-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ZL4H5jnXVLiBUb6QpJVgzeWrfajMMajHJ9+JDOf6sjSdZd46v0xiDtpmAJQIuCyQ zADEBl6Zo0JC3bUlaAkixA== 0000912224-94-000024.txt : 19940719 0000912224-94-000024.hdr.sgml : 19940719 ACCESSION NUMBER: 0000912224-94-000024 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940718 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEHMAN BROTHERS HOLDINGS INC CENTRAL INDEX KEY: 0000806085 STANDARD INDUSTRIAL CLASSIFICATION: 6211 IRS NUMBER: 133216325 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 033-65674 FILM NUMBER: 94539134 BUSINESS ADDRESS: STREET 1: AMERICAN EXPRESS TWR STREET 2: 3 WORLD FINANCIAL CNTR CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2122982000 MAIL ADDRESS: STREET 1: AMERICAN EXPRESS TOWER STREET 2: WORLD FINANCIAL CENTER ATTN GEN COUNSEL CITY: NEW YORK STATE: NY ZIP: 10283 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON LEHMAN HUTTON HOLDINGS INC DATE OF NAME CHANGE: 19901017 424B2 1 REGISTRATION NO. 33-65674 NASD File No. 930707011 Rule 424(b)(2) PRICING SUPPLEMENT NO. 57 DATED JULY 14, 1994 (To Prospectus dated October 4, 1993 as supplemented by a Prospectus Supplement dated March 4, 1994) LEHMAN BROTHERS HOLDINGS INC. Medium Term Notes, Series E Due 9 Months or More from Date of Issue (Indexed Notes) ___________________________ Principal Amount: $15,000,000. See "Description of Indexed Notes-Maturity Amount" below. Maturity Date: July 28, 1999. Issue Date: July 28, 1994. Issue Price: 100%. Coupon Rate: Not Applicable. Agent's Commission: 0.50%. Payment Date: The Maturity Date (or, if such day is not a Business Day, the next following Business Day). Calculation Agent: Lehman Brothers Inc. Index: The Wilshire Real Estate Securities Index, as published by Wilshire Associates Incorporated ("Wilshire") and set forth on the "WLREIT [Index] [Go]" page published by Bloomberg Financial Services, Inc. Base Value: 77.90. Maturity Amount: See "Description of Indexed Notes - Maturity Amount." Authorized Denominations: $1,000,000 and integral multiples of $100,000 in excess thereof. Form of Note: Book-Entry Note. The aggregate principal amount of this offering is $15,000,000 and relates only to Pricing Supplement No. 57. Medium-Term Notes, Series E may be issued by the Issuer in an aggregate principal amount of up to $2,500,000,000 and, to date, including this offering, an aggregate of $2,162,100,000 Medium-Term Notes, Series E have been issued and are outstanding. PS-2 DESCRIPTION OF INDEXED NOTES I. General The following description of the particular terms of the Indexed Notes supplements, and to the extent inconsistent therewith replaces, thedescription of the general terms and provisions of the Notes set forth in the accompanying Prospectus Supplement and the description of Debt Securities set forth in the accompanying Prospectus, to which descriptions reference is hereby made. All terms used herein but not otherwise defined herein and which are defined in the accompanying Prospectus or Prospectus Supplement shall have the meanings therein assigned to them. II. Maturity Amount There will be no periodic payments of interest on the Indexed Notes. The amount payable on the Maturity Date of any Indexed Note (the "Maturity Amount") will be equal to the greater of (i) the Minimum Maturity Amount and (ii) the Index Maturity Amount. The Indexed Notes mature on July 28, 1999, and the Maturity Amount will be paid on such day (or if such day is not a Business Day, on the following Business Day). "Minimum Maturity Amount" with respect to each Indexed Note means 120.5% of the principal amount of such Indexed Note. "Index Maturity Amount" with respect to each Indexed Note means an amount equal to the sum of (i) the principal amount of such Indexed Note and (ii) the product of (x) the principal amount of such Indexed Note, (y) the Index Appreciation Ratio and (z) the Participation Rate. "Index Appreciation Ratio" means: Final Average Index Value - Base Value ______________________________________ Base Value "AMEX" means the American Stock Exchange. "Base Value" of the Index is 77.90 PS-3 "Business Day" means a day which is not a day on which banking institutions in New York, New York or the New York Stock Exchange are authorized or required by law to close. "Calculation Agent" means Lehman Brothers Inc. and its successors and assigns. "Calculation Period" means each period from and including April 23, May 25, June 23 and July 20, 1999 to and including the third scheduled Trading Day after each such date, respectively. "Final