-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q0p+zDyv9tqpg+k+ZvmLpHGrecq7PoUnnoTudv5CBenMDWbjoQU6FKnrP1sOoAAs YhtNHsP1GZAysitLUMMayA== 0000950130-01-506125.txt : 20020413 0000950130-01-506125.hdr.sgml : 20020413 ACCESSION NUMBER: 0000950130-01-506125 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011219 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20011219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER & CO CENTRAL INDEX KEY: 0000895421 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 363145972 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11758 FILM NUMBER: 1817037 BUSINESS ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2127614000 MAIL ADDRESS: STREET 1: 1221 SIXTH AVENUE STREET 2: 27TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020 FORMER COMPANY: FORMER CONFORMED NAME: DEAN WITTER DISCOVER & CO DATE OF NAME CHANGE: 19960315 8-K 1 d8k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 19, 2001 Morgan Stanley Dean Witter & Co. -------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 1-11758 36-3145972 ------------------------------------------------------------------------- (state or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification No.) incorporation) 1585 Broadway, New York, New York 10036 ------------------------------------------------ (Address of principal executive offices)(Zip Code) Registrant's telephone number, including area code: (212) 761-4000 -------------- ------------------------------------------------------------------------- (Former address, if changed since last report.) Item 5. Other events - ---------------------- On December 19, 2001, Morgan Stanley Dean Witter & Co. (the "Registrant") released financial information with respect to its year and quarter ended November 30, 2001. A copy of the press release containing this information is annexed as Exhibit 99.1 to this Report and by this reference incorporated herein and made a part hereof. The Registrant released Credit Services Owned and Managed Quarterly Statements of Income for fiscal 2000 and 2001 reflecting the reclassification of cardmember reward expense. A copy of this information is annexed as Exhibit 99.2 to this Report and by this reference incorporated herein and made a part hereof. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits - -------------------------------------------------------------------------------- 99.1 Press release of the Registrant dated December 19, 2001 containing financial information for the fourth quarter ended November 30, 2001. - -------------------------------------------------------------------------------- 99.2 Credit Services Owned and Managed Quarterly Statements of Income for fiscal 2000 and 2001 reflecting the reclassification of cardmember reward expense. - -------------------------------------------------------------------------------- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. MORGAN STANLEY DEAN WITTER & CO. -------------------------------- (Registrant) By: /s/ -------------------------------- Ronald T. Carman Assistant Secretary Dated: December 19, 2001 Contact: Investor Relations Media Relations William Pike Raymond O'Rourke 212-761-0008 212-761-4262 MORGAN STANLEY REPORTS FULL-YEAR NET INCOME OF $3.6 BILLION AND ROE OF 19%; FOURTH QUARTER NET INCOME IS $870 MILLION NEW YORK, December 19, 2001 -- Morgan Stanley (NYSE: MWD) today reported net income for the fiscal year of $3,610 million, 34 percent below last year's record $5,456 million. Diluted earnings per share were $3.19, down 33 percent from $4.73 a year ago. Net revenues (total revenues less interest expense and the provision for loan losses) declined 16 percent to $21.9 billion and the return on average common equity for the full year was 19 percent./1/ Net income for the fourth quarter ended November 30, 2001 was $870 million -- a 28 percent decline from last year's fourth quarter net income of $1,208 million. Diluted earnings per share were $0.78 -- down 26 percent from $1.06 a year ago. Fourth quarter net revenues of $4.6 billion were 17 percent below last year's fourth quarter. The annualized return on average common equity was 18 percent for the quarter. Philip J. Purcell, Chairman, and Robert G. Scott, President, said in a joint statement, "This has been a difficult year, with the economic downturn and the extraordinary events of September 11. However, the commitment and dedication of our employees throughout the year allowed us to earn a return on equity of 19 percent. We have focused on reducing expenses throughout 2001 and we will continue this effort in 2002. While the economic environment remains uncertain, we continue to benefit from the diversity of our businesses. Exceeding the expectations of our clients remains our first priority." SECURITIES FULL YEAR The Company's securities business posted net income of $2,363 million in fiscal 2001, down 42 percent from a year ago. Net revenues declined 20 percent to $15.9 billion, reflecting substantially lower levels of activity in almost all institutional and individual investor businesses. Fixed income, which includes commodities, was an exception: it achieved record full-year net revenues. In institutional securities, the Company's fixed income business benefited from monetary easing in the U.S. and Europe, increased volatility in both commodity prices and fixed income markets and robust underwriting volumes in investment grade issues. Investment banking and equities were hard hit by the industry-wide slowdown in M&A and equity issuance. For the first eleven months of calendar 2001, industry-wide announced and completed global M&A activity declined 54 percent and 41 percent, respectively, from year ago levels. Worldwide equity and equity-related issuance was 38 percent lower./2/ Additionally, equity sales and trading revenues were negatively impacted by declines in volatility and liquidity, and an increase margin pressure. - -------- /1/ All amounts for the twelve-months ended November 30, 2001 exclude (1) an extraordinary loss, net of taxes, of $30 million, or $0.03 per share, resulting from the early extinguishment of debt, and (2) a net after-tax charge of $59 million, or $0.05 per share, resulting from the adoption of SFAS 133 on December 1, 2000. See Page F-1 of Financial Summary, Notes 1 & 2. /2/ Source: Thomson Financial Securities Data. 4 The Company's market share positions are: 31 percent in completed global M&A; 28 percent in announced global M&A; 11 percent in worldwide equity and equity-related underwritings; and 17 percent in worldwide IPOs./3/ The individual investor group's net revenues declined substantially from last year's record level as retail participation in equity markets was down throughout the year. A decline in net interest income, driven by sharply lower margin debit balances, also contributed to the lower revenues. IIG added 106,000 domestic client accounts to stand at a record 5.6 million, while total client assets declined $67 billion, or 10 percent, to $595 billion at fiscal year end. Principal investment activities had negative revenues of $311 million for the full year compared to a $133 million gain a year ago. FOURTH QUARTER Securities posted net income of $530 million, a 41 percent decline versus fourth quarter 2000. The decrease was driven by lower net revenues across most of the Company's securities businesses. A reduction in non-compensation expenses, excluding costs associated with the Company's aircraft leasing business, contributed positively to the quarter's results. o Institutional sales and trading net revenues of $1.4 billion were 3 percent below a year ago. - Higher fixed income revenues were driven primarily by strong gains in government debt and interest rate derivatives trading as both desks benefited from the higher levels of trading volume and market volatility in the fourth quarter. - Equities' revenues were down from fourth quarter 2000, primarily due to lower customer flows, a continuing decline in primary issuance, and a significant decrease in volatility. o In investment banking: - Advisory revenues were $319 million, down 44 percent from last year's fourth quarter. The decline resulted primarily from the sharp decrease in global M&A activity that began during the second half of last year. Global completed M&A volume fell 53 percent in the fourth quarter compared to a year ago./4/ - Total underwriting revenues declined 12 percent from last year's fourth quarter to $479 million as lower equity revenues were partially offset by an increase in fixed income. The decline in equities reflects a 50 percent decrease in global equity new issuance volume./4/ o In the individual investor group: - Net revenues declined 23 percent to $986 million reflecting both the continued lower level of retail participation in equity markets compared to a year ago, and a decrease in revenues from asset management products and fee-based assets. In addition, net interest income decreased due to lower margin debit balances. - Globally, the number of financial advisors declined by 652 quarter-to-quarter and by 276 year-to-year to stand at 13,690 at fiscal year-end. Client assets in fee-based accounts were $110 billion, unchanged from the third quarter, but down 9 percent from a year ago. INVESTMENT MANAGEMENT FULL YEAR Investment management reported net income of $545 million, a 19 percent decline from last year's $677 million. The decline reflects a decrease in the Company's average assets under management, due largely to a decline in the market value of equity assets -- partially offset by a 6 percent decline in non-compensation expenses. Assets under management were $459 billion, down 8 percent for the fiscal year. The Company launched 9 new funds during the year, generating combined sales of nearly - --------- /3/ Source: Thomson Financial Securities Data -- January 1 to November 30, 2001. /4/ Source: Thomson Financial Securities Data -- September 1 to November 30, 2001 & 2000. 