PROSPECTUS Dated May 1, 1996 Pricing Supplement No. 11 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-01655
Dated May 1, 1996 May 16, 1996
Rule 424(b)(3)
$15,750,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
EXCHANGEABLE NOTES DUE APRIL 30, 2002
Exchangeable For Shares of Common Stock of
FEDERAL NATIONAL MORTGAGE ASSOCIATION
and
STUDENT LOAN MARKETING ASSOCIATION
The Exchangeable Notes due April 30, 2002 (the "Notes") are Medium-Term Notes,
Series C (Senior Fixed Rate Notes) of Morgan Stanley Group Inc. (the
"Company"), as further described below and in the Prospectus Supplement under
"Description of Notes - Fixed Rate Notes." The issue price of each Note
issued on the Original Issue Date (as defined herein) will be $830.83 (83.083%
of the principal amount at maturity) (the "Issue Price"), and there will be no
periodic payments of interest. The yield to maturity of 2.7391% per annum has
been computed on a semiannual bond-equivalent basis based on the aggregate
Issue Prices of the Notes and a related issuance, on April 29, 1996, of
Medium-Term Notes, Series C of the Company having terms identical to the
Notes, as set forth under "Total Amount of OID" and "Original Yield to
Maturity" herein. The Notes are issued in minimum denominations of $1,000 per
Note and will mature on April 30, 2002.
On any Exchange Date (as defined herein), the holder of a Note will have the
right (the "Exchange Right"), subject to a prior call of the Notes for cash 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 Exchange prior to 11:00 a.m. New York City time on
such date, to exchange each $1,000 principal amount of such Note for (i)
10.12898 shares (the "Fannie Mae Exchange Ratio") of the common stock of the
Federal National Mortgage Association ("Fannie Mae" and "Fannie Mae Stock")
and (ii) 6.17547 shares (the "Sallie Mae Exchange Ratio") of the common stock
of the Student Loan Marketing Association ("Sallie Mae" and "Sallie Mae
Stock") (collectively, the "Basket Stocks" and each individually a "Basket
Stock"). The Fannie Mae Exchange Ratio and the Sallie Mae Exchange Ratio were
initially calculated so that the Fannie Mae Stock and the Sallie Mae Stock
constitute 43.44% and 56.56%, respectively, of the initial dollar value of the
Basket (as defined herein). Upon exchange, the holder will not receive any
cash payment representing any accrued OID. Such accrued OID will be deemed
paid by the shares of such Basket Stocks received by the holder upon exercise
of the Exchange Right. Each Exchange Ratio will remain constant for the term
of the Notes unless adjusted for certain corporate events; provided, however,
that none of the Exchange Ratios will be adjusted for any original issue
discount ("OID") on the Notes. See "Adjustments to the Exchange Ratios" in
this Pricing Supplement. An Exchange Date will be any NYSE Trading Day (as
defined herein) that falls during the period beginning July 29, 1996 and
ending on the day prior to the earliest of (i) the Maturity Date, (ii) the
Call Date (as defined below) and (iii) in the event of a call for cash as
described under "Company Exchange Right" herein, the Company Notice Date (as
defined herein).
On or after April 30, 1998, the Company may call the Notes, in whole but not
in part, for mandatory exchange into the Basket Stocks at the applicable
Exchange Ratios on the date (the "Call Date") not less than 30 nor more than
60 days after the Company Notice Date, as specified by the Company; provided
that from April 30, 1998 through April 30, 1999 the Company may call the Notes
only if Parity (as defined herein) as determined on the NYSE Trading Day
immediately prior to the Company Notice Date is greater than $1,500; and
provided further that after April 30, 1999, if Parity as determined by the
NYSE Trading Day immediately prior to the Company Notice Date is less than the
applicable Call Price (as defined herein) for such Company Notice Date, the
Company will pay such applicable Call Price in cash on the Call Date. If the
Notes are so called for mandatory exchange, the Basket Stocks or cash to be
delivered to holders of Notes will be delivered on the Call Date.
Fannie Mae and Sallie Mae are not affiliated with the Company nor involved in
this offering of the Notes. The Market Prices for the Fannie Mae Stock and
Sallie Mae Stock on the date of this Pricing Supplement were $31 3/4 and $68
3/8, respectively. See "Historical Information" in this Pricing Supplement
for information on the range of Market Prices for Fannie Mae Stock and Sallie
Mae Stock.
