PROSPECTUS Dated May 1, 1996 Pricing Supplement No. 29 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-01655
Dated May 1, 1996 July 30, 1996
Rule 424(b)(3)
$11,358,945
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
MANDATORILY EXCHANGEABLE NOTES DUE AUGUST 15, 1997
Mandatorily Exchangeable For Shares of Common Stock of
LEGG MASON INC.
The Mandatorily Exchangeable Notes due August 15, 1997 (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" and "- Exchangeable
Notes."
The principal amount of each of the Notes being offered hereby will be $292.50
(the "Issue Price"). The Notes will mature on August 15, 1997. Interest on
the Notes, at the rate of 3.03% of the principal amount per annum, is payable
quarterly in arrears on each February 15, May 15, August 15 and November 15,
beginning November 15, 1996.
At maturity (including as a result of acceleration or otherwise), the
principal amount of each Note will be mandatorily exchanged by the Company
into a number of shares of the common stock, par value $0.10 per share (the
"LM Stock") of Legg Mason Inc. ("Legg Mason") at the Exchange Rate (or, at
the Company's option, cash equal to $360.00 in the case of clause (a) below).
The Exchange Rate for each $292.50 principal amount of any Note is equal to,
subject to certain adjustments, (a) if the product of the Exchange Factor (as
defined below) and the Market Price per share of LM Stock, determined as of
the maturity of the Notes (as defined herein, the "Maturity Price"), is
greater than $36.00 (the "Cap Price"), (i) the product of (x) the Exchange
Factor and (y) the Cap Price divided by the Maturity Price times (ii) ten
shares of LM Stock, (b) if the Maturity Price is greater than $23.875 (the
"Floor Price") and less than or equal to the Cap Price, the product of the
Exchange Factor and ten shares of LM Stock or (c) if the Maturity Price is
less than or equal to the Floor Price, (i) the product of (x) the Exchange
Factor and (y) the Floor Price divided by the Maturity Price times (ii) ten
shares of LM Stock. The Exchange Factor will be set initially at 1.0, but will
be subject to adjustment upon the occurrence of certain corporate events. See
"Exchange at Maturity," "Maturity Price," "Exchange Factor" and "Antidilution
Adjustments" in this Pricing Supplement.
The opportunity for equity appreciation afforded by an investment in the Notes
is less than that afforded by an investment in the LM Stock because at
maturity a holder may receive less than ten shares of LM Stock per Note. The
value of the LM Stock received by a holder of the Notes upon exchange at
maturity, determined as described herein, may be more or less than the
principal amount of the Notes.
Legg Mason is not affiliated with the Company, is not involved in this
offering of Notes and will have no obligations with respect to the Notes. The
Market Price for LM Stock on the date of this Pricing Supplement was $28.125.
See "Historical Information" in this Prospectus Supplement for information on
the range of Market Prices for LM Stock.
The Company will cause the Market Price, any adjustments to the Exchange
Factor and any other antidilution adjustments to be determined by the
Calculation Agent for The Chase Manhattan 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-4 and PS-5 herein.
----------------
PRICE 100% AND ACCRUED INTEREST
----------------
Agent's Proceeds to
Price to Public(1) Commissions(2) Company(1)
-------------------- ---------------- -------------
Per Note.... 100% 0.25% 99.75%
Total....... $11,358,945 $28,397 $11,330,548
_______________
(1) Plus accrued interest, if any, from August 7, 1996.
(2) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
MORGAN STANLEY & CO.
