PROSPECTUS Dated January 24, 1997 Pricing Supplement No. 36 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-18005
Dated February 21, 1997 Dated April 23, 1997
Rule 424(b)(3)
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES E
EQUITY LINKED NOTES DUE MAY 19, 1998
----------------
The Equity Linked Notes due May 19, 1998 (the "Notes") are Medium-Term
Notes, Series E 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 Pound Sterling1,000,000 and will mature on May 19,
1998 (the "Maturity Date"). The Notes will bear interest at the rate of 1.00%
per annum payable on May 19, 1998 (the "Interest Payment Date"). The Notes
will not be redeemable by the Company in whole or in part prior to the
Maturity Date other than under the circumstances described under "Description
of Notes--Tax Redemption" in the accompanying Prospectus Supplement. The Notes
will be issued only in bearer form, which form is further described under
"Description of the Notes--Forms, Denominations, Exchange and Transfer" in the
accompanying Prospectus Supplement. Notes in bearer form will not be
exchangeable at any time for Notes in registered form.
At maturity, the holder of each Note will receive the par amount of such
Note ( Pound Sterling1,000,000) ("Par") plus accrued interest plus an amount
(the "Supplemental Redemption Amount") based on the percentage increase, if
any, in the value of the Nikkei Stock Average (the "Nikkei 225 Index")
published by Nihon Keizai Shimbun, Inc. ("NKS") excluding the value of a
basket of the stocks of fifteen financial services and real estate companies
(collectively, the "Basket Stocks" and individually a "Basket Stock") included
among the underlying stocks of the Nikkei 225 Index as of April 23, 1997, as
determined by the Calculation Agent and as further described in this Pricing
Supplement. The Supplemental Redemption Amount, if any, payable with respect
to each Note at maturity will equal the product of (i) the par amount of such
Note, (ii) 0.43 and (iii) the remainder of (a) a fraction, the numerator of
which is the Final Index Value less the Initial Index Value and the
denominator of which is the Initial Index Value, minus (b) 0.141 times a
fraction, the numerator of which is the Final Basket Value less the Initial
Basket Value and the denominator of which is the Initial Basket Value. The
Supplemental Redemption Amount cannot be less than zero.
The Initial Index Value has been set to equal Yen18,736.00. The Final
Index Value will equal the Index Closing Value (as defined herein) of the
Nikkei 225 Index on May 8, 1998 ( the "Determination Date"), except in the
case of certain Market Disruption Events (as defined herein). The Initial
Basket Value has been set to equal Yen87,391,800. The Final Basket Value will
equal the share-weighted value of the Basket Stocks (the "Basket Value") on
the Determination Date, except in the case of certain Market Disruption
Events. Unless the remainder in clause (iii) above is greater than zero, the
holder of each Note will be repaid the par amount of such Note plus accrued
interest, but will not receive any Supplemental Redemption Amount. For
information as to the calculation of the Supplemental Redemption Amount, the
composition of the Basket Stocks and certain tax consequences to beneficial
owners of the Notes, see "Supplemental Redemption Amount,""Basket Value,"
"Basket Stocks," "Determination Date" and "United States Federal Taxation" in
this Pricing Supplement.
The Company will cause the "Supplemental Redemption Amount," "Basket
Value," and composition of the "Basket Stocks" to be determined by Morgan
Stanley & Co. International Limited (the "Calculation Agent") for The 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-5 through PS-7 herein.
MORGAN STANLEY & CO.
International
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount.............. Pound Sterling3,000,000
Maturity Date................. May 19, 1998
Interest Rate................. 1.00%
Interest Payment Date......... May 19, 1998
Specified Currency............ U.K. Sterling (" Pound Sterling")
Issue Price................... 100%
Issue Date (Settlement Date).. May 8, 1997
Common Code................... 7627807
ISIN.......................... XS0076278075
Book Entry Note or
Certificated Note............. Book Entry
Senior Note or Subordinated
Note.......................... Senior
Minimum Denominations......... Pound Sterling1,000,000
Trustee....................... The 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 ( Pound Sterling1,000,000) ("Par") plus
accrued interest plus the Supplemental
Redemption Amount, if any.
