-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Is08151aotjgSxHN100V0+kl1Hd1YWjkBhAMqpg4PtRIv89HsU9ngJOzbKctJVwh 8AjA9o5oYU3wkI3aiWP2yA== 0000903423-02-000195.txt : 20020415 0000903423-02-000195.hdr.sgml : 20020415 ACCESSION NUMBER: 0000903423-02-000195 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20020321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER & CO CENTRAL INDEX KEY: 0000895421 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 363145972 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-47576 FILM NUMBER: 02581319 BUSINESS ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2127614000 MAIL ADDRESS: STREET 1: 1221 SIXTH AVENUE STREET 2: 27TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020 FORMER COMPANY: FORMER CONFORMED NAME: DEAN WITTER DISCOVER & CO DATE OF NAME CHANGE: 19960315 424B3 1 msdw424b3_3-20.txt PROSPECTUS Dated January 24, 2001 Pricing Supplement No. 63 to PROSPECTUS SUPPLEMENT Registration Statement No. 333-47576 Dated January 24, 2001 Dated March 19, 2002 Rule 424(b)(3) 1,200,000 BOXES Morgan Stanley Dean Witter & Co. MEDIUM-TERM NOTES, SERIES C -------------------- Biotech BOXES due January 30, 2032 Basket Opportunity eXchangeablE SecuritiesSM ("BOXESSM")Patent Pending Exchangeable for a Cash Amount Based on the Closing Prices of the Underlying Stocks of the AMEX BIOTECHNOLOGY INDEX [LOGO] The Biotech BOXES are senior unsecured debt securities of Morgan Stanley Dean Witter & Co. exchangeable upon maturity, earlier exchange by a holder or redemption by us for an amount of cash based on the closing prices of the underlying stocks of the AMEX Biotechnology Index, which we refer to as the BTK Index, on the date of exchange. Holders will not be entitled to receive the actual shares of stock underlying the Biotech BOXES either on exchange, on our redemption or at maturity. o The issue price of each Biotech BOXES is $18.1623, which is equal to one thirtieth of the closing prices of the underlying stocks of the BTK Index on the date of this pricing supplement based on the representation of those stocks in the BTK Index, plus the maximum agent's commissions. o On the maturity date, you will receive as repayment of principal an amount of cash based on the closing prices of the underlying stocks of the BTK Index, plus accrued but unpaid base and supplemental coupon amounts. The Biotech BOXES do not guarantee any return of principal at maturity. o We will pay a quarterly base coupon on each Biotech BOXES equal to the cash distributions, if any, on the amount of stocks underlying that Biotech BOXES to the extent the BTK Index is not adjusted to reflect such payments. We will also pay an annual supplemental coupon at an annual rate of 0.05% of the lesser of one thirtieth of the closing value of the BTK Index on the date of this pricing supplement and one thirtieth of the average closing value of the BTK Index during the preceding annual calculation period. o Beginning on April 22, 2002, you may exchange a minimum of 30,000 Biotech BOXES on any trading day for an amount of cash based on the closing prices of the underlying stocks of the BTK Index, plus accrued but unpaid base coupon amounts. o Beginning on March 22, 2009, we may require you to exchange your Biotech BOXES for an amount of cash based on the closing prices of the underlying stocks of the BTK Index, plus accrued but unpaid base coupon amounts. o The Biotech BOXES have been approved for listing under the symbol "BXB" on the American Stock Exchange and the Philadelphia Stock Exchange, subject to official notice of issuance. We may issue additional Biotech BOXES having terms identical to those we are offering under this pricing supplement (other than price), but we are not obligated to do so. You should read the more detailed description of the Biotech BOXES in this pricing supplement. In particular, you should review and understand the descriptions in "Summary of Pricing Supplement" and "Description of the Biotech BOXES." Investing in the Biotech BOXES involves risks. See "Risk Factors" beginning on p. PS-9. PRICE $18.1623 PER BIOTECH BOXES Agent's Proceeds to Price to Public(1)(2) Commissions(2) the Company(1) --------------------- -------------- -------------- Per Biotech BOXES................... $18.1623 $.34 $17.8223 Total............................... $21,794,760 $408,000 $21,386,760
- ------------------------------------ (1) Plus accrued interest, if any, from the original issue date. (2) The price to public for investors purchasing 3,000 or more Biotech BOXES in any single transaction will be subject to a reduced commission. See "Supplemental Information Concerning Plan of Distribution" in this pricing supplement. MORGAN STANLEY (This page intentionally left blank) SUMMARY OF PRICING SUPPLEMENT The following summary describes the Biotech BOXES we are offering to you in general terms. You should read the summary together with the more detailed information contained in the rest of this pricing supplement and the accompanying prospectus and prospectus supplement. You should carefully consider, among other things, the matters addressed in "Risk Factors." The Biotech BOXES are debt securities of Morgan Stanley Dean Witter & Co. The Biotech BOXES are exchangeable for an amount of cash based on the closing prices of the underlying stocks of the BTK Index on the date of exchange and the representation of those stocks in the BTK Index. The BTK Index is published by The American Stock Exchange LLC, which we refer to as the "American Stock Exchange." The Biotech BOXES also entitle holders to receive, as interest on the Biotech BOXES, certain coupon amounts as described below under "Description of the Biotech BOXES--Interest Rate." Unlike conventional debt securities, the Biotech BOXES do not guarantee the return of principal at maturity. Beginning on March 22, 2009 (or earlier if the BTK Index is discontinued or suspended and there is no appropriate successor index), we have the right to redeem the Biotech BOXES as described below under "Description of the Biotech BOXES--Issuer Redemption Right." "Basket Opportunity eXchangeablE Securities" and "BOXES" are our service marks. "AMEX Biotechnology Index" is a service mark of The American Stock Exchange LLC. "American Stock Exchange" and "AMEX" are federally registered trademarks of The American Stock Exchange LLC. "Philadelphia Stock Exchange" and "PHLX" are federally registered trademarks of the Philadelphia Stock Exchange. Each Biotech BOXES costs $18.1623 We, Morgan Stanley, are offering our Basket Opportunity eXchangeablE Securities due January 30, 2032 which are exchangeable daily, beginning on April 22, 2002, for a cash amount based on the closing prices of the stocks underlying the BTK Index on the date of exchange, subject to the exchange conditions described below under "Description of the Biotech BOXES--Exchange Right." The issue price of each Biotech BOXES is $18.1623, which is equal to one thirtieth of the closing prices of the underlying stocks of the BTK Index as of the date of this pricing supplement based on the representation of those stocks in the BTK Index, plus the maximum agent's commissions as set forth on the cover page of this pricing supplement. Purchases of 3,000 or more Biotech BOXES are entitled to reduced agent's commissions as described in "Supplemental Information Concerning Plan of Distribution" below. Biotech BOXES are debt securities The Biotech BOXES are debt securities. As a holder of the Biotech BOXES, you will not be recognized by the issuers of the underlying stocks of the BTK Index as the owner of those stocks, and you will have no rights as a stockholder with respect to any of the underlying stocks including, without limitation, the right to vote or tender or exchange the underlying stocks in any tender or exchange offer by the issuers of the underlying stocks or any third party. The Biotech BOXES are You will receive for each of your Biotech exchangeable for a cash amount BOXES at maturity, or earlier upon based on the closing prices of exercise of your exchange right or our the stocks underlying the BTK redemption of the Biotech BOXES as Index described in this pricing supplement under "Description of the Biotech BOXES--Cash Settlement Value Payable at Maturity or upon Exchange or Issuer Redemption," an amount of cash based on the closing prices of the underlying stocks on the date of exchange, plus accrued but unpaid base coupon amounts and, at maturity, accrued but unpaid supplemental coupon amounts. The composition of the BTK Index as of March 19, 2002 appears in the section of this pricing supplement captioned "Description of the Biotech BOXES--Composition of BTK Index." Each of the issuers of the underlying stocks is a reporting company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). You can review quarterly historical values of the BTK Index since 1997 under the section of this pricing supplement captioned "Description of the Biotech BOXES--Historical Information." On March 19, 2002 the closing value of the BTK Index as reported by the American Stock Exchange was 534.67. The historical performance of the BTK Index is not an indication of the value of the BTK Index, and therefore the underlying stocks, at the maturity date or any other future date. The American Stock Exchange and the issuers of the underlying stocks are not affiliates of ours and are not involved in this offering. The obligations represented by the Biotech BOXES are solely those of Morgan Stanley Dean Witter & Co. How the exchange ratios for the The exchange ratio for each underlying underlying stocks will be stock initially will be calculated by calculated multiplying (a) the number of shares of that stock used in calculating the BTK Index by (b) one thirtieth. The initial exchange ratio for each underlying stock is set out under "Description of the Biotech BOXES--Underlying Stocks." The exchange ratios for the underlying stocks will be adjusted following each quarterly rebalancing of the BTK Index by the American Stock Exchange (as described below under "Description of the Biotech BOXES--The BTK Index"). The exchange ratio for each underlying stock will also be adjusted if the American Stock Exchange adjusts the composition of the BTK Index or the number of shares of the underlying stock used in calculating the BTK Index between quarterly adjustments. The American Stock Exchange may make these adjustments in order to reflect corporate events relating to an issuer of an underlying stock or when it determines to substitute a new stock for an underlying stock, to add to the underlying stocks or to contract the BTK Index by deleting an underlying stock. When the American Stock Exchange makes any rebalancing or adjustment, the exchange ratios applicable in calculating exchange values for underlying stocks will be automatically reset from and after the effective date of that adjustment. Biotech BOXES are exchangeable at Unlike conventional debt securities, the maturity for an amount of cash Biotech BOXES do not guarantee any return based on the closing prices of of principal at maturity. Instead, on the the stocks underlying the BTK maturity date of the Biotech BOXES, we Index will pay to you an amount of cash, calculated as described under "Description of the Biotech BOXES--Cash Settlement Value Payable at Maturity or upon Exchange or Issuer Redemption," plus accrued but unpaid base and supplemental coupon amounts. The cash amount that you receive for your Biotech BOXES will depend on the exchange ratio of each underlying stock on the sixth trading day prior to the maturity date. The value of your Biotech BOXES will depend on the composition of the BTK Index and the exchange ratios of the underlying stocks at that time. A "trading day" means a day on which securities are traded on each of the principal U.S. securities exchanges or trading systems on which the underlying stocks are then listed or quoted. Interest on the Biotech BOXES We will pay interest on the Biotech BOXES will vary as follows: o We will pay a base coupon quarterly on the 30th day of each March, June, September and December, commencing on June 30, 2002 (or if an interest payment date is not a business day in New York City, on the immediately following business day). The quarterly base coupon per Biotech BOXES will equal the sum of: (a) each cash dividend or cash distribution other than dividends or distributions described in paragraph (b) below, if any, on any underlying stock at its respective exchange ratio and for which the "ex-dividend" date (that is, the date on and after which transactions in the underlying stock on an organized securities exchange or trading system no longer carry the right to receive that dividend or distribution) has occurred during the related quarterly calculation period with respect to that interest payment date and to the extent that the BTK Index is not adjusted by the American Stock Exchange to incorporate the value of that cash dividend or other distribution; and (b) each extraordinary dividend, if any, paid on any underlying stock, at its respective exchange ratio, during that quarterly calculation period to the extent that the BTK Index is not adjusted by the American Stock Exchange to incorporate the value of that extraordinary dividend. Although you will be entitled to receive base coupon amounts equal to the dividends and distributions paid on the underlying stocks of the BTK Index, as of the date of this pricing supplement none of the issuers of those stocks has paid a cash dividend on those stocks. If the issuers of the underlying stocks do not pay cash dividends in the future, the base coupon amounts you receive in respect of the Biotech BOXES will be limited to the cash value of the non-cash dividends or distributions paid on the underlying stocks, as described below under "Description of the Biotech BOXES--Interest Rate." The commencement dates for the quarterly calculation periods for base coupons will be the 30th day of January, April, July and October. Base coupon amounts will be calculated from and including one commencement date to, but excluding, the next commencement date, provided that the initial quarterly calculation period will commence on, and include, the original issue date and the final quarterly calculation period will extend to, but exclude, the sixth trading day prior to the date we redeem the BOXES or the fifteenth day prior to the maturity date. The interest payment date related to each quarterly calculation period will be the interest payment date that is two months following the last day of the applicable calculation period. The calculation agent will notify JPMorgan Chase Bank, the trustee for our senior notes, of base coupon amounts on or before the second trading day immediately following the last day of the applicable calculation period, and base coupon amounts will be paid to holders of record on the fifteenth day of the month following the applicable calculation period or, in the case of base coupon amounts payable at maturity, holders of record on the maturity date. An "extraordinary dividend" means (a) the full amount per share of underlying stock of any cash dividend or other cash distribution that is identified as an extraordinary or special dividend or distribution by the issuer of the relevant underlying stock including, regardless of whether identified by the issuer as extraordinary or special, any cash dividends or cash amounts paid on the underlying stocks as a result of a merger, reorganization or other corporate event involving an issuer of the underlying stocks; (b) any cash dividend or other cash distribution with respect to an underlying stock that exceeds the immediately preceding non-extraordinary cash dividend for that underlying stock by an amount equal to at least 1% of the closing price of that underlying stock on the trading day preceding the "ex-dividend" date for the payment of such cash dividend or other cash distribution; or (c) as described below under "Description of the Biotech BOXES--Interest Rate," the cash value of any non-cash dividend or distribution paid on an underlying stock. o On the interest payment date occurring in December of each year (or if that interest payment date is not a business day in New York City, on the immediately following business day), commencing on the interest payment date occurring in December 2002, we will also pay an annual supplemental coupon on each Biotech BOXES, which will accrue at an annual rate of 0.05% of the lesser of one thirtieth of the closing value of the BTK Index on the date of this pricing supplement and one thirtieth of the average closing value of the BTK Index during the preceding annual calculation period. This means that the annual supplemental coupon per each Biotech BOXES can never exceed 0.05% of one thirtieth of the closing value of the BTK Index on the date of this pricing supplement. Each annual calculation period will commence on, and include, the 30th day of each October and extend to, but exclude, the 30th day of the following October, except that the first calculation period will commence on, and include, the original issue date and the final calculation period will extend to, but exclude, the fifteenth day prior to the maturity date. Annual supplemental