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 811-08795
BROOKFIELD HIGH INCOME FUND INC.
(Exact name of registrant as specified in charter)
BROOKFIELD PLACE
250 VESEY STREET, 15th Floor
NEW YORK, NEW YORK 10281-1023
(Address of principal executive offices) (Zip code)
BRIAN F. HURLEY, PRESIDENT
BROOKFIELD HIGH INCOME FUND INC.
BROOKFIELD PLACE
250 VESEY STREET, 15th Floor
NEW YORK, NEW YORK 10281-1023
(Name and address of agent for service)
Registrant’s telephone number, including area code: (855) 777-8001
Date of fiscal year end: September 30, 2016
Date of reporting period: March 31, 2016
Item 1. Reports to Shareholders.
Brian F. Hurley President | Craig Noble Chief Executive Officer amd Chief Investment Officer Brookfield Investment Management Inc. |
Portfolio Characteristics (Unaudited)
PORTFOLIO STATISTICS | |
Annualized distribution rate1 | 12.82% |
Weighted average coupon | 6.68% |
Weighted average life | 5.57 years |
Percentage of leveraged assets | 27.94% |
Total number of holdings | 123 |
CREDIT QUALITY2 | |
BBB and Above | 4.2% |
BB | 29.1% |
B | 47.1% |
CCC and Below | 11.1% |
Unrated | 2.4% |
Securitized Products | 2.7% |
Equities | 3.4% |
Total | 100.0% |
ASSET ALLOCATION3 | |
Residential Mortgage Related Holdings | 3.8% |
Corporate Bonds | 121.5% |
Term Loans | 5.8% |
Common Stocks | 2.7% |
Exchange Traded Fund | 1.4% |
Warrants | 0.6% |
Short Term Investment | 1.5% |
Liabilities in Excess of Other Assets | (37.3%) |
Total | 100.0% |
1 | The distribution rate referenced above is calculated as the annualized amount of the most recent monthly distribution declared divided by March 31, 2016 stock price. This calculation does not include any non-income items such as loan proceeds or borrowings. The Fund estimates that it has distributed more than its net investment income and net realized capital gains; therefore, a portion of your distribution may be a return of capital. Fiscal Year-to-date through March 31, 2016, 32% of the Fund’s distributions is a return of capital, but will be determined at the Fund's fiscal year-end. |
2 | Sector and credit ratings allocations are expressed as a percentage of total investments (by market value), not total assets and will vary over time. Cash is excluded. Credit ratings are expressed as a percentage of total investments (by market value) and will vary over time. Credit allocation excludes equities. The higher of an S&P or Moody’s rating was used. If a Moody’s rating was used, we converted such rating to a comparable S&P ratings. |
3 | Percentages are based on net assets. |
Schedule of Investments (Unaudited)
Interest Rate | Maturity | Principal Amount (000s) | Value | |||
RESIDENTIAL MORTGAGE RELATED HOLDINGS – 3.8% | ||||||
Non-Agency Mortgage-Backed Securities – 3.8% | ||||||
Alternative Loan Trust | ||||||
Series 2007-OA3, Class 1A1 1,2,3 | 0.57% | 04/25/47 | $ 1,480 | $ 1,227,960 | ||
GSAMP Trust | ||||||
Series 2006-HE8, Class A2C 2,3 | 0.60 | 01/25/37 | 1,475 | 1,169,145 | ||
Home Equity Asset Trust | ||||||
Series 2006-7, Class 2A3 2,3 | 0.58 | 01/25/37 | 2,060 | 1,399,515 | ||
Nomura Resecuritization Trust | ||||||
Series 2014-1R, Class 2A11 3,4 | 0.70 | 02/26/37 | 4,362 | 2,162,741 | ||
Securitized Asset Backed Receivables LLC Trust | ||||||
Series 2007-BR4, Class A2B 2,3 | 0.63 | 05/25/37 | 2,493 | 1,440,363 | ||
Total Non-Agency Mortgage-Backed Securities | 7,399,724 | |||||
Total RESIDENTIAL MORTGAGE RELATED HOLDINGS (Cost $8,180,403) | 7,399,724 | |||||
CORPORATE BONDS – 121.5% | ||||||
Automotive – 3.8% | ||||||
American Axle & Manufacturing, Inc. 1 | 6.25 | 03/15/21 | 3,190 | 3,293,675 | ||
American Axle & Manufacturing, Inc. 1 | 7.75 | 11/15/19 | 650 | 711,750 | ||
Ford Motor Co. 1 | 6.50 | 08/01/18 | 3,100 | 3,378,839 | ||
Motors Liquidation Co. 5,6 | 8.38 | 07/15/33 | 8,250 | 825 | ||
Total Automotive | 7,385,089 | |||||
Basic Industry – 8.8% | ||||||
Alcoa, Inc. 1 | 5.55 | 02/01/17 | 1,000 | 1,023,300 | ||
Arch Coal, Inc. 1,6 | 7.25 | 06/15/21 | 6,100 | 38,125 | ||
Cascades, Inc. 1,4,7 | 5.50 | 07/15/22 | 3,000 | 2,885,625 | ||
Hexion, Inc. | 8.88 | 02/01/18 | 1,425 | 976,125 | ||
Hexion, Inc. 1 | 9.00 | 11/15/20 | 4,500 | 1,811,250 | ||
INEOS Group Holdings SA 1,4,7 | 6.13 | 08/15/18 | 3,800 | 3,864,106 | ||
Millar Western Forest Products Ltd. 7 | 8.50 | 04/01/21 | 1,575 | 661,500 | ||
PulteGroup, Inc. 1 | 6.38 | 05/15/33 | 2,350 | 2,397,000 | ||
USG Corp. 1 | 9.75 | 01/15/18 | 3,075 | 3,439,387 | ||
Total Basic Industry | 17,096,418 | |||||
Capital Goods – 6.5% | ||||||
Ardagh Packaging Finance PLC 1,4,7 | 6.75 | 01/31/21 | 3,625 | 3,507,188 | ||
Crown Cork & Seal Company, Inc. 1 | 7.38 | 12/15/26 | 3,950 | 4,216,625 | ||
DP World Sukuk Ltd. 4,7 | 6.25 | 07/02/17 | 400 | 418,200 | ||
Terex Corp. 1 | 6.00 | 05/15/21 | 3,000 | 2,902,500 | ||
Terex Corp. 1 | 6.50 | 04/01/20 | 1,100 | 1,061,500 | ||
Tyco Electronics Group SA 1,7 | 6.55 | 10/01/17 | 500 | 534,221 | ||
Total Capital Goods | 12,640,234 | |||||
Consumer Goods – 3.5% | ||||||
ACCO Brands Corp. 1 | 6.75 | 04/30/20 | 3,575 | 3,780,562 | ||
Post Holdings, Inc. 1 | 7.38 | 02/15/22 | 2,825 | 2,987,438 | ||
Total Consumer Goods | 6,768,000 |
Schedule of Investments (Unaudited) (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |||
CORPORATE BONDS (continued) | ||||||
Consumer Non-Cyclical – 0.7% | ||||||
Anheuser-Busch InBev Worldwide, Inc. 1 | 7.75% | 01/15/19 | $ 1,000 | $ 1,165,514 | ||
DP World Ltd. 4,7 | 6.85 | 07/02/37 | 200 | 203,892 | ||
Total Consumer Non-Cyclical | 1,369,406 | |||||
Electric Utilities & Generation – 1.7% | ||||||
TerraForm Power Operating LLC 4 | 5.88 | 02/01/23 | 4,000 | 3,240,000 | ||
Energy – 20.7% | ||||||
AmeriGas Finance LLC 1 | 7.00 | 05/20/22 | 1,025 | 1,050,625 | ||
Blue Racer Midstream LLC 1,4 | 6.13 | 11/15/22 | 4,200 | 3,496,500 | ||
BreitBurn Energy Partners LP 1,6 | 8.63 | 10/15/20 | 3,475 | 347,500 | ||
Crestwood Midstream Partners LP 1 | 6.00 | 12/15/20 | 3,550 | 2,786,750 | ||
EP Energy LLC 1 | 6.38 | 06/15/23 | 3,725 | 1,713,500 | ||
EV Energy Partners LP 1 | 8.00 | 04/15/19 | 4,400 | 1,100,000 | ||
Ferrellgas Partners LP 1 | 8.63 | 06/15/20 | 3,375 | 3,121,875 | ||
Global Partners LP | 6.25 | 07/15/22 | 4,650 | 3,464,250 | ||
Holly Energy Partners LP | 6.50 | 03/01/20 | 3,000 | 2,970,000 | ||
ION Geophysical Corp. | 8.13 | 05/15/18 | 1,975 | 987,500 | ||
LBC Tank Terminals Holding Netherlands BV 1,4,7 | 6.88 | 05/15/23 | 3,325 | 3,092,250 | ||
Linn Energy LLC | 7.75 | 02/01/21 | 250 | 28,750 | ||
Linn Energy LLC 1 | 8.63 | 04/15/20 | 3,200 | 368,000 | ||
Pioneer Natural Resources Co. | 6.65 | 03/15/17 | 1,250 | 1,292,561 | ||
Precision Drilling Corp. 1,7 | 6.63 | 11/15/20 | 1,800 | 1,440,000 | ||
Suburban Propane Partners LP | 7.38 | 08/01/21 | 2,800 | 2,849,000 | ||
Targa Pipeline Partners LP 1 | 5.88 | 08/01/23 | 4,000 | 3,610,000 | ||
Tesoro Logistics LP 1 | 6.13 | 10/15/21 | 4,250 | 4,250,000 | ||
Trinidad Drilling Ltd. 1,4,7 | 7.88 | 01/15/19 | 2,865 | 2,188,144 | ||
W&T Offshore, Inc. | 8.50 | 06/15/19 | 1,215 | 145,800 | ||
Total Energy | 40,303,005 | |||||
Financial Services – 1.5% | ||||||
Puma International Financing SA 4,7 | 6.75 | 02/01/21 | 3,125 | 2,998,438 | ||
Healthcare – 7.7% | ||||||
CHS/Community Health Systems, Inc. 1 | 7.13 | 07/15/20 | 3,050 | 2,882,250 | ||
CHS/Community Health Systems, Inc. | 6.88 | 02/01/22 | 1,525 | 1,376,313 | ||
DJO Finco, Inc. 4 | 8.13 | 06/15/21 | 250 | 221,250 | ||
HCA, Inc. | 5.88 | 05/01/23 | 1,775 | 1,861,531 | ||
HCA, Inc. 1 | 8.00 | 10/01/18 | 3,475 | 3,892,000 | ||
inVentiv Health, Inc. 1 | 10.00 | 08/15/18 | 569 | 545,529 | ||
inVentiv Health, Inc. 4,8 | 10.00 | 08/15/18 | 936 | 945,498 | ||
Kindred Healthcare, Inc. | 6.38 | 04/15/22 | 3,750 | 3,379,687 | ||
Total Healthcare | 15,104,058 | |||||
Leisure – 10.7% | ||||||
Boyd Gaming Corp. 4 | 6.38 | 04/01/26 | 100 | 103,750 | ||
Boyd Gaming Corp. 1 | 9.00 | 07/01/20 | 3,625 | 3,833,437 | ||
Cedar Fair LP 1 | 5.25 | 03/15/21 | 4,200 | 4,352,250 | ||
GLP Capital LP 1 | 5.38 | 11/01/23 | 4,525 | 4,525,000 | ||
Isle of Capri Casinos, Inc. | 5.88 | 03/15/21 | 1,700 | 1,751,000 |
Schedule of Investments (Unaudited) (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |||
CORPORATE BONDS (continued) | ||||||
MGM Resorts International 1 | 7.63% | 01/15/17 | $ 2,875 | $ 2,982,813 | ||
