Filed pursuant to Rule 424(b)(5)
Registration Statement No. 333-92082
PROSPECTUS SUPPLEMENT
(To Prospectus Dated May 14, 2003)
U.S. $1,500,000,000
SEARS ROEBUCK ACCEPTANCE CORP.
MEDIUM-TERM NOTES SERIES VII
DUE AT LEAST NINE MONTHS FROM DATE OF ISSUE
------------------------
Sears Roebuck Acceptance Corp. ("SRAC") may offer from time to time up to
U.S.$1,500,000,000 (or its equivalent in foreign currencies) of its Medium-Term
Notes Series VII (the "Notes"). SRAC will describe the specific terms of each
Note, which may be different from the terms described in this prospectus
supplement, in pricing supplements to this prospectus supplement. Each Note will
have the following terms:
- A maturity date, which will be at least nine months from the date the Note
is issued;
- A fixed or floating interest rate. (Certain Notes issued at a discount may
not bear interest.) SRAC may determine the interest on floating rate Notes
by using any of the following indexes, as specified in the applicable
pricing supplement, or by using any other rate that SRAC describes in the
applicable pricing supplement:
- CD Rate - LIBOR
- CMT Rate - Prime Rate
- Commercial Paper Rate - Treasury Rate
- Federal Funds Rate
- A currency in which the Note will be denominated, which may be U.S.
dollars or any foreign currency; and
- An interest payment date or dates.
Unless SRAC indicates otherwise in this prospectus supplement or in the
applicable pricing supplement:
- SRAC will not have the right to redeem the Notes prior to their maturity
date, nor will you have the right to require such redemption at your
option;
- SRAC will issue the Notes only in a minimum denomination of U.S.$1,000 or
the approximate equivalent in the foreign currency specified in the
applicable pricing supplement;
- SRAC will issue Notes denominated in U.S. dollars in book-entry form and
Notes denominated in a currency other than U.S. dollars in certificated
form; and
- SRAC will not list the Notes on any securities exchange.
SRAC may offer and sell:
- through its Agents (Barclays Capital Inc., Bear, Stearns & Co. Inc.,
Citigroup Global Markets Inc., Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated)
or through another agent as specified in the applicable pricing
supplement;
- directly to certain institutional investors in jurisdictions where SRAC or
its employees are registered or qualified to make direct offers or in
transactions that do not require registration or qualification; or
- to an Agent as principal for resale to other investors or dealers.
You must pay for the Notes in the currency specified in the applicable
pricing supplement by delivering the purchase price to an Agent or, if SRAC
sells directly to you, to SRAC, unless you make other payment arrangements.
------------------------
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS, INCLUDING THOSE DESCRIBED IN
THE "RISK FACTORS" SECTION BEGINNING ON PAGE S-4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY
PRICING SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
Unless otherwise specified in the applicable pricing supplement, the price
to the public for the Notes will be 100% of the principal amount. SRAC will pay
commissions to the Agents, ranging from .125% to .750% of the principal amount
of each Note sold through or purchased by the Agents (or another percentage that
SRAC negotiates with the Agents), depending upon the stated maturity of the
Note. If SRAC sells all of the Notes to or through the Agents at the commissions
specified above, SRAC expects to receive proceeds of between U.S.$1,488,750,000
and U.S.$1,498,125,000, after paying the Agents' discounts and commissions of
between U.S.$1,875,000 and U.S.$11,250,000 and before deducting expenses payable
by SRAC, including reimbursement of some of the Agents' expenses. On direct
sales by SRAC, SRAC's proceeds will equal the aggregate public offering price of
the Notes sold. The Agents are not required to sell any specific number or
dollar amount of Notes, however they will use their reasonable efforts to sell
the Notes from time to time. SRAC has not set a date for termination of the
offering.
SRAC's address is 3711 Kennett Pike, Greenville, Delaware, 19807, and its
phone number is (302) 434-3100.
------------------------
BARCLAYS CAPITAL
BEAR, STEARNS & CO. INC.
CITIGROUP
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY
SEARS ROEBUCK ACCEPTANCE CORP.
The date of this prospectus supplement is May 14, 2003
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus
supplement, the accompanying prospectus or the applicable pricing supplement.
You must not rely on any unauthorized information or representations. This
prospectus supplement, the accompanying prospectus and the applicable pricing
supplement are offering to sell only the Notes offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus supplement, the accompanying prospectus and the
applicable pricing supplement is current only as of its date.
------------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement and Pricing Supplements.... S-3
Currency Exchange and Other Information..................... S-3
Risk Factors................................................ S-4
Capitalization of Sears Roebuck Acceptance Corp............. S-6
Description of Notes........................................ S-6
Material United States Federal Tax Considerations........... S-17
Plan of Distribution........................................ S-27
Use of Proceeds............................................. S-29
Legal Matters............................................... S-29
Glossary.................................................... S-30
PROSPECTUS
Available Information....................................... 3
Reports to Holders of Debt Securities....................... 3
Incorporation of Certain Documents by Reference............. 3
Sears Roebuck Acceptance Corp............................... 4
Use of Proceeds............................................. 4
Ratio of Earnings to Fixed Charges.......................... 5
Description of Debt Securities.............................. 5
Plan of Distribution........................................ 10
Legal Matters............................................... 11
Experts..................................................... 11
S-2
ABOUT THIS PROSPECTUS SUPPLEMENT
AND PRICING SUPPLEMENTS
This prospectus supplement sets forth certain terms of the Notes that SRAC
may offer. It supplements the "Description of Debt Securities" in the
prospectus. This prospectus supplement supersedes the prospectus to the extent
it contains information that is different from the information in the
prospectus.
Each time SRAC offers Notes, it will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the Notes SRAC is offering and the terms of the offering. The
pricing supplement will supersede this prospectus supplement to the extent it
contains information that is different from the information contained in this
prospectus supplement.
It is important for you to read and consider all information contained in
this prospectus supplement and the accompanying prospectus and pricing
supplement in making your investment decision. You should also read and consider
the information contained in the documents identified in "Available Information"
and "Incorporation of Certain Documents by Reference" in the prospectus.
CURRENCY EXCHANGE AND OTHER INFORMATION
You must pay for the Notes in the currency that SRAC specifies in the
applicable pricing supplement. Currently, the United States has limited
facilities to convert U.S. dollars into foreign currencies, and vice versa.
However, you may establish non-U.S. dollar denominated checking or savings
accounts at U.S. banks in the United States in certain limited circumstances.
SRAC will pay principal and interest to you in the currency it specifies in the
applicable pricing supplement unless that currency is unavailable due to
circumstances beyond SRAC's control. See "Risk Factors" and "Description of
Notes" in this prospectus supplement.
"U.S. dollars," "U.S.$," and "$" in this prospectus supplement refer to the
currency of the United States of America.
S-3
RISK FACTORS
Your investment in the Notes will involve certain risks. This prospectus
supplement, the accompanying prospectus and any applicable pricing supplement do
not describe all of those risks. You should, in consultation with your own
financial and legal advisors, carefully consider the following discussion of
risks before deciding whether an investment in the Notes is suitable for you.
The Notes will not be an appropriate investment for you if you are not
knowledgeable about significant features of the Notes or financial matters in
general. You should not purchase the Notes unless you understand, and know that
you can bear, these investment risks.
The information in this prospectus supplement is directed to prospective
purchasers who are United States residents. If you are a resident of a country
other than the United States, you should consult your own financial and legal
advisors to discuss matters that may affect your purchase, holding or receipt of
payments of principal and interest on the Notes. SRAC disclaims any
responsibility for advising you on these matters.
INDEXED NOTES.
Investment in indexed Notes and foreign currency Notes entails significant
risks that are not associated with similar investments in conventional fixed
rate or floating rate debt securities. These risks include, among others,
fluctuation of the indexes or formulas and the possibility that you will receive
a lower or no amount of principal, premium or interest, and at different times
than you expected. Such risks depend on a variety of interrelated factors,
including economic, financial and political events over which SRAC has no
control. In addition, if an index or formula used to determine any amounts
payable under the Notes contains a multiplier or leverage factor, the multiplier
or leverage factor will magnify the effect of any change in the index or
formula. While values of certain indexes and formulas have at times been highly
volatile and such volatility may be expected to continue in the future, past
experience is not necessarily indicative of what may occur in the future.
EXCHANGE RATES AND EXCHANGE CONTROLS.
Investments in securities denominated in foreign currencies have
significant risks that are not associated with investments denominated in U.S.
dollars. These risks include, without limitation, the possibility that rates of
exchange between the U.S. dollar and foreign currencies may change significantly
and the possibility that either the Unites States or foreign governments will
impose or modify foreign exchange controls. Foreign currency risks generally
depend on economic and political events and the supply of, and demand for, the
relevant currencies, factors over which SRAC has no control. In recent years,
rates of exchange between the U.S. dollar and certain foreign currencies have
been highly volatile, and you may expect that volatility to continue in the
future. Historical fluctuations in any particular exchange rate do not
necessarily indicate, however, the type of fluctuations in the rate that may
occur during the term of any Note. If the currency specified by SRAC for a
particular Note were to depreciate against the U.S. dollar, the effective yield
of the Note would decrease below its interest rate and in certain circumstances
could result in a loss to the investor.
Governments have imposed exchange controls in the past and may do so in the
future. Exchange controls could affect exchange rates and limit the availability
of a foreign currency specified in a pricing supplement at the time a payment on
a Note is due in that currency. Even if governments do not impose exchange
controls, it is possible that a foreign currency will not be available at the
time a payment is due in that currency. If the specified currency is
unavailable, SRAC will make required payments in U.S. dollars as described in
this prospectus supplement on the basis of the market exchange rate in effect on
the date of the payment. If the market exchange rate is not available on that
date, then SRAC will make the payment on the basis of the
S-4
last available market exchange rate. See "Description of Notes--Payment
Currency" and "Description of Notes--General" in this prospectus supplement.
If SRAC denominates Notes in a foreign currency, the applicable pricing
supplement will contain information about the specified currency, including
information about any current foreign exchange controls that apply to the
foreign currency. SRAC will furnish that information for information only and
you should not regard it as indicative of the range of, or trends in,
fluctuations in currency exchange rates that may occur in the future.
The Notes, when denominated in a foreign currency, are not an appropriate
investment for investors who do not have experience with foreign currency
transactions.
THE MARKET VALUE OF THE NOTES MAY BE AFFECTED BY FACTORS IN ADDITION TO CREDIT
RATINGS.
Any credit ratings that are assigned to the Notes program may not reflect
the potential impact of all risks on the market value of the Notes. Nor will the
credit ratings take into account fluctuations in the market value of the Notes
or the possibility that payments on indexed Notes may be less than anticipated
because of changes in the specified index.
SRAC MAY CHOOSE TO REDEEM NOTES WHEN PREVAILING INTEREST RATES ARE RELATIVELY
LOW.
If your Notes will be redeemable at SRAC's option, unless otherwise
specified in any applicable pricing supplement, SRAC may choose to redeem your
Notes at any time and from time to time, especially when prevailing interest
rates are lower than the rate borne by the Notes. If prevailing rates are lower
at the time of redemption, you would not be able to reinvest the redemption
proceeds in a comparable security at an effective interest rate as high as the
interest rate on the Notes being redeemed. SRAC's redemption right also may
adversely impact your ability to sell your Notes as the optional redemption date
or period approaches. SRAC will not be required to (1) issue, exchange or
register the transfer of any Note to be redeemed for a period of 15 days before
a notice of redemption for the Notes is mailed or (2) exchange or register the
transfer of the portion of any Note previously designated for redemption.
SRAC CANNOT ASSURE YOU THAT A TRADING MARKET FOR YOUR NOTES WILL EVER DEVELOP OR
BE MAINTAINED.
In evaluating the Notes, you should assume that you will be holding the
Notes until their stated maturity. The Notes are a new issue of securities. SRAC
cannot assure you that a trading market for your Notes will ever develop, be
liquid or be maintained. Many factors independent of SRAC's creditworthiness
affect the trading market for and market value of your Notes. Those factors
include, without limitation:
- the complexity and volatility of the index or formula applicable to your
Notes;
- the method of calculating the principal, premium and interest for the
Notes;
- the time remaining to the stated maturity of the Notes;
- the outstanding amount of the Notes;
- the redemption or repayment features of the Notes;
- the amount of other debt securities linked to the index or formula
applicable to your Notes; and
- the level, direction and volatility of interest rates generally.
In addition, real or expected changes in SRAC's credit ratings may affect
the market value of your Notes. There may be a limited number of buyers when you
decide to sell your Notes. This may affect the price you receive for your Notes
or your ability to sell your Notes at all. In
S-5
addition, Notes that are designed for specific investment objectives or
strategies often experience a more limited trading market and more price
volatility than those not so designed.
GOVERNING LAW AND JUDGMENTS.
The Notes will be governed by and construed in accordance with the laws of
the State of Delaware. If an action based on the Notes resulted in a judgment
against SRAC in a court in the United States, it is likely that the court would
grant judgment only in U.S. dollars. It is not clear, however, whether in
granting that judgment, the court would use the rate of conversion into U.S.
dollars that would be in effect on the date of default, the date the judgment
was rendered, or some other date.
CAPITALIZATION OF SEARS ROEBUCK ACCEPTANCE CORP.
The following table sets forth SRAC's capitalization as of March 29, 2003.
MARCH 29, 2003
(UNAUDITED)
--------------------------
(U.S. DOLLARS IN MILLIONS)
Debt Payable within one year(1)............................. $ 2,951
Term debt................................................... 11,026
Shareholder's equity(2)..................................... 3,399
-------
Total capitalization(3)..................................... $17,376
=======
---------------
(1) "Debt payable within one year" excludes the current portion of term debt,
which the table includes under "Term debt."
(2) SRAC has 500,000 authorized shares of common stock at a par value of $100.
SRAC had 350,000 shares of common stock outstanding as of March 29, 2003.
(3) As of the date of this prospectus supplement, SRAC's capitalization had not
otherwise changed materially since March 29, 2003.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes being
offered supplements and, to the extent inconsistent with or to the extent
otherwise specified in an applicable pricing supplement, replaces the
description of the general terms and provisions of the debt securities set forth
under the heading "Description of Debt Securities" in the accompanying
prospectus. Unless otherwise specified in an applicable pricing supplement, the
Notes will have the terms described below.
GENERAL
SRAC will issue the Notes under the indenture (the "Indenture") dated as of
October 1, 2002, between SRAC and BNY Midwest Trust Company, as trustee. SRAC
has filed a copy of the Indenture with the Securities and Exchange Commission;
the Indenture is incorporated into this prospectus supplement and the prospectus
by reference. The Notes and the Indenture will be governed by and construed in
accordance with the laws of the State of Delaware.
Each Note will mature at least nine months from the date it is issued. SRAC
may only redeem or repay a Note before its maturity date if it specifies that it
may do so in the applicable pricing supplement. SRAC may not issue more than
$1,500,000,000 of Medium-Term Notes Series VII, which will constitute a single
series of debt securities under the Indenture. SRAC may, from time to time,
without the consent of the registered holders of the Notes, issue additional
Notes or other debt securities having the same terms as previously issued Notes
(other than the
S-6
date of issuance, the date interest, if any, begins to accrue and the offering
price, which may vary) that will form a single issue with the previously issued
Notes.
