Subject to Completion, Pricing Supplement dated April 29, 1998
PROSPECTUS Dated March 26, 1998 Pricing Supplement No. 12 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-46935
Dated March 26, 1998 Dated , 1998
Rule 424(b)(3)
$100,000,000
Morgan Stanley Dean Witter & Co.
SONY CORPORATION 3% CURRENCY PROTECTED SECURITIES ("CPS(SM)")
DUE MAY 17, 2000
MEDIUM-TERM NOTES, SERIES C
The 3% Currency Protected Securities Due May 17, 2000 (the
"Sony CPS") are Medium-Term Notes, Series C (Senior Fixed Rate Notes) of
Morgan Stanley Dean Witter & Co. (the "Company"), as further described below
and in the Prospectus Supplement under "Description of Notes--Fixed Rate
Notes" and "--Exchangeable Notes." The Sony CPS permit the investor to
participate in the price fluctuations of the common stock, Yen 50 par value per
share (the "Sony Stock"), of Sony Corporation, a company incorporated under
the laws of Japan ("Sony"), without being affected by future changes in the
Japanese Yen/U.S. Dollar exchange rate. See "Hypothetical Movements in the
Japanese Yen/U.S. Dollar Exchange Rate" in this Pricing Supplement. The Sony
Stock is quoted in Japanese Yen on the Tokyo Stock Exchange. As of
, 1998, the Market Price of Sony Stock was Japanese Yen.
The principal amount of each Sony CPS being offered hereby will
be $ (the "Issue Price"), which equals the quotient of (a) the Initial
Stock Price of 20 shares (the "Initial Share Control Amount") of Sony Stock
divided by (b) an exchange rate of Japanese Yen per U.S. Dollar.
The Sony CPS will mature on May 17, 2000. Interest on the Sony CPS, at the
rate of 3% of the principal amount per annum, is payable semiannually in
arrears on each May 17 and November 16, beginning November 16, 1998. Interest
on the Sony CPS will accrue at a higher rate than the rate at which dividends
have been paid to date on the Sony Stock.
At maturity (including as a result of acceleration or
otherwise), the Company will, with respect to the principal amount of each
Sony CPS, deliver either (i) an amount in U.S. Dollars equal to the product of
the principal amount thereof and the Stock Percentage Change (the "Cash
Amount") or (ii) if the holder so elects, the Equivalent Share Amount (see
"Right to Receive the Equivalent Share Amount" in this Pricing Supplement).
The Stock Percentage Change is a fraction, the numerator of which will be the
Final Stock Price and the denominator of which will be the Initial Stock
Price. The Initial Stock Price will equal the Market Price of Sony Stock on
the Pricing Date. The Final Stock Price will equal the Market Price of Sony
Stock on the Determination Date, which will be May 9, 2000, subject to certain
market disruption events. See "Exchange at Maturity" and "Antidilution
Adjustments" in this Pricing Supplement.
Sony is not affiliated with the Company, is not involved in
this offering of Sony CPS and will have no obligations with respect to the
Sony CPS. See "Historical Information" in this Pricing Supplement for
information on the range of Market Prices for Sony Stock on the Tokyo Stock
Exchange.
The Company will cause the Market Price and any antidilution
adjustments to be determined by the Calculation Agent for The Chase Manhattan
Bank, as Trustee under the Senior Debt Indenture.
As a result of the formula for determining the amount
payable at the maturity of the Sony CPS, a holder may receive more or less
than the Issue Price per Sony CPS at maturity. In addition, an investment
in the Sony CPS entails risks not associated with similar investments in a
conventional debt security, as described under "Risk Factors" on PS-5 and
PS-6 herein.
The Sony CPS have been approved for listing on the American
Stock Exchange, Inc. ("AMEX"), subject to official notice of issuance. The
AMEX symbol for the Sony CPS is "SPS." It is not possible to predict whether
the Sony CPS will trade in the secondary market or if such market will be
liquid or illiquid.
----------------
PRICE $ PER SONY CPS AND ACCRUED INTEREST
----------------
Agent's Proceeds to
Price to Public(1) Commissions(2) Company(1)
------------------ -------------- -----------
Per Sony CPS... $ $ $
Total.......... $ $ $
- ------------
(1) Plus accrued interest, if any, from , 1998.
(2) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
MORGAN STANLEY DEAN WITTER
Information contained in this preliminary pricing supplement is subject to
completion or amendment. These securities may not be delivered prior to the
time a final pricing supplement is delivered. This pricing supplement and the
accompanying prospectus and prospectus supplement shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of any such State.
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount.............. $100,000,000
Maturity Date................. May 17, 2000
Interest Rate................. 3% per annum.
Interest Payment Dates........ May 17 and November 16, beginning November
16, 1998
Specified Currency............ U.S. Dollars
Issue Price................... $ per Sony CPS, which equals the
quotient of (a) the Initial Stock Price times
the Initial Share Control Amount divided by
(b) the Initial FX Rate.
Original Issue Date
(Settlement Date)........... , 1998
Pricing Date.................. The day the Sony CPS are initially priced to
the public in the United States, except that
for the purpose of determining the Initial
Stock Price and the Initial FX Rate, the
Pricing Date will be the next succeeding
Trading Day in Tokyo.
CUSIP.........................
Book Entry Note or
Certificated Note........... Book Entry
Senior Note or Subordinated
Note........................ Senior
Denominations................. $ and integral multiples thereof
Trustee....................... The Chase Manhattan Bank
Agent......................... Morgan Stanley & Co. Incorporated
Amount Payable at Maturity.... At maturity (including as a result of
acceleration or otherwise), the Company will,
with respect to the principal amount of each
Sony CPS, upon delivery of such Sony CPS to
the Trustee, deliver either (i) an amount in
U.S. Dollars equal to the product of the
principal amount thereof and the Stock
Percentage Change (the "Cash Amount") or (ii)
if the holder so elects, the Equivalent Share
Amount. See "Right to Receive Equivalent
Share Amount."
The Company shall, or shall cause the
Calculation Agent to, deliver U.S. Dollars
(or Sony ADRs, if any holder of the Sony CPS
exercises the Right to Receive the Equivalent
Share Amount) to the Trustee for delivery to
the holders. References to payment "per Sony
CPS" refer to each $ principal amount of
any Sony CPS.
Stock Percentage Change....... The Stock Percentage Change is a fraction,
the numerator of which will be the Final
Stock Price and the denominator of which will
be the Initial Stock Price.
Initial Stock Price........... Yen , the Market Price of one share of
Sony Stock on the Pricing Date, as determined
by the Calculation Agent.
Final Stock Price............. The product of the Market Price of one share
of Sony Stock and the Share Ratio, each as
determined on the Determination Date by the
Calculation Agent.
Initial Share Control Amount.. 20
Initial FX Rate............... Japanese Yen per U.S. $1.00, the
Japanese Yen/U.S. dollar exchange rate as of
the Pricing Date.
Share Ratio................... The Share Ratio will initially be set at 1.0,
but will be subject to adjustment upon the
occurrence of certain corporate events through
and including the Determination Date. See
"Antidilution Adjustments" below.
