PROSPECTUS Dated March 29, 1995 Pricing Supplement No. 71 to
PROSPECTUS SUPPLEMENT Registration Statement No. 33-57833
Dated March 29, 1995 April 22, 1996
Rule 424(b)(3)
$26,000,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
EXCHANGEABLE NOTES DUE APRIL 30, 2002
Exchangeable For Shares of Common Stock of
FEDERAL NATIONAL MORTGAGE ASSOCIATION
and
STUDENT LOAN MARKETING ASSOCIATION
The Exchangeable Notes due April 30, 2002 (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 $861.45 (86.145% 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 2.5% 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 April 30, 2002.
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 delivery to 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 (i)
10.12898 shares (the "Fannie Mae Exchange Ratio") of the common stock of the
Federal National Mortgage Association ("Fannie Mae" and "Fannie Mae Stock")
and (ii) 6.17547 shares (the "Sallie Mae Exchange Ratio") of the common stock
of the Student Loan Marketing Association ("Sallie Mae" and "Sallie Mae
Stock") (collectively, the "Basket Stocks" and each individually a "Basket
Stock"). The Fannie Mae Exchange Ratio and the Sallie Mae Exchange Ratio were
initially calculated so that the Fannie Mae Stock and the Sallie Mae Stock
constitute 40% and 60%, respectively, of the initial dollar value of the
Basket (as defined herein). Upon exchange, the holder will not receive any
cash payment representing any accrued OID. Such accrued OID will be deemed
paid by the shares of such Basket Stocks received by the holder upon exercise
of the Exchange Right. Each Exchange Ratio will remain constant for the term
of the Notes unless adjusted for certain corporate events; provided, however,
that none of the Exchange Ratios will be adjusted for any original issue
discount ("OID") on the Notes. See "Adjustments to the Exchange Ratios" in
this Pricing Supplement. An Exchange Date will be any NYSE Trading Day (as
defined herein) that falls during the period beginning July 29, 1996 and
ending on the day prior to the earliest of (i) the Maturity Date, (ii) the Call
Date (as defined below) and (iii) in the event of a call for cash as described
under "Company Exchange Right" herein, the Company Notice Date (as defined
herein).
On or after April 30, 1998, the Company may call the Notes, in whole but not
in part, for mandatory exchange into the Basket Stocks at the applicable
Exchange Ratios on the date (the "Call Date") not less than 30 nor more than
60 days after the Company Notice Date, as specified by the Company; provided
that from April 30, 1998 through April 30, 1999 the Company may call the Notes
only if Parity (as defined herein) as determined on the NYSE Trading Day
immediately prior to the Company Notice Date is greater than $1,500; and
provided further that after April 30, 1999, if Parity as determined by the
NYSE Trading Day immediately prior to the Company Notice Date is less than the
applicable Call Price (as defined herein) for such Company 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, the Basket Stocks or cash to be
delivered to holders of Notes will be delivered on the Call Date.
Fannie Mae and Sallie Mae are not affiliated with the Company nor involved in
this offering of the Notes. The Market Prices for the Fannie Mae Stock and
Sallie Mae Stock on the date of this Pricing Supplement were $31.25 and
$77.25, respectively. See "Historical Information" in this Pricing Supplement
for information on the range of Market Prices for Fannie Mae Stock and Sallie
Mae Stock.
The Company will cause Parity and any adjustments to the Exchange Ratios 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 through PS-7 herein.
_____________
PRICE 86.145%
_____________
Agent's
Price to Public Commissions(1) Proceeds to Company
----------------- ---------------- ---------------------
Per Note... 86.145% .25% 85.895%
Total...... $22,397,700 $65,000 $22,332,700
_______________
(1) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount:.............. $26,000,000
Maturity Date:................. April 30, 2002
Specified Currency:............ U.S. Dollars
Issue Price:................... 86.145%
Original Issue Date
(Settlement Date):............. April 29, 1996
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 by the Company for cash as
described under "Company Exchange Right"
below, the holders of Notes will be entitled
upon (a) completion by the holder and
delivery to 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
(b) delivery on such date of such Notes to
the Trustee, to exchange each $1,000
principal amount of Notes for (i) 10.12898
shares of Fannie Mae Stock and (ii) 6.17547
shares of Sallie Mae Stock (collectively, the
"Basket Stocks" and individually, a "Basket
Stock"), subject in each case to adjustment
as described under "Adjustments to the
Exchange Ratios" below. Upon any such
exchange, the Company will deliver the shares
of such Basket Stocks. 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
Date.
