Bond Bank of Scotland 7.754% ( XS0109139427 ) in GBP

Bank of Scotland

100 % ⇌

United Kingdom

XS0109139427 ( in GBP )

7.754% per year ( payment 2 times a year)

Perpetual

Prospectus brochure of the bond Bank of Scotland XS0109139427 en GBP 7.754%, maturity Perpetual

31/05/2025 ( In 33 days )

Bank of Scotland is a major commercial bank operating in Scotland, part of the Lloyds Banking Group since 2008.

Bank of Scotland issued a perpetual GBP-denominated bond (ISIN: XS0109139427) currently trading at 100% of face value, offering a 7.754% coupon rate with semi-annual payments.

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PRELIMINARY OFFERING CIRCULAR DATED FEBRUARY 23, 2000
ein. The
elied upon by
ed to her
Bank of Scotland Capital Funding L.P.
eferr
£250,000,000
8.117% Non-cumulative Perpetual Preferred Securities, Class A
ests r
and
£150,000,000
7.754% Non-cumulative Perpetual Preferred Securities, Class B
orm and should not be r
each having the benefit of a subordinated guarantee of
ein) or any inter
The Governor and Company of the Bank of Scotland
(established by an Act of the Parliament of Scotland in 1695)
Issue price: £1,000 per Class A Preferred Security
cular in its final f
(equal to 100% of its liquidation preference)
estment in Bank of Scotland Capital Funding L.P. must bev
Issue price: £1,000 per Class B Preferred Security
(equal to 100% of its liquidation preference)
The £250,000,000 8.117% Non-cumulative Perpetual Preferred Securities, Class A (the ``Class A Preferred Securities'') and the £150,000,000
ed Securities (as defined her
7.754% Non-cumulative Perpetual Preferred Securities, Class B (the ``Class B Preferred Securities'' and, together with the Class A Preferred
horities. Any in
Securities, the ``Preferred Securities'') each with a liquidation preference of £1,000 (the ``Liquidation Preference''), comprising limited partnership
eferr
ent in the offering cir
interests in Bank of Scotland Capital Funding L.P. (the ``Issuer''), are proposed to be in issue on March 14, 2000 (the ``Issue Date''). The Preferred
Pr
Securities will entitle holders to receive non-cumulative preferential cash distributions (``Distributions'') in arrear on May 31 and November 30 in
each year, subject to certain conditions described herein. From (and including) the Issue Date to (but excluding) May 31, 2010 in the case of the
Class A Preferred Securities, or May 31, 2021 in the case of the Class B Preferred Securities, Distributions will be at a fixed rate per annum of
or any
8.117% of the Liquidation Preference in the case of the Class A Preferred Securities, or 7.754% of the Liquidation Preference in the case of the
egulatory aut
Class B Preferred Securities. From (and including) May 31, 2010 in the case of the Class A Preferred Securities, or May 31, 2021 in the case of the
Class B Preferred Securities, Distributions will be at a rate calculated as the sum of the Reference Rate and a Margin (each as defined herein). See
ant rv
``Description of the Preferred Securities -- Distributions''.
ele
Investors should be aware that the Issuer is a Jersey limited partnership and is not a legal entity separate from its partners. All obligations of the
Issuer to make payment in respect of the Preferred Securities are guaranteed on a subordinated basis pursuant to a guarantee dated March 14, 2000
e commitments f
(the ``Guarantee'') given by the Governor and Company of the Bank of Scotland (``Bank of Scotland'' or the ``Bank''). See ``Description of the
ed by rv
Guarantee''.
o
The Preferred Securities are perpetual securities and not subject to any mandatory redemption provisions. The Preferred Securities may be
redeemed, at the option of Bank of Scotland Capital Funding (Jersey) Limited, as general partner of the Issuer (the ``General Partner''), on May 31,
