PROSPECTUS Dated March 29, 1995 Pricing Supplement No. 19 to
PROSPECTUS SUPPLEMENT Registration Statement No. 33-57833
Dated March 29, 1995 September 18, 1995
Rule 424(b)(3)
$ 50,000,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
EXCHANGEABLE NOTES DUE SEPTEMBER 30, 2000
Exchangeable For Shares of Common Stock of
THE BOEING COMPANY
The Exchangeable Notes due September 30, 2000 (the "Notes") are Medium-Term
Notes, Series C (Senior Fixed Rate Notes) of Morgan Stanley Group Inc. (the
"Company"), as further described below and in the Prospectus Supplement under
"Description of Notes - Fixed Rate Notes." The issue price of each Note will
be $904.89 (90.489% of the principal amount at maturity) (the "Issue Price"),
and there will be no periodic payments of interest. The Issue Price
represents a yield to maturity of 2.0% per annum computed on a semiannual
bond-equivalent basis based on the Issue Price calculated from the date of
issuance (the "Original Issue Date"). The Notes are issued in minimum
denominations of $1,000 per Note and will mature on September 30, 2000.
On any Exchange Date (as defined herein), the holder of a Note will have the
right (the "Exchange Right"), subject to a prior call of the Notes for cash by
the Company (as described in the immediately succeeding paragraph) and upon
completion by the holder and acknowledgment by the Company and the Calculation
Agent of an Official Notice of Exchange prior to 11:00 a.m. New York City time
on such date, to exchange each $1,000 principal amount of such Note for
11.1581 shares (the "Exchange Ratio") of the common stock, par value $5.00 per
share ("BA Stock"), of The Boeing Company ("Boeing"), subject to the Company's
right to pay cash in an amount equal to the Exchange Ratio times the Market
Price (as defined herein) of BA Stock on the Exchange Date in lieu of such
shares. The Exchange Ratio will be adjusted for certain corporate events but
will not be adjusted for any original issue discount ("OID") on the Notes.
See "Adjustments to Exchange Ratio" in this Pricing Supplement. Upon
exchange, the holder will not receive any cash payment representing any
accrued OID. Such accrued OID will be deemed paid by the BA Stock or cash
received by the holder upon exercise of the Exchange Right. An Exchange Date
will be any NYSE Trading Day (as defined herein) that falls during the period
beginning December 21, 1995 and ending on the day prior to the earliest of the
Maturity Date, the Call Date (as defined below) and, in the event of a call
for cash as described under "Company Exchange Right" herein, the Notice Date
(as defined herein).
On or after March 18, 1999, the Company may call the Notes, in whole but not
in part, for mandatory exchange into BA Stock at the Exchange Ratio; provided
that, if Parity (as defined herein) as determined on the NYSE Trading Day
immediately prior to the Notice Date is less than the applicable Call Price
(as defined herein) for such Notice Date, the Company will pay such applicable
Call Price in cash on the date (the "Call Date") not less than 30 nor more
than 60 days after the Notice Date, as specified by the Company. If the Notes
are so called for mandatory exchange, the BA Stock or cash to be delivered to
holders of Notes will be delivered on the Call Date.
Boeing is neither affiliated with the Company nor involved in this offering of
the Notes. The Market Price of the BA Stock on the date of this Pricing
Supplement was $70.75 (the "Initial Market Price").
The Company will cause Parity and any adjustments to the Exchange Ratio 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.
The Notes have been approved for listing on the New York Stock Exchange
("NYSE") under the symbol "MSBA 00", subject to official notice of issuance.
It is not possible to predict whether the Notes will trade in the secondary
market or if such market will be liquid or illiquid.
-------------
PRICE 90.489%
-------------
Agent's
Price to Public Commissions(1) Proceeds to Company
----------------- ---------------- ---------------------
Per Note... 90.489% 0.25% 90.239%
Total...... $45,244,500 $125,000 $45,119,500
_______________
(1) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
MORGAN STANLEY & CO.
