UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File No. 811-5399
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THE NEW AMERICA HIGH INCOME FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
33 Broad Street, Boston, MA 02109
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(Address of Principal Executive Offices) (Zip Code)
Richard E. Floor, Secretary
The New America High Income Fund, Inc.
33 Broad Street
Boston, MA 02109
Registrant's telephone number, including area code:(617) 263-6400
Date of fiscal year end: December 31
Date of reporting period: January 1, 2003 to June 30, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
THE NEW
AMERICA
HIGH INCOME
FUND, INC.
[NEW AMERICA HIGH INCOME FUND LOGO]
SEMI-ANNUAL
REPORT
JUNE 30, 2003
August 22, 2003
DEAR SHAREHOLDER,
During the first six months of 2003, the high yield bond market continued the
improvement that began late in 2002. The Fund's market price per share was $2.20
on June 30th. Including the dividends paid of $.0975 per share, the Fund had a
14.6% total return for the first half of 2003, based upon the market price per
share. When this letter went to press on August 22, 2003, our Fund's shares had
an annualized dividend yield of 10.6%, based upon a stock price of $1.98 and the
current monthly dividend of $.0175 per month. The net asset value per share was
$2.19 on June 30th, up almost 16% from the December 31, 2002 level of $1.89.
Looking back over the last six months there have been two significant events in
the Fund:
- The new investment manager, T. Rowe Price Associates, Inc. (TRP) was able
to take over the management of the portfolio in a rising market and has
managed the Fund's portfolio with a goal of achieving an asset mix designed
to preserve income.
- The Fund successfully completed a rights offering. The offering raised
approximately $42 million through the sale of new shares at a subscription
price of $1.81 per share. Because the issuance of additional common stock
in the rights offering has caused a reduction in the Fund's leverage ratio,
the Directors have authorized action designed to restore the leverage ratio
to approximately 40%, its general level prior to the rights offering. The
leverage is an important contributor supporting the Fund's common dividend.
As you all know, the Fund's leverage exaggerates both the decline in net asset
value per share in a falling market and the gain in net asset value per share in
rising markets. A positive impact on the high yield debt market from a
recovering economy should put the Fund in a position to benefit from its
leveraged capital structure. A detailed review of the high yield market and the
economy written by the Fund's investment manager, TRP, follows.
HIGH YIELD MARKET UPDATE
The high yield market continued its impressive recovery during the first half of
2003, adding to significant gains earned in the fourth quarter of 2002. The
second quarter saw strong performance in the stock market and the continued
process of balance sheet repair undertaken by many U.S. corporations.
The high yield market has now generated a return of over 20% during the past
twelve months. The most impressive results originated from the lowest rated and
most speculative companies and sectors. CCC-rated bonds continue to
significantly outperform higher rated securities, from both a yield and capital
appreciation standpoint. Conversely, we see many higher rated BB bonds as
fundamentally overvalued in a low interest rate environment. With yields under
7% for many credits, BB-rated bonds could be susceptible to rising interest
rates if momentum in the economy improves.
STRATEGY REVIEW
High yield investors assume two types of risk: credit and interest rate. For the
past five years, managing credit risk has been the principal challenge in the
high yield bear market. We now see the risk shifting more to interest rates. If
fiscal and monetary stimulus in the U.S. gain traction by the second half of
2003, we could see stronger economic activity. With interest rates near historic
lows, we expect yields to move upward if our scenario proves correct. While high
yield bonds should outperform their investment grade counterparts, in a rising
interest rate environment, rising interest rates could wipe out most of the
income from higher rated bonds in our universe. The average duration and yield
of BB-rated bonds are 4.5 and 6.6%, respectively. The basics of bond mathematics
lead us to an obvious conclusion. We will continue to reduce our exposure to
BB's in the portfolio.
The outlook for lower rated B's and CCC's appears much brighter in our forecast.
In addition to their significant yield advantage relative to BB's, we expect the
lower quality sectors of the market to benefit if trends in improving credit
quality and reduced default risk. The default rate in the high yield market has
already fallen sharply
this year. Even the most speculative companies in our universe have found ways
to repair balance sheets through new bank and bond financings. With equity
markets rallying sharply, high yield companies should also be able to issue
stock and low coupon convertible bonds.
No sector better exemplifies the shift in the credit cycle than utilities, with
year-to-date performance exceeding 30%. At year end, we had limited exposure in
this industry. Today utilities comprise one of our top sector exposures and we
have found numerous ideas that have generated meaningful capital appreciation.
Williams, AES and Calpine are among the recommendations that were strong
contributors during the second quarter.
Three years ago, the telecommunications sector began a dramatic and well
documented upheaval that made even the more established credits seem dicey
propositions at best. Today, we see opportunities among higher yielding telecom
companies that will remain solvent and continue to pay the coupons on their
bonds. Like the utility sector, we increased our allocation in this area of the
market with very positive results. Qwest and Charter Communications are two
major names in the high yield market that have staged impressive recoveries this
year. Both are now core positions in the portfolio. We were also gratified to
see a significant rebound in our wireless services companies, with some of the
best returns in the market.
We noted in our last report our intention to exercise particular care when
considering the sale of the portfolio's discounted securities, mindful of the
fact that many could enjoy meaningful capital appreciation in an improving
market. We can now report that we successfully harvested significant gains from
recoveries in discounted positions Athena Nuero, Avista, Case and airlines Delta
and Northwest, among others. Proceeds from these recovered positions have been
gradually redeployed to reduce the portfolio's sector and credit concentrations.
We anticipate this will result in less volatile performance going forward.
While we have shifted from a conservative to a neutral stance by rotating from
BB's to CCC's, we have not compromised our risk control standards. Even with the
increased allocation, CCC's remain a relatively small part of the portfolio and
subject to limitations associated with maintaining the AAA credit rating for the
ATP. Today the portfolio is more balanced from a sector standpoint, with no
industry representing more than 10% of assets and no current intention to move
to a more concentrated strategy. Our risk control priorities will be a drag on
performance in 2003, as opposed to a positive contributor in less favorable
market conditions, but still remain a critical component in generating superior
long term returns in this asset class.
Thank you for your continued interest in the Fund,
Sincerely,
/s/ Robert F. Birch /s/ Mark Vaselkiv
Robert F. Birch Mark Vaselkiv
President Vice President
The New America High Income Fund, Inc. T. Rowe Price Associates, Inc.
2
The New America High Income Fund, Inc.
