As filed with the Securities and Exchange Commission on September 5, 1997
Securities Act File No. 333-1787
Investment Company Act File No. 811-7565
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form N-2
(check appropriate box or boxes)
/x/ Registration Statement Under The Securities Act of 1933
/x/ Pre-Effective Amendment No. 5
/ / Post-Effective Amendment No.
and/or
/x/ Registration Statement Under The Investment Company Act of 1940
/x/ Amendment No. 5
ABC COMPANY STRYPES Trust
(Exact Name of Registrant as Specified in Charter)
c/o Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19715
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (302) 738-6680
Donald J. Puglisi
850 Library Avenue
Suite 204
Newark, Delaware 19715
(Name and Address of Agent for Service)
Copies to:
Norman D. Slonaker, Esq. Thomas J. Rice, Esq.
Craig E. Chapman, Esq. Coudert Brothers
Brown & Wood LLP 1114 Avenue of the Americas
One World Trade Center New York, New York 10036-7703
New York, New York 10048-0557
Approximate date of proposed public offering: As soon as practicable
after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act
of 1933, as amended, other than securities offered in connection with a
dividend reinvestment plan, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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CROSS-REFERENCE SHEET/*/
<TABLE>
<CAPTION>
<S> <C>
Item Number in Form N-2 Caption in Prospectus
- ----------------------- ---------------------
PART A - INFORMATION REQUIRED IN A PROSPECTUS
1. Outside Front Cover . . . . . . . . . . . . Front Cover Page
2. Inside Front and Outside Back
Cover Page . . . . . . . . . . . . . . . . . Front Cover Page; Inside Front Cover Page;
Underwriting
3. Fee Table and Synopsis . . . . . . . . . . . Prospectus Summary; Fee Table
4. Financial Highlights . . . . . . . . . . . . Not Applicable
5. Plan of Distribution . . . . . . . . . . . . Front Cover Page; Prospectus Summary; Net Asset
Value; Underwriting
6. Selling Shareholders . . . . . . . . . . . . Not Applicable
7. Use of Proceeds . . . . . . . . . . . . . . Use of Proceeds; Investment Objective and Policies
8. General Description of the Registrant . . . Front Cover Page; Prospectus Summary; The Trust;
Investment Objective and Policies; Investment
Restrictions; Risk Factors; Dividends and
Distributions; Additional Information
9. Management . . . . . . . . . . . . . . . . . Trustees; Management Arrangements
10. Capital Stock, Long-Term Debt and Other
Securities . . . . . . . . . . . . . . . . . Description of STRYPES
11. Defaults and Arrears on Senior Securities . Not Applicable
12. Legal Proceedings . . . . . . . . . . . . . Not Applicable
13. Table of Contents of the Statement of
Additional Information . . . . . . . . . . . Not Applicable
PART B - INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
14. Cover Page . . . . . . . . . . . . . . . . . Not Applicable
15. Table of Contents . . . . . . . . . . . . . Not Applicable
16. General Information and History . . . . . . Not Applicable
17. Investment Objective and Policies . . . . . Prospectus Summary; Investment Objective and
Policies; Investment Restrictions
18. Management . . . . . . . . . . . . . . . . . Trustees; Management Arrangements
19. Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . Management Arrangements; Underwriting; Legal
Matters; Experts
20. Investment Advisory and Other Services . . . Management Arrangements
- ---------------
/*/PURSUANT TO THE GENERAL INSTRUCTIONS TO FORM N-2, ALL INFORMATION
REQUIRED TO BE SET FORTH IN PART B: STATEMENT OF ADDITIONAL INFORMATION HAS
BEEN INCLUDED IN PART A: THE PROSPECTUS.
21. Brokerage Allocation and Other Practices . . Investment Objective and Policies
22. Tax Status . . . . . . . . . . . . . . . . . Certain Tax Considerations
23. Financial Statements . . . . . . . . . . . . Experts; Independent Auditors' Report; Statement
of Assets, Liabilities and Capital
PART C - OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate Item, so
numbered, in Part C to this Registration Statement.
</TABLE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
PROSPECTUS SUBJECT TO COMPLETION
- --------
PRELIMINARY PROSPECTUS DATED SEPTEMBER 5, 1997
_,000,000 STRYPES(SERVICE MARK)
ABC COMPANY STRYPES TRUST
(Exchangeable for Ordinary Shares of XYZ BANK, par value (c)$1.00 per share)
Each of the Structured Yield Product Exchangeable for Stock(Service
Mark) (the "STRYPES") of ABC COMPANY STRYPES Trust (the "Trust") offered
hereby represents a proportionate share of beneficial interest in the Trust,
which entitles the holder to receive an annual distribution of $ , and
will be exchanged for between % and 100% of the Reference Property
(or, in certain circumstances, cash, or a combination of cash and Reference
Property, with an equal value) per STRYPES upon conclusion of the term of the
Trust on , 2000 (the "Exchange Date"). The term "Reference
Property" means initially five Ordinary Shares, par value (c)$1.00 per share
(the "Bank Ordinary Shares"), of Bank (the "Bank") and shall be subject to
adjustment from time to time prior to the Business Day (as defined herein)
immediately preceding the Exchange Date to reflect the application of the
adjustment provisions described herein. At the request of a STRYPES holder,
Bank Ordinary Shares constituting Reference Property which such holder may be
entitled to receive on the Exchange Date or otherwise will be delivered in
the form of American Depositary Shares ("Bank ADSs") representing such shares
and evidenced by American Depositary Receipts ("Bank ADRs"), but only if at
the time of delivery Bank ADSs are listed on the New York Stock Exchange (the
"NYSE") or another national or regional U.S. stock exchange or quoted on a
U.S. automated quotation system. The annual distribution of $ per
STRYPES is payable quarterly on each February 15, May 15, August 15 and
November 15, commencing , 199 . The STRYPES are not subject to
redemption.
The Trust is a recently created Delaware business trust established to
purchase and hold (i) a series of zero-coupon U.S. Government securities
("U.S. Treasury Securities") maturing on a quarterly basis through the
Exchange Date and (ii) a forward purchase contract (the "Contract") with an
existing stockholder (the "Contracting Stockholder") of the Bank relating to
the Reference Property. The Trust's investment objective is to distribute to
holders of STRYPES on a quarterly basis $ per STRYPES and, on the
Exchange Date, a percentage of each type of Reference Property (or, under
certain circumstances, cash, or a combination of cash and Reference Property,
with an equal value) per STRYPES equal to the Exchange Amount. The Exchange
Amount is equal to: (a) if the Reference Property Value (as defined herein)
is greater than or equal to the Threshold Appreciation Price, % of each
type of Reference Property, (b) if the Reference Property Value is less than
the Threshold Appreciation Price but is greater than the Initial Price, a
percentage of each type of Reference Property, allocated as proportionately
as practicable, so that the aggregate value thereof equals the Initial Price
and (c) if the Reference Property Value is less than or equal to the Initial
Price, 100% of the Reference Property. As described herein under "Investment
Objective and Policies--The Contract--General," the "Threshold Appreciation
Price" initially will be $ and the "Initial Price" initially will be
$___________ (the last reported per ADS sale price of Bank ADS on the NYSE on
, 1997), provided that such amounts will be adjusted as described
herein upon any distribution to holders of Cash Reorganization Price Payment
Amounts (as defined herein). Each Bank ADS currently represents five Bank
Ordinary Shares. On , 1997, the last reported sale price per Bank
Ordinary Share on the (NAME) Stock Exchange (the "XXX") was (c)$ .
Holders otherwise entitled to receive fractional units or interests of
Reference Property in respect of their aggregate holdings of STRYPES will
receive cash in lieu thereof. Pursuant to the terms of the Contract, the
Contracting Stockholder is obligated to deliver to the Trust on the Business
Day immediately preceding the Exchange Date the Reference Property required
by the Trust in order to exchange all of the STRYPES on the Exchange Date in
accordance with the Trust's investment objective. The obligation of the
Contracting Stockholder to deliver the Reference Property under the Contract
may be cash settled, at the option of the Contracting Stockholder (the "Cash
Settlement Option"), in whole or in part, by delivering to the Trust on the
Business Day immediately preceding the Exchange Date, in lieu of the portion
of the Reference Property otherwise deliverable in respect of which the Cash
Settlement Option is exercised, cash in an amount equal to the value of such
Reference Property immediately prior to the Exchange Date. In the event
that the Contracting Stockholder exercises the Cash Settlement Option,
holders of the STRYPES will receive cash, or a combination of cash and
Reference Property, on the Exchange Date. AS DESCRIBED HEREIN, THE REFERENCE
PROPERTY VALUE WILL REPRESENT A DETERMINATION OF THE VALUE OF THE REFERENCE
PROPERTY IMMEDIATELY PRIOR TO THE EXCHANGE DATE. ACCORDINGLY, THERE CAN BE
NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS OF THE STRYPES ON THE
EXCHANGE DATE PLUS ANY CASH REORGANIZATION PRICE PAYMENT AMOUNTS (AS DEFINED
HEREIN) PREVIOUSLY PAID WILL BE EQUAL TO OR GREATER THAN THE ISSUE PRICE OF
THE STRYPES. IF THE REFERENCE PROPERTY VALUE IS LESS THAN THE INITIAL PRICE,
SUCH AMOUNTS RECEIVABLE MAY BE LESS THAN THE ISSUE PRICE PAID FOR THE
STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES WILL RESULT IN A LOSS. See
"Investment Objectives and Policies--General" and "--The Contract."
SEE "RISK FACTORS," BEGINNING ON PAGE 18 OF THIS PROSPECTUS, FOR CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE STRYPES.
(continued on following page)
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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 Sales Proceeds to
Public Load(1) Trust(2)
-------- ------- -----------
<S> <C> <C> <C>
Per STRYPES . . . . . . . . . . . . . . . $ $ $
Total(3) . . . . . . . . . . . . . . . . $ $ $
</TABLE>
(1) The Contracting Stockholder has agreed to indemnify the Underwriter
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. See "Underwriting."
(2) Expenses of the Offering, which are payable by the Trust, are estimated
to be approximately $ .
(3) The Trust has granted the Underwriter an option, exercisable for 30 days
from the date hereof, to purchase up to an additional _00,000 STRYPES
(subject to decrease as a result of the issuance and sale of STRYPES in
connection with the formation of the Trust) to cover over-allotments, if
any. If all such STRYPES are purchased, the total Price to Public,
Sales Load and Proceeds to Trust will be $ , $ and $ ,
respectively. See "Underwriting."
The STRYPES are offered by the Underwriter, subject to prior sale, when,
as and if issued to and accepted by it, and subject to approval of certain
legal matters by counsel for the Underwriter and certain other conditions.
The Underwriter reserves the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. It is expected that delivery of
the STRYPES will be made through the facilities of The Depository Trust
Company on or about , 1997.
- -----------------
/(Service Mark)/ Service mark of Merrill Lynch & Co., Inc.
---------------------
MERRILL LYNCH & CO.
---------------------
The date of this Prospectus is , 1997.
<PAGE>
(continued from previous page)
In the event of the liquidation of the Bank or any successor or certain
related events (other than in connection with the consolidation, merger or
acquisition of the Bank or any such successor not involving an acquisition of
the Bank Ordinary Shares or successor Reference Securities (as defined
herein) for consideration consisting solely of cash) or upon the occurrence
of certain defaults by the Contracting Stockholder under the Contract or the
collateral arrangements described herein, the Contract would be accelerated,
the Trust's assets (other than assets received pursuant to the Contract)
would be liquidated, the net assets of the Trust would be distributed pro
rata to the holders of the STRYPES and the term of the Trust would expire.
In the event of a consolidation, merger or acquisition of the Bank or any
successor involving consideration consisting solely of cash for the purchase
of the Bank Ordinary Shares or any successor Reference Securities
constituting the Reference Property, the amount of the cash payable to the
Trust pursuant to the Contract out of the cash received for the Bank Ordinary
Shares or any successor Reference Securities will become the Cash
Reorganization Price Payment Amount (as defined herein). In the event of the
consolidation, merger or acquisition of the Bank or any successor not
involving any cash consideration for the purchase of the Bank Ordinary Shares
or any successor Reference Securities constituting the Reference Property,
the Reference Property will be the securities or other property received in
exchange for such Bank Ordinary Shares or successor Reference Securities. In
the event of the consolidation, merger or acquisition of the Bank or any
successor involving partial cash consideration for the purchase of the Bank
Ordinary Shares or any successor Reference Securities constituting the
Reference Property: (i) the Reference Property will become the securities or
other property received in exchange for such Bank Ordinary Shares or
successor Reference Securities; (ii) out of the cash received for such Bank
Ordinary Shares or other Reference Securities, the Cash Reorganization Price
Payment Amount will be payable to the Trust on the effective date of such
consolidation, merger or acquisition; and (iii) the Trust will distribute the
aggregate Cash Reorganization Price Payment Amount pro rata to the holders of
the STRYPES as soon as practicable after receipt from the Contracting
Stockholder. As further described herein, the Cash Reorganization Price
Payment Amount will be the present value of cash payable in respect of the
Reference Property by reason of such consolidation, merger or acquisition,
discounted from the Exchange Date to the date of payment to the Trust on a
quarterly basis (assuming a 360-day year of twelve 30-day months) at the
Adjusted Treasury Rate (as defined herein). See "Investment Objective and
Policies--The Contract--Bank Liquidation Events Causing a Dissolution of the
Trust" and "--Collateral Arrangements; Acceleration."
The Bank is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the STRYPES and will have no obligations with
respect to the STRYPES.
Application has been made to list the STRYPES on the NYSE. Prior to the
offering there has been no public market for the STRYPES. Shares of closed-
end investment companies have in the past frequently traded at a discount
from their net asset values and initial public offering prices. The risks
associated with this characteristic of closed-end investment companies may be
greater for investors expecting to sell shares of a closed-end investment
company soon after the completion of an initial public offering.
The STRYPES are designed to provide investors with a current
distribution yield, while also providing the opportunity for investors to
share in the appreciation, if any, of the value of the Reference Property
above the Threshold Appreciation Price. However, the opportunity for equity
appreciation afforded by an investment in the STRYPES is less than that
afforded by a direct investment in the Reference Property because the value
of the Reference Property receivable by a holder of a STRYPES upon exchange
on the Exchange Date will exceed the issue price of such STRYPES only if the
Reference Property Value exceeds the Threshold Appreciation Price, which
represents an appreciation of % over the Initial Price. In addition,
because each STRYPES will entitle the holder to receive only % of the
Reference Property if the Reference Property Value exceeds the Threshold
Appreciation Price, holders of the STRYPES will be entitled to receive upon
exchange only % of any appreciation of the value of the Reference
Property above the Threshold Appreciation Price. Holders of STRYPES will
realize the entire decline in value if the Reference Property Value is less
than the Initial Price. There can be no assurance that the distribution
yield on the STRYPES will be higher than the dividend yield on the Bank
Ordinary Shares or other Reference Securities over the term of the Trust. As
described herein under "Investment Objective and Policies--The Contract--
General," the "Threshold Appreciation Price" initially will be $ and
the "Initial Price" initially will be $___________ (the last reported per ADS
sale price of Bank ADSs on the NYSE on , 1997), provided that such
amounts will be adjusted as described herein upon any distribution to holders
of Cash Reorganization Price Payment Amounts (as defined herein).
The STRYPES may not be a suitable investment for investors who are not
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 has adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that, except under limited
circumstances, the U.S. Treasury Securities may not be disposed of prior to
their respective maturities. As a result, the Trust will continue to hold
the Contract despite any significant decline in the value of the Reference
Property or adverse changes in the financial condition of the Bank. The
Trust will not be managed like a typical closed-end investment company. The
Trust will be treated as a grantor trust for United States Federal income tax
purposes and each holder of STRYPES will be treated as the owner of its pro
rata portion of the Contract and the U.S. Treasury Securities. The U.S.
Treasury Securities held by the Trust will be treated for United States
Federal income tax purposes as having original issue discount and holders of
STRYPES will be required to recognize currently as income their pro rata
portion of such original issue discount as it accrues over the term of the
Trust. The quarterly cash distributions paid to the holders of STRYPES,
which distributions are anticipated to exceed the currently includable
original issue discount, will be treated as a tax-free return of the holders'
costs of the U.S. Treasury Securities and any previously included original
issue discount, and therefore will not be considered current income to
holders upon receipt thereof for United States Federal income tax purposes.
Although under current law holders of STRYPES should not recognize income,
gain or loss with respect to the Contract over its term, holders will
recognize taxable gain or loss upon receipt of cash, if any, upon dissolution
of the Trust. For a discussion of certain United States Federal income tax
considerations for holders of the STRYPES, see "Certain Tax Considerations."
(SUMMARIZE SIGNIFICANT FOREIGN TAX CONSEQUENCES TO U.S. INVESTORS IN
STRYPES, IF ANY.)
This Prospectus sets forth concisely information about the Trust that a
prospective investor ought to know before investing and should be read and
retained for future reference. Additional information about the Trust has
been filed with the Commission and is available upon written or oral request
and without charge. See "Additional Information."
-------------------------
Certain persons participating in this offering may engage in
transactions that stabilize, maintain or otherwise affect the price of the
STRYPES, the Bank ADSs or the Bank Ordinary Shares. Such transactions may
include stabilizing, the purchase of STRYPES to cover syndicate short
positions and the imposition of penalty bids. For a description of these
activities, see "Underwriting."
