<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1997.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ELMWOOD FUNDING LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CAYMAN ISLANDS N/A
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
P.O. BOX 1984
ELIZABETHAN SQUARE
GEORGE TOWN
GRAND CAYMAN
BRITISH WEST INDIES
(345) 949-8244
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DEUTSCHE MORGAN GRENFELL (CAYMAN) LIMITED
P.O. BOX 1984
ELIZABETHAN SQUARE
GEORGE TOWN
GRAND CAYMAN
BRITISH WEST INDIES
ATTENTION: DARREN RILEY
(345) 949-8244
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
DONALD A. BENDERNAGEL, ESQ. BRIAN D. RANCE, ESQ.
CITICORP SECURITIES, INC. MILBANK, TWEED, HADLEY & MCCLOY
399 PARK AVENUE 1 CHASE MANHATTAN PLAZA
11TH FLOOR NEW YORK, NEW YORK 10005
NEW YORK, NEW YORK 10043
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined
by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
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. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Trust Certificates.......... $50,000,000 100% $50,000,000 $15,151.52
Trust Certificates to be
sold in market-making
transactions(2)............ -- -- -- --
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) This Registration Statement also registers an indeterminate amount of
securities to be sold by Citicorp Securities, Inc. or its affiliates in
market-making transactions where required.
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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 HEREAFTER 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 SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
PROSPECTUS
TRUST CERTIFICATES
(ISSUABLE IN SERIES)
ELMWOOD FUNDING LIMITED
(a company incorporated with limited liability
in the Cayman Islands on September 17, 1996)
DEPOSITOR
The Trust Certificates (the "Certificates") offered hereby and by supplements
(each a "Prospectus Supplement") to this Prospectus will be offered from time
to time in one or more series (each a "Series"), denominated in U.S. dollars.
Certificates of each respective Series will be offered on terms to be
determined at the time of sale as described in the related Prospectus
Supplement accompanying the delivery of this Prospectus.
Each Series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a publicly issued, fixed income debt security
issued pursuant to an effective registration statement filed with the
Securities and Exchange Commission (the "Commission") or in a debt security
issued, or directly and fully guaranteed or insured, by the Government of the
United States of America or by any entity controlled or supervised by and
acting as an instrumentality of the Government of the United States of America
and exempt from the Securities Act of 1933, as amended (the "Securities Act"),
by reason of Section 3(a) (2) thereof ("Government Securities") or a pool of
such debt securities (the "Underlying Securities"), together with other assets
(such as guarantees, letters of credit, financial insurance, interest rate and
or currency swaps and other derivative transactions that credit enhance or
otherwise support the Underlying Securities) designed to assure the servicing
or timely distribution of payments to holders of the Certificates, all as
described in the related Prospectus Supplement (such assets, together with the
Underlying Securities, the "Deposited Assets"), to be deposited in a trust
(the "Trust") for the benefit of holders of Certificates of such Series
("Certificateholders") by Elmwood Funding Limited, a company incorporated with
limited liability in the Cayman Islands on September 17, 1996 (the
"Depositor"), pursuant to a Trust Agreement and a series supplement thereto
with respect to any given Series (collectively, the "Trust Agreement") between
the Depositor and the trustee (the "Trustee") named in the related Prospectus
Supplement. The Underlying Securities that are not Government Securities will
represent senior debt obligations issued by one or more corporations organized
under the laws of the United States of America or any state thereof. As a
condition to the deposit into a Trust of Underlying Securities that are not
Government Securities constituting 10% or more of the total Underlying
Securities with respect to the related Series of Certificates, as of the date
of the issuance of such Series, the issuer of such Underlying Securities will
be subject to the periodic reporting requirements of the Securities Exchange
Act of 1934, as amended, and in accordance therewith will file reports,
including reports on Forms 10-K and 10-Q, and other information with the
Commission and will meet certain other criteria described under the heading
"Description of Deposited Assets--Underlying Securities Issuer". The
Underlying Securities that are not Government Securities will be purchased by
the Depositor in the secondary market and, correspondingly, will not be
acquired from the issuer thereof (whether as part of any distribution by or
pursuant to any agreement with such issuer or otherwise). No such issuer of
Underlying Securities will participate in the offering of the Certificates,
nor will such issuer receive any of the proceeds from the sale of the
Underlying Securities to the Depositor or from the issuance by the Depositor
of the Certificates. See "Description of Certificates".
Except as otherwise provided herein and in the applicable Prospectus
Supplement, the Depositor's only obligations with respect to each Series of
Certificates will be, pursuant to certain representations and warranties
concerning the Deposited Assets, to assign and deliver the Deposited Assets
and certain related documents to the applicable Trustee. The Certificates of
each Series will not represent an obligation of or interest in the Depositor,
Citicorp Securities, Inc. (the "Offering Agent") or any of their respective
affiliates. Neither the Certificates nor the Deposited Assets (unless
otherwise specified in such Prospectus Supplement) will be guaranteed or
insured by any governmental agency or instrumentality (except in the case of
Government Securities), or by the Depositor, Citicorp Securities, Inc. or
their respective affiliates.
Application will be made to list each Series of Certificates on the New York
Stock Exchange. At the time of issue, each Series of Certificates offered
hereby will be rated in one of the investment grade categories recognized by
one or more nationally recognized rating agencies. There will be no market for
any Series of Certificates prior to the issuance thereof, and there can be no
assurance that a secondary market will develop or, if it does develop, that it
will provide Certificateholders with liquidity of investment or will continue
for the life of the Certificates. To locate the definition of a defined term
herein, see the "Index of Defined Terms" located at the back of this
Prospectus.
Each Series of Certificates initially will be represented by one or more
global securities (each, a "Global Security") registered in the name of CEDE &
Co., as nominee of The Depository Trust Company ("DTC"). The interests of
beneficial owners of such Certificates will be represented by book entries on
the records of participating members of DTC. Definitive certificates in
registered form without coupons ("Definitive Certificates") will be available
only under the limited circumstances described herein under the heading
"Description of the Certificates--Global Securities".
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH HEREIN UNDER "RISK
FACTORS," BEGINNING ON PAGE 4.
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.
The Certificates may be offered and sold to or through underwriters, dealers
or agents or directly to purchasers, as more fully described under "Plan of
Distribution" and in the related Prospectus Supplement. This Prospectus may
not be used to consummate sales of Certificates offered hereby unless
accompanied by a Prospectus Supplement.
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CITICORP SECURITIES, INC.
June 16, 1997
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Certificates to be offered
thereby and hereby will set forth, among other things, the following with
respect to such Series: (a) the specific designation and aggregate principal
amount thereof, (b) a description of the material economic terms of the
Deposited Assets, (c) the identity of each issuer of the Underlying Securities
(together with, if applicable in the case of any Government Securities, the
name of any governmental agency or instrumentality that is guaranteeing or
insuring such Government Securities) and each obligor with respect to any of
the other Deposited Assets, (d) the name of the Trustee, (e) the Certificate
Rate (as defined below) or the applicable method of calculation thereof, (f)
the time and place of distribution (each such date, a "Distribution Date") of
any interest, premium (if any) and/or principal, (g) the date of issue, (h)
the scheduled final Distribution Date, if applicable, (i) the offering price
and (j) any other material terms of Certificates of such Series (including
terms relating to the rights of the Trust or any third party to redeem or
purchase such Certificates prior to the scheduled final Distribution Date).
See "Description of Certificates--General" for a listing of other items that
may be specified in the applicable Prospectus Supplement.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (together with all
amendments and exhibits, the "Registration Statement") under the Securities
Act, relating to the Certificates. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information, reference is hereby made to the Registration
Statement.
The Depositor will be subject to the periodic reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports and other information with the
Commission. Reports and other information concerning the Depositor can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's Regional Offices at Seven World Trade Center, New York,
New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can be obtained upon
written request addressed to the Commission, Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site at http://www.sec.gov containing reports,
proxy statements and other information regarding registrants that file
electronically with the Commission. The Depositor does not intend to send any
financial reports to Certificateholders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Depositor pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Certificates shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Depositor will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests
for such copies should be directed to Elmwood Funding Limited, c/o Deutsche
Morgan Grenfell (Cayman) Limited, P.O. Box 1984, Elizabethan Square, George
Town, Grand
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Cayman, British West Indies, Attention: Darren Riley. Telephone requests for
such copies should be directed to Elmwood Funding Limited, c/o Deutsche Morgan
Grenfell (Cayman) Limited at 345-949-8244.
REPORTS TO CERTIFICATEHOLDERS
Except as otherwise specified in the applicable Prospectus Supplement,
unless and until definitive Certificates are issued, on each Distribution Date
unaudited reports containing information concerning the related Trust will be
prepared by the related Trustee and sent on behalf of the related Trust only
to Cede & Co. ("Cede"), as nominee of DTC and registered holder of the
Certificates. If Definitive Certificates are issued, such reports will be
prepared by the related Trustee and sent on behalf of the related Trust
directly to the Certificateholders in accordance with the Trust Agreement. See
"Description of Certificates--Global Securities" and "Description of the Trust
Agreement--Reports to Certificateholders; Notice". Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Depositor, on behalf of each Trust, will cause to
be filed with the Commission such periodic reports as are required under the
Exchange Act.
ENFORCEMENT OF CIVIL LIABILITIES
The Depositor is a Cayman Islands company and its directors are residents of
various jurisdictions outside the United States. All or a substantial portion
of the assets of such directors and the Depositor, at any one time, are or may
be located in jurisdictions outside the United States. Therefore, it
ordinarily could be difficult for investors to effect service of process
within the United States on any of these parties who reside outside the United
States or to recover against them on judgments of United States courts
predicated upon civil liability under the United States federal securities
laws. Notwithstanding the forgoing, the Depositor has irrevocably agreed that
it may be served with process with respect to actions based on offers and
sales of Certificates made hereby in the United States by serving Donald A.
Bendernagel, Esq., Citibank, N.A., 399 Park Avenue, 11th Floor, New York, New
York 10043, its United States agent appointed for that purpose. The Depositor
has been advised by Maples and Calder, its Cayman Islands counsel, that there
is doubt as to whether the courts of the Cayman Islands would enforce (i)
judgments of United States courts obtained in actions against such persons or
the Depositor predicated upon the civil liability provisions of the United
States federal securities laws and (ii) original actions brought in the Cayman
Islands against such persons or the Depositor predicated solely upon United
States federal securities laws. There is no treaty in effect between the
United States and the Cayman Islands providing for such enforcement, and there
are grounds upon which Cayman Islands courts may not enforce judgments of
United States courts. Certain remedies available under the United States
federal securities laws would not be allowed in Cayman Islands courts as
contrary to that nation's public policy.
References herein to "U.S. dollars," "U.S.$," "USD," "dollar" or "$" are to
the lawful currency of the United States.
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<PAGE>
RISK FACTORS
In connection with an investment in the Certificates of any Series,
prospective purchasers should consider, among other things, (1) the risk
factors set forth below and (2) any additional risk factors set forth in the
relevant Prospectus Supplement.
LIMITED LIQUIDITY. There will be no market for any Series of Certificates
prior to the issuance thereof, and there can be no assurance that a secondary
market will develop or, if it does develop, that it will provide
Certificateholders with liquidity of investment or will continue for the life
of such Certificates. The Depositor has been advised by the Offering Agent
that the Offering Agent intends to make a market in the Certificates, as
permitted by applicable laws and regulations, after the issuance thereof. The
Offering Agent is not obligated, however, to make a market in the Certificates
of any Series and any such market making activity may be discontinued at any
time without notice at the sole discretion of the Offering Agent. If an active
public market for the Certificates does not develop or continue, the market
prices and liquidity of the Certificates may be adversely affected.
RECOURSE LIMITED. The Certificates will not represent a recourse obligation
of or interest in the Depositor, the Offering Agent or any of their respective
affiliates. Unless otherwise specified in the applicable Prospectus
Supplement, the Certificates of each Series will not be insured or guaranteed
by any government agency or instrumentality (except in the case of Government
Securities that are guaranteed or insured by a governmental agency or
instrumentality), the Depositor, the Offering Agent, any person or entity
affiliated with the Depositor or the Offering Agent, or any other person or
entity. The obligations, if any, of the Depositor with respect to the
Certificates of any Series will only be pursuant to certain limited
representations and warranties with respect to an Underlying Security, and
recourse with respect to the satisfaction of any such obligations will be
limited to any recourse for a breach of a corresponding representation or
warranty that the Depositor may have against the seller of such Underlying
Security to the Depositor. The Depositor does not have, and is not expected in
the future to have, any significant assets with which to satisfy any claims
arising from a breach of any representation or warranty. If, for example, the
Depositor were required to repurchase an Underlying Security with respect to
which the Depositor has breached a representation or warranty, its only source
of funds to make such repurchase would be from funds obtained from the
enforcement of a corresponding obligation, if any, on the part of the seller
of such Underlying Security to the Depositor.
LIMITED ASSETS. The only material assets of any Trust will be the Deposited
Assets corresponding to the related Series of Certificates being offered. The
Certificates do not represent obligations of the Depositor, the Offering Agent
or any of their respective affiliates and, unless otherwise specified in the
applicable Prospectus Supplement, are not insured or guaranteed by the
Depositor, the Offering Agent, any of their respective affiliates or any other
person or entity (except in the case of Government Securities that are
guaranteed or insured by a governmental agency or instrumentality).
Accordingly, Certificateholders' receipt of distributions in respect of the
Certificates will depend entirely on the performance of and the Trust's
receipt of payments with respect to the Deposited Assets. See "Description of
Deposited Assets and Credit Support".
EARLY REDEMPTION; REDUCTION IN YIELD. The timing of distributions of
interest, premium (if any) and principal of any Series of Certificates is
affected by a number of factors. In particular, the type and maturities of the
Underlying Securities and the terms, if any, upon which the Underlying
Securities may be subject to early redemption or purchase (either by the
applicable obligor or pursuant to a third-party call option), repayment (at
the option of the holders thereof) or extension of maturity will generally
affect the weighted average life of the related Series of Certificates. The
effective yield to holders of the Certificates of any Series may also be
affected by certain aspects of the Deposited Assets.
With respect to any Series of Certificates the Underlying Securities of
which consist of one or more redeemable securities, extendable securities or
securities subject to a third-party call option, the yield to maturity of such
Series may be affected by any optional or mandatory redemption or repayment or
extension of the related Underlying Securities, or by the exercise of such
call option, prior to the stated maturity thereof. A variety of
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<PAGE>
tax, accounting, economic and other factors will influence whether an issuer
or call option holder exercises any right of redemption or call right in
respect of its securities. All else remaining unchanged, if interest rates
fall significantly below the interest rates prevailing at the time of issuance
of the Certificates, the likelihood of redemption or call would be expected to
increase. In addition, if there is a material reduction in the credit risk
associated with the Underlying Securities Issuer, the likelihood of redemption
of any redeemable Underlying Securities would be expected to increase. There
can be no certainty as to whether any Underlying Security redeemable at the
option of the Underlying Security Issuer or otherwise, or callable at the
option of a third party, will be repaid or called prior to its stated
maturity.
The Underlying Securities will generally be subject to acceleration upon the
occurrence of certain Underlying Security Events of Default, although
Government Securities may be subject to few or no Underlying Security Events
of Default. See "Description of the Deposited Assets--Underlying Securities
Indenture" below. The maturity and yield on the Certificates will be affected
by any early repayment of the Underlying Securities as a result of the
acceleration of the Outstanding Debt Securities by the holders thereof. If an
Underlying Securities Issuer becomes subject to a bankruptcy or similar
insolvency proceeding, the timing and amount of payments with respect to both
interest and principal may be materially and adversely affected. A variety of
factors influence the performance of private debt issuers and correspondingly
may affect an Underlying Securities Issuer's ability to satisfy its
obligations with respect to the Underlying Securities, including the
Underlying Securities Issuer's operating and financial condition, its capital
structure and other social, geographic, legal and economic factors.
The extent to which the yield to maturity of such Certificates may vary from
the anticipated yield due to the rate and timing of payments on the Deposited
Assets will also depend upon the degree to which they are purchased at a
discount or premium and the degree to which the timing of payments thereon is
sensitive to the rate and timing of payments on the Deposited Assets.
The yield to maturity of any Series of Certificates will also be affected by
variations in the interest rates applicable to, and the corresponding payments
in respect of, such Certificates, to the extent that the Certificate Rate for
such Series is based on variable or adjustable interest rates. With respect to
any Series of Certificates representing an interest in a pool of corporate
debt securities, disproportionate principal payments (whether resulting from
differences in amortization schedules, payments due on scheduled maturity or
upon early redemption) on the related Underlying Securities having interest
rates higher or lower than the then applicable Certificate Rate applicable to
such Certificates may affect the yield thereon.
The applicable Prospectus Supplement for a Series of Certificates will set
forth additional information regarding yield and maturity considerations
applicable to such Series and the related Deposited Assets, including the
related Underlying Securities.
NEED TO OBTAIN INFORMATION CONCERNING UNDERLYING SECURITIES ISSUERS. A
prospective purchaser of Certificates should obtain and evaluate the same
information concerning each Underlying Securities Issuer as it would obtain
and evaluate if it were investing directly in the Underlying Securities or in
other securities issued by the Underlying Securities Issuer. None of the
Depositor, the Trustee, the Offering Agent or any of their respective
affiliates assumes any responsibility for the accuracy or completeness of any
information concerning any Underlying Securities Issuer (including, without
limitation, no investigation as to its financial condition or
creditworthiness) or concerning the Underlying Securities (whether or not such
information is filed with the Commission) or otherwise considered by a
purchaser of the Certificates in making its investment decision in connection
therewith; provided that the foregoing shall not apply to any information
concerning the Underlying Securities and any Underlying Securities Issuer that
is expressly set forth in this Prospectus or an applicable Prospectus
Supplement. The issuance of Certificates of any Series should not be construed
as an endorsement by the Depositor, the Offering Agent or the Trustee of the
financial condition or business prospects of any Underlying Securities Issuer.