SCHEDULE OF INVESTMENTS -- JUNE 30, 2003 (UNAUDITED)
(Dollar Amounts in Thousands)
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
--------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- 154.09% (d)
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AEROSPACE AND DEFENSE -- 1.87%
$ 650 Aviall, Inc., Senior Notes,
7.625%, 07/01/11 (g) B1 $ 660
350 Esterline Technologies Corp.,
Senior Subordinated Notes,
7.75%, 06/15/13 (g) B1 367
600 Sequa Corporation, Senior Notes,
9%, 08/01/09 B1 636
1,200 Vought Aircraft Industries, Inc.,
Senior Notes,
8%, 7/15/11 (g) B2 1,209
-----------
2,872
-----------
AUTOMOBILE -- 3.86%
150 Arvin Industries, Inc., Senior Notes,
7.125%, 03/15/09 Baa3 158
450 ArvinMeritor, Inc., Senior Notes,
8.75%, 03/01/12 Baa3 506
365 Cummins, Inc., Senior Notes,
9.50% 12/01/10 (g) Ba2 411
575 Dana Corporation, Notes
9%, 08/15/11 Ba3 622
395 Dana Corporation, Senior Notes,
10.125%, 03/15/10 Ba3 435
250 General Motors Corporation,
Senior Notes,
7.125%, 07/15/13 Baa1 250
650 HLI Operating Company Inc.,
Senior Notes,
10.50%, 06/15/10 (g) B1 683
600 Tenneco Automotive Inc., Senior
Secured Notes,
10.25%, 07/15/13 (g) B2 608
275 Tenneco Automotive Inc., Senior
Subordinated Notes,
11.625%, 10/15/09 Caa1 242
1,225 TRW Automotive Inc., Senior Notes,
9.375%, 02/15/13 (g) B1 1,335
600 TRW Automotive Inc., Senior
Subordinated Notes,
11%, 02/15/13 (g) B2 660
-----------
5,910
-----------
BEVERAGE, FOOD AND TOBACCO -- 5.75%
$ 1,125 Agrilink Foods, Inc. , Senior
Subordinated Notes,
11.875%, 11/01/08 B3 $ 1,218
1,200 B&G Foods, Inc., Senior
Subordinated Notes,
9.625%, 08/01/07 B3 1,239
625 Burns Philp, Senior
Subordinated Notes,
10.75%, 02/15/11 (g) B3 654
1,125 DIMON Incorporated, Senior Notes,
9.625%, 10/15/11 Ba3 1,238
600 Doane Pet Care Co., Senior Notes,
10.75%, 03/01/10 B2 654
400 Dole Food Company, Inc.,
Senior Notes
7.25%, 05/01/09 B2 424
825 Dole Food Company, Inc.,
Senior Notes
8.875%, 03/15/11 (g) B2 875
325 Domino's, Inc., Senior
Subordinated Notes,
8.25%, 07/01/11 (g) B3 336
1,125 Le-Nature's, Inc., Senior
Subordinated Notes,
9%, 06/15/13 (g) B3 1,164
325 Luigino's Inc., Senior
Subordinated Notes,
10%, 02/01/06 B3 338
650 Merisant Co., Senior
Subordinated Notes,
9.50%, 07/15/13 (g) B2 671
-----------
8,811
-----------
BROADCASTING AND ENTERTAINMENT -- 8.44%
1,125 Charter Communications
Holdings, LLC, Senior Notes,
10.75%, 10/01/09 Ca 878
775 Charter Communications
Holdings, LLC, Senior Notes,
11.125%, 01/15/11 Ca 601
2,550 CSC Holdings, Inc., Senior Notes,
7.625%, 04/01/11 B1 2,588
1,250 Insight Midwest, L.P., Senior Notes,
9.75%, 10/01/09 (g) B2 1,325
575 Insight Midwest, L.P., Senior Notes,
10.50%, 11/01/10 B2 633
The accompanying notes are an integral
part of these financial statements.
3
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
--------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
--------------------------------------------------------------------------------
$ 1,175 Mediacom Broadband LLC,
Senior Notes,
11%, 07/15/13 B2 $ 1,316
925 Paxson Communications
Corporation, Senior
Subordinated Notes,
10.75%, 07/15/08 Caa1 999
550 Radio One, Inc., Senior
Subordinated Notes,
8.875%, 07/01/11 B2 606
1,955 Rogers Communications, Inc.,
Senior Notes,
8.875%, 07/15/07 B2 2,014
1,150 Spanish Broadcasting System, Inc.,
Senior Subordinated Notes,
9.625%, 11/01/09 B3 1,219
150 XM Satellite Radio Inc., Senior
Secured Discount Debentures,
14%, 12/31/09 (h) Caa1 108
650 XM Satellite Radio Inc., Senior
Secured Notes,
12%, 06/15/10 (g) Caa1 643
-----------
12,930
-----------
BUILDING AND REAL ESTATE -- 7.46%
1,175 Associated Materials, Inc., Senior
Subordinated Notes,
9.75%, 04/15/12 B3 1,281
125 D.R. Horton, Inc., Senior Notes,
6.875%, 05/01/13 Ba1 133
75 D.R. Horton, Inc., Senior Notes,
8.50%, 04/15/12 Ba1 84
500 Georgia-Pacific Corporation,
Senior Debentures,
9.875%, 11/01/21 Ba3 502
1,500 Georgia-Pacific Corporation,
Senior Notes,
9.375%, 02/01/13 (g) Ba2 1,650
50 LNR Property Corporation, Senior
Subordinated Notes,
7.625%, 07/15/13 (g) Ba3 50
1,175 LNR Property Corporation, Senior
Subordinated Notes,
10.50%, 01/15/09 Ba3 1,269
$ 950 Lennar Corporation, Senior Notes,
9.95%, 05/01/10 Baa3 $ 1,123
1,100 Ryland Group, Inc.
Senior Subordinated Notes,
8.25%, 04/01/08 Ba2 1,148
2,000 Standard Pacific Corp.,
Senior Notes,
8%, 02/15/08 Ba2 2,090
650 Texas Industries, Inc., Senior Notes,
10.25%, 06/15/11 (g) B1 676
50 WCI Communities, Inc., Senior
Subordinated Notes,
9.125%, 05/01/12 Ba3 53
700 WCI Communities, Inc., Senior
Subordinated Notes,
10.625%, 02/15/11 Ba3 774
600 Williams Scotsman, Inc.,
Senior Notes,
9.875%, 06/01/07 B3 594
-----------
11,427
-----------
CHEMICALS, PLASTICS AND RUBBER -- 10.03%
3,400 ARCO Chemical Company,
Debentures,
9.80%, 02/01/20 Ba3 3,026
1,450 Avecia Group plc, Senior Notes,
11%, 07/01/09 Caa1 1,305
1,650 Compass Minerals Group, Inc., Senior
Subordinated Notes,
10%, 08/15/11 B3 1,848
150 Equistar Chemicals, LP, Senior Notes,
10.625%, 05/01/11 (g) B1 154
1,025 Hercules, Inc., Senior Notes,
11.125%, 11/15/07 Ba2 1,189
525 Huntsman Advanced Materials LLC,
Senior Secured
Notes, 11%, 07/15/10 (g) B2 545
600 Huntsman International LLC,
Senior Notes,
9.875%, 03/01/09 B3 627
1,325 Huntsman International LLC,
Senior Subordinated
10.125%, 07/01/09 Caa1 1,285
2,375 Koppers Inc., Senior
Subordinated Notes,
9.875%, 12/01/07 B2 2,452
The accompanying notes are an integral
part of these financial statements.
