As filed with the Securities and Exchange Commission on August 18, 1995
Securities Act File No. 33-
Investment Company Act File No. 811-07341
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form N-2
Registration Statement Under The Securities Act of 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
and/or
Registration Statement Under The Investment Company Act of 1940 [X]
Amendment No. [ ]
(check appropriate box or boxes)
PEPS TRUST
(Exact Name of Registrant as Specified in Charter)
c/o Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
(Address of Principal Executive Offices)
Registrants' Telephone Number, including Area Code: (212) 703-4198
Steven R. Umlauf
Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
(Name and Address of Agent for Service)
Copies to:
Linda A. Simpson, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
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.[ ]
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
_____________________________________________________________________________
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Title of Securities Amount Being Price Offering Registration
Being Registered Registered Per Share(1) Price(1) Fee
_____________________________________________________________________________
Shares of beneficial
interest 400,000 Shares $25.00 $10,000,000 $3,448.28
_____________________________________________________________________________
(1) Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
This Registration Statement relates to the offering of 400,000 shares of
beneficial interest in the PEPS Trust (without giving effect to the
Underwriters' over-allotment option), of which shares of beneficial
interest will be offered in the United States and Canada and shares of
beneficial interest will be offered internationally outside the United States
and Canada. The Registration Statement includes the U.S. Prospectus followed
by an alternate front cover page and underwriting section for the
International Prospectus as indicated on each page.
CROSS-REFERENCE SHEET
PARTS A AND B OF PROSPECTUS(*)
Items in Parts A and B of Form N-2 Location in Prospectus
__________________________________ ______________________
1. Outside Front Cover............ Front Cover Page
2. Inside Front and Outside Back
Cover Page..................... Front Cover Page; Inside Front Cover
Page
3. Fee Table and Synopsis......... Prospectus Summary; Fee Table
4. Financial Highlights........... Not Applicable
5. Plan of Distribution........... Front Cover Page; Prospectus
Summary; Underwriting
6. Selling Shareholders........... Not Applicable
7. Use of Proceeds................ Use of Proceeds; Investment
Objective and Policies
8. General Description of the
Registrant................... Front Cover Page; Prospectus
Summary; The Trust; Investment
Restrictions; Investment Objectives
and Policies; Risk Factors and
Special Considerations
9. Management..................... Management and Administration of the
Trust
10.Capital Stock, Long-Term Debt
and Other Securities; Federal
Income Tax Considerations...... Description of PEPS
11.Defaults and Arrears on Senior
Securities .................... Not Applicable
12.Legal Proceedings.............. Not Applicable
13.Table of Contents of the Statement
of Additional Information.... Not Applicable
14.Cover Page..................... Not Applicable
15.Table of Contents.............. Not Applicable
16.General Information and History The Trust
17.Investment Objectives and Policies Investment Objectives and Policies;
Investment................... Restrictions
18.Management..................... Management and Administration of
the Trust
19.Control Persons and Principal
Holders of Securities.......... Management and Administration of
the Trust
20.Investment Advisory and Other
Services...................... Management and Administration of
the Trust
21.Brokerage Allocation and Other
Practices..................... Investment Objectives and Policies
22.Tax Status..................... Taxation
23.Financial Statements........... PEPS Trust - Statement of Assets and
Liabilities
______________
(*)Pursuant to the General Instructions to Form N-2, all information required
to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus. Information required to be included in
Part C is set forth under the appropriate item, so numbered in Part C of this
Registration Statement.
PROSPECTUS (Subject to Completion)
Issued August 18, 1995
400,000 PEPS(sm)
PEPS Trust
$ . Shares
(Premium Exchangeable Participating Shares - PEPS(sm))
(Subject to Exchange for Shares of Common Stock of [Name of Company], no par
value)
Each of the shares ($ . Premium Exchangeable Participating Shares, or
"PEPS") of the PEPS Trust (the "Trust") represents the right to receive an
annual distribution of $ , and will be exchanged for between 0.x and 1.xx
shares of common stock (the "Common Stock") of [Name of Company], no par
value, on , 1998 (the "Exchange Date"). The annual distribution
of $ per PEPS is payable quarterly on each , ,
and , commencing , 1996. The PEPS are not subject to
redemption.
The Trust is a newly organized, three-year Trust established to purchase
and hold a portfolio of stripped U.S. Treasury securities maturing on a
quarterly basis through the Exchange Date, and one or more forward contracts
(the "Contracts") with certain existing shareholders (the "Sellers") of [Name
of Company] (the "Company") relating to the Common Stock. Of the 400,000 PEPS
offered hereby, PEPS are being offered initially in the United States and
Canada by the U.S. Underwriters and PEPS are being offered initially
internationally outside the United States and Canada by the International
Underwriters. See "Underwriters."
The Trust's investment objective is to provide each holder with a
quarterly distribution of $ . per PEPS, and to provide the holder of each
PEPS, on the Exchange Date, shares of Common Stock per PEPS equal to (i) if
the Exchange Price per share of Common Stock is less than $ (the "Threshold
Appreciation Price") but equal to or greater than $ (the "Downside
Protection Threshold Price"), a number (or fractional number) of shares of
Common Stock per PEPS so that the value thereof at the Exchange Price
equals $ (the "Initial Value"), (ii) if the Exchange Price per share of
Common Stock is equal to or greater than the Threshold Appreciation Price,
0.x shares of Common Stock per PEPS and (iii) if the Exchange Price per
share of Common Stock is less than the Downside Protection Threshold Price,
1.xx shares of Common Stock per PEPS. Holders otherwise entitled to
receive fractional shares in respect of their aggregate holdings of PEPS
will receive cash in lieu thereof. The Exchange Price per share of Common
Stock means the average Closing Price (as defined herein) of a share of
Common Stock on the 20 Trading Days (as defined herein) immediately prior
to (but not including) the Exchange Date.
The yield on PEPS is higher than the current dividend yield on the
Common Stock. However, the opportunity for equity appreciation afforded by
an investment in the PEPS is less than that afforded by an investment in
the Common Stock because the value of the Common Stock receivable by
holders of the PEPS upon exchange at the Exchange Date will only exceed the
Initial Value if the Exchange Price exceeds the Threshold Appreciation
Price, which represents an appreciation of % of the Initial Value.
Moreover, because a holder of each PEPS will only receive 0.x shares of
Common Stock if the Exchange Price exceeds the Threshold Appreciation
Price, holders of the PEPS will only be entitled to receive upon exchange %
of any appreciation of the value of the Common Stock in excess of the
Threshold Appreciation Price. Unlike the Common Stock, an investment in
PEPS affords protection from depreciation of the Common Stock to the extent
that the Exchange Price does not fall below the Downside Protection
Threshold Price. In the event the Exchange Price is less than the Downside
Protection Threshold Price, holders will receive 1.xx shares of Common
Stock per PEPS and accordingly will have only limited protection from
depreciation below % of the Initial Value.
The Trust's portfolio will not be managed in the traditional sense. The
Trust's management powers will be limited to the disposition of the Contracts
in certain limited circumstances. The Trust may continue to hold the
Contracts despite a significant decline in the market price of the Common
Stock or adverse changes in the financial condition of the Company. The
address of the Trust is 1251 Avenue of the Americas, New York, New York 10020
(telephone no. (212) 703-4198). Investors are advised to read this Prospectus
and to retain it for future reference.
The Company is not affiliated with the Trust.
Application will be made to list the PEPS on the New York Stock Exchange
under the symbol . Prior to this offering there has been no public
market for the PEPS.
"PEPS" and "Premium Exchangeable Participating Securities" are service
marks of Morgan Stanley & Co. Incorporated.
The last reported sale price of the Common Stock on the New York Stock
Exchange on , 1995 was $ per share, which is equal to the
issue price of the PEPS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to
Public Discounts(1) the Trust(2)
________ ____________ ____________
Per PEPS...................... $ $ $
Total(3)...................... $ $ $
_______
(1) The Trust, the Company and the Sellers have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Trust.
(3) The Trust has granted to the Underwriters an option for 30 days to
purchase up to an additional PEPS at the price to the public less
underwriting discount, solely to cover over-allotments. If the option
is exercised in full, the total Price to Public, Underwriting Discounts
and Proceeds to the Trust will be $ , $ and $ , respectively. See
"Underwriting."
The PEPS are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Davis
Polk & Wardwell, counsel for the Underwriters. It is expected that delivery
of the PEPS will be made on or about , 1995 at the office of Morgan
Stanley & Co. Incorporated, New York, New York, against payment therefor in
New York funds.
MORGAN STANLEY & CO.
Incorporated
, 1995
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROPSECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
No person is authorized in connection with any offering made hereby to give
any information or to make any representation other than those contained in
this Prospectus, and if given or made, such information or representation must
not be relied upon as having been authorized by the Trust, the Investment
Adviser or any Underwriter. This Prospectus does not constitute an offering
to sell or a solicitation of an offer to buy by any person in any jurisdiction
in which it is unlawful for such person to make such an offering or
solicitation. Neither the delivery of this Prospectus 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.
_________________
Until , 1995 (25 days after the commencement of the offering), all
dealers effecting transactions in the PEPS, whether or not participating in
this distribution, may be required to deliver a Prospectus. This delivery
requirement is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.
TABLE OF CONTENTS
_________________
Page
____
Prospectus Summary......................................................
The Trust...............................................................
Use of Proceeds.........................................................
Investment Objectives and Policies......................................
Investment Restrictions.................................................
Risk Factors and Special Considerations.................................
Description of the PEPS.................................................
Management and Administration of the Trust..............................
Federal Income Tax Considerations.......................................
Underwriting............................................................
Legal Matters...........................................................
Experts.................................................................
Additional Information..................................................
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE PEPS OR THE
COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
PROSPECTUS SUMMARY
This summary of the provisions relating to the PEPS does not purport to
be complete and is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus. Certain terms used in this summary
are defined elsewhere in this Prospectus.
The Trust
The Trust is a newly organized, three-year trust. The Trust will be
registered as a non-diversified closed-end management investment company under
the Investment Company Act of 1940 (the "Investment Company Act"). Under
provisions of the Internal Revenue Code of 1986, as amended (the "Code")
applicable to grantor trusts, neither the Trustees nor , the
Trust's Investment Adviser, will have the power to vary the investments held
by the Trust. Accordingly, the Trust's portfolio will not be managed in the
traditional sense. The Trust's management powers will be limited to the
disposition of a Contract in certain limited circumstances. See "Management
and Administration of the Trust -- Trustees." Any proceeds resulting from the
disposition of a Contract will not be reinvested but will be distributed to
holders of the PEPS ("Holders"). The Trust will pay an advisory fee to the
Investment Adviser and the administrative fees and certain expenses of
as the Trust's Administrator. See "The Trust" and "Management and
Administration of the Trust -- Estimated Expenses."
The Offering
The Trust is offering 400,000 PEPS to the public at a purchase price of $
per PEPS (which is equal to the last reported sale price of the Common
Stock on the date of the Offering) through a group of underwriters (the
"Underwriters") lead managed in the U.S. and Canada by Morgan Stanley & Co.
Incorporated and lead managed internationally by Morgan Stanley & Co.
International Limited. In addition, the Underwriters have been granted
options to purchase up to additional PEPS solely for the purpose of
covering over-allotments. See "Underwriting."
