-----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, Ud581gSSUobtdW/wDtRVkm3408SS/0wgvxttfFg1QWnOW+BNZvn90bjKsPqV+P0V JsqM3ekPksJ3EsALWWEJ6w== 0000950103-96-001019.txt : 19960724 0000950103-96-001019.hdr.sgml : 19960724 ACCESSION NUMBER: 0000950103-96-001019 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960723 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: 96597867 BUSINESS ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2127034000 424B3 1 Subject to Completion, Pricing Supplement dated July 15, 1996 PROSPECTUS Dated May 1, 1996 Pricing Supplement No. 23 to PROSPECTUS SUPPLEMENT Registration Statement No. 333-01655 Dated May 1, 1996 Dated July , 1996 Rule 424(b)(3) $15,000,000 Morgan Stanley Group Inc. MEDIUM-TERM NOTES, SERIES C EQUITY LINKED NOTES DUE JULY 31, 1999 The Equity Linked Notes due July 31, 1999 (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 July 31, 1999 (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 a dollar amount (the "Supplemental Redemption Amount") equal to the product of (i) (the "Multiplier") and (ii) the amount, if any, by which the Final Market Price (as defined below) of the non-voting Class B common stock, par value 0.01 per share ("VIA B Stock"), of Viacom Inc. ("Viacom") exceeds $70.00, subject to certain adjustments (the "Strike Price"). The Supplemental Redemption Amount cannot be less than zero. The Final Market Price will be the Market Price of VIA B Stock on the Determination Date (as defined herein). The Multiplier and the Strike Price will be subject to adjustment upon the occurrence of certain corporate events. See "Antidilution Adjustments" in this Pricing Supplement. If the Final Market Price is equal to or less than the Strike Price, 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 Market Price" and "United States Federal Taxation" in this Pricing Supplement. Viacom is neither affiliated with the Company nor involved in this offering of the Notes. The Market Price of the VIA B Stock on the date of this Pricing Supplement was $ . See "Historical Information" in this Pricing Supplement for information on the range of Market Prices for VIA B Stock. The Company will cause the Supplemental Redemption Amount and any adjustments to the Multiplier or Strike Price to be determined by Morgan Stanley & Co. Incorporated (the "Calculation Agent") for Chase Manhattan Bank, as Trustee under the Senior Debt Indenture. An investment in the Notes entails risks not associated with similar investments in a conventional debt security, as described under "Risk Factors" on PS-4 through PS-6 herein. MORGAN STANLEY & CO. Incorporated Capitalized terms not defined herein have the meanings given to such terms in the accompanying Prospectus Supplement. INFORMATION CONTAINED IN THIS PRELIMINARY SUPPLEMENT IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE DELIVERED PRIOR TO THE TIME A FINAL PRICING SUPPLEMENT IS DELIVERED. THIS PRICING SUPPLEMENT AND TEH ACCOMPANYING PROSPECTUS AND PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICIATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. Principal Amount:.............. $15,000,000 Maturity Date:................. July 31, 1999 Interest Rate:................. 0.00% per annum Specified Currency:............ U.S. Dollars Issue Price:................... 100% Settlement Date (Original Issue Date):................. July , 1996 Book Entry Note or Certificated Note:........... Book Entry Senior Note or Subordinated Note:........................ Senior Minimum Denominations:......... $1,000 Trustee:....................... Chase Manhattan Bank Maturity Redemption Amount:.... At maturity (including as a result of acceleration or otherwise), the holder of each Note will receive the par amount of such Note ($1,000) ("Par") plus the Supplemental Redemption Amount, if any. References herein to "Notes" refer to each $1,000 principal amount of any Note. Supplemental Redemption Amount:...................... The Supplemental Redemption Amount payable with respect to each Note at maturity shall be calculated on the Determination Date (as defined below) and shall be an amount equal to the greater of (a) the product of (i) (the "Multiplier") and (ii) the amount, if any, by which the Final Market Price of the VIA B Stock exceeds $70.00, subject to certain adjustments (the "Strike Price"). See "Antidilution Adjustments" below. The Company shall cause the Calculation Agent to provide written notice to the holder of each Note and 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 third Business Day following the last day of the Calculation Period. See "Final Market Price" below. Final Market Price:............ The Final Market Price will be the Market Price as determined on the Determination Date by the Calculation Agent. Determination Date:............ The Determination Date shall be the first Trading Day on which a Market Disruption Event has not occurred during the Calculation Period; provided that if a Market Disruption Event shall have occurred on each Trading Day to and including the final Trading Day in the Calculation Period, such final Trading Day in the Calculation Period shall be deemed the Determination Date notwithstanding the occurrence of a Market Disruption Event. Calculation Period:............ The period from and including June 30, 1999 to and including July 6, 1999. 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. Strike Price................... $70.00, subject to adjustment for certain corporate events. See "Antidilution Adjustments" below. Market Price:.................. If VIA B Stock (or any other security for which a Market Price must be determined) is listed on a national securities exchange, is a security of The Nasdaq National Market ("NASDAQ NMS") or is included in the OTC Bulletin Board Service ("OTC Bulletin Board") operated by the National Association of Securities Dealers, Inc. (the "NASD"), the Market Price for any one share of VIA B 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 VIA B Stock (or such other security) is listed or admitted to trading or (ii) if not listed or admitted to trading on any such securities exchange or if such last reported sale price is not obtainable, the last reported sale price on the over-the-counter market as reported on the NASDAQ NMS or OTC Bulletin Board on such day. If the last reported sale price is not available pursuant to clause (i) or (ii) of the preceding sentence, the Market Price for any Trading Day shall be the mean, as determined by the Calculation Agent, of the bid prices for VIA B Stock (or such other security) obtained from as many dealers in such stock, but not exceeding three, as will make such bid prices available to the Calculation Agent. The term "NASDAQ NMS" shall include any successor to such system and the term "OTC Bulletin Board Service" shall include any successor service thereto. 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 Multiplier or the Strike Price or determining the Market Price or whether a Market Disruption Event has occurred. See "Market Disruption Event" and "Antidilution Adjustments" below. MS & Co. is obligated to carry out its duties and functions as Calculation Agent in good faith and using its reasonable judgment. Market Disruption Event:....... "Market Disruption Event" means, with respect to VIA B Stock: (i) a suspension, absence or material limitation of trading of VIA B Stock on the primary market for VIA B 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 VIA B 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 contract will not constitute a Market Disruption Event, (3) limitations pursuant to New York Stock Exchange Rule 80A (or any applicable rule or regulation enacted or promulgated by the New York Stock Exchange, any other self-regulatory organization or the Securities and Exchange Commission of similar scope as determined by the Calculation Agent) on trading during significant market fluctuations shall constitute a Market Disruption Event, (4) a suspension of trading in an options contract on VIA B 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 VIA B Stock and (5) a "suspension, absence or material limitation of trading" on the primary securities market on which options contracts related to VIA B Stock are traded will not include any time when such securities market is itself closed for trading under ordinary circumstances. Risk Factors:.................. An investment in the Notes entails significant risks not associated with similar investments in a conventional debt security, including the following: There will be no periodic payments of interest on the Notes as there would be 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. Because the Supplemental Redemption Amount may be equal to zero, the effective yield to maturity may be less than that which would be payable on such a conventional fixed-rate debt security. The return of only the par amount of a Note at maturity may not compensate the holder for any opportunity cost implied by inflation and other factors relating to the time value of money. The Company is not affiliated with Viacom and, although the Company as of the date of this Pricing Supplement does not have any material non-public information concerning Viacom, corporate events of Viacom (including those described below in "Antidilution Adjustments" that may affect the Multiplier or the Strike Price and, consequently, the Supplemental Redemption Amount) are beyond the Company's ability to control and are difficult to predict. Viacom is not involved in the offering of the Notes and has no obligations with respect to the Notes, including any obligation to take the interests of the Company or of holders of Notes into consideration for any reason. Viacom will not receive any of the proceeds of the offering of the Notes made hereby and is not responsible for, and has not participated in, the determination of the timing of, prices for or quantities of, the Notes offered hereby. 