SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. _)
Filed by the Registrant |X| Filed by a Party other than the Registrant [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
|X| Preliminary Proxy Statement [ ] Confidential for use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The New America High Income Fund, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number of the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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Preliminary Copy
[Letterhead of THE NEW AMERICA HIGH INCOME FUND, INC.]
August __, 1996
Dear Fellow Stockholder:
The Board of Directors of the Fund is seeking your approval to effect a
series of changes to the terms of the Fund's Auction Term Preferred Stock
("ATP"). Enclosed is a proxy statement which outlines these changes in more
detail, as well as a proxy card with which you can vote on these changes. None
of the proposed changes is expected to increase the Fund's expenses. In fact,
the Board of Directors believes that the proposed changes will result in a
reduction in the Fund's expenses and also provide increased flexibility to take
advantage of opportunities presented in the ever-changing market in which
we invest.
As you are aware, the Fund's Board of Directors is completely independent
of the Fund's investment adviser. The Board has carefully reviewed the proposal
presented in the accompanying proxy statement and believes that implementing the
changes contemplated in the proposal will benefit the Fund by permitting it to
take advantage of changes that have occurred in the financial markets since the
Fund's inception in 1988.
The proposed changes can be summarized as follows:
1. The Board will be allowed to authorize our investment adviser to invest
in a broader range of securities. The Fund will continue to be subject
to rigorous asset coverage tests required Moody's Investors Service,
Inc. and Fitch Investors Service, Inc. in connection with such
agencies' issuance of a credit rating with respect to the ATP.
2. The broker-dealers for the ATP will be allowed to seek a more
competitive dividend rate for the ATP. Currently, the minimum rate
applicable to the ATP is 99% of a specified AA composite commercial
paper rate. The proposed change will reduce the minimum from 99% to 80%
of the benchmark. To the extent the Fund achieves a lower dividend rate
on the ATP the amount available for dividends on Common Shares will
be increased.
The Fund's Board has been active and taken several initiatives to increase
stockholder value. During the past three years, the Fund's capital structure was
overhauled, shareholders were given the opportunity to particpate in a rights
offering, and the Fund earned a 5 star rating from Morningstar. The changes
proposed in the accompanying proxy statement are important to our continuing
progress.
I hope that you will take the time to consider and vote on the changes
discussed in greater detail in the attached proxy statement. Your prompt
response will be much appreciated as it will save the Fund the additional
expense of further mailings and solicitations.
Sincerely,
Robert F. Birch
President
IMPORTANT
It is important that your shares be represented at the Special Meeting. Whether
or not you plan to attend the Special Meeting in person, you are requested to
complete, sign and return the enclosed proxy card as soon as possible. You may
withdraw your proxy if you attend the Special Meeting and desire to vote in
person.
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Preliminary Copy
THE NEW AMERICA HIGH INCOME FUND, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On Tuesday, October 15, 1996
A Special Meeting of Stockholders (the "Special Meeting") of The New
America High Income Fund, Inc. (the "Fund") will be held at the Goodwin, Procter
& Hoar LLP Conference Center, Second Floor, Exchange Place, Boston,
Massachusetts 02109 on Tuesday, October 15, 1996 at 9:30 A.M, for the
following purposes.
1. To approve an amendment to the Articles Supplementary of the
Fund's Charter to permit the Board of Directors to amend
certain of its terms relating to the Fund's Auction Term
Preferred Stock without stockholder approval, as described in
the accompanying proxy statement.
2. To transact such other business as may properly come before
the Special Meeting and any adjournments thereof.
The matters referred to above may be acted upon at the Special Meeting
or any adjournments thereof.
The close of business on August 27, 1996 has been fixed as the record
date for determination of stockholders entitled to notice of, and to vote at,
the Special Meeting and any adjournments thereof.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE SIZE OF YOUR HOLDINGS IN THE
FUND. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. HOLDERS OF THE
FUND'S COMMON STOCK SHOULD SIGN AND RETURN THE WHITE PROXY. HOLDERS OF THE
FUND'S AUCTION TERM PREFERRED STOCK SHOULD SIGN AND RETURN THE YELLOW PROXY.
By Order of the Board of Directors
Richard E. Floor
Secretary
August __, 1996
Boston, Massachusetts
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Preliminary Copy
THE NEW AMERICA HIGH INCOME FUND, INC.
10 Winthrop Square, Fifth Floor
Boston, Massachusetts 02110
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PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
October 15, 1996
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This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of The New America High Income
Fund, Inc., a Maryland corporation (the "Fund"), for use at the Fund's Special
Meeting of Stockholders (the "Special Meeting") to be held at the Goodwin,
Procter & Hoar LLP Conference Center, Second Floor, Exchange Place, Boston,
Massachusetts on Tuesday, October 15, 1996 at 9:30 a.m. and at any and all
adjournments thereof, for the purposes set forth in the accompanying Notice of
Special Meeting dated August ____, 1996.
This Proxy Statement and the accompanying Notice of Special Meeting and
form of proxy will be first sent to the stockholders on or about August ___,
1996. The Board of Directors has fixed the close of business on August 27, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at the Special Meeting. As of the record date, ___________ shares of
the Fund's Common Stock, $.01 par value per share (the "Common Stock"), were
issued and outstanding and 2,000 shares of the Fund's Auction Term Preferred
Stock, $1.00 par value per share, liquidation preference $50,000 per share, were
issued and outstanding, consisting of 1,200 shares of Series A Auction Term
Preferred Stock and 800 shares of Series B Auction Term Preferred Stock
(collectively, the "ATP"). Each outstanding share of Common Stock and each of
ATP is entitled to one vote on all matters submitted to stockholders of the
relevant class or classes.
