Offer to Purchase
by
First Trust/Four Corners Senior Floating Rate Income Fund
(the "Fund")
for Cash
Up to 100% of the Fund's
Outstanding MMP Shares (as defined below) at a Price of 95% of
the Liquidation Preference Per Share
--------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON
TUESDAY, JULY 14, 2009, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------
THE OFFER (AS DEFINED HEREIN) IS CONDITIONED UPON THE FUND OBTAINING
FINANCING UNDER ITS EXISTING CREDIT FACILITY AS WELL AS THE OTHER CONDITIONS
DESCRIBED HEREIN. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF MMP
SHARES BEING TENDERED. SEE "INTRODUCTION" AND "THE OFFER--CONDITIONS TO THE
OFFER."
NEITHER THE FUND NOR ITS BOARD OF TRUSTEES (THE "BOARD") IS MAKING ANY
RECOMMENDATION TO ANY HOLDER OF MMP SHARES WHETHER TO TENDER OR REFRAIN FROM
TENDERING MMP SHARES IN THE OFFER. EACH HOLDER OF MMP SHARES IS URGED TO READ
AND EVALUATE THE OFFER CAREFULLY AND TO CONSULT THEIR OWN TAX AND FINANCIAL
ADVISORS AS TO WHETHER TO PARTICIPATE IN THE OFFER. NO PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THE OFFER OTHER THAN THE MATERIALS ENCLOSED HEREWITH AND THE STATEMENTS
SPECIFICALLY SET FORTH IN SUCH MATERIALS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND OR THE BOARD.
--------------------------------
Important Information
If you wish to tender all or any part of your MMP Shares (as defined
below), you should either (i)(a) complete and sign the Letter of Transmittal (or
a facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have your signature thereon guaranteed if required by Instruction 1
to the Letter of Transmittal, and mail or deliver the Letter of Transmittal (or
such facsimile thereof) and any other required documents to the Depositary (as
defined herein) or (b) deliver such MMP Shares pursuant to the procedures for
book-entry transfers set forth in the section "The Offer--Procedure for
Tendering MMP Shares" prior to the expiration date of the Offer; or (ii) request
your broker, dealer, commercial bank, trust company or other nominee to effect
the transaction for you. If you have MMP Shares registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, you must
contact such broker, dealer, commercial bank, trust company or other nominee if
you desire to tender your MMP Shares.
If you desire to tender your MMP Shares and your MMP Shares are not
immediately available, or you cannot comply with the procedures for book-entry
transfers described in this Offer to Purchase on a timely basis, you may tender
such MMP Shares by following the procedures for guaranteed delivery set forth in
the section "The Offer--Procedure for Tendering MMP Shares."
To tender your MMP Shares, you must follow the procedures described in
the materials enclosed herewith. The Fund may reject any tender not fully in
compliance with these procedures.
A summary of the principal terms of the Offer appears on pages 1-5
hereof in the section "Summary Term Sheet".
If you have questions about the Offer, you can contact The Xxxxxx
Group, Inc. (the "Information Agent" for the Offer) at its address and telephone
number set forth on the back cover of the Offer. You can also obtain additional
copies of this Offer to Purchase, the related Letter of Transmittal and the
Notice of Guaranteed Delivery from the Information Agent, or your broker,
dealer, commercial bank, trust company or other nominee. Deutsche Bank Trust
Company Americas (the "Depositary") will serve as the depositary for the Offer.
IF YOU DO NOT WISH TO TENDER YOUR MMP SHARES, YOU NEED NOT TAKE ANY
ACTION.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION, AND YOU SHOULD CAREFULLY READ BOTH IN THEIR ENTIRETY
BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER.
June 16, 2009
TABLE OF CONTENTS
SECTION HEADING PAGE
SUMMARY TERM SHEET............................................................1
INTRODUCTION..................................................................6
THE OFFER.....................................................................7
1. Terms of the Offer; Expiration Date....................................7
2. Extension of Tender Period; Termination; Amendment.....................8
3. Acceptance for Payment and Payment.....................................9
4. Procedure for Tendering MMP Shares....................................10
5. Withdrawal Rights.....................................................14
6. Material Tax Considerations...........................................14
7. Price Range of MMP Shares; Dividends..................................18
8. Certain Information Concerning the Fund...............................20
9. Source and Amount of Funds............................................21
10. Interest of Trustees and Executive Officers...........................22
11. Certain Effects of the Offer..........................................24
12. Purpose of the Offer; Certain Agreements Regarding the MMP Shares.....26
13. Conditions to the Offer...............................................28
14. Plans or Proposals of the Fund; Regulatory Approvals..................29
15. Fees and Expenses.....................................................30
16. Financial Information.................................................30
17. Miscellaneous.........................................................30
This page is intentionally left blank.
SUMMARY TERM SHEET
This summary term sheet is a brief description of the material
provisions of the Offer (as defined below) being made by First Trust/Four
Corners Senior Floating Rate Income Fund, a Massachusetts business trust (the
"Fund"), to purchase for cash up to 100% of its outstanding Money Market
Cumulative Preferred Shares, par value $0.01 per share, with a liquidation
preference of $25,000 per share (the "MMP Shares"), upon the terms and subject
to the conditions set forth in this Offer to Purchase and the accompanying
Letter of Transmittal (which together, as amended, supplemented or otherwise
modified from time to time, constitute the "Offer"). The price to be paid for
the MMP Shares is an amount per share, net to the seller in cash, equal to 95%
of the liquidation preference of $25,000 per share (or $23,750 per share), plus
any unpaid dividends accrued through the Expiration Date (as defined below).
The following are some of the questions you, as a holder of the MMP
Shares, may have and answers to those questions. You should carefully read the
Offer to Purchase and the accompanying Letter of Transmittal in their entirety
because the information in this summary term sheet is not complete and
additional important information is contained in the remainder of the Offer to
Purchase and the Letter of Transmittal.
What and How Many Securities is the Fund Offering to Purchase?
o The Fund is offering to purchase up to 100% of its 880
outstanding MMP Shares. The Fund will, upon the terms and subject to
the conditions of the Offer, purchase all MMP Shares tendered prior to
the time the Offer expires. See "The Offer--Terms of the Offer;
Expiration Date."
How Much Are You Offering to Pay for My MMP Shares and What is the Form of
Payment? Will I Have to Pay any Fees or Commissions?
o The price to be paid for the Fund's MMP Shares is an amount per
share, net to the seller in cash, equal to 95% of the
liquidation preference of $25,000 per share (or $23,750 per share) plus
any unpaid dividends accrued through the Expiration Date. See "The
Offer--Terms of the Offer; Expiration Date" and "The Offer--Acceptance
for Payment and Payment."
If you tender your MMP Shares to the Fund in the Offer, you will not
have to pay brokerage fees, commissions or similar expenses. If you own
your MMP Shares through a broker or other nominee, and your broker
tenders your MMP Shares on your behalf, your broker or nominee may
charge you a fee for doing so. You should consult your broker or
nominee to determine whether any charges will apply.
How Long Do I Have to Decide Whether to Tender in the Offer?
o You have until 5:00 P.M., Eastern time, on July 14,
2009, to decide whether to tender your MMP Shares in the Offer.
Further, if you cannot deliver everything required to make a valid
tender to Deutsche Bank Trust Company Americas (the "Depositary") prior
to such time, you may be able to use a guaranteed delivery procedure,
which is described in "The Offer--Procedure for Tendering MMP Shares."
Does the Fund Have the Financial Resources to Make Payment?
o Yes. Assuming the Fund purchases 100% of its MMP Shares
at 95% of the liquidation preference of $25,000 per share (or $23,750
per share), the total cost, not including fees and expenses incurred in
connection with the Offer, will be approximately $20,900,000, plus any
unpaid dividends accrued through the Expiration Date, for the Fund. The
Fund intends to borrow funds under an existing credit facility to pay
the purchase price for MMP Shares tendered. The Fund may also use cash
on hand to pay a portion of the purchase price or may sell assets and
use the proceeds of such sales to pay a portion of the purchase price.
See "The Offer--Source and Amount of Funds."
How Do I Tender My MMP Shares in the Offer?
o To tender MMP Shares, you must deliver a completed Letter of
Transmittal to the Depositary not later than the time the Offer
expires. If your MMP Shares are held in street name by your broker,
dealer, bank, trust company or other nominee, such nominee can tender
your MMP Shares through The Depository Trust Company. If you cannot
deliver everything required to make a valid tender to the Depositary
prior to the expiration date of the Offer, you may have a limited
amount of additional time by having a broker, a bank or other fiduciary
that is a member of the Securities Transfer Agents Medallion Program or
other eligible institution guarantee that the missing items will be
received by the Depositary within three trading days. However, the
Depositary must receive the missing items within that three trading day
period. See "The Offer--Procedure for Tendering MMP Shares."
When and How Will I Be Paid for My Tendered MMP Shares in the Offer?
o The Fund will pay for all validly tendered and not withdrawn MMP Shares
promptly after the expiration date of the Offer, subject to the
satisfaction or waiver of the conditions to the Offer, as set forth in
"The Offer--Conditions to the Offer." The Fund does, however, reserve
the right, in its sole discretion, to delay payment for MMP Shares
pending receipt of any regulatory or governmental approvals to the
Offer as described under the caption "The Offer--Plans or Proposals of
the Fund; Regulatory Approvals." The Fund will pay for your validly
tendered and not withdrawn MMP Shares by depositing the purchase price
with the Depositary which will act as your agent for the purpose of
receiving payments from the Fund and transmitting such payments to you.
