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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 number 811-5399
---------------------------------------------
The New America High Income Fund, Inc
-------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
33 Broad St Boston MA 02109
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ellen E. Terry 33 Broad St, Boston, MA 02109
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(Name and address of agent for service)
Registrant's telephone number, including area code: 617-263-6400
----------------------------
Date of fiscal year end: 12/31
--------------------------
Date of reporting period: 1/1/05 - 6/30/05
-------------------------
Item 1 - Report to Shareholders
THE NEW
AMERICA
HIGH INCOME
FUND, INC.
SEMI-ANNUAL
REPORT
JUNE 30, 2005
[NEW AMERICA HIGH INCOME FUND LOGO]
August 1, 2005
DEAR FELLOW SHAREHOLDERS,
While the high yield bond market was rather volatile in the first half of 2005
compared with market conditions last year, the defensive high yield investing
style of the Fund's portfolio managers has resulted in relative stability in the
Fund's net asset value per share (the "NAV") and dividend. In the current high
yield market environment, we believe that a defensive investment strategy is the
best one for our shareholders, especially since the Fund's leverage magnifies
the effect of market changes on the NAV. From its inception, the Fund's leverage
has been at the upper end of the range permitted by law and by the credit
ratings agencies for the Fund's Auction Term Preferred Stock (the "ATP"). The
leverage is an important contributor to the Fund's dividend (but can magnify the
effect of market downturns) and a reduction in the leverage would most likely
cause a reduction in the dividend. As of June 30th, the Fund was approximately
39% leveraged.
- The monthly dividend was unchanged at $.0175 per share. There were no
defaults in the portfolio during the period. It remains the Fund's policy to
pay a dividend derived solely from the income earned by the portfolio during
the year. Based upon current earnings, we continue to target a monthly
dividend of $.0175 per share, but of course future portfolio results and
market conditions will determine the actual dividend paid.
- The market price of the Fund's shares declined from $2.19 to $2.12 during the
six month period. Annualizing the current monthly dividend of $.0175 at the
NYSE closing market price of $2.12 on June 30th would produce a dividend
yield of 9.91%. Based upon the Fund's market price and dividends earned for
the six month period, the Fund's shares earned a total return of 0.79%. The
CS First Boston High Yield Index had a total return of 0.77% for the six
months ended June 30th.
- The Fund's NAV declined from $2.26 at the beginning of the year to $2.17 on
June 30th. Annualizing the current monthly dividend of $.0175 at the closing
NAV of $2.17 on June 30th would produce a dividend yield of 9.68%.
- The Fund's shares generally traded at a discount to their net asset value
throughout the six month period. The discount widened from its beginning of
the year level in March and April, when the high yield bond market was
particularly unsettled. However by June 30th the market price discount to the
net asset value per share was -2.3%, compared with a -3.1% discount at the
beginning of the year.
On June 10th, 2005, a Schedule 13G was filed by First Trust Portfolios L.P. and
related entities disclosing that as of December 31, 2004, had purchased 10.9% of
the Fund's common stock on behalf of accounts it manages. In addition, it filed
Schedule 13Gs on 23 other closed end funds including a number of funds that have
similar investment objectives to our Fund.
TOTAL RETURNS FOR THE PERIODS ENDING JUNE 30, 2005
--------------------------------------------------
1 YEAR 3 YEARS CUMULATIVE
------ ------------------
New America High Income Fund
(Stock Price and Dividends)* 21.39% 28.53%
New America High Income Fund
(NAV and Dividends) 12.55% 37.67%
Lipper Closed-End Fund Leveraged
High Yield Average 12.92% 65.99%
CS First Boston High Yield Index 10.09% 48.57%
10 Year U.S. Treasury Bond 9.60% 22.12%
Sources: CS First Boston, Citigroup, Lipper, The New America High Income Fund,
Inc.
Past performance is no guarantee of future results. Total return assumes the
reinvestment of dividends.
* Because the Fund's shares may trade at either a discount or 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 and dividends.
HIGH YIELD MARKET UPDATE
Following two-and-a-half years of good conditions for high yield investors - an
environment characterized by extremely low volatility and steady income -
volatility crept into the asset class over the past six months. The high yield
market was off sharply in March, April and early May then rallied strongly over
the last six weeks, recovering enough to provide a slight positive return for
the first half of the year, as measured by the CS First Boston High Yield Index.
The Fund's performance generally tracked the market's month-to-month
vacillations. Several factors contributed to the see-saw performance witnessed
during the first half of 2005:
- The impending downgrades of GM and Ford debt stoked fears of a potential
oversupply in the high-yield market. Investors were surprised by the speed
and magnitude of the ratings downgrades and worried about the ramifications
for the rest of the junk bond universe.
- Hedge funds' growing participation within the asset class sparked significant
volatility. As financial markets began to experience some losses, investors
worried these funds might be forced to unwind aggressive positions,
potentially introducing forced selling and unforeseen shocks to the market.
- Longer-term interest rates, as measured by the 10-Year Treasury, a key
benchmark for valuing high yield debt, zigged and zagged dramatically in the
period, even as the Fed repeatedly raised short-term rates. Movements in the
10-Year Treasury bond directly impact relative valuations in the high yield
market, and investors' appetite for risk and yield. Although high-yield bonds
were only marginally affected by the Fed's short-term rate hikes, the
prospect of an economic slowdown precipitated a flight to quality as we
approached the end of the reporting period.
- Technical factors also added some volatility. Some investors, sensing the
market as overvalued, reduced high-yield holdings or rotated out of the asset
class, introducing some pressure on the price of high-yield bonds.
In our last report we noted that the strong performance for high-yield bonds in
2003 and 2004 left the asset class with historically low absolute yields and
limited potential for additional capital appreciation in 2005. As value
conscious investors, our jobs are much tougher when the market is richly valued
and offering low yields, and we have a difficult time finding attractively
priced securities offering the potential for higher income. While a weaker
market can be unsettling, it does at least offer the prospect that new issues
will be attractively priced, allowing us the opportunity to build a more robust
income stream for the fund. As the market rallied in the final six weeks of the
first half, many higher quality companies issued bonds in the 6% to 6.5% range.
We generally continue to regard ten year junk bonds with 6.5% coupons as
unappealing for the long term. While credit trends remain positive for the vast
majority of companies in the portfolio, as the last six months reminded us,
volatility can surge quickly. We are paying particular attention to the
potential risks brought by some high yield investors' expanded use of exotic
instruments in the derivatives markets.
STRATEGY UPDATE
Our focus during the first half of 2005 revolved around purchasing fallen
angels, which are bonds that were issued with high quality credit ratings, but
which have been downgraded to below investment grade quality. We added to the
Fund's holdings in General Motors and also initiated a meaningful position in
Ford. In both cases we bought bonds issued by the companies' finance
subsidiaries, General Motors Acceptance Corporation and Ford Motor Credit. We
think these credits are less risky than securities issued by their respective
parent companies, as they have less direct exposure to legacy liabilities
including health care and pension expense. Both companies' securities traded up
sharply in the final weeks of the second quarter, and it now appears that both
Ford and GM's transitions from the high quality to the high yield market are
proceeding smoothly, despite the sheer magnitude of debt each has outstanding.
2
Away from autos, our analysts researched and recommended three additional fallen
angels which we purchased in the portfolio. The first company was Maytag, a well
known appliance manufacturer that has suffered from high manufacturing costs
versus foreign competition. Our research concluded there was ample ability for
the company to refinance short term debt that had recently suffered a ratings
downgrade to junk territory. The Fund also bought Bombardier, a Canadian
aerospace company involved in a turnaround story with fundamental trends moving
in the right direction. Finally, at quarter end we purchased a new issue from RJ
Reynolds Tobacco after an extensive review of current issues related to
cigarette litigation. Historically, fallen angels have often been a source of
profits for high yield investors and we are constructive on the new names we
have identified in the first six months of 2005.
Finally, our analysts uncovered interesting opportunities in two convertible
bonds which are now in the portfolio. We bought positions in Echostar and Amazon
in June, after the convertible market endured some of the same hedge fund
related turbulence witnessed in the high yield market. While convertibles are
not normally a priority for us, these bonds' yields compared favorably to more
traditional high yield securities and were a natural extension of our research
efforts in a year when new issue volume for high yield is down substantially
compared with new issue volume in recent years.
OUTLOOK
Given the choppy market conditions, we were pleased the Fund has earned a
positive return for the first half of 2005, albeit small in absolute terms.
After enduring three months of turmoil the high yield market ended the second
quarter in relative calm. We believe conditions may remain reasonably benign, at
least through the historically slower summer months, with things picking up in
the later part of the year. While the price adjustment that took place in the
spring was necessary and beneficial in the longer term, interest rates and
spreads for high yield bonds still remain low by historical standards, providing
little margin for error in terms of credit selection or with respect to larger
macro trends. The Fund's posture continues to favor bonds with less interest
rate sensitivity and more conservative credit profiles, even if this sacrifices
some performance in the short-term. We believe that in this stage of the cycle,
the risks to a more aggressive stance may have begun to outweigh the rewards,
and a more defensive position may help protect the gains shareholders have
enjoyed while seeking to maintain the income stream.
Thank you for your continued interest in the Fund.
Sincerely,
/s/ Robert F. Birch /s/ Mark Vaselkiv /s/ Paul Karpers
Robert F. Birch Mark Vaselkiv Paul Karpers
President Vice President Vice President
The New America High Income Fund, Inc. T. Rowe Price Associates T. Rowe Price Associates
THE VIEWS EXPRESSED IN THIS UPDATE ARE AS OF THE DATE OF THIS LETTER. THESE
VIEWS AND ANY PORTFOLIO HOLDINGS DISCUSSED IN THE UPDATE ARE SUBJECT TO CHANGE
AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. THE FUND AND THE ADVISER
DISCLAIM ANY DUTY TO UPDATE THESE VIEWS, WHICH MAY NOT BE RELIED UPON AS
INVESTMENT ADVICE. IN ADDITION, REFERENCES TO SPECIFIC COMPANIES' SECURITIES
SHOULD NOT BE REGARDED AS INVESTMENT ADVICE.
3
The New America High Income Fund, Inc.
INDUSTRY SUMMARY AS A PERCENT OF
JUNE 30, 2005 (UNAUDITED) TOTAL INVESTMENTS
------------------------------------------------------------------------
Telecommunications 11.17%
Oil and Gas 7.65%
Containers, Packaging and Glass 7.45%
Broadcasting and Entertainment 6.69%
Chemicals, Plastics and Rubber 6.52%
Hotels, Motels, Inns, and Gaming 6.29%
Printing and Publishing 5.53%
Utilities 5.40%
Healthcare, Education and Childcare 5.18%
Automobile 4.94%
Building and Real Estate 4.70%
Electronics 4.09%
Mining, Steel, Iron, Non-Precious Metals 3.65%
Aerospace and Defense 2.35%
Diversified/Conglomerate Service 2.21%
Beverage, Food and Tobacco 2.13%
Retail Stores 1.99%
Diversified/Conglomerate Manufacturing 1.97%
Leisure, Amusement and Entertainment 1.89%
Ecological 1.52%
Personal, Food, and Misc. Services 1.33%
Personal/Non-Durable Consumer Products 1.16%
Furnishings, Housewares,
Durable Consumer Products 0.93%
Finance 0.75%
Banking 0.59%
Textiles and Leather 0.29%
Farming and Agriculture 0.26%
Personal Transportation 0.25%
Machinery 0.24%
Grocery 0.19%
Cargo Transport 0.18%
Short Term Investments 0.51%
------
Total Investments 100.00%
======
MOODY'S INVESTORS SERVICE RATINGS AS A PERCENT OF
JUNE 30, 2005 (UNAUDITED) TOTAL INVESTMENTS
------------------------------------------------------------------------
Short Term Investments 0.51%
------
B1 14.54%
B2 26.57%
B3 22.34%
------
Total B 63.45%
------
Ba1 0.38%
Ba2 7.54%
Ba3 14.51%
------
Total Ba 22.43%
------
Baa2 1.56%
Baa3 0.33%
------
Total Baa 1.89%
------
Caa1 8.70%
Caa2 1.96%
Caa3 0.09%
------
Total Caa 10.75%
------
Unrated 0.63%
------
Equity 0.34%
------
Total Investments 100.00%
======
4
SCHEDULE OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) (Dollar Amounts in
Thousands)
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
---------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- 157.35% (d)
AEROSPACE AND DEFENSE -- 3.74%
$ 850 Aviall, Inc., Senior Notes,
7.625%, 07/01/11 B1 $ 893
525 BE Aerospace, Inc., Senior
Subordinated Notes,
8%, 03/01/08 Caa2 525
1,125 BE Aerospace, Inc., Senior
Subordinated Notes,
8.875%, 05/01/11 Caa2 1,173
1,625 GenCorp Inc., Senior
Subordinated Notes,
9.50%, 08/15/13 Caa1 1,763
425 Moog, Inc., Senior
Subordinated Notes,
6.25%, 01/15/15 Ba3 427
600 Sequa Corporation, Senior Notes,
9%, 08/01/09 B1 660
650 TransDigm Inc., Senior
Subordinated Notes,
8.375%, 07/15/11 B3 684
1,500 Vought Aircraft Industries, Inc.,
Senior Notes, 8%, 07/15/11 B2 1,470
-----------
7,595
-----------
AUTOMOBILE -- 7.84%
950 Accuride Corp., Senior Subordinated
Notes, 8.50%, 02/01/15 Caa1 929
800 ADESA, Inc., Senior Subordinated
Notes, 7.625%, 06/15/12 B1 812
1,225 American Axle & Manufacturing, Inc.,
Senior Notes, 5.25%, 02/11/14 Baa3 1,075
675 Autocam Corporation, Senior
Subordinated Notes,
10.875%, 06/15/14 Caa2 439
600 Cooper Standard Automotive, Inc.,
Senior Subordinated Notes,
8.375%, 12/15/14 B3 480
590 Cummins, Inc., Senior Notes,
9.50%, 12/01/10 Ba2 652
1,800 Ford Motor Credit Company,
Senior Notes, 7%, 10/1/13 Baa2 1,745
775 Ford Motor Credit Company,
Senior Notes, 7.375%, 10/28/09 Baa2 763
1,925 General Motors Acceptance
Corporation, Senior Bonds,
6.75%, 12/01/14 Baa2 1,730
$ 875 General Motors Acceptance
Corporation, Senior Bonds,
8%, 11/01/31 Baa2 $ 789
500 Hawk Corporation, Senior Notes,
8.75%, 11/01/14 B2 505
675 Insurance Auto Auctions, Inc.,
Senior Notes, 11%, 04/01/13 (g) Caa1 692
275 Navistar International Corporation,
Senior Notes,
6.25%, 03/01/12 (g) Ba3 265
525 Navistar International Corporation,
Senior Notes, 7.50%, 06/15/11 Ba3 536
150 J.B. Poindexter & Co., Inc.,
Senior Notes, 8.75%, 03/15/14 B1 137
900 Tenneco Automotive Inc., Senior
Subordinated Notes,
8.625%, 11/15/14 B3 905
1,582 TRW Automotive Inc., Senior
Notes, 9.375%, 02/15/13 Ba3 1,756
791 TRW Automotive Inc., Senior
Subordinated Notes,
11%, 02/15/13 B1 910
975 Visteon Corporation,
Senior Notes, 7%, 03/10/14 B3 807
-----------
15,927
-----------
BANKING -- .93%
675 Dollar Financial Group, Inc.,
Senior Notes, 9.75%, 11/15/11 B3 695
1,100 Global Cash Access Inc., Senior
Subordinated Notes,
8.75%, 03/15/12 Caa1 1,196
-----------
1,891
-----------
BEVERAGE, FOOD AND TOBACCO -- 3.39%
281 Agrilink Foods, Inc. , Senior
Subordinated Notes,
11.875%, 11/01/08 B3 292
550 Alliance One International, Inc.,
Senior Notes, 11%, 05/15/12 (g) B2 565
925 B&G Foods, Inc., Senior Notes,
8%, 10/01/11 B2 957
325 Del Monte Corporation, Senior
Subordinated Notes,
6.75%, 02/15/15 (g) B2 330
275 Del Monte Corporation, Senior
Subordinated Notes,
8.625%, 12/15/12 B2 302
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
$ 400 Dole Food Company, Inc.,
Senior Notes 8.625%, 05/01/09 B2 $ 425
700 Dole Food Company, Inc.,
Senior Notes 8.875%, 03/15/11 B2 747
1,175 Le-Nature's, Inc., Senior
Subordinated Notes,
10.00%, 06/15/13 (g) Caa1 1,198
400 Pierre Foods, Inc., Senior
Subordinated Notes,
9.875%, 07/15/12 B3 412
1,100 R.J. Reynolds Tobacco
Holdings, Inc., Senior Notes
6.50%, 07/15/10 (g) Ba2 1,100
550 Wornick Company, Senior Secured
Notes, 10.875%, 07/15/11 B2 558
-----------
6,886
-----------
BROADCASTING AND ENTERTAINMENT -- 10.46%
175 AMC Entertainment, Inc., Senior
Notes, 8.625%, 08/15/12 (g) B2 179
600 CCO Holdings, LLC, Senior Notes,
7.535%, 12/15/10 (g) B3 582
800 CCO Holdings, LLC, Senior Notes,
8.75%, 11/15/13 B3 792
900 Charter Communications Operating,
LLC, Senior Secured Notes,
8%, 04/30/12 (g) B2 900
250 Cinemark, Inc., Senior Discount
Notes, 9.75%, 03/15/14 (b)(g) Caa1 166
2,125 Cinemark, Inc., Senior Discount
Notes, 9.75%, 03/15/14 (b) Caa1 1,413
75 Cinemark USA, Inc., Senior
Subordinated Notes,
9%, 02/01/13 B3 78
625 CSC Holdings, Inc., Senior Notes,
6.75%, 04/15/12 (g) B1 586
1,000 CSC Holdings, Inc., Senior Notes,
7.625%, 04/01/11 B1 995
850 DirectTV Holdings, LLC, Senior
Notes, 6.375%, 06/15/15 (g) Ba2 845
228 DirectTV Holdings, LLC, Senior
Notes, 8.375%, 03/15/13 Ba2 252
500 EchoStar Communications
Corporation, Convertible
Subordinated Notes,
5.75%, 05/15/08 B2 497
$ 1,475 EchoStar DBS Corporation, Senior
Notes, 6.625%, 10/01/14 Ba3 $ 1,457
644 EchoStar DBS Corporation, Senior
Notes, 9.125%, 01/15/09 Ba3 686
225 Fisher Communications, Inc.,
Senior Notes, 8.625%, 09/15/14 B2 239
850 Gray Television, Inc., Senior
Subordinated Notes,
9.25%, 12/15/11 B1 922
375 Insight Midwest, L.P., Senior Notes,
9.75%, 10/01/09 B2 389
750 Insight Midwest, L.P., Senior Notes,
10.50%, 11/01/10 B2 798
825 Loews Cineplex Entertainment
Corporation, Senior
Subordinated Notes,
9%, 08/01/14 (g) B3 800
825 Marquee Holdings, Inc., Senior
Notes, 12%, 08/15/14 (b) Caa1 495
600 Mediacom Broadband LLC, Senior
Notes, 11%, 07/15/13 B2 650
2,475 Quebecor Media, Inc., Senior
Notes, 11.125%, 07/15/11 B2 2,747
850 Rogers Cable Inc., Senior Secured
Notes, 6.75%, 03/15/15 Ba3 875
275 Sinclair Broadcast Group, Inc.,
Senior Subordinated Notes,
8%, 03/15/12 B2 282
825 Sinclair Broadcast Group, Inc.,
Senior Subordinated Notes,
8.75%, 12/15/11 B2 866
825 Videotron Ltee., Senior Notes,
6.875%, 01/15/14 Ba3 835
850 Warner Music Group, Senior
Subordinated Notes,
7.375%, 04/15/14 B3 861
300 WDAC Subsidiary Corp. Senior
Notes, 8.375%, 12/1/14 (g) Caa1 287
706 XM Satellite Radio Inc., Senior
Secured Notes, 12%, 06/15/10 Caa1 794
-----------
21,268
-----------
BUILDING AND REAL ESTATE -- 7.45%
1,050 ACIH Inc., Senior Discount Notes,
11.50%, 12/15/12 (b)(g) Caa1 619
850 Ainsworth Lumber Company, Ltd.,
Senior Notes, 7.25%, 10/01/12 B2 803
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
$ 625 B.F. Saul Real Estate Investment
Trust, Senior Secured Notes,
7.50%, 03/1/14 B3 $ 648
1,150 Building Materials Corporation of
America, Senior Notes,
7.75%, 08/01/14 B2 1,072
1,050 Collins & Aikman Floorcoverings, Inc.,
Senior Subordinated Notes,
9.75%, 02/15/10 Caa1 1,087
825 Hovnanian Enterprises, Inc.,
Senior Subordinated Notes,
7.75%, 05/15/13 Ba2 858
275 Meristar Hospitality Operating,
Senior Notes, 9%, 01/15/08 B2 286
525 Meristar Hospitality Operating,
Senior Notes, 9.125%, 01/15/11 B2 546
775 Mobile Mini, Inc., Senior Notes,
9.50%, 07/01/13 B2 864
1,275 Norcraft Companies, L.P., Senior
Subordinated Notes,
9%, 11/01/11 B3 1,320
325 Omega Healthcare Investors, Inc.,
Senior Notes, 7%, 04/01/14 B1 323
675 RMCC Acquisition Company,
Senior Subordinated Notes,
9.50%, 11/01/12 (g) Caa1 655
750 Texas Industries, Inc., Senior
Notes, 7.25%, 07/15/13 (g) Ba3 769
750 Texas Industries, Inc., Senior
Notes, 10.25%, 06/15/11 B1 869
750 U.S. Concrete, Inc., Senior
Subordinated Notes,
8.375%, 04/1/14 B3 705
325 Ventas Realty, Limited Partnership,
Senior Notes, 6.75%, 06/1/10 (g) Ba3 337
875 WII Components, Inc., Senior Notes,
10%, 02/15/12 B2 860
700 WCI Communities, Inc., Senior
Subordinated Notes,
9.125%, 05/01/12 Ba3 733
975 WCI Communities, Inc., Senior
Subordinated Notes,
10.625%, 02/15/11 Ba3 1,053
675 Williams Scotsman, Inc., Senior
Secured Notes, 10%, 08/15/08 B2 737
-----------
15,144
-----------
CARGO TRANSPORT -- .28%
$ 200 Great Lakes Dredge and Dock
Corporation, Senior
Subordinated Notes,
7.75%, 12/15/13 Caa3 $ 152
400 TFM, S.A. de C.V., Senior Notes,
9.375%, 05/01/12 (g) B2 418
-----------
570
-----------
CHEMICALS, PLASTICS AND RUBBER -- 10.34%
525 ARCO Chemical Company, Senior
Debentures, 10.25%, 11/01/10 B1 575
300 ARCO Chemical Company, Senior
Notes, 9.80%, 02/01/20 B1 336
990 BCP Caylux Holdings Luxembourg
S.C.A., Senior Subordinated
Notes, 9.625%, 06/15/14 B3 1,109
675 Borden Chemical, Inc., Senior
Secured Notes, 9%, 07/15/14 (g) B3 685
1,650 Compass Minerals Group, Inc.,
Senior Subordinated Notes,
10%, 08/15/11 B3 1,798
1,792 Crystal US Holdings 3 LLC, Senior
Discount Notes,
10.50%, 10/01/14 (b) Caa2 1,259
274 Crystal US Holdings 3 LLC, Senior
Discount Notes,
10%, 10/01/14 (b) Caa2 194
375 EquiStar Chemicals PL Funding,
Senior Notes, 8.75%, 02/15/09 B2 396
475 Ethyl Corporation, Senior Notes,
8.875%, 05/01/10 B2 494
425 Freeport McMoran Resources,
Senior Notes, 7%, 02/15/08 Ba3 430
600 Huntsman International LLC,
Senior Notes, 9.875%, 03/01/09 B2 642
959 Huntsman LLC, Senior Secured
Notes, 11.625%, 10/15/10 B1 1,124
2,050 Invista, Units,
9.25%, 05/01/12 (g) B1 2,242
1,375 KI Holdings, Inc., Senior Discount
Notes, 9.875%, 11/15/14 (b)(g) Caa2 811
75 KI Holdings, Inc., Senior Discount
Notes, 9.875%, 11/15/14 (b) Caa2 44
1,250 Koppers Inc., Senior Secured
Notes, 9.875%, 10/15/13 B2 1,356
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
$ 400 Lyondell Chemical Company,
Senior Secured Notes,
9.50%, 12/15/08 B1 $ 427
600 Lyondell Chemical Company,
Senior Secured Notes,
9.625%, 05/01/07 B1 640
625 Lyondell Chemical Company,
Senior Secured Notes,
10.50%, 06/1/13 B1 716
200 Lyondell Chemical Company,
Senior Secured Notes,
11.125%, 07/15/12 B1 226
525 PolyOne Corporation, Senior Notes,
10.625%, 05/15/10 B3 556
825 Resolution Performance Products,
LLC, Senior Secured Notes,
9.50%, 04/15/10 B3 850
1,825 Rhodia S.A., Senior Notes,
10.25%, 06/01/10 B3 1,957
1,150 Rockwood Specialties Group, Inc.,
Senior Subordinated Notes,
10.625%, 05/15/11 B3 1,268
200 VWR International, Inc., Senior
Notes, 6.875%, 04/15/12 B3 198
725 VWR International, Inc., Senior
Subordinated Notes,
8%, 04/15/14 Caa1 692
-----------
21,025
-----------
CONTAINERS, PACKAGING AND GLASS -- 11.83%
625 AEP Industries, Inc., Senior Notes,
7.875%, 03/15/13 (g) B2 625
950 Ball Corporation, Senior Notes,
6.875%, 12/15/12 Ba2 1,000
950 Boise Cascade, LLC, Senior
Subordinated, Notes,
7.125%, 10/15/14 (g) B2 933
775 BWAY Corporation, Senior
Subordinated Notes,
10%, 10/15/10 B3 810
1,300 Crown European Holdings, S.A.,
Senior Secured Notes,
9.50%, 03/01/11 B1 1,440
$ 650 Crown European Holdings, S.A.,
Senior Secured Notes,
10.875%, 03/01/13 B2 $ 767
500 Georgia-Pacific Corporation, Senior
Notes, 8.875%, 02/01/10 Ba2 567
2,075 Georgia-Pacific Corporation, Senior
Notes, 9.375%, 02/01/13 Ba2 2,360
675 Graham Packaging Company, L.P.,
Senior Notes, 8.50%, 10/15/12 (g) Caa1 687
450 Graphic Packaging International Inc.,
Senior Notes, 8.50%, 08/15/11 B2 460
325 Graphic Packaging International Inc.,
Senior Subordinated, Notes,
9.50%, 08/15/13 B3 328
350 Greif Brothers Corporation,
Senior Subordinated Notes,
8.875%, 08/1/12 B1 375
850 Jefferson Smurfit Corporation, (U.S.)
Senior Notes, 7.50%, 06/01/13 B2 812
900 Jefferson Smurfit Corporation, (U.S.)
Senior Notes, 8.25%, 10/01/12 B2 907
800 JSG Funding, PLC, Senior
Subordinated Notes,
7.75%, 04/01/15 (g) Caa1 656
1,425 Longview Fibre Company, Senior
Subordinated Notes,
10%, 01/15/09 B2 1,518
1,410 MDP Acquisitions Plc, Senior
Notes, 9.625%, 10/01/12 B3 1,403
275 NewPage Corporation,
Senior Secured Notes,
9.46% , 05/01/12 (g) B3 276
675 NewPage Corporation,
Senior Secured Notes,
10%, 05/01/12 (g) B3 680
325 NewPage Corporation,
Senior Subordinated Notes,
12%, 05/01/13 (g) Caa2 323
825 Norske Skog Canada Ltd., Senior
Notes 7.375%, 03/1/14 Ba3 809
475 Owens-Brockway Glass Container,
Inc., Senior Notes,
8.25%, 05/15/13 B2 515
450 Owens-Brockway Glass Container,
Inc., Senior Secured Notes,
7.75%, 05/15/11 B1 482
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
$ 725 Owens-Brockway Glass Container,
Inc., Senior Secured Notes,
8.75%, 11/15/12 B1 $ 799
1,225 Owens-Brockway Glass Container,
Inc., Senior Secured Notes,
8.875%, 02/15/09 B1 1,302
1,550 Plastipak Holdings, Inc., Senior
Notes, 10.75%, 09/01/11 B3 1,709
375 Silgan Holdings Inc., Senior
Subordinated Notes,
6.75%, 11/15/13 B1 383
450 Solo Cup Company, Senior
Subordinated Notes,
8.50%, 02/15/14 B3 421
100 Stone Container Corporation,
Senior Notes, 9.75%, 02/01/11 B2 106
625 Stone Container Finance Company
of Canada, Senior Notes,
7.375%, 07/15/14 B2 587
-----------
24,040
-----------
DIVERSIFIED/CONGLOMERATE MANUFACTURING -- 3.12%
850 Aearo Company, Senior
Subordinated Notes,
8.25%, 04/15/12 B3 850
625 Bombardier, Inc., Senior Notes,
6.30%, 05/1/14 (g) Ba2 558
1,175 Bombardier, Inc., Senior Notes,
6.75%, 05/01/12 (g) Ba2 1,110
850 Case New Holland Inc., Senior
Notes, 9.25%, 08/01/11 (g) Ba3 899
500 Columbus McKinnon Corporation,
Senior Subordinated Notes,
8.50%, 04/01/08 Caa1 498
550 Manitowoc Company, Inc., Senior
Notes, 7.125%, 11/01/13 B1 571
1,700 Rexnord Corp., Senior
Subordinated Notes,
10.125%, 12/15/12 B3 1,861
-----------
6,347
-----------
DIVERSIFIED/CONGLOMERATE SERVICE -- 3.50%
1,475 Brand Services, Inc., Senior
Subordinated Notes,
12%, 10/15/12 Caa1 1,578
$ 1,225 Brickman Group, LTD, Senior
Subordinated Notes,
11.75%, 12/15/09 B2 $ 1,390
864 Coinmach Corporation, Senior
Notes, 9%, 02/01/10 B3 890
1,525 National Waterworks, Inc., Senior
Subordinated Notes,
10.50%, 12/01/12 B3 1,719
625 NationsRent Companies, Inc.,
Senior Notes, 9.50%, 10/15/10 B2 675
850 Sunstate Equipment Co, LLC,
Senior Secured Notes,
10.50%, 04/01/13 (g) B3 871
-----------
7,123
-----------
ECOLOGICAL -- 2.42%
1,575 Allied Waste North America, Inc.,
Senior Secured Notes,
7.875%, 04/15/13 B2 1,603
925 Allied Waste North America, Inc.,
Senior Secured Notes,
8.875%, 04/01/08 B2 967
100 Allied Waste North America, Inc.,
Senior Secured Notes,
9.25%, 09/01/12 B2 107
2,075 Casella Waste Systems, Inc.,
Senior Subordinated Notes,
9.75%, 02/01/13 B3 2,241
-----------
4,918
-----------
ELECTRONICS -- 6.49%
125 Activant Solutions, Inc., Senior
Notes, 9.09%, 04/01/10 (g) B2 131
150 Amkor Technology, Inc., Senior
Notes, 7.75%, 05/15/13 B3 127
375 Amkor Technology, Inc., Senior
Notes, 9.25%, 02/15/08 B3 356
825 Celestica, Inc., Senior
Subordinated Notes,
7.875%, 07/01/11 B2 850
200 Coleman Cable, Inc., Senior Notes,
9.875%, 10/01/12 (g) B3 178
850 Flextronics International, Inc.,
Senior Subordinated Notes,
6.25%, 11/15/14 Ba2 850
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
$ 650 Freescale Semiconductor, Inc.,
Senior Notes, 6.875%, 07/15/11 Ba2 $ 691
925 Freescale Semiconductor, Inc.,
Senior Notes, 7.125%, 07/15/14 Ba2 992
625 General Cable Corporation, Senior
Notes, 9.50%, 11/15/10 B2 666
400 Hynix Semiconductor, Inc., Senior
Notes, 9.875%, 07/01/12 (g) B1 400
825 Invensys plc, Senior Notes,
9.875%, 03/15/11 (g) B3 804
450 MagnaChip Semiconductor S.A.,
Senior Secured Notes,
6.875%, 12/15/11 (g) Ba3 443
375 New Asat Finance LLC, Senior
Notes 9.25%, 02/01/11 B3 319
150 Sanmina-SCI Corporation, Senior
Secured Notes,
10.375%, 01/15/10 Ba2 167
725 Sanmina-SCI Corporation,
Senior Subordinated Notes,
6.75%, 03/01/13 (g) B1 692
525 Semiconductor Note Participation
Trust, 10%, 08/04/11(g) (e) 787
350 STATS ChipPAC Ltd., Senior Notes,
6.75%, 11/15/11 Ba2 332
875 Stratus Technologies, Inc., Senior
Notes, 10.375%, 12/01/08 B3 849
775 Superior Essex Communications
LLC, Senior Notes, 9%, 04/15/12 B3 771
800 Telex Communications, Inc.,
Senior Secured Notes,
11.50%, 10/15/08 B3 854
1,050 UGS Corp., Senior Subordinated
Notes, 10%, 06/01/12 B3 1,176
375 Xerox Corp., Senior Notes,
7.20%, 04/01/16 Ba2 408
325 Xerox Corp., Senior Notes,
7.625%, 06/15/13 Ba2 350
-----------
13,193
-----------
FARMING AND AGRICULTURE -- .41%
150 IMC Global Inc., Senior Notes,
10.875%, 06/01/08 Ba3 169
125 IMC Global Inc., Senior Notes,
10.875%, 08/01/13 Ba3 147
$ 100 IMC Global Inc., Senior Notes,
11.25%, 06/01/11 Ba3 $ 111
397 United Agri Products, Inc., Senior
Notes, 8.25%, 12/15/11 B1 411
-----------
838
-----------
FINANCE -- 1.19%
2,300 E*TRADE Financial Corp., Senior
Notes, 8%, 06/15/11 B1 2,427
-----------
FURNISHINGS, HOUSEWARES, DURABLE CONSUMER PRODUCTS -- 1.48%
600 MAAX Corporation, Senior
Subordinated Notes,
9.75%, 06/15/12 B3 531
1,000 Maytag Corporation, Senior Notes,
6.875%, 12/01/06 Ba2 1,020
1,050 Sealy Mattress Company, Senior
Subordinated Notes,
8.25%, 06/15/14 B3 1,058
875 Simmons Company, Senior Discount
Notes, 10%, 12/15/14 (b)(g) Caa2 407
-----------
3,016
-----------
GROCERY -- .30%
625 Pathmark Stores, Inc., Senior
Subordinated Notes,
8.75%, 02/01/12 Caa1 614
-----------
HEALTHCARE, EDUCATION AND CHILDCARE -- 8.23%
875 AmerisourceBergen Corporation,
Senior Notes, 8.125%, 09/01/08 Ba2 950
700 Biovail Corporation, Senior
Subordinated Notes,
7.875%, 04/01/10 B2 718
375 Community Health Systems, Inc.,
Senior Subordinated Notes,
6.50%, 12/15/12 B3 377
1,425 Concentra Operating Corporation,
Senior Subordinated Notes,
9.50%, 08/15/10 B3 1,514
325 Davita, Inc., Senior Notes,
6.625%, 03/15/13 (g) B2 336
825 Davita, Inc., Senior Subordinated
Notes, 7.25%, 03/15/15 (g) B3 848
825 Fisher Scientific International Inc.,
Senior Subordinated Notes,
6.125%, 07/01/15 (g) Ba3 825
575 Fresenius Medical Care Capital
Trust IV, 7.875%, 06/15/11 B1 620
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
$ 1,125 Genesis Healthcare Corporation,
Senior Subordinated Notes,
8%, 10/15/13 B3 $ 1,221
875 HCA Inc., Senior Notes,
6.375%, 01/15/15 Ba2 909
1,275 HCA Inc., Senior Notes,
8.75%, 09/1/10 Ba2 1,453
350 MedQuest, Inc., Senior Subordinated
Notes, 11.875%, 08/15/12 Caa1 331
1,175 Omnicare, Inc., Senior Subordinated
Notes, 8.125%, 03/15/11 Ba2 1,241
1,125 Quintiles Transnational Corp.,
Senior Subordinated Notes,
10%, 10/01/13 B3 1,240
450 Tenet Healthcare Corporation,
Senior Notes, 6.50%, 06/01/12 B3 429
300 Tenet Healthcare Corporation,
Senior Notes, 7.375%, 02/01/13 B3 298
175 Tenet Healthcare Corporation,
Senior Notes, 9.875%, 07/01/14 B3 188
1,300 Triad Hospitals, Inc., Senior
Subordinated Notes,
7%, 11/15/13 B3 1,339
775 US Oncology, Inc., Senior Notes,
9%, 08/15/12 B2 829
525 Vanguard Health Holding Company II,
LLC, Senior Subordinated Notes,
9%, 10/01/14 Caa1 568
500 Warner Chilcott Corporation,
Senior Subordinated Notes,
8.75%, 02/01/15 (g) Caa1 486
-----------
16,720
-----------
HOTELS, MOTELS, INNS AND GAMING -- 9.98%
1,225 American Casino & Entertainment
Properties LLC, Senior Secured
Notes, 7.85%, 02/01/12 B2 1,302
1,000 Ameristar Casinos, Inc., Senior
Subordinated Notes,
10.75%, 02/15/09 B2 1,088
450 Argosy Gaming Company, Senior
Subordinated Notes,
7%, 01/15/14 B1 498
75 Argosy Gaming Company, Senior
Subordinated Notes,
9%, 09/01/11 Ba3 82
$ 1,000 Boyd Gaming Corporation, Senior
Subordinated Notes,
6.75%, 04/15/14 B1 $ 1,025
100 Boyd Gaming Corporation, Senior
Subordinated Notes,
7.75%, 12/15/12 B1 107
25 Boyd Gaming Corporation, Senior
Subordinated Notes,
8.75%, 04/15/12 B1 27
700 Herbst Gaming, Inc., Senior
Subordinated Notes,
7%, 11/15/14 B3 704
100 Host Marriott, L.P., Senior Notes,
6.375%, 03/15/15 (g) Ba3 99
740 Host Marriott, L.P., Senior Notes,
9.50%, 01/15/07 Ba3 786
525 Isle of Capri Casinos, Inc., Senior
Subordinated Notes,
7%, 03/01/14 B2 529
1,625 John Q. Hammons Hotels, LP,
First Mortgage Notes,
8.875%, 05/15/12 B2 1,779
1,775 La Quinta Properties, Inc.,
Senior Notes, 8.875%, 03/15/11 Ba3 1,921
175 Las Vegas Sands Corporation,
Senior Notes,
6.375%, 02/15/15 (g) B2 170
600 Mandalay Resort Group, Senior
Subordinated Notes,
10.25%, 08/01/07 Ba3 660
825 MGM MIRAGE, Senior Notes,
9.75%, 06/01/07 Ba3 891
1,500 MGM MIRAGE, Senior Secured
Notes, 8.50%, 09/15/10 Ba2 1,658
650 Mohegan Tribal Gaming Authority,
Senior Notes,
6.125%, 02/15/13 (g) Ba2 656
575 Mohegan Tribal Gaming Authority,
Senior Subordinated Notes,
6.875%, 02/15/15 (g) Ba3 589
1,100 Mohegan Tribal Gaming Authority,
Senior Subordinated Notes,
8%, 04/01/12 Ba3 1,169
75 Penn National Gaming, Inc.,
Senior Subordinated Notes,
6.75%, 03/1/15 (g) B3 75
The accompanying notes are an integral part of these financial statements.
11
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
---------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
$ 650 Poster Financial group, Inc., Senior
Notes, 8.75%, 12/01/11 B2 $ 661
75 Resorts International Hotel and
Casino, Inc., Senior Notes,
11.50%, 03/15/09 B2 85
650 Seneca Gaming Corporation,
Senior Notes,
7.25%, 05/01/12 (g) B1 672
525 Station Casinos, Inc., Senior Notes,
6%, 04/01/12 Ba3 538
125 Station Casinos, Inc., Senior
Subordinated Notes,
6.50%, 02/01/14 B1 128
600 Station Casinos, Inc., Senior
Subordinated Notes,
6.875%, 03/01/16 B1 618
550 Station Casinos, Inc., Senior
Subordinated Notes,
6.875%, 03/01/16 (g) B1 567
600 Trump Entertainment
ResortsHoldings, L.P., Senior
Secured Notes, 8.50%, 06/01/15 Caa1 585
625 Wynn Las Vegas, LLC, Senior
Secured Notes,
6.625%, 12/01/14 (g) B2 606
-----------
20,275
-----------
LEISURE, AMUSEMENT AND ENTERTAINMENT -- 3.00%
800 AMF Bowling Worldwide, Inc. Senior
Subordinated Notes,
10%, 03/01/10 B3 808
575 Equinox Holdings, Inc., Senior
Notes, 9%, 12/15/09 B3 594
775 K2 Inc., Senior Notes,
7.375%, 07/01/14 Ba3 814
325 Six Flags Inc., Senior Notes,
8.875%, 02/01/10 Caa1 314
175 Six Flags Inc., Senior Notes,
9.75%, 04/15/13 Caa1 165
800 Town Sports International, Inc.,
Senior Notes, 9.625%, 04/15/11 B2 820
1,450 Universal City Development
Partners, Ltd., Senior Notes,
11.75%, 04/01/10 B2 1,664
$ 225 Universal City Florida Holding Co.,
Senior Notes, 7.96%, 05/1/10 B3 $ 234
650 Universal City Florida Holding Co.,
Senior Notes, 8.375%, 05/1/10 B3 678
-----------
6,091
-----------
MACHINERY -- .38%
747 JLG Industries, Inc., Senior
Subordinated Notes,
8.375%, 06/15/12 B3 781
-----------
MINING, STEEL, IRON AND NON-PRECIOUS METALS -- 5.80%
475 Aleris International, Inc., Senior
Notes, 9%, 11/15/14 (e) 494
75 Algoma Steel Inc., Secured Notes,
11%, 12/31/09 (e) 82
825 Alpha Natural Resources, LLC,
Senior Notes, 10%, 06/01/12 (g) B3 908
450 Century Aluminum Company,
Senior Notes, 7.50%, 08/15/14 B1 448
1,525 Earle M. Jorgensen Company,
Senior Secured Notes,
9.75%, 06/01/12 B2 1,636
825 Foundation PA Coal Company,
Senior Notes, 7.25%, 08/01/14 B1 866
750 Gerdau Ameristeel Corporation,
Senior Notes, 10.375%, 07/15/11 Ba3 817
675 James River Coal Company,
Senior Notes, 9.375%, 06/1/12 B3 692
725 Luscar Coal Ltd., Senior Notes,
9.75%, 10/15/11 Ba3 794
675 Massey Energy Company, Senior
Notes, 6.625%, 11/15/10 Ba3 697
500 Neenah Foundry Company, Senior
Secured Notes, 11%, 09/30/10 (g) B2 541
825 Novelis, Inc., Senior Notes,
7.25%, 02/15/15 (g) B1 827
2,000 Peabody Energy Corporation,
Senior Notes, 6.875%, 03/15/13 Ba3 2,130
850 Valmont Industries, Inc., Senior
Subordinated Notes,
6.875%, 05/01/14 Ba3 856
-----------
11,788
-----------
OIL AND GAS -- 12.14%
2,500 AmeriGas Partners, L.P., Senior
Notes, 7.25%, 05/20/15 (g) B2 2,575
The accompanying notes are an integral part of these financial statements.
12
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
---------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
$ 450 Chesapeake Energy Corporation,
Senior Notes,
6.375%, 06/15/15 (g) Ba3 $ 460
1,425 Chesapeake Energy Corporation,
Senior Notes,
6.625%, 01/15/16 (g) Ba3 1,471
175 Chesapeake Energy Corporation,
Senior Notes, 7%, 08/15/14 Ba3 186
125 Compton Petroleum Corporation,
Senior Notes, 9.90%, 05/15/09 B2 131
750 Denbury Resources, Inc., Senior
Subordinated Notes,
7.50%, 04/01/13 B2 780
325 Dresser-Rand Group Inc., Senior
Subordinated Notes,
7.375%, 11/01/14 (g) B3 338
400 El Paso Production Holding Co.,
Senior Notes 7.75%, 06/01/13 B3 428
150 Encore Acquisition Company,
Senior Subordinated Notes,
8.375%, 06/15/12 B2 163
1,725 Ferrellgas Partners L.P., Senior
Notes, 8.75%, 06/15/12 B2 1,725
200 Grant Prideco, Inc., Senior Notes
9%, 12/15/09 Ba3 219
1,050 Hanover Equipment Trust, Senior
Secured Notes, 8.75%, 09/01/11 B2 1,110
800 Inergy, L.P., Senior Notes,
6.875%, 12/15/14 (g) B1 782
650 Magnum Hunter Resources, Inc.,
Senior Notes, 9.60%, 03/15/12 B2 722
200 Northwest Pipeline Corporation,
Senior Notes, 8.125%, 03/01/10 Ba2 217
625 Ocean Rig Norway AS, Senior
Secured Notes,
8.375%, 07/01/13 (g) B3 634
130 Parker Drilling Company, Senior
Notes, 10.125%, 11/15/09 B2 137
1,025 Petroleum Geo-Services ASA,
Senior Notes, 10%, 11/05/10 Ba3 1,151
950 Petroleum Helicopters, Inc., Senior
Notes, 9.375%, 05/01/09 B1 1,002
775 Plains Exploration & Production Co.,
L.P., Senior Subordinated Notes,
8.75%, 07/01/12 Ba3 841
$ 600 Pride International, Inc., Senior
Notes, 7.375%, 07/15/14 Ba2 $ 656
225 Range Resources Corporation,
Senior Subordinated
6.375%, 03/15/15 B3 224
500 Range Resources Corporation,
Senior Subordinated Notes,
7.375%, 07/15/13 B3 532
375 Southern Natural Gas Company,
Senior Notes, 8.875%, 03/15/10 B1 412
1,100 Stone Energy Corporation, Senior
Subordinated Notes,
8.25%, 12/15/11 B2 1,155
500 Swift Energy Company, Senior
Notes, 7.625%, 07/15/11 B1 516
925 Universal Compression, Inc., Senior
Notes, 7.25%, 05/15/10 Ba3 964
675 Whiting Petroleum Corporation,
Senior Subordinated Notes,
7.25%, 05/1/13 B2 692
175 Williams Companies, Inc., Senior
Notes, 7.625%, 07/15/19 B1 197
3,725 Williams Companies, Inc., Senior
Notes, 8.125%, 03/15/12 B1 4,265
-----------
24,685
-----------
PERSONAL, FOOD AND MISCELLANEOUS SERVICES -- 2.12%
650 El Pollo Loco, Inc., Senior Secured
Notes, 9.25%, 12/15/09 B2 692
608 FTD, Inc., Senior Subordinated
Notes, 7.75%, 02/15/14 B3 593
700 Landry's Restaurants, Inc., Senior
Notes, 7.50%, 12/15/14 B2 679
850 O'Charleys, Inc., Senior
Subordinated Notes,
9%, 11/01/13 Ba3 918
250 Perkins Family Restaurants, L.P.,
Senior Notes,
10.125%, 12/15/07 B1 251
150 Real Mex Restaurants, Inc., Senior
Notes, 10.00%, 04/01/10 B2 158
1,125 Worldspan, L.P., Senior Notes,
9.518%, 02/15/11(g) B3 1,015
-----------
4,306
-----------
The accompanying notes are an integral part of these financial statements.
13
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
---------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
PERSONAL NON-DURABLE CONSUMER PRODUCTS -- 1.84%
$ 1,050 American Achievement Corporation,
Senior Subordinated Notes,
8.25%, 04/01/12 B3 $ 1,061
575 Chattem, Inc., Senior Subordinated
Notes, 7%, 03/01/14 B2 592
325 Church & Dwight Company, Inc.,
Senior Subordinated Notes,
6%, 12/15/12 Ba3 328
1,675 Rayovac Corporation, Senior
Subordinated Notes,
8.50%, 10/01/13 B3 1,750
-----------
3,731
-----------
PERSONAL TRANSPORTATION -- .39%
800 CHC Helicopter Corporation, Senior
Subordinated Notes,
7.375%, 05/01/14 B2 798
-----------
PRINTING AND PUBLISHING -- 8.77%
450 Advanstar Communications Inc.,
Senior Notes, 10.75%, 08/15/10 B3 492
425 Advanstar Communications Inc.,
Senior Subordinated Notes,
12%, 02/15/11 Caa2 453
675 Advanstar Inc., Senior Discount
Debentures, 15%, 10/15/11 (b) (e) 668
850 Affinity Group Inc., Senior
Subordinated Notes,
9%, 02/15/12 B3 852
350 Affinity Group Inc., Senior
Subordinated Notes,
10.875%, 02/15/12 Caa1 336
1,878 CanWest Media, Inc., Senior
Subordinated Notes,
8%, 09/15/12 B2 1,981
950 CanWest Media, Inc., Senior
Subordinated Notes,
10.625%, 05/15/11 B2 1,040
635 Cenveo Corporation, Senior Notes,
9.625%, 03/15/12 B1 689
1,137 Dex Media East LLC, Senior
Subordinated Notes,
12.125%, 11/15/12 B2 1,362
825 Dex Media West LLC, Senior Notes,
8.50%, 08/15/10 B1 903
$ 1,685 Dex Media West LLC, Senior
Subordinated Notes,
9.875%, 08/15/13 B2 $ 1,929
475 Haights Cross Communications
Operating Company, Senior
Notes, 11.75%, 08/15/11 Caa1 520
600Houghton Mifflin Company, Senior
Notes, 8.25%, 02/01/11 B3 621
475 Houghton Mifflin Company, Senior
Subordinated Notes,
9.875%, 02/01/13 Caa1 511
950 Jostens Intermediate Holding Corp.,
Senior Subordinated Notes,
7.625%, 10/1/12 B3 931
225 MediaNews Group, Inc., Senior
Subordinated Notes,
6.375%, 04/1/14 B2 215
400 MediaNews Group, Inc., Senior
Subordinated Notes,
6.875%, 10/1/13 B2 398
675 Morris Publishing Group, LLC,
Senior Subordinated Notes,
7%, 08/01/13 Ba3 658
2,095 R.H. Donnelley Inc., Senior
Subordinated Notes,
10.875%, 12/15/12 B2 2,441
350 Vertis, Inc., Senior Notes,
10.875%, 06/15/09 Caa1 333
475 Vertis, Inc., Senior Secured Notes,
9.75%, 04/01/09 B3 494
-----------
17,827
-----------
RETAIL STORES -- 3.16%
525 Alimentation Couche-Tard, Inc.,
Senior Subordinated Notes,
7.50%, 12/15/13 Ba3 555
618 Amazon.com, Inc., Convertible
Subordinated Notes,
4.75%, 02/01/09 B3 592
525 Gregg Appliances, Inc., Senior
Notes, 9%, 02/01/13 (g) B2 494
975 Jean Coutu Group, Inc., Senior
Notes, 7.625%, 08/01/12 B2 1,007
1,000 Jean Coutu Group, Inc., Senior
Subordinated Notes,
8.50%, 08/01/14 B3 983
The accompanying notes are an integral part of these financial statements.
14
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
---------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
$ 1,150 Leslie's Poolmart, Inc., Senior
Notes, 7.75%, 02/01/13 B2 $ 1,162
800 Movie Gallery, Inc., Senior Notes,
11%, 05/01/12 (g) B2 840
850 Nebraska Book Company, Inc.,
Senior Subordinated Notes,
8.625%, 03/15/12 Caa1 793
-----------
6,426
-----------
TELECOMMUNICATIONS -- 17.73%
1,872 Alamosa (Delaware), Inc., Senior
Notes, 11%, 07/31/10 Caa1 2,106
800 American Tower Corporation, Senior
Notes, 7.125%, 10/15/12 B3 842
125 American Tower Corporation, Senior
Notes, 7.50%, 05/01/12 B3 133
150 American Tower Corporation, Senior
Subordinated Notes,
7.25%, 12/01/11 B2 158
1,050 AT&T Corporation, Senior Notes,
9.05%, 11/15/11 Ba1 1,210
1,000 Call-Net Enterprises Inc., Senior
Secured Notes
10.625%, 12/31/08 B3 1,075
875 Centennial Communications Corp.,
Senior Notes, 8.125%, 02/01/14 B3 930
350 Centennial Communications Corp.,
Senior Notes, 10.125%, 06/15/13 B3 395
1,025 Eircom Funding plc, Senior
Subordinated Notes,
8.25%, 08/15/13 B1 1,112
425 Horizon PCS, Inc., Senior Notes,
11.375%, 07/15/12 B2 474
275 Inmarsat Finance, plc, Senior
Notes, 7.625%, 06/30/12 B2 291
1,425 Intelsat, Ltd., Senior Notes,
7.805%, 01/15/12 (g) B2 1,450
950 IPC Information Systems, Inc.,
Senior Subordinated Notes,
11.50%, 12/15/09 B3 1,024
450 iPCS Escrow Company, Senior
Notes, 11.50%, 05/01/12 B3 505
850 Leucadia National Corporation,
Senior Notes, 7%, 08/15/13 Ba2 853
975 MCI, Inc., Senior Notes,
7.688%, 05/01/09 B2 1,014
$ 3,075 NEXTEL Communications, Inc.,
Senior Notes, 6.875%, 10/31/13 Ba3 $ 3,290
2,875 NEXTEL Communications, Inc.,
Senior Notes, 7.375%, 08/01/15 Ba3 3,105
725 Nextel Partners, Inc., Senior
Notes, 8.125%, 07/01/11 Ba3 788
924 PanAmSat Corporation, Senior
Notes, 9%, 08/15/14 B1 1,007
100 PanAmSat Holdco, Senior Discount
Notes, 10.375%, 11/01/14 (b) B3 69
750 Primus Telecommunications
Holding, Inc., Senior Notes,
8%, 01/15/14 Caa1 398
125 Primus Telecommunications
Holding, Inc., Senior Notes,
12.75%, 10/15/09 Caa3 52
700 Qwest Communications
International, Inc., Senior Notes,
7.50%, 02/15/14 (g) B3 658
825 Qwest Corporation
6.671%, 06/15/13 (g) Ba3 842
2,197 Qwest Services Corp., Senior
Subordinated Notes,
13.50%, 12/15/10 Caa1 2,538
375 Rogers Wireless Inc., Senior
Secured Notes, 7.50%, 03/15/15 Ba3 407
2,400 Rogers Wireless Inc., Senior
Secured Notes, 8%, 12/15/12 B2 2,580
1,000 Rogers Wireless Inc., Senior
Secured Notes,
9.625%, 05/01/11 Ba3 1,175
875 Time Warner Telecom, Inc., Senior
Notes, 10.125%, 02/01/11 B3 877
875 Time Warner Telecom, LLC, Senior
Notes, 9.75%, 07/15/08 B3 879
1,025 TSI Telecommunications Services,
Inc., Senior Subordinated Notes,
12.75%, 02/01/09 B2 1,122
800 UbiquiTel Operating Co., Senior
Notes, 9.875%, 03/01/11 Caa1 870
625 US LEC Corporation, Senior
Notes, 11.89%, 10/01/09 B3 633
1,050 US Unwired Inc., Senior Secured
Notes, 10%, 06/15/12 Caa1 1,166
-----------
36,028
-----------
The accompanying notes are an integral part of these financial statements.
15
MOODY'S
PRINCIPAL RATING VALUE
AMOUNT/UNITS (UNAUDITED) (NOTE 1(a))
---------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- CONTINUED
TEXTILES AND LEATHER -- .46%
$ 100 Interface, Inc., Senior Subordinated
Notes, 9.50%, 02/01/14 Caa3 $ 101
850 Rafaella Apparel Group, Inc., Senior
Secured, 11.25%, 06/15/11(g) B2 822
-----------
923
-----------
UTILITIES -- 8.18%
350 The AES Corporation, Senior Notes,
7.75%, 03/01/14 B1 379
725 The AES Corporation, Senior Notes,
9.375%, 09/15/10 B1 819
1,700 The AES Corporation, Senior
Secured Notes, 9%, 05/15/15 (g) Ba3 1,904
1,050 Allegheny Energy Supply Company,
LLC, Senior Notes,
8.25%, 04/15/12 (g) Ba3 1,168
1,125 Midwest Generation, LLC, Senior
Secured Notes, 8.75%, 05/01/34 B1 1,260
2,372 NRG Energy, Inc., Senior Secured
Notes, 8%, 12/15/13 (g) B1 2,502
1,650 Orion Power Holdings, Inc., Senior
Notes, 12%, 05/01/10 B2 1,976
700 Roseton-Danskammer 2001, Senior
Secured Notes, 7.27%, 11/08/10 Caa2 697
1,775 Sierra Pacific Resources, Senior
Notes, 8.625%, 03/15/14 B2 1,959
1,500 TECO Energy, Inc., Senior Notes,
7%, 05/01/12 Ba2 1,616
1,650 Texas Genco LLC, Senior Notes,
6.875%, 12/15/14 (g) B1 1,737
600 Utilicorp Canada Financial
Corporation, Senior Notes,
7.75%, 06/15/11 B2 618
-----------
16,635
-----------
TOTAL CORPORATE DEBT SECURITIES
(Total cost of $316,406) 319,836
-----------
SHARES
---------------------------------------------------------------------------------
PREFERRED STOCK -- .54% (d)
BANKING -- 0.00%
57,935 WestFed Holdings, Inc., Cumulative,
Series A, Preferred Stock,
15.50% (a)(c) (e) --
-----------
BROADCASTING AND ENTERTAINMENT -- .16%
300 Spanish Broadcasting,
System, Inc., Series B,
Preferred Stock, 10.75% Caa1 321
-----------
MOODY'S
RATING VALUE
SHARES (UNAUDITED) (NOTE 1(a))
---------------------------------------------------------------------------------
MINING, STEEL, IRON, NON-PRECIOUS METALS -- 0.00%
18,000 Weirton Steel Corporation, Series C
Preferred Stock (a)(c) (e) $ --
-----------
UTILITIES -- .38%
700 NRG Energy, Inc., Convertible
Preferred Stock, 4%, (g) B3 770
-----------
TOTAL PREFERRED STOCK
(Total cost of $6,341) 1,091
-----------
COMMON STOCK AND WARRANTS -- 0.00% (d)
27,474 WestFed Holdings, Inc.,
Common Stock (a)(c) --
10,052 WKI Holding Company, Inc.,
Common Stock (c)(f) --
-----------
TOTAL COMMON STOCK AND WARRANTS
(Total cost of $2,295) --
-----------
PRINCIPAL
AMOUNT
---------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- .81% (d)
$ 1,000 Nordea North America, Inc.,
Commercial Paper, Due 07/20/05
Discount of 3.16% P-1 998
658 Sysco Corporation,
Commercial Paper, Due 07/01/05,
Discount of 3.35% P-1 658
-----------
TOTAL SHORT-TERM INVESTMENTS
(Total cost of $1,656) 1,656
-----------
TOTAL INVESTMENTS
(Total cost of $326,698) $ 322,583
===========
(a) Denotes issuer is in bankruptcy proceedings. Income is not being accrued.
(b) Securities are step interest bonds. Interest on these bonds accrues based
on the effective interest method which results in a constant rate of
interest being recognized.
(c) Security is valued at fair value using methods determined by the Board of
Directors. The total value of these securities at June 30, 2005 was $0.
(d) Percentages indicated are based on total net assets to common shareholders
of $203,265.
(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. Unless
otherwise noted, 144A Securities are deemed to be liquid. See Note 1(a) of
the Notes to Financial Statements for vaulation policy. Total market value
of Rule 144A securities amounted to $55,158 as of June 30, 2005.
The accompanying notes are an integral part of these financial statements.
16
The New America High Income Fund, Inc.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2005 (UNAUDITED)
ASSETS: (Dollars in thousands, except per share amounts)
INVESTMENTS IN SECURITIES, at value (Identified
cost of $326,698 see Schedule of Investments
and Notes 1 and 2) $ 322,583
INTEREST RATE SWAP, at fair value (Note 6) 1,286
CASH 3,802
RECEIVABLES:
Investment securities sold 2,643
Interest and dividends 6,240
PREPAID EXPENSES 106
------------
Total assets $ 336,660
------------
LIABILITIES:
PAYABLES:
Investment securities purchased $ 2,814
Dividend on common stock 178
Dividend on preferred stock 147
Swap settlement payable 57
ACCRUED EXPENSES (Note 3) 199
------------
Total liabilities $ 3,395
------------
AUCTION TERM PREFERRED STOCK:
$1.00 par value, 1,000,000 shares authorized,
5,200 shares issued and outstanding,
liquidation preference of $25,000 per share
(Notes 4 and 5) $ 130,000
------------
NET ASSETS $ 203,265
============
REPRESENTED BY:
COMMON STOCK:
$0.01 par value, 200,000,000 shares authorized,
93,868,118 shares issued and outstanding $ 939
CAPITAL IN EXCESS OF PAR VALUE 382,030
UNDISTRIBUTED NET INVESTMENT
INCOME (Note 2) 963
ACCUMULATED NET REALIZED LOSS FROM
SECURITIES TRANSACTIONS (Note 2) (177,838)
NET UNREALIZED DEPRECIATION ON
INVESTMENTS AND INTEREST RATE SWAPS (2,829)
------------
NET ASSETS APPLICABLE TO COMMON STOCK
(Equivalent to $2.17 per share, based on
93,868,118 shares outstanding) $ 203,265
============
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
JUNE 30, 2005 (UNAUDITED)
INVESTMENT INCOME: (Note 1) (Dollars in thousands)
Interest income $ 12,770
Other income 545
Dividend income 22
------------
Total investment income $ 13,337
------------
EXPENSES:
Cost of leverage:
Preferred and auction (Note 5) $ 165
------------
Total cost of leverage $ 165
------------
Professional services:
Management (Note 3) $ 576
Custodian and transfer agent 116
Legal (Note 8) 72
Audit 33
------------
Total professional services $ 797
------------
Administrative:
General administrative $ 232
Directors 110
NYSE 45
Shareholder communications 27
Miscellaneous 22
Shareholder meeting 19
------------
Total administrative $ 455
------------
Total expenses $ 1,417
------------
Net investment income $ 11,920
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT ACTIVITIES:
Realized gain on investments, net $ 1,926
------------
Net swap settlement disbursements (Note 6) $ (646)
------------
Change in net unrealized depreciation
on investments $ (12,370)
Change in unrealized appreciation
on interest rate swap agreement 363
------------
Total change in net unrealized depreciation
on investments and interest rate swap $ (12,007)
------------
Net loss on investments and interest rate swap $ (10,727)
------------
COST OF PREFERRED LEVERAGE
Distributions to preferred stockholders $ (1,880)
------------
Net decrease in net assets resulting
from operations $ (687)
============
The accompanying notes are an integral part of these financial statements.
17
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS FOR THE
ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004
--------------- --------------
FROM OPERATIONS: (Dollars in thousands, except per share amounts)
Net investment income $ 11,920 $ 24,824
Realized gain (loss) on investments, net 1,926 (992)
Net swap settlement disbursements (646) (3,071)
Change in net unrealized appreciation (depreciation) on investments and other
financial instruments (12,007) 9,758
Distributions from net investment income related to preferred stock
Dividends to preferred stockholders (1,880) (1,999)
--------------- --------------
Net increase (decrease) in net assets resulting from operations $ (687) $ 28,520
--------------- --------------
FROM FUND SHARE AND AUCTION TERM PREFERRED STOCK TRANSACTIONS:
Proceeds from rights offering (23,397,095 shares), net of $84 of offering costs in 2004
(Note 9) $ -- $ (84)
Net asset value of 339,724 shares issued to common stockholders for reinvestment of
dividends in 2004 -- 750
--------------- --------------
Increase in net assets resulting from fund share transactions $ -- $ 666
--------------- --------------
DISTRIBUTIONS TO COMMON STOCKHOLDERS:
From net investment income ($.09 and $.23 per share in 2005 and 2004,
respectively) $ (8,213) $ (21,726)
--------------- --------------
Total net increase (decrease) in net assets $ (8,900) $ 7,460
--------------- --------------
NET ASSETS APPLICABLE TO COMMON STOCK:
Beginning of period $ 212,165 $ 204,705
--------------- --------------
End of period (Including $963 and $(864) of undistributed net investment income at
June 30, 2005 and December 31, 2004, respectively) $ 203,265 $ 212,165
=============== ==============
The accompanying notes are an integral part of these financial statements.
18
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, 2005 FOR THE YEARS ENDED DECEMBER 31,
(UNAUDITED) 2004 2003 (b) 2002 2001 (c) 2000
--------------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE:
Beginning of period $ 2.26 $ 2.19 $ 1.89 $ 2.61 $ 2.85 $ 3.86
--------------- ---------- ---------- ---------- ---------- ----------
NET INVESTMENT INCOME .13 .26 .26# .37 .48 .60
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
OTHER FINANCIAL INSTRUMENTS (.10) .09 .34 (.72) (.24) (1.00)
DISTRIBUTIONS FROM NET INVESTMENT INCOME
RELATED TO PREFERRED STOCK: (.03) (.05) (.06) (.08) (.12) (.18)
--------------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS -- .30 .54 (.43) .12 (.58)
--------------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From net investment income (.09) (.23) (.22) (.29) (.36) (.43)
--------------- ---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (.09) (.23) (.22) (.29) (.36) (.43)
--------------- ---------- ---------- ---------- ---------- ----------
Effect of rights offering and related
expenses; and Auction Term Preferred
Stock offering costs and sales load -- -- (.02) -- -- --
--------------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE:
End of period $ 2.17 $ 2.26 $ 2.19 $ 1.89 $ 2.61 $ 2.85
=============== ========== ========== ========== ========== ==========
PER SHARE MARKET VALUE:
End of period $ 2.12 $ 2.19 $ 2.16 $ 2.01 $ 2.64 $ 2.63
=============== ========== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN+ .79% 12.80% 19.23% (12.97)% 13.97% (3.84)%
=============== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
19
FOR THE
SIX MONTHS
ENDED
JUNE 30, 2005 FOR THE YEARS ENDED DECEMBER 31,
(UNAUDITED) 2004 2003 (b) 2002 2001 (c) 2000
--------------- ---------- ---------- ---------- ---------- ----------
NET ASSETS, END OF PERIOD, APPLICABLE
TO COMMON STOCK (a) $ 203,265 $ 212,165 $ 204,705 $ 131,170 $ 178,231 $ 191,928
=============== ========== ========== ========== ========== ==========
NET ASSETS, END OF PERIOD, APPLICABLE
TO PREFERRED STOCK (a) $ 130,000 $ 130,000 $ 130,000 $ 100,000 $ 150,000 $ 160,000
=============== ========== ========== ========== ========== ==========
TOTAL NET ASSETS APPLICABLE
TO COMMON AND PREFERRED STOCK,
END OF PERIOD (a) $ 333,265 $ 342,165 $ 334,705 $ 231,170 $ 328,231 $ 351,928
=============== ========== ========== ========== ========== ==========
EXPENSE RATIOS:
Ratio of preferred and other leverage
expenses to average net assets* .16%** .15% .16% .18% .17% .19%
Ratio of operating expenses to average
net assets* 1.22%** 1.27% 1.56% 1.46% 1.11% .99%
--------------- ---------- ---------- ---------- ---------- ----------
RATIO OF TOTAL EXPENSES TO AVERAGE
NET ASSETS* 1.38%** 1.42% 1.72% 1.64% 1.28% 1.18%
=============== ========== ========== ========== ========== ==========
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS* 11.61%** 12.02% 12.81% 16.48% 16.70% 17.46%
RATIO OF TOTAL EXPENSES TO AVERAGE
NET ASSETS APPLICABLE TO COMMON
AND PREFERRED STOCK .85%** .87% 1.05% .89% .71% .64%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS APPLICABLE TO
COMMON AND PREFERRED STOCK 7.13%** 7.38% 7.79% 8.91% 9.23% 9.41%
PORTFOLIO TURNOVER RATE 31.74% 70.90% 120.47% 82.47% 38.89% 45.58%
(a) Dollars in thousands.
