<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(5)
REGISTRATION NO. 333-49257
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 14, 1998)
16,500,000 Shares
LOGO
Ordinary Shares
(par value $0.041666667 per share)
All of the Ordinary Shares, par value $0.041666667 per share (the "Ordinary
Shares"), of ACE Limited, a Cayman Islands company (the "Company"), offered
hereby (the "Offering") are being sold by the Company. The Ordinary Shares are
listed on the New York Stock Exchange (the "NYSE") under the symbol "ACL". On
April 14, 1998, the last reported sales price of the Ordinary Shares on the
NYSE Composite Tape was $37 7/8 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Ordinary Shares will be purchased from the Company by J.P. Morgan
Securities Inc. (the "Underwriter") at a price of $36 3/4 per share (resulting
in $606,375,000 aggregate net proceeds (before expenses) to the Company). The
Company will pay certain expenses of the Offering estimated at $500,000.
The Ordinary Shares may be offered by the Underwriter from time to time in one
or more transactions (which may involve block transactions) on the NYSE, in the
over-the-counter market, through negotiated transactions or otherwise at market
prices prevailing at the time of the sale or at prices otherwise negotiated,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriter. See "Underwriting."
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act").
The Ordinary Shares are offered, subject to prior sale, when, as and if
accepted by the Underwriter and subject to approval of certain legal matters by
counsel for the Underwriter. It is expected that delivery of the Ordinary
Shares will be made against payment therefor in immediately available funds on
or by April 17, 1998 at the office of J.P. Morgan Securities Inc., 60 Wall
Street, New York, New York.
J.P. MORGAN & CO.
April 14, 1998
<PAGE>
No person is authorized in connection with the Offering to give any information
or to make any representation not contained or incorporated by reference in
this Prospectus Supplement or the accompanying Prospectus, and any information
or representation not contained or incorporated herein or therein must not be
relied upon as having been authorized by the Company or the Underwriter. This
Prospectus Supplement and the accompanying Prospectus relate solely to the
Ordinary Shares and may not be used or relied on in connection with any other
offer or sale of securities of the Company. Neither this Prospectus Supplement
nor the accompanying Prospectus constitutes an offer to sell or a solicitation
of any offer to buy by any person in any jurisdiction in which it is unlawful
for such person to make such an offer or solicitation. Neither the delivery of
this Prospectus Supplement nor the accompanying Prospectus at any time nor any
sale made hereunder shall under any circumstance imply that the information
herein is correct as of any date subsequent to the date hereof.
No action has been or will be taken by the Company or the Underwriter that
would permit a public offering of the Ordinary Shares or possession or
distribution of this Prospectus Supplement and the accompanying Prospectus in
any jurisdiction where action for that purpose is required, other than in the
United States. Persons into whose possession this Prospectus Supplement and the
accompanying Prospectus come are required by the Company and the Underwriter to
inform themselves about and to observe any restrictions as to the Offering of
the Ordinary Shares and the distribution of this Prospectus Supplement and the
accompanying Prospectus.
In this Prospectus Supplement and the accompanying Prospectus, references to
"dollar" and "$" are to United States currency, and the terms "United States"
and "U.S." mean the United States of America, its states, its territories, its
possessions and all areas subject to its jurisdiction.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
Use of Proceeds...................... S-2
Capitalization....................... S-3
Underwriting......................... S-3
PAGE
Incorporation of Certain Documents by
Reference........................... 2
The Company.......................... 4
The CAT Acquisition.................. 5
Use of Proceeds...................... 5
Taxation of Shareholders of the
Company............................. 5
Plan of Distribution................. 12
Legal Matters........................ 12
Experts.............................. 13
PROSPECTUS
Available Information................. 2
Enforcement of Civil Liabilities under
United States Federal Securities
Laws................................. 2
USE OF PROCEEDS
The net proceeds from the sale of the Ordinary Shares offered hereby (after
deducting underwriting discounts and commissions and estimated expenses of the
Offering) are estimated to be approximately $605,875,000. A portion of the net
proceeds will be used to repay $385 million of indebtedness incurred by the
Company in connection with the acquisition of CAT Limited ("CAT") on April 1,
1998 and the remaining net proceeds will be used for general corporate
purposes, which may include acquisitions. The aforementioned indebtedness was
borrowed under the Company's existing revolving credit agreement and bears
interest (5.97% as of April 13, 1998) at a rate based upon the London Interbank
Offered Rate.
S-2
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of December 31, 1997 and as adjusted to give effect to (i) the acquisition
of ACE USA, Inc. on January 2, 1998, (ii) a three-for-one split of the
Company's Ordinary Shares effective March 2, 1998, (iii) the acquisition of CAT
on April 1, 1998 and (iv) the Offering and the application of the net proceeds
therefrom. The following table should be read in conjunction with the Company's
consolidated financial statements, and the notes thereto, incorporated by
reference herein.
<TABLE>
<CAPTION>
-----------------------
AS OF DECEMBER 31,
1997
-----------------------
ACTUAL AS ADJUSTED
Dollars in Thousands ---------- -----------
<S> <C> <C>
Long-term debt......................................... $ -- $ 250,000
Shareholders' equity:
Ordinary Shares (par value $0.041666667; 300,000,000
shares authorized, 163,414,356 shares issued and
outstanding, 179,914,356 shares issued and
outstanding as adjusted)............................ 6,809 7,497
Additional paid-in capital........................... 1,086,802 1,691,990
Unearned stock grant compensation.................... (4,250) (4,250)
Net unrealized appreciation on investments........... 174,302 174,302
Cumulative translation adjustments................... 709 709
Retained earnings.................................... 1,354,180 1,354,180
---------- ----------
Total shareholders' equity......................... $2,618,552 $3,224,428
---------- ----------
Total capitalization............................... $2,618,552 $3,474,428
========== ==========
</TABLE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus Supplement (the "Underwriting
Agreement"), the Underwriter has agreed to purchase, and the Company has agreed
to sell to it, the Ordinary Shares. Under the terms and conditions of the
Underwriting Agreement, the Underwriter is obliged to take and pay for all such
Ordinary Shares, if any are taken.