2010 or on each fifth anniversary thereafter, in the case of the Class A Preferred Securities, or on May 31, 2021 or on each fifth anniversary
thereafter in the case of the Class B Preferred Securities, in whole, but not in part, at an amount equal to the Optional Redemption Price, subject to
satisfaction of the Redemption Conditions (each as defined herein). The Preferred Securities are also redeemable, subject to satisfaction of certain
conditions, in whole but not in part, at any time following the occurrence of a Tax Event or a Regulatory Event (each as defined herein). Under
ection, completion, modification and amendm
existing requirements, neither the Issuer nor the Bank nor any of its subsidiaries may redeem or purchase any Preferred Securities unless the
Financial Services Authority, or any successor organisation thereto, (the ``FSA'') in the United Kingdom has given its prior written consent. See
``Description of the Preferred Securities -- Redemption and Purchase''.
vitation to subscribe or mak
In the event of the dissolution or winding-up of the Issuer, holders of Preferred Securities will be entitled, subject to satisfaction of certain
conditions, to receive a Liquidating Distribution (as defined herein). See ``Description of the Preferred Securities -- Liquidating Distributions''.
Upon the occurrence of a Substitution Event (as defined herein), the Preferred Securities will, subject as provided herein, be substituted by the
Substitute Stock (as defined herein). See ``Description of the Preferred Securities -- Substitution by Substitute Stock''.
The Preferred Securities are expected to be assigned on issue a rating of BBB+ by Standard and Poor's Rating Services, a division of The
McGraw Hill Companies, Inc. (``Standard and Poor's'') and ``a1'' by Moody's Investors Service, Inc (``Moody's''). A credit rating is not a
recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the relevant rating agency.
Application has been made to list the Class A Preferred Securities and the Class B Preferred Securities on the Luxembourg Stock Exchange.
eliminary and is subject to corr
See ``Investment Considerations'' for a discussion of certain factors that should be
considered by prospective investors.
cular and not on this document.
The Preferred Securities have not been registered under the Securities Act (as defined herein) or any U.S. State securities laws and,
cular is pr
subject to certain exceptions, may not be offered or sold within the United States except to qualified institutional buyers in accordance with
Rule 144A under the Securities Act (``Rule 144A''). For a description of restrictions on resales or transfers, see ``Notice to Investors''.
The Preferred Securities sold in the United States pursuant to Rule 144A will be represented by a single global certificate for each
class in registered form (the ``Restricted Global Certificates''). The Preferred Securities sold outside the United States pursuant to
Regulation S under the Securities Act (``Regulation S'') will be represented by a single global certificate for each class in registered form
(the ``Regulation S Global Certificates'' and, together with the Restricted Global Certificates, the ``Global Certificates''). The Global
Certificates will be registered in the name of a nominee of, and will be deposited with a common depositary for, Morgan Guaranty Trust
pose. The issue of this document on behalf of any person has not been appr
Company of New York, Brussels office, as operator of the Euroclear System (``Euroclear'') and Clearstream Banking, soci´et´e anonyme
(``Clearstream, Luxembourg'') on or around the Issue Date.
cular does not constitute or contain any offer to sell or in
or any pur
CREDIT SUISSE FIRST BOSTON
MORGAN STANLEY DEAN WITTER
LEHMAN BROTHERS
ormation contained in this offering cir
This offering cir
inf
any person f
solely on the basis of the final offering cir Dated: March 10, 2000

