PROSPECTUS SUPPLEMENT
(To Prospectus dated May 18, 2000)
$15,708,077,477
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.......................... $15,708,077,477 $19,635,097 - $117,810,581 $15,688,442,380 - $15,590,266,896
</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 18, 2000
<PAGE>
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
Series C Notes and Series C Units
Offered on a Global Basis................................................S-30
United States Federal Taxation.............................................S-34
Plan of Distribution.......................................................S-47
Legal Matters..............................................................S-48
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.........................................................18
Description of Warrants......................................................23
Description of Purchase Contracts............................................26
Description of Capital Stock.................................................27
Forms of Securities..........................................................40
Plan of Distribution.........................................................43
Legal Matters................................................................44
Experts......................................................................44
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.
S-2
<PAGE>
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. $15,708,077,477, 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
S-3
<PAGE>
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).
S-4
<PAGE>
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
S-5
<PAGE>
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.
S-6
<PAGE>
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 29, 2000, we had
approximately $28.9 billion aggregate principal amount of debt securities
outstanding under the Senior Debt Indenture and approximately $90.0 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, the issue
price of that debt security plus all discount accreted as of February 29, 2000
and (2) for any debt security denominated in a foreign currency, the U.S.
dollar equivalent on February 29, 2000 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 February 29, 2000, we had outstanding approximately $61.3
billion of senior indebtedness (not including approximately $10.2 billion of
additional senior indebtedness consisting of guaranteed obligations of the
indebtedness of subsidiaries), approximately $90.0 million of subordinated
indebtedness and approximately $439 million of Capital Units.
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 (price to public);
o the aggregate principal amount;
o the denominations or minimum denominations;
o the original issue date;
o whether the notes are senior or subordinated;
S-7
<PAGE>
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;
o if the notes are in book-entry form, whether the notes will be
offered on a global basis to investors through Euroclear and
Clearstream, Luxembourg as well as through the Depositary (each as
defined below); 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.
"Clearstream, Luxembourg" means Clearstream Banking, societe anonyme.
"Depositary" means The Depository Trust Company, New York, New York.
S-8
<PAGE>
"Euro LIBOR notes" means LIBOR notes for which the index currency is
euros.
"Euroclear operator" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
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. dollar," 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
S-9
<PAGE>
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.
S-10
<PAGE>
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:
S-11
<PAGE>
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,
S-12
<PAGE>
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.
S-13
<PAGE>
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;"
S-14
<PAGE>
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.
S-15
<PAGE>
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)."
S-16
<PAGE>
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.
S-17
<PAGE>
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.
S-18
<PAGE>
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
S-19
<PAGE>
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.
S-20
<PAGE>
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
S-21
<PAGE>
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 = --------------- x 100
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:
o the rate on that interest determination date, if the Designated CMT
Telerate Page is 7051; and
o 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
S-22
<PAGE>
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
S-23
<PAGE>
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
S-24
<PAGE>
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:
S-25
<PAGE>
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.
S-26
<PAGE>
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
S-27
<PAGE>
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.
S-28
<PAGE>
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.
S-29
<PAGE>
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.
SERIES C NOTES AND SERIES C UNITS OFFERED ON A GLOBAL BASIS
In the event that we offer any of the securities under our Series C
Program on a global basis, we will so specify in the applicable pricing
supplement and the additional information contained in this section will apply.
Book-Entry, Delivery and Form
The securities will be issued in the form of one or more fully registered
global securities which will be deposited with, or on behalf of, the Depositary
and registered in the name of Cede & Co., the Depositary's nominee. Beneficial
interests in the registered global securities will be represented through
book-entry accounts of financial institutions acting on behalf of beneficial
owners as direct and indirect participants in the Depositary. Investors may
elect to hold interests in the registered global securities held by the
Depositary through Clearstream, Luxembourg or the Euroclear operator if they
are participants in such systems, or indirectly through organizations which are
participants in such systems. Clearstream, Luxembourg and the Euroclear
operator will hold interests on behalf of their participants through customers'
securities accounts in Clearstream, Luxembourg's and the Euroclear operator's
names on the books of their respective depositaries, which in turn will hold
such interests in customers' securities accounts in the depositaries' names on
the books of the Depositary. Citibank, N.A. will act as depositary for
Clearstream, Luxembourg and The Chase Manhattan Bank will act as depositary for
the Euroclear operator, in such capacities, the "U.S. depositaries." Except as
set forth below, the registered global securities may be transferred, in whole
but not in part, only to the Depositary, another nominee of the Depositary or
to a successor of the Depositary or its nominee.
