Subject to Completion, Pricing Supplement dated November 9, 1995
PROSPECTUS Dated March 29, 1995 Pricing Supplement No. 21 to
PROSPECTUS SUPPLEMENT Registration Statement No. 33-57833
Dated March 29, 1995 November , 1995
Rule 424(b)(3)
$20,000,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
4.0% Senior Fixed Rate Notes Due December 16, 2002
EQUITY PARTICIPATION NOTES
Interest payable June 15 and December 15
The 4.0% Senior Fixed Rate Notes due December 16, 2002 (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 4.0% per annum payable semi-annually on June 15
and December 15 of each year (each an "Interest Payment Date") commencing
December 15, 1995. The Notes will be issued in minimum denominations of
$1,000 and will mature on December 16, 2002 (the "Initial Maturity Date"),
unless the maturity of the Notes is extended in accordance with the procedures
described below. The Initial Maturity Date will be automatically extended to
January 15, 2003 (the "Final Maturity Date"), unless the holders of 100% of
the principal amount of the Notes elect to terminate such automatic extension.
The Notes will not be redeemable by the Company in whole or in part prior to
the Initial Maturity Date (or, if applicable, the Final Maturity Date).
On the Initial Maturity Date (or, if applicable, the Final Maturity Date), the
holder of each Note will receive the par amount of such Note ($1,000) ("Par")
and the dollar amount, if any, by which the Final Basket Value (as defined
below) exceeds $1,000 (the "Supplemental Redemption Amount"), as further
described in this Pricing Supplement. The Supplemental Redemption Amount
cannot be less than zero. The Initial Basket Value has been set to equal
$714.33 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 nine 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 based on the average daily closing value of
such Basket Stock during the period from and including the fifteenth scheduled
NYSE Trading Date prior to the Initial Maturity Date (or, if applicable, the
Final Maturity Date) (the "Calculation Period"). See "Final Basket Value" in
this Pricing Supplement.
For information as to the calculation of the Supplemental Redemption Amount,
the calculation and the composition of the Basket and certain tax consequences
to beneficial owners of the Notes, see "Supplemental Redemption 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-5 and PS-6 herein.
________________
PRICE 100% AND ACCRUED INTEREST
________________
<TABLE>
<CAPTION>
Price to Public(1) Agent's Commissions(2) Proceeds to Company(1)
-------------------- ------------------------ ------------------------
<S> <C> <C> <C>
Per Note............. 100%
Total................ $20,000,000 $ $
_______________
<FN>
(1) Plus accrued interest, if any, from November , 1995.
(2) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
</FN>
</TABLE>
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:.............. $20,000,000
Initial Maturity Date:......... December 16, 2002. The Initial Maturity Date
will be automatically extended to January 15,
2003, unless, on any NYSE Trading Day which
is at least two Business Days prior to the
beginning of the Calculation Period
applicable to the Initial Maturity Date, the
holders of 100% of the principal amount of
the Notes exercise their right (evidenced by
the completion by such holders and
acknowledgment by the Company and the
Calculation Agent of the "Option to Elect
Termination" attached hereto as Annex A (the
"Notice") prior to 11:30 a.m. New York City
time on such date), to terminate the
automatic extension of maturity.
Final Maturity Date:............ January 15, 2003
Interest Rate:................. 4.0%
Interest Payment Dates:........ June 15 and December 15
Specified Currency:............ U.S. Dollars
Issue Price:................... 100%
Settlement Date (Original Issue
Date):....................... November , 1995
Book Entry Note or Certificated
Note:........................ Book Entry
Senior Note or Subordinated
Note:........................ Senior
Minimum Denominations:......... $1,000
Trustee:....................... Chemical Bank
Supplemental Redemption
Amount:........................ On the Initial Maturity Date (or, if
applicable, the Final Maturity Date), the
holder of each Note will receive the par
amount of such Note ($1,000) ("Par") and the
Supplemental Redemption Amount, which is
equal to the dollar amount, if any, by which
the Final Basket Value exceeds $1,000. The
Supplemental Redemption Amount cannot be less
than zero.
Initial Basket Value:.......... The Initial Basket Value shall equal $714.33
per $1,000 principal amount of Notes. 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.