RISK OF LOSS IF PUBLIC INFORMATION NOT AVAILABLE. If an obligor on any
Concentrated Underlying Securities ceases to file periodic reports under the
Exchange Act, the Depositor will instruct the Trustee of the
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<PAGE>
relevant Trust to sell all of such Concentrated Underlying Securities, which
sale will result in a loss to the Certificateholders of the relevant Series if
the sale price is less than the purchase price for such Concentrated
Underlying Securities.
CERTAIN LEGAL ASPECTS. The applicable Prospectus Supplement may set forth
certain legal considerations that are applicable to a specific Series of
Certificates being offered in connection with that Prospectus Supplement or
the assets assigned and delivered to the related Trust.
RATINGS OF THE CERTIFICATES. At the time of issue, the Certificates of any
given Series offered hereby will be rated in one of the investment grade
categories recognized by one or more nationally recognized rating agencies (a
"Rating Agency"). The rating is not a recommendation to purchase, hold or sell
Certificates, inasmuch as such rating does not comment as to market price or
suitability for a particular investor. There can be no assurance that the
rating will remain for any given period of time or that the rating will not be
lowered or withdrawn entirely by the Rating Agency if in its judgment
circumstances in the future so warrant.
GLOBAL SECURITIES. Unless otherwise specified in the related Prospectus
Supplement, the Certificates of each Series will initially be represented by
one or more Global Securities deposited with, or on behalf of, a Depository
(as defined below) and will not be issued as individual definitive
Certificates to the purchasers of such Certificates. Consequently, unless and
until such individual definitive Certificates of a particular Series are
issued, such purchasers will not be recognized as Certificateholders under the
Trust Agreement. Hence, until such time, such purchasers will only be able to
exercise the rights of Certificateholders indirectly through the Depository
and its respective participants and, as a result, the ability of any such
purchaser to pledge that Certificate to persons or entities that do not
participate in the Depository's system, or otherwise to act with respect to
such Certificate, may be limited. See "Description of Certificates--Global
Securities" and any further description contained in the related Prospectus
Supplement.
LIMITATION ON REMEDIES DUE TO PASSIVE NATURE OF THE TRUST. The Trustee with
respect to any Series of Certificates will hold the Deposited Assets for the
benefit of the Certificateholders. Each Trust will generally hold the related
Deposited Assets to maturity and not dispose of them, regardless of adverse
events, financial or otherwise, which may affect any Underlying Securities
Issuer or the value of the Deposited Assets. Except as indicated below, a
holder will not be able to dispose of or take other actions with respect to
any Deposited Assets. As a result, in the event that the value of a Deposited
Asset declines, an investor in Certificates of the relevant Series that would
have disposed of a direct investment in that Deposited Asset prior to such
decline will incur losses by reason of its investment in the Certificates and
the Trust's continued holding of such Deposited Asset. Under certain
circumstances described in the applicable Prospectus Supplement, the Trustee
will (or will at the direction of a specified percentage of Certificateholders
of the relevant Series) dispose of, or take certain other actions in respect
of, the Deposited Assets. In certain limited circumstances, such as a
mandatory redemption of Underlying Securities or the exercise by a third party
of the right to purchase Underlying Securities (and as described below under
"Description of Deposited Assets--Principal Economic Terms of Underlying
Securities"), the Trustee may dispose of the Deposited Assets prior to
maturity. The applicable Prospectus Supplement will describe the particular
circumstances, if any, under which a Deposited Asset may be disposed of prior
to maturity.
The Prospectus Supplement for each Series of Certificates will set forth
information regarding additional risk factors, if any, applicable to such
Series.
AMENDMENT OF TRUST AGREEMENT. By its own terms, the Trust Agreement may be
amended or otherwise modified with the consent of a percentage of
Certificateholders specified in the Prospectus Supplement (which percentage
will not be less than a majority). Any such amendment or other modification
could have a material adverse effect on those Certificateholders of the
relevant Series that do not consent to such amendment or other modification.
However, the Trust Agreement provides that any amendment or other modification
that would reduce the amount of, or defer the date of, distributions to
Certificateholders of a Series may become effective only with the consent of
each affected Certificateholder of that Series and that, if so specified in
the applicable
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Prospectus Supplement, any such amendment or other modification that would
result in the reduction or withdrawal of the then current rating assigned to
the Certificates of a Series by a Rating Agency would require the consent of a
higher percentage of Certificateholders of that Series (as specified in the
Prospectus Supplement).
GENERAL UNAVAILABILITY OF OPTIONAL EXCHANGE. Although the Prospectus
Supplement for a Series of Certificates may designate such Series as an
"Exchangeable Series" and may provide that a Certificateholder may exchange
Certificates of the Exchangeable Series for a pro rata portion of the
Deposited Assets of the related Trust, any such right of exchange will be
exercisable only to the extent that such exchange would not be inconsistent
with continued satisfaction of Rule 3a-7 under the Investment Company Act of
1940, as amended, and all applicable rules, regulations and interpretations
thereunder and would not affect the characterization of the Trust as a
"grantor trust" for U.S. Federal income tax purposes. See "Description of the
Certificates--Optional Exchange". Accordingly, the right of optional exchange
described in this Prospectus under the heading "Description of the
Certificates--Optional Exchange" and further described in the relevant
Prospectus Supplement will generally be available only to the Depositor and
the Offering Agent and their respective affiliates and designees. Other
Certificateholders will generally not be able to exchange their Certificates
of an Exchangeable Series for a pro rata portion of the Deposited Assets of
the related Trust.
THE DEPOSITOR
The Depositor was incorporated in the Cayman Islands on September 17, 1996
by a firm of attorneys at law with its principal place of business in the
Cayman Islands. The registered office of the Depositor is P.O. Box 309, Ugland
House, South Church Street, George Town, Grand Cayman, Cayman Islands, British
West Indies. The principal business office of the Depositor is at P.O. Box
1984, Elizabethan Square, George Town, Grand Cayman, Cayman Islands, British
West Indies.
The affairs of the Depositor are administered by Deutsche Morgan Grenfell
(Cayman) Limited ("DMG") pursuant to an Administration Agreement dated as of
March 14, 1997, as amended, between the Depositor and DMG. As of the date
hereof, DMG is located at P.O. Box 1984, Elizabethan Square, George Town,
Grand Cayman, Cayman Islands, British West Indies, Telephone: 345-949-8244.
The Memorandum and Articles of Association of the Depositor provide that the
Depositor may conduct any lawful activities necessary or incidental to serving
as depositor of one or more trusts that may issue and sell Certificates.
All of the issued capital stock of the Depositor is held by a trust
established by DMG, as trustee, for the benefit of one or more organizations
or entities that under the laws of the Cayman Islands would be recognized as
exclusively charitable, each of which organizations and/or entities will be
identified by the trustee during the three month period after the termination
of such trust in accordance with its terms. The Depositor is not affiliated
with Citicorp Securities, Inc.
USE OF PROCEEDS
The net proceeds to be received from the sale of each Series of Certificates
(whether or not offered hereby) will be used by the Depositor to purchase the
related Deposited Assets. Any remaining net proceeds, if any, will be used by
the Depositor for purposes related to the deposit of Deposited Assets into one
or more Trusts and the preparation, distribution and filing by the Depositor
of periodic reports and other information, including, but not limited to, the
fees and expenses of the Depositor (or any administrator thereof) incurred in
connection with the ongoing activities of a Trust.
FORMATION OF THE TRUST
The Depositor will assign and deliver the Deposited Assets for each Series
of Certificates to the Trustee named in the applicable Prospectus Supplement,
in its capacity as Trustee, for the benefit of the Certificateholders of such
Series. See "Description of the Trust Agreement--Assignment of Deposited
Assets". The Trustee
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named in the applicable Prospectus Supplement will administer the Deposited
Assets pursuant to the Trust Agreement and will receive a fee for such
services (the "Trustee's Fee"). The Trustee will take such steps as may be
necessary to ensure that, to the extent the assignment of the Deposited Assets
to the Trust by the Depositor could be treated under applicable law as a
financing as opposed to an absolute sale, the Trust will have a first priority
perfected security interest (or its equivalent) in the Deposited Assets as
against other creditors of the Depositor.
Unless otherwise stated in the Prospectus Supplement, the Depositor's
assignment of the Deposited Assets to the Trustee will be without recourse to
the Depositor (except as to certain limited representations and warranties).
Unless otherwise provided in the related Prospectus Supplement, each Trust
will consist of (i) such Deposited Assets, or interests therein, exclusive of
any interest in such assets (the "Excluded Interest") retained or acquired by
the Depositor, or any previous owner thereof or any other person or entity, as
from time to time are specified in the Trust Agreement; (ii) such assets as
from time to time are identified as deposited in the related Certificate
Account; (iii) rights under the agreement or agreements pursuant to which the
Trustee has acquired such Deposited Assets; and (iv) any cash or other
property received upon the sale, exchange, collection or other disposition of
any of the foregoing.
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DESCRIPTION OF CERTIFICATES
Each Series of Certificates will be issued pursuant to a Trust Agreement and
a separate series supplement thereto between the Depositor and the Trustee
named in the related Prospectus Supplement, a form of which Trust Agreement is
attached as an exhibit to the Registration Statement. The provisions of the
Trust Agreement (as so supplemented) may vary depending upon the nature of the
Certificates to be issued thereunder and the nature of the Deposited Assets
and related Trust. The following summaries describe material provisions of the
Trust Agreement which may be applicable to each Series of Certificates. The
applicable Prospectus Supplement for a Series of Certificates will describe
any material provision of the Trust Agreement that is not described herein or
the description of which is different in any material respect from the
description contained herein. The following summaries do not purport to be
complete and are subject to the detailed provisions of the form of Trust
Agreement to which reference is hereby made for a full description of such
provisions, including the definition of certain terms used, and for other
information regarding the Certificates. Article and section references in
parentheses below are to articles and sections in the Trust Agreement.
Wherever particular sections or defined terms of the Trust Agreement are
referred to, such sections or defined terms are incorporated herein by
reference as part of the statement made, and the statement is qualified in its
entirety by such reference. As used herein with respect to any Series, the
term "Certificate" refers to all the Certificates of that Series, whether or
not offered hereby and by the related Prospectus Supplement, unless the
context otherwise requires.
A copy of the applicable series supplement to the Trust Agreement relating
to each Series of Certificates issued from time to time will be filed by the
Depositor as an exhibit to a Registration Statement on Form 8-A to be filed
with the Commission in connection with the issuance of such Series.
GENERAL
With respect to each Trust, the entire beneficial ownership in the Deposited
Assets held by such Trust under the related Trust Agreement will be
represented by the Certificates of the relevant Series.
Reference is made to the related Prospectus Supplement for a description of
the following terms of the Series of Certificates in respect of which this
Prospectus and such Prospectus Supplement are being delivered:
(i) the title of such Certificates;
(ii) the Series of such Certificates;
(iii) material information concerning the type, characteristics and
specifications of the Deposited Assets being deposited into the related
Trust by the Depositor (including, with respect to any Underlying Security
which at the time of such deposit represents a significant portion of all
such Deposited Assets, information concerning the material terms of each
such Underlying Security, the identity of the issuer thereof and where
publicly available information regarding such issuer may be obtained);
(iv) the dates on which or periods during which such Series of
Certificates may be issued (each, an "Original Issue Date"), the offering
price thereof and the applicable Distribution Dates on which the principal,
if any, of (and premium, if any, on) such Series will be distributable;
(v) whether the Certificates of such Series are Fixed Rate Certificates
or Floating Rate Certificates (each, as defined below) and the applicable
interest rate (the "Certificate Rate"), or the method of calculation
thereof applicable to such Series, if variable (a "Variable Certificate
Rate"); the date or dates from which such interest will accrue; the
applicable Distribution Dates on which interest, principal and premium, in
each case as applicable, on such Series will be distributable and the
related Record Dates, if any;
(vi) the option, if any, of any specified Certificateholder of such
Series to receive a portion of the assets of the Trust (or of the proceeds
obtained by the Trust upon the sale or other disposition of such assets) in
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exchange for surrendering such Certificateholder's Certificate (in each
case to the extent not inconsistent with continued satisfaction of the
applicable requirements for exemption under Rule 3a-7 under the Investment
Company Act of 1940 and all applicable rules, regulations and
interpretations thereunder and for treatment of the Trust as a "grantor
trust" for U.S. Federal income tax purposes) and the periods within which
or the dates on which, and the terms and conditions upon which any such
option may be exercised, in whole or in part;
(vii) the option, if any, of any specified third party (which may include
one or more of the Depositor, the Offering Agent or their respective
affiliates) to purchase Certificates held by a Certificateholder and the
periods within which or the dates on which, and the terms and conditions
upon which any such option may be exercised, in whole or in part;
(viii) the rating of each Series offered hereby;
(ix) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which such Series will be issuable;
(x) the identity of the Depository (as defined below), if other than The
Depository Trust Company, for such Certificates;
(xi) all applicable Required Percentages and Voting Rights (each as
defined below) relating to the manner and percentage of votes of
Certificateholders of such Series required with respect to certain actions
by the Depositor or the Trustee under the Trust Agreement or with respect
to the applicable Trust; and
(xii) all other material terms of such Series of Certificates.
The United States Federal income tax consequences and ERISA consequences
relating to any Series of Certificates will be described in the applicable
Prospectus Supplement.
Transfers of beneficial ownership interests in any Global Security will be
effected in accordance with the normal procedures of The Depository Trust
Company or any other specified Depositary. In the event that Definitive
Certificates are issued in the limited circumstances described herein, they
may be transferred or exchanged for like Certificates of the same Series at
the corporate trust office or agency of the applicable Trustee in the City and
State of New York, subject to the limitations provided in the Trust Agreement,
without the payment of any service charge, other than any tax or governmental
charge payable in connection therewith. The Depositor may at any time purchase
Certificates at any price in the open market or otherwise. Certificates so
purchased by the Depositor may, at the discretion of the Depositor, be held,
resold or surrendered to the Trustee for cancellation of such Certificates.
DISTRIBUTIONS
Distributions allocable to principal, premium (if any) and interest on the
Certificates of each Series will be made by or on behalf of the Trustee on
each Distribution Date as specified in the related Prospectus Supplement, and
the amount of each distribution will be determined as of the close of business
on the date specified in the related Prospectus Supplement (the "Determination
Date").
Unless otherwise provided in the applicable Prospectus Supplement and except
as provided in the succeeding paragraph, distributions with respect to
Certificates will be made at the corporate trust office or agency of the
Trustee specified in the applicable Prospectus Supplement in The City of New
York; provided that any such amounts distributable on the final Distribution
Date of a Certificate will be distributed only upon surrender of such
Certificate at the applicable location set forth above.
Unless otherwise specified in the applicable Prospectus Supplement,
distributions on Certificates will be made, except as provided below, by check
mailed to the Certificateholders listed on the relevant Record Date in the
ownership register maintained for that purpose under the Trust Agreement
(which, in the case of Global Securities, will be a nominee of the
Depository). A Certificateholder of $10,000,000 or more in aggregate
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principal amount of Certificates of a given Series, and any holder of a Global
Security, shall be entitled to receive such distributions by wire transfer of
immediately available funds, but only if appropriate wire transfer
instructions have been received in writing by the Trustee for such Series not
later than 15 calendar days prior to the applicable Distribution Date.
Except as otherwise specified in the applicable Prospectus Supplement,
"Business Day" with respect to any Certificate means any day, other than a
Saturday or Sunday, that is (i) not a day on which banking institutions are
authorized or required by law or regulation to be closed in The City of New
York and (ii) if the Certificate Rate for such Certificate is based on LIBOR,
a London Banking Day. "London Banking Day" with respect to any Certificate
means any day on which dealings in deposits in U.S. dollars are transacted in
the London interbank market. The Record Date with respect to any Distribution
Date for a Series of Certificates shall be specified as such in the applicable
Prospectus Supplement.
INTEREST ON THE CERTIFICATES
The interest rate applicable to the Certificates (the "Certificate Rate")
will be described in the applicable Prospectus Supplement and will be based
upon the rate of interest received on the Underlying Securities and any
payments payable in respect of the Retained Interest (if any). The Certificate
Rate may be either a fixed rate or a floating rate.
Fixed Rate Certificates. Each Series of Certificates with a fixed
Certificate Rate ("Fixed Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance, from its Original Issue Date, or
from the last date to which interest has been paid, at the fixed Certificate
Rate stated on the face thereof and in the applicable Prospectus Supplement
until the principal amount thereof is distributed or made available for
repayment, except that, if so specified in the applicable Prospectus
Supplement, the Certificate Rate for such Series may be subject to adjustment
from time to time in response to designated changes in the rating assigned to
such Certificates by one or more rating agencies, in accordance with a
schedule or otherwise, all as described in such Prospectus Supplement. Unless
otherwise set forth in the applicable Prospectus Supplement, interest on each
Series of Fixed Rate Certificates will be distributable in arrears on each
Distribution Date specified in such Prospectus Supplement. Each such
distribution of interest shall include interest accrued through the day
specified in the applicable Prospectus Supplement. Unless otherwise specified
in the applicable Prospectus Supplement, interest on Fixed Rate Certificates
will be computed on the basis of a 360-day year of twelve 30-day months.
Floating Rate Certificates. Each Series of Certificates with a variable
Certificate Rate ("Floating Rate Certificates") will bear interest, on the
outstanding Certificate Principal Balance, from its Original Issue Date to the
first Interest Reset Date (as defined below) for such Series at the Initial
Certificate Rate set forth on the face thereof and in the applicable
Prospectus Supplement. Thereafter, the Certificate Rate on such Series for
each Interest Reset Period (as defined below) will be determined by reference
to an interest rate basis (the "Base Rate"), plus or minus the Spread, if any,
or multiplied by the Spread Multiplier, if any. The Base Rate for any Series
of Certificates will, as described in greater detail below, be a fluctuating
rate of interest that is publicly available and is established by reference to
quotations provided by third parties of the interest rate from time to time
prevailing on loans or other extensions of credit in a specified credit
market. The "Spread" is the number of basis points (one basis point equals one
one-hundredth of a percentage point) that may be specified in the applicable
Prospectus Supplement as being applicable to such Series, and the "Spread
Multiplier" is the percentage that may be specified in the applicable
Prospectus Supplement as being applicable to such Series, except that if so
specified in the applicable Prospectus Supplement, the Spread or Spread
Multiplier on such Series of Floating Rate Certificates may be subject to
adjustment from time to time in response to designated changes in the rating
assigned to such Certificates by one or more rating agencies, in accordance
with a schedule or otherwise, all as described in such Prospectus Supplement.
The applicable Prospectus Supplement, unless otherwise specified therein, will
designate one of the following Base Rates as applicable to a Floating Rate
Certificate: (i) LIBOR (a "LIBOR Certificate"), (ii) the Commercial Paper Rate
(a "Commercial Paper Rate Certificate"), (iii) the Treasury Rate (a "Treasury
Rate Certificate"), (iv) the Federal Funds Rate (a "Federal Funds Rate
Certificate") or (v) the CD Rate (a "CD Rate Certificate"). The "Index
Maturity" for any Series of
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Floating Rate Certificates is the period of maturity of the instrument or
obligation from which the Base Rate is calculated. "H.15(519)" means the
publication entitled "Statistical Release H.15(519), Selected Interest Rates,"
or any successor publication, published by the Board of Governors of the
Federal Reserve System. "Composite Quotations" means the daily statistical
release entitled "Composite 3:30 p.m. Quotations for U.S. Government
Securities", or any successor publication, published by the Federal Reserve
Bank of New York. Interest will be payable only from cash received by the
Trustee from the Deposited Assets or other assets deposited in the Trust and
available for application to such payment, notwithstanding the accrual of
interest on the Certificate Principal Balance at a higher rate.
As specified in the applicable Prospectus Supplement, Floating Rate
Certificates of a given Series may also have either or both of the following
(in each case expressed as a rate per annum on a simple interest basis): (i) a
maximum limitation, or ceiling, on the rate at which interest may accrue
during any interest accrual period specified in the applicable Prospectus
Supplement ("Maximum Certificate Rate") and (ii) a minimum limitation, or
floor, on the rate at which interest may accrue during any such interest
accrual period ("Minimum Certificate Rate"). In addition to any Maximum
Certificate Rate that may be applicable to any Series of Floating Rate
Certificates, the Certificate Rate applicable to any Series of Floating Rate
Certificates will in no event be higher than the maximum rate permitted by
applicable law, as the same may be modified by United States law of general
application. The Floating Rate Certificates will be governed by the law of the
State of New York and, under such law as of the date of this Prospectus, the
maximum rate of interest, with certain exceptions, is 25% per annum on a
simple interest basis.
The Depositor will appoint, and enter into agreements with, agents (each a
"Calculation Agent") to calculate Certificate Rates on each Series of Floating
Rate Certificates. The applicable Prospectus Supplement will set forth the
identity of the Calculation Agent for each Series of Floating Rate
Certificates. All determinations of interest by the Calculation Agent shall,
if made on a commercially reasonable basis and in good faith, be conclusive
for all purposes and binding on the holders of Floating Rate Certificates of a
given Series.
The Certificate Rate will be reset daily, weekly, monthly, quarterly,
semiannually or annually (such period being the "Interest Reset Period", and
the first day of each Interest Reset Period being an "Interest Reset Date"),
as specified in the applicable Prospectus Supplement. Interest Reset Dates
with respect to each Series will be specified in the applicable Prospectus
Supplement; provided that unless otherwise specified in such Prospectus
Supplement, the Certificate Rate in effect for the ten days immediately prior
to the Scheduled Final Distribution Date will be that in effect on the tenth
day preceding such Scheduled Final Distribution Date. If an Interest Reset
Date for any Series of Floating Rate Certificates would otherwise be a day
that is not a Business Day, such Interest Reset Date will occur on a prior or
succeeding Business Day, as specified in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, interest
payable in respect of Floating Rate Certificates shall be the accrued interest
from and including the Original Issue Date of such Series or the last Interest
Reset Date to which interest has accrued and been distributed, as the case may
be, to but excluding the immediately following Distribution Date.
With respect to a Floating Rate Certificate, accrued interest shall be
calculated by multiplying the Certificate Principal Balance of such
Certificate by an accrued interest factor. Such accrued interest factor will
be computed by adding the interest factors calculated for each day in the
period for which accrued interest is being calculated. Unless otherwise
specified in the applicable Prospectus Supplement, the interest factor
(expressed as a decimal calculated to seven decimal places without rounding)
for each such day is computed by dividing the Certificate Rate in effect on
such day by 360, in the case of LIBOR Certificates, Commercial Paper Rate
Certificates, Federal Funds Rate Certificates and CD Rate Certificates or by
the actual number of days in the year, in the case of Treasury Rate
Certificates. For purposes of making the foregoing calculation, the variable
Certificate Rate in effect on any Interest Reset Date will be the applicable
rate as reset on such date.
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Unless otherwise specified in the applicable Prospectus Supplement, all
percentages resulting from any calculation of the Certificate Rate on a
Floating Rate Certificate will be rounded, if necessary, to the nearest
1/100,000 of 1% (.0000001), with five one-millionths of a percentage point
rounded upward, and all currency amounts used in or resulting from such
calculation on Floating Rate Certificates will be rounded to the nearest one-
hundredth of a unit (with .005 of a unit being rounded upward).
Interest on any Series of Floating Rate Certificates will be distributable
on the Distribution Dates and for the interest accrual periods as and to the
extent set forth in the applicable Prospectus Supplement.
Upon the request of the holder of any Floating Rate Certificate of a given
Series, the Calculation Agent for such Series will provide the Certificate
Rate then in effect and, if determined, the Certificate Rate that will become
effective on the next Interest Reset Date with respect to such Floating Rate
Certificate.
(1) CD Rate Certificates. Each CD Rate Certificate will bear interest for
each Interest Reset Period at the Certificate Rate calculated with reference
to the CD Rate and the Spread or Spread Multiplier, if any, specified in such
Certificate and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the "CD
Rate" for each Interest Reset Period shall be the rate as of the second
Business Day prior to the Interest Reset Date for such Interest Reset Period
(a "CD Rate Determination Date") for negotiable certificates of deposit having
the Index Maturity designated in the applicable Prospectus Supplement as
published in H.15(519) under the heading "CDs (Secondary Market)". In the
event that such rate is not published prior to 3:00 p.m., New York City time,
on the Calculation Date (as defined below) pertaining to such CD Rate
Determination Date, then the "CD Rate" for such Interest Reset Period will be
the rate on such CD Rate Determination Date for negotiable certificates of
deposit of the Index Maturity designated in the applicable Prospectus
Supplement as published in Composite Quotations under the heading
"Certificates of Deposit". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "CD Rate" for such Interest Reset Period will
be calculated by the Calculation Agent for such CD Rate Certificate and will
be the arithmetic mean of the secondary market offered rates as of 10:00 a.m.,
New York City time, on such CD Rate Determination Date, of three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in The City
of New York selected by the Calculation Agent for such CD Rate Certificate for
negotiable certificates of deposit of major United States money center banks
of the highest credit standing (in the market for negotiable certificates of
deposit) with a remaining maturity closest to the Index Maturity designated in
the related Prospectus Supplement in a denomination of $5,000,000; provided
that if the dealers selected as aforesaid by such Calculation Agent are not
quoting offered rates as mentioned in this sentence, the "CD Rate" for such
Interest Reset Period will be the same as the CD Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the Initial Certificate Rate).
The "Calculation Date" pertaining to any CD Rate Determination Date shall be
the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (b) the second Business Day preceding the date any
distribution of interest is required to be made following the applicable
Interest Reset Date.
(2) Commercial Paper Rate Certificates. Each Commercial Paper Rate
Certificate will bear interest for each Interest Reset Period at the
Certificate Rate calculated with reference to the Commercial Paper Rate and
the Spread or Spread Multiplier, if any, specified in such Certificate and in
the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Commercial Paper Rate" for each Interest Reset Period will be determined by
the Calculation Agent for such Commercial Paper Rate Certificate as of the
second Business Day prior to the Interest Reset Date for such Interest Reset
Period (a "Commercial Paper Rate Determination Date") and shall be the Money
Market Yield (as defined below) on such Commercial Paper Rate Determination
Date of the rate for commercial paper having the Index Maturity specified in
the applicable Prospectus Supplement, as such rate shall be published in
H.15(519) under the heading "Commercial Paper".
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In the event that such rate is not published prior to 3:00 p.m., New York City
time, on the Calculation Date (as defined below) pertaining to such Commercial
Paper Rate Determination Date, then the "Commercial Paper Rate" for such
Interest Reset Period shall be the Money Market Yield on such Commercial Paper
Rate Determination Date of the rate for commercial paper of the specified
Index Maturity as published in Composite Quotations under the heading
"Commercial Paper". If by 3:00 p.m., New York City time, on such Calculation
Date such rate is not yet published in either H.15(519) or Composite
Quotations, then the "Commercial Paper Rate" for such Interest Reset Period
shall be the Money Market Yield of the arithmetic mean of the offered rates,
as of 11:00 a.m., New York City time, on such Commercial Paper Rate
Determination Date of three leading dealers of commercial paper in The City of
New York selected by the Calculation Agent for such Commercial Paper Rate
Certificate for commercial paper of the specified Index Maturity placed for an
industrial issuer whose bonds are rated "AA" or the equivalent by a nationally
recognized rating agency; provided that if the dealers selected as aforesaid
by such Calculation Agent are not quoting offered rates as mentioned in this
sentence, the "Commercial Paper Rate" for such Interest Reset Period will be
the same as the Commercial Paper Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the Initial
Certificate Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D X 360 X 100
Money Market Yield = -------------
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate Determination
Date shall be the first to occur of (a) the tenth calendar day after such
Commercial Paper Rate Determination Date or, if such day is not a Business
Day, the next succeeding Business Day or (b) the second Business Day preceding
the date any distribution of interest is required to be made following the
applicable Interest Reset Date.
(3) Federal Funds Rate Certificates. Each Federal Funds Rate Certificate
will bear interest for each Interest Reset Period at the Certificate Rate
calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any, specified in such Certificate and in the applicable
Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Federal Funds Rate" for each Interest Reset Period shall be the effective
rate on the Interest Reset Date for such Interest Reset Period (a "Federal
Funds Rate Determination Date") for Federal Funds as published in H.15(519)
under the heading "Federal Funds (Effective)". In the event that such rate is
not published prior to 3:00 p.m., New York City time, on the Calculation Date
(as defined below) pertaining to such Federal Funds Rate Determination Date,
the "Federal Funds Rate" for such Interest Reset Period shall be the rate on
such Federal Funds Rate Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate". If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "Federal Funds Rate" for
such Interest Reset Period shall be the rate on such Federal Funds Rate
Determination Date made publicly available by the Federal Reserve Bank of New
York which is equivalent to the rate which appears in H.15(519) under the
heading "Federal Funds (Effective)"; provided that if such rate is not made
publicly available by the Federal Reserve Bank of New York by 3:00 p.m., New
York City time, on such Calculation Date, the "Federal Funds Rate" for such
Interest Reset Period will be the same as the Federal Funds Rate in effect for
the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Certificate Rate). Unless otherwise
specified in the applicable Prospectus Supplement, in the case of a Federal
Funds Rate Certificate that resets daily, the Certificate Rate on such
Certificate for the period from and including a Monday to but excluding the
succeeding Monday will be reset by the Calculation Agent for such Certificate
on such second Monday (or, if not a Business Day, on the next succeeding
Business Day) to a rate equal to the average of the Federal Funds Rate in
effect with respect to each such day in such week.
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The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding Business Day.
(4) LIBOR Certificates. Each LIBOR Certificate will bear interest for each
Interest Reset Period at the Certificate Rate calculated with reference to
LIBOR and the Spread or Spread Multiplier, if any, specified in such
Certificate and in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rate for U.S. dollar deposits,
unless otherwise specified in the applicable Prospectus Supplement, "LIBOR"
for each Interest Reset Period will be determined by the Calculation Agent for
any LIBOR Certificate as follows:
(i) On the second London Banking Day prior to the Interest Reset Date for
such Interest Reset Period (a "LIBOR Determination Date"), the Calculation
Agent for such LIBOR Certificate will determine the arithmetic mean of the
offered rates for deposits in U.S. dollars for the period of the Index
Maturity specified in the applicable Prospectus Supplement, commencing on
such Interest Reset Date, which appear on the Reuters Screen LIBO Page at
approximately 11:00 a.m., London time on such LIBOR Determination Date.
"Reuters Screen LIBO Page" means the display designated as page "LIBOR" on
the Reuters Monitor Money Rates Service (or such other page may replace
that page on that service for the purpose of displaying London interbank
offered rates of major banks).
(ii) If fewer than two offered rates appear on the Reuters Screen LIBO
Page on such LIBOR Determination Date, the Calculation Agent for such LIBOR
Certificate will request the principal London offices of each of four major
banks in the London interbank market selected by such Calculation Agent to
provide such Calculation Agent with their offered quotations for deposits
in U.S. dollars for the period of the specified Index Maturity, commencing
on such Interest Reset Date, to prime banks in the London interbank market
at approximately 11:00 a.m., London time, on such LIBOR Determination Date
and in a principal amount equal to an amount of not less than $1,000,000
that is representative of a single transaction in such market at such time.
If at least two such quotations are provided, "LIBOR" for such Interest
Reset Period will be the arithmetic mean of such quotations. If fewer than
two such quotations are provided, "LIBOR" for such Interest Reset Period
will be the arithmetic mean of rates quoted by three major banks in The
City of New York selected by the Calculation Agent for such LIBOR
Certificate at approximately 11:00 a.m., New York City time, on such LIBOR
Determination Date for loans in U.S. dollars to leading European banks, for
the period of the specified Index Maturity, commencing on such Interest
Reset Date, and in a principal amount equal to an amount of not less than
$1,000,000 that is representative of a single transaction in such market at
such time; provided that if fewer than three banks selected as aforesaid by
such Calculation Agent are quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Certificate Rate).
If LIBOR with respect to any LIBOR Certificate is indexed to the offered
rates for deposits in a currency other than U.S. dollars, the applicable
Prospectus Supplement will set forth the method for determining such rate.
(5) Treasury Rate Certificates. Each Treasury Rate Certificate will bear
interest for each Interest Reset Period at the Certificate Rate calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any, specified in such Certificate and in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Treasury Rate" for each Interest Reset Period will be the rate for the
auction held on the Treasury Rate Determination Date (as defined below) for
such Interest Reset Period of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "U.S. Government Certificate-Treasury bills auction average
(investment)" or, in the event that such rate is not published prior to 3:00
p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Treasury Rate Determination Date, the auction average rate
(expressed as a bond equivalent
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on the basis of a year of 365 or 366 days, as applicable, and applied on a
daily basis) on such Treasury Rate Determination Date as otherwise announced
by the United States Department of the Treasury. In the event that the results
of the auction of Treasury bills having the specified Index Maturity are not
published or reported as provided above by 3:00 p.m., New York City time, on
such Calculation Date, or if no such auction is held on such Treasury Rate
Determination Date, then the "Treasury Rate" for such Interest Reset Period
shall be calculated by the Calculation Agent for such Treasury Rate
Certificate and shall be a yield to maturity (expressed as a bond equivalent
on the basis of a year of 365 or 366 days, as applicable, and applied on a
daily basis) of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 p.m., New York City time, on such Treasury Rate
Determination Date, of three leading primary United States government
securities dealers selected by such Calculation Agent for the issue of
Treasury bills with a remaining maturity closest to the specified Index
Maturity; provided that if the dealers selected as aforesaid by such
Calculation Agent are not quoting bid rates as mentioned in this sentence,
then the "Treasury Rate" for such Interest Reset Period will be the same as
the Treasury Rate for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the Initial Certificate Rate).
The "Treasury Rate Determination Date" for such Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest
Reset Period falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless
that day is a legal holiday, in which case the auction is normally held on the
following Tuesday, except that such auction may be held on the preceding
Friday. If, as the result of a legal holiday, an auction is so held on the
preceding Friday, such Friday will be the Treasury Rate Determination Date
pertaining to the Interest Reset Period commencing in the next succeeding
week. Unless otherwise specified in the applicable Prospectus Supplement, if
an auction date shall fall on any day that would otherwise be an Interest
Reset Date for a Treasury Rate Certificate, then such Interest Reset Date
shall instead be the Business Day immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a Business Day, the next
succeeding Business Day or (b) the second Business Day preceding the date any
distribution of interest is required to be made following the applicable
Interest Reset Date.
PRINCIPAL OF THE CERTIFICATES
Unless the related Prospectus Supplement provides otherwise, each
Certificate will have a "Certificate Principal Balance" which, at any time,
will equal the maximum amount that the holder thereof will be entitled to
receive in respect of principal out of the future cash flows on the Deposited
Assets. Unless otherwise specified in the related Prospectus Supplement,
distributions generally will be applied to undistributed accrued interest on,
then to principal of, and then to premium (if any) on, each such Certificate
until the aggregate Certificate Principal Balance has been reduced to zero.
The outstanding Certificate Principal Balance of a Certificate will be reduced
to the extent of distributions of principal thereon, and, if applicable
pursuant to the terms of the related Series, by the amount of any net losses
realized on any Deposited Asset ("Realized Losses") allocated thereto. Unless
the related Prospectus Supplement provides otherwise, the initial aggregate
Certificate Principal Balance of Certificates of a Series will equal the
outstanding aggregate principal balance of the related Deposited Assets as of
the applicable Cut-off Date. The initial aggregate Certificate Principal
Balance of a Series will be specified in the related Prospectus Supplement.
Ordinary distributions of principal in respect of any Series of Certificates
will be made on a pro rata basis among all the Certificates of such Series.
OPTIONAL EXCHANGE
If a (or a specified) holder may exchange Certificates of any given Series
for a pro rata portion of the Deposited Assets, the applicable Prospectus
Supplement will designate such Series as an "Exchangeable Series". The terms
upon which a (or a specified) holder may exchange Certificates of any
Exchangeable Series for a pro rata portion of the Deposited Assets of the
related Trust will be specified in the related Prospectus Supplement; provided
that (a) any right of exchange shall be exercisable only to the extent that
such exchange
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would not be inconsistent with continued satisfaction of the applicable
requirements for exemption under Rule 3a-7 under the Investment Company Act of
1940 and all applicable rules, regulations and interpretations thereunder and
would not affect the characterization of the Trust as a "grantor trust" for
U.S. Federal income tax purposes and (b) if the Deposited Assets constitute a
pool of Underlying Securities, any exercise of the Optional Exchange Right
will be effected so that, with respect to each series or issue of Underlying
Securities included in such pool (together with any related assets that credit
enhance or otherwise support that series or issue of Underlying Securities),
the proportion that the principal amount of such series or issue of Underlying
Securities (together with such related assets) bears to the aggregate
principal amount of Certificates immediately prior to such exercise will be
equal to the proportion that the principal amount of such series or issue of
Underlying Securities (together with such related assets) bears to the
aggregate principal amount of Certificates immediately after such exercise.
See "Risk Factors--General Unavailability of Optional Exchange". Such terms
may relate to, but are not limited to, the following:
(a) a requirement that the exchanging holder tender to the Trustee all
Certificates within such Exchangeable Series;
(b) a minimum Certificate Principal Balance with respect to each
Certificate being tendered for exchange;
(c) a requirement that the Certificate Principal Balance of each
Certificate tendered for exchange be an integral multiple of an amount
specified in the Prospectus Supplement;
(d) specified dates during which a holder may effect such an exchange
(each, an "Optional Exchange Date");
(e) limitations on the right of an exchanging holder to receive any
benefit upon exchange from any assets (other than securities that are not
Underlying Securities) deposited in the applicable Trust; and
(f) adjustments to the value of the proceeds of any exchange based upon
the required prepayment of future expense allocations and the establishment
of a reserve for any anticipated Extraordinary Trust Expenses.
Unless otherwise specified in the related Prospectus Supplement, in order
for a Certificate of a given Exchangeable Series to be exchanged by the
applicable Certificateholder, the trustee for such Certificate must receive,
at least 30 (or such shorter period acceptable to the Trustee) but not more
than 45 days prior to an Optional Exchange Date, a telegram, telex, facsimile
transmission or letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc., the Depository (in
accordance with its normal procedures) or a commercial bank or trust company
in the United States setting forth the name of the holder of such Certificate,
the Certificate Principal Balance of such Certificate to be exchanged, the
certificate number or a description of the tenor and terms of such
Certificate, a statement that the option to elect exchange is being exercised
thereby and a guarantee that the Certificate to be exchanged with the form
entitled "Option to Elect Exchange" on the reverse of the Certificate duly
completed will be received by such Trustee not later than five Business Days
after the date of such telegram, telex, facsimile transmission or letter. Such
Certificate and form duly completed must be received by such Trustee by such
fifth Business Day. Any tender of a Certificate by the holder for exchange
shall be irrevocable. The exchange option may be exercised by the holder of a
Certificate for less than the entire Certificate Principal Balance of such
Certificate provided that the Certificate Principal Balance of such
Certificate remaining outstanding after redemption is an authorized
denomination and all other exchange requirements set forth in the related
Prospectus Supplement are satisfied. Upon such partial exchange, such
Certificate shall be cancelled and a new Certificate or Certificates for the
remaining Certificate Principal Balance thereof shall be issued (which shall
be in the name of the holder of such exchanged Certificate).
Unless otherwise specified in the applicable Prospectus Supplement, because
initially and until Definitive Certificates are issued each Certificate will
be represented by a Global Security, the Depository's nominee will be the
Certificateholder of such Certificate and therefore will be the only entity
that can exercise a right of exchange. In order to ensure that the
Depository's nominee will timely exercise a right of exchange with respect to
a particular Certificate, the beneficial owner of such Certificate must
instruct the broker or other direct or
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indirect participant through which it holds an interest in such Certificate to
notify the Depository of its desire to exercise a right of exchange. Different
firms have different cut-off times for accepting instructions from their
customers and, accordingly, each beneficial owner should consult the broker or
other direct or indirect participant through which it holds an interest in a
Certificate in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to the
Depository.
Unless otherwise provided in the applicable Prospectus Supplement, upon the
satisfaction of the foregoing conditions and any applicable conditions with
respect to the related Deposited Assets, as described in such Prospectus
Supplement, the applicable Certificateholder will be entitled to receive a
distribution of a pro rata share of the Deposited Assets related to the
Exchangeable Series being exchanged, in the manner and to the extent described
in such Prospectus Supplement. Alternatively, to the extent so specified in
the applicable Prospectus Supplement, the applicable Certificateholder, upon
satisfaction of such conditions, may direct the related Trustee to sell, on
behalf of such Certificateholder, such pro rata share of the Deposited Assets,
in which event the Certificateholder shall be entitled to receive the net
proceeds of such sale, less any costs and expenses incurred by such Trustee in
facilitating such sale, subject to any additional adjustments set forth in the
Prospectus Supplement.
CALL RIGHT
If one or more specified persons has the right to purchase all or a portion
of the Trust Certificates of any given Series, the applicable Prospectus
Supplement will designate such Series as a "Callable Series". The terms upon
which any such specified person or entity may exercise its right to purchase
all or a portion of the Trust Certificates of a Series will be specified in
the related Prospectus Supplement. Such terms may relate to, but are not
limited to, the following:
(a) a minimum Certificate Principal Balance with respect to each
Certificate being purchased;
(b) a requirement that the Certificate Principal Balance of each
Certificate being purchased be an integral multiple of an amount specified
in the Prospectus Supplement;
(c) specified dates during which such a purchase may be effected (each, a
"Call Date"); and
(d) the price at which such a purchase may be effected (the "Call
Price").
After receiving notice of the exercise of such a call right, the Trustee
will provide notice thereof as specified in the applicable Prospectus
Supplement. Upon the satisfaction of any applicable conditions to the exercise
of such right to purchase of the Trust Certificates described in such
Prospectus Supplement, each Certificateholder will be entitled to receive a
distribution of a pro rata share of the Call Price paid in connection with
such exercise, in the manner and to the extent described in such Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the call
right will not be exercised unless the value of any Trust Certificate being
purchased exceeds the Call Price payable upon exercise to the
Certificateholder in respect of such Trust Certificate.
GLOBAL SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement, all
Certificates of a given Series will, upon issuance, be represented by one or
more Global Securities that will be deposited with, or on behalf of, The
Depository Trust Company, New York, or such other depositary identified in the
related Prospectus Supplement (the "Depository"), and registered in the name
of a nominee of the Depository. Unless and until it is exchanged in whole or
in part for the individual Certificates represented thereby (each a
"Definitive Certificate"), a Global Security may not be transferred except as
a whole by the Depository for such Global Security to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor of the Depository or a nominee of such successor.
The Depository Trust Company has advised the Depositor as follows: The
Depository Trust Company 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 the provisions of Section
17A of the Exchange Act. The Depository Trust Company was created to hold
securities of, and to facilitate the clearance and settlement of securities
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transactions among, the institutions that have accounts with the Depository
("participants") in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. The Depository's participants include
securities brokers and dealers (including the Offering Agent), banks, trust
companies, clearing corporations and certain other organizations, some of
which (and/or their representatives) own the Depository. 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. The
Depository Trust Company has confirmed to the Depositor that it intends to
follow such procedures.
Upon the issuance of a Global Security, the Depository for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Certificates represented by
such Global Security to the accounts of its participants. The accounts to be
accredited shall be designated by the underwriters of such Certificates, or,
if such Certificates are offered and sold directly through one or more agents,
by the Depositor or such agent or agents. Ownership of beneficial interests in
a Global Security will be limited to participants or persons or entities that
may hold beneficial interests through participants. Ownership of beneficial
interests in a Global Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the Depository
for such Global Security or by participants or persons or entities that hold
through participants. The laws of some states require that certain purchasers
of securities take physical delivery of such securities. Such limits and such
laws may limit the market for beneficial interests in a Global Security.
So long as the Depository for a Global Security, or its nominee, is the
owner of such Global Security, the Depository or such nominee, as the case may
be, will be considered the sole Certificateholder of the individual
Certificates represented by such Global Security for all purposes under the
Trust Agreement governing such Certificates. Except as set forth below, owners
of beneficial interests in a Global Security will not be entitled to have any
of the individual Certificates represented by such Global Security registered
in their names, will not receive or be entitled to receive physical delivery
of any such Certificates and will not be considered the Certificateholders
thereof under the Trust Agreement governing such Certificates. Because the
Depository can only act on behalf of its participants, the ability of a holder
of any Certificate to pledge that Certificate to persons or entities that do
not participate in the Depository's system, or to otherwise act with respect
to such Certificate, may be limited due to the lack of a physical certificate
for such Certificate.
Distributions of principal of (and premium, if any) and any interest on
individual Certificates represented by a Global Security will be made to the
Depository or its nominee, as the case may be, as the Certificateholder of
such Global Security. None of the Depositor, the Trustee for such
Certificates, any Paying Agent or the Certificate Registrar for such
Certificates will have responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial interests in
such Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
The Depositor expects that the Depository for Certificates of a given
Series, upon receipt of any distribution of principal, premium or interest in
respect of a definitive Global Security representing any of such Certificates,
will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Security as shown on the records of the Depository. The
Depositor also expects that payments by participants to owners of beneficial
interests in such Global Security held through such participants will be
registered in "street name" and will be the responsibility of such
participants.
If the Depository for Certificates of a given Series is at any time
unwilling or unable to continue as depositary and a successor depositary is
not appointed by the Depositor within 90 days, the Depositor will issue
individual Definitive Certificates in exchange for the Global Security or
Securities representing such Certificates. In addition, the Depositor may at
any time and in its sole discretion determine not to have any Certificates of
a given Series represented by one or more Global Securities and, in such
event, will issue Definitive Certificates of such Series in exchange for the
Global Security or Securities representing such Certificates. Further, if the
Depositor so specifies with respect to the Certificates of a given Series, an
owner of a beneficial interest in a
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Global Security representing Certificates of such Series may, on terms
acceptable to the Depositor and the Depository for such Global Security,
receive individual Definitive Certificates in exchange for such beneficial
interest. In any such instance, an owner of a beneficial interest in a Global
Security will be entitled to physical delivery of individual Definitive
Certificates of the Series represented by such Global Security equal in
principal amount to such beneficial interest and to have such Definitive
Certificates registered in its name. Individual Definitive Certificates of
such Series so issued will be issued in denominations, unless otherwise
specified by the Depositor, of $1,000 and integral multiples thereof.
The applicable Prospectus Supplement will set forth any specific terms of
the depositary arrangement with respect to any Series of Certificates being
offered thereby to the extent not set forth or different from the description
set forth above.
DESCRIPTION OF DEPOSITED ASSETS
GENERAL
Each Series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a publicly issued, fixed income debt security
issued pursuant to an effective registration statement filed with the
Commission or in a debt security issued, or directly and fully guaranteed or
insured, by the Government of the United States of America or by any entity
controlled or supervised by and acting as an instrumentality of the Government
of the United States of America and exempt from the Securities Act by reason
of Section 3(a)(2) thereof ("Government Securities") or a pool of such debt
securities (the "Underlying Securities"), together with other assets (which
may include guarantees, letters of credit, financial insurance, interest rate
and/or currency swaps and other derivative transactions that credit enhance or
otherwise support the Underlying Securities) designed to assure the servicing
or timely distribution of payments to holders of the Certificates, all as
described in the related Prospectus Supplement (such assets, together with the
Underlying Securities, the "Deposited Assets"). The Underlying Securities that
are not Government Securities will represent senior debt obligations issued by
one or more Underlying Securities Issuers, each of which will satisfy certain
Eligibility Criteria described below under "Underlying Securities Issuer". The
Underlying Securities that are not Government Securities will be purchased by
the Depositor in the secondary market and, correspondingly, will not be
acquired from any Underlying Securities Issuer (whether as part of any
distribution by or pursuant to any agreement with such Underlying Securities
Issuer or otherwise). No Underlying Securities Issuer will participate in the
offering of the Certificates. Unless otherwise indicated in the applicable
Prospectus Supplement with respect to Underlying Securities that are
Government Securities, no Underlying Securities Issuer will receive any of the
proceeds from the sale of Underlying Securities to the Depositor or from the
issuance by the Depositor of the Certificates, and none of the Depositor,
Citicorp Securities, Inc. or any of their respective affiliates will have
participated in the initial public offering of any Underlying Securities.
This Prospectus relates only to the Certificates offered hereby and does not
relate to the Underlying Securities. The following description of the
Underlying Securities and the Underlying Securities Issuer is intended only to
summarize material characteristics of the Underlying Securities that the
Depositor is permitted to deposit in a Trust and does not purport to be a
complete description of any prospectus relating to Underlying Securities or of
any Underlying Securities Indenture (as defined below).
The related Prospectus Supplement will describe the material terms of the
Deposited Assets, including the material terms of any derivative instruments
that are included in the Deposited Assets.
SELECTION OF DEPOSITED ASSETS
The Offering Agent may from time to time identify to the Depositor
Underlying Securities and other Deposited Assets to be deposited into a Trust
and, in connection therewith, will structure and identify to the Depositor the
terms and conditions of Certificates representing undivided beneficial
interests therein (including, without limitation, as to whether such
Certificates will be a Callable Series or an Exchangeable Series). If the
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board of directors of the Depositor (which is independent of the Offering
Agent), after reviewing a transaction identified by the Offering Agent,
decides to participate in such transaction, then the Depositor will deposit
the identified Underlying Securities and other Deposited Assets into a Trust
and cause such Trust to issue Certificates representing undivided beneficial
interests therein.
UNDERLYING SECURITIES ISSUER
Each Underlying Securities Issuer will be a corporation organized under the
laws of the United States of America or any state thereof or (in the case of
Government Securities) the Government of the United States of America or an
entity controlled or supervised by and acting as an instrumentality of the
Government of the United States of America. Each Prospectus Supplement will
include the following information concerning the identity of each Underlying
Securities Issuer: (i) its jurisdiction of incorporation; (ii) the date of its
incorporation; (iii) the address of its principal executive offices; and (iv)
its Internal Revenue Service employer identification number (collectively,
"Identifying Information"). Identifying Information will be obtained by the
Depositor from publicly available sources. With respect to Underlying
Securities that are Government Securities, each Prospectus Supplement will
include the name of the issuer of such Government Securities and, if such
Government Securities are guaranteed or insured by the Government of the
United States of America or by an entity controlled or supervised by and
acting as an instrumentality of the Government of the United States of
America, the name of such guarantor or insurance provider.
As a condition to the deposit into a Trust of any Underlying Securities that
are not Government Securities constituting 10% or more of the total Underlying
Securities with respect to the related Series of Certificates (a "Concentrated
Underlying Security"), such Underlying Securities and the related Underlying
Securities Issuer will, at the time of such deposit, meet the following
criteria (collectively, the "Eligibility Criteria"):
(1) the Underlying Securities will have been issued pursuant to an
effective registration statement filed under the Securities Act;
(2) a class of equity securities of the Underlying Securities Issuer will
have been registered under Section 12(b) or 12(g) of the Exchange Act;
(3) the Underlying Securities Issuer will be subject to the periodic
reporting requirements of the Exchange Act and, in accordance therewith,
will be obligated to file reports, including reports on Forms 10-K and 10-
Q, and other information with the Commission;
(4) the Underlying Securities Issuer: (a) will have been subject to the
periodic reporting requirements of Section 12 or 15(d) of the Exchange Act
for a period of at least twelve calendar months immediately preceding the
deposit date; and (b) will have filed in a timely manner all reports
required to be filed under such periodic reporting requirements during the
twelve calendar months and any portion of a month immediately preceding the
deposit date;
(5) the Underlying Securities Issuer will have outstanding voting
securities (excluding securities held by affiliates of the Underlying
Securities Issuer) having an aggregate market value of at least
$75,000,000; and
(6) the Underlying Securities will be rated at least "BBB-" or "Baa3" by
Standard & Poor's Ratings Services or Moody's Investors Service, Inc. (or
any comparable rating by another nationally recognized statistical rating
organization).
The determination of whether Concentrated Underlying Securities and the
related Underlying Securities Issuer meet the Eligibility Criteria will be
made by reference to publicly available sources (and without other independent
investigation).
Reports and information referred to in paragraph (3) above may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: New York Regional Office, Room 1100, 7 World Trade
Center, New York, New York 10048 and Chicago Regional Office, Suite 1400,
Northwestern Atrium Center, 500 W.
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Madison Street, Chicago, Illinois 60661-2511, and copies of such material can
be obtained from the Public Reference Section of the Commission, Washington,
D.C. 20549, at prescribed rates. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy statements and other information
regarding registrants that file electronically with the Commission. Such
reports and other information may also be inspected at the Information Center
of the New York Stock Exchange Inc., 20 Broad Street, New York, New York
10005.