Incorporated
(This page intentionally left blank)
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount:.............. $50,000,000
Maturity Date:................. September 30, 2000
Specified Currency:............ U.S. Dollars
Issue Price:................... 90.489%
Original Issue Date
(Settlement Date):........... September 22, 1995
Book Entry Note or
Certificated Note:........... Book Entry
Senior Note or Subordinated
Note:........................ Senior
Minimum Denominations:......... $1,000
Trustee:....................... Chemical Bank
Exchange Right:................ On any Exchange Date, subject to a prior call
of the Notes for cash by the Company as
described under "Company Exchange Right"
below, the holders of Notes will be entitled
upon completion by the holder and
acknowledgment by the Company and the
Calculation Agent of an Official Notice of
Exchange (in the form of Annex A attached
hereto) prior to 11:00 a.m. New York City
time on such date and delivery on such date
of such Notes to the Trustee, to exchange
each $1,000 principal amount of Notes for
11.1581 shares (the "Exchange Ratio") of BA
Stock, subject to adjustment as described
under "Adjustments to the Exchange Ratio"
below. Upon any such exchange, the Company
may, at its sole option, deliver such shares
of BA Stock or pay an amount in cash equal to
the Exchange Ratio times the Market Price of
BA Stock on the Exchange Date, as determined
by the Calculation Agent, in lieu of such
shares. Such delivery or payment will be
made 3 Business Days after any Exchange Date,
subject to delivery of such Notes to the
Trustee on the Exchange Rate.
The Company shall, or shall cause the
Calculation Agent to, deliver such shares of
BA Stock or cash to the Trustee for delivery
to the holders.
No Fractional Shares........... If upon any exchange of the Notes the Company
chooses to deliver shares of BA Stock, the
Company will pay cash in lieu of issuing
fractional shares of BA Stock in an amount
equal to the corresponding fractional Market
Price of BA Stock on such Exchange Date.
Exchange Ratio................. 11.1581, subject to adjustment for certain
corporate events. See "Adjustments to
Exchange Ratio" below.
Exchange Date.................. Any NYSE Trading Day that falls during the
period beginning December 21, 1995 and ending
on the day prior to the earliest of (i) the
Maturity Date, (ii) the Call Date and (iii)
in the event of a call for cash as described
under "Company Exchange Right" below, the
Notice Date.
Company Exchange Right......... On or after March 18, 1999, the Company may
call the Notes, in whole but not in part, for
mandatory exchange into BA Stock at the
Exchange Ratio; provided that, if Parity on
the NYSE Trading Day immediately preceding
the Notice Date, as determined by the
Calculation Agent, is less than the
applicable Call Price for such Notice Date,
the Company will pay such applicable Call
Price in cash on the Call Date. If the Notes
are so called for mandatory exchange, then,
unless (solely in the case of an exchange for
BA Stock) a holder subsequently exercises the
Exchange Right, the BA Stock or cash to be
delivered to holders of Notes will be
delivered on the Call Date fixed by the
Company and set forth in its notice of
mandatory exchange, upon delivery of such
Notes to the Trustee. Upon a mandatory
exchange, the holder will not receive any
additional cash payment representing any
accrued OID. Such accrued OID will be deemed
paid by the delivery of BA Stock or cash.
The Company shall, or shall cause the
Calculation Agent to, deliver such shares of
BA Stock or cash to the Trustee for delivery
to the holders.
Notice Date.................... Any NYSE Trading Day on or after March 18,
1999 on which the Company issues its notice
of mandatory exchange.
Parity:........................ With respect to any NYSE Trading Day, an
amount equal to the Exchange Ratio times the
Market Price (as defined below) of BA Stock
on such NYSE Trading Day.
