Subject to Completion, Pricing Supplement dated March 15, 1996
PROSPECTUS Dated March 29, 1995 Pricing Supplement No. 65 to
PROSPECTUS SUPPLEMENT Registration Statement No. 33-57833
Dated March 29, 1995 March , 1996
Rule 424(b)(3)
[$15,000,000]
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
EXCHANGEABLE NOTES DUE [MARCH 30, 2002]
Exchangeable For Shares of Common Stock of
ABC Corp., DEF Corp. and XYZ Corp.
The Exchangeable Notes due [March 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 will
be $ ( % of the principal amount at maturity) (the "Issue Price"),
and there will be no periodic payments of interest. The Issue Price
represents a yield to maturity of % per annum computed on a semiannual
bond-equivalent basis based on the Issue Price calculated from the date of
issuance (the "Original Issue Date"). The Notes are issued in minimum
denominations of $1,000 per Note and will mature on [March 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) ___
shares (the "ABC Exchange Ratio") of the common stock of ABC ("ABC Stock"),
(ii) ___ shares (the "DEF Exchange Ratio") of the common stock of DEF ("DEF
Stock") and (iii) ___ shares (the "XYZ Exchange Ratio") of the common stock of
XYZ ("XYZ Stock") (collectively, the "Basket Stocks" and individually a
"Basket Stock"), subject to the Company's right to pay cash in an amount equal
to the applicable Exchange Ratio times the applicable Market Price (as defined
herein) of any of such Basket Stocks on the Exchange Date in lieu of such
shares. Each Exchange Ratio was initially calculated so that each Basket
Stock constitutes an equal dollar value within the Basket. 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 or
cash 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 March , 1997 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 March , 1999 the Company may call the Notes, in whole but not in
part, for mandatory exchange into the Basket Stocks at the applicable Exchange
Ratios; provided that between March , 1999 and on or before March , 2000 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 March , 2000, 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 date (the "Call Date") not less than 30 nor more than 60 days after the
Company Notice Date, as specified by the Company. 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.
ABC Corp., DEF Corp. and XYZ Corp. are not affiliated with the Company nor
involved in this offering of the Notes. The Market Price for the ABC Stock,
DEF Stock and XYZ Stock on the date of this Pricing Supplement was $ , $
and $ , respectively. See "Historical Information" in this Pricing
Supplement for information on the range of Market Prices for ABC Stock, DEF
Stock and XYZ 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-6 herein.
_________________
PRICE %
_________________
Agent's
Price to Public Commissions(1) Proceeds to Company
----------------- ---------------- ---------------------
Per Note... % % %
Total...... $ $ $
_______________
(1) 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:.............. [$15,000,000]
Maturity Date:................. [March 30, 2002]
Specified Currency:............ U.S. Dollars
Issue Price:................... %
Original Issue Date (Settlement
Date):........................ March , 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) shares of ABC Stock, (ii)
shares of DEF Stock and (iii) shares of
XYZ 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 may, at its
sole option, deliver the shares of such
Basket Stocks or, in lieu of the shares of
any or all of such Basket Stocks, pay an
amount in cash equal to the applicable
Exchange Ratio times the applicable Market
Price of any such Basket Stock on the
Exchange Date, as determined by the
Calculation Agent. 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 or cash to the Trustee for delivery to
the holders.
No Fractional Shares:.......... If upon any exchange of the Notes the Company
chooses to deliver 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 ABC Stock, DEF Stock
and XYZ Stock are (the "ABC Exchange
Ratio"), (the "DEF Exchange Ratio") and
(the "XYZ 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 March , 1997 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 March , 1999, the Company may
call the Notes, in whole but not in part,
for mandatory exchange into the Basket
Stocks at the applicable Exchange Ratios;
provided that, between March , 1999 and on
or before March , 2000, 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
March , 2000, 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.
Company Notice Date:........... Any NYSE Trading Day on or after March ,
1999 on which the Company issues its notice
of exchange.
Parity:........................ With respect to any NYSE Trading Day, an
amount equal to the sum of (i) the ABC
Exchange Ratio times the Market Price (as
defined below) of ABC Stock, (ii) the DEF
Exchange Ratio times the Market Price of DEF
Stock and (iii) the XYZ Exchange Ratio times
the Market Price of XYZ Stock, in each case
as such Market Prices shall be determined on
such NYSE Trading Day.
Call Price:.................... Notice Date Call Price
----------- ----------
On or after _____ and before
___% of principal amount _____
On or after _____ and before
___% of principal amount _____
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
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
NYSE, as determined by the Calculation Agent,
and on which a Market Disruption Event has
not occurred.
Basket:........................ The following table sets forth 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:
Issuer of Initial Dollar Value
the Market Price Represented Initial
------------ in Original Initial Exchange
Basket Stock (1) (2) Basket Value Weight Ratio(2)
- ---------------- ------------ ------------- ------- --------
ABC Corp. $ $ 33 1/3%
DEF Corp. $ $ 33 1/3%
XYZ Corp. $ $ 33 1/3%
(1) The common stocks of the three United
States corporations listed herein are
currently traded on [ ]
(2) Initial Market Prices and Initial
Exchange Ratios were determined
based on average Market Prices at
the time the Notes were priced by
the Company for initial offering to
the public.
