-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IDy+y83WpeZGDjo5tHsmELp74Ks+eahS3yLpwbmknJNE5K2N3VrvS8l7TKnxbeDu SA8CTqjSn8r0JYoBFTVURw== 0000950146-96-001446.txt : 19960816 0000950146-96-001446.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950146-96-001446 CONFORMED SUBMISSION TYPE: PRES14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960827 FILED AS OF DATE: 19960815 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW AMERICA HIGH INCOME FUND INC CENTRAL INDEX KEY: 0000825345 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRES14A SEC ACT: 1934 Act SEC FILE NUMBER: 811-05399 FILM NUMBER: 96616397 BUSINESS ADDRESS: STREET 1: TEN WINTHROP SQ STREET 2: FIFTH FLOOR CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6173508610 MAIL ADDRESS: STREET 1: TEN WINTHROP SQ STREET 2: FIFTH FLOOR CITY: BOSTON STATE: MA ZIP: 02110 PRES14A 1 PRELIMINARY PROXY STATEMENT 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: 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. 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 Preliminary Copy THE NEW AMERICA HIGH INCOME FUND, INC. 10 Winthrop Square, Fifth Floor Boston, Massachusetts 02110 ------------------ PROXY STATEMENT SPECIAL MEETING OF STOCKHOLDERS October 15, 1996 ------------------ 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 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, 2 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. 3 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 4 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. 5 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. 6 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 7 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: 8 "...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 9 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 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 (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 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 Boston, Massachusetts August __, 1996 14 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 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 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) (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. 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) (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. -----END PRIVACY-ENHANCED MESSAGE-----