Average Index Value" of the Index will be determined by the Calculation Agent and will equal the arithmetic average (mean) of the Monthly Values for April, May, June and July, 1999. "Index Security" means one of the real estate securities comprising the Index. "Market Disruption Event" means the suspension or material limitation, for more than two hours, of trading in Index Securities comprising 20% or more of the aggregate value of the Index (whether by reason of movements in prices of the related Index Securities otherwise exceeding levels permitted by the relevant exchanges or otherwise). The phrase "material limitation" as used in the preceding sentence shall include, without limitation, limitations pursuant to NYSE Rule 80A (or any applicable rule or regulation enacted or promulgated by the NYSE or any other self regulatory organization or the SEC of similar scope as determined by the Calculation Agent) on trading during significant market fluctuations; provided, however, that a limitation on the hours in a Trading Day and/or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the relevant exchange. The determination of whether or not a Market Disruption Event has occurred on any Trading Day shall be made by the Calculation Agent. "Maturity Date" means July 28, 1999. "Monthly Value", for any month, means the value that will be calculated during the Calculation Period for such month. The Monthly Value for each month will equal the arithmetic average (mean) of the closing values of the Index on the first three Trading Days in the applicable Calculation Period (provided that a Market Disruption Event shall not have occurred on any such Trading Day). If a Market Disruption Event PS-4 occurs on one or more of the Trading Days during a Calculation Period, the Monthly Value for the relevant month will equal the average of the values on Trading Days on which a Market Disruption Event did not occur during such Calculation Period or, if there is only one such Trading Day, the value on such day. If Market Disruption Events occur on all of the Trading Days during a Calculation Period, the Monthly Value for the relevant month shall equal the closing value of the Index on the last Trading Day of the Calculation Period regardless of whether a Market Disruption Event shall have occurred on such day. "NASDAQ" means the National Association of Securities Dealers Automated Quotation National Market System. "NYSE" means the New York Stock Exchange. "Participation Rate" means 170%. "Trading Day" means a day on which the NYSE, AMEX and NASDAQ are open for trading. III. Special Considerations Investors should be aware that if the Final Average Index Value does not exceed the Base Value by more than approximately 12.06%, Holders of the Indexed Notes will receive only the Minimum Maturity Amount. The amount by which such Minimum Maturity Amount exceeds the principal amount of the Indexed Notes is below what the Issuer would pay as interest as of the date hereof if the Issuer issued non-callable senior debt securities with a similar maturity to that of the Indexed Notes and the payment of the Minimum Maturity Amount is not expected to reflect the full opportunity costs associated with inflation or other factors relating to the time value of money. There can be no assurance that a secondary market for the Indexed Notes will develop or if a secondary market does develop, that it will provide Holders of Indexed Notes with liquidity of investment. It is expected that the price at which a Holder will be able to sell Indexed Notes will be affected by a number of factors including the extent of the appreciation, if any, of the Index over the Base Value and the volatility of the Index. It is impossible to predict whether the level of the Index will rise or fall. The level of the Index will be affected by complex and interrelated political, economic, financial and other factors generally and factors affecting commercial real PS-5 estate in particular as well as changes in interest rates. It is suggested that prospective investors who consider purchasing the Indexed Notes should reach an investment decision only after carefully considering the suitability of the Indexed Notes in light of their particular circumstances. PS-6 THE WILSHIRE REAL ESTATE SECURITIES INDEX All disclosures contained in the Pricing Supplement regarding the Index, including its composition, method of calculation, changes in its components and historical information, are derived from sources and information that the Issuer believes to be reliable and