The Company shall, or shall cause the
Calculation Agent to, deliver such Basket
Stocks to the Trustee for delivery to the
holders.
No Fractional Shares:.......... If upon any exchange of the Notes the Company
delivers any Basket Stock, the Company will
pay cash in lieu of delivering fractional
shares of any such Basket Stock in an amount
equal to the corresponding fractional Market
Price as determined by the Calculation Agent
on such Exchange Date.
Exchange Ratios:............... The Exchange Ratios for Fannie Mae Stock and
the Sallie Mae Stock (each, an "Exchange
Ratio") are 10.12898 (the "Fannie Mae
Exchange Ratio") and 6.17547 (the "Sallie Mae
Exchange Ratio"), respectively, subject in
each case to adjustment for certain corporate
events. See "Adjustments to Exchange Ratios"
below.
Exchange Date:................. Any NYSE Trading Day that falls during the
period beginning July 29, 1996 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
Company Notice Date.
Company Exchange Right:........ On or after April 30, 1998, the Company may
call the Notes, in whole but not in part, for
mandatory exchange on the Call Date into the
Basket Stocks at the applicable Exchange
Ratios; provided that, from April 30, 1998
through April 30, 1999, the Company may only
call the Notes if Parity on the NYSE Trading
Day immediately preceding the Company Notice
Date is greater than $1,500; and provided
further that after April 30, 1999, if Parity
as determined by the Calculation Agent on the
NYSE Trading Day immediately prior to the
Company Notice Date is less than the
applicable Call Price for such Company Notice
Date, the Company will pay such Call Price
in cash on the Call Date. If the Notes are
so called for mandatory exchange by the
Company, then, unless a holder subsequently
exercises the Exchange Right (the exercise of
which will not be available to the holder
following a call for cash in an amount equal
to the Call Price), the Basket Stocks 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 an exchange by the
Company, the holder will not receive any
additional cash payment representing any
accrued OID. Such accrued OID will be deemed
paid by the delivery of the Basket Stocks or
cash. The Company shall, or shall cause the
Calculation Agent to, deliver such Basket
Stocks or cash to the Trustee for delivery to
the holders.
On or after the Company Notice Date (other
than with respect to a call of the Notes for
cash by the Company) holders of the Notes will
continue to be entitled to exercise the
Exchange Right and receive any amounts
described under "Exchange Right" above.
Company Notice Date:........... Any NYSE Trading Day on or after April 30,
1998 on which the Company issues its notice
of mandatory exchange.
Parity:........................ With respect to any NYSE Trading Day, an
amount equal to the sum of (i) the Fannie Mae
Exchange Ratio times the Market Price (as
defined below) of Fannie Mae Stock and (ii)
the Sallie Mae Exchange Ratio times the
Market Price of Sallie Mae Stock, in each
case as such Market Prices shall be
determined on such NYSE Trading Day.
Call Price:.................... The table below shows indicative Call Prices
for each $1,000 principal amount of Notes on
April 30, 1998 and at each April 30
thereafter to and including the Maturity
Date. The Call Price for each $1,000
principal amount of Notes called for mandatory
exchange on Call Dates between such
indicative dates would include an additional
amount reflecting any additional OID accrued
from the next preceding date in the table
through the applicable Call Date. Such
additional accreted amount, as determined by
the Calculation Agent, will be calculated on
a semiannual bond-equivalent basis based on
the Call Price for the immediately preceding
Call Date indicated in the table below.
Accrued Original
Issue Discount
Call Date Issue Price at 2.5% Call Price
- ----------------- ------------- ------------------ ------------
April 30, 1998 $861.45 $43.95 $905.40
April 30, 1999 $861.45 $66.73 $928.18
April 30, 2000 $861.45 $90.08 $951.53
April 30, 2001 $861.45 $114.01 $975.46
Maturity $861.45 $138.55 $1,000.00
Market Price:.................. If a Basket Stock (or any other security for
which a Market Price must be determined) is
listed on a national securities exchange, or
is traded on 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 one share of such Basket
Stock (or one unit of any such other
security) for any Exchange Date 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 each 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 for such Basket Stock pursuant to
clause (i) or (ii) of the preceding sentence,
the applicable Market Price for such Basket
Stock on such Exchange Date shall be the
mean, as determined by the Calculation Agent,
of the bid prices for the 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 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 ("NYSE"), as
determined by the Calculation Agent, and on
which a Market Disruption Event has not
occurred.
