Amendment No. 1 Dated October 9, 1997 to
PROSPECTUS Dated June 2, 1997 Pricing Supplement No. 15 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-27919
Dated June 17, 1997 Dated September 30, 1997
Rule 424(b)(3)
LIT 27,500,000,000
Morgan Stanley, Dean Witter, Discover & Co.
MEDIUM-TERM NOTES, SERIES D
EQUITY LINKED NOTES DUE 2004
------------
The Equity Linked Notes due 2004 (the "Notes") are Medium-
Term Notes, Series D of Morgan Stanley, Dean Witter, Discover & Co. (the
"Company" ), as further described herein and in the Prospectus Supplement
under "Description of Notes--Fixed Rate Notes" and "--Notes Linked to
Commodity Prices, Single Securities, Baskets of Securities or Indices." The
Notes are being issued in minimum denominations of Italian lire ("LIT ")
50,000,000 and will mature on December 2, 2004 (the "Maturity Date"). The
Issue Price of each Note will be LIT 46,750,000 (93.5% of the principal
amount) (the "Issue Price"), and there will be no payments of interest
prior to the maturity of the Notes.
The Notes will not be redeemable by the Company in whole or
in part prior to the Maturity Date other than under the circumstances
described under "Description of Notes--Tax Redemption" in the accompanying
Prospectus Supplement. The Notes will be issued only in bearer form, which
form is further described under "Description of Notes--Forms,
Denominations, Exchange and Transfer" in the accompanying Prospectus
Supplement. Notes in bearer form will not be exchangeable at any time for
Notes in registered form.
On the Maturity Date, the holder of each Note will receive (i)
the par amount of such Note (LIT 50,000,000) ("Par") plus (ii) an amount (the
"Supplemental Redemption Amount") based on the percentage increase, if any, in
the value of a basket of indices that includes the Deutsche Aktienindex (the
"DAX"[Registered]), a registered trademark of the Frankfurt Stock Exchange
(the "FSE"), the Financial Times-Stock Exchange 100 Share Index (the "FT-SE
100"), as calculated by the FT-SE International Limited ("FSIL"), and the MIB
30 Index, as calculated by the Consiglio Di Borsa (the "Italian Stock Exchange
Council") (together, the "Underlying Indices" and each an "Underlying Index").
The Supplemental Redemption Amount payable with respect to each
Note at maturity will equal the product of (i) the par amount of such Note and
(ii) the greater of (x) 12% and (y) the Basket Appreciation Percentage. The
Basket Appreciation Percentage will be the sum of (A) 1/3 times the DAX
Change Percentage, (B) 1/3 times the FT-SE 100 Change Percentage and (C) 1/3
times the MIB 30 Index Change Percentage. The DAX Change Percentage is the
amount by which the Final Average Value of the DAX exceeds the Initial Value
of the DAX, expressed as a percentage of such Initial Value. The FT-SE 100
Change Percentage is the amount by which the Final Average Value of the FT-SE
100 exceeds the Initial Value of the FT-SE 100, expressed as a percentage of
such Initial Value. The MIB 30 Index Change Percentage is the amount by which
the Final Average Value of the MIB 30 Index exceeds the Initial Value of the
MIB 30 Index, expressed as a percentage of such Initial Value. The Initial
Value of each Underlying Index will be the value of such Underlying Index on
December 2, 1997. The Final Average Value of each Underlying Index will equal
the arithmetic average of the closing values of such Underlying Index on the
second day of each month, commencing January 2, 1998, and ending at the
maturity of the Notes (the "Determination Dates"), except in the case of
certain Market Disruption Events and except that the Final Determination Date
will be November 18, 2004, rather than December 2, 2004.
Due to the method of calculation, the Notes will not be subject
to currency risk related to fluctuations in the Italian lire value of the DAX,
which is quoted in Deutsche Marks or the FT-SE 100, which is quoted in Pounds
Sterling.
For information as to the calculation of the Supplemental
Redemption Amount and certain tax consequences to beneficial owners of the
Notes, see "Supplemental Redemption Amount," "Final Average Value,"
"Determination Dates" and "United States Federal Taxation" in this Pricing
Supplement.
The Company will cause the "Supplemental Redemption Amount" to
be determined by Morgan Stanley & Co. International Limited (the "Calculation
Agent") for The Chase Manhattan Bank, as Trustee under the Senior Debt
Indenture.
Application has been made to the London Stock Exchange Limited
(the "London Stock Exchange") for the Notes to be admitted to the Official
List.
An investment in the Notes entails risks not associated with similar
investments in a conventional debt security, as described under "Risk Factors"
on PS-6 through PS-8 herein.
MORGAN STANLEY DEAN WITTER
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES OR THE
INDIVIDUAL STOCKS UNDERLYING THE DAX, THE FT-SE 100 AND/OR THE MIB 30 INDEX.
SPECIFICALLY, THE AGENT MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY
BID FOR, AND PURCHASE, THE NOTES OR INDIVIDUAL STOCKS UNDERLYING THE DAX, THE
FT-SE 100 AND/OR THE MIB 30 INDEX IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES SEE "USE OF PROCEEDS AND HEDGING."
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount.............. LIT 27,500,000,000
Maturity Date................. December 2, 2004.
Interest Rate................. There will be no periodic payments of interest.
See "Supplemental
Redemption Amount."
