- -----------------------------------------------------------------------------
January 17, 1996
Dear Shareholder:
The high yield market enjoyed an exceptional year in 1995, following upon
a lackluster 1994. The market's rebound and appreciation resulted from
several factors. First, interest rates declined measurably during the year;
for instance, yields on the 10-year Treasury Note declined from 7.8% to 5.6%.
Second, the Federal Reserve Board acted to reduce short term rates. While the
reduction was modest, the message was clear that the Fed would work to
preserve economic growth. Third, new flows into open-end high yield mutual
funds were at a very healthy level, translating into strong demand for high
yield securities.
While the absolute returns of the high yield market were strong, the
relative difference in yield between high yield securities and Treasuries
widened during the year. This is not surprising given that part of the
bullishness in the Treasury market has been driven by perceived economic
weakness. Looking forward, we would expect that the yield spread between the
high yield and Treasury securities will be on average wider in 1996 than in
1995 reflecting investors' concerns about the economy. Given the potential
for a weaker economy, we continue to emphasize issuers that offer improving
fundamental outlooks irrespective of the broader economy, or issuers that are
intent on reducing their debt or otherwise improving their balance sheets.
Total return of the Fund, based on net asset value and reinvestment of
dividends, is shown below for the periods ended December 31, 1995. (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 beneficial impact on the Fund's performance during the twelve
months ended December 31, 1995. (The Fund's leverage had the reverse effect
during 1994, when bond prices in general declined due to the increase in
interest rates.)
<TABLE>
<CAPTION>
Total Returns for the Periods Ended
December 31, 1995
-------------------------------------
Three Years
---------------
Six One Avg.
Mos. Year Cum. Annual
------- ------- ---- -------
<S> <C> <C> <C> <C>
New America High Income Fund (Stock Price and
Dividends) 6.5% 33.5% 68.2% 18.9%
New America High Income Fund (NAV and Dividends) 10.9 29.4 60.8 17.2
Lipper Closed-End Fund Leveraged High Yield Average 7.1 20.5 45.1 13.2
</TABLE>
<PAGE>
The Fund's stock closed the quarter at $4.75 per share. This price
reflected a 0.8% premium to the Fund's net asset value of $4.71 per share.
The Fund's monthly dividend of $0.04 ($0.48 annualized) represents a yield of
10.1% relative to the December 31, 1995 stock price; this yield is 450 basis
points in excess of the 10-year Treasury rate.
The Fund remains highly diversified with debt holdings in 116 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,
Sweetheart Cup, a leading producer of disposable food service and packaging
goods, and Telefonica Argentina (US $), one of two licensed providers of
basic telephone services in Argentina. The average quality of the Fund's
investment portfolio was B1/B+ as of December 31, 1995, and the average
effective yield, maturity and duration (all of which incorporate call
expectations) of the Fund's holdings were 9.6%, 6.4 years and 4.1 years,
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 -- December 31, 1995 (Dollar Amounts in Thousands)
=============================================================================
<TABLE>
<CAPTION>
Principal Moody's Value
Amount Rating (Note 1(a))
--------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- 93.05% (e)
--------------------------------------------------------------------
<S> <C> <C> <C>
Aerospace and Defense -- 5.97%
$2,500 Howmet Corporation, Senior
Subordinated Notes, 10%,
12/01/03 (j) B3 $ 2,613
1,250 K&F Industries, Inc., Senior
Secured Notes, 11.875%,
12/01/03 B1 1,344
4,286 K&F Industries, Inc., Senior
Subordinated Debentures,
13.75%, 08/01/01 B2 4,447
3,000 Rohr, Inc., Senior Notes,
11.625%, 05/15/03 Ba3 3,218
4,245 Wyman-Gordon Company, Senior
Notes, 10.75%, 03/15/03 B1 4,457
---------
16,079
---------
Automobile -- 3.17%
500 Exide Corporation, Senior
Notes, 10%, 04/15/05 B1 543
