Exchangeability: Into MSFT 2.75% Convertible Notes due 1999 beginning 3/15/97 on any dividend date. Terms essentially are identical to MSFT 2.75% Cvt. Pfd. except for certain maturity settlement features (see below). Maturity Settlement (bond): Differs from MSFT 2.75% Cvt Pfd. in three respects: 1. Investors must elect conversion option or bond automatically will be redeemed for $79.875. 2. Investors receive an additional $0.40/share if they elect to convert at maturity. 3. If settle in stock, investors get the number of shares equal to 99.5% of the maturity settlement value.