AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 14, 2005
REGISTRATION NO. 333- 121429
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
CINCINNATI FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------
OHIO 6331 31-0746871
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
6200 S. GILMORE ROAD
FAIRFIELD, OHIO 45014-5141
(513) 870-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------------
KENNETH W. STECHER
CINCINNATI FINANCIAL CORPORATION
6200 S. GILMORE ROAD
FAIRFIELD, OHIO 45014-5141
(513) 870-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------------
COPY TO:
JONATHAN L. FREEDMAN, ESQ.
DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 259-8000
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
PROSPECTUS
$375,000,000
CINCINNATI FINANCIAL CORPORATION
$375,000,000 6.125% SENIOR NOTES DUE 2034
Offer to exchange all of its outstanding 6.125% Senior Notes due 2034 (the
Notes) for an equal amount of 6.125% Senior Notes due 2034, which have been
registered under the Securities Act of 1933 (the Exchange Notes).
The Exchange Offer
- We will exchange all outstanding Notes
that are validly tendered and not validly
withdrawn for an equal principal amount
of Exchange Notes that are freely
tradeable, except in limited
circumstances described below.
- You may withdraw tenders of
outstanding Notes at any time prior to
the expiration of the exchange offer.
- The exchange offer expires at 5:00
p.m., New York City time, on April 15,
2005, unless extended. We currently do
not intend to extend the expiration date.
- The exchange of outstanding Notes for
Exchange Notes in the exchange offer will
not be a taxable event for U.S. federal
income tax purposes.
- We will not receive any proceeds from
the exchange offer.
The Exchange Notes
- The Exchange Notes are being
offered to satisfy certain of our
obligations under the Registration
Rights Agreement entered into in
connection with the placement of
the outstanding Notes.
- The terms of the Exchange Notes
to be issued in the exchange offer
are substantially identical to the
outstanding Notes, except that the
Exchange Notes will be freely
tradeable, except in limited
circumstances described below.
Resales of Exchange Notes
- The Exchange Notes may be sold
in the over-the-counter market, in
negotiated transactions or through
a combination of such methods.
If you are a broker-dealer and you receive Exchange Notes for your own account,
you must acknowledge that you will deliver a prospectus in connection with any
resale of such Exchange Notes. By making such acknowledgement, you will not be
deemed to admit that you are an "underwriter" under the Securities Act of 1933.
Broker-dealers may use this prospectus in connection with any resale of Exchange
Notes received in exchange for outstanding Notes where the outstanding Notes
were acquired by the broker-dealer as a result of market-making activities or
trading activities. We have agreed to make this prospectus, and any amendment or
supplement thereto, available to any such broker-dealer for use in connection
with any resale of any Exchange Notes for a period of the lesser 180 days after
the expiration of the exchange offer (as such date may be extended) and the date
on which all broker-dealers have sold all Exchange Notes held by them. A
broker-dealer may not participate in the exchange offer with respect to
outstanding Notes acquired other than as a result of market-making activities or
trading activities. See "Plan of Distribution."
If you are an affiliate of Cincinnati Financial Corporation, are engaged in, or
intend to engage in, or have an agreement or understanding to participate in, a
distribution of the Exchange Notes, you cannot rely on the applicable
interpretations of the Securities and Exchange Commission, or SEC, and you must
comply with the registration requirements of the Securities Act of 1933 in
connection with any resale transaction.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is March 15, 2005.
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TABLE OF CONTENTS
ABOUT THIS PROSPECTUS 1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 1
WHERE YOU CAN FIND MORE INFORMATION 2
PROSPECTUS SUMMARY 4
RECENT DEVELOPMENTS 11
RATIO OF EARNINGS TO FIXED CHARGES 13
USE OF PROCEEDS 13
SELECTED HISTORICAL FINANCIAL INFORMATION 14
THE EXCHANGE OFFER 16
DESCRIPTION OF THE EXCHANGE NOTES 26
EXCHANGE OFFERS AND REGISTRATION RIGHTS 34
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES 35
RATINGS 38
ERISA CONSIDERATIONS 38
PLAN OF DISTRIBUTION 39
LEGAL OPINIONS 39
EXPERTS 39
ABOUT THIS PROSPECTUS
Unless otherwise indicated, all references in this prospectus to
"Cincinnati Financial," "we," "us" and "our," unless the context requires
otherwise, refer to Cincinnati Financial Corporation, a company incorporated in
Ohio, and its subsidiaries. Unless the context otherwise requires, "notes"
refers to the outstanding Notes and the Exchange Notes.
You should rely only on the information contained in this document.
Neither Cincinnati Financial nor the exchange agent has authorized anyone to
provide you with information different from that contained in this document. We
are not offering to exchange, or soliciting any offers to exchange, securities
pursuant to the exchange offer in any jurisdiction in which those offers or
exchanges would not be permitted. The information contained in this document is
accurate only as of the date of this document regardless of the time of delivery
of this document or the time of any exchange of securities in the exchange
offer.
This document incorporates important business and financial information
about us from documents filed with the SEC that have not been included in or
delivered with this document. This information is available without charge upon
written or oral request. See "Where You Can Find More Information" beginning on
page 2.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This is a "Safe Harbor" statement under the Private Securities Litigation
Reform Act of 1995. Certain forward-looking statements contained herein involve
potential risks and uncertainties. Our future results could differ materially
from those discussed. Factors that could cause or contribute to such differences
include, but are not limited to:
- Unusually high levels of catastrophe losses due to changes in weather
patterns, environmental events, terrorism incidents or other causes
- Ability to obtain adequate reinsurance on acceptable terms, amount of
reinsurance purchased and financial strength of reinsurers
- Increased frequency and/or severity of claims
- Events or conditions that could weaken or harm our relationships with our
independent agencies and hamper opportunities to add new agencies,
resulting in limitations on our opportunities for growth, such as:
- Downgrade of our financial strength ratings,
- Concerns that doing business with us is too difficult or
- Perceptions that our level of service, particularly claims service, is no
longer a distinguishing characteristic in the marketplace
- Insurance regulatory actions, legislation or court decisions or legal
actions that increase expenses or place us at a disadvantage in the
marketplace
- Delays in the development, implementation, performance and benefits of
technology projects and enhancements
- Inaccurate estimates or assumptions used for critical accounting
estimates, including loss reserves
- Events that reduce our ability to maintain effective internal control over
financial reporting under the Sarbanes-Oxley act of 2002 in the future
- Recession or other economic conditions or regulatory, accounting or tax
changes resulting in lower demand for insurance products
- Sustained decline in overall stock market values negatively affecting our
equity portfolio, in particular a sustained decline in the market value of
Fifth Third Bancorp shares, a significant equity holding
- Events that lead to a significant decline in the market value of a
particular security and impairment of the asset
- Prolonged low interest rate environment or other factors that limit our
ability to generate growth in investment income
- Adverse outcomes from litigation or administrative proceedings
- Effect on the insurance industry as a whole, and thus on our business, of
the suit brought by the Attorney General of the State of New York against
participants in the insurance industry, as well as any increased
regulatory oversight that might result from the suit
- Limited flexibility in conducting investment activities if the
restrictions imposed by the Investment Company Act of 1940 become
applicable to us
Further, our insurance businesses are subject to the effects of changing
social, economic and regulatory environments. Public and regulatory initiatives
have included efforts to adversely influence and restrict premium rates,
restrict the ability to cancel policies, impose underwriting standards and
expand overall regulation. We also are subject to public and regulatory
initiatives that can affect the market value for our common stock, such as
recent measures affecting corporate financial reporting and governance. The
ultimate changes and eventual effects, if any, of these initiatives are
uncertain.
Readers are cautioned that we undertake no obligation to review or update
the forward-looking statements included herein.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with
the SEC. You may read and copy any materials we file at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operations of the
Public Reference Room. The SEC maintains an Internet site that contains reports,
proxy and other information statements, and other information regarding issuers
that file electronically with the SEC. You may examine our SEC filings through
the SEC's Web site at http://www.sec.gov. You may also find additional
information about us at our Web site at http://www.cinfin.com. Information
contained on our Web site is not intended to be incorporated by reference in
this prospectus and you should not consider that information a part of this
prospectus.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the completion of the exchange offer.
SEC Filings (File No. 0-4604) Period
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Annual Report on Form 10-K .................. Year Ended December 31, 2004
Current Reports on Form 8-K ................. January 12, 2005; February 9,
2005 (Item 8.01 filed) and
February 22, 2005
You may request a copy of these filings, at no cost, by writing or calling
us at the following address or telephone number:
Heather Wietzel
Investor Relations
Cincinnati Financial Corporation
P.O. Box 145496
Cincinnati, Ohio 45250-5496
(513) 603-5950
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Exhibits to the filings will not be sent, however, unless those exhibits
have specifically been incorporated by reference in this prospectus.
TO OBTAIN TIMELY DELIVERY, SECURITY HOLDERS MUST REQUEST THE INFORMATION
NO LATER THAN FIVE BUSINESS DAYS BEFORE THE DATE THEY MUST MAKE THEIR INVESTMENT
DECISION. ANY REQUEST FOR COPIES OF DOCUMENTS SHOULD BE MADE NO LATER THAN APRIL
8, 2005 TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS PRIOR TO THE EXPIRATION DATE
OF THE EXCHANGE OFFER. IN THE EVENT THAT WE EXTEND THE EXCHANGE OFFER, YOU MUST
SUBMIT YOUR REQUEST AT LEAST FIVE BUSINESS DAYS BEFORE THE EXPIRATION DATE, AS
EXTENDED. IF YOU REQUEST ANY SUCH DOCUMENTS FROM US, WE WILL MAIL THEM TO YOU BY
FIRST CLASS MAIL, OR ANOTHER EQUALLY PROMPT MEANS, WITHIN ONE BUSINESS DAY AFTER
WE RECEIVE YOUR REQUEST.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere or incorporated by reference in this prospectus.
Because this is a summary, it may not contain all the information that may be
important to you. You should read the entire prospectus, as well as the
information incorporated by reference, before making an investment decision.
CINCINNATI FINANCIAL CORPORATION
OVERVIEW
Cincinnati Financial Corporation is an Ohio corporation. Through our
subsidiaries, Cincinnati Financial has been conducting insurance operations
since 1950, marketing commercial, personal and life insurance. We report results
in four segments:
- Commercial lines property casualty insurance
- Personal lines property casualty insurance
- Life insurance and
- Investments
Cincinnati Financial Corporation owns 100 percent of its three
subsidiaries: The Cincinnati Insurance Company, CFC Investment Company and
CinFin Capital Management Company. The Cincinnati Insurance Company owns 100
percent of its three subsidiaries: The Cincinnati Casualty Company, The
Cincinnati Indemnity Company and The Cincinnati Life Insurance Company.
The Cincinnati Insurance Company, founded in 1950, leads our property
casualty group (jointly The Cincinnati Insurance Companies). The Cincinnati
Casualty Company and the Cincinnati Indemnity Company round out the property
casualty insurance group, providing flexibility in pricing and underwriting
while ceding substantially all of their business to The Cincinnati Insurance
Company. The Cincinnati Life Insurance Company primarily markets life insurance
and annuities. CFC Investment Company complements the insurance subsidiaries
with leasing and financing services. CinFin Capital Management Company provides
asset management services to institutions, corporations and high net worth
individuals.
We market our commercial and personal insurance policies in 31 states
through a select group of 986 independent insurance agencies as of December 31,
2004. We are committed to the independent agent distribution system, recognizing
that locally based independent agencies have relationships in their communities
that lead to profitable business. Field marketing and other associates provide
service and accountability to the agencies, living in the communities they serve
and working from offices in their homes, providing 24/7 availability. We
differentiate ourselves by providing local decision-making, by providing what we
believe is exceptional claims service through locally based field claims
associates serving the needs of agents and policyholders, and by offering
competitive products, rates and compensation. The commercial and personal lines
property casualty insurance segments combined to generate more than 80 percent
of our $3.614 billion in revenue in 2004.
As of the date of this prospectus, our 6.9% Senior Notes due 2028 and our
6.125% Senior Notes due 2034 were rated as follows:
- A.M. Best Co.: aa- (very strong) with stable outlook
- Fitch Ratings: A+ (high credit quality) with stable outlook
- Moody's Investor Service: A2 (above average) with stable outlook and
- Standard & Poor's Ratings Services: A (strong) with negative outlook
The Cincinnati Insurance Companies are one of only 21 insurance groups,
among 1,090 groups reviewed by Best, assigned a financial strength rating of A++
(Superior) as of July 2004. Each of our property casualty
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subsidiaries is also separately rated A++ (Superior) by Best. Best bases its
financial strength ratings on factors that concern policyholder safety and not
upon factors concerning investor protection.
In addition, our insurance subsidiaries were assigned the following
insurer financial strength ratings as of the date of this prospectus:
- Fitch Ratings: AA (very strong)
- Moody's Investor Service: Aa3 (excellent) and
- S&P: AA- (very strong) with negative outlook
Neither senior debt nor financial strength ratings are recommendations to
buy, sell or hold securities of the rated entities. They are subject to revision
or withdrawal at any time at the sole discretion of the assigning agency.
The Cincinnati Life Insurance Company's mission complements that of the
overall company: to provide products and services that attract and retain
high-quality independent agencies. Cincinnati Life primarily focuses on life
products that produce revenue growth through a steady stream of premiums rather
than seeking to accumulate assets through the sale of single-premium-type
policies. Cincinnati Life has a Best financial strength rating of A+ (Superior).
