Author: Gordon Platt
Royal Bank of Scotland Issues Preference Shares

Royal Bank of Scotland, the second-largest bank in the UK, issued $925 million of preference shares in the form of American Depositary Receipts.

A portion of the proceeds may be used to help pay for RBS’s acquisition of Cleveland, Ohio-based Charter One Financial, which is expected to close by the fourth quarter of 2004. Proceeds will also be used to strengthen RBS’s capital base and for general corporate purposes.

The use of ADRs as an acquisition currency has declined in recent years, although there have been several notable cross-border transactions using this method, including HSBC’s purchase of US-based Household International, which was completed in 2003.

RBS’s Citizens Financial Group, which is based in Providence, Rhode Island, agreed in May 2004 to acquire Charter One for $10.5 billion.

Citizens Financial will add major markets in six new states as a result of the acquisition, which will boost RBS’s US-generated profits to 25% of the total. The United Kingdom’s Financial Services Authority confirmed that the newly issued preference shares would qualify as Tier One capital for Royal Bank of Scotland.

The bank issued 37 million Series M dollar-denominated preference shares in the US at a subscription price of $25 per share, with a coupon of 6.4%. The non-voting preference shares were not offered to the public in the UK.

RBS was advised on the issue by Citigroup, which acted as manager along with Merrill Lynch, Morgan Stanley, RBS Greenwich Capital, UBS Securities and Wachovia Securities.

Various series of preference shares of RBS are traded in the United States through a New York Stock Exchange-listed ADR program with Bank of New York as depositary and paying agent.

The Series M preference shares, which pay quarterly dividends, can be redeemed in whole or in part at any time on or after September 30, 2009.

Phytopharm Begins Level-I Program

Cambridge, UK-based Phytopharm, which develops plant-based medicines and manufactures them to pharmaceutical standards, established a Level-I ADR program with Bank of New York as depositary.

The Level-I program is the first step toward listing Phytopharm’s securities on Nasdaq, according to the company, which has hired Global Markets Capital Group to manage the listing process.

Phytopharm CEO Richard Dixey says US investors are interested in the company’s products for obesity, Alzheimer’s disease and Lou Gehrig’s disease.

Each Phytopharm ADR represents two ordinary shares, which are traded on the London Stock Exchange.

Hong Kong Toy Firm Selects Depositary

Hong Kong-based Grand Toys International, a toy manufacturer and distributor, selected Bank of New York as depositary for its ADR program.

Each ADR is equivalent to one ordinary share and trades on Nasdaq.

The program was launched following the reorganization of Grand Toys International, a marketing and distribution company based in Montreal, Canada, into a Hong Kong holding company. At the time of the reorganization, on August 13, 2004, Grand Toys acquired Playwell International, a Hong Kong-based toy manufacturer.

Grand Toys financed the acquisition through the issuance of shares.

The newly reorganized company will have both manufacturing and distribution capabilities and will be able to expand its product offerings significantly, company officials say.

Playwell’s Asian World Enterprises subsidiary holds intellectual property licenses from Walt Disney and Crayola.

Fuji Photo Film Trims Trade Size

Fuji Photo Film reduced the number of common shares representing one minimum trading unit in the Japanese market to 100 shares from 1,000 shares.

This change will not affect the ADR ratio to common shares of on to one. Existing ADRs will continue to be valid and will not have to be exchanged for new ADRs, according to JPMorgan Chase, the depositary bank for the unsponsored ADR program.

Fuji is the leading producer of photographic film and paper in Japan and is virtually tied with Eastman Kodak in the global market.

Gradipore Starts ADR Program

Sydney, Australia-based Gradipore, a manufacturer of niche therapeutic products, established a Level-I ADR program with Bank of New York as depositary.

Gradipore plans to seek a Level II listing of its ADRs on Nasdaq in the near future.

Each ADR is equivalent to 10 common shares that trade on the Australia Stock Exchange.

Gradipore also plans to change its name to Life Therapeutics, following its acquisition in January 2004 of the US therapeutic plasma business of Georgia-based Life Sera.

Gradipore recently opened a scientific research and office facility in New York. The majority of the company’s employees are based in the US, which accounts for 70% of its revenues.

Mayne Chooses Bank of New York

Melbourne, Australia-based Mayne Group selected Bank of New York as successor depositary for its ADR facility in the over-the-counter market.

Each ADR represents five ordinary shares that trade on the Australia Stock Exchange.

Mayne manufactures specialty pharmaceuticals, including generic injectable anti-cancer drugs. It also provides diagnostic services.

·Gordon Platt