<PAGE>
2,500,000 SHARES
DOLE FOOD
AUTOMATIC COMMON EXCHANGE SECURITY TRUST
$2.75 "TRUST AUTOMATIC COMMON EXCHANGE SECURITIES" (TRACES-TM-/-SM-)
(SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK OF DOLE FOOD COMPANY, INC.)
--------------
Each of the $2.7475 Automatic Common Exchange Securities (the "Securities")
of Dole Food Automatic Common Exchange Security Trust (the "Trust") represents
the right to receive an annual distribution of $2.7475, and will be exchanged
for between 0.8329 shares and 1 share of common stock, no par value (the "Common
Stock"), of Dole Food Company , Inc. (the "Company") on August 15, 1999 (the
"Exchange Date"). The annual distribution of $2.7475 per Security is payable
quarterly on each February 15, May 15, August 15 and November 15, commencing
November 15, 1996. The Securities are not subject to redemption.
The Trust is a newly organized, finite-term Trust established to purchase
and hold a portfolio of stripped U.S. Treasury securities maturing on a
quarterly basis through the Exchange Date, and a forward purchase contract (the
"Contract") with an existing shareholder (the "Seller") of the Company relating
to the Common Stock. The Trust's investment objective is to provide each holder
of Securities with a quarterly distribution of $0.6869 per Security and, on the
Exchange Date, a number of shares of Common Stock per Security equal to the
Exchange Rate. The Exchange Rate is equal to (i) if the Current Market Price is
less than $47.125 (the "Appreciation Threshold Price") but equal to or greater
than $39.25 (the "Initial Price"), a number (or fractional number) of shares of
Common Stock per Security having a value (determined at the Current Market
Price) equal to the Initial Price, (ii) if the Current Market Price is equal to
or greater than the Appreciation Threshold Price, 0.8329 shares of Common Stock
per Security and (iii) if the Current Market Price is less than the Initial
Price, 1 share of Common Stock per Security, subject in each case to adjustment
in certain events. Holders otherwise entitled to receive fractional shares in
respect of their aggregate holdings of Securities will receive cash in lieu
thereof. The "Initial Price" is $39.25 per share of Common Stock. The "Current
Market Price" means the average Closing Price per share of Common Stock for the
20 Trading Days immediately prior to, but not including, the Exchange Date. In
lieu of delivery of the Common Stock, the Seller may elect under the Contract to
pay cash on the Exchange Date in an amount equal to the then current market
value of the number of shares of the Common Stock determined under the above
formula (the "Cash Settlement Alternative"). To the extent the Seller elects the
Cash Settlement Alternative, holders of Securities will receive cash instead of
Common Stock on the Exchange Date. Holders otherwise entitled to receive
fractional shares in respect of their aggregate holdings of Securities will
receive cash in lieu thereof.
Holders of Securities will receive distributions at a higher annual rate
than the current annual dividends paid on the Common Stock. There is no
assurance, however, that the yield on the Securities will be higher than the
dividend yield on the Common Stock over the term of the Trust. In addition, the
opportunity for equity appreciation afforded by an investment in the Securities
is less than that afforded by an investment in the Common Stock because holders
of Securities will realize no equity appreciation if, on the Exchange Date, the
Current Market Price of the Common Stock is below the Appreciation Threshold
Price, and less than all of the appreciation if at that time the Current Market
Price is above the Appreciation Threshold Price. Holders of Securities will
realize the entire decline in equity value if the Current Market Price is less
than the price to public per Security shown below.
The Company is not affiliated with the Trust.
The Securities have been approved for listing on the American Stock Exchange
under the symbol DLA. Prior to this offering there has been no public market for
the Securities. The last reported sale price of the Common Stock on the New York
Stock Exchange on August 8, 1996, was $39.25 per share.
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" ON PAGE 16 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN
FACTORS RELEVANT TO AN INVESTMENT IN THE SECURITIES.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO PUBLIC SALES LOAD(1) PROCEEDS TO THE TRUST(2)
--------------- -------------- ------------------------
<S> <C> <C> <C>
Per Security....................................................... $39.25 $ --(4) $39.25
Total(3)........................................................... $98,125,000 $ --(4) $98,125,000
</TABLE>
- --------------------------
(1) The Company and the Seller have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting".
(2) Expenses of the offering, which are payable by Goldman, Sachs & Co. and the
Seller, are estimated to be $219,000.
(3) The Trust has granted to the Underwriters an option for 30 days to purchase
up to an additional 372,452 Securities at the price to the public per
Security, solely to cover over-allotments. If the option is exercised in
full, the total Price to Public and Proceeds to the Trust will be
$112,743,741. See "Underwriting".
(4) In light of the fact that the proceeds of the sale of the Securities will be
used in part by the Trust to purchase the Contract from the Seller, the
Underwriting Agreement provides that the Seller will pay to the Underwriters
as compensation ("Underwriters' Compensation") $1.18 per Security. See
"Underwriting".
----------------
The Securities are offered by Goldman, Sachs & Co., as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that certificates for the
Securities will be ready for delivery through the Facilities of the Depository
Trust Company, on or about August 14, 1996.
GOLDMAN, SACHS & CO.
---------
The date of this Prospectus is August 8, 1996.
<PAGE>
The Trust has adopted a policy that the Contract may not be disposed of
during the term of the Trust. The Trust will continue to hold the Contract
despite any significant decline in the market price of the Common Stock or
adverse changes in the financial condition of the Company.
This Prospectus sets forth concisely information about the Trust that a
prospective investor ought to know before investing. Potential investors are
advised to read this Prospectus and to retain it for future reference.
The Securities may be a suitable investment for those investors who are able
to understand the unique nature of the Trust and the economic characteristics of
the Contract and the U.S. Treasury securities held by the Trust.
The Trust will be a grantor trust for federal income tax purposes and each
holder of Securities will be treated as the owner of its pro rata portions of
the stripped U.S. Treasury securities and the Contract. For a discussion of the
principal United States federal income tax consequences of ownership of
Securities, see "Certain Federal Income Tax Considerations".
THE TRUST IS A NEWLY ORGANIZED CLOSED-END INVESTMENT COMPANY WITH NO
PREVIOUS HISTORY OF PUBLIC TRADING. TYPICAL CLOSED-END FUND SHARES FREQUENTLY
TRADE AT A PREMIUM TO OR DISCOUNT FROM NET ASSET VALUE. THIS CHARACTERISTIC OF
INVESTMENTS IN A CLOSED-END INVESTMENT COMPANY IS A RISK SEPARATE AND DISTINCT
FROM THE RISK THAT THE TRUST'S NET ASSET VALUE WILL DECREASE. THE TRUST CANNOT
PREDICT WHETHER ITS SHARES WILL TRADE AT, BELOW OR ABOVE NET ASSET VALUE. THE
RISK OF PURCHASING INVESTMENTS IN A CLOSED-END COMPANY THAT MIGHT TRADE AT A
DISCOUNT MAY BE GREATER FOR INVESTORS WHO WISH TO SELL THEIR INVESTMENTS SOON
AFTER COMPLETION OF AN INITIAL PUBLIC OFFERING.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OR
THE COMMON STOCK AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE
PACIFIC STOCK EXCHANGE, THE AMERICAN STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY OF THE PROVISIONS RELATING TO THE SECURITIES DOES NOT PURPORT
TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN TERMS USED IN THIS SUMMARY ARE
DEFINED ELSEWHERE IN THIS PROSPECTUS.
THE TRUST
GENERAL. The Trust is a newly organized, finite-term trust. The Trust will
be registered as a non-diversified closed-end management investment company
under the Investment Company Act of 1940 (the "Investment Company Act"). Under
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable to grantor trusts, the Trustees will not have the power to vary the
investments held by the Trust.
INVESTMENT OBJECTIVE AND POLICIES. The Trust will purchase and hold a
portfolio of stripped U.S. Treasury securities maturing on a quarterly basis
through the Exchange Date and the Contract with the Seller obligating the
Seller, on the Exchange Date, to deliver to the Trust a number of shares of
Common Stock equal to the product of the Exchange Rate times the initial number
of shares subject to the Contract (or the Current Market Price thereof). It is
the Trust's investment objective to provide the holders of Securities
("Holders") with a quarterly distribution of $0.6869 per Security (which amount
equals the pro rata portion of the fixed quarterly cash distributions from the
proceeds of the maturing U.S. Treasury securities) and, on the Exchange Date, a
number of shares of Common Stock per Security equal to the Exchange Rate or, if
the Seller elects the Cash Settlement Alternative, an amount in cash equal to
the Current Market Price thereof. The Exchange Rate is equal to (i) if the
Current Market Price is less than the Appreciation Threshold Price but equal to
or greater than the Initial Price, a number (or fractional number) of shares of
Common Stock per Security having a value (determined at the Current Market
Price) equal to the Initial Price, (ii) if the Current Market Price is equal to
or greater than the Appreciation Threshold Price, 0.8329 shares of Common Stock
per Security and (iii) if the Current Market Price is less than the Initial
Price, 1 share of Common Stock per Security, subject in each case to adjustment
in certain events. This provides the Trust with the potential for a portion of
any capital appreciation above the Appreciation Threshold Price on the Common
Stock, but no protection from depreciation of the Common Stock. Holders
otherwise entitled to receive fractional shares in respect of their aggregate
holdings of Securities will receive cash in lieu thereof. See "Investment
Objective and Policies -- Trust Termination".
The purchase price under the Contract is equal to $31.7438 per share of
Common Stock initially subject thereto and $79,440,466 (2,502,548 shares of
Common Stock) in the aggregate (exclusive of the over-allotment option) and is
payable to the Seller by the Trust at the closing of the offering of the
Securities. The obligations of the Seller under the Contract will be secured by
a pledge of the Common Stock or, at the election of the Seller, by substitute
collateral consisting of short-term, direct obligations of the U.S. Government.
See "Investment Objective and Policies -- The Contract -- Collateral
Arrangements; Acceleration".
THE OFFERING
The Trust is offering 2,500,000 Securities to the public at a purchase price
of $39.25 per Security (which is equal to the last reported sale price of the
Common Stock on the date of the Offering) through Goldman, Sachs & Co. ("Goldman
Sachs" or the "Underwriters"). In addition, the Underwriters have been granted
options to purchase up to 372,452 additional Securities solely for the purpose
of covering over-allotments. See "Underwriting".
THE SECURITIES
GENERAL. The Securities are designed to provide investors with a higher
distribution per Security than the dividend currently paid per share on the
Common Stock. The annual distribution on the Securities is $2.7475 per share.
