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
Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
(Name of Registrant as Specified in Its Charter)
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The New America High Income Fund, Inc.
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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[X ] No fee required.
[ ] Fee computed on table below per Exchange Act
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(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
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[ ] 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, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date Filed:
THE NEW AMERICA HIGH INCOME FUND, INC.
33 BROAD STREET
BOSTON, MASSACHUSETTS 02109
January 8, 2003
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting" or "Meeting") of The New America High Income Fund, Inc., a
Maryland corporation (the "Fund") to be held at the offices of Goodwin
Procter LLP, Exchange Place, 53 State Street, Boston, MA 02109, on Thursday,
February 13, 2003 at 11:00 a.m. local time.
At the Meeting, stockholders are being asked to consider and vote upon
several issues of great importance to all stockholders.
PROPOSAL ONE would approve a new investment advisory contract. The
stockholders of the Fund are being asked to approve a new investment advisory
agreement between the Fund and T. Rowe Price Associates, Inc. ("T. Rowe Price")
The Board of Directors (the "Board") voted unanimously to appoint T. Rowe Price
as the Fund's investment advisor based upon a number of factors, including its
record of superior investment performance in the high yield bond asset class and
its disciplined but flexible investment approach. The high yield bond management
team at T. Rowe Price is headed by Mark Vaselkiv, who has managed high yield
portfolios at T. Rowe Price for 15 years in a variety of high yield market
conditions. T. Rowe Price is a large organization with substantial resources and
qualified personnel. Please refer to more detailed information about T. Rowe
Price, the proposed investment advisory contract and the revised management fee
inside this proxy statement.
In addition to approving the new investment advisory contract, there are
four proposals on the proxy that relate to changes in the Fund's fundamental
investment policies. These proposals are recommended in order to make changes
that T. Rowe Price believes would be helpful in its management of the Fund's
investments and to reflect changes in regulation that have occurred since the
Fund was established. Please refer to the complete discussion of these proposals
in this proxy statement.
PROPOSAL TWO would eliminate the Fund's investment policy regarding
investment in the securities of other investment companies. This change is
proposed primarily to permit the Fund to invest its short-term cash in a money
market fund offered exclusively to T. Rowe Price's advisory clients. This
investment option for the Fund's cash is expected to earn higher returns with
greater diversification than cash management investment options the Fund has
used in the past.
PROPOSAL THREE would eliminate the Fund's fundamental investment policy
governing the purchase of securities that are not "readily marketable." This
proposal is designed to remove any potential ambiguity regarding the Fund's
ability to invest in "Rule 144A Securities," a category which now represents a
significant segment of the high yield debt market. T. Rowe Price does not
currently expect that the elimination of this restriction will have any impact
on the securities it selects for the Fund.
PROPOSAL FOUR would eliminate the Fund's fundamental investment policy
limiting the Fund's investment in any single issuer to 5% of the value of the
Fund's total assets. This change would facilitate the investment in the money
market fund T. Rowe Price offers to its advisory clients as a cash management
investment option (as discussed in Proposal Two above). Under conditions where
the Fund maintained a cash position greater than 5%, it would be unable to
invest the entire position in the T. Rowe Price money market fund. If
stockholders approve this
change, the Fund will still be subject to single issuer limitations imposed by
certain rating agency requirements included in the Fund's charter and
diversification requirements imposed by the Internal Revenue Code and the
Investment Company Act of 1940.
PROPOSAL FIVE would eliminate the Fund's fundamental investment policy
regarding the purchase of securities in which the officers and directors of the
Fund and the Fund's investment adviser hold certain interests. At the time the
Fund was formed, state securities regulators routinely required this sort of
investment policy, which is designed to prevent conflicts of interest that might
arise as a result of personal investing activities by Fund and investment
advisor officers and directors/partners. Since the passage of the National
Securities Markets Improvements Act of 1996, which preempted most state
regulation of mutual fund offerings, funds generally do not adopt this
investment policy. The Fund has maintained a Code of Ethics since its inception
governing personal investing that addresses the types of conflicts of interest
that the fundamental investment policy is designed to prevent. T. Rowe Price has
maintained a Code of Ethics since one was first required under federal law in
1981. The T. Rowe Price Code of Ethics also contains restrictions on the
personal investments of its investment personnel which address the same types of
conflicts of interest referred to in the fundamental investment policy.
We hope that you will be able to attend the Meeting. Whether or not you plan
to attend the Meeting and regardless of the number of shares you own, it is
important that your shares be represented. You are urged to complete, sign and
date the enclosed proxy card and return it in the enclosed postage-paid envelope
or vote your shares via Internet or by touch-tone telephone. Please act promptly
to assure that your shares are represented at the Meeting.
Sincerely,
/s/ Robert F. Birch
Robert F. Birch
PRESIDENT
PLEASE GIVE ALL OF THIS INFORMATION YOUR CAREFUL ATTENTION. 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 PROMPTLY COMPLETE,
SIGN AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE. CERTAIN HOLDERS OF
COMMON STOCK MAY ALSO VOTE THEIR SHARES VIA THE INTERNET OR TELEPHONE AS
DISCUSSED IN THE PROXY STATEMENT. RETURNING A SIGNED PROXY CARD OR AUTHORIZING A
PROXY BY TELEPHONE OR OVER THE INTERNET TO VOTE YOUR SHARES WILL NOT PREVENT YOU
FROM VOTING YOUR SHARES IN PERSON IF YOU SUBSEQUENTLY CHOOSE TO ATTEND THE
MEETING, BUT YOUR PRESENCE (WITHOUT FURTHER ACTION) AT THE MEETING WILL NOT IN
ITSELF CONSTITUTE A REVOCATION OF A PREVIOUSLY DELIVERED PROXY.
THE NEW AMERICA HIGH INCOME FUND, INC.
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, FEBRUARY 13, 2003
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To the stockholders of The New America High Income Fund, Inc.:
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders (the
"Special Meeting" or "Meeting") of The New America High Income Fund, Inc., a
Maryland corporation (the "Fund"), will be held at the offices of Goodwin
Procter LLP, Exchange Place, 53 State Street, Boston, Massachusetts 02109, on
Thursday, February 13, 2003 at 11:00 a.m. local time, for the following
purposes:
1. To approve a new investment advisory agreement between the Fund and T.
Rowe Price Associates, Inc.
2. To eliminate the Fund's investment policy regarding investment in the
securities of other investment companies.
3. To eliminate the Fund's fundamental investment policy regarding
securities that are not readily marketable.
4. To eliminate the Fund's investment policy regarding purchase of
securities of a single issuer.
5. To eliminate the Fund's investment policy regarding the purchase of
issuers in which the Fund's and the Adviser's officers and directors hold
certain interests.
6. 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 December 19, 2002 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Special Meeting and any adjournments or postponements 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 CARD. HOLDERS OF THE
FUND'S AUCTION TERM PREFERRED STOCK SHOULD SIGN AND RETURN THE YELLOW PROXY
CARD. CERTAIN COMMON STOCKHOLDERS MAY ALSO SUBMIT THEIR PROXIES OVER THE
INTERNET OR BY TELEPHONE.
By Order of the Board of Directors
Richard E. Floor
SECRETARY
January 8, 2003
Boston, Massachusetts
THE NEW AMERICA HIGH INCOME FUND, INC.
33 BROAD STREET
BOSTON, MASSACHUSETTS 02109
(617) 263-6400
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PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
FEBRUARY 13, 2003
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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" or "Meeting") to be held at the
offices of Goodwin Procter LLP, Exchange Place, 53 State Street, Boston,
Massachusetts 02109 on Thursday, February 13, 2003 at 11:00 a.m. local time, and
at any and all adjournments or postponements thereof, for the purposes set forth
in the accompanying Notice of Special Meeting dated January 8, 2003.
Notice of Special Meeting and a form of proxy are enclosed herewith. This
proxy statement, the accompanying Notice of Special Meeting and form of proxy
will be first sent to stockholders on or about January 8, 2003.
The Board of Directors has fixed the close of business on December 19, 2002
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, 69,548,153 shares of
the Fund's Common Stock, par value $.01 per share (the "Common Stock"), were
issued and outstanding and 4,000 shares of the Fund's Auction Term Preferred
Stock, par value $1.00 per share and liquidation preference of $25,000 per share
(the "ATP"), were issued and outstanding, consisting of 1,400 shares of ATP
Series A, 1,000 shares of ATP Series B, 600 shares of ATP Series C, and 1,000
shares of ATP Series D. Each issued and outstanding share of Common Stock and
each issued and outstanding share of the ATP is entitled to one vote on each
matter submitted to stockholders at the Special Meeting.
The Fund does not know of any person who is the beneficial owner of more
than 5% of the issued and outstanding shares of the Common Stock or the ATP at
December 19, 2002. The following table shows the beneficial ownership of the
Fund's Common Stock by the Fund's Directors and officers as of October 31, 2002,
based on information provided to the Fund by the Directors and officers. No
officer or Director of the Fund owns shares of the Fund's ATP. All individuals
listed in the table have sole voting and investment power over the shares
reported as owned unless otherwise indicated.
SHARES OF PERCENT OF SHARES OF
COMMON STOCK COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------------ ------------------ ------------------
Robert F. Birch 146,154 *
Joseph L. Bower 20,000 *
Richard E. Floor 141,216 *
Bernard J. Korman 503,679 *
Ernest E. Monrad 265,484(1) *
Ellen Terry 18,807 *
All executive officers and directors as
a group 1,095,340 1.6%
-------------------
* Less than 1%
1
(1) Includes 119,023 shares owned by Mr. Monrad's spouse and 7,037 shares held
by Mr. Monrad as a fiduciary for unrelated persons. In both cases,
Mr. Monrad disclaims beneficial ownership of such shares.
The address of each director and officer is: c/o The New America High Income
Fund, Inc., 33 Broad Street, Boston, Massachusetts 02109.
If the accompanying form of proxy is properly executed and returned in time
to be voted at the Special Meeting (either by returning the paper proxy card or,
for certain holders of Common Stock, by submitting a proxy electronically by
telephone or over the Internet), the shares represented thereby will be voted in
accordance with the instructions indicated thereon by the stockholder. Executed
proxies that are unmarked will be voted for the following: (a) the approval of
an investment advisory agreement between the Fund and T. Rowe Price
Associates, Inc., (b) the approval of each proposal to amend the Fund's
investment policies and (c) 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.
