AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1998
SECURITIES ACT FILE NO. 333-
INVESTMENT COMPANY ACT FILE NO. 811-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
PRE-EFFECTIVE AMENDMENT NO. |_|
POST-EFFECTIVE AMENDMENT NO. |_|
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. |_|
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FIFTH AUTOMATIC
COMMON EXCHANGE SECURITY TRUST
(Exact Name of Registrant as Specified in its Charter)
C/O GOLDMAN, SACHS & CO.
85 BROAD STREET
NEW YORK, NEW YORK 10004
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 902-1000
KENNETH L. JOSSELYN, ESQ.
85 BROAD STREET
NEW YORK, NEW YORK 10004
(Name and Address of Agent for Service)
COPIES TO:
Robert E. Buckholz, Jr., Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. |_|
|_| 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 333- . ------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- --------------------------------------------------------------------------------
Title of Securities Proposed Maximum Amount of
Being Registered Aggregate Offering Price(1) Registration Fee
---------------- --------------------------- ----------------
Trust Automatic Common
Exchange Securities $10,000,000 $2,950
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(1) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
<TABLE>
<CAPTION>
FIFTH AUTOMATIC COMMON EXCHANGE SECURITY TRUST
CROSS-REFERENCE SHEET
(PURSUANT TO RULE 404(C) UNDER THE SECURITIES ACT OF 1933)
PART A & B OF PROSPECTUS*
ITEM
NUMBER CAPTION LOCATION IN PROSPECTUS
- ------ ------- ----------------------
<C> <S> <C>
1. Outside Front Cover......................................... Front Cover Page
2. Inside Front and Outside Back Cover Page.................... Front Cover Page; Inside Front Cover Page;
Outside Back Cover Page
3. Fee Table and Synopsis...................................... Prospectus Summary; Fee Table
4. Financial Highlights........................................ Not Applicable
5. Plan of Distribution........................................ Front Cover Page; Prospectus Summary;
Underwriting
6. Selling Shareholders........................................ Not Applicable
7. Use of Proceeds............................................. Use of Proceeds; Investment Objective and Policies
8. General Description of the Registrant....................... Front Cover Page; Prospectus Summary;
The Trust; Investment Objective and Policies;
Risk Factors
9. Management.................................................. Management and Administration of the Trust
10. Capital Stock, Long-Term Debt and Other
Securities................................................. Investment Objective and Policies; Description of
the Securities; Certain Federal Income Tax
Considerations
11. Defaults and Arrears on Senior Securities................... Not Applicable
12. Legal Proceedings........................................... Not Applicable
13. Table of Contents of the Statement
of Additional Information.................................. Not Applicable
14. Cover Page.................................................. Not Applicable
15. Table of Contents........................................... Not Applicable
16. General Information and History............................. The Trust
17. Investment Objective and Policies........................... Investment Objective and Policies
18. Management.................................................. Management and Administration of the Trust
19. Control Persons and Principal Holders of
Securities................................................. Management and Administration of the Trust
20. Investment Advisory and Other Services...................... Management and Administration of the Trust
21. Brokerage Allocation and Other Practices.................... Investment Objective and Policies
22. Tax Status.................................................. Certain Federal Income Tax Considerations
23. Financial Statements........................................ Statement of Assets and Liabilities
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<FN>
* Pursuant to the General Instructions to Form N-2, all information required
to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus. Information required to be included in
Part C is set forth under the appropriate item so numbered in Part C of this
Registration Statement.
</FN>
</TABLE>
<PAGE>
RED HERRING INFORMATION
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 LAW OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 21, 1998
_______ SHARES
FIFTH AUTOMATIC
COMMON EXCHANGE SECURITY TRUST
$ . TRUST AUTOMATIC COMMON EXCHANGE SECURITIES (TRACES (TM)/(SM))
(SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK OF ________________)
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Each of the $ . Trust Automatic Common Exchange Securities (the
"Securities") of Fifth Automatic Common Exchange Security Trust (the "Trust")
represents the right to receive an annual distribution of $ . , and will be
exchanged for between 0. shares and one share of common stock, $___ par value
(the "Common Stock"), of ______________ (the "Company") on ____________, ____
(the "Exchange Date").
The Trust is a newly organized, finite-term Trust established to acquire and
hold a portfolio of stripped U.S. Treasury securities maturing on a quarterly
basis through the Exchange Date, and forward purchase contracts (the
"Contracts") with one or more existing shareholders of the Company (the
"Sellers") relating to the Common Stock. The Trust's investment objective is to
provide each holder of Securities with a quarterly distribution of $ . per
Security and, on the Exchange Date, a number of shares of Common Stock per
Security equal to the Exchange Rate.
The Exchange Rate will vary in accordance with a formula, depending on the
Average Market Price (as defined herein) of the Common Stock on the Exchange
Date:
- if the Average Market Price is less than the Appreciation Threshold
Price but equal to or greater than the Initial Price, the Exchange Rate
will be the number of shares of Common Stock having a value (determined
at the Average Market Price) equal to the Initial Price;
- if the Average Market Price is equal to or greater than the Appreciation
Threshold Price, the Exchange Rate will be 0.__ shares of Common Stock;
and
- if the Average Market Price is less than the Initial Price, the Exchange
Rate will be one share of Common Stock.
For purposes of this formula, the Appreciation Threshold Price is $____ and the
Initial Price is $____. The formula will be subject to adjustment in certain
events.
In lieu of delivering Common Stock, each Contract entitles the Seller
thereunder to elect to pay cash upon settlement of such Contract in an amount
equal to the then Average Market Price of the number of shares of Common Stock
determined pursuant to the above formula (the "Cash Settlement Alternative"). To
the extent the Sellers elect the Cash Settlement Alternative, holders of
Securities will receive cash instead of Common Stock upon settlement of the
Contracts. Holders otherwise entitled to receive fractional shares in respect of
their aggregate holdings of Securities will receive cash in lieu thereof.
Holders of Securities will receive distributions at a higher annual rate
than the current annual dividends paid on the Common Stock. There is no
assurance, however, that the yield on the Securities will be higher than the
dividend yield on the Common Stock over the term of the Trust. In addition, the
opportunity for equity appreciation afforded by an investment in the Securities
is less than that afforded by an investment in the Common Stock because holders
of Securities will realize no equity appreciation if, on the Exchange Date, the
Average Market Price of the Common Stock is below the Appreciation Threshold
Price, and less than all of the appreciation if at that time the Average Market
Price is above the Appreciation Threshold Price. Holders of Securities will
realize the entire decline in equity value if the Average Market Price is less
than the price to public per Security shown below.
The Company is not affiliated with the Trust.
Application will be made to list the Securities on the [New York] Stock
Exchange under the symbol ____. Prior to this offering there has been no public
market for the Securities. The last reported sale price of the Common Stock on
the [New York] Stock Exchange on _________ __, 1998, was $_____ per share.
(continued on next page)
SEE "RISK FACTORS" ON PAGE ___ OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE SECURITIES.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE TO PUBLIC SALES LOAD (1) PROCEEDS TO THE TRUST(2)
--------------- -------------- ------------------------
Per Security... $ $ (4) $
Total(3)....... $ $ (4) $
- ------------------------------------
(1) The Company and the Sellers have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933. See "Underwriting".
(2) Expenses of the offering, which are payable by the Sellers, are estimated
to be $_______.
(3) The Trust has granted to the Underwriters an option for 30 days to purchase
up to an additional _______ Securities at the price to the public per
Security, solely to cover over-allotments. If the option is exercised in
full, the total Price to Public, Sales Load and Proceeds to the Trust will
be $ , $ , $ , respectively. See "Underwriting".
(4) In light of the fact that the proceeds of the sale of the Securities will
be used in part by the Trust to purchase the Contracts from the Sellers,
the Underwriting Agreement provides that the Sellers will pay to the
Underwriters as compensation ("Underwriters' Compensation") $ . per
Security. See "Underwriting".
---------------------------
The Securities are offered severally by the Underwriters, as specified
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that the Securities will be
ready for delivery in book entry form only through the facilities of The
Depository Trust Company, on or about ______ , 1998, against payment in
immediately available funds.
GOLDMAN, SACHS & CO.
---------------------------
The date of this Prospectus is ______, 1998.
<PAGE>
The Trust has adopted a policy that the Contracts may not be disposed of
during the term of the Trust. The Trust will continue to hold the Contracts
despite any significant decline in the market price of the Common Stock or
adverse changes in the financial condition of the Company.
This Prospectus sets forth concisely information about the Trust that a
prospective investor ought to know before investing. Potential investors are
advised to read this Prospectus and to retain it for future reference.
The Securities may be a suitable investment for those investors who are able
to understand the unique nature of the Trust and the economic characteristics of
the Contracts and the U.S. Treasury securities held by the Trust.
The Trust will be a grantor trust for federal income tax purposes and each
holder of Securities will be treated as the owner of its pro rata portions of
the stripped U.S. Treasury securities and the Contracts. For a discussion of the
principal United States federal income tax consequences of ownership of
Securities, see "Certain Federal Income Tax Considerations".
THE TRUST IS A NEWLY ORGANIZED CLOSED-END INVESTMENT COMPANY WITH NO
PREVIOUS HISTORY OF PUBLIC TRADING. TYPICAL CLOSED-END FUND SHARES FREQUENTLY
TRADE AT A 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.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER THE OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
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<PAGE>
PROSPECTUS SUMMARY
This summary of the provisions relating to the Securities does not purport
to be complete and is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus. Certain terms used in this summary are
defined elsewhere in this Prospectus.
THE TRUST
GENERAL. The Trust is a newly organized, finite-term trust. The Trust will
be registered as a non-diversified closed-end management investment company
under the Investment Company Act of 1940 (the "Investment Company Act"). Under
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable to grantor trusts, the Trustees will not have the power to vary the
investments held by the Trust.
INVESTMENT OBJECTIVE AND POLICIES. The Trust will acquire and hold a
portfolio of stripped U.S. Treasury securities maturing on a quarterly basis
through the Exchange Date, and the Contracts with the Sellers obligating each
Seller, on the Exchange Date, to deliver to the Trust a number of shares of
Common Stock equal to the product of the Exchange Rate times the initial number
of shares subject to such Seller's Contract (or an amount of cash equal to the
Average Market Price thereof). The Trust's investment objective is to provide
the holders of Securities ("Holders") with a quarterly distribution of $. per
Security (which amount equals the pro rata portion of the fixed quarterly cash
distributions from the proceeds of the maturing U.S. Treasury securities held by
the Trust) and, on the Exchange Date, a number of shares of Common Stock per
Security equal to the Exchange Rate (or to the extent the Sellers select the
Cash Settlement Alternative, an amount in cash equal to the Average Market Price
thereof).
The Exchange Rate will vary in accordance with a formula, depending on the
Average Market Price (as defined herein) of the Common Stock on the Exchange
Date:
- if the Average Market Price is less than the Appreciation Threshold
Price but equal to or greater than the Initial Price, the Exchange Rate
will be the number of shares of Common Stock having a value (determined
at the Average Market Price) equal to the Initial Price;
- if the Average Market Price is equal to or greater than the Appreciation
Threshold Price, the Exchange Rate will be 0.__ shares of Common Stock;
and
- if the Average Market Price is less than the Initial Price, the Exchange
Rate will be one share of Common Stock.
