PROSPECTUS Dated March 29, 1995 Pricing Supplement No. 54 to
PROSPECTUS SUPPLEMENT Registration Statement No. 33-57833
Dated March 29, 1995 February 28, 1996
Rule 424(b)(3)
$25,000,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
EQUITY LINKED NOTES DUE JUNE 23, 1999
____________
The Equity Linked Notes due June 23, 1999 (the "Notes") are Medium-Term Notes,
Series C 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, Equity Indices or
Other Factors." The Notes are being issued in minimum denominations of $1,000
and will mature on June 23, 1999 (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.
At maturity, the holder of each Note will receive the par amount of such Note
($1,000) ("Par") plus an amount (the "Supplemental Redemption Amount") based
on the percentage increase, if any, in the Final Average 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, A Division of the McGraw-Hill
Companies, Inc. ("S&P"), over 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 equal the
product of (i) the par amount of such Note and (ii) a fraction the numerator
of which shall be the Final Average Index Value less the Initial 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 653.50. The Final Average Index Value will equal
the arithmetic average of the closing S&P 500 Index values on each of January
11, 1999, February 9, 1999, March 9, 1999, April 9, 1999, May 10, 1999 and
June 9, 1999 (the "Determination Dates"), except in the case of certain Market
Disruption Events (as defined herein). If the Final Average Index Value is
equal to or less 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 Average Index Value," "Determination
Dates" 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 through PS-7 herein.
----------
PRICE 100%
----------
Price to Public Agent's Commissions(1) Proceeds to Company
--------------- ---------------------- -------------------
Per Note. 100% .35% 99.65%
Total.... $25,000,000 $87,500 $24,912,500
_______________
(1) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
Capitalized terms not defined above have the meanings given to such terms in
the accompanying Prospectus Supplement.
MORGAN STANLEY & CO.
Incorporated
Principal Amount:.............. $25,000,000
Maturity Date:................. June 23, 1999
Interest Rate:................. 0.00%
Specified Currency:............ U.S. Dollars
Issue Price:................... 100%
Settlement Date (Original
Issue Date):................... March 6, 1996
Book Entry Note or
Certificated Note:............. Book Entry
Senior Note or Subordinated
Note:.......................... Senior
Minimum Denominations:......... $1,000
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 ($1,000) ("Par") plus the Supplemental
Redemption Amount, if any.
Supplemental Redemption
Amount:........................ The Supplemental Redemption Amount, if any,
payable with respect to each Note at maturity
shall be an amount equal to the product of
(i) the par amount of such Note and (ii) a
fraction the numerator of which shall be the
Final Average Index Value less the Initial
Index Value and the denominator of which
shall be the Initial Index Value. The
Supplemental Redemption Amount shall not be
less than zero. The Supplemental Redemption
Amount is described by the following formula:
Par x (Final Average Index Value - Initial
Index Value)
---------------------------------------
Initial Index Value
The Company shall cause the Calculation Agent
to provide written notice 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 second 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 653.50.
Final Average Index Value:..... The Final Average Index Value shall be the
arithmetic average of the Index Closing
Values (as defined below) on each of the
Determination Dates, as determined by the
Calculation Agent.
Index Closing Value:........... The Index Closing Value, as of any
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 Dates:........... The Determination Dates shall be January 11,
1999, February 9, 1999, March 9, 1999, April
9, 1999, May 10, 1999 and June 9, 1999 or, if
any such date is not a Trading Day, the next
succeeding Trading Day, unless there is a
Market Disruption Event on any such Trading
Day. If a Market Disruption Event occurs on
any such Trading Day, such 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 any of January 11, 1999, February
9, 1999, March 9, 1999, April 9, 1999, May
10, 1999 or June 9, 1999, as the case may be,
then (i) such fifth succeeding Trading Day
will be deemed to be the relevant
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 (x) a price change exceeding limits
set by such 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 futures or options
contracts related to the S&P 500 Index and (5)
an "absence 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 Average 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 Average Index Value of the S&P
500 Index does not exceed the Initial Index
Value, the holders of the Notes will receive
only the par amount of each Note at maturity.
Because the Final Average Index Value will be
based upon an average of closing values of
the S&P 500 Index on specified days (the
Determination Dates) during six successive
months, a significant increase in the S&P 500
Index as measured on the Determination Date
in the final month, or in any earlier month,
may be substantially or entirely offset by
the values of the S&P 500 Index on the
Determination Dates in the other months.
