<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1998
SECURITIES ACT REGISTRATION NO. 33-
INVESTMENT COMPANY ACT FILE NO. 811-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
---------------
FORM N-2
---------------
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[_] PRE-EFFECTIVE AMENDMENT NO.
[_] POST-EFFECTIVE AMENDMENT NO.
AND
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[_] AMENDMENT NO.
---------------
PEAK TRENDS TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
C/O PUGLISI & ASSOCIATES
850 LIBRARY AVENUE
SUITE 204
NEWARK, DELAWARE 19715
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(302) 738-6680
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------
DONALD J. PUGLISI
PUGLISI & ASSOCIATES
850 LIBRARY AVENUE, SUITE 204
NEWARK, DELAWARE 19715
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH COPIES TO:
MICHAEL V. GISSER, ESQ. JOHN E. LANGE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP PAUL, WEISS, RIFKIND, WHARTON &
30TH FLOOR, TOWER II, LIPPO CENTRE GARRISON
89 QUEENSWAY HONG KONG CLUB BUILDING, 13TH FLOOR
CENTRAL, HONG KONG 3A CHATER ROAD
--------------- CENTRAL, HONG KONG
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of the Registration Statement. If any securities on this
form are to be offered on a delayed or continuous basis in reliance on Rule
415 under the Securities Act of 1933, other than securities offered in
connection with a dividend reinvestment plan, check the following box: [_]
If appropriate, check the following box:
[_]This [post-effective] amendment designates a new effective date for a
previously filed [post-effective amendment] [registration statement]
[_]This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration
statement for the same offering is 33- .
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- -------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
BEING OFFERING PRICE OFFERING REGISTRATION
TITLE OF SECURITIES BEING REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Enhanced Dividend
Securities, no par
value................... 271,187 $25.00 $6,779,675.00 $2,000.00
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c).
---------------
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 THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 (A)
OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PEAK TrENDS TRUST
CROSS REFERENCE SHEET
(PURSUANT TO RULE 404(c) UNDER THE SECURITIES ACT OF 1933)
PARTS A & B OF PROSPECTUS*
<TABLE>
<C> <C> <S>
Item 1. Outside Front Cover................... Front Cover Page; Inside
Front Cover page
Item 2. Inside Front and Outside Back Cover Front Cover Page; Inside
Page.................................. Front Cover Page; Outside
Back Cover Page
Item 3. Fee Table and Synopsis................ Prospectus Summary; Fee Table
Item 4. Financial Highlights.................. Not Applicable
Item 5. Plan of Distribution.................. Front Cover Page; Prospectus
Summary; Underwriting
Item 6. Selling Shareholders.................. Not Applicable
Item 7. Use of Proceeds....................... Use of Proceeds; Investment
Objective and Policies
Item 8. General Description of the Front Cover Page; Prospectus
Registrant............................ Summary; The Trust;
Investment Objective and
Policies; Risk Factors
Item 9. Management............................ Management and Administration
of the Trust
Item 10. Capital Stock, Long-Term Debt, and
Other Securities...................... Description of the TrENDS;
Investment Objective and
Policies; Certain Federal
Income Tax Considerations
Item 11. Defaults and Arrears on Senior
Securities............................ Not Applicable
Item 12. Legal Proceedings..................... Not Applicable
Item 13. Table of Contents of the Statement of
Additional Information................ Not Applicable
Item 14. Cover Page............................ Not Applicable
Item 15. Table of Contents..................... Not Applicable
Item 16. General Information and History....... The Trust
Item 17. Investment Objective and Policies..... Investment Objective and
Policies
Item 18. Management............................ Management and Administration
of the Trust
Item 19. Control Persons and Principal Holders Management and Administration
of Securities......................... of the Trust
Item 20. Investment Advisory and Other Management and Administration
Services.............................. of the Trust; Prospectus
Summary
Item 21. Brokerage Allocation and Other Investment Objective and
Practices............................. Policies
Item 22. Tax Status............................ Certain Federal Income Tax
Considerations
Item 23. Financial Statements.................. Statements of Assets and
Liabilities
</TABLE>
* Pursuant to the General Instructions of Form N-2, all information required
to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus. Information required to be included in
Part C is set forth under the appropriate item, so numbered in Part C of
this Registration Statement.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 7, 1998
PROSPECTUS
, 1998
TRENDS
PEAK TRENDS TRUST
TRUST ENHANCED DIVIDEND SECURITIES
(EXCHANGEABLE FOR SHARES OF COMMON STOCK OF PEAK INTERNATIONAL LIMITED)
Each of the Trust Enhanced Dividend Securities (the "TrENDS") of Peak TrENDS
Trust (the "Trust") represents the right to receive an annual distribution of
$ , and will be exchanged for between shares and 1 share of common
stock, $ par value per share (the "Common Stock"), of Peak International
Limited (the "Company") on (the "Exchange Date"), subject to a cash
settlement feature. The annual distribution of $ per TrENDS is payable
quarterly on each , , and , commencing . The TrENDS are not
subject to early redemption.
The Trust is a newly organized, finite-term Trust established to purchase and
hold a portfolio of stripped U.S. Treasury securities maturing on a quarterly
basis through the Exchange Date, and a forward purchase contract relating to
the Common Stock (the "Contract") with Luckygold 18A Limited, a company
incorporated in the British Virgin Islands ("Luckygold" or the "Seller") and an
existing shareholder of the Company. Mr. T.L. Li, the sole shareholder of
Luckygold, will guarantee (the "Guarantee") the delivery of shares of Common
Stock subject to the Contract on the Exchange Date and the maintenance of
collateral pursuant to the Collateral Agreement (as defined herein). See
"Investment Objective and Policies--The Contract--The Guarantee." The Trust's
investment objective is to provide each holder of TrENDS (the "Holder") with a
quarterly distribution of $ per TrENDS and, on the Exchange Date, a number
of shares of Common Stock per TrENDS equal to the Exchange Rate. The "Exchange
Rate" is equal to (i) if the Reference Market Price (as defined below) on the
Exchange Date is less than $ (the "Threshold Appreciation Price") but equal
to or greater than the Price to Public as shown below (the "Floor Price"), a
number (or fractional number) of shares of Common Stock per TrENDS which when
multiplied by the Reference Market Price is equal to the Floor Price, (ii) if
the Reference Market Price on the Exchange Date is equal to or greater than the
Threshold Appreciation Price, shares of Common Stock per TrENDS and (iii)
if the Reference Market Price on the Exchange Date is less than the Floor
Price, 1 share of Common Stock per TrENDS, subject in each case to adjustment
in certain events. The "Reference Market Price" means the average Closing Price
(as defined herein) per share of Common Stock for the 20 Trading Days (as
defined herein) immediately prior to, but not including, the Exchange Date. In
lieu of delivery of the Common Stock, the Seller may elect under the Contract
to pay cash on the Exchange Date in an amount equal to the Reference Market
Price times the number of shares of Common Stock determined under the above
formula (the "Cash Settlement Alternative"). If the Seller elects the Cash
Settlement Alternative, holders of TrENDS will receive cash instead of shares
of Common Stock on the Exchange Date. Holders otherwise entitled to receive
fractional shares in respect of their aggregate holdings of TrENDS will receive
cash in lieu thereof.
Holders of TrENDS will receive quarterly distributions whereas the Company
does not currently pay dividends on the Common Stock. However, the Company
could commence at any time paying dividends on the Common Stock, to which the
Holders of TrENDS would not be entitled, and there is no assurance that the
yield on the TrENDS will be higher than the dividend yield on the Common Stock
over the term of the Trust. In addition, the opportunity for equity
appreciation afforded by an investment in the TrENDS is less than that afforded
by an investment in the Common Stock because holders of the TrENDS will realize
no equity appreciation unless the Reference Market Price of the Common Stock on
the Exchange Date exceeds the Threshold Appreciation Price. Moreover, because a
Holder will only receive shares of Common Stock per TrENDS if the
Reference Market Price on the Exchange Date exceeds the Threshold Appreciation
Price, Holders will only be entitled to receive upon exchange % of any
appreciation of the value of the Common Stock in excess of the Threshold
Appreciation Price. Holders of TrENDS will realize the entire decline in equity
value if the Reference Market Price on the Exchange Date is less than the Floor
Price. Accordingly, the value of the Common Stock or cash equivalent received
by a Holder may be less than the amount paid by such Holder for its TrENDS.
The Company is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the TrENDS and will have no obligations with respect
to the TrENDS. This Prospectus relates only to the TrENDS offered hereby and
does not relate to the Company or the Common Stock.
Application has been made to list the TrENDS on the American Stock Exchange
(the "ASE") under the symbol "PTT". Prior to this offering there has been no
public market for the TrENDS. The Common Stock is traded on the Nasdaq National
Market under the symbol "PEAKF". The reported last sale price of the Common
Stock on the Nasdaq National Market on was $ per share.
SEE "RISK FACTORS" COMMENCING ON PAGE 19 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE TRENDS.
THESE TRENDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO PUBLIC SALES LOAD(1) PROCEEDS TO THE TRUST(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per TrENDS............... $ $ $
Total (3)................ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) The Seller has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting." In light of the fact
that the proceeds of the sale of the TrENDS will be used in part by the
Trust to purchase the Contract from the Seller, the Underwriting Agreement
provides that the Seller will pay to the Underwriters as compensation
("Underwriters' Compensation") $ per TrENDS. See "Underwriting."
(2) Expenses of the offering, which are payable by the Seller, are estimated
to be approximately $ .
(3) The Trust has granted to the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to additional TrENDS at the
Price to Public per TrENDS, solely to cover over-allotments, if any. If the
Underwriters exercise such option, the total Price to Public, Sales Load
and Proceeds to the Trust will be $ , $ , and $ , respectively.
See "Underwriting."
The TrENDS are being offered hereby by the several Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to various prior conditions, including their right to reject orders in
whole or in part. It is expected that delivery of the TrENDS will be made
through the facilities of The Depository Trust Company on or about 1998.
DONALDSON, LUFKIN & JENRETTE _____________________BANCAMERICA ROBERTSON STEPHENS
SECURITIES CORPORATION
<PAGE>
The Trust has adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust. The Trust will continue to hold the
Contract despite any significant decline in the market price of the Common
Stock or adverse changes in the financial condition of the Company.
The TrENDS may be a suitable investment for those investors who are able to
understand the unique nature of the Trust and the economic characteristics of
the Contract and the U.S. Treasury securities held by the Trust.
The Trust will be a grantor trust for United States federal income tax
purposes and each holder of TrENDS will be treated as the owner of its pro
rata portions of the stripped U.S. Treasury securities and the Contract. For a
discussion of the principal United States federal income tax consequences of
ownership of the TrENDS, see "Certain Federal Income Tax Considerations."
This Prospectus sets forth concisely the information about the Trust that a
prospective investor ought to know before investing. Potential investors are
advised to read this Prospectus and to retain it for future reference.
THE TRUST IS A NEWLY ORGANIZED CLOSED-END INVESTMENT COMPANY WITH NO
PREVIOUS HISTORY OF PUBLIC TRADING. TYPICAL CLOSED-END FUND SHARES FREQUENTLY
TRADE AT A PREMIUM TO OR DISCOUNT FROM NET ASSET VALUE. THIS CHARACTERISTIC OF
INVESTMENTS IN A CLOSED-END INVESTMENT COMPANY IS A RISK SEPARATE AND DISTINCT
FROM THE RISK THAT THE TRUST'S NET ASSET VALUE WILL DECREASE. THE TRUST CANNOT
PREDICT WHETHER ITS SHARES WILL TRADE AT, BELOW OR ABOVE NET ASSET VALUE. THE
RISK OF PURCHASING INVESTMENTS IN A CLOSED-END INVESTMENT COMPANY THAT MIGHT
TRADE AT A DISCOUNT MAY BE GREATER FOR INVESTORS WHO WISH TO SELL THEIR
INVESTMENTS SOON AFTER COMPLETION OF AN INITIAL PUBLIC OFFERING.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT, IMPOSE
PENALTY BIDS OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN OR OTHERWISE
AFFECT THE MARKET PRICE OF THE TRENDS OR THE COMMON STOCK AT LEVELS ABOVE
THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
This summary of the provisions relating to the TrENDS does not purport to be
complete and is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus. Certain terms used in this summary are defined
elsewhere in this Prospectus.
THE TRUST
GENERAL
The Trust is a newly organized, finite-term trust. The Trust will be
registered as a non-diversified, closed-end management investment company under
the Investment Company Act of 1940, as amended (the "Investment Company Act").
Consistent with provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations thereunder applicable to grantor trusts, the
Trustees will not have the power to vary the investments held by the Trust.
INVESTMENT OBJECTIVE AND POLICIES
The Trust will purchase and hold a portfolio of stripped U.S. Treasury
securities maturing on a quarterly basis through the Exchange Date and a
forward purchase contract with the Seller relating to shares of Common Stock.
The Trust's investment objective is to provide the Holders with a quarterly
distribution of $ per TrENDS (which amount equals a pro rata portion of the
fixed quarterly cash distributions from the proceeds of the maturing U.S.
Treasury securities held by the Trust) and, on the Exchange Date, a number of
shares of Common Stock per TrENDS equal to the Exchange Rate or, if the Seller
elects the Cash Settlement Alternative, which election must be made not later
than 20 trading days prior to but not including the Exchange Date, an amount in
cash equal to the Reference Market Price of that number of shares. The Exchange
Rate is equal to (i) if the Reference Market Price is less than the Threshhold
Appreciation Price but equal to or greater than the Floor Price, a number (or
fractional number) of shares of Common Stock per TrENDS which when multiplied
by the Reference Market Price is equal to the Floor Price, (ii) if the
Reference Market Price is equal to or greater than the Threshhold Appreciation
Price, shares of Common Stock per TrENDS and (iii) if the Reference
Market Price is less than the Floor Price, 1 share of Common Stock per TrENDS,
subject in each case to adjustment in certain events. This provides the Trust
with the potential for a portion of any capital appreciation above the
Threshhold Appreciation Price on the Common Stock, but no protection from
depreciation of the Common Stock and no participation in appreciation through
the Threshhold Appreciation Price. Holders otherwise entitled to receive
fractional shares in respect of their aggregate holdings of TrENDS will receive
cash in lieu thereof. See "Investment Objective and Policies--Trust
Termination."
STRUCTURE
The purchase price under the Contract is equal to $ per share of Common
Stock initially subject thereto and $ ( shares of Common Stock) in the
aggregate (exclusive of the Underwriters' over-allotment option) and is payable
to the Seller by the Trust at the closing of the offering of the TrENDS (the
"Closing"). The obligations of the Seller under the Contract will be secured by
a pledge of Common Stock or, at the election of the Seller, by substitute
collateral consisting of short-term, direct obligations of the U.S. Government
and will be subject to the Guarantee. See "Investment Objective and Policies--
The Contract--Collateral Arrangements; Acceleration" and "Investment Objective
and Policies--The Contract--The Guarantee."
THE OFFERING
The Trust is offering TrENDS to the public at a purchase price of $
per TrENDS (which is equal to the reported last sale price of the Common Stock
on the date of the offering) through the Underwriters. In addition, the Trust
has granted to the Underwriters an option, exercisable within 30 days of the
date hereof, to purchase up to additional TrENDS, solely to cover over-
allotments, if any. See "Underwriting."
3
<PAGE>
THE TRENDS
GENERAL
The TrENDS are designed to provide investors with a quarterly distribution at
the annual rate of $ per share of TrENDS. The Company does not currently pay
dividends on its Common Stock. Any decision to commence paying dividends on the
Common Stock by the Company and the amount of any such dividends would be
discretionary with its Board of Directors and subject to legal and other
factors, including the Company's future earnings, cash flow, financial
condition and capital requirements. Quarterly distributions on the TrENDS will
consist solely of the cash received from the U.S. Treasury securities held by
the Trust. The Trust will not be entitled to any dividends that may be declared
on the Common Stock because the Common Stock will only be transferred to the
Trust on the Exchange Date.
There is no assurance that the yield on the TrENDS will be higher than the
dividend yield on the Common Stock over the term of the Trust. In addition, the
opportunity for equity appreciation afforded by an investment in the TrENDS is
less than that afforded by an investment in the Common Stock because Holders
will realize no equity appreciation if, on the Exchange Date, the Reference
Market Price of the Common Stock is below the Threshold Appreciation Price
(which represents an appreciation of % of the Floor Price). Moreover,
because a Holder will only receive shares of Common Stock per TrENDS (or
the Reference Market Price thereof) if the Reference Market Price exceeds the
Threshold Appreciation Price, Holders will only be entitled to receive upon
exchange % of any appreciation of the value of the Common Stock in excess of
the Threshold Appreciation Price. Holders of TrENDS will realize the entire
decline in equity value if the Reference Market Price is less than the Floor
Price. Accordingly, the value of the Common Stock or cash equivalent received
by a Holder may be less than the amount paid by such Holder for its TrENDS.
DISTRIBUTIONS
Holders are entitled to receive distributions at the rate per TrENDS of $
per annum or $ per quarter, payable quarterly on each , , and
or, if any such date is not a business day, on the next succeeding
business day, to Holders of record as of each , , and ,
respectively. The first distribution, in respect of the period from Closing
until , will be payable on to Holders of record as of and will equal
$ per TrENDS. See "Investment Objective and Policies--General."
MANDATORY EXCHANGE
On the Exchange Date, each outstanding TrENDS will be exchanged automatically
for between of a share and 1 share of Common Stock, subject to adjustment
in the event of certain dividends or distributions, subdivisions, splits,
combinations, issuances of certain rights or warrants or distributions of
certain assets with respect to the Common Stock. Further, in lieu of delivering
the Common Stock, the Seller may elect under the Contract to pay cash on the
Exchange Date in an amount equal to the then applicable Reference Market Price
times such number of shares of the Common Stock (the "Cash Settlement
Alternative"). If the Seller elects the Cash Settlement Alternative, which
election shall be made not later than 20 Trading Days prior to but not
including the Exchange Date, Holders will receive cash instead of Common Stock
on the Exchange Date. In addition, in the event of a merger of the Company into
another entity, or the liquidation of the Company, or in certain related
events, Holders would receive consideration in the form of cash or Marketable
Securities (as defined below under the caption "Investment Objective and
Policies --The Contract-- Dilution Adjustments") rather than shares of Common
Stock. Further, the occurrence of certain defaults by the Seller under the
Contract or the collateral arrangements would cause the acceleration of the
Contract and the early exchange of each TrENDS for an amount of shares of
Common Stock (or Marketable Securities), cash, or a combination thereof, in
respect of the shares of Common Stock and the U.S. Treasury securities. See
"Investment Objective and Policies--The Contract--Collateral Arrangements;
Acceleration," "--The U.S. Treasury Securities" and "--Trust Termination."
4
<PAGE>
VOTING RIGHTS
Holders will have the right to vote on matters affecting the Trust, as
described under the caption "Description of the TrENDS," but will have no
voting rights with respect to the Common Stock prior to receipt of shares of
Common Stock by the Holders upon the mandatory exchange of the TrENDS on the
Exchange Date. See "Description of the TrENDS."
THE COMPANY
Reference is made to the accompanying prospectus of the Company with respect
to the shares of Common Stock which may be received by a Holder of TrENDS on
the Exchange Date or upon earlier dissolution of the Trust. THE COMPANY
PROSPECTUS IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF
THE TRENDS TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF REFERENCE ONLY. THE
COMPANY PROSPECTUS DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR IS IT
INCORPORATED BY REFERENCE HEREIN.
The Company is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the TrENDS and will have no obligations with respect
to the TrENDS. This Prospectus relates only to the TrENDS offered hereby and
does not relate to the Company or the Common Stock.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be treated as a grantor trust for United States federal income
tax purposes, and accordingly, each Holder will be treated, for United States
federal income tax purposes, as the owner of its pro rata portion of the U.S.
Treasury securities and the Contract. Each Holder will have to include in its
gross income for United States federal income tax purposes its allocable share
of the income received by the Trust and the original issue discount accrued on
the U.S. Treasury securities. The U.S. Treasury securities held by the Trust
will be treated for United States federal income tax purposes as having
"original issue discount" that will accrue over the term of the U.S. Treasury
securities and each Holder must recognize its pro rata portion of such discount
as income regardless of its method of accounting. It is currently anticipated
that a substantial portion of each quarterly cash distribution to the Holders
will be treated as a tax-free return of the Holders' investment in the U.S.
Treasury securities and therefore will not be considered current income for
United States federal income tax purposes. A Holder will have taxable gain or
loss upon receipt of cash distributed on the Exchange Date. Each Holder's tax
basis in its Common Stock or Marketable Securities distributed on the Exchange
Date will be equal to its tax basis in its pro rata portion of the Contract
less the portion of such tax basis allocable to any shares of Common Stock for
which cash is received. See "Certain Federal Income Tax Considerations."
ALTERNATIVE FEDERAL INCOME TAX CHARACTERIZATIONS
Holders should also be aware that there are alternative characterizations of
the assets of the Trust which could require Holders to include more interest in
income than they would include in income under the analysis set out above. See
"Certain Federal Income Tax Considerations."
MANAGEMENT AND ADMINISTRATION OF THE TRUST
The Trust will be internally managed and will not have an investment adviser.
The administration of the Trust will be overseen by three Trustees. The day-to-
day administration of the Trust will be carried out by The Bank of New York (or
its successor) as trust administrator (the "Administrator"). The Bank of New
York (or its successor) will also act as custodian (the "Custodian") for the
Trust's assets and as paying agent (the "Paying Agent"), registrar and transfer
agent with respect to the TrENDS. Except as aforesaid, The Bank of New York has
no other affiliation with, and is not engaged in any other transaction with,
the Trust. See "Management and Administration of the Trust."
5
<PAGE>
LIFE OF THE TRUST
The Trust will terminate automatically on or shortly after the Exchange Date.
Promptly after the Exchange Date, the shares of Common Stock or cash, as the
case may be, to be exchanged for the TrENDS and other remaining net assets of
the Trust, if any, will be distributed pro rata to Holders. See "Investment
Objective and Policies-- Trust Termination."
RISK FACTORS
The Trust will not be managed in the traditional sense. The Trust has adopted
a fundamental policy that the Contract may not be disposed of during the term
of the Trust and that the U.S. Treasury securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities and the
termination of the Trust. The foregoing policies are fundamental policies of
the Trust that may not be changed without the approval of 100% in interest of
the Holders. The Trust will continue to hold the Contract despite any
significant decline in the market price of the Common Stock or adverse changes
in the financial condition of the Company. See "Risk Factors--Internal
Management; No Portfolio Management" and "Management and Administration of the
Trust--Trustee."
Holders of TrENDS will receive quarterly distributions, whereas the Company
does not currently pay dividends on the Common Stock. However, the Company
could commence paying dividends on its Common Stock at any time and there is no
assurance that the yield on the TrENDS will be higher than the dividend yield
on the Common Stock over the term of the Trust. In addition, the opportunity
for equity appreciation afforded by an investment in the TrENDS is less than
that afforded by an investment in the Common Stock because Holders of TrENDS
will realize no equity appreciation unless the Reference Market Price of the
Common Stock on the Exchange Date exceeds the Threshold Appreciation Price,
(which represents an appreciation of % of the Floor Price). Moreover,
because a Holder will only receive shares of Common Stock per TrENDS (or
the Reference Market Price thereof) if the Reference Market Price on the
Exchange Date exceeds the Threshold Appreciation Price, Holders will only be
entitled to receive upon exchange % of any appreciation of the value of the
Common Stock in excess of the Threshold Appreciation Price. Holders of TrENDS
will realize the entire decline in equity value if the Reference Market Price
is less than the Floor Price. Accordingly, the value of the Common Stock or
cash equivalent received by a Holder may be less than the amount paid by such
Holder for its TrENDS. In addition, because the Reference Market Price
generally is determined on a 20-Trading Day average, the value of a share of
Common Stock distributed on the Exchange Date may be more or less than the
Reference Market Price used to determine the amount receivable at the Exchange
Date.
The Trust is classified as a "non-diversified" investment company under the
Investment Company Act. Consequently, the Trust is not limited by the
Investment Company Act in the proportion of its assets that may be invested in
the securities of a single issuer. Since the only securities held by the Trust
will be the U.S. Treasury securities and the Contract, the Trust may be subject
to greater risk than would be the case for an investment company with
diversified investments. See "Investment Objective and Policies" and "Risk
Factors--Non- Diversified Status."
The trading prices of the TrENDS in the secondary market will be directly
affected by the trading prices of the Common Stock in the secondary market.
Trading prices of Common Stock will be influenced by the Company's operating
results and prospects and by economic, financial and other factors and market
conditions.
6
<PAGE>
A bankruptcy of the Seller could adversely affect the timing of exchange or,
as a result, the amount received by the Holders in respect of the TrENDS. See
"Risk Factors--Risk Relating to Bankruptcy of Seller."
HOLDERS OF THE TRENDS WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT TO THE
COMMON STOCK (INCLUDING, WITHOUT LIMITATION, VOTING RIGHTS AND RIGHTS TO
RECEIVE ANY DIVIDENDS OR OTHER DISTRIBUTIONS IN RESPECT THEREOF) UNLESS AND
UNTIL SUCH TIME, IF ANY, AS THE SELLER SHALL HAVE DELIVERED SHARES OF COMMON
STOCK PURSUANT TO THE CONTRACT AT THE EXCHANGE DATE. THE SELLER MAY TAKE
ACTIONS AS THE CONTROLLING SHAREHOLDER OF THE COMPANY THAT ARE NOT IN THE BEST
INTEREST OF HOLDERS OF THE TRENDS.
LISTING
Application has been made to list the TrENDS on the American Stock Exchange
under the symbol "PTT".
