-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VysI1RZJUEjH19XnFv6tBu0xPxUOra8/sIgw6eB/25jBIA9UQXYiFI++qGUNUiK6 5sEp7C66qSAgJI3SZ173Gw== 0000912057-01-006859.txt : 20010307 0000912057-01-006859.hdr.sgml : 20010307 ACCESSION NUMBER: 0000912057-01-006859 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW AMERICA HIGH INCOME FUND INC CENTRAL INDEX KEY: 0000825345 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042995419 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05399 FILM NUMBER: 1556807 BUSINESS ADDRESS: STREET 1: TEN WINTHROP SQ STREET 2: FIFTH FLOOR CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6173508610 MAIL ADDRESS: STREET 1: TEN WINTHROP SQ STREET 2: FIFTH FLOOR CITY: BOSTON STATE: MA ZIP: 02110 N-30D 1 a2039814zn-30d.txt N-30D State Street Bank and Trust Company P.O. Box 8200 Boston, Massachusetts 02266-8200 THE NEW AMERICA HIGH INCOME FUND, INC. [NEW AMERICA HIGH INCOME FUND LOGO] - ------------------------------ ANNUAL - ------------------------------ REPORT - ------------------------------ DECEMBER 31, 2000 - ------------------------------ - -------------------------------------------------------------------------------- January 31, 2001 DEAR SHAREHOLDER: We live in a time of paradoxes in the high yield market. As the year drew to a close, the economic outlook grew bleaker, but the high yield bond market strengthened. The financial press reported that talented investors such as Warren Buffett had begun to accumulate high yield bonds. During the year the Fund's shares went from trading at a substantial discount to net asset value to trading in a range around parity as buyers emerged for our stock. Assuming that the consensus economic outlook is correct, there is a reasonable possibility that we are at, or are approaching a bottom in the high yield bond market, but there are many caveats to this scenario, which are dealt with in more detail below. Last year was the third consecutive year of poor returns in the high yield market and the Fund's leverage played its part by magnifying the Fund's negative total return. In an improving high yield bond market, the Fund's leverage would tend to increase the total return.
TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000 ------------------------------------------------- ONE YEAR THREE YEARS -------- -------------------------------- CUMULATIVE AVERAGE ANNUAL ---------- -------------- New America High Income Fund (Stock Price plus Dividends)* (3.8)% (32.2)% (12.2)% New America High Income Fund (Net Asset Value plus Dividends)** (16.0)% (16.2)% (5.7)% Lipper Closed-End Fund Leveraged High Yield Average** (14.7)% (13.0)% (4.8)%
Source: Lipper Analytical Services, Inc. and The New America High Income Fund, Inc. * Because the Fund's shares may trade at either a discount or a premium to the Fund's net asset value per share, returns based upon the share price and dividends will tend to differ from those derived from the underlying change in net asset value. ** Returns are adjusted for dilutive effect of rights offerings as calculated by Lipper Analytical Services, Inc. During the year: The Fund continued its practice of paying a steady dividend throughout the year. By year-end, however, the deterioration in the high yield market and the portfolio required a reduction in the monthly dividend to $.03 per share. Based upon current projections, we believe the dividend is sustainable throughout 2001. The Fund reduced its leverage by $50,000,000 in anticipation of adverse market conditions. The reduction in the dollar amount of the Fund's leverage does have the effect of reducing the portfolio's income, but was prudent in light of the Fund's AAA rating on its Auction Term Preferred Stock. Wellington Management's investment management contract was renewed as they have outperformed many of their competitors in a difficult period. Professor Franco Modigliani, our most distinguished director, Nobel Prize winner and fellow shareholder, became a Director Emeritus, as required by the Fund's director retirement policy. All the directors acknowledge his great contribution to our Fund over the years and are delighted that he will continue to give us the benefit of his wisdom in the years to come. - -------------------------------------------------------------------------------- HIGH YIELD MARKET UPDATE Illiquidity has reigned in the fixed income markets ever since the fall of 1998, following the Russian default and the near implosion of the massive hedge fund Long-Term Capital Management. Following upon these events, broker-dealers removed significant capital from their trading desks, restricting their ability to take bonds into position. As a result, trades are generally effected only when both sides of the equation can be lined up. A significant liquidity premium has now been built into valuations. The reduced activity becomes self-fulfilling in creating deeper liquidity concerns. Commercial banks, acting out of fear as well as concerns promulgated by banking regulators, have markedly tightened credit standards during the year. The ability of leveraged companies to renew or maintain lines of credit has been reduced. Troubled corporations face a heightened risk of default, as has been evidenced in the sharply higher market default rate during the year, as noted by various sources such as Moody's. Demand for high yield paper has been negative for most of the last eighteen months. Open-end high yield mutual funds suffered their worst outflows to date, cumulating an aggregate of $10.8 billion in redemptions during the year, according to data tracked by AMG Data Services. Open-end high yield mutual funds remain the most visible and active constituency of the high yield market. At this point, the difference in yield between the high yield market and US 10-Year Treasuries is 740 basis points, according to data provided by Lehman Brothers. This yield differential clearly incorporates most, if not all, of the above negative factors. Several articles have recently appeared in THE WALL STREET JOURNAL and THE NEW YORK TIMES suggesting that the market may be poised for a rebound. We would opine that the worst of the credit cycle may not be over. However, the Fed's