Subject to Completion, Pricing Supplement dated November 27, 1996
PROSPECTUS Dated May 1, 1996 Pricing Supplement No. 51 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-01655
Dated May 1, 1996 Dated November , 1996
Rule 424(b)(3)
$
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
Senior Floating Rate Notes
REVERSE EQUITY NOTES DUE SEPTEMBER , 1997
Redemption Value Based on the Value of the Common Stock of
SYLVAN LEARNING SYSTEMS, INC.
The Reverse Equity Notes due September , 1997 (the "Notes")
are Medium-Term Notes, Series C (Senior Floating Rate Notes) of Morgan Stanley
Group Inc. (the "Company"), as further described below and in the Prospectus
Supplement under "Description of Notes--Floating Rate Notes."
The principal amount of each of the Notes being offered hereby
will be $ (the "Initial Price" or "Par"). The Notes mature on September
, 1997. The Notes will bear interest from the date of issuance to, but
excluding March , 1997 at % and thereafter at LIBOR (as defined in the
accompanying Prospectus Supplement) minus 0.25%, payable quarterly in arrears
on March , 1997, June , 1997 and at maturity, subject to the adjustments
described in the third paragraph below.
If the Determination Price (as defined herein) of the common
stock, $.01 par value per share (the "Sylvan Stock"), of Sylvan Learning
Systems, Inc. ("Sylvan") is less than $ (the "Lower Threshold Price"),
the holder of a Note will have the right (the "Repayment Right"), on any
Exchange Date (as defined herein), subject to a prior call of the Notes by the
Company (as described in the immediately succeeding paragraph) and upon
completion by the holder and delivery to the Company and the Calculation Agent
of an Official Notice of Exercise of Repayment Right prior to 11:00 a.m. New
York City time on such date (the "Repayment Notice Date"), to sell each $
principal amount of a Note to the Company for cash in an amount (the
"Repayment Price") equal to the sum of (i) the Initial Price and (ii) the Lower
Threshold Price less the Determination Price. The Determination Price will be
adjusted for certain corporate events. See "Determination Price," "Exchange
Factor" and "Antidilution Adjustments" in this Pricing Supplement.
If the Determination Price is greater than $ (the
"Upper Threshold Price"), the Company may, upon not less than 30 nor more than
60 days notice, call the Notes (the "Company Call Right"), in whole but not in
part, on any Exchange Date specified in such notice (the "Call Date") for cash
in an amount per each $ principal amount of a Note (the "Call Price")
equal to the greater of (i)(x) the Initial Price minus (y) the Determination
Price less the Upper Threshold Price and (ii) $ (the "Minimum Call
Price").
Interest on the Notes will accrue on the Par amount thereof,
provided that, (i) if the Determination Price is lower than the Lower
Threshold Price, interest will accrue on the Repayment Price from and
including April , 1997 to but excluding the maturity date or any earlier
Repayment Date (as defined herein), and (ii) if the Determination Price is
higher than the Upper Threshold Price, interest will accrue on the Call Price
from and including April , 1997 to but excluding the maturity date or
earlier Call Date. The amount of cash received by a holder of the Notes upon
exercise of the Repayment Right or the Company Call Right, in each case
determined as described herein, may be more or less than the principal amount
of the Notes and will be equal to the Minimum Call Price if the Determination
Price is greater than $ .
Sylvan is not affiliated with the Company, is not involved in
this offering of Notes and will have no obligations with respect to the Notes.
See "Historical Information" in this Pricing Supplement for information on the
range of Market Prices for Sylvan Stock.
The Company will cause the Determination Price, the Repayment
Price and the Call Price, LIBOR, 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.
THIS NOTE IS SUBJECT TO RESTRICTIONS ON TRANSFER AND MAY ONLY
BE TRANSFERRED WITH THE PRIOR APPROVAL OF THE COMPANY. SEE "RESTRICTIONS ON
TRANSFER" ON PS-6 IN THIS PRICING SUPPLEMENT.
An investment in the Notes entails risks not associated with
similar investments in a conventional debt security, as described under "Risk
Factors" on PS- 6 through PS- 8 herein.
