-----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, ILHz0UzPQXF6ZByeu+gsr+YpgrpRznLVPqNAoLxV4cv45Y6Zg3UMcO+M5UTfwc9m gL1aV8O0PYHFty9MDj41Pw== 0000950103-96-000900.txt : 19960524 0000950103-96-000900.hdr.sgml : 19960524 ACCESSION NUMBER: 0000950103-96-000900 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960523 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: 333-01655 FILM NUMBER: 96571764 BUSINESS ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2127034000 424B3 1 PROSPECTUS Dated May 1, 1996 Pricing Supplement No. 10 to PROSPECTUS SUPPLEMENT Registration Statement No. 333-01655 Dated May 1, 1996 Dated May 16, 1996 Rule 424(b)(3) $2,500,000 Morgan Stanley Group Inc. MEDIUM-TERM NOTES, SERIES C EQUITY LINKED NOTES DUE MAY 30, 2001 The Equity Linked Notes due May 30, 2001 (the "Notes") are Medium-Term Notes, Series C of Morgan Stanley Group Inc. (the "Company"), as further described herein and in the Prospectus Supplement under "Description of Notes - Fixed Rate Notes" and " - Notes Linked to Commodity Prices, Single Securities, Baskets of Securities or Indices." The Notes are being issued in minimum denominations of $1,000 and will mature on May 30, 2001 (the "Maturity Date"). There will be no periodic payments of interest on the Notes. The Notes will not be redeemable by the Company in whole or in part prior to the Maturity Date. At maturity, the holder of each Note will receive the par amount of such Note ($1,000) ("Par") plus an amount (the "Supplemental Redemption Amount") based on the percentage increase, if any, in the Final Average Index Value (as defined herein) of the S&P MidCap 400 Index (the "S&P MidCap 400 Index"), as calculated by Standard & Poor's ("S&P"), a Division of the McGraw-Hill Companies, Inc., over the Initial Index Value (as defined herein), as further described in this Pricing Supplement. The Supplemental Redemption Amount, if any, payable with respect to each Note at maturity will equal the product of (i) the par amount of such Note, (ii) 1.109 and (iii) a fraction, the numerator of which shall be the Final Average Index Value less the Initial Index Value and the denominator of which shall be the Initial Index Value. The Supplemental Redemption Amount cannot be less than zero. The Initial Index Value has been set to equal 241.96. The Final Average Index Value will equal the arithmetic average of the closing S&P MidCap 400 Index values on each of April 27, 2001, May 4, 2001, May 11, 2001, May 18, 2001 and May 25, 2001 (the "Determination Dates"), except in the case of certain Market Disruption Events (as defined herein). If the Final Average Index Value is equal to or less than the Initial Index Value, the holder of each Note will be repaid the par amount of such Note, but will not receive any Supplemental Redemption Amount. For information as to the calculation of the Supplemental Redemption Amount, and certain tax consequences to beneficial owners of the Notes, see "Supplemental Redemption Amount," "Final Average Index Value," "Determination Dates" and "United States Federal Taxation" in this Pricing Supplement. The Company will cause the "Supplemental Redemption Amount" to be determined by Morgan Stanley & Co. Incorporated (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% ________________ Price to Public Agent's Commissions(1) Proceeds to Company --------------- ---------------------- ------------------- Per Note. 100% .50% 99.50% Total.... $2,500,000 $12,500 $2,487,500 _______________ (1) The Company has agreed to indemnify the Agent against certain liabilities, including liabilities under the Securities Act of 1933. Capitalized terms not defined above have the meanings given to such terms in the accompanying Prospectus Supplement. MORGAN STANLEY & CO. Incorporated Principal Amount:.............. $2,500,000 Maturity Date:................. May 31, 2001 Interest Rate:................. 0.00% Specified Currency:............ U.S. Dollars Issue Price:................... 100% Settlement Date (Original Issue Date):......................... May 30, 1996 Book Entry Note or Certificated Note:.......................... Book Entry Senior Note or Subordinated Note:.......................... Senior Minimum Denominations:......... $1,000 Trustee:....................... Chemical Bank Maturity Redemption Amount:.... At maturity (including as a result of acceleration or otherwise), the holder of each Note will receive the par amount of such Note ($1,000) ("Par") plus the Supplemental Redemption Amount, if any. Supplemental Redemption Amount:........................ The Supplemental Redemption Amount, if any, payable with respect to each Note at maturity shall be an amount equal to the product of (i) the par amount of such Note, (ii) 1.109 and (iii) a fraction, the numerator of which shall be the Final Average Index Value less the Initial Index Value and the denominator of which shall be the Initial Index Value. The Supplemental Redemption Amount shall not be less than zero. The Supplemental Redemption Amount is described by the following formula: Par x 1.109 x (Final Average Index Value - Initial Index Value) ------------------------------------------------- Initial Index Value The Company shall cause the Calculation Agent to provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, of the Supplemental Redemption Amount, on or prior to 11:00 a.m. on the Business Day preceding the Maturity Date. See "Discontinuance of the S&P MidCap 400 Index; Alteration of Method of Calculation" below. All percentages resulting from any calculation with respect to the Notes will be rounded to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent with one-half cent being rounded upwards. Initial Index Value:........... The Initial Index Value is 241.96. Final Average Index Value:..... The Final Average Index Value shall be the arithmetic average of the Index Closing Values (as defined below) on each of the Determination Dates, as determined by the Calculation Agent. Index Closing Value:........... The Index Closing Value, as of any Determination Date, will equal the closing value of the S&P MidCap 400 Index or any Successor Index (as defined below) at the regular official weekday close of trading on such Determination Date. See "Discontinuance of the S&P MidCap 400 Index; Alteration of Method of Calculation." References herein to the S&P MidCap 400 Index shall be deemed to include any Successor Index, unless the context requires otherwise. Trading Day:................... A day on which trading is generally conducted (i) on the New York Stock Exchange ("NYSE"), the American Stock Exchange, Inc. ("AMEX") and the NASDAQ National Market ("NASDAQ NMS"), (ii) on the Chicago Mercantile Exchange and (iii) on the Chicago Board of Options Exchange, as determined by the Calculation Agent. Determination Dates:........... The Determination Dates shall be April 27, 2001, May 4, 2001, May 11, 2001, May 18, 2001 and May 25, 2001 or, if any such date is not a Trading Day, the next succeeding Trading Day, unless there is a Market Disruption Event on any such Trading Day. If a Market Disruption Event occurs on any such Trading Day, such Determination Date shall be the immediately succeeding Trading Day during which no Market Disruption Event shall have occurred; provided that if a Market Disruption Event has occurred on each of the five Trading Days immediately succeeding any of April 27, 2001, May 4, 2001, May 11, 2001 or May 18, 2001, as the case may be, then (i) such fifth succeeding Trading Day will be deemed to be the relevant Determination Date, notwithstanding the occurrence of a Market Disruption Event on such day and (ii) with respect to any such fifth Trading Day on which a Market Disruption Event occurs, the Calculation Agent will determine the value of the S&P MidCap 400 Index on such fifth Trading Day in accordance with the formula for and method of calculating the S&P MidCap 400 Index last in effect prior to the commencement of the Market Disruption Event, using the closing price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for such suspension or limitation) on such Trading Day of each security most recently comprising the S&P MidCap 400 Index. Notwithstanding the foregoing, no Determination Date shall be later than the second Business Day prior to the Maturity Date. If such second Business Day is a Determination Date but is not a Trading Day or if there is a Market Disruption Event on such second Business Day, the Calculation Agent will determine the value of the S&P MidCap 400 Index on such second Business Day in accordance with clause (ii) of the preceding paragraph. As a result of the foregoing, it is possible that the Index Closing Value determined on such second Business Day will be counted more than once in determining the Final Average Index Value. In case an Event of Default with respect to any Notes shall have occurred and be continuing, the amount declared due and payable upon any acceleration of the Notes will be determined by the Calculation Agent and will be equal to the par amount plus the Supplemental Redemption Amount determined as though each of the Determination Dates scheduled to occur on or after such date of acceleration were the date of acceleration. Market Disruption Event:....... "Market Disruption Event" means, with respect to the S&P MidCap 400 Index: (i) a suspension, absence or material limitation of trading of 80 or more of the securities included in the S&P MidCap 400 Index on the primary market for such securities for more than two hours of trading or during the one-half hour period preceding the close of trading in such market; or the suspension, absence or material limitation of trading on the primary market for trading in futures or options contracts related to the S&P MidCap 400 Index during the one-half hour period preceding the close of trading in the applicable market, in each case as determined by the Calculation Agent in its sole discretion; and (ii) a determination by the Calculation Agent in its sole discretion that the event described in clause (i) above materially interfered with the ability of the Company or any of its affiliates to unwind all or a material portion of the hedge with respect to the Notes. For purposes of determining whether a Market Disruption Event has occurred: (1) a limitation on the hours or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the relevant exchange or market, (2) a decision to permanently discontinue trading in the relevant futures or options contract will not constitute a Market Disruption Event, (3) 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 or the Securities and Exchange Commission of similar scope as determined by the Calculation Agent) on trading during significant market fluctuations shall constitute a Market Disruption Event, (4) a suspension of trading in a futures or options contract on the S&P MidCap 400 Index by the primary securities market related to such contract by reason of (x) a price change exceeding limits set by such exchange or market, (y) an imbalance of orders relating to such contracts or (z) a disparity in bid and ask quotes relating to such contracts will constitute a suspension or material limitation of trading in futures or options contracts related to the S&P MidCap 400 Index and (5) an "absence of trading" on the primary market on which futures or options contracts related to the S&P MidCap 400 Index are traded will not include any time when such market is itself closed for trading under ordinary circumstances. Calculation Agent:............. Morgan Stanley & Co. Incorporated ("MS & Co.") All determinations made by the Calculation Agent shall be at the sole discretion of the Calculation Agent and shall, in the absence of manifest error, be conclusive for all purposes and binding on the Company and holders of the Notes. Because the Calculation Agent is an affiliate of the Company, potential conflicts of interest may exist between the Calculation Agent and the holders of the Notes, including with respect to certain determinations and judgments that the Calculation Agent must make in determining the Final Average Index Value or whether a Market Disruption Event has occurred. See "Discontinuance of the S&P MidCap 400 Index; Alteration of Method of Calculation" below and "Market Disruption Event" above. 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 security, including the following. If the Final Average Index Value of the S&P MidCap 400 Index does not exceed the Initial Index Value, the holders of the Notes will receive only the par amount of each Note at maturity. Because the Final Average Index Value will be based upon an average of closing values of the S&P MidCap 400 Index on specified days (the Determination Dates) during five successive weeks, a significant increase in the S&P MidCap 400 Index as measured on the Determination Date in the final week, or in any earlier week, may be substantially or entirely offset by the values of the S&P MidCap 400 Index on the Determination Dates in the other weeks. The Notes do not bear any periodic payment of interest. Because the Supplemental Redemption Amount may be equal to zero, the effective yield to maturity may be less than that which would be payable on a conventional fixed-rate debt security having the same maturity date as the Notes and issued by the Company on the Original Issue Date. The return of only the par amount of a Note at maturity will not compensate the holder for any opportunity cost implied by inflation and other factors relating to the time value of money. The percentage appreciation of the S&P MidCap 400 Index based on the Final Average Index Value over the Initial Index Value does not reflect the payment of dividends on the stocks underlying the S&P MidCap 400 Index. Therefore, in addition to the considerations regarding averaging discussed above, the yield to maturity based on the Final Average Index Value relative to the Initial Index Value will not be the same yield as would be produced if such underlying stocks were purchased and held for a similar period. The Notes will not be listed on any exchange. There can be no assurance as to whether there will be a secondary market in the Notes or if there were to be such a secondary market, whether such market would be liquid or illiquid. It is expected that the secondary market for the Notes will be affected by the creditworthiness of the Company and by a number of factors, including, but not limited to, the volatility of the S&P MidCap 400 Index, dividend rates on the stocks underlying the S&P MidCap 400 Index, the time remaining to the Determination Dates and to the maturity of the Notes and market interest rates. In addition, the Final Average Index Value depends on a number of interrelated factors, including economic, financial and political events, over which the Company has no control. The value of the Notes prior to maturity is expected to depend primarily on market interest rates and the extent of the appreciation, if any, of the Final Average Index Value over the Initial Index Value. If, however, the Notes are sold prior to maturity at a time when the S&P MidCap 400 Index exceeds the Initial Index Value, the sale price may be at a discount from the amount expected to be payable to the holder if such excess were to prevail on each of the Determination Dates because of the possible fluctuation of the S&P MidCap 400 Index between the time of such sale and the Determination Dates. The price at which a holder will be able to sell the Notes prior to maturity may be at a discount, which could be substantial, from the par amount thereof, if, at such time, the S&P MidCap 400 Index or the Final Average Index Value, if determined, is below, equal to or not sufficiently above the Initial Index Value. The historical S&P MidCap 400 Index values should not be taken as an indication of the future performance of the S&P MidCap 400 Index during the term of the Notes. While the trading prices of the stocks underlying the S&P MidCap 400 Index will determine the value of the S&P MidCap 400 Index, it is impossible to predict whether the value of the S&P MidCap 400 Index will rise or fall. Trading prices of the stocks underlying the S&P MidCap 400 Index will be influenced by both the complex and interrelated political, economic, financial and other factors that can affect the capital markets generally and the equity trading markets on which the underlying stocks are traded, and by various circumstances that can influence the values of the underlying stocks in a specific market segment or a particular underlying stock. The policies of S&P concerning additions, deletions and substitutions of the stocks underlying the S&P MidCap 400 Index and the manner in which S&P takes account of certain changes affecting such underlying stocks may affect the value of the S&P MidCap 400 Index. The policies of S&P with respect to the calculation of the S&P MidCap 400 Index could also affect the value of the S&P MidCap 400 Index. S&P may discontinue or suspend calculation or dissemination of the S&P MidCap 400 Index. Any such actions could affect the value of the Notes. See "S&P MidCap 400 Index" and "Discontinuance of the S&P MidCap 400 Index; Alteration of Method of Calculation" below. Because the Calculation Agent is an affiliate of the Company, potential conflicts of interest may exist between the Calculation Agent and the holders of the Notes, including with respect to certain determinations and judgments that the Calculation Agent must make in determining the Final Average Index Value or whether a Market Disruption Event has occurred. See "Discontinuance of the S&P MidCap 400 Index; Alteration of Method of Calculation" below and "Market Disruption Event" above. 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 Final Average Index Value that the Calculation Agent may be required to make 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. If a bankruptcy proceeding is commenced in respect of the Company, the claim of a holder of a Note may, under Section 502(b)(2) of Title 11 of the United States Code, be limited to the par amount of such Note. It is suggested that prospective investors who consider purchasing the Notes should reach an investment decision only after carefully considering the suitability of the Notes in light of their particular circumstances. Investors should also consider the tax consequences of investing in the Notes. See "United States Federal Taxation" below. S&P MidCap 400 Index:.......... The S&P MidCap 400 Index is published by S&P and is intended to provide a benchmark for performance measurement of the medium capitalization segment of the U.S. equity markets. It tracks the stock price movement of 400 companies with mid-sized market capitalizations, primarily ranging from $300 million to $5.2 billion. The calculation of the value of the S&P MidCap 400 Index (discussed below in further detail) is based on the relative value of the aggregate Market Value (as defined below) of the common stocks of 400 companies (the "Component Stocks") as of a particular time as compared to the aggregate average Market Value of the common stocks of 400 similar companies during the base period of December 31, 1990. The "Market Value" of any Component Stock is the product of the market price per share and the number of the then outstanding shares of such Component Stock. S&P chooses companies for inclusion in the S&P MidCap 400 Index with an aim of achieving a distribution by broad industry groupings that approximates the distribution of these groupings in the common stock population of the medium capitalization segment of the U.S. equity market. S&P may from time to time, in its sole discretion, add companies to, or delete companies from, the S&P MidCap 400 Index to achieve the objectives stated above. Relevant criteria employed by S&P include the viability of the particular company, the extent to which that company represents the industry group to which it is assigned, the extent to which the company's common stock