The Company will cause Parity and any adjustments to the Exchange Ratios to be
determined by 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 83.083%
-------------
Agent's
Price to Public Commissions(1) Proceeds to Company
--------------- -------------- -------------------
Per Note... 83.083% .25% 82.833%
Total...... $13,085,572.50 $39,375.00 $13,046,197.50
_______________
(1) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount:.............. $15,750,000
Maturity Date:................. April 30, 2002
Specified Currency:............ U.S. Dollars
Issue Price:................... 83.083%
Original Issue Date (Settlement
Date): May 23, 1996
Book Entry Note or Certificated
Note: Book Entry
Senior Note or Subordinated Note:Senior
Minimum Denominations:......... $1,000
Trustee:....................... Chemical Bank
Exchange Right:................ On any Exchange Date, subject to a prior
call of the Notes by the Company for cash
as described under "Company Exchange
Right" below, the holders of Notes will be
entitled upon (a) completion by the holder
and delivery to the Company and the
Calculation Agent of an Official Notice of
Exchange (in the form of Annex A attached
hereto) prior to 11:00 a.m. New York City
time on such date and (b) delivery on such
date of such Notes to the Trustee, to
exchange each $1,000 principal amount of
Notes for (i) 10.12898 shares of Fannie
Mae Stock and (ii) 6.17547 shares of
Sallie Mae Stock (collectively, the
"Basket Stocks" and individually, a
"Basket Stock"), subject in each case to
adjustment as described under "Adjustments
to the Exchange Ratios" below. Upon any
such exchange, the Company will deliver
the shares of such Basket Stocks. Such
delivery or payment will be made 3
Business Days after any Exchange Date,
subject to delivery of such Notes to the
Trustee on the Exchange Date.
The Company shall, or shall cause the
Calculation Agent to, deliver such Basket
Stocks to the Trustee for delivery to the
holders.
No Fractional Shares:.......... If upon any exchange of the Notes the Company
delivers any Basket Stock, the Company will
pay cash in lieu of delivering fractional
shares of any such Basket Stock in an amount
equal to the corresponding fractional Market
Price as determined by the Calculation Agent
on such Exchange Date.
Exchange Ratios:............... The Exchange Ratios for Fannie Mae Stock
and the Sallie Mae Stock (each, an
"Exchange Ratio") are 10.12898 (the
"Fannie Mae Exchange Ratio") and 6.17547
(the "Sallie Mae Exchange Ratio"),
respectively, subject in each case to
adjustment for certain corporate events.
See "Adjustments to Exchange Ratios"
below.
Exchange Date:................. Any NYSE Trading Day that falls during the
period beginning July 29, 1996 and ending on
the day prior to the earliest of (i) the
Maturity Date, (ii) the Call Date and (iii)
in the event of a call for cash as described
under "Company Exchange Right" below, the
Company Notice Date.
Company Exchange Right:........ On or after April 30, 1998, the Company may
call the Notes, in whole but not in part, for
mandatory exchange on the Call Date into the
Basket Stocks at the applicable Exchange
Ratios; provided that, from April 30, 1998
through April 30, 1999, the Company may only
call the Notes if Parity on the NYSE Trading
Day immediately preceding the Company Notice
Date is greater than $1,500; and provided
further that after April 30, 1999, if Parity
as determined by the Calculation Agent on the
NYSE Trading Day immediately prior to the
Company Notice Date is less than the
applicable Call Price for such Company Notice
Date, the Company will pay such Call Price in
cash on the Call Date. If the Notes are so
called for mandatory exchange by the Company,
then, unless a holder subsequently exercises
the Exchange Right (the exercise of which
will not be available to the holder following
a call for cash in an amount equal to the
Call Price), the Basket Stocks or cash to be
delivered to holders of Notes will be
delivered on the Call Date fixed by the
Company and set forth in its notice of
mandatory exchange, upon delivery of such
Notes to the Trustee. Upon an exchange by
the Company, the holder will not receive any
additional cash payment representing any
accrued OID. Such accrued OID will be deemed
paid by the delivery of the Basket Stocks or
cash. The Company shall, or shall cause the
Calculation Agent to, deliver such Basket
Stocks or cash to the Trustee for delivery to
the holders.
