Filed pursuant to Rule 424(b)(5)
Registration No. 333-83180
333-83180-03
Prospectus Supplement
March 1, 2002
(To prospectus dated February 28, 2002)
$500,000,000
BP Capital Markets p.l.c.
4.0% Guaranteed Notes Due 2005
[LOGO] bp
Payment of the principal of and interest on the notes is guaranteed by
BP p.l.c.
-----------------
The notes will bear interest at the rate of 4.0% per year. BP Capital
Markets p.l.c. will pay interest on the notes on April 29 and October 29 of
each year, beginning on October 29, 2002. The notes will mature on April 29,
2005.
Payment of the principal of and interest on the notes is guaranteed by BP
p.l.c.
Application has been made to list the notes on the Luxembourg Stock Exchange
in accordance with its rules.
-----------------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus supplement or the related prospectus. Any
representation to the contrary is a criminal offense.
Investing in these securities involves certain risks. See "Risk Factors"
beginning on page 1 of the attached prospectus.
-----------------
Per Note Total
-------- ------------
Public Offering Price /(1)/ 99.666% $498,330,000
Underwriting Discount 0.25% $ 1,250,000
Proceeds to BP Capital Markets p.l.c. (before expenses) 99.416% $497,080,000
- --------
(1) Interest on the notes will accrue from March 8, 2002.
-----------------
The underwriters expect to deliver the notes to purchasers in book-entry
form only through the facilities of The Depository Trust Company on or about
March 8, 2002.
-----------------
Joint Bookrunners
Salomon Smith Barney UBS Warburg
FOR NEW HAMPSHIRE RESIDENTS ONLY: NEITHER THE FACT THAT A REGISTRATION
STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF
THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT
THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE
OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW
HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT
MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION
IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE
HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR
GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO
MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT
ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
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TABLE OF CONTENTS
Prospectus Supplement
Page
----
DESCRIPTION OF NOTES....................................... S-5
SELECTED FINANCIAL INFORMATION............................. S-7
UNDERWRITING............................................... S-10
GENERAL INFORMATION........................................ S-12
Prospectus
ABOUT THIS PROSPECTUS...................................... i
RISK FACTORS............................................... 1
FORWARD-LOOKING STATEMENTS................................. 2
WHERE YOU CAN FIND MORE INFORMATION ABOUT US............... 2
BP p.l.c................................................... 3
DESCRIPTION OF BP DEBT ISSUERS............................. 4
RATIO OF EARNINGS TO FIXED CHARGES......................... 4
CAPITALIZATION AND INDEBTEDNESS OF BP ..................... 5
USE OF PROCEEDS............................................ 5
LEGAL OWNERSHIP............................................ 6
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES.............. 8
CLEARANCE AND SETTLEMENT................................... 18
TAX CONSIDERATIONS......................................... 22
PLAN OF DISTRIBUTION....................................... 41
VALIDITY OF SECURITIES..................................... 43
EXPERTS.................................................... 43
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES................ 44
EXPENSES................................................... 45
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You should only rely on the information contained or incorporated by
reference in this prospectus supplement and the attached prospectus. BP Capital
Markets p.l.c. ("BP Capital U.K.") and BP p.l.c. ("BP") have not, and the
underwriters have not, authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. BP Capital U.K. and BP are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement and the prospectus, as
well as information BP has previously filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference, is accurate as of the
date on the front cover of this prospectus supplement only. BP Capital U.K.'s
and BP's business, financial condition, results of operations and prospects may
have changed since that date.
The distribution of this prospectus supplement and prospectus and the
offering of the notes in certain jurisdictions may be restricted by law. This
prospectus supplement and prospectus do not constitute an offer, or an
invitation on BP Capital U.K.'s and BP's behalf or on behalf of the
underwriters or any of them, to subscribe to or purchase any of the notes, and
may not be used for or in connection with an offer or solicitation by anyone,
in any jurisdiction in which such an offer or solicitation is not authorized or
to any person to whom it is unlawful to make such an offer or solicitation. See
"Underwriting" below.
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BP Capital U.K. and BP cannot guarantee that listing will be obtained on the
Luxembourg Stock Exchange. Inquiries regarding the listing status of the notes
on the Luxembourg Stock Exchange should be directed to our Luxembourg listing
agent, Kredietbank S.A. Luxembourgeoise.
This prospectus supplement and the attached prospectus shall be used solely
for the purpose of considering a purchase of the notes. The prospectus
supplement and the 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 BP Capital U.K. and BP. BP
Capital U.K. and BP accept responsibility for the information contained in this
prospectus supplement and prospectus (including information incorporated by
reference) and confirm, having made all reasonable inquiries, that, to the best
of the knowledge and belief of BP Capital U.K. and BP, there are no other facts
the omission of which would make any statement herein and in the documents
incorporated by reference misleading in any material respect.
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DESCRIPTION OF NOTES
This section outlines the specific financial and legal terms of the notes
that are more generally described under "Description of Debt Securities and
Guarantees" beginning on page 8 of the prospectus that is attached to this
prospectus supplement. If anything described in this section is inconsistent
with the terms described under "Description of Debt Securities and Guarantees"
in the attached prospectus, the terms described below shall prevail.
. Title: 4.0% Guaranteed Notes due April 29, 2005.
. Total principal amount being issued: $500,000,000.
. Issuance date: March 8, 2002.
. Due date for principal: April 29, 2005.
. Interest rate: 4.0% per annum.
. Date interest starts accruing: March 8, 2002.
. Interest due dates: Every April 29 and October 29.
. First interest due date: October 29, 2002.
. Regular record dates for interest: Every April 14 and October 14.
. Guarantee: Payment of the principal of and interest on the notes is
guaranteed by BP. For more information about the guarantee, you should
read "Description of Debt Securities and Guarantees" beginning on page 8
of the attached prospectus.
. Ranking: The notes are unsecured and will rank equally with all of BP
Capital U.K.'s other unsecured and unsubordinated indebtedness.
. Payment of additional amounts: None.
. Form of notes: The notes will be issued as one or more global securities.
You should read "Legal Ownership--Global Securities" beginning on page 6
of the attached prospectus for more information about global securities.
. Name of depositary: The Depository Trust Company, commonly referred to as
"DTC".
. Trading through DTC, Clearstream, Luxembourg and Euroclear: Initial
settlement for the notes will be made in immediately available funds.
Secondary market trading between DTC participants will occur in the
ordinary way in accordance with DTC's rules and will be settled in
immediately available funds using DTC's Same-Day Funds Settlement System.
Secondary market trading between Clearstream Banking, societe anonyme, in
Luxembourg ("Clearstream, Luxembourg"), customers and/or Euroclear Bank
S.A./N.V. ("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. For more information about global securities held by DTC through
Clearstream, Luxembourg or Euroclear, you should read "Clearance and
Settlement" beginning on page 18 of the prospectus.
. Listing: Application has been made to list the notes on the Luxembourg
Stock Exchange in accordance with its rules.
. Redemption: The notes are not redeemable, except as described under
"Description of Debt Securities and Guarantees--Optional Tax Redemption"
on page 15 of the attached prospectus. The provisions for optional tax
redemption described therein will apply to changes in tax treatment
occurring after the issuance date. At maturity, the notes will be repaid
at par.
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. Sinking fund: There is no sinking fund.
. Trustee: BP Capital U.K. will issue the notes under an indenture with
JPMorgan Chase Bank, as trustee, to be entered into on March 8, 2002,
which is referred to on page 8 of the attached prospectus.
. Net proceeds: The net proceeds will be $497,080,000.
. Governing law and jurisdiction: The indenture, the notes and the
guarantee are governed by New York law. Any legal proceeding arising out
of or based upon the indenture, the notes or the guarantee may be
instituted in any state or federal court in the Borough of Manhattan in
New York City, New York.
BP Capital U.K.'s principal executive offices are located at Breakspear
Park, Breakspear Way, Hemel Hempstead, Herts HP2 4UL, England.
S-6
SELECTED FINANCIAL INFORMATION
The following information has been extracted or derived from the audited
financial statements of BP and its subsidiaries (the "BP Group") included
within BP's Annual Reports on Form 20-F for the relevant years, as reclassified
to conform with the accounting presentation adopted in BP's Annual Report on
Form 20-F for the year ended December 31, 2000, and from the audited financial
statements for the year ended December 31, 2001 and included in BP's Form 6-K/A
dated February 27, 2002 that has been filed with the SEC.
Years ended December 31,
----------------------------------------------------
2001 2000 1999 1998 1997 1996
------- ------- ------- ------- ------- -------
(US$ million, except per share amounts)
U.K. GAAP
Income statement data
Turnover........................................................... 175,389 161,826 101,180 83,732 108,564 102,064
Less: joint ventures............................................... (1,171) (13,764) (17,614) (15,428) (16,804) --
------- ------- ------- ------- ------- -------
Group turnover..................................................... 174,218 148,062 83,566 68,304 91,760 102,064
Total replacement cost operating profit (a)........................ 16,135 17,756 8,894 6,521 10,683 10,634
Replacement cost profit before exceptional items (b)............... 9,880 11,214 5,330 3,959 6,622 6,659
Profit for the year................................................ 8,010 11,870 5,008 3,220 5,673 7,417
Per ordinary share (c): (cents)
Profit for the year:
Basic........................................................... 35.70 54.85 25.82 16.77 29.56 38.79
Diluted......................................................... 35.48 54.48 25.68 16.70 29.41 38.63
Dividends (d)................................................... 22.00 20.50 20.00 19.75 18.00 15.50
Average number outstanding of 25 cents ordinary shares (shares
million)....................................................... 22,436 21,638 19,386 19,192 19,185 19,119
Balance sheet data
Total assets....................................................... 141,158 143,938 89,561 84,915 86,279 88,651
Net assets......................................................... 74,994 74,001 44,342 43,573 43,603 42,443
Share capital...................................................... 5,629 5,653 4,892 4,863 4,330 4,382
BP shareholders' interest.......................................... 74,367 73,416 43,281 42,501 42,503 42,130
Finance debt due after more than one year.......................... 12,327 14,772 9,644 9,641 8,853 8,954
Debt to borrowed and invested capital (e).......................... 14% 17% 18% 18% 17% 17%
Other data
Per ordinary share: (cents)
Replacement cost profit before exceptional items................... 44.03 51.82 27.48 20.62 34.51 34.82
Net cash inflow from operating activities (f)...................... 22,409 20,416 10,290 9,586 15,558 13,679
Net cash outflow from capital expenditure acquisitions
and disposals..................................................... 11,604 6,207 5,142 6,520 10,056 8,056
U.S. GAAP
Income statement data
Revenues........................................................... 174,218 148,062 83,566 68,304 91,760 102,064
Profit for the period.............................................. 4,164 10,183 4,596 2,826 5,686 6,795
Comprehensive income............................................... 2,457 7,674 3,674 2,848 4,106 7,218
Profit per ordinary share (c)(g): (cents)
Basic........................................................... 18.55 47.05 23.70 14.72 29.62 35.54
Diluted......................................................... 18.44 46.74 23.56 14.66 29.46 35.39
Profit per American Depositary Share (c)(g)(h): (cents)
Basic........................................................... 111.30 282.30 142.20 88.32 177.72 213.24
Diluted......................................................... 110.64 280.44 141.36 87.96 176.76 212.34
Balance sheet data
Total assets....................................................... 146,959 152,355 90,342 85,538 87,076 89,934
BP shareholders' interest.......................................... 62,322 65,666 37,838 37,334 37,504 37,259
Other data
Net cash used in investing activities.............................. 11,685 6,326 4,922 6,861 10,151 8,311
Net cash used in financing activities.............................. 5,853 7,852 3,332 2,161 3,449 3,239
S-7
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(a) Operating profit is a U.K. GAAP measure of trading performance. It excludes
profits and losses on the sale of businesses and fixed assets and
fundamental restructuring costs, interest expense and taxation.
BP determines operating profit on a replacement cost basis, which eliminates
the effect of inventory holding gains and losses. For the oil and gas
industry, the price of crude oil can vary significantly from period to
period; hence, the value of crude oil (and products) also varies. As a
consequence, the amount that would be charged to cost of sales on a
first-in, first-out (FIFO) basis of inventory valuation would include the
effect of oil price fluctuations on oil and products inventories. BP,
therefore, charges cost of sales with the average cost of supplies incurred
during the period rather than the historical cost of supplies on a FIFO
basis. For this purpose, inventories at the beginning and end of the period
are valued at the average cost of supplies incurred during the period rather
than at their historical cost. These valuations are made quarterly by each
business unit, based on local oil and product price indices applicable to
their specific inventory holdings, following a methodology that has been
consistently applied by BP for many years. Operating profit on the
replacement cost basis and a derivative measure--profit adjusted for
depreciation and amortization arising from the fixed asset revaluation
adjustment and goodwill consequent upon the ARCO and Burmah Castrol
acquisitions, and adjusted for special items (non-recurring charges and
credits that are not classified as exceptional under U.K. GAAP)--are used by
BP management as the primary measures of business unit trading performance.
BP management believes that these measures assist investors to assess BP's
underlying trading performance from period to period.
Replacement cost is not a U.S. GAAP measure. The major U.S. oil companies
apply the last-in, first-out (LIFO) basis of inventory valuation. The LIFO
basis is not permitted under U.K. GAAP. The LIFO basis eliminates the effect
of price fluctuations on crude oil and product inventory except where an
inventory drawdown occurs in a period. BP management believes that where
inventory volumes remain constant or increase in a period, operating profit
on the LIFO basis will not differ materially from operating profit on BP's
replacement cost basis.
Where an inventory drawdown occurs in a period, cost of sales on a LIFO
basis will be charged with the historical cost of the inventory drawn down,
whereas BP's replacement cost basis charges cost of sales at the average
cost of supplies for the period. To the extent that the historical cost on
the LIFO basis of the inventory drawn down is lower than the current cost of
supplies in the period, operating profit on the LIFO basis will be greater
than operating profit on BP's replacement cost basis. To the extent that the
historical cost on the LIFO basis of the inventory drawdown is greater than
the current cost of supplies in the period, operating profit on the LIFO
basis will be lower than operating profit on BP's replacement cost basis.
(b) Replacement cost profit before exceptional items excludes profits and
losses on the sale of businesses and fixed assets and fundamental
restructuring costs, which are defined by U.K. GAAP. This measure, and a
derivative measure--profit adjusted for depreciation and amortization
arising from the fixed asset revaluation adjustment and goodwill consequent
upon the ARCO and Burmah Castrol acquisitions, and adjusted for special
items (non-recurring charges and credits that are not classified as
exceptional under U.K. GAAP)--are used by the BP board in setting targets
for and monitoring performance within the BP Group. BP's management
believes these indicators provide the most relevant and useful measures for
investors because they most accurately reflect underlying trading
performance.
(c) On October 4, 1999, BP split (or subdivided) its ordinary share capital. As
a result, the number of ordinary shares held at the close of business on
Friday October 1, 1999 doubled and holders of American depositary shares
received a two-for-one stock split. Comparative figures for 1996 to 1998
inclusive have been changed accordingly.
(d) BP dividends per share represent historical dividends per share paid by The
British Petroleum Company, p.l.c., for 1996 to 1998 inclusive.
(e) Finance debt due after more than one year, compared with such debt plus BP
and minority shareholders' interests.
(f) The net cash inflows from operating activities are presented in accordance
with the requirements of Financial Reporting Standard No. 1 (Revised 1996)
issued by the U.K. Accounting Standards Board. For a cash flow statement
prepared on a U.S. GAAP basis, please see Item 18--Financial
Statements--Note 43 of
S-8
our Annual Report on Form 20-F for the fiscal year ended December 31, 2000,
which is incorporated by reference to this prospectus supplement.
(g) The BP Group adopted FASB Statement of Financial Accounting Standards No.
128--'Earnings per Share' (SFAS 128) for the accounting period ending
December 31, 1997. The amounts for 1996 have been changed accordingly.
(h) Effective as of January 1, 1999, the BP Group adopted Financial Reporting
Standard No. 12 'Provisions, Contingent Liabilities and Contingent Assets'.
Comparative figures for 1996 to 1998 inclusive have been changed
accordingly.
S-9
UNDERWRITING
The underwriters named below have severally agreed, subject to the terms and
conditions of the Purchase Agreement with BP Capital U.K. and BP, dated the
date of this prospectus supplement, to purchase the principal amount of notes
set forth below opposite their respective names. The underwriters are committed
to purchase all of such notes if any are purchased.
Principal
Underwriters Amount of Notes
------------ ---------------
Salomon Smith Barney Inc............................................. $ 250,000,000
UBS Warburg LLC...................................................... $ 250,000,000
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Total............................................................. $ 500,000,000
=============
The underwriters propose to offer the notes in part directly to the public
at the initial public offering price set forth on the cover page of this
prospectus supplement and in part to certain securities dealers at such price
less a concession of 0.15% of the principal amount of the notes. The
underwriters may allow, and such dealers may reallow, a concession not to
exceed 0.125% of the principal amount of the notes to certain brokers and
dealers.
The notes are a new issue of securities with no established trading market.
Application has been made to list the notes on the Luxembourg Stock Exchange in
accordance with its rules, although no assurance can be given that the notes
will be listed on the Luxembourg Stock Exchange, and if so listed, the listing
does not assure that a trading market for the notes will develop. BP Capital
U.K. and BP have been advised by the underwriters that they intend to make a
market in the notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the notes.
BP Capital U.K. and BP have agreed to indemnify the several underwriters
against certain liabilities, including liabilities under the Securities Act of
1933.
Delivery of the notes will be made against payment on or about the fifth
business day following the date of this prospectus supplement. Trades of
securities in the secondary market generally are required to settle in three
business days, referred to as T+3, unless the parties to a trade agree
otherwise. Accordingly, by virtue of the fact that the initial delivery of the
notes will not be made on a T+3 basis, investors who wish to trade the notes
before a final settlement will be required to specify an alternative settlement
cycle at the time of any such trade to prevent a failed settlement.
From time to time the underwriters engage in transactions with BP Capital
U.K. or BP in the ordinary course of business. The underwriters have performed
investment banking services for BP in the last two years and have received fees
for these services.
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934. Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the notes in the open market after
the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit reclaiming a selling concession from a syndicate
member when the notes originally sold by such syndicate member are purchased in
a syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the notes to be higher than it would otherwise be in the
absence of such transactions.
