PROSPECTUS Dated January 24, 1997 Pricing Supplement No. 34 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-18005
Dated February 21, 1997 Dated April 21, 1997
Rule 424(b)(3)
$4,600,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES E
WTI CURVE LINKED NOTES DUE MAY 6, 1998
------------
The WTI Curve Linked Notes due May 6, 1998 (the "Notes") are
Medium-Term Notes, Series E of Morgan Stanley Group Inc. (the "Company"), as
further described herein and in the Prospectus Supplement under "Description
of Notes--Fixed Rate Notes" and "--Notes Linked to Commodity Prices, Single
Securities, Baskets of Securities or Indices." The Notes are being issued
in minimum denominations of $10,000 and will mature on May 6, 1998 (the
"Maturity Date"). There will be no periodic payments of interest on the
Notes.
The Notes will not be redeemable by the Company in whole or in
part prior to the Maturity Date other than under the circumstances described
under "Description of Notes -- Tax Redemption" in the accompanying Prospectus
Supplement. The Notes will be issued in bearer form, which form is further
described under "Description of Notes -- Forms, Denominations, Exchange and
Transfer" in the accompanying Prospectus Supplement. Notes in bearer form
will not be exchangeable at any time for Notes in registered form.
At maturity, the holder of each Note will receive the par
amount of such Note ($10,000) ("Par") plus an amount (the "Supplemental
Redemption Amount") based on the average spread, during a reference period,
between the prices of specified futures contracts on West Texas Intermediate
Light Sweet Crude Oil ("WTI"), traded on the New York Mercantile Exchange (the
"NYMEX").
The Supplemental Redemption Amount, if any, payable with
respect to each Note at maturity will equal the product of (i) the par amount
of such Note, (ii) .04 and (iii) the CURVE. The Supplemental Redemption Amount
cannot be less than zero. The CURVE will equal the arithmetic average of the
spreads, calculated on each NYMEX Trading Day in the Reference Period, that
equal the greater of (i) zero and (ii) the settle price of the front WTI
futures contract (the "Front WTI Settle Price") minus the settle price of the
thirteenth WTI futures contract (the "Thirteenth WTI Settle Price"). The
Reference Period extends from January 1, 1998 to March 31, 1998, inclusive.
The Front WTI Settle Price and the Thirteenth WTI Settle Price for any day in
the Reference Period will be the prices for the respective futures contracts
reported by the NYMEX for such day in the Daily Futures Report. See
"Discontinuance of the Daily Futures Report; Alteration of Calculation
Method." If the CURVE does not exceed zero, the holder of each Note will be
repaid the par amount of such Note, but will not receive any Supplemental
Redemption Amount.
For information as to the calculation of the Supplemental
Redemption Amount, and certain tax consequences to beneficial owners of the
Notes, see "Supplemental Redemption Amount," "CURVE," "Reference Period" and
"United States Federal Taxation" in this Pricing Supplement.
The Company will cause the "Supplemental Redemption Amount" to
be determined by Morgan Stanley & Co. International Limited (the "Calculation
Agent") for The Chase Manhattan 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-4 through PS-5 herein.
Capitalized terms not defined above have the meanings given to such terms in
the accompanying Prospectus Supplement.
MORGAN STANLEY & CO.
International
Principal Amount.............. $4,600,000
Maturity Date................. May 6, 1998
Interest Rate................. 0.00%
Specified Currency............ U.S. Dollars
Issue Price................... 100%
Settlement Date (Original
Issue Date)................. May 6, 1997
Book Entry Note or
Certificated Note........... Book Entry
Senior Note or Subordinated
Note........................ Senior
Minimum Denominations......... $10,000
Trustee....................... The Chase Manhattan Bank
Common Code................... 7596413
ISIN.......................... XS0075964139
Maturity Redemption Amount ... At maturity (including as a result of
acceleration or otherwise), the holder of
each Note will receive the par amount of such
Note ($10,000) ("Par") plus the Supplemental
Redemption Amount, if any.
Supplemental Redemption
Amount ..................... The Supplemental Redemption Amount, if any,
payable with respect to each Note at maturity
will equal the product of (i) the par amount
of such Note, (ii) .04 and (iii) the CURVE.
The Supplemental Redemption Amount shall not
be less than zero. The Supplemental
Redemption Amount is described by the
following formula:
Par x .04 x CURVE
The Company shall cause the Calculation Agent
to provide written notice to the Trustee at
its New York office, on which notice the
Trustee may conclusively rely, of the
Supplemental Redemption Amount, if any, on or
prior to 11:00 a.m. on the Business Day
preceding the Maturity Date. See
"Discontinuance of the Daily Futures Report;
Alteration of Calculation Method" below.