For purposes of this formula, the Appreciation Threshold Price is $____ and the
Initial Price is $____. The formula will be subject to adjustment in certain
events.
The Exchange Rate formula provides the Trust with the potential for a
portion of any capital appreciation above the Appreciation Threshold Price on
the Common Stock, but no protection from depreciation of the Common Stock.
Holders otherwise entitled to receive fractional shares in respect of their
aggregate holdings of Securities will receive cash in lieu thereof. See
"Investment Objective and Policies -- Trust Termination".
STRUCTURE. The purchase price under the Contracts is equal to $ per share
of Common Stock initially subject thereto and $ (_________ shares of Common
Stock) in the aggregate (assuming no exercise of the Underwriters'
over-allotment option) and is payable to the Sellers by the Trust at the closing
of the offering of the Securities. The obligations of the Sellers under the
Contracts will be secured by a pledge of the Common Stock (or at the election of
the Sellers, by substitute collateral consisting of short-term, direct
obligations of the U.S. Government). See "Investment Objective and Policies --
The Contracts -- Collateral Arrangements; Acceleration."
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<PAGE>
THE OFFERING
The Trust is offering _________ Securities to the public at a purchase price
of $______ per Security (which is equal to the last reported sale price of the
Common Stock on the date of this Prospectus) through Goldman, Sachs & Co.
("Goldman Sachs" or the "Underwriters"). In addition, the Underwriters have been
granted options to purchase up to _______ additional Securities solely for the
purpose of covering over-allotments. See "Underwriting".
THE SECURITIES
GENERAL. The Securities are designed to provide investors with a higher
distribution per Security than the dividend currently paid per share on the
Common Stock. The annual distribution per Security is $ . Based on the current
annual dividend rate of $.__ per share of Common Stock, the annual per share
distribution per Security is $____ greater than the current annual per share
dividend rate on the Common Stock. Future declarations of dividends on the
Common Stock by the Company and the amount of such dividends are discretionary
with its Board of Directors and subject to legal and other factors. Such further
declarations will necessarily depend on the Company's future earnings, financial
condition, capital requirements and other factors. Quarterly distributions on
the Securities will consist solely of the cash received from the U.S. Treasury
securities. The Trust will not be entitled to any dividends that may be declared
on the Common Stock. A portion of each year's distributions on the Securities
will constitute a return of capital for U.S. federal income tax purposes. See
"Investment Objectives and Policies -- Tax Treatment of Distributions".
Holders will receive distributions at a higher annual rate than the current
annual dividends paid on the Common Stock. There is no assurance, however, that
the yield on the Securities will be higher than the dividend yield on the Common
Stock over the term of the Trust. In addition, the opportunity for equity
appreciation afforded by an investment in the Securities is less than that
afforded by an investment in the Common Stock because Holders will realize no
equity appreciation if, on the Exchange Date, the Average Market Price of the
Common Stock is below the Appreciation Threshold Price (which represents an
appreciation of ____% of the Initial Price). Moreover, because a Holder will
only receive 0.__ shares of Common Stock per Security (or the Average Market
Price thereof) if the Average Market Price exceeds the Appreciation Threshold
Price, Holders will only be entitled to receive upon exchange ____% of any
appreciation of the value of the Common Stock in excess of the Appreciation
Threshold Price. Holders of Securities will realize the entire decline in equity
value if the Average Market Price on the Exchange Date is less than the price to
public per Security shown on the cover page hereof.
DISTRIBUTIONS. Holders are entitled to receive distributions at the rate per
Security of $ 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 will be
payable on _________, 1998 to Holders of record as of _________, 1998. See
"Investment Objective and Policies -- Tax Treatment of Distributions".
MANDATORY EXCHANGE. On the Exchange Date, each outstanding Security will be
exchanged automatically for between 0.__ shares and one share of Common Stock,
subject to adjustment in the event of certain dividends or distributions,
subdivisions, splits, combinations, issuances of certain rights or warrants or
distributions of certain assets with respect to the Common Stock. In lieu of
delivering Common Stock, each Contract entitles the Seller thereunder to elect
to pay cash upon settlement of such Contract in an amount equal to the then
Average Market Price of the number of shares of Common Stock determined pursuant
to the above formula (the "Cash Settlement Alternative"). To the extent the
Sellers elect the Cash Settlement Alternative, holders of Securities will
receive cash instead of Common Stock on the Exchange Date.
The "Average Market Price" on any date means the average Closing Price per
share of Common Stock for the 20 Trading Days immediately prior to, but not
including, such date, provided that for purposes of determining the payment
required upon cash settlement of the Contracts in connection with a Rollover
Offering, "Average Market Price" means the Closing Price per share of Common
Stock on the Trading Day immediately preceding the date that the Rollover
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<PAGE>
Offering is priced (the "Pricing Date") or, if the Rollover Offering is priced
after 4:00 P.M., New York City time, on the Pricing Date, the Closing Price per
share on the Pricing Date.
"Rollover Offering" means a reoffering or refinancing of all (but not less
than all) of the Securities effected within 30 days prior to the Exchange Date
by means of a completed public offering by or on behalf of the Sellers. The
Trustees will notify the Holders of any election of the Cash Settlement
Alternative, and whether it is intended to be in connection with a Rollover
Offering, not less than 30 nor more than 60 days prior to the Exchange Date.
In addition, in the event of a merger of the Company with another entity, or
the liquidation of the Company, or 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 Contracts --
Dilution Adjustments") rather than shares of Common Stock. Further, the
occurrence of certain defaults by the Sellers under the Contracts or the
collateral arrangements would cause the acceleration of the Contracts and the
exchange of each Security for an amount of shares of Common Stock (or Marketable
Securities), cash, or a combination thereof, in respect of the shares of Common
Stock and the U.S. Treasury Securities. See "Investment Objective and Policies
- -- The Contracts -- Collateral Arrangements; Acceleration"; "-- The U.S.
Treasury Securities" and "-- Trust Termination".
VOTING RIGHTS. Holders will have the right to vote on matters affecting the
Trust, as described below under the caption "Description of the Securities", but
will have no voting rights with respect to the Common Stock prior to receipt of
shares of Common Stock by the Holders as a result of the exchange of the
Securities for the Common Stock on the Exchange Date or upon earlier settlement.
See "Investment Objective and Policies -- The Company" and "Description of the
Securities".
THE COMPANY
[TO COME]
Reference is made to the accompanying prospectus of the Company (pages A-1
through A-_ hereto) which describes the Company and the shares of Common Stock
of the Company deliverable to the Holders upon mandatory exchange of the
Securities on the Exchange Date. The Company is not affiliated with the Trust
and will not receive any of the proceeds from the sale of the Securities. The
Company prospectus relates to an aggregate of _________ shares of Common Stock
(plus an additional _______ shares that may be delivered upon exercise of the
Underwriters' over-allotment option).
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be treated as a grantor trust for federal income tax
purposes. Accordingly, each Holder will be treated for federal income tax
purposes as the owner of its pro rata portion of the U.S. Treasury securities
and the Contracts, and income received (including original issue discount
treated as received) by the Trust will generally be treated as income of the
Holders. The U.S. Treasury securities will be treated for federal income tax
purposes as having "original issue discount" that will accrue over the term of
such U.S. Treasury securities. Actual receipts of cash in respect of U.S.
Treasury securities will not be included in income, however, but rather will
reduce the aggregate tax basis of the Securities. A holder will have taxable
gain or loss upon receipt by the Trust of cash in lieu of Common Stock. Holders
should also be aware that there are alternative characterizations of the assets
of the Trust and the Securities 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 _________ (or its
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<PAGE>
successor) as trust administrator (the "Administrator"). ____________ (or its
successor) will also act as custodian (the "Custodian") for the Trust's assets
and as paying agent (the "Paying Agent"), registrar and transfer agent with
respect to the Securities. Except as aforesaid, _____________ has no other
affiliation with, and is not engaged in any other transaction with, the Trust.
See "Management and Administration of the Trust".
LIFE OF THE TRUST
The Trust will terminate automatically on or shortly after the Exchange
Date. Promptly after the Exchange Date the shares of Common Stock or cash, as
the case may be, to be exchanged for the Securities and other remaining Trust
assets, if any, will be distributed pro rata to Holders. See "Investment
Objective and Policies -- Trust Termination".
RISK FACTORS
The Trust will not be managed in the traditional sense. The Trust has
adopted a policy that the Contracts may not be disposed of during the term of
the Trust and that the U.S. Treasury securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities and the
termination of the Trust. The Trust will continue to hold the Contracts despite
any significant decline in the market price of the Common Stock or adverse
changes in the financial condition of the Company. See "Risk Factors -- Internal
Management; No Portfolio Management" and "Management and Administration of the
Trust -- Trustees".
Holders will receive distributions at a higher annual rate than the current
annual dividends paid on the Common Stock. There is no assurance, however, that
the yield on the Securities will be higher than the dividend yield on the Common
Stock over the term of the Trust. In addition, the opportunity for equity
appreciation afforded by an investment in the Securities is less than that
afforded by an investment in the Common Stock because Holders will realize no
equity appreciation if, on the Exchange Date, the Average Market Price of the
Common Stock is below the Appreciation Threshold Price (which represents an
appreciation of % of the Initial Price). Moreover, because a Holder will only
receive 0. shares of Common Stock per Security (or the Average Market Price
thereof) if the Average Market Price exceeds the Appreciation Threshold Price,
Holders will only be entitled to receive upon exchange ____% of any appreciation
of the value of the Common Stock in excess of the Appreciation Threshold Price.
Holders of Securities will realize the entire decline in equity value if the
Average Market Price on the Exchange Date is less than the price to public per
Security shown on the cover page hereof.
The Trust is classified as a "non-diversified" investment company under the
Investment Company Act. Consequently, the Trust is not limited by the Investment
Company Act in the proportion of its assets that may be invested in the
securities of a single issuer. Since the only assets held by the Trust will be
the U.S. Treasury securities and the Contracts, the Trust will be subject to
greater risk than would be the case for an investment company with diversified
investments. See "Investment Objective and Policies" and "Risk Factors --
Non-Diversified Status".
The trading prices of the Securities in the secondary market will be
directly affected by the trading prices of the Common Stock in the secondary
market. Trading prices of Common Stock will be influenced by the Company's
operating results and prospects and by economic, financial and other factors and
market conditions.
Holders of the Securities will not be entitled to any rights with respect to
the Common Stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions in respect thereof) unless and
until such time, if any, as the Sellers shall have delivered shares of Common
Stock pursuant to the Contracts.
LISTING
Application will be made to list the Securities on the [New York] Stock
Exchange (the "NYSE") under the symbol ---.
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<PAGE>
FEES AND EXPENSES
In light of the fact that the proceeds of the sale of the Securities will be
used in part by the Trust to purchase the Contracts from the Sellers, the
Underwriting Agreement provides that the Sellers will pay Underwriters'
Compensation to the Underwriters of $ . per Security. See "Underwriting".
