PROSPECTUS Dated March 26, 1998 Pricing Supplement No. 2 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-46935
Dated March 26, 1998 Dated April 23, 1998
Rule 424(b)(3)
$60,000,000
Morgan Stanley Dean Witter & Co.
Dow Jones Industrial Average[SM]
BRoad InDex Guarded Equity-linked Securities[SM] due April 30, 2004
("BRIDGES[SM]")
MEDIUM-TERM NOTES, SERIES C
------------
The Dow Jones Industrial Average(SM) BRoad InDex Guarded
Equity-linked Securities due April 30, 2004 (the "BRIDGES") are Medium-Term
Notes, Series C of Morgan Stanley Dean Witter & 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 April 30, 2004 (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 Dow Jones Industrial Average(SM) (the "DJIA"), as
calculated by Dow Jones & Company, Inc. ("Dow Jones") over the Initial Index
Value, each as further described below. "Dow Jones," "Dow Jones Industrial
Average(SM)" and "DJIA(SM)" are service marks of Dow Jones & Company, Inc.
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 DJIA Percent Change. The DJIA
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 9143.33. The Final Index
Value will equal the arithmetic average of the DJIA closing values on each of
January 15, 2002, February 28, 2003 and April 21, 2004. See "Determination
Dates" herein.
If the DJIA 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 DJIA Percent Change, the Final Index Value and certain
tax consequences to beneficial owners of the BRIDGES, see "Supplemental
Redemption Amount," "DJIA Percent Change," "Final Index Value" and "United
States Federal Taxation" in this Pricing Supplement.
The Company will cause the Supplemental Redemption Amount, the
DJIA 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-6 through 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 "BDJ."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
----------------------
Agent's
Price to Public Commissions(1) Proceeds to Company
--------------- -------------- -------------------
Per BRIDGES.. $10 $0.225 $9.775
Total........ $60,000,000 $1,350,000 $58,650,000
- ------------
(1) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
MORGAN STANLEY DEAN WITTER
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 DJIA. SPECIFICALLY, THE
AGENT MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND
PURCHASE, THE BRIDGES[SM] OR INDIVIDUAL STOCKS UNDERLYING THE DJIA 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.............. $60,000,000
Maturity Date................. April 30, 2004
Specified Currency............ U.S. Dollars
Issue Price................... $10
Settlement Date (Original
Issue Date)................. April 28, 1998
CUSIP......................... 617446356
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 DJIA
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 DJIA; 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.
DJIA Percent Change........... The DJIA 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 DJIA Percent Change is
described by the following formula:
(Final Index Value - Initial Index Value)
-----------------------------------------
Initial Index Value
Initial Index Value........... 9143.33.
Index Closing Value........... The Index Closing Value, on any Determination
Date, will equal the closing value of the
DJIA or any Successor Index at the regular
official weekday close of trading on such
Determination Date. See "Discontinuance of
the DJIA; Alteration of Method of
Calculation."
References herein to the DJIA 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 January 15,
2002, February 28, 2003 and April 21, 2004.
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 DJIA on
such fifth Trading Day in accordance with the
formula for and method of calculating the
DJIA 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 DJIA.
If the last scheduled 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 DJIA 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 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 DJIA:
(i) a suspension, absence or material
limitation of trading of 6 or more of the
securities included in the DJIA 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 DJIA 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 DJIA 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 DJIA and (5)
a "suspension, absence or material limitation
of trading" on the primary market on which
futures or options contracts related to the
DJIA 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 DJIA Percent Change, the Final Index
Value, the Supplemental Redemption Amount or
whether a Market Disruption Event has
occurred. See "Discontinuance of the DJIA;
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 DJIA 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 DJIA 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 DJIA based on the Final
Index Value over the Initial Index Value does
not reflect the payment of dividends on the
stocks underlying the DJIA. 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 DJIA, dividend
rates on the stocks underlying the DJIA, 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 DJIA 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 DJIA (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 DJIA values should not be
taken as an indication of the future
performance of the DJIA during the term of the
BRIDGES. While the trading prices of the
stocks underlying the DJIA will determine the
value of the DJIA, it is impossible to predict
whether the value of the DJIA will rise or
fall. Trading prices of the stocks
underlying the DJIA 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 Dow Jones concerning
additions, deletions and substitutions of the
stocks underlying the DJIA and the manner in
which Dow Jones takes account of certain
changes affecting such underlying stocks may
affect the value of the DJIA. The policies of
Dow Jones with respect to the calculation of
the DJIA could also affect the value of the
DJIA. Dow Jones may discontinue or suspend
calculation or dissemination of the DJIA.
