PROSPECTUS Dated June 2, 1997 Pricing Supplement No. 8 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-27919
Dated June 17, 1997 Dated July 2, 1997
Rule 424(b)(3)
LIT 8,350,000,000
Morgan Stanley, Dean Witter, Discover & Co.
MEDIUM-TERM NOTES, SERIES D
EQUITY LINKED NOTES DUE 2007
--------------
The Equity Linked Notes due 2007 (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 ")
5,000,000 and will mature on October 1, 2007 subject to extension as
described herein (the "Maturity Date"). The Issue Price of each Note will
be LIT 2,994,000 (59.88% of the principal amount) (the "Issue Price"), and
there will be no payments of interest prior to the maturity of the Notes.
The Issue Price represents a minimum yield to maturity of 5.26% per annum
computed on a semi-annual bond-equivalent basis based on the Issue Price
calculated from the Original Issue Date to October 1, 2007.
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 5,000,000 ) ("Par") plus (ii) an amount (the
"Supplemental Redemption Amount") based on the percentage increases, if any,
for each of ten twelve-month periods (the first of which will commence on
October 1, 1997), in the value of the Deutsche Aktienindex (the "DAX"),
calculated as described below, to the extent that the sum of such
increases, if any, exceeds an amount equal to 67.00% of the Issue Price per
Note ( the "Assumed Return"). "DAX" is a registered trademark of the
Frankfurt Stock Exchange (the "FSE").
The Supplemental Redemption Amount, if any, will be calculated
on the Determination Date and will equal the excess of the sum of the Yearly
Index Values over the Assumed Return. The Yearly Index Value for each
twelve-month period beginning on the close of business on October 1 of each
year and ending at the close of business on October 1 of the next succeeding
year (each an "Index Period") will be calculated on the Yearly Calculation
Date and will equal the product of (i) the Issue Price and (ii) a fraction,
the numerator of which shall be the Final Average Index Value less the Initial
Index Value, and the denominator of which shall be the Initial Index Value, in
each case as such values are determined for such Index Period. The Yearly
Index Value cannot be less than zero. The Initial Index Value for any Index
Period will be the value of the DAX on the first day of such Index Period, or
if such day is not a Trading Day, the next succeeding Trading Day, and will be
reset for each Index Period. The Final Average Index Value for any Index
Period will equal the average of the closing prices of the DAX on the first
Trading Day of each month in such Index Period beginning in November, subject
to certain adjustments. If the sum of the Yearly Index Values does not exceed
the Assumed Return, the holder of each Note will be repaid Par, but will not
receive any Supplemental Redemption Amount.
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" and "United States Federal
Taxation" in this Pricing Supplement.
The Company will cause the "Supplemental Redemption Amount,"
the "Yearly Index Value," the "Initial Index Value" and the "Final Average
Index Value" to be determined by Morgan Stanley & Co. International Limited
(the "Calculation Agent") for The Chase Manhattan Bank (formerly known as
Chemical 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. SPECIFICALLY, THE AGENT MAY OVERALLOT
IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE NOTES OR
INDIVIDUAL STOCKS UNDERLYING THE DAX 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 8,350,000,000
Maturity Date................. October 1, 2007, but if the Final Index Day
is adjusted as under "Monthly Closing Value,"
the Maturity Date of any outstanding Note
will be extended to the second Business Day
succeeding such Final Index Day, provided
that the Maturity Date will in no event be
extended beyond October 12, 2007.
Yield to Maturity............. 5.26% per annum, computed on a semi-annual
bond-equivalent basis based on the Issue
Price calculated from the Original Issue Date
to October 1, 2007.
Specified Currency............ Italian lire ("LIT")
Issue Price................... 59.88%
Settlement Date (Original
Issue Date)................... October 1, 1997
Common Code................... 007825781
ISIN.......................... XS0078257812
Senior Note or Subordinated
Note.......................... Senior
Minimum Denominations......... LIT 5,000,000
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 5,000,000) ("Par") plus (ii) the
Supplemental Redemption Amount, if any. If
the Maturity Date is extended as described
under "Maturity Date" above, no adjustment
will be made to the amounts described in
clauses (i) and (ii) above. References
herein to "Notes" refer to each LIT 5,000,000
principal amount of any Note.