Based on the current annual dividend rate of $.40 per share of Common Stock, the
annual per share distribution per Security is $2.3475 greater than the current
annual per share dividend rate on the Common Stock. Future declarations of
dividends on the Common Stock by the
3
<PAGE>
Company and the amount of such dividends are discretionary with its Board of
Directors and subject to legal and other factors. Such further declarations will
necessarily depend on the Company's future earnings, financial condition,
capital requirements and other factors. Quarterly distributions on the
Securities will consist solely of the cash received from the U.S. Treasury
securities. The Trust will not be entitled to any dividends that may be declared
on the Common Stock.
Holders will receive distributions at a higher annual rate than the current
annual dividends paid on the Common Stock. There is no assurance, however, that
the yield on the Securities will be higher than the dividend yield on the Common
Stock over the term of the Trust. In addition, the opportunity for equity
appreciation afforded by an investment in the Securities is less than that
afforded by an investment in the Common Stock because Holders will realize no
equity appreciation if, on the Exchange Date, the Current Market Price of the
Common Stock is below the Appreciation Threshold Price (which represents an
appreciation of 120.06% of the Initial Price). Moreover, because a Holder will
only receive 0.8329 shares of Common Stock per Security (or the current Market
Price thereof) if the Current Market Price exceeds the Appreciation Threshold
Price, Holders will only be entitled to receive upon exchange 83.29% of any
appreciation of the value of the Common Stock in excess of the Appreciation
Threshold Price. Holders of Securities will realize the entire decline in equity
value if the Current Market Price is less than the price to public per Security
shown on the cover page hereof.
DISTRIBUTIONS. Holders are entitled to receive distributions at the rate
per Security of $2.7475 per annum or $0.6869 per quarter, payable quarterly on
each February 15, May 15, August 15 and November 15 or, if any such date is not
a business day, on the next succeeding business day, to Holders of record as of
each February 1, May 1, August 1 and November 1, respectively. The first
distribution, in respect of the period from Closing until November 15, 1996,
will be payable on November 15, 1996 to Holders of record as of November 1, 1996
and will equal $0.6945 per Security. See "Investment Objective and Policies --
General".
MANDATORY EXCHANGE. On the Exchange Date, each outstanding Security will be
exchanged automatically for between 0.8329 shares and 1 share of Common Stock,
subject to adjustment in the event of certain dividends or distributions,
subdivisions, splits, combinations, issuances of certain rights or warrants or
distributions of certain assets with respect to the Common Stock. In lieu of
delivery of the Common Stock, the Seller may elect under the Contract to pay
cash on the Exchange Date in an amount equal to the then Current Market Price of
such number of shares of the Common Stock (the "Cash Settlement Alternative").
If the Seller elects the Cash Settlement Alternative, Holders will receive cash
instead of Common Stock on the Exchange Date. In addition, in the event of a
merger of the Company into another entity, or the liquidation of the Company, or
in certain related events, Holders would receive consideration in the form of
cash or Marketable Securities (as defined below under the caption "Investment
Objective and Policies -- The Contract -- Dilution Adjustments") rather than
shares of Common Stock. Further, the occurrence of certain defaults by the
Seller under the Contract or the collateral arrangements would cause the
acceleration of the Contract and the exchange of each Security for an amount of
shares of Common Stock (or Marketable Securities), cash, or a combination
thereof, in respect of the shares of Common Stock and the U.S. Treasury
Securities. See "Investment Objective and Policies -- The Contract -- Collateral
Arrangements; Acceleration"; "-- The U.S. Treasury Securities" and "-- Trust
Termination".
VOTING RIGHTS. Holders will have the right to vote on matters affecting the
Trust, as described below under the caption "Description of the Securities", but
will have no voting rights with respect to the Common Stock prior to receipt of
shares of Common Stock by the Holders as a result of the exchange of the
Securities for the Common Stock on the Exchange Date. See "Investment Objective
and Policies -- The Company" and "Description of the Securities".
THE COMPANY
The Company is engaged in the business of food production and distribution.
The Company is one of the largest companies engaged in the worldwide sourcing,
growing, processing, distributing and
4
<PAGE>
marketing of high quality, branded fresh produce. The Company sources, grows,
processes or markets fruits, vegetables, nuts and beverages in the following
locations: North America, Latin America, Asia and Europe.
Reference is made to the accompanying prospectus of the Company (pages A-1
through A-6 hereto) which describes the Company and the shares of Common Stock
of the Company deliverable to the Holders upon mandatory exchange of the
Securities on the Exchange Date. The Company is not affiliated with the Trust
and will not receive any of the proceeds from the sale of the Securities. The
Company prospectus relates to an aggregate of 2,500,000 shares of Common Stock
(plus an additional 372,452 shares that may be delivered upon exercise of the
Underwriters' over-allotment option).
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be treated as a grantor trust for federal income tax
purposes. Accordingly, each Holder will be treated for federal income tax
purposes as the owner of its pro rata portion of the U.S. Treasury securities
and the Contract, and income received (including original issue discount treated
as received) by the Trust will generally be treated as income of the Holders.
The U.S. Treasury securities held by the Trust will be treated for federal
income tax purposes as having "original issue discount" that will accrue over
the term of the U.S. Treasury securities. It is currently anticipated that a
substantial portion of each quarterly cash distribution to the Holders will be
treated as a tax-free return of the Holders' investment in the U.S. Treasury
securities and therefore will not be considered current income for federal
income tax purposes. However, a Holder (whether on the cash or accrual method of
tax accounting) must recognize currently as income original issue discount on
the U.S. Treasury securities as it accrues. A Holder will have taxable gain or
loss upon receipt of cash in lieu of Common Stock distributed upon termination
of the Trust. Each Holder's basis in its Common Stock will be equal to its basis
in its pro rata portion of the Contract less the portion of such basis allocable
to any shares of Common Stock for which cash is received. See "Certain Federal
Income Tax Considerations".
ALTERNATIVE FEDERAL INCOME TAX CHARACTERIZATIONS
Holders should also be aware that there are alternative characterizations of
the assets of the Trust which could require Holders to include more interest in
income than they would include in income under the analysis set out above. See
"Certain Federal Income Tax Considerations".
MANAGEMENT AND ADMINISTRATION OF THE TRUST
The Trust will be internally managed and will not have an investment
adviser. The administration of the Trust will be overseen by three Trustees. The
day-to-day administration of the Trust will be carried out by The Bank of New
York (or its successor) as trust administrator (the "Administrator"). The Bank
of New York (or its successor) will also act as custodian (the "Custodian") for
the Trust's assets and as paying agent (the "Paying Agent"), registrar and
transfer agent with respect to the Securities. Except as aforesaid, The Bank of
New York has no other affiliation with, and is not engaged in any other
transaction with, the Trust. See "Management and Administration of the Trust".
LIFE OF THE TRUST
The Trust will terminate automatically on or shortly after the Exchange
Date. Promptly after the Exchange Date the shares of Common Stock or cash, as
the case may be, to be exchanged for the Securities and other remaining Trust
assets, if any, will be distributed pro rata to Holders. See "Investment
Objective and Policies -- Trust Termination".
RISK FACTORS
The Trust will not be managed in the traditional sense. The Trust has
adopted a policy that the Contract may not be disposed of during the term of the
Trust and that the U.S. Treasury securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities and the
termination of the Trust. The Trust will continue to hold the Contract despite
any significant decline in the market price of the Common Stock or adverse
changes in the financial condition of the Company. See "Risk Factors -- Internal
Management; No Portfolio Management" and "Management and Administration of the
Trust -- Trustees".
5
<PAGE>
Holders will receive distributions at a higher annual rate than the current
annual dividends paid on the Common Stock. There is no assurance, however, that
the yield on the Securities will be higher than the dividend yield on the Common
Stock over the term of the Trust. In addition, the opportunity for equity
appreciation afforded by an investment in the Securities is less than that
afforded by an investment in the Common Stock because Holders will realize no
equity appreciation if at the Exchange Date the Current Market Price of the
Common Stock is below the Appreciation Threshold Price (which represents an
appreciation of 120.06% of the Initial Price). Moreover, because a Holder will
only receive 0.8329 shares of Common Stock per Security (or the Current Market
Price thereof) if the Current Market Price exceeds the Appreciation Threshold
Price, Holders will only be entitled to receive upon exchange 83.29% of any
appreciation of the value of the Common Stock in excess of the Appreciation
Threshold Price. Holders of Securities will realize the entire decline in equity
value if the Current Market Price is less than the price to public per Security
shown on the cover page hereof.
The Trust is classified as a "non-diversified" investment company under the
Investment Company Act. Consequently, the Trust is not limited by the Investment
Company Act in the proportion of its assets that may be invested in the
securities of a single issuer. Since the only securities held by the Trust will
be the U.S. Treasury securities and the Contract, the Trust may be subject to
greater risk than would be the case for an investment company with diversified
investments. See "Investment Objective and Policies" and "Risk Factors --
Non-Diversified Status".
The trading prices of the Securities in the secondary market will be
directly affected by the trading prices of the Common Stock in the secondary
market. Trading prices of Common Stock will be influenced by the Company's
operating results and prospects and by economic, financial and other factors and
market conditions.
Holders of the Securities will not be entitled to any rights with respect to
the Common Stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions in respect thereof) unless and
until such time, if any, as the Seller shall have delivered shares of Common
Stock pursuant to the Contract at the Exchange Date.
A bankruptcy of the Seller could adversely affect the timing of exchange or,
as a result, the amount received by the Holders in respect of the Securities.
See "Risk Factors -- Risk Relating to Bankruptcy of Seller."
LISTING
The Securities have been approved for listing on the American Stock Exchange
(the "AMEX") under the symbol DLA.
FEES AND EXPENSES
In light of the fact that the proceeds of the sale of the Securities will be
used in part by the Trust to purchase the Contract from the Seller, the
Underwriting Agreement provides that the Seller will pay Underwriters'
Compensation to the Underwriters of $1.18 per Security. See "Underwriting".
Estimated organization costs of the Trust in the amount of $10,000 and estimated
costs of the Trust in connection with the initial registration and public
offering of the Securities in the amount of $103,000 will be paid by Goldman
Sachs. Other estimated costs of the Trust in connection with the public offering
of the Securities in the amount of $116,000 will be paid by the Seller. Each of
the Administrator, the Custodian and the Paying Agent, and each Trustee will be
paid by Goldman Sachs at the closing of the offering of the Securities a
one-time, up-front amount in respect of its ongoing fees and, in the case of the
Administrator, anticipated expenses of the Trust (estimated to be $300,000 in
the aggregate), over the term of the Trust. Goldman Sachs have agreed to pay any
on-going expenses of the Trust in excess of these estimated amounts and to
reimburse the Trust for any amounts it may be required to pay as indemnification
to any Trustee, the Administrator, the Custodian or the Paying Agent. See
"Management and Administration of the Trust -- Estimated Expenses".
