<SUBMISSION>
<ACCESSION-NUMBER>0000950153-03-002242
<TYPE>424B5
<PUBLIC-DOCUMENT-COUNT>2
<FILING-DATE>20031107
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>PINNACLE WEST CAPITAL CORP
<CIK>0000764622
<ASSIGNED-SIC>4911
<IRS-NUMBER>860512431
<STATE-OF-INCORPORATION>AZ
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>424B5
<ACT>33
<FILE-NUMBER>333-101457
<FILM-NUMBER>03986199
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>400 NORTH FIFTH STREET
<STREET2>.
<CITY>PHOENIX
<STATE>AZ
<ZIP>85004
<PHONE>6023792500
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>400 NORTH FIFTH STREET
<STREET2>.
<CITY>PHOENIX
<STATE>AZ
<ZIP>85004
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>AZP GROUP INC
<DATE-CHANGED>19870506
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>424B5
<SEQUENCE>1
<FILENAME>p68427e424b5.htm
<DESCRIPTION>424B5
<TEXT>
<HTML>
<HEAD>
<TITLE>e424b5</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
 <B><FONT size="2">PROSPECTUS SUPPLEMENT</FONT></B>
</DIV>

<DIV align="left">
<B><FONT size="2">(To Prospectus Dated December&nbsp;5,
2002)</FONT></B>
</DIV>

<DIV align="right">
<B><FONT size="2">Filed pursuant to Rule 424(b)(5)</FONT></B>
</DIV>

<DIV align="right">
<B><FONT size="2">Registration No. 333-101457</FONT></B>
</DIV>

<P align="center">
<B><FONT size="4">$165,000,000</FONT></B>

<P align="center">
<B><FONT size="5">Pinnacle West Capital Corporation</FONT></B>

<P align="center">
<B><FONT size="4">Floating Rate Senior Notes due 2005</FONT></B>

<P align="center">
<HR size="1" width="100%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This is an offering by Pinnacle West Capital
Corporation of $165,000,000 of Floating Rate Senior Notes due
November&nbsp;1, 2005 (&#147;Senior Notes&#148;). Interest on
the Senior Notes is payable quarterly in arrears on
February&nbsp;1, May&nbsp;1, August&nbsp;1, and November&nbsp;1
of each year, beginning February&nbsp;1, 2004. Interest on the
Senior Notes will be determined from time to time as described
under &#147;Interest and Maturity&#148; beginning on page S-11
of this prospectus supplement. We may not redeem the Senior
Notes prior to November&nbsp;1, 2004. On or after
November&nbsp;1, 2004, we may redeem all (but not less than all)
of the Senior Notes on any interest payment date at a redemption
price equal to 100% of the principal amount being redeemed plus
accrued and unpaid interest to the redemption date. The Senior
Notes have no sinking fund provisions. We do not intend to list
the Senior Notes on any securities exchange or quotation system.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Senior Notes will be unsecured senior
obligations of our company and will rank equally with all of our
other unsecured senior indebtedness from time to time
outstanding. The Senior Notes will be structurally subordinated
to the debt securities and other obligations of our subsidiaries
and to any secured debt we may issue in the future. See the
first and third risk factors under &#147;Risk Factors&#148;
beginning on page&nbsp;S-4 of this prospectus supplement.
</FONT>

<P align="left">
<B><I><FONT size="2">Investing in the Senior Notes involves
risk. See &#147;Risk Factors&#148; beginning on page&nbsp;S-4 of
this prospectus supplement and on page 3 of the accompanying
prospectus.</FONT></I></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Note</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Initial public offering price<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting discount
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.25%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">412,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds before expenses, to Pinnacle West
    Capital Corporation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99.75%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">164,587,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Plus accrued interest from November&nbsp;12, 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus supplement
or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.</FONT></B>

<P align="left">
<FONT size="2">The underwriters expect to deliver the Senior
Notes to purchasers in book-entry form only through the
facilities of The Depository Trust Company against payment in
New York, New York on or about November&nbsp;12, 2003.
</FONT>

<P align="center">
<HR size="1" width="90%" align="center" noshade>

<P align="center">
<B><FONT size="5">Barclays Capital</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B><FONT size="4">BNY Capital Markets, Inc.</FONT></B></TD>
    <TD align="right"><B><FONT size="4">McDonald Investments Inc.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">The date of this prospectus supplement is
November&nbsp;6, 2003.
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">SELECTED INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">BUSINESS OF PINNACLE WEST CAPITAL CORPORATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">RISK FACTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">FORWARD-LOOKING STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">USE OF PROCEEDS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">RATIO OF EARNINGS TO FIXED CHARGES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">DESCRIPTION OF THE SENIOR NOTES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">REGARDING THE TRUSTEE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">UNDERWRITING</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">EXPERTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010">LEGAL OPINIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">WHERE YOU CAN FIND MORE INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#012">RISK FACTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#013">ABOUT THIS PROSPECTUS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#014">FORWARD-LOOKING STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#015">WHERE YOU CAN FIND MORE INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">THE COMPANY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#017">RATIO OF EARNINGS TO FIXED CHARGES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#018">USE OF PROCEEDS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#019">GENERAL DESCRIPTION OF THE SECURITIES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#020">DESCRIPTION OF DEBT SECURITIES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#021">DESCRIPTION OF PREFERRED STOCK</A></TD></TR>
<TR><TD colspan="9"><A HREF="#022">DESCRIPTION OF COMMON STOCK</A></TD></TR>
<TR><TD colspan="9"><A HREF="#023">DESCRIPTION OF THE PURCHASE CONTRACTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#024">DESCRIPTION OF UNITS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#025">PLAN OF DISTRIBUTION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#026">EXPERTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#027">LEGAL OPINIONS</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">You should rely only on the information
contained in or incorporated by reference in this prospectus
supplement and the accompanying prospectus. Neither we nor the
underwriters have authorized anyone to provide any different or
additional information. We are not making an offer of these
securities in any jurisdiction where the offer is not permitted.
You should not assume that the information contained in or
incorporated by reference in this prospectus supplement and the
accompanying prospectus is accurate as of any date other than
the date on the front cover of this prospectus supplement or the
date of the accompanying prospectus, as applicable.</FONT></B>

<P align="left">
<B><FONT size="2">This document is in two parts. The first part
is this prospectus supplement, which describes the terms of the
offering of Senior Notes and also adds to and updates
information contained in the accompanying prospectus and the
documents incorporated by reference into the accompanying
prospectus. The second part is the accompanying prospectus,
which gives more general information, some of which will not
apply to the Senior Notes. If the description of the offering
varies between this prospectus supplement and the accompanying
prospectus, you should rely on the information in this
prospectus supplement.</FONT></B>

<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<P align="center">
<B><FONT size="2">Prospectus Supplement</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selected Information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Business of Pinnacle West Capital Corporation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Risk Factors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Forward-Looking Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Use of Proceeds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ratio of Earnings to Fixed Charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Description of the Senior Notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Regarding the Trustee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Experts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Legal Opinions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Where You Can Find More Information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">Prospectus</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Risk Factors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">About this Prospectus
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Forward-Looking Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Where You Can Find More Information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">The Company
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ratio of Earnings to Fixed Charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Use of Proceeds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General Description of the Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Description of Debt Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Description of Preferred Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Description of Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Description of the Purchase Contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Description of Units
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Plan of Distribution
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Experts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Legal Opinions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">S-1
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "SELECTED INFORMATION" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center">
<B><FONT size="2">SELECTED INFORMATION</FONT></B>

<P align="center">
<B><FONT size="2">The Offering</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Securities Offered
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">$165,000,000 of Floating Rate Senior Notes due
    November&nbsp;1, 2005.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Application of Proceeds
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We will use the net proceeds of the Senior Notes
    for the repayment of long-term and short-term borrowings, and
    will temporarily invest the net proceeds pending such
    application. See &#147;Use of Proceeds.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">The Company</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Business
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Through our subsidiaries, we are principally
    engaged in generating, selling, and delivering electricity and
    energy-related products and services to retail and wholesale
    customers in the western United States. Another of our
    subsidiaries develops residential, commercial, and industrial
    real estate projects.
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Twelve Months Ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Income Statement Data (dollars in
    thousands):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Operating Revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,308,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,601,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,393,998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,119,522</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income from Continuing Operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">184,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">327,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">302,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of September 30, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As Adjusted(1)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Capitalization Data (dollars in
    thousands):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-Term Borrowings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90,011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-Term Debt (including current maturities)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,289,880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,429,880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common Stock Equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,803,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,803,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Capitalization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,183,267</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,233,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">As adjusted for the assumed issuance of the
    Senior Notes and the repayment of short-term borrowings and a
    private placement note as described under &#147;Use of
    Proceeds.&#148; We expect to incur additional short-term
    borrowings to repay all $215&nbsp;million of our 4.5% Senior
    Notes due February&nbsp;9, 2004.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">S-2
</FONT>
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<P><HR noshade><P>
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<P align="center">
<B><FONT size="2">BUSINESS OF PINNACLE WEST CAPITAL
CORPORATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were incorporated in 1985 under the laws of
the State of Arizona and own all of the outstanding equity
securities of Arizona Public Service Company (&#147;APS&#148;).
APS is an electric utility that provides either retail or
wholesale electric service to substantially all of the state of
Arizona, with the major exceptions of the Tucson metropolitan
area and about one-half of the Phoenix metropolitan area. APS
also generates, sells and delivers electricity to wholesale
customers in the western United States. Electricity is delivered
through a distribution system owned by APS.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our other major subsidiaries are:
</FONT>
<P>

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    <TD width="1%"></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pinnacle West Energy Corporation (&#147;Pinnacle
    West Energy&#148;), through which we conduct our competitive
    electricity generation operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">APS Energy Services Company, Inc.
    (&#147;APSES&#148;), which provides commodity-related energy
    services and energy-related products and services to commercial,
    industrial and institutional retail customers in the western
    United States;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">SunCor Development Company (&#147;SunCor&#148;),
    a developer of residential, commercial, and industrial real
    estate projects in Arizona, New Mexico, and Utah; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">El Dorado Investment Company (&#147;El
    Dorado&#148;), an investment firm, which owns a majority
    interest in NAC International Inc. (specializing in spent
    nuclear fuel technology) and holds miscellaneous small
    investments, including interests in Arizona community-based
    ventures.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our principal executive offices are located at
400&nbsp;North Fifth Street, Phoenix, Arizona 85004 (telephone
602-250-1000).
</FONT>

<P align="center"><FONT size="2">S-3
</FONT>

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<P align="center">
<B><FONT size="2">RISK FACTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Before investing in the Senior Notes, you should
carefully consider the discussions of risks set forth below and
under &#147;Risk Factors&#148; beginning on page 3 of the
accompanying prospectus, and the other information included or
incorporated by reference in this prospectus supplement and the
accompanying prospectus, including information under the heading
&#147;Forward-Looking Statements.&#148; Although we have tried
to discuss key factors in this prospectus supplement and the
accompanying prospectus, please be aware that other risks may
prove to be important in the future. New risks may emerge at any
time and we cannot predict such risks or estimate the extent to
which they may affect our financial performance. The risk
factors set forth below supersede any similarly entitled risk
factors contained in the accompanying prospectus.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">The Senior Notes will be structurally
    subordinated to the debt securities and other obligations of our
    subsidiaries.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because we are structured as a holding company,
all existing and future debt and other liabilities of our
subsidiaries will be effectively senior in right of payment to
the Senior Notes. None of the indentures under which we may
issue debt securities limits the ability of our subsidiaries to
incur additional debt in the future. The assets and cash flows
of our subsidiaries will be available, in the first instance, to
service their own debt and other obligations. Our ability to
have the benefit of their assets and cash flows, particularly in
the case of any insolvency or financial distress affecting our
subsidiaries, would arise only through our equity ownership
interests in our subsidiaries and only after their creditors
have been satisfied. As of September&nbsp;30, 2003, our
subsidiaries, principally APS, had approximately $2.7 billion of
debt outstanding, of which $597&nbsp;million represented APS
first mortgage bonds or APS senior notes, both of which are
directly or indirectly secured by substantially all of APS&#146;
assets.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Our cash flow depends on the performance of
    our subsidiaries.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conduct our operations primarily through
subsidiaries. Substantially all of our consolidated assets are
held by such subsidiaries. Accordingly, our cash flow is
dependent upon the earnings and cash flows of these subsidiaries
and their distributions to us. The subsidiaries are separate and
distinct legal entities and have no obligation to make
distributions to us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The debt agreements of some of our subsidiaries
may restrict their ability to pay dividends, make distributions
or otherwise transfer funds to us. As part of the approval by
the Arizona Corporation Commission (&#147;ACC&#148;) of a $500
million financing arrangement between APS and Pinnacle West
Energy, APS must maintain a common equity ratio of at least 40%
and may not pay common dividends if the payment would reduce its
common equity below that threshold. As defined in the ACC
financing order approving the arrangement, common equity ratio
is common equity divided by common equity plus long-term debt,
including current maturities of long-term debt. At
September&nbsp;30, 2003, APS&#146; common equity ratio was
approximately 46%.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">We may issue additional debt in the future,
    which may be secured.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">None of the indentures under which we may issue
debt securities limits our ability to incur additional debt in
the future. Such debt, in our discretion, may be secured by all
or any portion of our assets. If we issue secured debt in the
future, such secured debt will rank effectively senior to the
Senior Notes to the extent of the security pledged therefor. At
September&nbsp;30, 2003, our outstanding senior debt (excluding
the debt of our subsidiaries) was approximately
$540&nbsp;million, none of which was secured.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">We cannot predict the outcome of APS&#146;
    general rate case pending before the ACC.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As required by a 1999 settlement agreement among
APS and various parties (the &#147;1999 Settlement
Agreement&#148;), on June&nbsp;27, 2003, APS filed a general
rate case with the ACC. APS requested a
</FONT>

<P align="center"><FONT size="2">S-4
</FONT>

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<DIV align="left">
<FONT size="2">$175.1&nbsp;million, or 9.8%, increase in its
annual retail electricity revenues, to become effective
July&nbsp;1, 2004. The major reasons for the request include:
</FONT>
</DIV>
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    <FONT size="2">complying with the provisions of the 1999
    Settlement Agreement;
    </FONT></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
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    <FONT size="2">incorporating significant increases in fuel and
    purchased power costs, including results of purchases through
    the ACC&#146;s &#147;Track B&#148; procurement process;
    </FONT></TD>
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    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
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    <FONT size="2">recognizing changes in APS&#146; cost of service,
    cost allocation and rate design;
    </FONT></TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">obtaining rate base recognition of the generating
    plants built in Arizona by Pinnacle West Energy since 1999 to
    serve APS&#146; retail electricity customers (specifically,
    Redhawk Units&nbsp;1 and 2, West Phoenix Units&nbsp;4 and 5 and
    Saguaro Unit&nbsp;3);
    </FONT></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">recovering $234&nbsp;million written off by APS
    as a result of the 1999 Settlement Agreement; and
    </FONT></TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">recovering restructuring and compliance costs
    associated with the ACC&#146;s electric competition rules.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The general rate case will also address the
implementation of rate adjustment mechanisms that were the
subject of ACC hearings in April 2003. The rate adjustment
mechanisms, which were authorized in the 1999 Settlement
Agreement, would allow APS to recover several types of costs,
the most significant of which are power supply costs (fuel and
purchased power costs) and costs associated with complying with
the ACC retail competition rules described below. If APS does
not have a rate adjustment mechanism that allows it to recover
its full costs of procuring fuel for its generating plants, then
changes in fuel prices may increase its cost of producing power
or decrease the amount it receives from selling power, harming
our financial performance. On November&nbsp;4, 2003, the ACC
approved the issuance of an order which authorizes a rate
adjustment mechanism allowing APS to recover changes in
purchased power costs (but not changes in fuel costs) incurred
after July&nbsp;1, 2004. The other rate adjustment mechanisms
authorized in the 1999 Settlement Agreement (such as the costs
associated with complying with the ACC electric competition
rules) were also tentatively approved for subsequent
implementation in the general rate case. The purchased power
rate adjustment mechanism will not become effective until there
is a final order in the general rate case, and the ACC further
reserved the right to amend or modify, in all respects, this
November 4 order during the rate case. We assume that the ACC
will make a decision in the general rate case by the end of
2004. We cannot predict the outcome of the rate case and the
resulting levels of regulated revenues.
</FONT>

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    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">The procurement of wholesale power by APS
    without the ability to adjust retail rates could have an adverse
    impact on our business and financial results.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1999 Settlement Agreement limits APS&#146;
ability to change retail rates until at least July&nbsp;1, 2004,
which could have a significant adverse financial impact on us if
wholesale power prices significantly exceed the amount included
for generation costs in APS&#146; current bundled retail rates.
Under the ACC&#146;s rules, APS is the &#147;provider of last
resort&#148; for standard-offer, full-service customers under
rates that have been approved by the ACC. The 1999 Settlement
Agreement allows APS to seek adjustment of these rates in the
event of emergency conditions or circumstances, such as the
inability to secure financing on reasonable terms; material
changes in APS&#146; cost of service for ACC-regulated services
resulting from federal, tribal, state or local laws; regulatory
requirements; or judicial decisions, actions or orders. Energy
prices in the western wholesale market vary and, during the
course of the last two years, have been volatile. At various
times, prices in the spot wholesale market have significantly
exceeded the amount included in APS&#146; current retail rates.
In the event of shortfalls due to unforeseen increases in load
demand or generation or transmission outages, APS may need to
purchase additional supplemental power in the wholesale spot
market. Unless APS is able to obtain an adjustment of its rates
under the emergency provisions of the 1999 Settlement Agreement,
there can be no assurance that APS would be able to fully
recover the costs of this power. In addition, APS filed a
general rate case with the ACC on June&nbsp;27, 2003 (see
discussion above). Among other things, the rate case will
address the implementation of rate adjustment mechanisms, which
would allow APS to recover several types of costs, the most
significant of which are power supply
</FONT>

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</FONT>
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<DIV align="left">
<FONT size="2">costs (fuel and purchased power costs) and costs
associated with complying with the ACC retail competition rules.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

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    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Deregulation or restructuring of the
    electric industry may result in increased competition, which
    could have a significant adverse impact on our business and our
    financial results.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Retail competition could have a significant
adverse financial impact on us due to an impairment of assets, a
loss of retail customers, lower profit margins or increased
costs of capital. In 1999, the ACC approved rules that provide a
framework for the introduction of retail electric competition in
Arizona. Under the rules, as modified by the 1999 Settlement
Agreement, APS was required to transfer all of its competitive
electric assets and services to an unaffiliated party or parties
or to a separate corporate affiliate or affiliates no later than
December&nbsp;31, 2002. To satisfy this requirement APS had
planned to transfer its generation assets to Pinnacle West
Energy. Pursuant to an ACC order dated September&nbsp;10, 2002,
the ACC unilaterally modified the 1999 Settlement Agreement and
directed APS to cancel any plans to divest interests in any of
its generating assets. The ACC further established a requirement
that APS solicit bids for certain estimated amounts of capacity
and energy for periods beginning July&nbsp;1, 2003. Pinnacle
West Energy bid on and entered into contracts to supply most of
APS&#146; requirements in the summer months through September
2006. These regulatory developments and legal challenges to the
rules have raised considerable uncertainty about the status and
pace of retail electric competition and of electric
restructuring in Arizona. Although some very limited retail
competition existed in APS&#146; service area in 1999 and 2000,
there are currently no active retail competitors offering
unbundled energy or other utility services to APS&#146;
customers. As a result, we cannot predict when, and the extent
to which, additional competitors will re-enter APS&#146; service
territory.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of changes in federal law and
regulatory policy, competition in the wholesale electricity
market has greatly increased due to a greater participation by
traditional electricity suppliers, non-utility generators,
independent power producers, and wholesale power marketers and
brokers. This increased competition could affect our load
forecasts, plans for power supply and wholesale energy sales and
related revenues. As a result of the changing regulatory
environment and the relatively low barriers to entry, we expect
wholesale competition to increase. As competition continues to
increase, our financial position and results of operations could
be adversely affected.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">The uncertain outcome regarding the
    creation of regional transmission organizations, or RTOs, and
    implementation of the FERC&#146;s standard market design, or
    SMD, may materially impact our operations, cash flows or
    financial position.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In a December 1999 order, the FERC set minimum
characteristics and functions that must be met by utilities that
participate in regional transmission organizations. The
characteristics for an acceptable RTO include independence from
market participants, operational control over a region large
enough to support efficient and nondiscriminatory markets, and
exclusive authority to maintain short-term reliability.
Additionally, the FERC is considering implementing a standard
market design for wholesale markets. On October&nbsp;16, 2001,
APS and other owners of electric transmission lines in the
Southwest filed with the FERC a request for a declaratory order
confirming that their proposal to form WestConnect RTO, LLC
would satisfy the FERC&#146;s requirements for the formation of
an RTO. On October&nbsp;10, 2002, the FERC issued an order
finding that the WestConnect proposal, if modified to address
specified issues, could meet the FERC&#146;s RTO requirements
and provide the basic framework for a standard market design for
the Southwest. On September&nbsp;15, 2003, the FERC issued an
order granting clarification and rehearing, in part, of its
prior orders. In particular, this order approved the use of a
physical congestion management scheme, which is used to allocate
transmission rights on congested lines, for WestConnect for an
initial phase-in period. FERC indicated that the WestConnect
utilities and the appropriate regional state advisory committee
should develop a market based congestion management scheme for
subsequent implementation. APS is now participating in a
cost/benefit analysis of implementing WestConnect, and the
results of this analysis are expected to be completed in the
first quarter of 2004.
</FONT>

<P align="center"><FONT size="2">S-6
</FONT>

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    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Actual results could differ from estimates
    used to prepare our financial statements.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In preparing the financial statements in
accordance with generally accepted accounting principles,
management must often make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues, expenses
and related disclosures at the date of the financial statements
and during the reporting period. Some of those judgments can be
subjective and complex, and actual results could differ from
those estimates. We consider the following accounting policies
to be our most critical because of uncertainties, judgments and
complexities of the underlying accounting standards and
operations involved.
</FONT>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Regulatory Accounting&nbsp;&#151; Regulatory
    accounting allows for the actions of regulators, such as the ACC
    and the FERC, to be reflected in the financial statements. Their
    actions may cause us to capitalize costs that would otherwise be
    included as an expense in the current period by unregulated
    companies.
    </FONT></TD>
</TR>

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    <TD>&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pensions and Other Postretirement Benefit
    Accounting&nbsp;&#151; Changes in our actuarial assumptions used
    in calculating our pension and other postretirement benefit
    liability and expense can have a significant impact on our
    earnings and financial position. The most relevant actuarial
    assumptions are the discount rate used to measure our liability
    and the expected long-term rate of return on plan assets used to
    estimate earnings on invested funds over the long-term.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Derivative Accounting&nbsp;&#151; Derivative
    accounting requires evaluation of rules that are complex and
    subject to varying interpretations. Our evaluation of these
    rules, as they apply to our contracts, will determine whether we
    use accrual accounting or fair value (mark-to-market)
    accounting. Mark-to-market accounting requires that changes in
    fair value be recorded in earnings or, if certain hedge
    accounting criteria are met, in other comprehensive income.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mark-to-Market Accounting&nbsp;&#151; The market
    value of our derivative contracts is not always readily
    determinable. In some cases, we use models and other valuation
    techniques to determine fair value. The use of these models and
    valuation techniques sometimes requires subjective and complex
    judgment. Actual results could differ from the results estimated
    through application of these methods.
    </FONT></TD>
</TR>

</TABLE>

<!-- link1 "FORWARD-LOOKING STATEMENTS" -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="center">
<B><FONT size="2">FORWARD-LOOKING STATEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This document contains forward-looking statements
based on current expectations, and we assume no obligation to
update these statements or make any further statements on any of
these issues, except as required by applicable law. These
forward-looking statements are often identified by words such as
&#147;hope,&#148; &#147;may,&#148; &#147;believe,&#148;
&#147;anticipate,&#148; &#147;plan,&#148; &#147;expect,&#148;
&#147;require,&#148; &#147;intend,&#148; &#147;assume&#148; and
similar words. Because actual results may differ materially from
expectations, we caution readers not to place undue reliance on
these statements. A number of factors could cause future results
to differ materially from historical results, or from results or
outcomes currently expected or sought by us. These factors
include, but are not limited to:
</FONT>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the ongoing restructuring of the electric
    industry, including the introduction of retail electric
    competition in Arizona and decisions impacting wholesale
    competition;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the outcome of regulatory and legislative
    proceedings relating to the restructuring;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">state and federal regulatory and legislative
    decisions and actions, including the outcome of the rate case
    APS filed with the ACC on June&nbsp;27, 2003 and the wholesale
    electric price mitigation plan adopted by the FERC;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">regional economic and market conditions,
    including the results of litigation and other proceedings
    resulting from the California energy situation, volatile
    purchased power and fuel costs and the completion of generation
    and transmission construction in the region, which could affect
    customer growth and the cost of power supplies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the cost of debt and equity capital and access to
    capital markets;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">S-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">energy usage;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">weather variations affecting local and regional
    customer energy usage;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">conservation programs;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">power plant performance;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">market prices for electricity and gas;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the successful completion of our generation
    construction program;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulatory issues associated with generation
    construction, such as permitting and licensing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in accounting principles generally
    accepted in the United States of America;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to compete successfully outside
    traditional regulated markets (including the wholesale market);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to manage our marketing and trading
    activities and the use of derivative contracts in our business
    (including the interpretation of the subjective and complex
    accounting rules related to these contracts);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">technological developments in the electric
    industry;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the performance of the stock market, which
    affects the amount of our required contributions to our pension
    plan and nuclear decommissioning trust funds;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the strength of the real estate market in
    SunCor&#146;s market areas, which include Arizona, New Mexico
    and Utah; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">other uncertainties, all of which are difficult
    to predict and many of which are beyond our control.
    </FONT></TD>
</TR>

</TABLE>

<!-- link1 "USE OF PROCEEDS" -->
<DIV align="left"><A NAME="004"></A></DIV>

<P align="center">
<B><FONT size="2">USE OF PROCEEDS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will use the net proceeds from the sale of the
Senior Notes to repay short-term borrowings (with an estimated
average interest rate of approximately 1.13%) and our
$25&nbsp;million 6.87% private placement note due
December&nbsp;17, 2003. This indebtedness was incurred for
general corporate purposes, including capital infusions into
Pinnacle West Energy in support of its generation construction
program. We expect to incur additional short-term borrowings to
repay all $215 million of our 4.5% Senior Notes due
February&nbsp;9, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Until we are able to use the proceeds for these
purposes, we will invest the proceeds temporarily in
U.S.&nbsp;Government or agency obligations, commercial paper,
bank certificates of deposit, or repurchase agreements
collateralized by U.S. Government or agency obligations, or we
will deposit the proceeds with banks.
</FONT>

<P align="center"><FONT size="2">S-8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "RATIO OF EARNINGS TO FIXED CHARGES" -->
<DIV align="left"><A NAME="005"></A></DIV>

<P align="center">
<B><FONT size="2">RATIO OF EARNINGS TO FIXED
CHARGES<SUP>(a)</SUP></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows our consolidated ratio
of earnings to fixed charges and our consolidated ratio of
earnings to combined fixed charges and preferred dividends:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Twelve Months Ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1998</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated ratio of earnings to fixed charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated ratio of earnings to combined fixed
    charges and preferred dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The ratio of earnings to fixed charges was
computed by dividing earnings by fixed charges. For this
purpose, earnings consist of pre-tax income from continuing
operations excluding extraordinary items, discontinued
operations and cumulative effects of changes in accounting for
derivatives and trading activities, plus the amount of fixed
charges as defined below. Fixed charges consist of: expensed
interest; amortization of debt discount, premium and expense;
and an estimate of interest implicit in rentals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The ratio of earnings to combined fixed charges
and preferred dividends was computed by dividing earnings by the
sum of fixed charges and preferred dividends. For this purpose,
earnings consist of pre-tax income from continuing operations
excluding extraordinary items, discontinued operations and
cumulative effects of changes in accounting for derivatives and
trading activities, plus the amount of combined fixed charges
and preferred dividends as defined below. Combined fixed charges
and preferred dividends consist of: expensed interest;
amortization of debt discount, premium and expense; an estimate
of interest implicit in rentals; and preferred stock dividend
requirements of majority-owned subsidiaries increased to reflect
our pre-tax earnings requirement.
</FONT>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<DIV align="left">
<FONT size="2">(a)&nbsp;We have reclassified certain prior year
amounts to conform to the current year presentation.
</FONT>
</DIV>

<P align="center"><FONT size="2">S-9
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "DESCRIPTION OF THE SENIOR NOTES" -->
<DIV align="left"><A NAME="006"></A></DIV>

<P align="center">
<B><FONT size="2">DESCRIPTION OF THE SENIOR NOTES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">We will issue the Senior Notes as a separate
series of Debt Securities under the indenture dated as of
December&nbsp;1, 2000, between us and The Bank of New York, as
trustee. Because this is a summary, it does not contain all the
information that may be important to you. The following
description of specific terms of the Senior Notes supplements
the description of the general terms and provisions of the Debt
Securities in the prospectus under &#147;Description of Debt
Securities.&#148;</FONT></I>

<P align="left">
<B><FONT size="2">General</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The specific financial and legal terms of the
Senior Notes are set forth below:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Title: </FONT></B><FONT size="2">Floating Rate
    Senior Notes due 2005.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Total principal amount being issued:
    </FONT></B><FONT size="2">$165,000,000.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Due date for principal:
    </FONT></B><FONT size="2">November&nbsp;1, 2005.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Interest rate for initial interest period:
    </FONT></B><FONT size="2">LIBOR plus 0.80%.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Date interest starts accruing:
    </FONT></B><FONT size="2">November&nbsp;12, 2003.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Interest payment dates:
    </FONT></B><FONT size="2">February&nbsp;1, May&nbsp;1,
    August&nbsp;1, and November 1.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Regular record dates for interest dates:
    </FONT></B><FONT size="2">The fifteenth calendar day preceding
    each interest payment date.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">First interest payment date:
    </FONT></B><FONT size="2">February&nbsp;1, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Form of Senior Notes:
    </FONT></B><FONT size="2">A Global Security will initially
    represent the Senior Notes. We will deposit the Global Security
    with or on behalf of The Depository Trust Company
    (&#147;DTC&#148;). See &#147;Description of Debt
    Securities&nbsp;&#151; Global Securities&#148; in the
    accompanying prospectus. We may allow exchange of the Global
    Security for registered Senior Notes and transfer of the Global
    Security to a person other than DTC in additional circumstances
    that we agree to other than those described under that heading.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Sinking fund: </FONT></B><FONT size="2">The
    Senior Notes will not be subject to any sinking fund.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Optional redemption:
    </FONT></B><FONT size="2">We may not redeem the Senior Notes
    prior to November&nbsp;1, 2004. On or after November&nbsp;1,
    2004, we may redeem all (but not less than all) of the Senior
    Notes on any interest payment date at a redemption price equal
    to 100% of the principal amount being redeemed plus accrued and
    unpaid interest to the redemption date.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Covenants: </FONT></B><FONT size="2">The
    Senior Notes and the related indenture do not contain any
    financial or other similar restrictive covenants. However, we
    will be subject to the covenant described under the caption
    &#147;Description of Debt Securities&nbsp;&#151; Consolidation,
    Merger, and Sale of Assets&#148; in the attached prospectus.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Senior Notes will constitute a series of our
unsecured senior Debt Securities. The Senior Notes will rank
equally with all of our existing and future senior unsecured
debt and senior to all of our existing and future subordinated
debt and will be effectively subordinated to all of our secured
debt and the debt of our subsidiaries. See the first and third
risk factors under &#147;Risk Factors&#148; beginning on page
S-4 of this prospectus supplement. As of September&nbsp;30,
2003, we had $540&nbsp;million of existing senior debt and did
not have any secured debt.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may, without the consent of the holders of the
Senior Notes, issue additional notes having the same ranking and
same interest rate, maturity and additional terms as the Senior
Notes. Any additional notes would, together with the Senior
Notes, constitute a single series of notes under the indenture.
</FONT>

<P align="center"><FONT size="2">S-10
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Certain Definitions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Business Day&#148; means any day other than
a Saturday or a Sunday or a day on which banking institutions in
The City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate
trust office of the trustee is closed for business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Calculation Agent&#148; means The Bank of
New York or its successor appointed by us, acting as calculation
agent.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Interest Determination Date&#148; means the
second London Business Day immediately preceding the first day
of the relevant Interest Period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Interest Period&#148; means the period
commencing on an interest payment date for the Senior Notes (or
commencing on the issue date for the Senior Notes, if no
interest has been paid or duly made available for payment since
that date) and ending on the day before the next succeeding
interest payment date for the Senior Notes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;LIBOR&#148; for any Interest Determination
Date will be the London interbank offered rate for deposits in
U.S. dollars having an index maturity of three&nbsp;months for a
period commencing on the second London Business Day immediately
following such Interest Determination Date (the &#147;Three
Month Deposits&#148;) in amounts of not less than $1,000,000, as
such rate appears on Telerate Page&nbsp;3750, at approximately
11:00&nbsp;a.m., London time, on such Interest Determination
Date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;London Business Day&#148; means a day on
which dealings in deposits in U.S. dollars are transacted, or
with respect to any future date, are expected to be transacted,
in the London interbank market.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Telerate Page&nbsp;3750&#148; means the
display designated on page&nbsp;&#147;3750&#148; on Moneyline
Telerate (or such other page as may replace the 3750&nbsp;page
on that service or such other service or services as may be
nominated by the British Bankers&#146; Association for the
purpose of displaying London interbank offered rates for U.S.
dollar deposits).
</FONT>

<P align="left">
<B><FONT size="2">Interest and Maturity</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Senior Notes will mature on November&nbsp;1,
2005 and will be issued in the aggregate principal amount of
$165,000,000. We will pay interest on the Senior Notes on
February&nbsp;1, May&nbsp;1, August&nbsp;1 and November&nbsp;1
of each year, and at maturity, to holders of record at the close
of business on the fifteenth calendar day preceding each
interest payment date. We will begin paying interest on the
Senior Notes on February&nbsp;1, 2004. Interest starts to accrue
from the date that the Senior Notes are issued.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If any interest payment date falls on a day that
is not a Business Day, the interest payment date will be the
next succeeding Business Day. If the maturity date of the Senior
Notes or any redemption date falls on a day that is not a
Business Day, the payment of principal and interest (to the
extent payable with respect to the principal amount being
redeemed if on a redemption date) will be made on the next
succeeding Business Day, and no interest on such payment shall
accrue for the period from and after the maturity date or such
redemption date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Senior Notes will bear interest for each
Interest Period at a per annum rate determined by the
Calculation Agent as described below. The per annum interest
rate will be equal to LIBOR on the relevant Interest
Determination Date plus 0.80%; provided, however, that in
certain circumstances described below, the interest rate will be
determined by the Calculation Agent in an alternative manner
without reference to LIBOR. Promptly upon such determination,
the Calculation Agent will notify the trustee of the interest
rate for the new Interest Period. The interest rate determined
by the Calculation Agent, absent manifest error, shall be
binding and conclusive upon the beneficial owners and holders of
the Senior Notes, us and the trustee.
</FONT>