---------------
PRICE % AND ACCRUED INTEREST
---------------
Agent's Proceeds to
Price to Public(1) Commissions(2) Company(1)
-------------------- ---------------- -------------
Per Note.... % % %
Total....... $ $ $
- ------------
(1) Plus accrued interest, if any, from December , 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
INFORMATION CONTAINED IN THIS PRELIMINARY PRICING SUPPLEMENT IS SUBJECT TO
COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE DELIVERED PRIOR TO THE
TIME A FINAL PRICING SUPPLEMENT IS DELIVERED. THIS PRICING SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS AND PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
Capitalized terms not defined herein have the meanings given to such terms
in the accompanying Prospectus Supplement.
Principal Amount.............. $
Maturity Date................. September , 1997
Initial Interest Rate......... % per annum
Base Rate..................... LIBOR
Index Maturity................ 3 months
Spread........................ Minus 0.25%
Interest Payment Period....... Quarterly
Interest Payment Dates........ March , 1997, June , 1997 and September
, 1997, subject to adjustment as described in
the accompanying Prospectus Supplement
Interest Reset Dates.......... Same as Interest Payment Dates
Interest Reset Period......... Quarterly
Interest Determination Dates.. Two London Banking Days prior to each
Interest Reset Date
Reporting Service............. Telerate (Page 3750)
Specified Currency............ U.S. Dollars
Issue Price................... %
Original Issue Date
(Settlement Date)............. December , 1996
Book Entry Note or
Certificated Note............. Certificated
Senior Note or Subordinated
Note.......................... Senior
Denominations................. $ and integral multiples thereof
Trustee....................... The Chase Manhattan Bank
CUSIP.........................
Repayment Right............... If the Determination Price is less than $
(the "Lower Threshold Price"), the holder of
a Note will have the right on any Exchange
Date, subject to a prior call of the Notes by
the Company and upon (i) completion by the
holder and delivery to the Company and the
Calculation Agent of an Official Notice of
Exercise of Repayment Right (in the form of
Annex A hereto) prior to 11:00 a.m. New York
City time on such date (the "Repayment Notice
Date") and (ii) delivery on such date of such
Notes to the Trustee, to sell each $
principal amount of a Note to the Company for
cash in an amount (the "Repayment Price")
equal to the sum of (i) the Initial Price and
(ii) the Lower Threshold Price less the
Determination Price, subject to adjustment as
described under "Antidilution Adjustments"
below.
Three Business Days after the Repayment
Notice Date (the "Repayment Date"), the
Company shall, or shall cause the Calculation
Agent to, deliver the Repayment Price (plus
any accrued and unpaid interest on the Note
to but excluding the Repayment Date) to the
Trustee for delivery to the holders. The
Calculation Agent shall calculate the
Repayment Price. References to payment "per
Note" refer to each $ principal amount
of any Note.
If a holder delivers an Official Notice of
Exercise of Repayment Right and the
Determination Price is determined by the
Calculation Agent to be greater than the
Lower Threshold Price, such Official Notice
of Exercise of Repayment Right will be deemed
not to have been given and the Notes
delivered with such notice to the Trustee,
will be returned by the Trustee, at the
instruction of the Calculation Agent, to the
holder thereof.
Company Call Right............ If the Determination Price is greater than
$ (the "Upper Threshold Price"), the
Company may, upon not less than 30 nor more
than 60 days notice, call the Notes, in whole
but not in part, on any Exchange Date
specified in such notice (the "Call Date") for
cash in an amount per Note (the "Call Price")
equal to the greater of (i) (x) the Initial
Price minus (y) the Determination Price less
the Upper Threshold Price and (ii) the
Minimum Call Price.
The Company shall, or shall cause the
Calculation Agent to, deliver the Call Price
(plus any accrued and unpaid interest on the
Note to but excluding the Call Date) to the
Trustee for delivery to the holders. The
Calculation Agent will calculate the Call
Price.
Interest Adjustment........... Interest on the Notes will accrue on the Par
amount thereof, provided that, (i) if the
Determination Price is lower than the Lower
Threshold Price, interest will accrue on the
Repayment Price from and including April ,
1997 to but excluding the Maturity Date or
any earlier Repayment Notice Date and (ii) if
the Determination Price is higher than the
Upper Threshold Price, interest will accrue
on the Call Price from and including April
, 1997 to but excluding the Maturity Date or
earlier Call Date.
Initial Price................. $
Upper Threshold Price......... 104% of the Initial Price
Lower Threshold Price......... 95% of the Initial Price
Minimum Call Price............ 5% of the Initial Price
Determination Price........... The Determination Price will be determined by
the Calculation Agent and will equal the
arithmetic average of the products (each a
"Product") of (i) the Market Price of one
share of Sylvan Stock and (ii) the Exchange
Factor, each as determined on the 20
scheduled Trading Days during the Calculation
Period (each a "Determination Date");
provided that, if a Market Disruption Event
(as defined below) occurs on any such
Determination Date (consequently, a
"Non-Determination Date"), then the
Calculation Agent shall disregard such
Non-Determination Date and shall weight the
Product for each succeeding Determination
Date during the Calculation Period to ratably
distribute the intended weight of such
Non-Determination Date across the remaining
Determination Dates; provided further that,
if a holder exercises the Repayment Right on
the nineteenth scheduled Trading Day, the
"Product" as determined on such nineteenth
day shall also be deemed to be the "Product"
on the twentieth scheduled Trading Day.
Accordingly, if a Market Disruption Event
occurs during the Calculation Period, the
weightings of the Products for the
Determination Dates will be calculated as
follows: (A) each Determination Date
preceding the first Market Disruption Event
will receive a weighting of 1/20 and (B) each
Determination Date following a Market
Disruption Event will receive a weighting
that equals a fraction (i) the numerator of
which will be the fraction that equals 1
minus the sum of the weights of all preceding
Determination Dates and (ii) the denominator
of which will be the number of scheduled
Determination Dates from and including such
Determination Date to and including the last
scheduled Determination Date in the
Calculation Period. If there is no
succeeding Trading Day on which a Market
Disruption Event has not occurred, the
product shall be determined on the last
Trading Day in the Calculation Period
notwithstanding the occurrence of a Market
Disruption Event on such Trading Day and, if
any scheduled Trading Day during the
Calculation Period is not an actual Trading
Day, the Market Price of Sylvan Stock for
such scheduled Trading Day shall be
determined as of the earliest practicable
time (which may be after such scheduled
Repayment Day).
All percentages resulting from any
calculation on 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.
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 Trading Day
immediately prior to maturity. See
"Antidilution Adjustments" below.
Calculation Period............ The period from and including March , 1997
to and including April , 1997.
Exchange Date................. Any Trading Day that falls during the period
beginning on April , 1997, the nineteenth
scheduled Trading Day in the Calculation
Period, to the earliest of the Maturity Date,
the Call Date and the Repayment Date.
Market Price.................. If Sylvan 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 Sylvan Stock
(or one unit of any such other security) on
any 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 Sylvan 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 Trading Day shall be the mean, as
determined by the Calculation Agent, of the
bid prices for Sylvan Stock (or any such
other security) obtained from as many dealers
in such stock, but not exceeding three, as
will make such bid prices available to the
Calculation Agent. The term "NASDAQ NMS
security" shall include a security included
in any successor to such system and the term
"OTC Bulletin Board Service" shall include
any successor service thereto.
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.
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 the Determination Price or any
Market Price or whether a Market Disruption
Event has occurred. See "Determination
Price" above and "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.