The STRYPES may not be sold or offered for sale in the (COUNTRY), its
Territories or possessions ("(COUNTRY)"), nor may an invitation to make an
offer to buy the STRYPES be made in (COUNTRY), except under circumstances
that result in the offer or invitation for sale or purchase being an
"excluded offer" or an "excluded invitation" for the purposes of the
(COUNTRY) Corporations Law.
PROSPECTUS SUMMARY
The following summary should be read in conjunction with the more
detailed information appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information contained in this Prospectus assumes
that the Underwriter's over-allotment option is not exercised. Unless
otherwise stated or the context otherwise requires, references herein to $,
US$ or U.S. dollars are to United States dollars and references herein to
(c)$ are to "(COUNTRY)" DOLLARS.
THE TRUST
ABC COMPANY STRYPES Trust (the "Trust") is a recently created Delaware
business trust that will be registered as a non-diversified closed-end
management investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The term of the Trust will expire on
or shortly after , 2000 (the "Exchange Date"), except that the Trust
may be dissolved prior to such date under certain limited circumstances. The
Trust will be treated as a grantor trust for United States Federal income tax
purposes.
THE OFFERING
The Trust is offering _,000,000 STRYPES, each representing a
proportionate share of beneficial interest in the Trust, at an initial public
offering price of $ per STRYPES (which is equal to the last reported per
ADS sale price of the Bank ADSs on the NYSE on , 1997, the date
of the offering (the "Offering")). The Underwriter has been granted an
option, exercisable for 30 days from the date of this Prospectus, to purchase
up to an aggregate of _00,000 additional STRYPES (subject to decrease as a
result of the issuance and sale of STRYPES in connection with the formation
of the Trust) to cover over-allotments, if any. See "Underwriting."
THE BANK
According to publicly available information, XYZ Bank (the "Bank") is a
(country) bank engaged in a broad range of banking and financial services.
The Bank ADSs are listed on the NYSE and, accordingly, the Bank is
subject to the informational requirements of the Securities Exchange Act of
1934 (the "Exchange Act") applicable to foreign private issuers. Any
information included herein regarding the Bank has been derived from
information filed by the Bank with the Securities and Exchange Commission and
other publicly available information. The Bank has not participated in the
preparation of this Prospectus and no due diligence inquiry of the Bank has
been made by the Trust, the Underwriter or any other party in connection with
the Offering. There can be no assurance that all events occurring prior to
the date hereof (including events that would affect the accuracy or
completeness of such publicly available information about the Bank) that
would affect the trading price of the Bank ADSs or the Bank Ordinary Shares
have been publicly disclosed. Because the Reference Property is initially
Bank Ordinary Shares, such events, if any, would also affect the trading
price of the STRYPES.
INVESTMENT OBJECTIVE AND POLICIES
The Trust will purchase and hold a series of zero-coupon U.S. Government
securities ("U.S. Treasury Securities") maturing on a quarterly basis through
the Exchange Date and a forward purchase contract (the "Contract") with an
existing stockholder (the "Contracting Stockholder") of the Bank relating to
the Reference Property. The Trust's investment objective is to distribute to
holders of the STRYPES ("holders") on a quarterly basis $ per STRYPES
(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 percentage of each type of
Reference Property (or, under certain circumstances, cash, or a combination
of cash and Reference Property, with an equal value) per STRYPES equal to the
Exchange Amount. The Exchange Amount shall be equal to (a) if the Reference
Property Value (as defined herein) is greater than or equal to the Threshold
Appreciation Price, % of each type of Reference Property, (b) if the
Reference Property Value is less than the Threshold Appreciation Price but is
greater than the Initial Price, a percentage of each type of Reference
Property, allocated as proportionately as practicable, so that the aggregate
value thereof is equal to the Initial Price, and (c) if the Reference
Property Value is less than or equal to the Initial Price, 100% of each type
of Reference Property. As described herein under "Investment Objective and
Policies--The Contract--General," the "Threshold Appreciation Price"
initially will be $ and the "Initial Price" initially will be $
(the last reported per ADS sale price of Bank ADSs on the NYSE on ,
1997), provided that such amounts will be adjusted as described herein upon
any distribution to holders of Cash Reorganization Price Payment Amounts (as
defined herein). The term "Reference Property" means initially five Ordinary
Shares, par value (c)$1.00 per share (the "Bank Ordinary Shares"), of the
Bank and shall be subject to adjustment from time to time prior to the
Business Day (as defined herein) immediately preceding the Exchange Date to
reflect the adjustment provisions described herein. At the request of a
STRYPES holder, Bank Ordinary Shares constituting Reference Property which
such holder may be entitled to receive on the Exchange Date or otherwise will
be delivered in the form of American Depositary Shares ("Bank ADSs")
representing such shares and evidenced by American Depositary Receipts ("Bank
ADRs"), but only if at the time of delivery Bank ADSs are listed on the NYSE
or another national or regional U.S. stock exchange or quoted on a U.S.
automated quotation system. On the date hereof, Bank ADSs are listed on the
NYSE and each such Bank ADS represents five Bank Ordinary Shares. Holders
otherwise entitled to receive fractional units or interests of any Reference
Security (as defined herein) or other property constituting part of the
Reference Property in respect of their aggregate holdings of STRYPES will
receive cash in lieu thereof. See "Investment Objective and Policies--
General" and "--Fractional Interests." The continued listing of the Bank
ADSs on a national or regional U.S. stock exchange or the quotation of the
Bank ADSs on a U.S. automated quotation system are not matters under the
control or influence of the Trust or the Contracting Shareholder and
therefore, no assurance is hereby given that the Bank ADSs will continue to
be listed on the NYSE or, alternatively, listed on another national or
regional U.S. stock exchange or quoted on a U.S. automated quotation system
in the future.
Pursuant to the terms of the Contract, the Contracting Stockholder is
obligated to deliver to the Trust on the Business Day immediately preceding
the Exchange Date the Reference Property required by the Trust in order to
exchange all of the STRYPES (including any STRYPES issued pursuant to the
over-allotment option granted by the Trust to the Underwriter and STRYPES
issued in connection with the formation of the Trust) on the Exchange Date in
accordance with the Trust's investment objective. The obligation of the
Contracting Stockholder to deliver the Reference Property under the Contract
may be cash settled, at the option of the Contracting Stockholder (the "Cash
Settlement Option"), in whole or in part, by delivering to the Trust on the
Business Day immediately preceding the Exchange Date, in lieu of the portion
of the Reference Property otherwise deliverable in respect of which the Cash
Settlement Option is exercised, cash in an amount equal to the value of such
Reference Property immediately prior to the Exchange Date. In the event that
the Contracting Stockholder exercises the Cash Settlement Option, holders of
the STRYPES will receive cash, or a combination of cash and Reference
Property, on the Exchange Date. See "Investment Objective and Policies--The
Contract."
Holders of the STRYPES will receive distributions at the rate per
STRYPES of $ per annum, or $ 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 (as defined herein), 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
, 1997 until , 199 ) will be payable on , 199 to holders
of record as of , 199 , and will equal $ per STRYPES. See
"Investment Objective and Policies--Trust Assets."
On the Exchange Date, each outstanding STRYPES will be exchanged for
between % and 100% of each type of Reference Property (or, in the event
the Contracting Stockholder exercises the Cash Settlement Option, cash, or a
combination of cash and Reference Property, with an equal value), depending
on the Reference Property Value. AS DESCRIBED HEREIN, THE REFERENCE PROPERTY
VALUE WILL REPRESENT A DETERMINATION OF THE VALUE OF THE REFERENCE PROPERTY
IMMEDIATELY PRIOR TO THE EXCHANGE DATE. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS OF THE STRYPES ON THE
EXCHANGE DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE PRICE OF THE
STRYPES. IF THE REFERENCE PROPERTY VALUE OF THE REFERENCE PROPERTY IS LESS
THAN THE INITIAL PRICE, SUCH AMOUNTS RECEIVABLE WILL BE LESS THAN THE ISSUE
PRICE PAID FOR THE STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES WILL
RESULT IN A LOSS. In the event of the liquidation of the Bank or any
successor or certain related events (other than in connection with the
consolidation, merger or acquisition of the Bank or any such successor not
involving an acquisition of the Bank Ordinary Shares or successor Reference
Securities for consideration consisting solely of cash) or upon the
occurrence of certain defaults by the Contracting Stockholder under the
Contract or the collateral arrangements described herein, the Contract would
be accelerated, the Trust's assets (other than assets received pursuant to
the Contract) would be liquidated, the net assets of the Trust would be
distributed pro rata to the holders of the STRYPES and the terms of the Trust
would expire. In the event of a consolidation, merger or acquisition of the
Bank or any successor for consideration consisting solely of cash for the
purchase of the Bank Ordinary Shares or any successor Reference Securities
constituting the Reference Property, the amount of the cash payable to the
Trust pursuant to the Contract out of the cash received for the Bank Ordinary
Shares or any successor Reference Securities will be the Cash Reorganization
Price Payment Amount (as defined herein). In the event of the consolidation,
merger or acquisition of the Bank or any successor not involving any cash
consideration for the purchase of the Bank Ordinary Shares or any successor
Reference Securities constituting the Reference Property, the Reference
Property will become the securities or other property received in exchange
for such Bank Ordinary Shares or successor Reference Securities. In the
event of the consolidation, merger or acquisition of the Bank or any
successor involving partial cash consideration for the purchase of the Bank
Ordinary Shares or any successor Reference Securities constituting the
Reference Property: (i) the Reference Property will become the securities or
other property received in exchange for such Bank Ordinary Shares or
successor Reference Securities; (ii) out of the cash received for such Bank
Ordinary Shares or other Reference Securities, the Cash Reorganization Price
Payment Amount will be payable to the Trust on the effective date of such
consolidation, merger or acquisition; and (iii) the Trust will distribute the
aggregate Cash Reorganization Price Payment Amount pro rata to the holders of
the STRYPES as soon as practicable after receipt from the Contracting
Stockholder. As further described herein, the Cash Reorganization Price
Payment Amount will be the present value of the cash payable in respect of
the Reference Property by reason of such consolidation, merger or
acquisition, discounted from the Exchange Date to the date of payment to the
Trust on a quarterly basis (assuming a 360-day year of twelve 30-day months)
at the Adjusted Treasury Rate (as defined herein). See "Investment Objective
and Policies--The Contract--Bank Liquidation Events Causing a Dissolution
of the Trust" and "--Collateral Arrangements; Acceleration."
TRUST ASSETS
The Trust's assets will consist of: (i) a series of zero-coupon U.S.
Treasury Securities with face amounts and maturities corresponding to the
amounts and payment dates of the distributions payable with respect to the
STRYPES, comprising approximately % of the initial assets of the Trust,
and (ii) the Contract with the Contracting Stockholder relating to the
Reference Property, comprising approximately % of the initial assets of
the Trust.
Pursuant to the terms of the Contract, the Contracting Stockholder is
obligated to deliver to the Trust on the Business Day immediately preceding
the Exchange Date an aggregate number or amount of Reference Property equal
to the product of the Exchange Amount and the aggregate number of STRYPES
then outstanding, subject to the Contracting Stockholder's Cash Settlement
Option.
The purchase price under the Contract is equal to $ (assuming the
Underwriter's over-allotment option is not exercised) and is payable to the
Contracting Stockholder by the Trust on or about , 1997. No other
consideration is payable by the Trust to the Contracting Stockholder in
connection with its acquisition of the Contract or the performance of the
Contract by the Contracting Stockholder. See "Investment Objective and
Policies--The Contract."
The obligations of the Contracting Stockholder under the Contract
initially will be secured by a pledge of the maximum number of Bank Ordinary
Shares or, upon the occurrence of a Reorganization Event (as defined herein)
other than a Bank Liquidation Event (as defined herein), other Reference
Property received by the Contracting Stockholder in lieu of such Bank
Ordinary Shares, deliverable by the Contracting Stockholder pursuant to the
Contract. See "Investment Objective and Policies--The Contract--Collateral
Arrangements; Acceleration."
RELATIONSHIP TO BANK ORDINARY SHARES
Holders of the STRYPES will receive distributions at the rate of %
of the issue price per annum. (SUMMARIZE BANK'S RECENT DIVIDEND PAYMENTS.)
Any future determination as to the payment of dividends on the Bank Ordinary
Shares will be at the discretion of the Bank's Board of Directors and will
depend upon the Bank's operating results, financial condition and capital
requirements, contractual restrictions, general business conditions and such
other factors as the Bank's Board of Directors deems relevant. Also,
dividends on the Bank Ordinary Shares are payable in "(country)" dollars,
while the distributions on the STRYPES will be made in U.S. dollars. For a
description of certain dividends paid on Bank Ordinary Shares and certain
information regarding the exchange rate of U.S. dollars for "(country)"
dollars, see "Investment Objectives and Policies--The Bank." There can be no
assurance that the distribution yield on the STRYPES will be higher than the
dividend yield on the Bank Ordinary Shares over the term of the Trust.
Holders of STRYPES will not be entitled to receive any future dividends on
the Bank Ordinary Shares unless and until such time, if any, as the Trust
shall have delivered Bank Ordinary Shares or Bank ADSs in exchange for
STRYPES on the Exchange Date or upon earlier dissolution of the Trust, and
unless the applicable record date for determining stockholders entitled to
receive such dividends occurs after such delivery. See "Risk Factors--No
Stockholder Rights."
The opportunity for equity appreciation afforded by an investment in the
STRYPES is less than that afforded by a direct investment in the Bank
Ordinary Shares because the value of the Bank Ordinary Shares receivable by a
holder of a STRYPES upon exchange on the Exchange Date will not exceed the
issue price of such STRYPES if the Reference Property Value exceeds the
Threshold Appreciation Price, which represents an appreciation of % over
the Initial Price. Moreover, each STRYPES will entitle the holder to receive
on the Exchange Date only % (the percentage equal to the Initial Price
divided by the Threshold Appreciation Price) of any appreciation of the value
of Reference Property Value above the Threshold Appreciation Price. Holders
of STRYPES will realize the entire decline in value if the Reference Property
Value is less than the Initial Price. As described herein under "Investment
Objective and Policies--The Contract--General," the "Threshold Appreciation
Price" initially will be $ and the "Initial Price" initially will be
$___________ (the last reported per ADS sale price of Bank ADS on the NYSE on
, 1997), provided that such amounts will be adjusted as described
herein upon any distribution to holders of Cash Reorganization Price Payment
Amounts (as defined herein). See "Risk Factors--Limitations on Opportunity
for Equity Appreciation; Potential Losses."
DILUTION
The percentage of each type of Reference Property (or the amount of cash
or combination of cash and Reference
Property) that holders of STRYPES are entitled to receive upon exchange on
the Exchange Date will not be adjusted for certain events, such as offerings
of Bank Ordinary Shares by the Bank for cash or in connection with
acquisitions. The Bank is not restricted in connection with the STRYPES from
issuing additional Bank Ordinary Shares during the term of the Trust. In
addition, principal stockholders of the Bank, including the Contracting
Stockholder (except as to Bank Ordinary Shares pledged for the benefit of
STRYPES holders), are not precluded from selling Bank Ordinary Shares.
Neither the Bank nor any stockholder of the Bank, including the Contracting
Stockholder, has any obligation to consider the interests of holders of
STRYPES for any reason. Additional issuances of Bank Ordinary Shares or
other Reference Securities may materially and adversely affect the price of
Bank Ordinary Shares or other Reference Securities and, because of the
relationship of the percentage of each type of Reference Property (or the
amount of cash or combination of cash and Reference Property) to be received
on the Exchange Date to the price of such other Reference Property, such
other events may materially and adversely affect the trading price of the
STRYPES. There can be no assurance that the Bank or any successor will not
take any of the foregoing actions, or that it will not make offerings of, or
that principal stockholders will not sell any, Bank Ordinary Shares in the
future, or as to the amount of any such offerings or sales. See "Risk
Factors--Reference Property Adjustments."
TERM OF THE TRUST
The Trust will dissolve on or shortly after the Exchange Date, except if
dissolved earlier under certain limited circumstances. On or shortly after
the Exchange Date, the Reference Property or cash to be exchanged for the
STRYPES and any other remaining Trust assets, net of any remaining Trust
expenses, if any, will be distributed pro rata to holders. In the event that
certain defaults shall have occurred with respect to the Contracting
Stockholder under the Contract or the collateral arrangements described
herein or the Bank is liquidated (other than in connection with the
consolidation, merger or acquisition of the Bank), the Contract would
accelerate, the Trust's assets (other than assets received pursuant to the
Contract) would be liquidated, the net assets of the Trust would be
distributed pro rata to the holders, and the term of the Trust would expire.
See "Investment Objective and Policies--The Contract" and "--Trust
Dissolution," and "Risk Factors--Limited Term."
CERTAIN TAX CONSIDERATIONS
The Trust will be taxable as a grantor trust for United States Federal
income tax purposes. Accordingly, each holder will be treated for United
States 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. See "Certain Tax Considerations."
The U.S. Treasury Securities held by the Trust will be treated for
United States Federal income tax purposes as having "original issue discount"
which will accrue over the term of the U.S. Treasury Securities. It is
currently anticipated that each quarterly cash distribution to the holders
will be treated as a tax-free return of the holders' costs of the U.S.
Treasury Securities and any previously included original issue discount, and
therefore will not be considered current income to holders upon receipt
thereof for United States 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. See "Certain Tax Considerations."
