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.
<PAGE>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
<PAGE>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
<PAGE>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
<PAGE>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.
<PAGE>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
<PAGE>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
<PAGE>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
<PAGE>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:
<PAGE>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
<PAGE>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 <PAGE>PS-12
<TABLE>
<S> <C> <C>
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
<PAGE>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
<PAGE>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
<PAGE>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
<PAGE>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
</TABLE>
<PAGE>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
<PAGE>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.
<PAGE>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.
<PAGE>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).