Palace Entertainment Holdings LLC 1,4 | 8.88 | 04/15/17 | 3,475 | 3,370,750 | ||
Total Leisure | 20,919,000 | |||||
Media – 10.9% | ||||||
CCO Holdings LLC | 5.75 | 01/15/24 | 5,550 | 5,778,937 | ||
Cumulus Media Holdings, Inc. 1 | 7.75 | 05/01/19 | 2,455 | 932,900 | ||
iHeart Communications, Inc. 1 | 9.00 | 03/01/21 | 3,550 | 2,471,688 | ||
Lamar Media Corp. | 5.38 | 01/15/24 | 4,150 | 4,327,620 | ||
Mediacom Broadband LLC | 6.38 | 04/01/23 | 3,150 | 3,220,875 | ||
Neptune Finco Corp. 4 | 10.88 | 10/15/25 | 4,125 | 4,483,875 | ||
Total Media | 21,215,895 | |||||
Pipelines – 1.9% | ||||||
MPLX LP 4 | 4.88 | 12/01/24 | 3,900 | 3,600,624 | ||
Retail – 3.4% | ||||||
L Brands, Inc. 1 | 7.60 | 07/15/37 | 2,500 | 2,600,000 | ||
L Brands, Inc. | 8.50 | 06/15/19 | 800 | 936,080 | ||
New Albertsons, Inc. 1 | 7.75 | 06/15/26 | 3,300 | 3,085,500 | ||
Total Retail | 6,621,580 | |||||
Services – 10.7% | ||||||
Avis Budget Car Rental LLC 1 | 5.50 | 04/01/23 | 1,550 | 1,503,500 | ||
Casella Waste Systems, Inc. 1 | 7.75 | 02/15/19 | 3,400 | 3,448,875 | ||
Dynagas LNG Partners LP 1,7 | 6.25 | 10/30/19 | 2,825 | 1,892,750 | ||
H&E Equipment Services, Inc. 1 | 7.00 | 09/01/22 | 4,250 | 4,313,750 | ||
Sotheby's 1,4 | 5.25 | 10/01/22 | 1,850 | 1,655,750 | ||
Teekay Offshore Partners LP 1,7 | 6.00 | 07/30/19 | 3,750 | 2,353,125 | ||
United Rentals North America, Inc. 1 | 5.75 | 11/15/24 | 3,625 | 3,625,000 | ||
United Rentals North America, Inc. | 7.63 | 04/15/22 | 1,225 | 1,304,625 | ||
United Rentals North America, Inc. 1 | 8.25 | 02/01/21 | 797 | 832,865 | ||
Total Services | 20,930,240 | |||||
Telecommunications – 21.5% | ||||||
CenturyLink, Inc. 1 | 7.65 | 03/15/42 | 3,050 | 2,516,250 | ||
CyrusOne LP 1 | 6.38 | 11/15/22 | 4,425 | 4,590,937 | ||
FairPoint Communications, Inc. 1,4 | 8.75 | 08/15/19 | 2,250 | 2,131,875 | ||
Frontier Communications Corp. 1,4 | 11.00 | 09/15/25 | 6,150 | 6,180,750 | ||
Intelsat Luxembourg SA 1,7 | 7.75 | 06/01/21 | 6,425 | 1,911,438 | ||
Level 3 Financing, Inc. 1 | 5.38 | 05/01/25 | 5,775 | 5,847,187 | ||
Qwest Capital Funding, Inc. 1 | 6.88 | 07/15/28 | 475 | 394,250 | ||
Qwest Corp. 1 | 6.88 | 09/15/33 | 850 | 828,784 | ||
SBA Communications Corp. | 4.88 | 07/15/22 | 5,000 | 5,062,500 | ||
T-Mobile USA, Inc. 1 | 6.63 | 04/01/23 | 3,340 | 3,515,350 | ||
Wind Acquisition Finance SA 4,7 | 7.38 | 04/23/21 | 1,150 | 1,040,750 | ||
Windstream Services LLC 1 | 7.50 | 06/01/22 | 5,725 | 4,393,938 | ||
Zayo Group LLC | 6.00 | 04/01/23 | 3,525 | 3,518,373 | ||
Total Telecommunications | 41,932,382 |
Schedule of Investments (Unaudited) (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |||
CORPORATE BONDS (continued) | ||||||
Transportation – 1.6% | ||||||
Watco Companies LLC 1,4 | 6.38% | 04/01/23 | $ 3,275 | $ 3,193,125 | ||
Utility – 5.9% | ||||||
AES Corp. 1 | 4.88 | 05/15/23 | 4,250 | 4,090,625 | ||
NRG Energy, Inc. | 6.25 | 07/15/22 | 3,975 | 3,696,750 | ||
NRG Yield Operating LLC | 5.38 | 08/15/24 | 4,050 | 3,766,500 | ||
Total Utility | 11,553,875 | |||||
Total CORPORATE BONDS (Cost $272,875,957) | 236,871,369 | |||||
TERM LOANS – 5.8% | ||||||
Caesars Growth Properties Holdings LLC 3,9 | 6.25 | 04/10/21 | 1,719 | 1,398,075 | ||
FairPoint Communications, Inc. 3,9 | 7.50 | 02/14/19 | 1,940 | 1,919,785 | ||
FMG Resources August 2006 Property Ltd. 3,9 | 4.25 | 06/30/19 | 3,416 | 2,877,245 | ||
Four Seasons Holdings, Inc. 3,9 | 6.25 | 12/13/20 | 3,325 | 3,286,197 | ||
MEG Energy Corp. 3,9 | 3.75 | 03/31/20 | 1,750 | 1,405,250 | ||
Texas Competitive Electric Holdings Company LLC 3,9 | 4.92 | 10/10/17 | 1,566 | 446,353 | ||
Total TERM LOANS (Cost $12,763,256) | 11,332,905 |
Shares | Value | |||||
COMMON STOCKS – 2.7% | ||||||
Automotive – 0.4% | ||||||
Ford Motor Co. | 61,300 | $ 827,550 | ||||
Basic Industry – 0.1% | ||||||
EnLink Midstream Partners LP | 7,800 | 94,146 | ||||
Capital Goods – 0.6% | ||||||
General Electric Co. | 37,450 | 1,190,535 | ||||
Consumer Staples – 0.2% | ||||||
B&G Foods, Inc. | 13,810 | 480,726 | ||||
Energy – 0.2% | ||||||
BreitBurn Energy Partners LP 10 | 13,075 | 7,314 | ||||
EV Energy Partners LP | 7,900 | 15,326 | ||||
Thunderbird Resources Equity, Inc. 5,10 | 11 | 453,548 | ||||