<P align="center"><FONT size="2">S-11
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the following circumstances exist on any
Interest Determination Date, the Calculation Agent shall
determine the interest rate for the Senior Notes as follows:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;In the event LIBOR cannot be determined
    from the Moneyline Telerate service as described herein as of
    approximately 11:00&nbsp;a.m. London time on such Interest
    Determination Date, the Calculation Agent shall request the
    principal London offices of each of four major banks in the
    London interbank market selected by the Calculation Agent (after
    consultation with us) to provide a quotation of the rate (the
    &#147;Rate Quotation&#148;) at which Three&nbsp;Month Deposits
    in amounts of not less than $1,000,000 are offered by it to
    prime banks in the London interbank market, at approximately
    11:00&nbsp;a.m. London time on such Interest Determination Date,
    that is representative of single transactions at such time (the
    &#147;Representative Amounts&#148;). If at least two Rate
    Quotations are provided, the interest rate will be the
    arithmetic mean of the Rate Quotations obtained by the
    Calculation Agent, plus 0.80%.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;In the event LIBOR cannot be determined
    from the Moneyline Telerate service as described herein and
    fewer than two Rate Quotations are available as provided in
    (1)&nbsp;above, the interest rate will be the arithmetic mean of
    the rates quoted at approximately 11:00&nbsp;a.m. New York City
    time on such Interest Determination Date, by three major banks
    in New York City, selected by the Calculation Agent (after
    consultation with us), for loans in Representative Amounts in
    U.S. dollars to leading European banks, having an index maturity
    of three months for a period commencing on the second London
    Business Day immediately following such Interest Determination
    Date, plus 0.80% provided, however, that if fewer than three
    banks selected by the Calculation Agent are quoting such rates,
    the interest rate for the applicable Interest Period will be the
    same as the interest rate in effect for the immediately
    preceding Interest Period.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the request of a holder of the Senior Notes,
the Calculation Agent will provide to such holder the interest
rate in effect on the date of such request and, if determined,
the interest rate for the next Interest Period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest on the Senior Notes will be calculated
on the basis of the actual number of days for which interest is
payable in the relevant Interest Period, divided by 360. All
dollar amounts resulting from such calculations will be rounded,
if necessary, to the nearest cent with one-half cent rounded
upward.
</FONT>

<P align="left">
<B><FONT size="2">Optional Redemption</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Senior Notes are not redeemable prior to
November&nbsp;1, 2004. The Senior Notes will be redeemable at
our option in whole, on not less than 30&nbsp;days&#146; nor
more than 60&nbsp;days&#146; notice, beginning on
November&nbsp;1, 2004 and on each interest payment date
thereafter, prior to maturity of the Senior Notes, at a
redemption price equal to 100% of the principal amount being
redeemed plus accrued and unpaid interest thereon to the date of
redemption. Senior Notes to be redeemed become due on the
redemption date, and interest will cease to accrue on those
Senior Notes on the redemption date.
</FONT>

<P align="left">
<B><FONT size="2">Defeasance</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The provisions described in the accompanying
prospectus under the caption &#147;Description of Debt
Securities&nbsp;&#151; Defeasance and Covenant Defeasance&#148;
are applicable to the Senior Notes.
</FONT>

<P align="center"><FONT size="2">S-12
</FONT>

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<!-- link1 "REGARDING THE TRUSTEE" -->
<DIV align="left"><A NAME="007"></A></DIV>

<P align="center">
<B><FONT size="2">REGARDING THE TRUSTEE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank of New York is the trustee under the
indenture relating to the Senior Notes. We maintain normal
banking arrangements with The Bank of New York, which include a
$20&nbsp;million commitment pursuant to a revolving credit
agreement, none of which was outstanding at September&nbsp;30,
2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank of New York also serves as:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Trustee under the indenture relating to
    subordinated debt securities; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Investment manager for our nonunion
    post-retirement medical fund.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">BNY Western Trust, an affiliate of The Bank of
New York, is the trustee for our pension plan. The Bank of New
York is the trustee under APS&#146; first mortgage bond
indenture, senior note indenture, and subordinated debt
securities indenture. The Bank of New York is also the trustee
for the holders of several issues of pollution control bonds
issued on APS&#146; behalf. BNY Capital Markets, Inc., another
affiliate of The Bank of New York, is the remarketing agent for
a series of APS&#146; pollution control bonds. APS maintains
normal banking arrangements with The Bank of New York, which
include an $18 million commitment by The Bank of New York
pursuant to an APS revolving credit agreement, none of which was
outstanding at September&nbsp;30, 2003.
</FONT>

<!-- link1 "UNDERWRITING" -->
<DIV align="left"><A NAME="008"></A></DIV>

<P align="center">
<B><FONT size="2">UNDERWRITING</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to the terms and conditions set forth in
the underwriting agreement dated the date of this prospectus
supplement between us and each of the underwriters named below,
we have agreed to sell to each of the underwriters, and each of
the underwriters has severally agreed to purchase the principal
amount of Senior Notes set forth opposite its name below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal Amount of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Underwriters</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Senior Notes</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Barclays Capital Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">115,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">BNY Capital Markets, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">McDonald Investments Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the underwriting agreement, the underwriters
have agreed, subject to the terms and conditions set forth
therein, to purchase all of the Senior Notes offered hereby if
any of the Senior Notes are purchased. The obligations of the
underwriters, including their agreement to purchase the Senior
Notes from us, are several and not joint. The underwriting
agreement provides that the obligations of the underwriters
pursuant thereto are subject to certain conditions. The
underwriters will sell the Senior Notes to the public when and
if the underwriters buy the Senior Notes from us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters have advised us that they
initially propose to offer part of the Senior Notes directly to
the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that
represents a concession not in excess of 0.15% of the principal
amount of the Senior Notes. The underwriters may allow, and any
such dealers may reallow, a concession to certain other dealers
not to exceed 0.10% of the principal amount of the Senior Notes.
After the initial offering of the Senior Notes, the offering
price and other selling terms may from time to time be varied by
the underwriters.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not plan to list the Senior Notes on any
national securities exchange or the Nasdaq Stock Market, and
there is no established trading market for the Senior Notes. The
underwriters have advised us that they intend to make a market
in the Senior Notes. The underwriters are not obligated to do
so, however, and may discontinue their market making at any time
without notice. No assurance can be given as to the liquidity of
the trading market for the Senior Notes or that a public trading
market for the Senior Notes will develop.
</FONT>

<P align="center"><FONT size="2">S-13
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to facilitate the offering of the Senior
Notes, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the Senior
Notes. Specifically, the underwriters may overallot in
connection with the offering of the Senior Notes, creating a
short position in the Senior Notes for its own account. In
addition, to cover overallotments or to stabilize the price of
the Senior Notes, the underwriters may bid for, and purchase,
Senior Notes in the open market. Finally, the underwriters may
reclaim selling concessions allowed to an underwriter or a
dealer for distributing the Senior Notes in the offering, if it
repurchases previously distributed Senior Notes in transactions
to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize
or maintain the market price for the Senior Notes above
independent market levels. The underwriters are not required to
engage in these activities and may end any of these activities
at any time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that our expenses in connection with
the offer and sale of the Senior Notes will be approximately
$270,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have agreed to indemnify the underwriters
against, or contribute to payments the underwriters may be
required to make in respect of, certain liabilities, including
liabilities under the Securities Act of 1933.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters and certain of their affiliates
have, from time to time, performed various investment or
commercial banking and financial advisory services for us and
our affiliates in the ordinary course of business.
</FONT>

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<P align="center">
<B><FONT size="2">EXPERTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The financial statements and the related
financial statement schedule incorporated in this prospectus
supplement by reference from the Company&#146;s Current Report
on Form&nbsp;8-K filed November&nbsp;5, 2003 have been audited
by Deloitte&nbsp;&#38; Touche LLP, independent auditors, as
stated in their report (which report expresses an unqualified
opinion and includes explanatory paragraphs relating to the
change in 2002 in the method of accounting for trading
activities in order to comply with the provisions of Emerging
Issues Task Force Issue No.&nbsp;02-3, &#147;Issues Involved in
Accounting for Derivative Contracts Held for Trading Purposes
and Contracts Involved in Energy Trading and Risk Management
Activities&#148;, and to the change in 2001 in the method of
accounting for derivatives and hedging activities in order to
comply with the provisions of Statement of Financial Accounting
Standards No.&nbsp;133, &#147;Accounting for Derivative
Instruments and Hedging Activities&#148;), which is incorporated
herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as
experts in accounting and auditing.
</FONT>

<!-- link1 "LEGAL OPINIONS" -->
<DIV align="left"><A NAME="010"></A></DIV>

<P align="center">
<B><FONT size="2">LEGAL OPINIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The validity of the Senior Notes offered hereby
will be passed upon for Pinnacle West Capital Corporation by
Snell&nbsp;&#38; Wilmer L.L.P., One Arizona Center, Phoenix,
Arizona 85004, and for the underwriters by Pillsbury Winthrop
LLP, One Battery Park Plaza, New&nbsp;York, NY 10004-1490.
Snell&nbsp;&#38; Wilmer L.L.P. may rely as to all matters of New
York law upon the opinion of Pillsbury Winthrop LLP. Pillsbury
Winthrop LLP may rely as to all matters of Arizona law upon the
opinion of Snell&nbsp;&#38; Wilmer L.L.P.
</FONT>

<P align="center"><FONT size="2">S-14
</FONT>

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<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="center">
<B><FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT></B>

<P align="left">
<B><FONT size="2">Available Information</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We file annual, quarterly, and current reports,
and other information with the SEC. Our SEC filings are
available to the public over the Internet at the SEC&#146;s web
site: http://www.sec.gov. You may also read and copy any
document we file at the SEC&#146;s public reference room, which
is located at 450&nbsp;Fifth Street NW, Washington D.C. 20549.
You may call the SEC at 1-800-SEC-0330 for further information
on the public reference room. Reports and other information
concerning us can also be inspected and copied at the offices of
the New York Stock Exchange at 20&nbsp;Broad Street, New York,
New York 10005, and the Pacific Stock Exchange at 301&nbsp;Pine
Street, San Francisco, California 94104. Our filings with the
SEC are also available on our own web site at
http://www.pinnaclewest.com. The information on our web site is
not part of this prospectus supplement or the accompanying
prospectus
</FONT>

<P align="left">
<B><FONT size="2">Incorporation by Reference</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The SEC allows us to incorporate by reference the
information we file with them, which means that we can disclose
important information to you by referring you to those
documents. The information incorporated by reference is
considered to be part of this prospectus supplement, and later
information that we file with the SEC will automatically update
and supersede this information. We incorporate by reference the
documents listed below and any future filings we make with the
SEC under Sections&nbsp;13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 until all of the offered Senior
Notes are sold under this prospectus supplement:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Annual Report on Form&nbsp;10-K for the fiscal
    year ended December&nbsp;31, 2002 (except for Item&nbsp;8, which
    has been revised in the Current Report on Form&nbsp;8-K filed
    November&nbsp;5, 2003);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Quarterly Reports on Form&nbsp;10-Q for the
    fiscal quarters ended March&nbsp;31 and June&nbsp;30, 2003; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Current Reports on Form&nbsp;8-K filed
    January&nbsp;23, February&nbsp;4, February&nbsp;28,
    March&nbsp;12, March&nbsp;28, May&nbsp;2, May&nbsp;7,
    May&nbsp;13, June&nbsp;30, July&nbsp;28, September&nbsp;2,
    October&nbsp;6, October&nbsp;24 and November&nbsp;5, 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">You may request a copy of these filings and will
receive a copy of these filings, at no cost to you, by writing
or telephoning us at the following address:
</FONT>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">Pinnacle West Capital Corporation <BR>
     Office of the Secretary <BR>
     Station 9046 <BR>
     P.O.&nbsp;Box 53999 <BR>
     Phoenix, Arizona 85072-3999 <BR>
     (602)&nbsp;250-3252
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">S-15
</FONT>
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<P align="left"><FONT size="2">Prospectus
</FONT>
<P align="center"><FONT size="2"><B>PINNACLE WEST CAPITAL CORPORATION</B>
</FONT>

<P align="center"><FONT size="2"><B>$600,000,000</B>
</FONT>

<P align="center"><FONT size="2"><B>Debt Securities<BR>
Preferred Stock<BR>
Common Stock<BR>
Purchase Contracts<BR>
Units</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may offer and sell these securities from time to time in one or more
offerings. This
prospectus provides you with a general description of the securities we may
offer.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each time we sell these securities, we will provide a supplement to this
prospectus that contains
specific information about the offering and the terms of the securities. The
supplement may also add,
update, or change information contained in this prospectus. You should
carefully read this prospectus
and any supplement, as well as the documents incorporated or deemed to be
incorporated by reference
in this prospectus, before you invest in any of these securities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>See &#147;Risk Factors&#148; beginning on page 3 of this prospectus to read about certain
factors
you should consider.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal executive offices are located at 400 North Fifth Street, Phoenix,
AZ 85004. Our
telephone number is (602)&nbsp;250-1000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is listed on the New York Stock Exchange under the symbol
&#147;PNW.&#148;
</FONT>
<P align="center"><HR align="center" size="1" width="30%" noshade>

<P align="left"><FONT size="2"><B>Neither the Securities and Exchange Commission nor any state securities
commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this
prospectus. Any representation to the contrary is a criminal offense.</B>
</FONT>
<P align="center"><HR align="center" size="1" width="30%" noshade>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may offer and sell these securities directly to purchasers, through agents,
dealers, or
underwriters as designated from time to time, or through a combination of these
methods. Additional
information on our plan of distribution can be found inside under &#147;Plan of
Distribution.&#148; We will describe
the plan of distribution for any securities in the relevant prospectus
supplement. If any agents, dealers or
underwriters are involved in the sale of any securities, the relevant
prospectus supplement will set forth
any applicable commissions or discounts.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus may not be used to consummate sales of these securities unless
accompanied
by the applicable prospectus supplement.
</FONT>
<P align="center"><FONT size="2"><HR align="center" size="1" width="30%" noshade>
</FONT>

<P align="center"><FONT size="2">
The date of this prospectus is December&nbsp;5, 2002
</FONT>