In all cases, payment for tendered MMP Shares will be made only after
timely receipt by the Depositary of a properly completed and duly
executed Letter of Transmittal, any other required documents for such
MMP Shares and, for MMP Shares held in street name, confirmation of a
book-entry transfer of such MMP Shares (as described in "The
Offer--Procedure for Tendering MMP Shares").
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Until What Time Can I Withdraw Tendered MMP Shares in the Offer?
o You can withdraw tendered MMP Shares at any time until the Offer has
expired and, if the Fund has not agreed to accept your MMP Shares for
payment by August 11, 2009, you can withdraw them at any time after
such time until the Fund accepts MMP Shares for payment. See "The
Offer--Withdrawal Rights."
How Do I Withdraw Tendered MMP Shares in the Offer?
o To withdraw MMP Shares, you must deliver a written notice of withdrawal
(a form of which can be provided upon request from the Information
Agent (as defined below)) with the required information to the
Depositary while you have the right to withdraw the MMP Shares. If your
MMP Shares are held in street name by your broker, dealer, bank, trust
company or other nominee, contact that firm to withdraw your tendered
MMP Shares.
Withdrawals of tenders of MMP Shares may not be rescinded, and any MMP
Shares validly withdrawn will thereafter be deemed not validly tendered
for purposes of the Offer. However, withdrawn MMP Shares may be
retendered by following one of the procedures described in the section
"The Offer-- Procedure for Tendering MMP Shares" of this Offer at any
time prior to the Expiration Date. See "The Offer--Withdrawal Rights."
Will I Have to Pay Taxes if the Fund Purchases My MMP Shares in the Offer?
o Generally, your sale of MMP Shares pursuant to the Offer will be a
taxable transaction for federal income tax purposes and may also be a
taxable transaction under applicable state, local and foreign tax laws.
For federal income tax purposes, the sale of MMP Shares for cash will
be treated either as (1) a sale or exchange of MMP Shares, or (2) a
distribution with respect to your MMP Shares, potentially taxable as a
dividend. See "The Offer--Material Tax Considerations."
You are urged to consult with your own tax advisor to determine the tax
consequences of participating in the Offer.
What Is the Purpose of the Offer?
o The Fund issued the MMP Shares for purposes of investment leverage to
augment the amount of investment capital available for use in the
pursuit of its investment objectives. Through the use of leverage, the
Fund, similar to other closed-end funds, sought to enhance the
distributions and investment return available over time to the holders
of its common shares by earning a rate of portfolio return (which
includes the return related to investments made with the proceeds from
leverage) that exceeds the leverage costs, typically over the long
term.
Under market conditions as they existed prior to February 2008,
dividend rates on the MMP Shares for each rate period were set at the
market clearing rate determined through an auction process maintained
and administered by unaffiliated broker-dealers that brought together
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xxxxxxx, who sought to buy MMP Shares, and holders of MMP Shares, who
sought to sell their MMP Shares. The terms of the MMP Shares generally
provide that, if an auction fails to establish a market clearing rate
(because of an imbalance of sell orders over bids), the dividend
payment rate over the next dividend period is set at a specified
maximum applicable rate (the "Maximum Rate") and holders will continue
to hold their MMP Shares. As a result, in a failed auction, holders of
MMP Shares who desire to sell their MMP Shares are unable to do so. A
failed auction is not a default under the terms of the MMP Shares. In
the case of a failed auction, the Fund continues to pay dividends, but
at the specified Maximum Rate rather than at a market clearing rate.
Prior to February 2008, the Maximum Rate had never been triggered.
Consistent with patterns in the broader market for auction rate
securities, beginning in February 2008, each auction of the MMP Shares
has failed to establish a market clearing rate, the Maximum Rate has
been triggered and holders attempting to sell their MMP Shares through
such auctions have been unsuccessful.
The auction markets for auction rate securities like the MMP Shares are
not currently functioning normally and the Fund believes that such
auction markets are unlikely to return to normalcy. The Fund also
believes that no established secondary market for auction rate
securities exists today.
On April 9, 2009, the Fund was notified of a proposed nomination of two
individuals for election to the Board of Trustees (the "Board") at the
2009 annual meeting of shareholders of the Fund by individuals
representing approximately 88% of the MMP Shares outstanding. At the
request of such holders and as part of the Board's ongoing review of
available options to provide liquidity to the holders of the MMP
Shares, on June 15, 2009 the Fund entered into an agreement with such
holders of MMP Shares pursuant to which the Fund agreed to commence the
Offer and such holders of MMP Shares agreed to tender all of their MMP
Shares in accordance with the Offer and, upon consummation of the
Offer, withdraw the April 9, 2009 nomination letter. See "The Offer-
Purpose of the Offer; Certain Agreements Regarding the MMP Shares."
Please bear in mind that neither the Fund nor the Board has made any
recommendation as to whether or not you should tender your MMP Shares.
Holders of the MMP Shares are urged to consult their own investment and
tax advisors and make their own decisions whether to tender any MMP
Shares and, if so, how many MMP Shares to tender.
What Are the Most Significant Conditions to the Offer?
o The Offer is conditioned upon the Fund obtaining funds under its
existing credit facility and certain other conditions. The Offer is not
conditioned upon any minimum number of MMP Shares being tendered. See
"The Offer--Conditions to the Offer."
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If I Decide Not to Tender My MMP Shares in the Offer, How Will the Offer Affect
My MMP Shares?
o If you decide not to tender your MMP Shares, you will still own the
same number of MMP Shares and the terms of the MMP Shares will remain
the same. The MMP Shares are not listed on any securities exchange and
there is no established trading market for the MMP Shares. The MMP
Shares are auction rate securities and since February 2008 the periodic
auctions for the MMP Shares have failed. As a result, and because there
is no established trading market for the MMP Shares, holders desiring
to sell their MMP Shares may be unable to do so or may be forced to
sell at a substantial discount to the amount of the liquidation
preference of MMP Shares. If you do not tender your MMP Shares, the
Fund cannot assure you that you will be able to sell your MMP Shares in
the future and you may be forced to hold the MMP Shares indefinitely or
you may be required to sell your MMP Shares at a significant discount
to their liquidation preference of $25,000 per share. See "The
Offer--Certain Effects of the Offer."
Can the Offer Be Extended and under What Circumstances?
o The Offer may be extended for any period to the extent required or
permitted by law or by any rule, regulation, interpretation or position
of the Securities and Exchange Commission or its staff applicable to
the Offer, and after the initially scheduled expiration date of the
Offer if, upon any expiration of the Offer, any condition to the Offer
is not satisfied and there is a reasonable basis to believe that such
condition could be satisfied. See "The Offer--Extension of Tender
Period; Termination; Amendment."
How Will I Be Notified if the Offer is Extended?
o If the Fund decides to extend the Offer, the Fund will inform the
Depositary of that fact and will make a public announcement of the
extension, not later than 9:00 a.m., Eastern time, on the business day
after the day on which the Offer was scheduled to expire. See "The
Offer--Extension of Tender Period; Termination; Amendment."
Who Can I Talk to if I Have Questions about the Offer?
o You can call The Xxxxxx Group, Inc., the information agent for the
Offer (the "Information Agent"), at (000) 000-0000.
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To the MMP Shareholders (as defined below):
INTRODUCTION
First Trust/Four Corners Senior Floating Rate Income Fund, a
Massachusetts business trust (the "Fund"), hereby offers to purchase for cash up
to 100% of its 880 outstanding Money Market Cumulative Preferred (MMP(R))
Shares, with a liquidation preference of $25,000 and a par value of $0.01 per
share (the "MMP Shares"), upon the terms and subject to the conditions set forth
in this Offer to Purchase and the accompanying Letter of Transmittal (which
together, as amended, supplemented or otherwise modified from time to time,
constitute the "Offer"). The price to be paid for the MMP Shares is an amount
per share, net to the seller in cash, equal to 95% of the liquidation preference
of $25,000 per share (or $23,750 per share), plus any unpaid dividends accrued
through the Expiration Date (the "Per Share Purchase Amount").
The Offer is being extended to all holders of MMP Shares
("Shareholders" or "MMP Shareholders") of the Fund and is conditioned upon
obtaining the financing under the Fund's existing credit facility and certain
other conditions. The Offer is not conditioned upon any minimum number of MMP
Shares being tendered. See "The Offer--Conditions to the Offer."
Neither the Fund nor its Board of Trustees (the "Board") is making any
recommendation to any Shareholder whether to tender or refrain from tendering
MMP Shares in the Offer. Each Shareholder is urged to read and evaluate the
Offer carefully and to consult with their own tax and financial advisors as to
whether to participate in the Offer. No person has been authorized to give any
information or to make any representations in connection with the Offer other
than the materials enclosed herewith and the statements specifically set forth
in such materials, and, if given or made, such information or representations
may not be relied upon as having been authorized by the Fund or the Board.
You will not be obligated to pay brokerage fees, commissions or, except
as set forth in "The Offer--Terms of the Offer; Expiration Date," stock transfer
taxes on the sale of MMP Shares pursuant to the Offer. However, if you own your
MMP Shares through a broker or other nominee, and your broker tenders your MMP
Shares on your behalf, your broker or nominee may charge you a fee for doing so.
You should consult your broker or nominee to determine whether any charges will
apply. The Fund will pay all charges and expenses of Deutsche Bank Trust Company
Americas (the "Depositary") and The Xxxxxx Group, Inc. (the "Information Agent")
incurred in connection with the Offer. See "The Offer--Fees and Expenses." You
may be subject to federal income tax on the receipt of cash for MMP Shares
purchased by the Fund pursuant to the Offer. In addition, if you fail to
complete, sign and return to the Depositary the Substitute IRS Form W-9 that is
included with the Letter of Transmittal, you may be subject to required backup
federal income tax withholding of 28% of the gross proceeds payable to you
pursuant to the Offer, and certain non-U.S. Shareholders may be subject to a 30%
income tax withholding. See "The Offer--Material Tax Considerations."
