Amendment No. 1 to
PROSPECTUS Dated May 1, 1996 Pricing Supplement No. 14 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-01655
Dated May 2, 1996 Dated June 12, 1996
Rule 424(b)(3)
$20,100,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES E
EQUITY LINKED NOTES DUE JUNE 26, 1997
The Equity Linked Notes due June 26, 1997 (the "Notes") are Medium-Term Notes,
Series E of Morgan Stanley Group Inc. (the "Company"), as further described
herein and in the Prospectus Supplement under "Description of Notes - Fixed
Rate Notes" and " - Notes Linked to Commodity Prices, Single Securities,
Baskets of Securities or Indices." The Notes are being issued in minimum
denominations of $100,000 and will mature on June 26, 1997 (the "Maturity
Date"). There will be no periodic payments of interest on the Notes. The
Notes will not be redeemable by the Company in whole or in part prior to the
Maturity Date other than under the circumstances described under "Description
of Notes - Tax Redemption" in the accompanying Prospectus Supplement. The
Notes will be issued only in bearer form, which form is further described
under "Description of Notes - Forms, Denominations, Exchange and Transfer" in
the accompanying Prospectus Supplement. Notes in bearer form will not be
exchangeable at any time for Notes in registered form.
At maturity, the holder of each Note will receive the par amount of such Note
($100,000) ("Par") plus an amount (the "Supplemental Redemption Amount") based
on the percentage decrease, if any, in the Final Index Value (as defined
herein) of the S&P 500 Composite Stock Price Index (the "S&P 500 Index"), as
calculated by Standard & Poor's ("S&P"), a Division of the McGraw-Hill
Companies, Inc., from the Initial Index Value (as defined herein), as further
described in this Pricing Supplement. The Supplemental Redemption Amount, if
any, payable with respect to each Note at maturity will be calculated on the
Determination Date (as defined herein) and will equal the product of (i) the
par amount of such Note and (ii) a fraction, the numerator of which shall be
the Initial Index Value less the Final Index Value, and the denominator of
which shall be the Initial Index Value. The Supplemental Redemption Amount
cannot be less than zero. The Initial Index Value has been set to equal
669.04. The Final Index Value will equal the S&P 500 Index closing value on
June 12, 1997, except in the case of certain Market Disruption Events (as
defined herein). If the Final Index Value is equal to or greater than the
Initial Index Value, the holder of each Note will be repaid the par amount of
such Note, but will not receive any Supplemental Redemption Amount.
For information as to the calculation of the Supplemental Redemption Amount,
and certain tax consequences to beneficial owners of the Notes, see
"Supplemental Redemption Amount," "Final Index Value," "Determination Date"
and "United States Federal Taxation" in this Pricing Supplement.
The Company will cause the "Supplemental Redemption Amount" to be determined
by Morgan Stanley & Co. Incorporated (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.
MORGAN STANLEY & CO.
Incorporated
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount:.............. $20,100,000
Maturity Date:................. June 26, 1997
Interest Rate:................. 0.00% per annum
Specified Currency:............ U.S. Dollars
Issue Price:................... 100%
Settlement Date (Original Issue
Date):......................... June 26, 1996
Common Code.................... 6746586
ISIN........................... XS0067465863
Book Entry Note or Certificated
Note:.......................... Book Entry
Senior Note or Subordinated
Note:.......................... Senior
Minimum Denominations:......... $100,000
Trustee:....................... Chemical Bank
Maturity Redemption Amount:.... At maturity (including as a result of
acceleration or otherwise), the holder of
each Note will receive the par amount of such
Note ($100,000) ("Par") plus the Supplemental
Redemption Amount, if any. References herein
to "Notes" refer to each $100,000 principal
amount of any Note.