All percentages resulting from any
calculation with respect to the Notes will be
rounded to the nearest one hundred-thousandth
of a percentage point, with five
one-millionths of a percentage point rounded
upwards (e.g., 9.876545% (or .09876545) would
be rounded to 9.87655% (or .0987655)), and
all dollar amounts used in or resulting from
such calculation will be rounded to the
nearest cent with one-half cent being rounded
upwards.
CURVE......................... The CURVE shall equal the arithmetic average
of the spreads, calculated on each NYMEX
Trading Day in the Reference Period, that
equal the greater of (i) zero and (ii) the
Front WTI Settle Price minus the Thirteenth
WTI Settle Price, as determined by the
Calculation Agent.
Front WTI Settle Price........ For any NYMEX Trading Day during the
Reference Period, the Front WTI Settle Price
shall be the settle price for the first WTI
futures contract scheduled for settlement
following such day listed in the Daily
Futures Report.
Thirteenth WTI Settle Price... For any NYMEX Trading Day during the
Reference Period, the Thirteenth WTI Settle
Price shall be the settle price for the
thirteenth WTI futures contract scheduled for
settlement following such day listed in the
Daily Futures Report.
Daily Futures Report.......... The Daily Futures Report is published daily
by the NYMEX and lists pricing information
for futures contracts in oil products.
Futures contracts on WTI are listed under the
heading "Crude Oil." WTI is the grade of
light sweet crude oil that is traded on the
NYMEX. The Front WTI Settle Price and the
Thirteenth WTI Settle Price for a particular
day may also be obtained via the NYMEX
automated phone system.
NYMEX Trading Day............. A NYMEX Trading Day is a day on which the
NYMEX is open for business and there has not
been a Market Disruption Event.
Reference Period.............. The Reference Period extends from January 1,
1998 to March 31, 1998, inclusive.
Market Disruption Event....... "Market Disruption Event" means, with
respect to NYMEX:
(i) a suspension, absence or material
limitation of trading on the NYMEX of
futures contracts relating to light sweet
crude oil or WTI in each case as
determined by the Calculation Agent in its
sole discretion; and
(ii) a determination by the Calculation
Agent in its sole discretion that the
event described in clause (i) above
materially interfered with the ability of
the Company or any of its affiliates to
unwind all or a material portion of the
hedge with respect to the Notes.
For purposes of determining whether a
Market Disruption Event has occurred: (1)
a limitation on the hours or number of
days of trading will not constitute a
Market Disruption Event if it results from
an announced change in the regular
business hours of the relevant exchange or
market, (2) but a limitation on trading
imposed during the course of the day by
reason of price movements exceeding levels
permitted by NYMEX will constitute a
Market Disruption Event.
Calculation Agent............. Morgan Stanley & Co. International Limited
("MSIL")
All determinations made by the Calculation
Agent shall be at the sole discretion of the
Calculation Agent and shall, in the absence of
manifest error, be conclusive for all
purposes and binding on the Company and
holders of the Notes.
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Notes, including
with respect to certain determinations and
judgments that the Calculation Agent must make
in determining the Supplemental Redemption
Amount or whether a Market Disruption Event
has occurred. See "Alteration of Calculation
Method" below and "Market Disruption Event"
above. MSIL is obligated to carry out its
duties and functions as Calculation Agent in
good faith and using its reasonable judgment.
Risk Factors.................. An investment in the Notes entails
significant risks not associated with similar
investments in a conventional security,
including the following.
If the CURVE does not exceed zero, the
holders of the Notes will receive only the
par amount of each Note at maturity. The
CURVE is an average of the spreads between
the Front WTI Settle Price and the Thirteenth
WTI Settle Price calculated on each NYMEX
Trading Day during the Reference Period. Due
to volatility in the oil futures market, a
large spread on NYMEX Trading Days early in
the reference period may be mitigated by the
absence of a positive spread on NYMEX Trading
Days later in the Reference Period.
The Notes do not bear any periodic payment of
interest. Because the Supplemental Redemption
Amount may be equal to zero, the effective
yield to maturity may be less than that which
would be payable on a conventional fixed-rate
debt security having the same maturity date
as the Notes and issued by the Company on the
Original Issue Date.
The Notes will not be listed on any exchange.