4
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
--------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
--------------------------------------------------------------------------------
$ 275 PolyOne Corporation, Senior Notes,
10.625%, 05/15/10 (g) B2 $ 271
625 Resolution Performance
Products LLC, Senior
9.50%, 04/15/10 B2 650
1,950 Rhodia S.A., Senior
Subordinated Notes,
8.875%, 06/01/11 (g) Ba3 2,018
-----------
15,370
-----------
CONTAINERS, PACKAGING AND GLASS -- 14.17%
725 AEP Industries, Inc., Senior
Subordinated Notes,
9.875%, 11/15/07 B3 678
1,625 Ainsworth Lumber Co. Ltd.,
Senior Secured Notes,
12.50%, 07/15/07 B3 1,828
350 Applied Extrusion Technologies, Inc.,
Senior Notes,
10.75%, 07/01/11 Caa1 259
925 Bway Corporation, Senior
Subordinated Notes,
10%, 10/15/10 (g) B3 967
800 Constar International, Inc.
Senior Subordinated Notes,
11%, 12/01/12 B3 868
1,250 Crown European Holdings SA,
Senior Secured Notes,
9.50%, 03/01/11 (g) B1 1,356
725 Crown European Holdings SA,
Senior Secured Notes,
10.875%, 03/01/13 (g) B2 792
550 FiberMark, Inc., Senior Notes,
10.75%, 04/15/11 B2 564
825 Jefferson Smurfit Corporation,
(U.S.) Senior Notes,
8.25%, 10/01/12 B2 891
1,425 Longview
10%, 01/15/09 B2 1,571
1,185 MDP Acquisitions PLC,
Senior Notes,
9.625%, 10/01/12 B2 1,309
350 Owens-Brockway Glass Container,
Inc., Senior Secured Notes,
7.75%, 05/15/11 (g) B1 368
$ 925 Owens-Brockway Glass
Container, Inc., Senior Notes,
8.25%, 05/15/13 (g) B2 $ 962
175 Owens-Brockway Glass Container,
Inc., Senior Secured Notes,
8.75%, 11/15/12 B1 191
2,000 Owens-Brockway Glass Container,
Inc., Senior Secured Notes,
8.875%, 02/15/09 B1 2,170
525 Packaging Corporation of America,
Senior Subordinated Notes,
9.625%, 04/01/09 Ba2 578
1,700 Plastipak Holdings, Inc.,
Senior Notes,
10.75%, 09/01/11 B3 1,836
1,600 Potlatch Corporation,
Senior Subordinated Notes,
10%, 07/15/11 Ba1 1,776
1,750 Silgan Corporation, Senior
Subordinated Debentures,
9%, 06/01/09 B1 1,811
550 Smurfit Capital, Guaranteed Notes,
6.75%, 11/20/05 Ba3 568
350 Stone Container Finance Company
of Canada, Senior Notes,
11.50%, 08/15/06 (g) B2 374
-----------
21,717
-----------
DIVERSIFIED/CONGLOMERATE MANUFACTURING -- 2.79%
875 Actuant Financial Corporation,
Senior Subordinated Notes,
13%, 05/01/09 B2 1,024
275 AGCO Corporation, Senior Notes,
9.50%, 05/01/08 Ba3 302
1,450 Case Corporation, Senior Notes,
7.25%, 08/01/05 Ba3 1,450
420 Numatics, Incorporated,
Senior Subordinated Notes,
9.625%, 04/01/08 Caa2 269
1,200 Trimas Corp. Senior
Subordinated Notes,
9.875%, 06/15/12 B3 1,224
-----------
4,269
-----------
The accompanying notes are an integral
part of these financial statements.
5
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
--------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
--------------------------------------------------------------------------------
DIVERSIFIED/CONGLOMERATE SERVICE -- 1.85%
$ 775 Brand Services, Inc.,
Senior Subordinated Notes,
12%, 10/15/12 B3 $ 883
600 Brickman Group LTD,
Senior Subordinated Notes,
11.75%, 12/15/09 (g) B2 672
1,150 National Waterworks, Inc.,
Senior Subordinated Notes,
10.50%, 12/01/12 B3 1,276
-----------
2,831
-----------
ECOLOGICAL -- 2.48%
1,000 Allied Waste North America, Inc.,
Senior Notes,
8.50%, 12/01/08 Ba3 1,077
200 Allied Waste North America, Inc.,
Senior Secured Notes,
7.875%, 04/15/13 Ba3 210
1,225 Casella Waste Systems, Inc.,
Senior Subordinated Notes,
9.75%, 02/01/13 (g) B3 1,305
825 IESI Corporation, Senior
Subordinated Notes,
10.25%, 06/15/12 B3 883
300 Synagro Technologies, Inc.,
Senior Subordinated Notes,
9.50%, 04/01/09 B3 321
-----------
3,796
-----------
ELECTRONICS -- 4.16%
500 AMI Semiconductor, Inc.,
Senior Subordinated Notes,
10.75%, 02/01/13 (g) B3 560
650 Amkor Technology, Inc.,
Senior Notes,
7.75%, 05/15/13 (g) B1 611
825 Avaya Inc., Senior Secured Notes,
11.125%, 04/01/09 B2 903
575 Chippac International Ltd., Senior
Subordinated Notes, Series B,
12.75%, 08/01/09 B3 644
875 Fairchild Semiconductor
Corporation, Senior
10.50%, 02/01/09 B2 976
$ 875 IPC Acquisition Corporation,
Senior Subordinated Notes,
11.50%, 12/15/09 B3 $ 919
800 ON Semiconductor Corporation,
Senior Secured Notes,
12%, 03/15/10 B3 876
225 ON Semiconductor Corporation,
Senior Secured Notes,
12%, 05/15/08 Caa1 227
600 Sanmina Scientific Corporation,
Senior Secured Notes,
10.375%, 01/15/10 (g) Ba2 666
-----------
6,382
-----------
FURNISHINGS, HOUSEWARES, DURABLE CONSUMER PRODUCTS -- .80%
625 Sealy Mattress Company,
Senior Subordinated Notes,
9.875%, 12/15/07 B3 619
575 Simmons Company,
Senior Subordinated Notes,
10.25%, 03/15/09 B2 615
-----------
1,234
-----------
GROCERY STORES -- .76%
1,125 The Pantry Inc., Senior
Subordinated Notes,
10.25%, 10/15/07 B3 1,164
-----------
HEALTHCARE, EDUCATION AND CHILDCARE -- 7.34%
1,500 Alaris Medical Systems, Inc.,
Senior Secured Notes
11.625%, 12/01/06 B2 1,830
750 Ameripath, Inc.
Senior Subordinated Notes,
10.50%, 04/01/13 (g) B3 802
565 AmerisourceBergen Corporation,
Senior Notes,
7.25%, 11/15/12 Ba3 614
225 AmerisourceBergen Corporation,
Senior Notes,
8.125%, 09/01/08 Ba3 248
1,500 Athena Neurosciences Financial,
Senior Notes,
7.25%, 02/21/08 Caa2 1,275
1,125 Bio-Rad Laboratories, Inc.,
Senior Subordinated Notes,
11.625%, 02/15/07 B2 1,237
The accompanying notes are an integral
part of these financial statements.
6
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
--------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
--------------------------------------------------------------------------------
$ 375 Concentra Operating Corporation,
Senior Subordinated Notes,
13%, 08/15/09 B3 $ 420
450 Fisher Scientific International Inc.,
Senior Subordinated Notes,
8.125%, 05/01/12 B2 486
450 Fresenius Medical Care
Capital Trust IV,
7.875%, 06/15/11 Ba2 473
650 InSight Health Services Corp.,
Senior Subordinated Notes,
9.875%, 11/01/11 B3 676
950 Kinetic Concepts, Inc.,
Senior Subordinated Notes,
9.625%, 11/01/07 B3 997
1,100 Triad Hospitals Holdings, Inc.,
Senior Notes,
11%, 05/15/09 B2 1,226
875 Vicar Operating Inc., Senior Notes,
9.875%, 12/01/09 B3 958
-----------
11,242
-----------
HOTELS, MOTELS, INNS AND GAMING -- 13.15%
1,150 Ameristar Casinos, Inc.,
Senior Subordinated Notes,
10.75%, 02/15/09 B3 1,305
1,125 Argosy Gaming Company,
Senior Subordinated Notes,
10.75%, 06/01/09 B2 1,229
450 Chukansi Economic Development
14.50%, 06/15/09 (g) (e) 495
575 Coast Hotels and Casinos, Inc.,
Senior Subordinated Notes,
9.50%, 04/01/09 B2 615
1,675 Courtyard Marriott II Ltd.,
Senior Secured Notes,
10.75%, 02/01/08 B2 1,675
1,475 John Q. Hammons Hotels, LP,
First Mortgage Notes,
8.875%, 05/15/12 B2 1,558
725 Hard Rock Hotel, Inc.,
Senior Secured Notes,
8.875%, 06/01/13 (g) B3 758
550 Horseshoe Gaming Holding Corp.,
Senior Subordinated Notes,
8.625%, 05/15/09 B2 586
$ 1,215 Host Marriott LP,
Senior Notes, Series I,
9.50%, 01/15/07 Ba3 $ 1,315
600 Isle of Capri Casinos, Inc.,
Senior Subordinated Notes,
8.75%, 04/15/09 B2 642
2,450 La Quinta Properties, Inc.,
Senior Notes,
8.875%, 03/15/11 (g) Ba3 2,646
475 MeriStar Hospitality Operating
Partnership, L.P., Senior Notes,
9%, 01/15/08 B2 468
250 MeriStar Hospitality Operating
Partnership, L.P., Senior Notes,
9.125%, 01/15/11 B2 244
800 Mikohn Gaming Corporation,
Senior Secured Notes,
11.875%, 08/15/08 B3 792
425 Old Evangeline Downs, LLC,
Senior Secured Notes,
13%, 03/01/10 (g) (e) 434
1,225 Penn National Gaming, Inc.,
Senior Subordinated Notes,
11.125%, 03/01/08 B3 1,360
1,350 Pinnacle Entertainment, Inc.,
Senior Subordinated Notes,
9.25%, 02/15/07 Caa1 1,336
1,200 Station Casinos, Inc.,
Senior Subordinated Notes,
9.875%, 07/01/10 B2 1,332
1,200 Venetian Casino Resort, LLC,
Mortgage Notes,
11%, 06/15/10 B3 1,356
-----------
20,146
-----------
LEISURE, AMUSEMENT AND ENTERTAINMENT -- 2.32%
575 AMF Bowling Worldwide, Inc.
Senior Subordinated Notes,
13%, 09/01/08 B3 630
750 Bally Total Fitness Holding
Corporation, Senior Notes,
10.50%, 07/15/11 (g) B2 750
475 The Hockey Company,
Senior Secured Notes,
11.25%, 04/15/09 B2 527
1,275 Six Flags Inc., Senior Notes,
9.50%, 02/01/09 B2 1,256
The accompanying notes are an integral
part of these financial statements.
