AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 18, 1998
SECURITIES ACT FILE NO. 333-58751
INVESTMENT COMPANY ACT FILE NO. 811-08865
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-2
[X] Registration Statement Under The Securities Act of 1933
|X| Pre-Effective Amendment No. 1
[ ] Post-Effective Amendment No.
and/or
|X| Registration Statement Under The Investment Company Act of 1940
|X| Amendment No. 1
(check appropriate box or boxes)
ABC EXCHANGEABLE PREFERRED TRUST
(Exact Name of Registrant as Specified in Charter)
C/O PUGLISI & ASSOCIATES
850 LIBRARY AVENUE
SUITE 204
NEWARK, DELAWARE 19715
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (302) 738-6680
RL&F SERVICE CORP.
ONE RODNEY SQUARE
10TH FLOOR
10TH AND KING STREETS
WILMINGTON, DELAWARE 19801
(Name and Address of Agent for Service)
COPY TO:
CRAIG E. CHAPMAN, ESQ.
BROWN & WOOD LLP
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable
after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, as amended, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
The Registrant hereby amends 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 this registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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CROSS-REFERENCE SHEET*
Item Number in Form N-2 Caption in Prospectus
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<TABLE>
<CAPTION>
PART A--INFORMATION REQUIRED IN A PROSPECTUS
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1. Outside Front Cover........................... Front Cover Page
2. Inside Front and Outside Back Cover Page...... Front Cover Page; Inside Front Cover Page; Underwriting
3. Fee Table and Synopsis........................ Prospectus Summary; Fee Table
4. Financial Highlights.......................... Not Applicable
5. Plan of Distribution.......................... Front Cover Page; Prospectus Summary; Net Asset Value; Underwriting
6. Selling Shareholders.......................... Not Applicable
7. Use of Proceeds............................... Use of Proceeds and Collateral Arrangements; Investment Objective
and Policies
8. General Description of the Registrant......... Front Cover Page; Prospectus Summary; The Trust; Investment
Objective and Policies; Investment Restrictions; Risk Factors;
Dividends and Distributions; Additional Information
9. Management.................................... Trustees; Management Arrangements
10. Capital Stock, Long-Term Debt and Other
Securities.................................... Description of THE Trust Securities
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
</TABLE>
<TABLE>
<CAPTION>
PART B--INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
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14. Cover Page.................................... Not Applicable
15. Table of Contents............................. Not Applicable
16. General Information and History............... Not Applicable
17. Investment Objective and Policies............. Prospectus Summary; Investment Objective and Policies; Investment
Restrictions
18. Management.................................... Trustees; Management Arrangements
19. Control Persons and Principal Holders of
Securities ................................... Management Arrangements; Underwriting
20. Investment Advisory and Other Services........ Management Arrangements
21. Brokerage Allocation and Other Practices...... Investment Objective and Policies
22. Tax Status.................................... Certain United States Federal Income Tax Considerations
23. Financial Statements.......................... Experts; Independent Auditors' Report; Statement of Assets,
Liabilities and Capital
</TABLE>
PART C--OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
* 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.
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus, one to be
used in connection with an underwritten offering in the United States and Canada
(the "U.S. Prospectus"), and one to be used in connection with a concurrent
international underwritten offering outside the United States and Canada (the
"International Prospectus" and, together with the U.S. Prospectus, the
"Prospectuses"). The Prospectuses will be identical in all respects except for
the front cover page, the section entitled "Underwriting" and the outside back
cover page.
The form of the U.S. Prospectus is included herein and the form of the
front cover page, "Underwriting" section and outside back cover page of the
International Prospectus are included following the back cover page of the U.S.
Prospectus as pages X-1 through X-5.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 18, 1998
________ TRUST SECURITIES
ABC EXCHANGEABLE PREFERRED TRUST
Of the total of ______ Trust Securities Exchangeable for Preference
Shares (the "Trust Securities") of ABC Exchangeable Preferred Trust (the
"Trust") being offered, ______ Trust Securities initially are being offered in
the United States and Canada by the U.S. Underwriters (the "U.S. Offering") and
_______ Trust Securities initially are being offered in a concurrent
international offering outside the United States and Canada by the International
Managers (the "International Offering" and, together with the U.S. Offering, the
"Offerings"). The public offering price and the underwriting discount per Trust
Security are identical for both of the Offerings. See "Underwriting."
Each of the Trust Securities offered hereby will represent a
proportionate share of a beneficial ownership interest in the Trust and will be
sold at an initial public offering price of US$25. Except as described herein,
holders of the Trust Securities will receive non-cumulative dividend
distributions in an amount equal to US$ per Trust Security per annum, payable
quarterly in arrears in an amount equal to US$_____ per Trust Security on each ,
, , and of each year (each, a "Dividend Payment Date"), to holders of record
as of the immediately preceding , , and , respectively (each, a "Record Date").
The first DIVIDEND distribution in respect of the period from and including the
original issue date (the "Issue Date") to but excluding , 1998 will equal US$
per Trust Security.
The Trust is a newly-created Delaware business trust established for
the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in and holding % Mandatorily Redeemable Debt Securities due 2047 (the
"Debt Securities") issued by [NAME], a special purpose unlimited company
incorporated under the laws of, and domiciled in, the United Kingdom (the "U.K.
Company"), with an aggregate principal amount equal to such proceeds. The
Trust's investment objective is to distribute to the holders of Trust Securities
(a) pro rata based on the number of Trust Securities outstanding the interest
the Trust receives on the Debt Securities from time to time PRIOR TO AN EXCHANGE
DATE (AS DEFINED HEREIN) and (b) upon the occurrence of an Exchange Event (as
defined herein), the proceeds FROM the redemption of the Debt Securities. THE
REDEMPTION PROCEEDS WILL BE (I) IF THE EXCHANGE EVENT IS ANYTHING OTHER THAN A
REDEMPTION OR MANDATORY REPURCHASE ("BUY-BACK") OF THE ABC PREFERENCE SHARES FOR
CASH, American Depositary Receipts ("ADRs") evidencing, for each Trust Security,
one American Depositary Share ("ADS") representing four fully paid
non-cumulative preference shares, liquidation preference US$6.25 per share (the
"ABC Preference Shares"), issued by [NAME] ("ABC") AND (II) if the Exchange
Event is A redemption OR BUY-BACK of the ABC Preference Shares for cash, ^
US$25 per Trust Security PLUS AN AMOUNT EQUAL TO THE ACCRUED BUT UNPAID
INTEREST ON US$25 PRINCIPAL AMOUNT OF THE DEBT SECURITIES FROM AND INCLUDING THE
INTEREST PAYMENT DATE IMMEDIATELY PRECEDING THE EXCHANGE DATE TO BUT EXCLUDING
SUCH EXCHANGE DATE. PRIOR TO THE EXCHANGE DATE, THE ABC Preference Shares WILL
NOT PAY DIVIDENDS. FROM AND AFTER THE EXCHANGE DATE (UNLESS THE EXCHANGE EVENT
IS THE REDEMPTION OR BUY-BACK OF THE ABC PREFERENCE SHARES FOR CASH), EACH ABC
PREFERENCE SHARE will accrue non-cumulative dividends at the rate of US$ per
share per annum, payable quarterly in arrears in an amount equal to US$ per
share on each Dividend Payment Date to holders of record as of the immediately
preceding Record Date. See "Investment Objective and Policies."
(continued on following page)
SEE "RISK FACTORS", BEGINNING ON PAGE 16 OF THIS PROSPECTUS, FOR
CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE TRUST
SECURITIES.
<TABLE>
<CAPTION>
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.
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PRICE TO SALES PROCEEDS TO
PUBLIC(1) LOAD(2) TRUST(3)(4)
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<S> <C> <C> <C>
PER TRUST SECURITY............................. $25.00 (4) $
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TOTAL(5)....................................... $ (4) $
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</TABLE>
(1) PLUS ACCRUED DIVIDENDS, IF ANY, FROM , 1998.
(2) In view of the fact that the proceeds of the sale of the Trust Securities
will ultimately be invested in the ABC Preference Shares, THE TRUST AND ABC
HAVE agreed to indemnify the several U.S. Underwriters and the
International Managers (together, the "Underwriters") against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting estimated expenses of $ payable by the Trust.
(4) In view of the fact that the proceeds of the sale of the Trust Securities
will ultimately be invested in the ABC Preference Shares, ABC has agreed to
pay the Underwriters, as compensation, $ per Trust Security (or $ in
the aggregate if the Underwriters' over-allotment options are exercised in
full). See "Underwriting."
(5) The Trust has granted the U.S. Underwriters and the International Managers
options, exercisable for 30 days from the date hereof, to purchase up to
and additional Trust Securities, respectively, solely to cover
over-allotments, if any. If all such Trust Securities are purchased, the
total Price to Public and Proceeds to Trust will be $ and $ ,
respectively. See "Underwriting."
----------------
The Trust Securities are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the Trust Securities will be made through the facilities of The
Depository Trust Company on or about , 1998.
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MERRILL LYNCH & CO. [CO-MANAGERS]
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The date of this Prospectus is , 1998.
(continued from cover page)
The Trust will not be managed like a typical closed-end investment
company. The Trust has adopted a fundamental policy that 100% of its portfolio
will be invested in the Debt Securities and that the Debt Securities may not be
disposed of during the term of the Trust other than in connection with an
Exchange Event. For information concerning the ADSs that may be received by the
holders of Trust Securities upon the occurrence of an Exchange Event and the ABC
Preference Shares represented thereby, see the accompanying prospectus of ABC.
The Trust Securities are a suitable investment only for investors who are able
to understand the unique nature of the Trust and the economic characteristics of
the Debt Securities and the ADSs and the ABC Preference Shares that may be
issued upon an Exchange Event. See "Investment Objective and Policies."
The Trust will be treated as a grantor trust for U.S. Federal income
tax purposes. In general, for U.S. Federal income tax purposes no gain or loss
should be recognized by U.S. holders of the Trust Securities upon RECEIPT OF THE
ADSs UPON an exchange OR DISSOLUTION OF THE TRUST. However, U.S. holders will
recognize taxable gain or loss upon receipt of cash, if any, upon an exchange or
dissolution of the Trust. See "Certain United States Federal Income Tax
Considerations."
Application will be made to list the Trust Securities on the New York
Stock Exchange (the "NYSE"). Prior to the Offerings there has been no public
market for the Trust Securities. Shares of closed-end investment companies have
in the past frequently traded at a discount from their net asset values and
initial public offering prices. The risk of loss associated with this
characteristic of closed-end investment companies may be greater for investors
expecting to sell shares of a closed-end investment company soon after the
completion of an initial public offering.
This Prospectus sets forth concisely information about the Trust that a
prospective investor SHOULD know before investing and should be read and
retained for future reference.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE TRUST
SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
PROSPECTUS SUMMARY
The following summary should be read in conjunction with the more
detailed information appearing elsewhere in this Prospectus. Unless otherwise
indicated, the information contained in this Prospectus assumes that the
Underwriters' over-allotment option is not exercised.
THE TRUST
ABC Exchangeable Preferred Trust is a newly-created Delaware business
trust that will be registered as a non-diversified closed-end management
investment company under the U.S. Investment Company Act of 1940, as amended
(the "Investment Company Act"). The term of the Trust will expire on or shortly
after the occurrence of an Exchange Event. The Trust will be treated as a
grantor trust for United States Federal income tax purposes.
THE OFFERING
The Trust is offering ___________ Trust Securities, each representing a
proportionate share of beneficial interest in the Trust, at an initial public
offering price of US$25 per Trust Security. The Underwriters have been granted
an option, exercisable for 30 days from the date of this Prospectus, to purchase
up to an aggregate of _________ additional Trust Securities solely to cover
over-allotments, if any. See "Underwriting."
USE OF PROCEEDS AND COLLATERAL ARRANGEMENTS
The following transactions will take place on the Issue Date. The Trust
will use the proceeds from the sale of the Trust Securities in the Offerings to
subscribe for and purchase from the U.K. Company Debt Securities with an
aggregate principal amount equal to such proceeds. The Trust, as the holder of
the Debt Securities, will be entitled to receive interest due thereon quarterly
in arrears on each Dividend Payment Date (each, an "Interest Payment Date"), at
the rate per annum of % . The Debt Securities will be issued only in bearer form
and will be denominated and pay interest in U.S. dollars. The Debt Securities
will be listed on the Luxembourg Stock Exchange and, unless redeemed ON AN
earlier EXCHANGE DATE, will be redeemed on , 2047. The U.K. Company will use the
proceeds from the sale of the Debt Securities to purchase at a price equal to
their liquidation preference fully paid, non-dividend paying preference shares,
liquidation preference US$25 per share (the "Jersey Preference Shares"), issued
by [NAME], a company incorporated with limited liability under the laws of, and
domiciled in, Jersey, the Channel Islands (the "Jersey Subsidiary"). The Jersey
Subsidiary will use the proceeds from the sale of the Jersey Preference Shares
to purchase the ADSs from ABC at a price per ADS equal to the aggregate
liquidation preference of the four ABC Preference Shares represented thereby.
Pursuant to a security and pledge agreement (the "ADSs Security and Pledge
Agreement") to be entered into among the Trust, the U.K. Company, the Jersey
Subsidiary and The Bank of New York, as collateral agent (the "Collateral
Agent"), the Jersey SUBSIDIARY WILL IRREVOCABLY AND UNCONDITIONALLY DEPOSIT THE
ADSs with the Collateral Agent and PLEDGE THE ADSs to secure ITS obligations TO
the U.K. Company under the Jersey Preference Shares AND THE U.K. COMPANY, WITH
THE CONSENT OF THE JERSEY SUBSIDIARY, WILL IRREVOCABLY AND UNCONDITIONALLY
ASSIGN AND HYPOTHECATE SUCH PLEDGE TO THE TRUST TO SECURE ITS OBLIGATIONS UNDER
THE DEBT SECURITIES. PURSUANT TO ANOTHER SECURITY AND PLEDGE AGREEMENT (THE
"JERSEY PREFERENCE SHARES SECURITY AND PLEDGE AGREEMENT" AND, TOGETHER WITH THE
ADSs SECURITY AND PLEDGE AGREEMENT, THE "SECURITY AND PLEDGE AGREEMENTS") TO BE
ENTERED INTO AMONG THE TRUST, THE U.K. COMPANY AND THE COLLATERAL AGENT, THE
U.K. COMPANY WILL IRREVOCABLY AND UNCONDITIONALLY DEPOSIT THE JERSEY PREFERENCE
SHARES WITH THE COLLATERAL AGENT AND PLEDGE THE JERSEY PREFERENCE SHARES TO
SECURE ITS OBLIGATIONS TO THE TRUST UNDER THE DEBT SECURITIES. Prior to the
occurrence of an Exchange Event, ownership of the Jersey Preference Shares and
the ADSs will remain with the U.K. Company and the Jersey Subsidiary,
respectively, although pursuant to the ADSs Security and Pledge Agreement, the
Jersey Subsidiary will agree to , or WILL cause the Collateral Agent TO, DIRECT
the ADR depositary to vote the ABC Preference Shares represented by the ADSs as
directed by the holders of the Trust Securities.
Also on the Issue Date, ABC will use the proceeds from the issue of the
ABC Preference Shares to make a capital contribution to a business trust
established under the laws of the State of Delaware (the "Distribution Trust").
The Distribution Trust will use ABC's capital contribution to make a loan (the
"ABC LOAN") TO ABC OR a wholly-owned subsidiary or branch of ABC (the "ABC
BORROWER).
Reference is made to page 10 for a diagram of the foregoing
transactions.
ABC
Reference is made to the accompanying prospectus of ABC with respect to
the ABC PREFERENCE SHARES REPRESENTED BY THE ADSs that may be received by a
holder of Trust Securities upon the occurrence of an Exchange Event. THE
PROSPECTUS OF ABC IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE
PURCHASERS OF TRUST SECURITIES TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF
REFERENCE ONLY. THE PROSPECTUS OF ABC DOES NOT CONSTITUTE A PART OF THIS
PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN.
INVESTMENT OBJECTIVE AND POLICIES; DIVIDENDS AND DISTRIBUTIONS
The Trust's investment objective is to distribute to the holders of
Trust Securities (a) pro rata based on the number of Trust Securities
outstanding the interest the Trust receives on the Debt Securities from time to
time PRIOR TO AN EXCHANGE DATE and (b) upon the occurrence of an Exchange Event,
the proceeds FROM the redemption of the Debt SECURITIES. THE REDEMPTION PROCEEDS
WILL BE (I) IF THE EXCHANGE EVENT IS ANYTHING OTHER THAN A REDEMPTION OR
BUY-BACK OF THE ABC PREFERENCE SHARES FOR CASH, ADRs evidencing, for each Trust
Security, one ADS AND (II) if the Exchange Event is a redemption OR BUY-BACK of
the ABC Preference Shares for cash, US$25 per Trust Security PLUS AN AMOUNT
EQUAL TO THE ACCRUED BUT UNPAID INTEREST ON US$25 PRINCIPAL AMOUNT OF THE DEBT
SECURITIES FROM AND INCLUDING THE INTEREST PAYMENT DATE IMMEDIATELY PRECEDING
THE EXCHANGE DATE TO BUT EXCLUDING SUCH EXCHANGE DATE. See "Investment Objective
and Policies."
Except as described herein, holders of Trust Securities will receive
non-cumulative dividend distributions in an amount equal to US$ per Trust
Security per annum, payable quarterly in arrears in an amount equal to US$ per
Trust Security on each Dividend Payment Date to holders of record on the
immediately preceding Record Date. The first distribution in respect of the
period from and including the Issue Date to but excluding , 1998 will equal US$
per Trust Security. See "Investment Objective and Policies--Trust Assets."
