Subject to Completion, Pricing Supplement Dated August 2, 1995
PROSPECTUS Dated March 29, 1995 Pricing Supplement No. 15 to
PROSPECTUS SUPPLEMENT Registration Statement No. 33-57833
Dated March 29, 1995 August __, 1995
Rule 424(b)(3)
$15,000,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
% Senior Fixed Rate Notes Due August 15, 2003
EQUITY PARTICIPATION NOTES
Interest payable February 15 and August 15
The % Senior Fixed Rate Notes due August 15, 2003 (the "Notes") are
Medium-Term Notes, Series C (Senior Fixed Rate Notes) of Morgan Stanley Group
Inc. (the "Company"), as further described herein and in the Prospectus
Supplement under "Description of Notes - Fixed Rate Notes." The Notes will
bear interest at the rate of % per annum (the "Base Coupon Rate") payable
semi-annually on February 15 and August 15 of each year (each an "Interest
Payment Date") commencing February 15, 1996. The Notes will be issued in
minimum denominations of $1,000 and will mature on August 15, 2003 (the
"Maturity Date").
Beginning on the Interest Payment Date occurring on February 15, 2001 through
and including the Maturity Date, the interest payable on each Interest Payment
Date will equal the sum of the Base Coupon (as defined herein) plus an amount
(the "Supplemental Coupon") equal to one-sixth of the dollar amount, if any,
by which (a) the Final Basket Value exceeds (b) the Initial Basket Value (the
"Supplemental Coupon Amount"), as further described in this Pricing
Supplement. The Supplemental Coupon cannot be less than zero. The Initial
Basket Value has been set to equal $1,000 per Note based on the Market Prices
(as defined herein) on the date of pricing of a basket (the "Basket") of the
common stocks of the ten United States corporations listed herein
(collectively the "Basket Stocks" and individually a "Basket Stock"). The
Basket consists of a fixed number of shares of each Basket Stock (each a
"Multiplier") initially calculated so that each Basket Stock constitutes an
equal dollar value in the Initial Basket Value. The Multiplier with respect
to any Basket Stock will remain constant for the term of the Notes unless
adjusted for certain corporate events. See "Adjustments to the Multipliers
and the Basket" in this Pricing Supplement. The Final Basket Value will be
based on the aggregate Market Values of the Basket Stocks. The Market Value
for any Basket Stock will equal the arithmetic average of the product of the
Market Price and the applicable Multiplier of such Basket Stock on the first
10 Determination Days (as defined herein) beginning 15 NYSE Trading Days (as
defined herein) prior to August 15, 2000 (the "Calculation Period"), unless
the Market Value has been fixed previously pursuant to the "Early Lock-in
Right" (as described below). See "Final Basket Value" in this Pricing
Supplement.
The Initial Basket Value may be reset by the holders of 100% of the Notes on
any NYSE Trading Day prior to September 30, 1995 (the "Reset Period"). See
"Reset Right" in this Pricing Supplement. If such holders elect to reset the
Initial Basket Value, the Initial Basket Value used in determining the
Supplemental Coupon Amount will be the Basket Value on the date of such
election, but the Multipliers for each Basket Stock will remain unchanged.
On any NYSE Trading Day prior to the Calculation Period, the holders of 100%
of the Notes will have a one-time right (the "Early Lock-in Right") to fix the
Final Basket Value and consequently the Supplemental Coupon Amount for the
Notes. See "Early Lock-in Right" in this Pricing Supplement.
For information as to the calculation of the Supplemental Coupon, the
calculation and the composition of the Basket and certain tax consequences to
beneficial owners of the Notes, see "Supplemental Coupon," "Supplemental
Coupon Amount," "Final Basket Value," "Basket Stocks," "Adjustments to the
Multipliers and the Basket" and "United States Federal Taxation" in this
Pricing Supplement.
The Company will cause the "Final Basket Value" 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-6 and PS-7 herein.
________________
PRICE 100%
________________
Proceeds to
Price to Public(1) Agent's Commissions(2) Company(1)(3)
------------------ ---------------------- -------------
Per Note. 100% % %
Total.... $15,000,000 $ $
_______________
(1) Plus accrued interest, if any, from August , 1995.
(2) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
(3) Before deduction of expenses payable by the Company estimated at
$ .
Capitalized terms not defined above have the meanings given to such terms in
the accompanying Prospectus Supplement.
MORGAN STANLEY & CO.
Incorporated
INFORMATION CONTAINED IN THIS PRELIMINARY PRICING 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 THE ACCOMPANYING PROSPECTUS AND PROSPECTUS SUPPLEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION 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:................. August 15, 2003
Interest Rate:................. From the Interest Payment Date occurring on
February 15, 1996 through and including the
Interest Payment Date occurring on August 15,
2000, the interest payable on each Interest
Payment Date will equal the Base Coupon.
