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Notes
to Financial Statements
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Note
1
Accounting
policies
The
Diamond Hill Financial Trends Fund, Inc. (the “Fund”) (formerly, John Hancock
Financial Trends Fund, Inc.) is a diversified closed-end management investment
company registered under the Investment Company Act of 1940 (the “1940 Act”), as
amended.
Significant
accounting policies of the Fund are as follows:
Valuation
of investments
Security
valuation
The
net asset value of the common shares of the Fund is determined daily as of
the
close of the NYSE, normally at 4:00 P.M. Eastern Time. Short-term debt
investments that have a remaining maturity of 60 days or less are valued at
amortized cost, and thereafter assume a constant amortization to maturity of
any
discount or premium, which approximates market value. All other securities
held
by the Fund are valued at the last sale price or official closing price (closing
bid price or last evaluated quote if no sale has occurred) as of the close
of
business on the principal securities exchange (domestic or foreign) on which
they trade or, lacking any sales, at the closing bid price. Securities traded
only in the over-the-counter market are valued at the last bid price quoted
by
brokers making markets in the securities at the close of trading. Securities
for
which there are no such quotations, principally debt securities, are valued
based on the valuation provided by an independent pricing service, which
utilizes both dealer-supplied and electronic data processing techniques, which
take into account factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. Certificates of deposit are FDIC insured
and valued at cost.
Other
assets and securities for which no such quotations are readily available are
valued at fair value as determined in good faith under consistently applied
procedures established by and under the general supervision of the Board of
Directors.
Investment
transactions
Investment
transactions are accounted for on a trade date plus one basis for daily net
asset value calculations. However, for financial reporting purposes, investment
transactions are reported on trade date. Net realized gains and losses on sales
of investments are determined on the identified cost basis.
Securities
lending
The
Fund may lend securities in amounts up to 33 1⁄3% of the Fund’s total assets.
Such loans are callable at any time and are at all times fully secured by cash,
cash equivalents or securities issued or guaranteed by the U.S. Government
or
its agencies or instrumentalities and marked-to-market on a daily basis. The
Fund may bear the risk of delay in recovery of, or even of rights in, the
securities loaned should the borrower of the securities fail financially. The
Fund receives compensation for lending its securities either in the form of
fees
and/or by retaining a portion of interest on the investment of any cash received
as collateral. All collateral received will be in an amount equal to at least
100% of the market value of the loaned securities and is intended to be
maintained at that level during the period of the loan. The market value of
the
loaned securities is determined at the close of business of the Fund and any
additional required collateral is delivered to the Fund the next business day.
During the loan period, the Fund continues to retain rights of ownership,
including dividends and interest of the loaned securities. As of December 31,
2007, the Fund had no securities on loan.
Diamond
Hill Financial Trends Fund, Inc.
Federal
income taxes
The
Fund qualifies as a “regulated investment company” by complying with the
applicable provisions of the Internal Revenue Code and will not be subject
to
federal income tax on taxable income that is distributed to shareholders.
Therefore, no federal income tax provision is required.
New
accounting pronouncements
In
June 2006, Financial Accounting Standards Board (FASB) Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (the Interpretation), was issued
and
is effective for fiscal years beginning after December 15, 2006, and is to
be
applied to all open tax years as of the effective date. This Interpretation
prescribes a minimum threshold for financial statement recognition of the
benefit of a tax position taken or expected to be taken in a tax return, and
requires certain expanded disclosures. The Fund has analyzed its tax positions
taken on Federal income tax returns for all open tax years (tax years ended
December 31, 2004 through 2007) for purposes of implementing FIN 48 and has
concluded that no provision for income tax is required in the financial
statements.
In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements”.
This standard establishes a single authoritative definition of fair value,
sets
out a framework for measuring fair value and requires additional disclosures
about fair value measurements. SFAS No. 157 applies to fair value measurements
already required or permitted by existing standards. SFAS No. 157 is effective
for financial statements issued for fiscal years beginning after November 15,
2007 and interim period within those fiscal years. The changes to current
generally accepted accounting principles from the application of this Statement
relate to the definition of fair value, the methods used to measure fair value,
and the expanded disclosures about fair value measurements. As of December
31,
2007, the Management does not believe the adoption of SFAS No. 157 will impact
the amounts reported in the financial statements, however, additional disclosure
may be required about the inputs used to develop the measurements and the effect
of certain of the measurements reported on the Statement of Changes in Net
Assets for a fiscal period.