Dividend payments on the Trust Securities will be made from the
interest payments received by the Trust on the Debt Securities. Interest
payments on the Debt Securities will be made by the U.K. Company TO THE EXTENT
THAT IT RECEIVES payments (the "Income Entitlements") AS THE INCOME BENEFICIARY
OF the Distribution Trust. The U.K. Company's right to receive Income
Entitlements will not represent an absolute ownership interest in the
Distribution Trust or the income thereof, but rather an entitlement to receive ^
INCOME ENTITLEMENTS only to the extent actually distributed to the U.K. Company
by the Distribution Trust; if any Income Entitlement payable on any Interest
Payment Date is not paid to the U.K. Company or at its direction on such date
for any reason, the Distribution Trust will have no obligation to pay such
Income Entitlement to the U.K. Company AND THE U.K. COMPANY WILL HAVE NO RIGHT
TO REQUIRE SUCH PAYMENT.
ON AND AFTER AN EXCHANGE DATE, THE U.K. COMPANY WILL CEASE TO BE THE
INCOME BENEFICIARY OF THE DISTRIBUTION TRUST AND AN AFFILIATE OF ABC WILL
RECEIVE ALL THE INCOME ENTITLEMENTS OF THE DISTRIBUTION TRUST THEREAFTER;
PROVIDED, HOWEVER, IF THE EXCHANGE EVENT IS THE CASH REDEMPTION OR BUY-BACK OF
THE ABC PREFERENCE SHARES, THE U.K. COMPANY WILL BE ENTITLED TO RECEIVE AN
INCOME ENTITLEMENT EQUAL TO THE ACCRUED BUT UNPAID INTEREST ON THE DEBT
SECURITIES FOR THE PERIOD FROM AND INCLUDING THE INTEREST PAYMENT DATE
IMMEDIATELY PRECEDING THE EXCHANGE DATE TO BUT EXCLUDING THE EXCHANGE DATE.
Under the terms of the Distribution Trust, no Income Entitlement shall
be paid or payable TO THE U.K. COMPANY on any Interest Payment Date if (i) an
Exchange Event (OTHER THAN A REDEMPTION OR BUY-BACK OF THE ABC PREFERENCE SHARES
FOR CASH) HAS OCCURRED prior to such Interest Payment Date, (ii) the amount of
Income Entitlement payable on such date, together with the aggregate amount of
dividends paid on or before such date during the then current fiscal year of ABC
on any preference shares or ordinary shares of ABC, would exceed ABC's
distributable profits or (iii) the payment of such Income Entitlement would be
prohibited or limited by applicable law or regulation or by any instruments or
agreements to which ABC is subject (collectively, the "Payment PROHIBITIONS".)
IN THE EVENT AN INCOME ENTITLEMENT IS NOT PAID BECAUSE A PAYMENT PROHIBITION
EXISTS, AN EXCHANGE EVENT WILL OCCUR BECAUSE THE U.K. COMPANY WILL HAVE
INSUFFICIENT FUNDS TO PAY INTEREST ON THE DEBT SECURITIES.
On each Interest Payment Date, (i) the ABC BORROWER will make an
interest payment on the ABC Loan to the Distribution Trust; (II) if no Payment
Prohibition exists, the Distribution Trust will distribute SUCH INTEREST PAYMENT
AS AN Income ENTITLEMENT to the U.K. Company; and (III) the U.K. Company will
USE THE PROCEEDS FROM ANY SUCH DISTRIBUTION OF AN INCOME ENTITLEMENT TO pay (a)
interest on the Debt Securities to the Trust, (b) ongoing costs and expenses of
the U.K. Company AND THE JERSEY SUBSIDIARY, (C) QUARTERLY DIVIDEND PAYMENTS ON
THE U.K. COMPANY'S VOTING SHARES TO the Jersey Holding Company (as defined
herein), WHICH DIVIDENDS WILL BE USED BY THE JERSEY HOLDING COMPANY TO PAY
ONGOING EXPENSES OF THE JERSEY HOLDING COMPANY, the Jersey Charitable Trust, the
Collateral Agent and (PURSUANT TO AN EXPENSE AGREEMENT (THE "EXPENSE AGREEMENT")
BETWEEN THE JERSEY HOLDING COMPANY AND THE BANK OF NEW YORK, AS THE
ADMINISTRATOR, CUSTODIAN AND PAYING AGENT OF THE TRUST) THE TRUST, AND (D) an
indemnity fee payable to [NAME], an affiliate of ABC (the "ABC Affiliate"). On
EACH Interest Payment Date (which will also be a Dividend Payment Date), The
Bank of New York, as Administrator, will use all the interest received by the
Trust on the Debt Securities to pay DIVIDEND DISTRIBUTIONS on the Trust
Securities.
TRUST ASSETS
The Trust's assets will consist of US$ aggregate principal amount of
Debt Securities (US$ aggregate principal amount of Debt Securities if the
Underwriters' over-allotment option is exercised in full), and any distributions
thereon.
EXCHANGE EVENT
THE occurrence of any of the following events SHALL CONSTITUTE AN
"EXCHANGE EVENT" AS OF THE "EXCHANGE DATE" INDICATED BELOW:
(I) THE EARLIER OF , 2047 AND THE DATE OF ANY EARLIER REDEMPTION
OR BUY-BACK of the ABC Preference Shares FOR CASH, IN WHICH
CASE THE EXCHANGE DATE WILL BE THE EARLIER OF SUCH DATES;
(ii) ANY date selected by ABC in its absolute discretion, IN WHICH
CASE THE EXCHANGE DATE WILL BE SUCH DATE;
(III) the failure of the TRUST TO RECEIVE for any reason ON OR
within three Business Days AFTER an Interest Payment Date the
interest then due on the Debt Securities in full without
deduction or withholding for any taxes, duties or other
charges, IN WHICH CASE THE EXCHANGE DATE WILL BE THE FOURTH
BUSINESS DAY FOLLOWING SUCH INTEREST PAYMENT DATE;
(IV) ON ANY DATE, THE TIER 1 CAPITAL RATIO OR THE TOTAL CAPITAL
ADEQUACY RATIO of ABC (either as reported QUARTERLY by ABC to
the [applicable regulatory agency] or as determined at any
time by the [applicable regulatory agency] in its ABSOLUTE
discretion) IS below 4% or 8%, respectively (or, in each case,
such lesser percentage (the "Required Percentage"), as may BE
PRESCRIBED BY THE [APPLICABLE REGULATORY AGENCY] FOR ABC at
the time), and SUCH RATIO is not increased BY ABC to at least
4% or 8%, respectively (or such lesser Required Percentage),
within 90 days AFTER THE DATE ON WHICH ABC MAKES SUCH
QUARTERLY REPORT OR RECEIVES NOTICE FROM THE [APPLICABLE
REGULATORY AGENCY] OF SUCH DETERMINATION BY THE [APPLICABLE
REGULATORY AGENCY], AS APPLICABLE, IN WHICH CASE THE EXCHANGE
DATE WILL BE THE BUSINESS DAY IMMEDIATELY FOLLOWING THE
EXPIRATION OF SUCH 90-DAY PERIOD;
(V) ANY CHANGE IN (A) THE LEGAL ownership of the securities (OTHER
THAN THE DEBT SECURITIES) ISSUED BY, (B) ANY PROVISIONS OF THE
CONSTITUENT DOCUMENTS OF (UNLESS SUCH CHANGE HAS BEEN
CONSENTED TO BY THE RECORD HOLDERS OF MORE THAN 50% OF THE
TRUST SECURITIES OR, IN THE OPINION OF COMPETENT LEGAL COUNSEL
SELECTED BY THE TRUST SUCH CHANGE WOULD NOT HAVE A MATERIAL
ADVERSE IMPACT ON OF THE HOLDERS OF THE TRUST SECURITIES), OR
(C) the business purpose (as specified in the constituent
documents of the relevant entities) of, ANY OF THE U.K.
COMPANY, THE JERSEY HOLDING COMPANY, THE JERSEY CHARITABLE
TRUST OR THE JERSEY SUBSIDIARY, OR ANY CHANGE IN THE BUSINESS
PURPOSE (AS SPECIFIED IN THE CONSTITUENT DOCUMENTS) OF THE
DISTRIBUTION TRUST, IN WHICH CASE THE EXCHANGE DATE WILL BE
THE DATE ON WHICH THE CHANGE OCCURS;
(VI) THE DISTRIBUTION TRUST CEASES TO BE WHOLLY-OWNED, DIRECTLY OR
INDIRECTLY, BY ABC OR A WHOLLY-OWNED SUBSIDIARY OR BRANCH OF
ABC, IN WHICH CASE THE EXCHANGE DATE WILL BE THE DATE ON WHICH
THE DISTRIBUTION TRUST CEASES TO BE WHOLLY-OWNED, DIRECTLY OR
INDIRECTLY, BY ABC OR A WHOLLY-OWNED SUBSIDIARY OR BRANCH OF
ABC;
(VII) THE ABC BORROWER CEASES TO BE ABC OR A WHOLLY-OWNED SUBSIDIARY
OR BRANCH OF ABC, IN WHICH CASE THE EXCHANGE DATE WILL BE THE
DATE ON WHICH THE ABC BORROWER CEASES TO BE ABC OR A
WHOLLY-OWNED SUBSIDIARY OR BRANCH OF ABC; AND
(VIII)(A)ANY PROCEEDING IS COMMENCED BY ABC, the U.K. Company, the
Jersey Holding Company, the Jersey Charitable Trust, the
Jersey Subsidiary, the Distribution Trust or THE ABC BORROWER
(EACH, A "RELEVANT ENTITY") OR ANY PARTY THAT CONTROLS A
RELEVANT ENTITY FOR AN ORDER THAT THE RELEVANT ENTITY BE
DISSOLVED, WOUND UP OR LIQUIDATED OR FOR THE APPOINTMENT OF A
PROVISIONAL LIQUIDATOR, LIQUIDATOR, ADMINISTRATOR, CONTROLLER
OR SIMILAR OFFICIAL IN RESPECT OF THE RELEVANT ENTITY OR ALL
OR SUBSTANTIALLY ALL OF ITS PROPERTY, IN WHICH CASE THE
EXCHANGE DATE WILL BE THE DATE ON WHICH THE PROCEEDING IS
COMMENCED; (B) ANY PROCEEDING IS COMMENCED BY ANY OTHER PERSON
FOR AN ORDER THAT A RELEVANT ENTITY BE WOUND UP OR FOR THE
APPOINTMENT OF A PROVISIONAL LIQUIDATOR, LIQUIDATOR,
ADMINISTRATOR, CONTROLLER OR SIMILAR OFFICIAL IN RESPECT OF
THE RELEVANT ENTITY OR ALL OR SUBSTANTIALLY ALL OF ITS
PROPERTY (UNLESS SUCH PROCEEDING IS DISCONTINUED OR DISMISSED
WITHIN 21 DAYS OF ITS HAVING BEEN COMMENCED), IN WHICH CASE
THE EXCHANGE DATE WILL BE THE BUSINESS DAY IMMEDIATELY
FOLLOWING THE EXPIRATION OF SUCH 21-DAY PERIOD; OR (C) A
PROVISIONAL LIQUIDATOR, LIQUIDATOR, ADMINISTRATOR, CONTROLLER
OR SIMILAR OFFICIAL IS APPOINTED WHETHER BY A COURT OR
OTHERWISE IN RESPECT OF ANY RELEVANT ENTITY OR ALL OR
SUBSTANTIALLY ALL OF ITS PROPERTY (UNLESS SUCH APPOINTMENT IS
REVOKED OR SET ASIDE WITHIN 21 DAYS OF SUCH APPOINTMENT), IN
WHICH CASE THE EXCHANGE DATE WILL BE THE BUSINESS DAY
IMMEDIATELY FOLLOWING THE EXPIRATION OF SUCH 21-DAY PERIOD.
NOTWITHSTANDING THE FOREGOING, THE ABC BORROWER MAY, with the consent of the
DISTRIBUTION TRUST, assign the ABC Loan or the DISTRIBUTION TRUST may replace
the ABC Loan with another loan, in each case, to ABC OR TO another WHOLLY-OWNED
subsidiary or branch office of ABC with prospective payment terms identical to,
and other terms substantially the same as, those of the ABC Loan, in which case
ABC OR such other subsidiary or branch office and loan WILL be deemed to be the
ABC BORROWER and the ABC Loan, respectively, and any such action WILL not
constitute an Exchange Event.
Upon the occurrence of an Exchange Event, EACH HOLDER OF A TRUST
SECURITY WILL BE ENTITLED TO RECEIVE, FROM THE PROCEEDS OF THE SEQUENTIAL
REDEMPTION OF THE JERSEY PREFERENCE SHARES AND THE DEBT SECURITIES, A
DISTRIBUTION OF EITHER (I) IF THE EXCHANGE EVENT IS ANYTHING OTHER THAN A
REDEMPTION OR BUY-BACK OF THE ABC PREFERENCE SHARES FOR CASH, ONE ADS PER TRUST
SECURITY OR (II) IF THE EXCHANGE EVENT IS A REDEMPTION OR BUY-BACK OF THE ABC
PREFERENCE SHARES FOR CASH, US$25 PER TRUST SECURITY PLUS AN AMOUNT EQUAL TO THE
ACCRUED BUT UNPAID INTEREST ON US$25 PRINCIPAL AMOUNT OF THE DEBT SECURITIES
FROM AND INCLUDING THE INTEREST PAYMENT DATE IMMEDIATELY PRECEDING THE EXCHANGE
DATE TO BUT EXCLUDING SUCH EXCHANGE DATE. IN THE CASE OF ANY SUCH DISTRIBUTION
OF ADSs, THE HOLDERS OF TRUST SECURITIES SHALL BECOME THE RECORD HOLDERS OF THE
ADSs AS OF THE EXCHANGE DATE, AND ADRS EVIDENCING SUCH ADSs WILL BE DELIVERED TO
SUCH HOLDERS AS SOON AS PRACTICABLE FOLLOWING THE EXCHANGE DATE.
DIVIDEND DISTRIBUTIONS ON THE TRUST SECURITIES WILL CEASE TO ACCRUE ON
AND AFTER THE EXCHANGE DATE. IN THE CASE OF ANY EXCHANGE EVENT OTHER THAN A
REDEMPTION OR BUY-BACK OF THE ABC PREFERENCE SHARES FOR CASH, NO DIVIDEND
DISTRIBUTIONS WILL BE PAYABLE ON THE TRUST SECURITIES ON THE EXCHANGE DATE (EVEN
IF SUCH EXCHANGE DATE IS A DIVIDEND PAYMENT DATE). INSTEAD, NON-CUMULATIVE
DIVIDENDS WILL BEGIN TO ACCRUE ON THE ABC PREFERENCE SHARES FROM AND INCLUDING
THE LAST INTEREST PAYMENT DATE IN RESPECT OF WHICH INTEREST ON THE DEBT
SECURITIES HAS BEEN PAID OR PROVIDED FOR IN FULL. ACCORDINGLY, THE DIVIDENDS FOR
ANY QUARTERLY DIVIDEND PERIODS ENDING ON OR AFTER THE EXCHANGE DATE WILL BE
PAYABLE ONLY AS DIVIDENDS ON THE ABC PREFERENCE SHARES AND ONLY IN ACCORDANCE
WITH THE TERMS OF THE ABC PREFERENCE SHARES.
TERM OF THE TRUST
The Trust will dissolve as soon as possible after the exchange of the
Trust Securities for ADSs or cash, as the case may be, upon the occurrence of an
Exchange Event. See "Investment Objective and Policies" and "--LIMITED Term."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be classified a grantor trust for United States Federal
income tax purposes and the Debt Securities held by the Trust will be treated as
equity in ABC. Accordingly, each holder will be treated for United States
Federal income tax purposes as owning equity of ABC and will be required to
include in income, as dividends, the holder's pro rata share of the gross amount
of the interest paid on the Debt Securities to the extent of the current and
accumulated earnings and profits (as determined for United States Federal income
tax purposes) of ABC.
A holder's exchange of Trust Securities for ADSs upon the occurrence of
an Exchange Event generally will not constitute a taxable event for United
States Federal income tax purposes. However, the receipt of cash UPON EXCHANGE
of the Trust Securities IN CONNECTION WITH THE REDEMPTION OR BUY-BACK OF THE ABC
PREFERENCE SHARES FOR CASH would constitute a taxable event for United States
Federal income tax purposes, and a holder of Trust Securities generally would be
required to recognize gain or loss in respect of Trust Securities EXCHANGED for
cash. See "Certain United States Federal Income Tax Considerations."
MANAGEMENT ARRANGEMENTS
The Trust will be internally managed and will not have an investment
adviser. The Trust's portfolio will consist only of US$ aggregate principal
amount of Debt Securities (US$ aggregate principal amount of Debt Securities if
the Underwriters' over-allotment options are exercised in full), and any
distributions thereon, and will not be actively managed. The activities of the
Trust will be limited so as to ensure that the Trust will qualify as a grantor
trust for United States Federal income tax purposes. The administration of the
Trust will be overseen by the trustees (the "Trustees") thereof. The day-to-day
administration of the Trust will be carried out by The Bank of New York (or its
successor), as the Administrator. The Bank of New York (or its successor) will
also act as custodian (the "Custodian") for the Trust's assets and as paying
agent, transfer agent and registrar (the "Paying Agent") with respect to the
Trust Securities. Except as aforesaid, and except for The Bank of New York's
role as Collateral Agent under the Security and Pledge AGREEMENTS, AS PAYING AND
TRANSFER AGENT FOR THE DEBT SECURITIES and as depositary for the ADRs, The Bank
of New York will have no other affiliation with, and will not be engaged in any
other transaction with, the Trust. For their services, the fees of the
Administrator, the Custodian, the Trustees and the Paying Agent will be PAID BY
THE JERSEY HOLDING COMPANY PURSUANT TO THE EXPENSE AGREEMENT. See "Management
Arrangements."
RISK FACTORS
The Trust has adopted a fundamental policy that 100% of its portfolio
be invested in the Debt Securities, and the distributions thereon, and that the
Debt Securities may not be disposed of during the term of the Trust except upon
the occurrence of an Exchange Event. The Trust will not be managed like a
typical closed-end investment company.
