
<PAGE>
 
                                                                    EXHIBIT 99.1

         3


PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements


                           MORGAN STANLEY GROUP INC.                         
            CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                                 (IN MILLIONS)

      ASSETS

<TABLE>
<CAPTION>
                                                                                      February 28,
                                                                                         1997                 November 30,
                                                                                      (Unaudited)                 1996
                                                                                     --------------          --------------
<S>                                                                                  <C>                     <C>
Cash and interest-bearing equivalents                                                $       4,488           $       4,545

Cash and securities deposited with clearing organizations or segregated
    under federal and other regulations (securities at market value of
    $990 at February 28, 1997 and $2,474
    at November 30, 1996)                                                                    1,490                   3,164

Financial instruments owned:
    U.S. government and agency securities                                                   15,219                  11,079
    Other sovereign government obligations                                                  18,205                  19,473
    Corporate and other debt                                                                17,905                  15,978
    Corporate equities                                                                      14,242                  12,622
    Derivative contracts                                                                    12,818                  11,220
    Physical commodities                                                                       287                     375

Securities purchased under agreements to resell                                             70,029                  60,457

Securities borrowed                                                                         50,394                  39,680

Receivables:
    Customers                                                                               10,368                   5,761
    Brokers, dealers and clearing organizations                                              1,995                   5,421
    Interest and dividends                                                                   1,495                   1,320
    Fees and other                                                                           1,029                     745

Property, equipment and leasehold improvements, at cost, net of
    accumulated depreciation and amortization of $655 at February 28,
    1997 and $614
    at November 30, 1996                                                                     1,274                   1,301

Other assets                                                                                 3,534                   3,305
                                                                                     -------------           -------------

Total assets                                                                         $     224,772           $     196,446
                                                                                     =============           =============
</TABLE>

           See Notes to Condensed Consolidated Financial Statements.





                                                                          Page 3
<PAGE>
 
         4



                           MORGAN STANLEY GROUP INC.
            CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                        (IN MILLIONS, EXCEPT SHARE DATA)


LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                          February 28,
                                                              1997      November 30,
                                                           (Unaudited)     1996
                                                            ---------    ---------

<S>                                                         <C>          <C>      
Short-term borrowings                                       $  22,241    $  20,461

Financial instruments sold, not yet purchased:
      U.S. government and agency securities                    13,991       10,196
      Other sovereign government obligations                    8,355        6,513
      Corporate and other debt                                  1,242        1,112
      Corporate equities                                        8,762        8,889
      Derivative contracts                                     11,006        9,982
      Physical commodities                                         36          476

Securities sold under agreements to repurchase                 95,919       83,296

Securities loaned                                              10,432        8,975

Payables:
      Customers                                                21,041       18,629
      Brokers, dealers and clearing organizations               4,113        1,820
      Interest and dividends                                    1,244        1,478
      Other liabilities and accrued expenses                    1,344          972
Accrued compensation and benefits                               1,081        1,746
Long-term borrowings                                           16,470       14,498
                                                            ---------    ---------
                                                              217,277      189,043
                                                            ---------    ---------
Capital Units                                                     999          865
                                                            ---------    ---------
Commitments and contingencies

Stockholders' equity:

      Preferred stock                                           1,027        1,223
      Common stock, $1.00 par value; authorized
          600,000,000 shares; issued 163,821,105
          shares at February 28, 1997 and 163,236,893
          shares at November 30, 1996                             164          163
      Paid-in capital                                             892        1,144
      Retained earnings                                         4,767        4,504
      Cumulative translation adjustments                          (14)         (11)
                                                            ---------    ---------
          Subtotal                                              6,836        7,023

      Less:
          Note receivable related to sale of
               preferred stock to ESOP                             76           78
          Common stock held in treasury, at cost
               (5,796,887 shares at February 28, 1997 and
               9,894,271 shares at November 30, 1996)             264          407
                                                            ---------    ---------
                    Total stockholders' equity                  6,496        6,538
                                                            ---------    ---------

Total liabilities and stockholders' equity                  $ 224,772    $ 196,446
                                                            =========    =========
</TABLE>


           See Notes to Condensed Consolidated Financial Statements.



                                                                          Page 4
<PAGE>
 
         5


                           MORGAN STANLEY GROUP INC.
           CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
                       (IN MILLIONS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                 Three Months Ended
                                            February 28,     February 29,
                                                 1997            1996
                                            -------------   -------------
<S>                                         <C>             <C>          
Revenues:
      Investment banking                    $         442   $         399
      Principal transactions:
          Trading                                     751             704
          Investments                                  56              (7)
      Commissions                                     182             154
      Interest and dividends                        2,367           1,933
      Asset management and administration             278             122
      Other                                            --               3
                                            -------------   -------------

          Total revenues                            4,076           3,308
      Interest expense                              2,282           1,859
                                            -------------   -------------

          Net revenues                              1,794           1,449
                                            -------------   -------------

Expenses excluding interest:
      Compensation and benefits                       879             705
      Occupancy and equipment                         100              86
      Brokerage, clearing and exchange
          fees                                         84              66
      Communications                                   40              33
      Business development                             59              37
      Professional services                            60              42
      Other                                            62              40
                                            -------------   -------------

          Total expenses excluding
               interest                             1,284           1,009
                                            -------------   -------------

Income before income taxes                            510             440
Provision for income taxes                            194             167
                                            -------------   -------------

Net income                                  $         316   $         273
                                            =============   =============

Earnings applicable to common shares (1)    $         297   $         257
                                            =============   =============

Average common and common equivalent
      shares outstanding (1)                  158,307,567     156,549,243
                                            =============   =============

Primary earnings per share                  $        1.88   $        1.64
                                            =============   =============

Fully diluted earnings per share            $        1.80   $        1.57
                                            =============   =============
</TABLE>

(1) Amounts shown are used to calculate primary earnings per share.




           See Notes to Condensed Consolidated Financial Statements.


                                                                          Page 5
<PAGE>
 
         6

                           MORGAN STANLEY GROUP INC.
           CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
                                 (IN MILLIONS)

<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                      February 28,     February 29,       
                                                                          1997             1996           
                                                                      ------------     ------------          
<S>                                                                      <C>             <C>              
Cash flows from operating activities:                                                                     
      Net income                                                         $   316         $   273          
      Adjustments to reconcile net income                                                                 
          to net cash used for operating activities:                                                      
               Non-cash charges included in net income                        (1)             28          
               Changes in assets and liabilities:                                                         
               Cash and securities deposited with                                                         
                    clearing organizations or segregated                                                  
                    under federal and other regulations                    1,674            (416)         
               Financial instruments owned, net of                                                        
                    financial instruments sold, not yet purchased         (1,705)          4,878          
               Securities borrowed, net of securities loaned              (9,257)         (4,551)         
               Receivables and other assets                               (2,045)         (6,074)         
               Payables and other liabilities                              4,179            (225)         
                                                                         -------         -------          
      Net cash used for operating activities                              (6,839)         (6,087)         
                                                                                                          
      Cash flows from investing activities:                                                               
          Net payments for:                                                                               
               Property, equipment and leasehold                                                          
                    improvements                                             (16)            (47)         
               Purchase of Miller Anderson & Sherrerd, LLP, net                                           
                  of cash acquired                                            --            (200)         
                                                                         -------         -------          
      Net cash used for investing activities                                 (16)           (247)         
                                                                                                          
      Cash flows from financing activities:                                                               
          Net proceeds related to short-term borrowings                    1,780           1,213          
          Securities sold under agreements to                                                             
               repurchase, net of securities                                                              
               purchased under agreements to resell                        3,051           3,269          
          Proceeds from:                                                                                  
               Issuance of common stock                                       15              39          
               Issuance of long-term borrowings                            3,434           2,814          
               Issuance of Capital Units                                     134              --          
          Payments for:                                                                                   
               Repurchases of common stock                                   (62)           (350)         
               Repayments of long-term borrowings                         (1,306)           (207)         
               Redemption of 8.88% Cumulative Preferred Stock               (195)             --          
          Cash dividends                                                     (53)            (49)         
                                                                         -------         -------          
      Net cash provided by financing activities                            6,798           6,729          
                                                                         -------         -------          
                                                                                                          