If the accompanying form of proxy is properly executed and returned in
time to be voted at the Special Meeting, the shares represented thereby will be
voted in accordance with the instruction marked thereon by the stockholder.
Executed proxies that are unmarked will be voted to approve an amendment to the
Fund's charter which would permit the Directors to modify certain terms of the
charter relating to the ATP without shareholder approval (the "Proposal") and in
the discretion of the persons named as proxies in connection with any other
matter which may properly come before the Special Meeting or any adjournments
thereof. Under Maryland law, abstentions do not constitute a vote "for" or
"against" a matter, but will be included in determining the number of shares
outstanding and entitled to vote and will have the effect of a negative vote on
the Proposal (which requires a vote of the holders of the Common Stock and ATP
voting as a single class based on the total votes entitled to be cast, not the
votes actually cast). Abstentions will also have the effect of a negative vote
for purposes of the separate vote of the holders of the ATP (which requires a
vote based on either
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the number of shares of the ATP outstanding or the number of shares of the ATP
present at the Special Meeting). Abstentions will, however, be counted as shares
present at the Special Meeting for purposes of a quorum. Broker "non-votes"
(i.e., proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other person entitled to vote
shares on a particular matter with respect to which the brokers or nominees do
not have discretionary power) will be treated the same as abstentions. A
stockholder may revoke his or her proxy prior to its use by appearing at the
Special Meeting and voting in person, by giving written notice of such
revocation to the Secretary of the Fund, or by returning a subsequently dated
proxy. Holders of Common Stock should sign and return the white proxy. Holders
of the ATP should sign and return the yellow proxy.
In the event a quorum is not present at the Special Meeting or in the
event a quorum is present at the Special Meeting but sufficient votes to approve
the Proposal are not received, the persons named as proxies may propose one or
more adjournments of the Special Meeting to permit further solicitation of
proxies, provided that such persons determine such an adjournment and additional
solicitation is reasonable and in the interest of stockholders. A stockholder
vote may be taken on the Proposal prior to such adjournment if sufficient votes
have been received and such vote is otherwise appropriate. Any such adjournment
will require the affirmative vote of a majority of those shares present at the
Special Meeting in person or by proxy.
In addition to the solicitation of proxies by mail, Directors and
officers of the Fund or other representatives of the Fund may also solicit
proxies by telephone or telegraph or in person. [The Fund may also retain a
proxy solicitation firm to assist in the solicitation of proxies. The costs of
retaining such a firm, which the Fund does not anticipate would exceed
$___________, would depend upon the amount and type of services rendered and
would be borne by the Fund.] The costs of proxy solicitation and expenses
incurred in connection with preparing this Proxy Statement and its enclosures
will be paid by the Fund.
The Annual Report of the Fund for the year ended December 31, 1995,
including financial statements, and the Semi-Annual Report for the six months
ended June 30, 1996 have been mailed to stockholders of record at the close of
business on June 30, 1996 and to persons who were stockholders of record at the
close of business on ______ ___, 1996. If you did not receive either or both of
the Reports or if you would like to request another copy you may write the Fund
at the address noted above or call the Fund collect at (617) 350-8610.
THE INVESTMENT ADVISER
AND ADMINISTRATIVE SERVICES
Wellington Management Company, with its principal office at 75 State
Street, Boston, Massachusetts 02109, has served as the investment adviser to the
Fund since February 19, 1992. Since February 1992 the Fund has engaged Ellen E.
Terry, Vice President of the Fund,
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and Paul E. Saidnawey to perform administrative services subject to the
supervision of the President of the Fund.
PROPOSAL
APPROVAL OF AN AMENDMENT TO THE ARTICLES SUPPLEMENTARY OF
THE FUND'S CHARTER TO PERMIT THE BOARD OF DIRECTORS TO
AMEND CERTAIN OF ITS TERMS RELATING TO THE FUND'S AUCTION TERM
PREFERRED STOCK WITHOUT STOCKHOLDER APPROVAL
The Fund's Board of Directors has considered and declared advisable,
and directed the submission to the stockholders of the Fund of, an amendment
(the "Amendment") to the Articles Supplementary (the "Articles Supplementary")
to the Fund's Articles of Amendment and Restatement, as amended and supplemented
(the "Charter"), which would permit the Board of Directors to take certain
actions relating to the ATP without stockholder approval. The purpose of the
Amendment is to allow the Board to amend the terms of the ATP as described
below, and to provide the Directors with the flexibility to make certain limited
amendments in the future. The Board might consider additional amendments in the
future in response to rating agency requirements, changes in market conditions,
or other situations where amending certain terms of the ATP without the delay
and expense of a stockholder meeting would be in the best interests of the Fund.
The Fund's Board of Directors believes that the Amendment is in the best
interests of the Fund and its stockholders and recommends that Fund stockholders
approve the Amendment as more fully described below.