neither the Issuer nor the Calculation Agent assumes any responsibility for the accuracy or completeness of such information. The Indexed Notes are not sponsored, endorsed, sold or promoted by Wilshire. Wilshire makes no representation or warranty, express or implied, to the owners of the Indexed Notes or any member of the public regarding the advisability of investing in securities generally or in the Indexed Notes particularly or the ability of the Index to track general stock market performance. Wilshire's publication of the Index in no way suggests or implies an opinion by Wilshire as to the advisability of investment in any or all of the securities upon which the Index is based. Wilshire's only relationship to the Issuer and the Calculation Agent is the licensing of certain trademarks and trade names of Wilshire and of the Index which is determined, composed and calculated by Wilshire without regard to the Issuer, the Calculation Agent or the Indexed Notes. Wilshire is not responsible for and has not reviewed the Indexed Notes and Wilshire makes no representation or warranty, express or implied, as to their accuracy or completeness, or otherwise. Wilshire reserves the right, at any time, and without notice, to alter, amend, terminate or in any way change the Index. NEITHER THE ISSUER, THE CALCULATION AGENT, NOR WILSHIRE GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN, AND NEITHER THE ISSUER, THE CALCULATION AGENT, NOR WILSHIRE SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. NEITHER THE ISSUER, THE CALCULATION AGENT, NOR WILSHIRE MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED BY INVESTORS, HOLDERS OF THE INDEXED NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN. NEITHER THE ISSUER, THE CALCULATION AGENT, NOR WILSHIRE MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EACH EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL WILSHIRE, THE CALCULATION AGENT, OR THE ISSUER HAVE ANY LIABILITY FOR ANY PS-7 SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. The Wilshire Real Estate Securities Index has been licensed for use by the Issuer and its affiliates (including the Calculation Agent). General The Index, published by Wilshire, is a market capitalization-weighted index which is intended to provide an index of publicly-traded real estate equity securities. Included in the Index are companies specifically chartered for the ownership or operation of commercial real estate and for which market prices for each company's equity securities are continuously available. Not included in the Index are companies which may own or operate substantial real estate assets, but the ownership of such assets is incidental to the other business activities for which such companies are chartered. Also excluded are companies that may own and operate real estate that is not commercial in nature. See "Market Coverage" below. Because the Index is composed of equity securities concentrated in a single business sector or activity (i.e., commercial real estate), the Index should not be regarded as an index of general economic or business performance or of any other economic or business segment. Creation of the Index Information as to the value of the Index currently is available on Bloomberg Financial Markets on page WLREIT [Index] [Go]. The value of the Index is determined based on the sum of the products of (i) the most current market price for each security in the Index as reported on the applicable exchange or reporting system; and (ii) the number of shares outstanding of such class of equity security as of the beginning of the month as determined by Wilshire. The Index was introduced on September 18, 1991, and was constructed based on all real estate- related securities that Wilshire identified as PS-8 publicly-traded equity securities during the period 1978 to 1991 and meeting the then applicable stated Index selection criteria. The included securities are listed on the NYSE, AMEX or NASDAQ. A real estate asset size requirement was imposed to eliminate less liquid securities of smaller real estate companies. Only securities of issuers with real estate assets of at least $30,000,000 (book value in 1978) were included. In 1985, includable new securities were required to have been issued by companies with real estate assets having a book value of at least $40,000,000. The requirement increased to $50,000,000 in 1990. Wilshire anticipates that the minimum size requirement will increase to $60,000,000 in 1995. Once a security is included, it is retained regardless of future