From the Interest Payment Date occurring on
February 15, 2001 through and including the
Maturity Date, the interest payable on each
Interest Payment Date will equal the sum of
the Base Coupon plus the Supplemental Coupon,
if any. See "Base Coupon" and "Supplemental
Coupon" below.
Interest Payment Dates:........ February 15 and August 15
Specified Currency:............ U.S. Dollars
Issue Price:................... 100%
Settlement Date
(Original Issue Date):....... August __, 1995
Book Entry Note or
Certificated Note:........... Book Entry
Senior Note or Subordinated
Note:........................ Senior
Minimum Denominations:......... $1,000
Trustee:....................... Chemical Bank
Base Coupon Rate:.............. % per annum
Base Coupon:................... Principal Amount times Base Coupon Rate times
Day Count/360
Day Count:..................... The number of days from and including the
later of (i) the Original Issue Date and (ii)
the most recent Interest Payment Date on which
interest has been paid, to but excluding the
Interest Payment Date or the Maturity Date,
as applicable, on which interest is to be
paid, computed on the basis of a 360-day year
of twelve 30-day months.
Supplemental Coupon:........... The Supplemental Coupon is equal to one-sixth
of the Supplemental Coupon Amount. The
Supplemental Coupon cannot be less than zero.
The Company shall cause the Calculation Agent
to provide written notice to the Trustee at
its New York office of the Supplemental
Coupon on or prior to the tenth Business Day
following the last Determination Day used to
calculate the Final Basket Value.
Supplemental Coupon
Amount:...................... The Supplemental Coupon Amount is equal to
the dollar amount, if any, by which (a) the
Final Basket Value exceeds (b) the Initial
Basket Value; provided that, if the holders
of 100% of the Notes elect to exercise the
Early Lock-in Right, interest shall accrue on
the Supplemental Coupon Amount as determined
upon exercise of such right. See "Early
Lock-in Right" below.
Initial Basket Value:.......... The Initial Basket Value shall equal $1,000.
However, the holders of 100% of the Notes may
elect to change the Initial Basket Value
pursuant to the "Reset Right" (as defined
below). Based on the Market Prices (as
defined below) of the Basket Stocks on the
date of this Pricing Supplement, the
Multipliers have been initially set so that
the value of the Basket on such date equals
the Initial Basket Value.
Reset Right:................... On any NYSE Trading Day (as defined below)
prior to September 30, 1995 (the "Reset
Period"), the holders of 100% of the Notes
will have a one-time right (the "Reset
Right"), upon completion by such holders and
acknowledgment by the Company and the
Calculation Agent of the "Official Notice of
Reset" attached hereto as Annex A prior to
11:30 A.M. New York City time on such date
(the "Reset Date"), to reset the Initial
Basket Value for the Notes. If such holders
elect to reset the Initial Basket Value on
any Reset Date, the Initial Basket Value used
in determining the Supplemental Coupon Amount
will be the Basket Value on the date of such
election but the Multipliers for each Basket
Stock will remain unchanged.
Final Basket Value:............ Except as set forth below under the heading
"Early Lock-In Right," the Final Basket Value
per $1,000 principal amount of Notes will be
determined by the Calculation Agent, an
affiliate of the Company, and will equal the
sum of the Market Values of the Basket
Stocks. The "Market Value" of a Basket Stock
will equal the arithmetic average of the
products of the Market Price and the
applicable Multiplier of such Basket Stock
determined on each of the first 10
Determination Days with respect to such
Basket Stock during the Calculation Period.
If, as of any Trading Day (the "Trigger Date")
prior to September 30, 2000, the number of
Determination Days with respect to a Basket
Stock does not exceed the amount by which 10
exceeds the number of scheduled Trading Days
from and excluding the Trigger Date to and
including September 30, 2000 (the "Reference
Period"), then each Trading Day with respect
to such Basket Stock during the Reference
Period shall be deemed to be a Determination
Date for the purpose of determining the Final
Basket Value, notwithstanding the occurrence
of a Market Disruption Event on any such
Trading Day; provided, that if any scheduled
Trading Day during the Reference Period is
not an actual Trading Day, the Market Price
of such Basket Stock for such scheduled
Trading Day shall be determined as of the
earliest practicable time (which may be after
such scheduled Trading Day), except that if
such Market Price cannot be determined before
the close of business in New York City on
September 30, 2000, the Market Price for such
Basket Stock for such scheduled Trading Day
shall be deemed to be zero.