Restrictions on Transfer...... EACH HOLDER OF A NOTE MUST HAVE A VALID
BUSINESS PURPOSE FOR INVESTING IN THE NOTE,
AND ITS INVESTMENT IN THE NOTE MUST BE
CONSISTENT WITH ITS OVERALL INVESTMENT
STRATEGY. ANY RESALE, PLEDGE OR OTHER
TRANSFER OF THE NOTE MAY BE MADE ONLY WITH
THE COMPANY'S PRIOR APPROVAL AND WILL BE MADE
ONLY AFTER THE DELIVERY BY THE HOLDER,
PLEDGEE OR TRANSFEREE TO THE COMPANY OF (1) A
CERTIFICATE TO THE EFFECT THAT SUCH HOLDER,
PLEDGEE OR TRANSFEREE HAS A VALID BUSINESS
PURPOSE FOR INVESTING IN THE NOTE AND THAT
ITS INVESTMENT IN THE NOTE IS CONSISTENT WITH
ITS OVERALL INVESTMENT STRATEGY AND (2) SUCH
OTHER INFORMATION, CERTIFICATION OR
DOCUMENTATION AS THE COMPANY MAY REASONABLY
REQUEST TO EVIDENCE OR SUPPORT THE ACCURACY
OF SUCH CERTIFICATE AND THE AUTHORITY OF THE
PERSON SIGNING SUCH CERTIFICATE. THE COMPANY
MAY GRANT OR WITHHOLD ITS APPROVAL OF ANY
RESALE, PLEDGE OR OTHER TRANSFER IN ITS SOLE
DISCRETION, BASED ON ITS EVALUATION OF THE
VALIDITY OF THE BUSINESS PURPOSE AND THE
ADEQUACY OF EVIDENCE OF SUCH BUSINESS PURPOSE.
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 cash amount that a
holder of the Notes may receive if the
Company exercises the Company Call Right or
if a holder exercises the Repayment Right is
not fixed, but is based, inversely, on the
price of the Sylvan Stock and on the formulae
used to determine the Call Price or the
Repayment Price, respectively, at a given
Determination Price. Because the price of
the Sylvan Stock is subject to market
fluctuations, the amount of cash received by
a holder of Notes if the Company exercises
the Company Call Right or if a holder
exercises the Repayment Right, determined as
described herein, may be more or less than the
principal amount of the Notes. If the
Determination Price of the Sylvan Stock is
greater than the Upper Threshold Price, the
amount of cash 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. Because the
Determination Price will be based upon an
average of closing values of Sylvan Stock on
specified days (the Determination Dates), a
significant decrease in the value of Sylvan
Stock, which could result in a gain for the
holder, as measured on the final
Determination Date, or any earlier
Determination Date, may be substantially or
entirely mitigated by the values of Sylvan
Stock on the other Determination Dates.
Although the Determination Price (and thus
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 Sylvan
Stock, including, without limitation, the
occurrence of a partial tender or exchange
offer for the Sylvan Stock by Sylvan or any
third party. Such other events may adversely
affect the market value of the Notes.
There can be no assurance as to whether the
Notes will trade in the secondary market or,
if there is such a secondary market, 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.
Transfer restrictions on the Notes will
further impact the liquidity of the market.
The Notes may be transferred only to
investors with a valid business purpose for
investing in the Notes and only if the
Company has granted its approval of the
transfer. See "Restrictions on Transfer"
above.
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 Sylvan Stock, including, but not
limited to, the volatility of Sylvan Stock,
the dividend rate on Sylvan Stock, market
interest and yield rates and the time
remaining to the maturity of the Notes. In
addition, the value of Sylvan 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
Sylvan 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 Sylvan 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 Sylvan Stock is
above, equal to or not sufficiently below the
Initial Price. The historical Market Prices
of Sylvan Stock should not be taken as an
indication of Sylvan 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 Sylvan
and, although the Company as of the date of
this Pricing Supplement does not have any
material non-public information concerning
Sylvan, corporate events of Sylvan, including
those described below in "Antidilution
Adjustments," are beyond the Company's
ability to control and are difficult to
predict.
Sylvan 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.
Sylvan 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 Sylvan 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 Sylvan Stock
in any partial tender or exchange offer by
Sylvan or any third party).
