<PAGE>
RULE NO. 424(b)(2)
REGISTRATION NO. 33-57833
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 29, 1995)
$4,829,469,782
Morgan Stanley Group Inc.
GLOBAL MEDIUM-TERM NOTES, SERIES C
----------------
Due More Than Nine Months from Date of Issue
----------------
Morgan Stanley Group Inc. (the "Company") may offer from time to time its
Global Medium-Term Notes, which are issuable in one or more series and may be
offered and sold in the United States, outside the United States or both in
and outside the United States simultaneously. The Global Medium-Term Notes,
Series C (the "Notes"), offered by this Prospectus Supplement are offered in
the United States at an aggregate initial public offering price of up to
U.S.$4,829,469,782, or the equivalent thereof in other currencies, including
composite currencies such as the ECU (the "Specified Currency"). See
"Important Currency Exchange Information." Such aggregate offering price is
subject to reduction as a result of the sale by the Company of certain other
Debt Securities and Warrants to purchase Debt Securities, including the sale
outside the United States of the Company's Global Medium-Term Notes, Series D,
and Global Medium-Term Notes, Series E. See "Plan of Distribution." The Notes
may be issued as Senior Indebtedness or Subordinated Indebtedness.
Subordinated Indebtedness will be subordinate to all Senior Indebtedness. See
"Description of Debt Securities--Subordinated Debt" in the accompanying
Prospectus. The interest rate on each Note will be either a fixed rate
established by the Company at the date of issue of such Note, which may be
zero in the case of certain Original Issue Discount Notes, or a floating rate
as set forth therein and specified in the applicable Pricing Supplement. A
Fixed Rate Note may pay a level amount in respect of both interest and
principal amortized over the life of the Note (an "Amortizing Note").
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Fixed Rate Note is payable each March 1 and September 1 and at maturity.
Interest on each Floating Rate Note is payable on the dates set forth herein
and in the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, Amortizing Notes will pay principal and
interest semiannually each March 1 and September 1, or quarterly each March 1,
June 1, September 1 and December 1, and at maturity or upon earlier redemption
or repayment. Each note will mature on any day more than nine months from the
date of issue, as set forth in the applicable Pricing Supplement. See
"Description of Notes." Unless otherwise specified in the applicable Pricing
Supplement, the Notes may be redeemed by the Company or the holder prior to
maturity and will be issued in fully registered form in denominations of
$1,000 (or, in the case of Notes not denominated in U.S. dollars, the
equivalent thereof in the Specified Currency, rounded to the nearest 1,000
units of the Specified Currency) or any amount in excess thereof which is an
integral multiple of $1,000 (or, in the case of Notes not denominated in U.S.
dollars, 1,000 units of the Specified Currency). Any terms relating to Notes
being denominated in foreign currencies or composite currencies will be as set
forth in the applicable Pricing Supplement. Each Note will be represented
either by a Global Note registered in the name of a nominee of The Depository
Trust Company, as Depositary (a "Book-Entry Note"), or by a certificate issued
in definitive form (a "Certificated Note"), as set forth in the applicable
Pricing Supplement. Interests in Global Notes representing Book-Entry Notes
will be shown on, and transfers thereof will be effected only through, records
maintained by the Depositary (with respect to participants' interests) and its
participants. Book-Entry Notes will not be issuable as Certificated Notes
except under the circumstances described in the accompanying Prospectus.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
<TABLE>
<CAPTION>
PRICE TO AGENT'S PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (2)(3)
-------------- ------------------------ -------------------------------
<S> <C> <C> <C>
Per Note................ 100.000% .125% - .750% 99.875% - 99.250%
Total(4)................ $4,829,469,782 $6,036,837 - $36,221,023 $4,823,432,945 - $4,793,248,759
</TABLE>
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(1) Unless otherwise specified in the applicable pricing supplement, Notes
will be sold at 100% of their principal amount. If the Company issues
any Notes at a discount from or at a premium over its principal amount,
the Price to Public of any Note issued at a discount or premium will be
set forth in the applicable Pricing Supplement.
(2) Unless otherwise specified in the applicable Pricing Supplement, the
commission payable to the Agent for each Note sold through the Agent
will range from .125% to .750% of the principal amount of such Note;
provided, however, that commissions with respect to Notes having a
maturity of 30 years or greater will be negotiated. The Company may also
sell Notes to the Agent, as principal, at negotiated discounts, for
resale to investors or other purchasers.
(3) Before deducting expenses payable by the Company estimated at
$2,290,000.
(4) Or the equivalent thereof in other currencies, including composite
currencies.
----------------
Offers to purchase the Notes are being solicited from time to time by Morgan
Stanley & Co. Incorporated, a wholly owned subsidiary of the Company ("Morgan
Stanley" or the "Agent"), on behalf of the Company. The Agent has agreed to
use reasonable efforts to solicit purchases of such Notes. The Company may
also sell Notes to the Agent acting as principal for its own account for
resale to one or more investors and other purchasers at a fixed offering price
or at varying prices related to prevailing market prices at the time of resale
or otherwise, to be determined by the Agent and specified in the applicable
Pricing Supplement. No termination date for the offering of the Notes has been
established. The Company or the Agent may reject any order in whole or in
part. The Notes will not be listed on any securities exchange, and there can
be no assurance that the Notes offered hereby will be sold or that there will
be a secondary market for the Notes. See "Plan of Distribution."
This Prospectus Supplement and the accompanying Prospectus may be used by
the Agent in connection with offers and sales of the Notes in market-making
transactions at negotiated prices related to prevailing market prices at the
time of sale or otherwise. The Agent may act as principal or agent in such
transactions.
----------------
MORGAN STANLEY & CO.
Incorporated
March 29, 1995
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE AGENT. THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY SECURITIES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
___________________
IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Notes in the Specified Currency, and
payments of principal, premium, if any, and interest on such Notes will be made
in the Specified Currency, unless otherwise provided in the applicable Pricing
Supplement. Currently, there are limited facilities in the United States for
the conversion of U.S. dollars into foreign currencies and vice versa. In
addition, most banks do not currently offer non-U.S. dollar denominated checking
or savings account facilities in the United States. Accordingly, unless
otherwise specified in a Pricing Supplement or unless alternative arrangements
are made, payment of principal, premium, if any, and interest on Notes in a
Specified Currency other than U.S. dollars will be made to an account at a bank
outside the United States. See "Description of Notes" and "Foreign Currency
Risks."
If the applicable Pricing Supplement provides for payments of principal of
and interest on a non-U.S. dollar denominated Note to be made in U.S. dollars,
the conversion of the Specified Currency into U.S. dollars will be handled by
Morgan Stanley, in its capacity as Exchange Rate Agent. The costs of such
conversion will be borne by the holder of a Note through deductions from such
payments.
References herein to "U.S. dollars" or "U.S.$" or "$" are to the currency
of the United States of America.
___________________
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements the description of the general terms and provisions of the
Debt Securities set forth in the Prospectus, to which reference is hereby made.
In particular, as used under this caption, the term "Company" means Morgan
Stanley Group Inc. The particular terms of the Notes sold pursuant to any
pricing supplement (a "Pricing Supplement") will be described therein. The
terms and conditions set forth in "Description of Notes" will apply to each Note
unless otherwise specified in the applicable Pricing Supplement and in such
Note.
If any Note is not to be denominated in U.S. dollars, the applicable
Pricing Supplement will specify the currency or currencies, including composite
currencies such as the ECU, in which the principal, premium, if any, and
interest with respect to such Note are to be paid, along with any other terms
relating to the non-U.S. dollar denomination, including exchange rates for the
Specified Currency as against the U.S. dollar at selected times during the last
five years, and any exchange controls affecting such Specified Currency. See
"Foreign Currency Risks."
GENERAL
The Notes may be issued under the Senior Debt Indenture ("Senior Notes") or
the Subordinated Debt Indenture ("Subordinated Notes"). The Notes issued under
each Indenture, together with the Company's Global Medium-Term Notes, Series D,
and its Global Medium-Term Notes, Series E, referred to below under "Plan of
Distribution," will constitute a single series under such Indenture, together
with any medium-term notes of the Company issued in the future under such
Indenture which are designated by the Company as constituting a single
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series of securities with the Notes and the Global Medium-Term Notes, Series D,
and Global Medium-Term Notes, Series E, for purposes of such Indenture. At
October 31, 1994, the Company had approximately $4.3 billion aggregate principal
amount of medium-term notes outstanding under the Senior Debt Indenture and
approximately $100 million aggregate principal amount of medium-term notes
outstanding under the Subordinated Debt Indenture. Such aggregate principal
amounts may be increased from time to time as authorized by, or pursuant to
authority delegated by, the Board of Directors of the Company. Neither
Indenture limits the amount of additional indebtedness the Company may incur.
For the purpose of this paragraph, (i) the principal amount of any Original
Issue Discount Note (as defined below) means the Issue Price (as defined below)
of such Note and (ii) the principal amount of any Note issued in a foreign
currency or composite currency means the U.S. dollar equivalent on the date of
issue of the Issue Price of such Note.
Notes issued under the Senior Debt Indenture will rank pari passu with all
other Senior Indebtedness of the Company and with all other unsecured and
unsubordinated indebtedness of the Company. Notes issued under the Subordinated
Debt Indenture will rank pari passu with all other subordinated indebtedness of
the Company and, together with such other subordinated indebtedness, will be
subordinated in right of payment to the prior payment in full of the Senior
Indebtedness of the Company. See "Description of Debt Securities --
Subordinated Debt" in the Prospectus. At October 31, 1994, the aggregate
principal amount of Senior Indebtedness outstanding was approximately $14.2
billion and approximately $100 million in subordinated indebtedness was
outstanding.
Fixed Rate Notes, Amortizing Notes and Original Issue Discount Notes will
mature on any day more than nine months from the date of issue, as set forth in
the applicable Pricing Supplement. Floating Rate Notes (including Renewable
Notes, as defined below) will mature on an Interest Payment Date (as defined
below) more than nine months from the date of issue, as set forth in the
applicable Pricing Supplement. Except as may be specified for Notes denominated
in foreign or composite currencies or as otherwise provided in the applicable
Pricing Supplement, the Notes will be issued only in fully registered form in
denominations of U.S. $1,000 or any amount in excess thereof which is an
integral multiple of U.S. $1,000.
Unless otherwise provided in the applicable Pricing Supplement, Notes
denominated in a Specified Currency other than U.S. dollars will be issued in
denominations of the equivalent of U.S. $1,000 (rounded to an integral multiple
of 1,000 units of such Specified Currency), or any amount in excess thereof
which is an integral multiple of 1,000 units of such Specified Currency, as
determined by reference to the noon dollar buying rate in New York City for
cable transfers of such Specified Currency published by the Federal Reserve Bank
of New York (the "Market Exchange Rate") on the Business Day (as defined below)
immediately preceding the date of issuance; provided, however, that in the case
of ECUs, the Market Exchange Rate shall be the rate of exchange determined by
the Commission of the European Communities (or any successor thereto) as
published in the Official Journal of the European Communities, or any successor
publication, on the Business Day immediately preceding the date of issuance.
The Notes will be offered on a continuing basis, and each Note will be
issued initially as either a Book-Entry Note or a Certificated Note. Only Notes
payable solely in U.S. dollars may be issued as Book-Entry Notes. Except as set
forth in the Prospectus under "Description of Debt Securities -- Registered
Global Securities," Book-Entry Notes will not be issuable as Certificated Notes.
See "Book-Entry System" below.
