Morgan Stanley Group Inc/DE – ‘PRE 14A’ for 4/3/96

As of:  Friday, 2/9/96   ·   For:  4/3/96   ·   Accession #:  950130-96-468   ·   File #:  1-09085

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Preliminary Proxy Solicitation Material   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PRE 14A     Preliminary Proxy Statement                           46    214K 

Document Table of Contents

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SCHEDULE 14A INFORMATION  

Proxy Statement Pursuant to Section 14(a) of the Securities 
Exchange Act of 1934 (Amendment No.  )  

Filed by the Registrant [X]                                                     

Filed by a Party other than the Registrant [_]                                  

Check the appropriate box:                                                      

[X]  Preliminary Proxy Statement        [_]  Confidential, for Use of the       
                                          Commission Only (as permitted by
                           Rule 14a-6(e)(2))
[_]  Definitive Proxy Statement                                                 

[_]  Definitive Additional Materials                                            

[_]  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

Morgan Stanley Group Inc. 
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)  

--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)  

Payment of Filing Fee (Check the appropriate box):                              

[X]  $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)       
or Item 22(a)(2) of Schedule 14A.                                     

[_]  $500 per each party to the controversy pursuant to Exchange Act Rule       
14a-6(i)(3).                                                          

[_]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.   

(1) Title of each class of securities to which transaction applies:   

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(2) Aggregate number of securities to which transaction applies:      

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(3) Per unit price or other underlying value of transaction computed  
   pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:                  

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(5) Total fee paid:                                                   

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[_]  Fee paid previously with preliminary materials.                            

[_]  Check box if any part of the fee is offset as provided by Exchange         
  Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
     was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.           

(1) Amount Previously Paid:                                           

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(2) Form, Schedule or Registration Statement No.:                     

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(3) Filing Party:                                                     

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(4) Date Filed:                                                       

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Notes:                                                                          

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MORGAN STANLEY GROUP INC. 
1585 BROADWAY 
NEW YORK, NEW YORK 10036

                                                             February 26, 1996

Dear Stockholder:                                                               

     You are cordially invited to attend the 1996 Annual Meeting of Stockholders
of Morgan Stanley Group Inc. The meeting will be held on Wednesday, April 3,    
1996 at 9:30 A.M. at 1585 Broadway, 41st Floor, New York, New York. We hope that
you will be able to attend. Enclosed you will find a notice setting forth the   
business expected to come before the meeting, the Proxy Statement, a form of    
proxy and a copy of the Company's 1995 Annual Report.                           

     Whether or not you plan to attend the meeting in person, your shares should
be represented and voted at the meeting. Accordingly, after reading the enclosed
Proxy Statement, kindly complete, sign, date and promptly return the proxy in   
the enclosed self-addressed envelope. No postage is required if it is mailed in 
the United States. If you later decide to attend the meeting and wish to vote   
your shares personally, you may revoke your proxy at any time before it is      
exercised.                                                                      

                 Very truly yours,

                 Richard B. Fisher
        Chairman

            John J. Mack
         President

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MORGAN STANLEY GROUP INC. 
1585 BROADWAY 
NEW YORK, NEW YORK 10036

NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS 

                                                               February 26, 1996

   The 1996 Annual Meeting of Stockholders of Morgan Stanley Group Inc. (the
"Company") will be held at 1585 Broadway, 41st Floor, New York, New York on     
Wednesday, April 3, 1996 at 9:30 A.M. for the following purposes:               

1. To elect directors.                                                

2. To approve the Company's 1995 Equity Incentive Compensation Plan.  

 3. To approve an amendment to the Restated Certificate of Incorporation
        increasing from 300,000,000 to 600,000,000 the total number of shares of
        Common Stock, par value $1.00 per share, which the Company will have the
authority to issue.                                             

   4. To approve the selection of Ernst & Young LLP as independent auditors.

     5. To transact such other business as may properly come before the meeting.

     The record date for the determination of stockholders entitled to vote with
respect to this solicitation is the close of business on February 7, 1996.      

                                     By Order of the Board of Directors,

                   Jonathan M. Clark
                               General Counsel and Secretary

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TABLE OF CONTENTS 

Introduction........................................................        1   
Election of Directors...............................................        4   
Board of Directors Meetings, Committees and Fees....................        6   
Stock Ownership of Management.......................................        7   
Principal Stockholders..............................................        8   
Stockholders' Agreement.............................................        9   
Interest of Management in Certain Transactions......................       10   
Compensation of Executive Officers..................................       11   
Compensation Committee Report on Executive Officer Compensation.....       15   
Compensation Committee Interlocks and Insider Participation.........       18   
Performance Graph...................................................       19   
Approval of the 1995 Equity Incentive Compensation Plan.............       20   
Approval of an Amendment to the Restated Certificate                            
    Relating to the Number of Authorized Shares of Common Stock..       25
Appointment of Independent Auditors.................................       25   
Stockholder Proposals...............................................       26   
Other Matters.......................................................       26   
Morgan Stanley Group Inc. 1995 Equity Incentive Compensation Plan...  Annex A   
Amendment to the Restated Certificate Relating to the Number of                 
Authorized Shares of Common Stock................................  Annex B

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MORGAN STANLEY GROUP INC. 
1585 BROADWAY 
NEW YORK, NEW YORK 10036

PROXY STATEMENT 

INTRODUCTION

          This Proxy Statement is furnished in connection with a solicitation of
proxies by the Board of Directors of Morgan Stanley Group Inc., a Delaware      
corporation (together with its consolidated subsidiaries, the "Company", unless 
the context indicates otherwise), to be used at the 1996 Annual Meeting of      
Stockholders of the Company to be held on Wednesday, April 3, 1996 at 9:30 A.M. 
and at any adjournments thereof.  The approximate date on which this Proxy      
Statement and the accompanying form of proxy are first being sent to            
stockholders is February 26, 1996.                                              

         Holders of the Company's Common Stock, par value $1.00 per share (the
"Common Stock"), as of the close of business on February 7, 1996 will be        
entitled to vote at the 1996 Annual Meeting.  On that date, there were [     ]  
shares of Common Stock outstanding (excluding treasury shares), each of which is
entitled to one vote with respect to each matter to be voted on at the meeting. 
The Company's transfer books will not be closed.  In addition, on February 7,   
1996 there were [      ] outstanding shares of the Company's ESOP Convertible   
Preferred Stock (the "ESOP Stock"), each of which is entitled to 2.7 votes with 
respect to each matter to be voted on at the meeting. Generally, the Common     
Stock and the ESOP Stock vote together as a single class.                       

    A proxy in the accompanying form that is properly executed, duly
returned and not subsequently revoked will be voted in accordance with          
instructions contained thereon. If no instructions are given with respect to the
matters to be acted on, proxies will be voted as follows: for the election of   
the nominees for directors named below, for the approval of the 1995 Equity     
Incentive Compensation Plan, for the approval of an amendment (the "Authorized  
Common Stock Amendment") to the Restated Certificate of Incorporation (the      
"Restated Certificate") increasing the number of authorized shares of Common    
Stock, for the approval of the selection of Ernst & Young LLP as independent    
auditors of the Company and otherwise in accordance with the judgment of the    
person or persons voting the proxy on any other matter properly brought before  
the meeting.                                                                    

  A stockholder who executes a proxy (other than a proxy granted
pursuant to the Voting Agreements referred to below) may revoke it at any time  
before it is exercised by giving written notice to the General Counsel and      
Secretary of the Company, by subsequently filing another proxy or by attending  
the 1996 Annual Meeting and voting in person.                                   

    Each proposal (other than the Authorized Common Stock Amendment)
presented in this Proxy Statement will be approved if it is authorized by the   
affirmative vote of a majority of the combined voting power of the shares of    
Common Stock and ESOP Stock represented at the meeting.  The Authorized Common  
Stock Amendment will be approved if it receives the affirmative vote of a       
majority of the voting power of the outstanding shares of Common Stock voting as
a separate class and the affirmative vote of a majority of the voting power of  
the outstanding shares of Common Stock and ESOP stock voting together as a      
single class.  An abstention with respect to any proposal will be counted as    
present for purposes of determining the existence of a quorum and will have the 
practical effect of a negative vote as to that proposal.  Brokers (other than   
the Company's wholly owned subsidiary, Morgan Stanley & Co. Incorporated        
("Morgan Stanley")) that do not receive instructions are entitled to vote on the
proposals relating to the election of directors, the amendment of the Restated  
Certificate and selection of independent auditors presented in this Proxy       
Statement.  Under the rules of the New York Stock Exchange, Inc. (the "NYSE"),  
if Morgan Stanley does not receive instructions it is entitled to vote such     
shares only in the same proportion as the shares represented by votes cast by   
all record holders with respect to such proposal.  In the event of a broker non-
vote with respect to the proposal relating to the 1995 Equity Incentive         
Compensation Plan or any other proposal coming before the meeting arising from  
the absence of authorization by the beneficial owner to vote as to that proposal
if such proposal requires specific authorization, the proxy will be counted as  
present for purposes of determining the existence of a quorum with respect to   
any issue requiring the affirmative vote of a majority of the voting power of   
the shares represented at the meeting but will not be deemed as present and     
entitled to vote as to that proposal for purposes of determining                

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the total number of shares of which a majority is required for adoption, and    
with respect to any issue requiring the affirmative vote of a majority of the   
total voting power of the Company, will have the practical effect of a negative 
vote.                                                                           

         Certain stockholders of the Company hold their shares of Common Stock
subject to agreements relating to, among other things, the voting and           
disposition of such shares.  Such agreements include the Stockholders' Agreement
dated as of February 14, 1986, as amended (the "Stockholders' Agreement") among 
the Company and those persons who were stockholders (the "Recapitalization      
Signatories") of the Company at the time of a recapitalization effected in      
contemplation of the Company's initial public offering (all of whom were        
Managing Directors or Principals of Morgan Stanley and employees of the Company 
at such time), and various voting agreements (the "Plan Agreements" and,        
together with the Stockholders' Agreement, the "Voting Agreements") entered into
between the Company, certain of its employees and/or a trustee for a trust that 
holds shares of Common Stock on behalf of such employees (together with the     
Recapitalization Signatories, the "Signatories") in connection with the granting
to such employees of stock awards, stock unit awards and/or option awards under 
the Company's 1988 Equity Incentive Compensation Plan (the "1988 Equity         
Incentive Compensation Plan"), options under the Company's 1986 Stock Option    
Plan (the "Stock Option Plan") and performance units under the Company's        
Performance Unit Plan (the "Performance Unit Plan").  The shares of Common Stock
subject to the Plan Agreements have been issued pursuant to stock awards or     
stock unit awards and performance units granted to eligible employees under the 
1988 Equity Incentive Compensation Plan and the Performance Unit Plan,          
respectively, and upon the exercise of option awards and options granted to     
eligible employees under the 1988 Equity Incentive Compensation Plan and the    
Stock Option Plan, respectively.  Shares of ESOP Stock are not subject to any of
the Voting Agreements.                                                          

The Voting Agreements provide that, before any vote of the  
stockholders of the Company occurs, a preliminary vote (the "Preliminary Vote") 
will be taken at which each Signatory who is an employee of the Company on such 
date may vote all of his shares of Common Stock subject to the Voting Agreements
in such manner as such Signatory may determine in his sole discretion.  At any  
meeting of the stockholders called to vote with respect to any corporate action,
a Signatory who was an employee of the Company at the time of the Preliminary   
Vote or a trustee for a trust that holds shares of Common Stock on behalf of    
such employee must vote the shares of Common Stock that are subject to the      
Voting Agreements in accordance with the vote of the majority of the shares of  
Common Stock voted in the Preliminary Vote.  Signatories who are no longer      
employed by the Company on the date of the Preliminary Vote are not required to 
vote such shares of Common Stock in accordance with the vote of the majority of 
the shares of Common Stock voted in the Preliminary Vote.  See "Stockholders'   
Agreement".                                                                     

    At February 7, 1996, [    ] shares of Common Stock (constituting
approximately [    ]% of the votes that are entitled to be cast at the 1996     
Annual Meeting) were subject to voting restrictions contained in the Voting     
Agreements and will be required to be voted in accordance with the results of   
this year's Preliminary Vote.  A Preliminary Vote with respect to the proposals 
presented in this Proxy Statement will be taken on or about March 20, 1996.     

The expenses of the preparation of proxy materials and the  
solicitation of proxies for the 1996 Annual Meeting will be borne by the        
Company.  In addition to the solicitation of proxies by mail, solicitation may  
be made by certain employees of the Company by telephone, telegraph or other    
means and by Georgeson & Company Inc. Employees will receive no additional      
compensation for such solicitation, and Georgeson & Company Inc. will receive a 
fee of $15,000 for its services.  The Company will reimburse brokers,           
including Morgan Stanley, and other nominees for costs incurred by them in      
mailing proxy materials to beneficial holders in accordance with the rules of   
the NYSE.                                                                       

        As used herein, "Fiscal 1993" refers to the twelve month period from
February 1, 1993 to January 31, 1994 and "Fiscal 1994" refers to the twelve     
month period from February 1, 1994 to January 31, 1995. In February 1995, the   
Board of Directors approved a change in the Company's fiscal year-end from      
January 31 to November 30, effective for the 1995 fiscal year.   "Fiscal 1995"  
refers to the ten month period from February 1, 1995 to November 30, 1995.      

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        Unless otherwise indicated, all amounts of Common Stock, stock units
and stock options referred to herein have been adjusted to give effect to the   
Company's two-for-one stock split effected in the form of a stock dividend on   
January 26, 1996.                                                               

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ELECTION OF DIRECTORS 

          Ten persons are to be elected to serve on the Board of Directors until
the Company's next Annual Meeting and their respective successors shall have    
been elected and qualified.                                                     

          If any nominee shall become unable to stand for election as a director
at the meeting, an event not now anticipated by the Board of Directors, the     
proxy may be voted for a substitute designated by the Board of Directors.  The  
nominees for election as directors and a brief biography of each nominee are    
listed below. There are no family relationships among any directors, executive  
officers or nominees.                                                           

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Richard B. Fisher                                                               

        Mr. Fisher, age 59, has served as Chairman of the Board of Directors
of the Company and Morgan Stanley since January 1991.  From January 1984 through
December 1990, he served as President of the Company and Morgan Stanley.  He has
been a director and a Managing Director of the Company since July 1975 and a    
director and a Managing Director of Morgan Stanley since July 1970.  He was a   
partner in Morgan Stanley & Co., the predecessor of Morgan Stanley, from July   
1970 through June 1975.                                                         

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John J. Mack                                                                    

       Mr. Mack, age 51, has served as President of the Company and Morgan
Stanley since June 1993.  He has been a director and a Managing Director of the 
Company since December 1987 and was a director and a Managing Director of the   
Company from January 1979 to March 1986.  Mr. Mack has been a director and a    
Managing Director of Morgan Stanley since January 1979.                         

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Barton M. Biggs                                                                 

         Mr. Biggs, age 63, has been a director and a Managing Director of the
Company since May 1991 and a director and a Managing Director of Morgan Stanley 
since July 1973.  He was a director and a Managing Director of the Company from 
July 1975 to March 1986.  He was a partner in Morgan Stanley & Co. from June    
1973 through June 1975.  Mr. Biggs is chairman of the board of directors of The 
Latin American Discovery Fund, Inc., Morgan Stanley Emerging Markets Fund, Inc.,
Morgan Stanley Africa Investment Fund, Inc., Morgan Stanley India Investment    
Fund, Inc., Morgan Stanley Emerging Markets Debt Fund, Inc., Morgan Stanley     
Global Opportunity Bond Fund, Inc., The Morgan Stanley High Yield Fund, Inc.,   
The Pakistan Investment Fund, Inc., The Thai Fund, Inc., The Turkish Investment 
Fund, Inc., The Brazilian Investment Fund, Inc., The Malaysia Fund, Inc., Morgan
Stanley Institutional Fund, Inc., Morgan Stanley Fund, Inc., and PCS Cash Fund, 
Inc.  He is also a director of Morgan Stanley Asia-Pacific Fund, Inc.           

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Peter F. Karches                                                                

         Mr. Karches, age 44, has been a director and Managing Director of the
Company since February 1994.  He has also served as director and Managing       
Director of Morgan Stanley since January 1985.                                  

