22% 5.89% 4.49% 4.22%*
=========== ======= ======= =============
RATIO OF NET
INVESTMENT
INCOME TO
AVERAGE NET
ASSETS** 12.62% 14.50% 14.48% 13.56%*
PORTFOLIO
TURNOVER RATE 121.15% 49.98% 65.39% 149.00%*
(a) Prior to the appointment on February 19, 1992 of Wellington Management
Company, the Fund was advised by Ostrander Capital Management, L.P.
(b) Dollars in thousands.
(c) As discussed in Note 4 and Note 5, the Fund entered into a refinancing
transaction on January 4, 1994 and the per share data and ratios for the
year ended December 31, 1994 reflect this transaction.
* Annualized.
** Ratios calculated on the basis of expenses and net investment income
applicable to both the common and preferred shares relative to the
average net assets of both the common and preferred stockholders. The
expense ratio and net investment income ratio do not reflect the effect
of dividend payments (including swap settlement payments) to preferred
stockholders.
# Calculation is based on average shares outstanding during the indicated
period due to the per share effect of the Fund's June 1994 rights
offering.
+ Total investment return is calculated assuming a purchase of common stock
at the current market value on the first day and a sale at the current
market value on the last day of each year reported. Dividends and
distributions are assumed for purposes of this calculation to be
reinvested at prices obtained under the dividend reinvestment plan. This
calculation does not reflect brokerage commissions.
13
<PAGE>
Information Regarding
Senior Securities
<TABLE>
<CAPTION>
June 30,
1996 As of December 31,
(Unaudited) 1995 1994 1993 1992
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
TOTAL AMOUNT
OUTSTANDING
Notes $ -- $ -- $ -- $ -- $45,490,000
Preferred Stock 100,000,000 100,000,000 100,000,000 35,000,000 35,000,000
Short-term Loan -- -- -- 45,000,000 --
ASSET COVERAGE
Per Note (1) $ -- $ -- $ -- $ -- $ 4,141
Per Preferred
Stock Share (2) 133,076 132,411 120,795 473,351 408,277
Per $1,000 of
Short-term Loan
(1) -- -- -- 4,682 --
INVOLUNTARY
LIQUIDATION
PREFERENCE
Preferred Stock
Share $ 50,000 $ 50,000 $ 50,000 $ 100,000 $ 100,000
APPROXIMATE
MARKET VALUE
(UNAUDITED)
Per Note $ -- $ -- $ -- $ -- $ 1,000
Per Preferred
Stock Share 50,000 50,000 50,000 100,000 100,000
Per $1,000 of --
Short-term Loan -- -- -- 1,000
</TABLE>
1991 1990 1989 1988
---------- ---------- ---------- -------------
TOTAL AMOUNT
OUTSTANDING
Notes $45,490,000 $47,990,000 $96,100,000 $105,000,000
Preferred Stock 35,000,000 35,000,000 58,500,000 79,000,000
Short-term Loan -- -- -- --
ASSET COVERAGE
Per Note (1) $ 3,819 $ 3,476 $ 3,192 $ 3,680
Per Preferred
Stock Share (2) 366,363 339,466 360,096 356,156
Per $1,000 of
Short-term Loan
(1) -- -- -- --
INVOLUNTARY
LIQUIDATION
PREFERENCE
Preferred Stock
Share $ 100,000 $ 100,000 $ 100,000 $ 100,000
APPROXIMATE
MARKET VALUE
(UNAUDITED)
Per Note $ 1,000 $ 1,000 $ 1,000 $ 1,000
Per Preferred
Stock Share 100,000 100,000 100,000 100,000
Per $1,000 of --
Short-term Loan -- -- --
(1) Calculated by subtracting the Fund's total liabilities (not including
senior securities) from the Fund's total assets and dividing such amounts
by the number of Notes outstanding.
(2) Calculated by subtracting the Fund's total liabilities (including the
Notes but not including the Preferred Stock) from the Fund's total assets
and dividing such amount by the number of Preferred Shares outstanding.
14
<PAGE>
Notes to Financial Statements
June 30, 1996 (Unaudited)
(1) Significant Accounting and Other Policies
The New America High Income Fund, Inc. (the Fund) was organized as a
corporation in the state of Maryland on November 19, 1987, and is registered
with the Securities and Exchange Commission as a diversified, closed-end
investment company under the Investment Company Act of 1940. The Fund
commenced operations on February 26, 1988. The investment objective of the
Fund is to provide high current income, while seeking to preserve
stockholders' capital, through investment in a professionally managed,
diversified portfolio of "high yield" fixed-income securities.
