AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 1998
SECURITIES ACT FILE NO. 333-_______
INVESTMENT COMPANY ACT FILE NO. 811-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
|X| REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
|_| PRE-EFFECTIVE AMENDMENT NO.
|_| POST-EFFECTIVE AMENDMENT NO.
AND/OR
|X| REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
|_| AMENDMENT NO.
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
DEF 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. |_|
<TABLE>
<CAPTION>
- ------------------------------------------------------ ------------------ ------------------- -------------------- ---------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE OFFERING REGISTRATION
BEING REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE(2)
- ------------------------------------------------------ ------------------ ------------------- -------------------- ===============
<S> <C> <C> <C> <C>
TrUEPrS representing shares of beneficial interest... 40,000 Shares $25.00 $1,000,000 $295.00
- ------------------------------------------------------ ------------------ ------------------- -------------------- ===============
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Transmitted to the designated lockbox at Mellon Bank in Pittsburgh, PA.
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
CROSS-REFERENCE SHEET*
<TABLE>
<CAPTION>
ITEM NUMBER IN FORM N-2 CAPTION IN PROSPECTUS
PART A-INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
1. Outside Front Cover ................................... Front Cover Page
2. Inside Front and Outside Back Cover Page .............. 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 TrUEPrS
11. Defaults and Arrears on Senior Securities .....................Not Applicable
12. Legal Proceedings .............................................Not Applicable
13. Table of Contents of the Statement of Additional Information ..Not Applicable
PART B-INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
14. Cover Page ....................................................Not Applicable
15. Table of Contents .............................................Not Applicable
16. General Information and History ...............................Not Applicable
17. Investment Objective and Policies .............................Prospectus Summary; Investment Objective and
Policies; Investment Restrictions
18. Management ....................................................Trustees; Management Arrangements
19. Control Persons and Principal Holders of
Securities.....................................................Management Arrangements; Underwriting
20. Investment Advisory and Other Services.........................Management Arrangements
21. Brokerage Allocation and Other Practices.......................Investment Objective and Policies
22. Tax Status.....................................................Taxation
23. Financial Statements...........................................Experts; Independent Auditors' Report; Statement of
Assets and Liabilities
</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.
The information in this prospectus is not complete and may be changed. The Trust
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
or sale is not permitted
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 16, 1998
PROSPECTUS
TRUST UNITS EXCHANGEABLE FOR PREFERENCE SHARES
___________ TRUEPRS
DEF EXCHANGEABLE PREFERRED TRUST
(EXCHANGEABLE FOR AMERICAN DEPOSITARY RECEIPTS REPRESENTING
DEF PREFERENCE SHARES OR CASH)
------------------
THE ISSUER:
o DEF Exchangeable Preferred Trust (the "Trust") is a Delaware business
trust. It will use the proceeds from the sale of the TrUEPrS to purchase
and hold __% Mandatorily Redeemable Debt Securities due 2047 issued by
[Name of the U.K. Company]. The Trust also will enter into a purchase
contract with [Name of the Jersey Subsidiary] for the purchase of ADRs
representing DEF Preference Shares.
WHAT YOU WILL RECEIVE BEFORE THE EXCHANGE DATE:
o On each Dividend Payment Date before the Exchange Date, if the Trust has
sufficient funds, the Trust will pay you a non-cumulative dividend
distribution at the rate of ___% per annum of the issue price of the
TrUEPrS. Accordingly, if the Trust has sufficient funds, on the first
Dividend Payment Date (________, 1999) the Trust will pay you $____ per
TrUEPrS and on each subsequent Dividend Payment Date (________, ________,
________, and ________ of each year) before the Exchange Date the Trus
will pay you $_____ per TrUEPrS.
WHAT YOU WILL RECEIVE ON THE EXCHANGE DATE:
o On the Exchange Date, for each TrUEPrS you own, the Trust will deliver to
you one ADR representing four DEF Preference Shares or $25 in cash,
depending on the type of Exchange Event.
<TABLE>
<CAPTION>
IF THE EXCHANGE EVENT IS: FOR EACH TRUEPRS YOU WILL RECEIVE:
<S> <C> <C> <C>
(a) Anything other than a redemption or One ADR representing four DEF Preference Shares
mandatory repurchase (known as a
"Buy-Back" in Australia) of the DEF
Preference Shares for cash
(b) The redemption or Buy-Back of the DEF Cash equal to $25 plus the accrued dividend distribution
Preference Shares for cash for the then current quarterly dividend period
</TABLE>
o On and after the Exchange Date, the DEF Preference Shares represented by
the ADRs will accrue non-cumulative dividends at the same rate as the
dividend distribution rate on the TrUEPrS. If such dividends are declared
by the board of directors of DEF, they will be paid on the same dates as
the Dividend Payment Dates for the TrUEPrS.
o The Trust has applied to have the TrUEPrS listed on the New York Stock
Exchange under the symbol "__." If the New York Stock Exchange approves the
TrUEPrS for listing, the Trust expects that trading on the New York Stock
Exchange will commence within 30 days after delivery of the TrUEPrS.
INVESTING IN THE TRUEPRS INVOLVES CERTAIN RISKS WHICH ARE
DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING ON PAGE 10 OF THIS PROSPECTUS.
--------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
PER TRUEPRS TOTAL
----------- -----
Public Offering Price.................................. $25.00 $
Sales Load............................................. None* None*
Proceeds to Trust...................................... $25.00 $
*Because the proceeds of the sale of the TrUEPrS will ultimately be
invested in the DEF Preference Shares, DEF will pay the Underwriters $__ per
TrUEPrS (or $__ per TrUEPrS for sales of more than 10,000 TrUEPrS to a single
purchaser).
The Underwriters may also purchase up to an additional ____ TrUEPrS at
$25 per TrUEPrS, plus accrued dividends from _____, 1998, within 30 days from
the date of this prospectus to cover over-allotments.
The Trust expects that the TrUEPrS will be ready for delivery in
book-entry form only through the facilities of The Depository Trust Company on
or about _______, 1998.
------------------------
MERRILL LYNCH & CO.
[NAME OF CO-MANAGER]
[NAME OF CO-MANAGER]
-------------------------
"TrUEPrS" and "Trust Units Exchange for Preference Shares" are service marks
owned by Merrill Lynch & Co., Inc.
The date of this prospectus is ________, 1998
TABLE OF CONTENTS
PAGE
Summary Information - Q&A............................................ 3
Fee Table............................................................ 7
Structural Diagram................................................... 8
Risk Factors......................................................... 10
The Trust............................................................ 12
Use of Proceeds and Collateral Arrangements.......................... 12
Investment Objective and Policies.................................... 13
Investment Restrictions ............................................. 19
Description of the TrUEPrS........................................... 19
Trustees............................................................. 21
Management Arrangements.............................................. 22
Dividends and Distributions.......................................... 23
Net Asset Value...................................................... 24
Taxation............................................................. 25
Underwriting......................................................... 30
Legal Matters........................................................ 32
Experts.............................................................. 32
Additional Information............................................... 32
Independent Auditors' Report......................................... 33
Statement of Assets and Liabilities.................................. 34
Prospectus relating to American Depositary Receipts
representing DEF Preference Shares
SUMMARY INFORMATION - Q&A
This summary includes questions and answers that highlight selected
information from the prospectus to help you understand the TrUEPrS. However,
this summary may not contain all the information that may be important to you.
Certain terms used in this section are defined elsewhere in this prospectus. You
should carefully read this prospectus to fully understand the terms of the
TrUEPrS, as well as the tax and other considerations that are important to you
in making a decision about whether to invest in the TrUEPrS. You should pay
special attention to the "Risk Factors" section to determine whether an
investment in the TrUEPrS is appropriate for you.
WHAT ARE TRUEPRS?
TrUEPrS are Trust Units Exchangeable for Preference Shares. Each
TrUEPrS represents a proportionate share of beneficial interest in the assets of
the Trust. Each TrUEPrS will entitle the holder to receive, before the Exchange
Date, non-cumulative quarterly dividend distributions at the rate of $___ per
TrUEPrS per quarter if the Trust has sufficient funds.
HOW MANY TRUEPRS ARE BEING OFFERED?
The Trust is offering _____ TrUEPrS at a price of $25 per TrUEPrS. The
Underwriters may also purchase up to an additional ___ TrUEPrS at the price of
$25 per TrUEPrS, plus accrued dividends from _____, 1998, within 30 days of the
date of this prospectus in order to cover over-allotments, if any. You should
refer to the section in this prospectus called "Underwriting."
WHO IS THE TRUST?
DEF Exchangeable Preferred Trust is a recently created Delaware
business trust. The Trust will be registered as a non-diversified closed-end
management investment company under the Investment Company Act of 1940. The
Trust will dissolve as soon as practicable after the Trust distributes ADRs or
cash to you due to the occurrence of an Exchange Event. Please review the
sections in this prospectus called "The Trust," "Investment Objective and
Policies--Trust Dissolution" and "Risk Factors--Limited Term" for more
information.
WHO IS DEF?
DEF is [NAME], an [COUNTRY] bank. For more information about DEF and
the DEF Preference Shares represented by ADRs that you may receive due to the
occurrence of an Exchange Event, see the prospectus of DEF. The Trust has
attached the prospectus of DEF to this prospectus for your convenience only. The
prospectus of DEF is not a part of this prospectus and is not incorporated by
reference in this prospectus.
WHAT IS THE TRUST'S INVESTMENT OBJECTIVE?
The Trust's investment objective is to distribute to you:
o Before the Exchange Date, non-cumulative quarterly cash dividend
distributions from the interest the Trust receives on the Debt Securities.
o On the Exchange Date, ADRs or cash depending on the type of Exchange Event.
The Exchange Events that may occur are described below and in the section
in this prospectus called "Investment Objectives and Policies--Exchange Event."
WHAT ARE THE ASSETS OF THE TRUST?
The assets of the Trust will be (i) $_______ of Debt Securities issued by
the U.K. Company (or $______ if the Underwriters exercise their over-allotment
option in full) and (ii) the ADRs Purchase Contract. See "Investment Objective
and Policies--Trust Assets."
WHAT IS THE ADRS PURCHASE CONTRACT?
The ADRs Purchase Contract is an agreement entered into between the
Trust and the Jersey Subsidiary for the purchase by the Trust of the ADRs on the
Exchange Date. Because the Trust does not own the ADRs before the Exchange Date,
if the Trust is required to deliver ADRs to you upon the occurrence of an
Exchange Event, the Trust will obtain the ADRs from the Jersey Subsidiary
pursuant to the ADRs Purchase Contract. See "Investment Objective and Policies
- --Trust Assets."
WHEN WILL YOU RECEIVE YOUR QUArTERLY DIVIDEND DISTRIBUTIONS?