<P align="center"><FONT size="2">&nbsp;</FONT>
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<P align="center"><FONT size="2"><B>TABLE OF CONTENTS</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Page</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">RISK FACTORS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ABOUT THIS PROSPECTUS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">FORWARD-LOOKING STATEMENTS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">THE COMPANY</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">RATIO OF EARNINGS TO FIXED CHARGES (a)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">USE OF PROCEEDS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">GENERAL DESCRIPTION OF THE SECURITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">DESCRIPTION OF DEBT SECURITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">DESCRIPTION OF PREFERRED STOCK</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">DESCRIPTION OF COMMON STOCK</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">DESCRIPTION OF THE PURCHASE CONTRACTS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">DESCRIPTION OF UNITS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">PLAN OF DISTRIBUTION</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EXPERTS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LEGAL OPINIONS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise indicated, currency amounts in this prospectus and any prospectus supplement
are stated in United States dollars (&#147;$,&#148; &#147;dollars,&#148; &#147;U.S. dollars,&#148; or &#147;U.S.$&#148;).
</FONT>
<P align="center"><FONT size="2">2</FONT>
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<!-- link1 "RISK FACTORS" -->
<DIV align="left"><A NAME="012"></A></DIV>
<P align="center"><FONT size="2"><B>RISK FACTORS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before purchasing our debt securities you should carefully consider the
following risk factors as well as the other information contained in this
prospectus and the information incorporated by reference in order to evaluate
an investment in our securities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The construction costs of the generation facilities of Pinnacle West
Energy Corporation (&#147;Pinnacle West Energy&#148;) could negatively impact our results
of operations.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pinnacle West Energy, one of our wholly-owned subsidiaries, has completed
or has under construction about 1,700 MW of natural gas-fired generating
capacity at an estimated cost of about $1&nbsp;billion. In addition, Pinnacle West
Energy has begun construction of the 570 MW Silverhawk plant in Nevada at an
estimated cost of approximately $400&nbsp;million. On November&nbsp;22, 2002, Pinnacle
West Energy announced the decision to cancel Redhawk Units 3 and 4. The two
530-megawatt natural gas-fired generators were scheduled to begin producing
electricity by early 2007. As a result of the plant cancellation, we expect to
record a charge of approximately $50&nbsp;million before income taxes ($30&nbsp;million
after-tax or $0.35 per share) in the fourth quarter of 2002. Pinnacle West
Energy&#146;s expansion plans will be sized to meet cash flow and market conditions.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pinnacle West Energy has funded and is currently funding its capital
requirements through capital infusions from us. We finance those infusions
through debt financings and internally generated cash. We financed Pinnacle
West Energy&#146;s generation expansion program premised upon Pinnacle West Energy&#146;s
receipt of the generation assets of Arizona Public Service Company
(&#147;APS&#148;), our
public utility subsidiary, by the end of 2002, as previously required by the
Arizona Corporation Commission&#146;s (&#147;ACC&#148;) electric competition rules and the
1999 settlement agreement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through early-2004, we will need to refinance or repay approximately $790
million of bridge debt incurred by us to finance Pinnacle West Energy&#146;s
construction of generation plants built since 1999 to serve APS customers. In
addition, we must finance the ongoing capital expenditures for the Pinnacle
West Energy construction program. Failure to refinance or repay a portion of
this bridge debt at the subsidiary level could adversely impact our credit
ratings.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
ACC&#146;s reversal of the generation asset transfer requirement results in
Pinnacle West Energy being unable to obtain investment grade credit ratings.
This, in turn, precludes Pinnacle West Energy from accessing capital markets to
finance its ongoing construction program or to refinance the bridge financing
provided by us to fund the construction of Pinnacle West Energy generation
assets or from effectively competing in the wholesale markets.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;16, 2002, APS filed an application with the ACC requesting
the ACC to allow APS to borrow up to $500&nbsp;million and to lend the proceeds to
Pinnacle West Energy or to us; to guarantee up to $500&nbsp;million of Pinnacle West
Energy&#146;s or our debt, or a combination of both, not to exceed $500&nbsp;million in
the aggregate. On November&nbsp;8, 2002, APS filed an Interim Financing Application
with the ACC requesting the ACC to permit APS to (a)&nbsp;make short-term advances
to Pinnacle West in the form of an inter-affiliate line of credit in the amount
of $125&nbsp;million or (b)&nbsp;guarantee $125&nbsp;million of
Pinnacle West&#146;s short-term
debt. On November&nbsp;22, 2002, the ACC approved APS&#146; request to make the $125
million interim loan or guarantee, subject to various conditions, including (a)
APS acquiring a $125&nbsp;million security interest in certain Pinnacle West Energy
assets and (b)&nbsp;the ACC examining regulatory insulation between APS and its
affiliates in connection with the ACC&#146;s consideration of APS&#146; $500&nbsp;million
financing application. We are unable to predict what actions, if any, the ACC
might propose or take in connection with this examination.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our credit ratings could be adversely affected if APS&#146; $500&nbsp;million
financing application is not approved by the ACC. On November&nbsp;4, 2002,
Standard and Poor&#146;s Corporation lowered the Company&#146;s senior unsecured debt
rating from &#147;BBB&#148; to &#147;BBB-.&#148;
</FONT>
<P align="center"><FONT size="2">3</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event that the ACC does not approve the $500&nbsp;million financing
application , we believe that we would be able to access the capital markets or
take other steps to refinance or repay the outstanding bridge debt and continue
to meet our ongoing capital requirements, although there can be no assurance
that we would be able to do so. See the following two Risk Factors.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>If we are not able to access capital at competitive rates, our ability to
implement our financial strategy will be adversely affected.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on access to both short-term money markets and longer-term capital
markets as a significant source of liquidity and for capital requirements not
satisfied by the cash flow from our operations. We believe that we will
maintain sufficient access to these financial markets based upon current credit
ratings. However, certain market disruptions or a downgrade of our credit
rating may increase our cost of borrowing or adversely affect our ability to
access one or more financial markets. Such disruptions could include:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">an economic downturn;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">capital market conditions generally;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the bankruptcy of an unrelated energy company;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">market prices for electricity and gas;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">terrorist attacks or threatened attacks on our facilities or unrelated energy
companies; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the overall health of the utility industry.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in economic conditions could result in higher interest rates,
which would increase our interest expense on our debt and reduce funds
available to us for our current plans. Additionally, an increase in our
leverage could adversely affect us by:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">increasing the cost of future debt financing;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">increasing our vulnerability to adverse economic and industry conditions;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">requiring us to dedicate a substantial portion of our cash flow from
operations to
payments on our debt, which would reduce funds available to us for
operations, future
business opportunities or other purposes; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">placing us at a competitive disadvantage compared to our competitors that
have less
debt.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See the preceding and following Risk Factor.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A significant reduction in our credit ratings could materially and
adversely affect our business, financial condition and results of operations.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot be sure that any of our current ratings will remain in effect
for any given period of time or that a rating will not be lowered or withdrawn
entirely by a rating agency if, in its judgment, circumstances in the future so
warrant. Any downgrade could increase our borrowing costs which would diminish
our financial results. We would likely be required to pay a higher interest
rate in future financings, and our potential pool of investors and funding
sources could decrease. A downgrade could require additional support in the
form of letters of credit or cash or other collateral and otherwise have a
material adverse effect on our business, financial condition and results of
operations. If our short-term ratings were to be lowered, it could limit our
access to the commercial paper market. We note that the
<P align="center"><FONT size="2">4</FONT>
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</FONT>
<P align="left"><FONT size="2">ratings from credit agencies are not recommendations to buy, sell or hold our
securities and that each rating should be evaluated independently of any other
rating. See the preceding two Risk Factors.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The debt securities will be structurally subordinated to the debt
securities and other obligations of our subsidiaries.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because we are structured as a holding company, all existing and future
debt and other liabilities of our subsidiaries will be effectively senior in
right of payment to our debt securities. None of the indentures under which we
may issue debt securities limits our ability or the ability of our subsidiaries
to incur additional debt in the future. The assets and cash flows of our
subsidiaries will be available, in the first instance, to service their own
debt and other obligations. Our ability to have the benefit of their assets
and cash flows, particularly in the case of any insolvency or financial
distress affecting our subsidiaries, would arise only through our equity
ownership interests in our subsidiaries and only after their creditors have
been satisfied. As discussed in the first Risk Factor above, in connection
with the ACC&#146;s consideration of APS&#146; $500&nbsp;million financing application, the
ACC will examine regulatory insulation between APS and its affiliates. We are
unable to predict what actions, if any, the ACC might propose or take in
connection with this examination.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The use of derivative contracts in the normal course of our business could
result in financial losses that negatively impact our results of operations.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations include managing market risks related to commodity prices,
changes in interest rates, and investments held by our pension and nuclear
decommissioning trust funds. We are exposed to the impact of market
fluctuations in the price and transportation costs of electricity, natural gas,
coal, and emissions allowances. We employ established procedures to manage
risks associated with these market fluctuations by utilizing various commodity
derivatives, including exchange-traded futures and options and over-the-counter
forwards, options, and swaps. As part of our overall risk management program,
we enter into derivative transactions to hedge purchases and sales of
electricity, fuels, and emissions allowances and credits. The changes in
market value of such contracts have a high correlation to price changes in the
hedged commodity.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are exposed to losses in the event of nonperformance or nonpayment by
counterparties. We use a risk management process to assess and monitor the
financial exposure of all counterparties. Despite the fact that the majority
of trading counterparties are rated as investment grade by the credit rating
agencies, there is still a possibility that one or more of these companies
could default, resulting in a material adverse impact on our earnings for a
given period.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changing interest rates will affect interest paid on variable-rate debt
and interest earned by our pension and nuclear decommissioning trust funds.
Our policy is to manage interest rates through the use of a combination of
fixed-rate and floating-rate debt. The pension and nuclear decommissioning
fund also have risks associated with changing market values of equity
investments. Pension and nuclear decommissioning costs are recovered in
regulated electricity prices.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>We are subject to complex government regulation which may have a negative
impact on our business and our results of operations.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are, directly and through our subsidiaries, subject to governmental
regulation which may have a negative impact on our business and results of
operations. We are a &#147;holding company&#148; within the meaning of the Public
Utility Holding Company Act (&#147;PUHCA&#148;); however, we are exempt from the
provisions of PUHCA by virtue of our filing of an annual exemption statement
with the Securities and Exchange Commission (&#147;SEC&#148;).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;APS, our wholly-owned electric utility, is subject to comprehensive
regulation by several federal, state and local regulatory agencies, which
significantly influence its operating
environment and may affect its ability to recover costs from utility
customers. APS is required to have numerous permits, approvals
<P align="center"><FONT size="2">5</FONT>
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<P align="left"><FONT size="2">and certificates from the agencies that regulate APS&#146; business. The Federal
Energy Regulatory Commission (&#147;FERC&#148;), the Nuclear Regulatory Commission
(&#147;NRC&#148;), the Environmental Protection Agency (&#147;EPA&#148;), and the ACC regulate many
aspects of our utility operations, including siting and construction of
facilities, customer service and the rates that APS can charge customers. We
believe the necessary permits, approvals and certificates have been obtained
for our existing operations. However, we are unable to predict the impact on
our business and operating results from the future regulatory activities of any
of these agencies. Changes in regulations or the imposition of additional
regulations could have an adverse impact on our results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Deregulation or restructuring of the electric industry may result in
increased competition, which could have a significant adverse impact on our
business and our financial results.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail competition and the unbundling of regulated energy could have a
significant adverse financial impact on us due to an impairment of assets, a
loss of retail customers, lower profit margins or increased costs of capital.
In 1999, the ACC approved rules that provide a framework for the introduction
of retail electric competition in Arizona. Under the rules, as modified by a
1999 settlement agreement among APS and various parties, APS was required to
transfer all of its competitive electric assets and services to an unaffiliated
party or parties or to a separate corporate affiliate or affiliates no later
than December&nbsp;31, 2002. Pursuant to an ACC order dated September&nbsp;10, 2002, the
ACC unilaterally modified the 1999 settlement agreement and directed APS to
cancel any plans to divest interests in any of its generating assets. The ACC
further established a requirement that APS competitively procure, at a minimum,
any power required for its retail customers that APS cannot produce from its
existing generating assets. The ACC ordered the ACC staff and interested
parties to develop a competitive procurement process by March&nbsp;1, 2003. These
regulatory developments and legal challenges to the rules have raised
considerable uncertainty about the status and pace of retail electric
competition in Arizona. Although some very limited retail competition existed
in APS&#146; service area in 1999 and 2000, there are currently no active retail
competitors offering unbundled energy or other utility services to APS&#146;
customers. As a result, we cannot predict when, and the extent to which,
additional competitors will re-enter APS&#146; service territory. These matters are
discussed in detail in the documents filed by us with the SEC.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of changes in federal law and regulatory policy, competition
in the wholesale electricity market has greatly increased due to a greater
participation by traditional electricity suppliers, non-utility generators,
independent power producers, and wholesale power marketers and brokers. This
increased competition could affect our load forecasts, plans for power supply
and wholesale energy sales and related revenues. As a result of the changing
regulatory environment and the relatively low barriers to entry, we expect
wholesale competition to increase. As competition continues to increase, our
financial position and results of operations could be adversely affected.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The uncertain outcome regarding the creation of regional transmission
organizations, or RTOs, may materially impact our operations, cash flows or
financial position.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In a December 1999 order, the FERC set minimum characteristics and
functions that must be met by utilities that participate in RTOs. The
characteristics for an acceptable RTO include independence from market
participants, operational control over a region large enough to support
efficient and nondiscriminatory markets, and exclusive authority to maintain
short-term reliability. On October&nbsp;16, 2001, APS and other owners of electric
transmission lines in the southwest filed with the FERC a request for a
declaratory order confirming that their proposal to form WestConnect RTO, LLC
would satisfy the FERC&#146;s requirements for the formation of an RTO. On October
10, 2002, the FERC issued an order finding that the WestConnect proposal, if
modified to address specified issues, could meet the FERC&#146;s RTO requirements
and provide the basic framework for a standard market design for the southwest.
In its order, the FERC also stated that its approval of various WestConnect
provisions addressed in the order would not be
overturned or affected by the final rule the FERC intends to ultimately
adopt in response to its July&nbsp;31, 2002 Notice of Proposed Rulemaking regarding
a standard market design for the electric utility industry. FERC did not
address all of the proposed WestConnect provisions in its order and some could
still be affected by a final rule in the pending rulemaking proceeding. We
cannot currently predict what, if
</FONT>
<P align="center"><FONT size="2">6</FONT>
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</FONT>
<P align="left"><FONT size="2">any, impact there may be to the WestConnect proposal or to us if the FERC
adopts the proposed rule. On November&nbsp;12, 2002, APS and the other owners filed
a request for rehearing and clarification on portions of the October&nbsp;10 order.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>We are subject to numerous environmental laws and regulations which may
increase our cost of operations, impact our business plans, or expose us to
environmental liabilities.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to numerous environmental regulations affecting many
aspects of our present and future operations, including air emissions, water
quality, wastewater discharges, solid waste, and hazardous waste. These laws
and regulations can result in increased capital, operating, and other costs,
particularly with regard to enforcement efforts focused on power plant
emissions obligations. These laws and regulations generally require us to
obtain and comply with a wide variety of environmental licenses, permits,
inspections and other approvals. Both public officials and private individuals
may seek to enforce applicable environmental laws and regulations. We cannot
predict the outcome (financial or operational) of any related litigation that
may arise.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we may be a responsible party for environmental clean up at
sites identified by a regulatory body. We cannot predict with certainty the
amount and timing of all future expenditures related to environmental matters
because of the difficulty of estimating clean-up costs. There is also
uncertainty in quantifying liabilities under environmental laws that impose
joint and several liability on all potentially responsible parties.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot be sure that existing environmental regulations will not be
revised or that new regulations seeking to protect the environment will not be
adopted or become applicable to us. Revised or additional regulations that
result in increased compliance costs or additional operating restrictions,
particularly if those costs are not fully recoverable from APS&#146; customers,
could have a material adverse effect on our results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Recent events in the energy markets that are beyond our control may have
negative impacts on our business.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the energy crisis in California during the summer of 2001,
the recent volatility of natural gas prices in North America, the filing of
bankruptcy by the Enron Corporation, and investigations by governmental
authorities into energy trading activities, companies generally in the
regulated and unregulated utility businesses have been under an increased
amount of public and regulatory scrutiny. The capital markets and ratings
agencies also have increased their level of scrutiny. We believe that we are
complying with all applicable laws, but it is difficult or impossible to
predict or control what effect these or related issues may have on our business
or our access to the capital markets.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Our results of operations can be adversely affected by milder weather.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Weather conditions directly influence the demand for electricity and
affect the price of energy commodities. Electric power demand is generally a
seasonal business. In Arizona, demand for power peaks during the hot summer
months, with market prices also peaking at that time. As a result, our overall
operating results fluctuate substantially on a seasonal basis. In addition, we
have historically sold less power, and consequently earned less income, when
weather conditions are milder. As a result, unusually mild weather could
diminish our results of operations and harm our financial condition.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>There are inherent risks in the operation of nuclear facilities, such as
environmental, health and financial risks and the risk of terrorist attack.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through APS, we have an ownership interest in and operate the Palo Verde
Nuclear Generating Station (&#147;Palo Verde&#148;). Palo Verde is subject to
environmental, health and financial risks such as the ability to dispose of
spent nuclear fuel, the ability to maintain adequate reserves for
decommissioning, potential liabilities arising out of the operation of these
facilities, and the costs of securing the facilities
<P align="center"><FONT size="2">7</FONT>
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</FONT>
<P align="left"><FONT size="2">against possible terrorist attacks. We maintain decommissioning trusts and
external insurance coverage to minimize our financial exposure to these risks;
however, it is possible that damages could exceed the amount of insurance
coverage.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The NRC has broad authority under federal law to impose licensing and
safety-related requirements for the operation of nuclear generation facilities.
In the event of noncompliance, the NRC has the authority to impose fines or
shut down a unit, or both, depending upon its assessment of the severity of the
situation, until compliance is achieved. In addition, although we have no
reason to anticipate a serious nuclear incident at Palo Verde, if an incident
did occur, it could materially and adversely affect our results of operations
or financial condition. A major incident at a nuclear facility anywhere in the
world could cause the NRC to limit or prohibit the operation or licensing of
any domestic nuclear unit.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The operation of Palo Verde requires licenses that need to be periodically
renewed and/or extended. We do not anticipate any problems renewing these
licenses. However, as a result of potential terrorist threats and increased
public scrutiny of utilities, the licensing process could result in increased
licensing or compliance costs that are difficult or impossible to predict.
</FONT>
<!-- link1 "ABOUT THIS PROSPECTUS" -->
<DIV align="left"><A NAME="013"></A></DIV>
<P align="center"><FONT size="2"><B>ABOUT THIS PROSPECTUS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus is part of a registration statement (No.&nbsp;333-101457) that
we filed with the SEC utilizing a &#147;shelf&#148; registration process. Under this
shelf process, we may offer up to $600,000,000 aggregate initial offering price
of the debt securities, preferred stock, common stock, purchase contracts and
units described in this prospectus in one or more offerings. In this
prospectus we will refer to the debt securities, preferred stock, common stock,
share purchase contracts and units collectively as the &#147;securities.&#148; This
prospectus provides you with a general description of the securities we may
offer. Each time we offer securities, we will provide you with a prospectus
supplement and, if applicable, a pricing supplement. The prospectus supplement
and any applicable pricing supplement will describe the specific terms of the
securities being offered. The prospectus supplement and any applicable pricing
supplement may also add, update or change the information in this prospectus.
In addition, the registration statement filed with the SEC includes exhibits
that provide more details about the securities. Please carefully read this
prospectus, the applicable prospectus supplement and any applicable pricing
supplement, together with the information contained in the documents referred
to under the heading &#147;Where You Can Find More Information.&#148;
</FONT>
<!-- link1 "FORWARD-LOOKING STATEMENTS" -->
<DIV align="left"><A NAME="014"></A></DIV>
<P align="center"><FONT size="2"><B>FORWARD-LOOKING STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus, any accompanying prospectus supplement, and the
additional information described under the heading &#147;Where You Can Find More
Information&#148; may contain forward-looking statements within the meaning of the
safe harbor of the Private Securities Litigation Reform Act of 1995. These
statements are subject to risks and uncertainties and are based on the beliefs
and assumptions of our management, based on information currently available to
our management. When we use words such as &#147;believes,&#148; &#147;expects,&#148;
&#147;anticipates,&#148; &#147;intends,&#148; &#147;plans,&#148; &#147;estimates,&#148; &#147;should,&#148; or similar
expressions, we are making forward-looking statements.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward-looking statements are not guarantees of performance. They
involve risks, including those described under &#147;Risk Factors&#148; above,
uncertainties, and assumptions. Our future results may differ materially from
those expressed in these forward-looking statements. Many of the factors that
will determine these results are beyond our ability to control or predict.
These factors include, but are not limited to:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the ongoing restructuring of the electric industry, including the
introduction of retail
electric competition in Arizona and decisions impacting wholesale competition;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the outcome of regulatory and legislative proceedings relating to the restructuring;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">8</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">state and federal regulatory and legislative decisions and actions, including price caps
and other market constraints imposed by the FERC;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">regional economic and market conditions, including the California energy situation and
completion of generation construction in the region, which could affect customer growth
and the cost of power supplies;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the cost of debt and equity capital and access to the capital markets;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">weather variations affecting local and regional customer energy usage;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">conservation programs;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">power plant performance;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the successful completion of our generation expansion program;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">regulatory issues associated with generation expansion, such as permitting and licensing;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our ability to compete successfully outside traditional regulated markets (including the
wholesale market);</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">technological developments in the electric industry;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the performance of the stock market, which affects the amount of our required
contributions to our pension plan and decommissioning trust funds;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the strength of the real estate market in the market areas of SunCor, our
real estate
subsidiary, which include Arizona, New Mexico and Utah; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">other uncertainties, all of which are difficult to predict and many of which
are beyond our
control.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are cautioned not to put undue reliance on any forward-looking
statements. We claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995
for any forward-looking statements contained in this prospectus, including in
the information incorporated by reference in this prospectus, and any
prospectus supplement.
</FONT>
<P align="center"><FONT size="2">9</FONT>
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<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->
<DIV align="left"><A NAME="015"></A></DIV>
<P align="center"><FONT size="2"><B>WHERE YOU CAN FIND MORE INFORMATION</B>
</FONT>