Each of the underwriters has severally represented and agreed that:
(i) it has not offered or sold and will not offer or sell any notes to
persons in the United Kingdom prior to the expiry of the period of six
months from the issue date of the notes except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purpose 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);
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(ii) it has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement to
engage in investment activity (within the meaning of Section 21 of the
Financial Services and Markets Act 2000 ("FSMA")) received by it in
connection with the issue or sale of any notes in circumstances in which
Section 21(1) of FSMA does not apply to BP Capital U.K. or BP; and
(iii) it has complied and will comply with all applicable provisions of
the FSMA with respect to anything done by it in relation to any notes in,
from or otherwise involving the United Kingdom.
Each of the underwriters has agreed not to offer or sell the notes in the
Federal Republic of Germany other than in compliance with the Securities Sales
Prospectus Act (Wertpapier-Verkaufsprospektgesetz), or any other laws
applicable in the Federal Republic of Germany governing the issue, offering and
sale of securities. This prospectus supplement and the accompanying prospectus
do not constitute a sales prospectus for purposes of the Securities Sales
Prospectus Act and no sales prospectus has been or will be published in the
Federal Republic of Germany.
The notes have not been and will not be registered under the Securities and
Exchange Law of Japan (Law No. 25 of 1948) (as amended) (the "Securities and
Exchange Law") and are subject to the Special Taxation Measures Law of Japan
(Law No. 26 of 1957) (as amended) (the "Special Taxation Measures Law"). Each
of the underwriters has severally represented and agreed that (i) it has not,
directly or indirectly, offered or sold and will not, directly or indirectly,
offer or sell, the notes in Japan or to any person resident in Japan for
Japanese securities law purposes (including any corporation or other entity
organized under the laws of Japan), except pursuant to an exemption from the
registration requirements of, and otherwise in compliance with, the Securities
and Exchange Law; and (ii) it has not, directly or indirectly, offered or sold
and will not, (a) as part of its distribution at any time and (b) otherwise
until forty days after the closing date, directly or indirectly offer or sell
the notes to any person other than a Gross Recipient. A "Gross Recipient" for
this purpose is (i) a beneficial owner that is not an individual resident of
Japan or a Japanese corporation for Japanese tax purposes, (ii) a Japanese
financial institution, designated in Article 3-2 paragraph (19) of the Cabinet
Order of December 17, 1997 (the "Cabinet Order") relating to the Special
Taxation Measures Law that will hold the notes for its own proprietary account
or (iii) an individual resident of Japan or a Japanese corporation whose
receipt of interest on the notes will be made through a payment handling agent
in Japan as defined in Article 2-2 paragraph (2) of the Cabinet Order.
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GENERAL INFORMATION
Listing and Documents Available
Application has been made to list the notes on the Luxembourg Stock Exchange
in accordance with its rules. The Memoranda and Articles of Association of BP
Capital U.K. and BP and a legal notice relating to the issuance of the notes
will be deposited prior to listing with the Chief Registrar of the District
Court in Luxembourg (Greffier en Chef du Tribunal d'Arrondissement de et a
Luxembourg), where such documents may be examined and copies obtained upon
request. Copies of the above documents together with:
. this prospectus supplement and prospectus;
. the purchase agreement and the indenture;
. BP Capital U.K.'s non-consolidated audited financial information contained
in its Annual Reports and Accounts for the years ended December 31, 1999
and December 31, 2000;
. BP's consolidated audited financial information contained in its Annual
Reports on Forms 20-F for the years ended December 31, 1999 and December
31, 2000;
. BP's non-consolidated audited balance sheets contained in its Annual
Reports and Accounts for the years ended December 31, 1999 and December
31, 2000; and
. BP's consolidated unaudited financial information contained in its Reports
on Form 6-K for the quarterly periods ended March 31, June 30 and
September 30, 2001;
. as well as all other documents incorporated by reference herein, including
future Annual Reports on Form 20-F and Reports on Form 6-K;
so long as the notes are listed on the Luxembourg Stock Exchange, will be made
available for inspection, and may be obtained free of charge, at the following
addresses:
BP Shareholders Services Kredietbank S.A. Luxembourgeoise
200 East Randolph Drive 43 Boulevard Royal
Chicago, Illinois 60601 L-2955, Luxembourg
Phone: (312) 856-6111
BP Capital U.K. does not produce consolidated financial statements or
interim financial statements. BP does not produce non-consolidated annual cash
flow or income statements or non-consolidated interim financial statements.
Kredietbank S.A. Luxembourgeoise will act as listing agent.
Luxembourg Transfer and Paying Agent
For as long as the notes are listed on the Luxembourg Stock Exchange, BP
Capital U.K. will maintain a transfer and paying agent in Luxembourg. BP
Capital U.K. appoints Kredietbank S.A. Luxembourgeoise acting out of its
corporate office in Luxembourg, or its successor, as the transfer and paying
agent. BP Capital U.K. will notify you of any change in the Luxembourg transfer
and paying agent by publication in Luxembourg.
Transfer and Payment Procedures in Luxembourg
For more information about the transfer and payment procedures that will
apply to the Luxembourg transfer and paying agent in the limited situations
when the global security is terminated and interests in it are exchanged for
physical certificates representing definitive securities as detailed on page 7
of the attached prospectus, please see "Description of Debt Securities and
Guarantees--Additional Mechanics" beginning on page 10 of the attached
prospectus where references to the trustee shall be deemed to include the
Luxembourg transfer and paying agent.
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Capitalization and Indebtedness of BP Capital U.K.
The following table shows the unaudited consolidated capitalization and
indebtedness of BP Capital U.K. as of December 31, 2001:
As of
December 31, 2001
(US$ million)
-----------------
Share capital
Authorized share capital (1) 145
Called up share capital (2). 145
Share premium account....... 181
-----
Total share capital......... 326
-----
Finance debt
Due within one year......... 1,742
Due after more than one year 1,961
-----
Total finance debt.......... 3,703
-----
Total Capitalization........ 4,029
=====
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(1) Authorized share capital comprises 99,999,990 ordinary shares, par value
(Pounds)1 per share, and 10 cumulative preference shares, par value
(Pounds)1 per share.
(2) Issued and outstanding share capital as of December 31, 2001 comprised
99,999,990 ordinary shares, par value (Pounds)1 per share.
(3) Finance debt recorded in currencies other than U.S. dollars has been
translated into U.S. dollars at the relevant exchange rates existing on
December 31, 2001.
(4) As of December 31, 2001, all of the finance debt of BP Capital U.K. had
been guaranteed by BP.
(5) Total finance debt as of December 31, 2001 reported in the above table
excluded borrowings from other BP Group companies.
(6) As of December 31, 2001, BP Capital U.K. had no material outstanding
contingent liabilities or guarantees. All of BP Capital U.K.'s debt is
unsecured.
(7) As of February 26, 2002, BP Capital U.K.'s outstanding U.S. and Euro
commercial paper, reported under finance debt due within one year in the
above table, had increased by US$ 3,347 million equivalent.
(8) Apart from the change described in note (7), there has been no material
change since December 31, 2001 in the capitalization, indebtedness or
contingent liabilities of BP Capital U.K.
(9) After giving effect to the offering of the notes, net of fees, the finance
debt due after more than one year and the total capitalization of BP and BP
Capital U.K., respectively, will each increase by US$ 497 million. Subject
to market conditions, BP Capital U.K. may issue additional debt securities
in the near term.
The capitalization and indebtedness of BP is shown on page 5 of the attached
prospectus as amended by note 9 above.
Notices
As long as the notes are issued in global form, notices to be given to
holders of the notes will be given to DTC, in accordance with its applicable
procedures from time to time.
As long as the notes are listed on the Luxembourg Stock Exchange and its
rules require, BP Capital U.K. will also give notices to holders by publication
in a daily newspaper of general circulation in Luxembourg. BP Capital U.K.
expects that newspaper to be, but it need not be, the Luxemburger Wort. If
publication in Luxembourg is not practical, BP Capital U.K. will make the
publication elsewhere in Western Europe. "Daily newspaper" means a newspaper
that is published on each day, other than a Saturday, Sunday or holiday, in
Luxembourg or, when applicable, elsewhere in Western Europe. You will be
presumed to have received these notices on the date BP Capital U.K. first
publishes them. If BP Capital U.K. is unable to give notice as described
S-13
in this paragraph because the publication of any newspaper is suspended or it
is otherwise impracticable for BP Capital U.K. to publish the notice, then BP
Capital U.K. or the trustee, acting on our instructions, will give holders
notice in another form. That alternate form of notice will be sufficient notice
to you.
Neither the failure to give any notice to a particular holder, nor any
defect in a notice given to a particular holder, will affect the sufficiency of
any notice given to another holder.
Authorization
The notes have been issued pursuant to authority granted by the board of
directors of BP Capital U.K. on March 1, 2002. The giving of the guarantee was
authorized by the exercise of the delegated authority of the Chief Financial
Officer of BP on February 15, 2002, such authority delegated to him by the
Chief Executive Officer of BP on July 2, 2001 and November 14, 2001 pursuant to
a board resolution of BP on April 20, 2001.
Material Change
As of the date of this prospectus supplement, other than as disclosed or
contemplated herein or in the documents incorporated by reference, to the best
of BP Capital U.K.'s and BP's knowledge and belief, there has been no material
adverse change in the financial position of BP on a consolidated basis since
December 31, 2001. See "Where You Can Find More Information About Us" in the
attached prospectus.
Litigation
As of the date of this prospectus supplement, other than as disclosed or
contemplated herein or in the documents incorporated by reference, to the best
of BP Capital U.K.'s and BP's knowledge and belief, BP Capital U.K. and BP are
not parties to any legal or arbitration proceedings (including any that are
pending or threatened) that may have, or have had, since December 31, 2001, a
significant effect on BP's consolidated financial position or that are material
in the context of the issuance of the notes which could jeopardize BP Capital
U.K.'s and BP's ability to discharge its obligation under the notes.
Clearance Systems
The notes have been accepted for clearance through the DTC, Euroclear and
Clearstream, Luxembourg systems with the following codes: CUSIP 05565QAA6;
Common Code 01445873; and ISIN US05565QAA67.
S-14
$6,000,000,000
BP CAPITAL MARKETS AMERICA INC.
BP CAPITAL MARKETS P.L.C.
BP CANADA FINANCE COMPANY
BP AUSTRALIA CAPITAL MARKETS LIMITED
GUARANTEED DEBT SECURITIES
Fully and unconditionally guaranteed by
BP p.l.c.
-----------------
BP Capital Markets America Inc., BP Capital Markets p.l.c., BP Canada
Finance Company and BP Australia Capital Markets Limited may use this
prospectus to offer from time to time guaranteed debt securities.
You should read this prospectus and the accompanying prospectus supplement
carefully before you invest. We may sell these securities to or through
underwriters, and also to other purchasers or through agents. The names of the
underwriters will be set forth in the accompanying prospectus supplement.
Investing in these securities involves certain risks. See "Risk Factors"
beginning on page 1.
-----------------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------------
Prospectus dated February 28, 2002.
TABLE OF CONTENTS
Page
----
ABOUT THIS PROSPECTUS........................ i
RISK FACTORS................................. 1
FORWARD-LOOKING STATEMENTS................... 2
WHERE YOU CAN FIND MORE INFORMATION ABOUT US. 2
BP p.l.c..................................... 3
DESCRIPTION OF BP DEBT ISSUERS............... 4
RATIO OF EARNINGS TO FIXED CHARGES........... 4
CAPITALIZATION AND INDEBTEDNESS OF BP........ 5
USE OF PROCEEDS.............................. 5
LEGAL OWNERSHIP.............................. 6
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES 8
CLEARANCE AND SETTLEMENT..................... 18
TAX CONSIDERATIONS........................... 22
PLAN OF DISTRIBUTION......................... 41
VALIDITY OF SECURITIES....................... 43
EXPERTS...................................... 43
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES.. 44
EXPENSES..................................... 45
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
U.S. Securities and Exchange Commission, or the SEC, utilizing a shelf
registration process. Under this shelf process, we may sell the securities
described in this prospectus in one or more offerings up to a total dollar
amount of $6,000,000,000. 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 those securities and their 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 under the heading "Where You
Can Find More Information About Us".
In this prospectus, the terms "we," "our" and "us" refer to BP p.l.c., BP
Capital Markets America Inc., BP Capital Markets p.l.c., BP Canada Finance
Company and BP Australia Capital Markets Limited; "BP" refers to BP p.l.c.; the
"BP Group" refers to BP and its subsidiaries; and "BP Debt Issuers" refers to
BP Capital Markets America Inc., BP Capital Markets p.l.c., BP Canada Finance
Company and BP Australia Capital Markets Limited, collectively, each a "BP Debt
Issuer". Each of the BP Debt Issuers may be the issuer in an offering of debt
securities guaranteed by BP.
i
RISK FACTORS
Investing in the securities offered using this prospectus involves risk. You
should consider carefully the risks described below, together with the risks
described in the documents incorporated by reference into this prospectus and
any risk factors included in the prospectus supplement, before you decide to
buy our securities. If any of these risks actually occur, our business,
financial condition and results of operations could suffer, and the trading
price and liquidity of the securities offered using this prospectus could
decline, in which case you may lose all or part of your investment.
Risks Relating to BP's Business
There is strong competition, both within the oil industry and with other
industries, in supplying the fuel needs of commerce, industry and the home.
The oil industry is particularly subject to regulation and intervention by
governments throughout the world in such matters as the award of exploration
and production interests, the imposition of specific drilling obligations,
environmental protection controls, control over the development and
decommissioning of a field (including restrictions on production) and,
possibly, nationalization, expropriation or cancellation of contract rights.
The oil industry is also subject to the payment of royalties and taxation,
which tend to be high compared with those payable in respect of other
commercial activities.
Exploration and production require high levels of investment and have
particular economic risks and opportunities. They are subject to natural
hazards and other uncertainties, including those relating to the physical
characteristics of an oil or natural gas field.
Oil prices are subject to international supply and demand. Political
developments (especially in the Middle East) and the outcome of meetings of
OPEC can particularly affect world oil supply and oil prices.
Oil products marketing can be affected by intense competition.
Refining profitability can be volatile with both oversupply and periodic
supply tightness in various regional markets.
Crude oil prices are generally set in dollars while sales of refined
products may be in a variety of currencies. Fluctuation in exchange rates can
therefore give rise to foreign exchange exposures.
Sectors of the chemicals industry are also subject to fluctuations in supply
and demand within the chemicals market, with consequent effect on prices and
profitability, and to governmental regulation and intervention in such matters
as safety and environmental controls.
In addition to the adverse effect on revenues, margins and profitability
from any future fall in oil and natural gas prices, a prolonged period of low
prices or other indicators would lead to a review for impairment of the BP
Group's oil and natural gas properties. This review would reflect management's
view of long-term oil and natural gas prices. Such a review could result in a
charge for impairment which could have a significant effect on the BP Group's
results of operations in the period in which it occurs.
1
FORWARD-LOOKING STATEMENTS
This prospectus, including documents incorporated by reference, and the
related prospectus supplement may contain statements regarding our assumptions,
projections, expectations, intentions or beliefs about future events. These
statements are intended as "Forward-Looking Statements" under the Private
Securities Litigation Reform Act of 1995. These statements may generally, but
not always, be identified by the use of words such as 'anticipates', 'should',
'expects', 'estimates', 'believes' or similar expressions. In particular,
forward-looking statements include (i) certain statements with regard to
management aims and objectives, planned expansion, investment or other
projects, expected or targeted production volume, capacity or rate, the date or
period in which production is scheduled or expected to come on stream or a
project or action is scheduled or expected to be completed, (ii) the statements
with respect to the BP Group's ratio of net debt to net debt plus equity,
dividend policy, the manner in which BP uses cash surpluses, the target to
reduce the combined cost structure of the BP Group, return on average capital
employed, production targets, targeted performance improvements and effect on
pre-tax results, and levels of annual investment and (iii) the statements with
regard to trends in the trading environment, oil and gas prices, refining,
marketing and chemicals margins, inventory and product stock levels, supply
capacity, profitability, results of operations, liquidity or financial
position. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on circumstances that will
occur in the future. There are a number of factors that could cause actual
results and developments to differ materially from those expressed or implied
by these forward-looking statements, including:
. Future levels of industry product supply, demand and pricing;
. Political stability and economic growth in relevant areas of the world;
. Development and use of new technology and successful partnering;
. The actions of competitors;
. Natural disasters and other changes in business conditions;
. Wars and acts of terrorism or sabotage; and
. Other factors discussed under "Risk Factors" and elsewhere in this
document.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
BP files annual reports and other reports and information with the
Securities and Exchange Commission (the "SEC"). You may read and copy any
document BP files at the SEC's public reference rooms in Washington, D.C. and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. In addition, BP's SEC filings are
available to the public at the SEC's web site at http://www.sec.gov.
BP's American depositary shares are listed on the New York, Chicago and
Pacific stock exchanges. BP's ordinary shares are admitted to trading on the
London Stock Exchange plc and listed in France, Germany, Japan and Switzerland.
You can consult reports and other information about BP that it filed pursuant
to the rules of the London Stock Exchange and the New York Stock Exchange at
such exchanges.
The SEC allows BP to "incorporate by reference" into this prospectus the
information in documents filed with the SEC. This means that BP can disclose
important information to you by referring you to those documents. Each document
incorporated by reference is current only as of the date of such document, and
the incorporation by reference of such documents shall not create any
implication that there has been no change in our affairs since the date thereof
or that the information contained therein is current as of any time subsequent
to its date. The information incorporated by reference is considered to be a
part of this prospectus and should be read with the same care. When BP updates
the information contained in documents that have been incorporated by reference
by making future filings with the SEC, the information incorporated by
reference in this prospectus
2
is considered to be automatically updated and superseded. In other words, in
the case of a conflict or inconsistency between information contained in this
prospectus and information incorporated by reference into this prospectus, you
should rely on the information contained in the document that was filed later.
BP incorporates by reference the documents listed below and any documents BP
files with the SEC in the future under Section 13(a), 13(c), 14, or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") until the offerings
made under this prospectus are completed:
. Annual Report on Form 20-F for the year ended December 31, 2000.
. Reports on Form 6-K filed on May 24, 2001, August 17, 2001, November 21,
2001 and February 19, 2002 and the Report on Form 6-K/A filed on February
27, 2002.
