Pursuant to rule 424(b)(3)
                                                     Registration No. 333-63619

PROSPECTUS SUPPLEMENT
(To Prospectus dated September 30, 1998)
 
[LOGO OF FEDERAL REALTY INVESTMENT TRUST APPEARS HERE]
$250,000,000
Medium-Term Notes
Due Nine Months or More from Date of Issue
Federal Realty Investment Trust (the "Trust") may offer from time to time up to
$250,000,000 aggregate initial offering price, or the equivalent thereof in one
or more foreign or composite currencies, of its Medium-Term Notes Due Nine
Months or More from Date of Issue (the "Notes"). Such aggregate initial
offering price is subject to reduction as a result of the sale by the Trust of
other Offered Securities described in the accompanying Prospectus. Each Note
will mature on any day nine months or more from the date of issue, as specified
in the applicable pricing supplement hereto (each, a "Pricing Supplement"), and
may be subject to redemption at the option of the Trust or repayment at the
option of the Holder thereof, in each case, in whole or in part, prior to its
Stated Maturity Date, as specified in the applicable Pricing Supplement. In
addition, each Note may be denominated and/or payable in United States dollars
or a foreign or composite currency ("Foreign Currency Notes"), as specified in
the applicable Pricing Supplement. The Notes, other than Foreign Currency
Notes, will be issued in minimum denominations of $1,000 and integral multiples
thereof, unless otherwise specified in the applicable Pricing Supplement, while
Foreign Currency Notes will be issued in the minimum denominations specified in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Notes will
bear interest at fixed rates ("Fixed Rate Notes") or at floating rates
("Floating Rate Notes"). The applicable Pricing Supplement will specify whether
a Floating Rate Note is a Regular Floating Rate Note, a Floating Rate/Fixed
Rate Note or an Inverse Floating Rate Note and whether the rate of interest
thereon is determined by reference to one or more of the CD Rate, the CMT Rate,
the Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the
Federal Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an
"Interest Rate Basis"), or any other interest rate basis or formula, as
adjusted by any Spread and/or Spread Multiplier. Interest on each Floating Rate
Note will accrue from its date of issue and, unless otherwise specified in the
applicable Pricing Supplement, will be payable monthly, quarterly, semiannually
or annually in arrears, as specified in the applicable Pricing Supplement, and
on the Maturity Date. Unless otherwise specified in the applicable Pricing
Supplement, the rate of interest on each Floating Rate Note will be reset
daily, weekly, monthly, quarterly, semiannually or annually, as specified in
the applicable Pricing Supplement. Interest on each Fixed Rate Note will accrue
from its date of issue and will be payable in arrears as specified in the
applicable Pricing Supplement and on the Maturity Date. Notes may also be
issued that do not bear any interest currently or that bear interest at a below
market rate. See "Description of Notes."
The interest rate, or formula for the determination of the interest rate,
applicable to each Note and the other variable terms thereof will be
established by the Trust on the date of issue of such Note and will be
specified in the applicable Pricing Supplement. Interest rates or formulas and
other terms of Notes are subject to change by the Trust, but no change will
affect any Note already issued or as to which an offer to purchase has been
accepted by the Trust.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in certificated form (a "Certificated Note"), as specified in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company (the "Depositary") and
registered in the name of the Depositary or the Depositary's nominee. Interests
in the Global Securities will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary (with respect to
its participants) and the Depositary's participants (with respect to beneficial
owners).
SEE "RISK FACTORS" ON PAGE S-3 FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY
PRICING SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

- ------------------------------------------------------------------------

          PRICE TO     AGENTS' DISCOUNTS
          PUBLIC(1)    AND COMMISSIONS(1)(2) PROCEEDS TO TRUST(1)(3)
- ------------------------------------------------------------------------
                                    
Per Note  100%         .125% - .750%         99.875% - 99.250%
- ------------------------------------------------------------------------
Total(4)  $250,000,000 $312,500 - $1,875,000 $249,687,500 - $248,125,000
- ------------------------------------------------------------------------

(1) J.P. Morgan Securities Inc., BT Alex. Brown Incorporated, First Union
    Capital Markets, Goldman, Sachs & Co., Merrill Lynch & Co. and Merrill
    Lynch, Pierce, Fenner & Smith Incorporated (the "Agents") may purchase the
    Notes, as principal, from the Trust, for resale to investors and other
    purchasers at varying prices relating to prevailing market prices at the
    time of resale as determined by the applicable Agent, or, if so specified
    in the applicable Pricing Supplement, for resale at a fixed offering price.
    Unless otherwise specified in the applicable Pricing Supplement, any Note
    sold to an Agent as principal will be purchased by such Agent at a price
    equal to 100% of the principal amount thereof less a percentage of the
    principal amount equal to the commission applicable to an agency sale (as
    described below) of a Note of identical maturity. If agreed to by the Trust
    and an Agent, such Agent may utilize its reasonable efforts on an agency
    basis to solicit offers to purchase the Notes at 100% of the principal
    amount thereof, unless otherwise specified in the applicable Pricing
    Supplement. If the Trust issues any Note at a discount from or at a premium
    over its principal amount, the Price to Public of any Note issued at a
    discount or premium will be set forth in the applicable Pricing Supplement.
    The Trust will pay a commission to the applicable Agent, ranging from .125%
    to .750% of the principal amount of any Note, depending upon its stated
    maturity, sold through such Agent. Commissions with respect to Notes with
    stated maturities in excess of 30 years that are sold through such Agent
    will be negotiated between the Trust and such Agent at the time of such
    sale. See "Supplemental Plan of Distribution."
(2) The Trust has agreed to indemnify the Agents against, and to provide
    contribution with respect to, certain liabilities, including liabilities
    under the Securities Act of 1933, as amended. See "Supplemental Plan of
    Distribution."
(3) Before deducting expenses payable by the Trust estimated at $350,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
The Notes are being offered on a continuous basis by the Trust to or through
the Agents. Unless otherwise specified in the applicable Pricing Supplement,
the Notes will not be listed on any securities exchange and there can be no
assurance that the Notes offered hereby will be sold or that there will be a
secondary market for the Notes or that there will be liquidity in such market
if one develops. The Trust reserves the right to cancel or modify the offer
made hereby without notice. The Trust or an Agent, if it solicits the offer on
an agency basis, may reject any offer to purchase Notes in whole or in part.
See "Supplemental Plan of Distribution."
J.P. MORGAN & CO.
           BT ALEX. BROWN
                        FIRST UNION CAPITAL MARKETS
                                        GOLDMAN, SACHS & CO.
                                                             MERRILL LYNCH & CO.
September 30, 1998

 
  CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE AGENTS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND
MAY BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION."
 
  NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE
PRICING SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST OR THE AGENTS. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE NOTES OFFERED
HEREBY AND THEREBY OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
SUCH NOTES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT, THE
APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS, NOR ANY SALE MADE HEREUNDER
OR THEREUNDER, SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE TRUST SINCE THE DATE HEREOF OR
THEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN
OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH
INFORMATION.
 
                               TABLE OF CONTENTS
 
                             PROSPECTUS SUPPLEMENT
 


                                                                            PAGE
                                                                         
   Risk Factors............................................................  S-3
   Description of Notes....................................................  S-4
   Special Provisions Relating to Foreign Currency Notes................... S-21
   Certain United States Federal Income Tax Considerations................. S-23
   Supplemental Plan of Distribution....................................... S-31
   Legal Opinions.......................................................... S-32
                                  PROSPECTUS
   Available Information...................................................    2
   Incorporation of Certain Documents by Reference.........................    2
   The Trust...............................................................    3
   Use of Proceeds.........................................................    4
   Ratios of Earnings to Fixed Charges.....................................    4
   Description of Debt Securities..........................................    4
   Description of Preferred Shares.........................................   16
   Description of Common Shares............................................   22
   Plan of Distribution....................................................   24
   Legal Opinions..........................................................   25
   Experts.................................................................   25

 
                                      S-2

 
                                 RISK FACTORS
 
  THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL OF THE RISKS OF AN
INVESTMENT IN NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED OR PAYABLE
IN OR DETERMINED BY REFERENCE TO A CURRENCY OR COMPOSITE CURRENCY OTHER THAN
UNITED STATES DOLLARS OR TO ONE OR MORE INTEREST RATE, CURRENCY OR OTHER
INDICES OR FORMULAS. THE TRUST AND THE AGENTS DISCLAIM ANY RESPONSIBILITY TO
ADVISE PROSPECTIVE INVESTORS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS THEY CHANGE FROM TIME TO TIME. EACH PROSPECTIVE
INVESTOR SHOULD CONSULT HIS OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED OR PAYABLE IN OR DETERMINED BY
REFERENCE TO A CURRENCY OR COMPOSITE CURRENCY OTHER THAN UNITED STATES DOLLARS
OR TO ONE OR MORE INTEREST RATE, CURRENCY OR OTHER INDICES OR FORMULAS. SUCH
NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED
WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS OR TRANSACTIONS INVOLVING THE
APPLICABLE INTEREST RATE INDEX OR CURRENCY INDEX OR OTHER INDICES OR FORMULAS.
 
STRUCTURE RISKS
 
  An investment in Notes indexed, as to principal, premium, if any, and/or
interest, to one or more currencies or composite currencies (including
exchange rates and swap indices between currencies or composite currencies),
commodities, interest rates or other indices or formulas, either directly or
inversely, entails significant risks that are not associated with similar
investments in a conventional fixed rate or floating rate debt security. Such
risks include, without limitation, the possibility that any such index or
formula may be subject to significant changes, that the resulting interest
rate will be less than that payable on a conventional fixed rate or floating
rate debt security issued by the Trust at the same time, that the repayment of
principal and/or premium, if any, can occur at times other than that expected
by the investor, and that the investor could lose all or a substantial portion
of principal and/or premium, if any, payable on the Maturity Date (as defined
below). Such risks depend on a number of interrelated factors, including
economic, financial and political events, over which the Trust has no control.
Additionally, if the formula used to determine the amount of principal,
premium, if any, and/or interest payable with respect to such Notes contains a
multiplier or leverage factor, the effect of any change in the applicable
index or indices or formula or formulas will be magnified. In recent years,
values of certain indices and formulas have been highly volatile and such
volatility may continue or increase in the future. Fluctuations in the value
of any particular index or formula that have occurred in the past are not
necessarily indicative, however, of fluctuations that may occur in the future.
 
  The secondary market for Notes will be affected by a number of factors
independent of the creditworthiness of the Trust and the value of the
applicable index or indices or formula or formulas, including the complexity
and volatility of each such index or formula, the method of calculating the
principal, premium, if any, and/or interest in respect of such Notes, the time
remaining to the maturity of such Notes, the outstanding amount of such Notes,
any redemption features of such Notes, the amount of other debt securities
linked to such index or formula and the level, direction and volatility of
market interest rates generally. Such factors also will affect the market
value of such Notes. In addition, certain Notes may be designed for specific
investment objectives or strategies and, therefore, may have a more limited
secondary market and experience more price volatility than conventional debt
securities. Investors may not be able to sell such Notes readily or at prices
that will enable investors to realize their anticipated yield.
 
  Any optional redemption feature of Notes might affect the market value of
such Notes. Since the Trust may be expected to redeem such Notes when
prevailing interest rates are relatively low, an investor might not be able to
reinvest the redemption proceeds at an effective interest rate as high as the
interest rate on such Notes.
 
  The Notes will not have an established trading market when issued, and there
can be no assurance of a secondary market for the Notes or the liquidity of
such market if one develops. See "Supplemental Plan of Distribution."
 
  No investor should purchase Notes unless such investor understands and is
able to bear the risk that such Notes may not be readily saleable, that the
value of Notes will fluctuate over time and that such fluctuations may be
significant.
 
                                      S-3

 
CREDIT RATINGS
 
  The credit ratings assigned to the Trust's medium-term note program may not
reflect the potential impact of all risks related to structure and other
factors on the value of the Notes. Accordingly, prospective investors should
consult their own financial and legal advisors as to the risks entailed by an
investment in the Notes and the suitability of such Notes in light of their
particular circumstances.
 
EXCHANGE RATES AND EXCHANGE CONTROLS
 
  An investment in Foreign Currency Notes (as defined below) entails
significant risks that are not associated with a similar investment in a debt
security denominated and payable in United States dollars. Such risks include,
without limitation, the possibility of significant changes in the rate of
exchange between the United States dollar and the applicable foreign currency
or composite currency and the possibility of the imposition or modification of
exchange controls by the applicable governments or monetary authorities. Such
risks generally depend on factors over which the Trust has no control, such as
economic, financial and political events and the supply and demand for the
applicable currencies or composite currencies. In addition, if the formula
used to determine the amount of principal, premium, if any, and/or interest
payable with respect to Foreign Currency Notes contains a multiplier or
leverage factor, the effect of any change in the applicable currencies or
composite currencies will be magnified. In recent years, rates of exchange
between the United States dollar and foreign currencies or composite
currencies have been highly volatile and such volatility may continue or
increase in the future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of fluctuations
that may occur in the future. Depreciation of the foreign currency or
composite currency in which a Foreign Currency Note is payable against the
United States dollar would result in a decrease in the United States dollar-
equivalent yield of such Foreign Currency Note, in the United States dollar-
equivalent value of the principal and premium, if any, payable on the Maturity
Date of such Foreign Currency Note, and, generally, in the United States
dollar-equivalent market value of such Foreign Currency Note.
 