Any such actions could affect the value of
the BRIDGES. See "The Dow Jones Industrial
Average" and "Discontinuance of the DJIA;
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 DJIA 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 DJIA; 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.
The Dow Jones Industrial
Average.................... Unless otherwise stated, all information
herein on the DJIA is derived from Dow Jones
or other publicly available sources. Such
information reflects the policies of Dow
Jones as stated in such sources and such
policies are subject to change by Dow Jones.
Dow Jones is under no obligation to continue
to publish the DJIA and may discontinue
publication of the DJIA at any time.
The DJIA is a price-weighted index (i.e., the
weight of a component stock in the DJIA is
based on its price per share rather than the
total market capitalization of the issuer of
such component stock) comprised of 30 common
stocks chosen by the editors of the Wall
Street Journal ("WSJ") as representative of
the broad market of U.S. industry. The
corporations represented in the DJIA tend to
be leaders within their respective industries
and their stocks are typically widely held by
individuals and institutional investors.
Changes in the composition of the DJIA are
made entirely by the editors of the WSJ
without consultation with the corporations
represented in the DJIA, any stock exchange,
any official agency or the Company. Changes
to the common stocks included in the DJIA
tend to be made infrequently. Historically,
most substitutions have been the result of
mergers, but from time to time, changes may be
made to achieve what the editors of the WSJ
deem to be a more accurate representation of
the broad market of U.S. industry. In
choosing a new corporation for the DJIA, the
editors of the WSJ look for leading
industrial companies with a successful
history of growth and wide interest among
investors. The component stocks of the DJIA
may be changed at any time for any reason.
Dow Jones, publisher of the WSJ, is not
affiliated with the Company and has not
participated in any way in the creation of
the BRIDGES.
The DJIA initially consisted of twelve common
stocks and was first published in the WSJ in
1896. The DJIA was increased to include 20
common stocks in 1916 and to 30 common stocks
in 1928. The number of common stocks in the
DJIA has remained at 30 since 1928, and, in
an effort to maintain continuity, the
constituent corporations represented in the
DJIA have been changed on a relatively
infrequent basis.
The value of the DJIA is the sum of the
primary exchange prices of each of the 30
common stocks included in the DJIA, divided
by a divisor that is designed to provide
meaningful continuity in the value of the
DJIA. Because the DJIA is price-weighted,
stock splits or changes in the component
stocks could result in distortions in the
DJIA value. In order to prevent such
distortions related to extrinsic factors, the
divisor is changed in accordance with a
mathematical formula that reflects adjusted
proportions within the DJIA. The current
divisor of the DJIA is published daily in the
WSJ and other publications. In addition,
other statistics based on the DJIA may be
found in a variety of publicly available
sources.
The divisor is adjusted due to corporate
actions that change the price of any of the
stocks underlying the DJIA. The most
frequent reason for such an adjustment is a
stock split. For example, suppose a company
in the DJIA issues one new share for each
share outstanding. After this two-for-one
"split," each share of stock is worth half
what it was immediately before, other things
being equal. But without an adjustment in
the divisor, this split would produce a
distortion in the DJIA. An adjustment must
be made to compensate so that the "average"
will remain unchanged. At Dow Jones, this
adjustment is handled by changing the
divisor.(*) The formula used to calculate
divisor adjustments is:
- ------------
(*) Currently, the divisor is recalculated after the close of business on
the day prior to the occurrence of the split.