Supplemental Redemption
Amount........................ The Supplemental Redemption Amount payable
with respect to each Note on the Maturity
Date shall be calculated on the Determination
Date and shall be an amount equal to the
excess of the sum of the Yearly Index Values
over an amount equal to 67.00% of the Issue
Price per Note (the "Assumed Return").
The Company shall cause the Calculation Agent
to provide written notice to the holder of
each Note and 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 the DAX(*);
Alteration of Method of Calculation" below.
- -----------
(*)"DAX" is a registered trademark of the Frankfurt Stock Exchange
(the "FSE").
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 .09876545) would
be rounded to 9.87655% (or .0987655)), and
all lire amounts used in or resulting from
such calculation will be rounded to the
nearest lire with one-half lire being
rounded upwards.
Yearly Index Value ........... The Yearly Index Value for each Index Period
shall be calculated on the Yearly Calculation
Date and shall be an amount equal to the
greater of (a) the product of (i) the Issue
Price and (ii) a fraction the numerator of
which shall be the Final Average Index Value
less the Initial Index Value and the
denominator of which shall be the Initial
Index Value, in each case as such values are
determined for such Index Period and (b)
zero. The Yearly Index Value is described by
the following formula:
Issue (Final Average Index Value - Initial Index Value)
Price x -------------------------------------------------
Initial Index Value
; provided that the Yearly Index Value shall
not be less than zero.
Index Period.................. An Index Period is any of the ten
twelve-month periods beginning on the close
of business on October 1 of each year and
ending at the close of business on October 1
of the next succeeding year. The first such
twelve-month period will commence on October
1, 1997.
Initial Index Value........... The Initial Index Value for any Index Period
will be the value of the DAX, as calculated
by the FSE, or any Successor Index on the
first Trading Day of such Index Period.
If a Market Disruption Event occurs on such
Trading Day, the Initial Index Value shall be
determined on the immediately succeeding
Trading Day during which no Market Disruption
Event shall have occurred; provided that if a
Market Disruption Event has occurred on each
of the first five Trading Days of the Index
Period, then (i) the Initial Index Value
shall be determined on such fifth Trading Day,
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 DAX on such fifth Trading Day in
accordance with the formula for and method of
calculating the DAX 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 fifth
Trading Day of each security most recently
comprising the DAX. The Initial Index Value
will be reset every Index Period.
References herein to the DAX shall be deemed
to include any Successor Index, unless the
context requires otherwise.
Final Average Index Value..... The Final Average Index Value for any Index
Period shall be the average of the Monthly
Closing Values in such Index Period
commencing with the Monthly Closing Value in
November, as determined by the Calculation
Agent.
Monthly Closing Value......... A Monthly Closing Value shall be the closing
price of the DAX on the first Trading Day of
any month within an Index Period (the
"Monthly Index Day"), provided that the
Monthly Index Day that, but for this
sentence, would be on or after October 1,
2007 shall be the second scheduled Trading
Day preceding October 1, 2007 (the "Final
Index Day"). The Monthly Index Day and the
Final Index Day are each subject to
adjustment for any Market Disruption Event
as described in the immediately succeeding
paragraph.
If a Market Disruption Event occurs on any
Monthly Index Day or on the Final Index Day,
or if the Final Index Day is not an actual
Trading Day, the Monthly Index Value for such
month shall be determined on the immediately
succeeding Trading Day during which no Market
Disruption Event shall have occurred,
provided that (i) if a Market Disruption
Event has occurred on each of the five
Trading Days immediately succeeding the
Monthly Index Day or on each of the five
scheduled Trading Days immediately succeeding
the Final Index Day, as the case may be, then
(a) the Monthly Index Value for such month
shall be determined on such fifth succeeding
Trading Day, or in the case of the Final
Index Day, the fifth scheduled succeeding
Trading Day, notwithstanding the occurrence
of a Market Disruption Event on such day, (b)
with respect to any such fifth Trading Day on
which a Market Disruption Event occurs, the
Calculation Agent will determine the value of
the DAX on such fifth Trading Day in
accordance with the formula for and method of
calculating the DAX 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 fifth
Trading Day of each security most recently
comprising the DAX and (c) in the case of the
Final Index Day, if such fifth scheduled
succeeding Trading Day is not an actual
Trading Day, then the Monthly Closing
Value for such month shall be deemed to be
zero.