      Net (decrease)/increase in cash and interest-bearing equivalents       (57)            395          
      Cash and interest-bearing equivalents, at                                                           
          beginning of period                                              4,545           2,471          
                                                                         -------         -------          
      Cash and interest-bearing equivalents, at end of period            $ 4,488         $ 2,866          
                                                                         =======         =======          
</TABLE>


           See Notes to Condensed Consolidated Financial Statements.


                                                                          Page 6
<PAGE>
 
         7

                           MORGAN STANLEY GROUP INC.
        CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
                                 (IN MILLIONS)


SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:

In connection with the Company's fiscal 1996 acquisition of Miller Anderson &
Sherrerd, LLP, the Company issued approximately $66 million of notes payable,
as well as 2,012,264 shares of common stock having a fair value on the date of
acquisition, January 3, 1996, of approximately $83 million.



                                                                          Page 7
<PAGE>
 
         8

                           MORGAN STANLEY GROUP INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   Basis of Presentation

     The information furnished in this quarterly report has been prepared
     pursuant to the Securities and Exchange Commission's rules and
     regulations. The Condensed Consolidated Financial Statements reflect all
     adjustments (consisting only of normal recurring adjustments) which are,
     in the opinion of management, necessary for the fair statement of the
     results for the interim period and should be read in connection with the
     Annual Report on Form 10-K for the fiscal year ended November 30, 1996
     (file no. 1-9085)("Form 10-K"). The nature of the business of Morgan
     Stanley Group Inc. and its domestic and foreign subsidiaries
     (collectively, the "Company") is such that the results of any interim
     period may not be indicative of the results for the full year. Prior
     period financial statements have been reclassified, where appropriate, to
     conform to the fiscal 1997 presentation.

     Financial instruments, including derivatives, used in the Company's
     trading activities are recorded at fair value, and unrealized gains and
     losses are reflected in trading revenues. Interest revenue and expense
     arising from financial instruments used in trading activities are
     reflected in the Condensed Consolidated Statement of Income as interest
     income or expense. The fair values of trading positions generally are
     based on listed market prices. If listed market prices are not available
     or if liquidating the Company's positions would reasonably be expected to
     impact market prices, fair value is determined based on other relevant
     factors, including dealer price quotations and price quotations for
     similar instruments traded in different markets, including markets located
     in different geographic areas. Fair values for certain derivative
     contracts are derived from pricing models which consider current market
     and contractual prices for the underlying financial instruments or
     commodities, as well as time value and yield curve or volatility factors
     underlying the positions. Purchases and sales of financial instruments are
     recorded in the accounts on trade date. Unrealized gains and losses
     arising from the Company's dealings in over-the-counter ("OTC") financial
     instruments, including derivative contracts related to financial
     instruments and commodities, are presented in the accompanying Condensed
     Consolidated Statement of Financial Condition on a net-by-counterparty
     basis consistent with Financial Accounting Standards Board ("FASB")
     Interpretation No. 39, "Offsetting of Amounts Related to Certain
     Contracts." Reverse repurchase and repurchase agreements are presented
     net-by-counterparty where net presentation is consistent with FASB
     Interpretation No. 41, "Offsetting of Amounts Related to Certain
     Repurchase and Reverse Repurchase Agreements."

     The Company also enters into various financial instrument related
     derivative contracts, such as interest rate swaps, currency swaps and
     forward contracts, as an end user to manage the interest rate and currency
     exposure arising from certain borrowings. Net revenues from derivatives
     used in the Company's asset and liability management are recognized
     ratably over the term of the contract as an adjustment to interest
     expense.