Incorporated
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount:.......... $11,358,945
Maturity Date:............. August 15, 1997
Interest Rate:............. 3.03% per annum
Interest Payment Dates..... February 15, May 15, August 15 and November 15,
beginning November 15, 1996
Specified Currency:........ U.S. Dollars
Issue Price:............... 100%
Original Issue Date
(Settlement Date):......... August 7, 1996
Book Entry Note or
Certificated Note:......... Book Entry
Senior Note or Subordinated
Note:...................... Senior
Denominations:............. $292.50 and integral multiples thereof
Trustee:................... The Chase Manhattan Bank
Exchange at Maturity:...... At maturity (including as a result of
acceleration or otherwise), the principal amount
of each Note will be mandatorily exchanged by the
Company, upon delivery of such Note to the
Trustee, into a number of shares of LM Stock at
the Exchange Rate (or, at the Company's option,
cash equal to $360.00 in the case of clause (a)
below). The Exchange Rate for each $292.50
principal amount of any Note is equal to (a) if
the Maturity Price (as defined below) is greater
than $36.00 (the "Cap Price"), (i) the product of
(x) the Exchange Factor and (y) the Cap Price
divided by the Maturity Price times (ii) ten
shares of LM Stock, (b) if the Maturity Price is
greater than $23.875 (the "Floor Price") and less
than or equal to the Cap Price, the product of
the Exchange Factor and ten shares of LM Stock or
(c) if the Maturity Price is less than or equal to
the Floor Price, (i) the product of (x) the
Exchange Factor and (y) the Floor Price divided
by the Maturity Price times (ii) ten shares of LM
Stock, subject in each case to any applicable
antidilution adjustments as set forth under
"Antidilution Adjustments" below.
The Company shall, or shall cause the Calculation
Agent to, (i) provide written notice to the
Trustee on or prior to 10:30 a.m. on the NYSE
Trading Day immediately prior to maturity of the
Notes of the Company's determination to deliver
LM Stock or cash equal to $360.00 and (ii)
deliver such shares of LM Stock or cash to the
Trustee for delivery to the holders. The
Calculation Agent shall calculate the Exchange
Factor and determine the Exchange Rate applicable
at the maturity of the Notes. References to
payment "per Note" refer to each $292.50
principal amount of any Note.
No Fractional Shares:...... Upon mandatory exchange of the Notes, the Company
will pay cash in lieu of issuing fractional
shares of LM Stock in an amount equal to the
corresponding fractional Market Price of such
fraction of LM Stock as determined by the
Calculation Agent as of the maturity of the Notes.
Exchange Factor:........... The Exchange Factor will be set initially at 1.0,
but will be subject to adjustment upon the
occurrence of certain corporate events through and
including the second NYSE Trading Day immediately
prior to maturity. See "Antidilution
Adjustments" below.
Initial Price:............. $28.125, the Market Price of LM Stock on the date
of this Pricing
Supplement.
Maturity Price:............ Maturity Price means the product of (i) the
Market Price of one share of LM Stock and (ii)
the Exchange Factor, each determined as of the
second NYSE Trading Day immediately prior to
maturity.
Cap Price:................. $36.00
Floor Price:............... $23.875
Market Price:.............. If LM Stock (or any other security for which a
Market Price must be determined) 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 one share of LM
Stock (or one unit of any such other security) on
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
LM Stock (or any such other security) 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 LM Stock
(or any such other security) obtained from as
many dealers in such stock (or any such other
security), but not exceeding three, as will make
such bid prices available to the Calculation
Agent. The term "NASDAQ NMS" shall include any
successor to such system and the term "OTC
Bulletin Board Service" shall include any
successor service thereto.
NYSE Trading Day:.......... A day on which trading is generally conducted in
the over-the-counter market for equity securities
in the United States and on the New York Stock
Exchange, as determined by the Calculation Agent,
and on which a Market Disruption Event (as
defined below) 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 Factor or other antidilution
adjustments or determining any Market Price or
whether a Market Disruption Event has occurred.
See "Antidilution Adjustments" 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.
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 combine features of equity and debt
instruments. Accordingly, the terms of the Notes
differ from those of ordinary debt securities in
that the value of the LM Stock that a holder of
the Notes will receive upon mandatory exchange of
the principal amount thereof at maturity is not
fixed, but is based on the price of the LM Stock
and the Exchange Rate as determined at such
price. Because the price of the LM Stock is
subject to market fluctuations, the value of the
LM Stock received by a holder of Notes upon
exchange at maturity, determined as described
herein, may be more or less than the principal
amount of the Notes. If the Maturity Price of
the LM Stock is less than $29.25, the amount
receivable upon exchange will be less than the
principal amount of the Notes, in which case an
investment in the Notes may result in a loss.