Call Price..................... Notice Date Call Price
----------- ----------
On or after March 18, 1999 103% of principal
and before September 18, amount
1999
On or after September 18, 102% of principal
1999 and before amount
March 18, 2000
On or after March 18, 101% of principal
2000 and before amount
September 30, 2000
Market Price:.................. If BA Stock is listed on a national
securities exchange, is a security of The
Nasdaq National Market ("NASDAQ NMS") or is
included in the OTC Bulletin Board Service
("OTC Bulletin Board") operated by the
National Association of Securities Dealers,
Inc. (the "NASD"), the Market Price for any
NYSE Trading Day means (i) the last reported
sale price, regular way, on such day on the
principal United States securities exchange
registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), on
which BA 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 BA Stock obtained from as many
dealers in such stock, but not exceeding
three, as will make such bid prices available
to the Calculation Agent. The term "NASDAQ
NMS security" shall include a security
included in 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, and on which a Market
Disruption Event has not occurred.
Calculation Agent:............. Morgan Stanley & Co. Incorporated
("MS & Co.")
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Notes, including
with respect to certain determinations and
judgments that the Calculation Agent must make
in making adjustments to the Exchange Ratio
or determining the Market Price or whether a
Market Disruption Event has occurred. See
"Adjustment to the Exchange Ratio" and
"Market Disruption Event" below. MS & Co. is
obligated to carry out its duties and
functions as Calculation Agent in good faith
and using its reasonable judgment.
Total Amount of OID:........... $95.11 per $1,000 principal amount of Notes
Original Yield to Maturity:.... 2.0% per annum computed on a semiannual
bond-equivalent basis based on the Issue
Price calculated from the Original Issue Date.
Risk Factors:.................. An investment in the Notes entails
significant risks not associated with similar
investments in a conventional debt security,
including the following:
The Notes do not pay interest and the yield
to maturity is less than would be payable on
a non-exchangeable debt security issued with
OID if the Company were to issue such a
security at the same time it issues the
Notes.
The Company is not affiliated with Boeing
and, although the Company as of the date of
this Pricing Supplement does not have any
material non-public information concerning
Boeing, corporate events of Boeing, including
those described below in "Adjustments to the
Exchange Ratio," are beyond the Company's
ability to control and are difficult to
predict.
Boeing is not involved in the offering of the
Notes and has no obligations with respect to
the Notes, including any obligation to take
the interests of the Company or of holders of
Notes into consideration for any reason.
Boeing will not receive any of the proceeds
of the offering of the Notes made hereby and
is not responsible for, and has not
participated in, the determination of the
timing of, prices for or quantities of, the
Notes offered hereby.
There can be no assurance as to how the Notes
will trade in the secondary market or whether
such market will be liquid or illiquid. The
market value for the Notes will be affected
by a number of factors independent of the
creditworthiness of the Company and the value
of BA Stock, including, but not limited to,
the volatility of BA Stock, the dividend rate
on BA Stock, market interest and yield rates
and the time remaining to the first Exchange
Date, any Call Date or the maturity of the
Notes. In addition, the value of BA Stock
depends on a number of interrelated factors,
including economic, financial and political
events, over which the Company has no
control. The market value of the Notes is
expected to depend primarily on the extent of
the appreciation, if any, of the Market Price
of BA Stock above the Initial Market Price.
The price at which a holder will be able to
sell Notes prior to maturity may be at a
discount, which could be substantial, from
the accreted principal amount thereof, if, at
such time, the Market Price of BA Stock is
below, equal to or not sufficiently above the
Initial Market Price. The historical Market
Prices of BA Stock should not be taken as an
indication of BA Stock's future performance
during the term of any Note.
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Notes, including
with respect to certain adjustments to the
Exchange Ratio that may influence the
determination of Parity or of the amount of
stock or cash receivable upon exercise of the
Exchange Right or the Company Exchange Right.
See "Adjustments to the Exchange Ratio" 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.
Adjustments to the Exchange The Exchange Ratio will be adjusted as
Ratio:....................... follows:
1. If BA Stock is subject to a stock split
or reverse stock split, then once such split
has become effective, the Exchange Ratio will
be adjusted to equal the product of the prior
Exchange Ratio and the number of shares
issued in such stock split or reverse stock
split with respect to one share of BA Stock.