The Trust is classified as a "non-diversified" investment company under
the Investment Company Act. Consequently, the Trust is not limited by the
Investment Company Act in the proportion of its assets that may be invested in
the securities of a single issuer. Since the only securities held by the Trust
will be the Debt Securities, the Trust may be subject to greater risk than would
be the case for an investment company with more diversified investments.
The Trust Securities have no trading history and it is not possible to
predict how they will trade in the secondary market. The Underwriters currently
intend, but are not obligated, to make a market in the Trust 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 of the Trust Securities
with liquidity of investment or that it will continue for the life of the Trust
Securities.
The Trust is a newly organized closed-end investment company with no
previous operating history. Shares of closed-end investment companies frequently
trade at a discount from their net asset value, which is a risk separate and
distinct from the risk that the Trust's net asset value will decrease. The risk
of loss associated with this characteristic of closed-end investment companies
may be greater for investors expecting to sell shares of a closed-end investment
company soon after the completion of an initial public offering.
Except as described below, holders of the Trust Securities will not be
entitled to any rights with respect to the ABC Preference Shares (including,
without limitation, rights to receive any dividends or other distributions in
respect thereof) until such time, if any, as the Trust shall have delivered ADSs
representing the ABC Preference Shares in exchange for Trust Securities upon the
occurrence of an Exchange Event (which will not occur if the Exchange Event is
the redemption OR BUY-BACK of the ABC Preference Shares for cash). PURSUANT TO
THE ADSs SECURITY AND PLEDGE AGREEMENT AND THE ADSs DEPOSIT AGREEMENT, EACH
Trust Security will entitle the holder thereof to direct the exercise of the
voting rights attaching to one ADS and four ABC Preference Shares. The holders
of ADSs will be entitled to vote the ABC Preference Shares represented thereby
together with the holders of ordinary shares of ABC ON THE BASIS OF ONE VOTE PER
ABC PREFERENCE SHARE ON ANY POLL (a) in all cases with respect to CERTAIN
MATTERS SPECIFIED HEREIN AND (B) DURING A SPECIAL VOTING PERIOD (AS DEFINED
BELOW), with respect to all matters on which the holders of the ordinary shares
of ABC are entitled to vote. A "SPECIAL VOTING PERIOD" IS THE PERIOD FROM AND
INCLUDING (I) ANY DIVIDEND PAYMENT DATE ON WHICH ABC FAILS TO PAY IN FULL THE
DIVIDENDS ACCRUED IN RESPECT OF THE QUARTERLY DIVIDEND PERIOD THEN ENDED OR (II)
THE FOURTH BUSINESS DAY AFTER ANY EXCHANGE DATE OCCURRING AS A RESULT OF ANY
FAILURE BY THE TRUST TO RECEIVE IN FULL THE INTEREST PAYABLE ON THE DEBT
SECURITIES UNLESS, PRIOR TO SUCH DATE, ABC HAS PAID IN FULL AN OPTIONAL DIVIDEND
ON THE ABC PREFERENCE SHARES IN AN AGGREGATE AMOUNT EQUAL TO THE AMOUNT OF
INTEREST NOT SO RECEIVED (AN "OPTIONAL DIVIDEND"), IN EACH CASE TO BUT EXCLUDING
THE FIRST DIVIDEND PAYMENT DATE THEREAFTER AS OF WHICH ABC HAS PAID IN FULL FOUR
CONSECUTIVE QUARTERLY DIVIDENDS ON THE ABC PREFERENCE SHARES. In addition, the
holders of ADSs will have the right to vote separately as a class in certain
circumstances involving a variation of the rights of holders of the ADSs or the
ABC Preference Shares. PURSUANT TO THE ADSs SECURITY AND PLEDGE AGREEMENT, AS
long as the ADSs are owned by the Jersey Subsidiary, the Jersey Subsidiary will,
or will CAUSE the Collateral Agent TO, DIRECT the ADR depositary to vote the ABC
Preference Shares as directed by the holders of Trust Securities. See "Risk
Factors."
LISTING
Application will be made to list the Trust Securities on the NYSE.
RATINGS
The Trust Securities will be rated by Moody's Investors Service, Inc.
and by Standard & Poor's Ratings Service. A security rating is not a
recommendation to buy, sell or hold securities, is subject to revision or
withdrawal at any time by the assigning rating organization, and should be
evaluated independently of any other rating.
FEE TABLE
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load (as a percentage of offering price).......................... % (a)
Automatic Dividend Reinvestment Plan Fees....................................... Not Applicable
ANNUAL EXPENSES (as a percentage of net assets)
Management Fees(b).................................................................. %
Other Expenses(c)................................................................... %
=====================
TOTAL ANNUAL EXPENSES(C)............................................................ %
=====================
1 year 3 years
------ -------
Example
- -------
An investor would pay the following expenses on a $1,000 investment, including the maximum sales
load of $ and assuming (1) no annual expenses and (2) a 5% annual return throughout the $ $
periods.
</TABLE>
(a) See the cover page of this Prospectus and "Underwriting."
(b) See "Management Arrangements." The Trust will be internally managed;
consequently there will be no separate investment advisory fee paid by
the Trust. The Bank of New York will act as the Administrator of the
Trust.
(c) The organization costs of the Trust in the amount of $ and the costs
associated with the initial registration and the Offerings, estimated
to be approximately $ , will be paid by the Trust OUT OF the facility
fee TO BE paid ON THE ISSUE DATE to the Trust by the U.K. Company in
connection with the investment by the Trust in the Debt Securities. The
ongoing administrative and other expenses of the Trust will be paid BY
THE JERSEY HOLDING COMPANY PURSUANT TO THE EXPENSE AGREEMENT. ANY
expenses of the Trust NOT COVERED BY THE TRUST'S ARRANGEMENTS WITH THE
JERSEY HOLDING COMPANY will be paid by the ABC Affiliate PURSUANT TO AN
EXPENSE AND INDEMNITY AGREEMENT AMONG IT, THE U.K. COMPANY, THE TRUST,
THE JERSEY HOLDING COMPANY, THE JERSEY SUBSIDIARY AND THE JERSEY
CHARITABLE TRUST. See "Management Arrangements--Estimated Expenses."
Absent such arrangements, the Trust's "Other Expenses" and "Total
Annual Expenses" would be approximately % of the Trust's net assets.
The foregoing Fee Table is intended to assist investors in
understanding the costs and expenses that a holder of Trust Securities will bear
directly or indirectly. The Example set forth above utilizes a 5% annual rate of
return as mandated by Securities and Exchange Commission regulations. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES OR ANNUAL
RATES OF RETURN, AND ACTUAL EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ASSUMED FOR PURPOSES OF THE EXAMPLE.
[DIAGRAM OF THE TRANSACTION STRUCTURE]
DIAGRAM ILLUSTRATING TRANSACTION PARTIES, INTERVENING VEHICLES
AND INVESTMENT AND PAYMENT DIRECTIONS
THE TRUST
ABC Exchangeable Preferred Trust (the "Trust") is a newly-created
Delaware business trust and will be registered as a closed-end management
investment company under the U.S. Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Trust was formed on JULY 6, 1998 pursuant to
a Certificate of Trust as filed with the Secretary of State of the State of
Delaware on JULY 8, 1998 and a Trust Agreement dated as of such date, which was
amended and restated as of , 1998 (as so amended and restated, the "Declaration
of Trust"). The term of the Trust will expire as soon as possible after the
exchange of the Trust Securities for ADRs or cash, as the case may be, upon the
occurrence of an Exchange Event. The Trust will be treated as a grantor trust
for United States Federal income tax purposes. The Trust's principal office is
located at 850 Library Avenue, Suite 204, Newark, Delaware 19715, and its
telephone number is (302) 738-6680.
USE OF PROCEEDS AND COLLATERAL ARRANGEMENTS
The proceeds of the Offerings (without giving effect to the expenses of
the Offerings payable by the Trust) will be $ (or $ if the Underwriters'
over-allotment options are exercised in full). On the Issue Date (as defined
herein), the proceeds of the Offerings will be used to purchase US$ aggregate
principal amount (or US$ aggregate principal amount if the Underwriters'
over-allotment options are exercised in full) of % Mandatorily Redeemable Debt
Securities due 2047 (the "Debt Securities") from [NAME], a special purpose
unlimited company incorporated under the laws of, and domiciled in, the United
Kingdom (the "U.K. Company"). The Trust, as the holder of the Debt Securities,
will be entitled to receive interest thereon at the rate per annum of % ,
payable quarterly in arrears on each Dividend Payment Date (each, an "Interest
Payment Date"). The Debt Securities will be listed on the Luxembourg Stock
Exchange and, unless redeemed ON AN earlier Exchange DATE (as defined herein),
will be redeemed on , 2047. The Debt Securities will be issued only in bearer
form and will be denominated and pay interest in U.S. dollars.
The following transactions will take place on the Issue Date. Reference
is made to page 10 for a diagram of the transactions.
The U.K. Company will use the proceeds from the sale of the Debt
Securities to purchase at a price equal to their liquidation preference fully
paid, non-dividend paying preference shares, liquidation preference US$25 per
share (the "Jersey Preference Shares"), issued by [NAME], a company incorporated
with limited liability under the laws of, and domiciled in, Jersey, the Channel
Islands (the "Jersey Subsidiary"). The Jersey Subsidiary will use the proceeds
from the sale of the Jersey Preference Shares to purchase from [NAME] ("ABC")
___ American Depositary Shares ("ADSs"), each representing four fully paid
non-cumulative preference shares, liquidation preference US$6.25 per share (the
"ABC Preference Shares"), of ABC at a price per ADS equal to the aggregate
liquidation preference of the four ABC Preference Shares represented thereby. NO
DIVIDENDS WILL ACCRUE OR BE PAID ON THE ABC PREFERENCE SHARES REPRESENTED BY THE
ADSs UNLESS AN EXCHANGE EVENT (OTHER THAN A REDEMPTION OR BUY-BACK OF THE ABC
PREFERENCE SHARES) OCCURS. ON AND AFTER THE EXCHANGE DATE, NON-CUMULATIVE
DIVIDENDS WILL BE PAYABLE, IF AND WHEN DECLARED BY THE BOARD OF DIRECTORS OF ABC
OUT OF PROFITS LEGALLY AVAILABLE THEREFOR, IN U.S. DOLLARS IN AN AMOUNT EQUAL TO
US$ PER ABC PREFERENCE SHARE PER ANNUM, PAYABLE QUARTERLY IN ARREARS IN AN
AMOUNT EQUAL TO US$ PER ABC PREFERENCE SHARE ON EACH DIVIDEND PAYMENT DATE (AS
DEFINED HEREIN) TO HOLDERS OF RECORD AS OF THE IMMEDIATELY PRECEDING RECORD DATE
(AS DEFINED HEREIN).
ABC will use the proceeds from the issue of the ABC Preference Shares
to make a capital contribution to a business trust established under the laws of
the State of Delaware (the "Distribution Trust"). The Distribution Trust will
use ABC's capital contribution to make a loan (the "ABC LOAN") TO ABC OR a
wholly-owned subsidiary or branch of ABC (the "ABC BORROWER").
THE PURCHASE PRICE OF ANY TRUST SECURITIES SOLD PURSUANT TO THE
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTIONS WILL INCLUDE THE ACCRUED
DIVIDENDS FROM , 1998 TO THE DATE OF SUCH PURCHASE, AND THE RESULTING PURCHASE
PRICE OF ADDITIONAL DEBT SECURITIES WILL INCLUDE THE ACCRUED INTEREST FOR THE
SAME PERIOD. THE U.K. COMPANY WILL INVEST THE PORTION OF THE PURCHASE PRICE OF
THE DEBT SECURITIES ATTRIBUTABLE TO SUCH ACCRUED INTEREST IN U.S. GOVERNMENT
SECURITIES.
THE ADSs will be deposited with The Bank of New York, as the collateral
agent (the "Collateral Agent"), pursuant to A security and pledge agreement (the
"ADSs Security and Pledge Agreement") to be entered into among the Trust, the
U.K. Company, the Jersey Subsidiary and the Collateral Agent AND GOVERNED BY NEW
YORK LAW. Pursuant to the terms of the ADSs Security and Pledge Agreement, the
Jersey Subsidiary will IRREVOCABLY AND UNCONDITIONALLY deposit the ADSs with the
Collateral Agent and (I) THE JERSEY SUBSIDIARY WILL irrevocably and
unconditionally PLEDGE ITS INTEREST IN THE ADSs TO SECURE ITS OBLIGATIONS TO the
U.K. Company under the Jersey Preference Shares, (II) THE U.K. COMPANY, WITH THE
CONSENT OF THE JERSEY SUBSIDIARY, WILL IRREVOCABLY AND UNCONDITIONALLY ASSIGN
AND HYPOTHECATE TO THE TRUST SUCH PLEDGE TO SECURE ITS OBLIGATIONS UNDER THE
DEBT SECURITIES AND (III) THE JERSEY SUBSIDIARY AND THE U.K. COMPANY WILL
IRREVOCABLY AND UNCONDITIONALLY direct the Collateral Agent, upon the occurrence
of an Exchange Event (OTHER THAN A REDEMPTION OR BUY-BACK OF THE ABC PREFERENCE
SHARES), to transfer the ADSs to the Trust. PURSUANT TO ANOTHER SECURITY AND
PLEDGE AGREEMENT (THE "JERSEY PREFERENCE SHARES SECURITY AND PLEDGE AGREEMENT"
AND, TOGETHER WITH THE ADSs SECURITY AND PLEDGE AGREEMENT, THE "SECURITY AND
PLEDGE AGREEMENTS") TO BE ENTERED INTO AMONG THE TRUST, THE U.K. COMPANY AND THE
COLLATERAL AGENT AND GOVERNED BY JERSEY LAW, THE U.K. COMPANY WILL IRREVOCABLY
AND UNCONDITIONALLY DEPOSIT THE JERSEY PREFERENCE SHARES WITH THE COLLATERAL
AGENT AND PLEDGE THE JERSEY PREFERENCE SHARES TO SECURE ITS OBLIGATIONS TO THE
TRUST UNDER THE DEBT SECURITIES. Prior to the occurrence of an Exchange Event,
ownership of the Jersey Preference Shares and the ADSs will remain with the U.K.
Company and the Jersey Subsidiary, respectively, although pursuant to the ADSs
Security and Pledge Agreement, the Jersey Subsidiary will agree to, or WILL
cause the Collateral Agent TO, DIRECT the ADR depositary to vote the ABC
Preference Shares represented by the ADSs as directed by the holders of the
Trust Securities. Each Trust Security will entitle the holder to direct the
exercise of the voting rights attaching to one ADS and four ABC Preference
Shares.
The Debt Securities will be held by the Custodian for the Trust.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust will invest the proceeds of the Offerings in the Debt
Securities issued by the U.K. Company. The Trust's investment objective is to
distribute to the holders of Trust Securities (a) pro rata based on the number
of Trust Securities outstanding the interest the Trust receives on the Debt
Securities from time to time PRIOR TO AN EXCHANGE EVENT and (b) upon the
occurrence of an Exchange Event, the proceeds of the redemption of the Debt
Securities. THE REDEMPTION PROCEEDS WILL BE (I) IF THE EXCHANGE EVENT IS
ANYTHING OTHER THAN A REDEMPTION OR MANDATORY REPURCHASE ("BUY-BACK") OF THE ABC
PREFERENCE SHARES FOR CASH, American Depositary Receipts ("ADRs") evidencing,
for each Trust Security, one ADS representing four ABC Preference Shares, AND
(II) if the Exchange Event is A redemption OR BUY-BACK of the ABC Preference
Shares for cash, US$25 per Trust Security PLUS AN AMOUNT EQUAL TO THE ACCRUED
BUT UNPAID INTEREST ON US$25 PRINCIPAL AMOUNT OF THE DEBT SECURITIES FROM AND
INCLUDING THE INTEREST PAYMENT DATE IMMEDIATELY PRECEDING THE EXCHANGE DATE TO
BUT EXCLUDING SUCH EXCHANGE DATE. The ABC Preference Shares will accrue
non-cumulative dividends at the rate of US$ per share per annum, payable
quarterly in arrears in an amount equal to US$ per share on each Dividend
Payment Date to holders of record as of the immediately preceding Record Date.
Upon the occurrence of an Exchange Event, the Administrator will notify The
Depository Trust Company (the "Depository") and publish a notice in The Wall
Street Journal or another daily newspaper of national circulation stating
whether ADSs or cash will be delivered in exchange for the Trust Securities.
The Trust has adopted a fundamental policy as required by the
Declaration of Trust to invest 100% of its portfolio in the Debt Securities, and
any distributions thereon, and not to dispose of the Debt Securities during the
term of the Trust except upon the occurrence of an Exchange Event. The foregoing
fundamental policy of the Trust may not be changed without the vote of 100% of
the holders of the Trust Securities.
TRUST ASSETS
The Trust's assets will consist of US$ aggregate principal amount of
Debt Securities (US$ aggregate principal amount of Debt Securities if the
Underwriters' over-allotment options are exercised in full), and any
distributions thereon. Except as described herein, holders of the Trust
Securities will receive non-cumulative dividend distributions in an amount equal
to US$ per Trust Security per annum, payable quarterly in arrears in an amount
equal to US$ per Trust Security on each , , , and of each year (each, a
"Dividend Payment Date"), to holders of record as of the immediately preceding ,
, and (each, a "Record Date"), respectively. The first distribution in respect
of the period from and including the original issue date (the "Issue Date") to
but excluding , 1998 will equal US$ per Trust Security. See "Dividends and
Distributions."
In the event that any Dividend Payment Date for the Trust Securities or
Interest Payment Date for the Debt Securities is not a Business Day, then the
dividend or interest payable on such date need not be made on such Dividend
Payment Date or Interest Payment Date, as applicable, but instead may be made on
the next succeeding Business Day with the same force and effect as if made on
such Dividend Payment Date or Interest Payment Date, as the case may be. As used
herein, "Business Day" means EACH MONDAY, TUESDAY, WEDNESDAY, THURSDAY OR FRIDAY
WHICH IS NOT a day on which banking institutions in SYDNEY, AUSTRALIA, NEW YORK,
NEW YORK OR THE CITY WHICH IS THE PRINCIPAL PLACE OF BUSINESS OF THE ABC
BORROWER FROM TIME TO TIME (INITIALLY WELLINGTON, NEW ZEALAND) ARE AUTHORIZED OR
OBLIGED by law or executive order to CLOSE.