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION, AND YOU SHOULD CAREFULLY READ BOTH IN THEIR ENTIRETY
BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER.
If you do not wish to tender your MMP Shares, you need not take any
action.
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THE OFFER
1. Terms of the Offer; Expiration Date
Upon the terms and subject to the conditions set forth in the Offer,
the Fund will accept for payment and pay cash for up to 100% of the Fund's 880
MMP Shares outstanding. The Fund reserves the right to extend the Offer to a
later Expiration Date (as defined below). The price to be paid for the MMP
Shares is an amount per share, net to the seller in cash, equal to 95% of the
liquidation preference of $25,000 per share (or $23,750 per share), plus any
unpaid dividends accrued to the Expiration Date. Shareholders tendering MMP
Shares shall be entitled to receive all dividends accrued on or before the
Expiration Date, but not yet paid on MMP Shares tendered pursuant to the Offer.
Under no circumstances will interest be paid on the tender price for tendered
MMP Shares, regardless of any extension of or amendment to the Offer or any
delay in paying for such MMP Shares.
The Fund will, upon the terms and conditions of the Offer, purchase all
MMP Shares validly tendered and not withdrawn on the Expiration Date (as defined
below). The Fund may determine not to purchase any MMP Shares because one or
more conditions described in the section "The Offer--Conditions to the Offer" of
this Offer are not met.
"Expiration Date" means 5:00 P.M., Eastern time, on Tuesday, July 14,
2009, unless the Fund extends the period of time for which the Offer is open, in
which event "Expiration Date" means the latest time and date at which the Offer,
as so extended, shall expire.
Except as described herein, withdrawal rights expire on the Expiration
Date. The Fund does not contemplate extending the Offer.
The Offer is being made to all MMP Shareholders and is subject to
obtaining the financing under the Fund's existing credit facility and certain
other conditions. The Offer is not subject to any minimum number of MMP Shares
being tendered in the Offer.
See "The Offer--Conditions to the Offer."
The Fund expressly 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 notice of such extension to the Depositary. Any such extension
will also be publicly announced by press release issued no later than 9:00 a.m.,
Eastern time, on the next business day after the then-scheduled Expiration Date.
The Fund cannot assure you, however, that the Fund will exercise its right to
extend the Offer. During any extension, all MMP Shares previously tendered and
not withdrawn will remain subject to the Offer, subject to the right of a
tendering MMP Shareholder to withdraw his or her MMP Shares.
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If the Fund makes a material change in 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) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). During the extension, all MMP 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 MMP Shares.
Subject to the terms and conditions of the Offer, the Fund will pay the
consideration offered or return the tendered securities promptly after the
termination or withdrawal of the Offer. Any extension, delay or termination will
be followed as promptly as practicable by public announcement thereof, such
announcement, in the case of an extension, to be issued no later than 9:00 a.m.,
Eastern time, on the next business day after the then-scheduled Expiration Date.
Tendering MMP Shareholders will not be obligated to pay transfer taxes
on the purchase of MMP Shares by the Fund, except as set forth below. If payment
of the purchase price is to be made to, or MMP Shares not tendered or not
purchased are to be returned in the name of, any person other than the
registered holder(s), or if a transfer tax is imposed for any reason other than
the sale or transfer of MMP Shares to the Fund pursuant to the Offer, then the
amount of any stock or share transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) will be deducted from the purchase
price unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted.
There are 880 MMP Shares outstanding.
The Fund has been advised that no Trustees or officers of the Fund are
holders of MMP Shares and therefore no Trustee or officer will tender any MMP
Shares pursuant to the Offer. Beneficial ownership of the Fund's common shares
by the Trustees and officers of the Fund is described below. See "The
Offer--Interest of Trustees and Executive Officers."
When considering whether to tender their MMP Shares, Shareholders
should be aware that the payment received pursuant to this Offer will be less
than the amount that Shareholders would be entitled to receive upon a redemption
of such MMP Shares under the terms of the MMP Shares or upon a liquidation of
the Fund.
2. Extension of Tender Period; Termination; Amendment
The Fund expressly reserves the right, in its sole discretion, 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 Fund does not expect the Per Share
Purchase Amount to change. During any such extension, all MMP Shares previously
tendered and not purchased or withdrawn will remain subject to this Offer to
Purchase. 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 MMP Shares or, subject to applicable law, postpone
payment for MMP Shares upon the occurrence of any of the conditions specified in
the section "The Offer--Conditions to the Offer" of this Offer to Purchase; 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. Eastern time on the
next business day after the previously scheduled Expiration Date and will
disclose the approximate number of MMP Shares tendered as of that date. Without
limiting the manner in which the Fund may choose to make a public announcement
-8-
of any extension, termination or amendment, except as provided by applicable
law, 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 MMP Shares, or the Fund decreases the number of MMP 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.
3. Acceptance for Payment and Payment
Upon the terms and subject to the conditions of the Offer, the Fund
will accept for payment, and will pay cash for, MMP Shares validly tendered on
or before the Expiration Date, and not properly withdrawn in accordance with the
section "The Offer--Withdrawal Rights" of this Offer to Purchase, promptly after
the Expiration Date of the Offer. In addition, the Fund reserves the right,
subject to compliance with Rule 14e-1(c) under the Exchange Act, to delay the
acceptance for payment or payment for MMP Shares pending receipt of any
regulatory or governmental approvals to the Offer as described under the caption
"The Offer--Plans and Proposals of the Fund; Regulatory Approvals." For a
description of the Fund's right to terminate the Offer and not accept for
payment or pay for MMP Shares or to delay acceptance for payment or payment for
MMP Shares, see "The Offer--Extension of Tender Period; Termination; Amendment."
For purposes of the Offer, the Fund shall be deemed to have accepted
for payment tendered MMP Shares when, as and if the Fund gives oral or written
notice of its acceptance to the Depositary. The Fund will pay for MMP Shares
accepted for payment pursuant to the Offer by depositing the purchase price with
the Depositary. The Depositary will act as your agent for the purpose of
receiving payments from the Fund and transmitting such payments to you. In all
cases, payment for MMP Shares accepted for payment pursuant to the Offer will be
made only after timely receipt by the Depositary of a confirmation of a
book-entry transfer of such MMP Shares into the Depositary's account at the
Book-Entry Transfer Facility (as defined in "The Offer--Procedure for Tendering
MMP Shares"), a properly completed and duly executed Letter of Transmittal and
any other required documents. Accordingly, payment may be made to tendering
Shareholders at different times if delivery of the MMP Shares and other required
documents occurs at different times. For a description of the procedure for
tendering MMP Shares pursuant to the Offer, see "The Offer--Procedure for
Tendering MMP Shares." MMP Shares that have been tendered and accepted for
payment by the Fund will constitute authorized but unissued MMP Shares.
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Under no circumstances will the Fund pay interest on the consideration
paid for MMP Shares pursuant to the Offer, regardless of any delay in making
such payment. If the Fund increases the consideration to be paid for MMP Shares
pursuant to the Offer, the Fund will pay such increased consideration for all
MMP Shares purchased pursuant to the Offer.
If any tendered MMP Shares are not purchased pursuant to the Offer for
any reason, or if more MMP Shares are submitted than are tendered, such
unpurchased or untendered MMP Shares will be returned via credit to an account
maintained at the Book-Entry Transfer Facility (as defined below), without
expense to you or to other persons at your discretion, as promptly as
practicable following the expiration or termination of the Offer.
If the Fund is delayed in its acceptance for payment of, or in its
payment for, MMP Shares, or is unable to accept for payment or pay for MMP
Shares pursuant to the Offer for any reason, then, without prejudice to the
Fund's rights under the Offer, the Depositary may, on behalf of the Fund, retain
tendered MMP Shares, and such MMP Shares may not be withdrawn, unless and except
to the extent tendering Shareholders are entitled to withdrawal rights as
described in the section "The Offer--Withdrawal Rights" of this Offer to
Purchase.
The price to be paid for the MMP Shares is an amount per share, net to
the seller in cash, equal to 95% of the liquidation preference of $25,000 per
share (or $23,750 per share), plus unpaid dividends accrued through the
Expiration Date.
If you own your MMP Shares through a broker or other nominee, and your
broker or nominee tenders your MMP Shares on your behalf, your broker or nominee
may charge you a fee for doing so. You should consult your broker or nominee to
determine whether any charges will apply.
4. Procedure for Tendering MMP Shares
To tender MMP Shares pursuant to the Offer, either (i) the Depositary
must receive at one of its addresses set forth on the back cover of the Offer
(a) a properly completed and duly executed Letter of Transmittal and any other
documents required by the Letter of Transmittal and (b) for MMP Shares held at
The Depository Trust Company ("DTC"), delivery of such MMP Shares pursuant to
the procedures for book-entry transfer described below (and a confirmation of
such delivery including an Agent's Message (as defined below) if the tendering
Shareholder has not delivered a Letter of Transmittal), in each case by the
Expiration Date, or (ii) the guaranteed delivery procedure described below must
be complied with.
Shareholders having MMP 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 MMP
Shares.
If the Letter of Transmittal or any stock or share 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.
-10-
Letters of Transmittal must be sent to the Depositary; they should not
be sent or delivered to the Fund, the Information Agent or the Book-Entry
Transfer Facility (as defined below). Any documents delivered to the Fund, the
Information Agent or the Book-Entry Transfer Facility will not be forwarded to
the Depositary and, therefore, will not be deemed to have been properly
tendered.