The Notes will be direct, unsecured and unsubordinated obligations of SRAC
and will rank equally with all of SRAC's other unsecured and unsubordinated
indebtedness from time to time outstanding. The Notes will be identical except
for currency denomination, interest, interest payment dates, maturity date,
issue date and applicable redemption provisions. SRAC will not have to deposit
funds into a sinking fund before the maturity date for any Note.
SRAC will sell the Notes in individual issues. SRAC and each Note's initial
purchaser will mutually agree to the interest rate, maturity date and issue date
for the Note. SRAC will only pay interest and principal on the Notes on
"Business Days" (as defined in the Glossary).
SRAC will pay principal, any premium and interest on each Note in the
currency in which the Note is denominated. Unless SRAC specifies otherwise in
the applicable pricing supplement, SRAC will issue the Notes:
- in a minimum denomination of U.S.$1,000, or in integral multiples of
U.S.$1,000, if the Notes are denominated in U.S. dollars; or
- in a minimum denomination equivalent to U.S.$1,000, rounded down to an
integral multiple of 1,000 units of the currency in which the Notes are
denominated (but in no event rounded down to fewer than 1,000 units of
that currency), and in any larger amount in integral multiples of 1,000
units of that currency (each an "authorized denomination"), if the Notes
are denominated in a currency other than U.S. dollars.
SRAC will determine the market exchange rate for the applicable currency as
of the day before it accepts a purchase order for a Note, and will determine the
minimum denomination for that Note based on that market exchange rate. The
market exchange rate for a currency on a particular date is the noon buying rate
in The City of New York for cable transfers of that currency as certified for
customs purposes by the Federal Reserve Bank of New York.
INTEREST RATE
GENERAL
Unless SRAC specifies otherwise in the applicable pricing supplement, each
Note will bear interest at either a fixed or floating rate for the periods:
- from and including the date the Note was issued to, but excluding, the
first interest payment date;
- from and including each interest payment date to, but excluding, the next
interest payment date; and
- from and including the interest payment date immediately preceding the
maturity date or redemption date to, but excluding, the maturity date or
redemption date.
SRAC will pay interest (other than defaulted interest) on the interest
payment dates to those who are registered holders of Notes on the applicable
record date as described in "Description of Notes--Interest Rate--Fixed Rate
Notes" and "Description of Notes--Interest Rate--Floating Rate Notes--Interest
Reset Dates, Interest Payment Dates and Record Dates" in this prospectus
supplement. Cede & Co. will be the initial registered holder of the book-entry
Notes. See "Description of Notes--Book-Entry Notes" in this prospectus
supplement. SRAC will pay interest due on a redemption date or maturity date to
the same person to whom it is paying the principal amount. However, if SRAC
would have made a regular interest payment on the redemption or maturity date,
it will make that regular interest payment to the registered holder as of the
applicable record date, even if it is not the same person to whom it is paying
the principal amount.
S-7
If SRAC originally issues a Note between a record date and an interest
payment date, it will make the first payment of interest on the interest payment
date following the next record date to the registered owner on that record date.
FIXED RATE NOTES
Fixed rate Notes will bear interest at the rate specified in the applicable
pricing supplement.
Unless SRAC specifies otherwise in the applicable pricing supplement, the
interest payment dates for fixed rate Notes will be February 15 and August 15 of
each year. If an interest payment date (or maturity or redemption date) for any
fixed rate Note falls on a day that is not a Business Day, SRAC will pay the
interest (or interest and principal and any premium) on the next Business Day.
However, interest on the payment will not accrue for the period from the
original interest payment date (or maturity or redemption date) to that next
Business Day. SRAC will calculate the interest based on a 360-day year of twelve
30-day months.
The record date for fixed rate Notes is February 1 for a February 15
interest payment date, August 1 for an August 15 interest payment date and the
date that is 15 calendar days before any other interest payment date, whether or
not those dates are Business Days.
FLOATING RATE NOTES
General Information. Floating rate Notes will bear interest based on an
index specified in the applicable pricing supplement. Unless SRAC provides
otherwise in the applicable pricing supplement, BNY Midwest Trust Company will
be the "Calculation Agent" that calculates the interest on floating rate Notes.
Each floating rate Note must have the following terms, which will be set
forth in the pricing supplement for that Note:
- the interest rate basis or index to be used to determine the Note's
interest rate;
- the "Index Maturity," which means the period to maturity of the
instrument or obligation on which the interest rate formula is based. For
example, LIBOR may be different for one-month U.S. dollar deposits and
for three-month U.S. dollar deposits. If the pricing supplement for a
Note specifies LIBOR as the index and three months as the Index Maturity,
SRAC would pay interest on the Note based on LIBOR for three-month U.S.
dollar deposits;
- the frequency of changes of the interest rate on the Note (i.e., daily,
weekly, monthly, quarterly, semi-annually or annually);
- the dates as of which the Calculation Agent will determine the new
interest rate (the "Interest Determination Dates"), if these Interest
Determination Dates differ from those described in this prospectus
supplement;
- the dates on which the interest rate will change (the "Interest Reset
Dates"); and
- the Calculation Agent for the Notes, if BNY Midwest Trust Company is not
the Calculation Agent.
Each floating rate Note may also have the following terms, which will also
be set forth in the pricing supplement for that Note, if applicable:
- the "Spread," which is the number of basis points that the Calculation
Agent will add to or subtract from the interest rate determined for a
particular Interest Determination Date. For example, if a Note bears
interest at LIBOR plus .01%, and the Calculation Agent determines that
LIBOR is 5.00% per year, the Note will bear interest at 5.01% per year
until the next Interest Reset Date;
S-8
- the "Spread Multiplier," which is the number by which the Calculation
Agent will multiply the interest rate determined for a particular
Interest Determination Date. For example, if a Note bears interest at 90%
of LIBOR, and the Calculation Agent determines that LIBOR is 5.00% per
year, the Note will bear interest at 4.50% per year until the next
Interest Reset Date;
- the "Maximum Rate," or the ceiling on the rate of interest that may
accrue on the Note during any interest period; and
- the "Minimum Rate," or the floor on the rate of interest that may accrue
during any interest period.
The Calculation Agent will round all percentages resulting from any
interest rate calculations to the nearest one hundred-thousandth of a percentage
point, if necessary, with five millionths of a percentage point rounded upward
(for example, the Calculation Agent will round 9.876545% to 9.87655%). The
Calculation Agent will also round all U.S. dollar amounts used in or resulting
from such calculations to the nearest cent (with one-half cent being rounded
upward).
With respect to each floating rate Note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. The accrued interest
factor is computed by adding the interest factor calculated for each day from
and including the later of (a) the date of issue and (b) the last day to which
interest has been paid to but excluding the last date for which accrued interest
is being calculated as described in the immediately preceding paragraph. Unless
otherwise specified in the applicable pricing supplement, the interest factor
for each such day will be computed by dividing the interest rate applicable to
such day by 360, in the case of Notes for which the interest rate basis is the
CD Rate, the Commercial Paper Rate, the Federal Funds Rate, LIBOR or the Prime
Rate (each as defined in the Glossary), or by the actual number of days in the
year in the case of Notes for which the interest rate basis is the CMT Rate or
the Treasury Rate (each as defined in the Glossary).
If you own a floating rate Note, you may ask the Calculation Agent to
provide you with the current interest rate at any time. You may also ask the
Calculation Agent to provide you with the interest rate that will apply as of
the next Interest Reset Date if the Calculation Agent has determined the rate.
The Calculation Agent's determination of any interest rate will be final and
binding unless it is clearly wrong.
The following table sets forth the most common interest rate indexes that
SRAC may use, the source in which SRAC expects the index rate to be published,
and the Interest Determination Date and calculation basis for Notes with
interest rates based on each index. The Glossary to this prospectus supplement
sets out with greater specificity the procedures to determine interest rates
based on each index, and SRAC encourages you to review the Glossary provisions
that describe how the Calculation Agent will determine the interest rate for
your Note.
S-9
PRIMARY SOURCE INTEREST
INDEX OF RATE DETERMINATION DATE CALCULATION BASIS*
----- -------------- ------------------ ------------------
CD Rate................... H.15(519)** under the Second Market Day*** Actual/360
heading "CDs (Secondary preceding the Interest
Market)" Reset Date
CMT Rate.................. The display page Second Market Day Actual/Actual
designated as NDX H15 3 in preceding the Interest
the Bloomberg Professional Reset Date
Service under the heading
"Treasury Const. Mat.11"
for Mondays approximately
3:45 PM at the row for the
CMT Designated Maturity
Index****
Commercial Paper Rate..... H.15(519) under the Market Day preceding the Actual/360
heading "Commercial Interest Reset Date
Paper--Nonfinancial"
Federal Funds Rate........ H.15(519) under the Market Day preceding the Actual/360
heading "Federal Funds Interest Reset Date
(Effective)"
LIBOR..................... Page 3750 of Moneyline Second Market Day Actual/360
Telerate, Inc., as preceding the Interest
displayed on page BBAM Reset Date
(British Bankers
Association Official BBA
LIBOR Fixings) in the
Bloomberg Professional
Service
Prime Rate................ H.15(519) under the Market Day preceding the Actual/360
heading "Bank Prime Loan" Interest Reset Date
Treasury Rate............. The display page The day the federal Actual/Actual
designated as AUCR US in government auctions
the Bloomberg Professional Treasury bills for the
Service opposite the week in which the Interest
caption "INVESTMENT RT" Reset Date falls
(generally Monday, but may
be either the following
Tuesday or the preceding
Friday if Monday is a
legal holiday)
---------------
* The Calculation Agent will compute the interest for any period by
multiplying the interest rate for the period by
- the number of days in the period divided by 360 ("Actual/360") or
- the number of days in the period divided by the actual number of days in
the year ("Actual/ Actual").
** "Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System.
*** A "Market Day" for any Note other than a LIBOR-based Note is any day that
is not a legal holiday for banks in The City of New York. A "Market Day"
for any LIBOR-based Note is any day on which the London interbank market
transacts business related to U.S. dollar deposits.
**** "CMT Designated Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10 or 20 years) that
SRAC specifies in the applicable pricing supplement.
S-10
Interest Reset Dates, Interest Payment Dates and Record Dates. The
Calculation Agent will generally determine the initial interest rate as if the
issue date of the Note were an Interest Reset Date. The record date for floating
rate Notes is the date that is 15 calendar days before the interest payment
date, whether or not that date is a Business Day. The Interest Reset Dates and
interest payment dates are determined by the frequency with which SRAC resets
the interest rate, as follows:
FREQUENCY OF
INTEREST RESET INTEREST RESET DATE* INTEREST PAYMENT DATE**
-------------- -------------------- -----------------------
Daily Each Business Day Third Wednesday of each month or
third Wednesday of February,
May, August and November of each
year, as indicated in the
applicable pricing supplement
Weekly (other than Treasury Wednesday of each week Third Wednesday of each month or
Rate-based Notes) third Wednesday of February,
May, August and November of each
year, as indicated in the
applicable pricing supplement
Weekly (Treasury Rate-based Tuesday of each week Third Wednesday of each month or
Notes) third Wednesday of February,
May, August and November of each
year, as indicated in the
applicable pricing supplement
Monthly Third Wednesday of each month Third Wednesday of each month or
third Wednesday of February,
May, August and November of each
year, as indicated in the
applicable pricing supplement
Quarterly Third Wednesday of February, Third Wednesday of February,
May, August and November of each May, August and November of each
year year
Semi-Annually Third Wednesday of the two Third Wednesday of the two
months of each year that SRAC months of each year that SRAC
specifies in the applicable specifies in the applicable
pricing supplement pricing supplement
Annually Third Wednesday of the month of Third Wednesday of the month of
each year that SRAC specifies in each year that SRAC specifies in
the applicable pricing the applicable pricing
supplement supplement
---------------
* If an Interest Reset Date falls on a day that is not a Business Day, SRAC
will postpone the Interest Reset Date to the next Business Day. However, if
the postponement would cause the Interest Reset Date for a LIBOR-based Note
to be in the next calendar month, SRAC will move the Interest Reset Date to
the immediately preceding Business Day.
** SRAC will also pay interest on each Note on the maturity date or redemption
date of that Note. If an interest payment date (other than the maturity date
or redemption date) for a floating rate Note falls on a day that is not a
Business Day, SRAC will postpone the interest payment date to the next
Business Day. However, if the postponement would cause the interest payment
date for a LIBOR-based Note to be in the next calendar month, SRAC will move
the interest payment date to the immediately preceding Business Day. If the
maturity date or redemption date for a floating rate Note falls on a day that
is not a Business Day, SRAC will pay the principal and interest on the next
Business Day and interest will not accrue for the period from the original
maturity or redemption date to that next Business Day. The Calculation Agent
will not include the interest payment date in calculating the interest due on
that date.
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PAYMENT OF PRINCIPAL AND INTEREST
For information about the payment of principal and interest on book-entry
Notes, see "Description of Notes--Book-Entry Notes" in this prospectus
supplement.
If SRAC issues Notes in fully certificated form, SRAC, through the trustee,
will pay interest by wire transfer to you if:
- you own $10,000,000 (or the equivalent in a foreign currency) or more in
aggregate principal amount of certificated Notes with the same interest
payment date; and
- you deliver bank account information to the trustee at its designated
office in The City of New York (as set forth in the Indenture or
otherwise) on or before the record date for the interest payment date,
designating in writing an account located in the country issuing the
currency in which the Note is denominated (or, in the case of a Note
denominated in the Euro, an account located in any member state of the
European Union that has adopted the Euro) or another country that is
satisfactory to SRAC and the trustee.
SRAC, through the trustee, will, subject to applicable laws and regulations, and
until you notify the trustee to the contrary, pay interest to you by wire
transfer to the designated account. If SRAC does not pay interest by wire
transfer for any reason, it will mail a check to you at your address as it
appears on the security register on the applicable record date. See "Description
of Notes--Payment Currency" and "Currency Exchange and Other Information" in
this prospectus supplement.
SRAC, through the trustee, will pay principal by wire transfer to you if
you own $10,000,000 (or the equivalent in a foreign currency) or more in
aggregate principal amount of certificated Notes with the same maturity date or
redemption date. SRAC will pay you by check unless you have filed proper wire
transfer instructions with the trustee or given wire instructions to the trustee
at presentment. To receive payment upon redemption or at maturity of a U.S.
dollar-denominated certificated Note, you must present and surrender your Note
on or before the applicable redemption date or maturity date. To receive payment
upon redemption or at maturity of a Note denominated in a foreign currency, you
must present and surrender the Note at least two Business Days before the
applicable redemption date or maturity date. If you do not present and surrender
your Note denominated in a foreign currency two Business Days before the
applicable redemption date or maturity date, SRAC will pay the principal and
interest due upon redemption or at maturity (unless the redemption date or
maturity date is an interest payment date) two Business Days after you present
and surrender your Note. This date will be after the applicable redemption date
or maturity date, and you will not receive any additional interest because of
this delay.