Right to Receive the
Equivalent Share Amount..... On or prior to the fifteenth Business Day
prior to the Maturity Date, holders of Sony
CPS will be entitled, upon completion by the
holder and delivery to the Company and the
Calculation Agent of an Official Notice of
Exercise of Right to Receive Equivalent Share
Amount (in the form of Annex A attached
hereto) prior to 11:00 a.m., New York City
time on such date, to elect to receive the
Equivalent Share Amount at maturity, in lieu
of the Cash Amount, unless it is not
reasonably practicable at such time for the
Calculation Agent, in the opinion of the
Calculation Agent, to obtain such Equivalent
Share Amount, in which case the Cash Amount
will be paid.
Equivalent Share Amount....... The Equivalent Share Amount for any Sony CPS
means an amount of American Depositary
Shares, as determined by the Calculation
Agent, representing Sony Stock ("Sony ADRs")
equivalent to the Cash Amount otherwise
payable on such Sony CPS determined as
follows. The Equivalent Share Amount will be
a number of Sony ADRs resulting from the
conversion into Sony ADRs (at the then
current ratio of Sony Stock to Sony ADRs) of
a number of shares of Sony Stock having an
aggregate Market Price on the Determination
Date equal to the Cash Amount multiplied by
the Final FX Rate; provided that the Cash
Amount shall be reduced by the cost of
converting such Sony Stock into Sony ADRs
assessed by Morgan Guaranty Trust Company of
New York, as Depositary for such Sony ADRs
(together with any successor depositary, the
"Sony ADR Depositary") (estimated to be $0.05
per share of Sony Stock, or $1.00 per Sony
CPS, subject to any adjustment of the Share
Ratio) and by any tax or other governmental
charge levied in connection with such
conversion; and provided further that the
Company will pay cash in lieu of delivering
fractional Sony ADRs, in an amount as
determined by the Calculation Agent. The
Equivalent Share Amount will be delivered to
the investor on the later of (i) the Maturity
Date and (ii) the first Business Day when
Sony ADRs are available with respect to
shares of Sony Stock submitted to the Sony ADR
Depositary for conversion into Sony ADRs on
the Business Day immediately succeeding the
Determination Date. In the event of certain
Market Disruption Events, the delivery of
such Sony ADRs may be delayed until after the
Maturity Date.
Final FX Rate................. The Japanese Yen/U.S. dollar exchange rate as
of 1:00 p.m. (Tokyo time) on the
Determination Date as determined by reference
to Reuters Screen TKYFX, as determined by the
Calculation Agent on the Determination Date.
Determination Date............ May 9, 2000, or if such day is not a Trading
Day or if there is a Market Disruption Event
on such day, the Determination Date will be
the immediately succeeding Trading Day during
which no Market Disruption Event shall have
occurred; provided that the Determination
Date will be no later than the second
scheduled Trading Day preceding the Maturity
Date, notwithstanding the occurrence of a
Market Disruption Event on such second
scheduled Trading Day.
Market Price.................. The Market Price for any security for any
date means the official closing price
(afternoon session, as applicable) of such
security as reported by the principal
exchange on which such security is traded on
such date. If the official closing price is
not available for any reason (including,
without limitation, the occurrence of a Market
Disruption Event), the Market Price for such
security for any date shall be the mean, as
determined by the Calculation Agent, of the
bid prices for such security obtained from as
many dealers in such security, but not
exceeding three, as will make such bid prices
available to the Calculation Agent after 3:00
p.m. (local time in such principal market) on
such date.
Trading Day................... A day on which trading is generally conducted
on the Tokyo Stock Exchange ("TSE"), and in
the over-the-counter market for equity
securities in the United States and Japan, as
determined by the Calculation Agent.
Business Day.................. Any day other than a Saturday or Sunday, that
is neither a legal holiday nor a day on which
banking institutions are authorized or
required by law or regulation to close in The
City of New York or in Tokyo.
Calculation Agent............. Morgan Stanley & Co. Incorporated ("MS & Co.")
For potential conflicts of interest that may
exist between the Calculation Agent and the
holders of the Sony CPS, see "Risk Factors"
below. MS & Co. is obligated to carry out
its duties as Calculation Agent in good faith
using its reasonable judgment.
All percentages resulting from any
calculation on the Sony CPS will be rounded
to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of
a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) would be rounded to
9.87655% (or .0987655)), and all dollar
amounts used in or resulting from such
calculation will be rounded to the nearest
cent with one-half cent being rounded
upwards.
Risk Factors.................. An investment in the Sony CPS entails
significant risks not associated with similar
investments in a conventional debt security,
including the following:
The Sony CPS combine features of equity and
debt instruments. For example, holders of
Sony CPS, unlike holders of Sony Stock, will
not be entitled to receive dividends, if any,
that may be payable on Sony Stock. In
addition, the terms of the Sony CPS differ
from those of ordinary debt securities in
that the amount due at maturity is not fixed,
but is based on the price of the Sony Stock
at maturity. Because the price of the Sony
Stock is subject to market fluctuations, the
amount of cash or the value of the ADRs
received by a holder of Sony CPS at maturity,
determined as described herein, may be more
or less than the principal amount of the Sony
CPS. If the Final Stock Price is less than
the Initial Stock Price, the amount of cash
or the value of the ADRs receivable upon
exchange will be less than the principal
amount of the Sony CPS, in which case an
investment in the Sony CPS may result in a
loss.
Although the amount that holders of the Sony
CPS are entitled to receive at maturity is
subject to adjustment for certain corporate
events, such adjustments do not cover all
events that could affect the Market Price of
the Sony Stock, including, without
limitation, the occurrence of a partial
tender or exchange offer for the Sony Stock
by Sony or any third party. Such other
events may adversely affect the market value
of the Sony CPS or any ADRs allocated on the
Determination Date (but not received by the
holder until maturity) pursuant to such
holder's election to receive the Equivalent
Share Amount.
There can be no assurance as to whether the
Sony CPS will trade in the secondary market
or, if there is such a secondary market,
whether such market will be liquid or
illiquid. Securities with characteristics
similar to the Sony CPS are novel securities,
and there is currently no secondary market
for the Sony CPS.
The market value for the Sony CPS will be
affected by a number of factors in addition
to the creditworthiness of the Company and the
value of Sony Stock, including, but not
limited to the dividend rate on Sony Stock,
market interest and yield rates and the time
remaining to the maturity of the Sony CPS.
In addition, the value of Sony Stock depends
on a number of interrelated factors, including
economic, financial and political events,
that can affect the capital markets generally
and the market segment of which Sony is a part
and over which the Company has no control.
The market value of the Sony CPS is expected
to depend primarily on changes in the Market
Price of Sony Stock. The price at which a
holder will be able to sell Sony CPS prior to
maturity may be at a discount, which could
be substantial, from the principal amount
thereof, if, at such time, such Market Price
is below, equal to or not sufficiently above
the Initial Stock Price. The historical
Market Prices of Sony Stock should not be
taken as an indication of Sony Stock's future
performance during the term of any Sony CPS.