Clearstream, Luxembourg advises that it is incorporated under the laws of
Luxembourg as a bank. Clearstream, Luxembourg holds securities for its
customers, "Clearstream, Luxembourg customers," and facilitates the clearance
and settlement of securities transactions between Clearstream, Luxembourg
customers through electronic book-entry transfers between their accounts,
thereby eliminating the need for physical movement of securities. Clearstream,
Luxembourg provides to Clearstream, Luxembourg customers, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream, Luxembourg interfaces with domestic securities markets in over 30
countries through established depository and custodial relationships. As a
bank, Clearstream, Luxembourg is subject to regulation by the Luxembourg
Commission for the Supervision of the Financial Sector (Commission de
Surveillance du Secteur Financier). Clearstream, Luxembourg customers are
world-wide financial institutions, including underwriters, securities brokers
and dealers, banks, trust companies and clearing corporations. Clearstream,
Luxembourg's U.S. customers are limited to securities brokers and dealers and
banks. Indirect access to Clearstream, Luxembourg is also available to other
institutions such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Clearstream, Luxembourg
customer. Clearstream, Luxembourg has established an electronic bridge with the
Euroclear operator to facilitate settlement of trades between Clearstream,
Luxembourg and the Euroclear operator.
Distributions with respect to the securities held through Clearstream,
Luxembourg will be credited to cash accounts of Clearstream, Luxembourg
customers in accordance with its rules and procedures, to the extent received
by the U.S. depositary for Clearstream, Luxembourg.
The Euroclear operator advises that the Euroclear system was created in
1968 to hold securities for its participants, "Euroclear participants," and to
clear and settle transactions between Euroclear participants through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. The Euroclear system
provides various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. The Euroclear system is
operated by the Euroclear operator, under contract with Euroclear Clearance
Systems S.C., a Belgian cooperative corporation, the "cooperative." All
operations are conducted by the Euroclear operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts
maintained with the Euroclear operator, not the
S-30
<PAGE>
cooperative. The cooperative establishes policy for the Euroclear system on
behalf of Euroclear participants. Euroclear participants include banks
(including central banks), securities brokers and dealers and other
professional financial intermediaries and include the agents. Indirect access
to the Euroclear system is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System, and applicable
Belgian law, collectively, the "terms and conditions." The terms and conditions
govern transfers of securities and cash within the Euroclear system,
withdrawals of securities and cash from the Euroclear system, and receipts of
payments with respect to securities in the Euroclear system. All securities in
the Euroclear system are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
operator acts under the terms and conditions only on behalf of Euroclear
participants and has no record of or relationship with persons holding through
Euroclear participants.
Distributions with respect to the securities held beneficially through the
Euroclear system will be credited to the cash accounts of Euroclear
participants in accordance with the terms and conditions, to the extent
received by the U.S. depositary for Euroclear.
The Euroclear operator further advises that investors that acquire, hold
and transfer interests in the securities by book-entry through accounts with
the Euroclear operator or any other securities intermediary are subject to the
laws and contractual provisions governing their relationship with their
intermediary, as well as the laws and contractual provisions governing the
relationship between such an intermediary and each other intermediary, if any,
standing between themselves and the registered global securities.
The Euroclear operator advises as follows: Under Belgian law, investors
that are credited with securities on the records of the Euroclear operator have
a co-property right in the fungible pool of interests in securities on deposit
with the Euroclear operator in an amount equal to the amount of interests in
securities credited to their accounts. In the event of the insolvency of the
Euroclear operator, Euroclear participants would have a right under Belgian law
to the return of the amount and type of interests in securities credited to
their accounts with the Euroclear operator. If the Euroclear operator does not
have a sufficient amount of interests in securities on deposit of a particular
type to cover the claims of all participants credited with such interests in
securities on the Euroclear operator's records, all participants having an
amount of interests in securities of such type credited to their accounts with
the Euroclear operator will have the right under Belgian law to the return of
their pro-rata share of the amount of interests in securities actually on
deposit.
