Exhibit (a)(1)(i)
DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
2005 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103
Dear Shareholder:
On May 18, 2006, the Board of Directors of the Delaware Investments
Dividend and Income Fund, Inc. (the "Fund"), approved a tender offer for shares
of the Fund's Common Stock. The Fund is commencing an offer to purchase up to 5%
of its issued and outstanding shares upon the terms and subject to the
conditions set forth in the enclosed Offer to Purchase and the related Letter of
Transmittal (which together constitute the "Offer"). If more than 5% of the
Common Stock is tendered and not withdrawn, any purchases will be made on a pro
rata basis. The offer is for cash at a price per share equal to the Fund's net
asset value ("NAV") as of 4:00 p.m. New York City time the day after the offer
expires (as described below). The Offer is designed to provide shareholders of
the Fund the opportunity to redeem shares based on their NAV should they wish to
do so.
In order to participate, the materials described in the Offer must be
delivered to Mellon Investor Services LLC by 11:59 p.m. New York City time, June
30, 2006, or such later date to which the Offer is extended (the "Expiration
Date"). The pricing time and date for the Offer is currently scheduled to be
4:00 p.m. New York City time on July 3, 2006. Should the Offer be extended
beyond June 30, 2006, the pricing date will be the next business day following
the newly designated Expiration Date. The amount to be paid per share will be
the NAV of the Common Stock as of 4:00 p.m. New York City time on the pricing
date. Shareholders who choose to participate in the Offer can expect payments
for shares tendered and accepted to be mailed within approximately ten business
days after the Expiration Date. The Fund will charge a per account fee of $25.00
("Service Fee") for each account for which any shares are tendered and accepted
to help defray the costs of conducting the Offer. Shareholders whose shares are
not held of record in the name of a broker, dealer, commercial bank, trust
company or other nominee ("Nominee") must attach a check or money order for an
amount equal to $25.00 with the Letter of Transmittal. Shareholders whose shares
are held of record in the name of a Nominee should not include a check for the
Service Fee; rather, the Nominee will pay the Service Fee and that firm may bill
you separately for that fee. The Service Fee will be returned to you or the
Nominee, as appropriate, only if the Fund does not accept any of the shares that
you have tendered.
If, after carefully evaluating all of the information set forth in the
Offer to Purchase, you wish to tender Shares pursuant to the Offer, please
follow the instructions contained in the Offer to Purchase and Letter of
Transmittal or, if your shares are held of record in the name of a broker,
dealer, commercial bank, trust company or other nominee, contact that firm to
effect the tender for you. Shareholders are urged to consult their own
investment and tax advisers and make their own decisions whether to tender any
shares and, if so, how may shares to tender.
As of 4:00 p.m. on Friday, May 26, 2006, the Fund's NAV was $12.82 per
share and 11,588,670 shares were issued and outstanding. The Fund's NAV during
the pendency of this Offer may be obtained by contacting Mellon Investor
Services LLC, the Fund's Depositary and Information Agent, toll free at:
1-866-340-1397.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS IS MAKING ANY RECOMMENDATION TO
ANY SHAREHOLDER WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES IN THE OFFER.
THE FUND AND BOARD URGE EACH SHAREHOLDER TO READ AND EVALUATE THE OFFER AND
RELATED MATERIALS CAREFULLY AND MAKE HIS OR HER OWN DECISION. QUESTIONS,
REQUESTS FOR ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THE OFFER SHOULD
BE DIRECTED TO MELLON INVESTOR SERVICES LLC, AT 1-866-340-1397.
Sincerely,
/s/ Jude T. Driscoll
----------------------------------------
Jude T. Driscoll
Chairman, Director, Chief Executive
Officer and President
June 2, 2006
This Page Intentionally Left Blank
OFFER TO PURCHASE
DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OFFER TO PURCHASE FOR CASH 579,434
OUTSTANDING SHARES OF COMMON STOCK
SUMMARY TERM SHEET
THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION IN THIS OFFER TO PURCHASE. TO
UNDERSTAND THE OFFER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE TERMS OF
THE OFFER, YOU SHOULD READ CAREFULLY THIS ENTIRE OFFER TO PURCHASE AND THE
RELATED LETTER OF TRANSMITTAL. WE HAVE INCLUDED SECTION REFERENCES
PARENTHETICALLY TO DIRECT YOU TO A MORE COMPLETE DESCRIPTION IN THE OFFER TO
PURCHASE OF THE TOPICS IN THIS SUMMARY.
WHAT AND HOW MANY SECURITIES IS DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND,
INC. (THE "FUND") OFFERING TO PURCHASE? (SEE SECTION 1, "PRICE; NUMBER OF
SHARES; SERVICE FEE")
The Fund is offering to purchase up to 5% or 579,434 shares (the "Offer
Amount") of its shares of Common Stock ("Share" or "Shares"). If the number of
Shares properly tendered and not withdrawn prior to the date and time the offer
expires is less than or equal to the Offer Amount, the Fund will, upon the terms
and subject to the conditions of the offer, purchase all Shares tendered. If
more Shares than the Offer Amount are properly tendered and not withdrawn prior
to the date the offer expires, the Fund will purchase the Offer Amount on a pro
rata basis. Shareholders cannot be assured that all of their tendered Shares
will be repurchased.
HOW MUCH AND IN WHAT FORM WILL THE FUND PAY ME FOR MY SHARES? (SEE SECTION 1,
"PRICE; NUMBER OF SHARES; SERVICE FEE" AND SECTION 4, "PAYMENT FOR SHARES")
The Fund will pay cash for any Shares purchased pursuant to the offer. The
purchase price will equal the net asset value ("NAV") per share, as of 4:00
p.m., New York City time, on July 3, 2006, unless the offer is extended. As of
May 26, 2006, the Fund's NAV was $12.82 per Share. Of course, the NAV can change
every business day.
WHEN DOES THE OFFER EXPIRE? CAN THE FUND EXTEND THE OFFER, AND IF SO, WHEN WILL
THE FUND ANNOUNCE THE EXTENSION? (SEE SECTION 1, "PRICE; NUMBER OF SHARES;
SERVICE FEE" AND SECTION 15, "EXTENSION OF TENDER PERIOD; TERMINATION;
AMENDMENTS")
o The offer expires on Friday, June 30, 2006, at 11:59 p.m., New York
City time, unless the Fund extends the offer.
o The Fund may extend the offer period at any time. If it does, the Fund
will determine the purchase price on the first business day after the
new expiration date.
o If the offer period is extended, the Fund will make a public
announcement of the extension no later than 9:30 a.m. Eastern time on
the next business day following the previously scheduled expiration
date.
WILL I HAVE TO PAY ANY FEES OR COMMISSIONS? (SEE SECTION 1, "PRICE; NUMBER OF
SHARES; SERVICE FEE," SECTION 4, "PAYMENT FOR SHARES" AND SECTION 16, "FEES AND
EXPENSES")
Yes, a service fee of $25.00 must be paid to the Fund for each account for
which any shares are tendered to help defray certain costs, including the
processing of tender forms, effecting payment, postage and handling. In the case
where none of the Shares you tender are accepted, the Fund will return the
Service Fee.
DOES THE FUND HAVE THE FINANCIAL RESOURCES TO PAY ME FOR MY SHARES? (SEE SECTION
11, "SOURCE AND AMOUNT OF FUNDS")
Yes. Assuming the Fund purchases 579,434 Shares at the May 26, 2006 NAV of
$12.82 per Share, the Fund's total cost, not including fees and expenses
incurred in connection with the offer, will be approximately $7.4 million. The
Fund intends to first use cash on hand to pay the purchase price for Shares
tendered, and then intends to sell portfolio securities to raise the additional
cash needed for the purchase of the Shares. The Fund will not borrow money to
finance the purchase of Shares in the offer.
(i)
HOW DO I TENDER MY SHARES? (SEE SECTION 2, "PROCEDURES FOR TENDERING SHARES")
If your Shares are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee, you should contact that firm if you wish
to tender your Shares.
All other shareholders wishing to participate in the offer must, prior to
the date and time the offer expires, EITHER:
o Complete and execute the Letter of Transmittal (or facsimile thereof),
together with any required signature guarantees, and any other
documents required by the Letter of Transmittal. YOU MUST SEND THESE
MATERIALS ALONG WITH A $25.00 CHECK OR MONEY ORDER MADE PAYABLE TO
DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC. to Mellon Investor
Services LLC (the "Depositary") at its address set forth on page (v)
of this offer. If you hold certificates for Shares, you must send the
certificates to the Depositary at its address set forth on page (v)
of this offer. If your Shares are held in book-entry form, you must
comply with the Book-Entry Delivery Procedure set forth in Section 2.C
of this offer. In all these cases, the Depositary must receive these
materials prior to the date and time the offer expires.
OR
o Comply with the Guaranteed Delivery Procedure set forth in Section 2.D
of this offer.
The Fund's transfer agent holds Shares in uncertificated form for certain
shareholders pursuant to the Fund's dividend reinvestment plan. When a
shareholder tenders share certificates, the Depositary will accept any of the
shareholder's uncertificated shares for tender first, and accept the balance of
tendered shares from the shareholder's certificated shares.
UNTIL WHAT TIME CAN I WITHDRAW TENDERED SHARES? (SEE SECTION 3, "WITHDRAWAL
RIGHTS")
You may withdraw your tendered Shares at any time before 5:00 p.m. New York
City time on the date the offer period expires. In addition, after 11:59 p.m.
New York City time on July 28, 2006, if the Fund has not yet accepted tendered
shares for payment, you may withdraw your tendered shares.