The opportunity for equity appreciation afforded
by an investment in the Notes is less than that
afforded by an investment in the LM Stock because
at maturity a holder will receive less than ten
shares of LM Stock per Note if the value of a
share of LM Stock (as adjusted by the Exchange
Factor) has appreciated above the Cap Price. In
addition, because the Exchange Rate and the
Maturity Price are determined as of the second
NYSE Trading Day prior to maturity of the Notes
and because the price of LM Stock may fluctuate
after such NYSE Trading Day and prior to its
delivery at maturity, the value of any LM Stock
delivered at maturity may be less than $360.00
even if the Maturity Price, as so determined, was
greater than the Cap Price. The amount payable at
maturity with respect to each Note will not under
any circumstances exceed $360.00 per Note.
Although the amount that holders of the Notes are
entitled to receive at maturity is subject to
adjustment for certain corporate events, such
adjustments do not cover all events that could
affect the Market Price of the LM Stock,
including, without limitation, the occurrence of a
partial tender or exchange offer for the LM Stock
by Legg Mason or any third party. Such other
events may adversely affect the market value of
the Notes.
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.
Securities with characteristics similar to the
Notes are novel securities, and there is
currently no secondary market for the Notes. The
market value for the Notes will be affected by a
number of factors in addition to the
creditworthiness of the Company and the value of
LM Stock, including, but not limited to, the
volatility of LM Stock, the dividend rate on LM
Stock, market interest and yield rates and the
time remaining to the maturity of the Notes. In
addition, the value of LM Stock depends on a
number of interrelated factors, including
economic, financial and political events, that
can affect the capital markets generally and the
market segment of which Legg Mason is a part and
over which the Company has no control. The
market value of the Notes is expected to depend
primarily on changes in the Market Price of LM
Stock. The price at which a holder will be able
to sell Notes prior to maturity may be at a
discount, which could be substantial, from the
principal amount thereof, if, at such time, the
Market Price of one share of LM Stock is below,
equal to or not sufficiently above $29.25. As of
the date of this Pricing Supplement, the Market
Price of one share of LM Stock was below $29.25.
Consequently, if the Market Price of LM Stock
were to remain unchanged at the maturity of the
Notes, holders of the Notes would experience a
loss of principal. The historical Market Prices
of LM Stock should not be taken as an indication
of LM Stock's future performance during the term
of any Note.
The Notes will not be listed on any national
securities exchange or accepted for quotation on
a trading market and, as a result, pricing
information for the Notes may be difficult to
obtain.
The Company is not affiliated with Legg Mason
and, although the Company as of the date of this
Pricing Supplement does not have any material
non-public information concerning Legg Mason,
corporate events of Legg Mason, including those
described below in "Antidilution Adjustments,"
are beyond the Company's ability to control and
are difficult to predict.
Legg Mason 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. Legg Mason
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.
Holders of the Notes will not be entitled to any
rights with respect to the LM Stock (including,
without limitation, voting rights, the rights to
receive any dividends or other distributions in
respect thereof and the right to tender or
exchange LM Stock in any partial tender or
exchange offer by Legg Mason or any third party)
until such time as the Company shall deliver
shares of LM Stock to holders of the Notes at
maturity.
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 Factor and
other antidilution adjustments that may influence
the determination of the amount of LM Stock or
other property receivable at the maturity of the
Notes. See "Antidilution Adjustments" 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.
Antidilution Adjustments:.. The Exchange Factor (and, in the case of
paragraph 5 below, the determination of the
Exchange Rate) will be adjusted as follows:
1. If LM Stock is subject to a stock split or
reverse stock split, then once such split has
become effective, the Exchange Factor will be
adjusted to equal the product of the prior
Exchange Factor and the number of shares issued
in such stock split or reverse stock split with
respect to one share of LM Stock.
