PROSPECTUS SUPPLEMENT
(To Prospectus dated May 5, 1999)
$16,256,130,907
Morgan Stanley Dean Witter & Co.
GLOBAL MEDIUM-TERM NOTES, SERIES C
GLOBAL UNITS, SERIES C
-----------------------
We, Morgan Stanley Dean Witter & Co., may offer from time to time global
medium-term notes, either alone or as part of a unit. The specific terms
of any notes that we offer will be included in a pricing supplement. The
notes will have the following general terms:
o The notes will mature more than nine months from the date of issue.
o The notes will bear interest at either a fixed rate, which may be zero, or a
floating rate. Floating rates will be based on rates specified in the
applicable pricing supplement.
o The notes will pay interest, if any, on the dates stated in the applicable
pricing supplement.
o The notes will be either senior or subordinated.
o The applicable pricing supplement will specify whether the notes will be
denominated in U.S. dollars or some other currency.
o The notes will be held in global form by The Depository Trust Company,
unless the pricing supplement provides otherwise.
The pricing supplement may also specify that the notes will have additional
terms, including the following:
o The notes may be optionally or mandatorily exchanged for securities of an
issuer that is not affiliated with us, into a basket or index of those
securities or for the cash value of those securities.
o Payments on the notes may be linked to currency prices, commodity prices,
single securities, baskets of securities or indices.
o The notes may be either callable by us or puttable by you.
Units may include any combination of notes, universal warrants or purchase
contracts. Each universal warrant will either entitle or require you to
purchase or sell, and each purchase contract will require you to purchase or
sell, (1) securities of an entity not affiliated with us, a basket of those
securities, an index or indices of those securities or any combination of the
above, (2) currencies or (3) commodities. The specific terms of any units we
offer will be included in the applicable pricing supplement.
--------------------
Investing in the notes or units involves risks. See "Foreign Currency
Risks" beginning on page S-5.
--------------------
<TABLE>
Price to Agent's Proceeds to
Public Commissions Company
-------- ----------- -----------
<S> <C> <C> <C>
Per note or unit....... 100% .125% - .750% 99.875% - 99.250%
Total.................. $16,256,130,907 $20,320,164 - $121,920,982 $16,235,810,743 - $16,134,209,925
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated and Dean Witter Reynolds Inc., our wholly
owned subsidiaries, have agreed to use reasonable efforts to solicit offers to
purchase these securities as our agents. The agents may also purchase these
securities as principal at prices to be agreed upon at the time of sale. The
agents may resell any securities they purchase as principal at prevailing
market prices, or at other prices, as the agents determine.
Morgan Stanley & Co. Incorporated and Dean Witter Reynolds Inc. may use this
prospectus supplement and the accompanying prospectus in connection with
offers and sales of the securities in market-making transactions.
--------------------
MORGAN STANLEY DEAN WITTER
May 6, 1999
TABLE OF CONTENTS
Page
Prospectus Supplement
Summary....................................................................S-3
Foreign Currency Risks.....................................................S-5
Description of Notes.......................................................S-7
Description of Units......................................................S-27
The Depositary............................................................S-29
United States Federal Taxation............................................S-30
Plan of Distribution......................................................S-43
Legal Matters.............................................................S-44
Prospectus
Summary......................................................................3
Where You Can Find More Information..........................................7
Consolidated Ratios of Earnings to Fixed Charges and Earnings
to Fixed Charges and Preferred Stock Dividends.............................8
Morgan Stanley Dean Witter...................................................9
Use of Proceeds..............................................................9
Description of Debt Securities..............................................10
Description of Units........................................................17
Description of Warrants.....................................................23
Description of Purchase Contracts...........................................25
Description of Capital Stock................................................27
Forms of Securities.........................................................40
Plan of Distribution........................................................43
Legal Matters...............................................................44
Experts.....................................................................45
ERISA Matters for Pension Plans and Insurance Companies.....................45
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the prospectus and any pricing
supplement. We have not authorized anyone else to provide you with
different or additional information. We are offering to sell these
securities and seeking offers to buy these securities only in jurisdictions
where offers and sales are permitted.
SUMMARY
The following summary describes the notes and units we are
offering under this program in general terms only. You should read the
summary together with the more detailed information contained in this
prospectus supplement, in the accompanying prospectus and in the applicable
pricing supplement.
We, Morgan Stanley Dean Witter & Co., may offer from time to
time up to U.S. $16,256,130,907, or the equivalent of this amount in other
currencies, of the medium-term notes and units described in this prospectus
supplement. We will sell the notes and the units primarily in the United
States, but we may also sell them outside the United States or both in and
outside the United States simultaneously. We refer to the notes and units
offered under this prospectus supplement as our Series C medium-term notes and
our Series C units. We refer to the offering of the Series C medium-term
notes and the Series C units as our "Series C program."
General terms of the notes o The notes will mature more than nine
months from the date of issuance and
will pay interest, if any, on the dates
specified in the applicable pricing
supplement.
o The notes will bear interest at either
a fixed rate, which may be zero, or a
floating rate.
o The notes will be issued in U.S.
dollars unless we specify otherwise in
the applicable pricing supplement.
o The notes will be either senior or
subordinated.
o The notes may be either callable by us
or puttable by you.
o The notes may be optionally or
mandatorily exchanged for securities of
an issuer that is not affiliated with
us, into a basket or index of those
securities or for the cash value of
those securities.
o Payments of principal and/or interest
on the notes may be linked to currency
prices, commodity prices, single
securities, baskets of securities or
indices.
o We may issue amortizing notes that pay
a level amount in respect of both
interest and principal amortized over
the life of the note.
o The notes may be issued either alone or
as a part of a unit with any
combination of other securities.
o The notes will be held in global form
by The Depository Trust Company, unless
we specify otherwise in the applicable
pricing supplement.
o The notes will not be listed on any
securities exchange, unless we specify
otherwise in the applicable pricing
supplement.
General terms of units o Units may include any combination of
notes, universal warrants or purchase
contracts.
o Universal warrants will entitle or
require you to purchase from us or sell
to us:
o securities of an entity not
affiliated with us, a basket of
those securities, an index or
indices of those securities or any
combination of the above;
o currencies; or
o commodities.
The pricing supplement will explain how
we or, if specified, you may satisfy
any obligations under the universal
warrants through the delivery of the
underlying securities, currencies or
commodities or, in the case of
underlying securities or commodities,
the cash value of the underlying
securities or commodities.
o Purchase contracts included in units
will require you to purchase or sell:
o securities of an entity not
affiliated with us, a basket of
those securities, an index or
indices of those securities or any
combination of the above;
o currencies; or
o commodities.
A purchase contract issued as part of a
unit may be either prepaid or paid at
settlement. The applicable pricing
supplement will explain the methods by
which you may purchase or sell the
specified securities, currencies or
commodities at the settlement of the
purchase contract and any acceleration,
cancellation or termination provisions
or other provisions relating to the
settlement of the purchase contract.
o The applicable pricing supplement will
indicate whether and under what
circumstances securities included in a
unit may be separated from the other
securities comprising that unit.
Forms of securities The securities that we offer under our
Series C program will be issued in fully
registered form and will be represented
either by a global security registered in
the name of a nominee of The Depository
Trust Company, as depositary, or by
certificates issued in definitive form, as
set forth in the applicable pricing
supplement. We will not issue book-entry
securities as certificated securities
except under the circumstances described
in "Forms of Securities -- Global
Securities" in the prospectus. For
information on The Depository Trust
Company's book-entry system, see "The
Depositary" in this prospectus supplement.
How to reach us You may contact us at our principal
executive offices at 1585 Broadway, New
York, New York, 10036 (telephone number
(212) 761-4000).
FOREIGN CURRENCY RISKS
You should consult your financial and legal advisors as to any
specific risks entailed by an investment in notes, units or any of the
securities included in units that are denominated or payable in, or the
payment of which is linked to the value of, foreign currency. These notes,
units or other securities are not appropriate investments for investors who
are not sophisticated in foreign currency transactions.
The information set forth in this prospectus supplement is
directed to prospective purchasers who are United States residents. We
disclaim any responsibility to advise prospective purchasers who are residents
of countries other than the United States of any matters arising under foreign
law that may affect the purchase of or holding of, or receipt of payments on,
the notes, units or any securities included in the units. These persons
should consult their own legal and financial advisors concerning these matters.
Exchange Rates and Exchange Controls May Affect the Securities' Value or Return
Securities Involving Foreign Currencies Are Subject to General
Exchange Rate and Exchange Control Risks. An investment in a note, unit or
any security included in a unit that is denominated or payable in, or the
payment of which is linked to the value of, currencies other than U.S. dollars
entails significant risks. These risks include the possibility of significant
changes in rates of exchange between the U.S. dollar and the relevant foreign
currencies and the possibility of the imposition or modification of exchange
controls by either the U.S. or foreign governments. These risks generally
depend on economic and political events over which we have no control.
Exchange Rates Will Affect Your Investment. In recent years,
rates of exchange between U.S. dollars and some foreign currencies have been
highly volatile and this volatility may continue in the future. Fluctuations
in any particular exchange rate that have occurred in the past are not
necessarily indicative, however, of fluctuations that may occur during the
term of any note, unit or security included in a unit. Depreciation against
the U.S. dollar of the currency in which a note, unit or security included in
a unit is payable would result in a decrease in the effective yield of the note
below its coupon rate or in the payout of the unit or security included in the
unit and could result in an overall loss to you on a U.S. dollar basis. In
addition, depending on the specific terms of a currency-linked note, changes
in exchange rates relating to any of the relevant currencies could result in a
decrease in its effective yield and in your loss of all or a substantial
portion of the value of that note.
There May Be Specific Exchange Rate Risks Applicable to
Warrants and Purchase Contracts. Fluctuations in the rates of exchange
between U.S. dollars and any other currency (a) in which the exercise price of
a warrant or the purchase price of a purchase contract is payable, (b) in
which the value of the property underlying a warrant or purchase contract is
quoted or (c) to be purchased or sold by exercise of a warrant or pursuant to
a purchase contract or in the rates of exchange among any of these foreign
currencies may change the value of a warrant, a purchase contract or a unit
that includes a warrant or purchase contract. You could lose money on your
investment as a result of these fluctuations, even if the spot price of the
property underlying the warrant or purchase contract were such that the
warrant or purchase contract appeared to be "in the money."
We Have No Control Over Exchange Rates. Foreign exchange
rates can either float or be fixed by sovereign governments. Exchange rates
of most economically developed nations are permitted to fluctuate in value
relative to the U.S. dollar and to each other. However, from time to time
governments may use a variety of techniques, such as intervention by a
country's central bank or the imposition of regulatory controls or taxes, to
influence the exchange rates of their currencies. Governments may also issue
a new currency to replace an existing currency or alter the exchange rate or
relative exchange characteristics by a devaluation or revaluation of a
currency. These governmental actions could change or interfere with currency
valuations and currency fluctuations that would otherwise occur in response
to economic forces, as well as in response to the movement of currencies
across borders.
As a consequence, these government actions could adversely
affect the U.S. dollar-equivalent yields or payouts for (a) notes denominated
or payable in currencies other than U.S. dollars, (b) currency-linked notes,
(c) warrants or purchase contracts where the exercise price or the purchase
price is denominated in a foreign currency or where the value of the property
underlying the warrants or purchase contracts is quoted in a foreign currency
and (d) warrants or purchase contracts to purchase or sell foreign currency.
We will not make any adjustment or change in the terms of the
notes, units or any security included in a unit in the event that exchange
rates should become fixed, or in the event of any devaluation or revaluation
or imposition of exchange or other regulatory controls or taxes, or in the
event of other developments affecting the U.S. dollar or any applicable
foreign currency. You will bear those risks.
Some Foreign Currencies May Become Unavailable. Governments
have imposed from time to time, and may in the future impose, exchange
controls that could also affect the availability of a specified foreign
currency. Even if there are no actual exchange controls, it is possible that
the applicable currency for any security not denominated in U.S. dollars would
not be available when payments on that security are due.
Alternative Payment Method Used if Payment Currency Becomes
Unavailable. If a payment currency is unavailable, we would make required
payments in U.S. dollars on the basis of the market exchange rate. However, if
the applicable currency for any security is not available because the euro has
been substituted for that currency, we would make the payments in euro. The
mechanisms for making payments in these alternative currencies are explained
in "Description of Notes--Interest and Principal Payments" below.
We Will Provide Currency Exchange Information in Pricing
Supplements. The applicable pricing supplement will include information
regarding current applicable exchange controls, if any, and historic exchange
rate information for any note, unit or security included in a unit denominated
or payable in a foreign currency or requiring payments that are related to the
value of a foreign currency. That information will be furnished only for
information purposes. You should not assume that any historic information
concerning currency exchange rates will be representative of the range of or
trends in fluctuations in currency exchange rates that may occur in the future.
Currency Conversions May Affect Payments on Some Securities
The applicable pricing supplement may provide for (1) payments
on a non-U.S. dollar denominated note, unit or any security included in a unit
to be made in U.S. dollars or (2) payments on a U.S. dollar denominated note,
unit or any security included in a unit to be made in a currency other than
U.S. dollars. In these cases, Morgan Stanley & Co. Incorporated, in its
capacity as exchange rate agent, or a different exchange rate agent identified
in the pricing supplement, will convert the currencies. You will bear the
costs of conversion through deductions from those payments.
Exchange Rates May Affect the Value of a New York Judgment Involving Non-U.S.
Dollar Securities
The notes, units, universal warrants and purchase contracts
will be governed by and construed in accordance with the laws of the State of
New York. Unlike many courts in the United States outside the State of New
York, the courts in the State of New York customarily enter judgments or
decrees for money damages in the foreign currency in which notes, units,
universal warrants and purchase contracts are denominated. These amounts
would then be converted into U.S. dollars at the rate of exchange in effect on
the date the judgment or decree is entered. You would bear the foreign
currency risk during litigation.
Additional risks specific to particular securities issued under our Series C
program will be detailed in the applicable pricing supplements.
DESCRIPTION OF NOTES
Investors should carefully read the general terms and
provisions of our debt securities in "Description of Debt Securities" in the
prospectus. This section supplements that description. The pricing
supplement will add specific terms for each issuance of notes and may modify
or replace any of the information in this section and in "Description of Debt
Securities" in the prospectus. If a note is offered as part of a unit,
investors should also review the information in "Description of Units" in the
prospectus and in this prospectus supplement.
The following terms used in this section are defined in the
indicated sections of the accompanying prospectus:
o Capital Units ("Description of Capital Stock -- Outstanding
Capital Stock")
o Senior Debt Indenture ("Description of Debt Securities --
Indentures")
o senior indebtedness ("Description of Debt Securities --
Subordination Provisions")
o Subordinated Debt Indenture ("Description of Debt Securities
-- Indentures")
General Terms of Notes
We may issue notes under the Senior Debt Indenture or the
Subordinated Debt Indenture. The Series C medium- term notes issued under each
indenture, together with our Series D and Series E global medium-term notes,
referred to below under "Plan of Distribution," will constitute a single series
under that indenture, together with any medium-term notes we issue in the future
under that indenture that we designate as being part of that series.
Outstanding Indebtedness of MSDW. Neither indenture limits the
amount of additional indebtedness that we may incur. At February 28, 1999, we
had approximately $35.9 billion aggregate principal amount of debt securities
outstanding under the Senior Debt Indenture and approximately $88.7 million
aggregate principal amount of debt securities outstanding under the
Subordinated Debt Indenture. For the purposes of this paragraph, these amounts
include, (1) for any debt security sold with original issue discount, only the
issue price of that debt security and (2) for any debt security denominated
in a foreign currency, the U.S. dollar equivalent on the date of issue of the
issue price of that debt security.
