-----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, HQ6CxMS5yNRdOBKAnyZlDB7CNmDT8FkfoMmw8FWiAcMgocwPsDsBn+nqNSEuzOIG wDIielA2UX2BpPCiV3ms7A== 0000947871-96-000069.txt : 19960717 0000947871-96-000069.hdr.sgml : 19960717 ACCESSION NUMBER: 0000947871-96-000069 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960716 SROS: NONE 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: 033-58611 FILM NUMBER: 96595316 BUSINESS ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2127034000 424B3 1 PROSPECTUS SUPPLEMENT Information contained in this preliminary prospectus supplement is subject to completion or amendment. This prospectus supplement and the accompanying prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PROSPECTUS SUPPLEMENT (Subject to Completion, Issued July 12, 1996) (To Prospectus dated May 1, 1996) 2,000,000 Shares Morgan Stanley Group Inc. DEPOSITARY SHARES EACH REPRESENTING 1/4 OF A SHARE OF % CUMULATIVE PREFERRED STOCK ($200.00 Stated Value) --------------- Each Depositary Share (a "Depositary Share") represents ownership of 1/4 of a share of % Cumulative Preferred Stock, without par value, stated value $200.00 per share (the "Cumulative 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 Cumulative Preferred Stock represented thereby. The proportionate stated value of each Depositary Share is $50.00. See "Description of Depositary Shares." The Cumulative Preferred Stock will not be redeemable prior to August 30, 2001 except as stated below. On or after such date the Cumulative 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 Cumulative Preferred Stock (equivalent to $50.00 per Depositary Share) plus dividends accrued and accumulated but unpaid to the redemption date. The Cumulative Preferred Stock may also be redeemed prior to August 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 Cumulative Preferred Stock--Optional Redemption." Dividends on the Cumulative Preferred Stock will be cumulative from the date of issue and are payable quarterly, commencing August 30, 1996. The amount of dividends payable in respect of the Cumulative Preferred Stock will be adjusted in the event of certain amendments to the Code in respect of the dividends received deduction. See "Description of Cumulative Preferred Stock--Dividends." --------------- 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. --------------- 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. --------------- PRICE $50 A DEPOSITARY SHARE --------------- Underwriting Price to Discounts and Proceeds to Public(1)(2) Commissions(1)(3) Company(1)(2)(4) ------------ ----------------- ---------------- Per Depositary Share.... $50.0000 $ $ Total(5)................ $100,000,000 $ $ - ---------- (1) The applicable underwriting discount and commission will be $ per Depositary Share with respect to any Depositary Share sold to certain institutions. To the extent of such sales, the actual total underwriting discounts and commissions will be less, and the actual total proceeds to the Company will be greater, than the amounts shown in the table. See "Underwriters." (2) Plus accrued dividends, if any, from the date of issue. (3) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriters." (4) Before deducting expenses payable by the Company estimated to be $ . (5) 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 300,000 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, subject to note 1 above, be $ , $ , and $ , respectively. See "Underwriters." --------------- 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 July , 1996 at the office of Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in immediately available funds. --------------- MORGAN STANLEY & CO. Incorporated CS FIRST BOSTON GOLDMAN, SACHS & CO. LEHMAN BROTHERS MERRILL LYNCH & CO. July , 1996 SALOMON BROTHERS INC 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. Fiscal Fiscal (Unaudited) Period Ended Year Ended Year Ended Six Months Ended November 30, January 31, December 31, ---------------- ------------- ---------------------- ------------ May 31, May 31, 1996 1995 1995 1995 1994 1993 1991 ---- ---- ---- ---- ---- ---- ---- Ratio of earnings to fixed charges ........ 1.2 1.1 1.2 1.1 1.2 1.2 1.2 Ratio of earnings to fixed charges and preferred stock dividends 1.2 1.1 1.1 1.1 1.2 1.2 1.2
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 CUMULATIVE PREFERRED STOCK The following description of the Cumulative 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 Cumulative 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 Cumulative Preferred Stock (the "Certificate of Designation"). Pursuant to action of the Board of Directors of the Company or a committee thereof (the "Committee"), the shares of Cumulative Preferred Stock represented by the Depositary Shares (including the shares of Cumulative Preferred Stock represented by the Depositary Shares that are subject to the Underwriters' overallotment option) constitute a single series of Preferred Stock. The Cumulative Preferred Stock is not convertible into shares of any other class or series of stock of the Company. Shares of Cumulative Preferred Stock have no preemptive rights. Any shares of Cumulative Preferred Stock that are surrendered for redemption will be returned to the status of authorized and unissued Preferred Stock. The Bank of New York is the registrar, transfer agent and dividend disbursing agent for the shares of Cumulative Preferred Stock. S-2 Rank. As of the date hereof, the Cumulative 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. Dividends. Holders of shares of Cumulative Preferred Stock are entitled to receive, when and as declared by the Board of Directors or the Committee out of funds legally available therefor, cash dividends payable quarterly at the rate of % per annum. Dividends on the Cumulative Preferred Stock, calculated as a percentage of the stated value, will be payable quarterly on February 28, May 30, August 30 and November 30 (each a "Dividend Payment Date"), commencing August 30, 1996. Dividends on the Cumulative Preferred Stock will be cumulative from the date of initial issuance of such Cumulative 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 of Directors or the Committee. 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 Cumulative 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 Cumulative 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. 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, 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 to holders of record on the next succeeding Dividend Payment Date in addition to any other amounts payable on such date. In addition, if, prior to January 2, 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 Cumulative Preferred Stock (each an "Affected Dividend Payment S-3 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, on the second succeeding Dividend Payment Date following the date of enactment) to holders of record on such succeeding Dividend Payment Date 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 January 2, 1997 which retroactively reduces the Dividends Received Percentage to below 70%, or if prior to January 2, 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 Cumulative 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 Cumulative Preferred Stock. In the event that the Dividends Received Percentage is reduced to % or less, the Company may, at its option, redeem the Cumulative 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 Cumulative 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 Cumulative 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 Cumulative 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 Cumulative 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 Cumulative Preferred Stock is not subject to any mandatory redemption or sinking fund provision. The Cumulative Preferred Stock is not redeemable prior to August 30, 2001 except as stated below. On or after such date the Cumulative 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 (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 Cumulative Preferred Stock have not been paid, the Cumulative Preferred Stock may not be redeemed in part and the Company may not purchase or acquire any share of Cumulative Preferred Stock otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of the Cumulative Preferred Stock. If fewer than all the outstanding shares of Cumulative 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 % and, as a result, the amount of dividends on the Cumulative 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 S-4 Cumulative 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 % or less, the Company sends notice to holders of the Cumulative Preferred Stock of such redemption. A redemption of the Cumulative 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 Cumulative Preferred Stock. A redemption of the Cumulative 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 --------- -------------------- , 1996 to August 29, 1997............ $210.00 $52.50 August 30, 1997 to August 29, 1998............ 208.00 52.00 August 30, 1998 to August 29, 1999............ 206.00 51.50 August 30, 1999 to August 29, 2000............ 204.00 51.00 August 30, 2000 to August 29, 2001............ 202.00 50.50 On or after August 30, 2001................... 200.00 50.00 Voting Rights. Holders of Cumulative 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 Cumulative Preferred Stock or any other class or series of stock ranking on a parity with the Cumulative 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 Cumulative 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 Cumulative 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 Cumulative Preferred Stock will have one vote for each share held. DESCRIPTION OF DEPOSITARY SHARES Each Depositary Share represents 1/4 of a share of Cumulative Preferred Stock deposited with the Depositary pursuant to the Deposit Agreement, dated as of July , 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 Cumulative Preferred Stock represented by such Depositary Share, to all the rights, preferences and privileges of the Cumulative Preferred Stock represented thereby (including dividend, voting and liquidation rights) contained in the Certificate of Designation summarized under "Description of Cumulative Preferred Stock." The Company does not expect that there will be any public trading market for the Cumulative 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). S-5 Issuance of Depositary Receipts. Immediately following the issuance of the Cumulative Preferred Stock by the Company, the Company will deposit the Cumulative 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 Cumulative 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 Cumulative 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 Cumulative Preferred Stock on the basis set forth herein, but holders of such whole shares of Cumulative Preferred Stock will not thereafter be entitled to deposit such shares of Cumulative 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 Cumulative 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 Cumulative 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 Cumulative 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 Cumulative Preferred Stock represented thereby. See "Description of Cumulative Preferred Stock--Optional Redemption." If the Company redeems shares of Cumulative 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 Cumulative 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 Cumulative 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 Cumulative 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 S-6 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. CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF DEPOSITARY SHARES OR CUMULATIVE PREFERRED STOCK The following is a general discussion of the material United States federal income and estate tax consequences of the ownership and disposition of Depositary Shares or Cumulative Preferred Stock applicable to a beneficial owner thereof that is a "Non-U.S. Holder." In general, a "Non-U.S. Holder" is any person holding Depositary Shares or Cumulative Preferred Stock other than (i) a citizen or resident of the United States, (ii) a corporation or partnership created or organized under the laws of the United States or of any State, or (iii) an estate or trust whose income is included in gross income for United States federal income tax purposes regardless of its source. The following summary does not address all aspects of United States federal and estate taxation that may be relevant to Non-U.S. Holders in light of their particular circumstances. This summary is based on provisions of the Code and administrative and judicial interpretations as of the date hereof, all of which are subject to change, possibly on a retroactive basis. This summary does not deal with U.S. state and local or non-U.S. tax consequences and, except as specifically noted, does not address the effects of any tax treaties the United States has concluded with other countries. Proposed United States Treasury Regulations were issued on April 15, 1996 (the "Proposed Regulations") which, if adopted, would affect the United States taxation of dividends paid to a Non-U.S. Holder on Depositary Shares or Cumulative Preferred Stock. The Proposed Regulations are generally proposed to be effective with respect to dividends paid after December 31, 1997, subject to certain transition rules. The discussion below is not intended to be a complete discussion of the provisions of the Proposed Regulations, and prospective investors are urged to consult their tax advisors with respect to the effect the Proposed Regulations would have if adopted. ALL PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF DEPOSITARY SHARES OR CUMULATIVE PREFERRED STOCK. Depositary Shares. Holders of Depositary Shares will be treated for United States federal income tax purposes as owners of the underlying Cumulative Preferred Stock. Deposits and withdrawals of Depositary Shares in exchange for the Cumulative Preferred Stock will not result in taxable gain or loss for United States federal income tax purposes. Dividends. In general, dividends paid on Depositary Shares or Cumulative Preferred Stock to a Non-U.S. Holder will be subject to withholding of United States federal income tax at a rate of 30% of the amount of the dividend (or a lower rate prescribed by an applicable income tax treaty). However, if the dividend is effectively connected with the conduct of a United States trade or business by the Non-U.S. Holder and the Non-U.S. Holder properly files Internal Revenue Service Form 4224 (or such other applicable form required by the Internal Revenue Service) with the Company or its dividend disbursing agent, then the dividend (i) will not be subject to income tax withholding, and (ii) will be subject to United States federal income tax in the same manner as if the Non-U.S. Holder were a U.S. resident. In the case of a Non-U.S. Holder that is a corporation, such effectively connected S-7 dividend income may also be subject to the branch profits tax (which is generally imposed on a foreign corporation on the repatriation from the United States of effectively connected earnings and profits) at a 30% rate (or a lower rate prescribed by an applicable income tax treaty). For purposes of determining whether tax is to be withheld at a 30% rate or at a reduced rate as specified by an applicable tax treaty, under current United States Treasury Regulations the Company ordinarily will presume that dividends paid to a holder with an address in a foreign country are paid to a resident of such country absent knowledge that such presumption is not warranted. Under the Proposed Regulations, to obtain a reduced rate of withholding under a treaty a Non-U.S. Holder would generally be required to provide an Internal Revenue Service Form W-8 certifying such Non-U.S. Holder's entitlement to benefits under a treaty together with, in certain circumstances, additional information. The Proposed Regulations also would provide special rules to determine whether, for purposes of determining the applicability of a tax treaty and for purposes of the 30% withholding tax described above, dividends paid to a Non-U.S. Holder that is an entity should be treated as paid to the entity or to those holding an interest in that entity. The Company is required to report annually to the Internal Revenue Service and each Non-U.S. Holder the amount of dividends paid to, and the income tax withheld with respect to, such holder. Such information may also be made available by the Internal Revenue Service to the tax authorities of the country in which the Non-U.S. Holder resides. Dividends paid to a Non-U.S. Holder at an address within the United States may be subject to backup withholding imposed at a rate of 31% if the Non-U.S. Holder fails to establish that it is entitled to an exemption or to provide a correct taxpayer identification number and certain other information to the Company or its dividend disbursing agent. Disposition of Depositary Shares or Cumulative Preferred Stock. In general, a Non-U.S. Holder will not be subject to United States federal income tax on any gain realized upon the disposition of such holder's Depositary Shares or Cumulative Preferred Stock unless (i) the gain is effectively connected with a trade or business carried on by the Non-U.S. Holder within the United States or, alternatively, if an applicable income tax treaty so provides, attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States; (ii) the Depositary Shares or Cumulative Preferred Stock are disposed of by a Non-U.S. Holder who is an individual and has a "tax home" (as defined for United States federal income tax purposes) in the United States, who holds the Depositary Shares or Cumulative Preferred Stock, as the case may be, as a capital asset and who is present in the United States for 183 days or more in the taxable year of the disposition; (iii) the Non-U.S. Holder is subject to tax pursuant to provisions of the Code regarding the taxation of U.S. expatriates; or (iv) the Company is or has been a United States real property holding corporation for United States federal income tax purposes (which the Company does not believe it is or is likely to become) at any time within the shorter of the five-year period preceding such disposition or such Non-U.S. Holder's holding period. Information Reporting Requirements and Backup Withholding on Disposition of Depositary Shares or Cumulative Preferred Stock. Under current United States federal income tax law, information reporting and backup withholding imposed at a rate of 31% will apply to the proceeds of a disposition of Depositary Shares or Cumulative Preferred Stock paid to or through a U.S. office of a broker unless the disposing holder certifies as to its non-U.S. status or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding will not apply to a payment of disposition proceeds if the payment is made outside the United States through a non-U.S. office of a non-U.S. broker. However, U.S. information reporting requirements (but not backup withholding) will apply to a payment of disposition proceeds outside the United States if (A) the payment is made through an office outside the United States of a broker that is either (i) a United States person, (ii) a foreign person which derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States or (iii) a "controlled foreign corporation" for United States federal income tax purposes and (B) the broker fails to S-8 maintain documentary evidence that the holder is a Non-U.S. Holder and that certain conditions are met, or that the holder otherwise is entitled to an exemption. The Proposed Regulations would, if adopted, alter the foregoing rules in certain respects. Among other things, the Proposed Regulations would provide certain presumptions under which a Non-U.S. Holder would be subject to backup withholding and information reporting unless the Company receives certification from the holder of non-U.S. status. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is furnished to the Internal Revenue Service. Estate Tax. Depositary Shares or Cumulative Preferred Stock owned or treated as owned by an individual who is not a citizen or resident (as specifically defined for United States federal estate tax purposes) of the United States at the time of his or her death will be includable in the individual's gross estate for United States federal estate tax purposes and may be subject to United States federal estate tax, unless an applicable estate tax treaty provides otherwise. 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.............................. CS First Boston Corporation.................................... Goldman, Sachs & Co. .......................................... Lehman Brothers Inc. .......................................... Merrill Lynch, Pierce, Fenner & Smith Incorporated............. Salomon Brothers Inc .......................................... _________ Total.................................... 2,000,000 ========= 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 $ per Depositary Share; provided, however, that such concession shall not exceed $ per Depositary Share for sales to certain institutions. Any Underwriter may allow, and such dealers may reallow, a concession, not in excess of $ 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 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. S-9 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 300,000 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. 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 Cumulative 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 Cumulative 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. Shearman & Sterling, which is opining on the accuracy of the summary of certain tax matters described under the caption "Certain United States Federal Tax Considerations for Non-U.S. Holders of Depositary Shares or Cumulative Preferred Stock," represents the Company on a regular basis and in a variety of matters, including in connection with its merchant banking and leveraged capital activities. S-10 -----END PRIVACY-ENHANCED MESSAGE-----