Under Belgian law, the Euroclear operator is required to pass on the
benefits of ownership in any interests in securities on deposit with it (such
as dividends, voting rights and other entitlements) to any person credited with
such interests in securities on its records.
Individual certificates in respect of the securities will not be issued in
exchange for the registered global securities, except in very limited
circumstances. If the Depositary notifies MSDW that it is unwilling or unable
to continue as a clearing system in connection with the registered global
securities or ceases to be a clearing agency registered under the Exchange Act,
and a successor clearing system is not appointed by MSDW within 90 days after
receiving such notice from the Depositary or upon becoming aware that the
Depositary is no longer so registered, we will issue or cause to be issued
individual certificates in registered form on registration of transfer of, or
in exchange for, book-entry interests in the securities represented by such
registered global securities upon delivery of such registered global securities
for cancellation.
Title to book-entry interests in the securities will pass by book-entry
registration of the transfer within the records of Clearstream, Luxembourg, the
Euroclear operator or the Depositary, as the case may be, in accordance with
their respective procedures. Book-entry interests in the securities may be
transferred within Clearstream, Luxembourg and
S-31
<PAGE>
within the Euroclear system and between Clearstream, Luxembourg and the
Euroclear system in accordance with procedures established for these purposes
by Clearstream, Luxembourg and the Euroclear operator. Book-entry interests in
the securities may be transferred within the Depositary in accordance with
procedures established for this purpose by the Depositary. Transfers of
book-entry interests in the securities among Clearstream, Luxembourg and the
Euroclear operator and the Depositary may be effected in accordance with
procedures established for this purpose by Clearstream, Luxembourg, the
Euroclear operator and the Depositary.
A further description of the Depositary's procedures with respect to the
registered global securities is set forth in the prospectus under "Forms of
Securities-Global Securities." The Depositary has confirmed to MSDW, the
underwriter and the trustee that it intends to follow such procedures.
Global Clearance and Settlement Procedures
Initial settlement for the securities offered on a global basis will be
made in immediately available funds. Secondary market trading between the
Depositary's participants will occur in the ordinary way in accordance with the
Depositary's rules and will be settled in immediately available funds using the
Depositary's Same-Day Funds Settlement System. Secondary market trading between
Clearstream, Luxembourg customers and/or Euroclear participants will occur in
the ordinary way in accordance with the applicable rules and operating
procedures of Clearstream, Luxembourg and Euroclear and will be settled using
the procedures applicable to conventional Eurobonds in immediately available
funds.
Cross-market transfers between persons holding directly or indirectly
through the Depositary on the one hand, and directly or indirectly through
Clearstream, Luxembourg customers or Euroclear participants, on the other, will
be effected through the Depositary in accordance with the Depositary's rules on
behalf of the relevant European international clearing system by its U.S.
depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its U.S. depositary to take action to
effect final settlement on its behalf by delivering interests in the securities
to or receiving interests in the securities from the Depositary, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to the Depositary. Clearstream, Luxembourg customers and
Euroclear participants may not deliver instructions directly to their
respective U.S. depositaries.
Because of time-zone differences, credits of interests in the securities
received in Clearstream, Luxembourg or the Euroclear system as a result of a
transaction with a Depositary participant will be made during subsequent
securities settlement processing and dated the business day following the
Depositary settlement date. Such credits or any transactions involving
interests in such securities settled during such processing will be reported to
the relevant Clearstream, Luxembourg customers or Euroclear participants on
such business day. Cash received in Clearstream, Luxembourg or the Euroclear
system as a result of sales of interests in the securities by or through a
Clearstream, Luxembourg customer or a Euroclear participant to a Depositary
participant will be received with value on the Depositary settlement date but
will be available in the relevant Clearstream, Luxembourg or Euroclear cash
account only as of the business day following settlement in the Depositary.
Although the Depositary, Clearstream, Luxembourg and the Euroclear
operator have agreed to the foregoing procedures in order to facilitate
transfers of interests in the securities among participants of the Depositary,
Clearstream, Luxembourg and Euroclear, they are under no obligation to perform
or continue to perform such procedures and such procedures may be changed or
discontinued at any time.