All percentages resulting from any
calculation on 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. See also "Basket Stocks" below.
Early Lock-In Right:........... On any NYSE Trading Day prior to the
Calculation Period, the holders of 100% of
the Notes will have a one-time right (the
"Early Lock-in Right"), upon completion by
such holders and acknowledgment by the
Company and the Calculation Agent of the
"Official Notice of Early Lock-in" attached
hereto as Annex B prior to 11:30 A.M. New
York City time on such date (the "Early
Lock-in Date"), to fix the Final Basket Value
and consequently the Supplemental Coupon
Amount for the Notes. If such holders elect
to exercise the Early Lock-in Right, the
Final Basket Value will be determined as set
forth above, except that the Market Value
shall be determined using the first 3
Determination Days (by substituting 3 for 10
in the first paragraph under "Final Basket
Value" above) in the Calculation Period and
the Calculation Period shall be the period
from and including the Early Lock-In Date to
but excluding September 30, 2000. In
addition, if the Final Basket Value and
consequently the Supplemental Coupon Amount
is determined pursuant to the Early Lock-in
Right (and prior to the fifteenth scheduled
NYSE Trading Day prior to August 15, 2000),
then, for purposes of calculating the
Supplemental Coupon, the Supplemental Coupon
Amount shall be deemed to be (x) the
Supplemental Coupon Amount so determined (the
"Locked-in Supplemental Coupon Amount") plus
(y) accrued interest on the Locked-in
Supplemental Coupon Amount at a rate equal to
the current yield (interpolated offer side
rate as of the close of business, as
determined by the Calculation Agent, on the
day following the last Determination Day used
to calculate the Supplemental Coupon Amount)
for on-the-run U.S. Government securities
having maturities closest to August 15, 2000,
from and including the last Determination Day
used to calculate the Supplemental Coupon
Amount to but excluding the first scheduled
NYSE Trading Day prior to August 1, 2000.
The accrued interest described in clause (y)
of the preceding sentence shall be adjusted
and computed on the basis of a 360-day year
of twelve 30-day months.
Calculation Period:............ Except as set forth above under the heading
"Early Lock-In Right," the period from and
including the fifteenth scheduled NYSE Trading
Day prior to August 15, 2000 to and including
September 30, 2000.
Determination Day:............. With respect to any Basket Stock, any Trading
Day during the Calculation Period on which a
Market Disruption Event (as defined below)
with respect to such Basket Stock has not
occurred, except as described above under
"Final Basket Value."
Market Price:.................. If a Basket Stock is listed on a national
securities exchange, is a NASDAQ National
Market System ("NASDAQ NMS") security or is
included in the OTC Bulletin Board Service
("OTC Bulletin Board") operated by the
National Association of Securities Dealers,
Inc. (the "NASD"), Market Price for 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 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, or (iii) if the last
reported sale price is not available pursuant
to (i) and (ii) above, 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
for an amount equal to at least 10% (or 33%
if such Market Price is being determined in
connection with the exercise of the Early
Lock-In Right) of the Multiplier for such
Basket Stock times the principal amount of
Notes then outstanding divided by $1,000.
The term "NASDAQ NMS" shall include any
successor to such system and the term "OTC
Bulletin Board Service" shall include any
successor service thereto.
NYSE Trading Day:.............. A day on which trading is generally conducted
in the over-the-counter market for equity
securities in the United States and on the
New York Stock Exchange, as determined by the
Calculation Agent.
Trading Day:................... A day on which trading is conducted (i) on
the principal exchange on which such Basket
Stock is traded and (ii) on the principal
exchanges on which hedging instruments
related to such Basket Stock are traded, as
determined by the Calculation Agent.
Basket:........................ The basket is a portfolio of common stocks of
ten United States corporations. See "Basket
Stocks" below.
Basket Value:.................. The Basket Value, for any day, will equal the
sum of the products of the most recently
available Market Prices and the applicable
Multipliers for the Basket Stocks. The Final
Basket Value, however, is calculated based on
averaging Market Prices for certain days. See
"Final Basket Value."
Market Disruption Event:....... "Market Disruption Event" means, with respect
to any Basket Stock:
(i) a suspension, absence or material
limitation of trading of such 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 such
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 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 any Basket Stock by the primary securities
market related to such Basket Stock, 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) an "absence of trading" on the primary
securities market on which options contracts
related to such Basket Stock are traded, if
available, will not include any time when
such securities market is itself closed for
trading under ordinary circumstances.
Calculation Agent:............. Morgan Stanley & Co. Incorporated ("MS
& Co.")