asset size requirements established by Wilshire and regardless of the increase or decrease in real estate assets of the included issue. Although the selection process is determined based on a minimum dollar asset size, there is no minimum per share price requirement to be included in or to remain in the Index. In recent years, a number of limited partnerships with a common general partner have been consolidated into a single real estate investment trust ("REIT"). These securities are reviewed prior to inclusion in the Index. Trading of the securities included in the Index and the availability of share prices will be determined in accordance with the listing and reporting requirements of the exchange or the reporting system on which the relevant security trades. Information as to the reported price of each security and the number of shares outstanding is obtained from sources believed by Wilshire to be accurate and reliable, but Wilshire has not verified such information and disclaims responsibility therefor and any liability that may result from errors or omission contained therein. The Index is based on the total market capitalization of the common stocks of companies currently domiciled in the U.S. and its territories which may own or operate properties located in the U.S. and other countries. For the purposes hereof, the market capitalization of any common stock shall mean the product of the closing price per share thereof and the number of the outstanding shares thereof. In general, only a single class of equity security for each company comprising the Index is included in the Index. Included as a class of eligible equity PS-9 securities are units of publicly-traded limited partnerships which meet the corporate purpose, size and trading requirements for the Index. In the case of real estate companies which are partners in limited partnerships which own or operate real estate assets, only those limited partnership units converted to shares of common stock are included in the market capitalization calculation for such company. The Index is intended to replicate the ownership and operation of commercial real estate by means of measuring the value of the selected equity securities comprising the Index. The Index seeks to measure the returns (excluding dividends but including capital appreciation and depreciation) that could be replicated through a strategy of buying and holding the stocks included in the Index. The companies included in the Index as of January 1, 1994 may be obtained upon request from either Wilshire or the Calculation Agent. The companies comprising the Index may change during the period any Indexed Note is outstanding as set forth in the "Index Adjustments" section below. Market Coverage Only common stocks belonging to companies specifically chartered to own or operate commercial real estate and which are domiciled in the U.S. and its territories are eligible for inclusion in the Index. Stocks traded on the different national securities exchanges or in reporting systems in the U.S., but the issuers of which are domiciled in other countries, are currently not included. Preferred stock, convertible preferred stock, participating preferred stock, warrants and rights are also excluded. Mutual funds which are traded on any of the exchanges or reporting systems are not eligible for inclusion in the Index. REITS which invest in mortgages, health care REITS, real estate finance companies, home builders, large landowners and subdividers and any REIT with more than 25% of its assets in direct mortgage investments are not eligible for inclusion in the Index. Generally, only one class of security of an issuer is allowed into the Index. Computation of the Index The return for any period measures the return of all of the stocks included in the Index determined on a market capitalization basis. The mathematical formula for such a measure is as follows: PS-10 PIt = PIt-1*(1+(PR/ 100)) where, N The Sum of i=1 (Pt-Pt-1/Pt-1 )*(St-1*Pt-1) *100 PR = _____________________________________ N The Sum of (St-1 * Pt-1) i=1 t = time P = price N = total number of stocks S = shares outstanding i = one stock PR = price return of Index PI = price of Index Index Weightings After the list of eligible participants is determined, the weight of each security in the Index is then based upon the market capitalization of the publicly-traded shares of each security in the Index. Minimum Trading Price Rule Wilshire does not impose any minimum share price requirement for any security in the Index or any minimum trading volume. Instead, Wilshire relies on the continued listing and trade reporting requirements of the relevant exchange or reporting system on which the security trades. Index Adjustments Each quarter the index is reconstituted to include new equity securities that meet the purpose and trading requirements described above. In the case of equity securities that have been initially offered to the public, such securities will be included in the Index at the beginning of the calendar quarter following the date after the completion of the public offering of such security. For example, a REIT which PS-11 completed its initial public offering on October 30, 1993 which qualified under the criteria discussed above would be included in the Index beginning January 1, 1994. The addition of a new equity security will add to the market capitalization of the Index on the date of its inclusion. The Index is rebalanced monthly to reflect changes in the number of shares outstanding in the included companies as a result of corporate events. No Replacement Rule The Index does not replace the common stocks that are deleted from the Index for any reason (e.g., mergers, acquisitions, bankruptcy or other similar corporate activity) between reconstitution dates. Thus, the number of common stocks held in the Index over any year will fluctuate according to corporate activity. Index Values Wilshire calculates returns and Index values on a daily basis. The daily values were established on December 29, 1989 so that the Index initially had a value of 100. Historical Data on the Index The recent historical performance of the Index should not be taken as an indication of future performance and no assurance can be given that the Index will rise or that the Index will decline in the future. The following graph shows the price performance of the Index during the period from February, 1978 to May, 1994 based on the month-end Index values, including periods prior to the introduction of the Index. [[Graph omitted. The data points listed below were used to create the omitted graph.]] P PS-12 Wilshire Real Estate Securities Index: Feb-78 27.22 Historical Price Index Mar-78 29.25 Apr-78 31.13 May-78 30.57 Jun-78 30.89 Jul-78 31.59 Aug-78 34.05 Sep-78 33.98 Oct-78 27.33 Nov-78 28.56 Dec-78 29.71 Jan-79 31.27 Feb-79 30.99 Mar-79 36.21 Apr-79 36.17 May-79 36.69 Jun-79 39.85 Jul-79 41.29 Aug-79 47.60 Sep-79 47.28 Oct-79 41.86 Nov-79 44.61 Dec-79 48.46 Jan-80 51.56 Feb-80 49.63 Mar-80 39.18 Apr-80 42.08 May-80 44.60 Jun-80 46.05 Jul-80 51.24 Aug-80 52.69 Sep-80 51.96 Oct-80 55.54 Nov-80 56.26 Dec-80 54.01 Jan-81 54.43 Feb-81 54.40 Mar-81 58.17 Apr-81 58.76 May-81 57.88 Jun-81 59.67 Jul-81 59.08 Aug-81 55.94 Sep-81 50.30 Oct-81 52.72 Nov-81 55.40 Dec-81 55.01 Jan-82 51.12 Feb-82 49.85 Mar-82 48.94 Apr-82 49.92 May-82 49.55 Jun-82 47.57 Jul-82 47.50 PS-13 Aug-82 49.89 Sep-82 51.99 Oct-82 58.37 Nov-82 62.97 Dec-82 64.23 Jan-83 65.49 Feb-83 66.66 Mar-83 69.44 Apr-83 74.63 May-83 73.68 Jun-83 75.01 Jul-83 74.39 Aug-83 72.63 Sep-83 75.50 Oct-83 73.65 Nov-83 75.84 Dec-83 77.24 Jan-84 78.11 Feb-84 76.36 Mar-84 77.39 Apr-84 79.20 May-84 77.82 Jun-84 77.12 Jul-84 76.20 Aug-84 81.93 Sep-84 84.30 Oct-84 85.18 Nov-84 86.85 Dec-84 87.16 Jan-85 93.30 Feb-85 90.78 Mar-85 89.14 Apr-85 89.81 May-85 93.40 Jun-85 93.38 Jul-85 94.42 Aug-85 91.33 Sep-85 88.66 Oct-85 91.30 Nov-85 91.14 Dec-85 91.93 Jan-86 93.55 Feb-86 97.04 Mar-86 103.24 Apr-86 103.08 May-86 102.55 Jun-86 106.55 Jul-86 104.46 Aug-86 108.40 PS-14 Sep-86 103.08 Oct-86 107.57 Nov-86 106.32 Dec-86 104.24 Jan-87 108.38 Feb-87 112.64 Mar-87 112.04 Apr-87 109.32 May-87 107.20 Jun-87 109.82 Jul-87 111.21 Aug-87 109.44 Sep-87 108.21 Oct-87 87.67 Nov-87 88.98 Dec-87 90.20 Jan-88 96.04 Feb-88 101.21 Mar-88 98.64 Apr-88 100.31 May-88 100.38 Jun-88 103.39 Jul-88 104.32 Aug-88 103.63 Sep-88 104.52 Oct-88 104.19 Nov-88 102.40 Dec-88 104.63 Jan-89 106.07 PS-15 Feb-89 105.97 Mar-89 105.63 Apr-89 107.36 May-89 108.74 Jun-89 109.13 Jul-89 112.08 Aug-89 110.08 Sep-89 108.99 Oct-89 103.11 Nov-89 100.99 Dec-89 99.97 Jan-90 95.03 Feb-90 94.57 Mar-90 93.52 Apr-90 91.28 May-90 90.53 Jun-90 89.88 Jul-90 85.97 Aug-90 75.54 Sep-90 66.11 Oct-90 60.97 Nov-90 63.07 Dec-90 61.36 Jan-91 67.15 Feb-91 70.83 Mar-91 76.41 Apr-91 75.48 May-91 76.33 Jun-91 72.04 Jul-91 71.36 Aug-91 70.23 Sep-91 68.89 Oct-91 67.11 Nov-91 64.57 Dec-91 68.92 Jan-92 72.06 Feb-92 71.54 Mar-92 69.54 Apr-92 68.05 May-92 67.98 Jun-92 65.46 Jul-92 65.43 Aug-92 64.19 Sep-92 66.10 PS-16 Oct-92 66.52 Nov-92 66.88 Dec-92 69.57 Jan-93 74.21 Feb-93 77.58 Mar-93 82.25 Apr-93 77.34 May-93 75.89 Jun-93 77.30 Jul-93 78.68 Aug-93 80.01 Sep-93 83.16 Oct-93 80.56 Nov-93 76.78 Dec-93 76.12 Jan-94 78.19 Feb-94 81.15 Mar-94 76.82 Apr-94 77.47 May-94 78.72