Book-Entry Delivery. The Depositary has established an account with
respect to the MMP Shares at DTC (the "Book-Entry Transfer Facility") for
purposes of the Offer, and any financial institution that is a participant in
the system of the Book-Entry Transfer Facility may make delivery of MMP Shares
by causing the Book-Entry Transfer Facility to transfer such MMP Shares into the
Depositary's account in accordance with the procedures of the Book-Entry
Transfer Facility. However, although delivery of MMP Shares may be effected
through book-entry transfer, the Letter of Transmittal properly completed and
duly executed together with any required signature guarantees or an Agent's
Message and any other required documents must, in any case, be received by the
Depositary at one of its addresses set forth on the back cover of the Offer by
the Expiration Date, or the guaranteed delivery procedure described below must
be complied with. Delivery of the Letter of Transmittal and any other required
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Depositary. "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
book-entry confirmation which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the MMP Shares that are the subject of such
book-entry confirmation which such participant has received, and agrees to be
bound by, the terms of the Letter of Transmittal and that the Fund may enforce
such agreement against such participant.
Signature Guarantees. Except as otherwise provided below, all
signatures on a Letter of Transmittal must be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a member of a recognized Medallion Program approved by The
Securities Transfer Association Inc., including the Securities Transfer Agents
Medallion Program (STAMP) (each, an "Eligible Institution"). Signatures on a
Letter of Transmittal need not be guaranteed if (i) the Letter of Transmittal is
signed by the registered MMP Shareholder(s) (including, for the purposes of the
Offer, any participant in the DTC book-entry transfer facility whose name
appears on DTC's security position listing as the owner of the MMP Shares) of
the MMP Shares tendered pursuant to the Offer, unless such MMP Shareholder(s)
has completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" in the Letter of Transmittal or (ii)
such MMP Shares are tendered for the account of an Eligible Institution.
Guaranteed Delivery. If you wish to tender MMP Shares pursuant to the
Offer and cannot deliver such MMP Shares and all other required documents to the
Depositary by the Expiration Date, or cannot complete the procedure for delivery
by book-entry transfer on a timely basis, you may nevertheless tender such MMP
Shares if all of the following conditions are met:
(i) for MMP Shares held in street name, such tender is made
by or through an Eligible Institution;
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(ii) a properly completed and duly executed Notice of
Guaranteed Delivery in the form provided by the Fund is received by the
Depositary (as provided below) by the Expiration Date; and
(iii) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature
guarantee or an Agent's Message and any other documents required by the
Letter of Transmittal and, for MMP Shares held in street name,
confirmation of a book-entry transfer of such MMP Shares into the
Depositary's account at the Book-Entry Transfer Facility, are received
by the Depositary within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail to
the Depositary and must include a guarantee by an Eligible Institution in the
form set forth in such Notice. The method of delivery of MMP Shares and all
other required documents, including through the Book-Entry Transfer Facility, is
at your option and risk, and the delivery will be deemed made only when actually
received by the Depositary. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. In all cases, sufficient
time should be allowed to ensure timely delivery.
Back-up Withholding. Under the federal income tax law, the Depositary
will be required to withhold 28% of the amount of any payments made to
individuals and certain non-corporate Shareholders pursuant to the Offer. In
order to avoid such backup withholding, you must provide the Depositary with
your correct taxpayer identification number and certify that you are not subject
to backup withholding by completing the Substitute IRS Form W-9 included in the
Letter of Transmittal. If you are a non-resident alien or foreign entity not
subject to backup withholding, you must give the Depositary a completed Form
W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax
Withholding) or Form W-8IMY (Certificate of Foreign Intermediary, Foreign
Partnership or Certain U.S. Branches For United States Tax Withholding) prior to
receipt of any payment.
Validity. The Fund will determine, in its sole discretion, all
questions as to the form of documents and the validity, eligibility (including
time of receipt) and acceptance for payment of any tender of MMP Shares, and its
determination shall be final and binding. The Fund reserves the absolute right
to reject any or all tenders of MMP Shares that the Fund determines not to be in
proper form or the acceptance for payment of or payment for which may, in the
opinion of its counsel, be unlawful. The Fund also reserves the absolute right
to waive any defect or irregularity in any tender of MMP Shares. The Fund's
interpretation of the terms and conditions of the Offer will be final and
binding. Neither the Fund, the Depositary, the Information Agent nor any other
person will be under any duty to give notification of any defect or irregularity
in tenders or waiver of any such defect or irregularity or incur any liability
for failure to give any such notification.
The tender of MMP Shares pursuant to any one of the procedures
described above will constitute your acceptance of the Offer, as well as your
representation and warranty that (i) you own the MMP Shares being tendered
within the meaning of Rule 14e-4 promulgated under the Exchange Act, (ii) the
tender of such MMP Shares complies with Rule 14e-4, and (iii) you have the full
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power and authority to tender, sell, assign and transfer the MMP Shares
tendered, as specified in the Letter of Transmittal. The Fund's acceptance for
payment of MMP Shares tendered by you pursuant to the Offer will constitute a
binding agreement between the Fund and you with respect to such MMP Shares, upon
the terms and subject to the conditions of the Offer.
By submitting the Letter of Transmittal subject to, and effective upon,
acceptance for payment of the MMP Shares tendered in accordance with the terms
and subject to the conditions of the Offer, in consideration of the acceptance
for payment of such MMP 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 MMP
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 MMP 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 MMP 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)
transfer ownership of such MMP Shares (and any such other dividends,
distributions, other shares or securities or rights), together 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 MMP 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 MMP 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 MMP 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 MMP Shares
(and any and all dividends, distributions, other shares or other securities or
rights declared or issuable in respect of such MMP Shares after the Expiration
Date); (b) when and to the extent the Fund accepts the MMP 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 MMP
Shares (and any and all dividends, distributions, other shares or securities or
rights declared or issuable in respect of such MMP 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.
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5. Withdrawal Rights
You may withdraw tenders of MMP Shares made pursuant to the Offer at
any time prior to the Expiration Date. Thereafter, such tenders are irrevocable,
except that they may be withdrawn after August 11, 2009 unless such MMP Shares
are accepted for payment as provided in the Offer. If the Fund extends the
period of time during which the Offer is open or is delayed in accepting for
payment or paying for MMP Shares pursuant to the Offer for any reason, then,
without prejudice to its rights under the Offer, the Depositary may, on its
behalf, retain all MMP Shares tendered, and such MMP Shares may not be withdrawn
except as otherwise provided in this section.
To withdraw tendered MMP Shares, a written transmission of a notice of
withdrawal (a form of which can be provided upon request from the Information
Agent) with respect to the MMP Shares must be timely received by the Depositary
at one of its addresses set forth on the back cover of the Offer, and the notice
of withdrawal must specify the name of the person who tendered the MMP Shares to
be withdrawn and the number of MMP Shares to be withdrawn and the name of the
registered MMP Shareholder, if different from that of the person who tendered
such MMP Shares. If the MMP Shares to be withdrawn have been delivered to the
Depositary, a signed notice of withdrawal with (except in the case of MMP Shares
tendered by an Eligible Institution) signatures guaranteed by an Eligible
Institution must be submitted prior to the release of such MMP Shares. In
addition, such notice must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn MMP Shares.
Withdrawals may not be rescinded, and MMP Shares withdrawn will thereafter be
deemed not validly tendered for purposes of the Offer. However, withdrawn MMP
Shares may be re-tendered by again following one of the procedures described in
"The Offer--Procedures for Tendering Shares" at any time prior to the Expiration
Date.
The Fund will determine, in its sole discretion, all questions as to
the form and validity (including time of receipt) of any notice of withdrawal,
and the Fund's determination shall be final and binding. Neither the Fund, the
Depositary, the Information Agent nor any other person will be under any duty to
give notification of any defect or irregularity in any notice of withdrawal or
waiver of any such defect or irregularity or incur any liability for failure to
give any such notification.
The method of delivery of any documents related to a withdrawal is at
the option and risk of the withdrawing Shareholder. Any documents related to a
withdrawal will be deemed delivered only when actually received by the
Depositary. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery.
6. Material Tax Considerations
The following is a discussion of material U.S. federal income tax
consequences of the Offer to MMP Shareholders whose MMP Shares are tendered and
accepted for payment pursuant to the Offer. The discussion is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Department
regulations, Internal Revenue Service ("IRS") rulings and judicial decisions,
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all as currently in effect and all of which may be changed (possibly with
retroactive effect) by later legislative, judicial or administrative action. The
discussion does not address all aspects of U.S. federal income taxation that may
be relevant to a MMP Shareholder's particular circumstances or to a MMP
Shareholder subject to special treatment under the U.S. federal income tax law.
Examples would be financial institutions, tax-exempt organizations, life
insurance companies, dealers in securities or currencies, Shareholders holding
MMP Shares as part of a conversion transaction, as part of a hedge or hedging
transaction or as a position in a straddle for tax purposes and certain U.S.
expatriates. In addition, the discussion below does not consider the effect of
foreign, state, local or other tax laws that may be applicable to particular
holders. The discussion assumes that the MMP Shares tendered are held as
"capital assets" within the meaning of Code section 1221.
MMP Shareholders should consult their own tax advisor as to the
particular U.S. federal income tax consequences to it of participating in the
Offer and the applicability and effect of state, local or foreign tax laws.
The tax treatment of a MMP Shareholder who tenders MMP Shares in the
Offer will depend on whether such MMP Shareholder's receipt of cash for MMP
Shares pursuant to the Offer is treated as a sale or exchange of the MMP Shares
or instead as a distribution with respect to the Fund's shares that are actually
or constructively owned by the MMP Shareholder.