7
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
--------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
--------------------------------------------------------------------------------
$ 350 Universal City Development
Partners, Ltd., Senior Notes,
11.75%, 04/01/10 (g) B2 $ 386
-----------
3,549
-----------
MACHINERY -- .84%
1,175 Rexnord Corp., Senior
Subordinated Notes,
10.125%, 12/15/12 (g) B3 1,292
-----------
MINING, STEEL, IRON AND NON-PRECIOUS METALS -- 8.41%
1,195 AK Steel Corporation, Senior Notes,
7.75%, 06/15/12 B1 998
650 AK Steel Corporation, Senior Notes,
7.875%, 02/15/09 B1 559
550 Arch Western Finance LLC,
Senior Notes,
6.75%, 07/01/13 (g) Ba2 562
1,800 Century Aluminum Co.,
Senior Secured Notes,
11.75%, 04/15/08 B1 1,818
1,200 Gerdau Ameristeel Corporation,
Senior Notes,
10.375%, 07/15/11 (g) B2 1,170
175 IPSCO Inc., Senior Notes,
8.75%, 06/01/13 (g) Ba3 177
1,750 Earle M. Jorgensen Company,
Senior Secured Notes,
9.75%, 06/01/12 B2 1,855
675 Luscar Coal Ltd., Senior Notes,
9.75%, 10/15/11 Ba3 775
350 Mobile Mini, Inc., Senior Notes,
9.50%, 07/01/13 (g) B2 364
1,800 Russel Metals, Inc., Units,
Senior Notes,
10%, 06/01/09 B1 1,926
1,155 Steel Dynamics, Inc., Senior Notes,
9.50%, 03/15/09 B2 1,213
1,300 United States Steel Corporation,
Senior Notes,
9.75%, 05/15/10 B1 1,332
1,100 Weirton Steel Corporation,
Senior Secured Notes,
10%, 04/01/08 (a)(b) (e) 143
-----------
12,892
-----------
OIL AND GAS -- 6.22%
$ 175 ANR Pipeline Company, Senior Notes,
8.875%, 03/15/10 (g) B1 $ 192
250 Bluewater Financial Ltd.,
Guaranteed Senior Notes,
10.25%, 02/15/12 (g) B1 249
875 Chesapeake Energy Corporation,
Senior Notes,
9%, 08/15/12 Ba3 980
700 Compagnie Generale de
Geophysique (CGG), Senior Notes,
10.625%, 11/15/07 Ba3 717
425 Dresser, Inc., Senior Notes,
9.375%, 04/15/11 B2 440
425 Dynegy Holdings, Inc., Senior Notes,
8.75%, 02/15/12 Caa2 397
150 Encore Acquisition Company,
Senior Subordinated Notes,
8.375%, 06/15/12 B2 160
1,275 Ferrellgas Partners, LP,
8.75%, 06/15/12 B2 1,383
375 Frontier Escrow Corporation,
Senior Notes,
8%, 04/15/13 (g) (e) 393
750 Magnum Hunter Resources, Inc.,
Senior Notes,
9.60%, 03/15/12 B2 829
200 Northwest Pipeline Corporation,
Senior Notes,
8.125%, 03/01/10 B1 215
375 Southern Natural Gas Company,
Senior Notes,
8.875%, 03/15/10 (g) B1 412
825 Stone Energy Corporation,
Senior Subordinated Notes,
8.25%, 12/15/11 B2 870
1,175 Swift Energy Company,
Senior Subordinated Notes,
9.375%, 05/01/12 B3 1,269
700 Universal Compression, Inc.,
Senior Notes,
7.25%, 05/15/10 (g) B1 728
275 Westport Resources Corporation,
Senior Subordinated Notes,
8.25%, 11/01/11 Ba3 300
-----------
9,534
-----------
The accompanying notes are an integral
part of these financial statements.
8
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
--------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
--------------------------------------------------------------------------------
PERSONAL, FOOD AND MISCELLANEOUS SERVICES -- 1.83%
$ 775 Advantica Restaurant Group,
Senior Notes,
11.25%, 01/15/08 Caa2 $ 618
900 Coinmach Corporation,
Senior Notes,
9%, 02/01/10 B2 976
175 Jacuzzi Brands, Inc., Senior Notes,
9.625%, 07/01/10 (g) B3 179
900 Travelcenters
12.75%, 5/01/09 B3 1,026
-----------
2,799
-----------
PERSONAL NON-DURABLE CONSUMER PRODUCTS -- 3.82%
575 American Achievement Corporation,
11.625%, 01/01/07 B1 628
425 American Safety Razor Company,
Senior Notes,
9.875%, 08/01/05 B3 411
400 Commemorative Brands, Inc.,
Senior Subordinated Notes,
11%, 01/15/07 Caa1 386
275 Johnson Diversey Inc.,
Senior Subordinated Notes,
9.625%, 05/15/12 B2 305
2,125 Jostens, Inc., Senior
Subordinated Notes,
12.75%, 05/01/10 B3 2,529
1,600 Playtex Products, Inc.,
Senior Subordinated Notes,
9.375%, 06/01/11 B3 1,600
-----------
5,859
-----------
PERSONAL TRANSPORTATION -- 2.19%
1,550 Delta Air Lines, Inc., Notes,
7.90%, 12/15/09 B3 1,248
650 Laidlaw International, Incorporated,
Senior Notes,
10.75%, 06/15/11 (g) B2 682
1,500 Northwest Airlines, Inc.,
Senior Notes,
8.875%, 06/01/06 Caa1 1,222
200 Worldspan, L.P., Senior Notes,
9.625%, 06/15/11 (g) B2 207
-----------
3,359
-----------
PRINTING AND PUBLISHING -- 11.15%
$ 150 CBD Media LLC,
Senior Subordinated Notes,
8.625%, 06/01/11 (g) B3 $ 155
725 CanWest Media, Inc.,
Senior Subordinated Notes,
10.625%, 05/15/11 B2 830
575 Dex Media East LLC, Senior Notes,
9.875%, 11/15/09 B2 648
1750 Dex Media East, LLC,
Senior Subordinated Notes,
12.125%, 11/15/12 B3 2,082
2,245 RH Donnelley Financial Corporation,
Senior Subordinated Notes,
10.875%, 12/15/12 (g) B2 2,604
825 Houghton Mifflin Company,
Senior Subordinated Notes,
9.875%, 02/01/13 (g) B3 912
925 Liberty Group Operating, Inc.,
Senior Subordinated Notes,
9.375%, 02/01/08 Caa1 935
1,610 Mail-Well I Corp., Senior Notes,
9.625%, 03/15/12 B1 1,703
1,850 Quebecor Media Inc., Senior Notes,
11.125%, 07/15/11 B2 2,128
600 Vertis, Inc., Senior Secured Notes,
9.75%, 04/01/09 (g) B2 639
1,850 Vivendi Universal S.A., Senior Notes,
9.25%, 04/15/10 (g) B1 2,146
2,150 Von Hoffman Corp., Senior Notes,
10.25%, 03/15/09 B2 2,300
-----------
17,082
-----------
RETAIL STORES -- 1.31%
375 Barney's, Inc., Units,
Senior Secured Notes,
9%, 04/01/08 (g) B3 338
575 Dillard's Inc., Senior Notes,
6.875%, 06/01/05 Ba3 572
900 Gap Incorporated, Senior Notes,
10.55%, 12/15/08 Ba3 1,094
-----------
2,004
-----------
TELECOMMUNICATIONS -- 15.79%
525 Alamosa (Delaware) Inc.,
Senior Notes,
12.50%, 02/01/11 Caa3 436
The accompanying notes are an integral
part of these financial statements.