The Notes do not bear any periodic payment of
interest. 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 a conventional
fixed-rate debt security having the same
maturity date as the Notes and issued by the
Company on the Original Issue Date.
The return of only the par amount of a Note
at maturity will not compensate the holder
for any opportunity cost implied by inflation
and other factors relating to the time value
of money. The percentage appreciation of the
S&P 500 Index based on the Final Average
Index Value over the Initial Index Value does
not reflect the payment of dividends on the
stocks underlying the S&P 500 Index.
Therefore, in addition to the considerations
regarding averaging discussed above, the
yield to maturity based on the Final Average
Index Value relative to the Initial Index
Value will not be the same yield as would be
produced if such underlying stocks were
purchased and held for a similar period.
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 Dates and to the maturity of
the Notes and market interest rates. In
addition, the Final Average 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
appreciation, if any, of the Final Average
Index Value over the Initial Index Value. If,
however, the Notes are sold prior to maturity
at a time when the S&P 500 Index exceeds the
Initial Index Value, the sale price may be at
a discount from the amount expected to be
payable to the holder if such excess were to
prevail on each of the Determination Dates
because of the possible fluctuation of the
S&P 500 Index between the time of such sale
and the Determination Dates. 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 Average Index Value, if
determined, is below, equal to or not
sufficiently above 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 rise or
fall. 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 Average 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 Average 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>
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 Average Index Values,
the Supplemental Redemption Amount for each
$1,000 par amount of Notes.
Hypothetical Hypothetical
Final Average Supplemental Redemption
Index Value Amount
- --------------------------------- -------------------------
500.0 $ 0
550.0 $ 0
600.0 $ 0
650.0 $ 0
653.5 $ 0
700.0 $ 71.16
750.0 $ 147.67
800.0 $ 224.18
850.0 $ 300.69
900.0 $ 377.20
The above figures are for purposes of
illustration only. The actual Supplemental
Redemption Amount, if any, will depend
entirely on the actual Final Average Index
Value. See "Final Average 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 Dates.
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, any of the Determination
Dates and the Calculation Agent determines
that no Successor Index is available at such
time, then on each Determination Date until
the earlier to occur of (i) the Determination
Date scheduled to occur on June 9, 1999 and
(ii) a determination by the Calculation Agent
that a Successor Index is available, the
Calculation Agent shall determine the Index
Closing Value that would be used in computing
the Supplemental Redemption Amount on each
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. The
Calculation Agent shall cause notice of each
such Index Closing Value to be provided to
the holders of the Notes on each succeeding
Determination Date until and including June
9, 1999 (unless a Successor Index is prior
thereto determined to be available).
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
each Determination Date on which an Index
Closing Value is to be calculated, 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
Index 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 Dates
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 each of the Determination Dates
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 February 28, 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 increase
sufficiently to cause the holders of the
Notes to receive any Supplemental Redemption
Amount.
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
(through February 28,
1996)...... 661.45 598.48 644.75
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.
Such hedging may involve the purchase or sale
of exchange traded or over the counter
options on the S&P 500 Index or 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 will have a material impact
on the price of such options, 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 options,
futures contracts and options on futures
contracts. 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" 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. In addition, this discussion
addresses only initial holders purchasing at
the Issue Price of the Notes and that do not
hold the Notes as part of a hedging
transaction or "straddle."
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 maturity of the Notes a
United States Holder will recognize gain or
loss equal to the difference between the
amount realized by the Holder at maturity
(i.e. the sum of the par amount and the
Supplemental Redemption Amount received) and
such Holder's tax basis in the Notes. Any
loss recognized at maturity will be treated
as capital loss. It is unclear under
existing law whether gain recognized at
maturity will be treated as ordinary or
capital in character. Subject to further
guidance from the Internal Revenue Service,
however, 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 at
maturity.
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(g) 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 may be required
to account for the Notes in the manner
prescribed in proposed, but subsequently
withdrawn, Treasury regulation Section
1.1275-4(g). The Internal Revenue Service,
however, would not be required to accept such
method as correct.
Any gain or loss recognized on the sale or
exchange of a Note prior to maturity will be
treated as capital in character.
There can be no assurance that the ultimate
tax treatment of the Note would not differ
significantly from the description herein.
Prospective investors are urged to consult
their tax advisors as to the possible
consequences of holding the Notes.
See also "United States Federal Taxation" in
the accompanying Prospectus Supplement.