FEES AND EXPENSES
In light of the fact that the proceeds of the sale of the TrENDS will be used
in part by the Trust to purchase the Contract from the Seller, the Underwriting
Agreement provides that the Seller will pay Underwriters' Compensation to the
Underwriters of $ per TrENDS. See "Underwriting." Estimated organization
costs of the Trust in the amount of $ have been paid by Donaldson, Lufkin &
Jenrette Securities Corporation and estimated costs of the Trust in connection
with the initial registration and public offering of the TrENDS in the amount
of $ will be paid by the Seller. Each of the Administrator, the Custodian
and the Paying Agent, and each Trustee will be paid by the Underwriters out of
the Underwriters' Compensation at the closing of the offering of the TrENDS a
one-time, up-front amount in respect of its ongoing fees and, in the case of
the Administrator, anticipated expenses of the Trust over the term of the Trust
(estimated to be $ in the aggregate). Any on-going expenses of the Trust in
excess of these estimated amounts will be paid by the Underwriters, who will be
reimbursed by the Seller. See "Management and Administration of the Trust--
Estimated Expenses."
Regulations of the Commission applicable to closed-end investment companies
designed to assist investors in understanding the costs and expenses that an
investor will bear directly or indirectly require the presentation of Trust
expenses in the following format. Because the Trust will not bear any fees or
expenses, investors will not bear any direct expenses. The expenses that an
investor might be considered to be bearing indirectly are (i) the proportion of
the Sales Load payable by the Seller to the Underwriters with respect to such
investor's TrENDS; and (ii) the organizational and offering expenses of the
Trust, an estimated $ of which would be allocable to each year of the
Trust's existence, and the ongoing expenses of the Trust (including fees of the
Administrator, Custodian, Paying Agent and Trustees), estimated at $ per
year payable by Donaldson, Lufkin & Jenrette Securities Corporation at the
Closing.
INVESTOR TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load (as a percentage of Price to Public).................. 3%
Dividend Reinvestment and Cash Purchase Plan Fees................ Not Applicable
</TABLE>
ANNUAL EXPENSES
<TABLE>
<S> <C>
Management Fees............................................................. 0%
Other Expenses (after prepayment)........................................... 0%*
Total Annual Expenses....................................................... 0%*
</TABLE>
* Absent prepayment by the Underwriters out of their underwriting
compensation, the Trust's "total annual expenses" would be equal to
approximately % of the Trust's average net assets.
7
<PAGE>
Commission regulations also require that closed-end investment companies
present an illustration of cumulative expenses (both direct and indirect) that
an investor would bear. The example is required to factor in the applicable
Sales Load and to assume, in addition to a 5% annual return, the reinvestment
of all distributions at net asset value.
INVESTORS SHOULD NOTE THAT THE ASSUMPTION OF A 5% ANNUAL RETURN DOES NOT
ACCURATELY REFLECT THE FINANCIAL TERMS OF THE TRUST. SEE "INVESTMENT OBJECTIVE
AND POLICIES--GENERAL." ADDITIONALLY, THE TRUST DOES NOT PERMIT THE
REINVESTMENT OF DISTRIBUTIONS.
<TABLE>
<CAPTION>
1 3
EXAMPLE YEAR YEARS
<S> <C> <C>
You would bear the following expenses (i.e., the applicable sales
load and allocable portion of ongoing expenses paid by the Under-
writers) on a $1,000 investment, assuming a 5% annual return..... $30 $30
</TABLE>
8
<PAGE>
THE TRUST
The Trust is a newly organized Delaware trust and is registered as a non-
diversified closed-end investment company under the Investment Company Act.
The Trust was formed on March 24, 1998 and operates pursuant to a trust
agreement, as amended and restated on . The Trust is located at 850 Library
Avenue, Newark, Delaware 19715, and its telephone number is (302) 738-6680.
USE OF PROCEEDS
The net proceeds of this offering will be used on or shortly after the date
on which this offering is completed to purchase a fixed portfolio comprised of
stripped U.S. Treasury securities with face amounts and maturities
corresponding to the quarterly distributions payable with respect to the
TrENDS and the payment dates thereof, and to pay the purchase price under the
Contract to the Seller.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust will purchase and hold a portfolio of stripped U.S. Treasury
securities maturing on a quarterly basis through the Exchange Date and the
Contract relating to the Common Stock of the Company. The Trust's investment
objective is to provide each Holder with a quarterly cash distribution of $
per TrENDS (which amount equals the portion of the fixed quarterly
distributions from the proceeds of the maturing U.S. Treasury securities held
by the Trust) and, on the Exchange Date, a number of shares of Common Stock
per TrENDS equal to the Exchange Rate or, if the Seller elects the Cash
Settlement Alternative, an amount in cash equal to the Reference Market Price
times such number of shares. The Exchange Rate is equal to (i) if the
Reference Market Price is less than the Threshold Appreciation Price but equal
to or greater than the Floor Price, a number (or fractional number) of shares
of Common Stock per TrENDS which when multiplied by the Reference Market Price
is equal to the Floor Price, (ii) if the Reference Market Price is equal to or
greater than the Threshold Appreciation Price, shares of Common Stock
per TrENDS and (iii) if the Reference Market Price is less than the Floor
Price, 1 share of Common Stock per TrENDS, subject in each case to adjustment
in certain events. See "--The Contract--Dilution Adjustments." For purposes of
the preceding clause (i) the Exchange Rate will be rounded upward or downward
to the nearest 1/10,000 (or if there is not a nearest 1/10,000, to the next
lower 1/10,000). Holders otherwise entitled to receive fractional shares in
respect of their aggregate holdings of TrENDS will receive cash in lieu
thereof. The Reference Market Price per share of Common Stock means the
average Closing Price of a share of Common Stock on the 20 Trading Days (as
defined below) immediately prior to, but not including, the Exchange Date. The
"Closing Price" of the Common Stock on any date of determination means the
daily closing sale price (or, if no closing sale price is reported, the last
reported sale price) of the Common Stock as reported on the Nasdaq National
Market on such date of determination or, if the Common Stock is not listed for
trading on the Nasdaq National Market on any such date, as reported in the
composite transactions for the principal United States securities exchange on
which the Common Stock is so listed, or if the Common Stock is not so listed
on a United States national or regional securities exchange, as reported by
the Nasdaq National Market or, if the Common Stock is not so reported, the
last quoted bid-price for the Common Stock in the over-the-counter market as
reported by the National Quotation Bureau or similar organization, provided
that if any event that results in an adjustment to the number of shares of
Common Stock deliverable under the Contract as described under "--The
Contract-- Dilution Adjustments" occurs prior to the Exchange Date, the
Closing Price as determined pursuant to the foregoing will be appropriately
adjusted to reflect the occurrence of such event. A "Trading Day" means a day
on which the Common Stock (A) is not suspended from trading on any national or
regional securities exchange or association or over-the-counter market at the
close of business and (B) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of such security.
9
<PAGE>
A fundamental policy of the Trust is to invest at least 70% of its total
assets in the Contract. The Contract will comprise approximately % of the
Trust's initial assets. As a consequence, the Trust's investments will be
concentrated in the industry or industries in which the Company does business.
The Trust has also adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that the U.S. Treasury securities
held by the Trust may not be disposed of prior to the earlier of their
respective maturities and the termination of the Trust. The foregoing policies
are fundamental policies of the Trust that may not be changed without the
approval of 100% in interest of the Holders.
The value of the Common Stock (or cash or Marketable Securities received in
lieu thereof) that will be received by Holders in respect of the TrENDS on the
Exchange Date may be more or less than the amount paid for the TrENDS offered
hereby.
For illustrative purposes only, the following chart shows the number of
shares of Common Stock that a Holder would receive for each TrENDS at various
Reference Market Prices. The chart assumes that there would be no adjustments
to the number of shares of Common Stock deliverable under the Contract by
reason of the occurrence of any of the events described under "--The
Contract--Dilution Adjustments." There can be no assurance that the Reference
Market Price will be within the range set forth below. Given the Floor Price
of $ per TrENDS and the Threshold Appreciation Price of $ , a Holder
would receive in connection with the exchange of TrENDS on the Exchange Date
the following number of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
REFERENCE MARKET PRICE OF COMMON STOCK COMMON STOCK AMOUNT OF CASH
<S> <C> <C>
$ $
</TABLE>
The following table sets forth information regarding the distributions to be
received on the U.S. Treasury securities, the portion of each year's
distributions that will constitute a return of capital for United States
federal income tax purposes and the amount of original issue discount accruing
on the U.S. Treasury securities, assuming a yield-to-maturity accrual election
with respect to any short-term U.S. Treasury securities (i.e., any U.S.
Treasury security with a maturity date of one year or less from the date of
its issue), with respect to a Holder who acquires its TrENDS at the issue
price from an Underwriter pursuant to the original offering. See "Certain
Federal Income Tax Considerations--Recognition of Interest on the U.S.
Treasury Securities."
<TABLE>
<CAPTION>
ANNUAL GROSS
ANNUAL GROSS DISTRIBUTIONS ANNUAL INCLUSION
DISTRIBUTIONS FROM ANNUAL RETURN OF ORIGINAL ISSUE
FROM U.S. TREASURIES OF CAPITAL DISCOUNT IN
YEAR U.S. TREASURIES PER TRENDS PER TRENDS INCOME PER TRENDS
<S> <C> <C> <C> <C>
1998........... $ $ $ $
1999...........
2000...........
2001...........
</TABLE>
The annual distribution of $ per TrENDS is payable quarterly on each ,
, and , commencing , 1998. Quarterly distributions on the TrENDS
will consist solely of the cash received from the U.S. Treasury securities.
The first distribution, in respect of the period from Closing until , will
be payable to Holders of record as of and will equal $ per TrENDS.
The Trust will not be entitled to any dividends that may be declared on the
Common Stock. See "Management and Administration of the Trust--Distributions."
10
<PAGE>
ENHANCED YIELD; LESS POTENTIAL APPRECIATION THAN COMMON STOCK; NO DEPRECIATION
PROTECTION
Holders will receive quarterly distributions, whereas the Company does not
currently pay dividends on the Common Stock. However, the Company could
commence paying dividends on its Common Stock at any time and there is no
assurance that the yield on the TrENDS will be higher than the dividend yield
on the Common Stock over the term of the Trust. In addition, the opportunity
for equity appreciation afforded by an investment in the TrENDS is less than
that afforded by an investment in the Common Stock because Holders will
realize no equity appreciation if, on the Exchange Date, the Reference Market
Price of the Common Stock is below the Threshold Appreciation Price (which
represents an appreciation of % of the Floor Price). Moreover, because
Holders will only receive shares of Common Stock if the Reference Market
Price exceeds the Threshold Appreciation Price, Holders will only be entitled
to receive upon exchange % (the percentage equal to the Floor Price divided
by the Threshold Appreciation Price) of any appreciation of the value of the
Common Stock in excess of the Threshold Appreciation Price. Holders of TrENDS
will realize the entire decline in equity value if the Reference Market Price
is less than the Floor Price. Accordingly, the value of the Common Stock or
cash equivalent received by a Holder may be less than the amount paid by such
Holder for its TrENDS.
THE COMPANY
The Company is a leading supplier of precision engineered packaging products
for the storage, transportation and automated handling of semiconductor
devices and other electronic components.
The Company is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the TrENDS and will have no obligations with respect
to the TrENDS. This Prospectus relates only to the TrENDS offered hereby and
does not relate to the Company or the Common Stock.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, the
Company files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Copies of such
material can be inspected and copied at the public reference facilities
maintained by the Commission at the address specified under "Further
Information."
Effective October 31, 1997, the Common Stock began to trade on Nasdaq under
the symbol "PEAKF". Prior to October 31, 1997, the Common Stock traded on
Nasdaq under the symbol "PITLF". Public trading of the Common Stock commenced
on June 20, 1997. Prior to that time, there was no public market for the
Common Stock. The following table sets forth the high and low sale prices for
the Common Stock as reported by Nasdaq for the periods indicated:
<TABLE>
<CAPTION>
PRICE RANGE
OF COMMON
STOCK
-----------
HIGH LOW
<S> <C> <C>
Year Ending March 31, 1998:
1st Quarter (from June 20, 1997)...................................
2nd Quarter........................................................
3rd Quarter........................................................
4th Quarter........................................................
Year Ending March 31, 1999:
1st Quarter (through , 1998)..................................
</TABLE>
On , the reported last sale price of the Common Stock on Nasdaq was
$ per share. As of 1998, there were seven holders of record of the
Common Stock.
The Company has filed a registration statement on Form F-1 with the
Commission with respect to the shares of Common Stock that may be received by
a Holder of TrENDS on the Exchange Date or upon earlier dissolution
11
<PAGE>
of the Trust. The Company Prospectus constituting a part of such registration
statement includes information relating to the Company and the Common Stock,
including certain risk factors relevant to an investment in the Common Stock.
THE COMPANY PROSPECTUS IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE
PURCHASERS OF THE TRENDS TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF
REFERENCE ONLY. THE COMPANY PROSPECTUS DOES NOT CONSTITUTE A PART OF THIS
PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN.