9
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
--------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
--------------------------------------------------------------------------------
$ 1,050 Alaska Communications
System Holdings, Inc.,
Senior Subordinated Notes,
9.375%, 05/15/09 B3 $ 1,050
550 Colt Telecom Group plc,
Senior Discount Notes,
12%, 12/15/06 B3 553
2,150 DIRECTV Holdings LLC,
Senior Notes,
8.375%, 03/15/13 (g) B1 2,403
400 Dobson Communications
Corporation, Senior Notes,
10.875%, 07/01/10 B3 432
2,990 Echostar DBS Corporation,
Senior Notes,
9.125%, 01/15/09 Ba3 3,341
375 Echostar DBS Corporation,
Senior Notes,
10.375%, 10/01/07 Ba3 415
625 Level 3 Communications, Inc.,
Senior Notes,
9.125%, 05/01/08 Caa3 563
1,100 NEXTEL Communications, Inc.,
Senior Discount Notes,
9.95%, 02/15/08 B3 1,146
2,675 NEXTEL Communications, Inc.,
Senior Serial Notes,
9.50%, 02/01/11 B3 2,963
350 Nextel Partners, Inc., Senior Notes,
11%, 03/15/10 Caa1 380
150 Nextel Partners, Inc., Senior Notes,
8.125%, 07/01/11 (g) Caa1 149
1,025 Pegasus Satellite Communications,
Inc., Senior Notes,
11.25%, 01/15/10 (g) Ca 964
600 Pegasus Satellite Communications,
Inc., Senior Notes,
12.375%, 08/01/06 Ca 564
150 Pegasus Satellite Communications,
Inc., Senior Notes,
12.50%, 08/01/07 Ca 140
175 Pegasus Satellite Communications,
Inc., Senior Subordinated
Discount Notes,
13.50%, 03/01/07 (h) C 147
$ 1,175 Qwest Corporation, Senior Notes,
8.875%, 03/15/12 (g) Ba3 $ 1,310
1,747 Qwest Services Corporation, Senior
Subordinated Secured Notes,
13.50%, 12/15/10 (g) (e) 1,974
775 Rogers Wireless Inc.,
Senior Secured Notes,
9.375%, 06/01/08 Ba3 810
400 Rogers Wireless Inc.,
Senior Secured Notes,
9.625%, 05/01/11 Ba3 458
650 Rural Cellular Corporation,
Senior Subordinated Notes,
9.75%, 01/15/10 Caa1 572
300 Time Warner Telecom, Inc.,
Senior Notes,
9.75%, 07/15/08 B3 292
675 Time Warner Telecom, Inc.,
Senior Notes,
10.125%, 02/01/11 B3 656
1,075 Tritel PCS, Inc.,
Senior Subordinated Notes,
10.375%, 01/15/11 Baa2 1,322
775 Triton PCS, Inc., Senior Notes,
8.50%, 06/01/13 (g) B2 833
390 US West Capital Funding Inc., Notes,
6.375%, 07/15/08 Caa2 322
-----------
24,195
-----------
TEXTILES AND LEATHER -- 2.63%
625 Anvil Knitwear, Incorporated,
Senior Notes,
10.875%, 03/15/07 (e) 625
425 Avondale Mills Incorporated,
Senior Subordinated Notes,
10.25%, 05/01/06 B3 430
800 Avondale Mills, Incorporated,
Senior Subordinated Notes,
10.25%, 07/01/13 (g) B3 802
775 Collins & Aikman Floorcoverings,
Inc., Senior Subordinated Notes,
9.75%, 02/15/10 B2 810
250 Dan River, Inc., Senior Notes,
12.75%, 04/15/09 (g) B3 223
775 Interface, Incorporated,
Senior Notes,
7.30%, 04/01/08 B2 659
The accompanying notes are an integral
part of these financial statements.
10
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
--------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
--------------------------------------------------------------------------------
$ 575 Levi Strauss & Co., Senior Notes,
12.25%, 12/15/12 B3 $ 479
-----------
4,028
-----------
UTILITIES -- 12.67%
1,200 The AES Corporation,
Senior Secured,
9%, 05/15/15 (g) B2 1,272
975 The AES Corporation,
Senior Subordinated Notes,
8.375%, 08/15/07 Caa1 936
900 The AES Corporation,
Senior Subordinated Notes,
8.50%, 11/01/07 Caa1 864
750 Allegeny Energy Supply
Company, LLC, Senior Notes,
8.25%, 04/15/12 (g) B1 637
375 Aquila, Inc., Senior Notes,
14.875%, 07/01/12 (g) Caa1 399
1,000 Avista Corporation, Senior Notes,
9.75%, 06/01/08 Ba1 1,150
1,000 Calpine Corporation, Senior Notes,
8.50%, 02/15/11 B1 750
515 Calpine Corporation, Senior Notes,
8.625%, 08/15/10 B1 386
1,275 CMS Energy Corporation,
Senior Notes
9.875%, 10/15/07 B3 1,364
450 DPL, Inc., Senior Notes,
8.25%, 03/01/07 Baa2 516
825 Illinois Power Company, Senior
Secured First Mortgage Bonds,
11.50%, 12/15/10 (g) B3 943
225 Northwestern Corporation,
Senior Notes,
7.875%, 03/15/07 Caa1 176
500 Northwestern Corporation,
Senior Notes,
8.75%, 03/15/12 Caa1 385
$ 600 Orion Power Holdings, Inc.,
Senior Notes,
12%, 05/01/10 B2 $ 693
650 Reliant Resources, Inc.,
Senior Secured Notes,
9.50%, 07/15/13 (g) B1 657
456 South Point Energy Center, LLC,
Senior Secured,
8.40%, 05/30/12 (g) B1 456
1,125 South Point Energy Center, LLC,
Senior Secured,
9.825%, 05/30/19 (g) B1 1,057
775 TECO Energy, Inc., Senior Notes,
7%, 05/01/12 Ba1 759
200 TECO Energy, Inc., Senior Notes,
7.20%, 05/01/11 Ba1 200
100 TECO Energy, Inc., Senior Notes,
7.50%, 06/15/10 Ba1 103
1,025 TNP Enterprises, Inc.,
Senior Subordinated Notes,
10.25%, 04/01/10 Ba3 1,025
1,300 Western Resources, Inc.,
Senior Notes,
7.125%, 8/01/09 Ba2 1,302
750 The Williams Companies, Inc.,
Senior Notes,
7.50%, 01/15/31 B3 713
350 The Williams Companies, Inc.,
Senior Notes,
7.625%, 7/15/19 B3 340
500 The Williams Companies, Inc.,
Senior Notes,
8.125%, 03/15/12 B3 514
1,050 The Williams Companies, Inc.,
Senior Notes,
8.625%, 06/01/10 B3 1,097
700 The Williams Companies, Inc.,
Senior Notes,
8.75%, 03/15/32 B3 728
-----------
19,422
-----------
TOTAL CORPORATE DEBT SECURITIES
(Total cost of $227,315) 236,116
-----------
The accompanying notes are an integral
part of these financial statements.
