Registration Number 033-8857-99
Filed Pursuant to 424(b)(3)
PROSPECTUS
TELEPHONE AND DATA SYSTEMS, INC.
SERIES A COMMON SHARE
AUTOMATIC DIVIDEND REINVESTMENT PLAN
Series A Common Shares
($0.01 Par Value)
The Series A Common Share Automatic Dividend Reinvestment Plan, as
amended, which we refer to in this Prospectus as the "Plan" is sponsored by
Telephone and Data Systems, Inc., "TDS", a Delaware corporation and relates to
its Series A Common Shares, par value $.01 per share. The Plan provides
eligible holders, as defined in the Plan, of TDS's Series A Common Shares with a
systematic, economic and convenient method of investing cash dividends from such
shares in newly issued Series A Common Shares without payment of any brokerage
commission or service charge and at a 5% discount from market value, as
determined below. This Prospectus relates to 337,500 Series A Common Shares
covered by the Registration Statement of which this Prospectus is a part.
As a Participant in the Plan you may:
1. have cash dividends on all of your Series A Common Shares
automatically reinvested, or
2. have cash dividends on less than all of your Series A Common
Shares automatically invested while continuing to receive the
remainder of your cash dividends.
The price for the Series A Common Shares purchased with reinvested
dividends will be 95% of the average daily high and low sales prices for TDS's
Common Shares on the American Stock Exchange, as reported in The Wall Street
Journal, for a period of ten consecutive trading days ending on the trading day
immediately preceding the day on which the purchase is made. The investment
dates for reinvested dividends will be the dividend payment dates.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or has passed upon
the accuracy or adequacy of this Prospectus. Any representation to the contrary
is a criminal offense.
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The date of this Prospectus is November 29, 2000
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TABLE OF CONTENTS
Page
Summary of the Plan............................................ 3
Telephone and Data Systems, Inc................................ 4
Use of Proceeds................................................ 4
Series A Common Share Automatic Dividend Reinvestment Plan..... 4
Purpose........................................................ 4
Advantages..................................................... 4
Administration................................................. 4
Participation.................................................. 5
Costs.......................................................... 6
Purchases...................................................... 7
Reports to Participants........................................ 7
Dividends...................................................... 8
Certificates for Shares........................................ 8
Safekeeping of Shares.......................................... 9
Withdrawal..................................................... 9
Other Information.............................................. 9
Termination by TDS............................................. 12
Legal Matters.................................................. 12
Experts........................................................ 12
Where You Can Find More Information............................ 12
Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary
Statement
This Prospectus and the documents incorporated by reference herein contain
statements that are not based on historical fact, including the words
"believes," "anticipates," "intends," "expects," and similar words. These
statements constitute "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, events or developments to be significantly
different from any future results, events or developments expressed or implied
by such forward-looking statements. Such factors include:
* general economic and business conditions, both nationally and in the
regions in which TDS operates,
* technology changes,
* competition,
* changes in the telecommunications regulatory environment,
* pending and future litigation,
* acquisitions/divestitures of properties and or licenses,
* changes in customer growth rates, penetration rates, churn rates,
roaming rates and the mix of products and services offered in our
markets, and
* other factors described or incorporated in this Prospectus.
Investors are encouraged to consider these and other risks and uncertainties
that are discussed in documents filed by TDS with the Securities and Exchange
Commission.
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SUMMARY OF THE PLAN
* PARTICIPATION: TDS record shareholders who own at least one whole
Series A Common Share can participate in the Plan by submitting a
completed Authorization Form. You may obtain Authorization Forms from
TDS Investor Relations at (312) 630-1900. If your shares are held in a
brokerage account, you may participate by having your broker register
the Series A Common Shares in the Plan. No action is required if you
are already participating in the Plan.
* REINVESTMENT OF DIVIDENDS: You can reinvest your cash dividends on all
or a portion of your Series A Common Shares toward the purchase of
additional Series A Common shares of TDS stock without paying fees.
* PRICE FOR SHARES: The price for the Series A Common Shares purchased
with reinvested dividends will be 95% of the average daily high and low
sales prices for TDS's Common Shares on the American Stock Exchange, as
reported in The Wall Street Journal, for a period of ten consecutive
trading days ending on the trading day immediately preceding the day on
which the purchase is made.
* INVESTMENT DATES: The Investment Dates for reinvested dividends will be
the dividend payment dates.
