PROSPECTUS Dated March 29, 1995 Amendment No. 1 to
PROSPECTUS SUPPLEMENT Pricing Supplement No. 70 to
Dated March 29, 1995 Registration Statement No. 33-57833
April 19, 1996
Rule 424(b)(3)
$6,000,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
8% MANDATORILY EXCHANGEABLE NOTES DUE APRIL 30, 1998
Mandatorily Exchangeable
For Shares of a Basket of Common Stocks
The 8% Mandatorily Exchangeable Notes due April 30, 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 offered hereby will be $1,000 (the "Price to
Public"). The Notes will mature on April 30, 1998. Interest on the Notes, at
the rate of 8% of the principal amount per annum, is payable quarterly in
arrears on each January 30, April 30, July 30 and October 30, beginning July
30, 1996.
The Price to Public represents the sum of the Original Basket Values (as
defined below) of the following six constituent securities: (i) the common
stock, par value $.01 per share, of Advanced Micro Devices, Inc., (ii) the
common stock, par value $.01 per share, of Bay Networks, Inc., (iii) the
common stock, without par value, of Informix Corporation, (iv) the common
stock, without par value, of Nextel Communications, Inc., (v) the common
stock, par value $.00067 per share, of Sun Microsystems Inc. and (vi) the
American Depositary Shares of Telefonos de Mexico, S.A. de C.V. ("Telmex") each
representing 20 shares of the Series L common stock, without par value, of
Telmex (collectively, the "Basket Stocks" and "Basket Issuers", respectively,
and each a "Basket Stock" and a "Basket Issuer"). The Original Basket Value
of a Basket Stock is the product of the Initial Exchange Factor and the
Initial Price of such Basket Stock, as set forth under "Composition of the
Basket" in this Pricing Supplement. The Exchange Factors (as defined herein)
will remain constant for the term of the Notes unless adjusted upon the
occurrence of certain corporate events. See "Exchange Factors" and
"Antidilution Adjustments" in this Pricing Supplement.
At maturity (including as a result of acceleration or otherwise), each $1,000
principal amount of Notes will be mandatorily exchanged by the Company into a
number of shares of each of the Basket Stocks (or, under certain
circumstances, the cash equivalent value) to be determined as follows: (i) if
the Maturity Price (as defined below) of such Basket Stock is less than or
equal to the Cap Price (as defined herein) for such Basket Stock, the holder
of a Note will receive a number of shares of such Basket Stock equal to the
Exchange Factor for such Basket Stock and (ii) if the Maturity Price of such
Basket Stock is greater than the Cap Price for such Basket Stock, such holder
will receive a number of shares of such Basket Stock equal to the Exchange
Factor for such Basket Stock multiplied by a fraction, the numerator of which
is the Cap Price for such Basket Stock and the denominator of which is the
Maturity Price for such Basket Stock. The Maturity Price for each Basket
Stock will equal the product of the Market Price (as defined herein) of such
Basket Stock and the Exchange Factor for such Basket Stock (as adjusted for
certain corporate events). See "Exchange at Maturity," "Maturity Price" and
"Exchange Factor" in this Pricing Supplement.
The opportunity for equity appreciation afforded by an investment in the Notes
is less than that afforded by an investment in the Basket Stocks because at
maturity a holder may receive less than the number of shares of any Basket
Stock originally represented in the Basket if the Maturity Price for such
Basket Stock exceeds the Cap Price for such Stock. The aggregate value of the
Basket Stocks 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.
None of the Basket Issuers is affiliated with the Company, is involved in this
offering of Notes or will have any obligations with respect to the Notes. See
"Historical Information" in this Pricing Supplement for information on the
range of Market Prices for the Basket Stocks.
The Company will cause the Market Prices of the Basket Stocks, any adjustments
to the Exchange Factors 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-5 through PS-7 herein.
------------
PRICE 100% AND ACCRUED INTEREST
------------
Proceeds to
Agent's -------------
Price to Public(1) Commissions(2) Company(1)
-------------------- ---------------- -------------
Per Note.... 100% 0.25% 99.75%
Total....... $6,000,000 $15,000 $5,985,000
_______________
(1) Plus accrued interest, if any, from April 26, 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:................. $6,000,000
Maturity Date:.................... April 30, 1998
Interest Rate:.................... 8% per annum
Interest Payment Dates............ January 30, April 30, July 30 and October
30, beginning July 30, 1996
Specified Currency:............... U.S. Dollars
Issue Price:...................... 100%
Original Issue Date
(Settlement Date):................ April 26, 1996
Book Entry Note or Certificated
Note:............................. Book Entry
Senior Note or Subordinated Note:. Senior
Denominations:.................... $1,000
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 each of the Basket Stocks at the
rate of exchange applicable to such Basket
Stock to be determined as follows: (i) if
the Maturity Price of such Basket Stock is
less than or equal to the Cap Price of
such Basket Stock, a number of shares of
such Basket Stock equal to the Exchange
Factor for such Basket Stock and (ii) if
the Maturity Price of such Basket Stock is
greater than the Cap Price of such Basket
Stock, a number of shares of such Basket
Stock equal to the Exchange Factor for such
Basket Stock multiplied by a fraction the
numerator of which is the Cap Price for
such Basket Stock and the denominator of
which is the Maturity Price of such Basket
Stock, subject in each case to any
applicable antidilution adjustments as set
forth under "Antidilution Adjustments"
below. Notwithstanding the above, if the
value of the Basket Stocks to be so
delivered, at the applicable Market Prices
as of the second Trading Day immediately
prior to maturity (the "Basket Maturity
Value"), is greater than the Price to
Public, the Company may, at its sole
option, deliver, for each $1,000 principal
amount of each Note, cash in an amount
equal to the Basket Maturity Value in lieu
of delivering the Basket Stocks.