5 $2 billion. The percent of the Company's fund assets performing in the top half of the Lipper rankings for one year was 59 percent compared to 58 percent a year ago./5/ The number of funds rated four or five stars by Morningstar was 56 compared to 65 a year ago. FOURTH QUARTER Investment management's quarterly net income was $147 million, down 10 percent from $164 million in the fourth quarter of 2000. The decrease was driven by lower average assets under management partially offset by a decline in non-compensation expenses. o Retail assets fell $12 billion during the quarter and $35 billion from a year ago -- to stand at $280 billion. Institutional assets were unchanged during the quarter but declined $6 billion over the past twelve months to stand at $179 billion. CREDIT SERVICES FULL YEAR Credit services net income was $702 million, down 3 percent from a year ago. Moderate growth in Discover Card's consumer loan portfolio and a widening in the interest rate spread on that portfolio were offset by a deterioration in credit quality. Managed consumer loans were $49.3 billion at fiscal year end, 5 percent greater than a year ago, while the interest spread increased 62 basis points over the same time period. The consumer loan charge-off rate increased 96 basis points to 5.36 percent and the over-90-day delinquency rate rose 60 basis points to 3.02 percent. The decline in credit quality reflects the weakness in the U.S. economy, a high level of national bankruptcy filings and the adverse impact of the seasoning of cardmember accounts. For the year, total transaction volume rose to a record $93.3 billion, a record 721,000 merchant locations were opened, and 4.8 million new cardmember accounts were added. Discover now has 45.7 million cardmember accounts. FOURTH QUARTER Credit services net income rose 31 percent from a year ago to $193 million. The increase was driven by higher net interest income and lower marketing and business development expenses, partially offset by an increase in net charge-offs. In addition, merchant and cardmember fees were up from fourth quarter 2000 levels. o Managed consumer loans were $49.3 billion at quarter end, an increase of $2.2 billion, or 5 percent, from a year ago. The spread on these loans increased 143 basis points over the same period, driven by a decline in the cost of funds that began early in the year. o Merchant and cardmember fees increased 12 percent from a year ago to $539 million. Higher cardmember fees were primarily responsible for the increase. Transaction volume declined 3 percent to $22.1 billion, largely as a result of lower balance transfers. o The consumer loan net charge-off rate was 5.85 percent, essentially flat with the third quarter but up 128 basis points from a year ago. The over-90-day delinquency rate was 3.02 percent compared to 2.42 percent in fourth quarter 2000. o Discover opened 995,000 cardmember accounts and 161,000 new merchant locations during the quarter. Total capital at November 30, 2001 was $61.6 billion, including $21.9 billion of common and preferred stockholders' equity and preferred securities issued by subsidiaries. Book value per common share was $18.64, based on quarter-end shares outstanding of 1.1 billion. The Company announced that its Board of Directors declared a $0.23 quarterly dividend per common share. The dividend is payable on January 25, 2002 to common shareholders of record on January 11, 2002. - --------- /5/ October 2001 vs. October 2000. 6 The Company repurchased approximately 25 million shares of its common stock during the 2001 fiscal year. Morgan Stanley is a global financial services firm and a market leader in securities, investment management and credit services. With more than 700 offices in 28 countries, Morgan Stanley connects people, ideas and capital to help clients achieve their financial aspirations. Access this press release on-line @www.morganstanley.com # # # (See Attached Schedules) This release may contain forward-looking statements. These statements, which reflect management's beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect the Company's future results, please see "Certain Factors Affecting Results of Operations" and "Competition and Regulation" under each of "Securities," "Investment Management" and "Credit Services" in Part 1, Item 1, in the Company's 2000 Annual Report to Shareholders on Form 10-K and "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in the Company's Quarterly Reports on Form 10-Q for fiscal 2001. 7
MORGAN STANLEY DEAN WITTER & CO. Financial Summary (unaudited, dollars in millions) Percentage Quarter Ended Change From: Twelve Months Ended -------------------------------------------- -------------- ----------------------------- Nov 30, Nov 30, Aug 31, Nov 30, Aug 31, Nov 30, Nov 30, Percentage 2001 2000 2001 2000 2001 2001 2000 Change -------------- -------------- -------------- ------ ------ -------------- -------------- ---------- Net revenues Securities $ 3,120 $ 3,973 $ 3,640 (21%) (14%) $ 15,914 $ 19,807 (20%) Investment Management 559 696 603 (20%) (7%) 2,423 2,712 (11%) Credit Services 904 876 893 3% 1% 3,559 3,480 2% -------------- -------------- -------------- -------------- -------------- Consolidated net revenues $ 4,583 $ 5,545 $ 5,136 (17%) (11%) $ 21,896 $ 25,999 (16%) ============== ============== ============== ============== ============== Net income Securities $ 530 $ 897 $ 414 (41%) 28% $ 2,363 $ 4,054 (42%) Investment Management 147 164 125 (10%) 18% 545 677 (19%) Credit Services 193 147 196 31% (2%) 702 725 (3%) -------------- -------------- -------------- -------------- -------------- Income before extraordinary item and cumulative effect of accounting change 870 1,208 735 (28%) 18% 3,610 5,456 (34%) Extraordinary item (1) 0 0 (30) -- * (30) 0 * Cumulative effect of accounting change (2) 0 0 0 -- -- (59) 0 * -------------- -------------- -------------- -------------- -------------- Consolidated net income $ 870 $ 1,208 $ 705 (28%) 23% $ 3,521 $ 5,456 (35%) ============== ============== ============== ============== ============== Preferred stock dividend requirements $ 5 $ 9 $ 9 (44%) (44%) $ 32 $ 