Holders of Common Stock who tender proxies by mail should sign and return
the white proxy card. Holders of ATP should sign and return the yellow proxy
card. The proxy card should be returned in the enclosed postage-paid envelope.
Certain holders of Common Stock also have the option of executing and returning
their proxies by telephone or over the Internet. The form of proxy these
stockholders receive along with the proxy statement includes an attachment that
has instructions both for calling a toll free number for automated touch-tone
voting and for finding a website that will permit voting over the Internet.
Prior to using either of these methods of voting, stockholders should read the
proxy statement and have it and the form of proxy ready at hand.
A stockholder voting by telephone or over the Internet represents that the
stockholder is authorized to vote the shares of Common Stock being voted, such
as when a stockholder is acting on behalf of all registered owners of an account
or in the capacity of trustee of a trust or officer of an organization that
holds shares of the Fund. In addition, by using the telephone or the Internet to
submit voting instructions, the stockholder expressly authorizes EquiServe Trust
Company, N.A. ("EquiServe"), which is assisting the Fund in gathering and
tabulating votes for the Special Meeting, and its agents, to execute a proxy to
vote the stockholder's shares at the Special Meeting as the stockholder has
indicated. The Fund believes that the procedures governing the execution of
proxies by telephone or over the Internet are reasonably designed to ensure that
the identities of the stockholders executing proxies are accurately determined
and that the voting instructions of those stockholders are accurately recorded.
For purposes of determining the presence of a quorum for transacting
business at the Meeting and for determining whether sufficient votes have been
received for approval of the proposals, abstentions and broker "non-votes" (that
is, proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other persons entitled to
vote shares on a particular matter with respect to which the brokers or nominees
do not have discretionary power) will be treated as shares that are present at
the meeting, but which have not been voted. For this reason, both have the
practical effect of a vote against a proposal, but abstentions and broker
non-votes will assist the Fund in obtaining a quorum. 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. In addition, holders of Common
Stock who may vote by telephone or over the Internet may also revoke their
proxies by executing a subsequently dated proxy using either of these methods of
voting. Holders of Common Stock who vote by telephone or over the Internet
should not subsequently return a proxy card by mail unless they intend the proxy
card to revoke their prior instructions given by telephone or over the Internet.
If shares of the ATP are registered in the name of either a New York Stock
Exchange ("NYSE") member or the member's nominee on behalf of the shares'
beneficial owner, the member will request voting instructions with
2
respect to the shares from the beneficial owner. If the member does not receive
voting instructions for those shares in a timely manner and if certain other
conditions are met, the member may vote the shares in the same proportion as the
member votes shares of the ATP for which beneficial holders have provided voting
instructions.
In the event a quorum is not present at the Special Meeting, or in the event
sufficient votes to approve any of the proposals are not received, even though a
quorum is present at the Special Meeting, 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 are reasonable and in the interests of
stockholders of the Fund. Any such adjournment will require the affirmative vote
of a majority of those shares present at the Special Meeting in person or by
proxy. A stockholder vote may be taken on any proposal in this Proxy Statement
prior to such adjournment if sufficient votes have been received and such vote
is otherwise appropriate.
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, by telegraph or in person. The Fund has also retained a proxy
solicitor, The Altman Group, Inc. ("Altman"), to assist in the solicitation of
proxies. Pursuant to this arrangement, Altman has agreed to contact banks,
brokers and proxy intermediaries utilizing a variety of methods, including
reminder mailings and telephone solicitation. The costs of retaining Altman,
which will be fully borne by the Fund, are not expected to exceed $60,000. Under
the agreement, the Fund has agreed to indemnify and hold harmless Altman and its
employees against any liability incurred in connection with the solicitation of
proxies unless such liability results from gross negligence or misconduct on the
part of Altman. The agreement between the Fund and Altman will terminate upon
the conclusion of the Special Meeting or any adjournments thereof. The costs of
proxy solicitation and expenses incurred in connection with preparing this Proxy
Statement and its enclosures will be paid by the Fund.
Each proposal requires an affirmative vote of a majority of the outstanding
voting securities of the Fund (within the meaning of the 1940 Act) to be
approved. Under the 1940 Act, a "majority of the outstanding voting securities"
of a registered investment company means the affirmative vote by holders of the
lesser of either (a) 67% or more of the outstanding voting securities of such
company present at a meeting, if the holders of more than 50% of the outstanding
voting securities of such company are present in person or represented by proxy
or (b) more than 50% of the outstanding voting securities of such company.
Common Shares and ATP Series A, ATP Series B, ATP Series C, and ATP Series D
vote as one class. If a proposal does not receive the requisite stockholder
approval, then the Directors will meet to consider possible alternatives, which
might include resubmission of the proposal for stockholder approval.
While the Fund's current independent auditors for the year ended
December 31, 2002, KPMG LLP, are not expected to be present at the Special
Meeting, a representative of KPMG LLP will be available via telephone at the
Special Meeting to respond to appropriate questions and will have the
opportunity to make a statement if the representative so desires.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF THE ANNUAL REPORT OF THE
FUND FOR THE YEAR ENDED DECEMBER 31, 2001, AND A COPY OF THE SEMI-ANNUAL REPORT
FOR THE SEMI-ANNUAL PERIOD ENDED JUNE 30, 2002, INCLUDING FINANCIAL STATEMENTS,
TO EACH STOCKHOLDER UPON REQUEST. IF YOU WOULD LIKE TO RECEIVE EITHER THE ANNUAL
REPORT, OR THE SEMI-ANNUAL REPORT, OR BOTH, YOU MAY WRITE TO ELLEN E. TERRY AT
33 BROAD STREET, BOSTON, MASSACHUSETTS 02109, OR YOU MAY CALL THE FUND COLLECT
AT (617) 263-6400.
3
THE ADMINISTRATOR
Since February 1992, the Fund has engaged Ellen E. Terry to perform
administrative services, as well as Paul E. Saidnawey to provide certain related
administrative services subject to the supervision of the President of the Fund
and Ms. Terry.
PROPOSAL ONE
APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
The stockholders of the Fund are being asked to approve a new investment
advisory agreement (the "Proposed Agreement") between the Fund and T. Rowe Price
Associates, Inc. ("T. Rowe Price"). The Proposed Agreement is attached as
Exhibit A to this Proxy Statement. At a meeting of the Board of Directors held
on October 17, 2002, the Directors of the Fund unanimously voted to appoint T.
Rowe Price to succeed Wellington Management Company, LLP ("Wellington
Management") as the Fund's investment adviser. Effective December 2, 2002, the
Fund terminated its investment advisory agreement with Wellington Management and
entered into an interim arrangement with T. Rowe Price. The interim arrangement
is currently in effect pending stockholder approval of the Proposed Agreement.
Wellington Management, located at 75 State Street, Boston, Massachusetts 02109,
has served as investment adviser to the Fund since February 19, 1992 pursuant to
an investment advisory agreement dated February 19, 1992, as amended (the "Prior
Agreement"). The Prior Agreement was approved by Fund stockholders at an annual
meeting of stockholders held on May 11, 1992.
The advisory fee payable to T. Rowe Price under the interim arrangement is
the same as under the Prior Agreement, in accordance with Rule 15a-4 under the
Investment Company Act of 1940, as amended (the "1940 Act"), which permits the
Directors to enter into the interim arrangement prior to stockholder approval.
The interim arrangement terminates automatically after one hundred fifty (150)
days (May 1, 2003) as required by Rule 15a-4. If stockholders approve the
Proposed Agreement, the Proposed Agreement will take effect immediately,
replacing the interim arrangement.
CONSIDERATIONS OF THE BOARD OF DIRECTORS
In reaching a decision to engage T. Rowe Price as the Fund's investment
adviser, the Directors concluded that (a) T. Rowe Price had a record of superior
performance in the high yield asset class; (b) T. Rowe Price demonstrated an
appropriate awareness of the special requirements associated with the Fund's
leveraged structure; (c) T. Rowe Price is a large, well capitalized organization
with substantial resources and qualified personnel; and (d) T. Rowe Price's
disciplined but flexible investment approach is appropriate for the Fund. The
Board of Directors also considered the investment advisory fee under the
Proposed Agreement (the "Proposed Fee") and information on fees charged by other
investment advisers for comparable services and determined that the Proposed Fee
was reasonable in relation to the services to be provided by T. Rowe Price. None
of the Fund's Directors and officers are employed by or otherwise affiliated
with T. Rowe Price.
The Directors' decision to replace Wellington Management with T. Rowe Price
was prompted primarily by the Directors' view that the Fund's performance over
recent periods had not met expectations. Before selecting T. Rowe Price as the
Fund's new investment adviser, the Directors and Fund management, solicited and
considered proposals from a range of investment advisory organizations with
experience investing in high yield fixed income securities. In connection with
their final deliberations, the Directors reviewed additional materials provided
by T. Rowe Price in response to the Board's request, including information
regarding T. Rowe Price and its personnel, operations and financial condition.
Representatives of T. Rowe Price also met with Fund management and with the
Board of Directors and discussed T. Rowe Price's philosophy of management,
performance, expectations and method of operation as they would relate to the
Fund. Among other matters, the Directors also discussed with T. Rowe Price
(a) the manner in which T. Rowe Price would manage the transition from
Wellington Management, (b) T. Rowe Price's research methodology and the extent
to which portfolio management in T. Rowe Price's high-
4
yield group had access to information and analysis from T. Rowe Price's equity
management group, (c) default rates in the high yield bond portfolios managed by
T. Rowe Price and (d) the special considerations entailed in managing a
leveraged capital structure such as the Fund's. In addition, the Board of
Directors reviewed and discussed the terms and provisions of the Proposed
Agreement.
Based on its review, the Board of Directors approved the interim arrangement
and Proposed Agreement as being in the interests of the Fund's stockholders. The
Board then directed that the Proposed Agreement be submitted to stockholders for
approval with the Board's recommendation that stockholders of the Fund vote to
approve the Proposed Agreement.
T. ROWE PRICE -- PORTFOLIO MANAGEMENT
If the Proposed Agreement is approved, the Fund will be managed by an
Investment Advisory Committee chaired by Mark J. Vaselkiv, a Vice President of
T. Rowe Price and a Portfolio Manager in the Fixed Income Department, heading
taxable high yield bond management. Mr. Vaselkiv is currently the Fund's
portfolio manager under the interim arrangement. He has day-to-day
responsibility for managing the Fund and works with the committee in developing
and executing the Fund's investment program. He also serves as President of the
T. Rowe Price High Yield Fund and Chairman of its Investment Advisory Committee.
Mr. Vaselkiv has managed high yield bond portfolios at T. Rowe Price for 15
years through a variety of market conditions. Prior to joining T. Rowe Price, he
was employed as a Vice President, analyzing and trading high yield debt
securities, for Shenkman Capital Management, Inc., New York, and as a Private
Placement Credit Analyst in the Capital Markets Group of Prudential Insurance
Company. Mr. Vaselkiv earned a B.A. in Political Science from Wheaton College,
Illinois, and an M.B.A. in Finance from New York University, New York.
T. ROWE PRICE -- PERFORMANCE
Shown below are performance figures for two open-end funds managed by T.
Rowe Price that invest in high yield debt securities that have substantially
similar objectives, policies and strategies to the Fund, (a) T. Rowe Price High
Yield Fund, which is offered to investors as part of the T. Rowe Price family of
funds, and (b) Penn Series High Yield Bond Fund, which serves as an investment
vehicle for variable annuity and variable life insurance contracts offered by
The Penn Mutual Life Insurance Company and its subsidiary, The Penn Insurance
and Annuity Company. T. Rowe Price does not currently manage a closed-end fund
similar to the Fund. T. Rowe Price High Yield Fund focuses on the higher-quality
range (debt rated BB/B) of the high yield market. In evaluating the performance
figures shown below, stockholders should keep in mind that there are differences
between the open-end funds managed by T. Rowe Price and the Fund. Open-end funds
must manage cash flows associated with additional stockholder investments and
stockholder redemption requests. As a closed-end fund, the Fund does not
experience the same types of cash flows or need to maintain a cash position to
meet possible redemption requests. Neither of the open-end funds has a leveraged
capital structure or is subject to investment restrictions comparable to those
imposed on the Fund by the rating agencies for the ATP. In addition, T. Rowe
Price High Yield Fund and Penn Series High Yield Bond Fund have lower total fees
and expenses than those of the Fund. Performance of these open-end funds would
have been lower if they reflected deduction of the Fund's fees and expenses
(including the Proposed Fee).
Also shown below are performance figures for the T. Rowe Price High Yield
Composite, which is an aggregation of the high yield institutional accounts
managed by T. Rowe Price (excluding T. Rowe Price High Yield Fund and Penn
Series High Yield Bond Fund) whose investment objectives, policies and
strategies are substantially similar to the Fund's. These accounts were not
subject to the limitations and diversification requirements of the 1940 Act and
the Internal Revenue Code and had they been, their performance could have been
adversely affected. Moreover, the performance of these accounts does not reflect
the impact of a leveraged capital structure or investment restrictions
comparable to those imposed upon the Fund by the rating agencies for the ATP.
The
5
performance of the T. Rowe Price High Yield Composite is shown net of the
highest investment management fee applicable to any account included in the
Composite. Performance of the Composite would have been lower if it reflected
deduction of the Fund's fees and expenses (including the Proposed Fee).
For comparative purposes, also shown below are the performance of indices
designed to be representative of the high yield debt market as a whole and the
universe of open-end funds with objectives similar to T. Rowe Price High Yield
Fund's and Penn Series High Yield Bond Fund's. The CS First Boston Global High
Yield Index is an unmanaged index designed to be representative of the high
yield debt market as a whole. Returns for the CS First Boston Global High Yield
Index do not include operating expenses and other fees which the SEC requires to
be reflected in fund performance. It is not possible to invest directly in an
index. The Lipper High Current Yield Funds Average is an unweighted index of
open-end funds that focus on lower grade debt issues. Comparisons to the Lipper
index show how well T. Rowe Price High Yield Fund has done relative to its
competitors. The Lipper High Yield Bond Funds Index consists of the 30 largest
funds in the Lipper High Current Yield Funds category. The Index includes
T. Rowe Price High Yield Fund. The Lipper VA Underlying High Current Yield Funds
Average is an index of funds used as investment vehicles for variable annuities;
the funds in the index focus on lower grade debt issues. Comparison to the
Lipper index shows how well Penn Series High Yield Bond Fund has done relative
to its competitors.
AVERAGE ANNUAL TOTAL RETURNS
AS OF SEPTEMBER 30, 2002*
-------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
T. Rowe Price High Yield Fund 4.65% 1.25% 2.31% 6.36%
Penn Series High Yield Bond Fund 4.69 1.33 2.59 6.79
T. Rowe Price High Yield Composite 6.11 4.25 4.51 8.14
CS First Boston Global High Yield Index 2.85 -0.11 0.60 6.07
Lipper High Current Yield Funds Average -2.17 -3.83 -2.30 4.05
Lipper High Yield Bond Funds Index -3.20 -5.50 -2.67 4.19
Rank -- Lipper High Current Yield Funds
T. Rowe Price High Yield Fund 36 out of 378 23 out of 289 10 out of 178 7 out of 26
Lipper VA Underlying High Current Yield Funds Average -1.45% -3.43% -1.78% 4.67%
Rank -- Lipper VA Underlying High Current Yield Funds
Penn Series High Yield Bond Fund Index 7 out of 84 7 out of 68 3 out of 46 3 out of 23
-------------------
* Average annual total returns include changes in principal value, reinvested
dividends, and capital gain distributions. Expense limitations may have
increased fund total returns. Past performance does not guarantee future
results.
THE PROPOSED AGREEMENT
The Proposed Agreement, including the scope of services being provided, is
substantially identical to the Prior Agreement except for the amount of the
advisory fee, as discussed below, and the addition of certain non-substantive
provisions included in the text set forth in Exhibit A. The advisory fee paid by
the Fund under the Prior Agreement (the "Prior Fee") for fiscal 2001 was
$873,622. Had the Proposed Fee been in place for that period, the advisory fee
paid would have been $1,204,236, representing an increase of approximately 38%.
The Board of Directors believes T. Rowe Price's qualifications and outstanding
track record (as detailed above) justify the additional cost entailed in the
Proposed Fee. Based upon an analysis of publicly available information, Fund
management believes that the Proposed Fee is below the advisory fee rates of a
substantial majority of the Fund's principal competitors.
6
COMPARISON OF ADVISORY FEES UNDER THE PRIOR AND PROPOSED AGREEMENTS. The
investment advisory fee under the Prior Agreement was paid at the annual rate of
..45% of the Fund's "Average Net Assets," based on the average weekly net asset
value of the Fund. For purposes of this calculation, "Average Net Assets" meant
the Fund's total assets minus (a) the Fund's accrued liabilities (including the
aggregate principal amount of and the amount of the accrued interest on any
senior securities of the Fund constituting debt within the meaning of
Section 18 of the 1940 Act or under any credit facility with any bank or other
lender) and, without duplication of (a), (b) the aggregate liquidation
preference of and the amount of accumulated dividends on any senior securities
of the Fund constituting stock within the meaning of Section 18 of the 1940 Act.
In other words, the Prior Fee was calculated based solely on the amount of the
Fund's assets attributable to the Common Stock without regard to Fund assets
attributable to the ATP or any debt or borrowings that might serve a similar
leveraging purpose.
The Proposed Fee is equal to an annual rate of the Fund's Base Net Assets,
based on the Fund's average weekly net asset value, equal to .50% on the first
$50 million of Base Net Assets, .40% on the next $50 million of Base Net Assets
and .30% on Base Net Assets in excess of $100 million. "Base Net Assets" means
the Fund's net assets attributable to the Fund's outstanding Common Stock and
senior securities within the meaning of Section 18 of the 1940 Act. Base Net
Assets includes the liquidation preference and principal amount attributable to
the Fund's senior securities (currently the ATP) but not accrued interest and
dividends relating to those senior securities. In contrast to the Prior Fee, the
Proposed Fee will generally be calculated on a higher base amount, and the base
amount upon which the Proposed Fee is calculated will increase and decrease with
increases and decreases in the Fund's leverage. (The amount of the Fund's
leverage is controlled by the Directors.) At the same time, the Proposed Fee's
breakpoint fee schedule will tend to reduce the advisory fee at higher levels of
total net assets.
In order to facilitate a comparison of the relative effect of the Prior Fee
and the Proposed Fee, the following table shows the amount of the Prior Fee and
the Proposed Fee as a percentage of Fund total net assets applicable to the
Common Stock calculated for different asset levels and with varying Fund
leverage ratios:
TOTAL NET ASSETS APPLICABLE
TO COMMON STOCK (MILLIONS)(2)
LEVERAGE -------------------------------
RATIO(1) $100 $200 $300
-------- ---- ---- ----
20% Proposed Fee 0.53% 0.45% 0.43%
Prior Fee 0.45% 0.45% 0.45%
30% Proposed Fee 0.58% 0.50% 0.48%
Prior Fee 0.45% 0.45% 0.45%
40% Proposed Fee 0.65% 0.58% 0.55%
Prior Fee 0.45% 0.45% 0.45%
50% Proposed Fee 0.75% 0.68% 0.65%
Prior Fee 0.45% 0.45% 0.45%
-------------------
(1) The leverage ratios shown are for illustrative purposes only. The Fund's
leverage ratio is calculated by dividing assets attributable to the Fund's
leverage (the ATP) by the Fund's total net assets (assets attributable to
the Common Stock and the ATP). Although the Fund is designed to operate
with a leveraged structure and has generally maintained a leverage ratio in
the range of 35% to 45%, there is no guarantee that the Fund will maintain
any particular leverage ratio.
(2) As of November 30, 2002, the amount of the Fund's total net assets
applicable to the Common Stock was approximately $135 million, and the
Fund's leverage ratio was 42.4%. The amounts shown in the table are for
illustrative purposes only and are not a prediction of the future amount of
total net assets applicable to the Common Stock, which will depend on
market conditions and other factors.
7
T. ROWE PRICE -- OTHER FUNDS. T. Rowe Price acts as an investment adviser
for other funds with similar investment objectives. The following table sets
forth relevant information with respect to each fund for which T. Rowe Price
acts as an investment adviser or subadviser.