There can be no assurance as to whether there
will be a secondary market in the Notes or if
there were to be such a secondary market,
whether such market would be liquid or
illiquid. It is expected that the secondary
market for the Notes will be affected by the
creditworthiness of the Company and by a
number of factors, including, but not limited
to, the volatility and direction of
settlement prices for WTI futures contracts,
the time remaining to the Reference Period
and to the maturity of the Notes and market
interest rates. In addition, the CURVE value
depends on a number of interrelated factors,
including economic, financial and political
events, over which the Company has no
control. The oil market is particularly
volatile and can be affected by a variety
events on a global basis, including, without
limitation, the available stock in crude oil,
the available storage space for oil,
environmental regulations, any embargo on
oil, and any turmoil in oil-producing nations.
Historical information regarding the Front
WTI Settle Price and the Thirteenth WTI
Settle Price should not be taken as an
indication of the likely settle prices
during the Reference Period or the likely
value of the CURVE during such period.
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Notes, including
with respect to certain determinations and
judgments that the Calculation Agent must make
in determining the Supplemental Redemption
Amount or whether a Market Disruption Event
has occurred. See "Discontinuance of the
Daily Futures Report; Alteration of
Calculation Method" below and "Market
Disruption Event" above. MSIL, as a
registered broker-dealer, is required to
maintain policies and procedures regarding
the handling and use of confidential
proprietary information, and such policies
and procedures will be in effect
throughout the term of the Notes to
restrict the use of information relating
to the calculation of the CURVE that the
Calculation Agent may be required to make
prior to its dissemination. MSIL is
obligated to carry out its duties and
functions as Calculation Agent in good
faith and using its reasonable judgment.
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."
NYMEX......................... Unless otherwise stated, all information
herein relating to the New York Mercantile
Exchange (NYMEX) has been derived from
information published by the NYMEX and other
publicly-available sources. In 1994, the
NYMEX and the Commodity Exchange (COMEX)
merged to form the world's largest physical
commodity futures exchange under the NYMEX
name. A futures contract is a legally
binding obligation requiring the holder to
buy or sell a particular commodity at a
particular price and location at a specific
date. Contracts are standardized so that each
investor trades contracts with the same
requirements as to quality, quantity, and
delivery terms.
The NYMEX division trades crude oil, heating
oil, gasoline, natural gas, electricity,
propane, platinum, and palladium. The COMEX
division trades gold, silver, copper, and the
Eurotop 100 stock index.
Trading occurs during exchange hours on the
floor of the exchange (the "open outcry
session)." After hours, trading may be
conducted on NYMEX ACCESS, NYMEX's electronic
trading system. Between the open outcry
session and NYMEX ACCESS, trading occurs
about 22 hours a day. NYMEX ensures that
trading is orderly and fair through a strict
network of rules including those regarding
margin deposits, trading and delivery
procedures, and membership qualifications.
Light Sweet Crude Oil or WTI is the most
actively traded futures contract for a
physical commodity. Prior to 1970, oil prices
remained relatively stable. The 1973 Yom
Kippur War and 1979 Iranian Revolution
altered that reality. Prices increased
through much of the 1970s (from $2 a barrel
in 1973 to $32 a barrel in 1980), as U.S.
government price and allocation controls
prevented the market from responding to any
weakness in demand and oil-producing
nations were able to keep upward pressure
on prices.
In 1982 and 1983, as government controls were
lifted, the market began responding to supply
and demand. As the market changed, the
NYMEX introduced light sweet crude oil
futures to provide the oil industry with a
hedge against price volatility. The oil
market is particularly volatile as oil is
traded worldwide. Oil prices may be affected
by a variety of events on a global basis,
including, without limitation, the available
stock in crude oil, the available storage
space for crude oil, environmental
regulations, any United States embargo on oil
and any turmoil in oil-producing nations.
The following is summary of selected
specifications relating to Light Sweet Crude
Oil Futures:
Trading Unit: 1000 U.S. barrels (42,000
gallons)
Trading Hours: 9:45 a.m. for 3:10 p.m. for
the open outcry session. After-hours trading
is conducted on NYMEX ACCESS between 4:00
p.m. and 8:00 a.m. on Monday through
Thursday. On Sunday the electronic session
begins at 7:00 p.m. The settle prices listed
in the Daily Futures Report are those
gathered during the closing minutes of the
open outcry session (between 3:08 p.m. and
3:10 p.m.).
Trading Months: 30 consecutive months plus
two long-dated futures initially listed 36
and 48 months prior to delivery.
Price Quotation: Dollars and cents per
barrel.
Minimum Price Fluctuation: $.01 per barrel
($10.00 per contract).