On or after the Company Notice Date (other
than with respect to a call of the Notes
for cash by the Company) holders of the
Notes will continue to be entitled to
exercise the Exchange Right and receive
any amounts described under "Exchange
Right" above.
Company Notice Date:........... Any NYSE Trading Day on or after April 30,
1998 on which the Company issues its notice
of mandatory exchange.
Parity:........................ With respect to any NYSE Trading Day, an
amount equal to the sum of (i) the Fannie Mae
Exchange Ratio times the Market Price (as
defined below) of Fannie Mae Stock and (ii)
the Sallie Mae Exchange Ratio times the
Market Price of Sallie Mae Stock, in each
case as such Market Prices shall be
determined on such NYSE Trading Day.
Call Price:.................... The table below shows indicative Call Prices
for each $1,000 principal amount of Notes on
April 30, 1998 and at each April 30
thereafter to and including the Maturity
Date. The Call Price for each $1,000
principal amount of Notes called for
mandatory exchange on Call Dates between such
indicative dates would include an additional
amount reflecting any additional nominal
accrual from the next preceding date in the
table through the applicable Call Date at the
rate of 2.5% per annum. Such additional
accreted amount, as determined by the
Calculation Agent, will be calculated on a
semiannual bond-equivalent basis based on the
Call Price for the immediately preceding Call
Date indicated in the table below.
Call Date Call Price
--------- ----------
April 30, 1998 $905.40
April 30, 1999 $928.18
April 30, 2000 $951.53
April 30, 2001 $975.46
Maturity $1,000.00
Market Price:.................. If a Basket Stock (or any other security
for which a Market Price must be
determined) is listed on a national
securities exchange, or is traded on 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 such Basket Stock
(or one unit of any such other security)
for any Exchange Date 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 each
such Basket Stock 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 for such Basket Stock
pursuant to clause (i) or (ii) of the
preceding sentence, the applicable Market
Price for such Basket Stock on such
Exchange Date shall be the mean, as
determined by the Calculation Agent, of
the bid prices for the such Basket Stock
obtained from as many dealers in such
Basket 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.
NYSE Trading Day:.............. A day on which trading is generally conducted
in the over-the-counter market for equity
securities in the United States and on the
New York Stock Exchange ("NYSE"), as
determined by the Calculation Agent, and on
which a Market Disruption Event has not
occurred.
Basket:........................ The following table sets forth with respect
to the Notes issued on the Original Issue
Date the Basket Stocks, the initial Market
Price of each Basket Stock as of the date of
this Pricing Supplement, the approximate
dollar value of each Basket Stock represented
in the Basket, the initial weight assigned to
each Basket Stock and the Initial Exchange
Ratio of each Basket Stock as of the date of
this Pricing Supplement:
<TABLE>
<CAPTION>
Dollar Value
Issuer of Initial Represented Initial
the Market in the Original Initial Exchange
Basket Stock (1) Price (2) Basket Value Weight Ratio(2)
- ---------------- --------- --------------- ------- --------
<S> <C> <C> <C> <C>
Federal National
Mortgage
Association $31.6250 $320.329 43.44% 10.12898
Student Loan
Marketing
Association $67.5356 $417.064 56.56% 6.17547
(1) The common stocks of the two United
States corporations listed herein are
currently traded on the NYSE.
(2) Initial Market Prices were determined
based on prices of the Fannie Mae Stock
and the Sallie Mae Stock on the date of
this Pricing Supplement and on the days
immediately prior to that of this Pricing
Supplement.
The initial Exchange Ratio relating to each
Basket Stock indicates the number of shares
of such Basket Stock, given the Market Price
of such Basket Stock, required to be included
in the Basket so that each Basket Stock
represents the approximate percentage and
Dollar Value Represented in the Original
Basket Value with respect to the Notes issued
on the Original Issue Date as assigned to it
in the table above as of the date of this
Pricing Supplement. The respective Exchange
Ratios will remain constant for the term of
the Notes unless adjusted for certain
corporate events. See "Adjustments to the
Exchange Ratios."
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
Ratios or determining the Market Price for
each Basket Stock or whether a Market
Disruption Event has occurred. See
"Adjustment to the Exchange Ratios" 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.
Total Amount of OID:........... $150.10 per $1,000 principal amount of Notes.
The calculation of the Total Amount of OID
has been determined by treating the Notes as
part of a single issue that includes (i)
$26,000,000 principal amount of Notes issued
on April 29, 1996 for $22,397,700 (but
otherwise having terms identical to the Notes
described herein) and (ii) $15,750,000 of
Notes issued on May 23, 1996 for
$13,085,572.50. Consequently, the aggregate
issue price of the Notes is $35,483,272.50
and the stated redemption price at maturity
is $41,750,000. The Yield to Maturity has
been computed on a semiannual bond-equivalent
basis by treating such aggregate Issue Price
as paid in installments of $22,397,700 on
April 29, 1996 and of $13,085,572.50 on May
23, 1996.
Original Yield to Maturity:.... 2.7391% per annum computed as set forth under
"Total Amount of OID" above.
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 do not pay interest and the
yield to maturity is less than would be
payable on a non-exchangeable debt
security issued with OID if the Company
were to issue such a security at the same
time it issues the Notes.
The Company is not affiliated with the
issuers of the Basket Stocks and, although
the Company as of the date of this Pricing
Supplement does not have any material
non-public information concerning such
issuers, corporate events of any such issuer,
including those described below in
"Adjustments to the Exchange Ratios," are
beyond the Company's ability to control and
are difficult to predict.
The issuers of the Basket Stocks are not
involved in the offering of the Notes and
have 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. The
issuers of the Basket Stocks will not receive
any of the proceeds of the offering of the
Notes made hereby and is not responsible for,
and have not participated in, the
determination of the timing of, prices for or
quantities of, the Notes offered hereby.
There can be no assurance as to how the Notes
will trade in the secondary market or whether
such market will be liquid or illiquid. The
market value for the Notes will be affected
by a number of factors independent of the
creditworthiness of the Company and the value
of the Basket Stocks, including, but not
limited to, the volatility of the Basket
Stocks, the dividend rate on the Basket
Stocks, market interest and yield rates, and
the time remaining to the first Exchange
Date, any Call Date or the maturity of the
Notes. In addition, the value of the Basket
Stocks depend on a number of interrelated
factors, including economic, financial and
political events, over which the Company has
no control. The market value of the Notes is
expected to depend primarily on the extent of
the appreciation, if any, of Parity above the
Issue Price. 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 accreted principal
amount thereof, if, at such time, Parity is
below, equal to or not sufficiently above the
Issue Price. In addition, the appreciation,
if any, in the value of one Basket Stock may
be reduced, or entirely offset, by the
depreciation in the other Basket Stock. The
historical market prices of the Basket Stocks
should not be taken as an indication of
future performance of the Basket Stocks
during the term of any Note or of the future
value of Parity.
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 Ratios that may influence the
determination of Parity or of the amount of
stock or cash receivable upon exercise of the
Exchange Right or the Company Exchange Right.
See "Adjustments to the Exchange Ratio" and
"Market Disruption Event."
It is suggested that prospective investors
who consider purchasing the Notes should
reach an investment decision only after
carefully considering the suitability of the
Notes in light of their particular
circumstances.
Investors should also consider the tax
consequences of investing in the Notes. See
"United States Federal Taxation" below.
Adjustments to the Exchange Ratios: The Fannie Mae Exchange Ratio and Sallie
Mae Exchange Ratio will each be adjusted as
follows:
1. If any of the Basket Stocks are subject
to a stock split or reverse stock
split, then once such split has become
effective, the Exchange Ratio for such
Basket Stock will be adjusted to equal
the product of the prior Exchange Ratio
of such Basket Stock and the number of
shares of such Basket Stock issued in
such stock split or reverse stock split
with respect to one share of such
Basket Stock.
2. If any of the Basket Stocks is subject
to a stock dividend (issuance of
additional shares of such Basket
Stock that is given ratably to all
holders of such Basket Stock), then
once the dividend on the applicable
Basket Stock has become effective
and the applicable Basket Stock is
trading ex-dividend, the applicable
Exchange Ratio will be adjusted so
that the new Exchange Ratio for the
applicable Basket Stock shall equal
the prior Exchange Ratio plus the
product of (i) the number of shares
issued with respect to one share of
such Basket Stock and (ii) the prior
Exchange Ratio.