NET ASSETS OF FUND FEE WAIVER
NAME OF FUND INVESTMENT OBJECTIVE AS OF 9/30/02 RATE OF COMPENSATION OR REDUCTION
------------ -------------------- ------------- -------------------- ------------
T. Rowe Price High Yield Fund* High current income $2,097,886,209 An individual fee of None
and, secondarily, .30% + a group fee
capital appreciation rate** which was .32%
as of 9/30/02
Penn Series High current income $59,945,210 .50% on average daily None
High Yield Bond Fund* net assets up to $250
million; .40% on next
$500 million; .40% on
all average daily net
assets when combined
assets exceed $750
million***
-------------------
* Open-end fund.
** The "group" fee rate is based on the combined assets of certain funds
distributed by an affiliate of T. Rowe Price. The current "group" fee rate
at various combined asset levels for these funds is as follows:
..480% first $1 billion
..450% next $1 billion
..420% next $1 billion
..390% next $1 billion
..370% next $1 billion
..360% next $2 billion
..350% next $2 billion
..340% next $5 billion
..330% next $10 billion
..320% next $10 billion
..310% next $16 billion
..305% next $30 billion
..300% next $40 billion
..295% thereafter
*** Combined assets are aggregated across the funds that T. Rowe Price
subadvises for the Penn Series Funds, Inc.
ADDITIONAL EXPENSE INFORMATION. The tables below and the assumption in the
examples of a 5% annual return are required by SEC regulations applicable to all
investment companies to assist investors in understanding the various costs and
expenses associated with their investment. The example and fee table should not
be considered a representation of past or future expenses or annual rates of
return. Actual expenses or annual rates of return may be more or less than those
assumed for purposes of the example and fee table.
8
CURRENT PRO FORMA
------- ---------
STOCKHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price) None None
Dividend Reinvestment Plan Fees (1) None None
ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO COMMON SHARES) (2)
Investment Advisory Fee 0.45% 0.63%
Preferred Stock Payments and Related Expenses (3) 3.49% 3.49%
Other Expenses 0.98% 0.98%
Total Other Expenses 4.47% 4.47%
----- -----
Total Annual Expenses 4.92% 5.10%
===== =====
-------------------
(1) Each participant will, however, pay a pro rata share of brokerage
commissions if shares of Common Stock are purchased by the Dividend Paying
Agent in the open market, which occurs only when the net asset value of
shares of Common Stock exceeds the market price. There is a $.75 fee for
each cash purchase under the Fund's Cash Purchase Plan.
(2) Pro Forma Investment Advisory Fee has been calculated based upon the Fund's
size and capital structure as of November 30, 2002. "Total Other Expenses"
and its components have been estimated.
(3) Includes dividends on ATP, payments under interest rate swap, and
commissions and fees paid in connection with periodic auctions of ATP.
EXAMPLE--CURRENT:
--------------------------------------------
CUMULATIVE EXPENSE PAID FOR THE PERIOD OF
--------------------------------------------
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
$52 $155 $257 $513
EXAMPLE--PRO FORMA:
--------------------------------------------
CUMULATIVE EXPENSE PAID FOR THE PERIOD OF
--------------------------------------------
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
$54 $160 $266 $527
The examples set forth above assume reinvestment of all dividends and other
distributions at net asset value and an expense ratio based on net assets
attributable to Common Stock of 4.92% (Current) and 5.10% (Pro Forma), of which
3.49% is attributable to preferred stock payments and related expenses. In
addition, while the examples assume reinvestment of all dividends and
distributions at net asset value, participants in the Fund's Dividend
Reinvestment Plan may receive shares purchased or issued at a price or value
different from net asset value.
OTHER INFORMATION ABOUT THE PROPOSED AGREEMENT. If approved by
stockholders, the Proposed Agreement will remain in full force and effect
through December 2, 2004, and will continue in full force and effect
indefinitely thereafter, but only so long as such continuance is specifically
approved at least annually by both (i) the Board of Directors of the Fund or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund, and (ii) the vote of a majority of those Directors of the
Fund who are not parties to the Proposed Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval.
INFORMATION ABOUT T. ROWE PRICE. T. Rowe Price is a registered investment
adviser under the Investment Advisers Act of 1940, as amended, and is organized
under the laws of Maryland. Its principal business address is 100 East Pratt
Street, Baltimore, Maryland 21202.
9
T. Rowe Price is a wholly owned subsidiary of T. Rowe Price Group, Inc.
("Price Group"), a publicly-traded financial services holding company founded in
1937 by Thomas Rowe Price, Jr. The address of Price Group is 100 East Pratt
Street, Baltimore, Maryland 21202.
The name and principal occupation of the principal executive officer and
each director of T. Rowe Price are as follows:
NAME PRINCIPAL OCCUPATION
---- --------------------
George A. Roche President, Chairman of the Board, Director, and
Chairman of the Management Committee of T. Rowe
Price Group, Inc.; President, and Director of
T. Rowe Price Associates, Inc.
Edward C. Bernard Director and Vice President of T. Rowe Price
Group, Inc. and T. Rowe Price Associates, Inc.
James A.C. Kennedy III Director and Vice President of T. Rowe Price
Group, Inc. and T. Rowe Price Associates, Inc.
William T. Reynolds Director and Vice President of T. Rowe Price
Group, Inc. and T. Rowe Price Associates, Inc.
James S. Riepe Director, Vice President and Vice Chairman of the
Board of T. Rowe Price Group, Inc. and T. Rowe
Price Associates, Inc.
M. David Testa Chief Investment Officer, Director, Vice
President, and Vice Chairman of the Board of
T. Rowe Price Group, Inc. and Vice President of
T. Rowe Price Associates, Inc.
Cristina Wasiak Chief Financial Officer and Vice President of T.
Rowe Price Group, Inc. and T. Rowe Price
Associates, Inc.
The address of each person listed above is 100 East Pratt Street, Baltimore,
Maryland 21202.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that stockholders vote FOR Proposal One.
PROPOSAL TWO
ELIMINATION OF THE FUND'S INVESTMENT POLICY
REGARDING INVESTMENT IN THE SECURITIES OF OTHER INVESTMENT COMPANIES
T. Rowe Price, the Fund's investment adviser, has recommended elimination of
the Fund's fundamental investment policy on investment in other investment
companies, which reads as follows:
"[As a matter of fundamental policy, the Fund may not:] Invest in the
securities of other registered investment companies, except as they may
be acquired as part of a merger or consolidation or acquisition of
assets or by purchases in the open market involving only customary
brokers' commissions."
Fundamental investment policies may only be amended or eliminated with
stockholder approval.
REASONS FOR THE PROPOSED CHANGE
Elimination of the policy is designed to allow the Fund to invest in a money
market fund offered exclusively to T. Rowe Price's advisory clients as one of
the available options for managing the Fund's cash position. The money market
fund seeks to offer more attractive returns and diversification compared to
other available cash management investment options which the Fund has used in
the past, e.g. overnight repurchase agreements. Pursuant to the SEC exemptive
relief that permits this arrangement, the Fund may invest no more than 25% of
its assets in the money
10
market fund. In general, investments by investment companies in other funds tend
to a layering of fees and expenses, including investment advisory expenses and
administrative expenses. The T. Rowe Price money market fund has been designed
to substantially reduce any layering of expenses. T. ROWE PRICE DOES NOT RECEIVE
AN INVESTMENT MANAGEMENT FEE FOR SERVING AS THE MONEY MARKET FUND'S INVESTMENT
ADVISER.
If this fundamental investment policy is eliminated, the Fund will continue
to be subject to limitations on its purchase of securities of other investment
companies imposed by the 1940 Act. The 1940 Act generally limits the Fund
(1) to investing no more than 10% of its total assets in the securities of other
investment companies; (2) to owning no more than 3% of the total outstanding
voting stock of any other investment company; and (3) to having no more than 5%
of its total assets invested in securities of any other investment company. The
1940 Act also provides an exception to these general limitations to permit
master-feeder fund structures. T. Rowe Price has indicated there is no current
intention that the Fund invest in other investment companies aside from T. Rowe
Price's internal money market fund.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that stockholders vote FOR Proposal Two.
PROPOSAL THREE
ELIMINATION OF THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING SECURITIES THAT ARE NOT READILY MARKETABLE
T. Rowe Price, the Fund's investment adviser, has recommended elimination of
the Fund's fundamental investment policy governing the purchase of securities
that are not readily marketable, which reads as follows:
"[As a matter of fundamental policy, the Fund may not:] Invest more than
20% of the market or other fair value of its total assets in securities
that are not readily marketable, including those that are restricted as
to disposition under the federal securities laws or otherwise. This
restriction shall not apply to securities received as a result of a
corporate reorganization or similar transaction affecting readily
marketable securities already held in the portfolio of the Fund or to
repurchase agreements that have a maturity of seven days or less;
however, the Fund will attempt to dispose in an orderly fashion of any
securities received under these circumstances to the extent that such
securities, together with other securities that are not readily
marketable, exceed 20% of the market or other fair value of the Fund's
total assets."
Fundamental investment policies may only be amended or eliminated with
stockholder approval.
The risk of investing in securities that are not readily marketable is that
the Fund may be unable to sell those securities at a time when it needs to, for
example, raise cash or adjust its portfolio holdings to meet the asset coverage
requirements associated with the credit ratings for the Fund's ATP. If
stockholders approve the proposed change, the Board of Directors of the Fund
intends to adopt a non-fundamental policy, which may be changed in the future
without stockholder approval, regarding illiquid securities as follows:
"[As a matter of non-fundamental policy, the Fund may not:] Purchase
illiquid securities if, as a result, more than 20% of its net assets
would be invested in such securities. Securities eligible for resale
under Rule 144A of the Securities Act of 1933 are not included in the
20% limitation;"
In general, the SEC defines an illiquid security as one which can not be
sold in the ordinary course of business within seven days at approximately the
value assigned it by the Fund.
REASONS FOR THE PROPOSED CHANGE
The proposed change is principally designed to ensure that the Fund may
invest without limit in securities eligible for resale under Rule 144A of the
Securities Act of 1933, as amended ("Rule 144A Securities"). A
11
significant and growing segment of the high yield debt market consists of
securities that are subject to restriction on resale to the general public under
the federal securities laws but are traded in an established institutional
market in reliance on Rule 144A. Rule 144A Securities represented 81% of new
high yield debt issues during the period January 1, 2002 to December 18, 2002.