Ranking. Notes issued under the Senior Debt Indenture will
rank on a parity with all other senior indebtedness of MSDW and with all other
unsecured and unsubordinated indebtedness of MSDW, subject to statutory
exceptions in the event of liquidation upon insolvency. Notes issued under
the Subordinated Debt Indenture will rank on a parity with all other
subordinated indebtedness of MSDW and, together with all other subordinated
indebtedness, will be subordinated in right of payment to the prior payment in
full of our senior indebtedness. See "Description of Debt Securities --
Subordination Provisions" in the prospectus. At November 30, 1998, we had
outstanding approximately $36.1 billion of senior indebtedness, approximately
$83.5 million of subordinated indebtedness and approximately $999 million of
Capital Units ($352 million of which were redeemed effective March 1, 1999).
Terms Specified in Pricing Supplements. A pricing supplement
will specify the following terms of any issuance of our Series C medium-term
notes to the extent applicable:
o the specific designation of the notes;
o the issue price;
o the aggregate principal amount;
o the denominations or minimum denominations;
o the original issue date;
o whether the notes are senior or subordinated;
o the stated maturity date and any terms related to any
extension of the maturity date;
o whether the notes are fixed rate notes, floating rate notes,
notes with original issue discount and/or amortizing notes;
o for fixed rate notes, the rate per year at which the notes
will bear interest, if any, or the method of calculating
that rate and the dates on which interest will be payable;
o for floating rate notes, the base rate, the index maturity,
the spread, the spread multiplier, the initial interest
rate, the interest reset periods, the interest payment
dates, the maximum interest rate, the minimum interest
rate and any other terms relating to the particular method
of calculating the interest rate for the note;
o if the note is an amortizing note, the amortization schedule;
o whether the notes may be redeemed, in whole or in part, at
our option or repaid at your option, prior to the stated
maturity date, and the terms of any redemption or
repayment;
o whether the notes are currency-linked notes and/or notes
linked to commodity prices, single securities, baskets of
securities or indices;
o the terms on which holders of the notes may convert or
exchange them into or for stock or other securities of
entities not affiliated with us or any other property, any
specific terms relating to the adjustment of the
conversion or exchange feature and the period during which
the holders may effect the conversion or exchange;
o whether the notes are renewable notes;
o if any note is not denominated and payable in U.S. dollars,
the currency or currencies in which the principal,
premium, if any, and interest, if any, will be paid, which
we refer to as the "specified currency," along with any
other terms relating to the non-U.S. dollar denomination,
including exchange rates as against the U.S. dollar at
selected times during the last five years and any exchange
controls affecting that specified currency;
o whether the notes will be listed on any stock exchange;
o whether the notes will be issued in book-entry or
certificated form; and
o any other terms on which we will issue the notes.
Some Definitions. We have defined some of the terms that we
use frequently in this prospectus supplement below:
A "business day" means any day, other than a Saturday or
Sunday, (a) that is neither a legal holiday nor a day on which banking
institutions are authorized or required by law or regulation to close (x) in
The City of New York or (y) for notes denominated in a specified currency
other than U.S. dollars, Australian dollars or euro, in the principal
financial center of the country of the specified currency or (z) for notes
denominated in Australian dollars, in Sydney, and (b) for notes denominated in
euro, that is also a day on which the Trans-European Automated Real-time Gross
Settlement Express Transfer System, which is commonly referred to as "TARGET,"
is operating.
"Depositary" means The Depository Trust Company, New York, New
York.
"Euro LIBOR notes" means LIBOR notes for which the index
currency is euros.
An "interest payment date" for any note means a date on which,
under the terms of that note, regularly scheduled interest is payable.
"London banking day" means any day on which dealings in
deposits in the relevant index currency are transacted in the London interbank
market.
The "record date" for any interest payment date is the date 15
calendar days prior to that interest payment date, whether or not that date is
a business day.
"TARGET Settlement Day" means any day on which the
Trans-European Automated Real-time Gross Settlement Express Transfer System is
open.
References in this prospectus supplement to "U.S. dollars" or
"U.S.$" or "$" are to the currency of the United States of America.
Forms of Notes
We will offer the notes on a continuing basis and will issue
notes only in fully registered form either as book-entry notes or as
certificated notes. We may issue the notes either alone or as part of a unit.
Book-Entry Notes. For notes in book-entry form, MSDW will
issue one or more global certificates representing the entire issue of notes.
Except as set forth in the prospectus under "Forms of Securities -- Global
Securities," you may not exchange book-entry notes or interests in book-entry
notes for certificated notes.
Each global note certificate representing book-entry notes will
be deposited with, or on behalf of, the Depositary and registered in the name
of a nominee of the Depositary. These certificates name the Depositary or its
nominee as the owner of the notes. The Depositary maintains a computerized
system that will reflect the interests held by its participants in the global
notes. An investor's beneficial interest will be reflected in the records of
the Depositary's direct or indirect participants through an account maintained
by the investor with its broker/dealer, bank, trust company or other
representative. A further description of the Depositary's procedures for
global notes representing book-entry notes is set forth in the prospectus
under "Forms of Securities--Global Securities." The Depositary has confirmed to
MSDW, the agents and each trustee that it intends to follow these procedures.
Certificated Notes. If we issue notes in certificated form,
the certificate will name the investor or the investor's nominee as the owner
of the note. The person named in the note register will be considered the
owner of the note for all purposes under the indenture. For example, if we
need to ask the holders of the notes to vote on a proposed amendment to the
notes, the person named in the note register will be asked to cast any vote
regarding that note. If you have chosen to have some other entity hold the
certificates for you, that entity will be considered the owner of your note
in our records and will be entitled to cast the vote regarding your note. You
may not exchange certificated notes for book-entry notes or interests in
book-entry notes.
Denominations. MSDW will issue the notes:
o for U.S. dollar-denominated notes, in denominations of $1,000
or any amount greater than $1,000 that is an integral
multiple of $1,000; or
o for notes denominated in a specified currency other than U.S.
dollars, in denominations of the equivalent of $1,000,
rounded to an integral multiple of 1,000 units of the
specified currency, or any larger integral multiple of
1,000 units of the specified currency, as determined by
reference to the market exchange rate, as defined under
"-- Interest and Principal Payments -- Unavailability of
Foreign Currency" below, on the business day immediately
preceding the date of issuance.
Interest and Principal Payments
Payments, Exchanges and Transfers. Holders may present notes
for payment of principal, premium, if any, and interest, if any, register the
transfer of the notes and exchange the notes at the agency in the Borough of
Manhattan, The City of New York, maintained by MSDW for that purpose.
However, holders of global notes may transfer and exchange global notes only
in the manner and to the extent set forth under "Forms of Securities -- Global
Securities" in the prospectus. On the date of this prospectus supplement, the
agent for the payment, transfer and exchange of the notes is The Chase
Manhattan Bank, acting through its corporate trust office at 450 West 33rd
Street, New York, New York 10001. We refer to The Chase Manhattan Bank,
acting in this capacity, as the paying agent.
We will not be required to:
o register the transfer of or exchange any note if the holder
has exercised the holder's right, if any, to require us to
repurchase the note, in whole or in part, except the
portion of the note not required to be repurchased,
o register the transfer of or exchange notes to be redeemed for
a period of fifteen calendar days preceding the mailing of
the relevant notice of redemption, or
o register the transfer of or exchange any registered note
selected for redemption in whole or in part, except the
unredeemed or unpaid portion of that registered note being
redeemed in part.
No service charge will be made for any registration or transfer
or exchange of notes, but we may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection with the
registration of transfer or exchange of notes.
Although we anticipate making payments of principal, premium,
if any, and interest, if any, on most notes in U.S. dollars, some notes may be
payable in foreign currencies as specified in the applicable pricing
supplement. Currently, few facilities exist in the United States to convert
U.S. dollars into foreign currencies and vice versa. In addition, most U.S.
banks do not offer non-U.S. dollar denominated checking or savings account
facilities. Accordingly, unless alternative arrangements are made, we will pay
principal, premium, if any, and interest, if any, on notes that are payable
in a foreign currency to an account at a bank outside the United States,
which, in the case of a note payable in euro, will be made by credit or
transfer to a euro account specified by the payee in a country for which the
euro is the lawful currency.
Recipients of Payments. The paying agent will pay interest to
the person in whose name the note is registered at the close of business on
the applicable record date. However, upon maturity, redemption or repayment,
the paying agent will pay any interest due to the person to whom it pays the
principal of the note. The paying agent will make the payment of interest on
the date of maturity, redemption or repayment, whether or not that date is an
interest payment date. The paying agent will make the initial interest
payment on a note on the first interest payment date falling after the date of
issuance, unless the date of issuance is less than 15 calendar days before an
interest payment date. In that case, the paying agent will pay interest or,
in the case of an amortizing note, principal and interest, on the next
succeeding interest payment date to the holder of record on the record date
corresponding to the succeeding interest payment date.
Book-Entry Notes. The paying agent will make payments of
principal, premium, if any, and interest, if any, to the account of the
Depositary, as holder of book-entry notes, by wire transfer of immediately
available funds. We expect that the Depositary, upon receipt of any payment,
will immediately credit its participants' accounts in amounts proportionate to
their respective beneficial interests in the book-entry notes as shown on the
records of the Depositary. We also expect that payments by the Depositary's
participants to owners of beneficial interests in the book-entry notes will be
governed by standing customer instructions and customary practices and will be
the responsibility of those participants.
Certificated Notes. Except as indicated below for payments of
interest at maturity, redemption or repayment, the paying agent will make U.S.
dollar payments of interest either:
o by check mailed to the address of the person entitled to
payment as shown on the note register; or
o for a holder of at least $10,000,000 in aggregate principal
amount of certificated notes having the same interest
payment date, by wire transfer of immediately available
funds, if the holder has given written notice to the
paying agent not later than 15 calendar days prior to the
applicable interest payment date.
U.S. dollar payments of principal, premium, if any, and interest, if any, upon
maturity, redemption or repayment on a note will be made in immediately
available funds against presentation and surrender of the note.
Payment Procedures for Book-Entry Notes Denominated in a
Foreign Currency. Book-entry notes payable in a specified currency other than
U.S. dollars will provide that a beneficial owner of interests in those notes
may elect to receive all or a portion of the payments of principal, premium,
if any, or interest, if any, in U.S. dollars. In those cases, the Depositary
will elect to receive all payments with respect to the beneficial owner's
interest in the notes in U.S. Dollars, unless the beneficial owner takes the
following steps:
o The beneficial owner must give complete instructions to the
direct or indirect participant through which it holds the
book-entry notes of its election to receive those payments
in the specified currency other than U.S. dollars by wire
transfer to an account specified by the beneficial owner
with a bank located outside the United States. In the
case of a note payable in euro, the account must be a euro
account in a country for which the euro is the lawful
currency.
o The participant must notify the Depositary of the beneficial
owner's election on or prior to the third business day
after the applicable record date, for payments of
interest, and on or prior to the twelfth business day
prior to the maturity date or any redemption or repayment
date, for payment of principal or premium.
o The Depositary will notify the paying agent of the beneficial
owner's election on or prior to the fifth business day
after the applicable record date, for payments of
interest, and on or prior to the tenth business day prior
to the maturity date or any redemption or repayment date,
for payment of principal or premium.
Beneficial owners should consult their participants in order to
ascertain the deadline for giving instructions to participants in order to
ensure that timely notice will be delivered to the Depositary.
Payment Procedures for Certificated Notes Denominated in a
Foreign Currency. For certificated notes payable in a specified currency
other than U.S. dollars, the notes may provide that the holder may elect to
receive all or a portion of the payments on those notes in U.S. dollars. To
do so, the holder must send a written request to the paying agent:
o for payments of interest, on or prior to the fifth business
day after the applicable record date; or
o for payments of principal, at least ten business days prior
to the maturity date or any redemption or repayment date.
To revoke this election for all or a portion of the payments on the
certificated notes, the holder must send written notice to the paying agent:
o at least five business days prior to the applicable record
date, for payment of interest; or
o at least ten calendar days prior to the maturity date or any
redemption or repayment date, for payments of principal.
If the holder does not elect to be paid in U.S. dollars, the paying agent will
pay the principal, premium, if any, or interest, if any, on the certificated
notes:
o by wire transfer of immediately available funds in the
specified currency to the holder's account at a bank
located outside the United States, and in the case of a
note payable in euro, in a country for which the euro is
the lawful currency, if the paying agent has received the
holder's written wire transfer instructions not less than
15 calendar days prior to the applicable payment date; or
o by check payable in the specified currency mailed to the
address of the person entitled to payment that is
specified in the note register, if the holder has not
provided wire instructions.
However, the paying agent will only pay the principal of the certificated
notes, any premium and interest, if any, due at maturity, or on any redemption
or repayment date, upon surrender of the certificated notes at the office or
agency of the paying agent.
Determination of Exchange Rate for Payments in U.S. Dollars for
Notes Denominated in a Foreign Currency. The exchange rate agent will convert
the specified currency into U.S. dollars for holders who elect to receive
payments in U.S. dollars and for beneficial owners of book-entry notes that do
not follow the procedures we have described immediately above. The conversion
will be based on the highest bid quotation in The City of New York received by
the exchange rate agent at approximately 11:00 a.m., New York City time, on
the second business day preceding the applicable payment date from three
recognized foreign exchange dealers for the purchase by the quoting dealer:
o of the specified currency for U.S. dollars for settlement on
the payment date;
o in the aggregate amount of the specified currency payable to
those holders or beneficial owners of notes; and
o at which the applicable dealer commits to execute a contract.
One of the dealers providing quotations may be the exchange rate agent unless
the exchange rate agent is our affiliate. If those bid quotations are not
available, payments will be made in the specified currency. The holders or
beneficial owners of notes will pay all currency exchange costs by deductions
from the amounts payable on the notes.
Unavailability of Foreign Currency. The relevant specified
currency may not be available to us for making payments of principal of,
premium, if any, or interest, if any, on any note. This could occur due to
the imposition of exchange controls or other circumstances beyond our control
or if the specified currency is no longer used by the government of the
country issuing that currency or by public institutions within the
international banking community for the settlement of transactions. If the
specified currency is unavailable, we may satisfy our obligations to holders
of the notes by making those payments on the date of payment in U.S. dollars
on the basis of the noon dollar buying rate in The City of New York for cable
transfers of the currency or currencies in which a payment on any note was to
be made, published by the Federal Reserve Bank of New York, which we refer to
as the "market exchange rate." If that rate of exchange is not then available
or is not published for a particular payment currency, the market exchange
rate will be based on the highest bid quotation in The City of New York
received by the exchange rate agent at approximately 11:00 a.m., New York City
time, on the second business day preceding the applicable payment date from
three recognized foreign exchange dealers for the purchase by the quoting
dealer:
o of the specified currency for U.S. dollars for settlement on
the payment date;
o in the aggregate amount of the specified currency payable to
those holders or beneficial owners of notes; and
o at which the applicable dealer commits to execute a contract.
One of the dealers providing quotations may be the exchange rate agent unless
the exchange rate agent is our affiliate. If those bid quotations are not
available, the exchange rate agent will determine the market exchange rate at
its sole discretion.
These provisions do not apply if a specified currency is
unavailable because it has been replaced by the euro. If the euro has been
substituted for a specified currency, MSDW may at its option, or will, if
required by applicable law, without the consent of the holders of the affected
notes, pay the principal of, premium, if any, or interest, if any, on any
note denominated in the specified currency in euro instead of the specified
currency, in conformity with legally applicable measures taken pursuant to, or
by virtue of, the treaty establishing the European Community, as amended by
the treaty on European Union. Any payment made in U.S. dollars or in euro as
described above where the required payment is in an unavailable specified
currency will not constitute an event of default.
Discount Notes. Some notes may be considered to be issued with
original issue discount, which must be included in income for United States
federal income tax purposes at a constant yield. See "United States Federal
Taxation -- Notes -- Discount Notes" below. If the principal of any note that
is considered to be issued with original issue discount is declared to be due
and payable immediately as described under "Description of Debt Securities --
Events of Default" in the prospectus, the amount of principal due and payable
on that note will be limited to:
o the aggregate principal amount of the note multiplied by the
sum of
o its issue price, expressed as a percentage of the aggregate
principal amount, plus
o the original issue discount amortized from the date of issue
to the date of declaration, expressed as a percentage of
the aggregate principal amount.