Final Basket Value:............ 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 within the
Calculation Period (the "Trigger Date") prior
to the Initial Maturity Date (or, if
applicable, the Final Maturity Date), 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 the Initial Maturity
Date (or, if applicable, the Final Maturity
Date) (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 the Initial
Maturity Date (or, if applicable, the Final
Maturity Date), 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.
Calculation Period:............ The period from and including the fifteenth
scheduled NYSE Trading Day prior to the Final
Maturity Date (or, if the holders of 100% of
the principal amount of the Notes exercise
their right to terminate the automatic
extension of maturity, the Initial Maturity
Date).
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. If the last reported sale price
is not available pursuant to clause (i) or
(ii) of the preceding sentence, the Market
Price for any NYSE Trading Day shall be
the mean, as determined by the Calculation
Agent, of the bid prices for such Basket
Stock obtained from as many dealers in
such Basket Stock, but not exceeding
three, as will make such bid prices
available to the Calculation Agent. The
term "NASDAQ NMS" shall include any
successor to such system and the term "OTC
Bulletin Board Service" shall include any
successor service thereto.
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 or market 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
nine 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 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 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 Interest 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 and
market interest rates. 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 Par. If, however,
Notes are sold prior to the Calculation
Period at a time when the Basket Value
exceeds Par, 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 Par 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, 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 the 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:
<TABLE>
<CAPTION>
Dollar Value
Issuer of Represented
the Initial in Original Initial
Basket Stock (1) Market Price (2) Basket Value Multiplier(2)
------------------------ ---------------- --------------- -------------
<S> <C> <C> <C>
American International
Group, Inc. $79.37
Atlantic Richfield
Company $79.37
Circus Circus
Enterprises, Inc. $79.37
Home Depot Inc. $79.37
Lowe's Companies, Inc. $79.37
MCI Communications Corp. $79.37
Newell Co. $79.37
Thermo Electron
Corporation $79.37
Travelers Group Inc. $79.37
</TABLE>
(1) All of the common stocks of the nine
United States corporations listed
herein are currently traded on the New
York Stock Exchange, except for MCI
Communications Corp., which is traded
on the NASDAQ NMS.
(2) Initial Market Prices and Initial
Multipliers were determined based on
average Market Prices at the time the
Notes were priced by the Company for
initial offering to the public.
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."
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. A Distribution on a
Basket Stock described in paragraph 6 below
that also constitutes an Extraordinary
Dividend shall only cause an adjustment to the
Multiplier for such Basket Stock pursuant to
paragraph 6.
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 shall be solely
responsible for the determination and
calculation of any adjustments to any
Multiplier of any Basket Stock or to the
Basket and its determinations and
calculations with respect thereto shall be
conclusive.
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 and the
Supplemental Redemption Amount 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 Redemption Amount.
<TABLE>
<CAPTION>
Supplemental
--------------------
Final Redemption
------------- --------------------
Basket Values Amount(1)
------------- --------------------
<S> <C>
Less than or equal to $700 $
$800 $
$900 $
$1,000 $
$1,100 $
$1,200 $
$1,300 $
$1,400 $
$1,500 $
------------------------------------
</TABLE>
(1) Payable on the Initial Maturity Date (or,
if applicable, the Final Maturity Date).
The above figures are for purposes of
illustration only. The actual Supplemental
Redemption Amount will depend entirely on the
actual Final Basket Value. See "Supplemental
Redemption 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 REDEMPTION
AMOUNT 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 November 6, 1995, and the Market
Price on November 6, 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 Redemption Amount.
<TABLE>
<CAPTION>
Basket Stock High Low Last
--------------------- ------------- --------- ----------
<S> <C> <C> <C>
American International
Group, Inc.
(CUSIP # 026874107)
1992................. 53.609 36.891
1993................. 66.672 50.000
1994................. 66.500 55.000
1995................. 87.500 64.672 86.375
</TABLE>
<TABLE>
<CAPTION>
Basket Stock High Low Last
-------------------- ----------- --------- ----------
<S> <C> <C> <C>
Atlantic Richfield
Company
(CUSIP # 048825103)
1992................ 121.250 98.250
1993................ 126.375 102.000
1994................ 111.750 93.750
1995................ 117.500 101.125 106.750
</TABLE>
<TABLE>
<CAPTION>
Basket Stock High Low Last
-------------------- ----------- --------- ----------
<S> <C> <C> <C>
Circus Circus
Enterprises, Inc.
