PROSPECTUS Dated March 29, 1995 Pricing Supplement No. 33 to
PROSPECTUS SUPPLEMENT Registration Statement No. 33-57833
Dated March 29, 1995 February 1, 1996
Rule 424(b)(3)
$50,024,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
5.50% MANDATORILY EXCHANGEABLE NOTES DUE FEBRUARY 2, 1998
Mandatorily Exchangeable For Shares of Common Stock of
CITICORP
The 5.50% Mandatorily Exchangeable Notes due February 2, 1998 (the "Notes")
are Medium-Term Notes, Series C (Senior Fixed Rate Notes) of Morgan Stanley
Group Inc. (the "Company"), as further described below and in the Prospectus
Supplement under "Description of Notes - Fixed Rate Notes."
The principal amount of each of the Notes being offered hereby will be $74.00
(the "Initial Price"). The Notes will mature on February 2, 1998. Interest
on the Notes, at the rate of 5.50% of the principal amount per annum, is
payable quarterly in arrears on each February 1, May 1, August 1 and November
1, beginning May 1, 1996.
At maturity (including as a result of acceleration or otherwise), the
principal amount of each Note will be mandatorily exchanged by the Company
into a number of shares of the common stock, par value $1.00 per share, of
Citicorp (the "Citicorp Stock") (or at the Company's option, cash with an
equal value in the case of clause (b) below) at the Exchange Rate. The
Exchange Rate is equal to, subject to certain adjustments, (a) if the product
of the Exchange Factor (as defined below) and the Market Price (as defined
herein) per share of Citicorp Stock determined as of the maturity of the Notes
(the "Maturity Price") is greater than or equal to $84.36 (the "Threshold
Appreciation Price"), 0.877193 of the product of the Exchange Factor and one
share of Citicorp Stock per Note, (b) if the Maturity Price is less than the
Threshold Appreciation Price but is greater than the Initial Price, a fraction
of the product of the Exchange Factor and one share of Citicorp Stock so that
the value of such fraction (determined at the Maturity Price) equals the
Initial Price and (c) if the Maturity Price is less than or equal to the
Initial Price, the product of the Exchange Factor and one share of Citicorp
Stock per Note. The Exchange Factor will be set initially at 1.0, but will be
subject to adjustment upon the occurrence of certain corporate events.
Because the Exchange Rate varies depending on the Maturity Price, holders of
the Notes will not necessarily receive at maturity an amount equal to the
principal amount thereof. See "Exchange at Maturity," "Exchange Factor" and
"Antidilution Adjustments" in this Pricing Supplement.
Interest on the Notes will accrue at a higher rate than the rate at which
dividends have been paid on the Citicorp Stock. The opportunity for equity
appreciation afforded by an investment in the Notes is less than that afforded
by an investment in the Citicorp Stock because at maturity a holder may
receive less than one share of Citicorp Stock per Note. The value of the
Citicorp Stock received by a holder of the Notes upon exchange at maturity,
determined as described herein, may be more or less than the principal amount
of the Notes.
Citicorp ("Citicorp") is not affiliated with the Company, is not involved in
this offering of Notes and will have no obligations with respect to the Notes.
See "Historical Information" in this Pricing Supplement for information on the
range of Market Prices for Citicorp Stock.
The Company will cause the Market Price, any adjustments to the Exchange
Factor and any other antidilution adjustments to be determined by the
Calculation Agent for Chemical Bank, as Trustee under the Senior Debt
Indenture.
An investment in the Notes entails risks not associated with similar
investments in a conventional debt security, as described under "Risk Factors"
on PS-5 and PS-6 herein.