Estimated organization costs of the Trust in the amount of $10,000 and estimated
costs of the Trust in connection with the initial registration and public
offering of the Securities in the amount of $_______ will be paid by the
Sellers. Each of the Administrator, the Custodian and the Paying Agent, and each
Trustee will be paid by the Sellers at the closing of the offering of the
Securities a one-time, up-front amount in respect of its ongoing fees and, in
the case of the Administrator, anticipated expenses of the Trust (estimated to
be $_______ in the aggregate), over the term of the Trust. The Sellers have
agreed to pay any ongoing expenses of the Trust in excess of these estimated
amounts and to reimburse the Trust for any amounts it may be required to pay as
indemnification to any Trustee, the Administrator, the Custodian or the Paying
Agent. See "Management and Administration of the Trust -- Estimated Expenses".
Regulations of the Securities and Exchange Commission ("SEC") applicable to
closed-end investment companies designed to assist investors in understanding
the costs and expenses that an investor will bear directly or indirectly require
the presentation of Trust expenses in the following format. Because the Trust
will not bear any fees or expenses, investors will not bear any direct expenses.
The only expenses that an investor might be considered to be bearing indirectly
are (i) the Underwriters' Compensation payable by the Sellers with respect to
such investor's Securities and (ii) the ongoing expenses of the Trust (including
fees of the Administrator, Custodian, Paying Agent and Trustees), estimated at
$_______ per year, payable by the Sellers at the closing of the offering. See
"Investment Objective and Policies -- General".
INVESTOR TRANSACTION EXPENSES
Sales Load (as a percentage of offering price)................... %
Dividend Reinvestment and Cash Purchase Plan Fees................ N/A
ANNUAL EXPENSES
Management Fees.................................................. 0%
Other Expenses................................................... %
----
Total Annual Expenses....................................... %
====
SEC regulations also require that closed-end investment companies present an
illustration of cumulative expenses (both direct and indirect) that an investor
would bear. The example is required to factor in the applicable Sales Load and
to assume, in addition to a 5% annual return, the reinvestment of all
distributions at net asset value. INVESTORS SHOULD NOTE THAT THE ASSUMPTION OF A
5% ANNUAL RETURN DOES NOT ACCURATELY REFLECT THE FINANCIAL TERMS OF THE TRUST.
SEE "INVESTMENT OBJECTIVE AND POLICIES -- GENERAL". ADDITIONALLY, THE TRUST DOES
NOT PERMIT THE REINVESTMENT OF DISTRIBUTIONS.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ------- ------ -------
<S> <C> <C>
You would bear the following expenses
(i.e., the applicable sales load and
allocable portion of ongoing expenses
paid by the Sellers) on a $1,000
investment, assuming a 5%
annual return.......................... $ $
</TABLE>
-7-
<PAGE>
THE TRUST
The Trust is a newly organized New York trust and is registered as a
closed-end investment company under the Investment Company Act. The Trust was
formed on April 21, 1998 pursuant to a trust agreement dated as of such date and
amended and restated as of ______ , 1998. The address of the Trust is 85 Broad
Street, New York, New York 10004 (telephone no. (212) 902-1000).
USE OF PROCEEDS
The net proceeds of this offering will be used immediately upon the closing
of this offering (a) to purchase a fixed portfolio comprised of stripped U.S.
Treasury securities with face amounts and maturities corresponding to the
quarterly distributions payable with respect to the Securities and the payment
dates thereof, and (b) to pay the purchase price under the Contracts to the
Sellers.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust will acquire and hold a portfolio of stripped U.S. Treasury
securities maturing on a quarterly basis through the Exchange Date and the
Contracts 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 Security (which amount equals the pro rata portion of the fixed quarterly
distributions from the proceeds of the maturing U.S. Treasury securities held by
the Trust) and, on the Exchange Date, a number of shares of Common Stock per
Security equal to the Exchange Rate (or to the extent the Sellers select the
Cash Settlement Alternative, an amount in cash equal to the Average Market Price
thereof).
The Exchange Rate will vary in accordance with a formula, depending on the
Average Market Price of the Common Stock on the Exchange Date:
- if the Average Market Price is less than the Appreciation Threshold Price
but equal to or greater than the Initial Price, the Exchange Rate will be
the number of shares of Common Stock having a value (determined at the
Average Market Price) equal to the Initial Price;
- if the Average Market Price is equal to or greater than the Appreciation
Threshold Price, the Exchange Rate will be 0.__ shares of Common Stock;
and
- if the Average Market Price is less than the Initial Price, the Exchange
Rate will be one share of Common Stock.
The formula will be subject to adjustment in certain events. See "-- The
Contracts -- Dilution Adjustments". For purposes of the first part of the
formula, the Exchange Rate will be rounded upward or downward to the nearest
1/10,000 (or if there is not a nearest 1/10,000, to the next lower 1/10,000).
Holders otherwise entitled to receive fractional shares in respect of their
aggregate holdings of Securities will receive cash in lieu thereof. See "--
Trust Termination".
The "Average Market Price" per share of Common Stock on any date means the
average Closing Price (as defined below) of a share of Common Stock on the 20
Trading Days (as defined below) immediately prior to but not including such
date, provided that for purposes of determining the payment required upon cash
settlement of the Contracts in connection with a Rollover Offering, "Average
Market Price" means the Closing Price per share of Common Stock on the Trading
Day immediately preceding the date that the Rollover Offering is priced (the
"Pricing Date") or, if the Rollover Offering is priced after 4:00 P.M., New York
City time, on the Pricing Date, the Closing Price per share on the Pricing Date.
-8-
<PAGE>
"Rollover Offering" means a reoffering or refinancing of all (but not less
than all) of the Securities effected within 30 days prior to the Exchange Date
by means of a completed public offering by or on behalf of the Sellers.
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 [NYSE Consolidated
Tape] on such date of determination or, if the Common Stock is not listed for
trading on the [NYSE] 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 Contracts as described under "-- The Contracts -- 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.
A fundamental policy of the Trust is to invest at least [70]% of its total
assets in the Contracts. The Trust has also adopted a fundamental policy that
the Contracts may not be disposed of during the term of the Trust and that the
U.S. Treasury securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust. The
foregoing investment objective and policies are fundamental policies of the
Trust that may not be changed without the approval of a majority of the Trust's
outstanding Securities. A "majority of the Trust's outstanding Securities" means
the lesser of (i) 67% of the Securities represented at a meeting at which more
than 50% of the outstanding Securities are represented, and (ii) more than 50%
of the outstanding Securities.
The value of the Common Stock (or cash or Marketable Securities received in
lieu thereof) that will be received by Holders in respect of the Securities on
the Exchange Date may be more or less than the amount paid for the Securities
offered hereby.
For illustrative purposes only, the following chart shows the number of
shares of Common Stock that a Holder would receive for each Security at various
Average Market Prices. The chart assumes that there would be no adjustments to
the number of shares of Common Stock deliverable under the Contracts by reason
of the occurrence of any of the events described under "-- The Contracts --
Dilution Adjustments". There can be no assurance that the Average Market Price
on the Exchange Date will be within the range set forth below. Given the Initial
Price of $____ per Security and the Appreciation Threshold Price of $____, a
Holder would receive in connection with the exchange of Securities on the
Exchange Date the following number of shares of Common Stock:
AVERAGE MARKET PRICE NUMBER OF SHARES
------------------------ -------------------
TAX TREATMENT OF DISTRIBUTIONS
The following table sets forth information regarding the distributions to be
received on the U.S. Treasuries to be acquired by the Trust with a portion of
the proceeds of the Offering (assuming no exercise of the Underwriters'
over-allotment option), the portion of each year's distributions that will
constitute a return of capital for U.S. federal income tax purposes and the
amount of original issue discount accruing (assuming a yield-to-maturity accrual
election in respect of any short-term U.S. Treasury securities) on such U.S.
Treasuries with respect to a Holder who acquires its Securities
-9-
<PAGE>
at the issue price from an Underwriter pursuant to the original offering. See
"Certain Federal Income Tax Considerations -- Recognition of Interest on the
U.S. Treasury Securities".
<TABLE>
<CAPTION>
ANNUAL GROSS
ANNUAL GROSS DISTRIBUTIONS FROM ANNUAL RETURN OF ANNUAL INCLUSION OF
DISTRIBUTIONS FROM U.S. TREASURIES CAPITAL PER ORIGINAL ISSUE DISCOUNT
U.S. TREASURIES PER SECURITY SECURITY IN INCOME PER SECURITY
YEAR ------------------ ------------------- ----------------- -----------------------
- ----
<S> <C> <C> <C> <C>
1998...........................
1999...........................
2000...........................
2001...........................
</TABLE>
The annual distribution of $____ per Security is payable quarterly on each
___________, ______, _________ and ___________, commencing ___________, 1998.
Quarterly distributions on the Securities will consist solely of the cash
received from the U.S. Treasury securities. The Trust will not be entitled to
any dividends that may be declared on the Common Stock. See "Management and
Administration of the Trust -- Distributions".
ENHANCED YIELD; LESS EQUITY APPRECIATION THAN COMMON STOCK; NO DEPRECIATION
PROTECTION
Holders will receive distributions at a higher annual rate than the current
annual dividends paid on the Common Stock. However, there is no assurance that
the yield on the Securities will be higher than the dividend yield on the Common
Stock over the term of the Trust. In addition, the opportunity for equity
appreciation afforded by an investment in the Securities is less than that
afforded by an investment in the Common Stock because Holders will realize no
equity appreciation if, on the Exchange Date, the Average Market Price of the
Common Stock is below the Appreciation Threshold Price (which represents an
appreciation of ____% of the Initial Price). Moreover, because Holders will only
receive 0. _____ shares of Common Stock per Security (or the Average Market
Price thereof) if the Average Market Price exceeds the Appreciation Threshold
Price, Holders will only be entitled to receive upon exchange ____% (the
percentage equal to the Initial Price divided by the Appreciation Threshold
Price) of any appreciation of the value of the Common Stock in excess of the
Appreciation Threshold Price. Holders of Securities will realize the entire
decline in value if the Average Market Price on the Exchange Date is less than
the price to public per Security shown on the cover page hereof.
THE COMPANY
[TO COME]
The shares of Common Stock are traded on the [New York] Stock Exchange. The
following table sets forth, for the calendar quarters indicated, the reported
high and low sales prices of the shares of Common Stock on the [New York Stock
Exchange Composite Tape] and the cash dividends per share of Common Stock. As of
______________________, 1998, there were
-10-
<PAGE>
record holders of the Common Stock, including The Depository Trust Company,
which holds shares of Common Stock on behalf of an indeterminate number of
beneficial owners.
DIVIDEND
HIGH LOW PER SHARE
-------- -------- ------------
1996
1st Quarter..............................
2nd Quarter..............................
3rd Quarter..............................
4th Quarter..............................
1997
1st Quarter..............................
2nd Quarter..............................
3rd Quarter..............................