Supplemental Redemption
Amount ....................... The Supplemental Redemption Amount, if any,
payable with respect to each Note at maturity
will be an amount equal to the product of (i)
the par amount of such Note, (ii) 0.43 and
(iii) the remainder of (a) a fraction, the
numerator of which is the Final Index Value
less the Initial Index Value and the
denominator of which is the Initial Index
Value, minus (b) 0.141 times a fraction, the
numerator of which is the Final Basket Value
less the Initial Basket Value and the
denominator of which is the Initial Basket
Value. The Supplemental Redemption Amount
will not be less than zero. The Supplemental
Redemption Amount is described by the
following formula:
( Final Index Value - Final Basket Value - )
( Initial Index Value Initial Basket Value )
Par x 0.43 x ---------------------- -0.141 x ----------------------
( Initial Index Value Initial Basket Value)
; provided that the Supplemental Redemption
Amount may not be less than zero.
The Company will cause the Calculation Agent
to provide written notice 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 Business Day preceding
the Maturity Date. See "Discontinuance of
the Nikkei 225 Index; Alteration of Method of
Calculation" below.
All percentages resulting from any
calculation with respect to the Notes will be
rounded to the nearest one hundred-thousandth
of a percentage point, with five
one-millionths of a percentage point rounded
upwards (e.g., 9.876545% (or .09876545) would
be rounded to 9.87655% (or .0987655)), and
all U.K. Sterling amounts used in or
resulting from such calculation will be
rounded to the nearest pence with one-half
pence being rounded upwards.
Index Closing Value........... The Index Closing Value, as of the
Determination Date, will equal the closing
value (afternoon session) of the Nikkei 225
Index or any Successor Index (as defined
below) at the regular official weekday close
of trading on such Determination Date. See
"Discontinuance of the Nikkei 225 Index;
Alteration of Method of Calculation" below.
References herein to the Nikkei 225 Index
will be deemed to include any Successor
Index, unless the context requires otherwise.
Initial Index Value........... The Initial Index Value is Yen18,736.00.
Final Index Value............. The Final Index Value will equal the Index
Closing Value on the Determination Date. See
"Determination Date" below.
Basket Value.................. The Basket Value on any date will be a value
equal to the sum of the products of the
Market Price and the Multiplier for each
Basket Stock, in each case determined as of
such date.
See "Basket Stocks" below.
Initial Basket Value ......... The Initial Basket Value has been set to
equal Yen87,391,800.
Final Basket Value............ The Final Basket Value will equal the Basket
Value on the Determination Date, as computed
by the Calculation Agent. See "Determination
Date" below.
Trading Day................... A day on which trading is generally conducted
(i) on the Tokyo Stock Exchange ("TSE"), (ii)
on the Osaka Stock Exchange ("OSE") and (iii)
on any exchange on which futures or options
contracts related to the Nikkei 225 Index are
traded, other than a day on which trading on
such exchanges is scheduled to close prior to
its regular weekday closing time, as
determined by the Calculation Agent.
Market Price.................. The Market Price for one share of a Basket
Stock (or one unit of any other security for
which a Market Price must be determined) on
any Trading Day means the last reported sale
price, regular way, on such day on the TSE.
If the last reported sale price is not
available for any Trading Day, the Market
Price for such Trading Day shall be the last
reported sale price on the immediately
preceding Trading Day for which a last
reported sale price is available.
Determination Date............ The Determination Date will be May 8, 1998
or, if such date is not a Trading Day, the
next succeeding Trading Day, unless there is a
Market Disruption Event on any such Trading
Day. If a Market Disruption Event occurs on
any such Trading Day, such Determination Date
will be the immediately succeeding Trading Day
during which no Market Disruption Event will
have occurred; provided that if a Market
Disruption Event has occurred on each of the
five Trading Days immediately succeeding May
8, 1998, then (i) such fifth succeeding
Trading Day will be deemed to be the relevant
Determination Date, notwithstanding the
occurrence of a Market Disruption Event on
such day and (ii) with respect to any such
fifth Trading Day on which a Market
Disruption Event occurs, the Calculation
Agent will determine the value of the Nikkei
225 Index and the Final Basket Value on such
fifth Trading Day in accordance with the
formula for and method of calculating the
Nikkei 225 Index last in effect prior to the
commencement of the Market Disruption Event,
using the closing price (or, if trading in the
relevant securities has been materially
suspended or materially limited, its good
faith estimate of the closing price that
would have prevailed but for such suspension
or limitation) on such Trading Day of each
security most recently comprising the Nikkei
225 Index and the Basket Stocks.
Market Disruption Event....... "Market Disruption Event" means, with respect
to the Nikkei 225 Index:
(i) a suspension, absence or material
limitation of trading of 20% or more of
the securities included in the Nikkei 225
Index on the primary market for such
securities 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, absence or
material limitation of trading on the
primary markets for trading in futures or
options contracts related to the Nikkei
225 Index 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 or market, (2)
a decision to permanently discontinue trading
in the relevant futures or options contract
will not constitute a Market Disruption
Event, (3) a suspension of trading in a
futures or options contract on the Nikkei 225
Index by the primary securities market
related to such contract by reason of (x) a
price change exceeding limits set by such
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 futures or
options contracts related to the Nikkei 225
Index and (4) a suspension, absence or
material limitation of trading on the primary
markets on which futures or options contracts
related to the Nikkei 225 Index are traded
will not include any time when such market is
itself closed for trading under ordinary
circumstances.
Calculation Agent............. Morgan Stanley & Co. International Limited
and its successors ("MSIL")
All determinations made by the Calculation
Agent will be at the sole discretion of the
Calculation Agent and will, in the absence of
manifest error, be conclusive for all
purposes and binding on the Company and
holders of the Notes.
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 determining the Final Index Value, the
Final Basket Value or whether a Market
Disruption Event has occurred. See
"Discontinuance of the Nikkei 225 Index;
Alteration of Method of Calculation" below
and "Market Disruption Event" above. MSIL 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 security,
including the following.
The interest rate applicable to the Notes is
less than that which would be payable on a
conventional fixed-rate debt security having
the same maturity date as the Notes and
issued by the Company on the 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 Notes will not be listed on any exchange.
There can be no assurance as to whether there
will be a secondary market in the Notes or if
there were to be such a secondary market,
whether such market would be liquid or
illiquid. It is expected that the secondary
market for the Notes will be affected by the
creditworthiness of the Company and by a
number of factors, including, but not limited
to, the volatility of the Nikkei 225 Index
and of the Basket Stocks, dividend rates on
the stocks underlying the Nikkei 225 Index
and on the Basket Stocks, the time remaining
to the Determination Dates and to the
maturity of the Notes and market interest
rates. In addition, the Final Index Value
depends on a number of interrelated factors,
including economic, financial and political
events, over which the Company has no
control. The value of the Notes prior to
maturity is expected to depend primarily on
market interest rates and the extent of the
appreciation, if any, of the Final Index
Value less the Final Basket Value over the
Initial Index Value less the Initial Basket
Value. If, however, the Notes are sold prior
to maturity at a time when the Nikkei 225
Index less the current Basket Value exceeds
the Initial Index Value less the Initial
Basket Value, the sale price may be at a
discount from the amount expected to be
payable to the holder if such excess were to
prevail on the Determination Date because of
the possible fluctuation of the Nikkei 225
Index and Basket Value between the time of
such sale and the Determination Date. The
price at which a holder will be able to sell
the Notes prior to maturity may be at a
discount, which could be substantial, from
the par amount thereof, if, at such time, the
Nikkei 225 Index less the current Basket
Value or the Final Index Value less the Final
Basket Value, if determined, is below, equal
to or not sufficiently above the Initial
Index Value less the Initial Basket Value.
The return of only the par amount of a Note
plus accrued interest at maturity will not
compensate the holder for any opportunity cost
implied by inflation and other factors
relating to the time value of money. The
percentage appreciation of the Nikkei 225
Index excluding the Basket Values based on
the formula for determining the Supplemental
Redemption Amount does not reflect the payment
of dividends on the stocks underlying the
Nikkei 225 Index. Therefore, the yield to
maturity based on the formula for determining
the Supplemental Redemption Amount will not
be the same yield as would be produced if the
stocks underlying the Nikkei 225 Index
(exclusive of the Basket Stocks) were
purchased and held for a similar period.
