-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ANKRzWfOEm7h9K8yRTm+FyvWhuPI74Z1a7khKAiiD2Di/kkX/5ZQ0NOMenTtEjn4 FTdlE+rVLMNwsnoA1SdVJA== 0000950103-96-000827.txt : 19960429 0000950103-96-000827.hdr.sgml : 19960429 ACCESSION NUMBER: 0000950103-96-000827 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960426 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: 96551723 BUSINESS ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2127034000 424B3 1 PROSPECTUS Dated March 29, 1995 Pricing Supplement No. 70 to PROSPECTUS SUPPLEMENT Registration Statement No. 33-57833 Dated March 29, 1995 April 19, 1996 Rule 424(b)(3) $6,000,000 Morgan Stanley Group Inc. MEDIUM-TERM NOTES, SERIES C Senior Fixed Rate Notes 8% MANDATORILY EXCHANGEABLE NOTES DUE APRIL 30, 1998 Mandatorily Exchangeable For Shares of a Basket of Common Stocks The 8% Mandatorily Exchangeable Notes due April 30, 1998 (the "Notes") are Medium-Term Notes, Series C (Senior Fixed Rate Notes) of Morgan Stanley Group Inc. (the "Company"), as further described below and in the Prospectus Supplement under "Description of Notes - Fixed Rate Notes." The principal amount of each of the Notes offered hereby will be $1,000 (the "Price to Public"). The Notes will mature on April 30, 1998. Interest on the Notes, at the rate of 8% of the principal amount per annum, is payable quarterly in arrears on each January 30, April 30, July 30 and October 30, beginning July 30, 1996. The Price to Public represents the sum of the Original Basket Values (as defined below) of the following six constituent securities: (i) the common stock, par value $.01 per share, of Advanced Micro Devices, Inc., (ii) the common stock, par value $.01 per share, of Bay Networks, Inc., (iii) the common stock, without par value, of Informix Corporation, (iv) the common stock, without par value, of Nextel Communications, Inc., (v) the common stock, par value $.00067 per share, of Sun Microsystems Inc. and (vi) the American Depositary Shares of Telefonos de Mexico, S.A. de C.V. ("Telmex") each representing 20 shares of the Series L common stock, without par value, of Telmex (collectively, the "Basket Stocks" and "Basket Issuers", respectively, and each a "Basket Stock" and a "Basket Issuer"). The Original Basket Value of a Basket Stock is the product of the Initial Exchange Factor and the Initial Price of such Basket Stock, as set forth under "Composition of the Basket" in this Pricing Supplement. The Exchange Factors (as defined herein) will remain constant for the term of the Notes unless adjusted upon the occurrence of certain corporate events. See "Exchange Factors" and "Antidilution Adjustments" in this Pricing Supplement. At maturity (including as a result of acceleration or otherwise), each $1,000 principal amount of Notes will be mandatorily exchanged by the Company into a number of shares of each of the Basket Stocks (or, under certain circumstances, the cash equivalent value) to be determined as follows: (i) if the Maturity Price (as defined below) of such Basket Stock is less than or equal to the Cap Price (as defined herein) for such Basket Stock, the holder of a Note will receive a number of shares of such Basket Stock equal to the Exchange Factor for such Basket Stock and (ii) if the Maturity Price of such Basket Stock is greater than the Cap Price for such Basket Stock, such holder will receive a number of shares of such Basket Stock equal to the Exchange Factor for such Basket Stock multiplied by a fraction, the numerator of which is the Cap Price for such Basket Stock and the denominator of which is the Maturity Price for such Basket Stock. The Maturity Price for each Basket Stock will equal the product of the Market Price (as defined herein) of such Basket Stock and the Exchange Factor for such Basket Stock (as adjusted for certain corporate events). See "Exchange at Maturity," "Maturity Price" and "Exchange Factor" in this Pricing Supplement. The opportunity for equity appreciation afforded by an investment in the Notes is less than that afforded by an investment in the Basket Stocks because at maturity a holder may receive less than the number of shares of any Basket Stock originally represented in the Basket if the Maturity Price for such Basket Stock exceeds the Cap Price for such Stock. The aggregate value of the Basket Stocks received by a holder of the Notes upon exchange at maturity, determined as described herein, may be more or less than the principal amount of the Notes. None of the Basket Issuers is affiliated with the Company, is involved in this offering of Notes or will have any obligations with respect to the Notes. See "Historical Information" in this Pricing Supplement for information on the range of Market Prices for the Basket Stocks. The Company will cause the Market Prices of the Basket Stocks, any adjustments to the Exchange Factors and any other antidilution adjustments to be determined by the Calculation Agent for Chemical Bank, as Trustee under the Senior Debt Indenture. An investment in the Notes entails risks not associated with similar investments in a conventional debt security, as described under "Risk Factors" on PS-5 through PS-7 herein. PRICE 100% AND ACCRUED INTEREST Agent's Proceeds to Price to Public(1) Commissions(2) Company(1) -------------------- ---------------- ------------- Per Note.... 100% 0.25% 99.75% Total....... $6,000,000 $15,000 $5,985,000 _______________ (1) Plus accrued interest, if any, from April 26, 1996. (2) The Company has agreed to indemnify the Agent against certain liabilities, including liabilities under the Securities Act of 1933. MORGAN STANLEY & CO. Incorporated Capitalized terms not defined herein have the meanings given to such terms in the accompanying Prospectus Supplement. Principal Amount:................. $6,000,000 Maturity Date:.................... April 30, 1998 Interest Rate:.................... 8% per annum Interest Payment Dates:........... January 30, April 30, July 30 and October 30, beginning July 30, 1996 Specified Currency:............... U.S. Dollars Issue Price:...................... 100% Original Issue Date (Settlement Date):.......................... April 26, 1996 Book Entry Note or Certificated Note:............................ Book Entry Senior Note or Subordinated Note:. Senior Denominations:.................... $1,000 Trustee:.......................... Chemical Bank Exchange at Maturity:............. At maturity (including as a result of acceleration or otherwise), the principal amount of each Note will be mandatorily exchanged by the Company, upon delivery of such Note to the Trustee, into a number of shares of each of the Basket Stocks at the rate of exchange applicable to such Basket Stock to be determined as follows: (i) if the Maturity Price of such Basket Stock is less than or equal to the Cap Price of such Basket Stock, a number of shares of such Basket Stock equal to the Exchange Factor for such Basket Stock and (ii) if the Maturity Price of such Basket Stock is greater than the Cap Price of such Basket Stock, a number of shares of such Basket Stock equal to the Exchange Factor for such Basket Stock multiplied by a fraction the numerator of which is the Cap Price for such Basket Stock and the denominator of which is the Maturity Price of such Basket Stock, subject in each case to any applicable antidilution adjustments as set forth under "Antidilution Adjustments" below. Notwithstanding the above, if the value of the Basket Stocks to be so delivered, at the applicable Maturity Prices as of the second Trading Day immediately prior to maturity (the "Basket Maturity Value"), is greater than the Price to Public, the Company may, at its sole option, deliver, for each $1,000 principal amount of each Note, cash in an amount equal to the Basket Maturity Value in lieu of delivering the Basket Stocks. The Company shall, or shall cause the Calculation Agent to, (i) provide written notice to the Trustee on or prior to 10:30 a.m. on the Trading Day immediately prior to maturity of the Notes of the Company's determination to deliver Basket Stocks or cash equal to the Basket Maturity Value and (ii) deliver such shares of the Basket Stocks or cash to the Trustee for delivery to the holders. The Calculation Agent shall calculate the Exchange Factors for each Basket Stock and determine the rate of exchange applicable to each of the Basket Stocks at the maturity of the Notes. References to "Note" refer to each $1,000 principal amount of any Note. No Fractional Shares:............. Upon mandatory exchange of the Notes, the Company will pay cash in lieu of issuing fractional shares of any Basket Stock in an amount equal to the corresponding fractional Market Price of such fraction of such Basket Stock as determined by the Calculation Agent as of the maturity of the Notes. Composition of the Basket:....................... The "Basket" comprises the six Basket Stocks listed in the following table, which sets forth for each Basket Issuer, the ticker symbol, the Initial Price as of the date of this Pricing Supplement, the Per Share Cap Price, the Initial Exchange Factor as of the date of this Pricing Supplement, the Original Basket Value represented in the Basket and the Cap Price:
Original Basket Value Initial Represented Ticker Initial Per Share Exchange in Price to --------- Basket Issuer Price(3) Cap Price Factor(3) Public Cap Price - --------------------------------- -------- --------- --------- ------------------ ------------- Advanced Micro Devices, Inc. AMD(1) $17.375 $25.28 7.19425 $125.00 $181.875 Bay Networks, Inc. BAY(1)(4) $30.57 $44.48 8.17795 $250.00 $363.750 Informix Corporation IFMX(2) $23.93 $34.82 6.96476 $166.67 $242.505 Nextel Communications, Inc. CALL(2) $18.25 $26.55 6.84932 $125.00 $181.875 Sun Microsystems, Inc. SUNW(2) $48.75 $70.93 5.12821 $250.00 $363.750 Telefonos de Mexico, S.A. de C.V. TMX(1) $37.375 $54.38 2.22965 $ 83.33 $121.245 TOTAL $1,000.00 $1,455.000 - -------------- (1) Currently traded on The New York Stock Exchange ("NYSE"). (2) Currently traded on The Nasdaq National Market ("NASDAQ NMS"). (3) Initial Prices and Initial Exchange Factors were determined based on average market prices at the time the Notes were priced by the Company for initial offering to the public. (4) Previously traded on NASDAQ NMS through February 28, 1996 under the symbol "BNET."
Exchange Factor:............... The Exchange Factor for each of the Basket Stocks will be the Initial Exchange Factor as set forth in the table above, in each case, as subject to adjustment upon the occurrence of certain corporate events through and including the second Trading Day immediately prior to maturity. See "Antidilution Adjustments" below. Price to Public:............... $1,000 Maturity Price:................ Maturity Price of each Basket Stock means the product of (i) the Market Price of one share of such Basket Stock and (ii) the Exchange Factor for such Basket Stock, each determined as of the second Trading Day immediately prior to maturity. Cap Price:..................... The Cap Price for each Basket Stock is as set forth in the table above. Market Price:.................. If a Basket Stock (or any other security for which a Market Price must be determined) is listed on a national securities exchange, is a security of NASDAQ NMS or is included in the OTC Bulletin Board Service ("OTC Bulletin Board") operated by the National Association of Securities Dealers, Inc. (the "NASD"), the Market Price for one share of such Basket Stock (or one unit of any such other security) on any Trading Day means (i) the last reported sale price, regular way, on such day on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on which such Basket Stock is listed or admitted to trading or (ii) if not listed or admitted to trading on any such securities exchange or if such last reported sale price is not obtainable, the last reported sale price on the over-the-counter market as reported on the NASDAQ NMS or OTC Bulletin Board on such day. If the last reported sale price is not available for such Basket Stock pursuant to clause (i) or (ii) of the preceding sentence, the Market Price for such Basket Stock for any Trading Day shall be the mean, as determined by the Calculation Agent, of the bid prices for such Basket Stock obtained from as many dealers in such Basket Stock, but not exceeding three, as will make such bid prices available to the Calculation Agent. The term "NASDAQ NMS" shall include any successor to such system and the term "OTC Bulletin Board Service" shall include any successor service thereto. Trading Day:................... A day, as determined by the Calculation Agent, (a) on which trading is generally conducted (i) on the NYSE, the American Stock Exchange, Inc. ("AMEX"), and NASDAQ NMS, (ii) on the Chicago Mercantile Exchange, (iii) on the Chicago Board of Options Exchange and (iv) in the over-the-counter market for equity securities in the United States and (b) on which a Market Disruption Event (as defined below) has not occurred. Calculation Agent:............. Morgan Stanley & Co. Incorporated ("MS & Co.") Because the Calculation Agent is an affiliate of the Company, potential conflicts of interest may exist between the Calculation Agent and the holders of the Notes, including with respect to certain determinations and judgments that the Calculation Agent must make in making adjustments to the Exchange Factors or other antidilution adjustments or determining any Market Prices or whether a Market Disruption Event has occurred. See "Antidilution Adjustments" and "Market Disruption Event" below. MS & Co. is obligated to carry out its duties and functions as Calculation Agent in good faith and using its reasonable judgment. Risk Factors:.................. An investment in the Notes entails significant risks not associated with similar investments in a conventional debt security, including the following: The Notes combine features of equity and debt instruments. Accordingly, the terms of the Notes differ from those of ordinary debt securities in that the value of any Basket Stock that a holder of the Notes will receive upon mandatory exchange of the principal amount thereof at maturity is not fixed, but is based on the price of such Basket Stock and the applicable rate of exchange for such Basket Stock as determined at such price. Because the price of each Basket Stock is subject to market fluctuations, the value of any Basket Stock received by a holder of Notes upon exchange at maturity, determined as described herein, may be more or less than the principal amount of such Basket Stock originally represented in the Initial Price of the Notes. See "Composition of the Basket" above. In addition, the appreciation, if any, in the value of any Basket Stock may be reduced, or entirely off set, by the depreciation in any one or more of the other Basket Stocks. If the Basket Maturity Value of the Notes is less than the Initial Price, the amount receivable upon exchange will be less than the principal amount of the Notes, in which case an investment in the Notes may result in a loss. The opportunity for equity appreciation afforded by an investment in the Notes is less than that afforded by an investment in the Basket Stocks because at maturity a holder will receive less than the number of shares of a Basket Stock originally represented in the Basket if the Maturity Price for such Basket Stock exceeds the Cap Price for such Basket Stock. In addition, because the rate of exchange, the Exchange Factor and the Maturity Price are determined as of the second Trading Day prior to maturity of the Notes and because the price of any Basket Stock may fluctuate after such Trading Day and prior to its delivery at maturity, the value of any Basket Stock delivered at maturity may be less than the Cap Price for such Basket Stock even if the Maturity Price for such Basket Stock, as so determined, was greater than the Cap Price. The amount payable at maturity with respect to each Note will not under any circumstances exceed $1,455.00 per Note. Although the amount that holders of the Notes are entitled to receive at maturity is subject to adjustment for certain corporate events, such adjustments do not cover all events that could affect the Market Prices of the Basket Stocks, including, without limitation, the occurrence of a partial tender or exchange offer for any Basket Stock by the applicable Basket Issuer or any third party. Such other events may adversely affect the market value of the Notes. There can be no assurance as to how the Notes will trade in the secondary market or whether such market will be liquid or illiquid. Securities with characteristics similar to the Notes are novel securities, and there is currently no secondary market for the Notes. The market value for the Notes will be affected by a number of factors in addition to the creditworthiness of the Company and the value of the Basket Stock, including, but not limited to, the volatility of the Basket Stocks, the dividend rate on the Basket Stocks, market interest and yield rates and the time remaining to the maturity of the Notes. In addition, the value of the Basket Stocks depends on a number of interrelated factors, including economic, financial and political events, that can affect the capital markets generally and the market segments of which each Basket Stock is a part and over which the Company has no control. The market value of the Notes is expected to depend primarily on changes in the Market Prices of Stocks. The price at which a holder will be able to sell Notes prior to maturity may be at a discount, which could be substantial, from the principal amount thereof, if, at such time, the sum of the Market Prices of the Basket Stocks is below, equal to or not sufficiently above the Initial Price. The historical Market Prices of the Basket Stocks should not be taken as an indication of the future performance of the Basket Stocks during the term of any Note or of the Basket Maturity Value. The Notes will not be listed on any national securities exchange or accepted for quotation on a trading market and, as a result, pricing information for the Notes may be difficult to obtain. The Company is not affiliated with any of the Basket Issuers and, although the Company as of the date of this Pricing Supplement does not have any material non-public information concerning any of the Basket Issuers, corporate events of the Basket Issuer, including those described below in "Antidilution Adjustments," are beyond the Company's ability to control and are difficult to predict. None of the Basket Issuers is involved in the offering of the Notes or has any obligations with respect to the Notes, including any obligation to take the interests of the Company or of holders of Notes into consideration for any reason. None of the Basket Issuers will receive any of the proceeds of the offering of the Notes made hereby or is responsible for, or has participated in, the determination of the timing of, prices for or quantities of, the Notes offered hereby. Holders of the Notes will not be entitled to any rights with respect to any of the Basket Stocks (including, without limitation, voting rights, the rights to receive any dividends or other distributions in respect thereof and the right to tender or exchange any Basket Stock in any partial tender or exchange offer by any Basket Issuer or any third party) until such time as the Company shall deliver shares of the Basket Stocks to holders of the Notes at maturity. Fluctuations in the exchange rate between the Mexican peso and the U.S. dollar will affect the U.S. dollar equivalent of the Mexican peso price of Series L common stock, without par value, of Telmex (the "Telmex Series L Shares") on the Bolsa Mexicana de Valores, S.A. de C.V. (the "Mexican Stock Exchange") and, as a result, will likely affect the market price of the American Depositary Shares of Telmex each representing 20 Telmex Series L Shares (the "Telmex ADRs"), which may consequently affect the amount payable at maturity of the Notes. See "Historical Information -- Currency Exchange Rates and the Telmex ADRs" below. Because the Calculation Agent is an affiliate of the Company, potential conflicts of interest may exist between the Calculation Agent and the holders of the Notes, including with respect to certain adjustments to the Exchange Factors and other antidilution adjustments that may influence the determination of the amount of each of the Basket Stocks or other property receivable at the maturity of the Notes. See "Antidilution Adjustments" and "Market Disruption Event." It is suggested that prospective investors who consider purchasing the Notes should reach an investment decision only after carefully considering the suitability of the Notes in light of their particular circumstances. Investors should also consider the tax consequences of investing in the Notes. See "United States Federal Taxation" below. Antidilution Adjustments:...... The Exchange Factor for each Basket Stock (and, in the case of paragraph 5 below, the determination of the applicable rate of exchange) will be adjusted as follows: 1. If any Basket Stock is subject to a stock split or reverse stock split, then once such split has become effective, the Exchange Factor for such Basket Stock will be adjusted to equal the product of the prior Exchange Factor for such Basket Stock and the number of shares issued in such stock split or reverse stock split with respect to one share of such Basket Stock. 2. If any Basket Stock is subject to a stock dividend (issuance of additional shares of such Basket Stock) that is given ratably to all holders of shares of such Basket Stock, then once the dividend has become effective and such Basket Stock is trading ex-dividend, the Exchange Factor for such Basket Stock will be adjusted so that the new Exchange Factor for such Basket Stock shall equal the prior Exchange Factor plus the product of (i) the number of shares issued with respect to one share of such Basket Stock and (ii) the prior Exchange Factor. 3. There will be no adjustments to the Exchange Factors to reflect cash dividends or other distributions paid with respect to any Basket Stock other than distributions described in clause (v) of paragraph 5 below and Extraordinary Dividends as described below. A cash dividend or other distribution with respect to a Basket Stock will be deemed to be an "Extraordinary Dividend" if such dividend or other distribution exceeds the immediately preceding non-Extraordinary Dividend for such Basket Stock by an amount equal to at least 10% of the Market Price of such Basket Stock on the Trading Day preceding the ex-dividend date for the payment of such Extraordinary Dividend (the "ex-dividend date"). If an Extraordinary Dividend occurs with respect to a Basket Stock, the Exchange Factor with respect to such Basket Stock will be adjusted on the ex-dividend date with respect to such Extraordinary Dividend so that the new Exchange Factor will equal the product of (i) the then current Exchange Factor and (ii) a fraction, the numerator of which is the Market Price on the Trading Day preceding the ex-dividend date, and the denominator of which is the amount by which the Market Price on the Trading Day preceding the ex-dividend date exceeds the Extraordinary Dividend Amount. The "Extraordinary Dividend Amount" with respect to an Extraordinary Dividend for such Basket Stock will equal (i) in the case of cash dividends or other distributions that constitute quarterly dividends, the amount per share of such Extraordinary Dividend minus the amount per share of the immediately preceding non-Extraordinary Dividend for a Basket Stock or (ii) in the case of cash dividends or other distributions that do not constitute quarterly dividends, the amount per share of such Extraordinary Dividend. To the extent an Extraordinary Dividend is not paid in cash, the value of the non-cash component will be determined by the Calculation Agent, whose determination shall be conclusive. A distribution on any Basket Stock described in clause (v) of paragraph 5 below that also constitutes an Extraordinary Dividend shall only cause an adjustment to the Exchange Factor for such Basket Stock pursuant to clause (v) of paragraph 5. 4. If any Basket Issuer issues rights or warrants to all holders of its Basket Stock to subscribe for or purchase such Basket Stock at an exercise price per share less than the Market Price of such Basket Stock on (i) the date the exercise price of such rights or warrants is determined and (ii) the expiration date of such rights or warrants, and if the expiration date of such rights or warrants precedes the maturity of the Notes, then the Exchange Factor for such Basket Stock will be adjusted to equal the product of the prior Exchange Factor for such Basket Stock and a fraction, the numerator of which shall be the number of shares of such Basket Stock outstanding immediately prior to the issuance of such rights or warrants plus the number of additional shares of such Basket Stock offered for subscription or purchase pursuant to such rights or warrants and the denominator of which shall be the number of shares of such Basket Stock outstanding immediately prior to the issuance of such rights or warrants plus the number of additional shares of such Basket Stock which the aggregate offering price of the total number of shares of such Basket Stock so offered for subscription or purchase pursuant to such rights or warrants would purchase at the Market Price of such Basket Stock on the expiration date of such rights or warrants, which shall be determined by multiplying such total number of shares offered by the exercise price of such rights or warrants and dividing the product so obtained by such Market Price. 5. If (i) there occurs any reclassification of any Basket Stock, (ii) a Basket Issuer, or any surviving entity or subsequent surviving entity of such Basket Issuer (a "Successor Basket Issuer") has been subject to a merger, combination or consolidation and is not the surviving entity, (iii) any statutory exchange of securities of a Basket Issuer or any Successor Basket Issuer with another corporation occurs (other than pursuant to clause (ii) above), (iv) a Basket Issuer is liquidated, (v) a Basket Issuer issues to all of its shareholders equity securities of an issuer other than such Basket Issuer (other than in a transaction described in clauses (ii), (iii) or (iv) above) (a "Spin-off Event") or (vi) a tender or exchange offer is consummated for all the outstanding shares of any Basket Stock (any such event in clauses (i) through (vi) a "Reorganization Event"), the method of determining the rate of exchange applicable to the affected Basket Stock in respect of the amount payable with respect to such Basket Stock upon exchange at maturity for each Note will be adjusted to provide that each holder of Notes will receive at maturity, in respect of the amount due in relation to such Basket Stock per Note, securities, cash or any other assets distributed in any such Reorganization Event, including, in the case of a Spin-off Event, the share of the applicable Basket Stock with respect to which the spun-off security was issued (collectively, the "Exchange Property") (or, at the sole option of the Company, cash equal to the value of such Exchange Property if the Company exercises its right to deliver the Basket Maturity Value in cash) in an amount with a value equal to either (a) if the Transaction Value (as defined below) is less than or equal to the Cap Price for such Basket Stock, the Transaction Value or (b) if the Transaction Value with respect to such Basket Stock is greater than the Cap Price for such Basket Stock, the applicable Cap Price. If Exchange Property with respect to any Basket Stock consists of more than one type of property, holders of Notes will receive at maturity a pro rata share of each such type of such Exchange Property. "Transaction Value" means the sum of (i) for any cash received in any such Reorganization Event, the amount of cash received per share of the affected Basket Stock, as adjusted by the applicable Exchange Factor for such Basket Stock, (ii) for any property other than cash or securities received in any such Reorganization Event, the market value of such Exchange Property received for each share of the affected Basket Stock at the date of