Basket:........................ 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 approximate dollar value of
each Basket Stock represented in the Basket,
the initial weight assigned to each Basket
Stock and the Initial Exchange Ratio of each
Basket Stock as of the date of this Pricing
Supplement:
<TABLE>
<CAPTION>
Dollar Value
Issuer of Initial Represented Initial
the Market in the Original Initial Exchange
Basket Stock (1) Price (2) Basket Value Weight Ratio(2)
- -------------------------------- ------------- ----------------------- ----------- ------------
<S> <C> <C> <C> <C>
Federal National
Mortgage
Association $31.354 $317.584 40% 10.12898
Student Loan
Marketing
Association $77.140 $476.376 60% 6.17547
<FN>
(1) The common stocks of the two United States corporations listed herein
are currently traded on the NYSE.
(2) Initial Market Prices and Initial Exchange Ratios were determined
based on prices of the Fannie Mae Stock and the Sallie Mae Stock on the
date of this Pricing Supplement and on the days immediately prior to that
of this Pricing Supplement.
</TABLE>
The initial Exchange Ratio 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 Basket so that each Basket Stock
represents the approximate percentage and
Dollar Value Represented in the Original
Basket Value as assigned to it in the table
above as of the date of this Pricing
Supplement. The respective Exchange Ratios
will remain constant for the term of the
Notes unless adjusted for certain corporate
events. See "Adjustments to the Exchange
Ratios."
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 Ratios
or determining the Market Price for each
Basket Stock or whether a Market Disruption
Event has occurred. See "Adjustment to the
Exchange Ratios" 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:.......... $138.55 per $1,000 principal amount of Notes
Original Yield to Maturity:.... 2.5% 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 the
issuers of the Basket Stocks and, although
the Company as of the date of this Pricing
Supplement does not have any material
non-public information concerning such
issuers, corporate events of any such issuer,
including those described below in
"Adjustments to the Exchange Ratios," are
beyond the Company's ability to control and
are difficult to predict.
The issuers of the Basket Stocks are not
involved in the offering of the Notes and
have 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. The
issuers of the Basket Stocks will not receive
any of the proceeds of the offering of the
Notes made hereby and is not responsible for,
and have 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 the Basket Stocks, including, but not
limited to, the volatility of the Basket
Stocks, the dividend rate on the Basket
Stocks, 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 the Basket
Stocks depend 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 Parity above the
Issue 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, Parity is
below, equal to or not sufficiently above the
Issue Price. In addition, the appreciation,
if any, in the value of one Basket Stock may
be reduced, or entirely offset, by the
depreciation in the other Basket Stock. The
historical market prices of the Basket Stocks
should not be taken as an indication of
future performance of the Basket Stocks
during the term of any Note or of the future
value of Parity.
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 Ratios 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
Ratios:....................... The Fannie Mae Exchange Ratio and Sallie
Mae Exchange Ratio will each be adjusted as
follows:
1. If any of the Basket Stocks are subject
to a stock split or reverse stock split, then
once such split has become effective, the
Exchange Ratio for such Basket Stock will be
adjusted to equal the product of the prior
Exchange Ratio of such Basket Stock and the
number of shares of such Basket Stock issued
in such stock split or reverse stock split
with respect to one share of such Basket
Stock.
2. If any of the Basket Stocks is subject to
a stock dividend (issuance of additional
shares of such Basket Stock that is given
ratably to all holders of such Basket Stock),
then once the dividend on the applicable
Basket Stock has become effective and the
applicable Basket Stock is trading
ex-dividend, the applicable Exchange Ratio
will be adjusted so that the new Exchange
Ratio for the applicable Basket Stock shall
equal the prior Exchange Ratio plus the
product of (i) the number of shares issued
with respect to one share of such Basket
Stock and (ii) the prior Exchange Ratio.
3. There will be no adjustments to any
Exchange Ratio to reflect cash dividends or
other distributions paid with respect to any
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 the applicable Basket Stock by
an amount equal to at least 10% of the Market
Price of such Basket 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, the Exchange
Ratio with respect to such Basket 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 a Basket
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 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 any Basket Stock described in
paragraph 6 below that also constitutes an
Extraordinary Dividend shall only cause an
adjustment to the applicable Exchange Ratio
pursuant to paragraph 6.