1,900 Exide Corporation, Senior
Notes, 10.75%, 12/15/02 B1 2,062
1,000 Lear Seating Corporation,
Senior Subordinated Notes,
11.25%, 07/15/00 B1 1,053
1,500 Lear Seating Corporation,
Subordinated Notes, 8.25%,
02/01/02 B2 1,470
2,000 Penda Corp., Senior Notes,
Series B, 10.75%, 03/01/04 B2 1,660
1,750 Walbro Corporation, Senior
Notes, 9.875%, 07/15/05 Ba3 1,746
---------
8,534
---------
Banking -- 1.41%
500 Anchor Bancorp, Inc., Senior
Notes, 8.9375%, 07/09/03 Ba3 518
500 Banco Rio de la Plata S.A.,
Class IV Negotiable
Obligation, 8.75%, 12/15/03 B1 438
1,250 Dime Bancorp, Senior Notes,
10.50%, 11/15/05 Ba3 1,375
1,500 FirstFed Financial Corp.,
Notes, 11.75%, 10/01/04 B2 1,463
</TABLE>
<TABLE>
<CAPTION>
Principal Moody's Value
Amount Rating (Note 1(a))
--------------------------------------------------------------------
<S> <C> <C> <C>
$3,564 WestFed Holdings, Inc., Split
Coupon Senior Debentures,
15.50%, 09/15/99 (a)(c)(d) (f) $ 0
---------
3,794
---------
Beverages, Food and Tobacco -- .49%
1,350 GRUMA, S.A. de C.V., Notes,
9.75%, 03/09/98 (f) 1,310
---------
Buildings and Real Estate -- 4.60%
2,500 Continental Homes Holding
Corp., Senior Notes, 12%,
08/01/99 Ba3 2,700
500 Del Webb Corporation, Senior
Notes, 10.875%, 03/31/00 Ba3 510
1,750 Del Webb Corporation, Senior
Subordinated Debentures, 9%,
02/15/06 B2 1,663
3,000 Domtar, Inc., Senior Notes,
11.75%, 03/15/99 Ba1 3,360
475 Lone Star Industries, Inc.,
Senior Notes, 10%, 07/31/03 (f) 480
3,500 Toll Corp., Senior
Subordinated Notes, 10.50%,
03/15/02 Ba3 3,684
---------
12,397
---------
Chemicals, Plastics and Rubber -- 1.75%
1,000 General Chemical, Senior
Subordinated Notes, 9.25%,
08/15/03 B2 1,005
425 Rexene Corp., Senior Notes,
11.75%, 12/01/04 B1 445
3,000 Sherritt Inc., Senior Notes,
10.50%, 03/31/14 B1 3,274
---------
4,724
---------
Containers, Packaging and Glass -- 7.37%
2,400 Calmar Inc., Senior
Subordinated Notes, 11.50%,
08/15/05 (j) B3 2,430
1,250 Container Corp., Guaranteed
Senior Notes, Series B,
10.75%, 05/01/02 B2 1,269
5,000 Container Corp., Senior Notes,
9.75%, 04/01/03 B2 4,875
1,500 Owens Illinois, Inc., Senior
Debentures, 11%, 12/01/03 Ba3 1,695
500 Portola Packaging, Inc.,
Senior Notes, 10.75%, 10/01/05 B2 518
</TABLE>
The accompanying notes are an integral
part of these financial statements.
3
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Schedule of Investments -- December 31, 1995 (Continued)
(Dollar Amounts in Thousands)
=============================================================================
<TABLE>
<CAPTION>
Principal Moody's Value
Amount Rating (Note 1(a))
--------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- continued
--------------------------------------------------------------------
<S> <C> <C> <C>
$1,750 Rainy River Forest Products,
Inc., Senior Secured Notes,
10.75%, 10/15/01 Ba1 $ 1,925
2,000 Repap New Brunswick, Inc.,
First Priority Senior Secured
Notes, 9.875%, 07/15/00 Ba3 1,980
1,500 Repap New Brunswick, Inc.,
Second Priority Senior Secured
Notes, 10.625%, 04/15/05 B2 1,470
1,000 Repap Wisconsin, Inc., First
Priority Senior Secured Notes,
9.25%, 02/01/02 B1 950
300 Silgan Corp., Senior
Subordinated Notes, 11.75%,
06/15/02 B3 321
500 Silgan Holdings Inc., Senior
Discount Debentures, 13.25%,
12/15/02 (g) B3 473
2,000 Stone Container Corp., Senior
Notes, 9.875%, 02/01/01 B1 1,945
---------
19,851
---------
Diversified/Conglomerate Manufacturing -- 10.66%
1,000 American Standard Inc., Senior
Debentures, 11.375%, 05/15/04 Ba3 1,105
3,250 American Standard Inc., Senior
Subordinated Discount
Debentures, 10.50%, 06/01/05
(g) B1 2,787
2,500 Bell & Howell Company, Senior
Notes, 9.25%, 07/15/00 B1 2,563
2,950 Bell & Howell Holdings
Company, Series B, Senior
Discount Debentures, 03/01/05
(g) B3 1,932
1,700 Cabot Safety Acquisition Co.,
Senior Subordinated Notes,
12.50%, 07/15/05 B3 1,811
1,500 Coltec Industries, Inc.,
Senior Notes, 9.75%, 04/01/00 B1 1,545
1,000 Coltec Industries, Inc.,
Senior Subordinated Notes,
10.25%, 04/01/02 B3 1,028
1,000 Day International Group, Inc.,
Senior Subordinated Notes,
11.125%, 06/01/05 B3 1,020
</TABLE>
<TABLE>
<CAPTION>
Principal Moody's Value
Amount Rating (Note 1(a))
--------------------------------------------------------------------
<S> <C> <C> <C>
$3,500 Essex Group, Inc., Senior
Notes, 10%, 05/01/03 B1 $ 3,430
1,000 The Interlake Corporation,
Senior Notes, 12%, 11/15/01 B2 1,010
2,000 The Interlake Corporation,
Senior Subordinated
Debentures, 12.125%, 03/01/02 B3 1,900
2,500 Overhead Door Corporation,
Senior Notes, 12.25%, 02/01/00 B1 2,450
2,000 Specialty Equipment Companies,
Inc., Senior Subordinated
Notes, 11.375%, 12/01/03 B3 2,030
1,250 Thermadyne Holdings Corp.,
Senior Notes, 10.25%, 05/01/02 Caa 1,244
825 UCAR Global Enterprises Inc.
Senior Subordinated Notes,
12%, 01/15/05 B2 953
800 Westinghouse Electric
Corporation, Notes, 8.375%,
06/15/02 Ba1 825
1,025 Westinghouse Electric
Corporation, Notes, 8.875%,
06/01/01 Ba1 1,085
---------
28,718
---------
Diversified Natural Resources, Metals and Minerals -- .35%
1,500 Haynes Holdings, Inc.,
Subordinated Notes, 13.50%,
08/15/99 Ca 938
---------
Ecological -- .98%
3,000 Envirosource, Inc., Senior
Notes, 9.75%, 06/15/03 B3 2,640
---------
Electronics -- .83%
2,250 Digital Equipment Corp.,
Debentures, 7.75%, 04/01/23 Ba1 2,238
---------
Farming and Agriculture -- 2.98%
500 Agriculture Minerals And
Chemicals, Senior Notes,
10.75%, 09/30/03 Ba3 553
3,500 Arcadian Partners, L.P.,
Senior Notes, Series B,
10.75%, 05/01/05 B2 3,868
3,500 PMI Acquisition Corp., Senior
Subordinated Notes, 10.25%,
09/01/03 B2 3,596
---------
8,017
---------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
4
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Schedule of Investments -- December 31, 1995 (Continued)
(Dollar Amounts in Thousands)
=============================================================================
<TABLE>
<CAPTION>
Principal Moody's Value
Amount Rating (Note 1(a))
--------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- continued
--------------------------------------------------------------------
<S> <C> <C> <C>
Finance -- .60%
$1,750 Imperial Credit Industries,
Inc., Senior Notes, 9.75%,
01/15/04 B1 $ 1,610
---------
Grocery -- 1.63%
4,000 Big V Supermarkets, Inc.
Senior Subordinated Notes,
Series B, 11%, 02/15/04 B3 3,240
750 Dominicks Finer Foods, Inc.,
Senior Subordinated Notes,
10.875%, 05/01/05 B3 797
500 Eagle Food Centers, Inc.,
Senior Notes, 8.625%, 04/15/00 B1 343
---------
4,380
---------
Healthcare, Education and Childcare -- 3.40%
2,000 Kindercare Learning Centers,
Inc., Senior Subordinated
Notes, 10.375%, 06/01/01 Ba3 2,110
500 Manor Care, Inc., Senior
Subordinated Notes, 9.50%,
11/15/02 Ba2 540
3,500 OrNda HealthCorp, Senior
Subordinated Notes, 11.375%,
08/15/04 B2 3,938
500 Quorum Health Group, Inc.,
Senior Subordinated Notes,
8.75%, 11/1/05 B1 518
650 Tenet Healthcare Corp., Senior
Notes, 9.625%, 09/01/02 Ba2 715
1,200 Tenet Healthcare Corp., Senior
Subordinated Notes, 10.125%,
03/01/05 Ba3 1,335
---------
9,156
---------
Hotels, Motels, Inns and Gaming -- 2.89%
2,000 GB Property Funding Corp.,
First Mortgage Notes, 10.875%,
01/15/04 B2 1,755
1,000 Harrah's Operating Inc.,
Senior Subordinated Notes,
10.875%, 4/15/02 Ba3 1,075
1,500 John Q. Hammons Hotels, L.P.
First Mortgage Notes, 8.875%,
02/15/04 B1 1,485
</TABLE>
<TABLE>
<CAPTION>
Principal Moody's Value
Amount Rating (Note 1(a))
--------------------------------------------------------------------
<S> <C> <C> <C>
$2,500 La Quinta Inns, Senior
Subordinated Notes, 9.25%,
05/15/03 Ba3 $ 2,650
825 Red Roof Inns, Inc., Senior
Notes, 9.625%, 12/15/03 B3 809
---------
7,774
---------
Machinery -- .21%
525 Idex Corporation, Senior
Subordinated Notes, 9.75%,
09/15/02 Ba3 557
---------
Mining, Steel, Iron, Non-Precious Metals -- 8.12%
2,500 AK Steel Corporation, Senior
Notes, 10.75%, 04/01/04 Ba3 2,775
4,500 Armco Inc., Senior Notes,
9.375%, 11/01/00 B2 4,455
3,250 Bethlehem Steel Corporation,
Senior Notes, 10.375%,
09/01/03 B1 3,429
2,500 Great Lakes Carbon Corp.,
Senior Secured Note, 10%,
01/01/06 Ba3 2,563
850 GS Technologies Operating Co.,
Inc., Senior Notes, 12.25%,
10/01/05 B2 847
1,075 Kaiser Aluminum & Chemical
Corporation, Senior Notes,
9.875%, 02/15/02 B1 1,105
1,000 Magma Copper Company, Senior
Subordinated Notes, 12%,
12/15/01 Ba3 1,114
1,000 Northwestern Steel & Wire
Company, Senior Notes, 9.50%,
06/15/01 B1 985
1,750 Weirton Steel Corporation,
Senior Notes, 10.875%,
10/15/99 B2 1,750
3,000 Wheeling-Pittsburgh
Corporation, Senior Notes,
9.375%, 11/15/03 B1 2,835
---------
21,858
---------
Oil and Gas -- 4.99%
2,500 Energy Ventures, Inc., Senior