General
The PEPS are designed to provide investors with a higher distribution per
PEPS than the dividend currently paid per share on the Common Stock. The
annual distribution on the PEPS is $ per share. Based on the current
annual dividend rate of $ per share of Common Stock, the annual per share
distribution per PEPS is $ greater than the current annual per share
dividend rate on the Common Stock. Future declarations of dividends on the
Common Stock by the Company and the amount of such dividends are discretionary
with its Board of Directors and subject to legal and other factors. Such
further declarations will necessarily depend on its future earnings, financial
condition, capital requirements and other factors.
The yield on PEPS is higher than the current dividend yield on the Common
Stock. However, the opportunity for equity appreciation afforded by an
investment in the PEPS is less than that afforded by an investment in the
Common Stock because the value of the Common Stock receivable by holders of
the PEPS upon exchange at the Exchange Date will only exceed the Initial Value
if the Exchange Price exceeds the Threshold Appreciation Price, which
represents an appreciation of % of the Initial Value. Moreover, because a
holder of each PEPS will only receive 0.x shares of Common Stock if the
Exchange Price exceeds the Threshold Appreciation Price, holders of the PEPS
will only be entitled to receive upon exchange % of any appreciation of the
value of the Common Stock in excess of the Threshold Appreciation Price.
Unlike the Common Stock, an investment in PEPS affords protection from
depreciation of the Common Stock to the extent that the Exchange Price does
not fall below the Downside Protection Threshold Price. In the event the
Exchange Price is less than the Downside Protection Threshold Price, holders
will receive 1.xx shares of Common Stock per PEPS and accordingly will have
only limited protection from depreciation below % of the Initial Value.
Distributions
The Holders are entitled to receive distributions at the rate per PEPS of $
per annum or $ per quarter, payable quarterly on each , ,
and or, if any such date is not a business day, on the next
succeeding business day, to holders of record as of each , , and
, respectively. The first distribution will be payable on 1, 1996
to holders of record as of , 1995. See "Investment Objectives and
Policies -- Trust Assets."
Mandatory Exchange
On the Exchange Date, each outstanding PEPS will be exchanged automatically
for between 0.x and 1.xx shares of Common Stock, subject to adjustment in the
event of certain dividends or distributions, subdivisions, splits,
combinations, issuances of certain rights or warrants or distributions of
certain assets with respect to the Common Stock. In the event of a merger of
the Company into another entity, or the liquidation of the Company, or in
certain related events, Holders of the PEPS would receive consideration in the
form of cash or Marketable Securities rather than shares of Common Stock.
Additionally, the occurrence of certain defaults by the Sellers under the
Contracts or the collateral arrangements would cause the acceleration of the
Contracts and the exchange of each PEPS for an amount of cash in respect of
the shares of Common Stock. See "Investment Objectives and Policies -- The
Contracts."
Voting Rights
The Holders will have the right to vote on matters affecting the Trust, as
described under "Description of the PEPS," but will not have voting rights
with respect to the Common Stock prior to receipt of the Common Stock by the
holders of PEPS as a result of the exchange of the PEPS for the Common Stock
on the Exchange Date. See "Investment Objectives and Policies -- The Company"
and "Description of the PEPS."
The Company
The Company is [description].
Reference is made to the accompanying prospectus of the Company (pages A-1
through A- hereto) which describes the Company (including financial matters)
and the shares of Common Stock of the Company deliverable to the holders of
the PEPS upon mandatory exchange of the PEPS on the Exchange Date. The
Company is not affiliated with the Trust and will not receive any of the
proceeds from the sale of the PEPS. The Company prospectus relates to an
aggregate of shares of Common Stock.
Assets of the Trust; Investment Objectives and Policies
The Trust will purchase and hold a portfolio of stripped U.S. Treasury
securities maturing on a quarterly basis through the Exchange Date and one or
more Contracts relating to the Common Stock of the Company. It is the Trust's
investment objective to provide to each Holder, on the Exchange Date, shares
of Common Stock equal to (i) if the Exchange Price (as
defined herein) per share of Common Stock is less than the Threshold
Appreciation Price but equal to or greater than the Downside Protection
Threshold Price, a number of shares of Common Stock per PEPS so that the value
thereof at the Exchange Price equals the Initial Value, (ii) if the Exchange
Price per share of Common Stock is equal to or greater than the Threshold
Appreciation Price, 0.x shares of Common Stock per PEPS and (iii) if the
Exchange Price per share of Common Stock is less than the Downside Protection
Threshold Price, 1.xx shares of Common Stock per PEPS. Holders otherwise
entitled to receive fractional shares in respect of their aggregate holdings
of PEPS will receive cash in lieu thereof. See "Investment Objectives and
Policies - Trust Termination; No Fractional Shares of Common Stock." It is
also the Trust's investment objective to provide each Holder with a quarterly
distribution of $ per PEPS, equal to the pro rata portion of the quarterly
cash distributions from the proceeds of the U.S. Treasury securities.
The Trust will enter into one or more forward contracts (the
"Contracts") with certain shareholders of the Company (the "Sellers")
obligating the Sellers, severally and not jointly, on the Exchange Date, to
deliver to the Trust shares of Common Stock in the aggregate, except that
(i) if the Exchange Price per share of Common Stock is less than the
Threshold Appreciation Price but equal to or greater than the Downside
Protection Threshold Price, each Seller will be obligated to deliver under
its Contract a number of shares of Common Stock with an aggregate value
equal to the product of the Initial Value times the initial number of
shares of Common Stock subject to such Contract, (ii) if the Exchange Price
per share of Common Stock is equal to or greater than the Threshold
Appreciation Price, each Seller will be obligated to deliver under its
Contract a number of shares of Common Stock equal to the product of 0.x
times the initial number of shares of Common Stock subject to such Contract
and (iii) if the Exchange Price per share of Common Stock is less than the
Downside Threshold Protection Price, each Seller will be obligated to
deliver under its contract a number of shares of Common Stock equal to the
product of 1.xx times the initial number of shares of Common Stock subject
to such Contract. This provides the Trust with the potential for a portion
of any capital appreciation above the Threshold Appreciation Price on the
Common Stock, and limited protection from depreciation of the Common Stock.
The purchase price under the Contracts is equal to $ per share of Common
Stock and $ in the aggregate and is payable to the Sellers by the Trust on
or about , 1995.
The obligations of each Seller under its Contract will be secured by a
pledge of the Common Stock or, at the election of the Sellers, by substitute
collateral consisting of U.S. Government Treasury Securities. See "Investment
Objectives and Policies."
Federal Income Tax Considerations
The Trust will be taxable as a grantor trust for federal income tax
purposes. Accordingly, each Holder of the Trust will be treated for federal
income tax purposes as the owner of its pro rata portion of the U.S. Treasury
securities and the Contracts, and income received (including original issue
discount treated as received) by the Trust will generally be treated as income
of the Holders. See "Federal Income Tax Considerations."
The U.S. Treasury securities held by the Trust will be treated for federal
income tax purposes as having "original issue discount" which will accrue over
the term of the U.S. Treasury securities. It is currently anticipated that a
substantial portion of each quarterly cash distribution to the Holders of the
Trust will be treated as a tax-free return of the Holders' costs of the U.S.
Treasury securities and therefore will not be considered current income for
federal income tax purposes. However, a Holder (whether on the cash or
accrual method of tax accounting) must recognize currently as income original
issue discount on the U.S. Treasury securities as it accrues. It is also
expected that the tax-free portion of each quarterly cash distribution will
increase as a percentage of the total distribution during the life of the
Trust. See "Federal Income Tax Considerations."
Under existing law, a Holder will not recognize income, gain or loss upon
the Trust's entry into the Contracts or over the term of the Contracts. The
delivery of Common Stock pursuant to the Contracts will not be taxable to the
Holders. A Holder will have taxable gain or loss upon receipt of cash in lieu
of fractional shares of Common Stock distributed upon termination of the
Trust. Each Holder's basis in its Common Stock will be equal to its basis in
its pro rata portion of the Contracts less the portion of such basis allocable
to any fractional shares of Common Stock for which cash is received. See
"Federal Income Tax Considerations."
Management and Administration of the Trust
The administration of the Trust will be overseen by three Trustees. will
act as the Trust's Investment Adviser (the "Investment Adviser") while the
day-to-day administration of the Trust will be carried out by (or its
successor) as trust administrator (the "Administrator"). (or its
successor) will also act as custodian for the Trust's assets and as paying
agent, registrar and transfer agent with respect to the PEPS. Except as
aforesaid, has no other affiliation with, and is not engaged in any other
transaction with, the Trust. See "Management and Administration of the
Trust."
Life of the Trust
The Trust will terminate automatically on or shortly after the Exchange
Date. Promptly after the Exchange Date the shares of Common Stock to be
exchanged for the PEPS and other remaining Trust assets, if any, net of
remaining Trust expenses, if any, will be distributed pro rata to Holders.
See "Investment Objectives and Policies -- Trust Termination" and "Risk
Factors and Special Considerations -- Limited Term."
Risk Factors and Special Considerations
The Trust will not be managed in the traditional sense. The Trust may
continue to hold the Contracts despite a significant decline in the market
price of the Common Stock or adverse changes in the financial condition of the
Company. However, the Trust will have the power, but not the obligation, to
sell Contracts only in the limited circumstances of (a) a decline in the
market price of the Common Stock to less than 50% of its market price on
, 1995 or (b) the bankruptcy or insolvency of the Company. Proceeds
from any sale of a Contract will not be reinvested but will be distributed pro
rata to Holders. In the event of such a sale of the Contracts and
distribution of proceeds, the U.S. Treasury securities remaining in the Trust
will be liquidated, the proceeds distributed pro rata to Holders and the Trust
terminated. See "Risk Factors and Special Considerations -- Limited
Management" and "Management and Administration of the Trust -- Trustees" and
"-- Investment Adviser."
The yield on the PEPS is higher than the current dividend yield on the
Common Stock. However, the opportunity for equity appreciation afforded by an
investment in the PEPS is less than that afforded by an investment in the
Common Stock because the value of the Common Stock receivable by holders of
the PEPS upon exchange at the Exchange Date will only exceed the Initial Value
if the Exchange Price exceeds the Threshold Appreciation Price, which
represents an appreciation of % of the Initial Value. Moreover, because a
holder of each PEPS will only receive 0.x shares of Common Stock if the
Exchange Price exceeds the Threshold Appreciation Price, holders of the PEPS
will only be entitled to receive upon exchange % of any appreciation of the
value of the Common Stock in excess of the Threshold Appreciation Price.
Unlike the Common Stock, an investment in PEPS affords protection from
depreciation of the Common Stock to the extent that the Exchange Price does
not fall below the Downside Protection Threshold Price. In the event the
Exchange Price is less than the Downside Protection Threshold Price, holders
will receive 1.xx shares of Common Stock per PEPS and accordingly will not be
protected from depreciation below % of the Initial Value.
The Trust is classified as a "non-diversified" investment company under the
Investment Company Act. Consequently, the Trust is not limited by the
Investment Company Act in the proportion of its assets that may be invested in
the securities of a single issuer. Since the only securities held by the
Trust will be the U.S. Treasury securities and the Contracts, the Trust may be
subject to greater risk than would be the case for an investment company with
more diversified investments. See "Investment Objectives and Policies" and
"Risk Factors and Special Considerations -- Non-Diversified Status."