4. If the issuer of any Basket Stock 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 shares
of the applicable Basket Stock so long as a
Market Price for such Basket Stock is
available. If a Market Price is no longer
available for the applicable Basket Stock for
whatever reason, including the liquidation of
the issuer of such Basket Stock or the
subjection of such issuer to a proceeding
under any applicable bankruptcy, insolvency
or other similar law, then the value of such
Basket Stock will equal zero for so long as
the applicable Market Price is not available.
5. If there occurs any reclassification or
change of any Basket Stock, or if the issuer
of such Basket Stock 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 the issuer of
such Basket Stock as an entirety or
substantially as an entirety, in each case as
a result of which the holders of such Basket
Stock shall be entitled to receive stock,
other securities or other property or assets
(including cash) with respect to or in
exchange for such Basket 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
(including cash) 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 shares of such applicable Basket
Stock immediately prior to any such corporate
event. At such time, no adjustment will be
made to the applicable Exchange Ratio.
6. If the issuer of any Basket Stock issues
to all holders of shares of such Basket Stock
equity securities of an issuer other than the
Issuer of such Basket Stock (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 the applicable Basket Stock at
the time of the issuance of such new equity
securities and the number of shares of the
new equity securities issued with respect to
one share of the applicable Basket Stock.
No adjustments to any Exchange Ratio will be
required unless such adjustment would require
a change of at least 0.1% in the applicable
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 any 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
any Basket Stock.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to the Exchange
Ratios 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 any of
the Exchange Ratios upon written request by
any holder of the Notes.
Market Disruption Event:....... "Market Disruption Event" means:
(i) a suspension, absence or material
limitation of trading of any 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 any
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 NYSE, any other
self-regulatory organization, the Securities
and Exchange Commission or any other exchange
relevant to the determination of the Market
Price 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 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 such Basket Stock and (5) "a
suspension, absence or material limitation of
trading" on the primary securities market on
which options contracts related to any Basket
Stock are traded will not include any time
when such securities market is itself closed
for trading under ordinary circumstances.
Public Information............. Fannie Mae and Sallie Mae each periodically
publish certain financial and other
information, which is available from Fannie
Mae and Sallie Mae, respectively, upon
request and which is delivered to the NYSE at
11 Wall Street, New York, New York 10005. 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 A BASKET STOCK OR OF ANY AFFILIATE
THEREOF. 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 ANY BASKET STOCK (AND
THEREFORE THE INITIAL MARKET PRICE AND THE
EXCHANGE RATIO FOR SUCH BASKET STOCK), 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 VALUE RECEIVED
ON ANY EXCHANGE DATE OR CALL DATE 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 MAKES ANY REPRESENTATION TO ANY
PURCHASER OF NOTES AS TO THE PERFORMANCE OF
ANY BASKET STOCK.
The Company or its affiliates may presently
or from time to time engage in business with
the issuers of the Basket Stocks including
extending loans to, or making equity
investments in, such Basket Stocks or
providing advisory services to the issuers of
the Basket Stocks, 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 the Basket Stocks 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 Notes with respect to any matters
whatsoever relating to such Basket Stocks.
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 1993, 1994, 1995 and during 1996
through April 22, 1996. The Market Prices on
April 22, 1996 for Fannie Mae Stock and
Sallie Mae Stock were $31.25 and $77.25,
respectively. Beneath the name of each
issuer is the CUSIP number for the security
included in the Basket relating to such
issuer. The Market Prices and Dividends per
Share listed below were obtained from
Bloomberg Financial Markets, and the Company
believes such information to be accurate.
Neither the Company nor the agent makes any
representation as to the accuracy of such
information. 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 beneficial owners of the Notes to
receive an amount in excess of the principal
amount on any Exchange Date or Call Date.
Dividends
High Low Per Share
---- --- ---------
Fannie Mae Stock*
(CUSIP #313586109)
Calendar Year
1993
First Quarter 21 1/8 18 27/32 .1
Second Quarter 21 3/16 18 3/4 .115
Third Quarter 21 1/4 18 15/16 .115
Fourth Quarter 20 13/32 18 15/32 .13
1994
First Quarter 22 9/32 19 7/16 .15
Second Quarter 21 15/16 19 7/16 .15
Third Quarter 22 11/32 19 1/2 .15
Fourth Quarter 19 5/8 17 1/32 .15
1995
First Quarter 20 25/32 17 15/32 .17
Second Quarter 25 20 5/16 .17
Third Quarter 26 11/32 22 21/32 .17
Fourth Quarter 31 3/16 25 19/32 .17
1996
First Quarter 35 3/8 29 3/4 .19
Second Quarter 34 3/8 29 3/8 .19
(to April 22, 1996)
_________
* Historical Prices and Dividends per Share have been adjusted for a 4 for
1 stock split of the Fannie Mae Stock, which became effective in the First
Quarter of 1994.
Dividends
High Low Per Share
---- --- ---------
Sallie Mae Stock
(CUSIP #863871505)
Calendar Year
1993
First Quarter 74 1/2 42 1/2 .3
Second Quarter 50 40 .3
Third Quarter 49 1/8 41 1/2 .3
Fourth Quarter 47 1/4 42 1/8 .35
1994
First Quarter 49 3/4 43 1/8 .35
Second Quarter 43 7/8 36 .35
Third Quarter 38 3/4 32 1/4 .35
Fourth Quarter 34 1/2 31 3/8 .37
1995
First Quarter 38 5/8 33 1/4 .37
Second Quarter 48 1/4 35 .37
Third Quarter 55 3/8 47 1/4 .37
Fourth Quarter 70 3/4 56 .4
1996
First Quarter
Second Quarter 85 1/2 63 3/4 .4
(to April 22, 1996) 82 5/8 73 5/8
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 and prior to the date of this Pricing
Supplement, the Company, through its
subsidiaries, hedged its anticipated exposure
in connection with the Notes by taking
positions in the Basket Stocks. Such hedging
was carried out in a manner designed to
minimize any impact on the prices of the
Basket Stocks. Purchase activity could
potentially have increased the prices of any
or all of the Basket Stocks and therefore
effectively have increased the level to which
the Basket Stocks must rise before a holder
of a Note will receive more than the accreted
principal amount on any Exchange Date or Call
Date. The Company, through its subsidiaries,
is likely to modify its hedge position
throughout the life of the Notes by
purchasing and selling the Basket Stocks,
options contracts on such Basket Stocks
listed on major securities markets or
positions in any other instruments that it
may wish to use in connection with such
hedging. Although the Company has no reason
to believe that its hedging activity had or
will have a material impact on the price of
the Basket Stocks or such options, there can
be no assurance that the Company did not or
will not affect such prices as a result of its
hedging activities.
United States Federal Taxation: United States Holders of the Notes. The
following discussion is based on the opinion
of Davis Polk & Wardwell, special tax counsel
to the Company. This discussion supplements
the "United States Federal Taxation" section
in the accompanying Prospectus Supplement.
Any limitations on disclosure and any defined
terms contained therein are equally
applicable to the summary below. The Notes
will be issued with original issue discount
("OID") equal to the difference between the
Notes' Issue Price and their "stated
redemption price at maturity." For this
purpose, the stated redemption price at
maturity of the Notes is equal to the
principal amount.
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 Basket
Stocks, 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
any of the Basket Stocks will have a basis in
such Basket 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. With
respect to accrual basis taxpayers receiving
the Call Price in cash pursuant to the
Company Exchange Right, such accrual basis
taxpayers may recognize gain or loss at the
time the Notice is received rather than at
the time of payment. 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 (other than
pursuant to the Exchange Right or the Company
Exchange Right or upon maturity of the Notes)
of a Note prior to maturity will be treated
as capital in character.
ANNEX A
OFFICIAL NOTICE OF EXCHANGE
Dated: On or after July 29, 1996
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: James C. Jurney)
Dear Sirs:
The undersigned holder of the Medium Term Notes, Series C, Senior Fixed
Rate Notes due April 30, 2002 (Exchangeable for Shares of Common Stock of
Federal National Mortgage Association ("Fannie Mae Stock") and Student Loan
Marketing Association ("Sallie Mae Stock") (collectively, the "Basket
Stocks")) 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) April 30, 2002, (ii) the Call Date and (iii) in
the event of a call for cash, the Company Notice Date), the Exchange Right as
described in Pricing Supplement No. 71 dated April 22, 1996 (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. Upon receipt of this notice, the Company will
deliver shares of the Basket Stocks 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_________
