Recent Developments in U.S. Securities Laws

A. Disclosure Simplification

Effective as of September 2, 1997, the SEC has eliminated or amended a number of forms and rules to simplify the disclosure process, including:

Form 8-A, the short-form registration statement used by reporting companies to register a class of securities under the Exchange Act, is now effective automatically for debt and equity securities (previously, Form 8-A was effective automatically only for debt securities) and certain exhibits are no longer required to be filed with each relevant national securities exchange.

Post-effective amendments to Securities Act registration statements filed solely to add exhibits will become effective automatically upon filing.

ADRs listed on a national securities exchange and registered on Form F-6 are now exempted from the registration requirements of Section 12(b) of the Exchange Act, although the underlying class of securities is not.

Rule 401(c) under the Securities Act has been amended to allow a company to file a registration statement amendment on any Securities Act form that the company is eligible to use at the time it files the amendment, even if the original registration statement was filed on a different form (i.e., if the original registration statement was filed on Form S-1 but at the time that the company files an amendment to the registration statement the company is eligible to use Form S-2, the company may file the amendment under the rules applicable to Form S-2).

Form SR, the use of proceeds report for IPOs, has been eliminated. The information previously required by Form SR must now be included in the company's first periodic Exchange Act report following the effectiveness of the registration statement and thereafter in each of its periodic Exchange Act reports until the company has disclosed the use of all of the proceeds or the termination of the offer. Form 20-F has also been amended to require foreign private issuers to disclose use of proceeds information in their annual reports.

Form 8-B, the registration statement for certain successor issuers, has been eliminated and Rule 12g-3 under the Exchange Act has been amended to provide for reporting by successor issuers.

(Securities Act Release No. 7431, Exchange Act Release No. 38850, July 18, 1997)

B. Market Risk Disclosure

The SEC earlier this year adopted new rules which require companies to provide expanded disclosure with respect to market risk sensitive instruments (e.g., derivative financial instruments, other financial instruments and derivative commodity instruments). The new rules require two types of disclosure: (1) disclosure of accounting policies for market risk sensitive instruments and (2) disclosure of quantitative and qualitative information about market risk inherent in market risk sensitive instruments.

The new accounting policy disclosure requirements (contained in new Rule 4.08(n) of Regulation S-X and Item 310 of Regulation S-B) became effective June 15, 1997. Companies must provide the required accounting policy disclosure in filings that include financial statements for either an annual or interim fiscal period ending after June 15, 1997. Foreign private issuers filing financial statements under Item 17 of Form 20-F are exempt from the disclosure requirements. The new rules require disclosure of seven derivative accounting policy items in the footnotes to financial statements.

The new requirement to provide quantitative and qualitative information about market risk (new Item 305 of Regulation S-K and Item 9A of Form 20-F) also became effective June 15, 1997 but companies are being phased-in in two groups over the next year. All companies with market capitalizations of more than $2.5 billion on January 28, 1997 and all banks and thrifts of any size market capitalization must provide the required quantitative and qualitative market risk disclosure in filings that include audited financial statements for fiscal years ended after June 15, 1997. All other companies must include the disclosure in filings that include audited financial statements for fiscal years ended after June 15, 1998. Interim information is not required until after the first fiscal year end in which the new disclosure rules are effective. Small business issuers and registered investment companies are exempt from the disclosure requirements.

The new rules require companies to furnish quantitative information using one or more of three prescribed methods (tabular presentation, sensitivity analysis and value at risk). The new rules also require a description of (a) primary market risk exposures as of the latest fiscal year, (b) how those exposures are managed and (c) changes in either (a) or (b). The required disclosure should be placed outside the financial statements and related notes thereto and must also be included in the annual report delivered to shareholders.

Quantitative and qualitative information about market risk sensitive instruments which is provided outside the financial statements and related notes thereto will be deemed to constitute forward looking statements for purposes of the safe harbors for forward looking statements provided in Section 27A of the Securities Act and Section 21E of the Exchange Act. Third parties, such as auditors, who assist in compiling the required information, will also be covered by the safe harbor.

The SEC staff recently issued a publication of frequently asked questions and answers about the new market risk disclosure rules, which may be helpful in the preparation of a company's quarterly or annual reports. Copies of this publication can be obtained from the SEC's website (http://www.sec.gov/rules/othern/derivfaq.htm) or by calling either of us in the New York office.

(Securities Act Release No. 7386, Exchange Act Release No. 38223, January 31, 1997)

C. Revised EDGAR Rules

Because the phase-in of the EDGAR system has been completed, the SEC has adopted revised rules governing the submission of filings and other documents via EDGAR. Among other technical amendments, the transition rules (Rules 901, 902 and 903 of Regulation S-T) regarding the phase-in of registrants have been eliminated. Under new Rule 601 (which tracks old rule 901), foreign private issuers are not required to file electronically unless they are filing jointly with a domestic registrant or acting as a third party filer with respect to such a registrant. Foreign private issuers may choose to file electronically in most situations, where supportable by the EDGAR system. In addition, if a foreign private issuer engages in an exchange offer, merger or other business combination with a domestic registrant, the parties can file the registration statement and related documents on paper if the domestic registrant will not be a reporting company when the transaction if completed. Under new Rule 101, the first electronic amendment to a paper-filed Schedule 13D or 13G no longer needs to include a restatement of the entire text of the schedule, but only the amended portions of such schedule. In addition, under new Rule 304(d), companies no longer need to send to the SEC staff a paper copy of the performance graph required in proxy statements.