Furthermore, BP incorporates by reference any reports on Form 6-K furnished
to the SEC by BP pursuant to the Exchange Act that indicate on their cover page
that they are incorporated by reference in this prospectus after the date of
this prospectus and before the date that any offering of the securities by
means of this prospectus is terminated.
The Annual Report on Form 20-F of BP contains a summary description of BP's
business and audited consolidated financial statements with a report by our
independent auditors. These financial statements are prepared in accordance
with generally accepted accounting principles applicable in the United Kingdom.
We refer to these accounting principles as U.K. GAAP in this prospectus. The
Annual Report on Form 20-F of BP also presents the effects of the differences
on our audited consolidated financial statements between U.K. GAAP and
generally accepted accounting principles applicable in the United States. We
refer to the latter accounting principles as U.S. GAAP in this prospectus.
You may request a copy of these filings, other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing,
at no cost, by writing to or telephoning BP at the following address:
BP p.l.c.
Britannic House, 1 Finsbury Circus
London EC2M 7BA, England
(011) 44-20-7496-4000
You should rely only on the information that we incorporate by reference or
provide in this prospectus or the prospectus supplement. 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 in this prospectus or the prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
BP p.l.c.
BP was created on December 31, 1998 by the merger of Amoco Corporation of
the United States and The British Petroleum Company p.l.c. of the U.K Following
this merger, Amoco Corporation became a wholly-owned subsidiary of The British
Petroleum Company p.l.c. and was renamed BP Amoco Corporation, and The British
Petroleum Company p.l.c. was renamed BP Amoco p.l.c. Amoco Corporation was
incorporated in Indiana, USA, in 1889 and The British Petroleum Company p.l.c.
was incorporated in 1909 in England. On April 14, 2000, BP acquired the
Atlantic Richfield Company and on July 7, 2000, BP completed its successful
tender offer for Burmah Castrol plc of England. To signify the single entity
that has successfully been created through these combinations, the name of the
company was changed to BP p.l.c. with effect from May 1, 2001.
3
DESCRIPTION OF BP DEBT ISSUERS
Financial Statements And Issuer Identity
We do not present separate financial statements of the BP Debt Issuers in
this prospectus because management has determined that they would not be
material to investors. BP will fully and unconditionally guarantee the
guaranteed debt securities issued by the BP Debt Issuers as to payment of
principal, premium, if any, interest and any other amounts due.
BP will determine the identity of an issuer relating to a particular series
of debt securities in light of considerations related to the funding needs of
BP and its consolidated subsidiaries. These include:
. the anticipated use of proceeds;
. related funding requirements of BP and its consolidated subsidiaries; and
. relevant tax considerations.
BP Capital Markets America Inc.
BP Capital Markets America Inc. ("BP Capital America") is a wholly-owned
indirect subsidiary of BP and was incorporated under the laws of Delaware on
February 15, 2002. BP Capital America is a financing vehicle for the BP Group
and issues debt securities on behalf of the BP Group. BP Capital America will
lend substantially all proceeds of its borrowings to the BP Group.
BP Capital Markets p.l.c.
BP Capital Markets p.l.c. ("BP Capital U.K.") is a wholly-owned indirect
subsidiary of BP and was incorporated under the laws of England and Wales on
December 14, 1976. BP Capital U.K. is a financing vehicle for the BP Group and
issues debt securities and commercial paper on behalf of the BP Group. BP
Capital U.K. will lend substantially all proceeds of its borrowings to the BP
Group.
BP Canada Finance Company
BP Canada Finance Company ("BP Canada") is a wholly-owned indirect
subsidiary of BP and was incorporated under the laws of Nova Scotia on February
18, 2002. BP Canada is a financing vehicle for the BP Group and issues debt
securities on behalf of the BP Group. BP Canada will lend substantially all
proceeds of its borrowings to the BP Group.
BP Australia Capital Markets Limited
BP Australia Capital Markets Limited ("BP Australia") is a wholly-owned
indirect subsidiary of BP and was incorporated in the Commonwealth of Australia
on December 18, 1985. BP Australia is a financing vehicle for the BP Group and
issues debt securities and commercial paper on behalf of the BP Group. BP
Australia will lend substantially all proceeds of its borrowings to the BP
Group.
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
Nine months ended
September 30, Years ended December 31,
----------------- ------------------------
2001 2000 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
For the BP Group(1).................................. 10.3 11.5 9.7 5.7 4.3 7.9 7.8
For the BP Group adjusted to accord with U.S. GAAP(2) 9.4 11.3 9.2 5.6 4.1 7.6 7.8
- --------
Fixed charges for both computations consist of interest (including capitalized
interest) on all indebtedness, amortization of debt discount and expense and
that portion of rental expense representative of the interest factor.
(1) Earnings consist of profit before taxation, after eliminating the BP
Group's share of undistributed income of associated undertakings, plus
fixed charges (excluding capitalized interest).
(2) Earnings consist of the earnings available for payment of fixed charges as
determined for the BP Group, in accordance with U.K. GAAP, after taking
account of adjustments to profit before taxation to accordance with U.S.
GAAP.
(3) As of December 31, 2001, the ratio of earnings to fixed charges for the BP
Group, in accordance with U.K. GAAP, was 8.3.
4
CAPITALIZATION AND INDEBTEDNESS OF BP
The following table shows the unaudited consolidated capitalization and
indebtedness of the BP Group, extracted from the Annual Accounts as of December
31, 2001:
As of December 31,
2001
(US$ million)
-------------
Share capital
Authorized share capital (1). 9,021
Called up share capital (2,3) 5,629
Share premium................ 3,590
Merger reserve............... 26,983
Capital redemption reserve... 424
Other reserves............... 233
------
Total share capital.......... 36,859
======
Finance debt (4-7)
Due within one year.......... 9,090
Due after more than one year. 12,327
------
Total finance debt........... 21,417
------
Total Capitalization (8)..... 58,276
======
- --------
(1) Authorized share capital comprises 36 billion ordinary shares, par value
US$0.25 per share, and 12,750,000 cumulative preference shares, par value
(Pounds)1 per share.
(2) Issued and outstanding share capital as of December 31, 2001 comprised
22,432,076,754 ordinary shares, par value US$0.25 per share, and 12,706,252
preference shares, par value (Pounds)1 per share.
(3) Issued and outstanding share capital as of February 15, 2002 comprised
22,440,558,599 ordinary shares, par value US$0.25 per share, and 12,706,252
preference shares, par value (Pounds)1 per share.
(4) Finance debt recorded in currencies other than U.S. dollars has been
translated into U.S. dollars at the relevant exchange rates existing on
December 31, 2001.
(5) Obligations under finance leases are included in the above table.
(6) As of December 31, 2001, BP had outstanding guarantees totaling US$ 19,900
million, of which US$ 19,843 million related to guarantees in respect of
borrowings by its subsidiary undertakings. Thus 93% of the finance debt had
been guaranteed by BP. BP has no material outstanding contingent
liabilities. All of BP's debt is unsecured.
(7) As of February 15, 2002, BP's outstanding U.S. and Euro commercial paper,
reported under Finance debt due within one year in the above table, had
increased by US$ 2,795 million equivalent.
(8) Apart from the changes described in notes (3) and (7) above, there has been
no material change since December 31, 2001 in the consolidated
capitalization, indebtedness or contingent liabilities of BP.
USE OF PROCEEDS
Unless otherwise indicated in an accompanying prospectus supplement, the net
proceeds from the sale of securities will be used for general corporate
purposes. These include working capital for BP or other companies in the BP
Group and the repayment of existing borrowings of BP and its subsidiaries.
5
LEGAL OWNERSHIP
Street Name and Other Indirect Holders
We generally will not recognize investors who hold securities in accounts at
banks or brokers as legal holders of securities. When we refer to the holders
of securities, we mean only the actual legal and (if applicable) record holder
of those securities. Holding securities in accounts at banks or brokers is
called holding in street name. If you hold securities in street name, we will
recognize only the bank or broker or the financial institution the bank or
broker uses to hold its securities. These intermediary banks, brokers and other
financial institutions pass along principal, interest and other payments on the
securities, either because they agree to do so in their customer agreements or
because they are legally required. If you hold securities in street name, you
should check with your own institution to find out:
. how it handles securities payments and notices;
. whether it imposes fees or charges;
. how it would handle voting if it were ever required to vote;
. whether and how you can instruct it to send you securities registered in
your own name so you can be a direct holder as described below; and
. how it would pursue rights under the securities if there were a default or
other event triggering the need for holders to act to protect their
interests.
Direct Holders
Our obligations, as well as the obligations of the trustee and those of any
third parties employed by us or the trustee, under the securities run only to
persons who are registered as holders of securities. As noted above, we do not
have obligations to you if you hold in street name or other indirect means,
either because you choose to hold securities in that manner or because the
securities are issued in the form of global securities as described below. For
example, once we make payment to the registered holder, we have no further
responsibility for the payment even if that holder is legally required to pass
the payment along to you as a street name customer but does not do so.
Global Securities
What is a Global Security?
A global security is a special type of indirectly held security, as
described above under "Street Name and Other Indirect Holders". If we choose to
issue securities in the form of global securities, the ultimate beneficial
owners can only be indirect holders.
We require that the securities included in the global security not be
transferred to the name of any other direct holder unless the special
circumstances described below occur. The financial institution that acts as the
sole direct holder of the global security is called the depositary. Any person
wishing to own a security must do so indirectly by virtue of an account with a
broker, bank or other financial institution that in turn has an account with
the depositary. The prospectus supplement relating to an offering of a series
of securities will indicate whether the series will be issued only in the form
of global securities.
Special Investor Considerations for Global Securities
As an indirect holder, an investor's rights relating to a global security
will be governed by the account rules of the investor's financial institution
and of the depositary, as well as general laws relating to securities
transfers. We do not recognize this type of investor as a holder of securities
and instead deal only with the depositary that holds the global security.
6
If you are an investor in securities that are issued only in the form of
global securities, you should be aware that:
. You cannot get securities registered in your own name.
. You cannot receive physical certificates for your interest in the
securities.
. You will be a street name holder and must look to your own bank or broker
for payments on the securities and protection of your legal rights
relating to the securities, as explained earlier under "Street Name and
Other Indirect Holders".
. You may not be able to sell interests in the securities to some insurance
companies and other institutions that are required by law to own their
securities in the form of physical certificates.
. The depositary's policies will govern payments, transfers, exchange and
other matters relating to your interest in the global security. We and the
trustee have no responsibility for any aspect of the depositary's actions
or for its records of ownership interests in the global security. We and
the trustee also do not supervise the depositary in any way.
. The depositary will require that interests in a global security be
purchased or sold within its system using same-day funds.
Special Situations When the Global Security Will Be Terminated
In a few special situations described below, the global security will
terminate and interests in it will be exchanged for physical certificates
representing securities. After that exchange, the choice of whether to hold
securities directly or in street name will be up to the investor. Investors
must consult their own bank or brokers to find out how to have their interests
in securities transferred to their own name so that they will be direct
holders. The rights of street name investors and direct holders in the
securities have been previously described in the subsections entitled "--Street
Name and Other Indirect Holders" and "--Direct Holders".
The special situations for termination of a global security are:
. When the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary.
. When an event of default on the securities has occurred and has not been
cured. Defaults on debt securities are discussed below under "Description
of Debt Securities and Guarantees--Default and Related Matters--Events of
Default".
The prospectus supplement may also list additional situations for
terminating a global security that would apply only to the particular series of
securities covered by the prospectus supplement. When a global security
terminates, the depositary, and not we or the trustee, is responsible for
deciding the names of the institutions that will be the initial direct holders.
In the remainder of this description "you" means direct holders and not
street name or other indirect holders of securities. Indirect holders should
read the previous subsection entitled "Street Name and Other Indirect
Holders".
7
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
Each of the BP Debt Issuers may issue guaranteed debt securities using this
prospectus. As required by U.S. federal law for all bonds and notes of
companies that are publicly offered, the debt securities are governed by a
document called the indenture. Each of the BP Debt Issuers will enter into an
indenture with JPMorgan Chase Bank.
The trustee under each of the indentures has two main roles:
. first, it can enforce your rights against us if we default. There are some
limitations on the extent to which the trustee acts on your behalf,
described under "Default and Related Matters--Events of Default--Remedies
If an Event of Default Occurs" below; and
. second, the trustee performs administrative duties for us, such as sending
you interest payments, transferring your debt securities to a new buyer if
you sell and sending you notices.
BP acts as the guarantor of the guaranteed debt securities issued under the
BP Debt Issuers' indentures. The guarantees are described under "Guarantees"
below.
The indentures and their associated documents contain the full legal text
governing the matters described in this section. The indentures, the debt
securities and the guarantees are governed by New York law. The indentures are
exhibits to our registration statement. See "Where You Can Find More
Information About Us" for information on how to obtain a copy.
This section summarizes the material provisions of the indentures, which are
substantially identical to each other, the debt securities and the guarantees.
However, because it is a summary, it does not describe every aspect of the
indentures, the debt securities or the guarantees. This summary is subject to
and qualified in its entirety by reference to all the provisions of the
indentures, including some of the terms used in the indentures. We describe the
meaning for only the more important terms. We also include references in
parentheses to some sections of the indentures. Whenever we refer to particular
sections or defined terms of the indentures in this prospectus or in the
prospectus supplement, those sections or defined terms are incorporated by
reference herein or in the prospectus supplement. This summary also is subject
to and qualified by reference to the description of the particular terms of
your series described in the prospectus supplement.
The BP Debt Issuers may each issue as many distinct series of debt
securities under its respective indenture as it wishes. This section summarizes
all material terms of the debt securities that are common to all series, unless
otherwise indicated in the prospectus supplement relating to a particular
series.
We may issue the debt securities as original issue discount securities,
which are debt securities that are offered and sold at a substantial discount
to their stated principal amount. (Section 101) Special U.S. federal income
tax, accounting and other considerations may apply to original issue discount
securities. These considerations will be described in the prospectus supplement
relating to any original issue discount securities that may be issued. The debt
securities may also be issued as indexed securities or securities denominated
in foreign currencies or currency units, as described in more detail in the
prospectus supplement relating to any such debt securities.
In addition, the specific financial, legal and other terms particular to a
series of debt securities are described in the prospectus supplement and the
pricing agreement relating to the series. Those terms may vary from the terms
described here. Accordingly, this summary also is subject to and qualified by
reference to the description of the terms of the series described in the
prospectus supplement.
The prospectus supplement relating to a series of debt securities will
describe the following terms of the series:
. which of the BP Debt Issuers is the issuer of the debt securities;
. the title of the series of debt securities;
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. any limit on the aggregate principal amount of the series of debt
securities;
. any stock exchange on which we will list the series of debt securities;
. the date or dates on which we will pay the principal of the series of debt
securities;
. the rate or rates, which may be fixed or variable, per annum at which the
series of debt securities will bear interest, if any, and the date or
dates from which that interest, if any, will accrue;
. the dates on which interest, if any, on the series of debt securities will
be payable and the regular record dates for the interest payment dates;
. any mandatory or optional sinking funds or analogous provisions or
provisions for redemption at the option of the holder;
. the date, if any, after which and the price or prices at which the series
of debt securities may, in accordance with any optional or mandatory
redemption provisions that are not described in this prospectus, be
redeemed and the other detailed terms and provisions of those optional or
mandatory redemption provisions, if any;
. the denominations in which the series of debt securities will be issuable
if other than denominations of $1,000 and any integral multiple of $1,000;
. the currency of payment of principal, premium, if any, and interest on the
series of debt securities if other than the currency of the United States
of America and the manner of determining the equivalent amount in the
currency of the United States of America;
. any index used to determine the amount of payment of principal of,
premium, if any, and interest on the series of debt securities;
. the applicability of the provisions described later under
"Covenants--Defeasance and Discharge";
. whether we will be required to pay additional amounts for withholding
taxes or other governmental charges and, if applicable, a related right to
an optional tax redemption for such a series;
. whether the series of debt securities will be issuable in whole or part in
the form of a global security as described under "Legal Ownership--Global
Securities", and the depositary or its nominee with respect to the series
of debt securities, and any special circumstances under which the global
security may be registered for transfer or exchange in the name of a
person other than the depositary or its nominee; and
. any other special features of the series of debt securities.
Unless otherwise stated in the prospectus supplement, the debt securities
will be issued only in fully registered form without interest coupons.
Guarantees
BP will fully and unconditionally guarantee the payment of the principal of,
premium, if any, and interest on the guaranteed debt securities, including
certain additional amounts which may be payable under the guarantees, as
described under "--Payment of Additional Amounts". BP guarantees the payment of
such amounts when such amounts become due and payable, whether at the stated
maturity of the debt securities, by declaration or acceleration, call for
redemption or otherwise.
Overview of Remainder of This Description
The remainder of this description summarizes:
. Additional mechanics relevant to the debt securities under normal
circumstances, such as how you transfer ownership and where we make
payments.
. Your rights under several special situations, such as if we merge with
another company or if we want to change a term of the debt securities.
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. Your rights to receive payment of additional amounts due to changes in
U.K., Canada and Australia tax withholding or deduction requirements.
. Your rights if we default or experience other financial difficulties.
. Our relationship with the trustee.
Additional Mechanics
Exchange and Transfer
You may have your debt securities broken into more debt securities of
smaller denominations or combined into fewer debt securities of larger
denominations, as long as the total principal amount is not changed.
(Section 305) This is called an exchange.
You may exchange or transfer registered debt securities at the office of the
trustee. The trustee acts as our agent for registering debt securities in the
names of holders and transferring registered debt securities. We may change
this appointment to another entity or perform the service ourselves. The entity
performing the role of maintaining the list of registered holders is called the
security registrar. It will also register transfers of the registered debt
securities. (Section 305)
You will not be required to pay a service charge to transfer or exchange
debt securities, but you may be required to pay for any tax or other
governmental charge associated with the exchange or transfer. The transfer or
exchange of a registered debt security will only be made if the security
registrar is satisfied with your proof of ownership.
If we have designated additional transfer agents, they are named in the
prospectus supplement. We may cancel the designation of any particular transfer
agent. We may also approve a change in the office through which any transfer
agent acts. (Section 1002)
If the debt securities are redeemable and we redeem less than all of the
debt securities of a particular series, we may block the transfer or exchange
of debt securities during a specified period of time in order to freeze the
list of holders to prepare the mailing. The period begins 15 days before the
day we mail the notice of redemption and ends on the day of that mailing. We
may also refuse to register transfers or exchanges of debt securities selected
for redemption. However, we will continue to permit transfers and exchanges of
the unredeemed portion of any security being partially redeemed. (Section 305)
Payment and Paying Agents
We will pay interest to you if you are a direct holder listed in the
trustee's records at the close of business on a particular day in advance of
each due date for interest, even if you no longer own the security on the
interest due date. That particular day, usually about two weeks in advance of
the interest due date, is called the regular record date and is stated in the
prospectus supplement. (Section 307)
We will pay interest, principal and any other money due on the registered
debt securities at the corporate trust office of the trustee in New York City.