3. There will be no adjustments to any
Exchange Ratio to reflect cash
dividends or other distributions
paid with respect to any Basket
Stock other than distributions
described in paragraph 6 below and
Extraordinary Dividends as described
below. A cash dividend or other
distribution with respect to a
Basket Stock will be deemed to be an
"Extraordinary Dividend" if such
dividend or other distribution
exceeds the immediately preceding
non-Extraordinary Dividend for the
applicable Basket Stock by an amount
equal to at least 10% of the Market
Price of such Basket Stock on the
NYSE Trading Day preceding the ex-
dividend date for the payment of
such Extraordinary Dividend (the
"ex-dividend date"). If an
Extraordinary Dividend occurs, the
Exchange Ratio with respect to such
Basket Stock will be adjusted on the
ex-dividend date with respect to
such Extraordinary Dividend so that
the new Exchange Ratio will equal
the product of (i) the then current
Exchange Ratio and (ii) a fraction,
the numerator of which is the Market
Price on the NYSE Trading Day
preceding the ex-dividend date, and
the denominator of which is the
amount by which the Market Price on
the NYSE Trading Day preceding the
ex-dividend date exceeds the
Extraordinary Dividend Amount. The
"Extraordinary Dividend Amount" with
respect to an Extraordinary Dividend
for a Basket 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 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 any Basket Stock
described in paragraph 6 below that
also constitutes an Extraordinary
Dividend shall only cause an
adjustment to the applicable
Exchange Ratio pursuant to paragraph 6.
4. If the issuer of any Basket Stock is
being liquidated or is subject to a
proceeding under any applicable
bankruptcy, insolvency or other similar
law, the Notes will continue to be
exchangeable into shares of the
applicable Basket Stock so long as a
Market Price for such Basket Stock is
available. If a Market Price is no
longer available for the applicable
Basket Stock for whatever reason,
including the liquidation of the issuer
of such Basket Stock or the subjection
of such issuer to a proceeding under
any applicable bankruptcy, insolvency
or other similar law, then the value of
such Basket Stock will equal zero for
so long as the applicable Market Price
is not available.
5. If there occurs any reclassification or
change of any Basket Stock, or if the
issuer of such Basket Stock has been
subject to a merger, combination or
consolidation and is not the surviving
entity, or if there occurs a sale or
conveyance to another corporation of
the property and assets of the issuer of
such Basket Stock as an entirety or
substantially as an entirety, in each
case as a result of which the holders
of such Basket Stock shall be entitled
to receive stock, other securities or
other property or assets (including
cash) with respect to or in exchange
for such Basket Stock, then the holders
of the Notes then outstanding will be
entitled thereafter to exchange such
Notes into the kind and amount of
shares of stock, other securities or
other property or assets (including
cash) that they would have owned or
been entitled to receive upon such
reclassification, change, merger,
combination, consolidation, sale or
conveyance had such holders exchanged
such Notes for shares of such
applicable Basket Stock immediately
prior to any such corporate event. At
such time, no adjustment will be made
to the applicable Exchange Ratio.
6. If the issuer of any Basket Stock
issues to all holders of shares of such
Basket Stock equity securities of an
issuer other than the Issuer of such
Basket Stock (other than in a
transaction described in paragraph 5
above), then the holders of the Notes
then outstanding will be entitled to
receive such new equity securities upon
exchange of such Notes. The Exchange
Ratio for such new equity securities
will equal the product of the Exchange
Ratio in effect for the applicable
Basket Stock at the time of the
issuance of such new equity securities
and the number of shares of the new
equity securities issued with respect
to one share of the applicable Basket
Stock.
No adjustments to any Exchange Ratio
will be required unless such adjustment
would require a change of at least 0.1%
in the applicable Exchange Ratio then
in effect. The Exchange Ratio
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 any Exchange Ratio
will be made other than those specified
above. The adjustments specified above
do not cover all events that could
affect the Market Price of any Basket
Stock.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to the
Exchange Ratios and of any related
determinations and calculations with
respect to any distributions of stock,
other securities or other property or
assets (including cash) in connection
with any corporate event described in
paragraph 5 or 6 above, and its
determinations and calculations with
respect thereto shall be conclusive.