It is expected that all or a substantial portion of the Ordinary Shares offered
hereby may be sold by the Underwriter to purchasers in one or more transactions
(which may involve block transactions) on the NYSE or on other national
securities exchanges on which the Ordinary Shares are traded or otherwise. The
distribution of the Ordinary Shares may also be effected from time to time in
special offerings, exchange distributions and/or secondary distributions
pursuant to and in accordance with the rules of the NYSE or such other
exchanges, in the over-the-counter market, in negotiated transactions through
the writing of options on the Ordinary Shares (whether such options are listed
on an options exchange or otherwise), or in a combination of such methods at
prevailing market prices or at negotiated prices. The Underwriter may effect
such transactions by selling Ordinary Shares to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the Underwriter and/or the purchasers of such Ordinary Shares
for whom they may act as agents or to whom they may sell as principal.
In connection with the sale of the Ordinary Shares, the Underwriter may receive
compensation from purchasers of the Ordinary Shares for whom it may act as
agent or to whom it may sell as principal in the form of commissions or
discounts, in each case in amounts which will not exceed those customary in the
types of transactions involved. The Underwriter and any dealers that
participate in the distribution
S-3
<PAGE>
of the Ordinary Shares may be deemed to be underwriters, and any discounts
received by them from the Company and any compensation received by them on
resale of the Ordinary Shares by them may be deemed to be discounts and
commissions, under the Securities Act.
The Company has agreed that, without the consent of the Underwriter, it will
not, for a period of 90 days after the date of this Prospectus, (A) sell,
pledge, assign or transfer or dispose of any equity securities of the Company
or any option, right, warrant or contract to purchase any equity securities of
the Company or any securities convertible into or exercisable or exchangeable
for any equity security of the Company or (B) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences
of ownership of the Ordinary Shares, whether any such transaction described in
clause (A) or (B) above is to be settled by delivery of Ordinary Shares or such
other securities, in cash or otherwise, other than (x) any issuances of
Ordinary Shares, options, or other securities or rights pursuant to any
employee or director compensation, option, savings, benefit or other plan of
the Company, (y) any issuances upon exercise, conversion or exchange of any
securities or obligations outstanding on the date of the Underwriting Agreement
and (z) any issuances of equity securities as consideration for an acquisition.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act.
From time to time in the ordinary course of its business, the Underwriter and
its affiliates have engaged in and may in the future engage in commercial
and/or investment banking transactions with the Company.
Meryl D. Hartzband, a Managing Director of the Underwriter, is a director of
the Company.
S-4
<PAGE>
PROSPECTUS
18,975,000 SHARES
ACE LIMITED
ORDINARY SHARES
(PAR VALUE $0.041666667)
----------------
This prospectus relates to 18,975,000 ordinary shares, par value
$0.041666667 per share ("Ordinary Shares"), of ACE Limited, a Cayman Islands
company (the "Company"), which may be offered from time to time by the Company
(the "Offering"). The Company may, from time to time, as determined by market
conditions, offer shares in ordinary brokerage transactions on the New York
Stock Exchange, Inc., by means of one or more block trades, secondary
distributions, exchange distributions or special offerings, through a broker-
dealer who purchases such shares as principal and resells them for its own
account, or in other transactions to be determined at the time of sale. Such
sales may be consummated using one or more broker-dealers. The specific terms
of the offering and sale of the Ordinary Shares in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include the public offering price and the aggregate number
of Ordinary Shares offered. If any broker-dealers are involved in the sale of
any of the Ordinary Shares, their names and any applicable purchase price,
fee, commission or discount arrangement between or among them will be set
forth in or will be calculable from the information set forth in the
applicable Prospectus Supplement. No Ordinary Shares may be sold without
delivery of the applicable Prospectus Supplement describing the method and
terms of the offering thereof. See "Plan of Distribution."
The Ordinary Shares are listed on the New York Stock Exchange, Inc. (the
"NYSE") under the symbol "ACL." On April 14, 1998, the last reported sales
price of the Ordinary Shares on the NYSE was $37 7/8 share.
This Prospectus may not be used to consummate sales of Ordinary Shares
unless accompanied by a Prospectus Supplement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
Prospectus dated April 14, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates, or at the Commission's worldwide
web site at http://www.sec.gov. Such reports, proxy statements and other
information concerning the Company may also be inspected and copied at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Ordinary Shares offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which
are contained in exhibits to the Registration Statement as permitted by the
rules and regulations of the Commission. Statements made in this Prospectus as
to the contents of any contract, agreement or other document referred to are
not necessarily complete. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.
ENFORCEMENT OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS
The Company is a Cayman Islands company and certain of its officers and
directors are residents of various jurisdictions outside of the United States.