On each Dividend Payment Date before the Exchange Date, if the Trust
has sufficient funds, you will receive a non-cumulative quarterly cash dividend
distribution from the Trust at the rate of ___% of the issue price of the
TrUEPrS per annum ($____ per TrUEPrS per annum or $_____ per TrUEPrS per
quarter). Before the Exchange Date, the Trust will make dividend distributions
to you on each Dividend Payment Date (_____, ______, ______, and ______) if you
are registered on the register of the Trust as of the preceding Record Date
(______, ______, _______, and ______). If the Dividend Payment Date is not a
Business Day, you will be paid on the following Business Day. You will receive
the first distribution in the amount of $____ per TrUEPrS for the period from
______, 1998 until ______, 1999 on ______, 1999 if you are registered on the
Trust's register as of ______, 1999.
WHAT WILL YOU RECEIVE ON THE EXCHANGE DATE?
For each TrUEPrS you own, you will receive one ADR representing four
DEF Preference Shares or $25 in cash, depending on the type of Exchange Event.
IF THE EXCHANGE EVENT IS: YOU WILL RECEIVE:
(a) Anything other than a One ADR representing four
redemption or Buy-Back DEF Preference Shares
of the DEF Preference
Shares for cash
(b) The redemption or Cash equal to $25 plus the
Buy-Back of the DEF accrued dividend
Preference Shares for distribution for the then
cash current quarterly dividend
period
If ADRs are distributed, you will become the owner of the ADRs as of
the opening of business on the Exchange Date. The Trust will deliver the ADRs to
you through the facilities of The Depository Trust Company as soon as
practicable on or after the Exchange Date.
WHAT EVENTS WILL OCCUR ON THe ISSUE DATE OF THE TRUEPRS?
The Trust will use the proceeds from the sale of the TrUEPrS, including
the sale of 4,000 TrUEPrS to an affiliate of Merrill Lynch, Pierce, Fenner &
Smith Incorporated to satisfy the requirements of the Investment Company Act of
1940, to purchase from the U.K. Company Debt Securities in an amount equal to
such proceeds. The Debt Securities accrue interest at the rate per annum of __%.
The Interest Payment Dates for the Debt Securities are the same as the Dividend
Payment Dates for the TrUEPrS. The U.K. Company will use all the proceeds from
the sale of the Debt Securities to purchase the Jersey Preference Shares issued
by the Jersey Subsidiary. The Jersey Subsidiary will use all the proceeds from
the sale of the Jersey Preference Shares to pay the subscription price to DEF
for the DEF Preference Shares represented by the ADRs to be issued to the Jersey
Subsidiary.
DEF will use all the proceeds it receives from the Jersey Subsidiary to
make a capital contribution to the Distribution Trust. The Distribution Trust
will use DEF's capital contribution to make one or more DEF Loans to one or more
DEF Borrowers. See the sections in this prospectus called "Use of Proceeds and
Collateral Arrangements" and "Structural Diagram."
WHAT SECURITY ARRANGEMENTS APPLY TO THE TRUST'S ASSETS?
Under the ADRs Security and Pledge Agreement among the Trust, the U.K.
Company, the Jersey Subsidiary and the Collateral Agent, the Jersey Subsidiary
will pledge the ADRs to the holder of the Jersey Preference Shares (initially
the U.K. Company) to secure the Jersey Subsidiary's redemption obligations under
the Jersey Preference Shares and to the Trust to secure the Jersey Subsidiary's
obligation to deliver the ADRs under the ADRs Purchase Contract. The U.K.
Company will also assign its security interest in the ADRs to the Trust to
secure the U.K. Company's redemption obligations under the Debt Securities.
Under the Jersey Preference Shares Security and Pledge Agreement among
the Trust, the U.K. Company and the Collateral Agent, the U.K. Company, as
holder of the Jersey Preference Shares, will pledge the Jersey Preference Shares
to the Trust to secure the U.K. Company's redemption obligations under the Debt
Securities.
HOW WILL THE TRUST OBTAIN CASH FOR DIVIDEND DISTRIBUTIONS ON THE TRUEPRS?
The Trust will pay dividend distributions on the TrUEPrS from the
interest payments it receives on the Debt Securities. The U.K. Company will pay
interest on the Debt Securities if it receives sufficient funds from the
Distribution Trust. The U.K. Company's right to receive payments from the
Distribution Trust will not represent an absolute ownership interest in the
Distribution Trust or its income. The U.K. Company only has a right to receive
payments if the Distribution Trust actually distributes a payment to the U.K.
Company. If the Distribution Trust is not prohibited from making any payments as
described in the section in this prospectus called "Investment Objectives and
Policies--Intervening Vehicles--Distribution Trust," the Distribution Trust will
pay the U.K. Company from the interest payments it receives on the DEF Loan from
the DEF Borrower. If the Distribution Trust does not make any such payment for
any reason, the U.K Company will have insufficient funds to pay interest on the
Debt Securities and an Exchange Event will occur.
WHAT ARE THE EXCHANGE EVENTS?
The first of the following dates or events to occur will constitute an
"Exchange Event."
(i) ______, 2047 or the date of any earlier redemption or Buy-Back of the
DEF Preference Shares;
(ii) any date DEF selects in its absolute discretion;
(iii) the Trust fails to receive in full the interest due on the Debt
Securities on any Dividend Payment Date within three Business Days
after such Dividend Payment Date (without any deductions or
withholdings for taxes, duties or other charges);
(iv) DEF's Tier 1 Capital Ratio is below 4% or DEF's Total Capital Adequacy
Ratio is below 8% (or, in either case, any lower percentage prescribed
for DEF by the [applicable regulatory agency] at the time) and DEF
fails to increase such ratio to at least 4% or 8% (or such lower
percentage), as the case may be, within 90 days;
(v) subject to certain exceptions, there is any change in:
(a) the legal ownership of the securities issued by
(b) the charter or other governing documents of, or
(c) the business purpose of
the U.K. Company, the Jersey Holding Company, the Jersey
Charitable Trust or the Jersey Subsidiary;
(vi) there is any change in the business purpose of the Distribution Trust
or DEF ceases to own directly or indirectly all the common securities
of the Distribution Trust;
(vii) any DEF Borrower ceases to be DEF or one of its wholly owned
subsidiaries;
(viii) certain events of bankruptcy occur with respect to DEF, the U.K.
Company, the Jersey Holding Company, the Jersey Charitable Trust, the
Jersey Subsidiary, the Distribution Trust or any DEF Borrower;
(ix) the Trust dissolves; and
(x) the Collateral Agent fails, at any time, to have a valid first,
perfected and enforceable security interest in, and lien on, the Jersey
Preference Shares and the ADRs (and any proceeds from the redemption of
such securities) and such failure is not remedied on or before 10
Business Days after the Collateral Agent gives written notice of such
failure to the U.K. Company or the Jersey Subsidiary.
For a more detailed description of each of the Exchange Events and the
corresponding Exchange Date, see the section in this prospectus called
"Investment Objective and Policies--Exchange Event."
WILL YOU CONTINUE TO RECEIVE DIVIDEND DISTRIBUTIOnS ON THE TRUEPRS ON AND AFTER
THE EXCHANGE DATE?
No. The Trust will not pay you dividend distributions on the TrUEPrS on
and after the Exchange Date.
0 If the Exchange Event is an event other than a redemption or Buy-Back of
the DEF Preference Shares for cash, the Trust will not pay you dividend
distributions on the TrUEPrS on the Exchange Date (even if the Exchange
Date is a Dividend Payment Date). Instead, dividends on the DEF Preference
Shares will begin to accrue from and including the Dividend Payment Date
immediately preceding the Exchange Date.
o If the Exchange Event is the redemption or Buy-Back of the DEF Preference
Shares for cash, on the Exchange Date, the Trust will pay you accrued
dividend distributions for the period from and including the Dividend
Payment Date immediately preceding the Exchange Date to but excluding the
Exchange Date.
WHAT ABOUT U.S. TAXES?
The Trust will be classified as a grantor trust for United States
Federal income tax purposes. The Debt Securities held by the Trust will be
treated as equity in DEF. Accordingly, you will be treated for United States
Federal income tax purposes as owning equity of DEF and will be required to
include in income, as dividends, your 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 DEF.
Generally, your income will not include any ADRs you receive upon the
occurrence of an Exchange Event. However, your income will include any cash you
may receive if the Exchange Event is the redemption or Buy-Back of the DEF
Preference Shares for cash. In that case, you would be required to recognize
gain or loss for the TrUEPrS. Please review the section in this prospectus
called "Taxation--Certain United States Federal Income Tax Considerations."
WHAT ABOUT [COUNTRY] TAXES?
The Trust will not be treated as a resident of [COUNTRY] for [COUNTRY]
income tax purposes. Because it will not receive [COUNTRY] source income, the
Trust will not be subject to [COUNTRY] tax on income earned. If you are a
non-[COUNTRY] resident holder of TrUEPrS, you will not be subject to [COUNTRY]
tax whether by withholding or otherwise for the Trust's quarterly dividend
distributions.
There should be no [COUNTRY] tax consequences to the Trust of the
distribution of the ADRs to you, as a holder of TrUEPrS, when an Exchange Event
occurs. The sale of TrUEPrs or the DEF Preference Shares represented by the ADRs
may generate assessable income to you if you are a U.S. holder. The sale of
TrUEPrS or ADRs by a U.S. holder may be subject to [COUNTRY] capital gains tax
where a U.S. holder is a non-[COUNTRY] resident but the U.S. holder and the U.S.
holder's associates together beneficially hold or at any time during the five
years preceding such sale held shares or interests in shares representing 10% or
more in value of the issued capital of a [COUNTRY] listed company, such as DEF.
Subject to certain conditions, the terms of the DEF Preference Shares
provide for holders to be grossed-up for [COUNTRY] withholding tax on payments
paid on the DEF Preference Shares being dividends or amounts deemed to be
dividends for [COUNTRY] tax purposes. Please review the section in this
prospectus called "Taxation--Certain [COUNTRY] Tax Considerations."
DO YOU HAVE VOTING RIGHTS?
You are entitled to one vote for each TrUEPrS you own. Except as
described in the section in this prospectus called "Description of TrUEPrS --
Voting Rights," as a holder of TrUEPrS, you will not be entitled to any voting
rights for the DEF Preference Shares. However, while you are a TrUEPrS holder,
the Jersey Subsidiary, as holder of the ADRs, will, or will cause the Collateral
Agent to, direct the ADR depositary to vote DEF Preference Shares represented by
the ADRs as directed by the holders of the TrUEPrS. You should review the
section in this prospectus called "Description of TrUEPrS--Voting Rights."
