Filed Pursuant to Rule 424(b)(5)
Registration No. 333-69576
333-69576-01
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 24, 2001)
PNC LOGO
$1,000,000,000
PNC FUNDING CORP
$600,000,000 FLOATING RATE SENIOR NOTES DUE 2004
$400,000,000 5.75% SENIOR NOTES DUE 2006
UNCONDITIONALLY GUARANTEED BY
THE PNC FINANCIAL SERVICES GROUP, INC.
------------------
PNC Funding Corp will issue the senior notes in two series: $600,000,000
aggregate principal amount that will mature on October 29, 2004, and bear
interest at a floating rate of LIBOR plus 0.375%; and $400,000,000 aggregate
principal amount that will mature on August 1, 2006, and bear interest at 5.75%
per annum. The 2006 senior notes are additional debt securities of PNC Funding
Corp under the Indenture described in the accompanying prospectus and will be
treated as a single series with the $700,000,000 aggregate principal amount of
2006 senior notes issued by PNC Funding Corp on August 1, 2001.
Interest on the 2004 senior notes is payable quarterly in arrears on
January 29, April 29, July 29 and October 29 of each year beginning January 29,
2002. Interest on the 2006 senior notes is payable semiannually in arrears on
February 1 and August 1 of each year beginning February 1, 2002. The senior
notes will rank equally with all other unsecured senior indebtedness of PNC
Funding Corp. The PNC Financial Services Group, Inc. will guarantee the senior
notes and the guarantees will rank equally with the senior unsecured
indebtedness of The PNC Financial Services Group, Inc. The senior notes are not
guaranteed by the subsidiaries of The PNC Financial Services Group, Inc. The
guarantees are effectively subordinated to all indebtedness and other
liabilities (including trade payables and deposits) of such subsidiaries. PNC
Funding Corp may redeem the senior notes for the reasons described under
"Certain Terms of the Senior Notes -- Redemption for Taxation Reasons." The
senior notes are not otherwise redeemable prior to maturity. The senior notes
will not be subject to any sinking fund.
We intend to apply to have the senior notes listed on the Luxembourg Stock
Exchange in accordance with the rules of that exchange.
THE SENIOR NOTES AND THE GUARANTEES ARE NOT DEPOSITS OF A BANK AND ARE NOT
INSURED BY THE UNITED STATES FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
INSURER OR GOVERNMENT AGENCY.
None of the Securities and Exchange Commission, any state securities
commission, the Luxembourg Stock Exchange nor any foreign government agency has
approved or disapproved of these securities or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
------------------
PER SENIOR NOTE PER SENIOR NOTE
DUE 2004 DUE 2006 TOTAL
--------------- --------------- --------------
Public Offering Price.......................... 100.000%(1) 103.010%(2) $1,012,040,000(1)(2)
Underwriting Discount.......................... 0.225% 0.350% $ 2,750,000
Proceeds to PNC Funding Corp (before
expenses).................................... 99.775%(1) 102.660%(2) $1,009,290,000
---------------
(1) Plus accrued interest, if any, from October 30, 2001, to the date of
delivery, with respect to the 2004 senior notes.
(2) Plus accrued interest from August 1, 2001, to the date of delivery, with
respect to the 2006 senior notes.
Interest on the 2006 senior notes will accrue from August 1, 2001. Interest
on the 2004 senior notes will accrue from October 30, 2001.
------------------
The underwriters expect to deliver the senior notes to purchasers in
book-entry form only through The Depository Trust Company, Clearstream,
Luxembourg and the Euroclear System, as the case may be, on or about October 30,
2001.
------------------
JOINT BOOK-RUNNING MANAGERS
JPMORGAN SALOMON SMITH BARNEY
------------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PNC CAPITAL MARKETS, INC.
October 23, 2001
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT PAGE OF
THIS PROSPECTUS SUPPLEMENT OR, WITH RESPECT TO INFORMATION INCORPORATED BY
REFERENCE, AS OF THE DATE OF SUCH INFORMATION.
------------------
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS MAY BE USED BY
PNC CAPITAL MARKETS, INC. AND J.J.B. HILLIARD, W.L. LYONS, INC., BOTH OF WHICH
ARE AFFILIATES OF THE PNC FINANCIAL SERVICES GROUP, INC. AND PNC FUNDING CORP,
IN CONNECTION WITH OFFERS AND SALES RELATED TO SECONDARY MARKET TRANSACTIONS IN
THE SENIOR NOTES. PNC CAPITAL MARKETS, INC., J.J.B. HILLIARD, W.L. LYONS, INC.
AND OTHER AFFILIATES OF THE PNC FINANCIAL SERVICES GROUP, INC. AND PNC FUNDING
CORP MAY ACT AS PRINCIPAL OR AGENT IN THOSE TRANSACTIONS. THOSE SALES WILL BE
MADE AT PRICES RELATED TO PREVAILING MARKET PRICES AT THE TIME OF SALE OR
OTHERWISE.
We intend to apply to list the senior notes on the Luxembourg Stock Exchange
in accordance with the rules of that exchange. We cannot guarantee that listing
will be obtained on the Luxembourg Stock Exchange. Inquiries regarding our
listing status on the Luxembourg Stock Exchange should be directed to our
Luxembourg listing agent, Deutsche Bank Luxembourg S.A., 2 Boulevard Konrad
Adenauer, L-1115 Luxembourg.
This prospectus supplement and the accompanying prospectus include
particulars given in compliance with the rules governing the listing of
securities on the Luxembourg Stock Exchange for the purpose of giving
information with regard to The PNC Financial Services Group, Inc. and PNC
Funding Corp. The Luxembourg Stock Exchange takes no responsibility for the
contents of this document, makes no representation as to its accuracy or
completeness, and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the contents
of this prospectus supplement and the accompanying prospectus. Copies of this
prospectus supplement, the accompanying prospectus and the documents
incorporated by reference in this prospectus supplement and the accompanying
prospectus will be available free of charge at the office of the Luxembourg
listing agent.
Subject to the following sentence, we accept responsibility for the
information contained in this prospectus supplement and the accompanying
prospectus and confirm, having made all reasonable inquiries, that to the best
of our knowledge and belief there are no other facts the omission of which would
make any statement herein misleading in any material respect as of the date of
this prospectus supplement. We have obtained the information in this prospectus
supplement and the accompanying prospectus concerning The Depository Trust
Company ("DTC"), the Euroclear System ("Euroclear"), Clearstream Banking
Luxembourg S.A. ("Clearstream, Luxembourg") and their respective book-entry
systems from prospectus language prepared by DTC, Euroclear and Clearstream,
Luxembourg describing book-entry-only issuance, and we take responsibility for
having correctly extracted that information from these sources in all material
respects, but we take no responsibility for the accuracy of the information
itself.
References to "PNC" in this prospectus supplement and in the accompanying
prospectus are references to The PNC Financial Services Group, Inc. (which name
was changed from PNC Bank Corp. on March 9, 2000), specifically or, if the
context requires, to The PNC Financial Services Group, Inc. together with its
subsidiaries. References to "PNC Funding" in this prospectus supplement and the
accompanying prospectus are references to PNC Funding Corp, a wholly-owned
indirect subsidiary of PNC, specifically; and references to "we," "us" and "our"
are references to PNC and PNC Funding.
The distribution of this prospectus supplement and the accompanying
prospectus and the offering of the senior notes in some jurisdictions may be
restricted by law. Persons who receive this prospectus supplement and the
accompanying prospectus should inform themselves about and observe any such
restrictions. This prospectus supplement and the accompanying prospectus do not
constitute, and may not be used in connection with, an offer or solicitation by
anyone in any jurisdiction in which such offer or solicitation is not authorized
or in which the person making such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or solicitation. See
"Offering Restrictions."
In this prospectus supplement and the accompanying prospectus, unless
otherwise specified or the context otherwise requires, references to "dollars,"
"$" and "U.S. $" are to United States dollars.
Information contained in this prospectus supplement updates and supersedes
information in the accompanying prospectus.
------------------
S-2
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Certain Updating Information................................ S-4
The PNC Financial Services Group, Inc....................... S-4
Executive Officers and Directors of PNC..................... S-4
Executive Officers and Directors of PNC Funding............. S-5
Recent Developments......................................... S-6
Use of Proceeds............................................. S-6
Capitalization of The PNC Financial Services Group, Inc..... S-7
Summary Consolidated Financial Data......................... S-8
Certain Terms of the Senior Notes........................... S-9
Certain United States Federal Income Tax Considerations..... S-15
Underwriting................................................ S-18
Offering Restrictions....................................... S-19
Legal Opinions.............................................. S-21
Experts..................................................... S-21
General Information......................................... S-22
PROSPECTUS
About this Prospectus....................................... 2
Where You Can Find More Information......................... 2
Forward-Looking Statements.................................. 4
The PNC Financial Services Group, Inc....................... 5
PNC Funding Corp............................................ 5
Use of Proceeds............................................. 6
Consolidated Ratio of Earnings to Fixed Charges............. 6
Consolidated Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends................................. 6
Description of Debt Securities and Guarantees............... 7
Description of Common Stock................................. 23
Description of Preferred Stock.............................. 24
Description of Depositary Shares............................ 29
Description of Warrants..................................... 30
Certain Tax Considerations.................................. 32
Plan of Distribution........................................ 32
Legal Opinions.............................................. 33
Experts..................................................... 34
S-3
CERTAIN UPDATING INFORMATION
The office of the Securities and Exchange Commission ("SEC") at which you
may read and copy the documents and information that we file with the SEC,
including the registration statement that contains the accompanying prospectus,
is the SEC's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C.
20549. The information under "Where You Can Find More Information" in the
accompanying prospectus should be read accordingly.
THE PNC FINANCIAL SERVICES GROUP, INC.
PNC is a bank holding company registered under the Bank Holding Company Act
of 1956, as amended, and a financial holding company under the
Gramm-Leach-Bliley Act. PNC was incorporated under Pennsylvania law in 1983 with
the consolidation of Pittsburgh National Corporation and Provident National
Corporation. Since 1983, PNC has diversified its geographic presence, business
mix and product capabilities through strategic bank and nonbank acquisitions and
the formation of various nonbanking subsidiaries.
PNC is one of the largest diversified financial services organizations in
the United States, currently operating businesses engaged in regional community
banking, corporate banking, real estate finance, asset-based lending, wealth
management, asset management and global fund services. PNC provides certain
products and services nationally and others in PNC's primary geographic markets
in Pennsylvania, New Jersey, Delaware, Ohio and Kentucky. PNC also provides
certain asset management and global fund services internationally. At September
30, 2001, PNC's consolidated assets, deposits, and shareholders' equity were
$71.9 billion, $45.0 billion, and $6.9 billion, respectively.
PNC's principal executive offices are located at One PNC Plaza, 249 Fifth
Avenue, Pittsburgh, Pennsylvania 15222-2707, U.S.A. and its telephone number is
(412) 762-2000.
EXECUTIVE OFFICERS AND DIRECTORS OF PNC
The following persons are the executive officers of PNC. The title of each
executive officer appears opposite his or her name.
James E. Rohr Chairman, President and Chief Executive Officer
Walter E. Gregg, Jr. Vice Chairman
Thomas K. Whitford Group Executive, Executive Vice President, Strategic
Planning
Joseph C. Guyaux Group Executive, Executive Vice President, Regional
Community Banking
Ralph S. Michael, III Group Executive, Executive Vice President, PNC Advisors and
PNC Capital Markets
Robert L. Haunschild Senior Vice President and Chief Financial Officer
Thomas E. Paisley, III Senior Vice President and Chairman of Corporate Credit
Policy
Samuel R. Patterson Controller
Helen P. Pudlin Senior Vice President and General Counsel
Timothy G. Shack Group Executive, Executive Vice President and Chief
Information Officer
S-4
The following persons are the members of the Board of Directors of PNC. The
principal occupation of each director appears opposite his or her name.
Paul W. Chellgren Chairman and Chief Executive Officer, Ashland Inc.
Robert N. Clay President and Chief Executive Officer, Clay Holding Company
George A. Davidson, Jr. Retired Chairman, Dominion Resources, Inc.
David F. Girard-diCarlo Co-Chairman and Managing Partner, Blank Rome Comisky &
McCauley LLP
Walter E. Gregg, Jr. Vice Chairman, The PNC Financial Services Group, Inc.
William R. Johnson Chairman, President and Chief Executive Officer, H.J. Heinz
Company
Bruce C. Lindsay Chairman and Managing Director, Brind-Lindsay & Co., Inc.
W. Craig McClelland Retired Chairman and Chief Executive Officer, Union Camp
Corporation
Thomas H. O'Brien Retired Chairman, The PNC Financial Services Group, Inc.
Jane G. Pepper President, Pennsylvania Horticultural Society
James E. Rohr Chairman, President and Chief Executive Officer, The PNC
Financial Services Group, Inc.
Lorene K. Steffes Vice President, Software Services and Software Group
Pittsburgh Site Executive, IBM Corporation
Dennis F. Strigl President and Chief Executive Officer, Verizon Wireless
Services, LLC
Thomas J. Usher Chairman and Chief Executive Officer, USX Corporation
Milton A. Washington President and Chief Executive Officer, Allegheny Housing
Rehabilitation Corporation
Helge H. Wehmeier President and Chief Executive Officer, Bayer Corporation
EXECUTIVE OFFICERS AND DIRECTORS OF PNC FUNDING
The following persons are the executive officers of PNC Funding. The title
of each executive officer appears opposite his or her name.
Robert L. Haunschild Chairman and President
Randall C. King Senior Vice President
Kevin Glass Vice President and Assistant Treasurer
Lisa Kovac Vice President and Assistant Treasurer
Maria C. Schaffer Vice President and Treasurer
Thomas R. Moore Secretary
Dale F. Marrison Assistant Secretary
The following persons are the members of the Board of Directors of PNC
Funding. The principal occupation of each director appears opposite his or her
name.
Walter E. Gregg, Jr. Vice Chairman, The PNC Financial Services Group, Inc.
Robert L. Haunschild Senior Vice President and Chief Financial Officer, The PNC
Financial Services Group, Inc.
Randall C. King Treasurer, The PNC Financial Services Group, Inc.
With respect to the senior notes, the address of each executive officer and
member of the Boards of Directors of PNC Funding and PNC is One PNC Plaza, 249
Fifth Avenue, Pittsburgh, PA 15222-2707, U.S.A.
S-5
RECENT DEVELOPMENTS
On October 18, 2001, PNC announced its financial results for the quarter
ended September 30, 2001. Earnings for the third quarter of 2001 were $298
million or $1.02 per diluted share compared with earnings from continuing
operations of $299 million or $1.01 per diluted share for the third quarter of
2000. Excluding net losses from venture capital activities, earnings per diluted
share were $1.05 for the third quarter of 2001. Reported earnings for the third
quarter of 2000, which include the residential mortgage banking business that
was sold in January 2001, were $322 million or $1.09 per diluted share. Return
on average common shareholders' equity was 17.92 percent and return on average
assets was 1.71 percent for the third quarter of 2001 compared with 21.54
percent and 1.67 percent, respectively, for the third quarter of 2000. As of
September 30, 2001, PNC's borrowed funds were $13.0 billion, while its capital
stock was $3.0 billion.
USE OF PROCEEDS
We anticipate our net proceeds from the sale of the senior notes, after
estimated expenses payable by PNC Funding, to be $1,009,252,500, excluding our
receipt of amounts with respect to accrued interest on the senior notes. Of
these proceeds, we intend to use approximately $150 million to reduce a portion
of PNC Funding's outstanding commercial paper. As of September 30, 2001, PNC
Funding had a total of $200 million of commercial paper outstanding, with a
weighted-average maturity of 15 days and a weighted-average interest rate of
2.64% per annum. PNC Funding used the proceeds of the issuance of its
outstanding commercial paper to finance the activities of PNC and its
subsidiaries. We intend to use the remainder of the net proceeds for general
corporate purposes, which may include:
- advances to PNC and its subsidiaries to finance their activities,
- financing of possible future acquisitions,
- repayment of other outstanding indebtedness, and
- repurchases of issued and outstanding shares of common and/or preferred
stock under authorized programs of PNC.
Until we use the net proceeds from the sale of the senior notes for these
purposes, we will use the net proceeds to reduce our short-term indebtedness or
for temporary investments. We expect that we may from time to time engage in
additional financings of a character and in amounts to be determined.
S-6
CAPITALIZATION OF
THE PNC FINANCIAL SERVICES GROUP, INC.
(UNAUDITED)
The following table sets forth the actual unaudited consolidated
capitalization of PNC as of June 30, 2001 and as adjusted to reflect the
issuance of the senior notes on August 1, 2001 and the issuance of the senior
notes offered by this prospectus supplement and the application of the net
proceeds from the issuance of the senior notes offered by this prospectus
supplement as described in "Use of Proceeds". PNC Funding's unaudited financial
data and other information, including capitalization, are part of the
consolidated results of PNC. This data is prepared on a basis consistent with
that of PNC's audited consolidated financial statements for the year ended
December 31, 2000. The following data should be read in conjunction with PNC's
unaudited consolidated financial statements included in PNC's Quarterly Report
on Form 10-Q for the six months ended June 30, 2001 and audited consolidated
financial statements incorporated by reference in PNC's Annual Report on Form
10-K for the year ended December 31, 2000.
JUNE 30, 2001
--------------------------
ACTUAL AS ADJUSTED
--------- -------------
(U.S. DOLLARS IN MILLIONS)
Deposits.................................................... $45,826 $45,826
Subordinated debt........................................... 2,349 2,349
Short-term debt(a).......................................... 6,690 6,540
Other borrowed funds........................................ 3,080 5,230
------- -------
Total debt.................................................. 57,945 59,945
Mandatorily redeemable capital securities of subsidiary
trusts.................................................... 848 848
Equity capital:
Common stock.............................................. 1,764 1,764
Preferred stock........................................... 5 5
Treasury stock............................................ (3,203) (3,203)
Surplus................................................... 1,257 1,257
Retained earnings......................................... 7,010 7,010
Other..................................................... (85) (85)
------- -------
Total equity capital........................................ 6,748 6,748
------- -------
Total capitalization........................................ $65,541 $67,541
======= =======
---------------
(a) Short-term debt includes all bank notes, as of June 30, 2001, of which 4%
mature in one year.
On August 1, 2001, PNC Funding issued $450,000,000 in aggregate principal
amount of Floating Rate Senior Notes due 2003 and $700,000,000 in aggregate
principal amount of 5.75% Senior Notes due 2006. On October 4, 2001, PNC Funding
redeemed all outstanding shares of Fixed/Adjustable Rate Noncumulative Preferred
Stock, Series F for approximately $204,950,000. As of the date of this
prospectus supplement, there has been no material change in the consolidated
capitalization of PNC since June 30, 2001 other than as described above.
S-7
SUMMARY CONSOLIDATED FINANCIAL DATA
The following unaudited table sets forth certain consolidated financial
data for PNC and its subsidiaries and is qualified in its entirety by the
detailed information and financial statements included in the documents
incorporated herein by reference. See "Where You Can Find More Information" in
the accompanying prospectus.