Notes, 10.25%, 03/15/04 B1 2,650
500 Global Marine Inc., Senior
Notes, 12.75%, 12/15/99 B1 553
1,800 Oryx Energy Company, Notes,
8.125%, 10/15/05 Ba3 1,852
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Schedule of Investments -- December 31, 1995 (Continued)
(Dollar Amounts in Thousands)
=============================================================================
<TABLE>
<CAPTION>
Principal Moody's Value
Amount Rating (Note 1(a))
--------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- continued
--------------------------------------------------------------------
<S> <C> <C> <C>
$1,000 Plains Resources Inc., Senior
Subordinated Notes, 12%,
10/01/99 B3 $ 1,038
3,000 Santa Fe Energy Resources,
Inc., Senior Subordinated
Debentures, 11%, 05/15/04 B1 3,270
3,000 Seagull Energy Corp., Senior
Subordinated Notes, 8.625%,
08/01/05 B2 2,910
1,200 Transportadora de Gas del Sur
S.A., Medium Term Note, 7.75%,
12/23/98 (f) 1,155
---------
13,428
---------
Personal Transportation -- .37%
5,000 Braniff, Inc., Senior Reset
Notes, 15%, 04/01/99
(a)(b)(c)(d) (f) 0
1,065 US Air, 1993-A Pass Through
Trusts, 10.375%, 03/01/13 B1 991
---------
991
---------
Personal and Non-Durable Consumer Products -- 6.54%
1,200 American Safety Razor Company,
Series B, Senior Notes,
9.875%, 08/01/05 B1 1,221
400 Fort Howard Corp., Senior
Notes, 8.25%, 02/01/02 B1 390
5,000 Fort Howard Corp., Senior
Notes, 9.25%, 03/15/01 B1 5,075
1,000 Fort Howard Corp., Senior
Subordinated Notes, 9%,
02/01/06 B2 980
3,000 Jordan Industries, Inc.,
Senior Notes, 10.375%,
08/01/03 B3 2,670
5,000 Sweetheart Cup, Inc.,
Guaranteed Senior Subordinated
Notes, 10.50%, 09/01/03 B2 5,038
2,250 Westpoint Stevens, Inc.,
Senior Notes, 8.75%, 12/15/01 B1 2,250
---------
17,624
---------
Printing, Publishing and Broadcasting -- 7.73%
2,500 EZ Communications, Inc.,
Senior Subordinated Notes,
9.75%, 12/01/05 B2 2,513
</TABLE>
<TABLE>
<CAPTION>
Principal Moody's Value
Amount Rating (Note 1(a))
--------------------------------------------------------------------
<S> <C> <C> <C>
$1,000 Granite Broadcasting
Corporation, Senior
Subordinated Debentures,
12.75%, 09/01/02 B3 $ 1,110
1,500 Granite Broadcasting
Corporation, Senior
Subordinated Notes, Series B,
10.375%, 05/15/05 B3 1,538
1,050 Graphic Controls Corporation,
Senior Subordinated Notes,
12%, 09/15/05 (j) B3 1,087
2,150 Heritage Media Services, Inc.,
Senior Secured Notes, 11%,
06/15/02 Ba3 2,284
1,000 Infinity Broadcasting
Corporation, Senior
Subordinated Notes, 10.375%,
03/15/02 Ba3 1,075
825 S F X Broadcasting, Inc.,
Senior Subordinated Notes,
11.375%, 10/01/00 B2 872
500 Time Warner Inc., Debentures,
9.125%, 01/15/13 Ba1 564
1,500 Turner Broadcasting System,
Inc., Senior Debentures,
8.40%, 02/01/24 Ba2 1,500
1,000 Turner Broadcasting System,
Inc., Senior Notes, 7.40%,
02/01/04 Ba2 1,011
1,150 S.D. Warren Company, Senior
Subordinated Notes, Series B,
12%, 12/15/04 B1 1,268
1,500 World Color Press, Senior
Subordinated Notes, 9.125%,
03/15/03 B1 1,545
3,500 Young Broadcasting, Inc.,
Guaranteed Senior Subordinated
Notes, 11.75%, 11/15/04 B2 3,920
500 Young Broadcasting, Inc.,
Senior Subordinated Notes,
10.125%, 02/15/05 B2 528
---------
20,815
---------
Retail Stores -- .57%
2,000 Payless Cashways, Inc., Senior
Subordinated Notes, 9.125%,
04/15/03 Ba3 1,540
</TABLE>
The accompanying notes are an integral
part of these financial statements.
6
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Schedule of Investments -- December 31, 1995 (Continued)
(Dollar Amounts in Thousands)
=============================================================================
<TABLE>
<CAPTION>
Principal Moody's Value
Amount Rating (Note 1(a))
--------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- continued
--------------------------------------------------------------------
<S> <C> <C> <C>
Telecommunications -- 11.20%
$1,000 Cablevision Industries
Corporation, Senior
Debentures, Series B, 9.25%,
04/01/08 B1 $ 1,070
1,000 Cablevision Systems
Corporation, Senior
Subordinated Debentures,
10.75%, 04/01/04 B3 1,055
2,250 Cablevision Systems
Corporation, Senior
Subordinated Notes, 9.25%,
11/01/05 B3 2,331
1,500 Comcast Corporation, Senior
Subordinated Debentures,
9.125%, 10/15/06 B1 1,564
850 Comcast Corporation, Senior
Subordinated Debentures,
9.375%, 05/15/05 B1 899
1,500 Continental Cablevision, Inc.,
Senior Debentures, 9%,
09/01/08 Ba2 1,575
650 Continental Cablevision Inc.,
Senior Notes, 8.30%, 05/15/06
(j) Ba2 652
1,115 Continental Cablevision, Inc.
