Morgan Stanley 1999 Annual Report Download - page 28

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In the fourth quarter of fiscal 1998, the Company com-
pleted the sale of its Global Custody business. The Company also
sold its interest in the operations of SPS, a 73%-owned, publicly
held subsidiary of the Company. In addition, the Company sold cer-
tain credit card receivables relating to its discontinued BRAVO
Card. The Company’s aggregate net pre-tax gain resulting from
these transactions was $685 million.
In addition, during fiscal 1998 the Company sold its
Prime OptionSM MasterCard®portfolio (“Prime Option”), a business
it had operated with NationsBank of Delaware, N.A., and its
Correspondent Clearing business. The gains resulting from the sale
of these businesses were not material to the Company’s results of
operations or financial condition.
BUSINESS SEGMENTS
The remainder of Results of Operations is presented on a business
segment basis. With the exception of fiscal 1997’s merger-related
expenses, substantially all of the operating revenues and operating
expenses of the Company can be directly attributed to its three
business segments: Securities, Asset Management and Credit
Services. Certain revenues and expenses have been allocated to
each business segment, generally in proportion to their respective
revenues or other relevant measures. The accompanying business
segment information includes the operating results of Morgan
Stanley Dean Witter Online (“MSDW Online”), the Company’s
provider of electronic brokerage services, within the Securities seg-
ment. Previously, the Company had included MSDW Online’s
results within its Credit Services segment. In addition, the segment
data presented below reflect the Company’s adoption of Statement
of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures
about Segments of an Enterprise and Related Information.” Prior to
the adoption of SFAS No. 131, the Company had presented the
results of its Securities and Asset Management segments on a com-
bined basis. The segment data of all periods presented have been
restated to reflect these changes. The following discussion excludes
the cumulative effect of the accounting change in references to fis-
cal 1998 net income. Certain reclassifications have been made to
prior-period amounts to conform to the current year’s presentation.
SECURITIES
STATEMENTS OF INCOME
FISCAL FISCAL FISCAL
(dollars in millions) 1999 1998 1997
Revenues:
Investment banking $ 4,430 $ 3,314 $ 2,660
Principal transactions:
Trading 5,983 3,283 3,191
Investments 712 390 473
Commissions 2,904 2,288 2,024
Asset management,
distribution and
administration fees 1,240 998 783
Interest and dividends 11,448 13,455 10,233
Other 158 166 130
Total revenues 26,875 23,894 19,494
Interest expense 10,500 12,355 9,470
Net revenues 16,375 11,539 10,024
Compensation and benefits 7,225 5,428 4,825
Occupancy and equipment 493 419 388
Brokerage, clearing and
exchange fees 378 354 318
Information processing and
communications 756 591 514
Marketing and business
development 511 414 280
Professional services 578 445 290
Other 570 447 383
Total non-interest expenses 10,511 8,098 6,998
Income before income taxes 5,864 3,441 3,026
Provision for income taxes 2,183 1,199 1,185
Net income $ 3,681 $ 2,242 $ 1,841
Securities provides a wide range of financial products, services and
investment advice to individual and institutional investors. Securities
business activities are conducted in the U.S. and throughout the
world and include investment banking, institutional sales and trad-
ing, full-service and online brokerage services, and principal invest-
ing activities. At November 30, 1999, the Company’s financial
advisors provided investment services to more than 4.5 million client
accounts with assets of $583 billion. The Company had the second
largest financial advisor sales organization in the U.S. and had
12,674 professional financial advisors and 475 branches globally at
November 30, 1999.
Securities achieved record net revenues and net income of
$16,375 million and $3,681 million in fiscal 1999, increases of
42% and 64%, respectively, from fiscal 1998. In fiscal 1998,
99 AR |page 26