coupons will be paid to holders of record as of the fifteenth day of November following the relevant annual calculation period or, in the case of the annual supplemental coupon payable at maturity, holders of record on the maturity date. Annual supplemental coupons will accrue on the basis of a 360-day year consisting of twelve 30-day months. Accrued but unpaid base coupon amounts are payable by us upon your exercise of your exchange right, upon any redemption by us of Biotech BOXES and at maturity of the Biotech BOXES as described under "Description of the Biotech BOXES--Interest Rate." Accrued but unpaid supplemental coupon amounts will be payable by us on the maturity date of the Biotech BOXES but not upon your exercise of your exchange right or upon a redemption by us of the Biotech BOXES. Such accrued but unpaid supplemental coupon amounts will accrue through the trading day immediately prior to the maturity date. Beginning on April 22, 2002, Beginning on April 22, 2002 (but prior to holders will be able to exchange the sixth trading day preceding the their Biotech BOXES on any maturity date of the Biotech BOXES or any trading day redemption date), you may exchange your Biotech BOXES on any trading day for an amount of cash, calculated as described below under "Description of the Biotech BOXES--Cash Settlement Value Payable at Maturity or upon Exchange or Issuer Redemption" and, except in the limited circumstances described below under "Description of the Biotech BOXES--Determination Date," determined as of the date you deliver a valid notice of exchange, which we refer to as the exchange notice date, plus accrued but unpaid base coupon amounts. If you properly elect to exchange, on the ordinary settlement date for securities transactions, known as "regular way" settlement (currently three trading days), following the exchange notice date, we will pay a cash amount and any accrued but unpaid base coupon amounts to the trustee for delivery to you, unless there is a market disruption event, as described below under "Description of the Biotech BOXES--Market Disruption Event," with respect to any of the underlying stocks on the exchange notice date. If there is a market disruption event, settlement will occur on the later of (i) the regular way settlement date; and (ii) the second trading day after Morgan Stanley & Co. Incorporated, which we refer to as MS & Co., as calculation agent, determines the cash amount you will receive in exchange for your tendered Biotech BOXES, as described below under "Description of the Biotech BOXES--Determination Date." In no event will settlement occur later than the fifth trading day following the exchange notice date. We refer to the ordinary settlement date for exchanges as the "exchange date." You must exchange at least 30,000 Biotech BOXES (and multiples of 100 in excess of 30,000), except when you exchange your Biotech BOXES following, and during the continuance of, a credit exchange event as described below under "Description of the Biotech BOXES--Credit Exchange Event." If the minimum requirement applies, then as a practical matter only institutions or large investors may be able to exercise their exchange right. To exchange your Biotech BOXES, you must instruct your broker or other person through whom you hold your Biotech BOXES to take the following steps through normal clearing system channels: o fill out an official notice of exchange, which is attached as Annex A to this pricing supplement; o deliver your official notice of exchange to us (which must be acknowledged by us) before 12:00 p.m. (New York City time) on any trading day; and o transfer your book-entry interest in the Biotech BOXES to the trustee on our behalf at or prior to 10:00 a.m. (New York City time) on the exchange date. If we receive your official notice of exchange after 12:00 p.m. (New York City time) on any trading day or on any day that is not a trading day, that notice will not be effective. You will need to submit a new notice in order to exercise your exchange right on any future trading day. We may request that MS & Co., which is one of our broker-dealer subsidiaries, purchase the Biotech BOXES you tender in consideration of the cash amount that would otherwise have been payable by us, plus accrued but unpaid base coupon amounts. MS & Co.'s agreement to purchase the tendered Biotech BOXES will be without prejudice to your right to proceed against us upon any failure of MS & Co. to settle the purchase when due. Any Biotech BOXES purchased by MS & Co. will remain outstanding. Holders will also be able to If our senior debt is downgraded below A- exchange their Biotech BOXES upon by Standard & Poor's Ratings Services, a the occurrence of a credit division of The McGraw-Hill Companies, exchange event Inc., or below A3 by Moody's Investors Service, Inc., and for so long as our senior debt is rated below these ratings by either or both of Standard & Poor's and Moody's, exchanges will not be subject to any minimum exchange requirement. We will instruct the trustee to notify you upon the occurrence of a credit exchange event. Our senior debt is currently rated AA- by Standard & Poor's and Aa3 by Moody's. We will have the right to redeem Beginning on March 22, 2009 (or earlier if the Biotech BOXES beginning on the BTK Index is discontinued or suspended March 22, 2009 and there is no appropriate successor index), we will have the right to redeem the Biotech BOXES for mandatory exchange in whole, but not in part, upon at least 30 but not more than 60 days' notice to the holders of the Biotech BOXES. Should we decide to redeem the Biotech BOXES, we will pay to you an amount of cash, calculated as described in "Description of the Biotech BOXES--Cash Settlement Value Payable at Maturity or upon Exchange or Issuer Redemption" and determined as of the sixth trading day prior to the redemption date, plus accrued but unpaid base coupon amounts. No accrued but unpaid supplemental coupon amounts will be payable by us upon our redemption of the Biotech BOXES. We may make additional issuances We may issue additional Biotech BOXES of Biotech BOXES having terms identical to those we are offering under this pricing supplement (other than price). Should we so decide, we intend to make new issuances on the third Thursday of any calendar month, but we may make them on any other trading day we deem appropriate. MS & Co. will be the calculation We have appointed MS & Co. to act as the agent calculation agent for JPMorgan Chase Bank, the trustee for our senior notes. As calculation agent, MS & Co. will determine, among other things, the exchange ratios used to calculate the cash amount that you will receive at maturity, if you exercise your exchange right or if we redeem the Biotech BOXES. The characterization of the No statutory, judicial or administrative Biotech BOXES for federal income authority directly addresses the tax purposes is uncertain characterization of the Biotech BOXES or instruments similar to the Biotech BOXES for U.S. federal income tax purposes. Pursuant to the terms of the Biotech BOXES, Morgan Stanley and you will be obligated to characterize the Biotech BOXES for all tax purposes as contracts under which we deliver at maturity or upon exchange or redemption, a cash amount determined by reference to a portfolio of stocks consisting of the underlying stocks in exchange for a fixed purchase price, as described below under "Description of the Biotech BOXES--U.S. Federal Income Tax Consequences--Taxation of the Biotech BOXES." The Internal Revenue Service may disagree with this characterization of the Biotech BOXES. See "Risk Factors" and "Description of the Biotech BOXES--U.S. Federal Income Tax Consequences--Possible Alternative Treatment" below. Where you can find more The Biotech BOXES are senior notes issued information on the Biotech BOXES as part of our Series C medium-term note program. You can find a general description of our Series C medium-term note program in the accompanying prospectus supplement dated January 24, 2001. We describe the basic features of this type of note in the sections called "--Exchangeable Notes," "--Notes Linked to Commodity Prices, Single Securities, Baskets of Securities or Indices" and "--Redemption and Repurchase of Notes--Optional Redemption by MSDW." For a detailed description of the terms of the Biotech BOXES, including the specific procedures and deadlines governing the exchange of the Biotech BOXES, the procedures and timing of the issuer redemption provision and the calculation of the cash amount and interest you will receive in exchange for your Biotech BOXES, you should read the "Description of the Biotech BOXES" section in this pricing supplement. You should also read about some of the risks involved in investing in the Biotech BOXES in the section called "Risk Factors." We urge you to consult with your investment, legal, tax, accounting and other advisors with regard to any investment in the Biotech BOXES. How to reach us You may contact your local Morgan Stanley branch office or our principal executive offices at 1585 Broadway, New York, New York 10036. Our telephone number is (212) 761-4000. RISK FACTORS The Biotech BOXES are not secured debt and are riskier than debt securities that repay a fixed principal amount. Because the Biotech BOXES will be repaid by payment of an amount of cash based on the closing prices of the stocks underlying the BTK Index, there is no guaranteed return of principal at maturity. This section describes the most significant risks relating to the Biotech BOXES. You should carefully consider whether the Biotech BOXES are suited to your particular circumstances before you decide to purchase them. General Risk Factors Coupon amounts on the Biotech Coupon amounts payable on the Biotech BOXES are expected to be BOXES will be variable and are expected significantly less than on in the aggregate to be significantly ordinary notes. lower than the interest coupon amounts that we would pay on ordinary senior unsecured notes maturing at the same time as the Biotech BOXES. Historical dividends and other The historical level of dividends and amounts paid on the underlying stocks other amounts paid on the underlying are not indicative of future base stocks cannot be used to predict the coupon amounts. likely level of base coupon amounts payable on the Biotech BOXES, and we cannot assure you that the level of base coupon amounts will equal or exceed historical levels. As of the date of this pricing supplement none of the issuers of those stocks has paid a cash dividend on those stocks. If the issuers of the underlying stocks do not pay cash dividends in the future, the base coupon amounts you receive in respect of the Biotech BOXES will be limited to the cash value of the non-cash dividends or distributions paid on the underlying stocks, as described below under "Description of the Biotech BOXES--Interest Rate." Because the issuers of the underlying stocks rarely pay non-cash dividends or distributions, the amount of base coupon amounts you receive on the Biotech BOXES may be minimal or zero. You may lose your investment. You may lose all or a substantial portion of your investment in the Biotech BOXES if the values of the underlying stocks, and therefore the value of the BTK Index, decline. We have the right to redeem the Biotech BOXES at any time on or after March 22, 2009 (or earlier if the BTK Index is discontinued or suspended and there is no appropriate successor index). If we redeem the Biotech BOXES, our redemption could occur at a time when the aggregate value of the underlying stocks is less than the issue price for the Biotech BOXES or then prevailing market prices for the Biotech BOXES. The Biotech BOXES may trade at The Biotech BOXES may trade at prices prices that do not reflect the that do not reflect the value of the BTK value of the BTK Index. Index. In addition, the Biotech BOXES may trade differently from other instruments that are benchmarked to the BTK Index. The market price of the Biotech Several factors, many of which are BOXES will be influenced by many beyond our control, will influence the unpredictable factors. value of the Biotech BOXES, including: o the value of the BTK Index, which will be affected by the performance of the underlying stocks, as well as economic, financial, political, regulatory or judicial events that affect the underlying stocks and interest and yield rates in the financial markets generally; o the dividend rate on the underlying stocks; and o our creditworthiness. Some or all of these factors will influence the price that you will receive if you sell your Biotech BOXES prior to maturity. For example, you may have to sell your Biotech BOXES at a substantial discount from your original investment in the Biotech BOXES if at the time of sale the market price of the Biotech BOXES is below the value of the Biotech BOXES at the time you purchased your Biotech BOXES. This could happen, for example, because of a decline in the value of the BTK Index or because the Biotech BOXES are trading at a discount. You cannot predict the future performance of the BTK Index or the shares underlying the BTK Index based on the historical performance of the BTK Index or the historical performance of the underlying stocks. We cannot give any assurance that any increases in value of some underlying stocks will not be offset by decreases in value of other underlying stocks. Furthermore, we cannot guarantee that the value of the underlying stocks will increase so that you will receive at maturity an amount in excess of your investment in the Biotech BOXES. Investment in the Biotech BOXES is Your investment in the Biotech BOXES is not the same as investing directly not the same as a direct investment in in the underlying stocks. the underlying stocks. For example, you will not have the right to receive the underlying stocks and thus will not be able to dispose of some but not all of the underlying stocks at any point in time. In addition, because we pay base coupon amounts quarterly and because there is a delay between the end of a quarterly calculation period for base coupon amounts and the related interest payment date, you may receive cash dividends or other cash amounts, if any, paid on the underlying stocks (and not reflected in a change to the BTK Index) substantially later than do holders of the underlying stocks. As an owner of the Biotech BOXES, you will not have any shareholder rights in the underlying stocks, and you should expect that the tax treatment of your investment in the Biotech BOXES will differ from a direct investment in the underlying stocks. In addition, investing in Biotech BOXES is not equivalent to investing in a mutual fund or other pooled investment entity that invests in the underlying stocks or that is benchmarked to the BTK Index. The return on your investment in the Biotech BOXES may differ from the return you might earn on a direct investment in the underlying stocks or such a fund or pooled investment over a similar period. There are risks associated with a Because the Biotech BOXES will be repaid sector investment. through the payment of an amount of cash based on the closing prices of the stocks underlying the BTK Index in proportion to their representation in the BTK Index, the Biotech BOXES are an investment that is dependent upon the performance of selected issuers in a particular sector of the economy--namely, the biotechnology industry. Consequently, the value of the Biotech BOXES may be subject to greater volatility and be more adversely affected by a single economic, political or regulatory occurrence than an investment in a more broadly diversified group of issuers. The BTK Index is not necessarily Although the stocks underlying the BTK representative of the biotechnology Index are common stocks of companies industry. generally considered to be involved in various aspects of the biotechnology industry, price movements in the underlying stocks, the BTK Index and the Biotech BOXES may not correlate perfectly with price movements in the entire biotechnology industry. If the underlying stocks or the BTK Index decline in value, your Biotech BOXES will decline in value even if the biotechnology industry as a whole rises in value. In addition, after pricing of the Biotech BOXES, one or more of the issuers of the underlying stocks may engage in new lines of business or may cease to be involved in the biotechnology industry. Due to fluctuations in the relative values of the underlying stocks, adjustments to the exchange ratios and/or changes made by the American Stock Exchange in the composition of the underlying stocks, the Biotech BOXES may come to represent a concentrated investment in one or more of the underlying stocks, which may increase your investment risk. We are not affiliated with the We are not affiliated with any of the issuers of the underlying stocks and issuers of the stocks underlying the BTK have not investigated them. Index and have not performed any due diligence investigation or review of any of them. You should undertake an independent investigation of the issuers of the component stocks of the BTK Index and of the BTK Index itself to the extent required in your judgment to allow you to make an informed decision with respect to an investment in the Biotech BOXES. You should continue to monitor the composition of the stocks underlying the BTK Index and the performance of the issuers of those stocks during the period of time that you hold Biotech BOXES since the underlying stocks may change over time. We or our subsidiaries may now or in the future engage in business with one or more of the issuers of the underlying stocks, including extending loans to, or making equity investments in, any of them or their affiliates or providing underwriting or advisory services to them, including merger and acquisition advisory services. We or our affiliates may also acquire non-public information about one or more of these issuers. We have no ability to control or predict the actions of the issuers of the underlying stocks, including any corporate actions of the type that would require the American Stock Exchange to adjust the BTK Index. We or our affiliates from time to time have published and in the future may publish research reports with respect to the underlying stocks. The BTK Index was compiled independently of any research recommendations and may not be consistent with any such recommendations. The issuers of the underlying stocks are not involved in the offering of the Biotech BOXES in any way and have no obligation to consider your interest as an owner of the Biotech BOXES in taking any corporate actions that might affect the value of your Biotech BOXES. None of the money you pay for the Biotech BOXES will go to the issuers of the underlying stocks. Because the characterization of the There is currently no statutory, Biotech BOXES for federal income tax judicial or administrative authority purposes is uncertain, the material that directly addresses the federal income tax consequences of an characterization of the Biotech BOXES or investment in the Biotech BOXES are instruments similar to the Biotech BOXES uncertain. for U.S. federal income tax purposes. Pursuant to the terms of the Biotech BOXES, Morgan Stanley and you agree to treat the Biotech BOXES as contracts under which we deliver at maturity or upon exchange or redemption a cash amount determined by reference to a portfolio of stocks consisting of the underlying stocks in exchange for a fixed purchase price, as described in "Description of the Biotech BOXES--U.S. Federal Income Tax Consequences--Taxation of the Biotech BOXES." You will be required to characterize the Biotech BOXES for all tax purposes in this manner (absent an administrative determination or judicial ruling to the contrary) even if your tax advisor would otherwise adopt an alternative characterization. If the Internal Revenue Service were successful in asserting an alternative characterization for the Biotech BOXES, the timing and character of income on the Biotech BOXES may differ. We are not requesting a ruling from the IRS with respect to the Biotech BOXES, and we cannot assure you that the IRS will agree with the conclusions expressed under "Description of the Biotech BOXES--U.S. Federal Income Tax Consequences." Adjustments to the BTK Index could The American Stock Exchange is solely adversely affect the value of the responsible for calculating and Biotech BOXES. maintaining the BTK Index. You should not conclude that the inclusion of a stock in the BTK Index is an investment recommendation by us of that stock. The American Stock Exchange can, in its sole discretion, add, delete or substitute the stocks underlying the BTK Index or make other methodological changes required by certain corporate events relating to the underlying stocks, such as stock splits and dividends, spin-offs, rights issuances and mergers and acquisitions, that could change the value of the BTK Index. The American Stock Exchange will also rebalance the BTK Index on a quarterly basis. Any of these actions could adversely affect the value of the Biotech BOXES. The American Stock Exchange may discontinue or suspend calculation or publication of the BTK Index at any time. In these circumstances and upon receipt of notice from the American Stock Exchange, MS & Co., as the calculation agent, will have discretion to substitute a successor index that is substantially identical to the BTK Index. Although MS & Co. will be obligated to select a successor index without regard to its affiliation with us, MS & Co. could have an economic interest that is different than that of holders of the Biotech BOXES insofar as, for example, MS & Co. is not precluded from considering indices that are calculated and published by MS & Co. or another of its affiliates. If there is no appropriate successor index, the Biotech BOXES will be exchangeable until the maturity date for a cash amount based on the closing prices of the stocks underlying the BTK Index computed by the calculation agent in accordance with the methodology for calculating the BTK Index last in effect prior to discontinuance of the BTK Index. As a result of any adjustment to or discontinuance of the BTK Index, the Biotech BOXES may no longer reflect over time a diversified investment in the biotechnology industry. We will have the right to redeem the Biotech BOXES at any time that the calculation agent determines that there is no appropriate successor index, even if this occurs before March 22, 2009. The composition of the underlying As of the date of this pricing stocks may change over time. supplement, all of the underlying stocks have been issued by issuers that are reporting companies under the Exchange Act. However, as discussed in the second preceding paragraph, the composition of the securities underlying the BTK Index may change over time. There may be additions to the BTK Index of securities to which you may not want exposure, including securities representing an investment in non-U.S. issuers, or deletions of stocks to which you would want exposure. We have no control over the composition or calculation of the BTK Index, and you should not place undue reliance on the creditworthiness, business plans or prospects or other factors relating to any particular issuer of underlying stocks as of the date hereof. In addition, in the future the underlying stocks could include securities of non-U.S. issuers in the form of American Depositary Receipts or otherwise. Investments related to securities of non-U.S. issuers involve certain special risks, including risks associated with political and economic uncertainty, currency exchange rate fluctuations, possible lower levels of disclosure and regulation in non-U.S. securities markets than in the United States, foreign exchange controls and uncertainties as to the status, interpretation and application of laws. Non-U.S. companies also are not generally subject to uniform accounting, auditing and financial reporting standards, and auditing practices and requirements may not be comparable to those applicable to U.S. companies. Further, prices of securities traded in foreign securities markets, especially markets of emerging or developing countries, tend to be volatile. These risks may result in unfavorable market fluctuations in the value of shares of non-U.S. issuers underlying the BTK Index. The inclusion of securities of non-U.S. issuers in the underlying stocks could also adversely affect the base coupon amounts payable to holders of Biotech BOXES if cash amounts paid in respect of those securities are subject to withholding taxes or subject to reduction on account of foreign currency conversion fees or other similar amounts. In any such case, we will pay base coupon amounts based on the cash amounts in respect of those securities less withholding taxes that would be imposed on those cash amounts when paid to a U.S. portfolio investor in those securities and less any foreign currency conversion fees or other similar amounts that would be deducted from those cash amounts when paid to a U.S. portfolio investor in those securities. Any cash amounts paid in respect of securities of non-U.S. issuers will likely be in foreign currency, in which case exchange rate fluctuations may also negatively affect the base coupon amounts payable to holders of Biotech BOXES. Because the primary trading market for the securities of non-U.S. issuers may not be U.S. stock exchanges, the trading volume of those securities may become limited. Low trading volume or lack of liquidity for those securities may adversely affect their market prices and the market prices of the Biotech BOXES. Our hedging activity could adversely On or prior to the date of this pricing affect the value of the Biotech BOXES supplement, we, through our subsidiaries and the underlying stocks. or others, may hedge our anticipated exposure in connection with the Biotech BOXES by taking positions in the underlying stocks or in other instruments whose value is derived from the underlying stocks. If we pursue a hedging strategy, the price at which we are able to purchase such positions may be a factor in determining the issue price of the Biotech BOXES. Through our subsidiaries, we may adjust any hedge position throughout the life of the Biotech BOXES by purchasing and selling the underlying stocks and other instruments, including in connection with an adjustment to or rebalancing of the BTK Index. This hedging activity may adversely affect the value of the underlying stocks and, accordingly, the value of the Biotech BOXES. The Biotech BOXES may not be actively There may be little or no secondary traded. market for the Biotech BOXES even though they have been approved for listing on the American Stock Exchange and the Philadelphia Stock Exchange. If there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Biotech BOXES easily. MS & Co. currently intends to act as market maker for the Biotech BOXES but is not required to do so. In addition, MS & Co. will be required to cease its market making activities during the business day prior to any subsequent issuance of the Biotech BOXES. Supplemental coupon payments are The annual supplemental coupon payable capped. on each Biotech BOXES will initially accrue at an annual rate of 0.05% of the lesser of one thirtieth of the closing value of the BTK Index on the date of this pricing supplement and one thirtieth of the average closing value of the BTK Index during the preceding annual calculation period and will accrue on the basis of a 360-day year consisting of twelve 30-day months. This means that the annual supplemental coupon per each Biotech BOXES can never exceed 0.05% of one thirtieth of the closing value of the BTK Index on the date of this pricing supplement. There are restrictions on the minimum Except for exchanges during the number of Biotech BOXES you may continuance of a credit exchange event, exchange. you must exchange at least 30,000 Biotech BOXES at any one time in order to exercise your right to exchange your Biotech BOXES for a cash amount. If the minimum requirement applies, then as a practical matter only institutions or large investors may be able to exercise their exchange right. Risk factors specific to companies involved in the biotechnology industry Biotechnology company stock prices The trading prices of biotechnology are volatile, which will directly companies' common stocks have been and affect the price volatility of the are likely to continue to be volatile. A Biotech BOXES. biotechnology company's stock price will fluctuate, and could fluctuate significantly, in response to various factors and events, including the following: o differences between actual financial or operating results and those expected by investors and analysts; o announcements of technological innovations or new services by the company or its competitors; o changes in patent or proprietary rights; o announcements by the company or its competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; o failure to integrate or realize projected benefits from acquisitions; o changes in government regulations; and o fluctuations in financial or operating results. Overall stock market fluctuations, as well as general political and economic conditions, may also affect a biotechnology company's stock prices. Some biotechnology companies have a Some biotechnology companies, including history of net losses and may never some of the issuers of the underlying become profitable. stocks of the Biotech BOXES, have a history of net losses, expect to incur substantial net losses in the future and may never become profitable. Net losses result principally from costs incurred in research and development, including clinical trials, and from selling, general and administrative costs associated with their operations. While all biotechnology companies strive to achieve profitability, there can be no assurance that they will do so. The efforts of government entities Biotechnology companies will continue to and third party payors to contain be affected by the efforts of health care costs may adversely governments and third party payors, such affect biotechnology companies. as government health administration organizations, private health insurers, managed care providers and health maintenance organizations, to contain or reduce health care costs by limiting coverage and the level of reimbursement for a biotechnology company's products. In the United States and some foreign countries, there have been, and there will likely to continue to be, proposals to limit the price and profitability of biotechnology products. The announcement or adoption of such proposals could have a material adverse affect on a biotechnology company's business and financial condition. An increasing emphasis on managed health care in the United States also puts pressure on the prices of the products and technologies of biotechnology companies Sales of the products of biotechnology companies often depend, in part, on the availability and amount of reimbursement consumers receive from third party payors. Third party payors increasingly challenge the prices and cost-effectiveness of health care products and technologies and deny or limit coverage for new products, which has resulted in lower average sales prices for some biotechnology companies. As a result of these actions by third party payors, there is substantial uncertainty as to the reimbursement status of many biotechnology companies' products. Biotechnology companies are subject Products and technologies produced and to extensive and costly government sold by biotechnology companies are regulation. subject to extensive regulation by the Food and Drug Administration in the United States and comparable agencies in other countries. Products typically require extensive laboratory and clinical testing and government review and approval before they can be marketed. This process can take many years and may require the expenditure of substantial resources. The success of a biotechnology company's products depends, in part, upon obtaining and maintaining regulatory approval to market products and complying with continued review by regulatory agencies. The failure to obtain required government approvals, the modification, suspension or loss of previously obtained approvals or the failure to comply with regulatory requirements can result in fines, unanticipated expenditures, product delays, product seizures, non-approval or recall, interruption of production and even criminal prosecution. Many biotechnology companies rely on Because the materials used in their a limited number of suppliers for the products are not widely available, many materials used in their products. biotechnology companies must rely on a limited number of suppliers. Many of these suppliers are subject to review and approval by the Food and Drug Administration and/or other regulatory agencies. The interruption of materials from these suppliers due to technical, regulatory or other problems could prevent a biotechnology company from meeting demand for its product and could adversely affect its results of operations and financial condition. Many biotechnology companies have Many biotechnology companies have limited manufacturing capabilities limited manufacturing experience and no and must depend on third party commercial scale manufacturing manufacturers. capabilities. In order to continue to develop and market their products, these companies often rely on unaffiliated third parties to produce materials they use in pre-clinical and clinical testing and commercial production. There are a limited number of manufacturers capable of producing materials under standards that comply with Food and Drug Administration requirements in the United States and requirements of comparable agencies in other countries. As a result, it can be difficult for a biotechnology company to quickly and efficiently find a new manufacturer if its existing manufacturer is unable or unwilling to continue production. If a biotechnology company without internal manufacturing capabilities is unable to arrange for third party manufacturing on commercially reasonable terms or if third party manufacturers fail to perform their obligations, its results of operations and financial condition could be adversely affected. Many biotechnology companies have Many biotechnology companies have limited sales, marketing and limited sales, marketing and distribution experience and