Regulations of the Securities and Exchange Commission ("SEC") applicable to
closed-end investment companies designed to assist investors in understanding
the costs and expenses that an investor
6
<PAGE>
will bear directly or indirectly require the presentation of Trust expenses in
the following format. Because the Trust will not bear any fees or expenses,
investors will not bear any direct expenses. The only expenses that an investor
might be considered to be bearing indirectly are (i) the Underwriters'
Compensation payable by the Seller with respect to such investor's Securities
and (ii) the organizational and offering expenses of the Trust, an estimated
$76,333 of which would be allocable to each year of the Trust's existence, and
the ongoing expenses of the trust (including fees of the Administrator,
Custodian, Paying Agent and Trustees), estimated at $100,000 per year, payable
by Goldman Sachs at the closing of the offering. See "Investment Objective and
Policies -- General".
INVESTOR TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load (as a percentage of offering price)....................... 3.0%
Dividend Reinvestment and Cash Purchase Plan Fees.................... N/A
</TABLE>
ANNUAL EXPENSES
<TABLE>
<S> <C>
Management Fees.................................................... 0%
Other Expenses (after reimbursement by Goldman Sachs)*............. 0.039%
---------
Total Annual Expenses (after reimbursement by Goldman
Sachs)*....................................................... 0.039%
---------
---------
</TABLE>
- ------------------------------
* Absent the reimbursement, the Trust's "total annual expenses" would be equal
to approximately 0.179% of the Trust's average net assets. Goldman Sachs is
paying expenses on behalf of the Trust out of its normal underwriting
compensation.
SEC regulations also require that closed-end investment companies present an
illustration of cumulative expenses (both direct and indirect) that an investor
would bear. The example is required to factor in the applicable Sales Load and
to assume, in addition to a 5% annual return, the reinvestment of all
distributions at net asset value. INVESTORS SHOULD NOTE THAT THE ASSUMPTION OF A
5% ANNUAL RETURN DOES NOT ACCURATELY REFLECT THE FINANCIAL TERMS OF THE TRUST.
SEE "INVESTMENT OBJECTIVE AND POLICIES -- GENERAL." ADDITIONALLY, THE TRUST DOES
NOT PERMIT THE REINVESTMENT OF DISTRIBUTIONS.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
You would bear the following expenses (I.E., the applicable sales load
and allocable portion of ongoing expenses paid by Goldman Sachs and the
Seller) on a $1,000 investment, assuming a 5% annual return............. $ 30.39 $ 31.22
</TABLE>
7
<PAGE>
THE TRUST
The Trust is a newly organized New York trust and is registered as a
closed-end investment company under the Investment Company Act. The Trust was
formed on January 18, 1996 pursuant to a trust agreement dated as of such date
and amended and restated as of August 8, 1996. The address of the Trust is 85
Broad Street, New York, New York 10004 (telephone no. (212) 902-1000).
USE OF PROCEEDS
The net proceeds of this offering will be used on or shortly after the date
on which this offering is completed to purchase a fixed portfolio comprised of
stripped U.S. Treasury securities with face amounts and maturities corresponding
to the quarterly distributions payable with respect to the Securities and the
payment dates thereof, and to pay the purchase price under the Contract to the
Seller.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust will purchase and hold a portfolio of stripped U.S. Treasury
securities maturing on a quarterly basis through the Exchange Date and the
Contract relating to the Common Stock of the Company. The Trust's investment
objective is to provide each Holder with a quarterly cash distribution of
$0.6869 per Security (which amount equals the pro rata portion of the fixed
quarterly distributions from the proceeds of the maturing U.S. Treasury
securities held by the Trust) and, on the Exchange Date, a number of shares of
Common Stock per Security equal to the Exchange Rate or, if the Seller elects
the Cash Settlement Alternative, an amount in cash equal to the Current Market
Price thereof. The Exchange Rate is equal to (i) if the Current Market Price is
less than the Appreciation Threshold Price but equal to or greater than the
Initial Price, a number (or fractional number) of shares of Common Stock per
Security equal to the Initial Price divided by the Current Market Price (i.e.,
the value of such shares of Common Stock (determined at the Current Market
Price) shall equal the Initial Price), (ii) if the Current Market Price is equal
to or greater than the Appreciation Threshold Price, 0.8329 shares of Common
Stock per Security and (iii) if the Current Market Price is less than the
Initial Price, 1 share of Common Stock per Security, subject in each case to
adjustment in certain events. See "-- The Contract -- Dilution Adjustments". For
purposes of the preceding clause (i) the Exchange Rate will be rounded upward or
downward to the nearest 1/10,000 (or if there is not a nearest 1/10,000, to the
next lower 1/10,000). Holders otherwise entitled to receive fractional shares in
respect of their aggregate holdings of Securities will receive cash in lieu
thereof. See "-- Trust Termination". The Current Market Price per share of
Common Stock means the average Closing Price (as defined below) of a share of
Common Stock on the 20 Trading Days (as defined below) immediately prior to but
not including the Exchange Date. The Closing Price of the Common Stock on any
date of determination means the daily closing sale price (or, if no closing sale
price is reported, the last reported sale price) of the Common Stock as reported
on the New York Stock Exchange Consolidated Tape on such date of determination
or, if the Common Stock is not listed for trading on the New York Stock Exchange
on any such date, as reported in the composite transactions for the principal
United States securities exchange on which the Common Stock is so listed, or if
the Common Stock is not so listed on a United States national or regional
securities exchange, as reported by The Nasdaq National Market or, if the Common
Stock is not so reported, the last quoted bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, provided that if any event that results in an adjustment to the
number of shares of Common Stock deliverable under the Contract as described
under "-- The Contract -- Dilution Adjustments" occurs prior to the Exchange
Date, the Closing Price as determined pursuant to the foregoing will be
appropriately adjusted to reflect the occurrence of such event. A "Trading Day"
means a day on which the Common Stock (A) is not suspended from trading on any
national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at least once on the national
or regional securities exchange or association or over-the-counter market that
is the primary market for the trading of such security.
8
<PAGE>
A fundamental policy of the Trust is to invest at least 70% of its total
assets in the Contract. The Trust has also adopted a fundamental policy that the
Contract may not be disposed of during the term of the Trust and that the U.S.
Treasury securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust. The
foregoing investment objective and policies are fundamental policies of the
Trust that may not be changed without the approval of a majority of the Fund's
outstanding Securities. A "majority of the Fund's outstanding Securities" means
the lesser of (i) 67% of the Securities represented at a meeting at which more
than 50% of the outstanding Securities are represented, and (ii) more than 50%
of the outstanding Securities.
The value of the Common Stock (or cash or Marketable Securities received in
lieu thereof) that will be received by Holders in respect of the Securities on
the Exchange Date may be more or less than the amount paid for the Securities
offered hereby.
For illustrative purposes only, the following chart shows the number of
shares of Common Stock that a Holder would receive for each Security at various
Current Market Prices. The chart assumes that there would be no adjustments to
the number of shares of Common Stock deliverable under the Contract by reason of
the occurrence of any of the events described under "-- The Contract --Dilution
Adjustments". There can be no assurance that the Current Market Price will be
within the range set forth below. Given the Initial Price of $39.25 per Security
and the Appreciation Threshold Price of $47.125, a Holder would receive in
connection with the exchange of Securities on the Exchange Date the following
number of shares of Common Stock:
<TABLE>
<CAPTION>
CURRENT MARKET PRICE NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK
--------------------- ---------------------
<S> <C>
$ 48.000 0.8329
47.125 0.8329
45.000 0.8722
39.250 1.0000
35.000 1.0000
34.000 1.0000
</TABLE>
The following table sets forth information regarding the distributions to be
received on the U.S. Treasuries, the portion of each year's distributions that
will constitute a return of capital for federal income tax purposes and the
amount of original issue discount accruing, assuming yield-to-maturity accrual
election, on the U.S. Treasuries with respect to a Holder who acquires its
Securities at the issue price from an Underwriter pursuant to the original
offering. See "Certain Federal Income Tax Considerations -- Recognition of
Interest on the U.S. Treasury Securities".
<TABLE>
<CAPTION>
ANNUAL GROSS
ANNUAL GROSS DISTRIBUTIONS FROM ANNUAL RETURN OF ANNUAL INCLUSION OF
DISTRIBUTIONS FROM U.S. TREASURIES CAPITAL PER ORIGINAL ISSUE DISCOUNT
YEAR U.S. TREASURIES PER SECURITY SECURITY IN INCOME PER SECURITY
- ----------------------------- ------------------ ------------------ ----------------- -----------------------
<S> <C> <C> <C> <C>
1996......................... $ 1,738,037 $ 0.6945 $ 0.5329 $ 0.1616
1997......................... 6,875,751 2.7475 2.4081 0.3394
1998......................... 6,875,751 2.7475 2.5498 0.1977
1999......................... 5,156,813 2.0606 2.0147 0.0459
</TABLE>
The annual distribution of $2.7475 per Security is payable quarterly on each
February 15, May 15, August 15 and November 15, commencing November 15, 1996.
Quarterly distributions on the Securities will consist solely of the cash
received from the U.S. Treasury securities. The Trust will not be entitled to
any dividends that may be declared on the Common Stock. See "Management and
Administration of the Trust -- Distributions".
ENHANCED YIELD; LESS EQUITY APPRECIATION THAN COMMON STOCK; NO DEPRECIATION
PROTECTION
Holders will receive distributions at a higher annual rate than the current
annual dividends paid on the Common Stock. However, there is no assurance that
the yield on the Securities will be higher than the dividend yield on the Common
Stock over the term of the Trust. In addition, the opportunity for equity
9
<PAGE>
appreciation afforded by an investment in the Securities is less than that
afforded by an investment in the Common Stock because Holders will realize no
equity appreciation if, on the Exchange Date, the Current Market Price of the
Common Stock is below the Appreciation Threshold Price (which represents an
appreciation of 120.06% of the Initial Price). Moreover, because Holders will
only receive 0.8329 shares of Common Stock per Security (or the Current Market
Price thereof) if the Current Market Price exceeds the Appreciation Threshold
Price, Holders will only be entitled to receive upon exchange 83.29% (the
percentage equal to the Initial Price divided by the Appreciation Threshold
Price) of any appreciation of the value of the Common Stock in excess of the
Appreciation Threshold Price. Holders of Securities will realize the entire
decline in value if the Current Market Price is less than the price to public
per Security shown on the cover page hereof.
THE COMPANY
The Company is engaged in the business of food production and distribution.
The Company is one of the largest companies engaged in the worldwide sourcing,
growing, processing, distributing and marketing of high quality, branded fresh
produce. The Company sources, grows, processes or markets fruits, vegetables,
nuts and beverages in the following locations: North America, Latin America,
Asia and Europe.
The shares of Common Stock are traded on the New York Stock Exchange and the
Pacific Stock Exchange. The following table sets forth, for the calendar
quarters indicated, the reported high and low sales prices of the shares of
Common Stock on the New York Stock Exchange Composite Tape and the cash
dividends per share of Common Stock. As of August 8, 1996, there were 13,649
record holders of the Common Stock, including The Depository Trust Company,
which holds shares of Common Stock on behalf of an indeterminate number of
beneficial owners.
<TABLE>
<CAPTION>
DIVIDEND
HIGH LOW PER SHARE
--------- --------- ---------
<S> <C> <C> <C>
1994
1st Quarter........................... $ 35 1/2 $ 26 3/8 $.10
2nd Quarter........................... 34 1/2 26 1/4 .10
3rd Quarter........................... 30 3/4 26 1/4 .10
4th Quarter........................... 28 3/8 22 1/2 .10
1995
1st Quarter........................... 28 1/2 23 .10
2nd Quarter........................... 31 27 3/4 .10
3rd Quarter........................... 35 1/8 28 3/8 .10
4th Quarter(1)........................ 38 5/8 34 1/8 .10
1996
1st Quarter........................... 42 7/8 33 7/8 .10
2nd Quarter........................... 43 36 3/4 .10
3rd Quarter (through August 8,
1996)................................ 43 3/4 38 1/4
</TABLE>
- ------------------------
(1) On December 28, 1995, the Company completed the separation of its real
estate and resorts entity, Castle & Cooke, Inc. ("Castle") from its food
business. In connection with the distribution, each Company shareholder of
record on December 20, 1995 received a dividend of one share of Castle
common stock for every three shares of the Company's common stock.
Holders will not be entitled to rights with respect to the Common Stock
(including, without limitation, voting rights and rights to receive dividends or
other distributions in respect thereof) until receipt of shares of Common Stock
by the Holders as a result of the exchange of the Securities for the Common
Stock on the Exchange Date.
Reference is made to the accompanying prospectus of the Company, dated
August 8, 1996 (pages A-1 through A-6 hereto) which describes the Company and
the shares of Common Stock deliverable to the Holders upon mandatory exchange of
the Securities on the Exchange Date. The Company is not affiliated with the
Trust and will not receive any of the proceeds from the sale of the
10
<PAGE>
Securities. The Company prospectus relates to an aggregate of 2,500,000 shares
of Common Stock (plus an additional 372,452 shares that may be delivered upon
exercise of the Underwriters' over-allotment option).
THE CONTRACT
GENERAL. The Trust will enter into the Contract with the Seller obligating
the Seller to deliver to the Trust on the Exchange Date a number of shares of
Common Stock equal to the product of the Exchange Rate times the initial number
of shares of Common Stock subject to the Contract. The aggregate initial number
of shares of Common Stock under the Contract will equal the aggregate number of
Securities offered hereby (subject to increase in the event the Underwriters
exercise their overallotment option). The Contract also provides that the Seller
may deliver to the Trust on the Exchange Date, at the Seller's option, an amount
of cash equal to the value of the Common Stock deliverable pursuant to the
Contract (the "Cash Settlement Alternative"). If the Seller elects to deliver
cash in lieu of shares of Common Stock, he would be required to deliver cash in
respect of all shares deliverable pursuant to the Contract.
The purchase price of the Contract was arrived at by arm's-length
negotiation between the Trust and the Seller taking into consideration factors
including the price, expected dividend level and volatility of the Common Stock,
current interest rates, the term of the Contract, current market volatility
generally, the collateral security pledged by the Seller, the value of other
similar instruments and the costs and anticipated proceeds of the offering of
the Securities. All matters relating to the administration of the Contract will
be the responsibility of either the Administrator or the Custodian.
DILUTION ADJUSTMENTS. The Exchange Rate is subject to adjustment if the
Company shall (i) pay a stock dividend or make a distribution with respect to
the Common Stock in shares of such stock, (ii) subdivide or split its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue by reclassification
of its shares of Common Stock any shares of other common stock of the Company.
In any such event, the Exchange Rate shall be multiplied by a dilution
adjustment equal to the number of shares of Common Stock (or, in the case of a
reclassification referred to in clause (iv) above, the number of shares of other
common stock of the Company issued pursuant thereto), or fraction thereof, that
a shareholder who held one share of Common Stock immediately prior to such event
would be entitled solely by reason of such event to hold immediately after such
event.
In addition, if the Company shall issue rights or warrants to all holders of
Common Stock entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than the Then-Current Market Price of the Common Stock
(as defined below) (other than rights to purchase Common Stock pursuant to a
plan for the reinvestment of dividends or interest) then the Exchange Rate shall
be multiplied by a dilution adjustment equal to a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding immediately
prior to the time (determined as described below) the adjustment is calculated
by reason of the issuance of such rights or warrants plus the number of
additional shares offered for subscription or purchase pursuant to such rights
or warrants, and of which the denominator shall be the number of shares of
Common Stock outstanding immediately prior to the time such adjustment is
calculated plus the number of additional shares that the aggregate offering
price of the shares so offered for subscription or purchase would purchase at
the Then-Current Market Price. To the extent that, after expiration of such
rights or warrants, the shares offered thereby shall not have been delivered,
the Exchange Rate shall be further adjusted to equal the Exchange Rate that
would have been in effect had the foregoing adjustment been made upon the basis
of delivery of only the number of shares of Common Stock actually delivered. The
"Then-Current Market Price" of the Common Stock means the average Closing Price
per share of Common Stock for a Calculation Period of five Trading Days
immediately prior to the time such adjustment is calculated (or, in the case of
an adjustment calculated at the opening of business on the business day
following a record date, as described below, immediately prior to the earlier of
the time such adjustment is calculated and the related "ex-date" on which the
shares of Common Stock first trade regular way on their principal market without
the right to receive the relevant dividend, distribution or issuance); provided
that if no Closing Price for the Common
11
<PAGE>
Stock is determined for one or more (but not all) of such Trading Days, such
Trading Day shall be disregarded in the calculation of the Then-Current Market
Price (but no additional Trading Days shall be added to the Calculation Period).
If no Closing Price for the Common Stock is determined for any of such Trading
Days, the most recently available Closing Price for the Common Stock prior to
such five Trading Days shall be the Then-Current Market Price.
Further, if the Company shall pay a dividend or make a distribution to all
holders of Common Stock, in either case, of evidences of its indebtedness or
other non-cash assets (excluding any stock dividends or distributions in shares
of Common Stock) or issue to all holders of Common Stock rights or warrants to
subscribe for or purchase any of its securities (other than rights or warrants
referred to in the previous paragraph), then the Exchange Rate shall be
multiplied by a dilution adjustment equal to a fraction, of which the numerator
shall be the Then-Current Market Price per share of Common Stock, and the
denominator shall be such price less the fair market value (as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Administrator) as of the time the adjustment is calculated of the
portion of such evidences of indebtedness, non-cash assets or rights or warrants
payable in respect of one share of Common Stock.
Further, if the Company distributes cash (other than any Permitted Dividend
(as defined below), any cash distributed in consideration of fractional shares
of Common Stock and any cash distributed in a Reorganization Event (as defined
below) ("Excluded Distributions")), by dividend or otherwise, to all holders of
Common Stock or makes an Excess Purchase Payment (as defined below) then the
Exchange Rate shall be multiplied by a dilution adjustment equal to a fraction,
of which the numerator shall be the Then-Current Market Price on the record date
in respect of such distribution and of which the denominator shall be such price
less the amount of such distribution applicable to one share of Common Stock
that would not be a Permitted Dividend (or in the case of an Excess Purchase
Payment, less the aggregate amount of such Excess Purchase Payment divided by
the number of outstanding shares of Common Stock on such record date). For
purposes of these adjustments, (a) the term "Permitted Dividend" means any
quarterly cash dividend in respect of the Common Stock, other than a quarterly
cash dividend that exceeds the immediately preceding quarterly cash dividend,
and then only to the extent that the per share amount of such dividend results
in an annualized dividend yield on the Common Stock in excess of 12 1/2% and (b)
the term "Excess Purchase Payment" means the excess, if any, of (i) the cash and
the value (as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator, whose determination
shall be conclusive) of all other consideration paid by the Company with respect
to one share of Common Stock acquired in a tender offer or exchange offer by the
Company over (ii) the Then-Current Market Price per share of Common Stock.
If any adjustment in the Exchange Rate is required to be calculated as
described above, corresponding adjustments to the Initial Price and the
Appreciation Threshold Price shall be calculated.
Dilution adjustments shall be effected: (i) in the case of any dividend,
distribution or issuance described above, at the opening of business on the
business day following the record date for determination of holders of Common
Stock entitled to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after such record
date, at the time such dividend, distribution or issuance shall be announced by
the Company; (ii) in the case of any subdivision, split, combination or
reclassification described above, on the effective date of such transaction;
(iii) in the case of any Excess Purchase Payment for which the Company shall
announce, at or prior to the time it commences the relevant share repurchase,
the repurchase price for such shares to be repurchased, on the date of such
announcement; and (iv) in the case of any other Excess Purchase Payment, on the
date that the holders of Common Stock become entitled to payment with respect
thereto. There will be no adjustment under the Contract in respect of any
dividends, distributions, issuances or repurchases that may be declared or
announced after the Exchange Date. If any announcement or declaration of a
record date in respect of a dividend, distribution, issuance or repurchase shall
subsequently be cancelled by the Company, or such dividend, distribution,
issuance or repurchase shall fail to receive requisite approvals or shall fail
to occur for any other reason, then the Exchange Rate
12
<PAGE>
shall be further adjusted to equal the Exchange Rate that would have been in
effect had the adjustment for such dividend, distribution, issuance or
repurchase not been made. All adjustments described herein shall be rounded
upward or downward to the nearest 1/10,000 (or if there is not a nearest
1/10,000, to the next lower 1/10,000). No adjustment in the Exchange Rate shall
be required unless such adjustment would require an increase or decrease of at
least one percent therein; provided, however, that any adjustments which by
reason of the foregoing are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
In the event of (A) any consolidation or merger of the Company, or any
surviving entity or subsequent surviving entity of the Company (a "Company
Successor"), with or into another entity (other than a merger or consolidation
in which the Company is the continuing corporation and in which the Common Stock
outstanding immediately prior to the merger or consolidation is not exchanged
for cash, securities or other property of the Company or another corporation),
(B) any sale, transfer, lease or conveyance to another corporation of the
property of the Company or any Company Successor as an entirety or substantially
as an entirety, (C) any statutory exchange of securities of the Company or any
Company Successor with another corporation (other than in connection with a
merger or acquisition) or (D) any liquidation, dissolution or winding up of the
Company or any Company Successor (any such event described in clause (A), (B),
(C) or (D), a "Reorganization Event"), the Exchange Rate will be adjusted such
that, on the Exchange Date, each Holder will receive for each Security cash in
an amount equal to (i) if the Transaction Value (as defined below) is less than
the Appreciation Threshold Price but equal to or greater than the Initial Price,
the Initial Price, (ii) if the Transaction Value is greater than or equal to the
Appreciation Threshold Price, 0.8329 multiplied by the Transaction Value and
(iii) if the Transaction Value is less than the Initial Price, the Transaction
Value. Notwithstanding the foregoing, to the extent that any Marketable
Securities (as defined below) are received by holders of Common Stock in such
Reorganization Event, then in lieu of delivering cash as provided above, the
Seller may at his option deliver a proportional amount of such Marketable
Securities. If a Seller elects to deliver Marketable Securities, Holders will be
responsible for the payment of any and all brokerage and other transaction costs
upon the sale of such securities.