If the formula for determining the
Supplemental Redemption Amount results in a
remainder no greater than zero, the holders of
the Notes will receive only the par amount of
each Note plus accrued interest at maturity.
Because the Final Index Value and the Final
Basket Value will be based upon the closing
value of the Nikkei 225 Index and the Basket
Stocks on a specified day (the Determination
Date), a significant increase in the Nikkei
225 Index or decrease in the value of the
Basket Stocks subsequent to issuance may be
substantially or entirely offset by
subsequent decreases in the value of the
Nikkei 225 Index or increases in the value of
the Basket Stocks on or prior to the
Determination Date.
Neither the historical Nikkei 225 Index
values nor the historic Basket Values should
be taken as an indication of the future
performance of the Nikkei 225 Index or the
Basket Stocks during the term of the Notes.
While the trading prices of the Basket Stocks
and the other stocks underlying the Nikkei
225 Index will determine the value of the
Basket Stocks and the Nikkei 225 Index, it is
impossible to predict whether the value of
the Nikkei 225 Index or the Basket Stocks
will rise or fall. Trading prices of the
stocks underlying the Nikkei 225 Index
(including the Basket Stocks) will be
influenced by both the complex and
interrelated political, economic, financial
and other factors that can affect the capital
markets generally and the equity trading
markets on which the underlying stocks are
traded, and by various circumstances that can
influence the values of the underlying stocks
in a specific market segment or a particular
underlying stock.
The policies of NKS concerning additions,
deletions and substitutions of the stocks
underlying the Nikkei 225 Index and the
manner in which NKS takes account of certain
changes affecting such underlying stocks may
affect the value of the Nikkei 225 Index.
The policies of NKS with respect to the
calculation of the Nikkei 225 Index could
also affect the value of the Nikkei 225
Index. NKS may discontinue or suspend
calculation or dissemination of the Nikkei
225 Index. Any such actions could affect the
value of the Notes. See "Nikkei 225 Index"
and "Discontinuance of the Nikkei 225 Index;
Alteration of Method of Calculation" 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 determinations and
judgments that the Calculation Agent must make
in determining the Final Index Value, the
Final Basket Value or whether a Market
Disruption Event has occurred. See
"Discontinuance of the Nikkei 225 Index;
Alteration of Method of Calculation" below
and "Market Disruption Event" above. MSIL,
as a registered broker-dealer, is required to
maintain policies and procedures regarding
the handling and use of confidential
proprietary information, and such policies
and procedures will be in effect throughout
the term of the Notes to restrict the use of
information relating to the calculation of
the Final Index Value and the Final Basket
Value that the Calculation Agent may be
required to make prior to its dissemination.
MSIL is obligated to carry out its duties and
functions as Calculation Agent in good faith
and using its reasonable judgment.
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.
Nikkei 225 Index.............. Unless otherwise stated, all information
herein relating to the Nikkei 225 Index has
been derived from the Stock Market Indices
Data Book published by NKS and other
publicly-available sources. Such information
reflects the policies of NKS and are subject
to change at the discretion of NKS.
The Nikkei 225 Index is a stock index
calculated, published and disseminated by NKS
that measures the composite price performance
of selected Japanese stocks. The Nikkei 225
Index currently is based on 225 highly
capitalized underlying stocks (the "Underlying
Stocks") trading on the TSE representing a
broad cross-section of Japanese industries.
All 225 Underlying Stocks are stocks listed in
the First Section of the TSE. Stocks listed
in the First Section are among the most
actively traded stocks on the TSE.
The Nikkei 225 Index is a modified,
price-weighted index (i.e., an Underlying
Stock's weight in the index is based on its
price per share rather than the total market
capitalization of the issuer) which is
calculated by (i) multiplying the per share
price of each Underlying Stock by the
corresponding weighting factor for such
Underlying Stock (a "Weight Factor"), (ii)
calculating the sum of all these products and
(iii) dividing such sum by a divisor (the
"Divisor"). The Divisor, initially set in
1949 at 225, was 9.999 as of April 23, 1997
and is subject to periodic adjustments as set
forth below. Each Weight Factor is computed
by dividing Yen50 by the par value of the
relevant Underlying Stock, so that the share
price of each Underlying Stock when
multiplied by its Weight Factor corresponds
to a share price based on a uniform par value
of Yen50. The stock prices used in the
calculation of the Nikkei 225 Index are those
reported by a primary market for the
Underlying Stocks (currently the TSE). The
level of the Nikkei 225 Index is calculated
once per minute during TSE trading hours.
In order to maintain continuity in the Nikkei
225 Index in the event of certain changes due
to non-market factors affecting the
Underlying Stocks, such as the addition or
deletion of stocks, substitution of stocks,
stock splits or distributions of assets to
stockholders, the Divisor used in calculating
the Nikkei 225 Index is adjusted in a manner
designed to prevent any instantaneous change
or discontinuity in the level of the Nikkei
225 Index. Thereafter, the Divisor remains
at the new value until a further adjustment is
necessary as the result of another change.
As a result of such change affecting any
Underlying Stock, the Divisor is adjusted in
such a way that the sum of all share prices
immediately after such change multiplied by
the applicable Weight Factor and divided by
the new Divisor (i.e., the level of the
Nikkei 225 Index immediately after such
change) will equal the level of the Nikkei
225 Index immediately prior to the change.
An Underlying Stock may be deleted or added
by NKS. Any stock becoming ineligible for
listing in the First Section of the TSE due to
any of the following reasons will be deleted
from the Underlying Stocks: (i) bankruptcy
of the issuer, (ii) merger of the issuer
with, or acquisition of the issuer by,
another company, (iii) delisting of such
stock, (iv) transfer of such stock to the
"Seiri-Post" because of excess debt of the
issuer or because of any other reason or (v)
transfer of such stock to the Second Section.
In addition, Underlying Stocks with
relatively low liquidity, based on trading
volume and price fluctuation over the past
ten years, may be deleted by NKS subject to a
maximum of six such deletions by reason of low
liquidity per year. Upon deletion of a stock
from the Underlying Stocks, NKS will select a
suitable replacement for such deleted
Underlying Stock in accordance with certain
criteria. In an exceptional case, a newly
listed stock in the First Section of the TSE
that is recognized by NKS to be
representative of a market may be added to
the Underlying Stocks. In such a case, an
existing Underlying Stock with low trading
volume and not representative of a market
will be deleted by NKS.
Nikkei 225 Index Underlying
Stocks........................ A list of the issuers of the Underlying
Stocks constituting the Nikkei 225 Index is
available from the Nikkei Economic Electronic
Databank System and from the Stock Market
Indices Data Book published by NKS. NKS may
delete, add or substitute any stock
underlying the Nikkei 225 Index.
Discontinuance of the Nikkei
225 Index; Alteration of
Method of Calculation......... If NKS discontinues publication of the
Nikkei 225 Index and NKS or another entity
publishes a successor or substitute index
that the Calculation Agent determines, in its
sole discretion, to be comparable to the
discontinued Nikkei 225 Index (such index
being referred to herein as a "Successor
Index"), then the Index Closing Value will be
determined by reference to the value of such
Successor Index at the close of trading on
the TSE or the relevant exchange or market for
the Successor Index on the Determination Date.
Upon any selection by the Calculation Agent
of a Successor Index, the Calculation Agent
will cause written notice thereof to be
furnished to the Trustee, to the Company and
to the holders of the Notes within three
Trading Days of such selection.
If NKS discontinues publication of the Nikkei
225 Index prior to, and such discontinuance
is continuing on, the Determination Date and
the Calculation Agent determines that no
Successor Index is available at such time,
then on such Determination Date, the
Calculation Agent will determine the Index
Closing Value and the Basket Value that would
be used in computing the Supplemental
Redemption Amount on such Determination Date.
The Index Closing Value will be computed by
the Calculation Agent in accordance with the
formula for and method of calculating the
Nikkei 225 Index last in effect prior to such
discontinuance, using the closing price (or,
if trading in the relevant securities has been
materially suspended or materially limited,
its good faith estimate of the closing price
that would have prevailed but for such
suspension or limitation) on such
Determination Date of each security most
recently comprising the Nikkei 225 Index.