Supplemental Redemption
Amount:........................ The Supplemental Redemption Amount payable
with respect to each Note at maturity shall
be calculated on the Determination Date (as
defined below) and shall be an amount equal
to the greater of (a) the product of (i) the
par amount of such Note and (ii) a fraction
the numerator of which shall be the Initial
Index Value less the Final Index Value and
the denominator of which shall be the Initial
Index Value and (b) zero. The Supplemental
Redemption Amount is described by the
following formula:
Par x (Initial Index Value - Final Index Value)
-----------------------------------------
Initial Index Value
; provided that the Supplemental Redemption
Amount shall not be less than zero.
The Company shall cause the Calculation Agent
to provide written notice to the holder of
each Note and to the Trustee at its New York
office, on which notice the Trustee may
conclusively rely, of the Supplemental
Redemption Amount, on or prior to 11:00 a.m.
on the Business Day preceding the Maturity
Date. See "Discontinuance of the S&P 500
Index; Alteration of Method of Calculation"
below.
All percentages resulting from any
calculation with respect to 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.
Initial Index Value:........... The Initial Index Value is 669.04.
Final Index Value:............. The Final Index Value shall be the Index
Closing Value (as defined below) on the
Determination Date, as determined by the
Calculation Agent.
Index Closing Value:........... The Index Closing Value, as of the
Determination Date, will equal the closing
value of the S&P 500 Index or any Successor
Index (as defined below) at the regular
official weekday close of trading on such
Determination Date. See "Discontinuance of
the S&P 500 Index; Alteration of Method of
Calculation."
References herein to the S&P 500 Index shall
be deemed to include any Successor Index,
unless the context requires otherwise.
Trading Day:................... A day on which trading is generally
conducted (i) on the New York Stock
Exchange ("NYSE"), the American Stock
Exchange, Inc. ("AMEX"), and the NASDAQ
National Market ("NASDAQ NMS"), (ii) on
the Chicago Mercantile Exchange and (iii)
on the Chicago Board of Options Exchange,
as determined by the Calculation Agent.
Determination Date:............ The Determination Date shall be June 12, 1997
or, if such date is not a Trading Day, the
next succeeding Trading Day, unless there is
a Market Disruption Event on such Trading
Day. If a Market Disruption Event occurs on
any such Trading Day, the Determination Date
shall be the immediately succeeding Trading
Day during which no Market Disruption Event
shall have occurred; provided that if a
Market Disruption Event has occurred on each
of the five Trading Days immediately
succeeding June 12, 1997, then (i) such fifth
succeeding Trading Day will be deemed to be
the Determination Date, notwithstanding the
occurrence of a Market Disruption Event on
such day and (ii) with respect to any such
fifth Trading Day on which a Market
Disruption Event occurs, the Calculation
Agent will determine the value of the S&P 500
Index on such fifth Trading Day in accordance
with the formula for and method of
calculating the S&P 500 Index last in effect
prior to the commencement of the Market
Disruption Event, using the closing price
(or, if trading in the relevant securities
has been materially suspended or materially
limited, its good faith estimate of the
closing price that would have prevailed but
for such suspension or limitation) on such
Trading Day of each security most recently
comprising the S&P 500 Index.
Market Disruption Event:....... "Market Disruption Event" means, with
respect to the S&P 500 Index:
(i) a suspension, absence or material
limitation of trading of 100 or more of the
securities included in the S&P 500 Index on
the primary market for such securities 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,
absence or material limitation of trading on
the primary market for trading in futures or
options contracts related to the S&P 500
Index 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 or market, (2)
a decision to permanently discontinue trading
in the relevant futures or 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 NYSE, 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 a futures or options
contract on the S&P 500 Index by the primary
securities market related to such contract by
reason of (a) a price change exceeding limits
set by such exchange or market, (b) an
imbalance of orders relating to such
contracts or (c) a disparity in bid and ask
quotes relating to such contracts will
constitute a suspension or material
limitation of trading in futures or
options contracts related to the S&P 500
Index and (5) a "suspension, absence or
material limitation of trading" on the
primary market on which futures or options
contracts related to the S&P 500 Index are
traded will not include any time when such
market is itself closed for trading under
ordinary circumstances.
Calculation Agent:............. Morgan Stanley & Co. Incorporated ("MS &
Co.")
All determinations made by the Calculation
Agent shall be at the sole discretion of
the Calculation Agent and shall, in the
absence of manifest error, be conclusive
for all purposes and binding on the
Company and holders of the Notes.
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 Index Value or
whether a Market Disruption Event has
occurred. See "Discontinuance of the S&P
Index; Alteration of Method of
Calculation" below and "Market Disruption
Event" above. 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 security,
including the following.
If the Final Index Value of the S&P 500 Index
exceeds or is equal to the Initial Index
Value, the holders of the Notes will receive
only the par amount of each Note at maturity.
Because the Final Index Value will be based
upon the closing value of the S&P 500 Index
on a specified day (the Determination Date),
a significant decrease in the S&P 500 Index
subsequent to issuance may be
substantially or entirely offset by
subsequent increases in the value of the
S&P 500 Index on or prior to the
Determination Date.
There will be no periodic payments of
interest on the Notes as there would be 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. Because the Supplemental Redemption
Amount may be equal to zero, the effective
yield to maturity may be less than that which
would be payable on such a conventional
fixed-rate debt security.
The return of only the par amount of a Note
at maturity may not compensate the holder for
any opportunity cost implied by inflation and
other factors relating to the time value of
money.
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. It is expected that the secondary
market for the Notes will be affected by the
creditworthiness of the Company and by a
number of factors, including, but not limited
to, the volatility of the S&P 500 Index,
dividend rates on the stocks underlying the
S&P 500 Index, the time remaining to the
Determination Date and to the maturity of the
Notes and market interest rates. In
addition, the Final Index Value depends on a
number of interrelated factors, including
economic, financial and political events,
over which the Company has no control. The
value of the Notes prior to maturity is
expected to depend primarily on market
interest rates and the extent of the
depreciation or appreciation of the S&P 500
Index from the Initial Index Value through
the Determination Date. The price at which a
holder will be able to sell the Notes prior
to maturity may be at a discount, which could
be substantial, from the par amount thereof,
if, at such time, the S&P 500 Index or the
Final Index Value, if determined, is above,
equal to, or not sufficiently below the
Initial Index Value.
The historical S&P 500 Index values should
not be taken as an indication of the future
performance of the S&P 500 Index during the
term of the Notes. While the trading prices
of the stocks underlying the S&P 500 Index
will determine the value of the S&P 500
Index, it is impossible to predict whether
the value of the S&P 500 Index will fall
or rise. Trading prices of the stocks
underlying the S&P 500 Index will be
influenced by both the complex and
interrelated political, economic,
financial and other factors that can
affect the capital markets generally and
the equity trading markets on which the
underlying stocks are traded, and by
various circumstances that can influence
the values of the underlying stocks in a
specific market segment or a particular
underlying stock.
The policies of S&P concerning additions,
deletions and substitutions of the stocks
underlying the S&P 500 Index and the manner
in which S&P takes account of certain changes
affecting such underlying stocks may affect
the value of the S&P 500 Index. The policies
of S&P with respect to the calculation of the
S&P 500 could also affect the value of the
S&P 500 Index. S&P may discontinue or
suspend calculation or dissemination of
the S&P 500 Index. Any such actions could
affect the value of the Notes. See "S&P
500 Index" and "Discontinuance of the S&P
500 Index; Alteration of Method of
Calculation" below.
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 Index Value
or whether a Market Disruption Event has
occurred. See "Discontinuance of the S&P
Index; Alteration of Method of
Calculation" 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 Final Index
Value that the Calculation Agent may be
required to make 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.
If a bankruptcy proceeding is commenced in
respect of the Company, the claim of a holder
of a Note may, under Section 502(b)(2) of
Title 11 of the United States Code, be
limited to the par amount of such Note.
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.
