<PAGE>
- --------------------------------------------------------------------------------
February 5, 1999
Dear Shareholder:
Investors will remember 1998 as a year of extreme volatility in all securities
markets. New America's portfolio returns are amplified by the Fund's leverage,
provided by the Fund's Auction Term Preferred Stock ("ATP"). This leverage
increases the Fund's total return to common shareholders in a strong market and
decreases the total return in a falling market. The degree of volatility in the
market and its causes are discussed in the paragraphs below. However, despite
the effect of the unsettled market on the shares, the Fund had the following
accomplishments during 1998:
- - The monthly dividend of $.0425 per month was stable throughout the year and
a special dividend of $.07 was paid in January, 1999.
- - At the year-end closing market price of $4.25 and a dividend of $.0425 per
month, the Fund's annualized current yield was 12%.
- - The Fund increased its capital by approximately $135 million through
issuing rights to shareholders and selling an additional series of ATP. The
offerings contributed to the continued decline of our expense ratios, which
are shown below as a percentage of the total net assets applicable to
common and also as a percentage of the total net assets applicable to
common and preferred.
<TABLE>
<CAPTION>
Total Net Assets Total Net Assets
Applicable to Applicable to
Common Common and Preferred
------ --------------------
1998 1997 1998 1997
------ ------ ------ -----
<S> <C> <C> <C> <C>
Preferred Expenses .14% .13 .08% .08%
Operating Expenses .82% .92% .50% .58%
--- ---- --- ---
Total Expenses .96% 1.05% .58% .66%
--- ---- --- ---
</TABLE>
The Fund's total returns are shown below for the periods ended December 31,
1998.
<TABLE>
<CAPTION>
Total Returns for Periods Ended December 31, 1998
-------------------------------------------------
One Year Three Years
------------ ---------------------------
Cumulative Avg. Annual
------------ ------------
<S> <C> <C> <C>
New America High Income Fund
(NAV and Dividends) (7.1)% 22.5% 7.0%
New America High Income Fund
(Stock Price and Dividends) (15.2) 24.1 7.5
- -----------------------
New America High Income Fund
(NAV and Dividends)* (4.6) 29.3 9.0
Lipper Closed-End Fund
Leveraged High Yield Average* (2.8) 29.1 8.9
</TABLE>
*Returns are adjusted for dilutive effect of rights offerings as calculated by
Lipper Analytical Services, Inc.
Source: Lipper Analytical Services, Inc. and The New America High Income Fund,
Inc.
<PAGE>
- --------------------------------------------------------------------------------
High Yield Market Update
The second half of the year proved to be a fairly tumultuous one for the high
yield market. Specifically, the financial markets experienced a severe crisis in
confidence during August and September. This crisis was instigated by the
contemporaneous events of the insolvency of Long Term Capital Management, a
hedge fund with over $90 billion in investments, and the default by Russia on
some of its ruble denominated debt. Following upon the announcement of these
unexpected events, liquidity in the U.S. financial markets effectively dried up
across all credit sensitive asset classes, from small stocks and emerging market
securities to mortgage-backed securities, investment grade and high yield bonds.
Valuations plummeted in high yield, reflecting the sudden imposition of a
significant liquidity premium as well as selling pressure created by redemptions
in open-end funds.
On September 29, the Federal Reserve made the first of three rate cuts. This
decision almost immediately brought back some semblance of liquidity as well as
renewed confidence in the markets. Positive flows returned to mutual funds, as
well, and perhaps surprisingly, offerings of new issues also came back to life.
Despite the improved conditions in the high yield market during the fourth
quarter, yield spreads remain at relatively high levels. For instance, the
difference between the high yield market rate and the 10-year U.S. Treasury
ended the year at 588 basis points, an improvement from the yield spread of
slightly over 600 basis points at September 30, but a dramatic increase from
yield spreads of approximately 300 basis points earlier in the year! Valuations
today still reflect a greater than typical liquidity premium and volatility
premium. We expect that the markets will need some time to overcome the recent
past. Perhaps most importantly, given this recent volatility, we would note that
the U.S. economy continues to chug along, creating a positive economic backdrop
for credit sensitive assets such as high yield bonds.
With respect to the portfolio, it remains highly diversified with exposure to
over 150 different issuers. The average quality of the holdings in the Portfolio
was B1/BB-, and the average yield to worst (including potential issuer calls)
was 10.6% as of year end. The Portfolio has exposure to certain U.S. dollar
denominated foreign issuers (Yankee) bonds. Total exposure to these issues
(excluding Canadian company exposure of 3.7%) was 5.9%. In general, these issues
sharply underperformed the domestic high yield market as a result of the crisis
in the markets in the third quarter. We continue to focus on the underlying
fundamentals of the issues we hold, and believe that many of these issues offer
attractive longer term return potential. With respect to industry exposure,
again, the Portfolio is highly diversified. One area of relative concentration
is the media and communications sector. Media companies are still benefiting
from consolidation opportunities within the U.S., as well as underlying strength
in the U.S. advertising market and consumer sectors. Selected holdings in this
sector include Fox Liberty Networks, a sports-programming cable network and
World Color Press, a commercial printer that, amongst other things, services
customers such as Forbes Magazine, Newsweek and National Geographic.
Year 2000 Problem
Like other mutual funds and organizations around the world, the Fund could be
adversely affected if its computer systems or those of its service providers do
not properly process dates beginning with January 1, 2000 and information
related to those dates (the "Year 2000 Problem"). The Fund's own computer
systems and
2
<PAGE>
- --------------------------------------------------------------------------------
software, which are used primarily in the preparation of financial statements,
maintaining the portfolio data-base and analyzing income flows to project
dividend payments and for compliance monitoring and reporting, were manufactured
or created after the Year 2000 Problem was widely understood and thus are not
susceptible to the Year 2000 Problem. However, we, like everybody else, live in
an interconnected world and receive data from suppliers who as yet cannot
certify that their systems will not be affected by the Year 2000 Problem. The
Fund's principal data supplier is State Street Bank and Trust Company ("State
Street Bank"). State Street Bank is the custodian of the Fund's assets and the
shareholder accounting agent. State Street Bank and the Fund's other data
suppliers have responded to our requests regarding how they intend to address
the Year 2000 Problem and have assured the Fund that their systems upgrades are
on track and will be complete before the year 2000.
In addition, we have sought and received assurances from Fund service providers,
including Wellington Management Company, LLP ("Wellington Management") and State
Street Bank, that they have taken and are taking appropriate measures to address
the Year 2000 Problem and do not currently expect their computer systems or
those of their service providers to experience a Year 2000 Problem which would
have a material adverse impact on the Fund. Wellington Management has advised
the Fund that the impact of the Year 2000 Problem is one of the factors it
considers in evaluating potential investments. Our program to monitor the Year
2000 Problem is an ongoing one, and we will continue to request, receive, and
review updates from the Fund's data and service providers on their Year 2000
Problem preparedness. Because of the highly complex nature of the Year 2000
Problem and the extent to which we cannot effect or control remedial measures by
those on whom the Fund must directly or indirectly rely for its operation, there
can, however, be no absolute assurance that the Year 2000 Problem will not have
a material adverse impact on the Fund.
As always, we appreciate your interest in the Fund.