Total Energy | 476,188 | |||||
Telecommunications – 0.8% | ||||||
CenturyLink, Inc. | 33,160 | 1,059,794 | ||||
Verizon Communications, Inc. | 7,500 | 405,600 | ||||
Total Telecommunications | 1,465,394 | |||||
Utility – 0.4% | ||||||
AES Corp. | 66,250 | 781,750 | ||||
Total COMMON STOCKS (Cost $5,975,210) | 5,316,289 |
Schedule of Investments (Unaudited) (continued)
Shares | Value | |||||
EXCHANGE TRADED FUND – 1.4% | ||||||
SPDR® Barclays High Yield Bond ETF | 80,500 | $ 2,757,125 | ||||
Total EXCHANGE TRADED FUND (Cost $2,656,613) | 2,757,125 |
WARRANTS – 0.6% | ||||||
Automotive – 0.6% | ||||||
General Motors Co. 10 Expiration: July 2016 Exercise Price: $10.00 | 34,193 | 740,279 | ||||
General Motors Co. 10 Expiration: July 2019 Exercise Price: $18.33 | 34,193 | 467,076 | ||||
Total Automotive | 1,207,355 | |||||
Total WARRANTS (Cost $1,969,136) | 1,207,355 |
Interest Rate | ||||||
SHORT TERM INVESTMENT – 1.5% | ||||||
STIT Liquid Assets Portfolio, Institutional Class 3 | 0.45% | 2,844,266 | 2,844,266 | |||
Total SHORT TERM INVESTMENT (Cost $2,844,266) | 2,844,266 | |||||
Total Investments – 137.3% (Cost $307,264,841) | 267,729,033 | |||||
Liabilities in Excess of Other Assets – (37.3)% | (72,749,044) | |||||
TOTAL NET ASSETS – 100.0% | $ 194,979,989 |
The following notes should be read in conjunction with the accompanying Schedule of Investments. | |
1 | — All or a portion of this security is pledged as collateral for credit facility. |
2 | — Security is a “step up” bond where the coupon increases or steps up at a predetermined date. |
3 | — Variable rate security – Interest rate shown is the rate in effect as of March 31, 2016. |
4 | — Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold in transactions exempt from registration, normally to qualified institutional buyers. As of March 31, 2016, the total value of all such securities was $54,985,081 or 28.2% of net assets. |
5 | — Security fair valued in good faith pursuant to the fair value procedures adopted by the Board of Directors. As of March 31, 2016, the total value of all such securities was $454,373 or 0.2% of net assets. |
6 | — Issuer is currently in default on its regularly scheduled interest payment. |
7 | — Foreign security or a U.S. security of a foreign company. |
8 | — Payment in kind security. |
9 | — Private Placement. |
10 | — Non-income producing security. |
Statement of Assets and Liabilities (Unaudited)
Assets: | |
Investments in securities, at value (Note 2) | $264,884,767 |
Investments in short term securities, at value | 2,844,266 |
Total investments, at value | 267,729,033 |
Cash | 46,501 |
Interest and dividends receivable | 5,289,399 |
Receivable for open forward currency contracts (Note 2) | 38,197 |
Prepaid expenses | 961 |
Total assets | 273,104,091 |
Liabilities: | |
Payable for credit facility (Note 6) | 76,316,860 |
Payable for credit facility interest (Note 6) | 8,008 |
Payable for investments purchased | 1,414,578 |
Investment advisory fee payable (Note 4) | 147,974 |
Administration fee payable (Note 4) | 34,148 |
Directors' fees payable | 7,858 |
Accrued expenses | 194,676 |
Total liabilities | 78,124,102 |
Commitments and contingencies (Note 9) | |
Net Assets | $194,979,989 |
Composition of Net Assets: | |
Capital stock, at par value ($0.001 par value, 1,000,000,000 shares authorized) (Note 7) | $ 25,532 |
Additional paid-in capital (Note 7) | 275,247,062 |
Distributions in excess of net investment income | (3,712,945) |
Accumulated net realized loss on investments, foreign currency transactions and forward currency contracts | (37,079,761) |
Net unrealized depreciation on investments, foreign currency translations and forward currency contracts | (39,499,899) |
Net assets applicable to capital stock outstanding | $194,979,989 |
Total investments at cost | $307,264,841 |
Shares Outstanding and Net Asset Value Per Share: | |
Shares outstanding | 25,532,427 |
Net asset value per share | $ 7.64 |
Statement of Operations (Unaudited)
Investment Income (Note 2): | |
Interest | $ 9,957,376 |
Dividends (net of foreign withholding tax of $349) | 129,422 |
Total investment income | 10,086,798 |
Expenses: | |
Investment advisory fees (Note 4) | 901,061 |
Administration fees (Note 4) | 207,937 |
Legal fees | 270,944 |
Directors' fees | 45,986 |
Reports to stockholders | 41,737 |
Fund accounting servicing fees | 39,392 |
Registration fees | 16,755 |
Transfer agency fees | 15,819 |
Audit and tax services | 12,203 |
Insurance | 8,970 |
Custodian fees | 7,727 |
Miscellaneous | 5,645 |
Total operating expenses | 1,574,176 |
Interest expense on credit facility (Note 6) | 694,305 |
Total expenses | 2,268,481 |
Net investment income | 7,818,317 |
Net Realized and Unrealized Gain (Loss) on Investments, Foreign Currency Transactions and Forward Currency Contracts (Note 2): | |
Net realized gain (loss) on: | |
Investments | (6,998,407) |
Foreign currency transactions | 3,263 |
Forward currency contracts | (86,257) |
Net realized loss | (7,081,401) |
Net change in unrealized appreciation (depreciation) on: | |
Investments | (5,359,072) |
Foreign currency and foreign currency translations | 3,144 |
Forward currency contracts | 105,307 |
Net change in unrealized depreciation | (5,250,621) |
Net realized and unrealized loss on investments | (12,332,022) |
Net decrease in net assets resulting from operations | $ (4,513,705) |
Statements of Changes in Net Assets
For the Six Months Ended March 31, 2016 (Unaudited) | For the Fiscal Year Ended September 30, 2015 | ||
Increase (Decrease) in Net Assets Resulting from Operations: | |||
Net investment income | $ 7,818,317 | $ 19,405,117 | |
Net realized loss on investments, foreign currency transactions and forward currency contracts | (7,081,401) | (4,352,235) | |
Net change in unrealized depreciation on investments, foreign currency translations and forward currency contracts | (5,250,621) | (39,575,693) | |
Net decrease in net assets resulting from operations | (4,513,705) | (24,522,811) | |
Distributions to Stockholders (Note 2): | |||
Net investment income | (11,489,592) | (19,844,487) | |
Return of capital | — | (4,002,800) | |
Total distributions | (11,489,592) | (23,847,287) | |
Total decrease in net assets | (16,003,297) | (48,370,098) | |
Net Assets: | |||
Beginning of period | 210,983,286 | 259,353,384 | |
End of period | $194,979,989 | $210,983,286 | |
(including distributions in excess of net investment income of) | $ (3,712,945) | $ (41,670) |
Statement of Cash Flows (Unaudited)
Increase (Decrease) in Cash: | |
Cash flows provided by (used for) operating activities: | |
Net decrease in net assets resulting from operations | $ (4,513,705) |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities | |
Purchases of long-term portfolio investments and principal payups | (35,060,670) |
Proceeds from disposition of long-term portfolio investments and principal paydowns | 46,312,043 |
Purchases of short-term portfolio investments, net | (1,275,648) |
Return of capital distributions from portfolio investments | 33,377 |
Decrease in interest and dividends receivable | 803,787 |
Increase in receivable for open forward currency contracts | (38,197) |
Decrease in prepaid expenses | 7,728 |
Decrease in receivable for investments sold | 9,375 |
Decrease in payable to custodian | (8,410) |
Decrease in payable for open forward currency contracts | (67,110) |
Increase in payable for credit facility interest | 1,188 |
Decrease in payable for investments purchased | (909,304) |
Decrease in investment advisory fee payable | (17,855) |
Decrease in administration fee payable | (4,120) |
Decrease in directors' fee payable | (389) |
Increase in accrued expenses | 18,792 |
Net amortization on investments and paydown gains or losses | (145,252) |
Net change in unrealized depreciation on investments | 5,359,072 |
Net realized loss on investments | 6,998,407 |
Net cash provided by operating activities | 17,503,109 |
Cash flows used for financing activities: | |
Net cash used for credit facility | (6,000,000) |
Distributions paid to stockholders | (11,489,592) |
Net cash used for financing activities | (17,489,592) |
Net increase in cash | 13,517 |
Cash at the beginning of period | 32,984 |
Cash at the end of period | $ 46,501 |
Supplemental Disclosure of Cash Flow Information: | |
Interest payments for the six months ended March 31, 2016, totaled $693,117. |
Financial Highlights
For the Six Months Ended March 31, 2016 | For the Fiscal Year Ended September 30, | For the Three Months Ended September 30, | For the Fiscal Years Ended June 30, | ||||||||||
(Unaudited) | 2015 | 2014 2 | 2014 | 2013 | 2012 | 2011 | |||||||
Per Share Operating Performance: | |||||||||||||
Net asset value, beginning of period | $ 8.26 | $ 10.16 | $ 10.70 | $ 10.14 | $ 9.86 | $ 9.92 | $ 9.25 | ||||||
Net investment income1 | 0.31 | 0.76 | 0.21 | 0.88 | 0.92 | 0.91 | 0.93 | ||||||
Net realized and unrealized gain (loss) on investment transactions | (0.48) | (1.73) | (0.52) | 0.60 | 0.27 | (0.03) | 0.69 | ||||||
Net increase (decrease) in net asset value resulting from operations | (0.17) | (0.97) | (0.31) | 1.48 | 1.19 | 0.88 | 1.62 | ||||||
Distributions from net investment income | (0.45) | (0.77) | (0.23) | (0.91) | (0.91) | (0.94) | (0.95) | ||||||
Return of capital distributions | — | (0.16) | — | (0.01) | — | — | — | ||||||
Total distributions paid | (0.45) | (0.93) | (0.23) | (0.92) | (0.91) | (0.94) | (0.95) | ||||||
Net asset value, end of period | $ 7.64 | $ 8.26 | $ 10.16 | $ 10.70 | $ 10.14 | $ 9.86 | $ 9.92 | ||||||
Market price, end of period | $ 7.02 | $ 7.29 | $ 9.37 | $ 10.54 | $ 9.62 | $ 10.00 | $ 9.90 | ||||||
Total Investment Return† | 2.82% 4 | -13.26% | -9.05% 4 | 20.13% | 5.12% | 11.37% | 29.77% | ||||||
Ratios to Average Net Assets/ Supplementary Data: | |||||||||||||
Net assets, end of period (000s) | $194,980 | $210,983 | $259,353 | $73,260 | $69,463 | $67,491 | $67,871 | ||||||
Operating expenses | 1.59% 3 | 1.41% | 1.82% 3 | 2.06% | 1.63% | 1.71% | 1.65% | ||||||
Interest expense | 0.70% 3 | 0.51% | 0.45% 3 | 0.48% | 0.53% | 0.62% | 0.42% | ||||||
Total expenses | 2.29% 3 | 1.92% | 2.27% 3 | 2.54% | 2.16% | 2.33% | 2.07% | ||||||
Net expenses, including fee waivers and reimbursement and excluding interest expense | 1.59% 3 | 1.41% | 1.82% 3 | 1.95% | 1.52% | 1.59% | 1.53% | ||||||
Net investment income | 7.89% 3 | 8.04% | 8.04% 3 | 8.47% | 8.87% | 9.45% | 9.36% | ||||||
Net investment income, excluding the effect of fee waivers and reimbursement | 7.89% 3 | 8.04% | 8.04% 3 | 8.36% | 8.76% | 9.33% | 9.25% | ||||||
Portfolio turnover rate | 13% 4 | 27% | 11% 4 | 28% | 28% | 24% | 46% | ||||||
Credit facility, end of period (000s) | $ 76,317 | $ 82,317 | $102,800 | $28,000 | $30,400 | $30,400 | $29,400 | ||||||
Asset coverage per $1,000 unit of senior indebtedness5 | $ 3,555 | $ 3,563 | $ 3,523 | $ 3,616 | $ 3,280 | $ 3,220 | $3,310 |
† | Total investment return is computed based upon the New York Stock Exchange market price of the Fund's shares and excludes the effect of broker commissions. Distributions are assumed to be reinvested at the prices obtained under the Fund's dividend reinvestment plan. |
1 | Per share amounts presented are based on average shares outstanding throughout the period indicated. |
2 | Amounts shown are for the three months ended September 30, 2014 and are not necessarily indicative of a full year of operations. The Fund changed its fiscal year end from June 30 to September 30. |
3 | Annualized. |
4 | Not annualized. |
5 | Calculated by subtracting the Fund's total liabilities (not including borrowings) from the Fund's total assets and dividing by the total number of senior indebtedness units, where one unit equals $1,000 of senior indebtedness. |
Notes to Financial Statements (Unaudited)
Notes to Financial Statements (Unaudited) (continued)
Level 1 - | quoted prices in active markets for identical assets or liabilities |
Level 2 - | quoted prices in markets that are not active or other significant observable inputs (including, but not limited to: quoted prices for similar assets or liabilities, quoted prices based on recently executed transactions, interest rates, prepayment speeds, credit risk, etc.) |
Level 3 - | significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets or liabilities) |
Notes to Financial Statements (Unaudited) (continued)
Valuation Inputs | Level 1 | Level 2 | Level 3 | Total | |||
Residential Mortgage Related Holdings | $ — | $ — | $ 7,399,724 | $ 7,399,724 | |||
Corporate Bonds | — | 236,870,544 | 825 | 236,871,369 | |||
Term Loans | — | 11,332,905 | — | 11,332,905 | |||
Common Stocks | 4,862,741 | — | 453,548 | 5,316,289 | |||
Exchange Traded Fund | 2,757,125 | — | — | 2,757,125 | |||
Warrants | 1,207,355 | — | — | 1,207,355 | |||
Short Term Investment | 2,844,266 | — | — | 2,844,266 | |||
Total | $ 11,671,487 | $ 248,203,449 | $ 7,854,097 | $ 267,729,033 |
Valuation Inputs | Level 1 | Level 2 | Level 3 | Total | |||
Other Financial Instruments* | $ 38,197 | $ — | $ — | $ 38,197 | |||
Total | $ 38,197 | $ — | $ — | $ 38,197 |
Notes to Financial Statements (Unaudited) (continued)
Quantitative Information about Level 3 Fair Value Measurements(1) | ||||
Assets | Value as of March 31, 2016 | Valuation Methodology | Significant Unobservable Input | Range (Weighted Average) |
Corporate Bond: | ||||
Motors Liquidation Co. | $ 825 | Discounted Cash Flow | Anticipated Residual Value | $0.01 |
Common Stock: | ||||
Thunderbird Resources Equity, Inc. | 453,548 | Analysis of Enterprise Value | Various assumptions of value of assets and liabilities | $34,259-$42,321 ($35,000) |
Total | $454,373 |
Investments in Securities | Residential Mortgage Related Holdings | Corporate Bonds | Common Stocks | Total | |||
Balance as of September 30, 2015 | $8,079,848 | $ 4,120,625 | $399,350 | $12,599,823 | |||
Accrued Discounts (Premiums) | 210,384 | 9,818 | — | 220,202 | |||
Realized Gain (Loss) | 100,402 | — | — | 100,402 | |||
Change in Unrealized Appreciation (Depreciation) | (708,437) | (519,618) | 54,198 | (1,173,857) | |||
Purchases at cost | 57,605 | — | — | 57,605 | |||
Sales proceeds | (340,078) | — | — | (340,078) | |||
Transfers out of Level 3 | — | (3,610,000) | — | (3,610,000) (a) | |||
Balance as of March 31, 2016 | $7,399,724 | $ 825 | $453,548 | $ 7,854,097 | |||
Change in unrealized gains or losses relating to assets still held at reporting date | $ (708,437) | $ — | $ 54,198 | $ (654,239) |
Notes to Financial Statements (Unaudited) (continued)
Notes to Financial Statements (Unaudited) (continued)
Settlement Date | Currency to be Delivered | U.S. $ Value at March 31, 2016 | Currency to be Received | U.S. $ Value at March 31, 2016 | Unrealized Appreciation (Depreciation) | ||
05/09/16 | 341,352 | U.S. Dollars | $341,352 | 497,266 | Canadian Dollars | $382,898 | $41,546 |
05/09/16 | 497,266 | Canadian Dollars | 382,898 | 379,549 | U.S. Dollars | 379,549 | (3,349) |
Total | $38,197 |
Derivatives | Statement of Assets and Liabilities | Unrealized Appreciation as of March 31, 2016 |
Forward contracts | Receivable for open forward currency contracts | $38,197 |
Derivatives | Location of Gains (Losses) on Derivatives Recognized in Income | Net Realized Loss on Forward currency contracts | Net Change in Unrealized Appreciation on Forward currency contracts |
Forward contracts | Forward currency contracts | $(86,257) | $105,307 |
Notes to Financial Statements (Unaudited) (continued)
Gross Amounts not offset in the Statement of Assets and Liabilities | ||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts Presented in the Statement of Assets and Liabilities | Financial Instruments | Collateral Pledged (Received) | Net Amount | |
Description | ||||||
Forward contracts | $41,546 | $(3,349) | $38,197 | $— | $— | $38,197 |
Notes to Financial Statements (Unaudited) (continued)
Total line of credit amount available | $120,000,000 |
Line of credit outstanding at March 31, 2016 | 76,316,860 |
Line of credit amount unused at March 31, 2016 | 43,683,140 |
Average balance outstanding during the period | 79,051,833 |
Interest expense incurred on line of credit during the period | 694,305 |
Notes to Financial Statements (Unaudited) (continued)
Ordinary income | $19,844,487 |
Return of capital | 4,002,800 |
Total | $23,847,287 |
Capital loss carryforward1 | $(30,123,574) |
Other accumulated losses | (78,053) |
Tax basis unrealized depreciation | (34,087,681) |
Total tax basis net accumulated losses | $(64,289,308) |
Expiring In: | |
2017 | $25,914,000 |
Infinite (Short-Term) | 936,031 |
Infinite (Long-Term) | 3,273,543 |
Cost of Investments | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Depreciation |
$307,264,841 | $6,797,729 | $(46,333,537) | $(39,535,808) |
Notes to Financial Statements (Unaudited) (continued)
Notes to Financial Statements (Unaudited) (continued)
Dividend Per Share | Record Date | Payable Date |
$0.0750 | April 14, 2016 | April 21, 2016 |
$0.0750 | May 19, 2016 | May 26, 2016 |
Compliance Certification (Unaudited)
Proxy Results (Unaudited)
Shares Voted For | Shares Voted Against | Shares Voted Abstain | ||
1. | To elect to the Fund's Board of Directors Edward A. Kuczmarski | 20,671,370 | 1,527,659 | - |
Dividend Reinvestment Plan (Unaudited)
Joint Notice of Privacy Policy (Unaudited)
• | Information we receive from you in applications or other forms, correspondence or conversations, including but not limited to name, address, phone number, social security number, assets, income and date of birth. |
• | Information about transactions with us, our affiliates, or others, including but not limited to account number, balance and payment history, parties to transactions, cost basis information, and other financial information. |
• | Information we may receive from our due diligence, such as your creditworthiness and your credit history. |
• | Unaffiliated service providers (e.g. transfer agents, securities broker-dealers, administrators, investment advisors or other firms that assist us in maintaining and supporting financial products and services provided to you); |
• | Government agencies, other regulatory bodies and law enforcement officials (e.g. for reporting suspicious transactions); |
• | Other organizations, with your consent or as directed by you; and |
• | Other organizations, as permitted or required by law (e.g. for fraud protection) |
Directors of the Fund | |
Edward A. Kuczmarski | Chairman |
Louis P. Salvatore | Audit Committee Chairman |
Stuart A. McFarland | Director |
Heather S. Goldman | Director |
Jonathan C. Tyras | Director (Interested) |
Officers of the Fund | |
Brian F. Hurley | President |
Angela W. Ghantous | Treasurer |
Alexis I. Rieger | Secretary |
Seth A. Gelman | Chief Compliance Officer |
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. Investments.
Schedule of Investments is included as part of the report to stockholders filed under Item 1 of this Form.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable for semi-annual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable for semi-annual reports.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
None.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant’s nominating committee charter does not contain any procedure by which shareholders may recommend nominees to the registrant’s board of directors.
Item 11. Controls and Procedures.
(a) The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s Disclosure Controls and Procedures are effective, based on their evaluation of such Disclosure Controls and Procedures as of a date within 90 days of the filing of this report on Form N-CSR.
(b) As of the date of filing this Form N-CSR, the Registrant’s principal executive officer and principal financial officer are aware of no changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected or is reasonably likely to materially affect the Registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) None.
(2) A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached as an exhibit to this Form N-CSR.
(3) None.
(b) A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(b) under the Investment Company Act of 1940 is attached as an exhibit to this Form N-CSR.
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.
BROOKFIELD HIGH INCOME FUND INC.
By: | /s/ Brian F. Hurley | |||
Brian F. Hurley | ||||
President and Principal Executive Officer |
Date: May 27, 2016
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/ Brian F. Hurley | |||
Brian F. Hurley | ||||
President and Principal Executive Officer |
Date: May 27, 2016
By: | /s/ Angela W. Ghantous | |||
Angela W. Ghantous | ||||
Treasurer and Principal Financial Officer |
Date: May 27, 2016