2. If BA Stock is subject to a stock
dividend (issuance of additional shares of BA
Stock) that is given ratably to all holders
of shares of BA Stock, then once the dividend
has become effective and BA Stock is trading
ex-dividend, the Exchange Ratio will be
adjusted so that the new Exchange Ratio shall
equal the prior Exchange Ratio plus the
product of (i) the number of shares issued
with respect to one share of BA Stock and
(ii) the prior Exchange Ratio.
3. There will be no adjustments to the
Exchange Ratio to reflect cash dividends or
other distributions paid with respect to BA
Stock other than distributions described in
paragraph 6 below and Extraordinary Dividends
as described below. A cash dividend or other
distribution with respect to BA Stock will be
deemed to be an "Extraordinary Dividend" if
such dividend or other distribution exceeds
the immediately preceding non-Extraordinary
Dividend for BA Stock by an amount equal to
at least 10% of the Market Price of BA Stock
on the NYSE 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 BA Stock, the Exchange Ratio
with respect to BA Stock will be adjusted on
the ex-dividend date with respect to such
Extraordinary Dividend so that the new
Exchange Ratio will equal the product of (i)
the then current Exchange Ratio and (ii) a
fraction, the numerator of which is the
Market Price on the NYSE Trading Day
preceding the ex-dividend date, and the
denominator of which is the amount by which
the Market Price on the NYSE Trading Day
preceding the ex-dividend date exceeds the
Extraordinary Dividend Amount. The
"Extraordinary Dividend Amount" with respect
to an Extraordinary Dividend for BA Stock
will equal (i) in the case of cash dividends
or other distributions that constitute
quarterly dividends, the amount per share of
such Extraordinary Dividend minus the amount
per share of the immediately preceding
non-Extraordinary Dividend for BA Stock or
(ii) in the case of cash dividends or other
distributions that do not constitute
quarterly dividends, the amount per share of
such Extraordinary Dividend. 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 the BA Stock described in
paragraph 6 below that also constitutes an
Extraordinary Dividend shall only cause an
adjustment to the Exchange Ratio pursuant to
paragraph 6.
4. If Boeing is being liquidated or is
subject to a proceeding under any applicable
bankruptcy, insolvency or other similar law,
the Notes will continue to be exchangeable
into BA Stock so long as a Market Price for
BA Stock is available. If a Market Price is
no longer available for BA Stock for whatever
reason, including the liquidation of Boeing
or the subjection of Boeing to a proceeding
under any applicable bankruptcy, insolvency
or other similar law, then the value of BA
Stock will equal zero for so long as no Market
Price is available.
5. If there occurs any reclassification or
change of BA Stock, or if Boeing has been
subject to a merger, combination or
consolidation and is not the surviving
entity, or if there occurs a sale or
conveyance to another corporation of the
property and assets of Boeing as an entirety
or substantially as an entirety, in each case
as a result of which the holders of BA Stock
shall be entitled to receive stock, other
securities or other property or assets
(including cash) with respect to or in
exchange for such BA Stock, then the holders
of the Notes then outstanding will be
entitled thereafter to exchange such Notes
into the kind and amount of shares of stock,
other securities or other property or assets
that they would have owned or been entitled
to receive upon such reclassification,
change, merger, combination, consolidation,
sale or conveyance had such holders exchanged
such Notes for MOT Stock immediately prior to
any such corporate event. At such time, no
adjustment will be made to the Exchange Ratio
of BA Stock.
6. If Boeing issues to all of its
shareholders equity securities of an issuer
other than Boeing (other than in a
transaction described in paragraph 5 above),
then the holders of the Notes then outstanding
will be entitled to receive such new equity
securities upon exchange of such Notes. The
Exchange Ratio for such new equity securities
will equal the product of the Exchange Ratio
in effect for BA Stock at the time of the
issuance of such new equity securities times
the number of shares of the new equity
securities issued with respect to one share
of BA Stock.
No adjustments to the Exchange Ratio will be
required unless such adjustment would require
a change of at least 0.1% in the Exchange
Ratio then in effect. The Exchange Ratio
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 Exchange Ratio will be
made other than those specified above. The
adjustments specified above do not cover all
events that could affect the Market Price of
the BA Stock.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to the Exchange
Ratio and of any related determinations and
calculations with respect to any
distributions of stock, other securities or
other property or assets (including cash) in
connection with any corporate event described
in paragraph 5 or 6 above, and its
determinations and calculations with respect
thereto shall be conclusive.
The Calculation Agent will provide
information as to any adjustments to the
Exchange Ratio upon written request by any
holder of the Notes.
Market Disruption Event:....... "Market Disruption Event" means, with respect
to BA Stock:
(i) a suspension, absence or material
limitation of trading of BA Stock on the
primary market for BA 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 BA 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 BA Stock by the primary securities market
trading in such options, if available, by
reason of (x) a price change exceeding limits
set by such securities exchange or market,
(y) an imbalance of orders relating to such
contracts or (z) a disparity in bid and ask
quotes relating to such contracts will
constitute a suspension or material
limitation of trading in options contracts
related to BA Stock and (5) an "absence of
trading" on the primary securities market on
which options contracts related to BA Stock
are traded will not include any time when such
securities market is itself closed for
trading under ordinary circumstances.
BA Stock; Public Information... BA Stock is registered under the Exchange
Act. Companies with securities registered
under the Exchange Act are required to file
periodically certain financial and other
information specified by the Securities and
Exchange Commission (the "Commission").
Information provided to or filed with the
Commission is available at the offices of the
Commission specified under "Available
Information" in the accompanying Prospectus.
In addition, information regarding Boeing 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
BA STOCK OR OTHER SECURITIES OF BOEING. ALL
DISCLOSURES CONTAINED IN THIS PRICING
SUPPLEMENT REGARDING BOEING 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 BOEING.
NEITHER THE COMPANY NOR THE AGENT MAKES ANY
REPRESENTATION THAT SUCH PUBLICLY AVAILABLE
DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE
INFORMATION REGARDING BOEING 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 BA STOCK (AND THEREFORE THE
INITIAL MARKET PRICE AND THE EXCHANGE RATIO),
HAVE BEEN PUBLICLY DISCLOSED. SUBSEQUENT
DISCLOSURE OF ANY SUCH EVENTS OR THE
DISCLOSURE OF OR FAILURE TO DISCLOSE MATERIAL
FUTURE EVENTS CONCERNING BOEING COULD AFFECT
THE VALUE RECEIVED ON ANY EXCHANGE DATE OR
CALL DATE WITH RESPECT TO THE NOTES AND
THEREFORE THE TRADING PRICES OF THE NOTES.
NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES
MAKE ANY REPRESENTATION TO ANY PURCHASER OF
NOTES AS TO THE PERFORMANCE OF BA STOCK.
The Company or its affiliates may presently
or from time to time engage in business with
Boeing including extending loans to, or
making equity investments in, Boeing or
providing advisory services to Boeing,
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 Boeing
and, in addition, one or more affiliates of
the Company may publish research reports with
respect to Boeing. The Company does not make
any representation to any purchaser of Notes
with respect to any matters whatsoever
relating to Boeing. Any prospective
purchaser of a Note should undertake an
independent investigation of Boeing as in its
judgment is appropriate to make an informed
decision with respect to an investment in BA
Stock.
Historical Information......... The following table sets forth the high and
low Market Price during 1992, 1993, 1994, and
during 1995 through September 18, 1995, and
the Market Price on September 18, 1995. All
Market Prices are rounded to the nearest
one-tenth of a cent, and certain Market
Prices have been adjusted for stock splits.