Sincerely yours,
/s/Robert F. Birch /s/Catherine A. Smith
Robert F. Birch Catherine A. Smith
President Senior Vice President
The New America High Income Fund, Inc. Wellington Management Company, LLP
3
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments -- December 31, 1998 (Dollar Amounts in Thousands)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- -------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE DEBT SECURITIES -- 89.64% (e)
- -------------------------------------------------------------------------
Aerospace and Defense -- 2.03%
$ 2,000 Argo-Tech Corporation, Senior
Subordinated Notes, 8.625%,
10/01/07 ......................... B3 $ 1,890
3,500 L-3 Communications Corporation,
Senior Subordinated Notes,
8.50%, 05/15/08 .................. B2 3,596
590 L-3 Communications Corporation,
Senior Subordinated Notes, 8%,
08/01/08 (i) ..................... B2 594
3,775 Moog, Inc., Senior Subordinated
Notes, 10%, 05/01/06 ............. B1 3,907
-------
9,987
-------
Automobile -- 4.65%
7,000 Accuride Corporation, Senior
Subordinated Notes, 9.25%,
02/01/08 ......................... B2 6,860
1,500 Federal-Mogul Corporation, Notes,
7.875%, 07/01/10 ................. Ba2 1,536
3,500 Federal-Mogul Corporation, Senior
Notes, 8.80%, 04/15/07 ........... Ba2 3,762
1,500 Hayes Lemmerz International, Inc.,
Senior Subordinated Notes,
8.25%, 12/15/08 (i) .............. B2 1,493
2,000 Hayes Wheels International, Inc.,
Senior Subordinated Notes,
9.125%, 07/15/07 ................. B2 2,080
3,500 Key Plastics, Inc., Senior
Subordinated Notes, 10.25%,
03/15/07 ......................... B3 3,272
2,265 LDM Technologies, Inc., Senior
Subordinated Notes, 10.75%,
01/15/07 ......................... B3 2,265
1,500 Lear Corporation, Subordinated
Notes, 9.50%, 07/15/06 ........... Ba3 1,658
-------
22,926
-------
Banking -- 2.57%
3,575 Emergent Group, Inc., Senior
Notes, 10.75%, 09/15/04 .......... Caa2 1,609
1,500 FirstFed Financial Corp., Notes,
11.75%, 10/01/04 ................. B2 1,545
</TABLE>
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- -------------------------------------------------------------------------
<S> <C> <C> <C>
$ 4,000 Olympic Financial Ltd., Units,
Senior Notes, 11.50%, 03/15/07,
Warrants, exp. 03/15/07 .......... B2 $ 2,960
2,895 United Companies Financial
Corporation, Subordinated
Notes, 8.375%, 07/01/05 .......... Caa2 1,505
7,000 Western Financial Savings Bank,
Subordinated Capital
Debentures, 8.875%, 08/01/07 ..... B2 5,040
-------
12,659
-------
Beverage, Food and Tobacco -- 1.05%
810 Aurora Foods Inc., Series C
Senior Subordinated Notes,
9.875%, 02/15/07 ................. B1 883
410 Aurora Foods Inc., Senior
Subordinated Notes, 8.75%,
07/01/08 ......................... B1 426
1,870 Purina Mills, Inc., Senior
Subordinated Notes, 9%,
03/15/10 ......................... B2 1,861
2,000 Joseph E. Seagram & Sons, Inc.,
Senior Notes, 6.80%, 12/15/08 .... Baa3 1,978
-------
5,148
-------
Buildings and Real Estate -- 7.56%
2,580 Aracruz Celulose S.A., Notes,
10.375%, 01/31/02 (i) ............ B2 2,193
3,500 Associated Materials Incorporated,
Senior Subordinated Notes,
9.25% 03/01/08 ................... B2 3,570
4,000 Beazer Homes USA, Inc., Senior
Notes, 8.875%, 04/01/08 .......... B1 3,830
5,000 Falcon Building Products, Inc.,
Senior Subordinated Notes,
9.50%, 06/15/07 .................. B3 4,450
6,000 Kaufman and Broad Home
Corporation, Senior Subordinated
Notes, 9.625%, 11/15/06 .......... Ba3 6,330
4,000 The Ryland Group, Inc., Senior
Subordinated Notes, 8.25%,
04/01/08 ......................... B1 3,800
5,000 Standard Pacific Corp., Senior
Notes, 8.50%, 06/15/07 ........... Ba2 5,075
2,000 Standard Pacific Corp., Senior
Notes, 8%, 02/15/08 .............. Ba2 1,940
The accompanying notes are an integral
part of these financial statements.
</TABLE>
4
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments -- December 31, 1998 -- Continued (Dollar Amounts in
Thousands)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- -------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE DEBT SECURITIES -- continued
- -------------------------------------------------------------------------
$ 2,000 Toll Corp., Senior Subordinated
Notes, 7.75%, 9/15/07 ............ Ba3 $ 1,995
4,000 U.S. Home Corporation, Senior
Subordinated Notes, 8.88%,
08/15/07 ......................... B1 4,080
-------
37,263
-------
Chemicals, Plastics and Rubber -- 3.98%
5,500 Arco Chemical Co., Debentures,
9.80%, 02/01/20 .................. Ba2 5,679
1,500 Buckeye Cellulose Corporation,
Senior Subordinated Notes,
8.50%, 12/15/05 .................. Ba3 1,560
1,000 Buckeye Technologies Inc., Senior
Subordinated Notes, 8%,
10/15/10 ......................... Ba3 965
3,500 PCI Chemicals Canada Inc.,
Senior Secured Notes, 9.25%,
10/15/07 ......................... B2 2,835
1,500 Philipp Brothers Chemicals, Inc.,
Senior Subordinated Notes,
9.875%, 06/01/08 (i) ............. B3 1,470
2,000 Pioneer Americas Acquisition
Corp., Senior Secured Notes,
9.25%, 06/15/07 .................. B2 1,600
3,500 Sovereign Specialty Chemicals,
Inc., Senior Subordinated Notes,
9.50% 8/1/07 ..................... B3 3,552
2,000 Texas Petrochemicals Corporation,
Senior Subordinated Notes,
11.125%, 07/01/06 ................ B3 1,970
-------
19,631
-------
Containers, Packaging and Glass -- 5.45%
3,000 BWAY Corporation, Senior
Subordinated Notes, 10.25%,
04/15/07 ......................... B2 3,150
1,805 Container Corporation of America,
Senior Notes, Series B, 10.75%,
05/01/02 ......................... B2 1,841
6,195 Container Corporation of America,
Senior Notes, 9.75%, 04/01/03 .... B2 6,350
2,000 Domtar Inc., Debentures, 9.50%,
08/01/16 ......................... Ba1 2,060
</TABLE>
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- -------------------------------------------------------------------------
<S> <C> <C> <C>
$ 4,770 Gaylord Container Corporation,
Senior Notes, 9.375%, 06/15/07.... Caa1 $ 4,186
2,000 Owens-Illinois, Inc., Senior Notes,
7.85%, 05/15/04 .................. Ba1 2,069
7,000 Silgan Corporation, Senior
Subordinated Debentures, 9%,
06/01/09 ......................... B1 7,210
-------
26,866
-------
Diversified/Conglomerate Manufacturing -- 3.00%
2,000 Coltec Industries Inc., Senior
Notes, 7.50%, 04/15/08 ........... Ba2 2,107
2,500 Guangdong Enterprises (Holdings)
Limited, Senior Notes, 8.875%,
05/22/07 (i) ..................... B2 1,050
1,500 Henry Company, Senior Notes,
10%, 04/15/08 .................... B3 1,500
500 International Wire Group, Inc.,
Senior Subordinated Notes,
Series B, 11.75%, 06/01/05 ....... B3 526
2,500 International Wire Group, Inc.,
Senior Subordinated Notes,
11.75%, 06/01/05 ................. B3 2,631
825 Johnstown America Industries,
Inc., Senior Subordinated Notes,
Series C, 11.75%, 08/15/05 ....... B3 870
3,500 Johnstown America Industries,
Inc., Senior Subordinated Notes,
11.75%, 08/15/05 ................. B3 3,693
1,000 Roller Bearing Company of
America, Inc., Senior
Subordinated Notes, 9.625%,
06/15/07 ......................... B3 960
1,500 Telecommunications Techniques
Co., LLC, Senior Subordinated
Notes, 9.75%, 05/15/08 ........... B3 1,455
-------
14,792
-------
Diversified/Conglomerate Service -- 5.45%
5,000 Allied Waste North America,
Senior Notes, 7.625%,
01/01/06(i). ..................... Ba2 5,050
4,000 DecisionOne Corporation, Senior
Subordinated Notes, 9.75%,
08/01/07 ......................... B3 1,840
The accompanying notes are an integral
part of these financial statements.
