Subject to Completion, Pricing Supplement dated July 15, 1996
PROSPECTUS Dated May 1, 1996 Pricing Supplement No. 23 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-01655
Dated May 1, 1996 Dated July , 1996
Rule 424(b)(3)
$15,000,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
EQUITY LINKED NOTES DUE JULY 31, 1999
The Equity Linked Notes due July 31, 1999 (the "Notes") are
Medium-Term Notes, Series C of Morgan Stanley Group Inc. (the "Company"),
as further described herein and in the Prospectus Supplement under
"Description of Notes - Fixed Rate Notes" and " - Notes Linked
to Commodity Prices, Single Securities, Baskets of Securities or Indices."
The Notes are being issued in minimum denominations of $1,000 and will
mature on July 31, 1999 (the "Maturity Date"). There will be no periodic
payments of interest on the Notes. The Notes will not be redeemable by the
Company in whole or in part prior to the Maturity Date.
At maturity, the holder of each Note will receive the par amount of
such Note ($1,000) ("Par") plus a dollar amount (the "Supplemental
Redemption Amount") equal to the product of (i) (the "Multiplier") and
(ii) the amount, if any, by which the Final Market Price (as defined below)
of the non-voting Class B common stock, par value 0.01 per share ("VIA B
Stock"), of Viacom Inc. ("Viacom") exceeds $70.00, subject to certain
adjustments (the "Strike Price"). The Supplemental Redemption Amount
cannot be less than zero. The Final Market Price will be the Market Price
of VIA B Stock on the Determination Date (as defined herein). The
Multiplier and the Strike Price will be subject to adjustment upon the
occurrence of certain corporate events. See "Antidilution Adjustments" in
this Pricing Supplement. If the Final Market Price is equal to or less
than the Strike Price, the holder of each Note will be repaid the par
amount of such Note, but will not receive any Supplemental Redemption
Amount.
For information as to the calculation of the Supplemental Redemption
Amount and certain tax consequences to beneficial owners of the Notes, see
"Supplemental Redemption Amount," "Final Market Price" and "United States
Federal Taxation" in this Pricing Supplement.
Viacom is neither affiliated with the Company nor involved in this
offering of the Notes. The Market Price of the VIA B Stock on the date of
this Pricing Supplement was $ . See "Historical Information" in this
Pricing Supplement for information on the range of Market Prices for VIA B
Stock.
The Company will cause the Supplemental Redemption Amount and any
adjustments to the Multiplier or Strike Price to be determined by Morgan
Stanley & Co. Incorporated (the "Calculation Agent") for Chase Manhattan
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 through PS-6 herein.
MORGAN STANLEY & CO.
Incorporated
Capitalized terms not defined herein have the meanings given to such
terms in the accompanying Prospectus Supplement.
INFORMATION CONTAINED IN THIS PRELIMINARY SUPPLEMENT IS SUBJECT TO
COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE DELIVERED PRIOR TO THE
TIME A FINAL PRICING SUPPLEMENT IS DELIVERED. THIS PRICING SUPPLEMENT AND
TEH ACCOMPANYING PROSPECTUS AND PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICIATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION
OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
Principal Amount:.............. $15,000,000
Maturity Date:................. July 31, 1999
Interest Rate:................. 0.00% per annum
Specified Currency:............ U.S. Dollars
Issue Price:................... 100%
Settlement Date (Original
Issue Date):................. July , 1996
Book Entry Note or
Certificated Note:........... Book Entry
Senior Note or Subordinated
Note:........................ Senior
Minimum Denominations:......... $1,000
Trustee:....................... Chase Manhattan Bank
Maturity Redemption Amount:.... At maturity (including as a result of
acceleration or otherwise), the holder of
each Note will receive the par amount of such
Note ($1,000) ("Par") plus the Supplemental
Redemption Amount, if any. References herein
to "Notes" refer to each $1,000 principal
amount of any Note.