The Calculation Agent will provide
information as to any adjustments to
any of the Exchange Ratios upon written
request by any holder of the Notes.
Market Disruption Event:....... "Market Disruption Event" means:
(i) a suspension, absence or material
limitation of trading of any Basket
Stock on the primary market for such
Basket 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 any Basket 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 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, the Securities
and Exchange Commission or any other exchange
relevant to the determination of the Market
Price 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 any Basket 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 such Basket Stock and (5) "a
suspension, absence or material limitation of
trading" on the primary securities market on
which options contracts related to any Basket
Stock are traded will not include any time
when such securities market is itself closed
for trading under ordinary circumstances.
Public Information............. Fannie Mae and Sallie Mae each periodically
publish certain financial and other
information, which is available from Fannie
Mae and Sallie Mae, respectively, upon
request and which is delivered to the NYSE
at 11 Wall Street, New York, New York 10005.
In addition, information regarding the
issuers of the Basket Stocks 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 THE BASKET STOCKS OR OTHER
SECURITIES OF ANY ISSUER OF A BASKET STOCK
OR OF ANY AFFILIATE THEREOF. ALL
DISCLOSURES CONTAINED IN THIS PRICING
SUPPLEMENT REGARDING THE ISSUERS OF THE
BASKET STOCKS 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
THE ISSUERS OF THE BASKET STOCKS. NEITHER
THE COMPANY NOR THE AGENT MAKES ANY
REPRESENTATION THAT SUCH PUBLICLY
AVAILABLE DOCUMENTS OR ANY OTHER PUBLICLY
AVAILABLE INFORMATION REGARDING THE
ISSUERS OF THE BASKET STOCKS 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 ANY
BASKET STOCK (AND THEREFORE THE INITIAL
MARKET PRICE AND THE EXCHANGE RATIO FOR
SUCH BASKET STOCK), HAVE BEEN PUBLICLY
DISCLOSED. SUBSEQUENT DISCLOSURE OF ANY
SUCH EVENTS OR THE DISCLOSURE OF OR
FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS
CONCERNING THE ISSUERS OF THE BASKET
STOCKS COULD AFFECT THE VALUE RECEIVED ON
ANY EXCHANGE DATE OR CALL DATE WITH
RESPECT TO THE NOTES AND THEREFORE THE
TRADING PRICES OF THE NOTES.
THE INCLUSION OF A STOCK IN THE BASKET IS NOT
A RECOMMENDATION TO BUY OR SELL SUCH STOCK,
AND NEITHER THE COMPANY NOR ANY OF ITS
AFFILIATES MAKES ANY REPRESENTATION TO ANY
PURCHASER OF NOTES AS TO THE PERFORMANCE OF
ANY BASKET STOCK.
The Company or its affiliates may presently
or from time to time engage in business with
the issuers of the Basket Stocks including
extending loans to, or making equity
investments in, such Basket Stocks or
providing advisory services to the issuers of
the Basket Stocks, 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 the Basket Stocks and, in
addition, one or more affiliates of the
Company may publish research reports with
respect to such issuers. The Company does
not make any representation to any purchaser
of Notes with respect to any matters
whatsoever relating to such Basket Stocks.
Any prospective purchaser of a Note should
undertake an independent investigation of the
issuers of the Basket Stocks as in its
judgment is appropriate to make an informed
decision with respect to an investment in the
Basket Stocks.
Historical Information......... The following table sets forth the high and
low Market Prices with respect to each Basket
Stock during 1993, 1994, 1995 and during 1996
through May 16, 1996. The Market Prices on
May 16, 1996 for Fannie Mae Stock and Sallie
Mae Stock were $31 3/4 and $68 3/8,
respectively. Beneath the name of each
issuer is the CUSIP number for the security
included in the Basket relating to such
issuer. The Market Prices and Dividends per
Share listed below were obtained from
Bloomberg Financial Markets, and the Company
believes such information to be accurate.
Neither the Company nor the agent makes any
representation as to the accuracy of such
information. The historical prices of the
Basket Stocks should not be taken as an
indication of future performance, and no
assurance can be given that the prices of the
Basket Stocks will increase sufficiently to
cause the beneficial owners of the Notes to
receive an amount in excess of the principal
amount on any Exchange Date or Call Date.