Under Maryland law, an amendment to the Charter requires the
affirmative vote of the holders of two-thirds of the total number of shares
outstanding and entitled to vote thereon, unless otherwise provided in the
Charter. Under the Charter, approval of the Amendment requires the approval of a
majority of the shares of Common Stock and of the ATP outstanding and entitled
to vote thereon, voting as a single class. The Charter further requires that the
Amendment be approved by the affirmative vote of holders of shares of the ATP
outstanding and entitled to vote thereon, voting as a separate class, equal to
the lesser of: (a) 67% of the shares present at the meeting if 50% or more of
the outstanding shares of the ATP are present or represented by proxy, or (b)
more than 50% of the outstanding shares of the ATP.
The following contains brief descriptions of certain terms of the
capital stock of the Fund. These descriptions do not purport to be complete and
are subject to qualification in their entirety by reference to the Charter which
establishes and fixes the rights and preferences of the Common Stock and the
ATP. A copy of the Charter, including a copy of the Articles Supplementary
establishing the ATP, may be obtained by calling the Fund at (617) 350-8610.
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Description of Capital Stock
General. The authorized capital stock of the Fund consists of 1,000,000
shares of preferred stock, $1.00 par value, issuable in one or more series and
200,000,000 shares of Common Stock, par value $.01 per share. All shares of
Common Stock have equal rights as to voting, dividends and liquidation. All
shares of Common Stock and ATP issued and outstanding are fully paid and
nonassessable. Shares of Common Stock have no preemptive, conversion or
redemption rights and are freely transferable. Subject to confirmation from the
rating agencies rating the credit quality of the ATP that such ratings will not
change, the Fund may, in the future, issue additional shares of either series or
additional series of preferred stock ranking on a parity with the ATP with
respect to payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Fund, but which additional
series may have substantially different terms from those of the ATP.
Dividends and Dividend Periods for the ATP. The Fund pays dividends on
the ATP according to the procedures described below. For each dividend period,
subject to certain exceptions, the dividend rate is the applicable rate that the
auction agent advises the Fund has resulted from an auction with respect to the
ATP. A dividend period is either (a) the standard term period of 28 days (unless
the 28th day does not fall on a business day in which case the number of days
ending on the business day preceding the 28th day) (a "Standard Term Period")
or, subject to certain conditions and with notice to holders prior to the
auction for that dividend period, a period longer or shorter than 28 days and
having such duration as the Board of Directors shall specify (an "Alternate Term
Period").
An Alternate Term Period will not be effective unless, among other
things, sufficient clearing orders exist at the auction in respect of such
Alternate Term Period (that is, in general, the number of shares subject to buy
orders is at least equal to the number of shares subject to sell orders by
existing holders). If sufficient clearing orders do not exist at any auction in
respect of an Alternate Term Period, the dividend period commencing on the
Business Day succeeding such Auction will be a Standard Term Period and the
holders of the shares of the affected series will be required to continue to
hold such shares for such Standard Term Period.
For dividend periods of one year or less, dividends are payable on the
business day next succeeding the last day of the dividend period and, if any, on
the 91st, 181st and 271st days thereof. For dividend periods of more than one
year, dividends are payable on a quarterly basis thereof. For dividend periods
of more than one year, dividends are payable on a quarterly basis on each
January 1, April 1, July 1 and October 1 within the dividend period and on the
business day following the last day of the dividend period. Dividends are paid
through a securities depository (The Depository Trust Company or a successor
securities depository) (a "Securities Depository") on each dividend payment
date. The Securities Depository's current procedures provide for it to
distribute dividends in same-day funds to members of or participants in the
Securities Depository that will act on behalf of a holder of
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the ATP or person placing an order to purchase ATP (an "Agent Member") who are
in turn expected to distribute such dividends to the persons for whom they are
acting as agents.
The applicable rate resulting from an auction may not be greater than
the Maximum Applicable Rate, which is equal to 150% of the applicable AA
Composite Commercial Paper Rate (for a dividend period of fewer than 184 days)
or the applicable Treasury Index Rate (for a dividend period of 184 days or more
(each, a "Reference Rate")), in each case subject to upward but not downward
adjustment in the discretion of the Board of Directors after consultation with
the broker-dealers, provided that immediately following any such increase the
Fund must be in compliance with certain asset amount and composition tests as
set forth in the Articles Supplementary.
The AA Composite Commercial Paper Rate is a rate of interest derived
from the rate on commercial paper of issuers whose corporate bonds are rated AA
by Standard & Poor's Corporation ("S&P") or Aa2 by Moody's Investors Service,
Inc. ("Moody's") or a rate quoted by certain financial institutions designed to
approximate the rate on commercial paper of such issuers, as described in
greater detail in the Articles Supplementary. The Treasury Index Rate is the
average yield to maturity for actively traded marketable U.S. Treasury fixed
interest rate securities having the same number of 30-day periods to maturity as
the length of the applicable dividend period, determined to the extent necessary
by linear interpolation based upon the yield for such securities having the next
shorter and next longer number of 30-day periods to maturity treating all
dividend periods with a length greater than the longest maturity for such
securities as having a length equal to such longest maturity. The Treasury Index
Rate is determined based on statistical data published by the Board of Governors
of the Federal Reserve System or, if such data has not been published during the
15 days preceding the date of computation, based on comparable data from at
least three recognized dealers in U.S. Government securities selected by the
Fund.