That office is currently located at JPMorgan Chase Bank, 450 West 33rd Street,
New York, New York 10001. You must make arrangements to have your payments
picked up at or wired from that office. We may also choose to pay interest by
mailing checks. Interest on global securities will be paid to the holder
thereof by wire transfer of same-day funds.
Holders buying and selling debt securities must work out between them how to
compensate for the fact that we will pay all the interest for an interest
period to the one who is the registered holder on the regular record date. The
most common manner is to adjust the sales price of the debt securities to pro
rate interest fairly between buyer and seller. This pro rated interest amount
is called accrued interest.
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Street name and other indirect holders should consult their banks or brokers
for information on how they will receive payments.
We may also arrange for additional payment offices, and may cancel or change
these offices, including our use of the trustee's corporate trust office. These
offices are called paying agents. We may also choose to act as our own paying
agent. We must notify you through the trustee of changes in the paying agents
for any particular series of debt securities. (Section 1002)
Notices
We and the trustee will send notices only to direct holders, using their
addresses as listed in the trustee's records. (Section 106)
Regardless of who acts as paying agent, all money that we pay to a paying
agent that remains unclaimed at the end of two years after the amount is due to
direct holders will be repaid to us. After that two-year period, you may look
only to us for payment and not to the trustee, any other paying agent or anyone
else. (Section 1006)
Special Situations
Mergers and Similar Events
We are generally permitted to consolidate or merge with another company or
firm. We are also permitted to sell or lease substantially all of our assets to
another corporation or other entity or to buy or lease substantially all of the
assets of another corporation or other entity. No vote by holders of debt
securities approving any of these actions is required, unless as part of the
transaction we make changes to the indenture requiring your approval, as
described below under "--Modification and Waiver". We may take these actions as
part of a transaction involving outside third parties or as part of an internal
corporate reorganization. We may take these actions even if they result in:
. a lower credit rating being assigned to the debt securities; or
. additional amounts becoming payable in respect of U.K., Canadian or
Australian withholding tax, and the debt securities thus being subject to
redemption at our option, as described below under "--Optional Tax
Redemption".
We have no obligation under the indenture to seek to avoid these results, or
any other legal or financial effects that are disadvantageous to you, in
connection with a merger, consolidation or sale or lease of assets that is
permitted under the indenture. However, we may not take any of these actions
unless all the following conditions are met:
. Where a BP Debt Issuer or BP, as applicable, merges out of existence or
sells or leases substantially all of its assets, the other entity must
assume its obligations on the debt securities or the guarantees. Such
other entity must be organized under the laws of such BP entity's
jurisdiction or a political subdivision thereof.
. The merger, sale or lease of assets or other transaction must not cause a
default on the debt securities, and we must not already be in default. For
purposes of this no-default test, a default would include an event of
default that has occurred and not been cured, as described below under
"Default and Related Matters--Events of Default--What is An Event of
Default?" A default for this purpose would also include any event that
would be an event of default if the requirements for giving us default
notice or our default having to exist for a specific period of time were
disregarded.
. It is possible that the merger, sale or lease of assets or other
transaction would cause some of our property to become subject to a
mortgage, security interest, lien or other legal mechanism giving lenders
preferential rights in that property over other lenders or over our
general creditors if we fail to pay them back.
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It is possible that the U.S. Internal Revenue Service may deem a merger or
other similar transaction to cause an exchange for U.S. federal income tax
purposes of debt securities for new securities by the holders of the debt
securities. This could result in the recognition of taxable gain or loss for
U.S. federal income tax purposes and possible other adverse tax consequences.
Modification and Waiver
There are three types of changes we can make to the indentures and the debt
securities.
Changes Requiring Your Approval. First, there are changes that cannot be
made to your debt securities without your specific approval. We must obtain
your specified approval in order to:
. change the stated maturity of the principal or interest on a debt security;
. reduce any amounts due on a debt security;
. reduce the amount of principal payable upon acceleration of the maturity
of a debt security following a default;
. change the place or currency of payment on a debt security;
. impair your right to sue for payment;
. reduce the percentage of holders of debt securities whose consent is
needed to modify or amend the indentures;
. reduce the percentage of holders of debt securities whose consent is
needed to waive compliance with various provisions of the indentures or to
waive various defaults;
. modify any other aspect of the provisions dealing with modification and
waiver of the indentures; and
. change the obligations of BP to pay any principal, premium or interest
under the guarantees. (Section 902)
Changes Requiring a Majority Vote. The second type of change to the
indentures and the debt securities is the kind that requires a vote in favor by
holders of debt securities owning a majority of the principal amount of the
particular series affected. Most changes fall into this category, except for
clarifying changes and other changes that would not adversely affect holders of
the debt securities in any material respect. The same vote would be required
for us to obtain a waiver of all or part of the covenants described below, or a
waiver of a past default. However, we cannot obtain a waiver of a payment
default or any other aspect of the indentures or the debt securities listed in
the first category described previously under "Changes Requiring Your Approval"
unless we obtain your individual consent to the waiver. (Section 513)
Changes Not Requiring Approval. The third type of change does not require
any vote by holders of debt securities. This type is limited to clarifications
and other changes that would not adversely affect holders of the debt
securities in any material respect. (Section 901)
Further Details Concerning Voting. When taking a vote, we will use the
following rules to decide how much principal amount to attribute to a security:
. For original issue discount securities, we will use the principal amount
that would be due and payable on the voting date if the maturity of the
debt securities were accelerated to that date because of a default.
. For debt securities whose principal amount is not known (for example,
because it is based on an index), we will use a special rule for that
security described in the prospectus supplement.
. For debt securities denominated in one or more foreign currencies or
currency units, we will use the U.S. dollar equivalent as of the date of
original issuance.
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. Debt securities will not be considered outstanding, and therefore not
eligible to vote, if we have deposited or set aside in trust for you money
for their payment or redemption. Debt securities will also not be eligible
to vote if they have been fully defeased as described later under
"Covenants--Defeasance and Discharge". (Section 101)
. We will generally be entitled to set any day as a record date for the
purpose of determining the holders of outstanding debt securities that are
entitled to vote or take other action under the indenture. If we set a
record date for a vote or other action to be taken by holders of a
particular series, that vote or action may be taken only by persons who
are holders of outstanding debt securities of that series on the record
date and must be taken within 90 days following the record date or another
period that we may specify (or as the trustee may specify, if it set the
record date). We may shorten or lengthen (but not beyond 90 days) this
period from time to time. (Sections 501, 502, 512, 513 and 902)
Street name and other indirect holders should consult their banks or brokers
for information on how approval may be granted or denied if we seek to change
the indenture or the debt securities or request a waiver.
Redemption and Repayment
Unless otherwise indicated in the prospectus supplement, your debt security
will not be entitled to the benefit of any sinking fund--that is, we will not
deposit money on a regular basis into any separate custodial account to repay
your debt securities. In addition, we will not be entitled to redeem your debt
security before its stated maturity unless the prospectus supplement specifies
a redemption commencement date. You will not be entitled to require us to buy
your debt security from you, before its stated maturity, unless the related
prospectus supplement specifies one or more repayment dates.
If the prospectus supplement specifies a redemption commencement date or a
repayment date, it will also specify one or more redemption prices or repayment
prices, which may be expressed as a percentage of the principal amount of your
debt security or by reference to one or more formulae used to determine the
redemption price(s). It may also specify one or more redemption periods during
which the redemption prices relating to a redemption of debt securities during
those periods will apply.
If the prospectus supplement specifies a redemption commencement date, we
may redeem your debt security at our option at any time on or after that date.
If we redeem your debt security, we will do so at the specified redemption
price, together with interest accrued to the redemption date. If different
prices are specified for different redemption periods, the price we pay will be
the price that applies to the redemption period during which your debt security
is redeemed.
If the prospectus supplement specifies a repayment date, your debt security
will be repayable by us at your option on the specified repayment date(s) at
the specified repayment price(s), together with interest accrued to the
repayment date.
In the event that we exercise an option to redeem any debt security, we will
give written notice of the principal amount of the debt security to be redeemed
to the trustee at least 45 days before the applicable redemption date and to
the holder not less than 30 days nor more than 60 days before the applicable
redemption date. We will give the notice in the manner described above under
"Additional Mechanics--Notices".
If a debt security represented by a global security is subject to repayment
at the holder's option, the depositary or its nominee, as the holder, will be
the only person that can exercise the right to repayment. Any indirect holders
who own beneficial interests in the global security and wish to exercise a
repayment right must give proper and timely instructions to their banks or
brokers through which they hold their interests, requesting that they notify
the depositary to exercise the repayment right on their behalf. Different firms
have different deadlines for accepting instructions from their customers, and
you should take care to act promptly enough to ensure that your request is
given effect by the depositary before the applicable deadline for exercise.
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Street name and other indirect holders should contact their banks or brokers
for information about how to exercise a repayment right in a timely manner.
We or our affiliates may purchase debt securities from investors who are
willing to sell from time to time, either in the open market at prevailing
prices or in private transactions at negotiated prices. Debt securities that we
or they purchase may, in our discretion, be held, resold or canceled.
Payment of Additional Amounts
The government of any jurisdiction where BP or BP Capital U.K., BP Canada or
BP Australia is incorporated may require BP or BP Capital U.K., BP Canada or BP
Australia to withhold or deduct amounts from payments on the principal or
interest on a debt security or any amounts to be paid under the guarantees for
or on account of taxes or any other governmental charges. If the jurisdiction
requires a withholding or deduction of this type, BP or BP Capital U.K., BP
Canada or BP Australia, as the case may be, may be required to pay you an
additional amount so that the net amount you receive will be the amount
specified in the debt security to which you are entitled. However, in order for
you to be entitled to receive the additional amount, you must not be resident
in the jurisdiction that requires the withholding or deduction.
BP or BP Capital U.K., BP Canada or BP Australia as the case may be, will
not have to pay additional amounts under any of the following circumstances:
. The U.S. government or any political subdivision of the U.S. government is
the entity that is imposing the tax or governmental charge.
. The tax or governmental charge is imposed due to the presentation of a
debt security, if presentation is required, for payment on a date more
than 30 days after the security became due or after the payment was
provided for.
. The tax or governmental charge is on account of an estate, inheritance,
gift, sale, transfer, personal property or similar tax or other
governmental charge.
. The tax or governmental charge is for a tax or governmental charge that is
payable in a manner that does not involve withholdings.
. The tax or governmental charge is imposed or withheld because the holder
or beneficial owner failed:
. to provide information about the nationality, residence or identity of
the holder or beneficial owner, or
. to make a declaration or satisfy any information requirements that the
statutes, treaties, regulations or administrative practices of the
taxing jurisdiction require as a precondition to exemption from all or
part of such tax or governmental charge.
. The withholding or deduction is imposed pursuant to any European Union
Directive on the taxation of savings implementing the conclusions of the
ECOFIN Council meeting of November 26 and 27, 2000, or any law
implementing such directive.
. The withholding or deduction is imposed on a holder or beneficial owner
who could have avoided such withholding or deduction by presenting its
debt securities to another paying agent.
. The holder is a fiduciary or partnership or an entity that is not the sole
beneficial owner of the payment of the principal of, or any interest on,
any security, and the laws of the jurisdiction require the payment to be
included in the income of a beneficiary or settlor for tax purposes with
respect to such fiduciary or a member of such partnership or a beneficial
owner who would not have been entitled to such additional amounts had it
been the holder of such security.
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In addition, BP Canada will not have to pay additional amounts under either
of the following circumstances:
. The debt security is presented for payment by, or by a third party on
behalf of, a holder in respect of whom such taxes or duties are required
to be withheld or deducted by reason of the holder being a person with
whom BP Canada or BP are not dealing at arm's length (within the meaning
of the Income Tax Act (Canada)).
. The debt security is presented for payment by, or by a third party on
behalf of, a holder in respect of whom such taxes or duties would not have
been imposed but for the failure of the holder to comply with any
requirement under relevant income tax treaties or Canadian statutes and
regulations (or any administrative practice in Canada) to claim or
establish entitlement to exemption from or reduction of such taxes or
duties.
In addition, BP Australia will not have to pay additional amounts payable if
the holder is an associate of BP Australia for the purposes of section 128F of
the Income Tax Assessment Act 1936 of Australia.
These provisions will also apply to any taxes or governmental charges
imposed by any jurisdiction in which a successor to BP is organized. The
prospectus supplement relating to the debt securities may describe additional
circumstances in which BP would not be required to pay additional amounts.
(Section 1010)
Optional Tax Redemption
We may also have the option to redeem the debt securities of a given series
if, as a result of any change in United Kingdom, Canadian or Australian tax
treatment, BP, BP Capital U.K., BP Canada or BP Australia would be required to
pay additional amounts as described above under "--Payment of Additional
Amounts". This option applies only in the case of changes in United Kingdom,
Canadian or Australian tax treatment that occur on or after the date specified
in the prospectus supplement for the applicable series of debt securities. The
redemption price for the debt securities, other than original issue discount
debt securities, will be equal to the principal amount of the debt securities
being redeemed plus accrued interest. The redemption price for original issue
discount debt securities will be specified in the prospectus supplement for
such securities. (Section 1108)
Event Risk Provisions
The debt securities do not contain event risk provisions designed to require
BP or the BP Debt Issuers to redeem the debt securities, reset the interest
rate or take other actions in response to highly leveraged transactions,
changes in credit ratings or similar occurrences.
Defeasance and Discharge
The following discussion of full defeasance and discharge will be applicable
to your series of debt securities only if we choose to have them apply to that
series. If we do so choose, we will state that in the prospectus supplement.
(Section 403)
We can legally release ourselves from any payment or other obligations on
the debt securities, except for various obligations described below, if we, in
addition to other actions, put in place the following arrangements for you to
be repaid:
. We must deposit in trust for your benefit and the benefit of all other
direct holders of the debt securities a combination of money and U.S.
government or U.S. government agency notes or bonds that will generate
enough cash to make interest, principal and any other payments on the debt
securities on their various due dates. In addition, on the date of such
deposit, we must not be in default. For purposes of this no-default test,
a default would include an event of default that has occurred and not been
cured, as described below under "Default and Related Matters--Events of
Default--What is An Event of Default?" A default for this purpose would
also include any event that would be an event of default if the
requirements for giving us default notice or our default having to exist
for a specific period of time were disregarded.
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. We must deliver to the trustee a legal opinion of our counsel confirming
that under current U.S. federal income tax law we may make the above
deposit without causing you to be taxed on the debt securities any
differently than if we did not make the deposit and just repaid the debt
securities ourselves. In the case of debt securities being discharged, we
must deliver along with this opinion a private letter ruling from U.S.
Internal Revenue Service to this effect or a revenue ruling pertaining to
a comparable form of transaction to that effect published by the U.S.
Internal Revenue Service to the same effect.
. If the debt securities are listed on the New York Stock Exchange, we must
deliver to the trustee a legal opinion of our counsel confirming that the
deposit, defeasance and discharge will not cause the debt securities to be
delisted.
However, even if we take these actions, a number of our obligations relating
to the debt securities will remain. These include the following obligations:
. to register the transfer and exchange of debt securities;
. to replace mutilated, destroyed, lost or stolen debt securities;
. to maintain paying agencies; and
. to hold money for payment in trust.
Default and Related Matters
Ranking
The debt securities are not secured by any of our property or assets.
Accordingly, your ownership of debt securities means you are one of our
unsecured creditors. The debt securities are not subordinated to any of our
other debt obligations and therefore they rank equally with all our other
unsecured and unsubordinated indebtedness.
Events of Default
You will have special rights if an event of default occurs and is not cured,
as described later in this subsection.
What Is an Event of Default? The term "event of default" means any of the
following:
. We do not pay the principal or any premium on a debt security at maturity.
. We do not pay interest on a debt security within 30 days of its due date.
. We do not deposit any sinking fund payment on its due date.
. We remain in breach of a covenant or any other term of the indentures for
90 days after we receive a notice of default stating we are in breach. The
notice must be sent by either the trustee or holders of 25% of the
principal amount of debt securities of the affected series.
. We file for bankruptcy or certain other events in bankruptcy, insolvency
or reorganization occur.
. Any other event of default described in the prospectus supplement occurs.
(Section 501)
Remedies If an Event of Default Occurs. If an event of default has occurred
and has not been cured, the trustee or the holders of 25% in principal amount
of the debt securities of the affected series may declare the entire principal
amount of all the debt securities of that series to be due and immediately
payable. This is called a declaration of acceleration of maturity. A
declaration of acceleration of maturity may be canceled by the holders of at
least a majority in principal amount of the debt securities of the affected
series if certain conditions are met. (Section 502)
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Except in cases of default, where the trustee has some special duties, the
trustee is not required to take any action under the indenture at the request
of any holders unless the holders offer the trustee reasonable protection from
expenses and liability. This protection is called an indemnity. (Section 603)
If reasonable indemnity is provided, the holders of a majority in principal
amount of the outstanding debt securities of the relevant series may direct the
time, method and place of conducting any lawsuit or other formal legal action
seeking any remedy available to the trustee. These majority holders may also
direct the trustee in performing any other action under the indenture. (Section
512)
Before you bypass the trustee and bring your own lawsuit or other formal
legal action or take other steps to enforce your rights or protect your
interests relating to the debt securities, the following must occur:
. You must give the trustee written notice that an event of default has
occurred and remains uncured.
. The holders of 25% in principal amount of all outstanding debt securities
of the relevant series must make a written request that the trustee take
action because of the default, and must offer reasonable indemnity to the
trustee against the cost and other liabilities of taking that action.
. The trustee must have not taken action for 60 days after receipt of the
above notice and offer of indemnity. (Section 507)
Street name and other indirect holders should consult their banks or brokers
for information on how to give notice or direction to or make a request of
the trustee and to make or cancel a declaration of acceleration.