The amortization will be calculated using the "interest method," computed in
accordance with generally accepted accounting principles in effect on the date
of declaration. See the applicable pricing supplement for any special
considerations applicable to these notes.
Fixed Rate Notes
Each fixed rate note will bear interest from the date of
issuance at the annual rate stated on its face until the principal is paid or
made available for payment.
How Interest Is Calculated. Interest on fixed rate notes will
be computed on the basis of a 360-day year of twelve 30-day months.
How Interest Accrues. Interest on fixed rate notes will accrue
from and including the most recent interest payment date to which interest has
been paid or duly provided for, or, if no interest has been paid or duly
provided for, from and including the issue date or any other date specified in
a pricing supplement on which interest begins to accrue. Interest will accrue
to but excluding the next interest payment date, or, if earlier, the date on
which the principal has been paid or duly made available for payment, except
as described below under "If a Payment Date is Not a Business Day."
When Interest Is Paid. Payments of interest on fixed rate
notes will be made on the interest payment dates specified in the applicable
pricing supplement. However, if the first interest payment date is less than
15 days after the date of issuance, interest will not be paid on the first
interest payment date, but will be paid on the second interest payment date.
Amount of Interest Payable. Interest payments for fixed rate
notes will include accrued interest from and including the date of issue or
from and including the last date in respect of which interest has been paid,
as the case may be, to but excluding the relevant interest payment date or
date of maturity or earlier redemption or repayment, as the case may be.
If a Payment Date is Not a Business Day. If any scheduled
interest payment date is not a business day, MSDW will pay interest on the
next business day, but interest on that payment will not accrue during the
period from and after the scheduled interest payment date. If the scheduled
maturity date or date of redemption or repayment is not a business day, MSDW
may pay interest and principal and premium, if any, on the next succeeding
business day, but interest on that payment will not accrue during the period
from and after the scheduled maturity date or date of redemption or repayment.
Amortizing Notes. A fixed rate note may pay a level amount in
respect of both interest and principal amortized over the life of the note.
Payments of principal and interest on amortizing notes will be made on the
interest payment dates specified in the applicable pricing supplement, and at
maturity or upon any earlier redemption or repayment. Payments on amortizing
notes will be applied first to interest due and payable and then to the
reduction of the unpaid principal amount. We will provide to the original
purchaser, and will furnish to subsequent holders upon request to us, a table
setting forth repayment information for each amortizing note.
Floating Rate Notes
Each floating rate note will mature on the date specified in
the applicable pricing supplement.
Each floating rate note will bear interest at a floating rate
determined by reference to an interest rate or interest rate formula, which we
refer to as the "base rate." The base rate may be one or more of the
following:
o the CD rate,
o the commercial paper rate,
o EURIBOR,
o the federal funds rate,
o LIBOR,
o the prime rate,
o the Treasury rate,
o the CMT rate, or
o any other rate or interest rate formula specified in the
applicable pricing supplement and in the floating rate note.
Formula for Interest Rates. The interest rate on each floating
rate note will be calculated by reference to:
o the specified base rate based on the index maturity,
o plus or minus the spread, if any, and/or
o multiplied by the spread multiplier, if any.
For any floating rate note, "index maturity" means the period
of maturity of the instrument or obligation from which the base rate is
calculated and will be specified in the applicable pricing supplement. The
"spread" is the number of basis points (one one-hundredth of a percentage
point) specified in the applicable pricing supplement to be added to or
subtracted from the base rate for a floating rate note. The "spread
multiplier" is the percentage specified in the applicable pricing supplement
to be applied to the base rate for a floating rate note.
Limitations on Interest Rate. A floating rate note may also
have either or both of the following limitations on the interest rate:
o a maximum limitation, or ceiling, on the rate of interest
which may accrue during any interest period, which we
refer to as the "maximum interest rate;"
o a minimum limitation, or floor, on the rate of interest that
may accrue during any interest period, which we refer to
as the "minimum interest rate."
Any applicable maximum interest rate or minimum interest rate will be set
forth in the pricing supplement.
In addition, the interest rate on a floating rate note may not
be higher than the maximum rate permitted by New York law, as that rate may be
modified by United States law of general application. Under current New York
law, the maximum rate of interest, subject to some exceptions, for any loan in
an amount less than $250,000 is 16% and for any loan in the amount of $250,000
or more but less than $2,500,000 is 25% per annum on a simple interest basis.
These limits do not apply to loans of $2,500,000 or more.
How Floating Interest Rates Are Reset. The interest rate in
effect from the date of issue to the first interest reset date for a floating
rate note will be the initial interest rate specified in the applicable
pricing supplement. We refer to this rate as the "initial interest rate."
The interest rate on each floating rate note may be reset daily, weekly,
monthly, quarterly, semiannually or annually. This period is the "interest
reset period" and the first day of each interest reset period is the "interest
reset date." The "interest determination date" for any interest reset date is
the day the calculation agent will refer to when determining the new interest
rate at which a floating rate will reset, and is applicable as follows:
o for CD rate notes, commercial paper rate notes, federal funds
rate notes, prime rate notes and CMT rate notes, the
interest determination date will be the second business
day prior to the interest reset date;
o for EURIBOR notes or Euro LIBOR notes, the interest
determination date will be the second TARGET Settlement
Day, as defined under "-- General Terms of Notes -- Some
Definitions," prior to the interest reset date;
o for LIBOR notes (other than Euro LIBOR notes), the interest
determination date will be the second London banking day
prior to the interest reset date, except that the interest
determination date pertaining to an interest reset date
for a LIBOR note for which the index currency is pounds
sterling will be the interest reset date; and
o for Treasury rate notes, the interest determination date will
be the day of the week in which the interest reset date
falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless
that day is a legal holiday, in which case the auction is normally held on the
following Tuesday, but the auction may be held on the preceding Friday. If,
as the result of a legal holiday, the auction is held on the preceding Friday,
that Friday will be the interest determination date pertaining to the interest
reset date occurring in the next succeeding week. If an auction falls on a
day that is an interest reset date, that interest reset date will be the next
following business day.
The interest reset dates will be specified in the applicable
pricing supplement. If an interest reset date for any floating rate note
falls on a day that is not a business day, it will be postponed to the
following business day, except that, in the case of a EURIBOR note or a LIBOR
note, if that business day is in the next calendar month, the interest reset
date will be the immediately preceding business day.
The interest rate in effect for the ten calendar days
immediately prior to maturity, redemption or repayment will be the one in
effect on the tenth calendar day preceding the maturity, redemption or
repayment date.
In the detailed descriptions of the various base rates which
follow, the "calculation date" pertaining to an interest determination date
means the earlier of (1) the tenth calendar day after that interest
determination date, or, if that day is not a business day, the next succeeding
business day, and (2) the business day preceding the applicable interest
payment date or maturity date or, for any principal amount to be redeemed or
repaid, any redemption or repayment date.
How Interest Is Calculated. Interest on floating rate notes
will accrue from and including the most recent interest payment date to which
interest has been paid or duly provided for, or, if no interest has been paid
or duly provided for, from and including the issue date or any other date
specified in a pricing supplement on which interest begins to accrue.
Interest will accrue to but excluding the next interest payment date or, if
earlier, the date on which the principal has been paid or duly made available
for payment, except as described below under "If a Payment Date is Not a
Business Day."
The applicable pricing supplement will specify a calculation
agent for any issue of floating rate notes. Upon the request of the holder of
any floating rate note, the calculation agent will provide the interest rate
then in effect and, if determined, the interest rate that will become
effective on the next interest reset date for that floating rate note.
For a floating rate note, accrued interest will be calculated
by multiplying the principal amount of the floating rate note by an accrued
interest factor. This accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. The interest factor for each day is computed by dividing the
interest rate applicable to that day:
o by 360, in the case of CD rate notes, commercial paper rate
notes, EURIBOR notes, federal funds rate notes, LIBOR
notes, except for LIBOR notes denominated in pounds
sterling, and prime rate notes;
o by 365, in the case of LIBOR notes denominated in pounds
sterling; or
o by the actual number of days in the year, in the case of
Treasury rate notes and CMT rate notes.
For these calculations, the interest rate in effect on any interest reset date
will be the applicable rate as reset on that date. The interest rate
applicable to any other day is the interest rate from the immediately
preceding interest reset date or, if none, the initial interest rate.
All percentages used in or resulting from any calculation of
the rate of interest on a floating rate note will be rounded, if necessary, to
the nearest one hundred-thousandth of a percentage point (.0000001), with five
one-millionths of a percentage point rounded upward, and all U.S. dollar
amounts used in or resulting from these calculations on floating rate notes
will be rounded to the nearest cent, with one-half cent rounded upward.
When Interest Is Paid. MSDW will pay interest on floating rate
notes on the interest payment dates specified in the applicable pricing
supplement. However, if the first interest payment date is less than 15 days
after the date of issuance, interest will not be paid on the first interest
payment date, but will be paid on the second interest payment date.
If a Payment Date is Not a Business Day. If any scheduled
interest payment date, other than the maturity date or any earlier redemption
or repayment date, for any floating rate note falls on a day that is not a
business day, it will be postponed to the following business day, except that,
in the case of a EURIBOR note or a LIBOR note, if that business day would fall
in the next calendar month, the interest payment date will be the immediately
preceding business day. If the scheduled maturity date or any earlier
redemption or repayment date of a floating rate note falls on a day that is
not a business day, the payment of principal, premium, if any, and interest,
if any, will be made on the next succeeding business day, but interest on that
payment will not accrue during the period from and after the maturity,
redemption or repayment date.
Base Rates
CD Rate Notes
CD rate notes will bear interest at the interest rates
specified in the CD rate notes and in the applicable pricing supplement.
Those interest rates will be based on the CD rate and any spread and/or spread
multiplier and will be subject to the minimum interest rate and the maximum
interest rate, if any.
"CD rate" means, for any interest determination date, the rate
on that date for negotiable certificates of deposit having the index maturity
specified in the applicable pricing supplement as published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication of the Board of
Governors of the Federal Reserve System ("H.15(519)") under the heading "CDs
(Secondary Market)."
The following procedures will be followed if the CD rate cannot
be determined as described above:
o If the above rate is not published in H.15(519) by 9:00 a.m.,
New York City time, on the calculation date, the CD rate
will be the rate on that interest determination date set
forth in the daily update of H.15(519), available through
the world wide website of the Board of Governors of the
Federal Reserve System at
http://www.bog.frb.fed.us/releases/h15/update, or any
successor site or publication, which is commonly referred
to as the "H.15 Daily Update," for the interest
determination date for certificates of deposit having the
index maturity specified in the applicable pricing
supplement, under the caption "CDs (Secondary Market)."
o If the above rate is not yet published in either H.15(519) or
the H.15 Daily Update by 3:00 p.m., New York City time, on
the calculation date, the calculation agent will determine
the CD rate to be the arithmetic mean of the secondary
market offered rates as of 10:00 a.m., New York City time,
on that interest determination date of three leading
nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the
calculation agent, after consultation with us, for
negotiable certificates of deposit of major United States
money center banks of the highest credit standing in the
market for negotiable certificates of deposit with a
remaining maturity closest to the index maturity specified
in the applicable pricing supplement in an amount that is
representative for a single transaction in that market at
that time.
o If the dealers selected by the calculation agent are not
quoting as set forth above, the CD rate will remain the CD
rate for the immediately preceding interest reset period,
or, if there was no interest reset period, the rate of
interest payable will be the initial interest rate.
Commercial Paper Rate Notes
Commercial paper rate notes will bear interest at the interest
rates specified in the commercial paper rate notes and in the applicable
pricing supplement. Those interest rates will be based on the commercial
paper rate and any spread and/or spread multiplier and will be subject to the
minimum interest rate and the maximum interest rate, if any.
The "commercial paper rate" means, for any interest
determination date, the money market yield, calculated as described below, of
the rate on that date for commercial paper having the index maturity specified
in the applicable pricing supplement, as that rate is published in H.15(519),
under the heading "Commercial Paper -- Nonfinancial."
The following procedures will be followed if the commercial
paper rate cannot be determined as described above:
o If the above rate is not published by 9:00 a.m., New York
City time, on the calculation date, then the commercial
paper rate will be the money market yield of the rate on
that interest determination date for commercial paper of
the index maturity specified in the applicable pricing
supplement as published in the H.15 Daily Update under the
heading "Commercial Paper -- Nonfinancial."
o If by 3:00 p.m., New York City time, on that calculation date
the rate is not yet published in either H.15(519) or the
H.15 Daily Update, then the calculation agent will
determine the commercial paper rate to be the money market
yield of the arithmetic mean of the offered rates as of
11:00 a.m., New York City time, on that interest
determination date of three leading dealers of commercial
paper in The City of New York selected by the calculation
agent, after consultation with us, for commercial paper of
the index maturity specified in the applicable pricing
supplement, placed for an industrial issuer whose bond
rating is "AA," or the equivalent, from a nationally
recognized statistical rating agency.
o If the dealers selected by the calculation agent are not
quoting as mentioned above, the commercial paper rate for
that interest determination date will remain the
commercial paper rate for the immediately preceding
interest reset period, or, if there was no interest reset
period, the rate of interest payable will be the initial
interest rate.
The "money market yield" will be a yield calculated in
accordance with the following formula:
D x 360
money market yield = ----------- x 100
360-(D x M)
where "D" refers to the applicable per year rate for commercial
paper quoted on a bank discount basis and expressed as a decimal and "M"
refers to the actual number of days in the interest period for which interest
is being calculated.
EURIBOR Notes
EURIBOR notes will bear interest at the interest rates
specified in the EURIBOR notes and in the applicable pricing supplement. That
interest rate will be based on EURIBOR and any spread and/or spread multiplier
and will be subject to the minimum interest rate and the maximum interest
rate, if any.
"EURIBOR" means, for any interest determination date, the rate
for deposits in euros as sponsored, calculated and published jointly by the
European Banking Federation and ACI - The Financial Market Association, or any
company established by the joint sponsors for purposes of compiling and
publishing those rates, for the index maturity specified in the applicable
pricing supplement as that rate appears on the display on Bridge Telerate,
Inc., or any successor service, on page 248 or any other page as may replace
page 248 on that service, which is commonly referred to as "Telerate Page
248," as of 11:00 a.m. (Brussels time).
The following procedures will be followed if the rate cannot be
determined as described above:
o If the above rate does not appear, the calculation agent will
request the principal Euro-zone office of each of four
major banks in the Euro-zone interbank market, as selected
by the calculation agent, after consultation with us, to
provide the calculation agent with its offered rate for
deposits in euros, at approximately 11:00 a.m. (Brussels
time) on the interest determination date, to prime banks
in the Euro-zone interbank market for the index maturity
specified in the applicable pricing supplement commencing
on the applicable interest reset date, and in a principal
amount not less than the equivalent of U.S.$1 million in
euro that is representative of a single transaction in
euro, in that market at that time. If at least two
quotations are provided, EURIBOR will be the arithmetic
mean of those quotations.
o If fewer than two quotations are provided, EURIBOR will be
the arithmetic mean of the rates quoted by four major
banks in the Euro-zone, as selected by the calculation
agent, after consultation with us, at approximately 11:00
a.m. (Brussels time), on the applicable interest reset
date for loans in euro to leading European banks for a
period of time equivalent to the index maturity specified
in the applicable pricing supplement commencing on that
interest reset date in a principal amount not less than
the equivalent of U.S.$1 million in euro.
o If the banks so selected by the calculation agent are not
quoting as mentioned in the previous bullet point, the
EURIBOR rate in effect for the applicable period will be
the same as EURIBOR for the immediately preceding interest
reset period, or, if there was no interest reset period,
the rate of interest will be the initial interest rate.