WILL THE TRUEPRS BE LIStED ON A STOCK EXCHANGE?
The Trust has applied to have the TrUEPrS listed on the New York Stock
Exchange. If the New York Stock Exchange approves the TrUEPrS for listing, the
Trust expects that trading on the New York Stock Exchange will commence within
30 days after delivery of the TrUEPrS. You should be aware that the listing of
the TrUEPrS on the New York Stock Exchange will not necessarily ensure that a
liquid trading market will be available for the TrUEPrS. You should review the
section in this prospectus called "Risk Factors--Uncertain Trading Market."
WHAT ARE THE RISKS ASSOCIATED WITH YOUR INVESTMENT?
The material risks associated with the TrUEPrS are described in the
"Risk Factors" section beginning on page 10 of this prospectus.
HOW WILL THE TRuST BE MANAGED?
The Trust will be internally managed and will not have an investment
adviser, which means that there will be no outside manager or adviser to manage
the Trust's portfolio. In addition, the Trust's portfolio will not be actively
managed; the assets of the Trust will not be traded but will be held as required
by the agreement that governs the Trust. The administration of the Trust will be
overseen by the Trustees. The Bank of New York will act as trust administrator,
custodian for the Trust's assets and paying agent, transfer agent and registrar
for the TrUEPrS. Except as mentioned above and except for The Bank of New York's
role as collateral agent and securities intermediary under the ADRs Security and
Pledge Agreement and the Jersey Preference Shares Security and Pledge Agreement,
as paying agent and transfer agent for the Debt Securities and the DEF
Preference Shares and as ADR depositary, The Bank of New York has no affiliation
with, and is not engaged in any transaction with, the Trust. For their services,
the Jersey Holding Company will pay the fees of the administrator, the custodian
and the paying agent. Please see the section in this prospectus called
"Management Arrangements" for a more detailed discussion.
FEE TABLE
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load (as a
percentage of offering
price).................... 0%(a)
Automatic Dividend Not Applicable
Reinvestment Plan Fees....
ANNUAL EXPENSES (as a
percentage of net assets)
Management Fees(b) ....... 0%
Other Expenses(c) ........ 0%
======
Total Annual Expenses(c).. 0%
======
EXAMPLE 1 year 3 years
------ -------
An investor would pay the
following expenses on a
$1,000 investment, including
the maximum sales load of $0
and assuming (1) no annual
expenses and (2) a 5% annual
return throughout the periods $0 $0
- ------------
(a) There is no sales load. Because the proceeds of the sale of the TrUEPrS
will ultimately be invested in the DEF Preference Shares, DEF has
agreed to pay the Underwriters' compensation. See the cover page of
this prospectus and "Underwriting."
(b) See "Management Arrangements." The Trust will be internally managed;
consequently, the Trust will not pay any separate investment advisory
fee. The Bank of New York will act as the Administrator of the Trust.
(c) The Trust will pay the organization costs in the amount of $____ and
the costs associated with the initial registration and the offering of
the TrUEPrS, estimated to be approximately $_____. The Trust will pay
these costs out of the facility fee to be paid on the issue date of the
TrUEPrS to the Trust by the U.K. Company in connection with the
investment by the Trust in the Debt Securities. The Jersey Holding
Company will pay the ongoing administrative and other expenses of the
Trust pursuant to the Trust Expense Agreement between the Jersey
Holding Company and The Bank of New York. Subject to the satisfaction
of certain conditions, expenses of the Trust not paid by the Trust's
arrangements with the Jersey Holding Company under the Trust Expense
Agreement will be paid by the DEF Affiliate pursuant to the Expense and
Indemnity Agreement. See "Management Arrangements--Estimated Expenses."
Absent such arrangements, the Trust's "Other Expenses" and "Total
Annual Expenses" are estimated to initially be $_______ in the
aggregate or ____% of the Trust's net assets.
This table is intended to assist you in understanding the costs and
expenses that a holder of TrUEPrS will bear directly or indirectly. The example
utilizes a 5% annual rate of return, which is required 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.
STRUCTURAL DIAGRAM
[Diagram of Transaction Structure
illustrating transaction parties,
intervening vehicles and investment
and payment directions]
RISK FACTORS
Your investment in the TrUEPrS will involve certain risks. You should
carefully consider the following discussion of risks before deciding whether an
investment in the TrUEPrS is suitable for you.
NO ACTIVE TRUST PORTFOLIO MANAGEMENT
The Trust will not be managed like a typical closed-end investment
company. The Trust has a fundamental policy (a) to invest 100% of its portfolio
in the Debt Securities issued by the U.K. Company and any distributions thereon,
and not to dispose of the Debt Securities during the term of the Trust, and (b)
to enter into the ADRs Purchase Contract and not to dispose of the ADRs Purchase
Contract during the term of the Trust. The Debt Securities will be redeemed on
the Exchange Date.
NON-DIVERSIFIED PORTFOLIO
Before the Exchange Date, the Trust's assets will consist of (a) the
Debt Securities and distributions thereon and (b) the ADRs Purchase Contract. 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.
ABSENCE OF TRaDING HISTORY
The TrUEPrS have no trading history and it is not possible to predict
how they will trade in the secondary market. The trading price of the TrUEPrS
may vary considerably before an Exchange Event. This is due to factors such as
complex and interrelated political, economic, financial and other factors that
can affect the capital markets generally, the stock exchanges or quotation
systems on which DEF's shares are traded and the market segment of which DEF is
a part and fluctuations in interest rates and rates of exchange between the
[CURRENCY OF THE COUNTRY] and the U.S. dollar. These are factors that are
difficult to predict and beyond the Trust's control. Please review the
accompanying prospectus of DEF.
POSSIBILITY OF THE TRUEPRS TRADING AT A DISCOUNT FROM NET ASSET VALUE
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 price that is lower than their net asset value. This is a risk
separate and distinct from the risk that the Trust's net asset value will
decrease. The Trust cannot predict whether the TrUEPrS will trade at, below or
above their net asset value. The risk of purchasing investments that might trade
at a discount is greater for investors who want to sell their investments in a
relatively short period of time after completion of the Trust's initial public
offering . 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 determined over time. The Trust cannot
redeem the TrUEPrS.
UNCERTAIN TRaDING MARKET
The TrUEPrS are a new issue of securities and, accordingly, have no
established trading market. You cannot assume that a trading market will
develop. If such a trading market does develop, there can be no assurance that
there will be liquidity in the trading market. If the trading market for the
TrUEPrS is limited, there may be a limited number of buyers when you decide to
sell your TrUEPrS if you do not want to hold your investment until an Exchange
Event occurs. This may affect the price you receive. Although the Underwriters
have no obligation to make a market in the TrUEPrS, they have advised the Trust
that they intend to make a market in the TrUEPrS. The Underwriters may cease
these market making activities at any time.
The Trust has applied to have the TrUEPrS listed on the New York Stock
Exchange. If the New York Stock Exchange approves the TrUEPrS for listing, the
Trust expects that trading on the New York Stock Exchange will commence within
30 days after delivery of the TrUEPrS. In the event of a delisting or suspension
of trading on such exchange, the Trust will apply for listing of the TrUEPrS on
another national securities exchange or for quotation on another trading market.
If the TrUEPrS are not listed or traded on any securities exchange or trading
market, or if trading of the TrUEPrS is suspended, pricing information for the
TrUEPrS may be more difficult to obtain. The price and liquidity of the TrUEPrS
may also be adversely affected.
LIMITED TERM OF THE TRUST
When an Exchange Event occurs, the term of the Trust will expire as
soon as possible after the distribution to you of ADRs or cash.
LIMITED STOCKhOLDER RIGHTS
Except as described in the section in this prospectus called
"Description of TrUEPrS--Voting Rights," you, as a holder of the TrUEPrS, will
not have any rights with respect to the ADRs or the DEF Preference Shares
(including rights to receive any dividends or other distributions on them) until
the Trust delivers the ADRs to you upon the occurrence of an Exchange Event
(unless the Exchange Event is the redemption or Buy-Back of the DEF 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.
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 or 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, the Trust cannot assure you that its service providers have
anticipated every step necessary to avoid any adverse effect on the Trust caused
by the Year 2000 Problem.
THE TRUST
DEF 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 October 13, 1998
pursuant to a Certificate of Trust as filed with the Secretary of State of the
State of Delaware on October 13, 1998 and as restated and filed on __________ ,
1998 and a Trust Agreement dated as of October 13, 1998, which was amended and
restated (as amended and restated, the "Declaration of Trust"). The term of the
Trust will expire as soon as possible after the exchange of the TrUEPrS 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 offering of the TrUEPrS (the "Offering") (without
giving effect to the expenses of the Offering payable by the Trust) and the
______TrUEPrS (the "Initial TrUEPrS") issued by the Trust to ML IBK Positions,
Inc. will be $___________ (or $___________ if the Underwriters' over-allotment
option is exercised in full). On the Issue Date (as defined herein), the
proceeds of the Offering and the proceeds from the sale of the Initial TrUEPrS
will be used to purchase $___________ aggregate principal amount (or
$___________ aggregate principal amount if the Underwriters' over-allotment
option is 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 England and Wales, 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. See
"Investment Objective and Policies-Trust Assets."
The following transactions will take place on the Issue Date. Reference
is made to page 9 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 $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 make a payment to [NAME]
("DEF") in consideration for the issuance by the ADR (as defined herein)
depositary to the Jersey Subsidiary of American Depositary Receipts ("ADRs"),
each representing four fully paid non-cumulative preference shares, liquidation
preference $6.25 per share (the "DEF Preference Shares"), of DEF, at a price per
ADR equal to $25 (i.e., the aggregate liquidation preference of the four DEF
Preference Shares represented thereby). No dividends will accrue or be paid on
the DEF Preference Shares represented by the ADRs unless an Exchange Event
(other than a redemption or mandatory repurchase (such mandatory repurchase
being a "Buy-Back") of the DEF Preference Shares) occurs. On and after such an
Exchange Date, non-cumulative dividends will be payable, if and when declared by
the board of directors of DEF out of profits legally available therefor, in U.S.
dollars in an amount equal to $__ per DEF Preference Share per annum, payable
quarterly in arrears in an amount equal to $__ per DEF Preference Share on each
Dividend Payment Date (as defined herein) to holders of record as of the
immediately preceding Record Date (as defined herein).
DEF will use the proceeds from the issue of the DEF 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 DEF's capital contribution to make one or more loans (each, a "DEF Loan") to
DEF and/or one or more wholly-owned subsidiaries or branches of DEF (each, an
"DEF Borrower").