* SAFEKEEPING OF CERTIFICATES: You can transfer to the Agent for
safekeeping your TDS stock certificates representing the Series A
Common Shares on which you are having dividends reinvested under the
Plan. There is no charge for this service. A certificate for any number
of whole shares credited to an account will be sent to you, free of
charge, upon written request.
* WITHDRAWAL FROM THE PLAN: You may withdraw from the Plan at any time by
notifying the Agent in writing. A certificate for the whole Series A
Common Shares credited to your account, along with a cash payment for
any fractional share, will be issued to you. Dividends paid after
withdrawal from the Plan will be paid in cash directly to you, unless
you elect to rejoin the Plan by submitting a new Authorization Form.
* TRACKING YOUR INVESTMENT: You will receive a statement of your Plan
account with respect to each month in which a transaction takes place.
These statements provide details of the transactions and the share
balance in your program account.
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TELEPHONE AND DATA SYSTEMS, INC.
TDS is a diversified telecommunications service company that provides
high-quality telecommunications services to more than three million wireless
telephone and wireline telephone customers. TDS's business development strategy
is to expand its existing operations through internal growth and acquisitions.
USE OF PROCEEDS
The number of Series A Common Shares that will be sold under the Plan
and the prices at which such shares will be sold cannot now be determined. The
net proceeds from the sale of such shares will be used by TDS for general
corporate purposes of TDS. Until the proceeds are used for these purposes, TDS
may deposit them in interest-bearing accounts or invest them in certificates of
deposit, United States Government securities or prime commercial paper.
SERIES A COMMON SHARE AUTOMATIC DIVIDEND REINVESTMENT PLAN
The following is a question and answer statement of the provisions of
TDS's Series A Common Share Automatic Dividend Reinvestment Plan, which we refer
to as the "Plan". Questions and Answers 1 through 31 both explain and constitute
the Plan.
PURPOSE
1. What Is The Purpose Of The Plan?
The purpose of the Plan is to provide eligible holders, as defined in
the Answer to Question 4, of TDS's Series A Common Shares with a systematic,
economic and convenient method of investing cash dividends from such shares in
newly issued Series A Common Shares of TDS without payment of any brokerage
commission or service charge, and at a 5% discount from market value, as
determined below. Since the additional Series A Common Shares will be purchased
directly from TDS, the Plan will provide TDS with additional capital funds.
ADVANTAGES
2. What Are The Advantages Of The Plan?
You may purchase Series A Common Shares of TDS with cash dividends on
all or less than all of TDS's Series A Common Shares registered in your name.
The price of Series A Common Shares purchased with cash dividends will be 95% of
market value as set forth in the Answer to Question 13.
No commission or service charge is paid by participants in connection
with purchases under the Plan. Full investment of funds is possible under the
Plan because the Plan permits fractions of shares, as well as full shares, to be
credited to participants' accounts. In addition, dividends in respect of such
fractions, as well as in respect of full shares, will be credited to
participants' accounts and reinvested in TDS's Series A Common Shares under the
Plan. The safekeeping of Series A Common Shares credited to a participant's
account is assured since certificates for such shares are not issued unless
requested by the participant. Regular statements of account will provide
simplified record keeping.
ADMINISTRATION
3. Who Administers The Plan?
Computershare Investor Services acts as an Agent for participants in
the Plan. The Agent keeps a continuing record of each participant's account,
sends periodic statements of account to each participant with respect to each
month in which a transaction takes place and performs other duties relating to
the Plan. Series A Common Shares of TDS purchased under the Plan will be
registered in the name of the Agent or its nominee, as Agent for each
participant in the Plan, and will be credited to the accounts of the respective
participants. Should the Agent resign, another bank will be asked to serve as
the Agent. All communications regarding the Plan should be sent to the Agent
addressed as follows:
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Telephone and Data Systems, Inc.
Series A Common Share Automatic Dividend Reinvestment Plan
c/o Computershare Investor Services
P.O. Box A3309
Chicago, Illinois 60690-3309
Telephone: 877/337-1575
Agent also acts as dividend disbursing and transfer agent for TDS's
Series A Common Shares.