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Each of the General Partner (in relation to itself, the Issuer and the Preferred Securities only) and the Bank
confirms, after having made all reasonable enquiries, that this Offering Circular contains all information with
regard to the Issuer, the Group (as defined herein) and the Preferred Securities which is material in the context of
the issue of the Preferred Securities, that the information contained in this Offering Circular is true and accurate
in all material respects and is not misleading, that the opinions and intentions expressed in this Offering Circular
are honestly held and that there are no other facts the omission of which makes this Offering Circular as a whole
or any such information or the expression of any such opinions or intentions misleading. Each of the General
Partner and the Bank accepts responsibility accordingly.
No person has been authorised to give any information or to make any representation not contained in this
document and, if given or made, such information or representation must not be relied upon as having been
authorised by the Issuer, the General Partner, the Bank or the Managers (as defined herein). Neither the delivery
of this document nor any subscription, sale or purchase made in connection herewith shall, in any circumstances,
create any implication that there has been no change in the affairs of the Issuer, the General Partner, the Bank or
the Group since the date hereof.
Prospective investors should inform themselves as to the legal requirements and tax consequences within the
countries of their residence and domicile for the acquisition, holding or disposal by them of Preferred Securities
and any foreign exchange restrictions that might be relevant to them. This Offering Circular does not constitute
an offer of or an invitation by or on behalf of the Issuer or any of its partners, the Bank or the Managers to
subscribe for or purchase any of the Preferred Securities.
Investors should satisfy themselves that they understand all the risks associated with making investments in
the Preferred Securities. If a prospective investor is in any doubt whatsoever as to the risks involved in investing
in the Preferred Securities, he should consult his professional advisers. This Offering Circular does not constitute
investment advice or a recommendation to buy, subscribe for or underwrite any Preferred Securities by the
Issuer, the General Partner, the Bank or the Managers.
EACH PURCHASER OF THE PREFERRED SECURITIES MUST COMPLY WITH ALL
APPLICABLE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTION IN WHICH IT
PURCHASES, OFFERS OR SELLS THE PREFERRED SECURITIES OR POSSESSES OR
DISTRIBUTES THIS OFFERING CIRCULAR AND MUST OBTAIN ANY CONSENT, APPROVAL OR
PERMISSION REQUIRED BY IT FOR THE PURCHASE, OFFER OR SALE BY IT OF THE
PREFERRED SECURITIES UNDER THE LAWS AND REGULATIONS IN FORCE IN ANY
JURISDICTION TO WHICH IT IS SUBJECT OR IN WHICH IT MAKES SUCH PURCHASES,
OFFERS OR SALES, AND NONE OF THE BANK OR THE MANAGERS SHALL HAVE ANY
RESPONSIBILITY THEREFOR.
Investors in the Preferred Securities will be deemed to have represented that they do not own, directly or
indirectly, 10% or more of the ordinary stock of the Bank. If at any time an investor in the Preferred Securities
owns, directly or indirectly, 10% or more of the ordinary stock of the Bank, the Issuer will have the right to
suspend payment of Distributions in respect of such investor's Preferred Securities. Investors in the Preferred
Securities are required to provide written notice to the General Partner on behalf of the Issuer if at any time any
such holder of Preferred Securities owns, directly or indirectly, 10% or more of the ordinary stock of the Bank.
The distribution of this document and the offering of the Preferred Securities in certain jurisdictions may be
restricted by law. Persons into whose possession this document comes are required by the Issuer, the Bank and
the Managers to inform themselves about, and to observe, any such restrictions. In particular, there are
restrictions on the distribution of this Offering Circular, and the offer and sale of the Preferred Securities, in the
United States and the United Kingdom. See ``Notice to Investors'' and ``Subscription and Sale.''
No action has been taken to permit a public offering of the Preferred Securities in any jurisdiction where
action would be required for such purpose. Accordingly, the Preferred Securities may not be offered or sold,
directly or indirectly and this Offering Circular may not be distributed in any jurisdiction, except in accordance
with the legal requirements applicable in that jurisdiction. In particular, the Preferred Securities have not been,
and will not be, registered under the United States Securities Act of 1933, as amended (the ``Securities Act'').
2