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 any Repayment Price or Call
Price. 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 and consult
their tax advisors concerning 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
Determination Price will be adjusted as
follows:
1. If Sylvan 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 Sylvan Stock.
2. If Sylvan Stock is subject (i) to a stock
dividend (issuance of additional shares of
Sylvan Stock) that is given ratably to all
holders of shares of Sylvan Stock or (ii) to
a distribution of Sylvan Stock as a result of
the triggering of any provision of the
corporate charter of Sylvan by any
shareholder that is not a holder of the
Notes, then once the dividend has become
effective and Sylvan 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 Sylvan
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
Sylvan 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 Sylvan Stock will be deemed
to be an "Extraordinary Dividend" if (i) such
dividend or other distribution exceeds the
immediately preceding non-Extraordinary
Dividend for Sylvan Stock by an amount
equal to at least 0.5% of the Market Price
of Sylvan Stock on the Trading Day
preceding the ex-dividend date for the
payment of such Extraordinary Dividend
(the "ex-dividend date") or (ii) Sylvan
publicly declares such cash dividend or
other distribution to be extraordinary or
non recurring. If an Extraordinary
Dividend occurs with respect to Sylvan
Stock, the Exchange Factor with respect to
Sylvan 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 Trading Day
preceding the ex-dividend date, and the
denominator of which is the amount by
which the Market Price on the Trading Day
preceding the ex-dividend date exceeds the
Extraordinary Dividend Amount. The
"Extraordinary Dividend Amount" with
respect to an Extraordinary Dividend for
Sylvan 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 Sylvan 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 Sylvan Stock described in clause (v)
of paragraph 5 below that also constitutes
an Extraordinary Dividend shall only cause
an adjustment to the Exchange Factor
pursuant to clause (v) of paragraph 5.
4. If Sylvan issues rights or warrants to all
holders of Sylvan Stock to subscribe for or
purchase Sylvan Stock at an exercise price
per share less than the Market Price of the
Sylvan 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 Sylvan Stock outstanding
immediately prior to such issuance plus the
number of additional shares of Sylvan Stock
offered for subscription or purchase pursuant
to such rights or warrants and the
denominator of which shall be the number of
shares of Sylvan Stock outstanding
immediately prior to such issuance plus the
number of additional shares of Sylvan Stock
which the aggregate offering price of the
total number of shares of Sylvan 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
or change of Sylvan Stock, (ii) Sylvan, or
any surviving entity or subsequent surviving
entity of Sylvan (a "Sylvan Successor") has
been subject to a merger, combination or
consolidation and is not the surviving
entity, (iii) any statutory exchange of
securities of Sylvan or any Sylvan Successor
with another corporation occurs (other than
pursuant to clause (ii) above), (iv) Sylvan
is liquidated, (v) Sylvan issues to all of
its shareholders equity securities of an
issuer other than Sylvan (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 Sylvan Stock
(any such event in clauses (i) through (vi) a
"Reorganization Event"), the method of
determining any Repayment Price or Call Price
will be adjusted, if the Reorganization Event
is consummated prior to the end of the
Calculation Period, to provide that on and
after the date of such consummation the
Transaction Value on any day will be used as
a "Product" (in lieu of the product of the
Market Price and the Exchange Factor) to
determine the Determination Price. "Exchange
Property" means the securities, cash or any
other assets distributed in any such
Reorganization Event, including, in the case
of a Spin-off Event, the share of Sylvan
Stock with respect to which the spun-off
security was issued. "Transaction Value"
means (i) for any cash received in any such
Reorganization Event, the amount of cash
received per share of Sylvan 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 Sylvan 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 on
the applicable day during the Calculation
Period multiplied by the quantity of such
security received for each share of Sylvan
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 will be
required unless such adjustment would require
a change of at least 0.1% in the Exchange
Factor then in effect. The Exchange Factor
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 to
the method of determining the Determination
Price 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 Sylvan Stock, including,
without limitation, a partial tender or
exchange offer for the Sylvan Stock.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to the Exchange
Factor or to the method of determining the
Determination Price and of any related
determinations and calculations with respect
to any distributions of 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 to the method of
determining the Determination Price upon
written request by any holder of the Notes.
Market Disruption Event....... "Market Disruption Event" means, with respect
to Sylvan Stock:
(i) a suspension, absence or material
limitation of trading of Sylvan Stock on
the primary market for Sylvan 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 Sylvan 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 Sylvan 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 Sylvan Stock and (5) a
"suspension, absence or material
limitation of trading" on the primary
securities market on which options
contracts related to Sylvan Stock are
traded will not include any time when such
securities market is itself closed for
trading under ordinary circumstances.
