-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, gC0R4N8HVS5NHf2bTG1Qjoeck729Wc+TKsGJ7hOxEgMu8kkN6wJJ9NCXVH3Uv7Vc mykV2rC4qzrT3xt9Xuh0bw== 0000950103-95-000238.txt : 19950619 0000950103-95-000238.hdr.sgml : 19950619 ACCESSION NUMBER: 0000950103-95-000238 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950616 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY GROUP INC /DE/ CENTRAL INDEX KEY: 0000789625 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 132838811 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-57833 FILM NUMBER: 95547662 BUSINESS ADDRESS: STREET 1: 1251 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2127034000 424B3 1 Amendment No. 1 dated June 13, 1995 to PROSPECTUS Dated March 29, 1995 Pricing Supplement No. 5 to PROSPECTUS SUPPLEMENT Registration Statement No. 33-57833 Dated March 29, 1995 (Subject to Completion, Issued June 8, 1995) June , 1995 Rule 424(b)(3) $ Morgan Stanley Group Inc. MEDIUM-TERM NOTES, SERIES C Senior Floating Rate Notes NIKKEI 225 CASH EXCHANGEABLE NOTES DUE SEPTEMBER 30, 1998 Interest payable March 30, June 30, September 30 and December 30 The Nikkei 225 Cash Exchangeable Notes due September 30, 1998 (the "Notes") are Medium-Term Notes, Series C (Senior Floating Rate Notes) of Morgan Stanley Group Inc. (the "Company"), as further described below and in the Prospectus Supplement under "Description of Notes - Floating Rate Notes". Interest will be computed on an actual/360 basis. The interest rate in effect from June , 1995 to and excluding June 30, 1995 is 1%. Thereafter the interest rate in effect for the Interest Period commencing on each Interest Reset Date will be the greater of (i) LIBOR (as defined herein and in the Prospectus Supplement) minus % and (ii) 0%. The Notes will be exchangeable on certain dates at the option of the holder but will not otherwise be redeemable by the Company in whole or in part prior to the Maturity Date. The Notes are issued in minimum denominations of $1,000 per Note and will mature at par on September 30, 1998. On any Exchange Date (as defined herein), the holder of a Note will have the right, upon completion and execution of a Notice of Exchange, to exchange the Note and receive Parity. Parity is an amount of cash in U.S. Dollars equal to the product of a) (the "Exchange Ratio") and b) the Final Nikkei Value divided by Yen per US $1.00. Due to this method of calculation, the determination of Parity will not be affected by fluctuations in the U.S. Dollar/Japanese Yen exchange rate. The Exchange Dates will be June 28, 1996, June 30, 1997, June 30, 1998 and September 29, 1998. The Final Nikkei Value will equal the arithmetic average closing values (afternoon session) of the Nikkei 225 Index on the two Nikkei Determination Days (as defined herein) immediately succeeding the Exchange Date, except that the Final Nikkei Value with respect to the September 29, 1998 Exchange Date (the "Final Exchange Date") will be the arithmetic average closing values (afternoon session) of the Nikkei 225 Index on certain scheduled Nikkei Determination Days preceding and excluding the Maturity Date. (See "Final Nikkei Value" herein.) In the event that Parity exceeds $1,000 per Note (Par) on the Final Exchange Date, holders of Notes will automatically be deemed to have exchanged the Notes for Parity on the Final Exchange Date. The Company will cause Parity to be determined by the Calculation Agent for Chemical Bank, as Trustee (the "Trustee") under the Senior Debt Indenture. An investment in the Notes entails risks not associated with similar investments in a conventional debt security, as described under "Risk Factors" on PS-4 and PS-5 herein. Application has been made to list the Notes on the New York Stock Exchange ("NYSE"). The NYSE symbol for the Notes is " ." It is not possible to predict whether the Notes will trade in the secondary market or if such market will be liquid or illiquid. ________________ PRICE 100% AND ACCRUED INTEREST, IF ANY ________________ Agent's Proceeds to Price to Public(1) Commissions(2) Company(1)(3) -------------------- ---------------- --------------- Per Note.... 100% % % Total....... $ $ $ _______________ (1) Plus accrued interest, if any, from June , 1995. (2) The Company has agreed to indemnify the Agent against certain liabilities, including liabilities under the Securities Act of 1933. (3) Before deduction of expenses payable by the Company estimated at $ . Capitalized terms not defined above have the meanings given to such terms in the accompanying Prospectus Supplement. MORGAN STANLEY & CO. Incorporated Principal Amount:.............. $ Maturity Date:................. September 30, 1998 Base Rate:..................... LIBOR LIBOR Currency:................ U.S. Dollars Index Maturity:................ 3 Months Spread (Plus or Minus):........ Minus % Reference Screen:.............. Telerate Page 3750 Interest Accrual Date:......... June , 1995 Initial Interest Rate:......... 1% per annum Initial Interest Reset Date:... June 30, 1995 Maximum Interest Rate:......... N/A Minimum Interest Rate:......... 0% Exchange Dates:................ June 28, 1996, June 30, 1997, June 30, 1998 and September 29, 1998, or if any such day is not a Business Day the immediately succeeding day that is a Business Day. On any Exchange Date, the holder of a Note will have the right, upon completion and execution of an irrevocable notice of exchange delivered to the Trustee on such Exchange Date (the "Notice of Exchange"), to exchange the Note and receive Parity. Parity is an amount of cash in U.S. Dollars equal to the product of a) (the "Exchange Ratio") and b) the Final Nikkei Value divided by Yen per US $1.00. In the event that Parity exceeds $1,000 per Note (Par) on the Final Exchange Date, holders of Notes will automatically be deemed to have exchanged the Notes for Parity on the Final Exchange Date. Parity will be greater than $1,000 per Note (Par) only if the Final Nikkei Value with respect to any Exchange Date is greater than (the "Exchange Level"). In the case of each Exchange Date other than the Final Exchange Date, a holder exercising such exchange right will receive payment of Parity on the third Business Day after the second Nikkei Determination Day immediately succeeding such Exchange Date. Holders deemed to have automatically exercised their exchange right on the Final Exchange Date will receive payment of Parity on the Maturity Date. The Company shall cause the Calculation Agent to provide written notice to the Trustee at its New York office of the Parity amount promptly at the opening of business New York time on the second Business Day after the second Nikkei Determination Day immediately succeeding each Exchange Date other than the Final Exchange Date (if any holder has exercised such exchange right on such Exchange Date) and promptly at the opening of business on the Business Day immediately preceding the Maturity Date. Any holder of a Note that exercises the right to exchange such Note and receive Parity on an Exchange Date prior to the Final Exchange Date may receive less than $1,000 per Note (Par). Furthermore, because the Final Nikkei Value will only be determined after such Exchange Date, a holder of a Note will not be able to determine, on such Exchange Date, the closing values of the Nikkei 225 that will be used in calculating the Final Nikkei Value and the Parity amount of such Note (and will thus be unable to determine with certainty such amounts at the time a Notice of Exchange is submitted). In addition, any downward movement in the level of the Nikkei 225 between the Exchange Date on which the holder of a Note submits a Notice of Exchange and the time at which the Final Nikkei Value with respect to such Exchange Date is determined (which period will, at a minimum, represent two Business Days on which the Tokyo Stock Exchange and the Osaka Securities Exchange are open for business and, if a Market Disruption Event exists, may be longer) will result in such holder receiving a lower Parity amount than anticipated by such holder (including an amount less than the par value) based on the level of the Nikkei 225 most recently reported prior to exercise. See "Final Nikkei Value" below. Exchange Ratio................. Interest Payment Dates:........ Each March 30, June 30, September 30 and December 30, commencing June 30, 1995, or if any such day is not a Business Day the immediately succeeding day that is a Business Day, unless (except in the case of September 30, 1998) such succeeding Business Day falls in the next calendar month in which case such Interest Payment Date shall be the first preceding day that is a Business Day. Interest Payment Period:....... Quarterly, except for the period commencing on the Interest Accrual Date and ending June 30, 1995. Interest Reset Period:......... The period from and including June 30, 1995 to but excluding the September 30, 1995 Interest Payment Date and each successive period beginning on, and including, an Interest Payment Date and ending on, but excluding, the next succeeding Interest Payment Date. Interest Reset Dates:.......... The first Interest Payment Date and each successive Interest Payment Date thereafter. Specified Currency:............ U.S. Dollars Issue Price:................... 100% Settlement Date (Original Issue Date):................... June , 1995 Book Entry Note or Certificated Note:............. Book Entry Note Senior Note or Subordinated Note:.......................... Senior Note Minimum Denominations:......... $1,000 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 determining the Final Nikkei Value with respect to any Exchange Date. See "Final Nikkei Value" below. MS & Co., 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 Nikkei Final Value prior to its dissemination. MS & Co. is obligated to carry out its duties and functions as Calculation Agent in good faith and using its reasonable judgment. Trustee:....................... Chemical Bank Final Nikkei Value:............ The arithmetic average of the closing values (afternoon session) of the Nikkei Stock Average (the "Nikkei 225") calculated and published by Nihon Keizai Shimbun, Inc. ("NKS") on the two Nikkei Determination Days immediately succeeding the Exchange Date, except that the Final Nikkei Value with respect to the September 29, 1998 Exchange Date (the "Final Exchange Date") will be the arithmetic average of the closing values (afternoon session) on the first two Nikkei Determination Days during the period of 15 Business Days preceding, and excluding, the Maturity Date on which, without giving effect to any Market Disruption Events, the Tokyo Stock Exchange ("TSE") and the Osaka Securities Exchange ("OSE") would be scheduled to be open for business; provided that if, due to Market Disruption Events, there is only one Nikkei Determination Day during such period, then the Final Nikkei Value with respect to the Final Exchange Date shall be the arithmetic average of the closing value (afternoon session) of the Nikkei 225 on such day and the Exchange Level; and provided further that if, due to Market Disruption Events, there are no Nikkei Determination Days during such period, then the Final Nikkei Value with respect to the Final Exchange Date shall be deemed to be the Exchange Level. See "Adjustments to Index," "Market Disruption Event" and "Discontinuance of the Index" below. Nikkei Determination Day:...... A Business Day which is also a day on which the TSE and the OSE are each open for business and on which a Market Disruption Event has not occurred. See "Market Disruption Event" below. NYSE Listing:.................. Although application has been made to list the Notes on the NYSE, it is not possible to predict whether the Notes will trade in the secondary market or if such market will be liquid or illiquid. To the extent any holders exercise their rights to exchange Notes and receive Parity, the number of Notes outstanding will decrease, which could result in a decrease in the liquidity of the Notes. Risk Factors................... An investment in the Notes entails significant risks not associated with similar investments in a conventional debt security. Because the interest rate applicable to the Notes includes a spread below the floating U.S. Dollar LIBOR rate, it will result in an interest rate that is less than that which would be payable on a conventional fixed-rate debt security if the Company were to issue such a security at the same time, including the possibility that no interest will be paid. 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 the Nikkei 225, including, but not limited to, the volatility of the Nikkei 225, the volatility of the U.S. Dollar/Japanese Yen exchange rate, the time remaining to any Exchange Date or the maturity of the Notes and market interest rates in the U.S. and Japan. In addition, the value of the Nikkei 225 depends on a number of interrelated factors, including economic, financial and political events, over which the Company has no control. The historical experience of the Nikkei 225 should not be taken as an indication of its future performance during the term of any Note. At any Exchange Date, including the Final Exchange Date, Parity will be greater than $1,000 per Note (Par) only if the Final Nikkei Value with respect to any Exchange Date is greater than the Exchange Level. See also "Use of Proceeds and Hedging" below. Furthermore, holders of the Notes should be aware that there is no principal protection with respect to exchanges made prior to the Final Exchange Date. Any holder of a Note that exercises the right to exchange such Note and receive Parity on an Exchange Date prior to the Final Exchange Date may receive less than $1,000 per Note (Par). Because the Final Nikkei Value with respect to an Exchange Date other than the Final Exchange Date will be determined after such Exchange Date, a holder of a Note will not be able to determine, on such Exchange Date, the closing values of the Nikkei 225 that will be used in calculating the Final Nikkei Value and the Parity amount of such Note (and will thus be unable to determine with certainty such amounts at the time a Notice of Exchange is submitted). In addition, any downward movement in the level of the Nikkei 225 between the Exchange Date on which the holder of a Note submits a Notice of Exchange and the time at which the Final Nikkei Value with respect to such Exchange Date is determined will result in such holder receiving a lower Parity amount than anticipated by such holder based on the level of the Nikkei 225 most recently reported prior to exercise. See "Final Nikkei Value" above. 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 value of the Nikkei 225 and to the Exchange Ratio that may influence the determination of the Final Nikkei Value and Parity. See "Adjustments to the Index," "Market Disruption Event" and "Discontinuance of the Index." NKS is under no obligation to continue the calculation or dissemination of the Nikkei 225. In the event that NKS discontinues or suspends calculation or publication of the Nikkei 225 or that the calculation of the Nikkei 225 is changed in a material respect, the Calculation Agent may calculate a stock average comparable to the Nikkei 225 and the Final Nikkei Value shall be calculated based on such comparable index at each Exchange Date. See "Adjustments to the Index," "Market Disruption Event" and "Discontinuance of the Index" below. The Company, the Calculation Agent and the Trustee disclaim all responsibility for the calculation or other maintenance of or any adjustments to the Nikkei 225. Upon the occurrence of certain events described under "Discontinuance of the Index", a Successor Index (which will also relate to the trading of equity securities in Japan) will be substituted for the Nikkei 225 as the basis of the calculation of the Final Nikkei Value and of Parity. In the event that a Successor Index is substituted for the Nikkei 225, no assurance can be given as to whether the Final Nikkei Value calculated on the basis of such Successor Index will be more than, less than or equal to the Final Nikkei Value or Parity amount which would have been payable had such substitution not occurred. Although this Pricing Supplement sets forth procedures for making adjustments to the calculation of the Final Nikkei Value under certain circumstances, a discontinuance of the publication of the Nikkei 225 or an adjustment to its method of calculation may adversely affect trading in the Notes. The Nikkei 225 does not reflect the payment of dividends on the stocks underlying it and therefore the yield to maturity of the Notes based on the Nikkei 225 will not produce the same yield as if such underlying stocks were purchased and held for a similar period. Furthermore, an investment in the underlying stocks would, unlike the calculation of Parity with respect to the Notes, be affected by fluctuations in the exchange rate between the Japanese Yen and the investment currency of the holder of the Notes. 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. The Nikkei 225 Index:.......... All information regarding the Nikkei 225 set forth herein, including, without limitation, its make-up, method of calculation and changes in its components, has been derived from information made publicly available by NKS. Although the Company believes the following description of the Nikkei 225 to be accurate as of the date of this Pricing Supplement, it disclaims all responsibility for any future changes NKS may make with respect to the Nikkei 225, including those related to its composition and calculation. Characteristics The Nikkei 225 is one of Japan's major stock market indices. Nihon Keizai Shimbun, Inc. has calculated and published the Nikkei 225 since 1970. The Nikkei 225 is an average price adjusted by the Dow method, which is regarded as being suitable for monitoring the level of the stock market and its changes. The constituents of the Nikkei 225 are 225 actively traded stocks listed on the 1st section of the TSE. Since October 1991, constituents of the Nikkei 225 are reviewed every year and relatively low liquidity stocks are replaced by high liquidity stocks. The Nikkei 225 therefore responds to changes in the stock market while maintaining continuity. Deletion and Addition Rules Since October 1, 1991, the constituents of the Nikkei 225 have been reviewed in accordance with the following rules once a year. Constituents of the Nikkei 225 The Nikkei 225 is calculated from the prices of 225 TSE 1st section stocks selected to represent the overall performance of the stock market. The intention is to maintain continuity while at the same time keeping it composed of stocks of higher market liquidity. High Liquidity Group Stocks with relatively high market liquidity are selected from the TSE 1st section listing and are categorized as the "high liquidity group". The market liquidity of each stock is measured by that stocks trading volume and its price fluctuation per trading volume for the preceding 10 years. The stocks ranking in the first half of the TSE 1st section as measured by these two parameters form the high liquidity group. Standard for Deletion Any constituent stock shall be deleted from the Nikkei 225 if it ceases to be traded on the TSE 1st section for any of the following reasons: (i) bankruptcy; (ii) merger or acquisition by another company; (iii) delisting or moving to "Seiri-Post" due to excess debt, etc.; (iv) moving to the 2nd section. Constituent stocks having relatively low market liquidity on the TSE 1st section (i.e. those not belonging to the high liquidity group) may be deleted. Such cases are limited to a maximum of 3 per cent of the total number of constituent stocks of the Nikkei 225 i.e., 6 of them, per year. Standard for Addition If one or more constituent stocks are deleted from the Nikkei 225, they are replaced by the corresponding number of non-constituent stocks which have been selected as replacement candidates in accordance with the following procedure. Selection of Priority Industries First, each industry's distribution in the high liquidity group is identified and the ideal number of Nikkei 225 constituents from each industry is determined in proportion to the number of stocks that industry has in the high liquidity group. Then, by reference to the ideal and actual numbers of the Nikkei 225 constituents from the relevant industry, its shortage ratio is calculated. The industry classification used here is as defined by Nikkei (36 sectors). Ideal number of constituents from the industry (A) = B x 225 --- C/2 Shortage Ratio = A-D x 100 --- D Where = B is the number of stocks the industry has in the then high liquidity group. C is the total number of stocks listed on the TSE 1st section. D is the actual number of Nikkei 225 constituents from the industry. Addition candidates are selected from industries having a larger shortage ratio ("priority industries"). Selection of Addition Candidates from Priority Industries Addition candidates are selected from each priority industry in order of market liquidity. Notwithstanding the above, stocks may (in principle) not be adopted as addition candidates if they at the time of selection: (i) have been listed on the TSE 1st section for less than 3 years; or (ii) have less than 60 million shares outstanding (the number of outstanding shares of stocks with par value other than 50 yen is calculated after converting to a 50-yen par value basis). Exception If a stock newly listed by the TSE on its 1st section as an exceptional case is deemed to be representative of the overall performance of the market, such stock may replace a Nikkei 225 constituent having lower market liquidity. Determination and announcement of the changes Deletion/addition stocks are determined and announced by NKS after taking counsel of scholars, experts, etc. Method of calculation The Nikkei 225 is an average price of 225 stocks traded on the TSE 1st section. However, it is different from a simple average in that the divisor is adjusted to maintain continuity. When there is a non-market change in the price of the constituents or constituents are changed, the divisor is adjusted, so that the index level remains unchanged by the event. Use of the Nikkei 225 Index.... The use of and reference to the Nikkei 225 in connection with the Notes has been consented to by NKS, the publisher of the Nikkei 225. All rights to the Nikkei 225 are owned by NKS. The Company, the Calculation Agent and the Trustee disclaim all responsibility for the calculation or other maintenance of or any adjustments to the Nikkei 225. In addition, 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 value of Parity or the Final Nikkei Value, as described above. The following table sets forth the high and low daily closing values of the Nikkei 225 for each quarter, in the period from January 1, 1990 through June 13, 1995, as published by NKS. The historical experience of the Nikkei 225 should not be taken as an indication of its future performance, and no assurance can be given as to the level of the Nikkei 225 as of the relevant Nikkei Determination Days corresponding to any Exchange Date. Daily Closing Values in Japanese Yen ----------------------------------------------------- End of High Low Quarter --------------- --------------- --------------- 1990: 1st Quarter...... 38,712.88 29,843.34 29,980.45 2nd Quarter...... 33,192.50 28,002.07 31,940.24 3rd Quarter...... 33,172.28 20,983.50 20,983.50 4th Quarter...... 25,352.63 20,221.86 23,848.71 1991: 1st Quarter...... 27,146.91 22,442.70 26,292.04 2nd Quarter...... 26,980.37 23,290.96 23,290.96 3rd Quarter...... 24,120.75 21,456.76 23,916.44 4th Quarter...... 25,222.28 21,502.90 22,983.77 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 through June 13, 1995...... 17,103.69 14,599.68 14,599.68 Nikkei 225 Index Underlying Stocks: A list of the issuers of the 225 stocks (each a "Stock") 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. Adjustments to the Index: If at any time the method of calculating the Nikkei 225, or the value thereof, is changed in a material respect, or if the Nikkei 225 is in any other way modified so that the Nikkei 225 does not, in the reasonable opinion of the Calculation Agent, fairly represent the value of the Nikkei 225 had such changes or modifications not been made (except for changes in the Stocks by NKS, as described above under "The Nikkei 225 Index"), then, from and after such time, the Calculation Agent shall, at the close of business in New York, New York, on each date that the closing value (afternoon session) of the Nikkei 225 is to be calculated to determine the Final Nikkei Value, make such adjustments as, in the good faith judgment of the Calculation Agent may be necessary in order to arrive at a calculation of a value of a stock index comparable to the Nikkei 225 as if such changes or modifications had not been made, and calculate such closing value with reference to the Nikkei 225, as adjusted. Accordingly, if the method of calculating the Nikkei 225 is modified so that the value of the Nikkei 225 is a fraction or a multiple of what it would have been if it had not been modified (e.g., due to a split in the Nikkei 225), then the Calculation Agent shall adjust the Nikkei 225 in order to arrive at a value of the Nikkei 225 as if it had not been modified (e.g., as if such split had not occurred). The Calculation Agent shall promptly give notice to the holders of the Notes of such adjusted value. Market Disruption Event: "Market Disruption Event" means the occurrence or existence of both of the following events on a Business Day that would otherwise be a Nikkei Determination Day as determined by the Calculation Agent: (i) a suspension or absence of trading on the TSE of 20% or more of the Stocks which then comprise the Nikkei 225 (or a Successor Index, as defined below) during the one-half hour period preceding the close of trading on the TSE; and (ii) the suspension or material limitation on the Singapore International Monetary Exchange Ltd. (the "SIMEX"), Osaka Securities Exchange (the "OSE") and the other major securities markets for trading in futures or options contracts related to the Nikkei 225 or a Successor Index (as defined below) taken as a whole, during the one-half hour period preceding the close of trading on the applicable exchange. 