PROSPECTUS SUPPLEMENT Rule 424(b)(2)
Registration Statement
(To Prospectus dated May 1, 1996) No. 333-01655
6,000,000 Shares
Morgan Stanley Group Inc.
DEPOSITARY SHARES
EACH REPRESENTING 1/4 OF A SHARE OF
SERIES A FIXED/ADJUSTABLE RATE
CUMULATIVE PREFERRED STOCK
($200.00 Stated Value)
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Each Depositary Share (a "Depositary Share") represents ownership of
1/4 of a share of Series A Fixed/Adjustable Rate Cumulative Preferred Stock,
without par value, stated value $200.00 per share (the "Series A
Fixed/Adjustable Rate Preferred Stock"), of the Company to be deposited with The
Bank of New York, as Depositary, and, through the Depositary, entitles the
holder, proportionately, to all rights, preferences and privileges of the Series
A Fixed/Adjustable Rate Preferred Stock represented thereby. The proportionate
stated value of each Depositary Share is $50.00. See "Description of Depositary
Shares."
The Series A Fixed/Adjustable Rate Preferred Stock will not be
redeemable prior to November 30, 2001 except as stated below. On or after such
date the Series A Fixed/Adjustable Rate Preferred Stock will be redeemable at
the option of the Company, in whole or in part, upon not less than 30 days'
notice, at a redemption price equal to $200.00 per share of Series A
Fixed/Adjustable Rate Preferred Stock (equivalent to $50.00 per Depositary
Share) plus dividends accrued and accumulated but unpaid to the redemption date.
The Series A Fixed/Adjustable Rate Preferred Stock may also be redeemed prior to
November 30, 2001, in whole but not in part, at the option of the Company, in
the event of certain amendments to the Internal Revenue Code of 1986, as amended
(the "Code"), in respect of the dividends received deduction. See "Description
of Series A Fixed/Adjustable Rate Preferred Stock--Optional Redemption."
Dividends on the Series A Fixed/Adjustable Rate Preferred Stock will be
cumulative from the date of issue and are payable quarterly, commencing February
28, 1997. Dividends on the Series A Fixed/Adjustable Rate Preferred Stock will
be payable quarterly, when, as and if declared, on February 28, May 30, August
30 and November 30 of each year, commencing February 28, 1997, at a rate of
5.91% per annum through November 30, 2001. Thereafter, the dividend rate on the
Fixed/Adjustable Preferred Stock will be the Applicable Rate from time to time
in effect. The Applicable Rate per annum for any dividend period beginning on or
after November 30, 2001 will be equal to .37% plus the highest of the Treasury
Bill Rate, the Ten-Year Constant Maturity Rate and the Thirty-Year Constant
Maturity Rate (each as defined herein), as determined in advance of such
dividend period. The Applicable Rate per annum for any dividend period beginning
on or after November 30, 2001, will not be less than 6.41% nor greater than
12.41%. The amount of dividends payable in respect of the Series A
Fixed/Adjustable Rate Preferred Stock will be adjusted in the event of certain
amendments to the Code in respect of the dividends received deduction. See
"Description of Series A Fixed/Adjustable Rate Preferred Stock--Dividends."
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Application will be made to list the Depositary Shares on the New York
Stock Exchange. Trading of the Depositary Shares on the New York Stock Exchange
is expected to commence within a 30-day period after the initial delivery of the
Depositary Shares.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE $50 A DEPOSITARY SHARE
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Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(3)
--------- -------------- ----------
Per Depositary Share.... $50.0000 $.625 $49.375
Total(4)................ $300,000,000 $3,750,000 $296,250,000
- ----------
(1) Plus accrued dividends, if any, from the date of issue.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriters."
(3) Before deducting expenses payable by the Company estimated to be $171,750.
(4) The Company has granted to the Underwriters an option, exercisable within
30 days of the date of this Prospectus Supplement, to purchase up to an
aggregate of 900,000 additional Depositary Shares at the price to public
less underwriting discounts and commissions, for the purpose of covering
over-allotments, if any. If the Underwriters exercise such option in full,
the total price to public, underwriting discounts and commissions and
proceeds to the Company will be $345,000,000, $4,312,500 and $340,687,500,
respectively. See "Underwriters."
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The Depositary Shares are offered, subject to prior sale, when, as and
if issued and accepted by the Underwriters named herein, and subject to approval
of certain legal matters by Davis Polk & Wardwell, counsel for the Underwriters.
It is expected that delivery of the Depositary Receipts evidencing the
Depositary Shares will be made on or about November 14, 1996 at the office of
Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in
immediately available funds.
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MORGAN STANLEY & CO.
Incorporated
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
DEAN WITTER REYNOLDS INC.
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
NATIONSBANC CAPITAL MARKETS, INC.
SMITH BARNEY INC.
November 8, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEPOSITARY
SHARES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE,
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the consolidated ratios of earnings to
fixed charges and earnings to fixed charges and preferred stock dividends for
the Company for the periods indicated.
<TABLE>
<CAPTION>
Fiscal Fiscal
(Unaudited) Period Ended Year Ended Year Ended
Nine Months Ended November 30, January 31, December 31,
----------------------- ------------ ------------------ ------------
August 31, August 31,
1996 1995 1995 1995 1994 1993 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges........... 1.2 1.2 1.2 1.1 1.2 1.2 1.2
Ratio of earnings
to fixed charges and
preferred stock dividends.. 1.1 1.2 1.1 1.1 1.2 1.2 1.2
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of income before income taxes and fixed charges. For the
purpose of calculating the ratio of earnings to fixed charges and preferred
stock dividends, earnings consist of income before income taxes, fixed charges
and preferred stock dividends. For purposes of calculating both ratios, fixed
charges consist solely of interest expense, capitalized interest and that
portion of rentals representative of an interest factor.
DESCRIPTION OF SERIES A FIXED/ADJUSTABLE RATE PREFERRED STOCK
The following description of the Series A Fixed/Adjustable Rate
Preferred Stock offered hereby supplements the description of the general terms
and provisions of the Offered Preferred Stock set forth in the Prospectus, to
which description reference is hereby made. In particular, as used under this
caption and under "Description of Depositary Shares" below, the term "Company"
means Morgan Stanley Group Inc. The following summary of the particular terms
and provisions of the Series A Fixed/Adjustable Rate Preferred Stock does not
purport to be complete and is qualified in its entirety by reference to the
Company's Restated Certificate of Incorporation and the Certificate of
Designation of Preferences and Rights of the Fixed/Adjustable Rate Preferred
Stock (the "Certificate of Designation").
Pursuant to action of the Board of Directors of the Company (the
"Board") or a committee thereof (the "Committee"), the shares of Series A
Fixed/Adjustable Rate Preferred Stock represented by the Depositary Shares
(including the shares of Series A Fixed/Adjustable Rate Preferred Stock
represented by the Depositary Shares that are subject to the Underwriters'
overallotment option) constitute a single series of Preferred Stock. The Series
A Fixed/Adjustable Rate Preferred Stock is not convertible into shares of any
other class or series of stock of the Company. Shares of Series A
Fixed/Adjustable Rate Preferred Stock have no preemptive rights. Any shares of
Series A Fixed/Adjustable Rate Preferred Stock that are surrendered for
redemption will be returned to the status of authorized and unissued Preferred
Stock.
S-2
<PAGE>
The Bank of New York is the registrar, transfer agent and dividend
disbursing agent for the shares of Series A Fixed/Adjustable Rate Preferred
Stock.
Rank. As of the date hereof, the Series A Fixed/Adjustable Rate
Preferred Stock ranks as to payment of dividends and amounts payable on
liquidation prior to the Common Stock and on a parity with the ESOP Preferred
Stock and the Existing Cumulative Preferred Stock, including 1,000,000 shares of
the Company's 7 3/4% Cumulative Preferred Stock, with a stated value of $200.00
per share.
Dividends. Holders of shares of Series A Fixed/Adjustable Rate
Preferred Stock are entitled to receive cash dividends when, as and if declared
by the Board or the Committee out of assets legally available therefor.
Dividends on the Series A Fixed/Adjustable Rate Preferred Stock, calculated as a
percentage of the stated value, will be payable quarterly on February 28, May
30, August 30 and November 30 of each year (each a "dividend payment date"),
commencing February 28, 1997. From the date of issuance of the Series A
Fixed/Adjustable Rate Preferred Stock and continuing through November 30, 2001,
the rate of such dividend will be 5.91% per annum.
After November 30, 2001, dividends on the Series A Fixed/Adjustable
Rate Preferred Stock will be payable quarterly on each dividend payment date at
the Applicable Rate (as defined below) from time to time in effect. The
Applicable Rate per annum for any dividend period beginning on or after November
30, 2001 will be equal to .37% plus the highest of the Treasury Bill Rate, the
Ten-Year Constant Maturity Rate and the Thirty-Year Constant Maturity Rate (each
as defined below under "Adjustable Rate Dividends"), as determined in advance of
such dividend period. The Applicable Rate per annum for any dividend period
beginning on or after November 30, 2001, will not be less than 6.41% nor greater
than 12.41% (without taking into account any adjustments as described below
under "Changes in the Dividends Received Percentage").