The Company is not affiliated with Sony and,
although the Company as of the date of this
Pricing Supplement does not have any material
non-public information concerning Sony,
corporate events of Sony, including those
described below in "Antidilution
Adjustments," are beyond the Company's
ability to control and are difficult to
predict.
Sony is not involved in the offering of the
Sony CPS and has no obligations with respect
to the Sony CPS, including any obligation to
take the interests of the Company or of
holders of Sony CPS into consideration for
any reason. Sony will not receive any of the
proceeds of the offering of the Sony CPS made
hereby and is not responsible for, and has
not participated in, the determination of the
timing of, prices for or quantities of, the
Sony CPS offered hereby.
Holders of the Sony CPS will not be entitled
to any rights with respect to the Sony Stock
(including, without limitation, the right to
receive dividends or other distributions,
voting rights and the right to tender or
exchange Sony Stock in any partial tender or
exchange offer by Sony or any third party).
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Sony CPS,
including with respect to certain adjustments
to the Share Ratio and other antidilution
adjustments that may influence the
determination of the amount of cash
receivable at the maturity of the Sony CPS.
See "Antidilution Adjustments" and "Market
Disruption Event."
It is suggested that prospective investors
who consider purchasing the Sony CPS should
reach an investment decision only after
carefully considering the suitability of the
Sony CPS in light of their particular
circumstances.
Investors should also consider the tax
consequences of investing in the Sony CPS,
certain aspects of which are uncertain. See
"United States Federal Income Taxation" below.
Antidilution Adjustments...... The Share Ratio (and, in the case of
paragraph 5 below, the determination of the
Cash Amount) will be adjusted as follows:
1. If Sony Stock is subject to a
stock split or reverse stock split, then
once such split has become effective, the
Share Ratio will be adjusted to equal the
product of the prior Share Ratio and the
number of shares issued in such stock
split or reverse stock split with respect
to one share of Sony Stock.
2. If Sony Stock is subject (i) to a
stock dividend (issuance of additional
shares of Sony Stock) that is given
ratably to all holders of shares of Sony
Stock or (ii) to a distribution of Sony
Stock as a result of the triggering of any
provision of the corporate charter of Sony
by any shareholder that is not a holder of
the Sony CPS, then once the dividend has
become effective and Sony Stock is trading
ex-dividend, the Share Ratio will be
adjusted so that the new Share Ratio shall
equal the prior Share Ratio plus the
product of (i) the number of shares issued
with respect to one share of Sony Stock
and (ii) the prior Share Ratio.
3. There will be no adjustments to
the Share Ratio to reflect cash dividends
or other distributions paid with respect
to Sony Stock other than distributions
described in clause (v) of paragraph 5
below and Extraordinary Dividends as
described below. A cash dividend or other
distribution with respect to Sony Stock
will be deemed to be an "Extraordinary
Dividend" if such dividend or other
distribution exceeds the immediately
preceding non-Extraordinary Dividend for
Sony Stock by an amount equal to at least
10% of the Market Price of Sony Stock on
the Trading Day preceding the ex-dividend
date for the payment of such Extraordinary
Dividend (the "ex-dividend date"). If an
Extraordinary Dividend occurs with respect
to Sony Stock, the Share Ratio with
respect to Sony Stock will be adjusted on
the ex-dividend date with respect to such
Extraordinary Dividend so that the new
Share Ratio will equal the product of (i)
the then current Share Ratio and (ii) a
fraction, the numerator of which is the
Market Price on the Trading Day preceding
the ex-dividend date, and the denominator
of which is the amount by which the Market
Price on the Trading Day preceding the ex-
dividend date exceeds the Extraordinary
Dividend Amount. The "Extraordinary
Dividend Amount" with respect to an
Extraordinary Dividend for Sony Stock will
equal (i) in the case of cash dividends or
other distributions that constitute
quarterly dividends, the amount per share
of such Extraordinary Dividend minus the
amount per share of the immediately
preceding non-Extraordinary Dividend for
Sony Stock or (ii) in the case of cash
dividends or other distributions that do
not constitute quarterly dividends, the
amount per share of such Extraordinary
Dividend. To the extent an Extraordinary
Dividend is not paid in cash, the value of
the non-cash component will be determined
by the Calculation Agent, whose
determination shall be conclusive. A
distribution on the Sony Stock described
in clause (v) of paragraph 5 below that
also constitutes an Extraordinary Dividend
shall cause an adjustment to the Share
Ratio pursuant only to clause (v) of
paragraph 5.
4. If Sony issues rights or warrants
to all holders of Sony Stock to subscribe
for or purchase Sony Stock at an exercise
price per share less than the Market Price
of the Sony Stock on (i) the date the
exercise price of such rights or warrants
is determined and (ii) the expiration date
of such rights or warrants, and if the
expiration date of such rights or warrants
precedes the maturity of the Sony CPS,
then the Share Ratio will be adjusted to
equal the product of the prior Share Ratio
and a fraction, the numerator of which
shall be the number of shares of Sony
Stock outstanding immediately prior to
such issuance plus the number of
additional shares of Sony Stock offered
for subscription or purchase pursuant to
such rights or warrants and the
denominator of which shall be the number
of shares of Sony Stock outstanding
immediately prior to such issuance plus
the number of additional shares of Sony
Stock which the aggregate offering price
of the total number of shares of Sony
Stock so offered for subscription or
purchase pursuant to such rights or
warrants would purchase at the Market
Price on the expiration date of such
rights or warrants, which shall be
determined by multiplying such total
number of shares offered by the exercise
price of such rights or warrants and
dividing the product so obtained by such
Market Price.
5. If (i) there occurs any
reclassification or change of Sony Stock,
(ii) Sony, or any surviving entity or
subsequent surviving entity of Sony (a
"Sony Successor") has been subject to a
merger, combination or consolidation and
is not the surviving entity, (iii) any
statutory exchange of securities of Sony
or any Sony Successor with another
corporation occurs (other than pursuant to
clause (ii) above), (iv) Sony is
liquidated, (v) Sony issues to all of its
shareholders equity securities of an
issuer other than Sony (other than in a
transaction described in clauses (ii),
(iii) or (iv) above) (a "Spin-off Event")
or (vi) a tender or exchange offer is
consummated for all the outstanding shares
of Sony Stock (any such event in clauses
(i) through (vi) a "Reorganization
Event"), the method of determining the
amount payable at maturity for each Sony
CPS will be adjusted to provide that each
holder of Sony CPS will receive at
maturity, in respect of the principal
amount of each Sony CPS and in lieu of the
Cash Amount, U.S. Dollars in an amount
equal to the Transaction Value (as defined
below); provided that, if the Exchange
Property (as defined below) received in
any such Reorganization Event consists
only of cash, the maturity date of the
Sony CPS will be deemed to be accelerated
to the date on which such cash is
distributed to holders of Sony Stock.