SRAC will pay any administrative costs imposed by banks in connection with
sending payments by wire transfer, but you must pay any tax, assessment or
governmental charge imposed upon your payments.
REDEMPTION
SRAC may not redeem any Note prior to its maturity date unless, in the
applicable pricing supplement for the Note, it either:
- identifies a date after which it may redeem the Note at its option at any
time; or
- identifies a specific date or dates on which it may redeem the Notes at
its option or on which you may require SRAC to redeem your Note at your
option.
If SRAC may redeem the Note at its option or you may require SRAC to redeem your
Note at your option, SRAC will specify the price or prices at which the
redemption may occur in the
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applicable pricing supplement. The Note's redemption date will be the date on
which the Note actually is redeemed.
If SRAC specifies in a pricing supplement that it has the right to redeem
your Note after a certain date, then SRAC may redeem the Note, in whole or in
part, at any time after that date by giving the registered holder of the Note at
least 30 but not more than 60 calendar days' notice. SRAC will redeem the Note
at the applicable redemption price, plus accrued and unpaid interest to the
redemption date. If SRAC specifies in the pricing supplement for your Note that
it has the right to redeem that Note on a specified date or dates, or that you
have the right to require SRAC to redeem that Note on a specified date or dates,
then the Note will be redeemable in whole or in part on the specified date or
dates if SRAC gives the registered holder, or the registered holder gives SRAC,
at least 30 but not more than 60 calendar days' notice. The pricing supplement
for a Note with these specified dates will specify whether the option to redeem
may be exercised by SRAC, by you or both. Any election by you to require SRAC to
redeem your Notes will be irrevocable. SRAC will redeem global Notes in
accordance with the applicable depository procedures, and any notices will also
be given in accordance with those procedures. In the event that any Note is
redeemed only in part, that Note must be redeemed in increments of $1,000 or the
minimum authorized denomination for that Note. The remaining principal amount of
that Note after the partial redemption must be at least $1,000 or the minimum
authorized denomination for that Note.
If applicable, SRAC will comply with the requirements of Section 14(e) of
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder, and any other securities laws or regulations in connection with any
redemption of Notes at the option of the registered holders thereof.
SRAC may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by SRAC may, at SRAC's discretion, be
held, resold or surrendered to the trustee for cancellation.
PAYMENT CURRENCY
If a Note is denominated in a currency other than U.S. dollars, and that
currency is not available due to exchange controls or other circumstances beyond
SRAC's control, SRAC may make payments on the Note in U.S. dollars. SRAC will
determine the amount of the U.S. dollar payment by using the most recently
available market exchange rate for that currency. (The "market exchange rate"
for a currency is described under the heading "Description of Notes--General" in
this prospectus supplement.) Payments under these circumstances in U.S. dollars
will satisfy SRAC's payment obligations on the Note and will not constitute a
default under the indenture.
JUDGMENTS
SRAC will indemnify the registered holder of any Note denominated in a
currency other than U.S. dollars against any loss incurred as a result of any
judgment or order being given or made for any amount due under the particular
Note and that judgment or order requiring payment in a currency (the "Judgment
Currency") other than the Specified Currency, and as a result of any variation
between:
- the rate of exchange at which the Specified Currency amount is converted
into the Judgment Currency for the purpose of that judgment or order; and
- the rate of exchange at which the registered holder, on the date of
payment of that judgment or order, is able to purchase the Specified
Currency with the amount of the Judgment Currency actually received.
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INDEXED NOTES
SRAC may determine the principal amount of or the amount of interest
payable on certain of its Notes by reference to currencies, currency units,
commodity prices, financial or non-financial indexes or other factors. SRAC will
indicate in the applicable pricing supplement if it will determine the amount of
principal or interest payable in this manner. If you own these indexed Notes,
you may receive a principal amount at maturity that is greater than or less than
the face amount of the Notes, depending upon the fluctuation of the relative
value, rate or price of the specified index. If applicable, SRAC will include in
the applicable pricing supplement information about how it will determine the
principal amount payable at maturity, the amount of interest payable, a
historical comparison of the relative value, rate or price of the specified
index and the face amount of the indexed Note, certain additional risk factors
and certain additional United States federal income tax considerations.
ORIGINAL ISSUE DISCOUNT NOTES
A fixed rate Note, a floating rate Note or an indexed Note may be treated
as issued with original issue discount. A Note of this type is issued at a price
lower than its principal amount and provides that, upon redemption or
acceleration of its maturity, an amount less than its principal amount will be
payable. An original issue discount Note may be a zero coupon Note. A Note
issued at a discount to its principal may, for United States federal income tax
purposes, be considered an original issue discount Note, regardless of the
amount payable upon redemption or acceleration of maturity. See "Material United
States Federal Tax Considerations--United States Holders--Discount Notes" below
for a brief description of the U.S. federal income tax consequences of owning an
original issue discount Note.
BOOK-ENTRY NOTES
SRAC has obtained the information in this section concerning The Depository
Trust Company ("DTC")and DTC's book-entry system from sources that it believes
to be reliable, but SRAC takes no responsibility for the accuracy of this
information.
Unless otherwise specified in the applicable pricing supplement, all Notes
denominated in U.S. dollars will be initially issued in book-entry only form.
This means that SRAC will not issue certificates for Notes, except for Notes
denominated in a currency other than U.S. dollars and except in the limited
cases described below. Instead, SRAC will issue global Notes held through DTC
and registered in the name of Cede & Co., as nominee of DTC, or such other
nominee as may be requested by an authorized representative of DTC. Accordingly,
Cede & Co. or such other nominee will be the holder of record of the Notes. Each
Note represented by a global Note evidences a beneficial interest in that global
Note.
Beneficial interests in a global Note will be shown on, and transfers
effected through, records maintained by DTC or its participants. In order to own
a beneficial interest in a Note, you must be an institution that has an account
with DTC or have a direct or indirect account with such an institution.
Transfers of ownership interests in the Notes will be accomplished by making
entries in DTC participants' books acting on behalf of beneficial owners.
So long as DTC or its nominee is the registered holder of a global Note,
DTC or its nominee, as the case may be, will be the sole holder and owner of the
Notes represented thereby for all purposes, including payment of principal and
interest, under the Indenture. Except as otherwise provided below, you will not
be entitled to receive physical delivery of certificated Notes and will not be
considered the holder of the Notes for any purpose under the Indenture.
Accordingly, you must rely on the procedures of DTC and the procedures of the
DTC participant through which you own your Note in order to exercise any rights
of a holder of a Note under the Indenture. The laws of some jurisdictions
require that certain purchasers of Notes take physical delivery of such
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Notes in certificated form. Those limits and laws may impair the ability to
transfer beneficial interests in the Notes.
Each global Note representing Notes will be exchangeable for certificated
Notes of like tenor and terms and of differing authorized denominations in a
like aggregate principal amount, only if (1) SRAC advises the trustee in writing
that DTC is no longer willing or able to discharge its responsibilities
properly, and the trustee or SRAC is unable to locate a qualified successor or
(2) SRAC, at its option, elects to terminate the book-entry system through DTC.
Upon any such exchange, certificated Notes shall be registered in the names of
and delivered to the beneficial owners of the global Note representing the
Notes.
DTC will act as securities depositary for the Notes. The Notes will be
issued as fully registered Notes registered in the name of Cede & Co. (DTC's
partnership nominee) or such other name as may be requested by an authorized
representative of DTC. Generally, one fully registered global Note will be
issued for all of the principal amount of the Notes with the same terms. If,
however, the aggregate principal amount of the Notes exceeds $500 million, one
certificate will be issued with respect to each $500 million of principal amount
and an additional certificate will be issued with respect to any remaining
principal amount of such Note.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, 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 the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds and provides asset servicing for over 2
million issues of U.S. and non-U.S. equity issues, corporate and municipal debt
issues and money market instruments from over 85 countries that DTC's direct
participants deposit with DTC.
DTC also facilitates the post-trade settlement among direct participants of
sales and other securities transactions in deposited securities, through
electronic computerized book-entry transfers and pledges between direct
participants' accounts. This eliminates the need for physical movement of
securities certificates. Direct participants include both U.S. and non-U.S.
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is a wholly owned subsidiary of The
Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a
number of direct participants of DTC and members of the National Securities
Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing
Corporation, and Emerging Markets Clearing Corporation, as well as by The New
York Stock Exchange, Inc., the American Stock Exchange LLC and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as both U.S. and non-U.S. securities brokers and
dealers, banks, trust companies and clearing corporations ("indirect
participants") that clear through or maintain a custodial relationship with a
direct participant, either directly or indirectly. DTC has Standard & Poor's
highest rating: AAA. The DTC rules applicable to its participants are on file
with the Securities and Exchange Commission.
Purchases of the Notes under the DTC system must be made by or through
direct participants, which will receive a credit for the Notes on DTC's records.
The beneficial interest of each actual purchaser of each Note is in turn to be
recorded on the direct and indirect participants' records. Beneficial owners
will not receive written confirmation from DTC of their purchase. Beneficial
owners are, however, expected to receive written confirmations providing details
of the transaction, as well as periodic statements of their holdings, from the
direct or indirect participant through which the beneficial owner entered into
the transaction. Transfers of beneficial interests in the Notes are to be
accomplished by entries made on the books of direct and indirect participants
acting on behalf of beneficial owners. Beneficial owners will not receive
certificates representing their beneficial interests in Notes, except in the
event that use of the book-entry system for the Notes is discontinued.
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To facilitate subsequent transfers, all Notes deposited by direct
participants with DTC will be registered in the name of DTC's partnership
nominee, Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of the Notes with DTC and their registration
in the name of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the Notes; DTC's records reflect only the identity of the direct participants to
whose accounts such Notes will be credited, which may or may not be the
beneficial owners. The direct and indirect participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. Beneficial owners of the Notes may wish to
take certain steps to augment the transmission to them of notices of significant
events with respect to the Notes, such as redemption, tenders, defaults, and
proposed amendments to the documents governing the Notes. For example,
beneficial owners of the Notes may wish to ascertain that the nominee holding
the Notes for their benefit has agreed to obtain and transmit notices to
beneficial owners. In the alternative, beneficial owners may wish to provide
their names and addresses to the registrar of the Notes and request that copies
of the notices be provided to them directly. Any such request may or may not be
successful.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote
with respect to the Notes unless authorized by a direct participant in
accordance with DTC's procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to SRAC as soon as possible after the regular record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those direct
participants to whose accounts the Notes are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
SRAC will pay principal and or interest payments on the Notes in same-day
funds directly to Cede & Co., or such other nominee as may be requested by an
authorized representative of DTC. DTC's practice is to credit direct
participants' accounts on the applicable payment date in accordance with their
respective holdings shown on DTC's records upon DTC's receipt of funds and
corresponding detail information. Payments by participants to beneficial owners
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of these
participants and not of DTC or any other party, subject to any statutory or
regulatory requirements that may be in effect from time to time. Payment of
principal and interest to Cede & Co., or such other nominee as may be requested
by an authorized representative of DTC, is SRAC's responsibility, disbursement
of such payments to direct participants is the responsibility of DTC, and
disbursement of such payments to the beneficial owners is the responsibility of
the direct or indirect participants.
SRAC will send any redemption notices to DTC. If less than all of the Notes
are being redeemed, DTC's practice is to determine by lot the amount of the
interest of each direct participant in such issue to be redeemed.
If a holder has the right to require SRAC to redeem Notes that it holds, a
beneficial owner, or its authorized representative, shall give notice to elect
to have its Notes redeemed by SRAC, through its direct or indirect participant,
to the trustee, and shall effect delivery of such Notes by causing the direct
participant to transfer that participant's interest in the global Note
representing such Notes, on DTC's records, to the trustee. The requirement for
physical delivery of Notes in connection with a demand for redemption will be
deemed satisfied when the ownership rights in the global Note representing such
Notes are transferred by the direct participants on DTC's records.
S-16
DTC may discontinue providing its services as securities depository for the
Notes at any time by giving SRAC reasonable notice. Under such circumstances, if
a successor securities depositary is not obtained, SRAC will print and deliver
certificated Notes to the beneficial owners of interests in the Notes. SRAC may
decide to discontinue use of the system of book-entry transfers through DTC (or
a successor securities depositary). In that event, SRAC will print and deliver
certificated Notes to the beneficial owners of interests in the Notes.
The information in this section concerning DTC and DTC's system has been
obtained from sources that SRAC believes to be reliable, but neither SRAC nor
any Agent takes any responsibility for its accuracy.
MODIFICATION OR AMENDMENT OF THE INDENTURE
To determine whether holders of the requisite principal amount of Notes
have consented to a modification or alteration of the Indenture, the trustee
will calculate the U.S. dollar equivalent of the principal amount of Notes
denominated in foreign currencies. This U.S. dollar equivalent will be based on
the market exchange rate for each foreign currency on the latest date for which
that rate was determined on or before the date for determining the holders that
may give the required consent. (The "market exchange rate" for a currency is
described under the heading "Description of Notes--General" in this prospectus
supplement.) See "Description of Debt Securities--Modification or Amendment of
the Indenture" in the prospectus.
MATERIAL UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a summary of the material United States Federal income tax
consequences of purchasing, owning and disposing of the Notes. This summary is
based upon the opinion of Mayer, Brown, Rowe & Maw, SRAC's special United States
federal income tax counsel. For purposes of this "Material United States Federal
Tax Considerations" section of this prospectus supplement, with respect to
book-entry Notes, the term "holder" refers to you if you acquire a beneficial
ownership interest in those Notes through the book-entry system of DTC and with
respect to certificated Notes, the term "holder" refers to you if you are the
beneficial owner of those Notes, regardless of whether those Notes are
registered in your name or the name of your nominee. This summary deals only
with Notes held as capital assets and does not deal with special tax rules
applicable to certain holders of Notes, including:
- dealers in securities or currencies or traders in securities who elect
mark-to-market accounting for United States federal income tax purposes;
- tax-exempt organizations;
- banks;
- regulated investment companies;
- common trust funds;
- United States holders (as defined below) whose functional currency is not
the United States dollar; or
- persons holding Notes as part of a larger integrated financial
transaction.
In addition, the tax consequences of holding a particular Note will depend, in
part, on the particular terms of such Note as described in the applicable
pricing supplement.
This summary is based on United States federal income tax law, including
the United States Internal Revenue Code of 1986, as amended (the "Code") as of
the date of this prospectus supplement. Subsequent developments in United States
federal income tax law, which may be applied retroactively, could have a
material effect on the United States federal income tax
S-17
consequences of purchasing, owning and disposing of Notes as set forth in this
summary. Before you purchase Notes, you are urged to consult your tax advisor
about how the United States federal income tax law or any other laws, including
the laws of any other taxing jurisdiction, will apply to your particular
situation.