Listing
Application will be made to list the PEPS on the New York Stock Exchange
under the symbol .
Fees and Expenses
The public offering price of the PEPS includes an underwriting discount
payable by the Trust to the Underwriters of %. Each of the Investment
Adviser, the Administrator, the Custodian and the Paying Agent, and each
Trustee, will be paid a one-time, up-front amount in respect of its fee and,
in the case of the Administrator, anticipated expenses of the Trust, over the
term of the Trust. These amounts, estimated to be $ in the aggregate,
estimated organization costs of the Trust in the amount of $ and
estimated offering costs in the amount of $ , will be paid from the
proceeds of the offering of the PEPS.
THE TRUST
PEPS Trust, [Company] Series (the "Trust) is a New York trust formed on
August 17, 1995 pursuant to a trust agreement dated as of August 17, 1995 (the
"Trust Agreement), as amended on , 1995. The Trust's portfolio will
not be managed in the traditional sense. The Trust will pay an advisory fee
to the Investment Adviser and certain administrative fees and other operating
expenses.
USE OF PROCEEDS
The net proceeds of this offering will be used to purchase a fixed
portfolio comprised of U.S. Treasury securities and, at the same time, to pay
the purchase price under the Contracts.
INVESTMENT OBJECTIVES AND POLICIES
Trust Assets
The Trust's investment objectives are to provide (i) current quarterly cash
distributions from the proceeds of the U.S. Treasury securities and (ii) the
potential for a portion of any price appreciation on the Common Stock above
the Threshold Appreciation Price and limited protection from depreciation of
the Common Stock. A fundamental policy of the Trust is to invest at least 80%
of its portfolio in the Contracts.
In general, each Holder will receive, on , 1998 (the "Exchange Date"),
shares of Common Stock equal to (i) if the Exchange Price per share of
Common Stock is less than the Threshold Appreciation Price but equal to or
greater than the Downside Protection Threshold Price, a number (or
fractional number) of shares of Common Stock per PEPS so that the value
thereof at the Exchange Price equals Initial Value, (ii) if the Exchange
Price per share of Common Stock is equal to or greater than the Threshold
Appreciation Price, 0.x shares of Common Stock per PEPS and (iii) if the
Exchange Price is less than the Downside Protection Threshold Price, 1.xx
shares of Common Stock per PEPS. Holders otherwise entitled to receive
fractional shares in respect of their aggregate holdings of PEPS will
receive cash in lieu thereof. See "-- Trust Termination; No Fractional
Shares of Common Stock." The Exchange Price per share of Common Stock means
the average Closing Price (as defined below) of a share of Common Stock on
the 20 Trading Days (as defined below) immediately prior to but not
including the Exchange Date. The Closing Price of the Common Stock on any
date of determination means the daily closing sale price (or, if no closing
sale price is reported, the last reported sale price) of the Common Stock
as reported on the NYSE Consolidated Tape on such date of determination or,
if the Common Stock is not listed for trading on the NYSE on any such date,
as reported in the composite transactions for the principal United States
securities exchange on which the Common Stock is so listed, or if the
Common Stock is not so listed on a United States national or regional
securities exchange, as reported by The Nasdaq National Market, or if the
Common Stock is not so reported, the last quoted bid price for the Common
Stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization, provided that if any event that results in
an adjustment to the number of shares of Common Stock deliverable under the
Contracts as described under "The Contracts - Dilution Adjustments" occurs
prior to the Exchange Date, the Closing Price as determined pursuant to the
foregoing will be appropriately adjusted to reflect the occurrence of such
event. A "Trading Day" means a day on which the Common Stock (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-market that is the primary market for the trading
of such security. If the Exchange Price cannot be calculated in accordance
with the foregoing, the Exchange Price on the date of determination shall
be determined by a nationally recognized independent investment banking
firm retained for this purpose by the Administrator.
The value of the Common Stock that will be received by Holders upon
exchange of PEPS for shares of Common Stock on the Exchange Date may be less
than the amount paid for the PEPS offered hereby.
For illustrative purposes only, the following chart shows the number of
shares of Common Stock that a Holder would receive for each PEPS at various
Exchange Prices. The chart assumes that there would be no adjustments to the
number of shares of Common Stock deliverable under the Contracts by reason of
the occurrence of any of the events described under "The Contracts - Dilution
Adjustments." There can be no assurance that the Exchange Price will be
within the range set forth below. Given the initial price of $ per
PEPS, the Threshold Appreciation Price of $ and the Downside Protection
Threshold Price of $ , a Holder would receive in connection with the
exchange of PEPS on the Exchange Date the following number of shares of Common
Stock:
Exchange Price Number of Shares
of Common Stock of Common Stock
--------------- ----------------
The following table sets forth information regarding the distributions to
be received on the U.S. Treasuries, the portion of each year's distributions
that will constitute a return of capital for federal income tax purposes and
the amount of original issue discount accruing on the U.S. Treasuries with
respect to a Holder who acquires its PEPS at the issue price from an
Underwriter pursuant to the original offering. See "Federal Income Tax
Considerations."
<TABLE>
<CAPTION> Annual Gross Annual
Distributions Inclusion of
Annual Gross from Original Issue
Distributions U.S. Annual Return Discount
from Treasuries of Capital in Income
Year U.S. Treasuries per PEPS per PEPS per PEPs
--- ---------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
1995 $ $ $ $
1996
1997
1998
</TABLE>
The annual distribution of $ per PEPS is payable quarterly on each
, , and , commencing , 1996. Quarterly
distributions on the PEPS will consist solely of the cash received from the
U.S. Treasury securities. The Trust will not be entitled to any dividends
that may be declared on the Common Stock. See "Management and Administration
of the Trust - Distributions."
Enhanced Yield; Limited Depreciation Protection; Less Equity Appreciation than
Common Stock
Distributions will be paid on the PEPS at a higher rate than the rate at
which dividends are currently paid on the Common Stock. The opportunity for
equity appreciation afforded by an investment in the PEPS is less than that
afforded by an investment in the Common Stock because the value of the Common
Stock receivable by holders of the PEPS upon exchange at the Exchange Date
will only exceed the Initial Value if the Exchange Price exceeds the Threshold
Appreciation Price, which represents an appreciation of % of the Initial
Value. Moreover, because a holder of each PEPS will only receive 0.x shares
of Common Stock if the Exchange Price exceeds the Threshold Appreciation
Price, holders of the PEPS will only be entitled to receive upon exchange
% (the percentage equal to the Initial Value divided by the Threshold
Appreciation Price) of any appreciation of the value of the Common Stock in
excess of the Threshold Appreciation Price. Unlike the Common Stock, an
investment in PEPS affords protection from depreciation of the Common Stock to
the extent that the Exchange Price does not fall below the Downside Protection
Threshold Price. In the event the Exchange Price is less than the Downside
Protection Threshold Price, holders will receive 1.xx shares of Common Stock
per PEPS and accordingly will have only limited protection from depreciation
below % of the Initial Value.
The Company
[description of the Company]
The shares of Common Stock are traded on [the New York Stock
Exchange]. The following table sets forth, for the indicated periods, the
reported high and low sales prices of the shares of Common Stock on the New
York Stock Exchange Composite Tape and the cash dividends per share of Common
Stock. As of , 1995, there were record holders of the
Common Stock, including The Depository Trust Company which holds shares of
Common Stock on behalf of an indeterminate number of beneficial owners.
Dividend
High Low Per share
------ ----- -----------
1994
1st Quarter $ $ $
2nd Quarter
3rd Quarter
4th Quarter
1995
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter (through , 1995)
Holders will not be entitled to rights with respect to the Common Stock
(including, without limitation, voting rights and rights to receive dividends
or other distributions in respect thereof) until receipt of the Common Stock
by the holders of PEPS as a result of the exchange of the PEPS for the Common
Stock on the Exchange Date.
Reference is made to the accompanying prospectus of the Company (pages A-1
through A- hereto) which describes the Company (including financial
matters) and the shares of Common Stock deliverable to the Holders of the PEPS
upon mandatory exchange of the PEPS on the Exchange Date. The Company is not
affiliated with the Trust and will not receive any of the proceeds from the
sale of the PEPS. The Company prospectus relates to an aggregate of
shares of Common Stock.
The Contracts
General. The Trust will enter into one or more Contracts with the
Sellers obligating the Sellers, severally and not jointly, to deliver to
the Trust on the Exchange Date (i) if the Exchange Price per share of
Common Stock is less than the Threshold Appreciation Price but equal to or
greater than the Downside Protection Threshold Price, each Seller will be
obligated to deliver under its Contract a number of shares of Common Stock
with an aggregate value equal to the product of the Initial Value times the
initial number of shares of Common Stock subject to such Contract, (ii) if
the Exchange Price per share of Common Stock is equal to or greater than
the Threshold Appreciation Price, each Seller will be obligated to deliver
under its Contract a number of shares of Common Stock equal to the product
of 0.x times the initial number of shares of Common Stock subject to such
Contract and (iii) if the Exchange Price per share of Common Stock is less
than the Downside Protection Threshold Price, each Seller will be obligated
to deliver under its Contract a number of shares of Common Stock equal to
the product of 1.xx times the initial number of shares of Common Stock
subject to such Contract.
Dilution Adjustments.The number of shares of Common Stock deliverable
pursuant to the Contracts (the "Exchange Ratio") is subject to adjustment if
the Company shall (i) pay a stock dividend or make a distribution with respect
to the Common Stock in shares of such stock, (ii) subdivide or split its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, (iv) issue by reclassification
of its shares of Common Stock any shares of common stock of the Company, (v)
issue rights or warrants to all holders of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less
than the market price of the Common Stock (other than rights to purchase
Common Stock pursuant to a plan for the reinvestment of dividends or interest)
or (vi) pay a dividend or make a distribution to all holders of Common Stock
of evidences of its indebtedness or other non-cash assets (excluding any
dividends or distributions referred to in clause (i) above) or issue to all
holders of Common Stock rights or warrants to subscribe for or purchase any of
its securities (other than those referred to in clause (v) above).
If the Company distributes cash (other than any Permitted Dividend (as
defined below), special dividends of $ and $ per share of Common Stock
to be distributed to holders of record on , 1995 and , 1996,
respectively, any cash distributed in consideration of fractional shares of
Common Stock and any cash distributed in a Reorganization Event (as defined
below) ("Excluded Distributions")), by dividend or otherwise, to all holders
of Common Stock or makes an Excess Purchase Payment (as defined below) then
the Exchange Ratio in effect on the record date with respect to such
distribution or the payment date with respect to such Excess Purchase Payments
will be adjusted by a fraction, of which the numerator shall be the market
price per share of the Common Stock on such record date or payment date and of
which the denominator shall be such market price per share of Common Stock
less the amount of such distribution applicable to one share of Common Stock
which would not be a Permitted Dividend (or in the case of an Excess Purchase
Payment, less the aggregate amount of such Excess Purchase Payments divided by
the number of outstanding shares of Common Stock on the relevant payment
date). For purposes of these adjustments, (a) the term "Permitted Dividend"
means any [quarterly/semiannual] cash dividend in respect of the Common Stock
to the extent that the per share amount of such dividend does not exceed $
, and (b) the term "Excess Purchase Payment" means the excess, if any, of (i)
the cash and the value (as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Administrator, whose
determination shall be conclusive) of all other consideration paid by the
Company with respect to one share of Common Stock acquired in a tender offer
or exchange offer by the Company over (ii) the Closing Price per share of
Common Stock on the payment date for such Excess Purchase Payment.