distribution experience and capabilities capabilities. and must rely on third parties to carry out these activities. The terms of the sales, marketing and distribution agreements with these third parties may not be favorable to the biotechnology company and may give it little or no control over the activities of the third parties. The efforts and success of these third parties may significantly determine the amount and timing of revenues with respect to a particular product. Biotechnology companies operate in The biotechnology industry is a dynamic industry characterized by characterized by rapid product rapid product obsolescence. obsolescence. To compete successfully in this environment, biotechnology companies must adapt to rapidly changing technologies and must quickly develop products that are clinically-effective and cost-effective, or incur the risk that their competitors will introduce the same or similar products, or products which could make their products obsolete. Many of these activities require extensive product research and development, which can be costly and time-consuming. Because research and development expenses are often made before it is known whether a product will be commercially viable, there can be no assurance that the revenues, if any, generated by a product will recover its costs of development. Many products that appear promising may not be introduced for many reasons, including: o results indicating lack of effectiveness or harmful side effects in laboratory testing or clinical trials; o failure to receive necessary regulatory approvals; o inability to develop manufacturing methods that are cost-effective and meet regulatory standards; and o competing proprietary rights. Many biotechnology companies may not be able to successfully introduce new products or achieve market acceptance from the medical community, third party payors or individual users. Failure to do so could have a material adverse effect on their business, results of operations and financial condition. Biotechnology companies may be unable Many biotechnology companies rely on to protect their intellectual property patents and other intellectual property rights or may be the subject of rights to establish and protect intellectual property infringement proprietary rights in their current and claims. future products and technologies. The validity and scope of patents in the biotechnology industry is uncertain and involves complex legal and factual questions and issued patents may be revoked or modified by the relevant patent authorities or courts. Patent disputes are frequent in the biotechnology industry and often result in litigation that is time-consuming and expensive and that may subject a biotechnology company to significant liabilities to third parties. These claims, whether meritorious or not, can also: o preclude or delay the successful introduction of new products and technologies; o force a biotechnology company to enter into an undesirable royalty or licensing arrangement; or o force a biotechnology company to cease production and marketing of its products. Many biotechnology companies also rely on trade secrets and proprietary know-how that they seek to protect through confidentiality agreements with their employees, consultants and partners. There can be no assurance that such parties will abide by these agreements or that courts will enforce them. Biotechnology companies may incur Biotechnology companies are exposed to significant product liability potential product liability risks by the expenses. testing, manufacturing, marketing and sale of many of their products and technologies. Product liability claims may be made by consumers, healthcare providers, pharmaceutical companies or others. Many biotechnology companies obtain only limited product liability insurance and there can be no assurance that a biotechnology company will be able to maintain its product liability insurance, that it will continue to be able to obtain adequate product liability insurance on reasonable terms or that any product liability insurance obtained will provide adequate coverage against potential liabilities. Biotechnology companies may be The research and development activities required to pay damages for of biotechnology companies often involve environmental accidents and may incur the use of hazardous, infectious and substantial costs to comply with radioactive materials that could be environmental laws. harmful to human health or safety or to the environment. Biotechnology companies are subject to extensive federal, state and local laws and regulation governing the use, generation, storage, handling and manufacture of these materials and may incur substantial costs to comply with existing and future laws and regulations. Although biotechnology companies maintain safety procedures with respect to these materials, they may be liable for any damages that result from an accident and those damages may exceed a company's resources. Biotechnology companies face Biotechnology companies may experience challenges gaining governmental and difficulties in launching new products, consumer acceptance of their products. many of which are novel products based on technologies that are unfamiliar to the healthcare community. There can be no assurance that healthcare providers and patients will accept these products. In addition, government agencies and private organizations involved in healthcare publish guidelines and recommendations to healthcare providers and patients. These guidelines and recommendations are very influential and may adversely affect the usage of a biotechnology company's products. Biotechnology companies may be involved in the development of genetically engineered agricultural and food products. The commercial success of these products will depend, in part, on governmental and public acceptance of their cultivation, distribution and consumption. Public attitudes may be influenced by the media and by opponents who claim that genetically engineered products are unsafe for consumption and pose unknown health risks as well as risks to the environment or to social or economic practices. Biotechnology companies may continue to have to expend significant resources to foster governmental and consumer acceptance of genetically engineered agricultural and food products, particularly in Europe where securing governmental approvals for, and achieving consumer confidence in, these products continues to pose numerous challenges. The success of any genetically engineered agricultural and food products may be delayed or impaired in certain geographical areas due to the existing or future regulatory, legislative or public acceptance issues. Some of the issuers of the underlying stocks may now or in the future be involved in the development of genetically engineered agricultural and food products. Many biotechnology companies are The success of many biotechnology dependent on their ability to attract companies is highly dependent on the and retain highly-skilled personnel. experience, abilities and continued services of key executive officers, scientific personnel and other skilled personnel. Because competition for qualified personnel is intense, there is no certainty that biotechnology companies will be able to continue to attract and retain qualified personnel. If these companies were unable to attract and retain additional key personnel, or if they were unable to retain and motivate their existing key personnel, their business, financial condition and results of operations could be adversely affected. DESCRIPTION OF THE BIOTECH BOXES Terms not defined in this pricing supplement have the meanings given to them in the accompanying prospectus supplement. The term "Biotech BOXES" refers to each of our Basket Opportunity eXchangeablE Securities due January 30, 2032 based on the BTK Index. In this pricing supplement, the terms "Morgan Stanley," "we," "us" and "our" refer to Morgan Stanley Dean Witter & Co. Maturity Date........................... January 30, 2032 Issue Price............................. $18.1623 per Biotech BOXES. The Issue Price is calculated as the sum of one thirtieth of the aggregate closing prices of the Underlying Stocks (as defined below) as of the date of this pricing supplement at their respective Exchange Ratios (as defined below), plus the maximum agent's commissions. Investors purchasing 3,000 or more Biotech BOXES in any single transaction will be subject to a reduced commission. See "Supplemental Information Concerning Plan of Distribution" below. Agent's Commissions..................... $.34 per Biotech BOXES. The maximum agent's commissions are equal to 1.9% of one thirtieth of the aggregate closing prices of the Underlying Stocks on March 19, 2002, at their respective Exchange Ratios. Investors purchasing 3,000 or more Biotech BOXES in any single transaction will be subject to a reduced commission. See "Supplemental Information Concerning Plan of Distribution" below. Trading Day............................. A day on which securities are traded on each of the principal U.S. securities exchanges or trading systems on which the stocks underlying the BTK Index are then listed or quoted. Exchange Notice Date.................... Beginning April 22, 2002, any Trading Day on which a holder delivers an Official Notice of Exchange to us (which must be acknowledged by us) before 12:00 p.m. (New York City time), except that no Exchange Notice Date may occur on or after six Trading Days prior to the Maturity Date or any Early Redemption Date (as defined below under "--Issuer Redemption Right"). Exchange Date........................... The date on which the exercise of a holder's exchange right is settled. The Exchange Date is scheduled to be the regular way settlement date for securities transactions occurring on the Exchange Notice Date (as defined below), but it may be later than that date if: (i) you fail timely to deliver your Biotech BOXES to the Trustee or to fulfill the conditions of your exchange in accordance with "--Exchange Right" below; or (ii) in certain circumstances, a Market Disruption Event (as defined below) has occurred. See "--Determination Date" and "--Exchange Right" below. Cash Settlement Value Payable at Maturity or upon Exchange or Issuer Redemption....................... Each Biotech BOXES is exchangeable on the Maturity Date, an Early Redemption Date or any Exchange Date, as applicable, for an amount of cash equal to the sum of the Exchange Values (as defined below) of each of the Underlying Stocks, determined on the appropriate Determination Date (as defined below). Determination Date...................... For purposes of calculating the Cash Settlement Value payable on the Maturity Date, the Exchange Value for an Underlying Stock will be calculated on the sixth Trading Day immediately prior to the Maturity Date, unless there is a Market Disruption Event with respect to that Underlying Stock on that date. For purposes of calculating the Cash Settlement Value payable on any Early Redemption Date, the Exchange Value for an Underlying Stock will be calculated on the sixth Trading Day immediately prior to the Early Redemption Date, unless there is a Market Disruption Event with respect to that Underlying Stock on that date. For purposes of calculating the Cash Settlement Value payable on any Exchange Date, the Exchange Value for an Underlying Stock will be calculated on the Exchange Notice Date, unless there is a Market Disruption Event with respect to that Underlying Stock on that date. If a Market Disruption Event occurs with respect to an Underlying Stock on the day its Exchange Value is scheduled to be calculated for purposes of determining the Cash Settlement Value payable, the Determination Date will be the immediately succeeding Trading Day on which no Market Disruption Event has occurred with respect to that Underlying Stock. The Determination Date for any Underlying Stock, however, will be no later than (i) the second Trading Day preceding the Maturity Date; (ii) the second Trading Day preceding the Early Redemption Date; or (iii) the third Trading Day following an Exchange Notice Date, as the case may be. If a Market Disruption Event occurs on the date specified in clause (i), (ii) or (iii) of the preceding sentence with respect to any Underlying Stock for which the Exchange Value has not previously been determined, then the Exchange Value of that Underlying Stock will be calculated on that date using the Market Price determined by the Calculation Agent as described below under "--Market Price." Original Issue Date (Settlement Date)... March 22, 2002 Senior or Subordinated Note............. Senior CUSIP................................... 61744Y413 Minimum Denominations................... 100 Biotech BOXES and multiples of 100. Underlying Stocks....................... The securities included in the BTK Index from time to time. Interest Rate........................... We will pay interest on the Biotech BOXES as follows: o Base Coupons. We will pay a base coupon quarterly on each Interest Payment Date (as defined below under "--Interest Payment Dates"). The quarterly base coupon per Biotech BOXES will equal the sum of (i) each cash dividend or cash distribution other than dividends or distributions described in clause (ii) below, if any, on any Underlying Stock at its respective Exchange Ratio and for which the "ex-dividend" date (that is, the date on which transactions in the Underlying Stock on an organized securities exchange or trading system no longer carry the right to receive that dividend or distribution) has occurred during the related quarterly calculation period; and (ii) each extraordinary dividend, if any, paid on any Underlying Stock, at its respective Exchange Ratio, during such quarterly calculation period; provided that the base coupon will not include any dividends or distributions referred to in clause (i) or (ii) above whose value the American Stock Exchange incorporates into the BTK Index. Except as otherwise provided in the fourth paragraph of this section, cash dividends or other cash distributions on an Underlying Stock will be considered to have accrued for purposes of calculating base coupon amounts as of the "ex-dividend" date (in the case of cash dividends and distributions referred to in clause (i) above) or the date the dividend or distribution is paid (in the case of dividends and distributions referred to in clause (ii) above). The commencement dates for the quarterly calculation periods for base coupons will be the 30th day of January, April, July and October. Base coupon amounts will be calculated from and including one commencement date to, but excluding, the next commencement date, provided that the initial quarterly calculation period will commence on, and include, the Original Issue Date and the final quarterly calculation period will extend to, but exclude, either the fifteenth day prior to the Maturity Date or the sixth Trading Day prior to the Early Redemption Date, as applicable. The Interest Payment Date related to each quarterly calculation period will be either the Interest Payment Date that is two months following the last day of the applicable calculation period or, with respect to the final quarterly calculation period, the Maturity Date or the Early Redemption Date, as applicable. The Calculation Agent will notify the Trustee of base coupon amounts on or before the second Trading Day immediately following the last day of the applicable calculation period, and base coupon amounts will be paid to holders of record on the fifteenth day of the month following the applicable calculation period or, in the case of base coupon amounts payable at maturity or upon our redemption, holders of record on the Maturity Date or the Early Redemption Date, as applicable. An "extraordinary dividend" means (a) the full amount per share of any cash dividend or other cash distribution that is identified as an extraordinary or special dividend or distribution by the issuer of the relevant Underlying Stock, including, regardless of whether identified by the issuer as extraordinary or special, any cash dividends or cash amounts paid on an Underlying Stock as a result of a merger, reorganization or other corporate event involving an issuer of the Underlying Stock; (b) any cash dividend or other cash distribution with respect to an Underlying Stock that exceeds the immediately preceding non-extraordinary cash dividend for that Underlying Stock by an amount equal to at least 1% of the closing price of that Underlying Stock on the Trading Day preceding the "ex-dividend" date for the payment of such cash dividend or other cash distribution; or (c) the cash value of any non-cash dividend or distribution on an Underlying Stock. The cash value of a non-cash dividend or distribution (or any portion of a non-cash dividend or distribution) that is paid in Marketable Securities will be an amount equal to the Market Price of those Marketable Securities on the Trading Day immediately following the day on which the non-cash distribution is paid times the number of shares or notes of those Marketable Securities paid per units of the relevant Underlying Stock. The cash value of a non-cash dividend or distribution (or any