UNITED STATES HOLDERS
This part of the summary applies to you if you are a "United States holder"
of Notes. You are a United States holder if you are a beneficial owner of Notes
and you are a United States person. A United States person is:
- a citizen or resident of the United States;
- a corporation or partnership (or an entity treated as a corporation or
partnership for United States Federal income tax purposes) organized
under the laws of the United States or of any State;
- an estate the income of which is subject to United States federal income
taxation regardless of the source of that income; or
- a trust, if a United States court is able to exercise primary supervision
over the trust's administration and one or more United States persons has
the authority to control all of the trust's substantial decisions.
PAYMENTS OF INTEREST
The stated interest on your Notes will be taxed to you as ordinary interest
income. In addition:
- if you use the cash method of accounting for tax purposes, you will be
taxed on the interest on your Notes at the time it is paid to you; and
- if you use the accrual method of accounting for tax purposes, you will be
taxed on the interest on your Notes at the time it accrues.
DISCOUNT NOTES
A Note, other than a short-term Note, will be treated as issued with
original issue discount (a "discount Note") to the extent that:
- the Note's stated redemption price at maturity exceeds
- the Note's issue price (by more than a specified de minimis amount).
A Note's "stated redemption price at maturity" is the sum of all payments
to be made on such Note, other than payments of qualified stated interest.
"Qualified stated interest" is interest that is unconditionally payable at least
annually at a fixed rate during the entire term of the Note. The "issue price"
of a Note generally will be the first price at which a substantial amount of
Notes included in the issue of which the Notes are a part is sold to persons
other than bond houses, brokers, or similar persons or organizations acting in
the capacity of underwriters, placement agents, or wholesalers.
If you hold a discount Note, you generally will have to include original
issue discount ("OID") in income as it accrues (on a constant-yield basis)
before receiving cash attributable to such income, and generally will have to
include in income increasingly greater amounts of OID over the life of the
discount Note. The amount of OID that you must include in income for a
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taxable year equals the sum of the daily portions of OID for each day during the
taxable year on which you own the discount Note. Calculation of the daily
portions of OID requires four steps:
1. Calculate the yield to maturity on the discount Note to maturity by
determining the discount rate that results in a present value for all
principal and interest payments equal to the issue price.
2. Determine the accrual period, which will generally be the period between
interest payment dates.
3. Determine the OID allocable to each accrual period by first multiplying
(1) the yield to maturity, as determined under step one, divided by the
number of accrual periods per year by (2) the discount Note's adjusted
issue price at the beginning of the period, which equals the issue price
plus OID previously included in gross income less payments previously
made on the discount Note.
4. Determine the daily portions of OID by dividing the OID amount for the
accrual period by the number of days in the accrual period.
You will not be required to include separately in income cash payments made
on a discount Note, even if denominated as interest, to the extent such payments
constitute OID that you previously included in income.
In the case of the purchase of a discount Note after its original issuance
and at a purchase price greater than the adjusted issue price of the discount
Note, the daily portion of OID shall be reduced by an amount equal to the
product of (1) such daily portion of OID and (2) a fraction, the numerator of
which is equal to the excess of the purchase price of such discount Note over
the adjusted issue price of such discount Note and the denominator of which is
equal to the amount of unaccrued OID remaining on the discount Note.
PAYMENTS IN FOREIGN CURRENCY
You must include in income the U.S. dollar value of any interest payment
you receive in a foreign currency. If you are cash-method taxpayer, you must
determine the U.S. dollar value of the interest payment, other than OID, by
using the spot exchange rate for that currency on the date you receive your
payment, even if you do not actually convert the payment to U.S. dollars.
If you are an accrual-method taxpayer, you must include in income the U.S.
dollar value of any interest, other than OID, that accrues in a foreign currency
determined by translating such income into U.S. dollars at either:
- the average spot rate during the accrual period (or the portion within
your taxable year, if the accrual period spans two taxable years); or
- at your election, the spot rate on either the last day of the accrual
period (or the last day of the taxable year, if the accrual period spans
two taxable years) or the day you receive such interest, if that day is
within five days of the applicable accrual period.
If you elect to use a spot rate other than the average spot rate during the
accrual period, you generally must use the same method to determine the U.S.
dollar value of all other interest you accrue in foreign currency on debt
instruments during or after the year you make this election, and this election
may not be changed without the consent of the Internal Revenue Service ("IRS").
If you are an accrual-method taxpayer, when you actually receive the
interest payment on the Note, or transfer your Note, you will recognize foreign
currency gain or loss equal to the difference between:
- the U.S. dollar value of the amount of interest accrued, determined as
discussed above; and
S-19
- the U.S. dollar value of the interest paid to you or included in the
price received by you on disposition of the Note, determined by using the
spot rate on the payment date or the date of disposition of the Note, as
applicable, whether or not you actually convert the payment to U.S.
dollars on that date.
If you own a discount Note denominated in a foreign currency, OID will
accrue in that foreign currency, and you must include in income the U.S. dollar
value of the accrued OID whether you are a cash-method or accrual method
taxpayer. You may determine the U.S. dollar value of OID accrued in a foreign
currency by using the method described above in the context of accrued interest
denominated in a foreign currency. When you actually receive the accrued OID, or
transfer your Note, you will recognize foreign currency gain or loss equal to
the difference between:
- the U.S. dollar value of the amount of accrued OID, determined as
discussed above; and
- the U.S. dollar value of the amount of OID paid to you or included in the
price received by you on disposition of the Note, determined by using the
spot rate on the payment date or the date of disposition of the Note, as
applicable, whether or not you actually convert the payment to U.S.
dollars on that date.
You must treat any foreign currency gain or loss you recognize as ordinary
gain or loss and not as an adjustment to interest income.
AMORTIZABLE BOND PREMIUM
Generally, if the price you paid for your Notes exceeds the amount payable
upon the Notes at maturity, the excess may constitute amortizable bond premium.
You may elect to amortize such bond premium under the constant interest rate
method over the period from your acquisition date to the Notes' maturity date as
an offset to interest income on the Notes, rather than as a separate interest
deduction item subject to the investment interest limitations of the Code. If
you elect to amortize bond premium, you must generally reduce your tax basis in
the related Notes by the amount of bond premium used to offset interest income.
If your Notes are redeemed in full before their maturity and you have elected to
amortize bond premium, you may be entitled to a deduction for any remaining
unamortized bond premium in the taxable year of the redemption. Any election you
make to amortize bond premium generally will apply to all debt instruments held
by you (other than debt instruments the interest on which is excludable from
gross income) at the beginning of the first taxable year to which your election
applies, and any debt instruments you acquire thereafter, and is irrevocable
without the consent of the IRS.
SHORT-TERM NOTES
Notes that have a fixed maturity of one year or less ("short-term Notes")
will be treated as having been issued with acquisition discount (generally the
difference between the stated redemption price at maturity and the cost of a
Note). In general, if you are an individual or other cash-method United States
holder, you will not be required to accrue such acquisition discount unless you
elect to do so. If you do not make such an election, any gain recognized by you
on the sale, exchange or maturity of the short-term Note will be ordinary income
to the extent of the acquisition discount accrued on a straight-line basis, or
upon election under a constant yield method (based on daily compounding),
through the date of sale or stated maturity, and a portion of the deductions
otherwise allowable to you for interest on borrowings allocable to the short-
term Note will be deferred until a corresponding amount of income is realized.
If you are not an individual and report your income for United States federal
income tax purposes under the accrual method, you will be required to accrue
acquisition discount on a short-term Note on a straight-line basis unless an
election is made to accrue the acquisition discount under a constant yield
method (based on daily compounding).
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MARKET DISCOUNT
If you purchase a Note that has a term of more than one year for an amount
that is less than its issue price (or, in the case of a subsequent purchaser,
that is less than its stated redemption price at maturity or revised issue
price), you will be treated as having purchased such Note at a "market
discount," unless such market discount is less than a specified de minimis
amount.
Under the market discount rules, you will be required to treat any partial
principal payment on, or any gain realized on the sale, exchange, retirement or
other disposition of, a Note as ordinary income to the extent of the lesser of
(1) the amount of such payment or realized gain or (2) the market discount which
you have not previously included in income and that is treated as having accrued
on such Note at the time of such payment or disposition. Market discount will be
considered to accrue ratably during the period from the date of acquisition to
the stated maturity date of the Note, unless you elect to accrue market discount
on the basis of semiannual compounding. Such an election shall apply only to the
Notes with respect to which you make it and may not be revoked.
You may be required to defer the deduction of all or a portion of the
interest paid or accrued on any indebtedness you incurred or maintained to
purchase or carry a Note with market discount until the stated maturity of the
Note or certain earlier dispositions, because a current deduction is only
allowed to the extent the interest expense exceeds an allocable portion of
market discount.
You may elect to include market discount in income currently as it accrues
(on either a ratable or semiannual compounding basis), in which case the rules
described above regarding the treatment as ordinary income of gain upon the
disposition of the Note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply to you. Generally,
such currently included market discount is treated as ordinary interest for
United States federal income tax purposes. Such an election will apply to all
debt instruments acquired by you on or after the first day of the first taxable
year to which such election applies and may be revoked only with the consent of
the IRS.
VARIABLE RATE NOTES
A "variable rate Note" generally is a Note that:
- has an issue price that does not exceed the total noncontingent principal
payments due under the Note by more than a specified de minimis amount;
- provides for stated interest, paid or compounded at least annually, at a
current value of
(a) one or more qualified floating rates,
(b) a single fixed rate and one or more qualified floating rates,
(c) a single objective rate or
(d) a single fixed rate and a single objective rate that is a qualified
inverse floating rate; and,
- does not provide for any contingent principal payments.
A "qualified floating rate" is any variable rate if:
- variations in the value of such rate can reasonably be expected to
measure contemporaneous variations in the cost of newly borrowed funds in
the currency in which the Note is denominated; or
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- it is equal to:
(a) the product of a qualified floating rate described above and a fixed
multiple that is greater than 0.65 but not more than 1.35; or
(b) the product of a qualified floating rate described above and a fixed
multiple that is greater than 0.65 but not more than 1.35, increased
or decreased by a fixed rate.
A rate is not a qualified floating rate if the rate is subject to one or
more restrictions such as a cap or floor unless the restriction is fixed
throughout the term of the Note or the restriction is not reasonably expected as
of the issue date to significantly affect the yield of the Note.
An "objective rate" is a rate, other than a qualified floating rate, that
is determined using a single fixed formula and that is based upon objective
financial or economic information that is not within the control of the issuer
(or a party related to the issuer) or that is unique to the circumstances of the
issuer (or a party related to the issuer). A rate is not an "objective rate,"
however, if it is reasonably expected that the average value of such rate during
the first half of the Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Note's term. An objective rate is a "qualified inverse floating rate" if:
- the rate is equal to a fixed rate minus a qualified floating rate; and
- variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate.
If a Note provides for stated interest at either a qualified floating rate
or a objective rate, all stated interest on the Note which is unconditionally
payable in cash or property (other than debt instruments of the issuer) at least
annually will constitute qualified stated interest and the amount of OID, if
any, is determined by using, in the case of a qualified floating rate or a
qualified inverse floating rate, the value, as of the issue date of the
qualified floating rate or the qualified inverse floating rate or, in the case
of any other objective rate, a fixed rate that reflects the reasonably expected
yield for the Note.
If a Note does not provide for stated interest at a single qualified
floating rate or objective rate, or at a single fixed rate (other than at a
single period for an initial period), the amount of interest and OID accruals on
the Note generally are determined by:
(i) determining a fixed rate substitute for each variable rate provided
under the Note (generally, the value of each variable rate as of the
issue date or, in the case of an objective rate that is not a
qualified inverse floating rate, a rate that reflects the reasonably
expected yield on the Note);
(ii) constructing the equivalent fixed rate debt instrument (using the
fixed rate substitute described above);
(iii) determining the amount of qualified stated interest and OID with
respect to the equivalent fixed rate debt instrument; and
(iv) making the appropriate adjustments for actual variable rates during
the applicable accrual period.
If a Note provides for stated interest either at one or more qualified
floating rates or at a qualified inverse floating rate, and in addition provides
for stated interest at a single fixed rate (other than at a single fixed rate
for an initial period), the amount of interest and OID accruals are determined
as in the immediately preceding paragraph with the modification that the Note is
treated, for purposes of the first three steps of the determination, as if it
provided for a qualified floating rate (or a qualified inverse floating rate, if
the Note provides for a qualified inverse floating rate) rather than a fixed
rate. The qualified floating rate (or qualified inverse floating
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rate) replacing the fixed rate must be such that the fair market value of the
Note as of the issue date would be approximately the same as the fair market
value of an otherwise identical debt instrument that provides for the qualified
floating rate (or qualified inverse floating rate) rather than the fixed rate.
ELECTION TO TREAT ALL INTEREST AS OID
You may elect to include in income all interest that accrues on a Note
using the constant-yield method described above under "Material United States
Federal Tax Considerations -- United States Holders -- Discount Notes" in this
prospectus supplement with certain modifications. For this purpose, interest
includes stated interest, acquisition discount, OID, de minimis OID, market
discount, and de minimis market discount, as adjusted by amortizable bond
premium or acquisition premium. If you make this election:
- the issue price of the Note will equal your adjusted basis in the Note
immediately after your acquisition of the Note;
- the issue date of the Note will be the date you acquire the Note; and
- no payments on the Note will be treated as payments of "qualified stated
interest."
This election generally will apply only to the Note with respect to which
it is made, and may not be revoked without IRS consent. If you make this
election on a Note with amortizable bond premium, then you will be deemed to
have elected to apply amortizable bond premium against interest with respect to
all debt instruments with amortizable bond premium held by you as of the
beginning of the taxable year in which you acquire the Note on which you make
this election. If you make this election, you also will be treated as having
made the elections discussed above under "Market Discount" to include market
discount in income over the life of all debt instruments you hold or acquire
afterwards and to accrue market discount on a constant-yield basis.
SALE, REDEMPTION OR OTHER DISPOSITION OF NOTES
Your adjusted tax basis in your Notes will be the Notes' U.S. dollar cost,
increased by any amounts that you included in income as market discount and the
amount of OID you previously included in income and reduced by any bond premium
you amortize. You will recognize capital gain or loss when you sell or otherwise
dispose of your Notes, or when SRAC redeems your Notes, equal to the difference
between:
- the amount realized on the sale or redemption or other disposition (less
any amount attributable to accrued interest, which will be taxable as
such); and
- your adjusted tax basis in the Notes.
Your gain or loss will be a long-term capital gain or loss if at the time of the
sale, payment or other disposition, you have held the Notes for more than one
year. If you are a non-corporate taxpayer, any long-term capital gain you
realize upon a sale, payment, or other disposition of Notes will be subject to
tax at a rate of 20%, which rate decreases to 18% if your holding period at the
time of sale, payment or other disposition exceeds two years. The deductibility
of capital losses is subject to limitation.
If your Note is denominated in a foreign currency, the amount you realize
on a sale or redemption will equal the U.S. dollar value of the sale proceeds or
principal payment, determined using the spot rate on the date of sale or
redemption. Your tax basis in a Note denominated in foreign currency generally
will be the U.S. dollar value of the purchase price of the Note on the date of
purchase, determined using the spot rate on the date of purchase, increased by
the U.S. dollar amount of previously accrued OID (as determined above), if any.