In the event of (A) any consolidation or merger of the Company, or any
surviving entity or subsequent surviving entity of the Company (a "Company
Successor"), with or into another entity (other than a merger or consolidation
in which the Company is the continuing corporation and in which the Common
Stock outstanding immediately prior to the merger or consolidation is not
exchanged for cash, securities or other property of the Company or another
corporation), (B) any sale, transfer, lease or conveyance to another
corporation of the property of the Company or any Company Successor as an
entirety or substantially as an entirety, (C) any statutory exchange of
securities of the Company or any Company Successor with another corporation
(other than in connection with a merger or acquisition) or (D) any
liquidation, dissolution or winding up of the Company or any Company Successor
(any such event described in clause (A), (B), (C) or (D), a "Reorganization
Event"), the Exchange Ratio will be adjusted to equal an aggregate amount such
that, on the Exchange Date, each Holder will receive for each PEPS cash in an
amount equal to (i) if the Transaction Value (as defined below) is less than
the Threshold Appreciation Price but equal to or greater than the Downside
Protection Threshold Price, the Initial Value, (ii) if the Transaction Value
is greater than or equal to the Threshold Appreciation Price, 0.x multiplied
by the Transaction Value and (iii) if the Transaction Value is less than the
Downside Protection Threshold Price, 1.xx multiplied by the Transaction Value.
"Transaction Value" means (i) for any cash received in any such Reorganization
Event, the amount of cash received per share of Common Stock, (ii) for any
property other than cash or Marketable Securities received in any such
Reorganization Event, an amount equal to the market value on the date the
Reorganization Event is consummated of such property received per share of
Common Stock as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Trust and (iii) for any
Marketable Securities received in any such Reorganization Event, an amount
equal to the average Closing Price per share of such securities on the 20
Trading Days immediately prior to the Exchange Date multiplied by the number
of such securities received for each share of Common Stock. "Marketable
Securities" means any securities listed on a U.S. national securities exchange
or reported by The Nasdaq National Market, but shall not include any such
securities that by their terms mature, expire or are callable by the issuer
thereof prior to the Exchange Date. Notwithstanding the foregoing, if any
Marketable Securities are received in such Reorganization Event, then in lieu
of delivering cash as provided above, the Sellers may at their option deliver
an equivalent value of such marketable securities received in such
Reorganization Event, determined in accordance with clause (iii) above. If a
Seller elects to deliver Marketable Securities, Holders will be responsible
for the payment of any and all brokerage and other transaction costs upon the
sale of such securities. The kind and amount of securities into which the
PEPS shall be exchangeable after consummation of such transaction shall be
subject to adjustment as described in the immediately preceding paragraph
following the date of consummation of such transaction.
Collateral Arrangements. Each Seller's obligations under its Contract will
be secured by a security interest in the maximum number of shares of Common
Stock subject to such Contract pursuant to a Security and Pledge Agreement
between such Seller and [the Custodian], as collateral agent. Unless a Seller
is in default in its obligations under the Security and Pledge Agreement, the
Seller will be permitted to substitute for the pledged shares of Common Stock
collateral consisting of short-term, direct obligations of the U.S.
Government. Any U.S. Government obligations pledged as substitute collateral
will be required to have an aggregate market value at the time of substitution
and at daily mark-to-market valuations thereafter of not less than 150% of the
product of the market price of the Common Stock at the time of each valuation
times the number of shares of Common Stock for which such obligations are
being substituted.
Failure by [any] Seller to provide additional U.S. Government obligations
to cover any collateral shortfall, or the bankruptcy or insolvency of [any]
Seller, will cause an automatic acceleration of [each] Seller's obligations
under [each] Contract. In any such event, or in the event that by the
Exchange Date any substitute collateral has not been replaced by a number of
shares of Common Stock sufficient to meet the obligations under any Contract,
the [Custodian] will (i) liquidate any U.S. Government obligations pledged
under the Security and Pledge Agreement relating to [each] Seller and (ii)
distribute to the Trust for distribution pro rata to the Holders, with respect
to each Seller's Contract, any shares of Common Stock then pledged by that
Seller, together with the net proceeds of the liquidation of the U.S.
Government obligations then pledged by that Seller in an amount equal to the
market value at such time of a number of shares of Common Stock equal to the
difference between the maximum number of shares of Common Stock subject to
such Seller's Contract less the number of such shares pledged at such time.
Any net proceeds from the liquidation of such U.S. Government obligations
remaining after such distribution and after payment of any expenses or other
amounts owed by such Seller will be returned to such Seller. Each Security
and Pledge Agreement will provide that, in the event of a Reorganization
Event, the relevant Seller will pledge as security for its obligations under
the Contract the consideration received by it in the Reorganization Event in
respect of the maximum number of shares of Common Stock subject to its
Contract, except that, for consideration other than cash or marketable
securities, the Seller will be required to pledge cash in the amount of the
Transaction Value of such consideration.
Description of Sellers. [The Sellers may be individuals or trusts or other
entities through which such individuals hold their shares of Common Stock. A
brief description of the Sellers will be added. Specific information on the
holdings of the Sellers, as required by the 1933 Act, will be included in the
appendix pages to this prospectus.]
Temporary Investments
For cash management purposes, the Trust may invest the proceeds of the U.S.
Treasury securities and any other cash held by the Trust in short-term
obligations of the U.S. Government maturing no later than the business day
preceding the next following distribution date.
Trust Termination; No Fractional Shares of Common Stock
The Trust will terminate automatically on or shortly after the Exchange
Date. Within approximately business days after the Exchange Date
following the payment of any remaining expenses of the Trust, the shares of
Common Stock to be received pursuant to the Contracts and any other remaining
assets of the Trust will be distributed pro rata to Holders. Each Holder will
receive the greatest number of whole shares of Common Stock allocable to its
PEPS, plus the cash value, based on the Exchange Price, of any fractional
shares so allocable.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy, the Trust may not purchase any
securities or instruments other than the U.S. Treasury securities, the
Contracts and the Common Stock or other assets received pursuant to the
Contracts and, for cash management purposes, short-term obligations of the
U.S. Government; issue any securities or instruments except for the PEPS; 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.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Limited Management
The Trust will not be managed in the traditional sense. The Trust intends
that its portfolio will remain fixed except for the events described under
"Investment Objectives and Policies -- The Contracts," subject to the
Trustees' power, but not obligation, to dispose of the Contracts only in
certain circumstances. As a result, the Contracts may continue to be held by
the Trust despite significant declines in the market price of the Common Stock
or adverse changes in the financial condition of the Company. Proceeds from
any disposition of the Contracts will not be reinvested but will be
distributed to Holders, at which time any U.S. Treasury securities held by the
Trust would also be liquidated and distributed and the Trust terminated. See
``Management and Administration of the Trust--Trustees.''
Limited Term
The Trust will have a limited term of three years and will terminate on or
shortly after the Exchange Date. On or shortly after the Exchange Date, the
Trust will distribute the shares of Common Stock received by the Trust
pursuant to the Contracts and other net assets held by the Trust pro rata to
Holders and then terminate.
Limited Appreciation Potential; Common Stock Depreciation Risk
It is anticipated that on the Exchange Date the Trust will receive the
Common Stock deliverable pursuant to the Contracts, which will then be
distributed to Holders. The yield on the PEPS is higher than the current
dividend yield on the Common Stock. However, because the terms of the
Contracts call for the Sellers to deliver less than the full number of shares
of Common Stock subject to the Contracts where the Exchange Price exceeds the
Initial Value (and therefore less than one full share of Common Stock for each
outstanding PEPS), the PEPS have more limited appreciation potential than the
Common Stock. Therefore, the PEPS may trade below the value of the Common
Stock if the Common Stock appreciates in value. An investment in PEPS does
afford protection from the depreciation of the Common Stock to the extent that
the Exchange Price does not fall below % of the Initial Value.
Dilution Adjustments; Shareholder Rights
The number of shares of Common Stock that Holders are entitled to receive
at the termination of the Trust is subject to adjustment for certain events
arising from stock splits and combinations, stock dividends and certain other
actions of the Company that modify its capital structure. See "Investment
Objectives and Policies - The Contracts - Dilution Adjustments." Such number
of shares to be received by Holders may not be adjusted for other events, such
as offerings of Common Stock for cash or in connection with acquisitions, that
may adversely affect the price of the Common Stock and, because of the
relationship of the amount to be received pursuant to the Contracts to the
price of the Common Stock, such other events may adversely affect the trading
price of the PEPS. There can be no assurance that the Company will not take
any of the foregoing actions, or that it will not make offerings of, or that
major shareholders will not sell any, Common Stock in the future, or as to the
amount of any such offerings or sales. In addition, until the receipt of the
Common Stock by Holders as a result of the exchange of the PEPS for the Common
Stock, Holders will not be entitled to any rights with respect to the Common
Stock (including without limitation voting rights and the rights to receive
any dividends or other distributions in respect thereof).
Trading Value; Listing
The PEPS are innovative securities and it is not possible to predict how
they will trade in the secondary market. The trading price of the PEPS may
vary considerably prior to the Exchange Date due to, among other things,
fluctuations in the price of the Common Stock (which may occur due to changes
in the Company's financial condition, results of operations or prospects, or
because of complex and interrelated political, economic, financial and other
factors that can affect the capital markets generally, the stock exchanges or
quotation systems on which the Common Stock is traded and the market segment
of which the Company is a part) and fluctuations in interest rates and other
factors that are difficult to predict and beyond the Trust's control.
The Underwriters currently intend, but are not obligated, to make a market
in the PEPS. There can be no assurance that a secondary market will develop
or, if a secondary market does develop, that it will provide the holders of
the PEPS with liquidity of investment or that it will continue for the life of
the PEPS.
Application will be made to list the PEPS on the NYSE. Assuming the
acceptance of such application, there can be no assurance that the PEPS will
not later be delisted or that trading in the PEPS on the NYSE will not be
suspended. In the event of a delisting or suspension of trading on such
exchange, the Trust will apply for listing of the PEPS on another national
securities exchange or for quotation on another trading market. If the PEPS
are not listed or traded on any securities exchange or trading market, or if
trading of the PEPS is suspended, pricing information for the PEPS may be more
difficult to obtain, and the price and liquidity of the PEPS may be adversely
affected.
Net Asset Value
The Trust is a newly organized closed-end investment company with no
previous operating history. Investments in closed-end investment companies
frequently trade at a discount from net asset value. This characteristic of
investments in a closed-end investment company is a risk separate and distinct
from the risk that the Trust's net asset value will decrease. The Trust cannot
predict whether its shares will trade at, below or above net asset value. The
risk of purchasing investments in a closed-end company that might trade at a
discount is more pronounced for investors who wish to sell their investments
in a relatively short period of time after completion of the Trust's initial
public offering because for those investors, realization of a gain or loss on
their investments is likely to be more dependent upon the existence of a
premium or discount than upon portfolio performance. The PEPS are not subject
to redemption.
The net asset value of the portfolio will be calculated by the
Administrator 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 PEPS 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 U.S. Treasury
securities will be valued at the mean between the last current bid and asked
prices or, if quotations are not available, as determined in good faith by the
Trustees. Short-term investments having a maturity of 60 days or less are
valued at cost with accrued interest or discount earned included in interest
receivable. The Contracts will be valued at fair value as determined in good
faith by the Trustees (if necessary through consultation with accountants,
bankers and other specialists) although the actual calculation may be done by
others.