</TABLE>
5
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments -- December 31, 1998 -- Continued (Dollar Amounts in
Thousands)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE DEBT SECURITIES -- continued
- -----------------------------------------------------------------------------
$ 1,750 DecisionOne Holdings Corp.,
Units, Senior Discount
Debentures, 11.50%, 08/01/08
Warrants, exp. 08/01/07 (g) ....... Caa1 $ 350
3,500 Globo Comunicacoes e
Participacoes S.A., Notes,
10.625%, 12/05/08 (i) ............. B2 2,257
2,000 Iron Mountain Incorporated, Senior
Notes, 8.75%, 09/30/09. ........... B3 2,060
3,500 Outdoor Systems, Inc., Senior
Subordinated Notes, 8.875%,
06/15/07 .......................... B1 3,745
3,000 Pierce Leahy Corp., Senior
Subordinated Notes, 9.125%,
07/15/07 .......................... B3 3,165
3,000 PSINet Inc., Senior Notes, 10%,
02/15/05 .......................... B3 2,970
2,000 Rogers Communications Inc.,
Senior Notes, 8.875%, 07/15/07..... B2 2,060
3,500 UNICCO Service Company, Senior
Subordinated Notes, 9.875%,
10/15/07 .......................... B3 3,378
-------
26,875
-------
Diversified Natural Resources, Metals and Minerals -- .83%
3,000 P&L Coal Holdings Corporation,
Senior Notes, 8.875%, 05/15/08..... Ba3 3,053
1,000 P&L Coal Holdings Corporation,
Senior Subordinated Notes,
9.625%, 05/15/08 .................. B2 1,018
-------
4,071
-------
Electronics -- 3.21%
3,000 Advanced Micro Devices, Inc.
Senior Secured Notes, 11%,
08/01/03 .......................... Ba3 3,218
2,000 Amphenol Corporation, Senior
Subordinated Notes, 9.875%,
05/15/07 .......................... B2 2,070
4,000 Samsung Electronics America,
Inc., Guaranteed Notes, 9.75%,
05/01/03 (i) ...................... Ba1 3,800
4,000 Unisys Corporation, Senior Notes,
7.875%, 04/01/08 .................. Ba3 4,245
</TABLE>
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
$ 2,500 WESCO Distribution, Inc., Senior
Subordinated Notes, 9.125%,
06/01/08 .......................... B2 $ 2,500
-------
15,833
-------
Finance -- .69%
2,000 Navistar Financial Corporation,
Senior Subordinated Notes, 9%,
06/01/02 .......................... Ba3 2,070
1,590 Resource America, Inc., Senior
Notes, 12%, 08/01/04 .............. Caa1 1,304
-------
3,374
-------
Furnishings, Housewares, Durable Consumer Products -- 1.25%
2,500 Nortek, Inc., Senior Notes, 9.25%,
03/15/07 .......................... B1 2,556
3,500 Nortek, Inc., Senior Notes,
9.125%, 09/01/07 .................. B1 3,596
-------
6,152
-------
Grocery -- .68%
725 Homeland Stores, Inc., Senior
Subordinated Notes, 10%,
08/01/03 .......................... (f) 667
2,550 Fred Meyer, Inc., Notes, 7.375%,
03/01/05 .......................... Ba2 2,682
-------
3,349
-------
Healthcare, Education and Childcare -- 7.08%
4,000 Beverly Enterprises, Inc., Senior
Notes, 9%, 02/15/06 ............... Ba3 4,180
5,000 Columbia/HCA Healthcare
Corporation, Notes, 7.25%,
05/20/08 .......................... Ba2 4,896
6,000 Fisher Scientific International Inc.,
Senior Subordinated Notes, 9%,
02/01/08 .......................... B3 5,970
2,000 Kinetic Concepts, Inc., Senior
Subordinated Notes, 9.625%,
11/01/07 .......................... B3 1,900
2,595 Mediq/PRN Life Support Services,
Inc., Senior Subordinated Notes,
11%, 06/01/08 ..................... B3 2,491
2,500 Owens & Minor, Inc. Senior
Subordinated Notes, 10.875%,
06/01/06 .......................... B1 2,687
3,000 PharMerica, Inc., Senior Subordinated
Notes, 8.375%, 04/01/08 ........... B2 2,685
The accompanying notes are an integral
part of these financial statements.
</TABLE>
6
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments -- December 31, 1998 -- Continued (Dollar Amounts in
Thousands)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- -------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE DEBT SECURITIES -- continued
- -------------------------------------------------------------------------
$ 2,500 Tenet Healthcare Corporation,
Senior Subordinated Notes,
8.625%, 01/15/07 ................. Ba3 $2,600
2,500 Tenet Healthcare Corporation,
Senior Subordinated Notes,
8.125%, 12/01/08 (i) ............. Ba3 2,581
5,500 Universal Hospital Services, Inc.,
Senior Notes, 10.25%, 03/01/08.... B3 4,895
------
34,885
------
Hotels, Motels, Inns and Gaming -- 2.36%
1,500 Fitzgeralds Gaming Corporation,
Senior Secured Notes, 12.25%,
12/15/04 ......................... B3 810
5,000 John Q. Hammons Hotels, L.P.,
First Mortgage Notes, 8.875%,
02/15/04 ......................... B1 4,600
2,500 Hollywood Casino Corporation,
Senior Secured Notes, 12.75%,
11/01/03 ......................... B2 2,662
3,500 Lady Luck Gaming Corporation,
First Mortgage Notes, 11.875%,
03/01/01 ......................... B2 3,579
------
11,651
------
Leisure, Amusement, Motion Pictures and
Entertainment -- 2.19%
5,000 Fox/Liberty Networks, LLC, Senior
Notes, 8.875%, 08/15/07 .......... B1 5,075
2,000 Loews Cineplex Entertainment
Corporation, Senior Subordinated
Notes, 8.875%, 08/01/08 .......... B3 2,065
2,500 Muzak Limited Partnership, Senior
Notes, 10%, 10/01/03 ............. Ba3 2,600
1,000 Time Warner Telecom LLC, Senior
Notes, 9.75%, 07/15/08 ........... B2 1,050
------
10,790
------
Machinery -- .64%
2,500 Neenah Corporation, Senior
Subordinated Notes, 11.125%,
05/01/07 ......................... B3 2,569
575 Neenah Corporation, Senior
Subordinated Notes, 11.125%,
05/01/07 (i) ..................... B3 591
------
3,160
------
</TABLE>
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Mining, Steel, Iron and Non-Precious Metals -- 3.90%
$ 3,000 AK Steel Corporation, Senior
Notes, 9.125%, 12/15/06 .......... Ba2 $3,128
1,500 AmeriSteel Corporation, Senior
Notes, 8.75%, 04/15/08 ........... Ba3 1,440
2,500 Armco Inc., Senior Notes, 9%,
09/15/07 ......................... B2 2,550
4,000 Bayou Steel Corporation, First
Mortgage Notes, 9.50%, 05/15/08 B1 3,760
4,000 CSN Iron, S.A., Guaranteed
Notes, 9.125%, 06/01/07 (i) ...... B2 2,500
500 Pohang Iron & Steel Co., Ltd.,
Notes, 7.375%, 05/15/05 .......... Ba1 440
1,000 Pohang Iron & Steel Co., Ltd.,
Notes, 7.125%, 07/15/04 .......... Ba1 882
3,640 Weirton Steel Corporation, Senior
Notes, 11.375%, 07/01/04 ......... B2 3,349
1,245 Wells Aluminum Corporation, Senior
Notes, 10.125%, 06/01/05 ......... B2 1,152
------
19,201
------
Oil and Gas -- 6.25%
5,000 Abraxas Petroleum Corporation,
Senior Notes, 11.50%, 11/01/04 ... B3 3,800
4,225 Clark Refining and Marketing, Inc.,
Senior Notes, 8.375%, 11/15/07.... Ba3 3,950
5,000 Costilla Energy, Inc., Senior Notes,
10.25%, 10/01/06 ................. B2 3,600
1,335 Cross Timbers Oil Company,
Senior Subordinated Notes,
9.25%, 04/01/07 .................. B2 1,242
4,000 Dailey International Inc., Senior
Notes, 9.50%, 02/15/08 ........... Caa1 1,860
5,000 Frontier Oil Corporation, Senior
Notes, 9.125%, 02/15/06 .......... B1 4,600
2,915 Kelley Oil & Gas Corporation,
Senior Subordinated Notes,
10.375%, 10/15/06 ................ B3 2,157
3,000 Plains Resources Inc., Senior
Subordinated Notes, 10.25%,
03/15/06 ......................... B2 3,030
5,000 RAM Energy, Inc., Senior Notes,
11.50%, 02/15/08 ................. B3 3,250
3,500 Tuboscope Inc., Senior Notes,
7.50%, 02/15/08 .................. Ba2 3,299
------
30,788
------
The accompanying notes are an integral
part of these financial statements.
</TABLE>
7
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments -- December 31, 1998 -- Continued (Dollar Amounts in
Thousands)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- -------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE DEBT SECURITIES -- continued
- -------------------------------------------------------------------------
Personal and Non-Durable Consumer Products -- 1.46%
$ 6,460 American Pad and Paper
Company of Delaware, Inc.,
Senior Subordinated Notes,
13%, 11/15/05 .................... Caa1 $ 3,746
2,000 Chattem, Inc., Senior Subordinated
Notes, 8.875%, 04/01/08 .......... B2 2,050
1,420 True Temper Sports, Inc. Senior
Subordinated Notes, 10.875%,
12/01/08 (i) ..................... B3 1,420
-------
7,216
-------
Personal Transportation -- .86%
5,000 Braniff, Inc., Senior Reset Notes,
15%, 04/01/99 (a)(b)(c)(d) ....... (f) 0
2,275 Continental Airlines, Inc., Senior
Notes, 8%, 12/15/05 .............. Ba2 2,295
3,500 Valujet, Inc., Senior Notes,
10.25%, 04/15/01 ................. B3 1,960
-------
4,255
-------
Printing, Publishing and Broadcasting -- 14.31%
2,500 Adelphia Communications
Corporation, Senior Notes,
9.875%, 03/01/07 ................. B2 2,769
2,500 Adelphia Communications
Corporation, Senior Notes,
8.375%, 02/01/08 ................. B2 2,588
1,550 Adelphia Communications
Corporation, Senior Notes,
8.375%, 02/01/08 (i) ............. B2 1,604
2,500 Allbritton Communications
Company, Senior Subordinated
Notes, 8.875%, 02/01/08 .......... B3 2,488
2,190 APP Finance (VII) Mauritius
Limited, Guaranteed Convertible
Notes, 3.50%, 04/30/03 (i) ....... (f) 1,086
1,250 APP International Finance Company
B.V., Guaranteed Secured Notes,
11.75%, 10/01/05 ................. Caa1 825
800 Big Flower Press Holdings, Inc.,
Senior Subordinated Notes,
8.875%, 07/01/07 ................. B2 816
4,000 Big Flower Press Holdings, Inc.,
Senior Subordinated Notes,
8.625%, 12/01/08 (i) ............. B2 4,000
</TABLE>
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- -----------------------------------------------------------------------
<S> <C> <C> <C>
$ 5,000 Boise Cascade Corp., Debentures,
9.45%, 11/01/09 .................. Baa3 $ 5,551
2,975 Century Communications Corp.,
Senior Notes, 8.875%, 01/15/07.... Ba3 3,287
2,500 Chancellor Media Corporation of
Los Angeles, Senior Subordinated
Notes, 9.375%, 10/01/04 .......... Ba3 2,594
1,500 Chancellor Media Corporation of
Los Angeles, Senior Subordinated
Notes, 8.125%, 12/15/07 .......... B1 1,489
710 Citadel Broadcasting Company,
Senior Subordinated Notes,
9.25%, 11/15/08 (i) .............. B3 738
2,250 CSC Holdings Inc., Senior
Debentures, Series B, 8.125%,
08/15/09 ......................... Ba2 2,406
5,000 Doman Industries Limited, Senior
Notes, 8.75%, 03/15/04 ........... B1 3,900
3,000 Falcon Holding Group, L.P., Senior
Debentures, 8.375%, 04/15/10 ..... B2 3,053
1,170 Granite Broadcasting Corporation,
Senior Subordinated Notes,
8.875%, 05/15/08 ................. B3 1,117
1,500 Jacor Communications Company,
Senior Subordinated Notes,
9.75%, 12/15/06 .................. B2 1,665
890 Jacor Communications Company,
Senior Subordinated Notes,
8.75%, 06/15/07 .................. B2 959
1,000 Lin Television Corporation, Senior
Subordinated Notes, 8.375%,
03/01/08 ......................... B2 1,004
2,865 Mail-Well I Corporation, Senior
Subordinated Notes, 8.75%,
12/15/08 (i) ..................... B1 2,865
2,500 Multicanal S.A., Notes, 9.25%,
02/01/02 ......................... Ba3 2,275
3,500 Pindo Deli Finance Mauritius
Limited, Guaranteed Senior
Notes, 10.75%, 10/01/07 .......... Caa1 1,855
2,305 PRIMEDIA Inc., Senior Notes,
7.625%, 04/01/08 ................. Ba3 2,305
1,500 Repap New Brunswick Inc.,
Second Priority Senior Secured
Notes, 10.625%, 04/15/05 ......... Caa1 1,020
The accompanying notes are an integral
part of these financial statements.
