Morgan Stanley 1999 Annual Report Download - page 73

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The above table does not include interest rate floor agreements that
are utilized by the Company to manage interest rate risk. At
November 30, 1999, interest rate floor agreements with an
aggregate notional value of $610 million were outstanding. These
agreements have expiration dates from fiscal 2000 to fiscal 2014
and an aggregate fair value of $0.2 million at November 30, 1999.
There were no interest rate floor agreements outstanding at
November 30, 1998.
As noted above, the Company uses interest rate and cur-
rency swaps to modify the terms of its existing borrowings. Activity
during the periods in the notional value of the swap contracts
used by the Company for asset and liability management (and the
unrecognized (loss) gain at fiscal year-end) is summarized in the
table below:
FISCAL FISCAL
(dollars in millions) 1999 1998
Notional value at beginning of period $13,101 $11,707
Additions 5,372 4,520
Matured (1,804) (2,305)
Terminated (848) (868)
Effect of foreign currency translation on
non-U.S. dollar notional values and
changes in redemption values on
structured borrowings 260 47
Notional value at fiscal year-end $16,081 $13,101
Unrecognized (loss) gain at fiscal year-end $ (243) $ 279
The Company also uses interest rate swaps and swap options to mod-
ify certain of its repurchase financing agreements. The Company had
interest rate swaps and swap options with notional values of approx-
imately $6.0 billion and $5.1 billion at November 30, 1999 and
1998 and unrecognized losses of approximately $(38) million and
$(10) million at November 30, 1999 and 1998, for such purpose.
The unrecognized losses on these swaps and swap options were off-
set by unrecognized gains on certain of the Company’s repurchase
financing agreements.
The estimated fair value of the Company’s long-term borrow-
ings approximated carrying value based on rates available to the
Company at year-end for borrowings with similar terms and maturities.
Cash paid for interest for the Company’s borrowings
and deposits approximated interest expense in fiscal 1999, 1998
and 1997.
U.S. DOLLAR NON-U.S. DOLLAR(1)
RECEIVE RECEIVE RECEIVE RECEIVE RECEIVE
FIXED FLOATING FLOATING INDEX/ FIXED FLOATING NOV. 30, NOV. 30,
PAY PAY PAY EQUITY PAY PAY 1999 1998
(dollars in millions) FLOATING FIXED FLOATING LINKED FLOATING FLOATING(2) TOTAL TOTAL
Maturing in fiscal 1999 $ — $— $— $ — $ — $ — $—$ 2,181
Maturing in fiscal 2000 1,180 300 420 928 62 226 3,116 2,241
Maturing in fiscal 2001 1,834 — 85 536 134 360 2,949 2,181
Maturing in fiscal 2002 1,075 200 — 156 111 3 1,545 979
Maturing in fiscal 2003 500 — — 137 347 199 1,183 1,252
Maturing in fiscal 2004 2,131 200 — 293 113 28 2,765 537
Thereafter 3,165 200 — 238 638 282 4,523 3,730
Total $9,885 $900 $505 $2,288 $1,405 $1,098 $16,081 $13,101
Weighted average at fiscal year-end(3)
Receive rate 6.4)% 5.4)% 5.8)% n/a 5.5)% 4.0)%
Pay rate 6.1)% 6.2)% 5.9)% n/a 4.8)% 5.3)%
(1) The differences between the receive rate and the pay rate may reflect differences in the rate of interest associated with the underlying currency.
(2) These amounts include currency swaps used to effectively convert borrowings denominated in one currency into obligations denominated in another currency.
(3) The table was prepared under the assumption that interest rates remain constant at year-end levels. The variable interest rates to be received or paid will change to the extent
that rates fluctuate. Such changes may be substantial. Variable rates presented generally are based on LIBOR or Treasury bill rates.
The table below summarizes the notional or contract amounts of
the swaps utilized by the Company for asset and liability manage-
ment by maturity and weighted average interest rates to be received
and paid at November 30, 1999. Swaps utilized to hedge the
Company’s structured borrowings are presented at their redemp-
tion values: