PROSPECTUS Dated March 29, 1995 Pricing Supplement No. 28 to
PROSPECTUS SUPPLEMENT Registration Statement No. 33-57833
Dated March 29, 1995 January 5, 1996
Rule 424(b)(3)
$28,031,250
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
MANDATORILY EXCHANGEABLE NOTES DUE JUNE 15, 1998
Mandatorily Exchangeable For Shares of Common Stock of
AIRTOUCH COMMUNICATIONS, INC.
The Mandatorily Exchangeable Notes due June 15, 1998 (the "Notes") are
Medium-Term Notes, Series C (Senior Fixed Rate Notes) of Morgan Stanley Group
Inc. (the "Company"), as further described below and in the Prospectus
Supplement under "Description of Notes - Fixed Rate Notes."
The principal amount of each of the Notes being offered hereby will be $28.75
(the "Initial Price"). The Notes will mature on June 15, 1998. Interest on
the Notes, at the rate of 4.0% of the principal amount per annum, is payable
quarterly in arrears on each March 15, June 15, September 15 and December 15,
beginning March 15, 1996.
At maturity (including as a result of acceleration or otherwise), the
principal amount of each Note will be mandatorily exchanged by the Company
into a number of shares of the common stock, par value $0.01 per share of
AirTouch Communications, Inc. (the "AirTouch Stock") (or at the Company's
option, cash with an equal value in the case of clause (b) below) at the
Exchange Rate. The Exchange Rate is equal to, subject to certain adjustments,
(a) if the product of the Exchange Factor (as defined below) and the Market
Price (as defined herein) per share of AirTouch Stock determined as of the
maturity of the Notes (the "Maturity Price") is greater than or equal to
$34.21 (the "Threshold Appreciation Price"), 0.8404 of the product of the
Exchange Factor and one share of AirTouch Stock per Note, (b) if the Maturity
Price is less than the Threshold Appreciation Price but is greater than the
Initial Price, a fraction of the product of the Exchange Factor and one share
of AirTouch Stock so that the value of such fraction (determined at the
Maturity Price) equals the Initial Price and (c) if the Maturity Price is less
than or equal to the Initial Price, the product of the Exchange Factor and one
share of AirTouch Stock per Note. The Exchange Factor will be set initially at
1.0, but will be subject to adjustment upon the occurrence of certain
corporate events. Because the Exchange Rate varies depending on the Maturity
Price, holders of the Notes will not necessarily receive at maturity an amount
equal to the principal amount thereof. See "Exchange at Maturity," "Exchange
Factor" and "Antidilution Adjustments" in this Pricing Supplement.
Cash dividends have not been paid on the AirTouch Stock to date. The
opportunity for equity appreciation afforded by an investment in the Notes is
less than that afforded by an investment in the AirTouch Stock because at
maturity a holder may receive less than one share of AirTouch Stock per Note.
The value of the AirTouch Stock received by a holder of the Notes upon
exchange at maturity, determined as described herein, may be more or less than
the principal amount of the Notes.
AirTouch Communications, Inc. ("AirTouch") is not affiliated with the Company,
is not involved in this offering of Notes and will have no obligations with
respect to the Notes. See "Historical Information" in this Prospectus
Supplement for information on the range of Market Prices for AirTouch Stock.
The Company will cause the Market Price, any adjustments to the Exchange
Factor and any other antidilution adjustments to be determined by the
Calculation Agent for Chemical Bank, as Trustee under the Senior Debt
Indenture.
An investment in the Notes entails risks not associated with similar
investments in a conventional debt security, as described under "Risk Factors"
on PS-4 and PS-5 herein.
PRICE 100% AND ACCRUED INTEREST
Agent's Proceeds to
Price to Public(1) Commissions(2) Company(1)
------------------- --------------- --------------------
Per Note.. 100% 0.25% 99.75%
Total..... $28,031,250 $70,078.13 $27,961,171.87
_______________
(1) Plus accrued interest, if any, from January 12, 1996.
(2) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
MORGAN STANLEY & CO.
