eTrade 2003 Annual Report Download - page 47

Table of Contents
Index to Financial Statements
addition, if funds are available, the issuance of securities could dilute the value of shares of our common stock and cause the market price to
fall.
We have various mechanisms in place that may discourage takeover attempts
Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a third party from acquiring control of
us in a merger, acquisition or similar transaction that a shareholder may consider favorable. Such provisions include:
Attempts to acquire control of E*TRADE may also be delayed or prevented by our stockholder rights plan, which is designed to enhance
the ability of our Board of Directors to protect shareholders against unsolicited attempts to acquire control of E*TRADE that do not offer an
adequate price to all shareholders or are otherwise not in the best interests of the company and our shareholders. In addition, certain provisions
of our stock incentive plans, management retention and employment agreements (including severance payments and stock option acceleration),
and Delaware law may also discourage, delay or prevent someone from acquiring or merging with us.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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authorization for the issuance of “blank check” preferred stock;
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provision for a classified Board of Directors with staggered, three-year terms;
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the prohibition of cumulative voting in the election of directors;
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a super-majority voting requirement to effect business combinations or certain amendments to our certificate of incorporation and
bylaws;
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limits on the persons who may call special meetings of shareholders;
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the prohibition of shareholder action by written consent; and
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advance notice requirements for nominations to the Board of Directors or for proposing matters that can be acted on by shareholders at
shareholder meetings.
For quantitative and qualitative disclosures about market risk, we have evaluated such risks for our Brokerage and Banking Segments
separately. The following discussion about our market risk disclosure includes forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements as a result of certain factors, including, but not limited to, those set forth in
the section entitled “Risk Factors.”
BROKERAGE OPERATIONS
Our Brokerage operations are exposed to market risk related to changes in interest rates, foreign currency exchange rates and equity
security price risk.
Interest Rate Sensitivity
At December 31, 2003, we had variable-rate brokerage and corporate term loans outstanding of approximately $17.2 million and $23.7
million at December 31, 2002. The monthly interest payments on these term loans are subject to interest rate risk. If market interest rates were
to increase immediately and uniformly by 1% at December 31, 2003 and 2002, the interest payments would increase by an immaterial amount.
Foreign Currency Exchange Risk
A portion of our operations consists of brokerage and investment services outside of the United States. As a result, our results of
operations could be adversely affected by factors, such as changes in foreign currency exchange rates or economic conditions in the foreign
markets in which we provide our services. We are primarily exposed to changes in exchange rates on the Japanese yen, the British pound, the
Canadian dollar and the Euro.
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