Under existing law, a holder should not recognize income, gain or loss
upon the Trust's entry into the Contract or over the term of the Contract.
In general, the delivery of Reference Property pursuant to the Contract will
not be taxable to the holders. A holder will recognize taxable gain or loss
upon receipt of cash, if any, upon dissolution of the Trust or to the extent
the Contracting Stockholder exercises the Cash Settlement Option, and may do
so in certain other circumstances. In general, each holder's initial tax
basis in any Reference Property received from the Trust on the Exchange Date
or upon earlier dissolution of the Trust will be equal to its basis in its
pro rata portion of the Contract less the portion of such basis allocable to
any cash that is received. See "Certain Tax Considerations."
(ADD ANY MATERIAL (COUNTRY) TAX CONSEQUENCES TO STRYPES HOLDERS.)
MANAGEMENT ARRANGEMENTS
The Trust will be internally managed and will not have an investment
adviser. The Trust's portfolio will not be actively managed. The
administration of the Trust will be overseen by the 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 for the Trust's assets
(the "Custodian") and as paying agent, transfer agent and registrar (the
"Paying Agent") with respect to the STRYPES. Except as aforesaid, and except
for The Bank of New York's role as collateral agent under the Trust's
Security and Pledge Agreement (see "Investment Objective and Policies--The
Contract--Collateral Arrangements; Acceleration"), The Bank of New York has
no other affiliation with, and is not engaged in any other transaction with,
the Trust. For their services, the Contracting Stockholder will pay The Bank
of New York in its capacities as the Administrator, the Custodian and the
Paying Agent at the closing of the Offering a one-time, up-front amount in
respect of its fee. See "Management Arrangements."
RISK FACTORS
The Trust has adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that, unless the Trust dissolves
prior to the Exchange Date due to the occurrence of a Bank Liquidation Event
or a Default by the Contracting Stockholder, the U.S. Treasury Securities may
not be disposed of prior to their respective maturities. The Trust will
continue to hold the Contract despite any significant decline in the value of
the Reference Property or adverse changes in the financial condition of the
Bank or other issuer of Reference Property.
Although the STRYPES will provide investors with a current distribution
yield, there is no assurance that the distribution yield on the STRYPES will
be higher than the yield on the Reference Property over the term of the
Trust. In addition, the opportunity for equity appreciation afforded by an
investment in the STRYPES is less than that afforded by a direct investment
in the Bank Ordinary Shares. The value of the Reference Property receivable
by a holder of a STRYPES upon exchange on the Exchange Date will exceed the
issue price of such STRYPES only if the Reference Property Value exceeds the
Threshold Appreciation Price, which represents an appreciation of % over
the Initial Price. Moreover, because each STRYPES will entitle the holder to
receive only % of each type of Reference Security if the Reference
Property Value exceeds the Threshold Appreciation Price, holders of the
STRYPES will be entitled to receive upon exchange only % of any
appreciation of the value of the Reference Property above the Threshold
Appreciation Price. AS DESCRIBED HEREIN, THE REFERENCE PROPERTY VALUE WILL
REPRESENT A DETERMINATION OF THE VALUE OF THE REFERENCE PROPERTY IMMEDIATELY
PRIOR TO THE EXCHANGE DATE. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
AMOUNT RECEIVABLE BY HOLDERS OF THE STRYPES ON THE EXCHANGE DATE PLUS ANY
CASH REORGANIZATION PRICE PAYMENT AMOUNTS PREVIOUSLY PAID WILL BE EQUAL TO OR
GREATER THAN THE ISSUE PRICE OF THE STRYPES. IF THE REFERENCE PROPERTY VALUE
IS LESS THAN THE INITIAL PRICE, SUCH AMOUNTS RECEIVABLE MAY BE LESS THAN THE
ISSUE PRICE OF THE STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES WILL
RESULT IN A LOSS.
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
more diversified investments.
The trading prices of the STRYPES in the secondary market will be
directly affected by the trading prices of Banks ADSs or Bank Ordinary Shares
or other Reference Property in the secondary market. It is impossible to
predict whether the price of Bank ADSs or Bank Ordinary Shares or other
Reference Property will rise or fall. Trading prices of Bank ADSs or Bank
Ordinary Shares or other Reference Property will be influenced by the Bank's
or successor issuer's operating results and prospects and by economic,
financial and other factors and market conditions.
Holders of STRYPES will not be entitled to any rights with respect to
the Bank Ordinary Shares (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 Trust shall have delivered Bank
Ordinary Shares in exchange for STRYPES on the Exchange Date or upon earlier
dissolution of the Trust, and unless the applicable record date, if any, for
the exercise of such rights occurs after such delivery.
The bankruptcy of the Contracting Stockholder could adversely affect the
time of exchange or, as a result, the amount received by the holders of the
STRYPES. See "Risk Factors--Risk Relating to Winding Up of Contracting
Stockholder."
Holders will experience a taxable event upon receipt of cash, if any,
upon dissolution of the Trust. Because of an absence of authority as to the
proper character of any gain or loss resulting from such a taxable event, the
ultimate tax consequences to holders as a result of the Contracting
Stockholder satisfying its obligation under the Contract, in whole or in
part, with cash is uncertain. See "Risk Factors."
LISTING
Application has been made to list the STRYPES on the NYSE.
FEE TABLE
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load (as a percentage of offering price) . . . . . . . . . . 3% (a)
Automatic Dividend Reinvestment Plan Fees . . . . . . . . . . . . . . . . Not Applicable
ANNUAL EXPENSES (as a percentage of net assets)
Management Fees(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
Other Expenses(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
TOTAL ANNUAL EXPENSES(C) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
</TABLE>
<TABLE>
<CAPTION>
Example 1 year 3 years
----------- ----------
<S> <C> <C>
An investor would pay the following expenses on a $1,000 investment,
including the maximum sales load of $30 and assuming (1) no annual
expenses and (2) a 5% annual return throughout the periods: $30 $30
</TABLE>
_____________
(a) See the cover page of this Prospectus and "Underwriting."
(b) See "Management Arrangements." The Trust will be internally managed;
consequently there is no separate investment advisory fee paid by the
Trust. The Bank of New York will act as the administrator of the Trust.
(c) The organization costs of the Trust in the amount of $ , the costs
associated with the initial registration and offering of the STRYPES
estimated to be approximately $ , and approximately $
in respect of anticipated ongoing expenses over the term of the Trust
will be paid by the Trust. Any unanticipated operating expenses of the
Trust will be paid by Merrill Lynch & Co., Inc., which will be
reimbursed by the Contracting Stockholder. See "Management
Arrangements--Estimated Expenses." Absent such arrangements, the
Trust's "Other Expenses" and "Total Annual Expenses" would be
approximately % of the Trust's net assets.
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Trust will bear directly or
indirectly. The Example set forth above assumes reinvestment of all
dividends and distributions and utilizes a 5% annual rate of return as
mandated by Securities and Exchange Commission regulations. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES OR ANNUAL RATES
OF RETURN, AND ACTUAL EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE ASSUMED FOR PURPOSES OF THE EXAMPLE.
THE TRUST
ABC COMPANY STRYPES Trust is a recently created Delaware business trust
and will be registered as a closed-end management investment company under
the Investment Company Act. The Trust was formed on March 14, 1996 pursuant
to a Trust Agreement dated as of such date (as amended and restated as of
, 1997 the "Declaration of Trust"). The term of the Trust will
expire on or shortly after , 2000, except that the Trust may be
dissolved prior to such date under certain limited circumstances. The Trust
will be treated as a grantor trust for United States Federal income tax
purposes. The Trust's principal office is located at 850 Library Avenue,
Suite 204, Newark, Delaware 19715, and its telephone number is (302) 738-
6680.
USE OF PROCEEDS
The net proceeds of the Offering will be approximately $
(or approximately $ , if the Underwriter's over-allotment option
is exercised in full), after payment of the sales load, the expenses of the
Offering and the other expenses payable by the Trust as described herein. At
the time of the closing of the Offering, or shortly thereafter, the net
proceeds of the Offering will be used to purchase a fixed portfolio comprised
of a series of zero-coupon U.S. Treasury Securities with face amounts and
maturities corresponding to the amounts and payment dates of the
distributions payable with respect to the STRYPES and to pay the purchase
price under the Contract to the Contracting Stockholder.
INVESTMENT OBJECTIVE AND POLICIES
Unless the context otherwise requires, the following discussion assumes
that on the Exchange Date, the Reference Property consists only of Bank
Ordinary Shares.
GENERAL
The Trust will purchase and hold (i) a series of zero-coupon U.S.
Treasury Securities maturing on a quarterly basis through the Exchange Date
and (ii) the Contract with the Contracting Stockholder relating to the
Reference Property. The Trust's investment objective is to distribute to
holders of STRYPES on a quarterly basis $ per STRYPES (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 percentage of the number or amount of each type of
Reference Security and other property constituting part of the Reference
Property (or, in certain circumstances, cash, or a combination of cash,
Reference Securities and other property, with an equal value) per STRYPES
equal to the Exchange Amount. The Exchange Amount is equal to: (a) if the
Reference Property Value is greater than or equal to the Threshold
Appreciation Price, % of the number or amount of each type of Reference
Property, (b) if the Reference Property Value is less than the Threshold
Appreciation Price but is greater than the Initial Price, a percentage of the
number or amount of each type of Reference Property, allocated as
proportionately as practicable, so that the aggregate value thereof is equal
to the Initial Price, and (c) if the Reference Property Value is less than or
equal to the Initial Price, 100% of the number or amount of each type of
Reference Property. The "Initial Price" initially will be $ , provided
that any time the Trust distributes Cash Reorganization Price Payment Amounts
to holders as described under "--The Contract--Reference Property
Adjustments," the Initial Price thereafter will be the product of the Initial
Price in effect immediately prior to such distribution and the fraction
obtained by dividing the portion of the Reference Property Value relating to
the non-cash consideration portion of the Reorganization Price (computed as
of the effective date of the reorganization, merger or acquisition) by the
Reference Property Value Price (computed as aforesaid), with such product
being rounded to the nearest cent. The "Threshold Appreciation Price"
initially will be $ , provided that immediately following the
distribution by the Trust of any Cash Reorganization Price Payment Amounts to
holders as described under "--The Contract--Reference Property Adjustments,"
the Threshold Appreciation Price thereafter will be the product of the
Threshold Appreciation Price in effect immediately prior to such distribution
and the fraction obtained by dividing the portion of the Reference Property
Value relating to the non-cash consideration portion of the Reorganization
Price (computed as of the effective date of the reorganization, merger or
acquisition) by the Reference Property Value (computed as aforesaid), with
such product being rounded to the nearest cent.
THERE CAN BE NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS OF THE
STRYPES ON THE EXCHANGE DATE PLUS ANY CASH REORGANIZATION PRICE PAYMENT
AMOUNTS previously paid will be equal to or greater than the issue price of
the STRYPES. If the Reference Property Value is less than the Initial Price,
such amounts receivable may be less than the issue price paid for the STRYPES
in which case an investment in STRYPES will result in a loss. Holders
otherwise entitled to receive fractional units or interests of any Reference
Security or other property constituting part of the Reference Property in
respect of their aggregate holdings of STRYPES will receive cash in lieu
thereof. See "Fractional Interests."
The term "Reference Property" initially means five Bank Ordinary Shares
and shall be subject to adjustment from time to time prior to the Business
Day immediately preceding the Exchange Date to reflect the addition,
substitution or distribution of any cash, securities and/or other property
resulting from the application of the adjustment provisions described below
under "-The Contract-Reference Property Adjustments." As more fully described
below, upon application of such adjustment provisions, in the future the
Reference Property may include, in addition to or in lieu of Bank Ordinary
Shares, other securities of the Bank, securities of another issuer, cash or
other property. The term "Reference Security" means, at any time, any
security (as defined in Section 2(1) of the Securities Act) then constituting
part of the Reference Property. The term "Reference Property Value" means,
subject to the adjustment provisions described below, the sum, determined as
of 10:00 A.M. (New York City time) on the second Business Day preceding the
Exchange Date, of (a) for any portion of the Reference Property consisting of
cash, the amount of such cash, (b) for any portion of the Reference Property
consisting of property other than cash or Reference Securities, the fair
market value of such property (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator) as of 10:00 A.M. (New York City time) on the third Business
Day preceding the Exchange Date of such property, and (c) for any portion of
the Reference Property consisting of a Reference Security, an amount equal to
the average Closing Price (as defined herein) per unit of such Reference
Security on the 20 Trading Days immediately prior to, but not including, the
second Trading Day preceding the Exchange Date multiplied by the number of
units of such Reference Security constituting part of the Reference Property.
At the request of a STRYPES holder, Bank Ordinary Shares constituting
Reference Property which such holder may be entitled to receive on the
Exchange Date or otherwise will be delivered in the form of Bank ADSs
representing such shares and evidenced by Bank ADRs, but only if at the time
of delivery Bank ADSs are listed on the NYSE or another national or regional
U.S. stock exchange or quoted on a U.S. automated quotation system. In the
event that a holder elects to receive Bank ADSs, on the Exchange Date or
other distribution date, the Trust will deposit the Bank Ordinary Shares with
the ADR depositary with instructions to register ADRs in such holder's name
and to deliver such ADRs as requested by such holder and the Trust will be
responsible for the payment of any fees of the ADR depositary in connection
therewith. Any such payment will be reimbursed by Merrill Lynch & Co., Inc.,
which in turn will be reimbursed by the Contracting Stockholder.
The "Closing Price" of (i) a Bank Ordinary Share constituting a
Reference Security on any date of determination means (a) (w) the closing
sale price per ADS (or, if no closing sale price per ADS is reported, the
last reported per ADS sale price) of Bank ADSs on the NYSE on such date or,
if Bank ADSs are not listed for trading on the NYSE on such date, as reported
in the composite transactions for the principal United States securities
exchange on which Bank ADSs are so listed, or, if Bank ADSs are not so
listed, as reported by National Association of Securities Dealers, Inc.
Automated Quotation System, or if Bank ADSs are not so reported, the last
quoted per ADS bid price for Bank ADSs in the over-the-counter market as
reported by the National Quotation Bureau or similar organization, or, if
such bid price is not available, the per ADS market value of Bank ADSs on
such date as determined by a nationally recognized independent investment
banking firm in the United States retained for this purpose by the
Administrator, divided by (x) the number of Bank Ordinary Shares represented
by Bank ADSs on such date of determination, or (b) if Bank ADSs are not
outstanding or traded, (y) the closing price per share (or, if no closing
price per share is reported, the last reported per share sale price) of Bank
Ordinary Shares on the "(country)" Stock Exchange (the "XXX") on such date
or, if Bank Ordinary Shares are not listed for trading on the XXX on such
date, the per share market value of Bank Ordinary Shares on such date as
determined by a nationally recognized independent investment banking firm in
"(country)" retained for this purpose by the Administrator, multiplied by (z)
the noon buying rate in New York City for cable transfers in "(country)"
dollars as certified by the Federal Reserve Bank of New York (the "Noon
Buying Rate") on such date; and (ii) a Reference Security other than a Bank
Ordinary Share on any date of determination means the closing sale price (or,
if no closing price is reported, the last reported sale price) of such
security on the NYSE on such date or, if such security is not listed for
trading on the NYSE on such date, as reported in the composite transactions
for the principal United States securities exchange on which such security is
so listed, or, if such security is not so listed on a United States exchange,
as reported by National Association of Securities Dealers, Inc. Automated
Quotation System, or, if such security is not so reported, the last quoted
bid price for such security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid price is
not available, the market value of such security on such date as determined
by a nationally recognized independent investment banking firm retained for
this purpose by the Administrator. A "Trading Day" is defined as a day on
which the security the Closing Price of which is being determined (A) is not
suspended from trading on any securities exchange or association or over-the-
counter market at the close of business and (B) has traded at least once on
the securities exchange or association or over-the-counter market that is the
primary market for the trading of such security or, in connection with
calculating the Reference Property Value for Bank Ordinary Shares using
clause (i)(a) of the definition of Closing Price, the primary trading market
for the trading of Bank ADSs. The term "Business Day" means any day that is
not a Saturday, a Sunday or a day on which the NYSE, The NASDAQ National
Market, or banking institutions or trust companies in The City of New York
are authorized or obligated by law or executive order to close.
Pursuant to the terms of the Contract, the Contracting Stockholder is
obligated to deliver to the Trust on the Business Day immediately preceding
the Exchange Date the aggregate number or amount of each type of Reference
Security and other property constituting part of the Reference Property
required by the Trust in order to exchange all of the STRYPES (including
STRYPES issued pursuant to the over-allotment option granted by the Trust to
the Underwriter and STRYPES issued in connection with the formation of the
Trust) on the Exchange Date in accordance with the Trust's investment
objective. The obligation of the Contracting Stockholder to deliver
Reference Property under the Contract may be cash settled, at the option of
the Contracting Stockholder (the "Cash Settlement Option"), in whole or in
part, by delivering to the Trust on the Business Day immediately preceding
the Exchange Date, in lieu of the portion of the number or amount of each
type of Reference Property otherwise deliverable in respect of which the Cash
Settlement Option is exercised, cash in an amount equal to the value of the
Reference Property immediately prior to the Exchange Date. To the extent
that the Contracting Stockholder elects to satisfy its obligation under the
Contract by delivering cash or the Reference Property includes cash, holders
will receive cash on the Exchange Date. On or prior to the twenty-sixth
Business Day preceding the Exchange Date, the Administrator will notify The
Depository Trust Company (the "Depository") and publish a notice in The Wall
Street Journal or another daily newspaper of national circulation stating
whether the applicable percentage of the number or amount of the Reference
Property or cash will be delivered in exchange for the STRYPES on the
Exchange Date. At the time such notice is published, the Reference Property
Value will not have been determined. If the Contracting Stockholder elects
to deliver Reference Property, holders will be responsible for the payment of
any and all brokerage costs upon the subsequent sale thereof.