The Maximum Applicable Rate for the shares of ATP applies automatically
following any auction for such shares in which sufficient clearing orders have
not been made (other than because all shares of ATP were the subject of
submitted hold orders) or following the failure to hold an auction for any
reason on the first business day next preceding the first day of a dividend
period for the relevant series of the ATP (the "Auction Date") scheduled to
occur (except for circumstances in which the dividend rate is the default rate,
which is the Reference Rate multiplied by three (3)).
The Minimum Applicable Rate applies automatically following an auction
in respect of a dividend period of 93 days or fewer in which all of the
outstanding shares are subject to (or are deemed to be subject to) hold orders.
The Minimum Applicable Rate is currently 99% of the applicable AA Composite
Commercial Paper Rate. No minimum rate is specified for auctions in respect of
dividend periods of more than 93 days.
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Prior to each auction, broker-dealers will notify holders of the term
of the next succeeding dividend period as soon as practicable after the
broker-dealers have been so advised by the Fund. After each auction, on the
Auction Date, broker-dealers will notify holders of the applicable rate for the
next succeeding dividend period and of the Auction Date of the next succeeding
auction.
The Proposed Amendment
Under current Part I, Section 6(j) ("Section 6(j)") of the Articles
Supplementary, the Directors may amend certain provisions of the Articles
Supplementary without any vote or consent of the holders of the ATP or any other
stockholder of the Fund so long as the amendment is made "in connection with
obtaining or maintaining one or more ratings with respect to the ATP." The
complete text of Section 6(j) is set forth in Exhibit A to this Proxy Statement.
The Directors propose to amend the Articles Supplementary by deleting the above
quoted language as set forth in Exhibit A.
The proposed Amendment will expand the Directors' power of amendment
available under current Article 6(j) to permit them to change certain provisions
in the Articles Supplementary relating to the ATP without the approval of
stockholders of the Fund regardless of whether those changes are "in connection
with obtaining or maintaining" a credit quality rating for the ATP from a rating
agency. Under the proposed Amendment, the Board of Directors may amend, alter or
repeal certain of the definitions in the Articles Supplementary which, in
general terms, relate primarily to Moody's and Fitch Investors Service, Inc.
("Fitch") guidelines establishing investment parameters for the Fund's portfolio
necessary for the Fund to maintain those rating agencies' issuance of ratings of
"aaa" and AAA, respectively, with respect to the ATP and to certain auction,
dividend payment and redemption procedures applicable to the ATP.
In order to make any such changes, however, the Board of Directors
would still be required to receive written confirmation from any rating agency
then assigning a credit quality rating to the ATP or from whom the Fund is
seeking a credit quality rating that such change would not affect the rating
currently assigned to or sought by the Fund, respectively. If the Fund at any
time fails to maintain a credit rating in the highest category of any two
nationally recognized statistical rating organizations, one of which is Moody's
or S&P (an ""aaa"/AAA Credit Rating"), and the Fund is unable to restore the
"aaa"/AAA Credit Rating within 90 calendar days thereafter, all shares of the
ATP will be subject to mandatory redemption out of funds legally available
therefor.
The proposed Amendment would not affect the voting rights of
stockholders with respect to changes in Charter provisions not contained in the
Articles Supplementary.
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Changes in the Articles Supplementary Currently Contemplated by the Board of
Directors.
If stockholders approve the proposed Amendment, the Directors intend to
make certain changes to the terms of the Articles Supplementary affecting the
ATP. The first change would revise the definition of Minimum Applicable Rate to
lower the minimum dividend rate payable on the ATP under certain conditions. The
second change would revise the definitions of Moody's Eligible Assets and Fitch
Eligible Assets as used in the Articles Supplementary (a) to include securities
that may be restricted as to resale under federal securities laws but which are
eligible for resale under Rule 144A promulgated by the Securities and Exchange
Commission ("Rule 144A securities") and (b) to modify the treatment of
obligations issued in connection with a reorganization under U.S. federal
bankruptcy law. These contemplated changes are described in greater detail
below. Although the proposed Amendment will give them the ability to do so
without stockholder approval, the Directors do not currently intend to make
changes to the Articles Supplementary other than those described in this Proxy
Statement.
Change in the Definition of Minimum Applicable Rate.
The following is a brief summary of certain auction procedures for the
ATP relevant to the application of the Minimum Applicable Rate.
Periodic auctions of the ATP, which permit current holders to retain or
sell their shares and potential holders to buy shares through a process known as
a "Dutch auction," determine the holders of the ATP for the next dividend period
and the dividend rate they will receive for that period. Generally speaking, the
standard or default dividend period is 28 days. Subject to certain conditions
and notice to stockholders, the Directors may specify a dividend period longer
than the standard period. The Minimum Applicable Rate is only meaningful in
auctions relating to dividend periods of 93 days or less; therefore, the
following discussion assumes an auction with respect to a dividend period of 93
days or less.
Current holders of the ATP and potential holders of the ATP participate
in the auction of the ATP by submitting orders before the appropriate deadline.
A current holder may submit, with respect to a specified number of shares of the
ATP, (a) an order to hold, which means the current holder chooses to retain
those shares regardless of the dividend rate set by the auction, (b) an order to
hold/sell, which means that the current holder will hold those shares if the
dividend rate determined by the auction is at least equal to the rate specified
in the order, but if not, the current holder desires to sell them, (c) an order
to sell, whereby the holder indicates that it desires to sell those shares
regardless of the dividend rate set by the auction, or (d) an order to buy, in
which the holder indicates the lowest dividend rate at which it will buy that
number of shares of the ATP. If a current holder fails to submit an order with
respect to any shares of the ATP currently held by it, and both the dividend
period preceding and following the auction are less than or equal to 93 days,
the current holder is deemed to
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have submitted a hold order. A potential holder may only place a buy order as
described in (d).
Once all bids have been received, the Auction Agent, a financial
institution, currently Bankers Trust Company, appointed by the Directors to
supervise the auction, allocates shares of the ATP based on the orders of
current and potential holders and determines the dividend rate. In the
allocation process, the Auction Agent assigns shares first to those current
holders who placed an order to hold or were deemed to have done so. The
remainder of the shares are allocated according to a procedure designed to match
prospective buyers and sellers, starting with the lowest bid and moving to the
highest, at the lowest possible dividend rate meeting the terms of their
respective orders. In some auctions, the terms specified by buyers and sellers
will match such that all orders are satisfied according to their terms, and the
market "clears." If the market clears in an auction, the resulting dividend rate
is the lowest rate at or below which all orders other than hold orders are
satisfied. In other auctions, however, the market may not clear because the
orders submitted are such that the Auction Agent cannot match all buy and sell
orders according to their terms using the method described above. If the market
does not clear in an auction, shares of the ATP are allocated, to the extent
possible, according to the matching procedure described above. Those orders
which cannot be matched are given allocations based on specified proration
procedures. If the market does not clear in an auction, the resulting dividend
rate is the Maximum Applicable Rate.
As noted above, the Minimum Applicable Rate has effect only when the
auction relates to a dividend period of 93 or less days. In such an auction, the
Minimum Applicable Rate can affect the auction process in only two situations.
The first situation arises when an order is placed with a rate less than the
Minimum Applicable Rate. Under the terms of the Articles Supplementary, that
order is automatically deemed to be one made at the Minimum Applicable Rate. The
second situation arises when all current holders either submit or are deemed to
have submitted hold orders. Under the Articles Supplementary, the dividend rate
for the next dividend period in this second situation is the Minimum Applicable
Rate. As described above, the nature of the auction procedure applicable to the
ATP is such that, for auctions relating to dividend periods of 93 days or less,
the Minimum Applicable Rate effectively sets a lower limit on the dividend rate
to be paid for that dividend period.
Currently, the Articles Supplementary define the Minimum Applicable
Rate as follows:
"...on any Auction Date with respect to a Dividend Period of 93 days or
fewer, 99% of the AA Composite Commercial Paper Rate at the close of
business on the Business Day next preceding such Auction Date."
If stockholders approve the proposed Amendment, the Directors currently
intend to revise the definition of Minimum Applicable Rate so that it reads as
follows:
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"...on any Auction Date with respect to a Dividend Period of 93 days or
fewer, 80% of the AA Composite Commercial Paper Rate at the close of
business on the Business Day next preceding such Auction Date."
The Directors believe that reducing the Minimum Applicable Rate to 80%
is in the Fund's best interest given the auction market for the ATP and the
minimum rates applicable to other participants in that market. All of the
auctions conducted since the ATP was initially offered have been for the
standard dividend period, generally 28 days in length. As a result, the ATP has
generally offered a dividend rate reflecting a premium over the market rate.
Given the prevailing conditions in the auction market for the ATP and the
investment character of the ATP as compared to the other participants in that
market, the Directors believe that the current Minimum Applicable Rate provides
an unnecessary premium over prevailing market dividend rates in auctions where
the Minimum Applicable Rate is invoked. The current definition of Minimum
Applicable Rate thereby places an unjustified burden on the Fund to produce
income in excess of that needed to fund a dividend rate satisfactory to buyers
in its market. If stockholders approve the proposed Amendment, the Directors,
therefore, intend to adjust the Minimum Applicable Rate as noted above to make
it more consistent with conditions in the ATP's auction market. The revised
definition will relieve the Fund of a potential dividend rate obligation
materially in excess of those applicable to the majority of other participants
in the auction preferred stock market.
A lower Minimum Applicable Rate may present the risk of a reduction in
buyer interest in the ATP. Investors who would ordinarily submit a buy order in
order to garner the potential premium offered by the current Minimum Applicable
Rate might choose not to submit buy orders if the Rate were lowered as currently
contemplated by the Directors. If, as a result, there were insufficient buy
orders to satisfy the number of sell orders made in an auction, the dividend
rate resulting from the auction would be the Maximum Applicable Rate, and the
liquidity of the ATP for current holders could be impaired. In the absence of
successful auctions, there is no assurance that a secondary market for the ATP
would develop or that, if such a market did develop, shares of the ATP would
trade at or close to their liquidation preference, i.e., $50,000 per share plus
accumulated dividends. Neither the Fund nor any other party is obligated to
purchase shares of the ATP in an auction or otherwise. The Board of Directors
has considered the risk of higher dividend rates on the Fund and the risk of a
decline in the liquidity of the ATP resulting from a reduction in the Minimum
Applicable Rate and does not believe that the proposed reduction will have a
material adverse affect on the Fund or the liquidity of the ATP.
Changes in the Definition of Eligible Assets - General.
