Professional Documents
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ASCOT Investor
We look to summarise the: Structuring and pricing of ASCOTs including a quick tutorial on the Bloombergs ASW function. Motivations for the different investor- types in entering ASCOT transactions both from the credit buyers and option buyers perspective. Relevant information on entering into asset-swap transactions with Morgan Stanleys AA-minus rated entity including key contacts on the trading and documentation.
CB
ASCOT*
MSDW
CB coupons
CB
CALL
Credit Investor
Floating coupons (Libor + spread)
Source: Morgan Stanley Dean Witter Research
This Memorandum is based upon information available to the public. No representation is made that it is accurate or complete. This Memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned herein. Morgan Stanley & Co International and others associated with it may have positions in, and may effect transactions in, securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies.
2 Index of Contents
Topic Development of the Market Splitting a Convertible Bond Who are the Investors ? What does the Credit Investor get ? What does the ASCOT Investor get ? Mechanics of the Transaction Option Call Features Strike Price Features The Bloomberg Calculator The Leverage Effect Example Protection against Credit Widening Example Documentation Sample Confirmation Morgan Stanley Contacts Appendix Indicative Swap Levels
Page 2 3 3 4 4 5 6 6 7 7 8 8 9 10
This Memorandum is based upon information available to the public. No representation is made that it is accurate or complete. This Memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned herein. Morgan Stanley & Co International and others associated with it may have positions in, and may effect transactions in, securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies.
3 2. Splitting a Convertible Bond Asset swapping is the splitting of a convertible bond into its two separate components. These are then purchased by investors seeking separate return profiles. These two components can be reassembled at any time at the option of the equity component holder. Exhibit 1 Hellenic Finance/National Bank of Greece 2% due 07/2003
Convertible Value
140 120 100 80 60 40 20 0 5,000 10,000 15,000 20,000 25,000
The optionality of convertibles ensures that the equity drives valuation as the stock price rises above the fixed CB conversion price
The Equity Component Convertible bond asset swaps offer the ASCOT buyer a pure and leveraged play on the underlying equity of a convertible bond while eliminating credit risk and giving an improved interest rate risk profile Hedge Funds Convertible Funds Institutional Equity Investors Retail Investors
Credit Component
Equity Compone nt
Credit Component: = Pure Bond Value The credit investor buys Synthetic Floating Rate Note Benefits to investor include access to a wider choice of credits as well as typically higher spreads than in other corporate bond markets.
Equity Component: = Call Option = the ASCOT The equity investor buys CB call option (ASCOT) Benefits to investor include off-balance sheet treatment and ability to eliminate credit risk exposure to the issuer.
This Memorandum is based upon information available to the public. No representation is made that it is accurate or complete. This Memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned herein. Morgan Stanley & Co International and others associated with it may have positions in, and may effect transactions in, securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies.
4 4. What does the Credit Investor Get? The credit investor receives a higher spread than is normally available on more traditional investments. He also gains access to a wider range of corporate credits where there may be limited opportunity in the market to purchase conventional products. In return he accepts the feature which allows the ASCOT holder to recall the asset swap package at any time. He also accepts the lower liquidity inherent with this being a structured package. Exhibit 2 Current Euribor-plus Spreads Available on Different Forms of Vivendi Credit (May 2000)
bp over Euribor 90 80 70 60 50 40 30 20 10 0 Bank Debt Straight Debt Credit Derivative CB Asset Swap + 35bp + 65bp + 75bp + 85bp
This Memorandum is based upon information available to the public. No representation is made that it is accurate or complete. This Memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned herein. Morgan Stanley & Co International and others associated with it may have positions in, and may effect transactions in, securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies.
