PROSPECTUS Dated June 2, 1997 Pricing Supplement No. 30 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-27919
Dated June 2, 1997 Dated February 20, 1998
Rule 424(b)(3)
$35,000,000
Morgan Stanley, Dean Witter, Discover & Co.
S&P 500 BRoad InDex Guarded Equity-linked Securities[SM] due December 31, 2003
("BRIDGES[SM]")
MEDIUM-TERM NOTES, SERIES C
--------------
The S&P 500 BRoad InDex Guarded Equity-linked Securities due
December 31, 2003 (the "BRIDGES") are Medium-Term Notes, Series C of Morgan
Stanley, Dean Witter, Discover & Co. (the "Company"), as further described
herein and in the Prospectus Supplement under "Description of Notes--Fixed
Rate Notes" and "-- Notes Linked to Commodity Prices, Single Securities,
Baskets of Securities or Indices." The BRIDGES are being issued in minimum
denominations of $10 and will mature on December 31, 2003 (the "Maturity
Date"). The issue price of each BRIDGES will be $10 (the "Issue Price"), and
there will be no periodic payments of interest on the BRIDGES. The BRIDGES
will not be redeemable by the Company in whole or in part prior to the
Maturity Date.
At maturity, the holder of each BRIDGES will receive $10, the
par amount of such BRIDGES ("Par"), plus an amount (the "Supplemental
Redemption Amount") based on the percentage increase, if any, in the Final
Index Value of the S&P 500 Composite Stock Price Index (the "S&P 500 Index"),
as calculated by Standard & Poor's ("S&P"), a Division of the McGraw-Hill
Companies, Inc., over the Initial Index Value, each as further described
below. The Supplemental Redemption Amount, if any, payable with respect to
each BRIDGES at maturity will be calculated on the last of the Determination
Dates and will equal the product of Par and the S&P 500 Index Percent Change.
The S&P 500 Index Percent Change is a fraction, the numerator of which will be
the Final Index Value less the Initial Index Value and the denominator of
which will be the Initial Index Value. The Supplemental Redemption Amount
cannot be less than zero. The Initial Index Value has been set to equal
1034.21. The Final Index Value will equal the arithmetic average of the S&P
500 Index closing values on each of April 30, 2001, August 30, 2002 and
December 19, 2003. See "Determination Dates" herein.
If the S&P 500 Index Percent Change is equal to or less than
zero, the holder of each BRIDGES will be repaid Par, but will not receive any
Supplemental Redemption Amount.
For information as to the calculation of the Supplemental
Redemption Amount, the S&P 500 Index Percent Change, the Final Index Value and
certain tax consequences to beneficial owners of the BRIDGES, see "Supplemental
Redemption Amount," "S&P 500 Index Percent Change," "Final Index Value" and
"United States Federal Taxation" in this Pricing Supplement.
The Company will cause the Supplemental Redemption Amount, the
S&P 500 Index Percent Change and the Final Index Value to be determined by
Morgan Stanley & Co. Incorporated (the "Calculation Agent") for The Chase
Manhattan Bank, as Trustee under the Senior Debt Indenture.
An investment in the BRIDGES entails risks not associated with
similar investments in a conventional debt security, as described under "Risk
Factors" on PS-7 and PS-8 herein.
The BRIDGES have been approved for listing on the New York Stock
Exchange ("NYSE"), subject to official notice of issuance. The NYSE symbol
for the BRIDGES is "BGS." It is not possible to predict whether the BRIDGES
will trade in the secondary market or if such market will be liquid or
illiquid.
"BRIDGES" and "BRoad InDex Guarded Equity-linked Securities" are service
marks of the Company.
--------------
PRICE $10 Per BRIDGES
-------------
<TABLE>
<S> <C> <C> <C>
Price to Public Agent's Commissions(1) Proceeds to Company
--------------- ---------------------- -------------------
Per BRIDGES. $10 $0.225 $9.775
Total....... $35,000,000 $787,500 $34,212,500
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
MORGAN STANLEY DEAN WITTER
(This page intentionally left blank)
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
BRIDGES[SM] OR THE INDIVIDUAL STOCKS UNDERLYING THE S&P 500. SPECIFICALLY, THE
AGENT MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND
PURCHASE, THE BRIDGES[SM] OR INDIVIDUAL STOCKS UNDERLYING THE S&P 500 IN THE
OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES SEE "USE OF PROCEEDS AND
HEDGING."
Capitalized terms not defined herein have the meanings given
to such terms in the accompanying Prospectus Supplement.