Notwithstanding these alternative
arrangements, discontinuance of the
publication of the Nikkei 225 Index may
adversely affect the value of the Notes.
If at any time the method of calculating the
Nikkei 225 Index or a Successor Index, or the
value thereof, is changed in a material
respect, or if the Nikkei 225 Index or a
Successor Index is in any other way modified
so that such index does not, in the opinion
of the Calculation Agent, fairly represent
the value of the Nikkei 225 Index or such
Successor Index had such changes or
modifications not been made, then, from and
after such time, the Calculation Agent will,
at the close of business in London on the
Determination Date, make such calculations
and adjustments as, in the good faith
judgment of the Calculation Agent, may be
necessary in order to arrive at a value of a
stock index comparable to the Nikkei 225
Index or such Successor Index, as the case
may be, as if such changes or modifications
had not been made, and calculate the
Supplemental Redemption Amount with reference
to the Nikkei 225 Index or such Successor
Index, as adjusted. Accordingly, if the
method of calculating the Nikkei 225 Index or
a Successor Index is modified so that the
value of such index is a fraction of what it
would have been if it had not been modified
(e.g., due to a split in the index), then the
Calculation Agent will adjust such index in
order to arrive at a value of the Nikkei 225
Index or such Successor Index as if it had
not been modified (e.g., as if such split had
not occurred).
Alternate Determination Date
in Case of an Event of
Default....................... In case an Event of Default with respect to
any Notes shall have occurred and be
continuing, the amount declared due and
payable upon any acceleration of the Notes
will be determined by the Calculation Agent
and will be equal to the par amount plus the
Supplemental Redemption Amount determined as
though the Determination Date scheduled to
occur on or after such date of acceleration
were the date of acceleration, plus any
accrued interest to, but not including, the
date of acceleration.
Public Information............ All disclosure contained in this Pricing
Supplement regarding the Nikkei 225 Index,
including, without limitation, its make-up,
method of calculation and changes in its
components, are derived from publicly
available information prepared by NKS.
NKS has no relationship to the Company or the
Notes; it does not sponsor, endorse,
authorize, sell or promote the Notes, and has
no obligation or liability in connection with
the administration, marketing or trading of
the Notes or with the calculation of the Index
Closing Value on the Determination Date or
the Supplemental Redemption Amount.
Basket Stocks................. The Basket Stocks are the stocks of fifteen
financial services and real estate companies
that were, as of April 23, 1997, included
among the Underlying Stocks of the Nikkei 225
Index. The Basket Stocks will be used to
calculate the Basket Value, subject to
adjustment as set forth below under
"Adjustments to the Multipliers and the
Basket." HOLDERS OF THE NOTES WILL NOT HAVE
ANY RIGHT TO RECEIVE THE BASKET STOCKS.
There can be no assurance that the Basket
Stocks will continue to be Underlying Stocks
of the Nikkei 225 Index at the maturity of
the Notes. The following table sets forth the
Basket Stocks, the initial Market Price of
each Basket Stock used to determine the
Initial Basket Value, the initial Multiplier
and the percentage of the Basket Value that
each Basket Stock represented, each as of
April 23, 1997:
Initial Weight in
Market Initial Initial Basket
Issuer of the Basket Stock Price Multiplier Value
-------------------------- ------- ---------- --------------
Sumitomo Bank, Ltd. Yen1530 5009 8.77%
Fuji Bank, Ltd. 1490 5003 8.53
Bank of Tokyo-Mitsubishi, Ltd. 2030 3577 8.31
Sanwa Bank, Ltd. 1400 5156 8.26
Mitsubishi Estate Co., Ltd. 1570 4514 8.11
Tokio Marine and Fire Insurance Co. Yen1220 5559 7.76%
Dai-Ichi Kangyo Bank, Ltd. 1390 4728 7.52
Nomura Securities Co., Ltd. 1410 4339 7.00
Daiwa House Industry Co., Ltd. 1470 3858 6.49
Mitsui Fudosan Co., Ltd. 1490 3760 6.41
Japan Securities Finance Co. 900 5739 5.91
Shimizu Corporation 597 7422 5.07
Kajima Corporation 559 7457 4.77
Chiyoda Corporation 444 7106 3.61
Obayashi Corp. 645 4715 3.48
The initial Multiplier relating to each
Basket Stock indicates the number of shares
of such Basket Stock, given the interday
market price of such Basket Stock, included
in the calculation of the Initial Basket
Value so that each Basket Stock represents
the percentage weight in the Initial Basket
Value indicated in the table above as of
April 23, 1997. The respective Multipliers
will remain constant for the term of the
Notes unless adjusted for certain corporate
events. See "Adjustments to the Multipliers
and the Basket."