The Notes may be presented for payment of principal and interest, transfer
of the Notes will be registrable and the Notes will be exchangeable at the
agency in the Borough of Manhattan, The City of New York, maintained by the
Company for such purpose; provided that Book-Entry Notes will be exchangeable
only in the manner and to the extent set forth under "Description of Debt
Securities -- Registered Global Securities" in the Prospectus. On the date
hereof, the agent for the payment, transfer and exchange of the Notes (the
"Paying Agent") is Chemical Bank, acting through its corporate trust office at
450 West 33rd Street, New York, New York 10001.
The applicable Pricing Supplement will specify the price (the "Issue
Price") of each Note to be sold pursuant thereto (unless such Note is to be sold
at 100% of its principal amount), the interest rate or interest rate
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formula, ranking, maturity, currency or composite currency and principal amount
and any other terms on which each such Note will be issued.
As used herein, the following terms shall have the meanings set forth
below:
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close in The City of New York and (i) with
respect to LIBOR Notes (as defined below), that is also a London Banking Day,
(ii) with respect to Notes denominated in a Specified Currency other than U.S.
dollars, Australian dollars or ECUs, in the principal financial center of the
country of the Specified Currency, (iii) with respect to Notes denominated in
Australian dollars, in Sydney and (iv) with respect to Notes denominated in
ECUs, that is not a non-ECU clearing day, as determined by the ECU Banking
Association in Paris.
An "Interest Payment Date" with respect to any Note shall be a date on
which, under the terms of such Note, regularly scheduled interest shall be
payable.
"London Banking Day" means any day on which dealings in deposits in the
relevant Index Currency (as defined below) are transacted in the London
interbank market.
"Original Issue Discount Note" means any Note that provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof pursuant to the relevant Indenture.
The "Record Date" with respect to any Interest Payment Date shall be the
date 15 calendar days prior to such Interest Payment Date, whether or not such
date shall be a Business Day.
PAYMENT CURRENCY
If the applicable Pricing Supplement provides for payments of interest and
principal on a non-U.S. dollar denominated Note to be made, at the option of the
holder of such Note, in U.S. dollars, conversion of the Specified Currency into
U.S. dollars will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent unless the Exchange Rate Agent is Morgan Stanley) for the purchase by the
quoting dealer of the Specified Currency for U.S. dollars for settlement on such
payment date in the aggregate amount of the Specified Currency payable to the
holders of Notes and at which the applicable dealer commits to execute a
contract. If such bid quotations are not available, payments will be made in
the Specified Currency. All currency exchange costs will be borne by the
holders of Notes by deductions from such payments.
Except as set forth below, if the principal of, premium, if any, or
interest on, any Note is payable in a Specified Currency other than U.S. dollars
and such Specified Currency is not available to the Company for making payments
thereof due to the imposition of exchange controls or other circumstances beyond
the control of the Company or is no longer used by the government of the country
issuing such currency or for the settlement of transactions by public
institutions within the international banking community, then the Company will
be entitled to satisfy its obligations to holders of the Notes by making such
payments in U.S. dollars on the basis of the Market Exchange Rate on the date of
such payment or, if the Market Exchange Rate is not available on such date, as
of the most recent practicable date. Any payment made under such circumstances
in U.S. dollars where the required payment is in a Specified Currency other than
U.S. dollars will not constitute an Event of Default.
If payment in respect of a Note is required to be made in ECUs and ECUs are
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control or are no longer used as either the unit of account
of the European Community or as the currency of the European Union, then all
payments in respect of such Note shall be made in U.S. dollars until ECUs are
again available or so used. The amount of
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each payment in U.S. dollars shall be computed on the basis of the equivalent of
the ECU in U.S. dollars, determined as described below, as of the second
Business Day prior to the date on which such payment is due.
The equivalent of the ECU in U.S. dollars as of any date shall be
determined by the Company or its agent on the following basis. The component
currencies of the ECU for this purpose (the "Components") shall be the currency
amounts that were components of the ECU as of the last date on which the ECU was
used as the unit of account of the European Community. The equivalent of the
ECU in U.S. dollars shall be calculated by aggregating the U.S. dollar
equivalents of the Components. The U.S. dollar equivalent of each of the
Components shall be determined by the Company or such agent on the basis of the
most recently available Market Exchange Rates for such Components.
All determinations referred to above made by the Company or its agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided that the
interest payable upon maturity, redemption or repayment (whether or not the date
of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. The initial interest
payment on a Note will be made on the first Interest Payment Date falling after
the date the Note is issued; provided, however, that payments of interest (or,
in the case of an Amortizing Note, principal and interest) on a Note issued less
than 15 calendar days before an Interest Payment Date will be paid on the next
succeeding Interest Payment Date to the holder of record on the Record Date with
respect to such succeeding Interest Payment Date. See "United States Federal
Taxation -- Discount Notes" below.
U.S. dollar payments of interest, other than interest payable at maturity
(or on the date of redemption or repayment, if a Note is redeemed or repaid by
the Company prior to maturity), will be made by check mailed to the address of
the person entitled thereto as shown on the Note register. U.S. dollar payments
of principal, premium, if any, and interest upon maturity, redemption or
repayment will be made in immediately available funds against presentation and
surrender of the Note. Notwithstanding the foregoing, (a) the Depositary, as
holder of Book-Entry Notes, shall be entitled to receive payments of interest by
wire transfer of immediately available funds and (b) a holder of $10,000,000 or
more in aggregate principal amount of Certificated Notes having the same
Interest Payment Date shall be entitled to receive payments of interest by wire
transfer of immediately available funds upon written request to the Paying Agent
not later than 15 calendar days prior to the applicable Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement or unless
alternative arrangements are made, payments of principal, premium, if any, and
interest on Notes in a Specified Currency other than U.S. dollars will be made
by wire transfer of immediately available funds to an account maintained by the
payee with a bank located outside the United States if the holder of such Notes
provides the Paying Agent with the appropriate wire transfer instructions not
later than 15 calendar days prior to the applicable payment date. If such wire
transfer instructions are not so provided, payments of interest on such Notes
(other than interest payable at maturity or on any redemption or repayment date)
will be made by check payable in such Specified Currency mailed to the address
of the person entitled thereto as such address shall appear in the Note
register.
Certain Notes, including Original Issue Discount Notes, may be considered
to be issued with original issue discount, which must be included in income for
United States federal income tax purposes at a constant yield. See "United
States Federal Taxation -- Discount Notes" below. Unless otherwise specified in
the applicable Pricing Supplement, if the principal of any Original Issue
Discount Note is declared to be due and payable immediately as described under
"Description of Debt Securities -- Events of Default" in the Prospectus, the
amount of principal due and payable with respect to such Note shall be limited
to the aggregate principal amount of such Note multiplied by the sum of its
Issue Price (expressed as a percentage of the aggregate principal amount) plus
the original issue
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discount amortized from the date of issue to the date of declaration, which
amortization shall be calculated using the "interest method" (computed in
accordance with generally accepted accounting principles in effect on the date
of declaration). Special considerations applicable to any such Notes will be
set forth in the applicable Pricing Supplement.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issuance at the
annual rate stated on the face thereof, except as described below under
"Extension of Maturity," until the principal thereof is paid or made available
for payment. Such interest will be computed on the basis of a 360-day year of
twelve 30-day months. Unless otherwise specified in the applicable Pricing
Supplement, payments of interest on Fixed Rate Notes other than Amortizing Notes
will be made semiannually on each March 1 and September 1 and at maturity or
upon any earlier redemption or repayment. Payments of principal and interest on
Amortizing Notes, which are securities on which payments of principal and
interest are made in equal installments over the life of the security, will be
made either quarterly on each March 1, June 1, September 1 and December 1 or
semiannually on each March 1 and September 1, as set forth in the applicable
Pricing Supplement, and at maturity or upon any earlier redemption or repayment.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. A table setting forth repayment information in respect of each
Amortizing Note will be provided to the original purchaser and will be
available, upon request, to subsequent holders.
If any Interest Payment Date for any Fixed Rate Note would fall on a day
that is not a Business Day, the interest payment shall be postponed to the next
day that is a Business Day, and no interest on such payment shall accrue for the
period from and after the Interest Payment Date. If the maturity date (or date
of redemption or repayment) of any Fixed Rate Note would fall on a day that is
not a Business Day, the payment of interest and principal (and premium, if any)
may 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 date of
redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from
the date of issue or from the last date in respect of which interest has been
paid, as the case may be, to, but excluding, the Interest Payment Date or the
date of maturity or earlier redemption or repayment, as the case may be. The
interest rates the Company will agree to pay on newly-issued Fixed Rate Notes
are subject to change without notice by the Company from time to time, but no
such change will affect any Fixed Rate Notes theretofore issued or that the
Company has agreed to issue.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the date of issuance until
the principal thereof is paid or made available for payment at a rate determined
by reference to an interest rate basis (the "Base Rate"), which may be adjusted
by a Spread and/or Spread Multiplier (each as defined below). The applicable
Pricing Supplement will designate one of the following Base Rates as applicable
to each Floating Rate Note: (a) the CD Rate (a "CD Rate Note"), (b) the
Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the Federal Funds
Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"), (e) the Prime
Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury Rate Note"), (g)
the Constant-Maturity Treasury Rate (a "CMT Rate Note") or (h) such other Base
Rate as is set forth in such Pricing Supplement and in such Floating Rate Note.
The "Index Maturity" for any Floating Rate Note is the period of maturity of the
instrument or obligation from which the Base Rate is calculated and will be
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii) multiplied
by the Spread Multiplier, if any. The "Spread" is the number of basis points
(one one-hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate
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for such Floating Rate Note, and the "Spread Multiplier" is the percentage
specified in the applicable Pricing Supplement to be applied to the Base Rate
for such Floating Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or ceiling,
on the rate of interest which may accrue during any interest period ("Maximum
Interest Rate"); and (ii) a minimum limitation, or floor, on the rate of
interest which may accrue during any interest period ("Minimum Interest Rate").
In addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on a Floating Rate
Note will in no event be higher than the maximum rate permitted by New York law,
as the same may be modified by United States law of general application. Under
current New York law, the maximum rate of interest, subject to certain
exceptions, for any loan in an amount less than $250,000 is 16% and for any loan
in the amount of $250,000 or more but less than $2,500,000 is 25% per annum on a
simple interest basis. These limits do not apply to loans of $2,500,000 or
more.
Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (such period being the "Interest Reset
Period" for such Note, and the first day of each Interest Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the Pricing Supplement, the Interest Reset Date
will be, in the case of Floating Rate Notes which reset daily, each Business
Day; in the case of Floating Rate Notes (other than Treasury Rate Notes) which
reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes
which reset weekly, the Tuesday of each week, except as provided below; in the
case of Floating Rate Notes which reset monthly, the third Wednesday of each
month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December; in the case of Floating Rate
Notes which reset semiannually, the third Wednesday of two months of each year,
as specified in the applicable Pricing Supplement; and in the case of Floating
Rate Notes which reset annually, the third Wednesday of one month of each year,
as specified in the applicable Pricing Supplement; provided, however, that (a)
the interest rate in effect from the date of issue to the first Interest Reset
Date with respect to a Floating Rate Note will be the initial interest rate set
forth in the applicable Pricing Supplement (the "Initial Interest Rate") and (b)
the interest rate in effect for the fifteen days immediately prior to maturity,
redemption or repayment will be that in effect on the fifteenth day preceding
such maturity, redemption or repayment date. If any Interest Reset Date for any
Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Reset Date shall be postponed to the next succeeding Business Day,
except that in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Reset Date shall be the next preceding
Business Day.
Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset Date,
on the third Wednesday of each month or on the third Wednesday of March, June,
September and December, as specified in the applicable Pricing Supplement; (ii)
in the case of Floating Rate Notes with a quarterly Interest Reset Date, on the
third Wednesday of March, June, September and December; (iii) in the case of
Floating Rate Notes with a semiannual Interest Reset Date, on the third
Wednesday of the two months specified in the applicable Pricing Supplement; and
(iv) in the case of Floating Rate Notes with an annual Interest Reset Date, on
the third Wednesday of the month specified in the applicable Pricing Supplement.