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Notes, including
with respect to certain determinations and
judgments that the Calculation Agent must make
in determining the Final Basket Value or
whether a Market Disruption Event has
occurred. See "Adjustment to the Multipliers
and the Basket" 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 Basket
Value prior to its dissemination. MS & Co.
is obligated to carry out its duties and
functions as Calculation Agent in good faith
and using its reasonable judgment.
Risk Factors:.................. An investment in the Notes entails
significant risks not associated with similar
investments in a conventional debt security,
including the following:
The Base Coupon Rate is 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 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. The value for the Notes prior to
maturity will be affected by a number of
factors independent of the creditworthiness
of the Company and the Basket Value,
including, but not limited to, the volatility
of the Basket, dividend rates on the Basket
Stocks, the time remaining to the Calculation
Period and to the maturity of the Notes,
market interest rates and whether the Reset
Right or Early Lock-In Right is exercised.
In addition, the Basket Value 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 Basket Value
over the Initial Basket Value. If, however,
Notes are sold prior to the Calculation
Period at a time when the Basket Value
exceeds the Initial Basket Value, the sale
price may be at a discount from the amount
expected to be payable to the holder if such
excess of the Basket Value over the Initial
Basket Value were to prevail during the
Calculation Period because of the possible
fluctuation of the Basket Value between the
time of such sale and the Calculation Period.
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 Basket Value, or the Final Basket
Value, if determined, is below, equal to or
not sufficiently above the Initial Basket
Value. The historical Basket Values should
not be taken as an indication of the future
performance of the Basket Stocks during the
term of the Notes.
The Basket Value does not reflect the payment
of dividends on the stocks underlying it and
therefore the yield to maturity of the Notes
based on the Final Basket Value relative to
the Initial Basket Value will not produce the
same yield as if such underlying Basket Stocks
were purchased and held for a similar period.
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
Multipliers applicable to each Basket Stock
and to the value of the Basket that may
influence the determination of the Final
Basket Value. See "Adjustments to the
Multipliers and the Basket" 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.
Basket Stocks:................. The Basket Stocks listed below will be used
to calculate Basket Value, subject to
adjustment as set forth below under
"Adjustments to the Multipliers and the
Basket." HOLDERS OF THE NOTES WILL NOT HAVE
ANY RIGHT TO RECEIVE THE BASKET STOCKS. The
following table sets forth the Basket Stocks,
the initial Market Price of each Basket Stock
as of the date of this Pricing Supplement,
the dollar value of each Basket Stock
represented in the Initial Basket Value and
the Initial Multiplier of each Basket Stock
as of the date of this Pricing Supplement:
Dollar Value
Issuer of Represented
the Initial in Original Initial
Basket Stock Market Price (1) Basket Value Multiplier(1)
- ------------------------- ---------------- ------------ -------------
AirTouch Communications,
Inc. $100
Cisco Systems, Inc.(2) $100
Columbia/HCA Healthcare
Corporation $100
General Motors
Corporation $100
Intel Corporation(2) $100
Merrill Lynch & Co., Inc. $100
Microsoft Corporation(2) $100
Motorola, Inc. $100
Mirage Resorts,
Incorporated $100
[To be determined] $100
(1) Initial Market Prices and initial
Multipliers will be determined on the
date the Notes are priced by the
Company for initial offering to the
public.
(2) The common stocks of Cisco Systems,
Inc., Intel Corporation and Microsoft
Corporation are currently traded on the
NASDAQ NMS. All of the other Basket
Stocks are currently traded on the New
York Stock Exchange.
The initial Multiplier relating to each
Basket Stock indicates the number of shares
of such Basket Stock, given the Market Price
of such Basket Stock, required to be included
in the calculation of the Initial Basket
Value so that each Basket Stock represents an
equal percentage and dollar value of the
Initial Basket Value as of the date of this
Pricing Supplement. The respective
Multipliers will remain constant for the term
of the Notes unless adjusted for certain
corporate events. See "Adjustments to the
Multipliers and the Basket."
If holders of 100% of the Notes elect to
exercise the Reset Right, the Multipliers
will remain unchanged, and consequently, the
Basket Stocks may not represent an equal
percentage and dollar value of the Initial
Basket Value as so reset. See "Reset Right"
above.
Adjustments to the Multipliers
and the Basket:.............. The Multiplier with respect to
any Basket Stock and the Basket will be
adjusted as follows:
1. If a Basket Stock is subject to a stock
split or reverse stock split, then once such
split has become effective, the Multiplier
relating to such Basket Stock will be
adjusted to equal the product of the number
of shares issued with respect to one share of
such Basket Stock and the prior Multiplier.
2. If a Basket Stock is subject to a stock
dividend (issuance of additional shares of
the 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
Multiplier relating to such Basket Stock will
be adjusted so that the new Multiplier shall
equal the former Multiplier plus the product
of (i) the number of shares of such Basket
Stock issued with respect to one share of
such Basket Stock and (ii) the prior
Multiplier.
3. There will be no adjustments to the
Multipliers to reflect cash dividends or
other distributions paid with respect to a
Basket Stock other than distributions
described in paragraph 6 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 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 Multiplier with respect
to such Basket Stock will be adjusted on the
ex-dividend date with respect to such
Extraordinary Dividend so that the new
Multiplier will equal the product of (i) the
then current Multiplier, 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 a
Basket Stock will equal such Extraordinary
Dividend minus the amount of the immediately
preceding non-Extraordinary Dividend for such
Basket Stock. 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.
4. If the issuer of a Basket Stock is being
liquidated or is subject to a proceeding
under any applicable bankruptcy, insolvency
or other similar law, such Basket Stock will
continue to be included in the Basket so long
as a Market Price for such Basket Stock is
available. If a Market Price is no longer
available for a Basket Stock for whatever
reason, including the liquidation of the
issuer of such Basket Stock or the subjection
of the issuer of such Basket Stock to a
proceeding under any applicable bankruptcy,
insolvency or other similar law, then the
value of such Basket Stock will equal zero in
connection with the calculation of the Basket
Value and Final Basket Value for so long as
no Market Price is available, and no attempt
will be made to find a replacement stock or
increase the Basket Value to compensate for
the deletion of such Basket Stock.
5. If the issuer of a Basket Stock has been
subject to a merger or consolidation and is
not the surviving entity, then a value for
such Basket Stock will be determined at the
time such issuer is merged or consolidated
and will equal the last available Market
Price for such Basket Stock and that value
will be constant for the remaining term of
the Notes. At such time, no adjustment will
be made to the Multiplier of such Basket
Stock. For purposes of calculating that
portion of the Final Basket Value
attributable to the value of such Basket
Stock, the Market Value will be deemed to be
the Multiplier of such Basket Stock times
such last available Market Price.
6. If the issuer of a Basket Stock issues
to all of its shareholders equity securities
of an issuer other than the issuer of the
Basket Stock (other than in a transaction
described in paragraph 5 above), then such
new equity securities will be added to the
Basket as a new Basket Stock, unless the
Market Price of such new equity securities
cannot be determined using the procedures
described above under "Market Price." The
Multiplier for such new Basket Stock will
equal the product of the original Multiplier
for the Basket Stock for which the new Basket
Stock is being issued (the "Initial Basket
Stock") and the number of shares of the new
Basket Stock issued with respect to one share
of the Initial Basket Stock.
No adjustments of any Multiplier of a Basket
Stock will be required unless such adjustment
would require a change of at least 0.1% in
the Multiplier then in effect. The
Multiplier 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 the Multiplier of any
Basket Stock or to the Basket will be made
other than those specified above. The
adjustments specified above do not cover all
events that could affect the Market Price of
a Basket Stock.
The Calculation Agent will provide
information as to any adjustments to the
Multipliers upon written request by any
holder of the Notes.
Hypothetical Payments:......... The following table illustrates, for a range
of hypothetical Final Basket Values, the Base
Coupon, the Supplemental Coupon and the total
of the Base Coupon and the Supplemental
Coupon for each $1,000 principal amount of
Notes. An investment in the Basket Stocks
would be significantly different than
investing in the Notes. Among other things,
an investor in the Basket Stocks may realize
certain dividends that are not reflected in
the Supplemental Coupon.
(Final Basket
Values minus Initial Base Supplemental
Basket Value)(1) Coupon(2) Coupon(3) Total Coupon(3)
- ------------------------- --------- ------------- ---------------
Less than or equal to $0 $11.250 $0.000 $11.250
$100 $11.250 $16.667 $27.917
$200 $11.250 $33.333 $44.583
$300 $11.250 $50.000 $61.250
$400 $11.250 $66.667 $77.917
$500 $11.250 $83.333 $94.583
$600 $11.250 $100.00 $111.250
$700 $11.250 $116.667 $127.917
$800 $11.250 $133.333 $144.583
$900 $11.250 $150.000 $161.250
$1,000 $11.250 $166.667 $177.917
$1,100 $11.250 $183.333 $194.583
$1,200 $11.250 $200.000 $211.250
$1,300 $11.250 $216.667 $227.917
$1,400 $11.250 $233.333 $244.583
$1,500 $11.250 $250.000 $261.250
$1,600 $11.250 $266.667 $277.917
$1,700 $11.250 $283.333 $294.583
$1,800 $11.250 $300.000 $311.250
$1,900 $11.250 $316.667 $327.917
$2,000 $11.250 $333.333 $344.583
(1) If the Early Lock-in Right were
exercised, the Locked-in Supplemental Coupon
Amount would be adjusted to reflect accrued
interest. See "Early Lock-in Right" above.