------------
PRICE 100% AND ACCRUED INTEREST
------------
Agent's Proceeds to
-------------
Price to Public(1) Commissions(2) Company(1)
-------------------- ---------------- -------------
Per Note.... 100% 0.25% 99.75%
Total....... $50,024,000 $125,060 $49,898,940
_______________
(1) Plus accrued interest, if any, from February 8, 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
(This page intentionally left blank)
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount:.............. $50,024,000
Maturity Date:................. February 2, 1998
Interest Rate:................. 5.50% per annum
Interest Payment Dates......... February 1, May 1, August 1 and November 1
Specified Currency:............ U.S. Dollars
Issue Price:................... 100%
Original Issue Date
(Settlement Date):........... February 8, 1996
Book Entry Note or
Certificated Note:........... Book Entry
Senior Note or Subordinated
Note:........................ Senior
Denominations:................. $74.00 and integral multiples thereof
Trustee:....................... Chemical Bank
Exchange at Maturity:.......... At maturity (including as a result of
acceleration or otherwise), the principal
amount of each Note will be mandatorily
exchanged by the Company, upon delivery of
such Note to the Trustee, into a number of
shares of Citicorp Stock at the Exchange
Rate (or, at the Company's option in the
case of clause (b) below, cash equal to
$74.00 per Note). The Exchange Rate is
equal to (a) if the Maturity Price (as
defined below) is greater than or equal to
$84.36 (the "Threshold Appreciation
Price"), 0.877193 of the product of the
Exchange Factor (as defined below) and one
share of Citicorp Stock per Note, (b) if
the Maturity Price is less than the
Threshold Appreciation Price but is
greater than the Initial Price, a fraction
of the product of the Exchange Factor and
one share of Citicorp Stock so that the
value of such fraction (determined at the
Maturity Price) equals the Initial Price
and (c) if the Maturity Price is less than
or equal to the Initial Price, the product
of the Exchange Factor and one share of
Citicorp Stock per Note, subject in each
case to any applicable antidilution
adjustments as set forth under
"Antidilution Adjustments" below.
The Company shall, or shall cause the
Calculation Agent to, deliver such shares of
Citicorp Stock or cash to the Trustee for
delivery to the holders. The Calculation
Agent shall calculate the Exchange Factor and
determine the Exchange Rate applicable at the
maturity of the Notes. References to payment
"per Note" refer to each $74.00 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 Citicorp Stock in an
amount equal to the corresponding fractional
Market Price as of the maturity of the Notes.
Exchange Factor:............... The Exchange Factor will be set initially at
1.0, but will be subject to adjustment upon
the occurrence of certain corporate events
through and including the second NYSE Trading
Day immediately prior to maturity. See
"Antidilution Adjustments" below.
Initial Price:................. $74.00
Maturity Price:................ Maturity Price means the product of (i) the
Market Price of one share of Citicorp Stock
and (ii) the Exchange Factor, each determined
as of the second NYSE Trading Day immediately
prior to maturity.
Market Price:.................. If Citicorp Stock (or any other security
for which a Market Price must be
determined) is listed on a national
securities exchange, is a security of The
Nasdaq National Market ("NASDAQ NMS") or
is included in the OTC Bulletin Board
Service ("OTC Bulletin Board") operated by
the National Association of Securities
Dealers, Inc. (the "NASD"), the Market
Price for one share of Citicorp Stock (or
one unit of any such other security) on
any NYSE Trading Day means (i) the last
reported sale price, regular way, on such
day on the principal United States
securities exchange registered under the
Securities Exchange Act of 1934, as
amended (the "Exchange Act"), on which
Citicorp Stock is listed or admitted to
trading or (ii) if not listed or admitted
to trading on any such securities exchange
or if such last reported sale price is not
obtainable, the last reported sale price
on the over-the-counter market as reported
on the NASDAQ NMS or OTC Bulletin Board on
such day. If the last reported sale price
is not available pursuant to clause (i) or
(ii) of the preceding sentence, the Market
Price for any NYSE Trading Day shall be
the mean, as determined by the Calculation
Agent, of the bid prices for Citicorp
Stock obtained from as many dealers in
such stock, but not exceeding three, as
will make such bid prices available to the
Calculation Agent. The term "NASDAQ NMS
security" shall include a security
included in any successor to such system
and the term "OTC Bulletin Board Service"
shall include any successor service
thereto.
NYSE Trading Day:.............. A day on which trading is generally conducted
in the over-the-counter market for equity
securities in the United States and on the
New York Stock Exchange, as determined by the
Calculation Agent, and on which a Market
Disruption Event (as defined below) has not
occurred.
Calculation Agent:............. Morgan Stanley & Co. Incorporated ("MS &
Co.")
Because the Calculation Agent is an
affiliate of the Company, potential
conflicts of interest may exist between
the Calculation Agent and the holders of
the Notes, including with respect to
certain determinations and judgments that
the Calculation Agent must make in making
adjustments to the Exchange Factor or
other antidilution adjustments or
determining any Market Price or whether a
Market Disruption Event has occurred. See
"Antidilution Adjustments" and "Market
Disruption Event" below. MS & Co. is
obligated to carry out its duties and
functions as Calculation Agent in good
faith and using its reasonable judgment.
Risk Factors:.................. An investment in the Notes entails
significant risks not associated with similar
investments in a conventional debt security,
including the following:
The Notes combine features of equity and debt
instruments. Accordingly, the terms of the
Notes differ from those of ordinary debt
securities in that the value of the Citicorp
Stock that a holder of the Notes will receive
upon mandatory exchange of the principal
amount thereof at maturity is not fixed, but
is based on the price of the Citicorp Stock
and the Exchange Rate as determined at such
price. Because the price of the Citicorp
Stock is subject to market fluctuations, the
value of the Citicorp Stock received by a
holder of Notes upon exchange at maturity,
determined as described herein, may be more
or less than the principal amount of the
Notes. If the Maturity Price of the Citicorp
Stock is less than the Initial Price, the
amount receivable upon exchange will be less
than the principal amount of the Notes, in
which case an investment in the Notes may
result in a loss.
The opportunity for equity appreciation
afforded by an investment in the Notes is
less than that afforded by an investment in
the Citicorp Stock because at maturity a
holder will receive less than one share of
Citicorp Stock per Note if the value of such
Citicorp Stock (as adjusted by the Exchange
Factor) has appreciated above the Initial
Price.
Although the amount that holders of the Notes
are entitled to receive at maturity is
subject to adjustment for certain corporate
events, such adjustments do not cover all
events that could affect the Market Price of
the Citicorp Stock, including, without
limitation, the occurrence of a partial
tender or exchange offer for the Citicorp
Stock by Citicorp 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 Citicorp Stock, including, but
not limited to, the volatility of Citicorp
Stock, the dividend rate on Citicorp
Stock, market interest and yield rates and
the time remaining to the maturity of the
Notes. In addition, the value of Citicorp
Stock depends on a number of interrelated
factors, including economic, financial and
political events, that can affect the
capital markets generally and the market
segment of which Citicorp is a part and
over which the Company has no control.
The market value of the Notes is expected
to depend primarily on changes in the
Market Price of Citicorp Stock. The price
at which a holder will be able to sell
Notes prior to maturity may be at a
discount, which could be substantial, from
the principal amount thereof, if, at such
time, the Market Price of Citicorp Stock
is below, equal to or not sufficiently
above the Initial Price. The historical
Market Prices of Citicorp Stock should not
be taken as an indication of Citicorp
Stock's future performance during the term
of any Note.
The Notes will not be listed on any national
securities exchange or accepted for quotation
on a trading market and, as a result, pricing
information for the Notes may be difficult to
obtain.
The Company is not affiliated with Citicorp
and, although the Company as of the date of
this Pricing Supplement does not have any
material non-public information concerning
Citicorp, corporate events of Citicorp,
including those described below in
"Antidilution Adjustments," are beyond the
Company's ability to control and are
difficult to predict.
Citicorp 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. Citicorp
will not receive any of the proceeds of
the offering of the Notes made hereby and
is not responsible for, and has not
participated in, the determination of the
timing of, prices for or quantities of,
the Notes offered hereby.
Holders of the Notes will not be entitled to
any rights with respect to the Citicorp Stock
(including, without limitation, voting
rights, the rights to receive any dividends
or other distributions in respect thereof and
the right to tender or exchange Citicorp
Stock in any partial tender or exchange offer
by Citicorp or any third party) until such
time as the Company shall deliver shares of
Citicorp Stock to holders of the Notes at
maturity.