36 (11%) ============== ============== ============== ============== ============== Earnings applicable to common shares $ 865 $ 1,199 $ 696 (28%) 24% $ 3,489 $ 5,420 (36%) ============== ============== ============== ============== ============== Basic earnings per common share Income before extraordinary item and cumulative effect of accounting change $ 0.80 $ 1.10 $ 0.67 (27%) 19% $ 3.29 $ 4.95 (34%) Extraordinary item $ 0.00 $ 0.00 $ (0.03) -- * $ (0.03)$ 0.00 * Cumulative effect of accounting change $ 0.00 $ 0.00 $ 0.00 -- -- $ (0.05)$ 0.00 * Net Income $ 0.80 $ 1.10 $ 0.64 (27%) 25% $ 3.21 $ 4.95 (35%) Diluted earnings per common share Income before extraordinary item and cumulative effect of accounting change $ 0.78 $ 1.06 $ 0.65 (26%) 20% $ 3.19 $ 4.73 (33%) Extraordinary item $ 0.00 $ 0.00 $ (0.03) -- * $ (0.03)$ 0.00 * Cumulative effect of accounting change $ 0.00 $ 0.00 $ 0.00 -- -- $ (0.05)$ 0.00 * Net Income $ 0.78 $ 1.06 $ 0.62 (26%) 26% $ 3.11 $ 4.73 (34%) Average common shares outstanding Basic 1,078,517,918 1,089,728,519 1,085,447,127 1,086,121,508 1,095,858,438 Diluted 1,108,980,235 1,135,358,763 1,119,301,107 1,121,764,086 1,145,011,515 Period end common shares outstanding 1,093,006,744 1,107,270,331 1,106,317,423 1,093,006,744 1,107,270,331 Return on common equity (3) 17.6% 26.5% 14.9% 18.5% 30.9%
____________________________________ (1) Represents extraordinary loss on the early extinguishment of debt. (2) Represents the effects of an accounting change adopted in the first quarter of fiscal 2001 with respect to the accounting for derivative instruments and hedging activities associated with SFAS 133. (3) Excludes the cumulative effect of accounting change and extraordinary item. Note: Certain reclassifications have been made to prior period amounts to conform to the current presentation. F - 1
MORGAN STANLEY DEAN WITTER & CO. Consolidated Income Statement Information (unaudited, dollars in millions) Percentage Quarter Ended Change From: Twelve Months Ended ----------------------------- ----------------- ------------------- Nov 30, Nov 30, Aug 31, Nov 30, Aug 31, Nov 30, Nov 30, Percentage 2001 2000 2001 2000 2001 2001 2000 Change -------- -------- -------- -------- -------- -------- -------- ---------- Investment banking $ 805 $ 1,131 $ 789 (29%) 2% $ 3,415 $ 5,008 (32%) Principal transactions: Trading 649 979 1,097 (34%) (41%) 5,501 7,361 (25%) Investments (104) (70) (59) (49%) (76%) (316) 193 * Commissions 750 858 718 (13%) 4% 3,153 3,645 (13%) Fees: Asset management, distribution and administration 944 1,101 1,020 (14%) (7%) 4,078 4,286 (5%) Merchant and cardmember 345 326 362 6% (5%) 1,345 1,323 2% Servicing 567 390 434 45% 31% 1,904 1,450 31% Interest and dividends 4,116 5,465 5,825 (25%) (29%) 24,127 21,234 14% Other 146 155 110 (6%) 33% 520 485 7% -------- -------- -------- -------- -------- Total revenues 8,218 10,335 10,296 (20%) (20%) 43,727 44,985 (3%) Interest expense 3,304 4,582 4,883 (28%) (32%) 20,779 18,176 14% Provision for consumer loan losses 331 208 277 59% 19% 1,052 810 30% -------- -------- -------- -------- -------- Net revenues 4,583 5,545 5,136 (17%) (11%) 21,896 25,999 (16%) -------- -------- -------- -------- -------- Compensation and benefits 1,424 1,775 2,380 (20%) (40%) 9,397 10,936 (14%) Occupancy and equipment 216 221 227 (2%) (5%) 895 772 16% Brokerage, clearing and exchange fees 169 151 165 12% 2% 664 586 13% Information processing and communications 411 417 402 (1%) 2% 1,622 1,486 9% Marketing and business development 287 452 274 (37%) 5% 1,258 1,560 (19%) Professional services 311 384 249 (19%) 25% 1,148 1,110 3% Other 397 256 281 55% 41% 1,228 1,058 16% -------- -------- -------- -------- -------- Total non-interest expenses 3,215 3,656 3,978 (12%) (19%) 16,212 17,508 (7%) -------- -------- -------- -------- -------- Gain on sale of business 0 0 0 -- -- 0 35 * -------- -------- -------- -------- -------- Income before taxes, extraordinary item and cumulative effect of accounting change 1,368 1,889 1,158 (28%) 18% 5,684 8,526 (33%) Income tax expense 498 681 423 (27%) 18% 2,074 3,070 (32%) -------- -------- -------- -------- -------- Income before extraordinary item and cumulative effect of accounting change 870 1,208 735 (28%) 18% 3,610 5,456 (34%) Extraordinary item (1) 0 0 (30) -- * (30) 0 * Cumulative effect of accounting change (2) 0 0 0 -- -- (59) 0 * -------- -------- -------- -------- -------- Net income $ 870 $ 1,208 $ 705 (28%) 23% $ 3,521 $ 5,456 (35%) ======== ======== ======== ======== ======== Preferred stock dividend requirements $ 5 $ 9 $ 9 (44%) (44%) $ 32 $ 36 (11%) ======== ======== ======== ======== ======== Earnings applicable to common shares $ 865 $ 1,199 $ 696 (28%) 24% $ 3,489 $ 5,420 (36%) ======== ======== ======== ======== ======== Compensation and benefits as a % of net revenues 31% 32% 46% 43% 42%
________________________________________________ (1) Represents extraordinary loss on the early extinguishment of debt. (2) Represents the effects of an accounting change adopted in the first quarter of fiscal 2001 with respect to the accounting for derivative instruments and hedging activities associated with SFAS 133. Note: Certain reclassifications have been made to prior period amounts to conform to the current presentation. F - 2
MORGAN STANLEY DEAN WITTER & CO. Securities Income Statement Information (unaudited, dollars in millions) Percentage Quarter Ended Change From: Twelve Months Ended ------------------------------ ----------------- ------------------- Nov 30, Nov 30, Aug 31, Nov 30, Aug 31, Nov 30, Nov 30, Percentage 2001 2000 2001 2000 2001 2001 2000 Change -------- -------- -------- ------- ------- -------- -------- ---------- Investment banking $ 798 $ 1,108 $ 777 (28%) 3% $ 3,362 $ 4,881 (31%) Principal transactions: Trading 649 979 1,097 (34%) (41%) 5,501 7,361 (25%) Investments (100) (103) (58) 3% (72%) (311) 133 * Commissions 740 849 709 (13%) 4% 3,116 3,605 (14%) Asset management, distribution and administration fees 416 497 458 (16%) (9%) 1,830 1,898 (4%) Interest and dividends 3,511 4,734 5,135 (26%) (32%) 21,464 18,256 18% Other 134 149 100 (10%) 34% 483 457 6% -------- -------- -------- -------- -------- Total revenues 6,148 8,213 8,218 (25%) (25%) 35,445 36,591 (3%) Interest expense 3,028 4,240 4,578 (29%) (34%) 19,531 16,784 16% -------- -------- -------- -------- -------- Net revenues 3,120 3,973 3,640 (21%) (14%) 15,914 19,807 (20%) -------- -------- -------- -------- -------- Compensation and benefits 1,136 1,398 1,993 (19%) (43%) 7,927 9,464 (16%) Occupancy and equipment 171 178 182 (4%) (6%) 716 609 18% Brokerage, clearing and exchange fees 129 104 123 24% 5% 496 425 17% Information processing and communications 250 275 255 (9%) (2%) 1,026 958 7% Marketing and business development 119 180 113 (34%) 5% 507 678 (25%) Professional services 224 293 182 (24%) 23% 837 815 3% Other 278 147 163 89% 71% 775 611 27% -------- -------- -------- -------- -------- Total non-interest expenses 2,307 2,575 3,011 (10%) (23%) 12,284 13,560 (9%) -------- -------- -------- -------- -------- Income before taxes, extraordinary item and cumulative effect of accounting change 813 1,398 629 (42%) 29% 3,630 6,247 (42%) Income tax expense 283 501 215 (44%) 32% 1,267 2,193 (42%) -------- -------- -------- -------- -------- Income before extraordinary item and cumulative effect of accounting change 530 897 414 (41%) 28% 2,363 4,054 (42%) Extraordinary item - loss on the early extinguishment of debt 0 0 (30) -- * (30) 0 * Cumulative effect of accounting change (1) 0 0 0 -- -- (46) 0 * -------- -------- -------- -------- -------- Net income $ 530 $ 897 $ 384 (41%) 38% $ 2,287 $ 4,054 (44%) ======== ======== ======== ======== ======== Compensation and benefits as a % of net revenues 36% 35% 55% 50% 48% Non-compensation expenses as a % of net revenues 38% 30% 28% 27% 21% Profit margin (2) 17% 23% 11% 15% 20%
___________________________ (1) Represents the effects of an accounting change adopted in the first quarter of fiscal 2001 with respect to the accounting for derivative instruments and hedging activities associated with SFAS 133. (2) Net income excluding cumulative effect of accounting change and extraordinary item as a % of net revenues. F - 3
MORGAN STANLEY DEAN WITTER & CO. Investment Management Income Statement Information (unaudited, dollars in millions) Percentage Quarter Ended Change From: Twelve Months Ended ------------------------------ ------------------- ------------------- Nov 30, Nov 30, Aug 31, Nov 30, Aug 31, Nov 30, Nov 30, Pecentage 2001 2000 2001 2000 2001 2001 2000 Change -------- -------- -------- -------- -------- -------- -------- --------- Investment banking $ 7 $ 23 $ 12 (70%) (42%) $ 53 $ 127 (58%) Principal transactions: Investments (4) 33 (1) (112%) * (5) 60 (108%) Commissions 10 9 9 11% 11% 37 40 (8%) Asset management, distribution and administration fees 528 604 562 (13%) (6%) 2,248 2,388 (6%) Interest and dividends 12 29 16 (59%) (25%) 70 83 (16%) Other 10 6 7 67% 43% 32 28 14% -------- -------- -------- -------- -------- Total revenues 563 704 605 (20%) (7%) 2,435 2,726 (11%) Interest expense 4 8 2 (50%) 100% 12 14 (14%) -------- -------- -------- -------- -------- Net revenues 559 696 603 (20%) (7%) 2,423 2,712 (11%) -------- -------- -------- -------- -------- Compensation and benefits 119 195 205 (39%) (42%) 743 814 (9%) Occupancy and equipment 25 25 26 -- (4%) 103 97 6% Brokerage, clearing and exchange fees 40 47 42 (15%) (5%) 168 161 4% Information processing and communications 27 24 29 13% (7%) 106 90 18% Marketing and business development 26 54 35 (52%) (26%) 138 178 (22%) Professional services 30 38 22 (21%) 36% 112 113 (1%) Other 36 39 33 (8%) 9% 126 159 (21%) -------- -------- -------- -------- -------- Total non-interest expenses 303 422 392 (28%) (23%) 1,496 1,612 (7%) -------- -------- -------- -------- -------- Gain on sale of business 0 0 0 -- -- 0 35 * -------- -------- -------- -------- -------- Income before income taxes 256 274 211 (7%) 21% 927 1,135 (18%) Income tax expense 109 110 86 (1%) 27% 382 458 (17%) -------- -------- -------- -------- -------- Net income $ 147 $ 164 $ 125 (10%) 18% $ 545 $ 677 (19%) ======== ======== ======== ======== ======== Compensation and benefits as a % of net revenues 21% 28% 34% 31% 30% Non-compensation expenses as a % of net revenues 33% 33% 31% 31% 29% Profit margin (1) 26% 24% 21% 22% 25%