The Contract will comprise approximately % of the Trust's initial
assets. The Trust has adopted a fundamental policy that the Contract may not
be disposed of during the term of the Trust and that, unless the Trust
dissolves prior to the Exchange Date due to the occurrence of a Bank
Liquidation Event (as defined herein) or in the event of a Default by the
Contracting Stockholder, the U.S. Treasury Securities may not be disposed of
prior to their respective maturities. The foregoing fundamental policies of
the Trust may not be changed without the vote of 100% in interest of the
holders.
TRUST ASSETS
The Trust's assets primarily will consist of: (i) U.S. Treasury
Securities and (ii) the Contract. The Trust may also make certain temporary
investments. See "--Temporary Investments." For illustrative purposes only,
the following table shows the number of Bank Ordinary Shares or amount of
cash (in U.S. dollars) that a holder would receive for each STRYPES at
various Reference Property Values. The table assumes that there will be no
Reference Property adjustments as described below under "--The Contract--
Reference Property Adjustments" and, accordingly, that on the Exchange Date,
the Reference Property will consist of five Bank Ordinary Shares. There can
be no assurance that the Reference Property Value will be within the range
set forth below. Given an Initial Price of $ and a Threshold
Appreciation Price of $ , a holder would receive on the Exchange Date
the following number of Bank Ordinary Shares or amount of cash (if the
Contracting Stockholder elects to satisfy its obligation under the Contract
in whole with cash) per STRYPES:
<TABLE>
<CAPTION>
Reference Property
Value of Number of Number of Bank ADSs
Bank Ordinary Bank Ordinary (Assuming 5 Bank Ordinary Amount of
Shares Shares Shares per Bank ADS) Cash
------------------ ------------- ------------------------- ---------
<S> <C> <C> <C>
</TABLE>
The following table sets forth information regarding the distributions
to be received on the U.S. Treasury Securities, the portion of each year's
distributions that will constitute a return of capital for United States
Federal income tax purposes and the amount of original issue discount
accruing, assuming a yield-to-maturity accrual election, on the U.S. Treasury
Securities with respect to a holder who acquires its STRYPES at the issue
price from an Underwriter pursuant to the Offering. See "Certain Tax
Considerations."
<TABLE>
<CAPTION>
Annual
Annual Gross Annual Gross Inclusion of
Distributions Distributions Original Issue
from U.S. from U.S. Annual Return Discount in
Treasury Treasury Securities per of Capital per Income per
Year Securities STRYPES STRYPES STRYPES
- ------- -------------- ----------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
1997 $ $ $ $
1998
1999
2000
</TABLE>
The anticipated annual distribution of $ per STRYPES is
payable quarterly on each February 15, May 15, August 15 and November 15,
commencing , 199 . Quarterly distributions on the STRYPES will
consist solely of the cash received from the proceeds of the maturing U.S.
Treasury Securities held by the Trust. The Trust will not be entitled to any
future dividends that may be declared on the Bank Ordinary Shares. See
"Dividends and Distributions."
ENHANCED YIELD; LESS POTENTIAL FOR EQUITY APPRECIATION THAN BANK ORDINARY
SHARES; NO DEPRECIATION PROTECTION
Although the STRYPES will provide investors with a current distribution
yield, there is no assurance that the distribution yield on the STRYPES will
be higher than the dividend yield on the Bank Ordinary Shares or other
Reference Securities over the term of the Trust. In addition, the
opportunity for equity appreciation afforded by an investment in the STRYPES
is less than that afforded by a direct investment in the Bank Ordinary
Shares. The value of the Bank Ordinary Shares receivable by a holder of a
STRYPES on the Exchange Date will exceed the issue price of such STRYPES only
if the Reference Property Value exceeds the Threshold Appreciation Price,
which represents an appreciation of % of the Initial Price. Moreover,
because each STRYPES will entitle the holder to receive only % of the
number or amount of each type of Reference Security and other property
constituting part of the Reference Property if the Reference Property Value
exceeds the Threshold Appreciation Price, holders of the STRYPES will be
entitled to receive upon exchange only % (the percentage equal to the
Initial Price divided by the Threshold Appreciation Price) of any
appreciation of the value of the Reference Property above the Threshold
Appreciation Price. Holders of STRYPES will bear the entire decline in value
if the Reference Property Value is less than the Initial Price.
THE BANK
(Information to be provided)
THE CONTRACT
General. Pursuant to the terms of the Contract, the Contracting
Stockholder is obligated to deliver to the Trust on the Business Day
immediately preceding the Exchange Date an aggregate number or amount of each
type of Reference Security and other property constituting part of the
Reference Property equal to the product of the Exchange Amount and the
aggregate number of STRYPES then outstanding. The obligation of the
Contracting Stockholder to deliver shares of Reference Property under the
Contract may be cash settled, at the option of the Contracting Stockholder,
in whole or in part, by delivering to the Trust on the Business Day
immediately preceding the Exchange Date, in lieu of the portion of the
Reference Property otherwise deliverable in respect of which the Cash
Settlement Option is exercised, cash in an amount (calculated to the nearest
1/100th of a dollar or, if there is not a nearest 1/100th of a dollar, then
to the next higher 1/100th of a dollar) equal to the Reference Property
Value. In the event, and to the extent, that the Contracting Stockholder
exercises the Cash Settlement Option, holders of the STRYPES will receive
cash on the Exchange Date.
Reference Property Adjustments. The Reference Property is subject to
adjustment if an issuer of a Reference Security shall: (i) pay a stock
dividend or make a distribution with respect to such Reference Security in
Reference Securities; (ii) subdivide or split the outstanding units of such
Reference Security into a greater number of units; (iii) combine the
outstanding units of such Reference Security into a smaller number of units;
(iv) issue by reclassification of units of such Reference Security any units
of another security of such issuer; (v) issue rights or warrants to all
holders of such Reference Security entitling them, for a period expiring
prior to the fifteenth calendar day following the Exchange Date, to subscribe
for or purchase any of its securities or other property (other than rights to
purchase units of such Reference Security pursuant to a plan for the
reinvestment of dividends or interest); or (vi) pay a dividend or make a
distribution to all holders of such Reference Security of cash, securities or
other property (excluding any cash dividend on any Reference Security
consisting of capital stock that does not constitute an Extraordinary Cash
Dividend (as defined below), excluding any payment of interest on such
Reference Security consisting of an evidence of indebtedness and excluding
any dividend or distribution referred to in clause (i), (ii), (iii), (iv) or
(v) above) or issue to all holders of such Reference Security rights or
warrants to subscribe for or purchase any of its securities or other property
(other than rights to purchase units of such Reference Security pursuant to a
plan for the reinvestment of dividends or interest and rights referred to in
clause (v) above) (any of the foregoing cash, securities or other property or
rights or warrants are referred to as the "Distributed Assets") (any such
event described in clause (i), (ii), (iii), (iv), (v) or (vi), a "Dilution
Event").
In the case of the Dilution Events referred to in clauses (i),
(ii), (iii) and (iv) above, the Reference Property shall be adjusted to
include the number of units of such Reference Security and/or security of
such issuer which a holder of units of such Reference Security would have
owned or been entitled to receive immediately following any such event had
such holder held, immediately prior to such event, the number of units of
such Reference Security constituting part of the Reference Property
immediately prior to such event. Each such adjustment shall become effective
immediately after the effective date for such subdivision, split, combination
or reclassification, as the case may be. Each such adjustment shall be made
successively.
In the case of the Dilution Event referred to in clause (v) above, the
Reference Property shall be adjusted to include an amount in cash equal to
the fair market value (determined as described below), as of the fifth
Business Day (except as provided below) following the date on which such
rights or warrants are received by securityholders entitled thereto (the
"Receipt Date"), of each such right or warrant multiplied by the product of
(A) the number of such rights or warrants issued for each unit of such
Reference Security and (B) the number of units of such Reference Security
constituting part of the Reference Property on the date of issuance of such
rights or warrants, immediately prior to such issuance, without interest
thereon. For purposes of the foregoing, the fair market value of each such
right or warrant shall be determined by The Administrator and shall be the
quotient of (x) the highest net cash bid, as of approximately 10:00 A.M.,
local time, on the fifth Business Day following the Receipt Date for
settlement three Business Days later, by a recognized securities dealer in
the primary market for such Reference Security or, if the Reference
Securities are Bank Ordinary Shares and the fair market value is being
determined when the Closing Price thereof would be determined by reference to
Bank ADSs, by a recognized securities dealer in The City of New York, in any
case selected by or on behalf of the Administrator (from three (or such fewer
number of dealers as may be providing such bids) such recognized dealers
selected by or on behalf of the Administrator), for the purchase by such
quoting dealer of the number of rights or warrants (the "Aggregate Number")
that a holder of such Reference Security would receive if such holder held,
as of the record date for determination of stockholders entitled to receive
such rights or warrants, a number of units of such Reference Security equal
to the product of (1) the aggregate number of outstanding STRYPES as of such
record date and (2) the number of units of such Reference Security
constituting part of the Reference Property, divided by (y) the Aggregate
Number. Each such adjustment shall become effective on the fifth Business Day
following the Receipt Date of such rights or warrants. If for any reason the
Administrator is unable to obtain the required bid on the fifth Business Day
following the Receipt Date, it shall attempt to obtain such bid at successive
intervals of three months thereafter and on the third Business Day prior to
the Exchange Date until it is able to obtain the required bid or, if earlier,
until the third Business Day prior to the Exchange Date. From the date of
issuance of such rights or warrants until the required bid is obtained or
those efforts end on the third Business Day prior to the Exchange Date, the
Reference Property shall include the number of such rights or warrants issued
for each unit of such Reference Security multiplied by the number of units of
such Reference Security constituting part of the Reference Property on the
date of issuance of such rights or warrants, immediately prior to such
issuance, and such rights or warrants constituting part of the Reference
Property shall be deemed for all purposes to have a fair market value of
zero.
In the case of the Dilution Event referred to in clause (vi) above, the
Reference Property shall be adjusted to include, from and after such
dividend, distribution or issuance, (x) in respect of that portion, if any,
of the Distributed Assets consisting of cash, the amount of such Distributed
Assets consisting of cash received for each unit of such Reference Security
multiplied by the number of units of such Reference Security constituting
part of the Reference Property on the date of such dividend, distribution or
issuance, immediately prior to such dividend, distribution or issuance,
without interest thereon, plus (y) in respect of that portion, if any, of the
Distributed Assets which are other than cash, the number or amount of each
type of Distributed Assets other than cash received with respect to each unit
of such Reference Security multiplied by the number of units of such
Reference Security constituting part of the Reference Property on the date of
such dividend, distribution or issuance, immediately prior to such dividend,
distribution or issuance.
An "Extraordinary Cash Dividend" means, with respect to any consecutive
12-month period, the amount, if any, by which the aggregate amount of all
cash dividends on any Reference Security consisting of capital stock
occurring in such 12-month period (or, if such Reference Security was not
outstanding at the commencement of such 12-month period, occurring in such
shorter period during which such Reference Security was outstanding) exceeds
on a per share basis 12% of the average of the Closing Prices per share of
such Reference Security over such 12-month period (or such shorter period
during which such Reference Security was outstanding); provided that, for
purposes of the foregoing definition, the amount of cash dividends paid on a
per share basis will be appropriately adjusted to reflect the occurrence
during such period of any stock dividend or distribution of shares of capital
stock of the issuer of such Reference Security or any subdivision, split,
combination or reclassification of shares of such Reference Security.
In the event of (A) any consolidation or merger of an issuer of a
Reference Security with or into another entity (other than a consolidation or
merger in which such issuer is the continuing corporation and in which the
Reference Security outstanding immediately prior to the consolidation or
merger is not exchanged for cash, securities or other property of such issuer
or another entity) or acquisition of an issuer of a Reference Security by
another entity, (B) any sale, transfer, lease or conveyance to another
corporation of the property of an issuer of a Reference Security as an
entirety or substantially as an entirety, (C) any statutory exchange of
securities of an issuer of a Reference Security with another entity or
(D) any liquidation, dissolution, winding up or bankruptcy of an issuer of a
Reference Security (excluding any distribution in such Dilution Event
referred to in clause (vi) above) (any such event described in clause (A),
(B), (C) or (D), a "Reorganization Event"), the Reference Property shall be
adjusted to include, from and after the effective date for such
Reorganization Event, in lieu of the number of units of such Reference
Security constituting part of the Reference Property immediately prior to the
effective date for such Reorganization Event, the amount or number of any
cash, securities and/or other property owned or received in such
Reorganization Event with respect to each unit of such Reference Security
multiplied by the number of units of such Reference Security constituting
part of the Reference Property immediately prior to the effective date for
such Reorganization Event; provided that, in the case of any event specified
in clause (A) of the definition of Reorganization Event involving cash
consideration for the purchase of the Bank Ordinary Shares or successor
Reference Securities, the amount of cash constituting the Reference Property
shall be adjusted to include the Cash Reorganization Price Amount, and the
Trust will distribute the Aggregate Cash Reorganization Price Amount pro rata
to the holders of the STRYPES as soon as practicable after receipt pursuant
to the Contract.
The term "Reorganization Price" for any STRYPES means the cash,
securities or other property received by the Contracting Stockholder as
consideration for the purchase of the Bank Ordinary Shares or any successor
Reference Securities constituting the Reference Property in connection with
any event specified in clause (A) of the definition of Reorganization Event.
The term "Cash Reorganization Price Payment Amount" with respect to any
Reorganization Price that includes cash consideration means the present value
of the Cash Consideration Amount, discounted from the Exchange Date to the
date on which such Cash Reorganization Price Payment Amount is distributed to
holders of STRYPES (the "Remaining Life") on a quarterly basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury
Rate. "Aggregate Cash Reorganization Price Payment Amount" at any time means
the Cash Reorganization Price Payment Amount multiplied by the number of
STRYPES outstanding at such time. The term "Cash Consideration Amount" with
respect to any Reorganization Price means cash equal to (a) if the
Reorganization Price is greater than or equal to the Threshold Appreciation
Price, % of the Reorganization Price multiplied by the percentage
(calculated to the nearest 0.001%) of the Reorganization Price which is cash,
(b) if the Reorganization Price is less than the Threshold Appreciation Price
but greater than the Initial Price, the Initial Price multiplied by the
percentage (calculated to the nearest 0.001%) of the Reorganization Price
which is cash, and (c) if the Reorganization Price is less than or equal to
the Initial Price, the Reorganization Price multiplied by the percentage
(calculated to the nearest 0.001%) of the Reorganization Price which is cash.
"Adjusted Treasury Rate" means, with respect to any event specified in
clause (A) of the definition of Reorganization Event, the rate per annum
equal to (i) the yield, under the heading which represents the average for
the immediately prior week, appearing in the most recently published
statistical release designated "H.15 (519)" or any successor publication
which is published weekly by the Federal Reserve Board and which establishes
yields on actively traded United States Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Remaining Life (if no maturity is within three
months before or after the maturity corresponding to the Remaining Life,
yields for the two published maturities most closely corresponding to the
Remaining Life will be interpolated, and the Adjusted Treasury Rate will be
interpolated or extrapolated from such yields on a straight-line basis,
rounding to the nearest month) or (ii) if such release (or any successor
release) is not published during the week preceding the calculation date or
does not contain such yields, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue, calculated
using a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for the date on
which such event is consummated, in each case calculated on the third
Business Day preceding the date on which such event is consummated.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the
Remaining Life that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the Remaining Life. If
no United States Treasury security has a maturity which is within a period
from three months before to three months after the event specified in clause
(A) of the definition of Reorganization Event, the two most closely
corresponding United States Treasury securities will be used as the
Comparable Treasury Issue, and the Adjusted Treasury Rate will be
interpolated or extrapolated on a straight-line basis, rounding to the
nearest month, using such securities.
"Quotation Agent" means the Reference Treasury Dealer, which will be
appointed by the (Name) or, if the (Name) fails to do so, by the
Administrator. "Reference Treasury Dealer" means a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer").
"Comparable Treasury Price" means, with respect to any event specified
in clause (A) of the definition of Reorganization Event, (i) the average of
five Reference Treasury Dealer Quotations for the date on which such event is
consummated, after excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (ii) if the Paying Agent obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined
by the Administrator, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Administrator by such Reference Treasury Dealer at 5:00
p.m., New York City time, on the third Business Day preceding the date on
which the relevant event specified in clause (A) of the definition of
Reorganization Event is consummated.
The Administrator is required, within ten Business Days following the
occurrence of an event that requires an adjustment to the Reference Property
(or if the Administrator is not aware of such occurrence, as soon as
practicable after becoming so aware), to provide written notice to the
Holders of the occurrence of such event and a statement in reasonable detail
setting forth the amount or number of each type of Reference Security and
other property then constituting part of the Reference Property.
No adjustments to the Reference Property will be made for certain other
events, such as offerings of Bank Ordinary Shares by the Bank for cash or in
connection with acquisitions. Likewise, no adjustments to the Reference
Property will be made for any sales of Bank Ordinary Shares by the
Contracting Stockholder.