5 6. Mechanics of the Transaction The Credit Buyer is effectively buying a callable synthetic floating rate note: The investor purchases from Morgan Stanley an asset swap package which comprises a notional amount of convertible bonds, the asset, coupled with an interest rate swap. The price paid is typically 100% of notional. The interest rate swap agreement is for the investor to pay Morgan Stanley the fixed coupons of the convertible bond (2% from Exhibit 3) in return for receiving quarterly floating rate coupons set at EurIBOR (or LIBOR) + the agreed spread (EurIBOR +40bp from Exhibit 3). The future cash flows on the fixed leg of the swap (CB coupons) are typically lower than those on the floating leg. By discounting all these future cash flows by the zero coupon curve implied in the swap curve we can calculate the Net Present Value of the swap (in this illustration, that comes to 6.60% of the notional). This NPV typically has a negative value to Morgan Stanley reflecting the excess in value of payments owing over receivable payments. Morgan Stanley retains an option to repurchase the entire package, bonds plus swap, from the credit investor at 100% plus accrued interest.
Credit Investor
buys CBs @ 100%
Floating Coupons of 3 month uribor +40bp
MSDW
buys ASCOT @ 0%
Equity Investor
sells CBs @ 93.10 (uribor +50bp)
ASCOT Intrinsic Value of 7.60%* (with uribor +40bp strike)
MSDW
sells ASCOT @ 0%
* The ASCOT buyer sells CBs @ 93.1 0 (euribor +50) bu t his strike price immed iately b ecomes 93.40 (eu ribor +40). Th is reflects th e bid/offer spread of en tering into the transaction. Th e intrin sic value of th e ASCOT be comes 7.60 (101 less 93.40 )
The ASCOT Buyer is effectively buying an OTC call option to purchase a Convertible Bond: Assuming the ASCOT investor already owns convertible bonds, he will sell those bonds at a price which is calculated by subtracting the NPV of the interest rate swap from 100% of the notional value of the bonds. This can be viewed as the pure bond floor. Morgan Stanley has therefore purchased bonds at one price and sold them to the credit buyer at 100%. The difference between these two is the swap NPV (6.60%) and by keeping this Morgan Stanley is able to meet its obligation on the swap payments i.e. it pays for the shortfall of the payments made on the floating leg versus the payments received on the fixed leg.
The ASCOT investor simultaneously purchases at zero cost from Morgan Stanley an option to repurchase the convertible bonds. The strike price is set at 100% minus the unwind value of the associated interest rate swap on the date of exercise. The option strike price is therefore floating rather than fixed. The unwind value of the swap is the Net Present Value of the remaining fixed and floating cash flows of the interest rate swap. The strike price thus increases/decreases as interest rates fall/rise. At maturity however the strike price is 100% The ASCOT is an individually negotiated contract with Morgan Stanley and has no public secondary market. It can however be reassigned to a third party subject to consent.
This Memorandum is based upon information available to the public. No representation is made that it is accurate or complete. This Memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned herein. Morgan Stanley & Co International and others associated with it may have positions in, and may effect transactions in, securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies.
6 7. Option Call Features An ASCOT is an American-style over-the-counter call option to repurchase a convertible bond. The holder may exercise at any time but there may be restrictions for exercising within the first six months. Bonds will be delivered back to the ASCOT holder for value date a maximum 10 (but typically less) days following exercise. The expiry date of the option is set to match either the maturity date or the put date of the underlying convertible bond. If the Issuer calls the convertible bonds for early redemption under the terms and conditions of the bonds then automatic exercise of the ASCOT is triggered whereby the holder must repurchase the bonds. This avoids the potential scenario of missing the final date for conversion of bonds to equity. If the Issuer of the bonds defaults, the ASCOT will expire 10 days later.
97 96 95 94 93.4 93 92 91 90.6 90 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5
3 month Euribor Rates (%)
96.2
As rates rise, the strike price will fall
94.8
92
This Memorandum is based upon information available to the public. No representation is made that it is accurate or complete. This Memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned herein. Morgan Stanley & Co International and others associated with it may have positions in, and may effect transactions in, securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies.
