MARKETS AND MONEY David L. Runkle March 3, 1988 It has come to my attention that many market players, advisors and brokers don't know about the Americus Trust concept. The Americus Trust instruments provide a great opportunity for both speculators and conservative investors, in many cases better than the common stock or its option. The Americus Trust is a redeemable, unit share invest- ment trust, or USIT. The trust creates three new securities, known as Units (redeemable into common stock), Primes (the income portion) and Scores (the capital appreciation por- tion). Each trust accepts shares and issues Units. The Units are broken down into the two other components, Primes and Scores. The conservative Prime, the income component, receives the full dividend (less trust fee). It retains voting priv- ileges. At the termination of the trust, the Prime owner is entitled to the market value of the common stock up to the Termination Claim price, maximum. The more speculative Score, the risk component, is like a European warrant (exercisable only on a specified future date). The Score is entitled to all the appreciation over and above the specified Termination Claim price. The Termination Claim price is similar to a strike price because if the common is higher than the Termination price, all of that higher price goes to Score holders. Also similar to a strike price, if the Score is not above the Termination price, the score expires worthless. This illustrates the desirability of these instruments. The Prime can be used as a way to pay less for the income to be received as dividends, thus yielding more. The Score is like a long-term option or warrant. The Prime and Score can be combined into the Unit and exchanged for a share of common stock at any time during the life of the trust, with- out charge. Americus Trust Units, Primes and Scores are listed on the American Stock Exchange, with the exception of AT&T, and can be found in most major newspapers' stock listings. They are all listed under "A", for example, prices from trading on Thursday, March 3, 1988: Stock Div Yld Vol High Low Close Change A-ibm 4.35 4.2 89 104 3/8 102 3/4 102 3/4 - 7/8 A-ibm sc ... ... 286 15 14 1/4 14 3/8 - 3/8 (common stock) IBM 4.40 3.8 10857 117 1/4 115 3/4 116 1/2 - 3/4 IBM's termination claim price is 210, on June 30, 1992. The conservative investor can buy the prime for 102 3/4 and disregard the score if he thinks that IBM will not trade above 210 in the next four years. He can get a better yield for his money, and still be entitled to the stock at the termination date. The speculator can buy or sell short the score, looking for leverage. In this example, the score has changed fully half as much as the common, for only 1/10 the investment. He can trade for the short-term rise or fall of the score price or for the longer term, as desired. The hedger can buy the prime component and sell short the score, thus capturing the dividend and protecting some- what against a possible decline in the stock. One must study the past relationship between the prime and score and common to make sure that a proper hedge is possible, as the score may or may not go with the common in price change. Let's look at one more example from trading on Thursday March 3, 1988: Stock Div Yld Vol High Low Close Change A-xon 3.95 6.8 4 58 1/2 58 1/2 58 1/2 - ... A-xon sc ... ... 61 26 3/4 25 1/2 26 - 1 (common stock) Exxon 2.00 4.7 10115 42 3/4 41 7/8 42 1/4 - 3/8 Exxon terminates on September 20, 1990, at 60. The stock has split 2-for-1 since the trust was offered, so that is why the numbers don't add up. If we look at the common in pre-split terms (price doubled), the numbers provide some interesting ideas. The stock is now 84 1/2 (pre-split), and the score is 26. The score gives the right to the stock price above 60, read 30 after the split. If XON goes to 50, (or 100 pre-split), the score will be worth 40 as everything will accrue to the score above the 60 termination claim. Thus, a rise of 7 3/4 in the common from 42 1/2 to 50 (18%), will yield a rise of 14 in the score from 26 to 40 (54%). Following is a tabular listing of the trusts available: STOCK TERMINATION SYMBOL Date Price Prime Score American Express 8-24-92 50 XPP XPS Amer. Home Prod. 12-20-91 90 HPP HPS AT&T (NYSE) 2-14-92 30 ATP ATS Amoco 3-30-92 105 AOP AOS Atlantic Richfield 7- 1-92 116 RFP RFS Bristol-Myers 2-14-92 110 BYP BYS Chevron 7- 1-92 75 CVP CVS Coca-Cola 7-15-92 56 KKP KKS Dow Chemical 5-18-92 110 DOP DOS DuPont 3-27-92 110 DPP DPS Eastman Kodak 4-15-92 92 KDP KDS Exxon 9-20-90 60 XNP XNS Ford 6-30-92 104 FCP FCS General Electric 5-11-92 140 GNP GNS General Motors 6-30-92 107 GCP GCS GTE 7-15-92 44 LDP LDS Hewlett-Packard 7-27-92 90 HLP HLS IBM 6-30-92 210 BZP BZS Johnson & Johnson 6-30-92 118 JNP JNS Merck 4-14-92 200 MKP MKS 3M 3-25-92 156 MMP MMS Mobil 6-30-92 60 MBP MBS Philip Morris 7-27-92 110 HMP HMS Procter & Gamble 6- 1-92 105 OGP OGS Sears Roebuck 7-15-92 64 RSP RSS Texaco 6-30-92 70 TCP TCS Union Pacific 4-15-92 87 UPP UPS Xerox 7-15-92 97 XXP XXS Markets are always providing opportunity to those who study. These Americus Trust products are another way to use the tools available to us to profit from today's market. A little study, manipulation of the numbers, and above all, proper money management along with common sense can yield superior results. This information has been compiled from sources thought to be reliable, including Shearson-Lehman-Hutton and Alex. Brown & Sons, Inc. I cannot be held responsible for any errors or omissions. Financial markets are constantly chang- ing. Therefore, you are advised to have a comprehensive strategy before engaging in the volatile financial markets.