Adjustments to the Multipliers
and the Basket................ The Multiplier with respect to any Basket
Stock and the Basket will be adjusted as
follows:
1. If a Basket Stock is subject to a stock
split or reverse stock split, then once such
split has become effective, the Multiplier
relating to such Basket Stock will be
adjusted to equal the product of the prior
Multiplier 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 a Basket Stock is subject to a stock
dividend (issuance of additional shares of
the 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
Multiplier relating to such Basket Stock will
be adjusted so that the new Multiplier shall
equal the prior Multiplier plus the product
of (i) the number of shares of such Basket
Stock issued with respect to one share of
such Basket Stock and (ii) the prior
Multiplier.
3. There will be no adjustments to the
Multipliers to reflect cash dividends or
other distributions paid with respect to a
Basket Stock other than distributions
described in paragraph 6 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 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 Multiplier with respect
to such Basket Stock will be adjusted on the
ex-dividend date with respect to such
Extraordinary Dividend so that the new
Multiplier will equal the product of (i) the
then current Multiplier, 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 a
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 such
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 a Basket
Stock described in paragraph 6 below that
also constitutes an Extraordinary Dividend
shall cause an adjustment to the Multiplier
for such Basket Stock pursuant only to
paragraph 6.
4. If the issuer of a Basket Stock is being
liquidated or is subject to a proceeding
under any applicable bankruptcy, insolvency
or other similar law, such Basket Stock will
continue to be included in the Basket so long
as a Market Price for such Basket Stock is
available. If a Market Price is no longer
available for a Basket Stock for whatever
reason, including the liquidation of the
issuer of such Basket Stock or the subjection
of the issuer of such Basket Stock to a
proceeding under any applicable bankruptcy,
insolvency or other similar law, then the
value of such Basket Stock will equal zero in
connection with the calculation of the Basket
Value and Final Basket Value for so long as
no Market Price is available, and no attempt
will be made to find a replacement stock or
increase the Basket Value to compensate for
the deletion of such Basket Stock.
5. If the issuer of a Basket Stock has been
subject to a merger or consolidation and is
not the surviving entity, then a value for
such Basket Stock will be determined at the
time such issuer is merged or consolidated
and will equal the last available Market
Price for such Basket Stock and that value
will be constant for the remaining term of
the Notes. At such time, no adjustment will
be made to the Multiplier of such Basket
Stock. For purposes of calculating that
portion of the Final Basket Value
attributable to the value of such Basket
Stock, the Market Value will be deemed to be
the Multiplier of such Basket Stock times
such last available Market Price.
6. If the issuer of a Basket Stock issues to
all of its shareholders equity securities of
an issuer other than the issuer of the Basket
Stock (other than in a transaction described
in paragraph 5 above), then such new equity
securities will be added to the Basket as a
new Basket Stock, unless the Market Price of
such new equity securities cannot be
determined using the procedures described
above under "Market Price." The Multiplier
for such new Basket Stock will equal the
product of the original Multiplier for the
Basket Stock for which the new Basket Stock
is being issued (the "Initial Basket Stock")
and the number of shares of the new Basket
Stock issued with respect to one share of the
Initial Basket Stock.
No adjustments of any Multiplier of a Basket
Stock will be required unless such adjustment
would require a change of at least 0.1% in
the Multiplier then in effect. The
Multiplier 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 Multiplier of any
Basket Stock or to the Basket will be made
other than those specified above. The
adjustments specified above do not cover all
events that could affect the Market Price of
a Basket Stock.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to any
Multiplier of any Basket Stock or to the
Basket and its determinations and
calculations with respect thereto shall be
conclusive.