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 percentage and dollar value of
the Initial Basket Value 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:........... % per $1,000 principal amount of Notes
Original Yield to Maturity:.... % per annum computed on a semiannual
bond-equivalent basis based on the Issue
Price calculated from the Original Issue Date.
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 the Market Price
above the initial Market Price for each such
Basket 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 accreted principal
amount thereof, if, at such time, the Market
Price for each such Basket Stock is below,
equal to or not sufficiently above the
initial Market Price for such 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.
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 ABC Exchange Ratio, DEF Exchange Ratio
and XYZ Exchange Ratio will 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 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
for 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) an
"absence 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............. All of the Basket Stocks are 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 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 March , 1996. The Market Price on
March , 1996 for ABC Stock, DEF Stock and
XYZ Stock was $ , $ and $ ,
respectively. Beneath the name of each
issuer is the CUSIP number for the security
included in the Basket relating to such
issuer. 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.
Basket Stock High Low Last
- ------------ ---- --- ----
Calendar Year
1993
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1994
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1995
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1996
First Quarter (to March , 1996)
Basket Stock High Low Last
- ------------ ---- --- ----
Calendar Year
1993
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1994
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1995
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1996
First Quarter (to March , 1996)
Basket Stock High Low Last
- ------------ ---- --- ----
Calendar Year
1993
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1994
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1995
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1996
First Quarter (to March , 1996)
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 the date of this Pricing Supplement, the
Company, through its subsidiaries, may hedge
its anticipated exposure in connection with
the Notes by taking positions in any or all
of the Basket Stocks, in 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. In the event that the Company
pursues such a hedging strategy, the price at
which the Company is able to purchase such
positions may be a factor in determining the
Exchange Ratio for any such Basket Stock.
Purchase activity could potentially increase
the prices of any or all of the Basket Stocks
and therefore effectively increase 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. Although the Company has
no reason to believe that its hedging
activity will have a material impact on the
price of the Basket Stocks or such options,
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 the
securities and instruments listed above and
other available securities and instruments.
United States Federal Taxation: United States Holders of the Notes. The
following discussion is based on the opinion
of , special tax counsel to the
Company. This discussion supplements the
"United States Federal Taxation" section in
the accompanying Prospectus Supplement.
Any limitations on disclosure and any defined
terms contained therein are equally
applicable to the summary below. The Notes
will be issued with original issue discount
("OID") equal to the difference between the
Notes' Issue Price and their "stated
redemption price at maturity." For this
purpose, the stated redemption price at
maturity of the Notes is equal to the
principal amount.
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 exercise of the
Exchange Right or upon payment pursuant to
the Company Exchange Right, a United
States Holder will recognize gain or loss
equal to the difference between the amount
realized (which, if the Company delivers
Basket Stocks, will be the fair market
value of such stock at the time of the
exchange, plus any cash received in lieu
of fractional shares) on the exchange and
such Holder's tax basis in the Note. A
United States Holder receiving any of the
Basket Stocks will have a basis in such
Basket Stock equal to its fair market
value at the time of the exchange and a
holding period in such stock beginning the
day after the date of the exchange. With
respect to accrual basis taxpayers
receiving the Call Price in cash pursuant
to the Company Exchange Right, such
accrual basis taxpayers may recognize gain
or loss at the time the Notice is received
rather than at the time of payment. Any
loss recognized on any exchange will be
treated as capital loss. It is unclear,
however, under existing law whether gain
recognized on any exchange will be treated
as ordinary or capital in character.
Subject to further guidance from the
Internal Revenue Service, 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 upon
exercise of the Exchange Right or the
Company Exchange Right.
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 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 would be required
to account for the Note in the manner
prescribed in withdrawn Treasury regulation
Section 1.1275-4. The Internal Revenue
Service, however, would not be required to
accept such method as correct.
Any gain or loss recognized on the sale or
other taxable disposition of a Note prior to
maturity will be treated as capital in
character.
ANNEX A
OFFICIAL NOTICE OF EXCHANGE
Dated:[On or after March , 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) 761-0028
(Attn: Richard P. Sandulli)
Dear Sirs:
The undersigned holder of the Medium Term Notes, Series C, Senior
Fixed Rate Notes due [March 30, 2002] (Exchangeable for Shares of Common Stock
of ABC Corp., DEF Corp. and XYZ Corp.) 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) [March
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. dated March , 1996 (the "Pricing Supplement") to the Prospectus
Supplement dated March 29, 1995 and the Prospectus dated March 29, 1995
related to Registration Statement No. 33-57833. 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, whereupon
the Company will deliver, at its sole option, any or all shares of the Basket
Stocks or cash 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 ___________