Non-Diversified Status
The Trust is considered non-diversified under the Investment Company Act,
which means that the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. Since the only
securities held or received by the Trust will be U.S. Treasury securities and
the Contracts or other assets consistent with the terms of the Contracts, the
Trust may be subject to greater risk than would be the case for an investment
company with more diversified investments.
DESCRIPTION OF THE PEPS
Each PEPS represents an equal proportional interest in the Trust, and a
total of 400,000 PEPS will be issued. Upon liquidation of the Trust, Holders
are entitled to share pro rata in the net assets of the Trust available for
distribution. PEPS have no preemptive, redemption or conversion rights. PEPS
are fully paid and nonassessable by the Trust.
Holders are entitled to a full vote for each PEPS held on all matters to be
voted on by Holders and are not able to cumulate their votes in the election
of Trustees. The Trustees of the Trust have been selected initially by
as the initial Holder of the Trust. The Trust intends to hold
annual meetings as required by the rules of the New York Stock Exchange. The
Trustees may call special meetings of Holders for action by Holder vote as may
be required by either the Investment Company Act or the Trust Agreement. The
Holders have the right, upon the declaration in writing or vote of more than
two-thirds of the outstanding PEPS, 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 PEPS or to vote on other matters
upon the written request of the record holders of 51% of the PEPS (unless
substantially the same matter was voted on during the preceding 12 months).
Book-Entry System
The PEPS will be issued in the form of one or more global securities (the
"Global Securities") deposited with The Depository Trust Company (the
"Depositary") and registered in the name of a nominee of the Depositary.
The Depositary has advised the Trust and the Underwriters as follows: The
Depositary 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 Exchange Act. The
Depositary was created to hold securities of persons who have accounts with
the Depositary ("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 Depositary'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 Depositary or its nominee will
credit the respective PEPS 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 Depositary
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 Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the PEPS.
Except as set forth below, owners of beneficial interests in such Global
Securities will not be entitled to have the PEPS registered in their names and
will not receive or be entitled to receive physical delivery of the PEPS in
definitive form and will not be considered the owners or holders thereof.
Payment of shares of Common Stock or amounts payable or other consideration
deliverable on exchange of, and any quarterly distributions on, PEPS
registered in the name of or held by the Depositary or its nominee will be
made to the Depositary or its nominee, as the case may be, as the registered
owner or the holder of the Global Security. None of the Trust, the Investment
Adviser, any Trustee, the Paying Agent, the Administrator or the Custodian for
the PEPS 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 Depositary, upon receipt of any payment in
respect of a permanent Global Security, will credit immediately participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Security as shown on the
records of the Depositary. 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 in bearer form or 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
Depositary to a nominee or a successor of the Depositary. If the Depositary
is at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Trust within ninety days, the Trust will
issue PEPS in definitive registered form in exchange for the Global Security
representing such PEPS. In addition, the Trust may at any time and in its
sole discretion determine not to have any PEPS represented by one or more
Global Securities and, in such event, will issue PEPS in definitive form in
exchange for all of the Global Securities representing the PEPS. Further, if
the Trust so specifies with respect to the PEPS, an owner of a beneficial
interest in a Global Security representing PEPS may, on terms acceptable to
the Trust and the Depositary for such Global Security, receive PEPS 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
PEPS represented by such Global Security equal in number to that represented
by such beneficial interest and to have such PEPS registered in its name.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
Trustees
The Trust will be overseen by three Trustees. Under the provisions of the
Code applicable to grantor trusts, the Trustees will not have the power to
vary the investments held by the Trust. Nevertheless, the Trustees may
consider disposing of the Contracts, although they are not obligated to do so,
in the event of (a) a decline in the market price of the Common Stock to less
than 50% of its market price on , 1995 or (b) the bankruptcy or
insolvency of the Company.
The names of the persons who have been elected by
, the initial Holder of the Trust, and who will serve as the Trustees are
set forth below. The positions and the principal occupations of the
individual Trustees during the past five years are also set forth below.
Principal Occupation
Name, Age and Address Title During Past Five Years
--------------------- ----- ----------------------
Managing Trustee
Trustee
Trustee
The Trust intends to pay each of the Trustees who is not a director,
officer or employee of any Underwriter, the Investment Adviser or the
Administrator, or of any affiliate thereof, an annual fee of $ and to
pay the Trust's Managing Trustee an additional fee of $ for serving in
that capacity. In addition, the Trust will reimburse all of the Trustees for
travel and out-of-pocket expenses incurred in connection with Trustees'
meetings.
Investment Adviser
will serve as the Investment Adviser to the Trust
pursuant to an investment advisory agreement with the Trust. The Investment
Adviser will, among other things, advise the Trustees in connection with the
advisability of disposing of Contracts or other assets of the Trust and issues
arising under the Pledge and Security Agreements. The Investment Adviser is a
corporation engaged in the business. The Investment
Adviser's office is located at .
The investment advisory agreement provides that the Investment Adviser will
not be liable to the Trust for any error of judgment or for any loss suffered
by the Trust in connection with the performance of its duties thereunder
except a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties, or from reckless
disregard by it of its obligations and duties under the agreement. The
investment advisory agreement will continue in effect for a period of two
years from its effective date. If not sooner terminated, the investment
advisory agreement will continue in effect for the third year of the Trust
provided that such continuance is specifically approved by (a) the vote of a
majority of the Trustees who are not parties to the agreement or interested
persons (as defined in the Investment Company Act), cast in person at a
meeting called for the purpose of voting on approval and (b) either (i) the
vote of a majority of the outstanding PEPS or (ii) the vote of a majority of
the Trustees. The investment advisory agreement may be terminated at any time
by the Trust on 60 days' written notice upon the vote of a majority of the
Trustees or a majority of the outstanding PEPS. The investment advisory
agreement will terminate automatically in the event of its assignment (as
defined in the Investment Company Act).
Administrator
The day-to-day affairs of the Trust will be managed by ,
as Trust Administrator pursuant to an Administration Agreement. Under the
Administration Agreement, the Trustees have delegated most of their
operational duties to the Administrator, including without limitation, the
duties to: (i) receive invoices for expenses incurred by the Trust; (ii) with
the approval of the Trustees, engage legal and other professional advisors
(other than the independent public accountants for the Trust); (iii) instruct
the Paying Agent to pay distributions on PEPS as described herein; (iv)
prepare and mail, file or publish all notices, proxies, reports, tax returns
and other communications and documents, and keep all books and records, for
the Trust; (v) at the direction of the Trustees, institute and prosecute legal
and other appropriate proceedings to enforce the rights and remedies of the
Trust; and (vi) make all necessary arrangements with respect to meetings of
Trustees and any meetings of holders of PEPS. The Administrator will not,
however, select the independent public accountants for the Trust or sell or
otherwise dispose of the Trust assets (except at the direction of the Trustees
in connection with an acceleration of the Contracts, or the settlement of the
Contracts at the Exchange Date, or a disposition of the Contracts as described
under "Management and Administration of the Trust -- Trustees," and upon
termination of the Trust).
The Administration Agreement may be terminated by either the Trust or the
Administrator upon 60 days' prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
Except for its roles as Administrator, custodian, paying agent,
registrar and transfer agent for the Trust, has no other affiliation with,
and is not engaged in any other transactions with, the Trust.
The address of the Administrator is .
Custodian
The Trust's custodian (the "Custodian) is pursuant to
a custodian agreement (the "Custodian Agreement). In the event of any
termination of the Custodian Agreement by the Trust or the resignation of the
Custodian, the Trust must engage a new Custodian to carry out the duties of
the Custodian as set forth in the Custodian Agreement. Pursuant to the
Custodian Agreement, all net cash received by the Trust will be invested by
the Custodian in short-term U.S. Treasury securities maturing on or shortly
before the next quarterly distribution date. The Custodian will also act as
collateral agent under the Security and Pledge Agreement and will hold a
perfected security interest in the Common Stock and U.S. Treasury securities
or other assets consistent with the terms of the Contracts pledged thereunder.
Paying Agent
The transfer agent, registrar and paying agent (the "Paying Agent) for the
PEPS is pursuant to a paying agent agreement (the "Paying
Agent Agreement). In the event of any termination of the Paying Agent
Agreement by the Trust or the resignation of the Paying Agent, the Trust will
use its best efforts to engage a new Paying Agent to carry out the duties of
the Paying Agent.
Indemnification
The Trust will indemnify each Trustee, the Investment Adviser, the Paying
Agent, the Administrator and the Custodian, with respect to any claim,
liability, loss or expense (including the costs and expenses of the defense
against any claim or liability) which it may incur in acting as Trustee,
Investment Adviser, Paying Agent, Administrator or Custodian, as the case may
be, except in the case of willful misfeasance, bad faith, gross negligence or
reckless disregard of their respective duties.
Distributions
The Trust intends to distribute to Holders on a quarterly basis the
proceeds of the U.S. Treasury securities held by the Trust, net of any Trust
expenses. The first distribution, reflecting the Trust's operations from the
date of this offering, will be made on , 1996 to holders of record as
of , 1995. Thereafter, distributions will be made on ,
, and of each year to Holders of record as of each
, , and , respectively. Upon
termination of the Trust as described in "Investment Objectives and Policies
- - - -- Trust Termination," each Holder will receive any remaining net assets of
the Trust.
Estimated Expenses
The Trust will pay at its inception to each of the Investment Adviser, the
Administrator, the Custodian and the Paying Agent, and to each Trustee, a
one-time, up-front amount in respect of its fee and, in the case of the
Administrator, anticipated expenses of the Trust over the term of the Trust.
The anticipated Trust expenses to be borne by the Administrator include, among
other things, expenses for legal and independent accountants' services, costs
of printing proxies, PEPS certificates and Holder reports, expenses of the
Trustees, fidelity bond coverage, stock exchange listing fees and expenses of
qualifying the PEPS for sale in the various states. Organization costs of the
Trust in the amount of $ , offering costs estimated to be $ , and
the aggregate of the one-time, up-front payments described above in the amount
of $ , will be paid from the proceeds of the offering of the PEPS.
The amount payable to the Administrator in respect of ongoing expenses of
the Trust was determined based on estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. There cannot, however, be any assurance that actual
operating expenses of the Trust will not be substantially more than this
amount. Any excess expenses will be for the account of [the Sellers or, in
the event of their failure to pay such amounts,] the Trust.
FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Davis Polk & Wardwell, tax counsel to the Trust
("Counsel"), the following is a general summary of the material federal income
tax consequences of the ownership of the PEPS with respect to a Holder who
acquires its PEPS at the issue price from an Underwriter pursuant to the
original offering. It does not discuss all of the tax consequences that may
be relevant to a Holder in light of its particular circumstances or to Holders
subject to special treatment under federal income tax laws (e.g., certain
financial institutions, insurance companies, dealers in stock or securities,
tax-exempt organizations or persons who hold the PEPS as a part of a hedging
transaction or straddle). Changes to existing law, which could have
retroactive effect, may alter the consequences described below. PROSPECTIVE
PURCHASERS OF PEPS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE FEDERAL, STATE
AND LOCAL INCOME TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF PEPS.