"Euro-zone" means the region comprised of member states of the
European Union that adopt the single currency in accordance with the treaty
establishing the European Community, as amended by the treaty on European
Union.
Federal Funds Rate Notes
Federal funds rate notes will bear interest at the interest
rates specified in the federal funds rate notes and in the applicable pricing
supplement. Those interest rates will be based on the federal funds rate and
any spread and/or spread multiplier and will be subject to the minimum
interest rate and the maximum interest rate, if any.
The "federal funds rate" means, for any interest determination
date, the rate on that date for federal funds as published in H.15(519) under
the heading "Federal Funds (Effective)" as displayed on Bridge Telerate,
Inc., or any successor service, on page 120 or any other page as may replace
the applicable page on that service, which is commonly referred to as
"Telerate Page 120."
The following procedures will be followed if the federal funds
rate cannot be determined as described above:
o If the above rate is not published by 9:00 a.m., New York
City time, on the calculation date, the federal funds rate
will be the rate on that interest determination date as
published in the H.15 Daily Update under the heading
"Federal Funds/Effective Rate."
o If that rate is not yet published in either H.15(519) or the
H.15 Daily Update by 3:00 p.m., New York City time, on the
calculation date, the calculation agent will determine the
federal funds rate to be the arithmetic mean of the rates
for the last transaction in overnight federal funds by
each of three leading brokers of federal funds
transactions in The City of New York selected by the
calculation agent, after consultation with us, prior to
9:00 a.m., New York City time, on that interest
determination date.
o If the brokers selected by the calculation agent are not
quoting as mentioned above, the federal funds rate
relating to that interest determination date will remain
the federal funds rate for the immediately preceding
interest reset period, or, if there was no interest reset
period, the rate of interest payable will be the initial
interest rate.
LIBOR Notes
LIBOR notes will bear interest at the interest rates specified
in the LIBOR notes and in the applicable pricing supplement. That interest
rate will be based on London interbank offered rate, which is commonly
referred to as "LIBOR," and any spread and/or spread multiplier and will be
subject to the minimum interest rate and the maximum interest rate, if any.
The calculation agent will determine "LIBOR" for each interest
determination date as follows:
o As of the interest determination date, LIBOR will be either:
o if "LIBOR Reuters" is specified in the applicable pricing
supplement, the arithmetic mean of the offered rates for
deposits in the index currency having the index maturity
designated in the applicable pricing supplement, commencing
on the second London banking day immediately following that
interest determination date, that appear on the Designated
LIBOR Page, as defined below, as of 11:00 a.m., London time,
on that interest determination date, if at least two offered
rates appear on the Designated LIBOR Page; except that if
the specified Designated LIBOR Page, by its terms provides
only for a single rate, that single rate will be used; or
o if "LIBOR Telerate" is specified in the applicable pricing
supplement, the rate for deposits in the index currency
having the index maturity designated in the applicable
pricing supplement, commencing on the second London banking
day immediately following that interest determination date
or, if pounds sterling is the index currency, commencing on
that interest determination date, that appears on the
Designated LIBOR Page at approximately 11:00 a.m., London
time, on that interest determination date.
o If (1) fewer than two offered rates appear and "LIBOR
Reuters" is specified in the applicable pricing
supplement, or (2) no rate appears and the applicable
pricing supplement specifies either (x) "LIBOR Telerate"
or (y) "LIBOR Reuters" and the Designated LIBOR Page by
its terms provides only for a single rate, then the
calculation agent will request the principal London
offices of each of four major reference banks in the
London interbank market, as selected by the calculation
agent after consultation with us, to provide the
calculation agent with its offered quotation for deposits
in the index currency for the period of the index maturity
specified in the applicable pricing supplement commencing
on the second London banking day immediately following the
interest determination date or, if pounds sterling is the
index currency, commencing on that interest determination
date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on that interest
determination date and in a principal amount that is
representative of a single transaction in that index
currency in that market at that time.
o If at least two quotations are provided, LIBOR determined on
that interest determination date will be the arithmetic mean of
those quotations. If fewer than two quotations are provided,
LIBOR will be determined for the applicable interest reset date
as the arithmetic mean of the rates quoted at approximately
11:00 a.m., London time, or some other time specified in the
applicable pricing supplement, in the applicable principal
financial center for the country of the index currency on that
interest reset date, by three major banks in that principal
financial center selected by the calculation agent, after
consultation with us, for loans in the index currency to
leading European banks, having the index maturity specified in
the applicable pricing supplement and in a principal amount
that is representative of a single transaction in that index
currency in that market at that time.
o If the banks so selected by the calculation agent are not
quoting as mentioned in the previous bullet point, LIBOR in
effect for the applicable period will be the same as LIBOR for
the immediately preceding interest reset period, or, if there
was no interest reset period, the rate of interest payable will
be the initial interest rate.
The "index currency" means the currency specified in the
applicable pricing supplement as the currency for which LIBOR will be
calculated, or, if the euro is substituted for that currency, the index
currency will be the euro. If that currency is not specified in the
applicable pricing supplement, the index currency will be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is
designated in the applicable pricing supplement, the display on the Reuters
Monitor Money Rates Service for the purpose of displaying the London interbank
rates of major banks for the applicable index currency or its designated
successor, or (b) if "LIBOR Telerate" is designated in the applicable pricing
supplement, the display on Bridge Telerate Inc., or any successor service, on
the page specified in the applicable pricing supplement, or any other page as
may replace that page on that service, for the purpose of displaying the
London interbank rates of major banks for the applicable index currency.
If neither LIBOR Reuters nor LIBOR Telerate is specified in the
applicable pricing supplement, LIBOR for the applicable index currency will be
determined as if LIBOR Telerate were specified, and, if the U.S. dollar is the
index currency, as if Page 3750, had been specified.
Prime Rate Notes
Prime rate notes will bear interest at the interest rates
specified in the prime rate notes and in the applicable pricing supplement.
That interest rate will be based on the prime rate and any spread and/or
spread multiplier, and will be subject to the minimum interest rate and the
maximum interest rate, if any.
The "prime rate" means, for any interest determination date,
the rate on that date as published in H.15(519) under the heading "Bank Prime
Loan."
The following procedures will be followed if the prime rate
cannot be determined as described above:
o If the rate is not published prior to 9:00 a.m., New York City
time, on the calculation date, then the prime rate will be the
rate on that interest determination date as published in H.15
Daily Update under the heading "Bank Prime Loan."
o If the rate is not published prior to 3:00 p.m., New York City
time, on the calculation date in either H.15(519) or the H.15
Daily Update, then the calculation agent will determine the
prime rate to be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the Reuters
Screen USPRIME 1 Page, as defined below, as that bank's prime
rate or base lending rate as in effect for that interest
determination date.
o If fewer than four rates appear on the Reuters Screen USPRIME 1
Page for that interest determination date, the calculation
agent will determine the prime rate to be the arithmetic mean
of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on
that interest determination date by at least three major banks
in The City of New York selected by the calculation agent,
after consultation with us.
o If the banks selected are not quoting as mentioned above, the
prime rate will remain the prime rate for the immediately
preceding interest reset period, or, if there was no interest
reset period, the rate of interest payable will be the initial
interest rate.
"Reuters Screen USPRIME 1 Page" means the display designated as
page "USPRIME 1" on the Reuters Monitor Money Rates Service, or any successor
service, or any other page as may replace the USPRIME 1 Page on that service
for the purpose of displaying prime rates or base lending rates of major
United States banks.
Treasury Rate Notes
Treasury rate notes will bear interest at the interest rates
specified in the Treasury rate notes and in the applicable pricing supplement.
That interest rate will be based on the Treasury rate and any spread and/or
spread multiplier and will be subject to the minimum interest rate and the
maximum interest rate, if any.
"Treasury rate" means:
o the rate from the auction held on the applicable interest
determination date, which we refer to as the "auction," of
direct obligations of the United States, which are commonly
referred to as "Treasury Bills," having the index maturity
specified in the applicable pricing supplement as that rate
appears under the caption "INVESTMENT RATE" on the display on
Bridge Telerate, Inc., or any successor service, on page 56 or
any other page as may replace page 56 on that service, which we
refer to as "Telerate Page 56," or page 57 or any other page as
may replace page 57 on that service, which we refer to as
"Telerate Page 57," or
o if the rate described in the first bullet point is not
published by 3:00 p.m., New York City time, on the calculation
date, the bond equivalent yield of the rate for the applicable
Treasury Bills as published in the H.15 Daily Update, or other
recognized electronic source used for the purpose of displaying
the applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Auction High," or
o if the rate described in the second bullet point is not
published by 3:00 p.m., New York City time, on the related
calculation date, the bond equivalent yield of the auction rate
of the applicable Treasury Bills, announced by the United
States Department of the Treasury, or
o in the event that the rate referred to in the third bullet
point is not announced by the United States Department of the
Treasury, or if the auction is not held, the bond equivalent
yield of the rate on the applicable interest determination date
of Treasury Bills having the index maturity specified in the
applicable pricing supplement published in H.15(519) under the
caption "U.S. Government Securities/Treasury Bills/Secondary
Market," or
o if the rate referred to in the fourth bullet point is not so
published by 3:00 p.m., New York City time, on the related
calculation date, the rate on the applicable interest
determination date of the applicable Treasury Bills as
published in H.15 Daily Update, or other recognized electronic
source used for the purpose of displaying the applicable rate,
under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market," or
o if the rate referred to in the fifth bullet point is not so
published by 3:00 p.m., New York City time, on the related
calculation date, the rate on the applicable interest
determination date calculated by the calculation agent as the
bond equivalent yield of the arithmetic mean of the secondary
market bid rates, as of approximately 3:30 p.m., New York City
time, on the applicable interest determination date, of three
primary United States government securities dealers, which may
include the agent or its affiliates, selected by the
calculation agent, for the issue of Treasury Bills with a
remaining maturity closest to the index maturity specified in
the applicable pricing supplement, or
o if the dealers selected by the calculation agent are not
quoting as mentioned in the sixth bullet point, the Treasury
rate for the immediately preceding interest reset period, or,
if there was no interest reset period, the rate of interest
payable will be the initial interest rate.
The "bond equivalent yield" means a yield calculated in
accordance with the following formula and expressed as a percentage:
D x N
Bond Equivalent Yield = --------------
360 - (D x M)
where "D" refers to the applicable per annum rate for Treasury Bills quoted on
a bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest
is being calculated.
CMT Rate Notes
CMT rate notes will bear interest at the interest rates
specified in the CMT rate notes and in the applicable pricing supplement.
That interest rate will be based on the CMT rate and any spread and/or spread
multiplier and will be subject to the minimum interest rate and the maximum
interest rate, if any.
The "CMT rate" means, for any interest determination date, the
rate displayed on the Designated CMT Telerate Page, as defined below, under
the caption "... Treasury Constant Maturities ... Federal Reserve Board
Release H.15... Mondays Approximately 3:45 p.m.," under the column for the
Designated CMT Maturity Index, as defined below, for:
(1) the rate on that interest determination date, if the
Designated CMT Telerate Page is 7051; and
(2) the week or the month, as applicable, ended immediately
preceding the week in which the related interest determination date occurs,
if the Designated CMT Telerate Page is 7052.
The following procedures will be followed if the CMT rate
cannot be determined as described above:
o If that rate is no longer displayed on the relevant page, or if
not displayed by 3:00 p.m., New York City time, on the related
calculation date, then the CMT rate will be the Treasury
Constant Maturity rate for the Designated CMT Maturity Index as
published in the relevant H.15(519).
o If the rate described in the immediately preceding sentence is
no longer published, or if not published by 3:00 p.m., New York
City time, on the related calculation date, then the CMT rate
will be the Treasury Constant Maturity rate for the Designated
CMT Maturity Index or other United States Treasury rate for the
Designated CMT Maturity Index on the interest determination
date as may then be published by either the Board of Governors
of the Federal Reserve System or the United States Department
of the Treasury that the calculation agent determines to be
comparable to the rate formerly displayed on the Designated CMT
Telerate Page and published in the relevant H.15(519).
o If the information described in the immediately preceding
sentence is not provided by 3:00 p.m., New York City time, on
the related calculation date, then the calculation agent will
determine the CMT rate to be a yield to maturity, based on the
arithmetic mean of the secondary market closing offer side
prices as of approximately 3:30 p.m., New York City time, on
the interest determination date, reported, according to their
written records, by three leading primary United States
government securities dealers, which we refer to as a
"reference dealer," in The City of New York, which may include
an agent or other affiliates of ours, selected by the
calculation agent as described in the following sentence. The
calculation agent will select five reference dealers, after
consultation with us, and will eliminate the highest quotation
or, in the event of equality, one of the highest, and the
lowest quotation or, in the event of equality, one of the
lowest, for the most recently issued direct noncallable fixed
rate obligations of the United States, which are commonly
referred to as "Treasury notes," with an original maturity of
approximately the Designated CMT Maturity Index and a remaining
term to maturity of not less than that Designated CMT Maturity
Index minus one year. If two Treasury notes with an original
maturity as described above have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the quotes
for the Treasury note with the shorter remaining term to
maturity will be used.
o If the calculation agent cannot obtain three Treasury notes
quotations as described in the immediately preceding sentence,
the calculation agent will determine the CMT rate to be a yield
to maturity based on the arithmetic mean of the secondary
market offer side prices as of approximately 3:30 p.m., New
York City time, on the interest determination date of three
reference dealers in The City of New York, selected using the
same method described in the immediately preceding sentence,
for Treasury notes with an original maturity equal to the
number of years closest to but not less than the Designated CMT
Maturity Index and a remaining term to maturity closest to the
Designated CMT Maturity Index and in an amount of at least
$100,000,000.
o If three or four (and not five) of the reference dealers are
quoting as described above, then the CMT rate will be based on
the arithmetic mean of the offer prices obtained and neither
the highest nor the lowest of those quotes will be eliminated.
o If fewer than three reference dealers selected by the
calculation agent are quoting as described above, the CMT rate
will be the CMT rate for the immediately preceding interest
reset period, or, if there was no interest reset period, the
rate of interest payable will be the initial interest rate.
"Designated CMT Telerate Page" means the display on Bridge
Telerate, Inc., or any successor service, on the page designated in the
applicable pricing supplement or any other page as may replace that page on
that service for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519). If no page is specified in the applicable pricing
supplement, the Designated CMT Telerate Page will be 7052, for the most recent
week.
"Designated CMT Maturity Index" means the original period to
maturity of the U.S. Treasury securities, which is either 1, 2, 3, 5, 7, 10,
20 or 30 years, specified in an applicable pricing supplement for which the
CMT rate will be calculated. If no maturity is specified in the applicable
pricing supplement, the Designated CMT Maturity Index will be two years.
Renewable Notes
MSDW may also issue variable rate renewable notes which will
bear interest at a specified rate that will be reset periodically based on a
base rate and any spread and/or spread multiplier, subject to the minimum
interest rate and the maximum interest rate, if any. Any renewable notes we
issue will be book-entry floating rate notes. The general terms of the
renewable notes are described below.
Automatic Extension of Maturity. The renewable notes will
mature on the date specified in the applicable pricing supplement, which we
refer to as the "initial maturity date." On the interest payment dates in
each year specified in the applicable pricing supplement, each of which is
treated as an election date under the terms of the renewable notes, the
maturity of the renewable notes will automatically be extended to the interest
payment date occurring twelve months after the election date, unless the
holder elects to terminate the automatic extension of maturity for all or any
portion of the principal amount of that holder's note. However, the maturity
of the renewable notes may not be extended beyond the final maturity date,
which will be specified in the applicable pricing supplement.
Holder's Option to Terminate Automatic Extension. On an
election date, the holder may elect to terminate the automatic extension of
the maturity of the renewable notes or of any portion of the renewable note
having a principal amount of $1,000 or any integral multiple of $1,000. To
terminate the extension, the holder must deliver a notice to the paying agent
within the time frame specified in the applicable pricing supplement. This
option may be exercised for less than the entire principal amount of the
renewable notes, as long as the principal amount of the remainder is at least
$1,000 or any integral multiple of $1,000.