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Sir David A. Walker                                                             

      Sir David Walker, age 56, has been a director of the Company since
November 1994 and a Managing Director of the Company since May 1995.  He has    
been a director of Morgan Stanley since February 1995 and a Managing Director of
Morgan Stanley since November 1994.  Before joining the Company, Sir David was  
Deputy Chairman of Lloyds Bank PLC in England.  From 1988 to 1992 he was        
Chairman of the Securities and Investments                                      

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Board, the British authority that regulates the securities markets. From 1982 to
1988 he was the executive director of the Bank of England and remained as a non-
executive director at the Bank until early 1993. Sir David has been a non-      
executive director of Reuters Holdings PLC since April 1994.                    

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Robert P. Bauman                                                                

       Mr. Bauman, age 64, has been  the Non-Executive Chairman of British
Aerospace PLC since May 1994.   He served as Chief Executive Officer of         
SmithKline Beecham PLC from 1989 until April 1994.  Mr. Bauman is also a        
director of Capital Cities/ABC, Inc., Cigna Corporation and Union Pacific       
Corporation. Mr. Bauman has been a non-executive director of Reuters Holdings   
PLC since March 1994.                                                           

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Daniel B. Burke                                                                 

        Mr. Burke, age 67, is retired.  He served as chief executive officer
of Capital Cities/ABC, Inc. from 1990 until February 1994. He also served as    
president and chief operating officer of that corporation from 1986 until       
February 1994 and has been one of its directors since 1967.  Mr. Burke is also a
director of Avon Products, Inc., Consolidated Rail Corporation, and Rohm and    
Haas Company.  Mr. Burke has been a director of the Company since February 1994.

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S. Parker Gilbert                                                               

        Mr. Gilbert, age 62, is retired.  He served as Chairman of the Board
of Directors of the Company and Morgan Stanley from January 1984 through        
December 1990.  He was President of the Company and Morgan Stanley from January 
1983 through December 1983.  He was a Managing Director of the Company from July
1975 through December 1990 and a director and a Managing Director of Morgan     
Stanley from May 1970 through December 1990.  From January 1969 through June    
1975, Mr. Gilbert was a partner in Morgan Stanley & Co.  He has been a director 
of the Company since July 1975.  Mr. Gilbert is also a director of Burlington   
Resources Inc., ITT Corporation, and Taubman Centers, Inc.                      

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Allen E. Murray                                                                 

          Mr. Murray, age 66, is retired.  He served as chairman of the board of
directors and chief executive officer of Mobil Corporation from February 1986   
until March 1994 and as one of its directors from May 1977 until March 1994.    
Mr. Murray also served as president and chief operating officer of that         
corporation from November 1984 until March 1993.  He is also a director of      
Lockheed Martin Corporation, Metropolitan Life Insurance Company and Minnesota  
Mining & Manufacturing Company.  Mr. Murray has been a director of the Company  
since November 1992.                                                            

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Paul J. Rizzo                                                                   

     Mr. Rizzo, age 68, is retired.  He served as vice chairman of the
board of directors of International Business Machines Corporation from January  
1993 through December 1994 and from February 1983 to September 1987 and as a    
senior vice president from 1974 until February 1983.  He has been a partner in  
Franklin Street Partners since 1992.  From September 1987 until 1992, he was    
Dean of Kenan-Flagler Business School at the University of North Carolina-Chapel
Hill.  Mr. Rizzo is also a director of Johnson & Johnson, McGraw-Hill, Inc., and
Ryder System, Inc.  Mr. Rizzo was a director of the Company from July 1986      
through December 1992 and has been a director since February 1995.              

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BOARD OF DIRECTORS MEETINGS, COMMITTEES AND FEES

     The Board of Directors held three meetings and acted by unanimous
written consent on four occasions during Fiscal 1995.  Messrs. Fisher, Mack,    
Biggs, Karches and Walker currently are the members of the Executive Committee  
of the Board of Directors, which is authorized to exercise all the powers of the
Board of Directors in the management of the business and affairs of the Company 
to the fullest extent permitted by law and the Restated Certificate.  The       
Executive Committee of the Board of Directors held one meeting and acted by     
unanimous written consent on six occasions during Fiscal 1995.  In addition to  
the Executive Committee, the Board of Directors has established a standing Audit
Committee and a standing Compensation Committee.  The Company does not maintain 
a standing nominating committee.                                                

       The Audit Committee, among other things, recommends to the Board of
Directors the Company's independent auditors, confers with the Company's        
independent auditors and internal auditors concerning the scope of their        
respective examinations, reviews the Company's financial statements and the work
of the Company's independent auditors and internal auditors and obtains         
recommendations concerning internal controls.  Messrs. Murray, Burke and Rizzo  
are the current members of the Audit Committee.  The Audit Committee held two   
meetings during Fiscal 1995.                                                    

    The Company's Compensation Committee determines the compensation
policies applicable to the senior officers of the Company and establishes the   
total compensation for each senior officer in light of these policies.  The     
Compensation Committee also addresses all questions of interpretation,          
administration and application of the Company's employee benefit plans,         
including the 1988 Equity Incentive Compensation Plan, the Stock Option Plan,   
the Performance Unit Plan and the 1988 Capital Accumulation Plan (the "Capital  
Accumulation Plan").  The Compensation Committee held three meetings and acted  
by unanimous written consent on five occasions during Fiscal 1995.  The current 
members of the Compensation Committee are Messrs. Rizzo, Burke, Gilbert and     
Murray.  See "Compensation Committee Report on Executive Officer Compensation"; 
"Compensation Committee Interlocks and Insider Participation".                  

     During Fiscal 1995, each of the current Directors, except Messrs.
Biggs and Rizzo, attended at least seventy-five percent of the meetings of the  
Board of Directors and the Committees on which he served.                       

      Messrs. Fisher, Mack, Biggs, Karches and Walker do not receive any
additional compensation for acting as directors of the Company.  Directors who  
are not employees of the Company or a subsidiary (the "Outside Directors")      
receive a director's fee of $40,000 for each full year served (prorated for     
those directors serving part of a fiscal year); because of the shortened fiscal 
year, the Outside Directors received a fee of $30,000 for Fiscal 1995.  Each    
Outside Director who served on the Board of Directors in Fiscal 1995 has been   
granted 200 shares of Common Stock pursuant to the Company's 1993 Stock Plan for
Outside Directors for services to the Company during Fiscal 1995 (prorated for  
those directors serving part of Fiscal 1995) and in subsequent fiscal years each
Outside Director will be granted 200 shares of Common Stock for each full fiscal
year served (prorated for any director serving part of the year).  Directors    
receive no additional compensation for participation on committees of the Board.
Richard Cheney (who served as director of the Company until December 31, 1995)  
was paid $75,000 pursuant to a consulting arrangement with the Company for his  
consulting services during Fiscal 1995.                                         

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STOCK OWNERSHIP OF MANAGEMENT 

          The following table shows certain information concerning the number of
shares of the Company's capital stock beneficially owned, directly or           
indirectly, as of February 7, 1996, by each director, nominee and named         
executive officer and by all current directors and executive officers as a      
group.                                                                          

                                                        [Enlarge/Download Table]

                                                                    COMMON STOCK      

                                                              Amount and              
                                                               Nature of              
                                                              Beneficial       Percent
Beneficial Owners                                              Ownership      of Class
---------------------------------                             ----------     ---------
                                                                                      
Richard B. Fisher (1) (2) (3) (4)............................  4,212,742     [      ] 
John J. Mack (1) (2) (3) (4).................................  2,568,548     [      ] 
Barton M. Biggs (1) (2) (3) (4)..............................  2,629,130     [      ] 
Peter F. Karches (1) (2) (3) (4).............................  1,261,436     [      ] 
Philip N. Duff  (1) (2) (3)  (4).............................    178,496     [      ] 
Sir David A. Walker (3)......................................     16,156     [      ] 
Robert P. Bauman.............................................          -     [      ] 
Daniel B. Burke..............................................      2,800     [      ] 
S. Parker Gilbert (2) (4)....................................  2,589,444     [      ] 
Allen E. Murray..............................................      6,500     [      ] 
Paul J. Rizzo................................................      3,326     [      ] 
All current directors and executive officers as a group                               
(12 persons) (1) (2) (3) (4)................................. 13,609,938     [      ] 

(1) Except as otherwise disclosed below, the voting and disposition of the      
shares of Common Stock are subject to the terms of the Voting Agreements.  See  
"Introduction" and "Stockholders' Agreement".                                   

(2) Includes 479,914; 466,226; 314,642; 330,066; 80,890; 245,008 and 1,977,240  
shares for Messrs. Fisher, Mack, Biggs, Karches, Duff, Gilbert and all current  
directors and executive officers as a group, respectively, that may be acquired 
upon the exercise of options that are exercisable within 60 days after February 
7, 1996.  Such options were granted pursuant to the 1988 Equity Incentive       
Compensation Plan or the Stock Option Plan.                                     

(3) Includes 419,134; 414,366; 271,184; 509,340; 94,272; 16,078 and 1,797,434   
shares of Common Stock underlying stock unit awards granted Messrs. Fisher,     
Mack, Biggs, Karches, Duff, Walker and all current directors and executive      
officers as a group, respectively, as part of  compensation pursuant to the 1988
Equity Incentive Compensation Plan.  With respect to all such stock unit awards,
an equivalent number of shares of Common Stock held in trust will be voted in   
accordance with the results of the Preliminary Vote.                            

(4) Includes 2,484; 2,484; 2,446; 2,484; 1,396; 688; and 14,174 shares of Common
Stock into which shares of ESOP Stock are convertible which have been allocated 
to Messrs. Fisher, Mack, Biggs, Karches, Duff, Gilbert and all current directors
and executive officers as a group, respectively.  Each share of ESOP Stock is   
entitled to 2.7 votes with respect to each matter to be voted on at the 1996    
Annual Meeting.  ESOP participants have the ability to direct the voting with   
respect to ESOP Stock allocated to them.  Such shares are not subject to the    
Voting Agreements.                                                              

------                                                                          
*  Indicates beneficial ownership of less than 1% of the outstanding Common     
Stock.                                                                          

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PRINCIPAL STOCKHOLDERS

     The following table sets forth certain information regarding each
person or group of persons known to the Company as of February 7, 1996 to be the
beneficial owner of more than 5% of any class of the Company's voting           
securities.                                                                     

                                                                [Download Table]

                                        Shares of Common Stock Beneficially Owned
Name of Persons or Identity of Group                Number               Percent 
---------------------------------------------------------------------------------
                                                                                 
Signatories to Voting Agreements (1)     [           ]  (2) (3) (4) (5)  [    ]% 

------                                                                          
(1)  The voting of the shares of Common Stock received in connection with the   
Company's 1986 recapitalization is subject to the voting restrictions contained 
in the Stockholders' Agreement.  The voting of Common Stock issued to employees 
in connection with the 1988 Equity Incentive Compensation Plan, the Stock Option
Plan and the Performance Unit Plan is generally subject to similar voting       
restrictions.  The information provided relates to the voting power of such     
securities.  The Signatories to the Voting Agreements do not share dispositive  
power. See "Introduction" and "Stockholders' Agreement".                        

(2)  Includes shares of Common Stock that may be acquired upon the exercise of  
options that are exercisable within 60 days after February 7, 1996.  Such       
options were granted pursuant to the 1988 Equity Incentive Compensation Plan or 
the Stock Option Plan.  Of these shares, [    ] will not be subject to the      
Voting Agreements.                                                              

(3)  Includes [    ] shares underlying stock unit awards granted pursuant to the
1988 Equity Incentive Compensation Plan as part of compensation.  An equivalent 
number of shares of Common Stock held in trust will be voted in accordance with 
the results of the Preliminary Vote.                                            

(4)  Includes [    ] shares of Common Stock that are not subject to the Voting  
Agreements.                                                                     

(5)  Does not include [    ] shares of ESOP Stock allocated to the Signatories, 
each share of which is entitled to 2.7 votes with respect to each matter to be  
voted on at the 1996 Annual Meeting. Such shares are not subject to the Voting  
Agreements.                                                                     

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STOCKHOLDERS' AGREEMENT 

          Prior to a recapitalization effected in contemplation of the Company's
initial public offering on March 21, 1986, the Company and the Recapitalization 
Signatories entered into the Stockholders' Agreement, which relates to the      
disposition and voting of the shares of Common Stock acquired by such           
Recapitalization Signatories pursuant to the recapitalization (the              
"Recapitalization Common Stock").  The Stockholders' Agreement does not prohibit
or restrict the acquisition, ownership, disposition or voting by                
Recapitalization Signatories of any shares of Common Stock not acquired in      
connection with the Company's recapitalization.  Shares acquired pursuant to the
Company's employee benefit plans are generally subject to similar restrictions  
under the Plan Agreements although not all of such shares are subject to the age
restrictions described below.                                                   

   Except as otherwise determined by the Board of Directors of the
Company and subject to applicable legal requirements, Recapitalization          
Signatories employed by the Company may dispose of their Recapitalization Common
Stock only as provided in the Stockholders' Agreement.  The Stockholders'       
Agreement permits each such Recapitalization Signatory to dispose of shares of  
such Recapitalization Signatory's Recapitalization Common Stock and/or shares of
Common Stock acquired pursuant to the Company's Performance Unit Plan and/or    
Stock Option Plan ("Plan Stock" and, together with the Recapitalization Common  
Stock, "Total Restricted Stock") in the following amounts, representing the     
percentage of Total Restricted Stock owned by such Recapitalization Signatory   
that is permitted to be sold:                                                   

                                                                [Download Table]

                          % of Total Restricted Stock
                              Permitted to be Sold   
Age as of Date of Sale                               
                                                     
35 through 38                          10%           
39 through 42                     Additional 10%     
43 through 46                     Additional 10%     
47 through 49                     Additional 10%     
50 and above                      Additional 10%     

  Such restrictions are in effect only while the Signatory is an
employee of the Company.                                                        

   Pursuant to the revised terms of the Stockholders' Agreement, a
Recapitalization Signatory employed by the Company may pledge his shares of     
Recapitalization Common Stock that are not otherwise permitted to be transferred
under the Stockholders' Agreement to a bank to secure a bona fide full recourse 
loan for value.  Any shares of Recapitalization Common Stock so pledged would be
free from the restrictions on disposition described above so long as such shares
of Recapitalization Common Stock are so pledged, but would thereafter be once   
again subject to the restrictions on disposition described above, unless the    
bank has sold such shares of Recapitalization Common Stock pursuant to a bona   
fide foreclosure proceeding.  Any such shares of Recapitalization Common Stock  
sold pursuant to any such bona fide foreclosure proceeding would be free from   
the provisions of the Stockholders' Agreement.                                  

         See "Introduction" for information concerning the voting restrictions
imposed on shares of Recapitalization Common Stock pursuant to the Stockholders'
Agreement.                                                                      

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INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

   Other than as described in this Proxy Statement, no director or
executive officer of the Company was indebted to the Company during Fiscal 1995 
for any amount in excess of $60,000, and there were no related party            
transactions among the Company and its executive officers, directors and the    
holders of more than 5% of the outstanding shares of Common Stock.              

   Mr. Mack, through a corporation, owns a car that is utilized in
Company business.  Reimbursements are made at rates that the Company believes   
could have been obtained from non-affiliated third parties for comparable       
services.  Aggregate payments made by the Company to Mr. Mack's corporation     
during the period from February 1, 1995 to January 31, 1996 were $64,825.       

          The Company extends, and in the ordinary course of its business during
Fiscal 1995 the Company extended, credit to certain directors, officers and     
employees of the Company and Morgan Stanley, as well as to members of their     
immediate families, in connection with their purchase of securities.  Such      
extensions of credit have been made on substantially the same terms, including  
interest rates and collateral, as those prevailing at the time for comparable   
transactions with non-affiliated third parties, and did not involve more than   
normal risk of collectibility or present other unfavorable features.  To the    
extent that officers and employees of the Company and Morgan Stanley (and       
members of their immediate families) wish to purchase securities in brokerage   
transactions, they are ordinarily required to do so through Morgan Stanley,     
which offers them a discount of up to 40% on its standard commission rate.      
Morgan Stanley also, from time to time and in the ordinary course of its        
business, enters into transactions involving the purchase or sale of securities 
from or to certain directors, officers and employees of the Company and Morgan  
Stanley and members of their immediate families, as principal.  Such purchases  
and sales of securities on a principal basis are effected at a discount from the
dealer mark-up or mark-down, as the case may be, charged to non-affiliated third
parties.  Pursuant to its stock repurchase authorization, the Company also may  
repurchase or acquire shares of Common Stock in the open market and in privately
negotiated transactions, including transactions with directors, executive       
officers and employees.  Such transactions are in the ordinary course of        
business and at prevailing market prices.                                       

         The Company, from time to time, also makes advances to certain of its
directors, officers and employees against commissions and other compensation    
that would otherwise be payable to them in the ordinary course of business and  
loans in connection with housing and relocation expenses.  No interest is       
charged by the Company on such advances and loans.                              