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) a suspension of trading in a futures or options contract on the Nikkei 225 by the TSE, the OSE or other major securities market 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 futures or options contracts related to the Nikkei 225 and (4) an "absence of trading" on the SIMEX, OSE or a major securities market on which futures or options contracts related to the Nikkei 225 are traded will not include any time when the SIMEX, OSE or such securities market, as the case may be, itself is closed for trading under ordinary circumstances. The Calculation Agent shall promptly give notice to the holders of the Notes, by publication in The Wall Street Journal (or another newspaper of general circulation), if a Market Disruption Event shall have occurred on any day that would otherwise have been a Nikkei Determination Day. Discontinuance of the Index: If the NKS discontinues publication of the Nikkei 225 and NKS or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, within two Nikkei Determination Days of such discontinuance, to be comparable to the Nikkei 225 (any such index referred to hereinafter as a "Successor Index"), then, upon the Calculation Agent's notification of such determination to the Trustee and the Company, the Calculation Agent will substitute the Successor Index as calculated by the NKS or such other entity for the Nikkei 225, as the case may be, and calculate the Final Nikkei Value as described above under "Exchange Dates" and "Final Nikkei Value". After such substitution, the Exchange Ratio would be modified as follows: New Exchange Ratio = Original Exchange Ratio x Most Recent Nikkei 225 Value ---------------------------- Successor Index Value where "Most Recent Nikkei 225 Value" and "Successor Index Value" are the closing levels (afternoon session) of the respective indexes on the day of such substitution; provided that if the Successor Index is first published on the Business Day immediately following the discontinuance of the Nikkei 225, the Successor Index Value shall be the closing level (afternoon session) on such first publication day and the "Most Recent Nikkei 225 Value" will be based on the final published value of the Nikkei 225. Upon any selection by the Calculation Agent of a Successor Index, the Company shall cause notice thereof and of any adjustment to the Exchange Ratio to be given to holders of the Notes. If NKS discontinues publication of the Nikkei 225 and a Successor Index is not selected, within two Nikkei Determination Days of such discontinuance, by the Calculation Agent (or such Successor Index is no longer published on any of the Nikkei Determination Days), the value to be substituted for the Nikkei 225 for any such Nikkei Determination Day used to calculate the Final Nikkei Value, with respect to all succeeding Exchange Dates, will be the final published closing level (afternoon session) of the Nikkei 225 (or such Successor Index) prior to such discontinuance. Any determination by the Calculation Agent that there is no successor or substitute index comparable to the Nikkei 225 will be final. If a Successor Index is selected, such Successor Index shall be substituted for the Nikkei 225 for all purposes, including for purposes of determining whether a Market Disruption Event exists. Notwithstanding these alternative arrangements, discontinuance of the publication of the Nikkei 225 may adversely affect trading in the Notes. Use of Proceeds and Hedging: The net proceeds to be received by the Company from the sale of the Notes will be used for general corporate purposes and, in part, by the Company or one or more of its affiliates in connection with hedging the Company's obligations under the Notes. See also "Use of Proceeds" in the accompanying Prospectus. On the Tokyo trading day on the date of this Pricing Supplement, the Company, through its subsidiaries, may hedge its anticipated exposure in connection with the Notes by taking positions in futures contracts listed on the OSE linked to the Nikkei 225, positions in the component stocks of the Nikkei 225 or positions in any other instruments that it may wish to use in connection with such hedging. In the event that the Company pursues such a hedging strategy, the price at which the Company is able to purchase such positions will be a factor in determining the pricing of the Notes. Purchase activity could potentially increase the prices of such futures contracts or the Stocks, and therefore effectively increase the level to which the Nikkei 225 must rise before a holder of a Note will receive more than the par value of the Note upon exercise of the right to exchange such Note for Parity. Although the Company has no reason to believe that its hedging activity had a material impact on the price of such futures contracts or the Stocks, 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, may modify its hedge position throughout the life of the Notes by purchasing and selling the securities and instruments listed above and other available securities and instruments, including, but not limited to, options contracts listed on the OSE linked to the Nikkei 225, futures or options contracts listed on the SIMEX linked to the Nikkei 