New Divisor = Current Divisor x Adjusted Sum of Prices
------------------------
Unadjusted Sum of Prices
Issuer of Component
Stock(1) Symbol
----------------------------------------------------- ------
Allied-Signal Inc.................................... ALD
Aluminum Co. of America.............................. AA
American Express Co.................................. AXP
AT&T Corp.......................................... T
Boeing Co., The...................................... BA
Caterpillar Inc...................................... CAT
Chevron Corp....................................... CHV
Coca-Cola Co., The ................................ KO
Disney (Walt) Co..................................... DIS
DuPont (E.I.) De Nemours & Co...................... DD
Eastman Kodak Co..................................... EK
Exxon Corp......................................... XON
General Electric Co.................................. GE
General Motors Corp................................ GM
Goodyear Tire & Rubber Co............................ GT
Hewlett-Packard Co................................... HWP
International Business Machines Corp................. IBM
International Paper Co............................... IP
Johnson & Johnson.................................... JNJ
McDonald's Corp...................................... MCD
Merck & Co........................................... MRK
Minnesota Mining & Manufacturing Co.................. MMM
Morgan (J.P.) & Co................................... JPM
Morris (Philip) Cos.................................. MO
Procter & Gamble Co.................................. PG
Sears, Roebuck & Co.................................. S
Travelers Group Inc.................................. TRV
Union Carbide Corp................................... UK
United Technologies Corp............................. UTX
Wal-Mart Stores Inc.................................. WMT
(1) Although all 30 stocks underlying the DJIA are currently
listed on the New York Stock Exchange, listing on the New
York Stock Exchange is not a criterion for selection.
The Company or its affiliates may presently
or from time to time engage in business with
Dow Jones or one or more of the issuers of
the component stocks of the DJIA, including
extending loans to, or making equity
investments in, Dow Jones or such issuers or
providing advisory services to such issuers,
including merger and acquisition advisory
services. In the course of such business with
issuers, the Company or its affiliates may
acquire non-public information with respect
to such issuers. The Company may also act
as market maker for the common stocks of such
issuers. The Company does not make any
representation to any purchaser of BRIDGES
with respect to any matters whatsoever
relating to Dow Jones or such issuers. Any
prospective purchaser of BRIDGES should
undertake an independent investigation of the
issuers of the component stocks of the DJIA
and with respect to the competency of Dow
Jones to formulate and calculate the DJIA as
in its judgment is appropriate to make an
informed decision with respect to an
investment in the BRIDGES. The composition
of the DJIA does not reflect any investment
or sell recommendations of the Company or its
affiliates.
"Dow Jones," "Dow Jones Industrial
Average(SM)," and "DJIA(SM)" are service
marks of Dow Jones & Company, Inc. and have
been licensed for use for certain purposes by
the Company. The Company's BRIDGES based on
the Dow Jones Industrial Average(SM), are not
sponsored, endorsed, sold or promoted by Dow
Jones, and Dow Jones makes no representation
regarding the advisability of investing in
such product(s).
Discontinuance of the DJIA;
Alteration of Method of
Calculation................. If Dow Jones discontinues publication of
the DJIA and Dow Jones or another entity
publishes a successor or substitute index
that the Calculation Agent determines, in its
sole discretion, to be comparable to the
discontinued DJIA (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 Dow Jones discontinues publication of the
DJIA 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 DJIA 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 DJIA 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 DJIA. Notwithstanding
these alternative arrangements,
discontinuance of the publication of the DJIA
may adversely affect the value of the BRIDGES.
If at any time the method of calculating the
DJIA or a Successor Index, or the value
thereof, is changed in a material respect, or
if the DJIA 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 DJIA 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 DJIA 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 DJIA
or such Successor Index, as adjusted.
Accordingly, if the method of calculating the
DJIA 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
DJIA 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 DJIA, including,
without limitation, its make-up, method of
calculation and changes in its components,
are derived from publicly available
information prepared by Dow Jones. 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 DJIA
for each quarter in the period from January
1, 1992 through April 23, 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 DJIA
should not be taken as an indication of
future performance, and no assurance can be
given that the DJIA will increase
sufficiently to cause the holders of the
BRIDGES to receive any Supplemental
Redemption Amount.