Dividends,
interest and distributions
Dividend
income on investment securities is recorded on the ex-dividend date or, in
the
case of some foreign securities, on the date thereafter when the Fund identifies
the dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding taxes,
which
are accrued as applicable.
The
Fund records distributions to shareholders from net investment income and net
realized gains, if any, on the ex-dividend date. During the year ended December
31, 2007, the tax character of distributions paid was as follows: ordinary
income $2,119,354 and long-term capital gains $7,829,714. During the year ended
December 31, 2006, the tax character of distributions paid was as follows:
ordinary income $1,478,534 and long-term capital gains $3,129,132.
As
of December 31, 2007, the components of distributable earnings on a tax basis
included $280,096 of undistributed ordinary income and $752,716 of undistributed
long-term capital gains and $688 of post-October losses.
Such
distributions on a tax basis, are determined in conformity with income tax
regulations, which may differ from U.S. generally accepted accounting principles
(GAAP). Distributions in excess of tax basis earnings and profits, if any,
are
reported in the Fund’s financial statements as a return of capital.
Diamond
Hill Financial Trends Fund, Inc.
Use
of estimates
The
preparation of financial statements, in accordance with GAAP, requires
management to make estimates and assumptions that affect the reported amounts
of
assets and liabilities and disclosure of contingent assets and liabilities
at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from these
estimates.
Note
2
Management
fees and transactions with affiliates and others
Investment
Advisory
The
Fund had an investment management contract (“Old Advisory Agreement”) with John
Hancock Advisers, LLC (“John Hancock”) through November 30, 2007, under which
John Hancock furnished office space, furnishings and equipment and provided
the
services of persons to manage the investment of the Fund’s assets and to
continually review, supervise and administer the Fund’s investment program.
Under the Old Advisory Agreement, the Fund paid a monthly management fee to
John
Hancock at an annual rate of 0.65% of the Fund’s average weekly net asset value,
or a flat annual fee of $50,000, whichever was higher. If total Fund expenses
exceeded 2% of the Fund’s average weekly net asset value in any one year, the
Fund may have required John Hancock to reimburse the Fund for such excess,
subject to a minimum fee of $50,000.
From
December 1, 2007 through January 2, 2008, the Fund operated under an Interim
Investment Advisory Agreement (“Interim Advisory Agreement”) with Diamond Hill
Capital Management, Inc. (“Adviser”), which had substantially identical terms as
the Old Advisory Agreement. This Interim Advisory Agreement was approved by
the
Board of Directors on September 5, 2007, subject to shareholder approval which
was subsequently obtained on January 3, 2008. However, pursuant to a new Interim
Expense Limitation Agreement effective December 1, 2007, the Adviser
contractually agreed to limit their advisory fee to an annual rate of 0.512%
of
the Fund’s average weekly net assets. For the year ended December 31, 2007,
$17,626 of advisory fees were waived.
Effective
January 3, 2008, the Fund entered into an Investment Advisory Agreement (“New
Advisory Agreement”) with the Adviser. This New Advisory Agreement was approved
by the Board of Directors on September 5, 2007, subject to shareholder approval
which was subsequently obtained on January 3, 2008. Under the New Advisory
Agreement, the Adviser provides management of the investment and reinvestment
of
the Fund’s assets; continuous review, supervision, and administration of the
investment program of the Fund; provides office space, furnishings and equipment
used to carry out the investment management of the Fund. For these services,
the
Adviser receives a fee at an annual rate of 0.65% of the Fund’s average weekly
net asset value, or a flat annual fee of $50,000, whichever is higher. If total
Fund expenses exceed 2% of the Fund’s average weekly net asset value in any one
year, the Fund may require the Adviser to reimburse the Fund for such excess,
subject to a minimum fee of $50,000. However, pursuant to the new Expense
Limitation Agreement (“Limitation Agreement”), the Adviser has agreed to limit
the operating expenses of the Fund to an annual rate of 1.15% of the average
weekly net assets of the Fund. This Limitation Agreement is effective through
January 2, 2010.
Administration
The
Fund had an Administration Agreement with John Hancock through November 30,
2007, under which John Hancock provided certain administrative services required
by the Fund. The Fund paid a monthly administration fee to John Hancock at
an
annual rate of 0.15% of the Fund’s average weekly net assets value, or a flat
annual fee of $35,000, whichever was higher.