We will furnish to the trustee every year a written statement of certain of
our officers certifying that, to their knowledge, we are in compliance with the
indenture and the debt securities, or else specifying any default. (Section
1008)
Regarding the Trustee
BP and several of its subsidiaries maintain banking relations with the
trustee group of companies in the ordinary course of their business.
If an event of default occurs, or an event occurs that would be an event of
default if the requirements for giving us default notice or our default having
to exist for a specific period of time were disregarded, the trustee may be
considered to have a conflicting interest with respect to the debt securities
or the applicable indenture for purposes of the Trust Indenture Act of 1939. In
that case, the trustee may be required to resign as trustee under the
applicable indenture and we would be required to appoint a successor trustee.
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CLEARANCE AND SETTLEMENT
Securities we issue may be held through one or more international and
domestic clearing systems. The principal clearing systems we will use are the
book-entry systems operated by The Depository Trust Company ("DTC") in the
United States, Clearstream Banking, societe anonyme, in Luxembourg
("Clearstream, Luxembourg") and Euroclear Bank S.A./N.V. in Brussels, Belgium
("Euroclear"). These systems have established electronic securities and payment
transfer, processing, depositary and custodial links among themselves and
others, either directly or through custodians and depositaries. These links
allow securities to be issued, held and transferred among the clearing systems
without the physical transfer of certificates.
Special procedures to facilitate clearance and settlement have been
established among these clearing systems to trade securities across borders in
the secondary market. Where payments for securities we issue in global form
will be made in U.S. dollars, these procedures can be used for cross-market
transfers and the securities will be cleared and settled on a delivery against
payment basis.
Cross-market transfers of securities that are not in global form may be
cleared and settled in accordance with other procedures that may be established
among the clearing systems for these securities. Investors in securities that
are issued outside of the United States, its territories and possessions must
initially hold their interests through Euroclear, Clearstream, Luxembourg or
the clearance system that is described in the applicable prospectus supplement.
The policies of DTC, Clearstream, Luxembourg and Euroclear will govern
payments, transfers, exchange and other matters relating to the investor's
interest in securities held by them. This is also true for any other clearance
system that may be named in a prospectus supplement.
We have no responsibility for any aspect of the actions of DTC, Clearstream,
Luxembourg or Euroclear or any of their direct or indirect participants. We
have no responsibility for any aspect of the records kept by DTC, Clearstream,
Luxembourg or Euroclear or any of their direct or indirect participants. We
also do not supervise these systems in any way. This is also true for any other
clearing system indicated in a prospectus supplement.
DTC, Clearstream, Luxembourg and Euroclear and their participants perform
these clearance and settlement functions under agreements they have made with
one another or with their customers. You should be aware that they are not
obligated to perform these procedures and may modify them or discontinue them
at any time.
The description of the clearing systems in this section reflects our
understanding of the rules and procedures of DTC, Clearstream, Luxembourg and
Euroclear as they are currently in effect. Those systems could change their
rules and procedures at any time.
The Clearing Systems
DTC
DTC has advised us as follows:
. DTC is:
. a limited purpose trust company organized under the laws of the State of
New York;
. a member of the Federal Reserve System;
. a "clearing corporation" within the meaning of the Uniform Commercial
Code; and
. a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934.
. DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between
participants through electronic book-entry changes to accounts of its
participants. This eliminates the need for physical movement of
certificates.
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. Participants in DTC include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other
organizations. DTC is partially owned by some of these participants or
their representatives.
. Indirect access to the DTC system is also available to banks, brokers,
dealers and trust companies that have relationships with participants.
. The rules applicable to DTC and DTC participants are on file with the SEC.
Clearstream, Luxembourg
Clearstream, Luxembourg has advised us as follows:
. Clearstream, Luxembourg is a duly licensed bank organized as a societe
anonyme incorporated under the laws of Luxembourg and is subject to
regulation by the Luxembourg Commission for the Supervision of the
Financial Sector (Commission de Surveillance du Secteur Financier).
. Clearstream, Luxembourg holds securities for its customers and facilitates
the clearance and settlement of securities transactions among them. It
does so through electronic book-entry changes to the accounts of its
customers. This eliminates the need for physical movement of certificates.
. Clearstream, Luxembourg provides other services to its participants,
including safekeeping, administration, clearance and settlement of
internationally traded securities and lending and borrowing of securities.
It interfaces with the domestic markets in over 30 countries through
established depositary and custodial relationships.
. Clearstream, Luxembourg's customers include worldwide securities brokers
and dealers, banks, trust companies and clearing corporations and may
include professional financial intermediaries. Its U.S. customers are
limited to securities brokers and dealers and banks.
. Indirect access to the Clearstream, Luxembourg system is also available to
others that clear through Clearstream, Luxembourg customers or that have
custodial relationships with its customers, such as banks, brokers,
dealers and trust companies.
Euroclear
Euroclear has advised us as follows:
. Euroclear is incorporated under the laws of Belgium as a bank and is
subject to regulation by the Belgian Banking and Finance Commission
(Commission Bancaire et Financiere) and the National Bank of Belgium
(Banque Nationale de Belgique).
. Euroclear holds securities for its customers and facilitates the clearance
and settlement of securities transactions among them. It does so through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates.
. Euroclear provides other services to its customers, including credit
custody, lending and borrowing of securities and tri-party collateral
management. It interfaces with the domestic markets of several other
countries.
. Euroclear customers include banks, including central banks, securities
brokers and dealers, trust companies and clearing corporations and may
include certain other professional financial intermediaries.
. Indirect access to the Euroclear system is also available to others that
clear through Euroclear customers or that have relationships with
Euroclear customers.
. All securities in Euroclear are held on a fungible basis. This means that
specific certificates are not matched to specific securities clearance
accounts.
19
Other Clearing Systems
We may choose any other clearing system for a particular series of
securities. The clearance and settlement procedures for the clearing system we
choose will be described in the applicable prospectus supplement.
Primary Distribution
The distribution of the securities will be cleared through one or more of
the clearing systems that we have described above or any other clearing system
that is specified in the applicable prospectus supplement. Payment for
securities will be made on a delivery versus payment or free delivery basis.
These payment procedures will be more fully described in the applicable
prospectus supplement.
Clearance and settlement procedures may vary from one series of securities
to another according to the currency that is chosen for the specific series of
securities. Customary clearance and settlement procedures are described below.
We will submit applications to the relevant system or systems for the
securities to be accepted for clearance. The clearance numbers that are
applicable to each clearance system will be specified in the prospectus
supplement.
Clearance and Settlement Procedures--DTC
DTC participants that hold securities through DTC on behalf of investors
will follow the settlement practices applicable to United States corporate debt
obligations in DTC's Same-Day Funds Settlement System, or such other procedures
as are applicable for other securities.
Securities will be credited to the securities custody accounts of these DTC
participants against payment in same-day funds, for payments in U.S. dollars,
on the settlement date. For payments in a currency other than U.S. dollars,
securities will be credited free of payment on the settlement date.
Clearance and Settlement Procedures--Euroclear and Clearstream, Luxembourg
We understand that investors that hold their securities through Euroclear or
Clearstream, Luxembourg accounts will follow the settlement procedures that are
applicable to conventional Eurobonds in registered form for debt securities, or
such other procedures as are applicable for other securities.
Securities will be credited to the securities custody accounts of Euroclear
and Clearstream, Luxembourg participants on the business day following the
settlement date, for value on the settlement date. They will be credited either
free of payment or against payment for value on the settlement date.
Secondary Market Trading
Trading between DTC Participants
Secondary market trading between DTC participants will occur in the ordinary
way in accordance with DTC's rules. Secondary market trading will be settled
using procedures applicable to United States corporate debt obligations in
DTC's Same-Day Funds Settlement System for debt securities, or such other
procedures as are applicable for other securities.
If payment is made in U.S. dollars, settlement will be in same-day funds. If
payment is made in a currency other than U.S. dollars, settlement will be free
of payment. If payment is made other than in U.S. dollars, separate payment
arrangements outside of the DTC system must be made between the DTC
participants involved.
Trading between Euroclear and/or Clearstream, Luxembourg Participants
We understand that secondary market trading between Euroclear and/or
Clearstream, Luxembourg participants will occur in the ordinary way following
the applicable rules and operating procedures of Euroclear and Clearstream,
Luxembourg. Secondary market trading will be settled using procedures
applicable to
20
conventional Eurobonds in registered form for debt securities, or such other
procedures as are applicable for other securities.
Trading between a DTC Seller and a Euroclear or Clearstream, Luxembourg
Purchaser
A purchaser of securities that are held in the account of a DTC participant
must send instructions to Euroclear or Clearstream, Luxembourg at least one
business day prior to settlement. The instructions will provide for the
transfer of the securities from the selling DTC participant's account to the
account of the purchasing Euroclear or Clearstream, Luxembourg participant.
Euroclear or Clearstream, Luxembourg, as the case may be, will then instruct
the common depositary for Euroclear and Clearstream, Luxembourg to receive the
securities either against payment or free of payment.
The interests in the securities will be credited to the respective clearing
system. The clearing system will then credit the account of the participant,
following its usual procedures. Credit for the securities will appear on the
next day, European time. Cash debit will be back-valued to, and the interest on
the securities will accrue from, the value date, which would be the preceding
day, when settlement occurs in New York. If the trade fails and settlement is
not completed on the intended date, the Euroclear or Clearstream, Luxembourg
cash debit will be valued as of the actual settlement date instead.
Euroclear participants or Clearstream, Luxembourg participants will need the
funds necessary to process same-day funds settlement. The most direct means of
doing this is to preposition funds for settlement, either from cash or from
existing lines of credit, as for any settlement occurring within Euroclear or
Clearstream, Luxembourg. Under this approach, participants may take on credit
exposure to Euroclear or Clearstream, Luxembourg until the securities are
credited to their accounts one business day later.
As an alternative, if Euroclear or Clearstream, Luxembourg has extended a
line of credit to them, participants can choose not to preposition funds and
will instead allow that credit line to be drawn upon to finance settlement.
Under this procedure, Euroclear participants or Clearstream, Luxembourg
participants purchasing securities would incur overdraft charges for one
business day (assuming they cleared the overdraft as soon as the securities
were credited to their accounts). However, interest on the securities would
accrue from the value date. Therefore, in many cases, the investment income on
securities that is earned during that one business day period may substantially
reduce or offset the amount of the overdraft charges. This result will,
however, depend on each participant's particular cost of funds.
Because the settlement will take place during New York business hours, DTC
participants will use their usual procedures to deliver securities to the
depositary on behalf of Euroclear participants or Clearstream, Luxembourg
participants. The sale proceeds will be available to the DTC seller on the
settlement date. For the DTC participants, then, a cross-market transaction
will settle no differently than a trade between two DTC participants.
Special Timing Considerations
You should be aware that investors will only be able to make and receive
deliveries, payments and other communications involving the securities through
Clearstream, Luxembourg and Euroclear on days when those systems are open for
business. Those systems may not be open for business on days when banks,
brokers and other institutions are open for business in the United States.
In addition, because of time-zone differences, there may be problems with
completing transactions involving Clearstream, Luxembourg and Euroclear on the
same business day as in the United States. U.S. investors who wish to transfer
their interests in the securities, or to receive or make a payment or delivery
of the securities, on a particular day, may find that the transactions will not
be performed until the next business day in Luxembourg or Brussels, depending
on whether Clearstream, Luxembourg or Euroclear is used.
21
TAX CONSIDERATIONS
United States Taxation
This section describes the material United States federal income tax
consequences of owning the debt securities described in this prospectus. It
applies to you only if you acquire debt securities in the offering or offerings
contemplated by this prospectus and you hold your debt securities as capital
assets for tax purposes. This section is the opinion of Sullivan & Cromwell,
our U.S. counsel. This section does not apply to you if you are a member of a
class of holders subject to special rules, such as:
. a dealer in securities or currencies;
. a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings;
. a bank;
. a life insurance company;
. a tax-exempt organization;
. a person that owns debt securities that are a hedge or that are hedged
against interest rate or currency risks;
. a person that owns debt securities as part of a straddle or conversion
transaction for tax purposes; or
. a person whose functional currency for tax purposes is not the U.S. dollar.
This section deals only with debt securities that are due to mature 30 years
or less from the date on which they are issued. The United States federal
income tax consequences of owning debt securities that are due to mature more
than 30 years from their date of issue will be discussed in an applicable
prospectus supplement. This section is based on the Internal Revenue Code of
1986, as amended, which we refer to in this discussion as the Code, its
legislative history, existing and proposed regulations under the Code,
published rulings and court decisions, all as currently in effect. These laws
are subject to change, possibly on a retroactive basis.
Please consult your own tax advisor concerning the consequences of owning
these debt securities in your particular circumstances under the Code and the
laws of any other taxing jurisdiction.
United States Holders
This subsection describes the tax consequences to a "United States holder".
A United States holder is a beneficial owner of a debt security that is:
. a citizen or resident of the United States;
. a domestic corporation;
. an estate whose income is subject to United States federal income tax
regardless of its source; or
. a trust if a United States court can exercise primary supervision over the
trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
If you are not a United States holder, this subsection does not apply to
you, and you should see the sections entitled "United States Alien Holders (BP
Capital America)" and "United States Alien Holders (BP Capital U.K., BP Canada
or BP Australia)" below for information that may apply to you.
Payments of Interest. Except as described below in the case of interest on
a "discount debt security" that is not "qualified stated interest", each as
defined below under "Original Issue Discount--General", you will be taxed on
any interest on your debt security, whether payable in U.S. dollars or a
currency, composite currency or basket of currencies other than U.S. dollars,
as ordinary income at the time you receive the interest or at the time it
accrues, depending on your method of accounting for tax purposes. We refer to a
currency, composite currency or basket of currencies other than U.S. dollars as
foreign currency throughout this subsection.
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Interest paid on, and original issue discount (as described below under
"Original Issue Discount"), if any, accrued with respect to the debt securities
that are issued by BP Capital U.K., BP Canada or BP Australia constitutes
income from sources outside the United States, but, with certain exceptions,
will be "passive" or "financial services" income, which is treated separately
from other types of income for purposes of computing the foreign tax credit
allowable to a United States Holder. Interest paid on, and original issue
discount (as described below under "Original Issue Discount"), if any, accrued
with respect to the debt securities that are issued by BP Capital America
constitute income from sources within the United States, but, with certain
exceptions, will be "passive" or "financial services" income, which is treated
separately from other types of income for purposes of computing the foreign tax
credit allowable to a United States Holder.
Cash Basis Taxpayers. If you are a taxpayer that uses the "cash receipts
and disbursements" method of accounting for tax purposes and you receive an
interest payment that is denominated in, or determined by reference to, a
foreign currency, you must recognize income equal to the U.S. dollar value of
the interest payment, based on the exchange rate in effect on the date of
receipt, regardless of whether you actually convert the payment into U.S.
dollars.
Accrual Basis Taxpayers. If you are a taxpayer that uses the accrual method
of accounting for tax purposes, you may determine the amount of income that you
recognize with respect to an interest payment denominated in, or determined by
reference to, a foreign currency by using one of two methods. Under the first
method, you will determine the amount of income accrued based on the average
exchange rate in effect during the interest accrual period (or, with respect to
an accrual period that spans two taxable years, that part of the period within
the taxable year).
If you elect the second method, you would determine the amount of income
accrued on the basis of the exchange rate in effect on the last day of the
accrual period (or, in the case of an accrual period that spans two taxable
years, the exchange rate in effect on the last day of the part of the period
within the taxable year). Additionally, under this second method, if you
receive a payment of interest within five business days of the last day of your
accrual period or taxable year, you may instead translate the interest accrued
into U.S. dollars at the exchange rate in effect on the day that you actually
receive the interest payment. If you elect the second method it will apply to
all debt instruments that you hold at the beginning of the first taxable year
to which the election applies and to all debt instruments that you thereafter
acquire. You may not revoke this election without the consent of the Internal
Revenue Service.
When you actually receive an interest payment, including a payment
attributable to accrued but unpaid interest upon the sale or retirement of your
debt security, denominated in, or determined by reference to, a foreign
currency for which you accrued an amount of income, you will recognize ordinary
income or loss measured by the difference, if any, between the exchange rate
that you used to accrue interest income and the exchange rate in effect on the
date of receipt, regardless of whether you actually convert the payment into
U.S. dollars.
Original Issue Discount--General. If you own a debt security, other than a
debt security with a term of one year or less, referred to as a "short-term
debt security", it will be treated as issued at an original issue discount,
referred to as a "discount debt security", if the debt security's "stated
redemption price at maturity" exceeds its "issue price" by more than a "de
minimis amount". All three terms are defined below. Generally, a debt
security's "issue price" will be the first price at which a substantial amount
of debt securities included in the issue of which the debt security is a part
are sold to persons other than bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers. A debt security's "stated redemption price at maturity" is the
total of all payments provided by the debt security that are not payments of
"qualified stated interest". Generally, an interest payment on a debt security
is "qualified stated interest" if it is part of a series of stated interest
payments on a debt security that are unconditionally payable at least annually
at a single fixed rate (with certain exceptions for lower rates paid during
some periods) applied to the outstanding principal amount of the debt security.
There are special rules for "variable rate debt securities" that we discuss
below under "Variable Rate Debt Securities".
23
In general, your debt security is not a discount debt security if the amount
by which its "stated redemption price at maturity" exceeds its "issue price" is
less than the de minimis amount of 1/4 of 1 percent of its stated redemption
price at maturity multiplied by the number of complete years to its maturity,
referred to as the "de minimis amount". Your debt security will have "de
minimis original issue discount" if the amount of the excess is less than the
de minimis amount. If your debt security has "de minimis original issue
discount", you must include it in income as stated principal payments are made
on the debt security, unless you make the election described below under
"Election to Treat All Interest as Original Issue Discount". You can determine
the includible amount with respect to each such payment by multiplying the
total amount of your debt security's de minimis original issue discount by a
fraction equal to:
. the amount of the principal payment made
divided by:
. the stated principal amount of the debt security.
Inclusion of Original Issue Discount in Income. Generally, if your discount
debt security matures more than one year from its date of issue, you must
include original issue discount, referred to as "OID", in income before you
receive cash attributable to that income. The amount of OID that you must
include in income is calculated using a constant-yield method, and generally
you will include increasingly greater amounts of OID in income over the life of
your discount debt security. More specifically, you can calculate the amount of
OID that you must include in income by adding the daily portions of OID with
respect to your discount debt security for each day during the taxable year or
portion of the taxable year that you hold your discount debt security, referred
to as "accrued OID". You can determine the daily portion by allocating to each
day in any "accrual period" a pro rata portion of the OID allocable to that
accrual period. You may select an accrual period of any length with respect to
your discount debt security and you may vary the length of each accrual period
over the term of your discount debt security. However, no accrual period may be
longer than one year and each scheduled payment of interest or principal on
your discount debt security must occur on either the first or final day of an
accrual period.