The Calculation Agent will provide
information as to any adjustments to the
Multipliers upon written request by any
holder of the Notes.
Historical Data on the
Nikkei 225 Index.............. NKS first calculated and published the
Nikkei 225 Index in 1970. The following
table sets forth the high, the low and the
closing values of the Nikkei 225 Index for
each quarter in the period from January 1,
1992 through April 23, 1997, as published by
NKS. The historical performance of the
Nikkei 225 Index should not be taken as an
indication of future performance, and no
assurance can be given that such performance,
taken together with the performance of the
Basket Stocks, will cause the holders of the
Notes to receive any Supplemental Redemption
Amount under the formula for determining such
Supplemental Redemption Amount.
Nikkei 225
Values in Yen
---------------------------------------
High Low Close
--------- --------- ---------
1992:
1st Quarter 23,801.18 19,345.95 19,345.95
2nd Quarter 18,804.60 15,741.27 15,951.73
3rd Quarter 18,908.47 14,309.41 17,399.08
4th Quarter 17,690.67 15,993.48 16,924.95
1993:
1st Quarter 19,048.38 16,287.45 18,591.45
2nd Quarter 21,076.00 19,099.09 19,590.00
3rd Quarter 21,148.11 19,621.46 20,105.71
4th Quarter 20,500.25 16,078.71 17,417.24
1994:
1st Quarter 20,677.77 17,369.74 19,111.92
2nd Quarter 21,552.81 19,122.22 20,643.93
3rd Quarter 20,862.77 19,468.89 19,563.81
4th Quarter 20,148.83 18,666.93 19,723.06
1995:
1st Quarter 19,684.04 15,749.77 16,139.95
2nd Quarter 17,103.69 14,507.17 14,517.40
3rd Quarter 18,758.55 14,485.41 17,913.06
4th Quarter 20,011.76 17,337.19 19,868.15
1996:
1st Quarter 21,406.85 19,734.70 21,406.85
2nd Quarter 22,666.80 21,171.82 22,530.75
3rd Quarter 22,455.50 20,107.15 21,556.40
4th Quarter 21,612.30 19,161.77 19,361.35
1997:
1st Quarter 19,446.00 17,303.77 18,003.40
2nd Quarter
(through
April 23, 1997) 18,735.50 17,485.87 18,735.50
Source: Bloomberg
Hypothetical Basket Values.... The following table sets forth the
hypothetical closing Basket Values for each
quarter in the period from January 1, 1994
through April 23, 1997 as determined by the
Calculation Agent. The historical
performance of the closing Basket Values
should not be taken as an indication of
future performance, and no assurance can be
given that such performance, taken together
with the performance of the Nikkei 225 Index,
will cause the holders of the Notes to
receive any Supplemental Redemption Amount
under the formula for determining such
Supplemental Redemption Amount.
Basket Values
in Yen
1994:
1st Quarter................... 116,110,000
2nd Quarter................... 122,921,000
3rd Quarter................... 112,605,000
4th Quarter................... 113,719,000
1995:
1st Quarter................... 97,375,000
2nd Quarter................... 88,445,700
3rd Quarter................... 107,973,000
4th Quarter................... 120,512,000
1996:
1st Quarter................... 127,179,000
2nd Quarter................... 129,440,000
3rd Quarter................... 122,440,000
4th Quarter................... 99,016,700
1997:
1st Quarter................... 85,345,900
2nd Quarter (at April 23,
1997)......................... 86,507,000
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,
including hedging market risks associated
with the Supplemental Redemption Amount.
Such hedging may involve the purchase or sale
of exchange traded or over the counter
options on the Nikkei 225 Index or individual
stocks included in the Nikkei 225 Index,
futures contracts on the Nikkei 225 Index and
options on such futures contracts. Although
the Company has no reason to believe that its
hedging activity will have a material impact
on the price of such options, stocks, futures
contracts and options on futures contracts,
there can be no assurance that the Company
will not affect such prices 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 such
instruments and any other instruments that it
may wish to use in connection with such
hedging. See also "Use of Proceeds" in the
accompanying Prospectus.
United States Federal Taxation The investor should refer to the discussion
under "United States Federal Taxation" in the
accompanying Prospectus Supplement.