The Company shall, or shall cause the
Calculation Agent to, (i) provide written
notice to the Trustee on or prior to 10:30
a.m. on the Trading Day immediately prior
to maturity of the Notes of the Company's
determination to deliver Basket Stocks or
cash equal to the Basket Maturity Value
and (ii) deliver such shares of the Basket
Stocks or cash to the Trustee for delivery
to the holders. The Calculation Agent
shall calculate the Exchange Factors for
each Basket Stock and determine the rate
of exchange applicable to each of the
Basket Stocks at the maturity of the
Notes. References to "Note" refer to each
$1,000 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 any Basket Stock in
an amount equal to the corresponding
fractional Market Price of such fraction
of such Basket Stock as determined by the
Calculation Agent as of the maturity of
the Notes.
Composition of
the Basket:....................... The "Basket" comprises the six Basket
Stocks listed in the following table,
which sets forth for each Basket Issuer,
the ticker symbol, the Initial Price as of
the date of this Pricing Supplement, the
Per Share Cap Price, the Initial Exchange
Factor as of the date of this Pricing
Supplement, the Original Basket Value
represented in the Basket and the Cap
Price:
<TABLE>
<CAPTION>
Original Basket
Value
Initial Represented
Initial Per Share Exchange in Price to
Basket Issuer Ticker Price(3) Cap Price Factor(3) Public Cap Price
- --------------------------------- --------- -------- --------- --------- ------------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Advanced Micro Devices, Inc. AMD(1) $17.375 $25.28 7.19425 $125.00 $181.875
Bay Networks, Inc. BAY(1)(4) $30.57 $44.48 8.17795 $250.00 $363.750
Informix Corporation IFMX(2) $23.93 $34.82 6.96476 $166.67 $242.505
Nextel Communications, Inc. CALL(2) $18.25 $26.55 6.84932 $125.00 $181.875
Sun Microsystems, Inc. SUNW(2) $48.75 $70.93 5.12821 $250.00 $363.750
Telefonos de Mexico, S.A. de C.V. TMX(1) $37.375 $54.38 2.22965 $83.33 $121.245
TOTAL $1,000.00 $1,455.000
<FN>
(1) Currently traded on The New York Stock Exchange ("NYSE").
(2) Currently traded on The Nasdaq National Market ("NASDAQ NMS").
(3) Initial Prices and Initial Exchange Factors were determined based on
average market prices at the time the Notes were priced by the
Company for initial offering to the public.
(4) Previously traded on NASDAQ NMS through February 28, 1996 under the
symbol "BNET."
</TABLE>
Exchange Factor:............... The Exchange Factor for each of the Basket
Stocks will be the Initial Exchange Factor as
set forth in the table above, in each case,
as subject to adjustment upon the occurrence
of certain corporate events through and
including the second Trading Day immediately
prior to maturity. See "Antidilution
Adjustments" below.
Price to Public:............... $1,000
Maturity Price:................ Maturity Price of each Basket Stock means the
product of (i) the Market Price of one share
of such Basket Stock and (ii) the Exchange
Factor for such Basket Stock, each determined
as of the second Trading Day immediately
prior to maturity.
Cap Price:..................... The Cap Price for each Basket Stock is as set
forth in the table above.
Market Price:.................. If a Basket Stock (or any other security for
which a Market Price must be determined) is
listed on a national securities exchange, is
a security of 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 such Basket
Stock (or one unit of any such other
security) on any 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 such Basket
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 for such Basket Stock pursuant to
clause (i) or (ii) of the preceding sentence,
the Market Price for such Basket Stock for
any Trading Day shall be the mean, as
determined by the Calculation Agent, of the
bid prices for such Basket Stock obtained
from as many dealers in such Basket Stock,
but not exceeding three, as will make such
bid prices available to the Calculation
Agent. The term "NASDAQ NMS" shall include
any successor to such system and the term
"OTC Bulletin Board Service" shall include
any successor service thereto.
