| CONVERTIBLE PREFERRED STOCK
> During 1996, Microsoft issued 12.5 million shares of 2.75% convertible exchangeable principal-protected preferred stock. Dividends are payable quarterly in arrears. Preferred stockholders have preference over common stockholders in dividends and liquidation rights. In December 1999, each preferred share is convertible into common shares or an equivalent amount of cash determined by a formula that provides a floor price of $79.875 and a cap of $102.24 per preferred share, equivalent to $19.97 and $25.56 per common share. Net proceeds of $980 million were used to repurchase common shares.
COMMON STOCK
> ISSUED AND OUTSTANDING Shares of common stock outstanding were as follows:
| Year Ended June 30 |
1997 |
|
1998 |
|
1999 |
|
| |
|
|
|
|
|
|
| Balance, beginning of year |
4,776 |
|
4,816 |
|
4,940 |
|
| |
|
|
|
|
|
|
| Issued |
188 |
|
202 |
|
213 |
|
| |
|
|
|
|
|
|
| Repurchased |
(148 |
) |
(78 |
) |
(44 |
) |
|
|
| |
Balance, end of year |
4,816 |
|
4,940 |
|
5,109 |
|
|
|
> REPURCHASE PROGRAM The Company repurchases its common stock in the open market to provide shares for issuing to employees under stock option and stock purchase plans. The Company’s Board of Directors authorized continuation of this program in 2000.
During 1998, the Company executed two forward settlement structured repurchase agreements with an independent third party totaling 42 million shares of stock and paid cash for a portion of the purchase price. In 1999, the Company settled the agreements by returning 28 million shares of stock, based upon the stock price on the date of settlement. The timing and method of settlement were at the discretion of the Company. The differential between the cash paid and the price of Microsoft common stock on the date of the agreement was originally reflected in common stock and paid-in capital.
PUT WARRANTS
> To enhance its stock repurchase program, Microsoft sells put warrants to independent third parties. These put warrants entitle the holders to sell shares of Microsoft common stock to the Company on certain dates at specified prices. On June 30, 1999, 163 million warrants were outstanding with strike prices ranging from $59 to $65 per share. The put warrants expire between September 1999 and March 2002. The outstanding put warrants permit a net-share settlement at the Company’s option and do not result in a put warrant liability on the balance sheet.
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