  Governments or monetary authorities have imposed from time to time, and may
in the future impose or revise, exchange controls at or prior to the date on
which any payment of principal of, or premium, if any, or interest on, a
Foreign Currency Note is due, which could affect exchange rates as well as the
availability of the foreign currency or composite currency in which such
payment is to be made on such date. Even if there are no exchange controls, it
is possible that the foreign currency or composite currency in which a payment
in respect of any particular Foreign Currency Note is to be made would not be
available on the applicable payment date due to other circumstances beyond the
reasonable control of the Trust. In such cases, the Trust will be entitled to
satisfy its obligations in respect of such Foreign Currency Note in United
States dollars. See "Special Provisions Relating to Foreign Currency Notes--
Payment Currency."
 
                             DESCRIPTION OF NOTES
 
  The Notes will be issued as a series of Debt Securities (as defined below)
under an Indenture, dated as of September 1, 1998, as amended, supplemented or
modified from time to time (the "Indenture"), between the Trust and First
Union National Bank, as trustee (the "Trustee"). The Indenture is subject to,
and governed by, the Trust Indenture Act of 1939, as amended. The following
summary of certain provisions of the Notes and the Indenture does not purport
to be complete and is qualified in its entirety by reference to the actual
provisions of the Notes and the Indenture. Capitalized terms used but not
defined herein shall have the meanings given to them in the accompanying
Prospectus, the Notes or the Indenture, as the case may be. The term "Debt
Securities," as used in this Prospectus Supplement, refers to all debt
securities, including the Notes, issued and issuable from time to time under
the Indenture. The following description of the particular terms of the Notes
offered hereby (referred to in the accompanying Prospectus as the "Senior
Securities") supplements, and to the extent inconsistent therewith replaces,
the description of the general terms and provisions of the Senior Securities
set forth in the Prospectus, to which description reference is hereby made.
 
  The following description of Notes will apply to each Note offered hereby
unless otherwise specified in the applicable Pricing Supplement.
 
                                      S-4

 
GENERAL
 
  The Notes will be unsecured obligations of the Trust and will rank pari
passu with all other unsecured and unsubordinated indebtedness of the Trust
from time to time outstanding. The Notes are effectively subordinated to
mortgages and other secured indebtedness of the Trust (approximately $648
million at June 30, 1998), which encumber certain assets of the Trust.
 
  The Indenture does not limit the aggregate initial offering price of Debt
Securities that may be issued thereunder and Debt Securities may be issued
thereunder from time to time in one or more series up to the aggregate initial
offering price from time to time authorized by the Trust for each series. The
Trust may, from time to time, without the consent of the Holders of the Notes,
provide for the issuance of Notes or other Debt Securities under the Indenture
in addition to the $250,000,000 aggregate initial offering price of Notes
offered hereby.
 
  The Notes are currently limited to up to $250,000,000 aggregate initial
offering price, or the equivalent thereof in one or more foreign or composite
currencies. The Notes will be offered on a continuous basis and will mature on
any day nine months or more from their dates of issue (each, a "Stated
Maturity Date"), as specified in the applicable Pricing Supplement. Unless
otherwise specified in the applicable Pricing Supplement, interest-bearing
Notes will either be Fixed Rate Notes or Floating Rate Notes, as specified in
the applicable Pricing Supplement. Notes may also be issued that do not bear
any interest currently or that bear interest at a below market rate.
 
  Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in, and payments of principal, premium, if any, and/or
interest will be made in, United States dollars. The Notes also may be
denominated in, and payments of principal, premium, if any, and/or interest
may be made in, one or more foreign currencies or composite currencies
("Foreign Currency Notes"). See "Special Provisions Relating to Foreign
Currency Notes--Payment of Principal, Premium, if any, and Interest." The
currency or composite currency in which a Note is denominated, whether United
States dollars or otherwise, is herein referred to as the "Specified
Currency." References herein to "United States dollars," "U.S. dollars" and
"U.S.$" are to the lawful currency of the United States of America (the
"United States").
 
  Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for the Notes in the applicable Specified Currencies. At
the present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign currencies or composite
currencies and vice versa, and commercial banks do not generally offer non-
United States dollar checking or savings account facilities in the United
States. Each applicable Agent is prepared to arrange for the conversion of
United States dollars into the applicable Specified Currency to enable the
purchaser to pay for the related Foreign Currency Note, provided that a
request is made to such Agent on or prior to the fifth Business Day (as
defined below) preceding the date of delivery of such Foreign Currency Note,
or by such other day as determined by such Agent. Each such conversion will be
made by an Agent on such terms and subject to such conditions, limitations and
charges as such Agent may from time to time establish in accordance with its
regular foreign exchange practices. All costs of exchange will be borne by the
purchaser of each such Foreign Currency Note. See "Special Provisions Relating
to Foreign Currency Notes."
 
  Interest rates offered by the Trust with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of Notes
purchased in any single transaction. Interest rates or formulas and other
terms of Notes are subject to change by the Trust from time to time, but no
such change will affect any Note already issued or as to which an offer to
purchase has been accepted by the Trust.
 
  Each Note will be issued in fully registered form as a Book-Entry Note or a
Certificated Note. The authorized denominations of each Note other than a
Foreign Currency Note will be $1,000 and integral multiples thereof, unless
otherwise specified in the applicable Pricing Supplement, while the authorized
denominations of each Foreign Currency Note will be specified in the
applicable Pricing Supplement.
 
  Payments of principal of, premium, if any, and interest on, Book-Entry Notes
will be made by the Trust through the Paying Agent (as defined below) to the
Depositary. See "--Book-Entry Notes." In the case of Certificated Notes,
payment of principal and premium, if any, due on the Stated Maturity Date or
any prior date on which the principal, or an installment of principal, of each
Certificated Note becomes due and payable, whether by the declaration of
 
                                      S-5

 
acceleration, notice of redemption at the option of the Trust, notice of the
Holder's option to elect repayment or otherwise (the Stated Maturity Date or
such prior date, as the case may be, is herein referred to as the "Maturity
Date" with respect to the principal of the applicable Note repayable on such
date) will be made in immediately available funds upon presentation and
surrender thereof (or, in the case of any repayment on an Optional Repayment
Date, upon presentation and surrender thereof and a duly completed election
form in accordance with the provisions described below) at the office or
agency maintained by the Trust for such purpose in the Borough of Manhattan,
The City of New York. Such office or agency is maintained currently by First
Union National Bank (the "Paying Agent") at 40 Broad Street, New York, New
York 10004. Payment of interest due on the Maturity Date of each Certificated
Note will be made to the person to whom payment of the principal and premium,
if any, shall be made. Payment of interest due on each Certificated Note on
any Interest Payment Date (as defined below) other than the Maturity Date will
be made at the office or agency referred to above maintained by the Trust for
such purpose or, at the option of the Trust, may be made by check mailed to
the address of the Holder entitled thereto as such address shall appear in the
Security Register of the Trust. Notwithstanding the foregoing, a Holder of
$10,000,000 (or, if the applicable Specified Currency is other than United
States dollars, the equivalent thereof in such Specified Currency) or more in
aggregate principal amount of Notes (whether having identical or different
terms and provisions) will be entitled to receive interest payments on any
Interest Payment Date other than the Maturity Date by wire transfer of
immediately available funds if appropriate wire transfer instructions have
been received in writing by the Paying Agent not less than 15 days prior to
such Interest Payment Date. Any such wire transfer instructions received by
the Paying Agent shall remain in effect until revoked by such Holder. For
special payment terms applicable to Foreign Currency Notes, see "Special
Provisions Relating to Foreign Currency Notes--Payment of Principal, Premium,
if any, and Interest."
 
  As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking
institutions are authorized or required by law, regulation or executive order
to close in The City of New York; provided, however, that with respect to
Foreign Currency Notes, such day is also not a day on which banking
institutions are authorized or required by law, regulation or executive order
to close in the Principal Financial Center (as defined below) of the country
issuing the Specified Currency (or if the Specified Currency is European
Currency Units ("ECU"), such day is not a day that appears as an ECU non-
settlement day on the display designated as "ISDE" on the Reuter Monitor Money
Rates Service (or a day so designated by the ECU Banking Association), or, if
ECU non-settlement days do not appear on that page (and are not so
designated), is not a day on which payments in ECU cannot be settled in the
international interbank market); provided, further, that, with respect to
Notes as to which LIBOR is an applicable Interest Rate Basis, such day is also
a London Business Day (as defined below). "London Business Day" means any day
(i) if the Index Currency (as defined below) is other than ECU, on which
dealings in such Index Currency are transacted in the London interbank market
or (ii) if the Index Currency is ECU, that does not appear as an ECU non-
settlement day on the display designated as "ISDE" on the Reuter Monitor Money
Rates Service (or a day so designated by the ECU Banking Association, or, if
ECU non-settlement days do not appear on that page (and are not so
designated), is not a day on which payments in ECU cannot be settled in the
international interbank market).
 
  "Principal Financial Center" means the capital city of the country issuing
the Specified Currency or, solely with respect to the calculation of LIBOR,
the Index Currency, except that with respect to United States dollars,
Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs
and ECU, the Principal Financial Center shall be The City of New York, Sydney,
Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
 
  Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "--Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the office or agency maintained by the
Trust for such purpose in the Borough of Manhattan, The City of New York. No
service charge will be made by the Trust or The Bank of New York (the
"Securities Registrar") for any such registration of transfer or exchange of
Notes, but the Trust may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith
(other than exchanges pursuant to the Indenture not involving any transfer).
 
  Notwithstanding any provisions described in this Prospectus Supplement to
the contrary, if a Note specifies that an Addendum is attached thereto or that
"Other/Additional Provisions" apply, such Note will be subject to the terms
specified in such Addendum or "Other/Additional Provisions," as the case may
be, and will be described in the applicable Pricing Supplement.
 
 
                                      S-6

 
REDEMPTION AT THE OPTION OF THE TRUST
 
  Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The applicable Pricing Supplement
will indicate if the Notes will be redeemable prior to the Stated Maturity
Date and the terms on which such Notes will be redeemable at the option of the
Trust. If so specified, the Notes will be subject to redemption at the option
of the Trust on any date on and after the applicable Initial Redemption Date
in whole or from time to time in part in increments of $1,000 or such other
minimum denomination specified in such Pricing Supplement (provided that any
remaining principal amount thereof shall be at least $1,000 or such minimum
denomination), at the applicable Redemption Price (as defined below), together
with unpaid interest accrued to the date of redemption, on notice given not
more than 60 nor less than 30 calendar days prior to the date of redemption
and in accordance with the provisions of the Indenture. Unless otherwise
specified in the applicable Pricing Supplement, "Redemption Price," with
respect to a Note, means an amount equal to the Initial Redemption Percentage
specified in the applicable Pricing Supplement (as adjusted by the Annual
Redemption Percentage Reduction, if applicable) multiplied by the unpaid
principal amount to be redeemed. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial
Redemption Date by an amount equal to the applicable Annual Redemption
Percentage Reduction, if any, until the Redemption Price is equal to 100% of
the unpaid principal amount to be redeemed. See also "--Original Issue
Discount Notes."
 
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASES BY THE TRUST
 
  The applicable Pricing Supplement will indicate if the Notes will be
repayable at the option of the Holders thereof on a date specified prior to
the applicable Maturity Date and, unless otherwise specified in the Pricing
Supplement, such Notes shall be repayable at a price equal to 100% of the
principal amount thereof, together with unpaid interest accrued to the date of
repayment.
 
  In order for such a Note to be repaid, the Paying Agent must receive at
least 30 days but not more than 60 days prior to the repayment date (i) such
Note with the form entitled "Option to Elect Repayment" on the reverse of such
Note duly completed or (ii) facsimile transmission or a letter from a member
of a national securities exchange or the National Association of Securities
Dealers, Inc. or a commercial bank or trust company in the United States
setting forth the name of the Holder of such Note, the principal amount of
such Note, the principal amount of such Note to be repaid, the certificate
number or a description of the tenor and terms of such Note, a statement that
the option to elect repayment is being exercised thereby, and a guarantee that
such Note to be repaid, together with the duly completed form entitled "Option
to Elect Repayment" on the reverse of such Note, will be received by the
Paying Agent not later than the fifth Business Day after the date of such
facsimile transmission or letter; however, such facsimile transmission or
letter shall only be effective if such Note and duly completed form are
received by the Paying Agent by such fifth Business Day. Unless otherwise
specified in the applicable Pricing Supplement, exercise of the repayment
option by the Holder of a Note will be irrevocable. The repayment option may
be exercised by the Holder of a Note for less than the entire principal amount
of the Note, but in that event, the principal amount of the Note remaining
outstanding after repayment must be in an authorized denomination.
 