If the Final Index Day is adjusted in the
manner set forth in the immediately
preceding paragraph, the Maturity Date
shall be extended to the second Business
Day succeeding such Final Index Day,
provided that the Maturity Date will in no
event be extended beyond October 12, 2007.
Trading Day................... A day on which trading is generally conducted
(i) on the FSE and (ii) on the London Stock
Exchange Limited (the "LSE"), as determined
by the Calculation Agent.
Determination Date............ The Determination Date shall be the Final
Index Day, as adjusted, if required, for
certain Market Disruption Events. See
"Monthly Closing Value" above and "Market
Disruption Event" below.
Yearly Calculation Date....... The Yearly Calculation Date for any Index
Period shall be the last Trading Day in such
Index Period, provided that the Yearly
Calculation Date that, but for this sentence,
would be on or after October 1, 2007, shall
be the Final Index Day, as adjusted, if
required, for certain Market Disruption
Events. See "Monthly Closing Value" above
and "Market Disruption Event" below.
Market Disruption Event....... "Market Disruption Event" means, with
respect to the DAX:
(i) a suspension, absence or material
limitation of trading of 20% or more of
the securities included in the DAX on the
primary market for such securities for
more than two hours of trading or during
the one-half hour period preceding the
close of trading in such market; or the
suspension, absence or material limitation
of trading on the primary market for
trading in futures or options contracts
related to the DAX during the one-half hour
period preceding the close of trading in
the applicable market, in each case as
determined by the Calculation Agent in its
sole discretion; and
(ii) a determination by the Calculation
Agent in its sole discretion that the
event described in clause (i) above
materially interfered with the ability of
the Company or any of its affiliates to
unwind all or a material portion of the
hedge with respect to the Notes.
For purposes of determining whether a Market
Disruption Event has occurred: (1) a
limitation on the hours 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 or market, (2)
a decision to permanently discontinue trading
in the relevant futures or options contract
will not constitute a Market Disruption
Event, (3) limitations on trading during
significant market fluctuations by the FSE
pursuant to the Borsengesetz (Stock Exchange
Law) will constitute a suspension, absence or
material limitation of trading, (4) a
suspension of trading in a futures or options
contract on the DAX by the primary securities
market related to such contract by reason of
(a) a price change exceeding limits set by
such exchange or market, (b) an imbalance of
orders relating to such contracts or (c) a
disparity in bid and ask quotes relating to
such contracts will constitute a suspension,
absence or material limitation of trading in
futures or options contracts related to the
DAX and (5) a suspension, absence or material
limitation of trading on the primary market
on which futures or options contracts related
to the DAX are traded will not include any
time when such market is itself closed for
trading under ordinary circumstances.
Calculation Agent............. Morgan Stanley & Co. International Limited
and its successors ("MSIL")
All determinations made by the Calculation
Agent shall be at the sole discretion of the
Calculation Agent and shall, 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 Supplemental Redemption
Amount or whether a Market Disruption Event
has occurred. See "Discontinuance of the
DAX; Alteration of Method of Calculation"
below and "Market Disruption Event" above.