portion of a non-cash dividend or distribution) that is not paid in Marketable Securities will be an amount equal to the market value of that non-cash dividend or distribution per share of the relevant Underlying Stock on the date on which that dividend or distribution is paid, as determined by a nationally recognized independent investment bank the Calculation Agent retains for that purpose, whose determination will be final. "Marketable Securities" are any perpetual equity securities that are listed on a U.S. national securities exchange or reported by the Nasdaq National Market. Although you will be entitled to receive base coupon amounts equal to the dividends and distributions paid on the Underlying Stocks, as of the date of this pricing supplement none of the issuers of the Underlying Stocks has paid a cash dividend on those stocks. If the issuers of the Underlying Stocks do not pay cash dividends in the future, the base coupon amounts you receive in respect of the Biotech BOXES will be limited to the cash value of the non-cash dividends or distributions paid on the Underlying Stocks, as described above. Base coupon amounts will accrue on the Biotech BOXES with respect to an Underlying Stock only if the Underlying Stock was included in the BTK Index on or prior to the record date for the related dividend or other payment on the Underlying Stock. This means, for example, that base coupon amounts will not include an ordinary cash dividend paid on an Underlying Stock that was added to the BTK Index during the quarterly calculation period to the extent the "ex-dividend" date for that cash dividend occurred on or prior to the date the Underlying Stock was added to the BTK Index. On the other hand, for example, if an Underlying Stock is removed from the BTK Index on or after the "ex-dividend" date for an ordinary cash dividend, you will be entitled to receive that cash dividend on the Interest Payment Date following the quarterly calculation period in which such "ex-dividend" date occurs. Base coupon amounts payable in respect of each Biotech BOXES will be calculated on the basis of the dividends paid in respect of each share of Underlying Stock represented by that Biotech BOXES, based on the applicable Exchange Ratios on the "ex-dividend" date for that dividend. You will not receive any non-cash dividends or distributions on any Underlying Stock. o Annual supplemental coupons. On the Interest Payment Date occurring in December of each year, we will also pay an annual supplemental coupon on each Biotech BOXES, which will accrue at an annual rate of 0.05% of the lesser of one thirtieth of the Closing Value (as defined below) of the BTK Index on the date of this pricing supplement and one thirtieth of the average closing value of the BTK Index during the preceding annual calculation period. This means that the annual supplemental coupon per each Biotech BOXES can never exceed 0.05% of one thirtieth of the Closing Value of the BTK Index on the date of this pricing supplement. For purposes of calculating the annual supplemental coupon, the average closing value of the BTK Index during the preceding annual calculation period will equal the sum of the Closing Values of the BTK Index on each Trading Day in that calculation period divided by the number of Trading Days in that calculation period. The fraction used in calculating supplemental coupon amounts is subject to adjustment in certain circumstances as described below under "--Adjustments to the Biotech BOXES." Each annual calculation period will begin on, and include, the 30th day of each October and extend to, but exclude, the 30th day of the following October except that the first calculation period will begin on, and include, the Original Issue Date and the last calculation period will extend to, but exclude, the fifteenth day prior to the Maturity Date. The Calculation Agent will notify the Trustee of supplemental coupon amounts on or before the second Trading Day immediately following the last day of the applicable calculation period and annual supplemental coupons will be paid to either holders of record as of the fifteenth day of November following the relevant annual calculation period or, in the case of the annual supplemental coupon payable at maturity, holders of record on the maturity date. Annual supplemental coupons will accrue on the basis of a 360-day year consisting of twelve 30-day months. Accrued but unpaid base coupon amounts are payable by us upon your exercise of your exchange right, upon any redemption by us of Biotech BOXES and at maturity of the Biotech BOXES. The base coupon amounts you will receive upon exchange will be calculated up to, and including, the Exchange Notice Date or up to but excluding the sixth Trading Day prior to the Early Redemption Date (as defined below under "--Issuer Redemption Right") or the fifteenth day prior to the Maturity Date, as the case may be. Accrued but unpaid supplemental coupon amounts will be payable by us on the Maturity Date but not upon your exercise of your exchange right or upon an early redemption by us of the Biotech BOXES. Accrued but unpaid supplemental coupon amounts paid on the Maturity Date will accrue through the Trading Day immediately prior to the Maturity Date. Interest Payment Dates.................. The 30th day of each March, June, September and December, commencing on June 30, 2002 in respect of base coupons and December 30, 2002 in respect of annual supplemental coupons, including the Maturity Date, or if any such day is not a Business Day (as defined below) in New York City, the immediately following Business Day. In the event that the payment is made on the immediately following Business Day, no interest on the payment will accrue for the period from and after the Interest Payment Date or the Maturity Date (or any redemption or repayment date) to that immediately following Business Day. Interest will be paid to the persons in whose name the Biotech BOXES are registered at the close of business on the applicable record date, which will be either the fifteenth day of the month following the applicable calculation period or, in the case of base and supplemental coupon amounts payable at maturity, the Maturity Date, whether or not that day is a Business Day. In addition, Interest Payment Dates are subject to adjustment in certain circumstances relating to the early redemption of the BOXES. See "--Issuer Redemption Right" below. Early Redemption Notice Date............ The date, if any, on which we exercise our redemption right with respect to the Biotech BOXES, as described under "--Issuer Redemption Right" and "--Discontinuance of the BTK Index; Successor Index; Issuer Redemption Right" below. Business Day............................ Any day except Saturday, Sunday and any day that is in New York City a legal holiday or a day on which banking institutions or securities exchanges are authorized or required by law or other governmental action to close. Closing Value........................... The closing value of the BTK Index, as reported by the American Stock Exchange on a specified date. Exchange Right.......................... Beginning April 22, 2002, you may, subject to the Minimum Exchange Amount (as defined below), exchange your Biotech BOXES for your Cash Settlement Value, plus accrued but unpaid base coupon amounts up to, and including, the Exchange Notice Date, by instructing your broker or other person through whom you hold your Biotech BOXES to take the following steps through normal clearing system channels: o fill out an Official Notice of Exchange, which is attached as Annex A to this pricing supplement; o deliver your Official Notice of Exchange to us (which must be acknowledged by us) before 12:00 p.m. (New York City time) on any Trading Day; and o transfer your book-entry interest in the Biotech BOXES to the Trustee on our behalf at or prior to 10:00 a.m. (New York City time) on the Exchange Date. If we receive your Official Notice of Exchange after 12:00 p.m. (New York City time) on any Trading Day or on any day that is not a Trading Day, that notice will not be effective, and you will need to submit a new notice in order to exercise your exchange right on any future Trading Day. Subject to your proper instruction of the DTC participant through whom you hold your Biotech BOXES (as described below), we will deliver your Cash Settlement Value, plus accrued but unpaid base coupon amounts, to the Trustee for payment to you for regular way settlement (currently three Trading Days), unless there is a Market Disruption Event (as described below) with respect to one or more of the Underlying Stocks on the Exchange Notice Date (and, so long as the regular way settlement date is three Trading Days, a Market Disruption Event occurs, or is continuing with respect to such Underlying Stock(s) on the Trading Day following the Exchange Notice Date). If there is a Market Disruption Event, settlement will occur on the later of (i) the regular way settlement date; and (ii) the second Trading Day after the last Determination Date on which MS & Co. determines the Cash Settlement Value of your tendered Biotech BOXES, as described under "--Determination Date" above. In no event will settlement occur later than the fifth Trading Day following the Exchange Notice Date. We may request that MS & Co. purchase the Biotech BOXES you tender in consideration of the Cash Settlement Value that would otherwise have been payable by us, plus accrued but unpaid base coupon amounts. MS & Co.'s agreement to purchase the tendered Biotech BOXES will be without prejudice to your right to proceed against us upon any failure by MS & Co. to settle the purchase when due. Any Biotech BOXES purchased by MS & Co. will remain outstanding. Since the Biotech BOXES will be held only in book-entry form, only DTC may exercise the exchange right with respect to the Biotech BOXES. Accordingly, beneficial owners of Biotech BOXES that desire to have all or any portion of their Biotech BOXES exchanged must instruct the participant through which they own their interest to direct DTC to exercise the exchange right on their behalf by forwarding the Official Notice of Exchange to us as discussed above. In order to ensure that the instructions are received by us on a particular day, the applicable beneficial owner must so instruct the participant through which it owns its interest before that participant's deadline for accepting instructions from their customers. Different firms may have different deadlines for accepting instructions from their customers. Accordingly, beneficial owners of Biotech BOXES should consult the participants through which they own their interest for the respective deadlines. All instructions given to participants from beneficial owners of Biotech BOXES relating to the right to exchange their Biotech BOXES will be irrevocable. In addition, at the time instructions are given, each beneficial owner must direct the participant through which it owns its interest to transfer its book-entry interest in the related Biotech BOXES, on DTC's records, to the Trustee on our behalf. See "Forms of Securities--Global Securities" in the accompanying prospectus. If the Exchange Date for the exchange of your Biotech BOXES is after the conclusion of a quarterly calculation period and prior to the "ex-interest" date for the Interest Payment Date relating to that quarterly calculation period, on the Exchange Date you will be entitled to base coupon amounts that have accrued from and including the commencement date of that quarterly calculation period to and including the applicable Exchange Notice Date. The "ex-interest" date for any Interest Payment Date is the date on which purchase transactions in the Biotech BOXES no longer carry the right to receive the interest payable on that Interest Payment Date. If the Exchange Date for the exchange of your Biotech BOXES is on or after the "ex-interest" date for an Interest Payment Date and prior to that Interest Payment Date, on the Exchange Date you will only be entitled to your Cash Settlement Value plus any base coupon amounts that have accrued from but excluding the last day of the quarterly calculation period relating to that Interest Payment Date to and including the Exchange Notice Date. Minimum Exchange Amount................. In order to exercise your exchange right, you must exchange at least 30,000 Biotech BOXES, or multiples of 100 in excess of 30,000. The Minimum Exchange Amount will not apply so long as a Credit Exchange Event (as defined below under "--Credit Exchange Event") has occurred and is continuing. Issuer Redemption Right................. Beginning on March 22, 2009 (or earlier if the BTK Index is discontinued or suspended and there is no appropriate successor index), upon at least 30 but not more than 60 days' notice to holders of Biotech BOXES, we may redeem the Biotech BOXES for mandatory exchange in whole, but not in part. If we redeem the Biotech BOXES, we will pay to you on the date fixed by us in our redemption notice for settlement of the redemption (the "Early Redemption Date"), your Cash Settlement Value, as described under "--Cash Settlement Value Payable at Maturity or upon Exchange or Issuer Redemption" above, plus accrued but unpaid base coupon amounts, as described under "--Interest Rate" above, upon delivery of your Biotech BOXES to the Trustee. You will continue to be entitled to exercise your exchange right as described under "--Exchange Right" above on or after the Early Redemption Notice Date up to but excluding the sixth Trading Day immediately preceding the Early Redemption Date. If the Early Redemption Notice Date is after the conclusion of a quarterly calculation period but prior to the "ex-interest" date for the Interest Payment Date relating to that quarterly calculation period, that Interest Payment Date and the related Record Date will be suspended and on the Early Redemption Date holders of the BOXES on that Early Redemption Date will be entitled to their Cash Settlement Value plus any base coupon amounts that have accrued from and including the commencement date of that quarterly calculation period to but excluding the sixth Trading Day prior to the Early Redemption Date. If the Early Redemption Notice Date is after the conclusion of a quarterly calculation period and on or after the "ex-interest" date for the Interest Payment Date relating to that quarterly calculation period, we will pay on the Early Redemption Date to the holders of the BOXES on the Early Redemption Date any base coupon amounts that have accrued from but excluding the last day of the quarterly calculation period relating to that Interest Payment Date to but excluding the sixth Trading Day prior to the Early Redemption Date, and we will pay to holders of the BOXES on the Record Date relating to that Interest Payment Date base coupon amounts accruing during the quarterly calculation period relating to that Interest Payment Date either: (i) on that Interest Payment Date, if that Interest Payment Date is prior to the Early Redemption Date, or (ii) on the Early Redemption Date, if that Interest Payment Date is on or after the Early Redemption Date. Exchange Ratios......................... The Exchange Ratios for each Underlying Stock initially will be calculated by multiplying (a) the number of shares of that Underlying Stock, after appropriate adjustments (including those relating to the Divisor (as defined below under "--The BTK Index")), used by the American Stock Exchange in calculating the BTK Index by (b) one thirtieth. The Calculation Agent will adjust the Exchange Ratios for the Underlying Stocks following each quarterly rebalancing of the BTK Index by the American Stock Exchange (as described below under "--The BTK Index"). The Calculation Agent will also adjust an Exchange Ratio (x) if the American Stock Exchange adjusts the composition of the BTK Index, the Divisor or the number of shares of the Underlying Stock used in calculating the BTK Index between quarterly rebalancings; (y) in accordance with the third and fifth paragraphs of the section captioned "--Discontinuance of the BTK Index; Successor Index; Issuer Redemption Right"; and (z) in accordance with the section captioned "--Adjustments to the Biotech BOXES." No such adjustment will be made, however, if the Calculation Agent determines that such change by the American Stock Exchange contains or is the result of a manifest error. In such case, any exchange will be made at the Exchange Ratio then in effect without regard to such manifest error. Exchange Value.......................... The Exchange Value for each Underlying Stock will be calculated by multiplying (a) the Underlying Stock's Exchange Ratio by (b) the Underlying Stock's Market Price on the applicable Determination Date. Composition of BTK Index................ The following table lists, as of the date of this pricing supplement, the Underlying Stocks, the principal exchange or trading system on which each Underlying Stock is listed or quoted, the ticker symbol of each Underlying Stock, the percentage of the value of the BTK Index represented by each Underlying Stock and the Exchange Ratio of each Underlying Stock per one Biotech BOXES. Principal Percent Exchange Issuer Exchange Ticker of Value Ratio Affymetrix, Inc. Nasdaq AFFX 4.819% 0.028725 Amgen Inc. Nasdaq AMGN 6.514% 0.018631 Appelera Corp-Celera NYSE CRA 5.462% 0.042509 Genomics Group. Biogen, Inc. Nasdaq BGEN 5.528% 0.018987 Cephalon, Inc. Nasdaq CEPH 5.789% 0.015207 Chiron Corporation Nasdaq CHIR 6.515% 0.024056 Genentech Inc. NYSE DNA 6.291% 0.021255 Genzyme Corporation Nasdaq GENZ 5.826% 0.020543 Gilead Sciences Inc. Nasdaq GILD 6.673% 0.030859 Human Genome Sciences, Inc. Nasdaq HGSI 5.272% 0.037751 IDEC Pharmaceuticals Nasdaq IDPH 6.599% 0.016719 Corporation Immunex Corporation Nasdaq IMNX 6.550% 0.037618 Invitrogen Corp. Nasdaq IVGN 3.940% 0.018275 MedImmune Inc. Nasdaq MEDI 5.689% 0.023567 Millennium Nasdaq MLNM 7.020% 0.049668 Pharmaceuticals, Inc. Protein Design Labs, Inc. Nasdaq PDLI 3.875% 0.043132 Vertex Pharmaceuticals Inc. Nasdaq VRTX 7.640% 0.048423 The BTK Index was approved for options trading by the SEC on September 28, 1992 with 15 component stocks. The composition of the BTK Index has changed significantly since then. The composition of the stocks underlying the BTK Index is likely to change over time, and the Cash Settlement Value you receive upon exchange of your Biotech BOXES or upon a redemption by us or at maturity of the Biotech BOXES may be based on different stocks than the stocks underlying the BTK Index as of the date of this pricing supplement. The BTK Index........................... We have derived all information regarding the BTK Index contained in this pricing supplement, including its composition, method of calculation and changes in its components, from publicly available sources and other sources we believe to be reliable. Such information reflects the policies of, and is subject to change by, the American Stock Exchange. The American Stock Exchange has no obligation to continue to publish, and may discontinue or suspend publication of, the BTK Index at any time. A list of the issuers of the Underlying Stocks of the BTK Index at any time is available from the American Stock Exchange. The American Stock Exchange's address is 86 Trinity Place, New York, NY 10006, and its telephone number is (212) 306-1000. The BTK Index is a stock index calculated and published by the American Stock Exchange that measures the composite price performance of selected stocks of U.S. companies whose primary business involves the use of biological processes such as recombinant DNA technology, molecular biology and genetic engineering to develop products or to provide services. The American Stock Exchange first calculated the BTK Index in 1991. The BTK Index currently is based on 17 highly capitalized and widely held underlying common stocks trading as National Market securities through the facilities of The Nasdaq National Market or on the New York Stock Exchange, Inc. (the "NYSE") and representing a limited cross-section of biotechnology industry issuers. The BTK Index is an equal-dollar weighted index (i.e., each Underlying Stock is represented in approximately equal dollar amounts in the index). The value of the BTK Index was initially calculated by (i) determining the number of shares (to the nearest whole share) that would represent an investment of $10,000 in each Underlying Stock at their closing prices on October 18, 1991; (ii) multiplying the resulting number of shares for each Underlying Stock by the closing price for that Underlying Stock on October 18, 1991; (iii) calculating the sum of all those products; and (iv) dividing such sum by a divisor (the "Divisor") which established a base value for the index. The Divisor was initially set to yield a benchmark value for the BTK Index of 200.00 as of the close of trading on October 18, 1991. The Divisor was 749.64144 as of March 19, 2002. The value of the BTK Index at any time equals the aggregate market value (based on U.S. primary market prices) of the assigned number of shares of each Underlying Stock divided by the Divisor. Each quarter, following the close of trading on the third Friday of January, April, July and October the American Stock Exchange adjusts the number of shares of each Underlying Stock so that the number of shares of each Underlying Stock again represents an equal dollar amount. If necessary, the American Stock Exchange adjusts the Divisor to ensure continuity of the BTK Index's value. The adjusted portfolio becomes the basis for the index's value on the first Trading Day following the quarterly adjustment. The number of shares of each Underlying Stock remains fixed between quarterly adjustments except in the event of certain types of corporate actions, such as the payment of a dividend (other than an ordinary cash dividend), stock distributions, stock splits, reverse stock splits, rights offerings, or a distribution, reorganization, recapitalization, or similar events with respect to an Underlying Stock. The number of shares of an Underlying Stock is also adjusted in the event of a merger, consolidation, dissolution or liquidation of with respect to the issuer of that stock. When such adjustments occur between quarterly adjustments, the number of shares of the relevant Underlying Stock is adjusted, to the nearest whole share, to maintain that stock's relative weight in the Index at the level immediately prior to the event giving rise to the adjustment. In the event an Underlying Stock is replaced, the average dollar value of the remaining Underlying Stocks is calculated and that amount is invested in the new Underlying Stock to the nearest whole share. In both cases, the Divisor will be adjusted, if necessary, to ensure the continuity of the Index's value. The level of the BTK Index is calculated continuously and disseminated on a real-time basis to market information vendors via the Options Price Reporting Authority during the trading day. The BTK Index values are also available on broker-dealer terminals and quotation systems. In accordance with Rule 901C of the American Stock Exchange, if any change in the nature of any stock in the BTK Index occurs as a result of delisting, merger, acquisition or other similar event, the American Stock Exchange may delete that stock from the Index and replace it with another stock which the American Stock Exchange believes is representative of the biotechnology sector. In making a replacement determination, the American Stock Exchange has stated that it also will take into account a stock's capitalization, liquidity, volatility and name recognition and will ensure that at each quarterly rebalancing at least 90% of the weight of the BTK Index will be made up of stocks that are eligible for standardized options trading. Historical Information.................. The following table sets forth the high and low values of the BTK Index for each quarter in the period from January 1, 1997 through March 19, 2002. The historical information listed below was obtained from Bloomberg Financial Markets. The historical performance of the BTK Index or the Underlying Stocks should not be taken as an indication of future performance. BTK Index Values High Low Close 1997 First Quarter...............169.90 139.54 139.54 Second Quarter..............154.81 125.15 142.52 Third Quarter...............181.35 131.58 176.63 Fourth Quarter..............193.12 155.64 162.42 1998 First Quarter...............183.74 155.10 174.56 Second Quarter..............183.37 146.56 146.84 Third Quarter...............152.09 104.51 139.39 Fourth Quarter..............185.13 123.86 185.13 1999 First Quarter...............201.27 176.81 186.95 Second Quarter..............215.47 171.24 214.34 Third Quarter...............291.25 220.21 252.74 Fourth Quarter..............399.68 242.64 391.44 2000 First Quarter...............794.53 361.41 499.90 Second Quarter..............696.12 405.43 644.23 Third Quarter...............800.56 591.44 769.72 Fourth Quarter..............786.03 557.82 634.32 2001 First Quarter...............665.25 423.47 470.24 Second Quarter..............674.38 413.72 611.70 Third Quarter...............604.62 415.55 450.43 Fourth Quarter..............618.00 449.04 580.58 2002 First Quarter (through March 19, 2002).............571.40 457.21 534.67 Source: Bloomberg Financial Markets The following graph illustrates the trends of the historical closing values of the BTK Index, calculated on a monthly basis, from January 2, 1997 to March 18, 2002. Graph Ommited - BTK Index - Historical Performance Discontinuance of the BTK Index; Successor Index; Issuer Redemption Right................................... If the American Stock Exchange discontinues or suspends publication of the BTK Index and the American Stock Exchange or another entity publishes a successor or substitute index that the Calculation Agent determines to be substantially identical to the discontinued or suspended BTK Index (such index being referred to in this pricing supplement as a "Successor Index"), then the Successor Index will replace the BTK Index for all purposes, including for purposes of determining the Exchange Ratios to be used in computing the Cash Settlement Value payable based on the shares of common stock underlying the Successor Index, which will be "Underlying Stock." Upon any selection by the Calculation Agent of a Successor Index, the Calculation Agent will cause written notice of its selection of a Successor Index to be furnished to the Trustee, to Morgan Stanley and to the holders of the Biotech BOXES within three Trading Days of such selection. If the American Stock Exchange discontinues or suspends publication of the BTK Index prior to, and that discontinuance or suspension is continuing on, a date on which your Cash Settlement Value is to be determined and the Calculation Agent determines that no Successor Index is available at that time, then on that date (unless we have redeemed the Biotech BOXES as described above under "--Issuer Redemption Right"), the Calculation Agent or one of its affiliates will determine the Exchange Ratios to be used in computing your Cash Settlement Value. Your Cash Settlement Value will be computed by the Calculation Agent or one of its affiliates in accordance with the formula for and method of calculating the BTK Index last in effect prior to the discontinuance or suspension, using the Market Price at that time (or, if trading in an Underlying Stock has been materially suspended or limited, its good faith estimate of the Market Price that would have prevailed but for that suspension or limitation) for each security most recently comprising the BTK Index. A material suspension or limitation of trading with respect to an Underlying Stock will be deemed to have occurred upon (i) a suspension, absence or material limitation of trading in that Underlying Stock for more than two hours of trading or during the one-half hour period preceding the close of trading in the primary exchange or market of trading for that Underlying Stock; or (ii) a breakdown or failure in the price and trading systems of the primary exchange or market of trading for that Underlying Stock, as a result of which the reported trading prices for that Underlying Stock during the last one-half hour preceding the closing of trading in such market are materially inaccurate. Notwithstanding the foregoing, we will have the right to redeem the Biotech BOXES at any time that the Calculation Agent determines that there is no appropriate Successor Index, even if this occurs before March 22, 2009. See "--Issuer Redemption Right" above. If we exercise this right, then from and after the Early Redemption Notice Date the Calculation Agent will cease to calculate the BTK Index and the composition of the Underlying Stocks will become fixed as of that date, except that the Calculation Agent in its sole discretion may make adjustments after that date solely to reflect the occurrence of a corporate or other similar event affecting an Underlying Stock (such as, for example, a merger or other corporate combination or a stock split or reverse stock split). Any such subsequent adjustment will be designed to maintain the relative investment represented by each Underlying Stock at its respective Exchange Ratio as of the Early Redemption Notice Date. Adjustments to the Biotech BOXES........ If the method of calculating the BTK Index or a Successor Index is modified so that the value of such index is a fraction or multiple of what it would have been had it not been modified (e.g., due to a split in the index), then the Calculation Agent will adjust the Exchange Ratios of the Underlying Stocks in order to arrive at a value of the Biotech BOXES relative to the BTK Index or such Successor Index as if the BTK Index or Successor Index had not been modified (e.g., as if such split had not occurred). The fraction used in calculating supplemental coupon amounts (including with respect to the initial BTK Index value) is also subject to adjustment in these circumstances. Credit Exchange Event................... If our senior debt rating is downgraded below A- by Standard & Poor's or below A3 by Moody's (or below the equivalent ratings of any successor to Standard & Poor's or Moody's), a Credit Exchange Event will occur. So long as a Credit Exchange Event has occurred and is continuing, the Minimum Exchange Amount will not apply. We will instruct the Trustee to notify you upon the occurrence of a Credit Exchange Event. Additional Issuances of Biotech BOXES... We may, without notice to holders of Biotech BOXES, issue additional Biotech BOXES having terms identical to those we are offering on the date of this pricing supplement (other than price). Should we so decide, we currently intend to make such issuances on the third Thursday of any calendar month, but we may make such issuances on any other Trading Day we deem appropriate. The pricing of any new issuance of Biotech BOXES will be derived from the Market Prices of the Underlying Stocks as of the applicable pricing date at their respective Exchange Ratios, plus the maximum agent's commission specified in the relevant pricing supplement, accrued but unpaid base coupon amounts through the date of the pricing supplement, including, solely for these purposes, (i) base coupon amounts with respect to any Underlying Stock whose next record date for ordinary dividends will occur between the date of the pricing supplement for that issuance of Biotech BOXES and the date MS & Co. delivers those Biotech BOXES; (ii) any extraordinary dividend paid during such period; and (iii) accrued but unpaid supplemental coupon amounts to, but not including, the date of the pricing supplement. The prices of Biotech BOXES so issued could be at a premium or discount to then prevailing trading prices of the Biotech BOXES. Book-Entry Note or Certificated Note.... Book-Entry Events of Default....................... Events of default under the Biotech BOXES will include, among other things, default in payment of any principal (i.e., payment of Cash Settlement Value at maturity or upon redemption or exchange), default for 30 days in the payment of any interest (i.e., payment of base coupon amounts or supplemental coupon amounts) and events of bankruptcy, insolvency or reorganization with respect to us. Upon acceleration of the Biotech BOXES following the occurrence of an event of default, holders will be entitled to receive their Cash Settlement Value calculated by the Calculation Agent as of the date of the acceleration, plus accrued but unpaid base coupon amounts and accrued but unpaid supplemental coupon amounts up to but excluding the date of acceleration, provided that if prior to the date of acceleration (i) you have submitted an Official Notice of Exchange in accordance with your Exchange Right; or (ii) we have exercised our redemption right with respect to the Biotech BOXES in accordance with "--Issuer Redemption Right" and "--Early Redemption Notice Date" above and the date of acceleration occurs on or after the sixth Trading Day prior to the Early Redemption Date, the amount you will be entitled to receive will equal the Cash Settlement Value calculated as of the Determination Date, plus accrued but unpaid base coupon amounts accrued up to and including the Exchange Notice Date or up to but excluding the sixth Trading Day prior to the Early Redemption Date, respectively. If we exercise our redemption right and the acceleration date occurs before the sixth Trading Day prior to the Early Redemption Date, you will be entitled to receive your Cash Settlement Value calculated as of the date of acceleration, plus accrued but unpaid base coupon amounts up to, but excluding, the date of acceleration. For a description of all the events that constitute events of default under the Biotech BOXES, see "Description of Debt Securities--Events of Default" in the accompanying prospectus. Trustee................................. JPMorgan Chase Bank Agent for the underwritten offering of Biotech BOXES........................... MS & Co. Calculation Agent....................... MS & Co. The Calculation Agent will round all percentages resulting from any calculation with respect to the Biotech BOXES to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)). All dollar amounts used in, or resulting from, such calculation will be rounded to the nearest cent with five tenths of a cent being rounded upwards. The Calculation Agent is solely responsible for determining the Cash Settlement Value and base and supplemental coupon amounts. All determinations made by the Calculation Agent will be at the sole discretion of the Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes and binding on us and holders of the Biotech BOXES. Market Disruption Event................. A Market Disruption Event with respect to an Underlying Stock will be deemed to have occurred upon: (i) a suspension, absence or material limitation of trading of that Underlying Stock on the primary market for that Underlying Stock for more than two hours of trading or during the one-half hour period preceding the close of the principal trading session in that market; or a breakdown or failure in the price and trade reporting systems of the primary market for that Underlying Stock as a result of which the reported trading prices for that Underlying Stock during the last one-half hour preceding the closing of the principal trading session in that market are materially inaccurate, as determined by the Calculation Agent in its sole discretion; and (ii) a determination by the Calculation Agent in its sole discretion that any event described in clause (i) above materially interfered with the ability of Morgan Stanley or any of its affiliates to unwind or adjust all or a material portion of the hedge with respect to the Biotech BOXES. For purposes of determining whether a Market Disruption Event has occurred with respect to an Underlying Stock: (1) a limitation on the hours or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the relevant exchange; and (2) limitations pursuant to New York Stock Exchange Rule 80A (or any applicable rule or regulation enacted or promulgated by the NYSE, any other self-regulatory organization or the Commission of similar scope as determined by the Calculation Agent) on trading during significant market fluctuations shall constitute a suspension, absence or material limitation of trading. Market Price............................ If an Underlying Stock (or any other security for which a Market Price must be determined) is listed on a national securities exchange, is a security of The Nasdaq National Market or is included in the OTC Bulletin Board Service ("OTC Bulletin Board") operated by the National Association of Securities Dealers, Inc. (the "NASD"), the Market Price for one share of that Underlying Stock (or one unit of any such other security) means (i) the last reported sale price, regular way, of the principal trading session on that day on the principal U.S. securities exchange registered under the Exchange Act, on which that Underlying Stock (or any such other security) is listed or admitted to trading (which may be the Nasdaq National Market if it is then a national securities exchange) or (ii) if not listed or admitted to trading on any securities exchange or if the last reported sale price is not obtainable (even if that Underlying Stock (or any such other security) is listed or admitted to trading on such securities exchange), the last reported sale price of the principal trading session on the over-the-counter market as reported on The Nasdaq National Market (if it is not then a national securities exchange) or OTC Bulletin Board on that day. If the last reported sale price of the principal trading session is not available pursuant to clause (i) or (ii) above, the Market Price for any Trading Day or any Determination Date that is not a Trading Day will be the mean, as determined by the Calculation Agent, of the bid prices for that Underlying Stock (or any such other security) obtained from as many dealers in such stock (which may include MS & Co. or any of our other subsidiaries or affiliates), but not exceeding three, as will make such bid prices available to the Calculation Agent. A "security of The Nasdaq National Market" shall include a security included in any successor to that system and the term "OTC Bulletin Board Service" shall include any successor to that service. Underlying Stocks; Public Information... As of the date of this pricing supplement, each of the issuers of the Underlying Stocks is a reporting company under the Exchange Act. Companies with securities registered under the Exchange Act are required to file periodically certain financial and other information specified by the Securities and Exchange Commission (which we refer to as the Commission). Information provided to or filed with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at its Regional Office located at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661, and copies of such material can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, information provided to or filed with the Commission electronically can be accessed through a website maintained by the Commission. The address of the Commission's website is http://www.sec.gov. Information provided to or filed with the Commission by each of the issuers pursuant to the Exchange Act can be located by reference to its respective Commission file number. In addition, information regarding the issuers of the Underlying Stocks may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. Neither we nor the American Stock Exchange make any representation or warranty as to the accuracy or completeness of such information. This pricing supplement relates only to the Biotech BOXES offered hereby and does not relate to the BTK Index, the Underlying Stocks or other securities of the issuers of the Underlying Stocks. We have derived all disclosures contained in this pricing supplement regarding the issuers of the Underlying Stocks from the publicly available documents described above. Neither we nor the American Stock Exchange nor MS & Co. have participated in the preparation of such documents or made any due diligence inquiry with respect to the issuers of the Underlying Stocks in connection with the offering of the Biotech BOXES. Neither we nor the American Stock Exchange nor MS & Co. make any representation that those publicly available documents are or any other publicly available information regarding the issuers of the Underlying Stocks is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date of this pricing supplement (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading prices of the Underlying Stocks (and therefore the value of the BTK Index and the Exchange Ratios) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning the issuers of the Underlying Stocks could affect the Cash Settlement Value received on the Maturity Date, any Exchange Date or the Early Redemption Date with respect to the Biotech BOXES and therefore the trading prices of the Biotech BOXES. The statements in the preceding four sentences are not intended to affect the rights of the holders of the Biotech BOXES under the securities laws. Neither we nor any of our affiliates make any representation to you as to the performance of any of the Underlying Stocks or the BTK Index as a whole. Neither we nor any of our affiliates can offer any assurance as to the composition of the Underlying Stocks at the time you receive your Cash Settlement Value since such composition may change over time. At the time you receive your Cash Settlement Value, some or all of the issuers of the Underlying Stocks may not be reporting companies under the Exchange Act. Use of Proceeds and Hedging............. The net proceeds we receive from the sale of the Biotech BOXES will be used for general corporate purposes and by us or one or more of our affiliates in connection with hedging our obligations under the Biotech BOXES. See also "Use of Proceeds" in the accompanying prospectus. On or prior to the date of this pricing supplement, we, through our subsidiaries or others, may hedge our anticipated exposure in connection with the Biotech BOXES by taking positions in the Underlying Stocks or in other instruments. If we pursue such a hedging strategy, the price at which we are able to purchase such positions may be a factor in determining the Issue Price of the Biotech BOXES. Through our subsidiaries, we are likely to modify any hedge position throughout the life of the Biotech BOXES by purchasing and selling the Underlying Stocks and other instruments. Although we have no reason to believe that hedging activity or other trading activities that we have, or any of our affiliates have, engaged in or may engage in have had or will have a material impact on the price of the Underlying Stocks or the BTK Index, we cannot give any assurance that these activities have not or will not affect those prices. License Agreement between the American Stock Exchange and Morgan Stanley....... The use of and reference to the BTK Index in connection with the Biotech BOXES has been consented to by the American Stock Exchange, the publisher of the BTK Index. "AMEX Biotechnology Index" and "BTK" are service marks of the American Stock Exchange. All rights to the BTK Index are owned by the American Stock Exchange. We, the Calculation Agent and the Trustee disclaim any and all responsibility for the calculation or other maintenance of or any adjustments to the BTK Index. The American Stock Exchange has the right to change the composition of the BTK Index and to cease calculation and publication of the BTK Index. In addition, the American Stock Exchange has no relationship to us or the Biotech BOXES; it does not sponsor, endorse, authorize, sell or promote the Biotech BOXES, and has no obligation or liability in connection with the administration, marketing or trading of the Biotech BOXES or with the calculation of the Cash Settlement Value that may be payable in the circumstances described under "--Cash Settlement Value Payable at Maturity or upon Exchange or Issuer Redemption" above. ERISA Matters for Pension Plans and Insurance Companies..................... Each fiduciary of a pension, profit-sharing or other employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA in the context of the Plan's particular circumstances before authorizing an investment in the Biotech BOXES. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the Plan. In addition, we and certain of our subsidiaries and affiliates, including MS & Co. and Dean Witter Reynolds Inc. ("DWR"), may be each considered a "party in interest" within the meaning of ERISA, or a "disqualified person" within the meaning of the Code with respect to many Plans. Prohibited transactions within the meaning of ERISA or the Code would likely arise, for example, if the Biotech BOXES are acquired by or with the assets of a Plan with respect to which MS & Co., DWR or any of their affiliates is a service provider, unless the Biotech BOXES are acquired pursuant to an exemption from the "prohibited transaction" rules. A violation of these prohibited transaction rules could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons, unless exemptive relief is available under an applicable statutory or administrative exemption. The U.S. Department of Labor has issued five prohibited transaction class exemptions ("PTCEs") that may provide exemptive relief for direct or indirect prohibited transactions resulting from the purchase or holding of the Biotech BOXES. Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts), and PTCE 84-14 (for certain transactions determined by independent qualified asset managers). Because we may be considered a party in interest with respect to many Plans, the Biotech BOXES may not be purchased or held by any Plan, any entity whose underlying assets include "plan assets" by reason of any Plan's investment in the entity (a "Plan Asset Entity") or any person investing "plan assets" of any Plan, unless such purchaser or holder is eligible for exemptive relief, including relief available under PTCE 96-23, 95-60, 91-38, 90-1, or 84-14 or such purchase and holding is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, or holder of the Biotech BOXES will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding the Biotech BOXES that it either (a) is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf of or with "plan assets" of any Plan or (b) is eligible for exemptive relief or such purchase and holding is not prohibited by ERISA or Section 4975 of the Code. Under ERISA, assets of a Plan may include assets held in the general account of an insurance company which has issued an insurance policy to such plan or assets of an entity in which the Plan has invested. Accordingly, insurance company general accounts that include assets of a Plan must ensure that one of the foregoing exemptions is available. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other persons considering purchasing the Biotech BOXES on behalf of or with "plan assets" of any Plan consult with their counsel regarding the availability of exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14. Purchasers of the Biotech BOXES have exclusive responsibility for ensuring that their purchase and holding of the Biotech BOXES do not violate the prohibited transaction rules of ERISA or the Code. U.S. Federal Income Tax Consequences.... The following is a discussion of the material U.S. federal income tax consequences that may be relevant to you if you are a beneficial owner of Biotech BOXES who is o an individual who is a citizen or resident of the United States, o a U.S. domestic corporation, or o any other person that is subject to U.S. federal income tax on a net income basis in respect of your investment in the Biotech BOXES (any of the foregoing, a "U.S. person"). This summary is based on U.S. federal income tax laws, regulations, rulings and decisions in effect as of the date of this pricing supplement, all of which are subject to change at any time (possibly with retroactive effect). This summary addresses the U.S. federal income tax consequences to you if you are an initial holder of the Biotech BOXES who will purchase the Biotech BOXES at the Issue Price in the original issuance or any additional issuance and who will hold the Biotech BOXES as capital assets. This summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase Biotech BOXES by any particular investor, including tax considerations that arise from rules of general application to all taxpayers or to certain classes of taxpayers. Thus, for example, this summary does not address all aspects of federal income taxation that may be relevant to you in light of your individual investment circumstances or if you are a taxpayer subject to special treatment under the U.S. federal income tax laws, such as dealers in securities or foreign currency, financial institutions, insurance companies, tax-exempt organizations and taxpayers holding the Biotech BOXES as part of a "straddle," "hedge," "conversion transaction," "synthetic security," or other integrated investment or who acquire Biotech BOXES within 30 days of selling shares of any of the Underlying Stocks at a loss. Moreover, the effect of any applicable state, local or foreign tax laws is not discussed. You should consult with your tax advisor in determining whether an investment in Biotech BOXES is appropriate for you in light of your personal tax circumstances. No statutory, judicial or administrative authority directly addresses the characterization of the Biotech BOXES or instruments similar to the Biotech BOXES for U.S. federal income tax purposes. As a result, significant aspects of the U.S. federal income tax consequences of an investment in the Biotech BOXES are not certain. Because of the lack of legal authority, our special tax counsel, Cleary, Gottlieb, Steen & Hamilton ("Tax Counsel") is unable to render an opinion as to the proper U.S. federal income tax characterization of the Biotech BOXES. The material U.S. federal income tax consequences of an investment in the Biotech BOXES are the timing and character of income on the Biotech BOXES. Because these consequences depend on the characterization of the Biotech BOXES, Tax Counsel is unable to render an opinion on the material U.S. federal income tax consequences of an investment in the Biotech BOXES. As described in "Taxation of the Biotech BOXES" below, pursuant to the terms of the Biotech BOXES, Morgan Stanley and you agree to treat each Biotech BOXES as a prepaid cash settlement forward contract with respect to a portfolio of stocks consisting of the Underlying Stocks for the delivery at maturity or upon exchange or redemption of a cash amount equal to the sum of your Cash Settlement Value and certain accrued but unpaid coupon amounts in exchange for a fixed purchase price. You will be required to characterize the Biotech BOXES for all tax purposes in this manner (absent an administrative determination or judicial ruling to the contrary) even if your tax advisor would otherwise adopt an alternative characterization. The following description of the treatment of Biotech BOXES for U.S. federal income tax purposes under that characterization and under possible alternative treatment is based on the advice of Tax Counsel. No ruling is being requested from the Internal Revenue Service (the "IRS") with respect to the Biotech BOXES, and no assurance can be given that the IRS will agree with the treatment of the Biotech BOXES described below. Accordingly, you should consult your tax advisor in determining the tax consequences