Principal Amount.............. $35,000,000
Maturity Date................. December 31, 2003
Specified Currency............ U.S. Dollars
Issue Price................... $10
Settlement Date (Original
Issue Date)................... February 25, 1998
CUSIP......................... 617446372
Book Entry Note or
Certificated Note............. Book Entry
Senior Note or Subordinated
Note.......................... Senior
Minimum Denominations......... $10
Trustee....................... The Chase Manhattan Bank
Agent......................... Morgan Stanley & Co. Incorporated
Maturity Redemption Amount.... At maturity (including as a result of
acceleration or otherwise), the holder of
each BRIDGES will receive $10, the par amount
of such BRIDGES ("Par"), plus the
Supplemental Redemption Amount, if any.
References herein to "BRIDGES" refer to each
$10 principal amount of any BRIDGES. There
will be no periodic payments of interest on
the BRIDGES.
Supplemental Redemption Amount The Supplemental Redemption Amount, payable
with respect to each BRIDGES at maturity,
will be calculated by the Calculation Agent
on the last of the Determination Dates and
will be an amount equal to the greater of (a)
zero and (b) the product of Par and the S&P
500 Index Percent Change.
The Company will cause the Calculation Agent
to provide written notice to the Trustee at
its New York office, on which notice the
Trustee may conclusively rely, of the
Supplemental Redemption Amount, on or prior
to 11:00 a.m. on the Business Day preceding
the Maturity Date. See "Discontinuance of
the S&P 500 Index; Alteration of Method of
Calculation" below.
All percentages resulting from any
calculation with respect to the BRIDGES 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.
S&P 500 Index Percent Change.. The S&P 500 Index Percent Change is a
fraction, the numerator of which will be the
Final Index Value less the Initial Index
Value and the denominator of which will be
the Initial Index Value. The S&P 500 Index
Percent Change is described by the following
formula:
(Final Index Value - Initial Index Value)
---------------------------------------------
Initial Index Value
Initial Index Value........... 1034.21
Index Closing Value........... The Index Closing Value, on any Determination
Date, will equal the closing value of the S&P
500 Index or any Successor Index at the
regular official weekday close of trading on
such Determination Date. See "Discontinuance
of the S&P 500 Index; Alteration of Method of
Calculation."
References herein to the S&P 500 Index will
be deemed to include any Successor Index,
unless the context requires otherwise.
Final Index Value............. The Final Index Value will equal the
arithmetic average of the Index Closing
Values on each of the Determination Dates as
calculated on the last Determination Date by
the Calculation Agent and rounded to the
nearest one hundredth of a point with five
one thousandths of a point being rounded
upwards.
Determination Dates........... The Determination Dates will be April 30,
2001, August 30, 2002 and December 19, 2003.
If either of the first two Determination
Dates is not a Trading Day or if a Market
Disruption Event occurs on either such date,
such Determination Date will be the
immediately succeeding Trading Day during
which no Market Disruption Event shall have
occurred; provided that if a Market
Disruption Event has occurred on each of the
five Trading Days immediately succeeding
either of the first two Determination Dates,
then (i) such fifth succeeding Trading Day
will be deemed to be the relevant
Determination Date, notwithstanding the
occurrence of a Market Disruption Event on
such day and (ii) with respect to any such
fifth Trading Day on which a Market
Disruption Event occurs, the Calculation
Agent will determine the value of the S&P 500
Index on such fifth Trading Day in accordance
with the formula for and method of
calculating the S&P 500 Index last in effect
prior to the commencement of the Market
Disruption Event, using the closing price
(or, if trading in the relevant securities
has been materially suspended or materially
limited, its good faith estimate of the
closing price that would have prevailed but
for such suspension or limitation) on such
Trading Day of each security most recently
comprising the S&P 500 Index.
If the last Determination Date is not a
Trading Day or if there is a Market
Disruption Event on such last Determination
Date, such last Determination Date will be
the immediately succeeding Trading Day during
which no Market Disruption Event shall have
occurred; provided that the last
Determination Date will be no later than the
second scheduled Trading Day preceding the
Maturity Date, and if such date is not a
Trading Day or if there is a Market Disruption
Event on such date, the Calculation Agent
will determine the value of the S&P 500 Index
on such last Determination Date in accordance
with clause (ii) of the preceding paragraph.