Specified Currency............ Italian lire ("LIT")
Issue Price................... 93.5%
Settlement Date (Original
Issue Date)................... December 2, 1997
Common Code................... 8104115
ISIN.......................... XS0081041153
Senior Note or Subordinated
Note.......................... Senior
Minimum Denominations......... LIT 50,000,000
Agent......................... Morgan Stanley & Co. International Limited
Trustee....................... The Chase Manhattan Bank
Maturity Redemption Amount.... On the Maturity Date, the holder of each Note
will receive (i) the par amount of such Note
LIT 50,000,000 ("Par") plus (ii) the
Supplemental Redemption Amount.
Supplemental Redemption Amount The Supplemental Redemption Amount payable
with respect to each Note at maturity will be
an amount equal to the product of (i) the par
amount of such Note and (ii) the greater of
(x) 12% and (y) the Basket Appreciation
Percentage. The Supplemental Redemption
Amount is described by the following formula:
1/3 (Final Average Value of the DAX -
Initial Value of the DAX)
-------------------------------------
Initial Value of the DAX
+ 1/3 (Final Average Value of the FT-SE 100 -
Initial Value of the FT-SE 100)
Par X MAX 12%, ---------------------------------------------
Initial Value of the FT-SE 100
+ 1/3 (Final Average Value of the MIB 30
Index - Initial Value of the MIB 30 Index)
---------------------------------------------
Initial Value of the MIB 30 Index
The Company will cause the Calculation Agent
to provide written notice to the Trustee at
its New York office, on which notice the
Trustee may conclusively rely, of the
Supplemental Redemption Amount, on or prior
to 11:00 a.m. on the Business Day preceding
the Maturity Date. See "Discontinuance of
Underlying Indices; Adjustments to Underlying
Indices" below.
All percentages resulting from any
calculation with respect to the 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 .9876545) would
be rounded to 9.87655% (or .987655)), and all
lira amounts used in or resulting from such
calculation will be rounded to the nearest
lira with one-half lira being rounded upwards.
Basket Appreciation Percentage: The sum of (A) 1/3 times the DAX Change
Percentage, (B) 1/3 times the FT-SE 100
Change Percentage and (C) 1/3 times the MIB
30 Index Change Percentage.
DAX Change Percentage:........ The amount by which (A) Final Average Value
of the DAX exceeds (B) the Initial Value of
the DAX, expressed as a percentage of such
Initial Value.
FT-SE Change Percentage:...... The amount by which (A) the Final Average
Value of the FT-SE 100 exceeds (B) the
Initial Value of the FT-SE 100, expressed as a
percentage of such Initial Value.
MIB 30 Index Change Percentage: The amount by which (A) the Final Average
Value of the MIB 30 Index exceeds (B) the
Initial Value of the MIB 30 Index, expressed
as a percentage of such Initial Value.
Initial Value:................ With respect to any Underlying Index, the
Initial Value will be the value of such
Underlying Index on December 2, 1997.
Final Average Value:.......... With respect to any Underlying Index, the
Final Average Value will be the arithmetic
average of the Index Closing Values of such
Underlying Index on each of the Determination
Dates, as determined by the Calculation Agent.
Index Closing Value........... The Index Closing Value of any Underlying
Index, as of any Determination Date, will
equal the closing value of such Underlying
Index or any Successor Index (as defined
below) at the regular official weekday close
of trading on such Determination Date. See
"Discontinuance of the Underlying Indices;
Adjustments to Underlying Indices."
References herein to any Underlying Index
will be deemed to include any Successor Index
to such Underlying Index, unless the context
requires otherwise.
Underlying Index:............. Any of the indices listed in the first column
of the table below (which are further
described herein) or any replacement index as
may be chosen by the Determination Agent as
provided under "Discontinuance of Underlying
Indices; Adjustments to Underlying Indices."
Each such index shall herein be referred to
by the term in the second column.
Underlying Name Underlying
Index Used Herein Exchange Index Publisher
- ------------ ----------- -------- ---------------
MIB 30 Index MIB 30 Index Borsa Italiana Italian Stock
S.p.A. (the Exchange
"Italian Council
Stock
Exchange")
Deutsche Aktieninde DAX Frankfurt Stock Deutsche
Exchange ("FSE") Borse AG
("DB")
Financial Times- FT-SE 100 London FT-SE
Stock Exchange 100 Stock Exchange International
Index Limited ("LSE") Limited ("FSIL")
Exchange...................... Any of the exchanges listed in the third
column of the table above or their successors.
Underlying Index Publisher.... Any of the publishers listed in the fourth
column of the table above or their successors.
Trading Day................... A day on which trading is generally conducted
(i) on the FSE, (ii) on the LSE, (iii) on the
Italian Stock Exchange and (iv) on any
exchange on which futures or options
contracts related to the DAX, the FT-SE 100,
or the MIB 30 Index are traded, other than a
day on which trading on such exchanges is
scheduled to close prior to its regular
weekday closing time, as determined by the
Calculation Agent.
Determination Dates........... The Determination Dates will be the second
day of each month, commencing January 2, 1998
and ending at the maturity of the Notes,
except that the Final Determination Date will
be November 18, 2004, rather than December 2,
2004, and, if any such date is not a Trading
Day, the Determination Date shall be the next
succeeding Trading Day, unless there is a
Market Disruption Event on any such Trading
Day. If a Market Disruption Event, with
respect to any Underlying Index, occurs on
any such Trading Day, such Determination Date
for the disrupted Underlying Index will be the
immediately succeeding Trading Day during
which no Market Disruption Event, related to
such Underlying Index, will have occurred;
provided that if a Market Disruption Event,
with respect to such Underlying Index, has
occurred on each of the five Trading Days
immediately succeeding any of the scheduled
Determination Days, then (i) such fifth
succeeding Trading Day will be deemed to be
the relevant Determination Date for such
Underlying Index, notwithstanding the
occurrence of a Market Disruption Event on
such day and (ii) with respect to any such
fifth Trading Day on which a Market
Disruption Event occurs, the Calculation
Agent will determine the value of the
disrupted Underlying Index on such fifth
Trading Day in accordance with the formula
for and method of calculating the disrupted
Underlying Index last in effect prior to the
commencement of the Market Disruption Event,
using the closing price (or, if trading in
the relevant securities has been materially
suspended or materially limited, its good
faith estimate of the closing price that
would have prevailed but for such suspension
or limitation) on such Trading Day of each
security most recently comprising the
disrupted Underlying Index.
In case an Event of Default with respect to
any Notes shall have occurred and be
continuing, the amount declared due and
payable upon any acceleration of the Notes
will be determined by the Calculation Agent
and will be equal to the par amount plus the
Supplemental Redemption Amount determined as
though each of the Determination Dates
scheduled to occur on or after such date of
acceleration were the date of acceleration.
Market Disruption Event:...... With respect to any Underlying Index, "Market
Disruption Event" means the occurrence or
existence of either of the following events
on a Determination Day as determined by the
Calculation Agent:
(i) a suspension, material
limitation or absence of trading on the
relevant Exchange of stocks then
constituting 20% or more, by weight, of
such Underlying Index (or the relevant
Successor Index) for more than two hours
of trading or during the one-half hour
period preceding the close of trading on
such Exchange; or
(ii) the suspension or material
limitation on any major securities market
of trading in futures or options contracts
related to such Underlying Index (or the
relevant Successor Index) for more than
two hours of trading or during the one-
half hour period preceding the close of
trading on such market.
For the purpose of determining whether a
Market Disruption Event exists at any time,
if trading in a security included in any
Underlying Index is materially suspended or
materially limited at that time, then the
relevant percentage contribution of that
security to the level of such Underlying
Index shall be based on a comparison of (x)
the portion of the level of such Underlying
Index attributable to that security relative
to (y) the overall level of such Underlying
Index, in each case immediately before that
suspension or limitation.
Calculation Agent............. Morgan Stanley & Co. International Limited
("MSIL")
All determinations made by the Calculation
Agent will be at the sole discretion of the
Calculation Agent and will, in the absence of
manifest error, be conclusive for all
purposes and binding on the Company and
holders of the Notes.
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Notes, including
with respect to certain determinations and
judgments that the Calculation Agent must make
in determining the Final Average Index Value
or whether a Market Disruption Event has
occurred. See "Discontinuance of Underlying
Indices; Adjustments to Underlying Indices"
below and "Market Disruption Event" above.
MSIL, as a registered broker-dealer, is
required to maintain policies and procedures
regarding the handling and use of
confidential proprietary information, and
such policies and procedures will be in
effect throughout the term of the Notes to
restrict the use of information relating to
the calculation of the Final Average Value of
an Underlying Index that the Calculation Agent
may be required to make prior to its
dissemination. MSIL is obligated to carry
out its duties and functions as Calculation
Agent in good faith and using its reasonable
judgment.
Risk Factors:................. An investment in the Notes entails
significant risks not associated with similar
investments in a conventional debt security
including the following.
Because the Final Average Value of each
Underlying Index will be based upon an
average of closing values for each such
Underlying Index on specified days (the
Determination Dates), a significant increase
in any Underlying Index as measured on the
Determination Date in the final month, or in
any earlier month, may be substantially or
entirely offset by the values of such
Underlying Index on the Determination Dates
in other months.
Neither the FT-SE 100 nor the MIB 30 Index
reflects the payment of dividends on the
stocks underlying it and therefore the yield
to maturity of the Notes based on the FT-SE
100 and the MIB 30 Index will not produce the
same yield as if such underlying stocks were
purchased and held for a similar period.
Furthermore, an investment in the underlying
stocks would, unlike the calculation of the
Supplemental Redemption Percentage with
respect to the Notes, be affected by
fluctuations in the exchange rate between the
Deutsche Marks or Pounds Sterling, as the
case may be, and the Italian lire.
There can be no assurance as to how the Notes
will trade in the secondary market or whether
such market will be liquid or illiquid. It
is expected that the secondary market value
for the Notes will be affected by the
creditworthiness of the Company and by a
number of Factors, including, but not limited
to, the volatility of each Underlying Index,
dividend rates on the stocks comprising each
Underlying Index, the time remaining to the
Determination Dates and to the maturity of
the Notes and market interest rates in Italy,
Germany and the United Kingdom. In addition,
the Final Average valve of each Underlying
Index depends on a number of interrelated
factors, including economic, financial and
political events, over which the Company has
no control. The historical experiences of the
Underlying Indices should not be taken as an
indication of their future performances
during the term of any Note.
The underlying stocks that constitute the
DAX, the FT-SE 100 and the MIB 30 Index have
been issued by German, United Kingdom and
Italian companies, respectively. Investments
in securities indexed to the value of German,
United Kingdom and Italian equity securities
involve certain risks associated with the
German, United Kingdom and Italian securities
markets, respectively, including the risks of
volatility in such markets, government
intervention in such markets,
cross-shareholdings in German and Italian
companies, legal requirements concerning
public information about German, United
Kingdom and Italian companies that are less
exhaustive than similar requirements
concerning companies that file reports with
the United States Securities and Exchange
Commission (the "SEC") and accounting and
financial standards that differ from country
to country and from those applicable to
companies in the United States.
Securities prices in Germany, United Kingdom
and Italy are subject to political, economic,
financial and social factors in Germany, the
United Kingdom and Italy, respectively that
could negatively affect securities markets in
such countries. Moreover, the German, United
Kingdom and Italian economies may differ
favorably or unfavorably from economies in
the United States in such respects as growth
of gross national product, rate of inflation,
capital reinvestment, resources and
self-sufficiency.
The historical values of an Underlying Index
should not be taken as an indication of the
future performance of such Underlying Index
during the term of the Notes. While the
trading prices of the stocks comprising an
Underlying Index will determine the value of
such Underlying Index, it is impossible to
predict whether the value of such Underlying
Index will fall or rise. Trading prices of
the stocks comprising an Underlying Index
will be influenced by both the complex and
interrelated political, economic, financial
and other factors that can affect the capital
markets generally and the equity trading
markets on which the such stocks are traded,
and by various circumstances that can
influence the values of stocks in a specific
market segment or of a particular stock.
The policies of an Exchange concerning
additions, deletions and substitutions of the
stocks comprising an Underlying Index and the
manner in which an Exchange takes account of
certain changes affecting such underlying
stocks may affect the value of such
Underlying Index. The policies of an
Exchange with respect to the calculation of
an Underlying Index could also affect the
value of such Underlying Index. An Exchange
may discontinue or suspend calculation or
dissemination of an Underlying Index. Any
such actions could affect the value of the
Notes. see "The Deutsche Aktienindex," "The
Financial Times-Stock Exchange 100 Share
Index," "MIB 30 Index" and "Discontinuance of
Underlying Indices; Adjustments to Underlying
Indices" below.
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Notes, including
with respect to certain determinations and
judgments that the Calculation Agent must make
in determining the Final Average Value of an
Underlying Index or whether a Market
Disruption Event has occurred. See
"Discontinuance of Underlying Indices;
Adjustments to Underlying Indices" below and
"Market Disruption Event" above.
It is suggested that prospective investors
who consider purchasing the Notes should
reach an investment decision only after
carefully considering the suitability of the
Notes in light of their particular
circumstances.
Investors should also consider the tax
consequences of investing in the Notes. See
"United States Federal Taxation" below.
The Deutsche Aktienindex...... All information regarding the DAX set forth
herein, including, without limitation, its
make-up, method of calculation and changes
in its components, has been derived from
publicly available information.
Characteristics
The DAX measures the composite price
performance of stocks of 30 actively traded
German companies listed on the FSE. The DAX
is calculated by the DB for the FSE and is
disseminated daily on Bloomberg Financial
Markets and Reuters. Historical daily closing
values for the DAX are available from October
1959. Publication of weighted DAX values
began in 1988, based on an initial DAX value
of 1,000 on December 30, 1987.
Calculation of the DAX
The DAX is calculated by (i) multiplying, for
each of the 30 stocks included in the DAX
(the "Underlying Stocks"), the current market
price per share on the date of the index
calculation by the number of shares listed on
the FSE as of the date of the last annual
weighting adjustment (determined by dividing
the listed capital of the Underlying Security
by the nominal value per share), (ii)
multiplying, for each Underlying Stock, the
product obtained in (i) above by a
stock-specific correction factor (as
determined on the date of the index
calculation) to adjust for dividend payments,
capital increases against capital
contributions or from company funds,
reductions in capital, changes in par value
and other subscription rights, (iii)
calculating the sum of the products obtained
for each Underlying Stock in (ii) above (the
"DAX Aggregate Market Value"), (iv) dividing
the DAX Aggregate Market Value by the DAX
Base Aggregate Market Value (i.e., the DAX
Aggregate Market Value as of December 30,
1987, as calculated by the DB) and (v)
multiplying the result by 1000. In order to
maintain continuity, the DAX is adjusted by a
concatenation factor that is determined each
year on the annual weighting adjustment date.
The concatenation factor adjusts for certain
changes affecting the stocks underlying the
DAX including the deletion and addition of
stocks, the substitution of stocks, stock
dividends and stock splits. Because the DAX
is weighted by capitalization, movements in
share prices of companies with relatively
larger market capitalization will have a
greater effect on the level of the entire DAX
than will movements in share prices of
companies with relatively smaller market
capitalization.
Underlying Stocks and Selection
The Underlying Stocks are selected and
revised annually from a reference group of
stocks listed on the FSE. The Underlying
Stocks are selected from this reference group
based on trading volume over the past 12
months, market capitalization and
availability of early opening prices. The
five largest companies included in the DAX are
Allianz AG, Daimler-Benz AG, Deutsche Bank
AG, Siemens AG and VEBA AG, which together
represent approximately 34.381% of the index
as a whole. A current list of the issuers of
the Underlying Stocks, as of September 30,
1997, is set forth below.
Company Weight
------- ------
Allianz AG 9.65%
BASF AG 3.81%
Bayer AG 4.95%
Bayerische Hypotheken-und 1.87%
Wechsel-Bank AG
Bayerische Motoren Werke AG (BMW) 2.85%
BayerischeVereinsbank AG 2.35%
Commerzbank AG 2.75%
Daimler-Benz AG 7.30%
Deutsche Bank AG 6.40%
Degussa AG 0.86%
Dresdner Bank AG 4.28%
Deutsche Telekom AG 3.30%
Henkel KGaA 1.40%
Hoechst AG 4.45%
Karstadt AG 0.50%
Deutsche Lufthansa AG 1.28%
Linde AG 1.00%
MAN AG 0.83%
Metro AG 1.88%
Mannesmann AG 2.99%
Munchener RuckversicherungsAG 4.91%
Preussag AG 0.77%
RWE AG 4.47%
SAP AG 4.79%
Schering AG 1.22%
Siemens AG 6.44%
Thyssen AG 1.35%
VEBA AG 4.97%
VIAG AG 2.03%
Volkswagen AG 4.34%
(Source: DB )
Deletion and Addition Rules
The DAX is reviewed annually by the DB in
order to maintain continuity in the level.