PS-17 MODIFICATIONS TO OR DISCONTINUANCE OF THE WILSHIRE REAL ESTATE SECURITIES INDEX Any modifications to or discontinuance of the Wilshire Real Estate Securities Index shall be addressed in accordance with the provisions set forth in the "Modifications to or Discontinuance of the Wilshire Real Estate Securities Index" set forth in Annex A attached hereto, the provisions of which are incorporated by reference herein. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS Set forth below is a summary of certain United States federal income tax consequences resulting from the ownership of Indexed Notes. Such consequences are in addition to those summarized in the accompanying Prospectus Supplement under the heading "Certain United States Federal Income Tax Consequences." Taxation of U.S. Investors While the matter is not free from doubt, the Indexed Notes should constitute debt obligations of the Issuer for U.S. federal income tax purposes, and no portion of the issue price of the Indexed Notes should be separately allocated to the contingent feature of the Indexed Notes. While the appropriate tax accounting for the Indexed Notes is not entirely clear, the Indexed Notes should be treated as issued with original issue discount ("OID") within the meaning of Section 1273(a) of the Code. In general, the total amount of OID on the Indexed Notes is the excess of the noncontingent payments on the Indexed Notes ("stated redemption price") over the issue price. A Holder generally must include OID in income for Federal income tax purposes as ordinary interest income as it accrues, in accordance with a constant interest method that takes into account the compounding of interest, in advance of receipt of the cash attributable to such income. See "Certain Federal Income Tax Consequences - Original Issue Discount" in the accompanying Prospectus Supplement. A Holder will recognize additional ordinary interest income in the event that the amount paid at maturity is greater than such Holder's aggregate tax basis in the Indexed Notes. Upon the sale, exchange, or other disposition of an Indexed Note, a Holder generally will recognize gain or loss equal to the difference between the amount realized on the sale or other disposition and the PS-18 Holder's tax basis in the Indexed Note. Such gain or loss generally will be long-term capital gain or loss if the Holder has held the Indexed Note for more than one year at the time of disposition. The distinction between capital gain or loss and ordinary income or loss is important for purposes of the limitations on a Holder's ability to offset capital losses against ordinary income. In addition, certain individuals are subject to taxation at a reduced rate on long-term capital gains. The Internal Revenue Service ("IRS") may contend that the Indexed Notes should be characterized for Federal income tax purposes under a different approach than that described above. For example, the IRS may contend that the Indexed Notes should be subject to certain proposed Treasury regulations dealing with "contingent payment" debt instruments (the "Proposed Regulations"). Under the Proposed Regulations, the issue price of an Indexed Note would be allocated between the noncontingent and contingent features of the Indexed Note. A Holder's noncontingent rights under an Indexed Note would be treated as a debt instrument issued with OID, and the contingent rights under the Indexed Note would be treated as a cash- settled property right. With respect to the noncontingent portion of an Indexed Note, a Holder would be required to accrue the OID currently under a constant yield method. Upon receipt of amount in respect of the contingent feature, a Holder would report any gain or loss on the cash-settled property right equal to the difference received for the cash settled property right and the portion of the Indexed Note's issue price separately allocated to such right as capital gain or loss. Although the Proposed Regulations are not at present effective, they are proposed to be retroactively effective once adopted in final form. These regulations have been criticized and the IRS released draft proposed regulations in January, 1993 which would have revoked the outstanding Proposed Regulations and provided substantially revised rules. Prior to issuance, however, these draft proposed regulations were