Senior Subordinated
Debentures, 11%, 06/01/07 B1 1,246
750 Marcus Cable Company, L.P.,
Senior Discount Notes, 14.25%,
12/15/05 (g) Caa 510
500 Marcus Cable Operating Company
L.P., Senior Subordinated
Guaranteed Discount Notes,
13.50%, 08/01/04 (g) B3 376
2,750 MobileMedia Communications,
Inc., Senior Subordinated
Notes, 9.375%, 11/01/07 B3 2,833
525 Paging Network, Inc., Senior
Subordinated Notes, 10.125%,
8/1/07 B2 568
1,500 Paging Network, Inc., Senior
Subordinated Notes, 11.75%,
05/15/02 B2 1,658
2,000 Rogers Cablesystems Limited,
Senior Secured Second Priority
Debentures, 9.65%, 01/15/14
(i) Ba3 1,278
</TABLE>
<TABLE>
<CAPTION>
Principal Moody's Value
Amount Rating (Note 1(a))
--------------------------------------------------------------------
<S> <C> <C> <C>
$1,000 Rogers Cantel Mobile Inc.,
Senior Subordinated Guaranteed
Notes, 11.125%, 07/15/02 B2 $ 1,073
3,000 Telecommunications, Inc.,
Senior Debentures, 9.25%,
01/15/23 Baa3 3,275
4,500 Telefonica de Argentina,
Notes, 11.875%, 11/01/04 B1 4,545
3,500 Videotron Limited, Senior
Subordinated Notes, 10.25%,
10/15/02 Ba3 3,666
---------
30,174
---------
Textiles and Leather -- .27%
750 Dominion Textile (USA) Inc.,
Guaranteed Senior Notes,
8.875%, 11/01/03 Ba3 728
---------
Utilities -- 3.97%
1,925 Cleveland Electric
Illuminating Company, First
Mortgage Bonds, Series B,
9.50%, 05/15/05 Ba2 1,992
2,000 Long Island Lighting Company,
Debentures, 8.90%, 07/15/19 Ba1 2,019
1,550 Midland Funding, Subordinated
Secured Lease Obligation
Bonds, 11.75%, 07/23/05 B2 1,624
2,000 Niagara Mohawk Power
Corporation, First Mortgage
Bonds, 6.625%, 07/01/05 Ba1 1,791
3,000 Texas-New Mexico Power
Company, Secured Debentures,
10.75%, 09/15/03 B1 3,274
---------
10,700
---------
Total Corporate Debt
Securities (Total cost of
$246,247) $250,575
---------
Sovereigns -- 1.63% (e)
796 Federal Republic of Brazil,
Capitalization Bonds, 8%,
04/15/14 (f) 457
2,500 Federal Republic of Brazil,
Bonds, 6%, 09/15/13 (f) 1,388
2,000 Republic of Argentina, Bonds,
8.375%, 12/20/03 B1 1,685
500 Republic of Argentina, Par
Bonds, 5%, 03/31/23 (j) B2 286
</TABLE>
The accompanying notes are an integral
part of these financial statements.
7
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Schedule of Investments -- December 31, 1995 (Continued)
(Dollar Amounts in Thousands)
=============================================================================
<TABLE>
<CAPTION>
Principal Moody's Value
Amount Rating (Note 1(a))
--------------------------------------------------------------------
<S> <C> <C> <C>
$1,000 The Republic of Argentina, Par
Bonds, 5.00%, 03/31/23 B2 $ 573
---------
Total Government Obligations
(Foreign) (Total cost of
$4,074) $ 4,389
---------
Shares
--------------------------------------------------------------------
PREFERRED STOCK -- .29% (e)
--------------------------------------------------------------------
Banking -- .09%
2,200 California Federal Bank,
Noncumulative Perpetual
Preferred Stock, Series B,
10.625% $ 238
62,935 WestFed Holdings, Inc.,
Senior, 15.50% (a)(d)(h) 0
---------
238
---------
Diversified/Conglomerate Manufacturing -- .20%
21,528 BCP/Essex Holdings Inc.,
Cumulative Redeemable
Exchangeable Preferred Stock,
Series B, 15% 544
---------
Total Preferred Stock
(Total cost of $5,689) $ 782
---------
--------------------------------------------------------------------
COMMON STOCK -- .03% (e)
--------------------------------------------------------------------
17,431 Haynes Acquisition Corp.
(b)(h) $ 4
42,222 Triangle Wire & Cable, Inc.
(b)(h) 84
27,474 WestFed Holdings, Inc., Series
B (a)(d)(h) 0
---------
Total Common Stock
(Total cost of $618) $ 88
---------
Units
--------------------------------------------------------------------
PARTNERSHIP AND TRUST INTEREST -- .00% (e)
--------------------------------------------------------------------
135 The DBL Liquidating Trust
Agreement, Class A $ 1
1,000 Thompson Capital Partners,
L.P. (b)(d)(h) 0
---------
Total Partnership And Trust
Interest (Total Cost of $440) $ 1
---------
</TABLE>
<TABLE>
<CAPTION>
Principal Value
Amount (Note 1(a))
--------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.48% (e)
--------------------------------------------------------------------
<S> <C> <C>
6,679 Aubrey Lanston
Repurchase Agreement, 5.90%,
01/02/96, (Collateral U.S.
Treasury Notes, 8.25%,
7/15/98, $6,160,000 principal) $ 6,679
---------
Total Short-Term Investments
(Total cost of $6,679) $ 6,679
---------
Total Investments (Total cost of $263,747) $262,514
=========
</TABLE>
(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 December 31, 1995 was $88 or .03% 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 December 31, 1995 was
$0.
(e) Percentages indicated are based on total assets of $269,299.
(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) Bond's par value and coupon rate are denominated in a foreign currency.
Market value is in US Dollars based on the Canadian Dollar Foreign
exchange rate at December 31, 1995.
(j) 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 $7,068 as of December
31, 1995.
The accompanying notes are an integral
part of these financial statements.