7 9. The Bloomberg Calculator The ASW function on Bloomberg for a single convertible bond allows the user to calculate the strike price of an ASCOT from a given credit spread. In the case of the Hellenic Finance / National Bank of Greece bond, by entering the 50bp spread, we derive 93.1 as the effective level at which the ASCOT buyer sells the CBs. The strike is calculated on the offer spread (40bp), equating to a strike of 93.4, using the same methodology. Exhibit 4: Illustration of the ASW Function on Bloomberg
Change the floating leg to quarterly payments (by entering 4) Set the Bid/Ask side of the curve to use; A for initial set up B for recalling bonds Ensure that the Default swap curve is set to #45 if EUR; #23 if USD #13 if JPY; #22 if GBP
ASCOT Price
3.40
55.00
+1,518%
The ASCOT buyer effectively sells the CBs at this interpolated price (93.1 in this case)
This Memorandum is based upon information available to the public. No representation is made that it is accurate or complete. This Memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned herein. Morgan Stanley & Co International and others associated with it may have positions in, and may effect transactions in, securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies.
8 11. Protection against Credit Widening ASCOTs not only provide convertible investors with protection against the ultimate credit risk of issuer default, but also protect against any credit widening which can have a significant impact on the valuation of a convertible bond. The following is an example of how a holder of ASCOTs fared relative to a holder of the Fullerton/Singapore Telecom 0% 2003 exchangeable bonds during the latest Asian crisis in 1998. Exhibit 6 Fullerton / Singapore Telecom 0% 2003 Issue Date: STOCK Price: CB Price: CB Premium: Strike (L+50): ASCOT Purchase Price: March 1998 S$ 3.2 100 8% 94 6
12. Documentation Transactions are negotiated with MSIL, Morgan Stanleys operating entity, under ISDA guidelines for swaps & OTC options. MSIL (Morgan Stanley International Ltd.) is a member of the UK regulating body, the Financial Services Authority (FSA). All new counterparties are required to have capacity & authority documents approved by MSIL before a transaction can be executed. All counterparties are required to enter into an ISDA Master Agreement with MSIL. MSIL is guaranteed by Morgan Stanley Dean Witter & Co. (Aa3/AA-). MSIL dispatches ISDA confirmations for each transaction which need to be signed and returned. Morgan Stanley Prime Brokerage offers equity financing services for hedged ASCOT positions.
A few months later: (in the height of the Asian crisis) Stock Price: CB Price: CB Premium: Strike (L+50): ASCOT Intrinsic Price: ASCOT Market Price*: Loss on CB: Intrinsic Loss on ASCOT: Real Loss on ASCOT:
Source: Morgan Stanley Dean Witter Research
This Memorandum is based upon information available to the public. No representation is made that it is accurate or complete. This Memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned herein. Morgan Stanley & Co International and others associated with it may have positions in, and may effect transactions in, securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies.
MORGAN STANLEY DEAN WITTER Convertible Bond Asset Swap - Draft Confirmation ASCOT Buyer
To: Attn.: Fax No: From: Morgan Stanley + Co. International Limited, London. Member of FSA. Date: Our File Ref: Our Swap Ref: Taps Ref: Re: Convertible Bond Call and Notional Swap Transaction between Morgan Stanley + Co. International Limited and
The purpose of this facsimile (this ''Confirmation'') is to confirm the terms and conditions of the bond option transaction and notional swap transaction entered into between Morgan Stanley + Co. International Limited and you on the Trade Date specified below (respectively, the ''Bond Option Transaction'' and the ''Notional Swap Transaction''; together the ''Transaction''). This Confirmation constitutes a ''Confirmation'' as referred to in the ISDA Master Agreement specified below. The definitions and provisions contained in the 1991 ISDA Definitions (as supplemented by the 1998 Supplement, and as amended and supplemented by the 1998 ISDA EURO Definitions) (the ''Swap Definitions'') and in the 1997 ISDA Government Bond Option Definitions (the ''Bond Definitions'', and together with the Swap Definitions, the ''Definitions''), in each case as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. The Bond Definitions apply in relation to the Bond Option Transaction (paragraphs 2 and 3(1) below). For purposes of the Bond Definitions, the Bond Option Transaction will be deemed to be a Government Bond Option Transaction. The Swap Definitions apply in relation to the Notional Swap Transaction (paragraph 4 below). In the event of any inconsistency between either set of Definitions and this Confirmation, this Confirmation will govern. This Confirmation supplements, forms part of and is subject to, the ISDA Master Agreement dated as of ,as amended and supplemented from time to time (the ''Agreement''), between Morgan Stanley + Co. International Limited and you. All provisions contained in the Agreement govern this Confirmation except as expressly modified below).