Bank Liquidation Events Causing a Dissolution of the Trust.
Notwithstanding anything to the contrary contained in the Contract, if any
event with respect to the Bank, or any surviving entity or subsequent
surviving entity of the Bank (a "Bank Successor") specified in clause (A) of
the definition of Reorganization Event involving all cash consideration for
all Reference Securities or of any event specified in clause (D) of the
definition of Reorganization Event (each, a "Bank Liquidation Event") occurs,
the Contracting Stockholder's obligations under the Contract shall be
automatically accelerated and the Contracting Stockholder shall be obligated
to deliver to the Trust, on the tenth Business Day after the effective date
for such Bank Liquidation Event (the "Early Settlement Date"), then (i) the
aggregate number or amount of each type of Reference Security and other
property constituting part of the Reference Property that would be required
to be delivered by the Contracting Stockholder on such date under the
Contract if the Exchange Date were redefined for all purposes to be the Early
Settlement Date and (ii) in the case of an event specified in clause (A) of
the definition of Reorganization Event involving all cash consideration for
the purchase of the Bank Ordinary Shares or any successor Reference
Securities then constituting the Reference Property, the amount of the cash
received for the Bank Ordinary Shares or any successor Reference Securities
to be paid to the Trust under the Contract will be the Cash Reorganization
Price Payment Amount, which amount may be less than the cash consideration
received by the Contracting Stockholder for such Bank Ordinary Shares or
other Reference Securities.
If a Bank Liquidation Event occurs, the Trust's assets (other than
assets received pursuant to the Contract) will be liquidated, the net assets
of the Trust will be distributed pro rata to the holders and the term of the
Trust will expire. In such event, the U.S. Treasury Securities will be sold
by the Trust, and the proceeds therefrom will be distributed along with
Reference Property received under the Contract on the Early Settlement Date
after providing for any expenses of the Trust.
Collateral Arrangements; Acceleration. Pursuant to a Security and
Pledge Agreement among the Contracting Stockholder, the Trust and The Bank of
New York, as collateral agent (the "Collateral Agent"), the Contracting
Stockholder's obligations under the Contract will be secured by a security
interest in the maximum number or amount of each type of Reference Security
and other property constituting part of the Reference Property deliverable by
the Contracting Stockholder under the Contract. The Collateral Agent will
promptly pay over to the Contracting Stockholder any dividends, interest,
principal or other payments received by the Collateral Agent in respect of
any collateral pledged by the Contracting Stockholder, unless (a) the
Contracting Stockholder is in Default, (b) such dividends, interest,
principal or other payments constitute part of the Reference Property or (c)
the payment of such amount to the Contracting Stockholder would cause the
collateral to become insufficient under the Security and Pledge Agreement.
The Contracting Stockholder shall have the right to vote any pledged units of
Reference Securities for so long as such shares are owned by it and pledged
under the Security and Pledge Agreement, unless the Contracting Stockholder
is in Default.
A "Collateral Event of Default" under the Security and Pledge Agreement
shall mean, at any time, failure of the collateral to consist of at least the
maximum number or amount of each type of Reference Security and other
property constituting part of the Reference Property deliverable by the
Contracting Stockholder under the Contract at such time if such failure is
not remedied on or before the third Business Day after notice of such failure
is given to the Contracting Stockholder.
The occurrence of a Collateral Event of Default under the Security and
Pledge Agreement or the bankruptcy or insolvency of the Contracting
Stockholder (each such event, a "Default") will cause an automatic
acceleration of the Contracting Stockholder's obligations under the Contract.
In any such event, the Contracting Stockholder will become obligated to
deliver a number or amount of each type of Reference Security and other
property constituting part of the Reference Property having an aggregate
value equal to the "Aggregate Acceleration Value" of 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 an 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
the number or amount of each type of Reference Security and other property
constituting part of the Reference Property under a portion of the Contract
that corresponds to 1,000 of the STRYPES offered hereby. 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 the 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 thereof by the
aggregate number of STRYPES then outstanding, except that, if no quotations
are provided, the Aggregate Acceleration Value will be the value of the
aggregate number or amount of each type of Reference Security and other
property constituting part of the Reference Property that would be required
to be delivered on such date under the Contract if the Exchange Date were
redefined for all purposes to be the acceleration date. Upon the occurrence
of a Default, the number or amount of each type of Reference Security and
other property constituting part of the Reference Property deliverable for
each STRYPES will be based solely on the Aggregate Acceleration Value
described above for the Contract.
For purposes of the Security and Pledge Agreement, unless otherwise
specifically provided, the value of a number or amount of any type of
Reference Property shall be (a) for any Reference Property consisting of
cash, the amount of such cash at the time of valuation, (b) for any Reference
Property consisting of property other than cash or Reference Securities, the
fair market value (as determined by a nationally recognized independent
banking firm retained for this purpose by the Collateral Agent) as of the
time of valuation of such property, and (c) for any Reference Property
consisting of a Reference Security, an amount equal to the market price of a
unit of such Reference Security at the time of valuation multiplied by the
number of units of such Reference Security then being valued.
The Collateral Agent is a "financial institution" for purposes of
Sections 555 and 101(22) of Title 11 of the United States Code (the
"Bankruptcy Code"). The Trust believes that the Collateral Agent will be the
agent and custodian for the Trust such that the Trust will be a "financial
institution" as defined in Section 101(22) of the Bankruptcy Code. 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 Reference Property then pledged. (THIS NEEDS TO BE MODIFIED FOR
(COUNTRY) PURPOSES.) See "--Trust Dissolution."
Fractional Interests. No fractional units of any Reference Security
will be delivered to the Trust if the Contracting Stockholder satisfies its
obligations under the Contract by delivering Reference Property. In lieu of
any fractional unit otherwise deliverable to the Trust in respect of the
Contracting Stockholder's obligations under the Contract, the Trust shall be
entitled to receive an amount in cash equal to the value of such fractional
unit based on the average Closing Price per unit of such Reference Security
on the 20 Trading Days immediately prior to, but not including, the second
Trading Day preceding the Exchange Date.
To the extent practicable, the Contracting Stockholder will deliver to
the Trust fractional interests of any Reference Property other than cash or a
Reference Security if the Contracting Stockholder satisfies its obligations
under the Contract by delivering Reference Property. If such delivery is not
practicable, in lieu of delivering any such fractional interest otherwise
deliverable in respect of the Contracting Stockholder's obligations under the
Contract, the Trust shall be entitled to receive an amount in cash equal to
the value of such fractional interest based on the fair market value (as
determined by a nationally recognized independent investment banking firm
retained for this purpose by the Administrator) as of 10:00 A.M. (New York
City time) on the third Business Day preceding the Exchange Date of such
Reference Property other than cash or a Reference Security.
Description of Contracting Stockholder. The Contracting Stockholder is
. The Contracting Stockholder currently owns
Bank Ordinary Shares or % of the Bank Ordinary Shares currently
outstanding.
Purchase Price. The purchase price under the Contract is equal to $
in the aggregate and is payable to the Contracting Stockholder by the Trust
on or about , 1997. No other consideration is payable by the
Trust to the Contracting Stockholder in connection with its acquisition of
the Contract or the performance of the Contract by the Contracting
Stockholder.
The Contract will be valued by the Trust at fair value as determined in
good faith at the direction of the Trustees (if necessary, through
consultation with accountants, bankers and other specialists). See "Net
Asset Value."
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon U.S. Treasury
Securities with face amounts and maturities corresponding to the amounts and
payment dates of the distributions payable with respect to the STRYPES. Up
to % of the Trust's total assets may be invested in these U.S. Treasury
Securities. In the event that the Contract is accelerated as described under
"--Bank Liquidation Event Causing a Dissolution of the Trust" or "--
Collateral Arrangements; Acceleration," the Administrator will liquidate any
such U.S. Treasury Securities then held in the Trust and distribute the
proceeds therefrom pro rata to the holders, together with amounts distributed
upon acceleration.
TEMPORARY INVESTMENTS
To the extent necessary to enable the Paying Agent to make the next
succeeding quarterly distribution, any moneys deposited with or received by
the Trust will be invested by the Paying Agent in short-term obligations of
the U.S. Government maturing no later than the Business Day preceding the
next following distribution date.
TRUST DISSOLUTION
The Trust will dissolve on or shortly after the Exchange Date, except if
dissolved earlier under certain limited circumstances. Although the Trust
has adopted a fundamental policy that it will not dispose of the Contract
prior to the Exchange Date, under certain circumstances the Contract may
terminate prior to the Exchange Date. In the event that a Bank Liquidation
Event shall have occurred or a Default shall have occurred with respect to
the Contracting Stockholder, the Trust's assets (other than assets received
pursuant to the Contract) would be liquidated, the net assets of the Trust
would be distributed pro rata to the holders and the term of the Trust would
expire. See "--The Contract--Bank Liquidation Events Causing a Dissolution
of the Trust" and "--Collateral Arrangements; Acceleration."
Written notice of any dissolution shall be sent to holders specifying
the record date for the distribution to holders, the amount distributable
(including, if applicable, the number or amount of each type of Reference
Security and other property constituting part of the Reference Property) with
respect to each STRYPES and the time of dissolution as determined by the
Trustees. Any such notice will be provided by mail, sent to each holder at
such holder's address as it appears on the register for the STRYPES, first
class, postage prepaid not less than nine days prior to the date on which
such distribution is to be made. At or prior to the mailing of such notice,
the Administrator shall publish a public announcement in The Wall Street
Journal or another daily newspaper of national circulation in the United
States.
FRACTIONAL UNITS AND INTERESTS
No fractional units of any Reference Security or amount of each type of
Reference Security and other property constituting part of the Reference
Property, or fractional interests of any Reference Property other than cash
or a Reference Security, will be distributed by the Trust to holders of
STRYPES on the Exchange Date or upon earlier dissolution of the Trust. All
fractional units or interests to which holders of STRYPES would otherwise be
entitled on the Exchange Date or upon earlier dissolution of the Trust will
be aggregated and liquidated by the Administrator and, in lieu of the
fractional units or interests to which a holder would otherwise have been
entitled in respect of the total number of STRYPES held by such holder, such
holder will receive its pro rata portion of the proceeds from such
liquidation (net of any brokerage or related expenses).
INVESTMENT RESTRICTIONS
The Trust has adopted a fundamental policy that the Trust may not
purchase any securities or instruments other than the U.S. Treasury
Securities, the Contract and any Reference Security 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 STRYPES;
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; or make loans. The Trust has adopted a
fundamental policy that the Contract may not be disposed of during the term
of the Trust and that, unless the Trust dissolves prior to the Exchange Date
due to the occurrence of a Bank Liquidation Event or in the event of a
Default by the Contracting Stockholder, the U.S. Treasury Securities may not
be disposed of prior to their respective maturities.
Because of the foregoing limitations, the Trust's investments will be
concentrated initially in the banking and financial services industry, which
is the principal industry in which the Bank currently operates. However, to
the extent that in the future the Bank diversifies its operations into one or
more other industries or is acquired by an entity that operates in one or
more other industries, the Trust's investments will be less concentrated in
the banking and financial services industry.
RISK FACTORS
NO ACTIVE PORTFOLIO MANAGEMENT
It is a fundamental policy of the Trust that the Contract may not be
disposed of during the term of the Trust and that, unless the Trust dissolves
prior to the Exchange Date due to the occurrence of a Bank Liquidation Event
or in the event of a Default by the Contracting Stockholder, the U.S.
Treasury Securities may not be disposed of prior to their respective
maturities. As a result, the Trust will continue to hold the Contract
despite any significant decline in the value of the Reference Property,
including the Bank Ordinary Shares, or adverse changes in the financial
condition of the issuer of the Reference Security, including the Bank. The
Trust will not be managed like a typical closed-end investment company.
ABSENCE OF TRADING HISTORY; MARKETABILITY; POSSIBILITY OF THE STRYPES TRADING
AT A DISCOUNT FROM NET ASSET VALUE
The STRYPES have no trading history and it is not possible to predict
how they will trade in the secondary market. The trading price of the
STRYPES may vary considerably prior to the Exchange Date due to, among other
things, fluctuations in trading prices of the Bank Ordinary Shares, Bank ADSs
or other Reference Securities (which may occur due to changes in the
financial condition, results of operations or prospects of the Bank or other
issuer of Reference Securities, 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 Bank
Ordinary Shares, Bank ADSs or other Reference Securities is traded and the
market segment of which the Bank or other issuer of Reference Securities is a
part), fluctuations in interest rates and rates of exchange between the
"(country)" dollar and the US dollar, and other factors that are difficult to
predict and beyond the Trust's control.
The Underwriter currently intends, but is not obligated, to make a
market in the STRYPES. There can be no assurance that a secondary market
will develop or, if a secondary market does develop, that it will provide the
holders of the STRYPES with liquidity of investment or that it will continue
for the life of the STRYPES. Application has been made to list the STRYPES
on the NYSE. There can be no assurance that such application will be
accepted or that, if accepted, the STRYPES will not later be delisted or that
trading in the STRYPES on the NYSE 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 STRYPES on another national securities exchange or for
quotation on another trading market. If the STRYPES are not listed or traded
on any securities exchange or trading market, or if trading of the STRYPES is
suspended, pricing information for the STRYPES may be more difficult to
obtain, and the price and liquidity of the STRYPES may be adversely affected.
The Trust is a recently organized closed-end investment company with no
previous operating history. Shares of closed-end investment companies
frequently trade at a discount from their net asset value, which is a risk
separate and distinct from the risk that the Trust's net asset value will
decrease. The Trust cannot predict whether the STRYPES will trade at, below
or above their net asset value. The risk of purchasing investments that
might trade at a discount is more pronounced for investors who wish to sell
their investments in a relatively short period of time after completion of
the Trust's 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.
STRYPES are not subject to redemption.
Reference Property Adjustments
The Reference Property (or, in the event the Contracting Stockholder
elects to exercise the Cash Settlement Option, the amount of cash or
combination of cash and Reference Property) that the Trust is entitled to
receive pursuant to the Contract on the Business Day immediately preceding
the Exchange Date or upon acceleration of the Contract is subject to
adjustment for certain events arising from, among other things, a merger,
consolidation or acquisition in which the Bank is not the surviving entity
and the liquidation, dissolution, winding up or bankruptcy of the Bank or
other issuer of a Reference Security, as well as stock splits and
combinations, stock dividends and certain other actions of the Bank that
modify its capital structure. See "Investment Objective and Policies--The
Contract--Reference Property Adjustments." Such number or amount of
Reference Property (or amount of cash or combination of cash and Reference
Property) to be received by the Trust will not be adjusted for other events,
such as offerings of Bank Ordinary Shares for cash or in connection with
acquisitions.
The Bank is not restricted in connection with the STRYPES from issuing
additional Bank Ordinary Shares during the term of the Trust. In addition,
no stockholder of the Bank, including the Contracting Stockholder, is
precluded from selling Bank Ordinary Shares or from participating in or
voting for a reorganization, merger or acquisition of the Bank. Neither the
Bank nor any stockholder of the Bank, including the Contracting Stockholder,
has any obligation to consider the interests of the holders of the STRYPES
for any reason. Additional issuances, sales, reorganizations, mergers and
acquisitions may materially and adversely affect the price of Bank Ordinary
Shares, Bank ADSs or other Reference Securities and, because of the
relationship of the number of Bank Ordinary Shares (or amount of cash) to be
received pursuant to the Contract to the price of the Bank Ordinary Shares,
such other events may materially and adversely affect the trading price of
the STRYPES. There can be no assurance that the Bank will not take any of
the foregoing actions, or that it will not make offerings of, or that
principal stockholders, including the Contracting Stockholder, will not sell
any Bank Ordinary Shares, in the future, or as to the amount of any such
offerings or sales.
LIMITED TERM
The term of the Trust will expire on or shortly after the Exchange Date,
unless the Trust is dissolved earlier under certain limited circumstances.
On or shortly after the Exchange Date, the Trust will distribute the
Reference Property and/or cash received by the Trust pursuant to the Contract
and other net assets held by the Trust pro rata to holders and dissolve
shortly thereafter. In the event that a Bank Liquidation Event shall have
occurred or a Default shall have occurred with respect to the Contracting
Stockholder, the Trust's assets (other than assets received pursuant to the
Contract) would be liquidated, the net assets of the Trust would be
distributed pro rata to holders and the term of the Trust would expire.
NON-DIVERSIFIED PORTFOLIO
The Trust's assets will consist almost entirely of the Contract and the
U.S. Treasury Securities. As a result, investments in the Trust may be
subject to greater risk than would be the case for a company with a more
diversified portfolio of investments.
COMPARISON TO OTHER EQUITY SECURITIES; RELATIONSHIP TO BANK ORDINARY SHARES
The terms of the STRYPES are similar to those of ordinary equity
securities in that the value of the Reference Property (or, in the event the
Contracting Shareholder exercises the Cash Settlement Option, the amount of
cash or combination of cash and Reference Property) that a holder of a
STRYPES will receive on the Exchange Date is not fixed, but is based on the
Reference Property Value (see "Investment Objective and Policies--General"
and "--The Contract"). THERE CAN BE NO ASSURANCE THAT SUCH AMOUNT RECEIVABLE
BY THE HOLDER ON THE EXCHANGE DATE PLUS ANY CASH REORGANIZATION PRICE PAYMENT
AMOUNTS PREVIOUSLY PAID WILL BE EQUAL TO OR GREATER THAN THE ISSUE PRICE PAID
FOR THE STRYPES. IF THE REFERENCE PROPERTY VALUE IS LESS THAN THE INITIAL
PRICE, SUCH AMOUNTS RECEIVABLE MAY BE LESS THAN THE ISSUE PRICE PAID FOR THE
STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES WILL RESULT IN A LOSS.