S&P 500 Index:................. The S&P 500 Index is published by S&P and is
intended to provide a performance benchmark
for the U.S. equity markets. The calculation
of the value of the S&P 500 Index (discussed
below in further detail) is based on the
relative value of the aggregate Market Value
(as defined below) of the common stocks of
500 companies (the "Component Stocks") as of
a particular time as compared to the
aggregate average Market Value of the common
stocks of 500 similar companies during the
base period of the years 1941 through 1943.
The "Market Value" of any Component Stock is
the product of the market price per share and
the number of the then outstanding shares of
such Component Stock. The 500 companies are
not the 500 largest companies listed on the
NYSE and not all 500 companies are listed on
such exchange. S&P chooses companies for
inclusion in the S&P 500 Index with an aim of
achieving a distribution by broad industry
groupings that approximates the distribution
of these groupings in the common stock
population of the U.S. equity market. S&P
may from time to time, in its sole
discretion, add companies to, or delete
companies from, the S&P 500 Index to achieve
the objectives stated above. Relevant
criteria employed by S&P include the
viability of the particular company, the
extent to which that company represents the
industry group to which it is assigned, the
extent to which the company's common stock is
widely-held and the Market Value and trading
activity of the common stock of that company.
The S&P 500 Index is calculated using a
base-weighted aggregate methodology: the
level of the Index reflects the total Market
Value of all 500 Component Stocks relative to
the S&P 500 Index's base period of 1941-43
(the "Base Period").
An indexed number is used to represent the
results of this calculation in order to make
the value easier to work with and track over
time.
The actual total Market Value of the
Component Stocks during the Base Period has
been set equal to an indexed value of 10.
This is often indicated by the notation
1941-43=10. In practice, the daily
calculation of the S&P 500 Index is computed
by dividing the total Market Value of the
Component Stocks by a number called the Index
Divisor. By itself, the Index Divisor is an
arbitrary number. However, in the context of
the calculation of the S&P 500 Index, it is
the only link to the original base period
value of the Index. The Index Divisor keeps
the Index comparable over time and is the
manipulation point for all adjustments to the
S&P 500 Index ("Index Maintenance").
Index maintenance includes monitoring and
completing the adjustments for company
additions and deletions, share changes, stock
splits, stock dividends, and stock price
adjustments due to company restructurings or
spinoffs.
To prevent the value of the Index from
changing due to corporate actions, all
corporate actions which affect the total
Market Value of the Index require an Index
Divisor adjustment. By adjusting the Index
Divisor for the change in total Market Value,
the value of the S&P 500 Index remains
constant. This helps maintain the value of
the Index as an accurate barometer of stock
market performance and ensures that the
movement of the Index does not reflect the
corporate actions of individual companies in
the Index. All Index Divisor adjustments are
made after the close of trading and after the
calculation of the closing value of the S&P
500 Index. Some corporate actions, such as
stock splits and stock dividends, require
simple changes in the common shares
outstanding and the stock prices of the
companies in the Index and do not require
Index Divisor adjustments.
The table below summarizes the types of S&P
500 Index maintenance adjustments and
indicates whether or not an Index Divisor
adjustment is required.
<TABLE>
<CAPTION> Divisor
Type of Corporate Adjustment
Action Adjustment Factor Required
- ----------------- ----------------- ----------
<S> <C> <C>
Stock split Shares Outstanding multiplied by 2; No
(i.e. 2x1) Stock Price divided by 2
Share issuance Shares Outstanding plus newly issued Shares Yes
(i.e. Change > 5%)
Share repurchase Shares Outstanding minus Repurchased Shares Yes
(i.e. Change > 5%)
Special cash dividends Share Price minus Special Dividend Yes
Company change Add new company Market Value minus old Yes
company Market Value
Rights offering Price of parent company minus Yes
Price of Rights
---------------
Right Ratio
Spinoffs Price of parent company minus Yes
Price of Spinoff Co.
---------------------
Share Exchange Ratio
</TABLE>
Stock splits and stock dividends do not
affect the Index Divisor of the S&P 500
Index, because following a split or dividend
both the stock price and number of shares
outstanding are adjusted by S&P so that there
is no change in the Market Value of the
Component Stock. All stock split and
dividend adjustments are made after the close
of trading on the day before the ex-date.