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 security,
including the following:
There can be no assurance as to whether there
will be a secondary market in the Notes or if
there were to be such a secondary market,
whether such market would be liquid or
illiquid. It is expected that the secondary
market 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 the DAX, dividend rates
on the stocks underlying the DAX, the time
remaining to the Determination Date and to
the maturity of the Notes and market interest
rates. In addition, the Final Average Index
Value for each Index Period depends on a
number of interrelated factors, including
economic, financial and political events,
over which the Company has no control. The
value of the Notes prior to maturity is
expected to depend primarily on market
interest rates and the extent of any
appreciation of the DAX over each Index
Period. The price at which a holder will be
able to sell the Notes prior to maturity may
be at a discount, which could be substantial,
from the accreted value thereof, if, at such
time, it appears that the sum of the Yearly
Index Values will not or may not sufficiently
exceed the Assumed Return.
The underlying stocks that constitute the DAX
have been issued by German companies.
Investments in securities indexed to the value
of German equity securities involve certain
risks associated with the German securities
market, including the risks of volatility in
such market, government intervention in such
market, cross-shareholdings in German
companies, legal requirements concerning
public information about German 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 those applicable to companies
that file reports with the SEC.
The prices of stocks issued by German
companies are subject to political, economic,
financial and social factors in Germany, or in
Europe generally, that could negatively
affect the securities market. Moreover, the
German economy may differ favorably or
unfavorably from the economy in the United
States in such respects as growth of gross
national product, rate of inflation, capital
reinvestment, resources and self-sufficiency.
The stocks underlying the DAX are traded on
the FSE. Variations in the DAX may be
limited by a suspension, absence or material
limitation of trading on the FSE, which may,
in turn, adversely affect the amount of the
Supplemental Redemption Amount.
The historical DAX values should not be taken
as an indication of the future performance of
the DAX during the term of the Notes. While
the trading prices of the stocks underlying
the DAX will determine the value of the DAX,
it is impossible to predict whether the value
of the DAX will fall or rise. Trading prices
of the stocks underlying the DAX 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 underlying stocks are
traded, and by various circumstances that can
influence the values of the underlying stocks
in a specific market segment or a particular
underlying stock.
The policies of the FSE concerning additions,
deletions and substitutions of the stocks
underlying the DAX and the manner in which
the FSE takes account of certain changes
affecting such underlying stocks may affect
the value of the DAX. The policies of the
FSE with respect to the calculation of the
DAX could also affect the value of the DAX.
The FSE may discontinue or suspend
calculation or dissemination of the DAX. Any
such actions could affect the value of the
Notes. See "The Deutsche Aktienindex" and
"Discontinuance of the DAX; Alteration of
Method of Calculation" 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 Supplemental Redemption
Amount or whether a Market Disruption Event
has occurred. See "Discontinuance of the
DAX; Alteration of Method of Calculation"
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 Supplemental
Redemption Amount 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.
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 Deutsche Borse 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 FSE) 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, Bayer AG, and Siemens AG, which together
represent approximately 34.14% of the index
as a whole. A current list of the issuers of
the Underlying Stocks, as of July 2, 1997, is
set forth below.
Company Weight
------- ------
Allianz AG 9.01%
BASF AG 4.33%
Bayer AG 5.36%
Bayerische Hypotheken- und 1.48%
Wechsel-Bank AG
Bayerische Motoren Werke AG (BMW) 3.00%
BayerischeVereinsbank AG 1.84%
Commerzbank AG 2.40%
Daimler-Benz AG 7.89%
Deutsche Bank AG 5.62%
Degussa AG 0.85%
Dresdner Bank AG 3.13%
Deutsche Telekom AG 4.50%
Henkel KGaA 1.52%
Hoechst AG 4.98%
Karstadt AG 0.56%
Deutsche Lufthansa AG 1.29%
Linde AG 1.21%
MAN AG 0.90%
Metro AG 2.11%
Mannesmann AG 3.04%
Munchener RuckversicherungsAG 4.33%
Preussag AG 0.89%
RWE AG 4.34%
SAP AG 3.92%
Schering AG 1.38%
Siemens AG 6.26%
Thyssen AG 1.44%
VEBA AG 5.24%
VIAG AG 2.23%
Volkswagen AG 4.93%
(Source: Reuters)
Deletion and Addition Rules
The DAX is reviewed annually by the FSE 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, the publisher of the DAX. 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.