11
MOODY'S
RATING VALUE
SHARES (UNAUDITED) (NOTE 1(a))
--------------------------------------------------------------------------------
PREFERRED STOCK -- 2.70% (d)
--------------------------------------------------------------------------------
BANKING -- 0.00%
57,935 WestFed Holdings, Inc., Cumulative,
Series A, Preferred Stock,
15.50% (a)(c)(f) (e) $ --
-----------
BROADCASTING AND ENTERTAINMENT -- 1.97%
25,300 CSC Holdings, Inc., Series M,
Preferred Stock,
11.125% (f) B3 2,606
42 Paxson Communications
Corporation, Junior Exchangeable
Preferred Stock,
14.25% Caa2 418
-----------
3,024
-----------
CHEMICALS, PLASTICS AND RUBBER -- .37%
875 Hercules Trust II, Convertible
Preferred Stock,
6.50% Ba3 561
-----------
MINING, STEEL, IRON AND NON-PRECIOUS METALS -- 0.02%
18,000 Weirton Steel Corp., Series C,
Preferred Stock (a)(f) (e) 27
-----------
TELECOMMUNICATIONS -- .34%
200 Dobson Communications
Corporation, Senior Exchangeable
Preferred Stock, 12.25% Caa2 198
325 Dobson Communications
Corporation, Senior Exchangeable
Preferred Stock, 12.25% Caa2 322
-----------
520
-----------
TOTAL PREFERRED STOCK
(Total cost of $8,787) 4,132
-----------
--------------------------------------------------------------------------------
COMMON STOCK -- 0.00% (d)
--------------------------------------------------------------------------------
4,780 Mediq Inc. Common Stock (a)(c)(f) --
27,474 WestFed Holdings, Inc.,
Common Stock (a)(c)(f) --
10,052 WKI Holdings Common Stock
Common Stock (c)(f) --
-----------
TOTAL COMMON STOCK
(Total cost of $4,890) --
-----------
SHORT-TERM INVESTMENTS -- 12.00% (d)
--------------------------------------------------------------------------------
$ 5,000 Alpine Securitization Corp.,
Commercial Paper,
due 07/17/03,
Discount of 1% P-1 $ 4,998
5,000 Total S.A., Commercial Paper,
due 07/31/03,
Discount of 1.31% P-1 4,995
3,403 UBS Finance (Delaware), Inc.,
Commercial Paper,
due 07/01/03,
Discount of 1.31% P-1 3,403
5,000 Wal-Mart, Commercial Paper
due 08/14/03,
Discount of 1.04% P-1 4,994
-----------
TOTAL SHORT-TERM INVESTMENTS
(Total cost of $18,390) 18,390
-----------
TOTAL INVESTMENTS
(Total cost of $259,382) $ 258,638
===========
(a) Denotes issuer is in bankruptcy proceedings.
(b) Non-income producing security which is on non-accrual and/or has defaulted
on interest payments.
(c) Security is valued at fair value using methods determined by the Board of
Directors. The total value of these securities at June 30, 2003 was $0.
(d) Percentages indicated are based on total net assets to common shareholders
of $153,228.
(e) Not rated.
(f) Non-income producing.
(g) 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 $59,349 as of June 30,
2003.
(h) Securities are step interest bonds. Interest on these bonds accrue based on
the effective interest rate.
The accompanying notes are an integral
part of these financial statements.
12
The New America High Income Fund, Inc.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
ASSETS: (Dollars in thousands, except per share amounts)
INVESTMENTS IN SECURITIES, at value (Identified
cost of $259,382 see Schedule of Investments
and Notes 1 and 2) $ 258,638
RECEIVABLES:
Investment securities sold 1,416
Interest and dividends 5,577
PREPAID EXPENSES 82
DEFERRED OFFERING EXPENSES (Note 9) 880
-----------
Total assets $ 266,593
-----------
LIABILITIES:
PAYABLES:
Investment securities purchased $ 3,910
Dividend on common stock 166
Dividend on preferred stock 45
INTEREST RATE SWAP, at fair value (Note 6) 8,061
ACCRUED EXPENSES (Note 3) 380
ACCRUED OFFERING EXPENSES (Note 9) 803
-----------
Total liabilities $ 13,365
-----------
AUCTION TERM PREFERRED STOCK:
$1.00 par value, 1,000,000 shares authorized,
4,000 shares issued and outstanding,
liquidation preference of $25,000 per share
(Notes 4 and 5) $ 100,000
-----------
NET ASSETS $ 153,228
===========
REPRESENTED BY:
COMMON STOCK:
$0.01 par value, 200,000,000 shares authorized,
70,055,538 shares issued and outstanding $ 701
CAPITAL IN EXCESS OF PAR VALUE 340,674
UNDISTRIBUTED NET INVESTMENT INCOME
(Note 2) 1,159
ACCUMULATED NET REALIZED LOSS FROM
SECURITIES TRANSACTIONS (Note 2) (180,501)
NET UNREALIZED DEPRECIATION ON
INVESTMENTS AND INTEREST RATE SWAPS (8,805)
-----------
Net assets applicable to common stock
(Equivalent to $2.19 per share, based on
70,055,538 shares outstanding) $ 153,228
===========
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED
JUNE 30, 2003 (UNAUDITED)
INVESTMENT INCOME: (Note 1) (Dollars in thousands)
Interest income $ 11,169
Other income 73
Dividend income 43
-----------
Total investment income $ 11,285
-----------
EXPENSES:
Cost of leverage:
Preferred and auction fees (Note 5) $ 123
-----------
Total cost of leverage $ 123
-----------
Professional services expenses:
Management fees (Note 3) $ 405
Legal fees 238
Custodian and transfer agent fees 117
Audit fees 41
-----------
Total professional services expenses $ 801
-----------
Administrative expenses:
General administrative fees $ 216
Shareholder meeting expenses 128
Directors' fees 104
NYSE fees 34
Miscellaneous expenses 27
-----------
Total administrative expenses $ 509
-----------
Total expenses $ 1,433
-----------
Net investment income $ 9,852
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT ACTIVITIES:
Realized loss on investments $ (4,108)
-----------
Net swap settlement disbursements (Note 6) $ (1,591)
-----------
Change in net unrealized depreciation
on investments $ 25,643
Change in unrealized depreciation
on interest rate swap agreement (1,293)
-----------
Total change in net unrealized depreciation
on investments and interest rate swap $ 24,350
-----------
Net gain on investments and interest rate swap $ 18,651
-----------
COST OF PREFERRED LEVERAGE
Distributions to preferred stockholders $ (678)
-----------
Net increase in net assets resulting from operations $ 27,825
===========
The accompanying notes are an integral
part of these financial statements.
13
The New America High Income Fund, Inc.
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, 2003 DECEMBER 31,
(UNAUDITED) 2002
---------------- ------------------
FROM OPERATIONS: (Dollars in thousands, except per share amounts)
Net investment income $ 9,852 $ 25,177
Realized loss on investments, net (4,108) (45,362)
Net swap settlement disbursements (1,591) (2,851)
Change in net unrealized depreciation on investments and other
financial instruments 24,350 (4,364)
Distributions from net investment income related to preferred stock
Dividends to preferred stockholders ($170 and $488 per preferred share in 2003 and
2002, respectively) (678) (2,530)
---------------- ------------------
Net increase (decrease) in net assets resulting from operations $ 27,825 $ (29,930)
---------------- ------------------
FROM FUND SHARE TRANSACTIONS:
Net asset value of 507,385 shares and 1,215,044 shares issued to common
stockholders for reinvestment of dividends in 2003 and 2002, respectively $ 1,047 $ 2,710
---------------- ------------------
Increase in net assets resulting from fund share transactions $ 1,047 $ 2,710
---------------- ------------------
DISTRIBUTIONS TO COMMON STOCKHOLDERS:
From net investment income ($.10 and $.29 per share in 2003 and 2002,
respectively) $ (6,814) $ (19,841)
---------------- ------------------
Total net increase (decrease) in net assets $ 22,058 $ (47,061)
---------------- ------------------
NET ASSETS APPLICABLE TO COMMON STOCK:
Beginning of period $ 131,170 $ 178,231
---------------- ------------------
End of period (Including $1,159 and $351 of undistributed net investment
income at June 30, 2003 and December 31, 2002, respectively) $ 153,228 $ 131,170
================ ==================
The accompanying notes are an integral
part of these financial statements.
