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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 24, 1996
MORGAN STANLEY GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 1-9085 13-2838811
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1585 Broadway, New York, New York 10036
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (212) 761-4000
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Item 7(c). Exhibits
8.19 Tax Opinion of Davis Polk & Wardwell, dated July 24, 1996,
relating to the registrant's Nikkei 225 Protection Step-Up
Exchangeable Notes due July 31, 2003, as described in Pricing
Supplement No. 21 dated July 26, 1996 to the Prospectus
Supplement dated May 1, 1996 and the Prospectus dated May 1,
1996 related to Registration Statement No. 333-01655.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MORGAN STANLEY GROUP INC.
Registrant
/s/ Patricia A. Kurtz
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Patricia A. Kurtz
Assistant Secretary
Date: August 5, 1996
Index to Exhibits
Exhibit No. Description
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8.19 Tax Opinion of Davis Polk & Wardwell, dated
July 24, 1996, relating to the registrant's
Nikkei 225 Protection Step-Up Exchangeable
Notes due July 31, 2003, as described in
Pricing Supplement No. 21 dated July 26, 1996
to the Prospectus Supplement dated May 1,
1996 and the Prospectus dated May 1, 1996
related to Registration Statement No.
333-01655.
Exhibit 8.19
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4571
July 24, 1996
Morgan Stanley Group Inc.
1585 Broadway
New York, NY 10036
Re: Morgan Stanley Group Inc.
Nikkei 225 Protection Step-Up
Exchangeable Notes Due July 31, 2003
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Dear Sirs:
We have acted as special tax counsel for you in connection with the
issuance of your $100,000,000 aggregate principal amount Nikkei 225 Protection
Step-Up Exchangeable Notes due July 31, 2003 (the "Notes"). In our opinion,
the discussion set forth below is a summary of certain material U.S. federal
income tax considerations that are generally relevant to holders of the Notes.
As used herein, the term "Foreign Holder" means a beneficial owner of a Note
that is for United States federal income tax purposes (i) a nonresident alien
individual, (ii) a corporation, partnership or other entity that was not
created or organized in or under the laws of the United States or any
political subdivision thereof or (iii) a nonresident alien or foreign
fiduciary or grantor of a trust or estate. Other capitalized terms appearing
herein and not defined have the meanings assigned to such terms in the Pricing
Supplement.
The summary is based on tax laws in effect as of the date hereof,
which are subject to change by legislative, judicial or regulatory action that
in some cases may have retroactive effect. This summary does not address all
of the tax considerations that may be relevant to a holder in light of such
holder's particular circumstances. In particular, this summary addresses only
persons who hold Notes as capital assets within the meaning of Section 1221 of
the Internal Revenue Code of 1986 (the "Code"), and does not deal with holders
subject to special rules, such as certain financial institutions, insurance
companies, dealers in options or securities, purchasers holding Notes as a
part of a hedging transaction or straddle or as part of a "synthetic security"
or other integrated investments, nonresident alien individuals that have lost
United States citizenship or that have ceased to be treated as resident
aliens, corporations that are treated as foreign or domestic personal holding
companies, controlled foreign corporations, or passive foreign investment
companies and Foreign Holders that are owned or controlled by persons subject
to United States income tax. This summary also does not deal with holders
other than initial holders of the Notes who are accrual basis taxpayers and
purchase Notes at the Issue Price.
The Notes will be treated as debt for United States federal income
tax purposes. Although Treasury regulations addressing the treatment of
contingent debt instruments were released on June 11, 1996, 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 August 13, 1996.
Under existing general United States federal income tax principles, an accrual
basis U.S. Holder may be required to include all or a portion of any such
contingent amount in income at the time such amount becomes fixed and
determinable, which is on the Nikkei Determination Date with respect to each
Exchange Date, and with respect to the Maturity Date is on the last Final
Determination Date in the Calculation Period used as a reference in the
calculation of the Nikkei Final Value for such Note. It is unclear under
existing law whether payments of contingent amounts in excess of the Notes'
principal amount will be treated as ordinary or capital in character. We
understand that the Company currently intends to treat such amounts as
interest income and to report such amounts accordingly. Prospective investors
should be urged to consult with their tax advisors regarding the tax treatment
of the contingent amounts payable on the Note.
United States Holders that have acquired debt instruments that are
similar to the Notes and have accounted for such debt instruments in a
consistent manner (including under proposed, but subsequently withdrawn,
Treasury regulations) may be deemed to have established a method of tax
accounting. In such instance, the United States Holder would be required to
apply such method of tax accounting to the Notes, unless consent of the
Commissioner of the Service is obtained to change such method.
Any gain or loss recognized on the sale or exchange of a Note prior
to its retirement will be treated as capital in character.
A Foreign Holder will generally not be subject to United States
federal income taxes, including withholding taxes, on payments of principal,
premium, if any, or interest on a Note, or any gain arising from the sale or
disposition of a Note provided that (i) any such income is not effectively
connected with the conduct of a trade or business within the United States,
(ii) such Foreign Holder is not a person who owns (directly or by attribution)
ten percent or more of the total combined voting power of all classes of stock
of the Company, (iii) the Foreign Holder (if an individual) is not present in
the United States 183 days or more during the taxable year of the disposition,
and (iv) the Foreign Holder does not have a "tax home" (as defined in section
911(d)(3) of the Code) or an office or other fixed place of business in the
United States.
The 31% "backup" withholding and information reporting requirements
will generally not apply to payments by the Company or its agents of
principal, premium, if any, and interest on a Note, and to proceeds of the
sale or redemption of a Note before maturity, with respect to a Foreign
Holder.
Foreign Holders of Notes should be urged to consult their tax
advisors regarding the application of information reporting and backup
withholding in their particular situations, the availability of an exemption
therefrom, and the procedure for obtaining such an exemption, if available.
Any amounts withheld from a payment to a Foreign Holder under the backup
withholding rules will be allowed as a credit against such Holder's United
States federal income tax liability and may entitle such Holder to a refund,
provided that the required information is furnished to the Service.
A Note held by an individual who at the time of his death is not a
citizen or domiciliary of the United States will not be subject to United
States federal estate tax as a result of such individual's death, provided
that (i) interest paid to such individual on such Note would not be
effectively connected with the conduct by such individual of a trade or
business within the United States and (ii) such individual is not a person who
owns (directly or by attribution) ten percent or more of the total combined
voting power of all classes of stock of the Company.
There can be no assurance that the ultimate tax treatment of the
Notes would not differ significantly from the description herein. Prospective
investors should be urged to consult their tax advisors as to the possible
consequences of holding the Notes.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the offering of the Notes. We also consent
to the use of our name under the caption "United States Federal Taxation" in
the pricing supplement relating to the Notes (the "Pricing Supplement").
Very truly yours,
Davis Polk & Wardwell
