8-KMaterial AgreementsExhibits & Filings

MORGAN STANLEY 8-K Report, Material Agreement (Jun 30, 2011)

Filed June 30, 2011For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley (MS) announced the completion of a significant transaction with Mitsubishi UFJ Financial Group, Inc. (MUFG) on June 30, 2011. MUFG converted its Series B Preferred Stock into approximately 385.5 million shares of Morgan Stanley common stock. This conversion triggers a one-time, non-cash charge of roughly $1.7 billion, impacting the company's earnings per share for the second quarter and first half of 2011. As part of the amended agreement, MUFG's rights have been adjusted. They will now have the ability to appoint a second member to Morgan Stanley's Board of Directors, replacing previous board observer rights. This change reflects MUFG's increased common stock ownership post-conversion. The strategic alliance between the two firms, including their Japanese securities joint venture, continues.

Key Highlights

  • 1Completion of MUFG's conversion of Series B Preferred Stock into ~385.5 million Morgan Stanley common shares.
  • 2A one-time, non-cash negative adjustment of approximately $1.7 billion will be recognized in EPS calculations for Q2 and H1 2011 due to conversion ratio adjustments.
  • 3MUFG will forgo its July 15, 2011 dividend payment on the Series B Preferred Stock.
  • 4MUFG gains the right to designate a second member to Morgan Stanley's Board of Directors, enhancing its governance influence.
  • 5This board seat right will be retained until MUFG's ownership falls below 20% for six consecutive months, at which point they regain board observer rights and one director seat.
  • 6The Investor Agreement was amended to reflect MUFG's expanded common stock holdings, including adjustments to 'standstill' and pre-emptive rights.
  • 7MUFG's pre-emptive rights have been extended to October 13, 2013.
  • 8The existing global strategic alliance, including the Japanese securities joint venture, remains in place.

Frequently Asked Questions

Morgan Stanley will record a one-time, non-cash charge of approximately $1.7 billion in its earnings per share calculation for the three and six month periods ending June 30, 2011. This charge arises from an adjustment to the conversion ratio of MUFG's preferred stock.

As a result of the conversion, MUFG's common stock ownership has increased. Consequently, Morgan Stanley has granted MUFG the right to designate a second member to its Board of Directors, replacing previous board observer rights. This right is subject to certain ownership thresholds.

MUFG will not receive the dividend that was scheduled to be payable on July 15, 2011, in respect of its Series B Preferred Stock, as this stock has now been converted.

No, the filing explicitly states that the global strategic alliance, which includes a securities joint venture in Japan and other banking initiatives, remains in place. The amendments to the Investor Agreement are primarily to accommodate MUFG's increased common stock ownership.