(The SEC adopted Rule 144A in 1990 in recognition of the increased size and
liquidity of the institutional markets for unregistered securities and the
importance of institutional investors in the capital formation process.) Issues
traded pursuant to Rule 144A now constitute approximately 13.01% of the market
in high yield debt securities. The size of this segment of the high yield debt
market and its available liquidity make it important to the Fund as a source of
investment opportunities. In addition, by making the Fund's policy
non-fundamental, the Fund will be able to respond more quickly to regulatory and
other developments without the delay and expense of a stockholder vote.
If this proposal is approved by stockholders, the Fund will be able to
invest in restricted securities that are illiquid provided that they are
eligible for resale under Rule 144A. However, T. Rowe Price has indicated that
the proposed changes are not expected to have any currently foreseeable impact
on the way it manages the Fund's investments, the investment performance of the
Fund or the securities or instruments which it selects for the Fund but may
provide additional investment flexibility that benefits the Fund in the future.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that stockholders vote FOR Proposal Three.
PROPOSAL FOUR
ELIMINATION OF THE FUND'S INVESTMENT POLICY
REGARDING PURCHASE OF SECURITIES OF A SINGLE ISSUER
T. Rowe Price, the Fund's investment adviser, has recommended elimination of
the Fund's fundamental investment policy limiting the Fund's investment in any
single issuer, which reads as follows:
"[As a matter of fundamental policy, the Fund may not:] Invest in
securities of any issuer if, immediately after such investment, more
than 5% of the value of the Fund's total assets would be invested in the
securities of such issuer, provided that this limitation does not apply
to obligations issued or guaranteed as to interest and principal by the
United States government or its agencies or instrumentalities."
Fundamental investment policies may only be amended or eliminated with
stockholder approval.
REASONS FOR THE PROPOSED CHANGE
The principal reason for the proposed change is to facilitate investment in
the money market fund T. Rowe Price offers to its advisory clients as a cash
management investment option (as discussed in connection with Proposal Two).
Under conditions where the Fund maintained a cash position greater than 5%, it
would be unable to invest the entire position in the T. Rowe Price money market
fund. This could result in lower returns on the Fund's idle cash when the money
market fund offered better returns than the other available cash management
investment options. Elimination of the current policy on concentration in any
single issuer also would allow the Fund to invest to a greater extent in
securities of a single issuer in other situations. However, T. Rowe Price does
not anticipate that, aside from any investment by the Fund in its internal money
market fund, elimination of this fundamental investment policy will have any
currently foreseeable impact on the way in which it manages the Fund's
investments, the investment performance of the Fund or the securities or
instruments which it selects for the Fund. However, this change may provide
additional investment flexibility that benefits the Fund in the future.
OTHER LIMITS ON SINGLE ISSUER CONCENTRATION
If stockholders approve this proposal, the Fund will continue to be subject
to single issuer limitations imposed by certain rating agency requirements
included in the Fund's charter and the 1940 Act as a result of the Fund's
12
status as a diversified investment company. As a condition to rating the credit
quality of the Fund's ATP in their respective highest rating categories, Moody's
Investors Service and Fitch Ratings have required that the Fund include certain
complex asset coverage tests in the Fund's charter documents. These tests
include limitations based on issuer, industry and credit rating among other
security characteristics. The overall effect of the rating agency asset coverage
requirements makes it very unlikely that the Fund would invest more than 5% of
its assets in any single issuer of high yield debt securities. Certain aspects
of these asset coverage requirements may be changed by the Board of Directors
with rating agency approval, but without stockholder approval.
As a diversified investment company under the 1940 Act, at least 75% of the
Fund's total assets must be cash and cash items (including receivables),
government securities, securities of other investment companies and securities
holdings that meet the SEC's single issuer diversification test. A holding in an
issuer meets this test if that issuer's securities are not more than 5% of the
Fund's total assets and the Fund's holdings of that issuer's securities are not
more than 10% of the outstanding voting securities of the issuer. The Fund's
status as a diversified investment company may not be changed without
stockholder approval.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that stockholders vote FOR Proposal Four.
PROPOSAL FIVE
ELIMINATION OF THE FUND'S INVESTMENT POLICY
REGARDING THE PURCHASE OF ISSUERS IN WHICH THE FUND'S AND THE ADVISER'S
OFFICERS AND DIRECTORS HOLD CERTAIN INTERESTS
T. Rowe Price, the Fund's investment adviser, has recommended that the
Fund's current fundamental investment policy regarding the purchase of
securities in which the officers and directors of the Fund and the Fund's
investment adviser hold certain interests be eliminated. The investment policy
reads as follows:
"[As a matter of fundamental policy, the Fund may not:] Invest in
securities of any issuer, if, to the knowledge of the Fund, officers and
Directors of the Fund and officers and partners of the Fund's investment
adviser who beneficially own more than 0.5% of the value of the Fund's
securities together own more than 5% of such issuer."
Fundamental investment policies may only be amended or eliminated with
stockholder approval.
REASONS FOR THE PROPOSED CHANGE
At the time the Fund was formed, state securities regulators routinely
imposed this type of investment policy, which is designed to prevent conflicts
of interest that might arise as a result of personal investing activities by
officers and directors/partners of the Fund and its investment adviser. Since
passage of the National Securities Markets Improvements Act of 1996 which
preempted substantive state regulation of most fund offerings, funds generally
do not adopt this investment policy. In addition, 1940 Act Rule 17j-1 requires
funds and their investment advisers to adopt codes of ethics governing personal
investing that address the types of conflicts of interest that the fundamental
investment policy is designed to prevent. The Fund has maintained a code of
ethics pursuant to 1940 Act Rule 17j-1 since inception. T. Rowe Price has
maintained one since first required by the Rule in 1981. T. Rowe Price has
indicated that elimination of this fundamental investment policy is not expected
to have any currently identifiable impact on the way it manages the Fund, the
investment performance of the Fund or the securities or instruments which it
selects for the Fund but may provide additional investment flexibility that
benefits the Fund in the future.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that stockholders vote FOR Proposal Five.
13
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 FOR ANNUAL MEETING
Stockholder proposals intended to be included in the proxy statement and
form of proxy to be presented at the Fund's 2003 Annual Meeting of Stockholders
must have been received at the Fund's principal offices, 33 Broad Street,
Boston, Massachusetts 02109, no later than November 17, 2002 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. Proxies solicited by the Board of
Directors for the Fund's 2003 Annual Meeting will confer discretionary voting
authority with respect to stockholder proposals received by the Secretary of the
Fund in writing at the principal offices of the Fund not later than the close of
business on January 17, 2003. Notice of a stockholder proposal for the 2003
Annual Meeting received after January 17, 2003 will be considered untimely.
Boston, Massachusetts
January 8, 2003
14
EXHIBIT A
The Proposed Agreement as shown below is marked to reflect changes from the
prior agreement. Additions are shown ***BETWEEN ASTERISKS.*** Deletions are
shown in [BRACKETS.]
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ***2ND*** day of ***DECEMBER***, 2002, by and between
The New America High Income Fund, Inc., a Maryland corporation (the "Fund"), and
***T. ROWE PRICE ASSOCIATES, INC.,*** a ***MARYLAND CORPORATION*** (the
"Investment Adviser").
WHEREAS, the Fund is a closed-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Fund desires to retain the Investment Adviser to render
investment management services to the Fund [AND]***UNDER THE TERMS OF THIS
AGREEMENT IN RELIANCE UPON RULE 15a-4 UNDER THE 1940 ACT PRIOR TO THE APPROVAL
BY FUND STOCKHOLDERS OF THIS AGREEMENT AND INTENDS TO SEEK FUND STOCKHOLDER
APPROVAL OF THIS AGREEMENT WITHIN THE TIME PERIOD PROVIDED FOR UNDER SUCH
RULE;***
***WHEREAS*** the Investment Adviser is willing to render
[SUCH]***INVESTMENT MANAGEMENT*** services ***TO THE FUND UNDER THE TERMS
DESCRIBED HEREIN;***
NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:
1. Duties of the Investment Adviser.
The Investment Adviser shall manage the investment and reinvestment of the
Fund's assets; continuously review, supervise, and administer the investment
program of the Fund; determine in its discretion the securities to be purchased,
retained, sold, pledged or loaned (and implement those decisions); determine in
its discretion when, to what extent and under what terms the Fund shall engage
in bank or other borrowings, to the extent permitted by law and authorized by
the Fund's Board of Directors (and, together with the Fund's Administrator, if
and to the extent one shall be appointed by the Fund, or such other parties as
the Investment Adviser may select with the approval of the Fund, implement those
determinations); provide the Fund with records concerning the Investment Adviser
and its activities that the Fund is required to maintain; render regular reports
to the Fund's officers and Directors concerning the Investment Adviser's
discharge of the foregoing responsibilities; and supply the Fund's officers and
Directors with all statistical information and reports reasonably required by
them and reasonably available to the Investment Adviser, including, without
limitation, all information required under Section 15(c) of the 1940 Act.
The Investment Adviser shall discharge the foregoing responsibilities
subject to the control of the officers and Directors of the Fund and in
compliance with such policies as the Directors may from time to time establish,
and in compliance with the objectives, policies, and limitations of the Fund set
forth in the Fund's prospectus, Registration Statement on Form N-2, charter and
relevant arrangements and agreements with respect to the Fund's senior
securities, if any, in each case as amended from time to time, and with all
applicable laws and regulations. The Investment Adviser agrees, at its own
expense, to render the services described herein and to provide the office
space, furnishings and equipment, and personnel required by it to perform those
services on the terms and for the compensation provided herein; provided,
however, that expenses for necessary services of parties other than the
Investment Adviser rendered in connection with the activities described above
shall be borne by those parties, or by the Fund, as appropriate. The Investment
Adviser shall authorize and permit any of its officers, partners and employees,
who may be elected as officers or Directors of the Fund, to serve in the
capacities in which they are elected.
2. Portfolio Transactions.
The Investment Adviser is authorized to arrange for the execution of the
Fund's portfolio transactions by selecting the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Fund and is
directed to use its best efforts to obtain the best net results, taking into
account such factors as price (including the applicable brokerage commission or
dealer spread), size of order, difficulty of execution and operational
facilities of the firm involved. The Investment Adviser may, in its discretion,
purchase and sell portfolio securities through brokers who provide the
Investment Adviser or the Fund with research, analysis, advice and similar
services, and the Investment Adviser may pay to these brokers, in return for
research and analysis, a higher commission than may be charged by other brokers,
provided that the Investment Adviser determines in good faith that such
commission is reasonable in terms either of that particular transaction or of
the overall responsibility of the Investment Adviser and the Investment
Adviser's other clients and that the total commission paid by the Fund will be
reasonable in relation to the benefits to the Fund over the long term.