4th Quarter
1998
1st Quarter..............................
2nd Quarter (through _________, 1998)....
- ---------------------------
Holders will not be entitled to rights with respect to the Common Stock
(including, without limitation, voting rights and rights to receive dividends or
other distributions in respect thereof) until receipt of shares of Common Stock
by the Holders as a result of the exchange of the Securities for the Common
Stock on the Exchange Date.
Reference is made to the accompanying prospectus of the Company, dated
_________ , 1998 (pages A-1 through A-_ hereto) which describes the Company and
the shares of Common Stock deliverable to the Holders upon mandatory exchange of
the Securities on the Exchange Date. The Company is not affiliated with the
Trust and will not receive any of the proceeds from the sale of the Securities.
The Company prospectus relates to an aggregate of _________ shares of Common
Stock (plus an additional _______ shares that may be delivered upon exercise of
the Underwriters' over-allotment option).
THE CONTRACTS
GENERAL. The Trust will enter into a Contract with each Seller obligating
that 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 such Contract. The aggregate initial number
of shares of Common Stock under the Contracts will equal the aggregate number of
Securities offered hereby (subject to increase in the event the Underwriters
exercise their over-allotment option). Each Contract also provides that the
Seller thereunder may deliver to the Trust upon settlement of such Contract, at
such Seller's option, an amount of cash equal to the then Average Market Price
of the number of shares of Common Stock deliverable pursuant to such Contract
(the "Cash Settlement Alternative"). If a Seller elects to deliver cash in lieu
of shares of Common Stock, such Seller would be required to deliver cash in
respect of all shares deliverable pursuant to such Seller's Contract. The
Trustees will notify the Holders of any election of the Cash Settlement
Alternative, and whether it is intended to be in connection with a Rollover
Offering (which would affect the computation of the Average Market Price in
connection with such settlement, as described under "General" above), not less
than 30 nor more than 60 days prior to the Exchange Date. The cash payment
received by the Trust upon such settlement will be promptly distributed to
Holders. Accordingly, if the cash settlement occurs in connection with a
Rollover Offering, such cash payment may be distributed in advance of the
Exchange Date, but the final quarterly distribution on the Securities will only
be distributed on the Exchange Date. If notice of a cash settlement in
connection with a Rollover Offering is given but the Rollover Offering is not
completed, the Contracts will settle by cash payment on the Exchange Date and
the Average Market Price will be computed on the basis of the average Closing
Price for 20 Trading Days.
-11-
<PAGE>
The purchase price of the Contracts was arrived at by arm's-length
negotiation between the Trust and the Sellers taking into consideration factors
including the price, expected dividend level and volatility of the Common Stock,
current interest rates, the term of the Contracts, current market volatility
generally, the collateral security pledged by the Sellers, the value of other
similar instruments and the costs and anticipated proceeds of the offering of
the Securities. All matters relating to the administration of the Contracts will
be the responsibility of either the Administrator or the Custodian.
DILUTION ADJUSTMENTS. The Exchange Rate is subject to adjustment if the
Company (i) pays a stock dividend or makes a distribution with respect to the
Common Stock in shares of such stock, (ii) subdivides or splits its outstanding
shares of Common Stock, (iii) combines its outstanding shares of Common Stock
into a smaller number of shares, or (iv) issues 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 adjusted as follows: for each share of
Common Stock that would have been issuable upon exchange prior to the
adjustment, the Holder will receive 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 issues rights or warrants to all holders of
Common Stock entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than the Then-Current Market Price of the Common Stock
(as defined below) (other than rights to purchase Common Stock pursuant to a
plan for the reinvestment of dividends or interest), then the Exchange Rate
shall be adjusted pursuant to the following formula:
A = ER x OS + AS
---------
OS + PS
where
ER = the Exchange Rate prior to the adjustment;
OS = 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;
AS = the number of additional shares offered for subscription or purchase
pursuant to such rights or warrants; and
PS = the number of additional shares that the aggregate offering price of
the shares so offered for subscription or purchase would purchase at
the Then-Current Market Price.
To the extent that, after expiration of such rights or warrants, the shares
offered thereby shall not have been delivered, the Exchange Rate shall be
further adjusted to equal the Exchange Rate that would have been in effect had
the foregoing adjustment been made upon the basis of delivery of only the number
of shares of Common Stock actually delivered.
The "Then-Current Market Price" of the Common Stock means the average
Closing Price per share of Common Stock for a Calculation Period of five Trading
Days immediately prior to the time such adjustment is effected (or, in the case
of an adjustment effected 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 effected and the related "ex-date" on which the
shares of Common Stock first trade regular way on their principal market without
the right to receive the relevant dividend, distribution or issuance); provided
that if no Closing Price for the Common Stock is determined for one or more (but
not all) of such Trading Days, such Trading Day shall be disregarded in the
calculation of the Then-Current Market Price (but no additional Trading Days
shall be added to the Calculation Period). If no Closing Price for the Common
Stock is determined for any of such Trading Days, the most recently available
Closing Price for the Common Stock prior to such five Trading Days shall be the
Then-Current Market Price. "Calculation Period" means any period of Trading Days
for which an average security price must be determined pursuant to the
Contracts.
-12-
<PAGE>
In addition, if the Company pays a dividend or makes a distribution to all
holders of Common Stock, in either case, of evidences of its indebtedness or
other non-cash assets (excluding any stock dividends or distributions in shares
of Common Stock) or issues to all holders of Common Stock rights or warrants to
subscribe for or purchase any of its securities (other than rights or warrants
referred to in the second paragraph of this subsection), then the Exchange Rate
shall be adjusted pursuant to the following formula:
A = ER x T
-------
T - V
where
ER = the Exchange Rate prior to adjustment;
T = the Then-Current Market Price per share of Common Stock; and
V = the fair market value (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator) as of the time the adjustment is calculated of the
portion of such evidences of indebtedness, non-cash assets or rights
or warrants payable in respect of one share of Common Stock.
In addition, if the Company distributes cash (other than an Excluded
Distribution ), by dividend or otherwise, to all holders of Common Stock or
makes an Excess Purchase Payment, then the Exchange Rate shall be adjusted
pursuant to the following formula:
A = ER x T
-------
T - D
where
ER = the Exchange Rate prior to adjustment;
T = the Then-Current Market Price on the record date in respect of such
distribution; and
D = the amount of such distribution applicable to one share of Common
Stock that would not be a Permitted Dividend (or in the case of an
Excess Purchase Payment, the aggregate amount of such Excess Purchase
Payment divided by the number of outstanding shares of Common Stock
on such record date).
For purposes of these adjustments,
(a) the term "Excluded Distribution" means any Permitted Dividend, any
cash distributed in consideration of fractional shares of Common
Stock and any cash distributed in a Reorganization Event;
(b) the term "Permitted Dividend" means any quarterly cash dividend in
respect of the Common Stock, other than a quarterly cash dividend
that exceeds the immediately preceding quarterly cash dividend, and
then only to the extent that the per share amount of such dividend
results in an annualized dividend yield on the Common Stock in excess
of ______%; and
(c) the term "Excess Purchase Payment" means the excess, if any, of (i)
the cash and the value (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator, whose determination shall be conclusive) of all other
consideration paid by the Company with respect to one share of Common
Stock acquired in a tender offer or exchange offer by the Company
over (ii) the Then-Current Market Price per share of Common Stock.
-13-
<PAGE>
If any adjustment in the Exchange Rate is required to be calculated as
described above, corresponding adjustments to the Initial Price and the
Appreciation Threshold Price shall be calculated.
Dilution adjustments shall be effected: (i) in the case of any dividend,
distribution or issuance described above, at the opening of business on the
business day following the record date for determination of holders of Common
Stock entitled to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after such record
date, at the time such dividend, distribution or issuance shall be announced by
the Company; (ii) in the case of any subdivision, split, combination or
reclassification described above, on the effective date of such transaction;
(iii) in the case of any Excess Purchase Payment for which the Company shall
announce, at or prior to the time it commences the relevant share repurchase,
the repurchase price for such shares to be repurchased, on the date of such
announcement; and (iv) in the case of any other Excess Purchase Payment, on the
date that the holders of Common Stock become entitled to payment with respect
thereto. There will be no adjustment under the Contracts in respect of any
dividends, distributions, issuances or repurchases that may be declared or
announced after the Exchange Date. If any announcement or declaration of a
record date in respect of a dividend, distribution, issuance or repurchase shall
subsequently be canceled by the Company, or such dividend, distribution,
issuance or repurchase shall fail to receive requisite approvals or shall fail
to occur for any other reason, then the Exchange Rate shall be further adjusted
to equal the Exchange Rate that would have been in effect had the adjustment for
such dividend, distribution, issuance or repurchase not been made. If after an
announcement of a share repurchase, the Company reduces the repurchase price or
repurchases fewer shares than announced, upon completion of such share
repurchase, the Exchange Rate shall be further adjusted to equal the Exchange
Rate that would have been in effect had the adjustment for such repurchase been
based on the actual price and amount repurchased. All adjustments described
herein shall be rounded upward or downward to the nearest 1/10,000 (or if there
is not a nearest 1/10,000, to the next lower 1/10,000). No adjustment in the
Exchange Rate shall be required unless such adjustment would require an increase
or decrease of at least one percent therein; provided, however, that any
adjustments which by reason of the foregoing are not required to be made shall
be carried forward and taken into account in any subsequent adjustment.
In the event of a Reorganization Event, the Exchange Rate will be adjusted
such that, on the Exchange Date, each Holder will receive for each Security cash
in an amount equal to:
(i) if the Transaction Value (as defined below) is less than the
Appreciation Threshold Price but equal to or greater than the Initial Price,
the Initial Price,
(ii) if the Transaction Value is greater than or equal to the
Appreciation Threshold Price, 0.__ multiplied by the Transaction Value, and
(iii) if the Transaction Value is less than the Initial Price, the
Transaction Value;
provided, however, that if the consideration received by holders of Common Stock
in such Reorganization Event does not include Marketable Securities, then (a)
the Sellers' delivery obligations under the Contracts will be accelerated, and
the Transaction Value will be deliverable promptly upon consummation of the
Reorganization Event; (b) the Custodian will liquidate the U.S. Treasury
securities acquired by the Trust at closing and then held by the Trust; and (c)
such Transaction Value and the proceeds of such liquidation will be distributed
to the Holders.
Notwithstanding the foregoing, to the extent that any Marketable Securities
(as defined below) are received by holders of Common Stock in such
Reorganization Event, then in lieu of delivering cash as provided above, the
Sellers may at their option deliver a proportional amount of such Marketable
Securities on the Exchange Date. If the Sellers elect to deliver Marketable
Securities on the Exchange Date, Holders will be responsible for the payment of
any and all brokerage and other transaction costs upon the sale of such
securities.