HOW DO I WITHDRAW TENDERED SHARES? (SEE SECTION 3, "WITHDRAWAL RIGHTS")
If you desire to withdraw tendered Shares, you should either:
o Give proper written notice to the Depositary; or
o If your Shares are held of record in the name of a broker, dealer,
commercial bank, trust company or other nominee, contact that firm to
withdraw your tendered Shares.
WILL THERE BE ANY TAX CONSEQUENCES TO TENDERING MY SHARES? (SEE SECTION 2,
"PROCEDURES FOR TENDERING SHARES," SECTION 10, "CERTAIN EFFECTS OF THE OFFER"
AND SECTION 14, "CERTAIN FEDERAL INCOME TAX CONSEQUENCES")
If your tendered Shares are purchased, it will be a taxable transaction
either in the form of a "sale or exchange" or, under certain circumstances, as a
"dividend."
Please consult your tax advisor as to the tax consequences of tendering
your Shares in this offer.
WHAT IS THE PURPOSE OF THE OFFER? (SEE SECTION 6, "PURPOSE OF THE OFFER")
The purpose of the offer is to fulfill a commitment made in the Fund's
prospectus, dated March 18, 1993, by the Board of Directors of the Fund to
conduct a tender offer for Shares of the Fund when, among other things, the
Shares trade at an average discount from NAV of more than 3% for a certain
period of time during any given year. The offer is intended to attempt to reduce
any market discount in the Fund's Shares. There can be no assurance that the
offer will result in the Fund's Shares trading at a price that approximates or
is equal to their NAV.
The Fund's Board of Directors intends to review whether this tender offer
effectively reduces the Fund's market discount and the Board may decide to make
similar offers as described in the Fund's prospectus. In addition, if a discount
to the Fund's NAV persists, the Board may consider alternative methods of
reducing the discount. Therefore, the Fund cannot assure you that the Fund will
make a similar tender offer in the future.
(ii)
Please bear in mind that neither the Fund nor its Board has made any
recommendation as to whether or not you should tender your Shares. Shareholders
are urged to consult their own investment and tax advisers and make their own
decisions whether to tender any Shares and, if so, how many Shares to tender.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS OF THE OFFER? (SEE SECTION 5, "CERTAIN
CONDITIONS OF THE OFFER")
It is the Board of Directors' policy that the Fund cannot accept Shares
tendered for payment under any one of the following circumstances that, in the
view of the Board of Directors, make it inadvisable to proceed with the offer,
purchase or payment. The following is not a complete list of the conditions to
the offer. For a complete list of the conditions to the offer, please see
Section 5, "Certain Conditions of the Offer" of this offer.
o The Fund would be unable to sell portfolio securities in an orderly
manner and the sale would have an adverse effect on the NAV of the
Fund to the detriment of those shareholders who do not tender their
Shares.
o The offer could impair compliance with U.S. Securities and Exchange
Commission or Internal Revenue Service requirements.
o Trading generally or prices on the New York Stock Exchange or NASDAQ
are suspended or limited.
o The purchase of Shares in the offer would result in the delisting of
the Shares on the New York Stock Exchange.
o In the Board of Directors' judgment, there is any material legal
action or proceeding instituted or threatened, challenging the offer
or otherwise materially adversely affecting the Fund.
o Certain circumstances beyond the Fund's control, including limitations
imposed by federal or state authorities on the extension of credit by
lenders or where banks have suspended payment.
o Circumstances where, in the Board of Directors' judgment, the Fund or
its shareholders may be adversely affected if Shares were purchased in
the offer.
o The Board of Directors determines that the purchase of Shares would be
a breach of their fiduciary duty.
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? (SEE SECTION 10,
"CERTAIN EFFECTS OF THE OFFER" AND SECTION 16, "FEES AND EXPENSES")
If you do not tender your Shares (or if you own Shares following completion
of the offer) you will be subject to any increased risks associated with the
reduction in the Fund's total assets due to the payment for the tendered Shares.
These risks may include greater volatility due to decreased diversification and
proportionately higher expenses. The reduced net assets of the Fund as a result
of the offer may result in less investment flexibility for the Fund, depending
on the number of Shares repurchased, and may have an adverse effect on the
Fund's investment performance.
WHOM DO I CONTACT IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
For additional information or assistance, you may contact the Depositary
toll-free at 1-866-340-1397 between the hours of 9:00 a.m. and 6:00 p.m. Eastern
time, Monday through Friday, except holidays.
(iii)
DELAWARE INVESTMENTS DIVIDEND AND INCOME FUND, INC.
OFFER TO PURCHASE FOR CASH 579,434
OF ITS ISSUED AND OUTSTANDING SHARES OF
COMMON STOCK AT NET ASSET VALUE PER SHARE
----------
THE OFFER PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 11:59 P.M. NEW YORK CITY TIME
ON JUNE 30, 2006, UNLESS THE OFFER IS EXTENDED.
----------
To the holders of Common Stock of DELAWARE INVESTMENTS DIVIDEND AND INCOME
FUND, INC.:
Delaware Investments Dividend and Income Fund, Inc., a diversified,
closed-end management investment company organized as a Maryland corporation
(the "Fund"), is offering to purchase up to 5%, or 579,434 shares of its Common
Stock ("Offer Amount"), with par value of $0.01 per share ("Shares"), for cash
at a price (the "Purchase Price") equal to their net asset value ("NAV") as of
4:00 p.m. New York City time on July 3, 2006, or if the offer is extended, on
the next business day after the offer expires. The offer period and withdrawal
rights will expire at 11:59 p.m. New York City time on June 30, 2006 (the
"Initial Expiration Date"), unless extended (the Initial Expiration Date or the
latest date to which the Offer is extended, the "Expiration Date"), upon the
terms and subject to the conditions set forth in this Offer to Purchase and the
related Letter of Transmittal (which together constitute the "Offer"). The
Shares are currently traded on the New York Stock Exchange ("NYSE") under the
ticker symbol "DDF." The NAV on May 26, 2006 was $12.82 per Common Share.
Through the Expiration Date, you can obtain current NAV quotations from Mellon
Investor Services LLC ("Depositary") by calling 1-866-340-1397 between the hours
of 9:00 a.m. and 6:00 p.m. Eastern time, Monday through Friday, except holidays.
Also, see Section 8, "Price Range of Shares."
The Offer is not conditioned upon the tender of any minimum number of
Shares. If the number of Shares properly tendered and not withdrawn prior to the
Expiration Date is less than or equal to the Offer Amount, the Fund will, upon
the terms and subject to the conditions of the Offer, purchase all Shares
tendered. If more Shares than the Offer Amount are properly tendered and not
withdrawn prior to the Expiration Date, the Fund will, upon the terms and
subject to the conditions of the Offer, purchase the Offer Amount on a pro rata
basis. See Section 1, "Price; Number of Shares; Service Fee."
A $25.00 service fee ("Service Fee") will be charged to each account
tendering Shares in order to help defray certain costs of the tender, including
the processing of tender forms, effecting payment, postage and handling. When
tendering Shares on behalf of their clients, brokers, dealers, commercial banks,
trust companies or other nominees will be required to pay the Service Fee for
Shares tendered by such firm on behalf of each of their client accounts. The
Service Fee will not be deducted from the purchase price. The fee will be used
as an offset to the foregoing costs.
If, after carefully evaluating all of the information set forth in the
Offer, you wish to tender Shares pursuant to the Offer, please either follow the
instructions contained in the Offer and Letter of Transmittal or, if your Shares
are held of record in the name of a broker, dealer, commercial bank, trust
company or other nominee, contact such firm to effect the tender for you. If you
do not wish to tender your Shares, you need not take any action.
(iv)
THIS OFFER IS BEING MADE TO ALL SHAREHOLDERS
OF THE FUND AND IS NOT CONDITIONED UPON ANY
MINIMUM NUMBER OF SHARES BEING TENDERED.
THIS OFFER IS SUBJECT TO CERTAIN CONDITIONS.
SEE SECTION 5, "CERTAIN CONDITIONS OF THE OFFER."
IMPORTANT
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH
SHAREHOLDER'S SHARES. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL
INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISERS AND MAKE
THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE FUND
AS TO WHETHER SHAREHOLDERS SHOULD TENDER SHARES PURSUANT TO THE OFFER. NO PERSON
HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND.
THE FUND HAS BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER OF THE FUND
INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
Questions and requests for assistance and requests for additional copies of
this Offer to Purchase and Letter of Transmittal should be directed to the
Depositary and Information Agent at the telephone number set forth below.
Mellon Investor Services LLC
Telephone Number: 1-866-340-1397
By Facsimile Transmission:
Mellon Investor Services LLC
Attn: Reorganization Dept.
1-201-680-4626
Confirm Receipt by Telephone:
1-201-680-4860
By Mail: By Overnight Courier: By Hand:
- ---------------------------- ---------------------------- ----------------------------
Mellon Investor Services LLC Mellon Investor Services LLC Mellon Investor Services LLC
Attn: Reorganization Dept. Attn: Reorganization Dept. Attn: Reorganization Dept.
