PROSPECTUS SUPPLEMENT
(To Prospectus dated March 29, 1995)
$450,000,000
Morgan Stanley Group Inc.
$300,000,000 5 5/8% NOTES DUE 1999
$150,000,000 FLOATING RATE NOTES DUE 1999
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The 5 5/8% Fixed Rate Senior Notes due March 1, 1999 (the "Fixed Rate
Notes") and the Floating Rate Senior Notes due March 1, 1999 (the "Floating
Rate Notes" and, together with the Fixed Rate Notes, the "Notes") are not
redeemable prior to maturity. The Fixed Rate Notes will bear interest from
the date of issuance at the rate of 5 5/8% per annum, payable semi-annually
in arrears on March 1 and September 1 of each year commencing on September
1, 1996. The Floating Rate Notes will bear interest from the date of
issuance to, but excluding, June 3, 1996 at 5.4896% and thereafter at LIBOR
(as defined herein) plus 0.22%, payable quarterly in arrears on March 1,
June 1, September 1 and December 1 of each year (except as described
herein) commencing June 3, 1996. The Notes will be represented by global
notes registered in the name of a nominee of The Depository Trust Company,
as Depositary. Beneficial interests in the Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depositary (with respect to participants' interests) and its participants.
Except as described in the accompanying Prospectus, Notes in certificated
form will not be issued in exchange for the global notes.
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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
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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FIXED RATE NOTES--PRICE 99.794% AND ACCRUED INTEREST, IF ANY
FLOATING RATE NOTES--PRICE 100% AND ACCRUED INTEREST, IF ANY
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Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(1)(3)
------------ -------------- -------------
Per Fixed Rate Note..... 99.794% .350% 99.444%
Total................... $299,382,000 $1,050,000 $298,332,000
Per Floating Rate Note.. 100.000% .350% 99.650%
Total................... $150,000,000 $525,000 $149,475,000
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(1) Plus accrued interest, if any, from February 26, 1996.
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deduction of expenses payable by the Company estimated at $257,625.
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The Notes are offered, subject to prior sale, when, as and if accepted by
the Underwriter and subject to approval of certain legal matters by Davis
Polk & Wardwell, counsel for the Underwriter. It is expected that delivery
of the Notes will be made on or about February 26, 1996 through the book-
entry facilities of The Depository Trust Company, against payment therefor
in immediately available funds.
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MORGAN STANLEY & CO.
Incorporated
February 21, 1996
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratio of earnings to
fixed charges for the Company for the periods indicated. Information for
the seven months ended August 31, 1995 and the six months ended August 31,
1995 and July 31, 1994 was derived from unaudited condensed consolidated
statements.
<TABLE>
<CAPTION>
Seven Six Six Fiscal
Months Ended Months Ended Months Ended Year Ended Year Ended
August 31, August 31, July 31, January 31, December 31,
1995 1995 1994 1995 1994 1993 1991 1990
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.1 1.1 1.2 1.2 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of income before income taxes and fixed charges. Fixed
charges for the purpose of calculating the ratio of earnings to fixed charges
consist solely of interest expense, capitalized interest and that portion of
rentals representative of an interest factor.
DESCRIPTION OF NOTES
The following description of the particular terms of the 5 5/8% Fixed
Rate Senior Notes due March 1, 1999 (the "Fixed Rate Notes") and the Floating
Rate Senior Notes due March 1, 1999 (the "Floating Rate Notes" and, together
with the Fixed Rate Notes, the "Notes") offered hereby (referred to in the
Prospectus as the "Offered Debt Securities") supplements the description of
the general terms and provisions of the Debt Securities set forth in the
Prospectus, to which description reference is hereby made. In particular, as
used under this caption, the term "Company" means Morgan Stanley Group Inc.
The following summary of the Notes is qualified in its entirety by reference
to the Senior Debt Indenture referred to in the Prospectus.
General
The Fixed Rate Notes will be limited to $300,000,000 in aggregate
principal amount and will mature on March 1, 1999. The Floating Rate Notes
will be limited to $150,000,000 in aggregate principal amount and will mature
on March 1, 1999. The Notes will constitute part of the senior debt of the
Company and will rank pari passu with all other unsecured and unsubordinated
debt of the Company. The Notes will be issued in fully registered form only,
in denominations of $1,000 and multiples thereof. Principal of and interest on
the Notes will be payable, and the transfer of Notes will be registrable,
through the Depositary as described under "Book-Entry Procedures."
The Notes will not be redeemable prior to maturity and will not be
subject to any sinking fund.
The Senior Debt Indenture permits the defeasance of the Notes upon the
satisfaction of the conditions described under "Description of Debt Securities
- -- Discharge, Defeasance and Covenant Defeasance" in the Prospectus. The
Fixed Rate Notes are subject to these defeasance provisions.