On occasions when the Investment Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Investment Adviser, to the extent permitted by applicable laws and regulations,
may, but shall be under no obligation to, aggregate the securities to be so
purchased or sold in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction will
be made by the Investment Adviser in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Fund and to such
other clients.
3. Compensation of the Investment Adviser.
***(a) THE PROVISIONS OF THIS SECTION 3(a) SHALL APPLY TO PERIODS PRIOR TO
THE DATE THIS AGREEMENT IS APPROVED BY HOLDERS OF A MAJORITY OF THE OUTSTANDING
VOTING SECURITIES OF THE FUND WITHIN THE MEANING OF THE 1940 ACT (SUCH APPROVAL
BEING REFERRED TO AS "STOCKHOLDER APPROVAL").***
For the services to be rendered by the Investment Adviser as provided in
Sections 1 and 2 of this Agreement, the Fund shall pay to the Investment
Adviser[, AS PROMPTLY AS POSSIBLE AFTER THE LAST DAY OF EACH MONTH,] an
investment advisory fee at the annual rate of .45% of the Fund's "Average Net
Assets," based on the average weekly net asset value. For purposes of this
[AGREEMENT]***SECTION 3(a),*** the Fund's "Average Net Assets" shall mean the
Fund's total assets minus (a) the Fund's accrued liabilities (including the
aggregate principal amount of and the amount of the accrued interest on any
senior securities of the Fund constituting debt within the meaning of Section 18
of the 1940 Act or under any credit facility with any bank or other lender) and,
without duplication of (a), (b) the aggregate liquidation preference of and the
amount of accumulated dividends on any senior securities of the Fund
constituting stock within the meaning of Section 18 of the 1940 Act.
[NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE INVESTMENT ADVISER AGREES
TO WAIVE THE FIRST $300,000 OF INVESTMENT ADVISORY FEE THAT WOULD OTHERWISE BE
PAYABLE UNDER THE TERMS OF THIS SECTION 3.]
***(b) THE PROVISIONS OF THIS SECTION 3(b) SHALL APPLY TO PERIODS BEGINNING
WITH AND SUBSEQUENT TO THE DATE OF STOCKHOLDER APPROVAL. FOR THE SERVICES TO BE
RENDERED BY THE INVESTMENT ADVISER AS PROVIDED IN SECTIONS 1 AND 2 OF THIS
AGREEMENT, THE FUND SHALL PAY TO THE INVESTMENT ADVISER AN INVESTMENT ADVISORY
FEE AT THE ANNUAL RATE OF THE FUND'S "BASE NET ASSETS" SHOWN IN THE FOLLOWING
SCHEDULE, BASED ON THE FUND'S AVERAGE WEEKLY NET ASSET VALUE:
FUND BASE NET ASSETS FEE RATE
-------------------- --------
FIRST $50 MILLION 0.50%
NEXT $50 MILLION 0.40%
ABOVE $100 MILLION 0.30%
FOR PURPOSES OF THIS SECTION 3(b), THE FUND'S "BASE NET ASSETS" SHALL MEAN NET
ASSETS ATTRIBUTABLE TO THE FUND'S OUTSTANDING COMMON STOCK AND SENIOR SECURITIES
WITHIN THE MEANING OF SECTION 18 OF THE 1940 ACT. BASE NET ASSETS SHALL INCLUDE
THE LIQUIDATION PREFERENCE AND PRINCIPAL AMOUNT ATTRIBUTABLE TO THE FUND'S
SENIOR SECURITIES BUT NOT ACCRUED INTEREST AND DIVIDENDS RELATING TO SUCH
SECURITIES.***
***(c) THE FEES DUE UNDER THIS SECTION 3 SHALL BE PAID AS PROMPTLY AS
POSSIBLE AFTER THE LAST DAY OF EACH MONTH.*** The first payment of the
investment advisory fee shall be made as promptly as possible at the end of the
month next succeeding the effective date of this Agreement, and shall constitute
a full payment of the fee due the Investment Adviser for all services rendered
pursuant to this Agreement prior to that date. In the event that the Investment
Adviser's right to such fee commences to accrue on a date other than the first
day of the month, the fee provided in this Section 3 shall be computed on the
basis of the period beginning on the first business day on which this Agreement
is in effect, subject to a pro rata adjustment based on the number of days in
that period as a percentage of the total number of days in such month. In the
event of termination of this Agreement, the fee provided in this Section 3 shall
be computed on the basis of the period ending on the last business day on which
this Agreement is in effect, subject to a pro rata adjustment based on the
number of days elapsed in the current fiscal month as a percentage of the total
number of days in such month. The average weekly net asset value of the Fund
shall in all cases be based only on those days when the New York Stock Exchange
is open for business, and shall be computed as of the time of the regular close
of business of the New York Stock Exchange, or such other time as may be
determined by the Fund's Board of Directors. ***IN THE EVENT THAT STOCKHOLDER
APPROVAL OCCURS OTHER THAN ON THE FIRST DAY OF A MONTH, THE ADVISORY FEE FOR THE
PORTION OF THE MONTH PRIOR TO STOCKHOLDER APPROVAL SHALL BE CALCULATED ACCORDING
TO SECTION 3(a) AND THE ADVISORY FEE FOR THE PORTION OF THE MONTH BEGINNING WITH
STOCKHOLDER APPROVAL SHALL BE CALCULATED ACCORDING TO SECTION 3(b).*** Each fee
payment to the Investment Adviser shall be accompanied by a report of the Fund
which shall show the amount properly payable to the Investment Adviser under
this Agreement and the detailed computation thereof.
4. Other Services.
At the request of the Fund, the Investment Adviser shall, subject to
availability, make available to the Fund office facilities, equipment, personnel
and services other than as set forth in Sections 1 and 2 of this Agreement. Such
office facilities, equipment, personnel and services shall be provided for or
rendered by the Investment Adviser and billed to the Fund at the Investment
Adviser's cost.
5. Reports.
The Fund and the Investment Adviser agree to furnish to each other, if
applicable, current prospectuses, registration statements, proxy statements,
reports to shareholders, certified copies of their financial statements, and
such other information with regard to their affairs as each may reasonably
request.
6. Status of the Investment Adviser.
The services of the Investment Adviser to the Fund are not to be deemed
exclusive, and the Investment Adviser shall be free to render similar services
to others so long as its services to the Fund are not impaired thereby. The
Investment Adviser shall be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to act for
or represent the Fund in any way or otherwise be deemed an agent of the Fund.
Nothing in this Agreement shall limit or restrict the right of any partner,
officer or employee of the Fund, to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of any
other business, whether of a similar nature or a dissimilar nature.
7. Certain Records.
Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the 1940 Act which are
prepared or maintained by the Investment Adviser on behalf of the Fund are
property of the Fund and will be surrendered promptly to the Fund on request.
8. Liability of the Investment Adviser.
The Investment Adviser shall not be liable for any error of judgment or for
any loss suffered by the Fund in connection with performance of its obligations
under this Agreement, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of, or from reckless
disregard by it of its obligations and duties under, this Agreement, or damages
resulting from a breach of fiduciary duty with respect to receipt of
compensation for services.
9. Indemnification.
The Fund will indemnify the Investment Adviser for all liabilities and
expenses, including defense costs, in connection with any litigation pertaining
to the period prior to the Investment Adviser's relationship with the Fund under
this Agreement, other than liabilities resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser.
***10. USE OF LOGO.
DURING THE TERM OF THIS AGREEMENT, THE FUND SHALL FURNISH TO THE INVESTMENT
ADVISER AT ITS PRINCIPAL OFFICE COPIES OF ALL MATERIALS PREPARED FOR
DISTRIBUTION TO SHAREHOLDERS OF THE FUND OR THE PUBLIC, WHICH USE THE INVESTMENT
ADVISER'S LOGO AND THE FUND SHALL NOT USE ANY SUCH MATERIALS IF THE INVESTMENT
ADVISER REASONABLY OBJECTS IN WRITING FIVE (5) DAYS (OR SUCH OTHER TIME AS MAY
BE MUTUALLY AGREED) AFTER RECEIPT THEREOF.***
***11.***[10.] Permissible Interests.
Directors, officers, agents and shareholders of the Fund are or may be
interested in the Investment Adviser (or any successor thereof) as partners,
officers or otherwise; partners, officers and agents of the Investment Adviser
are or may be interested in the Fund as Directors, officers, shareholders or
otherwise; and the Investment Adviser (or any successor thereof) is or may be
interested in the Fund as a shareholder or otherwise.
***12.***[11.] Duration and Termination.
If approved by holders of a majority of the outstanding voting securities of
the Fund at the first shareholders' meeting following the date of this
Agreement, and unless sooner terminated as provided herein, this Agreement shall
continue until, ***DECEMBER 2, 2004,*** and thereafter for periods of one year,
so long as such continuance thereafter is specifically approved at least
annually (a) by the vote of a majority of those Directors of the Fund who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Fund; provided, however, that if the shareholders of
the Fund fail to approve the Agreement as provided herein, the Investment
Adviser may continue to serve hereunder in the manner and to the extent
permitted by the 1940 Act and the rules and regulations thereunder until such
time as such approval has been obtained, whereupon the provisions of Section 3
hereof shall apply. The foregoing requirement that continuance of this Agreement
be "specifically approved at least annually" shall be construed in a manner
consistent with the 1940 Act and the rules and regulations thereunder. This
Agreement may be terminated at any time without the payment of any penalty by
the vote of a majority of Directors of the Fund or by the vote of a majority of
the outstanding voting securities of the Fund on 60 days' written notice to the
Investment Adviser or by the Investment Adviser at any time without the payment
of any penalty on 60 days' written notice to the Fund. This Agreement will
automatically and immediately terminate in the event of its assignment. Any
notice under this Agreement shall be given in writing, addressed and delivered,
or mailed postpaid, to the other party at any office of such party. As used in
this Section 11, the terms "assignment," "interested person," and "vote of a
majority of the outstanding voting securities" shall have the respective
meanings set forth in the 1940 Act and the rules and regulations thereunder,
subject to such exceptions as may be granted by the Securities and Exchange
Commission under the 1940 Act.