WITH RESPECT TO ANY UNDERLYING SECURITIES, A PROSPECTIVE CERTIFICATEHOLDER
SHOULD OBTAIN AND EVALUATE THE SAME INFORMATION CONCERNING THE RELEVANT
UNDERLYING SECURITIES ISSUER AS IT WOULD OBTAIN AND EVALUATE IF IT WERE
INVESTING DIRECTLY IN THE UNDERLYING SECURITIES OR IN OTHER SECURITIES ISSUED
BY THE UNDERLYING SECURITIES ISSUER. None of the Depositor, the Trustee, the
Offering Agent or any of their respective affiliates assumes any
responsibility for the accuracy or completeness of any publicly available
information concerning any Underlying Securities Issuer (including, without
limitation, no investigation as to its financial condition or
creditworthiness) or concerning any Underlying Securities (whether or not such
information is filed with the Commission) or otherwise considered by a
purchaser of the Certificates in making its investment decision in connection
therewith; provided that the foregoing shall not apply to any information
concerning the Underlying Securities and any Underlying Securities Issuer that
is expressly set forth in this Prospectus or an applicable Prospectus
Supplement (i.e., Identifying Information, information of the type described
in an applicable Prospectus Supplement under "Underlying Securities Indenture"
and "Principal Economic Terms of Underlying Securities" and as to whether
Concentrated Underlying Securities and the related Underlying Securities
Issuer meet the "Eligibility Criteria" described above).
UNDERLYING SECURITIES INDENTURE
General. Each Underlying Security that is not a Government Security will
have been issued pursuant to an agreement (each, an "Underlying Securities
Indenture") between the Underlying Securities Issuer and a trustee (the
"Underlying Securities Trustee"). The Underlying Securities Indenture and the
Underlying Securities Trustee will be qualified under the Trust Indenture Act
of 1939 (the "Trust Indenture Act") and the Underlying Securities Indenture
will contain certain provisions required by the Trust Indenture Act.
Certain Covenants. Indentures generally contain covenants intended to
protect security holders against the occurrence or effects of certain
specified events, including restrictions limiting the issuer's, and in some
cases one or more of the issuer's subsidiaries', ability to: (i) consolidate,
merge, or transfer or lease assets; or (ii) incur or suffer to exist any lien,
charge or encumbrance upon all or some specified portion of its property or
assets, or to incur, assume, guarantee or suffer to exist any indebtedness for
borrowed money if the payment of such indebtedness is secured by the grant of
such a lien. An indenture may also contain financial covenants which, among
other things, require the maintenance of certain financial ratios or the
creation or maintenance of reserves or permit certain actions to be taken only
if compliance with such covenants can be demonstrated at the time the actions
are to be taken. Subject to certain exceptions, indentures typically may be
amended or supplemented and past defaults may be waived with the consent of
the indenture trustee, the consent of the holders of not less than a specified
percentage of the outstanding securities or both.
The Underlying Securities Indenture related to one or more Underlying
Securities included in a Trust may include some, all or none of the foregoing
provisions or variations thereof, together with additional covenants not
discussed herein. Concentrated Underlying Securities, because they are
investment grade debt, are unlikely to be subject to extensive restrictive
covenants. Other Underlying Securities, if not rated investment grade,
generally will be subject to more extensive restrictive covenants. In any
event, there can be no assurance that any type of Underlying Securities will
be subject to any such covenants or that any such covenants will protect the
Trust as a holder of the Underlying Securities against losses. The Prospectus
Supplement used to offer any Series of Certificates will describe material
covenants in relation to any Concentrated Underlying Security (as defined
below) and, as applicable, will describe material covenants which are common
to any pool of Underlying Securities. Any material risk factors associated
with non-investment grade Underlying Securities deposited into a Trust will be
set forth in the applicable Prospectus Supplement.
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Events of Default. Indentures generally provide that any one of a number of
specified events will constitute an event of default with respect to the
securities issued thereunder. Such events of default typically include the
following or variations thereof: (i) failure by the issuer to pay an
installment of interest or principal on the securities at the time required
(subject to any specified grace period) or to redeem any of the securities
when required (subject to any specified grace period); (ii) failure by the
issuer to observe or perform any covenant, agreement or condition contained in
the securities or the indenture which failure is materially adverse to
security holders and continues for a specified period after notice thereof is
given to the issuer by the indenture trustee or the holders of not less than a
specified percentage of the outstanding securities; (iii) failure by the
issuer and/or one or more of its subsidiaries to make any required payment of
principal (and premium, if any) or interest with respect to other material
outstanding debt obligations or the acceleration by or on behalf of the
holders thereof of such securities; and (iv) certain events of bankruptcy or
insolvency with respect to the issuer and/or one or more of its subsidiaries.
Remedies. Indentures generally provide that upon the occurrence of an event
of default, the indenture trustee may, and upon the written request of the
holders of not less than a specified percentage of the outstanding securities
must, take such action as it may deem appropriate to protect and enforce the
rights of the security holders. Certain indentures provide that the indenture
trustee or a specified percentage of the holders of the outstanding securities
have the right to declare all or a portion of the principal and accrued
interest on the outstanding securities immediately due and payable upon the
occurrence of certain events of default, subject to the issuer's right to
cure, if applicable. Generally, an indenture will contain a provision
entitling the trustee thereunder to be indemnified by the security holders
prior to proceeding to exercise any right or power under such indenture with
respect to such securities at the request of such security holders. An
indenture is also likely to limit a security holder's right to institute
certain actions or proceedings to pursue any remedy under the indenture unless
certain conditions are satisfied, including obtaining the consent of the
indenture trustee, that the proceeding be brought for the ratable benefit of
all holders of the security and/or that the indenture trustee, after being
requested to institute a proceeding by the owners of at least a specified
minimum percentage of the securities, shall have refused or neglected to
comply with such request within a reasonable time.
Each Underlying Securities Indenture may include some, all or none of the
foregoing provisions or variations thereof, together with additional events of
default and/or remedies not discussed herein. The Prospectus Supplement with
respect to any Series of Certificates will describe the events of default
under the Underlying Securities Indenture with respect to any Concentrated
Underlying Security ("Underlying Security Events of Default") and applicable
remedies with respect thereto. With respect to any Trust comprising a pool of
securities, the applicable Prospectus Supplement will describe certain common
Underlying Security Events of Default with respect to such pool. There can be
no assurance that any such provision will protect the Trust, as a holder of
the Underlying Securities, against losses. Furthermore, a holder of
Certificates will have no independent legal right to exercise any remedies
with respect to the Underlying Securities and will be required to rely on the
Trustee of the applicable Trust to pursue any available remedies on behalf of
the relevant Certificateholders in accordance with the terms of the Trust
Agreement. If an Underlying Security Event of Default occurs and the Trustee
as a holder of the Underlying Securities is entitled to vote or take such
other action to declare the principal amount of an Underlying Security and any
accrued and unpaid interest thereon to be due and payable, the
Certificateholders' objectives may differ from those of holders of other
securities of the same series and class as any Underlying Security (all such
securities of the same series and class, herein "Outstanding Debt Securities")
in determining whether to require the acceleration of the Underlying
Securities.
Subordination. If specified in the applicable Prospectus Supplement, certain
of the Underlying Securities with respect to any Trust may be either senior
("Senior Underlying Securities") or subordinated ("Subordinated Underlying
Securities") in right to payment to other existing or future indebtedness of
the Underlying Securities Issuer. With respect to Subordinated Underlying
Securities, to the extent of the subordination provisions of such securities,
and after the occurrence of certain events, security holders and direct
creditors whose claims are senior to Subordinated Underlying Securities, if
any, may be entitled to receive payment of the full amount due thereon before
the holders of any subordinated debt securities are entitled to receive
payment on account of the principal (and premium, if any) or any interest on
such securities. Consequently, the Trust as a holder of subordinated
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debt may suffer a greater loss than if it held unsubordinated debt of the
Underlying Securities Issuer. There can be no assurance, however, that in the
event of a bankruptcy or similar insolvency proceeding the Trust as a holder
of Senior Underlying Securities would receive all payments in respect of such
securities even if holders of subordinated securities receive no amounts in
respect of such securities. Reference is made to the Prospectus Supplement
used to offer any Series of Certificates for a description of any
subordination provisions with respect to any Concentrated Underlying
Securities and the percentage of Senior Underlying Securities and Subordinated
Underlying Securities, if any, in a Trust comprised of a pool of securities.
Secured Obligations. Certain of the Underlying Securities with respect to
any Trust may represent secured obligations of the Underlying Securities
Issuer ("Secured Underlying Securities"). Generally, unless an event of
default shall have occurred, or with respect to certain collateral or as
otherwise set forth in the indenture pursuant to which such securities were
offered and sold, an issuer of secured obligations has the right to remain in
possession and retain exclusive control of the collateral securing a security
and to collect, invest and dispose of any income related to the collateral.
The indenture pursuant to which any secured indebtedness is issued may also
contain certain provisions for release, substitution or disposition of
collateral under certain circumstances with or without the consent of the
indenture trustee or upon the direction of not less than a specified
percentage of the security holders. The indenture pursuant to which any
secured indebtedness is issued will also provide for the disposition of the
collateral upon the occurrence of certain events of default with respect
thereto. In the event of a default in respect of any secured obligation,
security holders may experience a delay in payments on account of principal
(and premium, if any) or any interest on such securities pending the sale of
any collateral and prior to or during such period the related collateral may
decline in value. If proceeds of the sale of collateral following an indenture
event of default are insufficient to repay all amounts due in respect of any
secured obligations, the holders of such securities (to the extent not repaid
from the proceeds of the sale of the collateral) would have only an unsecured
claim ranking pari passu with the claims of all other general unsecured
creditors.
The Underlying Securities Indenture with respect to Secured Underlying
Securities may include, some, all or none of the foregoing provisions or
variations thereof. The Prospectus Supplement used to offer any Series of
Certificates that includes Concentrated Underlying Securities which are
Secured Underlying Securities will describe the material security provisions
of such Underlying Securities and the related collateral. With respect to any
Trust composed of a pool of securities, a substantial portion of which are
Secured Underlying Securities, the applicable Prospectus Supplement will
disclose certain material information with respect to such security provisions
and the collateral.
Government Securities. The foregoing description of the Underlying
Securities Indenture would generally not be applicable to any Underlying
Securities that are Government Securities. Government Securities included as
Underlying Securities will be exempt from the Securities Act by reason of
Section 3(a)(2) thereof. Accordingly, such Government Securities will also be
exempt from the Trust Indenture Act by reason of Section 304 thereof.
Agreements governing or otherwise relating to Government Securities may not
contain restrictive or financial covenants, or events of default, similar to
those (if any) contained in indentures relating to Underlying Securities
issued by private issuers. In addition, agreements governing or otherwise
relating to Government Securities may not provide for the right to declare all
or a portion of the principal and accrued interest on outstanding Government
Securities to be immediately due and payable upon the occurrence of certain
events of default.
PRINCIPAL ECONOMIC TERMS OF UNDERLYING SECURITIES
Reference is made to the applicable Prospectus Supplement with respect to
each Series of Certificates for a description of the following terms, as
applicable, of any Concentrated Underlying Security: (i) the title and series
of such Underlying Securities, and the aggregate principal amount,
denomination and form thereof; (ii) whether such securities are senior or
subordinated to any other existing or future obligations of the Underlying
Securities Issuer; (iii) whether any of the obligations are secured and the
nature of any collateral; (iv) the limit, if any,
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upon the aggregate principal amount of such debt securities; (v) the dates on
which, or the range of dates within which, the principal of (and premium, if
any, on) such debt securities will be payable; (vi) the rate or rates or the
method of determination thereof, at which such Underlying Securities will bear
interest, if any ("Underlying Securities Rate"); the date or dates from which
such interest will accrue ("Underlying Securities Interest Accrual Periods");
and the dates on which such interest will be payable ("Underlying Securities
Payment Dates"); (vii) the obligation, if any, of the Underlying Securities
Issuer to redeem the Outstanding Debt Securities pursuant to any sinking fund
or analogous provisions, or at the option of a holder thereof, and the periods
within which or the dates on which, the prices at which and the terms and
conditions upon which such debt securities may be redeemed or repurchased, in
whole or in part, pursuant to such obligation; (viii) the periods within which
or the dates on which, the prices at which and the terms and conditions upon
which such debt securities may be redeemed, if any, in whole or in part, at
the option of the Underlying Securities Issuer; (ix) whether the Underlying
Securities were issued at a price lower than the principal amount thereof; (x)
if other than United States dollars, the foreign currency in which such debt
securities are denominated, or in which payment of the principal of (and
premium, if any) or any interest on such Underlying Securities will be made
(the "Underlying Securities Currency"), and the circumstances, if any, when
such currency of payment may be changed; (xi) material events of default or
restrictive covenants provided for with respect to such Underlying Securities;
(xii) the rating thereof, if any, (xiii) the principal United States market on
which the Underlying Securities are traded; (xiv) if the Underlying Securities
are Government Securities guaranteed or insured by the Government of the
United States of America or by an entity controlled or supervised by and
acting as an instrumentality of the Government of the United States of
America, the name of such guarantor or insurance provider; and (xv) any other
material terms of such Underlying Securities.
With respect to a Trust comprised of a pool of Underlying Securities, the
applicable Prospectus Supplement will describe the composition of the
Underlying Securities pool as of the Cut-off Date, certain material events of
default or restrictive covenants common to the Underlying Securities, and, on
an aggregate, percentage or weighted average basis, as applicable, the
characteristics of the pool with respect to the terms set forth in (ii),
(iii), (v), (vi), (vii), (viii) and (ix) of the preceding paragraph and any
other material terms regarding such pool of securities.
If an obligor on Concentrated Underlying Securities ceases to file periodic
reports under the Exchange Act, the Depositor will continue to be subject to
the reporting requirements of the Exchange Act but certain information with
respect to such obligor may be unavailable. In the event such obligor ceases
to file periodic reports under the Exchange Act, the Depositor will instruct
the Trustee of the relevant Trust to sell all of such Concentrated Underlying
Securities (with the proceeds of such sale being distributable to the
Certificateholders of the relevant Series as otherwise described herein). Any
such sale will result in a loss to the Certificateholders of the relevant
Series if the sale price is less than the purchase price for such Concentrated
Underlying Securities.
OTHER DEPOSITED ASSETS
In addition to the Underlying Securities, the Depositor may also deposit
into a given Trust, or the Trustee on behalf of the Certificateholders of a
Trust may enter into an agreement constituting or providing for the purchase
of, to the extent described in the related Prospectus Supplement, other assets
(such as guarantees, letters of credit, financial insurance, interest rate
and/or currency swaps and other derivative transactions that credit enhance or
otherwise support the Underlying Securities) designed to assure the servicing
or timely distribution of payments to holders of the Certificates, all as
described in the applicable Prospectus Supplement. With respect to any such
other assets that are material to the amount or timing of payments on the
Certificates of any Series, the applicable Prospectus Supplement will contain
a description of the material terms thereof and, if relevant, information
relating to any obligor thereon or issuer thereof, all in a manner analogous
to the description of the Underlying Securities.
Unless otherwise specified in the related Prospectus Supplement, the
Deposited Assets for a given Series of Certificates and the related Trust will
not constitute Deposited Assets for any other Series of Certificates and the
related Trust, and the Certificates of a given Series will possess an equal
and ratable undivided ownership interest in such Deposited Assets.
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COLLECTIONS
The Trust Agreement will establish procedures by which the Trustee or such
other person specified in the Prospectus Supplement is obligated, for the
benefit of the Certificateholders of each Series of Certificates, to
administer the related Deposited Assets, including making collections of all
payments made thereon, depositing from time to time prior to any applicable
Distribution Date such collections into a segregated trust account maintained
or controlled by the applicable Trustee for the benefit of such Series (each a
"Certificate Account"). The applicable Prospectus Supplement will specify the
collection periods, if applicable, and Distribution Dates for a given Series
of Certificates and the particular requirements relating to the segregation
and investment of collections received on the Deposited Assets during a given
collection period or on or by certain specified dates. There can be no
assurance that amounts received from the Deposited Assets for a particular
Series of Certificates over a specified period will be sufficient, after
payment of all prior expenses and fees for such period, to pay amounts then
due and owing to holders of such Certificates.
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DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The following summary of material provisions of the Trust Agreement does not
purport to be complete, and such summary is qualified in its entirety by
reference to the detailed provisions of the Standard Terms for Trust
Agreements filed as an exhibit to the Registration Statement. Article and
section references in parentheses below are to articles and sections in the
Standard Terms for Trust Agreements. Wherever particular sections or defined
terms of the Standard Terms for Trust Agreements are referred to, such
sections or defined terms are incorporated herein by reference as part of the
statement made, and the statement is qualified in its entirety by such
reference.
ASSIGNMENT OF DEPOSITED ASSETS
At the time of issuance of any Series of Certificates, the Depositor will
cause the Underlying Securities and any other Deposited Asset specified in the
Prospectus Supplement to be assigned and delivered to the Trustee to be
deposited in the related Trust, together with all principal, premium (if any)
and interest received by or on behalf of the Depositor on or with respect to
such Underlying Securities and other Deposited Assets after the cut-off date
specified in the Prospectus Supplement (the "Cut-off Date"), other than
principal, premium (if any) and interest due on or before the Cut-off Date and
other than any Retained Interest. (Section 2.01) Concurrently with such
assignment, the Trustee will execute, authenticate and deliver the
Certificates to the Depositor in exchange for the Underlying Securities and
other Deposited Assets, if any. (Section 2.05) Each Deposited Asset will be
identified in a schedule to the Trust Agreement. Such schedule will include
certain summary identifying information with respect to each Underlying
Security and each other Deposited Asset as of the Cut-off Date. Such schedule
will include, to the extent applicable, information regarding the payment
terms of any Concentrated Underlying Security, the Retained Interest, if any,
with respect thereto, the maturity or terms thereof, the rating, if any,
thereof and any other material information with respect thereto.
