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:
| | Preliminary Proxy Statement [ ] Confidential for use of the
[X] 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):
| | $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.
[X] 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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THE NEW AMERICA HIGH INCOME FUND, INC.
10 Winthrop Square, Fifth Floor
Boston, Massachusetts 02110
August 29, 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 may result in
a reduction in the Fund's expenses and will 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 participate 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,
/s/ Robert F. Birch
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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THE NEW AMERICA HIGH INCOME FUND, INC.
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On Tuesday, October 15, 1996
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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 29, 1996
Boston, Massachusetts
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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 29, 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 29,
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,
35,485,613 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 outstanding share of the 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 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
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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 has retained Corporate Investor
Communications, a proxy solicitation firm, to assist in the solicitation of
proxies. The costs of retaining the firm, which the Fund does not anticipate
will exceed $15,000, will depend upon the amount and type of services
rendered and will be borne by the Fund. The other costs of proxy solicitation
and the 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, was mailed to stockholders of record at the
close of business on March 1, 1996 and the Semi-Annual Report for the six
months ended June 30, 1996 was mailed to stockholders of record at the close
of business on August 20, 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, 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
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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.
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
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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 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 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.
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.
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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 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,
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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:
" . . . 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
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reflects guidelines imposed by Moody's and Fitch, the rating agencies
currently assigning a credit quality rating to the ATP. The guidelines
reflected 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 Fund's investment adviser has implemented
guidelines and procedures developed and established by the Board of Directors
to determine the liquidity of restricted securities purchased by the Fund.
The adviser's implementation of these guidelines and procedures is subject to
continuing oversight by 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
8
<PAGE>
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, (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 because their issuers have limited operating histories in their
reorganized forms. 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
9
<PAGE>
of a stockholder meeting. Should Common and ATP stockholders fail to approve
the proposed Amendment by the necessary margins (see page 3 above), 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.
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.
Boston, Massachusetts
August 29, 1996
10
<PAGE>
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.
<PAGE>
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 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 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.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL BE
VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY WILL 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.
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.
Please sign this proxy exactly as your name appears on the reverse side. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
___________________________________ _______________________________________
___________________________________ _______________________________________
___________________________________ _______________________________________
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
For Against Abstain
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 consider and act upon any other business as may properly come before the
Special Meeting and any adjournment thereof.
THE BOARD OF TRUSTEES FAVORS A VOTE FOR EACH PROPOSAL
Please be sure to sign and date this Proxy. Date
Shareholder sign here Co-owner sign here
Mark box at right if any comments or address change have been noted on [ ]
the reverse side of this card.
RECORD DATE SHARES:
