EXHIBIT 99.1
MORGAN STANLEY UK GROUP PROFIT
SHARING SCHEME AND MORGAN
STANLEY UK GROUP PROFIT SHARING
PLAN
Combined Financial Statements for the years
ended 31 December 1998 and 1997
Deloitte & Touche
Stonecutter Court
1 Stonecutter Street
London EC4A 4TR
MORGAN STANLEY UK GROUP PROFIT SHARING SCHEME AND
MORGAN STANLEY UK GROUP PROFIT SHARING PLAN
REPORT AND COMBINED FINANCIAL STATEMENTS 1998 AND 1997 PAGE
CONTENTS
Report of the Independent Chartered Accountants 1
Combined Statements of financial condition 2
Combined Statements of income and change in Combined Schemes' equity 3
Notes to the combined financial statements 4
MORGAN STANLEY UK GROUP PROFIT SHARING SCHEME AND
MORGAN STANLEY UK GROUP PROFIT SHARING PLAN
REPORT OF THE INDEPENDENT CHARTERED ACCOUNTANTS
TO THE TRUSTEES OF THE MORGAN STANLEY UK GROUP PROFIT SHARING
SCHEMES (incorporating the Morgan Stanley UK Group Profit Sharing Scheme and the
Morgan Stanley UK Group Profit Sharing Plan)
We have audited the accompanying combined statements of financial condition of
the Morgan Stanley UK Group Profit Sharing Scheme ("the Scheme") and the Morgan
Stanley UK Group Profit Sharing Plan ("the Plan"), (collectively "the Schemes"),
as of 31 December 1998 and 1997 and the related statements of income and changes
in schemes' equity for the years then ended. These combined financial
statements are the responsibility of the Scheme's and the Plan's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements referred to above present fairly, in
all material respects, the combined financial condition of the Schemes as of 31
December 1998 and 1997 and the combined results of operations and the changes in
Schemes' equity for the years then ended in conformity with accounting
principles generally accepted in the United States.
Deloitte & Touche
Chartered Accountants
Stonecutter Court
1 Stonecutter Street
London, EC4A 4TR
England
17 February 1999
1
MORGAN STANLEY UK GROUP PROFIT SHARING SCHEME AND
MORGAN STANLEY UK GROUP PROFIT SHARING PLAN
COMBINED STATEMENTS OF FINANCIAL CONDITION
31 December 1998 and 1997
See Notes accompanying Combined Financial Statements
MORGAN STANLEY UK GROUP PROFIT SHARING SCHEME AND
MORGAN STANLEY UK GROUP PROFIT SHARING PLAN
COMBINED STATEMENTS OF INCOME AND CHANGES IN SCHEMES' EQUITY
Years ended 31 December 1998 and 1997
See Notes accompanying Combined Financial Statements
3
MORGAN STANLEY UK GROUP PROFIT SHARING SCHEME AND
MORGAN STANLEY UK GROUP PROFIT SHARING PLAN
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years ended 31 December 1998 and 1997
Scheme description
The financial statements show the combined results of the Morgan Stanley UK
Group Profit Sharing Scheme and Morgan Stanley UK Group Profit Sharing Plan.
On 12 November 1987 the Morgan Stanley International Profit Sharing Scheme
was established in the United Kingdom by a trust deed made between Morgan
Stanley Group Inc., its subsidiary Morgan Stanley International and Noble
Lowndes Settlement Trustees Limited. After the merger between Morgan Stanley
Group Inc. and Dean Witter, Discover & Co. on 31 May 1997 a new scheme, the
Morgan Stanley UK Group Profit Sharing Plan, was established in the United
Kingdom on 3 November 1997 by a trust deed made between Morgan Stanley, Dean
Witter, Discover & Co., its subsidiary Morgan Stanley UK Group and Noble
Lowndes Settlement Trustees Limited.
On 2 November 1998, a change was made to the Plan trust deed amending the
parent company name to Morgan Stanley Dean Witter & Co.
The Schemes allow employees of Morgan Stanley UK Group to accumulate pre-tax
profit share contributions in the form of shares of Morgan Stanley Dean
Witter & Co. Common Stock, with all contributions after 1997 being paid into
the Plan.
Eligibility
Full time employees of Morgan Stanley UK Group with at least one year of
service, commencing from the first of the month after the date of joining,
are eligible to participate in the scheme. Employees may elect to
participate in the Schemes, for the full amount of their profit share, up to
a maximum of the lesser of 10% of UK base salary or (Pounds)8,000.
Funding Policy
Amounts invested by employees are invested by Noble Lowndes Settlement
Trustees Limited, as Trustee, in Morgan Stanley Dean Witter & Co. shares
which are held by the Trustee in their name on the employee's behalf.
Shares in respect of the previous qualifying period are appropriated to
employees within two weeks of 31 December (the qualifying date). The
Trustee's fees and brokerage commissions are borne by Morgan Stanley UK
Group, the employer.
During the first two years after appropriation (the Retention Period)
certain statutory restrictions apply limiting members' ability to deal in or
withdraw their shares. After the Retention Period, members may withdraw
their shares or instruct the Trustee to sell their shares and withdraw the
cash proceeds. The cost of withdrawals from the scheme is determined on a
first in first out basis within the relevant employee allocation.
Taxation
The United Kingdom Board of Inland Revenue have approved both the Scheme and
the Plan under Schedule 9, Income & Corporation Taxes Act 1988 and the
Scheme and the Plan are thus exempt from taxation. Employee contributions to
the Schemes are not liable to income tax if shares are held by the Trustees
for at least five years after appropriation. If employees' shares are sold
prior to the end of the three year period, some or all of the income tax
benefits are lost.
1. ACCOUNTING POLICIES
Presentation of the Accounts
The Trustee, being the same for both the Scheme and the Plan, has resolved
that the results of the Scheme and the Plan should the combined as this
appropriately represents the similar nature of the schemes and the intent of
the employer, Morgan Stanley UK Group to continue benefits under the Scheme
after the merger.
4
MORGAN STANLEY UK GROUP PROFIT SHARING SCHEME AND
MORGAN STANLEY UK GROUP PROFIT SHARING PLAN
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years ended 31 December 1998 and 1997
Foreign Currencies
Monetary assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the balance sheet date except
for employee contributions receivable, which are translated at the rate
ruling at the time of share purchase, which occurs shortly after balance
sheet date. Transactions in foreign currencies are translated at the
approximate rate of exchange ruling at the date of the transaction.
Valuation of Investments
The investments are recorded at market value based on the closing market
price on the New York Stock Exchange.
Dividend Income
Dividend income is recorded when the applicable dividends are declared.
Dividends are received net of US withholding tax and are allocated to
participants according to their shareholdings.
5
MORGAN STANLEY UK GROUP PROFIT SHARING SCHEME AND
MORGAN STANLEY UK GROUP PROFIT SHARING PLAN
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years ended 31 December 1998 and 1997
2. CHANGES IN COMBINED HOLDINGS OF MORGAN STANLEY DEAN WITTER & Co.
COMMON STOCK
MORGAN STANLEY UK GROUP PROFIT SHARING SCHEME AND
MORGAN STANLEY UK GROUP PROFIT SHARING PLAN
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Years ended 31, December 1998 and 1997
3. CHANGE IN UNREALISED APPRECIATION OF INVESTMENTS
At 31 December 1998 the closing price on the New York Stock Exchange for
Morgan Stanley Dean Witter & Co. common stock was $71 per share.