PARTICIPATION
4. Who Is Eligible To Participate?
Holders of record of at least one whole Series A Common Share are
eligible to participate in the Plan. Beneficial owners of Series A Common Shares
which currently are registered in names other than their own, for example, in
the name of a broker or bank nominee, who wish to participate in the Plan must
either make appropriate arrangements for their nominee to do so or must become
security owners of record of Series A Common Shares.
All holders of record of at least one whole Series A Common Share are
eligible to participate in the Plan, unless they are citizens of a state or
foreign jurisdiction in which it would be unlawful for TDS to allow such
participation. TDS is not aware of any jurisdiction in which the making of the
offer is not in compliance with valid applicable law. If TDS becomes aware of
any jurisdiction in which the making of the offer would not be in compliance
with valid applicable law, TDS will make a good faith effort to comply with any
such law. If, after such good faith effort, TDS cannot comply with any such law,
the offer will not be made to holders of shares residing in any such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall not be
deemed to be made unless it is made on behalf of TDS by one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction, as
may be designated by TDS.
5. How Does A Series A Common Shareholder Participate?
A holder of Series A Common Shares may join the Plan at any time by
signing an "Authorization Form" and returning it to the Agent. An Authorization
Form and postage paid envelope may be obtained by written request addressed to
the Agent at the above address or by writing or calling TDS as follows:
Telephone and Data Systems, Inc.
Series A Common Shares Automatic Dividend Reinvestment Plan
30 North LaSalle Street, Ste. 4000, Chicago, IL 60602
Attn: Investor Relations Coordinator - telephone: 312/630-1900
6. When Does A Series A Common Shareholder's Participation Start?
Series A Common Shareholders
If an Authorization Form directing dividend reinvestment is received
from a Series A Common Shareholder by the Agent on or before the last business
day of the month preceding the next dividend payment, that dividend will be
applied to the purchase of Series A Common Shares under the Plan. If the
Authorization Form directing dividend reinvestment is received after that date,
dividend reinvestment will begin with the next succeeding payment. Cash
dividends on the Series A Common Shares are ordinarily paid in March, June,
September and December.
For example, if TDS's Board of Directors establishes June 30 as the
payment date for a Series A Common Share cash dividend, then in order to
reinvest the dividends payable on June 30 in new Series A Common Shares under
the Plan, a Series A Common Shareholder's Authorization Form must be received by
the Agent no later than the last business day in May. If the Authorization Form
is received after the last business day in May, the dividends payable on June 30
will be paid in cash and the Common Shareholder's participation in the Plan will
commence with the next Series A Common Share cash dividend payment date.
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7. If I am Currently Enrolled in the Plan, Do I Need To Take Any Action,
Or Will My Participation In The Plan Continue?
A Series A Common Shareholder enrolled in the plan will continue to be
enrolled in the Plan in accordance with the participation option previously
chosen under the Plan, provided he or she is a holder of record of at least one
whole Series A Common Share.
If an eligible shareholder currently enrolled in the Plan does not wish
to participate in the Plan, he or she should withdraw from the Plan in the
manner described in the Answers to Questions 20 and 21. If a holder of Series A
Common Shares wishes to change the nature of his or her participation, he or she
should return an Authorization Form as described herein. If a holder of Series A
Common Shares enrolled in the Plan does not wish to withdraw or change the
nature of his or her participation, he or she will be continued in the Plan and
the cash dividends on those Series A Common Shares owned of record by that
shareholder and designated for reinvestment under the Plan will be used to
purchase Series A Common Shares under the Plan at the 5% discount.
8. What Does The Authorization Form Provide?
The Authorization Form provides for the purchase of new Series A Common
Shares through the following investment options offered under the Plan:
Full Reinvestment - Cash dividends Series A Common Shares held of
record by a holder of Series A Common Shares will be invested at 95% of
market value - see the Answer to Question 13.
Partial Reinvestment - Cash dividends on less than all of the shares
held of record by a holder of Series A Common Shares will be invested
at 95% of market value -see the Answer to Question 13- and the
shareholder will continue to receive cash dividends on the other
shares.
Cash dividends on Series A Common Shares credited to the participant's
account under the Plan, including fractional shares, are automatically
reinvested to purchase additional Series A Common Shares no matter which option
is chosen. The Authorization Form also serves to appoint Computershare Investor
Services as Agent for the participant.
If a holder of Series A Common Shares has more than one stock account
pursuant to which he or she is eligible to participate in the Plan, a separate
Authorization Form is required for each account that he or she wishes included
in the Plan.
9. Is Partial Participation Possible Under The Plan?
Yes. An eligible shareholder who desires the dividends on only some of
his or her full Series A Common Shares to be invested under the Plan may
indicate such number of shares upon the applicable Authorization Form(s) under
"Partial Dividend Reinvestment."
10. May A Participant Change His Or Her Method Of Participation After
Enrollment?
Yes. If a shareholder elects to participate through the reinvestment of
dividends but later decides to change the number Series A Common Shares for
which dividends are being reinvested, a new Authorization Form may be executed
and returned to the Agent.
COSTS
11. Are There Any Expenses To Participants In Connection With Purchases
Under The Plan?
No. Participants will incur no costs. There are no brokerage fees
because Series A Common Shares are purchased directly from TDS. All costs of
administration of the Plan will be paid by TDS.
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PURCHASES
12. When Are The Investment Dates?
The Investment Dates for Series A Common Shares purchased under the
Plan with cash dividends on Series A Common Shares are the cash dividend payment
dates. TDS usually pays cash dividends on its Series A Common Shares in March,
June, September and December.
13. How Will The Purchase Price Of Series A Common Shares Be Determined?
No market exists for the Series A Common Shares. Therefore, TDS is
assuming for purposes hereof that each Series A Common Share has a fair market
value equal to one of TDS's Common Shares because the Series A Common Shares are
presently convertible into Common Shares on a one-for-one basis. Accordingly,
the price of Series A Common Shares purchased with reinvested cash dividends
will be 95% of the average daily high and low sales prices for TDS's Common
Shares on the American Stock Exchange, as reported in The Wall Street Journal,
for a period of ten consecutive trading days ending on the trading day
immediately preceding the Investment Date. If there is no trading in the Common
Shares reported on the American Stock Exchange for a substantial amount of time
during any such trading period, the purchase price per share shall be determined
by TDS on the basis of such market quotations as it shall deem appropriate. No
Series A Common Shares will be sold by TDS at less than the par value of such
shares.
14. How Many Series A Common Shares Will Be Purchased For Participants?
The number of Series A Common Shares to be purchased on an Investment
Date will be determined by the amount of each participant's dividends, including
dividends on Series A Common Shares purchased under the Plan, and the applicable
price of TDS's Common Shares. Each participant's account in the Plan will be
credited with the number of Series A Common Shares, including fractional shares
computed to four decimal places, equal to the amount of the dividends being
invested divided by 95% of the applicable purchase price.
REPORTS TO PARTICIPANTS
15. What Reports Will Be Sent To Participants In The Plan?
Each participant in the Plan will receive a statement of his or her
account with respect to each month in which a transaction takes place. These
statements are a participant's continuing record of the cost of his or her
purchases. Participants should retain these statements for income tax purposes.
Each statement will set forth the following information when applicable:
a. The total number of Series A Common Shares registered in the
name of the participant which is participating in the Plan.
b. The total number of Series A Common Shares which have been
accumulated under the Plan by the Participant but for which certificates have
not been issued - See Answer to Question 17.
c. The following information for each transaction during the
month and all transactions to date during the current year:
1. the amount of dividends invested;
2. the price per share for each transaction;
3. the number of shares purchased; and
4. certain tax information.
In addition, each participant will receive copies of communications
sent to every other holder of TDS's Series A Common Shares, including the Annual
Report to Shareholders, Notice of Annual Meeting of Shareholders and Proxy
Statement, and IRS information on Form 1099 for reporting dividend income.
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DIVIDENDS
16. Will Participants Be Credited With Dividends On Fractions Of Shares?
Yes. Participants will be credited with the amount of dividends
attributable to fractions of shares in their accounts under the Plan and such
dividends will be reinvested.
CERTIFICATES FOR SHARES
17. Will Certificates Be Issued For Series A Common Shares Purchased Under
The Plan?
Normally, certificates for TDS's Series A Common Shares purchased under
the Plan will not be issued to participants. The number of Series A Common
Shares credited to a participant's account under the Plan will be shown on each
statement of account mailed to the participant. This convenience protects
against loss, theft, or destruction of stock certificates.
Certificates for any number of whole Series A Common Shares credited to
an account under the Plan will be issued upon the written request of the
participant to the Agent and issuance of such certificates will not terminate
participation in the Plan. Any remaining full shares and fraction of a share
will continue to be credited to the participant's Plan account.
Dividends on Plan Series A Common Shares for which a participant
requests and receives a certificate will be reinvested in TDS's Series A Common
Shares at the 5% discount under the Plan and the Series A Common Shares
purchased therewith will be credited to the Participant's Plan if the
participant continues to own these Series A Common Shares and has elected full
dividend reinvestment of Series A Common Shares on his or her current Series A
Common Share Authorization Form. A participant who continues to own the Series A
Common Shares in question and desires to have the dividends on these shares
reinvested in TDS's Series A Common Shares but who does not have an existing
Authorization Form for Series A Common Shares or has elected only partial
reinvestment of his or her Series A Common Share dividends on the current
Authorization Form will have to execute a new Authorization Form and return it
to the Agent as set forth in the Answer to Question 10. Otherwise, dividends on
these Series A Common Shares will not be reinvested in TDS's Series A Common
Shares at the 5% discount as they were when they were held for the participant
in the Plan. Rather, the dividends on the Series A Common Shares in question
will be paid to the Shareholder in cash.
Series A Common Shares credited to the account of a participant under
the Plan may not be pledged as collateral otherwise transferred. A participant
who wishes to pledge or transfer such shares must request that certificates for
such shares be issued in his or her name.
Certificates for fractional Series A Common Shares will not be issued
under any circumstances.
An institution that is required by law to maintain physical possession
of certificates may request a special arrangement regarding the issuance of
certificates for Series A Common Shares purchased under the Plan. This request
should be sent to the Agent -see Answer to Question 3.
18. In Whose Name Will Certificates Be Issued?
Accounts under the Plan are maintained in the names in which
certificates of the participants were registered at the time they entered the
Plan. Consequently, certificates for whole shares issued upon the request of
participants will be similarly registered.
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SAFEKEEPING OF SHARES
19. May Participants Transfer Series A Common Shares Which Are Designated
For Participation In The Plan To The Agent For Safekeeping?
Yes. Participants may transfer to the Agent for safekeeping
certificates representing Series A Common Shares registered in their name. These
shares will be credited to the participants' accounts under the Plan along with
shares purchased for them under the Plan. There is no charge for this service.
The stock certificates should be sent by registered mail, return receipt
requested and properly insured, to the Agent. Certificates should not be
endorsed.
Dividends will be reinvested in shares represented by the certificates
transferred to the Agent.
WITHDRAWAL
20. When May A Participant Withdraw From The Plan?
A participant may withdraw from the Plan at any time by notifying the
Agent in writing. If the notice of termination is received by the Agent prior to
the fifth business day preceding the record date for the next Series A Common
Share cash dividend, the amount of that dividend will be paid to the withdrawing
participant. If the notice of termination is received by the Agent on or after
the fifth business day preceding the record date for the next Series A Common
Share cash dividend, the next dividend will be reinvested and subsequent
dividends will be paid in cash.
Dividends paid after withdrawal from the Plan will be paid in cash
directly to the shareholder unless he or she elects to rejoin the Plan, which
the shareholder may do as set forth in the Answer to Question 22.
21. What Happens When A Participant Withdraws From The Plan Or The Plan Is
Terminated?
When a participant withdraws from the Plan, or ceases to be a
shareholder of record, or ceases to be an eligible shareholder, or upon
termination of the Plan by TDS, a certificate for the whole Series A Common
Shares credited to his or her account under the Plan will be issued and a cash
payment will be made for any fractional share. This cash payment will be based
on the closing price of TDS's Common Shares on the American Stock Exchange as of
the date the written request for withdrawal is received, or the participant
ceases to be a shareholder of record, or the participant ceases to be an
eligible shareholder, or the Plan is terminated, whichever is applicable, or if
no trading occurs on such date, the next day on which the Common Shares are
traded.
OTHER INFORMATION
22. When May A Shareholder Rejoin The Plan?
Generally, a shareholder may rejoin the Plan at any time, provided he
or she is an eligible shareholder, by submitting a new Authorization Form.
However, TDS reserves the right to reject any Authorization Form from a previous
participant on the grounds of repeated joinings and withdrawals from Plan
participation. Such reservation is intended to minimize administrative expenses
and to encourage use of the Plan as a long-term investment service.
23. What Happens If A Participant Sells Or Transfers All Of His Or Her
Series A Common Shares?
If a participant ceases to be a shareholder of record holding of at
least one whole Series A Common Share, a cash payment will be made for any
fractional share remaining in the Plan. Thereafter, the shareholder may rejoin
the Plan as set forth in the Answer to Question 22 if he or she is or becomes a
holder of at least one whole Series A Common Share.
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24. What Happens When A Participant Who Is Reinvesting Dividends On All Or
Less Than All Of The Shares Registered In His Or Her Name Sells Or
Transfers A Portion Of Such Shares?
If a participant who is reinvesting dividends on all or only a portion
of Series A Common Shares registered in his or her name disposes of a portion of
such shares, TDS will continue to reinvest dividends on the remainder of the
Series A Common Shares registered in the participant's name up to the number
indicated on the participant's Authorization Form as the number of Series A
Common Shares for which dividends are to be reinvested, provided the participant
continues to hold at least one whole Series A Common Share. For example, if a
participant authorized TDS to reinvest dividends on 50 Series A Common Shares of
a total of 100 Series A Common Shares registered in his or her name, and then
disposes of 25 Series A Common Shares, TDS would continue to reinvest dividends
on 50 of the remaining 75 shares.
25. Does Participation In The Plan Involve Risk?
The Plan itself creates no risk. The risk to participants is the same
as with any other investment in TDS's Series A Common Shares. It should be
recognized that since investment prices are determined as an average of the
daily high and low sales prices for a period of ten consecutive trading dates on
which TDS's Common Shares are traded, see Answer to Question 13, a participant
loses any advantage otherwise available from being able to select the timing of
his or her investment. PARTICIPANTS MUST RECOGNIZE THAT NEITHER TDS NOR THE
AGENT CAN ASSURE A PROFIT OR PROTECT AGAINST A LOSS ON THE SHARES PURCHASED
UNDER THE PLAN.
SHAREHOLDERS ARE REFERRED TO THE RISK FACTORS DESCRIBED IN TDS'S
PROSPECTUS DATED SEPTEMBER 26, 2000 WHICH IS A PART OF TDS'S REGISTRATION
STATEMENT ON FORM S-4, REGISTRATION NO. 033-64293, WHICH IS INCORPORATED BY
REFERENCE HEREIN.
26. What Happens If TDS Issues A Stock Dividend, Declares A Stock Split Or
Has A Rights Offering?
Any Series A Common Shares distributed by TDS as a stock dividend on
shares credited to a participant's Plan account, or upon any split of such
shares, will be credited to the participant's Plan account. Stock dividends
distributed on Series A Common Shares in shares of any other class of capital
stock will be mailed directly to the shareholder in the same manner as to
shareholders not participating in the Plan. However, if a dividend reinvestment
plan or bookkeeping entry facility is established for the shares of such other
capital stock distributed as a dividend, the participant will automatically
become a participant of such dividend reinvestment plan or bookkeeping entry
facility and the shares distributed to such participant will instead be credited
to the participant's account. In a rights offering, a participant's entitlement
will be based upon his or her total holdings, including shares credited to the
participant's account under the Plan. Rights certificates will be issued for the
number of whole Series A Common Shares only, however, and rights based on a
fraction of a Series A Common Share held in a participant's Plan account will be
sold for the participant's account and the net proceeds will be forwarded to the
participant.
27. How Will A Participant's Shares Be Voted At Shareholders' Meetings?
All Series A Common Shares held in the Plan for a participant will be
voted as the participant directs on a proxy or voting instruction form which
will be furnished to the participant. If the participant does not return the
proxy or form to the Agent, the Agent will not vote the participant's Plan
shares.
28. What Are The Federal Income Tax Consequences Of Participation In The
Plan?
The following discussion sets forth the general Federal income tax
consequences for participants in the Plan. However, the discussion is not
intended to be an exhaustive treatment of such tax consequences. For example,
the discussion does not address the treatment of stock dividends, stock splits
or a rights offering to participants in the Plan. It also does not address
differences in tax treatment with respect to participants who do not hold the
Common Shares as capital assets. Because the tax laws are complex and constantly
changing, participants are urged to consult their own tax advisors regarding the
tax consequences of participating in the Plan, including the effects of any
applicable state, local or foreign tax laws, and for rules regarding the tax
basis in special cases such as the death of a participant or a gift of Common
Shares held under the Plan and for other tax consequences. Future legislative
changes or changes in administrative or judicial interpretation, some or all of
which may be retroactive, could significantly alter the Federal income tax
treatment discussed herein.
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In general, participants in the Plan who elect to reinvest cash
dividends will be treated, for Federal income tax purposes, as having received,
on the dividend payment date, a distribution in an amount equal to the fair
market value on the dividend payment date of the Common Shares purchased with
reinvested dividends, rather than a distribution in the amount of cash otherwise
payable to the participant. Participants should not be treated as receiving an
additional distribution based upon their pro rata share of the Plan
administration costs paid by TDS; however, there can be no assurance that the
IRS will agree with this position. TDS has no present plans to seek formal
advice from the IRS on this issue.
Generally, the distribution described above - the fair market value of
the Common Shares purchased with reinvested dividends - will be taxable to
participants as ordinary dividend income to the extent of TDS's current or
accumulated earnings and profits for Federal income tax purposes. The amount of
the distribution in excess of such earnings and profits will reduce a
participant's tax basis in the Common Shares with respect to which such
distribution was received, and, to the extent in excess of such basis, result in
capital gain. Certain corporate participants may be entitled to a dividends
received deduction with respect to amounts treated as ordinary dividend income.
Corporate participants should consult their own tax advisors regarding their
eligibility for and the extent of such deduction.
Tax information will be shown on the statements of account sent to
participants which participants should retain for tax purposes. These statements
are important for computing the tax basis of Common Shares acquired under the
Plan. The Form 1099 which each participant will receive annually will include
the income which is deemed to result from the receipt of the Common Shares under
the Plan.
As a general rule, the tax basis of shares or any fraction of a share
purchased with reinvested dividends will equal the fair market value of such
shares or fractional share as reported to participants on their statements.
A participant should not be treated as having received a distribution
from TDS as the result of making an optional cash payment under the Plan. The
tax basis of shares or any fraction thereof purchased with optional cash
payments will be the amount of such cash payment.
The holding period for Common Shares or a fraction thereof received as
a result of reinvestment of dividends under the Plan or through optional cash
payments will begin on the day following the purchase date.
Participants will generally not realize any taxable income when they
receive certificates for whole Common Shares credited to their accounts under
the Plan, either upon their request for certificates for certain of those
shares, upon ceasing to be a shareholder of record, upon ceasing to be an
eligible shareholder, or upon withdrawal from or termination of the Plan.
However, a participant may realize a gain or loss when Common Shares acquired
under the Plan are subsequently sold. In addition, participants may realize gain
or loss when they receive a cash adjustment for fractional shares credited to
their accounts upon withdrawal from or termination of the Plan. The amount of
such gain or loss will be the difference between the amount which the
participant receives for his or her shares or fractional share, and his or her
tax basis therefor (with special rules applying to determine the basis allocable
to shares that are not specifically identified when the Participant sells less
than all of his or her shares). Such gain or loss will generally be capital gain
or loss, and will be long-term capital gain or loss if the holding period for
such shares or fractional shares exceeds one year. The excess of net long-term
capital gains over net short-term capital losses is taxed at a lower rate than
ordinary income for certain taxpayers. The distinction between capital gain or
loss and ordinary income and loss is also relevant for purposes of, among other
things, limitations on the deductibility of capital losses. Any loss may be
disallowed under the "wash sale" rules to the extent the shares disposed of are
replaced, through the Plan or otherwise during the 61-day period beginning 30
days before and ending 30 days after the date of disposition.
29. What Provision Is Made For Shareholders, Foreign And Domestic, Whose
Dividends Are Subject To Income Tax Withholding?
In the case of foreign shareholders who elect to have their dividends
reinvested and whose dividends are subject to United States income tax
withholding, the Agent will invest in TDS's Series A Common Shares an amount
equal to the dividends of such foreign participants less the amount of tax
required to be withheld.
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Under certain circumstances, TDS may be required to backup-withhold
income tax on the dividends of participating domestic shareholders, including
those domestic shareholders who do not accurately report their dividend income,
fail to provide TDS with their taxpayer identification number, provide TDS with
an incorrect taxpayer identification number or fail to provide TDS with a
certificate setting forth that they are not subject to backup withholding. If
this should occur, 31% of the dividend income, or such other percentage as may
be required from time to time, will be withheld.