<P align="left"><FONT size="2"><B>Available Information</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file annual, quarterly, and current reports, and other information with
the SEC. Our SEC filings are available to the public over the Internet at the
SEC&#146;s web site: http://www.sec.gov. You may also read and copy any document we
file at the SEC&#146;s public reference room, which is located at 450 Fifth Street
NW, in Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Reports and other
information concerning us can also be inspected and copied at the offices of
the New York Stock Exchange at 20 Broad Street, New York, New York 10005, and
the Pacific Stock Exchange at 301 Pine Street, San Francisco, California 94104.
Our filings with the SEC are also available on our own web site at
http://www.pinnaclewest.com. The information on our web site is not part of
this registration statement.
</FONT>
<P align="left"><FONT size="2"><B>Incorporation By Reference</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Sections&nbsp;13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until all securities are sold under this prospectus.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Annual Report on Form&nbsp;10-K for the fiscal year ended December&nbsp;31, 2001
(except for Items 6, 7 and 8, which have been revised in the Current Report on Form&nbsp;8-K dated
November&nbsp;21, 2002);
</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">
Quarterly Reports on Form&nbsp;10-Q for the fiscal quarters ended March&nbsp;31, June&nbsp;30, and
September&nbsp;30, 2002;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Current Reports on Form&nbsp;8-K dated December&nbsp;14, 2001 and February&nbsp;8, March&nbsp;31,
April
26, May&nbsp;22, June&nbsp;5, June&nbsp;11, June&nbsp;30, July&nbsp;11, July&nbsp;23, August&nbsp;13, August
27,
September&nbsp;10, September&nbsp;30, October&nbsp;17, November&nbsp;14, November&nbsp;21, and
November
22, 2002;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The description of the Company&#146;s common stock contained in the registration
statement
on Form&nbsp;8-B filed with the SEC on July&nbsp;25, 1985, and any amendment or
report which we
have filed (or will file after the date of this prospectus and prior to
the termination of this
offering) for the purpose of updating such description, including the
Company&#146;s Current
Report on Form&nbsp;8-K dated March&nbsp;22, 1999 and Exhibit&nbsp;4.1 to the Company&#146;s
Quarterly
Report on Form&nbsp;10-Q for the fiscal quarter ended March&nbsp;31, 2002.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may request a copy of these filings and will receive a copy of these
filings, at no cost, by writing or telephoning us at the following address:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Pinnacle West Capital
Corporation<BR>Office of the Secretary<BR>Station 9068<BR>P.O. Box
53999<BR>Phoenix, Arizona 85072-3999<BR>(602)&nbsp;250-3252</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">10</FONT>




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<!-- link1 "THE COMPANY" -->
<DIV align="left"><A NAME="016"></A></DIV>
<P align="center"><FONT size="2"><B>THE COMPANY</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We own all of the outstanding common stock of Arizona Public Service Company (&#147;APS&#148;). APS
is an electric utility that provides either retail or wholesale electric service to substantially all of the state of
Arizona, with the major exceptions of the Tucson metropolitan area and about one-half of the Phoenix
metropolitan area. Electricity is provided through a distribution system owned by APS. APS also
generates and, through our marketing and trading division, sells and delivers electricity to wholesale
customers in the western United States.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our marketing and trading division currently sells into the wholesale market, the APS and
Pinnacle West Energy generation output that is not needed for
APS&#146; native load, which includes loads for
retail customers and traditional cost-of-service wholesale customers. Subject to specified risk parameters
established by our Board of Directors and its energy risk management committee, the marketing and
trading division also has engaged in activities to hedge purchases and sales of electricity, fuels, and
emissions allowances and credits and to profit from market price movements. However, the ACC has
ordered the ACC staff and interested parties to develop a competitive procurement process by March&nbsp;1,
2003 by which APS will competitively procure, at a minimum, any power needed for its retail customers
that it cannot produce from its existing generation assets. For purposes of this competitive procurement
process, Pinnacle West Energy generation assets are not counted as APS generation assets. The draft
ACC Staff report proposing a competitive procurement process provides that Pinnacle West Energy
would be able to bid in connection with any such competitive procurement by APS.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our other major subsidiaries are:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Pinnacle West Energy Corporation, through which we conduct our unregulated electricity
generation operations;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">APS Energy Services Company, Inc., which provides commodity-related energy services
(such as direct access commodity contracts, energy procurement, and energy supply
consultation) and energy-related products and services (such as energy master planning,
energy use consultation and facility audits, cogeneration analysis and installation, and
project management) to commercial, industrial and institutional retail customers in the
western United States;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">SunCor Development Company, a developer of residential, commercial, and industrial
real estate projects in Arizona, New Mexico, and Utah; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">El Dorado Investment Company, an investment firm.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">11</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<!-- link1 "RATIO OF EARNINGS TO FIXED CHARGES" -->
<DIV align="left"><A NAME="017"></A></DIV>
<P align="center"><FONT size="2"><B>RATIO OF EARNINGS TO FIXED CHARGES (a)</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows our consolidated ratio of earnings to fixed charges and our consolidated ratio of earnings to
combined fixed charges and preferred dividends:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Nine Months</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="19"><FONT size="1"><B>Twelve Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>September 30</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="19"><FONT size="1"><B>December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="19"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1999</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1998</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1997</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated ratio of earnings to fixed
charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">

    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated ratio of earnings to
combined fixed charges and preferred
dividends</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The ratio of earnings to fixed charges was computed by dividing earnings by fixed charges. For this purpose, earnings
consist of pre-tax income from continuing operations excluding extraordinary items and cumulative effect of change in accounting for
derivatives, plus the amount of fixed charges as defined below. Fixed charges consist of: expensed interest; amortization of debt
discount, premium and expense; and an estimate of interest implicit in rentals.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The ratio of earnings to combined fixed charges and preferred dividends was computed by dividing earnings by the sum of
fixed charges and preferred dividends. For this purpose, earnings consist of pre-tax income from continuing operations excluding
extraordinary items and cumulative effect of change in accounting for derivatives, plus the amount of combined fixed charges and
preferred dividends as defined below. Combined fixed charges and preferred dividends consist of: expensed interest; amortization of
debt discount, premium and expense; an estimate of interest implicit in rentals; and preferred stock dividend requirements of
majority-owned subsidiaries increased to reflect our pre-tax earnings requirement.
</FONT>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">We have reclassified certain prior year amounts to conform to the current year presentation.</FONT></TD>
</TR>
</TABLE>
<!-- link1 "USE OF PROCEEDS" -->
<DIV align="left"><A NAME="018"></A></DIV>
<P align="center"><FONT size="2"><B>USE OF PROCEEDS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to use the proceeds from the sale of these securities for general corporate purposes, which may include the
repayment of indebtedness, capital expenditures, the funding of working capital, acquisitions and stock repurchases and/or capital
infusions into one or more of our subsidiaries for any of those purposes. The specific use of proceeds from the sale of these
securities will be set forth in each prospectus supplement relating to each offering of these securities.
</FONT>
<!-- link1 "GENERAL DESCRIPTION OF THE SECURITIES" -->
<DIV align="left"><A NAME="019"></A></DIV>
<P align="center"><FONT size="2"><B>GENERAL DESCRIPTION OF THE SECURITIES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, directly or through agents, dealers or underwriters that we designate, may offer and sell, from time to time, up to
$600,000,000 (or the equivalent in one or more foreign currencies or currency units) aggregate initial offering price of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our debt securities, in one or more series, which may be senior debt securities or subordinated debt securities, in
each case consisting of notes or other unsecured evidences of indebtedness;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">shares of our preferred stock;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">shares of our common stock;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">12</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">purchase contracts to acquire any of the other securities that may be sold under this prospectus; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>

    <TD width="93%"><FONT size="2">any combination of these securities, individually or as units.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may offer and sell these securities either individually or as units consisting of one or more of these securities, each
on terms to be determined at the time of sale. We may issue debt securities and/or shares of preferred stock that are exchangeable
for and/or convertible into common stock or any of the other securities that may be sold under this prospectus. When particular
securities are offered, a supplement to this prospectus will be delivered with this prospectus, which will describe the terms of the
offering and sale of the offered securities.
</FONT>
<!-- link1 "DESCRIPTION OF DEBT SECURITIES" -->
<DIV align="left"><A NAME="020"></A></DIV>
<P align="center"><FONT size="2"><B>DESCRIPTION OF DEBT SECURITIES</B>
</FONT>