</TABLE>
8
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments -- December 31, 1998 -- Continued (Dollar Amounts in
Thousands)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- --------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE DEBT SECURITIES -- continued
- --------------------------------------------------------------------------
$ 4,250 Rifkin Acquisition Partners,
L.L.L.P., Senior Subordinated
Notes, 11.125%, 01/15/06 .......... B3 $ 4,675
2,500 Sullivan Graphics, Inc., Senior
Subordinated Exchange Notes,
12.75%, 08/01/05 .................. Caa1 2,544
2,500 Sun Media Corporation, Senior
Subordinated Notes, 9.50%,
02/15/07 .......................... B2 2,775
6,255 World Color Press, Inc., Senior
Subordinated Notes 8.375%,
11/15/08 (i) ...................... B1 6,286
-------
70,539
-------
Telecommunications -- 6.13%
765 Advanced Radio Telecom Corp.,
Senior Notes, 14%, 02/15/07 ....... Caa2 597
1,250 American Mobile Satellite
Corporation, Senior Notes,
12.25%, 04/10/08 .................. (f) 775
4,615 BTI Telecom Corp., Senior Notes,
10.50%, 09/15/07 .................. B3 3,415
2,000 GST Network Funding Inc., Senior
Secured Discount Exchange
Notes, 10.50%, 05/01/08 (g)(i) .... (f) 960
2,825 Hyperion Telecommunications,
Inc., Senior Secured Notes,
12.25%, 09/01/04 .................. B3 2,867
3,000 Innova, S. de R.L., Senior
Exchange Notes, 12.875%,
04/01/07 .......................... B3 2,055
2,000 Intermedia Communications Inc.,
Senior Notes, 8.875%, 11/01/07..... B2 1,930
1,500 Intermedia Communications Inc.,
Senior Notes, 8.50%, 01/15/08 ..... B2 1,433
2,500 Korea Telecom, Notes, 7.625%,
04/15/07 .......................... Ba1 2,169
5,000 McLeodUSA Incorporated, Senior
Notes, 9.25%, 07/15/07 ............ B2 5,112
2,250 MobileMedia Communications,
Inc., Senior Subordinated Notes,
9.375%, 11/01/07 (a)(c) ........... C 270
2,000 Rogers Cantel Inc., Senior Secured
Debentures, 9.75%, 06/01/16 ....... Ba3 2,140
</TABLE>
<TABLE>
<CAPTION>
Principal Moody's Value
Amount/Units Rating (Note 1(a))
- -------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,000 Rogers Cantel Inc., Senior
Secured Notes, 8.30%, 10/01/07 Ba3 $ 1,005
2,500 Tevecap S.A., Senior Notes,
12.625%, 11/26/04 ................. B2 1,450
3,000 Verio Inc., Senior Notes, 11.25%,
12/01/08 (i) ...................... B3 3,030
1,000 Winstar Equipment II Corp.,
Guaranteed Senior Secured
Exchange Notes, 12.50%,
03/15/04 .......................... B3 1,020
-------
30,228
-------
Textiles and Leather -- .92%
1,165 Galey & Lord, Inc., Senior
Subordinated Notes, 9.125%,
03/01/08 .......................... B3 1,008
3,500 WestPoint Stevens, Inc., Senior
Notes, 7.875%, 06/15/08 ........... Ba3 3,526
-------
4,534
-------
Utilities -- 1.14%
2,500 Cathay International Limited,
Senior Notes, 13%, 04/15/08 (i).... Ba3 925
2,750 Energy Corporation of America,
Senior Subordinated Notes,
9.50%, 05/15/07 ................... B2 2,544
2,000 Texas-New Mexico Power
Company, Secured Debentures,
10.75%, 09/15/03 .................. Baa3 2,144
-------
5,613
-------
Total Corporate Debt Securities
(Total cost of $485,548) .......... 441,786
-------
- -------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS (FOREIGN) -- 1.26%
- -------------------------------------------------------------------------
Sovereigns -- 1.26%
$ 2,061 Federal Republic of Brazil,
Capitalization Bonds, 8%,
04/15/14 .......................... B2 $ 1,229
2,500 Republic of Korea, Global Bonds,
8.875%, 04/15/08 .................. Ba1 2,581
4,000 Republic of Venezuela, Unsecured
Global Bonds, 9.25%, 09/15/27...... B2 2,410
-------
Total Government Obligations (Foreign)
(Total cost of $7,817)..................... 6,220
-------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
9
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments -- December 31, 1998 -- Continued (Dollar Amounts in
Thousands)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Value
Shares Rating (Note 1(a))
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCK -- 1.10% (e)
- ---------------------------------------------------------------------------
Banking -- 0.00%
57,935 WestFed Holdings, Inc., Cumulative,
Series A Preferred Stock, 15.50%
(a)(d)(h) ............................ (f) $ 0
Hotels, Motels, Inns and Gaming -- .03%
30,000 Fitzgeralds Gaming Corporation,
Cumulative Preferred Stock, 15% ...... ca 150
Insurance -- .57%
2,850 Superior National Capital Trust I,
Trust Preferred Securities, 10.75% ... b1 2,822
Machinery -- .26%
1,350 Fairfield Manufacturing Company, Inc.
Cumulative Exchangeable
Preferred Stock, 11.25% .............. (f) 1,296
Personal, Food and Miscellaneous Services -- .24%
275 SF Holdings Group, Inc.,
Exchangeable Preferred Stock,
13.75% ............................... (f) 1,183
-------
Total Preferred Stock
(Total cost of $13,037) .............. 5,451
-------
- ---------------------------------------------------------------------------
COMMON STOCK and WARRANTS -- .04% (e)
- ---------------------------------------------------------------------------
555 American Mobile Satellite
Corporation, Warrants, exp.
04/01/08 (h)(i) ........................ $ 2
12,500 Benedek Communications Corporation,
Warrants, exp. 07/01/07 (b)(h) ......... 25
515 Concentric Network Corporation,
Warrants, exp. 12/15/07 (h)(i) ......... 77
37,620 Fitzgeralds Gaming Corporation,
Common Stock (h) ....................... 0
1,500 MGC Communications, Inc.,
Warrants, exp. 10/01/04 (h)(i) ......... 46
10,175 SF Holdings Group, Inc., Class C,
Common Stock (h)(i) .................... 20
27,474 WestFed Holdings, Inc., Series B
Common Stock, (a)(d)(h) ................ 0
-------
Total Common Stock and
Warrants
(Total cost of $295) ................... 170
-------
</TABLE>
<TABLE>
<CAPTION>
Principal Value
Amount (Note 1(a))
- --------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 5.14% (e)
- --------------------------------------------------------------
$ 25,325 Paribas Corporation Repurchase
Agreement, 4.80%, 01/04/99,
(Collateral U.S. Treasury Note,
5.625%, 12/31/99, $25,578
principal) ..................... $ 25,325
--------
Total Short-Term Investments
(Total cost of $25,325) ........ 25,325
--------
TOTAL INVESTMENTS (Total cost of $532,022) $478,952
========
</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, 1998 was $25 or .01% 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, 1998 was $0.
(e) Percentages indicated are based on total assets of $492,870.
(f) Not rated.
(g) Security is a step interest or accrual bond. Interest on these bonds accrue
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 $46,638 as of December 31,
1998.
The accompanying notes are an integral
part of these financial statements.
10
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
Balance Sheet
December 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets: (Dollars in thousands, except per share amounts)
INVESTMENTS IN SECURITIES, at value (Identified
cost of $532,022, see Schedule of Investments
and Notes 1 and 2) .............................. $478,952
RECEIVABLES:
Investment securities sold ....................... 2,300
Interest and dividends ........................... 11,585
PREPAID EXPENSES .................................. 33
---------
Total assets .................................... $492,870
---------
Liabilities:
PAYABLES:
Investment securities purchased .................. $ 3,610
Dividend payable on common stock ................. 5,013
Dividend payable on preferred stock .............. 430
ACCRUED EXPENSES (Note 3) ......................... 299
---------
Total liabilities ............................... $ 9,352
---------
Net Assets:
AUCTION TERM PREFERRED STOCK:
$1.00 par value, 1,000,000 shares authorized,
8,400 shares issued and outstanding,
liquidation preference of $25,000 per share
(Notes 5 and 6) ................................ $210,000
---------
COMMON STOCK:
$0.01 par value, 200,000,000 shares authorized,
65,764,019 shares issued and outstanding ....... $ 658
CAPITAL IN EXCESS OF PAR VALUE .................... 365,079
UNDISTRIBUTED NET INVESTMENT INCOME
(Note 2) ........................................ 782
ACCUMULATED NET REALIZED LOSS FROM
SECURITIES TRANSACTIONS (Note 2) ................ (39,931)
NET UNREALIZED DEPRECIATION ON
INVESTMENTS ..................................... (53,070)
---------
Net assets applicable to common stock
(Equivalent to $4.16 per share, based on
65,764,019 shares outstanding) ................. $273,518
---------
Total Net Assets .................................. $483,518
=========
</TABLE>
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended
December 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income: (Note 1) (Dollars in thousands,
except per share amounts)
Interest income .......................................... $ 45,385
Dividend income .......................................... 932
Other Income ............................................. 376
--------
Total investment income ................................. $ 46,693
--------
Expenses:
Cost of Leverage:
Preferred and auction fees ............................... $ 395
--------
Total cost of leverage .................................. $ 395
--------
Professional services expenses:
Management fees (Note 3) ................................. $ 1,299
Custodian and transfer agent fees ........................ 276
Legal fees ............................................... 103
Audit fees ............................................... 55
--------
Total professional services expenses .................... $ 1,733
--------
Administrative expenses:
General administrative fees .............................. $ 335
Directors' fees .......................................... 186
NYSE fees ................................................ 44
Miscellaneous expenses ................................... 38
Shareholder meeting expenses ............................. 35
--------
Total administrative expenses ........................... $ 638
--------
Total expenses .......................................... $ 2,766
--------
Net investment income ................................... $ 43,927
--------
Realized and Unrealized Gain (Loss) on Investments and
Forward Foreign Currency Contracts:
Realized gain on investments and forward foreign
currency contracts, net ............................... $ 4,849
Change in net unrealized depreciation on
investments ........................................... (55,251)
--------
Net loss on investments ................................. $(50,402)
--------
Net decrease in net assets resulting from operations $ (6,475)
--------
Cost of Preferred Leverage:
Distributions to preferred stockholders .................. $(10,607)
Net swap settlement disbursements (Note 7) ............... (49)
--------
Total cost of preferred leverage ........................ $(10,656)
--------
Net decrease in net assets resulting from operations
less cost of preferred leverage ....................... $(17,131)
========
- --------------------------------------------------------------------------------
Amount Available for Distribution to Common Stockholders
Net investment income .................................... $ 43,927
Total cost of preferred leverage ........................ (10,656)
--------
Net amount available for distribution to common
stockholders ......................................... $ 33,271
========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
11
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
1998 1997
------------ ------------
<S> <C> <C>
From Operations: (Dollars in thousands, except per share amounts)
Net investment income ................................................................ $ 43,927 $ 31,539
Realized gain on investments and forward foreign currency contracts, net ............. 4,849 11,676
Change in net unrealized depreciation on investments and forward foreign
currency contracts .................................................................. (55,251) (331)
--------- ---------
Net (decrease) increase in net assets resulting from operations ..................... $ (6,475) $ 42,884
--------- ---------
From Fund Share Transactions:
Proceeds from sale of Auction Term Preferred Stock Series C (2,000 shares), net
of $734 of offering costs and sales load (Note 5) ................................... $ -- $ 49,266
Proceeds from sale of Auction Term Preferred Stock Series D (2,400 shares), net
of $729 of offering costs and sales load (Note 5) 59,271 --
Proceeds from rights offering (11,982,048 shares), net of $400 of offering costs ..... -- 53,639
Proceeds from rights offering (16,241,851 shares), net of $297 of offering costs
(Note 11) 76,365 --
Net asset value of 1,068,852 shares and 754,386 shares issued to common
stockholders for reinvestment of dividends in 1998 and 1997, respectively ........... 5,140 3,786
--------- ---------
Increase in net assets resulting from fund share transactions ....................... $ 140,776 $ 106,691
--------- ---------
Distributions to Stockholders:
Preferred dividends ($1,263 and $1,265 per share, respectively)....................... $ (10,607) $ (7,588)
Net swap settlement (disbursements) receipts ......................................... (49) 174
Common Dividends:
From net investment income ($.54 and $.53 per share in 1998 and 1997,
respectively) ...................................................................... (33,641) (24,496)
In excess of net investment income ($0 and $.01 per share in 1998 and 1997,
respectively) ...................................................................... (111) (448)
--------- ---------
Decrease in net assets resulting from distributions to stockholders ................. $ (44,408) $ (32,358)
--------- ---------
Total net increase in net assets ...................................................... $ 89,893 $ 117,217
--------- ---------
Net Assets Applicable to Common and Preferred Stock:
Beginning of period .................................................................. $ 393,625 $ 276,408
--------- ---------
End of period (Including $782 and $370 of undistributed net investment
income at December 31, 1998 and December 31, 1997, respectively) .................... $ 483,518 $ 393,625
========= =========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
12
<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 Years Ended December 31,
1998 (d) 1997 (d) 1996 1995 1994 (c)
---------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period ............ $ 5.03 $ 4.94 $ 4.71 $ 4.13 $ 5.15
------- ------ ------- ------ -------
NET INVESTMENT INCOME .71# .70# .69 .67 .72#
NET REALIZED AND
UNREALIZED
GAIN (LOSS) ON
INVESTMENTS AND
FORWARD FOREIGN
CURRENCY CONTRACTS (.81)# .25# .22 .62 (.82)#
------- ------ ------- ------ -------
TOTAL FROM
INVESTMENT
OPERATIONS ................... (.10) .95 .91 1.29 (.10)
------- ------ ------- ------ -------
DISTRIBUTIONS:
Dividends from net
investment income:
To preferred
stockholders
(including
net swap settlement
receipts/payments) ........... (.17) (.16) (.16) (.17) (.17)
To common
stockholders ................. (.54) (.53) (.52) (.50) (.53)
Dividends in excess of
net investment income:
To common
stockholders .................. -- (.01) -- (.04) --
Returns of capital:
To common
stockholders .................. -- -- -- -- --
------- ------ ------- ------ -------
TOTAL
DISTRIBUTIONS ................ (.71) (.70) (.68) (.71) (.70)
------- ------ ------- ------ -------
Effect of rights offering and
related expenses; and
Auction Term Preferred
Stock offering costs and
sales load ..................... (.06) (.16) -- -- (.22)
------- ------ ------- ------ -------
NET ASSET VALUE:
End of period .................. $ 4.16 $ 5.03 $ 4.94 $ 4.71 $ 4.13
------- ------ ------- ------ -------
======= ====== ======= ======== =======
PER SHARE MARKET VALUE:
End of period .................. $ 4.25 $ 5.63 $ 5.13 $ 4.75 $ 4.00
======= ====== ======= ======== =======
TOTAL INVESTMENT RETURN+ (15.15)% 21.97% 19.89% 33.50% (11.88)%
======= ====== ======= ======== =======
<CAPTION>
For the Period From
February 26, 1988
(Commencement
For the Years Ended December 31, of Operations) to
1993 1992 (a) 1991 1990 1989 December 31, 1988
------- ---------- -------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period ............ $ 4.32 $ 3.79 $ 3.42 $ 6.23 $ 8.60 $ 9.25
------ ------ ------ ------- ------- ------
NET INVESTMENT INCOME .59 .57 .65 .92 1.54 1.42
NET REALIZED AND
UNREALIZED
GAIN (LOSS) ON
INVESTMENTS AND
FORWARD FOREIGN
CURRENCY CONTRACTS .89 .57 .38 (2.82) (2.26) ( .66)
------ ------ ------ ------- ------- ------
TOTAL FROM
INVESTMENT
OPERATIONS ................... 1.48 1.14 1.03 (1.90) (.72) .76
------ ------ ------ ------- ------- ------
DISTRIBUTIONS:
Dividends from net
investment income:
To preferred
stockholders
(including
net swap settlement
receipts/payments) ........... (.05) (.06) (.10) (.16) (.30) ( .23)
To common
stockholders ................. (.53) (.55) (.56) (.75) (1.25) (1.18)
Dividends in excess of
net investment income:
To common
stockholders .................. (.07) -- -- -- -- --
Returns of capital:
To common
stockholders .................. -- -- -- -- (.10) --
------ ------ ------ ------- ------- ------
TOTAL
DISTRIBUTIONS ................ (.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 ..................... -- -- -- -- -- --
------ ------ ------ ------- ------- ------
NET ASSET VALUE:
End of period .................. $ 5.15 $ 4.32 $ 3.79 $ 3.42 $ 6.23 $ 8.60
====== ====== ====== ======= ======= ======
PER SHARE MARKET VALUE:
End of period .................. $ 5.13 $ 4.13 $ 3.63 $ 2.50 $ 5.88 $10.00
====== ====== ====== ======= ======= ======
TOTAL INVESTMENT RETURN+ 40.08% 29.70% 70.77% (47.94)% (30.04)% 13.28%
====== ====== ====== ======= ======= ======
</TABLE>
The accompanying notes are an integral
part of these financial statements.