Discontinuance of the DAX;
Alteration of Method of
Calculation................... If the FSE discontinues publication of the
DAX and the FSE or another entity publishes a
successor or substitute index that the
Calculation Agent determines, in its sole
discretion, to be comparable to the
discontinued DAX (such index being referred
to herein as a "Successor Index"), then the
relevant Monthly Closing Values and Initial
Index Values shall be determined by
reference to the value of such Successor
Index at the close of trading on the FSE, the
LSE or the relevant exchange or market for
the Successor Index on the Determination Date.
Upon any selection by the Calculation Agent
of a Successor Index, the Calculation Agent
shall 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 the FSE discontinues publication of the
DAX prior to, and such discontinuance is
continuing on, the Determination Date and the
Calculation Agent determines that no
Successor Index is available at such time,
then on such Determination Date, the
Calculation Agent shall determine the Monthly
Index Values and the Initial Index Values
that would be used in computing the
Supplemental Redemption Amount on such
Determination Date. The Monthly Closing
Values and the Initial Index Values shall be
computed by the Calculation Agent in
accordance with the formula for and method of
calculating the DAX 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 the DAX. Notwithstanding
these alternative arrangements,
discontinuance of the publication of the DAX
may adversely affect the value of the Notes.
If at any time the method of calculating the
DAX or a Successor Index, or the value
thereof, is changed in a material respect, or
if the DAX 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 the DAX or such
Successor Index had such changes or
modifications not been made, then, from and
after such time, the Calculation Agent shall,
at the close of business in London on the
Determination Date, 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 the DAX 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 the DAX or
such Successor Index, as adjusted.
Accordingly, if the method of calculating the
DAX 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 shall adjust such
index in order to arrive at a value of the
DAX or such Successor Index as if it had not
been modified (e.g., as if such split had not
occurred).
Alternate Determination Date
in case of an Event of
Default or a Tax Redemption... In case an Event of Default with respect to
any Notes shall have occurred and be
continuing or if the Notes are redeemed under
the circumstances described under
"Description of Notes--Tax Redemption" in the
accompanying Prospectus Supplement, the
amount declared due and payable upon any
acceleration of the Notes or the redemption
price of the Notes, as the case may be, will
be determined by the Calculation Agent and
will be equal to the accreted value of the
Note to the date of acceleration or redemption
at the Yield to Maturity, plus an amount
equal to the value of the Supplemental
Redemption Amount determined as of the date
of acceleration or redemption by a nationally
recognized independent investment banking
firm (other than an affiliate of the Company)
retained for this purpose by the Company.
Historical Information........ 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 July 2, 1997. All historical data
presented in the following table are based on
actual data from the Deutsche Borse. The
historical values of the DAX should not be
taken as an indication of future performance,
and no assurance can be given that the DAX
will increase sufficiently to cause the
holders of the Notes to receive any
Supplemental Redemption Amount.
Daily Closing Values in Deutsche Mark
---------------------------------------------
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..... 3674.36 3215.24 3547.84
3rd Quarter
(through July
2, 1997)....... 3854.76 3819.85 3854.76
(Source: DataStream)
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. On
or after the date of this Pricing Supplement,
the Company, through its subsidiaries and
others, may hedge its anticipated exposure in
connection with the Notes by taking positions
in exchange traded and over-the-counter
options on the DAX or individual stocks
included in the DAX, futures contracts on the
DAX and options on such futures contracts or
any other instruments that it may wish to use
in connection with such hedging. Such
hedging will be carried out in a manner
designed to minimize any impact on the prices
of the Underlying Stocks. Although the
Company has no reason to believe that its
hedging activity will have such an impact,
there can be no assurance that the Company
will not affect the prices of the Underlying
Stocks as a result of its hedging activities.
The Company, through its subsidiaries and
others, is likely to modify its hedge
position throughout the life of the Notes by
purchasing and selling the securities and
instruments listed above. See also "Use of
Proceeds" in the accompanying Prospectus.
United States Federal
Taxation...................... The investor should refer to the discussion
under "United States Federal Taxation" in the
accompanying Prospectus Supplement.