You can determine the amount of OID allocable to an accrual period by:
. multiplying your discount debt security's adjusted issue price at the
beginning of the accrual period by your debt security's yield to maturity,
and then
. subtracting from this figure the sum of the payments of qualified stated
interest on your debt security allocable to the accrual period.
You must determine the discount debt security's yield to maturity on the
basis of compounding at the close of each accrual period and adjusting for the
length of each accrual period. Further, you determine your discount debt
security's adjusted issue price at the beginning of any accrual period by:
. adding your discount debt security's issue price and any accrued OID for
each prior accrual period, and then
. subtracting any payments previously made on your discount debt security
that were not qualified stated interest payments.
If an interval between payments of qualified stated interest on your
discount debt security contains more than one accrual period, then, when you
determine the amount of OID allocable to an accrual period, you must allocate
the amount of qualified stated interest payable at the end of the interval
(including any qualified stated interest that is payable on the first day of
the accrual period immediately following the interval) pro rata to each accrual
period in the interval based on their relative lengths. In addition, you must
increase the adjusted issue price at the beginning of each accrual period in
the interval by the amount of any qualified stated interest that has accrued
prior to the first day of the accrual period but that is not payable until the
end of the interval. You may compute the amount of OID allocable to an initial
short accrual period by using any reasonable method if all other accrual
periods, other than a final short accrual period, are of equal length.
24
The amount of OID allocable to the final accrual period is equal to the
difference between:
. the amount payable at the maturity of your debt security (other than any
payment of qualified stated interest); and
. your debt security's adjusted issue price as of the beginning of the final
accrual period.
Acquisition Premium. If you purchase your debt security for an amount that
is less than or equal to the sum of all amounts (other than qualified stated
interest) payable on your debt security after the purchase date but is greater
than the amount of your debt security's adjusted issue price (as determined
above under "General"), the excess is "acquisition premium". If you do not make
the election described below under "Election to Treat All Interest as Original
Issue Discount", then you must reduce the daily portions of OID by a fraction
equal to:
. the excess of your adjusted basis in the debt security immediately after
purchase over the adjusted issue price of your debt security
divided by:
. the excess of the sum of all amounts payable (other than qualified stated
interest) on your debt security after the purchase date over your debt
security's adjusted issue price.
Pre-Issuance Accrued Interest. An election can be made to decrease the
issue price of your debt security by the amount of pre-issuance accrued
interest if:
. a portion of the initial purchase price of your debt security is
attributable to pre-issuance accrued interest;
. the first stated interest payment on your debt security is to be made
within one year of your debt security's issue date; and
. the payment will equal or exceed the amount of pre-issuance accrued
interest.
If this election is made, a portion of the first stated interest payment
will be treated as a return of the excluded pre-issuance accrued interest and
not as an amount payable on your debt security.
Debt Securities Subject to Contingencies Including Optional
Redemption. Your debt security is subject to a contingency if it provides for
an alternative payment schedule or schedules applicable upon the occurrence of
a contingency or contingencies (other than a remote or incidental contingency),
whether such contingency relates to payments of interest or of principal. In
such a case, you must determine the yield and maturity of your debt security by
assuming that the payments will be made according to the payment schedule most
likely to occur if:
. the timing and amounts of the payments that comprise each payment schedule
are known as of the issue date, and
. one of such schedules is significantly more likely than not to occur.
If there is no single payment schedule that is significantly more likely
than not to occur (other than because of a mandatory sinking fund), you must
include income on your debt security in accordance with the general rules that
govern contingent payment obligations. These rules will be discussed in the
applicable prospectus supplement.
Notwithstanding the general rules for determining yield and maturity, if
your debt security is subject to contingencies, and either you or the issuer
have an unconditional option or options that, if exercised, would require
payments to be made on the debt security under an alternative payment schedule
or schedules, then:
. in the case of an option or options that the issuer may exercise, the
issuer will be deemed to exercise or not exercise an option or combination
of options in the manner that minimizes the yield on your debt security;
and
. in the case of an option or options that you may exercise, you will be
deemed to exercise or not exercise an option or combination of options in
the manner that maximizes the yield on your debt security.
25
If both you and the issuer hold options described in the preceding sentence,
those rules will apply to each option in the order in which they may be
exercised. You may determine the yield on your debt security for the purposes
of those calculations by using any date on which your debt security may be
redeemed or repurchased as the maturity date and the amount payable on the date
that you chose in accordance with the terms of your debt security as the
principal amount payable at maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules,
referred to as a "change in circumstances", then, except to the extent that a
portion of your debt security is repaid as a result of the change in
circumstances and solely to determine the amount and accrual of OID, you must
redetermine the yield and maturity of your debt security by treating your debt
security as having been retired and reissued on the date of the change in
circumstances for an amount equal to your debt security's adjusted issue price
on that date.
Election to Treat All Interest as Original Issue Discount. You may elect to
include in gross income all interest that accrues on your debt security using
the constant-yield method described above under the heading "Inclusion of
Original Issue Discount in Income", with the modifications described below. For
purposes of this election, interest will include stated interest, OID, de
minimis original issue discount, market discount, de minimis market discount
and unstated interest, as adjusted by any amortizable bond premium (described
below under "Debt Securities Purchased at a Premium") or acquisition premium.
If you make this election for your debt security, then, when you apply the
constant-yield method:
. the "issue price" of your debt security will equal your cost;
. the issue date of your debt security will be the date you acquired it; and
. no payments on your debt security will be treated as payments of qualified
stated interest.
Generally, this election will apply only to the debt security for which you
make it; however, if the debt security for which this election is made has
amortizable bond premium, you will be deemed to have made an election to apply
amortizable bond premium against interest for all debt instruments with
amortizable bond premium (other than debt instruments the interest on which is
excludible from gross income) that you hold as of the beginning of the taxable
year in which you acquire the debt security for which you made this election or
which you acquire thereafter. Additionally, if you make this election for a
market discount debt security, you will be treated as having made the election
discussed below under "Market Discount" to include market discount in income
currently over the life of all debt instruments that you currently own or
thereafter acquire. You may not revoke any election to apply the constant-yield
method to all interest on a debt security or the deemed elections with respect
to amortizable bond premium or market discount debt securities without the
consent of the Internal Revenue Service.
Variable Rate Debt Securities. Your debt security will be a "variable rate
debt security" if:
. your debt security's "issue price" does not exceed the total noncontingent
principal payments by more than the lesser of:
. .015 multiplied by the product of the total noncontingent principal
payments and the number of complete years to maturity from the issue
date; or
. 15 percent of the total noncontingent principal payments; and
. your debt security provides for stated interest (compounded or paid at
least annually) only at:
. one or more "qualified floating rates";
. a single fixed rate and one or more qualified floating rates;
. a single "objective rate"; or
. a single fixed rate and a single objective rate that is a "qualified
inverse floating rate".
26
Your debt security will have a variable rate that is a "qualified floating
rate" if:
. variations in the value of the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the
currency in which your debt security is denominated; or
. the rate is equal to such a rate multiplied by either:
. a fixed multiple that is greater than 0.65 but not more than 1.35; or
. a fixed multiple greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate; and
. the value of the rate on any date during the term of your debt security is
set no earlier than 3 months prior to the first day on which that value is
in effect and no later than 1 year following that first day.
If your debt security provides for two or more qualified floating rates that
are within 0.25 percentage points of each other on the issue date or can
reasonably be expected to have approximately the same values throughout the
term of the debt security, the qualified floating rates together constitute a
single qualified floating rate.
Your debt security will not have a qualified floating rate, however, if the
rate is subject to certain restrictions, including caps, floors, governors, or
other similar restrictions, unless such restrictions are fixed throughout the
term of the debt security or are not reasonably expected to significantly
affect the yield on the debt security.
Your debt security will have a variable rate that is a single "objective
rate" if:
. the rate is not a qualified floating rate;
. the rate is determined using a single, fixed formula that is based on
objective financial or economic information that is not within the control
of or unique to the circumstances of the issuer or a related party; and
. the value of the rate on any date during the term of your debt security is
set no earlier than 3 months prior to the first day on which that value is
in effect and no later than 1 year following that first day.
Your debt security will not have a variable rate that is an objective rate,
however, if it is reasonably expected that the average value of the rate during
the first half of your debt security's term will be either significantly less
than or significantly greater than the average value of the rate during the
final half of your debt security's term.
An objective rate as described above is a "qualified inverse floating rate"
if:
. the rate is equal to a fixed rate minus a qualified floating rate; and
. the variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the cost of newly borrowed funds.
Your debt security will also have a single qualified floating rate or an
objective rate if interest on your debt security is stated at a fixed rate for
an initial period of one year or less followed by either a qualified floating
rate or an objective rate for a subsequent period, and either:
. the fixed rate and the qualified floating rate or objective rate have
values on the issue date of the debt security that do not differ by more
than 0.25 percentage points; or
. the value of the qualified floating rate or objective rate is intended to
approximate the fixed rate.
In general, if your variable rate debt security provides for stated interest
at a single qualified floating rate or objective rate, all stated interest on
your debt security is qualified stated interest. In this case, the amount of
OID, if any, is determined by using, in the case of a qualified floating rate
or qualified inverse floating rate, the value as of the issue date of the
qualified floating rate or qualified inverse floating rate, or, in the case of
any other objective rate, a fixed rate that reflects the yield reasonably
expected for your debt security.
27
If your variable rate debt security does not provide for stated interest at
a single qualified floating rate or a single objective rate, and also does not
provide for interest payable at a fixed rate, other than at a single fixed rate
for an initial period, you generally must determine the interest and OID
accruals on your debt security by:
. determining a fixed rate substitute for each variable rate provided under
your variable rate debt security;
. constructing the equivalent fixed rate debt instrument, using the fixed
rate substitute described above;
. determining the amount of qualified stated interest and OID with respect
to the equivalent fixed rate debt instrument; and
. adjusting for actual variable rates during the applicable accrual period.
When you determine the fixed rate substitute for each variable rate provided
under the variable rate debt security, you generally will use the value of each
variable rate as of the issue date or, for an objective rate that is not a
qualified inverse floating rate, a rate that reflects the reasonably expected
yield on your debt security.
If your variable rate debt security provides for stated interest either at
one or more qualified floating rates or at a qualified inverse floating rate,
and also provides for stated interest at a single fixed rate, other than at a
single fixed rate for an initial period, you generally must determine interest
and OID accruals by using the method described in the previous paragraph.
However, your variable rate debt security will be treated, for purposes of the
first three steps of the determination, as if your debt security had provided
for a qualified floating rate, or a qualified inverse floating rate, rather
than the fixed rate. The qualified floating rate, or qualified inverse floating
rate, that replaces the fixed rate must be such that the fair market value of
your variable rate debt security as of the issue date approximates the fair
market value of an otherwise identical debt instrument that provides for the
qualified floating rate, or qualified inverse floating rate, rather than the
fixed rate.
Short-Term Debt Securities. In general, if you are an individual or other
cash basis United States holder of a short-term debt security, you are not
required to accrue OID (as specially defined below for the purposes of this
paragraph) for U.S. federal income tax purposes unless you elect to do so.
However, you may be required to include any stated interest in income as you
receive it. If you are an accrual basis taxpayer, a taxpayer in a special
class, including, but not limited to, a regulated investment company, common
trust fund, or a certain type of pass through entity, or a cash basis taxpayer
who so elects, you will be required to accrue OID on short-term debt securities
on either a straight-line basis or under the constant-yield method, based on
daily compounding. If you are not required and do not elect to include OID in
income currently, any gain you realize on the sale or retirement of your
short-term debt security will be ordinary income to the extent of the OID
accrued on a straight-line basis, unless you make an election to accrue the OID
under the constant-yield method, through the date of sale or retirement.
However, if you are not required and do not elect to accrue OID on your
short-term debt securities, you will be required to defer deductions for
interest on borrowings allocable to your short-term debt securities in an
amount not exceeding the deferred income until the deferred income is realized.
When you determine the amount of OID subject to these rules, you must
include all interest payments on your short-term debt security, including
stated interest, in your short-term debt security's stated redemption price at
maturity.
Foreign Currency Discount Debt Securities. You must determine OID for any
accrual period on your discount debt security if it is denominated in, or
determined by reference to, a foreign currency in the foreign currency and then
translate the amount of OID into U.S. dollars in the same manner as stated
interest accrued by an accrual basis United States holder, as described under
"Payments of Interest". You may recognize ordinary income or loss when you
receive an amount attributable to OID in connection with a payment of interest
or the sale or retirement of your debt security.
Market Discount
You will be treated as if you purchased your debt security, other than a
short-term debt security, at a market discount and your debt security will be a
"market discount debt security" if:
. you purchase your debt security for less than its issue price (as
determined above under "Original Issue Discount--General"); and
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. your debt security's stated redemption price at maturity or, in the case
of a discount debt security, the debt security's "revised issue price",
exceeds the price you paid for your debt security by at least 1/4 of
1 percent of your debt security's stated redemption price at maturity or
revised issue price, respectively, multiplied by the number of complete
years to the debt security's maturity.
To determine the "revised issue price" of your debt security for these
purposes, you generally add any OID that has accrued on your debt security to
its "issue price".
If your debt security's stated redemption price at maturity or, in the case
of a discount debt security, its "revised issue price", does not exceed the
price you paid for the debt security by 1/4 of 1 percent multiplied by the
number of complete years to the debt security's maturity, the excess
constitutes "de minimis market discount", and the rules that we discuss below
are not applicable to you.
If you recognize gain on the maturity or disposition of your market discount
debt security, you must treat it as ordinary income to the extent of the
accrued market discount on your debt security. Alternatively, you may elect to
include market discount in income currently over the life of your debt
security. If you make this election, it will apply to all debt instruments with
market discount that you acquire on or after the first day of the first taxable
year to which the election applies. You may not revoke this election without
the consent of the Internal Revenue Service. You will accrue market discount on
your market discount debt security on a straight-line basis unless you elect to
accrue market discount using a constant-yield method. If you make this election
to accrue market discount using a constant-yield method, it will apply only to
the debt security with respect to which it is made and you may not revoke it.
If you own a market discount debt security and do not elect to include
market discount in income currently, you will generally be required to defer
deductions for interest on borrowings allocable to your debt security in an
amount not exceeding the accrued market discount on your debt security until
the maturity or disposition of your debt security.
Debt Securities Purchased at a Premium. If you purchase your debt security
for an amount in excess of all amounts payable on the debt security after the
acquisition date, other than payments of qualified stated interest, you may
elect to treat the excess as "amortizable bond premium". If you make this
election, you will reduce the amount required to be included in your income
each year with respect to interest on your debt security by the amount of
amortizable bond premium allocable, based on your debt security's yield to
maturity, to that year. If your debt security is denominated in, or determined
by reference to, a foreign currency, you will compute your amortizable bond
premium in units of the foreign currency and your amortizable bond premium will
reduce your interest income in units of the foreign currency. Gain or loss
recognized that is attributable to changes in exchange rates between the time
your amortized bond premium offsets interest income and the time of the
acquisition of your debt security is generally taxable as ordinary income or
loss. If you make an election to amortize bond premium, it will apply to all
debt instruments, other than debt instruments, the interest on which is
excludible from gross income, that you hold at the beginning of the first
taxable year to which the election applies, and to all debt instruments that
you thereafter acquire, and you may not revoke it without the consent of the
Internal Revenue Service. See also "Election to Treat All Interest as Original
Issue Discount".
Purchase, Sale and Retirement of the Debt Securities. Your tax basis in
your debt security will generally be the U.S. dollar cost, as defined below, of
your debt security, adjusted by:
. adding any OID or market discount, de minimis original issue discount and
de minimis market discount previously included in income with respect to
your debt security, and then
. subtracting the amount of any payments on your debt security that are not
qualified stated interest payments and the amount of any amortizable bond
premium applied to reduce interest on your debt security.
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If you purchase your debt security with foreign currency, the U.S. dollar
cost of your debt security will generally be the U.S. dollar value of the
purchase price on the date of purchase. However, if you are a cash basis
taxpayer (or an accrual basis taxpayer if you so elect), and your debt security
is traded on an established securities market, as defined in the applicable
Treasury regulations, the U.S. dollar cost of your debt security will be the
U.S. dollar value of the purchase price on the settlement date of your purchase.
You will generally recognize gain or loss on the sale or retirement of your
debt security equal to the difference between the amount you realize on the
sale or retirement and your tax basis in your debt security. If your debt
security is sold or retired for an amount in foreign currency, the amount you
realize will be the U.S. dollar value of such amount on:
. the date payment is received, if you are a cash basis taxpayer and the
debt securities are not traded on an established securities market, as
defined in the applicable Treasury regulation;
. the date of disposition, if you are an accrual basis taxpayer; or
. the settlement date for the sale, if you are a cash basis taxpayer (or an
accrual basis United States holder that so elects) and the debt securities
are traded on an established securities market, as defined in the
applicable Treasury regulation.
You will recognize capital gain or loss when you sell or retire your debt
security, except to the extent:
. attributable to changes in exchange rates as described in the next
paragraph;
. described above under "Original Issue Discount--Short-Term Debt
Securities" or "Original Issue Discount--Market Discount";
. attributable to accrued but unpaid interest; or
. the rules governing contingent payment obligations apply.
Capital gain of a noncorporate United States holder is generally taxed at a
maximum rate of 20% for property held more than one year and 18% for property
held more than five years.
You must treat any portion of the gain or loss that you recognize on the
sale or retirement of a debt security as ordinary income or loss to the extent
attributable to changes in exchange rates. However, you only take exchange gain
or loss into account to the extent of the total gain or loss you realize on the
transaction.
Exchange of Amounts in Other Than U.S. Dollars. If you receive foreign
currency as interest on your debt security or on the sale or retirement of your
debt security, your tax basis in the foreign currency will equal its U.S.
dollar value when the interest is received or at the time of the sale or
retirement. If you purchase foreign currency, you generally will have a tax
basis equal to the U.S. dollar value of the foreign currency on the date of
your purchase. If you sell or dispose of a foreign currency, including if you
use it to purchase debt securities or exchange it for U.S. dollars, any gain or
loss recognized generally will be ordinary income or loss.