The Fund invests primarily in fixed maturity corporate debt securities that
are rated less than investment grade. Risk of loss upon default by the issuer
is significantly greater with respect to such securities compared to
investment grade securities because these securities are generally unsecured
and are often subordinated to other creditors of the issuer and because these
issuers usually have high levels of indebtedness and are more sensitive to
adverse economic conditions, such as a recession, than are investment grade
issuers. In some cases, the collection of principal and timely receipt of
interest is dependent upon the issuer attaining improved operating results,
selling assets or obtaining additional financing.
See the schedule of investments for information on individual securities as
well as industry diversification and credit quality ratings.
The Fund's financial statements have been prepared in conformity with
generally accepted accounting principles that require the management of the
Fund to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund, which are in conformity with those generally accepted
in the investment company industry.
(a) Valuation of Investments--Following procedures approved by the Board of
Directors, investments for which market quotations are not readily available
(primarily fixed-income corporate bonds and notes) are stated at fair value
on the basis of subjective valuations furnished by securities dealers and
brokers. Independent pricing services also provide market quotations based
primarily on quotations from dealers and brokers, market transactions,
accessing data from quotations services, offering sheets obtained from
dealers and various relationships between securities. Other investments, with
a cost of $9,858,000 and a value of $0, are valued in good faith at fair
market value using methods determined by the Board of Directors. Investments
for which market quotations are readily available are stated at market value,
which is determined by using the mean of the most recently quoted bid and
asked prices provided by a principal market maker. Short-term investments
having maturities of 60 days or less are stated at amortized cost which
approximates market value.
(b) Interest and Dividend Income--Interest income is accrued on a daily
basis. Discount on short-term investments is amortized to investment income.
Market discounts or premiums on corporate debt securities are not amortized
for financial statement purposes. All income on original issue discount and
step interest bonds is accrued based on the effective interest method for
both financial reporting and tax reporting purposes as required by federal
income tax regulations. Dividend payments received in additional securities
are recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
(c) Federal Income Taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code of 1986, as amended, applicable to
regulated
15
<PAGE>
investment companies and to distribute substantially all of its taxable
income to its shareholders each year. Accordingly, no federal income tax
provision is required.
(2) Tax Matters and Distributions
At June 30, 1996, the total cost of securities (excluding temporary cash
investments) for federal income tax purposes was approximately $260,039,000.
Aggregate gross unrealized gain on securities in which there was an excess of
value over tax cost was $9,048,000. Aggregate unrealized loss on securities
in which there was an excess of tax cost over value was $13,118,000. Net
unrealized loss for tax purposes at June 30, 1996 was approximately
$4,070,000.
At June 30, 1996, the Fund had capital loss carryovers available to offset
future capital gain, if any, to the extent provided by regulations:
Carryover Available Expiration Date
- ---------------------- --------------------
$ 6,840,923 December 31, 1997
56,935,249 December 31, 1998
34,425,546 December 31, 1999
2,226,638 December 31, 2002
- ----------------------
$100,428,356
======================
To the extent that capital loss carryovers are used to offset realized
capital gains, it is unlikely that gains so offset will be distributed to
shareholders.
Distributions on Common Stock are declared based upon annual projections of
the Fund's investment company taxable income. The Fund records all dividends
and distributions payable to shareholders on the ex-dividend date, and
declares and distributes income dividends monthly.
In accordance with Statement of Position 93-2, the Fund has recorded several
reclassifications in the capital accounts. These reclassifications have no
impact on the net asset value of the Fund and are designed generally to
present undistributed net investment income or accumulated net realized gains
and losses on a tax basis, which is considered to be more informative to the
shareholder. As of December 31, 1995, the Fund has reclassified $453,436
related to amortization of market discounts on corporate bonds from
accumulated net realized loss from securities transactions to undistributed
net investment income.
The difference between earnings for financial statement purposes and earnings
for tax purposes is primarily due to the tax treatment of the amortization of
market discounts on corporate bonds and the recognition of interest income on
corporate bonds that have defaulted on their interest payments.
(3) Investment Advisory Agreement
Wellington Management Company, the Fund's Investment Advisor, earned
approximately $416,000 in management fees during the six months ended June
30, 1996. Management fees paid by the Fund to Wellington are calculated at
.50 of 1% (on an annual basis) of the average weekly value of the Fund's net
assets attributable to common stock ($166.2 million at June 30, 1996 ). At
June 30, 1996, the fee payable to the Investment Advisor was approximately
$68,000, which was included in accrued expenses on the accompanying balance
sheet.
(4) Repayment of Term Loan and Redemption of Taxable Auction Rate Preferred
Stock (TARPS)
The Fund completed a refinancing transaction on January 4, 1994, whereby the
Fund's existing senior securities were redeemed with the proceeds of the
offering of $100,000,000 of Auction Term Preferred Stock (ATP) Series A and B
(see Note 5). Accordingly, as of January 4, 1994, the Fund's Broker Dealer
agreement with Bear Stearns for auctions on the TARPS was canceled, as was
the Surety Bond covering the TARPS.