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Notes, including
with respect to certain adjustments to the
Exchange Factor and other antidilution
adjustments that may influence the
determination of the amount of Citicorp Stock
or other property receivable at the maturity
of the Notes. See "Antidilution Adjustments"
and "Market Disruption Event."
It is suggested that prospective investors
who consider purchasing the Notes should
reach an investment decision only after
carefully considering the suitability of the
Notes in light of their particular
circumstances.
Investors should also consider the tax
consequences of investing in the Notes. See
"United States Federal Taxation" below.
Antidilution Adjustments:...... The Exchange Factor (and, in the case of
paragraph 5 below, the determination of the
Exchange Rate) will be adjusted as follows:
1. If Citicorp Stock is subject to a stock
split or reverse stock split, then once such
split has become effective, the Exchange
Factor will be adjusted to equal the product
of the prior Exchange Factor and the number
of shares issued in such stock split or
reverse stock split with respect to one share
of Citicorp Stock.
2. If Citicorp Stock is subject to a stock
dividend (issuance of additional shares of
Citicorp Stock) that is given ratably to all
holders of shares of Citicorp Stock, then
once the dividend has become effective and
Citicorp Stock is trading ex-dividend, the
Exchange Factor will be adjusted so that the
new Exchange Factor shall equal the prior
Exchange Factor plus the product of (i) the
number of shares issued with respect to one
share of Citicorp Stock and (ii) the prior
Exchange Factor.
3. There will be no adjustments to the
Exchange Factor to reflect cash dividends or
other distributions paid with respect to
Citicorp 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 Citicorp Stock will be deemed
to be an "Extraordinary Dividend" if such
dividend or other distribution exceeds the
immediately preceding non-Extraordinary
Dividend for Citicorp Stock by an amount
equal to at least 10% of the Market Price of
Citicorp Stock on the NYSE Trading Day
preceding the ex-dividend date for the
payment of such Extraordinary Dividend (the
"ex-dividend date"). If an Extraordinary
Dividend occurs with respect to Citicorp
Stock, the Exchange Factor with respect to
Citicorp Stock will be adjusted on the
ex-dividend date with respect to such
Extraordinary Dividend so that the new
Exchange Factor will equal the product of (i)
the then current Exchange Factor and (ii) a
fraction, the numerator of which is the
Market Price on the NYSE Trading Day
preceding the ex-dividend date, and the
denominator of which is the amount by which
the Market Price on the NYSE Trading Day
preceding the ex-dividend date exceeds the
Extraordinary Dividend Amount. The
"Extraordinary Dividend Amount" with respect
to an Extraordinary Dividend for Citicorp
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
Citicorp Stock or (ii) in the case of cash
dividends or other distributions that do not
constitute quarterly dividends, the amount
per share of such Extraordinary Dividend. To
the extent an Extraordinary Dividend is not
paid in cash, the value of the non-cash
component will be determined by the
Calculation Agent, whose determination shall
be conclusive. A distribution on the Citicorp
Stock described in clause (v) of paragraph 5
below that also constitutes an Extraordinary
Dividend shall only cause an adjustment to
the Exchange Factor pursuant to clause (v) of
paragraph 5.
4. If Citicorp issues rights or warrants to
all holders of Citicorp Stock to subscribe
for or purchase Citicorp Stock at an exercise
price per share less than the Market Price of
the Citicorp Stock on (i) the date the
exercise price of such rights or warrants is
determined and (ii) the expiration date of
such rights or warrants, and if the
expiration date of such rights or warrants
precedes the maturity of the Notes, then the
Exchange Factor will be adjusted to equal the
product of the prior Exchange Factor and a
fraction, the numerator of which shall be the
number of shares of Citicorp Stock outstanding
on the date of issuance of such rights or
warrants, immediately prior to such issuance,
plus the number of additional shares of
Citicorp Stock offered for subscription or
purchase pursuant to such rights or warrants
and the denominator of which shall be the
number of shares of Citicorp Stock
outstanding on the date of issuance of such
rights or warrants, immediately prior to such
issuance, plus the number of additional
shares of Citicorp Stock which the aggregate
offering price of the total number of shares
of Citicorp Stock so offered for subscription
or purchase pursuant to such rights or
warrants would purchase at the Market Price
on the expiration date of such rights or
warrants, which shall be determined by
multiplying such total number of shares
offered by the exercise price of such rights
or warrants and dividing the product so
obtained by such Market Price.