Such potential adjustment is not reflected in
the table.
(2) Payable on each Interest Payment Date
during the term of the Notes.
(3) Payable on the six Interest Payment Dates
on and after February 15, 2001.
The above figures are for purposes of
illustration only. The actual Supplemental
Coupon will depend entirely on the actual
Initial Basket Value and on the actual Final
Basket Value. See "Supplemental Coupon
Amount" above.
Public Information:............ All of the Basket Stocks are registered under
the Securities Exchange Act of 1934, as
amended (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 issuers of the Basket Stocks
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
ISSUER OF THE BASKET STOCKS. ALL DISCLOSURES
CONTAINED IN THIS PRICING SUPPLEMENT REGARDING
THE ISSUERS OF THE BASKET STOCKS 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
ISSUERS OF THE BASKET STOCKS. NEITHER THE
COMPANY NOR THE AGENT MAKES ANY
REPRESENTATION THAT SUCH PUBLICLY AVAILABLE
DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE
INFORMATION REGARDING THE ISSUERS OF THE
BASKET STOCKS 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 THE BASKET STOCKS (AND
THEREFORE THE INITIAL BASKET VALUE), HAVE BEEN
PUBLICLY DISCLOSED. SUBSEQUENT DISCLOSURE OF
ANY SUCH EVENTS OR THE DISCLOSURE OF OR
FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS
CONCERNING THE ISSUERS OF THE BASKET STOCKS
COULD AFFECT THE SUPPLEMENTAL COUPON 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 MAKE ANY REPRESENTATION TO ANY
PURCHASER OF NOTES AS TO THE PERFORMANCE OF
THE BASKET.
The Company or its affiliates may presently
or from time to time engage in business with
one or more of the issuers of the Basket
Stocks, including extending loans to, or
making equity investments in, such issuers or
providing advisory services to such 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 such
issuers and, in addition, one or more
affiliates of the Company may publish
research reports with respect to such
issuers. The Company does not make any
representation to any purchaser of the Notes
with respect to any matters whatsoever
relating to such issuers. Any prospective
purchaser of a Note should undertake an
independent investigation of the issuers of
the Basket Stocks 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 with respect to each Basket
Stock during 1992, 1993, 1994, and during
1995 through August 2, 1995, and the Market
Price on August 2, 1995. All Market Prices
are rounded to the nearest one-tenth of a
cent, and certain Market Prices have been
adjusted for stock splits. Beneath the name
of each issuer is the CUSIP number for the
security included in the Basket relating to
such issuer. In order to derive historical
Basket Values retroactive adjustments to the
Multipliers would have to be made in
accordance with the procedures described
under "Adjustments to the Multipliers and the
Basket" above. 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 prices of the
Basket Stocks will increase sufficiently to
cause the holders of the Notes to receive any
Supplemental Coupons.
Basket Stock High Low Last
- ---------------------- -------------- --------- ----------
AirTouch Communications,
Inc.
(CUSIP # 00949T100)
1992..................
1993*................. 26.750 24.500
1994.................. 30.125 20.375
1995.................. 31.875 25.000 32.375
* The initial public offering of the common stock of AirTouch
Communications, Inc. occurred in December 1993.
Basket Stock High Low Last
- -------------------- ----------- --------- ----------
Cisco Systems, Inc.
(CUSIP # 17275R102)
1992................ 19.657 8.219
1993................ 32.875 19.500
1994................ 40.375 19.625
1995................ 58.625 32.563 53.250
Basket Stock High Low Last
- ---------------------- ------------- --------- ----------
Columbia/HCA Healthcare
Corporation
(CUSIP # 197677107)
1992.................. 21.500 14.750
1993.................. 33.625 17.000
1994.................. 44.625 33.375
1995.................. 49.000 35.625 48.875
Basket Stock High Low Last
- ---------------------- --------------- --------- ----------
General Motors Corporation
(CUSIP # 370442105)
1992.................. 44.000 28.875
1993.................. 56.750 32.875
1994.................. 64.750 36.625
1995.................. 51.750 37.375 48.625
Basket Stock High Low Last
- -------------------- ----------- --------- ----------
Intel Corporation
(CUSIP # 458140100)
1992................ 22.594 11.750
1993................ 36.625 21.844
1994................ 56.125 28.125
1995................ 76.438 31.813 61.500
Basket Stock High Low Last
- ---------------------- -------------- --------- ----------
Merrill Lynch & Co., Inc.