Under the terms of the Articles Supplementary, the Fund is required on
a regular periodic basis, typically every seven days, to meet a portfolio asset
composition test (the "Basic Maintenance Amount") which reflects guidelines
imposed by Moody's and Fitch, the rating agencies currently assigning a credit
quality rating to the ATP. The guidelines reflected
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<PAGE>
in the Basic Maintenance Amount are designed to ensure that assets underlying
the ATP will be sufficiently varied and will be of sufficient quality and value
to justify the ratings the agencies have assigned the ATP. Thus, for purposes of
satisfying each rating agency's requirements, only certain types of assets are
considered in determining whether the Basic Maintenance Amount has been met
("Moody's Eligible Assets" and "Fitch Eligible Assets," respectively). In the
context of a closed-end fund such as the Fund, the Basic Maintenance Amount
provides a set of tests for portfolio composition and asset coverage which
supplements (and in some cases is more restrictive than) the applicable
requirements under the Investment Company Act of 1940, as amended, and which
accordingly can affect the management of the Fund significantly.
Both Moody's and Fitch have approved proposed changes in the Fund's
asset composition tests which would permit Rule 144A securities and obligations
issued in connection with a reorganization under federal bankruptcy law
("reorganization bonds") to be counted towards satisfying the Basic Maintenance
Amount. While the Fund may already invest in these types of securities to some
extent, the fact that they do not constitute Moody's and Fitch Eligible Assets
under the Articles Supplementary limits the Fund's ability to make such
investments to a greater extent than either rating agency currently requires. If
stockholders approve the proposed Amendment, the Directors currently intend to
modify the Eligible Assets definitions in the Articles Supplementary to include
144A securities and reorganization bonds. These changes, each of which is
described in greater detail below, would permit the Adviser to exercise greater
investment flexibility within the portfolio composition guidelines currently
imposed by Moody's and Fitch.
Change in the Definition of Eligible Assets - Rule 144A Securities.
The markets for certain types of securities, such as repurchase
agreements, commercial paper, many types of municipal securities and some
corporate bonds and notes, are almost exclusively institutional. These
instruments are often restricted securities (i.e., securities that are
restricted as to disposition under the federal securities laws or otherwise)
because the securities are either themselves exempt from registration under the
securities laws or sold in transactions not requiring registration.
Institutional investors will, therefore, often rely on the issuer's ability to
honor a demand for repayment in less than seven days or on an institutional
market in which the unregistered security can be readily resold. The fact that
there may be legal or contractual restrictions on resale to the general public,
therefore, may not be dispositive with respect to the liquidity of such
investments.
The Securities and Exchange Commission has adopted Rule 144A, which is
viewed as a step toward achieving a more liquid and efficient institutional
resale market for restricted securities. In adopting Rule 144A, the Securities
and Exchange Commission indicated that Rule 144A securities may be treated as
liquid for purposes of applying the investment limitations of registered
open-end investment companies if the board of directors (or a fund's adviser
acting subject to the board's supervision) determines that the securities are
liquid. The
10
<PAGE>
Fund's investment adviser has implemented procedures to determine the liquidity
of restricted securities purchased by the Fund, subject to the oversight of the
Board.
As currently defined in the Articles Supplementary, both Moody's
Eligible Assets and Fitch Eligible Assets exclude Rule 144A securities by
requiring eligible securities to be registered under the Securities Act of 1933,
as amended (the "Securities Act"). As a consequence, any Rule 144A security held
by the Fund does not count towards the Basic Maintenance Amount, thus limiting
to a significant degree the Fund's ability to purchase these securities. Rule
144A securities are assuming increasing significance as a sector of the high
yield market. In order to permit the Fund to take greater advantage of the
opportunities these securities offer, the Board of Directors intends to
eliminate the provision in the Articles Supplementary excluding Rule 144A
securities from Moody's and Fitch Eligible Assets for purposes of the Basic
Maintenance Amount, should stockholders approve the proposed Amendment.
Because Rule 144A securities held by the Fund may be resold only under
certain circumstances and to certain qualified institutional buyers as defined
in the Rule, and because the markets and trading practices for such securities
are relatively new and still developing, the Fund may be adversely affected if
it wishes to sell its 144A holdings and qualified institutional buyers are, for
whatever reason, uninterested in purchasing such securities. The Board of
Directors believes that the system of guidelines followed by the Fund's adviser
and the oversight by the Board will provide the Fund with adequate assurances of
liquidity with respect to its Rule 144A holdings. The Fund will continue to be
subject to a fundamental investment restriction that limits the amount of
securities which are not readily marketable to 20% of the Fund's total assets.
Fundamental policies may only be changed by stockholder vote.
Change in the Definition of Eligible Assets - Obligations Issued in Connection
with a Reorganization.
If stockholders approve the proposed Amendment, the Board of Directors
also intends to amend the Articles Supplementary to change the definitions of
Moody's Eligible Assets and Fitch Eligible Assets with regard to bonds which are
issued in connection with a reorganization under federal bankruptcy law
("reorganization bonds").
Currently, Part I, Section 16(xx)(iv) of the Articles Supplementary
states that reorganization bonds may not be considered Moody's Eligible Assets.
If stockholders approve the proposed Amendment, the Directors intend to
eliminate this clause in the definition of Moody's Eligible Assets.