THE CONTRACT
GENERAL
The Trust will enter into the Contract with the Seller obligating the Seller
to deliver to the Trust on the Exchange Date a number of shares of Common
Stock equal to the product of the Exchange Rate times the initial number of
shares of Common Stock subject to the Contract, adjusted as described below.
The aggregate initial number of shares of Common Stock under the Contract will
equal the aggregate number of TrENDS offered hereby (subject to increase in
the event the Underwriters exercise their over-allotment option). The Contract
also provides that the Seller may deliver to the Trust on the Exchange Date,
at the Seller's option, an amount of cash equal to the value of the Common
Stock deliverable pursuant to the Contract (the "Cash Settlement
Alternative"). If the Seller elects to deliver cash in lieu of shares of
Common Stock, it would be required to deliver cash in respect of all shares
deliverable pursuant to the Contract. Mr. T.L. Li, the sole shareholder of
Luckygold, will guarantee the delivery of shares of Common Stock or the cash
equivalent of such shares subject to the Contract on the Exchange Date and the
maintenance of collateral pursuant to the Collateral Agreement (as defined
herein). See "--The Contract--The Guarantee."
The purchase price of the Contract was arrived at by arms-length negotiation
between the Trust and the Seller taking into consideration factors including
the price, expected dividend level and volatility of the Common Stock, current
interest rates, the term of the Contract, current market volatility generally,
the collateral security pledged by the Seller, the value of other similar
instruments and the costs and anticipated proceeds of the offering of the
TrENDS. All matters relating to the administration of the Contract will be the
responsibility of either the Administrator or the Custodian.
DILUTION ADJUSTMENTS
The Exchange Rate is subject to adjustment if the Company shall (i) pay a
stock dividend or make a distribution with respect to the Common Stock in
shares of such stock, (ii) subdivide or split its outstanding shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares, or (iv) issue by reclassification of its shares of Common
Stock any shares of other common stock of the Company. In any such event, the
Exchange Rate shall be multiplied by a dilution adjustment equal to the number
of shares of Common Stock (or, in the case of a reclassification referred to
in clause (iv) above, the number of shares of other common stock of the
Company issued pursuant thereto), or fraction thereof, that a shareholder who
held one share of Common Stock immediately prior to such event would be
entitled solely by reason of such event to hold immediately after such event.
In addition, if the Company shall issue rights or warrants to all holders of
Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Then-Reference Market Price of the
Common Stock (as defined below) (other than rights to purchase Common Stock
pursuant to a plan for the reinvestment of dividends or interest) then the
Exchange Rate shall be multiplied by a dilution adjustment equal to a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to the time (determined as described below) the
adjustment is calculated by reason of the issuance of such rights or warrants
plus the number of additional shares offered for subscription or purchase
pursuant to such rights or warrants, and of which the denominator shall be the
number of shares of Common
12
<PAGE>
Stock outstanding immediately prior to the time as of which such adjustment is
calculated plus the number of additional shares that the aggregate Price to
Public of the shares so offered for subscription or purchase would purchase at
the Then-Reference Market Price. To the extent that, after expiration of such
rights or warrants, the shares offered thereby shall not have been delivered,
the Exchange Rate shall be further adjusted to equal the Exchange Rate that
would have been in effect had the foregoing adjustment been made upon the
basis of delivery of only the number of shares of Common Stock actually
delivered. The "Then-Reference Market Price" of the Common Stock means the
average Closing Price per share of Common Stock for a Calculation Period of
five Trading Days immediately prior to the time such adjustment is calculated
(or, in the case of an adjustment calculated at the opening of business on the
business day following a record date, as described below, immediately prior to
the earlier of the time such adjustment is calculated and the related "ex-
date" on which the shares of Common Stock first trade regular way on their
principal market without the right to receive the relevant dividend,
distribution or issuance); provided, however, that if no Closing Price for the
Common Stock is determined for one or more (but not all) of such Trading Days,
such Trading Day shall be disregarded in the calculation of the Then-Reference
Market Price (but no additional Trading Days shall be added to the Calculation
Period). If no Closing Price for the Common Stock is determined for any of
such Trading Days, the most recently available Closing Price for the Common
Stock prior to such five Trading Days shall be the Then-Reference Market
Price.
If, after the date hereof, the Company makes an Excess Purchase Payment (as
defined below), then the Exchange Rate will be multiplied by a fraction of
which the numerator shall be the Then-Reference Market Price of the Common
Stock, and of which the denominator shall be such Then-Reference Market Price
less the amount of such distribution applicable to one share of Common Stock
which would not be a Permitted Dividend (as defined below) (or in the case of
an Excess Purchase Payment, less the aggregate amount of such Excess Purchase
Payments for which adjustment is being made at such time divided by the number
of outstanding shares of Common Stock on the date the adjustment is effected).
For purposes of these adjustments, the term "Excess Purchase Payment" means
the excess, if any, of (x) the cash and the value (as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Trust) of all other consideration paid by the Company with
respect to one share of Common Stock acquired in any share repurchase
(excluding share repurchases by the Company effected in compliance with Rule
10b-18 under the Exchange Act) whether made by the Company in the open market,
by private purchase, by tender offer, by exchange offer or otherwise, over (y)
the Then-Reference Market Price of the Common Stock. Notwithstanding the
foregoing, the Company may pay up to $ in aggregate consideration in
respect of share repurchases without any adjustment being required, provided
that no such repurchase involves an Excess Purchase Payment of more than 5% of
the Then-Reference Market Price of the Common Stock on the date an adjustment
therefor would otherwise be required to be effected.
If any adjustment in the Exchange Rate is required to be calculated as
described above, corresponding adjustments to the Threshold Appreciation Price
and the Floor Price, as previously adjusted, shall be calculated.
Dilution adjustments shall be effected: (i) in the case of any dividend,
distribution or issuance described above, at the opening of business on the
business day following the record date for determination of holders of Common
Stock entitled to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after such
record date, at the time such dividend, distribution or issuance shall be
announced by the Company; (ii) in the case of any subdivision, split,
combination or reclassification described above, on the effective date of such
transaction; (iii) in the case of any Excess Purchase Payment for which the
Company shall announce, at or prior to the time it commences the relevant
share repurchase, the repurchase price per share for shares proposed to be
repurchased, on the date of such announcement; and (iv) in the case of any
other Excess Purchase Payment, on the date that the holders of the repurchased
shares become entitled to payment in respect thereof. There will be no
adjustment under the Contract in respect of any dividends, distributions or
issuances that may be declared or announced after the Exchange Date. If any
announcement or declaration of a record date in respect of a dividend,
distribution or issuance shall subsequently be cancelled by the Company, or
such dividend, distribution or issuance shall fail to receive requisite
approvals
13
<PAGE>
or shall fail to occur for any other reason, then the Exchange Rate shall be
further adjusted to equal the Exchange Rate that would have been in effect had
the adjustment for such dividend, distribution or issuance not been made. All
adjustments described herein shall be rounded upward or downward to the
nearest 1/10,000 (or if there is not a nearest 1/10,000, to the next lower
1/10,000). No adjustment in the Exchange Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason of the
foregoing are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
In the event of (i) any dividend or distribution by the Company to all
holders of Common Stock of evidences of its indebtedness or other assets
(excluding (1) dividends or distributions referred to in clause (i) of the
first paragraph under this caption "--Dilution Adjustments," (2) any common
shares issued pursuant to a reclassification referred to in clause (iv) of
such paragraph and (3) Permitted Dividends made by the Company) or any
issuance by the Company to all holders of Common Stock of rights or warrants
(other than rights or warrants referred to in the second paragraph under this
caption "--Dilution Adjustments"), (ii) any consolidation or merger of the
Company with or into another entity (other than a merger or consolidation in
which the Company is the continuing corporation and in which the Common Stock
outstanding immediately prior to the merger or consolidation is not exchanged
for cash, securities or other property of the Company or another entity),
(iii) any sale, transfer, lease or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, (iv)
any statutory exchange of securities of the Company with another entity (other
than in connection with a merger or acquisition) or (v) any liquidation,
dissolution or winding up of the Company (any such event, an "Adjustment
Event"), each holder of a TrENDS will receive on the Exchange Date, in lieu of
or (in the case of an Adjustment Event described in clause (i) above) in
addition to, Common Stock as described above, cash in an amount equal to the
product of the initial number of shares of Common Stock subject to the
Contract and (A) if the Reference Market Price is greater than or equal to the
Threshold Appreciation Price, multiplied by the Transaction Value (as defined
below), (B) if the Reference Market Price is less than the Threshold
Appreciation Price but is equal to or greater than the Floor Price, the
product of (x) the Floor Price divided by the Reference Market Price
multiplied by (y) the Transaction Value and (C) if the Reference Market Price
is less than the Floor Price, the Transaction Value. Following an Adjustment
Event, the Reference Market Price, as such term is used in this paragraph and
throughout the definition of Exchange Rate, shall be deemed to equal (A) the
Reference Market Price of the Common Stock, as adjusted pursuant to the method
set forth in the preceding paragraph, plus (B) the Transaction Value. For
purposes of these provisions, the term "Permitted Dividend" means any cash
dividend in respect of the Common Stock, other than a cash dividend that,
together with any other cash dividends during the preceding 12 months, exceeds
10% of the average of the Closing Prices during such 12-month period.
Notwithstanding the foregoing, with respect to any securities received in an
Adjustment Event that (A) are (i) listed on a United States national
securities exchange, (ii) reported on a United States national securities
system subject to last sale reporting, (iii) traded in the over-the-counter
market and reported on the National Quotation Bureau or similar organization
or (iv) for which bid and ask prices are available from at least three
nationally recognized investment banking firms and (B) are either (x)
perpetual equity securities or (y) non-perpetual equity or debt securities
with a stated maturity after the stated maturity of the TrENDS ("Marketable
Securities"), the Seller may, at its option, in lieu of delivering the amount
of cash deliverable in respect of Marketable Securities received in an
Adjustment Event, as determined in accordance with the previous paragraph,
deliver a number of such Marketable Securities with a value equal to such cash
amount, as determined in accordance with clause (iii) of the definition of
Transaction Value, as applicable, but not exceeding, as a percentage of the
total consideration required to be delivered, the percentage of the total
transaction attributable to such Marketable Securities; provided, however,
that (i) if such option is exercised, the Seller shall deliver Marketable
Securities in respect of all, but not less than all, cash amounts that would
otherwise be deliverable in respect of Marketable Securities received in an
Adjustment Event, (ii) the Seller may not exercise such option if the Seller
has elected to deliver cash in lieu of the Common Stock, if any, deliverable
upon the Exchange Date or if such Marketable Securities have not yet been
delivered to the holders entitled thereto following such
14
<PAGE>
Adjustment Event or any record date with respect thereto, and (iii) subject to
clause (ii) of this proviso, the Seller must exercise such option if the
Seller does not elect to deliver cash in lieu of Common Stock, if any,
deliverable upon the Exchange Date. If the Seller elects to deliver Marketable
Securities, each holder of a TrENDS will be responsible for the payment of any
and all brokerage and other transaction costs upon the sale of such Marketable
Securities. If, following any Adjustment Event, any Marketable Security ceases
to qualify as a Marketable Security, then (x) the Seller may no longer elect
to deliver such Marketable Security in lieu of an equivalent amount of cash
and (y) notwithstanding clause (iii) of the definition of Transaction Value,
the Transaction Value of such Marketable Security shall mean the fair market
value of such Marketable Security on the date such security ceases to qualify
as a Marketable Security, as determined by a nationally recognized investment
banking firm retained for this purpose by the Seller.
"Transaction Value" means the sum of (i) for any cash received in any such
Adjustment Event, the amount of cash received per share of Common Stock, (ii)
for any property other than cash or Marketable Securities received in any such
Adjustment Event, an amount equal to the market value on the date the
Adjustment Event is consummated of such property received per share of Common
Stock as determined by a nationally recognized independent investment banking
firm retained for this purpose by the Administrator and (iii) for any
Marketable Securities received in any such Adjustment Event, an amount equal
to the average Closing Price per share of such securities for the 20 Trading
Days immediately prior to the Exchange Date multiplied by the number of such
securities received for each share of Common Stock; provided that if no
Closing Price for such Marketable Securities is determined for one or more
(but not all) of such Trading Days, such Trading Days shall be disregarded in
the calculation of such average Closing Price (but no additional Trading Days
shall be added to the Calculation Period). If no Closing Price for the
Marketable Securities is determined for all such Trading Days, the calculation
in the preceding clause (iii) shall be based on the most recently available
Closing Price for the Marketable Securities prior to such 20 Trading Days. The
number of shares of Marketable Securities included in the calculation of
Transaction Value for purposes of the preceding clause (iii) shall be subject
to adjustment if a dilution event of the type described above shall occur with
respect to the issuer of the Marketable Securities between the time of the
Adjustment Event and the Exchange Date.
No dilution adjustments will be made for events other than those described
above, such as offerings of Common Stock (other than through the issuance of
rights or warrants described above) for cash or in connection with
acquisitions.