"Exchange Property" means the securities,
cash or any other assets distributed in
any such Reorganization Event, including,
in the case of a Spin-off Event, the share
of Sony Stock with respect to which the
spun-off security was issued. "Transaction
Value" means (i) for any cash received in
any such Reorganization Event, the amount
of cash received per share of Sony Stock
multiplied by the product of the Initial
Share Control Amount and the then current
Share Ratio divided by the Initial FX
Rate, (ii) for any property other than
cash or securities received in any such
Reorganization Event, the market value (as
determined by the Calculation Agent) of
such Exchange Property received for each
share of Sony Stock at the date of the
receipt of such Exchange Property
multiplied by the product of the Initial
Share Control Amount and the then current
Share Ratio divided by the Initial FX Rate
and (iii) for any security received in any
such Reorganization Event, an amount equal
to the Market Price per share of such
security on the Determination Date
multiplied by the quantity of such
security received for each share of Sony
Stock multiplied by the product of the
Initial Share Control Amount and the then
current Share Ratio divided by the Initial
FX Rate.
6. In the event of a general
revaluation of the Japanese Yen pursuant
to any governmental action by Japan, the
Share Ratio will be adjusted by the
Calculation Agent so that the new Share
Ratio will reflect the effect of such
revaluation on the Japanese Yen /U.S.
dollar exchange rate. For example, if
Japan were to revalue the Yen by the
issuance of a new currency (the "New
Currency") whose value per currency unit
against the U.S. dollar was equivalent to
a multiple or fraction of the then
prevailing Japanese Yen/U.S. dollar rate
(and the price of Sony Stock was to be
quoted in such New Currency), the Market
Price will be determined by reference to
the market price of Sony Stock as quoted
in such New Currency and the Share Ratio
will be adjusted by such multiple or
fraction so that the US dollar value of
the Sony CPS would remain constant i.e.
the Cash Amount, if determined immediately
after such revaluation would be the same
as the Cash Amount as determined
immediately prior to such revaluation.
For purposes of paragraph 5 above, in the
case of a consummated tender or exchange
offer for all Exchange Property of a
particular type, Exchange Property shall be
deemed to include the amount of cash or other
property paid by the offeror in the tender or
exchange offer with respect to such Exchange
Property (in an amount determined on the
basis of the rate of exchange in such tender
or exchange offer). In the event of a tender
or exchange offer with respect to Exchange
Property in which an offeree may elect to
receive cash or other property, Exchange
Property shall be deemed to include the kind
and amount of cash and other property received
by offerees who elect to receive cash.
No adjustments to the Share Ratio will be
required unless such Share Ratio adjustment
would require a change of at least 0.1% in the
Share Ratio then in effect. The Share Ratio
resulting from any of the adjustments
specified above will be rounded to the
nearest one thousandth with five
ten-thousandths being rounded upward.
No adjustments to the Share Ratio or to the
amount payable at maturity of the Sony CPS
will be required other than those specified
above. However, the Company may, at its sole
discretion, cause the Calculation Agent to
make additional adjustments to the Share Ratio
to reflect changes occurring in relation to
the Sony Stock or any other Exchange Property
in other circumstances where the Company
determines that it is appropriate, but only
to reflect such changes, and not with the aim
of spreading investment risk. The required
adjustments specified above do not cover all
events that could affect the Market Price of
the Sony Stock, including, without
limitation, a partial tender or exchange
offer for the Sony Stock.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to the Share
Ratio and of any related determinations and
calculations with respect to any
distributions of stock, other securities or
other property or assets (including cash) in
connection with any corporate event described
in paragraph 5 above, and its determinations
and calculations with respect thereto shall
be conclusive.
The Calculation Agent will provide
information as to any adjustments to the
Share Ratio upon written request by any
holder of the Sony CPS.
Market Disruption Event....... "Market Disruption Event" means:
(i) a suspension, absence (including the
absence of an official closing price) or
material limitation of trading of Sony
Stock on the Tokyo Stock Exchange for more
than two hours of trading or during the
one-half hour period preceding or at the
close of trading in such market; or the
suspension or material limitation on the
primary market for trading in options
contracts related to Sony Stock, if
available, during the one-half hour period
preceding or at the close of trading in
the applicable market, in each case as
determined by the Calculation Agent in its
sole discretion; and
(ii) a determination by the Calculation
Agent in its sole discretion that the
event described in clause (i) above
materially interfered with the ability of
the Company or any of its affiliates to
unwind all or a material portion of the
hedge with respect to the Sony CPS or to
purchase Sony Stock for the purpose of
delivering the Equivalent Share Amount.
For purposes of determining whether a Market
Disruption Event has occurred: (1) a
limitation on the hours or number of days of
trading will not constitute a Market
Disruption Event if it results from an
announced change in the regular business
hours of the relevant exchange, (2) a
decision to permanently discontinue trading
in the relevant option contract will not
constitute a Market Disruption Event, (3)
limitations pursuant to any rule or
regulation enacted or promulgated by the
Tokyo Stock Exchange (or other regulatory
organization in Japan with jurisdiction over
the Tokyo Stock Exchange) on trading during
significant market fluctuations will
constitute a suspension or material
limitation of trading in Sony Stock, (4) a
suspension of trading in an options contract
on Sony Stock by the primary securities
market trading in such options, if available,
by reason of (x) a price change exceeding
limits set by such securities exchange or
market, (y) an imbalance of orders relating
to such contracts or (z) a disparity in bid
and ask quotes relating to such contracts
will constitute a suspension or material
limitation of trading in options contracts
related to Sony Stock and (5) a suspension,
absence or material limitation of trading on
the primary securities market on which
options contracts related to Sony Stock are
traded will not include any time when such
securities market is itself closed for
trading under ordinary circumstances.
Alternative Determination
Date in case of an Event
of Default.................. In case an Event of Default with respect to
any Sony CPS shall have occurred and be
continuing, the amount declared due and
payable upon any acceleration of the Sony CPS
will be determined by the Calculation Agent
and will be equal to the Cash Amount
determined as though the Determination Date
were the date of acceleration plus any
accrued but unpaid interest to but not
including the date of acceleration.
Sony Stock; Public Information Sony is engaged in the design, development,
manufacture and distribution of electronic
and entertainment products. American
Depositary Shares representing Sony Stock are
registered under the Exchange Act of 1934, as
amended (the "Exchange Act"). Companies with
securities registered under the Exchange Act
are required to file periodically certain
financial and other information specified by
the Securities and Exchange Commission (the
"Commission"). Information provided to or
filed with the Commission can be inspected
and copied at the public reference facilities
maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C.
20549 or at its Regional Office located at
Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661 and at Seven
World Trade Center, 13th Floor, New York, New
York 10048, and copies of such material can
be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
In addition, information provided to or filed
with the Commission electronically can be
assessed through a Website maintained by the
Commission. The address of the Commission's
Website is http:/www.sec.gov. Information
provided to or filed with the Commission by
Sony pursuant to the Exchange Act can be
located by reference to Commission file
number 1-6439. In addition, information
regarding Sony may be obtained from other
sources including, but not limited to, press
releases, newspaper articles and other
publicly disseminated documents. The Company
makes no representation or warranty as to the
accuracy or completeness of such reports.
THIS PRICING SUPPLEMENT RELATES ONLY TO THE
SONY CPS OFFERED HEREBY AND DOES NOT RELATE
TO SONY STOCK OR OTHER SECURITIES OF SONY.
ALL DISCLOSURES CONTAINED IN THIS PRICING
SUPPLEMENT REGARDING SONY ARE DERIVED FROM
THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN
THE PRECEDING PARAGRAPH. NEITHER THE COMPANY
NOR THE AGENT HAS PARTICIPATED IN THE
PREPARATION OF SUCH DOCUMENTS OR MADE ANY DUE
DILIGENCE INQUIRY WITH RESPECT TO SONY.
NEITHER THE COMPANY NOR THE AGENT MAKES ANY
REPRESENTATION THAT SUCH PUBLICLY AVAILABLE
DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE
INFORMATION REGARDING SONY ARE ACCURATE OR
COMPLETE. FURTHERMORE, THERE CAN BE NO
ASSURANCE THAT ALL EVENTS OCCURRING PRIOR TO
THE DATE HEREOF (INCLUDING EVENTS THAT WOULD
AFFECT THE ACCURACY OR COMPLETENESS OF THE
PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE
PRECEDING PARAGRAPH) THAT WOULD AFFECT THE
TRADING PRICE OF SONY STOCK (AND THEREFORE
THE INITIAL STOCK PRICE) HAVE BEEN PUBLICLY
DISCLOSED. SUBSEQUENT DISCLOSURE OF ANY SUCH
EVENTS OR THE DISCLOSURE OF OR FAILURE TO
DISCLOSE MATERIAL FUTURE EVENTS CONCERNING
SONY COULD AFFECT THE VALUE RECEIVED AT
MATURITY WITH RESPECT TO THE SONY CPS AND
THEREFORE THE TRADING PRICES OF THE SONY CPS.
NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES
MAKE ANY REPRESENTATION TO ANY PURCHASER OF
SONY CPS AS TO THE PERFORMANCE OF SONY STOCK.
The Company or its affiliates may presently
or from time to time engage in business with
Sony including extending loans to, or making
equity investments in, Sony or providing
advisory services to Sony, including merger
and acquisition advisory services. In the
course of such business, the Company or its
affiliates may acquire non-public information
with respect to Sony and, in addition, one or
more affiliates of the Company may publish
research reports with respect to Sony. The
statement in the preceding sentence is not
intended to affect the right of holders of
the Sony CPS under the securities laws. Any
prospective purchaser of a Sony CPS should
undertake an independent investigation of
Sony as in its judgment is appropriate to
make an informed decision with respect to an
investment in Sony Stock.
Historical Information........ The following table sets forth the high and
low Market Price during 1995, 1996, 1997, and
during 1998 through April 28, 1998. The
Market Price on April 28, 1998 was Yen 11,020.
The Market Prices and Dividends Per Share
listed below were obtained from Bloomberg
Financial Markets and the Company believes
such information to be accurate. The
historical prices of Sony Stock should not be
taken as an indication of future performance,
and no assurance can be given that the price
of Sony Stock will not decrease so that the
beneficial owners of the Sony CPS will
receive at maturity cash in an amount that is
less than the principal amount of the Sony
CPS. Nor can assurance be given that the
price of Sony Stock will increase above the
Initial Stock Price so that at maturity the
beneficial owners of the Sony CPS will
receive cash in an amount in excess of the
principal amount of the Sony CPS.
Dividends Per
Sony High Low Share(1)
-------------------- --------- --------- -------------
(SEDOL #6821506)
1995
First Quarter.... Yen 5680 Yen 4030 Yen 25
Second Quarter... 4300 3800 0
Third Quarter.... 5420 4100 25
Fourth Quarter... 6190 4600 0
1996
First Quarter.... 6850 6080 25
Second Quarter... 7250 6380 0
Third Quarter.... 7230 6700 25
Fourth Quarter... 7680 6760 0
1997
First Quarter.... 9080 7320 30
Second Quarter... 10100 8660 0
Third Quarter.... 12200 9640 25
Fourth Quarter... 12200 9450 0
1998
First Quarter.... 12400 10500 35
Second Quarter
(through April ,
1998) 11600 11000 0
(1) The Company makes no representation as to the amount of
dividends, if any, that Sony will pay in the future. In
any event, holders of the Sony CPS will not be entitled to
receive dividends, if any, that may be payable on Sony
Stock.
Hypothetical Movements in the
Japanese Yen/U.S. Dollar
Exchange Rate............... By linking the amount payable at maturity to
the Stock Percentage Change rather than the
U.S. Dollar value of Sony Stock at maturity,
the Sony CPS permit the investor to
participate in price fluctuations of the Sony
Stock without being affected by future
changes in the Japanese Yen/U.S. Dollar
exchange rate. Based on an initial Japanese
Yen/ U.S. Dollar exchange rate of Yen 130/1
U.S. $ and a Market Price of Sony Stock of
Yen 11,000 (or U.S. $84.62 at such initial
exchange rate) and assuming, solely for the
purpose of illustrating the lack of effect of
changes in such exchange rate, a hypothetical
20% increase in the Market Price of Sony
Stock to Yen 13,320, the following table
illustrates, for a range of Final FX Rates,
the variations in the U.S. Dollar value of
Sony Stock at maturity (excluding dividends)
and compares such values to the total payment
on the Sony CPS.
<TABLE>
<CAPTION>
Final CPS
Internal Rate of
Sony Change Final Sony Sony Change Final CPS Return (including
Final FX Rate on TSE (%) Price (in $) in $ (%) Value ($) 3% Coupon)
------------- ----------- ------------ ----------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
150 20.00% 88.00 4.00% 2,030.77 26.00%
146 20.00% 90.41 6.85% 2,030.77 26.00%
142 20.00% 92.96 9.86% 2,030.77 26.00%
138 20.00% 95.65 13.04% 2,030.77 26.00%
134 20.00% 98.51 16.42% 2,030.77 26.00%
Hypothetical Initial FX Rate 130 20.00% 101.54 20.00% 2,030.77 26.00%
126 20.00% 104.76 23.81% 2,030.77 26.00%
122 20.00% 108.20 27.87% 2,030.77 26.00%
118 20.00% 111.86 32.20% 2,030.77 26.00%
114 20.00% 115.79 36.84% 2,030.77 26.00%
110 20.00% 120.00 41.82% 2,030.77 26.00%
</TABLE>
Use of Proceeds and Hedging... The net proceeds to be received by the
Company from the sale of the Sony CPS will be
used for general corporate purposes and, in
part, by the Company or one or more of its
affiliates in connection with hedging the
Company's obligations under the Sony CPS.
See also "Use of Proceeds" in the
accompanying Prospectus. On or prior to the
date of this Pricing Supplement, the Company,
through its subsidiaries and others, may
hedge its anticipated exposure in connection
with the Sony CPS by taking positions in Sony
Stock, options contracts on Sony Stock listed
on major securities markets or positions in
any other instruments that it may wish to use
in connection with such hedging. In the
event that the Company pursues such a hedging
strategy, the price at which the Company is
able to purchase such positions may be a
factor in determining the Issue Price of the
Sony CPS. Purchase activity could potentially
have increased the price of Sony Stock, and
therefore effectively have increased the
level to which Sony Stock must rise before a
holder of a Sony CPS would receive at
maturity cash in an amount that is equal to
or greater than the principal amount of the
Sony CPS. Although the Company has no reason
to believe that its hedging activity will
have a material impact on the price of Sony
Stock, there can be no assurance that the
Company will not affect such price as a
result of its hedging activities. The
Company, through its subsidiaries, is likely
to modify its hedge position throughout the
life of the Sony CPS by purchasing and
selling the securities and instruments listed
above.
United States Federal Income
Taxation..................... The following summary is based on the
advice of Davis Polk & Wardwell, special tax
counsel to the Company, ("Tax Counsel") and
is a general discussion of the principal
potential U.S. federal income tax
consequences to holders who are initial
holders of the Sony CPS purchasing the Sony
CPS at the Issue Price, and who will hold the
Sony CPS as capital assets within the meaning
of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"). This
summary is based on the Code, administrative
pronouncements, judicial decisions and
existing and proposed Treasury Regulations
currently in effect, changes to any of which
subsequent to the date of this Pricing
Supplement may affect the tax consequences
described herein. This summary does not
address all aspects of the U.S. federal
income taxation that may be relevant to a
particular holder in light of its individual
circumstances or to certain types of holders
subject to special treatment under the U.S.
federal income tax laws (e.g., certain
financial institutions, insurance companies,
tax-exempt organizations, dealers in options
or securities, or persons who hold a Sony CPS
as a part of a hedging transaction, straddle,
conversion or other integrated transaction).
As the law applicable to the U.S. federal
income taxation of instruments such as the
Sony CPS is technical and complex, the
discussion below necessarily represents only
a general summary. Moreover, the effect of
any applicable state, local or foreign tax
laws is not discussed.
Pursuant to the terms of the Sony CPS, the
Company and every holder of a Sony CPS agree
(in the absence of an administrative
determination or judicial ruling to the
contrary) to characterize a Sony CPS for all
tax purposes as an investment unit consisting
of the following components (the
"Components"): (i) a contract (the "Forward
Contract") that requires the holder of the
Sony CPS to pay an amount as described below
under "Settlement of the Forward Contract"
and entitles the holder to receive a cash
amount at maturity as provided above in
"Amount Payable at Maturity", and (ii) a
deposit with the Company of a fixed amount of
cash to secure the Holder's obligation under
the Forward Contract (the "Deposit"), which
Deposit bears a yield of % per annum.
Furthermore, based on the Company's
determination of the relative fair market
values of the Components at the time of
issuance of the Sony CPS, the Company will
allocate 100% of the Issue Price of the Sony
CPS to the Deposit and none to the Forward
Contract. The Company's allocation of the
Issue Price among the Components will be
binding on a U.S. Holder of a Sony CPS,
unless such U.S. Holder timely and explicitly
discloses to the Internal Revenue Service
(the "IRS") that its allocation is different
from the Company's. The treatment of the
Sony CPS described above and the Company's
allocation are not, however, binding on the
IRS or the courts. No statutory, judicial or
administrative authority directly addresses
the characterization of the Sony CPS or
instruments similar to the Sony CPS for U.S.
federal income tax purposes, and no ruling is
being requested from the IRS with respect to
the Sony CPS. Due to the absence of
authorities that directly address instruments
that are similar to A Sony CPS, Tax Counsel
is unable to render an opinion as to the
proper U.S. federal income tax
characterization of the Sony CPS. As a
result, significant aspects of the U.S.
federal income tax consequences of an
investment in the Sony CPS are not certain,
and no assurance can be given that the IRS or
the courts will agree with the
characterization described above.
Accordingly, prospective purchasers are urged
to consult their tax advisors regarding the
U.S. federal income tax consequences of an
investment in A Sony CPS (including
alternative characterizations of A Sony CPS)
and with respect to any tax consequences
arising under the laws of any state, local or
foreign taxing jurisdiction. Unless
otherwise stated, the following discussions
are based on the assumption that the
treatment and the allocation described above
are accepted for U.S. federal income tax
purposes.
U.S. Holders
As used herein, the term "U.S. Holder" means
a beneficial owner of a Sony CPS that is, for
U.S. federal income tax purposes, (i) a
citizen or resident of the U.S., (ii) a
corporation created or organized under the
laws of the U.S. or any political subdivision
thereof, or (iii) an estate or trust the
income of which is subject to U.S. federal
income taxation regardless of its source.
Tax Treatment of A Sony CPS
Interest on the Deposit. As described above,
the Deposit is treated as bearing a yield of
% per annum, which is greater than the
stated interest rate on the Deposit.
Accordingly, the Deposit will be subject to
the "original issue discount" rules. A U.S.
Holder will include "qualified stated
interest" equal to the stated interest on the
Sony CPS in income in accordance with the
U.S. Holder's method of accounting for
federal income tax purposes. Additionally,
each U.S. Holder, including a taxpayer who
otherwise uses the cash method of accounting,
will be required to include original issue
discount ("OID") on the Deposit in income as
it accrues, in accordance with a constant
yield method based on a compounding of
interest. Such method will generally cause
the U.S. Holder to include OID in each
accrual period in an amount equal to the
product of the adjusted issue price of the
Deposit at the beginning of the accrual
period and the yield of the Deposit, less the
amount of any qualified stated interest
allocable to the accrual period. Because the
yield on the Deposit is higher than the
stated interest rate, the amount of income
recognized by the U.S. Holder will generally
be more than the stated interest paid to the
U.S. Holder and will increase during the term
of the Sony CPS.
Tax Basis. Based on the Company's
determination set forth above, the U.S.
Holder's tax basis in the Deposit would
initially be 100% of the Issue Price. The
U.S. Holder's tax basis in the Deposit will be
subsequently increased by OID accrued with
respect thereto.
Settlement of the Forward Contract. Upon the
final settlement of the Forward Contract, a
U.S. Holder receiving cash would, pursuant to
the Forward Contract, be deemed to have
applied the Deposit (including the amount of
OID accrued) toward the exchange for the cash
payment at maturity, and a U.S. Holder would
recognize gain or loss. The amount of such
gain or loss would be the extent to which the
amount of such cash received differs from the
U.S. Holder's tax basis in the Deposit.
U.S. Holders should note that while the
accrued but unpaid OID on the Deposit would
be taxable as ordinary income, any gain or
loss recognized upon the final settlement of
the Forward Contract would be capital gain or
loss. The distinction between capital gain or
loss and ordinary gain or loss is potentially
significant in several respects. For
example, limitations apply to a U.S. Holder's
ability to offset capital losses against
ordinary income, and certain U.S. Holders may
be subject to lower U.S. federal income tax
rates with respect to long-term capital gain
than with respect to ordinary gain. U.S.
Holders should consult their tax advisors
with respect to the treatment of capital gain
or loss on a Sony CPS.
A U.S. Holder receiving the Equivalent Share
Amount pursuant to the Forward Contract would
be deemed to have applied the Deposit toward
the purchase of such Equivalent Share Amount,
and such U.S. Holder would not recognize any
gain or loss with respect to the Equivalent
Share Amount received upon the final
settlement of the Forward Contract. A U.S.
Holder's tax basis in the Equivalent Share
Amount so received would be equal to the U.S.
Holder's tax basis in the Deposit allocable
thereto. Such U.S. Holder's holding period of
the Equivalent Share Amount would start on
the day after the Maturity Date.
Sale or Exchange of the Sony CPS. Upon a sale
or exchange of a Sony CPS prior to the
maturity of the Sony CPS, a U.S. Holder would
recognize taxable gain or loss equal to the
difference between the amount realized on
such sale or exchange and such U.S. Holder's
tax basis in the Sony CPS so sold or
exchanged. Any such gain or loss would
generally be capital gain or loss, as the
case may be. Such U.S. Holder's tax basis in
the Sony CPS would generally equal the
Holder's tax basis in the Deposit. For these
purposes, the amount realized does not
include any amount attributable to accrued
interest or OID on the Deposit, which would
be taxed as described under "-- Interest on
the Deposit" above.
Possible Alternative Tax Treatments of an
Investment in a Sony CPS
Due to the absence of authorities that
directly address the proper characterization
of the Sony CPS, no assurance can be given
that the IRS will accept, or that a court
will uphold, the characterization and tax
treatment described above. In particular,
the IRS could seek to analyze the U.S.
federal income tax consequences of owning a
Sony CPS under Treasury regulations governing
contingent payment debt instruments (the
"Contingent Payment Regulations").
The Company will take the position that the
Contingent Payment Regulations do not apply
to the Sony CPS. If the IRS were successful
in asserting that the Contingent Payment
Regulations applied to the Sony CPS, the
timing and character of income thereon would
be significantly affected. Among other
things, a U.S. Holder would be required to
accrue as OID, subject to the adjustments
described below, income at a "comparable
yield" on the Issue Price, regardless of the
U.S. Holder's usual method of accounting for
federal income tax purposes. In addition,
the Contingent Payment Regulations require
that a projected payment schedule, which
results in such a "comparable yield," be
determined, and that adjustments to income
accruals be made to account for differences
between actual payments and projected amounts
(including upon receipt of the Equivalent
Share Amount at Maturity). Furthermore, any
gain realized with respect to a Sony CPS
would generally be treated as ordinary
income, and any loss realized would generally
be treated as ordinary loss to the extent of
the U.S. Holder's prior ordinary income
inclusions (which were not previously
reversed) with respect to the Sony CPS.
Even if the Contingent Payment Regulations do
not apply to the Sony CPS, other alternative
U.S. federal income characterizations or
treatments of the Sony CPS are also possible,
which may also affect the timing and the
character of the income or loss with respect
to the Sony CPS. It is possible, for
example, that a Sony CPS could be treated as
including a pre-paid forward contract.
Accordingly, prospective purchasers are urged
to consult their tax advisors regarding the
U.S. federal income tax consequences of an
investment in a Sony CPS.
Proposed Legislation
On February 4, 1998, Representative Barbara
Kennelly released H.R. 3170 (the "Kennelly
Bill"), which, if enacted, would treat a
taxpayer owning certain types of derivative
positions in property as having "constructive
ownership" in that property, with the result
that all or a portion of the long term
capital gain recognized by such taxpayer with
respect to the derivative position would be
recharacterized as short term capital gain.
It is unclear whether, if enacted in its
present form, the Kennelly Bill would apply
to a Sony CPS. If the Kennelly Bill were to
apply to a Sony CPS, the effect on a U.S.
Holder of a Sony CPS would be to treat all or
a portion of the long term capital gain
recognized by such U.S. Holder on sale or
maturity of the Sony CPS (or the Equivalent
Share Amount received thereon) as short term
capital gain, but only to the extent such
long term capital gain exceeds the long term
capital gain that would have been recognized
by such U.S. Holder if the U.S. Holder had
acquired Sony Stock itself on the issue date
of the Sony CPS and disposed of the Sony
Stock upon disposition of the Sony CPS (or,
where the U.S. Holder elects to receive the
Equivalent Share Amount, upon disposition of
the Equivalent Share Amount). In addition,
the Kennelly Bill would impose an interest
charge on the gain that was recharacterized
on the sale or maturity of the Sony CPS (or
the Equivalent Share Amount received
thereon). As proposed, the Kennelly Bill
would be effective for gains recognized after
the date of enactment. U.S. Holders should
consult their tax advisors regarding the
potential application of the Kennelly Bill to
the purchase, ownership and disposition of a
Sony CPS.
Backup Withholding and Information Reporting
A U.S. Holder of a Sony CPS may be subject to
information reporting and to backup
withholding at a rate of 31 percent of the
amounts paid to the U.S. Holder, unless such
U.S. Holder provides proof of an applicable
exemption or a correct taxpayer identification
number, and otherwise complies with
applicable requirements of the backup
withholding rules. The amounts withheld
under the backup withholding rules are not an
additional tax and may be refunded, or
credited against the U.S. Holder's U.S.
federal income tax liability, provided the
required information is furnished to the IRS.
Non-U.S. Holders
As used herein, the term "Non-U.S. Holder"
means an owner of a Sony CPS that is, for
United States federal income tax purposes, (i)
a nonresident alien individual, (ii) a
foreign corporation, (iii) a nonresident
alien fiduciary of a foreign trust or estate
or (iv) a foreign partnership one or more of
the members of which is, for United States
federal income tax purposes, a nonresident
alien individual, a foreign corporation or a
nonresident alien fiduciary of a foreign
trust or estate. The following summary
addresses certain U.S. federal income tax
consequences to holders who are initial
holders of the Sony CPS purchasing the Sony
CPS at the Issue Price, and who will hold the
Sony CPS as capital assets within the meaning
of Section 1221 of the Code. This summary
does not deal with persons that are not
Non-U.S. Holders or that are subject to
special rules, such as nonresident alien
individuals that have lost United States
citizenship or that have ceased to be taxed
as United States resident aliens,
corporations that are treated as foreign
personal holding companies, controlled
foreign corporations or passive foreign
investment companies, and certain other
Non-U.S. Holders that are owned or controlled
by persons subject to United States federal
income tax. In addition, the following
summary does not apply to persons for whom
interest or gain on a Sony CPS is effectively
connected with a trade or business in the
United States.
As described above in "United States Federal
Income Taxation -- General," the Company and
every holder of a Sony CPS agree (in the
absence of an administrative determination or
judicial ruling to the contrary) to
characterize a Sony CPS for all purposes as an
investment unit consisting of the Forward
Contract and the Deposit.
Subject to the discussion below concerning
backup withholding, payments with respect to
a Sony CPS (including the delivery of the
Equivalent Share Amount) by the Company or a
paying agent to a Non-U.S. Holder, and gain
realized on the sale, exchange or other
disposition of such Sony CPS, should not be
subject to United States federal income or
withholding tax, provided that: (i) such
Non-U.S. Holder does not own, actually or
constructively, 10 percent or more of the
total combined voting power of all classes of
stock of the Company entitled to vote, is not
a controlled foreign corporation related,
directly or indirectly, to the Company
through stock ownership, and is not a bank
receiving interest described in Section
881(c)(3)(A) of the Code; (ii) the statement
required by Section 871(h) or Section 881(c)
of the Code has been provided with respect
to the beneficial owner, as discussed below;
(iii) such Non-U.S. Holder is not an
individual who is present in the United
States for 183 days or more in the taxable
year of disposition, or such individual does
not have a "tax home" (as defined in Section
911(d)(3) of the Code) or an office or other
fixed place of business in the United States;
and (iv) such payment and gain are not
effectively connected with the conduct by
such Non-U.S. Holder of a trade or business
in the United States.
Sections 871(h) and 881(c) of the Code
require that, in order to obtain the
portfolio interest exemption from withholding
tax, either the beneficial owner of the Sony
CPS, or a securities clearing organization,
bank or other financial institution that
holds customers' securities in the ordinary
course of its trade or business (a "Financial
Institution") and that is holding the Sony
CPS on behalf of such beneficial owner, file
a statement with the withholding agent to the
effect that the beneficial owner of the Sony
CPS is not a United States person. Under
United States Treasury Regulations, such
requirement will be fulfilled if the
beneficial owner of a Sony CPS certifies on
Internal Revenue Service Form W-8, under
penalties of perjury, that it is not a United
States person and provides its name and
address, and any Financial Institution
holding the Sony CPS on behalf of the
beneficial owner files a statement with the
withholding agent to the effect that it has
received such a statement from the Non-
U.S. Holder (and furnishes the
withholding agent with a copy thereof).
With respect to Sony CPS held by a foreign
partnership, under current law, the Form
W-8 may be provided by the foreign
partnership. However, for payments with
respect to a Sony CPS after December 31,
1999, unless the foreign partnership has
entered into a withholding agreement with
the Internal Revenue Service, a foreign
partnership will be required, in addition
to providing an intermediary Form W-8, to
attach an appropriate certification by
each partner. Prospective investors,
including foreign partnerships and their
partners, should consult their tax
advisors regarding possible additional
reporting requirements.
A Sony CPS held by a Non-U.S. Holder at the
time of his death is likely be subject to
United States federal estate tax as a result
of such individual's death, to the extent of
the value of the Forward Contract, if any,
unless a relevant estate tax treaty applies.
Possible Alternative Tax Treatments of an
Investment in a Sony CPS
As described above in "United States Federal
Income Taxation--U.S. Holders--Possible
Alternative Tax Treatments of an Investment
in a Sony CPS," the IRS may seek to treat the
Sony CPS as a debt instrument subject to the
Contingent Payment Regulations. If such a
characterization were successful, the tax
consequences to a Non-U.S. Holder of
ownership and disposition of a Sony CPS would
be the same as those described immediately
above. However, if the IRS sought to
recharacterize a Sony CPS as a pre-paid
forward contract, it is possible that
payments of stated interest made with respect
to a Sony CPS would be subject to withholding
at a rate of 30%, unless a relevant income
tax treaty applies. The Company does not
currently intend to withhold on payments of
stated interest with respect to a Sony CPS,
but will do so if required by law. Due to the
absence of authorities that directly address
instruments that are similar to a Sony CPS,
significant aspects of the U.S. federal
income tax consequences of an investment in a
Sony CPS are not certain, and no assurance
can be given that the IRS or the courts will
agree with the characterization of a Sony CPS
as an investment unit consisting of the
Forward Contract and the Deposit.
Accordingly, prospective purchasers are urged
to consult their tax advisors regarding the
U.S. federal income tax consequences of an
investment in a Sony CPS.
Backup Withholding and Information Reporting
Under current Treasury Regulations, backup
withholding at 31% will not apply to payments
by the Company made on a Sony CPS if the
certifications required by Sections 871(h) or
881(c) are received.
Under current Treasury Regulations, payments
on the sale, exchange or other disposition of
a Sony CPS made to or through a foreign
office of a broker generally will not be
subject to backup withholding. However, if
such broker is a United States person, a
controlled foreign corporation for United
States tax purposes, a foreign person 50
percent or more of whose gross income is
effectively connected with a United States
trade or business for a specified three-year
period or, in the case of payments made after
December 31, 1999, a foreign partnership with
certain connections to the United States,
information reporting will be required unless
the broker has in its records documentary
evidence that the beneficial owner is not a
United States person and certain other
conditions are met or the beneficial owner
otherwise establishes an exemption. Payments
to or through the United States office of a
broker will be subject to backup withholding
and information reporting unless the Non-U.S.
Holder certifies, under penalties of perjury,
that it is not a United States person or
otherwise establishes an exemption.
Non-U.S. Holders of Sony CPS should consult
their tax advisors regarding the application
of information reporting and backup
withholding in their particular situations,
the availability of an exemption therefrom,
and the procedure for obtaining such an
exemption, if available. Any amounts
withheld from a payment to a Non-U.S. Holder
under the backup withholding rules will be
allowed as a credit against such Non-U.S.
Holder's United States federal income tax
liability and may entitle such Non-U.S.
Holder to a refund, provided that the
required information is furnished to the
Internal Revenue Service.
ANNEX A
OFFICIAL NOTICE OF EXERCISE OF RIGHT TO
RECEIVE EQUIVALENT SHARE AMOUNT
SONY CORPORATION 3% CURRENCY PROTECTED SECURITIES ("CPS")[SM]
DUE MAY 17, 2000
MEDIUM-TERM NOTES
Dated: [On or prior to the fifteenth
Business Day prior to May 17, 2000]
Morgan Stanley Dean Witter & Co.
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. Incorporated, as
Calculation Agent
1585 Broadway
New York, New York 10036
Fax No.: (212) 761-0674
(Attn: Chance Steinberg)
Dear Sirs:
The undersigned holder of the Sony Corporation 3% Currency
Protected Securities ("CPS")[SM] Due May 17, 2000 of Morgan Stanley Dean
Witter & Co. (the "Sony CPS") hereby irrevocably elects to exercise with
respect to the number of Sony CPS indicated below, as of the date hereof,
provided that such day is prior to the fifteenth Business Day prior to May 17,
2000, the Right to Receive the Equivalent Share Amount as described in Pricing
Supplement No. 12 dated , 1998 (the "Pricing Supplement") to the
Prospectus Supplement dated March 26, 1998 and the Prospectus dated March 26,
1998 related to Registration Statement No. 333-46935. Capitalized terms not
defined herein have the meanings given to such terms in the Pricing
Supplement. Please date and acknowledge receipt of this notice in the place
provided below on the date of receipt, and fax a copy to the fax number
indicated, whereupon the Company will deliver Sony ADRs, in accordance with
the terms of the Sony CPS described in the Pricing Supplement.
Very truly yours,
------------------------------------
[Name of Holder]
By:
--------------------------------
[Title]
------------------------------------
[Fax No.]
$
----------------------------------
Number of Sony CPS surrendered for
exchange
Receipt of the above Official
Notice of Exchange is hereby acknowledged
MORGAN STANLEY DEAN WITTER & CO., as Issuer
MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent
By MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent
By:
------------------------------
Title:
Date and time of acknowledgment
----------