"Reorganization Event" means (A) any consolidation or merger of the Company,
or any surviving entity or subsequent surviving entity of the Company (a
"Company Successor"), with or into another entity (other than a merger or
consolidation in which the Company is the continuing corporation and in which
the Common Stock outstanding immediately prior to the merger or consolidation is
not exchanged for cash, securities or other property of the Company
-14-
<PAGE>
or another corporation), (B) any sale, transfer, lease or conveyance to another
corporation of the property of the Company or any Company Successor as an
entirety or substantially as an entirety, (C) any statutory exchange of
securities of the Company or any Company Successor with another corporation
(other than in connection with a merger or acquisition) or (D) any liquidation,
dissolution or winding up of the Company or any Company Successor.
"Transaction Value" means (i) for any cash received in any such
Reorganization Event, the amount of cash received per share of Common Stock,
(ii) for any property other than cash or Marketable Securities received in any
such Reorganization Event, an amount equal to the market value on the date the
Reorganization Event is consummated of such property received per share of
Common Stock as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator and (iii) for any
Marketable Securities received in any such Reorganization Event, an amount equal
to the average Closing Price per share of such securities on the 20 Trading Days
immediately prior to the Exchange Date multiplied by the number of such
securities received for each share of Common Stock; provided that if no Closing
Price for such Marketable Securities is determined for one or more (but not all)
of such Trading Days, such Trading Days shall be disregarded in the calculation
of such average Closing Price (but no additional Trading Days shall be added to
the Calculation Period). If no Closing Price for the Marketable Securities is
determined for all such Trading Days, the calculation in the preceding clause
(iii) shall be based on the most recently available Closing Price for the
Marketable Securities prior to such 20 Trading Days. The number of shares of
Marketable Securities included in the calculation of Transaction Value for
purposes of the preceding clause (iii) shall be subject to adjustment if a
dilution event of the type described above shall occur with respect to the
issuer of the Marketable Securities between the time of the Reorganization Event
and the Exchange Date.
For purposes of determining Transaction Value, the term "Trading Day" and
"Closing Price" will have the same meaning, as applied to the Marketable
Securities, as these terms have as applied to the Common Stock for purposes of
determining the Average Market Price.
"Marketable Securities" means any common equity securities (whether voting
or non-voting) listed on a U.S. national securities exchange or reported by The
NASDAQ National Market.
No dilution adjustments will be made for events, other than those described
above, such as offerings of Common Stock (other than through the issuance of
rights or warrants described above) for cash or in connection with acquisitions.
COLLATERAL ARRANGEMENTS; ACCELERATION. Each Seller's obligations under the
Contract between such Seller and the Trust initially will be secured by a
security interest in the maximum number of shares of Common Stock subject to
such Contract (subject to adjustment in accordance with the dilution adjustment
provisions of such Contract, described above), pursuant to a Collateral
Agreement between such Sellers and __________, as collateral agent (the
"Collateral Agent"). Unless a Seller is in default in its obligations under its
Collateral Agreement, such Seller will be permitted to substitute for the
pledged shares of Common Stock collateral consisting of short-term, direct
obligations of the U.S. Government. Any U.S. Government obligations pledged as
substitute collateral will be required to have an aggregate market value at the
time of substitution and at daily mark-to-market valuations thereafter of not
less than 150% (or, from and after any Insufficiency Determination that shall
not be cured by the close of business on the next 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 Agreements will provide
that, in the event of a Reorganization Event, each 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 its Contract at the time
of the Reorganization Event, plus cash in an amount equal to 100% of such
Seller's Cash Delivery Obligations (or U.S. Government obligations having an
aggregate market value when pledged and at daily mark-to-market valuations
thereafter of not less than 105% thereof). The Collateral Agent will be
required, under the Collateral Agreements, to invest any such cash in U.S.
Treasury securities maturing on or before ___________, ____. A Seller's "Cash
Delivery Obligations" shall be the Transaction Value of any consideration other
than Marketable Securities received by such Seller in respect of the maximum
number of shares subject to its Contract at the time of the Reorganization
Event. The number of shares of Marketable Securities required to be pledged
shall be subject to adjustment if any event requiring a dilution adjustment
under the Contracts shall occur. The Sellers will be permitted to substitute
U.S. Government obligations for Marketable Securities pledged at the time of or
after any Reorganization
-15-
<PAGE>
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 next 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 each Seller any dividends, interest, principal or other payments received by
the Collateral Agent in respect of any collateral pledged by such Seller,
including any substitute collateral, unless such Seller is in default of its
obligations under its Collateral Agreement, or unless the payment of such amount
to such Seller would cause the collateral to become insufficient under its
Collateral Agreement. Each Seller shall have the right to vote any pledged
shares of Marketable Securities for so long as such shares are owned by it and
pledged under its Collateral Agreement, including after an event of default
under such Seller's Contract or Collateral Agreement.
If the Collateral Agent shall determine (an "Insufficiency Determination")
that U.S. Government obligations pledged by any Seller as substitute collateral
shall fail to meet the foregoing requirements at any valuation, or that such
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 such Contract, and such failure shall
not be cured by the close of business on the next business day after such
determination, then, unless a Collateral Event of Default (as defined below)
under such 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 such
Collateral Agreement. The Collateral Agent shall discontinue such sales and
purchases if at any time a Collateral Event of Default under such Collateral
Agreement shall have occurred and be continuing. A "Collateral Event of Default"
under such Seller's 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 such Seller's Contract at such time (or, if a
Reorganization Event shall have occurred at or prior to such time, failure of
the collateral to include the maximum number of shares of any 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-Average 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 such Contract at such time and (y) the number
of shares of Common Stock (or shares of Marketable Securities) pledged as
collateral at such time; and (C) at any time after a Reorganization Event in
which consideration other than Marketable Securities shall have been delivered,
failure of any U.S. Government obligations pledged in respect of Cash Delivery
Obligations to have a market value at such time of at least 105% of such Cash
Delivery Obligations, if such failure shall not be cured within one business day
after notice thereof is delivered to such Seller.
The occurrence of a Collateral Event of Default under a Collateral
Agreement, or the bankruptcy or insolvency of a Seller, will cause an automatic
acceleration of such Seller's obligations under its Contract. In any such event,
such Seller will become obligated to deliver the initial number of shares of
Common Stock (or, after a Reorganization Event, the Marketable Securities or
cash or a combination thereof deliverable in respect thereof) subject to such
Seller's Contract, or any U.S. Government obligations then pledged in respect
thereof.
Upon any acceleration under a Collateral Agreement, (i) the Collateral Agent
will distribute to the Trust, for distribution pro rata to the Holders, the
shares of Common Stock then pledged by the Defaulting Seller, or cash generated
from the liquidation of U.S. Government obligations then pledged by the
Defaulting Seller, or a combination thereof (or, after a Reorganization Event,
the Marketable Securities then pledged by the Defaulting Seller, cash generated
from the liquidation of U.S. Government obligations then pledged by the
Defaulting Seller, or a combination thereof) and (ii) the Custodian will
liquidate a proportionate amount of the U.S. Treasury securities acquired by the
Trust at closing and then held by the Trust and distribute the proceeds pro rata
to the Holders. Following any distributions upon acceleration and liquidation in
accordance with the foregoing sentence, the number of shares of Common Stock or
Marketable Securities, as applicable, deliverable to Holders on the Exchange
Date will be proportionately reduced.
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In addition, in the event that by the Exchange Date any substitute collateral
has not been replaced by Common Stock (or, after a Reorganization Event, cash or
Marketable Securities) sufficient to meet the obligations under any 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
Sellers plus cash generated from the liquidation of U.S. Government obligations
then pledged by the Sellers (or, after a Reorganization 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). See "-- Trust Termination".
DESCRIPTION OF THE SELLERS. The Sellers are _________________. Reference is
made to the caption "Selling Shareholders" in the Company's prospectus for
information about the Sellers.
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon ("stripped") U.S.
Treasury securities with face amounts and maturities corresponding to the
distributions payable with respect to the Securities and the payment dates
thereof. Up to [30]% of the Trust's total assets may be invested in these U.S.
Treasury Securities. In the event that any Contract is accelerated, then a
proportionate amount of such U.S. Treasury securities then held in the Trust
shall be liquidated by the Administrator and the proceeds thereof distributed
pro rata to the Holders, together with the amounts distributed upon
acceleration. 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 Contracts and the
Common Stock or other assets received pursuant to the Contracts and, for cash
management purposes, short-term obligations of the U.S. Government; issue any
securities or instruments except for the Securities; make short sales or
purchase securities on margin; write put or call options; borrow money;
underwrite securities; purchase or sell real estate, commodities or commodities
contracts including futures contracts; or make loans (other than the purchase of
stripped U.S. Treasury securities as described in this Prospectus). The Trust
also has adopted a fundamental policy that the Contracts may not be disposed of
during the term of the Trust and that the U.S. Treasury securities held by the
Trust may not be disposed of prior to the earlier of their respective maturities
and the termination of the Trust.
Because of the foregoing limitations, the Trust's investments will be
concentrated in the ____________________ industry, which is the industry in
which the Company operates. The Trust is not permitted to purchase restricted
securities.
TRUST TERMINATION
The Trust will terminate automatically on or shortly after the Exchange
Date. Alternatively, in the event that all Contracts are accelerated, then any
U.S. Treasury securities then held in the Trust shall be liquidated by the
Administrator and the proceeds 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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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
Contracts 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 Contracts despite significant
declines in the market price of the Common Stock or adverse changes in the
financial condition of the Company (or, after a Reorganization Event, comparable
developments affecting any Marketable Securities or the issuer thereof). The
Trust will not be managed like a typical closed-end investment company.
LIMITED APPRECIATION POTENTIAL; COMMON STOCK DEPRECIATION RISK
The Trust anticipates that on the Exchange Date, it will receive the Common
Stock deliverable pursuant to the Contracts, which it will then distribute to
Holders. Although the yield on the Securities is higher than the current
dividend yield on the Common Stock, there is no assurance that the yield on the
Securities will be higher than the dividend yield on the Common Stock over the
term of the Trust. In addition, because the Contracts call for the Sellers to
deliver less than the full number of shares of Common Stock subject to the
Contracts where the Average Market Price exceeds the Initial Price (and
therefore less than one full share of Common Stock for each outstanding
Security), the Securities have more limited appreciation potential than the
Common Stock. Therefore, the Securities may trade below the value of the Common
Stock if the Common Stock appreciates in value. The value of the Common Stock to
be received by Holders on the Exchange Date (and any cash received in lieu
thereof) may be less than the amount paid for the Securities. Holders of
Securities will realize the entire decline in value if the Average Market Price
is less than the price to public per Security shown on the cover page hereof.
DILUTION ADJUSTMENTS; SHAREHOLDER RIGHTS
The number of shares of Common Stock that Holders are entitled to receive at
the termination of the Trust is subject to adjustment for certain events arising
from stock splits and combinations, stock dividends and certain other actions of
the Company that modify its capital structure. See "Investment Objective and
Policies -- The Contracts -- 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 Contracts to the price of the Common
Stock, such other events may adversely affect the trading price of the
Securities. There can be no assurance that the Company will not take any of the
foregoing actions, or that it will not make offerings of, or that major
shareholders will not sell any, Common Stock in the future, or as to the amount
of any such offerings or sales. In addition, until the receipt of the Common
Stock by Holders as a result of the exchange of the Securities for the Common
Stock, Holders will not be entitled to any rights with respect to the Common
Stock (including without limitation voting rights and the rights to receive any
dividends or other distributions in respect thereof).