  If a Note is represented by a Global Security, the Depositary's nominee will
be the Holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's
nominee will timely exercise a right to repayment with respect to a particular
Note, the Beneficial Owner of such Note must instruct the broker or other
Direct Participant (as defined below) or Indirect Participant (as defined
below) through which it holds an interest in such Note to notify the
Depositary of its desire to exercise a right to repayment. Different firms
have different deadlines for accepting instructions from their customers.
Accordingly, each Beneficial Owner should consult the broker or other Direct
Participant or Indirect Participant through which it holds an interest in a
Note in order to ascertain the deadline by which such instruction must be
given in order for timely notice to be delivered to the Depositary.
 
  If applicable, the Trust will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and any other securities laws or regulations in connection with any such
repayment.
 
                                      S-7

 
  The Trust may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by the Trust may, at the discretion of
the Trust, be held, resold or surrendered to the Trustee for cancellation.
 
INTEREST
 
General
  Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate
per annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case, as specified in
the applicable Pricing Supplement, until the principal thereof is paid or duly
made available for payment. Unless otherwise specified in the applicable
Pricing Supplement, interest payments in respect of Fixed Rate Notes and
Floating Rate Notes will equal the amount of interest accrued from and
including the immediately preceding Interest Payment Date in respect of which
interest has been paid or duly made available for payment (or from and
including the date of issue, if no interest has been paid or duly made
available for payment with respect to the applicable Note) to but excluding
the applicable Interest Payment Date or the Maturity Date, as the case may be
(each, an "Interest Period").
 
  Interest on Fixed Rate Notes and Floating Rate Notes will be payable in
arrears on each Interest Payment Date and on the Maturity Date. Unless
otherwise specified in the applicable Pricing Supplement, the first payment of
interest on any such Note originally issued between a Record Date (as defined
below) and the related Interest Payment Date will be made on the Interest
Payment Date immediately following the next succeeding Record Date to the
Holder on such next succeeding Record Date. Unless otherwise specified in the
applicable Pricing Supplement, a "Record Date" shall be the fifteenth calendar
day (whether or not a Business Day) immediately preceding the related Interest
Payment Date.
 
Fixed Rate Notes
  Interest on Fixed Rate Notes will be payable in arrears as specified in the
applicable Pricing Supplement (each, an "Interest Payment Date") and on the
Maturity Date. Unless otherwise specified in the applicable Pricing
Supplement, interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months.
 
  If any Interest Payment Date or the Maturity Date of a Fixed Rate Note falls
on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day with the same force and effect as if made on the date such payment was
due, and no interest will accrue on such payment for the period from and after
such Interest Payment Date or the Maturity Date, as the case may be, to the
date of such payment on the next succeeding Business Day.
 
Floating Rate Notes
  Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing
Supplement will specify certain terms with respect to which each Floating Rate
Note is being delivered, including: whether such Floating Rate Note is a
"Regular Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse
Floating Rate Note," the Fixed Rate Commencement Date, if applicable, Fixed
Interest Rate, if applicable, Interest Rate Basis or Bases, Initial Interest
Rate, if any, Initial Interest Reset Date, Interest Reset Period and Dates,
Interest Payment Period and Dates, Index Maturity, Maximum Interest Rate
and/or Minimum Interest Rate, if any, and Spread and/or Spread Multiplier, if
any, as such terms are defined below. If one or more of the applicable
Interest Rate Bases is LIBOR or the CMT Rate, the applicable Pricing
Supplement will specify the Index Currency, if any, and Designated LIBOR Page
or the Designated CMT Maturity Index and Designated CMT Telerate Page,
respectively, as such terms are defined below.
 
  The interest rate borne by the Floating Rate Notes will be determined as
follows:
 
  (i) Unless such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," or an "Inverse Floating Rate Note" or as having an Addendum
attached or having "Other/Additional Provisions" apply relating to a different
interest rate formula, such Floating Rate Note will be designated as a
"Regular Floating Rate Note" and, except as described below or in the
applicable Pricing Supplement, will bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the Initial Interest Reset Date, the rate at
 
                                      S-8

 
which interest on such Regular Floating Rate Note shall be payable shall be
reset as of each Interest Reset Date; provided, however, that the interest
rate in effect for the period, if any, from the date of issue to the Initial
Interest Reset Date will be the Initial Interest Rate.
 
  (ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed Rate
Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the rate determined
by reference to the applicable Interest Rate Basis or Bases (a) plus or minus
the applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the Initial Interest Reset Date, the rate at
which interest on such Floating Rate/Fixed Rate Note shall be payable shall be
reset as of each Interest Reset Date; provided, however, that (y) the interest
rate in effect for the period, if any, from the date of issue to the Initial
Interest Reset Date will be the Initial Interest Rate and (z) the interest
rate in effect for the period commencing on the Fixed Rate Commencement Date
to the Maturity Date shall be the Fixed Interest Rate, if such rate is
specified in the applicable Pricing Supplement or, if no such Fixed Interest
Rate is specified, the interest rate in effect thereon on the day immediately
preceding the Fixed Rate Commencement Date.
 
  (iii) If such Floating Rate Note is designated as an "Inverse Floating Rate
Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the Fixed Interest
Rate minus the rate determined by reference to the applicable Interest Rate
Basis or Bases (a) plus or minus the applicable Spread, if any, and/or (b)
multiplied by the applicable Spread Multiplier, if any; provided, however,
that, unless otherwise specified in the applicable Pricing Supplement, the
interest rate thereon will not be less than zero. Commencing on the Initial
Interest Reset Date, the rate at which interest on such Inverse Floating Rate
Note shall be payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period, if any, from the
date of issue to the Initial Interest Reset Date will be the Initial Interest
Rate.
 
  The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest
Rate Basis or Bases will be multiplied to determine the applicable interest
rate on such Floating Rate Note. The "Index Maturity" is the period to
maturity of the instrument or obligation with respect to which the related
Interest Rate Basis or Bases will be calculated.
 
  Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or
in the applicable Pricing Supplement, the interest rate in effect on each day
shall be (i) if such day is an Interest Reset Date, the interest rate
determined as of the Interest Determination Date (as defined below)
immediately preceding such Interest Reset Date or (ii) if such day is not an
Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the most recent Interest Reset Date.
 
  Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds
Rate, (vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such
other Interest Rate Basis or interest rate formula as may be specified in the
applicable Pricing Supplement, provided, however, that the interest rate in
effect on a Floating Rate Note for the period, if any, from the date of issue
to the Initial Interest Reset Date will be the Initial Interest Rate;
provided, further, that with respect to a Floating Rate/Fixed Rate Note the
interest rate in effect for the period commencing on the Fixed Rate
Commencement Date to the Maturity Date shall be the Fixed Interest Rate, if
such rate is specified in the applicable Pricing Supplement or, if no such
Fixed Interest Rate is specified, the interest rate in effect thereon on the
day immediately preceding the Fixed Rate Commencement Date.
 
  The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on such other specified basis (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Dates will be, in the case
of Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly,
the Wednesday of each week (with the exception of weekly reset Floating Rate
Notes as to which the Treasury Rate is an applicable Interest Rate Basis,
which will reset the Tuesday of each week, except as described below);
(iii) monthly, the third Wednesday of each
 
                                      S-9

 
month (with the exception of monthly reset Floating Rate Notes as to which the
Eleventh District Cost of Funds Rate is an applicable Interest Rate Basis,
which will reset on the first calendar day of the month); (iv) quarterly, the
third Wednesday of March, June, September and December of each year; (v)
semiannually, the third Wednesday of the two months specified in the
applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; provided, however, that,
with respect to Floating Rate/Fixed Rate Notes, the rate of interest thereon
will not reset after the applicable Fixed Rate Commencement Date. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that
is not a Business Day, such Interest Reset Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls
in the next succeeding calendar month, such Interest Reset Date will be the
immediately preceding Business Day. In addition, in the case of a Floating
Rate Note as to which the Treasury Rate is an applicable Interest Rate Basis
and the Interest Determination Date would otherwise fall on an Interest Reset
Date, then such Interest Reset Date will be postponed to the next succeeding
Business Day.
 
  The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date and calculated on or prior to the Calculation Date
(as defined below), except with respect to LIBOR and the Eleventh District
Cost of Funds Rate, which will be calculated as of such Interest Determination
Date. The "Interest Determination Date" with respect to the CD Rate, the CMT
Rate, the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate
will be the second Business Day immediately preceding the applicable Interest
Reset Date; the "Interest Determination Date" with respect to the Eleventh
District Cost of Funds Rate will be the last business day of the month
immediately preceding the applicable Interest Reset Date on which the Federal
Home Loan Bank of San Francisco (the "FHLB of San Francisco") publishes the
Index (as defined below); and the "Interest Determination Date" with respect
to LIBOR will be the second London Business Day immediately preceding the
applicable Interest Reset Date, unless the Index Currency is British pounds
sterling, in which case the "Interest Determination Date" will be the
applicable Interest Reset Date. With respect to the Treasury Rate, the
"Interest Determination Date" will be the day in the week in which the
applicable Interest Reset Date falls on which day Treasury Bills (as defined
below) are normally auctioned (Treasury Bills are normally sold at an auction
held on Monday of each week, unless that day is a legal holiday, in which case
the auction is normally held on the following Tuesday, except that such
auction may be held on the preceding Friday); provided, however, that if an
auction is held on the Friday of the week preceding the applicable Interest
Reset Date, the Interest Determination Date will be such preceding Friday. The
"Interest Determination Date" pertaining to a Floating Rate Note the interest
rate of which is determined by reference to two or more Interest Rate Bases
will be the most recent Business Day which is at least two Business Days prior
to the applicable Interest Reset Date for such Floating Rate Note on which
each Interest Rate Basis is determinable. Each Interest Rate Basis will be
determined as of such date, and the applicable interest rate will take effect
on the applicable Interest Reset Date.
 
  A Floating Rate Note may also have either or both of the following: (i) a
Maximum Interest Rate, or ceiling, that may accrue during any Interest Period
and (ii) a Minimum Interest Rate, or floor, that may accrue during any
Interest Period. In addition to any Maximum Interest Rate that may apply to
any Floating Rate Note, the interest rate on Floating Rate Notes will in no
event be higher than the maximum rate permitted by New York law, as the same
may be modified by United States law of general application.
 
  Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on the third Wednesday of each month or the third Wednesday
of March, June, September and December of each year, as specified in the
applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year; (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and (iv) annually, on the third Wednesday of the month of
each year specified in the applicable Pricing Supplement (each, an "Interest
Payment Date") and, in each case, on the Maturity Date. If any Interest
Payment Date other than the Maturity Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Payment Date will
be postponed to the next succeeding Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis and
such Business Day falls in the next succeeding calendar month, such Interest
Payment Date will be the immediately preceding Business Day. If the Maturity
Date of a Floating Rate Note falls on a day that is not a Business Day, the
required payment of principal, premium, if any, and interest will be made on
the
 
                                     S-10

 
next succeeding Business Day with the same force and effect as if made on the
date such payment was due, and no interest will accrue on such payment for the
period from and after the Maturity Date to the date of such payment on the
next succeeding Business Day.
 
  All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
 .09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used
in or resulting from such calculation on Floating Rate Notes will be rounded,
in the case of United States dollars, to the nearest cent or, in the case of a
foreign currency or composite currency, to the nearest unit (with one-half
cent or unit being rounded upwards).
 
  With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of
days in the year in the case of Floating Rate Notes for which an applicable
Interest Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise
specified in the applicable Pricing Supplement, the interest factor for
Floating Rate Notes for which the interest rate is calculated with reference
to two or more Interest Rate Bases will be calculated in each period in the
same manner as if only one of the applicable Interest Rate Bases applied as
specified in the applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, First Union
National Bank will be the "Calculation Agent" with respect to any Floating
Rate Note. Upon request of the Holder of any Floating Rate Note, the
Calculation Agent will disclose the interest rate then in effect and, if
determined, the interest rate that will become effective as a result of a
determination made for the next succeeding Interest Reset Date with respect to
such Floating Rate Note. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date," if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after
such Interest Determination Date, or, if such day is not a Business Day, the
next succeeding Business Day or (ii) the Business Day immediately preceding
the applicable Interest Payment Date or the Maturity Date, as the case may be.
 
  Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
 
  CD Rate. Unless otherwise specified in the applicable Pricing Supplement,
"CD Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CD Rate (a "CD Rate Interest Determination Date"), the rate on such date
for negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates
of deposit of the Index Maturity specified in the applicable Pricing
Supplement as published by the Federal Reserve Bank of New York in its daily
statistical release "Composite 3:30 P.M. Quotations for U.S. Government
Securities" or any successor publication ("Composite Quotations") under the
heading "Certificates of Deposit." If such rate is not yet published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the CD Rate on such CD Rate Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 A.M., New
York City time, on such CD Rate Interest Determination Date, of three leading
nonbank dealers in negotiable United States dollar certificates of deposit in
The City of New York (which may include any of the Agents or their affiliates)
selected by the Calculation Agent for negotiable United States dollar
certificates of deposit of major United States money center banks in the
market for negotiable United States dollar certificates of deposit with a
remaining maturity closest to the Index Maturity specified in the applicable
Pricing Supplement in an amount that is representative for a single
transaction in that market at that time; provided,
 
                                     S-11

 
however, that if the dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the CD Rate determined as of such CD
Rate Interest Determination Date will be the CD Rate in effect on such CD Rate
Interest Determination Date.
 