"Transaction Value" means (i) for any cash received in any such
Reorganization Event, the amount of cash received per share of Common Stock,
(ii) for any property other than cash or Marketable Securities received in any
such Reorganization Event, an amount equal to the market value on the date the
Reorganization Event is consummated of such property received per share of
Common Stock as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator and (iii) for any
Marketable Securities received in any such Reorganization Event, an amount equal
to the average Closing Price per share of such securities on the 20 Trading Days
immediately prior to the Exchange Date multiplied by the number of such
securities received for each share of Common Stock; provided that if no Closing
Price for such Marketable Securities is determined for one or more (but not all)
of such Trading Days, such Trading Days shall be disregarded in the calculation
of such average Closing Price (but no additional Trading Days shall be added to
the Calculation Period). If no Closing Price for the Marketable Securities is
determined for all such Trading Days, the calculation in the preceding clause
(iii) shall be based on the most recently available Closing Price for the
Marketable Securities prior to such 20 Trading Days. The number of shares of
Marketable Securities included in the calculation of Transaction Value for
purposes of the preceding clause (iii) shall be subject to adjustment if a
dilution event of the type described above shall occur with respect to the
issuer of the Marketable Securities between the time of the Reorganization Event
and the Exchange Date.
"Marketable Securities" means any common equity securities listed on a U.S.
national securities exchange or reported by The Nasdaq National Market.
No dilution adjustments will be made for events, other than those described
above, such as offerings of Common Stock (other than through the issuance of
rights or warrants described above) for cash or in connection with acquisitions.
13
<PAGE>
COLLATERAL ARRANGEMENTS; ACCELERATION. The Seller's obligations under the
Contract will be secured by a security interest in the maximum number of shares
of Common Stock subject to the Contract (subject to adjustment in accordance
with the dilution adjustment provisions of the Contract, described above)
pursuant to a Collateral Agreement between such Seller and The Bank of New York,
as collateral agent (the "Collateral Agent"). Unless the Seller is in default in
its obligations under the Security and Pledge Agreement, the Seller will be
permitted to substitute for the pledged shares of Common Stock collateral
consisting of short-term, direct obligations of the U.S. Government. Any U.S.
Government obligations pledged as substitute collateral will be required to have
an aggregate market value at the time of substitution and at daily
mark-to-market valuations thereafter of not less than 150% (or, from and after
any Insufficiency Determination that shall not be cured by the close of business
on the tenth business day thereafter, as described below, 200%) of the product
of the market price of the Common Stock at the time of each valuation times the
number of shares of Common Stock for which such obligations are being
substituted. The Collateral Agreement will provide that, in the event of a
Reorganization Event, the Seller will pledge as alternative collateral any
Marketable Securities received by it in respect of the maximum number of shares
of Common Stock subject to the Contract at the time of the Reorganization Event,
plus U.S. Government obligations having an aggregate market value when pledged
and at daily mark-to-market valuations thereafter of not less than 150% of the
Seller's Cash Delivery Obligations. The Seller's "Cash Delivery Obligations"
shall be the Transaction Value of any consideration other than Marketable
Securities received by the Seller in respect of the maximum number of shares
subject to the Contract at the time of the Reorganization Event. The number of
shares of Marketable Securities required to be pledged shall be subject to
adjustment if any event requiring a dilution adjustment under the Contract shall
occur. The Seller will be permitted to substitute U.S. Government obligations
for Marketable Securities pledged at the time of or after any Reorganization
Event. Any U.S. Government obligations so substituted will be required to have
an aggregate market value at the time of substitution and at daily
mark-to-market valuations thereafter of not less than 150% (or, from and after
any Insufficiency Determination that shall not be cured by the close of business
on the tenth business day thereafter, as described below, 200%) of the product
of the market price per share of Marketable Securities at the time of each
valuation times the number of shares of Marketable Securities for which such
obligations are being substituted. The Collateral Agent will promptly pay over
to the Seller any dividends, interest, principal or other payments received by
the Collateral Agent in respect of any collateral, including any substitute
collateral, unless the Seller is in default of its obligations under the
Collateral Agreement, or unless the payment of such amount to the Seller would
cause the collateral to become insufficient under the Collateral Agreement. The
Seller shall have the right to vote any pledged shares of Marketable Securities
for so long as such shares are owned by him and pledged under the Collateral
Agreement, including after an event of default under the Contract or the
Collateral Agreement.
If the Collateral Agent shall determine (an "Insufficiency Determination")
that U.S. Government obligations pledged as substitute collateral shall fail to
meet the foregoing requirements at any valuation, or that the Seller has failed
to pledge additional collateral required as a result of a dilution adjustment
increasing the maximum number of shares of Common Stock or shares of Marketable
Securities subject to the Contract, and such failure shall not be cured by the
close of business on the tenth business day after such determination, then,
unless a Collateral Event of Default (as defined below) under the Collateral
Agreement shall have occurred and be continuing, the Collateral Agent shall
commence (i) sales of the collateral consisting of U.S. Government obligations
and (ii) purchases, using the proceeds of such sales, of shares of Common Stock
or shares of Marketable Securities, in an amount sufficient to cause the
collateral to meet the requirements under the Collateral Agreement. The
Collateral Agent shall discontinue such sales and purchases if at any time a
Collateral Event of Default under the Collateral Agreement shall have occurred
and be continuing. A "Collateral Event of Default" under the Collateral
Agreement shall mean, at any time, (A) if no U.S. Government obligations shall
be pledged as substitute collateral at such time, failure of the collateral to
consist of at least the maximum number of shares of Common Stock subject to the
Contract at such time (or, if a Reorganization Event shall have occurred at or
prior to such time, failure of the collateral to include the maximum number of
shares of any
14
<PAGE>
Marketable Securities required to be pledged as described above); (B) if any
U.S. Government obligations shall be pledged as substitute collateral for shares
of Common Stock (or shares of Marketable Securities) at such time, failure of
such U.S. Government obligations to have a market value at such time of at least
105% of the market price per share of Common Stock (or the then-current market
price per share of Marketable Securities, as the case may be) times the
difference between (x) the maximum number of shares of Common Stock (or shares
of Marketable Securities) subject to the Contract at such time and (y) the
number of shares of Common Stock (or shares of Marketable Securities) pledged as
collateral at such time; and (C) at any time after a Reorganization Event in
which consideration other than Marketable Securities shall have been delivered,
failure of the U.S. Government obligations pledged in respect of the Cash
Delivery Obligations to have a market value at such time of at least 105% of the
Cash Delivery Obligations, if such failure shall not be cured within ten
business days after notice thereof is delivered to the Seller.
The occurrence of a Collateral Event of Default under the Collateral
Agreement, or the bankruptcy or insolvency of the Seller, will cause an
automatic acceleration of the Seller's obligations under the Contract. In any
such event, the Seller will become obligated to deliver shares of Common Stock
(or, after a Reorganization Event, Marketable Securities or cash or a
combination thereof) having an aggregate value equal to the "Aggregate
Acceleration Value" under the Contract. The Aggregate Acceleration Value will be
based on an "Acceleration Value" determined by the Administrator on the basis of
quotations from independent dealers. Each quotation will be for the amount that
would be paid to the relevant dealer in consideration of an agreement between
the Trust and such dealer that would have the effect of preserving the Trust's
rights to receive Common Stock (or, after a Reorganization Event, the
alternative consideration provided under the Contract) under a portion of the
Contract that corresponds to an initial number of shares of Common Stock equal
to 1,000. The Administrator will request quotations from four nationally
recognized independent dealers on or as soon as reasonably practicable following
the date of acceleration. If four quotations are provided, the Acceleration
Value will be the arithmetic mean of the two quotations remaining after
disregarding the highest and lowest quotations. If two or three quotations are
provided, the Acceleration Value will be the arithmetic mean of such quotations.
If one quotation is provided, the Acceleration Value will be equal to such
quotation. The Aggregate Acceleration Value will be computed by dividing the
Acceleration Value by 1,000 and multiplying the quotient by the initial number
of shares of Common Stock subject to the Contract, except that, if no quotations
are provided, the Aggregate Acceleration Value will be (A) the Current Market
Price per share of Common Stock on the acceleration date times the number of
shares of Common Stock that would be required to be delivered on such date under
the Contract if the Exchange Date were redefined to be the acceleration date or
(B) after a Reorganization Event, the value of the alternative consideration
that would be required to be delivered on such date under the Contract if the
Exchange Date were redefined to be the acceleration date. Upon the occurrence of
a Collateral Event of Default or the bankruptcy or insolvency of the Seller, the
Common Stock (or, after a Reorganization Event, Marketable Securities or cash or
a combination thereof) deliverable for each Security will be based solely on the
Aggregate Acceleration Value described above for the Contract.
Upon any acceleration, the Collateral Agent will distribute to the Trust,
for distribution pro rata to the Holders, the Aggregate Acceleration Value in
the form of shares of Common Stock then pledged, or cash generated from the
liquidation of U.S. Government obligations then pledged, or a combination
thereof (or, after a Reorganization Event, in the form of Marketable Securities
then pledged, cash generated from the liquidation of U.S. Government obligations
then pledged, or a combination thereof). In addition, in the event that by the
Exchange Date any substitute collateral has not been replaced by Common Stock
(or, after a Reorganization Event, cash or Marketable Securities) sufficient to
meet the obligations under the Contract, the Collateral Agent will distribute to
the Trust for distribution pro rata to the Holders the market value of the
Common Stock required to be delivered thereunder, in the form of any shares of
Common Stock then pledged by the Seller plus cash generated from the liquidation
of U.S. Government obligations then pledged by the Seller (or, after a
Reorganization Event, the market value of
15
<PAGE>
the alternative consideration required to be delivered thereunder, in the form
of any Marketable Securities then pledged, plus any cash then pledged, plus cash
generated from the liquidation of U.S. Government obligations then pledged). See
"-- Trust Termination".
DESCRIPTION OF SELLER. The Seller is David H. Murdock, as trustee of the
David H. Murdock Living Trust dated May 28, 1986, as amended. Reference is made
to the caption "Selling Shareholder" in the Company prospectus for information
about the Seller.
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon ("stripped") U.S.