TRADING VALUE; LISTING
The Trust is a newly organized closed-end investment company with no
previous operating history and the Securities are innovative securities. It is
not possible to predict how the Securities will trade in the secondary market.
The trading price of the Securities may vary considerably prior to the Exchange
Date due to, among other things, fluctuations in the price of the Common Stock
(which may occur due to changes in the Company's financial condition, results of
operations or prospects, or because of complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, the stock exchanges or quotation systems on which the Common Stock is
traded and the market segment of which the Company is a part) and fluctuations
in interest rates and other factors that are difficult to predict and beyond the
Trust's control. The Trust believes, however, that because of the yield on the
Securities and the formula for determining the number of shares of Common Stock
to be delivered on the Exchange Date, the Securities will tend to trade at a
premium to the market value of the Common Stock to the extent the Common
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Stock price falls and at a discount to the market value of the Common Stock to
the extent the Common Stock price rises. There can, however, be no assurance
that the Securities will trade at a premium to the market value of the Common
Stock.
Shares of closed-end investment companies frequently trade at a 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 because for those investors,
realization of a gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance.
Goldman Sachs currently intends, but is not obligated, to make a market in
the Securities. There can be no assurance that a secondary market will develop
or, if a secondary market does develop, that it will provide the Holders with
liquidity of investment or that it will continue for the life of the Securities.
Goldman Sachs may cease to make a market in the Securities at any time without
notice. Application will be made to list the Securities on the [NYSE]. Assuming
the acceptance of such application, there can be no assurance that the
Securities will not later be delisted or that trading in the Securities on the
[NYSE] will not be suspended. In the event of a delisting or suspension of
trading on such exchange, the Trust will apply for listing of the Securities on
another national securities exchange or for quotation on another trading market.
If the Securities are not listed or traded on any securities exchange or trading
market, or if trading of the Securities is suspended, pricing information for
the Securities may be more difficult to obtain, and the price and liquidity of
the Securities may be adversely affected.
NON-DIVERSIFIED STATUS
The Trust is considered non-diversified under the Investment Company Act,
which means that the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. Since the only assets
held or received by the Trust will be U.S. Treasury securities and the Contracts
or other assets consistent with the terms of the Contracts, the Trust will be
subject to greater risk than would be the case for an investment company with
diversified investments.
[RISKS RELATING TO THE COMPANY'S INDUSTRY]
[TO COME]
DESCRIPTION OF THE SECURITIES
Each Security represents an equal proportional interest in the Trust, and a
total of _______ Securities will be issued (assuming no exercise of the
Underwriters' overallotment option). Upon liquidation of the Trust, Holders are
entitled to share pro rata in the net assets of the Trust available for
distribution. The Securities have no preemptive, redemption or conversion
rights. Securities are fully paid and nonassessable by the Trust. The only
securities that the Trust is authorized to issue are the Securities offered
hereby and those sold to the initial Holder referred to below. See
"Underwriting".
Holders are entitled to a full vote for each Security held on all matters to
be voted on by Holders and are not able to cumulate their votes in the election
of Trustees. The Trustees of the Trust have been selected initially by Goldman
Sachs, as the initial Holder of Securities of the Trust. The Trust intends to
hold annual meetings as required by the rules of the [NYSE]. 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 Amended and Restated Trust Agreement.
The Holders have the right, upon the declaration in writing or vote of more than
two-thirds of the outstanding Securities, to remove a Trustee. The Trustees will
call a meeting of Holders to vote on the removal of a Trustee upon the written
request of the Holders of record of 10% of the Securities or to vote on other
matters upon the written request of the Holders of record of 51% of
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the Securities (unless substantially the same matter was voted on during the
preceding 12 months). The Trustees shall establish, and notify the Holders in
writing of, the record date for each such meeting which shall be not less than
10 nor more than 50 days before the meeting date. Holders at the close of
business on the record date will be entitled to vote at the meeting. The Trust
will also assist in communications with other Holders as required by the
Investment Company Act.
In calculating the net asset value of the Trust as required by the
Investment Company Act, the Amended and Restated Trust Agreement provides that
(i) the Treasury Securities will be valued at the mean between the last current
bid and asked prices or, if quotations are not available, as determined in good
faith by the Trustees, (ii) short-term investments having a maturity of 60 days
or less will be valued at cost with accrued interest or discount earned included
in interest receivable and (iii) the Contracts will be valued on the basis of
the bid price received by the Trust in respect of the Contracts, or any portion
thereof covering not less than 1,000 shares, from an independent broker-dealer
firm unaffiliated with the Trust to be named by the Trustees who is in the
business of making bids on financial instruments similar to the Contracts and
with terms comparable thereto, or if such a bid quotation is not available, as
determined in good faith by the Trustee.
BOOK-ENTRY-ONLY ISSUANCE
The Depository Trust Company ("DTC") will act as securities depository for
the Securities. The information in this section concerning DTC and DTC's
book-entry system is based upon information obtained from DTC. The Securities
offered hereby will be issued only as fully-registered securities registered in
the name of Cede & Co. (as nominee for DTC). One or more fully-registered global
Security certificates will be issued, representing in the aggregate the total
number of Securities, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the 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 Securities within the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of a Security
("Beneficial Owner") is in turn to be recorded on the Direct or Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Securities. Transfers of ownership
interests in Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Securities,
except upon a resignation of DTC.
DTC has no knowledge of the actual Beneficial Owners of the Securities;
DTC's records reflect only the identity of the Direct Participants to whose
accounts such Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
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Payments on the Securities will be made to DTC. 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.
Except as provided herein, a Beneficial Owner of an interest in a global
Security will not be entitled to receive physical delivery of Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Securities.
DTC may discontinue providing its services as securities depository with
respect to the Securities at any time by giving reasonable notice to the Trust.
Under such circumstances, in the event that a successor securities depository is
not obtained, certificates representing the Securities will be printed and
delivered.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The Trust will be internally managed by three Trustees, none of which is an
"interested person" of the Trust as defined in the Investment Company Act. Under
the provisions of the Code applicable to grantor trusts, the Trustees will not
have the power to vary the investments held by the Trust. It is a fundamental
policy of the Trust that the Contracts may not be disposed of during the term of
the Trust and that the U.S. Treasury Securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities and termination
of the Trust.
The names of the persons who have been elected by Goldman Sachs, the initial
Holder of the Trust, and who will serve as the Trustees are set forth below. The
positions and the principal occupations of the individual Trustees during the
past five years are also set forth below.
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- --------------------- ----- ----------------------
MANAGING TRUSTEE
TRUSTEE
TRUSTEE
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 Sellers,
on behalf of the Trust, in respect of its 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
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fee of $_________ for serving in that capacity. The Trustees will not receive,
either directly or indirectly, any other 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 __________ as Trust
Administrator pursuant to an Administration Agreement. Under the Administration
Agreement, the Trustees have delegated most of their operational duties to the
Administrator, including without limitation, the duties to: (i) receive invoices
for expenses incurred by the Trust; (ii) with the approval of the Trustees,
engage legal and other professional advisors (other than the independent public
accountants for the Trust); (iii) instruct the Paying Agent to pay distributions
on Securities as described herein; (iv) prepare and mail, file or publish all
notices, proxies, reports, tax returns and other communications and documents,
and keep all books and records, for the Trust; (v) at the direction of the
Trustees, institute and prosecute legal and other appropriate proceedings to
enforce the rights and remedies of the Trust; and (vi) make all necessary
arrangements with respect to meetings of Trustees and any meetings of Holders.
The Administrator, however, will not select the independent public accountants
for the Trust or sell or otherwise dispose of the Trust assets (except in
connection with an acceleration of a Contract or the settlement of the Contracts
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.
Except for its roles as Administrator, Custodian, Paying Agent, registrar
and transfer agent for the Trust, ___________ has no other affiliation with, and
is not engaged in any other transactions with, the Trust.
The address of the Administrator is _______________.
CUSTODIAN
The Trust's custodian (the "Custodian") is ______________ 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 Agreements 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 Contracts.
PAYING AGENT
The transfer agent, registrar and paying agent (the "Paying Agent") for the
Securities is _____________ pursuant to a paying agent agreement (the "Paying
Agent Agreement"). In the event of any termination of the Paying Agent Agreement
by the Trust or the resignation of the Paying Agent, the Trust will use its best
efforts to engage a new Paying Agent to carry out the duties of the Paying
Agent.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Paying Agent, the Administrator
and the Custodian, with respect to any claim, liability, loss or expense
(including the costs and expenses of the defense against any claim or liability)
that it may incur in acting as Trustee, Paying Agent, Administrator or
Custodian, as the case may be, except in the case of willful misfeasance, bad
faith, gross negligence or reckless disregard of their respective duties or
where applicable law prohibits such indemnification. Goldman Sachs has agreed to
reimburse the Trust for any amounts it may be required
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to pay as indemnification to any Trustee, the Administrator, the Custodian or
the Paying Agent. Goldman Sachs will in turn be reimbursed by the Sellers for
all such reimbursements paid by it.
DISTRIBUTIONS
The Trust intends to distribute to Holders on a quarterly basis an amount
equal to $ . per Security (which amount equals the pro rata portion of the fixed
quarterly cash distributions from the proceeds of the maturing U.S. Treasury
securities held by the Trust). The first distribution, reflecting the Trust's
operations from the date of this offering, will be made on ___________, 1998 to
Holders of record as of __________, 1998. 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 should be treated as a tax-free return of the
Holder's investment. See "Investment Objective and Policies -- Tax Treatment of
Distributions" and "Certain Federal Income Tax Considerations -- Recognition of
Interest on the U.S. Treasury Securities".
Upon termination of the Trust, as described under the caption "Investment
Objective and Policies -- Trust Termination", each Holder will receive any
remaining net assets of the Trust.
The Trust does not permit the reinvestment of distributions.
ESTIMATED EXPENSES
At the closing of this offering the Sellers will pay to each of the
Administrator, the Custodian and the Paying Agent, and to each Trustee, a
one-time, up-front amount in respect of its fee and, in the case of the
Administrator, anticipated expenses of the Trust over the term of the Trust. The
anticipated Trust expenses to be borne by the Administrator include, among other
things, expenses for legal and independent accountants' services, costs of
printing proxies, Securities certificates and Holder reports, expenses of the
Trustees, fidelity bond coverage, stock exchange listing fees and expenses of
qualifying the Securities for sale in the various states. Organization costs of
the Trust in the amount of $__________ and estimated costs of the Trust in
connection with the initial registration and public offering of the Securities
in the amount of $_______ will be paid by the Sellers.
The amount payable to the Administrator in respect of ongoing expenses of
the Trust was determined based on estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. There cannot, however, be any assurance that actual
operating expenses of the Trust will not be substantially more than this amount.