  CMT Rate. Unless otherwise specified in the applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date relating to
a Floating Rate Note for which the interest rate is determined with reference
to the CMT Rate (a "CMT Rate Interest Determination Date"), the rate displayed
on the Designated CMT Telerate Page under the caption " . . . Treasury
Constant Maturities . . . Federal Reserve Board Release H.15 . . . Mondays
Approximately 3:45 P.M.," under the column for the Designated CMT Maturity
Index for (i) if the Designated CMT Telerate Page is 7055, the rate on such
CMT Rate Interest Determination Date and (ii) if the Designated CMT Telerate
Page is 7052, the weekly or monthly average, as specified in the applicable
Pricing Supplement, for the week or the month, as applicable, ended
immediately preceding the week or month, as applicable, in which the related
CMT Rate Interest Determination Date occurs. If such rate is no longer
displayed on the relevant page or is not displayed by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for
the Designated CMT Maturity Index as published in the relevant H.15(519). If
such rate is no longer published or is not published by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate on such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for
the Designated CMT Maturity Index (or other United States Treasury rate for
the Designated CMT Maturity Index) for the CMT Rate Interest Determination
Date with respect to such Interest Reset Date as may then be published by
either the Board of Governors of the Federal Reserve System or the United
States Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided
by 3:00 P.M., New York City time, on the related Calculation Date, then the
CMT Rate on the CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic
mean of the secondary market closing offer side prices as of approximately
3:30 P.M., New York City time, on such CMT Rate Interest Determination Date
reported, according to their written records, by three leading primary United
States government securities dealers (each, a "Reference Dealer") in The City
of New York (which may include any of the Agents or their affiliates) selected
by the Calculation Agent (from five such Reference Dealers selected by the
Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury Notes") with an
original maturity of approximately the Designated CMT Maturity Index and a
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent is unable to obtain three such
Treasury Note quotations, the CMT Rate on such CMT Rate Interest Determination
Date will be calculated by the Calculation Agent and will be a yield to
maturity based on the arithmetic mean of the secondary market offer side
prices as of approximately 3:30 P.M., New York City time, on such CMT Rate
Interest Determination Date of three Reference Dealers in The City of New York
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100,000,000. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer
than three Reference Dealers so selected by the Calculation Agent are quoting
as mentioned herein, the CMT Rate determined as of such CMT Rate Interest
Determination Date will be the CMT Rate in effect on such CMT Rate Interest
Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the Calculation Agent will
obtain quotations for the Treasury Note with the shorter remaining term to
maturity and will use such quotations to calculate the CMT Rate as set forth
above.
 
  "Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service (or any successor service) on the page specified in the applicable
Pricing Supplement (or any other page as may replace such page on that service
(or any successor service) for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519)) for the purpose of displaying Treasury
Constant Maturities as reported in H.15(519). If no such page is specified in
the applicable Pricing Supplement, the Designated CMT Telerate Page shall be
7052, for the most recent week.
 
 
                                     S-12

 
  "Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either one, two, three, five, seven, 10, 20 or 30
years) specified in the applicable Pricing Supplement with respect to which
the CMT Rate will be calculated. If no such maturity is specified in the
applicable Pricing Supplement, the Designated CMT Maturity Index shall be two
years.
 
  Commercial Paper Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest
rate is determined with reference to the Commercial Paper Rate (a "Commercial
Paper Rate Interest Determination Date"), the Money Market Yield (as defined
below) on such date of the rate for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "Commercial Paper--Nonfinancial." In the event that such rate is
not published by 3:00 P.M., New York City time, on the related Calculation
Date, then the Commercial Paper Rate on such Commercial Paper Rate Interest
Determination Date will be the Money Market Yield of the rate for commercial
paper having the Index Maturity specified in the applicable Pricing Supplement
as published in Composite Quotations under the heading "Commercial Paper"
(with an Index Maturity of one month or three months being deemed to be
equivalent to an Index Maturity of 30 days or 90 days, respectively). If such
rate is not yet published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on the related Calculation Date, then the Commercial
Paper Rate on such Commercial Paper Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the Money Market Yield of the
arithmetic mean of the offered rates at approximately 11:00 A.M., New York
City time, on such Commercial Paper Rate Interest Determination Date of three
leading dealers of commercial paper in The City of New York (which may include
any of the Agents or their affiliates) selected by the Calculation Agent for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement placed for a nonfinancial issuer whose bond rating is "AA," or the
equivalent, from a nationally recognized statistical rating organization;
provided, however, that if the dealers so selected by the Calculation Agent
are not quoting as mentioned in this sentence, the Commercial Paper Rate
determined as of such Commercial Paper Rate Interest Determination Date will
be the Commercial Paper Rate in effect on such Commercial Paper Rate Interest
Determination Date.
 
  "Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
 
                                 
               Money Market Yield =        D x 360     x 100
                                        -------------
                                        360 - (D x M)

               
 
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the Interest Period for which interest is being
calculated.
 
  Eleventh District Cost of Funds Rate. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate
Note for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 as of 11:00
A.M., San Francisco time, on such Eleventh District Cost of Funds Rate
Interest Determination Date. If such rate does not appear on Telerate Page
7058 on such Eleventh District Cost of Funds Rate Interest Determination Date
then the Eleventh District Cost of Funds Rate on such Eleventh District Cost
of Funds Rate Interest Determination Date shall be the monthly weighted
average cost of funds paid by member institutions of the Eleventh Federal Home
Loan Bank District that was most recently announced (the "Index") by the FHLB
of San Francisco as such cost of funds for the calendar month immediately
preceding such Eleventh District Cost of Funds Rate Interest Determination
Date. If the FHLB of San Francisco fails to announce the Index on or prior to
such Eleventh District Cost of Funds Rate Interest Determination Date for the
calendar month immediately preceding such Eleventh District Cost of Funds Rate
Interest Determination Date, the Eleventh District Cost of Funds Rate
determined as of such Eleventh District Cost of Funds Rate Interest
Determination Date will be the Eleventh District Cost of Funds Rate in effect
on such Eleventh District Cost of Funds Rate Interest Determination Date.
 
                                     S-13

 
  Federal Funds Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest
rate is determined with reference to the Federal Funds Rate (a "Federal Funds
Rate Interest Determination Date"), the rate on such date for United States
dollar federal funds as published in H.15(519) under the heading "Federal
Funds (Effective)" or, if not published by 3:00 P.M., New York City time, on
the related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the Federal Funds Rate on such Federal Funds
Rate Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the rates for the last transaction in
overnight United States dollar federal funds arranged by three leading brokers
of federal funds transactions in The City of New York (which may include any
of the Agents or their affiliates) selected by the Calculation Agent prior to
9:00 A.M., New York City time, on such Federal Funds Rate Interest
Determination Date; provided, however, that if the brokers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Federal
Funds Rate determined as of such Federal Funds Rate Interest Determination
Date will be the Federal Funds Rate in effect on such Federal Funds Rate
Interest Determination Date.
 
  LIBOR. Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
 
  (i) With respect to any Interest Determination Date relating to a Floating
Rate Note for which the interest rate is determined with reference to LIBOR (a
"LIBOR Interest Determination Date"), LIBOR will be either: (a) if "LIBOR
Reuters" is specified in the applicable Pricing Supplement, the arithmetic
mean of the offered rates (unless the Designated LIBOR Page by its terms
provides only for a single rate, in which case such single rate shall be used)
for deposits in the Index Currency having the Index Maturity specified in such
Pricing Supplement, commencing on the applicable Interest Reset Date, that
appear (or, if only a single rate is required as aforesaid, appears) on the
Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest
Determination Date, or (b) if "LIBOR Telerate" is specified in the applicable
Pricing Supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Pricing Supplement as the method for calculating
LIBOR, the rate for deposits in the Index Currency having the Index Maturity
specified in such Pricing Supplement, commencing on such Interest Reset Date,
that appears on the Designated LIBOR Page as of 11:00 A.M., London time, on
such LIBOR Interest Determination Date. If fewer than two such offered rates
appear, or if no such rate appears, as applicable, LIBOR on such LIBOR
Interest Determination Date will be determined in accordance with the
provisions described in clause (ii) below.
 
  (ii) With respect to a LIBOR Interest Determination Date on which fewer than
two offered rates appear, or no rate appears, as the case may be, on the
Designated LIBOR Page as specified in clause (i) above, the Calculation Agent
will request the principal London offices of each of four major reference
banks in the London interbank market, as selected by the Calculation Agent, to
provide the Calculation Agent with its offered quotation for deposits in the
Index Currency for the period of the Index Maturity specified in the
applicable Pricing Supplement, commencing on the applicable Interest Reset
Date, to prime banks in the London interbank market at approximately 11:00
A.M., London time, on such LIBOR Interest Determination Date and in a
principal amount that is representative for a single transaction in such Index
Currency in such market at such time. If at least two quotations are so
provided, then LIBOR on such LIBOR Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two such quotations are so
provided, then LIBOR on such LIBOR Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 A.M., in the
applicable Principal Financial Center, on such LIBOR Interest Determination
Date by three major banks in such Principal Financial Center selected by the
Calculation Agent for loans in the Index Currency to leading European banks,
having the Index Maturity specified in the applicable Pricing Supplement and
in a principal amount that is representative for a single transaction in such
Index Currency in such market at such time; provided, however, that if the
banks so selected by the Calculation Agent are not quoting as mentioned in
this sentence, LIBOR determined as of such LIBOR Interest Determination Date
will be LIBOR in effect on such LIBOR Interest Determination Date.
 
  "Index Currency" means the currency or composite currency specified in the
applicable Pricing Supplement as to which LIBOR shall be calculated. If no
such currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
 
 
                                     S-14

 
  "Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page or such service (or any
successor service)) for the purpose of displaying the London interbank rates
of major banks for the applicable Index Currency, or (b) if "LIBOR Telerate"
is specified in the applicable Pricing Supplement or neither "LIBOR Reuters"
nor "LIBOR Telerate" is specified in the applicable Pricing Supplement as the
method for calculating LIBOR, the display on the Dow Jones Telerate Service
(or any successor service) on the page specified in such Pricing Supplement
(or any other page as may replace such page or such service (or any successor
service)) for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency.
 
  Prime Rate. Unless otherwise specified in the applicable Pricing Supplement,
"Prime Rate" means, with respect to any Interest Determination Date relating
to a Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the
rate on such date as is published in H.15(519) under the heading "Bank Prime
Loan." If such rate is not published prior to 3:00 P.M., New York City time,
on the related Calculation Date, then the Prime Rate shall be the arithmetic
mean of the rates of interest publicly announced by each bank that appears on
the Reuters Screen USPRIME1 Page (as defined below) as such bank's prime rate
or base lending rate as in effect for such Prime Rate Interest Determination
Date. If fewer than four such rates appear on the Reuters Screen USPRIME1 Page
for such Prime Rate Interest Determination Date, then the Prime Rate shall be
the arithmetic mean of the prime rates quoted on the basis of the actual
number of days in the year divided by a 360-day year as of the close of
business on such Prime Rate Interest Determination Date by four major money
center banks in The City of New York selected by the Calculation Agent. If
fewer than four such quotations are so provided, then the Prime Rate shall be
the arithmetic mean of four prime rates quoted on the basis of the actual
number of days in the year divided by a 360-day year as of the close of
business on such Prime Rate Interest Determination Date as furnished in The
City of New York by the major money center banks, if any, that have provided
such quotations and by a reasonable number of substitute banks or trust
companies to obtain four such prime rate quotations, provided such substitute
banks or trust companies are organized and doing business under the laws of
the United States, or any State thereof, each having total equity capital of
at least $500,000,000 and being subject to supervision or examination by
Federal or State authority, selected by the Calculation Agent to provide such
rate or rates; provided, however, that if the banks or trust companies so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, the Prime Rate determined as of such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate
Interest Determination Date.
 
  "Reuters Screen USPRIME1 Page" means the display designated as page
"USPRIME1" on the Reuter Monitor Money Rates Service (or any successor
service) or such other page as may replace the USPRIME1 Page on the Reuter
Monitor Money Rates Service (or any successor service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
 
  Treasury Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate from the auction held on such Treasury Rate
Interest Determination Date (the "Auction") of direct obligations of the
United States ("Treasury Bills") having the Index Maturity specified in the
applicable Pricing Supplement, as such rate is published in H.15(519) under
the heading "Treasury bills-auction average (investment)" or, if not published
by 3:00 P.M., New York City time, on the related Calculation Date, the auction
average rate of such Treasury Bills (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) as otherwise announced by the United States Department of the Treasury.
In the event that the results of the Auction of Treasury Bills having the
Index Maturity specified in the applicable Pricing Supplement are not reported
as provided by 3:00 P.M., New York City time, on the related Calculation Date,
or if no such Auction is held, then the Treasury Rate will be calculated by
the Calculation Agent and will be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 P.M., New York City time, on such Treasury
Rate Interest Determination Date, of three leading primary United States
government securities dealers (which may include any of the Agents or their
affiliates) selected by the Calculation Agent, for the issue of Treasury Bills
with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement; provided, however, that if the dealers so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, the Treasury Rate determined as of such Treasury Rate Interest
Determination Date will be the Treasury Rate in effect on such Treasury Rate
Interest Determination Date.
 