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------- ------- ------- ------- ------- -------
(U.S. DOLLARS IN MILLIONS)
SUMMARY OF OPERATIONS
Interest income.......................... $ 2,251 $ 2,341 $ 4,732 $ 4,583 $ 5,024 $ 4,912 $ 4,812
Interest expense......................... 1,132 1,241 2,568 2,239 2,536 2,467 2,413
Net interest income...................... 1,119 1,100 2,164 2,344 2,488 2,445 2,399
Provision for credit losses.............. 125 66 136 163 225 70
Noninterest income excluding net
securities gains (losses).............. 1,375 1,459 2,871 2,428 2,070 1,583 1,217
Net securities gains (losses)............ 46 (3) 20 22 16 40 22
Noninterest expense...................... 1,564 1,572 3,071 2,843 2,698 2,403 2,112
Applicable income taxes.................. 634 586 571 557 535
Income from continuing operations........ 560 601 1,214 1,202 1,080 1,038 991
Income from discontinued operations...... 40 22 65 62 35 14 1
Net income before cumulative effect of
accounting change...................... 600 623 1,279 1,264 1,115 1,052 992
Cumulative effect of accounting change... (5)
Net income............................... $ 595 $ 623 $ 1,279 $ 1,264 $ 1,115 $ 1,052 $ 992
PERIOD-END BALANCE SHEET DATA
Total assets............................. $70,013 $68,885 $69,844 $69,286 $70,754 $71,694 $71,312
Loans, net of unearned income............ 44,167 50,281 50,601 49,673 57,633 54,235 51,791
Allowance for credit losses.............. (675) (675) 675 674 753 972 1,166
Convertible debt(a)...................... 0 0 0 0 0 55 63
Shareholders' equity..................... 6,748 6,157 6,656 5,946 6,043 5,384 5,869
AVERAGE BALANCE SHEET DATA
Total assets............................. $71,350 $68,930 $68,978 $68,363 $69,624 $68,235 $68,988
Earning assets........................... 60,658 60,308 59,875 61,301 63,077 62,082 63,169
Loans, net of unearned income............ 47,309 50,098 50,018 52,780 55,613 52,899 48,757
Securities available for sale............ 9,895 6,068 6,061 6,084 6,129 8,316 13,384
Deposits................................. 45,834 44,898 45,672 44,152 43,894 43,931 44,499
Borrowed funds........................... 14,201 14,877 13,746 15,466 17,908 16,875 17,182
Shareholders' equity..................... 6,664 5,966 6,137 5,870 5,581 5,478 5,828
SELECTED RATIOS
Return on average common shareholders'
equity................................. 18.47% 21.81% 21.63% 22.41% 20.81% 20.01% 17.18%
Return on average assets................. 1.65 1.67 1.68 1.69 1.49 1.49 1.40
Average common shareholders' equity to
average total assets................... 8.97 8.20 8.44 8.13 7.56 7.57 8.32
Net interest margin...................... 3.64 3.43 3.37 3.68 3.85 3.94 3.83
CREDIT QUALITY RATIOS
Nonperforming loans to period-end
loans.................................. .85 .62 .64 .59 .50 .50 .67
Nonperforming assets to period-end loans,
loans held for sale and foreclosed
assets................................. .85 .67 .71 .61 .55 .59 .87
As a percent of average loans
Net charge-offs........................ .53 .26 .27 .31 .80 .51 .34
Provision for credit losses............ .53 .26 .27 .31 .40 .13
Allowance for credit losses............ 1.43 1.35 1.35 1.28 1.35 1.84 2.39
Allowance as a percent of period-end
Loans.................................. 1.53 1.34 1.33 1.36 1.31 1.79 2.25
Nonperforming loans.................... 180.48 217.04 208.98 231.62 263.29 360.00 337.97
RATIO OF EARNINGS TO FIXED CHARGES(B)
Excluding interest on deposits........... 2.85x 2.73x 2.79x 2.82x 2.42x 2.48x 2.50x
Including interest on deposits........... 1.71 1.71 1.69 1.76 1.63 1.63 1.62
---------------
(a) Convertible into common stock of PNC. From 1998, outstanding convertible
debt was less than $300,000 aggregate principal amount.
(b) The consolidated ratio of earnings to fixed charges has been computed by
dividing income from continuing operations before taxes (which excludes the
income from discontinued operations and the cumulative effect of accounting
change) and fixed charges by fixed charges. Fixed charges represent all
interest expense (ratios are presented both excluding and including interest
on deposits), borrowed funds discount amortization expense and the portion
of net rental expense which is deemed to be equivalent to interest on debt.
Interest expense (other than on deposits) includes interest on bank notes
and senior debt, federal funds purchased, repurchase agreements, other
borrowed funds, and subordinated debt.
S-8
CERTAIN TERMS OF THE SENIOR NOTES
The senior notes offered by this prospectus supplement will be issued by
PNC Funding under an Indenture dated as of December 1, 1991, among PNC, PNC
Funding and The Chase Manhattan Bank, as Trustee, as supplemented by a
Supplemental Indenture dated as of February 15, 1993 and a Second Supplemental
Indenture dated as of February 15, 2000. References to the Indenture in this
section will mean the Indenture as so supplemented. The accompanying prospectus
provides a more complete description of the Indenture. Each series of senior
notes will be Senior Debt Securities, as such term is defined in the
accompanying prospectus. The following description of the particular terms of
the senior notes supplements, and to the extent inconsistent therewith replaces,
the description of the general terms and provisions of the Senior Debt
Securities in the accompanying prospectus, to which description we refer you.
The accompanying prospectus sets forth the meaning of certain capitalized terms
used herein and not otherwise defined.
GENERAL
The senior notes due on October 29, 2004 (the "2004 Notes") and the senior
notes due on August 1, 2006 (the "2006 Notes") will initially be limited in this
offering to $600,000,000 aggregate principal amount and $400,000,000 aggregate
principal amount, respectively. The 2006 Notes are additional debt securities of
PNC Funding under the Indenture and will be treated as a single series with the
$700,000,000 aggregate principal amount of 5.75% Senior Notes due 2006 issued on
August 1, 2001. As a result, at the closing of this offering, the aggregate
outstanding principal amount of the 5.75% Senior Notes due 2006, including the
2006 Notes to be issued hereunder, will be $1,100,000,000.
The 2004 Notes and the 2006 Notes will mature on October 29, 2004 and
August 1, 2006, respectively, at their principal amount unless previously
redeemed or cancelled. Except for certain reasons related to U.S. taxation as
discussed in "Certain Terms of the Senior Notes - Redemption for Taxation
Reasons," the senior notes may not be redeemed by PNC Funding prior to their
stated maturity.
If any of the interest payment dates or a maturity date falls on a day that
is not a business day, PNC Funding will postpone the interest payment date or
the maturity date to the next succeeding business day, but the payment made on
such dates will be treated as being made on the date payment was first due and
the holders of the senior notes will not be entitled to any further interest or
other payments with respect to such postponements. The term "business day" means
any day other than a Saturday or Sunday on which DTC, Euroclear and Clearstream,
Luxembourg are operating and on which banks and foreign exchange markets are
open for business in the city of offices of the principal paying agent and of
the Luxembourg paying and listing agent and a day that it is not a day on which
banks are generally authorized or required by law or executive order to be
closed in the City of New York, New York, the City of Pittsburgh, Pennsylvania
or the Commonwealth of Pennsylvania.
The interest payable on the senior notes on any interest payment date,
subject to certain exceptions, will be paid to the person in whose name the
senior notes are registered at the close of business on the fifteenth calendar
day, whether or not a business day, immediately preceding the interest payment
date. However, interest that PNC Funding pays on the maturity date will be paid
to the person to whom the principal will be payable. Interest will be payable by
wire transfer in immediately available funds in U.S. dollars at the office of
the principal paying agent in New York, New York, at the office of the
Luxembourg paying and listing agent for so long as the senior notes are listed
on the Luxembourg Stock Exchange, or at PNC Funding's option in the event the
senior notes are not represented by Global Notes, by check mailed to the address
of the person specified for payment in the preceding sentences.
The senior notes are unconditionally guaranteed by PNC and rank equally
with all of PNC Funding's other unsecured senior indebtedness. The guarantees
will rank equally with the senior unsecured indebtedness of PNC. The senior
notes are not guaranteed by the subsidiaries of PNC. The guarantees are
effectively subordinated to all indebtedness and other liabilities (including
trade payables and deposits) of such subsidiaries.
The senior notes are not convertible into, or exchangeable for, equity
securities of PNC or PNC Funding.
The senior notes and the guarantees are not deposits of a bank and are not
insured by the United States Federal Deposit Insurance Corporation or any other
insurer or government agency.
S-9
INTEREST
The 2004 Notes
The 2004 Notes will bear interest at a floating rate of LIBOR plus 0.375%.
PNC Funding will pay interest on the 2004 Notes quarterly in arrears by 2:30
p.m. New York City time on January 29, April 29, July 29 and October 29 of each
year, each an "interest payment date" for the 2004 Notes, and on the maturity
date. Interest will be computed on the basis of a 360-day year for the actual
number of days elapsed.
Interest on the 2004 Notes will accrue from October 30, 2001 to January 29,
2002 excluding the first interest payment date and then from, and including, the
immediately preceding interest payment date to which interest has been paid or
duly provided for to, but excluding, the next interest payment date or the
maturity date, as the case may be. Each of these periods is referred to as an
"interest period" for the 2004 Notes.
The interest rate on the 2004 Notes will be calculated by Deutsche Bank AG
London, as calculation agent, except that the interest rate in effect for the
period from October 30, 2001 to January 29, 2002 (the "initial interest rate")
will be established by PNC Funding as the rate for deposits in U.S. dollars
having a maturity of three months commencing on October 30, 2001 that appears on
Telerate Page 3750 as of 11:00 a.m., London time, on October 26, 2001. If no
rate appears on Telerate Page 3750, as specified in the preceding sentence, then
the initial interest rate will be determined by PNC Funding in the manner
described in clause (ii) below, except that the banks referred to in such clause
will be selected by PNC Funding rather than the calculation agent.
The calculation agent will reset the interest rate with respect to the 2004
Notes on each interest payment date, each of which is referred to as an
"interest reset date." The second London business day preceding an interest
reset date will be the "interest determination date" for that interest reset
date. The interest rate in effect on each date that is not an interest reset
date will be the interest rate determined as of the interest determination date
pertaining to the immediately preceding interest reset date. The interest rate
in effect on any day that is an interest reset date will be the interest rate
determined as of the interest determination date pertaining to that interest
reset date, except that the interest rate in effect for the period from and
including October 30, 2001 to January 29, 2002, the initial interest reset date,
will be the initial interest rate.
"LIBOR" will be determined by the calculation agent in accordance with the
following provisions:
(i) With respect to any interest determination date, LIBOR will be the
rate for deposits in U.S. dollars having a maturity of three months
commencing on the first day of the applicable interest period that appears
on Telerate Page 3750 as of 11:00 a.m., London time, on that interest
determination date. If no rate appears on that interest determination date,
LIBOR, in respect to that interest determination date, will be determined
in accordance with the provisions described in (ii) below.
(ii) With respect to an interest determination date on which no rate
appears on Telerate Page 3750, as specified in (i) above, the calculation
agent will request the principal London offices of each of four major
reference banks in the London interbank market, as selected by the
calculation agent, to provide the calculation agent with its offered
quotation for deposits in U.S. dollars for the period of three months,
commencing on the first day of the applicable interest period, to prime
banks in the London interbank market at approximately 11:00 a.m., London
time, on that interest determination date and in a principal amount that is
representative for a single transaction in U.S. dollars in that market at
the time. If at least two quotations are provided, then LIBOR on that
interest determination date will be the arithmetic mean of those
quotations. If fewer than two quotations are provided, then LIBOR on the
interest determination date will be the arithmetic mean (rounded, if
necessary, to the nearest one-hundred-thousandth of a percentage point,
with five one-millionths of a percentage point rounded upwards) of the
rates quoted at approximately 11:00 a.m., New York City time, on the
interest determination date by three major banks in New York City selected
by the calculation agent for loans in U.S. dollars to leading European
banks, having a three-month maturity and in a principal amount that is
representative for a single transaction in U.S. dollars in that market at
that time; provided, however, that if the banks selected by the calculation
agent are not providing quotations in the manner described by this
sentence, LIBOR for the interest period commencing on the interest reset
date following the interest determination date will be LIBOR in effect on
that interest determination date.
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"London business day" means any day on which dealings in U.S. dollars are
transacted in the London interbank market.
"Telerate Page 3750" means the display designated as "Page 3750" on the Dow
Jones Market Service or any successor page or service, for the purposes of
displaying the London interbank offered rates for U.S. dollar deposits.
For so long as the 2004 Notes are listed on the Luxembourg Stock Exchange,
the calculation agent will notify the Luxembourg Stock Exchange and any holders
of 2004 Notes of the relevant interest rate, interest period and interest
(coupon) amount no later than the first business day following the relevant
interest reset date.
The 2006 Notes
The 2006 Notes will bear interest at the rate of 5.75% per annum. Interest
on the 2006 Notes will accrue from August 1, 2001, which will be payable
semiannually in arrears by 2:30 New York City time on February 1 and August 1 of
each year (each an "interest payment date" for the 2006 Notes), commencing
February 1, 2002. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. The interest period relating to an interest
payment date shall be the period from but not including the preceding interest
payment date to and including the relevant interest payment date.
ADDITIONAL PAYMENTS FOR TAXATION REASONS
All payments of principal and interest in respect of the senior notes shall
be made free and clear of, and without withholding or deduction for, any taxes,
duties, assessments or governmental charges of whatever nature imposed, levied,
collected, withheld or assessed by or within the United States or any authority
therein or thereof having power to tax, unless such withholding or deduction is
required by law. In that event, PNC Funding shall pay such additional amounts as
shall result in net receipt by the holders of the senior notes who are United
States Aliens (as such term is defined below) of such amounts as would have been
received by them had no such withholding or deduction been required, except that
the foregoing obligation to pay additional amounts shall not apply to:
(i) any tax, assessment or governmental charge that would not have been
so imposed but for the existence of any present or former connection
between such holder (or between a fiduciary, settlor, beneficiary,
member or shareholder of, or holder of power over, such holder, if
such holder is an estate, trust, partnership or corporation) and the
United States, including, without limitation, such holder (or
fiduciary, settlor, beneficiary, member, shareholder or holder of a
power) being considered as:
(A) being or having been present or engaged in a trade or business
in the United States or having or having had a permanent
establishment therein;
(B) having a current or former relationship with the United States,
including a relationship as a citizen or resident or being
treated as a resident thereof;
(C) being or having been a personal holding company, a controlled
foreign corporation, a passive foreign investment company, a
foreign personal holding company with respect to the United
States, a corporation that has accumulated earnings to avoid
United States federal income tax or a private foundation or
other tax-exempt organization; or
(D) an actual or a constructive "10 percent shareholder" of PNC
Funding or PNC as defined in Section 871(h)(3) of the United
States Internal Revenue Code of 1986, as amended (the "Code");
(ii) any holder who is a fiduciary or partnership or other than the sole
beneficial owner of the senior note, but only to the extent that a
beneficiary or settlor with respect to such fiduciary or member of
such partnership or a beneficial owner of the senior note would not
have been entitled to the payment of an additional amount had such
beneficiary, settlor, member or beneficial owner been the holder of
such senior note;
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(iii) any tax, assessment or governmental charge that would not have been
imposed or withheld but for the failure of the holder, if required,
to comply with certification, identification or information
reporting or any other requirements under United States income tax
laws and regulations, without regard to any tax treaty, with respect
to the payment, concerning the nationality, residence, identity or
connection with the United States of the holder or a beneficial
owner of such senior note, if such compliance is required by United
States income tax laws and regulations, without regard to any tax
treaty, as a precondition to relief or exemption from such tax,
assessment or governmental charge;
(iv) any tax, assessment or governmental charge that would not have been
so imposed or withheld but for the presentation by the holder of such
senior note for payment on a date more than 30 days after the date on
which such payment became due and payable or the date on which
payment thereof is duly provided for, whichever occurs later;
(v) any estate, inheritance, gift, sales, transfer, excise, wealth or
personal property tax or any similar tax, assessment or governmental
charge;
(vi) any tax, assessment or governmental charge that is payable otherwise
than by withholding by PNC Funding or a paying agent from the payment
of the principal of or interest on such senior note;
(vii) any tax, assessment or governmental charge required to be withheld
by any paying agent from such payment of principal of or interest on
any senior note, if such payment can be made without such
withholding by any other paying agent;
(viii) any tax required to be withheld or deducted from a payment to an
individual which is required to be made pursuant to any European
Union Directive on the taxation of savings implementing the
conclusion of the ECOFIN Council meeting of 26-27th November, 2000
or any law implementing or complying with, or introduced in order to
conform to, such Directive;
(ix) any senior note presented for payment by or on behalf of a holder who
would have been able to avoid such withholding or deduction by
presenting the relevant senior note to another paying agent in a
Member State of the European Union; or
(x) any combination of items (i), (ii), (iii), (iv), (v), (vi), (vii),
(viii) and/or (ix).
The term "United States" means the United States of America, the
Commonwealth of Puerto Rico and each possession of the United States of America
and place subject to its jurisdiction, and the term "United States Alien" means
any corporation, individual, estate or trust that, as to the United States, is
for United States federal income tax purposes (A) a foreign corporation, (B) a
non-resident alien individual or (C) a foreign estate or trust.
REDEMPTION FOR TAXATION REASONS
Each series of senior notes may be redeemed at the option of PNC Funding in
whole, but not in part, at any time, on giving not less than 30 nor more than 60
days' notice to the holders of such series of senior notes (which notice shall
be irrevocable), at their principal amount (together with interest accrued to
the date fixed for redemption), if (i) PNC Funding has or will become obliged to
pay additional amounts as a result of any change in, or amendment to, the laws
or regulations of the United States or any political subdivision or any
authority thereof or therein having power to tax, or any change in the
application or official interpretation of such laws or regulations, which change
or amendment becomes effective on or after the issue date of such series of
senior notes, and (ii) such obligation cannot be avoided by PNC Funding taking
reasonable measures available to it, provided that no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which PNC
Funding would be obliged to pay such additional amounts were a payment in
respect of such series of senior notes then due. Before the publication of any
notice of redemption pursuant to this paragraph, PNC Funding shall deliver to
the principal paying agent a certificate signed by two officers of PNC Funding
stating that PNC Funding is entitled to effect such redemption and setting forth
a statement of facts showing that the conditions precedent to the right of PNC
Funding to so redeem have occurred, and an opinion of independent legal advisers
of recognized standing to the effect that PNC Funding has or will become obliged
to pay such additional amounts as a result of such change or amendment.
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DELIVERY AND FORM
The senior notes of each series will be represented by one or more
permanent global certificates (each a "Global Note" and collectively, the
"Global Notes") deposited with DTC and registered in the name of Cede & Co.
(DTC's partnership nominee). The senior notes will be available for purchase in
denominations of $1,000 and integral multiples thereof in book-entry form only.
Unless and until certificated senior notes are issued under the limited
circumstances described in the accompanying prospectus, no beneficial owner of a
senior note shall be entitled to receive a definitive certificate representing a
senior note. So long as DTC or any successor depositary (collectively, the
"Depositary") or its nominee is the registered owner of the Global Notes, the
Depositary, or such nominee, as the case may be, will be considered to be the
sole owner or holder of the senior notes for all purposes of the Indenture.
Beneficial interests in the Global Notes will be represented through
book-entry accounts of financial institutions acting on behalf of beneficial
owners as direct and indirect participants in DTC. Investors may elect to hold
interests in the Global Notes through either DTC (in the United States) or
Clearstream, Luxembourg or Euroclear (in Europe), either directly if they are
participants of such systems or indirectly through organizations that are
participants in such systems. Clearstream, Luxembourg and Euroclear will hold
interests on behalf of their participants through customers' securities accounts
in Clearstream, Luxembourg's and Euroclear's names on the books of their U.S.
depositaries, which in turn will hold such interests in customers' securities
accounts in the U.S. depositaries' names on the books of DTC.
CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for the senior notes will be made in immediately
available funds. Secondary market trading between DTC participants will occur in
the ordinary way in accordance with DTC rules and will be settled in immediately
available funds. Secondary market trading between Clearstream, Luxembourg
customers and/or Euroclear participants will occur in the ordinary way in
accordance with the applicable rules and operating procedures of Clearstream,
Luxembourg and Euroclear and will be settled using the procedures applicable to
conventional eurobonds in immediately available funds.