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. The market value for the Notes will be affected by a number of factors independent of the creditworthiness of the Company and the value of VIA B Stock, including, but not limited to, the volatility of VIA B Stock, the dividend rate on VIA B Stock, market interest and yield rates and the time remaining to the Determination Date or the maturity of the Notes. In addition, the value of VIA B Stock depends on a number of interrelated factors, including economic, financial and political events, over which the Company has no control. The market value of the Notes is expected to depend primarily on the extent of the appreciation, if any, of the Market Price of VIA B Stock above the Strike Price. 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 accreted principal amount thereof, if, at such time, the Market Price of VIA B Stock is below, equal to or not sufficiently above the Strike Price. The historical Market Prices of VIA B Stock should not be taken as an indication of VIA B Stock's future performance during the term of any Note. 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 Multiplier or the Strike Price that may influence the determination of the Supplemental Redemption Amount. See "Supplemental Redemption Amount" and "Market Disruption Event" above, and "Antidilution Adjustments" below. 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. Antidilution Adjustments:...... The Multiplier and the Strike Price will be adjusted as follows: 1. Stock Dividends; Stock Splits; Reverse Stock Splits; Reclassifications. In case Viacom shall (i) pay a dividend or make any other distribution with respect to its VIA B Stock in shares of VIA B Stock, (ii) subdivide its outstanding VIA B Stock, (iii) combine its outstanding VIA B Stock into a smaller number of shares, or (iv) issue any shares of VIA B Stock in a reclassification of the VIA B Stock (including any such reclassification in connection with a merger, consolidation or other business combination in which Viacom is the continuing corporation), the Multiplier shall be adjusted so that if the Supplemental Redemption Amount were to be calculated immediately after the record date for such dividend or distribution or the effective date of such subdivision or combination, the holder of each Note would receive the same Supplemental Redemption Amount, taking into account the adjustment to the Strike Price under Paragraph 7 below, that such holder would have been entitled to receive immediately prior to any of the events described above, had such Supplemental Redemption Amount been calculated immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this Paragraph 1 shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. 2. Rights; Options; Warrants. In case Viacom shall issue rights, options, warrants or convertible or exchangeable securities (other than a convertible or exchangeable security subject to Paragraph 1) to all holders of its VIA B Stock, entitling them to subscribe for or purchase VIA B Stock at a price per share that is lower (at the record date for such issuance) than the Current Market Value per share of VIA B Stock, the Multiplier shall be adjusted so that the new Multiplier will equal the product of (i) the existing Multiplier multiplied by (ii) 1 plus a fraction, the numerator of which shall be the Cheap Stock Issued and the denominator of which shall be (x) the fully diluted shares of VIA B Stock outstanding on the date of issuance of such rights, options, warrants or convertible or exchangeable securities minus (y) the number of shares of VIA B Stock theretofore issuable upon the exercise of all Viacom Five-Year Warrants, scheduled to expire on July 7, 1999 (the "VIA E Warrants") then outstanding. Such adjustment shall be made whenever such rights, options, warrants or convertible or exchangeable securities are issued, and shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such rights, options, warrants or convertible or exchangeable securities. For purposes of this Paragraph 2, the "Cheap Stock Issued" shall be the number of additional shares of any VIA B Stock offered by Viacom for subscription or purchase as described above minus the number of shares of VIA B Stock that the aggregate offering price of the total number of shares of VIA B Stock so offered would purchase at the then Current Market Value per share of VIA B Stock. 3. Issuance of VIA B Stock at Lower Values. In case Viacom shall, in a transaction in which Paragraph 2 is inapplicable, issue or sell shares of VIA B Stock, or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of VIA B Stock, at a price per share of VIA B Stock (determined in the case of such rights, options, warrants or convertible or exchangeable securities, by dividing (A) the total amount receivable by Viacom (as valued by Viacom) in consideration of the issuance and sale of such rights, options, warrants or convertible or exchangeable securities, plus the total consideration, if any, payable to Viacom upon exercise, conversion or exchange thereof, by (B) the total number of shares of VIA B Stock covered by such rights, options, warrants or convertible or exchangeable securities) that is lower than the then Current Market Value per share of the VIA B Stock in effect immediately prior to such sale or issuance, then the Multiplier shall be adjusted so that the new Multiplier will equal the product of (i) the existing Multiplier multiplied by (ii) 1 plus a fraction, the numerator of which shall be the Cheap Stock Issued and the denominator of which shall be (x) the fully diluted shares of VIA B Stock outstanding on the date of issuance of such VIA B Stock or such rights, options, warrants or convertible or exchangeable securities minus (y) the number of shares of VIA B Stock theretofore issuable upon the exercise of all VIA E Warrants then outstanding. Such adjustment shall be made successively whenever any such sale or issuance is made. For purposes of this Paragraph 3, the "Cheap Stock Issued" shall be the number of additional shares of any VIA B Stock issued or offered by Viacom for subscription or purchase as described above minus the number of shares of VIA B Stock that the aggregate offering price of the total number of shares of the VIA B Stock so offered would purchase at the then Current Market Value per share of VIA B Stock. The provisions of this Paragraph 3 shall not apply (i) to shares issued pursuant to an employee stock option plan or similar plan providing for options or other similar rights to purchase shares of VIA B Stock, (ii) to issuances pursuant to incentive bonus plans or (iii) to shares issued in payment or settlement of any other equity-related award to employees. 4. Expiration of Rights; Options and Conversion Privileges. Upon the expiration of any rights, options, warrants or conversion or exchange privileges that have previously resulted in an adjustment hereunder, if any thereof shall not have been exercised, the Strike Price and the Multiplier shall, upon such expiration, be readjusted and shall thereafter, upon any future exercise, be such as they would have been had they been originally adjusted (or had the original adjustment not been required, as the case may be) as if (i) the only shares of VIA B Stock so issued were the shares of VIA B Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange rights and (ii) such shares of VIA B Stock, if any, were issued or sold for the consideration actually received by Viacom upon such exercise plus the consideration, if any, actually received by Viacom for issuance, sale or grant of all such rights, options, warrants or conversion or exchange rights whether or not exercised; provided, however that no such readjustment shall have the effect of increasing the Strike Price by an amount, or decreasing the Multiplier by an amount, in excess of the amount of the adjustment initially made in respect to the issuance, sale or grant of such rights, options, warrants or conversion or exchange rights. 5. Current Market Value. For the purposes of any computation under the heading "Antidilution Adjustments," the Current Market Value per share of VIA B Stock at the date herein specified shall be deemed to be the average of the daily market prices, as determined by the Calculation Agent, of the VIA B Stock for the 10 consecutive trading days immediately preceding the day as of which "Current Market Value" is being determined. The market price for each such trading day shall be the closing price, regular way, on such day, or if no sale takes place on such day, the average of the closing bid and asked prices on such day, as determined by the Calculation Agent. 6. Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. In case Viacom (i) consolidates with or merges into any other corporation and is not the continuing or surviving corporation of such consolidation or merger, or (ii) permits any other corporation to consolidate with or merge into Viacom and Viacom is the continuing or surviving corporation but, in connection with such consolidation or merger, the VIA B Stock is changed into or exchanged for stock or other securities of any other corporation or cash or any other assets, or (iii) transfers all or substantially all of its properties and assets to any other corporation, or (iv) effects a capital reorganization or reclassification of the VIA B Stock in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or assets with respect to or in exchange for VIA B Stock, then and in each such case, proper provision shall be made so that, upon the basis and upon the terms and in the manner provided in this Paragraph 6, the Final Market Price will be based on the value of the stock and other securities, cash and assets received per share of VIA B Stock upon the consummation of such consolidation, merger, transfer, reorganization or reclassification. 