COLLATERAL ARRANGEMENTS; ACCELERATION
The Seller's obligations under the Contract will be secured by a security
interest in the maximum number of shares of Common Stock subject to the
Contract or short-term, direct obligations of the U.S. Government pursuant to
a Collateral Agreement between the Seller, the Trust and The Bank of New York,
as collateral agent (the "Collateral Agent"). Unless the Seller is in default
in its obligations under the Collateral Agreement, the Seller will be
permitted to substitute for any pledged shares of Common Stock collateral
consisting of short-term, direct obligations of the U.S. Government. Any U.S.
Government obligations pledged as substitute collateral will be required to
have an aggregate market value at the time of substitution and at daily mark-
to-market valuations thereafter of not less than 150% (or, from and after any
Insufficiency Determination that shall not be cured by the close of business
on the tenth business day thereafter, as described below, 200%) of the product
of the market price of the Common Stock at the time of each valuation times
the number of shares of Common Stock for which such obligations are being
substituted. The Collateral Agreement will provide that, in the event of an
Adjustment Event, the Seller will pledge as alternative collateral any
Marketable Securities received by it in respect of the maximum number of
shares of Common Stock subject to the Contract at the time of the Adjustment
Event, plus U.S. Government obligations having an aggregate market value when
pledged and at daily mark-to-market valuations thereafter of not less than
150% of the Seller's Cash Delivery Obligations. The Seller's "Cash Delivery
Obligations" shall be the Transaction Value of any consideration other than
Marketable Securities received by the Seller in respect of the maximum number
of shares subject to the Contract at the time of the
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<PAGE>
Adjustment Event. The number of shares of Marketable Securities required to be
pledged shall be subject to adjustment if any event requiring a dilution
adjustment under the Contract shall occur. The Seller will be permitted to
substitute U.S. Government obligations for Marketable Securities pledged at
the time of or after any Adjustment Event. Any U.S. Government obligations so
substituted will be required to have an aggregate market value at the time of
substitution and at daily mark-to-market valuations thereafter of not less
than 150% (or, from and after any Insufficiency Determination that shall not
be cured by the close of business on the tenth business day thereafter, as
described below, 200%) of the product of the market price per share of
Marketable Securities at the time of each valuation times the number of shares
of Marketable Securities for which such obligations are being substituted. The
Collateral Agent will promptly pay over to the Seller any dividends, interest,
principal or other payments received by the Collateral Agent in respect of any
collateral, including any substitute collateral, unless the Seller is in
default of its obligations under the Collateral Agreement, or unless the
payment of such amount to the Seller would cause the collateral to become
insufficient under the Collateral Agreement. The Seller shall have the right
to vote any pledged shares of Common Stock or Marketable Securities for so
long as such shares are owned by it and pledged under the Collateral
Agreement, including after an event of default under the Contract or the
Collateral Agreement.
If the Collateral Agent shall determine that U.S. Government obligations
pledged as substitute collateral shall fail to meet the foregoing requirements
at any valuation (an "Insufficiency Determination"), or that the Seller has
failed to pledge additional collateral required as a result of a dilution
adjustment increasing the maximum number of shares of Common Stock or shares
of Marketable Securities subject to the Contract, and such failure shall not
be cured by the close of business on the tenth business day after such
determination, then, unless a Collateral Event of Default (as defined below)
under the Collateral Agreement shall have occurred and be continuing, the
Collateral Agent shall commence (i) sales of the collateral consisting of U.S.
Government obligations and (ii) purchases, using the proceeds of such sales,
of shares of Common Stock or shares of Marketable Securities, in an amount
sufficient to cause the collateral to meet the requirements under the
Collateral Agreement. The Collateral Agent shall discontinue such sales and
purchases if at any time a Collateral Event of Default under the Collateral
Agreement shall have occurred and be continuing. A "Collateral Event of
Default" under the Collateral Agreement shall mean, at any time, (A) if no
U.S. Government obligations shall be pledged as substitute collateral at such
time, failure of the collateral to consist of at least the maximum number of
shares of Common Stock subject to the Contract at such time (or, if an
Adjustment Event shall have occurred at or prior to such time, failure of the
collateral to include the maximum number of shares of any Marketable
Securities required to be pledged as described above); (B) if any U.S.
Government obligations shall be pledged as substitute collateral for shares of
Common Stock (or shares of Marketable Securities) at such time, failure of
such U.S. Government obligations to have a market value at such time of at
least 105% of the market price per share of Common Stock (or the then-current
market price per share of Marketable Securities, as the case may be) times the
difference between (x) the maximum number of shares of Common Stock (or shares
of Marketable Securities) subject to the Contract at such time and (y) the
number of shares of Common Stock (or shares of Marketable Securities) pledged
as collateral at such time; and (C) at any time after an Adjustment Event in
which consideration other than Marketable Securities shall have been
delivered, failure of the U.S. Government obligations pledged in respect of
the Cash Delivery Obligations to have a market value at such time of at least
105% of the Cash Delivery Obligations, if such failure shall not be cured
within ten business days after notice thereof is delivered to the Seller.
The occurrence of a Collateral Event of Default under the Collateral
Agreement, or the bankruptcy or insolvency of the Seller, will cause an
automatic acceleration of the Seller's obligations under the Contract. In any
such event, the Seller will become obligated to deliver shares of Common Stock
(or, after an Adjustment Event, Marketable Securities or cash or a combination
thereof) having an aggregate value equal to the "Aggregate Acceleration Value"
under the Contract. The Aggregate Acceleration Value will be based on an
"Acceleration Value," determined by the Administrator on the basis of
quotations from up to four nationally recognized independent investment
banking firms (each, an "Independent Dealer"). Each quotation will be for the
amount that would be paid to the relevant Independent Dealer in consideration
of an agreement between the
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<PAGE>
Trust and such dealer that would have the effect of preserving the Trust's
rights to receive Common Stock (or, after an Adjustment Event, the alternative
consideration provided under the Contract) under a portion of the Contract
that corresponds to an initial number of shares of Common Stock equal to
1,000. The Administrator will request quotations from four Independent Dealers
on or as soon as reasonably practicable following the date of acceleration. If
four quotations are provided, the Acceleration Value will be the arithmetic
mean of the two quotations remaining after disregarding the highest and lowest
quotations. If two or three quotations are provided, the Acceleration Value
will be the arithmetic mean of such quotations. If one quotation is provided,
the Acceleration Value will be equal to such quotation. The Aggregate
Acceleration Value will be computed by multiplying the Acceleration Value by
the quotient obtained by dividing the initial number of shares of Common Stock
subject to the Contract by 1,000; except that, if no quotations are provided,
the Aggregate Acceleration Value will be (A) the closing price per share of
Common Stock on the acceleration date times the number of shares of Common
Stock that would be required to be delivered on such date under the Contract
if the Exchange Date were redefined to be the acceleration date or (B) after
an Adjustment Event, the value of the alternative consideration that would be
required to be delivered on such date under the Contract if the Exchange Date
were redefined to be the acceleration date. Upon the occurrence of a
Collateral Event of Default or the bankruptcy or insolvency of the Seller, the
Common Stock (or, after an Adjustment Event, Marketable Securities or cash or
a combination thereof) deliverable for each TrENDS will be based solely on the
Aggregate Acceleration Value described above for the Contract. From time to
time, as determined in good faith by the Trustees of the Trust, the Trust may
also engage third parties to provide additional valuations.
Upon any acceleration, the Collateral Agent will distribute to the Trust,
for distribution pro rata to the Holders, the Aggregate Acceleration Value in
the form of shares of Common Stock then pledged, or cash generated from the
liquidation of U.S. Government obligations then pledged, or a combination
thereof (or, after an Adjustment Event, in the form of Marketable Securities
then pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof). In addition, in the event
that by the Exchange Date any substitute collateral has not been replaced by
Common Stock (or, after an Adjustment Event, cash or Marketable Securities)
sufficient to meet the obligations under the Contract, the Collateral Agent
will distribute to the Trust for distribution pro rata to the Holders the
market value of the Common Stock required to be delivered thereunder, in the
form of any shares of Common Stock then pledged by the Seller plus cash
generated from the liquidation of U.S. Government obligations then pledged by
the Seller (or, after an Adjustment Event, the market value of the alternative
consideration required to be delivered thereunder, in the form of any
Marketable Securities then pledged, plus any cash then pledged, plus cash
generated from the liquidation of U.S. Government obligations then pledged).
THE GUARANTEE
Under the Guarantee, Mr. T.L. Li will guarantee the delivery of shares of
Common Stock or the cash equivalent of such shares subject to the Contract on
the Exchange Date. Mr. T.L. Li will also guarantee the maintenance of
collateral pursuant to the Collateral Agreement.
DESCRIPTION OF SELLER
The Seller is Luckygold 18A Limited ("Luckygold"), a company incorporated in
the British Virgin Islands. Mr. T.L. Li owns all of the outstanding shares of
Luckygold. Reference is made to the caption "Principal Shareholders and
Selling Shareholder" in the Company Prospectus for information about the
Seller and Mr. T.L. Li.
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon ("stripped") U.S.
Treasury securities with face amounts and maturities corresponding to the
distributions payable with respect to the TrENDS and the payment dates
thereof. The Trust may invest up to 30% of its total assets in such U.S.
Treasury Securities. In the event
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<PAGE>
that the Contract is accelerated or disposed of as described under the caption
"Management Administration of the Trust--Trustees," then any such U.S.
Treasury securities then held in the Trust shall be liquidated by the
Administrator and distributed pro rata to the Holders, together with the
amounts distributed upon acceleration or any consideration received by the
Trust upon disposition of the Contract. See "--Collateral Arrangements;
Acceleration" and "--Trust Termination."
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest the proceeds of the U.S.
Treasury securities and any other cash held by the Trust in short-term
obligations of the U.S. Government maturing no later than the business day
preceding the next following distribution date. Not more than 5% of the
Trust's total assets will be invested in such short-term obligations or held
in cash at any one time.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy, the Trust may not purchase any securities
or instruments other than the U.S. Treasury securities, the Contract and the
Common Stock or other assets received pursuant to the Contract and, for cash
management purposes, short-term obligations of the U.S. Government; issue any
securities or instruments except for the TrENDS; make short sales or purchase
securities on margin; write put or call options; borrow money; underwrite
securities; purchase or sell real estate, commodities or commodities contracts
including futures contracts; or make loans. The Trust has also adopted a
fundamental policy that the Contract may not be disposed of during the term of
the Trust and that the U.S. Treasury securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities and the
termination of the Trust. The foregoing policies are fundamental policies of
the Trust that may not be changed without the approval of 100% in interest of
the Holders.
TRUST TERMINATION
The Trust will terminate automatically on or shortly after the Exchange
Date. Alternatively, in the event that the Contract is accelerated, any U.S.
Treasury securities then held in the Trust shall be liquidated by the
Administrator and distributed pro rata to the Holders, together with the
amounts distributed upon acceleration, and the Trust shall be terminated. See
"--Collateral Arrangements; Acceleration" and "--The U.S. Treasury
Securities."
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<PAGE>
RISK FACTORS
INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT
The Trust will be internally managed by its Trustees and will not have any
separate investment adviser. It is a fundamental policy of the Trust that the
Contract may not be disposed of during the term of the Trust and that the U.S.
Treasury securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust. As a
result, the Trust will continue to hold the Contract despite significant
declines in the market price of the Common Stock or adverse changes in the
financial condition of the Company (or, after an Adjustment Event, comparable
developments affecting any Marketable Securities or the issuer thereof). The
Trust will not be managed like a typical closed-end investment company.
LIMITED APPRECIATION POTENTIAL; COMMON STOCK DEPRECIATION RISK
The Trust anticipates that on the Exchange Date it will receive the Common
Stock deliverable pursuant to the Contract, which it will then distribute to
Holders. There is no assurance that the yield on the TrENDS will be higher
than the dividend yield on the Common Stock over the term of the Trust. In
addition, because the Contract calls for the Seller to deliver less than the
full number of shares of Common Stock subject to the Contract where the
Reference Market Price exceeds the Floor Price (and therefore less than one
full share of Common Stock for each outstanding TrENDS), the TrENDS have more
limited appreciation potential than the Common Stock. Therefore, the TrENDS
may trade below the value of the Common Stock if the Common Stock appreciates
in value. The value of the Common Stock to be received by Holders on the
Exchange Date (and any cash received in lieu thereof) may be less than the
amount paid by them for their TrENDS. Holders of TrENDS will realize the
entire decline in equity value if the Reference Market Price is less than the
Floor Price. In addition, because the Reference Market Price generally is
determined based on a 20-Trading Day average, the value of a share of Common
Stock distributed on the Exchange Date may be less than the Reference Market
Price used to determine the amount receivable at the Exchange Date.