Maximum Daily Price Fluctuation: $15.00 per
barrel ($15,000 per contract) in two stages
for the first two contract months. Initial
back month limits of $1.50 per barrel rise to
$3.00 per barrel if the previous day's
settlement price is at the $1.50 limit. In
the event of a $7.50 move in either of the
first two contract months, back month limits
are expanded to $7.50 per barrel from the
limit in place in the direction of the move.
Last Trading Day: Trading terminates at the
close of business on the third business day
prior to the 25th calendar day of the month
preceding the delivery month. As such, on or
before the third business day prior to the
25th day of any month, the Front WTI Settle
Price will refer to the futures contract
settled in the immediately succeeding
calender month. After the third business day
prior to the 25th day of such month through
the last day of such month, the Front WTI
Settle Price will refer to the futures
contract settled in the second succeeding
calender month.
Delivery: F.O.B. seller's facility, Cushing,
Oklahoma, at any pipeline or storage facility
with access to Arco, Cushing Storage, or
Texaco Trading and Transportation Inc., by
in-tank transfer, in-line transfer, book-out
or inter-facility transfer (pump-over).
Delivery Period: All deliveries are rateable
over the course of the month and must be
initiated on or after the first calendar day
and completed by the last calender day of the
delivery month.
Alternate Delivery Procedure: If buyer and
seller agree to consummate delivery under
terms different from those prescribed in the
contract specifications, they may proceed on
that basis after submitting a notice of their
intention to the Exchange.
Deliverable Grades: Specific domestic crudes
with 0.42% sulfur by weight or less, not less
than 37 degrees API gravity nor more than 42
degrees API gravity. The following domestic
crude streams are deliverable: West Texas
Intermediate, Low Sweet Mix, New Mexican
Sweet, North Texas Sweet, Oklahoma Sweet, and
South Texas Sweet.
Specific foreign crudes of not less than 34
degrees API nor more than 42 degrees API.
The following foreign streams are
deliverable: Brent, Forties, Bonny Light,
and Oseberg. Brent, Forties, and Oseberg
carry a 30 cent-per-barrel discount below the
settlement price, while Bonny Light carries a
60 cent-per-barrel premium.
Inspection: Inspection shall be conducted in
accordance with pipeline practices.
Margin Requirements: Margins are required for
open futures or short options positions.
Discontinuance of the Daily
Futures Report; Alteration of
Calculation Method............ If NYMEX discontinues preparation or
publication of the Daily Futures Report and
NYMEX or another entity prepares or publishes
a successor or substitute report, tape
recording, or other information source, that
the Calculation Agent determines, in its sole
discretion, to be comparable to the
discontinued Daily Futures Report (such
report being referred to herein as a
"Successor Report"), then the CURVE shall be
calculated by reference to the values of the
Front WTI Settle Price and the Thirteenth WTI
Settle Price, or their equivalent, in such
Successor Report.
Upon any selection by the Calculation Agent
of a Successor Report, the Calculation Agent
shall cause written notice thereof to be
furnished to the Trustee, to the Company and
to the holders of the Notes within three
Trading Days of such selection.
If NYMEX discontinues trading in WTI futures
contracts, and such discontinuance is
continuing on, any of the dates during the
Reference Period and the Calculation Agent
determines that another crude oil futures
contract (a "Successor Contract") traded on
the NYMEX is equivalent to the WTI futures
contract, the Front WTI Settle Price and the
Thirteenth WTI Settle Prices will be the front
settle price and the thirteenth settle price
of the Successor Contract. If the
Calculation Agent determines that no
Successor Contract exists, then on each date
during the Reference Period until the earlier
to occur of (i) the final date of the
Reference Period and (ii) a determination by
the Calculation Agent that a Successor
Contract is available on the NYMEX, the
Calculation Agent shall determine the Front
WTI Settle Price and the Thirteenth WTI
Settle Price based on the front settle price
and the thirteenth settle price for light
sweet crude oil on another exchange expressed
in dollars; provided that, if the Calculation
Agent determines that no Successor Contract
exists, the CURVE will be (x) calculated on
the basis of the days during the Reference
Period when a spread could be calculated or
(y) if there are no such days, shall be
deemed to be zero. Notwithstanding these
alternative arrangements, discontinuance of
the publication of the Daily Futures Report
may adversely affect the value of the Notes.