5. If (i) there occurs any reclassification
or change of Citicorp Stock, (ii) Citicorp,
or any surviving entity or subsequent
surviving entity of Citicorp (a "Citicorp
Successor") has been subject to a merger,
combination or consolidation and is not the
surviving entity, (iii) any statutory
exchange of securities of Citicorp or any
Citicorp Successor with another corporation
occurs (other than pursuant to clause (ii)
above), (iv) Citicorp is liquidated, (v)
Citicorp issues to all of its shareholders
equity securities of an issuer other than
Citicorp (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 Citicorp Stock (any
such event in clauses (i) through (vi) a
"Reorganization Event"), the method of
determining the Exchange Rate in respect of
the amount payable upon exchange at maturity
for each Note will be adjusted to provide
that each holder of Notes will receive at
maturity, in respect of the principal amount
of each Note, securities, cash or any other
assets distributed in any such Reorganization
Event, including, in the case of a Spin-off
Event, the share of Citicorp Stock with
respect to which the spun-off security was
issued (collectively, the "Exchange
Property") (or cash, in the case of clause
(b) below) in an amount equal to (a) if the
Transaction Value (as defined below) is
greater than or equal to the Threshold
Appreciation Price, 0.877193 multiplied by
the Transaction Value, (b) if the Transaction
Value is less than the Threshold Appreciation
Price but greater than the Initial Price, the
Initial Price and (c) if the Transaction
Value is less than or equal to the Initial
Price, the Transaction Value; provided that,
if the Exchange Property received in any such
Reorganization Event consists only of cash,
the maturity date of the Notes will be deemed
to be accelerated to the date on which such
cash is distributed to holders of Citicorp
Stock. If Exchange Property consists of more
than one type of property, holders of Notes
will receive at maturity a pro rata share of
each such type of Exchange Property.
"Transaction Value" means (i) for any cash
received in any such Reorganization Event,
the amount of cash received per share of
Citicorp Stock, as adjusted by the Exchange
Factor, (ii) for any property other than cash
or securities received in any such
Reorganization Event, the market value of
such Exchange Property received for each
share of Citicorp Stock at the date of the
receipt of such Exchange Property, as
adjusted by the Exchange Factor, as
determined by the Calculation Agent and (iii)
for any security received in any such
Reorganization Event, an amount equal to the
Market Price per share of such security at
the maturity of the Notes multiplied by the
quantity of such security received for each
share of Citicorp Stock, as adjusted by the
Exchange Factor.
For purposes of paragraph 5 above, in the
case of a consummated tender or exchange
offer for all Exchange Property of a
particular type, Exchange Property shall be
deemed to include the amount of cash or other
property paid by the offeror in the tender or
exchange offer with respect to such Exchange
Property (in an amount determined on the
basis of the rate of exchange in such tender
or exchange offer). In the event of a tender
or exchange offer with respect to Exchange
Property in which an offeree may elect to
receive cash or other property, Exchange
Property shall be deemed to include the kind
and amount of cash and other property received
by offerees who elect to receive cash.
No adjustments to the Exchange Factor or
Exchange Rate will be required unless such
adjustment would require a change of at least
0.1% in the Exchange Factor or Exchange Rate
then in effect. The Exchange Factor or
Exchange Rate resulting from any of the
adjustments specified above will be rounded
to the nearest one thousandth with five
ten-thousandths being rounded upward.
No adjustments to the Exchange Factor or
Exchange Rate will be made other than those
specified above. The adjustments specified
above do not cover all events that could
affect the Market Price of the Citicorp
Stock, including, without limitation, a
partial tender or exchange offer for the
Citicorp Stock.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to the Exchange
Factor or Exchange Rate and of any related
determinations and calculations with respect
to any distributions of stock, other
securities or other property or assets
(including cash) in connection with any
corporate event described in paragraph 5
above, and its determinations and
calculations with respect thereto shall be
conclusive.
