Morgan Stanley 1999 Annual Report Download - page 35

tions. Fiscal 1998’s results primarily reflect losses from an institu-
tional leveraged emerging market debt portfolio that occurred dur-
ing the third quarter of fiscal 1998.
Commissions
Asset Management primarily generates commission revenues
from dealer and distribution concessions on sales of certain funds,
as well as certain allocated commission revenues.
Commission revenues decreased 48% in fiscal 1999 and
21% in fiscal 1998. In both periods, the fluctuations primarily
reflected lower levels of transaction volume and allocated commis-
sion revenues.
Net Interest
Asset Management generates net interest revenues from certain
investment positions, as well as from certain allocated interest rev-
enues and expenses. Net interest revenues in fiscal 1998 and fis-
cal 1997 also include revenues from global custody and
correspondent clearing services.
Net interest revenues decreased 40% in fiscal 1999, pri-
marily reflecting the Company’s sale of its Global Custody and
Correspondent Clearing businesses in fiscal 1998. Net interest rev-
enues increased 36% in fiscal 1998, primarily reflecting higher net
revenues from certain investment positions.
Asset Management, Distribution and Administration Fees
Asset management, distribution and administration fees primarily
include revenues from the management and administration of
assets. These fees arise from investment management services the
Company provides to investment vehicles (the “Funds”) pursuant to
various contractual arrangements. Generally, the Company receives
fees based upon the Fund’s average net assets. Revenues in fiscal
1998 and fiscal 1997 also include other administrative fees and
non-interest revenues earned from global custody and correspon-
dent clearing services. Asset management, distribution and admin-
istration fees were as follows:
FISCAL FISCAL FISCAL
(dollars in millions) 1999 1998 1997
Asset management, distribution
and administration fees $1,930 $1,891 $1,742
The Company’s customer assets under management or supervision
were as follows:
FISCAL FISCAL FISCAL
(dollars in billions) 1999 1998 1997
Products offered primarily to
individuals $258 $219 $193
Products offered primarily to
institutional clients 167 157 145
Total assets under management
or supervision at fiscal
year-end(1) $425 $376 $338
(1) These amounts include assets associated with the Company’s ICS business. Revenues
generated by ICS are included in the Company’s Securities segment. ICS assets were
$23 billion, $19 billion and $14 billion at November 30 1999, 1998 and 1997,
respectively.
In fiscal 1999, asset management, distribution and administration
fees increased 2%. The increase in revenues primarily reflects higher
fund management fees as well as other revenues resulting from a
higher level of assets under management or supervision. These
increases were partially offset by the absence of revenues from global
custody and correspondent clearing activities, attributable to the
Company’s sale of its Global Custody business in the fourth quarter
of fiscal 1998 and its Correspondent Clearing business in the third
quarter of fiscal 1998. In fiscal 1998, asset management, distribu-
tion and administration fees increased 9%. The increase in revenues
primarily reflects higher fund management fees as well as other rev-
enues resulting from a higher level of assets under management or
supervision, including revenues from developed country global equity
and fixed income products. Such increases were partially offset by
the impact of market depreciation in certain of the Company’s prod-
ucts resulting from the downturn in certain global financial markets
which occurred during the latter half of the year. Fiscal 1998’s rev-
enues also were negatively impacted by the Company’s sale of its
Global Custody and Correspondent Clearing businesses.
As of November 30, 1999, assets under management or
supervision increased $49 billion from fiscal year-end 1998. In fis-
cal 1999, approximately 25% of the increase in assets under man-
agement or supervision was attributable to net inflows of new
customer assets, while the remaining 75% reflected market appre-
ciation. In fiscal 1998, approximately 50% of the increase in
assets under management or supervision was attributable to net
inflows of new customer assets, while the remaining 50% reflected
market appreciation.
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