In connection with the above refinancing, the Fund repaid the $45,000,000
term loan with The First National Bank of Boston (FNBB) in full, plus accrued
16
<PAGE>
interest through January 4, 1994. The Fund also redeemed the 350 shares of
TARPS outstanding at December 31, 1993 for approximately $35,094,000,
including payment of accumulated and unpaid dividends thereon through January
4, 1994.
(5) Auction Term Preferred Stock (ATP)
On January 4, 1994, the Fund issued 1,200 shares of Series A ATP and 800
shares of Series B ATP. The underwriting discount of $1,500,000 and offering
expenses of $336,000 associated with the ATP offering were recorded as a
reduction of the capital in excess of par value on Common Stock. The ATP's
dividends are cumulative at a rate determined at an auction, and dividend
periods will typically be 28 days unless notice is given for periods to be
longer or shorter than 28 days. Dividend rates ranged from 5.371% to 6.25%
for the six months ended June 30, 1996. The ATP is redeemable, at the option
of the Fund, or subject to mandatory redemption (if the Fund is in default of
certain coverage requirements) at a redemption price equal to $50,000 per
share, plus accumulated and unpaid dividends. The ATP has a liquidation
preference of $50,000 plus accumulated and unpaid dividends. The Fund is
required to maintain certain asset coverages with respect to the ATP, under
the Fund's Charter and the 1940 Act.
(6) ATP Auction-Related Matters
Bankers Trust Company (BTC) serves as the ATP's auction agent pursuant to an
agreement entered into on January 4, 1994. The term of the agreement is
unlimited and may be terminated by either party. BTC may resign upon notice
to the Fund, such resignation to be effective on the earlier of the 90th day
after the delivery of such notice and the date on which a successor auction
agent is appointed by the Fund. The Fund may also replace BTC as auction
agent at any time.
After each auction, BTC as auction agent will pay to each broker-dealer, from
funds provided by the Fund, a service charge at the annual rate of .25 of 1%
or such other percentage subsequently agreed to by the Fund and the
broker-dealers, of the purchase price of shares placed by such broker-dealers
at such auction. In the event an auction scheduled to occur on an auction
date fails to occur for any reason, the broker-dealers will be entitled to
service charges as if the auction had occurred and all holders of shares
placed by them had submitted valid hold orders. The Fund incurred
approximately $125,000 for service charges earned by Bear Stearns through
June 30, 1996. This amount is included under the caption preferred and
auction fees in the accompanying statement of operations.
(7) Interest Rate Swap
On February 3, 1994, the Fund entered into an interest rate swap transaction
with FNBB for the purpose of partially hedging its dividend payment
obligations with respect to the ATP through February 7, 1999. Under the terms
of the interest rate swap agreement, the Fund makes fixed payments to FNBB at
the rate of 5.25% per annum on the notional amount of the interest rate swap
($65 million) and receives a variable payment from FNBB equivalent to the 30
day, AA rated commercial paper rate in respect of such notional amounts.
Interest rates on the 30 day AA rated commercial paper ranged from 5.30% to
5.87% for the six months ended June 30, 1996. The interest rate swap
agreement was effective on February 7, 1994 and terminates on February 7,
1999.
The Fund follows hedge accounting (off balance sheet) with respect to the
swap agreement and settles the net amount receivable or payable from each
party every 30 days. For the six months ended June 30, 1996 the Fund's
obligation under the swap agreement was less than the amount receivable from
FNBB by $64,000, and is included in the accompanying statement of operations.
The Fund is exposed to credit loss in the event of nonperformance by
counterparties on interest rate swaps, but the Fund does not anticipate
nonperformance by any counterparty. While notional contract amounts are used
to express the volume of interest rate swap agreements, the
17
<PAGE>
amounts potentially subject to credit risk, in the event of nonperformance by
counterparties are substantially smaller. The estimated fair value of the
interest rate swap agreement at June 30, 1996 amounted to approximately
$1,475,000 unrealized gain. This value is not included in total net assets.
(8) Repurchase Agreements
At the time the Fund enters into a repurchase agreement, the value of the
underlying security, including accrued interest, will be equal to or exceed
the value of the repurchase agreement, and, in the case of repurchase
agreements exceeding one day, the value of the underlying security, including
accrued interest, is required during the term of the agreement to be equal to
or exceed the value of the repurchase agreement.
The underlying securities for all repurchase agreements are held in
safekeeping in an investment account of State Street Bank and Trust Company
(SSBT), the Fund's custodian, at the Federal Reserve Bank of Boston. In the
case of repurchase agreements exceeding one day, SSBT's Money Market
Department monitors the market value of the underlying securities by pricing
them daily, and in the event any individual repurchase agreement is not fully
collateralized, SSBT advises the Fund and additional collateral is obtained.