The Calculation Agent will provide
information as to any adjustments to the
Exchange Factor or Exchange Rate upon written
request by any holder of the Notes.
Market Disruption Event:....... "Market Disruption Event" means, with respect
to Citicorp Stock:
(i) a suspension, absence or material
limitation of trading of Citicorp Stock on
the primary market for Citicorp 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
Citicorp Stock, if available, during the
one-half hour period preceding the close of
trading in the applicable market, in each
case as determined by the Calculation Agent
in its sole discretion; and
(ii) a determination by the Calculation
Agent in its sole discretion that the event
described in clause (i) above materially
interfered with the ability of the Company or
any of its affiliates to unwind all or a
material portion of the hedge with respect to
the Notes.
For purposes of determining whether a Market
Disruption Event has occurred: (1) a
limitation on the hours or number of days of
trading will not constitute a Market
Disruption Event if it results from an
announced change in the regular business
hours of the relevant exchange, (2) a
decision to permanently discontinue trading
in the relevant option contract will not
constitute a Market Disruption Event, (3)
limitations pursuant to New York Stock
Exchange Rule 80A (or any applicable rule or
regulation enacted or promulgated by the New
York Stock Exchange, any other self-regulatory
organization or the Securities and Exchange
Commission of similar scope as determined by
the Calculation Agent) on trading during
significant market fluctuations shall
constitute a Market Disruption Event, (4) a
suspension of trading in an options contract
on Citicorp 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 Citicorp Stock and (5) an "absence
of trading" on the primary securities market
on which options contracts related to
Citicorp Stock are traded will not include
any time when such securities market is
itself closed for trading under ordinary
circumstances.
Citicorp Stock; Public
Information.................. Citicorp 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 Citicorp 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
CITICORP STOCK OR OTHER SECURITIES OF
CITICORP. ALL DISCLOSURES CONTAINED IN THIS
PRICING SUPPLEMENT REGARDING CITICORP 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
CITICORP. NEITHER THE COMPANY NOR THE AGENT
MAKES ANY REPRESENTATION THAT SUCH PUBLICLY
AVAILABLE DOCUMENTS OR ANY OTHER PUBLICLY
AVAILABLE INFORMATION REGARDING CITICORP 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 CITICORP STOCK (AND THEREFORE THE
INITIAL PRICE, THE THRESHOLD APPRECIATION
PRICE AND THE EXCHANGE RATE APPLICABLE ABOVE
THE THRESHOLD APPRECIATION PRICE) HAVE BEEN
PUBLICLY DISCLOSED. SUBSEQUENT DISCLOSURE OF
ANY SUCH EVENTS OR THE DISCLOSURE OF OR
FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS
CONCERNING CITICORP COULD AFFECT THE VALUE
RECEIVED AT MATURITY WITH RESPECT TO THE
NOTES AND THEREFORE THE TRADING PRICES OF THE
NOTES.
NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES
MAKE ANY REPRESENTATION TO ANY PURCHASER OF
NOTES AS TO THE PERFORMANCE OF CITICORP STOCK.
The Company or its affiliates may presently
or from time to time engage in business with
Citicorp including extending loans to, or
making equity investments in, Citicorp or
providing advisory services to Citicorp,
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
Citicorp and, in addition, one or more
affiliates of the Company may publish
research reports with respect to Citicorp.
The Company does not make any representation
to any purchaser of Notes with respect to any
matters whatsoever relating to Citicorp. Any
prospective purchaser of a Note should
undertake an independent investigation of
Citicorp as in its judgment is appropriate to
make an informed decision with respect to an
investment in Citicorp Stock.
Historical Information......... The following table sets forth the high and
low Market Price during 1993, 1994, 1995, and
during 1996 through February 1, 1996. The
Market Price on February 1, 1996 was $74.00.