The Underlying Stocks may be replaced, if
necessary, in accordance with
deletion/addition rules which provide
generally for the deletion of a stock from
the DAX if such stock ceases to meet the
criteria for inclusion. Stocks deleted will
be replaced by stocks included in the
reference group that meet such criteria.
No Relationship With the FSE
The use of and reference to the DAX in
connection with the Notes has been consented
to by the FSE. All rights to the DAX are
owned by the FSE. The Company, the
Calculation Agent and the Trustee disclaim
all responsibility for the calculation or
other maintenance of or any adjustments to
the DAX. In addition, the FSE has no
relationship to the Company or the Notes; it
does not sponsor, endorse, authorize, sell or
promote the Notes, and has no obligation or
liability in connection with the
administration, marketing or trading of the
Notes or with the calculation of the
Supplementary Redemption Amount.
Historical Information for the DAX
The following table sets forth the high and
low daily closing values, as well as
end-of-quarter values, of the DAX for each
quarter in the period from January 1, 1993
through September 30, 1997. All historical
data presented in the following table are
based on actual data from the DB. The
historical values of the DAX should not be
taken as an indication of future performance,
and no assurance can be given as to the level
of the DAX as of any Determination Day.
Daily Closing Values in Deutsche Marks
--------------------------------------
End of
High Low Quarter
---- --- -------
1993:
1st Quarter..... 1717.40 1516.50 1684.21
2nd Quarter..... 1708.33 1603.04 1697.63
3rd Quarter..... 1944.89 1692.17 1915.71
4th Quarter..... 2266.68 1912.09 2266.68
1994:
1st Quarter..... 2267.98 2020.33 2133.11
2nd Quarter..... 2271.11 1968.82 2025.34
3rd Quarter..... 2212.85 2011.75 2011.75
4th Quarter..... 2110.75 1960.59 2106.58
1995:
1st Quarter..... 2135.04 1910.96 1922.59
2nd Quarter..... 2148.68 1922.59 2083.93
3rd Quarter..... 2317.01 2083.93 2187.04
4th Quarter..... 2289.77 2096.08 2253.88
1996:
1st Quarter..... 2525.42 2253.88 2485.87
2nd Quarter..... 2573.69 2457.49 2561.39
3rd Quarter..... 2666.55 2447.80 2651.85
4th Quarter..... 2909.91 2655.73 2888.69
1997:
1st Quarter..... 3460.59 2848.77 3429.05
2nd Quarter..... 3805.29 3215.24 3785.77
3rd Quarter (through
September 30, 1997) 4438.93 3819.85 4167.85
(Source: DataStream)
The Financial Times - Stock
Exchange 100 Share Index:..... All information regarding the FT-SE 100 set
forth herein, including, without limitation,
its make-up, method of calculation and changes
in its components, has been derived from
publicly available information.
Characteristics
The FT-SE 100 is an index calculated,
published and disseminated by FSIL, a
company owned equally by the LSE and The
Financial Times Limited, in association with
the Institute and the Faculty of Actuaries.
The FT-SE 100 measures the composite price
performance of stocks of the largest 100
companies (determined on the basis of market
capitalization) traded on the LSE.
Publication of the FT-SE 100 began in
February, 1984.
The FT-SE 100, FT-SE Mid 250, FT-SE Actuaries
350 and FT-SE Actuaries 350 Industry Baskets
are calculated by FSIL and are members of the
FT-SE Actuaries Share Indices which are
calculated in accordance with a standard set
of ground rules established by The Financial
Times Limited and FSIL in conjunction with
the Institute of Actuaries and the Faculty of
Actuaries.
"FT-SE" and "Footsie" are joint trade marks
and service marks of FSIL and The Financial
Times Limited. "Eurotrack," "SE 100," and
"Mid 250" are trade and service marks of FSIL.
Calculation of the FT-SE 100
The FT-SE 100 is calculated by (i)
multiplying the per share price of each stock
included in the FT-SE 100 by the number of
outstanding shares, (ii) calculating the sum
of all these products (such sum being
hereinafter the "FT-SE Aggregate Market
Value") as of the starting date of the FT-SE
100 and (iii) dividing the FT-SE Aggregate
Market Value by a divisor which represents
the FT-SE Aggregate Market Value on the base
date of the FT-SE 100 and which can be
adjusted to allow changes in the issued share
capital of individual underlying stocks
(including the deletion and addition of
stocks, the substitution of stocks, stock
dividends and stock splits) to be made
without distorting the FT-SE 100. Because of
such capitalization weighting, movements in
share prices of companies with relatively
larger market capitalization will have a
greater effect on the level of the entire
FT-SE 100 than will movements in share prices
of companies with relatively smaller market
capitalization.
Underlying Stocks and Selection
The 100 stocks included in the FT-SE 100 (the
"FT-SE Underlying Stocks") were selected from
a reference group of stocks trading on the
LSE by excluding certain stocks that have low
liquidity based on public float, accuracy and
reliability of prices, size and number of
trading days. The FT-SE Underlying Stocks
were selected from this reference group by
selecting 100 stocks with the largest market
value. A list of the issuers of the FT-SE
Underlying Stocks is available from the FSIL
and certain public data services.
Deletion and Addition Rules
The FT-SE 100 is reviewed quarterly by an
Index Steering Committee of the LSE in order
to maintain continuity in the level. The
FT-SE Underlying Stocks may be replaced, if
necessary, in accordance with
deletion/addition rules which provide
generally for the removal and replacement of
a stock from the FT-SE 100 if such stock is
delisted or its issuer is subject to a
takeover offer that has been declared
unconditional or it has ceased, in the
opinion of the Index Steering Committee, to
be a viable component of the FT-SE 100. To
maintain continuity, a stock will be added at
the quarterly review if it has risen to 90th
place or above and a stock will be deleted if
at the quarterly review it has fallen to
111th place or below, in each case ranked on
the basis of market capitalization.
No Relationship With LSE, The Financial Times
Limited or FSIL
The use of and reference to the FT-SE 100 in
connection with the Notes has been consented
to by the FSIL. All rights to the FT-SE 100
are owned by the FSIL, the publisher of the
FT-SE 100. The Company, the Calculation
Agent and the Trustee disclaim all
responsibility for the calculation or other
maintenance of or any adjustments to the
FT-SE 100. In addition, none of the LSE, The
Financial Times Limited and FSIL has any
relationship to the Company or the Notes.
None of the LSE, The Financial Times Limited
and the FSIL sponsors, endorses, authorizes,
sells or promotes the Notes, or has any
obligation or liability in connection with
the administration, marketing or trading of
the Notes or with the calculation of the
Underlying Index Value for any Underlying
Index Determination Day or the Supplementary
Redemption Percentage.
Historical Information for the FT-SE 100
The following table sets forth the high and
low daily closing values of the FT-SE 100 for
each quarter, in the period from January 1,
1993 through September 30, 1997, as published
and/or calculated by the LSE. All historical
data presented in the following table are
based on actual data from the FT-SE 100. The
historical experience of the FT-SE should not
be taken as an indication of its future
performance, and no assurance can be given as
to the level of the FT-SE 100 as of any
Determination Day.
Daily Closing Values in Pounds Sterling
---------------------------------------
End of
High Low Quarter
---- --- -------
1993:
1st Quarter..... 2957.3 2737.6 2878.7
2nd Quarter..... 2907.6 2786.3 2900.0
3rd Quarter..... 3100.6 2814.1 3037.5
4th Quarter..... 3462.0 3039.3 3418.4
1994:
1st Quarter..... 3520.3 3086.4 3086.4
2nd Quarter..... 3168.3 2876.6 2919.2
3rd Quarter..... 3256.1 2936.4 3026.3
4th Quarter..... 3146.5 2943.4 3065.5
1995:
1st Quarter..... 3176.2 2954.2 3137.9
2nd Quarter..... 3403.8 3137.9 3314.6
3rd Quarter..... 3570.8 3314.6 3508.2
4th Quarter..... 3689.3 3460.1 3689.3
1996:
1st Quarter..... 3781.3 3639.5 3699.7
2nd Quarter..... 3857.1 3678.8 3711.0
3rd Quarter..... 3977.2 3632.3 3953.7
4th Quarter..... 4118.5 3900.4 4118.5
1997:
1st Quarter..... 4444.3 4056.6 4312.9
2nd Quarter..... 4783.1 4214.6 4604.6
3rd Quarter (through
September 30, 1997) 5244.2 4728.3 5244.2
(Source: Data Stream)
MIB 30 Index.................. All information regarding the MIB 30 Index
set forth herein, including, without
limitation, its make-up, method of
calculation and changes in its components,
has been derived from publicly available
information.
Characteristics
The MIB 30 Index measures the performance of
the 30 largest and most actively traded
stocks listed on the Italian Stock Exchange.
The MIB 30 Index is calculated by the CED
Borsa for the Italian Stock Exchange Council
and is disseminated daily on Bloomberg
Financial Markets, Reuters Limited and The
Financial Times Limited. Publication of the
MIB 30 Index began in 1993 based on an initial
MIB 30 Index value of 10,000 on December 31,
1992. Until October 14, 1994, the
historical series of the MIB 30 Index was
determined using the BCI Comit 30 Index
methodology.
Underlying Stocks and Selection
The 30 stocks included in the MIB 30 Index
(the "Underlying Securities") are selected
twice a year based on the average market
value and average trading volume of each
Underlying Security over the preceding 6
months. In selecting the Underlying
Securities, the Italian Stock Exchange
Council identifies those companies with the
highest market capitalization by evaluating
the liquidity of each company relative to the
liquidity of the market as a whole. As part
of this selection process, a stock which, at
the time of such selection, meets the average
market value and average trading volume
requirements may nonetheless be excluded from
the MIB 30 Index if such stock (i) has not
traded officially for a significant period of
time, (ii) is not likely to meet all
requirements for inclusion for the entire
period before the next recomposition, (iii)
has a ratio of average market value to
average trading volume that exceeds 10,000
(i.e., stocks with a high market value and
low trading volume) or (iv) is issued by the
same company as an Underlying Security that is
already included in the MIB 30 Index. In
addition, an Underlying Security may be
excluded from the MIB 30 Index, other than on
the yearly recomposition date, if there is a
cancellation or suspension for more than 20
trading days of official trading in the
Underlying Security, or any other event which
makes it reasonably certain that the
Underlying Security has lost liquidity or
market value. The five largest companies in
the MIB 30 Index are Eni, Telecom Italia,
Telecom Italia Mobile, Generali and Fiat,
which together represent approximately
59.976% of the index as a whole. A current
list of the 30 Underlying Securities, as of
September 30, 1997, is set forth below:
Company Weight
------- ------
Alleanza Assic................................ 2.496859%
Banca Commericale Italiana.................... 2.119882%
Banca di Roma................................. 1.370678%
Banca Fideuram................................ 1.610250%
Banca Popolare di Milano...................... 0.534430%
Banco Ambrosiano Veneto....................... 1.533857%
Benetton...................................... 1.261805%
Compart....................................... 0.600038%
Cred. Italiano................................ 2.194694%
Edison........................................ 1.391075%
Eni........................................... 20.879664%
Fiat.......................................... 5.456030%
Generali...................................... 8.574161%
Holding di Partecipazioni Industriali......... 0.579294%
Ina........................................... 2.637330%
1st Banc. S. Paolo di Torino.................. 2.489933%
1st Mobiliare Italiano........................ 2.661978%
Italgas....................................... 1.016714%
La Fondiaria.................................. 0.818022%
Mediaset...................................... 2.513324%
Mediobanca.................................... 1.619074%
Montedison.................................... 1.603051%
Olivetti...................................... 0.515268%
Parmalat...................................... 1.035315%
Pirelli....................................... 2.006473%
Ras........................................... 1.253275%
Rolo Banca.................................... 2.520062%
Saipem........................................ 0.911873%
Telecom Italia Mobile......................... 11.029376%
Telecom Italia................................ 14.766214%
(Source: Italian Stock Exchange)
Calculation of the MIB 30 Index
The MIB 30 Index is calculated by (i)
multiplying, for each Underlying Security,
the opening market price per share on the
semi-annual selection day for the MIB 30
Index (the "Base Price") by the number of
outstanding shares published in the
Listino Ufficial of the Italian Stock
Exchange three working days before such
semi-annual selection day (the "Base
Number of Shares"), (ii) multiplying, for
each Underlying Security, the product
obtained in (i) above by a ratio, the
numerator of which is the current market
price per share and the denominator of
which is the Base Price, (iii) calculating
the sum of the products obtained for each
Underlying Security in (ii) above, (iv)
dividing such sum by the aggregate market
value of the Underlying Securities on such
semi-annual selection day, represented by
the sum of the products obtained by
multiplying, for each Underlying Security,
the Base Price by the Base Number of
Shares and (v) multiplying the result by a
Base Index of 10,000. At every semi-
annual revision of the composition of the
MIB 30 Index, the Italian Stock Exchange
Council maintains the continuity of the
MIB 30 Index by chain-linking the last
value of the old index with the first
value of the index as revised.
In the event of capital increases by issuers
of the Underlying Securities, the calculation
described above will apply an adjustment
coefficient, as described below, to the Base
Price of the affected Underlying Security.
Upon such an event, a theoretical adjusted
price per share will be determined for the
affected Underlying Security according to the
rules of financial parity established by the
Italian Association of Financial Analysts.
The adjustment coefficient will be determined
as the ratio of the theoretical adjusted
price per share and the market price per
share on the day preceding the capital
increase. The Base Price will then be
multiplied by the adjustment coefficient to
produce an adjusted base price, which will
then replace the Base Price in the
calculation described above. In addition,
because the MIB 30 Index is a fixed weight
index during the periods between the dates of
selection, the adjustment to the Base Price is
balanced by a corresponding adjustment to the
Base Number of Shares. The Base Number of
Shares will be multiplied by the reciprocal
of the adjustment coefficient to produce the
adjusted base number of shares, which will
then replace the Base Number of Shares in the
calculation described above.
Historical Information for the MIB 30 Index
The following table sets forth the high and
low daily closing values, as well as
end-of-quarter closing values, of the MIB 30
Index for each quarter in the period from
January 1, 1993 through September 30, 1997.
The historical values of the MIB 30 Index
should not be taken as an indication of
future performance, and no assurance can be
given as to the level of the MIB 30 Index as
of any Determination Day.
Daily Closing Values In Italian Lira
------------------------------------
High Low Period End
---- --- ----------
1993
1st Quarter..... 12,354 10,000 10,781
2nd Quarter..... 12,967 10,784 12,645
3rd Quarter..... 15,089 12,571 14,177
4th Quarter..... 14,606 12,015 14,560
1994
1st Quarter..... 16,847 13,793 16,847
2nd Quarter..... 18,836 15,366 16,030
3rd Quarter..... 17,100 14,908 15,829
4th Quarter..... 15,829 13,164 14,748
1995
1st Quarter..... 15,847 13,481 13,856
2nd Quarter..... 15,669 13,661 14,415
3rd Quarter..... 15,895 14,252 14,674
4th Quarter..... 14,674 13,094 14,132
1996
1st Quarter..... 15,144 13,397 13,628
2nd Quarter..... 15,985 13,600 15,721
3rd Quarter..... 15,836 13,767 15,347
4th Quarter..... 15,791 14,399 15,697
1997
1st Quarter..... 19,102 15,574 17,461
2nd Quarter..... 20,485 17,124 19,987
3rd Quarter (through
September 30, 1997) 24,286 20,509 23,874
(Source: DataStream)
Discontinuance of Underlying
Indices; Adjustments to
Underlying Indices:............ If an Underlying Index Publisher
discontinues publication of an Underlying
Index and such Underlying Index Publisher or
another entity publishes a successor or
substitute index that the Calculation Agent
determines, in its sole discretion, to be
comparable to the discontinued Underlying
Index (such index being referred to herein
as a "Successor Index"), then the relevant
Index Closing Value for such Underlying Index
will be determined by reference to the value
of such Successor Index at the close of
trading on the relevant exchange or market
for the Successor Index on the Determination
Dates.