  Under the federal securities laws, the Company's directors and
executive officers and any person owning more than ten percent of the Company's 
Common Stock are required to report their initial ownership of Common Stock and 
any subsequent change in that ownership to the Securities and Exchange          
Commission (the "SEC") and the NYSE and to provide copies of any such forms they
file to the Company.  Based solely upon its review of copies of forms and       
written representations from certain reporting persons, the Company believes    
that for Fiscal 1995, each of its officers, directors and greater than ten      
percent shareholders has complied with all such applicable filing requirements. 

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COMPENSATION OF EXECUTIVE OFFICERS

        Summary of Cash and Certain Other Compensation.  The following table
summarizes the compensation paid by the Company and its subsidiaries to the     
Company's five most highly compensated executive officers who were serving as   
executive officers at November 30, 1995 (the "named executive officers") for    
services rendered in all capacities to the Company and its subsidiaries for     
Fiscal 1993, Fiscal 1994 and Fiscal 1995.                                       

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]


                                  Annual Compensation                        Long-Term Compensation              

                                                                                     Securities                  
                                                                 Restricted Stock    Underlying       All Other  
Name and                               Salary         Bonus          Award(s)         Options        Compensation
Principal Position         Year  (2)  ($)  (3)    ($)  (3)  (4)      ($) (5)          (#) (6)         ($)   (7)  
-------------------------  --------   --------    -------------   -------------      ----------      ------------
                                                                                                                 
Richard B. Fisher:            1995    $477,329    $ 4,187,004        $2,072,349           ------          $15,150
Chairman of the Board         1994     575,000      2,062,500            ------          198,276           15,000
of Directors and              1993     475,000      4,437,500         5,628,494           ------           23,584
Managing Director (1)                                                                                            

John J. Mack:                 1995    $456,575    $ 4,140,308        $2,046,186           ------          $15,150
President and                 1994     550,000      2,025,000            ------          193,192           15,000
Managing Director             1993     450,000      4,325,000         5,463,488           ------           23,584

Barton M. Biggs:              1995    $373,562    $ 2,801,713        $1,294,128           ------          $13,650
Managing Director             1994     450,000      1,700,000            ------          149,130           15,000
                              1993     450,000      2,950,000         3,446,770           ------           23,584

Peter F. Karches:             1995    $373,562    $ 3,891,267        $1,906,223           ------          $15,150
Managing Director             1994     300,000      2,025,000            ------          193,192           15,000

Philip N. Duff:               1995    $136,973    $ 2,512,202        $1,131,507           ------          $15,150
Chief Financial Officer       1994     165,000      1,467,500            ------          117,610           15,000
and Managing Director                                                                                            

-----                                                                           

For each of the above named executive officers, compensation
information is provided for years during which they served as executive officers
of the Company.                                                                 

(1)  The Company does not have an executive officer designated as "Chief        
Executive Officer"; however, for purposes of complying with rules of the SEC,   
Mr. Fisher is deemed the "CEO" in this table.                                   

(2)  In February 1995, the Board of Directors approved a change in the fiscal   
year-end of the Company from January 31 to November 30.  Figures for Fiscal 1995
relate to the ten-month period commencing on February 1, 1995 and ending on     
November 30, 1995.                                                              

(3)  Includes amounts contributed by each of the named executive officers to    
various deferred compensation plans of the Company.                             

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(4)  Includes for the years indicated amounts representing annual cash bonus.   
The amounts reported also include the value of units awarded pursuant to the    
Capital Accumulation Plan. The Capital Accumulation Plan provides participation 
in certain investments that the Company has made directly or indirectly in other
entities.                                                                       

(5)  The amounts reported represent the market value of the Common Stock        
underlying vested and unvested restricted stock units at the date of grant,     
without taking into account any diminution in value attributable to the         
restrictions on such stock units.  Awards of restricted stock units were made on
December 11, 1995 for performance in Fiscal 1995; the closing price of the      
Common Stock on that date as reported on the Consolidated Transaction Reporting 
System was $85.50 per share (on a pre-split basis).  Awards of stock units were 
made on February 25, 1994 for performance in Fiscal 1993; the closing price of  
the Common Stock on that date as reported on the Consolidated  Transaction      
Reporting System was $66.75 per share (on a pre-split basis).                   

      The vesting schedule for restricted stock units awarded as part of
Fiscal 1993 and Fiscal 1995 compensation to all Managing Directors, including   
the named executive officers, is as follows: 60% of each award reported in the  
table above vested upon grant; the remaining 40% of the award will vest in ten  
equal annual installments. Dividend equivalents are paid on restricted stock    
units (including unvested units) at the same rate as dividends paid to          
stockholders of Common Stock.                                                   

        Vested and unvested restricted stock units awarded as part of Fiscal
1993 and Fiscal 1995 compensation generally do not convert into shares of Common
Stock and are not transferable for ten years after award. Restricted stock      
units, whether vested or unvested, may not be sold, assigned, exchanged,        
pledged, hypothecated or otherwise disposed of or encumbered prior to the lapse 
of restrictions on transferability. Restricted stock units, whether vested or   
unvested, are subject to forfeiture in certain circumstances specified by the   
Compensation Committee.                                                         

   The aggregate number of restricted stock units (including units
awarded prior to the years reported) and the market value ascribed thereto as of
November 30, 1995 for each of the named executive officers are as follows: Mr.  
Fisher- 419,134 ($18,140,119); Mr. Mack- 414,366 ($17,933,760); Mr. Biggs-      
271,184 ($11,736,843); Mr. Karches - 509,340 ($22,044,235) and Mr. Duff -       
94,272 ($4,080,092).  Such number of restricted stock units and market values   
ascribed to them give effect to restricted stock unit awards granted subsequent 
to the end of Fiscal 1995 as part of compensation for that period.  For a       
discussion of the difference between the value ascribed to restricted stock     
units pursuant to SEC rules and the value ascribed to restricted stock units by 
the Compensation Committee, see "Compensation Committee Report on Executive     
Officer Compensation".                                                          

(6)  Awards of stock options were made for services performed in Fiscal 1994.   
The vesting schedule for stock options awarded as part of Fiscal 1994           
compensation to all Managing Directors, including the named executive officers, 
is as follows:  60% of each award reported in the table above vested and were   
exercisable upon grant, the remaining 40% of the award will vest and be         
exercisable in nine annual installments.  The expiration date for the stock     
options is January 31, 2005. The terms of stock option awards may vary slightly 
in certain non-U.S. jurisdictions.                                              

      Stock options awarded as part of Fiscal 1994 compensation, whether
vested or unvested, may not be sold, assigned, exchanged, pledged, hypothecated 
or otherwise disposed of or encumbered.  Stock options, whether vested or       
unvested, are subject to forfeiture in certain circumstances specified by the   
Compensation Committee.  Any shares acquired upon the exercise of options       
generally may not be transferred or sold prior to January 31, 2005, except to   
the extent required to cover the exercise price and tax liability arising upon  
exercise.                                                                       

(7)  The amounts reported consist of contributions by the Company to the        
Company's Deferred Profit Sharing Plan ("DPSP") and the Company's Employee Stock
Ownership Plan ("ESOP"). For amounts reported for Fiscal 1995, the Company      
contributed 21% to the DPSP and 79% to the ESOP; for Mr. Biggs, the Company     
contributed 23% to the DPSP and 77% to the ESOP.  For amounts reported for      
Fiscal 1994 and Fiscal 1993, the Company contributed 50% to the DPSP and 50% to 
the ESOP.  Contributions to the DPSP and the ESOP are made on December 31 and   
relate to the preceding twelve months.                                          

       Compensation to Managing Directors and Principals of Morgan Stanley
who are not executive officers of the Company may exceed the compensation paid  
to the named executive officers.                                                

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    The following table provides information concerning stock option
exercises in Fiscal 1995 and unexercised stock options held by each named       
executive officer as of November 30, 1995.                                      

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR 
AND FISCAL YEAR-END OPTION VALUES 

                                                        [Enlarge/Download Table]


                                                             Number of Securities                             
                                                            Underlying Unexercised       Value of Unexercised 
                                                                  Options at           In-the-Money Options at
                                                                FY-End (#) (2)              FY-End ($) (3)    
                                                        ------------------------------------------------------
                         Shares                                                                               
                      Acquired on           Value                                                             
Name                  Exercise (#)       Realized (1)   Exercisable  Unexercisable  Exercisable  Unexercisable
--------------------------------------------------------------------------------------------------------------
                                                                                                              
Richard B. Fisher          154,512         $5,178,408       471,972         79,312  $11,418,224       $993,383
John J. Mack               102,996          2,926,932       556,702         77,278   14,506,968        967,907
Barton M. Biggs             60,318          1,246,471       308,666         59,652    7,571,926        747,141
Peter F. Karches            77,976          2,051,800       322,322         77,278    7,869,734        967,907
Philip N. Duff                   0                  0        76,182         87,044    1,045,524        763,226

-----                                                                           
(1)  The valuation represents the difference between the average high and low   
sale price of a share of Common Stock, as reported on the Consolidated          
Transaction Reporting System, on the date of exercise and the exercise price of 
the options exercised.                                                          

(2)  The sale or disposition of shares of Common Stock underlying certain of the
options is restricted.                                                          

(3)  The value of unexercised, in-the-money options is based upon the difference
between the exercise prices of all such options and $84.55, the fair market     
value (on a pre-split basis), as determined by the Compensation Committee, of a 
share of Common Stock at the end of Fiscal 1995.  The actual amount, if any,    
realized upon exercise of stock options will depend upon the market price of the
Common Stock relative to the exercise price per share of Common Stock of the    
stock option at the time the stock option is exercised.  There is no assurance  
that the values of unexercised in-the-money stock options reflected in this     
table will be realized.                                                         

         Pension Plans.  Morgan Stanley's Pension Plan (the "Pension Plan") is
a defined benefit pension plan which covers all employees of Morgan Stanley who 
have completed at least one year of service with Morgan Stanley or one of its   
affiliates.  There is no maximum age limit to the eligibility requirements.  The
Pension Plan provides for normal retirement benefits beginning at age 65 but    
permits earlier retirement at or after attaining age 55 with ten years of       
Vesting Service as defined in the Pension Plan (five years if hired prior to    
January 1, 1988), subject to a reduction in benefits if payments commence       
earlier than age 60.  Salary is defined to include the highest five years of    
base compensation during the last ten years prior to retirement, excluding      
bonuses, overtime and other supplemental compensation.  All participants become 
vested after completing five years of service.                                  

         In addition to the Pension Plan, Morgan Stanley has adopted an Excess
Benefit Plan for participants in the Pension Plan whose benefits are reduced    
pursuant to limitations imposed by the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code") on pensions paid under Federal income tax         
qualified plans.  Employees covered by the Excess Benefit Plan receive a benefit
equal to the amount of benefit disallowed under the Pension Plan due to such    
limitations, including for 1995 a $150,000 compensation limit (subject to being 
increased in $10,000 increments based on annual rates of inflation) on the      
amount of compensation that can be taken into account for qualified pension plan
purposes.                                                                       

          Morgan Stanley also maintains a Supplemental Executive Retirement Plan
covering current and former Managing Directors and Principals of Morgan Stanley 
who are not less than 55 years of age and have completed at                     

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least five years of service and whose age plus years of service equals or       
exceeds 65. Benefits without any reduction are paid if payment occurs at or     
after age 60. Benefits payable under the Supplemental Executive Retirement Plan 
are also reduced by benefits payable under the Pension Plan and the Excess      
Benefit Plan and pension plans of affiliates of Morgan Stanley and of former    
employers. For participants who commence receiving benefits in 1989 and beyond, 
the annual benefit payable under the Supplemental Executive Retirement Plan (as 
reduced in the preceding sentence) is further reduced to the extent that total  
retirement benefits do not exceed $140,000. Participants are fully vested under 
the Supplemental Executive Retirement Plan at all times. Messrs. Fisher and     
Biggs currently meet the eligibility requirements of, and Mr. Gilbert is        
currently receiving payments under, the Supplemental Executive Retirement Plan. 

       Assuming that the participants in the chart below were eligible for
the Supplemental Executive Retirement Plan, the following table illustrates the 
total estimated annual normal retirement pension benefits, including Excess     
Benefit Plan and Supplemental Executive Retirement Plan amounts, payable upon   
normal retirement at age 65 to participants for the specified remuneration and  
years of credited service classifications set forth below.  Benefit amounts are 
computed on a straight life annuity basis.  There is no off-set for the payment 
of social security benefits although the calculation of benefits takes social   
security covered compensation into consideration.                               

PENSION PLAN TABLE

Annual pension benefits based on years of credited service at age 65  

                                                                [Download Table]

  Final                                                                       
Average                                                                       
 Salary    5 Yrs.   10 Yrs.   15 Yrs.   20 Yrs.   25 Yrs.   30 Yrs.   35 Yrs. 
-------   --------  --------  --------  --------  --------  --------  --------
                                                                              
$100,000  $ 20,000  $ 30,000  $ 40,000  $ 50,000  $ 50,000  $ 55,000  $ 60,000
150,000     30,000    45,000    60,000    75,000    75,000    82,500    90,000
200,000     40,000    60,000    80,000   100,000   100,000   110,000   120,000
250,000     50,000    75,000   100,000   125,000   125,000   137,500   140,000
300,000     60,000    90,000   120,000   140,000   140,000   140,000   154,325
350,000     70,000   105,000   140,000   140,000   140,000   154,778   180,575
400,000     80,000   120,000   140,000   140,000   147,732   177,278   206,825
450,000     90,000   135,000   140,000   140,000   166,482   199,778   233,075
500,000    100,000   140,000   140,000   148,186   185,232   222,278   259,325
550,000    110,000   140,000   140,000   163,186   203,982   244,778   285,575
600,000    120,000   140,000   140,000   178,186   222,732   267,278   311,825
650,000    130,000   140,000   144,889   193,186   241,482   289,778   338,075
700,000    140,000   140,000   156,139   208,186   260,232   312,278   364,325

         The compensation of the individuals named in the Summary Compensation
Table for purposes of determining benefits under the Pension Plan, the Excess   
Benefit Plan and the Supplemental Executive Retirement Plan during calendar 1995
is the amount reported as base salary in the Summary Compensation Table.  As of 
January 31, 1996, the credited years of service (rounded to the nearest whole   
year) for each of the individuals named in the Summary Compensation Table are as
follows: Mr. Fisher-34; Mr. Mack-22; Mr. Biggs-21; Mr. Karches-20; and Mr. Duff-
13.                                                                             

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COMPENSATION COMMITTEE REPORT ON EXECUTIVE OFFICER COMPENSATION 

    The Company's Compensation Committee determines the compensation
policies  applicable to the senior officers of the Company, including Messrs.   
Fisher,  Mack, Biggs, Karches and Duff, who were the five highest paid          
executive officers for Fiscal 1995 (collectively, the "Senior Executives").  The
Committee establishes the total compensation for each of the Senior Executives  
in light of these policies and in accordance with certain requirements imposed  
by Section 162(m) of the Internal Revenue Code ("Section 162(m)"), as explained 
more fully below.  In addition, the Compensation Committee reviews  proposed    
annual compensation packages of other executive officers and certain Managing   
Directors, and administers and makes awards under the Company's employee benefit
plans, including the 1988 Equity Incentive Compensation Plan and the Capital    
Accumulation Plan.                                                              

      The Compensation Committee is composed of Paul J. Rizzo, Daniel B.
Burke, S. Parker Gilbert  and Allen E. Murray, none of whom is, or during the   
previous year has been, an officer or employee of the Company.  The Compensation
Committee meets from time to time and also acts by unanimous written consent.   
See "Board of Directors Meetings, Committees and Fees".                         