<P align="left"><FONT size="2"><B>General</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following description highlights the general terms of the debt securities. When we offer debt securities in the future,
the prospectus supplement will explain the particular terms of those securities and the extent to which any of these general
provisions will not apply.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We can issue an unlimited amount of debt securities under the indentures listed below. We can issue debt securities from
time to time and in one or more series as determined by us. In addition, we can issue debt securities of any series with terms
different from the terms of debt securities of any other series and the terms of particular debt securities within any series may
differ from each other, all without the consent of the holders of previously issued series of debt securities. The debt securities
of each series will be our direct, unsecured obligations. The debt securities may be issued in one or more new series under:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">an Indenture, dated as of December&nbsp;1, 2000, between The Bank of New York and us, in the case of subordinated debt
securities;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">an Indenture, dated as of December&nbsp;1, 2000, between The Bank of New York and us, as amended by the First Supplemental
Indenture thereto dated as of March&nbsp;15, 2001, in the case of senior debt securities; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">in the case of convertible debt securities, one of two new indentures between us and The Bank of New York, as trustee,
for convertible senior debt securities or convertible subordinated debt securities.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have issued and there are outstanding $300&nbsp;million of our 6.40% Notes due 2006 under the senior debt securities indenture
described above.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because we are structured as a holding company, all existing and future indebtedness and other liabilities of our
subsidiaries will be effectively senior in right of payment to our debt securities, whether senior debt securities or subordinated
debt securities. None of the above Indentures limits our ability or the ability of our subsidiaries to incur additional indebtedness
in the future. The assets and cash flows of our subsidiaries will be available, in the first instance, to service their own debt and
other obligations and our ability to have the benefit of their assets and cash flows, particularly in the case of any insolvency or
financial distress affecting our subsidiaries, would arise only through our equity ownership interests in our subsidiaries and only
after their creditors had been satisfied. Additional information is
provided below under &#147;Subordination&#148; as to the allocation of
outstanding indebtedness on our part and on the part of our subsidiaries.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have summarized selected provisions of the Indentures below. The summary is not complete. We have filed the forms of
the Indentures as exhibits to the registration statement. You should
</FONT>
<P align="center"><FONT size="2">13</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">read the Indentures in their entirety, including the definitions of certain terms, together with this prospectus and the prospectus
supplement before you make any investment decision. Although separate Indentures are used for subordinated debt securities, senior
debt securities, convertible subordinated debt securities and convertible senior debt securities, the description of the Indenture in
this section applies to all Indentures, unless otherwise noted.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should refer to the prospectus supplement attached to this prospectus for the following information about a new series
of debt securities:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">title of the debt securities;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the aggregate principal amount of the debt securities or the series of which they are a part;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the date on which the debt securities mature;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the interest rate;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">when the interest on the debt securities accrues and is payable;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the record dates;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">places where
principal, premium, or interest will be payable;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">periods within which, and prices at which we can redeem debt securities at our option;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any obligation on our part to
redeem or purchase debt securities pursuant to a sinking fund or at the option of the holder;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">denominations and multiples at which debt securities will be issued if other than $1,000;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any index or formula from
which the amount of principal or any premium or interest may be determined;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any allowance for alternative currencies and determination of value;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">whether the debt securities are convertible and the terms and conditions applicable to conversion, including the
conversion price or rate, the conversion period, and other conversion terms and provisions;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">whether the debt securities are defeasible under the terms of the Indenture;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">whether we are issuing the debt
securities as global securities;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any additional or different events of default and any change in the right of the trustee or the holders to declare the
principal amount due and payable if there is any default;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any addition to or change in the covenants in the Indenture; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any other terms.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may sell the debt securities at a substantial discount below their principal amount. The prospectus supplement may
describe special federal income tax considerations that apply to debt
</FONT>
<P align="center"><FONT size="2">14</FONT>
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<P align="left"><FONT size="2">securities sold at an original issue discount or to debt securities that are denominated in a currency other than United States
dollars.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the applicable prospectus supplement specifies otherwise, the debt securities will not be listed on any securities
exchange.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than the protections described in this prospectus and in the prospectus supplement, holders of debt securities would
not be protected by the covenants in the Indenture from a highly-leveraged transaction.
</FONT>
<P align="left"><FONT size="2"><B>Subordination</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Indenture relating to the subordinated debt securities states that, unless otherwise provided in a supplemental
indenture or a board resolution, the debt securities will be subordinate to all senior debt. This is true whether the senior debt is
outstanding as of the date of the Indenture or is incurred afterwards. The balance of the information under this heading assumes
that a supplemental indenture or a board resolution results in a series of debt securities being subordinated obligations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Indenture states that we cannot make payments of principal, premium, or interest on the subordinated debt if:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the principal, premium or interest on senior debt is not paid when due and the applicable grace period for the default
has ended and the default has not been cured or waived; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the maturity of any senior debt has been accelerated because of a default.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Indenture provides that we must pay all
senior debt in full before the holders of the subordinated debt securities may receive or retain any payment if our assets are
distributed to our creditors upon any of the following:
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;dissolution;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;winding-up;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;liquidation;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reorganization, whether voluntary or
involuntary;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;bankruptcy;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;insolvency;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;receivership; or
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;any other proceedings.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Indenture provides that when all amounts owing on the senior debt are paid in full, the holders of the subordinated debt
securities will be subrogated to the rights of the holders of senior debt to receive payments or distributions applicable to senior
debt.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Indenture defines senior debt as the principal, premium, interest and any other payment due under any of the following,
whether outstanding at the date of the Indenture or thereafter incurred, created or assumed:
</FONT>
<P align="center"><FONT size="2">15</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">all of our debt evidenced by notes, debentures, bonds, or other securities we sell for money;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">all debt of others of the kinds described in the preceding bullet point that we assume or guarantee in any manner; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">all renewals, extensions, or refundings of debt of the kinds described in either of the two preceding bullet points.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, the preceding will not be considered senior debt if the document creating the debt or the assumption or guarantee
of the debt states that it is not superior to or that it is on equal footing with the subordinated debt securities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Indenture does not limit the aggregate amount of senior debt that we may issue. As of September&nbsp;30, 2002, our
outstanding senior debt (excluding our subsidiaries) was approximately $792&nbsp;million. In addition, as of September&nbsp;30, 2002, our
subsidiaries, principally APS, had approximately $2.3&nbsp;billion of debt outstanding, of which $430&nbsp;million represented APS first
mortgage bonds or senior notes, both of which are directly or
indirectly secured by substantially all of APS&#146; assets. As discussed
above under &#147;General&#148;, our debt securities, whether senior debt securities or subordinated securities, are structurally subordinated
to the debt securities and other obligations of our subsidiaries.
</FONT>
<P align="left"><FONT size="2"><B>Convertibility</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No series of debt securities, whether senior or subordinated, will be convertible into, or exchangeable for, other
securities or property except as set forth in the applicable prospectus supplement. You should refer to the prospectus supplement
that accompanies this prospectus for a description of the specific conversion provisions and terms of any series of convertible debt
securities that we may offer by that prospectus supplement. These terms and provisions may include:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the title and specific designation of the convertible debt securities, including whether they are convertible senior
debt securities or convertible subordinated debt securities;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the terms and conditions upon which conversion of the convertible debt securities may be effected, including the
conversion price, the conversion period and other conversion provisions;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the terms and conditions on which we may, or may be required to, redeem the convertible debt securities;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the place or places where we must pay the convertible debt securities and where any convertible debt securities issued
in registered form may be sent for transfer, conversion or exchange; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any other terms of the convertible debt securities and any other deletions from or modifications or additions to the
indenture in respect of the convertible debt securities, including those relating to the subordination of any
convertible debt securities or any addition to or changes in the events of default or covenants of any convertible debt
securities.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Form, Exchange, and Transfer</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each series of debt securities will be issuable only in fully registered form and without coupons. In addition, unless
otherwise specified in a prospectus supplement, the debt securities will be issued in denominations of $1,000 and multiples of
$1,000. We, the trustee, and any of our agents may treat the
</FONT>
<P align="center"><FONT size="2">16</FONT>
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<P align="left"><FONT size="2">registered holder of a debt security as the absolute owner for the purpose of making payments, giving notices, and for all other
purposes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of debt securities may exchange them for any other debt securities of the same series, in authorized
denominations and equal principal amount. However, this type of exchange will be subject to the terms of the Indenture and any
limitations that apply to global securities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A holder may transfer debt securities by presenting the endorsed security at the office of a security registrar or at the
office of any transfer agent we designate. The holder will not be charged for any exchange or registration of transfer, but we may
require payment to cover any tax or other governmental charge in connection with the transaction. We have appointed the trustee
under each Indenture as security registrar. A prospectus supplement will name any transfer agent we designate for any debt
securities if different from the security registrar. We may designate additional transfer agents or rescind the designation of any
transfer agent or approve a change in the office through which any transfer agent acts at any time, except that we will maintain a
transfer agent in each place of payment for debt securities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the debt securities of any series are to be redeemed in part, we will not be required to do any of the following:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">issue, register the transfer of, or exchange any debt securities of that series and/or tenor beginning 15&nbsp;days before
the day of mailing of a notice of redemption of any debt security that may be selected for redemption and ending at the
close of business on the day of the mailing; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">register the transfer of or exchange any debt security selected for redemption, except for an unredeemed portion of a
debt security that is being redeemed in part.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Payment and Paying Agents</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise indicated in the applicable prospectus supplement, we will pay interest on a debt security on any interest
payment date to the person in whose name the debt security is registered.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise indicated in the applicable prospectus supplement, the principal, premium, and interest on the debt
securities of a particular series will be payable at the office of the paying agents that we may designate. However, we may pay any
interest by check mailed to the address, as it appears in the security register, of the person entitled to that interest. Also,
unless otherwise indicated in the applicable prospectus supplement, the corporate trust office of the trustee in The City of New York
will be our sole paying agent for payments with respect to debt securities of each series. Any other paying agent that we initially
designate for the debt securities of a particular series will be named in the applicable prospectus supplement. We may at any time
designate additional paying agents or rescind the designation of any paying agent or approve a change in the office through which any
paying agent acts, except that we will maintain a paying agent in each place of payment for the debt securities of a particular
series.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All money that we pay to a paying agent for the payment of the principal, premium, or interest on any debt security that
remains unclaimed at the end of two years after the principal, premium, or interest has become due and payable will be repaid to us,
and the holder of the debt security may look only to us for payment.
</FONT>
<P align="left"><FONT size="2"><B>Consolidation, Merger, and Sale Of Assets</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise indicated in the applicable prospectus supplement, we may not:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">consolidate with or merge into any other entity;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">17</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">convey, transfer, or lease our properties and assets substantially as an entirety to any entity; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">permit any entity to consolidate with or merge into us or convey, transfer, or lease its properties and assets
substantially as an entirety to us,</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">unless the following conditions are met:
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the successor entity is a corporation, partnership, trust, or other entity organized and validly existing under the
laws of any domestic jurisdiction and assumes our obligations on the debt securities and under the Indenture;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">immediately after giving effect to the transaction, no event of default, and no event which, after notice or lapse of
time or both, would become an event of default, shall have occurred and be continuing; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">other conditions are met.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon any merger, consolidation, or transfer or lease of properties, the successor person will be substituted for us under
the Indenture, and, thereafter, except in the case of a lease, we will be relieved of all obligations and covenants under the
Indenture and the debt securities.
</FONT>
<P align="left"><FONT size="2"><B>Events of Default</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the following will be an event of default under the Indenture with respect to debt securities of any series:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our failure to pay principal of or any premium on any debt security of that series when due;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our failure to pay any interest on any debt securities of that series when due, and the continuance of that failure
for 30&nbsp;days;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our failure to deposit any sinking fund payment, when due, in respect of any debt securities of that series;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our failure to perform any of our other covenants in the Indenture relating to that series and the continuance of that
failure for 90&nbsp;days after written notice has been given by the trustee or the holders of at least 25% in principal
amount of the outstanding debt securities of that series;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">bankruptcy, insolvency, or reorganization events involving us; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any other event of default for that series described in the applicable prospectus supplement.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If an event of default occurs and is continuing other than an event of default relating to bankruptcy, insolvency, or
reorganization, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding debt securities of
the affected series may declare the principal amount of the debt securities of that series to be due and payable immediately. In the
case of any debt security that is an original issue discount security or the principal amount of which is not then determinable, the
trustee or the holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series may declare
the portion of the principal amount of the debt security specified in the terms of such debt security to be immediately due and
payable upon an event of default.
</FONT>
<P align="center"><FONT size="2">18</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If an event of default involving bankruptcy, insolvency, or reorganization occurs, the principal amount of all the debt
securities of the affected series will automatically, and without any action by the trustee or any holder, become immediately due and
payable. After any acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate
principal amount of the outstanding debt securities of that series may rescind and annul the acceleration if all events of default,
other than the non-payment of accelerated principal, have been cured or waived as provided in the Indenture.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or
direction of any of the holders, unless the holders have offered the trustee indemnity satisfactory to it. Subject to provisions for
the indemnification of the trustee, the holders of a majority in principal amount of the outstanding debt securities of any series
will have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the trustee, or
exercising any trust or power conferred on the trustee, with respect to the debt securities of that series.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No holder of a debt security of any series will have any right to institute any proceeding under the Indenture, or for the
appointment of a receiver or a trustee, or for any other remedy under the Indenture, unless:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the holder has previously given the trustee written notice of a continuing event of default with respect to the debt
securities of that series;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series have made
written request, and the holder or holders have offered reasonable indemnity, to the trustee to institute the proceeding
as trustee; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the trustee has failed to institute the proceeding, and has not received from the holders of a majority in aggregate
principal amount of the outstanding debt securities of that series a direction inconsistent with the request within 60
days after the notice, request, and offer of indemnity.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The limitations provided above do not apply to a suit instituted by a holder of a debt security for the enforcement of
payment of the principal, premium, or interest on the debt security on or after the applicable due date.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are required to furnish to the trustee annually a certificate of various officers stating whether or not we are in
default in the performance or observance of any of the terms, provisions, and conditions of the Indenture and, if so, specifying all
known defaults.
</FONT>
<P align="left"><FONT size="2"><B>Modification and Waiver</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In limited cases the trustee, as well as us, may make modifications and amendments to the Indenture without the consent of
the holders of any series of debt securities. The trustee may make modifications and amendments to the Indenture with the consent of
the holders of not less than 66 2/3% in aggregate principal amount of the outstanding debt securities of each series affected by the
modification or amendment. However, without the consent of the holder of each outstanding debt security affected, no modification or
amendment may:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">reduce the principal amount of, or any premium or interest on, any debt security;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">reduce the amount of principal of
an original issue discount security or any other debt security payable upon acceleration of the maturity of the
security;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">change the stated maturity of the principal of, or any installment of principal of or interest on, any debt security;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">19</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">change the place or currency of payment of principal of, or any premium or interest on, any debt security;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">make provisions with respect to conversion or exchange rights of holders of debt securities;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">impair the right to institute suit for the enforcement of any payment on or with respect to any debt security; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">reduce the percentage in principal amount of outstanding debt securities of any series, the consent of whose holders
is required for modification or amendment of the Indenture necessary for waiver of compliance with certain provisions of
the Indenture or of certain defaults, or modify the provisions of the Indenture relating to modification and waiver.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compliance with certain restrictive provisions of the Indenture may be waived by the holders of not less than 66 2/3% in
aggregate principal amount of the outstanding debt securities of any series. The holders of a majority in principal amount of the
outstanding debt securities of any series may waive any past default under the Indenture, except:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a default in the payment of principal, premium, or interest; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a default under covenants and provisions of the Indenture which cannot be amended without the consent of the holder of
each outstanding debt security of the affected series.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In determining whether the holders of the requisite principal amount of the outstanding debt securities have given or taken
any direction, notice, consent, waiver, or other action under the Indenture as of any date:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the principal amount of an outstanding original issue discount security will be the amount of the principal that would
be due and payable upon acceleration of the maturity on that date;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">if the principal amount payable at the stated maturity of a debt security is not determinable, the principal amount of
the outstanding debt security will be an amount determined in the manner prescribed for the debt security; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the principal amount of an outstanding debt security denominated in one or more foreign currencies will be the U.S.
dollar equivalent of the principal amount of the debt security or, in the case of a debt security described in the
previous clause above, the amount described in that clause.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If debt securities have been fully defeased or if we have deposited money with the trustee to redeem debt securities, they
will not be considered outstanding.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except in limited circumstances, we will be entitled to set any day as a record date for the purpose of determining the
holders of outstanding debt securities of any series entitled to give or take any direction, notice, consent, waiver, or other action
under the Indenture. In limited circumstances, the trustee will be entitled to set a record date for action by holders. If a record
date is set for any action to be taken by holders of a particular series, the action may be taken only by persons who are holders of
outstanding debt securities of that series on the record date. To be effective, the action must be taken by holders of the requisite
principal amount of the debt securities within a specified period following the record date. For any particular record date, this
period will be 180&nbsp;days or any other shorter period as we may specify. The period may be shortened or lengthened, but not beyond 180
days.
</FONT>
<P align="center"><FONT size="2">20</FONT>
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<P align="left"><FONT size="2"><B>Defeasance and Covenant Defeasance</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may elect to have the provisions of the Indenture relating to defeasance and discharge of indebtedness, or defeasance of
restrictive covenants in the Indenture, applied to the debt securities of any series, or to any specified part of a series. The
prospectus supplement describing a series of debt securities will state whether we can make these elections for that series.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><B>Defeasance
and Discharge</B></I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will be discharged from all of our obligations with respect to the debt securities of a series if we deposit with the
trustee money in an amount sufficient to pay the principal, premium, and interest on the debt securities of that series when due in
accordance with the terms of the Indenture and the debt securities. We can also deposit securities that will provide the necessary
monies. However, we will not be discharged from the obligations to exchange or register the transfer of debt securities, to replace
stolen, lost, or mutilated debt securities, to maintain paying agencies, and to hold moneys for payment in trust. The defeasance or
discharge may occur only if we deliver to the trustee an opinion of counsel stating that we have received from, or there has been
published by, the United States Internal Revenue Service a ruling, or there has been a change in tax law, in either case to the
effect that holders of such debt securities:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">will not recognize gain or loss for federal income tax purposes as a result of the deposit, defeasance, and discharge;
and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">will be subject to federal income tax on the same amount, in the same manner, and at the same times as would have been
the case if the deposit, defeasance, and discharge were not to occur.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><B>Defeasance
of Covenants</B></I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may elect to omit compliance with restrictive covenants in the Indenture and any additional covenants that may be
described in the applicable prospectus supplement for a series of debt securities. This election will preclude some actions from
being considered defaults under the Indenture for the applicable series. In order to exercise this option, we will be required to
deposit, in trust for the benefit of the holders of debt securities, funds in an amount sufficient to pay the principal, premium and
interest on the debt securities of the applicable series. We may also deposit securities that will provide the necessary monies. We
will also be required to deliver to the trustee an opinion of counsel to the effect that holders of the debt securities will not
recognize gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be
subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if the deposit
and defeasance were not to occur. If we exercise this option with respect to any debt securities and the debt securities are
declared due and payable because of the occurrence of any event of default, the amount of funds deposited in trust would be
sufficient to pay amounts due on the debt securities at the time of their respective stated maturities but may not be sufficient to
pay amounts due on the debt securities on any acceleration resulting from an event of default. In that case, we would remain liable
for the additional payments.
</FONT>
<P align="left"><FONT size="2"><B>Governing Law</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The law of the State of New York will govern the Indenture and the debt securities.
</FONT>
<P align="left"><FONT size="2"><B>Global Securities</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some or all of the debt securities of any series may be represented, in whole or in part, by one or more global securities,
which will have an aggregate principal amount equal to that of the debt securities they represent. We will register each global
security in the name of a depositary or nominee identified in
</FONT>
<P align="center"><FONT size="2">21</FONT>
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<P align="left"><FONT size="2">a prospectus supplement and deposit the global security with the depositary or nominee. Each global security will bear a legend
regarding the restrictions on exchanges and registration of transfer referred to below and other matters specified in a supplemental
indenture to the Indenture.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No global security may be exchanged for debt securities registered, and no transfer of a global security may be registered,
in the name of any person other than the depositary for the global security or any nominee of the depositary, unless:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the depositary has notified us that it is unwilling or unable to continue as depositary for the global security or has
ceased to be qualified to act as depositary;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a default has occurred and is continuing with respect to the debt securities represented by the global security; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any other circumstances exist that may be described in the applicable supplemental indenture and prospectus supplement.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will register all securities issued in exchange for a global security or any portion of a global security in the names
specified by the depositary.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As long as the depositary or its nominee is the registered holder of a global security, the depositary or nominee will be
considered the sole owner and holder of the global security and the debt securities that it represents. Except in the limited
circumstances referred to above, owners of beneficial interests in a global security will not:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">be entitled to have the global security or debt securities registered in their names;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">receive or be entitled to
receive physical delivery of certificated debt securities in exchange for a global security; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">be considered to be the owners or holders of the global security or any debt securities for any purpose under the
Indenture.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will make all payments of principal, premium, and interest on a global security to the depositary or its nominee. The
laws of some jurisdictions require that purchasers of securities take physical delivery of securities in definitive form. These laws
make it difficult to transfer beneficial interests in a global security.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ownership of beneficial interests in a global security will be limited to institutions that have accounts with the
depositary or its nominee, referred to as Participants, and to persons that may hold beneficial interests through Participants. In
connection with the issuance of any global security, the depositary will credit, on its book-entry registration and transfer system,
the respective principal amounts of debt securities represented by the global security to the accounts of its Participants.
Ownership of beneficial interests in a global security will only be shown on records maintained by the depositary or the
Participant. Likewise, the transfer of ownership interests will be effected only through the same records. Payments, transfers,
exchanges, and other matters relating to beneficial interests in a global security may be subject to various policies and procedures
adopted by the depositary from time to time. Neither we, the trustee, nor any of our agents will have responsibility or liability
for any aspect of the depositary&#146;s or any Participant&#146;s records relating to, or for payments made on account of, beneficial interests
in a global security, or for maintaining, supervising, or reviewing any records relating to the beneficial interests.
</FONT>
<P align="left"><FONT size="2"><B>Regarding the Trustee</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bank of New York is the trustee under our Indentures relating to the subordinated debt securities and convertible
subordinated debt securities and our Indentures relating to the senior debt
</FONT>
<P align="center"><FONT size="2">22</FONT>
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<P align="left"><FONT size="2">securities and the convertible senior debt securities. We maintain normal banking arrangements with The Bank of New York, which
include a $40&nbsp;million commitment pursuant to a revolving credit agreement, none of which was outstanding at September&nbsp;30, 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bank of New York also serves as:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">master trustee/custodian of our pension plan;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">investment manager for our nonunion post-retirement medical fund; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">custodian of international fixed-income assets
for our pension plan.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An affiliate of The Bank of New York also serves as an underwriter on certain of our debt issuances from time
to time.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bank
of New York is the trustee under APS&#146; first mortgage bond indenture, senior note indenture, and subordinated debt
securities indenture. The Bank of New York is also the trustee for the holders of several issues of pollution control bonds issued
on APS&#146; behalf, and an affiliate of The Bank of New York is the remarketing agent for a series of APS&#146; pollution control bonds. APS
maintains normal banking arrangements with The Bank of New York, which include a $15.6&nbsp;million commitment by The Bank of New York
pursuant to an APS revolving credit agreement, none of which was outstanding at September&nbsp;30, 2002.
</FONT>
<!-- link1 "DESCRIPTION OF PREFERRED STOCK" -->
<DIV align="left"><A NAME="021"></A></DIV>
<P align="center"><FONT size="2"><B>DESCRIPTION OF PREFERRED STOCK</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may issue, from time to time, shares of one or more series or classes of our preferred stock. The following description
sets forth certain general terms and provisions of the preferred stock to which any prospectus supplement may relate. The particular
terms of any series of preferred stock and the extent, if any, to which these general provisions may apply to the series of preferred
stock offered will be described in the prospectus supplement relating to that preferred stock.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary of provisions of the preferred stock does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the provisions of our articles of incorporation, bylaws and the amendment to our articles
relating to a specific series of the preferred stock (the &#147;statement of preferred stock designations&#148;), which will be in the form
filed as an exhibit to, or incorporated by reference in, the registration statement of which this prospectus is a part. Before
investing in any series of our preferred stock, you should read our articles, bylaws and the relevant statement of preferred stock
designations.
</FONT>
<P align="left"><FONT size="2"><B>General</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our articles of incorporation, we have the authority to issue up to 10,000,000 shares of preferred stock. No shares
of preferred stock are currently outstanding. 4,400,000 shares of preferred stock are reserved for issuance under our shareholders
rights plan. See Description of Common Stock&#151;Certain Anti-takeover Effects&#151;Shareholder Rights Plan. Our Board of Directors is
authorized to issue shares of preferred stock, in one or more series, and to fix for each series voting powers and those preferences
and relative, participating, optional or other special rights and those qualifications, limitations or restrictions as are permitted
by the Arizona Business Corporation Act (the &#147;ABCA&#148;).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors is authorized to determine the terms for each series of preferred stock, and the prospectus
supplement will describe the terms of any series of preferred stock being offered, including:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the designation of the shares and the number of shares that constitute the series;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">23</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the dividend rate (or the method of calculation thereof), if any, on the shares of the series and the priority as to
payment of dividends with respect to other classes or series of our capital stock;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the dividend periods (or the method of calculation thereof);</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the voting rights of the shares;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the liquidation preference and the priority as to payment of the liquidation preference with respect to other classes
or series of our capital stock and any other rights of the shares of the series upon our liquidation or winding-up;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">whether or not and on what terms the shares of the series will be subject to redemption or repurchase at our option or
at the option of the holders thereof;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">whether and on what terms the shares of the series will be convertible into or exchangeable for other securities;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">whether the shares of the series of preferred stock will be listed on a securities exchange;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any special United
States federal income tax considerations applicable to the series; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the other rights and privileges and any
qualifications, limitations or restrictions of the rights or privileges of the series.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Dividends</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of shares of preferred stock shall be entitled to receive, when and as declared by our Board of Directors out of our
funds legally available therefor, a cash dividend payable at the dates and at the rates, if any, per share as set forth in the
applicable prospectus supplement.
</FONT>
<P align="left"><FONT size="2"><B>Convertibility</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No series of preferred stock will be convertible into, or exchangeable for, other securities or property except as set forth
in the applicable prospectus supplement.
</FONT>
<P align="left"><FONT size="2"><B>Redemption and Sinking Fund</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No series of preferred stock will be redeemable or receive the benefit of a sinking fund except as set forth in the
applicable prospectus supplement.
</FONT>
<P align="left"><FONT size="2"><B>Liquidation Rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise set forth in the applicable prospectus supplement, in the event of our liquidation, dissolution or winding
up, the holders of shares of each series of preferred stock are entitled to receive distributions out of our assets available for
distribution to stockholders, before any distribution of assets is made to holders of (i)&nbsp;any other shares of preferred stock ranking
junior to that series of preferred stock as to rights upon liquidation and (ii)&nbsp;shares of common stock. The amount of liquidating
distributions received by holders of preferred stock will generally equal the liquidation preference specified in the applicable
prospectus supplement for that series of preferred stock, plus any dividends accrued and accumulated but unpaid to the date of final
distribution. The holders of each series of preferred stock will not be entitled to receive the liquidating distribution of, plus
such dividends on, those shares until the liquidation preference of any shares of our capital stock ranking senior to that series of
the preferred stock as to the rights upon liquidation shall have been paid or set aside for payment in full.
</FONT>
<P align="center"><FONT size="2">24</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If upon our liquidation, dissolution or winding up, the amounts payable with respect to the preferred stock, and any other
preferred stock ranking as to any distribution on a parity with the preferred stock are not paid in full, then the holders of the
preferred stock and the other parity preferred stock will share ratably in any distribution of assets in proportion to the full
respective preferential amount to which they are entitled. Unless otherwise specified in a prospectus supplement for a series of
preferred stock, after payment of the full amount of the liquidating distribution to which they are entitled, the holders of shares
of preferred stock will not be entitled to any further participation in any distribution of our assets. Neither a consolidation or
merger of us with another corporation nor a sale of securities shall be considered a liquidation, dissolution or winding up of us.
</FONT>
<P align="left"><FONT size="2"><B>Voting Rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of each series of preferred stock we may issue will have no voting rights, except as required by law and as
described below or in the applicable prospectus supplement. Our Board of Directors may, upon issuance of a series of preferred
stock, grant voting rights to the holders of that series, including rights to elect additional board members if we fail to pay
dividends in a timely fashion.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Arizona law provides for certain voting rights for holders of a class of stock, even if the stock does not have other voting
rights. Thus, the holders of all shares of a class, would be entitled to vote on any amendment to our articles of incorporation that
would:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">increase or decrease the aggregate number of authorized shares of the class;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">effect an exchange or reclassification of all or part of the shares of the class into shares of another class;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">effect an exchange or reclassification, or create the right of exchange of all or part of the shares of another class
into shares of the class;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">change the designations, rights, obligations, preferences, or limitations of all or part of the shares of the class;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">change the shares of all or part of the class into a different number of shares of the same class;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">create a new class of shares having rights or preferences with respect to distributions or to dissolution that are
prior, superior or substantially equal to the shares of the class;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">increase rights, preferences or number of authorized shares of any class that, after giving effect to the amendment,
have rights or preferences with respect to distributions or to dissolution that are prior, superior or substantially
equal to the shares of the class;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">limit or deny an existing preemptive right of all or part of the class; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">cancel or otherwise affect rights to distributions or dividends that have accumulated but have not yet been declared
on all or part of the shares of the class.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the proposed amendment would affect a series of the class, but not the entire class, in one or more of the ways described
in the bullets above, then the shares of the affected series will have the right to vote on the amendment as a separate voting
group. However, if a proposed amendment that would entitle two or more series of the class to vote as separate voting groups would
affect those series in the same or a substantially similar way, the shares of all the series so affected must vote together as a
single voting group on the proposed amendment.
</FONT>
<P align="center"><FONT size="2">25</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the articles of incorporation, Arizona law or the Board of Directors would require a greater vote or a different
quorum, if an amendment to the articles would allow the preferred stock or one or more series of the preferred stock to vote as
voting groups, the vote required by each voting group would be:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a majority of the votes entitled to be cast by the voting group, if the amendment would create dissenters rights; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">in any other case, if a quorum is present in person or by proxy consisting of a majority of the votes entitled to be
cast on the matter by the voting group, the votes cast by the voting group in favor of the amendment must exceed the
votes cast against the amendment by the voting group.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Arizona law may also require that the preferred stock be entitled to vote on certain other extraordinary transactions.
</FONT>
<P align="left"><FONT size="2"><B>Miscellaneous</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of our preferred stock will have no preemptive rights. All shares of preferred stock being offered by the
applicable prospectus supplement will be fully paid and not liable to further calls or assessment by us. If we should redeem or
otherwise reacquire shares of our preferred stock, then these shares will resume the status of authorized and unissued shares of
preferred stock undesignated as to series, and will be available for subsequent issuance. There are no restrictions on repurchase or
redemption of the preferred stock while there is any arrearage on sinking fund installments except as may be set forth in an
applicable prospectus supplement. Payment of dividends on any series of preferred stock may be restricted by loan agreements,
indentures and other transactions entered into by us. Any material contractual restrictions on dividend payments will be described
or incorporated by reference in the applicable prospectus supplement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When we offer to sell a series of preferred stock, we will describe the specific terms of the series in the applicable
prospectus supplement. If any particular terms of a series of preferred stock described in a prospectus supplement differ from any
of the terms described in this prospectus, then the terms described in the applicable prospectus supplement will be deemed to
supersede the terms described in this prospectus.
</FONT>
<P align="left"><FONT size="2"><B>No Other Rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares of a series of preferred stock will not have any preferences, voting powers or relative, participating, optional
or other special rights except as set forth above or in the applicable prospectus supplement, our articles of incorporation or the
applicable statement of preferred stock designations or as otherwise required by law.
</FONT>
<P align="left"><FONT size="2"><B>Transfer Agent and Registrar</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for each series of preferred stock will be designated in the applicable prospectus
supplement.
</FONT>
<!-- link1 "DESCRIPTION OF COMMON STOCK" -->
<DIV align="left"><A NAME="022"></A></DIV>
<P align="center"><FONT size="2"><B>DESCRIPTION OF COMMON STOCK</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may issue, from time to time, shares of our common stock, the general terms and provisions of which are summarized
below. This summary does not purport to be complete and is subject to, and is qualified in its entirety by express reference to, the
provisions of our articles of incorporation, bylaws and the applicable prospectus supplement.
</FONT>
<P align="center"><FONT size="2">26</FONT>
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<P align="left"><FONT size="2"><B>Authorized Shares</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our articles of incorporation, we have the authority to issue 150,000,000 shares of common stock. We have issued and
have outstanding approximately 84,755,377 shares of our common stock (as of November&nbsp;12, 2002) and we have reserved for issuance
approximately 16,962,874 shares of our common stock (as of November&nbsp;19, 2002), excluding any shares of common stock that could be
issued under the shareholders rights plan.
</FONT>
<P align="left"><FONT size="2"><B>Dividends</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to any preferential rights of any series of preferred stock, holders of shares of common stock will be entitled to
receive dividends on the stock out of assets legally available for distribution when, as and if authorized and declared by our Board
of Directors. The payment of dividends on the common stock will be a business decision to be made by our Board of Directors from
time to time based upon results of our operations and our financial condition and any other factors as our Board of Directors
considers relevant. Payment of dividends on the common stock may be restricted by loan agreements, indentures and other transactions
entered into by us from time to time. Any material contractual restrictions on dividend payments will be described in the applicable
prospectus supplement.
</FONT>
<P align="left"><FONT size="2"><B>Voting Rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of common stock are entitled to one vote per share on all matters voted on generally by the stockholders, including
the election of directors, and, except as otherwise required by law or except as provided with respect to any series of preferred
stock, the holders of the shares possess all voting power. Arizona law provides for cumulative voting for the election of
directors. As a result, any shareholder may cumulate his or her votes by casting them all for any one director nominee or by
distributing them among two or more nominees.
</FONT>
<P align="left"><FONT size="2"><B>Staggered Terms of Directors</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors is elected in three classes with staggered three-year terms. We currently have five directors in
class I and four directors each in classes II and III. One class of directors is elected each year for a three-year term. Election
of directors with staggered terms lessens the effectiveness of cumulative voting rights by reducing the number of directors who are
elected in any given year.
</FONT>
<P align="left"><FONT size="2"><B>Liquidation Rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to any preferential rights of any series of preferred stock, holders of shares of common stock are entitled to share
ratably in our assets legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding
up.
</FONT>
<P align="left"><FONT size="2"><B>Absence of Other Rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of common stock have no preferential, preemptive, conversion or exchange rights.
</FONT>
<P align="left"><FONT size="2"><B>Miscellaneous</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All shares of common stock being offered by the applicable prospectus supplement will be fully paid and not liable to
further calls or assessment by us.
</FONT>
<P align="left"><FONT size="2"><B>Transfer Agent and Registrar</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are the principal transfer agent and registrar for the common stock.
</FONT>
<P align="center"><FONT size="2">27</FONT>
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<P align="left"><FONT size="2"><B>Preferred Stock</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has the authority, without any further action by our stockholders, to issue from time to time shares
of preferred stock, in one or more series and to fix the designations, preferences, rights, qualifications, limitations and
restrictions thereof, including voting rights, dividend rights, dividend rates, conversion rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting any series. The issuance of preferred stock with voting rights
could have an adverse effect on the voting power of holders of common stock by increasing the number of outstanding shares having
voting rights. In addition, if our board of directors authorizes preferred stock with conversion rights, the number of shares of
common stock outstanding could potentially be increased up to the authorized amount. The issuance of preferred stock could decrease
the amount of earnings and assets available for distribution to holders of common stock. Any such issuance could also have the
effect of delaying, deterring or preventing a change in control of us and may adversely affect the rights of holders of our common
stock.
</FONT>
<P align="left"><FONT size="2"><B>Certain Anti-takeover Effects</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General. </I>Certain provisions of our articles of incorporation, bylaws, and the Arizona Revised Statutes (&#147;ARS&#148;), as well as
our shareholder rights plan, may have an anti-takeover effect and may delay or prevent a tender offer or other acquisition
transaction that a shareholder might consider to be in his or her best interest, including a transaction that results in a premium
over the market price of the common stock. The summary of the provisions of our articles, bylaws, shareholder rights plan, and the
ARS set forth below does not purport to be complete and is qualified in its entirety by reference to our articles, bylaws,
shareholder rights plan, and the ARS.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Business Combinations. </I>ARS &#167; 10-2741 through 2743 and Article&nbsp;XII of our bylaws restrict a wide range of transactions
(collectively, &#147;business combinations&#148;) between us or, in certain cases, one of our subsidiaries, and an interested shareholder (or
any affiliate or associate of the interested shareholder). An &#147;interested shareholder&#148; is, generally, any person who beneficially
owns, directly or indirectly, 10% or more of our outstanding voting power or any of our affiliates or associates. The statute
broadly defines &#147;business combinations&#148; to include, among other things and with certain exceptions:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">mergers and consolidations with an interested shareholder or an affiliate or associate of the interested shareholder;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">share exchanges with an interested shareholder or an affiliate or associate of the interested shareholder;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">sales, leases or other dispositions of assets to an interested shareholder or an affiliate or associate of the
interested shareholder, representing 10% or more of (i)&nbsp;the aggregate market value of all of our consolidated assets as
of the end of the most recent fiscal quarter, (ii)&nbsp;the aggregate market value of all our outstanding shares, or (iii)
our consolidated revenues or net income for the four most recent fiscal quarters;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the issuance or transfer of shares of stock having an aggregate market value of 5% or more of the aggregate market
value of all of our outstanding shares to an interested shareholder or an affiliate or associate of the interested
shareholder;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the adoption of a plan or proposal for our liquidation or dissolution or reincorporation in another state or
jurisdiction pursuant to an agreement or arrangement with an interested shareholder or an affiliate or associate of the
interested shareholder;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">corporate actions, such as stock splits and stock dividends, and other transactions resulting in an increase in the
proportionate share of the outstanding shares of any series</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">28</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">or class of stock of us or any of our subsidiaries owned by an interested shareholder or an affiliate or associate
of the interested shareholder; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the receipt by an interested shareholder or an affiliate or associate of the interested shareholder of the benefit
(other than proportionately as a shareholder) of any loans, advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by or through us or any of our subsidiaries.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The ARS and our bylaws provide that, subject to certain exceptions, we may not engage in a business combination with an
interested shareholder (or any affiliate or associate of the interested shareholder) or authorize one of our subsidiaries to do so,
for a period of three years after the date on which the interested shareholder first acquired the shares that qualify such person as
an interested shareholder (the &#147;share acquisition date&#148;), unless either the business combination or the interested shareholder&#146;s
acquisition of shares on the share acquisition date is approved by a committee of our Board of Directors (comprised solely of
disinterested directors or other disinterested persons) prior to the
interested shareholder&#146;s share acquisition date.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, after such three-year period, the ARS and our bylaws prohibit us from engaging in any business combination with
an interested shareholder (or any affiliate or associate of the interested shareholder), subject to certain exceptions, unless:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the business combination or acquisition of shares by the interested shareholder on the share acquisition date was
approved by our Board of Directors prior to the share acquisition date;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the business combination is approved by holders of a majority of our outstanding shares (excluding shares beneficially
owned by the interested shareholder or any affiliate or associate of the interested shareholder) at a meeting called
after such three-year period; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the business combination satisfies specified price and other requirements.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Anti-Greenmail Provisions. </I>ARS &#167; 10-2704
and Article&nbsp;XIII of our bylaws prohibit us from purchasing any shares of our voting stock from any beneficial owner (or group of
beneficial owners acting together to acquire, own or vote our shares) of more than 5% of the voting power of our outstanding shares
at a price per share in excess of the average closing sale price during the 30 trading days preceding the purchase or if the person
or persons have commenced a tender offer or announced an intention to seek control of us, during the 30 trading days prior to the
commencement of the tender offer or the making of the announcement, unless
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the 5% beneficial owner has beneficially owned the shares to be purchased for a period of at least three years;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">holders of a majority of our voting power (excluding shares held by the 5% beneficial owner or its affiliates or
associates or by any of our officers and directors) approve the purchase; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">we make the repurchase offer available to all holders of the class or series of securities to be purchased and to all
holders of other securities convertible into that class or series.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Control Share Acquisition Statute. </I>Through a provision in our bylaws, we have opted out of ARS &#167; 10-2721 through 2727, the
Arizona statutory provisions regulating control share acquisitions. As a result, potential acquirors are not subject to the
limitations imposed by that statute.
</FONT>
<P align="center"><FONT size="2">29</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Shareholder Rights Plan. </I>We have adopted a shareholder rights plan under which one preferred share purchase right is
attached to each outstanding share of our common stock. The rights become exercisable and will be separated from the common stock on
the Distribution Date, as such term is defined in the plan. Generally, subject to specified exceptions, the Distribution Date will
occur on the earlier of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">10&nbsp;days following a public
announcement that a person or group of affiliated or associated
persons (an &#147;acquiring person&#148;) has acquired beneficial ownership of 15% or more of our outstanding common stock, or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">10 business days following the commencement of, or announcement of an intention to make a tender offer or exchange
offer that would result in the beneficial ownership by a person or group of 15% or more of our outstanding common
stock.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each right entitles the registered holder to purchase from us one one-hundredth of a share of Series&nbsp;A Participating
Preferred Stock at any exercise price of $130, subject to adjustment under specified circumstances. However, after any person has
become an acquiring person (a &#147;Flip-In Event&#148;), upon exercise of the right, the holder will be entitled to receive common stock
valued at twice the exercise price of the right. In other words, a rights holder may purchase common stock at a 50% discount. In
some circumstances, the holder will receive cash, property or other securities instead of common stock. Upon the occurrence of a
Flip-In Event, any rights owned by an acquiring person, its affiliates and associates and certain of its transferees will become null
and void.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event that a person becomes an acquiring person, we are then merged, and the common stock is exchanged or converted
in the merger, then each right (other than those formerly held by the
acquiring person, which became void) would &#147;flip-over&#148; and be
exercisable for a number of shares of common stock of the acquiring company having a market value of two times the exercise price of
the right. In other words, a rights holder may purchase the acquiring company s common stock at a 50% discount.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After a Flip-In Event but before a &#147;flip-over&#148; event (as described above) occurs and before an acquiring person becomes the
owner of 50% or more of the common stock, the Board may cause the rights (either in whole or in part) to be exchanged for shares of
common stock (or fractional interests in Series&nbsp;A Preferred Stock, or equivalent securities, of equal value) at a one-to-one exchange
ratio. Rights held by the acquiring person, however, which became void upon the Flip-In Event, would not be entitled to participate
in such exchange.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may redeem the rights for $0.01 per right at any time prior to the date on which a person becomes an acquiring person.
The shareholder rights plan and the rights expire in March 2009, subject to extension.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For so long as the rights are redeemable, the terms of the rights may be amended or supplemented by the Board of Directors
at any time and from time to time without the consent of the holders of the rights. At any time when the rights are not redeemable,
the Board of Directors may amend or supplement the terms of the rights, provided that such amendment does not adversely affect the
interests of the holders of the rights. In no event may any amendment or supplement be made which changes the redemption price.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until a right is exercised, the holder thereof will have no rights as a stockholder, including, without limitation, the
right to vote or to receive dividends, except as holder of the common stock to which the right is attached.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For information on the terms of the Series&nbsp;A Preferred Stock, see the certificate of designation for the Series&nbsp;A Preferred
Stock, the form of which is attached as Exhibit&nbsp;A to the Amended and Restated
</FONT>
<P align="center"><FONT size="2">30</FONT>
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<P align="left"><FONT size="2">Rights Agreement, dated as of March&nbsp;26, 1999, filed as an exhibit to our Current Report on Form&nbsp;8-K dated March&nbsp;22, 1999, which is
incorporated herein by reference.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Special Meetings of Shareholders. </I>Pursuant to ARS &#167; 10-702, a special meeting of shareholders may be called by a
corporation&#146;s Board of Directors or any other person authorized to do so in its articles of incorporation or bylaws. Our bylaws
provide that, except as required by law, special meetings of shareholders may only be called by a majority of our Board of Directors,
the Chairman of the Board, or the President.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Election and Removal of Directors. </I>Our Board of Directors is divided into three classes. The directors in each class serve
for a three year term, with one class being elected each year by our shareholders. The classification of our Board of Directors
generally makes it more difficult for shareholders to effect a change in control because at least two shareholder meetings are
required to elect a majority of our Board. Arizona law provides for cumulative voting in the election of directors, which may make
it more difficult for shareholders to elect a majority of the Board of Directors.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bylaws provide that any director may be removed with or without cause, but only at a special meeting of shareholders
called for that purpose, by the vote of 66 2/3% of the outstanding voting power. However, if less than the entire Board of Directors is
to be removed, no one director may be removed if the votes cast against the director&#146;s removal would be sufficient to elect the
director if then cumulatively voted at an election of the class of directors of which the director is a part.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Shareholder Proposals and Director Nominations. </I>A shareholder can submit shareholder proposals and nominate candidates for
election to our Board of Directors if he or she follows the advance notice provisions set forth in our bylaws.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to shareholder proposals to bring business before the annual meeting, shareholders must submit a written notice
to the Secretary of the Company not fewer than 90 or more than 120&nbsp;days prior to the first anniversary of the date of our previous
year&#146;s annual meeting of shareholders. However, if we have changed the date of the annual meeting by more than 30&nbsp;days from the date
of the previous year&#146;s annual meeting, the written notice must be submitted no later than ten days after the day we make public the
date of the annual meeting. The written notice must briefly describe the business the shareholder desires to bring before the
meeting, the text of the proposal or business, the reasons for conducting such business at the meeting, and any material interest in
the proposal of the shareholder and the beneficial owner, if any, on whose behalf the proposal is made.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to director nominations, shareholders must submit written notice to the Secretary of the Company not fewer than
180&nbsp;days prior to the date of the annual meeting. This requirement is also contained in our articles of incorporation. Our bylaws
require that the written notice must contain all information relating to the director nominee that is required to be included in a
proxy statement pursuant to Regulation&nbsp;14A under the Securities Exchange Act of 1934, as well as the written consent of the proposed
nominee to be named in the proxy statement as a nominee and to serving as a director if elected.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All written notices delivered pursuant to the advance notice provisions of our bylaws are required to state (i)&nbsp;the name and
address of the sponsoring shareholder and the beneficial owner, if any, on whose behalf the proposal or nomination is made, (ii)&nbsp;the
class and number of shares that are owned beneficially and of record by the shareholder and such beneficial owner, (iii)&nbsp;a
representation that the shareholder is a holder of record entitled to vote at the meeting and intends to appear in person or by proxy
at the meeting to propose such business or nomination, and (iv)&nbsp;whether the shareholder or beneficial owner intends or is part of a
group that intends to deliver a proxy statement to holders of at least the number of shares required to adopt the proposal or elect
the nominee or otherwise solicit proxies in favor of the proposal or nomination.
</FONT>
<P align="center"><FONT size="2">31</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholder proposals and director nominations that are late or that do not include all required information may be
rejected. This could prevent shareholders from bringing certain matters before an annual meeting, including proposing the election
of non-incumbent directors.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A shareholder must also comply with all applicable laws in proposing business to be conducted and in nominating directors.
The notice provisions of the bylaws do not affect rights of shareholders to request inclusion of proposals in our proxy statement
pursuant to Rule&nbsp;14a-8 of the Securities Exchange Act of 1934.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Additional Authorized Shares of Capital Stock. </I>The authorized but unissued shares of common stock and preferred stock
available for issuance under our articles of incorporation could be issued at such times, under such circumstances, and with such
terms and conditions as to impede an acquisition transaction.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Amendment to Articles of Incorporation and Bylaws. </I>ARS &#167; 10-1001 through 1003 generally provide that both the Board of
Directors and the shareholders must approve amendments to an Arizona corporation&#146;s articles of incorporation, except that the Board
of Directors may adopt specified ministerial amendments without shareholder approval. Unless the articles of incorporation, Arizona
law or the Board of Directors would require a greater vote or a different quorum, the vote required by each voting group allowed or
required to vote on the amendment would be:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a majority of the votes entitled
to be cast by the voting group, if the amendment would create
dissenters&#146; rights; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">in any other case, if a quorum is present in person or by proxy consisting of a majority of the votes entitled to be
cast on the matter by the voting group, the votes cast by the voting group in favor of the amendment must exceed the
votes cast against the amendment by the voting group.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our articles of incorporation require the approval of at least two-thirds of the total voting power of all outstanding
shares of our voting stock to amend the provisions in Article&nbsp;Third relating to serial preferred stock, Article&nbsp;Fifth relating to the
election of our directors, including number, classification, term, and nomination procedure, and Article&nbsp;Tenth relating to this
voting requirement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARS &#167; 10-1020 provides that the Board of Directors may amend the corporation&#146;s bylaws unless either: (i)&nbsp;the articles or
applicable law reserves this power exclusively to shareholders in whole or in part or (ii)&nbsp;the shareholders in amending a particular
bylaw provide expressly that the Board may not amend or repeal that bylaw. An Arizona corporation&#146;s shareholders may amend the
corporation&#146;s bylaws even though they may also be amended by the Board of Directors. Our bylaws provide that the following
provisions may not be amended or repealed without the vote of a majority of the Board of Directors or the vote of 75% of the
outstanding voting power:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Section&nbsp;2.02, which deals with authority to call special meetings of shareholders;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Section&nbsp;3.01, which (i)&nbsp;provides for a staggered board of 9 to 21 members comprised of shareholders of the Company,
(ii)&nbsp;vests in the Board of Directors the exclusive power to increase or decrease the size of the Board within these
limits, and (iii)&nbsp;provides that the Board of Directors may fill vacancies in the Board, whether by reason of death,
resignation, disqualification, an increase in the size of the Board or otherwise;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Section&nbsp;3.13, which deals with removal of directors;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Article&nbsp;XII, which imposes restrictions on business combinations with interested shareholders;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">32</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Article&nbsp;XIII, which imposes anti-greenmail provisions; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Article&nbsp;XIV, which deals with amendments to the bylaws.</FONT></TD>
</TR>
</TABLE>
<!-- link1 "DESCRIPTION OF THE PURCHASE CONTRACTS" -->
<DIV align="left"><A NAME="023"></A></DIV>
<P align="center"><FONT size="2"><B>DESCRIPTION OF THE PURCHASE CONTRACTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may issue, from time to time, purchase contracts, including contracts obligating holders to purchase from us and us to
sell to the holders, a specified principal amount of debt securities or a specified number of shares of common stock or preferred
stock or any of the other securities that we may sell under this prospectus (or a range of principal amount or number of shares
pursuant to a predetermined formula) at a future date or dates. The consideration payable upon settlement of the purchase contracts
may be fixed at the time the purchase contracts are issued or may be determined by a specific reference to a formula set forth in the
purchase contracts. The purchase contracts may be issued separately or as part of units consisting of a purchase contract and other
securities or obligations issued by us or third parties, including United States treasury securities, securing the holders&#146;
obligations to purchase the relevant securities under the purchase contracts. The purchase contracts may require us to make periodic
payments to the holders of the purchase contracts or units or vice versa, and the payments may be unsecured or prefunded on some
basis. The purchase contracts may require holders to secure their obligations under the purchase contracts in a specified manner and
in certain circumstances we may deliver newly issued prepaid purchase contracts, often known as prepaid securities, upon release to a
holder of any collateral securing such holder s obligations under the original purchase contract.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The applicable prospectus supplement will describe the terms of any purchase contracts or purchase units and, if applicable,
such other securities or obligations. The prospectus supplement will describe the terms of any purchase contracts. The description
in the prospectus supplement will not necessarily be complete and will be qualified in its entirety by reference to the purchase
contracts, and, if applicable, collateral arrangements and depositary arrangements, relating to the purchase contracts.
</FONT>
<!-- link1 "DESCRIPTION OF UNITS" -->
<DIV align="left"><A NAME="024"></A></DIV>
<P align="center"><FONT size="2"><B>DESCRIPTION OF UNITS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may, from time to time, issue units comprised of one or more of the other securities that may be offered under this
prospectus, in any combination. Each unit may be issued so that the holder of the unit is also the holder of each security included
in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The unit
agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately
at any time, or at any time before a specified date.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any applicable prospectus supplement will describe:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the material terms of the units and of the securities comprising the units, including whether and under what
circumstances those securities may be held or transferred separately;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any material provisions relating to the issuance, payment, settlement, transfer or exchange of the units or of the
securities comprising the units; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any material provisions of the governing unit agreement that differ from those described above.</FONT></TD>
</TR>
</TABLE>
<!-- link1 "PLAN OF DISTRIBUTION" -->
<DIV align="left"><A NAME="025"></A></DIV>
<P align="center"><FONT size="2"><B>PLAN OF DISTRIBUTION</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may sell the securities to one or more underwriters for public offering and sale by them or may sell the securities to
investors through agents or dealers. Any underwriter or agent involved in the offer and sale of the securities will be named in the
applicable prospectus supplement. We also reserve
</FONT>
<P align="center"><FONT size="2">33</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">the right to sell securities directly to investors on our own behalf in those jurisdictions where we are authorized to do so.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Underwriters may offer and sell the securities at a fixed price or prices, which may be changed, or from time to time at
market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices. We also may,
from time to time, authorize underwriters acting as our agents to offer and sell the securities upon the terms and conditions set
forth in any prospectus supplement. In connection with the sale of the securities, underwriters may be deemed to have received
compensation from us in the form of underwriting discounts or commissions and may also receive commissions from purchasers of the
securities for whom they may act as agent.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a dealer is utilized in the sale of the securities in respect of which this prospectus is delivered, we may sell the
securities to the dealer, as principal. The dealer may then resell the securities to the public at varying prices to be determined
by the dealer at the time of resale.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any underwriting compensation paid by us to underwriters or agents in connection with the offering of the securities, and
any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in an applicable
prospectus supplement. Underwriters, dealers and agents participating in the distribution of the securities may be deemed to be
underwriters under the Securities Act, and any discounts and commissions received by them and any profit realized by them on resale
of the securities may be deemed to be underwriting discounts and commissions under the Securities Act. Underwriters, dealers and
agents may be entitled under agreements with us to indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by us for certain expenses.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with underwritten offerings of securities, underwriters may over-allot or effect transactions that stabilize,
maintain or otherwise affect the market price of the offered securities at levels above those that might otherwise prevail in the
open market, including by entering stabilizing bids, effecting syndicate covering transactions or imposing penalty bids, each of
which is described below.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">A stabilizing bid means the placing of any bid, or the effecting of any purchase, for the purpose of pegging, fixing
or maintaining the price of a security.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">A syndicate covering transaction means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with the offering.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">A penalty bid means an arrangement that permits the managing underwriter to reclaim a selling concession from a
syndicate member in connection with the offering when offered securities originally sold by the syndicate member are
purchased in syndicate covering transactions.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These transactions may be effected on the New York Stock Exchange, in the over-the-counter market or otherwise.
Underwriters are not required to engage in any of these activities, or to continue the activities if commenced.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If so indicated in an applicable prospectus supplement, we may authorize dealers acting as our agents to solicit offers by
institutions to purchase the securities from us at the public offering price set forth in the prospectus supplement pursuant to
delayed delivery contracts providing for payment and delivery on the date or dates stated in the prospectus supplement. Each delayed
delivery contract will be for an amount not less than, and the aggregate principal amount or offering price of the securities sold
pursuant to delayed delivery contracts will not be less nor more than, the respective amounts stated in the prospectus supplement.
Institutions with whom delayed delivery contracts, when authorized, may be entered into include commercial and savings banks,
insurance companies, pension funds, investment
</FONT>
<P align="center"><FONT size="2">34</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">companies, educational and charitable institutions and other institutions, but will in all cases be subject to approval by us.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The securities may also be offered and sold, if so indicated in the prospectus supplement, in connection with a remarketing
upon their purchase, in accordance with a redemption or repayment pursuant to their terms, or otherwise, by one or more firms
(&#147;remarketing firms&#148;), acting as principals for their own accounts or as agents for us. Any remarketing firm will be identified and
the terms of its agreement, if any, with us and its compensation will be described in the applicable prospectus supplement.
Remarketing firms may be deemed to be underwriters in connection with the securities remarketed by them. Remarketing firms may be
entitled under agreements which may be entered into with us to indemnification by us against certain liabilities, including
liabilities under the Securities Act.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The securities may or may not be listed on a national securities exchange or a foreign securities exchange. No assurances
can be given that there will be a market for any of the securities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One or more of the underwriters, and/or one or more of their respective affiliates, may be a lender under our credit
agreements and may provide other commercial banking, investment banking and other services to us and/or our subsidiaries and
affiliates in the ordinary course of business.
</FONT>
<!-- link1 "EXPERTS" -->
<DIV align="left"><A NAME="026"></A></DIV>
<P align="center"><FONT size="2"><B>EXPERTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements and the related financial statement schedule incorporated in this prospectus by reference from the
Company&#146;s Current Report on Form&nbsp;8-K dated November&nbsp;21, 2002 have been audited by Deloitte &#038; Touche LLP, independent auditors, as
stated in their report (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the change in
2001 in the method of accounting for derivatives and hedging activities in order to comply with the provisions of Statement of
Financial Accounting Standards No.&nbsp;133), which is incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and auditing.
</FONT>
<!-- link1 "LEGAL OPINIONS" -->
<DIV align="left"><A NAME="027"></A></DIV>
<P align="center"><FONT size="2"><B>LEGAL OPINIONS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Snell &#038; Wilmer L.L.P., One Arizona Center, Phoenix, Arizona 85004 will opine on the validity of the offered securities for
us. We currently anticipate that Sullivan and Cromwell, 1888 Century Park East, Los Angeles, California 90067 will opine on the
validity of the offered securities for any underwriters. Snell &#038; Wilmer L.L.P. may rely as to all matters of New York law upon the
opinion of Sullivan &#038; Cromwell. Sullivan &#038; Cromwell may rely as to all matters of Arizona law upon the opinion of Snell &#038; Wilmer
L.L.P.
</FONT>

<P align="center"><FONT size="2">35</FONT>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2"> <HR size="1" width="100%" align="left" noshade>
</FONT>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="center">
<B><FONT size="2">$165,000,000</FONT></B>

<P align="center">
<B><FONT size="2">Floating Rate Senior Notes Due 2005</FONT></B>

<P align="center">
<IMG src="p68427p6842701.gif" alt="(PINNACLE WEST CAPITAL CORPORATION LOGO)">

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="2">PROSPECTUS SUPPLEMENT</FONT></B>

<DIV align="center">
<B><FONT size="2">November&nbsp;6, 2003</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="5">Barclays Capital</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B><FONT size="4">BNY Capital Markets, Inc.</FONT></B></TD>
    <TD align="right"><B><FONT size="4">McDonald Investments Inc.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<HR size="1" width="100%" align="left" noshade>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>
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