of an investment in the Biotech BOXES, including the application of state, local or other tax laws and the possible effects of changes in federal or other tax laws. Taxation of the Biotech BOXES. Pursuant to the terms of the Biotech BOXES, Morgan Stanley and you will be obligated (in the absence of an administrative determination or judicial ruling to the contrary) to characterize the Biotech BOXES for all tax purposes as a prepaid cash settlement forward contract with respect to a portfolio of stocks consisting of the Underlying Stocks under which: o at the time of issuance of the Biotech BOXES you pay us a fixed amount of cash equal to the Issue Price of the Biotech BOXES in consideration for our obligation to deliver to you at maturity or upon exchange or redemption the cash amount described under "Description of the Biotech BOXES--Cash Settlement Value Payable at Maturity or upon Exchange or Issuer Redemption" above; o until maturity, exchange or redemption we will be obligated to pay amounts equal to the base coupons and supplemental coupons as a return on the Biotech BOXES that constitutes income to you; and o at maturity or upon exchange or redemption we will deliver to you a cash amount equal to the sum of the Cash Settlement Value and certain accrued but unpaid coupon amounts in full satisfaction of our obligation under the prepaid cash settlement forward contract. Consistent with the above characterization, base and supplemental coupon amounts paid generally will be treated as ordinary income that is taken into account in accordance with your method of accounting. If you are an accrual method taxpayer while not free from doubt it is expected that you would accrue each supplemental coupon at a rate equal to 0.05% of one thirtieth of the closing value of the BTK Index on the date of this pricing supplement until the amount of the coupon is fixed. If the actual coupon amount is less than the accrued coupon amount, the accrued amount would then be reduced to reflect the difference between the accrued and actual amounts. Your tax basis in Biotech BOXES generally will equal your cost for the Biotech BOXES. Upon the sale, exchange, maturity, redemption or other taxable disposition of Biotech BOXES, you generally will recognize capital gain or loss equal to the difference between the amount realized on sale, exchange, maturity, redemption or other taxable disposition and your tax basis in the Biotech BOXES. Capital gain or loss generally will be long-term capital gain or loss if you held the Biotech BOXES for more than one year at the time of disposition. Any non-cash adjustments made to the BTK Index are not expected to result in a taxable disposition of the Biotech BOXES. It is uncertain whether amounts received on disposition that are attributable to accrued but unpaid coupons reduce your amount realized or increase your basis in Biotech BOXES. You should consult your tax advisor regarding the treatment of coupons on the Biotech BOXES, including accrued but unpaid coupons on the disposition of Biotech BOXES. The treatment of base coupon amounts attributable to extraordinary dividends, if any, that are paid as a result of a merger, reorganization or other corporate events involving an issuer of any of the Underlying Stocks or that would not be treated as dividends by you if you held your pro rata share of the Underlying Stock is uncertain. In appropriate circumstances, we intend to take the position that such coupons will be treated as a partial redemption of your investment in the Biotech BOXES, and to report the coupons to the IRS in that manner. Under this characterization, you would recognize gain or loss at the time of the partial redemption, which will equal the difference between the cash received and the pro rata portion of your tax basis in the Biotech BOXES allocable to that cash (based upon the amount of such cash compared to the fair market value of the Biotech BOXES at the time of payment). Your tax basis in the Biotech BOXES would be reduced by the portion of the tax basis allocable to the cash received. For example, if you paid $10,000 for 100 Biotech BOXES and later receive a base coupon of $1,500 as a result of the merger of an issuer of one of the Underlying Stocks, and the value of the 100 Biotech BOXES immediately prior to the coupon payment is $15,000, you would allocate 10% ($1,500 divided by $15,000) of your $10,000 basis, or $1,000, to the $1,500 cash received. Accordingly, your gain would be $500 (equal to $1,500 cash received less $1,000 basis allocated to that cash) and your basis in the BOXES would be reduced to $9,000. It is also possible, however, that the IRS would take the view that all coupons attributable to extraordinary dividends are additional ordinary income to you, in which case your basis in the Biotech BOXES would not be reduced as a result of receiving such coupons. Prospective purchasers are urged to consult their tax advisors regarding the U.S. federal income tax consequences of receiving such base coupons. Constructive Ownership. Section 1260 of the Code treats a taxpayer owning certain types of derivative positions in property as having "constructive ownership" in that property, with the result that all or a portion of the long-term capital gain recognized by such taxpayer with respect to the derivative position may be recharacterized as ordinary income. Section 1260 in its current form would not apply to Biotech BOXES, except to the extent that the portfolio of Underlying Stocks includes shares of any non-U.S. issuers that are not active foreign operating companies. However, Section 1260 authorizes the Treasury Department to promulgate regulations (possibly with retroactive effect) to expand the application of the "constructive ownership" regime. There is no assurance that the Treasury Department will not promulgate regulations to apply the regime to Biotech BOXES. If Section 1260 were to apply to Biotech BOXES, you would be required to treat all or a portion of the long-term capital gain (if any) that you recognize on sale, exchange, maturity, redemption or other taxable disposition of the Biotech BOXES as ordinary income, but only to the extent such long-term capital gain exceeds the long-term capital gain that you would have recognized if you had acquired the relevant Underlying Stocks on the issue date of the Biotech BOXES and disposed of those Underlying Stocks upon disposition of the Biotech BOXES. In addition, Section 1260 would impose an interest charge on the gain that was recharacterized on the sale, exchange, maturity, redemption or other taxable disposition of the Biotech BOXES. Possible Alternative Treatment. Notwithstanding our and your contractual obligation to treat the Biotech BOXES in accordance with the above characterization, there can be no assurance that the IRS will accept, or that a court will uphold, this characterization. The documentation of the Biotech BOXES as our unsecured debt obligations suggests that the IRS might seek to apply to the Biotech BOXES the Treasury regulations governing contingent payment debt instruments (the "Contingent Payment Regulations"). If the IRS were successful in doing this, then, among other matters, o you would be required to accrue original issue discount on Biotech BOXES every year at a "comparable yield" for Morgan Stanley, determined at the time of issuance of the Biotech BOXES, in an amount that is likely to exceed the aggregate annual coupon payments you will receive; o the amount of original issue discount that you would accrue for every year would be adjusted to the extent that actual base coupon amounts differ from the "projected" amounts of those payments; and o on the sale, exchange, maturity, redemption, or other taxable disposition of the Biotech BOXES, you would recognize ordinary income, or ordinary loss to the extent of your aggregate prior accruals of original issue discount and capital loss thereafter, rather than capital gain or loss. Even if the Contingent Payment Regulations do not apply to the Biotech BOXES it is possible that the IRS could seek to characterize the Biotech BOXES in a manner that results in tax consequences to you different from those described above. Under an alternative characterization of the Biotech BOXES, it is possible, for example, that Biotech BOXES could be treated as an investment unit consisting of a deposit paying interest at the rate Morgan Stanley would pay on non-exchangeable senior notes maturing at the same time as the Biotech BOXES, plus a cash-settlement forward contract with respect to a portfolio of stocks consisting of the Underlying Stocks, in which case you would be required to accrue interest at a rate that is likely to be higher than the base coupon and supplemental coupon amounts you will receive. In addition, the Internal Revenue Service and U.S. Treasury Department have indicated that they plan to publish guidance with respect to accrual of income on certain derivative financial instruments with contingent payments, including prepaid forward contracts. If such guidance were issued, you could be required to include income in an amount greater than the base and supplemental coupon amounts you will receive. Non-United States Persons. Because the characterization of the coupon payments for U.S. federal income tax purposes is uncertain, if you are not a U.S. person, Morgan Stanley will withhold 30% U.S. federal income tax on the coupon payments made with respect to the Biotech BOXES. It may be possible to reduce this rate of tax under the portfolio interest exemption (which, subject to certain exceptions, exempts nonresident alien individuals and foreign corporations from tax on interest payments on debt from U.S. sources) or a U.S. income tax treaty. If you are eligible for a reduced rate of U.S. withholding tax pursuant to the portfolio interest exemption or a tax treaty, you may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for refund with the IRS. Any capital gain realized upon the sale, exchange, maturity, redemption, or other taxable disposition of the Biotech BOXES by you will generally not be subject to U.S. federal income tax if such gain is not effectively connected with a U.S. trade or business of yours and, if you are an individual, you are not present in the United States for 183 days or more in the taxable year of the disposition. You should consult your tax advisor regarding the treatment of a disposition of Biotech BOXES if you are the beneficial owner of more than 5% of the Biotech BOXES. Backup Withholding and Information Reporting. You may be subject to information reporting and to backup withholding with respect to certain amounts paid to you unless you provide proof of an applicable exemption or a correct taxpayer identification number and otherwise comply with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Rather, any amounts withheld from a payment to you under the backup withholding rules are allowed as a refund or credit against your U.S. federal income tax liability, provided the required information is furnished to the IRS. Supplemental Information Concerning Plan of Distribution.................... Under the terms and subject to the conditions contained in the U.S. distribution agreement referred to in the prospectus supplement under "Plan of Distribution," the agent, acting as principal for its own account, has agreed to purchase, and we have agreed to sell, the number of Biotech BOXES set forth on the cover of this pricing supplement. The agent proposes initially to offer part of the Biotech BOXES directly to the public at the public offering price set forth on the cover of this pricing supplement plus accrued interest, if any, from the Original Issue Date and part to certain dealers, at a price that represents a concession not in excess of $.34 per Biotech BOXES; provided that the price to public for investors purchasing: o less than or equal to 2,999 Biotech BOXES in any single transaction will be $18.1623 per Biotech BOXES (100% of the Issue Price); o 3,000 or more but less than 15,000 Biotech BOXES in any single transaction will be $18.0823 per Biotech BOXES (99.56% of the Issue Price); o 15,000 or more but less than 30,000 Biotech BOXES in any single transaction will be $18.0023 per Biotech BOXES (99.12% of the Issue Price); o 30,000 or more but less than 60,000 Biotech BOXES in any single transaction will be $17.8973 per Biotech BOXES (98.54% of the Issue Price); and o 60,000 or more Biotech BOXES in any single transaction will be $17.8373 per Biotech BOXES (98.21% of the Issue Price). The agent may allow, and those selected dealers may reallow, a concession not in excess of $.34 per Biotech BOXES to other dealers. We expect to deliver the Biotech BOXES against payment therefor in New York, New York on March 22, 2002. After the initial offering of the Biotech BOXES, the agent may vary the offering price and other selling terms from time to time. In order to facilitate the offering of the Biotech BOXES, the agent may engage in transactions that stabilize, maintain, or otherwise affect the price of the BOXES or the Underlying Stocks. Specifically, the agent may sell more Biotech BOXES than it is obligated to purchase in connection with the offering or may sell shares of the Underlying Stocks that it does not own, creating a naked short position in the Biotech BOXES or the Underlying Stocks, respectively for its own account. The agent must close out any naked short position by purchasing the Biotech BOXES or Underlying Stocks in the open market. A naked short position is more likely to be created if the agent is concerned that there may be downward pressure on the price of the Biotech BOXES or the Underlying Stocks in the open market after pricing that could adversely affect investors who purchase in the offering. As an additional means of facilitating the offering, the agent may bid for, and purchase, Biotech BOXES or Underlying Stocks in the open market to stabilize the price of the Biotech BOXES. Any of these activities may raise or maintain the market price of the Biotech BOXES above independent market levels or prevent or retard a decline in the market price of the Biotech BOXES. The agent is not required to engage in these activities and may end any of these activities at any time. See "--Use of Proceeds and Hedging" above. We may issue additional Biotech BOXES having terms identical to those we are offering under this pricing supplement (other than price). In connection with the issuance of any additional Biotech BOXES, MS & Co. may act as an agent in using its best efforts to solicit offers to purchase those additional Biotech BOXES or it may act as principal in purchasing those Biotech BOXES, as it may determine. The capacity in which MS & Co. acts in those cases will be specified in a separate pricing supplement. ANNEX A OFFICIAL NOTICE OF EXCHANGE Dated: On or after April 22, 2002 Morgan Stanley Dean Witter & Co. 1585 Broadway New York, New York 10036 Morgan Stanley & Co. Incorporated, as Calculation Agent 1585 Broadway New York, New York 10036 Fax No.: (212) 761-0674 (Attn: William Threadgill) Dear Sirs: The undersigned holder of the Basket Opportunity eXchangeablE SecuritiesSM due January 30, 2032, exchangeable for an amount of cash based on the value of the stocks underlying the American Stock Exchange's BTK Index of Morgan Stanley Dean Witter & Co. (CUSIP No. 61744Y413) (the "Biotech BOXES") hereby irrevocably elects to exercise with respect to the number of Biotech BOXES indicated below, as of the date hereof, the Exchange Right as described in the pricing supplement dated March 19, 2002 (the "Pricing Supplement") to the Prospectus Supplement and Prospectus dated January 24, 2001 related to Registration Statement No. 333-47576. Terms not defined herein have the meanings given to such terms in the Pricing Supplement. Please date and acknowledge receipt of this notice in the place provided below on the date of receipt, and fax a copy to the fax number indicated. The undersigned certifies to you that (i) it is, or is duly authorized to act for, the beneficial owner of the principal amount of the Biotech BOXES indicated below its signature (and attaches evidence of such ownership as provided by the undersigned's position services department or the position services department of the entity through which the undersigned holds its Biotech BOXES); and (ii) it will cause the Biotech BOXES to be exchanged to be transferred to the Trustee on the Exchange Date. Very truly yours, ----------------------------------- [Name of Holder] By: ------------------------------- [Title] ------------------------------- [Tel. No.] ------------------------------- [Fax No.] Number of Biotech BOXES surrendered for exchange(1): Receipt of the above Official Notice of Exchange is hereby acknowledged MORGAN STANLEY DEAN WITTER & CO., as Issuer MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent By: MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent By: ------------------------------------- Title: Date and time of acknowledgment: ----------------------------- - ----------- (1) Minimum 30,000 Biotech BOXES unless a Credit Exchange Event (as defined in the Pricing Supplement) has occurred and is continuing. -----END PRIVACY-ENHANCED MESSAGE-----