Daily Index Closing Values
Period
High Low End
---- --- ------
1992
First Quarter 3290.25 3172.41 3235.47
Second Quarter 3413.21 3181.35 3318.52
Third Quarter 3395.40 3228.17 3271.66
Fourth Quarter 3333.26 3136.58 3301.11
1993
First Quarter 3478.35 3241.96 3435.11
Second Quarter 3554.84 3370.82 3516.08
Third Quarter 3652.10 3449.94 3555.12
Fourth Quarter 3794.34 3577.77 3754.09
1994
First Quarter 3978.37 3626.76 3635.96
Second Quarter 3814.84 3593.36 3624.96
Third Quarter 3953.88 3646.65 3843.19
Fourth Quarter 3936.04 3674.63 3834.44
1995
First Quarter 4172.56 3832.08 4157.69
Second Quarter 4589.64 4168.41 4556.10
Third Quarter 4801.80 4580.62 4789.08
Fourth Quarter 5216.47 4703.82 5117.12
1996
First Quarter 5683.60 5032.94 5587.14
Second Quarter 5778.00 5420.95 5654.63
Third Quarter 5894.74 5346.55 5882.17
Fourth Quarter 6560.91 5904.90 6448.27
1997
First Quarter 7085.16 6442.49 6583.48
Second Quarter 7796.51 6391.69 7672.79
Third Quarter 8259.31 7622.42 7945.26
Fourth Quarter 8178.31 7161.15 7908.25
1998
First Quarter 8906.43 7580.42 8799.81
Second Quarter
(through April 23,
1998) 9184.94 8868.32 9143.33
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
individual stocks included in the DJIA and
futures contracts on the DJIA. 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
DJIA, individual stocks included in the DJIA,
futures contracts on the DJIA 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 or will have a
material impact on the price of such options,
stocks, futures contracts, and options on
futures contracts or on the value of the
DJIA, 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............. Dow Jones 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 DJIA, which is owned and published
by Dow Jones, in connection with certain
securities, including the BRIDGES.
The license agreement between Dow Jones 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 Dow Jones. Dow Jones makes no
representation or warranty, express or
implied, to the owners of the BRIDGES or any
member of the public regarding the
advisability of investing in securities
generally or in the BRIDGES particularly.
Dow Jones' only relationship to the Company
is the licensing of certain trademarks, trade
names and service marks of Dow Jones and of
the Dow Jones Industrial Average(SM) which is
determined, composed and calculated by Dow
Jones without regard to the Company or the
BRIDGES. Dow Jones has no obligation to take
the needs of the Company or the owners of the
BRIDGES into consideration in determining,
composing or calculating the Dow Jones
Industrial Average(SM). Dow Jones 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. Dow Jones has no
obligation or liability in connection with the
administration, marketing or trading of the
BRIDGES.
DOW JONES DOES NOT GUARANTEE THE ACCURACY
AND/OR THE COMPLETENESS OF THE DOW JONES
INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED
THEREIN AND DOW JONES SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS
OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY
THE COMPANY, OWNERS OF THE BRIDGES, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE
DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA
INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE
WITH RESPECT TO THE DOW JONES INDUSTRIAL
AVERAGE(SM) OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL DOW JONES HAVE ANY LIABILITY FOR
ANY LOST PROFITS OR INDIRECT, PUNITIVE,
SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY THEREOF. THERE ARE NO THIRD
PARTY BENEFICIARIES OF ANY AGREEMENTS OR
ARRANGEMENTS BETWEEN DOW JONES AND THE
COMPANY.
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
6.15%, 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 $14.33.
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:
TOTAL INTEREST
DEEMED TO
INTEREST HAVE ACCRUED
DEEMED TO FROM ORIGINAL
ACCRUE ISSUE DATE PER
DURING BRIDGES[SM] AS
ACCRUAL OF END OF
PERIOD (PER ACCRUAL
ACCRUAL PERIOD BRIDGES[SM]) PERIOD
-------------- ------------ --------------
Original Issue Date through December
31, 1998......................... $0.42 $0.42
January 1, 1999 through December 31,
1999............................. $0.64 $1.06
January 1, 2000 through December 31,
2000............................. $0.68 $1.74
January 1, 2001 through December 31,
2001............................. $0.72 $2.46
January 1, 2002 through December 31,
2002............................. $0.77 $3.23
January 1, 2003 through December 31,
2003............................. $0.81 $4.04
January 1, 2004 through April 30,
2004............................. $0.29 $4.33
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
who have lost United States citizenship or
who 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
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 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. 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.