ABC
THIS PROSPECTUS RELATES ONLY TO THE TRUST SECURITIES OFFERED HEREBY AND
DOES NOT RELATE TO ABC, THE ADSs OR THE ABC PREFERENCE SHARES. ABC HAS FILED A
REGISTRATION STATEMENT ON FORM F-3 WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION") WITH RESPECT TO THE ^ ABC PREFERENCE SHARES AND A
REGISTRATION STATEMENT ON FORM F-6 WITH RESPECT TO THE ADSs THAT MAY BE RECEIVED
BY A HOLDER OF TRUST SECURITIES UPON THE OCCURRENCE OF AN EXCHANGE EVENT. THE
PROSPECTUS OF ABC CONSTITUTING A PART OF SUCH REGISTRATION STATEMENT ON FORM F-3
INCLUDES INFORMATION RELATING TO ABC, THE ADSs AND THE ABC PREFERENCE SHARES.
THE PROSPECTUS OF ABC IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE
PURCHASERS OF TRUST SECURITIES TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF
REFERENCE ONLY. THE PROSPECTUS OF ABC DOES NOT CONSTITUTE A PART OF THIS
PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN.
EXCHANGE EVENT
THE occurrence of any of the following events SHALL CONSTITUTE AN
"EXCHANGE EVENT" AS OF THE "EXCHANGE DATE" INDICATED BELOW:
(I) THE EARLIER OF , 2047 AND THE DATE OF ANY EARLIER REDEMPTION
OR BUY-BACK of the ABC Preference Shares FOR CASH, IN WHICH
CASE THE EXCHANGE DATE WILL BE THE EARLIER OF SUCH DATES;
(ii) ANY date selected by ABC in its absolute discretion^, IN WHICH
CASE THE EXCHANGE DATE WILL BE SUCH DATE;
(III) the failure of the TRUST TO RECEIVE for any reason ON OR
within three Business Days AFTER an Interest Payment Date the
interest then due on the Debt Securities in full without
deduction or withholding for any taxes, duties or other
charges, IN WHICH CASE THE EXCHANGE DATE WILL BE THE FOURTH
BUSINESS DAY FOLLOWING SUCH INTEREST PAYMENT DATE;
(IV) ON ANY DATE, THE TIER 1 CAPITAL RATIO OR THE TOTAL CAPITAL
ADEQUACY RATIO of ABC (either as reported QUARTERLY by ABC to
the [applicable regulatory agency] or as determined at any
time by the [applicable regulatory agency] in its ABSOLUTE
discretion) IS below 4% or 8%, respectively (or, in each case,
such lesser percentage (the "Required Percentage"), as may BE
PRESCRIBED BY THE [APPLICABLE REGULATORY AGENCY] FOR ABC AT
THE TIME), AND SUCH RATIO IS NOT INCREASED BY ABC TO AT LEAST
4% OR 8%, respectively (or such lesser Required Percentage),
within 90 days AFTER THE DATE ON WHICH ABC MAKES SUCH
QUARTERLY REPORT OR RECEIVES NOTICE FROM THE [APPLICABLE
REGULATORY AGENCY] OF SUCH DETERMINATION BY THE [APPLICABLE
REGULATORY AGENCY], AS APPLICABLE, IN WHICH CASE THE EXCHANGE
DATE WILL BE THE BUSINESS DAY IMMEDIATELY FOLLOWING THE
EXPIRATION OF SUCH 90-DAY PERIOD;
(V) ANY CHANGE IN THE (A) LEGAL ownership of the securities (OTHER
THAN THE DEBT SECURITIES) ISSUED BY, (B) ANY PROVISIONS OF THE
CONSTITUENT DOCUMENTS OF (UNLESS CONSENTED TO BY THE RECORD
HOLDERS OF MORE THAN 50% OF THE TRUST SECURITIES OR, IN THE
OPINION OF COMPETENT LEGAL COUNSEL SELECTED BY THE TRUST SUCH
CHANGE WOULD NOT HAVE A MATERIAL ADVERSE IMPACT ON THE HOLDERS
OF THE TRUST SECURITIES), OR (C) the business purpose (as
specified in the constituent documents of the relevant
entities) of, ANY OF the U.K. Company, the Jersey Holding
Company, the Jersey Charitable Trust OR the Jersey Subsidiary,
OR ANY CHANGE IN THE BUSINESS PURPOSE (AS SPECIFIED IN THE
CONSTITUENT DOCUMENTS) OF the Distribution Trust, IN WHICH
CASE THE EXCHANGE DATE WILL BE THE DATE ON WHICH THE CHANGE
OCCURS;
(VI) THE DISTRIBUTION TRUST CEASES TO BE WHOLLY-OWNED, directly or
indirectly, ^ BY ABC OR A WHOLLY-OWNED subsidiary or branch ^ OF
ABC, IN WHICH CASE THE EXCHANGE DATE WILL BE THE DATE ON WHICH
THE DISTRIBUTION TRUST CEASES TO BE WHOLLY-OWNED, DIRECTLY OR
INDIRECTLY, BY ABC OR A WHOLLY-OWNED subsidiary or branch ^ OF
ABC;
(VII) THE ABC BORROWER CEASES TO BE ABC OR A WHOLLY-OWNED SUBSIDIARY
OR BRANCH OF ABC, IN WHICH CASE THE EXCHANGE DATE WILL BE THE
DATE ON WHICH THE ABC BORROWER CEASES TO BE ABC OR A
WHOLLY-OWNED SUBSIDIARY OR BRANCH OF ABC; AND
(VIII)(A) ANY PROCEEDING IS COMMENCED BY ABC, the U.K. Company, the
Jersey Holding Company, the Jersey Charitable Trust, the Jersey
Subsidiary, ^ the Distribution Trust or the ABC ^ BORROWER
(each, a "Relevant Entity") ^ OR ANY PARTY THAT CONTROLS A
RELEVANT ENTITY for an order that the Relevant Entity be ^
DISSOLVED, WOUND UP OR LIQUIDATED OR FOR THE APPOINTMENT OF a
liquidator, provisional liquidator, administrator ^, CONTROLLER
OR SIMILAR OFFICIAL IN RESPECT OF THE RELEVANT ENTITY OR ALL OR
SUBSTANTIALLY ALL OF ITS PROPERTY, IN WHICH CASE THE EXCHANGE
DATE WILL BE THE DATE ON WHICH THE PROCEEDING IS COMMENCED; (B)
ANY PROCEEDING IS COMMENCED BY ANY OTHER PERSON FOR AN ORDER
THAT A RELEVANT ENTITY BE WOUND UP OR FOR THE APPOINTMENT OF A
liquidator, provisional liquidator, administrator ^, CONTROLLER
OR SIMILAR OFFICIAL IN RESPECT OF THE RELEVANT ENTITY OR ALL OR
SUBSTANTIALLY ALL OF ITS PROPERTY (UNLESS SUCH PROCEEDING IS
DISCONTINUED OR DISMISSED WITHIN 21 DAYS OF ITS HAVING BEEN
COMMENCED), IN WHICH CASE THE EXCHANGE DATE WILL BE THE BUSINESS
DAY IMMEDIATELY FOLLOWING THE EXPIRATION OF SUCH 21-DAY PERIOD;
OR (C) A LIQUIDATOR, PROVISIONAL LIQUIDATOR, ADMINISTRATOR,
CONTROLLER OR SIMILAR OFFICIAL IS APPOINTED WHETHER BY A COURT
OR OTHERWISE IN RESPECT OF ANY RELEVANT ENTITY OR ALL OR
SUBSTANTIALLY ALL OF ITS PROPERTY (UNLESS SUCH APPOINTMENT IS
REVOKED OR SET ASIDE WITHIN 21 DAYS OF SUCH APPOINTMENT), IN
WHICH CASE THE EXCHANGE DATE WILL BE THE BUSINESS DAY
IMMEDIATELY FOLLOWING THE EXPIRATION OF SUCH 21-DAY PERIOD.
NOTWITHSTANDING THE FOREGOING, THE ABC BORROWER MAY, WITH THE CONSENT OF THE
DISTRIBUTION TRUST, ASSIGN THE ABC LOAN OR THE DISTRIBUTION TRUST MAY REPLACE
THE ABC LOAN WITH ANOTHER LOAN, IN EACH CASE, TO ABC OR TO ANOTHER WHOLLY-OWNED
SUBSIDIARY OR BRANCH OFFICE OF ABC WITH PROSPECTIVE PAYMENT TERMS IDENTICAL TO,
AND OTHER TERMS SUBSTANTIALLY THE SAME AS, THOSE OF THE ABC LOAN, IN WHICH CASE
ABC OR SUCH OTHER SUBSIDIARY OR BRANCH OFFICE AND LOAN WILL BE DEEMED TO BE THE
ABC BORROWER AND THE ABC LOAN, RESPECTIVELY, AND ANY SUCH ACTION WILL NOT
CONSTITUTE AN EXCHANGE EVENT.
TOTAL CAPITAL ADEQUACY RATIO MEANS THE RATIO OF QUALIFYING CAPITAL TO
RISK WEIGHTED ASSETS PRESCRIBED BY THE [APPLICABLE REGULATORY AGENCY] IN ITS
CAPITAL ADEQUACY GUIDELINES FOR [COUNTRY] BANKS, AS MODIFIED FROM TIME TO TIME.
TIER 1 CAPITAL RATIO MEANS THE RATIO OF TIER 1 CAPITAL TO RISK WEIGHTED ASSETS
(ON A CONSOLIDATED BASIS) PRESCRIBED BY THE [APPLICABLE REGULATORY AGENCY] IN
ITS CAPITAL ADEQUACY GUIDELINES FOR [COUNTRY] BANKS, AS MODIFIED FROM TIME TO
TIME. TIER 1 CAPITAL MEANS CAPITAL WHICH IS REGARDED AS "TIER 1 CAPITAL" FOR THE
PURPOSES OF THE CAPITAL ADEQUACY GUIDELINES OF THE [APPLICABLE REGULATORY
AGENCY].
If the Exchange Event is anything other than a redemption OR BUY-BACK
of the ABC Preference Shares for cash, then each Jersey Preference Share and
Debt Security will be redeemed, automatically and sequentially, for one ADS. If
a redemption OR BUY-BACK of the ABC Preference Shares for cash occurs, then the
Jersey Preference Shares and Debt Securities will be redeemed automatically and
sequentially, for cash. After any such redemption of the Debt Securities, the
Collateral Agent will deliver the ADSs or the cash for which the Debt Securities
are redeemed, as the case may be, to the Administrator and the Administrator, on
behalf of the Trust, will (i) in the case of a redemption OR BUY-BACK OF THE ABC
PREFERENCE SHARES for cash, distribute the proceeds to the holders of Trust
Securities at the rate of US$25 per Trust Security then outstanding TOGETHER
WITH AN AMOUNT EQUAL TO ACCRUED INTEREST ON AN EQUIVALENT AMOUNT OF DEBT
SECURITIES FROM AND INCLUDING THE INTEREST PAYMENT DATE IMMEDIATELY PRECEDING
THE EXCHANGE DATE TO BUT EXCLUDING THE EXCHANGE DATE, or (ii) in all other
cases, distribute the proceeds to the holders of Trust Securities at the rate of
one ADS per Trust Security then outstanding. THE DISTRIBUTION DESCRIBED IN THE
PRECEDING SENTENCE WILL BE MADE TO HOLDERS OF RECORD AS OF THE CLOSE OF BUSINESS
ON THE EXCHANGE DATE. The holders of the Trust Securities will thereafter have
no further claims against the Trust and the Administrator will wind up the
Trust.
DIVIDEND DISTRIBUTIONS ON the Trust Securities WILL CEASE TO ACCRUE ON
AND AFTER THE EXCHANGE DATE. IN THE CASE OF ANY EXCHANGE EVENT OTHER THAN A
REDEMPTION OR BUY-BACK OF THE ABC PREFERENCE SHARES FOR CASH, NO DIVIDEND
DISTRIBUTIONS WILL BE PAYABLE ON THE TRUST SECURITIES ON THE EXCHANGE DATE (EVEN
IF SUCH EXCHANGE DATE IS A DIVIDEND PAYMENT DATE). INSTEAD, NON-CUMULATIVE
DIVIDENDS WILL BEGIN TO ACCRUE ON THE ABC PREFERENCE SHARES FROM AND INCLUDING
THE LAST INTEREST PAYMENT DATE IN RESPECT OF WHICH INTEREST ON THE DEBT
SECURITIES HAS BEEN PAID OR PROVIDED FOR IN FULL. ACCORDINGLY, THE DIVIDENDS FOR
ANY QUARTERLY DIVIDEND PERIODS ENDING ON OR AFTER THE EXCHANGE DATE WILL BE
PAYABLE ONLY AS DIVIDENDS ON THE ABC PREFERENCE SHARES AND ONLY IN ACCORDANCE
WITH THE TERMS OF THE ABC PREFERENCE SHARES.
INTERVENING VEHICLES
The U.K. Company. The U.K. Company is a special purpose unlimited
company incorporated under the laws of, and domiciled in, the United Kingdom.
The U.K. Company is wholly-owned by an exempt company established under the laws
of, and domiciled in, Jersey, the Channel Islands (the "Jersey Holding
Company"), which holds all of the U.K. Company's ordinary shares. These ordinary
shares will be the only capital stock of the U.K. Company. The ordinary shares
of the Jersey Holding Company will be the only capital stock of the Jersey
Holding Company and are held by a charitable trust established under the laws
of, and domiciled in, Jersey, the Channel Islands (the "Jersey Charitable
Trust").
The U.K. Company was established for the purpose of, among other
things, owning all of the ordinary shares of the Jersey Subsidiary, issuing the
Debt Securities to the Trust and investing the proceeds thereof in the Jersey
Preference Shares. The U.K. Company will elect to be treated as a partnership
for United States Federal income tax purposes under U.S. Treasury Regulations
Sections 301.7701-1 through -3.
The U.K. Company will have at least two directors and an independent
auditor. The Memorandum and Articles of Association of the U.K. Company will
prohibit it from taking any action that would have a material adverse effect on
the holders of the Trust Securities. There will be no annual shareholder
meetings. There will be one directors' meeting each year at which the
director(s) will nominate directors, if necessary, and approve the annual
accounts. The U.K. Company will also appoint a paying agent located in The City
of New York to receive Income Entitlements from the Distribution Trust ^, to
make payments on the Debt Securities to the Trust AND TO MEET THE ONGOING COSTS
AND EXPENSES OF VARIOUS ENTITIES AS DESCRIBED BELOW.
The Jersey Subsidiary. The Jersey Subsidiary is a company incorporated
with limited liability under the laws of, and domiciled in, Jersey, Channel
Islands. The U.K. Company will own all the ordinary shares of the Jersey
Subsidiary. The Jersey Subsidiary was established for the purpose of, among
other things, issuing the Jersey Preference Shares to the U.K. Company and
investing the proceeds thereof in the ADSs. The Jersey Subsidiary will elect to
be disregarded as an entity that is separate from its owner (i.e., the U.K.
Company) for United States Federal income tax purposes under U.S. Treasury
Regulations Sections 301.7701-1 through -3.
The Jersey Subsidiary will be managed by a Board of Directors and have
an independent auditor. The Memorandum and the Articles of Association of the
Jersey Subsidiary will prohibit the Board of Directors from taking any action
that would have a material adverse effect on the holders of the Trust
Securities. There will be no annual shareholder meetings. There will be one
directors' meeting each year at which the director(s) will nominate directors,
if necessary, and approve the annual accounts.
The Distribution Trust. The Distribution Trust is a business trust
established under the laws of the State of Delaware. The Distribution Trust will
operate in accordance with the distribution trust agreement that establishes its
terms; the U.K. Company will have no right to cause any variation of such terms.
The Distribution Trust will elect to be disregarded as an entity that is
separate from its owner (i.e., THE HOLDER OF THE COMMON SECURITIES OF THE
DISTRIBUTION TRUST) for United States Federal income tax purposes under U.S.
Treasury Regulations Sections 301.7701-1 through -3.
The administration of the Distribution Trust will be overseen by the
trustees thereof.
On the Issue Date, ABC will use the proceeds from the issuance of the
ABC Preference Shares to make a capital contribution of US$ (or US$ if the
Underwriters exercise their over-allotment options in full) to the Distribution
Trust and the Distribution Trust will use THE capital contribution to make the
ABC Loan to the ABC BORROWER. THE ABC Loan will mature five years after the
MATURITY date of the Debt Securities on , 2052. The ABC Loan will be the only
asset, and interest thereon will be the only source of revenue, of the
Distribution Trust. Interest on the ABC Loan will accrue from the Issue Date and
be due and payable on each Interest Payment Date at the rate of % per annum. THE
INTEREST PAID ON THE ABC LOAN WILL BE USED BY the Distribution Trust TO PAY THE
INCOME ENTITLEMENTS TO THE U.K. COMPANY. THE INTEREST RATE REPRESENTS THE SUM OF
% (THE INTEREST RATE ON THE DEBT SECURITIES, WHICH EQUALS THE DIVIDEND RATE ON
THE TRUST SECURITIES) AND A SPREAD OF 0.25%. THE SPREAD IS designed to enable
the U.K. Company to PAY (A) ITS ONGOING COSTS AND expenses and those of the
Jersey SUBSIDIARY, (B) DIVIDENDS TO THE JERSEY HOLDING COMPANY IN AN AMOUNT
SUFFICIENT TO ENABLE IT TO PAY ITS EXPENSES AND THOSE OF the Jersey Charitable
Trust, the Collateral Agent and (PURSUANT TO THE EXPENSE AGREEMENT (AS DEFINED
HEREIN)) THE TRUST AND (C) the indemnity fee payable TO [NAME], AN AFFILIATE OF
ABC (THE "ABC AFFILIATE").
ON AND AFTER AN EXCHANGE DATE, THE U.K. COMPANY WILL CEASE TO BE AN
INCOME BENEFICIARY OF the Distribution Trust AND AN AFFILIATE OF ABC WILL
RECEIVE ALL THE INCOME ENTITLEMENTS OF THE DISTRIBUTION TRUST THEREAFTER;
PROVIDED, HOWEVER, IF THE EXCHANGE EVENT IS THE CASH REDEMPTION OR BUY-BACK OF
THE ABC PREFERENCE SHARES, THE U.K. COMPANY WILL BE ENTITLED TO RECEIVE AN
INCOME ENTITLEMENT EQUAL TO THE ACCRUED BUT UNPAID INTEREST ON THE DEBT
SECURITIES FOR THE PERIOD FROM AND INCLUDING THE INTEREST PAYMENT DATE
IMMEDIATELY PRECEDING THE EXCHANGE DATE TO BUT EXCLUDING THE EXCHANGE DATE.
Under the terms of the Distribution Trust, no Income Entitlement shall
be paid or payable TO THE U.K. COMPANY on any Interest Payment Date if (i) an
Exchange Event (OTHER THAN A REDEMPTION OR BUY-BACK OF THE ABC PREFERENCE SHARES
FOR CASH) has occurred or will occur prior to such Interest Payment Date, (ii)
the amount of Income Entitlement payable on such date, together with the
aggregate amount of dividends paid on or before such date during the then
current fiscal year of ABC on any preference shares or ordinary shares of ABC,
would exceed ABC's distributable profits or (iii) the payment of such Income
Entitlement would be prohibited or limited by applicable law or regulation or by
any instruments or agreements to which ABC is subject (collectively, the
"Payment Prohibitions"). IN THE EVENT AN INCOME ENTITLEMENT IS NOT PAID BECAUSE
A PAYMENT PROHIBITION EXISTS, AN EXCHANGE EVENT WILL OCCUR BECAUSE THE U.K.
COMPANY WILL HAVE INSUFFICIENT FUNDS TO PAY INTEREST ON THE DEBT SECURITIES.
TRUST DISSOLUTION
The Trust will dissolve as soon as possible after the exchange of the
Trust Securities for ADSs or cash, as the case may be, upon the occurrence of an
Exchange Event.
INVESTMENT RESTRICTIONS
The Trust has adopted a fundamental policy that the Trust may not
purchase any securities or instruments other than the Debt Securities and any
distributions thereon; issue any securities or instruments except for the Trust
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; or make loans. The Trust has adopted a
fundamental policy that 100% of its portfolio be invested in Debt Securities and
any distributions thereon, and not to dispose of the Debt Securities during the
term of the Trust, except upon the occurrence of an Exchange Event.
RISK FACTORS
NO ACTIVE PORTFOLIO MANAGEMENT
It is a fundamental policy of the Trust that 100% of its portfolio be
invested in the Debt Securities and any distributions thereon, and not to
dispose of the Debt Securities during the term of the Trust, except upon the
occurrence of an Exchange Event. The Trust will not be managed like a typical
closed-end investment company.
ABSENCE OF TRADING HISTORY; MARKETABILITY; POSSIBILITY OF THE TRUST SECURITIES
TRADING AT A DISCOUNT FROM NET ASSET VALUE
The Trust Securities have no trading history and it is not possible to
predict how they will trade in the secondary market. The trading price of the
Trust Securities may vary considerably prior to an Exchange Event due to, among
other things, complex and interrelated political, economic, financial and other
factors that can affect the capital markets generally, the stock exchanges or
quotation systems on which ABC's shares are traded and the market segment of
which ABC is a part and fluctuations in interest rates and rates of exchange
between the [CURRENCY OF THE COUNTRY] and the U.S. dollar and other factors that
are difficult to predict and beyond the Trust's control. Reference is made to
the accompanying prospectus of ABC.
The Trust Securities are a new issue of securities and, accordingly,
have no established trading market. The Underwriters currently intend, but are
not obligated, to make a market in the Trust 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 of the Trust Securities with liquidity
of investment or that it will continue for the life of the Trust Securities.
Application will be made to list the Trust Securities on the NYSE. There can be
no assurance that such application will be accepted or that, if accepted, the
Trust Securities will not later be delisted or that trading in the Trust
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
Trust Securities on another national securities exchange or for quotation on
another trading market. If the Trust Securities are not listed or traded on any
securities exchange or trading market, or if trading of the Trust Securities is
suspended, pricing information for the Trust Securities may be more difficult to
obtain, and the price and liquidity of the Trust Securities may be adversely
affected.
The Trust is a newly organized closed-end investment company with no
previous operating history. Shares of closed-end investment companies frequently
trade at a discount from their net asset value, which is a risk separate and
distinct from the risk that the Trust's net asset value will decrease. The Trust
cannot predict whether the Trust Securities will trade at, below or above their
net asset value. The risk of purchasing investments that might trade at a
discount is more pronounced for investors who wish to sell their investments in
a relatively short period of time after completion of the Trust's initial public
offering because for those investors realization of a gain or loss on their
investments is likely to be more dependent upon the existence of a premium or
discount than upon portfolio performance.
Trust Securities are not subject to redemption.
LIMITED TERM
The term of the Trust will expire as soon as possible after the
exchange of the Trust Securities for ADSs or cash, as the case may be, upon the
occurrence of an Exchange Event.
NON-DIVERSIFIED PORTFOLIO
The Trust's assets will consist entirely of the Debt Securities and
distributions thereon. As a result, investments in the Trust may be subject to
greater risk than would be the case for a company with a more diversified
portfolio of investments.
LIMITED STOCKHOLDER RIGHTS
Except as described below, holders of the Trust Securities will not be
entitled to any rights with respect to the ADSs or the ABC Preference Shares
(including, without limitation, rights to receive any dividends or other
distributions in respect thereof) until such time, if any, as the Trust shall
have delivered the ADSs in exchange for Trust Securities upon the occurrence of
an Exchange Event (unless the Exchange Event is the redemption OR BUY-BACK of
the ABC Preference Shares for cash). In addition, the Trust as the holder of the
Debt Securities, has no voting rights in relation to the U.K. Company.
Each Trust Security will entitle the holder thereof to direct the
exercise of the voting rights attaching to one ADS and four ABC Preference
Shares. The holders of ADSs will be entitled to vote the ABC Preference Shares
represented thereby together with the holders of ordinary shares of ABC, on the
basis of one vote per ABC PREFERENCE SHARE on any poll, (a) in all cases, with
respect to certain matters SPECIFIED HEREIN AND (B) DURING A SPECIAL VOTING
PERIOD (AS DEFINED BELOW), with respect to all matters on which the holders of
the ordinary shares of ABC are entitled to vote. A "SPECIAL VOTING PERIOD" IS
THE PERIOD FROM AND INCLUDING (I) ANY DIVIDEND PAYMENT DATE ON WHICH ABC FAILS
TO PAY IN FULL THE DIVIDENDS ACCRUED IN RESPECT OF THE QUARTERLY DIVIDEND PERIOD
THEN ENDED OR (II) THE FOURTH BUSINESS DAY AFTER ANY EXCHANGE DATE OCCURRING AS
A RESULT OF ANY FAILURE BY THE TRUST TO RECEIVE IN FULL THE INTEREST PAYABLE ON
THE DEBT SECURITIES, UNLESS, PRIOR TO SUCH DATE, ABC HAS PAID IN FULL AN
OPTIONAL DIVIDEND ON THE ABC PREFERENCE SHARES IN AN AGGREGATE AMOUNT EQUAL TO
THE AMOUNT OF INTEREST NOT SO RECEIVED (AN "OPTIONAL DIVIDEND"), IN EACH CASE TO
BUT EXCLUDING THE FIRST DIVIDEND PAYMENT DATE THEREAFTER AS OF WHICH ABC HAS
PAID IN FULL FOUR CONSECUTIVE QUARTERLY DIVIDENDS ON THE ABC PREFERENCE SHARES.
In addition, the holders of ADSs will have the right to vote separately as a
class in certain circumstances involving a variation of the rights of holders of
the ADSs or the ABC Preference Shares. As long as the ADSs are owned by the
Jersey Subsidiary, the Jersey Subsidiary will, or will CAUSE the Collateral
Agent TO, DIRECT the ADR depositary to vote the ABC Preference Shares as
directed by the holders of the Trust Securities.
YEAR 2000 NONCOMPLIANCE
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the Year 2000 from the Year
1900 (commonly known as the "Year 2000 Problem"). Like other investment
companies and financial and business organizations, the Trust could be adversely
affected if the computer systems used by the Trust's service providers do not
properly address this problem prior to January 1, 2000. The Trust has sought
assurances from its service providers that they are taking all necessary steps
to ensure that their computer systems will accurately reflect the Year 2000, and
the Trust will continue to monitor the situation. At this time, however, no
assurance can be given that the Trust's service providers have anticipated every
step necessary to avoid any adverse effect on the Trust attributable to the Year
2000 Problem.
DESCRIPTION OF THE TRUST SECURITIES
Each Trust Security represents a proportionate share of beneficial
interest in the Trust, and a total of _________ Trust Securities will be issued
in the Offerings, assuming no exercise of the Underwriters' over-allotment
options. Upon liquidation of the Trust, holders of Trust Securities are entitled
to share pro rata based on the number of Trust Securities outstanding in the net
assets of the Trust available for distribution. Holders of Trust Securities have
no preemptive, redemption or conversion rights. The Trust Securities, when
issued and outstanding, will be fully paid and nonassessable.
VOTING RIGHTS
Holders are entitled to one vote for each Trust Security on all matters
to be voted on by holders and are not able to cumulate their votes in the
election of Trustees. The Trust intends to hold annual meetings as required by
the rules of the NYSE. The holders have the right, upon the declaration in
writing or vote of more than two-thirds of the outstanding Trust 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 record holders of 10% of
the Trust Securities or to vote on other matters upon the written request of the
record holders of more than 50% of the Trust Securities (unless substantially
the same matter was voted on during the preceding 12 months).
PURSUANT TO THE ADSs SECURITY AND PLEDGE AGREEMENT AND THE ADR DEPOSIT
AGREEMENT, EACH Trust Security will entitle the holder thereof to direct the
exercise of the voting rights attaching to one ADS and four ABC Preference
Shares. The holders of ADSs will be entitled to vote together with the holders
of ordinary shares of ABC, on the basis of one vote per ABC PREFERENCE SHARE on
any poll, (a) in all cases, with respect to certain matters SPECIFIED BELOW AND
(b) DURING A SPECIAL VOTING PERIOD, with respect to all matters on which the
holders of the ordinary shares of ABC are entitled to vote. The matters referred
to in clause (a) of the preceding sentence upon which the holders of ABC
Preference Shares will have a right to vote, TOGETHER WITH THE HOLDERS OF
ORDINARY SHARES OF ABC, are: any proposal to reduce the share capital of ABC;
any resolution to approve the terms of a share BUY-BACK arrangement; any
proposal that affects the rights attached to the ABC Preference Shares; any
proposal to wind up ABC; any proposal for the disposal of the whole of the
property, business and undertaking of ABC; and any matter during the winding up
of ABC. In addition, the holders of ADSs will have the right to vote separately
as a class in certain circumstances involving a variation of the rights of
holders of the ADSs or the ABC Preference Shares. PURSUANT TO THE ADSs SECURITY
AND PLEDGE AGREEMENT, AS long as the ADSs are held by the Jersey Subsidiary, the
Jersey Subsidiary will, or will CAUSE the Collateral Agent TO, DIRECT the ADR
depositary to vote the ABC Preference Shares as directed by the holders of the
Trust Securities.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED HAS APPLIED TO THE
COMMISSION FOR AN EXEMPTIVE ORDER THAT WOULD, IF ISSUED, AMONG OTHER THINGS,
PERMIT OTHER INVESTMENT COMPANIES AND COMPANIES EXCEPTED FROM THE DEFINITION OF
INVESTMENT COMPANY UNDER SECTIONS 3(C)(1) AND 3(C)(7) OF THE INVESTMENT COMPANY
ACT TO OWN MORE THAN 3% OF THE TOTAL OUTSTANDING TRUST SECURITIES. UNDER THE
TRUST AGREEMENT, HOWEVER, ANY SUCH COMPANY OWNING TRUST SECURITIES IN EXCESS OF
THE LIMITS IMPOSED BY SECTIONS 12(D)(1)(A)(I) AND 12(D)(1)(C) OF THE INVESTMENT
COMPANY ACT MUST VOTE THEIR TRUST SECURITIES IN PROPORTION TO THE VOTE OF ALL
OTHER HOLDERS OF TRUST SECURITIES THAT ARE NOT SUCH COMPANIES.
Modifications and amendments of the terms of the Trust Securities, the
Debt Securities and the Jersey Preference Shares may be made with the consent of
not less than a majority of the holders of the Trust Securities; provided that,
no such modification or amendment may, without the consent of 100% of the
holders of the Trust Securities, change the amount or timing of any dividend on
the Trust Securities, the amount or timing of interest payments on the Debt
Securities, the liquidation preference of the Jersey Preference Shares, the
redemption amount of the Debt Securities and the Jersey Preference Shares or
otherwise adversely affect the foregoing terms. Modifications and amendments may
be made without the consent of any holder of the Trust Securities to cure any
ambiguity, defect or inconsistency in the Declaration of Trust or any instrument
defining the terms of the Trust Securities, the Debt Securities and the Jersey
Preference Shares, provided that, such action will not adversely affect in any
material respect the interests of the holders of the Trust Securities.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
Generally, under the [COUNTRY] Corporations Law, the concept of voting
share does not include certain types of preference shares with limited voting
rights. Because holders of the ABC Preference Shares have been conferred a right
to vote following a missed dividend, the ABC Preference Shares will be treated
as voting shares for relevant purposes. Therefore, a person with an entitlement
to ABC Preference Shares, including holders of Trust Securities, should consider
this entitlement with any entitlement to other voting shares in ABC in the
context of the regulatory thresholds summarized below AND SEEK APPROPRIATE LEGAL
ADVICE.
In summary, under the [COUNTRY] Corporations Law, a person or group of
persons cannot acquire voting shares in a public company if that person or group
of persons or another person would then be "entitled" (which is defined very
broadly) to more than 20% of the voting shares in ABC unless those shares are
acquired in a manner specifically permitted by law. This restriction also limits
the options available to a shareholder wanting to sell a shareholding of more
than 20% in an [COUNTRY] public company. The [COUNTRY] Corporations Law also
imposes certain substantial shareholding disclosure obligations on persons who
are or become "entitled" to 5% or more of the voting shares in a company listed
on the [COUNTRY] Stock Exchange, such as ABC.
BOOK-ENTRY SYSTEM
The Trust Securities will be issued in the form of one or more global
securities (the "Global Securities") deposited with the Depository and
registered in the name of a nominee of the Depository.
The Depository has advised the Trust and the Underwriters as follows:
The Depository is a limited-purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the SECURITIES Exchange
Act OF 1934, AS AMENDED. The Depository was created to hold securities of
persons who have accounts with the Depository ("participants") and to facilitate
the clearance and settlement of securities transactions among its participants
in such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
certificates. Such participants include securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to the Depository's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
Upon the issuance of a Global Security, the Depository or its nominee
will credit the respective Trust Securities represented by such Global Security
to the accounts of participants. The accounts to be credited shall be designated
by the Underwriters. Ownership of beneficial interests in such Global Securities
will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests by participants in such Global
Securities will be shown on, and the transfer of those ownership interests will
be effected only through, records maintained by the Depository or its nominee
for such Global Securities. Ownership of beneficial interests in such Global
Securities by persons that hold through participants will be shown on, and the
transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Trust
Securities. Except as set forth below, owners of beneficial interests in such
Global Securities will not be entitled to have the Trust Securities registered
in their names and will not receive or be entitled to receive physical delivery
of the Trust Securities in definitive form and will not be considered the owners
or holders thereof.
Delivery of ADSs or payment of amounts or delivery of other
consideration deliverable on exchange of, and any quarterly distributions on,
Trust Securities registered in the name of or held by the Depository or its
nominee will be made to the Depository or its nominee, as the case may be, as
the registered owner or the holder of the Global Security. None of the Trust,
any Trustee, the Administrator, the Paying Agent or the Custodian for the Trust
Securities will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Trust expects that the Depository, upon receipt of any payment in
respect of a Global Security, will credit immediately participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in such Global Security as shown on the records of the Depository. The Trust
also expects that payments by participants to owners of beneficial interests in
such Global Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name^", and will be the
responsibility of such participants.
A Global Security may not be transferred except as a whole by the
Depository to a nominee or a successor of the Depository. If the Depository is
at any time unwilling or unable to continue as depository and a successor
depository is not appointed by the Trust within ninety days, the Trust will
issue Trust Securities in definitive registered form in exchange for the Global
Security representing such Trust Securities. In addition, the Trust may at any
time and in its sole discretion determine not to have any Trust Securities
represented by one or more Global Securities and, in such extent, will issue
Trust Securities in definitive form in exchange for all of the Global Securities
representing the Trust Securities. Further, if the Trust so specifies with
respect to the Trust Securities, an owner of a beneficial interest in a Global
Security representing Trust Securities may, on terms acceptable to the Trust and
the Depository for such Global Security, receive Trust Securities in definitive
form. In any such instance, an owner of a beneficial interest in a Global
Security will be entitled to physical delivery in definitive form of Trust
Securities represented by such Global Security equal in number to that
represented by such beneficial interest and to have such Trust Securities
registered in its name.
TRUSTEES
The Trustees of the Trust consist of three individuals, none of whom is
an "interested person" of the Trust as defined in the Investment Company Act.
The Trustees of the Trust are responsible for the overall supervision of the
operations of the Trust and perform the various duties imposed on the trustees
of management investment companies by the Investment Company Act.