     Equity securities purchased in connection with merchant banking and other
     principal investment activities are initially carried in the Condensed
     Consolidated Financial Statements at their original costs. The carrying
     value of such equity securities is adjusted when changes in the underlying
     fair values are readily ascertainable, generally as evidenced by listed
     market prices of transactions which directly affect the value of such
     equity securities. Downward adjustments relating to such equity securities
     are made in the event that the Company determines that the eventual
     realizable value is less than the carrying value. The carrying value of
     investments made in connection with principal real estate activities which
     do not involve equity securities are adjusted periodically based on
     independent appraisals, estimates prepared by the Company of discounted
     future cash flows of the underlying real estate assets or other indicators
     of fair value.

     Loans made in connection with merchant banking and investment banking
     activities are carried at cost plus accrued interest less reserves, if
     deemed necessary, for estimated losses.




                                                                          Page 8
<PAGE>
 
         9

     Earnings per share is based on the weighted average number of common
     shares and share equivalents outstanding and gives effect to preferred
     stock dividend requirements.

     On April 3, 1996, the Company's stockholders approved an increase in the
     number of authorized shares of common stock from 300,000,000 to
     600,000,000.


2.   Long-Term Borrowings

     Long-term borrowings at February 28, 1997 scheduled to mature within one
     year aggregate $2,626 million.

     During the three month period ended February 28, 1997, the Company issued
     senior notes aggregating $3,424 million, including non-U.S. dollar
     currency notes aggregating $295 million, primarily pursuant to its public
     debt shelf registration statements. The weighted average coupon interest
     rate of these notes at February 28, 1997 was 6.1%; the Company has entered
     into certain transactions to obtain floating interest rates based on
     either short-term LIBOR or repurchase agreement rates for Treasury
     securities. Maturities in the aggregate of these notes for the fiscal
     years ending November 30 are as follows: 1997, $12 million; 1998, $64
     million; 1999, $652 million; 2000, $567 million; 2001, $21 million; and
     thereafter, $2,108 million. As of February 28, 1997, the aggregate
     outstanding principal amount of the Company's Senior Indebtedness (as
     defined in the aforementioned registration statements) was approximately
     $32.5 billion.

     From March 1, 1997 to March 31, 1997, additional senior notes aggregating
     $226 million were issued primarily pursuant to the Company's public debt
     shelf registration statements. These notes have maturities from 1999 to
     2002.

3.   Derivative Contracts and Other Commitments and Contingencies

     In the normal course of business, the Company enters into a variety of
     derivative contracts related to financial instruments and commodities. The
     Company uses swap agreements in its trading activities and in managing its
     interest rate exposure. The Company also uses forward and option
     contracts, futures and swaps in its trading activities; these financial
     instruments also are used to hedge the U.S. dollar cost of certain foreign
     currency exposures. In addition, financial futures and forward contracts
     are actively traded by the Company and are used to hedge proprietary
     inventory. The Company also enters into delayed delivery, when-issued, and
     warrant and option contracts involving securities. These instruments
     generally represent future commitments to swap interest payment streams,
     exchange currencies or purchase or sell other financial instruments on
     specific terms at specified future dates. Many of these products have
     maturities that do not extend beyond one year; swaps and options and
     warrants on equities typically have longer maturities. For further
     discussion of these matters, refer to "Management's Discussion and
     Analysis of Financial Condition and Results of Operations -- Derivative
     Financial Instruments", and Note 5 to the Consolidated Financial
     Statements, included in the Form 10-K.

     These derivative instruments involve varying degrees of off-balance sheet
     market risk. Future changes in interest rates, foreign currency exchange
     rates or the fair values of the financial instruments, commodities or
     indices underlying these contracts ultimately may result in cash
     settlements exceeding fair value amounts recognized in the Condensed
     Consolidated Statement of Financial Condition, which, as described in Note
     1, are recorded at fair value, representing the cost of replacing those
     instruments.


                                                                          Page 9
<PAGE>
 
         10

     The Company's exposure to credit risk with respect to these derivative
     instruments at any point in time is represented by the fair value of the
     contracts reported as assets. These amounts are presented on a
     net-by-counterparty basis consistent with FASB Interpretation No. 39, but
     are not reported net of collateral, which the Company obtains with respect
     to certain of these transactions to reduce its exposure to credit losses.

     The credit quality of the Company's trading-related derivatives at
     February 28, 1997 and November 30, 1996 is summarized in the tables below,
     showing the fair value of the related assets by counterparty credit
     rating. The actual credit ratings are determined by external rating
     agencies or by equivalent ratings used by the Company's Credit Department:

<TABLE>
<CAPTION>
February 28, 1997
----------------------------------------------------------------------------------------------------
                                                                         Collater-
                                                                         alized    Other
                                                                         Non-      Non-
                                                                         Invest-   Invest-
                                                                         ment      ment
(Dollars in millions)        AAA        AA          A         BBB        Grade     Grade       Total
----------------------------------------------------------------------------------------------------
<S>                        <C>        <C>        <C>        <C>        <C>        <C>        <C>    
Interest rate
      and currency
      swaps and options
      (including caps,
      floors and swap
      options) and
      other fixed
      income securities
      contracts            $   968    $ 1,679    $ 2,154    $   567    $    19    $   292    $ 5,679
Foreign exchange
      forward contracts
      and options            1,102      1,634        829         70         --        109      3,744
Mortgage-backed
      securities forward
      contracts, swaps
      and options               68         45         53         15         --          9        190
Equity securities
      contracts
      (including equity
      swaps, warrants
      and options)             757        475        387         95        384          9      2,107
Commodity forwards,
      options and swaps         99        329        264        252          4        150      1,098
                           -------    -------    -------    -------    -------    -------    -------
Total                      $ 2,994    $ 4,162    $ 3,687    $   999    $   407    $   569    $12,818
                           =======    =======    =======    =======    =======    =======    =======

Percent of total                23%        32%        29%         8%         3%         5%       100%
                           =======    =======    =======    =======    =======    =======    =======

</TABLE>



                                                                         Page 10
<PAGE>
 
         11


<TABLE>
<CAPTION>
November 30, 1996
----------------------------------------------------------------------------------------------------
                                                                         Collater-
                                                                         alized     Other
                                                                         Non-       Non-
                                                                         Invest-    Invest-
                                                                         ment       ment
(Dollars in millions)          AAA         AA          A        BBB      Grade      Grade      Total
----------------------------------------------------------------------------------------------------
<S>                        <C>        <C>        <C>        <C>        <C>        <C>        <C>    
Interest rate
      and currency
      swaps and options
      (including caps,
      floors and swap
      options) and
      other fixed
      income securities
      contracts            $   792    $ 1,445    $ 2,018    $   696    $    31    $   183    $ 5,165
Foreign exchange
      forward contracts
      and options              727        824        539         28         --         50      2,168
Mortgage-backed
      securities forward
      contracts, swaps
      and options               66         65         64         19         --          5        219
Equity securities
      contracts
      (including equity
      swaps, warrants
      and options)           1,074        274        408         60        426         43      2,285
Commodity forwards,
      options and swaps         95        318        318        280         72        300      1,383
                           -------    -------    -------    -------    -------    -------    -------
Total                      $ 2,754    $ 2,926    $ 3,347    $ 1,083    $   529    $   581    $11,220
                           =======    =======    =======    =======    =======    =======    =======

Percent of total                24%        26%        30%        10%         5%         5%       100%
                           =======    =======    =======    =======    =======    =======    =======

</TABLE>


     A substantial portion of the Company's securities and commodities
     transactions are collateralized and are executed with and on behalf of
     commercial banks and other institutional investors, including other
     brokers and dealers. Positions taken and commitments made by the Company,
     including positions taken and underwriting and financing commitments made
     in connection with its merchant banking and other principal investment
     activities, often involve substantial amounts and significant exposure to
     individual issuers and businesses, including non-investment grade issuers.
     The Company seeks to limit concentration risk created in its businesses
     through a variety of separate but complementary financial, position and
     credit exposure reporting systems, including the use of trading limits
     based in part upon the Company's review of the financial condition and
     credit ratings of its counterparties.

     See also "Business -- Risk Management" and "Management's Discussion and
     Analysis of Financial Condition and Results of Operations -- Risk
     Management" in the Form 10-K for discussions of the Company's risk
     management policies and procedures.

     The Company had approximately $2.9 billion of letters of credit
     outstanding at February 28, 1997 to satisfy various collateral
     requirements.


                                                                         Page 11
<PAGE>
 
         12


     The Company and its subsidiaries have been named as defendants in certain
     legal actions and have been involved in certain investigations and
     proceedings in the ordinary course of business. It is the opinion of
     management, based on current knowledge and after consultation with
     counsel, that the outcome of such matters will not have a material adverse
     effect on the Company's Condensed Consolidated Financial Statements
     contained herein.

4.   Preferred Stock and Capital Units

     Preferred stock is composed of the following issues. Each issue of
     preferred stock ranks in parity with all other preferred stock.

<TABLE>
<CAPTION>
                                            Shares Outstanding at                        Balance at
                                     -------------------------------------    ---------------------------------
                                      February 28,       November 30,          February 28,     November 30,
                                          1997               1996                  1997             1996
                                     ---------------  --------------------    ---------------  ----------------
                                                                                       (in millions)
<S>                                       <C>                   <C>             <C>                <C>           
ESOP Convertible
     Preferred Stock,
     liquidation preference
     $35.88                               3,687,031             3,699,302       $          132     $          133

Series A Fixed/Adjustable
     Rate Cumulative Preferred
     Stock, stated value $200             1,725,000             1,725,000                  345                345

7-3/4% Cumulative
     Preferred Stock,
     stated value $200                    1,000,000             1,000,000                  200                200

7-3/8% Cumulative
     Preferred Stock,
     stated value $200                    1,000,000             1,000,000                  200                200

8.88% Cumulative
     Preferred Stock,
     stated value $200                            -               975,000                    -                195

8-3/4% Cumulative
     Preferred Stock,
     stated value $200                      750,000               750,000                  150                150
                                                                                --------------     --------------
 
Total                                                                           $        1,027     $        1,223
                                                                                ==============     ==============

</TABLE>

     On December 3, 1996, the Company announced that it had called for
     redemption, on January 3, 1997, all 975,000 shares of its 8.88% Cumulative
     Preferred Stock at a redemption price of $201.632 per share, which
     reflects the stated value of $200 per share together with an amount equal
     to all dividends accrued and unpaid to, but excluding, January 3, 1997.



                                                                         Page 12
<PAGE>
 
         13

     Included in the Company's Condensed Consolidated Statement of Financial
     Condition at February 28, 1997 and November 30, 1996 are Capital Units
     issued by the Company and Morgan Stanley Finance plc, a U.K. subsidiary
     ("MS plc"). A Capital Unit consists of (a) a Subordinated Debenture of MS
     plc guaranteed by the Company and having maturities from 2013 to 2017, and
     (b) a related Purchase Contract issued by the Company, which may be
     accelerated by the Company beginning approximately one year after the
     issuance of each Capital Unit, requiring the holder to purchase one
     Depositary Share representing shares (or fractional shares) of the
     Company's Cumulative Preferred Stock.

     In the first quarter of fiscal 1997, the Company and MS plc issued 8.03%
     Capital Units in an aggregate amount of $134 million.