As used herein, the term "United States Holder means a Holder that is, for
United States federal income tax purposes, (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. The
term "Non-U.S. Holder means a Holder that is not a United States Holder.
The term "Holder as used below in the discussion of "Tax Consequences to
United States Holders and "Tax Consequences to Non-U.S. Holders means a
"United States Holder and a "Non-U.S. Holder, respectively.
Tax Status of the Trust
The Trust will be taxable as a grantor trust for federal income tax
purposes, and income received by the Trust will be treated as income of the
Holders in the manner set forth below.
Tax Consequences to United States Holders
Tax Basis of the U.S. Treasury Securities and the Contracts. Each Holder
will be considered the owner of its pro rata portion of the stripped U.S.
Treasury securities and the Contracts in the Trust under the grantor trust
rules of Sections 671-679 of the Code. The cost to the Holder of its PEPS
(net of its pro rata portion of the one-time fees payable to the Investment
Adviser, the Administrator, the Custodian, the Paying Agent and the Trustees
- - - -- see "Fees and Expenses of the Trust" below) will be allocated among the
Holder's pro rata portion of the U.S. Treasury securities and the Contracts
(in proportion to the fair market values thereof on the date on which the
Holder acquires its PEPS) in order to determine the Holder's tax bases. It is
currently anticipated that % and % of the net proceeds of the offering
will be used by the Trust to purchase the U.S. Treasury securities and as
payments under the Contracts, respectively.
Recognition of Interest on the U.S. Treasury Securities. The U.S.
Treasury securities in the Trust will consist of stripped U.S. Treasury
securities. A Holder will be required to treat its pro rata portion of
each U.S. Treasury security in the Trust as a bond that was originally
issued on the date the Holder purchased its PEPS and at an original issue
discount equal to the excess of the Holder's pro rata portion of the
amounts payable on such U.S. Treasury security over the Holder's tax basis
therefor as discussed above. The Holder (whether on the cash or accrual
method of tax accounting) is required to include original issue discount
(other than original issue discount on short-term U.S. Treasury securities
as defined below) in income for federal income tax purposes as it accrues,
in accordance with a constant yield method. Because it is expected that
more than 20% of the Holders will be accrual basis taxpayers, original
issue discount on any short-term U.S. Treasury security (i.e., any U.S.
Treasury security with a maturity of one year or less from the date it is
purchased) held by the Trust will also be required to be included in income
by the Holders as it is accrued. Unless a Holder elects to accrue the
original issue discount on a short-term U.S. Treasury security according
to a constant yield method based on daily compounding, such original issue
discount will be accrued on a straight-line basis. The Holder's tax basis
in a U.S. Treasury security will be increased by the amounts of any
original issue discount included in income by the Holder with respect to
such U.S. Treasury security.
Treatment of the Contracts. Each Holder will be treated as having entered
into a pro rata portion of the Contracts and, at the Exchange Date, as having
received a pro rata portion of the Common Stock delivered to the Trust. Under
existing law, a Holder will not recognize income, gain or loss upon entry into
the Contracts or over the term of the Contracts.
Sale of the PEPS. Upon a sale of all or some of a Holder's PEPS, a Holder
will be treated as having sold its pro rata portion of the U.S. Treasury
securities and the Contracts underlying the PEPS. The selling Holder will
recognize gain or loss equal to the difference between the amount realized and
the Holder's aggregate tax bases in its pro rata portion of the U.S. Treasury
securities and the Contracts. Any gain or loss will be long-term capital gain
or loss if the Holder has held the PEPS for more than one year. The excess of
net long-term capital gains over net short-term capital losses is taxed at a
lower rate than ordinary income for certain non-corporate taxpayers. The
distinction between capital gain or loss and ordinary income or loss is also
relevant for purposes of, among other things, limitations on the deductibility
of capital losses.
Distribution of the Common Stock. The delivery of Common Stock pursuant to
the Contracts will not be taxable to the Holders. A Holder will have taxable
gain or loss upon receipt of cash in lieu of fractional shares of Common Stock
distributed upon termination of the Trust. Each Holder's basis in its Common
Stock will be equal to its basis in its pro rata portion of the Contracts less
the portion of such basis allocable to any fractional shares of Common Stock
for which cash is received.
Fees and Expenses of the Trust. An individual Holder who itemizes
deductions may amortize and deduct over the term of the Trust (subject to
any other applicable limitations on itemized deductions) its pro rata
portion of fees and expenses described under "Management and Administration
of the Trust -- Estimated Expenses" incurred by the Trust resulting from
its ongoing operations (including the one-time fees payable to the
Investment Adviser, the Administrator, the Custodian, the Paying Agent and
the Trustees) only to the extent that such amount together with such
Holder's other miscellaneous deductions exceeds 2% of such Holder's
adjusted gross income. Counsel believes that a Holder's pro rata portion
of the expenses in connection with the organization of the Trust,
underwriting discounts and commissions and other offering expenses should
be includible in the cost to the Holder of the PEPS. However, there can be
no assurance that the Service will not take a contrary view. If the
Service were to prevail in treating such expenses as excludible from the
Holder's cost of the PEPS, such expenses would not be includible in the
basis of the assets of the Trust and should instead, subject to the 2%
floor for miscellaneous itemized deductions described above for individual
Holders, be amortizable over the term of the Trust.
Tax Consequences to Non-U.S. Holders
Subject to the discussion below concerning income that is effectively
connected with a trade or business of a Non-U.S. Holder in the United States,
under present United States federal income tax law:
(a) payments of interest (including any original issue discount) on a
Non-U.S. Holder's pro rata portion of any U.S. Treasury security will not be
subject to United States federal withholding tax provided that the statement
requirement set forth in Section 871(h) or Section 881(c) of the Code has been
fulfilled with respect to the beneficial owner, as discussed below; and
(b) any gain realized by a Non-U.S. Holder on the sale of its PEPS will not
be subject to U.S. federal income tax provided that in the case of a Non-U.S.
Holder who is a non-resident alien individual, such Holder is not present in
the United States for 183 days or more during the taxable year of the sale.
Sections 871(h) and 881(c) of the Code require that, in order to obtain the
portfolio interest exemption from withholding tax described in paragraph (a)
above, either the beneficial owner of the PEPS, or a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") and that is holding the PEPS on behalf of such beneficial owner,
file a statement with the Trust to the effect that the beneficial owner of the
PEPS is not a United States Holder. Under temporary United States Treasury
Regulations, such requirement will be fulfilled if the beneficial owner of a
PEPS certifies on Internal Revenue Service Form W-8 (or a substitute form
thereof), under penalties of perjury, that it is not a United States Holder
and provides its name and address, and any Financial Institution holding the
PEPS on behalf of the beneficial owner files a statement with the Trust to the
effect that it has received such a statement from the Holder (and furnishes
the Trust with a copy thereof).
If any interest or gain realized by a Non-U.S. Holder is effectively
connected with the Holder's trade or business in the United States, such
interest or gain will be subject to regular U.S. federal income tax in the
same manner as if the Non-U.S. Holder were a U.S. Holder. In addition,
if such Non-U.S. Holder is a foreign corporation, such interest or gain
may be included in the earnings and profits of such Holder in determining
such Holder's U.S. branch profits tax liability.
Information Reporting
After the end of each calendar year, the Trust will furnish to each record
holder of the PEPS an annual statement containing information relating to the
payments on the U.S. Treasury securities received by the Trust and relating to
the fees and expenses paid by the Trust. The Trust will also furnish annual
information returns to each record holder of the PEPS and to the Internal
Revenue Service.
New York State and City Income Tax Considerations
Under the income tax laws of the State and City of New York, the Trust will
not be treated as an association taxable as a corporation.
The foregoing discussion relates only to federal and certain New York State
and City income taxes. Holders may also be subject to state and local
taxation in other jurisdictions and should consult their tax advisers in this
regard.
UNDERWRITING
Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Trust has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Morgan Stanley & Co. Incorporated is
acting as representative, has severally agreed to purchase from the Trust, the
respective number of PEPS set forth opposite its name below:
Number of
U.S. Underwriter U.S. PEPS
________________ _________
Morgan Stanley & Co. Incorporated.....................
_________
Total.................................. [ ]
=========
This offering is part of a worldwide offering that consists of the U.S.
Offering and the International Offering (collectively, the "Offerings").
Under the terms and conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all the PEPS offered hereby
(other than the PEPS subject to the Underwriters' over-allotment option), if
any are taken.
The U.S. Underwriters propose to offer the PEPS in part directly to the
public at the initial public offering price set forth on the cover page of
this Prospectus, and in part to certain securities dealers at such price
less a concession of $ per PEPS. The U.S. Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per PEPS to
certain brokers and dealers. After the initial public offering the public
offering price and concession and discount to dealers may be changed by the
representative.
The Trust has also entered into an International Purchase Agreement (the
"International Purchase Agreement" and, together with the U.S. Underwriting
Agreement, the "Underwriting Agreements" and each individually an
"Underwriting Agreement") with certain underwriters (the "International
Underwriters") for whom Morgan Stanley & Co. International Limited is acting
as representative providing for a concurrent International Offering. The U.S.
Underwriters and the International Underwriters are collectively referred to
as the "Underwriters." The International Underwriters have agreed, subject to
the terms and conditions set forth in the International Purchase Agreement, to
take and pay for all of the PEPS being offered in the International Offering
(other than PEPS subject to the Underwriters' over-allotment option) if any
are taken. The closing of each of the Offerings is a condition to the closing
of each of the U.S. Offering and the International Offering.
The Underwriters have entered into an intersyndicate agreement (the
"Intersyndicate Agreement") that provides for the coordination of their
activities. Under the terms of the Intersyndicate Agreement, the Underwriters
in each geographic area have agreed not to offer or sell any PEPS in any other
geographic area until the completion of the distribution of the PEPS in each
Offering. Pursuant to the Intersyndicate Agreement, each of the U.S.
Underwriters has agreed or will agree that, as part of the distribution of the
U.S. PEPS, subject to certain exceptions, (i) it is not purchasing any PEPS
for the account of anyone other than a U.S. Person (as defined below) or
Canadian Person (as defined below) and (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any PEPS or distribute any
prospectus relating to the PEPS to any person outside the United States or
Canada or to anyone other than a U.S. Person or Canadian Person, or to any
dealer who does not so agree. Each of the International Underwriters has
agreed or will agree that, as part of the distribution of the International
PEPS, subject to certain exceptions, (i) it is not purchasing any PEPS for the
account of any U.S. Person or Canadian Person and (ii) it has not offered or
sold, and will not offer or sell, directly or indirectly, any PEPS or
distribute any prospectus relating to the PEPS in the United States or Canada
or to any U.S. Person or Canadian Person or to any dealer who does not so
agree. The foregoing limitations do not apply to stabilization transactions
or to transactions between the U.S. Underwriters and the International
Underwriters pursuant to the Intersyndicate Agreement. As used in this
section, "United States" means the United States of America, its territories,
possessions and other areas subject to its jurisdiction; "Canada" means
Canada, its provinces, territories, possessions and other areas subject to its
jurisdiction; and U.S. Person" and "Canadian Person" mean (i) a citizen or
resident of the United States or Canada, respectively, (ii) a corporation,
partnership, trust or other entity created or organized in or under the laws
of the United States or Canada, respectively (other than a foreign branch of
such an entity), or (iii) an estate or trust, the income of which is subject
to United States federal income taxation or Canadian federal income taxation,
respectively, regardless of its source of income, and includes any United
States or Canadian branch of a person not included in any of clauses (i), (ii)
and (iii) of this sentence.