Diamond
Hill Financial Trends Fund, Inc.
Effective
December 1, 2007, the Fund entered into an Administration Agreement with Diamond
Hill Capital Management, Inc. (“Administrator”), whereby the Administrator
agrees to oversee the determination and publication of the Fund’s net assets
value, the maintenance of the books and records of the Fund; prepare the Fund’s
federal, state and local income tax returns; prepare the financial information
for the Fund’s proxy statements, if required, and semi-annual and annual reports
to shareholders; prepare the Fund’s periodic financial reports to the Securities
and Exchange Commission; respond to shareholder inquiries; and supply the Board
of Directors and officers of the Fund with all statistical information and
reports reasonably required by them. This Administration Agreement was approved
by the Board of Directors on September 5, 2007. For these services, the
Administrator receives a fee at an annual rate of $22,000 or 0.15% of the Fund’s
average weekly assets, whichever is higher.
The
Administrator has entered into a Sub- Administration Agreement with JPMorgan
Chase Bank, N.A. (“JPMorgan), effective December 1, 2007, whereby JPMorgan will
provide sub-administration services for the Fund. The services provided under
the agreement includes day-to-day administration of matters related to the
corporate existence of the Trust and its Fund (other than rendering investment
advice), maintenance of books and records, preparation of reports, and
supervision of the Trust’s arrangement with the custodian. JPMorgan is paid
directly by the Administrator under terms of this service
agreement.
The
Fund does not pay remuneration to its Officers. Certain Officers of the Fund
are
officers of the Adviser.
Note
3
Guarantees
and indemnifications
Under
the Fund’s organizational documents, its Officers and Directors are indemnified
against certain liability arising out of the performance of their duties to
the
Fund. Additionally, in the normal course of business, the Fund enters into
contracts with service providers that contain general indemnification clauses.
The Fund’s maximum exposure under these arrangements is unknown, as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, based on experience, the Fund believes the risk of loss
to be
remote.
Note
4
Fund
share transactions
The
Fund had no share transactions during the last two years.
The
Fund from time-to-time may, but is not required to, make open market repurchases
of its shares in order to attempt to reduce or eliminate the amount of any
market value discount or to increase the net asset value of its shares, or
both.
In addition, the Board currently intends each quarter during periods when the
Fund’s shares are trading at a discount from the net asset value to consider the
making of tender offers. The Board may at any time, however, decide that the
Fund should not make share repurchases or tender offers.
Note
5
Investment
transactions
Purchases
and proceeds from sales or maturities of securities, other than short term
securities and obligations of the U.S. government, during the year ended
December 31, 2007, aggregated $33,185,368 and $41,339,386,
respectively.
The
cost of investments owned on December 31, 2007, including short-term
investments, for federal income tax purposes, was $41,142,635. Gross unrealized
appreciation and depreciation of investments aggregated $23,192,737 and
$1,644,139, respectively, resulting in net unrealized appreciation of
$21,548,598. The difference between book basis and tax basis net unrealized
appreciation of investments is attributable primarily to the tax deferral of
losses on certain sales of securities.
Diamond
Hill Financial Trends Fund, Inc.
Note
6
SEC
settlement
On
June 25, 2007, John Hancock Advisers, LLC (the Adviser to the Fund until
November 30, 2007) and John Hancock Funds, LLC (the Distributor to the Fund
until November 30, 2007) and two of their affiliates (collectively, the John
Hancock Affiliates) reached a settlement with the SEC that resolved an
investigation of certain practices relating to the John Hancock Affiliates’
variable annuity and mutual fund operations involving directed brokerage and
revenue sharing. Under the terms of the settlement, each John Hancock Affiliate
was censured and agreed to pay a $500,000 civil penalty to the United States
Treasury. In addition, John Hancock Advisers, LLC and the John Hancock Funds,
LLC agreed to pay disgorgement of $2,087,477 and prejudgment interest of
$359,460 to entities, including certain John Hancock Funds, that participated
in
John Hancock’s directed brokerage program during the period from 2000 to October
2003. Collectively, all John Hancock Affiliates agreed to pay a total
disgorgement of $16,926,420 and prejudgment interest of $2,361,460 to the
entities advised or distributed by John Hancock Affiliates. John Hancock
discontinued the use of directed brokerage in recognition of the sale of Fund
shares in October 2003. As a result of this settlement, the Fund received
$19,770, which was recorded as a realized gain to the Fund’s books on June 25,
2007.
Note
7
Subsequent
Event
A
Special Meeting of Shareholders of the Fund was held on January 3, 2008 to
approve or disapprove the following proposals: (i) to approve or disapprove
a
new Investment Advisory Agreement between the Fund and Diamond Hill Capital
Management, Inc.; (ii) to approve or disapprove the amendment to Investment
Restriction No. 6 to permit the Fund to make short sales of securities; and
(iii) to approve or disapprove the amendment of the Articles of Incorporation
of
the Fund to delete Article Tenth in its entirety. The proposals were approved
as
follows:
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Shares
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Shares
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Shares
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For
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Against
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Abstained
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Proposal
(i)
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1,707,198
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569,063
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67,881
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Proposal
(ii)
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1,667,452
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613,983
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62,707
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Proposal
(iii)
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1,715,062
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538,814
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90,268
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Diamond
Hill Financial Trends Fund, Inc.
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Report
of Independent Registered Public Accounting
Firm
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To
the Board of Directors and Shareholders of the
Diamond
Hill Financial Trends Fund, Inc.
We
have audited the accompanying statement of assets and liabilities, including
the
schedule of investments, of the Diamond Hill Financial Trends Fund, Inc. (the
“Fund”) (formerly the “John Hancock Financial Trends Fund, Inc.”), as of
December 31, 2007, and the related statements of operations and changes in
net
assets, and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund’s
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the year ended December 31, 2006 and the financial highlights
for each of the two years in the period ended December 31, 2006 were audited
by
other auditors whose report dated February 16, 2007, expressed an unqualified
opinion on those financial statements. The financial highlights for each of
the
two years in the period ended December 31, 2004 were audited by other auditors
whose report dated February 18, 2005, expressed an unqualified opinion on those
financial highlights.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in
the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2007, by correspondence with the custodian
and brokers. We believe that our audit provides a reasonable basis for our
opinion.
In
our opinion, the financial statements and financial highlights referred to
above
present fairly, in all material respects, the financial position of the Diamond
Hill Financial Trends Fund, Inc. at December 31, 2007, the results of its
operations, changes in its net assets and the financial highlights for the
year
then ended, in conformity with U.S. generally accepted accounting
principles.
/s/
Ernst &
Young LLP
Cincinnati,
Ohio
February
26, 2008
Unaudited
For
federal income tax purposes, the following information is furnished with respect
to the distributions of the Fund, if any, paid during its taxable year ended
December 31, 2007.
This
Fund has designated distributions of $7,829,714 to shareholders as a long-term
capital gain dividend.
With
respect to the ordinary dividends paid by the Fund for the fiscal year ended
December 31, 2007, 89% of the dividends qualify for the corporate
dividends-received deduction.
The
Fund hereby designates the maximum amount allowable of its net taxable income
as
qualified dividend income as provided in the Jobs and Growth Tax Relief
Reconciliation Act of 2003. This amount was reflected on Form 1099-DIV for
the
calendar year 2007.
Shareholders
were mailed a 2007 U.S. Treasury Department Form 1099-DIV in January 2008.
This
will reflect the total of all distributions that are taxable for calendar year
2007.
Change
in auditor
Unaudited
On
November 30, 2007, PricewaterhouseCoopers (PwC) resigned as the independent
registered public accounting firm of the Fund at the request of the Fund. On
December 10, 2007, the Board of Directors of the Fund, upon recommendation
of
the audit committee, engaged Ernst & Young LLP as the independent registered
public accounting firm for the Fund’s fiscal year ending December 31, 2007.
PwC’s audit reports on the Fund’s financial statements for the prior fiscal
years ended December 31, 2006 and 2005, contained no adverse opinion or
disclaimer of opinion; nor were its reports qualified or modified as to
uncertainty, audit scope, or accounting principles. Further, in connection
with
the audits for the fiscal years ended December 31, 2006 and 2005, and the
subsequent interim period through November 30, 2007, (1) there were no
disagreements between the Fund and PwC on accounting principles or practices,
financial statement disclosure or audit scope or procedure, which if not
resolved to the satisfaction of PwC would have caused it to make reference
to
the disagreement in its report, and (2) there were no reportable
events.