5.   Stockholders' Equity

     Morgan Stanley & Co. Incorporated ("MS&Co.") is a registered broker-dealer
     and a registered futures commission merchant and, accordingly, is subject
     to the minimum net capital requirements of the Securities and Exchange
     Commission, the New York Stock Exchange and the Commodity Futures Trading
     Commission. MS&Co. has consistently operated in excess of these
     requirements with aggregate net capital, as defined, totaling $1,596
     million at February 28, 1997, which exceeded the amount required by $1,255
     million. Morgan Stanley & Co. International Limited ("MSIL"), a
     London-based broker-dealer subsidiary, is subject to capital requirements
     of the Securities and Futures Authority, and Morgan Stanley Japan Limited
     ("MSJL"), a Tokyo-based broker-dealer, is subject to the capital
     requirements of the Japanese Ministry of Finance. MSIL and MSJL have
     consistently operated in excess of their respective regulatory capital
     requirements.

     Certain other U.S. and non-U.S. subsidiaries are subject to various
     securities, commodities and banking regulations, and capital adequacy
     requirements promulgated by the regulatory and exchange authorities of the
     countries in which they operate. These subsidiaries have consistently
     operated in excess of their applicable local capital adequacy
     requirements.


6.   Acquisitions

     During the first quarter of fiscal 1996, the Company completed its
     acquisition of Miller Anderson & Sherrerd, LLP ("MAS"), a
     Philadelphia-based institutional investment manager, for approximately
     $350 million. The Company's results for the three months ended February
     29, 1996 include the results of MAS from January 3, 1996, the date of
     acquisition.

     In the fourth quarter of fiscal 1996, the Company completed its purchase
     of Van Kampen American Capital, Inc. ("VKAC") for $1.175 billion. The
     consideration for the purchase of the equity of VKAC consisted of cash and
     approximately $26 million of preferred securities issued by one of the
     Company's subsidiaries and exchangeable into common stock of the Company.

     On April 3, 1997, the Company announced the acquisition of the
     institutional global custody business of Barclays PLC ("Barclays"). The
     amount of consideration for this business is to be fixed over a period of
     time based on account retention. The transaction involves approximately
     $250 billion of assets currently administered by Barclays, and the
     combination of Barclays with the Company's global custody businesses would
     have increased the Company's assets under administration at February 28,
     1997 to approximately $400 billion on a pro forma basis (assuming that
     current clients of Barclays agree to become clients of the Company).
     Barclays has agreed to provide global subcustodial services to the Company
     for a period of time after completion of the acquisition.




                                                                         Page 13
<PAGE>
 
         14

     The goodwill and other intangible assets associated with these
     transactions are amortized on a straight-line basis over periods from five
     to 25 years and are periodically evaluated for impairment.

7.   Announced Merger with Dean Witter, Discover & Co.

     On February 5, 1997, the Company and Dean Witter Discover & Co. ("DWD")
     announced a definitive agreement to merge. The combined company would be a
     pre-eminent global financial services firm with leading market positions
     in the securities, asset management and credit services businesses. Under
     the terms of the agreement unanimously approved by the Boards of both
     companies, each of the Company's common shares will be exchanged for 1.65
     DWD common shares. Shares of the Company's preferred stock outstanding
     will be exchanged for preferred stock of DWD having substantially
     identical terms. The transaction, which is expected to be completed in
     mid-1997, is intended to be accounted for as a pooling of interests and is
     subject to customary closing conditions, including certain regulatory
     approvals and the approval of shareholders of both companies.

8.   New Accounting Pronouncement

     In February, 1997, the FASB issued Statement of Financial Accounting
     Standards No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128
     establishes standards for computing and presenting earnings per share
     ("EPS"). SFAS No. 128 replaces the presentation of primary EPS with basic
     EPS and fully diluted EPS with diluted EPS. Basic EPS excludes dilution
     and is calculated by dividing income available to common shareholders by
     the weighted average number of common shares outstanding for the period.
     Diluted EPS is computed similarly to fully diluted EPS.

     SFAS No. 128 is effective for financial statement periods ending after
     December 15, 1997, and requires restatement of all prior period EPS data.
     The adoption of SFAS No. 128 would not have had, and is not expected to
     have, a material impact on the Company's EPS computations.





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