Any excess expenses will be paid by the Sellers or, in the event of failure by
the Sellers to pay such amounts, the Trust, which will reduce the amount
available to distribute to Holders.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the principal United States federal income tax
consequences of ownership of Securities reflects the opinion of Sullivan &
Cromwell, counsel to the Trust. It deals only with Securities held as capital
assets by a Holder who acquires its Securities at the issue price from an
Underwriter pursuant to the original offering, and not with special classes of
Holders, such as dealers in securities or currencies, banks, life insurance
companies, persons who are not United States Holders (as defined below), persons
that hold Securities that are part of a hedging transaction, straddle or
conversion transaction, or persons whose functional currency is not the U.S.
dollar. The summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), its legislative history, existing and proposed regulations
thereunder, published rulings and court decisions, all as currently in effect
and all subject to change at any time, perhaps with retroactive effect. It
should be noted that the Trust has not sought a ruling from the Internal Revenue
Service with respect to the federal income tax consequences of ownership of
Securities, and the opinion of counsel of Sullivan & Cromwell is not binding on
the Internal Revenue Service.
Prospective purchasers of Securities should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of ownership of Securities.
A United States Holder is a beneficial owner who or that is (i) a citizen or
resident of the United States, (ii) a domestic corporation or (iii) otherwise
subject to United States federal income taxation on a net income basis in
respect of Securities.
Holders should also be aware that there are alternative characterizations of
the assets of the Trust which could result in different federal income tax
consequences. See "Alternative Characterizations" below. While Sullivan &
Cromwell does not believe these alternative characterizations should apply for
federal income tax purposes, there can be no assurance in this regard, and
Holders should consult their tax advisors concerning the risks associated with
alternative characterizations. The following discussion assumes that no such
alternative characterizations will apply.
TAX STATUS OF THE TRUST. The Trust will be treated as a grantor trust for
federal income tax purposes, and each Holder will be considered the owner of its
pro rata portions of the stripped U.S. Treasury securities and the Contracts in
the Trust under the grantor trust rules of the Code. Income received by the
Trust will be treated as income of the Holders in the manner set forth below.
RECOGNITION OF ORIGINAL ISSUE DISCOUNT ON THE U.S. TREASURY SECURITIES. The
U.S. Treasury securities in the Trust will consist of stripped U.S. Treasury
securities. A Holder will be required to treat its pro rata portion of each U.S.
Treasury security in the Trust as a bond that was originally issued on the date
the Trust acquired the relevant U.S. Treasury securities and will include
original issue discount in income over the life of the U.S. Treasury securities
in an amount equal to the Holder's pro rata portion of the excess of the amounts
payable on such U.S. Treasury securities over the value of the U.S. Treasury
securities at the time the Trust acquires them. The amount of such excess will
constitute only a portion of the total amounts payable in respect of U.S.
Treasury securities held by the Trust, however. Consequently, a substantial
portion of each quarterly cash distribution to the Holders will be treated as a
tax-free return of the Holders' investment in the U.S. Treasury securities and
will not be considered current income for federal income tax purposes. See
"Investment Objective and Policies -- Tax Treatment of Distributions".
A Holder (whether on the cash or accrual method of tax accounting) will be
required to include original issue discount (other than original issue discount
on short-term U.S. Treasury securities as defined below) in income for federal
income tax purposes as it accrues on a constant yield basis. The Trust expects
that more than 20% of the Holders will be accrual basis taxpayers, in which case
original issue discount on any short-term U.S. Treasury security (i.e., any U.S.
Treasury security with a maturity of one year or less from the date it is
purchased) held by the Trust also will be required to be included in income by
the Holders as it is accrued. Unless a Holder elects to accrue the original
issue discount on a short-term U.S. Treasury security according to a constant
yield method based on daily compounding, such original issue discount will be
accrued on a straight-line basis.
-24-
<PAGE>
TAX BASIS OF THE U.S. TREASURY SECURITIES AND THE CONTRACTS. A Holder's
initial tax basis in the Contracts 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 net proceeds
of the offering will be used by the Trust to purchase the U.S. Treasury
securities and as payments for the Contracts, respectively. A Holder's tax basis
in the U.S. Treasury securities will be increased by the amounts of original
issue discount included in income in respect of U.S. Treasury securities and
decreased by each amount of cash received in respect of U.S. Treasury
securities.
TREATMENT OF THE CONTRACTS. Each Holder will be treated as having entered
into a pro rata portion of the Contracts and, at the Exchange Date, as having
received a pro rata portion of the Common Stock or cash, Marketable Securities
or a combination thereof delivered to the Trust.
DISTRIBUTION OF THE COMMON STOCK. The delivery of Common Stock pursuant to
the Contracts will not be taxable to the Holders. Each Holder's basis in its
Common Stock will be equal to its basis in its pro rata portion of the Contracts
less the portion of such basis allocable to any fractional shares of Common
Stock for which cash is received. A Holder will recognize short-term capital
gain or loss upon receipt by the Trust of cash in lieu of fractional shares of
Common Stock equal to the difference between the Holder's allocable portion of
the amount of cash received and the Holder's basis in such fractional shares.
The holding period for the Common Stock will begin on the day after it is
acquired by the Trust.
DISTRIBUTION OF CASH. If the Trust receives cash upon settlement of the
Contracts, a Holder will recognize capital gain or loss equal to the difference
between the Holder's allocable portion of the amount of cash received and the
Holder's basis of the Contracts settled therefor. Any gain or loss will be
capital gain or loss which is taxable to Holders as described below under "Sale
of Securities".
SALE OF SECURITIES. A Holder who sells Securities will be treated as having
sold its pro rata portions of the U.S. Treasury securities and the Contracts
underlying the Securities. The Holder will therefore recognize capital gain or
loss equal to the difference between the amount realized and the Holder's
aggregate tax bases in its pro rata portions of the U.S. Treasury securities and
the Contracts. Any gain or loss will be long-term capital gain or loss if the
Trust has held the relevant property for more than one year. Long-term capital
gain of an individual Holder will be subject to a maximum tax rate of 28% in
respect of property held for more than one year. The maximum rate is reduced to
20% in respect of property held in excess of 18 months.
ALTERNATIVE CHARACTERIZATIONS. Sullivan & Cromwell believes the Contracts
should be treated for federal income tax purposes as prepaid forward contracts
for the purchase of a variable number of shares of Common Stock.
The Internal Revenue Service could conceivably seek to treat the Contracts
differently. The Internal Revenue Service might, for example, seek to treat the
Contracts as loans to the Sellers in exchange for contingent debt obligations of
the Sellers. If the Internal Revenue Service were to prevail in making such an
assertion, a Holder might be required to include original issue discount in
income over the life of the Securities at a market rate of interest for the
Seller, taking account of all the relevant facts and circumstances. In addition,
a Holder would be required to include interest (rather than capital gain) in
income on the Exchange Date in an amount equal to the excess, if any, of the
value of the Common Stock received on the Exchange Date (or the proceeds from
cash settlement of the Contracts) over the aggregate of the basis of the
Contracts and any interest on the Contracts previously included in income (or
might be entitled to an ordinary deduction to the extent of interest previously
included in income and not ultimately received). The Internal Revenue Service
could also conceivably take the view that a Holder should include in income the
amount of cash actually received each year in respect of the Securities.
BACKUP WITHHOLDING AND INFORMATION REPORTING. The payments of principal and
interest (including original issue discount) on, and the proceeds received from
the sale of, Securities may be subject to U.S. backup withholding tax at the
rate of 31% if the Holder thereof fails to supply an accurate taxpayer
identification number or otherwise to comply with applicable U.S. information
reporting or certification requirements. Any amounts so withheld will be allowed
as
-25-
<PAGE>
a credit against such Holder's U.S. federal income tax liability and may entitle
such Holder to a refund, provided that the required information is furnished to
the Internal Revenue Service.
After the end of each calendar year, the Trust will furnish to each record
Holder of Securities an annual statement containing information relating to the
payments on the U.S. Treasury securities received by the Trust. The Trust will
also furnish annual information returns to each record Holder of the Securities
and to the Internal Revenue Service.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the Trust
has agreed to sell to Goldman Sachs, as Underwriters, and the Underwriters have
agreed to purchase from the Trust, _________ Securities.
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Securities offered
hereby, if any are taken.
The Underwriters propose to offer the Securities in part directly to the
public at the price to the public set forth on the cover page of this Prospectus
and in part to certain securities dealers at such price less a concession of
$____ per Security. The Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $____per Security to certain brokers and dealers.
After the Securities are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Underwriters. The
sales load of $__________ per Security is equal to ____% of the initial public
offering price. Investors must pay for any Securities purchased in the initial
public offering on or before _____________, 1998.
In connection with the offering, the Underwriters may purchase and sell the
Securities and the Common Stock in the open market. These transactions may
include over-allotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the securities or the Common
Stock; and short positions created by the Underwriters involve the sale by the
Underwriters of a greater number of Securities than they are required to
purchase from the Trust in the offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the Securities sold in the offering may be
reclaimed by the syndicate if such securities are repurchased by the syndicate
in stabilizing or covering transactions. These activities may stabilize,
maintain or otherwise affect the market price of the Securities which may be
higher than the price that might otherwise prevail in the open market, and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected on the [NYSE], in the over-the-counter market or otherwise.
In light of the fact that proceeds from the sale of the Securities will be
used by the Trust to purchase the Contracts from the Sellers, the Underwriting
Agreement provides that the Sellers will pay to the Underwriters the
Underwriters' Compensation of $____ per Security.
The Trust has granted the Underwriters an option exercisable for 30 calendar
days after the date of this Prospectus to purchase up to an aggregate of _______
additional Securities solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, they will receive the
Underwriters' Compensation referred to above for each Security so purchased.
The Sellers and the Company have agreed that, during the period beginning
from the date of this Prospectus and continuing to and including the date 180
days after the date of this Prospectus, they will not offer, sell, contract to
sell or otherwise dispose of any Common Stock or other securities of the Company
(other than pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus) which are substantially similar to the Common Stock
or which are convertible or exchangeable
-26-
<PAGE>
into Common Stock or other securities which are substantially similar to the
Common Stock, without the prior written consent of Goldman Sachs.
The Securities will be a new issue of securities with no established trading
market. Application has been made to list the Securities on the [NYSE]. Goldman
Sachs have advised the Company that they intend to make a market in the
Securities, but they are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Securities.
Goldman Sachs has informed the Trust that it will not confirm sales to any
accounts over which it exercises discretionary authority without specific
written approval of such transactions by the customer.
The Company and the Sellers have agreed to indemnify the Underwriters
against certain liabilities, including certain liabilities under the Securities
Act of 1933. The Underwriters have agreed to pay certain expenses of the Trust.
One Security has been subscribed for by Goldman Sachs at an aggregate
purchase price of $100.00. No Securities will be sold to the public until the
Securities subscribed for have been purchased and the purchase price thereof
paid in full to the Trust.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Trust and the
Underwriters by their counsel, Sullivan & Cromwell, 125 Broad Street, New York,
New York 10004.
EXPERTS
The financial statement included in this Prospectus has been audited by
_______________, independent accountants, as stated in their opinion appearing
herein, and has been so included in reliance upon such opinion given upon the
authority of that firm as experts in accounting and auditing.