2. If LM Stock is subject to a stock dividend
(issuance of additional shares of LM Stock) that
is given ratably to all holders of shares of LM
Stock, then once the dividend has become
effective and LM Stock is trading ex-dividend,
the Exchange Factor will be adjusted so that the
new Exchange Factor shall equal the prior
Exchange Factor plus the product of (i) the
number of shares issued with respect to one share
of LM Stock and (ii) the prior Exchange Factor.
3. There will be no adjustments to the Exchange
Factor to reflect cash dividends or other
distributions paid with respect to LM Stock other
than distributions described in clause (v) of
paragraph 5 below and Extraordinary Dividends as
described below. A cash dividend or other
distribution with respect to LM Stock will be
deemed to be an "Extraordinary Dividend" if such
dividend or other distribution exceeds the
immediately preceding non-Extraordinary Dividend
for LM Stock by an amount equal to at least 10%
of the Market Price of LM 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 LM Stock, the
Exchange Factor with respect to LM Stock will be
adjusted on the ex-dividend date with respect to
such Extraordinary Dividend so that the new
Exchange Factor will equal the product of (i) the
then current Exchange Factor 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 LM 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 LM 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 LM Stock described in clause
(v) of paragraph 5 below that also constitutes an
Extraordinary Dividend shall only cause an
adjustment pursuant to clause (v) of paragraph 5.
4. If Legg Mason issues rights or warrants to
all holders of LM Stock to subscribe for or
purchase LM Stock at an exercise price per share
less than the Market Price of the LM Stock on (i)
the date the exercise price of such rights or
warrants is determined and (ii) the expiration
date of such rights or warrants, and if the
expiration date of such rights or warrants
precedes the maturity of the Notes, then the
Exchange Factor will be adjusted to equal the
product of the prior Exchange Factor and a
fraction, the numerator of which shall be the
number of shares of LM Stock outstanding
immediately prior to the issuance of such rights
or warrants plus the number of additional shares
of LM Stock offered for subscription or purchase
pursuant to such rights or warrants and the
denominator of which shall be the number of
shares of LM Stock outstanding immediately prior
to the issuance of such rights or warrants plus
the number of additional shares of LM Stock which
the aggregate offering price of the total number
of shares of LM Stock so offered for subscription
or purchase pursuant to such rights or warrants
would purchase at the Market Price on the
expiration date of such rights or warrants, which
shall be determined by multiplying such total
number of shares offered by the exercise price of
such rights or warrants and dividing the product
so obtained by such Market Price.
5. If (i) there occurs any reclassification of
LM Stock, (ii) Legg Mason, or any surviving
entity or subsequent surviving entity of Legg
Mason (a "Legg Mason Successor") has been subject
to a merger, combination or consolidation and is
not the surviving entity, (iii) any statutory
exchange of securities of Legg Mason or any Legg
Mason Successor with another corporation occurs
(other than pursuant to clause (ii) above), (iv)
Legg Mason is liquidated, (v) Legg Mason issues
to all of its shareholders equity securities of
an issuer other than Legg Mason (other than in a
transaction described in clauses (ii), (iii) or
(iv) above) (a "Spin-off Event") or (vi) a tender
or exchange offer is consummated for all the
outstanding shares of LM Stock (any such event in
clauses (i) through (vi) a "Reorganization
Event"), the method of determining the Exchange
Rate in respect of the amount payable upon
exchange at maturity for each Note will be
adjusted to provide that each holder of Notes
will receive at maturity, in respect of each
$292.50 principal amount of each Note,
securities, cash or any other assets distributed
in any such Reorganization Event, including, in
the case of a Spin-off Event, the share of LM
Stock with respect to which the spun-off security
was issued (collectively, the "Exchange
Property") (or, at the sole option of the
Company, cash equal to $360.00, in the case of
clause (a) below) in an amount with a value equal
to (a) if the Transaction Value (as defined
below) is greater than the Cap Price, $360.00,
(b) if the Transaction Value is greater than the
Floor Price and less than or equal to the Cap
Price, the Transaction Value times ten or (c) if
the Transaction Value is less than or equal to
the Floor Price, $238.75; provided that, if the
Exchange Property received in any such
Reorganization Event consists only of cash, the
maturity date of the Notes will be deemed to be
accelerated to the date on which such cash is
distributed to holders of LM Stock. If Exchange
Property consists of more than one type of
property, holders of Notes will receive at
maturity a pro rata share of each such type of
Exchange Property. "Transaction Value" means the
sum of (i) for any cash received in any such
Reorganization Event, the amount of cash received
per share of LM Stock, as adjusted by the
Exchange Factor, (ii) for any property other than
cash or securities received in any such
Reorganization Event, the market value of such
Exchange Property received for each share of LM
Stock at the date of the receipt of such Exchange
Property, as adjusted by the Exchange Factor, as
determined by the Calculation Agent and (iii) for
any security received in any such Reorganization
Event, an amount equal to the Market Price per
share of such security as of the second NYSE
Trading Day immediately prior to the maturity of
the Notes multiplied by the quantity of such
security received for each share of LM Stock, as
adjusted by the Exchange Factor.