Supplemental Redemption
Amount:...................... The Supplemental Redemption Amount payable
with respect to each Note at maturity shall
be calculated on the Determination Date (as
defined below) and shall be an amount equal
to the greater of (a) the product of (i)
(the "Multiplier") and (ii) the amount, if
any, by which the Final Market Price of the
VIA B Stock exceeds $70.00, subject to
certain adjustments (the "Strike Price").
See "Antidilution Adjustments" below.
The Company shall cause the Calculation Agent
to provide written notice to the holder of
each Note and to the Trustee at its New York
office, on which notice the Trustee may
conclusively rely, of the Supplemental
Redemption Amount on or prior to 11:00 a.m.
on the third Business Day following the last
day of the Calculation Period. See "Final
Market Price" below.
Final Market Price:............ The Final Market Price will be the Market
Price as determined on the Determination Date
by the Calculation Agent.
Determination Date:............ The Determination Date shall be the first
Trading Day on which a Market Disruption
Event has not occurred during the Calculation
Period; provided that if a Market Disruption
Event shall have occurred on each Trading Day
to and including the final Trading Day in the
Calculation Period, such final Trading Day in
the Calculation Period shall be deemed the
Determination Date notwithstanding the
occurrence of a Market Disruption Event.
Calculation Period:............ The period from and including June 30, 1999
to and including July 6, 1999.
Trading Day:................... A day on which trading is generally conducted
(i) on the New York Stock Exchange ("NYSE"),
the American Stock Exchange, Inc.
("AMEX"), and the NASDAQ National Market
("NASDAQ NMS"), (ii) on the Chicago
Mercantile Exchange and (iii) on the
Chicago Board of Options Exchange, as
determined by the Calculation Agent.
Strike Price................... $70.00, subject to adjustment for certain
corporate events. See "Antidilution
Adjustments" below.
Market Price:.................. If VIA B 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 any one share of VIA B 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 VIA B Stock (or such other security) 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 Trading
Day shall be the mean, as determined by the
Calculation Agent, of the bid prices for VIA
B Stock (or such other security) 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" shall include any successor to
such system and the term "OTC Bulletin Board
Service" shall include any successor service
thereto.
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 Multiplier or
the Strike Price or determining the Market
Price or whether a Market Disruption Event
has occurred. See "Market Disruption Event"
and "Antidilution Adjustments" below. MS &
Co. is obligated to carry out its duties and
functions as Calculation Agent in good faith
and using its reasonable judgment.
Market Disruption Event:....... "Market Disruption Event" means, with respect
to VIA B Stock:
(i) a suspension, absence or material
limitation of trading of VIA B Stock on the
primary market for VIA B 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 VIA B 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 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 VIA B 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 VIA B Stock and (5) a "suspension,
absence or material limitation of trading" on
the primary securities market on which
options contracts related to VIA B Stock are
traded will not include any time when such
securities market is itself closed for
trading under ordinary circumstances.
Risk Factors:.................. An investment in the Notes entails
significant risks not associated with similar
investments in a conventional debt security,
including the following:
There will be no periodic payments of
interest on the Notes as there would be on a
conventional fixed-rate debt security having
the same maturity date as the Notes and
issued by the Company on the Original Issue
Date. Because the Supplemental Redemption
Amount may be equal to zero, the effective
yield to maturity may be less than that which
would be payable on such a conventional
fixed-rate debt security.
The return of only the par amount of a Note
at maturity may not compensate the holder for
any opportunity cost implied by inflation and
other factors relating to the time value of
money.
The Company is not affiliated with Viacom
and, although the Company as of the date of
this Pricing Supplement does not have any
material non-public information concerning
Viacom, corporate events of Viacom (including
those described below in "Antidilution
Adjustments" that may affect the Multiplier
or the Strike Price and, consequently, the
Supplemental Redemption Amount) are beyond the
Company's ability to control and are
difficult to predict.
Viacom 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.
Viacom 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.