(9) Purchase and Sales of Securities
Purchases and proceeds of sales or maturities of long term securities during
the six months ended June 30, 1996 were as follows:
Purchases of securities $80,649,000
Sales of securities $77,959,000
(10) Certain Transactions
A partner of Goodwin, Procter & Hoar, general counsel to the Fund, serves as
a Director of the Fund. Fees earned by Goodwin, Procter & Hoar amounted to
approximately $64,000, for the six months ended June 30, 1996. The Fund paid
approximately $60,000 during the six months ended June 30, 1996 to two
officers of the Fund for the provision of certain administrative services.
(11) Litigation Settlement
On January 8, 1992, the United States District Court for the District of
Massachusetts dismissed, in their entirety, four separate actions filed in
each case against the Fund, its former Investment Advisor, certain of its
officers, its directors, and certain other parties. The actions purported to
be class actions on behalf of the named plaintiffs and other persons
allegedly similarly situated who purchased Common Stock of the Fund within a
specified period. The actions alleged that the Fund and the other defendants,
including the Fund's underwriters, in connection with its February 1988
public offering, violated certain federal securities laws by reason of their
alleged failure to adequately disclose material facts in the Fund's
prospectus and/or other documents published by the Fund. Plaintiffs were
granted leave to amend their complaint limited to certain disclosure
obligations under the Securities Act of 1933, and did so. All of the
defendants, including the Fund, jointly moved for summary judgment on July 8,
1992. By memorandum and order dated August 26, 1993, the court granted the
defendants' motion for summary judgment in favor of all defendants on all
claims and entered judgment for defendants on August 27, 1993, and the
plaintiffs appealed. On September 28, 1994, the United States Court of
Appeals for the First Circuit issued an opinion affirming the decision of the
district court in part and reversing it in part. The Court held that the
district court properly entered summary judgment for the defendants as to all
disclosure issues except one. It reversed the district court's decision with
respect to that one issue and remanded the case for further proceedings. The
one remaining issue is whether it was misleading to purchasers in the initial
public offering for the original prospectus to include certain statistics
regarding the average performance of the high yield bond market for a ten
year period without also including different statistics, alleged by the
plaintiffs to exist and to be material, for
18
<PAGE>
the six year period prior to the offering. The defendants jointly moved for
summary judgment on this remaining issue on March 31, 1995.
On November 16, 1995, the parties executed a Stipulation and Agreement of
Compromise, Settlement and Release providing for the settlement of the
action. The settlement was approved by the Court pursuant to a Final Order
and Judgment entered on June 13, 1996. Pursuant to the settlement, the
defendants have created a Settlement Fund amounting in the aggregate to
$2,500,000 for distribution, after deduction of certain fees and expenses, to
a class consisting of all persons who purchased shares of the Fund's common
stock between February 19, 1988 and March 26, 1990, other than the
defendants. The Fund contributed $1,250,000 to the Settlement Fund on June
21, 1996, and the balance was contributed by certain of the underwriters of
the Fund's initial public offering. In addition, the Fund contributed $7,500
to a Notice and Administration Fund, to be used for mailing notice to class
members and other administrative purposes.
The Fund established a reserve for its share of the Settlement Fund and
charged $1,250,000 to operations for the year ended December 31, 1995. The
Fund charged $7,500 to operations for the six months ended June 30, 1996 for
its share of the Notice and Administration Fund.
-----------------------------------------------------------------------------
From time to time in the future, the Fund may effect redemptions and/or
repurchases of its ATP as provided in the applicable constituent instruments
or as agreed upon by the Fund and sellers. The Fund intends to effect such
redemptions and/or repurchases to the extent necessary to maintain applicable
asset coverage requirements.
19
<PAGE>
Directors
Robert F. Birch
Joseph L. Bower
Richard E. Floor
Bernard J. Korman
Franco Modigliani
Ernest E. Monrad
Officers
Robert F. Birch - President
Ellen E. Terry - Vice President, Treasurer
Richard E. Floor - Secretary
Investment Advisor
Wellington Management Company
75 State Street
Boston, MA 02109
Administrator
The New America High Income Fund, Inc.
Ten Winthrop Square
Boston, MA 02110
(617) 350-8610
Custodian and Transfer Agent
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
(617) 328-5000 ext. 6406
(800) 426-5523
Listed: NYSE
Symbol: HYB
20
<PAGE>
[COVER]
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
<PAGE>
The New
America
High Income
Fund, Inc.
- ---------------------------------
Semi-Annual
- ---------------------------------
Report
- ---------------------------------
June 30, 1996
- ---------------------------------