The ADRs will be deposited with The Bank of New York, as the collateral
agent (the "Collateral Agent"), pursuant to a security and pledge agreement (the
"ADRs Security and Pledge Agreement") to be entered into among the Trust, the
U.K. Company, the Jersey Subsidiary and the Collateral Agent. Pursuant to the
terms of the ADRs Security and Pledge Agreement, the Jersey Subsidiary will
irrevocably and unconditionally deposit the ADRs with the Collateral Agent and
(i) the Jersey Subsidiary will irrevocably and unconditionally pledge its
interest in the ADRs to the holder of the Jersey Preference Shares (initially
the U.K. Company) to secure its redemption obligations under the Jersey
Preference Shares and to the Trust to secure its obligation to deliver ADRs
under the ADRs Purchase Contract, (ii) the U.K. Company, with the consent of the
Jersey Subsidiary, will irrevocably and unconditionally assign and hypothecate
to the Trust its interest in such pledge to secure its redemption 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 DEF
Preference Shares for cash), to transfer the ADRs to the Trust. Pursuant to a
separate security and pledge agreement (the "Jersey Preference Shares Security
and Pledge Agreement" and, together with the ADRs 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 redemption obligations to
the Trust under the Debt Securities. Prior to the occurrence of an Exchange
Event, ownership of the Jersey Preference Shares and the ADRs will remain with
the U.K. Company and the Jersey Subsidiary, respectively, although pursuant to
the ADRs Security and Pledge Agreement, the Jersey Subsidiary will agree to, or
will cause the Collateral Agent to, direct the ADR depositary to vote the DEF
Preference Shares represented by the ADRs as directed by the holders of the
TrUEPrS. Each TrUEPrS will entitle the holder to direct the exercise of the
voting rights attaching to one ADR and the four DEF Preference Shares
represented thereby.
The Trust will also enter into the ADRs Purchase Contract between the
Trust and the Jersey Subsidiary (the "ADRs Purchase Contract") pursuant to which
the Jersey Subsidiary will deliver the ADRs to the Trust for distribution to the
holders of TrUEPrS after the occurrence of an Exchange Event (other than a
redemption or Buy-Back of the DEF Preference Shares for cash) and the redemption
of the Debt Securities and the Jersey Preference Shares.
The Debt Securities, the Jersey Preference Shares (if applicable), the
ADRs Purchase Contract and (if applicable) the ADRs to be purchased pursuant to
the terms of the ADRs Purchase Contract will be held by the Custodian for the
Trust.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust will invest the proceeds of the Offering in the Debt
Securities issued by the U.K. Company. The Trust's investment objective is to
distribute to the holders of TrUEPrS (a) prior to an Exchange Event, pro rata
based on the number of TrUEPrS outstanding the interest the Trust receives on
the Debt Securities from time to time, and (b) upon the occurrence of an
Exchange Event, (i) if the Exchange Event is anything other than a redemption or
Buy-Back of the DEF Preference Shares for cash, ADRs evidencing, for each
TrUEPrS, four DEF Preference Shares, and (ii) if the Exchange Event is a
redemption or Buy-Back of the DEF Preference Shares for cash, $25 per TrUEPrS
plus an amount equal to the accrued but unpaid interest on each $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.
Upon the occurrence of an Exchange Event, the DEF Preference Shares will accrue
non-cumulative dividends at the rate of $__ per share per annum, payable
quarterly in arrears in an amount equal to $__ 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 ADRs or cash will be delivered in exchange for the TrUEPrS.
The Trust has adopted a fundamental policy as required by the
Declaration of Trust (a) 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 other than in connection with a mandatory redemption
thereof as a result of an Exchange Event and (b) to enter into the ADRs Purchase
Contract and not to dispose of the ADRs Purchase Contract during the term of the
Trust. The foregoing fundamental policy of the Trust may not be changed without
the vote of 100% of the holders of the TrUEPrS.
TRUST ASSETS
Prior to an Exchange Date, the Trust's assets will consist of (a)
$___________ aggregate principal amount of Debt Securities ($___________
aggregate principal amount of Debt Securities if the Underwriters'
over-allotment option is exercised in full), and any distributions thereon, and
(b) the ADRs Purchase Contract.
As described above under "-General," upon the occurrence of an Exchange
Event, each TrUEPrS will be exchanged for either (i) one ADR or (ii) $25 in cash
plus the accrued dividend distribution thereon for the current quarterly
dividend period. The procedure by which the Trust will obtain the ADRs or cash
to be distributed to the holders of TrUEPrS will vary depending upon the nature
of the Exchange Event and, in the case of an Exchange Event resulting from a
redemption or Buy-Back of the DEF Preference Shares for cash, the value, for
purposes of calculating United Kingdom tax on capital gains, of one U.S. dollar
(or the equivalent thereof in any successor legal currency of the United States)
in terms of British pounds (or the equivalent thereof in any successor legal
currency of the United Kingdom) (the "Dollar Value") on the Exchange Date
(expressed as Pounds/$).
In the case of any Exchange Event other than a redemption or Buy-Back
of the DEF Preference Shares for cash, the Trust will obtain the ADRs to be
distributed to holders of TrUEPrS as a result of the following sequence of
events: (i) the U.K. Company will redeem the Debt Securities for cash at their
aggregate principal amount, (ii) under the terms of the Debt Securities, the
cash proceeds from the redemption referred to in clause (i) above will
automatically be applied to effect the purchase by the Trust of the Jersey
Preference Shares from the U.K. Company, (iii) the Jersey Subsidiary will redeem
the Jersey Preference Shares for cash at their aggregate liquidation preference,
and (iv) under the terms of the ADRs Purchase Contract, the cash redemption
proceeds of the Jersey Preference Shares will be used by the Trust to purchase
the ADRs from the Jersey Subsidiary.
In the case of an Exchange Event resulting from a redemption or
Buy-Back of the DEF Preference Shares for cash, the Trust will obtain the cash
to be distributed to the holders of TrUEPrS as a result of one of the two
sequences described below, depending on the Dollar Value on the Exchange Date.
If the Dollar Value on the Exchange Date is higher than the Dollar
Value on every date on which the DEF Preference Shares are originally issued
(i.e., if the British pound has depreciated against the U.S. dollar between such
dates), then the sequence of events preceding the distribution of cash to
holders of TrUEPrS will be as follows: (i) the U.K. Company will redeem the Debt
Securities for cash at their aggregate principal amount plus accrued interest
from and including the Interest Payment Date immediately preceding the Exchange
Date to but excluding the Exchange Date, (ii) under the terms of the Debt
Securities, the cash proceeds from the redemption referred to in clause (i)
above (excluding the accrued interest portion thereof) will automatically be
applied to effect the purchase by the Trust of the Jersey Preference Shares from
the U.K. Company, (iii) there will be a redemption or Buy-Back of the DEF
Preference Shares for cash in an amount equal to their aggregate liquidation
preference, and (iv) the Jersey Subsidiary will use the cash proceeds from the
redemption or Buy-Back referred to in clause (iii) above to redeem the Jersey
Preference Shares for cash at their aggregate liquidation preference.
If the Dollar Value on the Exchange Date is equal to or less than the
Dollar Value on every date on which the DEF Preference Shares are originally
issued (i.e., if the British pound has remained the same or appreciated against
the U.S. dollar between such dates), then the sequence of events preceding the
distribution of cash to holders of TrUEPrS will be as follows: (i) there will be
a redemption or Buy-Back of the DEF Preference Shares for cash in an amount
equal to their aggregate liquidation preference, (ii) the Jersey Subsidiary will
use the cash proceeds from the redemption or Buy-Back referred to in clause (i)
above to redeem the Jersey Preference Shares for cash at their aggregate
liquidation preference, and (iii) the U.K. Company will use the proceeds from
the redemption of the Jersey Preference Shares referred to in clause (ii) above
and the Income Entitlement it receives on the Exchange Date to redeem the Debt
Securities for cash at their aggregate principal amount plus accrued interest
from and including the Interest Payment Date immediately preceding the Exchange
Date to but excluding such Exchange Date.
Except as described herein, holders of the TrUEPrS will receive
non-cumulative dividend distributions in an amount equal to $____ per TrUEPrS
per annum, payable quarterly in arrears in an amount equal to $___ per TrUEPrS
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 dividend distribution in respect of the period from and including
_________, 1998 (the "Issue Date") to but excluding __________, 1999 will equal
$____ per TrUEPrS. The Record Date for such first dividend distribution will be
_________ or, with respect to TrUEPrS issued after _________ and before
__________, the date of issuance thereof. See "Dividends and Distributions."
In the event that any Dividend Payment Date for the TrUEPrS 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 [CITY, COUNTRY],
[Luxembourg,] New York, New York or any city or cities in which the principal
place of business of any DEF Borrower is located from time to time (initially
[CITY, COUNTRY]) are authorized or obliged by law or executive order to close.
DEF
THIS PROSPECTUS RELATES ONLY TO THE TrUEPrS OFFERED HEREBY AND DOES NOT
RELATE TO DEF, THE ADRs OR THE DEF PREFERENCE SHARES. DEF HAS FILED A
REGISTRATION STATEMENT ON FORM F-3 WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION") WITH RESPECT TO THE DEF PREFERENCE SHARES AND A REGISTRATION
STATEMENT ON FORM F-6 WITH RESPECT TO THE ADRs THAT MAY BE RECEIVED BY A HOLDER
OF TrUEPrS UPON THE OCCURRENCE OF AN EXCHANGE EVENT. THE PROSPECTUS OF DEF
CONSTITUTING A PART OF SUCH REGISTRATION STATEMENT ON FORM F-3 INCLUDES
INFORMATION RELATING TO DEF, THE ADRs AND THE DEF PREFERENCE SHARES. THE
PROSPECTUS OF DEF IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE
PURCHASERS OF TrUEPrS TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF REFERENCE
ONLY. THE PROSPECTUS OF DEF DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR
IS IT INCORPORATED BY REFERENCE HEREIN.
EXCHANGE EVENT
The earliest occurrence of any of the following dates or events shall
constitute an "Exchange Event" as of the "Exchange Date" applicable to such
Exchange Event as specified below:
(i) __________, 2047 or the date of any earlier redemption or Buy-Back
of the DEF Preference Shares for cash, in which case the Exchange Date will
be the earlier of such dates;
(ii) any date selected by DEF 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) any date on which the Tier 1 Capital Ratio or the Total Capital
Adequacy Ratio of DEF (either as reported quarterly by DEF to the
[applicable regulatory agency] or any successor or replacement body
("[applicable regulatory agency]") or as determined at any time by
[applicable regulatory agency] in its absolute discretion) is below 4% or
8%, respectively or, in each case, such lesser percentage as may be
prescribed by [applicable regulatory agency] for DEF at the time (the
applicable percentage in each such case being the "Required Percentage"),
and is not increased by DEF to at least the Required Percentage, within 90
days after the date on which DEF makes such quarterly report or receives
notice from [applicable regulatory agency] of such determination by
[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 provision of the constituent documents of (unless such
change has been consented to by the record holders of more
than 50% of the TrUEPrS or, in the opinion of competent
legal counsel selected by the Trust, such change would not
have a material adverse effect on the rights of the holders
of the TrUEPrS), or
(C) the business purpose (or, solely with respect to the Jersey
Charitable Trust, the powers of the trustees thereof) (as
specified in the constituent documents) of, any of the U.K.