Each of the corporate events exemplified in
the table requiring an adjustment to the
Index Divisor has the effect of altering the
Market Value of the Component Stock and
consequently of altering the aggregate Market
Value of the Component Stocks (the "Post-
Event Aggregate Market Value"). In order
that the level of the Index (the "Pre-
Event Index Value") not be affected by the
altered Market Value (whether increase or
decrease) of the affected Component Stock,
a new Index Divisor ("New Divisor") is
derived as follows:
Post-Event Aggregate Market Value = Pre-Event Index Value
---------------------
New Divisor
New Divisor = Post-Event Aggregate Market Value
-----------------------------------
Pre-Event Index Value
A large part of the S&P 500 Index maintenance
process involves tracking the changes in the
number of shares outstanding of each of the
S&P 500 Index companies. Four times a year,
on a Friday close to the end of each calendar
quarter, the share totals of companies in the
Index are updated as required by any changes
in the number of shares outstanding. After
the totals are updated, the Index Divisor is
adjusted to compensate for the net change in
the total Market Value of the Index. In
addition, any changes over 5% in the current
common shares outstanding for the S&P 500
Index companies are carefully reviewed on a
weekly basis, and when appropriate, an
immediate adjustment is made to the Index
Divisor.
Hypothetical Supplemental
Redemption Amount:............. The following table illustrates, for a range
of hypothetical Final Index Values, the
Supplemental Redemption Amount for each
$100,000 principal amount of Notes.
Hypothetical Hypothetical
Final Supplemental Redemption
Index Value Amount
-------------------------------- -------------------------
800 $0.00
750 $0.00
700 $0.00
669.04 $0.00
650 $2,845.87
600 $10,319.26
550 $17,792.66
500 $25,266.05
450 $32,739.45
The above figures are for purposes of
illustration only. The actual Supplemental
Redemption Amount, if any, will depend
entirely on the actual Final Index Value.
See "Final Index Value" and "Supplemental
Redemption Amount" above.
Discontinuance of the S&P
500 Index; Alteration of
Method of Calculation:......... If S&P discontinues publication of the
S&P 500 Index and S&P or another entity
publishes a successor or substitute index
that the Calculation Agent determines, in its
sole discretion, to be comparable to the
discontinued S&P 500 Index (such index being
referred to herein as a "Successor Index"),
then the relevant Index Closing Value shall
be determined by reference to the value of
such Successor Index at the close of trading
on the NYSE, the AMEX, NASDAQ NMS or the
relevant exchange or market for the Successor
Index on the Determination Date.
Upon any selection by the Calculation Agent
of a Successor Index, the Calculation Agent
shall cause written notice thereof to be
furnished to the Trustee, to the Company and
to the holders of the Notes within three
Trading Days of such selection.
If S&P discontinues publication of the S&P
500 Index prior to, and such discontinuance
is continuing on, the Determination Date and
the Calculation Agent determines that no
Successor Index is available at such time,
then on such Determination Date, the
Calculation Agent shall determine the Index
Closing Value that would be used in computing
the Supplemental Redemption Amount on such
Determination Date. The Index Closing Value
shall be computed by the Calculation Agent in
accordance with the formula for and method
of calculating the S&P 500 Index last in
effect prior to such discontinuance, using
the closing price (or, if trading in the
relevant securities has been materially
suspended or materially limited, its good
faith estimate of the closing price that
would have prevailed but for such suspension
or limitation) on such Determination Date of
each security most recently comprising the
S&P 500 Index. Notwithstanding these
alternative arrangements, discontinuance of
the publication of the S&P 500 Index may
adversely affect the value of the Notes.