PAYMENT AND PAYING AGENTS
The Chase Manhattan Bank will act as PNC Funding's principal paying agent
with respect to the senior notes through its offices presently located at 450
West 33rd Street, New York, New York 10001. PNC Funding may at any time rescind
the designation of a paying agent, appoint a successor paying agent, or approve
a change in the office through which any paying agent acts. For as long as a
series of the senior notes is listed on the Luxembourg Stock Exchange, PNC
Funding will maintain a paying agent in Luxembourg with respect to the series of
senior notes so listed. Deutsche Bank Luxembourg S.A., as the Luxembourg paying
and listing agent, will act as PNC Funding's paying agent in Luxembourg with
respect to the senior notes through its offices located at 2 Boulevard Konrad
Adenauer, L-1115 Luxembourg. Payments of interest and principal may be made by
wire-transfer in immediately available funds in U.S. dollars for senior notes
held in book-entry form or, at PNC Funding's option in the event the senior
notes are not represented by Global Notes, by check mailed to the address of the
person entitled to the payment as it appears in the senior note register.
Payment of principal will be made upon the surrender of the relevant senior
notes at the offices of the principal paying agent or Luxembourg paying and
listing agent.
For as long as a series of the senior notes is listed on the Luxembourg
Stock Exchange, PNC Funding will publish notice of any change in a paying agent
with respect to such series of the senior notes in a daily newspaper of general
circulation in Luxembourg (which is expected to be the Luxembourger Wort).
FURTHER ISSUANCES
PNC Funding may from time to time without the consent of the holders of
either series of the senior notes create and issue further notes having the same
terms and conditions as either series of the senior notes (so that, for the
avoidance of doubt, references in the conditions of such senior notes to "issue
date" shall be to the first issue date of the relevant series of the senior
notes) and so that the same shall be consolidated and form a single series with
such senior notes, and references in this "Certain Terms of the Senior Notes" to
"senior notes" shall be construed accordingly.
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NOTICES
Notices to the holders of registered senior notes will be mailed to them at
their respective addresses in the register of the senior notes and will be
deemed to have been given on the fourth weekday (being a day other than Saturday
or Sunday) after the date of mailing. Notices to the holders of registered
senior notes that are listed on the Luxembourg Stock Exchange will also be
published in a daily newspaper of general circulation in Luxembourg (which is
expected to be the Luxembourger Wort). For so long as a series of the senior
notes are listed on the Luxembourg Stock Exchange, any appointment of or change
in the Luxembourg paying and listing agent with respect to the series so listed
will be published in Luxembourg in the manner set forth above.
GOVERNING LAW
The senior notes and the guarantees will be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes the material United States
federal income tax consequences of the purchase, ownership and disposition of
the senior notes. This discussion is a summary for general information only and
does not consider all aspects of United States federal income taxation that may
be relevant to an investor in light of that investor's particular circumstances.
This discussion deals only with senior notes purchased at their original
offering price and held as capital assets within the meaning of Section 1221 of
the United States Internal Revenue Code of 1986, referred to in this discussion
as the "Code," as amended to the date of this prospectus supplement. This
summary does not address all of the tax consequences that may be relevant to a
holder of senior notes nor does it address the federal income tax consequences
to holders subject to special treatment under the United States federal income
tax laws, such as brokers or dealers in securities or currencies, certain
securities traders, tax-exempt entities, banks, thrifts, insurance companies,
other financial institutions, persons that hold senior notes as a position in a
"straddle" or as part of a "synthetic security," "hedging," "conversion" or
other integrated instrument, persons that have a "functional currency" other
than the United States dollar, investors in pass-through entities and certain
United States expatriates. Further, this summary does not address
- the income tax consequences to shareholders in, or partners or
beneficiaries of, a holder of the senior notes, or
- any state, local or foreign tax consequences of the purchase, ownership,
or disposition of the senior notes.
This discussion is based upon the Code, existing and proposed regulations
thereunder, and current administrative rulings and court decisions. All of the
foregoing are subject to change, possibly on a retroactive basis, and any such
change could affect the continuing validity of this discussion.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF SENIOR NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF UNITED
STATES FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL, OR
FOREIGN TAXING JURISDICTION.
For purposes of this discussion, the term "United States holder" means a
beneficial owner of a senior note that for United States federal income tax
purposes is
- a citizen or resident of the United States,
- a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any State thereof or the
District of Columbia,
- an estate the income of which is includible in its gross income for
United States federal income tax purposes without regard to its source,
or
- a trust if a court within the United States is able to exercise primary
supervision over its administration and one or more United States persons
have the authority to control all substantial decisions of the trust.
Certain United States federal income tax consequences relevant to a
beneficial owner of a senior note other than a United States holder, referred to
in this discussion as a "non-U.S. holder," are discussed separately below.
UNITED STATES HOLDERS
The following discussion applies to you if you are a United States holder.
Payments of Interest
Stated interest paid or accrued on the senior notes generally will be
taxable to you as ordinary income at the time the interest is paid or accrued in
accordance with your method of accounting for United States federal income tax
purposes.
Sale or Redemption of the Senior Notes
When you dispose of a senior note by sale, exchange, redemption or other
taxable disposition, you generally will recognize gain or loss equal to the
difference, if any, between (i) the amount realized on the
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disposition (other than amounts attributable to accrued and unpaid interest) and
(ii) your tax basis in the senior note. Your tax basis in a senior note
generally will equal the cost of the senior note. When a senior note is sold,
exchanged, redeemed or otherwise disposed of between interest payment dates, the
portion of the amount realized on the disposition that is attributable to
interest accrued to the date of sale but not yet reported as interest income
must be reported at the time of sale.
The gain or loss on a senior note generally will constitute capital gain or
loss, and will be long-term capital gain or loss if you have held the senior
note for longer than one year. Under current law, net capital gains of
individuals may be taxed at lower rates than items of ordinary income. Your
ability to offset capital losses against ordinary income is limited.
NON-U.S. HOLDERS
The following discussion summarizes certain United States federal income
tax consequences relevant to a non-U.S. holder of a senior note.
Payments of Stated Interest
Under current United States federal income tax law, and subject to the
discussion of backup withholding below, payments of stated interest on a senior
note to a non-U.S. holder will not be subject to United States federal income or
withholding tax if
- the non-U.S. holder does not actually or constructively own 10 percent or
more of the combined voting power of all classes of stock of PNC Funding
or PNC,
- the non-U.S. holder is not a controlled foreign corporation related to
PNC Funding or PNC, through stock ownership,
- the non-U.S. holder is not a bank receiving interest described in Section
881(c)(3)(A) of the Code,
- the non-U.S. holder as the beneficial owner of the senior note either (i)
provides a statement signed under penalties of perjury that includes the
beneficial owner's name, address and U.S. taxpayer identification number,
if any, and certifies (on an IRS Form W-8BEN or a substantially similar
substitute form) that the beneficial owner of the senior note is a
non-U.S. holder in compliance with applicable requirements, or (ii) holds
its note directly through a "qualified intermediary," and the qualified
intermediary has sufficient information in its files indicating that the
beneficial owner is not a United States holder, and
- PNC, PNC Funding, its paying agent and all intermediaries between the
non-U.S. holder and PNC Funding or its paying agent do not have actual
knowledge or reason to know that the non-U.S. beneficial ownership
statement is false.
A "qualified intermediary" is a bank, broker or other intermediary that (1)
is either a U.S. or non-U.S. entity, (2) is acting out of a non-U.S. branch or
office and (3) has signed an agreement with the Internal Revenue Service
providing that it will administer all or part of the U.S. withholding rules
under specified procedures.
A payment of stated interest on a senior note to a non-U.S. holder who
fails to satisfy one of the foregoing requirements generally will be subject to
withholding tax at a rate of 30% (subject to reduction or exemption under any
applicable tax treaty) unless
- the payment is effectively connected with a trade or business conducted
within the United States by that non-U.S. holder,
- the non-U.S. holder provides a properly completed IRS Form W-8ECI prior
to the payment of interest, and
- PNC, PNC Funding, its paying agent and all intermediaries between the
non-U.S. holder and PNC Funding or its paying agent do not have actual
knowledge or reason to know that the form is false.
Interest on a senior note that is effectively connected with the conduct of
a trade or business in the United States by a non-U.S. holder, although exempt
from the withholding tax (assuming appropriate certification is provided),
generally will be subject to graduated United States federal income tax on a net
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income basis as if those amounts were earned by a United States holder.
Corporate non-U.S. holders receiving effectively connected interest may also be
subject to an additional branch profits tax.
Sale or Redemption of Senior Notes
Except as described below and subject to the discussion concerning backup
withholding, a non-U.S. holder generally will not be subject to United States
federal income tax with respect to any gain realized upon the sale or redemption
of a senior note unless (i) the gain is effectively connected with a United
States trade or business of the non-U.S. holder or (ii) subject to certain
exceptions, the non-U.S. holder is an individual who holds the senior note as a
capital asset and is present in the United States for 183 days or more in the
taxable year of the disposition.
United States Federal Estate Tax
A senior note held by an individual who at the time of death is not a
citizen or resident of the United States will not be subject to United States
federal estate tax as a result of such individual's death if at the time of
death (i) the individual did not own actually or constructively 10% or more of
the total combined voting power of all classes of stock of PNC Funding or PNC
and (ii) payments of interest on senior notes held by such individual would not
have been effectively connected with a United States trade or business.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments made
on, and proceeds from the sale of, senior notes held by a non-corporate United
States holder. Payments made on, and proceeds from the sale of, senior notes
held by a United States holder may be subject to a "backup" withholding tax of
up to 31% unless the holder complies with certain identification or exemption
requirements.
Payments of stated interest and of proceeds from the sale of senior notes
made to a non-U.S. holder will not be subject to information reporting or backup
withholding tax if the holder certifies as to its non-U.S. status or otherwise
establishes entitlement to exemption and the payor has no actual knowledge or
reason to know that the holder is in fact a United States holder. A non-U.S.
holder may certify to its non-U.S. status by providing an IRS Form W-8BEN or
W-8ECI or a substantially similar substitute form or holding its senior note
through a Qualified Intermediary with sufficient information in its files as
described above. With some exceptions, a payment to a foreign partnership will
be treated as a payment directly to its partners. Notwithstanding the foregoing,
interest payments to a non-U.S. holder may be reported to the IRS on Form
1042-S.
Any amount withheld, whether with respect to a United States holder or a
non-U.S. holder, will be allowed as a credit against the holder's United States
federal income tax liability, or refunded, provided the required information is
provided to the IRS.
HOLDERS OF SENIOR NOTES SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE
APPLICATION OF INFORMATION REPORTING AND BACKUP WITHHOLDING IN THEIR PARTICULAR
SITUATIONS, THE AVAILABILITY OF AN EXEMPTION THEREFROM, AND THE PROCEDURE FOR
OBTAINING SUCH AN EXEMPTION, IF AVAILABLE.
Proposed European Union Withholding Directive
The European Union is currently considering proposals for a new directive
regarding the taxation of savings income. According to the most recently
available information it is proposed that, subject to a number of important
conditions being met, Member States will be required to provide to the tax
authorities of another Member State details of payments of interest or other
similar income paid by a person within its jurisdiction to an individual
resident in that other Member State, subject to the right of certain individual
Member States to opt instead for a withholding system for a transitional period
in relation to such payments. Full details of the proposals are not currently
available, and they may in any case be subject to further amendment.
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UNDERWRITING
Salomon Smith Barney Inc. and J.P. Morgan Securities Inc. are acting as
joint bookrunning managers of the offering and as representatives of the
underwriters named below.
Subject to the terms and conditions stated in the underwriting agreement,
dated the date of this prospectus supplement, each underwriter named below has
agreed to purchase, and we have agreed to sell to that underwriter, the
principal amount of senior notes set forth opposite the underwriter's name.
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF 2004 NOTES OF 2006 NOTES
----------- ---------------- ----------------
Salomon Smith Barney Inc. ....................... $270,000,000 $180,000,000
J.P. Morgan Securities Inc. ..................... 270,000,000 180,000,000
Goldman, Sachs & Co. ............................ 24,000,000 16,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 24,000,000 16,000,000
PNC Capital Markets, Inc. ....................... 12,000,000 8,000,000
------------ ------------
Total....................................... $600,000,000 $400,000,000
============ ============
The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters are obligated to purchase all of the senior notes if they purchase
any of the senior notes.
The underwriters propose to offer some of the senior notes directly to the
public at the public offering prices set forth on the cover page of this
prospectus supplement, and some of the senior notes to dealers at the public
offering prices less a concession not to exceed 0.125% of the principal amount
of the 2004 Notes and 0.200% of the principal amount of the 2006 Notes. The
underwriters may allow, and these dealers may reallow, a concession not to
exceed of 0.075% of the principal amount of the 2004 Notes and 0.150% of the
principal amount of the 2006 Notes on sales to other dealers. After the initial
public offering of the senior notes to the public, the representatives may
change the public offering prices and concessions.
The following table shows the underwriting discounts and commissions that
PNC Funding is to pay to the underwriters in connection with the offering
(expressed as a percentage of the principal amount of each series of senior
notes).
PAID BY PNC FUNDING CORP
------------------------
Per senior note due 2004.............................. 0.225%
Per senior note due 2006.............................. 0.350%
Although we intend to apply to have the 2004 Notes listed on the Luxembourg
Stock Exchange, the 2004 Notes are a new issue of securities with no established
trading market. The $700,000,000 aggregate principal amount of 5.75% Senior
Notes due 2006 issued on August 1, 2001, (with which the 2006 Notes offered
hereunder will be treated as a single series), are listed on the Luxembourg
Stock Exchange. We intend to apply to have the 2006 Notes offered hereunder
listed on the Luxembourg Stock Exchange. The underwriters have advised us that
they intend to make a market in the senior notes, but are not obligated to do
so, and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the senior
notes.
In connection with the offering, Salomon Smith Barney, on behalf of the
underwriters, may purchase and sell senior notes in the open market. These
transactions may include over-allotment, syndicate covering transactions and
stabilizing transactions. Over-allotment involves syndicate sales of senior
notes in excess of the principal amount of senior notes to be purchased by the
underwriters in the offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the senior notes in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of senior notes made for the purpose of preventing or retarding a
decline in the market price of the senior notes while the offering is in
progress.
The underwriters may also impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney, in covering syndicate short positions or making
stabilizing purchases, repurchases senior notes originally sold by that
syndicate member.
S-18
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the senior notes. They may also cause the price
of the senior notes to be higher than the price that otherwise would exist in
the open market in the absence of these transactions. The underwriters may
conduct these transactions in the over-the-counter market or otherwise. If the
underwriters commence any of these transactions, they may discontinue them at
any time.
The underwriters and their respective associates and affiliates may be
customers of, engage in transactions with, and perform investment banking and
other financial services (including commercial lending) for us and our
subsidiaries in the ordinary course of business. PNC Capital Markets, Inc., one
of our indirect wholly-owned subsidiaries, is acting as one of the underwriters.
When a member of the National Association of Securities Dealers, Inc. ("NASD"),
such as PNC Capital Markets, Inc., participates in the distribution of an
affiliated company's securities, the offering must be conducted in accordance
with applicable provisions of the NASD's Conduct Rule 2720. We are considered to
be an "affiliate" (as such term is defined in Rule 2720) of PNC Capital Markets,
Inc. Our offer and sale of the senior notes will comply with the applicable
requirements of Rule 2720 regarding the underwriting of securities of
affiliates. No NASD member participating in the offering of the senior notes
will execute a transaction in such senior notes in a discretionary account
without the prior written specific approval of the member's customer. The Chase
Manhattan Bank, an affiliate of J.P. Morgan Securities Inc., is the trustee
under the Indenture.
This prospectus supplement and the accompanying prospectus may be used by
PNC Capital Markets, Inc. and J.J.B. Hilliard, W.L. Lyons, Inc. in connection
with offers and sales related to secondary market transactions in the senior
notes. PNC Capital Markets, Inc., J.J.B. Hilliard, W.L. Lyons, Inc. and
affiliates of PNC and PNC Funding may act as principal or agent in those
transactions. Those sales will be made at prices related to prevailing market
prices at the time of sale or otherwise.
The underwriting agreement provides that PNC Funding and PNC will jointly
and severally indemnify the underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, or to contribute to
payments the underwriters may be required to make because of any of those
liabilities.
The underwriters have agreed to reimburse PNC Funding for certain expenses
incurred in connection with the offering.
It is expected that delivery of the senior notes will be made against
payment therefor on or about October 30, 2001, which is the fifth business day
following the date hereof (such settlement cycle being referred to as T+5).
Purchasers of senior notes should note that the ability to settle secondary
market trades of the senior notes effected on the date of pricing and the next
succeeding business day may be affected by the T+5 settlement.
We estimate that the total expenses for this offering will be $150,000.
OFFERING RESTRICTIONS
The senior notes are offered for sale in the United States and in
jurisdictions outside the United States, subject to applicable law.
Each of the underwriters has agreed that it will not offer, sell, or
deliver any of the senior notes, directly or indirectly, or distribute this
prospectus supplement or the accompanying prospectus or any other offering
material relating to the senior notes, in or from any jurisdiction outside the
United States except under circumstances that will, to the best of the
underwriter's knowledge and belief, result in compliance with the applicable
laws and regulations and which will not impose any obligations on us except as
set forth in the underwriting agreement.
You may be required to pay stamp taxes and other charges in accordance with
the laws and practices of the country in which you purchase the senior notes.
These taxes and charges are in addition to the issue price set forth on the
cover page.
S-19
UNITED KINGDOM
Each underwriter has represented and agreed that it and each of its
affiliates:
- has not offered or sold and, prior to the expiry of the period of
six months from the time of closing, will not offer or sell any of
the senior notes to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding,
managing, or disposing of investments (as principal or agent) for
the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in
the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995, as amended;
- has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the senior notes in, from or otherwise involving the
United Kingdom; and
- has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the
issue of the senior notes to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996, as amended or is a person
to whom those documents may otherwise lawfully be issued or passed
on.
GERMANY
In connection with the initial placement of senior notes in Germany, each
of the underwriters has represented and agreed that it has not offered or sold
and it will not offer or sell any senior notes in Germany other than in
compliance with the Securities Prospectus Act
(Wertpapier-Verkaufsprospektgesetz) of 13th December, 1990 as amended or any
other law applicable in Germany governing the issue, offering and sale of
securities.
THE NETHERLANDS
Each of the underwriters has represented and agreed that it has not,
directly or indirectly, offered or sold and will not, directly or indirectly,
offer or sell in the Netherlands any senior notes other than to persons who
trade or invest in securities in the conduct of a profession or business (which
include banks, stockbrokers, insurance companies, pension funds, other
institutional investors and finance companies and treasury departments of large
enterprises).
THE REPUBLIC OF FRANCE
Each of the underwriters has represented and agreed that the senior notes
are being issued outside of France, and that it, in connection with the initial
distribution of the senior notes, has not offered or sold and will not offer or
sell senior notes in France, and that it has not distributed and will not
distribute or cause to be distributed in France this prospectus supplement and
accompanying prospectus or any other offering material relating to the senior
notes, except to (i) qualified investors (investisseurs qualifies) and/or (ii) a
restricted circle of investors (Cercle restreint d'investisseurs), all as
defined in Article 6 of the Order ("Ordinance") dated 28th September, 1967 (as
amended) and Decree no. 98-880 dated 1st October, 1998 and in compliance with
regulations issued from time to time by the Commission des Operations de Bourse.
JAPAN
The senior notes have not been and will not be registered under the
Securities and Exchange Law of Japan and each of the underwriters has
represented and agreed that it and its affiliates have not offered or sold, and
will not offer or sell, directly or indirectly, any of the senior notes in or to
residents of Japan or to any persons for reoffering or resale, directly or
indirectly, in Japan or to any resident of Japan, except pursuant to an
exemption from the registration requirements of the Securities and Exchange Law
available thereunder and in compliance with the other relevant laws and
regulations of Japan.