Indexed Debt Securities. The applicable prospectus supplement will discuss
any special United States federal income tax rules with respect to debt
securities the payments on which are determined by reference to any index and
other debt securities that are subject to the rules governing contingent
payment obligations which are not subject to the rules governing variable rate
debt securities.
United States Alien Holders (BP Capital America). This subsection describes
the tax consequences to a "United States alien holder" of debt securities
issued by BP Capital America. You are a United States alien holder if you are
the beneficial owner of a debt security and are, for United States federal
income tax purposes:
. a nonresident alien individual;
. a foreign corporation;
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. a foreign partnership; or
. an estate or trust that in either case is not subject to United States
federal income tax on a net income basis on income or gain from a debt
security.
If you are a United States holder of debt securities issued by BP Capital
U.K., BP Canada or BP Australia, this subsection does not apply to you.
This discussion assumes that the debt security is not subject to the rules
of Section 871(h)(4)(A) of the Code, which relates to interest payments that
are determined by reference to the income, profits, changes in the value of
property or other attributes of the debtor or a related party.
Under present U.S. federal income and estate tax law, and subject to the
discussion of backup withholding below:
. the issuer and its paying agents will not deduct U.S. withholding tax from
payments of principal, premium, if any, and interest, including OID, to
you if, in the case of interest,
. you do not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the issuer entitled to
vote;
. you are not a controlled foreign corporation that is related to the
issuer through stock ownership; and
. the U.S. payor does not have actual knowledge or reason to know that you
are a United States person and:
a. you have furnished to the U.S. payor an Internal Revenue Service Form
W-8BEN or an acceptable substitute form upon which you certify, under
penalties of perjury, that you are a non-United States person,
b. in the case of payments made outside the United States to you at an
offshore account (generally, an account maintained by you at a bank
or other financial institution at any location outside the United
States), you have furnished to the U.S. payor documentation that
establishes your identity and your status as a non-United States
person,
c. the U.S. payor has received a withholding certificate (furnished on
an appropriate Internal Revenue Service Form W-8 or an acceptable
substitute form) from a person claiming to be:
i. a withholding foreign partnership (generally a foreign
partnership that has entered into an agreement with the Internal
Revenue Service to assume primary withholding responsibility with
respect to distributions and guaranteed payments it makes to its
partners),
ii. a qualified intermediary (generally a non-United States financial
institution or clearing organization or a non-United States
branch or office of a United States financial institution or
clearing organization that is a party to a withholding agreement
with the Internal Revenue Service), or
iii. a U.S. branch of a non-United States bank or of a non-United
States insurance company, and the withholding foreign
partnership, qualified intermediary or U.S. branch has received
documentation upon which it may rely to treat the payment as made
to a non-United States person in accordance with U.S. Treasury
regulations (or, in the case of a qualified intermediary, in
accordance with its agreement with the Internal Revenue Service),
d. the U.S. payor receives a statement from a securities clearing
organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business,
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i. certifying to the U.S. payor under penalties of perjury that an
Internal Revenue Service Form W-8BEN or an acceptable substitute
form has been received from you by it or by a similar financial
institution between it and you, and
ii. to which is attached a copy of the Internal Revenue Service Form
W-8BEN or acceptable substitute form, or
e. the U.S. payor otherwise possesses documentation upon which it may
rely to treat the payment as made to a non-United States person in
accordance with U.S. Treasury regulations; and
. no deduction for any United States federal withholding tax will be made
from any gain that you realize on the sale or exchange of your debt
security.
Further, a debt security held by an individual, who at death is not a
citizen or resident of the United States will not be includible in the
individual's gross estate for U.S. federal estate tax purposes if:
. the decedent did not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the issuer entitled
to vote at the time of death; and
. the income on the debt security would not have been effectively connected
with a United States trade or business of the decedent at the same time.
United States Alien Holders (BP Capital U.K., BP Canada or BP
Australia). This subsection describes the tax consequences to a United States
alien holder of debt securities issued by BP Capital U.K., BP Canada or BP
Australia. If you are a United States holder of debt securities issued by BP
Capital America, this subsection does not apply to you.
Payments of Interest. Subject to the discussion of backup withholding
below, payments of principal, premium, if any, and interest, including OID, on
a debt security is exempt from U.S. federal income tax, including withholding
tax, whether or not you are engaged in a trade or business in the United
States, unless:
. you are an insurance company carrying on a U.S. insurance business to
which the interest is attributable, within the meaning of the Code; or
. you both:
. have an office or other fixed place of business in the United States to
which the interest is attributable; and
. derive the interest in the active conduct of a banking, financing or
similar business within the United States.
Purchase, Sale, Retirement and Other Disposition of the Debt
Securities. You generally will not be subject to U.S. federal income tax on
gain realized on the sale, exchange or retirement of a debt security unless:
. the gain is effectively connected with your conduct of a trade or business
in the United States; or
. you are an individual, you are present in the United States for 183 or
more days during the taxable year in which the gain is realized and
certain other conditions exist.
For purposes of the U.S. federal estate tax, the debt securities will be
treated as situated outside the United States and will not be includible in the
gross estate of a holder who is neither a citizen nor a resident of the United
States at the time of death.
Backup Withholding and Information Reporting (BP Capital America)
This subsection describes the backup withholding and information reporting
relating to holders of debt securities issued by BP Capital America.
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United States Holders. In general, if you are a noncorporate United States
holder, the issuer and other payors are required to report to the Internal
Revenue Service all payments of principal, any premium, if any, and interest on
your debt security, and the accrual of OID on a discount debt security. In
addition, the proceeds of the sale of your debt security before maturity within
the United States will be reported to the U.S. Internal Revenue Service.
Additionally, backup withholding will apply to any payments, including payments
of OID, if you fail to provide an accurate taxpayer identification number, or
you are notified by the Service that you have failed to report all interest and
dividends required to be shown on your federal income tax returns.
United States Alien Holders. In general, if you are a United States alien
holder, payments of principal, premium, if any, or interest, including OID,
made by us and other payors to you will not be subject to backup withholding
and information reporting, provided that the certification requirements
described above under "--United States Alien Holders (BP Capital America)" are
satisfied or you otherwise establish an exemption. However, we and other payors
are required to report payments of interest on your debt securities on Internal
Revenue Service Form 1042-S even if the payments are not otherwise subject to
information reporting requirements. In addition, payment of the proceeds from
the sale of debt securities effected at a United States office of a broker will
not be subject to backup withholding and information reporting provided that:
. the broker does not have actual knowledge or reason to know that you are a
United States person and you have furnished to the broker:
. an appropriate Internal Revenue Service Form W-8 or an acceptable
substitute form upon which you certify, under penalties of perjury, that
you are not a United States person, or
. other documentation upon which it may rely to treat the payment as made
to a non-United States person in accordance with U.S. Treasury
regulations, or
. you otherwise establish an exemption.
If you fail to establish an exemption and the broker does not possess
adequate documentation of your status as a non-United States person, the
payments may be subject to information reporting and backup withholding.
However, backup withholding will not apply with respect to payments made to an
offshore account maintained by you unless the broker has actual knowledge that
you are a United States person.
In general, payment of the proceeds from the sale of debt securities
effected at a foreign office of a broker will not be subject to information
reporting or backup withholding. However, a sale effected at a foreign office
of a broker will be subject to information reporting and backup withholding if:
. the proceeds are transferred to an account maintained by you in the United
States,
. the payment of proceeds or the confirmation of the sale is mailed to you
at a United States address, or
. the sale has some other specified connection with the United States as
provided in U.S. Treasury regulations, unless the broker does not have
actual knowledge or reason to know that you are a United States person and
the documentation requirements described above (relating to a sale of debt
securities effected at a United States office of a broker) are met or you
otherwise establish an exemption.
In addition, payment of the proceeds from the sale of debt securities
effected at a foreign office of a broker will be subject to information
reporting if the broker is:
. a United States person,
. a controlled foreign corporation for United States tax purposes,
. a foreign person 50% or more of whose gross income is effectively
connected with the conduct of a United States trade or business for a
specified three-year period, or
33
. a foreign partnership, if at any time during its tax year:
. one or more of its partners are "US persons", as defined in U.S.
Treasury regulations, who in the aggregate hold more than 50% of the
income or capital interest in the partnership, or
. such foreign partnership is engaged in the conduct of a United States
trade or business,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above
(relating to a sale of debt securities effected at a United States office of a
broker) are met or you otherwise establish an exemption.
Backup Withholding and Information Reporting (BP Capital U.K., BP Canada or
BP Australia)
This subsection describes the backup withholding and information reporting
requirements regarding holders of debt securities issued by BP Capital U.K., BP
Canada or BP Australia.
United States Holders. If you are a noncorporate United States holder,
information reporting requirements, on Internal Revenue Service Form 1099,
generally will apply to payments of principal and interest on a debt security
within the United States, including payments made by wire transfer from outside
the United States to an account you maintain in the United States.
Additionally, backup withholding will apply to such payments if you are a
noncorporate United States holder that:
. fails to provide an accurate taxpayer identification number,
. is notified by the Internal Revenue Service that you have failed to report
all interest and dividends required to be shown on your federal income tax
returns, or
. in certain circumstances, fails to comply with applicable certification
requirements.
United States Alien Holders. If you are a United States alien holder, you
are generally exempt from backup withholding and information reporting
requirements with respect to:
. payments of principal and interest made to you outside the United States
by the Company or another non-United States payor and
. other payments of principal and interest, as long as the income associated
with such payments is otherwise exempt from United States federal income
tax, and:
. the payor or broker does not have actual knowledge or reason to know
that you are a United States person and you have furnished to the payor
or broker:
. an Internal Revenue Service Form W-8BEN or an acceptable substitute
form upon which you certify, under penalties of perjury, that you are
a non-United States person, or
. other documentation upon which it may rely to treat the payments as
made to a non-United States person in accordance with U.S. Treasury
regulations, or
. you otherwise establish an exemption.
Payment of the proceeds from the sale of debt securities issued by BP
Capital U.K., BP Canada or BP Australia will have the same information
reporting and backup withholding consequences as payments of the proceeds from
the sale of debt securities issued by BP Capital America described above.
United Kingdom Taxation
The following is a summary of the United Kingdom withholding tax treatment
at the date hereof in relation to the payment of principal, interest, discount
and premium in respect of the debt securities and also contains a summary of
some other salient points relating to the United Kingdom taxation treatment of
holders of debt securities. Except where the context otherwise requires, the
comments relate only to the position of persons who
34
are absolute beneficial owners of the debt securities and do not deal with the
position of certain classes of holders such as dealers. This section is the
opinion of the Group General Counsel to BP. Prospective investors who are in
any doubt as to their tax positions should consult their professional advisers.
1. Debt securities issued by BP Capital U.K. ("U.K. debt securities")
(A) While U.K. debt securities continue to be listed on a recognized stock
exchange as defined in Section 841 of the Income and Corporation Taxes Act 1988
(which includes the London and Paris Stock Exchanges), payments of interest, on
or after April 1, 2001, may be made without withholding or deduction for or on
account of United Kingdom income tax.
(B) Interest on the debt securities may also be paid without withholding or
deduction on account of United Kingdom tax where interest on the debt
securities is paid to a person who belongs in the United Kingdom and the Issuer
reasonably believes (and any person by or through whom interest on the debt
securities is paid reasonably believes) that the beneficial owner is within the
charge to United Kingdom corporation tax as regards the payment of interest at
the time the payment is made, provided that the Inland Revenue has not given a
direction that it has reasonable grounds to believe that it is likely that the
beneficial owner is not within the charge to United Kingdom corporation tax in
respect of such payment of interest at the time the payment is made.
(C) In all cases not falling within paragraph (A) or (B) above, subject to
relief under an applicable double taxation treaty, interest on U.K. debt
securities will be paid under deduction of United Kingdom income tax at the
lower rate (currently 20%) except in the case of interest on U.K. debt
securities with a maturity date of less than one year from the date of issue
(and the borrowing under such debt securities at no time forms part of a
borrowing which is intended to have a total term of one year or more).
(D) Payments on debt securities that, although not expressed to be interest,
fail to be treated as yearly interest for United Kingdom tax purposes will also
be subject to the withholding tax rules described above. A premium payable on a
redemption of a debt security may fall to be treated as yearly interest for
United Kingdom tax purposes. When U.K. debt securities are issued at a discount
or redeemable at a premium, United Kingdom withholding tax will not apply to
the payment of such discount or premium so long as it does not constitute
yearly interest for U.K. tax purposes.
(E) Payments, or parts thereof, constituting income in respect of U.K. debt
securities have a United Kingdom source and accordingly will be chargeable to
United Kingdom tax by direct assessment even if paid without withholding or
deduction. However, income in respect of debt securities with a United Kingdom
source received without deduction or withholding on account of United Kingdom
tax will not be chargeable to United Kingdom tax unless that securities holder
carries on a trade, profession or vocation in the United Kingdom through a
United Kingdom branch or agency in connection with which the income is received
or to which the debt securities are attributable. There are certain exemptions
for income received by certain categories of agent (such as some brokers and
investment managers).
2. Debt Securities issued by BP Capital America, BP Canada and BP Australia
("non-U.K. debt securities")
(A) Payments of interest on non-U.K. debt securities may be made without
withholding on account of United Kingdom income tax.
(B) Any income in respect of debt securities issued by BP Capital America, BP
Canada or BP Australia acting through a branch located in the United Kingdom
may have a United Kingdom source. The statements in paragraphs 1(E) and (F)
above will apply to any such income having a United Kingdom source.
3. All debt securities
(A) Holders of debt securities which are companies within the charge to U.K.
corporation tax may be subject to U.K. corporation tax on their holding,
disposal and redemption (including a part redemption of debt securities that
are redeemable in two or more installments) of debt securities. In general, all
returns on and fluctuations in
35
the value of the debt securities will be charged to tax as income in accordance
with securities holders' statutory accounting treatment. Such securities
holders will generally be charged to tax in each accounting period by reference
to the interest accrued in that period. Fluctuations in value relating to
foreign exchange gains and losses in respect of the debt securities will also
be brought into account as income.
(B) Holders of debt securities who are individuals and who are resident or
ordinarily resident in the United Kingdom or carry on a trade in the United
Kingdom through a branch or agency to which debt securities are attributable
may be subject to U.K. income or capital gains tax on the disposal or
redemption (including a part
redemption of debt securities that are redeemable in two or more installments)
of debt securities. The nature of the tax charge will depend on the terms of
the debt securities in question and the particular circumstances of the
relevant securities holder. In particular, individual securities holders should
have regard, where appropriate, to the capital gains tax legislation, the
"accrued income scheme" and the "relevant discounted securities legislation"
and they should note that under certain provisions of United Kingdom tax
legislation (the "relevant discounted securities legislation") the issue of
debt securities under a particular Pricing Supplement may, in certain
circumstances, alter the tax treatment of debt securities previously issued.
4. Provision of Information by and/or to the Inland Revenue
Securities holders who are individuals may wish to note that the Inland
Revenue has power to obtain information (including the name and address of the
beneficial owner of the interest) from any person in the United Kingdom:
. who either pays interest to or receives interest for the benefit of an
individual; or
. who, after April 5, 2002, either pays amounts payable on the redemption of
debt securities which are relevant discounted securities (for the purposes
of the Finance Act 1996) to, or receives such amounts for the benefit of,
an individual. Such information may, in certain circumstances, be
exchanged by the Inland Revenue with the tax authorities of other
jurisdictions.
5. Guarantee Payments
Any payments made by BP under the guarantee either to:
. holders who beneficially own debt securities, or
. either issuer to enable it to make payments of principal or interest in
respect of the debt securities,
will have a U.K. source for U.K. tax purposes. Therefore recipients may be
directly assessed for U.K. tax on the receipt of this payment. However, where a
payment is made to a holder who is resident in another jurisdiction, the
recipient will not be directly assessed for U.K. tax on that payment, unless
such recipient carries on a trade, profession or vocation in the U.K. through a
U.K. branch or agency in connection with which the interest is received or to
which those debt securities are attributable, in which case (subject to
exceptions for interest received by certain categories of agents) tax may be
levied on the U.K. branch or agency.
6. Inheritance Tax
A holder of debt securities who is an individual domiciled outside the
United Kingdom will generally not be liable to U.K. inheritance tax in respect
of his holding of debt securities. This will be the case if a register of the
debt securities is maintained outside the United Kingdom. If no register is
maintained, there may be a liability to inheritance tax if the debt securities
are held in the United Kingdom. If so, exemption from or reduction in any U.K.
inheritance tax liability may be available for holders of debt securities who
are resident in another jurisdiction under the Estate Tax Treaty made between
the United Kingdom and the United States.
Holders of debt securities who are resident in the United Kingdom may be
liable to inheritance tax with respect of their holdings of debt securities.
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7. Stamp Duty and Stamp Duty Reserve Tax
No U.K. stamp duty or stamp duty reserve tax will generally be payable by a
holder of debt securities on the creation, issue or redemption of the debt
securities by BP Capital U.K.
No liability for U.K. stamp duty or stamp duty reserve tax will arise on a
transfer, or an agreement to transfer, of debt securities unless such
securities carry:
. a right of conversion into shares or other securities;
. a right to interest, the amount of which is or was determined to any
extent by reference to the results of, or of any part of, a business or to
the value of any property;
. a right to interest the amount of which exceeds a reasonable commercial
return on the nominal amount of the capital; or
. a right of repayment to an amount which exceeds the nominal amount of the
capital and is not reasonably comparable with what is generally repayable
(in respect of a similar nominal amount of capital) under the terms of
issue of loan capital listed on the Official List of the London Stock
Exchange.
8. Proposed European Union Directive on the Taxation of Savings
On July 18, 2001 the EU Commission published a proposal for a new directive
regarding the taxation of savings income. 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
Member States (including Luxembourg but not including the UK) to opt instead
for a withholding system for a transitional period in relation to such
payments. The proposals are not yet final, and they may be subject to further
amendment and/or clarification.
Please consult your own tax advisor concerning the consequences of owning
these debt securities in your particular circumstances under the Code and the
laws of any other taxing jurisdiction.