If at any time the method of calculating the
S&P 500 Index or a Successor Index, or the
value thereof, is changed in a material
respect, or if the S&P 500 Index or a
Successor Index is in any other way modified
so that such index does not, in the opinion
of the Calculation Agent, fairly represent
the value of the S&P 500 Index or such
Successor Index had such changes or
modifications not been made, then, from and
after such time, the Calculation Agent shall,
at the close of business in New York City on
the Determination Date, make such
calculations and adjustments as, in the good
faith judgment of the Calculation Agent, may
be necessary in order to arrive at a value of
a stock index comparable to the S&P 500 Index
or such Successor Index, as the case may be,
as if such changes or modifications had not
been made, and calculate the Supplemental
Redemption Amount with reference to the S&P
500 Index or such Successor Index, as
adjusted. Accordingly, if the method of
calculating the S&P 500 Index or a Successor
fiIndex is modified so that the value of such
index is a fraction of what it would have
been if it had not been modified (e.g.,
due to a split in the index), then the
Calculation Agent shall adjust such index
in order to arrive at a value of the S&P
500 Index or such Successor Index as if it
had not been modified (e.g., as if such
split had not occurred).
Alternate Determination Date in
case of an Event of Default:... In case an Event of Default with respect to
any Notes shall have occurred and be
continuing, the amount declared due and
payable upon any acceleration of the Notes
will be determined by the Calculation Agent
and will be equal to the par amount plus the
Supplemental Redemption Amount determined as
though the Determination Date scheduled to
occur on or after such date of acceleration
were the date of acceleration.
Public Information:............ All disclosure contained in this Pricing
Supplement regarding the S&P 500 Index,
including, without limitation, its make-up,
method of calculation and changes in its
components, are derived from publicly
available information prepared by S&P.
Neither the Company nor the Agent take any
responsibility for the accuracy or
completeness of such information.
Historical Information:........ The following table sets forth the high and
low daily closing values, as well as
end-of-quarter closing values, of the S&P 500
Index for each quarter in the period from
January 1, 1991 through June 12, 1996. The
historical values of the S&P 500 Index should
not be taken as an indication of future
performance, and no assurance can be given
that the S&P 500 Index will decrease so as to
cause the holders of the Notes to receive any
Supplemental Redemption Amount (subject to
the provisions described in "Supplemental
Redemption Amount" above).
Daily Index Closing Values
------------------------------------------
Period
High Low End
---- --- ------
1991
1st Quarter.... 376.72 311.49 375.22
2nd Quarter.... 390.45 368.57 371.16
3rd Quarter.... 396.64 373.33 387.86
4th Quarter.... 417.09 375.22 417.09
1992
1st Quarter.... 420.77 403.00 403.69
2nd Quarter.... 418.49 394.50 408.14
3rd Quarter.... 425.27 409.16 417.80
4th Quarter.... 441.28 402.66 435.71
1993
1st Quarter.... 456.34 429.05 451.67
2nd Quarter.... 453.85 433.54 450.53
3rd Quarter.... 463.56 441.43 458.93
4th Quarter.... 470.94 457.48 466.45
1994
1st Quarter.... 482.00 445.55 445.76
2nd Quarter.... 462.37 438.92 444.27
3rd Quarter.... 476.07 446.13 462.71
4th Quarter.... 473.77 445.45 459.27
1995
1st Quarter.... 503.90 459.11 500.71
2nd Quarter.... 551.07 501.85 544.75
3rd Quarter.... 586.77 547.09 584.41
4th Quarter.... 621.69 576.72 615.93
1996
1st Quarter.... 661.45 598.48 645.50
2nd Quarter
(through June 12, 1996) 678.51 631.18 669.04
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,
including hedging market risks associated
with the Supplemental Redemption Amount. On
the date of this Pricing Supplement, the
Company, through its subsidiaries and others,
hedged its anticipated exposure in connection
with the Notes by the purchase and sale of
exchange traded and over the counter options
on the S&P 500 Index, individual stocks
included in the S&P 500 Index, futures
contracts on the S&P 500 Index and options on
such futures contracts. Although the Company
has no reason to believe that its hedging
activity had a material impact on the price
of such options, stocks, futures contracts,
and options on futures 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, is likely to modify its hedge
position throughout the life of the Notes by
purchasing and selling such instruments and
any other instruments that it may wish to use
in connection with such hedging. See also
"Use of Proceeds" in the accompanying
Prospectus.