If the holder elects to terminate the automatic extension of
the maturity of any portion of the principal amount of the renewable notes and
this election is not revoked as described below, that portion will become due
and payable on the interest payment date falling six months after the
applicable election date.
Revocation of Election by Holder. The holder may revoke an
election to terminate the automatic extension of maturity as to any portion of
the renewable notes having a principal amount of $1,000 or any integral
multiple of $1,000. To do so, the holder must deliver a notice to the paying
agent on any day after the election to terminate the automatic extension of
maturity is effective and prior to the fifteenth day before the date on which
that portion would otherwise mature. The holder may revoke the election for
less than the entire principal amount of the renewable notes as long as the
principal amount of both the portion whose maturity is to be terminated and
the remainder whose maturity is to be extended is at least $1,000 or any
integral multiple of $1,000. However, a revocation may not be made during the
period from and including a record date to but excluding the immediately
succeeding interest payment date.
An election to terminate the automatic extension of the
maturity of the renewable notes, if not revoked as described above by the
holder making the election or any subsequent holder, will be binding upon that
subsequent holder.
Redemption of Notes at Company's Option. MSDW has the option
to redeem renewable notes in whole or in part on the interest payment dates in
each year specified in the applicable pricing supplement, commencing with the
interest payment date specified in the applicable pricing supplement. The
redemption price will be equal to 100% of the principal amount of the
renewable notes to be redeemed, together with accrued and unpaid interest to
the date of redemption. Notwithstanding anything to the contrary in this
prospectus supplement, MSDW will mail a notice of redemption to each holder by
first-class mail, postage prepaid, at least 180 days and not more than 210
days prior to the date fixed for redemption.
Remarketing of Notes. MSDW may issue renewable notes with the
spread or spread multiplier to be reset by a remarketing agent in remarketing
procedures. A description of the remarketing procedures, the terms of the
remarketing agreement between MSDW and the remarketing agent and the terms of
any additional agreements with other parties that may be involved in the
remarketing procedures will be set forth in the applicable pricing supplement
and in the relevant renewable notes.
Exchangeable Notes
MSDW may issue notes, which we refer to as "exchangeable
notes," that are optionally or mandatorily exchangeable into:
o the securities of an entity not affiliated with MSDW;
o a basket of those securities;
o an index or indices of those securities; or
o any combination of the above.
The exchangeable notes may or may not bear interest or be
issued with original issue discount or at a premium. The general terms of the
exchangeable notes are described below.
Optionally Exchangeable Notes. The holder of an optionally
exchangeable note may, during a period, or at specific times, exchange the
note for the underlying property at a specified rate of exchange. If
specified in the applicable pricing supplement, MSDW will have the option to
redeem the optionally exchangeable note prior to maturity. If the holder of
an optionally exchangeable note does not elect to exchange the note prior to
maturity or any applicable redemption date, the holder will receive the
principal amount of the note plus any accrued interest at maturity or upon
redemption.
Mandatorily Exchangeable Notes. At maturity, the holder of a
mandatorily exchangeable note must exchange the note for the underlying
property at a specified rate of exchange, and, therefore, depending upon the
value of the underlying property at maturity, the holder of a mandatorily
exchangeable note may receive less than the principal amount of the note at
maturity. If so indicated in the applicable pricing supplement, the specified
rate at which a mandatorily exchangeable note may be exchanged may vary
depending on the value of the underlying property so that, upon exchange, the
holder participates in a percentage, which may be less than, equal to, or
greater than 100% of the change in value of the underlying property.
Mandatorily exchangeable notes may include notes where MSDW has the right, but
not the obligation, to require holders of notes to exchange their notes for
the underlying property.
Payments upon Exchange. The pricing supplement will specify if
upon exchange, at maturity or otherwise, the holder of an exchangeable note
may receive, at the specified exchange rate, either the underlying property or
the cash value of the underlying property. The underlying property may be the
securities of either U.S. or foreign entities or both. The exchangeable notes
may or may not provide for protection against fluctuations in the exchange
rate between the currency in which that note is denominated and the currency
or currencies in which the market prices of the underlying security or
securities are quoted. Exchangeable notes may have other terms, which will be
specified in the applicable pricing supplement.
Special Requirements for Exchange of Global Securities. If an
optionally exchangeable note is represented by a global note, the Depositary's
nominee will be the holder of that note and therefore will be the only entity
that can exercise a right to exchange. In order to ensure that the
Depositary's nominee will timely exercise a right to exchange a particular
note or any portion of a particular note, the beneficial owner of the note
must instruct the broker or other direct or indirect participant through which
it holds an interest in that note to notify the Depositary of its desire to
exercise a right to exchange. Different firms have different deadlines for
accepting instructions from their customers. Each beneficial owner should
consult the broker or other participant through which it holds an interest in
a note in order to ascertain the deadline for ensuring that timely notice will
be delivered to the Depositary.
Payments upon Acceleration of Maturity. If the principal
amount payable at maturity of any exchangeable note is declared due and
payable prior to maturity, the amount payable on:
o an optionally exchangeable note will equal the face amount of
the note plus accrued interest, if any, to but excluding the
date of payment, except that if a holder has exchanged an
optionally exchangeable note prior to the date of declaration
without having received the amount due upon exchange, the
amount payable will be the amount due upon exchange and will
not include any accrued but unpaid interest; and
o a mandatorily exchangeable note will equal an amount determined
as if the date of declaration were the maturity date plus
accrued interest, if any, to but excluding the date of payment.
Notes Linked to Commodity Prices, Single Securities, Baskets of Securities or
Indices
MSDW may issue notes with the principal amount payable on any
principal payment date and/or the amount of interest payable on any interest
payment date is determined by reference to one or more commodity prices,
securities of entities not affiliated with us, a basket of those securities or
an index or indices of those securities. These notes may include other terms,
which will be specified in the relevant pricing supplement.
Currency-Linked Notes
MSDW may issue notes with the principal amount payable on any
principal payment date and/or the amount of interest payable on any interest
payment date to be determined by reference to the value of one or more
currencies as compared to the value of one or more other currencies, which we
refer to as "currency-linked notes." The pricing supplement will specify the
following:
o information as to the one or more currencies to which the
principal amount payable on any principal payment date or the
amount of interest payable on any interest payment date is
linked or indexed;
o the currency in which the face amount of the currency-linked
note is denominated, which we refer to as the "denominated
currency;"
o the currency in which principal on the currency-linked note
will be paid, which we refer to as the "payment currency;"
o the interest rate per annum and the dates on which MSDW will
make interest payments;
o specific historic exchange rate information and any currency
risks relating to the specific currencies selected; and
o additional tax considerations, if any.
The denominated currency and the payment currency may be the
same currency or different currencies. Interest on currency-linked notes will
be paid in the denominated currency.
Redemption and Repurchase of Notes
Optional Redemption by MSDW. The pricing supplement will
indicate the terms of our option to redeem the notes. MSDW will mail a notice
of redemption to each holder by first-class mail, postage prepaid, at least 30
days and not more than 60 days prior to the date fixed for redemption, or
within the redemption notice period designated in the applicable pricing
supplement, to the address of each holder as that address appears upon the
books maintained by the paying agent. The notes, except for amortizing notes,
will not be subject to any sinking fund.
Repayment at Option of Holder. If applicable, the pricing
supplement relating to each note will indicate that the holder has the option
to have MSDW repay the note on a date or dates specified prior to its maturity
date. The repayment price will be equal to 100% of the principal amount of
the note, together with accrued interest to the date of repayment. For notes
issued with original issue discount, the pricing supplement will specify the
amount payable upon repayment.
For MSDW to repay a note, the paying agent must receive at
least 15 days but not more than 30 days prior to the repayment date:
o the note with the form entitled "Option to Elect Repayment" on
the reverse of the note duly completed; or
o a telegram, telex, facsimile transmission or a letter from a
member of a national securities exchange, or the National
Association of Securities Dealers, Inc. or a commercial bank or
trust company in the United States setting forth the name of
the holder of the note, the principal amount of the note, the
principal amount of the note to be repaid, the certificate
number or a description of the tenor and terms of the note, a
statement that the option to elect repayment is being exercised
and a guarantee that the note to be repaid, together with the
duly completed form entitled "Option to Elect Repayment" on the
reverse of the note, will be received by the paying agent not
later than the fifth business day after the date of that
telegram, telex, facsimile transmission or letter. However, the
telegram, telex, facsimile transmission or letter will only be
effective if that note and form duly completed are received by
the paying agent by the fifth business day after the date of
that telegram, telex, facsimile transmission or letter.
Except in the case of renewable notes, exercise of the
repayment option by the holder of a note will be irrevocable. The holder may
exercise the repayment option for less than the entire principal amount of the
note but, in that event, the principal amount of the note remaining
outstanding after repayment must be an authorized denomination.
Special Requirements for Optional Repayment of Global Notes.
If a note is represented by a global note, the Depositary or the Depositary's
nominee will be the holder of the note and therefore will be the only entity
that can exercise a right to repayment. In order to ensure that the
Depositary's nominee will timely exercise a right to repayment of a particular
note, the beneficial owner of the note must instruct the broker or other
direct or indirect participant through which it holds an interest in the note
to notify the Depositary of its desire to exercise a right to repayment.
Different firms have different cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other direct or indirect participant through which it holds an
interest in a note in order to ascertain the cut-off time by which an
instruction must be given in order for timely notice to be delivered to the
Depositary.
Open Market Purchases by MSDW. MSDW may purchase notes at any
price in the open market or otherwise. Notes so purchased by MSDW may, at the
discretion of MSDW, be held or resold or surrendered to the relevant trustee
for cancellation.
Replacement of Notes
At the expense of the holder, we will replace any notes that
become mutilated, destroyed, lost or stolen or are apparently destroyed, lost
or stolen. The mutilated notes must be delivered to the applicable trustee,
the paying agent and the registrar, in the case of registered notes, or
satisfactory evidence of the destruction, loss or theft of the notes must be
delivered to us, the paying agent, the registrar, in the case of registered
notes, and the applicable trustee. At the expense of the holder, an indemnity
that is satisfactory to us, the principal paying agent, the registrar, in the
case of registered notes, and the applicable trustee may be required before a
replacement note will be issued.
DESCRIPTION OF UNITS
Investors should carefully read the general terms and
provisions of our units in "Description of Units" in the prospectus. This
section supplements that description. The pricing supplement will add
specific terms for each issuance of units and may modify or replace any of the
information in this section and in "Description of Units" in the prospectus.
If a note is offered as part of a unit, investors should also review the
information in "Description of Debt Securities" in the prospectus and in
"Description of Notes" in this prospectus supplement. If a universal warrant
is offered as part of a unit, investors should also review the information in
"Description of Warrants" in the prospectus If a purchase contract is offered
as part of a unit, investors should also review the information in
"Description of Purchase Contracts" in the prospectus.
The following terms used in this section are defined in the
indicated sections of the accompanying prospectus:
o purchase contract ("Description of Purchase Contracts")
o purchase contract property ("Description of Purchase
Contracts")
o Unit Agreement ("Description of Units")
o universal warrant ("Description of Warrants -- Offered
Warrants")
o universal warrant agent ("Description of Warrants --
Provisions of the Universal Warrant Agreement")
o warrant property ("Description of Warrants -- Offered
Warrants")
Further Information on Units
Terms Specified in Pricing Supplement. MSDW may issue from
time to time units that may include one or more notes, universal warrants or
purchase contracts. The applicable pricing supplement will describe:
o the designation and the terms of the units and of the notes,
universal warrants, purchase contracts, or any combination of
notes, universal warrants or purchase contracts, included in
those units, including whether and under what circumstances
those notes, universal warrants or purchase contracts may be
separately traded;
o any additional terms of the Unit Agreement; and
o any additional provisions for the issuance, payment,
settlement, transfer or exchange of the units, or of the
securities comprised by those units.
Units will be issued only in fully registered form, in
denominations of whole units only, with face amounts as indicated in the
applicable pricing supplement.
Universal warrants will entitle or require you to purchase from
us or sell to us:
o securities of an entity not affiliated with us, a basket of
those securities, an index or indices of those securities or
any combination of the above;
o currencies; or
o commodities.
Purchase contracts included in units will require you to
purchase or sell:
o securities of an entity not affiliated with us, a basket of
those securities, an index or indices of those securities or
any combination of the above;
o currencies; or
o commodities.
Payments on Units and Securities Comprised by Units. At the
office of the unit agent in the Borough of Manhattan, The City of New York,
maintained by MSDW for that purpose, the holder may:
o present the units, accompanied by each of the securities then
comprised by that unit, for payment or delivery of warrant
property or purchase contract property or any other amounts
due;
o register the transfer of the units; and
o exchange the units, except that book-entry units will be
exchangeable only in the manner and to the extent set forth
under "Forms of Securities -- Global Securities" in the
prospectus.
On the date of this prospectus supplement, the agent for the
payment, transfer and exchange of units is The Chase Manhattan Bank, as unit
agent, acting through its corporate trust office at 450 West 33rd Street, New
York, New York 10001. The holder will not pay a service charge for any
registration of transfer or exchange of the units or of any security included
in a unit or interest in the unit or security included in a unit, except for
any tax or other governmental charge that may be imposed.
Although we anticipate making payments of principal, premium,
if any, and interest, if any, on most units in U.S. dollars, some units may be
payable in foreign currencies as specified in the applicable pricing
supplement. Currently, few facilities exist in the United States to convert
U.S. dollars into foreign currencies and vice versa. In addition, most U.S.
banks do not offer non-U.S. dollar denominated checking or savings account
facilities. Accordingly, unless alternative arrangements are made, we will pay
principal, premium, if any, and interest, if any, on units that are payable
in a foreign currency to an account at a bank outside the United States,
which, in the case of a note payable in euro will be made by credit or
transfer to a euro account specified by the payee in a country for which the
euro is the lawful currency.
Book-Entry Units
Book-Entry System. For each issuance of units in book-entry
form, MSDW will issue a single registered global unit representing the entire
issue of units. Each registered global unit representing book-entry units,
and each global security included in that unit, will be deposited with, or on
behalf of, the Depositary, and registered in the name of a nominee of the
Depositary. You may not exchange certificated units for book-entry units or
interests in book-entry units. In addition, except as described in the
prospectus under "Forms of Securities -- Global Securities," you may not
exchange book-entry units or interests in book-entry units for certificated
units.
Special Requirements for Exercise of Rights for Global Units.
If a book-entry unit represented by a registered global unit:
o includes a universal warrant entitling the holder to exercise
the universal warrant to purchase or sell warrant property,
o includes any note or purchase contract that entitles the holder
to redeem, accelerate or take any other action concerning that
note or purchase contract, or
o otherwise entitles the holder of the unit to take any action
under the unit or any security included in that unit,
then, in each of the cases listed above, the Depositary's nominee will be the
only entity that can exercise those rights.
In order to ensure that the Depositary's nominee will timely
exercise a right conferred by a unit or by the securities included in that
unit, the beneficial owner of that unit must instruct the broker or other
direct or indirect participant through which it holds an interest in that unit
to notify the Depositary of its desire to exercise that right. Different firms
have different deadlines for accepting instructions from their customers.
Each beneficial owner should consult the broker or other direct or indirect
participant through which it holds an interest in a unit in order to ascertain
the deadline for ensuring that timely notice will be delivered to the
Depositary.
A further description of the Depositary's procedures for
registered global securities representing book-entry securities, including
registered global units and the other registered global securities included in
the registered global units, is set forth in the prospectus under "Forms of
Securities -- Global Securities." The Depositary has confirmed to MSDW, the
unit agent, the collateral agent, the paying agent, the warrant agent and each
trustee that it intends to follow those procedures.