recent rate reduction of 100 basis points is indicative of the Fed's desire to abate at least some of the market's concerns. In January, open end high yield mutual fund flows were positive according to data tracked by AMG Data Services, and prices of many high yield issues have appreciated. Time will tell if the market is poised for a longer term recovery, or if January's rebound is more of a short term bounce. The Fund is highly diversified with exposure to over 140 different corporate issuers. The average quality of the Fund is rated Ba3/BB by Moody's and Standard & Poor's respectively, and the average yield, incorporating the impact of potential calls, is 12.6%. Average maturity and duration (including optionality) are 6.4 years and 4.2, although we would caution that these statistics have less bearing for a high yield portfolio than for an investment grade bond portfolio. Please visit the Fund's web-site at www.newamerica-hyb.com for more information. As always, we appreciate your interest in the Fund. Sincerely, /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 2 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2000 (Dollar Amounts in Thousands) ================================================================================
PRINCIPAL MOODY'S VALUE AMOUNT/UNITS RATING (NOTE 1(a)) - ------------------------------------------------------------- CORPORATE DEBT SECURITIES -- 90.74% (d) - ------------------------------------------------------------- AEROSPACE AND DEFENSE -- 1.89% $ 870 Argo-Tech Corporation, Senior Subordinated Notes, 8.625%, 10/01/07 ....................... B3 $ 687 2,500 L-3 Communications Corporation, Senior Subordinated Notes, 8.50%, 05/15/08 ................ B2 2,369 1,000 Loral Space Communications, Senior Notes, 9.50%, 01/15/06 .. B1 670 3,000 Moog, Inc., Senior Subordinated Notes, 10%, 05/01/06 ........... B1 2,970 -------- 6,696 -------- AUTOMOBILE -- 2.29% 2,500 Accuride Corporation, Senior Subordinated Notes, 9.25%, 02/01/08 ....................... B2 1,550 3,000 Exide Corp., Senior Notes,10%, 04/15/05 ....................... B1 2,220 3,500 Federal-Mogul Corporation, Notes, 7.375%, 01/15/06 ............... B2 560 1,000 Federal-Mogul Corporation, Notes, 7.50%, 01/15/09 ................ B2 160 3,500 Federal-Mogul Corporation, Senior Notes, 8.80%, 04/15/07 ......... B2 560 3,000 Key Plastics, Inc., Senior Subordinated Notes, 10.25%, 03/15/07 (a)(b) ................ (e) 30 1,500 LDM Technologies, Inc., Senior Subordinated Notes, 10.75%, 01/15/07 ....................... B3 750 1,500 Lear Corporation, Subordinated Notes, 9.50%, 07/15/06 ......... Ba3 1,447 1,880 Prestolite Electric Incorporated, Senior Notes, 9.625%, 02/01/08 . B2 846 -------- 8,123 -------- BANKING -- 2.74% 5,000 People's Bank, Subordinated Notes, 9.875% 11/15/10 ......... Baa3 5,194 5,000 Western Financial Savings Bank, Subordinated Capital Debentures, 8.875%, 08/01/07 ............... B2 4,500 -------- 9,694 -------- PRINCIPAL MOODY'S VALUE AMOUNT/UNITS RATING (NOTE 1(a)) - ------------------------------------------------------------- BROADCASTING AND ENTERTAINMENT -- 6.28% $ 950 Adelphia Communications Corporation, Senior Notes, 7.75%, 01/15/09 ................ B2 $ 770 4,050 Adelphia Communications Corporation, Senior Notes, 8.375%, 02/01/08 ............... B2 3,442 2,500 Adelphia Communications Corporation, Senior Notes, 9.875%, 03/01/07 ............... B2 2,325 3,500 CSC Holdings, Inc., Senior Debentures, Series B, 8.125%, 08/15/09 ....................... Ba1 3,578 1,000 CSC Holdings, Inc., Senior Subordinated Notes, 9.875%, 05/15/06 ....................... Ba3 1,020 4,000 Fox/Liberty Networks, LLC, Senior Notes, 8.875%, 08/15/07 ........ Ba1 3,980 3,450 Insight Midwest, L.P., Senior Notes, 9.75%, 10/01/09 ......... B1 3,424 1,500 Insight Midwest, L.P., Senior Notes, 10.50%, 11/01/10(g) ..... B1 1,545 1,000 RCN Corporation, Senior Notes, 10.125%, 01/15/20 ....... B3 530 2,500 United-Pan Europe Communications N.V.,Senior Notes, 11.25%, 02/01/10 ....................... B2 1,625 -------- 22,239 -------- BUILDING AND REAL ESTATE -- 6.94% 4,000 Beazer Homes USA, Inc., Senior Notes, 8.875%, 04/01/08 ........ Ba3 3,660 5,000 Del Webb Corporation, Senior Subordinated Debentures, 10.25%, 02/15/10 ............... B2 4,550 2,500 D.R. Horton, Inc., Senior Notes, 8%, 02/01/09 ................... Ba1 2,250 2,500 Kaufman and Broad Home Corporation, Senior Subordinated Notes, 9.625%, 11/15/06 ........ B1 2,450 4,000 The Ryland Group, Inc., Senior Subordinated Notes, 8.25%, 04/01/08 ....................... B1 3,360 2,000 Standard Pacific Corp., Senior Notes, 8%, 02/15/08 ............ Ba2 1,860 5,000 Standard Pacific Corp., Senior Notes, 8.50%, 06/15/07 ......... Ba2 4,600
The accompanying notes are an integral part of these financial statements. 3 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2000 -- CONTINUED (Dollar Amounts in Thousands) ================================================================================
PRINCIPAL MOODY'S VALUE AMOUNT/UNITS RATING (NOTE 1(a)) - ------------------------------------------------------------- CORPORATE DEBT SECURITIES -- CONTINUED - ------------------------------------------------------------- $ 2,000 Toll Corp., Senior Subordinated Notes, 7.75%, 9/15/07 .......... Ba2 $ 1,860 -------- 24,590 -------- CARGO TRANSPORTATION -- .72% 2,500 The Kansas City Southern Railway Company, Senior Notes, 9.50%, 10/01/08 (g) ................... Ba2 2,563 -------- CHEMICALS, PLASTICS AND RUBBER -- 5.10% 1,500 Acetex Corporation, Senior Secured Notes, 9.75%, 10/01/03 ....................... B3 1,365 7,000 Arco Chemical Co., Debentures, 9.80%, 02/01/20 ................ Ba3 6,160 3,000 Borden Chemicals and Plastics Operating Limited Partnership, Notes, 9.50%, 05/01/05 ......... B2 1,110 1,415 Buckeye Cellulose Corporation, Senior Subordinated Notes, 8.50%, 12/15/05 ................ Ba3 1,344 3,000 Georgia Gulf Corp., Senior Subordinated Notes, 10.375%, 11/1/07 ........................ B1 2,783 2,620 Lyondell Chemical Company, Senior Subordinated Notes, 10.875%, 05/01/09 .............. B2 2,475 750 PCI Chemicals Canada Inc., Senior Secured Notes, 9.25%, 10/15/07 ................ Ca 210 2,205 Resolution Performance, Senior Subordinated Notes, 13.50%, 11/15/10 (g) ................... B2 2,266 750 Sterling Chemicals, Inc., Senior Subordinated Notes, 11.75%, 08/15/06 ............... Caa3 367 -------- 18,080 -------- CONTAINERS, PACKAGING AND GLASS -- 6.09% 3,000 Abitibi-Consolidated Inc., Notes, 7.875%, 08/01/09 ............... Baa3 2,894 2,000 Abitibi-Consolidated Inc., Notes, 8.55%, 08/01/10 ................ A3 1,998 1,220 Anchor Glass Container Corporation, First Mortgage Notes, 11.25%, 04/01/05 ........ B1 842 PRINCIPAL MOODY'S VALUE AMOUNT/UNITS RATING (NOTE 1(a)) - ------------------------------------------------------------- $ 2,910 Consumers Packaging, Inc., Senior Notes, 9.75%, 02/01/07 .. Caa1 $ 91 4,000 Container Corporation of America, Senior Notes, 9.75%, 04/01/03 .. B2 4,030 1,000 Container Corporation of America, Senior Notes, Series B, 10.75%, 05/01/02 ....................... B2 1,018 2,500 Corning Consumer Products Co., Senior Subordinated Notes, 9.625%, 05/01/08 ............... B3 575 1,000 Domtar Inc., Debentures, 9.50%, 08/01/16 ....................... Baa3 1,030 2,815 Owens-Illinois, Inc., Senior Notes, 7.85%, 05/15/04 ................ B1 1,689 2,500 Owens-Illinois, Inc., Senior Notes, 8.10%, 05/15/07 ................ B1 1,400 3,500 Paperboard Industries International Inc., Senior Notes, 8.375%, 09/15/07 ....................... Ba3 2,625 3,000 Silgan Corporation, Senior Subordinated Debentures,9%, 06/01/09 ....................... B1 2,625 1,000 Worldwide Fiber, Inc., Senior Notes, 12%, 08/01/09 .................. B3 760 -------- 21,577 -------- DIVERSIFIED/CONGLOMERATE MANUFACTURING -- .45% 1,000 International Wire Group, Inc., Senior Subordinated Notes, 11.75%, 06/01/05 ............... B3 975 1,000 Numatics, Incorporated, Senior Subordinated Notes, 9.625%, 04/01/08 ....................... B3 620 -------- 1,595 -------- DIVERSIFIED/CONGLOMERATE SERVICE -- 4.40% 5,000 Allied Waste North America, Inc., Senior Notes, 7.625%, 01/01/06 . Ba3 4,750 1,000 Allied Waste North America, Inc., Senior Subordinated Notes, 10%, 08/01/09 .................. B2 940 3,500 Globo Communcacoes e Participacoes S.A., Notes, 10.625%, 12/15/08 (g) .......... B1 2,905 2,000 Rogers Communications Inc., Senior Notes, 8.875%, 07/15/07 . Ba2 1,980
The accompanying notes are an integral part of these financial statements. 4 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2000 -- CONTINUED (Dollar Amounts in Thousands) ================================================================================
PRINCIPAL MOODY'S VALUE AMOUNT/UNITS RATING (NOTE 1(a)) - ------------------------------------------------------------- CORPORATE DEBT SECURITIES -- CONTINUED - ------------------------------------------------------------- $ 2,500 United Rentals (North America), Inc., Senior Subordinated Notes, 9%, 04/01/09 ................... B2 $ 1,875 1,300 Waste Management, Inc., Debentures, 7.65%, 03/15/11 .... Ba1 1,273 2,000 Waste Management, Inc., Senior Notes, 6.875%, 05/15/09 ........ Ba1 1,882 -------- 15,605 -------- DIVERSIFIED NATURAL RESOURCES, METALS AND MINERALS -- 2.47% 2,290 Millar Western Forest Products Ltd., Senior Notes, 9.875%, 05/15/08 . B2 1,832 3,000 P&L Coal Holdings Corporation, Senior Notes, 8.875%, 05/15/08 . Ba3 3,015 3,950 Pacifica Papers Inc., Senior Notes, 10%, 03/15/09 .................. B1 3,920 -------- 8,767 -------- ELECTRONICS -- 6.14% 4,000 Amkor Technology, Senior Notes, 9.25%, 05/01/06 ................ Ba3 3,820 1,200 Amphenol Corporation, Senior Subordinated Notes, 9.875%, 05/15/07 ....................... B1 1,218 2,750 Exodus Communications, Inc., Senior Notes, 11.25%, 07/01/08 . B3 2,420 2,515 Fairchild Semiconductor Corporation, Senior Subordinated Notes, 10.375%, 10/01/07 ....... B2 2,339 2,500 MCMS, Inc., Senior Subordinated Notes, 9.75%, 03/01/08 ......... Caa3 1,500 1,500 Samsung Electronics America, Inc., Guaranteed Notes, 9.75%, 05/01/03 (g) ................... Baa3 1,564 3,600 Seagate Technology International, Senior Subordinated Notes, 12.50%, 11/15/07 (g) ........... B1 3,402 1,750 Viasystems, Inc., Senior Subordinated Notes, 9.75%, 06/01/07 ....................... B3 1,383 1,000 Viasystems, Inc., Senior Subordinated Notes, Series B, 9.75%, 06/01/07 ................ B3 790 PRINCIPAL MOODY'S VALUE AMOUNT/UNITS RATING (NOTE 1(a)) - ------------------------------------------------------------- $ 2,500 WESCO Distribution, Inc., Senior Subordinated Notes, 9.125%, 06/01/08 ....................... B2 $ 2,200 1,500 Zilog, Inc., Senior Secured Notes, 9.50%, 03/01/05 ................ B2 1,125 -------- 21,761 -------- FINANCE -- 1.18% 2,500 Golden State Holdings Inc., Senior Notes, 7.125%, 08/01/05 ........ Ba1 2,351 2,000 Navistar Financial Corporation, Senior Subordinated Notes, 9%, 06/01/02 ....................... Ba2 1,840 -------- 4,191 -------- FURNISHINGS, HOUSEWARES, DURABLE CONSUMER PRODUCTS -- .77% 1,500 Nortek, Inc., Senior Notes, 9.25%, 03/15/07 ....................... B1 1,369 1,500 Simmons Company, Senior Subordinated Notes,10.25%, 03/15/09 ....................... B3 1,350 -------- 2,719 -------- GROCERY -- .09% 850 Homeland Stores, Inc., Senior Subordinated Notes,10%, 08/01/03 ....................... (e) 323 -------- HEALTHCARE, EDUCATION AND CHILDCARE -- 8.06% 1,000 Alaris Medical Systems, Inc., Senior Subordinated Notes, 9.75%, 12/01/06 ................ Caa1 370 4,000 Beverly Enterprises, Inc., Senior Notes, 9%, 02/15/06 ............ B1 3,690 1,500 Bio Rad Labs, Inc., Senior Subordinated Notes, 11.625%, 02/15/07 ....................... B2 1,545 4,000 Columbia/HCA Healthcare Corporation, Notes, 7.25%, 05/20/08 ....................... Ba2 3,843 2,000 ConMed Corporation, Senior Subordinated Notes, 9%, 03/15/08 ....................... B3 1,600 2,500 DJ Orthopedics LLC, Senior Subordinated Notes, 12.625%, 06/15/09 ....................... B3 2,325 1,595 HCA Healthcare Co., Notes, 8.75%, 09/01/10 ....................... Ba2 1,679
The accompanying notes are an integral part of these financial statements. 5 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2000 -- CONTINUED (Dollar Amounts in Thousands) ================================================================================