14
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
FOR THE
SIX MONTHS
ENDED
JUNE 30, 2003 FOR THE YEARS ENDED DECEMBER 31,
(UNAUDITED) 2002 2001 (c) 2000 1999 1998 (b)
------------- --------- --------- --------- --------- ---------
NET ASSET VALUE:
Beginning of period $ 1.89 $ 2.61 $ 2.85 $ 3.86 $ 4.16 $ 5.03
--------- --------- --------- --------- --------- ---------
NET INVESTMENT INCOME .14 .37 .48 .60 .66 .71#
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
OTHER FINANCIAL INSTRUMENTS .29 (.72) (.24) (1.00) (.30) (.81)#
DISTRIBUTIONS FROM NET INVESTMENT INCOME
RELATED TO PREFERRED STOCK: (.03) (.08) (.12) (.18) (.18) (.17)
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS .40 (.43) .12 (.58) .18 (.27)
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From net investment income (.10) (.29) (.36) (.43) (.48) (.54)
In excess of net investment income -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (.10) (.29) (.36) (.43) (.48) (.54)
--------- --------- --------- --------- --------- ---------
Effect of rights offering and related expenses;
and Auction Term Preferred Stock offering
costs and sales load -- -- -- -- -- (.06)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE:
End of period $ 2.19 $ 1.89 $ 2.61 $ 2.85 $ 3.86 $ 4.16
========= ========= ========= ========= ========= =========
PER SHARE MARKET VALUE:
End of period $ 2.20 $ 2.01 $ 2.64 $ 2.63 $ 3.13 $ 4.25
========= ========= ========= ========= ========= =========
TOTAL INVESTMENT RETURN+ 14.57% (12.97)% 13.97% (3.84)% (16.92)% (15.15)%
========= ========= ========= ========= ========= =========
The accompanying notes are an integral
part of these financial statements.
15
FOR THE
SIX MONTHS
ENDED
JUNE 30, 2003 FOR THE YEARS ENDED DECEMBER 31,
(UNAUDITED) 2002 2001 (c) 2000 1999 1998 (b)
------------- --------- --------- --------- --------- ---------
NET ASSETS, END OF PERIOD, APPLICABLE
TO COMMON STOCK (a) $ 153,228 $ 131,170 $ 178,231 $ 191,928 $ 258,215 $ 273,518
========= ========= ========= ========= ========= =========
NET ASSETS, END OF PERIOD, APPLICABLE
TO PREFERRED STOCK (a) $ 100,000 $ 100,000 $ 150,000 $ 160,000 $ 210,000 $ 210,000
========= ========= ========= ========= ========= =========
TOTAL NET ASSETS APPLICABLE
TO COMMON AND PREFERRED STOCK,
END OF PERIOD (a) $ 253,228 $ 231,170 $ 328,231 $ 351,928 $ 468,215 $ 483,518
========= ========= ========= ========= ========= =========
EXPENSE RATIOS:
Ratio of preferred and other leverage
expenses to average net assets* .17%** .18% .17% .19% .18% .14%
Ratio of operating expenses to average
net assets* 1.85%** 1.46% 1.11% .99% .89% .82%
--------- --------- --------- --------- --------- ---------
RATIO OF TOTAL EXPENSES TO AVERAGE
NET ASSETS* 2.02%** 1.64% 1.28% 1.18% 1.07% .96%
========= ========= ========= ========= ========= =========
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS* 13.90%** 16.48% 16.70% 17.46% 16.36% 15.22%
RATIO OF TOTAL EXPENSES TO AVERAGE
NET ASSETS APPLICABLE TO COMMON
AND PREFERRED STOCK 1.19%** .89% .71% .64% .60% .58%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS APPLICABLE TO
COMMON AND PREFERRED STOCK 8.18%** 8.91% 9.23% 9.41% 9.16% 9.26%
PORTFOLIO TURNOVER RATE 156.63%** 82.47% 38.89% 45.58% 66.74% 124.67%
(a) Dollars in thousands.
(b) The Fund issued Series D ATP on May 20, 1998. The per share data and ratios
for the year ended December 31, 1998 reflect this transaction.
(c) As required, effective January 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing discount and premium on debt securities. This had no effect on
net investment income per share and a $.01 increase to net realized and
unrealized loss per share for the year ended December 31, 2001. The effect
of this change increased the ratio of net investment income to average net
assets from 16.29% to 16.70%. Per share, ratios and supplemental data for
periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.
* 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.
** Annualized
# Calculation is based on average shares outstanding during the indicated
period due to the per share effect of the Fund's March 1998 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.
16
INFORMATION REGARDING
SENIOR SECURITIES
JUNE 30, 2003 AS OF DECEMBER 31,
(UNAUDITED) 2002 2001 2000 1999 1998
------------- ------------- ------------- ------------- ------------- -------------
TOTAL AMOUNT OUTSTANDING:
Preferred Stock $ 100,000,000 $ 100,000,000 $ 150,000,000 $ 160,000,000 $ 210,000,000 $ 210,000,000
ASSET COVERAGE:
Per Preferred Stock Share (1) $ 63,307 $ 57,793 $ 54,705 $ 54,989 $ 55,740 $ 57,562
INVOLUNTARY LIQUIDATION PREFERENCE:
Preferred Stock Share (2) $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
APPROXIMATE MARKET VALUE:
Per Preferred Stock Share (2) $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
(1) Calculated by subtracting the Fund's total liabilities (not including the
Preferred Stock) from the Fund's total assets and dividing such amount by
the number of Preferred Shares outstanding.
(2) Plus accumulated and unpaid dividends.
The accompanying notes are an integral
part of these financial statements.
17
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2003 (UNAUDITED)
(1) SIGNIFICANT ACCOUNTING AND OTHER POLICIES
The New America High Income Fund, Inc. (the Fund) was organized as a
corporation in the state of Maryland on November 19, 1987 and is registered with
the Securities and Exchange Commission as a diversified, closed-end investment
company under the Investment Company Act of 1940. The Fund commenced operations
on February 26, 1988. The investment objective of the Fund is to provide high
current income while seeking to preserve stockholders' capital through
investment in a professionally managed, diversified portfolio of "high yield"
fixed-income securities.
The Fund invests primarily in fixed maturity corporate debt securities that
are rated less than investment grade. Risk of loss upon default by the issuer is
significantly greater with respect to such securities compared to investment
grade securities because these securities are generally unsecured and are often
subordinated to other creditors of the issuer and because these issuers usually
have high levels of indebtedness and are more sensitive to adverse economic
conditions, such as a recession, than are investment grade issuers. In some
cases, the collection of principal and timely receipt of interest is dependent
upon the issuer attaining improved operating results, selling assets or
obtaining additional financing.
See the schedule of investments for information on individual securities as
well as industry diversification and credit quality ratings.
The Fund's financial statements have been prepared in conformity with
generally accepted accounting principles in the United States 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 $9,809,000 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.
Premiums or discounts on corporate debt securities are amortized based on the
interest method for financial reporting purposes. All income on original issue
discount and step interest bonds is accrued based on the effective interest
method for tax reporting purposes as required by federal income tax regulations.
The Fund does not amortize market premiums or discounts for tax purposes.
Dividend payments received in the
18
form of 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 investment companies and to distribute substantially all of its
taxable income to its shareholders each year. Accordingly, no federal income tax
provision is required.
(2) TAX MATTERS AND DISTRIBUTIONS
At June 30, 2003, the total cost of securities (including temporary cash
investments) for federal income tax purposes was approximately $259,406,000.
Aggregate gross unrealized gain on securities in which there was an excess of
value over tax cost was approximately $12,904,000. Aggregate unrealized loss on
securities in which there was an excess of tax cost over value was approximately
$13,672,000. Net unrealized loss on investments for tax purposes at June 30,
2003 was approximately $768,000.
At December 31, 2002, the Fund had approximate capital loss carryovers
available to offset future capital gains, if any, to the extent provided by
regulations:
CARRYOVER AVAILABLE EXPIRATION DATE
------------------- -----------------
$ 35,581,000 December 31, 2007
21,822,000 December 31, 2008
67,042,000 December 31, 2009
46,118,000 December 31, 2010
-------------
$ 170,563,000
=============
It is the policy of the Fund to reduce future distributions of realized
gains to shareholders to the extent of the unexpired capital loss carry forward.