THE DEPOSITARY
The Depository Trust Company, New York, New York will be
designated as the depositary for any registered global security. Each
registered global security will be registered in the name of Cede & Co., the
Depositary's nominee.
The Depositary has advised MSDW as follows: the Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. The Depositary holds securities deposited with it by its
participants, and it facilitates the settlement of transactions among its
participants in those securities through electronic computerized book-entry
changes in participants' accounts, eliminating the need for physical movement
of securities certificates. The Depositary's participants include securities
brokers and dealers, including the agents, banks, trust companies, clearing
corporations and other organizations, some of whom and/or their
representatives own the Depositary. Access to the Depositary's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
The Depositary's management is aware that some computer
applications, systems, and the like for processing data that are dependent
upon calendar dates, including dates before, on, and after January 1, 2000,
may encounter "Year 2000 problems." The Depositary has informed participants
and other members of the financial community that it has developed and is
implementing a program so that its computer applications and other systems, in
ensuring the timely payment of distributions, including principal and income
payments, to security holders, book-entry deliveries, and settlement of trades
within the Depositary, continue to function appropriately. This program
includes a technical assessment and a remediation plan, each of which is
complete. Additionally, the Depositary's plan includes a testing phase, which
is expected to be completed within appropriate time frames. However, the
Depositary's ability to perform its services properly is also dependent upon
other parties, including but not limited to issuers and their agents, as well
as third party vendors from whom the Depositary licenses software and
hardware, and third party vendors on whom the Depositary relies for
information or the provision of services, including telecommunication and
electrical utility service providers, among others. The Depositary has
informed the financial community that it is contacting, and will continue to
contact, third party vendors from whom the Depositary acquires services to
impress upon them the importance of those services being Year 2000 compliant,
and to determine the extent of their efforts for Year 2000 remediation and, as
appropriate, testing of their services. In addition, the Depositary is in the
process of developing contingency plans as it deems appropriate.
According to the Depositary, the foregoing information relating
to the Depositary has been provided to the financial community for
informational purposes only and is not intended to serve as a representation,
warranty or contract modification of any kind.
UNITED STATES FEDERAL TAXATION
In the opinion of Brown & Wood llp, counsel to MSDW, the
following summary accurately describes the principal United States federal
income tax consequences of ownership and disposition of the notes and of units
consisting of notes and universal warrants or purchase contracts. This
summary is based on the Internal Revenue Code of 1986, which we refer to as
the "Code," and existing and proposed Treasury regulations, revenue rulings,
administrative interpretations and judicial decisions, all as currently in
effect and all of which are subject to change, possibly with retroactive
effect. Except as specifically set forth in this section, this summary deals
only with notes and units purchased by a United States holder, as defined
below, on original issuance and held as capital assets within the meaning of
Section 1221 of the Code. It does not discuss all of the tax consequences
that may be relevant to you in light of your particular circumstances or to
holders subject to special rules, such as persons other than United States
holders, insurance companies, dealers in securities or foreign currencies,
persons holding the notes or units as part of a hedging transaction,
"straddle," conversion transaction, or other integrated transaction, or United
States holders whose functional currency, as defined in Section 985 of the
Code, is not the U.S. dollar. Persons considering the purchase of the notes
or units should consult with their own tax advisors concerning 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 jurisdiction.
As used in this section, the term "United States holder" means
a beneficial owner of a note or unit who or that is:
o a citizen or resident of the United States for United States
federal income tax purposes;
o a corporation or partnership, including an entity treated as a
corporation or partnership for United States federal income tax
purposes, created or organized in or under the laws of the
United States, any state of the United States or the District
of Columbia;
o an estate the income of which is subject to United States
federal income taxation regardless of its source; or
o a trust if both:
o a United States court is able to exercise primary
supervision over the administration of the trust, and
o one or more United States persons have the authority to
control all substantial decisions of the trust.
In addition, some trusts treated as United States persons before August 20,
1996 may elect to continue to be so treated to the extent provided in Treasury
regulations.
Notes
Payments of Interest on the Notes
Interest paid on a note, whether in U.S. dollars or in other
than U.S. dollars, that is not a discount note, as defined below in " --
Discount Notes," or an exchangeable note, will generally be taxable to a
United States holder as ordinary interest income at the time it accrues or is
received, in accordance with the United States holder's method of tax
accounting.
Special rules governing the treatment of interest paid
regarding discount notes, including notes that pay interest annually that are
issued less than 15 calendar days before an interest payment date, notes that
mature one year or less from their date of issuance and notes issued for an
amount less than their stated redemption price at maturity, are described
under "Discount Notes" below. Special rules governing the treatment of
interest paid regarding exchangeable notes are described under "Optionally
Exchangeable Notes" and "Mandatorily Exchangeable Notes" below.
Discount Notes
The following discussion is a summary of the principal United
States federal income tax consequences of the ownership and disposition of
discount notes by United States holders. Additional rules applicable to
discount notes that are denominated in a specified currency other than the
U.S. dollar, or have payments of interest or principal determined by reference
to the value of one or more currencies or currency units other than the U.S.
dollar, are described under "Foreign Currency Notes" below.
A note that has an "issue price" that is less than its "stated
redemption price at maturity" will generally be considered to have been issued
bearing original issue discount , which we refer to as "OID," for United
States federal income tax purposes, referred to as a "discount note," unless
the difference is less than a specified de minimis amount, generally, 0.0025
multiplied by the product of the stated redemption price at maturity and the
number of complete years to maturity. The issue price of each note in an
issue of notes issued for cash generally will equal the first price at which
a substantial amount of those notes is sold to the public, ignoring sales to
bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents or wholesalers. The issue price of
a note does not change even if part of the issue is subsequently sold at a
different price. The stated redemption price at maturity of a note is the
total of all payments required to be made under the note other than "qualified
stated interest" payments. The term "qualified stated interest" is defined as
stated interest that is unconditionally payable in cash or property, other
than debt instruments of the issuer, at least annually at a single fixed rate
of interest. In addition, qualified stated interest generally includes, among
other things, stated interest on a variable rate debt instrument that is
unconditionally payable at least annually at a single qualified floating rate
or a rate that is determined using a single fixed formula that is based on
objective financial or economic information. A rate is a qualified floating
rate if variations in the rate can reasonably be expected to measure
contemporaneous fluctuations in the cost of newly borrowed funds in the
currency in which the note is denominated.
No payment of interest on a note that matures one year or less
from its date of issuance will be considered qualified stated interest and
accordingly that note will be treated as a discount note.
A United States holder of a discount note is required to
include qualified stated interest regarding the note in income at the time it
is received or accrued, in accordance with the holder's method of accounting.
In addition, United States holders of discount notes that
mature more than one year from the date of issuance will be required to
include OID in income for United States federal income tax purposes as it
accrues, in accordance with a constant yield method based on a compounding of
interest, before the receipt of cash payments attributable to that income, but
those holders will not be required to include separately in income cash
payments received on those notes, even if denominated as interest, to the
extent they do not constitute qualified stated interest. The amount of OID
includable in income for a taxable year by a United States holder of a
discount note will generally equal the sum of the "daily portions" of the
total OID on the discount note for each day during the taxable year in which
that holder held the discount note, which we refer to as "accrued OID."
Generally, the daily portion of OID is determined by allocating to each day in
any "accrual period" a ratable portion of the OID allocable to that accrual
period. The term "accrual period" means an interval of time of one year or
less; except that each scheduled payment of principal or interest either
occurs on the final day of an accrual period or the first day of an accrual
period. The amount of OID allocable to an accrual period is generally equal
to the difference between the product of the "adjusted issue price" of the
discount note at the beginning of that accrual period and its "yield to
maturity" adjusted to reflect the length of the accrual period and the amount
of any qualified stated interest allocable to the accrual period.
The "adjusted issue price" of a discount note at the beginning
of an accrual period will equal the issue price of the discount note plus the
amount of OID previously includable in the gross income of any United States
holder without reduction for any premium or amortized acquisition premium, as
described below, less any prior payments made on the discount note that were
not qualified stated interest payments. The "yield to maturity" of the
discount note will be computed on the basis of a constant annual interest rate
compounded at the end of each accrual period. Under the foregoing rules,
United States holders of discount notes will generally be required to include
in income increasingly greater amounts of OID in successive accrual periods.
Special rules will apply for calculating OID for initial short or final
accrual periods.
Notes that pay interest annually that are issued less than 15
calendar days before an interest payment date may be treated as discount
notes. United States holders intending to purchase those notes should refer
to the applicable pricing supplement.
Discount notes may be redeemable prior to maturity at the
option of MSDW, which we refer to as a "call option," and/or repayable prior
to maturity at the option of the holder, which we refer to as a "put option."
Discount notes containing either or both of these features may be subject to
rules that differ from the general rules discussed above. Holders intending
to purchase discount notes with either or both of these features should
carefully examine the applicable pricing supplement and should consult with
their own tax advisors with respect to either or both of these features since
the tax consequences with respect to OID will depend, in part, on the
particular terms and the particular features of the purchased note.
In general, a United States holder who uses the cash method of
tax accounting and who holds a discount note that matures one year or less
from the date of its issuance, which we refer to as a "short-term discount
note," is not required to accrue OID for United States federal income tax
purposes unless the holder elects to do so. United States holders who report
income for United States federal income tax purposes on the accrual method and
other holders, including banks and dealers in securities, are required to
include OID, or alternatively acquisition discount, on those short-term
discount notes on a straight-line basis, unless an election is made to accrue
the OID according to a constant yield method based on daily compounding. In
the case of a United States holder who is not required, and does not elect, to
include OID in income currently, any gain realized on the sale, exchange or
retirement of a short-term discount note will be ordinary interest income to
the extent of the OID accrued on a straight-line basis or, if elected by the
holder, under the constant yield method through the date of sale, exchange or
retirement. In addition, non-electing United States holders who are not
subject to the current inclusion requirement described in the second sentence
of this paragraph may be required to defer the deduction of all or a portion
of any interest paid on indebtedness incurred to purchase short-term discount
notes until OID is included in the holder's income.
If the amount of OID with respect to a note is less than the
specified de minimis amount, generally 0.0025 multiplied by the product of the
stated redemption price at maturity and the number of complete years to
maturity, the amount of OID is treated as zero and all stated interest is
treated as qualified stated interest. A United States holder will be required
to treat any stated principal payment on a note as capital gain to the extent
of the product of the total amount of de minimis OID and a fraction, the
numerator of which is the amount of the principal payment made and the
denominator of which is the stated principal amount of the note.
United States holders are permitted to elect to include all
interest on a note using the constant yield method. For this purpose,
interest includes stated interest, acquisition discount, OID, de minimis OID,
market discount, de minimis market discount, and unstated interest, as
adjusted by any amortizable bond premium or acquisition premium. Special
rules apply to elections made with respect to notes with amortizable bond
premium or market discount and United States holders considering this election
should consult their own tax advisors. The election cannot be revoked without
the approval of the Internal Revenue Service.
Market Discount and Premium
If a United States holder purchases a note, other than a
discount note or an exchangeable note, for an amount that is less than its
issue price or, with respect to a subsequent purchaser, its stated redemption
price at maturity or, in the case of a discount note, its adjusted issue
price, the amount of the difference will be treated as "market discount" for
United States federal income tax purposes, unless this difference is less than
a specified de minimis amount.
Under the market discount rules of the Code, a United States
holder will be required to treat any partial principal payment or, in the case
of a discount note, any payment that does not constitute qualified stated
interest, on, or any gain realized on the sale, exchange, retirement or other
disposition of, a note as ordinary income to the extent of the lesser of:
o the amount of the payment or realized gain, or
o the market discount that has not previously been included in
income and is treated as having accrued on the note at the time
of payment or disposition.
If the note is disposed of in a nontaxable transaction, other than a
nonrecognition transaction described in Code Section 1276(c), the amount of
gain realized on the disposition for purposes of the market discount rules
will be determined as if the holder had sold the note at its then fair market
value. Market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the note, unless the
United States holder elects to accrue on the basis of a constant interest rate.
A United States holder may be required to defer the deduction
of all or a portion of the interest paid or accrued on any indebtedness
incurred or maintained to purchase or carry a note until the maturity of the
note or its earlier disposition, except for certain nonrecognition
transactions. A United States holder may elect to include market discount in
income currently as it accrues, on either a ratable or a constant interest
rate basis, in which case the rules described above regarding the treatment as
ordinary income of gain upon the disposition of the note and upon the receipt
of cash payments on the note and regarding the deferral of interest deductions
will not apply. Generally, this currently included market discount is treated
as ordinary interest. The election will apply to all debt instruments
acquired by the United States holder on or after the first day of the first
taxable year to which that election applies and may be revoked only with the
consent of the Internal Revenue Service.
A United States holder who purchases a discount note for an
amount that is greater than its adjusted issue price, but less than or equal
to the sum of all amounts payable on the note after the purchase date, other
than payments of qualified stated interest, will be considered to have
purchased the note at an "acquisition premium" within the meaning of the Code.
Under the acquisition premium rules, the amount of OID which the holder must
include in its gross income with respect to the note for any taxable year, or
for the part of a taxable year in which the United States holder holds the
discount note, will be reduced by a fraction the numerator of which is the
excess of the cost of the note over its adjusted issue price and the
denominator of which is the excess of the sum of all amounts payable on the
note after the purchase date, other than qualified stated interest, over the
note's adjusted issue price.
A United States holder who purchases a discount note for an
amount that is greater than the sum of all amounts payable on the note after
the purchase date, other than qualified stated interest, will be considered to
have purchased that note at a "premium" within the meaning of the OID
regulations. In that case, the holder is not required to include any OID in
gross income.
If a United States holder purchases a note, other than an
exchangeable note, for an amount that is greater than the amount payable at
maturity, or on the earlier call date, in the case of a note that is
redeemable at the option of MSDW, that holder will be considered to have
purchased the note with "amortizable bond premium" equal in amount to that
excess, and may elect, in accordance with applicable Code provisions, to
amortize this premium, using a constant yield method over the remaining term
of the note and to offset interest otherwise required to be included in income
in respect of the note during any taxable year by the amortized amount of that
excess for the taxable year. However, if the note may be optionally redeemed
after the United States holder acquires it at a price in excess of its stated
redemption price at maturity, special rules would apply that could result in a
deferral of the amortization of some bond premium until later in the term of
the note. Any election to amortize bond premium applies to all debt
instruments acquired by the United States holder on or after the first day of
the first taxable year to which the election applies and may be revoked only
with the consent of the Internal Revenue Service.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a note, a United
States holder will generally recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement and
the United States holder's adjusted tax basis in the note. For these
purposes, the amount realized on the sale, exchange or retirement of a note,
other than an exchangeable note, does not include any amount attributable to
accrued interest or, in the case of a discount note, accrued qualified stated
interest, which will be taxable as interest unless previously taken into
account. A United States holder's adjusted tax basis in a note, other than an
exchangeable note, generally will equal the cost of the note to that holder,
increased by the amounts of any market discount, OID and de minimis OID
previously included in income by the holder with respect to the note and
reduced by any amortized bond premium and any principal payments received by
the United States holder and, in the case of a discount note, by the amounts
of any other payments that do not constitute qualified stated interest.
Subject to the discussion under "foreign currency notes" and
"optionally exchangeable notes" below, gain or loss recognized on the sale,
exchange or retirement of a note will be capital gain or loss, except to the
extent of any accrued market discount or, in the case of a short-term discount
note, any accrued OID which the United States holder has not previously
included in income, and will generally be long-term capital gain or loss if at
the time of sale, exchange or retirement the note has been held for more than
one year. The deductibility of capital losses is subject to limitations.
A United States holder generally will not recognize gain or
loss upon the election or revocation of the election or failure to elect to
terminate the automatic extension of maturity of a renewable note.
Foreign Currency Notes
The following discussion summarizes the principal United States
federal income tax consequences to a United States holder of the ownership and
disposition of notes, other than the currency-linked notes described above,
that are denominated in a specified currency other than the U.S. dollar or the
payments of interest or principal on which are payable in one or more
currencies or currency units other than the U.S. dollar, which we refer to as
"foreign currency notes."