PRINCIPAL MOODY'S VALUE AMOUNT/UNITS RATING (NOTE 1(a)) - ------------------------------------------------------------- CORPORATE DEBT SECURITIES -- CONTINUED - ------------------------------------------------------------- $ 2,595 Mediq/PRN Life Support Services, Inc., Senior Subordinated Notes, 11%, 06/01/08 (b) .............. C $ 26 2,500 Owens & Minor, Inc., Senior Subordinated Notes, 10.875%, 06/01/06 ....................... B1 2,575 3,000 Tenet Healthcare Corporation, Senior Subordinated Notes, 8.125%, 12/01/08 ............... Ba3 3,030 2,500 Tenet Healthcare Corporation, Senior Subordinated Notes, 8.625%, 01/15/07 ............... Ba3 2,569 2,135 Triad Hospitals Holdings, Inc., Senior Subordinated Notes, 11%, 05/15/09 .................. B3 2,263 4,485 Universal Hospital Services, Inc., Senior Notes, 10.25%,03/01/08 .. B3 3,050 -------- 28,565 -------- HOTELS, MOTELS, INNS AND GAMING -- 2.16% 3,500 John Q. Hammons Hotels, L.P., First Mortgage Notes, 8.875%, 02/15/04 ....................... B2 3,168 2,000 Harrah's Operating Company, Inc., Guaranteed Senior Subordinated Notes, 7.875%, 12/15/05 ........ Ba2 1,975 1,500 Hollywood Casino Corporation, Senior Secured Notes, 11.25%, 05/01/07 ....................... B3 1,541 1,000 Station Casinos, Inc., Senior Subordinated Notes, 8.875%, 12/01/08 ....................... B1 983 -------- 7,667 -------- LEISURE, AMUSEMENT AND ENTERTAINMENT -- .33% 2,000 Polaroid Corporation, Notes, 11.50%, 02/15/06 ............... Ba3 1,160 -------- MACHINERY -- .85% 1,500 Anthony Crane Rental, L.P., Senior Notes, 10.375%, 08/01/08 ....... Caa1 570 1,500 Bucyrus International, Inc., Senior Notes, 9.75%, 09/15/07 ......... Caa1 675 2,790 Grove Worldwide LLC, Senior Subordinated Notes, 9.25%, 05/01/08 ....................... Caa1 251 PRINCIPAL MOODY'S VALUE AMOUNT/UNITS RATING (NOTE 1(a)) - ------------------------------------------------------------- $ 2,000 The IT Group, Inc., Senior Subordinated Notes, 11.25%, 04/01/09 ....................... B3 $ 1,520 -------- 3,016 -------- MINING, STEEL, IRON AND NON-PRECIOUS METALS -- 2.55% 3,000 AK Steel Corporation, Senior Notes, 9.125%, 12/15/06 ........ Ba2 2,865 1,000 Algoma Steel, Inc., First Mortgage Notes, 12.375%, 07/15/05 ....... B2 340 4,000 Bayou Steel Corporation, First Mortgage Notes, 9.50%, 05/15/08 ....................... B2 1,400 1,265 Bethlehem Steel Corporation, Senior Notes, 10.375%, 09/01/03 ....................... B2 885 4,500 The LTV Corporation, Senior Notes, 8.20%, 09/15/07 (a)(b) ......... Ca 90 3,100 The LTV Corporation, Senior Notes, 11.75%, 11/15/09 (a)(b) ........ Ca 62 1,795 National Steel Corporation, First Mortgage Bonds, 9.875%, 03/01/09 ....................... B2 718 2,000 Pen Holdings, Inc., Senior Notes, 9.875%, 06/15/08 ............... B2 1,200 3,640 Weirton Steel Corporation, Senior Notes, 11.375%, 07/01/04 ....... B2 1,492 -------- 9,052 -------- OIL AND GAS -- 5.12% 1,500 Canadian Forest Oil Ltd., Senior Subordinated Notes, 8.75%, 09/15/07 ....................... B2 1,462 3,000 Clark Refining and Marketing, Inc., Senior Notes, 8.375%, 11/15/07 . Ba3 2,280 5,000 Frontier Oil Corporation, Senior Notes, 9.125%, 02/15/06 ........ B2 4,425 2,000 Pioneer Natural Resources Co., Senior Notes 9.625%, 04/01/10 .. Ba2 2,125 1,005 Plains Resources Inc., Senior Subordinated Notes, 10.25%, 03/15/06 ....................... B2 1,000 1,900 RAM Energy, Inc., Senior Notes, 11.50%, 02/15/08 ............... Caa1 1,482 1,760 RBF Finance Co., Senior Secured Notes, 11%, 03/15/06 ........... Ba3 2,042
The accompanying notes are an integral part of these financial statements. 6 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2000 -- CONTINUED (Dollar Amounts in Thousands) ================================================================================
PRINCIPAL MOODY'S VALUE AMOUNT/UNITS RATING (NOTE 1(a)) - ------------------------------------------------------------- CORPORATE DEBT SECURITIES -- CONTINUED - ------------------------------------------------------------- $ 3,500 Tuboscope Inc., Senior Notes, 7.50%, 02/15/08 ................ Ba1 $ 3,340 -------- 18,156 -------- PERSONAL, FOOD AND MISCELLANEOUS SERVICES -- 1.21% 2,000 Evenflo Company, Inc., Senior Notes, 11.75%, 08/15/06 ........ B2 1,400 3,000 True Temper Sports, Inc. Senior Subordinated Notes, 10.875%, 12/01/08 ....................... B3 2,895 -------- 4,295 -------- PERSONAL TRANSPORTATION -- 2.04% 2,000 Atlas Air, Inc., Senior Notes, 10.75%, 08/01/05 ............... B1 2,060 500 Atlas Air, Inc., Senior Notes, 9.375%, 11/15/06 ............... B1 485 2,500 Delta Air Lines, Inc., Notes, 7.90%, 12/15/09 ................ Baa3 2,398 2,500 Valujet, Inc., Senior Notes, 10.25%, 04/15/01 ............... B3 2,300 -------- 7,243 -------- PRINTING AND PUBLISHING -- 4.96% 2,235 The Ackerly Group, Inc., Senior Subordinated Notes, 9%, 01/15/09 ....................... B2 1,956 1,500 American Color Graphics, Inc., Senior Subordinated Notes, 12.75%, 08/01/05 ............... Caa1 1,410 1,000 Boise Cascade Corp., Debentures, 9.45%, 11/01/09 ................ Baa3 1,011 3,265 Doman Industries Limited, Senior Notes, 8.75%, 03/15/04 ......... Caa1 1,469 2,500 Doman Industries Limited, Senior Secured Notes, 12%, 07/01/04 ... B3 2,425 3,000 Sun Media Corporation, Senior Subordinated Notes, 9.50%, 02/15/07 ....................... B1 2,910 6,255 World Color Press, Inc., Senior Subordinated Notes, 8.375%, 11/15/08 ....................... Baa3 6,410 -------- 17,591 -------- TELECOMMUNICATIONS -- 9.64% 725 BTI Telecom Corp., Senior Notes, 10.50%, 09/15/07 ............... B3 181 PRINCIPAL MOODY'S VALUE AMOUNT/UNITS RATING (NOTE 1(a)) - ------------------------------------------------------------- $ 1,000 Charter Communications Holdings, LLC, Senior Notes, 8.25%, 04/01/07 ....................... B2 $ 915 4,000 Charter Communications Holdings, LLC, Senior Notes, 10%, 04/01/09 ....................... B2 3,890 3,500 Echostar DBS Corporation, Senior Notes, 9.25%, 02/01/06 ......... B1 3,412 3,000 FLAG Limited, Senior Notes, 8.25%, 01/30/08 ................ Ba3 2,520 2,500 FLAG Telecom Holdings Limited, Senior Notes, 11.625%, 03/30/10 B2 1,950 5,000 Global Crossing Holdings Ltd., Senior Notes, 9.125%, 11/15/06 Ba2 4,787 1,000 Hyperion Telecommunications, Inc., Senior Secured Notes, 12.25%, 09/01/04 ....................... B3 800 750 Intermedia Communications Inc., Senior Notes, 9.50%, 03/01/09 .. B2 540 2,500 MasTec, Inc., Senior Subordinated Notes, 7.75%, 02/01/08 ......... Ba1 2,303 3,000 McleodUSA Incorporated, Senior Notes, 9.25%, 07/15/07 ......... B1 2,745 2,000 NTL Incorporated, Senior Notes, 10%, 02/15/07 .................. B2 1,740 1,000 Rogers Cantel Inc., Senior Secured Notes, 8.30%, 10/01/07 ......... Baa3 990 3,000 Telewest Communications plc, Senior Notes, 9.875%, 02/01/10 . B1 2,610 2,000 Telewest Communications plc, Senior Notes, 11.25%, 11/01/08 . B1 1,770 1,000 360 Networks, Inc., Senior Notes, 13%, 05/01/08 .................. B3 795 3,000 Williams Communications Group, Inc., Senior Notes, 10.875%, 10/01/09 ....................... B2 2,220 -------- 34,168 -------- TEXTILES AND LEATHER -- 1.17% 1,000 Burlington Industries, Inc., Notes, 7.25%, 09/15/05 ................ B1 350 2,320 Pillowtex Corporation, Senior Subordinated Notes, 9%, 12/15/07(a)(b) ................. C 70 5,250 WestPoint Stevens, Inc., Senior Notes, 7.875%, 06/15/08 ........ B1 3,727 -------- 4,147 --------
The accompanying notes are an integral part of these financial statements. 7 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2000 -- CONTINUED (Dollar Amounts in Thousands) ================================================================================
PRINCIPAL MOODY'S VALUE AMOUNT/UNITS RATING (NOTE 1(a)) - ------------------------------------------------------------- CORPORATE DEBT SECURITIES -- CONTINUED - ------------------------------------------------------------- UTILITIES -- 5.10% $ 1,000 CMS Energy Corporation, Senior Notes, 7.50%, 01/15/09 ......... Ba3 $ 915 2,500 CMS Energy Corporation, Senior Notes, 9.875%, 10/15/07 ........ Ba3 2,613 4,000 CMS Energy Corporation, Subordinated Notes, 7.625%, 11/15/04 ....................... Ba3 3,841 3,500 Calpine Corporation, Senior Notes, 8.625% 08/15/10 ................ Ba1 3,447 4,500 Calpine Corporation, Senior Notes, 8.75%, 07/15/07 ................ Ba1 4,638 2,500 TNP Enterprises, Inc., Senior Subordinated Notes, 10.25%, 04/01/10 ....................... Ba3 2,613 -------- 18,067 -------- TOTAL CORPORATE DEBT SECURITIES (Total cost of $389,661)....... 321,650 -------- SHARES - ------------------------------------------------------------- PREFERRED STOCK -- .42% (d) - ------------------------------------------------------------- BANKING -- 0.00% 57,935 WestFed Holdings, Inc., Cumulative, Series A, Preferred Stock, 15.50% (a)(c)(f) ........ (e) -- MACHINERY -- .29% 1,350 Fairfield Manufacturing Company, Inc., Cumulative Exchangeable Preferred Stock, 11.25% ........ (e) $ 1,040 -------- PERSONAL, FOOD AND MISCELLANEOUS SERVICES -- .13% 125 SF Holdings Group, Inc., Exchangeable Preferred Stock, 13.75% (f) ..................... (e) 250 107 SF Holdings, Group, Inc., Exchangeable Preferred Stock, 13.75% (f)(g) .................... (e) 214 -------- 464 -------- TOTAL PREFERRED STOCK (Total cost of $7,724) ......... 1,504 -------- VALUE SHARES (NOTE 1(a)) - ------------------------------------------------------------- COMMON STOCK AND WARRANTS -- .03% (d) - ------------------------------------------------------------- 515 Concentric Network Corporation, Warrants, exp. 12/15/07 (f)(g) ... $90 9,719 DecisionOne Corp., Common Stock (f) .............................. 3 5,479 DecisionOne Corp., Class A, Warrants, exp. 4/18/07 (f) ....... -- 9,442 DecisionOne Corp., Class B Warrants, exp. 4/18/07 (f) ....... -- 5,600 DecisionOne Corp., Class C Warrants, exp. 4/18/07 (f) ....... -- 306 SF Holdings Group, Inc., Class C, Common Stock (f)(g) .............. -- 27,474 WestFed Holdings, Inc., Series B, Common Stock (a)(c)(f) ........... -- ---- TOTAL COMMON STOCK AND WARRANTS (Total cost of $5,060) ........... $93 ====
The accompanying notes are an integral part of these financial statements. 8 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2000 -- CONTINUED (Dollar Amounts in Thousands) ================================================================================
PRINCIPAL VALUE AMOUNT/UNITS (NOTE 1(a)) - ------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 5.72% (d) - ------------------------------------------------------------- $20,278 Paribas Corporation, Repurchase Agreement, 6%, 01/02/01, (Collateral U.S. Treasury Bonds, 7.625%, 11/15/22, $16,365 principal) ..................... $ 20,278 -------- TOTAL SHORT-TERM INVESTMENTS (Total cost of $20,278) ........ 20,278 -------- TOTAL INVESTMENTS (Total cost of $422,723) ....... $343,525 ========
(a) Denotes issuer is in bankruptcy proceedings. (b) Nonincome producing security which is on nonaccrual 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 December 31, 2000 was $0. (d) Percentages indicated are based on total assets of $354,477. (e) Not rated. (f) Nonincome 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 $14,549 as of December 31, 2000. The accompanying notes are an integral part of these financial statements. 9 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- BALANCE SHEET DECEMBER 31,2000 ================================================================================ ASSETS: (Dollars in thousands, except per share amounts) INVESTMENTS IN SECURITIES, at value (Identified cost of $422,723 see Schedule of Investments and Notes 1 and 2) ............................................. $343,525 RECEIVABLES: Investment Securities Sold ..................................... 1,025 Interest and dividends ......................................... 9,806 OTHER ASSETS ..................................................... 84 PREPAID EXPENSES ................................................. 37 -------- Total assets ................................................. $354,477 -------- LIABILITIES: PAYABLES: Dividend payable on common stock ............................... $ 1,653 Dividend payable on preferred stock ............................ 288 INTEREST RATE SWAP, at fair value (Note 6) ....................... 324 ACCRUED EXPENSES (Note 3) ........................................ 284 -------- Total liabilities ............................................ $ 2,549 -------- NET ASSETS: AUCTION TERM PREFERRED STOCK: $1.00 par value, 1,000,000 shares authorized, 6,400 shares issued and outstanding, liquidation preference of $25,000 per share (Notes 4 and 5) .............................................. $160,000 -------- COMMON STOCK: $0.01 par value, 200,000,000 shares authorized, 67,268,426 shares issued and outstanding ..................... $ 673 CAPITAL IN EXCESS OF PAR VALUE ................................... 336,573 UNDISTRIBUTED NET INVESTMENT INCOME (Note 2) ....................................................... 479 ACCUMULATED NET REALIZED LOSS FROM SECURITIES TRANSACTIONS (Note 2) ............................... (66,275) NET UNREALIZED DEPRECIATION ON INVESTMENTS AND INTEREST RATE SWAPS ............................ (79,522) -------- Net assets applicable to common stock (Equivalent to $2.85 per share, based on 67,268,426 shares outstanding) ............................... $191,928 -------- TOTAL NET ASSETS ................................................. $351,928 ========
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,2000 =============================================================================== INVESTMENT INCOME: (Note 1) (Dollars in thousands, except per share amounts) Interest income ................................................ $ 42,465 Dividend income ................................................ 152 Other income ................................................... 476 -------- Total investment income ...................................... $ 43,093 -------- EXPENSES: Cost of leverage: Preferred and auction fees ..................................... $ 443 -------- Total cost of leverage ....................................... $ 443 -------- Professional services expenses: Management fees (Note 3) ....................................... $ 1,039 Custodian and transfer agent fees .............................. 225 Legal fees ..................................................... 173 Audit fees ..................................................... 80 -------- Total professional services expenses ......................... $ 1,517 -------- Administrative expenses: General administrative fees .................................... $ 391 Directors' fees ................................................ 203 Shareholder meeting expenses ................................... 76 NYSE fees ...................................................... 57 Miscellaneous expenses ......................................... 51 -------- Total administrative expenses ................................ $ 778 -------- Total expenses ............................................... $ 2,738 -------- Net investment income ........................................ $ 40,355 -------- REALIZED AND UNREALIZED LOSS ON INVESTMENT ACTIVITIES: Realized loss on investments ................................... $(23,631) -------- Change in net unrealized depreciation on investments ............................................... $(39,479) Change in unrealized depreciation on interest rate swap agreements ............................. (4,239) -------- Total change in net unrealized depreciation on investments and interest rate swaps ........................ $(43,718) -------- Net loss on investments ...................................... $(67,349) -------- Net decrease in net assets resulting from operations ......... $(26,994) -------- COST OF PREFERRED LEVERAGE: Distributions to preferred stockholders ........................ $(12,764) Net swap settlement receipts (Note 6) .......................... 708 -------- Total cost of preferred leverage ............................. $(12,056) -------- Net decrease in net assets resulting from operations less cost of preferred leverage .............................. $(39,050) ======== - ------------------------------------------------------------------------------- AMOUNT AVAILABLE FOR DISTRIBUTION TO COMMON STOCKHOLDERS Net investment income .......................................... $ 40,355 Total cost of preferred leverage ............................. (12,056) -------- Net amount available for distribution to common stockholders ............................................... $ 28,299 =========
The accompanying notes are an integral part of these financial statements. 10 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS ================================================================================
FOR THE YEARS ENDED DECEMBER 31, 2000 1999 ------------- -------------- FROM OPERATIONS: (Dollars in thousands, except per share amounts) Net investment income ............................................................................ $ 40,355 $ 43,669 Realized loss on investments, net ................................................................ (23,631) (36,780) Change in net unrealized depreciation on investments and other financial instruments ......................................................................... (43,718) 17,266 --------- --------- Net (decrease) increase in net assets resulting from operations ............................... $ (26,994) $ 24,155 --------- --------- FROM FUND SHARE TRANSACTIONS: Net asset value of 367,877 shares and 1,136,530 shares issued to common stockholders for reinvestment of dividends in 2000 and 1999, respectively ..................... $ 1,247 4,692 Repurchase of Auction Term Preferred Stock (2,000 shares) in 2000 (Note 4) ....................... (50,000) -- --------- --------- (Decrease) increase in net assets resulting from fund share transactions ...................... $ (48,753) $ 4,692 --------- --------- DISTRIBUTIONS TO STOCKHOLDERS: Preferred dividends ($1,614 and $1,347 per preferred share in 2000 and 1999, respectively) ................................................................................. $ (12,764) $ (11,313) Net swap settlement receipts (disbursements) ..................................................... 708 (740) Common Dividends: From net investment income ($.43 and $.48 per share in 2000 and 1999, respectively) .............................................................................. (28,484) (32,097) --------- --------- Decrease in net assets resulting from distributions to stockholders .......................... $ (40,540) $ (44,150) --------- --------- Total net decrease in net assets ................................................................... $(116,287) $ (15,303) --------- --------- NET ASSETS APPLICABLE TO COMMON AND PREFERRED STOCK: Beginning of period .............................................................................. $ 468,215 $ 483,518 --------- --------- End of period (Including $479 and $457 of undistributed net investment income at December 31, 2000 and December 31, 1999, respectively) .............................. $ 351,928 $ 468,215 ========= =========
