Morgan Stanley 2005 Annual Report Download - page 15

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LETTER TO SHAREHOLDERS
in countries like Russia, China, India, Turkey, Brazil, South
Korea, Mexico and in the Middle East. We plan to capitalize on
this potential by marshaling our current strengths, improving
cooperation across divisions and adding resources to these areas.
For example, we enhanced our presence in both South Korea and
Russia by obtaining bank licenses to better serve our clients. We
also are continuing to build on our decade-old relationship with
China.
•We are employing more of our own equity capital to work
in principal investing, both independently and together
with clients as investment partners. Morgan Stanley’s global
franchise provides us with a vast array of investment ideas,
and we believe that applying our own capital in this fashion
will have significant benefits in terms of client collaboration
and increased returns for the firm.
•In Asset Management, we are shifting our focus to manage
for growth rather than just maximizing margins. We are
addressing the major growth opportunities in alternative
investments and in international markets through both organic
growth and acquisitions. We also are taking steps to improve
performance and stem outflows from our proprietary funds.
•In Retail Brokerage, we continue to build our high-net-worth
business, which is a key growth opportunity. We are expanding
our product offerings and adding other banking capabilities
and investment products to further improve the breadth of
services we offer to individual investors. A recent example of
these new initiatives is the successful offering of a BlackRock
closed-end fund—our first such launch since 1998—which
leveraged both institutional and retail capabilities. We also are
investing in technology and compliance to help get this busi-
ness where we want it to be.
•Discover offers significant growth potential, driven by attractive
market conditions and the October 2004 ruling in the U.S.
Department of Justice’s antitrust suit, which opened the debit
and third-party issuance markets to us for the first time. We
already have begun to move aggressively into these markets,
acquiring the PULSE Network and expanding our third-party
relationships. International opportunities also are just beginning
to accelerate. In 2005, we launched a strategic alliance with
China UnionPay, the only national bankcard payment network
in China, and agreed to acquire the Goldfish credit card
business in the U.K. to build scale in that attractive market.
Achieving all of the demanding targets we have set for our-
selves won’t happen overnight. During 2006, you will see invest-
ment in these initiatives and progress on many of these plans.
But some areas—like Retail Brokerage—may take two or three
years to improve margins. Nevertheless, we will be vigilant in
executing on our strategy and maintaining our focus on superior
performance. And we will be open and transparent with you
about our progress along the way.
We will tear down
any barriers that
impede our ability
to create a cohesive
“one firm” culture in
which every employee
acts and feels like an
owner of the firm.