P.O. Box 3300 480 Washington Boulevard 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Drop - Reorg New York, NY 10271
Jersey City, NJ 07310
June 2, 2006
(v)
TABLE OF CONTENTS
SECTION PAGE
----
Summary Term Sheet .................................................. (i)
1. Price; Number of Shares; Service Fee ................................ 1
2. Procedures for Tendering Shares ..................................... 2
3. Withdrawal Rights ................................................... 4
4. Payment for Shares .................................................. 5
5. Certain Conditions of the Offer ..................................... 6
6. Purpose of the Offer ................................................ 7
7. Plans or Proposals of the Fund ...................................... 7
8. Price Range of Shares ............................................... 7
9. Interest of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares ............................... 8
10. Certain Effects of the Offer ........................................ 9
11. Source and Amount of Funds .......................................... 10
12. Certain Information about the Fund .................................. 10
13. Additional Information .............................................. 11
14. Certain Federal Income Tax Consequences ............................. 11
15. Extension of Tender Period; Termination; Amendments ................. 14
16. Fees and Expenses ................................................... 14
17. Miscellaneous ....................................................... 14
1. PRICE; NUMBER OF SHARES; SERVICE FEE.
The Fund will, upon the terms and subject to the conditions of the Offer,
accept for payment (and thereby purchase) up to the Offer Amount or such lesser
number of its issued and outstanding Shares which are properly tendered (and not
withdrawn in accordance with Section 3, "Withdrawal Rights") prior to the
Initial Expiration Date. The Fund reserves the right to extend the Offer to a
later Expiration Date. See Section 15, "Extension of Tender Period; Termination;
Amendments." The later of the Initial Expiration Date or the latest time and
date to which the Offer is extended is hereinafter called the "Expiration Date."
The purchase price of the Shares will be their NAV computed as of 4:00 p.m. New
York City time on July 3, 2006, or if the Offer period is extended, the next
business day following the newly designated Expiration Date. The NAV on May 26,
2006 was $12.82 per Share. You can obtain current NAV quotations from the
Depositary by calling 1-866-340-1397 during normal business hours. Shareholders
tendering Shares shall be entitled to receive all dividends declared on or
before the Expiration Date, but not yet paid on Shares tendered pursuant to the
Offer. See Section 8, "Price Range of Shares." The Fund will not pay interest on
the purchase price under any circumstances.
The Offer is being made to all shareholders of the Fund and is not
conditioned upon any minimum number of Shares being tendered. If the number of
Shares properly tendered and not withdrawn prior to the Expiration Date is less
than or equal to the Offer Amount, the Fund will, upon the terms and subject to
the conditions of the Offer, purchase all Shares so tendered. If more Shares
than the Offer Amount are properly tendered and not withdrawn prior to the
Expiration Date, the Fund will purchase the Offer Amount on a pro rata basis.
Shareholders will pay to the Fund a $25.00 Service Fee for each account for
which any Shares are being tendered pursuant to the Offer to help defray certain
costs of the tender, including the processing of tender forms, effecting
payment, postage and handling. Brokers, dealers, commercial banks, trust
companies or other nominees ("Nominee Holder" or "Nominee Holders") will be
required to pay the Service Fee in an amount equal to $25.00 multiplied by the
number of such Nominee Holder's client accounts tendering shares pursuant to the
Offer. Shareholders tendering through a Nominee Holder should consider that
Nominee Holders may charge the Service Fee to the account of tendering
shareholders, at such Nominee Holder's discretion. The Fund expects that the
cost to the Fund of effecting this tender offer will exceed the aggregate of all
Service Fees received from those who tender their Shares. Such excess costs
associated with the tender will be charged against the capital of the Fund.
The Service Fee will not be deducted from the proceeds of the purchase.
Each shareholder (who does not tender Shares through a Nominee Holder) must pay
the amount of the Service Fee by submitting with the Letter of Transmittal a
check or money order made payable to Delaware Investments Dividend and Income
Fund, Inc. for $25.00 for each Fund account. Each Nominee Holder must pay the
amount of the Service Fee by submitting with the Letter of Transmittal a check
or money order made payable to Delaware Investments Dividend and Income Fund,
Inc. in an amount equal to $25.00 multiplied by the number of client accounts
represented by such Nominee Holder's Letter of Transmittal. The Service Fee will
be returned to a shareholder or Nominee Holder only in circumstances where none
of the Shares tendered are accepted. Tendering shareholders will not be
obligated to pay transfer taxes on the purchase of Shares by the Fund, except in
the circumstances set forth in Section 4, "Payment for Shares."
On May 26, 2006, there were approximately 11,588,670 Shares issued and
outstanding and there were approximately 413 holders of record of Shares. The
Fund has been advised that no Directors, officers or affiliates (as such term is
used in Rule 12b-2 under the Securities Exchange Act of 1934, as amended
("Exchange Act")) of the Fund intend to tender any Shares pursuant to the Offer.
The Fund reserves the right, in its sole discretion, at any time or from
time to time, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Depositary and making a
public announcement thereof. See Section 15, "Extension of Tender Period;
Termination; Amendments." There can be no assurance, however, that the Fund will
exercise its right to extend the Offer. If the Fund decides, in its sole
discretion, to decrease the number of Shares being sought and, at the time that
notice of such decrease is first published, sent or given to holders of Shares
in the manner specified below, the Offer is scheduled to expire at any time
earlier than the tenth business day from the date that such notice is first so
published, sent or given, the Offer will be extended at least until the end of
such ten business day period. During any extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering shareholder to withdraw his or her Shares.
1
2. PROCEDURES FOR TENDERING SHARES.
A. PROPER TENDER OF SHARES.
Shareholders having Shares that are registered in the name of a Nominee
Holder, such as a broker, dealer, commercial bank, trust company or other
nominee, should contact such firm if they desire to tender their Shares.
For Shares to be properly tendered pursuant to the Offer, the following
must occur prior to 11:59 p.m. New York City time on the Expiration Date:
(a) A properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees,
(or an Agent's Message in the case of a book-entry transfer, all as
described in Section 2.C.), payment of the Service Fee and any other
documents required by the Letter of Transmittal, must be transmitted
to and received by the Depositary at its address set forth on page
(v) of this Offer; and
(b) Either the certificates for Shares must be transmitted to and received
by the Depositary at its address set forth on page (v) of this Offer,
or the tendering shareholder must comply with the Book-Entry Delivery
Procedure set forth in Section 2.C; or
(c) Shareholders must comply with the Guaranteed Delivery Procedure set
forth in Section 2.D.
If the Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, agents, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Fund of their authority to so act.
Letters of Transmittal and certificates representing Shares should be sent
to the Depositary; they should not be sent or delivered to the Fund.
The Fund's transfer agent holds Shares in uncertificated form for certain
shareholders pursuant to the Fund's dividend reinvestment plan. When a
shareholder tenders certificated shares, the Depositary will accept any of the
shareholder's uncertificated shares for tender first, and accept the balance of
tendered shares from the shareholder's certificated shares.
Section 14(e) of the Exchange Act and Rule 14e-4 promulgated thereunder
make it unlawful for any person, acting alone or in concert with others, to
tender Shares in a partial tender offer for such person's own account unless at
the time of tender, and at the time the Shares are accepted for payment, the
person tendering has a net long position equal to or greater than the amount
tendered in (i) Shares, and will deliver or cause to be delivered such Shares
for the purpose of tender to the person making the Offer within the period
specified in the Offer, or (ii) an equivalent security and, upon acceptance of
his or her tender, will acquire Shares by conversion, exchange, or exercise of
such equivalent security to the extent required by the terms of the Offer, and
will deliver or cause to be delivered the Shares so acquired for the purpose of
tender to the Fund prior to or on the Expiration Date. Section 14(e) and Rule
14e-4 provide a similar restriction applicable to the tender or guarantee of a
tender on behalf of another person.
The acceptance of Shares by the Fund for payment will constitute a binding
agreement between the tendering shareholder and the Fund upon the terms and
subject to the conditions of the Offer, including the tendering shareholder's
representation that (i) such shareholder has a net long position in the Shares
being tendered within the meaning of Rule 14e-4 promulgated under the Exchange
Act and (ii) the tender of such Shares complies with Rule 14e-4.
By submitting the Letter of Transmittal subject to, and effective upon,
acceptance for payment of the Shares tendered in accordance with the terms and
subject to the conditions of the Offer, in consideration of the acceptance for
payment of such shares in accordance with the terms of the Offer, the tendering
shareholders shall be deemed to sell, assign and transfer to, or upon the order
of, the Fund all right, title and interest in and to all the Shares that are
being tendered and that are being accepted for purchase pursuant to the Offer
(and any and all dividends, distributions, other Shares or other securities or
rights declared or issuable in respect of such Shares after the Expiration Date)
and irrevocably constitute and appoint the Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares (and any
such dividends, distributions, other Shares or securities or rights), with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest) to (a) deliver certificates for such Shares (and
any such other dividends, distributions, other Shares or securities or rights)
or transfer ownership of such Shares (and any such other dividends,
distributions, other Shares or securities or rights), together, in
2
either such case, with all accompanying evidences of transfer and
authenticity to or upon the order of the Fund, upon receipt by the Depositary,
as the agent of the tendering shareholder, of the purchase price, (b) present
such Shares (and any such other dividends, distributions, other Shares or
securities or rights) for transfer on the books of the Fund, and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any such other dividends, distributions, other Shares or securities
or rights), all in accordance with the terms of the Offer. Upon such acceptance
for payment, all prior powers of attorney given by the tendering shareholder
with respect to such Shares (and any such dividends, distributions, other shares
or securities or rights) will, without further action, be revoked and no
subsequent powers of attorney may be given by the tendering Shareholder (and, if
given, will not be effective.)