Canadian Taxation
The following is a summary of the principal Canadian federal income tax
consequences at the date of the prospectus to a holder of debt securities who
is a non-resident of Canada in relation to the payment of principal, interest,
discount and premium in respect of debt securities issued by BP Canada. This
summary is based on the current provisions of the Income Tax Act (Canada) and
the regulations under that Act, current published administrative practices of
Canada Customs and Revenue Agency, and all specific proposals to amend the
Income Tax Act (Canada) and the regulations announced by the Minister of
Finance prior to the date of this prospectus. This section is the opinion of
the Senior Legal Counsel of BP Canada. This summary does not otherwise take
into account or anticipate changes in the law whether by judicial, governmental
or legislative decisions or action, nor does it take into account tax
legislation or considerations of any province or territory of Canada or any
jurisdiction other than Canada.
This summary assumes that, throughout the period debt securities are
outstanding, BP Canada will deal with you at arm's length within the meaning of
the Income Tax Act (Canada), and that BP Canada will not, under any
circumstances be obliged to pay more than 25% of the aggregate principal amount
of the debt securities within five years from the later of the date of issue of
any debt securities, or if payment in full of any debt securities is not made
on the date of issue, within five years from the date of final payment being
made for such debt securities, except in the event of a failure or default
under the terms of the debt securities or of any agreement relating to the debt
securities or if the terms of the debt securities or any such agreement become
unlawful or are changed by legislative, judicial or administrative action.
37
The payment by BP Canada of interest or principal on the debt securities to
a holder who is a non-resident of Canada and with whom BP Canada deals at arm's
length within the meaning of the Income Tax Act (Canada), at the time amounts
are payable, in the case of interest, or at the time the payments are made, in
the case of principal, will be exempt from Canadian withholding tax. For the
purposes of the Income Tax Act (Canada), related persons (as defined in the
Income Tax Act (Canada)) are deemed not to deal at arm's length and it is a
question of fact whether persons not related to each other deal at arm's length.
In addition, to qualify for the exemption, no portion of the interest may be
contingent or dependent upon the use of or production from property in Canada,
or be computed by reference to revenue, profit, cash flow, commodity price or
any similar criterion or by reference to dividends paid or payable to
shareholders of any class of shares of the capital stock of a corporation.
No other taxes on income (including taxable capital gains) will be payable
under the Income Tax Act (Canada) on the holding, redemption or disposition of
the debt securities, or the receipt of interest on the debt securities by
holders who are neither residents nor deemed to be residents of Canada for the
purposes of the Income Tax Act (Canada) and who do not use or hold and are not
deemed by those laws to use or hold the debt securities in carrying on business
in Canada for the purposes of the Income Tax Act (Canada), except that in some
circumstances holders who are non-resident insurers carrying on an insurance
business in Canada and elsewhere may be subject of those taxes.
There are no estate taxes or succession duties imposed under the federal
laws of Canada.
Australian Taxation
The following is a summary of the Australian taxation treatment at the date
of this prospectus of payments of principal, interest and discount on the debt
securities to be issued by BP Australia and certain other matters. It is not
exhaustive and, in particular, it focuses on the treatment of off-shore holders
of debt securities. In addition the matters raised in this summary are subject
to change, possibly with retro-active effect, and should be treated with
appropriate caution. This section is the opinion of Mallesons Stephen Jaques,
Australian counsel to BP Australia. Prospective holders of debt securities who
will hold the debt securities in Australia or who are in any doubt as to their
tax position should consult their professional advisers.
An exemption from Australian interest withholding tax ("AIWT") is available
in respect of the debt securities to be issued by BP Australia under section
128F of the Income Tax Assessment Act 1936 of Australia ("Australian Tax Act")
if the following conditions are met:
. BP Australia is a resident of Australia when it issues the debt securities
and when interest (as defined in section 128A(IAB)) is paid;
. the debt securities are issued in a manner which satisfies the public
offer test. There are five principal methods of satisfying the public
offer test, the purpose of which is to ensure that lenders in overseas
capital markets are aware that BP Australia is offering debt securities
for issue. In summary, the five methods are:
. offers to 10 or more unrelated financiers or securities dealers;
. offers to 100 or more investors;
. offers of listed debt securities;
. offers via publicly available information sources; and
. offers to a dealer, manager or underwriter who offers to sell the debt
securities within 30 days by one of the preceding methods.
38
In addition, the issue of a global security and the offering of interests in
the Global Security by one of these methods can also satisfy the public offer
test.
The exemption from AIWT is only available provided:
. BP Australia does not know, or have reasonable grounds to suspect, that at
the time of issue, the debt securities were being, or would later be,
acquired, directly or indirectly, by an associate of BP Australia (other
than in the capacity of a dealer, manager or underwriter in relation to
the placement of the debt securities); and
. BP Australia does not pay interest under a debt security to an associate
(other than in the capacity of a dealer, manager or underwriter in
relation to the placement of the debt securities) unless at the time of
the payment of interest, BP Australia does not know, or have reasonable
grounds to suspect, that the payee is an associate of BP Australia.
BP Australia proposes to issue debt securities in a manner which will
satisfy the requirements of section 128F of the Australian Tax Act.
If BP Australia should at any time be compelled by law to deduct or withhold
an amount in respect of any Australian withholding taxes, BP Australia shall,
subject to certain exceptions, pay such additional amounts as may be necessary
in order to ensure that the net amounts received by the holders of the debt
securities after such deduction or withholding shall equal the respective
amounts which would have been receivable had no such deduction or withholding
been required.
BP Australia has been advised that under Australian laws as presently in
effect:
. assuming the requirements of section 128F of the Australian Tax Act are
satisfied with respect to the debt securities, payments of principal,
interest and any discount in respect of the debt securities to a holder
who is a non-resident of Australia and who, during the taxable year, has
not held the debt securities in the course of carrying on business through
a permanent establishment within Australia, will not be subject to
Australian income taxes;
. a holder of the debt securities, who is a non-resident of Australia and
who during the taxable year has not held the debt securities in the course
of carrying on business through a permanent establishment within
Australia, will not be subject to Australian income tax on gains realized
during that year on sale or redemption of the debt securities, provided
such gains do not have an Australian source. A gain arising on the sale of
a debt security by a non-Australian resident holder to another
non-Australian resident where the debt security is sold outside Australia
and all negotiations are conducted, and the documentation is executed
outside Australia would not be regarded as having an Australian source;
. there are specific rules that can apply to treat a portion of the sale
price of debt securities as interest for withholding tax purposes (which
portion is not covered by the exemption in section 128F of the Australian
Tax Act) when certain debt securities originally issued at a discount or
with a maturity premium or which do not pay interest at least annually are
sold to an Australian resident (who does not acquire them in the course of
carrying on business at or through a permanent establishment outside
Australia) or a non-resident (who acquires them in the course of carrying
on a trade or business at or through a permanent establishment in
Australia). The Federal Government has announced that these rules will be
amended, and section 128F will apply to exempt that portion of the sale
price from AIWT after August 29, 2001. However, that announcement has not
yet been introduced into the Australian Tax Act;
. no debt securities will be subject to death, estate or succession duties
imposed by Australia, or by any political subdivision or authority therein
having power to tax, if held at the time of death;
39
. no ad valorem stamp, issue, registration or similar taxes are payable in
Australia on the issue of any debt securities or the transfer of any debt
securities (except in certain circumstances where the transfer occurs in
Australia otherwise than for full market value); and
. section 12-140 of the Taxation Administration Act 1953 of Australia
("TAA") imposes a type of withholding tax at the rate of (currently) 48.5%
on the payment of interest on certain securities unless the holder has
quoted a tax file number ("TFN"), or in certain circumstances an
Australian Business Number ("ABN"), or proof of some other exemption.
Assuming the requirements of section 128F of the Australian Tax Act are
satisfied with respect to the debt securities in registered form, these rules
should not apply to payments to a holder of registered debt securities who is
not a resident of Australia for tax purposes and not holding the debt
securities in the course of carrying on business at or through a permanent
establishment in Australia. Withholdings may be made from payments to holders
of registered debt securities who are residents of Australia or non-residents
carrying on business at or through a permanent establishment in Australia but
who do not quote a TFN, (in certain circumstances) an ABN or provide proof of
an appropriate exemption. For the avoidance of doubt, these provisions will
also not apply to debt securities in bearer form.
A number of significant changes to Australia's tax laws have been effected
as part of the Federal Government's tax reform measures, including the New
Business Tax System (Debt and Equity) Act 2001 of Australia ("Debt/Equity
Act"), which took effect from July 1, 2001 and contains new tests for
characterizing debt (for all entities) and equity (for companies) for
Australian tax purposes, including for the purposes of dividend and interest
withholding tax.
BP Australia intends to issue debt securities which are to be characterized
as "debt interests" for the purposes of the tests introduced by the Debt/Equity
Act so that the returns paid on the debt securities will continue to be
"interest" for the purpose of section 128F of the Australian Tax Act.
Accordingly, the Debt/Equity Act should not impact the tax treatment of the
holders of the debt securities.
The Federal Government's announcement (referred to above) also says that
section 128F of the Australian Tax Act will be amended (effective from August
29, 2001) to provide that the :
. section 128F exemption from AIWT will not be lost if an on-shore associate
purchases debt securities of a related Australian issuer. On-shore
associates are associates that are Australian residents or non-residents
carrying on business at or through a permanent establishment in Australia;
. class of off-shore associates that can acquire debt securities issued by a
related Australian issuer is to be expanded to include clearing houses,
paying agents, custodians and managers.
No Australian approvals are currently required for or in connection with the
issue of the debt securities by BP Australia or for or in connection with the
performance and enforceability of such debt securities. However, the specific
approval of the Reserve Bank of Australia must be obtained in connection with
certain payments to and transactions having a prescribed connection with
countries and entities designated from time to time by the Reserve Bank of
Australia for the purposes of the Banking (Foreign Exchange) Regulations
(currently the Federal Republic of Yugoslavia (Serbia and Montenegro), Iraq,
Libya, the Taliban (Islamic Emirate of Afghanistan) and the National Union for
the Total Independence of Angola (UNITA)) and certain named individuals or
organizations associated with terrorism.
40
PLAN OF DISTRIBUTION
We may sell the securities offered by this prospectus:
. through underwriters;
. through dealers;
. through agents; or
. directly to purchasers.
The prospectus supplement relating to any offering will identify or describe:
. any underwriter, dealers or agents;
. their compensation;
. the net proceeds to us;
. the purchase price of the securities;
. the initial public offering price of the securities; and
. any exchange on which the securities will be listed.
Underwriters
If we use underwriters in the sale, they will acquire securities for their
own account and may resell the securities from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. Unless we otherwise
state in the prospectus supplement, various conditions to the underwriters'
obligation to purchase securities apply, and the underwriters will be obligated
to purchase all of the securities contemplated in an offering if they purchase
any of such securities. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
Dealers
If we use dealers in the sale, unless we otherwise indicate in the
prospectus supplement, we will sell securities to the dealers as principals.
The dealers may then resell the securities to the public at varying prices that
the dealers may determine at the time of resale.
Agents and Direct Sales
We may sell securities directly or through agents that we designate. The
prospectus supplement will name any agent involved in the offering and sale and
states any commissions we will pay to that agent. Unless we indicate otherwise
in the prospectus supplement, any agent is acting on a best efforts basis for
the period of its appointment.
Institutional Investors
If we indicate in the prospectus supplement, we will authorize underwriters,
dealers or agents to solicit offers from various institutional investors to
purchase securities. In this case, payment and delivery will be made on a
future date that the prospectus supplement specifies. The underwriters, dealers
or agents may impose limitations on the minimum amount that the institutional
investor can purchase. They may also impose limitations on the portion of the
aggregate amount of the securities that they may sell. These institutional
investors include:
. commercial and savings banks;
. insurance companies;
41
. pension funds;
. investment companies;
. educational and charitable institutions; and
. other similar institutions as we may approve.
The obligations of any of these purchasers pursuant to delayed delivery and
payment arrangements will not be subject to any conditions. However, one
exception applies. An institution's purchase of the particular securities
cannot at the time of delivery be prohibited under the laws of any jurisdiction
that governs:
. the validity of the arrangements; or
. the performance by us or the institutional investor.
Indemnification
Agreements that we have entered into with underwriters, dealers or agents
may entitle them to indemnification by us against various civil liabilities.
These include liabilities under the Securities Act of 1933. The agreements may
also entitle them to contribution for payments which they may be required to
make as a result of these liabilities. Underwriters, dealers and agents may be
customers of, engage in transactions with, or perform services for, us in the
ordinary course of business.
Market Making
In the event that we do not list securities of any series on a U.S. national
securities exchange, various broker-dealers may make a market in the
securities, but will have no obligation to do so, and may discontinue any
market making at any time without notice. Consequently, it may be the case that
no broker-dealer will make a market in securities of any series or that the
liquidity of the trading market for the securities will be limited.
Certain Selling Restrictions
The debt securities have not been, and will not be, qualified for sale under
the securities law of Canada or any province or territory thereof. Unless
otherwise specified in the relevant prospectus supplement, all debt securities
of BP Canada will be issued with minimum denominations of CAN$150,000 or its
equivalent in other currencies or, in the case of zero coupon debt securities,
having an amortized face amount of at least CAN$150,000 or its equivalent in
other currencies. In addition, debt securities may not be offered, sold or
delivered, directly or indirectly, in Canada or to, or for the benefit of, any
resident thereof except pursuant to available exemptions from applicable
Canadian provincial or territorial securities laws.
42
VALIDITY OF SECURITIES
The Group General Counsel of BP will pass upon the validity of the debt
securities and guarantees as to matters of English law. The Assistant General
Counsel of BP will pass upon the validity of the debt securities and guarantees
as to matters of United States law. The Senior Legal Counsel of BP Canada will
pass upon Canadian law matters. The Managing Legal Adviser of BP Australia will
pass upon Australian law matters.
In connection with particular offerings of debt securities in the future,
the validity of those debt securities may be passed upon by Sullivan &
Cromwell, U.S. counsel to BP, as to certain matters of New York law. Cleary,
Gottlieb, Steen & Hamilton or any other law firm named in the applicable
prospectus supplement will pass upon the validity of the debt securities for
any underwriters or agents as to certain matters of New York law.
EXPERTS
The consolidated financial statements of BP appearing in BP's Annual Report
on Form 20-F for the year ended December 31, 2000, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in auditing and accounting.
The consolidated financial statements of Atlantic Richfield Company for the
year ended December 31, 2000 appearing in BP's Form 6-K filed on February 19,
2002, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
43
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES
BP and BP Capital U.K. are public limited companies incorporated under the
laws of England and Wales. BP Canada is incorporated under the laws of Nova
Scotia. BP Australia is incorporated under the laws of Australia. Many of our
directors and officers, and some of the experts named in this document, reside
outside the United States, principally in the United Kingdom. In addition,
although we have substantial assets in the United States, a large portion of
our assets and the assets of our directors and officers is located outside of
the United States. As a result, U.S. investors may find it difficult in a
lawsuit based on the civil liability provisions of the U.S. federal securities
laws:
. to effect service within the United States upon us or our directors and
officers located outside the United States;
. to enforce in U.S. courts or outside the United States judgments obtained
against us or those persons in the U.S. courts;
. to enforce in U.S. courts judgments obtained against us or those persons
in courts in jurisdictions outside the United States; and
. to enforce against us or those persons in the United Kingdom, Canada and
Australia, whether in original actions or in actions for the enforcement
of judgments of U.S. courts, civil liabilities based solely upon the U.S.
federal securities laws.
44
EXPENSES
The following are the estimated expenses to be incurred in connection with
the issuance and distribution of the debt securities registered with the SEC
under the registration statement:
Securities and Exchange Commission registration fee $ 552,000
Printing and engraving expenses.................... $ 200,000
Legal fees and expenses............................ $ 500,000
Accounting fees and expenses....................... $ 200,000
Indentures' Trustees' fees and expenses............ $ 71,000
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Total........................................... $1,533,000
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PRINCIPAL OFFICES OF THE ISSUER
BP Capital Markets p.l.c.
Breakspear Park, Breakspear Way
Hemel Hempstead
Herts HP2 4UL, England
PRINCIPAL OFFICES OF THE GUARANTOR
BP p.l.c.
Britannic House, 1 Finsbury Circus
London EC2M 7BA, England
THE TRUSTEE
JPMorgan Chase Bank
450 West 33rd Street
New York, New York 10001
LEGAL ADVISERS
To the Issuer and the Guarantor as to United States law
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
To the Underwriters as to United States law
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
PRINCIPAL PAYING AGENT AND PRINCIPAL REGISTRAR
JPMorgan Chase Bank
450 West 33rd Street
New York, New York 10001
LUXEMBOURG LISTING, TRANSFER AND PAYING AGENT
Kredietbank S.A. Luxembourgeoise
43 Boulevard Royal
P.O. Box 1108
L-2955, Luxembourg
AUDITORS TO BP CAPITAL MARKETS P.L.C. AND BP P.L.C.
Ernst & Young
Beckett House
1 Lambert Palace Road
London SW1 7EU, England
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No person has been authorized to give any information or to make any
representations other than those contained in this prospectus supplement or the
prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized. This prospectus supplement and the
prospectus do not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the securities described in this prospectus
supplement or an offer to sell or 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 supplement or the prospectus
nor any sale made hereunder or thereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of BP
Capital Markets p.l.c. or BP p.l.c. since the date hereof or that the
information contained herein or therein is correct as of any time subsequent to
the date of such information.
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TABLE OF CONTENTS
Page
- ----
Prospectus Supplement
Description of Notes....................... S-5
Selected Financial Information............. S-7
Underwriting............................... S-10
General Information........................ S-12
Prospectus
About This Prospectus...................... i
Risk Factors............................... 1
Forward-Looking Statements................. 2
Where You Can Find More Information
About Us................................. 2
BP p.l.c................................... 3
Description of BP Debt Issuers............. 4
Ratio of Earnings to Fixed Charges......... 4
Capitalization and Indebtedness of BP...... 5
Use of Proceeds............................ 5
Legal Ownership............................ 6
Description of Debt Securities and
Guarantees............................... 8
Clearance and Settlement................... 18
Tax Considerations......................... 22
Plan of Distribution....................... 41
Validity of Securities..................... 43
Experts.................................... 43
Enforceability of Certain Civil Liabilities 44
Expenses................................... 45
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$500,000,000
BP Capital Markets p.l.c.
4.0% Guaranteed Notes
Due 2005
Payment of the principal of and interest on the notes is guaranteed by
BP p.l.c.
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[LOGO] bp
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Salomon Smith Barney
UBS Warburg
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