                                     S-15

 
AMORTIZING NOTES
 
  The Trust may from time to time offer amortizing notes ("Amortizing Notes").
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Amortizing Note will be computed on the basis of a 360-day year of twelve
30-day months. Payments with respect to Amortizing Notes will be applied first
to interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. Further information concerning additional terms and
provisions of Amortizing Notes will be specified in the applicable Pricing
Supplement, including a table setting forth repayment information for such
Amortizing Notes.
 
ORIGINAL ISSUE DISCOUNT NOTES
 
  The Trust may offer Notes ("Discount Notes") from time to time that have an
Issue Price (as specified in the applicable Pricing Supplement) that is less
than 100% of the principal amount thereof (i.e., par). Discount Notes may not
bear any interest currently or may bear interest at a rate that is below
market rates at the time of issuance. The difference between the Issue Price
of a Discount Note and par is referred to herein as the "Discount." In the
event of redemption, repayment or acceleration of maturity of a Discount Note,
the amount payable to the Holder of such Discount Note will be equal to the
sum of: (i) the Issue Price (increased by any accruals of Discount) and, in
the event of any redemption of such Discount Note (if applicable), multiplied
by the Initial Redemption Percentage specified in the applicable Pricing
Supplement (as adjusted by the Annual Redemption Percentage Reduction, if
applicable); and (ii) any unpaid interest on such Discount Note accrued from
the date of issue to the date of such redemption, repayment or acceleration of
maturity.
 
  Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for a
Discount Note, such Discount will be accrued using a constant yield method.
The constant yield will be calculated using a 30-day month, 360-day year
convention, a compounding period that, except for the Initial Period (as
defined below), corresponds to the shortest period between Interest Payment
Dates for the applicable Discount Note (with ratable accruals within a
compounding period), a coupon rate equal to the initial coupon rate applicable
to such Discount Note and an assumption that the maturity of such Discount
Note will not be accelerated. If the period from the date of issue to the
initial Interest Payment Date for a Discount Note (the "Initial Period") is
shorter than the compounding period for such Discount Note, a proportionate
amount of the yield for an entire compounding period will be accrued. If the
Initial Period is longer than the compounding period, then such period will be
divided into a regular compounding period and a short period with the short
period being treated as provided in the preceding sentence. The accrual of the
applicable Discount may differ from the accrual of original issue discount for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
certain Discount Notes may not be treated as having original issue discount
within the meaning of the Code, and Notes other than Discount Notes may be
treated as issued with original issue discount for federal income tax
purposes. See "Certain United States Federal Income Tax Considerations"
herein.
 
INDEXED NOTES
 
  Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, to the exchange rate of one or more
designated currencies (including a composite currency such as the ECU)
relative to an indexed currency or to such other prices(s) or exchange rate(s)
("Indexed Notes"), as specified in the applicable Pricing Supplement. In
certain cases, Holders of Indexed Notes may receive a principal payment on the
Maturity Date that is greater than or less than the principal amount of such
Indexed Notes depending upon the relative value on the Maturity Date of the
specified indexed item. Information as to the method for determining the
amount of principal, premium, if any, and/or interest payable in respect of
Indexed Notes, certain historical information with respect to the specified
indexed item and certain tax considerations associated with an investment in
Indexed Notes will be specified in the applicable Pricing Supplement. See also
"Risk Factors."
 
COVENANTS
 
  Limitations on Incurrence of Debt. The Notes will provide that the Trust
will not, and will not permit any Subsidiary to, incur any Debt (as defined
below) if, immediately after giving effect to the incurrence of such Debt and
the application of the proceeds thereof, the aggregate principal amount of all
outstanding Debt of the Trust and
 
                                     S-16

 
its Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles is greater than 65% of the sum of
(without duplication) (i) the Trust's Total Assets as of the end of the
calendar quarter covered in the Trust's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with
the Securities and Exchange Commission (or, if such filing is not permitted
under the Securities Exchange Act of 1934, with the Trustee) prior to the
incurrence of such additional Debt and (ii) the purchase price of any real
estate assets or mortgages receivable acquired, and the amount of any
securities offering proceeds received (to the extent such proceeds were not
used to acquire real estate assets or mortgages receivable or used to reduce
Debt), by the Trust or any Subsidiary since the end of such calendar quarter,
including those proceeds obtained in connection with the incurrence of such
additional Debt.
 
  In addition to the foregoing limitation on the incurrence of Debt, the Notes
will provide that the Trust will not, and will not permit any Subsidiary to,
incur any Debt secured by any mortgage, lien, charge, pledge, encumbrance or
security interest of any kind upon any of the property of the Trust or any
Subsidiary if, immediately after giving effect to the incurrence of such Debt
and the application of the proceeds thereof, the aggregate principal amount of
all outstanding Debt of the Trust and its Subsidiaries on a consolidated basis
which is secured by any mortgage, lien, charge, pledge, encumbrance or
security interest on property of the Trust or any Subsidiary is greater than
40% of the Trust's Total Assets; provided that for purposes of this
limitation, the amount of obligations under capital leases shown as a
liability on the Trust's consolidated balance sheet shall be deducted from
Debt and from Total Assets.
 
  In addition to the foregoing limitations on the incurrence of Debt, the
Notes will provide that the Trust will not and will not permit any Subsidiary
to, incur any Senior Debt if the ratio of Consolidated Income Available for
Senior Debt Service (as defined below) to the Annual Senior Debt Service
Charge (as defined below) for the four consecutive fiscal quarters most
recently ended prior to the date on which such Senior Debt is to be incurred
shall have been less than 1.5 to 1, on an unaudited pro forma basis after
giving effect thereto and to the application of the proceeds therefrom, and
calculated on the assumption that (i) such Senior Debt and any other Senior
Debt incurred by the Trust and its Subsidiaries since the first day of such
four-quarter period and the application of the proceeds therefrom, including
to refinance other Senior Debt, had occurred at the beginning of such period;
(ii) the repayment or retirement of any other Senior Debt by the Trust and its
Subsidiaries since the first day of such four-quarter period had been
incurred, repaid or retired at the beginning of such period (except that, in
making such computation, the amount of Senior Debt under any revolving credit
facility shall be computed based upon the average daily balance of such Senior
Debt during such period); (iii) in the case of Acquired Debt (as defined
below) or Senior Debt incurred in connection with any acquisition since the
first day of such four-quarter period, the related acquisition had occurred as
of the first day of such period with the appropriate adjustments with respect
to such acquisition being included in such unaudited pro forma calculation;
and (iv) in the case of any acquisition or disposition by the Trust or its
Subsidiaries of any asset or group of assets since the first day of such four-
quarter period, whether by merger, stock purchase or sale, or asset purchase
or sale, such acquisition or disposition or any related repayment of Senior
Debt had occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being included in
such unaudited pro forma calculation.
 
  Furthermore, the Notes also will provide that the Trust will not, and will
not permit any Subsidiary to, incur any Debt if the ratio of Consolidated
Income Available for Debt Service (as defined below) to the Annual Debt
Service Charge (as defined below) for the four consecutive fiscal quarters
most recently ended prior to the date on which such additional Debt is to be
incurred shall have been less than 1.3 to 1, on an unaudited pro forma basis
after giving effect thereto and to the application of the proceeds therefrom,
and calculated on the assumption that (i) such Debt and any other Debt
incurred by the Trust and its Subsidiaries since the first day of such four-
quarter period and the application of the proceeds therefrom, including to
refinance other Debt, had occurred at the beginning of such period; (ii) the
repayment or retirement of any other Debt by the Trust and its Subsidiaries
since the first day of such four-quarter period had been incurred, repaid or
retired at the beginning of such period (except that, in making such
computation, the amount of Debt under any revolving credit facility shall be
computed based upon the average daily balance of such Debt during such
period); (iii) in the case of Acquired Debt or Debt incurred in connection
with any acquisition since the first day of such four-quarter period, the
related acquisition had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition being included in
such unaudited pro forma calculation; and (iv) in the case of any acquisition
or disposition by the Trust or its Subsidiaries of any asset or group of
assets since the first day of such four-quarter period, whether by merger,
stock purchase or sale, or asset purchase or sale, such acquisition or
disposition or any related repayment of Debt had occurred as of the first day
of such period with the appropriate adjustments with respect to such
acquisition or disposition being included in such unaudited pro forma
calculation.
 
                                     S-17

 
  As used herein,
 
  "Acquired Debt" means Debt (or Senior Debt, as the case may be) of a Person
(i) existing at the time such Person becomes a Subsidiary or (ii) assumed in
connection with the acquisition of assets from such Person, in each case,
other than Debt (or Senior Debt, as the case may be) incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
 
  "Annual Debt Service Charge" as of any date means the maximum amount which
is payable in any period for interest on, and original issue discount of, Debt
of the Trust and its Subsidiaries and the amount of dividends which are
payable in respect of any Disqualified Stock (as defined below).
 
  "Annual Senior Debt Service Charge" as of any date means the maximum amount
which is payable in any period for interest on, and original issue discount
of, Senior Debt of the Trust and its Subsidiaries.
 
  "Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
 
  "Consolidated Income Available for Debt Service" and "Consolidated Income
Available for Senior Debt Service" for any period means Funds from Operations
(as defined below) of the Trust and its Subsidiaries plus amounts which have
been deducted for interest on Debt of the Trust and its Subsidiaries.
 
  "Debt" means any indebtedness of the Trust, or any Subsidiary, whether or
not contingent, in respect of (without duplication) (i) borrowed money or
evidenced by bonds, notes, debentures or similar instruments, (ii)
indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or any
security interest existing on property owned by the Trust or any Subsidiary,
(iii) the reimbursement obligations, contingent or otherwise, in connection
with any letters of credit actually issued or amounts representing the balance
deferred and unpaid of the purchase price of any property or services, except
any such balance that constitutes an accrued expense or trade payable, or all
conditional sale obligations or obligations under any title retention
agreement, (iv) the principal amount of all obligations of the Trust or any
Subsidiary with respect to redemption, repayment or other repurchase of any
Disqualified Stock or (v) any lease of property by the Trust or any Subsidiary
as lessee which is reflected on the Trust's consolidated balance sheet as a
capitalized lease in accordance with generally accepted accounting principles
to the extent, in the case of items of indebtedness under (i) through (iii)
above, that any such items (other than letters of credit) would appear as a
liability on the Trust's consolidated balance sheet in accordance with
generally accepted accounting principles, and also includes, to the extent not
otherwise included, any obligation of the Trust or any Subsidiary to be liable
for, or to pay, as obligor, guarantor or otherwise (other than for purposes of
collection in the ordinary course of business or for the purposes of
guaranteeing the payment of all amounts due and owing pursuant to leases to
which the Trust is a party and has assigned its interest, provided that such
assignee of the Trust is not in default of any amounts due and owing under
such leases), Debt of another Person (other than the Trust or any Subsidiary)
(it being understood that Debt shall be deemed to be incurred by the Trust or
any Subsidiary whenever the Trust or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
 
  "Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
(ii) is convertible into or exchangeable or exercisable for Debt or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the Stated Maturity of the
Notes.
 
  "Funds from Operations" for any period means income before depreciation and
amortization and extraordinary items less gain on sale of real estate.
 
  "Senior Debt" means Debt other than subordinated Debt and payments under
Disqualified Stock of the Trust.
 
                                     S-18

 
  "Total Assets" as of any date means the sum of (i) the Trust's Undepreciated
Real Estate Assets and (ii) all other assets of the Trust determined in
accordance with generally accepted accounting principles (but excluding
goodwill).
 
  "Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Trust and its
Subsidiaries on such date, before depreciation and amortization determined on
a consolidated basis in accordance with generally accepted accounting
principles.
 
  See "Description of Debt Securities--Certain Covenants" in the Prospectus
for a description of additional covenants applicable to the Trust.
 
DEFEASANCE
 
  The provisions of Article 14 of the Indenture relating to defeasance and
covenant defeasance, which are described in the accompanying Prospectus, will
apply to the Notes.
 
BOOK-ENTRY NOTES
 
  The Trust has established a depositary arrangement with The Depository Trust
Company with respect to the Book-Entry Notes, the terms of which are
summarized below. Any additional or differing terms of the depositary
arrangement with respect to the Book-Entry Notes will be described in the
applicable Pricing Supplement.
 
  Upon issuance, all Book-Entry Notes up to $250,000,000 aggregate principal
amount bearing interest at the same rate or pursuant to the same formula and
having the same date of issue, Specified Currency, Interest Payment Dates,
Stated Maturity Date, redemption provisions (if any), repayment provisions (if
any) and other terms will be represented by a single Global Security. Each
Global Security representing Book-Entry Notes will be deposited with, or on
behalf of, the Depositary and will be registered in the name of the Depositary
or a nominee of the Depositary. No Global Security may be transferred except
as a whole by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or such nominee to a successor
of the Depositary or a nominee of such successor.
 