Trading Day................... A day on which trading is generally conducted
on the New York Stock Exchange ("NYSE"), the
American Stock Exchange, Inc. ("AMEX"), the
NASDAQ National Market ("NASDAQ NMS"), the
Chicago Mercantile Exchange and the Chicago
Board of Options Exchange, as determined by
the Calculation Agent.
Market Disruption Event....... "Market Disruption Event" means, with respect
to the S&P 500 Index:
(i) a suspension, absence or material
limitation of trading of 100 or more of
the securities included in the S&P 500
Index on the primary market for such
securities for more than two hours of
trading or during the one-half hour period
preceding the close of trading in such
market; or the suspension, absence or
material limitation of trading on the
primary market for trading in futures or
options contracts related to the S&P 500
Index during the one-half hour period
preceding 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 BRIDGES.
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 or market, (2)
a decision to permanently discontinue trading
in the relevant futures or options contract
will not constitute a Market Disruption
Event, (3) limitations pursuant to New York
Stock Exchange Rule 80A (or any applicable
rule or regulation enacted or promulgated by
the NYSE, any other self-regulatory
organization or the Securities and Exchange
Commission of similar scope as determined by
the Calculation Agent) on trading during
significant market fluctuations will
constitute a suspension, absence or material
limitation of trading, (4) a suspension of
trading in a futures or options contract on
the S&P 500 Index by the primary securities
market related to such contract by reason of
(a) a price change exceeding limits set by
such exchange or market, (b) an imbalance of
orders relating to such contracts or (c) a
disparity in bid and ask quotes relating to
such contracts will constitute a suspension
or material limitation of trading in futures
or options contracts related to the S&P 500
Index and (5) a "suspension, absence or
material limitation of trading" on the
primary market on which futures or options
contracts related to the S&P 500 Index are
traded will not include any time when such
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 BRIDGES shall have occurred and be
continuing, the amount declared due and
payable upon any acceleration of the BRIDGES
will be determined by the Calculation Agent
and will be equal to Par plus the Supplemental
Redemption Amount, if any, determined as
though each Determination Date scheduled to
occur on or after such date of acceleration
were the date of acceleration.
Calculation Agent............. Morgan Stanley & Co. Incorporated ("MS & Co.")
All determinations made by the Calculation
Agent will be at the sole discretion of the
Calculation Agent and will, in the absence of
manifest error, be conclusive for all
purposes and binding on the Company and
holders of the BRIDGES.
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 BRIDGES,
including with respect to certain
determinations and judgments that the
Calculation Agent must make in determining
the S&P 500 Index Percent Change, the Final
Index Value, the Supplemental Redemption
Amount or whether a Market Disruption Event
has occurred. See "Discontinuance of the S&P
500 Index; Alteration of Method of
Calculation" below and "Market Disruption
Event" above. MS & Co., as a registered
broker-dealer, is required to maintain
policies and procedures regarding the
handling and use of confidential proprietary
information, and such policies and procedures
will be in effect throughout the term of the
BRIDGES to restrict the use of information
relating to the calculation of the S&P 500
Index Percent Change, the Final Index Value
and the Supplemental Redemption Amount prior
to the dissemination of such information. MS
& Co. is obligated to carry out its duties
and functions as Calculation Agent in good
faith and using its reasonable judgment.
Risk Factors.................. An investment in the BRIDGES entails
significant risks not associated with similar
investments in a conventional security,
including the following.
If the S&P Index Percent Change is equal to
or less than zero, the holders of the BRIDGES
will receive only the par amount of each
BRIDGES at maturity.
There will be no periodic payments of
interest on the BRIDGES as there would be on
a conventional fixed-rate debt security
having the same maturity date as the BRIDGES
and issued by the Company on the Original
Issue Date. Because the Supplemental
Redemption Amount may be equal to zero, the
effective yield to maturity of the BRIDGES
may be less than that which would be payable
on such a conventional fixed-rate debt
security.
The return of only the par amount of each
BRIDGES at maturity will not compensate the
holder for any opportunity cost implied by
inflation and other factors relating to the
time value of money. The percentage
appreciation of the S&P 500 Index based on
the Final Index Value over the Initial Index
Value does not reflect the payment of
dividends on the stocks underlying the S&P
500 Index. Therefore, the yield to maturity
based on the Final Index Value relative to
the Initial Index Value will not be the same
yield as would be produced if such underlying
stocks were purchased and held for a similar
period.
There can be no assurance as to whether there
will be a secondary market in the BRIDGES or
if there were to be such a secondary market,
whether such market would be liquid or
illiquid. It is expected that the secondary
market for the BRIDGES will be affected by
the creditworthiness of the Company and by a
number of factors, including, but not limited
to, the volatility of the S&P 500 Index,
dividend rates on the stocks underlying the
S&P 500 Index, the time remaining to each
Determination Date and to the maturity of the
BRIDGES and market interest rates. In
addition, the Final Index Value depends on a
number of interrelated factors, including
economic, financial and political events,
over which the Company has no control. The
value of the BRIDGES prior to maturity is
expected to depend primarily on market
interest rates, market volatility and the
extent of the appreciation or depreciation of
the S&P 500 Index from the Initial Index
Value on each of the Determination Dates.
The price at which a holder will be able to
sell the BRIDGES prior to maturity may be at
a discount, which could be substantial, from
the par amount thereof, if, at such time, or
on any previous Determination Date the S&P
500 Index (or the Final Index Value, if
determined) is below, equal to or not
sufficiently above the Initial Index Value,
if market interest rates rise substantially
or if market volatility decreases.
The historical S&P 500 Index values should
not be taken as an indication of the future
performance of the S&P 500 Index during the
term of the BRIDGES. While the trading
prices of the stocks underlying the S&P 500
Index will determine the value of the S&P 500
Index, it is impossible to predict whether
the value of the S&P 500 Index will rise or
fall. Trading prices of the stocks underlying
the S&P 500 Index will be influenced by both
the complex and interrelated political,
economic, financial and other factors that can
affect the capital markets generally and the
equity trading markets on which the
underlying stocks are traded, and by various
circumstances that can influence the values
of the underlying stocks in a specific market
segment or a particular underlying stock.
The policies of S&P concerning additions,
deletions and substitutions of the stocks
underlying the S&P 500 Index and the manner
in which S&P takes account of certain changes
affecting such underlying stocks may affect
the value of the S&P 500 Index. The policies
of S&P with respect to the calculation of the
S&P 500 Index could also affect the value of
the S&P 500 Index. S&P may discontinue or
suspend calculation or dissemination of the
S&P 500 Index. Any such actions could affect
the value of the BRIDGES. See "S&P 500
Index" and "Discontinuance of the S&P 500
Index; Alteration of Method of Calculation"
below.
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 BRIDGES,
including with respect to certain
determinations and judgments that the
Calculation Agent must make in determining
the S&P 500 Index Percent Change, the Final
Index Value, the Supplement Redemption Amount
or whether a Market Disruption Event has
occurred. See "Market Disruption Event" and
"Calculation Agent" above and "Discontinuance
of the S&P 500 Index; Alteration of Method of
Calculation" below.
It is suggested that prospective investors
who consider purchasing the BRIDGES should
reach an investment decision only after
carefully considering the suitability of the
BRIDGES in light of their particular
circumstances.
Investors should also consider the tax
consequences of investing in the BRIDGES.
See "United States Federal Taxation" below.
U.S. taxable investors will be subject to
annual income tax based on the comparable
yield of the BRIDGES even though they will
not receive any payments thereon prior to
maturity and at maturity may only receive the
return of the par amount of the BRIDGES. In
addition, any gain recognized by U.S. taxable
investors on the sale, exchange or retirement
of the BRIDGES will be treated as ordinary
income.
S&P 500 Index................. The S&P 500 Index is published by S&P and is
intended to provide a performance benchmark
for the U.S. equity markets. The calculation
of the value of the S&P 500 Index (discussed
below in further detail) is based on the
relative value of the aggregate Market Value
(as defined below) of the common stocks of
500 companies (the "Component Stocks") as of
a particular time as compared to the
aggregate average Market Value of the common
stocks of 500 similar companies during the
base period of the years 1941 through 1943.
The "Market Value" of any Component Stock is
the product of the market price per share and
the number of the then outstanding shares of
such Component Stock. The 500 companies are
not the 500 largest companies listed on the
NYSE and not all 500 companies are listed on
such exchange. S&P chooses companies for
inclusion in the S&P 500 Index with an aim of
achieving a distribution by broad industry
groupings that approximates the distribution
of these groupings in the common stock
population of the U.S. equity market. S&P
may from time to time, in its sole
discretion, add companies to, or delete
companies from, the S&P 500 Index to achieve
the objectives stated above. Relevant
criteria employed by S&P include the
viability of the particular company, the
extent to which that company represents the
industry group to which it is assigned, the
extent to which the company's common stock is
widely-held and the Market Value and trading
activity of the common stock of that company.