U.S. Holders. As used herein, the term "U.S. Holder" means any MMP
Shareholder that is, for U.S. federal income tax purposes, (1) a citizen or
resident of the United States, (2) a corporation, partnership or other entity
created or organized in or under the laws of the United States, (3) any trust
the income of which is subject to U.S. federal income taxation regardless of its
source or (4) an estate the administration of which is subject to the primary
supervision of a U.S. court and for which one or more U.S. persons can make all
substantial decisions.
Characterization of the Dividend Distribution. A portion of the payment
to the MMP Shareholders may be designated as a dividend by the Fund. It is
likely that any such designated payment will be treated as a dividend for U.S.
federal income tax purposes to the extent of the earnings and profits of the
Fund.
Characterization of the Sale of MMP Shares Pursuant to the Offer. The
sale of MMP Shares by a MMP Shareholder pursuant to the Offer will be treated as
a "sale or exchange" for U.S. federal income tax purposes only if the receipt of
cash upon such sale:
1. is "substantially disproportionate" with respect to the
MMP Shareholder,
2. results in a "complete redemption" of the MMP Shares
owned by the MMP Shareholder, or
3. is "not essentially equivalent to a dividend" with
respect to the MMP Shareholder.
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In determining whether any of the above three tests is satisfied, a MMP
Shareholder must take into account not only stock that it actually owns, but
also stock that it constructively owns within the meaning of Code section 318.
Further, contemporaneous dispositions or acquisitions of the Fund's stock by a
holder or related individuals or entities may be deemed to be part of a single
integrated transaction that will be taken into account in determining whether
any of the three tests has been satisfied.
1. Substantially Disproportionate.
The purchase of MMP Shares pursuant to the Offer by the Fund will be
substantially disproportionate with respect to a holder if the percentage of the
Fund's then outstanding stock actually and constructively owned by the holder
immediately after the purchase is less than 80% of the percentage of the Fund's
stock owned by the holder determined immediately before the purchase. In no
event will a purchase of MMP Shares be substantially disproportionate with
respect to a holder that owns 50% or more of the Fund's combined voting power
after the conclusion of the Offer.
2. Complete Redemption.
The purchase of MMP Shares pursuant to the Offer will result in a
complete redemption of a holder's equity interest if (i) all of the Fund's stock
actually owned by the holder is sold pursuant to the Offer, (ii) all of the
Fund's stock constructively owned by the holder, is sold pursuant to the Offer
or, with respect to stock owned by certain related individuals, the holder is
entitled to and effectively waives, in accordance with Code section 302(c),
attribution of the Fund's stock that otherwise would be considered as
constructively owned by the holder and (iii) after the MMP Shares are sold the
holder does not actually or constructively (taking into account the effect of a
waiver of constructive ownership as provided in clause (ii)) own any other class
of the Fund's stock. Holders wishing to satisfy the complete redemption test
through waiver of the constructive ownership rules should consult their tax
advisors.
3. Not Essentially Equivalent to a Dividend.
The purchase of MMP Shares pursuant to the Offer will be treated as not
essentially equivalent to a dividend if the reduction in the holder's
proportionate interest in the Fund's stock as a result of the Fund's purchase of
MMP Shares constitutes a "meaningful reduction" of the holder's interest.
Whether the receipt of cash by a holder who sells MMP Shares pursuant to the
Offer will result in such a meaningful reduction will depend upon the holder's
particular facts and circumstances. Generally, even a small reduction in the
percentage ownership interest of a holder whose relative stock interest in a
publicly held entity (such as the Fund) is minimal and who exercises no control
over the entity's business should constitute a meaningful reduction. Holders
should consult their own tax advisors regarding the application of this test to
their particular circumstances.
Assuming any of the above three tests is satisfied with respect to a
sale of MMP Shares by a U.S. Holder pursuant to the Offer, the U.S. Holder will
recognize gain or loss equal to the difference between the amount of cash it
receives and its tax basis in the MMP Shares sold. The gain or loss will be
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capital gain or loss and will be long-term capital gain or loss if the MMP
Shares sold were held for more than one year. Capital loss can generally only be
used to offset capital gain. Under current law, long-term capital gain of a U.S.
individual is subject to a maximum 15% U.S. federal income tax rate.
If none of the three tests is satisfied with respect to a sale of MMP
Shares by a U.S. Holder pursuant to the Offer, the U.S. Holder will be treated
as having received a distribution from the Fund with respect to the U.S.
Holder's stock in an amount equal to the cash it receives pursuant to the Offer.
The distribution, in form, will likely be treated as a taxable ordinary income
dividend, although it is possible that the distribution could be treated as a
capital gain dividend and/or a return of capital distribution, depending, in
part, on the amount of the Fund's current or accumulated earnings and profits,
as determined under U.S. federal income tax principles. Current law imposes a
maximum 15% U.S. federal income tax rate with respect to "qualified dividend
income" of U.S. individuals. However, the Fund's dividends will only be treated
as qualified dividend income to the extent of dividends that the Fund receives
on stock of most U.S. and certain foreign corporations, and only to the extent
that the Fund and the U.S. Holder satisfy certain holding period and other
restrictions. Dividends paid by real estate investment trusts ("REITs"), and
dividends paid by a regulated investment company that are attributable to
dividends received from REITs, generally are not "qualified dividend income."
Thus, all or a portion of any amount that a U.S. Holder receives from the Fund
in connection with the Offer that is treated as a dividend may not constitute
qualified dividend income eligible for the reduced 15% U.S. federal income tax
rate. Any portion of a distribution that would be classified as a dividend but
for the fact that it exceeds the Fund's current or accumulated earnings and
profits will reduce the U.S. Holder's tax basis in its MMP Shares until that
basis is brought to zero and then as gain from the sale or exchange of such MMP
Shares. Any basis of a U.S. Holder in MMP Shares surrendered pursuant to the
Offer that is not reduced as described in the preceding sentence generally will
be added to its basis in its retained shares of the Fund's stock.
Foreign Holders. As used herein, the term "Foreign Holder" means any
holder other than a U.S. Holder. The following discussion does not address the
U.S. federal income tax consequences to Foreign Holders that beneficially held
more than 5 percent of the Fund's stock at any time. Any such Foreign Holder
should consult their own tax advisor regarding the U.S. federal income tax
consequences of the Offer. Except as described below and subject to the
discussion concerning backup withholding, a Foreign Holder will not be subject
to U.S. federal income tax on gains realized on the sale of MMP Shares pursuant
to the Offer unless (i) the gain is effectively connected with the foreign
Holder's conduct of trade or business within the United States and, where a tax
treaty applies, is attributable to a U.S. permanent establishment of the Foreign
Holder or (ii) in the case of an individual Foreign Holder, he or she is present
in the United States for 183 days or more during the taxable year of the sale
and certain other conditions are present.
To the extent a portion of the sales proceeds paid pursuant to the
Offer is treated as a dividend, it will be subject to a 30% U.S. withholding
tax, which the Fund will withhold, unless the tax is reduced by an applicable
income tax treaty between the United States and the Foreign Holder's country of
residence and the Foreign Holder submits proper evidence on Form W-8BEN, or
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other applicable forms, that such Foreign Holder qualifies for benefits under
such treaty. In lieu of the 30% withholding tax, a Foreign Holder will be
subject to U.S. federal income tax on the portion, if any, of a payment that is
treated as a dividend and that is effectively connected with the Foreign
Holder's conduct of a trade or business within the United States.
Foreign Holders are urged to consult their own tax advisors regarding
the application of the U.S. federal income tax law.
Backup Withholding. Payments to U.S. Holders pursuant to the Offer
generally will be subject to information reporting requirements. To avoid the
imposition of backup withholding (see the next paragraph), a U.S. Holder should
complete the Substitute IRS Form W-9 provided in the Letter of Transmittal and
either (i) provide its correct taxpayer identification number ("TIN"), which, in
the case of an individual U.S. Holder, is his or her social security number, and
certain other information, or (ii) establish a basis for an exemption from
backup withholding. Certain holders (including, among others, corporations,
individual retirement accounts and certain foreign individuals) are exempt from
these backup withholding and information reporting requirements.
If the Fund is not provided with the correct TIN or an adequate basis
for exemption, a U.S. Holder may be subject to backup withholding at a rate of
28% imposed on the gross proceeds received in the Offer (regardless of the
amount of gain, or loss, the holder may realize from the proceeds). If backup
withholding results in an overpayment of taxes, a refund or credit may be
obtained only directly from the IRS, provided that the required information is
provided to the IRS.
This tax discussion is included for general information. The tax
consequences of the receipt of cash pursuant to the Offer may vary depending on,
among other things, the particular circumstances of the holder. No information
is provided as to the state, local or foreign tax consequences of the Offer.
Holders are urged to consult their own tax advisors to determine the particular
federal, state, local and foreign tax consequences to them of tendering MMP
Shares under the Offer and the effect of the constructive ownership rules
mentioned above.
7. Price Range of MMP Shares; Dividends
The Fund's MMP Shares are not listed and do not trade on any securities
exchange. Therefore, no trading market for the MMP Shares has been established
and no price history is available.
The Fund issued the MMP Shares for purposes of investment leverage to
augment the amount of investment capital available for use in the pursuit of its
investment objectives. Through the use of leverage, the Fund, similar to other
closed-end funds, sought to enhance the distributions and investment return
available over time to the holders of its common shares by earning a rate of
portfolio return (which includes the return related to investments made with the
proceeds from leverage) that exceeds the leverage costs, typically over the long
term.