S-20
HONG KONG
Each of the underwriters has represented and agreed that it and its
affiliates have not offered or sold, and will not offer or sell, any of the
senior notes by means of any document to persons in Hong Kong other than persons
whose ordinary business it is to buy or sell shares or debentures, whether as
principal or agent, or otherwise in circumstances which do not constitute an
offer to the public within the meaning of the Hong Kong Companies Ordinance
(Chapter 32 of the Laws of Hong Kong).
LEGAL OPINIONS
The legal opinion required to be furnished by PNC Funding and PNC pursuant
to the underwriting agreement, dated the date of this prospectus supplement,
among PNC Funding, PNC and the underwriters will be rendered by Thomas R. Moore,
Esq., Senior Counsel and Corporate Secretary of PNC. Mr. Moore beneficially owns
or has rights to acquire, an aggregate of less than 1% of the outstanding shares
of common stock of PNC.
The underwriters are represented by Cravath, Swaine & Moore, 825 Eighth
Avenue, New York, New York 10019. As to matters of Pennsylvania law, Cravath,
Swaine & Moore will rely on the opinion of Thomas R. Moore, Esq., Senior Counsel
and Corporate Secretary of PNC.
EXPERTS
Ernst & Young LLP, independent auditors, have audited PNC's consolidated
financial statements incorporated by reference in PNC's Annual Report on Form
10-K for the year ended December 31, 2000, as set forth in their report, which
is incorporated by reference in this document. PNC's consolidated financial
statements are incorporated by reference in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
S-21
GENERAL INFORMATION
(1) In connection with the application to list the senior notes on the
Luxembourg Stock Exchange, a legal notice relating to the issue of the
senior notes and copies of the Articles of Incorporation and By-laws of PNC
Funding and the Articles of Incorporation, as amended and restated, and
By-laws of PNC will be deposited with the Chief Registrar of the District
Court in Luxembourg (Greffier en Chef du Tribunal d'Arrondissement de et
Luxembourg) where such documents may be examined and copies obtained free
of charge.
(2) PNC Funding and PNC have obtained all necessary consents, approvals and
authorizations in connection with the issue, performance and/or guaranty of
the senior notes. The issuance of the senior notes was authorized by
resolutions adopted by the Board of Directors of PNC Funding on September
10, 2001. The guaranty of the senior notes was authorized by resolutions
adopted by the Board of Directors of PNC on August 23, 2001.
(3) The senior notes have been accepted for clearance through DTC in the United
States, and through the Euroclear and Clearstream, Luxembourg clearance
systems in Europe. The CUSIP number for the 2004 Notes is 693476 AS 2 and
for the 2006 Notes is 693476 AR 4. The International Securities
Identification Number (ISIN) for the 2004 Notes is US693476 AS 21 and for
the 2006 Notes is US693476 AR 48. The Common Code for the 2004 Notes is
013819335 and for the 2006 Notes is 013350639.
(4) The independent certified public accountants of PNC are Ernst & Young LLP.
Ernst & Young, a leading accounting and auditing firm in the United States
and Canada, is located at One Oxford Centre, Pittsburgh, Pennsylvania
15219. Ernst & Young provided various audit and other services for PNC
during 2000. Such services included an audit of annual consolidated
financial statements, interim reviews of quarterly consolidated financial
statements, review and consultation connected with certain filings with the
Securities and Exchange Commission, internal control reviews required by
regulatory authorities and certain contractual agreements or requested by
PNC's management or internal audit staff, consultation on tax, financial
accounting and reporting matters, and meetings with the audit committee of
the Board of Directors of PNC.
(5) Except as disclosed herein or in the documents incorporated herein by
reference, as of the date of this prospectus supplement there has been no
material adverse change in the consolidated financial position of PNC
Funding or PNC since the date of PNC's last audited financial statements.
(6) Neither PNC Funding nor PNC is a party to any litigation, administrative
proceedings or arbitration which is or may be material in the context of
the issue of the senior notes and to their knowledge none has been
threatened.
(7) Prior to the completion of issuance of the senior notes, the following
documents will be available for inspection and obtainable free of charge
during usual business hours on any business day at the offices of the
Luxembourg paying and listing agent:
- the underwriting agreement;
- the Articles of Incorporation and By-laws of PNC Funding and the amended
and restated Articles of Incorporation and By-laws of PNC;
- the indenture;
- the form of the guarantees;
- the documents described under the section entitled "Where You Can Find
More Information" in the accompanying prospectus;
- the documents incorporated by reference into this prospectus supplement
and the accompanying prospectus; and
- a copy of this prospectus supplement together with the accompanying
prospectus.
(8) Copies of the documents incorporated by reference may be obtained free of
charge at the offices of the Luxembourg paying and listing agent during
usual business hours on any business day. The documents that we incorporate
by reference include PNC's:
S-22
(a) Annual Report on Form 10-K for the year ended December 31, 2000 filed
with the Securities and Exchange Commission, which includes the audited
consolidated financial statements of PNC as of, and for the year ended,
December 31, 2000;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 2001
filed with the Securities and Exchange Commission, which includes the
unaudited consolidated financial statements of PNC as of, and for the
quarter ended, March 31, 2001;
(c) Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 filed
with the Securities and Exchange Commission, which includes the
unaudited consolidated financial statements of PNC as of, and for the
quarter ended, June 30, 2001; and
(d) Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 1, 2001.
(9) For so long as a series of the senior notes are listed on Luxembourg Stock
Exchange, the following documents will also be obtainable free of charge at
the offices of the Luxembourg paying and listing agent during usual
business hours on any business day:
- all audited consolidated annual financial statements subsequently filed
with the Securities and Exchange Commission no later than the tenth
business day after such audited consolidated annual financial statements
are filed; and
- all unaudited consolidated quarterly interim financial statements
subsequently filed with the Securities and Exchange Commission no later
than the tenth business day after such unaudited consolidated quarterly
interim financial statements are filed.
(10) PNC prepares publicly-available consolidated financial statements on a
quarterly and annual basis. PNC prepares publicly-available
non-consolidated financial statements on an annual basis only, as a
footnote to its consolidated financial statements. PNC Funding's financial
data and other information are part of the consolidated results of PNC. PNC
Funding does not prepare separate publicly-available financial statements.
S-23
PROSPECTUS
PNC LOGO
$4,297,000,000
THE PNC FINANCIAL SERVICES GROUP, INC.
COMMON STOCK, PREFERRED STOCK, WARRANTS, GUARANTEES
AND DEPOSITARY SHARES
PNC FUNDING CORP
DEBT SECURITIES AND WARRANTS
We may offer, in one or more offerings, debt securities, common stock,
preferred stock, warrants, guarantees and depositary shares having an aggregate
initial public offering price of up to $4,297,000,000. We may also issue common
stock, preferred stock or debt securities upon the conversion, exchange or
exercise of certain of the securities listed above. When we decide to sell a
particular series of securities, we will prepare a prospectus supplement
describing those securities and our plan of distribution. You should read this
prospectus and any applicable prospectus supplement carefully before you invest.
The common stock of The PNC Financial Services Group, Inc. is listed on the
New York Stock Exchange under the symbol "PNC."
These securities are not savings or deposit accounts or other obligations
of any bank, and they are not insured by the Federal Deposit Insurance
Corporation or any other insurer or governmental agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined whether
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is September 24, 2001.
TABLE OF CONTENTS
About This Prospectus....................................... 2
Where You Can Find More Information......................... 2
Forward-Looking Statements.................................. 4
The PNC Financial Services Group, Inc....................... 5
PNC Funding Corp............................................ 5
Use of Proceeds............................................. 6
Consolidated Ratio of Earnings to Fixed Charges............. 6
Consolidated Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends................................. 6
Description of Debt Securities and Guarantees............... 7
Description of Common Stock................................. 23
Description of Preferred Stock.............................. 24
Description of Depositary Shares............................ 29
Description of Warrants..................................... 30
Certain Tax Considerations.................................. 32
Plan of Distribution........................................ 32
Legal Opinions.............................................. 33
Experts..................................................... 34
-i-
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may from time to time sell any combination of the
securities described in this prospectus in one or more offerings up to a total
dollar amount of $4,297,000,000 or the equivalent of this amount in foreign
currencies, foreign currency units or composite currencies. We may sell these
securities either separately or in units. We also may issue common stock,
preferred stock or debt securities upon the conversion, exchange or exercise of
certain of the securities described in this prospectus.
This prospectus provides you with a general description of the securities
we may offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with the additional information described below
under the heading "Where You Can Find More Information."
The registration statement that contains this prospectus, including the
exhibits to the registration statement and the information incorporated by
reference, contains additional information about the securities offered under
this prospectus. That registration statement can be read at the Securities and
Exchange Commission, or SEC, web site or at the SEC offices mentioned below
under the heading "Where You Can Find More Information."
Following the initial distribution of an offering of securities, PNC
Capital Markets, Inc., J.J.B. Hilliard, W.L. Lyons, Inc. and other affiliates of
ours may offer and sell those securities in secondary market transactions. PNC
Capital Markets, Inc., J.J.B. Hilliard, W.L. Lyons, Inc. and other affiliates of
ours may act as a principal or agent in these transactions. This prospectus and
the applicable prospectus supplement will also be used in connection with these
transactions. Sales in any of these transactions will be made at varying prices
related to prevailing market prices and other circumstances at the time of sale.
No person is authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
prospectus or the accompanying prospectus supplement, and, if given or made,
such information or representation must not be relied upon as having been
authorized. This prospectus and the accompanying prospectus supplement do not
constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities described in the accompanying prospectus
supplement or an offer to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this prospectus or the accompanying prospectus
supplement, nor any sale made hereunder and thereunder, shall, under any
circumstances, create any implication that there has been no change in our
affairs since the date of this prospectus or that the information contained or
incorporated by reference in this prospectus to the accompanying prospectus
supplement is correct as of any time subsequent to the date of such information.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement under the Securities
Act of 1933, as amended, that registers the distribution of the securities
offered under this prospectus. The registration statement, including the
attached exhibits and schedules and the information incorporated by reference,
contains additional relevant information about us and the securities. The rules
and regulations of the SEC allow us to omit from this prospectus certain
information included in the registration statement.
In addition, we file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy these
documents and information and the registration statement at the following
locations of the SEC:
- Public Reference Room, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20459,
- Midwest Regional Office, Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and
- Northeast Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048.
-2-
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20459, at prescribed rates. You may obtain information on the operation of
the public reference room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet World Wide Web site that contains
reports, proxy statements and other information about issuers of securities,
like us, who file such material electronically with the SEC through the
Electronic Data Gathering, Analysis and Retrieval (EDGAR) System. The address of
that web site is http://www.sec.gov. You also can inspect such reports, proxy
statements and other information about us at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. Our common stock and
certain series of our preferred stock are listed on the New York Stock Exchange.
The SEC allows us to "incorporate by reference" into this prospectus the
information PNC files with the SEC, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information that PNC files later with the SEC will automatically update
information in this prospectus. Because we are incorporating by reference future
filings with the SEC, this prospectus is continually updated and those future
filings may modify or supersede some of the information included or incorporated
in this prospectus. In all cases, you should rely on the later information over
different information included in this prospectus or any prospectus supplement.
This prospectus incorporates by reference the documents listed below that we
previously have filed with the SEC and any future filings made with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we have completed our offering of the securities to be issued under the
registration statement or, if later, until the date on which any of our
affiliates cease offering and selling these securities:
- The PNC Financial Services Group, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 2000,
- The PNC Financial Services Group, Inc.'s Quarterly Reports on Form 10-Q
for the quarterly periods ended March 31, 2001 and June 30, 2001,
- The PNC Financial Services Group, Inc.'s Current Report on Form 8-K that
was filed on August 1, 2001, and
- The description of The PNC Financial Services Group, Inc.'s common stock
and certain series of preferred stock contained in the Forms 8-A that
were filed on May 23, 2000 and September 24, 1987.
You may obtain these documents from us without charge by requesting them in
writing, by email or by telephone at the following address:
Lynn Fox Evans
Director of Financial Reporting
The PNC Financial Services Group, Inc.
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
(412) 762-1553
financial.reporting@pnc.com
-3-
FORWARD-LOOKING STATEMENTS
This prospectus, the accompanying prospectus supplements and the
information incorporated by reference in this prospectus may contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act with respect to the outlook or
expectations for our earnings, revenues, asset quality, share repurchases, and
other future financial or business performance, strategies and expectations.
Forward-looking statements are typically identified by words or phrases such as
"believe," "expect," "anticipate," "intend," "outlook," "forecast," "estimate,"
"position," "target," "mission," "assume," "achievable," "potential,"
"strategy," "goal," "objective," "plan," "aspiration," "outcome," "continue,"
"remain," "maintain," "seek," "strive," "trend" and variations of such words and
similar expressions, or future or conditional verbs such as "will," "would,"
"should," "could," "might," "can," "may" or similar expressions. We caution you
that forward-looking statements are subject to numerous assumptions, risks and
uncertainties, which change over time. Actual results could differ materially
from those anticipated in forward-looking statements and future results could
differ materially from historical performance. Forward-looking statements speak
only as of the date they are made, and we assume no duty to update
forward-looking statements. In addition to factors previously disclosed in PNC's
SEC reports, the following factors, among others, could cause actual results to
differ materially from forward-looking statements or historical performance:
- adjustments to recorded results of the sale of PNC's residential mortgage
banking business after final settlement is completed,
- changes in economic or industry conditions, the interest rate environment
or financial and capital markets, which could result in: a deterioration
in credit quality and increased credit losses; an adverse effect on the
allowance for loan losses; a reduction in demand for credit or fee-based
products and services, net interest income, value of assets under
management and assets serviced, value of debt and equity investments, or
value of on-balance sheet and off-balance-sheet assets; or changes in the
availability and terms of funding necessary to meet PNC's liquidity
needs,
- relative investment performance of assets under management,
- the introduction, withdrawal, success and timing of business initiatives
and strategies, decisions regarding further reductions in balance sheet
leverage, and PNC's inability to realize cost savings or revenue
enhancements, implement integration plans and other consequences of
mergers, acquisitions, restructurings and divestitures,
- customer borrowing, repayment, investment and deposit practices and their
acceptance of PNC's products and services,
- the impact of increased competition,
- the means PNC chooses to redeploy available capital, including the extent
and timing of any share repurchases and investments in PNC businesses,
- the inability to manage risks inherent in PNC's business,
- the unfavorable resolution of legal proceedings,
- the denial of insurance coverage for claims made by PNC,
- an increase in the number of customer or counterparty delinquencies,
bankruptcies or defaults that could result in, among other things,
increased credit and asset quality risk, a higher loan loss provision and
reduced profitability,
- the impact, extent and timing of technological changes, and
- actions of the Federal Reserve Board and legislative and regulatory
actions and reforms.
-4-
THE PNC FINANCIAL SERVICES GROUP, INC.
In this prospectus, we use "PNC" to refer to The PNC Financial Services
Group, Inc. specifically or, if the context requires, to The PNC Financial
Services Group, Inc. together with its subsidiaries; "PNC Funding" to refer to
PNC Funding Corp specifically; and "we" or "us" to refer collectively to PNC and
PNC Funding.
PNC is a bank holding company registered under the Bank Holding Company Act
of 1956, as amended, and a financial holding company under the
Gramm-Leach-Bliley Act. PNC was incorporated under Pennsylvania law in 1983 with
the consolidation of Pittsburgh National Corporation and Provident National
Corporation. Since 1983, PNC has diversified its geographic presence, business
mix and product capabilities through strategic bank and nonbank acquisitions and
the formation of various nonbanking subsidiaries.
PNC is one of the largest diversified financial services organizations in
the United States, currently operating businesses engaged in regional community
banking, corporate banking, real estate finance, asset-based lending, wealth
management, asset management and global fund services. PNC provides certain
products and services nationally and others in PNC's primary geographic markets
in Pennsylvania, New Jersey, Delaware, Ohio and Kentucky. PNC also provides
certain asset management and global fund services internationally. At June 30,
2001, PNC's consolidated assets, deposits, and shareholders' equity were $70.0
billion, $45.8 billion, and $6.7 billion, respectively.
PNC's principal executive offices are located at:
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
(412) 762-2000
PNC FUNDING CORP
PNC Funding is a wholly owned indirect subsidiary of PNC. PNC Funding was
incorporated under Pennsylvania law in 1972 and is engaged in financing the
activities of PNC and its subsidiaries through the issuance of commercial paper
and other debt guaranteed by PNC.
PNC Funding's principal executive offices are located at:
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
(412) 762-2000
-5-
USE OF PROCEEDS
Unless otherwise provided in the applicable prospectus supplement, we will
apply the net proceeds from the sale of the securities for general corporate
purposes, including:
- advances to PNC (in the case of PNC Funding) and subsidiaries of PNC
(including its bank subsidiaries),
- financing of possible future acquisitions,
- repayment of outstanding indebtedness, and
- repurchases of issued and outstanding shares of common and/or preferred
stock under authorized programs of PNC.
The amount and timing of advances to PNC and its subsidiaries will depend
on the future growth and financing requirements of PNC and its subsidiaries.
Pending ultimate application, the net proceeds may be used to make short-term
investments or reduce borrowed funds. In view of anticipated funding
requirements, we may from time to time engage in additional financings of a
character and in amounts to be determined.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following unaudited table presents our consolidated ratio of earnings
to fixed charges. The consolidated ratio of earnings to fixed charges was
computed by dividing income from continuing operations before income taxes
(which excludes the income from discontinued operations and the cumulative
effect of changes in accounting principles) and fixed charges by fixed charges.
Fixed charges represent all interest expense (ratios are presented both
excluding and including interest on deposits), the portion of net rental expense
that is deemed to be equivalent to interest on debt, borrowed funds discount
amortization expense and distributions on trust preferred capital securities.
Interest expense (other than on deposits) includes interest on bank notes and
senior debt, federal funds purchased, repurchase agreements, other borrowed
funds and subordinated debt. Because PNC Funding is a provider of funds to PNC
and its subsidiaries, fixed charges ratios are presented on a consolidated
basis.
YEAR ENDED DECEMBER 31,
{SIX MONTHS ENDED --------------------------------
JUNE 30, 2001 2000 1999 1998 1997 1996
----------------- ---- ---- ---- ---- ----
Excluding interest on deposits.............. 2.85x 2.79x 2.82x 2.42x 2.48x 2.50x
Including interest on deposits.............. 1.71 1.69 1.76 1.63 1.63 1.62
CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following unaudited table presents our consolidated ratio of earnings
to combined fixed charges and preferred stock dividends. The consolidated ratio
of earnings to combined fixed charges and preferred stock dividends was computed
by dividing income from continuing operations before income taxes (which
excludes the income from discontinued operations and the cumulative effect of
changes in accounting principles) and fixed charges and preferred stock
dividends by fixed charges and preferred stock dividends. Fixed charges
represent all interest expense (ratios are presented both excluding and
including interest on deposits), the portion of net rental expense that is
deemed to be equivalent to interest on debt, borrowed funds discount
amortization expense and distributions on trust preferred capital securities.
Interest expense (other than on deposits) includes interest on bank notes and
senior debt, federal funds purchased, repurchase agreements, other borrowed
funds and subordinated debt.
YEAR ENDED DECEMBER 31,
{SIX MONTHS ENDED} --------------------------------
JUNE 30, 2001 2000 1999 1998 1997 1996
------------------ ---- ---- ---- ---- ----
Excluding interest on deposits.............. 2.80x 2.74x 2.77x 2.39x 2.44x 2.49x
Including interest on deposits.............. 1.71 1.68 1.75 1.62 1.62 1.62
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DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
This section describes the general terms and provisions of the debt
securities that PNC Funding may offer, and the guarantees of those debt
securities by PNC. The debt securities may be either senior debt securities or
subordinated debt securities. The prospectus supplement will describe the
specific terms of the debt securities and guarantees offered through that
prospectus supplement and any general terms outlined in this section that will
not apply to those debt securities and guarantees.