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking
institutions are authorized or required by law or regulation to close in The
City of New York and, with respect to Floating Rate Notes, that is also a day
on which dealings in deposits in U.S. dollars are transacted in the London
interbank market.
Fixed Rate Notes
Each Fixed Rate Note will bear interest from February 26, 1996 at the
applicable annual rate set forth on the cover page of this Prospectus
Supplement, payable semiannually on March 1 and September 1 (each a "Fixed
Rate Interest Payment Date"), commencing September 1, 1996, to the person in
whose name such Note is registered at the close of business on the preceding
February 15 or August 15. Such interest will be computed on the basis of a
360-day year of twelve 30-day months.
If any Fixed Rate Interest Payment Date falls on a day that is not a
Business Day, the interest payment shall be postponed to the next day that is
a Business Day, and no interest on such payment shall accrue for the period
from and after such Fixed Rate Interest Payment Date. If the maturity date of
the Fixed Rate Notes falls on a day that is not a Business Day, the payment of
interest and principal may be made on the next succeeding Business Day, and no
interest on such payment shall accrue for the period from and after the
maturity date.
Interest payments for Fixed Rate Notes will include accrued interest
from the date of issue or from the last date in respect of which interest has
been paid, as the case may be, to, but excluding, the Fixed Rate Interest
Payment Date or the date of maturity, as the case may be.
Floating Rate Notes
Each Floating Rate Note will bear interest from February 26, 1996 to,
but excluding, June 3, 1996 at a rate per annum equal to 5.4896% (the "Initial
Interest Rate") and thereafter at a rate per annum equal to LIBOR (as defined
below) plus 0.22%, payable quarterly on March 1, June 1, September 1 and
December 1, except as provided below, commencing on June 3, 1996 to the person
in whose name such Note is registered at the close of business on the
preceding February 15, May 15, August 15 or November 15. As used herein,
"Floating Rate Interest Payment Date" means a date on which, under the terms
of the Floating Rate Notes, regularly scheduled interest is payable.
The rate of interest on the Floating Rate Notes will be reset quarterly
(the "Interest Reset Period," and the first day of each Interest Reset Period
being an "Interest Reset Date"). The Interest Reset Dates will be March 1,
June 1, September 1 and December 1; provided, however, that the interest rate
in effect from the date of issue to the first Interest Reset Date with respect
to the Floating Rate Notes will be the Initial Interest Rate. If any Interest
Reset Date would otherwise be a day that is not a Business Day, such Interest
Reset Date shall be postponed to the next succeeding Business Day, except that
if such Business Day is in the next succeeding calendar month, such Interest
Reset Date shall be the next preceding Business Day.
Except as provided below, interest on the Floating Rate Notes will be
payable on March 1, June 1, September 1 and December 1. If any Floating Rate
Interest Payment Date (other than the maturity date) for the Floating Rate
Notes would fall on a day that is not a Business Day, such Floating Rate
Interest Payment Date will be the following day that is a Business Day, except
that if such Business Day is in the next succeeding calendar month, such
Interest Payment Date shall be the next preceding day that is a Business Day.
If the maturity date of the Floating Rate Notes falls on a day that is not a
Business Day, the payment of principal and interest will be made on the next
succeeding Business Day, and no interest on such payment shall accrue for the
period from and after the maturity date.
Interest payments for Floating Rate Notes shall be the amount of
interest accrued from the date of issue or from the last date to which
interest has been paid to, but excluding, the Floating Rate Interest Payment
Date or maturity date, as the case may be.
Accrued interest on any Floating Rate Note shall be calculated by
multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. The interest factor for each such day is computed by dividing the
interest rate applicable to such day by 360. All percentages used in or
resulting from any calculation of the rate of interest on a Floating Rate Note
will be rounded, if necessary, to the nearest one-hundred-thousandth of a
percentage point (.0000001), with five one-millionths of a percentage point
rounded upward, and all dollar amounts used in or resulting from such
calculation will be rounded to the nearest cent, with one-half cent rounded
upward. The interest rate in effect on any Interest Reset Date will be the
applicable rate as reset on such date. The interest rate applicable to any
other day is the interest rate from the immediately preceding Interest Reset
Date (or, if none, the Initial Interest Rate).
The calculation agent is Chemical Bank (the "Calculation Agent") with
respect to the Floating Rate Notes. Upon the request of the holder of any
Floating Rate Note, the Calculation Agent will provide the interest rate then
in effect and, if determined, the interest rate that will become effective on
the next Interest Reset Date with respect to such Floating Rate Note.
The "Interest Determination Date" pertaining to an Interest Reset Date
will be the second London Banking Day preceding such Interest Reset Date.
"London Banking Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"LIBOR" for each Interest Reset Date will be determined by the
Calculation Agent as follows:
(i) As of the Interest Determination Date, the Calculation Agent
will determine "LIBOR Telerate" as the rate for deposits in U.S. dollars
for a period of three months, commencing on such Interest Determination
Date, that appears on Page 3750 on the Dow Jones Telerate Service, or
any successor page (the "Designated LIBOR Page"), at approximately
11:00 A.M., London time, on such Interest Determination Date. If no
rate appears, LIBOR in respect of such Interest Determination Date will
be determined as described in (ii) below.
(ii) With respect to an Interest Determination Date on which no
rate appears, the Calculation Agent will request the principal London
offices of each of four major reference banks in the London interbank
market, as selected by the Calculation Agent (after consultation with
the Company), to provide the Calculation Agent with its offered
quotations for deposits in U.S. dollars for a period of three months,
commencing on the second London Banking Day immediately following such
Interest Determination Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such Interest
Determination Date and in a principal amount of not less than U.S. $1
million that is representative of a single transaction in U.S. dollars
in such market at such time. If at least two such quotations are
provided, LIBOR will be the arithmetic means of such quotations. If
fewer than two quotations are provided, LIBOR in respect of that
Interest Determination Date will be the arithmetic mean of rates quoted
at approximately 11:00 A.M., New York time, on such Interest
Determination Date by three major banks in New York City selected by the
Calculation Agent (after consultation with the Company) on such Interest
Determination Date for loans in U.S. dollars to leading European banks,
for a period of three months, commencing on the second London Banking
Day immediately following such Interest Determination Date and in a
principal amount of not less than U.S. $1 million that is representative
of a single transaction in U.S. dollars in such market at such time;
provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset period (or, if there was not such
Interest Reset Period, the rate of interest payable on the Floating Rate
Notes for such Interest Reset Period shall be the Initial Interest
Rate).
Book-Entry Procedures
Upon issuance, the Fixed Rate Notes and the Floating Rate Notes will
each be represented by fully registered global notes (the "Global Notes"). The
Global Notes will be deposited with, or on behalf of, The Depository Trust
Company, as Depositary (the "Depositary"), and registered in the name of the
Depositary or a nominee thereof. Unless and until it is exchanged in whole or
in part for Notes in definitive form, the Global Notes may not be transferred
except as a whole by the Depositary to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. The Depositary was created to hold
securities of its participants and to facilitate the clearance and settlement
of transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the
need for physical movement of securities certificates. The Depositary's
participants include securities brokers and dealers (including the
Underwriter), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly.
A further description of the Depositary's procedures with respect to the
Global Notes is set forth in the Prospectus under "Description of Debt
Securities -- Global Securities." The Depositary has confirmed to the Company,
the Underwriter and the Trustee that it intends to follow such procedures.
THE UNDERWRITER
Under the terms and subject to the conditions contained in an
Underwriting Agreement dated the date hereof, Morgan Stanley & Co.
Incorporated (the "Underwriter") has agreed to purchase, and the Company has
agreed to sell to the Underwriter, $300,000,000 principal amount of Fixed Rate
Notes and $150,000,000 principal amount of Floating Rate Notes.
The Underwriting Agreement provides that the obligations of the
Underwriter to pay for and accept delivery of the Notes is subject to the
approval of certain legal matters by its counsel and to certain other
conditions. The Underwriter is committed to take and pay for all of the Notes
if any are taken.
The Underwriter initially proposes to offer part of the Notes 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 .25% of the principal amount of the Notes. The Underwriter may
allow, and such dealers may reallow, a concession not in excess of .10% of the
principal amount of the Notes to certain other dealers. After the initial
offering of the Notes, the offering price and other selling terms may from
time to time be varied by the Underwriter.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriter may be required to make
in respect thereof.
The Company does not intend to apply for listing of the Notes on a
national securities exchange, but has been advised by the Underwriter that it
presently intends to make a market in the Notes as permitted by applicable
laws and regulations. The Underwriter is not obligated, however, to make a
market in the Notes and any such market-making may be discontinued at any time
at the sole discretion of the Underwriter. Accordingly, no assurance can be
given as to the liquidity of, or trading market for, the Notes.
This Prospectus Supplement and the accompanying Prospectus may be used
by Morgan Stanley & Co. Incorporated ("Morgan Stanley") in connection with
offers and sales of the Notes in market-making transactions at negotiated
prices related to prevailing market prices at the time of sale or otherwise.
Morgan Stanley may act as principal or agent in such transactions.
Morgan Stanley is a wholly-owned subsidiary of the Company. Morgan
Stanley's participation in the offering of the Notes and its market-making
activities, if any, with respect to the Notes will be conducted in compliance
with Schedule E of the By-Laws of the National Association of Securities
Dealers, Inc.
The Underwriter does not intend to confirm sales to accounts over which
it exercises discretionary authority.