PEPS have been subscribed for by at an
aggregate purchase price of $100,000. No PEPS will be sold to the public
until the PEPS subscribed for have been purchased and the purchase price
thereof paid in full to the Trust.
The Trust has granted the Underwriters an option exercisable for 30
calendar days after the date of this Prospectus to purchase up to an aggregate
of additional PEPS to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of PEPS to be purchased by each of
them, as shown opposite their respective names in the table under
"Underwriting" in the relevant Prospectus, bears to the PEPS
initially offered hereby. The Underwriters may exercise such option only to
cover over-allotments in connection with the sale of the PEPS offered
hereby.
The Company and the Sellers have agreed not to offer, sell or otherwise
dispose of shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock, other than (i) in
certain permitted private sale transactions, (ii) pursuant to existing or
prospective employee stock option plans previously disclosed to the
Underwriters and (iii) certain gifts to donees who have agreed not to offer,
sell or otherwise dispose of shares of Common Stock as set forth herein, until
90 days from the date of this Prospectus without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters.
Application will be made to list the PEPS on the New York Stock Exchange
Inc.
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and the
Underwriters by their counsel, Davis Polk & Wardwell, 450 Lexington Avenue,
New York, New York 10017. The validity of the Contracts will be passed upon
by , counsel for the Sellers.
EXPERTS
The statement of assets and liabilities included in this Prospectus has
been audited by , independent accountants, 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 Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act of
1933, as amended, with respect to the PEPS offered hereby. Further
information concerning the PEPS and the Trust may be found in the Registration
Statement, of which this Prospectus constitutes a part. The Registration
Statement may be inspected without charge at the Commission's office in
Washington, D.C., and copies of all or any part thereof may be obtained from
such office after payment of the fees prescribed by the Commission.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Holders of PEPS Trust:
We have audited the accompanying statement of assets and liabilities of
PEPS Trust as of , 1995. This financial statement is the
responsibility of the Trust's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by the Trust's management, as well as evaluating
the overall financial statement presentation. We believe that our audit of the
financial statement provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of PEPS Trust, as of ,
1995 in conformity with generally accepted accounting principles.
[Accountants]
New York, New York
, 1995
STATEMENT OF ASSETS AND LIABILITIES
, 1995
ASSETS
Cash................................................................ $100,000
Deferred organizational expenses (Note 1)...........................
________
Total assets.................................................. $
========
LIABILITIES
Organizational expenses payable (Note 1).......................... $
========
NET ASSETS (Note 2)
Balance applicable to PEPS outstanding..................... $
Net asset value per PEPS.......................................... $
_____________
(1) The Trust was established on _________, 1995 and is registered as a
non-diversified, closed-end management investment company under the
Investment Company Act. Costs incurred by the Trust in connection with
its organization, estimated at $ , will be amortized on a straight-line
basis over a three-year period beginning at the commencement of
operations of the Trust. The Trust has entered into an agreement with
to act as trust administrator, custodian, paying agent, registrar and
transfer agent at a fee of $ , payable up front.
(2) Offering expenses, estimated at , will be payable upon completion
of the offering and will be charged to capital upon the commencement of
operations of the Trust.
APPENDIX A
[Company Prospectus]
ALTERNATE FRONT COVER PAGE FOR INTERNATIONAL PROSPECTUS
PROSPECTUS (Subject to Completion)
Issued August 18, 1995
400,000 PEPS(sm)
PEPS Trust
$ . Shares
(Premium Exchangeable Participating Shares - PEPS(sm))
(Subject to Exchange for Shares of Common Stock of [Name of Company], no par
value)
Each of the shares ($ . Premium Exchangeable Participating Shares, or
"PEPS") of the PEPS Trust (the "Trust") represents the right to receive an
annual distribution of $ , and will be exchanged for between 0.x and 1.xx
shares of common stock (the "Common Stock") of [Name of Company], no par
value, on , 1998 (the "Exchange Date"). The annual distribution
of $ per PEPS is payable quarterly on each , ,
and , commencing , 1996. The PEPS are not subject to
redemption.
The Trust is a newly organized, three-year Trust established to purchase
and hold a portfolio of stripped U.S. Treasury securities maturing on a
quarterly basis through the Exchange Date, and one or more forward contracts
(the "Contracts") with certain existing shareholders (the "Sellers") of [Name
of Company] (the "Company") relating to the Common Stock. Of the 400,000 PEPS
offered hereby, PEPS are being offered initially in the United States and
Canada by the U.S. Underwriters and PEPS are being offered initially
internationally outside the United States and Canada by the International
Underwriters. See "Underwriters."
The Trust's investment objective is to provide each holder with a
quarterly distribution of $ . per PEPS, and to provide the holder of each
PEPS, on the Exchange Date, shares of Common Stock per PEPS equal to (i) if
the Exchange Price per share of Common Stock is less than $ (the "Threshold
Appreciation Price") but equal to or greater than $ (the "Downside
Protection Threshold Price"), a number (or fractional number) of shares of
Common Stock per PEPS so that the value thereof at the Exchange Price
equals $ (the "Initial Value"), (ii) if the Exchange Price per share of
Common Stock is equal to or greater than the Threshold Appreciation Price,
0.x shares of Common Stock per PEPS and (iii) if the Exchange Price per
share of Common Stock is less than the Downside Protection Threshold Price,
1.xx shares of Common Stock per PEPS. Holders otherwise entitled to
receive fractional shares in respect of their aggregate holdings of PEPS
will receive cash in lieu thereof. The Exchange Price per share of Common
Stock means the average Closing Price (as defined herein) of a share of
Common Stock on the 20 Trading Days (as defined herein) immediately prior
to (but not including) the Exchange Date.
The yield on PEPS is higher than the current dividend yield on the
Common Stock. However, the opportunity for equity appreciation afforded by an
investment in the PEPS is less than that afforded by an investment in the
Common Stock because the value of the Common Stock receivable by holders of
the PEPS upon exchange at the Exchange Date will only exceed the Initial Value
if the Exchange Price exceeds the Threshold Appreciation Price, which
represents an appreciation of % of the Initial Value. Moreover, because a
holder of each PEPS will only receive 0.x shares of Common Stock if the
Exchange Price exceeds the Threshold Appreciation Price, holders of the PEPS
will only be entitled to receive upon exchange % of any appreciation of the
value of the Common Stock in excess of the Threshold Appreciation Price.
Unlike the Common Stock, an investment in PEPS affords protection from
depreciation of the Common Stock to the extent that the Exchange Price does not
fall below the Downside Protection Threshold Price. In the event the Exchange
Price is less than the Downside Protection Threshold Price, holders will
receive 1.xx shares of Common Stock per PEPS and accordingly will not be
protected from depreciation below % of the Initial Value.
The Trust's portfolio will not be managed in the traditional sense. The
Trust's management powers will be limited to the disposition of the Contracts
in certain limited circumstances. The Trust may continue to hold the
Contracts despite a significant decline in the market price of the Common
Stock or adverse changes in the financial condition of the Company. The
address of the Trust is 1251 Avenue of the Americas, New York, New York 10020
(telephone no. (212) 703-4198). Investors are advised to read this Prospectus
and to retain it for future reference.
The Company is not affiliated with the Trust.
Application will be made to list the PEPS on the New York Stock Exchange
under the symbol . Prior to this offering there has been no public
market for the PEPS.
"PEPS" and "Premium Exchangeable Participating Securities" are service
marks of Morgan Stanley & Co. Incorporated.
The last reported sale price of the Common Stock on the New York Stock
Exchange on , 1995 was $ per share, which is equal to the
issue price of the PEPS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to
Public Discounts(1) the Trust(2)
________ ____________ _____________
Per PEPS...................... $ $ $
Total(3)...................... $ $ $
__________
(1) The Trust, the Company and the Sellers have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Trust.
(3) The Trust has granted to the Underwriters an option for 30 days to
purchase up to an additional PEPS at the price to the public less
underwriting discount, solely to cover over-allotments. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Proceeds to the Trust will be $ , $ and $ , respectively.
See "Underwriting."
The PEPS are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Davis
Polk & Wardwell, counsel for the Underwriters. It is expected that delivery
of the PEPS will be made on or about , 1995 at the office of Morgan
Stanley & Co. Incorporated, New York, New York, against payment therefor in
New York funds.
MORGAN STANLEY & CO.
International
, 1995
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROPSECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
ALTERNATE UNDERWRITING PAGES FOR INTERNATIONAL PROSPECTUS
UNDERWRITING
Subject to the terms and conditions of the International Underwriting
Agreement, the Trust has agreed to sell to each of the International
Underwriters named below, and each of such International Underwriters, for
whom Morgan Stanley & Co. International Limited is acting as representative,
has severally agreed to purchase from the Trust, the respective number of PEPS
set forth opposite its name below:
International Number of
Underwriter International PEPS
____________ __________________
Morgan Stanley & Co. International Limited............
__________
Total.................................. [ ]
===========
This offering is part of a worldwide offering that consists of the U.S.
Offering and the International Offering (collectively, the "Offerings").
Under the terms and conditions of the International Underwriting Agreement,
the International Underwriters are committed to take and pay for all the PEPS
offered hereby (other than the PEPS subject to the Underwriters'
over-allotment option), if any are taken.
The International Underwriters propose to offer the PEPS in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus, and in part to certain securities dealers at such price
less a concession of $ per PEPS. The International Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per PEPS to
certain brokers and dealers. After the initial public offering the public
offering price and concession and discount to dealers may be changed by the
representative.
The Trust has also entered into a U.S. Underwriting Agreement (the "U.S.
Underwriting Agreement" and, together with the International Underwriting
Agreement, the "Underwriting Agreements" and each individually an
"Underwriting Agreement") with certain underwriters (the "U.S. Underwriters")
for whom Morgan Stanley & Co. Incorporated is acting as representative
providing for a concurrent U.S. Offering. The U.S. Underwriters and the
International Underwriters are collectively referred to as the "Underwriters."
The U.S. Underwriters have agreed, subject to the terms and conditions set
forth in the U.S. Underwriting Agreement, to take and pay for all of the PEPS
being offered in the U.S. Offering (other than PEPS subject to the
Underwriters' over-allotment option) if any are taken. The closing of each of
the Offerings is a condition to the closing of each of the U.S. Offering and
the International Offering.
The Underwriters have entered into an intersyndicate agreement (the
"Intersyndicate Agreement") that provides for the coordination of their
activities. Under the terms of the Intersyndicate Agreement, the Underwriters
in each geographic area have agreed not to offer or sell any PEPS in any other
geographic area until the completion of the distribution of the PEPS in each
Offering. Pursuant to the Intersyndicate Agreement, each of the U.S.