You will recognize
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foreign currency gain or loss on the disposition of a Note (other than a
discount Note) denominated in a foreign currency equal to the difference
between:
- the U.S. dollar value of your purchase price translated at the spot rate
on the date of disposition; and
- your purchase price translated into U.S. dollars at the spot rate on the
date of your purchase.
You will recognize foreign currency gain or loss on a discount Note
denominated in a foreign currency equal to the difference between:
- the U.S. dollar value of the adjusted issue price of the discount Note on
the date of disposition; and
- the U.S. dollar value of the issue price of the discount Note on the
issue date.
TRANSACTIONS IN FOREIGN CURRENCY
If you receive foreign currency as interest on a Note or on the sale or
redemption of a Note, you will have a tax basis in such foreign currency equal
to the U.S. dollar value of the foreign currency, determined using the spot rate
at the time of receipt. You will recognize gain or loss on a sale or other
disposition of such foreign currency equal to the difference between:
- the amount of U.S. dollars, or the U.S. dollar value of the other
currency or property received in such sale or disposition; and
- the adjusted tax basis of such currency.
If you use foreign currency that you own to purchase a Note, you generally
will recognize gain or loss equal to the difference, if any, between:
- your tax basis in such foreign currency; and
- the U.S. dollar fair market value of the Note on the date of purchase.
The amount of any foreign currency gain or loss you may realize with
respect to interest paid on a Note or amounts received on the call or redemption
of a Note is limited to extent of your total gain or loss on the transaction.
NON-UNITED STATES HOLDERS
The following summary applies to you if you are not a United States holder
(as defined above).
U.S. WITHHOLDING TAX
Under current United States federal income tax law, and subject to the
discussion below, United States federal withholding tax will not apply to
payments by SRAC or any paying agent of SRAC (in its capacity as such) of
principal of and interest (including payments of OID, if any) on your Note in
accordance with the "portfolio interest" exception of the Code, provided:
- you, or a partnership of which you are a member, do not actually or
constructively own 10 percent or more of the total combined voting power
of all classes of stock of SRAC entitled to vote;
- you are not a controlled foreign corporation for United States tax
purposes with respect to which SRAC is a "related person" as defined
under the Code; and
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- you provide a signed written statement, under penalties of perjury,
certifying that you are not a United States person and providing your
name and address to:
(a) SRAC or its agent;
(b) a securities clearing organization, bank (including certain
regulated United States branches of a foreign bank or a foreign
insurance company) or other financial institution that holds
customers' securities in the ordinary course of its trade or
business (a "Financial Institution"), if that institution:
- holds the Note on your behalf;
- provides an intermediary certificate to SRAC or its agent under
penalties of perjury confirming that the institution (or a
Financial Institution between you and the institution) has
received your signed written statement; and
- furnishes a copy of your signed written statement to SRAC or its
agent; or
(c) a specified withholding partnership or qualified intermediary that
provides a duly completed withholding certificate to SRAC or its
agent.
Your signed written statement will be generally effective only with respect to
interest payments made to you after you signed the statement in the calendar
year in which you sign it and the three immediately following calendar years.
U.S. INCOME TAX
Except for the possible application of United States withholding tax (see
"Material United States Federal Tax Considerations--Non-United States
Holders--U.S. Withholding Tax" in this prospectus supplement) and backup
withholding tax (see "Material United States Federal Tax Considerations--Backup
Withholding and Information Reporting" in this prospectus supplement), you will
not have to pay United States federal income tax on payments of interest
(including accrued OID, if any) on your Note, provided you (or the fiduciary,
settler, or beneficiary of, or a person holding a power over you, if you are an
estate or trust; or any of your partners, if you are a partnership):
- are not and have not been engaged in a trade or business in the United
States to which such payments are attributable or if a tax treaty
applies, do not have and have not had a permanent establishment in the
United States to which such payments are attributable;
- do not have and have not had certain present or former connections with
the United States including, without limitation, the status as a citizen
or former citizen or resident or former resident of the United States;
and
- are not and have not been, for United States federal income tax purposes,
(i) a personal holding company, (ii) a corporation that accumulates
earnings to avoid United States federal income tax, or (iii) a person
treated as making an election that subjects your payments of principal
and interest (including accrued OID, if any) on your Note to United
States federal income tax.
If you are engaged in a trade or business in the United States and interest
(including accrued OID, if any) is effectively connected with the conduct of
your trade or business (and if a tax treaty applies, you have a permanent
establishment in the United States to which such payments are attributable), you
may be subject to United States income tax on the interest even though it is
exempt from the withholding tax discussed in the preceding paragraphs. You will
have to pay this income tax at the statutory rates provided for United States
persons after you deduct any deductible expenses allocable to your effectively
connected interest. In addition, if you are a foreign corporation, you may be
subject to a branch profits tax equal to 30% of your effectively connected
earnings and profits for the taxable year, as adjusted for certain items,
S-25
unless a lower rate applies to you under a United States income tax treaty with
your country of residence. For this purpose, you must include interest
(including accrued OID, if any) on your Note in the earnings and profits subject
to the branch tax if these amounts are effectively connected with the conduct of
your United States trade or business.
SALE, REDEMPTION, OR OTHER DISPOSITION OF NOTES
You generally will not be subject to U.S. federal income tax on any gain
you recognize when you sell or otherwise dispose of your Notes, unless:
- the gain is effectively connected with the conduct of your United States
trade or business (and, if an applicable tax treaty so provides, is
attributable to your United States permanent establishment);
- you are an individual who is present in the United States for 183 days or
more in the year in which you sell or otherwise dispose of your Notes and
certain other conditions are met; or
- you are an individual who is subject to the special United States income
tax provisions that apply to certain expatriates.
If you recognize gain on the sale or other disposition of your Notes, and
that gain is effectively connected with the conduct of your United States trade
or business (and if a tax treaty applies, that gain is attributable to a
permanent establishment in the United States), it will not be subject to United
States withholding tax but will be subject to United States income tax and, if
you are a corporation, the branch profits tax (as described above). If you are
an individual who is present in the United States for 183 days or more in the
year in which you sell or otherwise dispose of your Notes, your gain may be
subject to tax at a flat rate of 30%, but you should be able to offset the gain
with United States capital losses. If you are an individual who has spent more
than 183 days in the United States in the year in which you sell or otherwise
dispose of your Notes, you should consult your tax advisor regarding the
application of these rules to your particular circumstances.
U.S. ESTATE TAX
If you are an individual and are not a citizen or resident of the United
States at the time of your death, your Note will generally not be subject to the
United States federal estate tax, unless:
- you actually or constructively own 10% or more of the total combined
voting power of all classes of stock of SRAC; or
- your interest (including accrued OID, if any) on the Note is effectively
connected with your conduct of a United States trade or business.
BACKUP WITHHOLDING AND INFORMATION REPORTING
If you do not provide a correct taxpayer identification number and other
information, or do not comply with certain other requirements or otherwise
establish an exemption, SRAC, its paying agent or a broker, as the case may be,
will be required to collect backup withholding tax from payments made to you.
This backup withholding tax applies to certain payments of principal and
interest (including payments of OID, if any) on Notes and to proceeds from the
sale or disposition of Notes before maturity. Generally, individuals are not
exempt recipients, whereas corporations and certain other entities generally are
exempt recipients.
If you are a Non-United States holder, backup withholding and information
reporting will not apply to payments of principal and interest (including
payments of OID, if any) on Notes to you if you qualify for the "portfolio
interest" exception to United States withholding tax as described in "Material
United States Federal Tax Considerations--Non-United States Holders--U.S.
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Withholding Tax" in this prospectus supplement, regardless of the identity of
the payor and regardless of whether the payment is collected by a United States
or foreign office of a custodian, nominee or other agent acting on your behalf.
Backup withholding will apply to payments to you, however, even if you are
a Non-United States holder, of the proceeds of the sale of a Note to or through
a foreign office of a broker that is a "U.S. payor" or a "U.S. middleman"
(including a person who is a United States person, a controlled foreign
corporation for United States federal income tax purposes, a foreign partnership
if at any time during the year it is either more than 50% owned (as measured by
income or capital interests) by United States persons or engaged in a United
States trade or business, or a foreign person 50% or more of whose gross income
is from a United States trade or business for a specified three-year period),
unless:
- you are an exempt recipient; or
- the broker has evidence in its records that you are not a United States
person and has no actual knowledge or reason to know that the evidence is
unreliable.
If you provide the IRS with the information it requires, you may receive a
refund or a credit against your United States federal income tax liability for
any amounts withheld from your payments under the backup withholding rules.
SRAC, its paying agent or a broker, as the case may be, generally will be
required to report certain information to the IRS relating to their payments to
you of principal and interest on Notes, and of proceeds from the sale or
disposition of Notes before maturity, if you are a non-corporate United States
holder.
PLAN OF DISTRIBUTION
SRAC is offering the Notes on a continuing basis through the Agents
(Barclays Capital Inc., Bear, Stearns & Co. Inc., Citigroup Global Markets Inc.,
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Morgan Stanley & Co. Incorporated). Each Agent has agreed to use its reasonable
efforts to solicit purchases of the Notes. SRAC also anticipates that it will
offer Notes directly to brokers or dealers, investment companies (or separate
accounts), insurance companies, banks, savings and loan associations, trust
companies or similar institutions, and trusts for which a bank, savings and loan
association, trust company or investment adviser is the trustee or authorized to
make investment decisions. In addition, SRAC also may sell Notes from time to
time through one or more additional agents on substantially the same terms as
those applicable to the Agents. SRAC has also agreed to reimburse the Agents for
some of their expenses. SRAC estimates that its expenses in connection with the
offering and sale of the Notes will be approximately $450,000.
The following table shows the potential discounts and commissions SRAC will
pay to the Agents in connection with this offering (however, SRAC and an Agent
may negotiate a different discount or commission):
PER NOTE TOTAL(1)
-------- --------
Agents' Commissions and Discounts............... .125% to .750% $1,875,000 to $11,250,000
---------------
(1) Or the equivalent thereof in one or more foreign currencies.
SRAC may also sell the Notes to any Agent, as principal, at negotiated
discounts for resale to investors or other purchasers. SRAC reserves the right
to sell Notes directly on its own behalf in jurisdictions where it and its
employees are or may become registered or qualified to do so or in transactions
in which they are exempt from having to register or qualify. SRAC will not pay
commissions on any sales it makes directly.
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Each Agent may act as an agent for sales of Notes, or may offer the Notes
it has purchased as principal to investors and dealers. Unless SRAC states
otherwise in the applicable pricing supplement, the Agents may compensate these
dealers in the form of discounts or concessions not in excess of the discount
that SRAC gave to the Agent.
Unless SRAC indicates otherwise in the applicable pricing supplement:
- Agents will purchase Notes as principal at a price equal to 100% of the
principal amount of the Notes less a percentage equal to the commission
that SRAC would pay on an agency sale of a Note of identical maturity;
and
- Agents may resell Notes that they purchase as principal to investors and
other purchasers from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying
prices related to prevailing prices determined at the time of sale; or
- Agents may resell Notes they purchase as principal to or through certain
dealers as described above.
After an Agent purchases Notes as principal in an initial public offering for
resale to investors and other purchasers on a fixed public offering price basis,
the Agent may vary the offering and other selling terms. SRAC may set forth
further information about the distribution of Notes in the applicable pricing
supplement.
Unless otherwise specified in the applicable pricing supplement, you will
be required to pay the purchase price of your Notes in immediately available
funds in the Specified Currency in The City of New York on the date of
settlement.
In connection with the offering, the Agents may purchase and sell the Notes
in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. Stabilizing transactions consist of
certain bids or purchases to prevent or retard a decline in the market price of
the Notes. Syndicate short positions involve the sale by the Agents of a greater
number of Notes than they are required to purchase from SRAC in the offering.
The Agents may reclaim selling concessions allowed to syndicate members or other
broker-dealers for the Notes sold in the offering if the Agents repurchase these
Notes in stabilizing transactions or in transactions to cover short positions.
These activities may stabilize, maintain or otherwise affect the market price of
the Notes, which may be higher than the price that might otherwise prevail in
the open market. The Agents may begin and discontinue these activities at any
time and may effect these transactions in the over-the-counter market or
otherwise.
SRAC has the sole right to accept offers to purchase Notes and may reject
any proposed purchase of Notes. Each Agent has the right, in its reasonable
discretion, to reject any offer it receives.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended. SRAC has agreed to indemnify the Agents
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
The Notes are a new issue of securities with no established trading market.
Unless otherwise specified in the applicable pricing supplement, SRAC does not
intend to apply for the listing of the Notes on any securities exchange. The
Agents have informed SRAC that they intend to make a market in the Notes, but
they are under no obligation to do so and may discontinue market making at any
time. SRAC can give you no assurance as to the liquidity of a trading market for
the Notes.
The Agents or their respective affiliates may receive proceeds from the
sale of the Notes if SRAC uses the proceeds to pay down its short-term debt that
the Agents or their respective
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affiliates hold. If required, the offering of the Notes will be conducted in
accordance with Rule 2710(c)(8) of the Conduct Rules of the National Association
of Securities Dealers, Inc. if any of the Agents or their respective affiliates
receive proceeds from the sale of the Notes.
In the ordinary course of their respective businesses, certain of the
Agents and/or their affiliates provide from time to time and may currently be
providing various general financing, financial advisory and banking services to
SRAC and its affiliates.
USE OF PROCEEDS
Unless otherwise indicated in an applicable pricing supplement, SRAC
expects to add the net proceeds (before expenses) that it receives from the sale
of the Notes to its general funds and may initially use these proceeds to reduce
its short-term debt, which consists primarily of commercial paper that was
issued for general corporate purposes. See "Use of Proceeds" in the accompanying
prospectus.
LEGAL MATTERS
Steven M. Cook, Vice President, Deputy General Counsel and Acting General
Counsel of Sears, is passing upon the legality of the Notes for SRAC. As of May
9, 2003, Mr. Cook owned 11,108 shares of Sears common stock (including 2,199
shares held in Sears 401(k) savings plans) and has been granted stock options
with respect to an additional 40,676 Sears common shares. Mayer, Brown, Rowe &
Maw will pass upon certain legal matters for SRAC as to specified tax matters.
Skadden, Arps, Slate, Meagher & Flom LLP will pass upon certain matters for the
Agents. Skadden, Arps, Slate, Meagher & Flom LLP performs legal services for
Sears from time to time.