Tax Redemption
Unless otherwise indicated in the applicable pricing supplement, we may
redeem, in whole but not in part, any of the securities under our Series C
Program offered on a global basis at our option at any time prior to maturity,
upon the giving of a notice of redemption as described below, at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest to the date fixed for redemption, if we determine that, as a result of
any change
S-32
<PAGE>
in or amendment to the laws (or any regulations or rulings promulgated
thereunder) of the United States or of any political subdivision or taxing
authority thereof or therein affecting taxation, or any change in official
position regarding the application or interpretation of such laws, regulations
or rulings, which change or amendment becomes effective on or after the date of
this prospectus supplement, we have or will become obligated to pay additional
amounts (as defined below) with respect to any such securities as described
below under "Payment of Additional Amounts." Prior to the giving of any notice
of redemption pursuant to this paragraph, MSDW shall deliver to the trustee:
o a certificate stating that MSDW is entitled to effect such redemption
and setting forth a statement of facts showing that the conditions
precedent to the right of MSDW to so redeem have occurred and
o an opinion of independent counsel satisfactory to the trustee to such
effect based on such statement of facts; provided that no such notice
of redemption shall be given earlier than 60 days prior to the
earliest date on which MSDW would be obligated to pay such additional
amounts if a payment in respect of such securities were then due.
Notice of redemption will be given not less than 30 nor more than 60 days
prior to the date fixed for redemption, which date and the applicable
redemption price will be specified in the notice. Such notice will be given in
accordance with "Notices" below.
Payment of Additional Amounts
Unless otherwise indicated in the applicable pricing supplement, we will,
with respect to any of the securities under our Series C Program offered on a
global basis and subject to certain exceptions and limitations set forth below,
pay such additional amounts, the "additional amounts," to the beneficial owner
of any note who is a non-United States person as may be necessary in order that
every net payment of the principal of and interest on such security and any
other amounts payable on such security, after withholding for or on account of
any present or future tax, assessment or governmental charge imposed upon or as
a result of such payment by the United States (or any political subdivision or
taxing authority thereof or therein), will not be less than the amount provided
for in such security to be then due and payable. MSDW will not, however, be
required to make any payment of additional amounts to any beneficial owner for
or on account of:
o any such tax, assessment or other governmental charge that would not
have been so imposed but for
o the existence of any present or former connection between such
beneficial owner (or between a fiduciary, settlor, beneficiary,
member or shareholder of such beneficial owner, if such
beneficial owner is an estate, a trust, a partnership or a
corporation for U.S. federal income tax purposes) and the United
States and its possessions, including, without limitation, such
beneficial owner (or such fiduciary, settlor, beneficiary,
member or shareholder) being or having been a citizen or
resident thereof or being or having been engaged in a trade or
business or present therein or having, or having had, a
permanent establishment therein or
o the presentation by or on behalf of the beneficial owner of any
such security for payment on a date more than 15 days after the
date on which such payment became due and payable or the date on
which payment thereof is duly provided for, whichever occurs
later;
o any estate, inheritance, gift, sales, transfer or personal property
tax or any similar tax, assessment or governmental charge;
o any tax, assessment or other governmental charge imposed by reason of
such beneficial owner's past or present status as a personal holding
company or foreign personal holding company or controlled foreign
corporation or passive foreign investment company with respect to the
United States or as a corporation that accumulates earnings to avoid
United States federal income tax or as a private foundation or other
tax-exempt organization;
o any tax, assessment or other governmental charge that is payable
otherwise than by withholding from payments on or in respect of any
such security;
S-33
<PAGE>
o any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal of, or
interest on, any such security, if such payment can be made without
such withholding by at least one other paying agent;
o any tax, assessment or other governmental charge that would not have
been imposed but for the failure to comply with certification,
information or other reporting requirements concerning the
nationality, residence or identity of the beneficial owner of such
security, if such compliance is required by statute or by regulation
of the United States or of any political subdivision or taxing
authority thereof or therein as a precondition to relief or exemption
from such tax, assessment or other governmental charge;
o any tax, assessment or other governmental charge imposed by reason of
such beneficial owner's past or present status as the actual or
constructive owner of 10% or more of the total combined voting power
of all classes of stock of MSDW entitled to vote or as a direct or
indirect subsidiary of ours; or
o any combination of the items listed above;
nor shall additional amounts be paid with respect to any payment on a security
to a non-United States person who is a fiduciary or partnership or other than
the sole beneficial owner of such payment to the extent such payment would be
required by the laws of the United States (or any political subdivision
thereof) to be included in the income, for tax purposes, of a beneficiary or
settlor with respect to such fiduciary or a member of such partnership or a
beneficial owner who would not have been entitled to the additional amounts had
such beneficiary, settlor, member or beneficial owner held its interest in the
security directly.
