Morgan Stanley 1999 Annual Report Download - page 33

Non-Interest Expenses
FISCAL FISCAL FISCAL
(dollars in millions) 1999 1998 1997
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
Fiscal 1999’s total non-interest expenses increased 30% to
$10,511 million. Within the non-interest expense category,
employee compensation and benefits expense increased 33%,
reflecting increased levels of incentive compensation based on
record fiscal 1999 revenues and earnings, as well as an increase in
the number of employees. Excluding compensation and benefits
expense, non-interest expenses increased $616 million. Occupancy
and equipment expense increased 18%, principally reflecting addi-
tional office space in New York and certain other locations, as well
as incremental rent attributable to the opening of 37 securities
branch locations. Brokerage, clearing and exchange fees increased
7%, primarily attributable to higher brokerage expenses due to
higher levels of trading volume in the global securities markets.
Information processing and communications costs increased 28%,
primarily due to increased costs associated with the Company’s infor-
mation technology infrastructure, including server and data center
costs. A higher number of employees utilizing communications sys-
tems and certain data services also contributed to the increase.
Marketing and business development expense increased 23%,
reflecting higher advertising expenses associated with the Company’s
individual securities business, including MSDW Online. Increased
travel and entertainment costs associated with the high levels of
activity in the global financial markets also contributed to the
increase. Professional services expense increased 30%, primarily
reflecting higher consulting costs as a result of certain information
technology initiatives, including the Company’s preparations for the
Year 2000 (see also “Year 2000” herein). Higher legal costs associ-
ated with increased levels of business activity and higher temporary
staffing fees also contributed to the increase. Other expenses
increased 28%, primarily reflecting the impact of a higher level of
business activity on various operating expenses. An increase in char-
itable donations and the amortization of goodwill associated with the
Company’s acquisition of AB Asesores in March 1999 also con-
tributed to the increase.
Fiscal 1998’s total non-interest expenses increased 16%
to $8,098 million. Within the non-interest expense category,
employee compensation and benefits expense increased 12%,
reflecting increased levels of incentive compensation based on
higher fiscal 1998 revenues and earnings, as well as an increase in
the number of employees. Excluding compensation and benefits
expense, non-interest expenses increased $497 million.
Occupancy and equipment expense increased 8%, principally
reflecting additional office space and higher occupancy costs in
New York and Hong Kong, as well as incremental rent attributable
to the opening of 27 securities branch locations. Brokerage, clear-
ing and exchange fees increased 11%, primarily reflecting
increased expenses related to higher levels of trading volume in the
global securities markets. Information processing and communica-
tions costs increased 15% due to higher data services and com-
munications costs related to an increased number of employees
and continued enhancements and maintenance associated with the
Company’s information technology infrastructure. Marketing and
business development expense increased 48%, reflecting higher
advertising expenses associated with the Company’s individual
securities business, primarily MSDW Online, as well as higher
travel and entertainment costs relating to increased levels of busi-
ness activity. Professional services expense increased 53%, pri-
marily reflecting higher consulting costs as a result of certain
information technology initiatives, including the Company’s prepa-
rations for EMU and Year 2000. Higher levels of temporary staff
and employment fees due to the increased level of overall business
activity also contributed to the increase. Other expenses increased
17%, reflecting the impact of a higher level of business activity on
various operating expenses.
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