The Terms of the Transaction to which this Confirmation relates are as follows: 1.
Party A: Morgan Stanley + Co. International Limited
General Terms:
Party B: Trade Date: Time of execution of the transaction is available upon request.
2.
Terms of Bond Option Transaction as follows: Option Style: Option Type: Seller: Buyer: Bonds: Stock Redemption: Should the Redemption be for Stock, as provided in the Terms and Conditions of the Bonds, Party B will pay to Party A a USD amount equal to the Redemption Amount of the Bonds, and Party A will deliver to Party B the Redeemed Bonds. This is providing Party A notify Party B of the Stock Redemption by at least Three (3) London and New York Business Days Prior to the 25 August 2003 Bond Maturity Date. Party B Party A Call American
Bond Maturity Date: Investor Put Date: Number of Options: Option Entitlement: Option Strike Price:
100.00 PCT.
Option Penalty: If the Option is Exercised for a Settlement Date prior to then Party B will make an Additional Payment to Party A of the present value of X basis points on the notional amount accruing from the Settlement Date until USD 1.00 (Receipt of which is hereby acknowledged)
Procedure for Exercise: Multiple Exercise: Applicable Any Seller Business Day during the period commencing on and including the Premium Payment Date and ending on and including the Expiration Date between 8.30 a.m. and 4.00 p.m. (London time). Exercise Period:
Any day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in The first to occur of: (a) The date on which notice is first given to the Holder of the Bonds by the issuer of the Bonds that any of the Bonds which are the subject of this Bond Option Transaction are for any reason called or redeemed by the issuer of the Bonds (expiration is limited to the Number of Options proportionate to the percentage of Bonds called or redeemed by the issuer of the Bonds), and (b) (c) (d) The Investor Put Date, and The Bond Maturity Date, and Default Date
Expiration Date:
''Holder of the Bonds'' means, at any given time, the holder as determined by the Calculation Agent in its sole discretion,
of a nominal amount of the Bonds equal to the Option Entitlement. ''Event of Default'' means that in the event that (i) either the Trustee for the Holder of the Bonds, notified the issuer of the Bonds of the occurrence of a default which with the giving of notice or the lapse of time or both, would become an Event of Default (as defined in the terms of the Bonds), and he issuer does not cure such default within the time specified after receipt or (ii) there is an Event of Default (as defined in the terms of the Bonds), and either the Trustee for the Holder of the Bonds, or the Holder of the Bonds, by notice to the issuer declares the Bonds to be due and payable immediately or (iii) there is an Event of Default (as defined in the terms of the Bonds), and the Bonds become immediately due and payable without any declaration or other act on the part of the Trustee for the Holder of the Bonds, or the Holder of the Bonds, Buyer must within thirty (30) Business Days of such Event of Default, and subject to any restrictions on transfer thereunder, deliver irrevocable notice of exercise to Seller, otherwise this Option will expire thirty (30) Business Days following such Event of Default such thirtieth Business Day, the ''Default Date'' Expiration Time: Exercise Date: 4.00 p.m. (London time) The Seller Business Day (which shall also be a Cleaance r System Business Day) during the Exercise Period on which Buyer exercises the Option, subject to The notice requirements and other terms specified in or pursuant to this Confirmation
Applicable, provided that Buyer must give notice of exercise in writing addressed to Alexandra MacGregor (Derivatives Products Group) at least ten (10) Seller Business Days prior to Exercise Date between the hours of 8.30 a.m. and 4.00 p.m. (London time).