DILUTION ADJUSTMENTS; SHAREHOLDER RIGHTS
The number of shares of Common Stock that Holders are entitled to receive at
the termination of the Trust is subject to adjustment for certain events
arising from stock splits and combinations, stock dividends and certain other
actions of the Company that modify its capital structure. See "Investment
Objective and Policies--The Contract--Dilution Adjustments." The number of
shares to be received by Holders may not be adjusted for other events, such as
offerings of Common Stock for cash or in connection with acquisitions, that
may adversely affect the price of the Common Stock and, because of the
relationship of the amount to be received pursuant to the Contract to the
price of the Common Stock, such other events may adversely affect the trading
price of the TrENDS. There can be no assurance that the Company will not take
any of the foregoing actions, or that it will not make offerings of, or that
major shareholders will not sell any, Common Stock in the future, or as to the
amount of any such offerings or sales. In addition, until the receipt of the
Common Stock by Holders as a result of the exchange of the TrENDS for the
Common Stock, Holders will not be entitled to any rights with respect to the
Common Stock (including without limitation voting rights and the rights to
receive any dividends or other distributions in respect thereof).
The Seller is not responsible for the determination or calculation of the
amount receivable by Holders of the TrENDS at the Exchange Date. The Contract
between the Trust and the Seller is a commercial transaction and does not
create any rights in, or for the benefit of, any third party, including any
Holder of the TrENDS. The Seller may take actions as the controlling
shareholder of the Company that are not in the best interest of Holders of the
TrENDS.
TRADING VALUE; LISTING; NEED FOR QUALIFIED INDEPENDENT UNDERWRITER
The Trust is a newly organized closed-end investment company with no
previous operating history and the TrENDS are innovative securities. It is not
possible to predict how the TrENDS will trade in the secondary
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<PAGE>
market. The trading price of the TrENDS may vary considerably prior to the
Exchange Date due to, among other things, fluctuations in the price of the
Common Stock (which may occur due to changes in the Company's financial
condition, results of operations or prospects, or because of complex and
interrelated political, economic, financial and other factors that can affect
the capital markets generally, the stock exchanges or quotation systems on
which the Common Stock is traded and the market segment of which the Company
is a part) and fluctuations in interest rates and other factors that are
difficult to predict and beyond the Trust's control. The Trust believes,
however, that because of the yield on the TrENDS and the formula for
determining the number of shares of Common Stock to be delivered on the
Exchange Date, the TrENDS will tend to trade at a premium to the market value
of the Common Stock to the extent the Common Stock price falls, and at a
discount to the market value of the Common Stock to the extent the Common
Stock price rises.
Shares of closed-end investment companies frequently trade at a premium to
or discount from net asset value. This characteristic of investments in a
closed-end investment company is a risk separate and distinct from the risk
that the Trust's net asset value will decrease. The Trust cannot predict
whether its shares will trade at, below or above net asset value. The risk of
purchasing investments in a closed-end company that might trade at a discount
may be greater for investors who wish to sell their investments soon after
completion of an initial public offering because for those investors,
realization of a gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance.
The Underwriters currently intend, but are not obligated, to make a market
in the TrENDS. There can be no assurance that a secondary market will develop
or, if a secondary market does develop, that it will provide the Holders with
liquidity of investment or that it will continue for the life of the TrENDS.
Application has been made to list the TrENDS on the ASE, but there can be no
assurance that, if listed, the TrENDS will not later be delisted or that
trading in the TrENDS on the ASE will not be suspended. In the event of a
delisting or suspension of trading on such exchange the Trust will apply for
listing of the securities on another national securities exchange or for
quotation on another trading market. If the TrENDS are not listed or traded on
any securities exchange or trading market, or if trading of the TrENDS is
suspended, pricing information for the TrENDS may be more difficult to obtain,
and the price and liquidity of the TrENDS may be adversely affected.
Approximately % of the net proceeds of this offering will be used on or
shortly after the Closing to pay the purchase price under the Contract to
Luckygold. Luckygold will, in turn, distribute as a dividend the net proceeds
from the offering to its sole shareholder, Mr. T.L. Li. Approximately $ of
such distribution will be used by Mr. T.L. Li to partially repay amounts
outstanding under a personal loan owed to an affiliate of Donaldson, Lufkin &
Jenrette Securities Corporation. Donaldson, Lufkin and Jenrette Securities
Corporation is a member of the National Association of Securities Dealers,
Inc. (the "NASD") and one of its affiliates will receive more than 10% of the
net proceeds from the offering as a result of such repayment. Accordingly,
under the Conduct Rules of the NASD, the price at which the TrENDS are
distributed to the public must be no higher than that recommended by a
"qualified independent underwriter" meeting certain standards. BancAmerica
Robertson Stephens has agreed to act as the qualified independent underwriter
in connection with the offering.
NON-DIVERSIFIED STATUS
The Trust is considered non-diversified under the Investment Company Act,
which means that the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. Since the only
securities or instruments held or received by the Trust will be U.S. Treasury
securities and the Contract or other assets consistent with the terms of the
Contract, the Trust may be subject to greater risk than would be the case for
an investment company with diversified investments.
RISK RELATING TO BANKRUPTCY OF SELLER
Mr. T.L. Li is domiciled in Hong Kong and the Seller is incorporated in the
British Virgin Islands and is not engaged in business in the United States.
Consequently, if the Seller were to become insolvent, the Seller
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<PAGE>
would most likely not be subject to Title 11 of the United States Bankruptcy
Code (the "Bankruptcy Code"). However, it is possible that the Seller could
become a debtor under the Bankruptcy Code.
In the event the Seller were to become a debtor under the Bankruptcy Code,
the Trust believes that the Contract would constitute a "securities contract"
for purposes of the Bankruptcy Code, performance of which may not be subject
to the automatic stay provisions of the Bankruptcy Code. It is, however,
possible that the Contract will be determined not to qualify as a "securities
contract" for this purpose, or not to be covered by the exemption from the
automatic stay provisions granted to a "securities contract", in which event,
if the Seller becomes subject to a case under the Bankruptcy Code, there could
be a delay in settlement of the Contract, which would adversely affect the
time of exchange or, as a result, the amount received by the Holders in
respect of the TrENDS.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The law regarding the treatment of TrENDS for United States federal income
tax purposes is subject to some uncertainty. Although the Trust and the Seller
will take the position that, for United States federal income tax purposes, a
Holder will be treated as the owner of its pro rata portions of the stripped
U.S. Treasury securities and the Contract, and the Contract should be treated
as a prepaid forward contract, there are other conceivable alternative
characterizations of TrENDS which could require Holders to include more
interest in income than would be includable in income under the analysis set
forth herein under "Certain Federal Income Tax Consequences." Accordingly,
prospective investors should consult their tax advisors with respect to the
tax consequences to them of the purchase, ownership and disposition of TrENDS
in light of their particular circumstances and the alternative
characterization. See "Certain United Stated Federal Income Tax
Considerations."
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<PAGE>
DESCRIPTION OF THE TRENDS
Each TrENDS represents an equal proportional interest in the Trust, and a
total of TrENDS will be issued (or TrENDS if the Underwriters' over-
allotment option is exercised in full). Upon liquidation of the Trust, Holders
are entitled to share pro rata in the net assets of the Trust available for
distribution. The TrENDS have no preemptive, redemption or conversion rights.
The TrENDS are fully paid and nonassessable by the Trust. The only securities
that the Trust is authorized to issue are the TrENDS offered hereby and those
sold to the initial Holders referred to below.
Holders are entitled to a full vote for each TrENDS held on all matters to
be voted on by Holders and are not able to cumulate their votes in the
election of Trustees. The Trustees of the Trust have been selected initially
by Donaldson, Lufkin & Jenrette Securities Corporation, as the initial Holder
of TrENDS of the Trust. The Trust intends to hold annual meetings as required
by the rules of the ASE. The Trustees may call special meetings of Holders for
action by Holder vote as may be required by either the Investment Company Act
or the Trust Agreement. The Holders have the right, upon the declaration in
writing or vote of more than two-thirds of the outstanding TrENDS, to remove a
Trustee. The Trustees will call a meeting of Holders to vote on the removal of
a Trustee upon the written request of the Holders of record of 10% of the
TrENDS or to vote on other matters upon the written request of the Holders of
record of 51% of the TrENDS (unless substantially the same matter was voted on
during the preceding 12 months). The Trust will also assist Holders in
communications with other Holders as required by the Investment Company Act.
BOOK-ENTRY ONLY ISSUANCE
The Depository Trust Company ("DTC") will act as securities depository for
the TrENDS. The information in this section concerning DTC and DTC's book-
entry system is based upon information obtained from DTC. The TrENDS offered
hereby will initially be issued only as fully-registered securities registered
in the name of DTC's nominee. One or more fully-registered global TrENDS
certificates will be issued, representing in the aggregate the total number of
TrENDS, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants").
Purchases of TrENDS within the DTC system must be made by or through Direct
Participants, which will receive a credit for the TrENDS on DTC's records. The
ownership interest of each actual purchaser of a TrENDS ("Beneficial Owner")
is in turn to be recorded on the Direct or Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the
Beneficial Owners purchased TrENDS. Transfers of ownership interests in TrENDS
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners.
Beneficial Owners will receive certificates representing their ownership
interests in TrENDS, upon a resignation of DTC, or upon request delivered to
the Administrator.
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DTC has no knowledge of the actual Beneficial Owners of the TrENDS; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such TrENDS are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
In connection with payments on the TrENDS, DTC's practice is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices and will be the responsibility of such Participant and
not of DTC or the Trust, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of dividends to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments
to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depository with
respect to the TrENDS at any time by giving reasonable notice to the Trust.
Under such circumstances, in the event that a successor securities depository
is not obtained, certificates representing the TrENDS will be printed and
delivered.
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MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The Trust will be internally managed by three Trustees and will not have any
separate investment adviser. Consistent with provisions of the Code applicable
to grantor trusts, the Trustees will not have the power to vary the
investments held by the Trust. It is a fundamental policy of the Trust that
the Contract may not be disposed of during the term of the Trust and that the
U.S. Treasury securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and termination of the Trust.
The names of the persons who have been elected by Donaldson, Lufkin &
Jenrette Securities Corporation, the initial Holder of the Trust, and who will
serve as the Trustees are set forth below. The positions and the principal
occupations of the individual Trustees during the past five years are also set
forth below.
<TABLE>
<CAPTION>
NAME, AGE AND ADDRESS TITLE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
<S> <C> <C>
Donald J. Puglisi, 52 Managing Trustee Professor of Finance, University of Delaware
Department of Finance
University of Delaware
Newark, DE 19176
William R. Latham III, Trustee Professor of Economics, University of Delaware
53
Department of Economics
University of Delaware
Newark, DE 19176
James B. O'Neill, 58 Trustee Professor of Economics, University of Delaware
Center for Economic Ed-
ucation &
Entrepreneurship
University of Delaware
Newark, DE 19176
</TABLE>
Each Trustee who is not a director, officer or employee of any Underwriter
or the Administrator, or of any affiliate thereof, will be paid by the
Underwriters, on behalf of the Trust, in respect of his annual fee and
anticipated out-of-pocket expenses, a one-time, up-front fee of $ . The
Trust's Managing Trustee will also receive an additional up-front fee of $
for serving in that capacity. The Trustees will not receive, either directly
or indirectly, any compensation, including any pension or retirement benefits,
from the Trust. None of the Trustees receives any compensation for serving as
a trustee or director of any other affiliated investment company.
ADMINISTRATOR
The day-to-day affairs of the Trust will be managed by The Bank of New York
as Administrator pursuant to an Administration Agreement. Under the
Administration Agreement, the Trustees have delegated most of their
operational duties to the Administrator, including without limitation, the
duties to: (i) receive invoices for expenses incurred by the Trust; (ii) with
the approval of the Trustees, engage legal and other professional advisors
(other than the independent public accountants for the Trust); (iii) instruct
the Paying Agent to pay distributions on TrENDS as described herein; (iv)
prepare and mail, file or publish all notices, proxies, reports, tax returns
and other communications and documents, and keep all books and records, for
the Trust; (v) at the direction of the Trustees, institute and prosecute legal
and other appropriate proceedings to enforce the rights and remedies of the
Trust; and (vi) make all necessary arrangements with respect to meetings of
Trustees and any meetings of Holders. The Administrator, however, will not
select the independent public accountants for the Trust or sell or otherwise
dispose of the Trust assets (except in connection with an acceleration of the
Contract or the settlement of the Contract at the Exchange Date and upon
termination of the Trust).
The Administration Agreement may be terminated by either the Trust or the
Administrator upon 60 days prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
24
<PAGE>
Except for its roles as Administrator, Custodian, Paying Agent, registrar
and transfer agent for the Trust, The Bank of New York has no other
affiliation with, and is not engaged in any other transactions with, the
Trust.
The address of the Administrator is 101 Barclay Street, New York, New York
10286.