The Market Prices listed below have been
derived from publicly disseminated
information that the Company believes to be
accurate. Neither the Company nor the Agent
makes any representation as to the accuracy
of such information. The historical prices
of BA Stock should not be taken as an
indication of future performance, and no
assurance can be given that the price of BA
Stock will increase sufficiently to cause the
beneficial owners of the Notes to receive an
amount in excess of the principal amount on
any Exchange Date or Call Date.
<TABLE>
<CAPTION>
Boeing High Low Last
-------------------- ---------- -------- --------
(CUSIP # 097023105)
<S> <C> <C> <C>
1992................ 54.375 33.750
1993................ 44.625 33.625
1994................ 49.875 42.500
1995................ 70.750 44.500 70.750
</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 BA Stock, in
options contracts on BA Stock 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 Exchange Ratio.
Purchase activity could potentially increase
the prices of BA Stock, and therefore
effectively increase the level to which BA
Stock must rise before a holder of a Note
will receive more than the accreted principal
amount on any Exchange Date or Call Date.
Although the Company has no reason to believe
that its hedging activity will have a material
impact on the price of BA Stock or such
options, there can be no assurance that the
Company will not affect such prices as a
result of its hedging activities. The
Company, through its subsidiaries, is likely
to modify its hedge position throughout the
life of the Notes by purchasing and selling
the securities and instruments listed above
and other available securities and
instruments.
United States Federal Taxation: United States Holders of the Notes. The
following discussion supplements the "United
States Federal Taxation" section in the
accompanying Prospectus Supplement. The
Notes will be issued with original issue
discount ("OID") equal to the difference
between the Note's Issue Price and its
"stated redemption price at maturity." For
this purpose, the stated redemption price at
maturity of the Notes is equal to the
principal amount. The federal income tax
consequences of Notes issued with OID, as
well as other tax considerations relevant to
the Notes, are discussed in the accompanying
Prospectus Supplement. 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. 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 exercise of the Exchange
Right or upon payment pursuant to the Company
Exchange Right, a United States Holder will
recognize gain or loss equal to the
difference between the amount realized
(which, if the Company delivers BA Stock,
will be the fair market value of such stock
at the time of the exchange, plus any cash
received in lieu of fractional shares) on the
exchange and such Holder's tax basis in the
Note. A United States Holder receiving BA
Stock will have a basis in the BA Stock equal
to its fair market value at the time of the
exchange and a holding period in such stock
beginning the day after the date of the
exchange. Any loss recognized on any
exchange will be treated as capital loss. It
is unclear, however, under existing law
whether gain recognized on any exchange will
be treated as ordinary or capital in
character. Subject to further guidance from
the Internal Revenue Service, 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 upon exercise of the Exchange
Right or the Company Exchange Right.
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 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. The Internal Revenue
Service, however, would not be required to
accept such method as correct.
Any gain or loss recognized on the sale or
other taxable disposition 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.
Foreign Holders of the Notes. As used
herein, the term "Foreign Holder" is a person
or entity that, for United States federal
income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign
partnership, or a non-resident fiduciary of a
foreign estate or trust.
A Foreign Holder will generally not be
subject to United States federal income
taxes, including withholding taxes, on
payments of principal, premium, if any, or
interest on a Note, or any gain arising from
the sale or disposition of a Note; provided
that (i) any such income is not effectively
connected with the conduct of a trade or
business within the United States, (ii) such
Foreign Holder is not a person who owns
(directly or by attribution) ten percent or
more of the total combined voting power of
all classes of stock of the Company, (iii)
the Foreign Holder (if an individual) is not
present in the United States 183 days or more
during the taxable year of the disposition
and (iv) the required certification of the
non-United States status of the beneficial
owner is provided to the Company or the Agent.
The 31% "backup" withholding and information
reporting requirements will generally not
apply to payments by the Company or its
agents of principal, premium, if any, and
interest on a Note, and to proceeds of the
sale or redemption of a Note before maturity,
if the required certification of the holder's
non-United States status is provided to the
Company or the Agent.