is widely-held and the Market Value and trading activity of the common stock of that company. The S&P MidCap 400 Index is calculated using a base-weighted aggregate methodology: the level of the Index reflects the total Market Value of all 400 Component Stocks relative to the S&P MidCap 400 Index's base period of December 31, 1990 (the "Base Period"). An indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over time. The actual total Market Value of the Component Stocks during the Base Period has been set equal to an indexed value of 100. This is often indicated by the notation December 31, 1990=100. In practice, the daily calculation of the S&P MidCap 400 Index is computed by dividing the total Market Value of the Component Stocks by a number called the Index Divisor. By itself, the Index Divisor is an arbitrary number. However, in the context of the calculation of the S&P MidCap 400 Index, it is the only link to the original base period value of the Index. The Index Divisor keeps the Index comparable over time and is the manipulation point for all adjustments to the S&P MidCap 400 Index ("Index Maintenance"). Index Maintenance includes monitoring and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to company restructurings or spinoffs. To prevent the value of the Index from changing due to corporate actions, all corporate actions which affect the total Market Value of the Index require an Index Divisor adjustment. By adjusting the Index Divisor for the change in total Market Value, the value of the S&P MidCap 400 Index remains constant. This helps maintain the value of the Index as an accurate barometer of stock market performance and ensures that the movement of the Index does not reflect the corporate actions of individual companies in the Index. All Index Divisor adjustments are made after the close of trading and after the calculation of the closing value of the S&P MidCap 400 Index. Some corporate actions, such as stock splits and stock dividends, require simple changes in the common shares outstanding and the stock prices of the companies in the Index and do not require Index Divisor adjustments. The table below summarizes the types of S&P MidCap 400 Index maintenance adjustments and indicates whether or not an Index Divisor adjustment is required. Divisor Type of Corporate Adjustment Action Adjustment Factor Required - ----------------- ------------------ ---------- Stock split Shares Outstanding multiplied by 2; No (i.e. 2x1) Stock Price divided by 2 Share issuance Shares Outstanding plus newly issued Shares Yes (i.e. Change > 5%) Share repurchase Shares Outstanding minus Repurchased Shares Yes (i.e. Change > 5%) Special cash dividends Share Price minus Special Dividend Yes Company change Add new company Market Value minus old Yes company Market Value Rights offering Price of parent company minus Yes Price of Rights --------------- Right Ratio Spin-Offs Price of parent company minus Yes Price of Spin-Off Co. --------------------- Share Exchange Ratio
Stock splits and stock dividends do not affect the Index Divisor of the S&P MidCap 400 Index, because following a split or dividend both the stock price and number of shares outstanding are adjusted by S&P so that there is no change in the Market Value of the Component Stock. All stock split and dividend adjustments are made after the close of trading on the day before the ex-date. Each of the corporate events exemplified in the table requiring an adjustment to the Index Divisor has the effect of altering the Market Value of the Component Stock and consequently of altering the aggregate Market Value of the Component Stocks (the "Post-Event Aggregate Market Value"). In order that the level of the Index (the "Pre-Event Index Value") not be affected by the altered Market Value (whether increase or decrease) of the affected Component Stock, a new Index Divisor ("New Divisor") is derived as follows: Post-Event Aggregate Market Value = Pre-Event Index Value --------------------------------- New Divisor New Divisor = Post-Event Aggregate Market Value --------------------------------- Pre-Event Index Value A large part of the S&P MidCap 400 Index maintenance process involves tracking the changes in the number of shares outstanding of each of the S&P MidCap 400 Index companies. Four times a year, on a Friday shortly prior to the end of each calendar quarter, the share totals of companies in the Index are updated as required by any changes in the number of shares outstanding. After the totals are updated, the Index Divisor is adjusted to compensate for the net change in the total Market Value of the Index. In addition, any changes over 5% in the current common shares outstanding for the S&P MidCap 400 Index companies are carefully reviewed on a weekly basis, and when appropriate, an immediate adjustment is made to the Index Divisor. Hypothetical Supplemental Redemption Amount:............. The following table illustrates, for a range of hypothetical Final Average Index Values, the Supplemental Redemption Amount for each $1,000 par amount of Notes. Hypothetical Hypothetical Final Average Supplemental Redemption Index Value Amount - --------------------------------- ------------------------- 150.00 $ 0 175.00 $ 0 200.00 $ 0 225.00 $ 0 241.96 $ 0 250.00 $ 36.85 275.00 $151.44 300.00 $266.02 325.00 $380.61 350.00 $495.19 The above figures are for purposes of illustration only. The actual Supplemental Redemption Amount, if any, will depend entirely on the actual Final Average Index Value. See "Final Average Index Value" and "Supplemental Redemption Amount" above. Discontinuance of the S&P MidCap 400 Index; Alteration of Method of Calculation:................ If S&P discontinues publication of the S&P MidCap 400 Index and S&P or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued S&P MidCap 400 Index (such index being referred to herein as a "Successor Index"), then the relevant Index Value shall be determined by reference to the value of such Successor Index at the close of trading on the NYSE, the AMEX, NASDAQ NMS or the relevant exchange or market for the Successor Index on the applicable Determination Dates. Upon any selection by the Calculation Agent of a Successor Index, the Calculation Agent shall cause written notice thereof to be furnished to the Trustee, to the Company and to the holders of the Notes within three Trading Days of such selection. If S&P discontinues publication of the S&P MidCap 400 Index prior to, and such discontinuance is continuing on, any of the Determination Dates and the Calculation Agent determines that no Successor Index is available at such time, then on each Determination Date until the earlier to occur of (i) the Determination Date scheduled to occur on May 25, 2001 and (ii) a determination by the Calculation Agent that a Successor Index is available, the Calculation Agent shall determine the Index Closing Value that would be used in computing the Supplemental Redemption Amount on each Determination Date. The Index Closing Value shall be computed by the Calculation Agent in accordance with the formula for and method of calculating the S&P MidCap 400 Index last in effect prior to such discontinuance, using the closing price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for such suspension or limitation) on such Determination Date of each security most recently comprising the S&P MidCap 400 Index. The Calculation Agent shall cause notice of each such Index Closing Value to be provided to the holders of the Notes on each succeeding Determination Date until and including May 25, 2001 (unless a Successor Index is prior thereto determined to be available). Notwithstanding these alternative arrangements, discontinuance of the publication of the S&P MidCap 400 Index may adversely affect the value of the Notes. If at any time the method of calculating the S&P MidCap 400 Index or a Successor Index, or the value thereof, is changed in a material respect, or if the S&P MidCap 400 Index or a Successor Index is in any other way modified so that such index does not, in the opinion of the Calculation Agent, fairly represent the value of the S&P MidCap 400 Index or such Successor Index had such changes or modifications not been made, then, from and after such time, the Calculation Agent shall, at the close of business in New York City on each Determination Date, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a value of a stock index comparable to the S&P MidCap 400 Index or such Successor Index, as the case may be, as if such changes or modifications had not been made, and calculate the Index Value with reference to the S&P MidCap 400 Index or such Successor Index, as adjusted. Accordingly, if the method of calculating the S&P MidCap 400 Index or a Successor Index is modified so that the value of such index is a fraction of what it would have been if it had not been modified (e.g., due to a split in the index), then the Calculation Agent shall adjust such index in order to arrive at a value of the S&P MidCap 400 Index or such Successor Index as if it had not been modified (e.g., as if such split had not occurred). Public Information:............ All disclosure contained in this Pricing Supplement regarding the S&P MidCap 400 Index, including, without limitation, its make-up, method of calculation and changes in its components, are derived from publicly available information prepared by S&P. Neither the Company nor the Agent take any responsibility for the accuracy or completeness of such information. Historical Information:........ The following table sets forth the high and low daily closing values, as well as end-of-quarter closing values, of the S&P MidCap 400 Index for each quarter in the period from January 1, 1991 through May 16, 1996. The historical values of the S&P MidCap 400 Index should not be taken as an indication of future performance, and no assurance can be given that the S&P MidCap 400 Index will increase sufficiently to cause the holders of the Notes to receive any Supplemental Redemption Amount. Daily Index Closing Values -------------------------------------------- High Low Period End ---- --- ---------- 1991 1st Quarter 122.17 95.16 122.17 2nd Quarter 127.91 119.43 120.57 3rd Quarter 132.12 120.90 131.30 4th Quarter 146.59 127.52 146.49 1992 1st Quarter 155.29 144.34 145.11 2nd Quarter 146.42 135.12 139.86 3rd Quarter 148.06 139.55 144.48 4th Quarter 160.57 137.41 160.55 1993 1st Quarter 166.78 155.02 165.01 2nd Quarter 168.49 156.39 168.01 3rd Quarter 176.04 164.04 175.60 4th Quarter 179.44 168.72 179.37 1994 1st Quarter 184.95 168.61 171.72 2nd Quarter 175.20 161.87 164.61 3rd Quarter 178.91 164.54 174.85 4th Quarter 176.99 161.55 169.44 1995 1st Quarter 183.64 167.93 182.37 2nd Quarter 200.17 180.86 197.37 3rd Quarter 218.76 197.02 215.70 4th Quarter 220.73 203.95 217.84 1996 1st Quarter.......... 233.10 206.34 230.30 2nd Quarter (through May 16, 1996).. 241.38 224.86 241.38 Use of Proceeds and Hedging:... The net proceeds to be received by the Company from the sale of the Notes will be used for general corporate purposes and, in part, by the Company or one or more of its affiliates in connection with hedging the Company's obligations under the Notes, including hedging market risks associated with the Supplemental Redemption Amount. Such hedging may involve the purchase or sale of exchange traded or over the counter options on the S&P MidCap 400 Index or individual stocks included in the S&P MidCap 400 Index, futures contracts on the S&P MidCap 400 Index and options on such futures contracts. Although the Company has no reason to believe that its hedging activity will have a material impact on the price of such options, futures contracts, and options on futures contracts, there can be no assurance that the Company will not affect such prices as a result of its hedging activities. The Company, through its subsidiaries, is likely to modify its hedge position throughout the life of the Notes by purchasing and selling such options, futures contracts and options on futures contracts. See also "Use of Proceeds" in the accompanying Prospectus. License Agreement:............. S&P and MS&Co. have entered into a non-exclusive license agreement providing for the license to MS&Co., and any of its affiliated or subsidiary companies, in exchange for a fee, of the right to use the S&P MidCap 400 Index, which is owned and published by S&P, in connection with certain securities, including the Notes. The license agreement between S&P and MS&Co. provides that the following language must be set forth in this Pricing Supplement: The Notes are not sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or warranty, express or implied, to the holders of the Notes or any member of the public regarding the advisability of investing in securities generally or in the Notes particularly or the ability of the S&P MidCap 400 Index to track general stock market performance. S&P's only relationship to the Company is the licensing of certain trademarks and trade names of S&P and of the S&P MidCap 400 Index, which is determined, composed and calculated by S&P without regard to the Company or the Notes. S&P has no obligation to take the needs of the Company or the holders of the Notes into consideration in determining, composing or calculating the S&P MidCap 400 Index. S&P is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Notes to be issued or in the determination or calculation of the equation by which the Notes are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Notes. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NOT WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. "Standard & Poor's[Registered]", "S&P[Registered]", "S&P 400[Registered]", "Standard & Poor's MidCap 400 Index," and "S&P MidCap 400 Index" are trademarks of McGraw-Hill, Inc. and have been licensed for use by MS & Co. 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. In addition, this discussion addresses only initial holders purchasing at the Issue Price of the Notes and that do not hold the Notes as part of a hedging transaction or "straddle." 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 regulations are finalized. Under general United States federal income tax principles, upon maturity of the Notes a United States Holder will recognize gain or loss equal to the difference between the amount realized by the Holder at maturity (i.e. the sum of the par amount and the Supplemental Redemption Amount received) and such Holder's tax basis in the Notes. Any loss recognized at maturity will be treated as 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 intends to treat such gain as interest income and to report such amounts accordingly. 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 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 may be required to account for the Notes in the manner prescribed in proposed, but subsequently 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 Note 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-----