FURTHER INFORMATION
The Trust has filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Securities offered hereby. Further information
concerning the Securities and the Trust may be found in the Registration
Statement of which this Prospectus constitutes a part. The Registration
Statement may be inspected without charge at the Commission's office in
Washington, D.C., and copies of all or any part thereof may be obtained from
such office after payment of the fees prescribed by the Commission. Such
Registration Statement is also available on the Commission's website
(http://www.sec.gov).
-27-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Securityholders of
Fifth Automatic Common Exchange Security Trust:
We have audited the accompanying statement of assets and liabilities of
Fifth Automatic Common Exchange Security Trust as of ________, 1998. This
financial statement is the responsibility of the Trust's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by the Trust's management, as well as evaluating the overall
financial statement presentation. We believe that our audit of the financial
statement provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Fifth Automatic Common
Exchange Security Trust, as of ________, 1998 in conformity with generally
accepted accounting principles.
New York, New York
________, 1998
-28-
<PAGE>
FIFTH AUTOMATIC COMMON EXCHANGE SECURITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
________, 1998
ASSETS
Cash................................................... $ 100
----------
Total assets........................................... $ 100
==========
LIABILITIES
....................................................... $ 0
-----------
NET ASSETS
Balance applicable to 1 Security outstanding........... $ 100
-----------
Net asset value per Security........................... $ 100
===========
- ---------------------------
(1) Fifth Automatic Common Exchange Security Trust (the "Trust") was
established on April 21, 1998 and has had no operations to date other than
matters relating to its organization and registration as a non-diversified,
closed-end management investment company under the Investment Company Act
of 1940. Costs incurred in connection with the organization of the Trust
will be paid by ___________________.
(2) The Trust proposes to sell Trust Automatic Common Exchange Securities (the
"Securities") to the public pursuant to a Registration Statement on Form
N-2 under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended. The Trust is a newly organized,
finite-term trust established to purchase and hold a portfolio of stripped
U.S. treasury securities and a forward purchase contract with existing
shareholders of ______ relating to the common stock of
_____________________. The Trust will be internally managed and will not
have an investment adviser. The administration of the Trust, which will be
overseen by the trustees, will be carried out by ____________ as trust
administrator. ____________ will also serve as custodian, paying agent,
registrar and transfer agent with respect to the Securities. Ongoing fees
and anticipated expenses for the term of the Trust will be paid for by
--------------------.
(3) The Trust issued one Security on ________, 1998 to Goldman, Sachs & Co. in
consideration for the aggregate purchase price of $100.
The Amended and Restated Trust Agreement provides that prior to the
offering, the Trust will split the outstanding Security to be effected on
the date that the price and underwriting discount of the Securities being
offered to the public is determined, but prior to the sale of the
Securities to Goldman, Sachs & Co. The initial Security will be split into
the smallest whole number of Securities that would result in the per
Security amount recorded as shareholders' equity after effecting the split
not exceeding the Public Offering price per Security.
-29-
<PAGE>
<TABLE>
<S> <C>
================================================================ ==============================================================
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 _______________ SHARES
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO FIFTH AUTOMATIC
SELL OR THE SOLICITATION OF ANY OFFER TO BUY SUCH SECURITIES
IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS COMMON EXCHANGE
UNLAWFUL.
SECURITY TRUST
------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary.................................... 3 $ . TRUST AUTOMATIC COMMON
The Trust............................................. 8 EXCHANGE SECURITIES
Use of Proceeds....................................... 8 (TRACES(TM)/(SM))
Investment Objective and Policies..................... 8
Risk Factors.......................................... 18
Description of the Securities......................... 19 ---------------------------
Management and Administration of the Trust............ 21
Certain Federal Income Tax Considerations............. 24 PROSPECTUS
Underwriting.......................................... 26
Validity of Securities................................ 27 ---------------------------
Experts............................................... 27
Further Information................................... 27
Report of Independent Accountants..................... 28
Statement of Assets and Liabilities................... 29
-----------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS)
ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO GOLDMAN, SACHS & CO.
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.
================================================================ ==============================================================
</TABLE>
<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
2.a.(i) Trust Agreement
2.a.(ii) Form of Amended and Restated Trust Agreement*
2.d Form of Specimen Certificate of Trust Automatic
Common Exchange Security
(included in Exhibit 2.a.(ii))*
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 Contract*
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.n.(i))*
2.n.(iii) Consent of Independent Public Accountants*
2.n.(iv) Consents to Being Named as Trustee*
2.p Form of Subscription Agreement*
2.r Financial Data Schedule*
- ---------------------------
* 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.
C-1
<PAGE>
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:
Registration fees.................................................. $
[New York] Stock Exchange listing fee..............................
Printing (other than certificates).................................
Fees and expenses of qualification under state securities laws
(excluding fees of counsel)......................................
Accounting fees and expenses.......................................
Legal fees and expenses............................................
NASD fees..........................................................
Miscellaneous......................................................
Total.............................................................. $
==========
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Prior to April 21, 1998 the Trust had no existence. As of the effective
date, the Trust will have entered into a Subscription Agreement for one Security
with Goldman, Sachs & Co. and an Underwriting Agreement with respect to
_________ Securities with Goldman, Sachs & Co.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
-------------- --------------
Trust Automatic Common Exchange Securities.............. 1
ITEM 29. INDEMNIFICATION
The Underwriting Agreement, to be 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 "Securities Act").
The Amended and Restated Trust Agreement filed as Exhibit 2.a.(ii) to this
Registration Statement provides for indemnification to each Trustee against any
claim or liability incurred in acting as Trustee of the Trust, except in the
case of willful misfeasance, bad faith, gross negligence or reckless disregard
of the Trustee's duties. The Custodian Agreement, Administration Agreement and
Paying Agent Agreement filed as Exhibits 2.j, 2.k.(i) and 2.k.(ii) to this
Registration Statement provide for indemnification to the Custodian,
Administrator and Paying Agent against any loss or expense incurred in the
performance of their obligations under the respective agreements, unless such
loss or expense is due to willful misfeasance, bad faith, gross negligence or
reckless disregard of their obligations. The Fund Indemnity Agreement filed as
Exhibit 2.k.(vi) to this Registration Statement provides that Goldman Sachs will
indemnify the Trust for certain indemnification expenses incurred under the
Amended and Restated Trust Agreement, the Custodian Agreement, the
Administration Agreement and the Paying Agent Agreement.
Insofar as indemnification for liabilities arising under the Securities 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 Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a 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
C-2
<PAGE>
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Not Applicable.
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 Goldman, Sachs & Co., 85 Broad Street, New
York, New York 10004 and at the offices of ______________, 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 its units 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 Securities 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 Securities 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 Securities 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.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York, State of New York, on the 21st day of
April, 1998.
FIFTH AUTOMATIC COMMON
EXCHANGE SECURITY TRUST
By: /s/ Paul S. Efron
----------------------------------
Paul S. Efron
Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person, in the
capacities and on the date indicated.
NAME TITLE DATE
/s/ Paul S. Efron Principal Executive Officer, April 21, 1998
- ------------------------ Principal Financial Officer,
Paul S. Efron Principal Accounting Officer
and Trustee
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ---------------------------------------------------------------- ----------
<S> <C> <C>
2.a.(i) Trust Agreement
2.a.(ii) Form of Amended and Restated Trust Agreement*
2.d Form of Specimen Certificate of Trust Automatic Common Exchange
Security (included in Exhibit 2.a.(ii))*
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 Contract*
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.n.(i))*
2.n.(iii) Consent of Independent Public Accountants*
2.n.(iv) Consents to Being Named as Trustee*
2.p Form of Subscription Agreement*
2.r Financial Data Schedule*
- ----------
<FN>
* To be Filed by Amendment.
</FN>
</TABLE>
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of April 21, 1998, between GOLDMAN,
SACHS & CO., as sponsor (the "Sponsor") and PAUL S. EFRON, as trustee (the
"Trustee").
1. The Sponsor hereby creates Fifth Automatic Common Exchange Security
Trust (the "Trust") in order that it may acquire and hold a fixed portfolio of
stripped U.S. Treasury Securities (the "Treasuries"), enter into and hold
purchase contracts with respect to common stocks chosen by the Trustee (the
"Contracts"), issue shares of beneficial interest therein ("Shares") and hold
the Trust Estate in trust for the use and benefit of all present and future
beneficial owners of Shares and otherwise carry out the terms and conditions
hereof, all for the purpose of providing periodic cash distributions and the
potential for capital appreciation for the beneficial owners of Shares. The
Trustee hereby declares that he will accept and hold the Trust Estate in trust
for the use and benefit of all present or future beneficial owners of Shares.
The Sponsor hereby deposits with the Trustee the sum of $10 to accept and hold
in trust hereunder. As used herein, "Trust Estate" means the Treasuries, the
Contracts and any monies held by the Trust from time to time.
2. The Sponsor specifically authorizes and directs the Trust to (i)
prepare a Registration Statement to be filed with the Securities and Exchange
Commission and an accompanying Prospectus to be furnished to prospective
purchasers of Shares; (ii) acquire the Treasuries as directed by the Sponsor;
(iii) enter into the Contracts; (iv) hold, invest and disburse monies as
directed by the Sponsor; and (v) adopt and amend bylaws and take any and all
other actions as necessary or advisable to carry out the purposes of the Trust.
3. Subject to the specific provisions hereof, the Trust will be managed
solely by the Trustee. The Trustee shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Trust
<PAGE>
and shall not employ, or permit another to employ, such funds or assets in any
manner except for the exclusive benefit of the Trust.
4. The Trustee may resign or be discharged of the trust created hereby
by executing an instrument in writing, filing the same with the Sponsor and such
resignation shall become effective immediately unless otherwise specified
therein. Prior to the issuance of Shares, any vacancy in the office of the
Trustee may be filled by appointment by the Sponsor.
5. The Trustee shall not be liable to the Trust or any beneficial owner
of Shares for any action taken or for refraining from taking any action except
in the case of willful misfeasance, bad faith, gross negligence or a willful
disregard of the duties of his office.
6. Prior to the issuance of Shares, (i) the trust created hereby shall
be revocable by the Sponsor at any time upon written notice to the Trustee, and
(ii) this Trust Agreement may be amended by the Trustee from time to time for
any purpose. This Trust Agreement and the Trust shall terminate upon the date
which is 21 years after the death of the last survivor of Joseph P. Kennedy
living on the date hereof.
7. This Trust Agreement is executed and delivered in the State of New
York, and all laws or rules of construction of the State of New York shall
govern the rights of the parties hereto and beneficial owners of Shares and the
interpretation of the provisions hereof.
8. This Trust Agreement may be executed in one or more counterparts and
when a counterpart has been executed by each party hereto all such counterparts
taken together shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed.
GOLDMAN, SACHS & CO., as Sponsor
/s/ Goldman, Sachs & Co.
------------------------------------
PAUL S. EFRON, as Trustee
/s/ Paul S. Efron
------------------------------------
Paul S. Efron