withdrawn. The IRS has indicated that it may replace the Proposed Regulations with a rule that requires some minimum amount of interest income to be accrued on all contingent payment debt instruments. It is impossible to predict whether, or in what manner, the Proposed Regulations may be modified and whether any modifications would apply to the Indexed Notes or whether any such proposed regulations would become final regulations. PS-19 Taxation of Certain Foreign Investors Amounts paid to a nonresident alien individual, foreign corporation, foreign partnership or foreign estate or trust will be exempt from U.S. withholding tax. Backup Withholding See the discussion of "Certain United States Federal Income Tax Consequences -- Backup Withholding and Information Reporting" in the accompanying Prospectus Supplement. PS-20 Annex A to the Pricing Supplement MODIFICATIONS TO OR DISCONTINUANCE OF WILSHIRE REAL ESTATE SECURITIES INDEX1* If Wilshire Associates Incorporated ("Wilshire") discontinues publication of the Wilshire Real Estate Securities Index (the "Index") and Wilshire or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the Index (any such index being referred to hereinafter as a "Successor Index"), then, upon the Calculation Agent's notification of such determination to the Noteholders and the Issuer, the Calculation Agent will substitute the Successor Index as calculated by Wilshire or such other entity for the Index. If Wilshire discontinues publication of the Index and a Successor Index is not selected by the Calculation Agent or is no longer published for any Calculation Period, the index to be substituted for the Index with respect to such Calculation Period will be an index as described below under "Discontinuance of the Index." If a Successor Index is selected or the Calculation Agent determines an index as a substitute for the Index as described below, such Successor Index or index shall be substituted for the Index for all purposes, including for purposes of determining whether a Market Disruption Event exists. If at any time the method of calculating the Index, or the value thereof, is changed in a material respect, or if the Index is modified in any other way such that, in the opinion of the Calculation Agent, the Index does not fairly represent the value that the Index would have had is such changes or modifications had not been made, then from and after such time, the Calculation Agent shall, for each Calculation Period, make such adjustment as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a calculation of a stock index comparable to the Index as if such changes or modifications had not been made. Accordingly, if the method of calculating the Index is modified so that the value of such Index is a fraction or a multiple of what it would have been if it had not been modified (e.g., due to a split in the Index), then the Calculation Agent shall adjust such Index in order to arrive at a determination of the Index as if it had not been modified (e.g., as if such split had not occurred). Discontinuance of the Index ____________________ [FN] 1 Capitalized terms not otherwise defined herein shall have the meanings assigned them in the Pricing Supplement. If Wilshire discontinues publication of the Index and a Successor Index is available, then the Index Maturity Amount will be determined by reference to the Successor Index, as provided above. If the publication of the Index is discontinued and Wilshire or another entity does not publish a Successor Index for any Calculation Period, the index to be substituted for the Index for such Calculation Period will be computed by the Calculation Agent who, using the formula and method of calculating the Index in effect as of the date the Index was last so calculated, shall make such calculation as required to determine any value to be substituted for the Index for any Calculation Period to be used to calculate the Index Maturity Amount. At any time with respect to any common stock which the Calculation Agent reasonably determines would have been deleted from the Index had the Index not been discontinued, the Calculation Agent shall delete such common stock from the substituted index at such time. In no event shall the Calculation Agent add any common stock to the substituted index, regardless of whether such common stock would have been added to the Index had the Index not been discontinued (e.g., pursuant to "The Wilshire Real Estate Securities Index -- Index Adjustment" in the Pricing Supplement). -----END PRIVACY-ENHANCED MESSAGE-----