Trading Day:................... A day, as determined by the Calculation
Agent, (a) on which trading is generally
conducted (i) on the NYSE, the American Stock
Exchange, Inc. ("AMEX"), and NASDAQ NMS, (ii)
on the Chicago Mercantile Exchange, (iii) on
the Chicago Board of Options Exchange and
(iv) in the over-the-counter market for
equity securities in the United States and
(b) 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
Factors or other antidilution adjustments or
determining any Market Prices 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 any Basket
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 such Basket Stock
and the applicable rate of exchange for such
Basket Stock as determined at such price.
Because the price of each Basket Stock is
subject to market fluctuations, the value of
any Basket 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 such Basket Stock
originally represented in the Initial Price
of the Notes. See "Composition of the
Basket" above. In addition, the
appreciation, if any, in the value of any
Basket Stock may be reduced, or entirely off
set, by the depreciation in any one or more
of the other Basket Stocks. If the Basket
Maturity Value of the Notes 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 Basket Stocks because at maturity a
holder will receive less than the number of
shares of a Basket Stock originally
represented in the Basket if the Maturity
Price for such Basket Stock exceeds the Cap
Price for such Basket Stock. In addition,
because the rate of exchange, the Exchange
Factor and the Maturity Price are determined
as of the second Trading Day prior to
maturity of the Notes and because the price
of any Basket Stock may fluctuate after such
Trading Day and prior to its delivery at
maturity, the value of any Basket Stock
delivered at maturity may be less than the
Cap Price for such Basket Stock even if the
Maturity Price for such Basket Stock, as so
determined, was greater than the Cap Price.
The amount payable at maturity with respect
to each Note will not under any circumstances
exceed $1,455.00 per Note.
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 Prices of
the Basket Stocks, including, without
limitation, the occurrence of a partial
tender or exchange offer for any Basket Stock
by the applicable Basket Issuer 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 the Basket Stock, including, but
not limited to, the volatility of the Basket
Stocks, the dividend rate on the Basket
Stocks, market interest and yield rates and
the time remaining to the maturity of the
Notes. In addition, the value of the Basket
Stocks depends on a number of interrelated
factors, including economic, financial and
political events, that can affect the capital
markets generally and the market segments of
which each Basket Stock 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 Prices of
Stocks. 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 sum of the Market Prices of the
Basket Stocks is below, equal to or not
sufficiently above the Initial Price. The
historical Market Prices of the Basket Stocks
should not be taken as an indication of the
future performance of the Basket Stocks
during the term of any Note or of the Basket
Maturity Value.
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 any of the
Basket Issuers and, although the Company as
of the date of this Pricing Supplement does
not have any material non-public information
concerning any of the Basket Issuers,
corporate events of the Basket Issuer,
including those described below in
"Antidilution Adjustments," are beyond the
Company's ability to control and are
difficult to predict.
None of the Basket Issuers is involved in the
offering of the Notes or has any 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. None of the
Basket Issuers will receive any of the
proceeds of the offering of the Notes made
hereby or is responsible for, or has
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 any of the Basket
Stocks (including, without limitation, voting
rights, the rights to receive any dividends
or other distributions in respect thereof and
the right to tender or exchange any Basket
Stock in any partial tender or exchange offer
by any Basket Issuer or any third party)
until such time as the Company shall deliver
shares of the Basket Stocks to holders of the
Notes at maturity.
Fluctuations in the exchange rate between the
Mexican peso and the U.S. dollar will affect
the U.S. dollar equivalent of the Mexican peso
price of Series L common stock, without par
value, of Telmex (the "Telmex Series L
Shares") on the Bolsa Mexicana de Valores,
S.A. de C.V. (the "Mexican Stock Exchange")
and, as a result, will likely affect the
market price of the American Depositary
Shares of Telmex each representing 20 Telmex
Series L Shares (the "Telmex ADRs"), which
may consequently affect the amount payable at
maturity of the Notes. See "Historical
Information -- Currency Exchange Rates and
the Telmex ADRs" below.
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Notes, including
with respect to certain adjustments to the
Exchange Factors and other antidilution
adjustments that may influence the
determination of the amount of each of the
Basket Stocks 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 for each Basket Stock
(and, in the case of paragraph 5 below, the
determination of the applicable rate of
exchange) will be adjusted as follows:
1. If any Basket Stock is subject to a
stock split or reverse stock split,
then once such split has become
effective, the Exchange Factor for such
Basket Stock will be adjusted to equal
the product of the prior Exchange
Factor for such Basket Stock and the
number of shares issued in such stock
split or reverse stock split with
respect to one share of such Basket
Stock.
2. If any Basket Stock is subject to a
stock dividend (issuance of additional
shares of such Basket Stock) that is
given ratably to all holders of shares
of such Basket Stock, then once the
dividend has become effective and such
Basket Stock is trading ex-dividend,
the Exchange Factor for such Basket
Stock will be adjusted so that the new
Exchange Factor for such Basket Stock
shall equal the prior Exchange Factor
plus the product of (i) the number of
shares issued with respect to one share
of such Basket Stock and (ii) the prior
Exchange Factor.
