December 1, 2003

Wanna Buy Some “IDS”? Today’s

Today’s WSJ contains an article about a company going public by selling “Income Deposit Securities” or “IDS.” IDS is a new dividend and interest bearing security designed to provide tax benefits to the issuer and investors. Each IDS represents one share of common stock and one portion of subordinated notes (but investors won’t own the underlying shares directly – rather a 3rd-party depository does). The IDS structure is akin to Canadian Income Trusts that are popular in Canada (but aren’t allowed in the US).

For the Volume Services America Holdings IPO, the IDS will trade on the AMEX with underlying shares of common stock trading on the Toronto Stock Exchange. Another IPO of IDS is forthcoming (from American Seafoods). The IRS has not ruled on whether the structure is kosher yet – so it is possible that Volume Services could lose the ability to deduct some, or all, of its interest payments.

More about the New NYSE Governance Standards

For members, we have posted an interview with David Martin and David Engvall on the New NYSE Governance Listing Standards.

I have received a number of inquiries as to what precisely was the NYSE’s follow-up guidance regarding transition – below is the exact text the NYSE staff emailed to listed companies:

“We have received numerous inquiries regarding 2004 disclosures required pursuant to our new corporate governance standards. We would like to clarify as follows:

· The existing audit committee and outside director requirements provided for in Section 303 of the Listed Company Manual continue to apply to listed companies pending transition to the new rules.

· If a company used the exception permitted by 303.02(D) during the preceding year, the requisite disclosure will be required in the 2004 annual meeting proxy.

· Companies have until the earlier of their first annual meeting after January 15, 2004, or October 31, 2004 to comply with the new standards, as expressed in Section 303A. Please see Section 303A of the Listed Company Manual for other transition requirements that may apply.

· Both sets of standards are currently available in the online version of the Listed Company Manual on

Section 303A contemplates disclosure as to certain matters in a company’s proxy statement, annual report to shareholders, SEC filings and the company’s corporate web site. Such disclosures encompass independence determinations and matters relating to governance documents, such as committee charters, Corporate Governance Guidelines, the Code of Business Conduct and Ethics and the CEO Certification to the NYSE. The NYSE mandated disclosures are not required in any documents that predate the applicable 2004 compliance date.

However, once the 2004 shareholder meeting is held, or by October 31, 2004, whichever is sooner, companies are expected to be in compliance with 303A and to have appropriately updated web sites with the committee charters, the Code of Business Conduct and Ethics and the Corporate Governance Guidelines.

303A.06 disclosures will be required as set forth in the SEC’s Final Rule relating to audit committees. (SEC Release No.34-47654)

We will continue to require submission of a Written Affirmation in 2004 approximately 30 days subsequent to the 2004 shareholder meeting that demonstrates compliance with 303A. The new form of Affirmation and other requirements will be distributed prior to year-end.”