***13. NOTICE.
ANY NOTICE UNDER THIS AGREEMENT SHALL BE GIVEN IN WRITING, ADDRESSED AND
DELIVERED, OR MAILED POSTPAID, TO THE OTHER PARTY AT THE FOLLOWING ADDRESSES:
TO THE FUND NEW AMERICA HIGH INCOME FUND, INC.
33 BROAD STREET
BOSTON, MA 02109
ATTN: ELLEN E. TERRY
FAX NO.: (617) 263-6402
TO THE INVESTMENT ADVISER: T. ROWE PRICE ASSOCIATES, INC.
100 EAST PRATT STREET
BALTIMORE, MD 21202
ATTN: GEORGE MURNAGHAN
FAX NO.: (410) 345-2349
WITH A COPY TO: HENRY H. HOPKINS, ESQUIRE
T. ROWE PRICE ASSOCIATES, INC.
100 EAST PRATT STREET
BALTIMORE, MD 21202
FAX NO.: (410) 345-6575
14.***[12.] Amendment; Waiver.
No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
the vote of the majority of the outstanding voting securities of the Fund.
***15.***[13.] Governing Law; Severability; Counterparts.
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby. This Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original, but such counterparts shall, together, constitute only one
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
[SIGNATURE LINES OMITTED]
THE NEW AMERICA HIGH INCOME FUND, INC.
33 BROAD STREET, BOSTON, MASSACHUSETTS 02109
SPECIAL MEETING OF STOCKHOLDERS
FEBRUARY 13, 2003
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of shares of Common Stock of The New America High
Income Fund, Inc., a Maryland corporation (the "Fund"), hereby constitute(s)
and appoint(s) ROBERT F. BIRCH and RICHARD E. FLOOR, and each of them, as
proxies for the undersigned, each with full power of substitution and
revocation, to represent the undersigned at the Special Meeting of
Stockholders of the Fund (the "Special Meeting" or "Meeting") to be held at
the offices of Goodwin Procter LLP, Exchange Place, 53 State Street, Boston,
Massachusetts 02109 on Thursday, February 13, 2003 at 11:00 a.m. local time,
and at any and all adjournments or postponements thereof, and thereat to vote
all shares of the Common Stock of the Fund held of record by the undersigned
on December 19, 2002, 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 IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ITEMS DESCRIBED IN PROPOSALS ONE THROUGH
FIVE AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL FIVE PROPOSALS. THE
UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF THE ACCOMPANYING NOTICE OF SPECIAL
MEETING AND PROXY STATEMENT.
--------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE 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?
------------------------------------ ------------------------------------
------------------------------------ ------------------------------------
------------------------------------ ------------------------------------
THE NEW AMERICA HIGH INCOME FUND, INC.
C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
----------------- ----------------
VOTE BY TELEPHONE VOTE BY INTERNET
----------------- ----------------
It's fast, convenient, and immediate! It's fast, convenient, and your
Call Toll-Free on a Touch Tone Phone vote is immediately confirmed and
1-877-PRX-VOTE (1-877-779-8683). posted.
------------------------------------- -------------------------------------
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement and Proxy Card. Statement and Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/hyb
3. Enter your Voter Control Number 3. Enter your Voter Control Number
located on your Proxy Card above located on your Proxy Card above
your name. your name.
4. Follow the recorded instructions. 4. Follow the instructions provided.
------------------------------------- -------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/hyb
anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE
--------------------------------------
THE NEW AMERICA HIGH INCOME FUND, INC.
--------------------------------------
FOR AGAINST ABSTAIN
1. To approve a new investment advisory / / / / / /
agreement between the Fund and T. Rowe
Price Associates, Inc.
2. To eliminate the Fund's investment policy / / / / / /
regarding investment in the securities of
other investment companies.
3. To eliminate the Fund's fundamental / / / / / /
investment policy regarding securities
that are not readily marketable.
4. To eliminate the Fund's investment policy / / / / / /
regarding purchase of securities of a
single issuer.
5. To eliminate the Fund's investment policy / / / / / /
regarding purchase of issuers in which the
Fund's and the Adviser's officers and
directors hold certain interests.
6. In the discretion of the proxies, on such
other matters as may properly come before
the Meeting and any adjournment thereof.
Mark box at right if an address change or comment / /
has been noted on the reverse side of this card.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR THE ITEMS DESCRIBED IN PROPOSALS ONE
THROUGH FIVE AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ALL OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL FIVE
PROPOSALS. THE UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF THE ACCOMPANYING
NOTICE OF SPECIAL MEETING AND PROXY STATEMENT.
Please be sure to sign and date this Proxy.
Signature: Date:
------------------------------ ------------------------------
Signature: Date:
------------------------------ ------------------------------
THE NEW AMERICA HIGH INCOME FUND, INC.
33 BROAD STREET, BOSTON, MASSACHUSETTS 02109
SPECIAL MEETING OF STOCKHOLDERS
FEBRUARY 13, 2003
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of shares of Series A, Series B, Series C, and/or
Series D Auction Term Preferred Stock (the "ATP") of The New America High Income
Fund, Inc., a Maryland corporation (the "Fund"), hereby constitute(s) and
appoint(s) ROBERT F. BIRCH and RICHARD E. FLOOR, and each of them, as proxies
for the undersigned, each with full power of substitution and revocation, to
represent the undersigned at the Special Meeting of Stockholders of the Fund
(the "Special Meeting" or "Meeting") to be held at the offices of Goodwin
Procter LLP, Exchange Place, 53 State Street, Boston, Massachusetts 02109 on
Thursday, February 13, 2003 at 11:00 a.m. local time, and at any and all
adjournments or postponements thereof, and thereat to vote all shares of the ATP
of the Fund held of record by the undersigned on December 19, 2002, 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 IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR THE ITEMS DESCRIBED IN PROPOSALS ONE THROUGH
FIVE AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL FIVE PROPOSALS. THE
UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF THE ACCOMPANYING NOTICE OF SPECIAL
MEETING AND PROXY STATEMENT.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE 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?
PLEASE PROVIDE NEW ADDRESS BELOW: DO YOU HAVE ANY COMMENTS?
-------------------------------------- ----------------------------------------
-------------------------------------- ----------------------------------------
-------------------------------------- ----------------------------------------
THE NEW AMERICA HIGH INCOME FUND, INC.
PLEASE MARK VOTES AS IN THIS EXAMPLE /X/
1. To approve a new investment advisory agreement between the Fund and T. Rowe
Price Associates, Inc. / / FOR / / AGAINST / / ABSTAIN
2. To eliminate the Fund's investment policy regarding investment in the
securities of other investment companies. / / FOR / / AGAINST
/ / ABSTAIN
3. To eliminate the Fund's fundamental investment policy regarding securities
that are not readily marketable. / / FOR / / AGAINST
/ / ABSTAIN
4. To eliminate the Fund's investment policy regarding purchase of securities
of a single issuer. / / FOR / / AGAINST / / ABSTAIN
5. To eliminate the Fund's investment policy regarding purchase of issuers in
which the Fund's and the Adviser's officers and directors hold certain
interests.
/ / FOR / / AGAINST / / ABSTAIN
6. In the discretion of the proxies, on such other matters as may properly come
before the Meeting and any adjournment thereof.
Please be sure to sign and date this Proxy.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR THE ITEMS DESCRIBED IN PROPOSALS ONE THROUGH
FIVE AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL FIVE PROPOSALS. THE
UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF THE ACCOMPANYING NOTICE OF SPECIAL
MEETING AND PROXY STATEMENT.
--------------------------------------
Date
--------------------------------------
Stockholder sign here
--------------------------------------
Co-owner sign here
Mark box at right if an address change or comment has been noted on the
reverse side of the card. / /
SHARES ON RECORD DATE:
---------------------------
THE NEW AMERICA HIGH INCOME FUND, INC.
SPECIAL MEETING OF STOCKHOLDERS
FEBRUARY 13, 2003
SCRIPT FOR TOUCH TONE TELEPHONE VOTING
Welcome to the electronic voting system. Please have your proxy card or
voting instruction sheet or ballot available before voting. Enter the voter
control number as it appears on the card, followed by the pound sign. [If
stockholder enters necessary information, script continues as follows.] One
moment please while we verify your information. Enter the last four digits of
the U.S. Social Security Number or the U.S. Taxpayer Identification Number for
this account, followed by the pound sign. [If stockholder enters necessary
information, script continues as follows.] The company that you are voting is
The New America High Income Fund, Inc. Your vote is subject to the same terms
and authorizations as indicated on the proxy card. It also authorizes the named
proxies to vote according to the instructions at the meeting of the
stockholders. To vote all proposals in accordance with the recommendations of
the Board of Directors, press one. If you wish to vote on one proposal at a
time, press two.
[If the stockholder presses one, the script continues as follows; if stockholder
presses two, the script continues using the script for proposal by proposal
voting.] You have cast your vote as follows: you have voted in the manner
recommended by the Board of Directors. To confirm your vote, press one. To
cancel your vote, press two. [If stockholder presses one, script continues as
follows.] Your vote has been successfully recorded. It is not necessary for you
to mail in your card. If you wish to vote another card or change your vote,
press one. Otherwise please hang up. Thank you for voting. [If stockholder
presses two, script continues as follows.] Your vote has been cancelled. If you
wish to vote this card, or another card, press one. Otherwise, please hang up
and mark, sign and return your card in the envelope provided. Thank you for
calling.
[SCRIPT FOR PROPOSAL BY PROPOSAL VOTING]
Proposal 1 - To approve a new investment advisory agreement between the Fund and
T. Rowe Price Associates, Inc. To vote FOR, press 1; AGAINST, press 2; to
ABSTAIN, press 3. [If stockholder presses one, two, or three, the script
continues as follows.]
Proposal 2 - To eliminate the Fund's investment policy regarding investment in
the securities of other investment companies. To vote FOR, press 1; AGAINST,
press 2; to ABSTAIN, press 3. [If stockholder presses one, two, or three, the
script continues as follows.]
Proposal 3 - To eliminate the Fund's fundamental investment policy regarding
securities that are not readily marketable. To vote FOR, press 1; AGAINST, press
2; to ABSTAIN, press 3. [If stockholder presses one, two, or three, the script
continues as follows.]