225, over-the-counter options linked to the Nikkei 225 and/or, in the event of a substitution of a Successor Index for the Nikkei 225, futures or options contracts listed on the SIMEX or OSE linked to the Successor Index (as defined herein), listed options linked to any Successor Index, over-the-counter options linked to any Successor Index and the component stocks of any Successor Index. United States Federal Taxation:The following 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 summary below. United States Holders. The Notes will be treated as debt for United States federal 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 a Note, by their terms apply only to debt instruments issued on or after the 60th day after the date the regulations are finalized. Under general United States federal income tax principles, a United States Holder would be required to include any contingent amount paid in excess of the Note's principal amount upon exercise of the exchange option at the time it accrues or is received in accordance with the United States Holder's method of accounting for federal income tax purposes. With respect to an accrual basis taxpayer, such taxpayer would be required to include any such amount in income upon the exercise of the exchange option only at the time such amount becomes fixed and determinable, which is on the second Nikkei Determination Date after each Exchange Date, except with respect to the Final Exchange Date for which such amount becomes fixed and determinable on the last Business Day (in the relevant 15 Business Day period) used as a reference in the calculation of the Final Nikkei Value for such Note. It is unclear under existing law whether payments of contingent amounts in excess of the Notes' principal amount will be treated as ordinary or capital in character. If a United States Holder receives an amount that is less than the principal amount of the Notes upon exercising the exchange option prior to maturity, such loss is likely to be treated as capital in character. 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 regulation Section 1.1275-4(g) 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 Note in the manner prescribed in withdrawn Treasury regulation Section 1.1275-4(g). 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. Foreign Holders. As used herein, the term "Foreign Holder" means a beneficial owner of a Note that is for United States federal income tax purposes (i) a nonresident alien individual, (ii) a corporation, partnership or other entity that was not created or organized in or under the laws of the United States or any political subdivision thereof or (iii) a nonresident alien or foreign fiduciary or grantor of a trust or estate. A Foreign Holder will generally not be subject to United States federal income taxes, including withholding taxes, on payments of principal, premium, if any, or interest on a Note, or any gain arising from the sale or disposition of a Note provided that (i) any such income is not effectively connected with the conduct of a trade or business within the United States, (ii) such Foreign Holder is not a person who owns (directly or by attribution) ten percent or more of the total combined voting power of all classes of stock of the Company, (iii) the Foreign Holder (if an individual) is not present in the United States 183 days or more during the taxable year of the disposition, (iv) the Foreign Holder does not have a "tax home" (as defined in section 911(d)(3) of the Code) or an office or other fixed place of business in the United States and (v) the required certification of the non-United States status of the beneficial owner is provided to the Company or the Agent. The 31% "backup" withholding and information reporting requirements will generally not apply to payments by the Company or its agents of principal, premium, if any, and interest on a Note, and to proceeds of the sale or redemption of a Note before maturity, if the required certification of the holder's non-United States status is provided to the Company or the Agent. Foreign Holders of Notes should consult their tax advisors regarding the application of information reporting and backup withholding in their particular situations, the availability of an exemption therefrom, and the procedure for obtaining such an exemption, if available. Any amounts withheld from a payment to a Foreign Holder under the backup withholding rules will be allowed as a credit against such Holder's United States federal income tax liability and may entitle such Holder to a refund, provided that the required information is furnished to the United States Internal Revenue Service (the "Service"). A Note held by an individual who at the time of his death is not a citizen or domiciliary of the United States will not be subject to United States federal estate tax as a result of such individual's death, provided that (i) interest paid to such individual on such Note would not be effectively connected with the conduct by such individual of a trade or business within the United States and (ii) such individual is not a person who owns (directly or by attribution) ten percent or more of the total combined voting power of all classes of stock of the Company. -----END PRIVACY-ENHANCED MESSAGE-----