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Subject to certain exceptions, the Preferred Securities may not be offered, sold or delivered within the United
States or to U.S. persons. A further description of certain restrictions on the offering and sale of the Preferred
Securities and on the distribution of this document is given under ``Subscription and Sale''.
The Jersey Financial Services Commission (the ``Commission'') has given and has not withdrawn its consent
under Article 4 of the Control of Borrowing (Jersey) Order 1958 to the creation by the Issuer of the Preferred
Securities. The Commission is protected by the Borrowing (Control) (Jersey) Law 1947, as amended, against
liability arising from the discharge of its functions under that Law.
INVESTORS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED (``ERISA''), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE ``CODE''), SHOULD CONSULT WITH THEIR ADVISORS AS TO THE
APPROPRIATENESS OF THEIR INVESTMENT IN THE PREFERRED SECURITIES UNDER ERISA
AND/OR SECTION 4975 OF THE CODE.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
(``RSA 421-B'') WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY
SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF NEW HAMPSHIRE
HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR
GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE,
OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
FORWARD-LOOKING STATEMENTS
This Offering Circular contains various forward-looking statements regarding events and trends that are
subject to risks and uncertainties that could cause the actual results and financial position of the Bank or the
Group to differ materially from the information presented herein. When used in this Offering Circular, the words
``estimate'', ``project'', ``intend'', ``anticipate'', ``believe'', ``expect'', ``should'' and similar expressions, as they
relate to the Group and its management, are intended to identify such forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date
hereof. The Group does not undertake any obligation to publicly release the result of any revisions to these
forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
PRESENTATION OF FINANCIAL INFORMATION
The Financial Statements are prepared in accordance with generally accepted accounting principles in the
United Kingdom (``U.K. GAAP''). U.K. GAAP relevant to the Group differs from generally accepted accounting
principles in the United States (``U.S. GAAP'') in certain material aspects. For a discussion of material
differences between U.K. GAAP and U.S. GAAP relevant to the Financial Statements, see ``Summary of Material
Differences Between U.K. GAAP and U.S. GAAP''.
In this Offering Circular, references to ``£'', ``sterling'' and ``pounds sterling'' are to the lawful currency of
the United Kingdom; references to ``U.S.$'', ``$'' and ``U.S. dollars'' are to the lawful currency of the United
States; references to ``4'' or ``Euro'' are to the currency established for participating members of the European
Union as of the beginning of stage three of European Monetary Union on January 1, 1999; references to ``A$''
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are to the lawful currency of Australia; references to ``NZ$'' are to the lawful currency of New Zealand;
references to ``DFL'' are to the lawful currency of The Netherlands and references to ``¥'' or ``Yen'' are to the
lawful currency of Japan. Merely for convenience, this Offering Circular contains translations of certain sterling
amounts into U.S. dollars at specified rates. These translations should not be construed as representations that the
sterling amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate
indicated. See ``Exchange Rate and Currency Information''.
Unless otherwise indicated, any reference in this Offering Circular to the ``Financial Statements'' is to the
audited Consolidated Financial Statements (including the notes thereto) of the Group included in this Offering
Circular. Any reference to the ``Interim Consolidated Financial Statements'' is to the unaudited interim
Consolidated Financial Statements of the Group (including the notes thereto) included in Annex A to this
Offering Circular.
For the purposes of the presentation of financial information, the term ``Group'' refers to Bank of Scotland
together with its consolidated subsidiaries (including, among others, Capital Bank plc (``Capital Bank''), Bank of
Western Australia Limited (``BankWest''), The British Linen Bank Limited (``British Linen Bank''), Bank of
Wales plc (``Bank of Wales'') and Countrywide Banking Corporation Limited (``Countrywide'')); the term
``Bank'' refers to the Group excluding the following Bank of Scotland subsidiaries (and their respective
consolidated subsidiaries): Capital Bank, BankWest, British Linen Bank, Bank of Wales and Countrywide.
Financial information presented for each of these excluded entities includes information with respect to such
entity's consolidated subsidiaries.
The Group prepares its Consolidated Financial Statements on the basis of a financial year (a ``fiscal year'')