As used herein, the term "non-United States person" means a beneficial
owner of a security that is, for United States federal income tax purposes, (i)
a nonresident alien individual, (ii) a foreign corporation, (iii) a nonresident
alien fiduciary of a foreign estate or trust or (iv) a foreign partnership one
or more of the members of which is, for United States federal income tax
purposes, a nonresident alien individual, a foreign corporation or a
nonresident alien fiduciary of a foreign estate or trust.
Notices
Notices to holders of the securities will be given by mailing such notices
to each holder by first class mail, postage prepaid, at the respective address
of each holder as that address appears upon the books of MSDW. Notices given to
the Depositary, as holder of the registered global securities, will be passed
on to the beneficial owners of the securities in accordance with the standard
rules and procedures of the Depositary and its direct and indirect
participants, including Clearstream, Luxembourg and the Euroclear operator.
See also "Plan of Distribution - Series C Notes and Series C Units Offered
on a Global Basis."
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
S-34
<PAGE>
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.
In the event we offer any of the securities under our Series C Program on
a global basis, you should consult the applicable pricing supplement for
additional discussion regarding United States federal taxation.
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 with respect to
discount notes, including notes that pay interest annually and 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 with
respect to 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 and will be referred to as a "discount note." If the
difference between the stated redemption price at maturity and the issue price
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, then the note will not be
S-35
<PAGE>
considered to have OID. 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 in respect of 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 (1) 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 (2) 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 and 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.
S-36
<PAGE>
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 if a
subsequent purchaser purchases a note for an amount that is less than 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
S-37
<PAGE>
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.
S-38
<PAGE>
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) on 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
S-39
<PAGE>
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 (including 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.
On January 12, 2000, Treasury regulations were finalized regarding debt
instruments denominated in a hyperinflationary currency. These regulations are
effective for transactions entered into on or after February 14, 2000. 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 preceding the end of the holder's taxable year. Under the
finalized regulations, a United States holder who acquires a foreign currency
note that is denominated in a hyperinflationary currency will recognize gain or
S-40
<PAGE>
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.
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 net positive adjustment, i.e., the excess of actual
payments over projected payments, in respect of an optionally exchangeable note
for a taxable year. A net negative adjustment, i.e., the excess of projected
payments over actual payments, in respect of an optionally exchangeable note
for a taxable year:
S-41
<PAGE>
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 net
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 net
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.
S-42
<PAGE>
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.
S-43
<PAGE>
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 values 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
S-44
<PAGE>
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 values 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 regulations which make
modifications to the withholding, backup withholding and information reporting
rules described above. These regulations attempt to unify certification
requirements and modify reliance standards. These regulations will generally be
effective for payments made after
S-45
<PAGE>
December 31, 2000, subject to transition rules. Prospective investors are urged
to consult their own tax advisors regarding these 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.
S-46
<PAGE>
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 $5,516,000 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
S-47
<PAGE>
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.
Series C Notes and Series C Units Offered on a Global Basis
If the applicable pricing supplement indicates that any of our Series C
Notes or Series C Units will be offered on a global basis, such registered
global securities will be offered for sale in those jurisdictions outside of
the United States where it is legal to make such offers.
Each of the agents have represented and agreed, and any other agent
through which MSDW may offer such securities on a global basis will represent
and agree, that it will comply with all applicable laws and regulations in
force in any jurisdiction in which it purchases, offers, sells or delivers the
securities or possesses or distributes the applicable pricing supplement, this
prospectus supplement or the accompanying prospectus and will obtain any
consent, approval or permission required by it for the purchase, offer or sale
by it of the securities under the laws and regulations in force in any
jurisdiction to which it is subject or in which it makes such purchases, offers
or sales and MSDW shall not have responsibility therefor.
Purchasers of any securities offered on a global basis may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the issue price set forth on the cover
page hereof.
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.
S-48
