-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TKSCCnXTNEnhHr27XjRPTlsvmreV387c37gdzdF92BMq46+KqNTK0o+/If9OCh8U Uy3tO2RWUwRcqHCdVyvqSg== 0000950103-96-000897.txt : 19960524 0000950103-96-000897.hdr.sgml : 19960524 ACCESSION NUMBER: 0000950103-96-000897 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960523 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY GROUP INC /DE/ CENTRAL INDEX KEY: 0000789625 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 132838811 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-57833 FILM NUMBER: 96571681 BUSINESS ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2127034000 424B3 1 Amendment No.1 dated May 23, 1996 to PROSPECTUS Dated March 29, 1995 Pricing Supplement No. 71 to PROSPECTUS SUPPLEMENT Registration Statement No. 33-57833 Dated March 29, 1995 April 22, 1996 Rule 424(b)(3) $26,000,000 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 $861.45 (86.145% 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 May 23, 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 40% and 60%, 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 $31.25 and $77.25, 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 86.145% ------------- Agent's Price to Public Commissions(1) Proceeds to Company ----------------- ---------------- --------------------- Per Note... 86.145% .25% 85.895% Total...... $22,397,700 $65,000 $22,332,700 _______________ (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:.............. $26,000,000 Maturity Date:................. April 30, 2002 Specified Currency:............ U.S. Dollars Issue Price:................... 86.145% Original Issue Date (Settlement Date):............. April 29, 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:
Dollar Value Issuer of Initial Represented Initial the Market in the Original Initial Exchange Basket Stock (1) Price (2) Basket Value Weight Ratio(2) - -------------------------------- ------------- ----------------------- ----------- ------------ Federal National Mortgage Association $31.354 $317.584 40% 10.12898 Student Loan Marketing Association $77.140 $476.376 60% 6.17547 (1) The common stocks of the two United States corporations listed herein are currently traded on the NYSE. (2) Initial Market Prices and Initial Exchange Ratios 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 and (ii) $15,750,000 of Notes issued on May 23, 1996 for $13,085,572.50 (but otherwise having terms identical to the Notes described herein). 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 April 22, 1996. The Market Prices on April 22, 1996 for Fannie Mae Stock and Sallie Mae Stock were $31.25 and $77.25, 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 29 3/8 .19 (to April 22, 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 April 22, 1996) 82 5/8 73 5/8 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: United States Holders of the Notes. The following discussion is based on the opinion of Davis Polk & Wardwell, special tax counsel to the Company. This discussion supplements the "United States Federal Taxation" section in the accompanying Prospectus Supplement. 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"). The Company intends to treat the $26,000,000 principal amount of Notes issued pursuant to this Prospectus Supplement as part of a single issue that also includes the $15,750,000 principal amount of Notes issued on May 23, 1996. Total OID and yield to maturity have been calculated by treating the Notes as having an aggregate issue price of $35,483,272.50, paid in installments of $22,397,700 on April 29, 1996 and $13,085,572.50 on May 23, 1996. Based on this approach, there is $150.10 of OID per $1,000 principal amount of Notes, and the Notes' yield to maturity, based on semi-annual compounding, is 2.7391%. 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 (other than pursuant to the Exchange Right or the Company Exchange Right or upon maturity of the Notes) of a Note prior to maturity will be treated as capital in character. 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. 71 dated April 22, 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. 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 -----END PRIVACY-ENHANCED MESSAGE-----