CUSTODIAN
The Trust's custodian (the "Custodian") is The Bank of New York pursuant to
a custodian agreement (the "Custodian Agreement"). In the event of any
termination of the Custodian Agreement by the Trust or the resignation of the
Custodian, the Trust must engage a new Custodian to carry out the duties of
the Custodian as set forth in the Custodian Agreement. Pursuant to the
Custodian Agreement, all net cash received by the Trust will be invested by
the Custodian in short-term U.S. Treasury securities maturing on or shortly
before the next quarterly distribution date. The Custodian will also act as
collateral agent under the Collateral Agreement and will hold a perfected
security interest in the Common Stock and U.S. Government obligations or other
assets consistent with the terms of the Contract.
PAYING AGENT
The transfer agent, registrar and paying agent (the "Paying Agent") for the
TrENDS is The Bank of New York pursuant to a paying agent agreement (the
"Paying Agent Agreement"). In the event of any termination of the Paying Agent
Agreement by the Trust or the resignation of the Paying Agent, the Trust will
use its best efforts to engage a new Paying Agent to carry out the duties of
the Paying Agent.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Paying Agent, the Administrator
and the Custodian with respect to any claim, liability, loss or expense
(including the costs and expenses of the defense against any claim or
liability) that it may incur in acting as Trustee, Paying Agent, Administrator
or Custodian as the case may be, except in the case of willful misfeasance,
bad faith, gross negligence or reckless disregard of their respective duties
or where applicable law prohibits such indemnification. The Seller has agreed
to reimburse the Trust for any amounts it may be required to pay as
indemnification to any Trustee, the Administrator, the Custodian or the Paying
Agent.
DISTRIBUTIONS
The Trust intends to distribute to Holders on a quarterly basis an amount
equal to $ per TrENDS (which amount equals the pro rata portion of the
fixed quarterly cash distributions from the proceeds of the maturing U.S.
Treasury securities held by the Trust). The first distribution, in respect of
the period from the Closing until , will be payable on to Holders of
record as of and will equal $ per TrENDS. Thereafter, distributions
will be made on , , and of each year to Holders of record as of
each , , and , respectively. A portion of each such distribution
will be treated as a tax-free return of the Holder's investment. See
"Investment Objective and Policies--General," and "Certain Federal Income Tax
Considerations--Recognition of Interest on the U.S. Treasury Securities."
Upon termination of the Trust, as described under the caption "Investment
Objective and Policies--Trust Termination," each Holder will receive its pro
rata portion of any remaining net assets of the Trust.
The Trust does not permit the reinvestment of distributions.
ESTIMATED EXPENSES
At the Closing, the Underwriters out of the Underwriters' Compensation will
pay to each of the Administrator, the Custodian and the Paying Agent, and to
each Trustee, a one-time, up-front amount in
25
<PAGE>
respect of its fee and, in the case of the Administrator, anticipated expenses
of the Trust over the term of the Trust. The anticipated Trust expenses to be
borne by the Administrator include, among other things, expenses for legal and
independent accountants' services, costs of printing proxies, TrENDS
certificates and Holder reports, expenses of the Trustees, fidelity bond
coverage, stock exchange listing fees and regulatory filings. Organization
costs of the Trust in the amount of $ will be paid by the Underwriters and
estimated costs of the Trust in connection with the initial registration and
public offering of the TrENDS in the amount of $ will be paid by the
Seller.
The amount payable to the Administrator in respect of ongoing expenses of
the Trust was determined based on estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. There cannot, however, be any assurance that actual
operating expenses of the Trust will not be substantially more than this
amount. Any on-going expenses of the Trust in excess of these estimated
amounts will be paid by the Underwriters, who will be reimbursed by the
Seller.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the
TrENDS. It deals only with TrENDS held as capital assets by a Holder who
acquires its TrENDS at the issue price from an Underwriter pursuant to the
original offering, and not with special classes of Holders, such as dealers in
securities or currencies, banks, life insurance companies, persons who are not
United States Holders (as defined below), persons who hold TrENDS that are
part of a straddle, hedging or conversion transaction, or persons whose
functional currency is not the U.S. dollar. The summary is based on the Code,
its legislative history, existing and proposed Treasury regulations
thereunder, Internal Revenue Service (the "IRS") rulings and pronouncements
and court decisions, all as currently in effect and all subject to change at
any time, perhaps with retroactive effect.
For purposes of this summary, a "United States Holder" is (i) a person who
is a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in or under the laws of the United States or
any state thereof or the District of Columbia, (iii) an estate the income of
which is subject to United States federal income taxation, regardless of its
source, or (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of such trust and one or
more United States persons have the authority to control all substantial
decisions of such trust.
Holders should also be aware that there are alternative characterizations of
the assets of the Trust which could result in different United States federal
income tax consequences. See "Alternative Characterizations" below. While
these alternative characterizations should not apply for United States federal
income tax purposes, there can be no assurance in this regard. The following
discussion assumes that no such alternative characterizations will apply.
Prospective investors should consult their tax advisors with respect to the
tax consequences to them of the purchase, ownership and disposition of the
TrENDS in light of their particular circumstances, including the tax
consequences under state, local, foreign and other tax laws and the possible
effects of changes in the United States federal or other tax laws. Holders
should also consult their tax advisors regarding the tax risks associated with
possible alternative characterizations of the TrENDS.
TAX STATUS OF THE TRUST
The Trust will be treated as a grantor trust for United States federal
income tax purposes, and, accordingly, each Holder will be considered the
owner of its pro rata portions of the stripped U.S. Treasury securities and
the Contract in the Trust. Income received by the Trust will be treated as
income of the Holders in the manner set forth below.
26
<PAGE>
RECOGNITION OF INTEREST ON THE U.S. TREASURY SECURITIES
The U.S. Treasury securities in the Trust will consist of stripped U.S.
Treasury securities. Each Holder will be required to treat its pro rata
portion of each U.S. Treasury security as an interest in a bond that was
originally issued on the date the Holder purchased its TrENDS at an original
issue discount ("OID") equal to the excess of such Holder's pro rata portion
of the amount payable on such U.S. Treasury securities and the Holder's tax
basis therefor (determined as described below). Each Holder, regardless of its
method of tax accounting, must accrue OID in income (other than OID on short-
term U.S. Treasury securities as defined below) over the life of the U.S.
Treasury securities on a constant yield to maturity basis. The amount of such
excess will constitute only a portion of the total amounts payable in respect
of the Treasury securities. Consequently, a portion of each scheduled interest
payment to Holders will be treated as a return of such Holders' investment in
the Treasury securities, which will not be subject to tax. A Holder's tax
basis in its pro rata portion of a U.S. Treasury security will be increased by
the amount of OID included in income by the Holder with respect to such U.S.
Treasury security (including any OID accrued on a short-term U.S. Treasury
security, determined as described below).
In the case of any U.S. Treasury security with a maturity of one year or
less from the date it is purchased (a "short-term U.S. Treasury security"), in
general only accrual basis taxpayers will be required to include OID in income
as it accrues. Unless such an accrual basis Holder elects to accrue the OID on
a short-term U.S. Treasury security according to the constant-yield-to-
maturity method, such OID will be accrued on a straight-line basis.
TAX BASIS OF THE U.S. TREASURY SECURITIES AND THE CONTRACT
A Holder's initial tax basis in the Contract and the U.S. Treasury
securities, respectively, will equal its pro rata portion of the amounts paid
for them by the Trust. It is currently anticipated that % and % of the
proceeds of the offering will be used by the Trust to purchase the U.S.
Treasury securities and as payments for the Contract, respectively.
TREATMENT OF THE CONTRACT
Each Holder will be treated as having entered into a pro rata portion of the
Contract and, at the Exchange Date, as having received a pro rata portion of
the Common Stock, cash, Marketable Securities or combination thereof delivered
to the Trust.
DELIVERY OF THE COMMON STOCK
The delivery of Common Stock pursuant to the Contract will not be taxable to
the Holders. Each Holder's basis in its Common Stock will be equal to its tax
basis in its pro rata portion of the Contract less the portion of such basis
allocable to any fractional share of Common Stock for which cash is received.
A Holder will recognize capital gain or loss upon receipt of cash in lieu of a
fractional share of Common Stock in an amount equal to the difference between
the amount of cash received and the tax basis of such fractional share. A
Holder's holding period for the Common Stock will begin on the date following
the date it is acquired by the Trust.
DELIVERY OF CASH AND MARKETABLE SECURITIES OR OTHER PROPERTY
If the Seller elects the Cash Settlement Alternative or, as a result of an
Adjustment Event, cash, Marketable Securities or a combination thereof is
delivered pursuant to the Contract, a Holder will recognize capital gain or
loss upon receipt in an amount equal to the difference between the amount of
cash received and its tax basis in its pro rata portion of the Contract
allocable to any Common Stock for which such cash was received. Such gain or
loss will be long-term capital gain or loss if the Holder has held the TrENDS
for more than one year immediately prior to such receipt of cash. Net capital
gain (i.e., generally capital gain in excess of capital loss) recognized by an
individual upon the sale of a capital asset that has been held for more than
18 months will generally be subject to tax at a rate not to exceed 20% and net
capital gain recognized from the sale of an asset held for more than 12 months
but less than 18 months will be subject to tax at a rate not to exceed 28%.
Net
27
<PAGE>
capital gain derived from the sale of assets held for less than 12 months will
be subject to tax at ordinary income tax rates. Capital gain derived by
corporations is subject to ordinary income tax rates applicable to
corporation. The deductibility of capital losses is subject to limitations.
A Holder's tax basis in any Marketable Securities received will be equal to
its tax basis in its pro rata portion of the Contract less the portion of such
tax basis allocable to any Common Stock for which cash was received. A
Holder's holding period for the Marketable Securities will begin on the date
following the date such Marketable Securities are acquired by the Trust. See
"Investment Objective and Policies--The Contract."
SALE OF TRENDS
Upon a sale, exchange or other taxable disposition of all or some of a
Holder's TrENDS, a Holder will be treated as having sold its pro rata portions
of the U.S. Treasury securities and the Contract underlying the TrENDS. Such
selling Holder will recognize capital gain or loss in an amount equal to the
difference between the amount realized and the Holder's aggregate tax bases in
its pro rata portions of the U.S. Treasury securities and the Contract. Such
capital gain or loss will be long-term capital gain or loss if the Holder has
held the TrENDS for more than one year immediately prior to such sale,
exchange or disposition. Capital gain and loss will be subject to tax in the
manner described under "--Delivery of Cash and Marketable Securities or Other
Property."
ALTERNATIVE CHARACTERIZATIONS
Although the Trust and the Seller will take the position that the Contract
should be treated for United States federal income tax purposes as a prepaid
forward contract for the purchase of a variable number of shares of Common
Stock, the IRS could conceivably take the view that the Contract should be
treated as a loan to the Seller in exchange for a contingent debt obligation
of the Seller. If the IRS were to prevail in making such an assertion, a
Holder would be required to include OID in income over the life of the TrENDS
at a market rate of interest for the Seller, taking account of all the
relevant facts and circumstances. In addition, a Holder might be required to
treat any gain realized on the sale, exchange, or redemption of the TrENDS as
ordinary income to the extent that such gain is allocable to the Contract. Any
loss realized on such sale, exchange or redemption that is allocable to the
Contract would be treated as an ordinary loss to the extent of the Holder's
OID inclusions with respect to the Contract, and as capital loss to the extent
in excess of such inclusions. The IRS could also conceivably take the view
that a Holder should simply include in income as interest the amount of cash
actually received each year in respect of the TrENDS.
28
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters") have severally agreed to purchase from the Trust and the Trust
has agreed to sell to each of the Underwriters, the number of TrENDS set forth
opposite each Underwriter's name in the table below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS TRENDS
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation..................
BancAmerica Robertson Stephens.......................................
---------
Total................................................................
</TABLE>
The Underwriting Agreement provides that the obligation of the several
Underwriters to purchase and accept delivery of the TrENDS offered hereby are
subject to approval of certain legal matters by counsel and to certain other
conditions. If any of the TrENDS are purchased by the Underwriters pursuant to
the Underwriting Agreement, the Underwriters are obligated to purchase all
such TrENDS (other than the TrENDS covered by the over-allotment option
described below).
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company, the Trust, the Seller and Mr. T.L. Li against
certain liabilities, including liabilities under the Securities Act. The
Underwriters agree to pay certain expenses of the Trust.
The Underwriters have advised the Company and the Seller that they propose
to offer the TrENDS to the public initially at the price set forth on the
cover page of this Prospectus and to certain dealers (who may include the
Underwriters) at such price, less a concession not to exceed $ per TrENDS.
The Underwriters may allow, and such dealers may re-allow, discount not in
excess of $ per TrENDS to any other Underwriter and certain other dealers.
After the offering, the offering price and other selling terms may be changed
by the Underwriters.
In light of the fact that the proceeds of the sale of the TrENDS will be
used in part by the Trust to purchase the Contract from the Seller, the
Underwriting Agreement provides that the Seller will pay to the Underwriters
as compensation $ per TrENDS.
The Trust has granted the Underwriters an option, exercisable for 30
calendar days after the date of this Prospectus, to purchase up to an
aggregate of TrENDS, solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, they will receive the
Underwriters' Compensation referred to above for each TrENDS so purchased. In
addition, in connection with any such exercise, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of the TrENDS to be purchased by each
of them, as shown in the foregoing table, bears to the TrENDS initially
offered.