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. The
market value for the Notes will be affected
by a number of factors independent of the
creditworthiness of the Company and the value
of VIA B Stock, including, but not limited
to, the volatility of VIA B Stock, the
dividend rate on VIA B Stock, market interest
and yield rates and the time remaining to the
Determination Date or the maturity of the
Notes. In addition, the value of VIA B Stock
depends on a number of interrelated factors,
including economic, financial and political
events, over which the Company has no
control. The market value of the Notes is
expected to depend primarily on the extent of
the appreciation, if any, of the Market Price
of VIA B Stock above the Strike Price. 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 accreted
principal amount thereof, if, at such time,
the Market Price of VIA B Stock is below,
equal to or not sufficiently above the Strike
Price. The historical Market Prices of VIA B
Stock should not be taken as an indication of
VIA B Stock's future performance during the
term of any Note.
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
Multiplier or the Strike Price that may
influence the determination of the
Supplemental Redemption Amount. See
"Supplemental Redemption Amount" and "Market
Disruption Event" above, and "Antidilution
Adjustments" below.
If a bankruptcy proceeding is commenced in
respect of the Company, the claim of a holder
of a Note may, under Section 502(b)(2) of
Title 11 of the United States Code, be
limited to the par amount of such Note.
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 Multiplier and the Strike Price will be
adjusted as follows:
1. Stock Dividends; Stock Splits; Reverse
Stock Splits; Reclassifications. In case
Viacom shall (i) pay a dividend or make any
other distribution with respect to its VIA B
Stock in shares of VIA B Stock, (ii)
subdivide its outstanding VIA B Stock, (iii)
combine its outstanding VIA B Stock into a
smaller number of shares, or (iv) issue any
shares of VIA B Stock in a reclassification
of the VIA B Stock (including any such
reclassification in connection with a merger,
consolidation or other business combination
in which Viacom is the continuing
corporation), the Multiplier shall be
adjusted so that if the Supplemental
Redemption Amount were to be calculated
immediately after the record date for such
dividend or distribution or the effective
date of such subdivision or combination, the
holder of each Note would receive the same
Supplemental Redemption Amount, taking into
account the adjustment to the Strike Price
under Paragraph 7 below, that such holder
would have been entitled to receive
immediately prior to any of the events
described above, had such Supplemental
Redemption Amount been calculated immediately
prior to the happening of such event or any
record date with respect thereto. An
adjustment made pursuant to this Paragraph
1 shall become effective immediately after
the effective date of such event retroactive
to the record date, if any, for such event.
2. Rights; Options; Warrants. In case
Viacom shall issue rights, options, warrants
or convertible or exchangeable securities
(other than a convertible or exchangeable
security subject to Paragraph 1) to all
holders of its VIA B Stock, entitling them to
subscribe for or purchase VIA B Stock at a
price per share that is lower (at the record
date for such issuance) than the Current
Market Value per share of VIA B Stock, the
Multiplier shall be adjusted so that the new
Multiplier will equal the product of (i) the
existing Multiplier multiplied by (ii) 1 plus
a fraction, the numerator of which shall be
the Cheap Stock Issued and the denominator of
which shall be (x) the fully diluted shares
of VIA B Stock outstanding on the date of
issuance of such rights, options, warrants or
convertible or exchangeable securities minus
(y) the number of shares of VIA B Stock
theretofore issuable upon the exercise of all
Viacom Five-Year Warrants, scheduled to
expire on July 7, 1999 (the "VIA E Warrants")
then outstanding. Such adjustment shall be
made whenever such rights, options, warrants
or convertible or exchangeable securities are
issued, and shall become effective
retroactively immediately after the record
date for the determination of stockholders
entitled to receive such rights, options,
warrants or convertible or exchangeable
securities.
For purposes of this Paragraph 2, the "Cheap
Stock Issued" shall be the number of
additional shares of any VIA B Stock offered
by Viacom for subscription or purchase as
described above minus the number of shares of
VIA B Stock that the aggregate offering price
of the total number of shares of VIA B Stock
so offered would purchase at the then Current
Market Value per share of VIA B Stock.