Company, the Jersey Holding Company, the Jersey Charitable
Trust or the Jersey Subsidiary, in which case the Exchange
Date will be the date on which the change occurs;
(vi) 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;
(vii) the common securities of the Distribution Trust cease to be
wholly-owned, directly or indirectly, by DEF or a directly or indirectly
wholly-owned subsidiary or branch of DEF, in which case the Exchange Date
will be the date on which the common securities of the Distribution Trust
cease to be wholly-owned, directly or indirectly, by DEF or a direct or
indirect wholly-owned subsidiary or branch of DEF;
(viii) DEF Borrower ceases to be DEF or a direct or indirect
wholly-owned subsidiary or branch of DEF, in which case the Exchange Date
will be the date on which such DEF Borrower ceases to be DEF or a direct or
indirect wholly-owned subsidiary or branch of DEF;
(ix) (A) a proceeding is commenced by DEF, the U.K. Company, the
Jersey Holding Company, the Jersey Charitable Trust, the Jersey
Subsidiary, the Distribution Trust or the DEF Borrower (each, a
"Relevant Entity") or a person that controls the Relevant
Entity for an order that the 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, in
which case the Exchange Date will be the date on which the
proceeding is filed;
(B) a 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 a Relevant Entity or all or
substantially all of its property (unless such proceeding is
discontinued or dismissed within 21 days of its having been
filed), in which case the Exchange Date will be the Business
Day immediately following the expiration of such 21-day period;
(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; or
(D) the Trust dissolves in accordance with the terms of the
Declaration of Trust or for any other reason, in which case the
Exchange Date will be the Business Day immediately preceding
the effective date of such dissolution; and
(x) the Collateral Agent fails, at any time, to have a valid first,
perfected and enforceable security interest in, and lien on, the Jersey
Preference Shares and the ADRs representing the DEF Preference Shares, and
any redemption proceeds from any of the foregoing, and such failure is not
remedied on or before ten Business Days after written notice of such
failure is given to the U.K. Company or the Jersey Subsidiary, as the case
may be, by the Collateral Agent as contemplated by the Security and Pledge
Agreements, in which case the Exchange Date will be the Business Day
immediately following the expiration of such ten-Business Day period.
Notwithstanding the foregoing, any DEF Borrower may, with the consent
of the Distribution Trust, assign its DEF Loan or the Distribution Trust may
replace any DEF Loan with another loan, in each case, to DEF or to another
directly or indirectly wholly-owned subsidiary or branch of DEF with prospective
payment terms identical to, and other terms substantially the same as, those of
such DEF Loan, in which case DEF or such other subsidiary or branch and loan
will be deemed to be such DEF Borrower and such DEF Loan, respectively, and any
such action will not constitute an Exchange Event.
Total Capital Adequacy Ratio means the total capital adequacy ratio as
prescribed by [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 group
basis) prescribed by [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 [applicable regulatory agency].
The redemption or Buy-Back component of the Exchange Event set forth in
clause (i) above is a result of the terms of the DEF Preference Shares, which
provide that, with the prior consent of [applicable regulatory agency] (if
required) or in the case of a Buy-Back, if no consent is required, with the
confirmation that [applicable regulatory agency] has no objection, and in
accordance with the terms of issue of the DEF Preference Shares, DEF may, in its
absolute discretion, redeem or Buy-Back the DEF Preference Shares for cash (a)
prior to the fifth anniversary of the Issue Date, in whole, but only upon the
occurrence of certain tax, regulatory or registration events and (b) at any time
on or after the fifth anniversary of the Issue Date, in whole or, after an
Exchange Date, in whole or in part.
If the Exchange Event is anything other than a redemption or Buy-Back
of the DEF Preference Shares for cash, then the Trust will distribute to holders
of the TrUEPrS one ADR per TrUEPrS. If a redemption or Buy-Back of the DEF
Preference Shares for cash occurs, then the Trust will distribute to holders of
the TrUEPrS cash in the amount of $25 per TrUEPrS, plus the accrued dividends
thereon for the current quarterly dividend period. After the occurrence of any
such Exchange Event, the Collateral Agent will deliver the ADRs or the cash, 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 DEF Preference
Shares for cash, distribute the proceeds to the holders of TrUEPrS at the rate
of $25 per TrUEPrS then outstanding together with an amount equal to the accrued
but unpaid interest on each $25 principal 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 ADRs
to the holders of TrUEPrS at the rate of one ADR per TrUEPrS then outstanding.
The distribution described in the preceding sentence will be made to holders of
record as of the opening of business on the Exchange Date. The holders of the
TrUEPrS will thereafter have no further claims against the Trust and the
Administrator will wind up the Trust.
Dividend distributions on the TrUEPrS 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 DEF Preference Shares for cash, no dividend distributions will
be payable on the TrUEPrS on the Exchange Date (even if such Exchange Date is a
Dividend Payment Date). Instead, non-cumulative dividends will begin to accrue
on the DEF 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 period ending
on or after the Exchange Date will be payable as dividends on the DEF Preference
Shares and in accordance with the terms of the DEF Preference Shares.
INTERVENINg VEHICLES
The U.K. Company. The U.K. Company is a special purpose unlimited
company incorporated under the laws of England and Wales, and domiciled in the
United Kingdom. The U.K. Company is wholly-owned by a special purpose company
incorporated with limited liability 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, 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 rights of the holders of the TrUEPrS. 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 special purpose
company incorporated with limited liability under the laws of, and domiciled in,
Jersey, Channel Islands. The Jersey Holding Company and the U.K. Company will
own 51% and 49%, respectively, of the ordinary shares of the Jersey Subsidiary,
unless an Exchange Event (other than a redemption or Buy-Back of the DEF
Preference Shares for cash if the Dollar Value on the Exchange Date is equal to
or less than the Dollar Value on every date on which the DEF Preference Shares
are originally issued) occurs, in which case, the U.K. Company will sell all the
ordinary shares it owns in the Jersey Subsidiary to the Jersey Holding Company
immediately prior to the redemption of the Jersey Preference Shares. The Jersey
Subsidiary was established for the purpose of, among other things, issuing the
Jersey Preference Shares and investing the proceeds thereof in the ADRs. The
Jersey Subsidiary 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 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 rights of the holders of the
TrUEPrS. 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, DEF will use the proceeds from the issuance of the
DEF Preference Shares to make a capital contribution of $____________ (or
$_______________ if the Underwriters exercise their over-allotment option in
full) to the Distribution Trust and the Distribution Trust will use the capital
contribution to make the DEF Loan to the DEF Borrower. The DEF Loan will mature
five years after the maturity date of the Debt Securities on ____________, 2047.
The DEF Loan will be the only asset, and interest thereon will be the only
source of revenue, of the Distribution Trust. Interest on the DEF Loan will
accrue from the date on which such loan is made and be due and payable on each
Interest Payment Date at the rate of _____% per annum. The interest paid on the
DEF 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 TrUEPrS) and
a spread of ____%. 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 Trust Expense Agreement (as defined herein)) the Trust and (c)
the indemnity fee payable to [NAME], an affiliate of DEF (the "DEF Affiliate").
On and after an Exchange Date, the U.K. Company will cease to be an
income beneficiary of the Distribution Trust and [NAME], an affiliate of DEF,
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 DEF 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. In
the event an Income Entitlement is not paid for any reason, an Exchange Event
will occur because the U.K. Company will have insufficient funds to pay interest
on the Debt Securities.
Under the terms of the Distribution Trust, other than in connection
with a redemption or Buy-Back of DEF Preference Shares for cash, no Income
Entitlement shall be paid or payable to the U.K. Company on any Interest Payment
Date if (i) an Exchange Event has occurred on or 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 DEF on any preference shares or ordinary shares of DEF,
would exceed DEF's earnings during the prior fiscal year or (iii) the payment of
such Income Entitlement would be prohibited or limited by applicable law,
regulation or order or by any instrument or agreement to which DEF is subject
(collectively, the "Payment Prohibitions"). In the event a Payment Prohibition
exists or will exist on any Interest Payment Date, DEF will notify the
Administrator no later than the third Business Day prior to such date.
TRUST DISSOLUTION
The Trust will dissolve as soon as possible after the exchange of the
TrUEPrS for ADRs 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 (a) the Debt Securities and
any distributions thereon, (b) the Jersey Preference Shares, if applicable, and
(c) if applicable, the ADRs to be purchased pursuant to the ADRs Purchase
Contract; issue any securities or instruments except for the TrUEPrS; 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 (a) 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,
other than in connection with a mandatory redemption thereof as a result of an
Exchange Event, and (b) to enter into the ADRs Purchase Contract and not to
dispose of the ADRs Purchase Contract during the term of the Trust.
Because of the foregoing limitations, the Trust's investments will be
concentrated initially in the financial services industry, which is the industry
in which DEF currently operates. However, to the extent that in the future DEF
diversifies its operations into one or more other industries, the Trust's
investments will be less concentrated in the financial services industry.
DESCRIPTION OF THE TRUEPRS
Each TrUEPrS represents a proportionate share of beneficial interest in
the assets of the Trust. A total of _______________ TrUEPrS will be issued in
the Offering, assuming no exercise of the Underwriters' over-allotment option,
and excluding 4,000 TrUEPrS issued to ML IBK Positions, Inc. in accordance with
the requirements of the Investment Company Act. Upon liquidation of the Trust,
holders of TrUEPrS are entitled to share pro rata based on the number of TrUEPrS
outstanding in the net assets of the Trust available for distribution. Holders
of TrUEPrS have no preemptive, redemption or conversion rights. The TrUEPrS,
when issued and outstanding, will be fully paid and nonassessable.
VOTING RIGHTS
Holders are entitled to one vote for each TrUEPrS 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 TrUEPrS, 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 TrUEPrS or to vote on
other matters upon the written request of the record holders of more than 50% of
the TrUEPrS (unless substantially the same matter was voted on during the
preceding 12 months).