Under the direction of the investment committee of the Board of Directors,
our portfolio managers seek to balance opportunities for current investment
income and long-term appreciation.
Our investment portfolio has a strong equity focus on a select group of
companies with histories of dividend increases and what we believe is potential
for appreciation. On a consolidated basis, we hold slightly less than 72.8
million shares of Fifth Third Bancorp stock at a cost of $283 million as of
December 31, 2004. The market value of our Fifth Third Bancorp position was
$3.443 billion at December 31, 2004, or 46.1 percent of our total equity
portfolio. As of March 9, 2005, the market value of our Fifth Third Bancorp
position was $3.326 billion.
Our common shares are traded under the symbol CINF on the Nasdaq National
Market System.
Our mailing address is 6200 S. Gilmore Road, Fairfield, Ohio 45014-5141
and our telephone number is (513) 870-2000.
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SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
On November 1, 2004, we completed the private offering of the outstanding
Notes. This prospectus is part of a registration statement covering the exchange
of the outstanding Notes for the Exchange Notes.
The outstanding Notes were issued and the Exchange Notes offered hereby
will be issued under the Indenture dated as of November 1, 2004 between us and
The Bank of New York Trust Company, N.A., as Trustee, as supplemented by the
Supplemental Indenture dated as of November 1, 2004 between us and The Bank of
New York Trust Company, N.A. (which we refer to collectively herein as the
"Indenture").
In connection with the private offering, we entered into a Registration
Rights Agreement, dated as of November 1, 2004, with J.P. Morgan Securities Inc.
and UBS Securities LLC, as representatives of the initial purchasers in the
private offering, or the Registration Rights Agreement, in which we agreed,
among other things, to deliver this prospectus to you as part of the exchange
offer and to complete the exchange offer within 180 days after the date of
original issuance of the outstanding Notes. You are entitled to exchange in the
exchange offer your outstanding Notes for Exchange Notes, which are identical in
all material respects to the outstanding Notes except:
- the Exchange Notes have been registered under the Securities Act;
and
- the Exchange Notes will not be subject to restrictions on transfer
or to any increase in annual interest rate for failure to fulfill
certain obligations under the Registration Rights Agreement to file
and cause to be effective a registration statement.
The Exchange Offer........... We are offering to exchange up to $375,000,000
aggregate principal amount of outstanding Notes
for up to $375,000,000 aggregate principal amount
of Exchange Notes. Outstanding Notes may be
exchanged only in integral multiples of $1,000.
Resale ...................... Based on an interpretation by the Staff of the
SEC, set forth in no-action letters issued to
third parties, we believe that the Exchange
Notes issued pursuant to the exchange offer in
exchange for outstanding Notes may be offered
for resale, resold and otherwise transferred by
you (unless you are an "affiliate" of Cincinnati
Financial Corporation within the meaning of Rule
405 under the Securities Act) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that
you are acquiring the Exchange Notes in the
ordinary course of your business and that you
have not engaged in, do not intend to engage in,
and have no arrangement or understanding with
any person to participate in, a distribution of
the Exchange Notes. Each participating
broker-dealer that receives Exchange Notes for
its own account pursuant to the exchange offer
in exchange for outstanding Notes that were
acquired as a result of market-making or other
trading activity must acknowledge that it will
deliver a prospectus in connection with any
resale of the Exchange Notes. See "Plan of
Distribution." You must also not act on behalf
of any person who could not truthfully make the
foregoing representations.
Any holder of outstanding Notes who:
- is an affiliate of Cincinnati Financial
Corporation;
- does not acquire Exchange Notes in the
ordinary course of its business; or
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- tenders in the exchange offer with the
intention to participate, or for the purpose
of participating, in a distribution of
Exchange Notes
cannot rely on the position of the staff of the
SEC enunciated in no-action letters and, in the
absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with the resale of the Exchange Notes. We have not
obtained, and do not plan to request, a no-action
letter from the Staff of the SEC with respect to
this exchange offer.
Expiration Date; Withdrawal
of Tender ...................The exchange offer will expire at 5:00 p.m., New
York City time, on April 15, 2005, or such later
date and time to which we extend it, which date we
refer to as the "expiration date." We do not
currently intend to extend the expiration date. A
tender of outstanding Notes pursuant to the
exchange offer may be withdrawn at any time prior
to the expiration date. Any outstanding Notes not
accepted for exchange for any reason will be
returned without expense to the tendering holder
promptly after the expiration or termination of the
exchange offer.
Certain Conditions to the
Exchange Offer ..............The exchange offer is subject to customary
conditions which we may waive. Please read the
section of this prospectus captioned "The Exchange
Offer - Certain Conditions to the Exchange Offer"
for more information regarding the conditions to
the exchange offer.
Procedures for Tendering
Outstanding Notes........... If you wish to participate in the exchange offer,
you must complete, sign and date the accompanying
letter of transmittal, or a facsimile of the letter
of transmittal according to the instructions
contained in this prospectus and the letter of
transmittal. You must also mail or otherwise
deliver the letter of transmittal, or a facsimile
of the letter of transmittal, together with the
outstanding Notes and any other required documents,
to the exchange agent at the address set forth on
the cover page of the letter of transmittal. If you
hold outstanding Notes through The Depository Trust
Company, or DTC, and wish to participate in the
exchange offer, you must comply with the Automated
Tender Offer Program, or ATOP, procedures of DTC,
by which you will agree to be bound by the letter
of transmittal. By signing, or agreeing to be bound
by, the letter of transmittal, you will represent
to us that, among other things:
- any Exchange Notes that you receive will be
acquired in the ordinary course of your
business;
- you have no arrangement or understanding
with any person or entity to participate in
a distribution of the Exchange Notes;
- if you are a broker-dealer that will receive
Exchange Notes for your own account in
exchange for outstanding Notes that were
acquired as a result of market-making
activities, that you will deliver a
prospectus, as required by law, in
connection with any resale of such Exchange
Notes;
- you are not an "affiliate," as defined in
Rule 405 of the Securities Act, of
Cincinnati Financial Corporation or, if you
are an affiliate,
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you will comply with any applicable
registration and prospectus delivery
requirements of the Securities Act; and
- you are not acting on behalf of any person
who could not truthfully make the foregoing
representations.
Special Procedures for
Beneficial Owners ......... If you are a beneficial owner of outstanding Notes
that are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee, and
you wish to tender such outstanding Notes in the
exchange offer, you should contact such registered
holder promptly and instruct such registered holder
to tender on your behalf. If you wish to tender on
your own behalf, you must, prior to completing and
executing the letter of transmittal and delivering
your outstanding Notes, either make appropriate
arrangements to register ownership of the
outstanding Notes in your name or obtain a properly
completed bond power from the registered holder. The
transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the expiration date.
Guaranteed Delivery
Procedures ................ If you wish to tender your outstanding Notes and (i)
your outstanding Notes are not immediately available
or (ii) you cannot deliver your outstanding Notes,
the letter of transmittal or any other documents
required by the letter of transmittal or (iii) you
cannot comply with the applicable procedures under
DTC's ATOP prior to the expiration date, you must
tender your outstanding Notes according to the
guaranteed delivery procedures set forth in this
prospectus under "The Exchange Offer - Guaranteed
Delivery Procedures."
Effect on Holders of
Outstanding Notes ......... As a result of the making of, and upon acceptance
for exchange of all validly tendered outstanding
Notes pursuant to the terms of, the exchange offer,
we will have fulfilled a covenant contained in the
Registration Rights Agreement and, accordingly,
there will be no increase in the interest rate on
the outstanding Notes under the circumstances
described in the Registration Rights Agreement. If
you are a holder of outstanding Notes and you do not
tender your outstanding Notes in the exchange offer,
you will continue to hold such outstanding Notes and
you will be entitled to all the rights and
limitations applicable to the outstanding Notes in
the Indenture, except for any rights under the
Indenture or the Registration Rights Agreement that
by their terms terminate upon the consummation of
the exchange offer. The tender of outstanding Notes
under the exchange offer will reduce the principal
amount of the outstanding Notes outstanding, which
may have an adverse effect upon, and increase the
volatility of, the market price of the outstanding
Notes due to a reduction in liquidity.
The trading market for outstanding Notes not
exchanged in the exchange offer may be more limited
than it is at present. Therefore, if your
outstanding Notes are not exchanged in the exchange
offer, it may become more difficult for you to sell
or transfer your unexchanged outstanding Notes.
Consequences of Failure
to Exchange ............... All untendered outstanding Notes will continue to be
subject to the restrictions on transfer provided for
in the outstanding Notes and in the Indenture. In
general, the outstanding Notes may not be offered or
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sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and
applicable state securities laws. Other than in
connection with the exchange offer, we do not
currently anticipate that we will register the
outstanding Notes under the Securities Act.
Certain Income Tax
Exchange Consequences..... The exchange of outstanding Notes for Exchange Notes
in the exchange offer will not be a taxable event
for United States federal income tax purposes. See
"Certain United States Federal Income Tax
Consequences."
Use of Proceeds........... We will not receive any cash proceeds from the
issuance of Exchange Notes pursuant to the exchange
offer.
Exchange Agent............ The Bank of New York Trust Company, N.A. is the
exchange agent for the exchange offer. The address
and telephone number of the exchange agent are set
forth in the section of this prospectus captioned
"The Exchange Offer - Exchange Agent."
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SUMMARY OF THE TERMS OF THE EXCHANGE NOTES
Issuer....................... Cincinnati Financial Corporation.
The Exchange Notes........... $375,000,000 principal amount of 6.125% Senior
Notes due 2034.
Maturity .................... November 1, 2034.
Interest Rate................ 6.125% per annum.
Interest Payment Dates....... May 1 and November 1 of each year, beginning on
May 1, 2005.
Ranking...................... The Exchange Notes will be our senior unsecured
obligations and will rank equally in right of
payment with any of our existing and future
unsecured and unsubordinated indebtedness.
The Exchange Notes will be effectively
subordinated to any of our future secured
indebtedness to the extent of the value of the
assets securing that indebtedness.
As of the date of this prospectus, our aggregate
principal amount of indebtedness, excluding the
Notes, was approximately $420 million (excluding
intercompany liabilities), consisting of $420
million aggregate principal amount of our 6.9%
Senior Debentures due 2028.
The Exchange Notes will not be guaranteed by any
of our subsidiaries and therefore will be
structurally subordinated to all indebtedness and
other obligations, including trade payables and
insurance liabilities, of our subsidiaries.
As of December 31, 2004, our subsidiaries had
approximately $8.300 billion of liabilities
(including trade payables, capital lease
obligations and insurance liabilities but
excluding intercompany liabilities).
Ratings...................... It is anticipated that the Exchange Notes will be
assigned a rating of "aa-" by A.M. Best, "A+" by
Fitch, "A2" by Moody's Investors Service and "A"
by S&P. A senior debt rating is not a
recommendation to buy, sell or hold securities and
may be subject to review, revision, suspension or
withdrawal at the sole discretion of the assigning
ratings agencies.
Optional Redemption ......... We may redeem the Exchange Notes, at our option,
at any time in whole, or from time to time in
part, prior to maturity at the redemption price
described under "Description of the Exchange Notes
- Optional Redemption."
Form and Denomination ....... The Exchange Notes will be issuable in
denominations of $1,000 or any integral multiples
of $1,000 in excess thereof.
Trustee ..................... The Bank of New York Trust Company, N.A.
Governing Law ............... The Indenture is, and the Exchange Notes will
be, governed by, and construed in accordance with,
the laws of the State of New York.
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RECENT DEVELOPMENTS
Investment Company Act of 1940
On August 26, 2004, we announced that Cincinnati Financial Corporation
transferred approximately 31.8 million shares of Fifth Third Bancorp common
stock to The Cincinnati Insurance Company, our lead property casualty insurance
subsidiary, to address the company's status under the Investment Company Act of
1940. The 31.8 million shares had a market value of $1.600 billion on August 26,
2004. The transfer was authorized by Cincinnati Financial's Board of Directors
on August 13, 2004, and approved by the Ohio Department of Insurance on August
24, 2004. After the contribution, the ratio of investment securities held at the
holding company level was 36.3 percent of total holding-company-only assets at
December 31, 2004.
CINCINNATI FINANCIAL CORPORATION (HOLDING COMPANY ONLY)
YEAR ENDED DECEMBER 31,
2004 2003
-----------------------
(DOLLARS IN MILLIONS)
Investment assets $2,837 $4,838
Equity in net assets of subsidiaries 4,732 3,287
Other assets 220 131
Total assets 7,789 8,256
Investment assets to total assets 36.3% 58.5%
As previously reported, as a result of a review made in June 2004, we
determined there was some uncertainty regarding the status of the Cincinnati
Financial Corporation holding company under the Investment Company Act of 1940.