The rules discussed below will generally not apply to a United
States holder that enters into a "qualified hedging transaction." A qualified
hedging transaction is an integrated economic transaction consisting of a
qualifying debt instrument, such as a foreign currency note, and a "section
1.988-5(a) hedge," as defined in section 1.988-5(a)(4) of the Treasury
regulations. Generally, an integrated economic transaction, if identified as
an integrated economic transaction by either the United States holder or the
Internal Revenue Service, is treated as a single transaction for United States
federal income tax purposes, the effect of which is to treat a holder as
owning a synthetic debt instrument that is subject to rules applicable to
discount notes. The rules with respect to a qualified hedging transaction are
extremely complex and special rules may apply in certain circumstances, and
persons that are considering hedging the currency risk are urged to consult
with their own tax advisors with respect to the application of these rules.
A United States holder who uses the cash method of accounting
and who receives a payment of interest with respect to a foreign currency
note, other than a discount note, except to the extent any qualified stated
interest is received, in which OID is accrued on a current basis, will be
required to include in income the U.S. dollar value of the foreign currency
payment, determined on the date that payment is received, regardless of
whether the payment is in fact converted to U.S. dollars at that time, and
that U.S. dollar value will be the United States holder's tax basis in the
foreign currency.
A United States holder, to the extent the above paragraph is
not applicable, will be required to include in income the U.S. dollar value of
the amount of interest income, including OID or market discount and reduced by
premium, acquisition premium and amortizable bond premium to the extent
applicable, that has accrued and is otherwise required to be taken into
account with respect to a foreign currency note during an accrual period. The
U.S. dollar value of the accrued income will be determined by translating the
income at the average rate of exchange for the accrual period or, with respect
to an accrual period that spans two taxable years, at the average rate for the
partial period within the taxable year. The average rate of exchange for the
accrual period, or partial period, is the simple average of the exchange rates
for each business day of the period, or other method if this method is
reasonably derived and consistently applied. A United States holder may elect
to determine the U.S. dollar value of this accrued income by translating the
income at the spot rate on the last day of the interest accrual period, or, in
the case of a partial accrual period, the spot rate on the last day of the
taxable year, or, if the date of receipt is within five business days of the
last day of the interest accrual period, the spot rate on the date of receipt.
The United States holder will recognize ordinary gain or loss with respect
to accrued interest income on the date this income is received. The amount of
ordinary gain or loss recognized will equal the difference between the U.S.
dollar value of the foreign currency payments received, determined on the date
this payment is received, in respect of the accrual period and the U.S. dollar
value of interest income that has accrued during this accrual period, as
determined above.
A United States holder will have a tax basis in any foreign
currency received on the sale, exchange or retirement of a foreign currency
note equal to the U.S. dollar value of that foreign currency, determined at
the time of the sale, exchange or retirement. Any gain or loss realized by a
United States holder on a sale or other disposition of foreign currency,
including its exchange for U.S. dollars or its use to purchase foreign
currency notes, will be ordinary income or loss.
A United States holder's tax basis in a foreign currency note,
and the amount of any subsequent adjustment to the United States holder's tax
basis, will be the U.S. dollar value of the foreign currency amount paid for
the foreign currency note, or of the foreign currency amount of the
adjustment, determined on the date of the purchase or adjustment. A United
States holder who converts U.S. dollars to a foreign currency and immediately
uses that currency to purchase a foreign currency note denominated in the same
currency ordinarily will not recognize gain or loss in connection with this
conversion and purchase. However, a United States holder who purchases a
foreign currency note with previously owned foreign currency will recognize
ordinary income or loss in an amount equal to the difference, if any, between
the holder's tax basis in the foreign currency and the U.S. dollar fair market
value of the foreign currency note on the date of purchase. For purposes of
determining the amount of any gain or loss recognized by a United States
holder on the sale, exchange or retirement of a foreign currency note, the
amount realized upon the sale, exchange or retirement will be the U.S. dollar
value of the foreign currency received, determined on the date of sale,
exchange or retirement.
Gain or loss realized upon the sale, exchange or retirement of
a foreign currency note will be ordinary income or loss to the extent it is
attributable to fluctuations in currency exchange rates. Gain or loss
attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the foreign currency principal amount of that
note, determined on the date that payment is received or that note is disposed
of, including any payment with respect to accrued interest, and the U.S.
dollar value of the foreign currency principal amount of the note, determined
on the date the United States holder acquired the note, and the U.S. dollar
value of accrued interest received, determined by translating that interest at
the average exchange rate for the accrual period. This foreign currency
principal amount of a foreign currency note generally equals the United States
holder's purchase price in units of foreign currency. This foreign currency
gain or loss will be recognized only to the extent of the total gain or loss
recognized by a United States holder on the sale, exchange or retirement of
the foreign currency note.
The source of exchange gain or loss will be determined by
reference to the residence of the holder or the "qualified business unit" of
the holder on whose books the note is properly reflected. Any gain or loss
recognized by a United States holder in excess of the foreign currency gain or
loss will be capital gain or loss, except to the extent of any accrued market
discount or, in the case of a short-term discount note, any accrued OID, and
generally will be long-term capital gain or loss if the holding period of the
foreign currency note exceeds one year. The deductibility of capital losses
is subject to limitations.
Any gain or loss that is treated as ordinary income or loss, as
described above, generally will not be treated as interest income or expense
except to the extent provided by administrative pronouncements of the Internal
Revenue Service.
OID, market discount, premium, acquisition premium and
amortizable bond premium of a foreign currency note are to be determined in
the relevant foreign currency. The amount of the discount or premium that is
taken into account currently under general rules applicable to notes other
than foreign currency notes is to be determined for any accrual period in the
relevant foreign currency and then translated into the United States holder's
functional currency on the basis of the average exchange rate in effect during
the accrual period. The amount of accrued market discount, other than market
discount that is included in income on a current basis, taken into account
upon the receipt of any partial principal payment or upon the sale, exchange,
retirement or other disposition of a foreign currency note will be the U.S.
dollar value of the accrued market discount determined on the date of receipt
of that partial principal payment or upon the sale, exchange, retirement or
other disposition.
Any loss realized on the sale, exchange or retirement of a
foreign currency note with amortizable bond premium by a United States holder
who has not elected to amortize the premium will be a capital loss to the
extent of the bond premium. If this election is made, amortizable bond
premium taken into account on a current basis will reduce interest income in
units of the relevant foreign currency. Exchange gain or loss is realized on
the amortized bond premium with respect to any period by treating the bond
premium amortized in the period as a return of principal.
The Code and the applicable regulations do not discuss the tax
consequences of an issuance of a foreign currency note that is denominated in,
or has payments of interest or principal determined by reference to, a
so-called hyperinflationary currency or more than one currency. On March 17,
1992, Treasury regulations were proposed regarding debt instruments
denominated in a hyperinflationary currency and some debt instruments
denominated in more than one currency. These proposed regulations are
proposed to be effective for transactions entered into on or after the date
these regulations are finalized.
A foreign currency note will be considered to be a debt
instrument denominated in a hyperinflationary currency if it is denominated in
a specified currency of a country in which there is cumulative inflation of at
least 100% during the 36 calendar month period ending on the last day of the
preceding calendar year. Under the proposed regulations, a United States
holder who acquires a foreign currency note that is denominated in a
hyperinflationary currency will recognize gain or loss for its taxable year
determined by reference to the change in exchange rates between the first day
of the taxable year, or the date the note was acquired, if later, and the last
day of the taxable year or the date the note was disposed of, if earlier.
This gain or loss will reduce or increase the amount of interest income
otherwise required to be taken into account. Special rules apply to the
extent the loss exceeds the amount of interest income otherwise taken into
account.
Under the proposed regulations, a foreign currency note will be
considered to be a "dual currency debt instrument" if:
o the qualified stated interest is denominated in or determined
by reference to a single currency,
o the stated redemption price at maturity is denominated in or
determined by reference to a different currency, and
o the amount of all payments in each currency is fixed on the
issue date.
A foreign currency note, other than a dual currency debt instrument, will be
considered to be a "multicurrency debt instrument" if payments are to be made
in more than one currency and the amount of all payments in each currency is
fixed on the issue date. A dual currency debt instrument will be treated as
two hypothetical debt instruments, a zero coupon bond denominated in the
currency of the stated redemption price at maturity and an installment
obligation denominated in the currency of the qualified stated interest. A
multicurrency debt instrument will be treated similarly and separated into
component hypothetical debt instruments in each currency. The OID and foreign
currency rules discussed above will apply to each hypothetical debt
instrument. The proposed regulations do not apply to any foreign currency
note that is denominated in, or has payments of interest or principal
determined by reference to, more than one currency except to the extent the
note meets the definition of a dual currency debt instrument or multicurrency
debt instrument.
Optionally Exchangeable Notes
The following discussion summarizes the principal United States
federal income tax consequences to a United States holder of the ownership and
disposition of optionally exchangeable notes.
Unless otherwise noted in the applicable pricing supplement,
optionally exchangeable notes will be treated as "contingent payment debt
instruments" for United States federal income tax purposes. As a result, the
optionally exchangeable notes will generally be subject to the OID provisions
of the Code and the Treasury regulations issued thereunder and a United States
holder will be required to accrue interest income on the optionally
exchangeable notes as set forth below.
At the time the optionally exchangeable notes are issued, MSDW
will be required to determine a "comparable yield" for the optionally
exchangeable notes that takes into account the yield at which MSDW could issue
a fixed rate debt instrument with terms similar to those of the optionally
exchangeable notes, including the level of subordination, term, timing of
payments and general market conditions, but excluding any adjustments for
liquidity or the riskiness of the contingencies with respect to the optionally
exchangeable notes. The comparable yield may be greater than or less than the
stated interest rate, if any, with respect to the optionally exchangeable
notes.
Solely for purposes of determining the amount of interest
income that a United States holder will be required to accrue, MSDW will be
required to construct a "projected payment schedule" in respect of the
optionally exchangeable notes representing a series of payments the amount and
timing of which would produce a yield to maturity on the optionally
exchangeable notes equal to the comparable yield. Neither the comparable
yield nor the projected payment schedule constitutes a representation by MSDW
regarding the actual amount, if any, that the optionally exchangeable notes
will pay. For United States federal income tax purposes, a United States
holder is required to use the comparable yield and the projected payment
schedule established by MSDW in determining interest accruals and adjustments
in respect of an optionally exchangeable note, unless the United States holder
timely discloses and justifies the use of other estimates to the Internal
Revenue Service.
Based on the comparable yield and the issue price of the
optionally exchangeable notes, a United States holder of an optionally
exchangeable note, regardless of accounting method, will be required to accrue
as OID the sum of the daily portions of interest on the optionally
exchangeable note for each day in the taxable year on which the holder held
the optionally exchangeable note, adjusted upward or downward to reflect the
difference, if any, between the actual and the projected amount of any
contingent payments on the optionally exchangeable note as set forth below.
The daily portions of interest in respect of an optionally exchangeable note
are determined by allocating to each day in an accrual period the ratable
portion of interest on the optionally exchangeable note that accrues in the
accrual period. The amount of interest on an optionally exchangeable note
that accrues in an accrual period is the product of the comparable yield on
the optionally exchangeable note, adjusted to reflect the length of the
accrual period, and the adjusted issue price of the optionally exchangeable
note. The adjusted issue price of an optionally exchangeable note at the
beginning of the first accrual period will equal its issue price and for any
accrual period thereafter will be (x) the sum of the issue price of the
optionally exchangeable note and any interest previously accrued thereon by a
holder, disregarding any positive or negative adjustments, minus (y) the
amount of any projected payments on the optionally exchangeable note for
previous accrual periods.
A United States holder will be required to recognize interest
income equal to the amount of any positive adjustment, i.e., the excess of
actual payments over projected payments, in respect of an optionally
exchangeable note for a taxable year. A negative adjustment, i.e., the excess
of projected payments over actual payments, in respect of an optionally
exchangeable note for a taxable year:
o will first reduce the amount of interest in respect of the
optionally exchangeable note that a United States holder would
otherwise be required to include in income in the taxable year
and
o to the extent of any excess, will give rise to an ordinary loss
equal to that portion of this excess as does not exceed the
excess of:
o the amount of all previous interest inclusions under the
optionally exchangeable note over
o the total amount of the United States holder's net negative
adjustments treated as ordinary loss on the exchangeable
note in prior taxable years.
A net negative adjustment is not subject to the two percent floor limitation
imposed on miscellaneous deductions under Section 67 of the Code. Any
negative adjustment in excess of the amounts described above will be carried
forward to offset future interest income in respect of the optionally
exchangeable note or to reduce the amount realized on a sale, exchange or
retirement of the optionally exchangeable note. Where a United States holder
purchases an optionally exchangeable note at a price other than the issue
price thereof, the difference between the purchase price and the issue price
will generally be treated as a positive or negative adjustment, as the case
may be, and allocated to the daily portions of interest or projected payments
with respect to the optionally exchangeable note over its remaining term.
Upon a sale, exchange or retirement of an optionally
exchangeable note, a United States holder will generally recognize taxable
gain or loss equal to the difference between the amount realized on the sale,
exchange or retirement and the holder's tax basis in the optionally
exchangeable note. If MSDW delivers property, other than cash, to a holder
in retirement of an optionally exchangeable note, the amount realized will
equal the fair market value of the property, determined at the time of
retirement, plus the amount of cash, if any, received in lieu of property. A
United States holder's tax basis in an optionally exchangeable note will equal
the cost thereof, increased by the amount of interest income previously
accrued by the holder in respect of the optionally exchangeable note,
disregarding any positive or negative adjustments, and decreased by the amount
of all prior projected payments in respect of the optionally exchangeable
note. A United States holder generally will treat any gain as interest
income, and any loss as ordinary loss to the extent of the excess of previous
interest inclusions over the total negative adjustments previously taken into
account as ordinary losses, and the balance as capital loss.
A United States holder will have a tax basis in any property,
other than cash, received upon the retirement of an optionally exchangeable
note equal to the fair market value of the property, determined at the time of
retirement. Any gain or loss realized by a United States holder on a sale or
exchange of the property will generally be capital gain or loss and will
generally be long-term capital gain or loss if the sale or exchange occurs
more than one year after the retirement of the exchangeable note. The
deductibility of capital losses is subject to limitations.
Mandatorily Exchangeable Notes
Under current United States federal income tax law, it is
unclear how a mandatorily exchangeable note will be treated. Prospective
purchasers of mandatorily exchangeable notes are urged to review the
applicable pricing supplement and consult with their tax advisors.
Notes Linked to Commodity Prices, Single Securities, Baskets of
Securities or Indices
The United States federal income tax consequences to a United
States holder of the ownership and disposition of notes that have principal or
interest determined by reference to commodity prices, securities of entities
unaffiliated with MSDW, baskets of those securities or indices will vary
depending upon the exact terms of the notes and related factors. Unless
otherwise noted in the applicable pricing supplement, these notes will be
subject to the same United States federal income tax treatment as optionally
exchangeable notes.
Units
The following discussion addresses the treatment of a unit
consisting of:
o a note and one or more universal warrants entitling the holder
of this unit to purchase securities of an entity unaffiliated
with MSDW, a basket of the securities, an index or indices of
the securities or any combination of the above or commodities,
which we refer to as a "warrant unit," or
o a note and one or more purchase contracts requiring the holder
of this unit to purchase securities of an entity unaffiliated
with MSDW, a basket of the securities, an index or indices of
the securities or any combination of the above or commodities,
which we refer to as a "purchase unit."
Other units and certain warrant units and purchase units with special terms
and conditions may be subject to United States federal income tax consequences
that differ from those described below. United States holders intending to
purchase these units should refer to the discussion relating to United States
federal income taxation in the applicable pricing supplement.