All or a substantial portion of the assets of the Company and such officers
and directors, at any one time, are or may be located in jurisdictions outside
of the United States. Therefore, it ordinarily could be difficult for
investors to effect service of process within the United States on any of the
parties who reside outside the United States or to recover against them on
judgments of United States courts predicated upon civil liability under the
United States federal securities laws. Notwithstanding the foregoing, the
Company has appointed CT Corporation System, 1633 Broadway, New York, New York
10019, as its agent to receive service of process with respect to actions
against it arising out of or in connection with the United States federal
securities laws or out of violations of such laws in any federal or state
court in the United States, in any case relating to the transactions covered
by this Prospectus. The Company has been advised by Maples and Calder, its
Cayman Islands counsel, that there is doubt as to whether the courts of the
Cayman Islands would enforce (i) judgments of United States courts obtained in
actions against such persons or the Company predicated solely upon United
States federal securities laws and (ii) original actions brought in the Cayman
Islands against such persons or the Company predicated solely upon United
States federal securities laws. There is no treaty in effect between the
United States and the Cayman Islands providing for such enforcement, and there
are grounds upon which Cayman Islands courts may not enforce judgments of
United States courts. Certain remedies available under the United States
federal securities laws would not be allowed in Cayman Islands courts as
contrary to that jurisdiction's public policy.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-11778) are
incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended September 30,
1997;
(b) Quarterly Report on Form 10-Q for the quarter ended December 31,
1997;
2
<PAGE>
(c) Current Report on Form 8-K, as amended (Date of earliest event
reported: January 2, 1998);
(d) Current Report on Form 8-K (Date of earliest event reported: March
25, 1998); and
(e) The description of the Ordinary Shares included in the Registration
Statement on Form 8-A dated March 2, 1993, as amended by Amendment No. 1
thereto dated March 11, 1993, filed under Section 12 of the Securities
Exchange Act of 1934.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, prior
to the termination of the Offering that all securities offered have been sold
or which deregisters all securities then remaining unsold, shall be deemed to
be incorporated herein by reference and shall be deemed a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein will be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is, or is deemed to be, incorporated by reference herein modifies
or supersedes any such statement. Any such statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the request of such
person, a copy of any of the foregoing documents incorporated herein by
reference (other than the exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Requests should
be directed to Investor Relations, ACE Limited, The ACE Building, 30
Woodbourne Avenue, Hamilton HM 08, Bermuda (telephone (441) 295-5200,
facsimile (441) 295-5221).
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
----------------
FOR NORTH CAROLINA INVESTORS: THE OFFERED SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH
CAROLINA, NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE
ADEQUACY OF THIS DOCUMENT. THE BUYER IN NORTH CAROLINA UNDERSTANDS THAT
NEITHER THE COMPANY NOR ITS SUBSIDIARIES ARE LICENSED IN NORTH CAROLINA
PURSUANT TO CHAPTER 58 OF THE NORTH CAROLINA GENERAL STATUTES, NOR COULD THEY
MEET THE BASIC ADMISSIONS REQUIREMENTS IMPOSED BY SUCH CHAPTER AT THE PRESENT
TIME.
----------------
NO OFFERED SECURITIES MAY BE OFFERED OR SOLD IN THE CAYMAN ISLANDS. PERSONS
RESIDENT IN BERMUDA FOR BERMUDA EXCHANGE CONTROL PURPOSES MAY REQUIRE THE
PRIOR APPROVAL OF THE BERMUDA MONETARY AUTHORITY IN ORDER TO ACQUIRE ANY
OFFERED SECURITIES.
----------------
In this Prospectus, references to "dollar" and "$" are to United States
currency, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
3
<PAGE>
THE COMPANY
ACE is a holding company incorporated with limited liability under the
Cayman Islands Companies Law (1995 Revision) and maintains its principal
business office in Bermuda. The Company, through its Bermuda-based operating
subsidiaries, A.C.E. Insurance Company, Ltd., Corporate Officers & Directors
Assurance Ltd. ("CODA") and Tempest Reinsurance Company Limited ("Tempest"),
provides insurance and reinsurance for a diverse group of international
clients. Through its U.S.-based subsidiary, ACE USA, Inc. (formerly
Westchester Specialty Group, Inc.) ("ACE USA"), the Company provides
commercial and umbrella coverages to a broad range of clients in the United
States. In addition, the Company provides funds at Lloyd's to support
underwriting by syndicates managed by Methuen Underwriting Limited ("MUL"),
ACE London Aviation Limited ("ALA") and ACE London Underwriting Limited
("ALU"), its indirect wholly owned subsidiaries.
The Company's long-term business strategy focuses on achieving underwriting
profits and providing value to its clients and shareholders through the
utilization of its growing capital base within the insurance and reinsurance
markets. As part of this strategy, the Company acquired CODA in 1993. During
1994 and 1995, the Company diversified its product portfolio from excess
liability insurance and directors and officers liability insurance to
accommodate the needs of its expanding, global client base of multinational
corporations by adding satellite insurance, aviation insurance, excess
property insurance and financial lines products. This diversification added
balance to the risk of the existing portfolio of insurance products and
enhanced the Company's overall profit potential while utilizing its existing
capital base. The Company continued its strategic diversification with the
acquisition in March 1996 of 51 percent of Methuen Group Limited ("Methuen"),
the holding company for MUL, and in July 1996 of Tempest, a leading Bermuda-
based property catastrophe reinsurer. The acquisition of Tempest provided the
Company with a unique opportunity to expand into the property catastrophe
reinsurance business through an established and well known reinsurance
company. Tempest underwrites property catastrophe reinsurance on a worldwide
basis, emphasizing excess layer coverages, and has large aggregate exposures
to man-made and natural disasters. The short-tail nature of the property
catastrophe business and shorter loss payout patterns complement the generally
longer-tail nature of the Company's other product lines.
In November 1996, the Company acquired the remaining 49 percent interest in
Methuen. Also in November 1996, the company acquired Ockham Worldwide Holdings
plc which subsequently changed its name to ACE London Holdings Ltd ("ACE
London"). ACE London owns two Lloyd's managing agencies, ALA and ALU.
In March 1997, the Company, together with two other insurance companies,
formed a managing general agency in Bermuda to provide underwriting services
to the three organizations for political risk insurance coverage. The new
company, Sovereign Risk Insurance Ltd ("Sovereign") issues subscription
policies with the Company assuming 50 percent of each risk underwritten. The
Company currently cedes 10 percent of all risks assumed from Sovereign.
Sovereign offers limits of up to $50 million per project ($100 million per
project after July 1, 1998) and $100 million per country ($250 million with
respect to certain countries).