The Trustees of the Trust are:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- --------------------- ----- ----------------------
<S> <C> <C>
Donald J. Puglisi, 52.................................... Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 53................................ Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 58..................................... Trustee Professor of Economics
Center for Economic University of Delaware
Education & Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
COMPENSATION OF TRUSTEES
The annual fees and anticipated out-of-pocket expenses of each
unaffiliated Trustee and any additional fees of the Trust's Managing Trustee
will be PAID BY THE JERSEY HOLDING COMPANY PURSUANT TO AN EXPENSE AGREEMENT (THE
"EXPENSE AGREEMENT") BETWEEN IT AND THE BANK OF NEW YORK, AS THE ADMINISTRATOR,
CUSTODIAN AND PAYING AGENT OF THE TRUST. The Trustees will not receive, either
directly or indirectly, any compensation, including any pension or retirement
benefits, from the Trust. None of the Trustees receives any compensation for
serving as a trustee or director of any other affiliated investment company.
MANAGEMENT ARRANGEMENTS
PORTFOLIO MANAGEMENT AND ADMINISTRATION
The Trust will be internally managed and will not have an investment
adviser. The Trust's portfolio will consist only of US$ aggregate principal
amount of Debt Securities (US$ aggregate principal amount of Debt Securities if
the Underwriters' over-allotment options are exercised in full), and any
distributions thereon, and will not be actively managed. The Trustees of the
Trust will authorize the purchase of the Debt Securities as directed by the
Declaration of Trust. It is a fundamental policy of the Trust that the Debt
Securities may not be disposed of during the term of the Trust, except upon the
occurrence of an Exchange Event.
The Trust will pay all expenses incurred in THE TRUST'S formation and
other initial expenses and expenses relating to the Offerings OUT OF the
facility fee TO BE paid ON THE ISSUE DATE to the Trust by the U.K. Company in
connection with the investment by the Trust in the Debt Securities. THE ongoing
ADMINISTRATIVE AND OTHER expenses of the Trust such as accounting services,
expenses for legal and auditing services, taxes, costs of printing proxies,
listing fees, if any, stock certificates and shareholder reports, charges of the
Administrator, the Custodian and the Paying Agent, fees and expenses of
Trustees, accounting costs, brokerage costs, litigation, mailing and other
expenses properly payable by the Trust will be paid BY THE JERSEY HOLDING
COMPANY PURSUANT TO THE EXPENSE AGREEMENT. ANY operating expenses of the Trust
NOT COVERED BY THE TRUST'S ARRANGEMENTS WITH THE JERSEY HOLDING COMPANY will be
paid by the ABC Affiliate PURSUANT TO AN EXPENSE AND INDEMNITY AGREEMENT (THE
"EXPENSE AND INDEMNITY AGREEMENT") AMONG IT, THE U.K. COMPANY, THE TRUST, THE
JERSEY HOLDING COMPANY, THE JERSEY SUBSIDIARY AND THE JERSEY CHARITABLE TRUST.
See "--Estimated Expenses."
Administrator. The day-to-day affairs of the Trust will be managed by
The Bank of New York, as the Administrator pursuant to an administration
agreement (the "Administration Agreement"). Under the Administration Agreement,
the Trustees have delegated most of their operational duties to the
Administrator, including without limitation, the duties to: (i) pay, or cause to
be paid, all expenses incurred by the Trust; (ii) with the approval of the
Trustees, engage legal and other professional advisors (other than the
independent public accountants for the Trust); (III) instruct the Paying Agent
to pay distributions on Trust Securities as described herein; (IV) cause the
legal and other professional advisors engaged by it to prepare and mail, file or
publish all notices, proxies, reports, tax returns and other communications and
documents for the Trust, and keep all books and records for the Trust; (V) at
the direction of the Trustees, and upon being furnished with reasonable security
and indemnity as the Administrator may require, institute and prosecute legal
and other appropriate proceedings to enforce the rights and remedies of the
Trust; and (VI) make, or cause to be made, all necessary arrangements with
respect to meetings of Trustees and any meetings of holders of Trust Securities.
The Administrator will not, however, select the independent public accountants
for the Trust or sell or otherwise dispose of the Trust assets (except in
connection with the occurrence of an Exchange Event).
The Administration Agreement may be terminated by either the Trust or
the Administrator upon 60 days prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
Except for its roles as Administrator, Custodian and Paying Agent of
the Trust, and except for its role as Collateral Agent under the Security and
Pledge AGREEMENTS, AS PAYING AND TRANSFER AGENT FOR THE DEBT SECURITIES and as
depositary for the ADRs, The Bank of New York has no other affiliation with, and
is not engaged in any other transactions with, the Trust.
The address of the Administrator is 101 Barclay Street, New York, New
York 10286.
CUSTODIAN
The Trust's custodian (the "Custodian") is The Bank of New York
pursuant to a custodian agreement (the "Custodian Agreement"). In the event of
any termination of the Custodian Agreement by the Trust or the resignation of
the Custodian, the Trust must engage a new Custodian to carry out the duties of
the Custodian as set forth in the Custodian Agreement. The Custodian will also
act as Collateral Agent under the Security and Pledge AGREEMENTS, under which it
will hold a perfected security interest in the ADSs, the Jersey Preference
Shares or other assets consistent with the terms of the securities pledged
thereunder, and as depositary for the ADRs.
PAYING AGENT
The paying agent, transfer agent and registrar (the "Paying Agent") for
the Trust Securities is The Bank of New York pursuant to a paying agent
agreement (the "Paying Agent Agreement"). In the event of any termination of the
Paying Agent Agreement by the Trust or the resignation of the Paying Agent, the
Trust will use its best efforts to engage a new Paying Agent to carry out the
duties of the Paying Agent.
INDEMNIFICATION
The Trust will, to the fullest extent permitted by applicable law,
indemnify each Trustee, the Administrator, the Paying Agent and the Custodian
with respect to any claim, liability, loss which it may incur in acting as
Trustee, Administrator, Paying Agent or Custodian, as the case may be, and any
reasonable expense incurred in connection with any such claim, liability or loss
(including the reasonable costs and expenses of the defense against any claim or
liability) except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of their respective duties. Subject to the
satisfaction of certain conditions, the ABC Affiliate will reimburse the Trust
for any amounts it may be required to pay as indemnification to any Trustee, the
Administrator, the Paying Agent or the Custodian.
ESTIMATED EXPENSES
Organization costs of the Trust in the amount of $ and estimated costs
of the Trust in connection with the initial registration of the Trust Securities
and the Offerings in the amount of approximately $ will be paid by the Trust OUT
OF the facility fee TO BE paid ON THE ISSUE DATE to the Trust by the U.K.
Company in connection with the investment by the Trust in the Debt Securities.
THE ONGOING ADMINISTRATIVE AND OTHER expenses of the Trust WILL BE PAID BY THE
JERSEY HOLDING COMPANY PURSUANT TO THE EXPENSE AGREEMENT. ANY operating expenses
of the Trust NOT COVERED BY THE TRUST'S ARRANGEMENTS WITH THE JERSEY HOLDING
COMPANY will be paid by the ABC Affiliate PURSUANT TO THE EXPENSE AND INDEMNITY
AGREEMENT.
DIVIDENDS AND DISTRIBUTIONS
The Trust intends to distribute to holders dividend distributions in an
amount equal to US$ per Trust Security per annum, payable quarterly in arrears
in an amount equal to US$ per Trust Security on each Dividend Payment Date to
holders of record on the immediately preceding Record Date. The first
distribution in respect of the period from and including the Issue Date to but
excluding , 1998 will equal US$ per Trust Security.
Dividend payments on the Trust Securities will be made from the
interest payments received by the Trust on the Debt Securities. Interest
payments on the Debt Securities will be made by the U.K. Company TO THE EXTENT
THAT IT RECEIVES Income Entitlements AS THE INCOME BENEFICIARY OF the
Distribution Trust. The U.K. Company's right to receive Income Entitlements will
not represent an absolute ownership interest in the Distribution Trust or the
income thereof, but rather an entitlement to receive INCOME ENTITLEMENTS only to
the extent actually distributed to the U.K. Company by the Distribution Trust;
if any Income Entitlement payable on any Interest Payment Date is not paid to
the U.K. Company or at its direction on such date for any reason, the
Distribution Trust will have no obligation to pay such Income Entitlement to the
U.K. Company AND THE U.K. COMPANY WILL HAVE NO RIGHT TO REQUIRE SUCH PAYMENT.
See "Investment Objective and Policies--Intervening Vehicles." IN THE EVENT AN
INCOME ENTITLEMENT IS NOT PAID BECAUSE A PAYMENT PROHIBITION EXISTS, AN EXCHANGE
EVENT WILL OCCUR BECAUSE THE U.K. COMPANY WILL HAVE INSUFFICIENT FUNDS TO PAY
INTEREST ON THE DEBT SECURITIES.
ON AND AFTER AN EXCHANGE DATE, THE U.K. COMPANY WILL CEASE TO BE THE
INCOME BENEFICIARY OF THE DISTRIBUTION TRUST AND AN AFFILIATE OF ABC WILL
RECEIVE ALL THE INCOME ENTITLEMENTS OF THE DISTRIBUTION TRUST THEREAFTER;
PROVIDED, HOWEVER, IF THE EXCHANGE EVENT IS THE CASH REDEMPTION OR BUY-BACK OF
THE ABC PREFERENCE SHARES, THE U.K. COMPANY WILL BE ENTITLED TO RECEIVE AN
INCOME ENTITLEMENT EQUAL TO THE ACCRUED BUT UNPAID INTEREST ON THE DEBT
SECURITIES FOR THE PERIOD FROM AND INCLUDING THE INTEREST PAYMENT DATE
IMMEDIATELY PRECEDING THE EXCHANGE DATE TO BUT EXCLUDING THE EXCHANGE DATE.
On each Interest Payment Date, (i) the ABC BORROWER will make an
interest payment on the ABC Loan to the Distribution Trust; (II) if no Payment
Prohibition exists, the Distribution Trust will distribute SUCH INTEREST PAYMENT
AS AN Income ENTITLEMENT to the U.K. Company; and (III) the U.K. Company will
pay (a) interest on the Debt Securities to the Trust, (b) ongoing costs and
expenses of the U.K. Company AND THE JERSEY SUBSIDIARY, (C) QUARTERLY DIVIDEND
PAYMENTS ON THE U.K. COMPANY'S VOTING SHARES TO THE JERSEY HOLDING COMPANY,
WHICH DIVIDENDS WILL BE USED BY THE JERSEY HOLDING COMPANY TO PAY ONGOING
EXPENSES OF the Jersey Holding Company, the Jersey Charitable Trust, the
Collateral Agent and (PURSUANT TO THE EXPENSE AGREEMENT) THE TRUST AND (D) AN
indemnity fee payable to the ABC Affiliate. On such Interest Payment Date (which
will also be a Dividend Payment Date), the Administrator of the Trust will use
all the interest received by the Trust on the Debt Securities to pay dividends
on the Trust Securities.
DIVIDEND DISTRIBUTIONS ON THE TRUST SECURITIES WILL CEASE TO ACCRUE ON
AND AFTER THE EXCHANGE DATE. IN THE CASE OF ANY EXCHANGE EVENT OTHER THAN A
REDEMPTION OR BUY-BACK OF THE ABC PREFERENCE SHARES FOR CASH, NO DIVIDEND
DISTRIBUTIONS WILL BE PAYABLE ON THE TRUST SECURITIES ON THE EXCHANGE DATE (EVEN
IF SUCH EXCHANGE DATE IS A DIVIDEND PAYMENT DATE). INSTEAD, NON-CUMULATIVE
DIVIDENDS WILL BEGIN TO ACCRUE ON THE ABC PREFERENCE SHARES FROM AND INCLUDING
THE LAST INTEREST PAYMENT DATE IN RESPECT OF WHICH INTEREST ON THE DEBT
SECURITIES HAS BEEN PAID OR PROVIDED FOR IN FULL. ACCORDINGLY, THE DIVIDENDS FOR
ANY QUARTERLY DIVIDEND PERIODS ENDING ON OR AFTER THE EXCHANGE DATE WILL BE
PAYABLE ONLY AS DIVIDENDS ON THE ABC PREFERENCE SHARES AND ONLY IN ACCORDANCE
WITH THE TERMS OF THE ABC PREFERENCE SHARES.
NET ASSET VALUE
The net asset value of the Trust Securities will be calculated by the
Trust no less frequently than quarterly by dividing the value of the net assets
of the Trust (the value of its assets less its liabilities) by the total number
of Trust Securities outstanding. The Trust's net asset value will be published
semi-annually as part of the Trust's semi-annual report to holders and at such
other times as the Trustees may determine. The value of the Debt Securities held
by the Trust will be determined in good faith by the Board of Trustees pursuant
to procedures adopted by them.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of Trust Securities is
based upon the advice of Sullivan & Cromwell, counsel to ABC. The summary
addresses only the tax consequences to persons that acquire Trust Securities in
connection with the Offerings and hold the Trust Securities as a capital asset.
It does not address all tax consequences of the ownership of Trust Securities
and does not take into account the specific circumstance of investors such as
tax-exempt entities, banks, certain insurance companies, broker dealers, traders
in securities that elect to mark to market, investors liable for the alternative
minimum tax, investors that hold Trust Securities as part of a straddle or
hedging or conversion transaction or investors whose functional currency is not
the U.S. dollar. The summary is based on the Internal Revenue Code of 1986, as
amended, its legislative history, existing and proposed regulations thereunder,
published rulings and court decisions as well as the income tax treaty between
the United States and [COUNTRY] (the "Treaty") all of which are subject to
change possibly with retroactive effect.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX
ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF TRUST SECURITIES, AS WELL AS THE EFFECT
OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
U.S. HOLDERS
A "U.S. Holder" is any beneficial owner of Trust Securities that is (i)
a citizen or resident of the United States, (ii) a domestic corporation, (iii)
an estate the income of which is subject to United States Federal income tax
without regard to its source, or (iv) a trust if a court within the United
States is able to exercise primary supervision over administration of the trust
and one or more United States persons having authority to control all
substantial decisions of the trust. A "Non-U.S. Holder" is any beneficial owner
that is not a United States person for United States Federal income tax
purposes.
CLASSIFICATION OF THE TRUST AND THE DEBT SECURITIES AND DISTRIBUTIONS
ON TRUST SECURITIES. For United States federal income tax purposes the Trust
will be classified as a grantor trust and not as an association taxable as a
corporation, and the Debt Securities held by the Trust will be treated as equity
in ABC. Accordingly, for United States Federal income tax purposes, each U.S.
Holder generally will be treated as OWNING equity of ABC and will be required to
include in income, as a dividend, the holder's share of the gross amount of the
interest paid to the Trust on the Debt Securities to the extent of the current
and accumulated earnings and profits (as determined for United States Federal
income tax purposes) of ABC. For foreign tax credit limitation purposes the
payments will be income from sources without the United States, but generally
will be treated separately, together with the other items of "passive income"
(or in the case of certain holders, "financial services income").
SALE OF THE TRUST SECURITIES. Upon a sale or other disposition of the
Trust Securities (including generally the receipt of a distribution of cash in
redemption of all of a U.S. Holder's Trust Securities), a U.S. Holder will
recognize gain or loss in an amount equal to the difference between the amount
realized and the U.S. Holder's adjusted tax basis. Generally, such gain or loss
will be capital gain or loss and will be long-term capital gain or loss if the
U.S. Holder's holding period exceeds one year. Any such gain will be income from
sources within the United States for foreign tax credit limitations purposes.
Long-term capital gain of a non-corporate U.S. Holder is generally subject to a
maximum tax rate of 28% in respect of property with a holding period of more
than one year and to a maximum tax rate of 20% in respect of property with a
holding period in excess of 18 months.
CONSEQUENCES OF AN EXCHANGE EVENT. As described above under "Investment
Objective and Policies--Exchange Event" upon the occurrence of an Exchange
Event, the Trust will distribute ADSs or, under certain circumstances, cash to
holders of Trust Securities in exchange for their Trust Securities and in
liquidation of the Trust. A U.S. Holder's exchange of Trust Securities for ADSs
generally will not be a taxable event for United States Federal income tax
purposes. A U.S. Holder's basis in the ADSs received upon exchange will
generally be the same as the U.S. Holder's basis in the property exchanged
therefor and such holder's holding period in the ADSs would include their
holding period in such property.
Upon the occurrence of certain Exchange Events, HOLDERS OF the Trust
Securities may RECEIVE cash. For U.S. federal income tax purposes such RECEIPT
OF CASH would constitute a taxable disposition of the Trust Securities and a
U.S. Holder would generally recognize gain or loss in the same manner if there
had been a sale or disposition as described under "--Sale of the Trust
Securities" above.
ADSs RECEIVED IN AN EXCHANGE EVENT
DISTRIBUTIONS ON THE ADSs. U.S. Holders will include in gross income
the gross amount of any dividend paid including Additional Amounts (as defined
and described in the accompanying prospectus of ABC), if any, before reduction
for [COUNTRY] withholding taxes by ABC, out of its current or accumulated
earnings and profits (as determined for U.S. federal income tax purposes) as
ordinary income when the dividend is actually or constructively received by the
U.S. Holder. The dividend will not be eligible for the dividends received
deduction generally allowed to United States corporations in respect of
dividends received from other United States corporations.
Subject to certain limitations, the [COUNTRY] tax withheld, if any, in
accordance with the Treaty and paid over to [COUNTRY] will be creditable against
the U.S. Holder's United States federal income tax liability. For foreign tax
credit limitation purposes, the dividend will be income from sources without the
United States, but generally will be treated separately, together with the other
items of "passive income" (or in the case of certain holders "financial services
income").
SALE OR OTHER DISPOSITION OF ADSs. A U.S. Holder will recognize gain or
loss for U.S. federal income tax purposes upon the sale or other disposition of
ADSs in an amount equal to the difference between the U.S. dollar value of the
amount realized and the U.S. Holder's adjusted tax basis (determined in U.S.
dollars) in the ADSs. Generally, such gain will be capital gain or loss, will be
long-term capital gain or loss if the U.S. Holder's holding period for the ADSs
exceeds one year and any such gain will be income from sources within the United
States for foreign tax credit limitations purposes. Long-term capital gain of a
non-corporate U.S. Holder is generally subject to a maximum tax rate of 28% in
respect of property with a holding period of more than one year and to a maximum
tax rate of 20% in respect of property with a holding period in excess of 18
months.