3. Issuance of VIA B Stock at Lower Values.
In case Viacom shall, in a transaction in
which Paragraph 2 is inapplicable, issue or
sell shares of VIA B Stock, or rights,
options, warrants or convertible or
exchangeable securities containing the right
to subscribe for or purchase shares of VIA B
Stock, at a price per share of VIA B Stock
(determined in the case of such rights,
options, warrants or convertible or
exchangeable securities, by dividing (A) the
total amount receivable by Viacom (as valued
by Viacom) in consideration of the issuance
and sale of such rights, options, warrants or
convertible or exchangeable securities, plus
the total consideration, if any, payable to
Viacom upon exercise, conversion or exchange
thereof, by (B) the total number of shares of
VIA B Stock covered by such rights, options,
warrants or convertible or exchangeable
securities) that is lower than the then
Current Market Value per share of the VIA B
Stock in effect immediately prior to such
sale or issuance, then the Multiplier shall
be adjusted so that the new Multiplier will
equal the product of (i) the existing
Multiplier multiplied by (ii) 1 plus a
fraction, the numerator of which shall be the
Cheap Stock Issued and the denominator of
which shall be (x) the fully diluted shares
of VIA B Stock outstanding on the date of
issuance of such VIA B Stock or such rights,
options, warrants or convertible or
exchangeable securities minus (y) the number
of shares of VIA B Stock theretofore issuable
upon the exercise of all VIA E Warrants then
outstanding. Such adjustment shall be made
successively whenever any such sale or
issuance is made.
For purposes of this Paragraph 3, the "Cheap
Stock Issued" shall be the number of
additional shares of any VIA B Stock issued or
offered by Viacom for subscription or
purchase as described above minus the number
of shares of VIA B Stock that the aggregate
offering price of the total number of shares
of the VIA B Stock so offered would purchase
at the then Current Market Value per share
of VIA B Stock.
The provisions of this Paragraph 3 shall not
apply (i) to shares issued pursuant to an
employee stock option plan or similar plan
providing for options or other similar rights
to purchase shares of VIA B Stock, (ii) to
issuances pursuant to incentive bonus plans or
(iii) to shares issued in payment or
settlement of any other equity-related award
to employees.
4. Expiration of Rights; Options and
Conversion Privileges. Upon the expiration
of any rights, options, warrants or
conversion or exchange privileges that have
previously resulted in an adjustment
hereunder, if any thereof shall not have been
exercised, the Strike Price and the
Multiplier shall, upon such expiration, be
readjusted and shall thereafter, upon any
future exercise, be such as they would have
been had they been originally adjusted (or
had the original adjustment not been
required, as the case may be) as if (i) the
only shares of VIA B Stock so issued were the
shares of VIA B Stock, if any, actually
issued or sold upon the exercise of such
rights, options, warrants or conversion or
exchange rights and (ii) such shares of VIA B
Stock, if any, were issued or sold for the
consideration actually received by Viacom
upon such exercise plus the consideration, if
any, actually received by Viacom for
issuance, sale or grant of all such rights,
options, warrants or conversion or exchange
rights whether or not exercised; provided,
however that no such readjustment shall have
the effect of increasing the Strike Price by
an amount, or decreasing the Multiplier by an
amount, in excess of the amount of the
adjustment initially made in respect to the
issuance, sale or grant of such rights,
options, warrants or conversion or exchange
rights.
5. Current Market Value. For the purposes
of any computation under the heading
"Antidilution Adjustments," the Current
Market Value per share of VIA B Stock at
the date herein specified shall be deemed
to be the average of the daily market
prices, as determined by the Calculation
Agent, of the VIA B Stock for the 10
consecutive trading days immediately
preceding the day as of which "Current
Market Value" is being determined. The
market price for each such trading day
shall be the closing price, regular way,
on such day, or if no sale takes place on
such day, the average of the closing bid
and asked prices on such day, as
determined by the Calculation Agent.