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GLOSSARY
"Bond Equivalent Yield" means a yield (expressed as a percentage)
calculated in accordance with the following formula:
D X N
Bond Equivalent Yield = --------------------- X 100
360 - (D X M)
where "D" refers to the per annum rate for Treasury bills, quoted on a bank
discount basis and expressed as a decimal; and "N" refers to 365 or 366, as the
case may be, and "M" refers to the number of days in the period for which
accrued interest is being calculated.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday:
- that is not a legal holiday for banking institutions in any of the City
of Wilmington, Delaware; the City of Chicago, Illinois; The City of New
York, New York; or the city where the trustee has its principal corporate
trust office; or
- with respect to Notes denominated in a currency other than U.S. dollars
or the Euro, that is not a legal holiday for banking institutions in any
of the City of Wilmington, Delaware; the City of Chicago, Illinois; The
City of New York, New York; the city where the trustee has its principal
corporate trust office; or the principal financial center (or centers) of
the country (or countries) that issues the specified currency of the
Notes;
- with respect to Notes denominated in the Euro, that is a day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer
(TARGET) System is open and that is not a legal holiday for banking
institutions in any of the City of Wilmington, Delaware; the City of
Chicago, Illinois; The City of New York, New York; the City of Brussels,
Belgium; or the city where the trustee has its principal corporate trust
office; or
- with respect to LIBOR Notes, that is a day on which the London interbank
market transacts dealings in U.S. dollar deposits and that is not a legal
holiday for banking institutions in any of the City of Wilmington,
Delaware; the City of Chicago, Illinois; The City of New York, New York;
or the city where the trustee has its principal corporate trust office.
"Calculation Date" with respect to the relevant Interest Determination Date
means, unless SRAC specifies otherwise in the applicable pricing supplement, the
earlier of (i) the tenth calendar day after each Interest Determination Date,
or, if the tenth calendar day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day immediately before the applicable
interest payment date, maturity date or redemption date.
"CD Rate" means, initially or for any Interest Reset Date, the rate
determined by the Calculation Agent for the applicable Interest Determination
Date as follows:
- if the Board of Governors of the Federal Reserve System publishes a rate
by 3:00 p.m., New York City time, on the Calculation Date in H.15(519)
under the heading "CDs (Secondary Market)" for the Interest Determination
Date for negotiable U.S. dollar certificates of deposit with the
specified Index Maturity, then the CD Rate will be that rate;
- if the rate referred to in the preceding bullet point is not so published
by 3:00 p.m., New York City time, on the Calculation Date, then the CD
Rate will be the rate set forth in H.15 Daily Update under the heading
"CDs (Secondary Market)" for the Interest Determination Date for U.S.
dollar negotiable certificates of deposit with the specified Index
Maturity, if the Board of Governors of the Federal Reserve System
publishes the rate by 3:00 p.m., New York City time, on the Calculation
Date;
- if the rate referred to in the preceding bullet point is not so published
by 3:00 p.m., New York City time, on the Calculation Date, the
Calculation Agent will select three leading
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unaffiliated nonbank dealers of negotiable U.S. dollar certificates of
deposit in The City of New York (which may include the Agents or their
affiliates) to provide quotations of their secondary market offered
rates, as of 10:00 a.m., New York City time, on the Interest
Determination Date, for U.S. dollar negotiable certificates of deposit of
major United States money market banks with a remaining maturity closest
to the specified Index Maturity in an amount that is representative for a
single transaction in that market at that time. If at least three dealers
provide the requested quotations, the CD Rate will be the arithmetic mean
of these quotations;
- if fewer than three dealers provide quotations as described in the
preceding bullet point, the CD Rate will be the CD Rate in effect on the
Interest Determination Date.
"CMT Designated Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10 or 20 years) that SRAC
specifies in the applicable pricing supplement with respect to which the CMT
Rate will be calculated.
"CMT Rate" means, initially or for any Interest Reset Date, the rate
determined by the Calculation Agent for the applicable Interest Determination
Date as follows:
- if a rate is displayed on the Bloomberg Professional Service (or any
successor service) on page "NDX H15 3" (or any other page as may replace
such page on that service) under the heading "Treasury Const. Mat.11" for
Mondays approximately 3:45 P.M., at the row for the CMT Designated
Maturity Index by 3:00 p.m., New York City time, on the Calculation Date
for (i) the Interest Determination Date (if the daily average is
designated in the applicable pricing supplement), or (ii) the week, or
the month, as applicable, ended immediately before the week or the month
as applicable in which the related Interest Determination Date occurs (if
the weekly or monthly average is designated in the applicable pricing
supplement), then the CMT Rate will be that rate;
- if the appropriate rate referred to in the preceding bullet point is no
longer displayed on the Bloomberg Page NDX H15 3, or if it is not
displayed by 3:00 p.m., New York City time, on the Calculation Date, then
the CMT Rate will be the treasury constant maturity rate for the CMT
Designated Maturity Index as published by the Board of Governors of the
Federal Reserve System in the relevant H.15(519) under the heading
"Treasury Constant Maturities", if the Board of Governors of the Federal
Reserve System publishes the treasury constant maturity rate by 3:00
p.m., New York City time, on the Calculation Date;
- if the rate referred to in the preceding bullet point is not published by
3:00 p.m., New York City time, on the Calculation Date, then the CMT Rate
will be the treasury constant maturity rate set forth in H.15 Daily
Update under the heading "Treasury Constant Maturities", if the Board of
Governors publishes the rate by 3:00 p.m., New York City time, on the
Calculation Date;
- if the rate referred to in the preceding bullet point is not published by
3:00 p.m., New York City time, on the Calculation Date, then the CMT Rate
will be the treasury constant maturity rate for the CMT Designated
Maturity Index (or other United States Treasury rate for the CMT
Designated Maturity Index) in effect on the Interest Determination Date
as the Board of Governors of the Federal Reserve System or the United
States Department of the Treasury may then publish that the Calculation
Agent determines to be comparable to the rate formerly displayed on the
CMT Designated Bloomberg Page and published in the relevant H.15(519), if
the Board of Governors of the Federal Reserve System or United States
Department of the Treasury publishes the treasury constant maturity rate
by 3:00 p.m., New York City time, on the Calculation Date;
- if the rate referred to in the preceding bullet point is not published by
3:00 p.m., New York City time, on the Calculation Date, then the
Calculation Agent will request quotations from five leading unaffiliated
primary United States government securities dealers in The City of New
York (which may include the Agents or their affiliates), (each, a
"Reference Dealer")
S-31
based on their written records, of the secondary market closing bid side
prices as of approximately 3:30 p.m., New York City time, on the Interest
Determination Date for the most recently issued direct noncallable fixed
rate obligations of the United States ("Treasury Notes"):
- with an original maturity of approximately the CMT Designated Maturity
Index;
- in a principal amount that is representative for a single transaction in
the securities in that market at that time; and
- with a remaining term to maturity of not less than the CMT Designated
Maturity Index minus one year;
- if all five Reference Dealers provide the requested quotations, then the
CMT Rate will be the arithmetic mean of the quotations, eliminating the
highest quotation (or one of the highest if two or more are equal) and
the lowest quotation (or one of the lowest if two or more are equal);
- if fewer than five Reference Dealers, but at least three Reference
Dealers, provide the requested quotations as described above, then the
CMT Rate will be the arithmetic mean of the quotations without
eliminating the highest or the lowest quotations;
- if the Calculation Agent does not obtain at least three quotations as
described above, the Calculation Agent will request quotations of the
secondary market bid side prices as of approximately 3:30 p.m., New York
City time, on the Interest Determination Date from five Reference Dealers
in The City of New York for Treasury Notes:
- with an original maturity of the number of years that is the next
highest to the CMT Designated Maturity Index;
- with a remaining term to maturity closest to the CMT Designated Maturity
Index (if two Treasury Notes have remaining terms to maturity equally
close to the CMT Designated Maturity Index, the Calculation Agent will
use the quotations for the Treasury Note with the shorter remaining term
to maturity); and
- in a principal amount that is representative for a single transaction in
the securities in that market at that time;
- if five Reference Dealers provide the requested quotations, then the CMT
Rate will be the arithmetic mean of the quotations, eliminating the
highest quotation (or one of the highest if two or more are equal) and
the lowest quotation (or one of the lowest if two or more are equal);
- if fewer than five Reference Dealers, but at least three Reference
Dealers, provide the requested quotations as described above, then the
CMT Rate will be the arithmetic mean of the quotations without
eliminating the highest or the lowest quotations;
- if fewer than three dealers provide the requested quotations as described
above, the CMT Rate will be the CMT Rate in effect on the Interest
Determination Date.
"Commercial Paper Rate" means, initially or for any Interest Reset Date,
the money market yield (calculated as described below) of the per annum rate
(quoted on a bank discount basis) in effect on the Interest Determination Date
for commercial paper with the specified Index Maturity, determined as follows:
- if the Board of Governors of the Federal Reserve System publishes a rate
in H.15(519) under the heading "Commercial Paper--Nonfinancial," or
another heading representing commercial paper of non-financial issuers
whose bond rating is "AA," or the equivalent, from a nationally
recognized statistical rating agency by 3:00 p.m., New York City time, on
S-32
the Calculation Date, then the Commercial Paper Rate will be the money
market yield of that rate.
- if the rate referred to in the preceding bullet point is not so published
by 3:00 p.m., New York City time, on the Calculation Date, then the
Commercial Paper Rate will be the rate set forth in H.15 Daily Update
under the heading "Commercial Paper--Nonfinancial," or another heading
representing commercial paper of non-financial issuers whose bond rating
is "AA," or the equivalent, from a nationally recognized statistical
rating agency, if the Board of Governors of the Federal Reserve System
publishes the rate by 3:00 p.m., New York City time, on the Calculation
Date;
- if the rate referred to in the preceding bullet point is not so published
by 3:00 p.m., New York City time, on the Calculation Date, the
Calculation Agent will request quotations from three leading unaffiliated
dealers of U.S. dollar commercial paper in The City of New York (which
may include the Agents or their affiliates) of the offered per annum
rates (quoted on a bank discount basis), as of 11:00 a.m., New York City
time, on the Interest Determination Date, for commercial paper:
- of the specified Index Maturity; and
- placed for an industrial issuer whose bond rating is "AA," or the
equivalent, from a nationally recognized statistical rating agency;
- if all three dealers provide the requested quotations, the Commercial
Paper Rate will be the money market yield of the arithmetic mean of the
quotations;
- if fewer than three dealers provide the requested quotations as described
above, the Commercial Paper Rate will be the Commercial Paper Rate in
effect on the Interest Determination Date.
The money market yield of the rate is a yield (expressed as a percentage)
calculated in accordance with the following formula:
D X 360
money market yield = --------------------- X 100
360 - (D X M)
where "D" refers to the per annum rate determined as described above, expressed
as a decimal; and "M" refers to the number of days in the period for which the
Calculation Agent is calculating accrued interest.
"Euro" means the lawful currency of the member states of the European
Economic and Monetary Union, pursuant to the Treaty establishing the European
Community, as amended by the Treaty on European Union.
"Federal Funds Rate" means, initially or for any Interest Reset Date, the
rate determined by the Calculation Agent for the applicable Interest
Determination Date as follows:
- if the Board of Governors of the Federal Reserve System publishes a rate
for U.S. dollar federal funds for the Interest Determination Date by 3:00
p.m., New York City time, on the Calculation Date in H.15(519) under the
heading "Federal Funds (Effective)," as such rate is displayed on the
Bloomberg Professional Service (or any successor service) on page FEDL01
(or any other page as may replace such page on that service), then the
Federal Funds Rate will be that rate;
- if such rate does not appear on the page described above or if the Board
of Governors of the Federal Reserve System does not publish the rate as
described above by 3:00 p.m., New York City time, on the Calculation
Date, then the Federal Funds Rate will be the rate for U.S. dollar
federal funds set forth in H.15 Daily Update for the Interest
Determination
S-33
Date under the heading "Federal Funds (Effective)," if the Board of
Governors publishes the rate by 3:00 p.m., New York City time, on the
Calculation Date;
- if the rate referred to in the preceding bullet point is not so published
by 3:00 p.m., New York City time, on the Calculation Date, the
Calculation Agent will request quotations from three leading unaffiliated
brokers (which may include the Agents or their affiliates) of federal
funds transactions in The City of New York prior to 9:00 a.m., New York
City time, on the Interest Determination Date for the last transaction in
overnight federal funds arranged by the brokers. If all three brokers
provide the requested quotations, the Federal Funds Rate will be the
arithmetic mean of the quoted rates;
- if fewer than three brokers provide the requested quotations as described
in the preceding bullet point, then the Federal Funds Rate will be the
Federal Funds Rate in effect on the Interest Determination Date.
"H.15(519)" means the weekly "Statistical Release H.15(519), Selected
Interest Rates" or any successor publication of the Board of Governors of the
Federal Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.federalreserve.gov/releases/h15/update, any successor site or
publication or another recognized electronic source used for the purpose of
displaying the applicable rate.
"Index Maturity" is defined in "Description of Notes--Interest
Rate--Floating Rate Notes--General Information" in this prospectus supplement.
"Interest Determination Date" is defined in "Description of Notes--Interest
Rate--Floating Rate Notes--General Information" in this prospectus supplement.
"Interest Reset Date" is defined in "Description of Notes--Interest
Rate--Floating Rate Notes--General Information" in this prospectus supplement.
"LIBOR" means, initially or for any Interest Reset Date, the rate
determined by the Calculation Agent for the applicable Interest Determination
Date as follows:
- if a rate appears on page 3750 of Moneyline Telerate, Inc., as displayed
on page "BBAM" (British Bankers Association Official BBA LIBOR Fixings)
in the Bloomberg Professional Service (or any other service that may
replace Moneyline Telerate, Inc. on page BBAM or any other page that may
replace page BBAM on the Bloomberg Professional Service or a successor
service, in each case for the purposes of displaying London interbank
offered rates of major banks) ("Bloomberg Page BBAM") as of 11:00 a.m.,
London time, on the Interest Determination Date, for deposits in U.S.
dollars with the specified Index Maturity commencing on the Interest
Reset Date, then LIBOR will be the rate that appears on that page;
- if no rate appears on Bloomberg Page BBAM as described above on the
Interest Determination Date, the Calculation Agent will request the
principal London office of four major banks in the London interbank
market to provide a quotation of the rate, at approximately 11:00 a.m.,
London time, on the Interest Determination Date, at which it would offer
deposits in U.S. dollars to prime banks in the London interbank market:
- with the specified Index Maturity;
- commencing on the Interest Reset Date; and
- in a principal amount of at least $1,000,000 that, in the Calculation
Agent's judgment, is representative for a single transaction in that
market at that time (a "Representative Amount");
S-34
- if at least two banks provide the requested quotations, then LIBOR will
be the arithmetic mean of the quotations;
- if fewer than two banks provide the requested quotations as described
above, the Calculation Agent will request three major unaffiliated banks
in The City of New York (which may include the Agents or their
affiliates) to provide a quotation of the rate, at approximately 11:00
a.m., New York City time, on the Interest Determination Date, at which it
would offer loans in U.S. dollars to leading European banks:
- with the specified Index Maturity;
- commencing on the Interest Reset Date; and
- in a Representative Amount;
- If all three New York banks provide the requested quotations, then LIBOR
will be the arithmetic mean of the quotations;
- if fewer than three New York banks provide the requested quotations as
described above, then LIBOR will be the LIBOR in effect on the Interest
Determination Date.