3. There will be no adjustments to the
Exchange Factors to reflect cash
dividends or other distributions paid
with respect to any Basket 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 a Basket
Stock will be deemed to be an
"Extraordinary Dividend" if such
dividend or other distribution exceeds
the immediately preceding
non-Extraordinary Dividend for such
Basket Stock by an amount equal to at
least 10% of the Market Price of such
Basket Stock on the 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 a Basket Stock, the Exchange
Factor with respect to such Basket
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
Trading Day preceding the ex-dividend
date, and the denominator of which is
the amount by which the Market Price on
the Trading Day preceding the
ex-dividend date exceeds the
Extraordinary Dividend Amount. The
"Extraordinary Dividend Amount" with
respect to an Extraordinary Dividend
for such Basket 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 a Basket
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
any Basket Stock described in clause
(v) of paragraph 5 below that also
constitutes an Extraordinary Dividend
shall only cause an adjustment to the
Exchange Factor for such Basket Stock
pursuant to clause (v) of paragraph 5.
4. If any Basket Issuer issues rights or
warrants to all holders of its Basket
Stock to subscribe for or purchase such
Basket Stock at an exercise price per
share less than the Market Price of
such Basket 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 for such Basket Stock
will be adjusted to equal the product
of the prior Exchange Factor for such
Basket Stock and a fraction, the
numerator of which shall be the number
of shares of such Basket Stock
outstanding immediately prior to the
issuance of such rights or warrants
plus the number of additional shares of
such Basket Stock offered for
subscription or purchase pursuant to
such rights or warrants and the
denominator of which shall be the
number of shares of such Basket Stock
outstanding immediately prior to the
issuance of such rights or warrants
plus the number of additional shares of
such Basket Stock which the aggregate
offering price of the total number of
shares of such Basket Stock so offered
for subscription or purchase pursuant
to such rights or warrants would
purchase at the Market Price of such
Basket Stock 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 of any Basket Stock,
(ii) a Basket Issuer, or any surviving
entity or subsequent surviving entity
of such Basket Issuer (a "Successor
Basket Issuer") has been subject to a
merger, combination or consolidation
and is not the surviving entity, (iii)
any statutory exchange of securities of
a Basket Issuer or any Successor Basket
Issuer with another corporation occurs
(other than pursuant to clause (ii)
above), (iv) a Basket Issuer is
liquidated, (v) a Basket Issuer issues
to all of its shareholders equity
securities of an issuer other than such
Basket Issuer (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 any Basket Stock
(any such event in clauses (i) through
(vi) a "Reorganization Event"), the
method of determining the rate of
exchange applicable to the affected
Basket Stock in respect of the amount
payable with respect to such Basket
Stock 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 amount
due in relation to such Basket Stock
per 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
the applicable Basket Stock with
respect to which the spun-off security
was issued (collectively, the "Exchange
Property") (or, at the sole option of
the Company, cash equal to the value of
such Exchange Property if the Company
exercises its right to deliver the
Basket Maturity Value in cash) in an
amount with a value equal to either (a)
if the Transaction Value (as defined
below) is less than or equal to the Cap
Price for such Basket Stock, the
Transaction Value or (b) if the
Transaction Value with respect to such
Basket Stock is greater than the Cap
Price for such Basket Stock, the
applicable Cap Price. If Exchange
Property with respect to any Basket
Stock consists of more than one type of
property, holders of Notes will receive
at maturity a pro rata share of each
such type of such Exchange Property.
"Transaction Value" means the sum of
(i) for any cash received in any such
Reorganization Event, the amount of
cash received per share of the affected
Basket Stock, as adjusted by the
applicable Exchange Factor for such
Basket Stock, (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 the affected
Basket Stock at the date of the receipt
of such Exchange Property, as adjusted
by the applicable Exchange Factor for
such Basket Stock, 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 as of the second Trading Day
immediately prior to the maturity of the
Notes multiplied by the quantity of
such security received for each share
of the affected Basket Stock, as
adjusted by the applicable Exchange
Factor for such Basket Stock.
For purposes of paragraph 5 above, in the
case of a consummated tender or exchange
offer for all Exchange Property of a
particular type distributed in connection
with a Reorganization Event affecting a Basket
Stock, 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
distributed in connection with a
Reorganization Event affecting a Basket Stock
in which an offeree may elect to receive cash
or other property, such Exchange Property
shall be deemed to include the kind and
amount of cash and other property received by
offerees who elect to receive cash.
With respect to the Telmex ADRs, comparable
Antidilution Adjustments will be made with
respect to corporate events affecting holders
of Telmex Series L Shares and Telmex ADRs;
provided that no adjustment will be made if
the depository for the Telmex ADRs shall have
adjusted the number of Telmex Series L Shares
represented by such Telmex ADRs so that the
price of such Telmex ADR would not be
affected by such corporate event. In
addition, in the event that Telmex and the
depositary for the Telmex ADRs elect, in the
absence of the events described in paragraphs
1 through 3 above, to change the number of
Telmex Series L Shares represented by each
Telmex ADR, then the Exchange Factor for the
Telmex ADRs will be proportionally adjusted
on the Trading Day after such change becomes
effective. If any Antidilution Adjustment
with respect to Telmex ADRs involves a
calculation determined by reference to a
payment in Mexican pesos, the U.S. dollar
amount of such payment will be determined, if
necessary, using the Free Market Rate (as
described under "Historical Information --
Currency Exchange Rates and the Telmex ADRs"
below) on the date applicable to such
adjustment.
No adjustments to any Exchange Factor will be
required unless such adjustment would require
a change of at least 0.1% in the applicable
Exchange Factor then in effect. The Exchange
Factor 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 any Exchange Factor 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 Basket Stocks, including, without
limitation, a partial tender or exchange
offer for any of the Basket Stocks.
NOTWITHSTANDING THE FOREGOING, THE AMOUNT
PAYABLE AT MATURITY WITH RESPECT TO EACH NOTE
WILL NOT UNDER ANY CIRCUMSTANCES EXCEED
$1,455.00 PER NOTE.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to the
Exchange Factors or the rates of exchange
applicable to the Basket Stocks 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
Exchanges Factor or the rates of exchange
applicable to the Basket Stocks upon written
request by any holder of the Notes.
Market Disruption Event:....... "Market Disruption Event" means:
(i) a suspension, absence or material
limitation of trading of any Basket
Stock on the primary market for such
Basket 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 any Basket 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
NYSE, any other self-regulatory organization,
the Securities and Exchange Com- mission or
any other exchange relevant to the
determination of the Market Prices of the
Basket Stocks 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 any Basket 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 such Basket Stock and (5) "a
suspension, absence or material limitation of
trading" on the primary securities market on
which options contracts related to any Basket
Stock are traded will not include any time
when such securities market is itself closed
for trading under ordinary circumstances.
Basket Stocks; Public
Information.................... All of the Basket Stocks are registered
under the 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 the Basket Issuers 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
THE BASKET STOCKS OR OTHER SECURITIES OF ANY
BASKET ISSUER OR ANY AFFILIATE THEREOF. ALL
DISCLOSURES CONTAINED IN THIS PRICING
SUPPLEMENT REGARDING THE BASKET ISSUERS 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 THE BASKET ISSUERS. NEITHER
THE COMPANY NOR THE AGENT MAKES ANY
REPRESENTATION THAT SUCH PUBLICLY AVAILABLE
DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE
INFORMATION REGARDING THE BASKET ISSUERS 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 ANY BASKET STOCK (AND THEREFORE THE
EXCHANGE FACTOR AND THE CAP PRICE APPLICABLE
TO SUCH BASKET STOCK) HAVE BEEN PUBLICLY
DISCLOSED. SUBSEQUENT DISCLOSURE OF ANY SUCH
EVENTS OR THE DISCLOSURE OF OR FAILURE TO
DISCLOSE MATERIAL FUTURE EVENTS CONCERNING
ANY BASKET ISSUER COULD AFFECT THE VALUE
RECEIVED AT MATURITY WITH RESPECT TO THE NOTES
AND THEREFORE THE TRADING PRICES OF THE NOTES.
THE INCLUSION OF A STOCK IN THE BASKET IS NOT
A RECOMMENDATION TO BUY OR SELL SUCH STOCK,
AND NEITHER THE COMPANY NOR ANY OF ITS
AFFILIATES MAKES ANY REPRESENTATION TO ANY
PURCHASER OF NOTES AS TO THE PERFORMANCE OF
ANY BASKET STOCK.
The Company or its affiliates may presently
or from time to time engage in business with
the Basket Issuers including extending loans
to, or making equity investments in, the
Basket Issuers or providing advisory services
to the Basket Issuers, 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 the Basket Issuers and, in
addition, one or more affiliates of the
Company may publish research reports with
respect to the Basket Issuers. The Company
does not make any representation to any
purchaser of Notes with respect to any
matters whatsoever relating to the Basket
Issuers. Any prospective purchaser of a Note
should undertake an independent investigation
of the Basket Issuers as in its judgment is
appropriate to make an informed decision with
respect to an investment in the Basket Stocks.
Historical Information......... The following table sets forth the high and
low Market Prices and Dividends per Share
during 1993, 1994, 1995 and during 1996,
through April 19, 1996. Beneath the name of
each Basket Issuer is the CUSIP number for
its Basket Stock. The Market Prices and
Dividends per Share listed below were
obtained from Bloomberg Financial Markets and
the Company believes such information to be
accurate. However, neither the Company nor
the Agent makes any representation as to the
accuracy of such information. The historical
prices of the Basket Stocks should not be
taken as an indication of future performance,
and no assurance can be given that the price
of the Basket Stocks will not decrease so
that the beneficial owners of the Notes will
receive at maturity shares of the Basket
Stocks worth less than the principal amount
of the Notes. Nor can assurance be given
that the Basket Maturity Value will increase
above the Price to Public so that at maturity
the beneficial owners of the Notes will
receive an amount in excess of the principal
amount of the Notes.
==============================================================================
Dividends
per
AMD High Low Share*
- -------------------------- ----------- ------- -----------
(CUSIP #007903107)
1993:
First Quarter............. $24 $17 3/4
Second Quarter............ 31 1/8 20 5/8
Third Quarter............. 32 3/8 23
Fourth Quarter............ 26 1/2 17 1/4
1994:
First Quarter............. 31 1/4 17 5/8
Second Quarter............ 31 23 5/8
Third Quarter............. 30 24 5/8
Fourth Quarter............ 26 5/8 22 1/2
1995:
First Quarter............. 35 1/8 25 1/8
Second Quarter............ 38 5/8 32 7/8
Third Quarter............. 36 1/4 29 1/8
Fourth Quarter............ 29 16 1/2
1996:
First Quarter............. 21 16 1/2
Second Quarter through
April 19, 1996**........ 18 1/8 16 7/8
==============================================================================
* Advanced Micro Devices, Inc. ("AMD") has
not paid cash dividends on the common stock
referenced on the cover of this Pricing
Supplement (the "AMD Stock") to date. The
Company makes no representation as to the
amount of dividends, if any, that AMD 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 AMD
Stock.
** The Market Price of AMD Stock on April 19, 1996 was $17 1/4.
==============================================================================
Dividends
per
BAY* High Low Share**
- ------------------------- ----------- --------- -----------
(CUSIP #072510100)
1993:
First Quarter............ $15 11/64 $11
Second Quarter........... 18 21/64 13 11/64
Third Quarter............ 18 27/64 13 3/4
Fourth Quarter........... 21 1/2 14 21/64
1994:
First Quarter............ 29 5/64 21 27/64
Second Quarter........... 25 7/8 14 11/64
Third Quarter............ 16 53/64 12 51/64
Fourth Quarter........... 20 21/64 12 53/64
1995:
First Quarter............ 25 3/4 18 45/64
Second Quarter........... 27 37/64 22 29/64
Third Quarter............ 37 21/64 27 11/64
Fourth Quarter........... 48 27/64 33 37/64
1996:
First Quarter............ 47 7/8 28 3/8
Second Quarter through
April 19, 1996***...... 30 3/4 26 7/8
==============================================================================
* Historical prices have been adjusted for
a 2 for 1 stock split of the common stock
(the "BAY Stock") of Bay Networks, Inc.
("BAY") referenced on the cover of this
Pricing Supplement, which became effective in
the Second Quarter of 1994, and for a 3 for 2
stock split of BAY Stock, which became
effective in the Fourth Quarter of 1995.
** BAY has not paid cash dividends on the
BAY Stock to date. The Company makes no
representation as to the amount of dividends,
if any, that BAY 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 BAY Stock.
*** The Market Price of BAY Stock on April 19, 1996 was $30 3/4.
==============================================================================
Dividends
per
IFMX* High Low Share**
- ------------------------- ------------ --------- -----------
(CUSIP #456779107)
1993:
First Quarter............ $10 1/8 $ 6 31/32
Second Quarter........... 13 1/2 16 15/16
Third Quarter............ 13 1/8 9 1/4
Fourth Quarter........... 11 7/8 8 5/16
1994:
First Quarter............ 12 1/16 8
Second Quarter........... 11 1/16 7 1/4
Third Quarter............ 13 7/8 7 15/16
Fourth Quarter........... 16 1/16 11 7/8
1995:
First Quarter............ 19 5/8 14 5/8
Second Quarter........... 25 15/16 17 1/16
Third Quarter............ 34 25 1/4
Fourth Quarter........... 33 24 1/8
1996:
First Quarter............ 35 7/8 26 3/8
Second Quarter through
April 19, 1996***...... 26 15/16 18 3/8
==============================================================================
* Historical prices have been adjusted for
a 2 for 1 stock split of the common stock
(the "IFMX Stock") of Informix Corporation
("Informix") referenced on the cover of this
Pricing Supplement, which became effective in
the Second Quarter of 1993, and for a 2 for 1
stock split of the IMFX Stock, which became
effective in the Second Quarter of 1995.
** Informix has not paid cash dividends on
the IFMX Stock to date. The Company makes no
representation as to the amount of dividends,
if any, that Informix 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 IFMX Stock.
*** The Market Price of IFMX Stock on April 19, 1996 was $23 3/4.
==============================================================================
Dividends
per
CALL High Low Share*
- -------------------------- ----------- ------- -----------
(CUSIP #65332V103)
1993:
First Quarter............. $27 $18 1/8
Second Quarter............ 27 7/8 22 3/8
Third Quarter............. 43 5/8 27
Fourth Quarter............ 54 3/8 33 1/2
1994:
First Quarter............. 46 1/4 35 5/8
Second Quarter............ 40 7/8 30
Third Quarter............. 30 1/2 20 7/8
Fourth Quarter............ 22 1/2 13 1/2
1995:
First Quarter............. 14 7/8 9 5/8
Second Quarter............ 16 3/4 13 1/4
Third Quarter............. 20 1/2 15 1/8
Fourth Quarter............ 17 5/8 13 7/8
1996:
First Quarter............. 18 7/8 13 1/2
Second Quarter through
April 19, 1996**........ 19 17 3/4
==============================================================================
* Nextel Communications Inc. ("Nextel") has
not paid cash dividends on the common stock
(the "CALL Stock") of Nextel referenced on the
cover of this Pricing Supplement to date.
The Company makes no representation as to the
amount of dividends, if any, that Nextel 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 CALL
Stock.
** The Market Price of CALL Stock on April 19, 1996 was $18 1/4.
==============================================================================
Dividends
per
SUNW* High Low Share**
- -------------------------- ---------- --------- -----------
(CUSIP #866810104)
1993:
First Quarter............. $20 1/8 $14 1/16
Second Quarter............ 16 3/16 12 9/16
Third Quarter............. 15 1/2 12
Fourth Quarter............ 14 3/4 10 5/8
1994:
First Quarter............. 15 3/8 12 3/8
Second Quarter............ 12 11/16 9 3/16
Third Quarter............. 15 9 13/16
Fourth Quarter............ 18 5/8 13 25/32
1995:
First Quarter............. 18 1/8 15 1/4
Second Quarter............ 25 1/4 17 7/16
Third Quarter............. 32 1/32 20 7/8
Fourth Quarter............ 49 7/8 27 3/8
1996:
First Quarter............. 56 1/8 37 3/8
Second Quarter through
April 19, 1996***....... 50 3/4 45 5/8
==============================================================================
* Historical prices have been adjusted for
a 2 for 1 stock split of the common stock
("SUNW Stock") of Sun Microsystems, Inc.
("SUN") which became effective in the Fourth
Quarter of 1995.
** SUN has not paid cash dividends on SUNW
Stock to date. The Company makes no
representation as to the amount of dividends,
if any, that SUN 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 SUNW Stock.
*** The Market Price of SUNW Stock on April 19, 1996 was $48 1/2.
<TABLE>
<CAPTION>
==========================================================================================================
Mexican Stock
NYSE Exchange
===========================================================================================================
Dividends
per
TMX High Low ADR* High Low
- ---------------------------- ----------- -------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
(Mexican New
Pesos per Telmex
(CUSIP #879403780) (U.S. dollars per Telmex ADR) Series L Share)
1993:
First Quarter............... $58 3/4 $47 $ NP9.200 NP7.250
Second Quarter.............. 55 3/4 45 1/8 .9624 8.675 7.025
Third Quarter............... 54 3/8 46 -- 8.565 7.175
Fourth Quarter.............. 67 5/8 50 1/8 -- 10.45 7.76
1994:
First Quarter............... 75 5/8 58 3/4 -- 11.75 9.94
Second Quarter.............. 63 1/8 51 1/4 .7402 10.54 8.64
Third Quarter............... 66 1/2 54 1/2 -- 11.18 9.26
Fourth Quarter.............. 63 1/2 37 3/4 .7257 10.84 8.44
1995:
First Quarter............... 38 5/8 24 1/4 -- 10.38 8.02
Second Quarter.............. 31 1/2 27 1/4 .4803 9.90 8.54
Third Quarter............... 35 5/8 29 1/2 -- 10.82 9.16
Fourth Quarter.............. 34 5/8 25 3/4 .39 12.82 9.48
1996:
First Quarter............... 36 29 -- 13.56 11.04
Second Quarter through
April 19, 1996**.......... 37 3/8 32 1/2 -- 13.92 12.26
===========================================================================================================
<FN>
* The Company makes no representation as to
the amount of dividends, if any, payable on
Telmex ADRs in the future. In any event,
holders of the Notes will not be entitled to
receive dividends, if any, that may be
payable on Telmex ADRs.
** The Market Price of Telmex ADRs on April
19, 1996 was $37 3/8; the closing price of
the Telmex Series L Shares on April 19, 1996
was NP 13.92. The Market Prices for the
first three Quarters of 1993 were derived
from the publicly available documents
referred to under "Basket Stocks; Public
Information" above.
</TABLE>
Currency Exchange Rights and the Telmex ADRs
Fluctuations in the exchange rate between the
Mexican peso and the U.S. dollar will affect
the U.S. dollar equivalent of the Mexican peso
price of the Telmex Series L Shares on the
Mexican Stock Exchange and, as a result, will
likely affect the market price of the Telmex
ADRs, which may consequently affect the
amount payable at maturity of the Notes.