6. Adjustments for Consolidation, Merger,
Sale of Assets, Reorganization, etc. In case
Viacom (i) consolidates with or merges into
any other corporation and is not the
continuing or surviving corporation of such
consolidation or merger, or (ii) permits any
other corporation to consolidate with or
merge into Viacom and Viacom is the
continuing or surviving corporation but, in
connection with such consolidation or merger,
the VIA B Stock is changed into or exchanged
for stock or other securities of any other
corporation or cash or any other assets, or
(iii) transfers all or substantially all of
its properties and assets to any other
corporation, or (iv) effects a capital
reorganization or reclassification of the VIA
B Stock in such a way that holders of Common
Stock shall be entitled to receive stock,
securities, cash or assets with respect to or
in exchange for VIA B Stock, then and in each
such case, proper provision shall be made so
that, upon the basis and upon the terms and
in the manner provided in this Paragraph 6,
the Final Market Price will be based on the
value of the stock and other securities, cash
and assets received per share of VIA B Stock
upon the consummation of such consolidation,
merger, transfer, reorganization or
reclassification.
7. Adjustment of Strike Price. Whenever the
Multiplier is adjusted, as provided in
Paragraph 1, 2 or 3, the Strike Price shall
be adjusted (calculated to the nearest $.01)
so that it shall equal the price determined
by multiplying such Strike Price immediately
prior to such adjustment by a fraction, the
numerator of which shall be the Multiplier
immediately prior to such adjustment, and the
denominator of which shall be the Multiplier
immediately thereafter.
8. De Minimis Adjustments. Except as
provided in Paragraph 3 with reference to
adjustments required by such Paragraph 3, no
adjustment in the number of shares of VIA B
Stock issuable hereunder shall be required
unless such adjustment would require an
increase or decrease of at least one percent
(1%) in the Multiplier; provided, however,
that any adjustments which by reason of this
Paragraph 8 are not required to be made shall
be carried forward and taken into account in
any subsequent adjustment. All calculations
shall be made to the nearest one-thousandth
of a share.
No adjustments to the Multiplier or the
Strike Price will be required other than
those specified above. However, the Company
may, at its sole discretion, cause the
Calculation Agent to make additional
adjustments to the Multiplier or the Strike
Price to reflect changes occurring in
relation to the VIA E Warrants or any other
Exchange Property in other circumstances
where the Company determines that such
changes are appropriate. The adjustments
specified above do not cover all events that
could affect the Market Price of the VIA B
Stock.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to the
Multiplier or Strike Price and of any related
determinations and calculations with respect
to any valuations of stock, other securities
or other property or assets (including cash)
in connection with any corporate event
described in paragraph 6 above, and its
determinations and calculations with respect
thereto shall be conclusive.
The Calculation Agent will provide
information as to any adjustments to the
Multiplier or Strike Price upon written
request by any holder of the Notes.
VIA B Stock;
Public Information:.......... VIA B Stock is 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 Viacom 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
VIA B STOCK OR OTHER SECURITIES OF VIACOM.
ALL DISCLOSURES CONTAINED IN THIS PRICING
SUPPLEMENT REGARDING VIACOM 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 VIACOM.
NEITHER THE COMPANY NOR THE AGENT MAKES ANY
REPRESENTATION THAT SUCH PUBLICLY AVAILABLE
DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE
INFORMATION REGARDING VIACOM 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 VIA B STOCK (AND THEREFORE
THE MULTIPLIER) HAVE BEEN PUBLICLY DISCLOSED.
SUBSEQUENT DISCLOSURE OF ANY SUCH EVENTS OR
THE DISCLOSURE OF OR FAILURE TO DISCLOSE
MATERIAL FUTURE EVENTS CONCERNING VIACOM
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
MAKES ANY REPRESENTATION TO ANY PURCHASER OF
NOTES AS TO THE PERFORMANCE OF VIA B STOCK.