"Prime Rate" means, initially or for any Interest Reset Date, the rate
determined by the Calculation Agent for the applicable Interest Determination
Date as follows:
- if the Board of Governors of the Federal Reserve System publishes a rate
in H.15(519) under the heading "Bank Prime Loan" by 3:00 p.m., New York
City time, on the Calculation Date, then the Prime Rate will be that
rate;
- if the rate referred to in the preceding bullet point is not so published
by 3:00 p.m., New York City time, on the Calculation Date, then the Prime
Rate will be the rate set forth in H.15 Daily Update under the heading
"Bank Prime Loan," if the Board of Governors of the Federal Reserve
System publishes the rate by 3:00 p.m., New York City time, on the
Calculation Date;
- if the rate referred to in the preceding bullet point is not so published
by 3:00 p.m., New York City time, on the Calculation Date, then the rate
will be the arithmetic mean of the interest rates publicly announced by
each bank that appears on the display on the Reuters Monitor Money Rates
Service (or any successor service) on page "USPRIME1" (or such other page
as may replace the USPRIME1 page on that service for the purpose of
displaying prime rates or base lending rates of major United States
banks) as of 11:00 a.m. New York City time on the Interest Determination
Date as such bank's prime rate or base lending rate in effect on the
Interest Determination Date, if at least four rates appear on the Reuters
Screen USPRIME1 Page;
- if fewer than four rates appear on the Reuters Screen USPRIME1 Page as
described in the preceding bullet point on the Interest Determination
Date, the Calculation Agent will request quotations from three major
unaffiliated banks (which may include the Agents or their affiliates) in
The City of New York for their prime rates or base lending rates (quoted
on the basis of the actual number of days in the year divided by a
360-day year) as of the close of business on the Interest Determination
Date. If all three banks provide the requested quotations, then the Prime
Rate will be the arithmetic mean of the quoted rates;
- if fewer than three banks provide the requested quotations as described
above, then the Prime Rate will be the Prime Rate in effect on the
Interest Determination Date.
"Treasury Rate" means, initially or for any Interest Reset Date, the rate
determined by the Calculation Agent for the applicable Interest Determination
Date as follows:
- if a rate appears on the display designated as "AUCR US" on the Bloomberg
Professional Service (or a successor service) opposite the caption
"INVESTMENT RT" (or any other
S-35
page as may replace such page on that service) by 3:00 p.m., New York
City time, on the Calculation Date for the auction on the relevant
Interest Determination Date of direct obligations of the United States
("Treasury bills") with the specified Index Maturity, then the Treasury
Rate will be that rate;
- if the appropriate page as described in the preceding bullet point is not
displayed by 3:00 p.m., New York City time, on the Calculation Date, and
the United States Department of Treasury announces in another manner the
Bond Equivalent Yield of the auction rate of the applicable Treasury
bills, then the Treasury Rate will be the rate as announced by the United
States Department of Treasury;
- if the results of the auction of Treasury bills on the Interest
Determination Date with the specified Index Maturity are not published or
reported as provided in the preceding bullet point by 3:00 p.m., New York
City time, on the Calculation Date, or if the United States Department of
the Treasury does not hold an auction that week, then the Treasury Rate
will be the Bond Equivalent Yield of the rate set forth in H.15(519) for
the relevant Interest Determination Date for Treasury bills with the
specified Index Maturity under the heading "U.S. Government
Securities/Treasury Bills/Secondary Market";
- if the rate referred to in the preceding bullet point is not published by
3:00 p.m., New York City time, on the Calculation Date, then the Treasury
Rate will be the rate set forth in H.15 Daily Update under the heading
"U.S. Government Securities/Treasury Bills/Secondary Market," if the
Board of Governors of the Federal Reserve System publishes the rate by
3:00 p.m., New York City time, on the Calculation Date;
- if the rate referred to in the preceding bullet point is not published by
3:00 p.m., New York City time, on the Calculation Date, the Calculation
Agent will request quotations from three primary unaffiliated United
States government securities dealers in The City of New York (which may
include the Agents or their affiliates) for the secondary market bid
rates as of approximately 3:30 p.m., New York City time, on the Interest
Determination Date for the issue of Treasury bills with a remaining
maturity closest to the specified Index Maturity. If all three securities
dealers provide the requested quotations, then the Treasury Rate will be
the Bond Equivalent Yield of the arithmetic mean of the quoted rates;
- if fewer than three securities dealers provide the requested quotations
as described above, the Treasury Rate will be the Treasury Rate in effect
on the Interest Determination Date.
S-36
SEARS ROEBUCK ACCEPTANCE CORP.
$9,500,000,000
DEBT SECURITIES
------------------------------
Sears Roebuck Acceptance Corp. ("SRAC") may from time to time sell up to
$9,500,000,000 aggregate initial offering price of its debt securities. These
debt securities may consist of debentures, notes or other types of unsecured
debt. This prospectus contains a general description of the debt securities that
SRAC may offer for sale. All remaining material terms of these debt securities
will be described in supplements to this prospectus.
------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
------------------------------
MAY 14, 2003
SRAC HAS NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO
THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AS IF SRAC HAD AUTHORIZED IT. THIS PROSPECTUS AND THE
ACCOMPANYING SUPPLEMENT TO THIS PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH THEY RELATE, NOR DO THIS PROSPECTUS AND THE ACCOMPANYING
SUPPLEMENT TO THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE
INFORMATION CONTAINED IN THIS PROSPECTUS AND THE SUPPLEMENT TO THIS PROSPECTUS
IS ACCURATE AS OF THE DATES ON THEIR COVERS. WHEN SRAC DELIVERS THIS PROSPECTUS
OR A SUPPLEMENT OR MAKES A SALE PURSUANT TO THIS PROSPECTUS, SRAC IS NOT
IMPLYING THAT THE INFORMATION IS CURRENT AS OF THE DATE OF THE DELIVERY OR SALE.
------------------------------
In connection with the issue of any debt securities, an underwriter, if
any, disclosed as stabilizing manager in the applicable supplement to this
prospectus, or any person acting for it, may over-allot or effect transactions
with a view to supporting the market price of such debt securities or any
associated securities at a level higher than that which might otherwise prevail
for a limited period after the issue date. However, there may be no obligation
on such stabilizing manager or any agent of it to do this. Such stabilizing, if
commenced, may be discontinued at any time, and must be brought to an end after
a limited period.
TABLE OF CONTENTS
PROSPECTUS
Available Information....................................... 3
Reports to Holders of Debt Securities....................... 3
Incorporation of Certain Documents by Reference............. 3
Sears Roebuck Acceptance Corp............................... 4
Use of Proceeds............................................. 4
Ratio of Earnings to Fixed Charges.......................... 5
Description of Debt Securities.............................. 5
Plan of Distribution........................................ 10
Legal Matters............................................... 11
Experts..................................................... 11
2
AVAILABLE INFORMATION
SRAC and Sears, Roebuck and Co. ("Sears"), SRAC's parent, are required to
file reports and other information with the Securities and Exchange Commission.
Sears also files proxy statements with the Commission. You can inspect and copy
these reports, proxy statements and other information at the public reference
facilities of the Commission, in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549. You can also obtain copies of these materials from the public
reference room of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. You may call the Commission at 1-800-SEC-0330 for
information on the operation of the public reference room. The Commission also
maintains a web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission (http://www.sec.gov). You can inspect reports and other information
concerning SRAC and Sears at the office of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005. You can also inspect reports, proxy
statements and other information concerning Sears at the offices of the Chicago
Stock Exchange Incorporated, 440 South LaSalle Street, Chicago, Illinois 60605,
and the Pacific Exchange, Inc., 301 Pine Street, San Francisco, California
94104.
SRAC and Sears have filed a registration statement and related exhibits
with the Commission under the Securities Act of 1933, as amended. The
registration statement contains additional information about SRAC, Sears and the
debt securities. You may inspect the registration statement and exhibits without
charge at the office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and you may obtain copies from the Commission at prescribed rates.
REPORTS TO HOLDERS OF DEBT SECURITIES
SRAC will send its annual reports to the holders of its debt securities.
These annual reports will include financial information that independent public
accountants have audited and reported on, as well as other information about
SRAC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
SRAC and Sears incorporate and make part of this prospectus by reference
the following documents, filed by SRAC and Sears with the Commission pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended (excluding any
information contained therein that is furnished to the Commission and is
specifically not incorporated by reference into the registration statement):
- the Annual Reports on Form 10-K for the fiscal year ended December 28,
2002, filed by SRAC and Sears;
- the Quarterly Reports on Form 10-Q for the quarter ended March 29, 2003,
filed by SRAC and Sears;
- the Current Reports on Form 8-K filed on January 16, February 6, March 26
and April 17, 2003, by Sears;
- the Current Reports on Form 8-K filed on February 14, February 27 and
April 28, 2003, by SRAC; and
- all documents filed by SRAC or Sears with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, on or after the date of this prospectus and before SRAC
stops offering the debt securities.
To receive a free copy of any of the documents incorporated by reference in
this prospectus (other than exhibits, unless they are specifically incorporated
by reference in the documents),
3
call or write Sears Roebuck Acceptance Corp., 3711 Kennett Pike, Greenville,
Delaware 19807, Attention: Vice President, Finance (302/434-3100).
SEARS ROEBUCK ACCEPTANCE CORP.
SRAC is a wholly owned subsidiary of Sears that was incorporated under the
laws of Delaware in 1956. Its general offices are located at 3711 Kennett Pike,
Greenville, Delaware 19807 (302/434-3100). It raises funds primarily by issuing
commercial paper, medium-term notes and discrete underwritten debt. It uses the
proceeds from its borrowings to acquire short-term notes of Sears and, on
occasion, to purchase outstanding receivable balances from Sears. Sears, a
multi-line retailer that conducts domestic and international merchandising and
credit operations, uses the funds it obtains from SRAC for general funding
purposes. SRAC, and not Sears, will be solely responsible for repaying the debt
securities.
SRAC generates income primarily from the earnings on its investment in the
notes and receivable balances of Sears. Sears presently calculates the interest
rate on its notes so that SRAC maintains an earnings to fixed charges ratio of
at least 1.25. The yield on SRAC's investment in Sears notes is related to
SRAC's borrowing costs. As a result, movements in interest rates and changes in
Sears borrowing requirements cause SRAC's earnings to fluctuate. The indentures
relating to SRAC's debt securities require SRAC to maintain a ratio of earnings
to fixed charges of not less than 1.10 for any fiscal quarter (determined in
accordance with Item 503(d) of Regulation S-K promulgated by the Commission) and
to cause Sears to maintain ownership of all of SRAC's voting stock as long as
any of SRAC's debt securities are outstanding. Sears has agreed to pay SRAC the
amounts that are necessary for SRAC to maintain an earnings to fixed charges
ratio of at least 1.10 and has agreed to maintain ownership of all of SRAC's
voting stock as long as any of SRAC's debt securities are outstanding. See
"Description of Debt Securities -- Indenture Restrictions."
As of May 14, 2003, SRAC had 10 employees.
USE OF PROCEEDS
SRAC generally will add the net proceeds it receives from the sale of its
debt securities to its general funds and use the proceeds to reduce its
short-term debt. As indicated in this prospectus under the heading "Sears
Roebuck Acceptance Corp.," SRAC's principal business is purchasing short-term
notes of Sears. Additionally, SRAC occasionally purchases receivable balances
from Sears domestic credit operations. SRAC expects to incur additional debt,
but has not yet determined how much or the terms of this debt. SRAC will make
these determinations from time to time based on economic conditions and certain
capital requirements of Sears. SRAC anticipates that Sears and its subsidiaries
will continue their practice of short-term borrowing and will occasionally incur
additional long-term debt and engage in securitization programs in which Sears
and its subsidiaries sell interests in pools of credit card receivables in
public or private transactions. Sears also occasionally may issue equity
securities.
4
RATIO OF EARNINGS TO FIXED CHARGES
Sears presently calculates the interest rate on SRAC's investment in Sears
notes to provide SRAC with earnings sufficient to cover its fixed charges at
least 1.25 times. The ratios of earnings to fixed charges for SRAC and Sears for
the interim period and the years ended on the dates set forth in the following
table were as follows:
13 WEEKS
ENDED
MARCH 29, DECEMBER 28, DECEMBER 29, DECEMBER 30, JANUARY 1, JANUARY 2,
2003 2002 2001 2000 2000 1999
------------- ------------ ------------ ------------ ---------- ----------
SRAC(A).............. 1.25 1.26 1.26 1.26 1.25 1.26
Sears(B)............. 1.97 2.86 1.76 2.59 2.72 2.19
---------------
(A) Calculated as follows:
earnings = net income + fixed charges + income taxes
---------------------------------------------------------------------------
fixed charges = interest expense + amortization of debt discount and expense
(B) Calculated as follows:
earnings = income before income taxes, minority interest and extraordinary
loss -- undistributed net income (loss) of unconsolidated subsidiaries +
fixed charges (excluding interest capitalized)
---------------------------------------------------------------------------
fixed charges = interest expense + amortization of debt discount and expense
+ the portion of operating lease rentals which Sears estimates represents
the interest element in such rentals + interest capitalized
DESCRIPTION OF DEBT SECURITIES
This prospectus describes certain general terms and provisions of SRAC's
unsecured debt securities. When SRAC offers to sell a particular series of debt
securities, it will describe the specific terms of the series in a supplement to
this prospectus. SRAC will also indicate in the supplement whether the general
terms and provisions described in this prospectus apply to a particular series
of debt securities.
The debt securities are to be issued under either an indenture dated as of
May 15, 1995 between SRAC and JPMorgan Chase Bank, as trustee, or an indenture
dated as of October 1, 2002 between SRAC and BNY Midwest Trust Company, as
trustee, the terms of each of which are identical in all material respects. SRAC
also may enter into an indenture with one or more other eligible trustees. SRAC
will identify the trustee and the particular indenture under which it is issuing
each series of its debt securities in the applicable supplement to this
prospectus.
The following sections summarize certain provisions of SRAC's debt
securities and indentures. This summary is qualified by and subject to the
actual provisions of the indenture under which SRAC is issuing a particular
series of debt securities. SRAC has filed the indentures with the Commission and
is incorporating each of them by reference in this prospectus. References below
to the "indenture" and the "trustee" refer to the applicable indenture and
trustee identified in a prospectus supplement relating to a particular series of
debt securities. Where this summary refers to particular provisions of each
indenture in parentheses, the provisions are incorporated by reference.
GENERAL TERMS
The debt securities will be unsecured obligations of SRAC.
SRAC can issue an unlimited amount of debt securities under the indenture,
and can issue them from time to time in one or more series.
5
If any of the following terms apply to a particular series of debt
securities that SRAC offers to sell, the supplement to this prospectus will
describe the applicable terms:
- the title
- any limit on the aggregate principal amount
- the maturity date or dates
- the issue price
- the interest rate or rates (which may be fixed or variable)
- the date from which interest will accrue
- the interest payment dates (including the first interest payment date)
- the record dates for the interest payment dates
- any optional or mandatory redemption, conversion or exchange provisions
and whether you have or SRAC has the right to use these provisions
- any subordination provisions
- any sinking fund provisions
- the amount payable upon acceleration of the maturity date, if the amount
is not the principal amount of the debt securities
- the terms of any warrants attached to the debt securities
- the currencies that you may use to purchase the debt securities and that
SRAC may use to pay principal, any premium and interest
- any index SRAC will use to determine the amount of principal, premium and
interest payments
- whether SRAC will issue the debt securities as one or more global
securities to be held for investors by a depository and, if so, the name
of the depository
- the places where the principal, any premium and interest will be payable,
if those places are not set forth in the indenture
- any other terms that are consistent with the indenture that may modify or
delete any provision of the indenture to the extent the provision applies
to such series
SRAC will pay principal and any premium and may pay any interest at the
office of the paying agent it maintains for such purposes in the Borough of
Manhattan of The City of New York. You may transfer your beneficial interests in
debt securities (other than debt securities represented by global securities) at
the same office. SRAC may also designate other locations for payments and
transfers in the city in which its principal executive offices are located or
the city in which the principal corporate trust office of the trustee is
located. Unless SRAC specifies otherwise in the supplement to this prospectus,
the locations for payment and transfer initially will include a designated
office of the trustee in the Borough of Manhattan of The City of New York and
SRAC's principal executive offices in Greenville, Delaware.
SRAC will generally pay interest on its debt securities by checks mailed to
you at your registered address, unless you make other arrangements or the debt
securities are represented by a global security. (Sections 2.5, 3.1, 3.2) If the
debt securities are represented by global securities, SRAC will provide
information about payment of principal, any premium and interest and about
transfers of beneficial interests in the global securities in the supplement to
this prospectus.
6
If SRAC has indicated in the supplement to this prospectus that it will pay
principal, any premium and interest in a currency other than U.S. dollars and
that currency is unavailable for payment due to circumstances beyond SRAC's
control, SRAC will pay the principal, any premium and interest in U.S. dollars.
The exchange rate will be the most recent noon buying rate in The City of New
York for cable transfers in the unavailable currency, as certified for customs
purposes by the Federal Reserve Bank of New York. (Section 2.12)
SRAC will issue its debt securities only in fully registered form, without
coupons. The debt securities will be issued in denominations of $1,000 or an
integral multiple of $1,000, unless SRAC indicates otherwise in the supplement
to this prospectus. (Section 2.2)
You will not have to pay a service charge to register a transfer or
exchange of debt securities. However, SRAC may require you to pay an amount
sufficient to cover any tax or other governmental charge in connection with the
transfer or exchange. (Section 2.5)
SRAC may issue debt securities at a discounted price with provisions that
permit it to pay less than the principal amount if the holders of the debt
securities accelerate the maturity date as a result of a continuing default. If
SRAC chooses to issue these discounted debt securities, it will describe the
federal income tax consequences and other special considerations in the
supplement to this prospectus.
If your beneficial interest in these debt securities are held of record in
the name of a depositary or other nominee, you must notify such depositary or
nominee to take action, under the indenture or otherwise, on your behalf as
holder of the debt securities.
INDENTURE RESTRICTIONS
The indenture provides that SRAC will maintain a ratio of earnings to fixed
charges in every fiscal quarter of at least 1.10 and that it will cause Sears to
maintain ownership of all of SRAC's voting stock. SRAC determines its ratio of
earnings to fixed charges in accordance with Item 503(d) of Regulation S-K
promulgated by the Commission, as in effect on the date of the indenture. SRAC
has letter agreements with Sears pursuant to which Sears has agreed, for the
benefit of the holders of SRAC's debt securities, that
- Sears will pay SRAC amounts which, when added to SRAC's other earnings,
will be sufficient for SRAC to maintain the fixed charge coverage ratio
required by the indenture; and
- Sears will maintain ownership of SRAC's voting stock as long as SRAC is
required to cause Sears to do so.
The indenture provides that SRAC will cause Sears to observe and perform in
all material respects all covenants or agreements of Sears contained in the
letter agreements and will not amend, waive, terminate or otherwise modify any
provision of the letter agreements. (Section 3.6)
DEFAULTS
If any of the following occur in connection with any series of SRAC's debt
securities, SRAC will be in default under those debt securities:
- if SRAC fails to pay the principal amount and any premium on the series
when due and payable;
- if SRAC fails for 30 days after any interest payment date to pay any
interest that has become due (unless it deposits the entire amount due
with the trustee or with a paying agent within 30 days after the due
date);
7
- if SRAC fails to perform any of its other covenants under the indenture
that apply to that series of debt securities and does not cure that
failure for 60 days after it receives written notice that it has failed
to perform from holders of a majority of the principal amount of the
particular series of debt securities or the trustee;
- if any of SRAC's creditors or creditors of Sears, including holders of
SRAC's debt securities from a different series, accelerates the maturity
date of $100,000,000 or more in principal amount of SRAC debt or Sears
debt as a result of an event of default under any relevant mortgage,
indenture or instrument, and that creditor does not rescind or annul the
acceleration within 30 days after SRAC receives written notice from
holders of a majority of the principal amount of the particular series of
debt securities or the trustee; however, if the maturity date was
accelerated as a result of compliance with applicable laws, court orders
or governmental decrees or if the default is remedied or cured by SRAC or
Sears or waived by the holders thereof or the debt is discharged prior to
the time that the holders of the particular series of SRAC debt
securities or the trustee take action to accelerate the maturity of these
SRAC debt securities or before the trustee receives a judgment in its
favor, then SRAC will not be in default under this provision;
- if SRAC takes specified actions in connection with a bankruptcy,
insolvency or reorganization; or
- if SRAC commits an act or omission that the supplement to this prospectus
identifies as an event of default.
Unless the supplement to this prospectus specifies otherwise, if SRAC
defaults on a particular series of debt securities and the default is
continuing, the holders of a majority of the principal amount of the outstanding
debt securities of that series or the trustee may accelerate the maturity date
of those debt securities. To accelerate the maturity date, those holders or the
trustee must declare that the principal amount of the debt securities of that
series is immediately due and payable. In certain circumstances, holders of a
majority of the principal amount of outstanding debt securities of the series
may annul the acceleration of the maturity date. (Section 6.1)
Within 90 days after a default for any series of debt securities occurs,
the trustee must notify the holders of debt securities of that series of the
default if it is known to the trustee and SRAC has not remedied it. A default
means the events specified above without the grace periods or notice. The
trustee may withhold notice to the holders of these debt securities of any
default (except in the payment of principal or interest) if it in good faith
considers this withholding to be in the best interests of the holders. (Section
10.3)
SRAC is required to file an annual certificate with the trustee, signed by
an officer, about any default by SRAC under any provision of the indenture.
(Section 3.4)
Before holders of debt securities have a right to institute a proceeding to
enforce the indenture or to obtain a remedy provided for by the indenture:
- holders of debt securities must notify the trustee of a default in
writing;
- holders of a majority of the principal amount of outstanding debt
securities of the particular series must request in writing that the
trustee institute the proceeding;
- holders of a majority of the principal amount of outstanding debt
securities of the particular series must offer reasonable indemnity to
the trustee if the trustee institutes the proceeding; and
- the trustee must neglect or refuse to institute the proceeding within a
reasonable time.
8
These requirements do not prevent a holder from enforcing the payment of
principal and interest on the debt securities held by such holder on or after
the relevant principal or interest due dates. (Section 6.7)
MODIFICATION OR AMENDMENT OF THE INDENTURE
SRAC may amend the indenture with the consent of the holders of a majority
of the aggregate principal amount of the outstanding debt securities of each
series affected by the amendment. However, SRAC may not make any amendment
without the consent of the holders of each affected debt security then
outstanding if that amendment will:
- permit SRAC to change the time of payment of any payment on the debt
securities, reduce any payment on the debt securities, or change the
currency in which SRAC makes any payments on the debt securities; or
- reduce the percentage of holders of any series of debt securities whose
consent is required to amend the indenture. (Article XI)
DEFEASANCE
TERMINATION OF SPECIFIED OBLIGATIONS
Unless SRAC provides otherwise in the supplement to this prospectus, SRAC
may terminate some of its obligations under the indenture with respect to the
debt securities of any series by depositing with the trustee or a paying agent,
in trust, any combination of the following in an amount sufficient to pay the
principal, any premium and each installment of interest on the debt securities
of that series on the dates these payments are due:
- money;
- securities backed by the full faith and credit of the United States of
America that the issuer cannot call or redeem (if the debt securities
with respect to which SRAC is terminating some of its obligations are
denominated in U.S. dollars);
- specified depository receipts for any non-callable and non-redeemable
securities backed by the full faith and credit of the United States of
America, or for a specific payment of interest on or principal of any
such securities, issued by a bank or trust company as custodian (if the
debt securities with respect to which SRAC is terminating some of its
obligations are denominated in U.S. dollars); or
- other securities that, when deposited in trust, alone or in combination
with other items in this list, will result in a nationally recognized
rating agency rating SRAC's debt securities in the highest generic
long-term debt rating category applicable to debt issued by an issuer
that has been released from its obligations to the same extent that SRAC
has been (if the debt securities with respect to which SRAC is
terminating some of its obligations are denominated in a foreign
currency).
As a prerequisite to establishing such a trust, in addition to other
requirements, SRAC must receive a ruling from the Internal Revenue Service or an
opinion of counsel who is not its employee. The ruling or opinion must state
that the holders of the debt securities with respect to which SRAC is
terminating some of its obligations will not recognize income, gain or loss for
federal income tax purposes as a result of the deposit with the trustee and
termination of these obligations. The ruling or opinion must also state that
those holders will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if SRAC had not
deposited money or securities with the trustee and terminated these obligations.
SRAC must also receive an opinion of counsel stating that, after 90 days, either
the trust deposit will not be subject to the effect of any applicable
bankruptcy, insolvency,
9
reorganization or similar laws affecting creditors' rights generally or that the
holders' rights would be adequately protected despite the application of such
laws to the trust funds.
Notwithstanding the deposit with the trustee or paying agent and compliance
with the additional requirements described above or in the indenture, SRAC's
obligations under the indenture to do the following with respect to a series
will remain in full force and effect until SRAC has paid the debt securities of
that series in full:
- pay principal, premium (if any) and interest;
- register the transfer or exchange of the debt securities;
- replace mutilated, destroyed, lost and stolen debt securities;
- maintain paying agencies; and
- hold monies for payment in trust. (Section 13.4)
If and when the Internal Revenue Service can provide a ruling, or counsel
can provide an opinion as described above, without reliance upon the
continuation of SRAC's obligations regarding the payment of principal, premium
(if any) and interest, then SRAC may discharge the indenture with respect to the
particular series of debt securities -- including its payment obligations -- by
delivering the ruling or opinion to the trustee and satisfying the other
conditions provided for in the indenture. (Section 13.4) Under present ruling
positions of the Internal Revenue Service, SRAC cannot obtain such a ruling or
opinion.
DISCHARGE OF THE INDENTURE
SRAC may also discharge the indenture, and all of its obligations under the
indenture, with respect to a particular series of debt securities -- including
its payment obligations -- if:
- all securities issued under the indenture have been canceled or delivered
to the trustee to be canceled; or
- all securities issued under the indenture that have not been canceled
- have become due and payable in accordance with their terms; or
- will become due and payable in accordance with their terms within
one year; or
- will be called for redemption within one year under arrangements
that satisfy the trustee.
To discharge the indenture in these circumstances, SRAC must deposit trust funds
with the trustee in an amount sufficient to pay all principal, interest and
premiums on the outstanding securities until they mature or are redeemed. SRAC
must also deliver a certificate of one of its officers and an opinion of
counsel, each stating that SRAC has complied with all conditions precedent to
the satisfaction and discharge of the indenture. (Section 13.1)
REGARDING THE TRUSTEES
JPMorgan Chase Bank, BNY Midwest Trust Company and certain of their
respective affiliates perform other services for SRAC.
PLAN OF DISTRIBUTION
SRAC may sell its debt securities to or through underwriters, directly to
other purchasers or through agents. SRAC anticipates offering its debt
securities directly to brokers or dealers, investment companies, insurance
companies, banks, savings and loan associations and trust companies or similar
institutions, and to trusts for which a bank, savings and loan association,
trust company or investment adviser is the trustee or is authorized to make
investment decisions.
SRAC may distribute its debt securities from time to time in one or more
transactions:
- at a fixed price or prices, which may change;
- at market prices prevailing at the time of sale;
10
- at prices related to such prevailing market prices; or
- at negotiated prices.
The supplement to this prospectus will describe the method of distribution
of any particular series of debt securities.
In connection with the sale of its debt securities, SRAC, or the purchasers
of debt securities for whom the underwriters may act as agents, may compensate
the underwriters in the form of discounts, concessions or commissions.
Underwriters may sell SRAC's debt securities to or through dealers and may
compensate the dealers in the form of discounts, concessions or commissions.
Dealers may also receive commissions from the purchasers of debt securities, for
whom they may act as agents. Under the Securities Act of 1933, as amended, the
Commission may deem underwriters, dealers and agents that participate in the
distribution of debt securities to be underwriters. The Commission also may deem
any discounts, commissions or concessions and any profit on the resale of debt
securities to be underwriting discounts and commissions under the Securities Act
of 1933, as amended. The supplement to this prospectus will identify any such
underwriter or agent and will describe any such compensation.
SRAC may enter into agreements to indemnify underwriters, dealers and
agents that participate in the distribution of its debt securities against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
LEGAL MATTERS
Unless otherwise specified in the supplement to this prospectus, Steven M.
Cook, Vice President, Deputy General Counsel and Acting General Counsel of
Sears, will pass upon the legality of the debt securities for SRAC.
EXPERTS
The financial statements of SRAC and the financial statements and the
related financial statement schedule of Sears incorporated in this prospectus by
reference from SRAC's and Sears' Annual Reports on Form 10-K for the year ended
December 28, 2002 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated herein by reference
(which reports express an unqualified opinion and include, in the case of the
report included in Sears' Annual Report on Form 10-K, an explanatory paragraph
referring to changes in accounting principles to adopt new accounting
standards), and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information contained in
the Quarterly Reports on Form 10-Q for Sears and SRAC, which are incorporated in
this prospectus by reference, Deloitte & Touche LLP have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in the Quarterly
Reports on Form 10-Q for Sears and SRAC and incorporated by reference in this
prospectus, they did not audit and they do not express an opinion on such
interim financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited nature
of the review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
reports on the unaudited interim financial information because those reports are
not "reports" or a "part" of the registration statement prepared or certified by
an accountant within the meaning of Sections 7 and 11 of the Securities Act of
1933, as amended.
11
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U.S. $1,500,000,000
SEARS ROEBUCK
ACCEPTANCE CORP.
MEDIUM-TERM NOTES SERIES VII
------------------
PROSPECTUS SUPPLEMENT
------------------
BARCLAYS CAPITAL
BEAR, STEARNS & CO. INC.
CITIGROUP
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY
SEARS ROEBUCK ACCEPTANCE CORP.
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