beginning on March 1 and ending on the last day of February of the following year. For the periods up to
February 28, 1994, the accounts of the Bank's subsidiaries, Capital Bank (formerly NWS BANK plc) and
Countrywide were prepared on the basis of a fiscal year beginning on January 1 and ending on December 31 and
the accounts of British Linen Bank Group Limited (with effect from March 2, 1998, The British Linen Bank
Limited, which became the new holding company of the British Linen Bank group of companies) were prepared
on the basis of a fiscal year beginning on February 1 and ending on January 31 of the following year. These
subsidiaries (including Countrywide until its disposal in September 1998) now report coterminously with the
Bank. As a result, financial information extracted from the Group's consolidated financial statements for the year
ended February 28, 1995 contained accounts for 12, 13 and 14 month periods as the relevant subsidiaries aligned
their accounting years with that of the Bank. References to a year in this Offering Circular are, unless otherwise
indicated, references to the Group's fiscal year ended on the last day of February of such year. In this Offering
Circular, financial and statistical information is, unless otherwise indicated, stated on the basis of such fiscal year.
Financial information with respect to BankWest, in which the Bank currently has a 55.39% interest, is presented
in accordance with U.K. GAAP on a fully consolidated basis. The Bank's ownership interest in BankWest has
increased from 51% in 1995, reflecting the Bank's policy of applying dividends received from BankWest to
increase its ownership interest.
In this Offering Circular, all references to ``billions'' are references to one thousand millions. Due to
rounding, the numbers presented throughout this Offering Circular may not add up precisely, and percentages
may not precisely reflect absolute figures.
Certain financial and statistical information in this Offering Circular is presented separately for domestic and
foreign activities. Foreign activities include transactions in which the debtor or customer is domiciled outside the
United Kingdom. For the purposes of such financial and statistical information, the United Kingdom includes the
Channel Islands and the Isle of Man.
ENFORCEMENT OF LIABILITIES; SERVICE OF PROCESS
The Bank is a U.K. clearing bank established by an Act of the Parliament of Scotland in 1695 with its
headquarters in Edinburgh. All of the directors and executive officers of the Bank are non-residents of the United
States. All or a substantial portion of the assets of such non-resident persons and of the Bank are located outside
the United States. As a result, it may not be possible for investors to effect service of process within the United
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States upon such persons or the Bank or to enforce against them in U.S. courts judgments obtained in such courts
predicated upon civil liability provisions of the federal securities laws of the United States. The Bank has been
advised by its solicitors, Tods Murray W.S., that there is doubt as to the enforceability in the United Kingdom in
original actions or in actions for the enforcement of judgments of U.S. courts, of civil liabilities predicated upon
the federal securities laws of the United States.
IN CONNECTION WITH THE OFFERING, MORGAN STANLEY & CO. INTERNATIONAL
LIMITED MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILISE OR MAINTAIN
THE MARKET PRICE OF THE PREFERRED SECURITIES AT LEVELS WHICH MIGHT NOT
OTHERWISE PREVAIL. SUCH STABILISING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME. ANY SUCH STABILISING SHALL BE IN COMPLIANCE WITH APPLICABLE LAWS,
REGULATIONS AND RULES.
EXCHANGE RATE AND CURRENCY INFORMATION
The following table shows the period end, average, high and low noon buying rates, based on the noon
buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the
Federal Reserve Bank of New York (the ``Noon Buying Rate''), for the pound sterling, expressed in U.S.$ per
£1.00, for the periods indicated.
U.S.$ per £1.00 for the year ended February 28/29,
Period End
Average(1)
High
Low
1995 ************************************************
1.55
1.58
1.64
1.53
1996 ************************************************
1.71
1.57
1.72
1.49
1997 ************************************************
1.64
1.64
1.70
1.58
1998 ************************************************
1.66
1.66
1.72
1.61
1999 ************************************************
1.60
1.66
1.72
1.60
2000 ************************************************
1.58
1.61
1.68
1.55
(1) The average of the Noon Buying Rates on the last business day of each month during the relevant period.
Fluctuations in exchange rates that have occurred in the past are not necessarily indicative of fluctuations in
the rate that may occur at any time in the future. No representations are made herein that the pound sterling
amounts referred to herein could have been or could be converted into U.S. dollars at any particular rate.
5

