Morgan Stanley 1999 Annual Report Download - page 74

99 AR |page 72
7COMMITMENTS AND CONTINGENCIES
The Company has non-cancelable operating leases covering office
space and equipment. At November 30, 1999, future minimum
rental commitments under such leases (net of subleases, princi-
pally on office rentals) were as follows:
(dollars in millions)
2000 $392
2001 346
2002 275
2003 225
2004 200
Thereafter 1,027
Occupancy lease agreements, in addition to base rentals, generally
provide for rent and operating expense escalations resulting from
increased assessments for real estate taxes and other charges. Total
rent expense, net of sublease rental income, was $296 million,
$274 million and $262 million in fiscal 1999, 1998 and 1997,
respectively.
The Company has an agreement with IBM Corporation,
under which the Company receives information processing, data
networking and related services. Under the terms of the agreement,
the Company has an aggregate minimum annual commitment of
$120 million subject to annual cost-of-living adjustments.
The Company has contracted to develop a one million-
square-foot office tower in New York City. Pursuant to this agree-
ment, the Company will own the building and has entered into a
99-year lease for the land at the development site. Construction
began in 1999 and the Company intends to occupy the building
upon project completion, which is anticipated in 2002. The total
investment in this project (which will be incurred over the next sev-
eral years) is estimated to be approximately $650 million.
In the normal course of business, the Company has been
named as a defendant in various lawsuits and has been involved in
certain investigations and proceedings. Some of these matters
involve claims for substantial amounts. Although the ultimate out-
come of these matters cannot be ascertained at this time, it is the
opinion of management, after consultation with counsel, that the res-
olution of such matters will not have a material adverse effect on the
consolidated financial condition of the Company but may be materi-
al to the Company’s operating results for any particular period,
depending upon the level of the Company’s income for such period.
At November 30, 1999 and 1998, the Company had
approximately $6.3 billion and $5.7 billion, respectively, of letters
of credit outstanding to satisfy various collateral requirements.
Financial instruments sold, not yet purchased represent
obligations of the Company to deliver specified financial instru-
ments at contracted prices, thereby creating commitments to
purchase the financial instruments in the market at prevailing
prices. Consequently, the Company’s ultimate obligation to satisfy
the sale of financial instruments sold, not yet purchased may
exceed the amounts recognized in the consolidated statements of
financial condition.
The Company also has commitments to fund certain fixed
assets and other less liquid investments, including at November
30, 1999 approximately $417 million in connection with its pri-
vate equity and other principal investment activities. Additionally,
the Company has provided and will continue to provide financing,
including margin lending and other extensions of credit to clients
(including subordinated loans on an interim basis to leveraged
companies associated with its investment banking and its private
equity and other principal investment activities), that may subject
the Company to increased credit and liquidity risks.