Dividends (including Additional Dividends as defined below) on the
Series A Fixed/Adjustable Rate Preferred Stock will be cumulative from the date
of initial issuance of such Series A Fixed/Adjustable Rate Preferred Stock.
Dividends will be payable to holders of record as they appear on the stock books
of the Company on such record dates, not more than 60 days nor less than 10 days
preceding the payment dates, as shall be fixed by the Board or the Committee.
Adjustable Rate Dividends. Except as provided below, the "Applicable
Rate" per annum for any dividend period beginning on or after November 30, 2001
will be equal to .37% plus the Effective Rate (as defined below), but not less
than 6.41% nor greater than 12.41% (without taking into account any adjustments
as described below under "Changes in the Dividends Received Percentage"). The
"Effective Rate" for any dividend period beginning on or after November 30, 2001
will be equal to the highest of the Treasury Bill Rate, the Ten-Year Constant
Maturity Rate and the Thirty-Year Constant Maturity Rate (each as defined below)
for such dividend period. If the Company determines in good faith that for any
reason: (i) any one of the Treasury Bill Rate, the Ten-Year Constant Maturity
Rate or the Thirty-Year Constant Maturity Rate cannot be determined for any
dividend period beginning on or after November 30, 2001, then the Effective Rate
for such dividend period will be equal to the higher of whichever two of such
rates can be so determined; (ii) only one of the Treasury Bill Rate, the
Ten-Year Constant Maturity Rate or the Thirty-Year Constant Maturity Rate can be
determined for any dividend period beginning on or after November 30, 2001, then
the Effective Rate for such dividend period will be equal to whichever such rate
can be so determined; or (iii) none of the Treasury Bill Rate, the Ten-Year
Constant Maturity Rate or the Thirty-Year Constant Maturity Rate can be
determined for any dividend period beginning on or after November 30, 2001, then
the Effective Rate for the preceding dividend period will be continued for such
dividend period.
The "Treasury Bill Rate" for each dividend period will be the
arithmetic average of the two most recent weekly per annum market discount rates
(or the one weekly per annum market discount rate, if only one such rate is
published during the relevant Calendar Period (as defined below)) for
three-month U.S. Treasury bills, as published weekly by the Federal Reserve
Board (as defined below) during the Calendar Period immediately
S-3
<PAGE>
preceding the tenth calendar day preceding the dividend period for which the
dividend rate on the Series A Fixed/Adjustable Rate Preferred Stock is being
determined.
The "Ten-Year Constant Maturity Rate" for each dividend period will be the
arithmetic average of the two most recent weekly per annum Ten-Year Average
Yields (as defined below) (or the one weekly per annum Ten-Year Average Yield,
if only one such yield is published during the relevant Calendar Period), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately preceding the tenth calendar day preceding the dividend period for
which the dividend rate on the Series A Fixed/Adjustable Rate Preferred Stock is
being determined.
The "Thirty-Year Constant Maturity Rate" for each dividend period will be the
arithmetic average of the two most recent weekly per annum Thirty-Year Average
Yields (as defined below) (or the one weekly per annum Thirty-Year Average
Yield, if only one such yield is published during the relevant Calendar Period),
as published weekly by the Federal Reserve Board during the Calendar Period
immediately preceding the tenth calendar day preceding the dividend period for
which the dividend rate on the Series A Fixed/Adjustable Rate Preferred Stock is
being determined.