The S&P 500 Index is calculated using a
base-weighted aggregate methodology: the
level of the Index reflects the total Market
Value of all 500 Component Stocks relative to
the S&P 500 Index's base period of 1941-43
(the "Base Period").
An indexed number is used to represent the
results of this calculation in order to make
the value easier to work with and track over
time.
The actual total Market Value of the
Component Stocks during the Base Period has
been set equal to an indexed value of 10.
This is often indicated by the notation
1941-43=10. In practice, the daily
calculation of the S&P 500 Index is computed
by dividing the total Market Value of the
Component Stocks by a number called the Index
Divisor. By itself, the Index Divisor is an
arbitrary number. However, in the context of
the calculation of the S&P 500 Index, it is
the only link to the original base period
value of the Index. The Index Divisor keeps
the Index comparable over time and is the
manipulation point for all adjustments to the
S&P 500 Index ("Index Maintenance").
Index Maintenance includes monitoring and
completing the adjustments for company
additions and deletions, share changes, stock
splits, stock dividends, and stock price
adjustments due to company restructurings or
spinoffs.
To prevent the value of the Index from
changing due to corporate actions, all
corporate actions which affect the total
Market Value of the Index require an Index
Divisor adjustment. By adjusting the Index
Divisor for the change in total Market Value,
the value of the S&P 500 Index remains
constant. This helps maintain the value of
the Index as an accurate barometer of stock
market performance and ensures that the
movement of the Index does not reflect the
corporate actions of individual companies in
the Index. All Index Divisor adjustments are
made after the close of trading and after the
calculation of the closing value of the S&P
500 Index. Some corporate actions, such as
stock splits and stock dividends, require
simple changes in the common shares
outstanding and the stock prices of the
companies in the Index and do not require
Index Divisor adjustments.
The table below summarizes the types of S&P
500 Index maintenance adjustments and
indicates whether or not an Index Divisor
adjustment is required.
<TABLE>
<CAPTION>
Divisor
Type of Adjustment
Corporate Action Adjustment Factor Required
- ------------------------ -------------------------- ------------
<S> <C> <C>
Stock split Shares Outstanding No
(i.e. 2x1) multiplied by 2;
Stock Price divided by 2
Share issuance Shares Outstanding plus Yes
(i.e. Change > 5%) newly issued Shares
Share repurchase Shares Outstanding minus Yes
(i.e. Change > 5%) Repurchased Shares
Special cash Share Price minus Special Yes
dividends Dividend
Company change Add new company Market Yes
Value minus old company
Market Value
Rights offering Price of parent company Yes
minus
( Price of Rights )
( ----------------- )
( Right Ratio )
Spinoffs Price of parent company Yes
minus
( Price of Spinoff Co. )
( ---------------------- )
( Share Exchange Ratio )
</TABLE>
Stock splits and stock dividends do not
affect the Index Divisor of the S&P 500
Index, because following a split or dividend
both the stock price and number of shares
outstanding are adjusted by S&P so that there
is no change in the Market Value of the
Component Stock. All stock split and
dividend adjustments are made after the close
of trading on the day before the ex-date.
Each of the corporate events exemplified in
the table requiring an adjustment to the
Index Divisor has the effect of altering the
Market Value of the Component Stock and
consequently of altering the aggregate Market
Value of the Component Stocks (the "Post-Event
Aggregate Market Value"). In order that the
level of the Index (the "Pre-Event Index
Value") not be affected by the altered Market
Value (whether increase or decrease) of the
affected Component Stock, a new Index Divisor
("New Divisor") is derived as follows:
Post-Event Aggregate Market Value
--------------------------------- = Pre-Event Index Value
New Divisor
Post-Event Aggregate Market Value
New Divisor = ---------------------------------
Pre-Event Index Value
A large part of the S&P 500 Index maintenance
process involves tracking the changes in the
number of shares outstanding of each of the
S&P 500 Index companies. Four times a year,
on a Friday close to the end of each calendar
quarter, the share totals of companies in the
Index are updated as required by any changes
in the number of shares outstanding. After
the totals are updated, the Index Divisor is
adjusted to compensate for the net change in
the total Market Value of the Index. In
addition, any changes over 5% in the current
common shares outstanding for the S&P 500
Index companies are carefully reviewed on a
weekly basis, and when appropriate, an
immediate adjustment is made to the Index
Divisor.
Discontinuance of the S&P
500 Index; Alteration of
Method of Calculation......... If S&P discontinues publication of the S&P
500 Index and S&P or another entity publishes
a successor or substitute index that the
Calculation Agent determines, in its sole
discretion, to be comparable to the
discontinued S&P 500 Index (such index being
referred to herein as a "Successor Index"),
then any subsequent Index Closing Value will
be determined by reference to the value of
such Successor Index at the close of trading
on the NYSE, the AMEX, NASDAQ NMS or the
relevant exchange or market for the Successor
Index on the relevant Determination Date.
Upon any selection by the Calculation Agent
of a Successor Index, the Calculation Agent
will cause written notice thereof to be
furnished to the Trustee, to the Company and
to the holders of the BRIDGES within three
Trading Days of such selection.
If S&P discontinues publication of the S&P
500 Index prior to, and such discontinuance
is continuing on, any Determination Date and
the Calculation Agent determines that no
Successor Index is available at such time,
then on such Determination Date, the
Calculation Agent will determine the Index
Closing Value that would be used in computing
the S&P 500 Index Percent Change on such
Determination Date. The Index Closing Value
will be computed by the Calculation Agent in
accordance with the formula for and method
of calculating the S&P 500 Index last in
effect prior to such discontinuance, using
the closing price (or, if trading in the
relevant securities has been materially
suspended or materially limited, its good
faith estimate of the closing price that
would have prevailed but for such suspension
or limitation) on such Determination Date of
each security most recently comprising the
S&P 500 Index. Notwithstanding these
alternative arrangements, discontinuance of
the publication of the S&P 500 Index may
adversely affect the value of the BRIDGES.
If at any time the method of calculating the
S&P 500 Index or a Successor Index, or the
value thereof, is changed in a material
respect, or if the S&P 500 Index or a
Successor Index is in any other way modified
so that such index does not, in the opinion
of the Calculation Agent, fairly represent
the value of the S&P 500 Index or such
Successor Index had such changes or
modifications not been made, then, from and
after such time, the Calculation Agent will,
at the close of business in New York City on
each Determination Date make such
calculations and adjustments as, in the good
faith judgment of the Calculation Agent, may
be necessary in order to arrive at a value of
a stock index comparable to the S&P 500 Index
or such Successor Index, as the case may be,
as if such changes or modifications had not
been made, and calculate the Supplemental
Redemption Amount with reference to the S&P
500 Index or such Successor Index, as
adjusted. Accordingly, if the method of
calculating the S&P 500 Index or a Successor
Index is modified so that the value of such
index is a fraction of what it would have been
if it had not been modified (e.g., due to a
split in the index), then the Calculation
Agent will adjust such index in order to
arrive at a value of the S&P 500 Index or
such Successor Index as if it had not been
modified (e.g., as if such split had not
occurred).
Public Information............ All disclosure contained in this Pricing
Supplement regarding the S&P 500 Index,
including, without limitation, its make-up,
method of calculation and changes in its
components, are derived from publicly
available information prepared by S&P.
Neither the Company nor the Agent take any
responsibility for the accuracy or
completeness of such information.
Historical Information........ The following table sets forth the high and
low daily closing values, as well as
end-of-quarter closing values, of the S&P 500
Index for each quarter in the period from
January 1, 1992 through February 20, 1998.
The Index Closing Values listed below were
obtained from Bloomberg Financial Markets.
The Company believes all such information to
be accurate. The historical values of the
S&P 500 Index should not be taken as an
indication of future performance, and no
assurance can be given that the S&P 500 Index
will increase sufficiently to cause the
holders of the BRIDGES to receive any
Supplemental Redemption Amount.
<TABLE>
Daily Index Closing Values
----------------------------------------
Period
High Low End
------ ------ ------
<S> <C> <C> <C>
1992
First Quarter........ 420.77 403.00 403.69
Second Quarter....... 418.49 394.50 408.14
Third Quarter........ 425.27 409.16 417.80
Fourth Quarter....... 441.28 402.66 435.71
1993
First Quarter........ 456.34 429.05 451.67
Second Quarter....... 453.85 433.54 450.53
Third Quarter........ 463.56 441.43 458.93
Fourth Quarter....... 470.94 457.48 466.45
1994
First Quarter........ 482.00 445.55 445.76
Second Quarter....... 462.37 438.92 444.27
Third Quarter........ 476.07 446.13 462.71
Fourth Quarter....... 473.77 445.45 459.27
1995
First Quarter........ 503.90 459.11 500.71
Second Quarter....... 551.07 501.85 544.75
Third Quarter........ 586.77 547.09 584.41
Fourth Quarter....... 621.69 576.72 615.93
1996
First Quarter........ 661.45 598.48 645.50
Second Quarter....... 678.51 631.18 670.63
Third Quarter........ 687.31 626.65 687.31
Fourth Quarter....... 757.03 689.08 740.74
1997
First Quarter........ 816.29 737.01 757.12
Second Quarter....... 898.70 737.65 885.14
Third Quarter........ 960.32 891.03 947.28
Fourth Quarter....... 983.79 876.98 970.43
1998
First Quarter
(through February
20, 1998)............ 1034.21 927.69 1034.21
</TABLE>
Use of Proceeds and Hedging... The net proceeds to be received by the
Company from the sale of the BRIDGES 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 BRIDGES,
including hedging market risks associated
with the Supplemental Redemption Amount.
On the date of this Pricing Supplement, the
Company, through its subsidiaries and others,
hedged its anticipated exposure in connection
with the BRIDGES by the purchase of futures
contracts on the S&P 500 Index. The Company,
through its subsidiaries, is likely to modify
its hedge position throughout the life of the
BRIDGES, including on each Determination
Date, by purchasing and selling exchange
traded and over the counter options on the
S&P 500 Index, individual stocks included in
the S&P 500 Index, futures contracts on the
S&P 500 Index and options on such futures
contracts or by taking positions in any other
instruments that it may wish to use in
connection with such hedging. Although the
Company has no reason to believe that its
hedging activity had a material impact on the
price of such options, stocks, futures
contracts, and options on futures contracts
or on the value of the S&P 500 Index, there
can be no assurance that the Company did not,
or in the future will not, affect such prices
as a result of its hedging activities. See
also "Use of Proceeds" in the accompanying
Prospectus.
License Agreement............. S&P and MS & Co. have entered into a
non-exclusive license agreement providing for
the license to MS & Co., and any of its
affiliated or subsidiary companies, in
exchange for a fee, of the right to use the
S&P 500 Index, which is owned and published
by S&P, in connection with certain
securities, including the BRIDGES.
The license agreement between S&P and MS &
Co. provides that the following language must
be set forth in this Pricing Supplement:
The BRIDGES are not sponsored, endorsed, sold
or promoted by S&P. S&P makes no
representation or warranty, express or
implied, to the holders of the BRIDGES or any
member of the public regarding the
advisability of investing in securities
generally or in the BRIDGES particularly or
the ability of the S&P 500 Index to track
general stock market performance. S&P's only
relationship to the Company is the licensing
of certain trademarks and trade names of S&P
and of the S&P 500 Index, which is
determined, composed and calculated by S&P
without regard to the Company or the BRIDGES.
S&P has no obligation to take the needs of
the Company or the holders of the BRIDGES
into consideration in determining, composing
or calculating the S&P 500 Index. S&P is not
responsible for and has not participated in
the determination of the timing of, prices
at, or quantities of the BRIDGES to be issued
or in the determination or calculation of the
equation by which the BRIDGES are to be
converted into cash. S&P has no obligation or
liability in connection with the
administration, marketing or trading of the
BRIDGES.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR
THE COMPLETENESS OF THE S&P 500 INDEX OR ANY
DATA INCLUDED THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO
BE OBTAINED BY THE COMPANY, HOLDERS OF THE
BRIDGES[SM], OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE S&P INDEX OR ANY DATA
INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS
LICENSED UNDER THE LICENSE AGREEMENT
DESCRIBED HEREIN OR FOR ANY OTHER USE. S&P
MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
"Standard & Poor's[Registered]",
"S&P[Registered]", "S&P 500[Registered]",
"Standard & Poor's 500," and "500" are
trademarks of McGraw-Hill, Inc. and have been
licensed for use by MS & Co.
United States Federal
Taxation...................... The BRIDGES are Notes linked to an index and
investors should refer to the discussion
under "United States Federal Taxation --
Notes -- Notes Linked to Commodity Prices,
Single Securities, Baskets of Securities or
Indices" and "United States Federal Taxation
-- Notes -- Optionally Exchangeable Notes" in
the accompanying Prospectus Supplement. In
connection with the discussion thereunder,
the Company has determined that the
"comparable yield" is an annual rate of
6.07%, compounded annually. Based on the
Company's determination of the comparable
yield, the "projected payment schedule" for a
BRIDGES (assuming a par amount of $10 or with
respect to each integral multiple thereof)
consists of a projected amount due at
maturity, equal to $14.13.
The following table states the amount of
interest that will be deemed to have accrued
with respect to a BRIDGES during each accrual
period, based upon the Company's
determination of the comparable yield and the
projected payment schedule:
<TABLE>
TOTAL
INTEREST
DEEMED TO
INTEREST HAVE ACCRUED
DEEMED TO FROM ORIGINAL
ACCRUE ISSUE DATE PER
DURING BRIDGES[SM] AS
ACCRUAL PERIOD ACCRUAL OF END OF
-------------- PERIOD (PER ACCRUAL
BRIDGES[SM]) PERIOD
------------ ---------------
<S> <C> <C>
Original Issue Date through December 31,
1998............................... $0.52 $0.52
January 1, 1999 through December 31,
1999............................... $0.64 $1.16
January 1, 2000 through December 31,
2000............................... $0.68 $1.84
January 1, 2001 through December 31,
2001............................... $0.72 $2.56
January 1, 2002 through December 31,
2002............................... $0.76 $3.32
January 1, 2003 through December 31,
2003............................... $0.81 $4.13
</TABLE>
THE COMPARABLE YIELD AND THE PROJECTED
PAYMENT SCHEDULE ARE NOT PROVIDED FOR ANY
PURPOSE OTHER THAN THE DETERMINATION OF
UNITED STATES HOLDERS' INTEREST ACCRUALS AND
ADJUSTMENTS THEREOF IN RESPECT OF THE
BRIDGES[SM] AND DO NOT CONSTITUTE A
REPRESENTATION REGARDING THE ACTUAL AMOUNTS
OF THE PAYMENTS ON THE BRIDGES[SM].
Additional Disclosure for Non-U.S. Holders.
The following discussion is based on the
opinion of Davis Polk & Wardwell, special tax
counsel to the Company. As used herein, the
term "Non-U.S. Holder" means an owner of a
BRIDGES 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 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, unless
otherwise noted, the following summary does
not apply to persons for whom interest or gain
on a BRIDGES is effectively connected with a
trade or business in the United States.
Persons considering the purchase of the
BRIDGES should consult their tax advisors with
regard to the application of the United States
federal income tax laws to their particular
situations as well as any tax consequences
arising under the laws of any state, local or
foreign taxing jurisdiction. This discussion
is based on the Code, and administrative
interpretations as of the date hereof, all of
which are subject to change, including changes
with retroactive effect. Capitalized terms
appearing herein and not defined have the
meanings assigned to such terms in the
Prospectus Supplement.
Subject to the discussion below concerning
backup withholding, payments of principal and
the Supplemental Redemption Amount, if any,
at maturity of a BRIDGES 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 BRIDGES, will not be
subject to United States federal income or
withholding tax, provided that: (i) such
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 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
BRIDGES, 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 BRIDGES on behalf of such
beneficial owner, file a statement with the
withholding agent to the effect that the
beneficial owner of the BRIDGES is not a
United States person. Under United States
Treasury Regulations, such requirement will
be fulfilled if the beneficial owner of a
BRIDGES 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 BRIDGES 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 Holder
(and furnishes the withholding agent with a
copy thereof). With respect to BRIDGES 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 BRIDGES after December 31, 1998,
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.
Under Section 2105(b) of the Code, a BRIDGES
held by an individual who is not a citizen or
resident of the United States at the time of
his death will not be subject to United
States federal estate tax as a result of such
individual's death, provided that the
individual 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 and, at
the time of such individual's death, payments
with respect to such BRIDGES would not have
been effectively connected to the conduct by
such individual of a trade or business in the
United States.
Under current Treasury Regulations, backup
withholding at 31% will not apply to payments
by the Company made on a BRIDGES if the
certifications required by Sections 871(h)
and 881(c) are received, provided in each
case that the Company or such paying agent,
as the case may be, does not have actual
knowledge that the payee is a United States
person.
Under current Treasury Regulations, payments
on the sale, exchange or other disposition of
a BRIDGES 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, 1998, 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. Under
proposed Treasury Regulations, backup
withholding may apply to any payment which
such broker is required to report if such
broker has actual knowledge that the payee is
a United States person. Payments to or
through the United States office of a broker
will be subject to backup withholding and
information reporting unless the Holder
certifies, under penalties of perjury, that
it is not a United States person or otherwise
establishes an exemption.
Non-U.S. Holders of BRIDGES 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 Holder's
United States federal income tax liability
and may entitle such Holder to a refund,
provided that the required information is
furnished to the Internal Revenue Service.