Pursuant to the ADRs Security and Pledge Agreement and the ADR deposit
agreement, each TrUEPrS will entitle the holder thereof to direct the exercise
of the voting rights attaching to one ADR and four DEF Preference Shares. The
holders of the DEF Preference Shares will be entitled to vote together with the
holders of ordinary shares of DEF, on the basis of one vote per DEF 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 DEF are entitled to vote. The
matters referred to in clause (a) of the preceding sentence upon which the
holders of DEF Preference Shares will have a right to vote, together with the
holders of ordinary shares of DEF, are: any proposal to reduce the share capital
of DEF; any resolution to approve the terms of a share buy-back arrangement; any
proposal that affects the rights attached to the DEF Preference Shares; any
proposal to wind up DEF; any proposal for the disposal of the whole of the
property, business and undertaking of DEF; and any matter during the winding up
of DEF. In addition, the holders of the DEF Preference Shares will have the
right to vote separately as a class in certain circumstances involving a
variation of the rights of holders of the DEF Preference Shares. Pursuant to the
ADRs Security and Pledge Agreement, as long as the ADRs are held by the Jersey
Subsidiary, the Jersey Subsidiary will, or will cause the Collateral Agent to,
direct the ADR depositary to vote the DEF Preference Shares as directed by the
holders of the TrUEPrS.
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 TrUEPrS. Under the Declaration
of Trust, however, any such company owning TrUEPrS 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 TrUEPrS in proportion to the vote of all other holders of
TrUEPrS that are not such companies. There is no assurance that the application
for an exemptive order will be granted by the Commission.
Modifications and amendments of the terms of the TrUEPrS, the Debt
Securities, the ADRs Purchase Contract and the Jersey Preference Shares may be
made with the consent of not less than a majority of the holders of the TrUEPrS;
provided that, no such modification or amendment may, without the consent of
100% of the holders of the TrUEPrS, change the amount or timing of any dividend
on the TrUEPrS, 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, the
purchase price for or the number of ADRs deliverable pursuant to the ADRs
Purchase Contract or otherwise adversely affect the foregoing terms or cause an
Exchange Event to occur. Modifications and amendments may be made without the
consent of any holder of the TrUEPrS to cure any ambiguity, defect or
inconsistency in the Declaration of Trust or any instrument defining the terms
of the TrUEPrS, the Debt Securities and the Jersey Preference Shares or the ADRs
Purchase Contract, provided that, such action will not adversely affect in any
material respect the rights of the holders of the TrUEPrS or cause an Exchange
Event to occur.
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 DEF Preference Shares have been conferred a right
to vote following a missed dividend, the DEF Preference Shares will be treated
as voting shares for relevant purposes. Therefore, a person with an entitlement
to DEF Preference Shares, including holders of TrUEPrS, should consider this
entitlement with any entitlement to other voting shares in DEF 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 DEF 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 DEF.
BOOK-ENTRY SYSTEM
The TrUEPrS 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 TrUEPrS 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 TrUEPrS.
Except as set forth below, owners of beneficial interests in such Global
Securities will not be entitled to have the TrUEPrS registered in their names
and will not receive or be entitled to receive physical delivery of the TrUEPrS
in definitive form and will not be considered the owners or holders thereof.
Delivery of ADRs or payment of amounts or delivery of other
consideration deliverable on exchange of, and any quarterly distributions on,
TrUEPrS 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 TrUEPrS 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 TrUEPrS in definitive registered form in exchange for the Global Security
representing such TrUEPrS. In addition, the Trust may at any time and in its
sole discretion determine not to have any TrUEPrS represented by one or more
Global Securities and, in such extent, will issue TrUEPrS in definitive form in
exchange for all of the Global Securities representing the TrUEPrS. Further, if
the Trust so specifies with respect to the TrUEPrS, an owner of a beneficial
interest in a Global Security representing TrUEPrS may, on terms acceptable to
the Trust and the Depository for such Global Security, receive TrUEPrS 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
TrUEPrS represented by such Global Security equal in number to that represented
by such beneficial interest and to have such TrUEPrS 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, 53....................................... Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 54................................... Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 59........................................ 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
"Trust 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. Prior to the Exchange Date, the Trust's portfolio will consist only of
(a) $________________ aggregate principal amount of Debt Securities
($_______________ aggregate principal amount of Debt Securities if the
Underwriters' over-allotment option is exercised in full), and any distributions
thereon, and (b) the ADRs Purchase Contract. The Trust's portfolio 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 other than in connection with a mandatory redemption thereof
as a result of an Exchange Event, and that the ADRs Purchase Contract not be
disposed of during the term of the Trust.
The Trust will pay all expenses incurred in the Trust's formation and
other initial expenses and expenses relating to the Offering 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 Trust Expense Agreement. Subject to the satisfaction of
certain conditions, any operating expenses of the Trust not covered by the
Trust's arrangements with the Jersey Holding Company will be paid by the DEF
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 TrUEPrS 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 TrUEPrS. 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 and securities
intermediary under the Security and Pledge Agreements, as paying and transfer
agent for the Debt Securities and the DEF Preference Shares, 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 ADRs, the Jersey Preference
Shares or other assets consistent with the terms of the securities pledged
thereunder on behalf of the Trust, and as depositary for the ADRs.
PAYING AGENT
The paying agent, transfer agent and registrar (the "Paying Agent") for
the TrUEPrS 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, pursuant to the Expense and Indemnity
Agreement, the DEF 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
TrUEPrS and the Offering 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 Trust Expense Agreement.
Subject to the satisfaction of certain conditions, any operating expenses of the
Trust not covered by the Trust's arrangements with the Jersey Holding Company
will be paid by the DEF 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 $_______ per TrUEPrS per annum, payable quarterly in arrears in
an amount equal to $_______ per TrUEPrS 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
_____________, 1999 will equal $__________ per TrUEPrS.
Dividend payments on the TrUEPrS 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 only 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 further 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 for any reason, an Exchange Event will occur because the
U.K. Company will have insufficient funds to pay interest on the Debt
Securities.
On and after the Exchange Date, the U.K. Company will cease to be the
income beneficiary of the Distribution Trust and [NAME], an affiliate of DEF,
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 DEF 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 DEF Borrower will make an interest payment on the DEF 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 Trust Expense Agreement) the Trust and
(d) an indemnity fee payable to the DEF 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 TrUEPrS.
Dividend distributions on the TrUEPrS 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 DEF Preference Shares for cash, no dividend distributions will
be payable on the TrUEPrS on the Exchange Date (even if such Exchange Date is a
Dividend Payment Date). Instead, non-cumulative dividends will begin to accrue
on the DEF 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
DEF Preference Shares and only in accordance with the terms of the DEF
Preference Shares.
NET ASSET VALUE
The net asset value of the TrUEPrS 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
TrUEPrS 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 (a) the Debt Securities and (b) the
ADRs Purchase Contract held by the Trust will be determined in good faith by the
Board of Trustees pursuant to procedures adopted by them.
TAXATION
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 TrUEPrS is based upon
the advice of Sullivan & Cromwell, counsel to DEF. The summary addresses only
the tax consequences to persons that acquire TrUEPrS in connection with the
Offering and hold the TrUEPrS as a capital asset. It does not address all tax
consequences of the ownership of TrUEPrS 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
TrUEPrS 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 TrUEPrS, 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 TrUEPrS 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 have 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 TrUEPrS. 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 DEF. Accordingly, for United States Federal income tax purposes, each U.S.
Holder generally will be treated as owning equity of DEF 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 DEF. 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 TrUEPrS. Upon a sale or other disposition of the TrUEPrS
(including generally the receipt of a distribution of cash in redemption of all
of a U.S. Holder's TrUEPrS), 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 limitation purposes.
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 ADRs or, under certain circumstances, cash to holders
of TrUEPrS in exchange for their TrUEPrS and in liquidation of the Trust. A U.S.
Holder's exchange of TrUEPrS for ADRs generally will not be a taxable event for
United States Federal income tax purposes. A U.S. Holder's basis in the ADRs
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 ADRs
would include their holding period in such property.
Upon the occurrence of certain Exchange Events, holders of the TrUEPrS
may receive cash. For U.S. federal income tax purposes such receipt of cash
would constitute a taxable disposition of the TrUEPrS 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 TrUEPrS" above. Amounts
representing accrued but unpaid interest on the Debt Securities will be treated
as a distribution on TrUEPrS as discussed under "-Classification of the Trust
and the Debt Securities and Distributions on TrUEPrS" above.
ADRs Received in an Exchange Event
Distributions on the ADRs. 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 DEF), if any, before reduction
for [COUNTRY] withholding taxes by DEF, 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 ADRs. A U.S. Holder will recognize gain or
loss for U.S. federal income tax purposes upon the sale or other disposition of
ADRs 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 ADRs. 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 ADRs
exceeds one year and any such gain will be income from sources within the United
States for foreign tax credit limitation purposes.
PFIC Considerations
DEF 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 TrUEPrS will be treated as owning an equity
interest in DEF for United States Federal income tax purposes, if DEF were a
PFIC a U.S. Holder of TrUEPrS as well as a holder of ADRs would be subject to
certain adverse tax consequences.
Non-U.S. Holders
Distributions on the TrUEPrS and ADRs. 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 TrUEPrS or ADRs), 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 TrUEPrS and ADRs. 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 TrUEPrS or ADRs 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 TrUEPrS or ADRs) 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 TrUEPrS or, in the case of ADRs, by a U.S. paying agent or other
U.S. intermediary and "backup withholding" at a rate of 31% will apply to such
payments 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 TrUEPrS or ADRs 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 TrUEPrS or ADRs 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 TrUEPrS or ADRs 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 or
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.
CERTAIN [COUNTRY] TAX CONSIDERATIONS
The taxation discussion below of certain [COUNTRY] tax consequences is
based on the advice of PricewaterhouseCoopers Securities Limited, [COUNTRY] and
outlines certain [COUNTRY] tax considerations for U.S. holders in relation to
the purchase, ownership and disposition of the TrUEPrS and the acquisition,
ownership and disposition of the DEF Preference Shares represented by the ADRs.
The discussion is intended only as a descriptive summary and does not purport to
be a complete technical analysis or listing of all potential [COUNTRY] tax
effects. This discussion is based upon laws, regulations, rulings and decisions
now in effect and is subject to changes in [COUNTRY] law, including in any
double taxation convention between [COUNTRY] and the United States (the
"Treaty"), including retroactive changes in effective dates, or possible
differing interpretations.
Persons considering the purchase of the TrUEPrS should consult their
own tax advisors concerning the application of [COUNTRY]'s tax laws to their
particular situations as well as any consequences of the purchase, ownership and
disposition of TrUEPrS or the DEF Preference Shares represented by the ADRs
arising under the laws of any other taxing jurisdiction.
The Trust would not be treated as a resident of [COUNTRY] for [COUNTRY]
income tax purposes. As it is not in receipt of [COUNTRY] source income it will
not be subject to [COUNTRY] tax on income earned. Therefore, quarterly
distributions by the Trust to non-[COUNTRY] resident holders of TrUEPrS will not
be subject to [COUNTRY] tax whether by withholding or otherwise.