Proposal 4 - To eliminate the Fund's investment policy regarding purchase of
securities of a single issuer. To vote FOR, press 1; AGAINST, press 2; to
ABSTAIN, press 3. [If stockholder presses one, two, or three, the script
continues as follows.]
Proposal 5 - To eliminate the Fund's investment policy regarding purchase of
issuers in which the Fund's and the Adviser's officers and directors hold
certain interests. To vote FOR, press 1; AGAINST, press 2; to ABSTAIN, press 3.
[If stockholder presses one, two, or three, the script continues as follows.]
You have cast your vote as follows. [Script reviews stockholder votes.] To
confirm your vote press, one; to cancel your vote, press two. [If stockholder
presses one, script continues as follows.] Your vote has been successfully
recorded. It is not necessary for you to mail in your card. If you wish to vote
another card or change your vote, press one. Otherwise please hang up. Thank you
for voting. [If stockholder presses two, script continues as follows.] Your vote
has been cancelled. If you wish to vote this card, or another card, press one.
Otherwise, please hang up and mark, sign and return your card in the envelope
provided. Thank you for calling.
[GRAPHIC]
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AUTHENTICATION: Login using your voter control number and last four digits
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FINISH: Update your address and review other options
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Enter the voter control number as it appears on your proxy
card, instruction card or ballot ___________________
Enter the last 4 digits of the U.S. social security number
(SSN) or the U.S. taxpayer identification number (TIN) for
this account.* ___________________
*If you do not have a SSN or TIN for this account, please
leave this box blank.
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THE NEW AMERICA HIGH INCOME FUND, INC.
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WELCOME
Name Line
Address Line
City, State Zip Code Line
DELIVERY PREFERENCE
Select how you would like to receive your future annual meeting materials:
/ / Postal mail -or-
/ / Electronically (VIEW TERMS AND CONDITIONS FOR ELECTRONIC DELIVERY)
E-mail address (e.g., name@xyz.com) _______________________________
Enter e-mail address again for validation _______________________________
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THE NEW AMERICA HIGH INCOME FUND, INC. SPECIAL MEETING OF STOCKHOLDERS
FEBRUARY 13, 2003
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of shares of Common Stock of The New America High
Income Fund, Inc., a Maryland corporation (the "Fund"), hereby constitute(s) and
appoint(s) ROBERT F. BIRCH and RICHARD E. FLOOR, and each of them, as proxies
for the undersigned, each with full power of substitution and revocation, to
represent the undersigned at the Special Meeting of Stockholders of the Fund
(the "Special Meeting" or "Meeting") to be held at the offices of Goodwin
Procter LLP, Exchange Place, 53 State Street, Boston, Massachusetts 02109 on
Thursday, February 13, 2003 at 11:00 a.m. local time, and at any and all
adjournments or postponements thereof, and thereat to vote all shares of the
Common Stock of the Fund held of record by the undersigned on December 19, 2002,
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 IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ITEMS DESCRIBED IN PROPOSALS ONE THROUGH
FIVE AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL FIVE PROPOSALS. THE
UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF THE ACCOMPANYING NOTICE OF SPECIAL
MEETING AND PROXY STATEMENT.
THE NEW AMERICA HIGH INCOME FUND, INC. BOARD OF DIRECTORS RECOMMENDS A VOTE:
"FOR" PROPOSAL 1
"FOR" PROPOSAL 2
"FOR" PROPOSAL 3
"FOR" PROPOSAL 4
"FOR" PROPOSAL 5
Check this box to cast your vote in accordance with the recommendations of The
New America High Income Fund, Inc. Board of Directors: / /
THE NEW AMERICA HIGH INCOME FUND, INC. BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 1.
1. To approve a new investment / / FOR / / AGAINST / / ABSTAIN
advisory agreement between the Fund
and T. Rowe Price Associates, Inc.
THE NEW AMERICA HIGH INCOME FUND, INC. BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 2.
2. To eliminate the Fund's investment / / FOR / / AGAINST / / ABSTAIN
policy regarding investment in the
securities of other investment
companies.
THE NEW AMERICA HIGH INCOME FUND, INC. BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 3.
3. To eliminate the Fund's / / FOR / / AGAINST / / ABSTAIN
fundamental investment policy
regarding securities that are not
readily marketable.
THE NEW AMERICA HIGH INCOME FUND, INC. BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 4.
4. To eliminate the Fund's investment / / FOR / / AGAINST / / ABSTAIN
policy regarding purchase of
securities of a single issuer.
THE NEW AMERICA HIGH INCOME FUND, INC. BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 5.
5. To eliminate the Fund's investment / / FOR / / AGAINST / / ABSTAIN
policy regarding purchase of
issuers in which the Fund's and
the Adviser's officers and
directors hold certain interests.
TO CAST YOUR VOTE PLEASE CLICK "SUBMIT".
(NOTE: Your vote will not be counted until you click "Submit".)
< SUBMIT >
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(C)2002 EquiServe(R). All rights reserved.
[GRAPHIC]
[EQUISERVE(R) LOGO] VOTE
BY NET
VOTE BY NET
THE NEW AMERICA HIGH INCOME FUND, INC.
Step 1 | Step 2 | < Step 3 > [GRAPHIC]PRINT THIS PAGE
NAME LINE
ADDRESS LINE
CITY, STATE ZIP CODE LINE
CONTROL NUMBER:
CONFIRMATION NUMBER:
DATE:
Thank you for using EquiServe's Vote-By-Net facility.
[Test Vote - Results will not be recorded.]
STEP 3: SUMMARY OF YOUR VOTE
Your vote was recorded by EquiServe as follows:
--------------------------------------------------------------------------------
1. To approve a new investment FOR
advisory agreement between the Fund
and T. Rowe Price Associates, Inc.
--------------------------------------------------------------------------------
2. To eliminate the Fund's investment FOR
policy regarding investment in the
securities of other investment
companies.
--------------------------------------------------------------------------------
3. To eliminate the Fund's FOR
fundamental investment policy
regarding securities that are not
readily marketable.
--------------------------------------------------------------------------------
4. To eliminate the Fund's investment FOR
policy regarding purchase of
securities of a single issuer.
--------------------------------------------------------------------------------
5. To eliminate the Fund's investment FOR
policy regarding purchase of
issuers in which the Fund's and
the Adviser's officers and
directors hold certain interests.
--------------------------------------------------------------------------------
Please keep a copy for your records. To change your vote click "Back".
To change your address or provide a comment click "Options".
You can now VOTE ANOTHER BALLOT or click "Finish" to exit to EquiServe Homepage.
< < BACK OPTIONS >> < FINISH >
HOME | ABOUT SECURITY | PRIVACY POLICY | BACK TO TOP
(C)2002 EquiServe(R). All rights reserved.
[GRAPHIC]
[EQUISERVE(R) LOGO] VOTE
BY NET
VOTE BY NET
THE NEW AMERICA HIGH INCOME FUND, INC.
Step 1 | Step 2 | < Step 3 > [GRAPHIC]PRINT THIS PAGE
NAME LINE
ADDRESS LINE
CITY, STATE ZIP CODE LINE
CONTROL NUMBER:
CONFIRMATION NUMBER:
DATE:
Thank you for using EquiServe's Vote-By-Net facility.
[Test Vote - Results will not be recorded.]
STEP 3: SUMMARY OF YOUR VOTE
Your vote was recorded by EquiServe as follows:
--------------------------------------------------------------------------------
1. To approve a new investment AGAINST
advisory agreement between the Fund
and T. Rowe Price Associates, Inc.
--------------------------------------------------------------------------------
2. To eliminate the Fund's investment AGAINST
policy regarding investment in the
securities of other investment
companies.
--------------------------------------------------------------------------------
3. To eliminate the Fund's AGAINST
fundamental investment policy
regarding securities that are not
readily marketable.
--------------------------------------------------------------------------------
4. To eliminate the Fund's investment AGAINST
policy regarding purchase of
securities of a single issuer.
--------------------------------------------------------------------------------
5. To eliminate the Fund's investment AGAINST
policy regarding purchase of
issuers in which the Fund's and
the Adviser's officers and
directors hold certain interests.
--------------------------------------------------------------------------------
Please keep a copy for your records. To change your vote click "Back".
To change your address or provide a comment click "Options".
You can now VOTE ANOTHER BALLOT or click "Finish" to exit to EquiServe Homepage.
< < BACK OPTIONS >> < FINISH >
HOME | ABOUT SECURITY | PRIVACY POLICY | BACK TO TOP
(C)2002 EquiServe(R). All rights reserved.
[GRAPHIC]
[EQUISERVE(R) LOGO] VOTE
BY NET
VOTE BY NET
THE NEW AMERICA HIGH INCOME FUND, INC.
Step 1 | Step 2 | < Step 3 > [GRAPHIC]PRINT THIS PAGE
NAME LINE
ADDRESS LINE
CITY, STATE ZIP CODE LINE
CONTROL NUMBER:
CONFIRMATION NUMBER:
DATE:
Thank you for using EquiServe's Vote-By-Net facility.
[Test Vote - Results will not be recorded.]
STEP 3: SUMMARY OF YOUR VOTE
Your vote was recorded by EquiServe as follows:
--------------------------------------------------------------------------------
1. To approve a new investment ABSTAIN
advisory agreement between the Fund
and T. Rowe Price Associates, Inc.
--------------------------------------------------------------------------------
2. To eliminate the Fund's investment ABSTAIN
policy regarding investment in the
securities of other investment
companies.
--------------------------------------------------------------------------------
3. To eliminate the Fund's ABSTAIN
fundamental investment policy
regarding securities that are not
readily marketable.
--------------------------------------------------------------------------------
4. To eliminate the Fund's investment ABSTAIN
policy regarding purchase of
securities of a single issuer.
--------------------------------------------------------------------------------
5. To eliminate the Fund's investment ABSTAIN
policy regarding purchase of
issuers in which the Fund's and
the Adviser's officers and
directors hold certain interests.
--------------------------------------------------------------------------------
Please keep a copy for your records. To change your vote click "Back".
To change your address or provide a comment click "Options".
You can now VOTE ANOTHER BALLOT or click "Finish" to exit to EquiServe Homepage.
< < BACK OPTIONS >> < FINISH >
HOME | ABOUT SECURITY | PRIVACY POLICY | BACK TO TOP
(C)2002 EquiServe(R). All rights reserved.
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