By submitting the Letter of Transmittal, and in accordance with the terms
and conditions of the Offer, the tendering shareholder also shall be deemed to
represent and warrant that: (a) the tendering shareholder has full power and
authority to tender, sell, assign and transfer the tendered Shares (and any and
all dividends, distributions, other Shares or other securities or rights
declared or issuable in respect of such Shares after the Expiration Date); (b)
when and to the extent the Fund accepts the Shares for purchase, the Fund will
acquire good, marketable and unencumbered title thereto, free and clear of all
liens, restrictions, charges, proxies, encumbrances or other obligations
relating to their sale or transfer, and not subject to any adverse claim; (c) on
request, the tendering shareholder will execute and deliver any additional
documents deemed by the Depositary or the Fund to be necessary or desirable to
complete the sale, assignment and transfer of the tendered Shares (and any and
all dividends, distributions, other Shares or securities or rights declared or
issuable in respect of such Shares after the Expiration Date); and (d) the
tendering shareholder has read and agreed to all of the terms of the Offer,
including this Offer to Purchase and the Letter of Transmittal.
B. SIGNATURE GUARANTEES AND METHOD OF DELIVERY.
Signatures on the Letter of Transmittal are required to be guaranteed if
stock certificates for Fund Shares and/or a check for cash is to be issued in a
name other than the registered owner of such Shares. In those instances, all
signatures on the Letter of Transmittal must be guaranteed by an eligible
guarantor acceptable to the Depositary (an "Eligible Guarantor"). An eligible
guarantor includes a bank, broker, dealer, credit union, savings association or
other entity that is a member in good standing of the securities transfer
medallion program, or a bank, broker, dealer, credit union, savings association
or other entity that is an "eligible guarantor institution" as such term is
defined in Rule 17Ad-15 under the Exchange Act. Shareholders should contact the
Depositary for a determination as to whether a particular institution is such an
Eligible Guarantor. If Shares are tendered for the account of an institution
that qualifies as an Eligible Guarantor, signatures on the Letter of Transmittal
are not required to be guaranteed. If the Letter of Transmittal is signed by a
person or persons authorized to sign on behalf of the registered owner(s), then
the Letter of Transmittal must be accompanied by documents evidencing such
authority to sign to the satisfaction of the Fund.
THE METHOD OF DELIVERY OF ANY DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE PARTY TENDERING SHARES. IF DOCUMENTS ARE SENT
BY MAIL, IT IS RECOMMENDED THAT THEY BE SENT BY REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED.
C. BOOK-ENTRY DELIVERY PROCEDURE.
The Depositary will establish accounts with respect to the Shares at the
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer by June 7, 2006. Any financial institution that is a participant in
any of the Book-Entry Transfer Facility's systems may make delivery of tendered
Shares by (i) causing such Book-Entry Transfer Facility to transfer such Shares
into the Depositary's account in accordance with such Book-Entry Transfer
Facility's procedure for such transfer; and (ii) causing a confirmation of
receipt of such delivery to be received by the Depositary. The Book-Entry
Transfer Facility may charge the account of such financial institution for
tendering Shares on behalf of shareholders. Notwithstanding that delivery of
Shares may be properly effected in accordance with this Book-Entry Delivery
Procedure, the following must be transmitted to and received by the Depositary
at the appropriate address set forth on page (v) of this Offer to Purchase
before 5:00 p.m. New York City time on the Expiration Date:
(i) The Letter of Transmittal (or manually signed facsimile thereof), with
signature guarantee, if required, or, in lieu of the Letter of
Transmittal, an Agent's Message (as defined below) in connection with
a book-entry transfer; and
(ii) Payment of the Service Fee and all other documents required by the
Letter of Transmittal.
3
The term "Agent's Message" means a message from the Book-Entry Transfer
Facility transmitted to, and received by, the Depositary forming a part of a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation"),
which states that the Book-Entry Transfer Facility has received an express
acknowledgment from the Book-Entry Transfer Facility participant tendering the
Shares that are the subject of the Book-Entry Confirmation that (i) the
Book-Entry Transfer Facility participant has received and agrees to be bound by
the terms of the Letter of Transmittal; and (ii) the Fund may enforce such
agreement against the Book-Entry Transfer Facility participant.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY FOR PURPOSES OF THIS OFFER.
D. GUARANTEED DELIVERY PROCEDURE.
If your certificates for Shares are not immediately available or time will
not permit the Letter of Transmittal and other required documents to reach the
Depositary prior to the Expiration Date, you may properly tender Shares if the
following three conditions are met:
(i) You make such tenders by or through an Eligible Guarantor; and
(ii) The Depositary receives, prior to 5:00 p.m. New York City time on the
Expiration Date, a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Fund
(delivered by hand, mail, telegram, telex or facsimile transmission);
and
(iii) The certificates for all tendered Shares, or a Book-Entry
Confirmation, together with a properly completed and duly executed
Letter of Transmittal (or, in the case of book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal), payment of the
Service Fee and any other documents required by the Letter of
Transmittal, are received by the Depositary within three New York
Stock Exchange ("NYSE") trading days after the execution date of the
Notice of Guaranteed Delivery.
E. DETERMINATION OF VALIDITY.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tenders will be determined by the Fund, in its sole
discretion, whose determination shall be final and binding. The Fund reserves
the absolute right to reject any or all tenders determined by it not to be in
appropriate form or the acceptance of or payment for which may, in the opinion
of the Fund's counsel, be unlawful. Failure to include payment of the Service
Fee with the Letter of Transmittal, or failure of a personal check in payment of
the Service Fee to clear, will be deemed to be an incomplete tender and will be
rejected. The Fund also reserves the absolute right to waive any of the
conditions of the Offer or any defect in any tender with respect to any
particular Shares or any particular shareholder, and the Fund's interpretations
of the terms and conditions of the Offer will be final and binding. Unless
waived, any defects or irregularities in connection with tenders must be cured
within such times as the Fund shall determine. Tendered Shares will not be
accepted for payment unless the defects or irregularities have been cured within
such time or waived. Neither the Fund, the Depositary nor any other person shall
be obligated to give notice of any defects or irregularities in tenders, nor
shall any of them incur any liability for failure to give such notice.
F. FEDERAL INCOME TAX WITHHOLDING.
To prevent backup federal income tax withholding equal to 28% of the gross
payments made pursuant to the Offer, each shareholder must notify the Depositary
of such shareholder's correct taxpayer identification number (or certify that
such taxpayer is awaiting a taxpayer identification number) and provide certain
other information by completing the Substitute Form W-9 included in the Letter
of Transmittal. Foreign shareholders who are individuals and who have not
previously submitted a Form W-8 to the Fund must do so in order to avoid backup
withholding.
For an additional discussion of backup federal income tax withholding as
well as a discussion of certain other federal income tax consequences to
tendering shareholders, see Section 14, "Certain Federal Income Tax
Consequences."
3. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 3, tenders of Shares made
pursuant to the Offer will be irrevocable. If you desire to withdraw Shares
tendered on your behalf by a broker, dealer, commercial bank, trust company or
other
4
nominee, you may withdraw by contacting that firm and instructing them to
withdraw such Shares. You have the right to withdraw Shares tendered at any time
prior to 5:00 p.m. New York City time on the Expiration Date. In addition, after
11:59 p.m. New York City time, on July 28, 2006, if the Fund has not yet
accepted tendered Shares for payment, you may withdraw your tendered Shares.
Upon terms and subject to the conditions of the Offer, the Fund expects to
accept for payment properly tendered Shares promptly after the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal
must be timely received by the Depositary at the address set forth on page (v)
of this Offer. Any notice of withdrawal must specify the name of the person who
deposited the Shares to be withdrawn, the number of Shares to be withdrawn, and
the names in which the Shares to be withdrawn are registered.
If certificates have been delivered to the Depositary, the name of the
registered holder and the serial numbers of the particular certificates
evidencing the Shares withdrawn must also be furnished to the Depositary and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Guarantor. If Shares have been delivered pursuant to the Book-Entry Delivery
Procedure set forth in Section 2, "Procedures for Tendering Shares," any notice
of withdrawal must specify the name and number of the account at the appropriate
Book-Entry Transfer Facility to be credited with the withdrawn Shares (which
must be the same name, number, and Book-Entry Transfer Facility from which the
Shares were tendered), and must comply with the procedures of that Book-Entry
Transfer Facility.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Fund in its sole discretion,
whose determination shall be final and binding. None of the Fund, the Depositary
or any other person is or will be obligated to give any notice of any defects or
irregularities in any notice of withdrawal, and none of them will incur any
liability for failure to give any such notice. Shares properly withdrawn shall
not thereafter be deemed to be tendered for purposes of the Offer. However,
withdrawn Shares may be retendered by following the procedures described in
Section 2, "Procedures for Tendering Shares," prior to 11:59 p.m. New York City
time on the Expiration Date.
4. PAYMENT FOR SHARES.
For purposes of the Offer, the Fund will be deemed to have accepted for
payment (and thereby purchased) Shares that are tendered and not withdrawn when,
as and if it gives oral or written notice to the Depositary of its acceptance of
such Shares for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, the Fund will, promptly after the Expiration Date,
accept for payment (and thereby purchase) Shares properly tendered prior to
11:59 p.m. New York City time on the Expiration Date.
Payment for Shares accepted for payment pursuant to the Offer will be made
by the Depositary out of funds made available to it by the Fund. The Depositary
will act as agent for tendering shareholders for the purpose of effecting
payment to the tendering shareholders. In all cases, payment for Shares tendered
and accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) Share certificates evidencing such Shares or a
Book-Entry Confirmation of the delivery of such Shares, (ii) a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) or,
in the case of a book-entry transfer, an Agent's Message in lieu of the Letter
of Transmittal, (iii) any other documents required by the Letter of Transmittal,
and (iv) payment of the Service Fee. Accordingly, payment may not be made to all
tendering shareholders at the same time and will depend upon when Share
certificates are received by the Depositary or Book-Entry Confirmations of
tendered Shares are received in the Depositary's account at the Book-Entry
Transfer Facility or the clearance of payment of the Service Fee.