Upon an Exchange Event, the Trust will acquire ADRs and then
immediately deliver the ADRs to the holders of TrUEPrS. There should be no
[COUNTRY] tax consequences to the Trust of the delivery of the ADRs to holders
of TrUEPrS.
Alternatively, upon an Exchange Event, the Trust may receive cash
repayment of principal and interest due on the Debt Securities. No [COUNTRY] tax
will be payable by the Trust on such receipts.
The sale of TrUEPrS or the DEF Preference Shares represented by the
ADRs may generate assessable income to certain U.S. holders, such as banks,
insurance companies and other persons or institutions in the business of
investment. The provisions of the Treaty, however, are designed to ensure that
this income, less all allowable deductions, is subject to [COUNTRY] tax only if
the U.S. holder who is a U.S. resident carries on business in [COUNTRY] through
a permanent establishment and the income earned is effectively connected with
that permanent establishment.
The sale of TrUEPrS or ADRs by a U.S. holder will not generate a net
capital gain and therefore will not be subject to [COUNTRY] capital gains tax
unless:
o the DEF Preference Shares are held by U.S. citizens or U.S.
corporations who are residents of [COUNTRY];
o the U.S. holder is a non-[COUNTRY] resident but the U.S. holder and the
U.S. holder's associates together beneficially hold or at any time
during the five years prior to the sale held shares or interests in
shares representing ten percent or more in value of the issued capital
of DEF; or
o the U.S. holder is a non-[COUNTRY] resident but has at any time used
the TrUEPrS or ADRs in carrying on trade or business through a
permanent establishment in [COUNTRY].
and the consideration received for the TrUEPrS or the ADRs, (or their
market value, if the disposition is not at arm's length or for no consideration)
exceeds the U.S. holder's cost base in the TrUEPrS or the ADRs after that cost
base is adjusted, where appropriate, for the effect of inflation.
The [COUNTRY] income tax rate on capital gains is the same as the
ordinary income tax rate applicable to the relevant taxpayer, subject to capital
gains tax averaging where applicable. In the case of companies this rate is
presently 36%.
An individual who is a U.S. holder will be a resident of [COUNTRY] if,
for example, that person:
o is domiciled in [COUNTRY], unless the person's permanent place of abode
is outside [COUNTRY]; or
o has been in [COUNTRY] for 183 days or more in a year of income unless
that person has a usual place of abode outside [COUNTRY] and does not
intend to take up residence in [COUNTRY].
However, if that individual would be a resident of the United States
for the purposes of U.S. law, the Treaty allocates residence for the purposes of
the Treaty solely to the country in which the person maintains a permanent home
(or habitual abode) or with which the person has closer personal and economic
ties.
A corporation who is a U.S. holder will be a resident of [COUNTRY] if
it is incorporated in [COUNTRY] or if it carries on business in [COUNTRY] and
has either its central management and control in [COUNTRY] or its voting power
controlled by shareholders who are residents of [COUNTRY].
Where the U.S. holder acquires ADRs on the Exchange Date, there may be
[COUNTRY] tax consequences in relation to dividends paid by that [COUNTRY]
listed corporation. Dividends paid by DEF may be paid as franked or unfranked
dividends. [COUNTRY] corporations are required to provide shareholders with
notices detailing the extent to which the dividend is franked or unfranked and
the deductions (if any) of dividend withholding tax. Broadly, to the extent to
which those dividends are paid out of profits which have been subject to
[COUNTRY] company income tax, they will be franked dividends. Fully franked
dividends paid to a non-resident will be exempt from [COUNTRY] dividend
withholding tax. Unfranked or partially franked dividends will be subject to
[COUNTRY] dividend withholding tax to the extent to which the dividend is
unfranked, unless a specific exemption is available.
The interaction of [COUNTRY] income tax law and the Treaty limits the
[COUNTRY] dividend withholding tax on unfranked or partially franked dividends
paid to a U.S. resident who is beneficially entitled to the dividend to 15
percent of the unfranked part of the gross dividend. However, where the U.S.
resident carries on business in [COUNTRY] through a permanent establishment or
performs independent personal services from a fixed base in [COUNTRY] and the
holding is effectively connected with the permanent establishment or fixed base,
the 15 percent limit should not apply and a dividend withholding tax at the rate
of 30 percent should apply in respect of such dividends in such circumstances.
However, under [COUNTRY] law an [COUNTRY] payer of dividends to a U.S. resident
in such circumstances is only obliged to withhold at the rate of 15 percent and,
as a matter of policy, the [COUNTRY] Taxation Office does not seek to collect
any further withholding tax.
Subject to certain conditions, the terms of the DEF Preference Shares
provide for holders to be grossed-up for [COUNTRY] withholding tax on payments
on the DEF Preference Shares being dividends or amounts deemed to be dividends
for [COUNTRY] tax purposes.
No stamp, issue, registration or similar taxes are payable in [COUNTRY]
in connection with the issue of TrUEPrS by the Trust or of ADRs. Transfers of
DEF Preference Shares by U.S. holders would be subject to stamp duty.
There are no specific estate, inheritance or gift taxes or duties
imposed in [COUNTRY]. In practice, no Revenue Authority in any State or
Territory of [COUNTRY] should seek to recover stamp duty on any transfer of or
agreement to transfer ADRs provided that the instruments are not executed and
the purchaser of the ADRs is not resident in [COUNTRY].
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement
(the "Purchase Agreement"), the Trust has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of the Underwriters, for
whom Merrill Lynch, Pierce, Fenner & Smith Incorporated and
_____________________________________________ are acting as representatives (the
"Representatives"), has severally agreed to purchase, the aggregate number of
TrUEPrS set forth opposite its name below:
Number of
Underwriter TrUEPrS
----------- ---------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................
Total......................................... ---------------
===============
In the Purchase Agreement, the Underwriters named therein have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
TrUEPrS being sold pursuant to the Purchase Agreement if any of such TrUEPrS are
purchased. Under certain circumstances, under the Purchase Agreement, the
commitments of non-defaulting Underwriters may be increased. 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 Representatives have advised the Trust that the Underwriters
propose to offer the TrUEPrS offered hereby in the 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 TrUEPrS; provided that such concession for sales of more than 10,000
TrUEPrS to any single purchaser will be $___ per TrUEPrS. The Underwriters may
allow, and such dealers may reallow, a discount not in excess of $___ per
TrUEPrS to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed. Investors must pay for
any TrUEPrS purchased in the initial public offering on or before ____________,
1998.
The Trust has granted the Underwriters an option to purchase up to an
additional ___________ TrUEPrS at the initial public offering price. Such
option, 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 option, 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 ____________ TrUEPrS initially purchased
by the Underwriters.
In view of the fact that the proceeds of the sale of the TrUEPrS will
ultimately be invested in ADRs representing the DEF Preference Shares, the
Purchase Agreement provides that DEF will pay, as compensation (the
"Underwriters' Compensation") to the Underwriters, an amount in immediately
available funds of $____ per TrUEPrS or $__________ in the aggregate (or
$_______________ in the aggregate if the Underwriters' over-allotment option is
exercised in full) for the accounts of the several Underwriters; provided that
such compensation for sales of more than 10,000 TrUEPrS to any single purchaser
will be $____ per TrUEPrS and to the extent such sales are made, the actual
amount of Underwriters' Compensation will be less than the aggregate amounts
specified above.
The Underwriters do not intend to confirm sales of TrUEPrS offered
hereby to any accounts over which they exercise discretionary authority.
Prior to the Offering, there has been no public market for the TrUEPrS.
Application has been made to list the TrUEPrS on the NYSE. If approved, trading
of the TrUEPrS on the NYSE is expected to commence within the 30-day period
after the Issue Date. The Representatives have advised the Trust that they
intend to make a market in the TrUEPrS prior to the commencement of trading on
the NYSE. The Representatives will have no obligation to make a market in the
TrUEPrS, however, and may cease market making activities, if commenced, at any
time. In connection with the listing, the Underwriters will undertake that sales
of TrUEPrS will meet the NYSE's minimum distribution standards.
In view of the fact that the proceeds of the sale of the TrUEPrS will
ultimately be invested in ADRs representing the DEF Preference Shares, the Trust
and DEF have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, 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 TrUEPrS for a purchase price of $100,000 on _______,
1998.
Until the distribution of the TrUEPrS is completed, rules of the
Commission may limit the ability of the Underwriters and any selling group
members to bid for and purchase the TrUEPrS. As an exception to these rules, the
Representatives are permitted to engage in certain transactions that stabilize
the price of the TrUEPrS. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the TrUEPrS.
If the Underwriters create a short position in the TrUEPrS in
connection with the Offering, i.e., if they sell more TrUEPrS than are set forth
on the cover page of this Prospectus, the Representatives may reduce that short
position by purchasing TrUEPrS in the open market. The Representatives may also
elect to reduce any short position by exercising all or part of the
over-allotment option described above.
The Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the Representatives
purchase TrUEPrS in the open market to reduce the Underwriters' short position
or to stabilize the price of the TrUEPrS, they may reclaim the amount of the
selling concession from the Underwriters and any selling group members who sold
those TrUEPrS as part of the Offering.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the Trust nor 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 TrUEPrS. In addition,
neither the Trust nor any of the Underwriters makes any representation that the
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Trust has not authorized, or taken any action to cause, the issue
or distribution in the [COUNTRY], any of its States, territories or possessions
or any political subdivision thereof ("[COUNTRY]"), or to any resident of
[COUNTRY], of this Prospectus or any other document inviting applications or
offers to subscribe for or purchase the TrUEPrS offered hereby or offering such
TrUEPrS for subscription or purchase and, accordingly, neither this Prospectus
(whether in draft or definitive form) nor any such other document may be issued
or distributed in [COUNTRY] or to any resident of [COUNTRY] for the purpose of
inviting applications or offers to subscribe for or purchase the TrUEPrS offered
hereby.
No prospectus in relation to the TrUEPrS has been lodged with or
registered by the [applicable regulatory agency]. In connection with the
distribution of the TrUEPrS, each of the several Underwriters will represent and
agree that it: (a) has not (directly or indirectly) offered for subscription or
purchase or issued invitations to subscribe for or purchase nor has it sold the
TrUEPrS; (b) will not (directly or indirectly) offer for subscription or
purchase or issue invitations to subscribe for or purchase or sell the TrUEPrS;
and (c) has not distributed and will not distribute any draft or definitive
prospectus, advertisement or other offering material, in each case in [COUNTRY]
or to any resident of [COUNTRY] (including corporations and other entities
organized under the laws of [COUNTRY] but not including a permanent
establishment of such corporations or other entities located outside [COUNTRY]).