If any Interest Payment Date (other than the maturity date or any earlier
redemption or repayment date) for any Floating Rate Note would fall on a day
that is not a Business Day with respect to such Floating Rate Note, such
Interest Payment Date will be the following day that is a Business Day with
respect to such Floating Rate Note, except that, in the case of a LIBOR Note, if
such Business Day is in the next succeeding calendar month, such Interest
Payment Date shall be the immediately preceding day that is a Business Day with
respect to such LIBOR Note. If the maturity date or any earlier redemption or
repayment date of a Floating Rate Note would fall on a day that is not a
Business Day, the payment of principal, premium, if any, and interest will be
made on the next succeeding Business Day, and no interest on such payment shall
accrue for the period from and after such maturity, redemption or repayment
date, as the case may be.
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Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes (except Floating Rate Notes on which interest
is reset daily or weekly) shall be the amount of interest accrued from the date
of issue or from the last date to which interest has been paid to, but
excluding, the Interest Payment Date or maturity date or date of redemption or
repayment. In the case of a Floating Rate Note on which interest is reset daily
or weekly, interest payments shall be the amount of interest accrued from the
date of issue or from the last date to which interest has been paid, as the case
may be, to and including the Record Date immediately preceding such Interest
Payment Date, except that at maturity or earlier redemption or repayment, the
interest payable will include interest accrued to, but excluding, the maturity,
redemption or repayment date, as the case may be.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. The interest factor for each such day is computed by dividing the
interest rate applicable to such day by 360, in the case of CD Rate Notes,
Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime
Rate Notes or by the actual number of days in the year, in the case of Treasury
Rate Notes and CMT Rate Notes. All percentages used in or resulting from any
calculation of the rate of interest on a Floating Rate Note will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point
(.0000001), with five one-millionths of a percentage point rounded upward, and
all dollar amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest cent, with one-half cent rounded upward.
The interest rate in effect on any Interest Reset Date will be the applicable
rate as reset on such date. The interest rate applicable to any other day is
the interest rate from the immediately preceding Interest Reset Date (or, if
none, the Initial Interest Rate).
The applicable Pricing Supplement shall specify a calculation agent (the
"Calculation Agent") with respect to any issue of Floating Rate Notes. Upon the
request of the holder of any Floating Rate Note, the Calculation Agent will
provide the interest rate then in effect and, if determined, the interest rate
that will become effective on the next Interest Reset Date with respect to such
Floating Rate Note.
The "Interest Determination Date" pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, Prime Rate
Notes and CMT Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Banking Day preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a Treasury Rate Note will be the day of the week in which such
Interest Reset Date falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is normally held on the
following Tuesday, but such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Interest Determination Date pertaining to the Interest
Reset Date occurring in the next succeeding week. If an auction falls on a day
that is an Interest Reset Date, such Interest Reset Date will be the next
following Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day, or, (ii) the Business Day preceding the applicable Interest
Payment Date or Maturity Date, as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
CD Rate Notes
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)," or, if
not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 P.M. Quotations for U.S. Government Securities" (the "Composite
Quotations") under the heading "Certificates of Deposit." If such rate is not
yet published in either H.15(519) or the Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such
Interest Determination Date for certificates of deposit in the denomination of
$5,000,000 with a remaining maturity closest to the Index Maturity designated in
the Pricing Supplement of three leading nonbank dealers in negotiable U.S.
dollar certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money center banks of the highest credit standing in the market for negotiable
certificates of deposit; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as set forth above, the CD
Rate in effect for the applicable period will be the same as the CD Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the CD Rate Notes for which such
CD Rate is being determined shall be the Initial Interest Rate).
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes and
in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) of the rate on such date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement, as such rate shall be published in H.15(519), under the heading
"Commercial Paper." In the event that such rate is not published by 9:00 A.M.,
New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate shall be the Money Market
Yield of the rate on such Interest Determination Date for commercial paper of
the specified Index Maturity as published in Composite Quotations under the
heading "Commercial Paper." If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not yet available in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate shall be the Money Market Yield of
the arithmetic mean of the offered rates as of 11:00 A.M., New York City time,
on such Interest Determination Date of three leading dealers of commercial paper
in The City of New York selected by the Calculation Agent for commercial paper
of the specified Index Maturity, placed for an industrial issuer whose bond
rating is "AA," or the equivalent, from a nationally recognized rating agency;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting offered rates as mentioned in this sentence, the
Commercial Paper Rate in effect for the applicable period will be the same as
the Commercial Paper Rate for the immediately preceding Interest Reset Period
(or, if there was no such Interest Reset Period, the rate of interest payable on
the Commercial Paper Rate Notes for which such Commercial Paper Rate is being
determined shall be the Initial Interest Rate).
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"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D x 360
x 100
-------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Index Maturity.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Federal Funds Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date, the
rate on such date for Federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)," or, if not so published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the Federal Funds Rate will be the rate on such Interest Determination Date as
published in the Composite Quotations under the heading "Federal Funds/Effective
Rate." If such rate is not yet published in either H.15(519) or the Composite
Quotations by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the Federal Funds Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight Federal
funds, as of 11:00 A.M., New York City time, on such Interest Determination
Date, arranged by three leading brokers of Federal funds transactions in The
City of New York selected by the Calculation Agent; provided, however, that if
the brokers selected as aforesaid by the Calculation Agent are not quoting as
set forth above, the Federal Funds Rate in effect for the applicable period will
be the same as the Federal Funds Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the rate of
interest payable on the Federal Funds Rate Notes for which such Federal Funds
Rate is being determined shall be the Initial Interest Rate).
LIBOR Notes
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and subject
to the Minimum Interest Rate and the Maximum Interest Rate, if any) specified in
the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" for each Interest Reset Date will be determined by the Calculation Agent
as follows:
(i) As of the Interest Determination Date, the Calculation Agent will
determine (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page (as defined below) by its terms provides only for a
single rate, in which case such single rate shall be used) for deposits in
the London interbank market in the Index Currency for the period of the
Index Maturity, commencing on the second London Business Day immediately
following such Interest Determination Date, which appear on the Designated
LIBOR Page at approximately 11:00 A.M., London time, on such Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified in the applicable Pricing
Supplement, the rate for deposits in the Index Currency for the period of
the Index Maturity, commencing on such Interest Determination Date, that
appears on the Designated LIBOR Page at approximately 11:00 A.M., London
time, on such Interest Determination Date. If fewer than two offered rates
appear (if "LIBOR Reuters" is specified in the applicable Pricing
Supplement and calculation of LIBOR is based on the arithmetic mean of the
offered rates), or if no rate appears (if the applicable Pricing Supplement
specifies either (x) "LIBOR Reuters" and
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<PAGE>
the Designated LIBOR Page by its terms provides only for a single rate or
(y) "LIBOR Telerate"), LIBOR in respect of that Interest Determination Date
will be determined as described in (ii) below.
(ii) With respect to an Interest Determination Date on which fewer
than two offered rates appear (if "LIBOR Reuters" is specified in the
applicable Pricing Supplement and calculation of LIBOR is based on the
arithmetic mean of the offered rates) or no rate appears (if the applicable
Pricing Supplement specifies either (x) "LIBOR Reuters" and the Designated
LIBOR Page by its terms provides only for a single rate or (y) "LIBOR
Telerate"), the Calculation Agent will request the principal London offices
of each of four major reference banks in the London interbank market, as
selected by the Calculation Agent (after consultation with the Company), to
provide the Calculation Agent with its offered quotations for deposits in
the Index Currency for the period of the specified Index Maturity,
commencing on the second London Banking Day immediately following such
Interest Determination Date, to prime banks in the London interbank market
at approximately 11:00 A.M., London time, on such Interest Determination
Date and in a principal amount equal to an amount of not less than U.S. $1
million (or the equivalent in the Index Currency) that is representative of
a single transaction in such Index Currency in such market at such time.
If at least two such quotations are provided, LIBOR will be the arithmetic
mean of such quotations. If fewer than two quotations are provided, LIBOR
in respect of that Interest Determination Date will be the arithmetic mean
of rates quoted at approximately 11:00 A.M. (or such other time specified
in the applicable Pricing Supplement), in the applicable principal
financial center for the country of the Index Currency on such Interest
Determination Date, by three major banks in such principal financial center
selected by the Calculation Agent (after consultation with the Company) on
such Interest Determination Date for loans in the Index Currency to leading
European banks, for the period of the specified Index Maturity commencing
on the second London Banking Day immediately following such Interest
Determination Date and in a principal amount of not less than $1 million
(or the equivalent in the Index Currency) that is representative of a
single transaction in such Index Currency in such market at such time;
provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the LIBOR Notes for
which LIBOR is being determined shall be the Initial Interest Rate).
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated
in the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Index Currency, Page 3750) had been specified.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set forth
in H.15(519) for such date opposite the caption "Bank Prime Loan." If such rate
is not yet published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such
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<PAGE>
Interest Determination Date, the Prime Rate for such Interest Determination Date
will be the arithmetic mean of the rates of interest publicly announced by each
bank named on the Reuters Screen NYMF Page (as defined below) as such bank's
prime rate or base lending rate as in effect for such Interest Determination
Date as quoted on the Reuters Screen NYMF Page on such Interest Determination
Date, or, if fewer than four such rates appear on the Reuters Screen NYMF Page
for such Interest Determination Date, the rate shall be the arithmetic mean of
the prime rates quoted on the basis of the actual number of days in the year
divided by 360 as of the close of business on such Interest Determination Date
by at least two of the three major money center banks in The City of New York
selected by the Calculation Agent from which quotations are requested. If fewer
than two quotations are provided, the Prime Rate shall be calculated by the
Calculation Agent and shall be determined as the arithmetic mean on the basis of
the prime rates in The City of New York by the appropriate number of substitute
banks or trust companies organized and doing business under the laws of the
United States, or any State thereof, in each case having total equity capital of
at least $500 million and being subject to supervision or examination by federal
or state authority, selected by the Calculation Agent to quote such rate or
rates. "Reuters Screen NYMF Page" means the display designated as Page "NYMF"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the NYMF Page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
If in any month or two consecutive months the Prime Rate is not published
in H.15(519) and the banks or trust companies selected as aforesaid are not
quoting as mentioned in the preceding paragraph, the "Prime Rate" for such
Interest Reset Period will be the same as the Prime Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the rate of interest payable on the Prime Rate Notes for which the Prime Rate is
being determined shall be the Initial Interest Rate). If this failure continues
over three or more consecutive months, the Prime Rate for each succeeding
Interest Determination Date until the maturity or redemption of such Prime Rate
Notes or, if earlier, until this failure ceases, shall be LIBOR determined as if
such Prime Rate Notes were LIBOR Notes with respect to which LIBOR Telerate had
been specified in the applicable Pricing Supplement, and the Spread, if any,
shall be the number of basis points specified in the applicable Pricing
Supplement as the "Alternate Rate Event Spread."
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any, and subject to the Minimum Interest Rate and the Maximum Interest Rate, if
any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the rate
for the auction held on such date of direct obligations of the United States
("Treasury Bills") having the Index Maturity designated in the applicable
Pricing Supplement, as published in H.15(519) under the heading "Treasury Bills-
auction average (investment)" or, if not so published by 9:00 A.M., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, the auction average rate on such Interest Determination Date (expressed as
a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States Department
of the Treasury. In the event that the results of the auction of Treasury Bills
having the Index Maturity designated in the applicable Pricing Supplement are
not published or reported as provided above by 3:00 P.M., New York City time, on
such Calculation Date or if no such auction is held on such Interest
Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) calculated using the arithmetic mean of the secondary
market bid rates, as of approximately 3:30 P.M., New York City time, on such
Interest Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity designated in the
applicable Pricing Supplement; provided, however, that if the dealers selected
as aforesaid by the Calculation Agent are not quoting bid rates as mentioned in
this sentence, the Treasury Rate for such Interest Reset Date will be the same
as the Treasury Rate for the immediately preceding Interest Reset Period (or, if
there was no such Interest
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<PAGE>
Reset Period, the rate of interest payable on the Treasury Rate Notes for which
the Treasury Rate is being determined shall be the Initial Interest Rate).
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed for
the Index Maturity designated in such CMT Rate Note on Telerate Page 7055 for
"Daily Treasury Constant Maturities and Money Markets/Federal Reserve Board
Release H.15 Monday's Approx. 3:45 P.M. EDT," for the applicable Interest
Determination Date (or such other page as may replace that page on such service
for the purpose of displaying rates or prices comparable to the CMT Rate, as
determined by the Calculation Agent). If such rate is not available by 3:00
P.M., New York City time, on the applicable Calculation Date, then the CMT Rate
for such Interest Determination Date shall be the bond equivalent yield to
maturity of the arithmetic mean (as calculated by the Calculation Agent) of the
secondary market bid rates, as of 3:00 P.M., New York City time, on the
applicable Interest Determination Date, reported by three leading primary United
States government securities dealers in The City of New York selected by the
Calculation Agent (after consultation with the Company), for the most recently
issued direct noncallable fixed rate Treasury Bills with an original maturity
approximately equal to the applicable Index Maturity; provided, however, that if
the dealers selected as aforesaid by the Calculation Agent are not quoting bid
rates as mentioned in this sentence, the "CMT Rate" for such Interest
Determination Date will be the same as the CMT Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest payable on the CMT Rate Notes for which the CMT
Rate is being determined shall be the Initial Interest Rate).
RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable notes
(the "Renewable Notes") that will bear interest at the interest rate
(calculated with reference to a Base Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Renewable Notes and in the applicable
Pricing Supplement. Renewable Notes are Book-Entry Floating Rate Notes.
The Renewable Notes will mature on an Interest Payment Date as specified in
the applicable Pricing Supplement (the "Initial Maturity Date"), unless the
maturity of all or any portion of the principal amount thereof is extended in
accordance with the procedures described below. On the Interest Payment Dates
in March and September in each year (unless different Interest Payment Dates are
specified in the applicable Pricing Supplement) (each such Interest Payment
Date, an "Election Date"), the maturity of the Renewable Notes will be extended
to the Interest Payment Date occurring twelve months after such Election Date
(unless a different extension period is specified in the applicable Pricing
Supplement), unless the holder thereof elects to terminate the automatic
extension of the maturity of the Renewable Notes or of any portion thereof
having a principal amount of $1,000 or any multiple of $1,000 in excess thereof
by delivering a notice to such effect to the Paying Agent not less than nor more
than a number of days to be specified in the applicable Pricing Supplement prior
to such Election Date. Such option may be exercised with respect to less than
the entire principal amount of the Renewable Notes; provided that the principal
amount for which such option is not exercised is at least $1,000 or any larger
amount that is an integral multiple of $1,000. Notwithstanding the foregoing,
the maturity of the Renewable Notes may not be extended beyond the Final
Maturity Date, as specified in the applicable Pricing Supplement (the "Final
Maturity Date"). If the holder elects to terminate the automatic extension of
the maturity of any portion of the principal amount of the Renewable Notes and
such election is not revoked as described below, such portion will become due
and payable on the Interest Payment Date falling six months (unless another
period is specified in the applicable Pricing Supplement) after the Election
Date prior to which the holder made such election.
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<PAGE>
An election to terminate the automatic extension of maturity may be revoked
as to any portion of the Renewable Notes having a principal amount of $1,000 or
any multiple of $1,000 in excess thereof by delivering a notice to such effect
to the Paying Agent on any day following the effective date of the election to
terminate the automatic extension of maturity and prior to the date 15 days
before the date on which such portion would otherwise mature. Such a revocation
may be made for less than the entire principal amount of the Renewable Notes for
which the automatic extension of maturity has been terminated; provided that the
principal amount of the Renewable Notes for which the automatic extension of
maturity has been terminated and for which such a revocation has not been made
is at least $1,000 or any larger amount that is an integral multiple of $1,000.
Notwithstanding the foregoing, a revocation may not be made during the period
from and including a Record Date to but excluding the immediately succeeding
Interest Payment Date.
An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent holder.
The Renewable Notes may be redeemed in whole or in part at the option of
the Company on the Interest Payment Dates in each year specified in the
applicable Pricing Supplement, commencing with the Interest Payment Date
specified in the applicable Pricing Supplement, at a redemption price of 100% of
the principal amount of the Renewable Notes to be redeemed, together with
accrued and unpaid interest to the date of redemption. Notwithstanding anything
to the contrary in this Prospectus Supplement, notice of redemption will be
provided by mailing a notice of such redemption to each holder by first class
mail, postage prepaid, at least 180 days and not more than 210 days prior to the
date fixed for redemption.
Renewable Notes may also be issued, from time to time, with the Spread or
Spread Multiplier to be reset by a remarketing agent in remarketing procedures
(the "Remarketing Procedures") to be specified in such Renewable Notes and in
the applicable Pricing Supplement. A description of the Remarketing Procedures,
the terms of the remarketing agreement between the Company and the remarketing
agent and the terms of any additional agreements with other parties that may be
involved in the Remarketing Procedures will be set forth in the applicable
Pricing Supplement.
CURRENCY LINKED NOTES
Notes may be issued, from time to time, with the principal amount payable
on any principal payment date, or the amount of interest payable on any interest
payment date, to be determined by reference to the value of one or more
currencies (or composite currencies) as compared to the value of one or more
other currencies (or composite currencies) ("Currency Linked Notes").
Information as to the one or more currencies (or composite currencies) to which
the principal amount payable on any principal payment date or the amount of
interest payable on any interest payment date is indexed, the currency in which
the face amount of the Currency Linked Note is denominated (the "Denominated
Currency"), the currency in which principal on the Currency Linked Note will be
paid (the "Payment Currency"), specific historic exchange rate information, any
currency risks relating to the specific currencies selected, and certain
additional tax considerations, if any, will be set forth in the applicable
Pricing Supplement. The Denominated Currency and the Payment Currency may be
the same currency or different currencies. Unless otherwise specified in the
applicable Pricing Supplement, interest on Currency Linked Notes will be paid in
the Denominated Currency based on the face amount of the Currency Linked Note at
the rate per annum and on the dates set forth in the applicable Pricing
Supplement. Currency Linked Notes may include, but are not limited to, Notes of
the types described below.
Principal Exchange Rate Linked Securities (PERLS)
PERLS are Currency Linked Notes pursuant to which the principal amount
payable on any principal payment date equals the Payment Currency equivalent at
such date of a fixed amount of a designated currency (or composite currency)
(the "Indexed Currency"). Generally, the fixed amount of Indexed Currency to
which the
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principal of a PERLS will be linked will be approximately equal in value to the
face amount of the PERLS in the Denominated Currency based on the exchange rate
between the Indexed Currency and the Denominated Currency in effect at the time
of pricing. The Denominated Currency, the Indexed Currency and the Payment
Currency will be identified in the applicable Pricing Supplement. In addition,
the fixed amount of the Indexed Currency to which the principal of the PERLS is
linked will be set forth in the applicable Pricing Supplement for a specific
representative face amount of the PERLS as well as for the aggregate face amount
of all PERLS forming part of the same issue (the "Conversion Reference Amount").
Holders of PERLS may receive an amount of principal greater than, less than
or equal in value to the face amount of the PERLS, depending on the change, if
any, in the relative exchange rates of the Denominated Currency, the Payment
Currency and the Indexed Currency from the issue date to the date that is two
Exchange Rate Days (as defined below) preceding the maturity date.
The Payment Currency equivalent of any Indexed Currency amount on any date
will be determined by an exchange rate agent (identified in the applicable
Pricing Supplement) based on the arithmetic mean of the quotations obtained by
such agent from reference dealers (identified in the applicable Pricing
Supplement) at 11:00 A.M., New York City time, on the second Exchange Rate Day
preceding such date for the purchase by the reference dealers of the Conversion
Reference Amount of the Indexed Currency with the Payment Currency for
settlement on such date; provided that if there is no cross-exchange rate
available in New York City between the Indexed Currency and the Payment
Currency, the quotations will be calculated by the exchange rate agent at the
time referred to above using the U.S. dollar equivalent of the Indexed Currency
and the Payment Currency as the basis for comparing the values of such
currencies; provided further that if the Payment Currency and the Indexed
Currency are identical, then the Payment Currency equivalent of any Indexed
Currency amount will be such amount.
"Exchange Rate Day" means, with respect to any currency conversion, any day
other than a Saturday or Sunday or a day on which banking institutions in New
York City are authorized or required by law or executive order to close and that
is a business day in each of the cities designated in the Pricing Supplement for
the currencies being converted and, in the case of conversions involving ECUs,
that is not a non-ECU clearing day, as determined by the ECU Banking Association
in Paris.
Reverse Principal Exchange Rate Linked Securities (Reverse PERLS)
Reverse PERLS are Currency Linked Notes pursuant to which the principal
amount payable on any principal payment date equals the Payment Currency
equivalent at such date of a fixed amount of a designated currency (or composite
currency) (the "First Indexed Currency") minus the Payment Currency equivalent
at maturity of a fixed amount of another designated currency (or composite
currency) (the "Second Indexed Currency"); provided that the minimum principal
amount payable at maturity will be zero. Generally, the fixed amount of the
First Indexed Currency to which the principal of a Reverse PERLS will be linked
will be approximately equal in value to twice the face amount of the Reverse
PERLS in the Denominated Currency, and the fixed amount of the Second Indexed
Currency to which the principal of a Reverse PERLS will be linked will be
approximately equal in value to the face amount of the Reverse PERLS in the
Denominated Currency, in each case based on the exchange rate between each
Indexed Currency and the Denominated Currency in effect at the time of pricing.
Holders of Reverse PERLS may receive an amount of principal greater than,
less than (with a minimum of zero) or equal in value to the face amount of the
Reverse PERLS, depending on the change, if any, in the relative exchange rates
of the Denominated Currency, the Payment Currency and the First and Second
Indexed Currencies from the issue date to the date that is two Exchange Rate
Days preceding the maturity date.
The Denominated Currency, the First and Second Indexed Currencies and the
Payment Currency will be identified in the applicable Pricing Supplement. In
addition, the fixed amounts of the First and Second Indexed Currencies to which
the principal of the Reverse PERLS is linked will be set forth in the applicable
Pricing Supplement for a specific representative face amount of the Reverse
PERLS as well as for the aggregate face amount
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of all Reverse PERLS forming part of the same issue (respectively, the "First
Conversion Reference Amount" and the "Second Conversion Reference Amount").
The Payment Currency equivalent of any First Indexed Currency amount on any
date will be determined by an exchange rate agent (identified in the applicable
Pricing Supplement) based on the arithmetic mean of the quotations obtained by
such agent from reference dealers (identified in the applicable Pricing
Supplement) at 11:00 A.M., New York City time, on the second Exchange Rate Day
preceding such date for the purchase by the reference dealers of the First
Conversion Reference Amount of the First Indexed Currency with the Payment
Currency for settlement on such date; provided that if there is no cross-
exchange rate available in New York City between the First Indexed Currency and
the Payment Currency, the quotations will be calculated by the exchange rate
agent at the time referred to above using the U.S. dollar equivalent of the
First Indexed Currency and the Payment Currency as the basis for comparing the
values of such currencies; provided further that if the First Indexed Currency
and the Payment Currency are identical, then the Payment Currency equivalent of
any First Indexed Currency amount will be such amount.
The Payment Currency equivalent of any Second Indexed Currency amount on
any date will be determined by an exchange rate agent (identified in the
applicable Pricing Supplement) based on the arithmetic mean of the quotations
obtained by such agent from the reference dealers (identified in the applicable
Pricing Supplement) at 11:00 A.M., New York City time, on the second Exchange
Rate Day preceding such date for the sale by the reference dealers of the Second
Conversion Reference Amount of the Second Indexed Currency for the Payment
Currency for settlement on such date; provided that if there is no cross-
exchange rate available in New York City between the Second Indexed Currency and
the Payment Currency, the quotations will be calculated by the exchange rate
agent at the time referred to above using the U.S. dollar equivalent of the
Second Indexed Currency and the Payment Currency as the basis for comparing the
values of such currencies; provided further that if the Second Indexed Currency
and the Payment Currency are identical, then the Payment Currency equivalent of
any Second Indexed Currency amount will be such amount.
Multicurrency Principal Exchange Rate Linked Securities (Multicurrency
PERLS)
Multicurrency PERLS are Currency Linked Notes pursuant to which the
principal amount payable on any principal payment date equals the Payment
Currency equivalent at such date of a fixed amount of a designated currency (or
composite currency) (the "First Indexed Currency") plus or minus the Payment
Currency equivalent at maturity of a fixed amount of a second designated
currency (or composite currency) (the "Second Indexed Currency") plus or minus
the Payment Currency equivalent at maturity of a fixed amount of a third
designated currency (or composite currency) (the "Third Indexed Currency");
provided that the minimum principal amount payable at maturity will be zero.
Generally, the added and subtracted fixed amounts of the First, Second and Third
Indexed Currencies (each, an "Indexed Currency") to which the principal of a
Multicurrency PERLS will be linked will have an aggregate value approximately
equal to the face amount of the Multicurrency PERLS in the Denominated Currency
based on exchange rates between each Indexed Currency and the Denominated
Currency in effect at the time of pricing.
Holders of Multicurrency PERLS may receive an amount of principal greater
than, less than (with a minimum of zero) or equal in value to the face amount of
the Multicurrency PERLS, depending on the change, if any, in the relative
exchange rates for the Denominated Currency, the Payment Currency and the First,
Second and Third Indexed Currencies from the issue date to the date that is two
Exchange Rate Days preceding the maturity date.
The Denominated Currency, each Indexed Currency, the Payment Currency and
whether the fixed amounts of the Second and Third Indexed Currencies are to be
added or subtracted to determine the principal amount payable at maturity of the
Multicurrency PERLS will be set forth in the applicable Pricing Supplement. In
addition, the fixed amounts of the First, Second and Third Indexed Currencies to
which the principal of the Multicurrency PERLS is linked will be set forth in
the applicable Pricing Supplement for a specific representative face amount of
the
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Multicurrency PERLS as well as for the aggregate face amount of all
Multicurrency PERLS forming part of the same issue (respectively, the "First
Conversion Reference Amount," the "Second Conversion Reference Amount" and the
"Third Conversion Reference Amount," each a "Conversion Reference Amount"). As
used herein, "Added Indexed Currency" means the First Indexed Currency and any
other Indexed Currency that is added to determine the principal amount payable
at maturity of the Multicurrency PERLS and a "Subtracted Indexed Currency" means
an Indexed Currency that is subtracted to determine the principal amount payable
at maturity of the Multicurrency PERLS.
The Payment Currency equivalent of any Added Indexed Currency amount on any
date will be determined by an exchange rate agent (identified in the applicable
Pricing Supplement) based on the arithmetic mean of the quotations obtained by
such agent from reference dealers (identified in the applicable Pricing
Supplement) at 11:00 A.M., New York City time, on the second Exchange Rate Day
preceding such date for the purchase by the reference dealers of the applicable
Conversion Reference Amount of the Added Indexed Currency with the Payment
Currency for settlement on such date; provided that if there is no cross-
exchange rate available in New York City between the Added Indexed Currency and
the Payment Currency, the quotations will be calculated by the exchange rate
agent at the time referred to above using the U.S. dollar equivalent of the
Added Indexed Currency and the Payment Currency as the basis for comparing the
values of such currencies; provided further that if the Added Indexed Currency
and the Payment Currency are identical, then the Payment Currency equivalent of
any Added Indexed Currency amount will be such amount.
The Payment Currency equivalent of any Subtracted Indexed Currency amount
on any date will be determined by an exchange rate agent (identified in the
applicable Pricing Supplement) based on the arithmetic mean of the quotations
obtained by such agent from reference dealers (identified in the applicable
Pricing Supplement) at 11:00 A.M. New York City time, on the second Exchange
Rate Day preceding such date for the sale by the reference dealers of the
applicable Conversion Reference Amount of the Subtracted Indexed Currency for
the Payment Currency, for settlement on such date; provided that if there is no
cross-exchange rate available in New York City between the Subtracted Indexed
Currency and the Payment Currency, the quotations will be calculated by the
exchange rate agent at the time referred to above using the U.S. dollar
equivalent of the Subtracted Indexed Currency and the Payment Currency as the
basis for comparing the values of such currencies; provided further that if the
Subtracted Indexed Currency and the Payment Currency are identical, then the
Payment Currency equivalent of any Subtracted Indexed Currency amount will be
such amount.
Payments upon Acceleration of Maturity
If the principal amount payable at maturity of any PERLS, Reverse PERLS or
Multicurrency PERLS is declared due and payable prior to maturity, the amount
payable with respect to such Note will be paid in the Denominated Currency and
will equal the face amount of such Note plus accrued interest to but excluding
the date of payment.
NOTES LINKED TO COMMODITY PRICES, EQUITY INDICES OR OTHER FACTORS
Notes may be issued, from time to time, with the principal amount payable
on any principal payment date, or the amount of interest payable on any interest
payment date, to be determined by reference to one or more commodity prices,
equity indices or other factors and on such other terms as may be set forth in
the relevant Pricing Supplement.
An investment in such Notes or Currency Linked Notes entails significant
risks not associated with similar investments in a conventional debt security.
If the interest rate of such a Note or Currency Linked Note is so indexed, it
may result in an interest rate that is less than that payable on a conventional
fixed-rate debt security issued at the same time, including the possibility that
no interest will be paid, and, if the principal amount of such a Note or
Currency Linked Note is so indexed, the principal amount payable at maturity may
be less than the original purchase price of such Note (if permitted pursuant to
the terms of such Note) including the possibility that
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no principal will be paid. The market values for such Notes will be affected by
a number of factors independent of the creditworthiness of the Company and the
value of the applicable currency, commodity or index, including the volatility
of the applicable currency, commodity or index, the time remaining to the
maturity of the Notes, the outstanding principal amount of the Notes and market
interest rates. The value of the applicable currency, commodity or index
depends on a number of interrelated factors, including economic, financial and
political events, over which the Company has no control. Additionally, if the
formula used to determine the principal amount, premium, if any, or interest
payable with respect to such Notes contains a multiple or leverage factor, the
effect of any change in the applicable currency, commodity or index may be
increased. The historical experience of the relevant currencies, commodities or
indices should not be taken as an indication of future performance of such
currencies, commodities or indices during the term of any Note.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Fixed Rate Note (other than an
Amortizing Note or a Currency Linked Note) will indicate whether the Company has
the option to extend the maturity of such Fixed Rate Note for one or more
periods of one or more whole years (each an "Extension Period") up to but not
beyond the date (the "Final Maturity Date") set forth in such Pricing
Supplement. If the Company has such option with respect to any such Fixed Rate
Note (an "Extendible Note"), the following procedures will apply, unless
modified as set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to an Extendible Note by
notifying the Paying Agent of such exercise at least 45 but not more than 60
days prior to the maturity date originally in effect with respect to such Note
(the "Original Maturity Date") or, if the maturity date of such Note has already
been extended, prior to the maturity date then in effect (an "Extended Maturity
Date"). No later than 38 days prior to the Original Maturity Date or an
Extended Maturity Date, as the case may be (each, a "Maturity Date"), the Paying
Agent will mail to the holder of such Note a notice (the "Extension Notice")
relating to such Extension Period, first class mail, postage prepaid, setting
forth (a) the election of the Company to extend the maturity of such Note; (b)
the new Extended Maturity Date; (c) the interest rate applicable to the
Extension Period; and (d) the provisions, if any, for redemption during the
Extension Period, including the date or dates on which, the period or periods
during which and the price or prices at which such redemption may occur during
the Extension Period. Upon the mailing by the Paying Agent of an Extension
Notice to the holder of an Extendible Note, the maturity of such Note shall be
extended automatically, and, except as modified by the Extension Notice and as
described in the next paragraph, such Note will have the same terms it had prior
to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 A.M., New York City
time, on the twentieth calendar day prior to the Maturity Date then in effect
for an Extendible Note (or, if such day is not a Business Day, not later than
10:00 A.M., New York City time, on the immediately succeeding Business Day), the
Company may, at its option, revoke the interest rate provided for in the
Extension Notice and establish a higher interest rate for the Extension Period
by causing the Paying Agent to send notice of such higher interest rate to the
holder of such Note by first class mail, postage prepaid, or by such other means
as shall be agreed between the Company and the Paying Agent. Such notice shall
be irrevocable. All Extendible Notes with respect to which the Maturity Date is
extended in accordance with an Extension Notice will bear such higher interest
rate for the Extension Period, whether or not tendered for repayment.
If the Company elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to require the Company to repay such
Note on the Maturity Date then in effect at a price equal to the principal
amount thereof plus any accrued and unpaid interest to such date. In order for
an Extendible Note to be so repaid on such Maturity Date, the holder thereof
must follow the procedures set forth below under "Repayment at the Noteholders'
Option; Repurchase" for optional repayment, except that the period for delivery
of such Note or notification to the Paying Agent shall be at least 25 but not
more than 35 days prior to the Maturity Date then in effect and except that a
holder who has tendered an Extendible Note for repayment pursuant to an
Extension Notice may, by written notice to the Paying Agent, revoke any such
tender for repayment until 3:00 P.M., New
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York City time, on the twentieth calendar day prior to the Maturity Date then in
effect (or, if such day is not a Business Day, until 3:00 P.M., New York City
time, on the immediately succeeding Business Day).
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Book-Entry Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, ranking, maturity date and
other terms, if any, will be represented by a single Global Note, and all
Floating Rate Book-Entry Notes having the same Issue Date, Initial Interest
Rate, Base Rate, Interest Reset Period, Interest Payment Dates, Index Maturity,
Spread and/or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, ranking, maturity date and other terms, if any, will be
represented by a single Global Note. Each Global Note representing Book-Entry
Notes will be deposited with, or on behalf of, The Depository Trust Company, New
York, New York (the "Depositary"), and registered in the name of a nominee of
the Depositary. Certificated Notes will not be exchangeable for Book-Entry
Notes and, except under the circumstances described in the Prospectus under
"Description of Debt Securities-Registered Global Securities," Book-Entry Notes
will not be exchangeable for Certificated Notes and will not otherwise be
issuable as Certificated Notes.
A further description of the Depositary's procedures with respect to Global
Notes representing Book-Entry Notes is set forth in the Prospectus under
"Description of Debt Securities -- Global Securities." The Depositary has
confirmed to the Company, the Agent and each Trustee that it intends to follow
such procedures.
OPTIONAL REDEMPTION
The Pricing Supplement will indicate either that the Notes cannot be
redeemed prior to maturity or will indicate the terms on which the Notes will be
redeemable at the option of the Company. Notice of redemption will be provided
by mailing a notice of such redemption to each holder by first class mail,
postage prepaid, at least 30 days and not more than 60 days prior to the date
fixed for redemption to the respective address of each holder as that address
appears upon the books maintained by the Paying Agent. The Notes, except for
Amortizing Notes, will not be subject to any sinking fund.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the holder on a date or dates
specified prior to its maturity date and, unless otherwise specified in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof,
together with accrued interest to the date of repayment, unless such Note was
issued with original issue discount, in which case the Pricing Supplement will
specify the amount payable upon such repayment.
In order for such a Note to be repaid, the Paying Agent must receive at
least 15 days but not more than 30 days prior to the repayment date (i) the Note
with the form entitled "Option to Elect Repayment" on the reverse of the Note
duly completed or (ii) a telegram, telex, facsimile transmission or a letter
from a member of a national securities exchange, or the National Association of
Securities Dealers, Inc. (the "NASD") or a commercial bank or trust company in
the United States setting forth the name of the holder of the Note, the
principal amount of the Note, the principal amount of the Note to be repaid, the
certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse of the Note, will be
received by the Paying Agent not later than the fifth Business Day after the
date of such telegram, telex, facsimile transmission or letter; provided,
however, that such telegram, telex, facsimile transmission or letter shall only
be effective if such Note and form duly completed are received by the Paying
Agent by such fifth Business Day. Except in the case of Renewable Notes or
Extendible Notes, and unless otherwise specified in the applicable Pricing
Supplement, exercise of the repayment option by the holder of a Note will be
irrevocable. The repayment option may be exercised by the holder of a Note for
less than the entire principal amount of the Note
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but, in that event, the principal amount of the Note remaining outstanding after
repayment must be an authorized denomination.
If a Note is represented by a Registered Global Security, the Depositary's
nominee will be the holder of such Note and therefore will be the only entity
that can exercise a right to repayment. In order to ensure that the
Depositary's nominee will timely exercise a right to repayment with respect to a
particular Note, the beneficial owner of such Note must instruct the broker or
other direct or indirect participant through which it holds an interest in such
Note to notify the Depositary of its desire to exercise a right to repayment.
Different firms have different cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other direct or indirect participant through which it holds an
interest in a Note in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to the
Depositary.
The Company may purchase Notes at any price in the open market or
otherwise. Notes so purchased by the Company may, at the discretion of the
Company, be held or resold or surrendered to the relevant Trustee for
cancellation.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility of the imposition or modification of exchange controls by either the
U.S. or foreign governments. Such risks generally depend on economic and
political events over which the Company has no control. In recent years, rates
of exchange between U.S. dollars and certain foreign currencies have been highly
volatile and such volatility may be expected to continue in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations in such rate that may occur
during the term of any Note. Depreciation against the U.S. dollar of the
currency in which a Note is payable would result in a decrease in the effective
yield of such Note below its coupon rate and, in certain circumstances, could
result in a loss to the investor on a U.S. dollar basis. In addition, depending
on the specific terms of a currency linked Note, changes in exchange rates
relating to any of the currencies involved may result in a decrease in its
effective yield and, in certain circumstances, could result in a loss of all or
a substantial portion of the principal of a Note to the investor.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN FINANCIAL AND LEGAL
ADVISORS AS TO ANY SPECIFIC RISKS ENTAILED BY AN INVESTMENT BY SUCH INVESTOR IN
NOTES DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF,
FOREIGN CURRENCY. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS
WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, premium, if
any, and interest on the Notes. Such persons should consult their own counsel
with regard to such matters.
Foreign exchange rates can either float or be fixed by sovereign
governments. Exchange rates of most economically developed nations are
permitted to fluctuate in value relative to the U.S. dollar. National
governments, however, rarely voluntarily allow their currencies to float freely
in response to economic forces.
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From time to time governments use a variety of techniques, such as intervention
by a country's central bank or imposition of regulatory controls or taxes, to
affect the exchange rate of their currencies. Governments may also issue a new
currency to replace an existing currency or alter the exchange rate or relative
exchange characteristics by devaluation or revaluation of a currency. Thus, a
special risk in purchasing non-U.S. dollar denominated Notes or Currency Linked
Notes is that their U.S. dollar-equivalent yields could be affected by
governmental actions, which could change or interfere with theretofore freely
determined currency valuation, fluctuations in response to other market forces,
and the movement of currencies across borders. There will be no adjustment or
change in the terms of such Notes in the event that exchange rates should become
fixed, or in the event of any devaluation or revaluation or imposition of
exchange or other regulatory controls or taxes, or in the event of other
developments affecting the U.S. dollar or any applicable Specified Currency.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal of, premium,
if any, or interest on a Note. Even if there are no actual exchange controls,
it is possible that the Specified Currency for any particular Note not
denominated in U.S. dollars would not be available when payments on such Note
are due. In that event, the Company would make required payments in U.S.
dollars on the basis of the Market Exchange Rate on the date of such payment, or
if such rate of exchange is not then available, on the basis of the Market
Exchange Rate as of the most recent practicable date. See "Description of Notes
-- Payment Currency."
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable current exchange
controls, if any, and historic exchange rate information on such currency or
currency unit. The information contained therein shall constitute a part of
this Prospectus Supplement and is furnished as a matter of information only and
should not be regarded as indicative of the range of or trends in fluctuations
in currency exchange rates that may occur in the future.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. In the event an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a court in the
United States, it is likely that such court would grant judgment relating to the
Notes only in U.S. dollars. If an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a New York court,
however, such court would render or enter a judgment or decree in the Specified
Currency. Such judgment would then be converted into U.S. dollars at the rate
of exchange prevailing on the date of entry of the judgment or decree.
UNITED STATES FEDERAL TAXATION
In the opinion of Shearman & Sterling, counsel to the Company, the
following summary accurately describes the principal United States federal
income tax consequences of ownership and disposition of the Notes. This summary
is based on the Internal Revenue Code of 1986, as amended to the date hereof
(the "Code"), and existing and proposed Treasury regulations, revenue rulings
and judicial decisions. This summary deals only with the Notes held as capital
assets within the meaning of Section 1221 of the Code. It does not discuss all
of the tax consequences that may be relevant to holders in light of their
particular circumstances or to holders subject to special rules, such as persons
other than United States Holders, as defined below, life insurance companies,
dealers in securities or foreign currencies, persons holding the Notes as a
hedge against currency risks, persons who have hedged the interest rate risks of
ownership of a Note, or United States Holders whose functional currency (as
defined in Section 985 of the Code) is not the United States dollar. Persons
considering the purchase of the Notes should consult with their own tax advisors
with regard to the application of the United States federal income tax laws to
their particular situations as well as any tax consequences arising under the
laws of any state, local or foreign tax jurisdiction.
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As used herein, the term "United States Holder" means a beneficial owner of
a Note that is for United States federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) an estate or trust the income of which
is subject to United States federal income taxation regardless of its source.
Payments of Interest on the Notes
Interest paid on a Note (whether in United States dollars or in other than
United States dollars), that is not a Discount Note, as defined below, will
generally be taxable to a United States Holder as ordinary interest income at
the time it accrues or is received, in accordance with the United States
Holder's method of accounting for federal income tax purposes.
Special rules governing the treatment of interest paid with respect to
Discount Notes, including certain Notes that pay interest annually that are
issued less than 15 calendar days before an Interest Payment Date, Notes that
mature one year or less from their date of issuance and Notes issued for an
amount less than their stated redemption price at maturity, are described under
"Discount Notes" below.
Discount Notes
The following discussion is a summary of the principal United States
federal income tax consequences of the ownership and disposition of Discount
Notes (as defined below) by United States Holders. Additional rules applicable
to Discount Notes that are denominated in a Specified Currency other than the
U.S. dollar, or have payments of interest or principal determined by reference
to the value of one or more currencies or currency units other than the U.S.
dollar, are described under "Foreign Currency Notes" below.
The following summary is based upon certain Treasury regulations issued on
January 27, 1994 (the "OID Regulations"). The OID Regulations are effective
for Notes issued on or after April 3, 1994.
Under the OID Regulations, a Note which has an "issue price" that is less
than its "stated redemption price at maturity" will generally be considered to
have been issued bearing original issue discount ("OID") for United States
federal income tax purposes (a "Discount Note"), unless such difference is less
than a specified de minimis amount. The issue price of a Note issued for cash
generally will be the initial offering price to the public at which price a
substantial amount of Notes is sold. Such issue price does not change even if
part of the issue is subsequently sold at a different price. The stated
redemption price at maturity of a Discount Note is the total of all payments
required to be made under the Discount Note other than "qualified stated
interest" payments. The term "qualified stated interest" is defined as stated
interest that is unconditionally payable at least annually at a single fixed
rate of interest. In addition, qualified stated interest generally includes
stated interest with respect to a variable rate debt instrument that is
unconditionally payable at least annually at a single qualified floating rate or
a rate that is determined using a single fixed formula that is based on one or
more qualified floating rates. A rate is a qualified floating rate if
variations in the rate can reasonably be expected to measure contemporaneous
fluctuations in the cost of newly borrowed funds.
Under the OID Regulations, no payment of interest on a Note that matures
one year or less from its date of issuance will be considered qualified stated
interest and accordingly such a Note will be treated as a Discount Note.
A United States Holder of Discount Notes is required to include qualified
stated interest in income at the time it is received or accrued, in accordance
with such holder's method of accounting.
In addition, United States Holders of Discount Notes that mature more than
one year from the date of issuance will be required to include OID in income for
United States federal income tax purposes as it accrues, in
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accordance with a constant yield method based on a compounding of interest,
before the receipt of cash payments attributable to such income, but such
holders will not be required to include separately in income cash payments
received on such Notes, even if denominated as interest, to the extent they do
not constitute qualified stated interest. The amount of OID includible in
income for a taxable year by the initial United States Holder of a Discount Note
will generally equal the sum of the "daily portions" of the total OID on the
Discount Note for each day during the taxable year on which such holder held the
Discount Note ("accrued OID"). Generally, the daily portion of the OID is
determined by allocation to each day in any "accrual period" a ratable portion
of the OID allocable to such accrual period. The term "accrual period" means an
interval of time of one year or less; provided that each scheduled payment of
principal or interest either occurs on the final day of an accrual period or the
first day of an accrual period. The amount of OID allocable to an accrual
period will be the excess of (a) the product of the "adjusted issue price" of
the Discount Note at the beginning of such accrual period and its "yield to
maturity" over (b) the amount of any qualified stated interest allocable to the
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of an accrual period will equal the issue price plus the amount of OID
previously includible in the gross income of any United States Holder (without
reduction for any premium or amortized acquisition premium, as described below),
less any payments made on such Discount Note (other than qualified stated
interest) on or before the first day of the accrual period. The "yield to
maturity" of the Discount Note will be computed on the basis of a constant
annual interest rate and compounded at the end of each accrual period. Under
the foregoing rules, United States Holders of Discount Notes will generally be
required to include in income increasingly greater amounts of OID in successive
accrual periods. Special rules will apply for calculating OID for initial short
or final accrual periods.
Under the OID Regulations, Notes that pay interest annually that are issued
less than 15 calendar days before an Interest Payment Date may be treated as
Discount Notes. United States Holders intending to purchase such Notes should
refer to the applicable Pricing Supplement.
Certain of the Discount Notes may be redeemable prior to maturity at the
option of the Company (a "call option") and/or repayable prior to maturity at
the option of the holder (a "put option"). Discount Notes containing either or
both of such features may be subject to rules that differ from the general rules
discussed above. Holders intending to purchase Discount Notes with either or
both of such features should carefully examine the applicable Pricing Supplement
and should consult with their own tax advisors with respect to either or both of
such features since the tax consequences with respect to OID will depend, in
part, on the particular terms and the particular features of the purchased Note.
In general, a United States Holder who uses the cash method of tax
accounting and who holds a Discount Note that matures one year or less from the
date of its issuance (a "short-term Discount Note") is not required to accrue
OID for United States federal income tax purposes unless such holder elects to
do so. United States Holders who report income for United States federal income
tax purposes on the accrual method and certain other holders, including banks
and dealers in securities, are required to include OID (or alternatively
acquisition discount) on such short-term Discount Notes on a straight-line
basis, unless an election is made to accrue the OID according to a constant
yield method based on daily compounding. In the case of a United States Holder
who is not required, and does not elect, to include OID in income currently, any
gain realized on the sale, exchange or retirement of a short-term Discount Note
will be ordinary interest income to the extent of the OID accrued on a straight-
line basis (or alternatively under the constant yield method) through the date
of sale, exchange or retirement. In addition, such non-electing United States
Holders who are not subject to the current inclusion requirement described in
the second sentence of this paragraph will be required to defer the deduction of
all or a portion of any interest paid on indebtedness incurred to purchase
short-term Discount Notes until such OID is included in such holder's income.
If the amount of OID with respect to a Note is less than the specified de
minimis amount (generally, 0.0025 multiplied by the product of the stated
redemption price at maturity and the number of complete years to maturity), the
amount of OID is treated as zero and all stated interest is treated as qualified
stated interest. Under the OID regulations, a United States Holder will be
required to treat any stated principal payment on a Note as capital gain
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to the extent of the product of the total amount of de minimis OID and a
fraction, the numerator of which is the amount of the principal payment made and
the denominator of which is the stated principal amount of the Note.
Under the OID Regulations, United States Holders are permitted to elect to
include all interest on a Note using the constant yield method. For this
purpose, interest includes stated interest, acquisition discount, OID, de
minimis OID, market discount, de minimis market discount, and unstated interest,
as adjusted by any amortizable bond premium or acquisition premium. Special
rules apply to elections made with respect to Notes with amortizable bond
premium or market discount and United States Holders considering such an
election should consult their own tax advisor. The election cannot be revoked
without the approval of the Internal Revenue Service.
Market Discount and Premium
If a United States Holder purchases a Note (other than a Discount Note) for
an amount that is less than its stated redemption price at maturity or, in the
case of a Discount Note, its adjusted issue price, the amount of the difference
will be treated as "market discount" for United States federal income tax
purposes, unless such difference is less than a specified de minimis amount.
Under the market discount rules of the Code, a United States Holder will be
required to treat any partial principal payment (or, in the case of a Discount
Note, any payment that does not constitute qualified stated interest) on, or any
gain realized on the sale, exchange, retirement or other disposition of, a Note
as ordinary income to the extent of the lesser of (i) the amount of such payment
or realized gain or (ii) the market discount that has not previously been
included in income and is treated as having accrued on such Note at the time of
such payment or disposition. If such Note is disposed of in a nontaxable
transaction (other than a nonrecognition transaction described in Code Section
1276(c)), the amount of gain realized on such disposition for purposes of the
market discount rules shall be determined as if such holder had sold the Note at
its then fair market value. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
the Note, unless the United States Holder elects to accrue on the basis of a
constant interest rate. A different rule may apply to Discount Notes or
Amortizing Notes under forthcoming regulations.
A United States Holder may be required to defer the deduction of all or a
portion of the interest paid or accrued on any indebtedness incurred or
maintained to purchase or carry such Note until the maturity of the Note or its
earlier disposition (including a nonrecognition transaction described in Code
Section 1276(c)). A United States Holder may elect to include market discount
in income currently as it accrues (on either a ratable or a constant interest
rate basis), in which case the rules described above regarding the treatment as
ordinary income of gain upon the disposition of the Note and upon the receipt of
certain cash payments and regarding the deferral of interest deductions will not
apply.
A United States Holder who purchases a Discount Note for an amount that is
greater than its adjusted issue price, but less than or equal to the sum of all
amounts payable on the Note, after the purchase date (other than qualified
stated interest), will be considered to have purchased such Note at an
"acquisition premium" within the meaning of the Code. Under the acquisition
premium rules of the Code, the amount of OID which such holder must include in
its gross income with respect to such Note for any taxable year will be reduced
by the fraction, the numerator of which is the excess of the cost of the Note
over its adjusted issue price and the denominator of which is the excess of the
sum of all amounts payable on the Note after the purchase date (other than
qualified stated interest) over the adjusted issue price.
A United States Holder who purchases a Discount Note for an amount that is
greater than the sum of all amounts payable on the Note after the purchase date
(other than qualified stated interest) will be considered to have purchased such
Note at a "premium" within the meaning of the OID Regulations. In such case,
the holder is not required to include any OID in gross income.
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If a United States Holder purchases a Note for an amount that is greater
than the amount payable at maturity (or on the earlier call date, in the case of
a Note that is redeemable at the option of the Company), such holder will be
considered to have purchased such Note with "amortizable bond premium" equal in
amount to such excess, and may elect (in accordance with applicable Code
provisions) to amortize such premium, using a constant yield method over the
remaining term of the Note and to offset interest otherwise required to be
included in income in respect of such Note during any taxable year by the
amortized amount of such excess for such taxable year. However, if such Note
may be optionally redeemed after the United States Holder acquires it at a price
in excess of its stated redemption price at maturity, special rules would apply
which could result in a deferral of the amortization of some bond premium until
later in the term of such Note.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a United States Holder
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and such holder's adjusted tax
basis in the Note. A cash basis taxpayer's amount realized on the sale,
exchange or retirement of a Note will be reduced by any amount attributable to
accrued interest (or, in the case of a Discount Note, accrued qualified stated
interest), which will be taxable as such. A United States Holder's adjusted tax
basis in a Note generally will equal the cost of the Note to such holder,
increased by the amounts of any market discount, OID and de minimis OID
previously included in income by the holder with respect to such Note and
reduced by any amortized bond premium and any principal payments received by the
United States Holder and, in the case of a Discount Note, by the amounts of any
other payments that do not constitute qualified stated interest.
Subject to the discussion under "Foreign Currency Notes" below, gain or
loss recognized on the sale, exchange or retirement of a Note will be capital
gain or loss (except to the extent of any accrued market discount or, in the
case of a short-term Discount Note, any accrued OID which the United States
Holder has not previously included in income), and will generally be long-term
capital gain or loss if at the time of sale, exchange or retirement the Note has
been held for more than one year.
A United States Holder generally will not recognize gain or loss upon the
election (or revocation of such election) or failure to elect to terminate the
automatic extension of maturity of a Renewable Note.
Foreign Currency Notes
The following discussion summarizes the principal United States federal
income tax consequences to a United States Holder of the ownership and
disposition of Notes (other than the Currency Linked Notes described above) that
are denominated in a Specified Currency other than the U.S. dollar or the
payments of interest or principal on which are payable in one or more currencies
or currency units other than the U.S. dollar (a "Foreign Currency Note").
The following summary is based upon certain Treasury regulations issued
pursuant to section 988 of the Code on March 16, 1992 (the "Section 988
Regulations").
The rules discussed below will generally not apply to a United States
Holder that enters into a "qualified hedging transaction" on or after September
21, 1989. A qualified hedging transaction is an integrated economic transaction
consisting of a qualifying debt instrument, such as a Foreign Currency Note, and
a "section 1.988-5(a) hedge," as defined in section 1.988-5(a)(4) of the Section
988 Regulations. Generally, such an integrated economic transaction, if
identified as such by either the United States Holder or the Service, is treated
as a single transaction for United States federal income tax purposes, the
effect of which is to treat such a holder as owning a synthetic debt instrument
that is subject to rules applicable to Discount Notes. The rules with respect
to a qualified hedging transaction are extremely complex and special rules may
apply in certain circumstances, and persons that are considering hedging the
currency risk are urged to consult with their own tax advisors with respect to
the application of these rules.
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A United States Holder who uses the cash method of accounting and who
receives a payment of interest with respect to a Foreign Currency Note (other
than a Discount Note (except to the extent any qualified stated interest is
received) in which OID is accrued on a current basis) will be required to
include in income the U.S. dollar value of the foreign currency payment
(determined on the date such payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S. dollar
value will be the United States Holder's tax basis in the foreign currency.
A United States Holder (to the extent the above paragraph is not
applicable) will be required to include in income the U.S. dollar value of the
amount of interest income (including OID or market discount and reduced by
premium, acquisition premium and amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Foreign Currency Note during an accrual period. The U.S.
dollar value of such accrued income will be determined by translating such
income at the average rate of exchange for the accrual period or, with respect
to an accrual period that spans two taxable years, at the average rate for the
partial period within the taxable year. The average rate of exchange for the
accrual period (or partial period) is the simple average of the exchange rates
for each business day of such period (or other method if such method is
reasonably derived and consistently applied). A United States Holder may elect
to determine the U.S. dollar value of such accrued income by translating such
income at the spot rate on the last day of the interest accrual period (or, in
the case of a partial accrual period, the spot rate on the last day of the
taxable year) or, if the date of receipt is within five business days of the
last day of the interest accrual period, the spot rate on the date of receipt.
Such United States Holder will recognize ordinary gain or loss with respect to
accrued interest income on the date such income is received. The amount of
ordinary gain or loss recognized will equal the difference between the U.S.
dollar value of the foreign currency payments received (determined on the date
such payment is received) in respect of such accrual period and the U.S. dollar
value of interest income that has accrued during such accrual period (as
determined above).
A United States Holder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a Foreign Currency Note equal to
the U.S. dollar value of such foreign currency, determined at the time of such
sale, exchange or retirement. Any gain or loss realized by a United States
Holder on a sale or other disposition of foreign currency (including its
exchange for U.S. dollars or its use to purchase Foreign Currency Notes) will be
ordinary income or loss.
A United States Holder's tax basis in a Foreign Currency Note, and the
amount of any subsequent adjustment to such holder's tax basis, will be the U.S.
dollar value of the foreign currency amount paid for such Foreign Currency Note,
or of the foreign currency amount of the adjustment, determined on the date of
such purchase or adjustment. A United States Holder who converts U.S. dollars
to a foreign currency and immediately uses that currency to purchase a Foreign
Currency Note denominated in the same currency ordinarily will not recognize
gain or loss in connection with such conversion and purchase. However, a United
States Holder who purchases a Foreign Currency Note with previously owned
foreign currency will recognize ordinary income or loss in an amount equal to
the difference, if any, between such holder's tax basis in the foreign currency
and the U.S. dollar fair market value of the Foreign Currency Note on the date
of purchase. For purposes of determining the amount of any gain or loss
recognized by a United States Holder on the sale, exchange or retirement of a
Foreign Currency Note, the amount realized upon such sale, exchange or
retirement will be the U.S. dollar value of the foreign currency received,
determined on the date of sale, exchange or retirement.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note will be ordinary income or loss to the extent it is attributable
to fluctuations in currency exchange rates. Gain or loss attributable to
fluctuations in exchange rates will equal the difference between the U.S. dollar
value of the foreign currency principal amount of such Note, determined on the
date such payment is received or such Note is disposed of, including any payment
with respect to accrued interest, and the U.S. dollar value of the foreign
currency principal amount of such Note, determined on the date such United
States Holder acquired such Note, and the U.S. dollar value of accrued interest
received (determined by translating such interest at the average exchange rate
for the accrual period). The foreign currency principal amount of a Foreign
Currency Note generally equals the United States Holder's purchase price in
units of foreign currency. Such foreign currency gain or loss will be
recognized
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only to the extent of the total gain or loss recognized by a United States
Holder on the sale, exchange or retirement of the Foreign Currency Note.