On June 28, 2004, Cincinnati Financial Corporation filed an application with the
SEC formally requesting an exemption for the holding company under Section
3(b)(2) of the Investment Company Act of 1940, which permits the SEC to exempt
entities primarily engaged in business other than that of investing,
reinvesting, owning, holding or trading in securities. Cincinnati Financial
Corporation alternatively has asked the SEC for relief pursuant to Section 6(c)
of the Investment Company Act OF 1940 that would exempt it from all the
provisions of the Investment Company Act of 1940 because doing so is necessary
or appropriate in the public interest consistent with the protection of
investors and consistent with the purposes intended by the Investment Company
Act of 1940. We simultaneously contacted the SEC's Division of Investment
Management to discuss the status of Cincinnati Financial Corporation under the
Investment Company Act of 1940. As of the filing date of this prospectus, the
request for an exemptive order is still pending with the staff of the SEC.
11
We strongly believe the holding company is, and has been, outside the
intended scope of the Investment Company Act of 1940 because we are, and have
been, primarily engaged in the business of property casualty and life insurance
through our subsidiaries. Several tests and enumerated exemptions determine
whether a company meets the definition of an investment company under the
Investment Company Act of 1940. One test states that a company is an investment
company if it owns investment securities with a value greater than 40 percent of
its total assets (excluding assets of its subsidiaries).
Registered investment companies are not permitted to operate their
business in the manner we operate our business, nor are registered investment
companies permitted to have many of the relationships that we have with our
affiliated companies. If it were to be determined that the company was an
unregistered investment company before the asset transfer, Cincinnati Financial
may be unable to enforce contracts with third parties, and third parties could
seek to obtain rescission of transactions with Cincinnati Financial undertaken
during the period that it was an unregistered investment company, subject to
equitable considerations set forth in the Investment Company Act of 1940. As a
result, it could be determined that holders of Cincinnati Financial's $420
million aggregate principal amount of 6.9% Debentures due 2028 have a right to
rescind such indebtedness, thereby requiring Cincinnati Financial to immediately
repay such amounts. Cincinnati Financial may be unable to refinance such
obligations on acceptable terms. However, Cincinnati Financial currently has
available sufficient assets to fund such repayment and believes that its assets
are adequate to meet its short- and long-term obligations.
To avoid regulation under the Investment Company Act of 1940 in the
future, our operations are, to an extent, limited by the constraint that
investment securities held at the holding company level remain below the 40
percent threshold described above. These considerations could require us to
dispose of otherwise desirable investment securities under undesirable
conditions or otherwise avoid economically advantageous transactions. Although
we intend to manage assets to stay below the 40 percent threshold (unless the
SEC grants our request for an exemptive order), events beyond our control,
including significant appreciation in the market value of certain investment
securities, could result in our breaching the 40 percent threshold. While we
believe that even in such circumstances we would not be an investment company
because we are primarily engaged in the business of insurance through our
subsidiaries, the SEC, among others, could disagree with this position. If it
were established that we are an unregistered investment company, there would be
a risk, among the other material adverse consequences described above, that we
could become subject to monetary penalties or injunctive relief, or both, in an
action brought by the SEC.
-12-
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the periods indicated:
YEAR ENDED DECEMBER 31,
------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Ratio of earnings
to fixed charges(1) 21.38X 14.58X 8.69X 6.52X 3.84x
----------
(1) The pro forma ratio of earnings to fixed charges, which gives effect to the
Notes and the use of proceeds to pay the outstanding balance under our line of
credit as if the Notes offering had closed and the repayment had occurred on
January 1, 2004 is 16.03x for the year ended December 31, 2004.
For purposes of calculating the ratios of earnings to fixed charges,
"earnings" are the sum of earnings before income taxes and extraordinary items
plus fixed charges. Fixed charges are the sum of (i) interest on indebtedness
and amortization of debt discount and debt issuance costs and (ii) an interest
factor attributable to rental expense.
USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under the
Registration Rights Agreement that we entered into in connection with the
private offering of the outstanding Notes. We will not receive any cash proceeds
from the issuance of the Exchange Notes in the exchange offer. In consideration
for issuing the Exchange Notes as contemplated in this prospectus, we will
receive in exchange a like principal amount of outstanding Notes. The
outstanding Notes surrendered in exchange for the Exchange Notes will be retired
and canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in any change in our capitalization.
We received net proceeds of approximately $368 million from the offering
and sale of the outstanding Notes, after deducting discounts, commissions and
other expenses of the offering of the outstanding Notes payable by us.
The net proceeds from the offering of the outstanding Notes were or will
be used as follows:
- $183 million was used to pay off short-term debt. A portion of the
short-term debt was paid prior to the offering using funds borrowed
from The Cincinnati Insurance Company, our property casualty
subsidiary. Proceeds from the offering were used to pay-off that
inter-company loan in addition to paying off the outstanding balance
on the lines of credit, on one of which Fifth Third Bancorp was the
lead lender.
- An estimated $100 million will be used to finance the construction
of an office building and parking garage to be situated at our
headquarters located in Fairfield beginning in 2005, as announced in
August 2004.
- Remaining net proceeds are available for general corporate purposes.
-13-
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected financial data as of December 31, 2004 and 2003, and
for the years ended December 31, 2004, 2003 and 2002, have been derived from our
audited consolidated financial statements incorporated by reference herein. The
selected financial data as of December 31, 2002 and as of and for the years
ended December 31, 2001 and 2000 have been derived from our audited consolidated
financial statements not included or incorporated by reference in this
prospectus. You should read the financial data presented below in conjunction
with the consolidated financial statements and accompanying notes thereto and
management's discussion and analysis of our financial condition and results of
operations contained in our Annual Report on Form 10-K for the year ended
December 31, 2004.
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA
Earned premiums $ 3,020 $ 2,748 $ 2,478 $ 2,152 $ 1,907
Investment income, net of expenses 492 465 445 421 415
Gross realized investment gains
and losses 91 (41) (94) (25) (2)
Total revenues 3,614 3,181 2,843 2,561 2,331
Net income 584 374 238 193 118
Net income per common share:
Basic 3.47 2.22 1.40 1.15 0.70
Diluted 3.44 2.20 1.39 1.13 0.70
Cash dividends per common share:
Declared 1.09 0.95 0.85 0.80 0.72
Paid 1.08 0.93 0.84 0.78 0.70
Weighted average
shares outstanding,
diluted (millions) 170 170 171 171 172
BALANCE SHEET DATA
Invested assets $ 12,677 $ 12,485 $ 11,226 $ 11,534 $ 11,276
Deferred policy acquisition costs 400 372 343 286 259
Total assets 16,107 15,509 14,122 13,964 13,274
Loss and loss expense reserves 3,549 3,415 3,176 2,887 2,473
Life policy reserves 1,194 1,025 917 724 641
Borrowings under credit lines 0 183 183 183 170
Long-term debt 791 420 420 426 449
Shareholders' equity 6,249 6,204 5,598 5,998 5,995
Book value per share 37.38 36.85 33.00 35.30 35.49
PROPERTY CASUALTY
INSURANCE OPERATIONS
Earned premiums $ 2,919 $ 2,653 $ 2,391 $ 2,073 $ 1,828
Investment income, net of expenses 289 245 234 223 223
-14-
Loss ratio 49.8% 56.1% 61.5% 66.6% 71.1%
Loss expense ratio 10.3 11.6 11.4 10.1 11.3
Expense ratio 29.7 27.0 26.8 28.2 30.4
Combined ratio 89.8% 94.7% 99.7% 104.9% 112.8%
All per share amounts have been adjusted for the 5 percent stock dividend
paid June 15, 2004.
ONE-TIME CHARGES OR ADJUSTMENTS:
As the result of a settlement negotiated with a vendor, 2003 pretax
results included the recovery of $23 million of a $39 million one-time, pretax
charge incurred in 2000 to write down previously capitalized costs related to
the development of software to process property casualty policies.
In 2000, we earned $5 million in interest in the first quarter from a $303
million single-premium bank-owned life insurance policy booked at the end of
1999 that was segregated as a Separate Account effective April 1, 2000.
Investment income and realized investment gains and losses from separate
accounts generally accrue directly to the contract holder and, therefore, are
not included in our consolidated financials.
-15-
THE EXCHANGE OFFER
GENERAL
Cincinnati Financial hereby offers, upon the terms and subject to the
conditions set forth in this prospectus and in the accompanying letters of
transmittal (which together constitute the exchange offer), to exchange up to
$375 million aggregate principal amount of our Notes for a like aggregate
principal amount of our Exchange Notes, properly tendered prior to the
expiration date and not withdrawn as permitted pursuant to the procedures
described below. The exchange offer is being made with respect to all of the
outstanding Notes.
As of the date of this prospectus, $375 million aggregate principal amount
of the Notes are outstanding. This prospectus, together with the letter of
transmittal, is first being sent on or about March 15, 2005, to all holders of
outstanding Notes known to Cincinnati Financial. Cincinnati Financial's
obligation to accept outstanding Notes for exchange pursuant to the exchange
offer is subject to certain conditions set forth under " - Certain Conditions to
the Exchange Offer" below. Cincinnati Financial currently expects that each of
the conditions will be satisfied and that no waivers will be necessary.
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We have entered into a Registration Rights Agreement in which we agreed,
under some circumstances, to file a registration statement relating to an offer
to exchange the outstanding Notes for Exchange Notes. We agreed to file a
registration statement relating to a registered exchange offer for the notes
with the SEC no later than the 90th day after the date that the Notes were first
issued. We also agreed to use our reasonable best efforts to cause the exchange
offer registration statement to become effective under the Securities Act no
later than the 150th day after the Notes were first issued. Unless the exchange
offer would not be permitted by applicable law or SEC policy, we will use our
reasonable best efforts to commence the exchange offer, keep the exchange offer
open for a period of not less than 20 business days (or longer, if required by
applicable law) after the date on which notice of the exchange offer is mailed
to holders of the notes and issue, on or prior to 30 business days after the
date on which the registration statement was declared effective by the SEC, new
notes in exchange for all notes tendered prior thereto in the exchange offer. We
also agreed to complete the exchange offer no later than the 180th day after the
Notes are first issued. The Exchange Notes will have terms substantially
identical to the outstanding Notes, except that the Exchange Notes will not
contain terms with respect to transfer restrictions, certain registration rights
and additional interest for failure to observe certain obligations in the
Registration Rights Agreement.
Under the circumstances set forth in the Registration Rights Agreement, we
will use our reasonable best efforts to file a shelf registration statement with
the SEC after such obligation arises. We will use our reasonable best efforts to
cause the shelf registration statement to be declared effective by the SEC as
promptly as reasonably practicable after filing, but no later than the 210th day
after the notes are first issued. We will also keep the shelf registration
statement effective for a period of two years after the date the shelf
registration statement is declared effective (or one year in the case of a shelf
registration effected at the request of the initial purchasers), or such shorter
period that will terminate when all of the notes covered by the shelf
registration statement are sold thereunder or are already freely tradable.
If we fail to comply with certain obligations under the Registration
Rights Agreement, we will be required to pay additional interest to each holder
of the Notes equal to 0.25% per annum upon the occurrence of each default, which
shall increase by an additional 0.25% per annum for each subsequent 90-day
period that a default remains uncured; however, in no event shall the rate of
additional interest exceed 0.50% per annum. Additional interest will accrue only
for those days that a default occurs and is continuing. All accrued additional
interest will be paid to the holder of the Notes in the same manner as interest
payments on the Notes, with payments being made on the interest payment dates
for the Notes. Following the cure of all defaults, no additional interest will
accrue.
Each holder of outstanding Notes that wishes to exchange outstanding Notes
for transferable Exchange Notes in the exchange offer will be required to make
the following representations:
- any Exchange Notes will be acquired in the ordinary course of its
business;
-16-
- the holder will have no arrangements or understanding with any
person to participate in the distribution of the outstanding Notes
or the Exchange Notes within the meaning of the Securities Act;
- the holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of ours or if it is an affiliate, that it will
comply with applicable registration and prospectus delivery
requirements of the Securities Act to the extent applicable;
- if the holder is not a broker-dealer, that it is not engaged in, and
does not intend to engage in, the distribution of the Exchange
Notes;
- if the holder is a broker-dealer, that it will receive Exchange
Notes for its own account in exchange for outstanding Notes that
were acquired as a result of market-making activities or other
trading activities and that it will be required to acknowledge that
it will deliver a prospectus in connection with any resale of the
Exchange Notes (See "Plan of Distribution"); and
- the holder is not acting on behalf of any person who could not
truthfully make the foregoing representations.
RESALE OF EXCHANGE NOTES
Based on interpretations of the SEC staff set forth in no-action letters
issued to unrelated third parties, we believe that Exchange Notes issued under
the exchange offer in exchange for outstanding Notes may be offered for resale,
resold and otherwise transferred by any holder of Exchange Notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act, if:
- the holder is not an "affiliate" of ours within the meaning of Rule
405 under the Securities Act;
- the Exchange Notes are acquired in the ordinary course of the
holder's business; and
- the holder does not intend to participate in the distribution of the
Exchange Notes.
We have not obtained, and do not plan to request, a no-action letter from
the staff of the SEC with respect to this exchange offer.
Any holder who tenders in the exchange offer with the intention of
participating in any manner in a distribution of the Exchange Notes:
- cannot rely on the position of the SEC staff enunciated in
interpretive letters; and
- must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary
resale transaction.