This Prospectus does not constitute an offer or, or an invitation to
purchase or subscribe for, the TrUEPrS in the [COUNTRY] or any of its states or
territories. The TrUEPrS may not be offered, sold or delivered in or to any
resident of the [COUNTRY] or any of its states or territories.
Each Underwriter has also in the Purchase Agreement represented and
agreed that:
(a) it has not offered or sold and prior to the date six months
after the date of issue of the TrUEPrS will not offer or sell any
TrUEPrS to persons in the United Kingdom 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;
(b) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything
done by it in relation to the TrUEPrS in, from or otherwise involving
the United Kingdom; and
(c) 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 TrUEPrS to a person who is of a kind described in
Article 11(3) of the Financial Services Act 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 DEF 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. See
also "Taxation."
EXPERTS
The statement of assets and liabilities 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
TrUEPrS offered hereby. Further information concerning the TrUEPrS 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.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholder of DEF Exchangeable Preferred Trust:
We have audited the accompanying statement of assets and liabilities of DEF
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 financial statement 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 provides a reasonable basis for our
opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all
material respects, the financial position of DEF Exchangeable Preferred Trust as
of ____________, 1998 in conformity with generally accepted accounting
principles.
Princeton, New Jersey
______________, 1998
<PAGE>
DEF EXCHANGEABLE PREFERRED TRUST
STATEMENT OF ASSETS AND LIABILITIES
______________, 1998
ASSETS
Cash $
--------------------
Total Assets $
====================
LIABILITIES
Total Liabilities $
====================
NET ASSETS $
====================
NET ASSET VALUE PER TRUEPRS
______ TrUEPrS issued and outstanding (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
out of 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 Trust Expense Agreement. Any expenses of
the Trust not covered by the Trust's arrangements with the Jersey Holding
Company under the Trust Expense Agreement will be paid by the DEF Affiliate
pursuant to the Expense and Indemnity Agreement.
(2) Offering expenses will be payable upon completion of the Offering and will
be paid by the Trust 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 TrUEPrS to ML IBK
Positions, Inc., an affiliate of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, in consideration for a purchase price of $____________.
THE FOLLOWING PROSPECTUS OF DEF IS ATTACHED AND DELIVERED FOR CONVENIENCE OF
REFERENCE ONLY. THE PROSPECTUS OF DEF DOES NOT CONSTITUTE A PART OF THE
FOREGOING PROSPECTUS OF DEF EXCHANGEABLE PREFERRED TRUST, NOR IS IT INCORPORATED
BY REFERENCE THEREIN.
<PAGE>
===============================================================================
Through and including _______, 1998 (the 25th day after the date of this
prospectus), all dealers effecting transactions in the TrUEPrS, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
DEF EXCHANGEABLE PREFERRED TRUST
_________ TRUEPRS
(EXCHANGEABLE FOR AMERICAN DEPOSITARY RECEIPTS
REPRESENTING DEF PREFERENCE SHARES
OR CASH)
------------
PROSPECTUS
------------
MERRILL LYNCH & CO.
[NAME OF CO-MANAGER]
[NAME OF CO-MANAGER]
___________, 1998
SM Service Mark of Merrill Lynch & Co., Inc.
==============================================================================
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
STATEMENT OF ASSETS AND LIABILITIES 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 TrUEPrS (included in Exhibit
(a)(2))**
(2) Portions of the Amended and Restated Trust Agreement of the
Registrant defining the rights of Holders of TrUEPrS**
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) Form of Purchase Agreement**
(i) Not applicable
(j) Form of Custodian Agreement**
(k) (1) Form of Administration Agreement**
(2) Form of Paying Agent Agreement**
(3) Form of Specimen for Debt Securities**
(4) Form of ADRs Security and Pledge Agreement**
(5) Form of Jersey Preference Shares Security and
Pledge Agreement**
(6) Form of Trust Reimbursement Agreement**
(7) Form of Trust Expense Agreement**
(8) Form of Expense and Indemnity Agreement**
(9) Form of Debt Securities Subscription Agreement**
(10) Form of ADRs Purchase Contract**
(11) Form of Distribution Trust Agreement**
(l) Opinion and Consent of Brown & Wood LLP, counsel to the
Trust**
(m) Not applicable
(n) (1) Tax Opinion and Consent of Sullivan & Cromwell**
(2) Tax Opinion and Consent of PricewaterhouseCoopers Securities
Limited, [COUNTRY] tax adviser to the Trust**
(3) Consent of Deloitte & Touche LLP, independent auditors for
the Trust**
(o) Not applicable
(p) Form of TrUEPrS Subscription Agreement**
(q) Not applicable
(r) Not applicable
- --------
* Filed herewith.
** To be filed by amendment.
ITEM 25. MARKETING ARRANGEMENTS
See Exhibit (h) to this Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be incurred in connection with the offering described
in this Registration Statement will be paid by the 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 TrUEPrS as of the effective date
of this Registration Statement.
ITEM 29. INDeMNIFICATION
Section 6.06 of the Amended and Restated Trust Agreement and Section 6
of the Purchase Agreement provide for indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to trustees, officers
and controlling persons of the Registrant, pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission (the "Commission") such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Trust is internally managed and does not have an investment
adviser.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
promulgated thereunder are maintained at the offices of the Registrant (850
Library Avenue, Suite 204, Newark, Delaware 19715), its custodian (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 16TH DAY OF
OCTOBER, 1998.
DEF 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.
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
/s/ Donald J. Puglisi
Managing Trustee October 16, 1998
- -------------------------------
Donald J. Puglisi
/s/ William R. Latham III
Trustee October 16, 1998
- -------------------------------
William R. Latham III
/s/ James B. O'Neill
- -------------------------------
James B. O'Neill Trustee October 16, 1998
</TABLE>
<PAGE>
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 TrUEPrS(included in
Exhibit(a)(2))**
(2) Portions of the Amended and Restated Trust Agreement of the
Registrant defining the rights of Holders of TrUEPrS**
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) Form of Purchase Agreement**
(i) Not applicable
(j) Form of Custodian Agreement**
(k) (1) Form of Administration Agreement**
(2) Form of Paying Agent Agreement**
(3) Form of Specimen for Debt Securities**
(4) Form of ADRs Security and Pledge Agreement**
(5) Form of Jersey Preference Shares Security and Pledge
Agreement**
(6) Form of Trust Reimbursement Agreement**
(7) Form of Trust Expense Agreement**
(8) Form of Expense and Indemnity Agreement**
(9) Form of Debt Securities Subscription Agreement**
(10) Form of ADRs Purchase Contract**
(11) Form of Distribution Trust Agreement**
(l) Opinion and Consent of Brown & Wood LLP, counsel to the
Trust**
(m) Not applicable
(n) (1) Tax Opinion and Consent of Sullivan & Cromwell**
(2) Tax Opinion and Consent of PricewaterhouseCoopers Securities
Limited, [COUNTRY] tax adviser to the Trust**
(3) Consent of Deloitte & Touche LLP, independent auditors for
the Trust**
(o) Not applicable
(p) Form of TrUEPrS Subscription Agreement**
(q) Not applicable
(r) Not applicable
- --------
* Filed herewith.
** To be filed by amendment.
Exhibit 99 (a)(1)
TRUST AGREEMENT OF DEF EXCHANGEABLE PREFERRED TRUST
TRUST AGREEMENT, dated as of October 13, 1998 among Jamie A.
Patinelli, as Depositor, and Donald J. Puglisi, William R. Latham III and James
B. O'Neill, as Trustees. The Depositor and the Trustees hereby agree as follows:
1. The trust created hereby shall be known as "DEF Exchangeable
Preferred Trust", in which name the Trustees may conduct the business of the
Trust, make and execute contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to
the Trustees the sum of $1. The Trustees hereby acknowledge receipt of such
amount in trust from the Depositor, which amount shall constitute the initial
trust estate. The Trustees hereby declare that they will hold the trust estate
in trust for the Depositor. It is the intention of the parties hereto that the
Trust created hereby constitute a business trust under Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. ss. 3801, et seq. and that this document
constitute the governing instrument of the Trust. The Trustees are hereby
authorized and directed to execute and file a certificate of trust with the
Delaware Secretary of State in the form attached hereto.
3. The Depositor and the Trustees will enter into an amended and
restated Trust Agreement, satisfactory to each such party, to provide for the
contemplated operation of the Trust created hereby. Prior to the execution and
delivery of such amended and restated Trust Agreement, the Trustees shall not
have any duty or obligation hereunder or with respect to the trust estate,
except as otherwise required by applicable law or as may be necessary to obtain
prior to such execution and delivery any licenses, consents or approvals
required by applicable law or otherwise.
4. This Trust Agreement may be executed in one or more counterparts.
5. The Trustees may resign upon thirty days prior notice to the
Depositor.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
DEPOSITOR:
By: /s/ Jamie A. Patinelli
-----------------------
Jamie A. Patinelli,
as Depositor
TRUSTEE:
By: /s/ Donald J. Puglisi
-----------------------
Donald J. Puglisi,
as Trustee
TRUSTEE:
By: /s/ William R. Latham III
--------------------------
William R. Latham III,
as Trustee
TRUSTEE:
By: /s/ James B. O'Neill
-----------------------
James B. O'Neill,
as Trustee
Exhibit 99 (a)(3)
CERTIFICATE OF TRUST
OF
DEF EXCHANGEABLE PREFERRED TRUST
This Certificate of Trust of DEF Exchangeable Preferred Trust (the
"Trust") is being duly executed and filed by the undersigned trustees of the
Trust, dated as of October 13, 1998, for the purposes of organizing a business
trust pursuant to the Delaware Business Trust Act, 12 Del. C. ss.ss. 3801 et
seq. (the "Act").
The undersigned hereby certify as follows:
1. Name. The name of the business trust is DEF Exchangeable Preferred
Trust.
2. Registered Office; Registered Agent. The business address of the
registered office of the Trust in the State of Delaware is One Rodney Square,
10th Floor, 10th and King Streets, in the City of Wilmington, County of New
Castle 19801. The name of the Trust's registered agent at such address is RL&F
Service Corp.
3. Effective Date. This Certificate of Trust shall be effective upon
filing in the Office of the Secretary of State of the State of Delaware.
4. Other Matters. The Trust will be a registered investment company
under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the undersigned, being trustees of the Trust, have
duly executed this Certificate of Trust as of the day and year first above
written.
By: /s/ Donald J. Puglisi
-------------------------
Donald J. Puglisi,
as Trustee
By: /s/ William R. Latham III
-------------------------
William R. Latham III,
as Trustee
By: /s/ James B. O'Neill
-------------------------
James B. O'Neill,
as Trustee
