Morgan Stanley 1999 Annual Report Download - page 84

Download and view the complete annual report

Please find page 84 of the 1999 Morgan Stanley annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 97

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97

99 AR |page 82 indebtedness of the Company, may restrict the Company’s ability to
withdraw capital from its subsidiaries. At November 30, 1999,
approximately $5.6 billion of net assets of consolidated sub-
sidiaries may be restricted as to the payment of cash dividends and
advances to the Company.
The Company repurchased approximately 50 million and
86 million shares of its common stock in fiscal 1999 and fiscal
1998, respectively. In an effort to enhance its ongoing stock repur-
chase program, the Company may sell put options on shares of its
common stock to third parties. These put options entitle the hold-
er to sell shares of the Company’s common stock to the Company
on certain dates at specified prices. As of November 30, 1999, put
options were outstanding on an aggregate of 1.0 million shares of
the Company’s common stock. These put options expire in February
2000. The company may elect cash settlement of the put options
instead of taking delivery of the stock.
Cumulative translation adjustments include gains or losses
resulting from translating foreign currency financial statements
from their respective functional currencies to U.S. dollars, net of
hedge gains or losses and related tax effects. The Company uses
foreign currency contracts and designates certain non-U.S. dollar
currency debt as hedges to manage the currency exposure relating
to its net monetary investments in non-U.S. dollar functional cur-
rency subsidiaries. Increases or decreases in the value of the
Company’s net foreign investments generally are tax-deferred for
U.S. purposes, but the related hedge gains and losses are taxable
currently. Therefore, the gross notional amounts of the contracts
and debt designated as hedges exceed the Company’s net foreign
investments to result in effective hedging on an after-tax basis. The
Company attempts to protect its net book value from the effects of
fluctuations in currency exchange rates on its net monetary invest-
ments in non-U.S. dollar subsidiaries by selling the appropriate
non-U.S. dollar currency in the forward market. However, under
some circumstances, the Company may elect not to hedge its net
monetary investments in certain foreign operations due to market
conditions, including the availability of various currency contracts
at acceptable costs. Information relating to the hedging of the
Company’s net monetary investments in non-U.S. dollar functional
currency subsidiaries and their effects on cumulative translation
adjustments is summarized below:
AT NOVEMBER 30
(dollars in millions) 1999 1998
Net monetary investments in non-U.S.
dollar functional currency subsidiaries $1,972 $1,364
Gross notional amounts of foreign exchange
transactions and non-U.S. dollar debt
designated as hedges(1) $3,309 $2,239
Cumulative translation adjustments
resulting from net investments in
subsidiaries with a non-U.S. dollar
functional currency $ 57 $29
Cumulative translation adjustments
resulting from realized or unrealized
gains or losses on hedges, net of tax (84) (41)
Total cumulative translation adjustments $ (27) $ (12)
(1) Notional amounts represent the contractual currency amount translated at respective
fiscal year-end spot rates.
12 EMPLOYEE COMPENSATION PLANS
The Company has adopted a variety of compensation plans for cer-
tain of its employees as well as the Company’s non-employee direc-
tors. These plans are designed to facilitate a pay-for-performance
policy, provide compensation commensurate with other leading
financial services companies and provide for internal ownership in
order to align the interests of employees with the long-term interests
of the Company’s shareholders. These plans are summarized below.
EQUITY-BASED COMPENSATION PLANS
The Company is authorized to issue up to approximately 590 mil-
lion shares of its common stock in connection with awards under
its equity-based compensation plans. At November 30, 1999,
approximately 320 million shares were available for future grant
under these plans.
STOCK OPTION AWARDS
Stock option awards have been granted pursuant to several equity-
based compensation plans. Historically, these plans have generally
provided for the granting of stock options having an exercise price
not less than the fair value of the Company’s common stock (as
defined in the plans) on the date of grant. Such options generally
become exercisable over a one-to-five-year period and expire seven
to 10 years from the date of grant.