In addition, the Depositor will, with respect to each Deposited Asset,
deliver or cause to be delivered to the Trustee (or to the custodian
hereinafter referred to) all documents necessary to transfer ownership of such
Deposited Asset to the Trustee. The Trustee will hold such documents in trust
for the benefit of the Certificateholders. (Sections 2.01 and 2.02)
The Depositor will make certain representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under, the
Trust Agreement. Upon a breach of any such representation of the Depositor
which materially and adversely affects the interests of the
Certificateholders, the Depositor will be obligated to cure the breach in all
material respects. (Sections 2.04 and 2.05)
COLLECTION AND OTHER ADMINISTRATIVE PROCEDURES
General. With respect to any Series of Certificates, the Trustee, directly
or through sub-administrative agents, will establish and maintain certain
accounts for the benefit of the holders of the relevant Certificates and will
deposit in such accounts all amounts received by it with respect to the
Deposited Assets. (Section 3.03) The Trustee on behalf of the Trust may direct
any depository institution maintaining such accounts to invest the funds in
such accounts in one or more eligible investments bearing interest or sold at
a discount. Except as otherwise provided in the applicable Series Supplement,
any earnings with respect to such investments will be paid to, and any losses
with respect to such investments will be solely for the account of, the
Certificateholders (and, if applicable, the holder of the Retained Interest)
pro rata in proportion to their interest in the invested funds. (Section 3.05)
The Trustee will make reasonable efforts to collect all scheduled payments
under the Deposited Assets in a manner consistent with the Trust Agreement.
(Section 3.02) Except as otherwise expressly set forth in the Trust Agreement
or the applicable Series Supplement, however, the Trustee will not be required
to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties under the Trust
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Agreement or in the exercise of any of its rights or powers if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
(Section 7.01)
Sub-Administration. The Trustee may enter into agreements (each a "Sub-
Administration Agreement") with one or more agents meeting the qualifications
set forth in the Trust Agreement (each a "Sub-Administrative Agent") in order
to delegate certain of its administrative obligations in respect of the
Deposited Assets to such Sub-Administrative Agents, provided that the Trustee
will remain obligated with respect to its obligations under the Trust
Agreement. (Section 7.02) Each Sub-Administrative Agent will be required to
perform the customary functions of an administrator of comparable financial
assets, including, if applicable, collecting payments from obligors and
remitting such collections to the Trustee; maintaining accounting records
relating to the Deposited Assets, attempting to cure defaults and
delinquencies; and enforcing any other remedies with respect thereto all as
and to the extent provided in the applicable Sub-Administration Agreement.
Each Sub-Administration Agreement will be consistent with the terms of the
Trust Agreement, and any such delegation to a Sub-Administrative Agent will
not be permitted if it would result in a withdrawal or downgrading of the
rating of the relevant Series of Certificates issued pursuant to the Trust
Agreement. (Section 7.02)
The Trustee will be solely liable for all fees owed by it to any Sub-
Administrative Agent, irrespective of whether the compensation of the Trustee,
pursuant to the Trust Agreement with respect to the particular Series of
Certificates, is sufficient to pay such fees. Each Sub-Administrative Agent
will be reimbursed by the Trustee for certain expenditures which it makes,
generally to the same extent the Trustee would be reimbursed under the terms
of the Trust Agreement relating to such Series. See "Trustee Compensation and
Payment of Expenses".
Realization upon Defaulted Deposited Assets. Unless otherwise provided in
the applicable Prospectus Supplement, the Trustee will be obligated to follow
or cause to be followed such normal practices and procedures as it deems
necessary or advisable to realize upon any defaulted Deposited Asset (Section
3.07), provided that, except as otherwise expressly provided in the applicable
Prospectus Supplement, it will not be required to expend or risk its own funds
or otherwise incur financial liability. (Section 6.02) If the proceeds of any
liquidation of the defaulted Deposited Asset are less than the sum of (i) the
outstanding principal balance of the defaulted Deposited Asset, (ii) interest
accrued but unpaid thereon at the applicable interest rate and (iii) the
aggregate amount of expenses incurred by the Trustee in connection with such
proceedings to the extent reimbursable from the assets of the Trust under the
Trust Agreement, the Trust for the applicable Series will realize a loss in
the amount of such difference. (Section 3.07)
RETAINED INTEREST
The Prospectus Supplement for a Series of Certificates will specify whether
there will be any Retained Interest in the Deposited Assets, and, if so, the
owner thereof. (Section 3.08) A Retained Interest in a Deposited Asset
represents a specified ownership interest therein and a right to a portion of
the payments thereon. (Section 1.01) Payments in respect of the Retained
Interest will be deducted from payments on the Deposited Assets as received
and, in general, will not be deposited in the applicable Certificate Account
or become a part of the related Trust. Unless otherwise provided in the
applicable Prospectus Supplement, after deduction of all applicable fees as
provided for in the Trust Agreement, the Trustee will allocate on a pari passu
basis any partial recovery on an Underlying Security between the Retained
Interest (if any) and the Certificateholders of the applicable Series.
(Section 3.08)
TRUSTEE COMPENSATION AND PAYMENT OF EXPENSES
The applicable Prospectus Supplement will specify the Trustee's
compensation, and the source, manner and priority of payment thereof, with
respect to a given Series of Certificates. (Section 7.06)
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The applicable Series Supplement may provide for the payment by the
Depositor of certain Prepaid Ordinary Expenses of the Trustee. If the Prepaid
Ordinary Expenses set forth in the Series Supplement are greater than zero,
the Trustee will be deemed to agree that the payment of such amount
constitutes full and final satisfaction of and payment for all Ordinary
Expenses. If the Prepaid Ordinary Expenses set forth in the Series Supplement
are zero, the Series Supplement may indicate that Ordinary Expenses will be
paid for by the Trust, in which case the Trustee will be paid on a periodic
basis by the Trust or the Retained Interest at the rate or amount and on the
terms provided for in the Series Supplement. The Trustee has agreed, pursuant
to the Trust Agreement, that its right to receive such payments from the Trust
will constitute full and final satisfaction of and payment for all Ordinary
Expenses and that the Trustee will have no claim on payment of Ordinary
Expenses from any other source, including the Depositor. If the Prepaid
Ordinary Expenses set forth in the Series Supplement are zero, the Series
Supplement may provide that the Depositor will pay to the Trustee from time to
time a fee for its services and expenses as Trustee as set forth in the Series
Supplement payable at the times set forth therein. The Trustee will agree,
pursuant to the Trust Agreement, that its right to receive such payments from
the Depositor will constitute full and final satisfaction of and payment for
all Ordinary Expenses and that the Trustee will have no claim for payment of
Ordinary Expenses from the Trust. The Trustee has further agreed that,
notwithstanding any failure by the Depositor to make such periodic payments of
Ordinary Expenses, the Trustee will continue to perform its obligations under
the Trust Agreement. The Depositor's obligations to pay Ordinary Expenses
under the Trust Agreement will be extinguished and of no further effect upon
the payment of Ordinary Expenses due and owing on the termination of the Trust
pursuant to the terms of the Trust Agreement.
Subject to the terms of the Trust Agreement, all Extraordinary Expenses (as
defined in the Trust Agreement), to the extent not paid by a third party, are
obligations of the Trust, and when due and payable will be satisfied solely by
the Trust.
The Trustee will not take any action, including appearing in, instituting or
conducting any action or suit under the Trust Agreement or in relation thereto
which, in the Trustee's opinion, would or might cause it to incur costs,
expenses or liabilities that are Extraordinary Expenses unless (i) the Trustee
is satisfied that it will have adequate security or indemnity in respect of
such costs, expenses and liabilities, (ii) the Trustee has been instructed to
do so by Certificateholders representing not less than the "Required
Percentage--Remedies" (as defined in the Trust Agreement) of the aggregate
principal amount of Certificates then outstanding, and (iii) the
Certificateholders, pursuant to the instructions given under clause (ii)
above, have agreed that such costs, expenses or liabilities will either be (x)
paid by the Trustee from the Trust, in the case of a vote of 100% of the
aggregate principal amount of Certificates then outstanding, or (y) paid by
the Trustee (which payment will be made out of its own funds and not from
monies on deposit in the Trust) in which case the Trustee will be entitled to
receive, upon demand, reimbursement from those Certificateholders who have
agreed to bear the entire amount of such costs, expenses or liabilities, on a
pro rata basis among such Certificateholders.
DISTRIBUTIONS ON CERTIFICATES
The distribution of interest and principal on Certificates issued in
registered form will be made (i) if the Certificates are held in book-entry
form, to the relevant book-entry depository, which will credit the relevant
participant's account at such book-entry depository in accordance with the
policies and procedure of such book-entry depository or (ii) if the
Certificates are not held in book-entry form, at the corporate trust office of
the Trustee as specified in the Trust Agreement or, at the option of the
Trustee, by check mailed to the address of the Person entitled thereto as such
address appears in the Certificate register. (Section 4.02) Subject to the
terms and conditions of the Trust Agreement, with respect to Certificates not
held in book-entry form and having the minimum wire denomination specified in
the Trust Agreement, such payment will be made by wire transfer of immediately
available funds to the account designated by the holder in a written request
received by the Trustee not later than 10 days prior to the relevant
distribution date; provided that if a wire transfer cannot be made for any
reason, payment will be made by check. The Trustee will not be required to
send federal funds wires until any corresponding payments which were not same
day funds when received by it have become same day funds.
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Unless specified otherwise in a Series Supplement, the final distribution of
principal, interest and/or premium will be made upon presentation and
surrender of such Certificates at the corporate trust office of the Trustee as
specified in the Trust Agreement.
OPTIONAL EXCHANGE
The terms and conditions, if any, upon which Certificates of any Series may
be exchanged for a pro rata portion of the Underlying Securities of the
related Trust will be specified in the related Series Supplement; provided
that any right of exchange will be exercisable only to the extent that the
Depositor provides upon the Trustee's request an opinion of counsel that (i)
such exchange would not be inconsistent with the Depositor's and the Trustee's
continued satisfaction of the applicable requirements under the Investment
Company Act of 1940, as amended, and (ii) such exchange would not affect the
characterization of the Trust as a "grantor trust" for United States federal
income tax purposes.
Any tender of a Certificate by the holder thereof for exchange will be
irrevocable. Unless otherwise provided in the applicable Series Supplement,
the exchange option may be exercised by the holder of a Certificate for less
than aggregate principal amount of such Certificate as long as the aggregate
principal amount outstanding after such exchange is an authorized denomination
and all other exchange requirements set forth in the related Series Supplement
are satisfied. Upon such partial exchange, such Certificate will be cancelled
and a new Certificate or Certificates for the remaining principal amount of
the Certificate will be issued (which, in the case of any Certificate issued
in registered form, will be in the name of the holder of such exchanged
Certificate).
VOTING RIGHTS WITH RESPECT TO UNDERLYING SECURITIES
Within five Business Days after receipt of notice of any meeting of, or
other occasion for the exercise of voting rights or the giving of consents by,
owners of any of the Underlying Securities, the Trustee will give notice to
the Certificateholders, setting forth (i) such information as is contained in
such notice to owners of Underlying Securities, (ii) a statement that the
Certificateholders will be entitled, subject to any applicable provision of
law and any applicable provisions of such Underlying Securities, to instruct
the Trustee as to the exercise of voting rights, if any, pertaining to such
Underlying Securities and (iii) a statement as to the manner in which
instructions may be given to the Trustee to give a discretionary proxy to a
person designated in the notice received by the Trustee. The Trustee will give
such notice to the Certificateholders of record on the relevant record date.
Upon the written request of the applicable Certificateholder, received on or
before the date established by the Trustee for such purpose, the Trustee will
endeavor, insofar as practicable and permitted under any applicable provision
of law and any applicable provision of or governing the Underlying Securities,
to vote in accordance with any nondiscretionary instruction set forth in such
written request. The Trustee will not vote except as specifically authorized
and directed in written instructions from the applicable Certificateholder
entitled to give such instructions. Notwithstanding the foregoing, if the
Trustee determines (based upon advice furnished by nationally recognized
independent tax counsel, whether at the request of any Certificateholder or
otherwise) that the exercise of voting rights with respect to any Underlying
Securities could result in a "sale or other disposition" of such Underlying
Securities within the meaning of Section 1001(a) of the Internal Revenue Code
of 1986, as amended, the Trustee will exercise such voting rights in a manner
that would not result in any such sale or other disposition. The Trustee will
have no responsibility to make any such determination.
Unless otherwise specified in the applicable Series Supplement, the voting
rights allocable to the owners of the Underlying Securities pursuant to the
terms thereof will be allocated among the Certificateholders pro rata, in the
proportion that the denomination of each Certificate bears to the aggregate
denomination of all Certificates.
By accepting delivery of a Certificate, whether upon original issuance or
subsequent transfer, exchange or replacement thereof, and without regard to
whether ownership is beneficial or otherwise, the Certificateholder
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agrees so long as it is an owner of such Certificate that it will not grant
any consent (i) to any conversion of the timing of payment of, or the method
or rate of accruing, interest on the Underlying Securities underlying the
Certificates held by such Certificateholder or (ii) to any redemption or
prepayment of the Underlying Securities underlying the Certificates held by
such Certificateholder. (Section 5.14) The Trustee will not grant any consent
solicited from the owners of the Underlying Securities underlying the
Certificates with respect to the matters set forth in Section 5.14 of the
Trust Agreement nor will it accept or take any action in respect of any
consent, proxy or instructions received from any Certificateholder in
contravention of the provisions of such Section.
LIMITATIONS ON RIGHTS OF CERTIFICATEHOLDERS
No Certificateholder will have the right under the Trust Agreement to
institute any proceeding with respect to the Trustee or the Trust unless such
holder previously has given to the Trustee written notice of breach and unless
(i) such holder has previously given to the Trustee a written notice of breach
and of the continuance thereof, (ii) the holders of Certificates of such
Series evidencing not less than the "Required Percentage --Remedies" of the
Voting Rights of such Series have made written request upon the Trustee to
institute such proceeding in its own name as Trustee thereunder and have
offered to the Trustee reasonable indemnity, (iii) the Trustee for 15 days has
neglected or refused to institute any such proceeding and (iv) no direction
inconsistent with such written request has been given to the Trustee during
such 15-day period by Certificateholders evidencing not less than the
"Required Percentage--Remedies" of the aggregate Voting Rights of such Series.
(Section 10.02) The Trustee, however, is under no obligation to exercise any
of the trusts or powers vested in it by the Trust Agreement or to make any
investigation of matters arising thereunder or to institute, conduct or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of Certificates covered by the Trust
Agreement, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby. (Section 10.02)
MODIFICATION AND WAIVER
The Trust Agreement may be amended from time to time by the Depositor and
the Trustee without the consent of any of the Certificateholders for any of
the following purposes: (i) to cure any ambiguity or to correct or supplement
any provision therein which may be defective or inconsistent with any other
provision therein or to provide for any other terms or modify any other
provisions with respect to matters or questions arising under the Trust
Agreement which will not adversely affect the interests of the Holders in any
material respect; (ii) to evidence and provide for the acceptance of
appointment thereunder of a change in Trustee as Trustee for a Series of
Certificates subsequent to the Closing Date for such Series, and to add to or
change any of the provisions of the Trust Agreement as shall be necessary to
provide for or facilitate the administration of the separate Trusts thereunder
by more than one trustee, pursuant to the requirements of Section 5.01
thereof; or (iii) to evidence and provide for the acceptance of appointment
thereunder by a successor Trustee with respect to the Certificates of one or
more Series or to add or change any of the provisions of the Trust Agreement
as shall be necessary to provide for or facilitate the administration of the
trusts thereunder; provided that no amendment will be permitted if it would
result in a withdrawal or downgrading of the rating of the relevant Series of
Certificates or if such amendment would cause any Trust created under the
Trust Agreement to fail to qualify as a "grantor trust" for U.S. Federal
income tax purposes. (Section 10.01)
Without limiting the generality of the foregoing, unless otherwise specified
in the applicable Prospectus Supplement, the Trust Agreement may also be
modified or amended from time to time by the Depositor, and the Trustee, with
the consent of the holders of Certificates evidencing not less than the
"Required Percentage --Amendment" of the Voting Rights of those Certificates
that are materially adversely affected by such modification or amendment for
the purpose of adding any provision to or changing in any manner or
eliminating any provision of the Trust Agreement or of modifying in any manner
the rights of such Certificateholders; provided that no such amendment will
(i) reduce in any manner the amount of, or delay the timing of, payments
received on Deposited Assets which are required to be distributed on any
Certificate without the consent of the
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holders of such Certificates or (ii) reduce the percentage of aggregate Voting
Rights required to take any action specified in the Trust Agreement, without
the consent of the Holders of all Certificates of such Series or Class then
Outstanding. (Section 10.01)
Unless otherwise specified in the applicable Prospectus Supplement, holders
of Certificates evidencing not less than the "Required Percentage--Waiver" of
the Voting Rights of a given Series may, on behalf of all Certificateholders
of that Series, (i) waive, insofar as that Series is concerned, compliance by
the Depositor or the Trustee with certain restrictive provisions, if any, of
the Trust Agreement before the time for such compliance and (ii) waive any
past default under the Trust Agreement with respect to Certificates of that
Series, except a default in the failure to distribute amounts received as
principal of (and premium, if any) or any interest on any such Certificate and
except a default in respect of a covenant or provision the modification or
amendment of which would require the consent of the holder of each outstanding
Certificate affected thereby (Section 5.19).
REPORTS TO CERTIFICATEHOLDERS; NOTICES
Reports to Certificateholders. Unless otherwise provided in the applicable
Prospectus Supplement, with each distribution to Certificateholders of a given
Series, the Trustee will forward or cause to be forwarded to each such
Certificateholder, to the Depositor and to such other parties as may be
specified in the Trust Agreement, a statement setting forth:
(i) the amounts received by the Trustee as of the last such statement in
respect of principal, interest and premium on the Underlying Securities and
any amounts received by the Trustee with respect to any swap agreement
entered into by the Trust pursuant to the terms of the Trust Agreement;
(ii) any amounts payable by the Trust for such date pursuant to any swap
agreement entered into by the Trust pursuant to the terms of the Trust
Agreement;
(iii) the amount of such distribution allocable to principal of and
premium, if any, and interest on the Certificates of such Series, and the
amount of aggregate unpaid interest accrued as of such distribution date;
(iv) in the case of Certificates bearing interest on a floating rate
basis, the respective floating rate applicable to such Certificates on such
distribution date, as calculated in accordance with the method specified in
such Certificates and the related Series Supplement;
(v) such other customary information as the Trustee deems necessary or
desirable, (or that any such Certificateholder reasonably requests in
writing) to enable such Certificateholders to prepare their tax returns;
(vi) if the Series Supplement provides for Advances (as defined in the
Trust Agreement), the aggregate amount of Advances, if any, included in
such distribution, and the aggregate amount of unreimbursed Advances, if
any, at the close of business on such distribution date;
(vii) the aggregate stated principal amount and, if applicable, notional
amount of the Underlying Securities related to such Series, the current
rating assigned by the applicable rating agency thereon and the current
interest rate or rates thereon at the close of business on such
distribution date;
(viii) the aggregate principal amount (or notional amount, if applicable)
of each Series at the close of business on such distribution date,
separately identifying any reduction in such aggregate principal amount (or
notional amount) due to the allocation of certain realized losses on such
distribution date or otherwise, as provided in the Trust Agreement; and
(ix) as to any Series for which credit support has been obtained, the
amount or notional amount of coverage of each element of credit support
(and rating, if any, thereof) included therein as of the close of business
on such distribution date.