If the Federal Reserve Board does not publish a weekly per annum market discount
rate, Ten-Year Average Yield or Thirty-Year Average Yield during any applicable
Calendar Period, then the Treasury Bill Rate, Ten-Year Constant Maturity Rate or
Thirty-Year Constant Maturity Rate, as the case may be, for such dividend period
will be the arithmetic average of the two most recent weekly per annum market
discount rates for three-month U.S. Treasury bills, Ten-Year Average Yields or
Thirty-Year Average Yields, as the case may be (or the one weekly per annum
rate, if only one such rate is published during the relevant Calendar Period),
as published weekly during such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the Company. If any such
rate is not published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such Calendar Period,
then the Treasury Bill Rate, Ten-Year Constant Maturity Rate or Thirty-Year
Constant Maturity Rate for such dividend period will be the arithmetic average
of the two most recent weekly per annum (i) in the case of the Treasury Bill
Rate, market discount rates (or the one weekly per annum market discount rate,
if only one such rate is published during the relevant Calendar Period) for all
of the U.S. Treasury bills then having remaining maturities of not less than 80
nor more than 100 days, and (ii) in the case of the Ten-Year Constant Maturity
Rate, average yields to maturity (or the one weekly per annum average yield to
maturity, if only one such yield is published during the relevant Calendar
Period) for all of the actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities (as defined below)) then having
remaining maturities of not less than eight nor more than twelve years, and
(iii) in the case of the Thirty-Year Constant Maturity Rate, average yields to
maturity (or the one weekly per annum average yield to maturity, if only one
such yield is published during the relevant Calendar Period) for all of the
actively traded marketable U.S. Treasury fixed interest rate securities (other
than Special Securities) then having remaining maturities of not less than
twenty-eight nor more than thirty years, in each case as published during such
Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board
does not publish such rates, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Company. If the Company
determines in good faith that for any reason (i) no such U.S. Treasury bill
rates are published as provided above during such Calendar Period or (ii) the
Company cannot determine the Treasury Bill Rate for any dividend period; then
the Treasury Bill Rate for such dividend period will be the arithmetic average
of the per annum market discount rates based upon the closing bids during such
Calendar Period for each of the issues of marketable non-interest-bearing U.S.
Treasury securities with a remaining maturity of not less than 80 nor more than
100 days from the date of each such quotation, as chosen and quoted daily for
each business day in New York City (or less frequently if daily quotations are
not generally available) to the Company by at least three recognized dealers in
U.S. Government securities selected by the Company. If the Company determines in
good faith that for any reason the Company cannot determine the Ten-Year
Constant Maturity Rate or Thirty-Year Constant Maturity Rate for any dividend
period as provided above, then the applicable rate for such dividend period will
be the arithmetic average of the per annum average yields to maturity based upon
the closing bids during such Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities)
S-4
<PAGE>
with a final maturity date (i) in the case of the Ten-Year Constant Maturity
Rate, not less than eight nor more than twelve years from the date of each such
quotation, and (ii) in the case of the Thirty-Year Constant Maturity Rate, not
less than twenty-eight nor more than thirty years from the date of each such
quotation, in each case as chosen and quoted daily for each business day in New
York City (or less frequently if daily quotations are not generally available)
to the Company by at least three recognized dealers in the United States.
The Treasury Bill Rate, the Ten-Year Constant Maturity Rate and the
Thirty-Year Constant Maturity Rate will each be rounded to the nearest five
hundredths of a percent, with .025% being rounded upward.
The Applicable Rate with respect to each dividend period beginning on
or after November 30, 2001 will be calculated as promptly as practicable by the
Company according to the appropriate method described above. The Company will
cause notice of each Applicable Rate to be given to the holders of Series A
Fixed/Adjustable Rate Preferred Stock when payment is made of the dividend for
the immediately preceding dividend period.
As used above, the term "Calendar Period" means a period of fourteen
calendar days; the term "Federal Reserve Board" means the Board of Governors of
the Federal Reserve System; the term "Special Securities" means securities which
can, at the option of the holder, be surrendered at face value in payment of any
Federal estate tax or which provide tax benefits to the holder and are priced to
reflect such tax benefits or which were originally issued at a deep or
substantial discount; the term "Ten-Year Average Yield" means the average yield
to maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of ten years); and the term
"Thirty-Year Average Yield" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of thirty years).
Changes in the Dividends Received Percentage. If one or more amendments
to the Internal Revenue Code of 1986, as amended (the "Code"), are enacted that
reduce the percentage of the dividends received deduction as specified in
Section 243(a)(1) of the Code or any successor provision (the "Dividends
Received Percentage") to below the existing Dividends Received Percentage
(currently 70%), the amount of each dividend payable per share of the Series A
Fixed/Adjustable Rate Preferred Stock for dividend payments made on or after the
date of enactment of such change will be adjusted by multiplying the amount of
the dividend payable determined as described above (before adjustment) by a
factor, which will be the number determined in accordance with the following
formula (the "DRD Formula"), and rounding the result to the nearest cent:
1 - (.35 (1 - .70))
-------------------------
1 - (.35 (1 - DRP))
For the purposes of the DRD Formula, "DRP" means the Dividends Received
Percentage applicable to the dividend in question. No amendment to the Code,
other than a change in the percentage of the dividends received deduction set
forth in Section 243(a)(1) of the Code or any successor provision, will give
rise to an adjustment. Notwithstanding the foregoing provisions, in the event
that, with respect to any such amendment, the Company will receive either an
unqualified opinion of nationally recognized independent tax counsel selected by
the Company or a private letter ruling or similar form of authorization from the
Internal Revenue Service to the effect that such an amendment would not apply to
dividends payable on the Series A Fixed/Adjustable Rate Preferred Stock, then
any such amendment will not result in the adjustment provided for pursuant to
the DRD Formula. The opinion referenced in the previous sentence will be based
upon a specific exception in the legislation amending the DRP or upon a
published pronouncement of the Internal Revenue Service addressing such
legislation. Unless the context otherwise requires, references to dividends in
this Prospectus Supplement will mean dividends as adjusted by the DRD Formula.