Warrant Units
While not free from doubt, based on certain representations
made by MSDW it is the opinion of Brown & Wood llp that, in the case of a
warrant unit, the note and the universal warrants comprising the warrant unit
should be treated as separate instruments and, pursuant to the terms of the
unit agreement, MSDW and each United States holder will be obligated, in the
absence of an applicable administrative ruling or judicial determination to
the contrary, to follow this treatment. Except as otherwise stated, the
following discussion assumes that the notes and universal warrants comprising
warrant units will be respected as separate instruments. Under this
treatment, the issue price of the warrant unit, determined in a similar manner
as the issue price of a note, will be allocated between the note and the
universal warrants based on their relative fair market values. This
allocation will be set forth in the applicable pricing supplement and will be
based on MSDW's judgment as to the relative value of the note and the
universal warrants at the time of original issue. No assurance can be given,
however, that the Internal Revenue Service will not challenge MSDW's
allocation. Unless otherwise noted in the applicable pricing supplement, the
note component of a warrant unit will be treated as having been issued with
OID.
The determination by MSDW of the issue price of a note and one
or more universal warrants comprising a warrant unit will be binding on a
holder thereof, unless a holder discloses the use of a different allocation on
a statement attached to the holder's federal income tax return for the taxable
year that includes the acquisition date of the warrant unit. If a holder
acquires a warrant unit at a price different from that on which MSDW's
allocation is based, this holder may be treated as having acquired the note
component thereof for an amount greater or less than the amount allocated to
the note by MSDW as set forth above, potentially resulting in "acquisition
premium" or "market discount."
Upon the exercise of a universal warrant, a United States
holder will not recognize gain or loss, except with respect to cash, if any,
received on exercise, and will have a tax basis in the property acquired
pursuant to exercise equal to the holder's tax basis in the universal warrant,
as described above, plus the exercise price of the universal warrant. The
holding period for any property so acquired will commence on the day after the
date of exercise of the universal warrant. If any cash is received in lieu of
the right to receive a fractional interest in property pursuant to a universal
warrant, a United States holder will recognize gain or loss the amount and
character of which will be determined as if the holder had received property
and then immediately sold it for cash. If cash is received in full settlement
of the right to receive property pursuant to a universal warrant, a United
States holder will recognize gain or loss in the same manner as on a sale or
exchange of a universal warrant as described below. On the sale of property
received upon exercise of a universal warrant, a United States holder will
recognize gain or loss equal to the difference between the amount realized
upon the sale and the holder's tax basis in the property, which will generally
equal the exercise price of the universal warrant plus the portion of the
issue price of the warrant unit that was allocated to the universal warrant.
The gain or loss will generally be capital gain or loss and will be long-term
capital gain or loss if, at the time of sale or exchange, the property was
held for more than one year. The deductibility of capital losses is subject
to limitations.
A United States holder of a universal warrant will recognize
gain or loss on the sale or exchange of the universal warrant, including if
the universal warrant expires unexercised or is settled entirely in cash, in
an amount equal to the difference between the amount realized and the holder's
tax basis in the universal warrant, as described above. This gain or loss
will generally be capital gain or loss and will be long-term capital gain or
loss if, at the time of sale or exchange, the universal warrant was held for
more than one year. On a sale or exchange of a warrant unit, the amount
realized on the sale or exchange will be allocated between the note and the
universal warrants comprising the warrant unit based on the relative fair
market value of the note and the universal warrants.
Unless otherwise noted in the applicable pricing supplement, a
note issued as part of a warrant unit will be taxable in the same manner as if
it had been issued separately. See discussion under "Notes" above.
It is also possible that a warrant unit could be characterized
as a single debt instrument. Under that characterization, the warrant unit
would constitute a contingent payment debt instrument and would be subject to
the OID provisions of the Code and the Treasury regulations issued thereunder.
For a description of the treatment of contingent payment debt instruments, see
the discussion under "Optionally Exchangeable Notes" above.
Purchase Unit
Under current United States federal income tax law, it is
unclear whether a purchase unit will be treated, in whole or in part, as a
forward contract, as indebtedness of MSDW, as one or more options or other
derivative instruments, or as a combination thereof. No statutory, judicial
or administrative authority definitively addresses the characterization for
United States federal income tax purposes of a purchase unit or instruments
similar to a purchase unit. As a result, significant aspects of the United
States federal income tax treatment of an investment in a purchase unit are
uncertain. No ruling has been or will be requested from the Internal Revenue
Service with respect to the purchase units and no assurance can be given that
the Internal Revenue Service or a court will agree with the analysis set forth
herein. Accordingly, prospective investors in a purchase unit should consult
their own tax advisors in determining the tax consequences of investments in
the purchase unit in light of their particular circumstances.
Unless otherwise noted in the applicable pricing supplement,
MSDW and each United States holder, pursuant to the terms of the unit
agreement, will be obligated, in the absence of an applicable administrative
ruling or judicial determination to the contrary, to treat a note and one or
more purchase contracts comprising the purchase unit as separate instruments.
Under this characterization, the issue price of the purchase unit, which is
determined in a similar manner as the issue price of a note, will be allocated
between the note and the purchase contracts based on their relative fair
market values. This allocation will be based on MSDW's judgment as to the
relative value of the note and the purchase contracts at the time of original
issue. Unless otherwise noted in the applicable pricing supplement, MSDW will
not allocate any of the issue price of a purchase unit to the purchase
contracts. No assurance can be given, however, that the Internal Revenue
Service will not challenge MSDW's allocation. In the event that a portion of
the issue price of a purchase unit is allocated to the purchase contracts, the
applicable note may be treated as having been issued with OID.
The determination by MSDW of the issue price of a note and one
or more purchase contracts comprising a purchase unit will be binding on a
holder of the note, unless the holder discloses the use of a different
allocation on a statement attached to that holder's federal income tax return
for the taxable year that includes the acquisition date of the purchase unit.
If a holder acquires a purchase unit at a price different from that on which
MSDW's allocation is based, that holder may be treated as having acquired the
note component thereof for an amount greater or less than the amount allocated
to the note by MSDW as set forth above, potentially resulting in "acquisition
premium" or "market discount."
In addition, under this characterization of a purchase unit, a
United States holder would recognize no gain or loss upon the performance of a
purchase contract, other than short-term capital gain or loss with respect to
any cash received in lieu of the right to receive a fractional interest in
property, in an amount equal to the difference between the cash received in
lieu of the property being purchased and the portion of the purchase price
paid for the property pursuant to the purchase contract. A United States
holder will generally have a tax basis in the property received pursuant to
a purchase contract equal to the amount paid therefor. If cash is received in
full settlement of the right to receive property pursuant to a purchase
contract, a United States holder will recognize gain or loss to the extent
that the purchase price under the purchase contract differs from the amount of
cash received. For these purposes, the purchase price under a purchase
contract generally consists of the portion, if any, of the United States
holder's original purchase price for the purchase unit allocated to that
purchase contract plus the amount of the additional payment to be made upon
performance. MSDW believes that the character of this gain or loss will be
determined in the same manner as on a sale or exchange of a purchase contract.
If a United States holder sells or otherwise disposes of a
purchase contract prior to maturity, the holder generally would, under the
characterization described above, recognize gain or loss equal to the
difference between the amount realized on the sale or other disposition and
the United States holder's tax basis in the purchase contract, which generally
would be zero, as described above. This gain or loss generally would be
capital gain or loss and would be long-term capital gain or loss if the United
States holder has held the purchase contract for more than one year at the
time of disposition. The deductibility of capital losses is subject to
limitations. On a sale or exchange of a purchase unit, the amount realized on
the sale or exchange will be allocated between the note and the purchase
contracts comprising the purchase unit based on the relative fair market value
of the note and the purchase contracts.
Under the above characterization, a note issued as part of a
purchase unit would be taxable in the same manner as if it had been issued
separately. See discussion under "Notes" above.
Although counsel does not believe that it is more likely, it is
possible that a purchase unit would be treated as a single debt instrument,
the principal amount of which is wholly dependent upon the future value of the
property subject to the purchase contract. In that case, the purchase unit
would constitute a contingent payment debt instrument and would be subject to
the OID provisions of the Code and the Treasury regulations issued thereunder.
For a description of the treatment of contingent payment debt instruments, see
discussion under "Optionally Exchangeable Notes" above.
It is also possible that a purchase unit could be characterized
in a manner that results in tax consequences different from those described
above. Under these alternative characterizations, it is possible, for
example, that:
o a United States holder could be taxed upon the receipt pursuant
to the purchase contract of property with a value in excess of
the principal amount of the note, rather than upon the sale of
property,
o gain could be treated as ordinary income, instead of capital
gain,
o a portion of the issue price of the purchase unit could be
allocated to the forward purchase contract and a United States
holder could be required to accrue OID equal to that amount, or
o payments of stated interest could be viewed in part as an
option premium or other fee income.
Backup Withholding
Certain "backup" withholding and information reporting
requirements may apply to payments on, and to proceeds of the sale before
maturity of, the notes and units. MSDW, its agent, a broker, the relevant
trustee or any paying agent, as the case may be, will generally withhold tax
at a rate of 31% from any payments to a United States holder who fails to
furnish his taxpayer identification number, i.e. social security number or
employer identification number, to certify that the holder is not subject to
backup withholding, or to otherwise comply with the applicable requirements of
the backup withholding rules. Some holders, including, among others,
corporations, are generally not subject to the backup withholding and
information reporting requirements.
Any amounts withheld under the backup withholding rules from a
payment to a United States holder would be allowed as a refund or a credit
against the holder's United States federal income tax as long as the required
information is furnished to the Internal Revenue Service.
On October 6, 1997, the Treasury Department issued new
regulations which make modifications to the withholding, backup withholding
and information reporting rules described above. The new regulations attempt
to unify certification requirements and modify reliance standards. The new
regulations will generally be effective for payments made after December 31,
2000, subject to transition rules. Prospective investors are urged to consult
their own tax advisors regarding the new regulations.
The federal income tax discussion set forth above is included
for general information only and may not be applicable depending upon a
holder's particular situation. Holders should consult their own tax advisors
with respect to the tax consequences to them of the ownership and disposition
of the notes, including the tax consequences under state, local, foreign and
other tax laws and the possible effects of changes in federal or other tax
laws.
PLAN OF DISTRIBUTION
MSDW is offering the Series C notes and Series C units on a
continuing basis exclusively through Morgan Stanley & Co. Incorporated and
Dean Witter Reynolds Inc., which we refer to individually as an "agent" and,
together, as the "agents," who have agreed to use reasonable efforts to
solicit offers to purchase these securities. MSDW will have the sole right to
accept offers to purchase these securities and may reject any offer in whole
or in part. Each agent may reject, in whole or in part, any offer it
solicited to purchase securities. Unless otherwise specified in the applicable
pricing supplement, MSDW will pay an agent, in connection with sales of these
securities resulting from a solicitation that agent made or an offer to
purchase that agent received, a commission ranging from .125% to .750% of the
initial offering price of the securities to be sold, depending upon the
maturity of the securities. MSDW and the agent will negotiate commissions for
securities with a maturity of 30 years or greater at the time of sale.
MSDW may also sell these securities to an agent as principal
for its own account at discounts to be agreed upon at the time of sale. That
agent may resell these securities to investors and other purchasers at a fixed
offering price or at prevailing market prices, or prices related thereto at
the time of resale or otherwise, as that agent determines and as we will
specify in the applicable pricing supplement. An agent may offer the
securities it has purchased as principal to other dealers. That agent may
sell the securities to any dealer at a discount and, unless otherwise
specified in the applicable pricing supplement, the discount allowed to any
dealer will not be in excess of the discount that agent will receive from
MSDW. After the initial public offering of securities that an agent is to
resell on a fixed public offering price basis, the agent may change the public
offering price, concession and discount.
Each of the agents may be deemed to be an "underwriter" within
the meaning of the Securities Act of 1933. MSDW and the agents have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments made in respect of those
liabilities. MSDW has also agreed to reimburse the agents for specified
expenses.
MSDW estimates that it will spend approximately $5,684,000 for
printing, rating agency, trustee's and legal fees and other expenses allocable
to the offering.
Unless otherwise provided in the applicable pricing supplement,
MSDW does not intend to apply for the listing of these securities on a
national securities exchange, but has been advised by the agents that they
intend to make a market in these securities or, if separable, any other
securities included in units, as applicable laws and regulations permit. The
agents are not obligated to do so, however, and the agents may discontinue
making a market at any time without notice. No assurance can be given as to
the liquidity of any trading market for these securities or if separable, any
other securities included in any units.
Morgan Stanley & Co. Incorporated and Dean Witter Reynolds Inc.
are wholly owned subsidiaries of MSDW. The agents will conduct each offering
of these securities in compliance with the requirements of Rule 2720 of the
NASD regarding an NASD member firm's distributing the securities of an
affiliate. Following the initial distribution of these securities, each agent
may offer and sell those securities or, if separable, any other securities
included in any units in the course of its business as a broker-dealer. An
agent may act as principal or agent in those transactions and will make any
sales at varying prices related to prevailing market prices at the time of
sale or otherwise. The agents may use this prospectus supplement in connection
with any of those transactions. The agents are not obligated to make a market
in any of these securities or any other securities included in units and may
discontinue any market-making activities at any time without notice.
Neither of the agents nor any dealer utilized in the initial
offering of these securities will confirm sales to accounts over which it
exercises discretionary authority without the prior specific written approval
of its customer.
In order to facilitate the offering of these securities, the
agents may engage in transactions that stabilize, maintain or otherwise affect
the price of these securities or of any other securities the prices of which
may be used to determine payments on these securities. Specifically, the
agents may overallot in connection with any offering of these securities,
creating a short position in these securities for their own accounts. In
addition, to cover overallotments or to stabilize the price of these
securities or of any other securities, the agents may bid for, and purchase,
these securities or any other securities in the open market. Finally, in any
offering of these securities through a syndicate of underwriters, the
underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing these securities in the offering if
the syndicate repurchases previously distributed securities in transactions to
cover syndicate short positions, in stabilization transactions or otherwise.
Any of these activities may stabilize or maintain the market price of these
securities above independent market levels. The agents are not required to
engage in these activities, and may end any of these activities at any time.
Concurrently with the offering of these securities through the
agents, we may issue other debt securities under the indentures referred to in
this prospectus supplement or other units similar to those described in this
prospectus supplement. Those debt securities may include medium-term notes
and units under our Series D and Series E prospectus supplement. We refer to
those notes as "Euro medium-term notes" and those units as "Euro units." The
Euro medium-term notes and Euro units may have terms substantially similar to
the terms of the securities offered under this prospectus supplement. The
Euro medium-term notes and Euro units may be offered concurrently with the
offering of these securities, on a continuing basis outside the United States
by MSDW, under a distribution agreement with Morgan Stanley & Co.
International Limited and other affiliates of MSDW, as agents for MSDW. The
terms of that distribution agreement, which we refer to as the Euro
Distribution Agreement, are substantially similar to the terms of the
distribution agreement for a U.S. offering, except for selling restrictions
specified in the Euro Distribution Agreement. Any Euro medium-term note or
Euro unit sold under the Euro Distribution Agreement, and any debt securities,
debt warrants or pre-paid purchase contracts issued by MSDW under the
indentures or any preferred stock, warrants or purchase contracts issued by
MSDW will reduce the aggregate offering price of the securities that may be
offered under this prospectus supplement, any pricing supplement and the
accompanying prospectus.
LEGAL MATTERS
The validity of the notes, the units and any securities
included in the units will be passed upon for MSDW by Brown & Wood llp or
other counsel who is satisfactory to the agents and who may be an officer of
MSDW. Davis Polk & Wardwell will pass upon some legal matters relating to the
notes, units and any securities included in the units for the agents. Davis
Polk & Wardwell has in the past represented MSDW and continues to represent
MSDW on a regular basis and in a variety of matters, including in connection
with its private equity and leveraged capital activities.