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NOTICE TO INVESTORS
Because of the following restrictions, purchasers are advised to consult legal counsel prior to making any
offer, resale, pledge or transfer of Preferred Securities.
Each purchaser of Preferred Securities offered hereby will be deemed to have represented and agreed as set
out below. Terms used in this section have meanings as defined in Rule 144A or in Regulation S.
(1)
(a) It is a qualified institutional buyer (a ``QIB'') within the meaning of Rule 144A and it is acquiring
such Preferred Securities for its own account or for the account of another QIB, and it is aware, and
each beneficial owner of such Preferred Securities has been advised, that the sale of such Preferred
Securities to it is being made in reliance on Rule 144A or (b) it is acquiring the Preferred Securities in
an offshore transaction within the meaning of Regulation S and it is not a U.S. person (and is not
acquiring the Preferred Securities for the account or benefit of a U.S. person) within the meaning of
Regulation S.
(2)
It understands that the Preferred Securities have not been, and will not be, registered under the
Securities Act and may not be offered, resold, pledged or otherwise transferred except (i) to a
purchaser that the holder reasonably believes is a QIB within the meaning of Rule 144A purchasing
for its own account or for the account of another QIB, in a transaction meeting the requirements of
Rule 144A; (ii) in an offshore transaction in accordance with Rule 903 or 904 of Regulation S; or
(iii) pursuant to an exemption under the Securities Act provided by Rule 144 thereunder (if available)
and, in each case, in accordance with the applicable securities laws of any State of the United States.
No representation can be made as to the availability of the exemption provided by Rule 144 for
resales of Preferred Securities.
(3)
It understands that the Preferred Securities will bear a legend to the following effect, unless the Bank
determines otherwise in compliance with applicable law:
``THE PREFERRED SECURITIES EVIDENCED HEREBY HAVE NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE ``SECURITIES ACT'') AND MAY NOT AS A MATTER OF U.S. LAW BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER, IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A; (2) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE
SECURITIES ACT OR (3) OTHERWISE PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS''.
(4)
(a) The purchaser is not an ``employee benefit plan'' as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (``ERISA''), a plan described in Section
4975(e)(1) of the Internal Revenue Code of 1986, as amended (the ``Code''), or an entity whose
underlying assets include plan assets by reason of a plan's investment in the entity, or a governmental
plan which is subject to any federal, state or local law that is substantially similar to the provisions of
Section 406 of ERISA or Section 4975 of the Code or (b) the purchaser's acquisition and ownership
of Preferred Securities will not result in a non-exempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code (or, in the case of a governmental plan, a violation of any
substantially similar federal, state or local law).
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(5)
It acknowledges that the Bank, the Managers and their respective affiliates and others will rely upon
the truth and accuracy of the foregoing acknowledgements, representations and agreements. If it is
acquiring any Preferred Securities for the account of one or more QIBs, it represents that it has sole
investment discretion with respect to each such account and that it has full power to make the
foregoing acknowledgements, representations and agreements on behalf of each such account.
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TABLE OF CONTENTS
Page
Summary of the Offering *****************************************************************
9
Use of Proceeds*************************************************************************
18
Investment Considerations ****************************************************************
19
Bank of Scotland Capital Funding L.P. ******************************************************
20
Capitalisation of Bank of Scotland *********************************************************
22
Dividend Policy *************************************************************************
23
Selected Consolidated Financial Information *************************************************
24
Management's Discussion and Analysis of Financial Condition and Results of Operations ************
27
Description of Business ******************************************************************
58
Management ***************************************************************************
69
Stock Ownership ************************************************************************
71
Description of Capital Stock **************************************************************
72
Description of the Preferred Securities ******************************************************
80
Summary of Provisions relating to the Preferred Securities in Global Form ************************
97
Description of the Guarantee **************************************************************
99
Taxation ******************************************************************************* 105
Subscription and Sale ******************************************************************** 110
General Information ********************************************************************* 112
Summary of Material Differences between U.K. GAAP and U.S. GAAP ************************** 114
Annex A -- Bank of Scotland Financial Information ****************************************** F-1
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SUMMARY OF THE OFFERING
The following summary is qualified in its entirety by the more detailed information appearing elsewhere in
this Offering Circular. Prospective investors should consider carefully the factors set forth under ``Investment
Considerations''.
Bank of Scotland
Bank of Scotland and its subsidiaries are a diversified financial services group engaged in banking, insurance
broking and financial services and finance-related activities throughout the United Kingdom and internationally.
The Bank, which was established by an Act of the Parliament of Scotland in 1695, is headquartered in Edinburgh.
It is a U.K. clearing bank and an ``authorised institution'' under the Banking Act 1987. In addition to clearing
services, the Group provides a range of banking services to corporate and personal customers in the United
Kingdom and abroad, including commercial loans, property finance, letters of credit, overdraft facilities, credit
card services, foreign exchange, treasury services, lease financing and factoring services.