  So long as the Depositary or its nominee is the registered owner of a Global
Security, the Depositary or its nominee, as the case may be, will be the sole
Holder of the Book-Entry Notes represented thereby for all purposes under the
Indenture. Except as otherwise provided in this section, the Beneficial Owners
of the Global Security or Securities representing Book-Entry Notes will not be
entitled to receive physical delivery of Certificated Notes and will not be
considered the Holders thereof for any purpose under the Indenture, and no
Global Security representing Book-Entry Notes shall be exchangeable or
transferable. Accordingly, each Beneficial Owner must rely on the procedures
of the Depositary and, if such Beneficial Owner is not a Participant (as
defined below), on the procedures of the Participant through which such
Beneficial Owner owns its interest in order to exercise any rights of a Holder
under such Global Security or the Indenture. The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of such
securities in certificated form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Security representing
Book-Entry Notes.
 
  Unless otherwise specified in the applicable Pricing Supplement, each Global
Security representing Book-Entry Notes will be exchangeable for Certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like principal amount, only if (i) the Depositary notifies the
Trust that it is unwilling or unable to continue as Depositary for the Global
Securities or the Depositary ceases to be a clearing agency registered under
the Exchange Act (if so required by applicable law or regulation) and, in each
case, a successor Depositary is not appointed by the Trust within 90 days
after the Trust receives such notice or becomes aware of such unwillingness,
inability or ineligibility, (ii) the Trust in its sole discretion determines
that the Global Securities shall be exchangeable for Certificated Notes or
(iii) there shall have occurred and be continuing an Event of Default under
the Indenture with respect to the Notes and Beneficial Owners representing a
majority in aggregate principal amount of the Book-Entry Notes represented by
Global Securities advise the Depositary to cease acting as depositary. Upon
any such exchange, the Certificated Notes shall be registered in the names of
the Beneficial Owners of the Global Security or Securities representing Book-
Entry Notes, which names shall be provided by the Depositary's relevant
Participants (as identified by the Depositary) to the Securities Registrar.
 
 
                                     S-19

 
  The information below concerning the Depositary and the Depositary's system
has been furnished by the Depositary, and the Trust takes no responsibility
for the accuracy thereof.
 
  The Depositary will act as securities depository for the Book-Entry Notes.
The Book-Entry Notes will be issued as fully registered securities registered
in the name of Cede & Co. (the Depositary's partnership nominee). One fully
registered Global Security will be issued for each issue of Book-Entry Notes,
each in the aggregate principal amount of such issue, and will be deposited
with the Depositary. If, however, the aggregate principal amount of any issue
exceeds $250,000,000, one Global Security will be issued with respect to each
$250,000,000 of principal amount and an additional Global Security will be
issued with respect to any remaining principal amount of such issue.
 
  The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants ("Participants")
deposit with the Depositary. The Depositary also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants of the Depositary ("Direct
Participants") include securities brokers and dealers (including the Agents),
banks, trust companies, clearing corporations and certain other organizations.
The Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the Depositary's system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to the Depositary and its Participants are on file with
the Securities and Exchange Commission.
 
  Purchases of Book-Entry Notes under the Depositary's system must be made by
or through Direct Participants, which will receive a credit for such Book-
Entry Notes on the Depositary's records. The ownership interest of each actual
purchaser of each Book-Entry Note represented by a Global Security
("Beneficial Owner") is in turn to be recorded on the Direct Participants' and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners are
expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct
Participants or Indirect Participants through which such Beneficial Owner
entered into the transaction. Transfers of ownership interests in a Global
Security representing Book-Entry Notes are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners of a Global Security representing Book-Entry Notes will not receive
Certificated Notes representing their ownership interests therein, except in
the event that use of the book-entry system for such Book-Entry Notes is
discontinued.
 
  To facilitate subsequent transfers, all Global Securities representing Book-
Entry Notes which are deposited with, or on behalf of, the Depositary are
registered in the name of the Depositary's partnership nominee, Cede & Co. The
deposit of Global Securities with, or on behalf of, the Depositary and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners of
the Global Securities representing the Book-Entry Notes; the Depositary's
records reflect only the identity of the Direct Participants to whose accounts
such Book-Entry 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.
 
  Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
 
  Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to the Trust as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
 
                                     S-20

 
  Principal, premium, if any, and/or interest payments on Global Securities
representing the Book-Entry Notes will be made to the Depositary. The
Depositary's practice is to credit Direct Participants' accounts on the
applicable payment date in accordance with their respective holdings shown on
the Depositary's records unless the Depositary has reason to believe that it
will not receive payment on such 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 in bearer form
or registered in "street name," and will be the responsibility of such
Participant and not of the Depositary, the Trustee or the Trust, subject to
any statutory or regulatory requirements as may be in effect from time to
time. Payment of principal, premium, if any, and/or interest to the Depositary
is the responsibility of the Trust or the Paying Agent, disbursement of such
payments to Direct Participants shall be the responsibility of the Depositary,
and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct Participants and Indirect Participants.
 
  If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the Book-Entry Notes within an issue are being redeemed, the
Depositary's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.
 
  A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by the Trust, through its Participant, to the
Securities Registrar, and shall effect delivery of such Book-Entry Notes by
causing the Direct Participant to transfer the Participant's interest in the
Global Security or Securities representing such Book-Entry Notes, on the
Depositary's records, to the Securities Registrar. The requirement for
physical delivery of Book-Entry Notes in connection with a demand for
repayment will be deemed satisfied when the ownership rights in the Global
Security or Securities representing such Book-Entry Notes are transferred by
Direct Participants on the Depositary's records.
 
  The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Trust or the Trustee. Under such circumstances, in
the event that a successor securities depository is not obtained, Certificated
Notes are required to be printed and delivered.
 
  The Trust may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, Certificated Notes will be printed and delivered.
 
             SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
 
GENERAL
 
  Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing
the applicable currency. The information set forth in this Prospectus
Supplement is directed to prospective purchasers who are United States
residents and, with respect to Foreign Currency Notes, is by necessity
incomplete. The Trust disclaims any responsibility to advise prospective
purchasers who are residents of countries other than the United States with
respect to any matters that may affect the purchase, holding or receipt of
payments of principal of, and premium, if any, and interest on, the Foreign
Currency Notes. Such persons should consult their own financial and legal
advisors with regard to such matters. See "Risk Factors -- Exchange Rates and
Exchange Controls."
 
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
 
  Unless otherwise specified in the applicable Pricing Supplement, the Trust
is obligated to make payments of principal of, and premium, if any, and
interest on, Foreign Currency Notes in the applicable Specified Currency (or,
if such Specified Currency is not at the time of such payment legal tender for
the payment of public and private debts, in such other coin or currency of the
country which issued such Specified Currency as at the time of such payment is
legal tender for the payment of such debts). Any such amounts payable by the
Trust in a foreign currency or composite currency will, unless otherwise
specified in the applicable Pricing Supplement, be converted by the exchange
rate agent named in the applicable Pricing Supplement (the "Exchange Rate
Agent") into United States dollars for payment to Holders. However, the Holder
of a Foreign Currency Note may elect to receive such amounts in the applicable
foreign currency or composite currency as hereinafter described.
 
                                     S-21

 
  Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in The City of New
York received by the Exchange Rate Agent at approximately 11:00 A.M., New York
City time, on the second Business Day preceding the applicable payment date
from three recognized foreign exchange dealers (one of whom may be the
Exchange Rate Agent) selected by the Exchange Rate Agent and approved by the
Trust for the purchase by the quoting dealer of the Specified Currency for
United States dollars for settlement on such payment date in the aggregate
amount of such Specified Currency payable to all Holders of Foreign Currency
Notes scheduled to receive United States dollar payments and at which the
applicable dealer commits to execute a contract. All currency exchange costs
will be borne by the Holders of such Foreign Currency Notes by deductions from
such payments. If three such bid quotations are not available, payments will
be made in the Specified Currency.
 
  A Holder of a Foreign Currency Note may elect to receive all or a specified
portion of any payment of the principal of, and premium, if any, and/or
interest on, such Foreign Currency Note in the Specified Currency by
submitting a written request for such payment to the Paying Agent at its
corporate trust office in The City of New York on or prior to the applicable
Record Date or at least fifteen calendar days prior to the Maturity Date, as
the case may be. Such written request may be mailed or hand delivered or sent
by cable, telex or other form of facsimile transmission. A Holder of a Foreign
Currency Note may elect to receive all or a specified portion of all future
payments in the Specified Currency in respect of such principal, premium, if
any, and/or interest and need not file a separate election for each payment.
Such election will remain in effect until revoked by written notice to the
Securities Registrar, but written notice of any such revocation must be
received by the Securities Registrar on or prior to the applicable Record Date
or at least fifteen calendar days prior to the Maturity Date, as the case may
be. Holders of Foreign Currency Notes whose Notes are to be held in the name
of a broker or nominee should contact such broker or nominee to determine
whether and how an election to receive payments in the Specified Currency may
be made.
 
  Payments of the principal of, and premium, if any, and/or interest on,
Foreign Currency Notes which are to be made in United States dollars will be
made in the manner specified herein with respect to Notes denominated in
United States dollars. See "Description of Notes--General." Payments of
interest on Foreign Currency Notes which are to be made in the Specified
Currency on an Interest Payment Date other than the Maturity Date will be made
by check mailed to the address of the Holders of such Foreign Currency Notes
as they appear in the Security Register, subject to the right to receive such
interest payments by wire transfer of immediately available funds under
certain circumstances described under "Description of Notes--General."
Payments of principal of, and premium, if any, and/or interest on, Foreign
Currency Notes which are to be made in the Specified Currency on the Maturity
Date will be made by wire transfer of immediately available funds to an
account with a bank designated at least fifteen calendar days prior to the
Maturity Date by each Holder thereof, provided that such bank has appropriate
facilities therefor and that the applicable Foreign Currency Note is presented
and surrendered at the principal corporate trust office of the Paying Agent in
time for the Paying Agent to make such payments in such funds in accordance
with its normal procedures.
 
  Unless otherwise specified in the applicable Pricing Supplement, a
Beneficial Owner of a Global Security or Securities representing Book-Entry
Notes payable in a Specified Currency other than United States dollars which
elects to receive payments of principal, premium, if any, and/or interest in
such Specified Currency must notify the Participant through which it owns its
interest on or prior to the applicable Record Date or at least fifteen
calendar days prior to the Maturity Date, as the case may be, of such
Beneficial Owner's election. Such Participant must notify the Depositary of
such election on or prior to the third Business Day after such Record Date or
at least twelve calendar days prior to the Maturity Date, as the case may be,
and the Depositary will notify the Securities Registrar of such election on or
prior to the fifth Business Day after such Record Date or at least ten
calendar days prior to the Maturity Date, as the case may be. If complete
instructions are received by the Participant from the Beneficial Owner and
forwarded by the Participant to the Depositary, and by the Depositary to the
Securities Registrar, on or prior to such dates, then such Beneficial Owner
will receive payments in the applicable Specified Currency.
 
PAYMENT CURRENCY
 
  If the Specified Currency for a Foreign Currency Note is not available for
the required payment of principal, premium, if any, and/or interest due to the
imposition of exchange controls or other circumstances beyond the reasonable
control of the Trust, the Trust will be entitled to satisfy its obligations to
the Holder of such Foreign Currency Note by making such payment in United
States dollars on the basis of the Market Exchange Rate (as defined below) on
the second Business Day prior to such payment or, if such Market Exchange Rate
is not then available, on the basis of the most recently available Market
Exchange Rate or as otherwise specified in the applicable Pricing Supplement.
 
                                     S-22

 
  If payment in respect of a Foreign Currency Note is required to be made in
any composite currency (e.g., ECU), and such composite currency is unavailable
due to the imposition of exchange controls or other circumstances beyond the
reasonable control of the Trust, the Trust will be entitled to satisfy its
obligations to the Holder of such Foreign Currency Note by making such payment
in United States dollars. The amount of each payment in United States dollars
shall be computed by the Exchange Rate Agent on the basis of the equivalent of
the composite currency in United States dollars. The component currencies of
the composite currency for this purpose (collectively, the "Component
Currencies" and each, a "Component Currency") shall be the currency amounts
that were components of the composite currency as of the last day on which the
composite currency was used. The equivalent of the composite currency in
United States dollars shall be calculated by aggregating the United States
dollar equivalents of the Component Currencies. The United States dollar
equivalent of each of the Component Currencies shall be determined by the
Exchange Rate Agent on the basis of the most recently available Market
Exchange Rate for each such Component Currency, or as otherwise specified in
the applicable Pricing Supplement.
 
  If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in
such single currency equal to the sum of the amounts of the consolidated
Component Currencies expressed in such single currency. If any Component
Currency is divided into two or more currencies, the amount of the original
Component Currency shall be replaced by the amounts of such two or more
currencies, the sum of which shall be equal to the amount of the original
Component Currency.
 
  The "Market Exchange Rate" for a Specified Currency other than United States
dollars means the noon dollar buying rate in The City of New York for cable
transfers for such Specified Currency as certified for customs purposes by (or
if not so certified, as otherwise determined by) the Federal Reserve Bank of
New York. Any payment made in United States dollars under such circumstances
where the required payment is in a Specified Currency other than United States
dollars will not constitute an Event of Default under the Indenture with
respect to the Notes.
 