Sylvan Stock; Public
Information.................. Sylvan is an international private provider
of educational and testing services. Sylvan
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 Sylvan 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
SYLVAN STOCK OR OTHER SECURITIES OF SYLVAN.
ALL DISCLOSURES CONTAINED IN THIS PRICING
SUPPLEMENT REGARDING SYLVAN 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 SYLVAN.
NEITHER THE COMPANY NOR THE AGENT MAKES ANY
REPRESENTATION THAT SUCH PUBLICLY AVAILABLE
DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE
INFORMATION REGARDING SYLVAN 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 SYLVAN STOCK (AND THEREFORE
THE INITIAL PRICE, THE THRESHOLD APPRECIATION
PRICE AND THE EXCHANGE RATE APPLICABLE ABOVE
THE THRESHOLD APPRECIATION PRICE) HAVE BEEN
PUBLICLY DISCLOSED. SUBSEQUENT DISCLOSURE OF
ANY SUCH EVENTS OR THE DISCLOSURE OF OR
FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS
CONCERNING SYLVAN 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
MAKE ANY REPRESENTATION TO ANY PURCHASER OF
NOTES AS TO THE PERFORMANCE OF SYLVAN STOCK.
The Company or its affiliates may presently
or from time to time engage in business with
Sylvan including extending loans to, or
making equity investments in, Sylvan or
providing advisory services to Sylvan,
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 Sylvan
and, in addition, one or more affiliates of
the Company may publish research reports with
respect to Sylvan. The Company does not make
any representation to any purchaser of Notes
with respect to any matters whatsoever
relating to Sylvan. Any prospective
purchaser of a Note should undertake an
independent investigation of Sylvan as in its
judgment is appropriate to make an informed
decision with respect to an investment in
Sylvan Stock.
Historical Information........ The following table sets forth the high and
low Market Price during 1993, 1994, 1995, and
during 1996 through November 26, 1996. The
Market Price on November 26, 1996 was $26
1/4. The Market Prices and Dividends Per
Share listed below were obtained from
Bloomberg Financial Markets and the Company
believes such information to be accurate.
However, neither the Company nor the Agent
makes any representation as to the accuracy
of such information. The historical prices
of Sylvan Stock should not be taken as an
indication of future performance, and no
assurance can be given that the price of
Sylvan Stock will not decrease so that the
beneficial owners of the Notes will receive
at maturity cash in an amount that is less
than the principal amount of the Notes. Nor
can assurance be given that the price of
Sylvan Stock will increase above the
Threshold Appreciation Price so that at
maturity the beneficial owners of the Notes
will receive cash in an amount in excess of
the principal amount of the Notes.
Sylvan* High Low
- -------------------- ------------ ------------
(CUSIP #871399101)
1994
First Quarter...... 11 1 7 1/2
Second Quarter..... 12 43/64 8 21/64
Third Quarter...... 12 21/64 9
Fourth Quarter..... 14 21/64 10 21/64
1995
First Quarter...... 13 5/64 10 53/64
Second Quarter..... 14 21/64 11 5/64
Third Quarter...... 21 43/64 14 19/64
Fourth Quarter..... 20 53/64 15 43/64
1996
First Quarter...... 24 53/64 18 11/64
Second Quarter..... 27 21/64 22 3/64
Third Quarter...... 27 21/64 20 21/64
Fourth Quarter.....
(through November
26, 1996.......... 31 53/64 26
* The Company makes no representation as to
the amount of dividends, if any, that Sylvan
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 Sylvan 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.
On or prior to the date of this Pricing
Supplement, the Company, through its
subsidiaries and others, will hedge its
anticipated exposure in connection with the
Notes by taking positions in Sylvan Stock.