If at any time the method of calculating the
Front WTI Settle Price or the Thirteenth WTI
Settle Price, or the value thereof, is changed
in a material respect by the NYMEX or any
other relevant exchange, or if the Daily
Futures Report or a Successor Report is in
any other way modified so that such Report
does not, in the opinion of the Calculation
Agent, fairly represent the value of the
Front WTI Settle Price and the Thirteenth WTI
Settle Price as described herein, the
Calculation Agent shall, at the close of
business in New York City on each day of the
Reference Period, make such calculations and
adjustments as, in the good faith judgment of
the Calculation Agent, may be necessary in
order to arrive at a value of the Front WTI
Settle Price and the Thirteenth WTI Settle
Price. The Calculation Agent shall cause
written notice of such calculations and
adjustments to be furnished to the holders of
the Notes.
Historical Information........ The following table sets forth the Front WTI
Settle Price and the Thirteenth WTI Settle
Price on the first day of each month in the
period from January 1, 1992 to April 1, 1997
as presented in the Daily Futures Report.
The historical values of the Front WTI Settle
Price and the Thirteenth WTI Settle Price
should not be taken as an indication of
future performance, and no assurance can be
given that the holders of the Notes will
receive any Supplemental Redemption Amount.
WTI SETTLE PRICES
(in dollars and cents per barrel)
Thirteenth
Front WTI WTI Settle
Settle Price Price
------------ ----------
1992
January 1..... 19.49 19.66
February 1.... 18.96 19.31
March 1....... 18.34 18.88
April 1....... 19.84 19.42
May 1......... 20.85 20.12
June 1........ 22.03 21.07
July 1........ 21.86 20.69
August 1...... 21.58 20.29
September 1... 21.64 20.46
October 1..... 21.83 20.78
November 1.... 20.77 20.37
December 1.... 19.51 19.69
1993
January 1..... 19.04 19.51
February 1.... 20.31 20.42
March 1....... 20.47 20.60
April 1....... 20.52 20.63
May 1......... 20.57 20.75
June 1........ 20.24 20.52
July 1........ 18.45 19.88
August 1...... 17.97 19.20
September 1... 17.97 19.23
October 1..... 18.63 19.29
November 1.... 17.43 18.93
December 1.... 15.48 17.50
1994
January 1..... 14.56 17.13
February 1.... 15.92 17.10
March 1....... 14.67 16.75
April 1....... 15.79 17.07
May 1......... 17.16 16.92
June 1........ 18.21 17.55
July 1........ 19.53 18.11
August 1...... 20.55 18.89
September 1... 17.47 17.78
October 1..... 18.19 18.34
November 1.... 18.68 18.01
December 1.... 17.82 17.81
1995
January 1..... 17.44 17.74
February 1.... 18.52 17.70
March 1....... 18.32 17.58
April 1....... 19.03 17.82
May 1......... 20.50 18.34
June 1........ 18.90 18.09
July 1........ 17.18 17.17
August 1...... 17.70 17.33
September 1... 18.04 17.32
October 1..... 17.64 16.98
November 1.... 17.74 16.98
December 1.... 18.43 17.17
1996
January 1..... 19.81 17.59
February 1.... 17.71 16.80
March 1....... 19.44 16.99
April 1....... 22.26 18.08
May 1......... 20.81 17.87
June 1........ 19.85 17.52
July 1........ 21.53 17.90
August 1...... 21.04 18.25
September 1... 23.40 18.71
October 1..... 24.14 19.51
November 1.... 23.03 19.68
December 1.... 24.80 20.64
1997
January 1..... 25.69 20.23
February 1.... 24.15 20.35
March 1....... 20.25 19.61
April 1....... 20.28 20.19
Use of Proceeds and Hedging... The net proceeds to be received by the
Company from the sale of the Notes will be
used for general corporate purposes and, in
part, by the Company or one or more of its
affiliates in connection with hedging the
Company's obligations under the Notes,
including hedging market risks associated
with the Supplemental Redemption Amount.
Such hedging may involve the purchase or sale
of WTI futures contracts, OTC swap agreements
or options agreements the settlement of which
is priced based on the NYMEX settlement price
of WTI futures contracts, or purchases and
sales of the cash commodity 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 such options, futures
contracts, and options on futures contracts,
there can be no assurance that the Company
will not affect such prices as a result of
its hedging activities. The Company, through
its subsidiaries, is likely to modify its
hedge position throughout the life of the
Notes by purchasing and selling such options,
futures contracts and options on futures
contracts. See also "Use of Proceeds" in the
accompanying Prospectus.
United States Federal
Taxation.................... The investor should refer to the discussion
under "United States Federal Taxation" in the
accompanying Prospectus Supplement.