the receipt of such Exchange Property, as adjusted by the applicable Exchange Factor for such Basket Stock, as determined by the Calculation Agent and (iii) for any security received in any such Reorganization Event, an amount equal to the Market Price per share of such security as of the second Trading Day immediately prior to the maturity of the Notes multiplied by the quantity of such security received for each share of the affected Basket Stock, as adjusted by the applicable Exchange Factor for such Basket Stock. For purposes of paragraph 5 above, in the case of a consummated tender or exchange offer for all Exchange Property of a particular type distributed in connection with a Reorganization Event affecting a Basket Stock, Exchange Property shall be deemed to include the amount of cash or other property paid by the offeror in the tender or exchange offer with respect to such Exchange Property (in an amount determined on the basis of the rate of exchange in such tender or exchange offer). In the event of a tender or exchange offer with respect to Exchange Property distributed in connection with a Reorganization Event affecting a Basket Stock in which an offeree may elect to receive cash or other property, such Exchange Property shall be deemed to include the kind and amount of cash and other property received by offerees who elect to receive cash. With respect to the Telmex ADRs, comparable Antidilution Adjustments will be made with respect to corporate events affecting holders of Telmex Series L Shares and Telmex ADRs; provided that no adjustment will be made if the depository for the Telmex ADRs shall have adjusted the number of Telmex Series L Shares represented by such Telmex ADRs so that the price of such Telmex ADR would not be affected by such corporate event. In addition, in the event that Telmex and the depositary for the Telmex ADRs elect, in the absence of the events described in paragraphs 1 through 3 above, to change the number of Telmex Series L Shares represented by each Telmex ADR, then the Exchange Factor for the Telmex ADRs will be proportionally adjusted on the Trading Day after such change becomes effective. If any Antidilution Adjustment with respect to Telmex ADRs involves a calculation determined by reference to a payment in Mexican pesos, the U.S. dollar amount of such payment will be determined, if necessary, using the Free Market Rate (as described under "Historical Information -- Currency Exchange Rates and the Telmex ADRs" below) on the date applicable to such adjustment. No adjustments to any Exchange Factor will be required unless such adjustment would require a change of at least 0.1% in the applicable Exchange Factor then in effect. The Exchange Factor resulting from any of the adjustments specified above will be rounded to the nearest one thousandth with five ten-thousandths being rounded upward. No adjustments to any Exchange Factor will be made other than those specified above. The adjustments specified above do not cover all events that could affect the Market Price of the Basket Stocks, including, without limitation, a partial tender or exchange offer for any of the Basket Stocks. NOTWITHSTANDING THE FOREGOING, THE AMOUNT PAYABLE AT MATURITY WITH RESPECT TO EACH NOTE WILL NOT UNDER ANY CIRCUMSTANCES EXCEED $1,455.00 PER NOTE. The Calculation Agent shall be solely responsible for the determination and calculation of any adjustments to the Exchange Factors or the rates of exchange applicable to the Basket Stocks and of any related determinations and calculations with respect to any distributions of stock, other securities or other property or assets (including cash) in connection with any corporate event described in paragraph 5 above, and its determinations and calculations with respect thereto shall be conclusive. The Calculation Agent will provide information as to any adjustments to the Exchanges Factor or the rates of exchange applicable to the Basket Stocks upon written request by any holder of the Notes. Market Disruption Event:....... "Market Disruption Event" means: (i) a suspension, absence or material limitation of trading of any Basket Stock on the primary market for such Basket Stock for more than two hours of trading or during the one-half hour period preceding the close of trading in such market; or the suspension or material limitation on the primary market for trading in options contracts related to any Basket Stock, if available, during the one-half hour period preceding the close of trading in the applicable market, in each case as determined by the Calculation Agent in its sole discretion; and (ii) a determination by the Calculation Agent in its sole discretion that the event described in clause (i) above materially interfered with the ability of the Company or any of its affiliates to unwind all or a material portion of the hedge with respect to the Notes. For purposes of determining whether a Market Disruption Event has occurred: (1) a limitation on the hours or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the relevant exchange, (2) a decision to permanently discontinue trading in the relevant option contract will not constitute a Market Disruption Event, (3) limitations pursuant to New York Stock Exchange Rule 80A (or any applicable rule or regulation enacted or promulgated by the NYSE, any other self-regulatory organization, the Securities and Exchange Com- mission or any other exchange relevant to the determination of the Market Prices of the Basket Stocks as determined by the Calculation Agent) on trading during significant market fluctuations shall constitute a Market Disruption Event, (4) a suspension of trading in an options contract on any Basket Stock by the primary securities market trading in such options, if available, by reason of (x) a price change exceeding limits set by such securities exchange or market, (y) an imbalance of orders relating to such contracts or (z) a disparity in bid and ask quotes relating to such contracts will constitute a suspension or material limitation of trading in options contracts related to such Basket Stock and (5) "a suspension, absence or material limitation of trading" on the primary securities market on which options contracts related to any Basket Stock are traded will not include any time when such securities market is itself closed for trading under ordinary circumstances. Basket Stocks; Public Information All of the Basket Stocks are registered under the Exchange Act. Companies with securities registered under the Exchange Act are required to file periodically certain financial and other information specified by the Securities and Exchange Commission (the "Commission"). Information provided to or filed with the Commission is available at the offices of the Commission specified under "Available Information" in the accompanying Prospectus. In addition, information regarding the Basket Issuers may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. The Company makes no representation or warranty as to the accuracy or completeness of such reports. THIS PRICING SUPPLEMENT RELATES ONLY TO