8
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
Balance Sheet
December 31, 1995
=============================================================================
<TABLE>
<CAPTION>
<S> <C>
Assets (Dollars in thousands, except per share amounts)
INVESTMENTS IN SECURITIES, at value
(Identified cost of $263,747, see Schedule
of Investments and Notes 1 and 2) $ 262,514
RECEIVABLES:
Investment securities sold 192
Interest and dividends 6,534
OTHER ASSETS 28
PREPAID EXPENSES 31
--------
Total assets $ 269,299
--------
Liabilities
PAYABLES:
Investment securities purchased $ 648
Dividend payable on common stock 2,216
Other payables (Note 11) 1,340
ACCRUED EXPENSES (Note 3) 272
--------
Total liabilities $ 4,476
--------
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, 34,977,965 shares issued and
outstanding $ 350
CAPITAL IN EXCESS OF PAR VALUE 266,760
ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET
INVESTMENT INCOME (Note 2) (851)
ACCUMULATED NET REALIZED LOSS FROM SECURITIES
TRANSACTIONS (Note 2) (100,203)
NET UNREALIZED DEPRECIATION ON INVESTMENTS (1,233)
--------
Net assets applicable to Common Stock
(Equivalent to $4.71 per share, based on
34,977,965 shares outstanding) $ 164,823
--------
Total Net Assets $ 264,823
========
</TABLE>
-----------------------------------------------------------------------------
Statement of Operations
For the Year Ended
December 31, 1995
=============================================================================
<TABLE>
<CAPTION>
<S> <C>
Investment Income: (Note 1) (Dollars in thousands, except per share amounts)
Interest income $ 26,267
Dividend income 74
Other Income 156
-------
Total investment income $ 26,497
-------
Expenses:
Cost of Leverage:
Preferred and auction fees $ 276
-------
Total cost of leverage $ 276
-------
Professional services expenses:
Management fees (Note 3) $ 782
Custodian and transfer agent fees 225
Legal fees 72
Litigation fees (Note 11) 549
Audit fees 66
-------
Total professional services expenses $ 1,694
-------
Administrative expenses:
General administrative fees $ 204
Directors' fees 180
Miscellaneous expenses 91
-------
Total administrative expenses $ 475
-------
Other expense:
Litigation settlement expense (Note 11) $ 1,250
-------
Total expenses $ 3,695
-------
Net investment income $ 22,802
-------
Realized and Unrealized Gain on Investments:
Realized gain on investments, net $ 565
Change in net unrealized depreciation on
investments 21,138
-------
Net gain on investments $ 21,703
-------
Net increase in net assets resulting from
operations $ 44,505
-------
Cost of Preferred Leverage:
Distributions to preferred stockholders $ (6,252)
Net swap settlement receipts (Note 7) 464
-------
Total cost of preferred leverage $ (5,788)
-------
Net increase in net assets resulting from
operations less distributions to preferred
stockholders $ 38,717
=======
----------------------------------------------------------------
Amount Available for Distribution to Common Stockholders
Net investment income $ 22,802
Total cost of preferred leverage (5,788)
-------
Net amount available for distribution to common
stockholders $ 17,014
=======
</TABLE>
The accompanying notes are an integral
part of these financial statements.
9
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
Statements of Changes in Net Assets
=============================================================================
<TABLE>
<CAPTION>
For the Year Ended
December 31,
1995 1994
-------- ----------
<S> <C> <C>
From Operations: (Dollars in thousands, except per share amounts)
Net investment income $ 22,802 $ 20,982
Realized gain (loss) on investments 565 (2,003)
Change in net unrealized depreciation on investments 21,138 (21,856)
------ --------
Net increase (decrease) in net assets resulting from operations $ 44,505 $ (2,877)
------ --------
From Fund Share Transactions:
Proceeds from sale of Auction Term Preferred Stock (2,000 shares),
net of $1,836,000 of offering costs and sales load $ -- $ 98,164
Proceeds from rights offering (8,568,097 shares), net of $603,000 of offering
costs -- 34,784
Redemption of Taxable Auction Rate Preferred Stock -- (35,000)
Net asset value of 705,577 shares and 336,363 shares issued to common
shareholders for reinvestment of dividends in 1995 and 1994, respectively 3,230 1,637
------ --------
Increase in net assets resulting from fund share transactions $ 3,230 $ 99,585
------ --------
Distributions to Stockholders:
Preferred dividends ($3,126 and $2,288 per share, respectively) $ (6,252) $ (4,529)
Net swap settlement receipts 464 (432)
Common Dividends:
From net investment income ($.50 and $.53 per share, respectively) (17,410) (15,830)
In excess of net investment income ($.04 and $0 per share, respectively) (1,304) --
------ --------
Decrease in net assets resulting from distributions to stockholders $(24,502) $(20,791)
------ --------
Total net increase in net assets $ 23,233 $ 75,917
------ --------
Net Assets Applicable to Common and Preferred Stock:
Beginning of period $241,590 $165,673
------ --------
End of period (Including $(851) and $396 of undistributed net investment
income at December 31, 1995 and December 31, 1994, respectively) $264,823 $241,590
====== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
10
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
Financial Highlights
Selected Per Share Data and Ratios
For Each Share of Common Stock Outstanding Throughout the Period
=============================================================================
<TABLE>
<CAPTION>
For the Period From
February 26, 1988
(Commencement
For the Years Ended December 31, of Operations) to
1995 1994 (c) 1993 1992 (a) 1991 1990 1989 December 31, 1988
----- -------- ----- -------- ----- ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 4.13 $ 5.15 $ 4.32 $ 3.79 $ 3.42 $ 6.23 $ 8.60 $ 9.25
------- ------- ------ ------ ------ ------- ------- ------
NET INVESTMENT INCOME .67 .72# .59 .57 .65 .92 1.54 1.42
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS .62 (.82)# .89 .57 .38 (2.82) (2.26) (.66)
------- ------- ------ ------ ------ ------- ------- ------
TOTAL FROM INVESTMENT
OPERATIONS 1.29 (.10) 1.48 1.14 1.03 (1.90) (.72) .76
------- ------- ------ ------ ------ ------- ------- ------
DISTRIBUTIONS:
Dividends from net investment
income:
To preferred stockholders
(including swap settlement
payments) (.17) (.17) (.05) (.06) (.10) (.16) (.30) (.23)
To common stockholders (.50) (.53) (.53) (.55) (.56) (.75) (1.25) (1.18)
Dividends in excess of net
investment income:
To common stockholders (.04) -- (.07) -- -- -- -- --
Returns of capital:
To common stockholders -- -- -- -- -- -- (.10) --
------- ------- ------ ------ ------ ------- ------- ------
TOTAL DISTRIBUTIONS (.71) (.70) (.65) (.61) (.66) (.91) (1.65) (1.41)
------- ------- ------ ------ ------ ------- ------- ------
Effect of rights offering and related
expenses; and Auction Term
Preferred Stock offering costs and
sales load -- (.22) -- -- -- -- -- --
------- ------- ------ ------ ------ ------- ------- ------
NET ASSET VALUE:
End of period $ 4.71 $ 4.13 $ 5.15 $ 4.32 $ 3.79 $ 3.42 $ 6.23 $ 8.60
======= ======= ====== ====== ====== ======= ======= ======
PER SHARE MARKET VALUE:
End of period $ 4.75 $ 4.00 $ 5.13 $ 4.13 $ 3.63 $ 2.50 $ 5.88 $10.00
======= ======= ====== ====== ====== ======= ======= ======
TOTAL INVESTMENT RETURN+ 33.50% (11.88)% 40.08% 29.70% 70.77% (47.94)% (30.04)% 13.28%
======= ======= ====== ====== ====== ======= ======= ======
</TABLE>
The accompanying notes are an integral
part of these financial statements.
11
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
Financial Highlights
Selected Per Share Data and Ratios
For Each Share of Common Stock Outstanding Throughout the Period (continued)
=============================================================================
<TABLE>
<CAPTION>
For the Period From
February 26, 1988
(Commencement
For the Years Ended December 31, of Operations) to
1995 1994 (c) 1993 1992 (a) 1991 1990 1989 December 31, 1988
----- -------- ---- -------- ---- ---- ---- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSETS, END OF PERIOD,
APPLICABLE TO COMMON
STOCK (b) $164,823 $141,590 $130,673 $107,897 $ 93,227 $ 83,813 $152,156 $202,363
======== ======== ======== ======== ======== ======== ======== ========
NET ASSETS, END OF PERIOD,
APPLICABLE TO PREFERRED
STOCK (b) $100,000 $100,000 $ 35,000 $ 35,000 $ 35,000 $ 35,000 $ 58,500 $ 79,000
======== ======== ======== ======== ======== ======== ======== ========
TOTAL NET ASSETS, END OF
PERIOD (b) $264,823 $241,590 $165,673 $142,897 $128,227 $118,813 $210,656 $281,363
======== ======== ======== ======== ======== ======== ======== ========
EXPENSE RATIOS
Ratio of interest expense to average
net assets** -- .01% 1.42% 2.95% 3.25% 4.17% 3.56% 3.29%*
Ratio of preferred and other debt
expenses to average net assets** .11% .13% .40% .65% .78% .62% .24% .23%*
Ratio of operating expenses to
average net assets** .84% .75% 1.56% 1.22% 1.19% 1.10% .69% .70%*
Ratio of litigation settlement
expense to average net assets** .49% -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
RATIO OF TOTAL EXPENSES TO
AVERAGE NET ASSETS** 1.44% .89% 3.38% 4.82% 5.22% 5.89% 4.49% 4.22%*
======== ======== ======== ======== ======== ======== ======== ========
RATIO OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS** 8.90% 9.06% 9.21% 10.09% 12.62% 14.50% 14.48% 13.56%*
PORTFOLIO TURNOVER RATE 62.66% 58.56% 85.76% 129.86% 121.15% 49.98% 65.39% 149.00%*
</TABLE>
(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.
The accompanying notes are an
integral part of these financial statements.
12
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Information Regarding
Senior Securities
=============================================================================
<TABLE>
<CAPTION>
As of December 31,
1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
TOTAL AMOUNT
OUTSTANDING
Notes $ -- $ -- $ -- $45,490,000 $45,490,000
Preferred Stock 100,000,000 100,000,000 35,000,000 35,000,000 35,000,000
Short-term Loan -- -- 45,000,000 -- --
ASSET COVERAGE
Per Note (1) $ -- $ -- $ -- $ 4,141 $ 3,819
Per Preferred Stock Share (2) 132,411 120,795 473,351 408,277 366,363
Per $1,000 of Short-term Loan (1) -- -- 4,682 -- --
INVOLUNTARY
LIQUIDATION
PREFERENCE
Preferred Stock Share $ 50,000 $ 50,000 $ 100,000 $ 100,000 $ 100,000
APPROXIMATE
MARKET VALUE
(UNAUDITED)
Per Note $ -- $ -- $ -- $ 1,000 $ 1,000
Per Preferred Stock Share 50,000 50,000 100,000 100,000 100,000
Per $1,000 of Short-term Loan -- -- 1,000 -- --
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
1990 1989 1988
------------- ------------- -------------
<S> <C> <C> <C>
TOTAL AMOUNT
OUTSTANDING
Notes $47,990,000 $96,100,000 $105,000,000
Preferred Stock 35,000,000 58,500,000 79,000,000
Short-term Loan -- -- --
ASSET COVERAGE
Per Note (1) $ 3,476 $ 3,192 $ 3,680
Per Preferred Stock Share (2) 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
APPROXIMATE
MARKET VALUE
(UNAUDITED)
Per Note $ 1,000 $ 1,000 $ 1,000
Per Preferred Stock Share 100,000 100,000 100,000
Per $1,000 of Short-term Loan -- -- --
</TABLE>
(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.