The tax character of distributions paid to common and preferred
shareholders of approximately $22,371,000 in 2002 was from ordinary income.
As of December 31, 2002, the components of distributable earnings on a tax
basis were approximately:
Undistributed Net Investment Income $ 402,000
Undistributed Long-Term Gain --
Unrealized Gain (Loss) $ (26,462,000)
Capital Losses Carry Forward
and Post October Losses Deferred $ (176,822,000)
The difference between components of distributable earnings on a tax basis
and the amounts reflected in the Statement of Assets and Liabilities are
primarily due to wash sales, accrued interest on defaulted bonds and
amortization of swap termination payments.
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.
The Fund was required to amortize market discounts and premiums for
financial reporting purposes beginning January 1, 2001. This new accounting
policy resulted in additional interest income for financial reporting purposes
only. The Fund does not amortize market discounts or premiums for tax purposes.
Therefore, the additional interest income for financial reporting purposes does
not result in additional common stock dividend income.
The Fund has recorded several reclassifications in the capital accounts 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. These reclassifications have no impact on the net asset value of
the Fund.
(3) INVESTMENT ADVISORY AGREEMENT
T. Rowe Price Associates, Inc. (T. Rowe Price), the Fund's Investment
Advisor, earned approximately $405,000 in management fees during the six months
19
ended June 30, 2003. Management fees paid by the Fund to T. Rowe Price were
calculated at 0.50% on the first $50,000,000 of the Fund's average weekly net
assets, 0.40% on the next $50 million and 0.30% on average weekly net assets in
excess of $100 million. T. Rowe Price's fee is calculated based on assets
attributable to the Fund's common and auction term preferred stock. At June 30,
2003, the fee payable to T. Rowe Price was approximately $74,000, which was
included in accrued expenses on the accompanying statement of assets and
liabilities.
(4) AUCTION TERM PREFERRED STOCK (ATP)
The Fund had 4,000 shares of ATP issued and outstanding at June 30, 2003.
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 1.15% to 1.60% for
the six months ended June 30, 2003. The average dividend rate as of June 30,
2003 was 1.25%.
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 in
order to maintain the Fund's Aaa/AAA ratings by Moody's Investors Service, Inc.
and Fitch, Inc., respectively.
(5) 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
0.25 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 $123,000 for
service charges through June 30, 2003. This amount is included under the caption
preferred and auction fees in the accompanying statement of operations.
(6) INTEREST RATE SWAPS
The Fund entered into an interest payment swap arrangement with Fleet Bank
(Fleet) for the purpose of partially hedging its dividend payment obligations
with respect to the ATP. Pursuant to the Swap Arrangement the Fund makes
payments to Fleet on a monthly basis at a fixed annual rate. In exchange for
such payment Fleet makes payments to the Fund on a monthly basis at a variable
rate determined with reference to one month LIBOR. The variable rates ranged
from 1.31% to 1.44% for the six months ended June 30, 2003. The effective date,
notional amount, maturity and fixed rate of the swap is as follows:
NOTIONAL FIXED
EFFECTIVE CONTRACT ANNUAL
DATE AMOUNT MATURITY RATE
10/1/01 $100 million 10/1/06 4.50%
20
Swap transactions, which involve future settlement, give rise to credit
risk. Credit risk is the amount of loss the Fund would incur in the event
counterparties failed to perform according to the terms of the contractual
commitments. In the event of nonperformance by the counterparty, the Fund's
dividend payment obligation with respect to the ATP would no longer be partially
hedged. Therefore, the ATP dividend would no longer be partially fixed. In an
unfavorable interest rate environment, the Fund would be subject to higher net
ATP dividend payments, resulting in less income available for the common share
dividend. 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 Fund accounts for interest rate swaps in accordance with the Statement
of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES. This statement requires an entity to recognize all
freestanding derivative instruments in the balance sheet as either assets or
liabilities and measure them at fair value. Any change in the unrealized gain or
loss is recorded in current earnings. For the six months ended June 30, 2003,
the Fund's obligations under the swap agreements were more than the amount
received from Fleet by approximately $1,591,000 and is included in the
accompanying statement of operations.
The estimated fair value of the interest rate swap agreement at June 30,
2003 amounted to approximately $8,061,000 of unrealized loss and is presented in
the accompanying balance sheet.
(7) PURCHASES AND SALES OF SECURITIES
Purchases and proceeds of sales or maturities of long-term securities
during the six months ended June 30, 2003 were approximately:
Purchases of securities $ 180,270,000
Sales of securities $ 191,034,000
(8) RELATED PARTY TRANSACTIONS
A partner of Goodwin Procter LLP, counsel to the Fund, serves as a Director
of the Fund. Fees earned by Goodwin Procter LLP amounted to approximately
$397,000 for the six months ended June 30, 2003. The Fund paid approximately
$130,000 during the six months ended June 30, 2003 to two officers of the Fund
for the provision of certain administrative services.
(9) RIGHTS OFFERING
The Fund issued to stockholders of record as of the close of business on
July 21, 2003, rights to subscribe for an aggregate of 23,397,095 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 $1.81 per
share one share for each right held. The subscription price was 94% of the
average of the last reported sales price of the Fund's Common Stock on the New
York Stock Exchange on August 18, 2003, the expiration date and the nine
preceding business days. On August 22, 2003 the Fund completed its rights
offering. Proceeds of approximately $42,348,000 and shares of 23,397,095 were
recorded. In addition the deferred offering expense of approximately $880,000
was netted against the rights offering proceeds.
21
COMMON AND AUCTION TERM PREFERRED STOCK TRANSACTIONS
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.
The Fund may purchase shares of its Common Stock in the open market when the
Common Stock trades at a discount to net asset value or at other times if the
Fund determines such purchases are in the best interest of its stockholders.
There can be no assurance that the Fund will take such action in the event of a
market discount to net asset value or that Fund purchases will reduce a
discount.
22
DIRECTORS
Robert F. Birch
Joseph L. Bower
Richard E. Floor
Bernard J. Korman
Ernest E. Monrad
DIRECTOR EMERITUS
Franco Modigliani
OFFICERS
Robert F. Birch - President
Ellen E. Terry - Vice President, Treasurer
Richard E. Floor - Secretary
INVESTMENT ADVISOR
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, Maryland 21202
ADMINISTRATOR
The New America High Income Fund, Inc.
33 Broad Street
Boston, MA 02109
(617) 263-6400
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
TRANSFER AGENT
EquiServe Trust Company N.A.
P.O. Box 43011
Providence, RI 02940-3011
(617) 328-5000 ext. 6406
(800) 426-5523
Listed: NYSE
Symbol: HYB
Web site: www.newamerica-hyb.com
23
EQUISERVE TRUST COMPANY N.A.
P.O. BOX 43011
PROVIDENCE, RI 02940-3011
NEHCM-SA-03
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The principal executive officer and principal financial officer concluded
that the registrant's disclosure controls and procedures (as defined in Rule
30a-2(c) under the Investment Company Act of 1940, as amended (the "1940
Act") provide reasonable assurances that material information regarding the
Registrant is made known to them by the appropriate persons, based on
their evaluation of the disclosure controls and procedures as of a date within
90 days of the filing date of this report.
(b) There was no change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred
during the Registrant's last fiscal half-year that has materially affected,
or is reasonably likely to materially affect, the Registrant's internal
control over financial reporting.
ITEM 10. EXHIBITS.
(a)(1) Not applicable.
(a)(2) The certifications required by Rule 30a-2(a) under the 1940 Act are
attached as exhibits to this report.
(b) The certifications required by Rule 30a-2(b) under the 1940 Act are
attached as exhibits to this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
The New America High Income Fund, Inc.
By: /s/ Robert F. Birch
------------------------
Name: Robert F. Birch
Title: Chief Executive Officer
Date: September 5, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert F. Birch
------------------------
Name: Robert F. Birch
Title: Chief Executive Officer
Date: September 5, 2003
By: /s/ Ellen E. Terry
------------------------
Name: Ellen E. Terry
Title: Chief Financial Officer
Date: September 5, 2003