License Agreement.............. S&P and MS & Co. have entered into a
non-exclusive license agreement providing for
the license to MS & Co., and any of its
affiliated or subsidiary companies, in
exchange for a fee, of the right to use the
S&P 500 Index, which is owned and published
by S&P, in connection with certain
securities, including the Notes.
The license agreement between S&P and MS &
Co. provides that the following language must
be set forth in this Pricing Supplement:
The Notes are not sponsored, endorsed, sold
or promoted by S&P. S&P makes no
representation or warranty, express or
implied, to the holders of the Notes or any
member of the public regarding the
advisability of investing in securities
generally or in the Notes particularly or the
ability of the S&P 500 Index to track general
stock market performance. S&P's only
relationship to the Company is the licensing
of certain trademarks and trade names of S&P
and of the S&P 500 Index, which is
determined, composed and calculated by S&P
without regard to the Company or the Notes.
S&P has no obligation to take the needs of
the Company or the holders of the Notes into
consideration in determining, composing or
calculating the S&P 500 Index. S&P is not
responsible for and has not participated in
the determination of the timing of, prices
at, or quantities of the Notes to be issued
or in the determination or calculation of the
equation by which the Notes are to be
converted into cash. S&P has no obligation
or liability in connection with the
administration, marketing or trading of the
Notes.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR
THE COMPLETENESS OF THE S&P 500 INDEX OR
ANY DATA INCLUDED THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY THE COMPANY,
HOLDERS OF THE NOTES, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE S&P INDEX OR
ANY DATA INCLUDED THEREIN IN CONNECTION
WITH THE RIGHTS LICENSED UNDER THE LICENSE
AGREEMENT DESCRIBED HEREIN OR FOR ANY
OTHER USE. S&P MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND HEREBY EXPRESSLY
DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO
THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED
OF THE POSSIBILITY OF SUCH DAMAGES.
"Standard & Poor's[Registered]",
"S&P[Registered]", "S&P 500[Registered]",
"Standard & Poor's 500," and "500" are
trademarks of McGraw-Hill, Inc. and have been
licensed for use by MS & Co.
United States Federal Taxation: 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 - Foreign Holders" 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 of the
Company for United States federal income tax
purposes. Accordingly, a Foreign Holder will
generally not be subject to United States
federal income tax, including withholding
tax, or estate tax with regard to a Note, if
the other requirements for exemption from tax
listed under "Income Taxes" and "Estate
Taxes" in the "United States Federal Taxation
- Foreign Holders" section in the
accompanying Prospectus Supplement are met.
Recent Developments - Legal
Proceedings:................... On June 11, 1996, an adversary
proceeding was commenced by Orange County,
California and its Treasurer-Tax Collector
against Morgan Stanley in the United
States Bankruptcy Court for the Central
District of California in County of Orange
and Moorlach v. Morgan Stanley & Co.,
Inc. The adversary proceeding is related
to Orange County's Chapter 9 bankruptcy
proceeding pending before the same court.
The complaint asserts that Orange County,
acting through its former Treasurer-Tax
Collector, entered into various reverse
repurchase agreements and other
transactions with Morgan Stanley which
were beyond the County's authority or
ultra vires and, therefore, void. The
complaint also asserts that Morgan Stanley
allowed Orange County to enter into
unsuitable transactions. In addition, the
complaint alleges that Morgan Stanley
violated the automatic stay provisions of
the Bankruptcy Code when it liquidated the
County's collateral and closed out certain
reverse repurchase transactions subsequent
to the County's December 6, 1994
bankruptcy filing. The complaint asserts
claims based on ultra vires, setoff,
equitable subordination, restitution,
enforcement of the automatic stay,
avoidance of post-petition transfers and
negligence and seeks compensatory damages
in an unspecified amount, declaratory and
injunctive relief, restitution, interest,
various costs and attorney's fees.