  All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
 
GOVERNING LAW; JUDGMENTS
 
  The Notes will be governed by and construed in accordance with the laws of
the State of New York. Under current New York law, where a cause of action is
based upon an obligation denominated in a non-United States currency, a state
court in the State of New York rendering a judgment on such an obligation
would be required to render such judgment in the non-United States currency,
and such judgment would be converted into United States dollars at the
exchange rate prevailing on the date of entry of the judgment. The holders of
such notes could be subject to exchange rate fluctuations occurring after such
judgment is rendered. It is not certain, however, that a non-New York court
would follow the same rules with respect to conversion.
 
            CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
 
  The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, tax-exempt organizations, regulated
investment companies, dealers in securities or currencies, persons holding
Notes as a hedge against currency risks or as a position in a "straddle" for
tax purposes, or persons whose functional currency is not the United States
dollar. It also does not deal with Holders other than original purchasers
(except where otherwise specifically noted). BECAUSE THE EXACT PRICING AND
OTHER TERMS OF THE NOTES WILL VARY, NO ASSURANCE CAN BE GIVEN THAT THE
CONSIDERATIONS DESCRIBED BELOW WILL APPLY TO A PARTICULAR ISSUANCE OF NOTES.
CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE
OWNERSHIP OF PARTICULAR NOTES (WHERE APPLICABLE) WILL BE SUMMARIZED IN THE
PRICING SUPPLEMENT RELATING TO SUCH NOTES. PERSONS CONSIDERING THE PURCHASE OF
NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF
UNITED STATES FEDERAL INCOME
 
                                     S-23

 
TAX LAWS TO THEIR PARTICULAR SITUATION AS WELL AS ANY CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES ARISING UNDER THE LAWS OF ANY
STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
 
  As used herein, the term "U.S. Holder" means a Beneficial Owner of a Note
that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate the income of which is subject
to United States Federal income taxation regardless of its source, (iv) a
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust,
or (v) any other person whose income or gain in respect of a Note is
effectively connected with the conduct of a United States trade or business.
Notwithstanding the preceding sentence, to the extent provided in Treasury
regulations, certain trusts in existence on August 20, 1996, and treated as
United States persons under the United States Internal Revenue Code of 1986,
as amended (the "Code"), and applicable Treasury regulations thereunder prior
to such date, that elect to continue to be treated as United States persons
under the Code or applicable Treasury regulations thereunder also will be U.S.
Holders. In the case of a holder of Notes that is a partnership for United
States Federal income tax purposes, each partner will take into account its
allocable share of income or loss from the Notes, and will take such income or
loss into account under the rules of taxation applicable to such partner,
taking into account the activities of the partnership and the partner. As used
herein, the term "non-U.S. Holder" means a Beneficial Owner of a Note that is
not a U.S. Holder.
 
U.S. HOLDERS
 
  Payments of Interest. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting).
 
  Original Issue Discount. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue
discount. The following summary is based upon final Treasury regulations (the
"OID Regulations"), as amended, under the original issue discount provisions
of the Code.
 
  For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a
Note providing for the payment of any amount other than qualified stated
interest (as defined below) prior to maturity, multiplied by the weighted
average maturity of such Note). The issue price of each Note in an issue of
Notes equals the first price at which a substantial amount of such Notes has
been sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note other than "qualified stated interest"
payments. The term "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single, fixed rate.
 
  Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S.
Holder's regular method of tax accounting. In general, the amount of original
issue discount included in income by the initial U.S. Holder of a Discount
Note is the sum of the daily portions of original issue discount with respect
to such Discount Note for each day during the taxable year (or portion of the
taxable year) on which such U.S. Holder held such Discount Note. The "daily
portion" of original issue discount on any Discount Note is determined by
allocating to each day in any accrual period a ratable portion of the original
issue discount allocable to that accrual period. An "accrual period" may be of
any length and the accrual periods may vary in length over the term of the
Discount Note, provided that each accrual period is no longer than one year
and each scheduled payment of principal or interest occurs either on the final
day of an accrual period or on the first day of an accrual period. The amount
of original issue discount allocable to each accrual period is generally equal
to the
 
                                     S-24

 
difference between (i) the product of the Discount Note's adjusted issue price
at the beginning of such accrual period and its yield to maturity (determined
on the basis of compounding at the close of each accrual period and
appropriately adjusted to take into account the length of the particular
accrual period) and (ii) the amount of any qualified stated interest payments
allocable to such accrual period. The "adjusted issue price" of a Discount
Note at the beginning of any accrual period is the sum of the issue price of
the Discount Note plus the amount of original issue discount allocable to all
prior accrual periods minus the amount of any prior payments on the Discount
Note that were not qualified stated interest payments. Under these rules, U.S.
Holders generally will have to include in income increasingly greater amounts
of original issue discount in successive accrual periods. These same rules
apply to any Note that is not otherwise a Discount Note, but nonetheless has
been issued with original issue discount.
 
  A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal
to the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder
must include in its gross income with respect to such Discount Note for any
taxable year (or portion thereof in which the U.S. Holder holds the Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period. These same rules apply to any Note
that is not otherwise a Discount Note, but nonetheless has been issued with
original issue discount.
 
  Variable Rate Debt Instruments. Under the OID Regulations, Floating Rate
Notes and Indexed Notes ("Variable Notes") are subject to special rules
whereby a Variable Note will qualify as a "variable rate debt instrument" if
(a) its issue price does not exceed the total noncontingent principal payments
due under the Variable Note by more than a specified de minimis amount and (b)
it provides for stated interest, paid or compounded at least annually, at
current values of (i) one or more qualified floating rates, (ii) a single
fixed rate and one or more qualified floating rates, (iii) a single objective
rate, or (iv) a single fixed rate and a single objective rate that is a
qualified inverse floating rate.
 
  A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable
rate equal to the product of a qualified floating rate and a fixed multiple
that is greater than .65 but not more than 1.35 will constitute a qualified
floating rate. A variable rate equal to the product of a qualified floating
rate and a fixed multiple that is greater than .65 but not more than 1.35,
increased or decreased by a fixed rate, will also constitute a qualified
floating rate. In addition, under the OID Regulations, two or more qualified
floating rates that can reasonably be expected to have approximately the same
values throughout the term of the Variable Note (e.g., two or more qualified
floating rates with values within 25 basis points of each other as determined
on the Variable Note's issue date) will be treated as a single qualified
floating rate. Notwithstanding the foregoing, a variable rate that would
otherwise constitute a qualified floating rate but which is subject to one or
more restrictions such as a maximum numerical limitation (i.e., a cap) or a
minimum numerical limitation (i.e., a floor) may, under certain circumstances,
fail to be treated as a qualified floating rate under the OID Regulations
unless such cap or floor is fixed throughout the term of the Note. An
"objective rate" is a rate that is not itself a qualified floating rate but
which is determined using a single fixed formula and which is based upon
objective financial or economic information (e.g., a rate that is based on one
or more qualified floating rates or on the yield of actively traded personal
property, other than stock or debt of the issuer or a related party). A rate
will not qualify as an objective rate if it is based on information that is
within the control of the issuer (or a related party) or that is unique to the
circumstances of the issuer (or a related party), such as dividends, profits,
or the value of the issuer's stock (although a rate does not fail to be an
objective rate merely because it is based on the credit quality of the
issuer). The OID Regulations also provide that other variable interest rates
may be treated as objective rates if so designated by the IRS in the future.
Despite the foregoing, a variable rate of interest on a Variable Note will not
constitute an objective rate if it is reasonably expected that the average
value of such rate during the first half of the Variable Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Variable Note's term. A "qualified
inverse floating rate" is any objective rate where such rate is equal to a
fixed rate minus a qualified floating rate, as long as variations in the rate
can reasonably be expected to inversely reflect contemporaneous variations in
the qualified floating rate. The OID Regulations also provide that if a
Variable Note provides for stated interest at a fixed rate for an initial
period of less than one year followed by a variable rate that is either a
qualified floating rate or an objective rate, and if the variable rate on the
Variable Note's issue date is intended
 
                                     S-25

 
to approximate the fixed rate (e.g., the value of the variable rate on the
issue date does not differ from the value of the fixed rate by more than 25
basis points), then the fixed rate and the variable rate together will
constitute either a single qualified floating rate or objective rate, as the
case may be.
 
  If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single qualified
floating rate or a single objective rate throughout the term thereof and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (i.e., at a price
below the Note's stated principal amount) in excess of a specified de minimus
amount. Original issue discount on such a Variable Note arising from "true"
discount and qualified stated interest are allocated to an accrual period
using the constant yield method described above by assuming that the variable
rate is a fixed rate equal to (i) in the case of a qualified floating rate or
qualified inverse floating rate, the value as of the issue date, of the
qualified floating rate or qualified inverse floating rate, or (ii) in the
case of an objective rate (other than a qualified inverse floating rate), a
fixed rate that reflects the yield that is reasonably expected for the
Variable Note. The amount of qualified stated interest allocable to an accrual
period is increased (or decreased) if the interest actually paid during an
accrual period exceeds (or is less than) the interest assumed to be paid
during the accrual period.
 
  In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed
rate that reflects the yield that is reasonably expected for the Variable
Note. In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Variable Notes as of the
Variable Note's issue date is approximately the same as the fair market value
of an otherwise identical debt instrument that provides for either the
qualified floating rate or qualified inverse floating rate rather than the
fixed rate. Subsequent to converting the fixed rate into either a qualified
floating rate or a qualified inverse floating rate, the Variable Note is then
converted into an "equivalent" fixed rate debt instrument in the manner
described above.
 
  Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest are determined for the "equivalent"
fixed rate debt instrument by applying the general original issue discount
rules to the "equivalent" fixed rate debt instrument, and a U.S. Holder of the
Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Variable Note during the accrual period.
 
  If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. On June 11, 1996 the IRS released final
Treasury regulations dealing with the treatment of contingent payment
obligations (the "Contingent Debt Regulations").
 
  Generally, if a Variable Note is treated as a contingent payment obligation,
interest payments thereon will be treated as "contingent interest" payments.
Any contingent interest payments on a Variable Note would be includible in
income in a taxable year whether or not the amount of any payment is fixed or
determinable in that year. The amount of interest included in income in any
particular accrual period would be determined by estimating a projected
 
                                     S-26

 
payment schedule (as determined under the Contingent Debt Regulations) for the
Variable Note based on a comparable yield based on a hypothetical fixed rate
instrument having similar terms and conditions as the Variable Note and
applying daily accrual rules similar to those for accruing original issue
discount on Notes issued with original issue discount (as discussed above). If
the actual amount of contingent interest payments is not equal to the
projected amount, an adjustment to income at the time of the payment must be
made to reflect the difference.
 
  Certain of the Notes (i) may be redeemable at the option of the Trust prior
to their stated maturity (a "call option") and/or (ii) may be repayable at the
option of the Holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such
features should consult their own tax advisors, since the original issue
discount consequences will depend, in part, on the particular terms and
features of the purchased Notes.
 
  U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
 
  Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, a cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or
upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions
otherwise allowable to the U.S. Holder for interest on borrowings allocable to
the Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other Holders including banks
and dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
 
  Market Discount. If a U.S. Holder purchases a Note, other than a Note issued
with original issue discount, for an amount that is less than its issue price
(or, in the case of a subsequent purchaser, its stated redemption price at
maturity) or, in the case of a Note issued with original issue discount, for
an amount that is less than its adjusted issue price as of the purchase date,
such U.S. Holder will be treated as having purchased such Note at a "market
discount," unless such market discount is less than a specified de minimis
amount.
 
  Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Note issued with original
issue discount, any payment that is part of its "revised issue price") on, or
any gain realized on the sale, exchange, retirement or other disposition of, a
Note as ordinary income to the extent of the lesser of (i) the amount of such
payment or realized gain or (ii) the market discount which has not previously
been included in income and is treated as having accrued on such Note at the
time of such payment or disposition. Market discount will be considered to
accrue ratably during the period from the date of acquisition to the Maturity
Date of the Note, unless the U.S. Holder elects to accrue market discount on
the basis of constant interest rate.
 
  A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note
or certain earlier dispositions, because a current deduction is only allowed
to the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or a constant interest rate
basis), in which case the rules described above regarding the treatment as
ordinary income of gain upon the disposition of the Note and upon the receipt
of certain cash payments and regarding the deferral of interest deductions
will not apply. Generally, such currently included market discount is treated
as ordinary interest for United States Federal income tax purposes. Such an
election will apply to all debt instruments acquired by the U.S. Holder on or
after the first day of the taxable year to which such election applies and may
be revoked only with the consent of the IRS.
 
                                     S-27

 
  Premium. If a U.S. Holder purchases a Note for an amount that is greater
than the sum of all amounts payable on the Note after the purchase date other
than payments of qualified stated interest, such U.S. Holder will be
considered to have purchased the Note with "amortizable bond premium" equal in
amount to such excess. A U.S. Holder may elect to amortize such premium using
a constant yield method over the remaining term of the Note in a manner
generally similar to the amortization of original issue discount. In the case
of a Note issued subject to a call option, however, the bond premium will be
amortized using different assumptions, which may defer the amortization of
some bond premium until later in the term of the Note. The amortized portion
of the premium may offset qualified stated interest on the Note when the U.S.
Holder takes the qualified stated interest into account under its regular
method of accounting. In the event that the amount of premium allocable to an
accrual period exceeds the amount of qualified stated interest taken into
account by the U.S. Holder in that period, the excess may be deducted only to
the extent that the U.S. Holder took qualified stated interest on the Note
into income in prior periods (and such amounts were not previously offset by
amortized bond premium). Any amount that cannot be deducted in the current
period may be carried forward to offset qualified stated interest taken into
income in future periods. Any election to amortize bond premium applies to all
taxable debt obligations then owned and thereafter acquired by the U.S. Holder
and may be revoked only with the consent of the IRS.
 