Pursuant to Part I, Section 16(oo)(iv) of the Articles Supplementary, a
reorganization bond may currently be considered Fitch Eligible Assets only if
(a) it is rated CCC or higher by both Fitch and S&P, (b) it provides for
periodic payment of interest in cash in U.S. dollars,
11
<PAGE>
(c) it has been registered under the Securities Act, and (d) it was issued by a
U.S. corporation. If stockholders approve the proposed Amendment, the Directors
intend to modify this clause in the Article Supplementary so that a
reorganization bond will qualify as a Fitch Eligible Asset if (a) it is rated
CCC (or its equivalent) or higher by either Fitch or Moody's and by S&P, (b) it
provides for periodic payment of interest in cash in U.S. dollars, (c) it has
been registered under the Securities Act or is eligible for trading under Rule
144A promulgated pursuant to the Securities Act as determined by the Fund's
adviser acting subject to the supervision of the Fund's Board of Directors, (d)
it was issued by a U.S. corporation, (e) at the time of purchase at least one
year had elapsed since the issuer's reorganization, or (f) it has been approved
by Fitch, which approval shall not be unreasonably withheld.
The Directors believe the Fund may benefit from the added flexibility
to invest to a larger extent than currently possible in reorganization bonds.
The Directors have noted the added risk that may be posed by these instruments.
However, any reorganization bonds purchased by the Fund will be required to meet
the credit quality and other requirements imposed by the revised definitions
noted above in order to qualify as Moody's and Fitch Eligible Assets.
The Directors believe that proposed Amendment is in the best interests
of the Fund because it will permit modifications to the terms of the ATP such as
those described above to be made in the future, as market conditions and other
considerations relevant to the Fund warrant, without the time and expense of a
stockholder meeting. If stockholders do not approve the proposed Amendment, the
Board of Directors will consider alternative actions, including redemption of
the ATP and issuance of one or more new series of preferred stock or other
financing. Any such new preferred stock would be issued pursuant to articles
supplementary that may include changes from the current Articles Supplementary
in addition to those noted above.
The Board of Directors recommends that stockholders vote FOR the
proposed Amendment.
12
<PAGE>
OWNERSHIP OF FUND SECURITIES
The Fund does not know of any person who beneficially owned more than
5% of the outstanding shares of the Common Stock or ATP as of the record date.
As of the record date, all of the executive officers and Directors of the Fund
as a group (seven persons) beneficially owned less than 1% of the outstanding
shares of Common Stock. No officer or Director of the Fund owns shares of the
Fund's ATP.
OTHER MATTERS
The Directors do not intend to present any other business at the
Special Meeting nor are they aware that any stockholder intends to do so. If,
however, any other matters are properly brought before the Special Meeting, the
persons named in the accompanying proxy will vote thereon in accordance with
their judgment.
STOCKHOLDER PROPOSALS
Any proposals of stockholders that are intended to be presented at the
Fund's 1997 Annual Meeting of Stockholders must be received at the Fund's
principal offices no later than November 8, 1996 and must comply with all other
legal requirements in order to be included in the Fund's proxy statement and
form of proxy for that meeting.
13
<PAGE>
Boston, Massachusetts
August __, 1996
14
<PAGE>
EXHIBIT A
Part I, Section 6(j) of the Articles Supplementary
Language to be deleted is bracketed.
" (j) The Board of Directors, without the vote or consent of any holder of the
Preferred Stock, including the ATP, or any other stockholder of the Corporation,
may from time to time amend, alter or repeal any or all of the definitions of
the terms or provisions listed below [in connection with obtaining or
maintaining one or more ratings with respect to the ATP], and any such
amendment, alteration or repeal will not be deemed to affect the preferences,
rights or powers of shares of ATP or the Holders thereof, provided that the
Board of Directors receives written confirmation from Moody's (if Moody's is
then rating the ATP) and Fitch (if Fitch is then rating the ATP) (with such
confirmation in no event being required to be obtained from a particular rating
agency in the case of the definitions relevant only to and adopted in connection
with the rating of the ATP, if any, by any other rating agency) that such
amendment, alteration or repeal would not impair the rating then assigned by
Moody's or Fitch, respectively. In addition, the Board of Directors, without the
vote or consent of any Holder of the Preferred Stock, including the ATP, or any
other stockholder of the Corporation, may from time to time adopt, amend, alter
or repeal any or all of any additional or other definitions or add covenants and
other obligations of the Corporation (e.g., maintenance of minimum liquidity
level) or confirm the applicability of covenants and other obligations set forth
herein in connection with obtaining or maintaining the rating of Moody's, Fitch
or any Other Rating Agency with respect to the ATP, and any such amendment,
alteration or repeal will not be deemed to affect the preferences, rights or
powers of the ATP or the Holders thereof, provided the Board of Directors
receives written confirmation from the relevant rating agency (such confirmation
in no event being required to be obtained from a particular rating agency with
respect to definitions or other provisions relevant only to another rating
agency's rating) that any such amendment, alteration or repeal would not
adversely affect the rating then assigned by such rating agency.
15
<PAGE>
Definitions and Provisions Subject to Change by Director Action:
ATP Basic Maintenance Amount Minimum Applicable Rate
ATP Basic Maintenance Moody's Discount Factor
Certificate Moody's Eligible Assets
Asset Coverage Cure Date Moody's Industry Classification
Deposit Securities 1940 Act Asset Coverage Cure
Discounted Value Date
Exposure Period 1940 Act ATP Asset Coverage
Fitch Discount Factor Volatility Factor
Fitch Eligible Assets Short Term Money Market
Fitch Industry Classification Instruments
Market Value
Maximum Applicable Rate
Last Paragraph of Section 12
In addition, the Board of Directors may amend the definition of Maximum
Applicable Rate to increase the percentage amount by which the Reference Rate is
multiplied to determine the Maximum Applicable Rate shown therein without the
vote or consent of the holders of the shares of the Preferred Stock, including
the ATP, or any other stockholder of the Corporation, and without receiving any
confirmation from any rating agency after consultation with the Broker-Dealers,
provided that immediately following any such increase the Corporation would be
in compliance with the ATP Basic Maintenance Amount."
16
<PAGE>
Preliminary Copy
THE NEW AMERICA HIGH INCOME FUND, INC.
Special Meeting of Stockholders -- Ocotber 15, 1996
Proxy Solicited on Behalf of the Board of Directors
The undersigned holder of shares of Common Stock of the New America
High Income Fund, Inc., a Maryland corporation (the "Fund"), hereby appoints
ROBERT F. BIRCH and RICHARD E. FLOOR and each of them, with full power of
substitution and revocation, as proxies to represent the undersigned at the
Special Meeting of Stockholders of the Fund to be held at the Goodwin, Procter &
Hoar LLP Conference Center, Second Floor, Exchange Place, Boston, Massachusetts
02109 on Tuesday, October 15, 1996 at 9:30 a.m., and at any and all adjournments
thereof, and thereat to vote all shares of the Common Stock of the Fund which
the undersigned would be entitled to vote, with all powers the undersigned would
possess if personally present, in accordance with the instructions on this
proxy.
Please Complete, Sign and Date on Reverse Side
and Mail in Accompanying Postpaid Envelope.
(Continued on other side)
<PAGE>
(Continued from other side)
THE BOARD OF TRUSTEES FAVORS A VOTE FOR EACH PROPOSAL
1. To approve an amendment to the Articles Supplementary of the Fund's Charter
to permit the Board of Directors to amend certain of its terms relating to the
Fund's Auction Term Preferred Stock without stockholder approval, as described
in the accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To consider and act upon any other business as may properly come before the
Special Meeting and any adjournment thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY
WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY SHALL BE
VOTED "FOR" THE APPROVAL OF PROPOSAL 1 AND IN THE DISCRETION OF THE PROXIES WITH
RESPECT TO ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE SPECIAL MEETING
AND ANY ADJOURNMENTS THEREOF. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE
ACCOMPANYING NOTICE OF SPECIAL MEETING AND PROXY STATEMENT.
___________________________________, 1996
Date
_________________________________________
Signature
_________________________________________
Signature
Please sign exactly as name or names
appear on this proxy. If shares are held
jointly, each holder should sign. When
signing as attorney, administrator,
trustee or guardian, please give your
title as such.
<PAGE>
Preliminary Copy
THE NEW AMERICA HIGH INCOME FUND, INC.
Special Meeting of Stockholders -- October 15, 1996
Proxy Solicited on Behalf of the Board of Directors
The undersigned holder of shares of Series A and/or Series B Auction
Term Preferred Stock (collectively, "Auction Term Preferred Stock") of the New
America High Income Fund, Inc., a Maryland corporation (the "Fund"), hereby
appoints ROBERT F. BIRCH and RICHARD E. FLOOR and each of them, with full power
of substitution and revocation, as proxies to represent the undersigned at the
Special Meeting of Stockholders of the Fund to be held at the Goodwin, Procter &
Hoar LLP Conference Center, Second Floor, Exchange Place, Boston, Massachusetts
02109 on Tuesday, October 15, 1996 at 9:30 a.m., and at any and all adjournments
thereof, and thereat to vote all shares of the Auction Term Preferred Stock of
the Fund which the undersigned would be entitled to vote, with all powers the
undersigned would possess if personally present, in accordance with the
instructions on this proxy.
Please Complete, Sign and Date on Reverse Side
and Mail in Accompanying Postpaid Envelope.
(Continued on other side)
<PAGE>
(Continued from other side)
THE BOARD OF TRUSTEES FAVORS A VOTE FOR EACH PROPOSAL
1. To approve an amendment to the Articles Supplementary of the Fund's Charter
to permit the Board of Directors to amend certain of its terms relating to the
Fund's Auction Term Preferred Stock without stockholder approval, as described
in the accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To consider and act upon any other business as may properly come before the
Special Meeting and any adjournment thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY
WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY SHALL BE
VOTED "FOR" THE APPROVAL OF PROPOSAL 1 AND IN THE DISCRETION OF THE PROXIES WITH
RESPECT TO ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE SPECIAL MEETING
AND ANY ADJOURNMENTS THEREOF. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE
ACCOMPANYING NOTICE OF SPECIAL MEETING AND PROXY STATEMENT.
___________________________________, 1996
Date
_________________________________________
Signature
_________________________________________
Signature
Please sign exactly as name or names
appear on this proxy. If shares are held
jointly, each holder should sign. When
signing as attorney, administrator,
trustee or guardian, please give your
title as such.