PFIC CONSIDERATIONS
ABC does not believe that it will be treated as a passive foreign
investment company (a "PFIC") for United States Federal income tax purposes but
that is a factual determination made annually and therefore may be subject to
change. Because a U.S. Holder of Trust Securities will be treated as owning an
equity interest in ABC for United States Federal income tax purposes, if ABC
were a PFIC a U.S. Holder of Trust Securities as well as a holder of ADSs would
be subject to certain adverse tax consequences.
NON-U.S. HOLDERS
DISTRIBUTIONS ON THE TRUST SECURITIES AND ADSs. Distributions to a
Non-U.S. Holder will not be subject to United States Federal income tax unless
such distributions are effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Holder (and are attributable
to a permanent establishment maintained in the United States by such Non-U.S.
Holder, if an applicable income tax treaty so requires as a condition for such
Non-U.S. Holder to be subject to United States taxation on a net income basis in
respect of income from Trust Securities or ADSs), in which case such Non-U.S.
Holder generally will be subject to tax in respect of distributions in the same
manner as a U.S. Holder. Any such effectively connected distributions received
by a non-U.S. corporation may also, under certain circumstances, be subject to
an "additional branch profits" tax at a 30% rate of such lower rate as may be
specified by an applicable income tax treaty.
SALE OR DISPOSITION OF THE TRUST SECURITIES AND ADSs. A Non-U.S. Holder
will not be subject to United States Federal income tax in respect of gain
recognized on a sale or other disposition of Trust Securities or ADSs unless (i)
the gain is effectively connected with a trade or business of the Non-U.S.
Holder in the United States (and is attributable to a permanent establishment
maintained in the United States by such Non-U.S. Holder, if an applicable income
tax treaty so requires as a condition for such Non-U.S. Holder to be subject to
United States taxation on a net income basis in respect of gain from the sale or
other disposition of the Trust Securities or ADSs) or (ii) in the case of a
Non-U.S. Holder who is an individual, such holder is present in the United
States for 183 or more days in the taxable year of the sale and certain other
conditions apply. Effectively connected gains realized by a corporate Non-U.S.
Holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX. In general,
information reporting requirements will apply to payments of dividends made
within the United States by the Trust or any of its paying agents on the Trust
Securities or, in the case of ADSs, by a U.S. paying agent or other U.S.
intermediary and "backup withholding" at a rate of 31% will apply to such
payments (other than dividends paid before December 31, 1999) made to a U.S.
Holder (other than a corporation or other exempt U.S. Holder) unless the U.S.
Holder furnishes its taxpayer identification number in the manner required by
United States law and applicable regulations, certifies that such number is
correct, certifies as to no loss or exemption from backup withholding and meets
certain other conditions. A Non-U.S. Holder will be exempt from back-up
withholding provided that certain certification requirements are satisfied.
Payment of the proceeds from the disposition of Trust Securities or
ADSs to or through the United States office of a broker is subject to both
information reporting and backup withholding unless the holder establishes an
exemption from information reporting and backup withholding. United States
information reporting and backup withholding generally will not apply to a
payment made outside the United States of the proceeds of a sale of Trust
Securities or ADSs through an office outside the United States of a non-United
States broker. However, United States information reporting will apply to a
payment made outside the United States of the proceeds of a sale of Trust
Securities or ADSs through an office outside the United States of a broker (i)
that is a United States person, (ii) that derives 50% or more of its gross
income for a specified three year period from the conduct of a trade or business
in the United States, (iii) that is a "controlled foreign corporation" as to the
United States, or (iv) with respect to payments made after December 31, 1999,
that is a foreign partnership if, at any time during its tax year, one or more
of its partners are U.S. persons (as defined in U.S. Treasury Regulations) who
in the aggregate hold more than 50% of the income or capital interest in the
partnership or if, at any time during its tax year, such foreign partnership is
engaged in a United States trade of business, unless the broker has documentary
evidence in its files that the holder or beneficial owner is not a United States
person or the holder or beneficial owner otherwise establishes an exemption.
Backup withholding will not apply to such payments unless the broker has actual
knowledge that the payee is a U.S. person.
Any amounts withheld from a holder under the backup withholding rules
will be allowed as a refund or a credit against such holder's United States
federal income tax liability, provided the required information is furnished to
the Internal Revenue Service.
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement
(the "U.S. Purchase Agreement"), the Trust has agreed to sell to each of the
underwriters named below (the "U.S. Underwriters"), and each of the U.S.
Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated and
are acting as representatives (the "U.S. Representatives"), has severally agreed
to purchase, the aggregate number of Trust Securities set forth opposite its
name below:
NUMBER OF
U.S. UNDERWRITER TRUST SECURITIES
---------------- ----------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................
Total.............................. --------------
==============
The Trust has also entered into a purchase agreement (the
"International Purchase Agreement" and, together with the U.S. Purchase
Agreement, the "Purchase Agreements") with Merrill Lynch International and
____________________, acting as lead managers (the "Lead Managers"), and certain
other underwriters outside the United States and Canada (the "International
Managers" and, together with the U.S. Underwriters, the "Underwriters"). Subject
to the terms and conditions set forth in the International Purchase Agreement,
the Trust has agreed to sell to the International Managers, and the
International Managers have severally agreed to purchase, an aggregate of
_______ Trust Securities.
In each Purchase Agreement, the Underwriters named therein have agreed,
subject to the terms and conditions set forth in such Purchase Agreement, to
purchase all of the Trust Securities being sold pursuant to such Purchase
Agreement if any of the Trust Securities being sold pursuant to such Purchase
Agreement are purchased. Under certain circumstances, under the Purchase
Agreements, the commitments of non-defaulting Underwriters may be increased.
Each Purchase Agreement provides that the Trust is not obligated to sell, and
the Underwriters named therein are not obligated to purchase, the Trust
Securities under the terms of the Purchase Agreement unless all of the Trust
Securities to be sold pursuant to the Purchase Agreements are contemporaneously
sold. In the event of a failure to close, any funds debited from any investor's
account maintained with an Underwriter will be credited to such account and any
funds received by such Underwriter by check or money order from any investor
will be returned to such investor by check.
The U.S. Representatives have advised the Trust that the U.S.
Underwriters propose to offer the Trust Securities offered hereby in the U.S.
Offering to the public initially at the public offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per Trust Security. The U.S. Underwriters may
allow, and such dealers may reallow, a discount not in excess of $ per Trust
Security to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be CHANGED. Investors must pay for
any Trust Securities purchased in the initial public offering on or before
, 1998.
The initial public offering price per Trust Security and the
underwriting discount per Trust Security are identical for both Offerings.
The Trust has granted the U.S. Underwriters and the International
Managers options to purchase up to an additional and Trust Securities ,
respectively, (subject to decrease pro rata by the number of Trust Securities
resulting from the split of the initial Trust Securities described below) at the
initial public offering price, less the underwriting discount. Such options,
which will expire 30 days after the date of this Prospectus, may be exercised
solely to cover over-allotments. To the extent that the Underwriters exercise
such options, each of the Underwriters will have a firm commitment, subject to
certain conditions, to purchase from the Trust approximately the same percentage
of the option shares that the number of shares to be purchased initially by that
Underwriter is of the Trust Securities initially purchased by the Underwriters.
In view of the fact that the proceeds of the sale of the Trust
Securities will ultimately be invested in ADSs representing the ABC Preference
Shares, each Purchase Agreement provides that ABC will pay, as compensation to
the Underwriters, an amount in immediately available funds $ per Trust Security.
The Trust has been informed that the Underwriters have entered into an
agreement (the "Intersyndicate Agreement") providing for the coordination of
their activities. Pursuant to the Intersyndicate Agreement, the U.S.
Underwriters and the International Managers are permitted to sell Trust
Securities to each other for purposes of resale at the initial public offering
price, less an amount not greater than the selling concession.
The Trust has been informed that, under the terms of the Intersyndicate
Agreement, the U.S. Underwriters and any dealer to whom they sell Trust
Securities will not offer to sell or resell Trust Securities to persons who are
non-U.S. or non-Canadian persons or to persons they believe intend to resell to
person who are non-U.S. or non-Canadian persons, and the International Managers
and any bank, broker or dealer to whom they sell Trust Securities will not offer
to sell or resell Trust Securities to U.S. persons or to Canadian persons or to
persons they believe intend to resell to U.S. persons or to Canadian persons,
except in the case of transactions pursuant to the Intersyndicate Agreement
which, among other things, permits the Underwriters to purchase from each other
and offer for resale such number of Trust Securities as the selling Underwriter
or Underwriters and the purchasing Underwriter or Underwriters may agree.
The Underwriters do not intend to confirm sales of Trust Securities
offered hereby to any accounts over which they exercise discretionary authority.
Prior to the Offerings, there has been no public market for the Trust
Securities. Application will be made to list the Trust Securities on the NYSE.
In connection with the listing, the Underwriters will undertake that sales of
Trust Securities will meet the NYSE's minimum distribution standards.
In view of the fact that the proceeds of the sale of the Trust
Securities will ultimately be invested in ADSs representing the ABC Preference
Shares, THE TRUST AND ABC HAVE agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act OF 1933, or
to contribute to payments the Underwriters may be required to make in respect
thereof.
In connection with the formation of the Trust, ML IBK POSITIONS, INC.,
an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, subscribed
for and purchased 4,000 Trust Securities for a purchase price of $100,000.
Until the distribution of the Trust Securities is completed, rules of
the Commission may limit the ability of the Underwriters and any selling group
members to bid for and purchase the Trust Securities. As an exception to these
rules, the U.S. Representatives are permitted to engage in certain transactions
that stabilize the price of the Trust Securities. Such transactions consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
the Trust Securities.
If the Underwriters create a short position in the Trust Securities in
connection with the Offerings, i.e., if they sell more Trust Securities than are
set forth on the cover page of this Prospectus, the U.S. Representatives may
reduce that short position by purchasing Trust Securities in the open market.
The U.S. Representatives may also elect to reduce any short position by
exercising all or part of the over-allotment options described above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase Trust Securities in the open market to reduce the
Underwriters' short position or to stabilize the price of the Trust Securities,
they may reclaim the amount of the selling concession from the Underwriters and
any selling group members who sold those Trust Securities as part of the
Offerings.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the Trust nor any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Trust Securities. In
addition, neither the Trust nor any of the Underwriters makes any representation
that the U.S. Representatives will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
Certain of the Underwriters render investment banking and other
financial services to ABC from time to time.
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and the
Underwriters by their counsel, Brown & Wood LLP, New York, New York. Certain
matters of Delaware law will be passed upon for the Trust by Richards, Layton &
Finger P.A., Wilmington, Delaware, special Delaware counsel to the Trust.
EXPERTS
The statement of assets, liabilities and capital included in this
Prospectus has been audited by DELOITTE & TOUCHE LLP, independent auditors, as
stated in their opinion appearing herein, and has been included in reliance upon
such opinion given on the authority of said firm as experts in auditing and
accounting.
ADDITIONAL INFORMATION
The Trust has filed with the Commission, Washington, D.C. 20549, a
Registration Statement on Form N-2 under the Securities Act with respect to the
Trust Securities offered hereby. Further information concerning the Trust
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 public reference facilities maintained by the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all
or any part thereof may be obtained from such office after payment of the fees
prescribed by the Commission. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, such as the Trust, that file
electronically with the Commission.
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholder of ABC Exchangeable Preferred
Trust:
We have audited the accompanying statement of assets, liabilities and
capital of ABC Exchangeable Preferred 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, liabilities and
capital 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 ABC Exchangeable
Preferred Trust, as of _____________, 1998 in conformity with generally accepted
accounting principles.
New York, New York
_______________, 1998
ABC EXCHANGEABLE PREFERRED TRUST
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
, 1998
ASSETS
Cash $100,000
--------
Total Assets............................................$100,000
========
LIABILITIES
Total Liabilities................................................$ 0
========
NET ASSETS.......................................................$100,000
========
CAPITAL
____ Trust Securities, par value $.10 per Trust Security; 4,000 Trust Securities
issued and $100,000 utstanding (Note 3)
- ------
(1) The Trust was created as a Delaware business trust on , 1998 and has
had no operations other than matters relating to its organization and
registration as a non-diversified, closed-end management investment
company under the U.S. Investment Company Act of 1940, as amended.
Costs incurred in connection with the organization of the Trust will be
paid by the Trust with AMOUNTS FROM the facility fee paid to the Trust
by the U.K. Company in connection with the investment by the Trust in
the Debt Securities. The ongoing administrative and other expenses of
the Trust will be paid BY THE JERSEY HOLDING COMPANY PURSUANT TO THE
EXPENSE AGREEMENT. ANY EXPENSES OF THE TRUST NOT COVERED BY THE TRUST'S
ARRANGEMENTS WITH THE JERSEY HOLDING COMPANY WILL BE PAID BY THE ABC
AFFILIATE PURSUANT TO THE EXPENSE AND INDEMNITY AGREEMENT.
(2) Offering expenses will be payable upon completion of the Offerings and
will be paid OUT OF the facility fee TO be paid to the Trust by the
U.K. Company in connection with the investment by the Trust in the Debt
Securities.
(3) On __________, 1998, the Trust issued 4,000 TRUST SECURITIES TO ML IBK
POSITIONS, INC., an affiliate of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, in consideration for a purchase price of $100,000.
- --------------------------------------------------------------------------------
THE FOLLOWING PROSPECTUS OF [NAME] IS ATTACHED AND DELIVERED FOR CONVENIENCE OF
REFERENCE ONLY. THE PROSPECTUS OF [NAME] DOES NOT CONSTITUTE A PART OF THE
FOREGOING PROSPECTUS OF ABC EXCHANGEABLE PREFERRED TRUST, NOR IS IT INCORPORATED
BY REFERENCE THEREIN.
- --------------------------------------------------------------------------------
[ABC Prospectus]
[To be provided.]
<TABLE>
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<S> <C>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING TRUST SECURITIES
DESCRIBED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE TRUST OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE ABC EXCHANGEABLE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY PREFERRED TRUST
SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY, OR OF ANY
SECURITIES OFFERED HEREBY, IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE TRUST SINCE THE DATE HEREOF
OR SINCE THE DATES AS OF WHICH INFORMATION IS SET FORTH HEREIN. IN
THE EVENT THAT ANY SUCH CHANGE SHALL OCCUR DURING THE PERIOD IN
WHICH APPLICABLE LAW REQUIRES DELIVERY OF THIS PROSPECTUS, THIS
PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.
----------------
----------------- PROSPECTUS
TABLE OF CONTENTS ----------------
PAGE
Prospectus Summary........................................... 3
Fee Table.................................................... 9
Structural Diagram........................................... 10
The Trust.................................................... 11
Use of Proceeds and Collateral Arrangements.................. 11
Investment Objective and Policies............................ 12
Investment Restrictions...................................... 16 MERRILL LYNCH & CO.
Risk Factors................................................. 16
Description of the Trust Securities.......................... 18 [CO-MANAGERS]
Trustees..................................................... 20
Management Arrangements...................................... 21
Dividends and Distributions.................................. 22
Net Asset Value.............................................. 23 , 1998
Certain United States Federal Income Tax
Considerations............................................ 23
Underwriting................................................. 26
Legal Matters................................................ 28
Experts...................................................... 28
Additional Information....................................... 28
Independent Auditors' Report................................. 29
Statement of Assets, Liabilities and Capital................. 30
Prospectus relating to Preference Shares
of [NAME]
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE
OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE TRUST
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY
BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
====================================================================== ============================================================
</TABLE>
PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 18, 1998
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
________ TRUST SECURITIES ABC EXCHANGEABLE PREFERRED TRUST
Of the total of ______ Trust Securities Exchangeable for Preference
Shares (the "Trust Securities") of ABC Exchangeable Preferred Trust (the
"Trust") being offered, ______ Trust Securities initially are being offered in
the United States and Canada by the U.S. Underwriters (the "U.S. Offering") and
_______ Trust Securities initially are being offered in a concurrent
international offering outside the United States and Canada by the International
Managers (the "International Offering" and, together with the U.S. Offering, the
"Offerings"). The public offering price and the underwriting discount per Trust
Security are identical for both of the Offerings. See "Underwriting."
Each of the Trust Securities offered hereby will represent a
proportionate share of a beneficial ownership interest in the Trust and will be
sold at an initial public offering price of US$25. Except as described herein,
holders of the Trust Securities will receive non-cumulative dividend
distributions in an amount equal to US$ per Trust Security per annum, payable
quarterly in arrears in an amount equal to US$_____ per Trust Security on each ,
, , and of each year (each, a "Dividend Payment Date"), to holders of record as
of the immediately preceding , , and , respectively (each, a "Record Date"). The
first DIVIDEND distribution in respect of the period from and including the
original issue date (the "Issue Date") to but excluding , 1998 will equal US$
per Trust Security.
The Trust is a newly-created Delaware business trust established for
the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in and holding % Mandatorily Redeemable Debt Securities due 2047 (the
"Debt Securities") issued by [NAME], a special purpose unlimited company
incorporated under the laws of, and domiciled in, the United Kingdom (the "U.K.