Foreign Holders of Notes should consult their
tax advisors regarding the application of
information reporting and backup withholding
in their particular situations, the
availability of an exemption therefrom, and
the procedure for obtaining such an
exemption, if available. Any amounts
withheld from a payment to a Foreign Holder
under the backup withholding rules will be
allowed as a credit against such Holder's
United States federal income tax liability
and may entitle such Holder to a refund,
provided that the required information is
furnished to the United States Internal
Revenue Service (the "Service").
A Note held by an individual who at the time
of his death is not a citizen or domiciliary
of the United States will not be subject to
United States federal estate tax as a result
of such individual's death; provided that (i)
interest paid to such individual on such Note
would not be effectively connected with the
conduct by such individual of a trade or
business within the United States and (ii)
such individual is not a person who owns
(directly or by attribution) ten percent or
more of the total combined voting power of
all classes of stock of the Company.
Foreign Holders of the BA Stock. The
following is a general discussion of certain
U.S. federal income and estate tax
consequences of the ownership and disposition
of BA Stock by a Foreign Holder. This
discussion is based on the Internal Revenue
Code of 1986, as amended (the "Code"), and
administrative interpretations as of the date
hereof, all of which may be changed either
retroactively or prospectively. This
discussion does not address all aspects of
U.S. federal income and estate taxation that
may be relevant to Foreign Holders in light
of their particular circumstances and does
not address any tax consequences arising
under the laws of any state, local or foreign
taxing jurisdiction.
Prospective holders should consult their tax
advisors with respect to the particular tax
consequences to them of holding and disposing
of BA Stock.
Dividends. Subject to the discussion below,
dividends paid to a Foreign Holder of BA
Stock generally will be subject to withholding
tax at a 30% rate or such lower rate as may
be specified by an applicable income tax
treaty. A Foreign Holder may be required to
file certain forms with Boeing and the
Service in order to claim treaty benefits.
Dividends paid to a Foreign Holder at an
address within the United States may be
subject to backup withholding imposed at a
rate of 31% if the Foreign Holder fails to
establish that it is entitled to an exemption
or to provide a correct taxpayer
identification number and other information
to the payor.
Upon the filing of an Internal Revenue
Service Form 4224 with the payor, there will
be no withholding tax on dividends that are
effectively connected with the Foreign
Holder's conduct of a trade or business
within the United States. Instead, the
effectively connected dividends will be
subject to regular U.S. income tax in the same
manner as if the Foreign Holder were a U.S.
resident. A non-U.S. corporation receiving
effectively connected dividends also may be
subject to an additional "branch profits tax"
which is imposed, under certain
circumstances, at a rate of 30% (or such
lower rate as may be specified by an
applicable treaty) of the non-U.S.
corporation's effectively connected earnings
and profits, subject to certain adjustments.
Generally, U.S. corporations must report to
the U.S. Internal Revenue Service the amount
of dividends paid, the name and address of
the recipient, and the amount, if any, of tax
withheld. A similar report is sent to the
holder. Pursuant to tax treaties or other
agreements, the Service may make its reports
available to tax authorities in the
recipient's country of residence.
Gain on Disposition of BA Stock. A Foreign
Holder generally will not be subject to U.S.
federal income tax with respect to gain
realized on a sale or other disposition of BA
Stock unless (i) the gain is effectively
connected with a trade or business of such
holder in the United States, (ii) in the case
of certain Foreign Holders who are
non-resident alien individuals and hold the
BA Stock as a capital asset, such individuals
are present in the United States for 183 or
more days in the taxable year of the
disposition, or (iii) the Company is or has
been a "U.S. real property holding
corporation" within the meaning of Section
897(c)(2) of the Code at any time within the
shorter of the five-year period preceding
such disposition or such holder's holding
period (unless the Foreign Holder qualifies
for certain exceptions to tax on the sale of
stock of a "U.S. real property holding
corporation", including an exception that may
apply to certain holders of 5% or less of a
class of stock).