As at August 31, 1999, the Group operated from locations throughout the world, including 320 branch
outlets in Scotland and 23 branch outlets in London and other regional commercial centres in England, as well as
from overseas branches in New York City, Hong Kong, Paris, Amsterdam and Frankfurt and representative
offices in Chicago, Houston, Jacksonville, Los Angeles, Boston, Seattle, Minneapolis and Singapore. As at
August 31, 1999, the Group employed approximately 20,000 people on a full-time equivalent basis.
The Group's total assets were £66.5 billion as at August 31, 1999, an increase of 11% over £59.8 billion as
at February 28, 1999. As at August 31, 1999, the Group's proprietors' funds were £3,208 million, compared to
£2,748 million as at August 31, 1998. For the six month period ended August 31, 1999, the Group's operating
profit (before provisions for bad and doubtful debts) was £601 million, an increase of 14% over the corresponding
period in 1998. The Group's return after taxes on average proprietors' equity was 21% (annualised) in the six
month period ended August 31, 1999, compared to 22.5% (annualised) in the corresponding period in 1998. The
Group's return before taxes on average total assets (excluding gains on sales arising from discontinued
operations) was 1.5% (annualised) in the six month period ended August 31, 1999, the same as in the
corresponding period in 1998. The Group's cost to income ratio (operating expenses to total income) was 48.2%
in the six month period ended August 31, 1999, compared to 49.9% in the corresponding period in 1998.
Moody's currently rates the Group's long term senior debt securities Aa3 and Standard & Poor's currently rates
the Group's long term senior debt securities A+.
The Group's business has historically been organised and as a result reported along the lines of its principal
operating subsidiaries. In the United Kingdom, the Group operates through the Bank (which includes for
operational and reporting purposes Bank of Scotland Treasury Services Plc (``Treasury Services'')) and operates
through its principal wholly-owned U.K. subsidiaries: Capital Bank, British Linen Bank and Bank of Wales. In
Australia, the Bank operates through BankWest, in which it has a 55.39% interest.
In January 1999, the Bank announced the creation of a new organisational structure for managing the
businesses of the Bank and its direct and indirect U.K. subsidiaries. Since then, the various profit centres that
were previously within divisions of the Bank have been realigned into and report through new structures,
Personal Banking, Business Banking and Corporate Banking and Structured Banking, which are supported by the
Services Division and the Group Office. During the course of 1999, the operations of the Bank's direct and
indirect U.K. subsidiaries, including Capital Bank, British Linen Bank and Bank of Wales, have largely been
realigned to report for management purposes through this new structure. Financial information was reported by
corporate entity until the end of the fiscal year ended February 29, 2000. The operations of BankWest are not
affected by the new structure.
The Bank's Ordinary Stock and its Non-Cumulative Irredeemable Preference Stocks are listed on the
London Stock Exchange. The Head Office of the Bank is located at The Mound, Edinburgh EH1 1YZ, Scotland
(telephone (0131) 442-7777).
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On February 14, 2000, an offer by the Bank for all outstanding ordinary shares of National Westminster
Bank Plc (``NatWest Shares'') lapsed. On that same date a competing offer for NatWest Shares by The Royal
Bank of Scotland Group plc became unconditional as to acceptances. The result of the NatWest bid is not
expected to affect the Bank's established strategy, which includes the provision of competitive and innovative
banking products in its core retail and corporate markets through low cost delivery systems.
Summary of the Financing
Bank of Scotland Capital Funding L.P. is the issuer of the Preferred Securities, which are guaranteed on a
subordinated basis by the Bank.
The Preferred Securities sold in the United States pursuant to Rule 144A will be represented by a Restricted
Global Certificate for each class. The Preferred Securities sold outside the United States pursuant to Regulation S
will be represented by a Regulation S Global Certificate for each class. The Global Certificates will be registered
in the name of a nominee of, and will be deposited with a common depositary for, Euroclear and Clearstream,
Luxembourg on or around the Issue Date. The global certificates will be exchangeable in certain limited
circumstances described therein in whole, but not in part, for Preferred Securities in definitive form.
Payments in respect of the Preferred Securities will be made without deduction for or on account of
withholding requirements with respect to income taxes, subject to certain limited exceptions. For a more detailed
discussion of U.S. and U.K. tax considerations, see ``Taxation''.
Summary of Terms of the Preferred Securities and the Guarantee
This summary does not purport to be complete and is qualified in its entirety by reference to the detailed
information appearing in ``Description of the Preferred Securities'' and ``Description of the Guarantee''.
Issuer *********************** Bank of Scotland Capital Funding L.P., a subsidiary undertaking of the
Bank established for an unlimited duration as a limited partnership in
Jersey and registered under the Limited Partnerships (Jersey) Law, 1994.
See ``Bank of Scotland Capital Funding L.P.''.
General Partner ************** Bank of Scotland Capital Funding (Jersey) Limited, a wholly owned
subsidiary of, and fully controlled by, the Bank, incorporated in Jersey
with limited liability and resident in Jersey for U.K. tax purposes, is the
sole general partner in the Issuer and, as such, solely manages the Issuer.
Guarantor ******************* The Governor and Company of the Bank of Scotland, established by an
Act of the Parliament of Scotland in 1695.
Issue ************************ £250,000,000 8.117% Non-cumulative Perpetual Preferred Securities,
Class A and £150,000,000 7.754% Non-cumulative Perpetual Preferred
Securities, Class B, each with a liquidation preference of £1,000,
comprising limited partnership interests in the Issuer.
The total Liquidation Preference will be included as Tier 1 capital in the
Bank's solo-consolidated accounts prepared in accordance with the capital
adequacy requirements of the FSA.
Use of Proceeds*************** The proceeds of the issue of the Preferred Securities will be used by the
Issuer, after paying any expenses of the issue, to subscribe for subordinated
cumulative perpetual notes in bearer form (the ``Subordinated Notes'')
issued by the Bank. See ``Use of Proceeds''.
10