Subject to certain exceptions, each of the Company, the Seller, Mr. T.L. Li
and the executive officers and directors of the Company has agreed not to
offer, sell, contract to sell, grant any option to purchase or otherwise
dispose of any Common Stock of the Company or any securities convertible into
or exercisable or exchangeable for such Common Stock or in any other manner
transfer all or a portion of the economic consequences associated with the
ownership of any such Common Stock, except to the Underwriters pursuant to the
Underwriting Agreement, for a period of 90 days after the date hereof without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
The TrENDS will be a new issue of securities with no established trading
market. Application has been made to list the TrENDS on the American Stock
Exchange under the symbol "PTT". The Underwriters have advised the Company
that they intend to make a market in the TrENDS, but they are not obligated to
do so and may discontinue market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the
TrENDS.
29
<PAGE>
The TrENDS have not been and must not be offered or sold in the United
Kingdom, by means of any document, except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their business or otherwise in
circumstances which do not constitute an offering to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations
1995. This document may only be issued or passed on to a person who is of a
kind described in Article 11(3) of the Financial Services Act of 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
such document may otherwise lawfully be issued or passed on under the
Financial Services Act of 1986.
Other than in the United States, no action has been taken by the Company,
the Seller or the Underwriters that would permit a public offering of the
TrENDS offered hereby in any jurisdiction where action for that purpose is
required. The TrENDS offered hereby may not be offered or sold, directly or
indirectly, nor may this Prospectus or any other offering material or
advertisements in connection with the offer and sale of any such TrENDS be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of such
jurisdiction. Persons into whose possession this Prospectus comes are advised
to inform themselves about and to observe any restrictions relating to the
offering and the distribution of this Prospectus. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any TrENDS
offered hereby in any jurisdiction in which such an offer or solicitation is
unlawful.
Until distribution of the TrENDS is completed, rules of the Commission may
limit the ability of the Underwriters and any selling group members to bid for
and purchase the TrENDS or shares of Common Stock. As an exception to these
rules, the Underwriters are permitted to engage in certain transactions to
stabilize the price of the TrENDS or the Common Stock. Such transactions
consist of bids or offers for the purpose of pegging, fixing or maintaining
the price of the TrENDS or the Common Stock.
If the Underwriters create a short position in the TrENDS in connection with
the offering, i.e., if it sells more TrENDS than are set forth on the cover
page of this Prospectus, the Underwriters may reduce that short position by
purchasing TrENDS in the open market. The Underwriters may also elect to
reduce any short position by exercising all or part of the over-allotment
option described above.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase TrENDS in
the open market to reduce the Underwriters' short position or to stabilize the
price of the TrENDS, they may reclaim the amount of the selling concession to
the Underwriters and any selling group members who sold those TrENDS as part
of the offering.
The purchase of a TrENDS for the purpose of stabilization or to reduce a
short position could cause the price of the security to be higher than it
might be in the absence of such purchases. The imposition of a penalty might
also have an effect on the price of a security to the extent that it were to
discourage resales of such securities.
Neither the Trust nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the TrENDS or on the
Common Stock. In addition, neither the Trust nor any of the Underwriters makes
any representation that the Underwriters will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
Approximately % of the net proceeds of this offering will be used on or
shortly after the Closing to pay the purchase price under the Contract to
Luckygold. Luckygold will, in turn, distribute as a dividend the net proceeds
from this offering to its sole shareholder, Mr. T.L. Li. Approximately $ of
such distribution will be used by Mr. T.L. Li to partially repay amounts
outstanding under a personal loan owed to an affiliate of Donaldson, Lufkin &
Jenrette Securities Corporation. Donaldson, Lufkin & Jenrette Securities
Corporation is a member of the National Association of Securities Dealers,
Inc. (the "NASD") and one of its affiliates will receive more than 10% of the
net proceeds from the offering as a result of such repayment. Accordingly,
under
30
<PAGE>
the Conduct Rules of the NASD, the price at which the TrENDS are distributed
to the public must be no lower than that recommended by a "qualified
independent underwriter" meeting certain standards. BancAmerica Robertson
Stephens has agreed to act as the qualified independent underwriter in
connection with the offering, has participated in the preparation of this
Prospectus and of the Registration Statement of which this Prospectus forms a
part and has exercised the usual standard of due diligence with respect
thereto. The price of the TrENDS when sold will be no higher than that
recommended by BancAmerica Robertson Stephens.
Certain of the Underwriters render investment banking and other financial
services to the Company and/or the Seller from time to time.
VALIDITY OF TRENDS
The validity of the TrENDS will be passed upon for the Trust by its counsel,
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York
10022, and certain legal matters will be passed upon for the Underwriters by
Paul, Weiss, Rifkind, Wharton & Garrison, 13/F, Hong Kong Club Building, 3A
Chater Road, Central, Hong Kong.
EXPERTS
The financial statement as of , 1998 included in this Prospectus has
been audited by , independent auditors, as stated in their opinion
appearing herein, and has been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
FURTHER INFORMATION
The Trust has filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a Registration Statement under the Securities Act with respect to
the TrENDS offered hereby. Further information concerning the TrENDS and the
Trust may be found in the Registration Statement of which this Prospectus
constitutes a part. The Registration Statement may be inspected without charge
at the Commission's office in Washington, D.C., and copies of all or any part
thereof may be obtained from such office after payment of the fees prescribed
by the Commission. In addition, the Registration Statement may be accessed
electronically at the Commission's site on the World Wide Web located at
http://www.sec.gov.
31
<PAGE>
INDEPENDENT AUDITORS' REPORT
32
<PAGE>
PEAK TRENDS TRUST
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<S> <C>
ASSETS
Cash.................................................................... $
------
Total Assets............................................................ $
======
LIABILITIES
Total Liabilities....................................................... $
------
Net Assets.............................................................. $
------
Balance applicable to $ TrENDS issued and outstanding................ $
======
Net Asset Value......................................................... $
======
</TABLE>
NOTE 1. ORGANIZATION
The Trust was established on March 24, 1998 and is registered as a non-
diversified, closed-end management investment company under the Investment
Company Act of 1940.
NOTE 2. ISSUANCE OF TRUST ENHANCED DIVIDEND SECURITIES ("TRENDS")
The Trust proposes to sell Trust Enhanced Dividend Securities ("TrENDS") to
the public pursuant to a Registration Statement on Form N-2 under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, as filed on . The Trust intends to use the proceeds to purchase a
portfolio comprised of stripped U.S. Treasury securities and to pay the
purchase price of forward contracts relating to shares of common stock of Peak
International Limited, a company incorporated in Bermuda. The proceeds of the
Public Offering will be recorded as shareholders' equity upon receipt of such
proceeds by the Trust. All offering costs of the Trust will be paid by the
seller of the forward contracts. Organizational costs have been paid by the
Underwriters.
33
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY TRENDS OTHER THAN THE TRENDS TO WHICH IT
RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY SUCH
TRENDS IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 3
The Trust.................................................................. 9
Use of Proceeds............................................................ 9
Investment Objective and Policies.......................................... 9
Risk Factors............................................................... 19
Description of the TrENDS.................................................. 22
Management and Administration of the Trust................................. 24
Certain Federal Income Tax Considerations.................................. 26
Underwriting............................................................... 29
Validity of TrENDS......................................................... 31
Experts.................................................................... 31
Further Information........................................................ 31
Independent Auditors' Report............................................... 32
Statement of Assets and Liabilities........................................ 33
</TABLE>
----------------
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE TRENDS, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TRENDS
PEAK TRENDS TRUST
TRUST ENHANCED DIVIDEND SECURITIES
(EXCHANGEABLE FOR SHARES OF COMMON STOCK OF PEAK INTERNATIONAL LIMITED)
-----------
PROSPECTUS
-----------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCAMERICA ROBERTSON STEPHENS
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
*Part A -- Report of Independent Accountants.
Statement of Assets and Liabilities.
Part B -- None.
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
*2.a.(i) Amended and Restated Trust Agreement
*2.a.(ii) Certificate of Trust
*2.d Form of Specimen Certificate of Trust Enhanced Dividend Securities
*2.h Form of Underwriting Agreement
*2.j Form of Custodian Agreement
*2.k.(i) Form of Administration Agreement
*2.k.(ii) Form of Paying Agent Agreement
*2.k.(iii) Form of Purchase Agreement
*2.k.(iv) Form of Collateral Agreement
*2.k.(v) Form of Fund Expense Agreement
*2.k.(vi) Form of Fund Indemnity Agreement
*2.l Opinion and Consent of Counsel to the Trust
*2.n.(i) Tax Opinion of Counsel to the Trust (Consent contained in Exhibit 2.l)
*2.n.(ii) Consent of Independent Public Accountants
*2.p Form of Subscription Agreement
</TABLE>
--------
* To be filed by amendment.
ITEM 25. MARKETING ARRANGEMENTS
See the form of Underwriting Agreement to be filed as Exhibit 2.h to this
Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
<TABLE>
<S> <C>
Registration fees...................................................... $ *
American Stock Exchange listing fee.................................... *
Printing (other than certificates)..................................... *
Engraving and printing certificates.................................... *
Fees and expenses of qualification under state securities laws
(excluding fees of counsel)........................................... *
Accounting fees and expenses........................................... *
Legal fees and expenses................................................ *
NASD fee............................................................... *
Miscellaneous.......................................................... *
Total................................................................ $ *
</TABLE>
--------
* To be furnished by amendment.
II-1
<PAGE>
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management and
Administration of the Trust" is incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF TRENDS
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
-------------- --------------
<S> <C>
TrENDS........................................................ 1
</TABLE>
There will be one record holder of the TrENDS as of the effective date of
this Registration Statement.
ITEM 29. INDEMNIFICATION
The Underwriting Agreement, filed as Exhibit 2.h to this Registration
Statement, provides for indemnification to the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Act").
Insofar as indemnification for liabilities arising under the Act, may be
permitted to trustees, officers and controlling persons of the Registrant,
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Trust is internally managed and does not have an investment adviser.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The Trust's accounts, books and other documents are currently located at the
offices of the Registrant, c/o Donald J. Puglisi, Puglisi & Associates, 850
Library Avenue, Suite 294, Newark, Delaware 19715 and at the offices of The
Bank of New York, 101 Barclay Street, New York, New York 10286, the
Registrant's Administrator, Custodian, paying agent, transfer agent and
registrar.
ITEM 32. MANAGEMENT SERVICES
Not Applicable.
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend offering of the shares
covered hereby until it amends its prospectus if (1) subsequent to the
effective date of its Registration Statement, the net asset value declines
more than 10 percent from its net asset value as of the effective date of the
Registration Statement or (2) the net asset value increases to an amount
greater than its net proceeds as stated in the prospectus.
(b) The Registrant hereby undertakes that (i) for the purpose of determining
any liability under the Act, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Registrant under Rule
497(h) under the Act shall be deemed to be part of this registration statement
as of the time it was declared effective; (ii) for the purpose of determining
any liability under the Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEWARK, AND STATE OF DELAWARE, ON
THE SIXTH DAY OF APRIL, 1998.
PEAK TrENDS TRUST
(REGISTRANT)
/s/ Donald J. Puglisi
By: _________________________________
DONALD J. PUGLISI AS TRUSTEE
/s/ William R. Latham III
By: _________________________________
WILLIAM R. LATHAM III AS TRUSTEE
/s/ James B. O'Neill
By: _________________________________
JAMES B. O'NEILL AS TRUSTEE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
NAME TITLE DATE
/s/ Donald J. Puglisi Managing Trustee April 6, 1998
- -------------------------------------
DONALD J. PUGLISI
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ----------
<S> <C> <C>
*2.a.(i) Amended and Restated Trust Agreement
*2.a.(ii) Certificate of Trust
*2.d Form of Specimen Certificate of Trust Enhanced Dividend Securities
*2.h Form of Underwriting Agreement
*2.j Form of Custodian Agreement
*2.k.(i) Form of Administration Agreement
*2.k.(ii) Form of Paying Agent Agreement
*2.k.(iii) Form of Purchase Agreement
*2.k.(iv) Form of Collateral Agreement
*2.k.(v) Form of Fund Expense Agreement
*2.k.(vi) Form of Fund Indemnity Agreement
*2.l Opinion and Consent of Counsel to the Trust
*2.n.(i) Tax Opinion of Counsel to the Trust (Consent contained in Exhibit 2.l)
*2.n.(ii) Consent of Independent Public Accountants
*2.p Form of Subscription Agreement
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
THE FOLLOWING PROSPECTUS OF PEAK INTERNATIONAL LIMITED IS ATTACHED AND
DELIVERED FOR CONVENIENCE OF REFERENCE ONLY. THE PROSPECTUS OF PEAK
INTERNATIONAL LIMITED DOES NOT CONSTITUTE A PART OF THE FOREGOING PROSPECTUS
OF PEAK TRENDS TRUST, NOR IS IT INCORPORATED BY REFERENCE THEREIN.