If any tendered Shares are not accepted for payment pursuant to the terms
and subject to the conditions of the Offer for any reason, or are not paid
because of an invalid tender, or if certificates are submitted for more Shares
than are tendered or if a shareholder withdraws tendered shares by a valid
notice of withdrawal (i) certificates for such unpurchased Shares will be
returned, without expense to the tendering shareholder, as soon as practicable
following expiration, termination or withdrawal of the Offer, (ii) Shares
delivered pursuant to the Book-Entry Delivery Procedures will be credited to the
appropriate account maintained within the appropriate Book-Entry Transfer
Facility, and (iii) uncertificated Shares held by the Fund's transfer agent
pursuant to the Fund's dividend reinvestment plan will be returned to the
dividend reinvestment plan account maintained by the transfer agent. The Service
Fee for a particular client account will be returned to the tendering
shareholder or Nominee Holder only in the case where none of the Shares tendered
have been accepted for payment.
5
The Fund will pay all transfer taxes, if any, payable on the transfer to it
of Shares purchased pursuant to the Offer. If, however, payment of the purchase
price is to be made to, or (in the circumstances permitted by the Offer) if
unpurchased Shares are to be registered in the name of any person other than the
registered holder, or if tendered certificates, if any, are registered or the
Shares tendered are held in the name of any person other than the person signing
the Letter of Transmittal, the amount of any transfer taxes (whether imposed on
the registered holder or such other person) payable on account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted.
Shareholders tendering Shares shall be entitled to receive all dividends
declared on or before the Expiration Date, but not yet paid, on Shares tendered
pursuant to the Offer. The Fund will not pay any interest on the purchase price
under any circumstances. In addition, if certain events occur, the Fund may not
be obligated to purchase Shares pursuant to the Offer. See Section 5, "Certain
Conditions of the Offer."
Any tendering shareholder or other payee who fails to complete fully and
sign the Substitute Form W-9 in the Letter of Transmittal may be subject to
required federal income tax withholding of 28% of the gross proceeds paid to
such shareholder or other payee pursuant to the Offer. Non-U.S. shareholders
should provide the Depositary with a completed Form W-8 in order to avoid 28%
backup withholding. A copy of Form W-8 will be provided upon request from the
Depositary. See Section 2, "Procedures for Tendering Shares" and Section 14,
"Certain Federal Income Tax Consequences."
5. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, it is the announced
policy of the Board of Directors of the Fund, which may be changed by the
Directors, that the Fund cannot accept tenders or effect repurchases if: (1)
such transactions, if consummated, would (a) result in delisting of the Fund's
Shares from the NYSE (the NYSE Listed Company Manual states that the NYSE would
promptly initiate suspension and delisting procedures with respect to closed-end
funds if the average market capitalization of the entity over thirty consecutive
trading days is below $15,000,000); (b) impair the Fund's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code") (which would make the Fund subject to U.S. federal income taxes on all
of its income and gains in addition to the taxation of shareholders who receive
distributions from the Fund); or (c) result in a failure to comply with the
applicable asset coverage requirements in the event any senior securities are
issued and outstanding; (2) the amount of Shares tendered would require
liquidation of such a substantial portion of the Fund's securities that the Fund
would not be able to liquidate portfolio securities in an orderly manner in
light of the existing market conditions and such liquidation would have an
adverse effect on the NAV of the Fund to the detriment of non-tendering
shareholders; (3) there is any (a) in the Board of Directors' judgment, material
legal action or proceeding instituted or threatened challenging such
transactions or otherwise materially adversely affecting the Fund; (b)
suspension of or limitation on prices for trading securities generally on the
NYSE or other national securities exchange(s), or the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") National Market System;
(c) declaration of a banking moratorium by Federal or state authorities or any
suspension of payment by banks in the United States or New York State; (d)
limitation affecting the Fund or the issuers of its portfolio securities imposed
by federal or state authorities on the extension of credit by lending
institutions; (e) commencement of war, armed hostilities or other international
or national calamity directly or indirectly involving the United States; or (f)
in the Board of Directors' judgment, other event or condition which would have a
material adverse effect on the Fund or its shareholders if tendered Shares were
purchased; or (4) the Board of Directors determines that effecting any such
transaction would constitute a breach of their fiduciary duty owed to the Fund
or its shareholders. The Directors may modify these conditions in light of
experience.
The Fund reserves the right, at any time during the pendency of the Offer,
to terminate, extend or amend the Offer in any respect. If the Fund determines
to terminate or amend the Offer or to postpone the acceptance for payment of or
payment for Shares tendered, it will, to the extent necessary, extend the period
of time during which the Offer is open as provided in Section 15, "Extension of
Tender Period; Termination; Amendments." Moreover, in the event any of the
foregoing conditions are modified or waived in whole or in part at any time, the
Fund will promptly make a public announcement of such waiver and may, depending
on the materiality of the modification or waiver, extend the Offer period as
provided in Section 15, "Extension of Tender Period; Termination; Amendments."
6
6. PURPOSE OF THE OFFER.
At the Fund's inception, the Board of Directors recognized the possibility
that the Fund's Shares might trade at a discount to the NAV and determined that
it would be in the best interests of shareholders to take action to attempt to
reduce or eliminate that discount. As stated in the Fund's Prospectus, dated
March 18, 1993 (the "Prospectus"), the Board determined that tender offers for
Shares of the Fund might help reduce any market discount that may develop, and
committed to the Fund, subject to exceptions detailed in the Prospectus, to
conduct an annual tender offer of the Fund's issued and outstanding Shares if,
during the period of twelve calendar weeks prior to a date in the second quarter
designated by the Board, Shares have traded on the principal securities
exchanges where listed, at an average discount from NAV of more than 3%, as of
the last trading day in each week during such twelve-week period. Those
conditions have been met and the Board has determined to effect this Offer under
Rule 13e-4 of the Exchange Act.
Any Shares acquired by the Fund pursuant to the Offer will thereafter
constitute authorized but unissued shares.
There can be no assurance that this Offer will reduce or eliminate any
spread between market price and the NAV of the Shares. The market price of the
Shares will, among other things, be determined by the relative demand for and
supply of Shares in the market, the Fund's investment performance, the Fund's
dividends and yields and investor perception of the Fund's overall
attractiveness as an investment as compared with other investment alternatives.
Nevertheless, the fact that the Offer is being conducted may result in more of a
reduction in the spread between market price and NAV than might otherwise be the
case. Consistent with their fiduciary obligations, in addition to the Offer, the
Board of Directors will continue to explore alternative means to reduce or
eliminate the Fund's market value discount from NAV. Therefore, the Fund cannot
assure you that it will make a similar tender offer in the future.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH
SHAREHOLDER'S SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH
RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN
THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISERS AND MAKE THEIR OWN
DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
7. PLANS OR PROPOSALS OF THE FUND.
Except to the extent described herein, the Fund has no present plans or
proposals, and is not engaged in any negotiations, that relate to or would
result in: any extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Fund; any purchase, sale or transfer
of a material amount of assets of the Fund (other than in its ordinary course of
business); any material changes in the Fund's present capitalization (except as
resulting from the Offer or otherwise set forth herein); or any other material
changes in the Fund's structure or business.
8. PRICE RANGE OF SHARES.
The Shares are traded on the NYSE. During each fiscal quarter of the Fund
during the past two fiscal years (as well as the first fiscal quarter of 2006),
the high and low NAV, and Market Price per Share, as well as the Closing NAV and
Market Price per Share (as of 4:00 p.m. on the last day of each of the Fund's
fiscal quarters) were as follows:
NAV ($) MARKET PRICE ($)
------------------- -------------------
FISCAL QUARTER ENDED HIGH LOW CLOSE HIGH LOW CLOSE
- -------------------- ----- ----- ----- ----- ----- -----
February 27, 2004 12.58 11.91 12.57 12.81 11.65 12.23
May 28, 2004 12.83 11.47 11.92 12.64 9.87 11.08
August 31, 2004 12.28 11.72 12.26 11.54 10.64 11.31
November 30, 2004 12.98 12.27 12.97 12.43 11.17 11.76
February 28, 2005 12.91 13.38 13.19 12.49 11.55 12.17
May 31, 2005 13.41 12.34 12.72 12.34 11.05 11.99
August 31, 2005 13.52 12.87 13.12 13.20 11.94 12.86
November 30, 2005 13.29 12.19 12.65 13.20 11.53 12.55
February 28, 2006 12.96 12.53 12.90 12.75 11.21 12.45
The Fund has a managed distribution policy. Under the policy, the Fund
declares and pays monthly distributions and is managed with a goal of generating
as much of the distribution as possible from ordinary income (net investment
income and short-term capital gains). The balance of the distribution then comes
from long-term capital gains and, if
7
necessary, a return of capital. The current annualized rate is $0.96 per share.
The Fund continues to evaluate its monthly distributions in light of ongoing
economic and market conditions and may change the amount of the monthly
distribution in the future. However, the Offer could result in additional
distributions separate from those declared pursuant to the managed distribution
policy due to the sale of portfolio securities in connection with the Offer. See
"Recognition of Capital Gains" in Section 10, "Certain Effects of the Offer."
Shareholders tendering Shares shall be entitled to receive all dividends
declared on or before the Expiration Date, but not yet paid, on Shares tendered
pursuant to the Offer. At this time, it is anticipated that a cash dividend will
be declared by the Board of Directors with a record date occurring before the
Expiration Date and that, accordingly, holders of Shares purchased pursuant to
the Offer will receive such dividend with respect to such Shares. The amount and
frequency of dividends in the future will depend on circumstances existing at
that time.
9. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE SHARES.
The members of the Board of Directors of the Fund are: Jude T. Driscoll
(Chairman), Thomas L. Bennett, John A. Fry, Anthony D. Knerr, Lucinda S.
Landreth, Ann R. Leven, Thomas F. Madison, Janet L. Yeomans and J. Richard
Zecher. Mr. Driscoll is considered an "interested person" of the Fund, as that
term is defined in the 1940 Act, as amended (the "1940 Act"), because of his
affiliation with the investment adviser of the Fund.
The executive officers of the Fund are Jude T. Driscoll, Chairman,
President and Chief Executive Officer and Michael P. Bishof, Senior Vice
President and Chief Financial Officer.
Correspondence to the Directors and executive officers of the Fund should
be mailed to c/o Delaware Investments Dividend and Income Fund, Inc., 2005
Market Street, Philadelphia, Pennsylvania 19103.
Based upon the Fund's records and upon information provided to the Fund by
its Directors, executive officers and affiliates (as such term is used in Rule
12b-2 under the Exchange Act), as of May 26, 2006, the Directors, executive
officers and their associates (as that term is defined in Rule 12b-2 under the
Exchange Act) of the Fund as a group beneficially owned no Shares. The Fund has
been informed that no Director or executive officer of the Fund intends to
tender any Shares pursuant to the Offer.
Based upon the Fund's records and upon information provided to the Fund by
its Directors, executive officers and affiliates (as such term is used in Rule
12b-2 under the Exchange Act), neither the Fund nor, to the best of the Fund's
knowledge, any of the Directors or executive officers of the Fund, nor any
associates of any of the foregoing, has effected any transactions in the Shares
during the sixty business day period prior to the date hereof.
Except as set forth in this Offer to Purchase, neither the Fund nor, to the
best of the Fund's knowledge, any of its affiliates, Directors or executive
officers, is a party to any contract, arrangement, understanding or relationship
with any other person relating, directly or indirectly, to the Offer with
respect to any securities of the Fund (including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies, consents or authorizations).
Delaware Management Company (a series of Delaware Management Business
Trust) (the "Adviser") serves as investment adviser to the Fund pursuant to an
investment management agreement. Under the investment management agreement, the
Adviser provides investment advisory services to the Fund for an annual fee
calculated daily at the rate of 0.55% of the Fund's adjusted average weekly net
assets.
The Fund also is a party to certain other service agreements. The Fund is a
party to an Administration and Accounting Agreement with Delaware Service
Company, Inc. (the "Administrator"), an affiliate of the Adviser. Under the
terms of the Administration and Accounting Agreement as of May 19, 2005, the
Administrator provides accounting and administration services to the Fund for a
monthly fee computed at the annual rate of 0.04% of the Fund's adjusted average
weekly net assets. JPMorgan Chase & Co. serves as custodian for the Fund's
portfolio securities pursuant to the Custodian Agreement entered into with the
Fund. Under the Custodian Agreement, the Fund is obligated to pay a fee equal to
0.001% of the Fund's average daily net assets, plus trading fees and other
out-of-pocket expenses. For the fiscal year ended November 30, 2005, the Fund
paid $9,933 in custodian fees. The Fund is a party to a transfer agency
agreement with Mellon Investor Services LLC. Pursuant to this transfer agency
agreement, the Fund is obligated to pay
8
Mellon Investor Services LLC a monthly fee equal to $2,340 plus out-of-pocket
expenses for the services it provides as transfer agent, dividend disbursing
agent and registrar for the Fund.
The Fund also entered into several agreements in connection with its
Commercial Paper Program (the "Program"). Under the Program, the Fund sells
unsecured promissory notes (the "Notes") to institutional accredited investors
in private placements. The agreements related to the Program are a Depositary
Agreement and a Liquidity Agreement with JPMorgan Chase. Under the Depositary
Agreement, JPMorgan Chase serves as the depositary and issuing and payment agent
with respect to the Notes, and under the Liquidity Agreement, JPMorgan Chase has
committed to loaning the Fund up $30 million at any one time to pay maturing
Notes. The Fund also is a party to a Placement Agency Agreement with Banc of
America Securities LLC, as the successor by merger of Continental Bank N.A.
("Banc of America"), pursuant to which Banc of America will use its reasonable
best efforts to sell Notes on behalf of the Fund.
10. CERTAIN EFFECTS OF THE OFFER.
Effect on NAV and Consideration Received by Tendering Shareholders. To pay
the aggregate purchase price of Shares accepted for payment pursuant to the
Offer, the Fund anticipates that funds will be first derived from any cash on
hand and then from the proceeds from the sale of portfolio securities held by
the Fund. If the Fund is required to sell a substantial amount of portfolio
securities to raise cash to finance the Offer, the market prices of the Fund's
portfolio securities, and hence the Fund's NAV, may decline. If such a decline
occurs, the Fund cannot predict what its magnitude might be or whether such a
decline would be temporary or continue to or beyond the Expiration Date. Because
the price per Share to be paid in the Offer will be dependent upon the NAV per
Share as determined on the first business day after the Expiration Date, if such
a decline continued to the Expiration Date, the consideration received by
tendering shareholders would be reduced more than it otherwise might. In
addition, the sale of portfolio securities will cause increased brokerage and
related transaction expenses, and the Fund may receive proceeds from the sale of
portfolio securities less than their valuations by the Fund. Accordingly,
because of the Offer, the Fund's NAV per Share may decline more than it
otherwise might, thereby reducing the amount of proceeds received by tendering
shareholders and the value per Share for non-tendering shareholders.
The Fund will sell portfolio securities during the pendency of the Offer to
raise cash for the purchase of Shares. Thus, it is likely that during the
pendency of the Offer, and possibly for a short time thereafter, the Fund will
hold a greater than normal percentage of its net assets in cash and cash
equivalents. This large cash position may interfere with the Fund's ability to
meet its investment objective. The Fund is required by law to pay for tendered
Shares it accepts for payment promptly after the Expiration Date of this Offer.
Because the Fund will not know the number of Shares tendered until the
Expiration Date, the Fund will not know until the Expiration Date the amount of
cash required to pay for such Shares. If on or prior to the Expiration Date the
Fund does not have, or believes it is unlikely to have, sufficient cash to pay
for all Shares tendered, it may extend the Offer to allow additional time to
sell portfolio securities and raise sufficient cash.
Recognition of Capital Gains. As noted, the Fund will likely be required to
sell portfolio securities pursuant to the Offer. If the Fund's tax basis for the
securities sold is less than the sale proceeds, the Fund will recognize capital
gains. The Fund would expect to distribute any such gains to shareholders of
record (reduced by net capital losses realized during the fiscal year, if any,
and available capital loss carry-forwards) following the end of the Fund's
fiscal year on November 30. This recognition and distribution of gains, if any,
would have two negative consequences: first, shareholders at the time of a
declaration of distributions would be required to pay taxes on a greater amount
of capital gain distributions than otherwise would be the case; and second, to
raise cash to make the distributions, the Fund might need to sell additional
portfolio securities, thereby possibly being forced to realize and recognize
additional capital gains. It is impossible to predict what the amount of
unrealized gains or losses would be in the Fund's portfolio at the time that the
Fund is required to liquidate portfolio securities (and hence the amount of
capital gains or losses that would be realized and recognized). As of November
30, 2005, there was unrealized appreciation of investments on a tax basis of
$10,290,474, and no remaining capital loss carry-forwards from prior years.
In addition, some of the distributed gains may be realized on securities
held for one year or less, which would generate income taxable to the
shareholders at ordinary income rates. This could adversely affect the Fund's
performance.
9
Tax Consequences of Repurchases to Shareholders. The Fund's purchase of
tendered Shares pursuant to the Offer will have tax consequences for tendering
shareholders and may have tax consequences for non-tendering shareholders. See
Section 14 "Certain Federal Income Tax Consequences."
Effect on Remaining Shareholders, Higher Expense Ratio and Less Investment
Flexibility. The purchase of Shares by the Fund pursuant to the Offer will have
the effect of increasing the proportionate interest in the Fund of non-tendering
shareholders. All shareholders remaining after the Offer will be subject to any
increased risks associated with the reduction in the Fund's aggregate assets
resulting from payment for the tendered Shares, such as greater volatility due
to decreased diversification and proportionately higher expenses. The reduced
net assets of the Fund as a result of the Offer may result in less investment
flexibility for the Fund, depending on the number of Shares repurchased, and may
have an adverse effect on the Fund's investment performance.
Effect on Percentage of Illiquid and Restricted Securities in the Fund's
Portfolio. As of May 26, 2006, the Fund held illiquid or restricted securities
in an amount equal to less than one-half of one percent of the Fund's total net
assets. Therefore, if the Fund does not purchase any such securities prior to
the Expiration Date, the Offer and the number of Shares purchased pursuant to
the Offer, will not materially increase the portion of illiquid securities in
the portfolio.
Possible Proration. If greater than 5% of the Fund's Shares are tendered
pursuant to the Offer, the Fund would, upon the terms and subject to the
conditions of the Offer, purchase Shares tendered on a pro rata basis.
Accordingly, shareholders cannot be assured that all of their tendered Shares
will be repurchased.
Effect on Commercial Paper Program. As a result of the decline in Fund
assets due to the Tender Offer, the Fund anticipates that it will be required to
reduce the amount of leverage it employs through the Program. This will require
the sale of additional portfolio securities and a further reduction in the
Fund's assets, with the attendant consequences discussed above.