The statements of account sent to participants will indicate the amount
of any income tax withheld. TDS cannot refund amounts withheld. Participants
subject to withholding should contact their tax advisors or the IRS for
additional information.
30. What Are The Responsibilities Of The Shareholders' Agent And TDS Under
The Plan?
In performing their duties under the Plan, the Agent and TDS will at
all times act in the best interests of the participants. However, they will not
be liable for any act performed in good faith, or for any good faith omission to
act, including, without limitation, any claims of liability arising out of
failure to terminate a participant's account upon such participant's death prior
to receipt of notice in writing of such death.
Although the Plan contemplates the continuation of quarterly Series A
Common Share dividend payments, the payment of future Series A Common Share
dividends will depend upon future earnings, the amount available for payment of
dividends by TDS, the financial condition of TDS and other factors.
TERMINATION BY TDS
31. May The Plan Be Changed Or Discontinued?
TDS reserves the right to suspend, modify or terminate the Plan at any
time. All participants will receive notice of such suspension, modification or
termination.
LEGAL MATTERS
Certain legal matters relating to the securities offered by this
Prospectus have been passed upon for TDS by Sidley & Austin, Chicago, Illinois.
TDS is controlled by a voting trust. Walter C.D. Carlson, a trustee and
beneficiary of the voting trust and a director of TDS and U.S. Cellular, Michael
G. Hron, the General Counsel and an Assistant Secretary of TDS and U.S. Cellular
and the Secretary or Assistant Secretary of certain subsidiaries of TDS, William
S. DeCarlo, an Assistant Secretary of TDS and certain subsidiaries of TDS, and
Stephen P. Fitzell, an Assistant Secretary of certain subsidiaries of TDS, are
partners of Sidley & Austin.
EXPERTS
The audited consolidated financial statements and schedules of TDS
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
incorporated by reference herein. The financial statements and schedules
referred to above have been incorporated by reference in reliance upon the
authority of such firms as experts in accounting and auditing in giving said
reports.
WHERE YOU CAN FIND MORE INFORMATION
TDS files reports, proxy statements and other information with the
Securities and Exchange Commission ("SEC"). You may inspect and copy such
reports, proxy statements and other information at the public reference
facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information. Such materials also may be accessed electronically by means
of the SEC's web site at http://www.sec.gov.
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TDS filed a Registration Statement related to the offering described in
this Prospectus. As allowed by SEC rules, this Prospectus does not contain all
of the information which you can find in the Registration Statement. You are
referred to the Registration Statement and the Exhibits thereto for further
information. This document is qualified in its entirely by such other
information.
The SEC allows us to "incorporate by reference" information into this
Prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this Prospectus, except for
any information superseded by information in this Prospectus.
This Prospectus incorporates by reference the documents set forth below
that have been previously filed with the SEC. These documents contain important
information about TDS's business and finances.
1. TDS's Annual Report on Form 10-K for the year ended December 31, 1999;
2. TDS's Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30, and September 30, 2000;
3. TDS's Current Report on Form 8-K reporting events on May 4, November
20, and November 24, 2000; and
4. TDS's Report on Form 8-A/A-3 dated May 22, 1998, which includes a
description of TDS's capital stock.
5. TDS's Prospectus dated September 26, 2000.
This Prospectus also incorporates by reference additional documents
that may be filed by TDS with the SEC between the date of this Prospectus and
the date our offering is completed.
You may obtain copies of such documents which are incorporated by
reference in this Prospectus, other than exhibits thereto which are not
specifically incorporated by reference herein, without charge, upon written or
oral request to Investor Relations, Telephone and Data Systems, Inc., 30 N.
LaSalle Street, Suite 4000, Chicago, IL 60602, (312) 630-1900. In order to
ensure timely delivery of documents, any request therefor should be made not
later than five business days prior to making an investment decision.
You should rely only on the information contained in or incorporated by
reference in this Prospectus. We have not authorized anyone to provide you with
information that is different from what is contained in this Prospectus. You
should not assume that the information contained in the Prospectus is accurate
as of any date other than the date of such Prospectus, and neither the mailing
of the Prospectus to shareholders nor the issuance of any securities hereunder
shall create any implication to the contrary. This Prospectus does not offer to
buy or sell any securities in any jurisdiction where it is unlawful to do so.
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