(Securities Act Release No. 7427, Exchange Act Release No. 38798, July 1, 1997)

D. Elimination of Social Security Numbers

The SEC has eliminated those portions of forms and schedules filed under the Securities Act, Exchange Act, Investment Company Act, Holding Company Act and Trust Indenture Act that request filers who are natural persons to furnish their Social Security numbers. Among the revised forms are Forms 3, 4 and 5, Form 144 and Schedules 13D, 13G and 14D-1. The SEC is in the process of preparing new versions of the Forms. Until revised forms are available, filers are requested to leave blank the line for their social security number.

(Securities Act Release No. 7424, Exchange Act Release No. 38771, June 25, 1997)

A. Disclosure of Non-GAAP Financial Measures

The SEC staff has provided guidance for reporting of non-GAAP financial measures such as EBITDA (earnings before interest, taxes, depreciation and amortization) or FFO (funds from operations) by registrants in their disclosure documents. The SEC staff recommends that non-GAAP measures generally be avoided unless management believes that the measure provides relevant and useful information. If a non-GAAP measure is used, it should not be presented with greater prominence than conventionally computed earnings or cash flows and should be located within an "other data" section in selected financial data. Wherever a non-GAAP measure is used, a footnote or other reference with a complete explanation of its calculation and components should be provided and should inform investors that the non-GAAP measure may not be comparable to similarly titled measures reported by other companies. In addition, if the non-GAAP measure is presented as an alternative or pro forma measure of performance, the SEC staff discourages adjustments to eliminate or smooth nonrecurring, infrequent or unusual items. The SEC also recommends that presentation of cash flow per share be avoided unless substantially all cash flow is distributed to investors annually.

B. Related Public and Private Offerings

According to the SEC staff and consistent with the staff's longstanding position, a company which files a registration statement for a specific securities offering but then decides to withdraw the registration statement and complete the offering under a Section 4(2) exemption would not be able to avail itself of the Section 4(2) exemption, as the filing of the registration statement would be deemed to constitute a "general solicitation." In addition, the SEC staff has addressed the situation where a company files a registration statement to register issuances of securities to purchasers who are committed to purchase securities from the issuer prior to filing on the condition that the securities be registered prior to issuance. According to the SEC staff, because it appears that offers were made and commitments obtained in reliance upon the Section 4(2) exemption, the registration statement should cover resales by the purchasers, and not the issuances to the purchasers.

C. Registration Issues Arising in Certain Mergers

Where a negotiated merger or other business combination between a registrant and another entity has been submitted to a shareholder vote and a third party submits a competing proposal involving acceptance of the third party's securities as consideration, the SEC staff has suggested that communications by the third party which disclose price and other material terms of the competing transaction may be deemed an "offer to sell" thereby requiring compliance with the registration requirements. In addition, in a negotiated stock-for-stock merger, communications made prior to the filing of a registration statement may constitute market conditioning if they exceed obligations under antifraud and stock exchange rules, but in any event, such communications must also then be reflected in the subsequently filed offering documents.

D. Investment Banking Firm Disclaimers

The SEC staff has discouraged the use of disclaimers of responsibility to shareholders with respect to a fairness opinion rendered by a financial advisor to a Board of Directors which is contained in proxy statements and other SEC filings in connection with a merger or other extraordinary transaction. The SEC staff has requested that any direct or indirect disclaimer of responsibility to shareholders be deleted from disclosure documents or that the disclaimer include an explanation clarifying certain legal issues raised thereby.

E. Year 2000 Computer Problem

According to a staff legal bulletin, companies must disclose any material financial impact that may arise from the Year 2000 computer problem, whereby, due to design of computer systems, computer applications could fail or create erroneous results if not corrected. A company should consider disclosure in "Management's Discussion and Analysis of Financial Condition and Results of Operations" if the company anticipates that the costs of addressing the problem or the consequences of incomplete or untimely resolution will have a material adverse effect on the company's operations and financial condition.

On August 25, 1997, the Nasdaq Stock Market adopted new requirements to strengthen the quantitative and qualitative requirements for issuers listing on Nasdaq. The changes have been approved by the SEC and increase the threshold criteria required to qualify for listing on the Nasdaq National Market and the Nasdaq SmallCap Market. Companies failing to satisfy the new continued listing requirements will be allowed six months to comply with the new requirements. The most significant of the changes to the National and SmallCap Market listing requirements are summarized below.

$1 minimum bid price required for common and preferred stock.

Increase in quantitative requirements.

Adoption of market capitalization alternative test for listing on the Nasdaq National Market.

Adoption of peer review requirement for independent auditors for Nasdaq-listed companies.

Adoption of corporate governance requirements for listing on the Nasdaq SmallCap Market.

Because of the changes to the listing requirements, the Nasdaq listing application has been revised and new application packages are now available from the NASD.

Any filer who anticipates submitting SEC filing fees via wire transfer should be aware that the Federal Reserve has mandated changes in the FEDWIRE instructions. These changes affect the format of the wire transfer (e.g. numeric tags have replaced the alphabetic acronym field identifiers) and take effect between June 23, 1997 and December 29, 1997 (depending on the initiating bank and/or wire service's agreement with the Federal Reserve).