       The Company does not have an executive officer designated as "Chief
Executive  Officer".  For purposes of this Report,  Mr. Fisher is referred to as
the "Chief Executive Officer".                                                  

        COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS GENERALLY FOR
FISCAL 1995. The Company's executive officer compensation program is designed to
be closely linked to corporate performance and returns to stockholders.  To this
end, the Company has developed an overall compensation strategy and specific    
compensation plans that tie a significant portion of executive officer          
compensation to the Company's success in meeting annual and long-term           
performance goals.  The overall objectives of this strategy are to:             

    .    support a pay-for-performance policy that differentiates compensation
 based on corporate, business unit and individual performance;

.    motivate executive officers to implement and achieve strategic   
business initiatives and reward them for their achievement; 

.    provide compensation opportunities that are comparable to those  
          offered by other leading companies in the financial services industry,
          thus allowing the Company to compete for and retain talented executive
     officers who are critical to the Company's long-term success; and

     .    align the interests of executive officers with the long-term interests
         of  stockholders by paying a significant portion of executive officer
    compensation with awards under the Company's equity compensation
plans.                                                      

     The compensation policies and strategic objectives that have been developed
for the Company's executive officers also are applied in determining            
compensation and compensation plans for the Company's other Managing Directors  
as well as for other officers and employees.                                    

     The total amount of compensation that the Compensation Committee authorizes
to be distributed to executive officers, Managing Directors and other employees 
for Fiscal 1995 is primarily a function of the financial performance of the     
Company as a whole.  In determining the amount of compensation to be paid to    
executive officers, the Compensation Committee (1) sets the parameters to be    
used in allocating Total Reward (as defined below) between cash and non-cash    
components for all executive officers, (2) determines the appropriate Total     
Reward for each executive officer and (3) allocates the Total Reward for each   
executive officer between cash and non-cash components based on the previously  
determined parameters.  In determining the size of aggregate annual Total Reward
payable to individuals other than the Senior Executives (whose Total Reward is  
linked to a formula adopted in accordance with Section 162(m) of the Internal   
Revenue Code, as more fully described below), no single performance factor or   
formula is used since the Committee believes that rigid application of          
quantitative  performance measures would omit important qualitative             
considerations and could  discourage important long-term strategic decisions.   
Accordingly, the intent is to have the                                          

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executive officer compensation for each year vary in light of Company, business 
unit and individual performance-related factors. The Compensation Committee     
takes into consideration such factors as absolute levels of, and year-over-year 
changes in, net revenues, net income, profit before taxes, earnings available to
common stockholders, earnings per share, book value per share and return on     
stockholders' equity. The Compensation Committee also examines the ratios of    
compensation to net revenue and compensation to pre-compensation profit before  
taxes. Although the Compensation Committee considers the aforementioned factors,
the Compensation Committee does not assign specific weighting to the factors.   
Instead, the determination of Total Reward is a more subjective process which   
focuses on the financial performance factors of the Company and business units  
as well as the performance of individuals.                                      

   The Compensation Committee also compares the financial performance of the
Company with the financial performance of the Financial Services Companies (as  
defined below). For Fiscal 1995, the Compensation Committee recognized that the 
Company's return on equity and earnings per share were above the estimated mean 
return on equity and earnings per share for the Financial Services Companies    
taken as a whole. While the Compensation Committee considers the financial      
performance and chief executive officer compensation of competitors in its      
determination of Total Reward, the Compensation Committee does not attempt to   
set Total Reward in a range established by a comparison of the financial        
performance and chief executive officer compensation of the Financial Services  
Companies. For purposes of this Report, the term "Financial Services Companies" 
refers collectively to the following companies in the financial services        
industry: Bankers Trust New York Corporation, The Bear Stearns Companies Inc.,  
J.P. Morgan & Co. Incorporated, Merrill Lynch & Co., Inc., Paine Webber Group   
Inc., Salomon Inc. and The Travelers Inc. The Financial Services Companies are  
the same companies that constitute the MSCI Domestic Financial Services/Banking 
Group Index. See "Performance Graph".                                           

COMPONENTS OF SENIOR EXECUTIVE AND EXECUTIVE OFFICER COMPENSATION.  In
December 1995, executive officers were awarded Total Reward following a review  
of the Company's Fiscal 1995 financial performance.  The Compensation           
Committee's policies applicable to each element of Fiscal 1995 compensation for 
executive officers are discussed below.                                         

   The components of the executive officer compensation program are designed
to meet the Company's compensation policies.  At present, the executive officer 
compensation program is composed of two elements that make up the officer's     
Total Reward: (A) base salary (plus fringe benefits typically offered to        
executives of major corporations) and (B) incentive compensation which consists 
of cash incentive compensation (bonus) and non-cash incentive compensation      
(primarily restricted stock units).  As Total Reward  increases, an increasing  
percentage of the total is in the form of the Company's restricted  stock units.

    A.  Base Salaries.  Executive officer base salaries, which are established
at the beginning of the year, are a relatively small portion of overall         
compensation.  In determining base salaries individual experience,              
responsibilities and tenure are taken into account.  Base salaries are in the   
mid-range of base salaries paid by the Financial Services Companies.            

B.  Incentive Compensation (Cash and Non-Cash).  Executive officer    
incentive  compensation is based primarily on the Company's financial           
performance for the year but also includes an assessment of individual and      
business unit performance.  The Company has consistently maintained the         
philosophy that compensation of its executive officers and other key employees  
should be directly and materially linked to operating performance.  To achieve  
this linkage, executive officer compensation is heavily weighted toward         
incentive compensation paid on the basis of performance.  Historically, in years
in which the Company's financial performance has been particularly favorable,   
its executive officers' incentive compensation has increased, and in less       
favorable years such compensation has been reduced. For example, compensation   
for Fiscal 1995 is greater than Fiscal 1994, reflecting the more favorable      
financial performance of the Company, while Fiscal 1994 incentive compensation  
was substantially less than Fiscal 1993 compensation, reflecting the less       
favorable financial performance of the Company.                                 

          (i)  SECTION 162(M) AND COMPENSATION POLICIES APPLICABLE TO THE SENIOR
EXECUTIVES.  The Compensation Committee establishes the Total Reward for the    
Senior Executives through the application of performance criteria.  The         
performance criteria were adopted in accordance with Section 162(m), which      
limits the deductibility of compensation in excess of $1,000,000 paid to the    
chief executive officer and the four other most highly compensated officers, as 
determined pursuant to the rules of the SEC, unless the payments are made under 
qualifying                                                                      

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performance-based plans and upon the attainment of certain performance goals. In
April 1995, the Compensation Committee established and approved performance     
criteria applicable to the Senior Executives that determine the amount of Total 
Reward payable to each of the Senior Executives. The performance criteria       
include a formula which links compensation of the Senior Executives to the      
Company's return on equity versus the Company's cost of equity capital and      
annual growth in book value per share. The Compensation Committee has certified 
in accordance with Section 162(m) that the Company's financial results for      
Fiscal 1995 have satisfied the performance criteria for Fiscal 1995. After an   
analysis of the considerations set forth above, for Fiscal 1995 the Compensation
Committee awarded Total Reward to the Senior Executives that was substantially  
below the amounts of Total Reward yielded by the application of the compensation
formula contained in the performance criteria.                                  

    Compensation payable to the Senior Executives has been paid partly in cash
and partly in the form of restricted stock units.  The Compensation Committee   
awarded an average of approximately 20%* of Senior Executives' Total Reward in  
restricted stock units for Fiscal 1995.                                         

       (ii) RESTRICTED STOCK UNITS.  As part of incentive compensation for
Fiscal 1995, all Managing Directors, including all Senior Executives, received  
awards of restricted stock units under the 1988 Equity Incentive Compensation   
Plan. The value of restricted stock units awarded to each Managing Director was 
a fixed percentage of Total Reward applied on the same basis to all plan        
participants.  The value of stock-based compensation earned cannot be realized  
immediately and will be dependent on the market value of the Company's stock    
well into the future.  Thus, the ultimate value of the restricted stock unit    
awards will depend on the continued success of the Company and will provide a   
continuing incentive to an executive officer long after the award has been      
granted.                                                                        

The value ascribed to such restricted stock units by the Compensation 
Committee was based on a 40% discount from the fair market value of the Common  
Stock in order to compensate for significant restrictions on disposition (by    
sale or otherwise) of these units.  Accordingly, the value ascribed to these    
units by the Compensation Committee differs from the amounts reported in the    
Summary Compensation Table under the column headed "Restricted Stock Awards"    
because those amounts are based on the price of Common Stock on  the date of    
grant.  See "Compensation of Executive Officers-Summary of Cash and  Certain    
Other Compensation".                                                            

     (iii) OTHER NON-CASH INCENTIVE COMPENSATION.  As part of non-cash
incentive compensation for each of Fiscal 1993, Fiscal 1994 and Fiscal 1995,    
certain Managing Directors, including all Senior Executives, also received      
awards of units under  the Capital Accumulation Plan.  The value of units       
awarded to each Managing Director was a fixed percentage of incentive           
compensation applied on the same basis to all plan participants.  The Capital   
Accumulation Plan provides participation in certain investments that the Company
has made directly or indirectly in other entities.  Awards under the Capital    
Accumulation Plan are designed to foster cross-divisional cooperation, reduce   
the Company's holdings of illiquid investments, and maximize the long-term value
of these investments.                                                           

 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The amount of Total Reward
payable to the Chief Executive Officer was established consistent with the      
provisions of the performance criteria set in accordance with Section 162(m), as
discussed above.  In making the determination regarding the amount of Total     
Reward to be awarded to the Chief Executive Officer for Fiscal 1995, the        
Compensation Committee took into account the individual and Company performance 
measures and policies described above.  Specifically, the Committee took into   
account the Chief Executive Officer's role in promoting the long-term strategic 
growth of the Company, including the Company's focus on cross-                  

________                                                                        
* Based on the Compensation Committee's valuation of Total Reward, stock-based  
compensation and Capital Accumulation Plan units.                               

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divisional cooperation and continuing expansion internationally.  It noted that 
the Company's Fiscal 1995 financial  performance was more favorable than        
performance in Fiscal 1994 and that the Company's return on stockholders' equity
increased to 16.2% in Fiscal 1995 from 8.8% in Fiscal 1994.  In light of the    
foregoing, the Committee deemed it appropriate to award the Chief Executive     
Officer incentive compensation in the form of cash equal to $4,046,000,         
restricted stock units with a grant value of $1,229,640, which translated into  
48,476 restricted stock units, and an award of $141,000 under the Capital       
Accumulation Plan.  The amount of Total Reward paid to the Chief Executive      
Officer in connection with Fiscal 1995 is approximately 73%** (on an annualized 
basis) above that awarded to him in Fiscal 1994.                                

The base salary for Mr. Fisher will remain at the same annual rate for
Fiscal 1996.                                                                    

*   *   *   *   * 

While the Committee intends to pursue a strategy of maximizing the    
deductibility of compensation paid to executive officers for the 1996 and future
fiscal years, it also intends to maintain the flexibility to take actions that  
it considers to be in the best interests of the Company and its stockholders,   
and which may be based on considerations in addition to tax deductibility.  The 
Committee will review the performance program in effect for the 1996 fiscal year
and will determine at a subsequent date whether a similar program, or some other
program, will be appropriate for future fiscal years.                           

                          The Compensation Committee

                       Paul J. Rizzo, Chairman
               Daniel B. Burke
                 S. Parker Gilbert
               Allen E. Murray

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 

The Company's Compensation Committee is composed of Messrs. Rizzo, Burke,   
Gilbert and Murray, none of whom is, or during the previous year has been, an   
officer or employee of the Company.  Mr. Gilbert had been a senior executive    
officer of the Company until his retirement in December 1990.  See "Election of 
Directors".                                                                     

During Fiscal 1995, no executive officer of the Company: (i) served as a    
member of the compensation committee (or other board committee performing       
similar functions or, in the absence of any such committee, the entire board of 
directors) of another entity, one of whose executive officers served on the     
Company's Compensation Committee; (ii) served as a director of another entity,  
one of whose executive officers served on the Company's Compensation Committee; 
or (iii) served as a member of the compensation committee (or other board       
committee performing similar functions or, in the absence of any such committee,
the entire board of directors) of another entity, one of whose executive        
officers served as a director of the Company.                                   

_______                                                                         
** Based on the Compensation Committee's valuation of Total Reward, stock-based 
compensation and Capital Accumulation Plan units.                               

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PERFORMANCE GRAPH 

  The line graph which follows charts the yearly percentage change in cumulative
stockholder return on an investment in the Company's Common Stock (MS) against  
each of the Standard & Poor's 500 Index(R) (the "S&P 500(R)") and the           
MSCI(R)Domestic Financial Services/Banking Group Index (the "MSCI(R) Index"), a 
peer group index consisting of major financial services companies (1), in each  
case, assuming an investment of $100 on January 31, 1990 (weighted on the basis 
of market capitalization) and cumulation and reinvestment of all dividends paid 
thereafter through November 30, 1995.  The line graph is not intended to be     
indicative of future stock performance.                                         

                                                                [Download Table]

                               Nov-90  Nov-91  Nov-92  Nov-93  Nov-94  Nov-95
                               ------  ------  ------  ------  ------  ------
                                                                             
Morgan Stanley Group Inc.       $100    $205    $208    $286    $240    $354 

S & P 500(R)                    $100    $120    $143    $157    $159    $217 

MCSI(R) Domestic Financial      $100    $167    $199    $268    $225    $334 
Services/Banking Group Index                                                 

------                                                                          
1. The MSCI(R) Index was constructed by Morgan Stanley Capital International,   
the Company's global financial information database.  The MSCI(R) Index   
  consists of the following companies: Bankers Trust New York Corporation, The
  Bear Stearns Companies Inc., J.P. Morgan & Co. Incorporated, Merrill Lynch &
  Co., Inc., Morgan Stanley Group Inc., Paine Webber Group Inc., Salomon Inc.,
and The Travelers Inc.                                                    

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APPROVAL OF THE 1995 EQUITY INCENTIVE COMPENSATION PLAN 

The Board of Directors has unanimously recommended the 1995 Equity    
Incentive Compensation Plan for approval by stockholders.                       

         The Morgan Stanley Group Inc. 1995 Equity Incentive Compensation Plan
was authorized by the Board of Directors on November 28, 1995 and is subject to 
approval by the Company's stockholders. A copy of the 1995 Equity Incentive     
Compensation Plan is attached hereto as Annex A and the following summary is    
qualified in its entirety by reference thereto.                                 

        Purposes and Eligibility.  The purposes of the 1995 Equity Incentive
Compensation Plan are to attract, retain and motivate key employees of the      
Company, to compensate them for their contributions to the growth and profits of
the Company and to encourage ownership by them of stock of the Company.  The    
1995 Equity Incentive Compensation Plan authorizes the issuance of certain      
awards ("Awards") to Managing Directors, Principals, Vice Presidents, officers, 
other key employees and consultants of the Company and its subsidiaries; non-   
employee directors of subsidiaries, and consultants of certain business         
organizations in which the Company or a subsidiary has an equity or similar     
interest, as well as former employees or former consultants of the Company, its 
subsidiaries and such other business organizations are also generally eligible  
to receive Awards.  (Such persons are referred to collectively as "Eligible     
Individuals".)  As of February 7, 1996, the Company estimates that there were   
approximately 2,600 Eligible Individuals.                                       

        Section 162(m) limits the deductibility of compensation in excess of
$1,000,000 paid to the chief executive officer and the four other most highly   
compensated officers as determined pursuant to the rules of the SEC (the        
"Section 162(m) Officers") unless the payments are made under qualifying        
performance-based plans and upon the attainment of certain performance goals.   
The 1995 Equity Incentive Compensation Plan contains special provisions         
governing compensation paid to Section 162(m) Officers that are intended to     
ensure that such compensation will be considered performance-based and hence    
fully deductible.  See "Awards to Section 162(m) Officers" below.  In order for 
the requirements of Section 162(m) to be met for compensation paid under the    
1995 Equity Incentive Compensation Plan, the plan must be approved by a majority
of the votes cast by the stockholders of the Company.                           

       Shares Available Under the 1995 Equity Incentive Compensation Plan.
An aggregate of 86,000,000 shares of Common Stock, plus the number of shares    
remaining under the 1988 Equity Incentive Compensation Plan at such time that   
the Compensation Committee determines that no further awards will be made       
thereunder (which shall not exceed 5 million), are authorized for issuance under
the 1995 Equity Incentive Compensation Plan.  Such shares may be either treasury
shares or newly issued shares.                                                  

In addition to this overall limit, the 1995 Equity Incentive
Compensation Plan contains limits on the number of shares that may be subject to
stock options and stock appreciation rights awarded in any single year, see     
"Awards -- Stock Options" below, and on the amount of annual bonus that may be  
paid in respect of any fiscal year to any Section 162(m) Officer, see "Awards to
Section 162(m) Officers" below.                                                 

    Administration.  The Compensation Committee administers the 1995
Equity Incentive Compensation Plan, approves the eligible participants who will 
receive Awards, determines the form and terms of the Awards and has the power to
fix and accelerate vesting periods.  Subject to certain limitations, the        
Compensation Committee may from time to time delegate some or all of its        
authority to an administrator consisting of one or more members of the          
Compensation Committee or one or more officers of the Company.                  

   Awards -- General.  The 1995 Equity Incentive Compensation Plan
authorizes a broad array of awards based on the Company's Common Stock,         
including (i) stock awards consisting of one or more shares of                  

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Common Stock granted or offered for sale to Eligible Individuals ("Stock        
Awards"), (ii) stock units which are settled by the delivery of shares of the   
Company's Common Stock ("Stock Units"), (iii) stock options ("Stock Options"),  
(iv) stock appreciation rights ("SARs"), which may be granted in tandem with or 
independently of stock options, and (v) other forms of equity-based or equity-  
related Awards which the Compensation Committee determines to be consistent with
the purposes of the 1995 Equity Incentive Compensation Plan and the interests of
the Company ("Other Awards"). Such Other Awards may also include cash payments  
which may be based on one or more criteria determined by the Compensation       
Committee which are unrelated to the value of the Company's Common Stock.       

        Awards under the 1995 Equity Incentive Compensation Plan may, in the
discretion of the Compensation Committee, be made in substitution for cash or   
other compensation payable to an Eligible Individual.  The Compensation         
Committee may establish rules pursuant to which an Eligible Individual may elect
to receive one form of Award permitted under the 1995 Equity Incentive          
Compensation Plan in lieu of any other form of Award, or may elect to receive an
Award in lieu of other compensation that otherwise might have been payable to   
the Eligible Individual.  For purposes of determining the number of shares of   
Common Stock subject to an Award, the Compensation Committee may value the      
shares at a discount to fair market value to reflect the various restrictions,  
conditions and limitations set forth in the 1995 Equity Incentive Compensation  
Plan and the terms of the Award or otherwise applicable to the shares.          

          The vesting, exercisability, payment and other restrictions applicable
to an Award (which may include, without limitation, restrictions on             
transferability or provision for mandatory resale to the Company) shall be      
determined by the Compensation Committee.  The Compensation Committee may       
accelerate (i) the vesting or payment of any Award, (ii) the lapse of           
restrictions on any award (including a Stock Award) or (iii) the date on which  
any Stock Option or SAR first becomes exercisable.  The Compensation Committee  
shall also have full authority to determine the effect, if any, that a          
participant's termination of employment will have on the vesting,               
exercisability, payment or lapse of restrictions applicable to an outstanding   
Award.                                                                          

        The Company may require a participant to pay a sum to the Company as
may be necessary to cover any taxes or other charges imposed on the Company with
respect to property or income received by a participant pursuant to the 1995    
Equity Incentive Compensation Plan.  The Company may offer loans to participants
to satisfy withholding requirements on such terms as the Compensation Committee 
may determine.                                                                  

        No Awards shall be made under the 1995 Equity Incentive Compensation
Plan after the tenth anniversary of the date of stockholder approval.           

       Awards -- Stock Awards and Stock Units.  Recipients of Stock Awards
are entitled to exercise voting rights and receive dividends with respect to the
shares of Common Stock underlying such Awards upon receipt of such Awards.      

          The Company's practice with respect to awards of Stock Units under the
1988 Equity Incentive Compensation Plan has been to contribute to certain       
grantor trusts a number of shares of Common Stock corresponding to the number of
shares subject to Stock Units;  pending settlement of Stock Units by the        
delivery of shares of Common Stock, recipients of Awards of Stock Units have    
been entitled to exercise voting rights with respect to the corresponding shares
held in trust. The Company expects to continue these practices with respect to  
Stock Units awarded under the 1995 Equity Incentive Compensation Plan.  In      
addition, the Compensation Committee may determine (and has determined with     
respect to stock units awarded under the 1988 Equity Incentive Compensation     
Plan) that recipients of Stock Units will receive amounts equivalent to         
dividends with respect to the shares underlying such Awards prior to receipt of 
such shares.                                                                    

 Voting rights relating to shares of Common Stock delivered in
connection with Awards (for example, shares constituting Stock Awards and shares
delivered upon exercise of Stock Options or settlement of Stock Units) and      
shares of Common Stock underlying Stock Units that are held in the grantor      
trusts referred to above are subject to restrictions which are substantially    
similar to those contained in the Stockholders' Agreement.  See "Stockholders'  
Agreement".  These restrictions do not currently apply, however, to Awards to   
Vice Presidents.                                                                

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      Awards -- Stock Options.  An award of Stock Options may consist of
either nonqualified stock options or incentive stock options within the meaning 
of Section 422 of the Code.  A Stock Option entitles the participant to acquire 
a specified number of shares of Common Stock at an exercise price determined by 
the Compensation Committee.  The exercise price may be paid in cash or          
previously owned stock or a combination thereof and, if the terms of the Stock  
Option so provide, in whole or in part through the withholding of shares of     
Common Stock subject to the Stock Option with a value equal to the exercise     
price. In addition, the Compensation Committee has authorized a "cashless       
exercise" procedure that affords participants the opportunity to sell           
immediately some or all of the shares underlying the exercised portion of a     
Stock Option in order to generate sufficient cash to pay the exercise price     
and/or to satisfy withholding tax obligations related to the Stock Option.      
Stock Options that are intended to qualify as incentive stock options within the
meaning of Section 422 of the Code expire no later than ten years from the date 
of award.                                                                       

       The maximum number of shares of Common Stock that may be subject to
Stock Options or SARs granted to or elected by a participant in the current     
fiscal year shall equal 3,340,000 Shares, and  in each subsequent fiscal year   
shall equal 110% of such maximum number for the preceding fiscal year; this     
limit does not apply, however, to Options the granting or vesting of which are  
subject to certain objective performance criteria. A limitation on the number of
Options or SARs that may be awarded to any individual is required under         
regulations under Section 162(m).                                               

 Awards to Section 162(m) Officers.  The 1995 Equity Incentive
Compensation Plan contains special provisions applicable to Section 162(m)      
Officers.                                                                       

         The 1995 Equity Incentive Compensation Plan provides that, unless the
Compensation Committee determines otherwise, all compensation (other than base  
salary, dividend equivalents and distributions from the Company's deferred      
compensation plans, capital accumulation or carried interest plans or other     
compensation plans designated by the Compensation Committee) paid by the Company
to Section 162(m) Officers for a given fiscal year shall be paid under the 1995 
Equity Incentive Compensation Plan.  For each fiscal year of the Company        
(beginning with the fiscal year that began December 1, 1995 and continuing for  
each fiscal year ending during the term of the 1995 Equity Incentive            
Compensation Plan), each Section 162(m) Officer will be eligible to earn an     
annual bonus amount whose value will be dependent upon the attainment for the   
applicable fiscal year of specified performance targets related to designated   
performance goals for such fiscal year selected by the Compensation Committee   
from among the following performance criteria:  (i) predicted economic value per
share of Common Stock, (ii) earnings per share, (iii) return on average common  
equity, (iv) pre-tax income, (v) pre-tax operating income, (vi) net revenue,    
(vii) net income, (viii) profits before taxes, (ix) book value per share, (x)   
stock price and (xi) earnings available to common stockholders.                 

        No later than 90 days following the commencement of each fiscal year
(or by such other time as may be required or permitted by Section 162(m) of the 
Code), the Compensation Committee shall, in writing, select the performance goal
or goals applicable to the fiscal year, establish the various targets and bonus 
amounts which may be earned for such year by each Section 162(m) Officer and    
specify the relationship between performance goals and targets and the bonus    
amount to be earned by each Section 162(m) Officer for such year.  The          
Compensation Committee may specify that the annual bonus amount for a fiscal    
year will be earned if the applicable target is achieved for one goal or for any
one of a number of goals.  The Compensation Committee may provide that the      
annual bonus amount for a fiscal year will be earned only if a target is        
achieved for more than one performance goal.   The Compensation Committee may   
also provide that the annual bonus amount to be earned for a given fiscal year  
will vary based upon different levels of achievement of the applicable          
performance targets.                                                            

  Following the completion of each fiscal year, the Compensation
Committee shall certify in writing whether the applicable performance targets   
have been achieved for such year and the bonus amounts, if any, payable to      
Section 162(m) Officers for such fiscal year.   The bonus amounts payable to a  
Section 162(m) Officer will be paid annually following the end of the applicable
fiscal year after such certification by the Compensation Committee in the form  
of cash or other permissible Awards with a value equal to the value of the      
annual bonus amount earned by the Section 162(m) Officer for such fiscal year.  
In determining the bonus amount earned by a Section 162(m) Officer for a given  
fiscal year, the Compensation Committee shall have discretion to reduce (but not
to increase) the                                                                

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bonus amount payable at a given level of performance to take into account       
additional factors that the Compensation Committee may deem relevant to the     
assessment of individual or corporate performance for the year.                 

    The 1995 Equity Incentive Compensation Plan sets forth a maximum
annual bonus amount that may be earned by any Section 162(m) Officer.  For the  
fiscal year beginning December 1, 1995 such maximum shall equal $25 million and 
for each subsequent fiscal year shall equal 110% of such maximum amount for the 
preceding fiscal year.  In the event that all or a portion of an annual bonus   
awarded to a Section 162(m) Officer for a given fiscal year is paid in whole or 
in part in the form of Awards under the 1995 Equity Incentive Compensation Plan,
then for purposes of determining the number of Shares subject to such Award, the
Compensation Committee may value the Shares at a discount to fair market value  
to reflect the various restrictions, conditions and limitations applicable to   
the Award, but such discount shall not exceed 50% of the fair market value as of
the relevant date of determination, as determined in accordance with a valuation
methodology approved by the Compensation Committee.                             

     In addition to the foregoing, the Compensation Committee may make
Awards to Section 162(m) Officers that vest or become exercisable upon the      
attainment of performance targets related to one or more performance goals      
selected by the Compensation Committee from among the goals specified above.    
The Compensation Committee may also grant Section 162(m) Officers Stock Options 
or SARs with a per share exercise price equal to the fair market value of a     
share of Common Stock on the date of grant of the Option or SAR, subject to the 
overall limit on the number of shares of Common Stock that may be made subject  
to Stock Options and SARs.  See "Awards -- Stock Options" above.                

      New Plan Benefits.  With the exception of awards to Section 162(m)
Officers, Awards under the 1995 Equity Incentive Compensation Plan will be      
authorized by the Compensation Committee in its sole discretion.  For this      
reason it is not possible to determine the benefits or amounts that will be     
received by any particular employees or group of employees in the future.       

         The Company from time to time grants stock units and stock options to
certain newly-hired employees.  Any such awards under the 1995 Equity Incentive 
Compensation Plan will be subject to stockholder approval of the 1995 Equity    
Incentive Compensation Plan.                                                    

       Awards under the 1995 Equity Incentive Compensation Plan to Section
162(m) Officers will be determined under the special provisions described above 
under "Awards to Section 162(m) Officers." Because the performance targets to be
applicable in any fiscal year will be determined by the Compensation Committee  
at the beginning at that fiscal year, and the amount, if any, payable to any    
Section 162(m) Officer will depend upon the extent to which such performance    
targets are satisfied, it is not possible to determine the benefits or amounts  
that will be received by any particular Section 162(m) Officer for the current  
fiscal year or any fiscal year in the future.  However, for Fiscal Year 1995 the
Compensation Committee employed a methodology for determining the compensation  
of the Company's Section 162(m) Officers that was substantially similar to that 
which is expected to be used for the current fiscal year. The amount of cash    
bonus and awards under the 1988 Equity Incentive Compensation Plan to each of   
the Company's Section 162(m) Officers is reported in the Summary Compensation   
Table above; an explanation of the basis on which such compensation was paid is 
set forth in the "Compensation Committee Report on Executive Officer            
Compensation" above.                                                            

Federal Income Tax Consequences                                                 

         Nonqualified Stock Options.  The grant of a nonqualified stock option
will not result in the recognition of taxable income by the participant or in a 
deduction to the Company.  Upon exercise, a participant will recognize ordinary 
income in an amount equal to the excess of the fair market value of the Common  
Stock purchased over the exercise price.  The Company is required to withhold   
tax on the amount of income so recognized, and a tax deduction is allowable     
equal to the amount of such income (subject to the satisfaction of certain      
conditions in the case of Stock Options exercised by Section 162(m) Officers).  
Gain or loss upon a subsequent sale of any Common Stock received upon the       
exercise of a nonqualified stock option generally would be taxed as capital gain
or loss                                                                         

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(long-term or short-term, depending upon the holding period of the stock sold). 
Certain additional rules apply if the exercise price for an option is paid in   
shares previously owned by the participant.                                     

        Incentive Stock Options.  Upon the grant or exercise of an incentive
stock option within the meaning of Section 422 of the Code, no income will be   
realized by the participant for federal income tax purposes and the Company will
not be entitled to any deduction.  However, the excess of the fair market value 
of the Common Stock as of the date of exercise over the exercise price will     
constitute an adjustment to taxable income for purposes of the alternative      
minimum tax.  If the shares of Common Stock are not disposed of within the one- 
year period beginning on the date of the transfer of such shares to the         
participant, nor within the two-year period beginning on the date of grant of   
the Stock Option, any profit realized by the participant upon the disposition of
such shares will be taxed as long-term capital gain and no deduction will be    
allowed to the Company.  If the shares of Common Stock are disposed of within   
the one-year period from the date of transfer of such shares to the participant 
or within the two-year period from the date of grant of the Stock Option, the   
excess of the fair market value of the shares on the date of exercise or, if    
less, the fair market value on the date of disposition, over the exercise price 
will be taxable as ordinary income of the participant at the time of            
disposition, and a corresponding deduction will be allowable.  Certain          
additional rules apply if the exercise price for an option is paid in shares    
previously owned by the participant.  If a Stock Option intended to qualify as  
an incentive stock option is exercised by a person who was not continually      
employed by the Company or certain of its affiliates from the date of grant of  
such Stock Option to a date not more than three months prior to such exercise   
(or one year if such person is disabled), then such Stock Option will not       
qualify as an incentive stock option and will instead be taxed as a nonqualified
stock option, as described above.                                               

         Stock Awards.  A participant who is awarded a Stock Award will not be
taxed at the time of award unless the participant makes special election with   
the Internal Revenue Service pursuant to Section 83(b) of the Code as discussed 
below.  Upon lapse of the risk of forfeiture or restrictions on transferability 
applicable to the Common Stock comprising the Stock Award, the participant will 
be taxed at ordinary income tax rates on the then fair market value of the      
Common Stock and a corresponding deduction will be allowable (subject to the    
satisfaction of certain conditions in the case of Stock Options exercised by    
Section 162(m) Officers).  In such case, the participant's basis in the Common  
Stock will be equal to the ordinary income so recognized.  Upon subsequent      
disposition of such Common Stock, the participant will realize long-term or     
short-term capital gain or loss.                                                

    Pursuant to Section 83(b) of the Code, the participant may elect
within 30 days of receipt of the Stock Award to be taxed at ordinary income tax 
rates on the fair market value of the Common Stock comprising such Stock Award  
at the time of award (determined without regard to any restrictions which may   
lapse).  In that case, the participant will acquire a basis in such Common Stock
equal to the ordinary income recognized by the participant at the time of award.
No tax will be payable upon lapse or release of the restrictions or at the time 
the Common Stock first becomes transferable, and any gain or loss upon          
subsequent disposition will be a capital gain or loss.  In the event of a       
forfeiture of Common Stock with respect to which a participant previously made a
Section 83(b) election, the participant will not be entitled to a loss          
deduction.                                                                      

         Stock Units.  A participant who receives Stock Units will be taxed at
ordinary income tax rates on the then fair market value of the shares of Common 
Stock distributed at the time of settlement of such Stock Unit and a            
corresponding deduction will be allowable to the Company at that time (subject  
to the satisfaction of certain conditions in the case of Stock Options exercised
by Section 162(m) Officers). The participant's basis in the shares of Common    
Stock will be equal to the amount taxed as ordinary income, and on subsequent   
disposition the participant will realize long-term or short-term capital gain or
loss.                                                                           

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THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE 1995 EQUITY INCENTIVE COMPENSATION PLAN.

AMENDMENT TO THE RESTATED CERTIFICATE RELATING
TO THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

  The Board of Directors has unanimously recommended the Authorized Common
Stock Amendment for approval by the stockholders.  Such approval would amend    
Article IV, Section 1 of the Restated Certificate, which relates to the         
Company's authorized Common Stock.                                              

The Company currently has authorized 300,000,000 shares of            
Common Stock, of which   [       ] shares (excluding treasury shares) are       
outstanding as of the close of business on February 7, 1996. Since the Company's
initial public offering there have been a three-for-two stock split and two two-
for-one stock splits, each effected in the form of stock dividends paid on the  
Common Stock. As a result of the most recent stock split, only [             ]  
of the 300,000,000 shares authorized in the Restated Charter remain available   
for issuance. The Authorized Common Stock Amendment would increase the number of
authorized shares of Common Stock to 600,000,000. The Board of Directors        
believes the Authorized Common Stock Amendment is advisable in order to maintain
the Company's financing and capital-raising flexibility as well as to permit    
additional stock splits in the future.                                          

  The full text of the applicable portions of Article IV, Section 1 of the
Restated Certificate, as it would be amended by the Authorized Common Stock     
Amendment, is set forth as Annex B to this Proxy Statement.  The changes to the 
applicable portions of Article IV, Section 1 of the Restated Certificate that   
would result from the Authorized Common Stock Amendment are marked on such      
Annex.                                                                          

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE AUTHORIZED COMMON STOCK AMENDMENT.

APPOINTMENT OF INDEPENDENT AUDITORS 

     The Board of Directors, based on the recommendation of the Audit Committee,
has voted to continue to retain Ernst & Young LLP to serve as independent       
auditors for the 1996 fiscal year and is submitting its selection of such firm  
to the stockholders for ratification.  If the selection is not ratified, the    
Board of Directors will reconsider its selection.  Ernst & Young LLP will have a
representative at the meeting who will be available to answer appropriate       
questions.                                                                      

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.

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STOCKHOLDER PROPOSALS 

     The Company will not consider any stockholder proposal for inclusion in the
1997 Annual Meeting of Stockholders' proxy materials unless received by the     
Company no later than October 29, 1996.                                         

OTHER MATTERS 

 At the date of this Proxy Statement, management has no knowledge of any
proposal other than that described herein that will be presented for            
consideration at the meeting. In the event any other proposal is presented at   
the meeting, it is intended that the persons named in the enclosed proxy will   
have authority to vote such proxy in accordance with their judgment on such     
proposal.                                                                       

February 26, 1996                                                               

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ANNEX A 

MORGAN STANLEY GROUP INC. 

1995 EQUITY INCENTIVE COMPENSATION PLAN 

    1.  PURPOSE.  The purposes of the Morgan Stanley Group Inc. 1995
Equity Incentive Compensation Plan are to attract, retain and motivate key      
employees of the Company, to compensate them for their contributions to the     
growth and profits of the Company and to encourage ownership by them of Stock of
the Company.                                                                    

         2.  DEFINITIONS. As used in the Plan, the following capitalized words
shall have the meanings indicated below:                                        

   "Administrator" means the individual or individuals to whom the
 Committee delegates authority under the Plan in accordance with Section
5(b).                                                                 
  "Award" means an award made pursuant to the terms of the Plan.
         "Award Agreement" means a written agreement between Morgan Stanley or
     one of its Subsidiaries which is approved in accordance with Section 12(d),
    which is executed by the Participant and by an officer on behalf of Morgan
     Stanley or such Subsidiary and which sets forth the terms and conditions of
the Award to the Participant.                                         
    "Award Certificate" means a written certificate issued by Morgan
 Stanley or one of its Subsidiaries which is approved in accordance with
    Section 12(d), which is executed by an officer on behalf of Morgan Stanley
or such Subsidiary and which sets forth the terms and conditions of an
Award.                                                                
"Board" means the Board of Directors of Morgan Stanley.     
       "Code" means the Internal Revenue Code of 1986, as amended, and the
applicable rulings and regulations thereunder.                        
  "Committee" means the Compensation Committee of the Board, any
   successor committee thereto or any other committee appointed by the Board
to administer the Plan.  The Committee shall consist of at least two  
individuals and shall serve at the pleasure of the Board.             
"Company" means Morgan Stanley and all of its Subsidiaries. 
       "Date of the Award" means the effective date of an Award (whether a
     mandatory Award or an elected Award pursuant to Section 12(a)) as specified
   by the Committee and set forth in the applicable Award Agreement or Award
Certificate.                                                          
       "Eligible Individuals" means the individuals described in Section 6
who are eligible for Awards under the Plan.                           
  "Employee Trust" means any trust established by the Company in
  connection with an employee benefit plan (including the Plan or the 1988
  EICP) under which current and former employees of the Company constitute
the principal beneficiaries.                                          
         "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the applicable rulings and regulations thereunder.                
         "Fair Market Value" means, with respect to a share of Stock, the fair
market value thereof as of the relevant date of determination, as     
determined in accordance with a valuation methodology approved by the 
Committee.                                                            
"Morgan Stanley" means Morgan Stanley Group Inc.            
         "1988 EICP" means the Morgan Stanley Group Inc. 1988 Equity Incentive
Compensation Plan, as amended.                                        
      "Option" means an option to purchase Stock, the terms of which are
described in Section 9.                                               
        "Option Award" means an Award of Options, pursuant to Section 9.  An
Option Award may consist of Options, the receipt of which was elected 
pursuant to Section 12(a).                                            

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        "Other Award" means any other form of award authorized under Section
     11 of the Plan.  An Other Award may consist of Awards, the receipt of which
was elected pursuant to Section 12(a).                                
      "Participant"  means an individual to whom an Award has been made.
    "Plan" means the Morgan Stanley Group Inc. 1995 Equity Incentive
Compensation Plan, as the same may be amended from time to time in    
accordance with Section 16(f) below.                                  
       "SAR" means a stock appreciation right, as described in Section 10.
      "SAR Award" means an Award of SARs pursuant to Section 10.   A SAR
    Award may be freestanding or granted in tandem with another type of Award.
    A SAR Award may consist of SARs, the receipt of which was elected pursuant
to Section 12(a).                                                     
         "Section 162(m) Participant" means, for a given fiscal year of Morgan
  Stanley, any Participant designated by the Compensation Committee by not
  later than 90 days following the start of such year as a Participant (or
  such other time as may be required or permitted by Section 162(m) of the
   Code) whose compensation for such fiscal year may be subject to the limit
on deductible compensation imposed by Section 162(m) of the Code.     
        "Shares" means the shares of Stock underlying, constituting, subject
to, or corresponding to an Award.                                     
        "Stock" means the common stock, par value $1.00 per share, of Morgan
Stanley.                                                              
          "Stock Award" means an Award of Shares pursuant to Section 7.  A Stock
  Award may consist of Stock, the receipt of which was elected pursuant to
Section 12(a).                                                        
          "Stock Unit" means a restricted stock unit, as described in Section 8.
         "Stock Unit Award" means an Award of Stock Units, pursuant to Section
     8.  A Stock Unit Award may consist of Stock Units, the receipt of which was
elected pursuant to Section 12(a).                                    
        "Subsidiary" means (i) a corporation or other entity with respect to
which Morgan Stanley, directly or indirectly, has the power, whether  
  through the ownership of voting securities, by contract or otherwise, to
 elect at least a majority of the members of such corporation's board of
 directors or analogous governing body, or (ii) any other corporation or
     other entity in which Morgan Stanley, directly or indirectly, has an equity
    or similar interest and which the Committee designates as a Subsidiary for
purposes of the Plan.                                                 
      "Substitute Awards" means Awards granted upon assumption of, or in
 substitution for, outstanding awards previously granted by a company or
  other entity acquired by the Company or with which the Company combines.
      "Term of the Plan" means the period beginning on the date that the
Plan is adopted by the Board and ending on the date that the Plan     
terminates in accordance with Section 3 or 16(f) below.               

       3.   EFFECTIVE DATE AND TERM.  The Plan shall become effective upon
its adoption by the Board subject to its approval by the stockholders of Morgan 
Stanley.  Prior to such stockholder approval, the Committee may grant Awards    
conditioned on stockholder approval.  If such stockholder approval is not       
obtained at or before the first annual meeting of stockholders to occur after   
the adoption of the Plan by the Board, the Plan and any Awards made thereunder  
shall terminate ab initio and be of no further force and effect.  In no event   
shall any Awards be made under the Plan after the tenth anniversary of the date 
of stockholder approval; provided, however, that no incentive stock option,     
within the meaning of Section 422 of the Code, may be granted under the Plan    
after the tenth anniversary of the adoption of the Plan by the Board.           

4.   STOCK SUBJECT TO PLAN.                                 
---------------------                             

       (a) [                       ] shares of Stock/1/ (whether issued or
unissued) shall be authorized for issuance under the Plan (the "Section 4       
Limit").                                                                        

        (b) The number and kind of shares authorized for issuance hereunder,
including the maximum number of Shares subject to Options or SARs as provided in
Section 4(d) below, may be equitably                                            

/1/ Such number shall equal 86,000,000 plus the number of Shares that remain    
available under the Morgan Stanley Group Inc. 1988 Equity Incentive Compensation
Plan at such time as the Compensation Committee determines that no further award
shall be made under such Plan, which number shall not exceed 5 million shares.  

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adjusted in the discretion of the Committee in the event of a stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, extraordinary
dividend, split-up, spin-off, combination, exchange of shares, warrants or      
rights offering to purchase Stock at a price substantially below Fair Market    
Value or other similar corporate event affecting the Stock in order to preserve 
the benefits or potential benefits intended to be made available to Participants
granted Awards. In the event of any of the foregoing events, the number of      
outstanding Awards and the number and kind of shares subject to any outstanding 
Award and the purchase price per share, if any, under any outstanding Award may 
be equitably adjusted (including by payment of cash to a Participant) in the    
discretion of the Committee in order to preserve the benefits or potential      
benefits intended to be made available to Participants granted Awards. Such     
adjustments shall be made by the Committee, whose determination as to what      
adjustments shall be made, and the extent thereof, shall be final. Unless       
otherwise determined by the Committee, such adjusted Awards shall be subject to 
the same vesting schedule and restrictions to which the underlying Award is     
subject. No fractional shares of Stock shall be reserved or authorized by any   
such adjustment.                                                                

  (c) In calculating the number of shares of Stock remaining for
issuance under the Plan, the following rules shall apply:                       

     1.   The Section 4 Limit shall be reduced by the number of Shares
         subject to outstanding Awards and, for Awards which are not
           denominated in Shares, by the number of Shares delivered upon
payment or settlement of the Award.               

          2.   The Section 4 Limit shall be increased by the number of shares of
            Stock tendered to pay the exercise price of any Option, SAR or
             Other Award and by the number of Shares withheld from any Award
          to satisfy a Participant's tax withholding obligation or, if
              applicable, withheld to pay the exercise price of an Option, SAR
or Other Award.                                   

       3.   The Section 4 Limit shall be increased by the number of Shares
             subject to an Award (or portion thereof) granted hereunder that
            is forfeited, is settled through the issuance of consideration
               other than Shares or otherwise terminates without the issuance of
           such Shares.   With respect to SAR Awards that are settled in
              whole or in part in Stock, this Section 4(c)(3) shall be applied
             by increasing the Section 4 Limit by the excess, if any, of the
          number of Shares subject to the SAR Award over the number of
              Shares delivered to the Participant upon exercise of such Award.

     4.   Any Shares underlying Substitute Awards shall not be counted
             against the Section 4 Limit and shall not be subject to Section
      4(d), except in the case of Shares with respect to which
           Substitute Awards are granted to officers or directors of the
              Company subject to the reporting obligations of Section 16(a) of
the Exchange Act.                                 

In no event may the operation of the foregoing result in the issuance under the 
Plan of a number of Shares in excess of the Section 4 Limit.                    

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      (d) The maximum number of Shares that may be subject to Options or
SARs granted to or elected by a Participant (i) in the fiscal year in which the 
Plan is approved by the stockholders of Morgan Stanley shall equal 3,340,000    
Shares, and (ii) in each subsequent fiscal year shall equal 110% of such maximum
number for the preceding fiscal year; provided, however, that the limitation    
imposed by this Section 4(d) shall not include Options or SARs granted to a     
Section 162(m) Participant in accordance with Section 14(b) or 14(c) below.     

5.   ADMINISTRATION.                                        

         (a) The Plan shall be administered by the Committee, which shall have
full power and authority, subject to the express provisions hereof, (i) to      
select Participants from among the Eligible Individuals, (ii) to make Awards in 
accordance with the Plan, (iii) to determine the number of Shares subject to    
each Award or the cash amount payable in connection with an Award, (iv) to      
determine the terms and conditions of each Award, including, without limitation,
those related to vesting, forfeiture, payment, exercisability, and the effect,  
if any, of a Participant's termination of employment with the Company or a      
change in control of the Company on the outstanding Awards granted to such      
Participant, and including the authority to amend the terms and conditions of an
Award after the granting thereof to a Participant in a manner that is not       
prejudicial to the rights of such Participant in such Award, (v) to determine   
whether the terms and conditions of each Award will be set forth in an Award    
Agreement or Award Certificate and to specify and approve the provisions of the 
Award Agreements and Award Certificates delivered to Participants in connection 
with their Awards, (vi) to construe and interpret any Award Agreement or Award  
Certificate delivered under the Plan, (vii) to prescribe, amend and rescind     
rules and procedures relating to the Plan, (viii) to vary the terms of Awards to
take account of tax, securities law and other regulatory requirements of foreign
jurisdictions and (ix) to make all other determinations and to formulate such   
procedures as may be necessary or advisable for the administration of the Plan. 

        (b) The Committee may, but need not, from time to time delegate some
or all of its authority under the Plan to an Administrator consisting of one or 
more members of the Committee or of one or more officers of the Company;        
provided, however, that the Committee may not delegate its authority (i) to make
Awards to Eligible Individuals (A) who are subject on the Date of the Award to  
the reporting rules under Section 16(a) of the Exchange Act, (B) who are Section
162(m) Participants or (C) who are officers of Morgan Stanley who are delegated 
authority by the Committee hereunder, or (ii) under Sections 5(c), 14 and 16(f) 
of the Plan.  Any delegation hereunder shall be subject to the restrictions and 
limits that the Committee specifies at the time of such delegation or           
thereafter.  Nothing in the Plan shall be construed as obligating the Committee 
to delegate authority to an Administrator, and the Committee may at any time    
rescind the authority delegated to an Administrator appointed hereunder or      
appoint a new Administrator.  At all times, the Administrator appointed under   
this Section 5(b) shall serve in such capacity at the pleasure of the Committee.
Any action undertaken by the Administrator in accordance with the Committee's   
delegation of authority shall have the same force and effect as if undertaken   
directly by the Committee, and any reference in the Plan to the Committee shall,
to the extent consistent with the terms and limitations of such delegation, be  
deemed to include a reference to the Administrator.                             

         (c) The Committee shall have full power and authority, subject to the
express provisions hereof, to construe and interpret the Plan.                  

(d) All determinations by the Committee in carrying out and 
administering the Plan and in construing and interpreting the Plan shall be     
final, binding and conclusive for all purposes and upon all persons interested  
herein.   In the event of any disagreement between the Committee and the        
Administrator, the Committee's determination on such matter shall be final and  
binding on all interested persons, including the Administrator.                 

       (e) No member of the Committee or the Administrator shall be liable
for anything whatsoever in connection with the administration of the Plan except
such person's own willful misconduct.  Under no circumstances shall any member  
of the Committee or the Administrator be liable for any act or omission of any  
other member of the Committee or the Administrator.  In the performance of its  
functions with respect to the Plan, the Committee and the Administrator shall be
entitled to rely upon information and advice furnished by the Company's         
officers, the Company's accountants, the Company's counsel and any other party  
the Committee or the Administrator deems necessary, and no member of the        
Committee or the Administrator shall be liable for any action taken or not taken
in reliance upon any such advice.                                               

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      6.   ELIGIBILITY.  Eligible Individuals shall include all Managing
Directors, Principals, Vice Presidents, officers, other key employees and       
consultants of the Company, non-employee directors of Subsidiaries and employees
and consultants of joint ventures, partnerships or similar business             
organizations in which Morgan Stanley or a Subsidiary has an equity or similar  
interest, other than those individuals who may be designated by the Committee   
from time to time as ineligible for such period of time as the Committee shall  
determine.  In accordance with rules specified by the Committee, Eligible       
Individuals may include former employees or former consultants of the Company   
and such joint ventures, partnerships or similar business organizations.        
Members of the Committee will not be eligible to participate in the Plan.  An   
individual's status as an Administrator will not affect his or her eligibility  
to participate in the Plan.                                                     

        7.   STOCK AWARDS.  Stock Awards shall consist of one or more Shares
of Stock granted or offered for sale to an Eligible Individual, and shall be    
subject to the terms and conditions established by the Committee in connection  
with the Award and specified in the applicable Award Agreement or Award         
Certificate.  The Shares subject to a Stock Award may, among other things, be   
subject to vesting requirements or restrictions on transferability.             

8.   STOCK UNIT AWARDS.                                     

          Stock Unit Awards shall consist of a grant of one or more Stock Units,
and shall be subject to the terms and conditions established by the Committee in
connection with the Award and specified in the applicable Award Agreement or    
Award Certificate.   Each Stock Unit awarded to a Participant shall correspond  
to one Share.   Upon satisfaction of the conditions to vesting and payment      
specified in the applicable Award Agreement or Award Certificate, a Stock Unit  
will be payable, at the discretion of the Committee, in Stock or in cash equal  
to Fair Market Value on the payment date of one Share.                          

9.   OPTION AWARDS.                                         

  (a) An Option Award shall consist of the grant of an Option to
purchase such number of Shares of Stock as determined by the Committee, and     
shall be subject to the terms and conditions established by the Committee in    
connection with the Award and specified in the applicable Award Agreement or    
Award Certificate.   Upon satisfaction of the conditions to exercisability      
specified in the applicable Award Agreement or Award Certificate, a Participant 
shall be entitled to exercise the Option in whole or in part and to receive,    
upon satisfaction or payment of the exercise price or an irrevocable notice of  
exercise in the manner contemplated by Section 9(b) below, the number of Shares 
in respect of which the Option shall have been exercised.  Such Options may be  
either nonqualified stock options or incentive stock options within the meaning 
of Section 422 of the Code.                                                     

      (b) Subject to the provisions of the applicable Award Agreement or
Award Certificate, the exercise price of the Option may be paid in cash or      
previously owned shares of Stock or a combination thereof and, if the applicable
Award Agreement or Award Certificate so provides, in whole or in part through   
the withholding of Shares subject to the Option with a value equal to the       
exercise price.  In accordance with the rules and procedures established by the 
Committee for this purpose, the Option may also be exercised through a "cashless
exercise" procedure approved by the Committee that affords Participants the     
opportunity to sell immediately some or all of the Shares underlying the        
exercised portion of the Option in order to generate sufficient cash to pay the 
Option exercise price and/or to satisfy withholding tax obligations related to  
the Option.                                                                     

        (c) Options which are intended to qualify as incentive stock options
under Section 422 of the Code shall expire no later than the tenth anniversary  
of the date of the grant thereof.                                               

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10.  SAR AWARDS.                                            

          An SAR Award shall consist of the grant of one or more SARs, and shall
be subject to the terms and conditions established by the Committee in          
connection with the Award and specified in the applicable Award Agreement or    
Award Certificate.   Upon satisfaction of the conditions to the payment         
specified in the applicable Award Agreement or Award Certificate, each SAR shall
entitle a Participant to an amount, if any, equal to the Fair Market Value of a 
Share on the date of exercise over the SAR exercise price specified in the      
applicable Award Agreement or Award Certificate.  At the discretion of the      
Committee, payments to a Participant upon exercise of an SAR may be made in     
Shares, cash or a combination thereof.                                          

         11.  OTHER AWARDS.  The Committee shall have the authority to specify
the terms and provisions of other forms of equity-based or equity-related Awards
not described above which the Committee determines to be consistent with the    
purpose of the Plan and the interests of the Company, which Awards may provide  
for cash payments based in whole or in part on the value or future value of     
Stock, for the acquisition or future acquisition of Stock, or any combination   
thereof.  Other Awards shall also include cash payments (including the cash     
payment of dividend equivalents) under the Plan which may be based on one or    
more criteria determined by the Committee which are unrelated to the value of   
Stock and which may be granted in tandem with, or independent of, other Awards  
under the Plan.                                                                 

12.  AWARDS IN GENERAL.                                     

         (a) Awards under the Plan may, in the discretion of the Committee, be
made in substitution in whole or in part for cash or other compensation payable 
to an Eligible Individual.   In accordance with rules and procedures established
by the Committee, an Eligible Individual may elect to receive one form of Award 
permitted under the Plan in lieu of any other form of Award, or may elect to    
receive an Award under the Plan in lieu of all or part of any compensation which
otherwise might have been paid to such Eligible Individual; provided, however,  
that any such election shall not require the Committee to make any Award to such
Eligible Individual.  Any such substitute or elective Awards shall have terms   
and conditions consistent with the provisions of the Plan applicable to such    
Award.  At the discretion of the Committee, Stock Units may at any time be      
substituted for the portion of a Stock Award that has not vested in accordance  
with the provisions of the applicable Award Agreement or Award Certificate.     
The substitution contemplated by the previous sentence may be made at any time  
prior to the applicable vesting date of the Stock Award.                        

      (b) For purposes of determining the number of Shares subject to an
Award, the Committee may value the Shares at a discount to Fair Market Value to 
reflect the various restrictions, conditions and limitations set forth in the   
Plan and the applicable Award Agreement or Award Certificate or otherwise       
applicable to the Shares.                                                       

  (c) With respect to any dividend or distribution on the Shares
corresponding to an Award, the Committee may in its discretion authorize current
or deferred payments (payable in cash or Stock or a combination thereof) or     
appropriate adjustments to the outstanding Award to reflect such dividend or    
distribution.                                                                   

          (d) In accordance with the procedures specified by, and subject to the
approval of, the Committee, Participants may be given the opportunity to defer  
the payment or settlement of an Award to one or more dates selected by the      
Participant.   In connection with such deferral, the Committee may provide that 
Awards so deferred may be credited with a notional return during the period of  
deferral based upon the corresponding return on one or more investments         
designated by the Committee or elected by the Participant in accordance with the
procedures established by the Committee for this purpose.   The Committee shall 
have the right at any time to accelerate the payment or settlement of any Award 
granted under the Plan, including, without limitation, any Award subject to a   
prior deferral election.                                                        

    (e) The terms and provisions of an Award shall be set forth in a
written Award Agreement or Award Certificate approved by the Committee and      
delivered or made available to the Participant as soon as practicable following 
the Date of the Award.                                                          

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   (f) The vesting, exercisability, payment and other restrictions
applicable to an Award (which may include, without limitation, restrictions on  
transferability or provision for mandatory resale to the Company) shall be      
determined by the Committee and set forth in the applicable Award Agreement or  
Award Certificate.   Notwithstanding the foregoing, the Committee may accelerate
(i) the vesting or payment of any Award, (ii) the lapse of restrictions on any  
Award (including a Stock Award) or (iii) the date on which any Option or SAR    
first becomes exercisable.  The date of a Participant's termination of          
employment for any reason shall be determined in the sole discretion of the     
Committee.  The Committee shall also have full authority to determine and       
specify in the applicable Award Agreement or Award Certificate the effect, if   
any, that a Participant's termination of employment for any reason will have on 
the vesting, exercisability, payment or lapse of restrictions applicable to an  
outstanding Award.                                                              

13.  CERTAIN RESTRICTIONS.                                  

   (a) Except as otherwise provided by the terms of any applicable
Employee Trust, prior to the exercise of any Option or SAR Award or payment of  
Stock pursuant to any Stock Unit Award or Other Award, the Participant shall not
have any rights as a stockholder with respect to any Shares of Stock subject to 
such Option or SAR or corresponding to such Stock Unit or Other Award.  Subject 
to the terms of any applicable Employee Trust, each Participant shall be the    
beneficial owner of any Shares actually issued by the Company in connection with
an Award.  Unless otherwise determined by the Committee, certificates           
representing the Participant's Shares shall be issued in the name of a nominee  
holder to be designated by the Committee.  Except for the risk of forfeiture and
the restrictions on transfer which may apply to certain Shares (including       
restrictions relating to any dividends or other rights), the Participant shall  
be entitled to all rights of ownership, including, without limitation, the right
(i) to vote such Shares, subject for as long as the Participant is employed by  
the Company, except where the constraints of local law dictate otherwise, to the
preliminary voting procedures set forth in the voting agreement, if any, set    
forth in the Award Agreement or Award Certificate and (ii) to receive cash or   
stock dividends thereon.                                                        

         (b) Unless the Committee determines otherwise, no Award granted under
the Plan shall be transferable other than by will or by the laws of descent and 
distribution; provided, however, that the Committee may, subject to such terms  
and conditions as the Committee shall specify, permit the transfer of an Award  
to a Participant's family members or to one or more trusts established in whole 
or in part for the benefit of one or more of such family members; provided,     
further, that the restrictions in this sentence shall not apply to the Shares   
received in connection with an Award after the date that the restrictions on    
transferability of such Shares set forth in the applicable Award Agreement or   
Award Certificate have lapsed.  During the lifetime of the Participant, an      
Option, SAR or similar-type Other Award shall be exercisable only by him or by  
the family member or trust to whom such Option, SAR or Other Award has been     
transferred in accordance with the previous sentence.                           

14.  PROVISIONS APPLICABLE TO SECTION 162(M) PARTICIPANTS.  

        (a) Anything in the Plan to the contrary notwithstanding, unless the
Committee determines otherwise, all compensation (other than base salary,       
dividend equivalents and distributions from the Company's deferred compensation 
plans, capital accumulation or carried interest plans or other compensation     
plans designated by the Committee) paid by the Company to Section 162(m)        
Participants for a given fiscal year shall be paid under the Plan and subject to
the terms and provisions of this Section 14.                                    

         (b)  (i)  Commencing with the fiscal year of Morgan Stanley beginning
December 1, 1995 and for each other fiscal year of Morgan Stanley ending during 
the Term of the Plan, unless the Compensation Committee determines otherwise,   
each Section 162(m) Participant will be eligible to earn under the Plan an      
annual bonus amount whose value will be dependent upon the attainment for the   
applicable fiscal year of specified performance targets related to designated   
performance goals for such fiscal year selected by the Committee from among the 
performance goals specified in Section 14(d) below.   No later than 90 days     
following the commencement of each fiscal year (or by such other time as may be 
required or permitted by Section 162(m) of the Code), the Committee shall, in   
writing, (A) designate each Section 162(m) Participant, (B) select the          
performance goal or goals applicable to the fiscal year, (C) establish the      
various targets and bonus amounts which may be earned for such year by each     
Section 162(m) Participant and (D) specify the relationship between performance 
goals and targets and the bonus amount to be earned by each Section 162(m)      
Participant for such year.                                                      

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     (ii) The Committee may specify that the annual bonus amount for a
fiscal year will be earned if the applicable target is achieved for one goal or 
for any one of a number of goals.  The Committee may also provide that the      
annual bonus amount for a fiscal year will be earned only if a target is        
achieved for more than one performance goal.   The Committee may also provide   
that the annual bonus amount to be earned for a given fiscal year will vary     
based upon different levels of achievement of the applicable performance        
targets.                                                                        

      (iii)  Following the completion of each fiscal year, the Committee
shall certify in writing whether the applicable performance targets have been   
achieved for such year and the bonus amounts, if any, payable to Section 162(m) 
Participants for such fiscal year.   The bonus amounts payable to a Section     
162(m) Participant will be paid annually following the end of the applicable    
fiscal year after such certification by the Committee in the form of cash or    
other permissible Awards with a value as of the Date of the Award, determined in
accordance with Section 12(b), equal to the value of the annual bonus amount    
earned by the Section 162(m) Participant for such fiscal year.  In determining  
the bonus amount earned by a Section 162(m) Participant for a given fiscal year,
the Committee shall have the right to reduce (but not to increase) the bonus    
amount payable at a given level of performance to take into account additional  
factors that the Committee may deem relevant to the assessment of individual or 
corporate performance for the year.                                             

        (iv) Anything in this Section 14(b) to the contrary notwithstanding,
the maximum annual bonus amount that may be earned by a Section 162(m)          
Participant for (A) the fiscal year in which the Plan is approved by the        
stockholders of Morgan Stanley shall equal $25 million and (B) each subsequent  
fiscal year shall equal 110% of such maximum amount for the preceding fiscal    
year.  In the event that all or a portion of an annual bonus awarded to a       
Section 162(m) Participant for a given fiscal year is paid in whole or in part  
in the form of Awards under the Plan, then for purposes of determining the      
number of Shares subject to such Award, the Committee may value the Shares at a 
discount to Fair Market Value to reflect the various restrictions, conditions   
and limitations set forth in the Plan and the applicable Award Agreement or     
Award Certificate or otherwise applicable to the Shares, but such discount shall
not exceed 50% of the Fair Market Value as of the relevant date of              
determination, as determined in accordance with a valuation methodology approved
by the Committee.                                                               

         (c) In addition to any other compensation payable under Section 14(b)
above, the Committee may grant Awards to a Participant that vest or become      
exercisable upon the attainment of performance targets related to one or more   
performance goals selected by the Committee from among the goals specified in   
Section 14(d) below.   Subject to Section 4(d) above, the Committee may also    
grant Section 162(m) Participants Options or SARs with a per share exercise     
price equal to the Fair Market Value of a share of Stock on the date of grant of
the Option or SAR.                                                              

   (d) For purposes of this Section 14, performance goals shall be
limited to one or more of the following:   (i) predicted economic value per     
share of Stock, (ii) earnings per share, (iii) return on average common equity, 
(iv) pre-tax income, (v) pre-tax operating income, (vi) net revenue, (vii) net  
income, (viii) profits before taxes, (ix) book value per share, (x) stock price 
and (xi) earnings available to common stockholders.                             

   (e) Without further action by the Board, the provisions of this
Section 14 shall cease to apply on the effective date of the repeal of Section  
162(m) of the Code (and any successor provision thereto).                       

       15.  INVESTMENT REPRESENTATION.  Each Award shall be conditioned on
the Participant making any representations required in the applicable Award     
Agreement or Award Certificate.  Each Award shall also be conditioned upon the  
making of any filings and the receipt of any consents or authorizations required
to comply with, or required to be obtained under, applicable local law.         

16.  MISCELLANEOUS PROVISIONS.                              

         (a) As a condition to the making of any Award, the vesting or payment
of any Award or the lapse of the restrictions pertaining thereto (including     
those related to the exercise of an Option or SAR), the Company may require the 
Participant to pay such sum to the Company as may be necessary to discharge the 
Company's obligations with respect to any taxes, assessments or other           
governmental charges imposed on property or income received by a Participant    
pursuant to the Plan.  In accordance with rules and procedures established by   
the Committee and, in the discretion of the Committee, such payment may be in   
the form of cash or other property.  In                                         

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accordance with rules and procedures established by the Committee, in           
satisfaction of such taxes, assessments or other governmental charges the       
Company may, in the discretion of the Committee, make available for delivery a  
lesser number of Shares in payment or settlement of an Award or permit a        
Participant to tender previously owned Shares to satisfy such withholding       
obligation. At the discretion of the Committee, the Company may deduct or       
withhold from any payment or distribution to a Participant whether or not       
pursuant to the Plan. In accordance with rules and procedures established by the
Committee, the Company may offer loans to Participants to satisfy withholding   
requirements on such terms as the Committee may determine, which terms may in   
the discretion of the Committee be non-interest bearing.                        

    (b) The Plan shall not give rise to any right on the part of any
Participant to continue in the employ of the Company.                           