(CUSIP # 172909103)
1992................ 38.172 23.672
1993................ 49.000 28.172
1994................ 40.250 20.125
1995................ 35.750 24.250 26.750
</TABLE>
<TABLE>
<CAPTION>
Basket Stock High Low Last
-------------------- ------------ --------- ----------
<S> <C> <C> <C>
Home Depot Inc.
(CUSIP # 437076102)
1992................ 51.094 30.313
1993................ 50.063 35.500
1994................ 47.750 36.625
1995................ 49.750 36.750 40.750
</TABLE>
<TABLE>
<CAPTION>
Basket Stock High Low Last
-------------------- ----------- --------- ----------
<S> <C> <C> <C>
Lowe's Companies,
Inc.
(CUSIP # 548661107)
1992................ 12.563 8.125
1993................ 29.750 12.125
1994................ 40.625 27.125
1995................ 38.750 26.500 30.375
</TABLE>
<TABLE>
<CAPTION>
Basket Stock High Low Last
---------------------- -------------- --------- ----------
<S> <C> <C> <C>
MCI Communications Corp.
(CUSIP # 552673105)
1992.................. 20.375 14.938
1993.................. 29.625 18.938
1994.................. 28.500 17.875
1995.................. 26.875 17.500 25.938
</TABLE>
<TABLE>
<CAPTION>
Basket Stock High Low Last
-------------------- ----------- --------- ----------
<S> <C> <C> <C>
Newell Co.
(CUSIP # 651192106)
1992................ 26.500 16.563
1993................ 21.250 15.563
1994................ 23.875 19.000
1995................ 26.250 20.625 23.875
</TABLE>
<TABLE>
<CAPTION>
Basket Stock High Low Last
-------------------- ----------- --------- ----------
<S> <C> <C> <C>
Thermo Electron
Corporation
(CUSIP # 883556102)
1992................ 21.000 16.891
1993................ 28.672 20.938
1994................ 31.828 24.328
1995................ 47.125 29.500 46.750
</TABLE>
<TABLE>
<CAPTION>
Basket Stock High Low Last
--------------------- ------------ --------- ----------
<S> <C> <C> <C>
Travelers Group, Inc.
(CUSIP # 894190107)
1992................. 24.844 18.375
1993................. 49.313 24.219
1994................. 42.719 30.785
1995................. 54.625 32.875 54.625
</TABLE>
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 Redemption Amount. 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.
The Notes will be treated as debt for United
States federal income tax purposes. Interest
on the Notes will be taxable to a United States
Holder as ordinary interest income at the time
it accrues or is received in accordance with
the United States Holder's method of accounting
for United States income tax purposes.
Although proposed Treasury regulations
addressing the treatment of contingent debt
instruments were issued on December 15, 1994,
such regulations, which generally would require
current accrual of contingent amounts and would
affect the character of gain on the sale,
exchange or retirement of 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 Note, a United
States Holder will recognize gain, if any,
equal to the difference between the amount
realized at maturity and such Holder's tax
basis in the Note. 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 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.
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 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
OPTION TO ELECT TERMINATION
Dated: [Two Business Days
prior to the
beginning of the
Calculation Period
applicable to the
Initial Maturity Date]
Morgan Stanley Group Inc.
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. Incorporated, as
Calculation Agent
1585 Broadway
New York, New York 10036
Fax No.: (212) 761-0028
(Attn: Richard P. Sandulli)
Dear Sirs:
Each of the undersigned holders of the Medium Term Notes, Series C, 4.0%
Senior Fixed Rate Notes due December 16, 2002 (Equity Participation Notes) of
Morgan Stanley Group Inc. (the "Notes") hereby represents that such holder,
together with each of the undersigned holders noted below, owns directly or
indirectly $20,000,000 principal amount of the Notes 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 at least two
NYSE Trading Days prior to the initially scheduled Calculation Period), the
right to terminate the automatic extension of maturity as described in Pricing
Supplement No. 21 dated November , 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. Accordingly, the Notes
will mature on the Initial Maturity Date. 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 us at the fax number indicated.
Very truly yours,
____________________________________
[Name of Holder]
By:_________________________________
[Title]
____________________________________
[Fax No.]
[Additional signature blocks, if
more than one holder]
Receipt of the above Option to Elect
Termination 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____________
