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SIGNATURE
TITLE
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
The New America High Income Fund, Inc.:
In planning and performing our audit of the financial statements of The New
America High Income Fund, Inc. for the year ended December 31, 1996, we
considered its internal control structure, including procedures for safeguarding
securities, in order to determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on the internal control
structure.
The management of The New America High Income Fund, Inc. is responsible for
establishing and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of internal control structure policies and
procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and transactions
are executed in accordance with management's authorization and recorded properly
to permit preparation of financial statements in conformity with generally
accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any evaluation
of the structure to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses, as defined above, as of
December 31, 1996.
This report is intended solely for the information and use of management and the
Securities and Exchange Commission.
/s/ Arthur Andersen LLP
Boston, Massachusetts
January 17, 1997
A Special Meeting of Stockholders of The New America High Income Fund, Inc.
was held on October 31, 1996, for the following purpose.
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.
Number of Shares
Votes For 17,974,138.864
Votes Against 1,897,606.508
On January 8, 1992, the United States District Court for the District of
Massachusetts dismissed, in their entirety, four separate actions filed in each
case against the Fund, its former Investment Advisor, certain of its officers,
its directors and certain other parties. The actions purported to be class
actions on behalf of the named plaintiffs and other persons allegedly similarly
situated who purchased common stock of the Fund within a specified period. The
actions alleged that the Fund and the other defendants, including the Fund's
underwriters, in connection with its February 1988 public offering, violated
certain federal securities laws by reason of their alleged failure to adequately
disclose material facts in the Fund's prospectus and/or other documents
published by the Fund. Plaintiffs were granted leave to amend their complaint,
limited to certain disclosure obligations under the Securities Act of 1933, and
did so. All of the defendants, including the Fund, jointly moved for summary
judgment on July 8, 1992. By memorandum and order dated August 26, 1993, the
court granted the defendants' motion for summary judgment in favor of all
defendants on all claims and entered judgment for defendants on August 27, 1993,
and the plaintiffs appealed. On September 28, 1994, the United States Court of
Appeals for the First Circuit issued an opinion affirming the decision of the
district court in part and reversing if in part. The Court held that the
district court properly entered summary judgment for the defendants as to all
disclosure issues except one. It reversed the district court's decision with
respect to that one issue and remanded the case for further proceedings. The one
remaining issue is whether it was misleading to purchasers in the initial public
offering for the original prospectus to include certain statistics regarding the
average performance of the high yield bond market for a ten-year period without
also including different statistics, alleged by the plaintiffs to exist and to
be material, for the six-year period prior to the offering. The defendants
jointly moved for summary judgment on this remaining issue on March 31, 1995.
On November 16, 1995, the parties executed a Stipulation and Agreement of
Compromise, Settlement and Release providing for the settlement of the action.
The settlement was approved by the Court pursuant to a Final Order and Judgment
entered on June 13, 1996. Pursuant to the settlement, the defendants have
created a Settlement Fund amounting in the aggregate to $2,500,000 for
distribution, after deduction of certain fees and expenses, to a class
consisting of all persons who purchased shares of the Fund's common stock
between February 19, 1988 and March 26, 1990, other than the defendants. The
Fund contributed $1,250,000 to the Settlement Fund on June 21, 1996, and the
balance was contributed by certain of the underwriters of the Fund's initial
public offering. In addition, the Fund contributed $7,500 to a Notice and
Administration Fund, to be used for mailing notice to class members and other
administrative purposes.
The Fund established a reserve for its share of the Settlement Fund and
charged $1,250,000 to operations for the year ended December 31, 1995. The Fund
charged $7,500 to operations for the year ended December 31, 1996 for its share
of the Notice and Administrative Fund.
Robert F. Birch, President and a Director of the Fund, did not file a Form
5 for the Fund's fiscal year ended December 31, 1995. Mr. Birch's Form 5 for
fiscal 1995 would have reported six transactions to reinvest Fund dividends.
Because of the size of these transactions, they were not required to be reported
under Section 16 of the Securities Exchange Act of 1934 on other than a year end
basis pursuant to Rule 16a-6 thereunder addressing small acquisitions. The six
transactions were subsequently included in Mr. Birch's Form 5 for the fiscal
year ended December 31, 1996.
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