The Company or its affiliates may presently
or from time to time engage in business with
Viacom including extending loans to, or
making equity investments in, Viacom or
providing advisory services to Viacom,
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 Viacom
and, in addition, one or more affiliates of
the Company may publish research reports with
respect to Viacom. The Company does not make
any representation to any purchaser of Notes
with respect to any matters whatsoever
relating to Viacom. Any prospective
purchaser of a Note should undertake an
independent investigation of Viacom as in its
judgment is appropriate to make an informed
decision with respect to an investment in VIA
B Stock.
Historical Information......... The following table sets forth the high and
low Market Price during 1993, 1994, 1995 and
during 1996 through July 15, 1996. The
Market Price on July 15, 1996 was $32 3/4
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 VIA B Stock should not be taken as an
indication of future performance, and no
assurance can be given that the price of VIA
B Stock will increase sufficiently to cause
the beneficial owners of the Notes to receive
any Supplemental Redemption Amount.
<TABLE>
<CAPTION>
Viacom High Low Close
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(CUSIP #617446CK3)
<S> <C> <C> <C>
1993:
First Quarter.................. $44 $36 1/8 $43 1/8
Second Quarter................. $48 3/4 $36 1/4 $47 3/8
Third Quarter.................. $59 3/4 $46 $55 1/4
Fourth Quarter................. $58 3/4 $40 7/8 $44 7/8
1994:
First Quarter.................. $44 1/2 $24 5/8 $26 1/2
Second Quarter................. $32 3/8 $22 1/4 $31 5/8
Third Quarter.................. $39 3/4 $30 3/4 $39 3/4
Fourth Quarter................. $40 5/8 $37 1/4 $40 5/8
1995:
First Quarter.................. $47 1/4 $40 5/8 $44 3/4
Second Quarter................. $48 1/2 $41 3/4 $46 3/8
Third Quarter.................. $53 7/8 $45 1/8 $49 3/4
Fourth Quarter................. $50 1/2 $45 1/8 $47 3/8
1996:
First Quarter.................. $37 1/4 $37 1/4 $42 1/8
Second Quarter................. $44 1/4 $37 7/8 $38 7/8
Third Quarter $38 7/8 $32 3/4 $32 3/4
(Through July 15, 1996)
</TABLE>
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.
On or prior to 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 the VIA E
Warrants. Such hedging was carried out in a
manner designed to minimize any impact on the
price of VIA B Stock. Purchase activity
could potentially have increased the price of
VIA B Stock, and therefore effectively have
increased the level to which VIA B Stock must
rise before a holder of a Note will receive
more than the accreted principal amount on
any Exchange Date or Call Date. Although the
Company has no reason to believe that its
hedging activity had a material impact on the
price of VIA B 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 VIA B Stock, VIA E
Warrants, options contracts on VIA B 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 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. Any limitations on
disclosure and any defined terms contained
therein are equally applicable to the
discussion below. This discussion also does
not deal with holders other than initial
United States Holders of the Notes who
purchase Notes at the Issue Price.
The Notes will be treated as debt for United
States federal income tax purposes. Although
Treasury regulations addressing the treatment
of contingent debt instruments were released
on June 11, 1996, 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 a Note, by their terms apply
only to debt instruments issued on or after
August 13, 1996. Under existing general
United States federal income tax principles,
a United States Holder will not be required
to include as income any increase in value of
a Note attributable to the Supplemental
Redemption Amount feature before its sale,
exchange, or the Determination Date. It is
unclear under existing law whether the
payment of the Supplemental Redemption
Amount, if any, will be treated as ordinary
or capital in character. The Company
currently intends to treat such amounts as
interest income and to report such amounts
accordingly. Prospective investors should
consult with their tax advisors regarding the
character of any such gain.
United States Holders that have acquired debt
instruments that are similar to the Notes and
have accounted for such debt instruments in
a consistent manner (including under
proposed, but subsequently withdrawn,
Treasury regulations) may be deemed to have
established a method of tax accounting. In
such instance, the United States Holder would
be required to apply such method of tax
accounting to the Notes, unless consent of
the Commissioner of the Internal Revenue
Service is obtained to change such method.
Any gain or loss recognized on the sale or
exchange of a Note prior to its retirement
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.