Treasury securities with face amounts and maturities corresponding to the
distributions payable with respect to the Securities and the payment dates
thereof. Up to 30% of the Trust's total assets may be invested in these U.S.
Treasury Securities. In the event that the Contract is accelerated or disposed
of as described under the caption "Management Administration of the Trust --
Trustees", then any such U.S. Treasury securities then held in the Trust shall
be liquidated by the Administrator and distributed pro rata to the Holders,
together with the amounts distributed upon acceleration or any consideration
received by the Trust upon disposition of the Contract. See "-- Collateral
Arrangements; Acceleration" and "-- Trust Termination".
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest the proceeds of the U.S.
Treasury securities and any other cash held by the Trust in short-term
obligations of the U.S. Government maturing no later than the business day
preceding the next following distribution date. Not more than 5% of the Trust's
total assets will be invested in such short-term obligations or held in cash at
any one time.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy, the Trust may not purchase any securities
or instruments other than the U.S. Treasury securities, the Contract and the
Common Stock or other assets received pursuant to the Contract and, for cash
management purposes, short-term obligations of the U.S. Government; issue any
securities or instruments except for the Securities; make short sales or
purchase securities on margin; write put or call options; borrow money;
underwrite securities; purchase or sell real estate, commodities or commodities
contracts including futures contracts; or make loans. The Trust also has adopted
a fundamental policy that the Contract may not be disposed of during the term of
the Trust and that the U.S. Treasury securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities and the
termination of the Trust.
Because of the foregoing limitations, the Trust's investments will be
concentrated in the food production and distribution industry, which is the
industry in which the Company operates. The Trust is not permitted to purchase
restricted securities.
TRUST TERMINATION
The Trust will terminate automatically on or shortly after the Exchange
Date. Alternatively, in the event that the Contract is accelerated, then any
U.S. Treasury securities then held in the Trust shall be liquidated by the
Administrator and distributed pro rata to the Holders, together with the amounts
distributed upon acceleration, and the Trust shall be terminated. See "--
Collateral Arrangements; Acceleration" and "-- The U.S. Treasury Securities".
RISK FACTORS
INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT
The Trust will be internally managed by its Trustees and will not have any
separate investment adviser. It is a fundamental policy of the Trust that the
Contract may not be disposed of during the term of the Trust and that the U.S.
Treasury securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust. As a
result, the Trust will continue to hold the Contract despite significant
declines in the market price of the Common Stock or adverse changes in
16
<PAGE>
the financial condition of the Company (or, after a Reorganization Event,
comparable developments affecting any Marketable Securities or the issuer
thereof). The Trust will not be managed like a typical closed-end investment
company.
LIMITED APPRECIATION POTENTIAL; COMMON STOCK DEPRECIATION RISK
The Trust anticipates that on the Exchange Date it will receive the Common
Stock deliverable pursuant to the Contract, which it will then distribute to
Holders. Although the yield on the Securities is higher than the current
dividend yield on the Common Stock, there is no assurance that the yield on the
Securities will be higher than the dividend yield on the Common Stock over the
term of the Trust. In addition, because the Contract calls for the Seller to
deliver less than the full number of shares of Common Stock subject to the
Contract where the Current Market Price exceeds the Initial Price (and therefore
less than one full share of Common Stock for each outstanding Security), the
Securities have more limited appreciation potential than the Common Stock.
Therefore, the Securities may trade below the value of the Common Stock if the
Common Stock appreciates in value. The value of the Common Stock to be received
by Holders on the Exchange Date (and any cash received in lieu thereof) may be
less than the amount paid for the Securities. Holders of Securities will realize
the entire decline in value if the Current Market Price is less than the price
to public per Security shown on the cover page hereof.
DILUTION ADJUSTMENTS; SHAREHOLDER RIGHTS
The number of shares of Common Stock that Holders are entitled to receive at
the termination of the Trust is subject to adjustment for certain events arising
from stock splits and combinations, stock dividends and certain other actions of
the Company that modify its capital structure. See "Investment Objective and
Policies -- The Contract -- Dilution Adjustments". The number of shares to be
received by Holders may not be adjusted for other events, such as offerings of
Common Stock for cash or in connection with acquisitions, that may adversely
affect the price of the Common Stock and, because of the relationship of the
amount to be received pursuant to the Contract to the price of the Common Stock,
such other events may adversely affect the trading price of the Securities.
There can be no assurance that the Company will not take any of the foregoing
actions, or that it will not make offerings of, or that major shareholders will
not sell any, Common Stock in the future, or as to the amount of any such
offerings or sales. In addition, until the receipt of the Common Stock by
Holders as a result of the exchange of the Securities for the Common Stock,
Holders will not be entitled to any rights with respect to the Common Stock
(including without limitation voting rights and the rights to receive any
dividends or other distributions in respect thereof).
TRADING VALUE; LISTING
The Trust is a newly organized closed-end investment company with no
previous operating history and the Securities are innovative securities. It is
not possible to predict how the Securities will trade in the secondary market.
The trading price of the Securities may vary considerably prior to the Exchange
Date due to, among other things, fluctuations in the price of the Common Stock
(which may occur due to changes in the Company's financial condition, results of
operations or prospects, or because of complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, the stock exchanges or quotation systems on which the Common Stock is
traded and the market segment of which the Company is a part) and fluctuations
in interest rates and other factors that are difficult to predict and beyond the
Trust's control. The Trust believes, however, that because of the yield on the
Securities and the formula for determining the number of shares of Common Stock
to be delivered on the Exchange Date, the Securities will tend to trade at a
premium to the market value of the Common Stock to the extent the Common Stock
price falls and at a discount to the market value of the Common Stock to the
extent the Common Stock price rises.
Shares of closed-end investment companies frequently trade at a premium to
or discount from net asset value. This characteristic of investments in a
closed-end investment company is a risk separate and distinct from the risk that
the Trust's net asset value will decrease. The Trust cannot predict whether its
shares will trade at, below or above net asset value. The risk of purchasing
investments in a closed-end company that might trade at a discount may be
greater for investors who wish to sell their
17
<PAGE>
investments soon after completion of an initial public offering because for
those investors, realization of a gain or loss on their investments is likely to
be more dependent upon the existence of a premium or discount than upon
portfolio performance.
Goldman Sachs currently intend, but are not obligated, to make a market in
the Securities. There can be no assurance that a secondary market will develop
or, if a secondary market does develop, that it will provide the Holders with
liquidity of investment or that it will continue for the life of the Securities.
The Securities have been approved for listing on the AMEX, but there can be no
assurance that the Securities will not later be delisted or that trading in the
Securities on the AMEX will not be suspended. In the event of a delisting or
suspension of trading on such exchange, the Trust will apply for listing of the
Securities on another national securities exchange or for quotation on another
trading market. If the Securities are not listed or traded on any securities
exchange or trading market, or if trading of the Securities is suspended,
pricing information for the Securities may be more difficult to obtain, and the
price and liquidity of the Securities may be adversely affected.
NON-DIVERSIFIED STATUS
The Trust is considered non-diversified under the Investment Company Act,
which means that the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. Since the only securities
or instruments held or received by the Trust will be U.S. Treasury securities
and the Contract or other assets consistent with the terms of the Contract, the
Trust may be subject to greater risk than would be the case for an investment
company with diversified investments.
RISK RELATING TO BANKRUPTCY OF SELLER
The Trust believes that the Contract constitutes a "securities contract" for
purposes of the Bankruptcy Code, performance of which would not be subject to
the automatic stay provisions of the Bankruptcy Code in the event of bankruptcy
of the Seller. It is, however, possible that the Contract will be determined not
to qualify as a "securities contract" for this purpose, in which case the
Seller's bankruptcy may cause a delay in settlement of the Contract, or
otherwise subject the Contract to the bankruptcy proceedings, which could
adversely affect the timing of exchange or, as a result, the amount received by
the Holders in respect of the Securities.
DESCRIPTION OF THE SECURITIES
Each Security represents an equal proportional interest in the Trust, and a
total of Securities will be issued. Upon liquidation of the Trust, Holders are
entitled to share pro rata in the net assets of the Trust available for
distribution. The Securities have no preemptive, redemption or conversion
rights. Securities are fully paid and nonassessable by the Trust. The only
securities that the Trust is authorized to issue are the Securities offered
hereby and those sold to the initial Holder referred to below. See
"Underwriting".
Holders are entitled to a full vote for each Security held on all matters to
be voted on by Holders and are not able to cumulate their votes in the election
of Trustees. The Trustees of the Trust have been selected initially by Goldman
Sachs, as the initial Holder of Securities of the Trust. The Trust intends to
hold annual meetings as required by the rules of the AMEX. The Trustees may call
special meetings of Holders for action by Holder vote as may be required by
either the Investment Company Act or the Trust Agreement. The Holders have the
right, upon the declaration in writing or vote of more than two-thirds of the
outstanding Securities, to remove a Trustee. The Trustees will call a meeting of
Holders to vote on the removal of a Trustee upon the written request of the
Holders of record of 10% of the Securities or to vote on other matters upon the
written request of the Holders of record of 51% of the Securities (unless
substantially the same matter was voted on during the preceding 12 months). The
Trust will also assist in communications with other Holders as required by the
Investment Company Act.
BOOK-ENTRY-ONLY ISSUANCE
The Depositary Trust Company ("DTC") will act as securities depository for
the Securities. The information in this section concerning DTC and DTC's
book-entry system is based upon information obtained from DTC. The Securities
offered hereby will initially be issued only as fully-registered securities
18
<PAGE>
registered in the name of Cede & Co. (as nominee for DTC). One or more
fully-registered global Security certificates will be issued, representing in
the aggregate the total number of Securities, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act. DTC holds securities that its participants ("Participants") deposit with
DTC. DTC also facilities the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations ("Direct Participants").
Access to the DTC system is also available to others such as securities brokers
and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants").
Purchases of Securities within the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of a Security
("Beneficial Owner") is in turn to be recorded on the Direct or Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Securities. Transfers of ownership
interests in Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners.
Beneficial Owners will receive certificates representing their ownership
interests in Securities, upon a resignation of DTC, or upon request delivered to
the Trust Administrator.
DTC has no knowledge of the actual Beneficial Owners of the Securities;
DTC's records reflect only the identity of the Direct Participants to whose
accounts such Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
In connection with payments on the Securities, DTC's practice is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices and will be the responsibility of such Participant and not
of DTC or the Trust, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of dividends to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Securities at any time by giving reasonable notice to the Trust.
Under such circumstances, in the event that a successor securities depository is
not obtained, certificates representing the Securities will be printed and
delivered.
19
<PAGE>
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The Trust will be internally managed by three Trustees. Under the provisions
of the Code applicable to grantor trusts, the Trustees will not have the power
to vary the investments held by the Trust. It is a fundamental policy of the
Trust that the Contract may not be disposed of during the term of the Trust and
that the U.S. Treasury Securities held by the Trust may not be disposed of prior
to the earlier of their respective maturities and termination of the Trust.