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Under market conditions as they existed prior to February 2008,
dividend rates on the MMP Shares for each rate period (currently the rate period
is 28 days) were set at the market clearing rate determined through an auction
process maintained and administered by unaffiliated broker-dealers that brought
together bidders, who sought to buy MMP Shares, and MMP Shareholders, who sought
to sell their MMP Shares. The auctions functioned in a manner such that MMP
Shareholders desiring to sell MMP Shares in the auction would receive the
liquidation preference per share. The terms of the MMP Shares generally provide
that, if an auction fails to establish a market clearing rate (because of an
imbalance of sell orders over bids), the dividend payment rate over the next
dividend period is set at a specified maximum applicable rate (the "Maximum
Rate"). In a failed auction, MMP Shareholders who desire to sell their MMP
Shares are unable to do so and instead will continue to hold their MMP Shares. A
failed auction is not a default under the terms of the MMP Shares. In the case
of a failed auction, the Fund continues to pay dividends, but at the specified
Maximum Rate rather than at a market clearing rate. The Maximum Rate is
dependent on the credit rating assigned to the MMP Shares and can range from
150% to 275% of a reference rate that may be based on the "AA" Financial
Composite Commercial Paper Rate, the Treasury Index Rate or LIBOR. As of May 20,
2009, the date of the beginning of the most recent rate period, the Maximum Rate
was 0.462%.
Prior to February 2008, the Maximum Rate had never been triggered.
Consistent with patterns in the broader market for auction rate securities,
beginning in February 2008, each auction of the MMP Shares has failed to
establish a market clearing rate, the Maximum Rate has been triggered and MMP
Shareholders attempting to sell their MMP Shares through such auctions have been
unsuccessful.
The auction markets for auction rate securities like the MMP Shares are
not currently functioning normally, and the Fund believes that such auction
markets are unlikely to return to normalcy. The Fund also believes that no
established secondary market for auction rate securities such as the MMP Shares
exists today.
The remainder of this page is intentionally left blank.
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Dividends have been paid on the MMP Shares generally every 28 days
since their issuance in an amount per share equal to a rate per-annum set at an
auction, or in the event of a failed auction, at the Maximum Rate. The
applicable rate per annum applied to determine the dividend for each dividend
period during the last two years was as follows:
Interest Rate per Annum
Dividend Payment Date for Applicable Dividend Period (%)
--------------------- ----------------------------------
5/20/2009 0.46200
4/22/2009 0.66000
3/25/2009 0.78000
2/25/2009 0.71900
1/28/2009 0.61400
12/31/2008 0.65400
12/03/2008 2.83500
11/05/2008 2.93400
10/08/2008 6.44100
9/10/2008 3.73100
8/13/2008 3.70100
7/16/2008 3.68400
6/18/2008 3.72300
5/21/2008 3.60600
4/23/2008 4.34300
3/26/2008 4.01700
2/27/2008 4.68300
1/30/2008 4.80000
1/02/2008 6.00000
12/05/2007 6.30000
11/07/2007 5.85000
10/10/2007 6.11000
9/12/2007 7.00000
8/15/2007 5.60000
7/18/2007 5.27000
6/20/2007 5.23800
5/23/2007 5.23800
The terms of the Offer provide that Shareholders tendering MMP Shares
are entitled to receive all dividends accrued on the MMP Shares on or before the
Expiration Date, but not yet paid. The amount and frequency of dividends in the
future will be set at an auction according to the terms of the MMP Shares or, if
the auction is a failed auction, at the Maximum Rate described above or as
otherwise provided pursuant to the terms of the MMP Shares.
8. Certain Information Concerning the Fund.
The Fund's principal executive offices are located at 000 Xxxx Xxxxxxx
Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000, telephone: (000) 000-0000.
-20-
Available Information about the Fund. The Fund is a closed-end
investment company, registered under the Investment Company Act of 1940, as
amended (the "1940 Act") and is subject to the informational requirements of the
Exchange Act and in accordance therewith files annual and semi-annual reports,
proxy statements and other information with the Securities and Exchange
Commission ("SEC") relating to its business, financial condition and other
matters. The Fund is required to disclose in such proxy statements certain
information, as of particular dates, concerning the Fund's Trustees and
officers, their remuneration, the principal holders of the Fund's securities and
any material interest of such persons in transactions with the Fund. The Fund
has also filed an Issuer Tender Offer Statement on Schedule TO with the SEC.
Such reports, proxy statements and other information may be inspected at the
public reference facilities maintained by the SEC at 000 X Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000. Copies may be obtained, by mail, upon payment of the
SEC's customary charges, by writing to its principal office at 000 X Xxxxxx,
X.X., Xxxxxxxxxx, X.X. 00000. Such reports and other information are also
available on the SEC's web site (xxxx://xxx.xxx.xxx).
Except as otherwise stated in the Offer, the information concerning the
Fund contained herein has been taken from or is based upon reports and other
documents on file with the SEC or otherwise publicly available.
Agreements Involving the Fund. First Trust Advisors L.P. ("First Trust
Advisors") acts as the investment adviser to the Fund pursuant to an investment
management agreement. Four Corners Capital Management, LLC ("Four Corners") acts
as a sub-adviser to the Fund pursuant to a Sub-Advisory Agreement with First
Trust Advisors and the Fund. The Fund pays advisory fees to First Trust Advisors
and out of its advisory fee, First Trust Advisors pays the sub-advisory fees.
The Fund is a party to the BNS Credit Facility (as defined and
discussed below) The Fund also is a party to certain other service agreements.
Deutsche Bank Trust Company Americas serves as the Fund's transfer agent,
registrar, and dividend paying agent with respect to the MMP Shares and, with
respect to the Offer, as Depositary. The custodian of the assets of the Fund is
PFPC Trust Company. PNC Global Investment Servicing (U.S.) Inc., formerly known
as PFPC Inc., serves as transfer, shareholder services and dividend paying agent
with respect to the common shares of the Fund and also provides certain
administrative and accounting services to the Fund.
9. Source and Amount of Funds
If 100% of the outstanding MMP 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 $20,900,000 plus any unpaid
dividends accrued through the Expiration Date.
The Fund intends to borrow under its existing Credit Agreement, dated
as of May 13, 2008, as amended (the "BNS Credit Facility"), which is included as
Exhibit (b) to the Schedule TO relating to this Offer, with The Bank of Nova
Scotia (the "Bank") and, if necessary, to use cash on hand or the sale of
portfolio securities to pay a portion of the purchase price for MMP Shares
-21-
tendered. Under the BNS Credit Facility, the Bank has agreed to make loans to
the Fund from time to time in an amount not to exceed $35,000,000. Borrowings
under the BNS Credit Facility bear interest at a floating rate based on LIBOR.
The current applicable interest rate under the BNS Credit Facility as of the
date hereof is 2.558%. As of June 9, 2009, $3,100,000 of borrowings were
outstanding under the BNS Credit Facility. The BNS Credit Facility expires on
May 11, 2010. Based on information provided by First Trust Advisors, the Board
believes that the Fund has monies, either through borrowings, as cash or through
the sale of portfolio securities, to purchase the MMP Shares that may be
tendered pursuant to the Offer. However, if, in the judgment of the Board, there
are insufficient funds to pay for tendered MMP Shares, the Fund may terminate
the Offer. See "The Offer--Conditions to the Offer."
The Fund intends to borrow pursuant to the BNS Credit Facility to make
payments under the Offer for tendered MMP Shares. The Fund intends to refinance
such borrowings when the BNS Credit Facility expires. If, at that time, the Fund
cannot refinance the BNS Credit Facility, the Fund will sell portfolio
securities to decrease its leveraged position and repay amounts outstanding
under the BNS Credit Facility.
10. Interest of Trustees and Executive Officers.
The business address of the Trustees ("Trustees") and executive
officers of the Fund is 000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx
00000. As of the date hereof, the Trustees and executive officers of the Fund
did not beneficially own any MMP Shares. However, the following table lists each
Trustee and officer of the Fund and the number of common shares of the Fund
owned as of May 31, 2009:
The remainder of the page is intentionally left blank.
-22-
--------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
--------------------------------------------------------------------------------------------------------------------------
NAME POSITION(S) HELD NUMBER OF COMMON NUMBER OF MMP SHARES
WITH THE FUND SHARES HELD HELD
------------------------------- --------------------------------------- ------------------------ -------------------------
Xxxxx X. Xxxxx* President, Chairman of the Board, 250 0
Chief Executive Officer and Trustee
--------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
--------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx* Trustee 332.75 0
------------------------------- --------------------------------------- ------------------------ -------------------------
Xxxxxx X. Xxxxxx* Trustee 571.031 0
------------------------------- --------------------------------------- ------------------------ -------------------------
Xxxxxx X. Xxxxx* Trustee 0 0
------------------------------- --------------------------------------- ------------------------ -------------------------
Xxxx X. Xxxxxxx* Trustee 253 0
--------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUND
--------------------------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxx* Treasurer, Controller, Chief 0 0
Financial Officer and Chief
Accounting Officer
------------------------------- --------------------------------------- ------------------------ -------------------------
Xxxx X. Xxxxxxx* Assistant Secretary 0 0
------------------------------- --------------------------------------- ------------------------ -------------------------
Xxxxx X. Xxxxx* Assistant Treasurer 0 0
------------------------------- --------------------------------------- ------------------------ -------------------------
Xxxxxxxxxxx X. Xxxxxx* Assistant Vice President 0 0
------------------------------- --------------------------------------- ------------------------ -------------------------
X. Xxxxx Xxxxxxx* Secretary and Chief Compliance 0 0
Officer ("CCO")
------------------------------- --------------------------------------- ------------------------ -------------------------
Xxxxxx X. Xxxxxxxxx* Vice President 0 0
------------------------------- --------------------------------------- ------------------------ -------------------------
Xxxxxx X. Xxxxx* Assistant Vice President 0 0
------------------------------- --------------------------------------- ------------------------ -------------------------
Xxxxxx X. Xxxxx* Assistant Secretary 0 0
------------------------------- --------------------------------------- ------------------------ -------------------------
* The business address of the Interested Trustee and each Independent Trustee
and officer is c/o First Trust Advisors, L.P., 000 Xxxx Xxxxxxx Xxxxx, Xxxxx
000, Xxxxxxx, Xxxxxxxx 00000 and the business telephone number of each is (800)
621-1675.