(b) The Fund issued Series C ATP on October 17, 2003. The per share data and
ratios for the year ended December 31, 2003 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.
** Annualized
# Calculation is based on average shares outstanding during the indicated
period due to the per share effect of the Fund's August, 2003 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.
20
The New America High Income Fund, Inc.
INFORMATION REGARDING
SENIOR SECURITIES
JUNE 30, 2005 AS OF DECEMBER 31,
(UNAUDITED) 2004 2003 2002 2001 2000
--------------- --------------- --------------- --------------- --------------- ---------------
TOTAL AMOUNT OUTSTANDING:
Preferred Stock $ 130,000,000 $ 130,000,000 $ 130,000,000 $ 100,000,000 $ 150,000,000 $ 160,000,000
ASSET COVERAGE:
Per Preferred Stock Share (1) $ 64,089 $ 65,801 $ 64,366 $ 57,793 $ 54,705 $ 54,989
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 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.
21
The New America High Income Fund, Inc.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 (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.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a Fund that is more diversified. 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
accounting principles generally accepted in the United States for investment
companies 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 with
original 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, for which market quotations are not readily available with a
cost of approximately $7,594,000 and a value of $0, are valued in good faith at
fair market value using methods determined by the Board of Directors.
(b) SECURITIES TRANSACTIONS AND NET INVESTMENT INCOME--Securities
transactions are recorded on trade date. Realized gains or losses on sales of
securities are calculated on the identified cost basis. 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
22
discount and step interest bonds is accrued based on the effective interest
method. The Fund does not amortize market premiums or discounts for tax
purposes. Dividend payments received in the 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, 2005, the total cost of securities (including temporary cash
investments) for federal income tax purposes was approximately $328,358,000.
Aggregate gross unrealized gain on securities in which there was an excess of
value over tax cost was approximately $7,150,000. Aggregate unrealized loss on
securities in which there was an excess of tax cost over value was approximately
$12,925,000. Net unrealized loss on investments for tax purposes at June 30,
2005 was approximately $5,775,000
At December 31, 2004, 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
21,821,000 December 31, 2008
67,043,000 December 31, 2009
45,239,000 December 31, 2010
7,387,000 December 31, 2011
125,000 December 31, 2012
----------------
$ 177,196,000
================
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 $23,725,000 in 2004 was from ordinary income.
As of December 31, 2004, the components of distributable earnings on a tax
basis were approximately:
Undistributed Net Investment Income $ 443,000
Undistributed Long-Term Gain --
Unrealized Gain $ 8,001,000
Capital Losses Carry Forward
and Post October Losses Deferred $ 179,118,000
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 market discount adjustments.
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 results
in additional interest income in some years and decreased interest income in
others for financial reporting purposes only. The Fund does not amortize market
discounts or premiums for tax purposes. Therefore, the additional or decreased
interest income for financial reporting purposes does not result in additional
or decreased common stock dividend income.
(3) INVESTMENT ADVISORY AGREEMENT
T. Rowe Price Associates, Inc. (T. Rowe Price), the Fund's Investment
Advisor, earned approximately $576,000 in management fees during the six months
23
ended June 30, 2005. 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,
2005, the fee payable to T. Rowe Price was approximately $94,000, which was
included in accrued expenses on the accompanying statement of assets and
liabilities.
(4) AUCTION TERM PREFERRED STOCK (ATP)
On October 17, 2003, the Fund issued 1,200 shares of Series C ATP. The
underwriting discount of $300,000 and offering expenses of $358,000 were
recorded as a reduction of the capital in excess of par value on common stock.
The Fund had 5,200 shares of ATP issued and outstanding at June 30, 2005. 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 2.38% - 3.37% for the
six months ended June 30, 2005. The average dividend rate as of June 30, 2005
was 3.26%.
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 $165,000 for
service charges for the six months ended June 30, 2005. 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
National 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 2.33% to 3.15% for the six months ended
24
June 30, 2005. The effective date, notional amount, maturity and fixed rate of
the swap is as follows:
NOTIONAL FIXED
EFFECTIVE CONTRACT ANNUAL
DATE AMOUNT MATURITY RATE
11/5/04 $130 million 11/5/09 3.775%
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 recognizes all freestanding derivative instruments in the balance
sheet as either assets or liabilities and measures them at fair value. Any
change in the unrealized gain or loss is recorded in current earnings. For the
six months ended June 30, 2005, the Fund's obligations under the swap agreements
were more than the amount received from Fleet by approximately $646,000 and such
amount is included in the accompanying statement of operations.
The estimated fair value of the interest rate swap agreement at June 30, 2005
amounted to approximately $1,286,000 of unrealized gain 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, 2005 were approximately:
Cost of purchases 103,440,000
Proceeds of sales or maturities 102,633,000
(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
$60,000 for the six months ended June 30, 2005.
The Fund paid approximately $142,000 during the six months ended June 30,
2005 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 $42,349,000 and shares of 23,397,095 were
recorded. In addition, offering expense of approximately $817,000 was netted
against the rights offering proceeds in 2003 and $84,000 in 2004.
25
SUPPLEMENTAL INFORMATION
AVAILABILITY OF PORTFOLIO HOLDINGS
The Fund provides a complete schedule of its portfolio holdings quarterly. The
lists of holdings as of the end of the second and fourth quarters appear in the
Fund's semi-annual and annual reports to shareholders, respectively. The
schedules of portfolio holdings as of the end of the first and third quarters
are filed with the Securities and Exchange Commission (the "SEC") on Form N-Q
(the "Forms") within 60 days of the end of the first and third quarters.
Shareholders can look up the Forms on the SEC's web site at www.sec.gov. The
Forms may also be reviewed and copied at the SEC's public reference room in
Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about
the SEC's web site and their public reference room. In addition, the Forms may
be reviewed on the Fund's web site at www.newamerica-hyb.com
COMPLIANCE CERTIFICATIONS
(Unaudited)
On May 18, 2005, your Fund submitted a CEO annual certification to the New York
Stock Exchange (NYSE) on which the Fund's principal executive officer certified
that he was not aware, as of that date, of any violation by the Fund of the
NYSE's Corporate Governance listing standards. In addition, as required by
Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Fund's
principal executive and principal financial officers have made quarterly
certifications, included in filings with the SEC on Forms N-CSR and N-Q,
relating to, among other things, the Fund's disclosure controls and procedures
and internal control over financial reporting.
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.
26
DIRECTORS
Robert F. Birch
Joseph L. Bower
Richard E. Floor
Bernard J. Korman
Marguerite A. Piret
DIRECTOR EMERITUS
Ernest E. Monrad
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
Computershare Shareholder Services, Inc.
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
27
Computershare Shareholder Services, Inc.
P.O. Box 43011
Providence, RI 02940-3011
3709-SAR-05
Item 2 - Code of Ethics - Not required in semi-annual filing.
Item 3 - Audit Committee Financial Experts - Not required in a semi-annual
filing.
Item 4 - Principal Accountant Fees and Services - Not required in semi-annual
filing.
Item 5 - Audit Committee of Listed Registrant - Not required in semi-annual
filing.
Item 6 - Schedule of Investments - Included as part of the report to
shareholders filed under Item 1 of this Form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not required in semi-annual filing.
Item 8 - Not required in semi-annual filing.
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not applicable.
Item 10 - Submission of Matters to a Vote of Security Holders - Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Fund's principal executive officer and principal financial officer
concluded that the Fund disclosure controls and procedures (as defined in
Rule 30a-3(c) under the 1940 Act) provide reasonable assurances that information
required to be disclosed by the Fund on Form N-CSR is recorded, processed,
summarized and reported within the required time periods and that information
required to be disclosed by the Fund in the reports that it files or submits on
Form N-CSR is accumulated and communicated to the Fund's management, including
its principal executive and principal financial officers, as appropriate to
allow timely decisions regarding required disclosure, 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 Fund's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during
the Fund's first fiscal half-year that has materially affected, or is reasonably
likely to materially affect, the Fund's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Not Applicable.
(a)(2) The certifications required by Rule 30a-2(a) under the 1940 Act.
(a)(3) Not Applicable.
(b) The certifications required by Rule 30a-2(b) under the 1940 Act.
2
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: President and Director
Date: August 26, 2005
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: President
Date: August 26, 2005
By: /s/ Ellen E. Terry
------------------------------------
Name: Ellen E. Terry
Title: Treasurer
Date: August 26, 2005
5