ACCORDINGLY, A HOLDER OF STRYPES ASSUMES THE RISK THAT THE MARKET VALUE OF
THE BANK ORDINARY SHARES OR OTHER REFERENCE PROPERTY MAY DECLINE, AND THAT
SUCH DECLINE COULD BE SUBSTANTIAL.
The trading prices of the STRYPES in the secondary market will be
affected by the trading prices of the Bank Ordinary Shares, Bank ADSs or
other Reference Securities in the secondary market. It is impossible to
predict whether the price of the Bank Ordinary Shares or other Reference
Property will rise or fall. Trading prices of Bank Ordinary Shares will be
influenced by the Bank's operating results and prospects and by economic,
financial and other factors and market conditions that can affect the capital
markets generally, including the level of, and fluctuations in, the trading
prices of stocks generally and sales of substantial amounts of Bank Ordinary
Shares in the market subsequent to the offering of the STRYPES or the
perception that such sales could occur.
LIMITATIONS ON OPPORTUNITY FOR EQUITY APPRECIATION; POTENTIAL LOSSES
The opportunity for equity appreciation afforded by an investment in the
STRYPES is less than the opportunity for equity appreciation afforded by a
direct investment in the Bank Ordinary Shares or Bank ADSs because the amount
receivable by a holder of a STRYPES on the Exchange Date will exceed the
issue price of such STRYPES only if the Reference Property Value exceeds the
Threshold Appreciation Price (which represents an appreciation of % over
the Initial Price). Moreover, each STRYPES will entitle the holder to
receive on the Exchange Date only % (the percentage equal to the Initial
Price divided by the Threshold Appreciation Price) of any appreciation of the
value of the Reference Property Value above the Threshold Appreciation Price.
See "Investment Objective and Policies--The Contract." Because the price of
the Reference Property Value is subject to market fluctuations, the value of
the Reference Property Value (or, in the event the Contracting Stockholder
exercises the Cash Settlement Option, the amount of cash or combination or
cash and Reference Property) received by the Trust on the Business Day
immediately preceding the Exchange Date, determined as described herein, may
be more or less than the issue price paid for the STRYPES.
NO STOCKHOLDER RIGHTS
Holders of the STRYPES will not be entitled to any rights with respect
to the Reference Property (including, without limitation, voting rights and
rights to receive any dividends or other distributions in respect thereof)
until such time, if any, as the Trust shall have delivered the Reference
Property, in exchange for STRYPES on the Exchange Date or upon earlier
dissolution of the Trust, and unless the applicable record date, if any, for
the exercise of such right occurs after such delivery. For example, in the
event that an amendment is proposed to the Memorandum and Articles of
Association of the Bank and the record date for determining the stockholders
of record entitled to vote on such amendment occurs prior to such delivery,
holders of the STRYPES will not be entitled to vote on such amendment and the
Contracting Stockholder would be entitled to exercise all voting rights with
respect to such amendment, without regard to the interests of the holders of
the STRYPES.
The Contracting Stockholder is not responsible for the determination or
calculation of the amount receivable by holders of the STRYPES on the
Exchange Date or upon earlier dissolution of the Trust. The Contract between
the Trust and the Contracting Stockholder is a commercial transaction and
does not create any rights in, or for the benefit of, any third party,
including any holder of STRYPES.
(Further information to be provided)
TAX MATTERS
Holders will experience a taxable event upon the exchange of STRYPES to
the extent that the Contracting Stockholder satisfies its obligations under
the Contract with cash. Because of an absence of authority as to the proper
character of any gain or loss resulting from such a taxable event, the
ultimate tax consequences to holders as a result of the Contracting
Stockholder satisfying its obligations under the Contract, in whole or in
part, with cash is uncertain. Accordingly, prospective investors in the
STRYPES should consult their own tax advisors in this regard. Investors
should also consult their own tax advisors concerning the proper treatment of
their pro rata share of the Trust's fees and expenses and the application of
the United States Federal income tax laws to their particular situations as
well as any consequences of the purchase, ownership and disposition of the
STRYPES arising under the laws of any other taxing jurisdiction. The tax
consequences of investing in the STRYPES are described in greater detail
under "Certain Tax Considerations."
DESCRIPTION OF THE STRYPES
Each STRYPES represents a proportionate share of beneficial interest in
the Trust, and a total of _,000,000 STRYPES will be issued in the Offering,
assuming no exercise of the Underwriter's over-allotment option. Upon
liquidation of the Trust, Holders are entitled to share pro rata in the net
assets of the Trust available for distribution. STRYPES have no preemptive,
redemption or conversion rights. The STRYPES, when issued and outstanding,
will be fully paid and nonassessable.
Holders are entitled to one vote for each STRYPES held on all matters to
be voted on by holders and are not able to cumulate their votes in the
election of Trustees. The Trust intends to hold annual meetings as required
by the rules of the NYSE. The holders have the right, upon the declaration
in writing or vote of more than two-thirds of the outstanding STRYPES, 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 record holders of 10% of
the STRYPES or to vote on other matters upon the written request of the
record Holders of 51% of the STRYPES (unless substantially the same matter
was voted on during the preceding 12 months).
BOOK-ENTRY SYSTEM
The STRYPES will be issued in the form of one or more global securities
(the "Global Securities") deposited with the Depository and registered in the
name of a nominee of the Depository.
The Depository has advised the Trust and the Underwriter as follows:
The Depository is a limited-purpose trust company organized under the laws of
the State of New York, 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 Section 17A of the Exchange Act.
The Depository was created to hold securities of persons who have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
certificates. Such participants include securities brokers and dealers,
banks, trust companies and clearing corporations. Indirect access to the
Depository's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Upon the issuance of a Global Security, the Depository or its nominee
will credit the respective STRYPES represented by such Global Security to the
accounts of participants. The accounts to be credited shall be designated by
the Underwriter. Ownership of beneficial interests in such Global Securities
will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests by participants in such
Global Securities will be shown on, and the transfer of those ownership
interests will be effected only through, records maintained by the Depository
or its nominee for such Global Securities. Ownership of beneficial interests
in such Global Securities by persons that hold through participants will be
shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The
laws of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and
such laws may impair the ability to transfer beneficial interests in a Global
Security.
So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the STRYPES.
Except as set forth below, owners of beneficial interests in such Global
Securities will not be entitled to have the STRYPES registered in their names
and will not receive or be entitled to receive physical delivery of the
STRYPES in definitive form and will not be considered the owners or holders
thereof.
Payment of Reference Property or amounts payable or other consideration
deliverable on exchange of, and any quarterly distributions on, STRYPES
registered in the name of or held by the Depository or its nominee will be
made to the Depository or its nominee, as the case may be, as the registered
owner or the holder of the Global Security. None of the Trust, any Trustee,
the Administrator, the Paying Agent or the Custodian for the STRYPES will
have any responsibility or liability for any aspect of the records relating
to, or payments made on account of, beneficial ownership interests in a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Trust expects that the Depository, upon receipt of any payment in
respect of a Global Security, will credit immediately participants' accounts
with payments in amounts proportionate to their respective beneficial
interests in such Global Security as shown on the records of the Depository.
The Trust also expects that payments by participants to owners of beneficial
interests in such Global Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street
name," and will be the responsibility of such participants.
A Global Security may not be transferred except as a whole by the
Depository to a nominee or a successor of the Depository. If the Depository
is at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Trust within ninety days, the Trust will
issue STRYPES in definitive registered form in exchange for the Global
Security representing such STRYPES. In addition, the Trust may at any time
and in its sole discretion determine not to have any STRYPES represented by
one or more Global Securities and, in such event, will issue STRYPES in
definitive registered form in exchange for all of the Global Securities
representing the STRYPES. Further, if the Trust so specifies with respect to
the STRYPES, an owner of a beneficial interest in a Global Security
representing STRYPES may, on terms acceptable to the Trust and the Depository
for such Global Security, receive STRYPES in definitive form. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of STRYPES represented by
such Global Security equal in number to that represented by such beneficial
interest and to have such STRYPES registered in its name.
TRUSTEES
The Trustees of the Trust consist of three individuals, none of whom is
an "interested person" of the Trust as defined in the Investment Company Act.
The Trustees of the Trust are responsible for the overall supervision of the
operations of the Trust and perform the various duties imposed on the
trustees of management investment companies by the Investment Company Act.
The Trustees of the Trust are:
<TABLE>
<CAPTION>
Principal Occupation
Name, Age and Address Title During Past Five Years
----------------------------- ---------------- ----------------------
<S> <C> <C>
Donald J. Puglisi, 52 Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 53 Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 58 Trustee Professor of Economics
Center for Economic University of Delaware
Education & Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
COMPENSATION OF TRUSTEES
Each unaffiliated Trustee will be paid by the Trust, in respect of its
annual fees and anticipated out-of-pocket expenses, out of the proceeds of
the Offering, 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.
MANAGEMENT ARRANGEMENTS
PORTFOLIO MANAGEMENT AND ADMINISTRATION
The Trust will be internally managed and will not have an investment
adviser. The Trust's portfolio will not be actively managed. The Trustees
of the Trust will authorize the purchase of the Contract and the U.S.
Treasury Securities as directed by the Declaration of 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, unless the Trust dissolves prior to
the Exchange Date due to the occurrence of a Bank Liquidation Event or in the
event of a Default by the Contracting Stockholder, the U.S. Treasury
Securities may not be disposed of prior to their respective maturities.
The Trust will pay all expenses incurred in the operation of the Trust,
including, among other things, accounting services, expenses for legal and
auditing services, taxes, costs of printing proxies, listing fees, if any,
stock certificates and shareholder reports, charges of the Custodian (as
defined below) and the Paying Agent (as defined below), expenses of
registering the STRYPES under Federal and state securities laws, Commission
fees, fees and expenses of Trustees, accounting costs, brokerage costs,
litigation and other extraordinary or non-recurring expenses, mailing and
other expenses properly payable by the Trust. See "--Estimated Expenses."
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) pay, or cause to be paid, all 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 STRYPES as described
herein; (iv) cause the legal and other professional advisors engaged by it to
prepare and mail, file or publish all notices, proxies, reports, tax returns
and other communications and documents for the Trust, and keep all books and
records for the Trust; (v) at the direction of the Trustees, and upon being
furnished with reasonable security and indemnity as the Administrator may
require, institute and prosecute legal and other appropriate proceedings to
enforce the rights and remedies of the Trust; and (vi) make, or cause to be
made, all necessary arrangements with respect to meetings of Trustees and any
meetings of holders of STRYPES. The Administrator will not, however, 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 as described under "Investment Objective and Policies--The Contract-
- -Bank Liquidation Event Causing a Dissolution of the Trust," and "--
Collateral Arrangements; Acceleration," or the settlement of the Contract on
the Business Day immediately preceding the Exchange Date).
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.
Except for its roles as Administrator, Custodian and Paying Agent of the
Trust, and except for its role as Collateral Agent under the Security and
Pledge Agreement, 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, New
York 10286.
CUSTODIAN
The Trust's 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. The Custodian will also act as
Collateral Agent under the Security and Pledge Agreement and will hold a
perfected security interest in the Reference Property or other assets
consistent with the terms of the Contract pledged thereunder.
PAYING AGENT
The paying agent, transfer agent and registrar for the STRYPES 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 Administrator, the Paying
Agent and the Custodian with respect to any claim, liability, loss which it
may incur in acting as Trustee, Administrator, Paying Agent or Custodian, as
the case may be, and any reasonable expense incurred in connection with any
such claim, liability or loss (including the reasonable costs and expenses of
the defense against any claim or liability) except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of their
respective duties. Subject to the satisfaction of certain conditions,
Merrill Lynch & Co., Inc. will reimburse the Trust for any amounts it may be
required to pay as indemnification to any Trustee, the Administrator, the
Paying Agent or the Custodian, and Merrill Lynch & Co., Inc. will in turn be
reimbursed by the Contracting Stockholder for all such reimbursements paid by
it.
ESTIMATED EXPENSES
At the closing of the Offering, the Trust will pay to each of the
Administrator, the Custodian and the Paying Agent a one-time, up-front amount
in respect of its fee and, in the case of the Administrator, certain
anticipated ongoing expenses of the Trust over the term of the Trust. The
anticipated Trust expenses to be borne by the Trust include, among other
things, expenses for legal and independent accountants' services, costs of
printing proxies, STRYPES certificates and holder reports and stock exchange
fees. Organization costs of the Trust in the amount of $ and
estimated costs of the Trust in connection with the initial registration and
public offering of the STRYPES in the amount of approximately $ will be
paid by the Trust.
The amount payable to the Administrator in respect of the anticipated
ongoing expenses of the Trust was determined based on expense estimates made
in good faith on the basis of information currently available to the Trust,
including estimates furnished by the Trust's agents. Merrill Lynch & Co.,
Inc. will pay any unanticipated operating expenses of the Trust. Merrill
Lynch & Co., Inc. will be reimbursed by the Contracting Stockholder for all
fees and expenses of the Trust paid by it.
DIVIDENDS AND DISTRIBUTIONS
The Trust intends to distribute to holders on a quarterly basis the
proceeds of the U.S. Treasury Securities held by the Trust. The first
distribution, in respect of the period from , 1997 until ,
199 , will be made on , 199 to holders of record as of
, 199 , and will equal $ per STRYPES. 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. Upon dissolution of the Trust as described in
"Investment Objective and Policies--Trust Dissolution" each holder will share
pro rata in any remaining net assets of the Trust.
NET ASSET VALUE
The net asset value of the STRYPES will be calculated by the Trust no
less frequently than quarterly by dividing the value of the net assets of the
Trust (the value of its assets less its liabilities) by the total number of
STRYPES outstanding. The Trust's net asset value will be published
semi-annually as part of the Trust's semi-annual report to holders and at
such other times as the Trustees may determine. The U.S. Treasury Securities
held by the Trust will be valued at the mean between the last current bid and
asked prices or, if quotations are not available, as determined in good faith
by the Trust. Short-term investments having a maturity of 60 days or less
are valued at cost with accrued interest or discount earned included in
interest receivable. The Contract will be valued at the mean of the bid
prices received by the Administrator from at least three independent broker-
dealer firms unaffiliated with the Trust who are in the business of making
bids on financial instruments similar to the Contract and with terms
comparable thereto.
CERTAIN TAX CONSIDERATIONS
UNITED STATES FEDERAL INCOME TAX
Set forth in full below is the opinion of Brown & Wood LLP, counsel to
the Trust, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the STRYPES. Such opinion is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including retroactive changes in effective dates) or
possible differing interpretations. The discussion below deals only with
STRYPES held as capital assets and does not purport to deal with persons in
special tax situations, such as financial institutions, insurance companies,
regulated investment companies, dealers in securities or currencies, tax-
exempt entities, or persons holding STRYPES as a hedge against currency
risks, as a position in a "straddle" or as part of a "hedging" or
"conversion" transaction for tax purposes. It also does not deal with
holders of STRYPES other than original purchasers thereof (except where
otherwise specifically noted herein). Moreover, the discussion below
generally does not address the tax consequences of ownership of the Reference
Property. The following discussion also does not address the tax
consequences of investing in the STRYPES arising under the laws of any state,
local or foreign jurisdiction. Persons considering the purchase of the
STRYPES should consult their own tax advisors concerning the application of
the United States Federal income tax laws to their particular situations as
well as any consequences of the purchase, ownership and disposition of the
STRYPES arising under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. holder" means a beneficial owner of
STRYPES that is for United States Federal income tax purposes (i) a citizen
or resident of the United States, (ii) a corporation, a partnership or other
entity created or organized in or under the laws of the United States or of
any political subdivision thereof, (iii) an estate the income of which is
subject to United States Federal income taxation regardless of its source, or
(iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust. As used herein, the term "non-U.S. holder" means a beneficial owner
of STRYPES that is not a U.S. holder. Unless otherwise specifically
provided, the following opinion of Brown & Wood LLP assumes that on the
Exchange Date the Reference Property that holders of the STRYPES will receive
will be only Bank Ordinary Shares.
CLASSIFICATION OF THE TRUST
The Trust will be classified as a grantor trust under subpart E, Part I
of subchapter J of the Internal Revenue Code of 1986, as amended (the
"Code"). As such, holders of the STRYPES will be treated for United States
Federal income tax purposes as owners of a pro rata undivided interest in the
Trust's assets which will consist of the U.S. Treasury Securities and the
Contract. Accordingly, each holder will be required to report on its United
States Federal income tax return its pro rata share of the entire income on
the Trust's assets in accordance with such holder's regular method of tax
accounting.
U.S. HOLDERS
As previously discussed, each U.S. holder will be considered the owner
of its pro rata portion of the U.S. Treasury Securities and the Contract held
by the Trust. The cost to a U.S. holder of its STRYPES will be allocated
among such U.S. holder's pro rata portion of the U.S. Treasury Securities and
the Contract (in proportion to the relative fair market values thereof on the
date on which the U.S. holder acquires its STRYPES) in order to determine the
U.S. holder's initial tax basis in the U.S. holder's pro rata portion of the
U.S. Treasury Securities and the Contract. It is currently anticipated that
% and % of the net proceeds of the offering will be used by the Trust to
purchase the U.S. Treasury Securities and as payments under the Contract,
respectively.
The U.S. Treasury Securities held by the Trust will be treated for
United States Federal income tax purposes as having original issue discount
which will accrue over the term of the U.S. Treasury Securities. In general,
a U.S. holder will be treated as having purchased each U.S. Treasury Security
held by the Trust with original issue discount in an amount equal to the
excess of the U.S. holder's pro rata portion of the amount payable on such
U.S. Treasury Security over the U.S. holder's initial tax basis therefor as
discussed above. A U.S. holder (whether on the cash or accrual method of tax
accounting) will be required to include such original issue discount in
income for United States Federal income tax purposes as it accrues in
accordance with a constant yield method. Because it is expected that 20% or
more of the holders of STRYPES will be accrual basis taxpayers, original
issue discount on any short-term U.S. Treasury Securities (i.e., any U.S.
Treasury Security with a maturity of one year or less from the date it is
purchased by the Trust) held by the Trust will also be currently includable
in income by U.S. holders as it accrues on a straight-line basis (unless a
U.S. holder elects to accrue such original issue discount on a constant yield
basis). A U.S. holder's tax basis in its pro rata portion of a U.S. Treasury
Security will be increased by the amount of any original issue discount
included in income by the U.S. holder with respect to such U.S. Treasury
Security (as described above). A U.S. holder will also be required to
recognize capital gain or loss with respect to such U.S. holder's pro rata
portion of the U.S. Treasury Securities upon an early dissolution of the
Trust in an amount equal to the difference between the U.S. holder's pro rata
portion of the proceeds received by the Trust upon the sale thereof and the
U.S. holder's adjusted tax basis in its pro rata portion of the U.S. Treasury
Securities. Such capital gain or loss would be long-term capital gain or
loss if the STRYPES have been held by the U.S. holder for more than one year.
Each U.S. holder will also be treated as having entered into a pro rata
portion of the Contract. Except upon early dissolution of the Trust or
possibly upon payment of a Cash Reorganization Price Payment Amount by the
Contracting Stockholder prior thereto (as discussed below), under current
law, a U.S. holder generally should not be required to recognize any income,
gain or loss with respect to the Contract until the Exchange Date. On the
Exchange Date, if the Contracting Stockholder delivers Reference Property
pursuant to the Contract in respect of a U.S. holder's STRYPES, the U.S.
holder will generally not realize any taxable gain or loss upon the receipt
of such Reference Property. However, a U.S. holder will generally be
required to recognize taxable gain or loss with respect to any cash received
in lieu of fractional units of any Reference Security, fractional interests
of any Reference Property other than cash, and any Reference Property
consisting of cash. The amount of such gain or loss recognized by a U.S.
holder will be equal to the difference, if any, between the amount of cash
received by the U.S. holder and the portion of the U.S. holder's tax basis in
the Contract that is allocable to such fractional units of any Reference
Security, fractional interests of any Reference Property other than cash, and
any Reference Property consisting of cash. Any such taxable gain or loss
attributable to cash received in lieu of fractional units of any Reference
Security and fractional interests of any Reference Property other than cash
will be treated as short-term capital gain or loss and, because the matter is
uncertain, any such taxable gain or loss attributable to any Reference
Property consisting of cash could be treated as short-term capital gain or
loss, as long-term capital gain or loss (depending upon the U.S. holder's
holding period for the STRYPES), or as ordinary income or loss. A U.S. holder
will have an initial tax basis in any Reference Property (as allocated among
the Reference Property in accordance with the relative fair market values
thereof, as determined on the Exchange Date) received thereby on the Exchange
Date (other than cash received in lieu of fractional units, fractional
interests and any Reference Property consisting of cash) in an amount equal
to the U.S. holder's tax basis in the Contract less the portion of such tax
basis that is allocable to any such fractional units of any Reference
Security, fractional interests of any Reference Property and any Reference
Property consisting of cash (as described above) and will realize taxable
gain or loss with respect to any such Reference Property received thereby on
the Exchange Date only upon the subsequent sale or disposition by the U.S.
holder of such Reference Property. In addition, a U.S. holder's holding
period for any Reference Property received by such U.S. holder on the
Exchange Date will begin on the Exchange Date and will not include the period
during which the U.S. holder held the related STRYPES.
Alternatively, if the Contracting Stockholder satisfies the Contract
with cash in respect of a U.S. holder's STRYPES, the U.S. holder will
recognize taxable gain or loss with respect to the Contract in an amount
equal to the difference, if any, between the total amount of cash received by
such U.S. holder on the Exchange Date and an amount equal to the U.S.
holder's tax basis in the Contract. It is uncertain whether such gain or
loss would be treated as capital or ordinary. If such gain or loss is
properly treated as capital, then such gain or loss will be treated as long-
term capital gain or loss if the STRYPES has been held by the U.S. holder for
more than one year as of the Business Day immediately preceding the Exchange
Date. If such gain or loss is properly treated as ordinary gain or loss, it
is possible that the deductibility of any loss by a U.S. holder who is an
individual could be subject to the limitations applicable to miscellaneous
itemized deductions provided for under Section 67(a) of the Code. In
general, Section 67(a) of the Code provides that an individual may only
deduct miscellaneous itemized deductions for a particular taxable year to the
extent that the aggregate amount of the individuals's miscellaneous itemized
deductions for such taxable year exceed two percent of the individual's
adjusted gross income for such taxable year (the miscellaneous itemized
deductions and other itemized deductions allowable to high-income
individuals, however, are generally subject to further limitations under
Section 68 of the Code). Prospective investors in the STRYPES who are
individuals should also be aware that miscellaneous itemized deductions are
not allowable in computing the United States Federal alternative minimum tax
imposed by Section 55 of the Code. Prospective investors in the STRYPES are
urged to consult their own tax advisors concerning the character of any gain
or loss realized on the Exchange Date with respect to the Contract in the
event that the Contracting Stockholder satisfies its obligations under the
Contract, in whole or in part, with cash on the Exchange Date, as well as the
deductibility of any such loss.
In the event that a U.S. holder receives a combination of cash and
Reference Property on the Exchange Date, the U.S. holder should be required
to apply the foregoing rules to the STRYPES held thereby on a pro rata basis
in proportion to the amount of Reference Property and cash received thereby.
Upon the sale or other disposition of a STRYPES prior to the Exchange
Date, a U.S. holder generally will be required to allocate the total amount
realized by such U.S. holder upon such sale or other disposition between the
U.S. holder's pro rata portion of the U.S. Treasury Securities and the
Contract based upon their relative fair market values (as determined on the
date of disposition). A U.S. holder will generally be required to recognize
taxable gain or loss with respect to each such component (i.e., the U.S.
holder's pro rata portion of the U.S. Treasury Securities and the Contract)
in an amount equal to the difference, if any, between the amount realized
with respect to each such component upon the sale or disposition of the
STRYPES (as determined in the manner described above) and the U.S. holder's
adjusted tax basis in each such component. Any such gain or loss will
generally be treated as long-term capital gain or loss if the U.S. holder has
held the STRYPES for more than one year at the time of disposition.
The proper treatment of the payment by the Contracting Stockholder or
Merrill Lynch & Co., Inc. of various costs and expenses associated with the
organization and operation of the Trust is uncertain. It is possible that
there will be no United States Federal income tax consequences to U.S.
holders as a result of any such payments. However, it is possible that the
Internal Revenue Service ("IRS") could assert that any such payments
constitute income to U.S. holders. If the IRS were to prevail in treating
such payments as income, then an individual U.S. holder who itemizes
deductions could possibly amortize and deduct over the term of the Trust
(subject to any applicable limitation such as those in Section 67(a) of the
Code) its pro rata portion of any such costs. Moreover, a U.S. holder should
be permitted to amortize and deduct over the term of the Trust (subject to
any applicable limitations such as those in Section 67(a) of the Code) its
pro rata portion of the one-time, up-front fees paid to the Administrator,
the Custodian and the Paying Agent, and should be permitted to deduct
(subject to any applicable limitations such as those in Section 67(a) of the
Code) its pro rata portion of the other expenses described under "Management
Arrangements--Estimated Expenses" incurred by the Trust resulting from its
ongoing operations (including the fees payable to the Trustees) as such
expenses are incurred. Brown & Wood LLP, counsel to the Trust, believes that
a U.S. holder's pro rata portion of the expenses directly incurred by a U.S.
holder in connection with the organization of the Trust, underwriting
discounts and commissions and other offering expenses should be includable in
the cost to the U.S. holder of the STRYPES. However, there can be no
assurance that the IRS will not take a contrary view. If the IRS were to
prevail in treating such expenses as excludible from a U.S. holder's cost of
the STRYPES, such expenses would not be includable in the basis of the assets
of the Trust and should instead, subject to the limitations provided for
under Section 67(a) of the Code, be amortizable and deductible over the term
of the Trust.
POSSIBLE ALTERNATIVE CHARACTERIZATIONS OF THE CONTRACT
Brown & Wood LLP, counsel to the Trust, believes the Contract should be
treated for United States Federal income tax purposes as a prepaid forward
contract for the purchase of a variable number of shares of Bank Ordinary
Shares. The IRS could conceivably take the view that the Contract should be
treated as a loan to the Contracting Stockholder in exchange for a contingent
debt obligation of the Contracting Stockholder. If the IRS were to prevail
in making such an assertion, a U.S. holder might be required to include
original issue discount in income over the term of the STRYPES based on the
excess of the anticipated value of the Bank Ordinary Shares to be received in
respect of the Contract over the amount paid for the Contract. In addition,
a U.S. holder would be required to include interest (rather than capital
gain) in income on the Exchange Date or earlier disposition of the STRYPES in
an amount equal to the excess, if any, of the value of the Bank Ordinary
Shares 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 IRS could also conceivably take the
view that a U.S. holder should simply include in income as interest the
amount of cash actually received each year in respect of the STRYPES.
MISCELLANEOUS TAX MATTERS
Special tax rules may apply to persons holding STRYPES as part of a
"synthetic security" or other integrated investment, or as part of a
straddle, hedging transaction or other combination of offsetting positions.
For instance, Section 1258 of the Code may possibly require certain U.S.
holders of the STRYPES who enter into hedging transactions or offsetting
positions with respect to the STRYPES to treat all or a portion of any gain
realized on the STRYPES as ordinary income in instances where such gain may
have otherwise been treated as capital gain. U.S. holders hedging their
positions with respect to the STRYPES or otherwise holding their STRYPES in a
manner described above should consult their own tax advisors regarding the
applicability of Section 1258 of the Code, or any other provision of the
Code, to their investment in the STRYPES.
If as a result of a Bank Liquidation Event, cash, Reference Securities,
or a combination of cash and Reference Securities is delivered pursuant to
the Contract, U.S. holders generally will be required to recognize taxable
gain or loss in respect of any cash received, including any cash received in
lieu of fractional units of Reference Securities or fractional interests of
Reference Property and, in some instances, in respect of any Reference
Securities received upon receipt thereof. Moreover, in some instances, U.S.
holders may be required to recognize at the time of a Reorganization Event
taxable gain or loss in respect of the amount of cash (and, in some cases,
Reference Securities) which is fixed at the time of such Reorganization Event
and is to be delivered pursuant to the Contract. It is uncertain whether any
taxable gain or loss recognized by a U.S. holder as a result of a
Reorganization Event would be capital or ordinary. U.S. holders are urged to
consult their own tax advisors concerning the specific tax consequences of a
Reorganization Event on their investment in a STRYPES.
The proper United States Federal income tax treatment of the receipt by
a U.S. holder of such U.S. holder's pro rata portion of a Cash Reorganization
Price Payment Amount prior to dissolution of the Trust is uncertain. It is
possible that such a payment would be treated as a tax-free return of the
U.S. holder's basis in its pro rata portion of the Contract to the extent the
amount of such payment does not exceed such U.S. holder's basis in its pro
rata portion of the Contract. Under this analysis, a U.S. holder would be
required to recognize taxable gain as a result of a Cash Reorganization Price
Payment Amount that is received prior to the dissolution of the Trust to the
extent that the amount of such payment exceeds the U.S. holder's tax basis in
its pro rata portion of the Contract. Alternatively, upon the receipt by a
U.S. holder of such U.S. holder's pro rata portion of a Cash Reorganization
Price Payment Amount prior to the dissolution of the Trust, the U.S. holder
may be required to recognize taxable gain or loss with respect to the U.S.
holder's pro rata portion of the Contract in an amount equal to the amount of
cash received by such U.S. holder and such U.S. holder's tax basis in its pro
rata portion of the Contract that is allocable to the proportionate amount of
the Contract in respect of which the Cash Reorganization Price Payment Amount
is received. It is unclear whether any taxable gain or loss recognized by a
U.S. holder as a result of the payment by the Contracting Shareholder of a
Cash Reorganization Price Payment Amount prior to dissolution of the Trust
would be treated as capital gain or loss or ordinary income or loss.
Prospective investors in the STRYPES should consult their own tax advisors
concerning the tax consequences to them of the payment by the Contracting
Shareholder of a Cash Reorganization Price Payment Amount.
THE TAXPAYER RELIEF ACT OF 1997
On August 5, 1997, the Taxpayer Relief Act of 1997 (the "Tax Act") was
enacted into law. The Tax Act reduces the maximum rates on long-term capital
gains recognized on capital assets held by individual taxpayers for more than
eighteen months as of the date of disposition (and would further reduce the
maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specified conditions). Prospective investors
should consult their own tax advisors concerning these tax law changes.
NON-U.S. HOLDERS
Subject to the discussion below concerning income that is effectively
connected with a trade or business conducted by a non-U.S. holder in the
United States, payments of interest (including original issue discount) made
with respect to the U.S. Treasury Securities will not be subject to United
States withholding tax, provided that such non-U.S. holder complies with
applicable certification requirements. In general, for a non-U.S. holder to
qualify for this exemption from taxation, the last United States payor in the
chain of payment prior to payment to a non-U.S. holder (the "Withholding
Agent") must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a
statement that (i) is signed by the beneficial owner of the U.S. Treasury
Securities under penalties of perjury, (ii) certifies that such owner is not
a U.S. holder and (iii) provides the name and address of the beneficial
owner. The statement may be made on an IRS Form W-8 or a substantially
similar form, and the beneficial owner must inform the Withholding Agent of
any change in the information on the statement within 30 days of such change.
If STRYPES is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide a
signed statement to the Withholding Agent. However, in such case, the signed
statement must be accompanied by a copy of the IRS Form W-8 or the substitute
form provided by the beneficial owner to the organization or institution.
Any capital gain realized in respect of STRYPES by a non-U.S. holder
will generally not be subject to United States Federal income tax if (i) such
gain in not effectively connected with a United States trade or business of
such non-U.S. holder and (ii) in the case of an individual non-U.S. holder,
such individual is not present in the United States for 183 days or more in
the taxable year of the sale or other disposition, or the gain is not
attributable to a fixed place of business maintained by such individual in
the United States and such individual does not have a "tax home" (as defined
for United States Federal income tax purposes) in the United States.
If any interest or gain realized by a non-U.S. holder is effectively
connected with the non-U.S. holder's conduct of a trade or business in the
United States, such interest or gain will be subject to regular United States
Federal income tax in the same manner as if the non-U.S. holder were a U.S.
holder. In addition, in such event, if such non-U.S. holder is a foreign
corporation, such interest or gain may be included in the earnings and
profits of such non-U.S. holder in determining such non-U.S. holder's United
States branch profits tax liability.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A beneficial owner of STRYPES may be subject to information reporting
and to backup withholding at a rate of 31 percent of certain amounts paid to
the beneficial owner unless such beneficial owner provides proof of an
applicable exemption or a correct taxpayer identification number and
otherwise complies with applicable requirements of the backup withholding
rules.
Any amounts withheld under the backup withholding rules from a payment
to a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PROSPECTIVE INVESTORS IN THE STRYPES SHOULD BE AWARE THAT THERE IS NO
AUTHORITY DIRECTLY ADDRESSING THE PROPER UNITED STATES FEDERAL INCOME TAX
TREATMENT OF THE STRYPES OR SECURITIES WITH TERMS SUBSTANTIALLY THE SAME AS
THE STRYPES AND THAT NO RULING HAS BEEN REQUESTED FROM THE IRS WITH RESPECT
TO THE STRYPES. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE IRS WILL
AGREE WITH THE FOREGOING DISCUSSION AND THAT THE IRS WILL NOT ASSERT A
CONTRARY POSITION AS TO THE PROPER UNITED STATES FEDERAL INCOME TAX TREATMENT
OF THE STRYPES WHICH MIGHT CAUSE THE CHARACTER AND TIMING OF INCOME, GAIN OR
LOSS RECOGNIZED WITH RESPECT TO A STRYPES TO DIFFER SIGNIFICANTLY FROM SUCH
CHARACTER AND TIMING DISCUSSED ABOVE. PROSPECTIVE INVESTORS IN THE STRYPES
ARE THEREFORE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS PRIOR TO MAKING AN
INVESTMENT IN THE STRYPES.
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement
(the "Purchase Agreement"), the Trust has agreed to sell to Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "Underwriter"), and the Underwriter
has agreed to purchase, ,000,000 STRYPES.
In the Purchase Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth in the Purchase Agreement, to purchase all of
the STRYPES being sold pursuant to the Purchase Agreement if any of the
STRYPES are purchased. In the event of a failure to close, any funds debited
from any investor's account maintained with the Underwriter will be credited
to such account and any funds received by the Underwriter by check or money
order from any investor will be returned to the investor by check.
The Underwriter has advised the Trust that it proposes initially to
offer the STRYPES to the public at the public offering price set forth on the
cover page of this Prospectus. The Underwriter has also advised the Trust
that it proposes to offer STRYPES to certain dealers at the initial public
offering price less a concession not in excess of $ per STRYPES. The
Underwriter may allow, and such dealers may reallow, a discount not in excess
of $ per STRYPES to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The sales load of $ per STRYPES is equal to % of the initial public
offering price. Investors must pay for any STRYPES purchased in the initial
public offering on or before , 1997.
The Trust has granted the Underwriter an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to an aggregate of _00,000
additional STRYPES (subject to decrease by the number of STRYPES resulting
from the split of the initial STRYPES described below) to cover over-
allotments, if any, at the initial public offering price less the sales load.
To the extent the Underwriter exercises such option, the Underwriter will
have a firm commitment, subject to certain conditions, to purchase a number
of additional STRYPES.
Prior to the Offering, there has been no public market for the STRYPES.
Application has been made to list the STRYPES on the NYSE.
The Contracting Stockholder has agreed, subject to certain exceptions,
not to directly or indirectly sell, offer to sell, grant any option for the
sale of, or otherwise dispose of, any Bank Ordinary Shares, Bank ADSs or
securities convertible or exercisable into, or exchangeable for, Bank
Ordinary Shares for a period of 90 days after the date of this Prospectus,
without the prior written consent of the Underwriter.
The Contracting Stockholder has agreed to indemnify the Underwriter
against certain liabilities, including liabilities under the Securities Act,
or to contribute to payments the Underwriter may be required to make in
respect thereof.
In connection with the formation of the Trust, ML IBK Positions, Inc.,
an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, has
subscribed for and purchased one STRYPES for a purchase price of $100. Prior
to the Offering, the initial STRYPES will be split into the smallest whole
number of STRYPES that would result in the per STRYPES amount recorded as
capital, after effecting the split, not exceeding the public offering price
per STRYPES. Under the Contract, the Contracting Stockholder will be
obligated to deliver to the Trust on the Business Day immediately preceding
the Exchange Date a number or amount of each type of Reference Property (or,
in certain circumstances, cash with an equal value) in respect of such
STRYPES on the same terms as the STRYPES offered hereby.
Until the distribution of the STRYPES is completed, rules of the
Commission may limit the ability of the Underwriter and any selling group
members to bid for and purchase the STRYPES, the Bank Ordinary Shares or the
Bank ADSs. As an exception to these rules, the Underwriter is permitted to
engage in certain transactions that stabilize the price of the STRYPES, the
Bank Ordinary Shares or the Bank ADSs. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
STRYPES, the Bank Ordinary Shares or the Bank ADSs.
If the Underwriters create a short position in the STRYPES in connection
with the Offering, i.e., if they sell more STRYPES than are set forth on the
cover page of this Prospectus, the Underwriter may reduce that short position
by purchasing STRYPES in the open market. The Underwriter may also elect to
reduce any short position by exercising all or part of the over-allotment
option described above.
The Underwriter may also impose a penalty bid on certain selling group
members. This means that if the Underwriter purchases STRYPES in the open
market to reduce the Underwriter's short position or to stabilize the price
of the STRYPES, they may reclaim the amount of the selling concession from
any selling group members who sold those STRYPES as part of the Offering.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of a security to the
extent that it were to discourage resales of the security.
Neither the Trust nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the STRYPES, the Bank
Ordinary Shares or the Bank ADSs. In addition, neither the Trust nor the
Underwriter makes any representation that the Underwriter will engage in such
transactions or that such transactions, once commenced, will not be
discontinued without notice.
The Underwriter renders investment banking and other financial services
to the Bank from time to time.
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and for the
Underwriter by their counsel, Brown & Wood LLP, New York, New York. Certain
matters of Delaware law will be passed upon for the Trust by Richards, Layton
& Finger, Wilmington, Delaware, and certain matters of "(country)" law will
be passed upon for the Trust by (foreign counsel), (City), (State)
"(country)". Certain legal matters will be passed upon for the Contracting
Stockholder by Coudert Brothers, New York, New York and (foreign counsel).
EXPERTS
The statement of assets, liabilities and capital included in this
Prospectus has been audited by , independent
auditors, as stated in their opinion appearing herein, and has been included
in reliance upon such opinion given on the authority of said firm as experts
in auditing and accounting.
ADDITIONAL INFORMATION
The Trust has filed with the Commission, Washington D.C. 20549, a
Registration Statement on Form N-2 under the Securities Act with respect to
the STRYPES offered hereby. Further information concerning the STRYPES 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 public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or any part thereof may be obtained from such office after
payment of the fees prescribed by the Commission. The Commission maintains a
Web site at http://www.sec.gov containing reports, proxy and information
statements and other information regarding registrants, such as the Trust,
that file electronically with the Commission.
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of ABC COMPANY STRYPES Trust:
We have audited the accompanying statement of assets, liabilities and capital
of ABC COMPANY STRYPES Trust as of , 1997. 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,
liabilities and capital is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the statement of assets, liabilities and capital. An audit also includes
assessing the accounting principles used and significant estimates made by
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 statement of assets, liabilities and capital referred to
above presents fairly, in all material respects, the financial position of
ABC COMPANY STRYPES Trust, as of , 1997, in conformity with
generally accepted accounting principles.
New York, New York
, 1997
ABC COMPANY STRYPES TRUST
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
, 199_
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $100
LIABILITIES
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100
CAPITAL
STRYPES, par value $.10 per STRYPES;
STRYPES issued and outstanding (Note 3) . . . . . . . . . . . . . . . . $100
___________________________________
(1) The Trust was created as a Delaware business trust on March 14, 1996 and
has had no operations 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, as amended. Costs
incurred in connection with the organization of the Trust and ongoing
administrative expenses will be paid or reimbursed by the Contracting
Stockholder.
(2) Offering expenses will be payable upon completion of the Offering and
also will be paid by the Contracting Stockholder.
(3) On , 1997, the Trust issued one STRYPES to (ML IBK
Positions, Inc.), an affiliate of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, in consideration for a purchase price of $100.
The Declaration of Trust provides that prior to the Offering, the Trust
will split the outstanding STRYPES to be effected on the date that the
price and underwriting discount of the STRYPES being offered to the
public is determined, but prior to the sale of the STRYPES to the
Underwriter. The outstanding STRYPES will be split into the smallest
whole number of STRYPES that would result in the per STRYPES amount
recorded as capital, after effecting the split, not exceeding the public
offering price per STRYPES.
====================================== =================================
NO DEALER, SALESPERSON OR OTHER
INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING _,000,000 STRYPES(SERVICE MARK)
DESCRIBED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY ABC COMPANY STRYPES TRUST
THE TRUST OR THE UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF Exchangeable for Ordinary Shares of
AN OFFER TO BUY, ANY SECURITIES XYZ BANK
OTHER THAN THOSE SPECIFICALLY
OFFERED HEREBY, OR OF ANY
SECURITIES OFFERED HEREBY, IN ANY
JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE AN OFFER OR
SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS
OF THE TRUST SINCE THE DATE HEREOF
OR SINCE THE DATES AS OF WHICH
INFORMATION IS SET FORTH HEREIN.
IN THE EVENT THAT ANY SUCH CHANGE
SHALL OCCUR DURING THE PERIOD IN
WHICH APPLICABLE LAW REQUIRES
DELIVERY OF THIS PROSPECTUS, THIS
PROSPECTUS WILL BE AMENDED OR
SUPPLEMENTED ACCORDINGLY.
____________________
______________
TABLE OF CONTENTS
Page
----
Prospectus Summary . . . . . 4
Fee Table . . . . . . . . . . 9 PROSPECTUS
The Trust . . . . . . . . . . 10
Use of Proceeds . . . . . . . 10
Investment Objective and
Policies . . . . . . . . . 10
Investment Restrictions . . . 18
Risk Factors . . . . . . . . 18 ____________________
Description of the STRYPES . 21
Trustees . . . . . . . . . . 22
Management Arrangements . . . 22
Dividends and Distributions . 24
Net Asset Value . . . . . . . 24
Certain Tax Considerations . 24 MERRILL LYNCH & CO.
Underwriting . . . . . . . . 29
Legal Matters . . . . . . . . 30
Experts . . . . . . . . . . . 30
Additional Information . . . 30
Independent Auditors' Report 31
Statement of Assets,
Liabilities and Capital . . 32
-------------------
UNTIL , 1997 (25
DAYS AFTER THE COMMENCEMENT OF THE
OFFERING), ALL DEALERS EFFECTING
TRANSACTIONS IN THE STRYPES,
WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED , 1997
TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO Merrill Lynch & Co., Inc.
THEIR UNSOLD ALLOTMENTS OR (Service Mark) Service mark of
SUBSCRIPTIONS.
====================================== =================================
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
Independent Auditors' Report
Statement of Assets, Liabilities and Capital as of ,
1997
2. EXHIBITS
(a)(1) Amended and Restated Trust Agreement//*
(2) Form of Amended and Restated Trust Agreement*//*
(3) Restated Certificate of Trust*
(b) Not applicable
(c) Not applicable
(d)(1) Form of Specimen certificate for STRYPES (included in
Exhibit 2(a)(2))**
(2) Portions of the Declaration of Trust of the Registrant
defining the rights of holders of STRYPES (included in
Exhibit 2(a)(2))**
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) Form of Purchase Agreement**
(i) Not applicable
(j) Form of Custodian Agreement**
(k)(1) Form of Administration Agreement**
(2) Form of Paying Agent Agreement**
(3) Form of Forward Purchase Contract**
(4) Form of Security and Pledge Agreement**
(5) Form of Fund Expense Agreement**
(6) Form of Fund Indemnity Agreement**
(l) Opinion and Consent of Brown & Wood LLP, counsel to the Trust**
(m) Not applicable
(n)(1) Tax Opinion and Consent of Brown & Wood LLP, counsel to the
Trust**
(2) Consent of , independent auditors for
the Trust**
(o) Not applicable
(p) Form of Subscription Agreement**
(q) Not applicable
(r) Financial Data Schedule**
___________________
//
* Filed herewith.
** To be filed by amendment.
ITEM 25. MARKETING ARRANGEMENTS
See Exhibit h to this Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be incurred in connection with the offering described in
this Registration Statement will be paid by the Contracting Stockholder.
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management
Arrangements" is incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
There will be one record holder of the STRYPES as of the effective date
of this Registration Statement.
ITEM 29. INDEMNIFICATION
Section 7.6 of the Amended and Restated Trust Agreement and Section 6 of
the Purchase Agreement provide for indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to trustees,
officers and controlling persons of the Registrant, pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Trust is internally managed and does not have an investment adviser.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the
rules promulgated thereunder are maintained at the offices of the Registrant,
850 Library Avenue, Suite 204, Newark, Delaware 19715, its custodian
((address)) and its paying agent ((address)).
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend the offering of the
STRYPES covered hereby until it amends its prospectuses contained herein if
(1) subsequent to the effective date of this Registration Statement, its net
asset value per STRYPES declines more than 10 percent from its net asset
value per STRYPES as of the effective date of the Registration Statement or
(2) the net asset value per STRYPES increases to an amount greater than its
net proceeds as stated in the prospectuses contained herein.
(b) The Registrant hereby undertakes that (i) for purpose of determining
any liability under the 1933 Act, the information omitted from the form of
prospectuses filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant under
Rule 497(h) under the 1933 Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; (ii) for the
purpose of determining any liability under the 1933 Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial
bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Newark, State of Delaware, on the
5th day of September, 1997.
ABC COMPANY STRYPES Trust
By: /s/ Donald J. Puglisi
------------------------------------
Donald J. Puglisi
Managing Trustee
Each person whose signature appears below hereby authorizes Donald
J. Puglisi, William R. Latham III, or James B. O'Neill, or any of them, as
attorney-in-fact, to sign on his behalf, individually and in each capacity
stated below, any amendment to this Registration Statement (including post-
effective amendments) and to file the same, with all exhibits thereto, with
the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, in the
capacities and on the date indicated.
Name Title Date
--- ----- ----
/s/ Donald J. Puglisi Managing Trustee September 5, 1997
- ---------------------------
Donald J. Puglisi
/s/ William R. Latham III Trustee September 5, 1997
- ---------------------------
William R. Latham III
/s/ James B. O'Neill Trustee September 5, 1997
- -------------------------------
James B. O'Neill
Exhibit 2(a)(1)
---------------
AMENDED AND RESTATED TRUST AGREEMENT
OF
CONTIFINANCIAL STRYPES TRUST
This Amendment to the Amended and Restated Trust Agreement of
ContiFinancial STRYPES Trust (the "Trust"), dated as of September 2, 1997
(this "Amendment"), is made and entered into by and among ML IBK Positions,
Inc. ("ML IBK") and Bear, Stearns & Co., Inc. ("Bear, Stearns"), Donald J.
Puglisi, William R. Latham, III, and James B. O'Neill, as trustees.
W I T N E S S E T H
-------------------
WHEREAS, the Trust is a Delaware business trust that was formed under
Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801, et
------- --
seq. (the "Act") pursuant to the Trust Agreement of the Trust, dated as of
- ----
March 14, 1996, and is governed by the Amended and Restated Trust Agreement
of the Trust, dated as of March 26, 1997 (the "Trust Agreement");
WHEREAS, the parties hereto desire to change the name of the Trust from
"ContiFinancial STRYPES Trust" to "ABC COMPANY STRYPES Trust";
WHEREAS, Bear, Stearns desires to withdraw from the trust;
WHEREAS, the parties hereto desire to amend the Trust Agreement to
reflect the terms set forth below.
NOW, THEREFORE, in consideration of the mutual promises and obligations
contained herein, the parties, intending to be legally bound, hereby agree as
follows:
I. AMENDMENTS.
----------
1. All references in the Trust Agreement to "ContiFinancial STRYPES
Trust" are hereby amended by changing such designation to "ABC COMPANY
STRYPES Trust."
2. Bear, Stearns hereby resigns as a sponsor of the Trust and conveys,
assigns and transfers to ML IBK, and to its successors and assigns, all the
rights and powers of Bear, Stearns as a sponsor under and pursuant to the
Trust Agreement, and the obligations of Bear, Stearns as a sponsor are hereby
released under and pursuant to the Trust Agreement. All references in the
Trust Agreement to "Sponsors" are hereby amended by changing such designation
to "Sponsor."
II. MISCELLANEOUS.
-------------
1. Successors and Assigns. This Amendment shall be binding upon,
----------------------
and shall enure to the benefit of, the parties hereto and their respective
successors and assigns.
2. Full Force and Effect. Except to the extent modified hereby, the
---------------------
Trust Agreement shall remain in full force and effect.
3. Counterparts. This Amendment may be executed in counterparts,
------------
all of which together shall constitute one agreement binding on all parties
hereto, notwithstanding that all such parties are not signatories to the
original or same counterpart.
4. Governing Law. This Amendment shall be interpreted in accordance
-------------
with the laws of the State of Delaware (without regard to principles of
conflict of laws), all rights and remedies being governed by such laws.
(SIGNATURE PAGE FOLLOWS)
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first set forth above.
ML IBK POSITIONS, INC.
By: /s/ Matthew Bowman
-----------------------------
Name: Matthew Bowman
Title:President
BEAR, STEARNS & CO., INC.
By: /s/ Bruce A. Wolfson
------------------------------
Name: Bruce A. Wolfson
Title: Senior Managing Director
TRUSTEES:
/s/ Donald J. Puglisi
---------------------------------------
Name: Donald J. Puglisi
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
/s/ William R. Latham, III
---------------------------------------
Name: William R. Latham, III
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
/s/ James B. O'Neil
----------------------------------------
Name: James B. O'Neill
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
Exhibit 2(a)(3)
---------------
RESTATED
CERTIFICATE OF TRUST OF CONTIFINANCIAL STRYPES TRUST
This Restated Certificate of Trust of ContiFinancial STRYPES Trust
(the "Trust"), dated as of September 2, 1997, is being duly executed and
filed by the undersigned Trustees of the Trust to amend and restate the
Restated Certificate of Trust of ContiFinancial STRYPES Trust, which was
originally named STRYPES Trust, and whose original Certificate of Trust was
filed on February 14, 1996, with the Secretary of State of the State of
Delaware under the Delaware Business Trust Act (12 Del. C.
-------
Section 3801, et seq.).
-- ----
1. Name. The name of the business trust is ABC COMPANY STRYPES
----
Trust.
2. Registered Office; Registered Agent. The business address of
-----------------------------------
the registered office of the Trust in the State of Delaware is One Rodney
Square, 10th Floor, Tenth and King Streets in the City of Wilmington, County
of New Castle, 19801. The name of the Trust's registered agent at such
address is RL&F Service Corp.
3. Effective Date. This Certificate of Trust shall be effective
--------------
upon the date and time of filing.
IN WITNESS WHEREOF, the undersigned trustees of the Trust have executed
this Restated Certificate of Trust as of the date first above written.
By: /s/ Donald J. Puglisi
--------------------------------------
Donald J. Puglisi, as Managing Trustee
By: /s/ William R. Lathan, III
------------------------------------
William R. Latham, III, as Trustee
By: /s/ James B. O'Neil
-------------------------------------
James B. O'Neill, as Trustee