7. Adjustment of Strike Price. Whenever the Multiplier is adjusted, as provided in Paragraph 1, 2 or 3, the Strike Price shall be adjusted (calculated to the nearest $.01) so that it shall equal the price determined by multiplying such Strike Price immediately prior to such adjustment by a fraction, the numerator of which shall be the Multiplier immediately prior to such adjustment, and the denominator of which shall be the Multiplier immediately thereafter. 8. De Minimis Adjustments. Except as provided in Paragraph 3 with reference to adjustments required by such Paragraph 3, no adjustment in the number of shares of VIA B Stock issuable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Multiplier; provided, however, that any adjustments which by reason of this Paragraph 8 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the nearest one-thousandth of a share. No adjustments to the Multiplier or the Strike Price will be required other than those specified above. However, the Company may, at its sole discretion, cause the Calculation Agent to make additional adjustments to the Multiplier or the Strike Price to reflect changes occurring in relation to the VIA E Warrants or any other Exchange Property in other circumstances where the Company determines that such changes are appropriate. The adjustments specified above do not cover all events that could affect the Market Price of the VIA B Stock. The Calculation Agent shall be solely responsible for the determination and calculation of any adjustments to the Multiplier or Strike Price and of any related determinations and calculations with respect to any valuations of stock, other securities or other property or assets (including cash) in connection with any corporate event described in paragraph 6 above, and its determinations and calculations with respect thereto shall be conclusive. The Calculation Agent will provide information as to any adjustments to the Multiplier or Strike Price upon written request by any holder of the Notes. VIA B Stock; Public Information:.......... VIA B Stock is registered under the Exchange Act. Companies with securities registered under the Exchange Act are required to file periodically certain financial and other information specified by the Securities and Exchange Commission (the "Commission"). Information provided to or filed with the Commission is available at the offices of the Commission specified under "Available Information" in the accompanying Prospectus. In addition, information regarding Viacom 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 VIA B STOCK OR OTHER SECURITIES OF VIACOM. ALL DISCLOSURES CONTAINED IN THIS PRICING SUPPLEMENT REGARDING VIACOM 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 VIACOM. NEITHER THE COMPANY NOR THE AGENT MAKES ANY REPRESENTATION THAT SUCH PUBLICLY AVAILABLE DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE INFORMATION REGARDING VIACOM 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 VIA B STOCK (AND THEREFORE THE MULTIPLIER) HAVE BEEN PUBLICLY DISCLOSED. SUBSEQUENT DISCLOSURE OF ANY SUCH EVENTS OR THE DISCLOSURE OF OR FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS CONCERNING VIACOM COULD AFFECT THE VALUE RECEIVED AT MATURITY WITH RESPECT TO THE NOTES AND THEREFORE THE TRADING PRICES OF THE NOTES. NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES MAKES ANY REPRESENTATION TO ANY PURCHASER OF NOTES AS TO THE PERFORMANCE OF VIA B STOCK. The Company or its affiliates may presently or from time to time engage in business with Viacom including extending loans to, or making equity investments in, Viacom or providing advisory services to Viacom, 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 Viacom and, in addition, one or more affiliates of the Company may publish research reports with respect to Viacom. The Company does not make any representation to any purchaser of Notes with respect to any matters whatsoever relating to Viacom. Any prospective purchaser of a Note should undertake an independent investigation of Viacom as in its judgment is appropriate to make an informed decision with respect to an investment in VIA B Stock. Historical Information......... The following table sets forth the high and low Market Price during 1993, 1994, 1995 and during 1996 through July 15, 1996. The Market Price on July 15, 1996 was $32 3/4 The Market Prices listed below have been derived from publicly disseminated information that the Company believes to be accurate. Neither the Company nor the Agent makes any representation as to the accuracy of such information. The historical prices of VIA B Stock should not be taken as an indication of future performance, and no assurance can be given that the price of VIA B Stock will increase sufficiently to cause the beneficial owners of the Notes to receive any Supplemental Redemption Amount.