In the case of information furnished pursuant to subclauses (i), (ii), (iii)
and (v) above, the amounts will be expressed as a U.S. dollar amount (or
equivalent thereof in any other specified currency) per minimum
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denomination of Certificates or for such other specified portion thereof.
Within a reasonable period of time after the end of each calendar year, the
Trustee will furnish to each person who at any time during the calendar year
was a Certificateholder a statement containing the information set forth in
subclauses (i), (ii), (iii) and (v) above, aggregated for such calendar year
or the applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Trustee will be deemed to have been
satisfied to the extent that substantially comparable information is provided
by the Trustee pursuant to any requirements of the Code as are from time to
time in effect. (Section 4.03)
Notices. Unless otherwise provided in the applicable Prospectus Supplement,
any notice required to be given to a holder of a Registered Certificate will
be mailed to the last address of such holder set forth in the applicable
Certificate Register. (Section 10.04)
EVIDENCE AS TO COMPLIANCE
The Trust Agreement will also provide for delivery to the Trustee on behalf
of the Certificateholders, on or before a specified date in each year, of an
annual statement from the principal executive, financial or accounting officer
of the Depositor as to his or her knowledge of the Depositor's compliance with
all conditions and covenants under the Trust Agreement. (Section 3.10).
Copies of the annual statement of an officer of the Depositor may be
obtained by Certificateholders without charge upon written request to the
Trustee at the address set forth in the related Prospectus Supplement.
REPLACEMENT CERTIFICATES
Unless otherwise provided in the applicable Prospectus Supplement, if a
Certificate is mutilated, destroyed, lost or stolen, it may be replaced at the
corporate trust office or agency of the Trustee in the City and State of New
York, or such other location as may be specified in the applicable Prospectus
Supplement, upon payment by the holder of such expenses as may be incurred by
the Trustee in connection therewith and the furnishing of such security and
indemnity as the Trustee and the Depositor may require to hold each of them
and any Paying Agent harmless. (Section 5.05)
TERMINATION
The obligations created by the Trust Agreement for each Series of
Certificates will terminate upon the payment to Certificateholders of that
Series of all amounts held in the related Certificate Account and required to
be paid to them pursuant to the Trust Agreement following the final payment or
other liquidation of the last Deposited Asset subject thereto or the
disposition of all property acquired upon foreclosure or liquidation of any
such Deposited Asset. In no event, however, will any Trust created by the
Trust Agreement continue beyond the respective date specified in the related
Prospectus Supplement. Written notice of termination of the obligations with
respect to the related Series of Certificates under the Trust Agreement will
be provided as set forth above under "--Reports to Certificateholders;
Notices--Notices", and the final distribution will be made only upon surrender
and cancellation of the Certificates at an office or agency appointed by the
Trustee which will be specified in the notice of termination. (Section 9.01)
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or sufficiency of
the Trust Agreement, the Certificates of any Series or any Deposited Asset or
related document and is not accountable for the use or application by the
Depositor, of any of the Certificates or of the proceeds of such Certificates.
(Section 7.04) However, upon receipt of the various certificates, reports or
other instruments required to be furnished to it, the Trustee is required to
examine such documents and to determine whether they conform to the applicable
requirements of the Trust Agreement. (Section 7.01)
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THE TRUSTEE
The Trustee for any given Series of Certificates under the Trust Agreement
will be named in the related Prospectus Supplement. The commercial bank,
national banking association or trust company serving as Trustee will be
unaffiliated with, but may have normal banking relationships with, the
Depositor and its affiliates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the material Federal income tax
consequences of the purchase, ownership and disposition of Certificates that
will apply to any Series of Certificates. This discussion is based upon laws,
regulations, rulings and decisions currently in effect, all of which are
subject to change, possibly on a retroactive basis. The discussion does not
deal with all Federal tax consequences applicable to all categories of
investors, some of which may be subject to special rules. In addition, this
discussion is generally limited to investors who will hold the Certificates as
"capital assets" (generally, property held for investment) within the meaning
of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"),
and who do not hold their Certificates as part of a "straddle", a "hedge" or a
"conversion transaction". The discussion contained herein assumes that the
aggregate deemed purchase price of the Certificates (as described herein),
excluding accrued interest on the Underlying Securities, will at least equal
the stated principal amount of the Underlying Securities. If this is not the
case for a particular Series of Certificates (and to the extent otherwise
applicable), the Prospectus Supplement relating to such Series will contain a
discussion of any additional material Federal income tax consequences
applicable to Certificates of that Series. INVESTORS SHOULD CONSULT THEIR OWN
TAX ADVISORS REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL AND OTHER TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CERTIFICATES.
Each Trust will be provided with an opinion of Milbank, Tweed, Hadley &
McCloy, special Federal tax counsel to the Offering Agent ("Federal Tax
Counsel"), regarding certain Federal income tax matters discussed below. An
opinion of Federal Tax Counsel, however, is not binding on the Internal
Revenue Service (the "IRS") or the courts. Prospective investors should note
that no rulings have been or will be sought from the IRS with respect to any
of the Federal income tax consequences discussed below, and no assurance can
be given that the IRS will not take contrary positions.
THE TAX DISCUSSION CONTAINED HEREIN ASSUMES THAT THE AGGREGATE DEEMED
PURCHASE PRICE OF THE CERTIFICATES (AS DESCRIBED HEREIN) WILL AT LEAST EQUAL
THE STATED PRINCIPAL AMOUNT OF THE UNDERLYING SECURITIES.
TAX STATUS OF TRUST
It is expected that each Prospectus Supplement will contain an opinion of
Federal Tax Counsel that the Trust will be classified as a grantor trust and
not as an association (or publicly traded partnership) taxable as a
corporation for Federal income tax purposes. If, in the opinion of Federal Tax
Counsel, the Trust will not be classified as a grantor trust for Federal
income tax purposes, the Prospectus Supplement will contain a statement to
that effect. If the Trust will be classified as a grantor trust, each
Certificateholder will be subject to Federal income taxation as if it owned
directly the portion of the Underlying Securities allocable to such
Certificates, as if (in the case of a Callable Series) it issued directly the
portion of the call right allocable to such Certificates and as if it paid
directly its allocable share of reasonable expenses paid by the Trust. The
following discussion assumes that the Underlying Securities were not issued
with original issue discount ("OID") and, accordingly, the Certificateholders
will not realize OID except with respect to a "stripped bond" (as defined
below).
INCOME OF CERTIFICATEHOLDERS
In General. A Certificateholder will allocate the amount it paid (or, as
explained in the next sentence, is deemed to have paid) for its Certificate
among the portions of the Underlying Securities allocable to such
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Certificate, in proportion to their relative fair market values on the date of
purchase of the Certificate. If a Series of Certificates is a Callable Series,
a Certificateholder should be treated as having purchased the portion of the
Underlying Securities represented by the Certificates for their full fair
market value, which may exceed the actual purchase price of the Certificates,
and, to the extent that the aggregate amount of the fair market value of the
portion of the Underlying Securities that are allocable to its Certificates
exceeds the amount the Certificateholder actually paid for its Certificates,
be deemed to have been paid such excess by the holder of the call right as a
call premium. A Certificateholder would calculate separately its income, gain,
loss or deduction realized with respect to each such asset.
If a Series of Certificates provides that a third party has the right to
retain or receive a portion of the interest paid on the Underlying Securities
(a "Retained Interest"), the Underlying Securities represented by a
Certificate of such Series will be considered to be a "stripped bond" within
the meaning of Section 1286 of the Code, because the holder of the Retained
Interest will be entitled to receive part of the interest on the Underlying
Securities but no principal on the Underlying Securities. Under Section 1286
of the Code, as stripped bonds, the portion of the Underlying Securities
represented by the Certificate is treated as having OID if the principal
amount of those Underlying Securities exceeds their ratable share of the
deemed purchase price, as described above. If there is OID, a holder would
(subject to a de minimis exception) be required to include in income the
portion of the OID allocable to such Underlying Securities based upon the
constant yield method. If the stripped bonds represented by the Underlying
Securities are purchased at a premium, the application of Section 1286 should
not result in any OID. If, however, a subsequent purchaser purchases the
Certificates for an amount such that the deemed purchase price of such
stripped bonds represented by the Certificates is less than their principal
amount by more than the de minimis amount, the portion of the Underlying
Securities represented by the Certificates so purchased will be treated as
having OID. If a Series of Certificates is a Callable Series and includes a
Retained Interest, in determining the price at which the portion of the
Underlying Securities represented by the Certificates is deemed to have been
purchased, the value of the stripped bond and the call right are taken into
account in the manner described in the preceding paragraph.
Based upon the foregoing, each Certificateholder will be required to report
on its Federal income tax return, in a manner consistent with its method of
accounting, its share of the gross income of the Trust, including interest
earned on the Underlying Securities, and any gain or loss upon collection or
disposition of the Underlying Securities. The portion of each payment to a
Certificateholder that is allocable to principal on the Underlying Securities
will represent a recovery of capital, which will reduce the tax basis of such
Certificateholder's undivided interest in the Underlying Securities.
Bond Premium. To the extent that the portion of the (deemed) purchase price
of a Certificate allocated to a Certificateholder's undivided interest in the
Underlying Securities is greater than the portion of the principal balance of
the Underlying Securities allocable to the Certificate, such interest in the
Underlying Securities will have been acquired at a premium. In determining the
amount of such premium, a portion of the purchase price for a Certificate will
be allocated to the accrued interest on the Underlying Securities at the time
of purchase as though such accrued interest were a separate asset, thus
reducing the portion of the purchase price allocable to the
Certificateholder's undivided interest in the Underlying Securities. A
Certificateholder may elect to amortize any premium as an offset to interest
income (with a corresponding reduction in the Certificateholder's basis) under
a constant yield method over the term of the Underlying Securities under
Section 171 of the Code. If a Certificateholder makes or has made that
election with respect to any debt instrument, the election would also apply to
all debt instruments held by the Certificateholder during the year in which
the election is made and all debt instruments acquired thereafter. If the
election is not made, any premium would be recognized as a capital loss under
the rules discussed below upon the maturity or redemption of the Underlying
Security, at which time the Certificateholder would recognize a capital gain
in connection with the lapse of any call right.
Modification or Exchange of Underlying Securities. Depending upon the
circumstances, it is possible that a modification of the terms of the
Underlying Securities would be a taxable event to Certificateholders on which
they would recognize gain or loss.
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DEDUCTIBILITY OF TRUST'S FEES AND EXPENSES
In computing its Federal income tax liability, a Certificateholder will be
entitled to deduct, consistent with its method of accounting, its share of
reasonable administrative fees, trustee fees and other fees paid or incurred
by the Trust and paid out of the Trust corpus as provided in Section 162 or
212 of the Code. If a Series of Certificates provides for a Retained Interest
and any fees and expenses paid to the Trustee and the Depositor are borne by
the holder of the Retained Interest, it is possible that such fees and
expenses will be treated as having been constructively received by the Trust
from the holder of the Retained Interest. In that case, a Certificateholder
will be required to include in its income and will be entitled to deduct its
pro-rata share of such fees. If a Certificateholder is an individual, estate
or trust, the deduction for his share of fees will be a miscellaneous itemized
deduction that may be disallowed in whole or in part.
PURCHASE AND SALE OF A CERTIFICATE
Upon purchase of a Certificate, a Certificateholder should be deemed to have
acquired its pro-rata share of the Underlying Securities at a price equal to
their fair market value and, in the case of a Callable Series, as having
received a payment in respect of any call right allocable to such Underlying
Securities equal to the difference between the fair market value of such
Underlying Securities and the purchase price of the Certificate (excluding any
amount paid in respect of accrued interest on the Underlying Securities).
Accordingly, in the case of a Callable Series, the Certificateholder's basis
in its interest in the Underlying Security would be greater than the amount
the Certificateholder paid for its Certificate (excluding any amount paid in
respect of accrued interest on the Underlying Securities).
Upon sale of a Certificate, the selling Certificateholder should be treated
as having received proceeds in respect of the Underlying Securities equal to
their fair market value (excluding accrued interest) and, if a Series of
Certificates is a Callable Series, as having paid an amount equal to the
difference between such fair market value and the proceeds received in respect
of the Certificates (excluding the portion thereof attributable to accrued
interest) to terminate its obligation under the call right. Gain or loss
should be determined separately for the portion of the Underlying Securities
and the call right allocable to the Certificates.
Gain or loss with respect to a call right will equal the difference between
the amount deemed to have been received with respect to the call right upon
the purchase of the Certificates and the amount deemed paid by the
Certificateholder in respect of the discharge of its obligations under the
call right in connection with the sale of the Certificates. Any such gain or
loss will be short term gain or loss, regardless of the holding period for the
Certificates. Gain or loss with respect to the Underlying Securities will
equal the difference between the amount deemed received in respect of the
Underlying Securities (excluding accrued interest, which will be treated as
interest received) and the Certificateholder's basis therefor. Subject to the
discussion below under "Application of the Straddle Rules," such gain or loss
will be long-term capital gain or loss if the Certificates have been held for
more than one year and short-term otherwise.
CALL PREMIUM; EXERCISE OF CALL RIGHT
As described above, if a Series of Certificates is a Callable Series, each
Certificateholder of that Series should be deemed to have received at the time
of its purchase of its Certificate a call premium in an amount equal to the
fair market value of the portion of the Call Right allocable to its
Certificate. The receipt of such call premium should not be a taxable event to
the Certificateholder until such time as the call right so allocable to its
Certificate is exercised or lapses. If the call right lapses unexercised, the
Certificateholder will be required to include the call premium in income for
the taxable year the call right terminated as short-term capital gain. If the
call right is exercised, the proceeds of sale of the Certificate will be
deemed for federal income tax purposes to be increased by the amount of the
call premium. The gain from such sale will be long-term if the Certificate was
then held for more than one year and short-term otherwise.
APPLICATION OF THE STRADDLE RULES
It is possible that a Certificateholder's interest in the Underlying
Security and a call right may constitute positions in a "straddle." If so, a
Certificateholder selling its Certificate would be required to treat any gain
or
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loss recognized with respect to the Underlying Security as short term gain or
loss, regardless of the period for which the Certificate is held. In addition,
the straddle rules might require a Certificateholder to capitalize, rather
than deduct, interest and carrying charges allocable to the
Certificateholder's interest in its Certificates. Further, if the Internal
Revenue Service were to take the position that a Certificateholder's interest
in the Underlying Security and the call right constituted a "conversion
transaction" as well as a straddle, then a portion of any gain realized with
respect to the Underlying Security or call right may be characterized as
ordinary income.
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of the
Certificates will not be subject to a "backup" withholding tax of 31% unless,
in general, the Certificateholder fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
FOREIGN CERTIFICATEHOLDERS
Amounts paid to Certificateholders that are not United States persons
("Foreign Certificateholders") generally will not be subject to the annual 30%
withholding tax, provided that such Foreign Certificateholder fulfills certain
certification requirements. Under such requirements, the holder must certify,
under penalties of perjury, that it is not a "United States person" and
provide its name and address. A "United States person" means a citizen or
resident of the U.S., a corporation, partnership or other entity created or
organized in or under the laws of the U.S. or any political subdivision
thereof, or an estate or trust the income of which is includable in gross
income for U.S. Federal income tax purposes, regardless of its source.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on (a) an employee benefit plan (as
defined in Section 3(3) of ERISA), (b) a plan described in Section 4975(e)(i)
of the Code or (e) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Plan").
In accordance with ERISA's general fiduciary standards, before investing in
a Certificate, a Plan fiduciary should determine whether such an investment is
permitted under the governing Plan instruments and appropriate for the Plan in
view of the Plan's overall investment policy and the composition and
diversification of its portfolio. Other provisions of ERISA and the Code
prohibit certain transactions involving the assets of a Plan and persons who
have certain specified relationships to the Plan ("parties in interest" within
the meaning of ERISA or "disqualified persons" within the meaning of the
Code). Thus, a Plan fiduciary considering an investment in Certificates should
also consider whether such an investment might constitute or give rise to a
prohibited transaction under ERISA or the Code.
An investment in Certificates by a Plan might result in the assets of the
Trust being deemed to constitute Plan assets, which in turn might mean that
certain aspects of such investment, including the operation of the trust,
might be prohibited transactions under ERISA and the Code. Neither ERISA nor
the Code defines the term "plan assets". Under Section 2510.3-101 of the
United States Department of Labor ("DOL") regulations (the "Regulation"), a
Plan's assets may include an interest in the underlying assets of an entity
(such as a trust) for certain purposes, including the prohibited transaction
provisions of ERISA and the Code, if the Plan acquires an "equity interest" in
such entity. Thus, if a Plan acquired a Certificate, for certain purposes
under ERISA and the Code (including the prohibited transaction provisions) the
Plan would be considered to own its share of the underlying assets of the
Trust unless (1) such Certificate is a "publicly-offered security" or (2)
equity participation by "benefit plan investors" is not "significant".