       (c) All expenses and costs in connection with the administration of
the Plan or issuance of Shares, Options, SARs, Stock Units or Other Awards      
hereunder shall be borne by the Company.                                        

(d) The headings of sections herein are included solely for 
convenience of reference and shall not affect the meaning of any of the         
provisions of the Plan.                                                         

          (e) The Plan and all rights hereunder shall be construed in accordance
with and governed by the internal laws of the State of Delaware.                

          (f) The Board or Committee may modify, amend, suspend or terminate the
Plan in whole or in part at any time; provided, however, that such modification,
amendment, suspension or termination shall not, without a Participant's consent,
affect adversely the rights of such Participant with respect to any Award       
previously made.  No amendment to the Plan may render any member of the         
Committee eligible to receive an Award at any time while such member is serving 
on the Committee.                                                               

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ANNEX B 

   Article IV, Section 1 of the Restated Certificate shall be amended in its
entirety to read as follows:                                                    

   SECTION 1.  Shares and Classes Authorized.  The total number of shares of
all classes of capital stock which the Corporation shall have authority to issue
is 330,000,000* 630,000,000** shares, which shall include:                      
-----------                                                               

     (a)  30,000,000 shares of preferred stock of no par value each (hereinafter
referred to as "Preferred Stock"); and                                

 (b)  300,000,000 600,000,000 shares of common stock of the par value of
-----------                                                 
$1.00 each (hereinafter referred to as "Common Stock");               

such classes of Preferred Stock and Common Stock being sometimes hereinafter    
collectively referred to as "capital stock".                                    

__________                                                                      

*    Underscored language appears in the Restated Certificate as currently in   
effect and will be deleted if the Authorized Common Stock Amendment is
adopted at the Annual Meeting.                                        

**   Language in bold type will be included in the Restated Certificate if the  
Authorized Common Stock Amendment is adopted at the Annual Meeting.   

B-1 

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MORGAN STANLEY GROUP INC. 
1585 BROADWAY 
NEW YORK, NEW YORK 10036  

                                                         February 26, 1996

Dear Employee Stockholder:                                                      

          As an employee of one of the subsidiaries of Morgan Stanley Group Inc.
(the "Company") and a party to the Stockholders' Agreement dated as of February 
14, 1986 among the Company and the persons listed on Appendix A thereto, as     
amended, and/or similar agreements entered into pursuant to the grant of stock  
awards, stock unit awards or stock option awards under the Company's 1988 Equity
Incentive Compensation Plan, 1986 Stock Option Plan and/or Performance Unit     
Plan, you are entitled to participate in a Preliminary Vote of certain of the   
Company's employee stockholders concerning the matters to be voted on at the    
Company's 1996 Annual Meeting of Stockholders.  The Preliminary Vote will be    
taken by written consent dated as of Wednesday, March 20, 1996.  A proxy/voting 
directive card is enclosed to enable you to participate in the Preliminary Vote.

   Employees of the Company who are entitled to vote shares of the
Company's Common Stock that are subject to the Preliminary Vote are required to 
grant irrevocable proxies voting their shares of Common Stock subject to the    
agreements in accordance with the vote of the majority of the shares voting in  
the Preliminary Vote on all matters submitted to the Preliminary Vote and       
granting to Jonathan M. Clark or Philip N. Duff authority to vote the shares of 
Common Stock in such person's discretion on any other matter properly coming    
before the Annual Meeting.  It is therefore essential that you vote your shares 
of Common Stock subject to the Preliminary Vote.  After reading the enclosed    
Proxy Statement, kindly complete, sign and promptly return the proxy/voting     
directive card on or before March 20, 1996 in the enclosed envelope.  The same  
card serves as a directive to State Street Bank and Trust Company, as Trustee   
(the "Trustee") of the Morgan Stanley Group Inc. "Rabbi" trust (the "Trust"),   
instructing the Trustee how to vote the shares of Common Stock held on your     
behalf in the Trust in the Preliminary Vote.  The Trustee will vote the shares  
at the Annual Meeting in accordance with the results of the Preliminary Vote.   
The number of shares subject to the directive to the Trustee corresponds to the 
number of stock units you received as part of compensation.                     

          Once the Preliminary Vote has been completed, pursuant to the enclosed
proxy/voting directive card we will have your shares of Common Stock that are   
subject to the voting restrictions voted at the Annual Meeting in accordance    
with the results.  Shares of Common Stock not subject to the Preliminary Vote   
that are held by you on March 20, 1996 may be voted in your sole discretion,    
following the procedures set forth in the following paragraph.                  

With respect to the shares of Morgan Stanley Group Inc. and 
Subsidiaries Employee Stock Ownership Plan Convertible Preferred Stock ("ESOP   
Stock") allocated to you, if any, or any shares of Common Stock owned by you    
that are not subject to the Preliminary Vote, you should have already received a
separate mailing that includes a proxy/voting instruction card whereby you are  
able to (i) direct Northern Trust Company, as Trustee of the ESOP, how to vote  
shares of ESOP Stock at the Annual Meeting and (ii) vote the shares of Common   
Stock that are not subject to the Preliminary Vote that are held by you.  In the
separate mailing you will also find a letter to stockholders, a notice setting  
forth the business expected to come before the Annual Meeting, the Proxy        
Statement and a copy of the Company's 1995 Annual Report.  Please refer to the  
Proxy Statement for a description of the matters to be voted on in the          
Preliminary Vote and at the Annual Meeting.  If you have not received the       
separate mailing, please contact Susan Krause in the Legal and Compliance       
Department at (212) 761-4670.                                                   

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       You are welcome to attend the Annual Meeting, which will be held on
Wednesday, April 3, 1996 at 9:30 A.M. at 1585 Broadway, 41st Floor, New York,   
New York.  You may also vote your shares of Common Stock that are not subject to
the Preliminary Vote in person at the Annual Meeting.                           

                                 Very truly yours,

                                 Richard B. Fisher
                                        Chairman of the Board of
                         Directors

                            John J. Mack
                         President

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P R O X Y   V O T I N G   I N S T R U C T I O N 
--------------------------------------------------------------------------------

MORGAN STANLEY GROUP INC.     

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS   
FOR THE ANNUAL MEETING OF STOCKHOLDERS, APRIL 3, 1996 

The undersigned hereby appoints Jonathan M. Clark and Philip N. Duff, and each  
of them, attorneys and proxies of the undersigned, with full power of           
substitution, to vote the number of shares of common stock of the Company held  
by the undersigned which shares the undersigned has power to vote at the Annual 
Meeting of Stockholders to be held on April 3, 1996 at 1585 Broadway, New York, 
New York, and at any adjournments thereof, in accordance with the instructions  
set forth in this Proxy and with the same effect as though the undersigned were 
present in person and voting such shares. The proxies are authorized in their   
discretion to vote upon such other business as may properly come before the     
meeting.                                                                        

With respect to shares of Common Stock of the Company allocated to my stock     
account pursuant to the Morgan Stanley Group Inc. 1988 Equity Incentive         
Compensation Plan (the "EICP Stock"), I, the undersigned, direct State Street   
Bank and Trust Company, as trustee under the Trust Agreement dated as of April  
1, 1994 (a) to vote such shares of EICP Stock at the Annual Meeting and any     
adjournments thereof in accordance with the directions set forth on the reverse 
side and (b) to grant a proxy to Jonathan M. Clark or Philip N. Duff, giving    
them discretion to vote such shares of EICP Stock in connection with such other 
business as may come before the meeting. I understand that the trustee will not 
vote any allocated shares of EICP Stock for which no instruction is received.   

With respect to the shares of preferred stock ("ESOP Stock") of the Company     
allocated to my stock account pursuant to the Morgan Stanley Group Inc. and     
Subsidiaries Employee Stock Ownership Plan (the "ESOP Plan") and a proportion of
shares of allocated ESOP Stock held in the trust which have not been allocated  
to participants in the ESOP Plan, I, the undersigned, direct Northern Trust     
Company, as trustee, (a) to vote such allocated shares of ESOP Stock at the     
Annual Meeting and any adjournments thereof in accordance with the directions   
set forth on the reverse side, (b) to vote such unallocated shares of ESOP Stock
in accordance with the provisions of the ESOP Plan, and (c) to grant a proxy to 
Jonathan M. Clark or Philip N. Duff, giving them discretion to vote such shares 
of ESOP Stock in connection with such other business as may come before the     
meeting. I understand that the trustee will not vote any allocated shares of    
ESOP Stock for which no instruction is received.                                

PLEASE DATE, SIGN AND MAIL THIS PROXY CARD IN THE ACCOMPANYING ENVELOPE 
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES 

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0306                                                                            

---                                                                             
X  PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE:                                  
---                                                                             

THIS PROXY/VOTING INSTRUCTION WILL BE VOTED AS DIRECTED. IF THIS PROXY/VOTING   
INSTRUCTION IS SIGNED AND RETURNED BUT NO DIRECTION IS MADE IT WILL BE VOTED    
"FOR" ALL ITEMS SET FORTH BELOW. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" 
ITEMS 1, 2, 3 AND 4.                                                            

FOR  WITHHELD                             

1.  ELECTION OF   -----  ------   NOMINEES: RICHARD B. FISHER, JOHN J. MACK,    
  DIRECTORS                     BARTON M. BIGGS, PETER F. KARCHES, SIR DAVID
                 -----  ------   A. WALKER, ROBERT P. BAUMAN, DANIEL B. BURKE,
                               S. PARKER GILBERT, ALLEN E. MURRAY AND PAUL
J. RIZZO.   

FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S)                         

-------------------------------------                                           

                                                    FOR   AGAINST  ABSTAIN

                                                  ------  -----    -----

2. APPROVAL OF THE 1995 EQUITY INCENTIVE COMPEN-                                
SATION PLAN                                        ------  -----    ----- 

3. APPROVAL OF AN AMENDMENT TO THE RESTATED           ------  -----    -----    
CERTIFICATE OF INCORPORATION INCREASING TO                                
600,000,000 THE TOTAL NUMBER OF SHARES OF                                 
COMMON STOCK AUTHORIZED FOR ISSUANCE               ------  -----    ----- 

4. APPROVAL OF THE SELECTION OF ERNST & YOUNG LLP                               
AS INDEPENDENT AUDITORS.                           ------  -----    ----- 

SIGNATURE(S) _________________________________________    DATED:______________  
PLEASE SIGN EXACTLY AS NAME(S) APPEARS HEREON. EXECUTORS, ADMINISTRATORS,       
TRUSTEES, GUARDIANS OR ATTORNEYS SHOULD SO INDICATE WHEN SIGNING. IF SIGNING FOR
A CORPORATION, PLEASE INDICATE YOUR TITLE.                                      

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P R O X Y   V O T I N G   D I R E C T I V E 
--------------------------------------------------------------------------------

MORGAN STANLEY GROUP INC  

THIS PROXY/VOTING DIRECTIVE IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS  
AND RELATES TO  
THE ANNUAL MEETING OF STOCKHOLDERS, APRIL 3, 1996 

   For purposes of a preliminary vote and in accordance with and pursuant to (i)
Article IV, Section 4.1 of the Stockholders' Agreement dated as of February 14, 
1986, as amended, among Morgan Stanley Group Inc., a Delaware corporation (the  
"Company"), and the persons listed on Appendix A thereto and/or (ii) Appendix A 
to the Morgan Stanley Group Inc. 1986 Stock Option Plan, as amended, and/or     
(iii) Appendix A to the Morgan Stanley Group Inc. Performance Unit Plan, as     
amended, and/or (iv) Appendix A to the award agreements or certificates entered 
into pursuant to the Morgan Stanley Group Inc. 1988 Equity Incentive            
Compensation Plan, as amended, and/or (v) Exhibit B to the Trust Agreement (the 
"Trust Agreement") dated as of March 5, 1991 between the Company and State      
Street Bank and Trust Company, as trustee (collectively, the "Voting            
Agreements"), the undersigned, being subject to voting restrictions in one or   
more of such Voting Agreements, does hereby (A) vote the shares of Common Stock 
of the Company held by the undersigned which have been issued pursuant to, or   
are subject to, one or more of the Voting Agreements (other than the number of  
such shares that corresponds to the number of Stock Units awarded to the        
undersigned under the Morgan Stanley Group Inc. 1988 Equity Incentive           
Compensation Plan (the "Trust Shares") and are held by the trustee referred to  
above (the "Trustee")) in accordance with any instructions on the reverse side, 
and (B) instruct the Trustee to vote Trust Shares in accordance with any        
instructions on the reverse side.                                               

With respect to shares of Common Stock (other than Trust Shares) of the   
Company held by the undersigned which have been issued pursuant to, or are      
subject to, one or more of the Voting Agreements (other than the Trust          
Agreement), the undersigned hereby appoints Jonathan M. Clark and Philip N.     
Duff, and each of them, attorneys and proxies of the undersigned, with full     
power of substitution, to vote the number of such shares of Common Stock of the 
Company which shares the undersigned has the power to vote at the Annual Meeting
of Stockholders of the Company to be held on April 3, 1996 at 1585 Broadway, New
York, New York, and at any adjournments thereof, in accordance with the results 
of the preliminary vote referred to above irrespective of the instructions on   
the reverse side and with the same effect as though the undersigned were present
in person and voting such shares. The proxies are authorized in their discretion
to vote upon such other business as may properly come before the meeting.       

  I hereby agree that all power and authority hereby conferred is coupled with
an interest and is irrevocable and, to the extent not prohibited by law, shall  
not be terminated by any act of the undersigned or by operation of law or by the
occurrence of any event whatsoever, including, without limitation, the death,   
incapacity, dissolution, liquidation, termination, bankruptcy, dissolution of   
marital relationship or insolvency of the undersigned or any similar event. If, 
after the execution of this document, any such event shall occur before the     
completion of the actions contemplated hereby, the above-designated attorneys   
and Trustee are nevertheless authorized and directed to complete all of such    
actions, to the extent required by the Voting Agreements.                       

In the event that the undersigned has executed this document but has not  
indicated his vote on any of the proposals on the reverse, the number of his    
shares subject to the Voting Agreements or held on his behalf will be voted in  
favor of any such above proposal for purposes of the preliminary vote among     
employee stockholders of the Company who are subject to one or more Voting      
Agreements.                                                                     

The validity, enforceability, interpretation and construction of the      
foregoing shall be determined in accordance with the substantive laws of the    
State of Delaware. THIS PROXY/VOTING DIRECTIVE IS IRREVOCABLE.                  

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0562                                                                            

---                                                                             
X  PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE:                                  
---                                                                             

THIS PROXY/VOTING DIRECTIVE WILL BE VOTED AS DIRECTED. IF THIS PROXY/VOTING     
DIRECTIVE IS SIGNED AND RETURNED BUT NO DIRECTION IS MADE, SHARES OF COMMON     
STOCK OTHER THAN TRUST SHARES WILL BE VOTED "FOR" ALL ITEMS SET FORTH BELOW. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2, 3 AND 4.                 

FOR  WITHHELD                             

1.  ELECTION OF   -----  ------   NOMINEES: RICHARD B. FISHER, JOHN J. MACK,    
  DIRECTORS                     BARTON M. BIGGS, PETER F. KARCHES, SIR DAVID
                 -----  ------   A. WALKER, ROBERT P. BAUMAN, DANIEL B. BURKE,
                               S. PARKER GILBERT, ALLEN E. MURRAY AND PAUL
J. RIZZO.   

FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S)                         

-------------------------------------                                           

                                                    FOR   AGAINST  ABSTAIN

                                                  ------  -----    -----

2. APPROVAL OF THE 1995 EQUITY INCENTIVE COMPEN-                                
SATION PLAN                                        ------  -----    ----- 

3. APPROVAL OF AN AMENDMENT TO THE RESTATED           ------  -----    -----    
CERTIFICATE OF INCORPORATION INCREASING TO                                
600,000,000 THE TOTAL NUMBER OF SHARES OF                                 
COMMON STOCK AUTHORIZED FOR ISSUANCE               ------  -----    ----- 

4. APPROVAL OF THE SELECTION OF ERNST & YOUNG LLP                               
AS INDEPENDENT AUDITORS.                           ------  -----    ----- 

SIGNATURE(S)___________________________________     DATED AS OF MARCH 20, 1996  
PLEASE SIGN EXACTLY AS NAME(S) APPEARS HEREON.                                  

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘PRE 14A’ Filing		Date		First		Last			Other Filings
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		2/26/96		2		41			10-K405,  424B3,  DEF 14A
Filed on:		2/9/96							424B2,  424B3,  SC 13G,  SC 13G/A
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