Morgan Stanley 1998 Annual Report Download - page 75

PREFERRED STOCK, CAPITAL UNITS AND
PREFERRED SECURITIES ISSUED BY SUBSIDIARIES
Preferred stock of the Company is composed of the following issues:
Shares Outstanding at Balance at
November 30 November 30
(dollars in millions) 1998 1997 1998 1997
ESOP Convertible Preferred Stock, liquidation preference $35.88 3,581,964 3,646,664 $129 $131
Series A Fixed/Adjustable Rate Cumulative Preferred Stock, stated value $200 1,725,000 1,725,000 345 345
7-3⁄4% Cumulative Preferred Stock, stated value $200 1,000,000 1,000,000 200 200
7-3⁄8% Cumulative Preferred Stock, stated value $200 — 1,000,000 —200
Total $674 $876
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In January 1999, the Company and MS plc called for
redemption all of the outstanding 7.82% Capital Units and 7.80%
Capital Units on February 28, 1999. The aggregate principal amount
of the Capital Units to be redeemed is $352 million.
The estimated fair value of the Capital Units
approximated carrying value at November 30, 1998 and
November 30, 1997.
SHAREHOLDERS’ EQUITY
MS&Co. and DWR are registered broker-dealers and registered
futures commission merchants and, accordingly, are subject to the
minimum net capital requirements of the Securities and Exchange
Commission, the New York Stock Exchange and the Commodity
Futures Trading Commission. MS&Co. and DWR have consistently
operated in excess of these requirements. MS&Co.’s net capital
totaled $3,205 million at November 30, 1998, which exceeded the
amount required by $2,699 million. DWR’s net capital totaled
$752 million at November 30, 1998, which exceeded the amount
required by $668 million. MSIL, a London-based broker-dealer sub-
sidiary, is subject to the capital requirements of the Securities and
Futures Authority, and MSJL, a Tokyo-based broker-dealer, is sub-
ject to the capital requirements of the Japanese Ministry of Finance.
MSIL and MSJL have consistently operated in excess of their respec-
tive regulatory capital requirements.
Under regulatory net capital requirements adopted
by the Federal Deposit Insurance Corporation (“FDIC”) and other reg-
ulatory capital guidelines, FDIC-insured financial institutions must
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*SEVENTY
-NINE *
MORGAN STANLEY DEAN WITTER *1998 ANNUAL REPORT
Each issue of outstanding preferred stock ranks in parity with all other
outstanding preferred stock of the Company.
During fiscal 1998, MSDW Capital Trust I, a Delaware
statutory business trust (the “Capital Trust”), all of the common secu-
rities of which are owned by the Company, issued $400 million of
7.10% Capital Securities (the “Capital Securities”) that are guar-
anteed by the Company. The Capital Trust issued the Capital
Securities and invested the proceeds in 7.10% Junior Subordinated
Deferrable Interest Debentures issued by the Company, which are due
February 28, 2038.
During fiscal 1998, the Company redeemed all
1,000,000 outstanding shares of its 7-3/8% Cumulative Preferred
Stock at a redemption price of $200 per share. The Company also
simultaneously redeemed all corresponding Depositary Shares at a
redemption price of $25 per Depositary Share. Each Depositary Share
represented 1/8 of a share of the Company’s 7-3/8% Cumulative
Preferred Stock.
The Company has Capital Units outstanding which
were issued by the Company and Morgan Stanley Finance plc (“MS
plc”), a U.K. subsidiary. A Capital Unit consists of (a) a Subordinated
Debenture of MS plc guaranteed by the Company and having matu-
rities from 2013 to 2017 and (b) a related Purchase Contract
issued by the Company, which may be accelerated by the Company
beginning approximately one year after the issuance of each Capital
Unit, requiring the holder to purchase one Depositary Share repre-
senting shares (or fractional shares) of the Company’s Cumulative
Preferred Stock. The aggregate amount of Capital Units outstand-
ing was $999 million at November 30, 1998 and 1997.