This prospectus may be used for an offer to resell, for the resale or for
other retransfer of Exchange Notes only as specifically set forth in this
prospectus. With regard to broker-dealers, only broker-dealers that acquired the
outstanding Notes as a result of market-making activities or other trading
activities may participate in the exchange offer. Each broker-dealer that
receives Exchange Notes for its own account in exchange for outstanding Notes,
where the outstanding Notes were acquired by the broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of the Exchange Notes. Please read the section
captioned "Plan of Distribution" for more details regarding the transfer of
Exchange Notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we will accept for exchange any
outstanding Notes properly tendered and not withdrawn prior to the
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expiration date. We will issue $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of outstanding Notes surrendered under
the exchange offer. Outstanding Notes may be tendered only in integral multiples
of $1,000.
The form and terms of the Exchange Notes will be substantially identical
to the form and terms of the outstanding Notes except the Exchange Notes will be
registered under the Securities Act and will not be subject to restrictions on
transfer or to any increase in annual interest rate for failure to fulfill
certain of our obligations under the Registration Rights Agreement to file, and
cause to be effective, a registration statement. The Exchange Notes will
evidence the same debt as the outstanding Notes. The Exchange Notes will be
issued under and entitled to the benefits of the same Indenture that authorized
the issuance of the outstanding Notes.
As of the date of this prospectus, $375 million aggregate principal amount
of the Notes are outstanding. This prospectus and a letter of transmittal are
being sent to all registered holders of outstanding Notes. There will be no
fixed record date for determining registered holders of outstanding Notes
entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions
of the exchange offer and Registration Rights Agreement, the applicable
requirements of the Securities Act and the Securities Exchange Act of 1934 and
the rules and regulations of the SEC. Outstanding Notes that are not tendered
for exchange in the exchange offer will remain outstanding and continue to
accrue interest but will not retain any rights under the Registration Rights
Agreement.
We will be deemed to have accepted for exchange properly tendered
outstanding Notes when we have given oral (promptly confirmed in writing) or
written notice of acceptance to the exchange agent. The exchange agent will act
as agent for the tendering holders for the purposes of receiving the Exchange
Notes from us and delivering Exchange Notes to holders. Under the terms of the
exchange offer and Registration Rights Agreement, we reserve the right to amend
or terminate the exchange offer, and not to accept for exchange any outstanding
Notes not previously accepted for exchange, upon the occurrence of any of the
conditions specified below under the caption " - Certain Conditions to the
Exchange Offer."
Holders who tender outstanding Notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding Notes. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. It is
important that you read the section labeled Fees and Expenses below for more
details regarding fees and expenses incurred in the exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time on April
15, 2005, unless in our sole discretion we extend it.
In order to extend the exchange offer, we will notify the exchange agent
orally (promptly confirmed in writing) or in writing of any extension. We will
notify the registered holders of outstanding Notes of the extension no later
than 9:00 a.m., New York City time, on the business day after the previously
scheduled expiration date.
We reserve the right, in our sole discretion:
- to delay accepting for exchange any outstanding Notes;
- to extend the exchange offer or to terminate the exchange offer and
to refuse to accept outstanding Notes not previously accepted if any
of the conditions set forth below under " - Certain Conditions to
the Exchange Offer" have not been satisfied, by giving oral
(promptly confirmed in writing) or written notice of the delay,
extension or termination to the exchange agent; or
-18-
- to amend the terms of the exchange offer, in any manner, under the
terms of the exchange offer and the Registration Rights Agreement.
Any delay in acceptance, extension, or termination will be followed as
promptly as practicable by oral or written notice to the registered holders of
outstanding Notes. If we amend the exchange offer in a manner that we determine
constitutes a material change, we will promptly disclose the amendment in a
manner reasonably designed to inform the holders of outstanding Notes of the
amendment.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we will have no obligation to publish, advertise, or
otherwise communicate any public announcement, other than by making a timely
release to a financial news service.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any Exchange Notes for, any outstanding Notes,
and we may terminate the exchange offer as provided in this prospectus before
accepting any outstanding Notes for exchange if in our reasonable judgment:
- the Exchange Notes to be received will not be tradable by the
holder, without restriction under the Securities Act, the Securities
Exchange Act and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United
States;
- the exchange offer, or the making of any exchange by a holder of
outstanding Notes, would violate applicable law or any applicable
interpretation of the staff of the SEC; or
- any action or proceeding has been instituted or threatened in any
court or by or before any governmental agency with respect to the
exchange offer that, in our judgment, would reasonably be expected
to impair our ability to proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the
outstanding Notes of any holder that has not made to us:
- the representations described under "-Purpose and Effect of the
Exchange Offer," "-Procedures for Tendering" and "Plan of
Distribution;" and
- such other representations as may be reasonably necessary under
applicable SEC rules, regulations or interpretations to make
available to it an appropriate form for registration of the Exchange
Notes under the Securities Act.
We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. Consequently, we may
delay acceptance of any outstanding Notes by giving oral or written notice of
the extension to holders of the Notes. During any such extensions, all Notes
previously tendered will remain subject to the exchange offer, and we may accept
them for exchange. We will return any outstanding Notes that we do not accept
for exchange for any reason without expense to their tendering holder as
promptly as practicable after the expiration or termination of the exchange
offer.
We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any outstanding Notes not previously accepted for
exchange, upon the occurrence of any of the conditions of the exchange offer
specified above. We will give oral or written notice of any extension,
amendment, nonacceptance, or termination to the holders of the outstanding Notes
as promptly as practicable.
These conditions are for our sole benefit and we may assert them
regardless of the circumstances that may give rise to them or waive them in
whole or in part at any or at various times in our sole discretion. If we fail
at any
-19-
time to exercise any of the foregoing rights, this failure will not constitute a
waiver of this right. Each right will be deemed an ongoing right that we may
assert at any time or at various times.
In addition, we will not accept for exchange any outstanding Notes
tendered, and will not issue Exchange Notes in exchange for any outstanding
Notes, if at the time any stop order will be threatened or in effect with
respect to the registration statement of which this prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended.
PROCEDURES FOR TENDERING
Only a holder of outstanding Notes may tender the outstanding Notes in the
exchange offer. In order to receive Exchange Notes, a holder of outstanding
Notes must follow the procedures described herein. To tender in the exchange
offer, a holder must:
- complete, sign and date the accompanying letter of transmittal, or a
facsimile of the letter of transmittal; have the signature on the
letter of transmittal guaranteed if the letter of transmittal so
requires; and mail or deliver the letter of transmittal or facsimile
to the exchange agent prior to the expiration date; or
- comply with DTC's ATOP procedures described below.
In addition, either:
- the exchange agent must receive the outstanding Notes along with the
accompanying letter of transmittal;
- the exchange agent must receive, prior to the expiration date, a
timely confirmation of book-entry transfer of the outstanding Notes
into the exchange agent's account at DTC according to the procedures
for book-entry transfer described below and a properly transmitted
agent's message; or
- the holder must comply with the guaranteed delivery procedures
described below.
To be tendered effectively, the exchange agent must receive any physical
delivery of a letter of transmittal and other required documents at the address
set forth below under " - Exchange Agent" prior to the expiration date.
The tender by a holder that is not withdrawn prior to the expiration date
will constitute an agreement between the holder and us in accordance with the
terms and subject to the conditions set forth in this prospectus and in the
accompanying letter of transmittal.
The method of delivery of outstanding Notes, the letter of transmittal and
all other required documents to the exchange agent is at the holder's election
and risk. Rather than mail these items, we recommend that holders use an
overnight or hand delivery service. In all cases, holders should allow
sufficient time to assure delivery to the exchange agent before the expiration
date. Holders should not send the letter of transmittal or outstanding Notes to
us. Holders may request their respective brokers, dealers, commercial banks,
trust companies or other nominees to effect the above transactions for them.
Any beneficial owner whose outstanding Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct it to
tender on the owner's behalf. If the beneficial owner wishes to tender on its
own behalf, it must, prior to completing and executing the accompanying letter
of transmittal and delivering its outstanding Notes either:
- make appropriate arrangements to register ownership of the
outstanding Notes in such owner's name; or
- obtain a properly completed bond power from the registered holder of
outstanding Notes.
-20-
The transfer of registered ownership may take considerable time and may
not be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal described
below must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act, unless the outstanding Notes are tendered:
- by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions"
on the accompanying letter of transmittal; or
- for the account of an eligible guarantor institution.
If the accompanying letter of transmittal is signed by a person other than
the registered holder of any outstanding Notes listed on the outstanding Notes,
the outstanding Notes must be endorsed or accompanied by a properly completed
bond power. The bond power must be signed by the registered holder as the
registered holder's name appears on the outstanding Notes and an eligible
guarantor institution must guarantee the signature on the bond power.
If the accompanying letter of transmittal or any outstanding Notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, these persons should so indicate when signing. Unless
waived by us, they should also submit evidence satisfactory to us of their
authority to deliver the accompanying letter of transmittal.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's ATOP to tender. Participants
in the program may, instead of physically completing and signing the
accompanying letter of transmittal and delivering it to the exchange agent,
transmit their acceptance of the exchange offer electronically. They may do so
by causing DTC to transfer the outstanding Notes to the exchange agent in
accordance with its procedures for transfer. DTC will then send an agent's
message to the exchange agent. The term "agent's message" means a message
transmitted by DTC, received by the exchange agent and forming part of the
book-entry confirmation, to the effect that:
- DTC has received an express acknowledgment from a participant in its
ATOP that is tendering outstanding Notes that are the subject of the
book-entry confirmation;
- the participant has received and agrees to be bound by the terms of
the accompanying letter of transmittal, or, in the case of an
agent's message relating to guaranteed delivery, that the
participant has received and agrees to be bound by the applicable
notice of guaranteed delivery; and
- the agreement may be enforced against that participant.
We will determine in our sole discretion all outstanding questions as to
the validity, form, eligibility, including time of receipt of the outstanding
Notes, as well as the acceptance of tendered outstanding Notes and withdrawal of
tendered outstanding Notes. Our determination will be final and binding. We
reserve the absolute right to reject any outstanding Notes not properly tendered
or any outstanding Notes the acceptance of which would, in the opinion of our
counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular outstanding Notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the accompanying letter of transmittal, will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of outstanding Notes must be cured within such time as
we will determine. Although we intend to notify holders of defects or
irregularities with respect to tenders of outstanding Notes, neither we, the
exchange agent nor any other person will incur any liability for failure to give
the notification. Tenders of outstanding Notes will not be deemed made until any
defects or irregularities have been cured or waived. Any outstanding Notes
received by the exchange agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the
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exchange agent without cost to the tendering holder, unless otherwise provided
in the letter of transmittal, as soon as practicable following the expiration
date.
In all cases, we will issue Exchange Notes for outstanding Notes that we
have accepted for exchange under the exchange offer only after the exchange
agent timely receives:
- outstanding Notes or a timely book-entry confirmation of the
outstanding Notes into the exchange agent's account at DTC; and
- a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
By signing the accompanying letter of transmittal or authorizing the
transmission of the agent's message, each tendering holder of outstanding Notes
will represent or be deemed to have represented to us that, among other things:
- any Exchange Notes that the holder receives will be acquired in the
ordinary course of its business;
- the holder has no arrangement or understanding with any person or
entity to participate in the distribution of the Exchange Notes;
- if the holder is not a broker-dealer, that it is not engaged in and
does not intend to engage in the distribution of the Exchange Notes;
- if the holder is a broker-dealer that will receive Exchange Notes
for its own account in exchange for outstanding Notes that were
acquired as a result of market-making activities or other trading
activities, that it will deliver a prospectus, as required by law,
in connection with any resale of any Exchange Notes. See "Plan of
Distribution;"
- the holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of ours or, if the holder is an affiliate, it will
comply with any applicable registration and prospectus delivery
requirements of the Securities Act; and
- the holder is not acting on behalf of any person who could not
truthfully make the foregoing representations.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with
respect to the outstanding Notes at DTC for purposes of the exchange offer
promptly after the date of this prospectus. Any financial institution
participating in DTC's system may make book-entry delivery of outstanding Notes
by causing DTC to transfer the outstanding Notes into the exchange agent's
account at DTC in accordance with DTC's procedures for transfer. Holders of
outstanding Notes who are unable to deliver confirmation of the book-entry
tender of their outstanding Notes into the exchange agent's account at DTC or
all other documents required by the letter of transmittal to the exchange agent
prior to the expiration date must tender their outstanding Notes according to
the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their outstanding Notes but whose outstanding
Notes are not immediately available or who cannot deliver their outstanding
Notes, the accompanying letter of transmittal or any other required documents to
the exchange agent or comply with the applicable procedures under DTC's ATOP
prior to the expiration date may tender if:
- the tender is made through an eligible guarantor institution;
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- prior to the expiration date, the exchange agent receives from the
eligible guarantor institution either a properly completed and duly
executed notice of guaranteed delivery, by facsimile transmission,
mail or hand delivery, or a properly transmitted agent's message
relating to guaranteed delivery:
1. setting forth the name and address of the holder, the
registered number(s) of the outstanding Notes and the
principal amount of outstanding Notes tendered;
2. stating that the tender is being made thereby; and
3. guaranteeing that, within three New York Stock Exchange
trading days after the expiration date, the accompanying
letter of transmittal, or facsimile thereof, together with the
outstanding Notes or a book-entry confirmation, and any other
documents required by the accompanying letter of transmittal
will be deposited by the eligible guarantor institution with
the exchange agent; and
- the exchange agent receives the properly completed and executed
letter of transmittal, or facsimile thereof, as well as all tendered
outstanding Notes in proper form for transfer or a book-entry
confirmation, and all other documents required by the accompanying
letter of transmittal, within three New York Stock Exchange trading
days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will
be sent to holders who wish to tender their outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders of outstanding
Notes may withdraw their tenders not later than the close of business on the
last exchange date.
For a withdrawal to be effective:
- the exchange agent must receive a written notice of withdrawal,
which notice may be by facsimile transmission or letter of
withdrawal at the address set forth below under "Exchange Agent;" or
- holders must comply with the appropriate procedures of DTC's ATOP
system.
Any notice of withdrawal must:
- specify the name of the person who tendered the outstanding Notes to
be withdrawn;
- identify the outstanding Notes to be withdrawn, including the
principal amount of the outstanding Notes;
- where certificates for outstanding Notes have been transmitted,
specify the name in which the outstanding Notes were registered, if
different from that of the withdrawing holder; and
- contain a statement that the holder is withdrawing its election to
have the Notes exchanged.
If certificates for outstanding Notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of the
certificates, the withdrawing holder must also submit:
- the serial numbers of the particular certificates to be withdrawn;
and
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- a signed notice of withdrawal with signatures guaranteed by an
eligible guarantor institution unless the holder is an eligible
guarantor institution.
If outstanding Notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn
outstanding Notes and otherwise comply with DTC procedures. We will determine
all questions as to the validity, form and eligibility, including time of
receipt, of the notices, and our determination will be final and binding on all
parties. We will deem any outstanding Notes so withdrawn not to have been
validly tendered for exchange for purposes of the exchange offer. Any
outstanding Notes that have been tendered for exchange but that are not
exchanged for any reason will be returned to their holder without cost to the
holder, or, in the case of outstanding Notes tendered by book-entry transfer
into the exchange agent's account at DTC according to the procedures described
above, the outstanding Notes will be credited to an account maintained with DTC
for outstanding Notes, as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. Properly withdrawn, outstanding
Notes may be retendered by following one of the procedures described under " -
Procedures for Tendering" above at any time prior to the expiration date.
EXCHANGE AGENT
The Bank of New York Trust Company, N.A. has been appointed as exchange
agent for the exchange offer. You should direct questions and requests for
assistance, requests for additional copies of this prospectus or for the letter
of transmittal and requests for the notice of guaranteed delivery to the
exchange agent as follows:
By Regular, Registered, Certified By Facsimile Transmission
Mail, Overnight Courier or Hand: (for Eligible Guarantor Institutions only):
The Bank of New York Trust (212) 298-1915
Company, N.A. Corporate Trust Operations
101 Barclay Street, Exchange Unit
New York, New York 10286
Attention: Mr. Kin Lau To Confirm by Telephone:
(212) 815-3750
Corporate Trust Operations
Exchange Unit
Delivery of the letter of transmittal to an address other than as set forth
above or transmission via facsimile other than as set forth above does not
constitute a valid delivery of the letter of transmittal.
FEES AND EXPENSES
We will bear all registration expenses of soliciting tenders. The
principal solicitation is being made by mail; however, we may make additional
solicitations by telephone or in person by our officers and regular employees
and those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptance of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with the
exchange offer. The expenses are estimated in the aggregate to be approximately
$138,000. They include:
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- SEC registration fees;
- fees and expenses of the exchange agent and Trustee;
- accounting and legal fees and printing costs; and
- related fees and expenses.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding Notes under the exchange offer. The tendering holder, however, will
be required to pay any transfer taxes, whether imposed on the registered holder
or any other person, if:
- certificates representing outstanding Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are
to be issued in the name of, any person other than the registered
holder of outstanding Notes tendered;
- tendered outstanding Notes are registered in the name of any person
other than the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of
outstanding Notes under the exchange offer.
If satisfactory evidence of payment of the taxes is not submitted with the
letter of transmittal, the amount of the transfer taxes will be billed to that
tendering holder.
Holders who tender their outstanding Notes for exchange will not be
required to pay any transfer taxes. However, holders who instruct us to register
Exchange Notes in the name of, or request that outstanding Notes not tendered or
not accepted in the exchange offer be returned to, a person other than the
registered tendering holder will be required to pay any applicable transfer tax.
Each holder of the Notes will pay all underwriting discounts and
commissions, brokerage commissions and transfer taxes, if any, related to the
sale or disposition of Notes pursuant to a shelf registration statement.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of outstanding Notes who do not exchange their outstanding Notes
for Exchange Notes under the exchange offer will remain subject to the
restrictions on transfer of the outstanding Notes:
- as set forth in the legend printed on the outstanding Notes as a
consequence of the issuance of the outstanding Notes under the
exemption from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities
laws; and
- otherwise as set forth in the offering memorandum distributed in
connection with the private offering of the outstanding Notes.
In general, you may not offer or sell the outstanding Notes unless they
are registered under the Securities Act, or if the offer or sale is exempt from
registration under the Securities Act and applicable state securities laws.
Except as required by the Registration Rights Agreement, we do not intend to
register resales of the outstanding Notes under the Securities Act. Based on
interpretations of the SEC staff, Exchange Notes issued under the exchange offer
may be offered for resale, resold or otherwise transferred by their holders
(other than any holder that is our "affiliate" within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the holders
acquired the Exchange Notes in the ordinary course of the holders' business and
the holders have no arrangement or understanding with respect to
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the distribution of the Exchange Notes to be acquired in the exchange offer. Any
holder who tenders in the exchange offer for the purpose of participating in a
distribution of the Exchange Notes:
- cannot rely on the applicable interpretations of the SEC; and
- must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary
resale transaction.
The tender of outstanding Notes under the exchange offer will reduce the
principal amount of outstanding Notes, which may have an adverse effect upon,
and increase the volatility of, the market price FOR outstanding Notes due to a
reduction in liquidity.
ACCOUNTING TREATMENT
We will record the Exchange Notes in our accounting records at the same
carrying value as the outstanding Notes, which is the aggregate principal
amount, as reflected in our accounting records on the date of exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes in
connection with the exchange offer. We will amortize the expenses of the
exchange offer over the life of the Exchange Notes.
OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered outstanding Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plans to acquire any outstanding Notes that are
not tendered in the exchange offer or to file a registration statement to permit
resales of any untendered outstanding Notes.
DESCRIPTION OF THE EXCHANGE NOTES
We will issue the Exchange Notes under an Indenture and a Supplemental
Indenture each dated as of November 1, 2004, between us and The Bank of New York
Trust Company, N.A., as trustee (which we refer collectively herein as the
"Indenture"). The Exchange Notes will be of the same series as the outstanding
Notes issued under the same Indenture. The following description is only a
summary of the material provisions of the Exchange Notes and the Indenture. We
urge you to read these documents in their entirety because they, and not this
description, define your rights as holders of the Exchange Notes. All references
to us in this section refer solely to Cincinnati Financial Corporation and not
to our subsidiaries.
GENERAL
The Exchange Notes will mature on November 1, 2034.
The Exchange Notes will be issued only in fully registered form without
coupons in denominations of $1,000 and any integral multiple thereof. No service
charge will be made for any registration of transfer or exchange of Exchange
Notes, but we may require payment to cover any taxes or other governmental
charges.
The Exchange Notes will bear interest at a rate of 6.125% per year from
November 1, 2004, or from the most recent date to which interest has been paid
or provided for, payable semi-annually in arrears on May 1 and November 1 of
each year, beginning on May 1, 2005, to the persons in whose names the Exchange
Notes are registered at the close of business on the next preceding April 15 or
October 15, respectively.
The Indenture does not limit the amount of notes that we may issue. We may
from time to time, without notice to or the consent of the holders of the
Exchange Notes, issue additional notes having identical terms and conditions to
the Exchange Notes being issued in this exchange offering (other than the date
of issuance and, under
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certain circumstances, the date from which interest thereon will begin to
accrue) in an unlimited aggregate principal amount, provided that such notes
must be part of the same issue as the Exchange Notes offered hereby for U.S.
federal income tax purposes. Any such new issuances will be part of the same
series of notes as the Exchange Notes being issued in this exchange offering and
will be treated as one class with the Exchange Notes being issued in this
exchange offering, including for purposes of voting and redemptions.
STRUCTURAL CONSIDERATIONS
Our ability to continue to satisfy our obligations, including the payment
of interest and principal on debt obligations, relies on the availability of
liquid assets at Cincinnati Financial Corporation, which is dependent in large
part on investment income from our investment portfolio and dividends from our
insurance subsidiaries. Dividends paid by our insurance subsidiaries are
restricted by regulatory requirements of the laws of Ohio, their domiciliary
state. Generally, the maximum dividend that may be paid without prior regulatory
approval is limited to the greater of the statutory net income for the preceding
calendar year or 10 percent of the policyholders' surplus as of the last day of
the preceding calendar year, and such dividend must be paid from statutory
earned surplus. Dividends exceeding these limitations may be paid only with
approval of the Ohio Department of Insurance. During 2005, the total dividends
that may be paid to Cincinnati Financial Corporation without regulatory approval
are approximately $588 million. Our insurance subsidiary declared dividends to
Cincinnati Financial Corporation of $175 million in 2004, $50 million in 2003
and $100 million in 2002.
RANKING
The Indenture does not limit our ability, or the ability of our
subsidiaries, to incur additional indebtedness. The Exchange Notes will be our
senior unsecured obligations and will rank equally in right of payment with any
of our existing and future unsecured and unsubordinated indebtedness. The
Exchange Notes will be effectively subordinated to any of our future secured
indebtedness to the extent of the value of the assets securing that
indebtedness. As of the date of this registration statement, our aggregate
principal amount of indebtedness, excluding the Notes, was approximately $420
million (excluding intercompany liabilities), consisting of $420 million
aggregate principal amount of our 6.9% Senior Debentures due 2028.
The Exchange Notes will not be guaranteed by any of our subsidiaries and
will therefore be structurally subordinated to all indebtedness and other
obligations, including trade payables and insurance liabilities, of our
subsidiaries. As of December 31, 2004, our subsidiaries had approximately $8.300
billion of liabilities (including trade payables, capital lease obligations and
insurance liabilities but excluding intercompany liabilities).
OPTIONAL REDEMPTION
We may redeem the Exchange Notes, at our option, at any time in whole, or
from time to time in part, prior to maturity at a redemption price equal to the
greater of:
- 100 percent of the principal amount of the Exchange Notes; and
- the sum of the present values of the remaining scheduled payments of
principal and interest thereon (exclusive of interest accrued but
not paid to the date of redemption) discounted to the redemption
date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate, plus 15 basis points,
plus in each case, interest accrued thereon but not paid to the date
of redemption.
"Treasury Rate" means, with respect to any redemption date, the rate per
year equal to the semiannual equivalent or interpolated (on a day count basis)
yield to maturity of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such redemption date.
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"Comparable Treasury Issue" means the United States Treasury security or
securities selected by an Independent Investment Banker as having an actual or
interpolated maturity comparable to the remaining term of the Exchange Notes to
be redeemed that would be utilized, at the time of selection and in accordance
with customary financial practice, in pricing new issues of corporate debt
securities of a comparable maturity to the remaining term of such Exchange
Notes.
"Independent Investment Banker" means one of the Reference Treasury
Dealers appointed by the trustee after consulting with us.
"Comparable Treasury Price" means, with respect to any redemption date:
- the average of the Reference Treasury Dealer Quotations for such
redemption date, after excluding the higher and lowest such
Reference Treasury Dealer Quotations; or
- if the trustee obtains fewer than four such Reference Treasury
Dealer Quotations, the average of all such quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 3:30 p.m. New York
City time on the third business day preceding such redemption date.
"Reference Treasury Dealer" means:
- each of J.P. Morgan Securities Inc. and UBS Securities LLC or their
respective affiliates; provided, however, that if any of the
foregoing shall cease to be a primary U.S. government securities
dealer in the United States (a "Primary Treasury Dealer"), we will
substitute therefor another Primary Treasury Dealer; and
- three other Primary Treasury Dealers selected by us.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Exchange Notes to be
redeemed.
Unless we default in payment of the redemption price, on and after the
redemption date interest will cease to accrue on the Exchange Notes or portions
thereof called for redemption.
We will pay interest to a person other than the holder of record on the
record date if we elect to redeem the Exchange Notes on a date that is after a
record date but on or prior to the corresponding interest payment date. In this
instance, we will pay accrued interest on the Exchange Notes being redeemed to,
but not including, the redemption date to the same person to whom we will pay
the redemption price of those Exchange Notes.
COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATIONS ON LIENS OF STOCK OF DESIGNATED SUBSIDIARIES
We are prohibited from directly or indirectly creating, assuming,
incurring or permitting any Indebtedness that is secured by a lien on the
capital stock of a Designated Subsidiary unless the Exchange Notes (and, if we
elect, any of our other Indebtedness that is not subordinate to the Exchange
Notes and with respect to which the governing instruments require, or pursuant
to which we are otherwise obligated to provide such security) are secured
equally and ratably with the Indebtedness for at least the time period that the
Indebtedness is secured.
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The term "Designated Subsidiary" means any present or future consolidated
subsidiary of Cincinnati Financial Corporation, the consolidated net worth of
which constitutes at least 10 percent of the consolidated net worth of
Cincinnati Financial Corporation. As of the date of this prospectus, our sole
Designated Subsidiary is The Cincinnati Insurance Company.
"Indebtedness" means the principal, premium and interest due on
indebtedness of a person, whether outstanding on the date of the Indenture or
later created, incurred or assumed, which is (a) indebtedness for money borrowed
and (b) any amendments, renewals, extensions, modifications and refundings of
any such indebtedness.
"Indebtedness for money borrowed" means:
- any obligation of, or any obligation guaranteed by, such person for
the repayment of borrowed money, whether or not evidenced by bonds,
notes or other written instruments;
- any obligation of, or any such obligation guaranteed by, such person
evidenced by bonds, notes or similar written instruments, including
obligations assumed or incurred in connection with the acquisition
of property, assets or businesses (however, the deferred purchase
price of any other business, property or assets shall not be
considered Indebtedness if the purchase price is payable in full
within 90 days of the date the Indebtedness was created); and
- any obligations of such person as lessee under leases required to be
capitalized on the balance sheet of the lessee under generally
accepted accounting principles and leases of property or assets made
as part of any sale and lease-back transaction to which such person
is a party.
Under this covenant, Indebtedness also includes any obligation of, or any
obligation guaranteed by, any person for the payment of amounts due under a swap
agreement or similar instrument or agreement, or under a foreign currency hedge
exchange or similar instrument or agreement.
LIMITATIONS ON DISPOSITION OF STOCK OF DESIGNATED SUBSIDIARIES
The Indenture provides that as long as any Exchange Notes are outstanding
(except in a transaction otherwise governed by the Indenture), we may not issue,
sell, transfer or otherwise dispose of any shares, securities convertible into,
warrants, rights or options to subscribe for or purchase shares of the capital
stock (other than preferred stock having no voting rights of any kind) of any
Designated Subsidiary.
Additionally, we will not permit any Designated Subsidiary to issue (other
than to us) any shares (other than director's qualifying shares), securities
convertible into, warrants, rights or options to subscribe for or purchase
shares of the capital stock (other than preferred stock having no voting rights
of any kind) of any Designated Subsidiary.
The foregoing applies if, after giving effect to the transaction and the
issuance of the maximum number of shares issuable upon the conversion or
exercise of all convertible securities, warrants, rights or options, we would
own, directly or indirectly, less than 80 percent of the shares of such
Designated Subsidiary (other than preferred stock having no voting rights of any
kind); provided, that (i) any issuance, sale, transfer or other permitted
disposition may only be made for at least a fair market value consideration as
determined by the Board of Directors and (ii) the foregoing will not prohibit
any issuance or disposition of securities if required by any law, regulation or
order of a governmental or insurance regulatory authority.
Notwithstanding the foregoing, we may (i) merge or consolidate any
Designated Subsidiary into or with another direct wholly owned subsidiary and
(ii) subject to the provisions set forth in " - Consolidation, Merger and Sale
of Assets" below, sell, transfer or otherwise dispose of the entire capital
stock of any Designated Subsidiary at one time for at least a fair market value
consideration as determined by the Board of Directors pursuant to a Board
resolution adopted in good faith.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that we may, without the consent of the holders,
consolidate, sell, lease or convey all or substantially all of our assets or
merge into any other corporation, provided: (i) the successor corporation is a
corporation organized and existing under the laws of the United States or a
State thereof, and the successor corporation expressly assumes our obligations
on the Exchange Notes by supplemental indenture satisfactory to the trustee; and
(ii) immediately after giving effect to such transaction, no default will have
occurred and be continuing.
Other than the covenants described above, the Indenture does not contain
any covenants or other provisions to protect the holders of the Notes in the
event of a takeover, recapitalization or a highly leveraged transaction.
MODIFICATION OF THE INDENTURE
We may not make any modification or alteration of the Indenture which
will:
- extend the time or terms of payment of the principal at maturity or
the interest on any of the notes, or reduce principal, premium or
the rate of interest, without the consent of each holder of notes so
affected; or
- without the consent of all of the holders of the notes then
outstanding, reduce the percentage of the holders of the notes who
are required to consent: (i) to any supplemental indenture, (ii) to
rescind and annul a declaration that the notes are due and payable
as a result of the occurrence of an Event of Default, (iii) to waive
any past Event of Default and its consequences, and (iv) to waive
compliance with certain other provisions in the Indenture.
Except as described above, we may, with the consent of the holders of more
than 50 percent in aggregate principal amount of the notes then outstanding,
make modifications and alterations of the terms of the Indenture which affect
the rights of the holders, including modifications which allow us to disregard
the limitations described under " - Limitations on Liens of Stock of Designated
Subsidiaries" and " - Limitations on Dispositions of Stock of Designated
Subsidiaries." In addition, as indicated under " - Events of Default" below,
holders of more than 50 percent in aggregate principal amount of the notes then
outstanding may waive past Events of Default in certain circumstances and may
direct the trustee in enforcement of remedies.
We and the trustee may, without the consent of any holders, modify and
supplement the Indenture:
- to evidence the succession of another corporation to us;
- to evidence and provide for the replacement of the trustee;
- with our concurrence, to add to the covenants for the benefit of the
holders;
- to modify the Indenture to permit the qualification of any
supplemental indenture under the Trust Indenture Act; and
- for certain other purposes.
DEFEASANCE, SATISFACTION AND DISCHARGE TO MATURITY OR REDEMPTION
Defeasance. We may cease to comply with certain terms of the Indenture if we
deposit with the trustee, in trust, at or before maturity or redemption, lawful
money or direct obligations of the United States or obligations the principal of
and interest on which are guaranteed by the United States in such amounts and
maturing at such times that the proceeds received upon the respective maturities
and interest payment dates will provide funds sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal, premium, if any, and interest when due, until the maturity of the
Exchange Notes then outstanding.
In such circumstances, we may cease to comply with the Indenture's
restrictive covenants described under " - Limitations on Liens of Stock
Designated of Subsidiaries" and " - Limitations on Disposition of Stock of
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Designated Subsidiaries" above, and the Events of Default described in the third
and fourth bullets under " - Events of Default" below shall no longer be in
effect. Notwithstanding defeasance of the notes, we would be required to (i)
duly and punctually pay the principal, premium, if any, and interest on the
notes if the notes are not paid from the money or securities held by the
trustee, (ii) comply with the Events of Default described in " - Events of
Default" below (other than the third and fourth bullets), and (iii) comply with
certain other provisions of the Indenture, including those relating to
registration, transfer and exchange, lost or stolen securities and maintenance
of place of payment.
Defeasance of the Exchange Notes is subject to the satisfaction of certain
specified conditions, including (i) the absence of an Event of Default at the
date of the deposit, and (ii) the perfection of the holders' security interest
in such deposit.
Satisfaction and Discharge. Upon the deposit of money or securities contemplated
above and the satisfaction of certain conditions, we may also cease to comply
with our obligation duly and punctually to pay the principal, premium, if any,
and interest on the Exchange Notes, and the Events of Default shall no longer be
in effect. Afterwards, the holders of the notes shall be entitled only to
payment out of the money or securities deposited with the trustee. Such
conditions include (except in certain limited circumstances involving a deposit
made within one year of maturity or redemption):
- the absence of an Event of Default at the date of deposit or on the
91st day thereafter;
- our delivery to the trustee of an opinion of nationally-recognized
tax counsel, or our receipt from, or publication of a ruling by, the
United States Internal Revenue Service, to the effect that holders
of the notes will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and discharge and
will be subject to federal income tax on the same amounts and in the
same manner and at the same times as would have been the case if
such deposit and discharge had not occurred; and
- that such satisfaction and discharge will not result in the
delisting of the notes from any nationally recognized exchange on
which they are listed.
Federal Income Tax Consequences. The federal income tax treatment of the deposit
and discharge described above under " - Defeasance, Satisfaction and Discharge
to Maturity or Redemption -- Satisfaction and Discharge" is not clear. A deposit
and discharge may be treated as a taxable exchange of such notes for beneficial
interests in the trust consisting of the deposited money or securities. In that
event, a holder of notes may be required to recognize gain or loss equal to the
difference between the holder's adjusted basis for the notes and the amount
realized in such exchange (which generally will be the fair market value of the
holder's beneficial interest in such trust). Thereafter, such holder then may be
required to include in income a share of the income, gain and loss of the trust.
As described above, it is a condition of a deposit and discharge that we deliver
an opinion of tax counsel, or that we receive from, or there shall have been
published by, the United States Internal Revenue Service a ruling to the effect
that holders of the notes (i) will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit or discharge and (ii)
will be subject to federal income tax on the same amounts and in the same manner
and at the same time as would have been the case if such deposit and discharge
HAD NOT OCCURRED. Purchasers of the notes should consult their own TAX advisors
with respect to the tax consequences to them of such deposit and discharge,
including the applicability and effect of tax laws other than federal income tax
law.
EVENTS OF DEFAULT
An "Event of Default" is defined in the Indenture as being:
- default for 30 days in payment of any interest on the notes;
- failure to pay principal and premium, if any, when due;
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- failure to observe or perform any other covenant in the Indenture or
notes (except a covenant or warranty whose breach or default in
performance is specifically dealt with in the Events of Default
section), if such failure continues for 30 days after written notice
by the trustee or the holders of at least 25 percent in aggregate
principal amount of the notes then outstanding;
- uncured or unwaived failure to pay principal of or interest on any
other obligation for borrowed money beyond any period of grace if
(i) the aggregate principal amount of any such obligation is in
excess of $50 million and (ii) we are not contesting the default in
such payment in good faith and by appropriate proceedings; or
- certain events of bankruptcy, insolvency, receivership or
reorganization.
The trustee or the holders of 25 percent in aggregate principal amount of
the outstanding notes may declare the notes immediately due and payable upon the
occurrence of any Event of Default (after expiration of any applicable grace
period). In certain cases, the holders of a majority in principal amount of the
notes then outstanding may waive any past default and its consequences, except a
default in the payment of principal, premium, if any, or interest.
The trustee shall, within 90 days after the occurrence of a continuing
default, give notice to the notes holders of all known uncured defaults (the
term default to include the events specified above without grace periods). In
the case of default in the payment of principal, premium, if any, or interest on
any of the notes, the trustee shall be protected in withholding notice if it in
good faith determines that withholding notice is in the interest of the note
holders.
Subject to the provisions of the Indenture relating to the duties of the
trustee in a continuing Event of Default, the trustee shall be under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the holders of notes outstanding, unless
such holders have offered the trustee reasonable indemnity. The right of a
holder to institute a proceeding with respect to the Indenture is subject to
certain conditions, including notice and indemnity to the trustee, but the
holder has a right to receipt of principal, premium, if any, and interest
(subject to certain limitations with respect to defaulted interest) on their due
dates or to institute suit for the enforcement thereof.
So long as the notes remain outstanding, we will be required to annually
furnish an Officers' Certificate to the trustee. The Officers' Certificate will
state whether, to the best of the signers' knowledge, we are in default under
any of the Indenture's provisions, and specifying all such defaults. We also
will be required to furnish the trustee with copies of certain reports filed
with the SEC.
The holders of a majority in principal amount of the notes outstanding
will have the right to direct the time, method and place for conducting any
proceeding for any remedy available to the trustee or exercising any power or
trust conferred on the trustee, provided that such direction is in accordance
with law and the Indenture's provisions. The trustee may decline to follow any
such direction if the trustee shall determine on the advice of counsel that the
proceeding may not be lawfully taken or would be materially or unjustly
prejudicial to holders not joining in such direction. The trustee will be under
no obligation to act in accordance with such direction unless such holders have
offered the trustee reasonable security or indemnity against costs, expenses and
liabilities which may be incurred thereby.
FORM, DENOMINATION AND REGISTRATION
The Exchange Notes will represented by one or more global certificates in
fully registered, book-entry form without interest coupons, will be deposited
with the trustee as custodian for The DTC, and will be registered in the name of
Cede & Co., or Cede, or another nominee designated by DTC except in limited
circumstances. The global exchange notes are hereinafter sometimes referred to
individually as a "global note" and collectively as the "global exchange notes."
Beneficial interests in the global exchange notes may be held directly through
DTC or indirectly through organizations which are participants in DTC. Except as
set forth below, the record ownership of the global exchange notes may be
transferred, in whole or in part, only to DTC, another nominee of DTC or to a
successor of DTC or its nominee.
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The laws of some states may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
limit or impair the ability to own, transfer or pledge beneficial interests in
the Exchange Notes in global form.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in immediately available funds.
Investors who are not participants in DTC may beneficially own interests
in a global note held by DTC only through participants or certain banks,
brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly, and have indirect access to the DTC system. So long as Cede, as the
nominee of DTC, is the registered owner of any global note, Cede for all
purposes will be considered the sole holder of that global note. Except as
provided below, owners of beneficial interests in a global note will not be
entitled to have certificates registered in their names, will not receive
physical delivery of certificates in definitive form, and will not be considered
the holder thereof.
Neither we nor the trustee (or any registrar or paying agent) will have
any responsibility for the performance by DTC or any of the participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised us that it will take any
action permitted to be taken by a holder of Exchange Notes only at the direction
of one or more participants whose accounts are credited with DTC interests in a
global note.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and to facilitate the clearance and settlement of securities
transactions, such as transfers and pledges, among participants in deposited
securities through electronic book-entry charges to accounts of its
participants, thereby eliminating the need for physical movement of securities
certificates. Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Certain of
those participants (or other representatives), together with other entities, own
DTC. The rules applicable to DTC and its participants are on file with the SEC.
Purchases of Exchange Notes under the DTC system must be made by or
through participants, which will receive a credit for the Exchange Notes on
DTC's records. The ownership interest of each actual purchaser of each Exchange
Note is in turn to be recorded on the participants' and indirect participants'
records. Beneficial owners will not receive written confirmation from DTC of
their purchase, but beneficial owners are expected to receive written
confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the participant or indirect participant
through which the beneficial owner entered into the transaction. Transfers of
ownership interests in the Exchange Notes are to be accomplished by entries made
on the books of participants acting on behalf of beneficial owners. Beneficial
owners will not receive certificates representing their ownership interests in
Exchange Notes, except under certain circumstances described below.
The deposit of Exchange Notes with a custodian for DTC and their
registration in the name of Cede effect no change in beneficial ownership. DTC
has no knowledge of the actual beneficial owners of the Exchange Notes; DTC's
records reflect only the identity of the participants to whose accounts such
Exchange Notes are credited, which may or may not be the beneficial owners. The
participants will remain responsible for keeping account of their holdings on
behalf of their customers.
We will make principal and interest payments on the Exchange Notes to DTC
by wire transfer of immediately available funds. DTC's practice is to credit
participants' accounts on the payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by participants to beneficial
owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers or registered in
"street name" and will be the responsibility of such participant and not of DTC,
the trustee or us, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal and interest to DTC
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is our responsibility, disbursement of those payments to participants will be
the responsibility of DTC, and disbursement of those payments to the beneficial
owners shall be the responsibility of participants and indirect participants.
Neither we nor the trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the global exchange notes or for maintaining, supervising
or reviewing any records relating to those beneficial ownership interests.
DTC may discontinue providing its services as securities depositary with
respect to the Exchange Notes at any time by giving reasonable notice to us.
Exchange Notes represented by a global note will be exchangeable for note
certificates with the same terms in authorized denominations only if:
- DTC notifies us that it is unwilling or unable to continue as
depositary for such global note or if DTC has ceased to be a
clearing agency registered under the Securities Exchange Act of
1934;
- an Event of Default has occurred and is continuing with respect to
the Exchange Debentures; or
- we, in our sole discretion, notify DTC in writing that we no longer
wish to have the Exchange Debentures represented by a global note.
In any such instance, an owner of a beneficial interest in the global
exchange notes will be entitled to physical delivery in definitive form of
Exchange Notes represented by the global exchange notes equal in principal
amount to that beneficial interest and to have those Exchange Notes registered
in its name. Exchange Notes so issued in definitive form will be issued as
registered Exchange Notes in denominations of $1,000 and integral multiples
thereof, unless otherwise specified by us. Our definitive Exchange Notes can be
transferred by presentation for registration to the registrar at its offices and
must be duly endorsed by the holder or his attorney duly authorized in writing,
or accompanied by a written instrument or instruments of transfer in form
satisfactory to us or the trustee duly executed by the holder or his attorney
duly authorized in writing. We may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
exchange or registration of transfer of definitive Exchange Notes.
INFORMATION CONCERNING THE TRUSTEE
Cincinnati Financial and its affiliates may from time to time borrow from
the trustee or an affiliate thereof or otherwise maintain other banking or
commercial transactions with the trustee or an affiliate thereof in the ordinary
course of business.
Under the Indenture, the trustee is required to transmit annual reports to
all holders regarding its eligibility as trustee under the Indenture and certain
related matters.
EXCHANGE OFFERS AND REGISTRATION RIGHTS
Cincinnati Financial and the initial purchasers entered into the
Registration Rights Agreement dated as of November 1, 2004, in contemplation of
the Notes issued on November 1, 2004.
Because this section is a summary, it does not describe every aspect of
the Registration Rights Agreement. This summary is subject to, and qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, including definitions of certain terms used in it. You may obtain a
copy of the Registration Rights Agreement by requesting one from us. In
addition, the information set forth below concerning certain interpretations of
and positions taken by the staff of the SEC is not intended to constitute legal
advice, and prospective investors should consult their own legal advisors with
respect to such matters.
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EXCHANGE OFFER
We agreed pursuant to the Registration Rights Agreement to file a
registration statement relating to a registered exchange offer for the
outstanding Notes with the SEC no later than the 90th day after the date that
the outstanding Notes were first issued. We also agreed to use our reasonable
best efforts to cause the exchange offer registration statement to become
effective under the Securities Act no later than the 150th day after the
outstanding Notes were first issued. Unless the exchange offer would not be
permitted by applicable law or SEC policy, we will use our reasonable best
efforts to commence the exchange offer, keep the exchange offer open for a
period of not less than 20 business days (or longer, if required by applicable
law) after the date on which notice of the exchange offer is mailed to holders
of the outstanding Notes and issue, on or prior to 30 business days after the
date on which the registration statement was declared effective by the SEC, new
Exchange Notes in exchange for all outstanding Notes tendered prior thereto in
the exchange offer. We also agreed to complete the exchange offer no later than
the 180th day after the Notes are first issued. The Exchange Notes will have
terms substantially identical to the outstanding Notes, except that the Exchange
Notes will not contain terms with respect to transfer restrictions, certain
registration rights and additional interest for failure to observe certain
obligations in the Registration Rights Agreement.
SHELF REGISTRATION
We may also be required to file a shelf registration statement to permit
certain holders of the outstanding Notes who were not eligible to participate in
the exchange offer to resell the outstanding Notes periodically without being
limited by the transfer restrictions. Under the circumstances set forth in the
Registration Rights Agreement, we will use our reasonable best efforts to file a
shelf registration statement with the SEC after such obligation arises. We will
cause the shelf registration statement to be declared effective by the SEC as
promptly as reasonably practicable after filing, but no later than the 210th day
after the outstanding Notes are first issued. We will also keep the shelf
registration statement effective for a period of two years after the date the
shelf registration statement is declared effective (or one year in the case of a
shelf registration effected at the request of the initial purchasers), or such
shorter period that will terminate when all of the outstanding Notes covered by
the shelf registration statement are sold thereunder or are already freely
tradable.
Holders of outstanding Notes will be required to deliver certain
information to be used in connection with the shelf registration statement in
order to have their Notes included in the shelf registration statement.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
EXCHANGE OF NOTES
The exchange of outstanding Notes for Exchange Notes in the exchange offer
will not constitute a taxable event to holders for United States federal income
tax purposes. Consequently, no gain or loss will be recognized by a holder upon
receipt of an Exchange Note, the holding period of the Exchange Note will
include the holding period of the outstanding Note exchanged therefor and the
basis of the Exchange Note will be the same as the basis of the outstanding Note
immediately before the exchange. The exchange offer will not result in a taxable
event for non-tendering holders. Upon consummation of the exchange offer, a
non-tendering holder will have the same adjusted basis in, and holding period
for, the outstanding Notes as the holder had immediately prior to the exchange
offer.
In any event, persons considering the exchange of outstanding Notes for
Exchange Notes should consult their own tax advisors concerning the United
States federal income tax consequences in light of their particular situations
as well as any consequences arising under the laws of any other taxing
jurisdiction.
CONSEQUENCES TO HOLDERS
The following summary describes the material United States federal income
tax consequences of the exchange offer and the ownership of Exchange Notes as of
the date hereof. Except where noted, the discussion below only deals with
Exchange Notes held as capital assets and does not deal with special situations,
such as those
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of dealers in securities or currencies, financial institutions, tax-exempt
entities, insurance companies, persons holding Exchange Notes as a part of a
hedging, integrated, conversion or constructive sale transaction or a straddle,
traders in securities that elect to use a mark-to-market method of accounting
for their securities holdings, persons liable for alternative minimum tax,
investors in pass-through entities or U.S. Holders (as defined below) of the
Exchange Notes whose "functional currency" is not the United States dollar. In
addition, this discussion does not address the consequences of holding
outstanding Notes that were not exchanged for Exchange Notes. Furthermore, the
discussion below is based upon the provisions of the Internal Revenue Code of
1986, as amended (the Code), and regulations, rulings and judicial decisions
thereunder as of the date hereof, and such authorities may be repealed, revoked
or modified so as to result in United States federal income tax consequences
different from those discussed below. If a partnership holds our Exchange Notes,
the tax treatment of a partner will generally depend upon the status of the
partner and the activities of the partnership. If you are a partner of a
partnership holding our Exchange Notes, you should consult your tax advisors.
Persons considering the purchase, ownership or disposition of Exchange Notes
should consult their own tax advisors concerning the United States federal
income tax consequences in light of their particular situations as well as any
consequences arising under the laws of any other taxing jurisdiction.
As used herein, a "U.S. Holder" of an Exchange Note means a holder that is
for United States federal income tax purposes (i) a citizen or resident of the
United States, (ii) a corporation or other entity taxable as a corporation for
United States federal income tax purposes, created or organized in or under the
laws of the United States or any political subdivision thereof, (iii) an estate
the income of which is subject to United States federal income taxation
regardless of its source or (iv) a trust if it (x) is subject to the supervision
of a court within the United States and one or more United States persons have
the authority to control all substantial decisions of the trust or (y) has a
valid election in effect under applicable United States Treasury regulations to
be treated as a United States person. A "Non-U.S. Holder" is a holder other than
a U.S. Holder and other than a partnership.
PAYMENTS OF INTEREST
Stated interest on an Exchange Note will generally be taxable to a U.S.
Holder as ordinary income at the time it is paid or accrued in accordance with
the U.S. Holder's method of accounting for tax purposes.
SALE, EXCHANGE AND RETIREMENT OF EXCHANGE NOTES
A U.S. Holder's tax basis in an Exchange Note will, in general, be the
same as the basis in such holder's outstanding Note immediately before the
exchange. Upon the sale, exchange, retirement or other disposition of a Exchange
Note, a U.S. Holder will recognize gain or loss equal to the difference between
the amount realized upon the sale, exchange, retirement or other disposition
(less any accrued and unpaid interest, which will be treated as a payment of
interest for United States federal income tax purposes) and the adjusted tax
basis of the Exchange Note. Such gain or loss will be capital gain or loss.
Capital gains of individuals derived in respect of capital assets held for more
than one year are eligible for reduced rates of taxation. The deductibility of
capital losses is subject to limitations.
MARKET DISCOUNT
If a U.S. Holder purchases an outstanding Note and exchanges it for an
Exchange Note or purchases an Exchange Note, in either case, for an amount that
is less than its stated redemption price at maturity, the amount of the
difference will be treated as "market discount" for United States federal income
tax purposes, unless such difference is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
principal payment on, or any gain on the sale, exchange, retirement or other
disposition of, an Exchange Note as ordinary income to the extent of the market
discount which has not previously been included in income and is treated as
having accrued on the outstanding Note exchanged for an Exchange Note, if any,
and on such Exchange Note at the time of such payment or disposition. Market
discount will be considered to accrue ratably during the period from the date of
acquisition of an outstanding Note exchanged for an Exchange
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Note or an Exchange Note, as the case may be, to the maturity date of the
Exchange Note, unless the U.S. Holder elects to accrue on a constant interest
method.
A U.S. Holder may also elect to include market discount in income
currently as it accrues (on either a ratable or constant interest method).
Unless a U.S. Holder makes such an election, the U.S. Holder may be required to
defer, until the maturity of the Exchange Note or its earlier disposition in a
taxable transaction, the deduction of all or a portion of the interest expense
on any indebtedness incurred or continued to purchase or carry such Exchange
Note or an outstanding Note exchanged for an Exchange Note.
AMORTIZABLE BOND PREMIUM
A U.S. Holder that purchases an outstanding Note and exchanges it for an
Exchange Note or that purchases an Exchange Note, in either case, for an amount
in excess of the sum of all amounts payable on such note after the purchase date
other than qualified stated interest will be considered to have purchased such
note at a "premium." A U.S. Holder generally may elect to amortize the premium
over the remaining term of the outstanding Note or the Exchange Note, as the
case may be, on a constant yield method as an offset to interest when includible
in income under the U.S. Holder's regular accounting method. If a U.S. Holder
does not make such an election, the premium will decrease the gain or increase
the loss otherwise recognized on disposition of the Exchange Note.
OPTIONAL REDEMPTION
Under certain circumstances exercise of the option to redeem the Exchange
Notes will require us to pay a "make-whole" premium to a holder of the Exchange
Notes. We intend to take the position that the Exchange Notes should not be
treated as contingent payment debt instruments because of this additional
payment. If the IRS successfully challenges this position, and the Exchange
Notes are treated as contingent payment debt instruments, the tax consequences
of holding and disposing of the Exchange Notes will differ materially from those
discussed herein.
You are urged to consult your own tax advisors regarding the United States
federal income tax treatment of the "make-whole" premium and the consequences
thereof.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
principal and interest paid on Exchange Notes and to the proceeds upon the sale
of an Exchange Note paid to U.S. Holders other than certain exempt recipients
(such as corporations). A backup withholding tax will apply to such payments if
the U.S. Holder fails to provide a taxpayer identification number or
certification of exempt status or fails to report in full dividend and interest
income.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
TAXATION OF NON-U.S. HOLDERS
In general, payment of interest on an Exchange Note to a Non-U.S. Holder
will not be subject to U.S. federal withholding tax (including any backup
withholding): if (i) the Non-U.S. Holder is not a bank for U.S. federal income
tax purposes whose receipt of interest on the Exchange Note is described in
Section 881(c)(3)(A) of the Code; and (ii) the Non-U.S. Holder certifies, on
Form W-8BEN (or permissible substitute or successor form) under penalties of
perjury that it is a Non-U.S. Holder and provides its name and address.
Beneficial owners should be aware that the Internal Revenue Service might take
the position that U.S. federal withholding tax applies to a beneficial owner
that owns, actually or constructively, 10 percent or more of the total combined
voting power of all classes of stock entitled to vote or that is a "controlled
foreign corporation" described in Section 881(c)(3)(c) of the Code. Subject to
the discussion below concerning backup withholding, any capital gain realized
upon a sale, exchange or retirement of an Exchange Note by or
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on behalf of a beneficial owner who is a Non-U.S. Holder ordinarily will not be
subject to U.S. federal withholding tax.
A holder of an Exchange Note who is a Non-U.S. Holder may be subject to
federal income tax on interest on the Exchange Note or on gain realized on the
disposition of the Exchange Note if (i) such interest or gain is effectively
connected with a U.S. trade or business of the holder; or (ii) in the case of an
individual, such holder is present in the U.S. for 183 days or more during the
taxable year of the sale, exchange or retirement and certain other requirements
are met.
INFORMATION REPORTING AND BACKUP WITHHOLDING FOR NON-U.S. HOLDERS
Backup withholding generally will not apply to payments of interest made to
a Non-U.S. Holder of an Exchange Note who provides a properly completed Form
W-8BEN (or a substantially similar form) or otherwise establishes an exemption
from backup withholding. Payments of principal or the proceeds of a disposition
of the Exchange Note by or through a U.S. office of a broker generally will be
subject to backup withholding and information reporting unless the Non-U.S.
Holder certifies its status as a Non-U.S. Holder under penalties of perjury (and
certain other conditions are met) or otherwise establishes an exemption.
payments of principal or the proceeds of a disposition of the Exchange Notes by
or through a foreign office of a U.S. broker or foreign broker with certain
relationships to the U.S. generally will be subject to information reporting
(but not backup withholding) unless the broker has documentary evidence in its
record that the holder is not a U.S. person and certain other conditions are met
or the holder otherwise establishes an exemption.
Any amounts withheld under backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's federal income tax liability provided the required
information is furnished to the Internal Revenue Service.
RATINGS
It is anticipated that the Exchange Notes will be assigned a rating of "aa-" by
A.M. Best, "A+" by Fitch, "A2" by Moody's Investors Service and "A" by S&P. A
senior debt rating is not a recommendation to buy, sell or hold securities and
may be subject to review, revision, suspension or withdrawal at the sole
discretion of the assigning ratings agencies.
ERISA CONSIDERATIONS
We and certain of our affiliates may be considered a "party in interest"
within the meaning of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or a "disqualified person" within the meaning of Section 4975
of the Internal Revenue Code with respect to employee benefit plans. Prohibited
transactions within the meaning of ERISA or the Internal Revenue Code may arise,
for example, if the Exchange Notes are acquired by or with the assets of a
pension or other employee benefit plan with respect to which we or any of our
affiliates is a service provider, unless the Exchange Notes are acquired
pursuant to an applicable exemption from the prohibited transaction rules.
Accordingly, by its acquisition and holding of the Exchange Notes each
holder of the Exchange Notes will be deemed to have represented that either (i)
it has not used the assets of any benefit plan, or any entity deemed to hold
assets of a benefit plan, for purposes of acquiring the Exchange Notes or (ii)
if the assets of a benefit plan are used to acquire the Exchange Notes, either
directly or indirectly, the acquisition and holding of the Exchange Notes do
not, and will not, constitute a non-exempt prohibited transaction under Section
406 of ERISA, Section 4975 of the Internal Revenue Code or any similar rules by
reason of the applicability to such purchase and holding of a class exemption
issued by the U.S. Department of Labor.
The issuance of Exchange Notes pursuant to the exchange offer to a plan is
in no respect a representation by us that such an investment meets all relevant
legal requirements with respect to investments by plans generally or any
particular plan, or that such an investment is appropriate for plans generally
or any particular plan.
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Any party considering acquiring the Exchange Notes pursuant to the
exchange offer on behalf of, or with the assets of, any benefit plan should
consult with its counsel to confirm that such investment will satisfy the
requirements of ERISA, the Internal Revenue Code and the Department of Labor
Regulations applicable to plans and that such purchaser can make the deemed
representations set forth above.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of the Exchange Notes. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for outstanding Notes where the outstanding Notes were acquired as a result of
market-making activities or other trading activities. We have agreed that we
will make such prospectus, and any amendment or supplement thereto, available to
any such broker-dealer for use in connection with any resale of any Exchange
Notes for a period of the lesser of 180 days after the expiration of the
exchange offer (as such date may be extended) and the date on which all
broker-dealers have sold all Exchange Notes held by them. We have also agreed
that we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal.
We will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own accounts
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of these methods
of resale, at market prices prevailing at the time of resale, at prices related
to the prevailing market prices or negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
the purchasers of any Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account pursuant to the exchange
offer and any broker or dealer that participates in a distribution of the
Exchange Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any resale of Exchange Notes and any
commissions or concessions received by these persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incident to the exchange offer, other
than commissions or concessions of any brokers or dealers and will indemnify the
holders of outstanding Notes, including any broker-dealers, against certain
liabilities, including liabilities under the Securities Act.
By its acceptance of the exchange offer, any broker-dealer that receives
Exchange Notes pursuant to the exchange offer hereby agrees to notify us prior
to using the prospectus in connection with the sale or transfer of Exchange
Notes, and acknowledges and agrees that, upon receipt of notice from us of the
happening of any event which makes any statement in this prospectus untrue in
any material respect or which requires the making of any changes in this
prospectus in order to make the statements therein not misleading or which may
impose upon us disclosure obligations that may have a material adverse effect on
us (which notice we agree to deliver promptly to such broker-dealer) such
broker-dealer will suspend use of this prospectus until we have notified such
broker-dealer that delivery of this prospectus may resume and have furnished
copies of any amendment or supplement to this prospectus to such broker-dealer.
LEGAL OPINIONS
The validity and legality of the Exchange Notes offered hereby will be
passed upon for the Company by Dewey Ballantine LLP.
EXPERTS
The consolidated financial statements and management's report on the
effectiveness of internal control over financial reporting incorporated in this
prospectus by reference from Cincinnati Financial Corporation's
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Annual Report on Form 10-K for the year ended December 31, 2004 and the related
financial statement schedules, have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
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PART II
Item 20. Indemnification of Directors and Officers.
Section 1701.13(E) of the Ohio Revised Code gives a corporation
incorporated under the laws of Ohio authority to indemnify or agree to indemnify
any person who is or was a director, officer, employee or agent of that
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, non-profit or for profit, a limited liability
company, or a partnership, joint venture, trust, or other enterprise, against
expenses, including attorney's fees, judgments, fines, and amounts paid in
settlement, actually and reasonably incurred by him in connection with any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, other than an action by or in the
right of the corporation, to which he was, is or may be made a party because of
being or having been such director, officer or employee, provided, in connection
therewith, that such person is determined to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, if he
had no reasonable cause to believe his conduct was unlawful, that, in the case
of an action or suit by or in the right of the corporation, (i) no negligence or
misconduct in the performance of his duty to the corporation shall have been
adjudged unless, and only to the extent that, a court determines, upon
application, that, despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity, and (ii) the action or suit is not one in which the only liability
asserted against a director is pursuant to Section 1701.95 of the Ohio Revised
Code, which relates to unlawful loans, dividends and distributions of assets.
Section 1701.13(E) further provides that to the extent that such person has been
successful on the merits or otherwise in defense of any such action, suit, or
proceeding, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection therewith. Section 1701.13(E) further provides
that unless at the time of a director's act or omission, the articles of
incorporation or the code of regulations of a corporation state by specific
reference to Section 1701.13(E) that Section 1701.13(E) does not apply to the
corporation, and unless the only liability asserted against a director is
pursuant to Section 1701.95 of the Ohio Revised Code, expenses, including
attorney's fees, incurred by a director in defending such an action, suit or
proceeding shall be paid by the corporation as they are incurred, in advance of
the final disposition of such action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director in which he agrees to (i) repay such
amounts if it is proved by clear and convincing evidence in a court of competent
jurisdiction that such director's action, or failure to act involved an act or
omission undertaken with deliberate intent to cause injury to the corporation or
undertaken with reckless disregard for the best interests of the corporation and
(ii) reasonably to cooperate with the corporation concerning said action, suit
or proceeding. Section 1701.13(E) also provides that the indemnification thereby
permitted shall not be exclusive, and shall be in addition to, any other rights
that directors, officers or employees may have, including rights under insurance
purchased by the corporation. Cincinnati Financial's Articles of Incorporation
provides for the indemnification of directors and officers of Cincinnati
Financial to the fullest extent permitted by law.
The above is a general summary of certain provisions of Cincinnati
Financial's Articles of Incorporation and of the Ohio Revised Code and is
subject in all respects to the specific and detailed provisions of Cincinnati
Financial's Articles of Incorporation and the Ohio Revised Code.
Cincinnati Financial maintains insurance policies insuring its directors
and officers against certain obligations that may be incurred by them.
Item 21. Exhibits and Financial Statement Schedules.
EXHIBIT NO. DESCRIPTION
*3.1 Amended Articles of Incorporation of Cincinnati Financial
Corporation - incorporated by reference to the 1999 Annual Report on
Form 10-K dated March 23, 2000
*3.2 Code of Regulations of Cincinnati Financial Corporation -
incorporated by reference to Exhibit 2 to the Registrant's Proxy
Statement dated March 2, 1992
*4.1 Indenture, dated as of November 1, 2004, between Cincinnati
Financial and The Bank of New York Trust Company, N.A., as Trustee -
incorporated by reference to Exhibit 4.1 to the Registrant's Form
8-K dated November 2, 2004
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*4.1 Indenture, dated as of November 1, 2004, between Cincinnati
Financial and The Bank of New York Trust Company, N.A., as Trustee -
incorporated by reference to Exhibit 4.1 to the Registrant's Form
8-K dated November 2, 2004
*4.2 Supplemental Indenture, dated as of November 1, 2004, between
Cincinnati Financial and The Bank of New York Trust Company, N.A.,
as Trustee - incorporated by reference to Exhibit 4.2 to the
Registrant's Form 8-K dated November 2, 2004
*4.3 Registration Rights Agreement, dated as of November 1, 2004 -
incorporated by reference to Exhibit 4.3 to the Registrant's Form
8-K dated November 2, 2004
5.1 Opinion of Dewey Ballantine LLP as to the legality of the
unsecured notes
12.1 Statement re: Computations of Ratios
*21.1 Subsidiaries of Registrant - incorporated by reference to Exhibit 21
to the 2003 Annual Report on Form 10-K dated March 11, 2004
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Dewey Ballantine LLP (included in Exhibit 5.1)
25.1 Form T-1 re: eligibility of The Bank of New York Trust Company,
N.A. to act as Trustee under the Indenture
99.1 Form of Letter of Transmittal
**99.2 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees
**99.3 Form of Letter to Clients
**99.4 Form of Notice of Guaranteed Delivery
* Incorporated by reference from other documents filed with the SEC as
indicated.
** Previously filed.
Item 22. Undertakings.
(a) Undertaking related to Rule 415 offering:
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
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(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) Undertaking related to filings incorporating subsequent Exchange Act
documents by reference:
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Undertaking related to registration on Form S-4 or F-4 of securities
offered for resale:
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus: (i) that is filed
pursuant to the immediately preceding paragraph, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Undertaking related to acceleration of effectiveness:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by the director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(e) Undertaking related to requests for information:
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
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(f) Undertaking related to post-effective amendments:
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Cincinnati, state of Ohio, on March 11, 2005.
CINCINNATI FINANCIAL CORPORATION
/S/ Kenneth W. Stecher
--------------------------------
BY: Kenneth W. Stecher
TITLE: Senior Vice President, Secretary and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below on March 11, 2005 by
the following persons in the capacities indicated.
SIGNATURE TITLE
Chairman, President and
* Chief Executive Officer
------------------------------------------ (Principal Executive Officer)
John J. Schiff, Jr.
Senior Vice President,
Secretary and Treasurer
/S/ Kenneth W. Stecher (Principal Financial and
------------------------------------------ Accounting Officer)
Kenneth W. Stecher
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*
-----------------------------------
William F. Bahl Director
*
-----------------------------------
James E. Benoski Director
*
-----------------------------------
Michael Brown Director
*
-----------------------------------
Dirk J. Debbink Director
*
-----------------------------------
Kenneth C. Lichtendahl Director
*
-----------------------------------
W. Rodney McMullen Director
*
-----------------------------------
Gretchen W. Price Director
*
-----------------------------------
Thomas R. Schiff Director
*
-----------------------------------
Frank J. Schulthess Director
*
-----------------------------------
John M. Shepherd Director
*
-----------------------------------
Douglas S. Skidmore Director
*
-----------------------------------
Larry R. Webb Director
*
-----------------------------------
E. Anthony Woods
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*BY: /S/ KENNETH W. STECHER
--------------------------
KENNETH W. STECHER
ATTORNEY-IN-FACT
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