Such hedging will be carried out in a manner
designed to minimize any impact on the price
of Sylvan Stock. Purchase activity could
potentially increase the price of Sylvan
Stock, and therefore effectively increase the
level to which Sylvan Stock must rise before
a holder of a Note would receive at maturity
cash in an amount that is equal to or greater
than the principal amount of the Notes. The
Company, through its subsidiaries, is likely
to modify its hedge position throughout the
life of the Notes by purchasing and selling
Sylvan Stock, options contracts on Sylvan
Stock listed on major securities markets or
positions in any other instruments that it
may wish to use in connection with such
hedging. Although the Company has no reason
to believe that its hedging activity will
have a material impact on the price of Sylvan
Stock, there can be no assurance that the
Company will not affect such price as a
result of its hedging activities.
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
discussion below. In addition, this general
discussion addresses only initial United
States Holders who are accrual basis taxpayers
for United States federal income tax purposes
and who purchase the Notes at the Issue Price.
The Company presently intends to treat the
coupon payments on the Notes as ordinary
income to the United States Holders. Under
this treatment, the coupon payments would be
taxable to United States Holders as ordinary
income as such payments accrue.
Under existing general United States federal
income tax principles, upon retirement of the
Note, a United States Holder will recognize
gain or loss equal to the difference between
the amount realized (other than amount
attributable to accrued coupon payments) on
the retirement and the Holder's tax basis in
the Note. Any loss recognized on the
retirement of a Note will be treated as
capital loss. Although the matter is not
free from doubt, any gain recognized thereon
should also be treated as capital in
character. An accrual basis taxpayer may be
required to recognize ordinary income upon
the expiration of the Calculation Period to
the extent of the excess, if any, of the
Repayment Price over the Issue Price, and
such Holder's tax basis in the Note will be
increased by the amount of any such income
recognized. The distinction between capital
income and ordinary income is potentially
significant in several respects. For
example, limitations apply to a United States
Holder's ability to offset capital losses
against ordinary income. Prospective
investors should consult with their tax
advisors regarding the character of any gain
recognized on the Notes.
Any gain or loss recognized on the sale or
exchange of a Note prior to retirement
generally will be treated as capital in
character. For these purposes, the amount
realized does not include any amount
attributable to any accrued but unpaid coupon
payments on the Note.
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.
ANNEX A
OFFICIAL NOTICE OF EXERCISE OF REPAYMENT RIGHT
Dated: [On or after April , 1997]
Morgan Stanley Group Inc.
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. Incorporated, as
Calculation Agent
1585 Broadway
New York, New York 10036
Fax No.: (212) 761-5314
(Attn: James Jurney)
Dear Sirs:
The undersigned holder of the Medium Term Notes, Series C,
Senior Floating Rate, Reverse Equity Notes due September , 1997, (Redemption
Value Based on the Value of the Common Stock of Sylvan Learning Systems, Inc.)
of Morgan Stanley Group Inc. (the "Notes") hereby irrevocably elects to
exercise with respect to the principal amount of the Notes indicated below, as
of the date hereof (or, if this letter is received after 11:00 a.m. on any
Trading Day, as of the next Trading Day, provided that such day is prior to
the earlier of (i) September , 1997 and (ii) the Call Date), the Repayment
Right as described in Pricing Supplement No. 51 dated November , 1996 (the
"Pricing Supplement") to the Prospectus Supplement dated May 1, 1996 and the
Prospectus dated May 1, 1996 related to Registration Statement No. 333-01655.
Capitalized terms not defined herein have the meanings given to such terms in
the Pricing Supplement. Please date and acknowledge receipt of this notice in
the place provided below on the date of receipt, and fax a copy to the fax
number indicated. Upon receipt of this notice, the Company will deliver cash
3 Business Days after the Repayment Notice Date in accordance with the terms
of the Notes, as described in the Pricing Supplement.
Very truly yours,
___________________________________
[Name of Holder]
By:________________________________
[Title]
___________________________________
[Fax No.]
$__________________________________
Principal Amount of Notes
surrendered for exchange
Receipt of the above Official
Notice of Exchange is hereby acknowledged
MORGAN STANLEY GROUP INC., as Issuer
MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent
By MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent
By:__________________________________________
Title:
Date and time of acknowledgment_______________