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 Citicorp Stock should not be taken as an
indication of future performance, and no
assurance can be given that the price of
Citicorp Stock will not decrease so that the
beneficial owners of the Notes will receive at
maturity shares of Citicorp Stock worth less
than the principal amount of the Notes. Nor
can assurance be given that the price of
Citicorp Stock will increase above the
Threshold Appreciation Price so that at
maturity the beneficial owners of the Notes
will receive an amount in excess of the
principal amount of the Notes.
<TABLE>
<CAPTION>
Dividends
Citicorp High Low Per Share
-------------------------- --------- --------- -----------
(CUSIP #17303410)
<S> <C> <C> <C>
1993:
First Quarter............. 29 5/8 20 7/8 -
Second Quarter............ 30 3/8 25 3/4 -
Third Quarter............. 38 1/8 30 1/8 -
Fourth Quarter............ 39 5/8 33 7/8 -
1994:
First Quarter............. 43 3/4 36 5/8 -
Second Quarter............ 41 7/8 36 3/4 .15
Third Quarter............. 45 40 .15
Fourth Quarter............ 47 3/4 40 .15
1995:
First Quarter............. 45 38 7/8 .30
Second Quarter............ 59 3/4 42 7/8 .30
Third Quarter............. 71 7/8 58 3/8 .30
Fourth Quarter............ 73 3/8 63 5/8 .30
1996:
First Quarter
Through February 1,
1996..................... 74 62 1/2 .45
</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 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
Citicorp Stock. Such hedging was carried out
in a manner designed to minimize any impact
on the price of Citicorp Stock. Purchase
activity could potentially have increased the
price of Citicorp Stock, and therefore
effectively increase the level to which
Citicorp Stock must rise before a holder of a
Note would receive at maturity an amount of
Citicorp Stock worth as much as or more than
the principal amount of the Notes. Although
the Company has no reason to believe that its
hedging activity had a material impact on the
price of Citicorp 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 Citicorp Stock, options
contracts on Citicorp Stock listed on major
securities markets or positions in any other
instruments that it may wish to use in
connection with such hedging.
United States Federal
Taxation:.................... The following discussion, to the extent it
contains legal conclusions, is based on the
opinion of Davis Polk & Wardwell, special tax
counsel to the Company. This discussion
supplements the "United States Federal
Taxation" section in the accompanying
Prospectus Supplement and should be read in
conjunction therewith. Any limitations on
disclosure and any defined terms contained
therein are equally applicable to the summary
below. Because of the absence of authority
on point, there are substantial uncertainties
regarding the U.S. federal income tax
consequences of an investment in the Notes.
The Company intends to treat the Notes as
indebtedness of the Company and such
treatment is binding on the Company and on all
holders except for holders who disclose on
their tax returns that they are treating the
Notes in a manner that is inconsistent with
the Company's treatment of the Notes. The
Company's treatment is not, however, binding
upon the Internal Revenue Service or the
courts, and there can be no assurance that it
will be accepted.
The Company presently intends to treat the
coupon interest on the Notes as reportable
interest. Under this approach, such interest
would be taxable to a United States Holder as
ordinary interest income at the time it
accrues or is received in accordance with the
United States Holder's method of accounting
for United States income tax purposes.
Although proposed Treasury regulations
addressing the treatment of contingent debt
instruments were issued on December 15, 1994,
such regulations, which generally would
require current accrual of contingent amounts
and would affect the character of gain on the
sale, exchange or retirement of debt, by
their terms apply only to debt instruments
issued on or after the 60th day after the
regulations are finalized.
Under general United States federal income
tax principles, upon maturity of a Note, a
United States Holder will recognize gain or
loss, if any, equal to the difference between
the amount realized at maturity and such
Holder's tax basis in the Note. Any loss
recognized upon 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
presently 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 maturity will be
treated as capital in character.
There can be no assurance that the ultimate
tax treatment of the Notes would not differ
significantly from the description herein.
Prospective investors are urged to consult
their tax advisors as to the possible
consequences of holding the Notes.
See also "United States Federal Taxation" in
the accompanying Prospectus Supplement.