Viacom High Low Close ------------------------------- ---------- --------- --------- (CUSIP #617446CK3) 1993: First Quarter.................. $44 $36 1/8 $43 1/8 Second Quarter................. $48 3/4 $36 1/4 $47 3/8 Third Quarter.................. $59 3/4 $46 $55 1/4 Fourth Quarter................. $58 3/4 $40 7/8 $44 7/8 1994: First Quarter.................. $44 1/2 $24 5/8 $26 1/2 Second Quarter................. $32 3/8 $22 1/4 $31 5/8 Third Quarter.................. $39 3/4 $30 3/4 $39 3/4 Fourth Quarter................. $40 5/8 $37 1/4 $40 5/8 1995: First Quarter.................. $47 1/4 $40 5/8 $44 3/4 Second Quarter................. $48 1/2 $41 3/4 $46 3/8 Third Quarter.................. $53 7/8 $45 1/8 $49 3/4 Fourth Quarter................. $50 1/2 $45 1/8 $47 3/8 1996: First Quarter.................. $37 1/4 $37 1/4 $42 1/8 Second Quarter................. $44 1/4 $37 7/8 $38 7/8 Third Quarter $38 7/8 $32 3/4 $32 3/4 (Through July 15, 1996)
Use of Proceeds and Hedging:... The net proceeds to be received by the Company from the sale of the Notes will be used for general corporate purposes and, in part, by the Company or one or more of its affiliates in connection with hedging the Company's obligations under the Notes. See also "Use of Proceeds" in the accompanying Prospectus. On or prior to the date of this Pricing Supplement, the Company, through its subsidiaries and others, hedged its anticipated exposure in connection with the Notes by taking positions in the VIA E Warrants. Such hedging was carried out in a manner designed to minimize any impact on the price of VIA B Stock. Purchase activity could potentially have increased the price of VIA B Stock, and therefore effectively have increased the level to which VIA B Stock must rise before a holder of a Note will receive more than the accreted principal amount on any Exchange Date or Call Date. Although the Company has no reason to believe that its hedging activity had a material impact on the price of VIA B Stock, there can be no assurance that the Company did not affect such price as a result of its hedging activities. The Company, through its subsidiaries, is likely to modify its hedge position throughout the life of the Notes by purchasing and selling VIA B Stock, VIA E Warrants, options contracts on VIA B Stock listed on major securities markets or positions in any other instruments that it may wish to use in connection with such hedging. United States Federal Taxation: The following discussion 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. Any limitations on disclosure and any defined terms contained therein are equally applicable to the discussion below. This discussion also does not deal with holders other than initial United States Holders of the Notes who purchase Notes at the Issue Price. The Notes will be treated as debt for United States federal income tax purposes. Although Treasury regulations addressing the treatment of contingent debt instruments were released on June 11, 1996, 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 August 13, 1996. Under existing general United States federal income tax principles, a United States Holder will not be required to include as income any increase in value of a Note attributable to the Supplemental Redemption Amount feature before its sale, exchange, or the Determination Date. It is unclear under existing law whether the payment of the Supplemental Redemption Amount, if any, will be treated as ordinary or capital in character. The Company currently intends to treat such amounts as interest income and to report such amounts accordingly. Prospective investors should consult with their tax advisors regarding the character of any such gain. United States Holders that have acquired debt instruments that are similar to the Notes and have accounted for such debt instruments in a consistent manner (including under proposed, but subsequently withdrawn, Treasury regulations) may be deemed to have established a method of tax accounting. In such instance, the United States Holder would be required to apply such method of tax accounting to the Notes, unless consent of the Commissioner of the Internal Revenue Service is obtained to change such method. Any gain or loss recognized on the sale or exchange of a Note prior to its retirement 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-----