The source of exchange gain or loss will be determined by reference to the
residence of the holder or the "qualified business unit" of the holder on whose
books the Note is properly reflected. Any gain or loss recognized by such a
United States Holder in excess of such foreign currency gain or loss will be
capital gain or loss (except to the extent of any accrued market discount or, in
the case of a short-term Discount Note, any accrued OID), and generally will be
long-term capital gain or loss if the holding period of the Foreign Currency
Note exceeds one year.
Any gain or loss that is treated as ordinary income or loss, as described
above, generally will not be treated as interest income or expense except to the
extent provided by administrative pronouncements of the Service.
OID, market discount, premium, acquisition premium and amortizable bond
premium of a Foreign Currency Note are to be determined in the relevant foreign
currency. The amount of such discount or premium that is taken into account
currently under general rules applicable to Notes other than Foreign Currency
Notes is to be determined for any accrual period in the relevant foreign
currency and then translated into the United States Holder's functional currency
on the basis of the average exchange rate in effect during such accrual period.
The amount of accrued market discount (other than market discount that is
included in income on a current basis) taken into account upon the receipt of
any partial principal payment or upon the sale, exchange, retirement or other
disposition of a Foreign Currency Note will be the U.S. dollar value of such
accrued market discount (determined on the date of receipt of such partial
principal payment or upon the sale, exchange, retirement or other disposition).
Any loss realized on the sale, exchange or retirement of a Foreign Currency
Note with amortizable bond premium by a United States Holder who has not elected
to amortize such premium will be a capital loss to the extent of such bond
premium. If such an election is made, amortizable bond premium taken into
account on a current basis shall reduce interest income in units of the relevant
foreign currency. Exchange gain or loss is realized on such amortized bond
premium with respect to any period by treating the bond premium amortized in
such period as a return of principal.
The Section 988 Regulations do not discuss the tax consequences of an
issuance of a Foreign Currency Note that is denominated in, or has payments of
interest or principal determined by reference to, a so-called hyperinflationary
currency or more than one currency. On March 17, 1992, Treasury regulations
were proposed with regard to debt instruments denominated in a hyperinflationary
currency and certain debt instruments denominated in more than one currency.
These proposed regulations are proposed to be effective for transactions entered
into on or after the date such regulations are finalized.
A Foreign Currency Note will be considered to be a debt instrument
denominated in a hyperinflationary currency if it is denominated in a Specified
Currency of a country in which there is cumulative inflation of at least 100
percent during the thirty-six calendar month period ending on the last day of
the preceding calendar year. Under the proposed regulations, a United States
Holder that acquires a Foreign Currency Note that is denominated in a
hyperinflationary currency will recognize gain or loss for its taxable year
determined by reference to the change in exchange rates between the first day of
the taxable year (or the date the Note was acquired, if later) and the last day
of the taxable year (or the date the Note was disposed of, if earlier). Such
gain or loss will reduce or increase the amount of interest income otherwise
required to be taken into account. Special rules apply to the extent such loss
exceeds the amount of interest income otherwise taken into account.
Under the proposed regulations, a Foreign Currency Note will be considered
to be a "dual currency debt instrument" if (i) the qualified stated interest is
denominated in or determined by reference to a single currency, (ii) the stated
redemption price at maturity is denominated in or determined by reference to a
different currency, and (iii) the amount of all payments in each currency is
fixed on the issue date. A Foreign Currency Note (other than a dual currency
debt instrument) will be considered to be a "multi-currency debt instrument" if
payments are to be made in more than one currency and the amount of all payments
in each currency is fixed on the issue date. A dual currency debt instrument
will be treated as two hypothetical debt instruments, a zero coupon bond
denominated in
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the currency of the stated redemption price at maturity and an installment
obligation denominated in the currency of the qualified stated interest. A
multi-currency debt instrument will be treated similarly and separated into
component hypothetical debt instruments in each currency. The OID and Section
988 rules discussed above will apply to each hypothetical debt instrument. The
proposed regulations do not apply to any Foreign Currency Note that is
denominated in, or has payments of interest or principal determined by reference
to, more than one currency except to the extent the Note meets the definition of
a dual currency debt instrument or multi-currency debt instrument.
PERLS, Reverse PERLS and Multicurrency PERLS
The following discussion relates to PERLS, Reverse PERLS and Multicurrency
PERLS which bear current coupons consistent with or greater than comparable
dollar denominated debt obligations. In other cases, holders should refer to
the discussion relating to taxation in the applicable Pricing Supplement.
Although no authority exists that addresses instruments having
characteristics similar to such instruments and the conclusions herein are
therefore not entirely free from doubt, Shearman & Sterling advises that such
PERLS, Reverse PERLS and Multicurrency PERLS should constitute debt obligations
for U.S. federal income tax purposes and that no portion of the issue price
should be allocated to the foreign exchange feature. The OID Regulations state
that a debt instrument will not be treated as a contingent debt instrument
merely because some or all of the payments are denominated in or determined by
reference to the value of one or more foreign currencies. It should be noted,
however, that the Section 988 Regulations do not yet address the treatment of
instruments like PERLS, Reverse PERLS or Multicurrency PERLS and the proposed
regulations do not address the treatment of such instruments except insofar as
they meet the definitions of dual currency debt instruments and multi-currency
debt instruments. It is possible that such regulations (or other authority),
when issued, could result in tax consequences that differ from those described
herein, and that such authority could apply with retroactive effect. See
discussion under "Foreign Currency Notes" for a summary of other federal income
tax principles that may apply to United States Holders of PERLS, Reverse PERLS
and Multicurrency PERLS.
Notes Linked to Commodity Prices, Equity Indices or Other Factors
The United States federal income tax consequences to a United States Holder
of the ownership and disposition of Notes that have principal or interest
determined by reference to commodity prices, equity indices or other factors
will vary depending upon the exact terms of the Notes and related factors.
Notes containing any of such features may be subject to rules that differ from
the general rules discussed above. Holders intending to purchase such Notes
should refer to the discussion relating to taxation in the applicable Pricing
Supplement.
BACKUP WITHHOLDING
The 31% "backup" withholding and information reporting requirements apply
to certain payments of principal, premium, if any, and interest on an
obligation, and to proceeds of the sale or redemption of an obligation before
maturity, to certain noncorporate United States Holders. The Company, its
agent, a broker, the relevant Trustee or any paying agent, as the case may be,
will be required to withhold from any payment that is subject to backup
withholding a tax equal to 31% of such payment if the United States Holder fails
to furnish his taxpayer identification number (social security number or
employer identification number), to certify that such holder is not subject to
backup withholding, or to otherwise comply with the applicable requirements of
the backup withholding rules. Certain holders (including, among others,
corporations and persons who are not United States persons) are not subject to
the backup withholding and reporting requirements.
Any amounts withheld under the backup withholding rules from a payment to a
United States Holder would be allowed as a refund or a credit against such
holder's United States federal income tax provided that the required information
is furnished to the Service.
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THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company
exclusively through the Agent, who has agreed to use reasonable efforts to
solicit offers to purchase Notes. The Company will have the sole right to
accept offers to purchase Notes and may reject any offer to purchase Notes in
whole or in part. The Agent will have the right to reject any offer to purchase
Notes solicited by it in whole or in part. Payment of the purchase price of the
Notes will be required to be made in immediately available funds. Unless
otherwise specified in the applicable Pricing Supplement, the Company will pay
the Agent, in connection with sales of Notes resulting from a solicitation made
or an offer to purchase received by the Agent, a commission ranging from .125%
to .750% of the principal amount of Notes to be sold, depending upon the
maturity of the Notes; provided, however, that commissions with respect to Notes
having a maturity of 30 years or greater will be negotiated.
The Company may also sell Notes to the Agent as principal for its own
account at discounts to be agreed upon at the time of sale. Such Notes may be
resold to investors and other purchasers at a fixed offering price or at
prevailing market prices, or prices related thereto at the time of such resale
or otherwise, as determined by the Agent and specified in the applicable Pricing
Supplement. The Agent may offer the Notes it has purchased as principal to
other dealers. The Agent may sell the Notes to any dealer at a discount and,
unless otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer will not be in excess of the discount to be received by
the Agent from the Company. After the initial public offering of Notes that are
to be resold by the Agent to investors and other purchasers on a fixed public
offering price basis, the public offering price, concession and discount may be
changed.
The Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company and the Agent have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments made in
respect thereof. The Company has also agreed to reimburse the Agent for certain
expenses.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange, but has been advised by the Agent that the Agent
intends to make a market in the Notes, as permitted by applicable laws and
regulations. The Agent is not obligated to do so, however, and the Agent may
discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
The Agent is a wholly owned subsidiary of the Company. Each offering of
Notes will be conducted in compliance with the requirements of Schedule E of the
By-laws of the NASD regarding an NASD member firm's distributing the securities
of an affiliate. Following the initial distribution of any Notes, the Agent may
offer and sell such Notes in the course of its business as a broker-dealer. The
Agent may act as principal or agent in such transactions. This Prospectus
Supplement may be used by the Agent in connection with such transactions. Such
sales, if any, will be made at varying prices related to prevailing market
prices at the time of sale or otherwise. The Agent is not obligated to make a
market in any Notes and may discontinue any market-making activities at any time
without notice.
The Agent and any dealers utilized in the sale of Notes will not confirm
sales to accounts over which they exercise discretionary authority.
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Concurrently with the offering of Notes through the Agent as described
herein, the Company may issue other Debt Securities pursuant to the Indentures
referred to herein. Such Debt Securities may include medium-term notes ("Global
Medium-Term Notes, Series D," and "Global Medium-Term Notes, Series E,"
collectively referred to as "Euro Medium-Term Notes") that may have terms
substantially similar to the terms of the Notes offered hereby and that may be
offered, concurrently with the offering of the Notes, on a continuing basis
outside the United States by the Company pursuant to a distribution agreement
(the "Euro Distribution Agreement") with Morgan Stanley & Co. International
Limited and certain other affiliates of the Company, as agents for the Company,
the terms of which are substantially similar to the terms of the distribution
agreement (the "U.S. Distribution Agreement") with the Agent, except for certain
selling restrictions specified in the Euro Distribution Agreement. Any Euro
Medium-Term Notes sold pursuant to such Euro Distribution Agreement, and any
Debt Securities issued by the Company pursuant to the Indentures, will reduce
the aggregate offering price of Notes that may be offered by this Prospectus
Supplement, any Pricing Supplement hereto and the Prospectus.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Jonathan
M. Clark, Esq., General Counsel and Secretary of the Company and a Managing
Director of Morgan Stanley, or other counsel who is satisfactory to the Agent
and is an officer of the Company. Mr. Clark and such other counsel beneficially
own, or have rights to acquire under an employee benefit plan of the Company, an
aggregate of less than 1% of the common stock of the Company. Certain legal
matters relating to the Notes will be passed upon for the Agent by Davis Polk &
Wardwell. Davis Polk & Wardwell has in the past represented and continues to
represent the Company on a regular basis and in a variety of matters, including
in connection with its merchant banking and leveraged capital activities. In
this regard, certain partners of Davis Polk & Wardwell, acting through a
separate partnership, acquired less than 1% of the common stock of a company of
which the Company and a fund managed by the Company own a controlling interest.
Shearman & Sterling, which is opining on the accuracy of the summary of certain
tax matters described under the caption "United States Federal Taxation,"
represents the Company on a regular basis and in a variety of matters, including
in connection with its merchant banking and leveraged capital activities.
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