  Disposition of a Note. Except as discussed above, upon the sale, exchange or
retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest)
and such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's
adjusted tax basis in a Note generally will equal such U.S. Holder's initial
investment in the Note increased by any original issue discount included in
income (and accrued market discount, if any, if the U.S. Holder has included
such market discount in income) and decreased by the amount of any payments,
other than qualified stated interest payments, received and amortizable bond
premium taken with respect to such Note. Such gain or loss generally will be
long-term capital gain or loss if the Note were held for more than one year.
 
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
 
  As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
 
  Cash Method. A U.S. Holder who uses the cash method of accounting for United
States Federal income tax purposes and who receives a payment of interest on a
Note (other than original discount or market discount) will be required to
include in income the U.S. dollar value of the Foreign Currency payment
(determined on the date such payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the U.S. Holder's tax basis in such Foreign Currency.
 
  Accrual Method. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the
U.S. dollar value of the amount of interest income (including original issue
discount or market discount and reduced by amortizable bond premium to the
extent applicable) that has accrued and is otherwise required to be taken into
account with respect to a Note during an accrual period. The U.S. dollar value
of such accrued income will be determined by translating such income at the
average rate of exchange for the accrual period or, with respect to an accrual
period that spans two taxable years, at the average rate for the partial
period within the taxable year. A U.S. Holder may elect, however, to translate
such accrued interest income using the rate of exchange on the last day of the
accrual period or, with respect to an accrual period that spans two taxable
years, using the rate of exchange on the last day of the taxable year. If the
last day of an accrual period is within five business days of the date of
receipt of the accrued interest, a U.S. Holder may translate such interest
using the rate of exchange on the date of receipt. The above election will
apply to other debt obligations held by the U.S. Holder and may not be changed
without the consent of the IRS. A U.S. Holder should consult a tax advisor
before making the above election. A U.S. Holder will recognize exchange gain
or loss (which will be treated as ordinary income or loss) with respect to
accrued interest income on the date such income is received. The amount of
ordinary income or loss recognized will equal the difference, if any, between
the U.S. dollar value of the Foreign Currency payment received (determined on
the date such payment is received) in respect of such accrual period and the
U.S. dollar value of interest income that has accrued during such accrual
period (as determined above).
 
  Purchase, Sale and Retirement of Notes. A U.S. Holder who purchases a Note
with previously owned Foreign Currency will recognize ordinary income or loss
in an amount equal to the difference, if any, between such U.S.
 
                                     S-28

 
Holder's tax basis in the Foreign Currency and the U.S. dollar fair market
value of the Foreign Currency used to purchase the Note, determined on the
date of purchase.
 
  Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income)
and will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year.
To the extent the amount realized represents accrued but unpaid interest,
however, such amounts must be taken into account as interest income, with
exchange gain or loss computed as described in "Payments of Interest in a
Foreign Currency" above. If a U.S. Holder receives Foreign Currency on such a
sale, exchange or retirement, the amount realized will be based on the U.S.
dollar value of the Foreign Currency on the date the payment is received or
the Note is disposed of (or deemed disposed of in the case of a taxable
exchange of the Note for a new Note). In the case of a Note that is
denominated in Foreign Currency and is traded on an established securities
market, a cash basis U.S. Holder (or, upon election, an accrual basis U.S.
Holder) will determine the U.S. dollar value of the amount realized by
translating the Foreign Currency payment at the spot rate of exchange on the
settlement date of the sale. A U.S. Holder's adjusted tax basis in a Note will
equal the cost of the Note to such Holder, increased by the amounts of any
market discount or original issue discount previously included in income by
the Holder with respect to such Note and reduced by any amortized acquisition
or other premium and any principal payments received by the Holder. A U.S.
Holder's tax basis in a Note, and the amount of any subsequent adjustments to
such Holder's tax basis, will be the U.S. dollar value of the Foreign Currency
amount paid for such Note, or of the Foreign Currency amount of the
adjustment, determined on the date of such purchase or adjustment.
 
  Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain
or loss attributable to fluctuations in exchange rates will equal the
difference between the U.S. dollar value of the Foreign Currency principal
amount of the Note, determined on the date such payment is received or the
Note is disposed of, and the U.S. dollar value of the Foreign Currency
principal amount of the Note, determined on the date the U.S. Holder acquired
the Note. Such Foreign Currency gain or loss will be recognized only to the
extent of the total gain or loss realized by the U.S. Holder on the sale,
exchange or retirement of the Note.
 
  Original Issue Discount. In the case of a Note issued with original issue
discount, (i) original issue discount is determined in units of the Foreign
Currency, (ii) accrued original issue discount is translated into U.S. dollars
as described in "Payments of Interest in a Foreign Currency--Accrual Method"
above and (iii) the amount of Foreign Currency gain or loss on the accrued
original issue discount is determined by comparing the amount of income
received attributable to the discount (either upon payment, maturity or an
earlier disposition), as translated into U.S. dollars at the rate of exchange
on the date of such receipt, with the amount of original issue discount
accrued, as translated above.
 
  Premium and Market Discount. In the case of a Note with market discount, (i)
market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the
Note (other than accrued market discount required to be taken into account
currently) is translated into U.S. dollars at the exchange rate on such
disposition date (and no part of such accrued market discount is treated as
exchange gain or loss) and (iii) accrued market discount currently includible
in income by a U.S. Holder for any accrual period is translated into U.S.
dollars on the basis of the average exchange rate in effect during such
accrual period, and the exchange gain or loss is determined upon the receipt
of any partial principal payment or upon the sale, exchange, retirement or
other disposition of the Note in the manner described in "Payments of Interest
in a Foreign Currency--Accrual Method" above with respect to computation of
exchange gain or loss on accrued interest.
 
  With respect to a Note issued with amortizable bond premium, such premium is
determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder
should recognize exchange gain or loss equal to the difference between the
U.S. dollar value of the bond premium amortized with respect to a period,
determined on the date the interest attributable to such period is received,
and the U.S. dollar value of the bond premium determined on the date of the
acquisition of the Note.
 
 
                                     S-29

 
  Exchange of Foreign Currencies. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement
of a Note equal to the U.S. dollar value of such Foreign Currency, at the time
the interest is received or at the time of the sale, exchange or retirement.
Any gain or loss realized by a U.S. Holder on a sale or other disposition of
Foreign Currency (including its exchange for U.S. dollars or its use to
purchase Notes) will be ordinary income or loss.
 
NON-U.S. HOLDERS
 
  A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Trust, a controlled foreign
corporation related to the Trust or a bank receiving interest described in
section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment to a non-U.S. Holder (the
"Withholding Agent") must have received in the year in which a payment of
interest or principal occurs, or in either of the two preceding calendar
years, a statement that (i) is signed by the Beneficial Owner of the Note
under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the Beneficial Owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the Beneficial Owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement
to the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the Beneficial Owner to the organization or institution.
 
  Final regulations dealing with withholding tax on income paid to foreign
persons, backup withholding and related matters (the "New Withholding
Regulations") were issued by the Treasury Department on October 6, 1997. The
New Withholding Regulations generally will be effective for payments made
after December 31, 1999, subject to certain transition rules. Prospective Non-
U.S. Holders are strongly urged to consult their own tax advisors with respect
to the New Withholding Regulations.
 
  Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount that constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
 
  The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Trust
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
 
BACKUP WITHHOLDING
 
  Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are
not "exempt recipients" and who fail to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the required manner. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities generally are exempt recipients.
Payments made in respect of the Notes to a U.S. Holder must be reported to the
IRS, unless the U.S. Holder is an exempt recipient or establishes an
exemption. Compliance with the identification procedures described in the
preceding section would establish an exemption from backup withholding for
those non-U.S. Holders who are not exempt recipients.
 
  In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-
U.S. Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines
that the seller is an exempt recipient or (ii) the seller certifies its non-
U.S. status (and certain other conditions are met). Certification of the
registered owner's non-U.S. status would be made normally on an IRS Form W-8
under penalties of perjury, although in certain cases it may be possible to
submit other documentary evidence. In addition, prospective purchasers of
Notes are strongly urged to consult their own tax advisors with respect to the
New Withholding Regulations.
 
 
                                     S-30

 
  Any amounts withheld under the backup withholding rules from a payment to a
Beneficial Owner would be allowed as a refund or a credit against such
Beneficial Owner's United States Federal income tax provided the required
information is furnished to the IRS.
 
                       SUPPLEMENTAL PLAN OF DISTRIBUTION
 
  The Notes are being offered on a continuous basis for sale by the Trust to
or through J.P. Morgan Securities Inc., BT Alex. Brown Incorporated, First
Union Capital Markets, Goldman, Sachs & Co., Merrill Lynch & Co. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (the "Agents"). The Agents may
purchase Notes, as principal, from the Trust from time to time for resale to
investors and other purchasers at varying prices relating to prevailing market
prices at the time of resale as determined by the applicable Agent(s), or, if
so specified in the applicable Pricing Supplement, for resale at a fixed
offering price. If agreed to by the Trust and an Agent, such Agent may also
utilize its reasonable efforts on an agency basis to solicit offers to
purchase the Notes at 100% of the principal amount thereof, unless otherwise
specified in the applicable Pricing Supplement. The Trust will pay a
commission to an Agent, ranging from .125% to .750% of the principal amount of
each Note, depending upon its stated maturity, sold through such Agent.
Commissions with respect to Notes with stated maturities in excess of 30 years
that are sold through an Agent will be negotiated between the Trust and such
Agent at the time of such sale.
 
  Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. An Agent may sell Notes it has purchased from the Trust as
principal to other dealers for resale to investors and other purchasers, and
may allow all or any portion of the discount received in connection with such
purchase from the Trust to such dealers. After the initial offering of Notes,
the offering price (in the case of Notes to be resold on a fixed price basis),
the concession and the discount may be changed.
 
  In connection with the purchase of Notes by one or more Agents, as
principal, for resale at a fixed price, the Agents may engage in transactions
that stabilize, maintain or otherwise affect the price of the Notes.
Specifically, the Agents may overallot in connection with such offering,
creating a syndicate short position. In addition, the Agents may bid for and
purchase the Notes in the open market to cover syndicate short positions or to
stabilize the price of the Notes. Finally, the syndicate may reclaim selling
concessions allowed for distributions of Notes in the offering, if the
syndicate repurchases previously distributed Notes in the market in syndicate
covering transactions, stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Notes above
independent market levels. The Agents are not required to engage in any of
these activities, and may end any of them at any time.
 
  The Trust has reserved the right to sell the Notes directly to investors,
and may solicit and accept offers to purchase Notes directly from investors
from time to time on its own behalf. No commission will be paid on Notes sold
directly by the Trust. In certain instances, the Trust may offer Notes to or
through additional agents named in the applicable Pricing Supplement.
 
  The Trust reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject offers in whole or in part (whether
placed directly with the Trust or though the Agents). Each Agent will have the
right, in its discretion reasonably exercised, to reject in whole or in part
any offer to purchase Notes received by it on an agency basis.
 
  Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the Specified Currency in The City of New York on the date
of settlement. See "Description of Notes--General."
 
  Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. The Agents may from time
to time purchase and sell Notes in the secondary market, but the Agents are
not obligated to do so, and there can be no assurance that there will be a
secondary market for the Notes or that there will be liquidity in the
secondary market if one develops. From time to time, the Agents may make a
market in the Notes, but the Agents are not obligated to do so and may
discontinue any market-making activity at any time.
 
 
                                     S-31

 
  The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Trust has
agreed to indemnify the Agents against certain liabilities (including
liabilities under the Securities Act), or to contribute to payments the Agents
may be required to make in respect thereof. The Trust has agreed to reimburse
the Agents for certain other expenses.
 
  In the ordinary course of their respective businesses, the Agents and their
affiliates have engaged in, and may in the future engage in, investment and
commercial banking transactions with the Trust and certain of its affiliates.
 
  Concurrently with the offering of Notes described herein, the Trust may
issue other Securities described in the accompanying Prospectus.
 
                                LEGAL OPINIONS
 
  Certain legal matters will be passed upon for the Trust by Kirkpatrick &
Lockhart LLP, Washington, D.C. and Goodwin, Procter & Hoar LLP, Boston,
Massachusetts, and for the Agents by Brown & Wood LLP, New York, New York. The
opinions of Kirkpatrick & Lockhart LLP, Goodwin, Procter & Hoar LLP and Brown
& Wood LLP will be based upon, and subject to, certain assumptions as to
future actions required to be taken in connection with the issuance and sale
of the Notes and as to other events that may affect the validity of the Notes
but that cannot be ascertained on the date of such opinions.
 
                                     S-32