Proxy
Voting
The
investment adviser is responsible for exercising the voting rights associated
with the securities purchased and held by the Funds. A description of the
policies and procedures that the Adviser uses in fulfilling this responsibility
and information regarding how those proxies were voted during the twelve month
period ended June 30 are available without charge upon request by calling
1-614-255-4080 or on the Securities and Exchange Commission’s website at
http://www.sec.gov.
Investment
objective and policy
The
Fund’s primary investment objective is long-term capital appreciation. Its
secondary investment objective is current income. The Fund will seek to achieve
its primary investment objective of long-term capital appreciation by investing
at least 80% (65% prior to January 25, 2002) of its assets in stocks of U.S.
financial services companies of any size. These companies include banks,
thrifts, finance companies, brokerage and advisory firms, real estate-related
firms, insurance companies and financial holding companies. These companies
are
usually regulated by governmental or quasi-governmental entities and, as a
result, are subject to the risk that regulatory developments will adversely
affect them. With respect to the Fund’s investment policy of investing at least
80% of “assets” in equity securities, “assets” is defined as net assets plus the
amount of any borrowings for investment purposes. The Fund will notify
shareholders at least 60 days prior to any change in this policy. In abnormal
market conditions, the Fund may take temporary defensive positions.
As
such, the Fund may temporarily invest all of its assets in investment-grade,
short-term securities. In such circumstances, the Fund may not achieve its
objective. The Fund’s current investment restriction, relating to industry
concentration, has been modified to remove the reference to the banking and
savings industry so that it reads as follows: “Except for temporary defensive
purposes, the Fund may not invest more than 25% of its total assets in any
one
industry or group of related industries, except that the Fund will invest more
than 25% of its assets in the financial services sector.”
Short
Sales
On
January 3, 2008, shareholders approved an amendment to the investment
restrictions of the Fund to permit the Fund to make short sales of securities.
Short sales are effected when it is believed that the price of a particular
security will decline, and involves the sale of a security which the Fund does
not own in hope of purchasing the same security at a later date at a lower
price. To make delivery to the buyer, the Fund must borrow the security, and
the
Fund is obligated to return the security to the lender, which is accomplished
by
a later purchase of the security by the Fund.
The
Fund will incur a loss as a result of a short sale if the price of the security
increases between the date of the short sale and the date on which the Fund
purchases the security to replace the borrowed security. The use of short sales
may cause the Fund to have higher expenses (especially dividend expenses) than
those of other equity mutual funds. Short sales are speculative transactions
and
involve special risks, including greater reliance on the Adviser’s ability to
accurately anticipate the future value of a security.
Bylaws
In
January 2003, the Board of Directors adopted several amendments to the Fund’s
bylaws, including provisions relating to the calling of a special meeting and
requiring advance notice of shareholder proposals or nominees for director.
The
advance notice provisions in the bylaws require shareholders to notify the
Fund
in writing of any proposal that they intend to present at an annual meeting
of
shareholders, including any nominations for Director, between 90 and 120 days
prior to the first anniversary of the mailing date of the notice from the prior
year’s annual meeting of shareholders. The notification must be in the form
prescribed by the bylaws. The advance notice provisions provide the Fund and
its
Directors with the opportunity to thoughtfully consider and address the matters
proposed before the Fund prepares and mails its proxy statement to shareholders.
Other amendments set forth the procedures that must be followed in order for
a
shareholder to call a special meeting of shareholders. The Fund is presently
listed on NASDAQ and, per a grandfathering provision, is not required to hold
annual shareholder meetings. The Board approved the above amendment to the
Fund’s bylaws to provide a defined structure for the submission of shareholder
proposals should the circumstances change and an annual meeting be required.
Please contact the Secretary of the Fund for additional information about the
advance notice requirements or the other amendments to the bylaws.
In
November 2005, the Fund’s Board of Directors adopted several amendments to the
Fund’s bylaws regarding the Chairman of the Board position: The Chairman of the
Board shall at all times be a director who is not an interested person of the
Fund as that term is defined by the Investment Company Act of 1940. The scope
of
the Chairman’s responsibilities and fiduciary obligations were further defined.
Lastly, disclosure regarding the election, resignation and removal of the
Chairman as well as the filling of a vacancy was added.
At
a quarterly meeting of the Fund’s Board of Directors held February 13, 2006, the
Board amended Article II Section 2 of the Fund’s bylaws to state that a special
meeting of the shareholders, unless otherwise provided by law or by the Articles
of Incorporation, may be called for any purpose or purposes by a majority of
the
Board of Directors, the President, or, subject to Section 2(c), by the Secretary
of the Corporation upon the written request of shareholders entitled to cast
at
least 35% of all votes entitles to be cast at the meeting.
Dividends
and distributions
During
the year ended December 31, 2007 dividends from net investment income totaling
$0.279 per share and capital gain distributions totaling $2.212 were paid to
shareholders. The dates of payments and the amounts per share are as
follows:
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INCOME
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PAYMENT
DATE
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DIVIDEND
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July
31, 2007
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$
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0.140
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December
18, 2007
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0.139
|
|
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CAPITAL
GAIN
|
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PAYMENT
DATE
|
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DISTRIBUTION
|
|
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July
31, 2007
|
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$
|
0.197
|
|
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December
18, 2007
|
|
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2.015
|
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Dividend
reinvestment plan
The
Fund offers its registered shareholders an automatic Dividend Reinvestment
Plan
(the “Plan”), which enables each participating shareholder to have all dividends
(including income dividends and/or capital gains distributions) payable in
cash,
reinvested by Mellon Investor Services (the “Plan Agent”) in shares of the
Fund’s common stock. However, shareholders may elect not to enter into, or may
terminate at any time without penalty, their participation in the Plan by
notifying the Plan Agent in writing. Shareholders who do not participate in
the
Plan will receive all dividends in cash.
In
the case of shareholders such as banks, brokers or nominees who hold shares
for
others who are the beneficial owners, the Plan Agent will administer the Plan
on
the basis of record ownership of shares. These record shareholders will receive
dividends under the Plan on behalf of participating beneficial owners and cash
on behalf of non-participating beneficial owners. These record holders will
then
credit the beneficial owners’ accounts with the appropriate stock or cash
distribution.
Whenever
the market price of the Fund’s stock equals or exceeds net asset value per
share, participating shareholders will be issued stock valued at the greater
of
(i) net asset value per share or (ii) 95% of the market price. If the net asset
value per share of the Fund’s stock exceeds the market price per share, the Plan
Agent shall make open market purchases of the Fund’s stock for each
participating shareholder’s account. These purchases may begin no sooner than
five business days prior to the payment date for the dividend and will end
up to
thirty days after the payment date. If shares cannot be purchased within thirty
days after the payment date, the balance of shares will be purchased from the
Fund at the average price of shares purchased on the open market. Each
participating shareholder will be charged a pro rata share of brokerage
commissions on all open market purchases. The shares issued to participating
shareholders, including fractional shares, will be held by the Plan Agent in
the
name of the shareholder. The Plan Agent will confirm each acquisition made
for
the account of the participating shareholders as soon as practicable after
the
payment date of the distribution.
The
reinvestment of dividends does not relieve participating shareholders of any
federal, state or local income tax that may be due with respect to each
dividend. Dividends reinvested in shares will be treated on your federal income
tax return as though you had received a dividend in cash in an amount equal
to
the fair market value of the shares received, as determined by the prices for
shares of the Fund on the Nasdaq National Market System as of the dividend
payment date. Distributions from the Fund’s long-term capital gains will be
taxable to you as long-term capital gains. The confirmation referred to above
will contain all the information you will require for determining the cost
basis
of shares acquired and should be retained for that purpose. At year end, each
account will be supplied with detailed information necessary to determine total
tax liability for the calendar year.
All
correspondence or additional information concerning the Plan should be directed
to the Plan Agent, Mellon Bank, N.A., c/o Mellon Investor Services at P.O.
Box
3338, South Hackensack, New Jersey 07606-1938 (Telephone:
1-877-254-8583).
Shareholder
communication and assistance
If
you have any questions concerning the Fund, we will be pleased to assist you.
If
you hold shares in your own name and not with a brokerage firm, please address
all notices, correspondence, questions or other communications regarding the
Fund to the transfer agent at:
Mellon
Investor Services
Newport
Office Center VII
480
Washington Boulevard
Jersey
City, NJ 0731 0
Telephone:
1-877-254-8583
If
your shares are held with a brokerage firm, you should contact that firm, bank
or other nominee for assistance.