Automatic Exercise:
The applicable Options will be deemed to be automatically exercised on the date which notice is first given to the Holder of the Bonds by the issuer of the Bonds that any of the Bonds which are the subject of this Bond Option Transaction are for any reason (except for tax reasons) called or redeemed by the issuer of the Bonds in accordance with the terms and conditions of the Bonds.
Automatic Exercise will be limited to a Number of Options proportionate to the percentage of Bonds called or redeemed by the Issuer for each early redemption date.
3.
(1) In relation to the Bond Option Transaction, Physical Settlement will be applicable. For the purpose of this paragraph 3(1), the following terms shall apply: Settlement Date: The Exercise Date; provided, however, if the Bond Option Transaction is automatically exercised, the Settlement Date shall be ten (10) Seller Business Days following the Exercise Date. Morgan Stanley + Co. International Limited w notify you ill separately regarding settlement details.
Settlement Terms:
Clearance System:
Any day on which the Clearance System is (or, but for the occurrence of a Settlement Disruption Event, would have been) open for the acceptance and execution of settlement instructions. In addition to the foregoing, the Calculation Agent will determine the Swap Cash Settlement Amount, as provided below. If the Swap Cash Settlement Amount is a positive amount, Party B will pay such amount to Party A on the Exercise Date. If the Swap Cash Settlement Amount is a negative amount, Party A will pay the absolute value of such amount to Party B on the Exercise Date.
(2)
An amount determined by the Calculation Agent as the amount that would be payable under Section 6(e)(ii)(2) of the Agreement if the Settlement Date had been designated as an Early Termination Date in respect of a Swap Transaction or portion thereof on the terms set out in paragraph 4 below as a result of a Termination Event, in respect of which the Swap Transaction was the sole Affected Transaction, Parties A and B are the Affected Parties and the Termination Currency was, provided that (a) Market Quotations will be determined by the Calculation Agent using its estimates of the amounts that would be paid for Replacement Transactions (as that term is defined in the definition of ''Market Quotation'') and (b) in the event of a dispute as to the amount so determined, the Calculation Agent shall obtain quotations from three mutually acceptable Reference Market Makers which will be averaged.
(3)
For purposes of settlement, if the Swap Cash Settlement Amount is payable by Party B, it will be aggregated with the Bond Payment due from Party B to Party A on the Exercise Date. If the Swap Cash Settlement Amount is payable by Party A, then the Swap Cash Settlement Amount will be deducted from the Bond Payment due from Party B to Party A on the Exercise Date, provided that if the Swap Cash Settlement Amount exceeds the Bond Payment, the excess shall be payable by Party A to Party B on the Exercise Date. The definition of ''Bond Payment'' contained in the Bond Definitions shall be amended for the purposes of this Transaction by including the word ''zero'' in place of the words ''accrued interest, if any, on the Option Entitlement computed in accordance with customary trade practices employed with respect to the Bonds''.
(4)
4.
Notional Amount: Effective Date: Settlement Date Termination Date:
The Investor Put Date /the Bond Maturity Date, subject to adjustment in accordance with the Following /Preceding Modified Following / Business Day Convention.
Fixed Amounts: Fixed Rate Payer: Fixed Rate Payer Payment Dates: On and in each year, from and including the first of or to occur after the Effective Date to and including the Termination Date, subject to adjustment in accordancewith the Following / Preceding Modified Following / Business Day Convention. Fixed Amount: Floating Amounts: Floating Rate Payer: Party B
On and in each year, from and including the first of or to occur after the Effective Date to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day Convention. Floating Rate Option: Designated Maturity: Spread: Floating Rate Day Count Fraction: Actual/360 The first day of each Calculation Period, except for the Reset Date with respect to the first Calculation Period which will be the day which precedes the first day of the second Calculation Period by the number of months equal to the Designated Maturity. The Additional Payment of USD / JPY from Party B to Party A should be wired to the Account detailed below for value Reset Dates: Plus XPCT. 3 Months USD-LIBOR-BBA
Additional Payment:
5.