Incorporated
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount:.............. $28,031,250
Maturity Date:................. June 15, 1998
Interest Rate:................. 4.0% per annum
Interest Payment Dates......... March 15, June 15, September 15 and December
15
Specified Currency:............ U.S. Dollars
Issue Price:................... 100%
Original Issue Date
(Settlement Date): January 12, 1996
Book Entry Note or
Certificated Note: Book Entry
Senior Note or Subordinated
Note: Senior
Denominations:................. $28.75 and integral multiples thereof
Trustee:....................... Chemical Bank
Exchange at Maturity:.......... At maturity (including as a result of
acceleration or otherwise), the principal
amount of each Note will be mandatorily
exchanged by the Company, upon delivery of
such Note to the Trustee, into a number of
shares of AirTouch Stock at the Exchange Rate
(or, at the Company's option in the case of
clause (b) below, cash equal to $28.75 per
Note). The Exchange Rate is equal to (a) if
the Maturity Price (as defined below) is
greater than or equal to $34.21 (the
"Threshold Appreciation Price"), 0.8404 of
the product of the Exchange Factor (as
defined below) and one share of AirTouch
Stock per Note, (b) if the Maturity Price is
less than the Threshold Appreciation Price
but is greater than the Initial Price, a
fraction of the product of the Exchange
Factor and one share of AirTouch Stock so
that the value of such fraction (determined
at the Maturity Price) equals the Initial
Price and (c) if the Maturity Price is less
than or equal to the Initial Price, the
product of the Exchange Factor and one share
of AirTouch Stock per Note, subject in each
case to any applicable antidilution
adjustments as set forth under "Antidilution
Adjustments" below.
The Company shall, or shall cause the
Calculation Agent to, deliver such shares of
AirTouch Stock or cash to the Trustee for
delivery to the holders. The Calculation
Agent shall calculate the Exchange Factor and
determine the Exchange Rate applicable at the
maturity of the Notes. References to payment
"per Note" refer to each $28.75 principal
amount of any Note.
No Fractional Shares:.......... Upon mandatory exchange of the Notes, the
Company will pay cash in lieu of issuing
fractional shares of AirTouch Stock in an
amount equal to the corresponding fractional
Market Price as of the maturity of the Notes.
Exchange Factor:............... The Exchange Factor will be set initially at
1.0, but will be subject to adjustment upon
the occurrence of certain corporate events
through and including the second NYSE Trading
Day immediately prior to maturity. See
"Antidilution Adjustments" below.
Initial Price:................. $28.75
Maturity Price:................ Maturity Price means the product of (i) the
Market Price of one share of AirTouch Stock
and (ii) the Exchange Factor, each determined
as of the second NYSE Trading Day immediately
prior to maturity.
Market Price:.................. If AirTouch Stock (or any other security
for which a Market Price must be
determined) is listed on a national
securities exchange, is a security of The
Nasdaq National Market ("NASDAQ NMS") or
is included in the OTC Bulletin Board
Service ("OTC Bulletin Board") operated by
the National Association of Securities
Dealers, Inc. (the "NASD"), the Market
Price for one share of AirTouch Stock (or
one unit of any such other security) on
any NYSE Trading Day means (i) the last
reported sale price, regular way, on such
day on the principal United States
securities exchange registered under the
Securities Exchange Act of 1934, as
amended (the "Exchange Act"), on which
AirTouch Stock is listed or admitted to
trading or (ii) if not listed or admitted
to trading on any such securities exchange
or if such last reported sale price is not
obtainable, the last reported sale price
on the over-the-counter market as reported
on the NASDAQ NMS or OTC Bulletin Board on
such day. If the last reported sale price
is not available pursuant to clause (i) or
(ii) of the preceding sentence, the Market
Price for any NYSE Trading Day shall be
the mean, as determined by the Calculation
Agent, of the bid prices for AirTouch
Stock obtained from as many dealers in
such stock, but not exceeding three, as
will make such bid prices available to the
Calculation Agent. The term "NASDAQ NMS
security" shall include a security
included in any successor to such system
and the term "OTC Bulletin Board Service"
shall include any successor service
thereto.
NYSE Trading Day:.............. A day on which trading is generally conducted
in the over-the-counter market for equity
securities in the United States and on the
New York Stock Exchange, as determined by the
Calculation Agent, and on which a Market
Disruption Event (as defined below) has not
occurred.
Calculation Agent:............. Morgan Stanley & Co. Incorporated ("MS &
Co.")
Because the Calculation Agent is an
affiliate of the Company, potential
conflicts of interest may exist between
the Calculation Agent and the holders of
the Notes, including with respect to
certain determinations and judgments that
the Calculation Agent must make in making
adjustments to the Exchange Factor or
other antidilution adjustments or
determining any Market Price or whether a
Market Disruption Event has occurred. See
"Antidilution Adjustments" and "Market
Disruption Event" below. MS & Co. is
obligated to carry out its duties and
functions as Calculation Agent in good
faith and using its reasonable judgment.
Risk Factors:.................. An investment in the Notes entails
significant risks not associated with similar
investments in a conventional debt security,
including the following:
The Notes combine features of equity and debt
instruments. Accordingly, the terms of the
Notes differ from those of ordinary debt
securities in that the value of the AirTouch
Stock that a holder of the Notes will receive
upon mandatory exchange of the principal
amount thereof at maturity is not fixed, but
is based on the price of the AirTouch Stock
and the Exchange Rate as determined at such
price. Because the price of the AirTouch
Stock is subject to market fluctuations, the
value of the AirTouch Stock received by a
holder of Notes upon exchange at maturity,
determined as described herein, may be more
or less than the principal amount of the
Notes. If the Maturity Price of the AirTouch
Stock is less than the Initial Price, the
amount receivable upon exchange will be less
than the principal amount of the Notes, in
which case an investment in the Notes may
result in a loss.
The opportunity for equity appreciation
afforded by an investment in the Notes is
less than that afforded by an investment in
the AirTouch Stock because at maturity a
holder will receive less than one share of
AirTouch Stock per Note if the value of such
AirTouch Stock (as adjusted by the Exchange
Factor) has appreciated above the Initial
Price.
Although the amount that holders of the Notes
are entitled to receive at maturity is
subject to adjustment for certain corporate
events, such adjustments do not cover all
events that could affect the Market Price of
the AirTouch Stock, including, without
limitation, the occurrence of a partial
tender or exchange offer for the AirTouch
Stock by AirTouch or any third party. Such
other events may adversely affect the market
value of the Notes.
There can be no assurance as to how the
Notes will trade in the secondary market
or whether such market will be liquid or
illiquid. Securities with characteristics
similar to the Notes are novel securities,
and there is currently no secondary market
for the Notes. The market value for the
Notes will be affected by a number of
factors in addition to the
creditworthiness of the Company and the
value of AirTouch Stock, including, but
not limited to, the volatility of AirTouch
Stock, the dividend rate on AirTouch
Stock, market interest and yield rates and
the time remaining to the maturity of the
Notes. In addition, the value of AirTouch
Stock depends on a number of interrelated
factors, including economic, financial and
political events, that can affect the
capital markets generally and the market
segment of which AirTouch is a part and
over which the Company has no control.
The market value of the Notes is expected
to depend primarily on changes in the
Market Price of AirTouch Stock. The price
at which a holder will be able to sell
Notes prior to maturity may be at a
discount, which could be substantial, from
the principal amount thereof, if, at such
time, the Market Price of AirTouch Stock
is below, equal to or not sufficiently
above the Initial Price. The historical
Market Prices of AirTouch Stock should not
be taken as an indication of AirTouch
Stock's future performance during the term
of any Note.
The Notes will not be listed on any national
securities exchange or accepted for quotation
on a trading market and, as a result, pricing
information for the Notes may be difficult to
obtain.
The Company is not affiliated with AirTouch
and, although the Company as of the date of
this Pricing Supplement does not have any
material non-public information concerning
AirTouch, corporate events of AirTouch,
including those described below in
"Antidilution Adjustments," are beyond the
Company's ability to control and are
difficult to predict.
AirTouch is not involved in the offering
of the Notes and has no obligations with
respect to the Notes, including any
obligation to take the interests of the
Company or of holders of Notes into
consideration for any reason. AirTouch
will not receive any of the proceeds of
the offering of the Notes made hereby and
is not responsible for, and has not
participated in, the determination of the
timing of, prices for or quantities of,
the Notes offered hereby.
Holders of the Notes will not be entitled to
any rights with respect to the AirTouch Stock
(including, without limitation, voting
rights, the rights to receive any dividends
or other distributions in respect thereof and
the right to tender or exchange AirTouch
Stock in any partial tender or exchange offer
by AirTouch or any third party) until such
time as the Company shall deliver shares of
AirTouch Stock to holders of the Notes at
maturity.
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Notes, including
with respect to certain adjustments to the
Exchange Factor and other antidilution
adjustments that may influence the
determination of the amount of AirTouch Stock
or other property receivable at the maturity
of the Notes. See "Antidilution Adjustments"
and "Market Disruption Event."
It is suggested that prospective investors
who consider purchasing the Notes should
reach an investment decision only after
carefully considering the suitability of the
Notes in light of their particular
circumstances.
Investors should also consider the tax
consequences of investing in the Notes. See
"United States Federal Taxation" below.
Antidilution Adjustments:...... The Exchange Factor (and, in the case of
paragraph 5 below, the determination of the
Exchange Rate) will be adjusted as follows:
1. If AirTouch Stock is subject to a stock
split or reverse stock split, then once such
split has become effective, the Exchange
Factor will be adjusted to equal the product
of the prior Exchange Factor and the number
of shares issued in such stock split or
reverse stock split with respect to one share
of AirTouch Stock.
2. If AirTouch Stock is subject to a stock
dividend (issuance of additional shares of
AirTouch Stock) that is given ratably to all
holders of shares of AirTouch Stock, then
once the dividend has become effective and
AirTouch Stock is trading ex-dividend, the
Exchange Factor will be adjusted so that the
new Exchange Factor shall equal the prior
Exchange Factor plus the product of (i) the
number of shares issued with respect to one
share of AirTouch Stock and (ii) the prior
Exchange Factor.
3. There will be no adjustments to the
Exchange Factor to reflect cash dividends
or other distributions paid with respect
to AirTouch Stock other than distributions
described in clause (v) of paragraph 5
below and Extraordinary Dividends as
described below. A cash dividend or other
distribution with respect to AirTouch
Stock will be deemed to be an
"Extraordinary Dividend" if such dividend
or other distribution exceeds the
immediately preceding non-Extraordinary
Dividend for AirTouch Stock by an amount
equal to at least 6% of the Market Price
of AirTouch Stock on the NYSE Trading Day
preceding the ex-dividend date for the
payment of such Extraordinary Dividend
(the "ex-dividend date"). If an
Extraordinary Dividend occurs with respect
to AirTouch Stock, the Exchange Factor
with respect to AirTouch Stock will be
adjusted on the ex-dividend date with
respect to such Extraordinary Dividend so
that the new Exchange Factor will equal
the product of (i) the then current
Exchange Factor and (ii) a fraction, the
numerator of which is the Market Price on
the NYSE Trading Day preceding the ex-
dividend date, and the denominator of
which is the amount by which the Market
Price on the NYSE Trading Day preceding
the ex-dividend date exceeds the
Extraordinary Dividend Amount. The
"Extraordinary Dividend Amount" with
respect to an Extraordinary Dividend for
AirTouch Stock will equal (i) in the case
of cash dividends or other distributions
that constitute quarterly dividends, the
amount per share of such Extraordinary
Dividend minus the amount per share of the
immediately preceding non-Extraordinary
Dividend for AirTouch Stock or (ii) in the
case of cash dividends or other
distributions that do not constitute
quarterly dividends, the amount per share
of such Extraordinary Dividend. To the
extent an Extraordinary Dividend is not
paid in cash, the value of the non-cash
component will be determined by the
Calculation Agent, whose determination
shall be conclusive. A distribution on
the AirTouch Stock described in clause (v)
of paragraph 5 below that also constitutes
an Extraordinary Dividend shall only cause
an adjustment to the Exchange Factor
pursuant to clause (v) of paragraph 5.
4. If AirTouch issues rights or warrants to
all holders of AirTouch Stock to subscribe
for or purchase AirTouch Stock at an exercise
price per share less than the Market Price of
the AirTouch Stock on (i) the date the
exercise price of such rights or warrants is
determined and (ii) the expiration date of
such rights or warrants, and if the
expiration date of such rights or warrants
precedes the maturity of the Notes, then the
Exchange Factor will be adjusted to equal the
product of the prior Exchange Factor and a
fraction, the numerator of which shall be the
number of shares of AirTouch Stock
outstanding on the date of issuance of such
rights or warrants, immediately prior to such
issuance, plus the number of additional
shares of AirTouch Stock offered for
subscription or purchase pursuant to such
rights or warrants and the denominator of
which shall be the number of shares of
AirTouch Stock outstanding on the date of
issuance of such rights or warrants,
immediately prior to such issuance, plus the
number of additional shares of AirTouch Stock
which the aggregate offering price of the
total number of shares of AirTouch Stock so
offered for subscription or purchase pursuant
to such rights or warrants would purchase at
the Market Price on the expiration date of
such rights or warrants, which shall be
determined by multiplying such total number
of shares offered by the exercise price of
such rights or warrants and dividing the
product so obtained by such Market Price.
5. If (i) there occurs any
reclassification or change of AirTouch
Stock, (ii) AirTouch, or any surviving
entity or subsequent surviving entity of
AirTouch (an "AirTouch Successor") has
been subject to a merger, combination or
consolidation and is not the surviving
entity, (iii) any statutory exchange of
securities of AirTouch or any AirTouch
Successor with another corporation occurs
(other than pursuant to clause (ii)
above), (iv) AirTouch is liquidated, (v)
AirTouch issues to all of its shareholders
equity securities of an issuer other than
AirTouch (other than in a transaction
described in clauses (ii), (iii) or (iv)
above) (a "Spin-off Event") or (vi) a
tender or exchange offer is consummated
for all the outstanding shares of AirTouch
Stock (any such event in clauses (i)
through (vi) a "Reorganization Event"),
the method of determining the Exchange
Rate in respect of the amount payable upon
exchange at maturity for each Note will be
adjusted to provide that each holder of
Notes will receive at maturity, in respect
of the principal amount of each Note,
securities, cash or any other assets
distributed in any such Reorganization
Event, including, in the case of a Spin-
off Event, the share of AirTouch Stock
with respect to which the spun-off
security was issued (collectively, the
"Exchange Property") (or cash, in the
case of clause (b) below) in an amount
equal to (a) if the Transaction Value (as
defined below) is greater than or equal to
the Threshold Appreciation Price, .8404
multiplied by the Transaction Value, (b)
if the Transaction Value is less than the
Threshold Appreciation Price but greater
than the Initial Price, the Initial Price
and (c) if the Transaction Value is less
than or equal to the Initial Price, the
Transaction Value; provided that, if the
Exchange Property received in any such
Reorganization Event consists only of
cash, the maturity date of the Notes will
be deemed to be accelerated to the date on
which such cash is distributed to holders
of AirTouch Stock. If Exchange Property
consists of more than one type of
property, holders of Notes will receive at
maturity a pro rata share of each such
type of Exchange Property. "Transaction
Value" means (i) for any cash received in
any such Reorganization Event, the amount
of cash received per share of AirTouch
Stock, as adjusted by the Exchange Factor,
(ii) for any property other than cash or
securities received in any such
Reorganization Event, the market value of
such Exchange Property received for each
share of AirTouch Stock at the date of the
receipt of such Exchange Property, as
adjusted by the Exchange Factor, as
determined by the Calculation Agent and
(iii) for any security received in any
such Reorganization Event, an amount equal
to the Market Price per share of such
security at the maturity of the Notes
multiplied by the quantity of such
security received for each share of
AirTouch Stock, as adjusted by the
Exchange Factor.
For purposes of paragraph 5 above, in the
case of a consummated tender or exchange
offer for all Exchange Property of a
particular type, Exchange Property shall
be deemed to include the amount of cash or
other property paid by the offeror in the
tender or exchange offer with respect to
such Exchange Property (in an amount
determined on the basis of the rate of
exchange in such tender or exchange
offer). In the event of a tender or
exchange offer with respect to Exchange
Property in which an offeree may elect to
receive cash or other property, Exchange
Property shall be deemed to include the
kind and amount of cash and other property
received by offerees who elect to receive
cash.
No adjustments to the Exchange Factor or
Exchange Rate will be required unless such
adjustment would require a change of at least
0.1% in the Exchange Factor or Exchange Rate
then in effect. The Exchange Factor or
Exchange Rate resulting from any of the
adjustments specified above will be rounded
to the nearest one thousandth with five
ten-thousandths being rounded upward.
No adjustments to the Exchange Factor or
Exchange Rate will be made other than those
specified above. The adjustments specified
above do not cover all events that could
affect the Market Price of the AirTouch
Stock, including, without limitation, a
partial tender or exchange offer for the
AirTouch Stock.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to the
Exchange Factor or Exchange Rate and of
any related determinations and
calculations with respect to any
distributions of stock, other securities
or other property or assets (including
cash) in connection with any corporate
event described in paragraph 5 above, and
its determinations and calculations with
respect thereto shall be conclusive.
The Calculation Agent will provide
information as to any adjustments to the
Exchange Factor or Exchange Rate upon written
request by any holder of the Notes.
Market Disruption Event:....... "Market Disruption Event" means, with respect
to AirTouch Stock:
(i) a suspension, absence or material
limitation of trading of AirTouch Stock on
the primary market for AirTouch Stock for
more than two hours of trading or during
the one-half hour period preceding the
close of trading in such market; or the
suspension or material limitation on the
primary market for trading in options
contracts related to AirTouch Stock, if
available, during the one-half hour period
preceding the close of trading in the
applicable market, in each case as
determined by the Calculation Agent in its
sole discretion; and
(ii) a determination by the Calculation
Agent in its sole discretion that the event
described in clause (i) above materially
interfered with the ability of the Company or
any of its affiliates to unwind all or a
material portion of the hedge with respect to
the Notes.
For purposes of determining whether a
Market Disruption Event has occurred: (1)
a limitation on the hours or number of
days of trading will not constitute a
Market Disruption Event if it results from
an announced change in the regular
business hours of the relevant exchange,
(2) a decision to permanently discontinue
trading in the relevant option contract
will not constitute a Market Disruption
Event, (3) limitations pursuant to New
York Stock Exchange Rule 80A (or any
applicable rule or regulation enacted or
promulgated by the New York Stock
Exchange, any other self-regulatory
organization or the Securities and
Exchange Commission of similar scope as
determined by the Calculation Agent) on
trading during significant market
fluctuations shall constitute a Market
Disruption Event, (4) a suspension of
trading in an options contract on AirTouch
Stock by the primary securities market
trading in such options, if available, by
reason of (x) a price change exceeding
limits set by such securities exchange or
market, (y) an imbalance of orders
relating to such contracts or (z) a
disparity in bid and ask quotes relating
to such contracts will constitute a
suspension or material limitation of
trading in options contracts related to
AirTouch Stock and (5) an "absence of
trading" on the primary securities market
on which options contracts related to
AirTouch Stock are traded will not include
any time when such securities market is
itself closed for trading under ordinary
circumstances.
AirTouch Stock; Public AirTouch Stock is registered under the
Information Exchange Act. Companies with securities
registered under the Exchange Act are
required to file periodically certain
financial and other information specified by
the Securities and Exchange Commission (the
"Commission"). Information provided to or
filed with the Commission is available at the
offices of the Commission specified under
"Available Information" in the accompanying
Prospectus. In addition, information
regarding AirTouch may be obtained from other
sources including, but not limited to, press
releases, newspaper articles and other
publicly disseminated documents. The Company
makes no representation or warranty as to the
accuracy or completeness of such reports.
THIS PRICING SUPPLEMENT RELATES ONLY TO THE
NOTES OFFERED HEREBY AND DOES NOT RELATE TO
AIRTOUCH STOCK OR OTHER SECURITIES OF
AIRTOUCH. ALL DISCLOSURES CONTAINED IN THIS
PRICING SUPPLEMENT REGARDING AIRTOUCH ARE
DERIVED FROM THE PUBLICLY AVAILABLE DOCUMENTS
DESCRIBED IN THE PRECEDING PARAGRAPH.
NEITHER THE COMPANY NOR THE AGENT HAS
PARTICIPATED IN THE PREPARATION OF SUCH
DOCUMENTS OR MADE ANY DUE DILIGENCE INQUIRY
WITH RESPECT TO AIRTOUCH. NEITHER THE
COMPANY NOR THE AGENT MAKES ANY
REPRESENTATION THAT SUCH PUBLICLY AVAILABLE
DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE
INFORMATION REGARDING AIRTOUCH ARE ACCURATE
OR COMPLETE. FURTHERMORE, THERE CAN BE NO
ASSURANCE THAT ALL EVENTS OCCURRING PRIOR TO
THE DATE HEREOF (INCLUDING EVENTS THAT WOULD
AFFECT THE ACCURACY OR COMPLETENESS OF THE
PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE
PRECEDING PARAGRAPH) THAT WOULD AFFECT THE
TRADING PRICE OF AIRTOUCH STOCK (AND
THEREFORE THE INITIAL PRICE, THE THRESHOLD
APPRECIATION PRICE AND THE EXCHANGE RATE
APPLICABLE ABOVE THE THRESHOLD APPRECIATION
PRICE) HAVE BEEN PUBLICLY DISCLOSED.
SUBSEQUENT DISCLOSURE OF ANY SUCH EVENTS OR
THE DISCLOSURE OF OR FAILURE TO DISCLOSE
MATERIAL FUTURE EVENTS CONCERNING AIRTOUCH
COULD AFFECT THE VALUE RECEIVED AT MATURITY
WITH RESPECT TO THE NOTES AND THEREFORE THE
TRADING PRICES OF THE NOTES.
NEITHER THE COMPANY NOR ANY OF ITS
AFFILIATES MAKE ANY REPRESENTATION TO ANY
PURCHASER OF NOTES AS TO THE PERFORMANCE
OF AIRTOUCH STOCK.
The Company or its affiliates may presently
or from time to time engage in business with
AirTouch including extending loans to, or
making equity investments in, AirTouch or
providing advisory services to AirTouch,
including merger and acquisition advisory
services. In the course of such business,
the Company or its affiliates may acquire
non-public information with respect to
AirTouch and, in addition, one or more
affiliates of the Company may publish
research reports with respect to AirTouch.
The Company does not make any representation
to any purchaser of Notes with respect to any
matters whatsoever relating to AirTouch. Any
prospective purchaser of a Note should
undertake an independent investigation of
AirTouch as in its judgment is appropriate to
make an informed decision with respect to an
investment in AirTouch Stock.
Historical Information......... The following table sets forth the high and
low Market Price during 1993, 1994 and 1995,
and the Market Price on January 5, 1996. The
Market Prices listed below have been derived
from publicly disseminated information that
the Company believes to be accurate. Neither
the Company nor the Agent makes any
representation as to the accuracy of such
information. The historical prices of
AirTouch Stock should not be taken as an
indication of future performance, and no
assurance can be given that the price of
AirTouch Stock will not decrease so that the
beneficial owners of the Notes will receive
at maturity shares of AirTouch Stock worth
less than the principal amount of the Notes.
Nor can assurance be given that the price of
AirTouch Stock will increase above the
Threshold Appreciation Price so that at
maturity the beneficial owners of the Notes
will receive an amount in excess of the
principal amount of the Notes.
AirTouch High Low Last
-------- ------- ------- --------
(CUSIP # 00949T100)
1993:*
Fourth Quarter........... 26 3/4 24 1/2
1994:
First Quarter............ 25 3/4 20 7/8
Second Quarter........... 26 1/2 20 3/8
Third Quarter............ 29 1/8 23 3/4
Fourth Quarter........... 30 1/8 26 1/4
1995:
First Quarter............ 29 5/8 26 3/8
Second Quarter........... 29 1/8 25
Third Quarter............ 34 5/8 29 1/2
Fourth Quarter 31 7/8 26 1/4
1996:
Through January 5,
1996 28 5/8 27 3/4 27 7/8
_____________
* The initial public offering of the AirTouch
Stock occurred in December 1993.
AirTouch has not paid cash dividends on the AirTouch Stock to date. The
Company makes no representation as to the amount of dividends, if any, that
AirTouch will pay in the future. In any event, holders of the Notes will
not be entitled to receive dividends, if any, that may be payable on
AirTouch Stock.
Use of Proceeds and Hedging:... The net proceeds to be received by the
Company from the sale of the Notes will be
used for general corporate purposes and, in
part, by the Company or one or more of its
affiliates in connection with hedging the
Company's obligations under the Notes. See
also "Use of Proceeds" in the accompanying
Prospectus.
Prior to the open of the NYSE Trading Day on
the date of this Pricing Supplement, the
Company, through its subsidiaries and others,
hedged its anticipated exposure in connection
with the Notes by taking positions in
AirTouch Stock. Such hedging was carried out
in a manner designed to minimize any impact
on the price of AirTouch Stock. Purchase
activity could potentially increase the price
of AirTouch Stock, and therefore effectively
increase the level to which AirTouch Stock
must rise before a holder of a Note would
receive at maturity an amount of AirTouch
Stock worth as much as or more than the
principal amount of the Notes. Although the
Company has no reason to believe that its
hedging activity had a material impact on the
price of AirTouch Stock, there can be no
assurance that the Company did not affect
such price as a result of its hedging
activities. The Company, through its
subsidiaries, is likely to modify its hedge
position throughout the life of the Notes by
purchasing and selling AirTouch Stock,
options contracts on AirTouch Stock listed on
major securities markets or positions in any
other instruments that it may wish to use in
connection with such hedging.
United States Federal Taxation: The following discussion, to the extent it
contains legal conclusions, is based on the
opinion of Davis Polk & Wardwell, special tax
counsel to the Company. This discussion
supplements the "United States Federal
Taxation" section in the accompanying
Prospectus Supplement and should be read in
conjunction therewith. Any limitations on
disclosure and any defined terms contained
therein are equally applicable to the summary
below. Because of the absence of authority
on point, there are substantial uncertainties
regarding the U.S. federal income tax
consequences of an investment in the Notes.
The Company intends to treat the Notes as
indebtedness of the Company and such
treatment is binding on the Company and on
all holders except for holders who
disclose on their tax returns that they
are treating the Notes in a manner that is
inconsistent with the Company's treatment
of the Notes. The Company's treatment is
not, however, binding upon the Internal
Revenue Service or the courts, and there
can be no assurance that it will be
accepted.
The Company presently intends to treat the
coupon interest on the Notes as reportable
interest. Under this approach, such interest
would 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 United States income tax purposes.
Although proposed Treasury regulations
addressing the treatment of contingent debt
instruments were issued on December 15, 1994,
such regulations, which generally would
require current accrual of contingent amounts
and would affect the character of gain on the
sale, exchange or retirement of debt, by
their terms apply only to debt instruments
issued on or after the 60th day after the
regulations are finalized.
Under general United States federal income
tax principles, upon maturity of a Note, a
United States Holder will recognize gain
or loss, if any, equal to the difference
between the amount realized at maturity
and such Holder's tax basis in the Note.
It is unclear under existing law whether
gain recognized at maturity will be
treated as ordinary or capital in
character. Subject to further guidance
from the Internal Revenue Service,
however, the Company intends to treat such
gain as interest income and to report such
amounts accordingly. Prospective
investors should consult with their tax
advisors regarding the character of gain
recognized at maturity.
United States Holders that have acquired debt
instruments similar to the Notes and have
accounted for such debt instruments under
proposed, but subsequently withdrawn,
Treasury regulations may be deemed to have
established a method of accounting that must
be followed with respect to the Notes, unless
consent of the Commissioner of the Internal
Revenue Service is obtained to change such
method. Absent such consent, such a Holder
would be required to account for the Notes in
the manner prescribed in such withdrawn
Treasury regulations. The Internal Revenue
Service, however, would not be required to
accept such method as correct.
Any gain or loss recognized on the sale or
exchange of a Note prior to maturity will be
treated as capital in character.
There can be no assurance that the ultimate
tax treatment of the Notes would not differ
significantly from the description herein.
Prospective investors are urged to consult
their tax advisors as to the possible
consequences of holding the Notes.
See also "United States Federal Taxation" in
the accompanying Prospectus Supplement.