Based upon the Fund's records and upon information provided to the Fund
by its Trustees and executive officers, neither the Fund nor, to the best of the
Fund's knowledge, any of the Trustees or executive officers of the Fund, has
effected any transactions in the MMP Shares during the sixty business day period
prior to the date hereof.
Except as set forth in this Offer to Purchase or filed as an Exhibit to
the Schedule TO of which this Offer to Purchase is a part, to the best of the
Fund's knowledge, the Fund knows of no agreement, arrangement or understanding,
contingent or otherwise or whether or not legally enforceable, between (a) the
Fund, any of the Fund's executive officers or Trustees, any person controlling
the Fund or any executive officer, trustee or director of any corporation or
other person ultimately in control of the Fund and (b) any person with respect
to any securities of the Fund (including, but not limited to, any agreement,
-23-
arrangement or understanding concerning the transfer or the voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss, or the giving or withholding of
proxies, consents or authorizations).
11. Certain Effects of the Offer.
Purchase Price in the Offer is Less than Liquidation Preference. The
Per Share Purchase Amount reflects a 5% discount to the liquidation preference
of $25,000 per MMP Share. As a result, MMP Shareholders who tender their shares
for purchase by the Fund pursuant to the Offer will realize less than they are
entitled to receive upon a liquidation of the Fund. In addition, in the event
the Fund were to effect a redemption of the MMP Shares pursuant to their terms,
the Fund would be required to pay a redemption price equal to 100% of the
liquidation preference of the MMP Shares to be redeemed (plus accrued
dividends). The Fund may consider in the future, based upon circumstances
existing at such time, what action, if any, to take with respect to any MMP
Shares that remain outstanding after the Offer, including a redemption of such
MMP Shares.
Risk of Fund's Inability to Refinance the BNS Credit Facility. The
leverage represented by the MMP Shares is perpetual in that the MMP Shares have
no fixed repayment date and may remain outstanding indefinitely. In contrast,
the leverage represented by borrowings under the BNS Credit Facility must be
renewed on an annual basis. All borrowings under the BNS Credit Facility must be
repaid on or prior to May 11, 2010, unless the BNS Credit Facility is renewed or
an acceptable means of refinancing the outstanding borrowings under the BNS
Credit Facility is available. If the Fund is unable to renew or refinance such
borrowings, the Fund will be forced to "delever" (i.e., sell assets and use the
proceeds of such sales to repay such borrowings). Such event could have negative
consequences for the Fund, including the Fund selling investments at a loss,
negative tax consequences to the Fund or its shareholders and reducing the
return to common shareholders of the Fund. The recent economic downturn has
resulted in a decrease in the amount of credit available to borrowers such as
the Fund.
Cost of Leverage Could Increase. Historically, the Fund has utilized
the MMP Shares as its primary form of leverage. Until February 2008, the rate
paid on the MMP Shares was determined pursuant to an auction process.
Traditionally, this auction process generally resulted in the Fund paying a cost
of leverage that was often lower, on a relative basis, than other forms of
leverage, including debt financing. As a result of the proposed change in the
form of primary leverage for the Fund, the Fund may incur higher leverage costs
than if the MMP Shares remained outstanding.
The 1940 Act Imposes Different Leverage Tests on Borrowings than on
Preferred Stock. Under the requirements of the 1940 Act, the Fund, immediately
after any borrowings constituting indebtedness, must have an "asset coverage" of
at least 300% (i.e., the indebtedness may not exceed 33-1/3% of the managed
assets after borrowings). With respect to such borrowings, asset coverage means
the ratio which the value of the total assets of the Fund, less all liabilities
and indebtedness not represented by senior securities (as defined in the 1940
Act), bears to the aggregate amount of such borrowings represented by senior
securities issued by the Fund. With respect to leverage consisting of preferred
shares, however, the 1940 Act provides that the Fund is not permitted to issue
-24-
preferred shares unless immediately after such issuance the value of the Fund's
managed assets is at least 200% of the liquidation value of the outstanding
preferred shares (i.e., the liquidation value of outstanding preferred shares
may not exceed 50% of the Fund's managed assets). As a result, the Fund may be
required to utilize less leverage in the future than would otherwise be the
case.
Effect on NAV. To pay the aggregate purchase price of MMP Shares
accepted for payment pursuant to the Offer, the Fund anticipates using
borrowings under the BNS Credit Facility and, if necessary, may also use cash on
hand or may sell portfolio securities to pay a portion of the purchase price for
MMP Shares tendered.
If the Fund is required to sell portfolio securities to raise cash to
help finance the Offer, the Fund will incur 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 amount of assets remaining for the benefit of non-tendering
Shareholders may decline.
Shareholders should note that the Offer is expected to result in
accretion to the NAV of the Fund's common shares following the Offer, due to the
fact that the tender price would represent a 5% discount to the liquidation
preference of the MMP Shares. The price to be paid in the Offer represents a
discount to the amount of the liquidation preference of $25,000 for each of the
MMP Shares, which is the amount a MMP Shareholder would be entitled to receive,
after payment of the Fund's liabilities, in the event of a liquidation of the
Fund (to the extent assets are available). In addition, the price to be paid in
the Offer represents a discount to the amount payable upon a redemption of the
MMP Shares pursuant to their terms.
The Fund may sell portfolio securities during the pendency of the Offer
to raise a small portion of the cash for the purchase of MMP Shares. Thus,
during the pendency of the Offer, and possibly for a short time thereafter, the
Fund may hold a greater than normal percentage of its net assets in cash and
cash equivalents. This cash position may earn a return less than that applicable
to the other assets of the Fund.
The Fund is required by law to pay for tendered MMP Shares it accepts
for payment promptly after the Expiration Date of this Offer. Because the Fund
will not know the number of MMP Shares tendered until the Expiration Date, the
Fund will not know until the Expiration Date the amount of cash required to pay
for such MMP 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 MMP
Shares tendered, it may extend the Offer to allow additional time to raise
sufficient cash.
Lack of Market for MMP Shares. The actual number of MMP Shares
outstanding subsequent to completion of the Offer will depend on the number of
MMP Shares tendered and purchased in the Offer. Any MMP Shares not tendered
pursuant to this Offer will remain outstanding. The MMP Shares are perpetual
preferred shares and will remain issued and outstanding until repurchased or
redeemed by the Fund. Although it has no current plan to do so, if the Fund were
to redeem the MMP Shares in accordance with their terms, it would be required to
pay the full liquidation preference of $25,000 per share plus accrued dividends
-25-
to the date of redemption. As mentioned previously, there have not been
sufficient clearing bids in recent auctions to effect transfers of the MMP
Shares and there can be no guarantee that there will be future liquidity for the
MMP Shares. In making any decision as to whether to effect a redemption of any
MMP Shares remaining outstanding following the consummation of the Offer, the
Fund will take into account the particular facts and circumstances that may then
exist, including its then current financial position and liquidity, the market
for the investments held by the Fund, the dividend rate on the MMP Shares and
such other factors as the Fund deems relevant.
MMP Shares the Fund acquires pursuant to the Offer will be canceled and
returned to the status of authorized but unissued shares and will be available
for the Fund to issue without further action by the shareholders of the Fund
(except as required by applicable law or the rules of the NYSE Amex or any other
securities exchange on which the common shares of the Fund may then be listed)
for purposes including, without limitation, the raising of additional capital
for use in the Fund's business.
Recognition of Gains/Losses. As noted, the Fund may be required to sell
portfolio securities to finance the purchase of MMP Shares tendered 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. 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). 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.
Tax Consequences of Purchase to Shareholders. The Fund's
purchase of tendered MMP Shares pursuant to the Offer will have
tax consequences for tendering Shareholders and may have tax
consequences for non-tendering Shareholders. See "The
Offer--Material Tax Considerations."
12. Purpose of the Offer; Certain Agreements Regarding the MMP Shares.
The Fund issued the MMP Shares for purposes of investment leverage to
augment the amount of investment capital available for use in the pursuit of its
investment objectives. Through the use of leverage, the Fund, similar to other
closed-end funds, sought to enhance the distributions and investment return
available over time to the holders of its common shares by earning a rate of
portfolio return (which includes the return related to investments made with the
proceeds from leverage) that exceeds the leverage costs, typically over the long
term.
-26-
Under market conditions as they existed prior to February 2008,
dividend rates on the MMP Shares for each rate period were set at the market
clearing rate determined through an auction process maintained and administered
by unaffiliated broker-dealers that brought together bidders, who sought to buy
MMP Shares, and holders of MMP Shares, who sought to sell their MMP Shares. The
terms of the MMP Shares generally provide that, if an auction fails to establish
a market clearing rate (because of an imbalance of sell orders over bids), the
dividend payment rate over the next dividend period is set at the "Maximum Rate"
and holders will continue to hold their MMP Shares. As a result, in a failed
auction, holders of MMP Shares who desire to sell their MMP Shares are unable to
do so. A failed auction is not a default under the terms of the MMP Shares. In
the case of a failed auction, the Fund continues to pay dividends, but at the
specified Maximum Rate rather than at a market clearing rate.
Prior to February 2008, the Maximum Rate had never been triggered.
Consistent with patterns in the broader market for auction rate securities,
beginning in February 2008, each auction of the MMP Shares has failed to
establish a market clearing rate, the Maximum Rate has been triggered and
holders attempting to sell their MMP Shares through such auctions have been
unsuccessful.
The auction markets for auction rate securities like the MMP Shares are
not currently functioning normally, and the Fund believes that such auction
markets are unlikely to return to normalcy. The Fund also believes that no
established secondary market for auction rate securities exists today.
On April 9, 2009, the Fund received a letter (the "Nomination Letter")
from Xxxxxx Management, Inc. ("XXX") indicating that it represented beneficial
owners holding 771 MMP Shares (approximately 88% of the MMP Shares outstanding)
and sought to nominate two individuals representing solely the MMP Shareholders
to serve on the Board at the 2009 annual meeting of shareholders. On June 15,
2009, the Fund and XXX entered into a letter agreement pursuant to which the
Fund and XXX agreed that if the Fund commenced a tender offer for 100% of the
MMP Shares at a price equivalent to 95% of the liquidation preference of $25,000
per MMP Share plus any unpaid dividends accrued to the Expiration Date prior to
the commencement of the 2009 Annual Meeting, XXX would tender all MMP Shares
owned or controlled by XXX, and would recommend to other persons who have a
relationship with XXX to tender their MMP Shares, pursuant to the Offer. In
addition, XXX agreed to withdraw the Nomination Letter at the time of the
completion of the payment for MMP Shares pursuant to the Offer. The parties also
agreed to certain mutual releases.
Neither the Fund nor the Board makes any recommendation to any
Shareholder as to whether to tender or refrain from tendering any or all of such
Shareholder's MMP 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 advisors and make their own
decisions whether to tender MMP Shares and, if so, how many MMP Shares to
tender.
-27-
13. Conditions to the Offer
Notwithstanding any other provision of the Offer, and in addition to
(and not in limitation of) the Fund's right to extend and amend the Offer at any
time in its sole discretion, the Fund shall not be required to accept for
repurchase or, subject to the applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act, pay for, and may delay the
acceptance for payment of or payment for any tendered MMP Shares, if, in the
Board's judgment:
(a) the Fund is not able to borrow sufficient funds under the BNS
Credit Facility to purchase MMP Shares tendered pursuant to the Offer;
(b) consummation of the Offer would jeopardize the Fund's status as a
regulated investment company under the Code;
(c) the Fund is not able to liquidate sufficient amounts of portfolio
securities of the Fund for purposes of conducting the Offer in an orderly manner
and consistent with the Fund's investment objectives;
(d) the Offer would result in a failure to comply with the applicable
asset coverage requirements of applicable law, the BNS Credit Facility or any
new senior securities that may be issued and outstanding;
(e) there shall be instituted, pending or threatened before any
governmental entity or court any action, proceeding, application or claim, or
there shall be any judgment, order or injunction sought or any other action
taken by any person or entity, which restrains, prohibits or materially delays
the making or consummation of the Offer, challenges the acquisition by the Fund
of any MMP Shares pursuant to the Offer or the Board's fulfillment of its
fiduciary obligations in connection with the Offer, seeks to obtain any material
amount of damages in connection with the Offer, challenges the validity or
enforceability of the letter agreement with XXX or otherwise directly or
indirectly adversely affects the Offer or the Fund;
(f) there shall have occurred or the completion of the Offer would
result in (i) the delisting of the common shares of the Fund from any national
securities exchange on which such common shares are currently listed; (ii) any
general suspension of trading in or limitation on prices for securities on the
NYSE Amex, The New York Stock Exchange, any other exchange on which the MMP
Shares are traded or any exchange on which portfolio securities held by the Fund
are traded; (iii) any declaration of a banking moratorium or similar action
materially adverse to the Fund by U.S. federal, state or local authorities or
any suspension of payment material to the Fund by banks in the United States or
any other jurisdiction; (iv) any limitation having a material adverse effect on
the Fund or the issuers of its portfolio securities that is imposed by U.S.
federal, state or local authorities, with respect to the extension of credit by
lending institutions; (v) the commencement or escalation of war, armed
hostilities, terrorist action or any other international or national calamity
directly or indirectly involving the United States; or (vi) any other event or
condition which would have a material adverse effect on the Fund or its
shareholders if the Offer were consummated; or
-28-
(g) the Board determines that effecting the Offer would be inconsistent
with applicable legal requirements or would constitute a breach of the Board's
fiduciary duty owed to the Fund or its shareholders.
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 MMP Shares tendered, it will, to the extent necessary,
extend the period of time during which the Offer is open as provided in the
section "The Offer--Extension of Tender Period; Termination; Amendment" of this
Offer to Purchase. 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 the section
"The Offer--Extension of Tender Period; Termination; Amendment" of this Offer to
Purchase.
The foregoing conditions are for the sole benefit of the Fund and may
be asserted by the Fund regardless of the circumstances (including any action or
inaction by the Fund) giving rise to any of these conditions, and may be waived
by the Fund, in whole or in part, at any time and from time to time, before the
payment date, in its sole discretion. The Fund's failure at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any of these rights,
and each of these rights shall be deemed an ongoing right that may be asserted
at any time and from time to time. Any determination or judgment by the Fund
concerning the events described above will be final and binding.
14. Plans or Proposals of the Fund; Regulatory Approvals
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 as otherwise set forth herein); any material change
in the Fund's dividend policy; any change in the Fund's Trustees and officers;
any class of the Fund's securities becoming eligible for termination of
registration under Section 12(g)(4) of the Exchange Act; a suspension of the
Fund's reporting requirements under securities laws; or any change in the Fund's
organizational and governance documents.
The Fund is not aware of any governmental license or regulatory permit
that appears to be material to its business that might be adversely affected by
its acquisition of MMP Shares as contemplated by the Offer, or of any approval
or other action by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the Fund's
acquisition or ownership of MMP Shares as contemplated by the Offer. Should any
such approval or other action be required, the Fund currently contemplates that
it will seek such approval or other action will be sought. The Fund cannot
predict whether it may determine that it is required to delay the acceptance for
payment of, or payment for, MMP Shares tendered in response to the Offer,
pending the outcome of any such matters. There can be no assurance that any
-29-
approval or other action, if needed, would be obtained or would be obtained
without substantial conditions or that the failure to obtain any approval or
other action might not result in adverse consequences to the Fund's business.
The Fund's obligation to accept for payment and pay for MMP Shares under the
Offer is subject to various conditions. See "The Offer--Conditions to the
Offer."
15. Fees and Expenses
The Fund has retained The Xxxxxx Group, Inc. to act as the Information
Agent and Deutsche Bank Trust Company Americas to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of MMP
Shares by mail, telephone, telex, email, telegraph and personal interviews and
may request brokers, dealers, banks, trust companies and other nominees to
forward materials relating to the Offer to beneficial owners. The Information
Agent and the Depositary each will receive reasonable and customary compensation
for their respective services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities in
connection therewith, including certain liabilities under the federal securities
laws.
The Fund will not pay any fees or commissions to any broker or dealer,
commercial bank, trust company or other person for soliciting tenders of MMP
Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies will, upon request, be reimbursed by the Fund for reasonable and
necessary costs and expenses incurred by them in forwarding materials to their
customers. No such broker, dealer, commercial bank or trust company has been
authorized to act as the agent of the Fund, the Information Agent, or the
Depositary for purposes of the Offer.
16. Financial Information
The financial statements contained in the Fund's Annual Report to
Shareholders for the period ended May 31, 2008 on Form N-CSR filed on August 8,
2008, which includes audited financial information for fiscal years ended May
31, 2008 and May 31, 2007, and the Fund's Semi-Annual Report to Shareholders for
the period ended November 30, 2008 on Form N-CSR filed on February 9, 2009,
which includes unaudited financial information for the six months ended November
30, 2008, are incorporated herein by reference.
17. Miscellaneous
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, MMP Shareholders in any jurisdiction in which the making of the Offer
or acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Fund may, in its discretion, take such action as it
may deem necessary to make the Offer in any such jurisdiction and extend the
Offer to MMP Shareholders in such jurisdiction.
-30-
No person has been authorized to give any information or make any
representation on behalf of the Fund not contained in the Offer or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized.
The Fund has filed with the SEC a Tender Offer Statement on Schedule
TO, together with exhibits, pursuant to Rule 13e-4 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer. The Schedule TO and any amendments thereto, including
exhibits, may be examined and copies may be obtained from the offices of the SEC
in the manner set forth in "The Offer--Certain Information Concerning the Fund."
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND
June 16, 2009
-31-
The Letter of Transmittal and any other required documents should be
sent to the Depositary at one of the addresses set forth below. If you have
questions or need additional copies of the Offer and the Letter of Transmittal,
you can contact the Information Agent at its addresses and relevant telephone
number set forth below. You may also contact your broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Offer.
The Depositary for the Offer is:
Deutsche Bank Trust Company Americas
(000) 000-0000 (toll free)
By First Class Mail, By Overnight Courier, By Hand:
By Registered Certified
or Express Mail
By First Class Mail: or Overnight Courier: By Hand:
DB Services Tennessee, Inc. DB Services Tennessee, Inc. DB Services Tennessee, Inc.
P.O. Box 305050 000 Xxxxxxxxx Xxxx Xxxx 000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Reorganization Unit Attn: Reorganization Unit Attn: Reorganization Unit
By Facsimile Transmission or Email:
By Facsimile Transmission: By Email:
(000) 000-0000 XX.Xxxxx@xx.xxx
The Information Agent for the Offer is:
The Xxxxxx Group, Inc.
(000) 000-0000
00 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