The debt securities will be issued under an indenture, dated as of December
1, 1991, as amended by a supplemental indenture dated as of February 15, 1993
and a second supplemental indenture dated as of February 15, 2000 (as amended,
the "indenture"), a copy of which has been filed with the SEC. The Chase
Manhattan Bank, formerly known as Chemical Bank and as successor by merger to
Manufacturers Hanover Trust Company, is the trustee under the indenture, unless
a different trustee for a series of debt securities is named in the prospectus
supplement. For each series of debt securities, a supplemental indenture may be
entered into among PNC Funding, PNC and The Chase Manhattan Bank or such other
trustee as may be named in the prospectus supplement relating to that series of
debt securities.
We have summarized the material terms and provisions of the indenture in
this section. We encourage you to read the indenture for additional information
before you buy any debt securities. The summary that follows includes references
to section numbers of the indenture so that you can more easily locate these
provisions.
DEBT SECURITIES IN GENERAL
The debt securities will be unsecured obligations of PNC Funding.
The indenture does not limit the amount of debt securities that we may
issue from time to time in one or more series. (Section 3.01) The indenture
provides that debt securities may be issued up to the principal amount
authorized by us from time to time. (Section 3.01) Unless otherwise specified in
the prospectus supplement for a particular series of debt securities, we may
reopen a previous issue of a series of debt securities and issue additional debt
securities of that series.
We will specify in the prospectus supplement relating to a particular
series of debt securities being offered the terms relating to the offering. The
terms may include:
- the title and type of the debt securities,
- the aggregate principal amount of the debt securities,
- the purchase price of the debt securities,
- the date or dates on which debt securities may be issued,
- the date or dates on which the principal of and premium on the debt
securities will be payable,
- if the debt securities will be interest bearing:
- the interest rate on the debt securities or the method by which the
interest rate may be determined,
- the date from which interest will accrue,
- the record and interest payment dates for the debt securities,
- the first interest payment date,
- any circumstances under which we may defer interest payments,
- the place or places where the principal of, and premium and interest on,
the debt securities will be payable,
- any optional redemption provisions that would permit us or the holders of
debt securities to redeem the debt securities before their final
maturity,
- any sinking fund provisions that would obligate us to redeem the debt
securities before their final maturity,
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- the denominations in which the debt securities shall be issued, if issued
in denominations other than $1,000 and any integral multiple thereof,
- the portion of the principal amount of the debt securities that will be
payable upon an acceleration of the maturity of the debt securities,
- whether payment of the principal of, premium, and interest on, the debt
securities will be with or without deduction for taxes, assessments or
governmental charges, and with or without reimbursement of taxes,
assessments or governmental charges paid by holders,
- any events of default which will apply to the debt securities that differ
from those contained in the indenture,
- whether the debt securities will be issued in registered form or in
bearer form, or in both registered form and bearer form,
- the currency or currencies in which the debt securities will be
denominated, payable, redeemable or repurchaseable,
- whether the debt securities of such series will be issued as a global
security and, if so, the identity of the depositary for such series,
- any trustees, paying agents, transfer agents or registrars for the debt
securities,
- any special federal income tax considerations applicable to the debt
securities, and
- any other terms of such debt securities.
We intend for any subordinated debt securities offered to be included as
regulatory capital under Federal Reserve Board interpretations. As a result,
these debt securities will contain subordination and acceleration provisions
different from, and covenants more limited than those in, certain prior
issuances of PNC Funding's subordinated debt securities.
If any of the debt securities are sold for, or if the principal of or any
interest on any series of debt securities is payable in, foreign currencies or
foreign currency units, the relevant restrictions, elections, tax consequences,
specific terms and other information will be set forth in the prospectus
supplement.
Although the indenture provides that we may issue debt securities in
registered form, with or without coupons, or in bearer form, each series of debt
securities will be issued in fully registered form unless the prospectus
supplement provides otherwise. Debt securities that are not registered as to
interest will have coupons attached, unless issued as original issue discount
securities.
The principal of, and premium and interest on, fully registered securities
will be payable at the place of payment designated for such securities and
stated in the prospectus supplement. PNC Funding also has the right to make
interest payments by check mailed to the holder at the holder's registered
address. The principal of, and premium, if any, and interest on any debt
securities in other forms will be payable in the manner and at the place or
places as may be designated by PNC Funding and specified in the prospectus
supplement. (Sections 3.01 and 5.01)
You may exchange or transfer the debt securities at the corporate trust
office of the trustee for the series of debt securities or at any other office
or agency maintained by us for those purposes. You may transfer bearer debt
securities by delivery. We will not require payment of a service charge for any
transfer or exchange of the debt securities, but PNC Funding may require payment
of a sum sufficient to cover any applicable tax or other governmental charge.
(Section 3.05)
Unless the prospectus supplement provides otherwise, each series of the
debt securities will be issued only in denominations of $1,000 or any integral
multiple thereof and payable in dollars. (Section 3.02) Under the indenture,
however, debt securities may be issued in any denomination and payable in a
foreign currency or currency unit. (Section 3.01)
We may issue debt securities with "original issue discount." Original issue
discount debt securities bear no interest or bear interest at below-market rates
and will be sold below their stated principal amount. The prospectus supplement
will describe any special federal income tax consequences and other special
considerations applicable to any securities issued with original issue discount.
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SENIOR DEBT SECURITIES
The senior debt securities will rank equally with all senior indebtedness
of PNC Funding. At August 31, 2001, the outstanding senior indebtedness of PNC
Funding was approximately $1.80 billion.
"Senior indebtedness of PNC Funding" means the principal of, and premium
and interest on, (i) all "indebtedness for money borrowed" of PNC Funding
whether outstanding on the date of execution of the indenture or thereafter
created, assumed or incurred, and (ii) any deferrals, renewals or extensions of
any such indebtedness. The following indebtedness of PNC Funding, however, is
not considered to be senior indebtedness of PNC Funding:
- 6 7/8% Subordinated Notes Due 2003,
- 6 1/8% Subordinated Notes Due 2003,
- 7 3/4% Subordinated Notes Due 2004,
- 6 7/8% Subordinated Notes Due 2007,
- 6 1/2% Subordinated Notes Due 2008,
- 6 1/8% Subordinated Notes Due 2009, and
- 7.50% Subordinated Notes Due 2009.
The term "indebtedness for money borrowed" means:
- any obligation of, or any obligation guaranteed by, PNC Funding for the
repayment of money borrowed, whether or not evidenced by bonds,
debentures, notes or other written instruments,
- any capitalized lease obligation, and
- any deferred obligation for payment of the purchase price of any property
or assets. (Section 1.01)
Senior indebtedness of PNC Funding includes any borrowings under the $485
Million Credit Facility under an Amended and Restated Credit Agreement dated as
of March 18, 1996, as amended, (the "$485 Million Credit Facility"), and
outstanding commercial paper issued by PNC Funding. No amounts are currently
outstanding under the $485 Million Credit Facility. There is no limitation on
the issuance of additional senior indebtedness of PNC Funding.
SUBORDINATED DEBT SECURITIES
The subordinated debt securities will be subordinated in right of payment
to all senior indebtedness of PNC Funding. (Section 12.01) In certain events of
insolvency of PNC Funding, the subordinated debt securities will also be
effectively subordinated in right of payment to all "other company obligations"
and will be subject to an obligation of PNC Funding to pay any "excess proceeds"
(as defined in the indenture) to creditors in respect of any unpaid "other
company obligations." (Section 12.13).
"Other company obligations" means obligations of PNC Funding associated
with derivative products such as interest rate and currency exchange contracts,
foreign exchange contracts, commodity contracts, or any similar arrangements,
unless the instrument by which PNC Funding incurred, assumed or guaranteed the
obligation expressly provides that it is subordinate or junior in right of
payment to any other indebtedness or obligations of PNC Funding. (Section 1.01)
At August 31, 2001, there were no "other company obligations" of PNC Funding.
Upon the liquidation, dissolution, winding up, or reorganization of PNC
Funding, PNC Funding must pay to the holders of all senior indebtedness of PNC
Funding the full amounts of principal of, and premium and interest on, that
senior indebtedness before any payment is made on the subordinated debt
securities. If, after PNC Funding has made those payments on the senior
indebtedness:
- (i) there are amounts available for payment on the subordinated debt
securities (as defined in the indenture, "excess proceeds"), and (ii) at
such time, any creditors in respect of "other company obligations" have
not received their full payments, then
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- PNC Funding shall first use such excess proceeds to pay in full all such
"other company obligations" before PNC Funding makes any payment in
respect of the subordinated debt securities. (Section 12.02)
In addition, PNC Funding may not make any payment on the subordinated debt
securities in the event:
- PNC Funding has failed to make full payment of the principal of, or
premium, if any, or interest on any senior indebtedness of PNC Funding,
or
- any event of default with respect to any senior indebtedness of PNC
Funding has occurred and is continuing, or would occur as a result of
such payment on the subordinated debt securities. (Section 12.03)
Because of the subordination provisions and the obligation to pay excess
proceeds, in the event of insolvency, holders of the subordinated debt
securities may recover less, ratably, than holders of senior indebtedness of PNC
Funding and "other company obligations" and other creditors of PNC Funding.
(Sections 12.01, 12.02, 12.03, and 12.13)
PNC Funding's obligations under the subordinated debt securities will rank
equally in right of payment with each other, subject to the obligations of the
holders of subordinated debt securities to pay over any excess proceeds to
creditors in respect of "other company obligations" as provided in the
indenture. (Section 12.13)
GUARANTEES IN GENERAL
PNC will unconditionally guarantee the due and punctual payment of the
principal of, premium, if any, and interest on the debt securities when and as
the same shall become due and payable, whether at maturity, upon redemption or
otherwise. (Section 3.12)
PNC is a holding company that conducts substantially all its operations
through subsidiaries. As a result, claims of the holders of the guarantees will
generally have a junior position to claims of creditors of PNC's subsidiaries
(including, in the case of any bank subsidiary, its depositors), except to the
extent that PNC may itself be a creditor with recognized claims against the
subsidiary. In addition, there are certain regulatory and other limitations on
the payment of dividends and on loans and other transfers of funds to PNC by its
bank subsidiaries.
GUARANTEES OF SENIOR DEBT SECURITIES
The guarantees of senior debt securities will rank equally with all senior
indebtedness of PNC (defined in the indenture as "senior guarantor
indebtedness"). (Section 12.04) At August 31, 2001, the outstanding senior
indebtedness of PNC was approximately $1.80 billion, which as of that date
consisted entirely of the guarantee of senior indebtedness of PNC Funding.
"Senior indebtedness of PNC" means the principal of, and premium, if any,
and interest on, (i) all "indebtedness for money borrowed" of PNC, whether
outstanding on the date of execution of the indenture or thereafter created,
assumed or incurred, and (ii) any deferrals, renewals or extensions of any such
indebtedness of PNC. (Section 1.01) The following indebtedness of PNC is,
however, not considered to be senior indebtedness of PNC:
- PNC's 8 1/4% Convertible Subordinated Debentures Due 2008, and
- PNC's guarantee of the following indebtedness of PNC Funding:
- 6 7/8% Subordinated Notes Due 2003,
- 6 1/8% Subordinated Notes Due 2003,
- 7 3/4%, Subordinated Notes Due 2004,
- 6 7/8% Subordinated Notes Due 2007,
- 6 1/2% Subordinated Notes Due 2008,
- 6 1/8% Subordinated Notes Due 2009, and
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- 7.50% Subordinated Notes Due 2009.
The term "indebtedness for money borrowed" means
- any obligation of, or any obligation guaranteed by, PNC for the repayment
of money borrowed, whether or not evidenced by bonds, debentures, notes
or other written instruments,
- any capitalized lease obligation, and
- any deferred obligation for payment of the purchase price of any property
or assets. (Section 1.01)
"Senior indebtedness of PNC" includes PNC's guarantee of the following
senior notes of PNC Funding:
- 6.95% Notes Due 2002,
- Floating Rate Senior Notes Due 2003,
- 7.00% Notes Due 2004, and
- 5.75% Senior Notes Due 2006.
"Senior indebtedness of PNC" also includes PNC's guarantee of any
borrowings under the $485 Million Credit Facility and of any outstanding
commercial paper issued by PNC Funding. There is no limitation under the
indenture on the issuance of additional senior indebtedness of PNC.
GUARANTEES OF SUBORDINATED DEBT SECURITIES
The guarantees of the subordinated debt securities ("subordinated
guarantees") will be subordinated in right of payment to all senior indebtedness
of PNC. (Section 12.04) In certain events of insolvency of PNC, the subordinated
guarantees will also be effectively subordinated in right of payment to all
"other guarantor obligations" (as defined in the indenture). (Section 12.05)
"Other guarantor obligations" means obligations of PNC associated with
derivative products such as interest rate and currency exchange contracts,
foreign exchange contracts, commodity contracts or any similar arrangements,
unless the instrument by which PNC incurred, assumed or guaranteed the
obligation expressly provides that it is subordinate or junior in right of
payment to any other indebtedness or obligations of PNC. (Section 1.01) At
August 31, 2001, there were no "other guarantor obligations" of PNC.
Upon the liquidation, dissolution, winding up, or reorganization of PNC,
PNC must pay to the holders of all senior indebtedness of PNC the full amounts
of principal of, and premium and interest on, that senior indebtedness before
any payment is made on the subordinated debt securities. If, after PNC has made
those payments on the senior indebtedness:
- (i) there are amounts available for payment on the subordinated debt
securities (as defined in the indenture, "excess proceeds"), and (ii) at
such time, any creditors in respect of "other guarantor obligations" have
not received their full payments, then
- PNC shall first use such excess proceeds to pay in full all such "other
guarantor obligations" before PNC makes any payment in respect of the
subordinated debt securities. (Section 12.05)
In addition, PNC may not make any payment on the subordinated debt
securities in the event:
- PNC has failed to make full payment of the principal of, or premium, if
any, or interest on any senior indebtedness of PNC, or
- any event of default with respect to any senior indebtedness of PNC has
occurred and is continuing, or would occur as a result of such payment on
the subordinated debt securities. (Section 12.06)
Because of the subordination provisions and the obligation to pay excess
proceeds, in the event of insolvency, holders of subordinated guarantees of PNC
may recover less, ratably, than holders of senior indebtedness of PNC, "other
guarantor obligations" and existing guarantor subordinated indebtedness (as
defined in the indenture) and other creditors of PNC. (Section 3.12, 12.04,
12.05, 12.06 and 12.14)
As defined in the indenture, the "existing guarantor subordinated
indebtedness" currently consists of PNC's 8 1/4% Convertible Subordinated
Debentures Due 2008. At August 31, 2001, $189,000 in principal amount of those
subordinated debentures was outstanding.
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As provided in the indenture, in the event of insolvency of PNC, the
holders of the subordinated guarantees are subject to an obligation to pay any
excess proceeds to creditors in respect of any unpaid "other guarantor
obligations" (as defined in the indenture).
The subordinated guarantees will also rank equally in right of payment with
PNC's guarantee of the following subordinated notes of PNC Funding:
- 6 7/8% Subordinated Notes Due 2003,
- 6 1/8% Subordinated Notes Due 2003,
- 7 3/4% Subordinated Notes Due 2004,
- 6 7/8% Subordinated Notes Due 2007,
- 6 1/2% Subordinated Notes Due 2008,
- 6 1/8% Subordinated Notes Due 2009, and
- 7.50% Subordinated Notes Due 2009.
As with holders of the subordinated guarantees, the holders of the
foregoing guarantees of the subordinated notes of PNC Funding are subject to an
obligation to pay any excess proceeds to creditors in respect of any unpaid
"other guarantor obligations." Therefore, in the event of insolvency of PNC,
holders of the subordinated guarantees will recover the same, ratably, as
holders of PNC's guarantees of such subordinated notes of PNC Funding.
EFFECT OF SUBORDINATION PROVISIONS
By reason of the subordination provisions described above and as described
more fully in the applicable prospectus supplement, in the event of insolvency
of PNC Funding, holders of subordinated notes may recover less, ratably, than
holders of senior indebtedness of PNC Funding and "other company obligations."
Holders of subordinated notes may also recover less, ratably, than other
creditors of PNC Funding. Similarly, holders of subordinated guarantees may
recover less, ratably, than holders of senior indebtedness of PNC and "other
guarantor obligations," and may also recover less, ratably, than holders of
"existing guarantor subordinated indebtedness" and other creditors of PNC.
CERTAIN COVENANTS
The indenture contains certain covenants that impose various restrictions
on us and, as a result, afford the holders of debt securities certain
protections. Although statements have been included in this prospectus as to the
general purpose and effect of the covenants, investors must review the full text
of the covenants to be able to evaluate meaningfully the covenants.
Restriction on Sale or Issuance of Voting Stock of a Principal Subsidiary Bank
The covenant described below is designed to ensure that, for so long as any
senior debt securities are issued and outstanding, PNC will continue directly or
indirectly to own and thus serve as the holding company for its "principal
subsidiary banks." When we use the term "principal subsidiary banks," we mean
each of:
- PNC Bank, National Association ("PNC Bank"),
- any other subsidiary bank the consolidated assets of which constitute 20%
or more of the consolidated assets of PNC and its subsidiaries,
- any other subsidiary bank designated as a principal subsidiary bank by
the board of directors of PNC, or
- any subsidiary that owns any voting shares or certain rights to acquire
voting shares of any principal subsidiary bank, and their respective
successors, provided any such successor is a subsidiary bank or a
subsidiary, as appropriate.
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As of the date hereof, our only principal subsidiary banks are PNC Bank and
its parent, PNC Bancorp, Inc.
The indenture prohibits PNC, unless debtholder consent is obtained from the
holders of senior debt securities, from:
- selling or otherwise disposing of, and permitting a principal subsidiary
bank to issue, voting shares or certain rights to acquire voting shares
of a principal subsidiary bank,
- permitting the merger or consolidation of a principal subsidiary bank
with or into any other corporation, or
- permitting the sale or other disposition of all or substantially all the
assets of any principal subsidiary bank,
if, after giving effect to any one of such transactions and the issuance of the
maximum number of voting shares issuable upon the exercise of all such rights to
acquire voting shares of a principal subsidiary bank, PNC would own directly or
indirectly less than 80% of the voting shares of such principal subsidiary bank.
These restrictions do not apply to:
- transactions required by any law, or any regulation or order of any
governmental authority,
- transactions required as a condition imposed by any governmental
authority to the acquisition by PNC, directly or indirectly, or any
other corporation or entity if thereafter,
- PNC would own at least 80% of the voting shares of the other
corporation or entity,
- the consolidated banking assets of PNC would be at least equal to
those prior thereto, and
- the board of directors of PNC shall have designated the other
corporation or entity a principal subsidiary bank,
- transactions that do not reduce the percentage of voting shares of such
principal subsidiary bank owned directly or indirectly by PNC, and
- transactions where the proceeds are invested within 180 days after such
transaction in any one or more subsidiary banks.
The indenture, however, does permit the following:
- the merger of a principal subsidiary bank with and into a principal
subsidiary bank or PNC,
- the consolidation of principal subsidiary banks into a principal
subsidiary bank or PNC, or
- the sale or other disposition of all or substantially all of the assets
of any principal subsidiary bank to another principal subsidiary bank or
PNC,
if, in any such case in which the surviving, resulting or acquiring entity is
not PNC, PNC would own, directly or indirectly, at least 80% of the voting
shares of the principal subsidiary bank surviving such merger, resulting from
such consolidation or acquiring such assets. (Section 5.06)
Ownership of PNC Funding
The indenture contains a covenant that, so long as any of the debt
securities are outstanding, PNC will continue to own, directly or indirectly,
all of the outstanding voting shares of PNC Funding. (Section 5.07)
Restriction on Liens
The purpose of the restriction on liens covenant is to preserve PNC's
direct or indirect interest in voting shares of principal subsidiary banks free
of security interests of other creditors. The covenant permits certain specified
liens and liens where the senior debt securities are equally secured. The
indenture prohibits PNC and its subsidiaries from creating or permitting any
liens (other than certain tax and judgment liens) upon voting shares of any
principal subsidiary bank to secure indebtedness for borrowed money unless the
senior
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debt securities are equally and ratably secured. Notwithstanding this
prohibition, PNC may create or permit the following:
- purchase money liens and liens on voting shares of any principal
subsidiary bank existing at the time such voting shares are acquired or
created within 120 days thereafter,
- the acquisition of any voting shares of any principal subsidiary bank
subject to liens at the time of acquisition or the assumption of
obligations secured by a lien on such voting shares,
- under certain circumstances, renewals, extensions or refunding of the
liens described in the two preceding bullets, and
- liens to secure loans or other extensions of credit under Section 23A of
the Federal Reserve Act or any successor or similar federal law or
regulation. (Section 5.08)
Consolidation or Merger
The covenant described below protects the holders of debt securities upon
certain transactions involving PNC Funding or PNC by requiring any successor to
PNC Funding or PNC to assume the predecessor's obligations under the indenture.
In addition, the covenant prohibits such transactions if they would result in an
event of default, a default or an event which could become an event of default
or a default under the indenture. PNC Funding or PNC may consolidate with, merge
into, or transfer substantially all of its properties to, any other corporation
organized under the laws of any domestic jurisdiction, if:
- the successor corporation assumes all obligations of PNC Funding or PNC,
as the case may be, under the debt securities and the guarantees and
under the indenture,
- immediately after the transaction, no event of default or default, and no
event which, after notice or lapse of time, would become an event of
default or default, exists, and
- certain other conditions are met. (Sections 10.01 and 10.03)
The indenture does not limit our ability to enter into a highly leveraged
transaction or provide you with any special protection in the event of such a
transaction.
MODIFICATION AND WAIVER
We and the trustee may modify the indenture with the consent of the holders
of the majority in aggregate principal amount of outstanding debt securities of
each series affected by the modification. The following modifications and
amendments, however, will not be effective against any holder without the
holder's consent:
- change the stated maturity of any payment of principal or interest,
- reduce the principal amount of, or the premium, if any, or the interest
on such debt security,
- reduce the portion of the principal amount of an original issue discount
debt security, payable upon acceleration of the maturity of that debt
security,
- change the place or places where, or the currency in which, any debt
security or any premium or interest is payable,
- impair the right of the holder to institute suit for the enforcement of
any payment on or with respect to any debt security,
- reduce the percentage in principal amount of debt securities necessary to
modify the indenture or the percentage in principal amount of outstanding
debt securities necessary to waive compliance with conditions and
defaults under the indenture, or
- modify or affect the terms and conditions of the guarantees in any manner
adverse to the holder. (Section 9.02)
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We and the trustee may modify and amend the indenture without the consent
of any holder of debt securities for any of the following purposes:
- to evidence the succession of another corporation to PNC Funding or PNC,
- to provide for the acceptance of appointment of a successor trustee,
- to add to the covenants of PNC Funding or PNC for the benefit of the
holders of debt securities,
- to cure any ambiguity, defect or inconsistency in the indenture, if such
action does not adversely affect the holders of debt securities in any
material respect,
- to secure the debt securities under applicable provisions of the
indenture,
- to establish the form or terms of debt securities,
- to permit the payment in the United States of principal, premium or
interest on unregistered securities, or
- to provide for the issuance of uncertificated debt securities in place of
certificated debt securities. (Section 9.01)
In addition, the holders of a majority in principal amount of outstanding
debt securities of any series may, on behalf of all holders of that series,
waive compliance with certain covenants, including those described under the
captions above entitled "Restriction on Sale or Issuance of Voting Stock of a
Principal Subsidiary Bank," "Ownership of PNC Funding" and "Restriction on
Liens." (Section 5.09) No waiver by the holders of any series of subordinated
debt securities is required with respect to the covenant described under the
caption above entitled "Restriction on Sale or Issuance of Voting Stock of a
Principal Subsidiary Bank." (Section 5.10) Covenants concerning the payment of
principal, premium, if any, and interest on the debt securities, compliance with
the terms of the indenture, maintenance of an agency, and certain monies held in
trust may only be waived pursuant to a supplemental indenture executed with the
consent of each affected holder of debt securities. The covenant concerning
certain reports required by federal law may not be waived.
EVENTS OF DEFAULT, DEFAULTS, WAIVERS
The indenture defines an event of default with respect to any series of
senior debt securities as being any one of the following events unless such
event is specifically deleted or modified in connection with the establishment
of the debt securities of a particular series:
- failure to pay interest on such series for 30 days after the payment is
due,
- failure to pay the principal of or premium, if any, on such series when
due,
- failure to deposit any sinking fund payment with respect to such series
when due,
- failure to perform any other covenant or warranty in the indenture that
applies to such series for 90 days after we have received written notice
of the failure to perform in the manner specified in the indenture,
- the occurrence of certain events relating to bankruptcy, insolvency or
reorganization of either of us or any principal subsidiary bank, or
- any other event of default specified in the supplemental indenture under
which such senior debt securities are issued or in the form of security
for such securities. (Section 7.01(a))
The indenture defines an event of default with respect to any series of
subordinated debt securities as certain events involving the bankruptcy or
reorganization of PNC or any principal subsidiary bank, or any other event of
default specified in the supplemental indenture under which such subordinated
debt securities are issued or in the form of securities for such series.
(Section 7.01(b)) There is no right of acceleration in the case of events
involving the bankruptcy, insolvency or reorganization of PNC Funding or of a
default in the payment of principal, interest, premium, if any, or any sinking
fund payment with respect to a series of subordinated debt securities or in the
case of a default in the performance of any other covenant of PNC
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Funding or PNC in the indenture. Accordingly, payment of principal of any series
of subordinated debt may be accelerated only in the case of the bankruptcy or
reorganization of PNC or any principal subsidiary bank.
If an event of default occurs and is continuing with respect to any series
of debt securities, either the trustee or the holders of at least 25% in
principal amount of outstanding debt securities of that series may declare the
principal of such series (or if debt securities of that series are original
issue discount securities, a specified amount of the principal) to be due and
payable immediately. Subject to certain conditions, the holders of a majority in
principal amount of the outstanding debt securities of such series may rescind
such declaration and waive certain defaults. Prior to any declaration of
acceleration, the holders of a majority in principal amount of the outstanding
debt securities of the applicable series may waive any past default or event of
default, except a payment default, or a past default or event of default in
respect of a covenant or provision of the indenture which cannot be modified
without the consent of the holder of each outstanding debt security affected.
(Sections 7.02, 7.08 and 7.13)
The indenture defines a default with respect to any series of subordinated
debt securities as being any one of the following events unless such event is
specifically deleted or modified in connection with the establishment of the
debt securities of a particular series:
- failure to pay interest on such series for 30 days after the payment is
due,
- failure to pay the principal of or premium, if any, on such series when
due,
- failure to perform any other covenant or warranty in the indenture that
applies to such series for 90 days after we have received written notice
of the failure to perform in the manner specified in the indenture,
- any other event of default specified in the supplemental indenture under
which such subordinated debt securities are issued or in the form of
security for such securities, or
- events involving the bankruptcy, insolvency or reorganization of PNC
Funding. (Section 7.01(c))
A breach of the covenant described under the caption above entitled
"Restriction on Sale or Issuance of Voting Stock of a Principal Subsidiary Bank"
will not result in a default with respect to any series of subordinated debt
securities. (Sections 7.01(b) and (c))
Other than its duties in the case of an event of default or a default, the
trustee is not obligated to exercise any of the rights or powers in the
indenture at the request or direction of holders of debt securities unless such
holders offer the trustee reasonable security or indemnity. If reasonable
indemnification is provided, then, subject to the other rights of the trustee,
the holders of a majority in principal amount of the outstanding debt securities
of any series may direct the time, method and place of conducting any proceeding
for any remedy available to the trustee with respect to debt securities of such
series. (Sections 8.03 and 7.12)
The indenture provides that if default is made on payment of interest and
continues for a 30 day period or if default is made on payment of principal of
any debt security of any series, PNC Funding will, upon demand of the trustee,
pay to it, for the benefit of the holder of any such debt security, the whole
amount then due and payable on such debt security for principal and interest.
The indenture further provides that if PNC Funding fails to pay such amount
immediately upon such demand, the trustee may, among other things, institute a
judicial proceeding for its collection. (Section 7.03)
The indenture requires us to furnish annually to the trustee certificates
as to the absence of any default under the indenture. The trustee may withhold
notice to the holders of debt securities of any default (except in payment of
principal, premium, if any, interest or sinking fund installment) if the trustee
determines that the withholding of the notice is in the interest of those
holders. (Sections 5.04 and 8.02)
The holder of any debt security of any series may institute any proceeding
with respect to the indenture or for any remedy thereunder if:
- a holder previously has given the trustee written notice of a continuing
event of default or default with respect to debt securities of that
series,
- the holders of at least 25% in principal amount of the outstanding debt
securities of that series have made a written request, and offered
reasonable indemnity, to the trustee to institute such proceeding,
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- the trustee has not received directions inconsistent with such request
from the holders of a majority in principal amount of the outstanding
debt securities of that series, and
- the trustee has not started such proceeding within 60 days after
receiving the request. (Section 7.07)
The holder of any debt security will have, however, an absolute right to
receive payment of the principal of, and premium, if any, and interest on such
debt security when due and to institute suit to enforce any such payment.
(Section 7.08)
DEFEASANCE
Except as may otherwise be provided in any applicable prospectus
supplement, the indenture provides that we will be discharged from our
obligations under the debt securities of a series at any time prior to the
stated maturity or redemption thereof when we have irrevocably deposited in
trust with the trustee money and/or government securities which through the
payment of principal and interest in accordance with their terms will provide
sufficient funds, without reinvestment, to repay in full the debt securities of
such series. Deposited funds will be in the currency or currency unit in which
the debt securities are denominated. Deposited government securities will be
direct obligations of, or obligations the principal of and interest on which are
fully guaranteed by, the government which issued the currency in which the debt
securities are denominated, and which are not subject to prepayment, redemption
or call. Upon such discharge, the holders of the debt securities of such series
will no longer be entitled to the benefits of the indenture, except for the
purposes of registration of transfer and exchange of the debt securities of such
series, and replacement of lost, stolen or mutilated debt securities, and may
look only to such deposited funds or obligations for payment. (Sections 11.01
and 11.02)
For federal income tax purposes, the deposit and discharge may, depending
on a variety of factors, result in a taxable gain or loss being recognized by
the holders of the affected debt securities. You are urged to consult your own
tax advisers as to the specific consequences of such a deposit and discharge,
including the applicability and effect of tax laws other than federal income tax
laws.
GOVERNING LAW
The indenture provides that the debt securities and the guarantees will be
governed by, and construed, in accordance with, the laws of the Commonwealth of
Pennsylvania. (Section 1.13)
GLOBAL SECURITIES
Book-Entry System
We may issue the debt securities of a series in whole or in part in the
form of a global security that will be deposited with a depositary. The
depositary will be The Depository Trust Company ("DTC"), unless otherwise
identified in the prospectus supplement relating to the series. A global
security may be issued as either a registered or unregistered security and in
either temporary or permanent form. Unless and until it is exchanged in whole or
in part for individual certificates evidencing debt securities in definitive
form represented thereby, a global security may not be transferred except as a
whole by the depositary for such global security or any nominee thereof to a
successor of such depositary or a nominee of such successor. (Section 2.05).
If DTC is the depositary for a series of debt securities, the series will
be issued as fully-registered securities 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. One fully registered global security will be
issued for the series of debt securities, in the aggregate principal amount of
the series, and will be deposited with DTC. If, however, the aggregate principal
amount of the series of debt securities exceeds $400 million, one global
security will be issued with respect to each $400 million of principal amount
and an additional global security will be issued with respect to any remaining
principal amount of the series.
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. DTC
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holds securities that its participants ("direct participants") deposit with DTC.
DTC also facilitates the settlement among direct participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in direct participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is owned
by a number of its direct participants and 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
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant, either directly or
indirectly ("indirect participants"). The rules applicable to DTC and its
participants are on file with the SEC.
Purchases of a series of debt securities under the DTC system must be made
by or through direct participants, which will receive a credit for the debt
securities on DTC's records. The ownership interest of each actual purchaser of
each debt security ("beneficial owner") is in turn to be recorded on the direct
participants' and indirect participants' records. Beneficial owners will not
receive written confirmation from DTC of their purchase, but beneficial owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the direct
participants or indirect participants through which the beneficial owner entered
into the transaction. Transfers of ownership interests in the debt securities
are to be accomplished by entries made on the books of the direct participants
or indirect participants acting on behalf of beneficial owners. Beneficial
owners will not receive certificates representing their ownership interest in
the global security or global securities, except in the event that use of the
book-entry system for the series of debt securities is discontinued.
To facilitate subsequent transfers, all global securities deposited by
direct participants with DTC are 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 global securities 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 advised us that DTC will have no
knowledge of the actual beneficial owners of the global securities, and that
DTC's records reflect only the identity of the direct participants to whose
accounts global securities are credited, which may or may not be the beneficial
owners. The direct participants 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.
To the extent any series of debt securities is redeemable, redemption
notices will be sent to DTC. If less than all of the debt securities within an
issue 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. The
applicable prospectus supplement for a series of debt securities will indicate
whether such series is redeemable.
To the extent applicable, neither DTC nor Cede & Co. (nor such other DTC
nominee) will consent or vote with respect to any global securities deposited
with it. Under its usual procedures, DTC will mail an omnibus proxy to the
issuer as soon as possible after the record date. The omnibus proxy assigns Cede
& Co.'s consenting or voting rights to those direct participants to whose
accounts the debt securities are credited on the record date (identified in a
listing attached to the omnibus proxy).
Principal and interest payments on the global securities deposited with DTC
will be made to Cede & Co., as nominee of DTC, or such other nominee as may be
requested by an authorized representative of DTC. DTC's practice is to credit
direct participants' accounts, upon DTC's receipt of funds and corresponding
detail information from the issuer, on the payable date in accordance with their
respective holdings shown on DTC's records. Payments by participants to
beneficial owners will be governed by standing instructions and customary
practices, as in the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility of
such participant and not DTC or PNC Funding, subject to any statutory or
regulatory requirements as 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) will be the responsibility of the
trustee, who unless otherwise indicated in the applicable prospectus supplement,
will be PNC Funding's paying agent, disbursement of such payments to
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direct participants will be the responsibility of DTC, and disbursement of such
payments to beneficial owners will be the responsibility of direct participants
and indirect participants. None of PNC Funding, PNC, the trustee, any paying
agent, or the registrar for the debt securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the global security or global securities
for any series of debt securities or for maintaining, supervising or reviewing
any records relating to such beneficial interests.
If DTC is at any time unwilling, unable or ineligible to continue as the
depositary and a successor depositary is not appointed by PNC Funding within 90
days, PNC Funding will issue certificated debt securities for each series in
definitive form in exchange for each global security. If PNC Funding determines
not to have a series of debt securities represented by a global security, which
it may do, it will issue certificated debt securities for such series in
definitive form in exchange for the global security. In either instance, a
beneficial owner will be entitled to physical delivery of certificated debt
securities for such series in definitive form equal in principal amount to such
beneficial owner's beneficial interest in the global security and to have such
certificated debt securities for such series registered in such beneficial
owner's name. Certificated debt securities so issued in definitive form will be
issued in denominations of $1,000 and integral multiples thereof and will be
issued in registered form only, without coupons.
Beneficial interests in the global debt securities will be represented
through book-entry accounts of financial institutions acting on behalf of
beneficial owners as direct and indirect participants in DTC. Unless otherwise
stated in the relevant prospectus, beneficial owners may elect to hold interests
in the debt securities through either DTC (in the United States) or Clearstream
Banking S.A., or "Clearstream, Luxembourg" formerly Cedelbank, or through
Euroclear Bank S.A. / N.V., as operator of the Euroclear System, or "Euroclear"
(in Europe), either directly if they are participants of such systems or
indirectly through organizations that are participants in such systems.
Clearstream, Luxembourg and Euroclear will hold interests on behalf of their
participants through customers' securities accounts in Clearstream, Luxembourg's
and Euroclear's names on the books of their U.S. depositaries, which in turn
will hold such interests in customers' securities accounts in the U.S.
depositaries' names on the books of DTC.
Clearstream, Luxembourg has advised us that it is incorporated under the
laws of Luxembourg as a bank. Clearstream, Luxembourg holds securities for its
customers and facilitates the clearance and settlement of securities
transactions between its customers through electronic book-entry changes in
accounts of its customers, thereby eliminating the need for physical movement of
certificates. Clearstream, Luxembourg provides to its customers, among other
things, services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream, Luxembourg interfaces with domestic markets in over 30 countries.
As a bank, Clearstream, Luxembourg is subject to regulation by the Luxembourg
Commission for the Supervision of the Financial Sector (Commission de
Surveillance du Secteur Financier). Clearstream, Luxembourg customers are
recognized financial institutions around the world, including securities brokers
and dealers, banks, trust companies, clearing corporations and other
organizations, and may include the underwriters. Clearstream's U.S. customers
are limited to securities brokers and dealers and banks. Indirect access to
Clearstream, Luxembourg is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with Clearstream, Luxembourg customers either directly or
indirectly.
Euroclear has advised us that it was created in 1968 to hold securities for
participants of Euroclear and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfer of securities and cash. Euroclear
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. Euroclear is operated by
the Euroclear Bank S.A./N.V. (the "Euroclear Operator"), under contract with
Euroclear Clearance Systems, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear participants. Euroclear participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the underwriters.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear participant, either
directly or indirectly.
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The Euroclear Operator has advised us as follows: Under Belgian law,
beneficial owners that are credited with securities on the records of the
Euroclear Operator have a co-proprietary right in the fungible pool of interests
in securities on deposit with the Euroclear Operator in an amount equal to the
amount of interests in securities credited to their accounts. In the event of
the insolvency of the Euroclear Operator, Euroclear participants would have a
right under Belgian law to the return of the amount and type of interests in
securities credited to their accounts with the Euroclear Operator. If the
Euroclear Operator did not have a sufficient amount of interests in securities
on deposit of a particular type to cover the claims of all participants credited
with such interests in securities on the Euroclear Operator's records, all
participants having an amount of interests in securities of such type credited
to their accounts with the Euroclear Operator would have the right under Belgian
law to the return of their pro rata share of the amount of interests in
securities actually on deposit.
Euroclear has further advised that beneficial owners that acquire, hold and
transfer interests in the debt securities by book-entry through accounts with
the Euroclear Operator or any other securities intermediary are subject to the
laws and contractual provisions governing their relationship with their
intermediary, as well as the laws and contractual provisions governing the
relationship between such an intermediary and each other intermediary, if any,
standing between themselves and the global securities.
Under Belgian law, the Euroclear Operator is required to pass on the
benefits of ownership in any interests in securities on deposit with it (such as
dividends, voting rights and other entitlements) to any person credited with
such interests in securities on its records.
We have provided the descriptions of the operations and procedures of DTC
set forth in "Book-Entry System" and elsewhere herein, and the descriptions of
the operations and procedures of DTC, Clearstream, Luxembourg and Euroclear
solely as a matter of convenience. These operations and procedures are solely
within the control of those organizations and are subject to change by them from
time to time. We and the principal paying agent do not take any responsibility
for these operations or procedures, and you are urged to contact DTC,
Clearstream, Luxembourg and Euroclear or their participants directly to discuss
these matters.
The laws of some jurisdictions may require that purchasers of securities
take physical delivery of those securities in definitive form. Accordingly, the
ability to transfer interests in the debt securities represented by a global
note to those persons may be limited. In addition, because DTC can act only on
behalf of its participants, who in turn act on behalf of persons who hold
interests through participants, the ability of a person having an interest in
debt securities represented by a global note to pledge or transfer such interest
to persons or entities that do not participate in DTC's system, or otherwise to
take actions in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
Neither we nor the principal paying agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of debt securities by DTC, Clearstream, Luxembourg, or Euroclear, or for
maintaining, supervising or reviewing any records of those organizations
relating to the debt securities.
Distributions on the debt securities held beneficially through Clearstream,
Luxembourg, will be credited to cash accounts of its customers in accordance
with its rules and procedures, to the extent received by the U.S. depositary for
Clearstream, Luxembourg.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of Euroclear, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipt of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
Distributions on the debt securities held beneficially through Euroclear
will be credited to the cash accounts of its participants in accordance with the
Terms and Conditions, to the extent received by the U.S. depositary for
Euroclear.
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Any other or differing terms of the depositary arrangement will be
described in the prospectus supplement relating to a series of debt securities.
Clearance and Settlement Procedures
Unless otherwise mentioned in the relevant prospectus supplement, initial
settlement for the debt securities will be made in immediately available funds.
Secondary market trading between DTC participants will occur in the ordinary way
in accordance with DTC rules and will be settled in immediately available funds.
Secondary market trading between Clearstream, Luxembourg customers and/or
Euroclear participants will occur in the ordinary way in accordance with the
applicable rules and operating procedures of Clearstream, Luxembourg and
Euroclear and will be settled using the procedures applicable to conventional
eurobonds in immediately available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC on the one hand, and directly or indirectly through Clearstream,
Luxembourg customers or Euroclear participants, on the other, will be effected
in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by the U.S. depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the U.S.
depositary to take action to effect final settlement on its behalf by delivering
or receiving the debt securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream, Luxembourg customers and Euroclear participants may not
deliver instructions directly to their U.S. depositaries.
Because of time-zone differences, credits of the debt securities received
in Clearstream, Luxembourg or Euroclear as a result of a transaction with a DTC
participant will be made during subsequent securities settlement processing and
dated the business day following DTC settlement date. Such credits or any
transactions in the debt securities settled during such processing will be
reported to the relevant Clearstream, Luxembourg customers or Euroclear
participants on such business day. Cash received in Clearstream, Luxembourg or
Euroclear as a result of sales of the debt securities by or through a
Clearstream, Luxembourg customer or a Euroclear participant to a DTC participant
will be received with value on the DTC settlement date but will be available in
the relevant Clearstream, Luxembourg or Euroclear cash account only as of the
business day following settlement in DTC.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the
foregoing procedures to facilitate transfers of the debt securities among
participants of DTC, Clearstream, Luxembourg and Euroclear, they are under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.
BEARER DEBT SECURITIES
If we ever issue bearer debt securities, the applicable prospectus
supplement will describe all of the special terms and provisions of debt
securities in bearer form, and the extent to which those special terms and
provisions are different from the terms and provisions that are described in
this prospectus, which generally apply to debt securities in registered form,
and will summarize provisions of the indenture that relate specifically to
bearer debt securities.
REGARDING THE TRUSTEE
In the ordinary course of business, we may maintain lines of credit with
one or more trustees for a series of debt securities and the principal
subsidiary banks and other subsidiary banks may maintain deposit accounts and
conduct other banking transactions with one or more trustees for a series of
debt securities.
TRUSTEE'S DUTY TO RESIGN UNDER CERTAIN CIRCUMSTANCES
PNC Funding may issue both senior and subordinated debt securities under
the indenture. Because the subordinated debt securities will rank junior in
right of payment to the senior debt securities, the occurrence of a default
under the indenture with respect to the subordinated debt securities or any
senior debt securities
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could create a conflicting interest under the Trust Indenture Act of 1939, as
amended, with respect to any trustee who serves as trustee for both senior and
subordinated debt securities. In addition, upon the occurrence of a default
under the indenture with respect to any series of debt securities the trustee of
which maintains banking relationships with PNC Funding or PNC, such trustee
would have a conflicting interest under the Trust Indenture Act as a result of
such business relationships. If a default has not been cured or waived within 90
days after the trustee has or acquires a conflicting interest, the trustee
generally is required by the Trust Indenture Act to eliminate such conflicting
interest or resign as trustee with respect to the subordinated debt securities
or the senior debt securities. In the event of the trustee's resignation, we
will promptly appoint a successor trustee with respect to the affected
securities.
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DESCRIPTION OF COMMON STOCK
As of the date of the prospectus, PNC is authorized to issue 800,000,000
shares of common stock. At August 31, 2001, PNC had 286,064,492 shares of common
stock issued and outstanding and 66,758,275 shares held in treasury.
The following summary is not complete. You should refer to the applicable
provisions of PNC's articles of incorporation, including the statements with
respect to shares pursuant to which the outstanding series of preferred stock
were issued and an additional series may be issued and to the Pennsylvania
Business Corporation Law for a complete statement of the terms and rights of the
common stock.
Holders of common stock are entitled to one vote per share on all matters
submitted to shareholders. Holders of common stock have neither cumulative
voting rights nor any preemptive rights for the purchase of additional shares of
any class of stock of PNC, and are not subject to liability for further calls or
assessments. The common stock does not have any sinking fund, conversion or
redemption provisions.
Holders of common stock may receive dividends when declared by the Board of
Directors of PNC out of funds legally available to pay dividends. The Board of
Directors may not pay or set apart dividends on common stock until dividends for
all past dividend periods on any series of outstanding preferred stock have been
paid or declared and set apart for payment.
PNC currently has outstanding $300 million of 8.315% Junior Subordinated
Debentures Due 2027 and $200 million of Floating Rate Junior Subordinated
Debentures Due 2028. The terms of these debentures permit PNC to defer interest
payments on the debentures for up to five years. If PNC defers interest payments
on these debentures, PNC may not during the deferral period:
- declare or pay any cash dividends on any of its common stock,
- redeem any of its common stock,
- purchase or acquire any of its common stock, or
- make a liquidation payment on any of its common stock.
In the event of dissolution or winding up of the affairs of PNC, holders of
common stock will be entitled to share ratably in all assets remaining after
payments to all creditors and payments required to be made in respect of
outstanding preferred stock (including accrued and unpaid dividends thereon)
have been made.
The Board of Directors of PNC may, except as otherwise required by
applicable law, cause the issuance of authorized shares of common stock without
shareholder approval to such persons and for such consideration as the Board of
Directors may determine in connection with acquisitions by PNC or for other
corporate purposes.
The Chase Manhattan Bank, New York, New York, is the transfer agent and
registrar for PNC's common stock. The shares of common stock are listed on the
New York Stock Exchange under the symbol "PNC." The outstanding shares of common
stock are, and the shares offered by this prospectus and the applicable
prospectus supplement will be, validly issued, fully paid and nonassessable, and
the holders of the common stock are not and will not be subject to any liability
as shareholders.
RIGHTS PLAN
The PNC Board of Directors adopted a shareholder rights plan effective as
of May 15, 2000 providing for the distribution of one right for each share of
common stock outstanding on May 25, 2000. The rights become exercisable only in
the event, with certain exceptions, that an acquiring party accumulates 10% or
more of the PNC's voting stock or a party announces an offer to acquire 10% or
more of the voting stock. The rights have an exercise price of $180 per right
and expire on May 25, 2010. Upon the occurrence of certain events, holders of
the rights will be entitled to purchase either PNC common or common equivalent
preferred shares or shares in an acquiring entity at half of market value. PNC
is entitled to redeem the rights at a value of $0.01 per right at any time until
the acquisition of a 10% position in its voting stock. A copy of the Rights
Agreement providing for the issuance of the rights is filed as an exhibit to
this Registration
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Statement. This description should be read together with the Rights Agreement
and is qualified in its entirety by reference to that agreement.
OTHER PROVISIONS
PNC's articles of incorporation and bylaws contain various provisions that
may discourage or delay attempts to gain control of PNC. PNC's bylaws include
provisions:
- authorizing the board of directors to fix the size of the board between
five and 36 directors,
- authorizing directors to fill vacancies on the board occurring between
annual shareholder meetings, including vacancies resulting from an
increase in the number of directors,
- authorizing only the board of directors, the Chairman of the board, PNC's
President and a Vice Chairman of the board to call a special meeting of
shareholders, and
- authorizing a majority of the board of directors to alter, amend, add to
or repeal the bylaws.
PNC's articles of incorporation vest the authority to make, amend and
repeal the bylaws in the board of directors, subject to the power of its
shareholders to change any such action.
The Pennsylvania "anti-takeover" statutes allow Pennsylvania corporations
to elect to either be covered or not be covered by certain of these statutes.
PNC has elected in its bylaws not to be covered by Title 15 of the Pennsylvania
consolidated statutes governing "control-share acquisitions" and "disgorgement
by certain controlling shareholders following attempts to acquire control."
However, the following provisions of Title 15 of the Pennsylvania consolidated
statutes apply to PNC:
- shareholders are not be entitled to call a special meeting (Section
2521),
- unless the articles of incorporation provided otherwise, action by
shareholder consent must be unanimous (Section 2524),
- shareholders are not be entitled to propose an amendment to the articles
of incorporation (Section 2535),
- certain transactions with interested shareholders (such as mergers or
sales of assets between the company and a shareholder) where the
interested shareholder is a party to the transaction or is treated
differently from other shareholders require approval by a majority of the
disinterested shareholders (Section 2538),
- a five year moratorium exists on certain business combinations with a 20%
or more shareholder (Sections 2551-2556), and
- shareholders have a right to "put" their shares to a 20% shareholder at a
"fair value" for a reasonable period after the 20% stake is acquired
(Sections 2541-2547).
In addition, in certain instances the ability of PNC's board to issue
authorized but unissued shares of common stock and preferred stock may have an
anti-takeover effect.
Existence of the above provisions could result in PNC being less attractive
to a potential acquiror, or result in PNC shareholders receiving less for their
shares of common stock than otherwise might be available if there is a takeover
attempt.
DESCRIPTION OF PREFERRED STOCK
This section describes the general terms and provisions of PNC's preferred
stock that may be offered by this prospectus. The prospectus supplement will
describe the specific terms of the series of the preferred stock offered through
that prospectus supplement and any general terms outlined in this section that
will not apply to that series of preferred stock.
We have summarized the material terms and provisions of the preferred stock
in this section. We have also filed PNC's articles of incorporation and the form
of certificate of preferred stock, which we will refer to as the "certificate of
designations" as exhibits to the registration statement. You should read PNC's
articles of
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incorporation and the certificate of designations relating to the applicable
series of the preferred stock for additional information before you buy any
preferred stock.
GENERAL
The Board of Directors of PNC (the "PNC board") is authorized without
further shareholder action to cause the issuance, as of August 31, 2001, of up
to 12,563,800 additional shares of preferred stock, including shares of
preferred stock reserved for issuance in connection with PNC's shareholder
rights plan described above. That preferred stock may be issued in one or more
series, each with the preferences, limitations, designations, conversion rights,
voting rights, dividend rights, voluntary and involuntary liquidation rights and
other rights as the PNC board may determine at the time of issuance.
The rights of the holders of PNC's common stock are subject to any rights
and preferences of the outstanding series of preferred stock and the preferred
stock offered in this prospectus. In addition, those rights would be subject to
the rights and preferences of any additional shares of preferred stock, or any
series thereof, which might be issued in the future.
The existence of authorized but unissued preferred stock could have the
effect of discouraging an attempt to acquire control of PNC. For example,
preferred stock could be issued to persons, firms or entities known to be
friendly to management.
PNC currently has outstanding $300 million of 8.315% Junior Subordinated
Debentures Due 2027 and $200 million of Floating Rate Junior Subordinated
Debentures Due 2028. The terms of these debentures permit PNC to defer interest
payments on the debentures for up to five years. If PNC defers interest payments
on these debentures, PNC may not during the deferral period:
- declare or pay any cash dividends on any of its preferred stock,
- redeem any of its preferred stock,
- purchase or acquire any of its preferred stock, or
- make a liquidation payment on any of its preferred stock.
PREFERRED STOCK OFFERED HEREIN
General
The preferred stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the prospectus supplement, the shares of each
series of preferred stock will upon issuance rank on a parity in all respects
with PNC's currently existing series of preferred stock, described below, and
each other series of preferred stock of PNC outstanding at that time. Holders of
the preferred stock will have no preemptive rights to subscribe for any
additional securities that may be issued by PNC. Unless otherwise specified in
the applicable prospectus supplement, The Chase Manhattan Bank, New York, New
York, will be the transfer agent and registrar for the preferred stock.
Because PNC is a holding company, its rights and the rights of holders of
its securities, including the holders of preferred stock, to participate in the
assets of any PNC subsidiary upon its liquidation or recapitalization will be
subject to the prior claims of such subsidiary's creditors and preferred
shareholders, except to the extent PNC may itself be a creditor with recognized
claims against such subsidiary or a holder of preferred shares of such
subsidiary.
PNC may elect to offer depositary shares evidenced by depositary receipts.
If PNC so elects, each depositary share will represent a fractional interest (to
be specified in the prospectus supplement relating to the particular series of
preferred stock) in a share of a particular series of the preferred stock issued
and deposited with a depositary (as defined below). For a further description of
the depositary shares, you should read "Description of Depositary Shares" below.
Dividends
The holders of the preferred stock will be entitled to receive dividends,
if declared by the PNC board or a duly authorized committee thereof. The
applicable prospectus supplement will specify the dividend rate and
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dates on which dividends will be payable. The rate may be fixed or variable or
both. If the dividend rate is variable, the applicable prospectus supplement
will describe the formula used for determining the dividend rate for each
dividend period. PNC will pay dividends to the holders of record as they appear
on the stock books of PNC on the record dates fixed by the PNC board or a duly
authorized committee thereof. PNC may pay dividends in the form of cash,
preferred stock (of the same or a different series) or common stock of PNC, in
each case as specified in the applicable prospectus supplement.
The applicable prospectus supplement will also state whether dividends on
any series of preferred stock are cumulative or noncumulative. If the PNC board
does not declare a dividend payable on a dividend payment date on any
noncumulative preferred stock, then the holders of that preferred stock will not
be entitled to receive a dividend for that dividend period, and PNC will have no
obligation to pay the dividend for that dividend period even if the PNC board
declares a dividend on that series payable in the future.
The PNC board will not declare and pay a dividend on the common stock or on
any class or series of stock of PNC ranking subordinate as to dividends to a
series of cumulative preferred stock (other than dividends payable in common
stock or in any class or series of stock of PNC ranking subordinate as to
dividends and assets to such series), until PNC has paid in full dividends (to
the extent cumulative) for all past dividend periods on all outstanding shares
of such series. If PNC does not pay in full dividends for any dividend period on
all shares of preferred stock ranking equally as to dividends, all such shares
will participate ratably in the payment of dividends for that period in
proportion to the full amounts of dividends to which they are entitled.
Voting
Except as provided in this prospectus or in the applicable prospectus
supplement, or as required by applicable law, the holders of preferred stock
will not be entitled to vote. Except as otherwise required by law or provided by
the PNC board and described in the applicable prospectus supplement, holders of
preferred stock having voting rights and holders of common stock vote together
as one class. Holders of preferred stock do not have cumulative voting rights.
If, at the time of any annual meeting of PNC shareholders, PNC has not
paid, or declared and set apart for payment, dividends on all outstanding shares
of preferred stock in an amount equal to six quarterly dividends at the rates
payable upon such shares, the number of directors of PNC will be increased by
two at the first annual meeting of shareholders held thereafter, and the holders
of all outstanding preferred stock voting together as a class will be entitled
to elect those two additional directors at that annual meeting. After PNC pays
the full amount of dividends to which the holders of preferred stock are
entitled, the terms of the two additional directors will end, the number of
directors of PNC will be reduced by two, and such voting right of the holders of
preferred stock will end.
Unless PNC receives the consent of the holders of at least two-thirds of
the outstanding shares of preferred stock of all series, PNC will not:
- create or increase the authorized number of shares of any class of stock
ranking as to dividends or assets senior to the preferred stock, or
- change the preferences, qualifications, privileges, limitations,
restrictions or special or relative rights of the preferred stock in any
material respect adverse to the holders of the preferred stock.
If any change to the rights of the preferred stock will affect any
particular series materially and adversely as compared to any other series of
preferred stock, PNC first must obtain the consent of the holders of at least
two-thirds of the outstanding shares of that particular series of preferred
stock.
The holders of the preferred stock of a series will not be entitled to
participate in any vote regarding a change in the rights of the preferred stock
if PNC makes provision for the redemption of all the preferred stock of such
series. See "Redemption by PNC" below. PNC is not required to obtain any consent
of holders of preferred stock of a series in connection with the authorization,
designation, increase or issuance of any shares of preferred stock that rank
junior or equal to the preferred stock of such series with respect to dividends
and liquidation rights.
Under interpretations adopted by the Federal Reserve or its staff, if the
holders of preferred stock of any series become entitled to vote for the
election of directors because dividends on such series are in arrears as
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described above, that series may then be deemed a "class of voting securities"
and a holder of 25% or more of such series (or a holder of 5% or more if it
otherwise exercises a "controlling influence" over PNC) may then be subject to
regulation as a bank holding company in accordance with the Bank Holding Company
Act. In addition, when the series is deemed a class of voting securities, any
other bank holding company may be required to obtain the prior approval of the
Federal Reserve to acquire more than 5% of that series, and any person other
than a bank holding company may be required to obtain the prior approval of the
Federal Reserve to acquire 10% or more of that series.
Liquidation of PNC
In the event of the voluntary or involuntary liquidation of PNC, the
holders of each outstanding series of preferred stock will be entitled to
receive liquidating distributions before any distribution is made to the holders
of common stock or of any class or series of stock of PNC ranking subordinate to
that series, the amount fixed by the PNC board for that series and described in
the applicable prospectus supplement, plus, if dividends on that series are
cumulative, accrued and unpaid dividends.
Redemption by PNC
PNC may redeem the whole or any part of the preferred stock at the times
and at the amount for each share set forth in the applicable prospectus
supplement.
PNC may acquire preferred stock from time to time at the price or prices
that PNC determines. If cumulative dividends, if any, payable for all past
quarterly dividend periods have not been paid, or declared and set apart for
payment, in full, PNC may not acquire preferred stock except in accordance with
an offer made in writing or by publication to all holders of record of shares of
preferred stock.
Conversion
The prospectus supplement may set for the rights, if any, for a holder of
preferred stock to convert that preferred stock into common stock or any other
class of capital securities of PNC.
PREFERRED STOCK CURRENTLY OUTSTANDING
At August 31, 2000, PNC had five series of preferred stock outstanding:
- 9,868 shares of $1.80 Cumulative Convertible Preferred Stock, Series A
("preferred stock-A"),
- 2,963 shares of $1.80 Cumulative Convertible Preferred Stock, Series B
("preferred stock-B"),
- 215,591 shares of $1.60 Cumulative Convertible Preferred Stock, Series C
("preferred stock-C"),
- 296,585 shares of $1.80 Cumulative Convertible Preferred Stock, Series D
("preferred stock-D"), and
- 4,099,000 shares of Fixed/Adjustable Rate Noncumulative Preferred Stock,
Series F ("preferred stock-F").
All shares of a former series of preferred stock, designated as $2.60
Cumulative Non Voting Preferred Stock, Series E, have been redeemed and restored
to the status of authorized but unissued preferred stock. In connection with
PNC's shareholders rights plan described above, PNC has issued rights attached
to its common stock that, once exercisable, will allow the holder of each share
of common stock to purchase from PNC one one-thousandth of a share of Series G
Junior Participating Preferred Stock ("preferred stock-G"). To date, we have not
issued any preferred stock-G.
Holders of outstanding preferred stock are entitled to cumulative dividends
at the annual rates set forth below in the table titled "Summary of Certain Key
Terms of Preferred Stock," which are payable quarterly when and as declared by
the Board of Directors of PNC. The Board of Directors may not pay or set apart
dividends on common stock until dividends for the current period and all past
dividend periods on all series of outstanding preferred stock have been paid or
declared and set apart for payment.
Holders of outstanding preferred stock, other than preferred stock-F, are
entitled to a number of votes equal to the number of full shares of common stock
into which their preferred stock is convertible. Holders
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of outstanding preferred stock currently are entitled to the conversion
privileges set forth below in the table titled "Summary of Certain Key Terms of
Preferred Stock."
In the event of a liquidation of PNC, holders of outstanding preferred
stock are entitled to receive the amounts set forth below in the table titled
"Summary of Certain Key Terms of Preferred Stock," plus all dividends accrued
and unpaid thereon, before any payments are made with respect to common stock.
Preferred stock-A, preferred stock-C and preferred stock-D are redeemable
at any time at the option of PNC at redemption prices equal to the respective
liquidation preference amounts stated above, plus accrued and unpaid dividends,
if any. Preferred stock-B is not redeemable. Prior to September 30, 2001,
preferred stock-F is not redeemable, except in limited circumstances by PNC. On
and after September 30, 2001, preferred stock-F is redeemable at the option of
PNC at its liquidation preference amount, plus accrued and unpaid dividends
(whether or not earned or declared) from the immediately preceding dividend
payment date (but without any cumulation for unpaid dividends for prior dividend
periods) to the date fixed for redemption. On August 23, 2001, PNC provided
notice to holders of the outstanding shares of preferred stock-F that it has
called the preferred stock-F for redemption on October 4, 2001.
All outstanding series of preferred stock, other than preferred stock-F,
are convertible (unless called for redemption and not converted within the time
allowed therefor), at any time at the option of the holder. No adjustment will
be made for dividends on preferred stock converted or on common stock issuable
upon conversion. The conversion rate of each series of convertible preferred
stock will be adjusted in certain events, including payment of stock dividends
on, or splits or combinations of, the common stock or issuance to holders of
common stock of rights to purchase common stock at a price per share less than
90% of current market price as defined in the articles of incorporation of PNC.
Appropriate adjustments in the conversion provisions also will be made in the
event of certain reclassifications, consolidations or mergers or the sale of
substantially all of the assets of PNC. Preferred stock-F is not convertible
into shares of common stock or any other security of PNC.
Preferred stock-A, preferred stock-B and preferred stock-F are currently
traded in the over-the-counter market. Preferred stock-C and preferred stock-D
are listed and traded on the New York Stock Exchange. The Chase Manhattan Bank,
New York, New York, is transfer agent and registrar for all outstanding series
of preferred stock.
SUMMARY OF CERTAIN KEY TERMS OF PREFERRED STOCK
----------------------------------------------------------------------------------------------------
ANNUAL
DIVIDEND RATE VOTING RIGHTS
PREFERRED (PAYABLE CUMULATIVE CONVERSION (BASED ON LIQUIDATION
SERIES QUARTERLY) DIVIDENDS RATE CONVERSION RATE) PREFERENCE REDEEMABLE
----------------------------------------------------------------------------------------------------
A $1.80 Y 1:8 Y $40/share Y
----------------------------------------------------------------------------------------------------
B $1.80 Y 1:8 Y $40/share N
----------------------------------------------------------------------------------------------------
C $1.60 Y 2.4:4 Y $20/share Y
----------------------------------------------------------------------------------------------------
D $1.80 Y 2.4:4 Y $20/share Y
----------------------------------------------------------------------------------------------------
F - 6.05% per N N/A N, except in $50/share Y, but not prior
year limited to 9/30/01,
through circumstances except in
9/29/01 limited
circumstances.
- between Called for
6.55% and redemption on
12.55% 10/4/01.
thereafter
(indexed to
certain
market
indices)
----------------------------------------------------------------------------------------------------
G None Currently Outstanding
----------------------------------------------------------------------------------------------------
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DESCRIPTION OF DEPOSITARY SHARES
GENERAL
PNC may, at its option, elect to offer fractional interests in the
preferred stock, rather than whole shares of preferred stock. If PNC does, PNC
will issue to the public receipts for depositary shares, and each of these
depositary shares will represent a fraction of a share of a particular series of
the preferred stock. We will specify that fraction in the prospectus supplement.
The shares of any series of the preferred stock underlying the depositary
shares will be deposited under a deposit agreement between PNC and a depositary
selected by PNC. The depositary will be a bank or trust company and will have
its principal office in the United States and a combined capital and surplus of
at least $50,000,000. The prospectus supplement relating to a series of
depositary shares will set forth the name and address of the depositary. Subject
to the terms of the deposit agreement, each owner of a depositary share will be
entitled, in proportion to the applicable fractional interest in a share of
preferred stock underlying that depositary share, to all the rights and
preferences of the preferred stock underlying that depositary share. Those
rights include dividend, voting, redemption, conversion and liquidation rights.
The depositary shares will be evidenced by depositary receipts issued under
the deposit agreement. PNC will issue depositary receipts to those persons who
purchase the fractional shares in the preferred stock underlying the depositary
shares, in accordance with the terms of the offering.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions received in respect of the preferred stock to the record holders
of related depositary shares in proportion to the number of depositary shares
owned by those holders.
If PNC makes a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary shares
that are entitled to receive the distribution, unless the depositary determines
that it is not feasible to make the distribution. If this occurs, the depositary
may, with the approval of PNC, sell the property and distribute the net proceeds
from the sale to the applicable holders.
REDEMPTION OF DEPOSITARY SHARES
Whenever PNC redeems shares of preferred stock that are held by the
depositary, the depositary will redeem, as of the same redemption date, the
number of depositary shares representing the shares of preferred stock so
redeemed. The redemption price per depositary share will be equal to the
applicable fraction of the redemption price per share payable with respect to
that series of the preferred stock. If fewer than all the depositary shares are
to be redeemed, the depositary will select the depositary shares to be redeemed
by lot or pro rata as may be determined by the depositary.
Depositary shares called for redemption will no longer be outstanding after
the applicable redemption date, and all rights of the holders of these
depositary shares will cease, except the right to receive any money or other
property upon surrender to the depositary of the depositary receipts evidencing
those depositary shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of preferred
stock are entitled to vote, the depositary will mail the information contained
in the notice of meeting to the record holders of the depositary shares
underlying that preferred stock. Each record holder of those depositary shares
on the record date (which will be the same date as the record date for the
preferred stock) will be entitled to instruct the depositary as to the exercise
of the voting rights pertaining to the amount of preferred stock underlying that
holder's depositary shares. The depositary will try, insofar as practicable, to
vote the number of shares of preferred stock underlying those depositary shares
in accordance with those instructions, and PNC will agree to take all action
which the depositary deems necessary in order to enable the depositary to do so.
The depositary will not vote the shares of preferred stock to the extent it does
not receive specific instructions from the holders of depositary shares
underlying the preferred stock.
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CONVERSION OF PREFERRED STOCK
If a series of the preferred stock underlying the depositary shares is
convertible into shares of PNC's common stock or any other class of capital
securities of PNC, PNC will accept the delivery of depositary receipts to
convert the preferred stock using the same procedures as those for delivery of
certificates for the preferred stock. If the depositary shares represented by a
depositary receipt are to be converted in part only, the depositary will issue a
new depositary receipt or depositary receipts for the depositary shares not to
be converted.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
PNC and the depositary may amend the form of depositary receipt evidencing
the depositary shares and any provision of the deposit agreement at any time.
However, any amendment that materially and adversely alters the rights of the
holders of depositary shares will not be effective unless the amendment has been
approved by the holders of at least a majority of the depositary shares then
outstanding. PNC or the depositary may terminate the deposit agreement only if
(i) all outstanding depositary shares have been redeemed or (ii) there has been
a final distribution of the underlying preferred stock in connection with any
liquidation, dissolution or winding up of PNC.
CHARGES OF DEPOSITARY
PNC will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. PNC will also pay
charges of the depositary in connection with the initial deposit of the
preferred stock and any redemption of the preferred stock. Holders of depositary
shares will pay other transfer and other taxes and governmental charges and such
other charges as are expressly provided in the deposit agreement to be for their
accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to PNC notice of its
election to do so. PNC may remove the depositary at any time. Any such
resignation or removal will take effect only upon the appointment of a successor
depositary and its acceptance of its appointment. The successor depositary must
be a bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
MISCELLANEOUS
The depositary will forward to the holders of depositary shares all reports
and communications from PNC that PNC delivers to the depositary and that PNC is
required to furnish to the holders of the preferred stock.
Neither the depositary nor PNC will be liable if it is prevented or delayed
by law or any circumstance beyond its control in performing its obligations
under the deposit agreement. The obligations of PNC and the depositary under the
deposit agreement will be limited to performance in good faith of their
respective duties under the deposit agreement. They will not be obligated to
prosecute or defend any legal proceeding relating to any depositary shares or
preferred stock unless satisfactory indemnity is furnished. They may rely upon
written advice of counsel or accountants, or upon information provided by
persons presenting preferred stock for deposit, holders of depositary shares or
other persons they believe to be competent and on documents they believe to be
genuine.
DESCRIPTION OF WARRANTS
PNC may issue warrants to purchase common stock, preferred stock or
depositary shares. PNC Funding may issue warrants to purchase debt securities.
We may issue warrants independently of or together with any other securities,
and the warrants may be attached to or separate from such securities. We will
issue each series of warrants under a separate warrant agreement to be entered
into between us and a warrant agent. The warrant agent will act solely as our
agent in connection with the warrant of such series and will not assume any
obligation or relationship of agency for or with holders of beneficial owners of
warrants. The following
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sets forth certain general terms and provisions of the warrants that we may
offer. Further terms of the warrants and the applicable warrant agreement will
be set forth in the applicable prospectus supplement.
DEBT WARRANTS
The applicable prospectus supplement will describe the terms of any debt
warrants, including the following:
- the title of the debt warrants,
- the offering price for the debt warrants, if any,
- the aggregate number of the debt warrants,
- the designation and terms of the debt securities purchasable upon
exercise of the debt warrants,
- if applicable, the designation and terms of the securities with which the
debt warrants are issued and the number of debt warrants issued with each
of these securities,
- if applicable, the date after which the debt warrants and any securities
issued with the warrants will be separately transferable,
- the principal amount of debt securities purchasable upon exercise of a
debt warrant and the purchase price,
- the dates on which the right to exercise the debt warrants begins and
expires,
- if applicable, the minimum or maximum amount of the debt warrants that
may be exercised at any one time,
- whether the debt warrants represented by the debt warrant certificates or
debt securities that may be issued upon exercise of the debt warrants
will be issued in registered or bearer form,
- information with respect to any book-entry procedures,
- the currency, currencies or currency units in which the offering price,
if any, and the exercise price are payable,
- if applicable, a discussion of certain United States federal income tax
considerations,
- any antidilution provisions of the debt warrants,
- any redemption or call provisions applicable to the debt warrants, and
- any additional terms of the debt warrants, including terms, procedures
and limitations relating to the exchange and exercise of the debt
warrants.
STOCK WARRANTS
The applicable prospectus supplement will describe the terms of any stock
warrants, including the following:
- the title of the stock warrants,
- the offering price of the stock warrants,
- the aggregate number of the stock warrants,
- the designation and terms of the common stock, preferred stock or
depositary shares that are purchasable upon exercise of the stock
warrants,
- if applicable, the designation and terms of the securities with which the
stock warrants are issued and the number of such stock warrants issued
with each such security,
- if applicable, the date after which the stock warrants and any securities
issued with the warrants will be separately transferable,
-31-
- the number of shares of common stock, preferred stock or depositary
shares purchasable upon exercise of a stock warrant and the purchase
price,
- the dates on which the right to exercise the stock warrants begins and
expires,
- if applicable, the minimum or maximum amount of the stock warrants which
may be exercised at any one time,
- the currency, currencies or currency units in which the offering price,
if, any, and the exercise price are payable,
- if applicable, a discussion of certain United States federal income tax
considerations,
- any antidilution provisions of the stock warrants,
- any redemption or call provisions applicable to the stock warrants, and
- any additional terms of the stock warrants, including terms, procedures
and limitations relating to the exchange and exercise of the stock
warrants.
CERTAIN TAX CONSIDERATIONS
PNC Funding will be required to withhold the Pennsylvania Corporate Loans
Tax from interest payments on debt securities held by or those subject to such
tax, principally individuals and partnerships resident in Pennsylvania and
resident trustees of trusts held for a resident beneficiary. The tax, at the
current annual rate of four mills on each dollar of nominal value ($4.00 per
$1,000), will be withheld, at any time when it is applicable, from each interest
payment to taxable holders of debt securities. The debt securities will be
exempt, under current law, from personal property taxes imposed by political
subdivisions in Pennsylvania.
Holders of securities should consult their tax advisors as to the
applicability to the securities and interest and dividends payable thereon of
federal, state and local taxes and of withholding on interest and dividends.
PLAN OF DISTRIBUTION
PNC Funding may offer and sell debt securities and warrants being offered
by use of this prospectus:
- through underwriters,
- through dealers,
- through agents,
- directly to purchasers, or
- through or in connection with hedging transactions.
PNC may offer and sell common stock, preferred stock, depositary shares and
warrants being offered by use of this prospectus:
- through underwriters,
- through dealers,
- through agents,
- directly to purchasers, or
- through or in connection with hedging transactions.
The applicable prospectus supplement will name any underwriters in
connection with offered debt securities, common stock, preferred stock,
depositary shares and warrants and will set forth any underwriting compensation
paid to such underwriters. Underwritten offerings may involve underwriting
syndicates represented by managing underwriters, or underwriters without a
syndicate.
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The distribution of securities may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
In connection with the sale of securities, underwriters or agents acting on
PNC's behalf may receive compensation from PNC Funding, PNC or from purchasers
of securities for whom they may act as agents, in the form of discounts,
concessions or commissions. The underwriters, dealers or agents that participate
in the distribution of securities may be deemed to be underwriters and any
discounts or commissions received by them and any profit on the resale of
securities by them may be deemed to be underwriting discounts and commissions
under the Securities Act. Any such underwriter will be identified and any such
compensation will be described in the prospectus supplement.
Under agreements which may be entered into with us, underwriters, dealers
and agents may be entitled to indemnification by us against certain liabilities,
including liabilities under the Securities Act, and to contributions from us in
respect of such liabilities. Underwriters, dealers and agents may be customers
of, engage in transactions with, or perform services for us in the ordinary
course of business.
If so indicated in the applicable prospectus supplement, PNC Funding and/or
PNC will authorize the underwriters or other persons acting as PNC Funding's
agents and/or PNC's agents to solicit offers by certain institutions to purchase
debt securities or warrants from PNC Funding and/or common stock, preferred
stock, depositary shares or warrants from PNC pursuant to contracts providing
for payment and delivery on a future date or dates stated in the applicable
prospectus supplement. Institutions with which such contracts may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others, but in
all cases such institutions must be approved by PNC Funding or PNC. The
obligations of any purchaser under any such contract will not be subject to any
conditions, except that (1) the purchase of the debt securities, the common
stock, the preferred stock, the depositary shares or the warrants shall not at
the time of delivery be prohibited under the laws of the jurisdiction to which
such purchaser is subject, and (2) if debt securities or common stock, preferred
stock, depositary shares or warrants are also being sold to underwriters, PNC
Funding or PNC shall have sold to such underwriters the debt securities or the
common stock or the preferred stock not sold for delayed delivery. The
underwriters and such other persons will not have any responsibility in respect
of the validity or performance of such contracts.
Following the initial distribution of an offering of securities, PNC
Capital Markets, Inc., J.J.B. Hilliard, W.L. Lyons, Inc. and other affiliates of
ours may offer and sell those securities in secondary market transactions. PNC
Capital Markets, Inc., J.J.B. Hilliard, W.L. Lyons, Inc. and other affiliates of
ours may act as a principal or agent in these transactions. This prospectus and
the applicable prospectus supplement will also be used in connection with these
transactions. Sales in any of these transactions will be made at varying prices
related to prevailing market prices and other circumstances at the time of sale.
The offer and sale of the securities by an affiliate of ours will comply
with the requirements of Rule 2720 of the Rules of Conduct of the National
Association of Securities Dealers, Inc. regarding underwriting of securities of
an affiliate. No NASD member participating in offers and sales will exercise a
transaction in the securities in a discretionary account without the prior
specific written approval of such member's customer.
Underwriters or agents and their associates may be customers of (including
borrowers from), engage in transactions with, and/or perform services for us
and/or the trustee in the ordinary course of business.
LEGAL OPINIONS
The validity of the securities will be passed upon for us by Thomas R.
Moore, Esq., Senior Counsel and Corporate Secretary of PNC, One PNC Plaza, 249
Fifth Avenue, Pittsburgh, Pennsylvania 15222. Mr. Moore beneficially owns, or
has rights to acquire, an aggregate of less than 1% of PNC's common stock. If
the securities are being distributed in an underwritten offering, the validity
of the securities will be passed upon for the underwriters by counsel identified
in the applicable prospectus supplement.
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EXPERTS
The consolidated financial statements of PNC incorporated by reference in
its Annual Report on Form 10-K for the year ended December 31, 2000 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report, which is incorporated by reference in this registration statement, and
are incorporated by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
Such financial statements are, and audited financial statements to be
included in subsequently filed documents will be, incorporated herein in
reliance upon the reports of independent auditors pertaining to such financial
statements (to the extent covered by consents filed with the Securities and
Exchange Commission) given on the authority of such firm as experts in
accounting and auditing.
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THE ISSUER
PNC FUNDING CORP
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222
U.S.A.
THE GUARANTOR
THE PNC FINANCIAL SERVICES GROUP, INC.
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222
U.S.A.
UNDERWRITERS
J.P. MORGAN SECURITIES INC.
270 Park Avenue
New York, NY 10017
U.S.A.
SALOMON SMITH BARNEY INC.
390 Greenwich Street, 4th Floor
New York, NY 10013
U.S.A.
GOLDMAN, SACHS & CO. MERRILL LYNCH, PIERCE, FENNER PNC CAPITAL MARKETS, INC.
85 Broad Street, 29th Floor & SMITH INCORPORATED One PNC Plaza
New York, NY 10004 4 World Financial Center, 249 Fifth Avenue
U.S.A. 7th Floor Pittsburgh, PA 15222
New York, NY 10080 U.S.A.
U.S.A.
PRINCIPAL PAYING AGENT, REGISTRAR AND TRUSTEE
THE CHASE MANHATTAN BANK
450 West 33rd Street
New York, New York 10001
U.S.A.
LUXEMBOURG PAYING, TRANSFER AND LISTING AGENT
DEUTSCHE BANK LUXEMBOURG S.A.
2 Boulevard Konrad Adenauer
L-1115 Luxembourg
CALCULATION AGENT
DEUTSCHE BANK AG LONDON
Winchester House
1 Great Winchester Street
London EC2N 2DB
UNITED STATES LEGAL ADVISERS
To PNC and PNC Funding To the Underwriters
Thomas R. Moore, Esq. ARNOLD & PORTER CRAVATH, SWAINE & MOORE
Senior Counsel and Thurman Arnold Building Worldwide Plaza
Corporate Secretary 555 Twelfth Street, N.W. 825 Eighth Avenue
THE PNC FINANCIAL Washington, DC 20004 New York, NY 10019
SERVICES GROUP, INC. U.S.A. U.S.A.
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222
U.S.A.
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$1,000,000,000
PNC FUNDING CORP
$600,000,000 FLOATING RATE SENIOR NOTES DUE 2004
$400,000,000 5.75% SENIOR NOTES DUE 2006
UNCONDITIONALLY GUARANTEED BY
THE PNC FINANCIAL SERVICES GROUP, INC.
PNC LOGO
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PROSPECTUS SUPPLEMENT
OCTOBER 23, 2001
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JPMORGAN
SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PNC CAPITAL MARKETS, INC.
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