THE NOTES OFFERED HEREBY AND DOES NOT RELATE TO THE BASKET STOCKS OR OTHER SECURITIES OF ANY BASKET ISSUER OR ANY AFFILIATE THEREOF. ALL DISCLOSURES CONTAINED IN THIS PRICING SUPPLEMENT REGARDING THE BASKET ISSUERS ARE DERIVED FROM THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING PARAGRAPH. NEITHER THE COMPANY NOR THE AGENT HAS PARTICIPATED IN THE PREPARATION OF SUCH DOCUMENTS OR MADE ANY DUE DILIGENCE INQUIRY WITH RESPECT TO THE BASKET ISSUERS. NEITHER THE COMPANY NOR THE AGENT MAKES ANY REPRESENTATION THAT SUCH PUBLICLY AVAILABLE DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE INFORMATION REGARDING THE BASKET ISSUERS ARE ACCURATE OR COMPLETE. FURTHERMORE, THERE CAN BE NO ASSURANCE THAT ALL EVENTS OCCURRING PRIOR TO THE DATE HEREOF (INCLUDING EVENTS THAT WOULD AFFECT THE ACCURACY OR COMPLETENESS OF THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING PARAGRAPH) THAT WOULD AFFECT THE TRADING PRICE OF ANY BASKET STOCK (AND THEREFORE THE EXCHANGE FACTOR AND THE CAP PRICE APPLICABLE TO SUCH BASKET STOCK) HAVE BEEN PUBLICLY DISCLOSED. SUBSEQUENT DISCLOSURE OF ANY SUCH EVENTS OR THE DISCLOSURE OF OR FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS CONCERNING ANY BASKET ISSUER COULD AFFECT THE VALUE RECEIVED AT MATURITY WITH RESPECT TO THE NOTES AND THEREFORE THE TRADING PRICES OF THE NOTES. THE INCLUSION OF A STOCK IN THE BASKET IS NOT A RECOMMENDATION TO BUY OR SELL SUCH STOCK, AND NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES MAKES ANY REPRESENTATION TO ANY PURCHASER OF NOTES AS TO THE PERFORMANCE OF ANY BASKET STOCK. The Company or its affiliates may presently or from time to time engage in business with the Basket Issuers including extending loans to, or making equity investments in, the Basket Issuers or providing advisory services to the Basket Issuers, including merger and acquisition advisory services. In the course of such business, the Company or its affiliates may acquire non-public information with respect to the Basket Issuers and, in addition, one or more affiliates of the Company may publish research reports with respect to the Basket Issuers. The Company does not make any representation to any purchaser of Notes with respect to any matters whatsoever relating to the Basket Issuers. Any prospective purchaser of a Note should undertake an independent investigation of the Basket Issuers as in its judgment is appropriate to make an informed decision with respect to an investment in the Basket Stocks. Historical Information......... The following table sets forth the high and low Market Prices and Dividends per Share during 1993, 1994, 1995 and during 1996, through April 19, 1996. Beneath the name of each Basket Issuer is the CUSIP number for its Basket Stock. The Market Prices and Dividends per Share listed below were obtained from Bloomberg Financial Markets and the Company believes such information to be accurate. However, neither the Company nor the Agent makes any representation as to the accuracy of such information. The historical prices of the Basket Stocks should not be taken as an indication of future performance, and no assurance can be given that the price of the Basket Stocks will not decrease so that the beneficial owners of the Notes will receive at maturity shares of the Basket Stocks worth less than the principal amount of the Notes. Nor can assurance be given that the Basket Maturity Value will increase above the Price to Public so that at maturity the beneficial owners of the Notes will receive an amount in excess of the principal amount of the Notes. Dividends per AMD High Low Share* - -------------------------- ----------- --- ----------- (CUSIP #007903107) 1993: First Quarter............. $24 $17 3/4 Second Quarter............ 31 1/8 20 5/8 Third Quarter............. 32 3/8 23 Fourth Quarter............ 26 1/2 17 1/4 1994: First Quarter............. 31 1/4 17 5/8 Second Quarter............ 31 23 5/8 Third Quarter............. 30 24 5/8 Fourth Quarter............ 26 5/8 22 1/2 1995: First Quarter............. 35 1/8 25 1/8 Second Quarter............ 38 5/8 32 7/8 Third Quarter............. 36 1/4 29 1/8 Fourth Quarter............ 29 16 1/2 1996: First Quarter............. 21 16 1/2 Second Quarter through April 19, 1996**........ 18 1/8 16 7/8 - ------------- * Advanced Micro Devices, Inc. ("AMD") has not paid cash dividends on the common stock referenced on the cover of this Pricing Supplement (the "AMD Stock") to date. The Company makes no representation as to the amount of dividends, if any, that AMD will pay in the future. In any event, holders of the Notes will not be entitled to receive dividends, if any, that may be payable on AMD Stock. ** The Market Price of AMD Stock on April 19, 1996 was $17 1/4. Dividends per BAY* High Low Share** - ------------------------- ----------- --- ----------- (CUSIP #072510100) 1993: First Quarter............ $15 11/64 $11 Second Quarter........... 18 21/64 13 11/64 Third Quarter............ 18 27/64 13 3/4 Fourth Quarter........... 21 1/2 14 21/64 1994: First Quarter............ 29 5/64 21 27/64 Second Quarter........... 25 7/8 14 11/64 Third Quarter............ 16 53/64 12 51/64 Fourth Quarter........... 20 21/64 12 53/64 1995: First Quarter............ 25 3/4 18 45/64 Second Quarter........... 27 37/64 22 29/64 Third Quarter............ 37 21/64 27 11/64 Fourth Quarter........... 48 27/64 33 37/64 1996: First Quarter............ 47 7/8 28 3/8 Second Quarter through April 19, 1996***...... 30 3/4 26 7/8 - ----------------- * Historical prices have been adjusted for a 2 for 1 stock split of the common stock (the "BAY Stock") of Bay Networks, Inc. ("BAY") referenced on the cover of this Pricing Supplement, which became effective in the Second Quarter of 1994, and for a 3 for 2 stock split of BAY Stock, which became effective in the Fourth Quarter of 1995. ** BAY has not paid cash dividends on the BAY Stock to date. The Company makes no representation as to the amount of dividends, if any, that BAY will pay in the future. In any event, holders of the Notes will not be entitled to receive dividends, if any, that may be payable on BAY Stock. *** The Market Price of BAY Stock on April 19, 1996 was $30 3/4. Dividends per IFMX* High Low Share** - ------------------------- ------------ --- ----------- (CUSIP #456779107) 1993: First Quarter............ $10 1/8 $ 6 31/32 Second Quarter........... 13 1/2 16 15/16 Third Quarter............ 13 1/8 9 1/4 Fourth Quarter........... 11 7/8 8 5/16 1994: First Quarter............ 12 1/16 8 Second Quarter........... 11 1/16 7 1/4 Third Quarter............ 13 7/8 7 15/16 Fourth Quarter........... 16 1/16 11 7/8 1995: First Quarter............ 19 5/8 14 5/8 Second Quarter........... 25 15/16 17 1/16 Third Quarter............ 34 25 1/4 Fourth Quarter........... 33 24 1/8 1996: First Quarter............ 35 7/8 26 3/8 Second Quarter through April 19, 1996***...... 