The accompanying notes are an integral part of these financial statements. 11 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 YEARS ENDED DECEMBER 31, 2000 1999 1998 (c) 1997 (c) 1996 1995 1994 (b) ------ ------ ------ ------ ------ ------ ------ NET ASSET VALUE: Beginning of period ............................. $ 3.86 $ 4.16 $ 5.03 $ 4.94 $ 4.71 $ 4.13 $ 5.15 ------ ------ ------ ------ ------ ------ ------ NET INVESTMENT INCOME .............................. .60 .66 .71# .70# .69 .67 .72# NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND OTHER FINANCIAL INSTRUMENTS ..................................... (1.00) (.30) (.81)# .25# .22 .62 (.82)# ------ ------ ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS ............ (.40) .36 (.10) .95 .91 1.29 (.10) ------ ------ ------ ------ ------ ------ ------ DISTRIBUTIONS: Dividends from net investment income: To preferred stockholders (including net swap settlement receipts/payments) ............... (.18) (.18) (.17) (.16) (.16) (.17) (.17) To common stockholders ...................... (.43) (.48) (.54) (.53) (.52) (.50) (.53) Dividends in excess of net investment income: To common stockholders ...................... -- -- -- (.01) -- (.04) -- ------ ------ ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS .............................. (.61) (.66) (.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 ................................... $ 2.85 $ 3.86 $ 4.16 $ 5.03 $ 4.94 $ 4.71 $ 4.13 ====== ====== ====== ====== ====== ====== ====== PER SHARE MARKET VALUE: End of period ................................... $ 2.63 $ 3.13 $ 4.25 $ 5.63 $ 5.13 $ 4.75 $ 4.00 ====== ====== ====== ====== ====== ====== ====== TOTAL INVESTMENT RETURN+ ........................... (3.84)% (16.92)% (15.15)% 21.97% 19.89% 33.50% (11.88)% ====== ====== ====== ====== ====== ====== ======
The accompanying notes are an integral part of these financial statements. 12 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 ================================================================================
FOR THE YEARS ENDED DECEMBER 31, 2000 1999 1998 (c) 1997 (c) 1996 1995 1994 (b) -------- -------- -------- -------- -------- -------- -------- NET ASSETS, END OF PERIOD, APPLICABLE TO COMMON STOCK (a) .............................. $191,928 $258,215 $273,518 $243,625 $176,408 $164,823 $141,590 ======== ======== ======== ======== ======== ======== ======== NET ASSETS, END OF PERIOD, APPLICABLE TO PREFERRED STOCK (a) ........................... $160,000 $210,000 $210,000 $150,000 $100,000 $100,000 $100,000 ======== ======== ======== ======== ======== ======== ======== TOTAL NET ASSETS, END OF PERIOD (a) ................. $351,928 $468,215 $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* .......................... .19% .18% .14% .13% .16% .18% .22% Ratio of operating expenses to average net assets* .99% .89% .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* ...................................... 1.18% 1.07% .96% 1.05% 1.32% 2.37% 1.54% ======== ======== ======== ======== ======== ======== ======== RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS* ...................................... 17.46% 16.36% 15.22% 13.86% 14.36% 14.61% 15.89% RATIO OF TOTAL EXPENSES TO AVERAGE NET ASSETS APPLICABLE TO COMMON AND PREFERRED STOCK .................................. .64% .60% .58% .66% .83% 1.44% .89% RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS APPLICABLE TO COMMON AND PREFERRED STOCK .................................. 9.41% 9.16% 9.26% 8.75% 9.05% 8.90% 9.04% PORTFOLIO TURNOVER RATE ............................. 45.58% 66.74% 124.67% 108.84% 53.45% 62.66% 58.56%
(a) Dollars in thousands. (b) 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. (c) 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. * 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. 13 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- INFORMATION REGARDING SENIOR SECURITIES ================================================================================
AS OF DECEMBER 31, 2000 1999 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------ ------------ ------------ TOTAL AMOUNT OUTSTANDING: Preferred Stock ................ $160,000,000 $210,000,000 $210,000,000 $150,000,000 $100,000,000 $100,000,000 $100,000,000 ASSET COVERAGE: Per Preferred Stock Share (1) .. $ 54,989 $ 55,740 $ 57,562 $ 65,604 $ 69,102 $ 66,206 $ 60,398 INVOLUNTARY LIQUIDATION PREFERENCE: Preferred Stock Share (2) ...... $ 25,000 $ 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 $ 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. 14 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 ================================================================================ (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 $4,919,000 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. As required, effective January 1, 2001, the Fund has adopted the provisions of the AICPA Audit & Accounting Guide for Investment Companies and 15 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- CONTINUED DECEMBER 31, 2000 ================================================================================ began amortizing discount or premium for all debt securities. Prior to January 1, 2001, the Fund did not amortize discount or premium on corporate securities. The cumulative effect of this accounting change had no impact on total net assets of the Fund, but resulted in a $394,000 reduction in cost of securities and a corresponding $394,000 increase in net unrealized appreciation (depreciation) based on securities held by the Fund at January 1, 2001. (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 December 31, 2000, the total cost of securities (including temporary cash investments) for federal income tax purposes was approximately $422,723,000. Aggregate gross unrealized gain on securities in which there was an excess of value over tax cost was approximately $3,197,000. Aggregate unrealized loss on securities in which there was an excess of tax cost over value was approximately $82,719,000. Net unrealized loss on investments and interest rate swaps for tax purposes at December 31, 2000 was approximately $79,522,000. At December 31, 2000, the Fund had approximate capital loss carryovers available to offset future capital gain, if any, to the extent provided by regulations:
CARRYOVER AVAILABLE EXPIRATION DATE - ------------------- ----------------- $ 2,227,000 December 31, 2002 35,580,000 December 31, 2007 21,821,000 December 31, 2008 ----------- $59,628,000 ===========
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 AICPA 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, 2000, the Fund has reclassified approximately $125,000 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. The Fund has also reclassified approximately ($29,000) to capital in excess of par value consisting of approximately ($53,000) and $82,000 from accumulated net realized loss and undistributed net investment income, respectively, to reflect the permanent differences resulting from the tax accounting for interest rate swap agreements entered into by the Fund. 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. (3) INVESTMENT ADVISORY AGREEMENT Wellington Management Company, LLP, the Fund's Investment Advisor, earned approximately $1,039,000 in management fees during the year ended December 31, 2000. Management fees paid by the Fund to Wellington Management are calculated at .45 of 1% (on an annual basis) of the average weekly 16 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- CONTINUED DECEMBER 31, 2000 ================================================================================ value of the Fund's net assets attributable to common stock ($191.9 million at December 31, 2000). At December 31, 2000, the fee payable to the Investment Advisor was approximately $74,000, which was included in accrued expenses on the accompanying balance sheet. (4) AUCTION TERM PREFERRED STOCK (ATP) The Fund had 6,400 shares of ATP issued and outstanding at December 31, 2000. During the year ended December 31, 2000, the Fund repurchased 2,000 shares of ATP at a redemption price equal to $50,000,000 or $25,000 per share plus accumulated and unpaid dividends. 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 5.69% to 6.95% for the year ended December 31, 2000. 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. (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 .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 $443,000 for service charges through December 31, 2000. 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 four interest payment swap arrangements with Fleet Bank (Fleet) 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 Fleet on a monthly basis at fixed annual rates. In exchange for such payments 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 5.79% to 6.80% for the year ended December 31, 2000. The effective date, notional amount, maturity and fixed rates of the swaps are as follows:
NOTIONAL FIXED EFFECTIVE CONTRACT ANNUAL DATE AMOUNT MATURITY RATE 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%
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. The Fund is exposed to credit loss in the 17 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- CONTINUED DECEMBER 31, 2000 ================================================================================ 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 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 year ended December 31, 2000, the Fund's receipts under the swap agreements were more than the amount owed to BBNA by approximately $708,000 and is included in the accompanying statement of operations. The estimated fair value of the interest rate swap agreements at December 31, 2000 amounted to approximately $324,000 unrealized loss and is presented in the accompanying balance sheet. (7) 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. (8) PURCHASE AND SALES OF SECURITIES Purchases and proceeds of sales or maturities of long-term securities during the year ended December 31, 2000 were as follows: Purchases of securities $175,673,000 Sales of securities $225,761,000
(9) 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 $123,000 for the year ended December 31, 2000. The Fund paid approximately $241,000 during the year ended December 31, 2000 to two officers of the Fund for the provision of certain administrative services. - -------------------------------------------------------------------------------- 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. 18 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, including the schedule of investments, of The New America High Income Fund, Inc. (the Fund) as of December 31, 2000, and the related statement of operations for the year then ended, the statements 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 financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and 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, 2000, 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 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, 2000, 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 accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Boston, Massachusetts January 26, 2001 19 The New America High Income Fund, Inc. - -------------------------------------------------------------------------------- ================================================================================ 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 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 INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP 225 Franklin Street Boston, MA 02110 Listed: NYSE Symbol: HYB Web site: www.newamerica-hyb.com 20 -----END PRIVACY-ENHANCED MESSAGE-----