13
<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 Years Ended December 31,
1998 (d) 1997 (d) 1996 1995 1994 (c)
---------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSETS, END OF
PERIOD, APPLICABLE
TO COMMON STOCK (b) $273,518 $243,625 $176,408 $164,823 $141,590
======== ======== ======== ======== ========
NET ASSETS, END OF
PERIOD, APPLICABLE
TO PREFERRED
STOCK (b) ..................... $210,000 $150,000 $100,000 $100,000 $100,000
======== ======== ======== ======== ========
TOTAL NET ASSETS, END
OF PERIOD (b) ................. $483,518 $393,625 $276,408 $264,823 $241,590
======== ======== ======== ======== ========
EXPENSE RATIOS:
Ratio of interest expense
to average net assets** -- -- -- -- .01%
Ratio of preferred and
other debt expenses to
average net assets** ......... .14% .13% .16% .18% .22%
Ratio of operating
expenses to average
net assets** ................. .82% .92% 1.16% 1.39% 1.31%
Ratio of litigation settlement
expense to average net
assets** ..................... -- -- -- .80% --
-------- -------- -------- -------- --------
RATIO OF TOTAL EXPENSES
TO AVERAGE NET ASSETS** .96% 1.05% 1.32% 2.37% 1.54%
======== ======== ======== ======== ========
RATIO OF NET INVESTMENT
INCOME TO AVERAGE
NET ASSETS** .................. 15.22% 13.86% 14.36% 14.61% 15.89%
RATIO OF TOTAL EXPENSES
TO AVERAGE NET
ASSETS APPLICABLE
TO COMMON AND
PREFERRED STOCK ............... .58% .66% .83% 1.44% .89%
PORTFOLIO TURNOVER
RATE .......................... 124.67% 108.84% 53.45% 62.66% 58.56%
<CAPTION>
For the Period From
February 26, 1988
(Commencement
For the Years Ended December 31, of Operations) to
1993 1992 (a) 1991 1990 1989 December 31, 1988
-------- ---------- -------- -------- -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS, END OF
PERIOD, APPLICABLE
TO COMMON STOCK (b) $130,673 $107,897 $ 93,227 $ 83,813 $152,156 $202,363
======== ======== ======== ======== ======== ========
NET ASSETS, END OF
PERIOD, APPLICABLE
TO PREFERRED
STOCK (b) ..................... $ 35,000 $ 35,000 $ 35,000 $ 35,000 $ 58,500 $ 79,000
======== ======== ======== ======== ======== ========
TOTAL NET ASSETS, END
OF PERIOD (b) ................. $165,673 $142,897 $128,227 $118,813 $210,656 $281,363
======== ======== ======== ======== ======== ========
EXPENSE RATIOS:
Ratio of interest expense
to average net assets** 1.83% 3.95% 4.51% 5.63% 4.98% 4.58%*
Ratio of preferred and
other debt expenses to
average net assets** ......... .51% .87% 1.08% .84% .34% .32%*
Ratio of operating
expenses to average
net assets** ................. 2.01% 1.63% 1.64% 1.49% .97% .97%*
Ratio of litigation settlement
expense to average net
assets** ..................... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
RATIO OF TOTAL EXPENSES
TO AVERAGE NET ASSETS** 4.35% 6.45% 7.23% 7.96% 6.29% 5.87%*
======== ======== ======== ======== ======== ========
RATIO OF NET INVESTMENT
INCOME TO AVERAGE
NET ASSETS** .................. 11.86% 13.49% 17.47% 19.60% 20.28% 18.83%*
RATIO OF TOTAL EXPENSES
TO AVERAGE NET
ASSETS APPLICABLE
TO COMMON AND
PREFERRED STOCK ............... 3.38% 4.82% 5.22% 5.89% 4.49% 4.22%*
PORTFOLIO TURNOVER
RATE .......................... 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, LLP, the Fund was advised by Ostrander Capital Management, L.P.
(b) Dollars in thousands.
(c) 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.
(d) As discussed in Note 5, the Fund issued Series C ATP on May 6, 1997 and
Series D ATP on May 20, 1998. The per share data and ratios for the years
ended December 31, 1997 and 1998 reflect these transactions.
* Annualized.
** Ratios calculated on the basis of expenses and net investment income
applicable to the common shares relative to the average net assets of the
common stockholders only. The expense ratio and net investment income ratio
do not reflect the effect of dividend payments (including net swap
settlement receipts/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, March 1997 and
March 1998 rights offerings.
+ 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.
14
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
Information Regarding
Senior Securities
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of December 31,
1998 1997
------------- -------------
<S> <C> <C>
TOTAL AMOUNT OUTSTANDING:
Notes .................................. $ -- $ --
Preferred Stock ........................ 210,000,000 150,000,000
Short-term Loan ........................ -- --
ASSET COVERAGE:
Per Note (1) ........................... $ -- $ --
Per Preferred Stock Share (2) .......... 57,562 65,604
Per $1,000 of Short-term Loan (1) ...... -- --
INVOLUNTARY LIQUIDATION PREFERENCE:
Preferred Stock Share (3) .............. $ 25,000 $ 25,000
APPROXIMATE MARKET VALUE:
Per Note ............................... $ -- $ --
Per Preferred Stock Share (3) .......... 25,000 25,000
Per $1,000 of Short-term Loan .......... -- --
<CAPTION>
As of December 31,
1996 1995 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
TOTAL AMOUNT OUTSTANDING:
Notes .................................. $ -- $ -- $ -- $ --
Preferred Stock ........................ 100,000,000 100,000,000 100,000,000 35,000,000
Short-term Loan ........................ -- -- -- 45,000,000
ASSET COVERAGE:
Per Note (1) ........................... $ -- $ -- $ -- $ --
Per Preferred Stock Share (2) .......... 69,102 66,206 60,398 473,351
Per $1,000 of Short-term Loan (1) ...... -- -- -- 4,682
INVOLUNTARY LIQUIDATION PREFERENCE:
Preferred Stock Share (3) .............. $ 25,000 $ 25,000 $ 25,000 $ 100,000
APPROXIMATE MARKET VALUE:
Per Note ............................... $ -- $ -- $ -- $ --
Per Preferred Stock Share (3) .......... 25,000 25,000 25,000 100,000
Per $1,000 of Short-term Loan .......... -- -- -- 1,000
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
1992 1991 1990 1989 1988
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
TOTAL AMOUNT OUTSTANDING:
Notes ..................................... $45,490,000 $45,490,000 $47,990,000 $96,100,000 $105,000,000
Preferred Stock ........................... 35,000,000 35,000,000 35,000,000 58,500,000 79,000,000
Short-term Loan ........................... -- -- -- -- --
ASSET COVERAGE:
Per Note (1) .............................. $ 4,141 $ 3,819 $ 3,476 $ 3,192 $ 3,680
Per Preferred Stock Share (2) ............. 408,277 366,363 339,466 360,096 356,156
Per $1,000 of Short-term Loan (1) ......... -- -- -- -- --
INVOLUNTARY LIQUIDATION PREFERENCE:
Preferred Stock Share (3) ................. $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000
APPROXIMATE MARKET VALUE:
Per Note .................................. $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Per Preferred Stock Share (3) ............. 100,000 100,000 100,000 100,000 100,000
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.