For purposes of paragraph 5 above, in the case of
a consummated tender or exchange offer for all
Exchange Property of a particular type, Exchange
Property shall be deemed to include the amount of
cash or other property paid by the offeror in the
tender or exchange offer with respect to such
Exchange Property (in an amount determined on the
basis of the rate of exchange in such tender or
exchange offer). In the event of a tender or
exchange offer with respect to Exchange Property
in which an offeree may elect to receive cash or
other property, Exchange Property shall be deemed
to include the kind and amount of cash and other
property received by offerees who elect to
receive cash.
No adjustments to the Exchange Factor or Exchange
Rate will be required unless such adjustment
would require a change of at least 0.1% in the
Exchange Factor or Exchange Rate then in effect.
The Exchange Factor or Exchange Rate 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 Factor or Exchange
Rate 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 LM Stock, including, without
limitation, a partial tender or exchange offer
for the LM Stock.
NOTWITHSTANDING THE FOREGOING, THE AMOUNT PAYABLE
AT MATURITY WITH RESPECT TO EACH NOTE WILL NOT
UNDER ANY CIRCUMSTANCES EXCEED $360.00 PER NOTE.
The Calculation Agent shall be solely responsible
for the determination and calculation of any
adjustments to the Exchange Factor or Exchange
Rate 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 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 Factor or
Exchange Rate upon written request by any holder
of the Notes.
Market Disruption Event:... "Market Disruption Event" means, with respect to
LM Stock:
(i) a suspension, absence or material limitation
of trading of LM Stock on the primary market for
LM 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 LM 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 option 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
LM 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 LM Stock and (5) a
"suspension, absence or material limitation of
trading" on the primary securities market on
which options contracts related to LM Stock are
traded will not include any time when such
securities market is itself closed for trading
under ordinary circumstances.
LM Stock; Public
Information................ LM 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 Legg Mason 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 LM STOCK
OR OTHER SECURITIES OF LEGG MASON. ALL
DISCLOSURES CONTAINED IN THIS PRICING SUPPLEMENT
REGARDING LEGG MASON 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 LEGG MASON. NEITHER THE COMPANY NOR
THE AGENT MAKES ANY REPRESENTATION THAT SUCH
PUBLICLY AVAILABLE DOCUMENTS OR ANY OTHER
PUBLICLY AVAILABLE INFORMATION REGARDING LEGG
MASON 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 LM STOCK (AND
THEREFORE THE INITIAL PRICE , THE FLOOR PRICE AND
THE CAP PRICE) HAVE BEEN PUBLICLY DISCLOSED.
SUBSEQUENT DISCLOSURE OF ANY SUCH EVENTS OR THE
DISCLOSURE OF OR FAILURE TO DISCLOSE MATERIAL
FUTURE EVENTS CONCERNING LEGG MASON COULD AFFECT
THE VALUE RECEIVED AT MATURITY WITH RESPECT TO
THE NOTES AND THEREFORE THE TRADING PRICES OF THE
NOTES.
NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES
MAKES ANY REPRESENTATION TO ANY PURCHASER OF
NOTES AS TO THE PERFORMANCE OF LM STOCK.
The Company or its affiliates may presently or
from time to time engage in business with Legg
Mason including extending loans to, or making
equity investments in, Legg Mason or providing
advisory services to Legg Mason, 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 Legg Mason and, in addition, one or more
affiliates of the Company may publish research
reports with respect to Legg Mason. The Company
does not make any representation to any purchaser
of Notes with respect to any matters whatsoever
relating to Legg Mason. Any prospective
purchaser of a Note should undertake an
independent investigation of Legg Mason as in its
judgment is appropriate to make an informed
decision with respect to an investment in LM
Stock.
Historical Information..... The following table sets forth the high and low
Market Prices and Dividends per Share during
1993, 1994, 1995 and during 1996, through July
30, 1996. The Market Price on July 30, 1996 was
$28.125. The Market Prices and Dividends per
Share listed below were obtained from Bloomberg
Financial Markets and the Company believes such
information to be accurate. The historical
prices of LM Stock should not be taken as an
indication of future performance, and no
assurance can be given that the price of LM Stock
will not decrease so that the beneficial owners
of the Notes will receive at maturity shares of
LM Stock worth less than the principal amount of
the Notes. Nor can assurance be given that the
price of LM Stock will increase above $29.25 so
that at maturity the beneficial owners of the
Notes will receive an amount in excess of the
principal amount of the Notes.
Dividends
per
Legg Mason* High Low Share**
- -------------------- ------------- ------- --------------
(CUSIP # 524901105)
1993:
First Quarter....... $ 23 45/64 $ 20 1/2 $.08
Second Quarter...... 22 19/64 19 19/32 .08
Third Quarter....... 24 3/32 21 29/32 .10
Fourth Quarter...... 25 22 1/2 .10
1994:
First Quarter....... 25 1/4 20 1/2 .10
Second Quarter...... 21 7/8 18 1/2 .10
Third Quarter....... 22 3/4 18 1/2 .11
Fourth Quarter...... 22 19 7/8 .11
1995:
First Quarter....... 23 5/8 20 5/8 .11
Second Quarter...... 28 3/8 23 1/8 .11
Third Quarter....... 30 5/8 26 5/8 .12
Fourth Quarter...... 31 3/8 27 3/8 .12
1996:
First Quarter....... 31 1/8 26 5/8 .12
Second Quarter...... 33 5/8 27 3/4 .12
Third Quarter
through
July 30, 1996..... 34 28 1/8 .13
* Historical prices and Dividends per Share have
been adjusted for a 5 for 4 stock split of the LM
Stock which became effective in the Third Quarter
of 1993. The dividend for the Third Quarter of
1996 was declared on July 24, 1996, but has not
been paid.
**The Company makes no representation as to the
amount of dividends, if any, that Legg Mason will
pay in the future. In any event, holders of the
Notes will not be entitled to receive dividends,
if any, that may be payable on LM Stock.
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.
Prior to and on the date of this Pricing
Supplement, the Company, through its subsidiaries
and others, hedged its anticipated exposure in
connection with the Notes by taking positions in
LM Stock. Such hedging was carried out in a
manner designed to minimize any impact on the
price of LM Stock. Purchase activity could
potentially have increased the price of LM Stock,
and therefore effectively have increased the level
to which LM Stock must rise before a holder of a
Note would receive at maturity an amount of LM
Stock worth as much as or more than the principal
amount of the Notes. Although the Company has no
reason to believe that its hedging activity had a
material impact on the price of LM Stock, there
can be no assurance that the Company did not, or
in the future will not, affect such price 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 LM Stock, options
contracts on LM Stock listed on major securities
markets or positions in any other instruments
that it may wish to use in connection with such
hedging.
United States Federal
Taxation:.................. The Company currently intends to treat gain
upon retirement of the Notes at maturity, to the
extent attributable to the exchange at maturity
feature, as interest income and to report such
amount accordingly.
See also "United States Federal Taxation" in the
accompanying Prospectus Supplement.