(CUSIP # 590188108)
1992.................. 33.313 22.375
1993.................. 50.813 28.875
1994.................. 44.875 33.250
1995.................. 58.125 39.750 55.625
Basket Stock High Low Last
- --------------------- ------------ --------- ----------
Microsoft Corporation
(CUSIP # 594918104)
1992................. 47.500 33.375
1993................. 48.125 35.500
1994................. 64.625 39.313
1995................. 109.000 59.000 89.000
Basket Stock High Low Last
- -------------------- ----------- --------- ----------
Motorola, Inc.
(CUSIP # 620076109)
1992................ 26.313 16.375
1993................ 53.000 29.500
1994................ 61.000 43.500
1995................ 78.625 52.290 73.875
Basket Stock High Low Last
- -------------------- ----------- --------- ----------
Mirage Resorts,
Incorporated
(CUSIP # 60462E104)
1992................ 14.800 9.450
1993................ 24.635 13.450
1994................ 26.500 17.000
1995................ 32.750 19.875 31.000
Basket Stock High Low Last
- ----------------------- ------- ----- ------
[To be determined]
(CUSIP # )
1992...................
1993...................
1994...................
1995...................
Use of Proceeds and Hedging:... The net proceeds to be received by the
Company from the sale of the Notes will be
used for general corporate purposes and, in
part, by the Company or one or more of its
affiliates in connection with hedging the
Company's obligations under the Notes. See
also "Use of Proceeds" in the accompanying
Prospectus.
On the date of this Pricing Supplement, the
Company, through its subsidiaries, may hedge
its anticipated exposure in connection with
the Notes by taking positions in the Basket
Stocks, in options contracts on 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. In the event that the Company
pursues such a hedging strategy, the price at
which the Company is able to purchase such
positions may be a factor in determining the
Initial Multipliers for the Basket Stocks.
Purchase activity could potentially increase
the prices of the Basket Stocks or such
options contracts, and therefore effectively
increase the level to which the Basket must
rise before a holder of a Note will receive
any Supplemental Coupons. Although the
Company has no reason to believe that its
hedging activity will have a material impact
on the price of the Basket Stocks or such
options 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, may modify
its hedge position throughout the life of the
Notes by purchasing and selling the
securities and instruments listed above and
other available securities and instruments.
United States Federal Taxation: The following 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.
United States Holders. The Notes will be
treated as indebtedness of the Company for
United States federal income tax purposes.
Although proposed Treasury regulations
addressing the treatment of contingent debt
instruments were issued on December 15, 1994,
such regulations, which generally would
require current accrual of contingent amounts
and would affect the character of gain on the
sale, exchange or retirement of a Note, by
their terms apply only to debt instruments
issued on or after the 60th day after the
date the regulations are finalized.
Subject to the discussion below regarding
United States Holders exercising the Early
Lock-in Right, a United States Holder would be
required, under general United States federal
income tax principles, to include the Base
Coupon and Supplemental Coupon, if any, paid
on a Note at the time they accrue or are
received in accordance with the United States
Holder's method of accounting for federal
income tax purposes. With respect to an
accrual basis taxpayer, the Company intends
to treat the Supplemental Coupons as accruing
ratably over the three year period over which
the Supplemental Coupons are payable and
report such amounts accordingly. It is
possible, however, that the Internal Revenue
Service could assert that all or a portion of
the Supplemental Coupons should be treated
as having accrued at the time the Final
Basket Value becomes fixed.
Holders exercising the Early Lock-in Right
will in effect have created a stepped
interest note by locking in a higher interest
rate beginning at the time the Supplemental
Coupons become payable. Although there is no
authority directly on point, the Company
believes that the requirement that a United
States Holder's method of accounting clearly
reflect income would require the United States
Holder to apply OID principles to the Note.
As discussed more fully in the accompanying
Prospectus Supplement, under OID principles,
the Base Coupon would be treated as qualified
stated interest and the Supplemental Coupons
would be included in the Note's stated
redemption price at maturity. Consequently,
at the time the Early Lock-in Right is
exercised, the Note would be treated as a
Discount Note with OID equal to the
difference between the Note's issue price and
its stated redemption price at maturity (i.e.
the principal amount plus the Supplemental
Coupons payable). United States Holders
would be required to include OID in income
for United States federal income tax purposes
as it accrues in accordance with a constant
yield method based on a compounding of
interest unless the amount of OID is less
than 1/4 of 1 percent of the stated
redemption price at maturity multiplied by
the number of complete years to maturity
remaining on the Note at the time the Early
Lock-in Right is exercised. Inclusion of OID
as it accrues will result in a United States
Holder who acquired the Note at original
issuance having taxable income in excess of
the amount of the Base Coupon prior to the
time the Supplemental Coupons become payable.