(3) Plus accumulated and unpaid dividends.
The accompanying notes are an integral
part of these financial statements.
15
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(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--Investments for which market quotations are
readily available are stated at market value, which is determined by using the
most recently quoted bid price provided by an independent pricing service or
principal market maker. Independent pricing services 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. Short-term investments having
maturities of 60 days or less are stated at amortized cost, which approximates
market value. 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. Other
investments, with a cost of approximately $7,667,000 and a value of $0, are
valued in good faith at fair market value using methods determined by the Board
of Directors.
(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
16
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements--Continued
December 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1998, the total cost of securities (excluding temporary
cash investments) for federal income tax purposes was approximately
$506,697,000. Aggregate gross unrealized gain on securities in which there was
an excess of value over tax cost was approximately $5,326,000. Aggregate
unrealized loss on securities in which there was an excess of tax cost over
value was approximately $58,396,000. Net unrealized loss for tax purposes at
December 31, 1998 was approximately $53,070,000.
At December 31, 1998, the Fund had approximate capital loss carryovers
available to offset future capital gain, if any, to the extent provided by
regulations:
<TABLE>
<CAPTION>
Carryover Available Expiration Date
- ------------------- ------------------
<S> <C>
$34,426,000 December 31, 1999
2,227,000 December 31, 2002
- -----------
$36,653,000
===========
</TABLE>
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, 1998, the Fund has reclassified approximately
$893,000 primarily related to amortization of market discounts on corporate
bonds and gains on foreign currency transactions from accumulated net realized
loss from securities transactions to undistributed net investment income. In
addition, the Fund has reclassified approximately $42,432,000, primarily related
to the expiration of unused capital loss carryovers from accumulated net
realized loss from securities transactions to capital in excess of par value.
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, LLP, the Fund's Investment Advisor, earned
approximately $1,299,000 in management fees during the year ended December 31,
1998. Management fees paid by the Fund to Wellington Management are calculated
at .45 of 1% (on an annual basis) of the average weekly value of the Fund's net
assets attributable to common stock ($273.5 million at December 31, 1998). At
December 31, 1998, the fee payable to the Investment Advisor was approximately
$107,000, which was included in accrued expenses on the accompanying balance
sheet.
(4) Forward Foreign Currency Contract
The Fund has in the past entered into forward foreign currency contracts in
connection with the purchase and sale of foreign investments but does not expect
to enter into any in the future. All commitments were marked to market at the
applicable exchange rates and any unrealized gains or losses were recorded in
the Fund's financial statements. The aggregate principal amounts of the
contracts were not recorded in the financial statements. The Fund records
realized gains or losses at the time the forward contract is offset by entry
into a closing
17
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements--Continued
December 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
transaction or by delivery of the currency. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. At December 31, 1998 there were no forward
foreign currency contracts outstanding.
(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. On May 6, 1997,
the Fund issued 2,000 shares of Series C ATP. The underwriting discount of
$437,500 and offering expenses of $297,000 were recorded as a reduction of the
capital in excess of par value on common stock. On May 20, 1998, the Fund issued
2,400 shares of Series D ATP. The underwriting discount of $510,000 and offering
expenses of $219,000 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 5.20% to 6.14% for the year ended December 31, 1998.
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 $25,000 per share plus accumulated and unpaid
dividends. The ATP has a liquidation preference of $25,000 per share 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 maximum 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 $395,000 for
service charges through December 31, 1998. This amount is included under the
caption preferred and auction fees in the accompanying statement of operations.
(7) Interest Rate Swaps
The Fund has entered into five interest payment swap arrangements with
BankBoston, N.A. (BBNA) for the purpose of partially hedging its dividend
payment obligations with respect to the ATP. Pursuant to each of the Swap
Arrangements the Fund makes payments to BBNA on a monthly basis at fixed annual
rates. In exchange for such payments BBNA makes payments to the Fund on a
monthly basis at a variable rate determined with reference to the 30-day, AA
rated commercial paper rate for the swap effective February 7, 1994 and one
month LIBOR for the other swaps. The variable rates ranged from 5.12% to 6.00%
for the year ended December 31, 1998. The effective date, notional
18
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements--Continued
December 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
amount, maturity and fixed rates of the swaps are as follows:
<TABLE>
<CAPTION>
Notional Fixed
Effective Contract Annual
Date Amount Maturity Rate
<S> <C> <C> <C>
2/7/94 $65 million 2/7/99 5.25%
10/7/97 $20 million 10/7/02 6.07%
6/2/98 $15 million 6/2/03 5.90%
12/7/98 $25 million 12/7/03 5.58%
2/8/99 $65 million 2/7/04 5.83%
</TABLE>
Until December 31, 1998, the Fund followed hedge accounting
(off-balance-sheet) with respect to the swap agreements and settled the net
amount receivable or payable from each party every 30 days. For the year ended
December 31, 1998, the Fund's obligations under the swap agreements were more
than the amount received from BBNA by approximately $49,000 and is included in
the accompanying statement of operations. Refer to Note 12 for the adoption of
new accounting standards relating to the swap agreements.
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 nonperformance by counterparties, are
substantially smaller. The estimated fair value of the interest rate swap
agreements at December 31, 1998 amounted to approximately $3,546,000 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, 1998 were as follows:
Purchases of securities $675,497,000
Sales of securities $550,270,000
(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 $196,000 for the year ended December 31, 1998. The Fund paid
approximately $204,000 during the year ended December 31, 1998 to two officers
of the Fund for the provision of certain administrative services.
(11) Rights Offering
The Fund issued to stockholders of record as of the close of business on
February 10, 1998, rights to subscribe for an aggregate of 16,241,851 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 $4.72 per
share one share for each right held. The subscription price was 92% of the
average of the last reported sales price of the Fund's Common Stock on the New
York Stock Exchange on March 18, 1998, the expiration date and the nine
preceding business days. On March 25, 1998, the Fund completed its rights
offering. Proceeds of approxi-
19
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements--Continued
December 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
mately $76,662,000 and shares of 16,241,851 were recorded. In addition, the
deferred offering expense balance of $297,000 was netted against the rights
offering proceeds.
(12) Subsequent Event
In January 1999, the Fund adopted Statement of Financial Accounting
Standards No. 133, Accounting for Derivatives Instruments and Hedging
Activities. This statement requires an entity to recognize all freestanding
derivatives instruments in the balance sheet as either assets or liabilities and
measure them at fair value. As discussed in Note 7, the Fund has entered into
five interest rate swaps. These swaps act as a partial hedge against the
exposure to variable cash flows of the Fund's ATP dividend payment obligations.
The estimated fair value of the interest rate swap agreements at the date of
adoption amounted to approximately $3,123,000 unrealized loss. This amount has
been recorded as a liability, with a corresponding transition adjustment
recorded in earnings. The Fund will measure the fair value of the swaps going
forward, with any change in the unrealized gain or loss recorded in current
earnings. The effect of adoption on the Fund's net asset value per share was a
decrease of approximately $0.05 per share.
- --------------------------------------------------------------------------------
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.
20
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
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, 1998, and the related statement of operations
for the year then ended, 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, 1998, by correspondence with the custodian and brokers. 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, 1998, 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 29, 1999
21
<PAGE>
The New America High Income Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, LLP
75 State Street
Boston, MA 02109
Administrator
The New America High Income Fund, Inc.
33 Broad Street
Boston, MA 02109
(617) 263-6400
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
22
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
The New
America
High Income
Fund, Inc.
- --------------------------------------------------------------------------------
Annual
- --------------------------------------------------------------------------------
Report
- --------------------------------------------------------------------------------
December 31, 1998
- --------------------------------------------------------------------------------