The names of the persons who have been elected by Goldman Sachs, the initial
Holder of the Trust, and who will serve as the Trustees are set forth below. The
positions and the principal occupations of the individual Trustees during the
past five years are also set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- ------------------------------------ ---------------------- ------------------------------
<S> <C> <C>
Donald J. Puglisi, 50 MANAGING TRUSTEE Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 51 TRUSTEE Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 57 TRUSTEE Professor of Economics
Center for Economic Education & University of Delaware
Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
Each Trustee who is not a director, officer or employee of any Underwriter
or the Administrator, or of any affiliate thereof, will be paid by the Seller,
on behalf of the Trust, in respect of its annual fee and anticipated
out-of-pocket expenses, a one-time, up-front fee of $10,800. The Trust's
Managing Trustee will also receive an additional up-front fee of $3,600 for
serving in that capacity. The Trustees will not receive, either directly or
indirectly, any compensation, including any pension or retirement benefits, from
the Trust. None of the Trustees receives any compensation for serving as a
trustee or director of any other affiliated investment company.
ADMINISTRATOR
The day-to-day affairs of the Trust will be managed by The Bank of New York
as Trust Administrator pursuant to an Administration Agreement. Under the
Administration Agreement, the Trustees have delegated most of their operational
duties to the Administrator, including without limitation, the duties to: (i)
receive invoices for expenses incurred by the Trust; (ii) with the approval of
the Trustees, engage legal and other professional advisors (other than the
independent public accountants for the Trust); (iii) instruct the Paying Agent
to pay distributions on Securities as described herein; (iv) prepare and mail,
file or publish all notices, proxies, reports, tax returns and other
communications and documents, and keep all books and records, for the Trust; (v)
at the direction of the Trustees, institute and prosecute legal and other
appropriate proceedings to enforce the rights and remedies of the Trust; and
(vi) make all necessary arrangements with respect to meetings of Trustees and
any meetings of Holders. The Administrator, however, will not select the
independent public accountants for the Trust or sell or otherwise dispose of the
Trust assets (except in connection with an acceleration of the Contract or the
settlement of the Contract at the Exchange Date and upon termination of the
Trust).
The Administration Agreement may be terminated by either the Trust or the
Administrator upon 60 days' prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
20
<PAGE>
Except for its roles as Administrator, Custodian, Paying Agent, registrar
and transfer agent for the Trust, The Bank of New York has no other affiliation
with, and is not engaged in any other transactions with, the Trust.
The address of the Administrator is 101 Barclay Street, New York, NY 10286.
CUSTODIAN
The Trust's custodian (the "Custodian") is The Bank of New York pursuant to
a custodian agreement (the "Custodian Agreement"). In the event of any
termination of the Custodian Agreement by the Trust or the resignation of the
Custodian, the Trust must engage a new Custodian to carry out the duties of the
Custodian as set forth in the Custodian Agreement. Pursuant to the Custodian
Agreement, all net cash received by the Trust will be invested by the Custodian
in short-term U.S. Treasury securities maturing on or shortly before the next
quarterly distribution date. The Custodian will also act as collateral agent
under the Collateral Agreement and will hold a perfected security interest in
the Common Stock and U.S. Government obligations or other assets consistent with
the terms of the Contract.
PAYING AGENT
The transfer agent, registrar and paying agent (the "Paying Agent") for the
Securities is The Bank of New York pursuant to a paying agent agreement (the
"Paying Agent Agreement"). In the event of any termination of the Paying Agent
Agreement by the Trust or the resignation of the Paying Agent, the Trust will
use its best efforts to engage a new Paying Agent to carry out the duties of the
Paying Agent.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Paying Agent, the Administrator
and the Custodian, with respect to any claim, liability, loss or expense
(including the costs and expenses of the defense against any claim or liability)
that it may incur in acting as Trustee, Paying Agent, Administrator or
Custodian, as the case may be, except in the case of willful misfeasance, bad
faith, gross negligence or reckless disregard of their respective duties or
where applicable law prohibits such indemnification. Goldman Sachs has agreed to
reimburse the Trust for any amounts it may be required to pay as indemnification
to any Trustee, the Administrator, the Custodian or the Paying Agent. Goldman
Sachs will in turn be reimbursed by the Seller for all such reimbursements paid
by it.
DISTRIBUTIONS
The Trust intends to distribute to Holders on a quarterly basis an amount
equal to $0.6869 per Security (which amount equals the pro rata portion of the
fixed quarterly cash distributions from the proceeds of the maturing U.S.
Treasury securities held by the Trust). The first distribution, in respect of
the period from the Closing until November 15, 1996, will be payable on November
15, 1996 to Holders of Record as of November 1, 1996 and will equal $0.6945 per
Security. Thereafter, distributions will be made on February 15, May 15, August
15 and November 15 of each year to Holders of record as of each February 1, May
1, August 1 and November 1, respectively. A portion of each such distribution
will be treated as a tax-free return of the Holder's investment. See "Investment
Objective and Policies -- General" and "Certain Federal Income Tax
Considerations -- Recognition of Interest on the U.S. Treasury Securities".
Upon termination of the Trust, as described under the caption "Investment
Objective and Policies -- Trust Termination", each Holder will receive any
remaining net assets of the Trust.
The Trust does not permit the reinvestment of distributions.
ESTIMATED EXPENSES
At the closing of this offering Goldman Sachs will pay to each of the
Administrator, the Custodian and the Paying Agent, and to each Trustee, a
one-time, up-front amount in respect of its fee and, in the case of the
Administrator, anticipated expenses of the Trust over the term of the Trust. The
anticipated Trust expenses to be borne by the Administrator include, among other
things, expenses for legal and independent accountants' services, costs of
printing proxies, Securities certificates and Holder reports, expenses of the
Trustees, fidelity bond coverage, stock exchange listing fees and expenses of
qualifying
21
<PAGE>
the Securities for sale in the various states. Organization costs of the Trust
in the amount of $10,000 and estimated costs of the Trust in connection with the
initial registration and public offering of the Securities in the amount of
$103,000 will be paid by Goldman Sachs. Other estimated costs of the Trust in
connection with the public offering of the Securities in the amount of $116,000
will be paid by the Seller.
The amount payable to the Administrator in respect of ongoing expenses of
the Trust was determined based on estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. There cannot, however, be any assurance that actual
operating expenses of the Trust will not be substantially more than this amount.
Any excess expenses will be paid by Goldman Sachs or, in event of their failure
to pay such amounts, the Trust.
22
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the principal United States federal income tax
consequences of ownership of Securities is based upon the opinion of Sullivan &
Cromwell, special tax counsel to the Trust. It deals only with Securities held
as capital assets by a Holder who acquires its Securities at the issue price
from an Underwriter pursuant to the original offering, and not with special
classes of Holders, such as dealers in securities or currencies, banks, life
insurance companies, persons who are not United States Holders (as defined
below), persons that hold Securities that are part of a hedging transaction,
straddle or conversion transaction, or persons whose functional currency is not
the U.S. dollar. The summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), its legislative history, existing and proposed regulations
thereunder, published rulings and court decisions, all as currently in effect
and all subject to change at any time, perhaps with retroactive effect.
Prospective purchasers of Securities should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of ownership of Securities.
A United States Holder is a beneficial owner who or that is (i) a citizen or
resident of the United States, (ii) a domestic corporation or (iii) otherwise
subject to United States federal income taxation on a net income basis in
respect of Securities.
Holders should also be aware that there are alternative characterizations of
the assets of the Trust which could result in different federal income tax
consequences. See "Alternative Characterizations" below. While Sullivan &
Cromwell does not believe these alternative characterizations should apply for
federal income tax purposes, there can be no assurance in this regard, and
Holders should consult their tax advisors concerning the risks associated with
alternative characterizations. The following discussion assumes that no such
alternative characterizations will apply.
TAX STATUS OF THE TRUST. The Trust will be treated as a grantor trust for
federal income tax purposes, and each Holder will be considered the owner of its
pro rata portions of the stripped U.S. Treasury securities and the Contract in
the Trust under the grantor trust rules of the Code. Income received by the
Trust will be treated as income of the Holders in the manner set forth below.
RECOGNITION OF INTEREST ON THE U.S. TREASURY SECURITIES. The U.S. Treasury
securities in the Trust will consist of stripped U.S. Treasury securities. A
Holder will be required to treat its pro rata portion of each U.S. Treasury
security in the Trust as a bond that was originally issued on the date the
Holder purchased its Securities at an original issue discount equal to the
excess of the Holder's pro rata portion of the amounts payable on such U.S.
Treasury security over the Holder's tax basis therefor (determined as described
below). The amount of such excess, however, will constitute only a portion of
the total amounts payable in respect of U.S. Treasury securities held by the
Trust and, consequently, a substantial portion of each quarterly cash
distribution to the Holders will be treated as a tax-free return of the Holders'
investment in the U.S. Treasury securities and will not be considered current
income for federal income tax purposes. See "Investment Objective and Policies
- -- General".
A Holder (whether on the cash or accrual method of tax accounting) will be
required to include original issue discount (other than original issue discount
on short-term U.S. Treasury securities as defined below) in income for federal
income tax purposes as it accrues on a constant yield basis. The Trust expects
that more than 20% of the Holders will be accrual basis taxpayers, in which case
original issue discount on any short-term U.S. Treasury security (I.E., any U.S.
Treasury security with a maturity of one year or less from the date it is
purchased) held by the Trust also will be required to be included in income by
the Holders as it is accrued. Unless a Holder elects to accrue the original
issue discount on a short-term U.S. Treasury security according to a constant
yield method based on daily compounding, such original issue discount will be
accrued on a straight-line basis. The Holder's tax basis in a U.S. Treasury
security will be increased by the amounts of any original issue discount
included in income by the Holder with respect to such U.S. Treasury security.
TAX BASIS OF THE U.S. TREASURY SECURITIES AND THE CONTRACT. A Holder's tax
basis in the Contract and the U.S. Treasury securities, respectively, will equal
its pro rata portion of the amounts paid for them by the Trust. It is currently
anticipated that 19.12% and 80.88% of the proceeds of the offering will be used
by the Trust to purchase the U.S. Treasury securities and as payments for the
Contract, respectively.
23
<PAGE>
TREATMENT OF THE CONTRACT. Each Holder will be treated as having entered
into a pro rata portion of the Contract and, at the Exchange Date, as having
received a pro rata portion of the Common Stock or cash, Marketable Securities
or a combination thereof delivered to the Trust.
DISTRIBUTION OF THE COMMON STOCK. The delivery of Common Stock pursuant to
the Contract will not be taxable to the Holders. Each Holder's basis in its
Common Stock will be equal to its basis in its pro rata portion of the Contract
less the portion of such basis allocable to any fractional shares of Common
Stock for which cash is received. A Holder will recognize capital gain or loss
upon receipt of cash in lieu of fractional shares of Common Stock distributed
upon termination of the Trust equal to the difference between the amount of cash
received and the basis of such fractional share. The holding period for the
Common Stock will begin on the date it is acquired.
DISTRIBUTION OF CASH OR MARKETABLE SECURITIES. If the Seller elects the
Cash Settlement Alternative or, as a result of a Reorganization Event, cash,
Marketable Securities, or a combination of cash and Marketable Securities is
delivered pursuant to the Contract, a Holder will recognize capital gain or loss
upon receipt equal to the difference between the amount of cash received, and
its basis in its pro rata portion of the Contract allocable to any shares for
which such cash was received. Any gain or loss will be capital gain or loss and,
if the Holder has held the Securities for more than one year, such gain or loss
will be long-term capital gain or loss. A Holder's basis in any Marketable
Securities received will be equal to its basis in its pro rata portion of the
Contract less the portion of such basis allocable to any shares of Common Stock
for which cash or fractional shares of Marketable Securities were received. See
"Investment Objective and Policies -- The Contract".
SALE OF SECURITIES. Upon a sale of all or some of a Holder's Securities, a
Holder will be treated as having sold its pro rata portions of the U.S. Treasury
securities and the Contract underlying the Securities. The selling Holder will
recognize gain or loss equal to the difference between the amount realized and
the Holder's aggregate tax bases in its pro rata portions of the U.S. Treasury
securities and the Contract. Any gain or loss will be long-term capital gain or
loss if the Holder has held the Securities for more than one year.
ALTERNATIVE CHARACTERIZATIONS. Sullivan & Cromwell believes the Contract
should be treated for federal income tax purposes as a prepaid forward contract
for the purchase of a variable number of shares of Common Stock. The Internal
Revenue Service could conceivably take the view that the Contract should be
treated as a loan to the Seller in exchange for a contingent debt obligation of
the Seller. If the Internal Revenue Service were to prevail in making such an
assertion and the Contract is entered into on or after August 13, 1996, a Holder
might be required to include original issue discount in income over the life of
the Securities based on the excess of the anticipated value of the Common Stock
to be received in respect of the Contract over the amount paid for the Contract.
In addition, regardless of when the Contract is entered into, a Holder would be
required to include interest (rather than capital gain) in income on the
Exchange Date in an amount equal to the excess, if any, of the value of the
Common Stock received on the Exchange Date (or the proceeds from prior
disposition of the Contract) over the aggregate of the basis of the Contract and
any interest on the Contract previously included in income (or might be entitled
to an ordinary deduction to the extent of interest previously included in income
and not ultimately received). The Internal Revenue Service could also
conceivably take the view that a Holder should simply include in income as
interest the amount of cash actually received each year in respect of the
Securities.
BACKUP WITHHOLDING AND INFORMATION REPORTING. The payments of principal and
interest (including original issue discount) on, and the proceeds received from
the sale of, Securities may be subject to U.S. backup withholding tax at the
rate of 31% if the Holder thereof fails to supply an accurate taxpayer
identification number or otherwise to comply with applicable U.S. information
reporting or certification requirements. Any amounts so withheld will be allowed
as a credit against such Holder's U.S. federal income tax liability and may
entitle such Holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
After the end of each calendar year, the Trust will furnish to each record
Holder of Securities an annual statement containing information relating to the
payments on the U.S. Treasury securities received by the Trust. The Trust will
also furnish annual information returns to each record Holder of the Securities
and to the Internal Revenue Service.
24
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the Trust
has agreed to sell to Goldman Sachs, as Underwriters, and the Underwriters, have
agreed to purchase from the Trust 2,500,000 Securities.
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Securities offered
hereby, if any are taken.
The Underwriters propose to offer the Securities in part directly to the
public at the price to the public set forth on the cover page of this Prospectus
and in part to certain securities dealers at such price less a concession of
$0.70 per Security. The Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $0.10 per Security to certain brokers and dealers.
After the Securities are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Underwriters.
In light of the fact that proceeds from the sale of the Securities will be
used by the Trust to purchase the Contract from the Seller, the Underwriting
Agreement provides that the Seller will pay to the Underwriters the
Underwriters' Compensation of $1.18 per Security.
The Trust has granted the Underwriters an option exercisable for 30 calendar
days after the date of this Prospectus to purchase up to an aggregate of 372,452
additional Securities solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, they will receive the
Underwriters' Compensation referred to above for each Security so purchased. In
addition, in connection with any such exercise, the Underwriters have severally
agreed, subject to certain conditions, to purchase approximately the same
percentage thereof that the number of the Securities to be purchased by each of
them, as shown in the foregoing table, bears to the 2,500,000 Securities
initially offered.
The Seller and the Company have agreed that, during the period beginning
from the date of this Prospectus and continuing to and including the date 180
days, in the case of the Seller, and 90 days, in the case of the Company, after
the date of this Prospectus, they will not offer, sell, contract to sell or
otherwise dispose of any Common Stock or other securities of the Company (other
than pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the Common Stock or which
are convertible or exchangeable into Common Stock or other securities which are
substantially similar to the Common Stock, without the prior written consent of
Goldman Sachs; provided, however, to the extent that the Seller borrows under a
margin loan (which loan shall not be in excess of $25,000,000) the foregoing
restrictions shall not apply to those shares of Common Stock that are pledged by
the Seller as collateral for such margin loan, provided, further, that the
foregoing restrictions shall not apply to pledges of Common Stock as collateral
pursuant to any margin loans existing on the date of this Prospectus.
The Securities will be a new issue of securities with no established trading
market. The Securities have been approved for listing on the American Stock
Exchange. Goldman Sachs have advised the Company that they intend to make a
market in the Securities, but they are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Securities.
The Company and the Seller have agreed to indemnify the Underwriters against
certain liabilities, including certain liabilities under the Securities Act of
1933. The Underwriters have agreed to pay certain expenses of the Trust.
One Security has been purchased by Goldman Sachs at an aggregate purchase
price of $100,000. The initial Security has been split into the smallest whole
number of Securities that would result in the per Security amount recorded as
shareholders' equity after effecting the split not exceeding the Public Offering
price per Security.
25
<PAGE>
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Trust and the
Underwriters by their counsel, Sullivan & Cromwell, 125 Broad Street, New York,
New York 10004.
EXPERTS
The financial statement included in this Prospectus has been audited by
Coopers & Lybrand L.L.P., independent accountants, as stated in their opinion
appearing herein, and has been so included in reliance upon such opinion given
upon the authority of that firm as experts in accounting and auditing.
FURTHER INFORMATION
The Trust has filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Securities offered hereby. Further information
concerning the Securities and the Trust may be found in the Registration
Statement of which this Prospectus constitutes a part. The Registration
Statement may be inspected without charge at the Commission's office in
Washington, D.C., and copies of all or any part thereof may be obtained from
such office after payment of the fees prescribed by the Commission.
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Securityholders of
Dole Food Automatic Common Exchange Security Trust:
We have audited the accompanying statement of assets and liabilities of Dole
Food Automatic Common Exchange Security Trust as of August 5, 1996. This
financial statement is the responsibility of the Trust's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by the Trust's management, as well as evaluating the overall
financial statement presentation. We believe that our audit of the financial
statement provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Dole Food Automatic Common
Exchange Security Trust, as of August 5, 1996 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
August 5, 1996
27
<PAGE>
DOLE FOOD AUTOMATIC COMMON EXCHANGE SECURITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 5, 1996
ASSETS
<TABLE>
<S> <C>
Cash............................................................................. $ 100,000
---------
Total assets................................................................. $ 100,000
---------
---------
LIABILITIES
.......................................................................... $ 0
---------
NET ASSETS
Balance applicable to 1 Security outstanding..................................... $ 100,000
---------
---------
Net asset value per Security..................................................... $ 100,000
---------
---------
</TABLE>
- ------------------------
(1) Dole Food Automatic Common Exchange Security Trust (the "Trust") was
established on August 1, 1996 and has had no operations to date other than
matters relating to its organization and registration as a non-diversified,
closed-end management investment company under the Investment Company Act of
1940. Costs incurred in connection with the organization of the Trust will
be paid by Goldman, Sachs & Co.
(2) The Trust proposes to sell Automatic Common Exchange Securities (the
"Securities") to the public pursuant to a Registration Statement on Form N-2
under the Securities Act of 1933, as amended, and the Investment Company Act
of 1940, as amended.
The Trust is a newly organized, finite-term trust established to purchase
and hold a portfolio of stripped U.S. treasury securities and a forward
purchase contract with an existing shareholder of Dole Food relating to the
common stock of Dole Food Company, Inc. The trust will be internally managed
and will not have an investment adviser. The administration of the trust,
which will be overseen by the trustees, will be carried out by The Bank of
New York as trust administrator. The Bank of New York will also serve as
custodian, paying agent, registrar and transfer agent with respect to the
Securities. Ongoing fees and anticipated expenses for the term of the trust
will be paid for by Goldman, Sachs & Co.
(3) The Trust issued 1 Security on August 5, 1996 to Goldman, Sachs & Co. in
consideration for the aggregate purchase price of $100,000.
The Amended and Restated Trust Agreement provides that prior to the
offering, the Trust will split the outstanding Security to be effected on
the date that the price and underwriting discount of the Securities being
offered to the public is determined, but prior to the sale of the Securities
to Goldman, Sachs & Co. The initial Security will be split into the smallest
whole number of Securities that would result in the per Security amount
recorded as shareholders' equity after effecting the split not exceeding the
Public Offering price per Security.
28
<PAGE>
- ----------------------------------------------
--------------------------------------------
- ----------------------------------------------
--------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary................................. 3
The Trust.......................................... 8
Use of Proceeds.................................... 8
Investment Objective and Policies.................. 8
Risk Factors....................................... 16
Description of the Securities...................... 18
Management and Administration of the Trust......... 20
Certain Federal Income Tax Considerations.......... 23
Underwriting....................................... 25
Validity of Securities............................. 26
Experts............................................ 26
Further Information................................ 26
Report of Independent Accountants.................. 27
Statement of Assets and Liabilities................ 28
</TABLE>
--------------
UNTIL SEPTEMBER 2, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,500,000 SHARES
DOLE FOOD AUTOMATIC
COMMON EXCHANGE
SECURITY TRUST
$2.75 "TRUST AUTOMATIC COMMON
EXCHANGE SECURITIES" (TRACES-TM-/-SM-)
------------
PROSPECTUS
-----------
GOLDMAN, SACHS & CO.
- ----------------------------------------------
----------------------------------------------
- ----------------------------------------------
----------------------------------------------