Calculation Agent:
The Calculation Agent is Party A. All determinations by the Calculation Agent are subject to agreement by Party A and Party B. If the parties are unable to agree on a particular calculation another Mutually Acceptable Calculation Agent, who is a leading dealer in the relevant market, will be appointed to determine such calculation (the ''Mutually Acceptable Calculation Agent''). The expense of the Mutually Acceptable Calculation Agent shall be borne by the parties equally.
6.
Account Details:
Account for Payments to Party A: Account for payments to Party B: Account for payments in USD: Please supply details
7.
8.
Please confirm that the foregoing correctly sets forth the terms of our agreement by sending to us a return facsimile substantially to the following effect: Quote To: Morgan Stanley + Co. International Limited, London Alexandra MacGregor, Lisa Conway London ((0) 207) 513 7988 London 8812564
Confirmation:
Attn.: Fax No: Telex No: From: Date: Your File Ref: Your Swap Ref: Re:Convertible Bond Call and Notional Swap Transaction between Morgan Stanley + Co. International Limited and We acknowledge receipt of your facsimile dated with respect to the above referenced transaction between Morgan Stanley + Co. International Limited and with a Trade Date of and a Termination Date of and confirm that such facsimile correctly sets forth the terms of our agreement relating to the transaction described therein. Account details: Signed: By: Name: Title: Unquote
We are delighted to have entered into the above referenced transaction with you, and we look forward to working with you again. Yours faithfully, Jack Inglis Annabel Littlewood Morgan Stanley + Co. International Limited
Trading London Jack Inglis Annabel Littlewood Ross Webster Ermes Caramaschi Jim Bedell Tanya Ferencko Jackson Chou Kenichi Ii Taro Goto Gavin Connor +44 (0)20 7425 5994 +44 (0)20 7425 7763 +44 (0)20 7425 6144 +44 (0)20 7425 8466 +1 212 761 5830 +1 212 761 2654 +81 3 5424 7814 +81 3 5424 7816 +81 3 5424 7845 +81 3 5424 5633
New York
Tokyo
Documentation London Tracy Northey Alexandra MacGregor Craig Abruzzo +44 (0)20 7425 5639 +44 (0)20 7425 7762 +1 212 761 5365
New York
This Memorandum is based upon information available to the public. No representation is made that it is accurate or complete. This Memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned herein. Morgan Stanley & Co International and others associated with it may have positions in, and may effect transactions in, securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies.
The following is a list of indicative asset swap credit spread levels based on recent business we have seen in the marketplace or else where no recent business has been transacted, the spreads shown are historical for illustrative purposes (notably in the Asian market). They are not firm bids nor should they be viewed as totally representative of the spreads currently trading in the market. This is not an exhaustive list and there are inevitably a large number of issues in the convertible market for which we have omitted to provide an indicated a credit spread. There may also be names on this list where there is no longer a credit bid available due to investors having exhausted their credit lines or due to changing market conditions. Credit spreads are subject to supply and demand considerations as well as market sentiment. They are therefore not static. Readers should recognise that Morgan Stanley cannot find a credit bid for all the known names in the convertible universe although we will use our best endeavours to do so. Sub-investment grade issues do not typically find ready interest from credit buyers and this is particularly so in the US and Pacific Rim convertible markets which are characterised predominantly by such issues. Please contact your sales representative for an update on particular issues or for a general market overview.
This Memorandum is based upon information available to the public. No representation is made that it is accurate or complete. This Memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned herein. Morgan Stanley & Co International and others associated with it may have positions in, and may effect transactions in, securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies.