THE OFFER MAY HAVE CERTAIN ADVERSE CONSEQUENCES FOR TENDERING AND NON-TENDERING
SHAREHOLDERS.
11. SOURCE AND AMOUNT OF FUNDS.
The actual cost to the Fund cannot be determined at this time because the
number of Shares to be purchased will depend on the number tendered, and the
price will be based on the NAV per Share on the business day after the
Expiration Date. If the NAV per Share on that date were the same as the NAV per
Share on May 26, 2006, and if 5% of the outstanding Shares are purchased
pursuant to the Offer, the estimated cost to the Fund, not including fees and
expenses incurred in connection with the Offer, would be approximately $7.4
million.
The monies to be used by the Fund to purchase Shares pursuant to the Offer
will be first obtained from any cash on hand and then from the proceeds of sales
of securities in the Fund's investment portfolio. The Directors believe that the
Fund has sufficient liquidity to purchase the Shares that may be tendered
pursuant to the Offer. However, if, in the judgment of the Directors, there is
not sufficient liquidity of the assets of the Fund to pay for tendered Shares,
the Fund may terminate the Offer. See Section 5, "Certain Conditions of the
Offer." The Fund will not borrow money or undertake any other alternative
arrangements to finance the purchase of tendered Shares.
12. CERTAIN INFORMATION ABOUT THE FUND.
The Fund was organized as a Maryland corporation on February 2, 1993, and
is a diversified, closed-end management investment company registered under the
1940 Act. The Shares were first issued to the public on March 26, 1993. As a
closed-end investment company, the Fund differs from an open-end investment
company (i.e., a mutual fund) in that it does not redeem its Shares at the
election of a shareholder and does not continuously offer its Shares for sale to
the public. The Fund's primary investment objective is to seek high current
income. Capital appreciation is a secondary objective. The Fund seeks to achieve
its objective by investing in income generating equity securities, including
dividend paying common stocks, convertible securities, preferred stocks and
other equity related securities. The Fund also invests in non-convertible debt
securities consisting primarily of corporate bonds, including high yield, high
risk debt securities.
The principal executive offices of the Fund are located at 2005 Market
Street, Philadelphia, Pennsylvania 19103.
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13. ADDITIONAL INFORMATION.
The Fund is subject to the information and reporting requirements of the
1940 Act and in accordance therewith is obligated to file reports and other
information with the Securities and Exchange Commission (the "Commission")
relating to its business, financial condition and other matters. The Fund has
also filed an Issuer Tender Offer Statement on Schedule TO with the Commission.
Such reports and other information are available for inspection at the public
reference room at the Commission's office, 100 F Street, N.E., Washington, D.C.
20549. Copies may be obtained, by mail, upon payment of the Commission's
customary charges, by writing to its principal office at 100 F Street, N.E.,
Washington, D.C. 20549. Such reports and other information are also available on
the Commission's web site (http://www.sec.gov).
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following discussion is a general summary of the U.S. federal income
tax consequences of a sale of Shares pursuant to the Offer. Shareholders should
consult their own tax advisers regarding the tax consequences of a sale of
Shares pursuant to the Offer, as well as the effects of state, local and foreign
tax laws. See also "Federal Income Tax Withholding," in Section 2.F.
Federal Income Tax Consequences to Tendering Shareholders - U.S. Shareholders.
In General. A shareholder's tender of all or a part of its Shares for cash
pursuant to the Offer will be a taxable transaction for federal income tax
purposes. The tax consequences of the sale will be determined in part under the
stock redemption rules of Section 302 of the Code. The amount and
characterization of income recognized by a shareholder in connection with a sale
pursuant to the Offer will depend on whether the sale is treated as an
"exchange" or a "dividend" for tax purposes.
Treatment as an Exchange. If the redemption qualifies under any of the
provisions of Section 302(b) of the Code, as more fully described below, the
cash received pursuant to the Offer will be treated as a distribution from the
Fund in exchange for the Shares sold. The treatment accorded to such an exchange
results in a shareholder's recognizing gain or loss equal to the difference
between (a) the cash received by the shareholder pursuant to the Offer and (b)
the shareholder's adjusted tax basis in the Shares surrendered. Assuming the
Shares are held as capital assets, such recognized gain or loss will be capital
gain or loss. If the Shares were held longer than one year, such capital gain or
loss will be long-term. The maximum rate on long-term capital gains for
individuals applicable to such a sale of Shares is 15%. Under certain "wash
sales" rules, recognition of a loss on Shares sold pursuant to the Offer will
ordinarily be disallowed to the extent a shareholder acquires Shares within 30
days before or after the date Shares are purchased pursuant to the Offer and, in
that event, the basis and holding period of the Shares acquired will be adjusted
to reflect the disallowed loss.
Treatment as a Dividend. If none of the provisions under Section 302(b) of
the Code outlined below are satisfied, a shareholder will be treated as having
received a dividend taxable as ordinary income in an amount equal to the entire
amount of cash received by the shareholder for its Shares pursuant to the Offer
to the extent the Fund has current and/or accumulated earnings and profits. Any
amounts treated as distributions to shareholders in excess of the Fund's current
and accumulated earnings and profits will be treated as a return of capital to
such shareholders to the extent of their basis in their Shares and then as
capital gain (which will be long-term or short-term depending on such
shareholder's applicable holding period for the Shares tendered).
Accordingly, the differentiation between "dividend" and "sale or exchange"
treatment is important with respect to the amount (there is no basis offset for
dividends) and character of income that tendering shareholders are deemed to
receive. While the marginal tax rates for dividends and capital gains remains
the same (35%) for corporate shareholders, under the Code the top income tax
rate on ordinary income of individuals (35%) exceeds the maximum tax rate on net
capital gains (15%) except to the extent any such dividends are designated by
the Fund as qualified dividend income taxable at the same rate as net capital
gains. In general, for individuals the amount of dividends that may be
designated by the Fund as qualified dividend income cannot exceed the amount of
qualified dividend income earned by the Fund on its investments for the taxable
year. For corporate shareholders, the amount of dividends that may be designated
by the Fund as qualifying for the 70% corporate dividends-received deduction
cannot exceed the amount of the dividends received by the Fund on its
investments in domestic corporations for the taxable year.
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Each shareholder's tax adviser should determine whether that shareholder
qualifies under one of the provisions of Section 302(b) of the Code. In the
event that the transaction is treated as a dividend distribution to a
shareholder for federal income tax purposes, such shareholder's remaining tax
basis in the Shares actually redeemed will be added to the tax basis of such
shareholder's remaining Shares in the Fund. In the event that a shareholder
actually owns no Shares in the Fund after the redemption, but the transaction is
nevertheless treated as a dividend distribution because such shareholder
constructively owns Shares in the Fund (see below), such shareholder's tax basis
should be added to Shares in the Fund owned by related persons that were
considered constructively owned by such shareholder.
Constructive Ownership of Stock. In determining whether the provisions
under Section 302(b) of the Code, as described below, are satisfied, a
shareholder must take into account not only Shares actually owned by such
shareholder, but also Shares that are constructively owned within the meaning of
Section 318 of the Code. Under Section 318 of the Code, a shareholder may
constructively own Shares actually owned, and in some cases constructively
owned, by certain related individuals and certain entities in which the
shareholder or a related individual or entity has an interest. The rules of
constructive ownership are complex and must be applied to a particular
shareholder's situation by a tax adviser.
The Provisions of Section 302(b) of the Code. Under Section 302(b) of the
Code, a redemption will be taxed as an exchange, and not as a dividend, if it
(a) results in a "complete redemption" of all the Shares owned by a shareholder,
(b) is "substantially disproportionate" with respect to a shareholder, or (c) is
"not essentially equivalent to a dividend" with respect to a shareholder. Each
shareholder should be aware that, under certain circumstances, sales, purchases,
or transfers of Shares in the market or to or from other parties contemporaneous
with sales pursuant to the Offer may be taken into account in determining
whether the tests under clause (a), (b), or (c) above are satisfied. Further,
the Fund believes that in the event the Offer is oversubscribed, resulting in a
proration, it is likely that less than all the Shares tendered by a shareholder
will be purchased by the Fund. Proration may affect whether a sale by a
shareholder will satisfy the provisions (a), (b), or (c) above.
A brief description of the three major provisions of Section 302(b) of the
Code is as follows:
1. A Complete Redemption of Interest. The receipt of cash by a shareholder
will result in a "complete redemption" of all the Shares owned by the
shareholder within the meaning of Section 302(b)(3) of the Code if either (i)
all the Shares actually and constructively owned by the shareholder are sold
pursuant to the Offer or (ii) all the Shares actually owned by the shareholder
are sold pursuant to the Offer, the only Shares the shareholder constructively
owns are actually owned by such shareholder's family members, and the
shareholder is eligible to waive and effectively waives, under procedures
described in Section 302(c) of the Code, such constructive ownership.
2. A Substantially Disproportionate Redemption. The receipt of cash by a
shareholder will be "substantially disproportionate" with respect to such
shareholder within the meaning of Section 302(b)(2) of the Code if the
percentage of the total outstanding Shares actually and constructively owned by
the shareholder immediately following the sale of Shares pursuant to the Offer
is less than 80 percent of the percentage of the total outstanding Shares
actually and constructively owned by such shareholder immediately before such
sale.
3. Not Essentially Equivalent to a Dividend. Even if a sale by a
shareholder fails to meet the "complete redemption" or "substantially
disproportionate" tests, a shareholder may nevertheless meet the "not
essentially equivalent to a dividend" test. Whether a specific redemption is
"not essentially equivalent to a dividend" depends on the individual
shareholder's facts and circumstances. In any event, the redemption must result
in a "meaningful reduction" of the shareholder's proportionate interest in the
Fund. The Internal Revenue Service (the "IRS") has indicated in published
rulings that, in the case of a minority shareholder in a publicly held
corporation whose relative stock investment in the corporation was minimal and
who exercised no control over corporate affairs, a small reduction in the
percentage ownership interest of such shareholder in such corporation (from
..0001118 percent to .0001081 percent - 3.3% reduction under the facts of this
ruling) was sufficient to constitute a "meaningful reduction." Shareholders
seeking to rely on this test should consult their own tax advisers as to the
application of this particular standard to their own situations.
Backup Withholding. The Depositary may be required to withhold 28% of the gross
proceeds paid to a shareholder or other payee pursuant to the Offer unless
either: (a) the shareholder has completed and submitted to the Depositary the
Substitute Form W-9 included with the Letter of Transmittal, providing the
shareholder's taxpayer identification number/social security number and
certifying under penalties of perjury: (i) that such number is correct, and (ii)
either
12
that (A) the shareholder is exempt from backup withholding, (B) the shareholder
has not been notified by the IRS that the shareholder is subject to backup
withholding as a result of an under-reporting of interest or dividends, or (C)
the IRS has notified the shareholder that the shareholder is no longer subject
to backup withholding; or (b) an exception applies under applicable law and
Treasury regulations.
Federal Income Tax Consequences to Tendering Shareholders - Non-U.S.
Shareholders.
U.S. Withholding at the Source. Any payments to a tendering shareholder who
is a nonresident alien individual, a foreign trust or estate or a foreign
corporation (as such terms are defined in the Code) that does not hold its
shares in connection with a trade or business conducted in the United States (a
"Foreign Shareholder") that are treated as dividends for U.S. federal income tax
purposes under the rules set forth above, will be subject to U.S. withholding
tax at the rate of 30% (unless a reduced rate applies under an applicable tax
treaty). A tendering Foreign Shareholder who realizes a capital gain on a tender
of Shares will not be subject to U.S. federal income tax on such gain, unless
the Shareholder is an individual who is physically present in the U.S. for 183
days or more and certain other conditions are satisfied. Such persons are
advised to consult their own tax advisers. Special rules may also apply in the
case of Foreign Shareholders that are: (i) engaged in a U.S. trade or business;
(ii) former citizens or residents of the U.S.; or (iii) subject to special rules
such as "controlled foreign corporations." Such persons are advised to consult
their own tax advisers.
Backup Withholding and Certification Rules. Non-U.S. shareholders have
special U.S. tax certification requirements to avoid backup withholding at a
rate of 28%, and if applicable, to obtain the benefit of any income tax treaty
between the non-U.S. shareholder's country of residence and the United States.
To claim these tax benefits, the non-U.S. shareholder must provide the
Depositary with a properly completed Form W-8BEN (or other Form W-8, where
applicable, or their substitute forms) to establish his or her status as an
non-U.S. shareholder, to claim beneficial ownership over Shares, and to claim,
if applicable, a reduced rate of or exemption from withholding tax under the
applicable treaty.
Federal Income Tax Consequences to Non-Tendering Shareholders.
Federal Income Tax Consequences to Non-Tendering Shareholders. The tender
offer plan described in the Prospectus contemplates that a shareholder wishing
to accept the tender offer must tender all (but not less than all) of the Shares
owned by such shareholder or attributed to it under Section 318 of the Code,
unless the Fund has received a private letter ruling from the IRS that a tender
of less than all of a shareholder's Shares will not cause non-tendering
shareholders to realize constructive distributions on their Shares under Section
305 of the Code. In connection with the 2005 tender offer and the favorable
private letter ruling received by the Fund on May 5, 2005, the Fund, through its
counsel, was informed by the Office of Associate Chief Counsel (Corporate) that
the IRS would not issue to the Fund a similar ruling in future years. The IRS's
informal policy is to issue no more than two such rulings to any one taxpayer on
the premise that multiple tender offers may constitute such a "plan" that has
the result of increasing the proprietary interests of some shareholders in the
assets and income of the funds and the receipt of money by other shareholders.
Since the Fund's organization in 1993, the Fund has consummated two tender
offers, one in 2000 and one in 2005.
In light of this communication from the IRS, it has been determined that
the Fund has no affirmative obligation to obtain a ruling from the IRS as a
pre-condition to accepting partial tenders. The Fund has previously stated that
it would not seek a private letter ruling from the IRS in connection with
accepting partial tenders for any future Fund tender offers. If the sale of
Shares pursuant to the Offer is treated as a "dividend" to a tendering
shareholder, however, a constructive dividend under Code Section 305(c) may
result to non-tendering shareholders whose proportionate interest in the
earnings and assets of the Fund has been increased as a result of such tender.
The Fund does not believe the Offer should cause non-tendering shareholders
to realize constructive distributions on their Shares under Section 305 of the
Code, but rather, the Offer should be treated as an "isolated transaction"
within the meaning of Treasury regulations. This is because, among other things,
the Fund is not required by its charter, bylaws or otherwise to redeem any of
its Shares, the Board has a fiduciary duty to the Fund and its shareholders to
consider the appropriateness of any share repurchase, and the Fund has no
absolute commitment to make any further tender offers subsequent to the present
Offer.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS A SUMMARY INCLUDED FOR
GENERAL INFORMATION PURPOSES ONLY. IN VIEW OF THE INDIVIDUAL NATURE OF TAX
CONSEQUENCES, EACH SHAREHOLDER IS ADVISED TO CONSULT ITS OWN TAX ADVISER WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO IT OF THE OFFER, INCLUDING THE
EFFECT AND APPLICABILITY OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF
13
CHANGES IN FEDERAL OR OTHER TAX LAWS. THE ADVICE ABOVE WAS NOT WRITTEN AND IS
NOT INTENDED TO BE USED AND CANNOT BE USED BY ANY TAXPAYER FOR PURPOSES OF (I)
AVOIDING UNITED STATES FEDERAL INCOME TAX PENALTIES THAT MAY BE IMPOSED, OR (II)
PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TRANSACTION OR MATTER
ADDRESSED HEREIN.
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
The Fund reserves the right, at any time and from time to time, to extend
the period of time during which the Offer is pending by making a public
announcement thereof. In the event that the Fund so elects to extend the tender
period, the NAV for the Shares tendered will be computed as of 4:00 p.m. New
York City time on the first business day following the Expiration Date, as
extended. During any such extension, all Shares previously tendered and not
purchased or withdrawn will remain subject to the Offer. The Fund also reserves
the right, at any time and from time to time up to and including the Expiration
Date, to (a) terminate the Offer and not to purchase or pay for any Shares or,
subject to applicable law, postpone payment for Shares upon the occurrence of
any of the conditions specified in Section 5, "Certain Conditions of the Offer";
and (b) amend the Offer in any respect by making a public announcement thereof.
Such public announcement will be issued no later than 9:00 a.m. New York City
time on the next business day after the previously scheduled Expiration Date and
will disclose the approximate number of Shares tendered as of that date. Without
limiting the manner in which the Fund may choose to make a public announcement
of extension, termination or amendment, except as provided by applicable law
(including Rule 13e-4(d)(2), Rule 13e-4(e)(3), and Rule 14e-1(d) under the
Exchange Act), the Fund shall have no obligation to publish, advertise or
otherwise communicate any such public announcement.
If the Fund materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Fund will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(3) promulgated under the Exchange Act. These rules require that the
minimum period during which an offer must remain open following material changes
in the terms of the offer or information concerning the offer (other than a
change in price or a change in percentage of securities sought) will depend on
the facts and circumstances, including the relative materiality of such terms or
information. If (i) the Fund increases or decreases the price to be paid for
Shares, or the Fund increases or decreases the number of Shares being sought and
(ii) the Offer is scheduled to expire at any time earlier than the expiration of
a period ending on the tenth business day from, and including, the date that
notice of such increase or decrease is first published, sent or given, the Offer
will be extended at least until the expiration of such period of ten business
days.
16. FEES AND EXPENSES.
The Fund will not pay to any broker or dealer, commercial bank, trust
company or other person any solicitation fee for any Shares purchased pursuant
to the Offer. The Fund will reimburse such persons for customary handling and
mailing expenses incurred in forwarding the Offer. No such broker, dealer,
commercial bank or trust company has been authorized to act as the agent of the
Fund or the Depositary for purposes of the Offer.
The Fund has retained Mellon Investor Services LLC to act as Depositary and
Information Agent. The Fund will pay the Depositary/Information Agent reasonable
and customary compensation for its services and will also reimburse the
Depositary/Information Agent for certain out-of-pocket expenses and indemnify it
against certain liabilities. The Fund will use the Service Fees it receives to
offset the fees charged by the Depositary.
17. MISCELLANEOUS.
The Offer is not being made to, nor will the Fund accept tenders from,
owners of Shares in any jurisdiction in which the Offer or its acceptance would
not comply with the securities or Blue Sky laws of such jurisdiction. The Fund
is not aware of any jurisdiction in which the making of the Offer or the tender
of Shares would not be in compliance with the laws of such jurisdiction.
However, the Fund reserves the right to exclude holders in any jurisdiction in
which it is asserted that the Offer cannot lawfully be made. So long as the Fund
makes a good-faith effort to comply with any state law deemed applicable to the
Offer, the Fund believes that the exclusions of holders residing in such
jurisdiction is permitted under Rule 13e-4(f)(9) promulgated under the Exchange
Act.
Delaware Investments Dividend and Income
Fund, Inc.
June 2, 2006
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