Dividends
High Low Per Share
---- --- ---------
Fannie Mae Stock*
(CUSIP #313586109)
Calendar Year
1993
First Quarter 21 1/8 18 27/32 .1
Second Quarter 21 3/16 18 3/4 .115
Third Quarter 21 1/4 18 15/16 .115
Fourth Quarter 20 13/32 18 15/32 .13
1994
First Quarter 22 9/32 19 7/16 .15
Second Quarter 21 15/16 19 7/16 .15
Third Quarter 22 11/32 19 1/2 .15
Fourth Quarter 19 5/8 17 1/32 .15
1995
First Quarter 20 25/32 17 15/32 .17
Second Quarter 25 20 5/16 .17
Third Quarter 26 11/32 22 21/32 .17
Fourth Quarter 31 3/16 25 19/32 .17
1996
First Quarter 35 3/8 29 3/4 .19
Second Quarter 34 3/8 28 .19
(to May 16, 1996)
_________
* Historical Prices and Dividends per Share have been adjusted for a 4 for
1 stock split of the Fannie Mae Stock, which became effective in the First
Quarter of 1994.
Dividends
High Low Per Share
---- --- ---------
Sallie Mae Stock
(CUSIP #863871505)
Calendar Year
1993
First Quarter 74 1/2 42 1/2 .3
Second Quarter 50 40 .3
Third Quarter 49 1/8 41 1/2 .3
Fourth Quarter 47 1/4 42 1/8 .35
1994
First Quarter 49 3/4 43 1/8 .35
Second Quarter 43 7/8 36 .35
Third Quarter 38 3/4 32 1/4 .35
Fourth Quarter 34 1/2 31 3/8 .37
1995
First Quarter 38 5/8 33 1/4 .37
Second Quarter 48 1/4 35 .37
Third Quarter 55 3/8 47 1/4 .37
Fourth Quarter 70 3/4 56 .4
1996
First Quarter
Second Quarter 85 1/2 63 3/4 .4
(to May 16, 1996) 82 5/8 68 3/8
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 and prior to the date of this Pricing
Supplement, the Company, through its
subsidiaries, hedged its anticipated exposure
in connection with the Notes by taking
positions in the Basket Stocks. Such hedging
was carried out in a manner designed to
minimize any impact on the prices of the
Basket Stocks. Purchase activity could
potentially have increased the prices of any
or all of the Basket Stocks and therefore
effectively have increased the level to which
the Basket Stocks must rise before a holder
of a Note will receive more than the accreted
principal amount on any Exchange Date or Call
Date. The Company, through its subsidiaries,
is likely to modify its hedge position
throughout the life of the Notes by
purchasing and selling the Basket Stocks,
options contracts on such Basket Stocks
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 had or will have a material
impact on the price of the Basket Stocks
or such options, there can be no assurance
that the Company did not or will not
affect such prices as a result of its
hedging activities.
United States Federal Taxation: The Company intends to treat gain realized by
a holder on the retirement of a Note, to the
extent attributable to the exchange feature,
as interest income and to report any such
amount accordingly. See also "United States
Federal Taxation" in the accompanying
Prospectus Supplement.
ANNEX A
OFFICIAL NOTICE OF EXCHANGE
Dated: On or after July 29, 1996
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) 761-0028
(Attn: James C. Jurney)
Dear Sirs:
The undersigned holder of the Medium Term Notes, Series C, Senior Fixed
Rate Notes due April 30, 2002 (Exchangeable for Shares of Common Stock of
Federal National Mortgage Association ("Fannie Mae Stock") and Student Loan
Marketing Association ("Sallie Mae Stock") (collectively, the "Basket
Stocks")) 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
NYSE Trading Day, as of the next NYSE Trading Day, provided that such day is
prior to the earliest of (i) April 30, 2002, (ii) the Call Date and (iii) in
the event of a call for cash, the Company Notice Date), the Exchange Right as
described in Pricing Supplement No. 11 dated May 16, 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
shares of the Basket Stocks 3 Business Days after the Exchange 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 acknowledgement---------
</TABLE>