26 15/16 18 3/8 - ----------------- * Historical prices have been adjusted for a 2 for 1 stock split of the common stock (the "IFMX Stock") of Informix Corporation ("Informix") referenced on the cover of this Pricing Supplement, which became effective in the Second Quarter of 1993, and for a 2 for 1 stock split of the IMFX Stock, which became effective in the Second Quarter of 1995. ** Informix has not paid cash dividends on the IFMX Stock to date. The Company makes no representation as to the amount of dividends, if any, that Informix will pay in the future. In any event, holders of the Notes will not be entitled to receive dividends, if any, that may be payable on IFMX Stock. *** The Market Price of IFMX Stock on April 19, 1996 was $23 3/4. Dividends per CALL High Low Share* - -------------------------- ----------- ----------- (CUSIP #65332V103) 1993: First Quarter............. $27 $18 1/8 Second Quarter............ 27 7/8 22 3/8 Third Quarter............. 43 5/8 27 Fourth Quarter............ 54 3/8 33 1/2 1994: First Quarter............. 46 1/4 35 5/8 Second Quarter............ 40 7/8 30 Third Quarter............. 30 1/2 20 7/8 Fourth Quarter............ 22 1/2 13 1/2 1995: First Quarter............. 14 7/8 9 5/8 Second Quarter............ 16 3/4 13 1/4 Third Quarter............. 20 1/2 15 1/8 Fourth Quarter............ 17 5/8 13 7/8 1996: First Quarter............. 18 7/8 13 1/2 Second Quarter through April 19, 1996**........ 19 17 3/4 - --------------- * Nextel Communications Inc. ("Nextel") has not paid cash dividends on the common stock (the "CALL Stock") of Nextel referenced on the cover of this Pricing Supplement to date. The Company makes no representation as to the amount of dividends, if any, that Nextel will pay in the future. In any event, holders of the Notes will not be entitled to receive dividends, if any, that may be payable on CALL Stock. ** The Market Price of CALL Stock on April 19, 1996 was $18 1/4. Dividends per SUNW* High Low Share** - -------------------------- ---------- ----------- (CUSIP #866810104) 1993: First Quarter............. $20 1/8 $14 1/16 Second Quarter............ 16 3/16 12 9/16 Third Quarter............. 15 1/2 12 Fourth Quarter............ 14 3/4 10 5/8 1994: First Quarter............. 15 3/8 12 3/8 Second Quarter............ 12 11/16 9 3/16 Third Quarter............. 15 9 13/16 Fourth Quarter............ 18 5/8 13 25/32 1995: First Quarter............. 18 1/8 15 1/4 Second Quarter............ 25 1/4 17 7/16 Third Quarter............. 32 1/32 20 7/8 Fourth Quarter............ 49 7/8 27 3/8 1996: First Quarter............. 56 1/8 37 3/8 Second Quarter through April 19, 1996***....... 50 3/4 45 5/8 - ------------------ * Historical prices have been adjusted for a 2 for 1 stock split of the common stock ("SUNW Stock") of Sun Microsystems, Inc. ("SUN") which became effective in the Fourth Quarter of 1995. ** SUN has not paid cash dividends on SUNW Stock to date. The Company makes no representation as to the amount of dividends, if any, that SUN will pay in the future. In any event, holders of the Notes will not be entitled to receive dividends, if any, that may be payable on SUNW Stock. *** The Market Price of SUNW Stock on April 19, 1996 was $48 1/2.
Mexican Stock NYSE Exchange - --------------------------------------------------------------------------- ------------------------- Dividends per TMX High Low ADR* High Low - ---------------------------- ----------- --------------- ----------- --------- (Mexican New Pesos per Telmex (CUSIP #879403780) (U.S. dollars per Telmex ADR) Series L Share) 1993: First Quarter............... $58 3/4 $47 $ NP9.200 NP7.250 Second Quarter.............. 55 3/4 45 1/8 .9624 8.675 7.025 Third Quarter............... 54 3/8 46 -- 8.565 7.175 Fourth Quarter.............. 67 5/8 50 1/8 -- 10.45 7.76 1994: First Quarter............... 75 5/8 58 3/4 -- 11.75 9.94 Second Quarter.............. 63 1/8 51 1/4 .7402 10.54 8.64 Third Quarter............... 66 1/2 54 1/2 -- 11.18 9.26 Fourth Quarter.............. 63 1/2 37 3/4 .7257 10.84 8.44 1995: First Quarter............... 38 5/8 24 1/4 -- 10.38 8.02 Second Quarter.............. 31 1/2 27 1/4 .4803 9.90 8.54 Third Quarter............... 35 5/8 29 1/2 -- 10.82 9.16 Fourth Quarter.............. 34 5/8 25 3/4 .39 12.82 9.48 1996: First Quarter............... 36 29 -- 13.56 11.04 Second Quarter through April 19, 1996**.......... 37 3/8 32 1/2 -- 13.92 12.26
- ------------------ * The Company makes no representation as to the amount of dividends, if any, payable on Telmex ADRs in the future. In any event, holders of the Notes will not be entitled to receive dividends, if any, that may be payable on Telmex ADRs. ** The Market Price of Telmex ADRs on April 19, 1996 was $37 3/8; the closing price of the Telmex Series L Shares on April 19, 1996 was NP 13.92. The Market Prices for the first three Quarters of 1993 were derived from the publicly available documents referred to under "Basket Stocks; Public Information" above. Currency Exchange Rights and the Telmex ADRs Fluctuations in the exchange rate between the Mexican peso and the U.S. dollar will affect the U.S. dollar equivalent of the Mexican peso price of the Telmex Series L Shares on the Mexican Stock Exchange and, as a result, will likely affect the market price of the Telmex ADRs, which may consequently affect the amount payable at maturity of the Notes. According to publicly available documents referred to under "Basket Stocks; Public Information" above, since November 1991, Mexico has had a free market for foreign exchange. Prior to December 21, 1994, Banco de Mexico had kept the new peso-U.S. dollar exchange rate within a range prescribed by the Government through intervention in the foreign exchange market. From November 11, 1991 through October 20, 1992, the upper limit of the prescribed range, expressed in terms of new pesos per U.S. dollar, rose by NP.0.0002 pe day, equivalent to a maximum devaluation of the new peso with respect to the U.S. dollar of approximately 2.4% per year. From October 20, 1992 until December 20, 1994, the upper limit of the prescribed band increased by NP.0.0004 per day, equivalent to a maximum devaluation of the new peso of approximately 4.5% per year. Within the band, Banco de Mexico had generally intervened to reduce day-to-day fluctuations in the exchange rate. On December 20, 1994, the Government announced the broadening of the band within which the new peso was allowed to float by increasing the upper limit of the band by 15%. On December 22, 1994 the Government suspended intervention by Banco de Mexico and allowed the new peso to float freely against the U.S. dollar. Factors contributing to the decision included the size of Mexico's current account deficit, the level of Banco de Mexico's foreign exchange reserves, rising interest rates for other currencies, especially the U.S. dollar, and reduced confidence in the Mexican economy on the part of international investors due to political uncertainty, especially concerning events in the State of Chiapas and turmoil associated with the presidential elections. By December 31, 1994, the noon buying rate for cable transfers in new pesos in New York City for customs purposes as reported by the Federal Reserve Bank of New York was NP.5.000 to the U.S. dollar. The new peso has been highly volatile throughout 1995. There can be no assurance that the Government will maintain its current policies with regard to the new peso or that the new peso will not further depreciate or appreciate in the future. The following table sets forth, for the periods indicated, the period-end, average, high and low free rate for the purchase of U.S. dollars, expressed in new pesos per U.S. dollar. The Federal Reserve Bank of New York commenced publication on November 8, 1993 of a noon buying rate for cable transfers in new pesos in New York City for customs purposes. The rates have not been restated in constant currency units. All amounts are stated in new pesos. Free Market Rate(1) ----------------------------------------- Year ended Period December 31, End Average(2) High Low ------------- ------ --------- ---- --- 1993 (from November 8)............ NP3.108 NP3.127 NP3.240 NP3.102 1994.............................. 5.000 3.385 5.750 3.105 1995.............................. 7.740 6.447 8.050 5.270 First Quarter 1996................ 7.538 7.522 7.695 7.325 Second Quarter 1996 (to April 19). 7.405 7.493 7.573 7.405 _______________ (1) Source: Federal Reserve Bank of New York (2) Average of daily rates The information presented in this Pricing Supplement relating to the exchange rate of the U.S. dollar as compared to the Mexican peso is furnished as a matter of information only. The Mexican peso has been subject to large devaluations in the past and may be subject to significant fluctuations in the future. The fluctuations in the Mexican peso/U.S. dollar exchange rate that have occurred in the past are not necessarily indicative of fluctuations in that rate that may occur over the term of the Notes. Use of Proceeds and Hedging:... The net proceeds to be received by the Company from the sale of the Notes will be used for general corporate purposes and, in part, by the Company or one or more of its affiliates in connection with hedging the Company's obligations under the Notes. See also "Use of Proceeds" in the accompanying Prospectus. Prior to and on the date of this Pricing Supplement, the Company, through its subsidiaries, hedged its anticipated exposure in connection with the Notes by taking positions in the Basket Stocks. Such hedging was carried out in a manner designed to minimize any impact on the price of the Basket Stocks. Purchase activity could potentially have increased the price of the Basket Stocks, and therefore effectively have increased the level to which the Basket Stocks must rise before a holder of a Note would receive at maturity shares of Basket Stocks in an amount worth as much as or more than the principal amount of the Notes. The Company, through its subsidiaries, is likely to modify its hedge position on the Notes, and, in certain instances, on other exchangeable securities of the Company exchangeable for or otherwise linked to one or more of the Basket Stocks, throughout the life of the Notes by purchasing and selling the Basket Stocks, options contracts on any or all of the Basket Stocks listed on major securities markets or positions in any other instruments that it may wish to use in connection with such hedging. Although the Company has no reason to believe that its hedging activity had or will have a material impact on the price of the Basket Stocks, there can be no assurance that the Company did not, or in the future will not, affect such prices as a result of its hedging activities. United States Federal Taxation: The following discussion is based on the opinion of Davis Polk & Wardwell, special tax counsel to the Company. This discussion supplements the "United States Federal Taxation" section in the accompanying Prospectus Supplement and should be read in conjunction therewith. Any limitations on disclosure and any defined terms contained therein are equally applicable to the summary below. Because of the absence of authority on point, there are substantial uncertainties regarding the U.S. federal income tax consequences of an investment in the Notes. The Company intends to treat the Notes as indebtedness of the Company and such treatment is binding on the Company and on all holders except for holders who disclose on their tax returns that they are treating the Notes in a manner that is inconsistent with the Company's treatment of the Notes. The Company's treatment is not, however, binding upon the Internal Revenue Service or the courts, and there can be no assurance that it will be accepted. The Company presently intends to treat the coupon interest on the Notes as reportable interest. Under this approach, such interest would be taxable to a United States Holder as ordinary interest income at the time it accrues or is received in accordance with the United States Holder's method of accounting for United States income tax purposes. Although proposed Treasury regulations addressing the treatment of contingent debt instruments were issued on December 15, 1994, such regulations, which generally would require current accrual of contingent amounts and would affect the character of gain on the sale, exchange or retirement of debt, by their terms apply only to debt instruments issued on or after the 60th day after the regulations are finalized. Under general United States federal income tax principles, upon maturity of a Note, a United States Holder will recognize gain or loss, if any, equal to the difference between the amount realized at maturity and such Holder's tax basis in the Note. Any loss recognized at maturity will be capital loss. It is unclear under existing law whether gain recognized at maturity will be treated as ordinary or capital in character. Subject to further guidance from the Internal Revenue Service, however, the Company does not currently intend to treat such gain as reportable interest income. Prospective investors should consult with their tax advisors regarding the character of gain recognized at maturity. United States Holders that have acquired debt instruments similar to the Notes and have accounted for such debt instruments under proposed, but subsequently withdrawn, Treasury regulations may be deemed to have established a method of accounting that must be followed with respect to the Notes, unless consent of the Commissioner of the Internal Revenue Service is obtained to change such method. Absent such consent, such a Holder would be required to account for the Notes in the manner prescribed in such withdrawn Treasury regulations. The Internal Revenue Service, however, would not be required to accept such method as correct. Any gain or loss recognized on the sale or exchange of a Note prior to the establishment of the Maturity Price will be treated as capital in character. There can be no assurance that the ultimate tax treatment of the Notes would not differ significantly from the description herein. Prospective investors are urged to consult their tax advisors as to the possible consequences of holding the Notes. See also "United States Federal Taxation" in the accompanying Prospectus Supplement. -----END PRIVACY-ENHANCED MESSAGE-----