Upon any selection by the Calculation Agent
of a Successor Index, the Calculation Agent
will cause written notice thereof to be
furnished to the Trustee, to the Company and
to the holders of the Notes within three
Trading Days of such selection.
If an Underlying Index Publisher discontinues
publication of an Underlying Index prior to,
and such discontinuance is continuing on, any
of the Determination Dates and the
Calculation Agent determines that no
Successor Index is available at such time,
then on each Determination Date until the
earlier to occur of (i) the Determination
Date scheduled to occur on November 18, 2004
and (ii) a determination by the Calculation
Agent that a Successor Index is available,
the Calculation Agent will determine the
Index Closing Value of such Underlying Index
that would be used in computing the
Supplemental Redemption Amount on each
Determination Date. The Index Closing Value
of such Underlying Index will be computed by
the Calculation Agent in accordance with the
formula for and method of calculating such
Underlying Index last in effect prior to such
discontinuance, using the closing price (or,
if trading in the relevant securities has
been materially suspended or materially
limited, its good faith estimate of the
closing price that would have prevailed but
for such suspension or limitation) on such
Determination Date of each security most
recently comprising such Underlying Index.
The Calculation Agent will cause notice of
each such Index Closing Value to be provided
to the holders of the Notes on each
succeeding Determination Date until and
including November 18, 2004 (unless a
Successor Index is prior thereto determined
to be available). Notwithstanding these
alternative arrangements, discontinuance of
the publication of an Underlying Index may
adversely affect the value of the Notes.
If at any time the method of calculating an
Underlying Index or a Successor Index, or the
value thereof, is changed in a material
respect, or if an Underlying Index or a
Successor Index is in any other way modified
so that such index does not, in the opinion
of the Calculation Agent, fairly represent
the value of such Underlying Index or such
Successor Index had such changes or
modifications not been made, then, from and
after such time, the Calculation Agent will,
at the close of business in London on each
Determination Date on which an Index Closing
Value is to be calculated, make such
calculations and adjustments as, in the good
faith judgment of the Calculation Agent, may
be necessary in order to arrive at a value of
a stock index comparable to such Underlying
Index or such Successor Index, as the case
may be, as if such changes or modifications
had not been made, and calculate the
Supplemental Redemption Amount with reference
to such Underlying Index or such Successor
Index, as adjusted. Accordingly, if the
method of calculating an Underlying Index or
a Successor Index is modified so that the
value of such index is a fraction 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 will adjust such index in
order to arrive at a value of such Underlying
Index such Successor Index as if it had not
been modified (e.g., as if such split had not
occurred).
Use of Proceeds and Hedging:.. The net proceeds to be received by the
Company from the sale of the Notes will be
used for general corporate purposes and, in
part, by the Company or one or more of its
affiliates in connection with hedging the
Company's obligations under the Notes,
including hedging market risks associated
with the Supplemental Redemption Amount.
Such hedging may involve the purchase or sale
of exchange traded or over the counter
options on the DAX, the FT-SE 100, or the MIB
30 Index or individual stocks included in the
DAX, the FT-SE 100, or the MIB 30 Index,
futures contracts on the DAX, the FT-SE 100,
or the MIB 30 Index and options on such
futures contracts. The Company, through its
subsidiaries, is likely to modify its hedge
position throughout the life of the Notes by
purchasing and selling such instruments and
any other instruments that it may wish to use
in connection with such hedging. Although
the Company has no reason to believe that its
hedging activity will have a material impact
on the price of such options, stocks,
futures contracts, and options on futures
contracts, there can be no assurance that the
Company will not affect such prices as a
result of its hedging activities. See also
"Use of Proceeds" in the accompanying
Prospectus.
License Agreements............ License Agreement for the FT-SE 100 Index
The Notes are not in any way sponsored,
endorsed, sold or promoted by FSIL or by The
Financial Times Limited and neither FSIL nor
The Financial Times Limited makes any
warranty or representation whatsoever,
express or implied, either as to the results
to be obtained from the use of the FT-SE 100
and/or the figure at which the said FT-SE 100
stands at any particular time on any
particular day or otherwise. The FT-SE 100
is compiled and calculated solely by FSIL.
However, neither FSIL nor The Financial Times
Limited shall be liable (whether in
negligence or otherwise) to any person for
any error in the FT-SE 100 and neither FSIL
nor The Financial Times Limited shall be
under any obligation to advise any person of
any error therein.
License Agreement for the MIB 30 Index
The Italian Stock Exchange Council and MSIL
have entered into a non-exclusive license
agreement providing for the license to MSIL,
in exchange for a fee, of the right to use
the MIB 30 Index, which is owned and
published by the Italian Stock Exchange
Council, in connection with certain
securities, including the Notes. The
Company, the Calculation Agent and the
Trustee disclaim all responsibility for the
calculation or other maintenance of or any
adjustments to the MIB 30 Index. In
addition, the Italian Stock Exchange Council
has no relationship to the Company or the
Notes; it does not sponsor, endorse,
authorize, sell or promote the Notes, and has
no obligation or liability in connection with
the administration, marketing or trading of
the Notes or with the calculation of the
Index Closing Values for any Determination
Date or the Supplemental Redemption Amount.
United States Federal Taxation The investor should refer to the discussion
under "United States Federal Taxation" in the
accompanying Prospectus Supplement.