Under the Regulations, a publicly-offered security is a security that is (1)
freely transferable, (2) part of a class of securities that is owned by 100 or
more investors independent of the issuer and of one another at the conclusion
of the initial offering and (3) either is (A) part of a class of securities
registered under Section 12(b)
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or 12(g) of the Exchange Act, or (B) sold to the Plan as part of an offering
of securities to the public pursuant to an effective registration statement
under the Securities Act and the class of securities of which such security is
a part is registered under the Exchange Act within 120 days (or such later
time as may be allowed by the Commission) after the end of the fiscal year of
the issuer during which the offering of such securities to the public
occurred. The Depositor anticipates that the Certificates will be considered
publicly-offered securities within the meaning of the Regulation.
Participation by benefit plan investors in the Certificates would not be
significant if immediately after the most recent acquisition of a Certificate,
whether or not from the Depositor or an Agent or Offering Agent, less than 25%
of the value of such Certificates were held by benefit plan investors, which
are defined as Plans and employee benefit plans not subject to ERISA (for
example, governmental plans).
If the assets of the Trust were deemed to be plan assets, certain
transactions involving the Trust, including the acquisition of the
Certificates themselves by a Plan, could be prohibited transactions. If, for
example, an obligor with respect to any of the Underlying Securities, or any
of such obligor's affiliates, were a party in interest or disqualified person
with respect to an acquiring Plan, the acquisition of the Certificate could be
construed as a prohibited indirect loan from the Plan to the obligor.
Certificates will not be sold to any Plan unless the Depositor is able to
confirm the existence of at least 100 independent purchasers of the
Certificates.
ANY PLAN OR INSURANCE COMPANY INVESTING ASSETS OF ITS GENERAL ACCOUNT
PROPOSING TO ACQUIRE CERTIFICATES SHOULD CONSULT WITH ITS COUNSEL.
PLAN OF DISTRIBUTION
Certificates may be offered in any of three ways: (i) through underwriters
or dealers; (ii) directly to one or more purchasers; or (iii) through agents.
The applicable Prospectus Supplement will set forth the material terms of the
offering of any Series of Certificates, which may include the names of any
underwriters, or initial purchasers, the purchase price of such Certificates
and the proceeds to the Depositor from such sale, any underwriting discounts
and other items constituting underwriters' compensation, any initial public
offering price, any discounts or concessions allowed or reallowed or paid to
dealers, any securities exchanges on which such Certificates may be listed,
any restrictions on the sale and delivery of Certificates in bearer form and
the place and time of delivery of the Certificates to be offered thereby.
If underwriters are used in the sale, Certificates will be acquired by the
underwriters at a fixed price for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions,
at a fixed public offering price or at varying prices determined at the time
of sale. Such Certificates may be offered to the public either through
underwriting syndicates represented by managing underwriters or by
underwriters without a syndicate. Such managing underwriters or underwriters
in the United States will include Citicorp Securities, Inc. Unless otherwise
set forth in the applicable Prospectus Supplement, the obligations of the
underwriters to purchase such Certificates will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all
such Certificates if any of such Certificates are purchased. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
Certificates may also be sold through agents designated by the Depositor
from time to time. Any agent involved in the offer or sale of Certificates
will be named, and any commissions payable by the Depositor to such agent will
be set forth, in the applicable Prospectus Supplement. Unless otherwise
indicated in the applicable Prospectus Supplement, any such agent will act on
a best efforts basis for the period of its appointment.
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If so indicated in the applicable Prospectus Supplement, the Depositor will
authorize agents, underwriters or dealers to solicit offers by certain
specified institutions to purchase Certificates at the public offering price
described in such Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a future date specified in such
Prospectus Supplement. Such contracts will be subject only to those conditions
set forth in the applicable Prospectus Supplement and such Prospectus
Supplement will set forth the commissions payable for solicitation of such
contracts.
Any underwriters, dealers or agents participating in the distribution of
Certificates may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of Certificates may be deemed to be
underwriting discounts and commissions under the Securities Act. Agents and
underwriters may be entitled under agreements entered into with the Depositor
to indemnification by the Depositor against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with
respect to payments that the agents or underwriters or their affiliates may be
required to make in respect thereof. Agents and underwriters and their
affiliates may be customers of, engage in transactions with, or perform
services for, the Depositor or its affiliates in the ordinary course of
business.
Only Certificates rated in one of the investment grade rating categories by
a Rating Agency will be offered hereby.
Affiliates of the underwriters may act as agents or underwriters in
connection with the sale of the Certificates. Any affiliate of the
underwriters so acting will be named, and its affiliation with the
underwriters described, in the related Prospectus Supplement. The underwriters
or their affiliates may act as principals or agents in connection with market-
making transactions relating to the Certificates. A Prospectus Supplement will
be prepared with respect to the Certificates for use by such underwriters or
affiliates in connection with offers and sales related to market-making
transactions in the Certificates.
If an Underwriter has participated in the initial public offering of the
Underlying Securities relating to a Series of Certificates, at least 90 days
will have elapsed since the date on which such Underwriter completed its sale
of its allotment of the Underlying Securities in such public offering.
LEGAL MATTERS
Certain legal matters with respect to the Certificates will be passed upon
for the Depositor and the underwriters by Milbank, Tweed, Hadley & McCloy New
York, New York or other counsel identified in the applicable Prospectus
Supplement.
39
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
--------------
<S> <C>
$................................................................ 3
Base Rate........................................................ 11
Business Day..................................................... 11
Calculation Date................................................. 13, 14, 15, 16
Calculation Agent................................................ 12
Callable Series.................................................. 18
Call Date........................................................ 18
Call Price....................................................... 18
CD Rate.......................................................... 13
CD Rate Certificate.............................................. 11
CD Rate Determination Date....................................... 13
CDs (Secondary Market)........................................... 13
Cede............................................................. 3
CertificateS..................................................... cover, 9
Certificate Account.............................................. 25
Certificate Principal Balance.................................... 16
Certificate Rate................................................. 9
Certificateholders............................................... cover
clearing agency.................................................. 18
clearing corporation............................................. 18
Code............................................................. 33
DOL.............................................................. 36
Commercial Paper Rate Certificate................................ 11
Commercial Paper Rate Determination Date......................... 13, 14
Commercial Paper Rate............................................ 13, 14
Commercial Paper................................................. 13
Commission....................................................... cover, 2
Company.......................................................... II-3
Composite Quotations............................................. 12
Concentrated Underlying Security................................. 21
Cut-off Date..................................................... 26
Definitive Certificates.......................................... cover, 18
Deposited Assets................................................. cover, 20
Depositor........................................................ cover
Depository....................................................... 18
Determination Date............................................... 10
Distribution Date................................................ 2
DMG.............................................................. 7
dollar........................................................... 3
DTC.............................................................. cover
Eligibility Criteria............................................. 21
ERISA............................................................ 36
Exchange Act..................................................... 2
Exchangeable Series.............................................. 7, 16
Excluded Interest................................................ 8
Federal Funds Rate............................................... 14
Federal Funds Rate Certificate................................... 11
Federal Funds Rate Determination Date............................ 14
Federal Funds (Effective)........................................ 14
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Federal Funds/Effective Rate............................................. 14
Federal Tax Counsel...................................................... 33
Fixed Rate Certificates.................................................. 11
Floating Rate Certificates............................................... 11
Foreign Certificateholders............................................... 36
Global Security.......................................................... cover
Government Securities.................................................... cover
H.15(519)................................................................ 12
Identifying Information.................................................. 21
Index Maturity........................................................... 11
Interest Reset Date...................................................... 12
Interest Reset Period.................................................... 12
IRS...................................................................... 33
LIBOR Determination Date................................................. 15
LIBOR Certificate........................................................ 11
LIBOR.................................................................... 15
London Banking Day....................................................... 11
Maximum Certificate Rate................................................. 12
Minimum Certificate Rate................................................. 12
Money Market Yield....................................................... 14
Offering Agent........................................................... cover
OID...................................................................... 33
Option to Elect Exchange................................................. 17
Optional Exchange Date................................................... 17
Original Issue Date...................................................... 9
Outstanding Debt Securities.............................................. 23
participants............................................................. 18
Prospectus Supplement.................................................... cover
Rating Agency............................................................ 6
Realized Losses.......................................................... 16
Registration Statement................................................... 2
Regulations.............................................................. 36
Required Percentage--Waiver.............................................. 31
Required Percentage--Amendment........................................... 30
Required Percentage--Remedies............................................ 28, 30
Retained Interest........................................................ 34
Reuters Screen LIBO Page................................................. 15
Secured Underlying Securities............................................ 23
Securities Act........................................................... 2
Senior Underlying Securities............................................. 23
Series................................................................... cover
Spread................................................................... 11
Spread Multiplier........................................................ 11
Sub-Administration Agreement............................................. 27
Sub-Administrative Agent................................................. 27
Subordinated Underlying Securities....................................... 23
Treasury Rate Certificate................................................ 11
Treasury Rate Determination Date......................................... 16
Treasury Rate............................................................ 15, 16
Treasury bills........................................................... 15
Trust.................................................................... cover
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Trust Agreement....................................................... cover
Trust Indenture Act................................................... 22
Trustee............................................................... cover
Trustee's Fee......................................................... 8
U.S. dollars.......................................................... 3
U.S.$................................................................. 3
Underlying Securities................................................. cover, 20
Underlying Securities Currency........................................ 24
Underlying Securities Indenture....................................... 22
Underlying Securities Interest Accrual Periods........................ 24
Underlying Securities Issuer.......................................... 20, 21
Underlying Securities Payment Dates................................... 24
Underlying Securities Rate............................................ 24
Underlying Securities Trustee......................................... 22
Underlying Security Events of Default................................. 23
USD................................................................... 3
Variable Certificate Rate............................................. 9
</TABLE>
42
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR RE-
LATED PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRE-
SENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ELMWOOD FUNDING
LIMITED OR THE OFFERING AGENT OR ANY UNDERWRITER. THIS PROSPECTUS OR RELATED
PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF ANY OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDIC-
TION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR RELATED PROSPECTUS SUPPLEMENT
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUM- STANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF ELMWOOD FUNDING LIMITED SINCE SUCH DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT..................................................... 2
AVAILABLE INFORMATION..................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 2
REPORTS TO CERTIFICATEHOLDERS............................................. 3
ENFORCEMENT OF CIVIL LIABILITIES.......................................... 3
RISK FACTORS.............................................................. 4
THE DEPOSITOR............................................................. 7
USE OF PROCEEDS........................................................... 7
FORMATION OF THE TRUST.................................................... 7
DESCRIPTION OF CERTIFICATES............................................... 9
General.................................................................. 9
Distributions............................................................ 10
Interest on the Certificates............................................. 11
Principal of the Certificates............................................ 16
Optional Exchange........................................................ 16
Call Right............................................................... 18
Global Securities........................................................ 18
DESCRIPTION OF DEPOSITED ASSETS........................................... 20
General.................................................................. 20
Selection of Deposited Assets............................................ 20
Underlying Securities Issuer............................................. 21
Underlying Securities Indenture.......................................... 22
Principal Economic Terms of Underlying Securities........................ 24
Other Deposited Assets................................................... 25
Collections.............................................................. 26
DESCRIPTION OF THE TRUST AGREEMENT........................................ 27
General.................................................................. 27
Assignment of Deposited Assets........................................... 27
Collection and Other Administrative Procedures........................... 27
Retained Interest........................................................ 28
Trustee Compensation and Payment of Expenses............................. 28
Distributions on Certificates............................................ 29
Optional Exchange........................................................ 30
Voting Rights with Respect to Underlying Securities...................... 30
Limitations on Rights of Certificateholders.............................. 31
Modification and Waiver.................................................. 31
Reports to Certificateholders; Notices................................... 32
Evidence as to Compliance................................................ 33
Replacement Certificates................................................. 33
Termination.............................................................. 33
Duties of the Trustee.................................................... 33
The Trustee.............................................................. 34
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 34
General.................................................................. 34
Tax Status of Trust...................................................... 34
Income of Certificateholders............................................. 34
Deductibility of Trust's Fees and Expenses............................... 36
Purchase and Sale of a Certificate....................................... 36
Call Premium; Exercise of Call Right..................................... 36
Application of the Straddle Rules........................................ 36
Backup Withholding....................................................... 37
Foreign Certificateholders............................................... 37
ERISA CONSIDERATIONS...................................................... 37
PLAN OF DISTRIBUTION...................................................... 38
LEGAL MATTERS............................................................. 39
</TABLE>
ELMWOOD FUNDING LIMITED
TRUST CERTIFICATES
(ISSUABLE IN SERIES)
----------------
PROSPECTUS
----------------
CITICORP SECURITIES, INC.
DATED JUNE 16, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are as set forth below. All such expenses, except for the SEC
registration and filing fees, are estimated:
<TABLE>
<S> <C>
SEC Registration Fee........................................... $15,151.52
Legal Fees and Expenses........................................ $ *
Accounting Fees and Expenses................................... $ 0.00
Trustee's Fees and Expenses (including counsel Fees)........... $ *
Blue Sky Qualification Fees and expenses....................... $ 0.00
Printing and Engraving Fees.................................... $ *
Rating Agency Fees............................................. $ *
NYSE Listing Fee............................................... $ *
Miscellaneous.................................................. $ 0.00
----------
Total...................................................... $ *
==========
</TABLE>
- --------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 123 of the Articles of Association of the Registrant provides that
the directors and officers of the Registrant and any trustee acting in
relation to any of the affairs of the Registrant and the heirs, executors,
administrators and personal representatives of any of the foregoing shall be
indemnified out of the assets of the Registrant from and against all actions,
proceedings, costs, charges, losses, damages and expenses incurred or
sustained by any of them by reason of any act done or omitted in connection
with their executing their duties in their respective offices or trusts,
except where such actions, proceedings, costs, charges, losses, damages or
expenses were incurred or sustained through the wilful neglect or default of
such director, officer or trustee. Section 123 further provides that no such
director, officer or trustee shall be answerable for (a) the act, receipt,
neglect or default of any other director, officer or trustee, (b) joining in
any receipt for the sake of conformity, (c) the solvency or honesty of any
banker or other person with whom any monies or effects belonging to the
Registrant may be lodged or deposited for safe custody, (d) any insufficiency
of any security upon which any monies of the Registrant may be invested or (e)
any other loss or damage resulting from any of the foregoing or incurred or
sustained in connection with the execution of his or her office or trust
unless the same shall result from the wilful neglect or default of such
director, officer or trustee.
Reference is made to Section 7 of the form of Underwriting Agreement filed
as Exhibit 1.1 hereto for provisions relating to the indemnification of
directors, officers and controlling persons against certain liabilities
including liabilities under the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement
*3.1 Certificate of Incorporation of Elmwood Funding Limited as currently
in effect
*3.2 Memorandum and Articles of Association of Elmwood Funding Limited as
currently in effect
*4.1 Form of Trust Agreement
*5.1 Opinion of Milbank, Tweed, Hadley & McCloy as to legality (including
consent of such firm)
*8.1 Opinion of Milbank, Tweed, Hadley & McCloy as to certain tax matters
(including consent of such firm)
*23.1 Consent of Milbank, Tweed, Hadley & McCloy (included in Exhibits 5.1
and 8.1)
*24.1 Power of Attorney
*25.1(a) Statement of eligibility of Trustee
</TABLE>
- --------
* To be filed by amendment.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
A. UNDERTAKING PURSUANT TO RULE 415.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change of such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To file a post-effective amendment to the Registration Statement to
include any financial statements required by Rule 3-19 of Regulation S-X
throughout the continuous offering.
B. FILING INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY REFERENCE.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
C. UNDERTAKING IN RESPECT OF INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, 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, such indemnification is against public policy as expressed in the
Securities 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 director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, 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
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE UNDERSIGNED
HEREBY CERTIFIES ON BEHALF OF ELMWOOD FUNDING LIMITED (THE "COMPANY") THAT SHE
HAS REASONABLE GROUNDS TO BELIEVE THAT THE COMPANY MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN GEORGE TOWN, GRAND CAYMAN, BRITISH WEST INDIES,
ON THE 9TH DAY OF JUNE, 1997.
Elmwood Funding Limited
/s/ Derrie Boggess
By: _________________________________
Derrie Boggess, Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE PERSONS LISTED BELOW IN
THE CAPACITIES AND ON THE DATES INDICATED BELOW:
SIGNATURE POSITION DATE
--------- -------- ----
/s/ Derrie Boggess Director June 9, 1997
_____________________________________
DERRIE BOGGESS
/s/ Darren Riley Director June 9, 1997
_____________________________________
DARREN RILEY
Elmwood Funding Limited has no executive officers; therefore, Darren Riley
has been temporarily designated as Chief Executive Officer and Derrie Boggess
has been temporarily designated as Chief Financial Officer and Chief
Accounting Officer, in each case solely for the purpose of complying with the
instructions for the filing of a Registration Statement on Form S-3.
AUTHORIZED REPRESENTATIVE
/s/ Esther Asher
_____________________________________
Esther Asher, as the duly authorized
representative of Elmwood Funding
Limited in the United States
Date: June 9, 1997
Esther Asher
c/o Citicorp Securities, Inc.
399 Park Avenue
7th Floor
New York, NY 10043
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
*1.1 Form of Underwriting Agreement
*3.1 Certificate of Incorporation of Elmwood Funding Limited as
currently in effect
*3.2 Memorandum and Articles of Association of Elmwood Funding
Limited as currently in effect
*4.1 Form of Trust Agreement
*5.1 Opinion of Milbank, Tweed, Hadley & McCloy as to legality
(including consent of such firm)
*8.1 Opinion of Milbank, Tweed, Hadley & McCloy as to certain
tax matters (including consent of such firm)
*23.1 Consent of Milbank, Tweed, Hadley & McCloy (included in
Exhibits 5.1 and 8.1)
*24.1 Power of Attorney
*25.1(a) Statement of eligibility of Trustee
</TABLE>
- --------
* To be filed by amendment.