According to publicly available documents
referred to under "Basket Stocks; Public
Information" above, since November 1991,
Mexico has had a free market for foreign
exchange. Prior to December 21, 1994, Banco
de Mexico had kept the new peso-U.S. dollar
exchange rate within a range prescribed by
the Government through intervention in the
foreign exchange market. From November 11,
1991 through October 20, 1992, the upper
limit of the prescribed range, expressed in
terms of new pesos per U.S. dollar, rose by
NP.0.0002 pe day, equivalent to a maximum
devaluation of the new peso with respect to
the U.S. dollar of approximately 2.4% per
year. From October 20, 1992 until December
20, 1994, the upper limit of the prescribed
band increased by NP.0.0004 per day,
equivalent to a maximum devaluation of the
new peso of approximately 4.5% per year.
Within the band, Banco de Mexico had
generally intervened to reduce day-to-day
fluctuations in the exchange rate.
On December 20, 1994, the Government
announced the broadening of the band within
which the new peso was allowed to float by
increasing the upper limit of the band by
15%. On December 22, 1994 the Government
suspended intervention by Banco de Mexico and
allowed the new peso to float freely against
the U.S. dollar. Factors contributing to the
decision included the size of Mexico's current
account deficit, the level of Banco de
Mexico's foreign exchange reserves, rising
interest rates for other currencies,
especially the U.S. dollar, and reduced
confidence in the Mexican economy on the part
of international investors due to political
uncertainty, especially concerning events in
the State of Chiapas and turmoil associated
with the presidential elections. By December
31, 1994, the noon buying rate for cable
transfers in new pesos in New York City for
customs purposes as reported by the Federal
Reserve Bank of New York was NP.5.000 to the
U.S. dollar. The new peso has been highly
volatile throughout 1995. There can be no
assurance that the Government will maintain
its current policies with regard to the new
peso or that the new peso will not further
depreciate or appreciate in the future.
The following table sets forth, for the
periods indicated, the period-end, average,
high and low free rate for the purchase of
U.S. dollars, expressed in new pesos per U.S.
dollar. The Federal Reserve Bank of New York
commenced publication on November 8, 1993 of
a noon buying rate for cable transfers in new
pesos in New York City for customs purposes.
The rates have not been restated in constant
currency units. All amounts are stated in
new pesos.
Free Market Rate(1)
----------------------------------------
Year ended Period
December 31, End Average(2) High Low
- ---------------------------------- ------- ---------- ------- -------
1993 (from November 8)............ NP3.108 NP3.127 NP3.240 NP3.102
1994.............................. 5.000 3.385 5.750 3.105
1995.............................. 7.740 6.447 8.050 5.270
First Quarter 1996................ 7.538 7.522 7.695 7.325
Second Quarter 1996 (to April 19). 7.405 7.493 7.573 7.405
==============================================================================
_______________
(1) Source: Federal Reserve Bank of New York
(2) Average of daily rates
The information presented in this Pricing
Supplement relating to the exchange rate of
the U.S. dollar as compared to the Mexican
peso is furnished as a matter of information
only. The Mexican peso has been subject to
large devaluations in the past and may be
subject to significant fluctuations in the
future. The fluctuations in the Mexican
peso/U.S. dollar exchange rate that have
occurred in the past are not necessarily
indicative of fluctuations in that rate that
may occur over the term of the Notes.
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 and on the date of this Pricing
Supplement, the Company, through its
subsidiaries, hedged its anticipated exposure
in connection with the Notes by taking
positions in the Basket Stocks. Such hedging
was carried out in a manner designed to
minimize any impact on the price of the
Basket Stocks. Purchase activity could
potentially have increased the price of the
Basket Stocks, and therefore effectively have
increased the level to which the Basket
Stocks must rise before a holder of a Note
would receive at maturity shares of Basket
Stocks in an amount worth as much as or more
than the principal amount of the Notes. The
Company, through its subsidiaries, is likely
to modify its hedge position on the Notes,
and, in certain instances, on other
exchangeable securities of the Company
exchangeable for or otherwise linked to one
or more of the Basket Stocks, throughout the
life of the Notes by purchasing and selling
the Basket Stocks, options contracts on any
or all of the Basket Stocks listed on major
securities markets or positions in any other
instruments that it may wish to use in
connection with such hedging. Although the
Company has no reason to believe that its
hedging activity had or will have a material
impact on the price of the Basket Stocks,
there can be no assurance that the Company did
not, or in the future will not, affect such
prices as a result of its hedging activities.
United States Federal Taxation: The following discussion 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. Any loss
recognized at maturity will be capital loss.
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 does not
currently intend to treat such gain as
reportable interest income. 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 the establishment
of the Maturity Price 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.