Underwriters has agreed or will agree that, as part of the distribution of the
U.S. PEPS, subject to certain exceptions, (i) it is not purchasing any PEPS
for the account of anyone other than a U.S. Person (as defined below) or
Canadian Person (as defined below) and (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any PEPS or distribute any
prospectus relating to the PEPS to any person outside the United States or
Canada or to anyone other than a U.S. Person or Canadian Person, or to any
dealer who does not so agree. Each of the International Underwriters has
agreed or will agree that, as part of the distribution of the International
PEPS, subject to certain exceptions, (i) it is not purchasing any PEPS for the
account of any U.S. Person or Canadian Person and (ii) it has not offered or
sold, and will not offer or sell, directly or indirectly, any PEPS or
distribute any prospectus relating to the PEPS in the United States or Canada
or to any U.S. Person or Canadian Person or to any dealer who does not so
agree. The foregoing limitations do not apply to stabilization transactions
or to transactions between the U.S. Underwriters and the International
Underwriters pursuant to the Intersyndicate Agreement. As used in this
section, "United States" means the United States of America, its territories,
possessions and other areas subject to its jurisdiction; "Canada" means
Canada, its provinces, territories, possessions and other areas subject to its
jurisdiction; and U.S. Person" and "Canadian Person" mean (i) a citizen or
resident of the United States or Canada, respectively, (ii) a corporation,
partnership, trust or other entity created or organized in or under the laws
of the United States or Canada, respectively (other than a foreign branch of
such an entity), or (iii) an estate or trust, the income of which is subject
to United States federal income taxation or Canadian federal income taxation,
respectively, regardless of its source of income, and includes any United
States or Canadian branch of a person not included in any of clauses (i), (ii)
and (iii) of this sentence.
PEPS have been subscribed for by at an
aggregate purchase price of $100,000. No PEPS will be sold to the public
until the PEPS subscribed for have been purchased and the purchase price
thereof paid in full to the Trust.
The Trust has granted the Underwriters an option exercisable for 30
calendar days after the date of this Prospectus to purchase up to an aggregate
of additional PEPS to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of PEPS to be purchased by each of
them, as shown opposite their respective names in the table under
"Underwriting" in the relevant Prospectus, bears to the PEPS
initially offered hereby. The Underwriters may exercise such option only to
cover over-allotments in connection with the sale of the PEPS offered
hereby.
The Company and the Sellers have agreed not to offer, sell or otherwise
dispose of shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock, other than (i) in
certain permitted private sale transactions, (ii) pursuant to employee stock
option plans previously disclosed to the Underwriters and (iii) certain gifts
to donees who have agreed not to offer, sell or otherwise dispose of shares of
Common Stock as set forth herein, until 90 days from the date of this
Prospectus without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters.
Application will be made to list the PEPS on the New York Stock Exchange
Inc.
Selling Restrictions
General
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the PEPS or the
possession, circulation or distribution of this Prospectus or any other
material relating to the Trust or the PEPS in any jurisdiction where action
for such purpose is required. Accordingly, no PEPS may be offered or sold,
directly or indirectly, and neither this Prospectus nor any other offering
material or advertisements in connection with the PEPS may be distributed or
published, in or from any country or jurisdiction, except in compliance with
any applicable rules and regulations or any such country or jurisdiction.
United Kingdom
Each International Underwriter represents and agrees that (i) it has not
offered or sold and prior to the date six months after the date of issue of
the PEPS will not offer or sell any PEPS 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; (ii)
it has complied with and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the PEPS in, from or otherwise involving the United Kingdom; and (iii) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document received by it in connection with the issue of the PEPS to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to
whom such document may otherwise lawfully be issued or passed on.
Hong Kong
Each International Underwriter has agreed that (i) has not offered or
sold and will not offer or sell in Hong Kong, by means of any documents, any
other than to persons whose ordinary business it is to buy or sell shares or
debentures, whether as a principal or agent, or in circumstances which do not
constitute an offer to the public within the meaning of the Companies
Ordinance (Cap. 32) of Hong Kong and (ii) it has not issued and will not issue
any invitation or advertisement relating to the PEPS in Hong Kong (except if
permitted to do so under the securities laws of Hong Kong) other than with
respect to PEPS intended to be disposed of to persons outside Hong Kong or to
be disposed of in Hong Kong only to persons whose business involves the
acquisition, disposal, or holding of securities, whether as principal or agent.
Singapore
Each International Underwriter has agreed that the PEPS may not be
offered or sold, nor may any document or other material in connection with the
PEPS be distributed, either directly or indirectly, (i) to persons in
Singapore other than in circumstances in which such offer or sale does not
constitute an offer or sale of the PEPS to the public in Singapore or (ii) to
the public or any member of the public in Singapore other than pursuant to,
and in accordance with the conditions of, an explanation invoked under
Division 5A of Part IV of the Companies Act, Chapter 50 of Singapore and to
persons to whom the PEPS may be offered or sold under such exemption.
FORM N-2
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Part A-- Report of Independent Accountants. Statement of Assets and
Liabilities.
Part B-- None.
(b) Exhibits
2.d.(i) Trust Agreement dated as of August 17, 1995
* 2.d.(ii) Form of Specimen Certificate of PEPS
* 2.g Form of Investment Adviser Agreement
* 2.h Form of U.S. Underwriting Agreement
* 2.j Form of Custodian Agreement
* 2.k.(i) Form of Administration Agreement
* 2.k.(ii) Form of Paying Agent Agreement
* 2.k.(iii) Form of Purchase Contract
* 2.l Opinion and Consent of Counsel to the Trust
* 2.n.(i) Tax Opinion of Counsel to the Trust (Consent contained in
Exhibit 2.l)
* 2.n.(ii) Consent of Independent Public Accountants
* 2.p Form of Subscription Agreement
______________
*To be filed by amendment.
Item 25. Marketing Arrangements
See the Form of Underwriting Agreement filed as Exhibit 2.h to this
Registration Statement.
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
Registration fees................................... $[ ]
New York Stock Exchange listing fee................. *
Printing (other than certificates).................. *
Engraving and printing certificates................. *
Fees and expenses of qualification under state
securities laws (excluding fees of counsel)....... *
Accounting fees and expenses........................ *
Legal fees and expenses............................. *
NASD fees........................................... [ ]
Miscellaneous....................................... *
_________
Total................................ $ *
=========
_________
* To be furnished by amendment.
Item 27. Person Controlled by or under Common Control with Registrant
Prior to August , 1995 the Trust had no existence. As of the effective
date the Trust will have entered a subscription agreement for PEPS
with and an Underwriting Agreement with
respect to PEPS with a group of underwriters represented by Morgan
Stanley & Co. Incorporated.
Item 28. Number of Holders of Securities
Title of Class Number of Record Holders
______________ ________________________
Shares of beneficial interest......... 0
Item 29. Indemnification
Article of the Trust Agreement, the Investment Advisory Agreement and
the Underwriting Agreements provide for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act), may be permitted to directors, officers and
controlling persons of the Registrant, pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
Item 30. Business and Other Connections of Investment Adviser
The description of the business of is set forth under
the caption "Management of the Fund" in the Prospectus forming part of this
Registration Statement.
The information as to the directors and officers of
, set forth in 's Form ADV filed with the Securities and
Exchange Commission on (File No. ) and as amended
through the date hereof is incorporated herein by reference.
Item 31. Location of Accounts and Records
[ ]
(Trust Agreement)
[ ]
(with respect to its services as Investment Adviser)
[ ]
(with respect to its services as Administrator)
[ ]
(with respect to its services as Custodian)
[ ]
(with respect to its services as Registrar, Transfer Agent and Paying Agent)
Item 32. Management Services
Not applicable.
Item 33. Undertakings
(a) The registrant hereby undertakes to suspend offering of its units
until it amends its prospectus if (1) subsequent to the effective date of its
registration statement, the net asset value declines more than 10 percent from
its net asset value as of the effective date of the Registration Statement or
(2) the net asset value increases to an amount greater than its net proceeds
as stated in the prospectus.
(b) The registrant hereby undertakes that (i) for purpose of determining
any liability under the 1933 Act, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the registrant under Rule
497(h) under the 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 New York, State of New York, on
the 17th day of August, 1995.
PEPS TRUST
By: /s/ Steven R. Umlauf
______________________
Steven R. Umlauf
Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, in the
capacities and on the date indicated.
Name Title Date
____ _____ ____
/s/ Steven R. Umlauf Principal Executive Officer, August 18, 1995
________________ Principal Financial Officer,
Steven R. Umlauf Principal Accounting Officer
and Trustee
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of August 17, 1995, between MORGAN
STANLEY & CO. INCORPORATED, as sponsor (the "Sponsor") and STEVEN R. UMLAUF,
as trustee (the "Trustee").
1. The Sponsor hereby creates PEPS Trust (the "Trust") in order
that it may acquire and hold a fixed portfolio of stripped U.S. Treasury
Securities (the "Treasuries"), enter into and hold purchase contracts with
respect to common stocks chosen by the Trustee (the "Contracts"), issue shares
of beneficial interest therein ("Shares") and hold the Trust Estate in trust
for the use and benefit of all present and future beneficial owners of Shares
and otherwise carry out the terms and conditions hereof, all for the purpose
of providing periodic cash distributions and the potential for capital
appreciation for the beneficial owners of Shares. The Trustee hereby declares
that he will accept and hold the Trust Estate in trust for the use and benefit
of all present or future beneficial owners of Shares. The Sponsor hereby
deposits with the Trustee the sum of $10 to accept and hold in trust
hereunder. As used herein, "Trust Estate" means the Treasuries, the Contracts
and any monies held by the Trust from time to time.
2. The Sponsor specifically authorizes and directs the Trust to
(i) prepare a Registration Statement to be filed with the Securities and
Exchange Commission and an accompanying Prospectus to be furnished to
prospective purchasers of Shares; (ii) acquire the Treasuries as directed by
the Sponsor; (iii) enter into the Contracts; (iv) hold, invest and disburse
monies as directed by the Sponsor; and (v) adopt and amend bylaws and take any
and all other actions as necessary or advisable to carry out the purposes of
the Trust.
3. Subject to the specific provisions hereof, the Trust will be
managed solely by the Trustee. The Trustee shall have fiduciary
responsibility for the safekeeping and use of all funds and assets of the
Trust and shall not employ, or permit another to employ, such funds or assets
in any manner except for the exclusive benefit of the Trust.
4. The Trustee may resign or be discharged of the trust created
hereby by executing an instrument in writing, filing the same with the Sponsor
and such resignation shall become effective immediately unless otherwise
specified therein. Prior to the issuance of Shares, any vacancy in the office
of the Trustee may be filled by appointment by the Sponsor.
5. The Trustee shall not be liable to the Trust or any beneficial
owner of Shares for any action taken or for refraining from taking any action
except in the case of willful misfeasance, bad faith, gross negligence or a
willful disregard of the duties of his office.
6. Prior to the issuance of Shares, (i) the trust created hereby
shall be revocable by the Sponsor at any time upon written notice to the
Trustee, and (ii) this Trust Agreement may be amended by the Trustee from time
to time for any purpose. This Trust Agreement and the Trust shall terminate
upon the date which is 21 years after the death of the last survivor of Joseph
P. Kennedy living on the date hereof.
7. This Trust Agreement is executed and delivered in the State of
New York, and all laws or rules of construction of the State of New York shall
govern the rights of the parties hereto and beneficial owners of Shares and
the interpretation of the provisions hereof.
8. This Trust Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party hereto all
such counterparts taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed.
MORGAN STANLEY & CO. INCORPORATED
By /s/ Steven R. Umlauf
__________________________
Name: Steven R. Umlauf
Title: Vice President
/s/ Steven R. Umlauf
__________________________
Steven R. Umlauf
1251 Avenue of the Americas
New York, NY 10021