The accompanying notes are an integral
part of these financial statements.
13
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1995
=============================================================================
(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 $11,358,000 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
14
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
Notes to Financial Statements--Continued
December 31, 1995
=============================================================================
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 December 31, 1995, the total cost of securities (excluding temporary
cash investments) for federal income tax purposes was approximately
$257,068,000. Aggregate gross unrealized gain on securities in which there
was an excess of value over tax cost was $12,146,000. Aggregate unrealized
loss on securities in which there was an excess of tax cost over value was
$13,379,000. Net unrealized loss for tax purposes at December 31, 1995 was
approximately $1,233,000.
At December 31, 1995, 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 $782,000 in management fees during the year ended December 31,
1995. 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 ($164.8 million at December 31, 1995). At
December 31, 1995, the fee payable to the Investment Advisor was
approximately $70,000, 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
interest through January 4, 1994. The Fund also
15
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
Notes to Financial Statements-Continued
December 31, 1995
=============================================================================
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 5.90% to 7.00% for
the year ended December 31, 1995. 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 $250,000 for service charges earned by Bear Stearns through
December 31, 1995. 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
5.83% to 6.11% for the year ended December 31, 1995. 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 year ended December 31, 1995 the Fund's
obligation under the swap agreement was less than the amount receivable from
FNBB by $464,000, 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 amounts
potentially subject to credit risk, in the event of
16
<PAGE>
The New America High Income Fund, Inc.
-----------------------------------------------------------------------------
Notes to Financial Statements-Continued
December 31, 1995
=============================================================================
nonperformance by counterparties are substantially smaller. The estimated
fair value of the interest rate swap agreement at December 31, 1995 amounted
to approximately $(54,000) unrealized loss. 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 year ended December 31, 1995 were as follows:
Purchases of securities $154,406,000
Sales of securities $152,378,000
(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 $55,000, for the year ended December 31, 1995. The Fund paid
approximately $125,000 during the year ended December 31, 1995 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 the six year period prior to the
offering. The defendants jointly moved for summary judgment on this remaining
issue on March 31, 1995.
17
<PAGE>
The New America High Income Fund, Inc.
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Notes to Financial Statements-Continued
December 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. Pursuant to the parties' agreement, the defendants will create 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 will contribute
$1,250,000 to the Settlement Fund, and the balance will be contributed by
certain of the underwriters of the Fund's initial public offering. In
addition, the Fund will contribute $7,500 to a Notice and Administration
Fund, to be used for mailing notice to class members and other administrative
purposes. The settlement is subject to the approval of the Court, which has
set April 1, 1996 as the date for a hearing at which it will consider final
approval of the settlement.
If the settlement is approved by the Court and becomes effective in
accordance with its terms, the Company will also release, and receive a
reciprocal release from, the other defendants to the litigation.
The Fund has established a reserve for its share of the Settlement Fund
and has charged $1,250,000 to operations for the year ended December 31,
1995.
(12) Rights Offering
The Fund issued to stockholders of record as of the close of business on
June 14, 1994, rights to subscribe for an aggregate of 8,600,000 shares of
common stock, $.01 par value per share, of the Fund. One right was issued for
each three full shares of common stock beneficially held on the record date.
The rights entitled a stockholder to acquire at the subscription price of
$4.13 per share one share for each right held. The subscription price was 93%
of the net asset value per share as of the close of business on July 22,
1994, the expiration date. On August 1, 1994, the Fund completed its rights
offering. Proceeds of approximately $35,387,000 and shares of approximately
8,568,000 were recorded. In addition, the deferred offering expense balance
of $603,000 was netted against the rights offering proceeds.
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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.
18
<PAGE>
The New America High Income Fund, Inc.
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=============================================================================
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
Independent Public Accountants
Arthur Andersen LLP
Boston, MA
19
<PAGE>
The New America High Income Fund, Inc.
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Report of Independent Public Accountants
=============================================================================
To the Shareholders and Board of Directors of The New America High Income
Fund, Inc.:
We have audited the accompanying balance sheet of The New America High
Income Fund, Inc. (the Fund) (a Maryland Corporation), including the schedule
of investments, as of December 31, 1995, and the related statement of
operations for the year then ended, and the statement of changes in net
assets for each of the two years in the period then ended and the financial
highlights for the periods presented. These financial statements and the
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1995, by correspondence with the
custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of The New America High Income Fund, Inc. as of December 31, 1995,
and 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 the periods presented, in conformity with generally
accepted accounting principles.
Boston, Massachusetts ARTHUR ANDERSEN LLP
January 26, 1996
20
<PAGE>
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
The New
America
High Income
Fund, Inc.
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Annual
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Report
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December 31, 1995
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