The Company's calculation of the dividends payable, as so adjusted and as
certified accurate as to calculation and reasonable as to method by the
independent certified public accountants then regularly engaged by the Company,
will be final and not subject to review absent manifest error.
S-5
<PAGE>
If any amendment to the Code which reduces the Dividends Received
Percentage to below 70% is enacted after a dividend payable on a dividend
payment date has been declared and on or before such dividend is paid, the
amount of dividend payable on such dividend payment date will not be increased.
Instead, an amount, equal to the excess of (x) the product of the dividends paid
by the Company on such dividend payment date and the DRD Formula (where the DRP
used in the DRD Formula would be equal to the reduced Dividends Received
Percentage) over (y) the dividends paid by the Company on such dividend payment
date, will be payable on the next succeeding dividend payment date to holders of
record in addition to any other amounts payable on such date.
In addition, if, prior to May 31, 1997, an amendment to the Code is
enacted that reduces the Dividends Received Percentage to below 70% and such
reduction retroactively applies to a dividend payment date as to which the
Company previously paid dividends on the Series A Fixed/Adjustable Rate
Preferred Stock (each an "Affected Dividend Payment Date"), the Company will pay
(if declared) additional dividends (the "Additional Dividends") on the next
succeeding dividend payment date (or if such amendment is enacted after the
dividend payable on such dividend payment date has been declared and on or
before such dividend is paid, on the second succeeding dividend payment date
following the date of enactment) payable on such succeeding dividend payment
date to holders of record in an amount equal to the excess of (x) the product of
the dividends paid by the Company on each Affected Dividend Payment Date and the
DRD Formula (where the DRP used in the DRD Formula would be equal to the reduced
Dividends Received Percentage applied to each Affected Dividend Payment Date)
over (y) the dividends paid by the Company on each Affected Dividend Payment
Date.
Additional Dividends will not be paid in respect of the enactment of
any amendment to the Code on or after May 31, 1997 which retroactively reduces
the Dividends Received Percentage to below 70%, or if prior to May 31, 1997,
such amendment would not result in an adjustment due to the Company having
received either an opinion of counsel or tax ruling referred to in the third
preceding paragraph. The Company will only make one payment of Additional
Dividends.
In the event that the amount of dividends payable per share of the
Series A Fixed/Adjustable Rate Preferred Stock will be adjusted pursuant to the
DRD Formula and/or Additional Dividends are to be paid, the Company will cause
notice of each such adjustment and, if applicable, any Additional Dividends, to
be sent to the holders of the Series A Fixed/Adjustable Rate Preferred Stock.
In the event that the Dividends Received Percentage is reduced to 50%
or less, the Company may, at its option, redeem the Series A Fixed/Adjustable
Rate Preferred Stock, in whole but not in part, as described below. See
"Redemption." See also "Recent Tax Proposals" for a discussion of certain
Proposals (as defined herein) to reduce the Dividends Received Percentage.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, the holders of shares of Series A Fixed/Adjustable
Rate Preferred Stock will be entitled to receive out of the assets of the
Company available for distribution to stockholders, before any distribution is
made to holders of (i) any other shares of Preferred Stock ranking junior to the
Series A Fixed/Adjustable Rate Preferred Stock as to rights upon liquidation,
dissolution or winding up which may be issued in the future or (ii) Common
Stock, liquidating distributions in the amount of $200.00 per share (equivalent
to $50.00 per Depositary Share), plus accrued and accumulated but unpaid
dividends to the date of final distribution, but the holders of the shares of
Series A Fixed/Adjustable Rate Preferred Stock will not be entitled to receive
the liquidation price of such shares until the liquidation preference of any
other shares of the Company's capital stock ranking senior to the Series A
Fixed/Adjustable Rate Preferred Stock as to rights upon liquidation, dissolution
or winding up shall have been paid (or a sum set aside therefor sufficient to
provide for payment) in full.
Optional Redemption. The Series A Fixed/Adjustable Rate Preferred Stock
is not subject to any mandatory redemption or sinking fund provision. The Series
A Fixed/Adjustable Rate Preferred Stock is not redeemable prior to November 30,
2001 except as stated below. On or after such date the Series A Fixed/Adjustable
Rate Preferred
S-6
<PAGE>
Stock will be redeemable at the option of the Company, in whole or in part, upon
not less than 30 days' notice at a redemption price equal to $200.00 per share
(equivalent to $50.00 per Depositary Share), plus accrued and accumulated but
unpaid dividends to but excluding the date fixed for redemption. If full
cumulative dividends on the Series A Fixed/Adjustable Rate Preferred Stock have
not been paid, the Series A Fixed/Adjustable Rate Preferred Stock may not be
redeemed in part and the Company may not purchase or acquire any share of Series
A Fixed/Adjustable Rate Preferred Stock otherwise than pursuant to a purchase or
exchange offer made on the same terms to all holders of the Series A
Fixed/Adjustable Rate Preferred Stock. If fewer than all the outstanding shares
of Series A Fixed/Adjustable Rate Preferred Stock are to be redeemed, the
Company will select those to be redeemed by lot or a substantially equivalent
method.
Notwithstanding the preceding paragraph, if the Dividends Received
Percentage is equal to or less than 50% and, as a result, the amount of
dividends on the Series A Fixed/Adjustable Rate Preferred Stock payable on any
dividend payment date will be or is adjusted upwards as described above under
"--Dividends--Changes in the Dividends Received Percentage," the Company, at its
option, may redeem all, but not less than all, of the outstanding shares of the
Series A Fixed/Adjustable Rate Preferred Stock (and the Depositary Shares),
provided that within sixty days of the date on which an amendment to the Code is
enacted which reduces the Dividends Received Percentage to 50% or less, the
Company sends notice to holders of the Series A Fixed/Adjustable Rate Preferred
Stock of such redemption. A redemption of the Series A Fixed/Adjustable Rate
Preferred Stock pursuant to this paragraph will take place on the date specified
in the notice, which shall be not less than thirty nor more than sixty days from
the date such notice is sent to holders of the Series A Fixed/Adjustable Rate
Preferred Stock. A redemption of the Series A Fixed/Adjustable Rate Preferred
Stock in accordance with this paragraph shall be at the applicable redemption
price set forth in the following table, in each case plus accrued and unpaid
dividends (whether or not declared) thereon to but excluding the date fixed for
redemption, including any changes in dividends payable due to changes in the
Dividends Received Percentage and Additional Dividends, if any.
Redemption Period Redemption Price
- ----------------- ----------------------------------
Per Share Per Depositary Share
--------- --------------------
November 14, 1996 to November 29, 1997..... $210.00 $52.50
November 30, 1997 to November 29, 1998..... 208.00 52.00
November 30, 1998 to November 29, 1999..... 206.00 51.50
November 30, 1999 to November 29, 2000..... 204.00 51.00
November 30, 2000 to November 29, 2001..... 202.00 50.50
On or after November 30, 2001.............. 200.00 50.00
Voting Rights. Holders of Series A Fixed/Adjustable Rate Preferred
Stock will not have any voting rights except as set forth below or as otherwise
from time to time required by law. Whenever dividends on Series A
Fixed/Adjustable Rate Preferred Stock or any other class or series of stock
ranking on a parity with the Series A Fixed/Adjustable Rate Preferred Stock with
respect to the payment of dividends shall be in arrears for dividend periods,
whether or not consecutive, containing in the aggregate a number of days
equivalent to six calendar quarters, the holders of shares of Series A
Fixed/Adjustable Rate Preferred Stock (voting separately as a class with all
other series of Preferred Stock upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for the election of two
of the authorized number of directors of the Company at the next annual meeting
of stockholders and at each subsequent meeting until all dividends accumulated
on Series A Fixed/Adjustable Rate Preferred Stock have been fully paid or set
apart for payment. The term of office of all directors elected by the holders of
Preferred Stock shall terminate immediately upon the termination of the right of
the holders of Preferred Stock to vote for directors. Holders of shares of
Series A Fixed/Adjustable Rate Preferred Stock will have one vote for each share
held.
S-7
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DESCRIPTION OF DEPOSITARY SHARES
Each Depositary Share represents 1/4 of a share of Series A
Fixed/Adjustable Rate Preferred Stock deposited with the Depositary pursuant to
the Deposit Agreement, dated as of November 14, 1996 (the "Deposit Agreement"),
among the Company, The Bank of New York, as depositary (the "Depositary"), and
the holders from time to time of depositary receipts issued thereunder. Subject
to the terms of the Deposit Agreement, each holder of a Depositary Share is
entitled, through the Depositary, in proportion to the 1/4 of a share of Series
A Fixed/Adjustable Rate Preferred Stock represented by such Depositary Share, to
all the rights, preferences and privileges of the Series A Fixed/Adjustable Rate
Preferred Stock represented thereby (including dividend, voting and liquidation
rights) contained in the Certificate of Designation summarized under
"Description of Series A Fixed/Adjustable Rate Preferred Stock." The Company
does not expect that there will be any public trading market for the Series A
Fixed/Adjustable Rate Preferred Stock except as represented by the Depositary
Shares. The Depositary Shares will be evidenced by depositary receipts
("Depositary Receipts") issued pursuant to the Deposit Agreement.
The following description of the particular terms and provisions of the
Depositary Shares offered hereby supplements the description of the general
terms and provisions of the Depositary Shares set forth in the Prospectus, to
which description reference is hereby made. The following summary of the
Depositary Shares, the Depositary Receipts and the Deposit Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Deposit Agreement (which contains the form of Depositary Receipt).
Issuance of Depositary Receipts. Immediately following the issuance of
the Series A Fixed/Adjustable Rate Preferred Stock by the Company, the Company
will deposit the Series A Fixed/Adjustable Rate Preferred Stock with the
Depositary, which will then issue and deliver the Depositary Receipts to the
Underwriters. Depositary Receipts will be issued evidencing only whole
Depositary Shares.
Dividends and Other Distributions. The Depositary will distribute all
dividends or other cash distributions received in respect of the Series A
Fixed/Adjustable Rate Preferred Stock to the record holders of Depositary Shares
in proportion to the number of the Depositary Shares owned by such holders. The
amount distributed will be reduced by any amounts required to be withheld by the
Company or the Depositary on account of taxes or other governmental charges.
Withdrawal of Stock. Upon surrender of the Depositary Receipts at the
corporate trust office of the Depositary and upon payment of the taxes, charges
and fees provided for in the Deposit Agreement and subject to the terms thereof,
the holder of the Depositary Shares evidenced thereby is entitled to delivery at
such office, to or upon his or her order, of the number of whole shares of
Series A Fixed/Adjustable Rate Preferred Stock and any money or other property,
if any, represented by such Depositary Shares. Holders of Depositary Shares will
be entitled to receive whole shares of Series A Fixed/Adjustable Rate Preferred
Stock on the basis set forth herein, but holders of such whole shares of Series
A Fixed/Adjustable Rate Preferred Stock will not thereafter be entitled to
deposit such shares of Series A Fixed/Adjustable Rate Preferred Stock with the
Depositary or to receive Depositary Shares therefor.
Voting. Because each Depositary Share represents ownership of 1/4 of a
share of Series A Fixed/Adjustable Rate Preferred Stock, holders of Depositary
Shares will be entitled to 1/4 of a vote per Depositary Share under the limited
circumstances in which the holders of Series A Fixed/Adjustable Rate Preferred
Stock are entitled to vote.
Redemption. The Depositary Shares will be redeemed, upon not less than
30 days' notice, using the cash proceeds received by the Depositary resulting
from any redemption of shares of Series A Fixed/Adjustable Rate Preferred Stock
held by the Depositary. Except in the case of certain optional redemptions, the
redemption price will be equal to $50.00 per Depositary Share plus accrued and
accumulated but unpaid dividends on the Series A Fixed/Adjustable Rate Preferred
Stock represented thereby. See "Description of Series A Fixed/Adjustable Rate
Preferred Stock--Optional Redemption." If the Company redeems shares of Series A
Fixed/Adjustable Rate
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Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing the shares of
Series A Fixed/Adjustable Rate Preferred Stock so redeemed. If fewer than all
the Depositary Shares are to be redeemed, the Depositary Shares to be redeemed
will be selected by lot or substantially equivalent method determined by the
Depositary.
Holders of Depositary Receipts will pay transfer and other taxes and
governmental charges and such other charges as are expressly provided in the
Deposit Agreement to be for their accounts.
RECENT TAX PROPOSALS
On December 7, 1995, the Clinton Administration released a budget plan
that included certain tax proposals (the "Proposals") that may affect holders of
the Series A Fixed/Adjustable Rate Preferred Stock. It is uncertain whether the
Proposals will be enacted into law.
Under the Proposals, the Dividends Received Percentage that is
currently available to corporate shareholders for certain dividends received
from another corporation in which the shareholder owns less than 20% (by vote
and value) would be reduced from 70% to 50%. As proposed, this provision would
be effective for dividends received or accrued after January 31, 1996. To the
extent the Dividends Received Percentage is reduced from 70%, the amount of
dividends payable per share will be adjusted in certain circumstances. See
"Description of Series A Fixed/Adjustable Rate Preferred
Stock--Dividends--Changes in the Dividends Received Percentage." Additionally,
under current law, the dividends received deduction is allowed to a corporate
shareholder only if the shareholder satisfies a 46-day holding period for the
dividend-paying stock (or a 91-day period for certain dividends on preferred
stock). The Proposals provide that a taxpayer would not be entitled to a
dividends received deduction if the taxpayer's holding period for the
dividend-paying stock were not satisfied over a period immediately before or
immediately after the taxpayer would become entitled to receive the dividend. As
proposed, this provision would be effective for any dividends received or
accrued after January 31, 1996.
Due to the inherently uncertain nature of proposed changes to the tax
law such as the Proposals, there can be no assurance as to whether, or in what
form, the Proposals may be enacted into law, or as to the effective dates of any
such changes to the law.
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UNDERWRITERS
Under the terms and subject to the conditions contained in the
Underwriting Agreement dated the date hereof, the Underwriters named below have
severally agreed to purchase, and the Company has agreed to sell to them,
severally, the respective number of Depositary Shares set forth opposite their
names below:
Number of
Name Depositary Shares
---- -----------------
Morgan Stanley & Co. Incorporated........................... 750,000
Bear, Stearns & Co. Inc. ................................... 750,000
Chase Securities Inc. ...................................... 750,000
Citicorp Securities, Inc. .................................. 750,000
Dean Witter Reynolds Inc. .................................. 750,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 750,000
NationsBanc Capital Markets, Inc. .......................... 750,000
Smith Barney Inc............................................ 750,000
---------
Total................................. 6,000,000
=========
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Depositary Shares are subject
to the approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are committed to take and pay for all of the
Depositary Shares if any are taken.
The Underwriters initially propose to offer part of the Depositary
Shares directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $.40 per Depositary Share. Any Underwriter may
allow, and such dealers may reallow, a concession, not in excess of $.25 per
Depositary Share, to certain other dealers. After the initial offering of the
Depositary Shares, the offering price and other selling terms may from time to
time be varied by Morgan Stanley & Co. Incorporated, as representative of the
Underwriters named on the cover page of this Prospectus Supplement.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
The Underwriters and any dealers utilized in the sale of Depositary
Shares will not confirm sales to accounts over which they exercise discretionary
authority.
The Company has granted to the Underwriters an option, exercisable for
30 days from the date of this Prospectus Supplement, to purchase up to 900,000
additional Depositary Shares at the public offering price set forth on the cover
page hereof, less underwriting discounts and commissions. The Underwriters may
exercise such option solely for the purpose of covering over-allotments, if any,
incurred in the sale of Depositary Shares offered hereby.
Morgan Stanley is a wholly owned subsidiary of the Company. The
offering of Depositary Shares will comply with Rule 2720 of the National
Association of Securities Dealers, Inc. ("NASD") regarding an NASD member firm's
underwriting securities of an affiliate.
Following the initial distribution of the Depositary Shares, Morgan
Stanley may offer and sell Depositary Shares in the course of its business as a
broker-dealer. Morgan Stanley may act as principal or agent in such
transactions. This Prospectus Supplement and the Prospectus may be used by
Morgan Stanley in connection with such transactions. Such sales, if any, will be
made at varying prices related to prevailing market prices at the time of sale.
Morgan Stanley is not obligated to make a market in the Depositary Shares and
may discontinue any market-making activities at any time without notice.
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Following the initial distribution of the Depositary Shares,
application will be made to list the Depositary Shares on the New York Stock
Exchange. Trading in the Depositary Shares on the New York Stock Exchange is
expected to commence within a 30-day period after the initial delivery of the
Depositary Shares.
LEGAL MATTERS
The validity of the Series A Fixed/Adjustable Rate Preferred Stock and
certain legal matters relating to the Depositary Shares will be passed upon for
the Company by Jonathan M. Clark, Esq., General Counsel and Secretary of the
Company and a Managing Director of Morgan Stanley, or other counsel who is
satisfactory to the Underwriters and an officer of the Company and Morgan
Stanley. Mr. Clark and such other counsel beneficially own, or have rights to
acquire under an employee benefit plan of the Company, an aggregate of less than
1% of the common stock of the Company. Certain legal matters relating to the
Series A Fixed/Adjustable Rate Preferred Stock and the Depositary Shares will be
passed upon for the Underwriters by Davis Polk & Wardwell. Davis Polk & Wardwell
has in the past represented and continues to represent the Company on a regular
basis and in a variety of matters, including in connection with its merchant
banking and leveraged capital activities.
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