On January 2, 1998, the Company acquired all of the outstanding capital
stock of ACE USA for aggregate cash consideration of $338 million. ACE USA,
through its insurance subsidiaries, provides specialty commercial property and
umbrella liability coverages in the U.S. In connection with the acquisition,
National Indemnity, a subsidiary of Berkshire Hathaway, provided $750 million
(75 percent quota share of $1 billion) of reinsurance protection to ACE USA
with respect to its loss reserves for the 1996 and prior accident years. The
Company financed this transaction with $250 million of bank debt and the
remainder with available cash.
On September 30, 1997, the Company announced the incorporation of ACE
Insurance Company Europe Limited ("AICE"), as part of the International
Financial Services Centre in Dublin, Ireland. AICE has been granted a license
to write all 18 classes of non-life insurance in all member states of the
European Union.
On March 11, 1998, the Company announced the formation of a joint venture,
ACE Capital Re Limited, with Capital Re Corporation ("Capital Re"). ACE
Capital Re Limited, a Bermuda-domiciled professional
4
<PAGE>
reinsurance company, will write both traditional and custom-designed programs
covering financial guaranty, mortgage guaranty and a broad range of financial
risks. Operations will be underwritten and managed in Bermuda by a joint
venture managing agency, ACE Capital Re Managers Ltd. The Company and Capital
Re each have a 50 percent economic interest in ACE Capital Re Limited and ACE
Capital Re Managers Ltd.
On April 1, 1998, the Company acquired (the "CAT Acquisition") CAT Limited
("CAT"), a privately-held Bermuda-based property catastrophe reinsurance
company, for $711 million in cash, subject to certain adjustments. See "The
CAT Acquisition."
The Company's principal executive offices are located at The ACE Building,
30 Woodbourne Avenue, Hamilton HM 08 Bermuda, and its telephone number is
(441) 295-5200.
THE CAT ACQUISITION
On April 1, 1998, the Company acquired CAT, a privately-held Bermuda-based
property catastrophe reinsurance company, for total consideration of $711
million. Of the total consideration, $624 million was paid by the Company to
CAT's shareholders at closing and $67 million was paid by CAT to the holders
of certain of its equity award units and stock options at closing. In
addition, the Company agreed to pay to CAT's shareholders the increase, if
any, in CAT's net book value from January 1, 1998 to April 1, 1998, subject to
a maximum of $40 million. At closing, the Company paid $20 million, the
estimated increase in such net book value, into an escrow pending
determination of CAT's closing net book value. At December 31, 1997, CAT's net
book value was approximately $474 million (after giving effect to the
distribution of the outstanding capital stock of Enterprise). For the year
ended December 31, 1997, CAT had net premiums written of $136 million and net
income of $106 million.
Prior to consummation of the CAT Acquisition, CAT disposed of its interest
in Enterprise Reinsurance Holdings Corporation ("Enterprise"), a provider of
finite reinsurance, insurance and strategic risk financing, to CAT's
shareholders. ACE received from certain of CAT's shareholders an option to
acquire up to 29 percent of the outstanding capital stock (19.9 percent voting
interest) of Enterprise.
Simultaneously with the closing of the CAT Acquisition, CAT acquired all of
the outstanding capital stock of Hamilton Services Limited, a technology and
support services company whose principal customer is CAT, for approximately
$1.6 million in cash.
Initially, the CAT Acquisition was financed with approximately $385 million
of short-term borrowings under the Company's existing credit facility and from
available cash. A portion of the proceeds from the Offering will be used to
refinance the aforementioned borrowings.
USE OF PROCEEDS
The net proceeds from the sale of the Ordinary Shares offered hereby will be
used to repay $385 million of indebtedness incurred by the Company in
connection with the CAT Acquisition and the remaining net proceeds will be
used for general corporate purposes, which may include acquisitions. The
aforementioned indebtedness was borrowed under the Company's existing
revolving credit agreement and bears interest (5.97% as of April 13, 1998) at
a rate based upon the London Interbank Offered Rate.
TAXATION OF SHAREHOLDERS OF THE COMPANY
The following summary of the taxation of shareholders of the Company is
based upon current law. Legislative, judicial or administrative changes may be
forthcoming that could affect this summary.
Statements made below as to Cayman Islands law are based on the opinion of
Maples and Calder, Cayman Islands counsel to the Company. Statements made
below as to Bermuda law are based on the opinion of Conyers
5
<PAGE>
Dill & Pearman, Bermuda counsel to the Company. Statements made below as to
United States law are based upon the opinion of Mayer, Brown & Platt, United
States counsel to the Company.
CAYMAN ISLANDS TAXATION
Dividends paid by the Company are not subject to Cayman Islands withholding
tax.
BERMUDA TAXATION
Currently, there is no Bermuda withholding tax on dividends paid by the
Company.
UNITED STATES TAXATION OF U.S. AND NON-U.S. SHAREHOLDERS
Summary
The following summary is qualified in its entirety by the more detailed
discussions set forth below:
. In any fiscal year in which the gross related person insurance income
("RPII") of any foreign insurance company subsidiary of the Company is
20 percent or more of such insurance company subsidiary's gross
insurance income for such fiscal year, U.S. persons who own Ordinary
Shares on the last day of such subsidiary's fiscal year may be required
to include their pro rata share of such insurance company subsidiary's
RPII, as described below, in their income for their taxable year which
includes the last day of the subsidiary's fiscal year and report such
amount on the U.S. income tax or information returns that they would
normally file for that taxable year. They also would be required to
attach to their returns Internal Revenue Service ("IRS") Form 5471,
which shows the calculation of RPII and certain other information about
the Company. Although no assurances can be given, the Company believes
that RPII will be less than 20 percent of gross insurance income for the
current and future fiscal years.
. IF RPII reporting is required for a particular fiscal year, the Company
will send to each shareholder who owned Ordinary Shares on the last day
of such year a Form 5471 completed with all Company information
(including the amount of RPII) and instructions for completing the
shareholder information. Tax-exempt organizations may be required to
report their share of RPII for any taxable year in which RPII reporting
is required on the information return that such tax-exempt organizations
would normally file for the year that includes the last day of such tax
year and attach to that return Form 5471.
. Gain from the sale or exchange of Ordinary Shares that would otherwise
be capital gain will not be treated as ordinary income pursuant to Code
section 1248 of the U.S. Internal Revenue Code (the "Code"). It is
possible, however, that the IRS might interpret regulations proposed by
the U.S. Treasury Department, or that the Treasury Department might
amend such regulations, to apply section 1248 and the requirement to
file Form 5471 to dispositions of Ordinary Shares. If the IRS or
Treasury Department were to take such action, the Company would notify
shareholders that Section 1248 will apply to dispositions of Ordinary
Shares. Under current law, U.S. persons (including tax-exempt
organizations) who own less than 10 percent of the Ordinary Shares and
sell or exchange Ordinary Shares will not be required to file Form 5471
with respect to such dispositions.
RPII
The following discussion generally is applicable only if the RPII of any of
the Company's foreign insurance company subsidiaries, determined on a gross
basis, is 20 percent or more of that insurance company subsidiary's gross
insurance income for the taxable year. For the Company's most recent fiscal
year ended September 30, 1997, the Company believes gross RPII of each of its
foreign insurance company subsidiaries was below 20 percent for the year.
Although no assurances can be given, the Company anticipates that gross RPII
of each of its foreign insurance company subsidiaries will be less than 20
percent of each such subsidiary's gross insurance income for subsequent years
and will endeavor to take such steps as it determines to be reasonable to
cause its gross RPII to remain below such level.
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Classification of the Company as a Controlled Foreign Corporation
Under section 951(a) of the Code, each "United States shareholder" of a
"controlled foreign corporation" ("CFC") must include in its gross income for
United States federal income tax purposes its pro rata share of the CFC's
"subpart F income," even if the subpart F income is not distributed. Under
Code section 951(b), any U.S. corporation, citizen, resident or other U.S.
person who owns, directly or indirectly through foreign persons, or is
considered to own (by application of the rules of constructive ownership set
forth in Code section 958(b), generally applying to family members,
partnerships, estates, trusts or controlled corporations) 10 percent or more
of the total combined voting power of all classes of stock of the foreign
corporation will be considered to be a "United States shareholder." In
general, a foreign corporation is treated as a CFC only if such "United States
shareholders" collectively own more than 50 percent (more than 25 percent for
certain insurance companies) of the total combined voting power or total value
of the corporation's stock for an uninterrupted period of 30 days or more
during any tax year. The Company believes that because of the wide dispersion
of its share ownership and because under its Articles of Association no single
shareholder is permitted to hold as much as 10 percent of its total combined
voting power, it is not a CFC under the foregoing general rules.
RPII Companies
Different definitions of "United States shareholders" and "controlled
foreign corporation" are applicable in the case of a foreign corporation which
earns RPII. RPII is defined in Code section 953(c)(2) as any "insurance
income" attributable to policies of insurance or reinsurance with respect to
which the person (directly or indirectly) insured is a "United States
shareholder" or a "related person" to such a shareholder. The proposed
regulations provide that, in general, "insurance income is income (including
premium and investment income) attributable to the issuing or reinsuring of
any insurance or annuity contract in connection with risks located in a
country . . . other than the country under the laws of which the controlled
foreign corporation is created or organized and which would be taxed under
[the portions of the Code relating to insurance companies] if the income were
the income of a domestic insurance company."
Generally, the term "related person" for this purpose means someone who
controls or is controlled by the U.S. shareholder or someone who is controlled
by the same person or persons which control the U.S. shareholder. Control is
measured by either more than 50 percent in value or more than 50 percent in
voting power of stock applying constructive ownership principles similar to
the rules of section 958 of the Code. A corporation's pension plan is
ordinarily not a "related person" with respect to the corporation unless the
pension plan owns, directly or indirectly through the application of
constructive ownership rules similar to those contained in section 958, more
than 50 percent measured by vote or value, of the stock of the corporation.
For purposes of inclusion of the Company's insurance company subsidiaries'
RPII in the income of United States shareholders, unless an exception applies,
the term "United States shareholder" includes all U.S. persons who
beneficially own any amount (rather than 10 percent or more) of the Company's
stock. An insurance company subsidiary of the Company will be treated as a CFC
if such U.S. persons are treated as owning 25 percent or more of the stock of
the insurance company subsidiary.
In determining the "United States shareholders" of the Company's foreign
insurance company subsidiaries, stock of the Company's foreign insurance
company subsidiaries held indirectly by U.S. persons through the Company or
any other non-U.S. entity is treated as held by United States shareholders.
RPII Exceptions
The special RPII rules do not apply if (A) direct and indirect insureds and
persons related to such insureds, whether or not U.S. persons, are treated as
owning less than 20 percent of the voting power and less than 20 percent of
the value of the stock of the Company's insurance company subsidiaries (which
exception is not anticipated to apply to the Company and its subsidiaries),
(B) the RPII of each of the Company's foreign insurance company subsidiaries,
determined on a gross basis, is less than 20 percent of each such subsidiary's
gross insurance income for the taxable year, (C) a foreign insurance company
subsidiary of the Company elects
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to be taxed on its RPII as if the RPII were effectively connected with the
conduct of a United States trade or business, or (D) a foreign insurance
company subsidiary of the Company elects to be treated as a United States
corporation. Where none of these exceptions applies, each United States person
owning or treated as owning stock in the Company (and therefore, indirectly,
in a foreign insurance company subsidiary of the Company) on the last day of
an insurance company subsidiary's fiscal year will be required to include in
its gross income for United States federal income tax purposes its share of
the RPII for the entire taxable year, determined as if all such RPII were
distributed proportionately only to such United States shareholders at that
date, but limited by the insurance company subsidiaries' current-year earnings
and profits and by the U.S. shareholder's share, if any, of prior-year
deficits in earnings and profits.
Computation of RPII
In order to determine how much RPII the Company has earned in each fiscal
year, the Company obtains and relies upon information from its insureds to
determine whether any of the insureds or persons related to such insureds own
shares of the Company and are U.S. persons. The Company currently sends, and
intends to continue to send, a letter after each fiscal year to each person
who was an insured during the year asking the insured to represent whether it
was a U.S. shareholder of the Company or related to a U.S. shareholder during
the year. For any year in which gross RPII is 20 percent or more of a foreign
insurance company subsidiary's gross insurance income for the year, the
Company may also seek information from its shareholders as to whether
beneficial owners of Ordinary Shares at the end of the year are United States
persons so that the RPII may be determined and apportioned among such persons.
The Company will inform all shareholders of RPII per share and U.S.
shareholders are obligated to file a return reporting such amounts. To the
extent the Company is unable to determine whether a beneficial owner of shares
is a U.S. person the Company may assume that such owner is not a U.S. person
for the purpose of allocating RPII, thereby increasing the per share RPII
amount for all U.S. shareholders.
If, as anticipated, RPII of each of the Company's foreign insurance company
subsidiaries is less than 20 percent of gross insurance income for the current
and subsequent fiscal years, U.S. shareholders will not be required to include
RPII in their taxable income for such years. The Company's estimate of its
insurance company subsidiaries' gross insurance income constituting RPII is
based on information provided to the Company by insureds of those insurance
company subsidiaries concerning whether the insureds are "United States
shareholders" or "related persons" thereto. The amount of RPII includible in
the income of a U.S. shareholder is based upon the net RPII income for the
year after deducting related expenses such as losses, loss reserves and
operating expenses.
Apportionment of RPII to U.S. Shareholders
Every U.S. person who owns Ordinary Shares on the last day of any fiscal
year of a foreign insurance company subsidiary in which such insurance company
subsidiary's gross insurance income constituting RPII for that year equals or
exceeds 20 percent of that insurance company subsidiary's gross insurance
income should expect that for such year it will be required to include in
gross income its share of that insurance company subsidiary's RPII for the
entire year, whether or not distributed, even though it may not have owned the
shares for the entire year. A U.S. person who owns Ordinary Shares during such
fiscal year but not on the last day of the fiscal year, which would normally
be September 30, is not required to include in gross income any part of the
Company's insurance company subsidiaries' RPII.
The tax consequences of RPII will not be applicable in any future fiscal
year in which the gross insurance income attributable to U.S. shareholders is
less than 20 percent of the gross insurance income of any of the Company's
insurance subsidiaries. See "Taxation of Shareholders of the Company--United
States Taxation of U.S. and Non-U.S. Shareholders--RPII." The Company expects
that the gross insurance income of its foreign insurance company subsidiaries
attributable to U.S. shareholders for its current and subsequent fiscal years
will be below 20 percent of the gross insurance income of each such insurance
company subsidiary.
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Information Reporting
Each U.S. person who is a shareholder of the Company on the last day of a
fiscal year of a foreign insurance company subsidiary in which such foreign
insurance company subsidiary's gross RPII constitutes 20 percent or more of
that foreign insurance company subsidiary's gross insurance income must attach
to the income tax or information return it would normally file for the period
which includes that date a Form 5471 with respect to the Company. This filing
requirement applies if the Company is a CFC for any thirty-day period during
its fiscal year whether or not any net RPII income is required to be reported.
The foreign insurance company subsidiaries of the Company will not be
considered to be CFCs for this purpose and, therefore, Form 5471 will not be
required, for any fiscal year in which each such foreign insurance company
subsidiary's gross RPII constitutes less than 20 percent of its gross
insurance income. U.S. persons who at any time own 10 percent or more of the
shares of the Company may be required in certain circumstances to file Form
5471 regardless of the amount of RPII received by the insurance company
subsidiaries. For any year in which any of the Company's foreign insurance
company subsidiaries' gross RPII constitutes 20 percent or more of their
respective gross insurance incomes, the Company intends to mail to all
shareholders of record, and will make available at the transfer agent with
respect to the Ordinary Shares, Form 5471 (completed with Company information)
for attachment to the returns of shareholders. The amounts of the RPII
inclusions may be subject to adjustment based upon subsequent IRS examination.
A tax-exempt organization will be required to attach Form 5471 to its
information return in the circumstances described above. Failure to file Form
5471 may result in penalties.
Tax-Exempt Shareholders
U.S. tax-exempt shareholders to which RPII is allocated are required to
treat such RPII as unrelated business taxable income within the meaning of
Code section 512, except to the extent that RPII is due to insurance or
reinsurance of that tax-exempt shareholder or its affiliates.
Basis Adjustments
A U.S. shareholder's tax basis in its Ordinary Shares will be increased by
the amount of any RPII that the shareholder includes in income. The
shareholder may exclude from income the amount of any distributions by the
Company to the extent of the RPII included in income for the year in which the
distribution was paid or for any prior year. The U.S. shareholder's tax basis
in its Ordinary Shares will be reduced by the amount of such distributions
that are excluded from income. In general, a U.S. shareholder will not be able
to exclude from income distributions with respect to RPII that a prior
shareholder included in income.
Dispositions of Ordinary Shares
Code section 1248 provides that if a U.S. person owns 10 percent or more of
the voting shares of a corporation that is a CFC, any gain from the sale or
exchange of the shares may be treated as ordinary income to the extent of the
CFC's earnings and profits during the period that the shareholder held the
shares (with certain adjustments). Code section 953(c)(7) generally provides
that section 1248 also will apply to the sale or exchange of shares in a
foreign corporation that earns RPII if the foreign corporation would be taxed
as an insurance company if it were a domestic corporation, regardless of
whether the shareholder is a 10 percent shareholder or whether RPII
constitutes 20 percent or more of the corporation's gross insurance income.
Existing Treasury Department regulations do not address whether Code section
1248 would apply when the foreign corporation (such as the Company) is not a
CFC but the foreign corporation has a subsidiary that is a CFC or that would
be taxed as an insurance company if it were a domestic corporation.
The Company believes, based on the advice of counsel, that Code section 1248
will not apply to dispositions of Ordinary Shares because the Company does not
have any 10 percent shareholders and the Company is not directly engaged in
the insurance business. There can be no assurance, however, that the IRS will
interpret proposed regulations under Code section 953 in this manner or that
the Treasury Department will not amend the proposed regulations under Code
section 953 or other regulations to provide that Code section 1248 will apply
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to dispositions of shares in a corporation such as the Company which is
engaged in the insurance business directly or indirectly through its
subsidiaries. If the IRS or Treasury Department were to take such action, the
Company would notify shareholders that Code section 1248 will apply to
dispositions of Ordinary Shares.
A shareholder of the Company who at no time owns 10 percent or more of the
Ordinary Shares is not required to file IRS Form 5471 with respect to a
disposition of Ordinary Shares. A 10 percent U.S. shareholder of the Company
may in certain circumstances be required to report a disposition of Ordinary
Shares by attaching Form 5471 to the U.S. income tax or information return
that it would normally file for the taxable year in which the disposition
occurs.
Foreign Tax Credit
Because U.S. shareholders own a majority of the Company's shares and because
a substantial part of the Company's foreign insurance company subsidiaries'
business includes the insurance of U.S. risks, only a portion of the RPII and
dividends paid by the Company (including any gain from the sale of Ordinary
Shares that is treated as a dividend under Section 1248 of the Code) will be
treated as foreign source income for purposes of computing a shareholder's
U.S. foreign tax credit limitation. It is likely that substantially all of the
RPII and dividends that are foreign source income will constitute either
"passive" or "financial services" income for foreign tax credit limitation
purposes. Thus, it may not be possible for certain U.S. shareholders to
utilize excess foreign tax credits to reduce U.S. tax on such income.
Uncertainty as to Application of RPII
The RPII provisions of the Code have never been interpreted by the courts.
Regulations interpreting the RPII provisions of the Code exist only in
proposed form, having been proposed on April 16, 1991. It is not certain
whether these regulations will be adopted in their proposed form or what
changes or clarifications might ultimately be made thereto or whether any such
changes, as well as any interpretation or application of RPII by the IRS, the
courts or otherwise, might have retroactive effect. The description of RPII
herein is therefore qualified. Accordingly, the meaning of the RPII provisions
and the application thereof to the Company and its subsidiaries is uncertain.
These provisions include the grant of authority to the U.S. Treasury
Department to prescribe "such regulations as may be necessary to carry out the
purpose of this subsection including . . . regulations preventing the
avoidance of this subsection through cross insurance arrangements or
otherwise." In addition, there can be no assurance that the amounts of the
RPII inclusions will not be subject to adjustment based upon subsequent IRS
examination. Each U.S. person who is considering an investment in Ordinary
Shares should consult his tax advisor as to the effects of these
uncertainties.
Passive Foreign Investment Companies
Sections 1291 through 1298 of the Code contain special rules applicable with
respect to foreign corporations that are "passive foreign investment
companies" ("PFICs"). In general, a foreign corporation will be a PFIC if 75
percent or more of its income constitutes "passive income" or 50 percent or
more of its assets produce passive income. If the Company were to be
characterized as a PFIC, its United States shareholders would be subject to a
penalty tax at the time of their sale of (or receipt of an "excess
distribution" with respect to) its shares and a portion of the gain may be
recharacterized as ordinary income. In general, a shareholder receives an
"excess distribution" if the amount of the distribution is more than 125
percent of the average distribution with respect to the stock during the three
preceding taxable years (or shorter period during which the taxpayer held the
stock). In general, the penalty tax is equivalent to an interest charge on
taxes that are deemed due during the period the United States shareholder
owned the shares, computed by assuming that the excess distribution or gain
(in the case of a sale) with respect to the shares was taxed in equal portions
throughout the holder's period of ownership at the highest marginal tax rate
for ordinary income. The interest charge is equal to the applicable rate
imposed on underpayments of U.S. Federal income tax for such period.
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The PFIC statutory provisions contain an express exception for income
"derived in the active conduct of an insurance business by a corporation which
is predominantly engaged in an insurance business . . . ." This exception is
intended to ensure that income derived by a bona fide insurance company is not
treated as passive income, except to the extent such income is attributable to
financial reserves in excess of the reasonable needs of the insurance
business. In the Company's view, the Company and its wholly-owned direct and
indirect subsidiaries are predominantly engaged in an insurance business and
do not have financial reserves in excess of the reasonable needs of their
insurance business. The PFIC statutory provisions contain a look-through rule
that states that, for purposes of determining whether a foreign corporation is
a PFIC, such foreign corporation shall be treated as if it received "directly
its proportionate share of the income . . ." and as if it "held its
proportionate share of the assets . . ." of any other corporation in which it
owns at least 25 percent of the stock. Under the look-through rule the Company
would be deemed to own the assets and to have received the income of its
insurance subsidiaries directly for purposes of determining whether the
Company qualifies for the aforementioned insurance exception.
However, no regulations interpreting the substantive PFIC provisions have
yet been issued. Therefore, substantial uncertainty exists with respect to
their application or their possible retroactivity. Each U.S. person who is
considering an investment in Ordinary Shares should consult his tax advisor as
to the effects of these rules.
Other
Dividends paid by the Company to U.S. corporate shareholders will not be
eligible for the dividends received deduction provided by section 243 of the
Code.
Except as discussed below with respect to backup withholding, dividends paid
by the Company will not be subject to a U.S. withholding tax.
Nonresident alien individuals will not be subject to U.S. estate tax with
respect to Ordinary Shares of the Company.
Information reporting to the IRS by paying agents and custodians located in
the U.S. will be required with respect to payments of dividends (if any) on
the Ordinary Shares to U.S. persons or to paying agents or custodians located
in the United States. In addition, a holder of Ordinary Shares may be subject
to backup withholding at the rate of 31 percent with respect to dividends paid
by such persons, unless such holder (a) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact; or
(b) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. The backup withholding tax is
not an additional tax and may be credited against a holder's regular Federal
income tax liability.
Subject to certain exceptions, persons that are not U.S. persons will be
subject to United States Federal income tax on dividend distributions with
respect to, and gain realized from the sale or exchange of, Ordinary Shares
only if such dividends or gains are effectively connected with the conduct of
a trade or business within the United States.
The foregoing discussion (including and subject to the matters and
qualifications set forth in such summary) of certain tax considerations (i)
under "Taxation of Shareholders of the Company--Bermuda Taxation" is based
upon the advice of Conyers Dill & Pearman, Hamilton, Bermuda, (ii) under
"Taxation of Shareholders of the Company--Cayman Islands Taxation" is based
upon the advice of Maples and Calder, George Town, Cayman Islands, British
West Indies, and (iii) under "Taxation of Shareholders of the Company--United
States Taxation of U.S. and Non-U.S. Shareholders" is based upon the advice of
Mayer, Brown & Platt, Chicago, Illinois (the advice of such firms does not
include any factual accounting matters, determinations or conclusions such as
RPII amounts and computations and amounts of components thereof (for example,
amounts or computations of income or expense items or reserves entering into
RPII computations) or facts relating to the Company's business or
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activities, all of which have been supplied by the Company). The summary is
based upon current law and is for general information only. The tax treatment
of a holder of Ordinary Shares, or of a person treated as a holder of Ordinary
Shares for United States Federal income, state, local or non-U.S. tax
purposes, may vary depending on the holder's particular tax situation.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could be retroactive and could affect the tax consequences to
holders of Ordinary Shares. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL AND NON-U.S. TAX
CONSEQUENCES TO THEM OF OWNING THE ORDINARY SHARES.
PLAN OF DISTRIBUTION
The Company may sell Ordinary Shares registered hereunder from time to time
in one or more transactions on or after the date hereof. The aggregate
proceeds to the Company from sales of the Ordinary Shares offered hereby will
be the purchase price of such Ordinary Shares, less any commissions, discounts
or other compensation of the Broker-Dealer (as defined).
Sales of Ordinary Shares by the Company may be made from time to time, as
market conditions permit, by any of the following means, or any combination
thereof, using such broker-dealer or broker-dealers as may enter into
arrangements with the Company from time to time (herein referred to as the
"Broker-Dealer"): (i) ordinary brokerage transactions on the NYSE and
transactions in which the Broker-Dealer solicits purchasers; (ii) block trades
in accordance with the rules of the NYSE in which the Broker-Dealer may
attempt to sell the Ordinary Shares as agent but may position and resell all
or a portion of the block as principal to facilitate the transactions; (iii)
"off-board" secondary distributions, exchange distributions or special
offerings in accordance with the rules of the NYSE in which the Broker-Dealer
may act as principal or agent; (iv) sales to the Broker-Dealer in which such
Broker-Dealer purchases the shares as principal and resells such shares for
its own account pursuant to a Prospectus Supplement; (v) sales "at the market"
or to or through a market maker or into an existing trading market, on an
exchange or otherwise, for such Ordinary Shares; and (vi) sales in other ways
not involving market makers or established trading markets, including direct
sales to institutions or individual purchasers.
The Ordinary Shares are expected to be sold at prices prevailing at the time
of sale, and it is anticipated that the offering prices will not exceed the
last reported sale price for the Ordinary Shares of the Company on the NYSE
immediately prior to the determination thereof. The Broker-Dealer will receive
such brokerage commissions or other compensation as may be negotiated with the
Company immediately prior to the sale. Such commissions or other compensation
are not expected to exceed those customary in the types of transactions
involved. The Broker-Dealer may also receive compensation from purchasers of
the Ordinary Shares which is not expected to exceed that customary in the
types of transactions involved.
In connection with the sale of the Ordinary Shares offered hereby, the
Broker-Dealer may be deemed to be an underwriter within the meaning of the
Securities Act, in which event the brokerage commissions or discounts received
by it may be deemed to be underwriting compensation. To the extent required by
the Securities Act, additional information relating to the specific Ordinary
Shares offered, the price at which such Ordinary Shares are offered and the
particular selling arrangements, if any, made with any Broker-Dealer in
connection therewith (including any applicable commissions or discounts) will
be set forth in an accompanying Prospectus Supplement or, if appropriate, a
post-effective amendment to the Registration Statement of which this
Prospectus is a part. The Company, under arrangements which it may enter into
with the Broker-Dealer, may agree to indemnify the Broker-Dealer against
certain liabilities, including liabilities under the Securities Act or to
contribute to payments that the Broker-Dealer may be required to make in
respect thereof.
LEGAL MATTERS
Certain legal matters with respect to Cayman Islands law and with respect to
the validity of the Ordinary Shares offered hereby will be passed upon for the
Company by Maples and Calder, George Town, Grand Cayman, Cayman Islands,
British West Indies. Certain legal matters with respect to Bermuda law will be
passed
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upon for the Company by Conyers Dill & Pearman, Hamilton, Bermuda. Certain
legal matters with respect to United States law will be passed upon for the
Company by Mayer, Brown & Platt, Chicago, Illinois and for any Broker-Dealers
by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
EXPERTS
The consolidated financial statements as of September 30, 1997 and 1996 and
for each of the fiscal years in the three-year period ended September 30,
1997, incorporated in this Prospectus by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1997 have been so
incorporated herein in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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