Information Reporting Requirements and Backup
Withholding on Disposition of BA Stock.
Under current United States federal income
tax law, information reporting and backup
withholding imposed at a rate of 31% will
apply to the proceeds of a disposition of BA
Stock paid to or through a U.S. office of a
broker unless the disposing holder certifies
its non-U.S. status or otherwise establishes
an exemption. Generally, U.S. information
reporting and backup withholding will not
apply to a payment of disposition proceeds if
the payment is made outside the United States
through a non-U.S. office of a non-U.S.
broker. However, U.S. information reporting
requirements (but not backup withholding)
will apply to a payment of disposition
proceeds outside the United States if (A) the
payment is made through an office outside the
United States of a broker that is either (i)
a U.S. person, (ii) a foreign person which
derives 50% or more of its gross income for
certain periods from the conduct of a trade
or business in the United States or (iii) a
"controlled foreign corporation" for U.S.
federal income tax purposes and (B) the
broker fails to maintain documentary evidence
that the holder is a Foreign Holder and that
certain conditions are met, or that the
holder otherwise is entitled to an exemption.
Backup withholding is not an additional tax.
Rather, the tax liability of persons subject
to backup withholding will be reduced by the
amount of tax withheld. If withholding
results in an overpayment of taxes, a refund
may be obtained, provided that the required
information is furnished to the U.S. Internal
Revenue Service.
Federal Estate Tax. An individual Foreign
Holder who is treated as the owner of or has
made certain lifetime transfers of an
interest in the BA Stock will be required to
include the value thereof in his gross estate
for U.S. federal estate tax purposes, and may
be subject to U.S. federal estate tax unless
an applicable estate tax treaty provides
otherwise.
See also "United States Federal Taxation" in
the accompanying Prospectus Supplement.
Supplemental Informaton
Concerning Plan of
Distribution................. Each Agent has represented and agreed that
(i) it has not offered or sold and, prior to
the expiry of the period of six months from
the Settlement Date, will not offer or sell
any Notes to persons in the United Kingdom
except to persons whose ordinary activities
involve them in acquiring, holding, managing
or disposing of investments (as principal or
agent) for the purposes of their businesses
or otherwise in circumstances which have not
resulted and will not result in an offer to
the public in the United Kingdom within the
meaning of the Public Offers of Securities
Regulations 1995; (ii) it has complied and
will comply with all applicable provisions of
the Financial Services Act 1986 with respect
to anything done by it in relation to the
Notes in, from or otherwise involving the
United Kingdom; and (iii) it has only issued
or passed on and will only issue or pass on
in the United Kingdom any document received
by it in connection with the issue of the
Notes to a person who is of a kind described
in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements)
(Exemption) Order 1995 or is a person to whom
such document may otherwise lawfully be
issued or passed on.
ANNEX A
OFFICIAL NOTICE OF EXCHANGE
Dated:[December 21, 1995 or thereafter]
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:
The undersigned holder of the Medium Term Notes, Series C, Senior
Fixed Rate Notes due September 30, 2000 (Exchangeable for Shares of Common
Stock of The Boeing Company) of Morgan Stanley Group Inc. (the "Notes") hereby
irrevocably elects to exercise with respect to the principal amount of the
Notes indicated below, as of the date hereof (or, if this letter is received
after 11:00 a.m. on any NYSE Trading Day, as of the next NYSE Trading Day,
provided that such day is prior to the earliest of (i) September 30, 2000,
(ii) the Call Date and (iii) in the event of a call for cash, the Notice
Date), the Exchange Right as described in Pricing Supplement No. 19 dated
September 18, 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 the fax number indicated, whereupon the Company
will deliver, at its sole option, shares of the Common Stock of The Boeing
Company or cash 3 Business Days after the Exchange Date 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
surrendered for exchange
Receipt of the above Official
Notice of Exchange 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___________________________