_______________ (1) Net income as a % of net revenues. F - 4
MORGAN STANLEY DEAN WITTER & CO. Credit Services Income Statement Information (unaudited, dollars in millions) Percentage Quarter Ended Change From: Twelve Months Ended ----------------------------- ---------------- ------------------- Nov 30, Nov 30, Aug 31, Nov 30, Aug 31, Nov 30, Nov 30, Percentage 2001 2000 2001 2000 2001 2001 2000 Change ------- ------- ------- ------- ------- ------- ------- ---------- Fees: Merchant and cardmember (1) $ 345 $ 326 $ 362 6% (5%) $ 1,345 $ 1,323 2% Servicing 567 390 434 45% 31% 1,904 1,450 31% Other 2 0 3 * (33%) 5 0 * ------- ------- ------- ------- ------- Total non-interest revenues 914 716 799 28% 14% 3,254 2,773 17% Interest revenue 593 702 674 (16%) (12%) 2,593 2,895 (10%) Interest expense 272 334 303 (19%) (10%) 1,236 1,378 (10%) ------- ------- ------- ------- ------- Net interest income 321 368 371 (13%) (13%) 1,357 1,517 (11%) Provision for consumer loan losses 331 208 277 59% 19% 1,052 810 30% ------- ------- ------- ------- ------- Net credit income (10) 160 94 (106%) (111%) 305 707 (57%) ------- ------- ------- ------- ------- Net revenues 904 876 893 3% 1% 3,559 3,480 2% ------- ------- ------- ------- ------- Compensation and benefits 169 182 182 (7%) (7%) 727 658 10% Occupancy and equipment 20 18 19 11% 5% 76 66 15% Information processing and communications 134 118 118 14% 14% 490 438 12% Marketing and business development (1) 142 218 126 (35%) 13% 613 704 (13%) Professional services 57 53 45 8% 27% 199 182 9% Other 83 70 85 19% (2%) 327 288 14% ------- ------- ------- ------- ------- Total non-interest expenses 605 659 575 (8%) 5% 2,432 2,336 4% ------- ------- ------- ------- ------- Income before income taxes and cumulative effect of accounting change 299 217 318 38% (6%) 1,127 1,144 (1%) Income tax expense 106 70 122 51% (13%) 425 419 1% ------- ------- ------- ------- ------- Income before cumulative effect of accounting change 193 147 196 31% (2%) 702 725 (3%) Cumulative effect of accounting change (2) 0 0 0 -- -- (13) 0 * ------- ------- ------- ------- ------- Net income $ 193 $ 147 $ 196 31% (2%) $ 689 $ 725 (5%) ======= ======= ======= ======= ======= Compensation and benefits as a % of net revenues 19% 21% 20% 20% 19% Non-compensation expenses as a % of net revenues 48% 54% 44% 48% 48% Profit margin (3) 21% 17% 22% 20% 21%
_________________________ (1) Information restated to reflect the reclassification of cardmember reward expense, previously reflected in marketing and business development, as a contra revenue item in merchant and cardmember fees. (2) Represents the effects of an accounting change adopted in the first quarter of fiscal 2001 with respect to the accounting for derivative instruments and hedging activities associated with SFAS 133. (3) Net income excluding cumulative effect of accounting change as a % of net revenues. F - 5
MORGAN STANLEY DEAN WITTER & CO. Credit Services Income Statement Information (unaudited, dollars in millions) (Managed loan basis) Percentage Quarter Ended Change From: Twelve Months Ended ---------------------------- ------------------ --------------------- Nov 30, Nov 30, Aug 31, Nov 30, Aug 31, Nov 30, Nov 30, Percentage 2001 2000 2001 2000 2001 2001 2000 Change -------- -------- -------- -------- -------- -------- -------- ---------- Fees: Merchant and cardmember (1) $ 539 $ 480 $ 539 12% -- $ 2,086 $ 1,950 7% Servicing 0 0 0 -- -- 0 0 -- Other 2 0 3 * (33%) 5 0 * -------- -------- -------- -------- -------- Total non-interest revenues 541 480 542 13% -- 2,091 1,950 7% Interest revenue 1,696 1,675 1,741 1% (3%) 6,929 6,327 10% Interest expense 562 754 657 (25%) (14%) 2,747 2,840 (3%) -------- -------- -------- -------- -------- Net interest income 1,134 921 1,084 23% 5% 4,182 3,487 20% Provision for consumer loan losses 771 525 733 47% 5% 2,714 1,957 39% -------- -------- -------- -------- -------- Net credit income 363 396 351 (8%) 3% 1,468 1,530 (4%) -------- -------- -------- -------- -------- Net revenues 904 876 893 3% 1% 3,559 3,480 2% -------- -------- -------- -------- -------- Compensation and benefits 169 182 182 (7%) (7%) 727 658 10% Occupancy and equipment 20 18 19 11% 5% 76 66 15% Information processing and communications 134 118 118 14% 14% 490 438 12% Marketing and business development (1) 142 218 126 (35%) 13% 613 704 (13%) Professional services 57 53 45 8% 27% 199 182 9% Other 83 70 85 19% (2%) 327 288 14% -------- -------- -------- -------- -------- Total non-interest expenses 605 659 575 (8%) 5% 2,432 2,336 4% -------- -------- -------- -------- -------- Income before income taxes and cumulative effect of accounting change 299 217 318 38% (6%) 1,127 1,144 (1%) Income tax expense 106 70 122 51% (13%) 425 419 1% -------- -------- -------- -------- -------- Income before cumulative effect of accounting change 193 147 196 31% (2%) 702 725 (3%) Cumulative effect of accounting change (2) 0 0 0 -- -- (13) 0 * -------- -------- -------- -------- -------- Net income $ 193 $ 147 $ 196 31% (2%) $ 689 $ 725 (5%) ======== ======== ======== ======== ======== Compensation and benefits as a % of net revenues 19% 21% 20% 20% 19% Non-compensation expenses as a % of net revenues 48% 54% 44% 48% 48% Profit margin (3) 21% 17% 22% 20% 21%
__________________ (1) Information restated to reflect the reclassification of cardmember reward expense, previously reflected in marketing and business development, as a contra revenue item in merchant and cardmember fees. (2) Represents the effects of an accounting change adopted in the first quarter of fiscal 2001 with respect to the accounting for derivative instruments and hedging activities associated with SFAS 133. (3) Net income excluding cumulative effect of accounting change as a % of net revenues. F - 6
MORGAN STANLEY DEAN WITTER & CO. Financial Information and Statistical Data (unaudited) Percentage Twelve Months Quarter Ended Change From: Ended --------------------------- --------------- --------------- Nov 30, Nov 30, Aug 31, Nov 30, Aug 31, Nov 30, Nov 30, Percentage 2001 2000 2001 2000 2001 2001 2000 Change --------- -------- -------- ------- ------- ------- ------- ---------- Morgan Stanley Total assets (millions) $ 484,000 $427,000 $507,000 13% (5%) Period end common shares outstanding (millions) 1,093.0 1,107.3 1,106.3 (1%) (1%) Book value per common share $ 18.64 $ 16.91 $ 17.76 10% 5% Shareholders' equity (millions) (1) $ 21,926 $ 19,671 $ 21,199 11% 3% Total capital (millions) (2) $ 61,633 $ 49,637 $ 60,652 24% 2% Worldwide employees 61,319 62,679 62,392 (2%) (2%) SECURITIES Advisory revenue (millions) $ 319 $ 566 $ 360 (44%) (11%) $1,420 $2,141 (34%) Underwriting revenue (millions) $ 479 $ 542 $ 417 (12%) 15% $1,942 $2,740 (29%) Institutional Securities Sales and trading net revenue (millions) (3) $ 1,392 $ 1,436 $ 1,778 (3%) (22%) $8,208 $8,862 (7%) Mergers and acquisitions announced transactions (4) Morgan Stanley global market volume (billions) $ 395.0 $1,069.5 $ 279.4 Rank 3 2 4 Worldwide equity and related issues (4) Morgan Stanley global market volume (billions) $ 40.2 $ 59.3 $ 32.9 Rank 4 3 4 Individual Investor Group Net revenue (millions) $ 986 $ 1,276 $ 1,056 (23%) (7%) $4,379 $5,548 (21%) Global financial advisors 13,690 13,966 14,342 (2%) (5%) Total client assets (billions) $ 595 $ 662 $ 597 (10%) -- Fee-based client account assets (billions) (5) $ 110 $ 121 $ 109 (9%) 1% INVESTMENT MANAGEMENT ($ billions) Assets under management or supervision Products offered primarily to individuals Mutual funds Equity $ 83 $ 103 $ 85 (19%) (2%) Fixed income 36 46 41 (22%) (12%) Money markets 66 57 65 16% 2% --------- -------- -------- Total mutual funds 185 206 191 (10%) (3%) ICS Assets 30 31 31 (3%) (3%) Separate accounts, unit trust and other arrangements 65 78 70 (17%) (7%) --------- -------- -------- Sub-total Individual 280 315 292 (11%) (4%) --------- -------- -------- Products offered primarily to institutional clients Mutual funds 38 35 38 9% -- Separate accounts, pooled vehicle and other arrangements 141 150 141 (6%) -- --------- -------- -------- Sub-total Institutional 179 185 179 (3%) -- --------- -------- -------- Total assets under management or supervision $ 459 $ 500 $ 471 (8%) (3%) ========= ======== ========
___________________ (1) Includes preferred and common equity and preferred securities issued by subsidiaries. (2) Includes preferred and common equity, preferred securities issued by subsidiaries, capital units and non-current portion of long-term debt. (3) Includes principal trading, commissions and net interest revenue. (4) Source: Thomson Financial Securities Data - January 1 to November 30, 2001. (5) Represents the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets. F - 7
MORGAN STANLEY DEAN WITTER & CO. Financial Information and Statistical Data (unaudited, dollars in millions) Quarter Ended Percentage Change From: Twelve Months Ended ----------------------------- ----------------------- --------------------- Nov 30, Nov 3, Aug 31, Nov 30, Aug 31, Nov 30, Nov 30, Percentage 2001 2000 2001 2000 2001 2001 2000 Change --------- --------- --------- --------- --------- --------- --------- ---------- CREDIT SERVICES Owned credit card loans Period end $ 20,085 $ 21,866 $ 20,194 (8%) (1%) $ 20,085 $ 21,866 (8%) Average $ 19,546 $ 20,897 $ 20,407 (6%) (4%) $ 20,701 $ 21,906 (6%) Managed credit card loans (1) Period end $ 49,332 $ 47,123 $ 49,704 5% (1%) $ 49,332 $ 47,123 5% Average $ 48,964 $ 45,825 $ 49,825 7% (2%) 49,432 $ 43,536 14% Interest yield 13.48% 14.13% 13.34% (65 bp) 14 bp 13.45% 13.82% (37 bp) Interest spread 8.81% 7.38% 8.13% 143 bp 68 bp 7.88% 7.26% 62 bp Net charge-off rate 5.85% 4.57% 5.79% 128 bp 6 bp 5.36% 4.40% 96 bp Delinquency rate (over 30 days) 6.85% 5.92% 6.31% 93 bp 54 bp 6.85% 5.92% 93 bp Delinquency rate (over 90 days) 3.02% 2.42% 2.61% 60 bp 41 bp 3.02% 2.42% 60 bp Transaction volume (billions) $ 22.1 $ 22.8 $ 23.3 (3%) (5%) $ 93.3 $ 90.1 4% Accounts (millions) 45.7 42.6 45.4 7% 1% 45.7 42.6 7% Active accounts (millions) 24.0 23.8 24.0 1% -- 24.0 23.8 1% Average receivables per average active account (actual $) $ 2,055 $ 1,960 $ 2,069 5% (1%) $ 2,057 $ 1,893 9% Securitization gain $ (7)$ 1 $ 3 * * $ 70 $ 80 (13%)
__________________ (1) Includes owned and securitized credit card loans. F - 8
MORGAN STANLEY DEAN WITTER & CO. Quarterly Credit Services Statements of Income (unaudited, dollars in millions) FOR THE QUARTER ENDED ----------------------------------------------------------------------- Nov 30, Aug 31, May 31, Feb 28, Nov 30, Aug 31, May 31, Feb 29, 2001 2001 2001 2001 2000 2000 2000 2000 -------- -------- -------- -------- -------- -------- -------- -------- Fees: Merchant and cardmember (1) $ 345 $ 362 $ 325 $ 313 $ 326 $ 339 $ 335 $ 323 Servicing 567 434 476 427 390 424 349 287 Other 2 3 0 0 0 0 0 0 -------- -------- -------- -------- -------- -------- -------- -------- Total non-interest revenues 914 799 801 740 716 763 684 610 Interest revenue 593 674 654 672 702 687 762 744 Interest expense 272 303 322 339 334 326 360 358 -------- -------- -------- -------- -------- -------- -------- -------- Net interest income 321 371 332 333 368 361 402 386 Provision for consumer loan losses 331 277 231 213 208 175 204 223 -------- -------- -------- -------- -------- -------- -------- -------- Net credit income (10) 94 101 120 160 186 198 163 -------- -------- -------- -------- -------- -------- -------- -------- Net revenues 904 893 902 860 876 949 882 773 -------- -------- -------- -------- -------- -------- -------- -------- Compensation and benefits 169 182 187 189 182 172 142 162 Occupancy and equipment 20 19 18 19 18 17 16 15 Information processing and communications 134 118 122 116 118 113 106 101 Marketing and business development (1) 142 126 163 182 218 168 164 154 Professional services 57 45 48 49 53 47 42 40 Other 83 85 85 74 70 77 69 72 -------- -------- -------- -------- -------- -------- -------- -------- Total non-interest expenses 605 575 623 629 659 594 539 544 -------- -------- -------- -------- -------- -------- -------- -------- Income before income taxes and cumulative effect of accounting change 299 318 279 231 217 355 343 229 Income tax expense 106 122 108 89 70 128 132 89 -------- -------- -------- -------- -------- -------- -------- -------- Income before cumulative effect of accounting change 193 196 171 142 147 227 211 140 Cumulative effect of accounting change (2) 0 0 0 (13) 0 0 0 0 -------- -------- -------- -------- -------- -------- -------- -------- Net income $ 193 $ 196 $ 171 $ 129 $ 147 $ 227 $ 211 $ 140 ======== ======== ======== ======== ======== ======== ======== ======== Compensation and benefits as a % of net revenue 19% 20% 21% 22% 21% 18% 16% 21% Non-compensation and benefits as a % of net revenue 48% 44% 48% 51% 54% 44% 45% 49% Profit Margin (3) 21% 22% 19% 17% 17% 24% 24% 18%
_____________________________________________ (1) Information restated to reflect the reclassification of cardmember reward expense, previously reflected in marketing and business development, as a contra revenue item in merchant and cardmember fees. (2) Represents the effects of an accounting change adopted in the first quarter of fiscal 2001 with respect to the accounting for derivative instruments and hedging activities associated with SFAS 133. (3) Net income excluding cumulative effect of accounting change as a % of net revenues.
MORGAN STANLEY DEAN WITTER & CO. Quarterly Credit Services Statements of Income (unaudited, dollars in millions) (Managed loan basis) FOR THE QUARTER ENDED ------------------------------------------------------------------------------------- Nov 30, Aug 31, May 31, Feb 28, Nov 30, Aug 31, May 31, Feb 29, 2001 2001 2001 2001 2000 2000 2000 2000 ------- ------- ------- ------- ------- ------- ------- ------- Fees: Merchant and cardmember (1) $ 539 $ 539 $ 512 $ 496 $ 480 $ 526 $ 479 $ 465 Servicing 0 0 0 0 0 0 0 0 Other 2 3 0 0 0 0 0 0 ------- ------- ------- ------- ------- ------- ------- ------- Total non-interest revenues 541 542 512 496 480 526 479 465 Interest revenue 1,696 1,741 1,745 1,747 1,675 1,631 1,570 1,451 Interest expense 562 657 730 798 754 738 695 653 ------- ------- ------- ------- ------- ------- ------- ------- Net interest income 1,134 1,084 1,015 949 921 893 875 798 Provision for consumer loan losses 771 733 625 585 525 470 472 490 ------- ------- ------- ------- ------- ------- ------- ------- Net credit income 363 351 390 364 396 423 403 308 ------- ------- ------- ------- ------- ------- ------- ------- Net revenues 904 893 902 860 876 949 882 773 ------- ------- ------- ------- ------- ------- ------- ------- Compensation and benefits 169 182 187 189 182 172 142 162 Occupancy and equipment 20 19 18 19 18 17 16 15 Information processing and communications 134 118 122 116 118 113 106 101 Marketing and business development (1) 142 126 163 182 218 168 164 154 Professional services 57 45 48 49 53 47 42 40 Other 83 85 85 74 70 77 69 72 ------- ------- ------- ------- ------- ------- ------- ------- Total non-interest expenses 605 575 623 629 659 594 539 544 ------- ------- ------- ------- ------- ------- ------- ------- Income before income taxes and cumulative effect of accounting change 299 318 279 231 217 355 343 229 Income tax expense 106 122 108 89 70 128 132 89 ------- ------- ------- ------- ------- ------- ------- ------- Income before cumulative effect of accounting change 193 196 171 142 147 227 211 140 Cumulative effect of acounting change (2) 0 0 0 (13) 0 0 0 0 ------- ------- ------- ------- ------- ------- ------- ------- Net income $ 193 $ 196 $ 171 $ 129 $ 147 $ 227 $ 211 $ 140 ======= ======= ======= ======= ======= ======= ======= ======= Compensation and benefits as a % of net revenue 19% 20% 21% 22% 21% 18% 16% 21% Non-compensation and benefits as a % of net revenue 48% 44% 48% 51% 54% 44% 45% 49% Profit Margin (3) 21% 22% 19% 17% 17% 24% 24% 18%
________________________ (1) Information restated to reflect the reclassification of cardmember reward expense, previously reflected in marketing and business development, as a contra revenue item in merchant and cardmember fees. (2) Represents the effects of an accounting change adopted in the first quarter of fiscal 2001 with respect to the accounting for derivative instruments and hedging activities associated with SFAS 133. (3) Net income excluding cumulative effect of accounting change as a % of net revenues. -----END PRIVACY-ENHANCED MESSAGE-----