United States Holders that have acquired debt
instruments similar to the Notes and have
accounted for such debt instruments under
proposed, but subsequently withdrawn,
Treasury regulation Section 1.1275-4(g) may
be deemed to have established a method of
accounting that must be followed with respect
to the Notes, unless consent of the
Commissioner of the Internal Revenue Service
is obtained to change such method. Absent
such consent, such a Holder would be required
to account for the Note in the manner
prescribed in withdrawn Treasury regulation
Section 1.1275-4(g). The Internal Revenue
Service, however, would not be required to
accept such method as correct.
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.
ANNEX A
OFFICIAL NOTICE OF RESET
Dated:[Prior to September 30, 1995]
Morgan Stanley Group Inc.
1251 Avenue of the Americas
New York, New York 10022
Morgan Stanley & Co. Incorporated, as
Calculation Agent
1251 Avenue of the Americas
New York, New York 10020
Fax No.: (212) 703-4377
(Attn: Richard P. Sandulli)
Dear Sirs:
Each of the undersigned holders of the Medium Term Notes, Series C, %
Senior Fixed Rate Notes due August 15, 2003 (Equity Participation Notes)
of Morgan Stanley Group Inc. (the "Notes") hereby represents that such holder
owns directly or indirectly the principal amount of the Notes recorded in the
space provided below such holder's signature and irrevocably elects to
exercise, as of the date hereof (or, if this letter is received after 11:30
a.m. on any day, as of the next day, provided that such day is prior to
September 30, 1995), the Reset Right as described in Pricing Supplement No.
[13] dated [ ], 1995 (the "Pricing Supplement") to the Prospectus
Supplement dated March 29, 1995 and the Prospectus dated March 29, 1995
related to Registration Statement No. 33-57833. Capitalized terms not defined
herein have the meanings given to such terms in the Pricing Supplement.
Please date and acknowledge receipt of this notice in the place provided below
on the date of receipt, and fax a copy to each of us at the fax numbers
indicated, whereupon the Initial Basket Value will be reset in accordance with
the terms of the Notes, as described in the Pricing Supplement.
Very truly yours,
[Name of Holder]
By:
[Title]
[Fax No.]
$
Principal Amount of Notes Held
[Additional signature blocks, if
more than one holder]
Receipt of the above Official
Notice of Reset is hereby acknowledged
MORGAN STANLEY GROUP INC., as Issuer
MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent
By MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent
By:
Title:
Date and time of acknowledgement
ANNEX B
OFFICIAL NOTICE OF EARLY LOCK-IN
Dated:[Prior to the Calculation Period]
Morgan Stanley Group Inc.
1251 Avenue of the Americas
New York, New York 10022
Morgan Stanley & Co. Incorporated, as
Calculation Agent
1251 Avenue of the Americas
New York, New York 10020
Fax No.: (212) 703-4377
(Attn: Richard P. Sandulli)
Dear Sirs:
Each of the undersigned holders of the Medium Term Notes, Series C, %
Senior Fixed Rate Notes due August 15, 2003 (Equity Participation Notes) of
Morgan Stanley Group Inc. (the "Notes") hereby represents that such holder
owns directly or indirectly the principal amount of the Notes recorded in the
space provided below such holder's signature and irrevocably elects to
exercise, as of the date hereof (or, if this letter is received after 11:30
a.m. on any day, as of the next day, provided that such day is prior to the
first day of the Calculation Period), the Early Lock-In Right as described in
Pricing Supplement No. [13] dated [ ], 1995 (the "Pricing
Supplement") to the Prospectus Supplement dated March 29, 1995 and the
Prospectus dated March 29, 1995 related to Registration Statement No.
33-57833. Capitalized terms not defined herein have the meanings given to
such terms in the Pricing Supplement. Please date and acknowledge receipt of
this notice in the place provided below on the date of receipt, and fax a copy
to each of us at the fax numbers indicated, whereupon the Final Basket Value,
and consequently the Supplemental Coupon Amount will be fixed in accordance
with terms set forth in the Notes, as described in the Pricing Supplement.
Very truly yours,
[Name of Holder]
By:
[Title]
[Fax No.]
$
Principal Amount of Notes Held
[Additional signature blocks, if
more than one holder]
Receipt of the above Official
Notice of Early Lock-in is hereby acknowledged
MORGAN STANLEY GROUP INC., as Issuer
MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent
By MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent
By:
Title:
Date and time of acknowledgement