Company"), with an aggregate principal amount equal to such proceeds. The
Trust's investment objective is to distribute to the holders of Trust Securities
(a) pro rata based on the number of Trust Securities outstanding the interest
the Trust receives on the Debt Securities from time to time PRIOR TO AN EXCHANGE
DATE (AS DEFINED HEREIN) and (b) upon the occurrence of an Exchange Event (as
defined herein), the proceeds FROM the redemption of the Debt Securities. THE
REDEMPTION PROCEEDS WILL BE (I) IF THE EXCHANGE EVENT IS ANYTHING OTHER THAN A
REDEMPTION OR MANDATORY REPURCHASE ("BUY-BACK") OF THE ABC PREFERENCE SHARES FOR
CASH, American Depositary Receipts ("ADRs") evidencing, for each Trust Security,
one American Depositary Share ("ADS") representing four fully paid
non-cumulative preference shares, liquidation preference US$6.25 per share (the
"ABC Preference Shares"), issued by [NAME] ("ABC") AND (II) if the Exchange
Event is A redemption OR BUY-BACK of the ABC Preference Shares for cash, US$25
per Trust Security PLUS AN AMOUNT EQUAL TO THE ACCRUED BUT UNPAID INTEREST ON
US$25 PRINCIPAL AMOUNT OF THE DEBT SECURITIES FROM AND INCLUDING THE INTEREST
PAYMENT DATE IMMEDIATELY PRECEDING THE EXCHANGE DATE TO BUT EXCLUDING SUCH
EXCHANGE DATE. PRIOR TO THE EXCHANGE DATE, THE ABC Preference Shares WILL NOT
PAY DIVIDENDS. FROM AND AFTER THE EXCHANGE DATE (UNLESS THE EXCHANGE EVENT IS
THE REDEMPTION OR BUY-BACK OF THE ABC PREFERENCE SHARES FOR CASH), EACH ABC
PREFERENCE SHARE will accrue non-cumulative dividends at the rate of US$ per
share per annum, payable quarterly in arrears in an amount equal to US$ per
share on each Dividend Payment Date to holders of record as of the immediately
preceding Record Date. See "Investment Objective and Policies."
(continued on following page)
SEE "RISK FACTORS", BEGINNING ON PAGE 16 OF THIS PROSPECTUS, FOR
CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE TRUST SECURITIES.
<TABLE>
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
========================================================================================================================
PRICE TO SALES PROCEEDS TO
PUBLIC(1) LOAD(2) TRUST(3)(4)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Trust Security............................. $25.00 (4) $
========================================================================================================================
TOTAL(5)....................................... $ (4) $
========================================================================================================================
</TABLE>
(1) PLUS ACCRUED DIVIDENDS, IF ANY, FROM , 1998.
(2) In view of the fact that the proceeds of the sale of the Trust Securities
will ultimately be invested in the ABC Preference Shares, THE TRUST AND ABC
HAVE agreed to indemnify the several U.S. Underwriters and the
International Managers (together, the "Underwriters") against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "UNDERWRITING."
(3) Before deducting estimated expenses of $ payable by the Trust.
(4) In view of the fact that the proceeds of the sale of the Trust Securities
will ultimately be invested in the ABC Preference Shares, ABC has agreed to
pay the Underwriters, as compensation, $ per Trust Security (or $ in the
aggregate if the Underwriters' over-allotment options are exercised in
full). See "UNDERWRITING."
(5) The Trust has granted the U.S. Underwriters and the International Managers
options, exercisable for 30 days from the date hereof, to purchase up to
and additional Trust Securities, respectively, solely to cover
over-allotments, if any. If all such Trust Securities are purchased, the
total Price to Public and Proceeds TO TRUST will be $ and $ , respectively.
See "Underwriting."
------------------
The Trust Securities are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the Trust Securities will be made through the facilities of The
Depository Trust Company on or about , 1998.
MERRILL LYNCH INTERNATIONAL [CO-MANAGERS]
------------------
The date of this Prospectus is , 1998.
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement
(the "U.S. Purchase Agreement"), the Trust has agreed to sell to each of the
underwriters named below (the "U.S. Underwriters"), and each of the U.S.
Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated and
acting as representatives (the "U.S. Representatives"), has severally agreed to
purchase, the aggregate number of Trust Securities set forth opposite its name
below:
NUMBER OF
U.S. UNDERWRITER TRUST SECURITIES
---------------- ----------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Total........................ --------------
==============
The Trust has also entered into a purchase agreement (the
"International Purchase Agreement" and, together with the U.S. Purchase
Agreement, the "Purchase Agreements") with Merrill Lynch International and
acting as lead managers (the "Lead Managers"), and certain other underwriters
outside the United States and Canada (the "International Managers" and, together
with the U.S. Underwriters, the "Underwriters"). Subject to the terms and
conditions set forth in the International Purchase Agreement, the Trust has
agreed to sell to the International Managers, and the International Managers
have severally agreed to purchase, an aggregate of Trust Securities.
In each Purchase Agreement, the Underwriters named therein have agreed,
subject to the terms and conditions set forth in such Purchase Agreement, to
purchase all of the Trust Securities being sold pursuant to such Purchase
Agreement if any of the Trust Securities being sold pursuant to such Purchase
Agreement are purchased. Under certain circumstances, under the Purchase
Agreements, the commitments of non-defaulting Underwriters may be increased.
Each Purchase Agreement provides that the Trust is not obligated to sell, and
the Underwriters named therein are not obligated to purchase, the Trust
Securities under the terms of the Purchase Agreement unless all of the Trust
Securities to be sold pursuant to the Purchase Agreements are contemporaneously
sold. In the event of a failure to close, any funds debited from any investor's
account maintained with an Underwriter will be credited to such account and any
funds received by such Underwriter by check or money order from any investor
will be returned to such investor by check.
The U.S. Representatives have advised the Trust that the U.S. Underwriters
propose to offer the Trust Securities offered hereby in the U.S. Offering to the
public initially at the public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $___ per Trust Security. The U.S. Underwriters may allow, and such
dealers may reallow, a discount not in excess of $___ per Trust Security to
certain other dealers. After the initial public offering, the public offering
price, concession and discount may be changed. Investors must pay for any Trust
Securities purchased in the initial public offering on or before __________,
1998.
The initial public offering price per Trust Security and the
underwriting discount per Trust Security are identical for both Offerings.
The Trust has granted the U.S. Underwriters and the International Managers
options to purchase up to an additional and Trust Securities, respectively,
(subject to decrease pro rata by the number of Trust Securities resulting from
the split of the initial Trust Securities described below) at the initial public
offering price, less the underwriting discount. Such options, which will expire
30 days after the date of this Prospectus, may be exercised solely to cover
over-allotments. To the extent that the Underwriters exercise such options, each
of the Underwriters will have a firm commitment, subject to certain conditions,
to purchase from the Trust approximately the same percentage of the option
shares that the number of shares to be purchased initially by that Underwriter
is of the ___ Trust Securities initially purchased by the Underwriters.
In view of the fact that the proceeds of the sale of the Trust
Securities will ultimately be invested in the ADSs representing the ABC
Preference Shares, each Purchase Agreement provides that ABC will pay, as
compensation to the Underwriters, an amount in immediately available funds $
per Trust Security.
The Trust has been informed that the Underwriters have entered into an
agreement (the "Intersyndicate Agreement") providing for the coordination of
their activities. Pursuant to the Intersyndicate Agreement, the U.S.
Underwriters and the International Managers are permitted to sell Trust
Securities to each other for purposes of resale at the initial public offering
price, less an amount not greater than the selling concession.
The Trust has been informed that, under the terms of the Intersyndicate
Agreement, the U.S. Underwriters and any dealer to whom they sell Trust
Securities will not offer to sell or resell Trust Securities to persons who are
non-U.S. or non-Canadian persons or to persons they believe intend to resell to
person who are non-U.S. or non-Canadian persons, and the International Managers
and any bank, broker or dealer to whom they sell Trust Securities will not offer
to sell or resell Trust Securities to U.S. persons or to Canadian persons or to
persons they believe intend to resell to U.S. persons or to Canadian persons,
except in the case of transactions pursuant to the Intersyndicate Agreement
which, among other things, permits the Underwriters to purchase from each other
and offer for resale such number of Trust Securities as the selling Underwriter
or Underwriters and the purchasing Underwriter or Underwriters may agree.
The Underwriters do not intend to confirm sales of Trust Securities
offered hereby to any accounts over which they exercise discretionary authority.
Prior to the Offerings, there has been no public market for the Trust
Securities. Application will be made to list the Trust Securities on the NYSE.
In connection with the listing, the Underwriters will undertake that sales of
Trust Securities will meet the NYSE's minimum distribution standards.
In view of the fact that the proceeds of the sale of the Trust
Securities will ultimately be invested in the ADSs representing the ABC
Preference Shares, THE TRUST AND ABC HAVE agreed to indemnify the Underwriters,
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments the Underwriters may be required to make in respect
thereof.
In connection with the formation of the Trust, ML IBK POSITIONS, INC.,
an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, subscribed
for and purchased 4,000 Trust Securities for a purchase price of $100,000.
Until the distribution of the Trust Securities is completed, rules of
the Commission may limit the ability of the Underwriters and any selling group
members to bid for and purchase the Trust Securities. As an exception to these
rules, the U.S. Representatives are permitted to engage in certain transactions
that stabilize the price of the Trust Securities. Such transactions consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
the Trust Securities.
If the Underwriters create a short position in the Trust Securities in
connection with the Offerings, i.e., if they sell more Trust Securities than are
set forth on the cover page of this Prospectus, the U.S. Representatives may
reduce that short position by purchasing Trust Securities in the open market.
The U.S. Representatives may also elect to reduce any short position by
exercising all or part of the over-allotment options described above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase Trust Securities in the open market to reduce the
Underwriters' short position or to stabilize the price of the Trust Securities,
they may reclaim the amount of the selling concession from the Underwriters and
any selling group members who sold those Trust Securities as part of the
Offerings.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the Trust nor any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Trust Securities. In
addition, neither the Trust nor any of the Underwriters makes any representation
that the U.S. Representatives will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
Each International Manager has agreed that: (i) it has not offered or
sold and prior to the date six months after the issue of the Trust Securities
will not offer or sell any Trust Securities to persons in the United Kingdom
prior to admission of the Trust Securities to listing in accordance with Part IV
of the Financial Services Act of 1986 (the "Act") except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 or the Act; (ii) it has complied and will
comply with all applicable provisions of the Act with respect to anything done
by it in relation to the Trust Securities in, from or otherwise involving the
United Kingdom; and (iii) it has only issued or passed on, and will only issue
or pass on, in the United Kingdom any document received by it in connection with
the issue of the Trust Securities to a person who is of a kind described in
Article 11(3) of the Financial Services Act of 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom the document may otherwise
lawfully be issued or passed on.
Certain of the Underwriters render investment banking and other
financial services to ABC from time to time.
<TABLE>
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<S> <C>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING TRUST SECURITIES
DESCRIBED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE TRUST OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT ABC EXCHANGEABLE
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, PREFERRED TRUST
ANY SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY, OR OF
ANY SECURITIES OFFERED HEREBY, IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH
IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE TRUST SINCE THE DATE
HEREOF OR SINCE THE DATES AS OF WHICH INFORMATION IS SET FORTH
HEREIN. IN THE EVENT THAT ANY SUCH CHANGE SHALL OCCUR DURING THE
PERIOD IN WHICH APPLICABLE LAW REQUIRES DELIVERY OF THIS
PROSPECTUS, THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ----------------
ACCORDINGLY.
PROSPECTUS
TABLE OF CONTENTS ----------------
PAGE
----
Prospectus Summary........................................... 3
Fee Table.................................................... 9
Structural Diagram........................................... 10
The Trust.................................................... 11
Use of Proceeds and Collateral Arrangements.................. 11
Investment Objective and Policies............................ 12
Investment Restrictions...................................... 16 MERRILL LYNCH INTERNATIONAL
Risk Factors................................................. 16
Description of the Trust Securities.......................... 18 [CO-MANAGERS]
Trustees..................................................... 20
Management Arrangements...................................... 21
Dividends and Distributions.................................. 22
Net Asset Value.............................................. 23 , 1998
Certain United States Federal Income Tax
Considerations............................................ 23
Underwriting................................................. 26
Legal Matters................................................ 28
Experts...................................................... 28
Additional Information....................................... 28
Independent Auditors' Report................................. 29
Statement of Assets, Liabilities and Capital................. 30
Prospectus relating to Preference Shares
of [NAME]
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE
OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE TRUST
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY
BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
==================================================================== ============================================================
</TABLE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
Independent Auditors' Report
Statement of Assets, Liabilities and Capital as of , 1998
2. EXHIBITS
(a) (1) Trust Agreement*
(2)Form of Amended and Restated Trust Agreement**
(3)Certificate of Trust*
(b) Not applicable
(c) Not applicable
(d)(1)Form of Specimen certificate for Trust Securities (included in
Exhibit 2(a)(2))**
(2)Portions of the Amended and Restated Trust Agreement of the Registrant
defining the rights of Holders of Trust Securities**
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) (1) Form of U.S. Purchase Agreement**
(2)Form of International Purchase Agreement**
(i) Not applicable
(j) Form of Custodian Agreement**
(k)(1) Form of Administration Agreement**
(2)Form of Paying Agent Agreement**
(3)Form of Specimen for Debt Securities**
(4)Form of ADSs Security and Pledge Agreement**
(5)Form of JERSEY PREFERENCE SHARES SECURITY AND PLEDGE AGREEMENT**
(6)FORM OF REIMBURSEMENT AGREEMENT**
(7)FORM OF EXPENSE AGREEMENT**
(8)FORM OF EXPENSE AND INDEMNITY AGREEMENT**
(9)FORM OF DEBT SECURITIES SUBSCRIPTION Agreement**
(l) Opinion and Consent of Brown & Wood LLP, counsel to the Trust*
(m) Not applicable
(n) (1) Tax Opinion and Consent of Brown & Wood LLP, counsel to
the Trust**
(2)Consent of DELOITTE & TOUCHE LLP, independent auditors for the Trust**
(o) Not applicable
(p) Form of TRUST SECURITIES Subscription Agreement**
(q) Not applicable
(r) Not applicable
- ---------
* PREVIOUSLY FILED.
** To be filed by amendment.
ITEM 25. MARKETING ARRANGEMENTS
See Exhibits (h)(1) and (h)(2) to this Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be incurred in connection with the offering described
in this Registration Statement will be paid by the Trust OUT OF the facility fee
paid ON THE ISSUE DATE to the Trust by the U.K. Company in connection with the
investment by the Trust in the Debt Securities.
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management
Arrangements" is incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
There will be one record holder of the Trust Securities as of the
effective date of this Registration Statement.
ITEM 29. INDEMNIFICATION
Section 6.06 of the Amended and Restated Trust Agreement, Section 6 of
the U.S. Purchase Agreement and Section 6 of the International Purchase
Agreement provide for indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to trustees, officers
and controlling persons of the Registrant, pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission (the "Commission") such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Trust is internally managed and does not have an investment
adviser.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
promulgated thereunder are maintained at the offices of the Registrant (850
Library Avenue, Suite 204, Newark, Delaware 19715), its custodian (101 Barclay
Street, New York, New York 10286) and its paying agent (101 Barclay Street, New
York, New York 10286).
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend the offering of the
shares covered hereby until it amends its prospectuses contained herein if (1)
subsequent to the effective date of this Registration Statement, its net asset
value per share declines more than 10 percent from its net asset value per share
as of the effective date of the Registration Statement or (2) the net asset
value per share increases to an amount greater than its net proceeds as stated
in the prospectuses contained herein.
(b) The Registrant hereby undertakes that (i) for purpose of
determining any liability under the 1933 Act, the information omitted from the
form of prospectuses filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the registrant
under Rule 497(h) under the 1933 Act shall be deemed to be part of this
registration statement as of the time it was declared effective; (ii) for the
purpose of determining any liability under the 1933 Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newark, State of Delaware, on the 17TH day of AUGUST,
1998.
ABC Exchangeable Preferred Trust
By: /s/ Donald J. Puglisi
-----------------------------
Donald J. Puglisi
Managing Trustee
Each person whose signature appears below hereby authorizes Donald J.
Puglisi, William R. Latham III or James B. O'Neill, or any of them, as
attorney-in-fact, to sign on his behalf, individually and in each capacity
stated below, any amendment to this Registration Statement (including
post-effective amendments) and to file the same, with all exhibits thereto, with
the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, in the
capacities and on the date indicated.
NAME TITLE DATE
/s/ Donald J. Puglisi Managing Trustee AUGUST 17, 1998
- --------------------------------
Donald J. Puglisi
/s/ William R. Latham III Trustee AUGUST 17, 1998
- --------------------------------
William R. Latham III
/s/ James B. O'Neill Trustee AUGUST 17, 1998
- --------------------------------
James B. O'Neill
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
(a)(1) Trust Agreement*
(2) Form of Amended and Restated Trust Agreement**
(3) Certificate of Trust*
(b) Not applicable
(c) Not applicable
(d)(1) Form of Specimen certificate for Trust Securities (included in
Exhibit 2(a)(2))**
(2) Portions of the Declaration of Trust of the Registrant defining the
rights of Holders of Trust Securities **
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h)(1) Form of U.S. Purchase Agreement**
(2) Form of International Purchase Agreement**
(i) Not applicable
(j) Form of Custodian Agreement**
(k)(1) Form of Administration Agreement**
(2) Form of Paying Agent Agreement**
(3) Form of Specimen for Debt Securities**
(4) Form of ADSs Security and Pledge Agreement**
(5) Form of JERSEY PREFERENCE SHARES SECURITY AND PLEDGE Agreement**
(6) Form of REIMBURSEMENT AGREEMENT**
(7) FORM OF EXPENSE AGREEMENT**
(8) FORM OF EXPENSE AND Indemnity Agreement**
(9) FORM OF DEBT SECURITIES SUBSCRIPTION AGREEMENT**
(l) Opinion and Consent of Brown & Wood LLP, counsel to the Trust**
(m) Not applicable
(n)(1) Tax Opinion and Consent of Brown & Wood LLP, counsel to the
Trust**
(2) Consent of independent auditors for the Trust**
(o) Not applicable
(p) Form of TRUST SECURITIES Subscription Agreement**
(q) Not applicable
(r) Not applicable
- ------------------------------
(Reference is made to Article III (Section 3.2), Article IV, Article V
and Article VIII (Sections 8.1 and 8.6) of the Trust's Amended and Restated
Trust Agreement filed as Exhibit (a)(2) to this Registration Statement.
* PREVIOUSLY FILED.
** To be filed by amendment.