11
Morgan Stanley & Co. International Limited and/or its affiliates ("Morgan Stanley Dean Witter") prepared the information and opinions accessible herein. Morgan Stanley Dean Witter does not undertake to advise you of changes in the opinions or information contained herein. You should note the date of each report. Other Morgan Stanley Dean Witter clients may receive research or other information, including rating changes, before they are made available to the users of this service. Morgan Stanley Dean Witter may discontinue or suspend coverage (for legal, policy or other reasons) of any issuer without advance notice and has no obligation to inform you of such discontinuance or suspension. Morgan Stanley Dean Witter may make markets or specialise in, have positions in and effect transactions on a principal basis in securities and other instruments mentioned and may also perform or seek to perform investment banking services for issuers of these securities and other instruments. The investments discussed or recommended may be unsuitable for investors depending on their specific investment objectives and financial position. In addition, the views described constitute the views of the global equity derivatives area and may differ from views of other areas of the Firm. Investors must make their own investment decisions in light of their own objectives, risk profile and circumstances and using such independent advisors as they believe necessary. Therefore, the research and other information provided herein are not intended to give investors specific advice as to whether they should, buy, sell or hold any security mentioned. In addition, the research and other information provided herein has been prepared solely for informational purposes and is not an offer to buy or sell, or a solicitation of an offer to buy or sell, the securities mentioned or to participate in any particular trading strategy. Where an investment is denominated in a currency other than the investor's currency or is a depository receipt, changes in rates of exchange may have an adverse effect on the value, price of, or income derived from the investment. Past performance is not necessarily a guide to future performance. Income from investments may fluctuate. The price or value of the investments to which the presentation relates, either directly or indirectly, may fall or rise against the interest of investors. Prices included herein are indicative only and may vary significantly from prices available from other sources. An indicative price of a transaction/security/instrument may differ substantially from an actionable value. Indicative price and availability are subject to change without notice. The information, data and research provided herein are based on information generally available to the public from sources believed to be reliable. No representation is made that it is accurate, complete, or current. Certain assumptions may have been made in this analysis which have resulted in any returns detailed herein. Transaction costs (such as commissions) are not included in the calculation of returns. No representation is made that any returns indicated will be achieved. Changes to the assumptions may have a material impact on any returns detailed. The materials provided herein are copyrighted by Morgan Stanley Dean Witter. They may not be copied, reproduced, republished, posted, transmitted or redistributed in any way, without the prior written permission of Morgan Stanley Dean Witter. None of the information contained herein may be modified without the prior written consent of Morgan Stanley Dean Witter. Options are not for everyone. Before engaging in the purchasing or writing of options, investors should understand the nature and extent of their rights and obligations and be aware of the risks involved, including the risks pertaining to the business and financial condition of the issuer and the underlying stock. A secondary market may not exist for these securities. For customers of Morgan Stanley & Co. Incorporated who are purchasing or writing exchange-traded options, your attention is called to the publication "Characteristics and Risks of Standardised Options" which is available from your account representative. The trading of futures or options on futures contains inherent risks. Investors should be aware that tax considerations, margin requirements, commissions and other transaction costs may significantly affect the economic consequences of the transactions discussed herein and should be reviewed carefully with their account representative and tax advisor. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise. Investors may be required to sign additional risk disclosure statements. In E.U. countries the information herein has been issued by Morgan Stanley & Co. International Ltd., regulated by the Securities and Futures Authority. In Japan, Singapore and Australia, the information is disseminated by Morgan Stanley Dean Witter Japan Limited, Morgan Stanley Dean Witter Asia (Singapore) Pte. and Morgan Stanley Dean Witter Australia Limited, respectively. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST. NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K. SECURITIES AND FUTURES AUTHORITY.
This Memorandum is based upon information available to the public. No representation is made that it is accurate or complete. This Memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned herein. Morgan Stanley & Co International and others associated with it may have positions in, and may effect transactions in, securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies.