Morgan Stanley International: European Overview Update

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally given on 12 November, 2002

Europe Update12 November 2002

Morgan Stanley


Morgan Stanley - European OverviewMorgan Stanley

1

Morgan Stanley Europe

Investment Management

Institutional Investment Management

Private Equity

Individual Investor Group

Private Wealth Management

Equity Fixed Income

Institutional Securities

Investment Banking

Consumer Banking Group

Consumer Banking Group International

Investment Banking Division

Mergers, Acquisitions & Restructuring

Real Estate Group

Corporate Finance

Global Capital Markets

Equity Capital Debt CapitalMarkets Markets

Securitised Products Group


Morgan Stanley’s European PresenceMorgan Stanley

UK (1977)

France (1990)

Germany (1987)

Ireland (1998)

Italy (1989)

Luxembourg (1989)

Netherlands (1997)

Portugal (2000)

Russia (1994)

Spain (1993/1999)

Sweden (1999)

Switzerland (1986)

Israel (2001)

South Africa (1994)

2


European Revenues1996 and 2001

Morgan Stanley

3

Global and European Revenues

Europe 18%Europe 12%

1996 2001

Global Revenues $12,023MM

European Revenues $1,429MM

Global Revenues $21,896MM

European Revenues $3,986MM

Source Morgan Stanley 10-K Filings and Morgan Stanley


European Market ConditionsMorgan Stanley

4

Market Conditions 2002 vs. 2001(1)

% Change in US$ Volume

Announced M&A Volume

Completed M&A VolumeDebt Underwriting

Equity Underwriting

Source Thomson Financial Securities Data

29%

28%26%

30%

Note1. 1 January to 31 October


397

628

1,362

1,497

777

487

346

284

160128

96136

177 191

130 121

0

200

400

600

800

1,000

1,200

1,400

1,600

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Dollar Volume(1)

$ Bn

The M&A Cycle: European Announced Transactions

Morgan Stanley

5

Notes1. Includes announced transactions, each with an aggregate value of $100 MM or more. Includes transactions with estimated values. Excludes terminated

transactions. Future terminations of pending transactions will reduce totals shown2. As of 31 October 2002

Source Thomson Financial

(2)


Morgan Stanley

European M&A Activity

6


Notes1. Includes announced transactions each with an aggregate value of $100 MM. As of 31 October 20022. GIG includes Aerospace, Automotive, Building Prods/Construction, Metal/Mining, Transportation3. Includes - Biotech/Chemicals/Healthcare, Consumer Prods, Retail/Wholesale, Casino/Gaming/Entertainment, Business Svcs, Textiles


(2) (3)

4 317 16

15 19

22 9

3441

6 102 2

0

20

40

60

80

100

2001 2002 YTD

Technology Communications/Media Utilities/Energy Financial InstitutionsGlobal Industries Real Estate Other

Transaction Volume by Industry(1)

%

1314

1316109

3531

2931

0

20

40

60

80

100

2001 2002 YTDFrance Germany Italy UK Other

Transaction Volume by Region(1)

%

(2) (3)


European M&A Activity (cont’d)Morgan Stanley

7

71

656666

717374

7881

85

0

10

20

30

40

50

60

70

80

90

UBS W J P Mor gan CSFB Mer r i l l

Lynch

Lehman

Announced European Transactions - ‘02 YTD(1)

$ Bn

76

60

128

109

10096

80 79

7273

0

20

40

60

80

100

120

140

Mor gan

Stanley

J P Mor gan Mer r i l l

Lynch

Ci tigr oup/

SSB

UBS

War bur g

Mergers and Acquisitions Completed - ‘02 YTD(1)

$ Bn

Note1. 2002 YTD data reflects transactions announced from January 1 through 31 October 2002

MarketShare (%)

29.5 25.2 23.2 22.1 18.6 18.3 17.5 16.8 16.7 13.9 MarketShare (%)

21.4 20.4 19.7 18.7 18.3 18.0 17.8 16.7 16.7 16.4

Source Thomson FinancialSource Thomson Financial

UBSWarburg

MorganStanley

JPMorgan

DeutscheBank

CSFB Citigroup/SSB

MerrillLynch

Lazard Lehman RothschildMorganStanley

GoldmanSachs

JPMorgan

DeutscheBank

MerrillLynch

Rothschild Citigroup/SSB

CSFB UBSWarburg

LehmanBrothers


Morgan Stanley

Bond Market Environment

8

29.0 20.1 30.418.3

29.535.7

59.7

35.830.5

46.5 46.1

39.4

33.324.3

44.928.1

41.8

47.2

22.0

63.5

76.9

99.2

19.7

24.6

10.1

26.7

13.1

13.4

12.4

8.6

111.3

238.0

217.0

297.2

167.5

0

50

100

150

200

250

300

1998 1999 2000 2001 2002

Consumer Air/Auto/Ship Industrial

Energy/Oil/Gas Telecoms/IT Others

(1)

Debt Issuance by Sector$US Bn

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

German 10-year Govt Bond Y ield US 10-year Govt Bond Y ield

UK 10-year Govt Bond Y ield

Government Yields(%)

4.0

4.5

5.0

5.5

6.0

6.5

7.0

AA A BBB

Corporate Absolute Yields(%)

Note1. 2002 YTD data reflects transactions announced from 1 January through 31 October 2002

Source Capital Bondware Source Bloomberg

Source Bloomberg


Morgan Stanley

Corporate Issuance - 1999-2002 YTD

27

97

99

63

94

167

111124

19

28

2024

130

190

157140

306

484

385

0

50

100

150

200

250

300

350

400

450

500

1999 2000 2001 2002YTD

310

Euros Sterling USD Others

Corporate Issuance(1)

Bn

Note1. As of 7 November 2002

9

Source Capital Bondware


Morgan Stanley

10

Rating Distribution in Euros(%)

Source Capital Bondware

AAA19%

AA11%

A25%

BBB45%

AAA6% AA

7%

A30%

BBB56%

2001

2002 YTD

Rating Distribution in Sterling(%)

Rating Distribution in USD(%)

Source Capital Bondware Source Thomson Financial

Note1. As of 31 October 2002

AAA17%

AA17%

A35%

BBB30%

AAA14%

AA16%

A39%

BBB30%

AAA8% AA

9%

A55%

BBB28%

AAA27%

AA8%

A38%

BBB27%

2001

2002 YTD

2001

2002 YTD

Corporate Issuance - 2001-2002 YTD(1)


European Securitisation MarketMorgan Stanley

11

95

122

81

57

3845

28

0

20

40

60

80

100

120

140

160

180

200

1996 1997 1998 1999 2000 2001 2002 YTD

European ABS Issuance: 1996-2002 YTD$ Bn

Source Morgan Stanley Research

(1)



European Securitisation IssuanceMorgan Stanley

12


European ABS Issuance by Country%

European ABS Issuance by Asset Class%

UK39%

Germany4%Spain

6%

Italy22%

Holland11%

France4%

Other7%

European5%

Ireland2%

20012001

RMBS40%

Autos4%

Leases3%

CLOs12%

Other17%

CMBS10%

NPLs4%

Operating Company5%

Credit Cards1%

Consumer Loans3%

Aircraft1%


UK39%

Germany9%

Spain6%

Italy18%

Holland7%

France7%

Other3%

European10%

2002 YTD(1)

RMBS37%

Autos6%Leases

6%

CDOs15%

Other13%

CMBS11%

Operating Company5%

Credit Cards5%

Consumer Loans1%

2002 YTD(1)



Global High Yield Market TrendsMorgan Stanley

4.18.014.318.115.6

6.33.7

45.3

84.3

39.5

85.9

126.1

115.7

63.3

49.5

92.3

53.9

104.0

141.7

122.0

66.9

0

20

40

60

80

100

120

140

160

1996 1997 1998 1999 2000 2001 2002YTD

European Issues Non-European Issues

Global Issues 1996-2002 YTD(1)

US$ Bn

Source Morgan Stanley Database

1.4

2.4

0.4

1.2

1.7

3.7

6.3

15.6

18.1

14.3

8.0

4.1

0.8

4.8

8.6

10.7

4.63.6

5.6

7.7

7.4

0.8

1.6

1.9

2.2

2.4

0.5

0.1

0

2

4

6

8

10

12

14

16

18

20

1996 1997 1998 1999 2000 2001 2002YTD

US$ € Issues £ Issues Others

European Issues 1996-2002 YTD(1)

US$ Bn

Source Morgan Stanley Database

5.5% 5.2% 11.0% 17.4% 26.6% 8.7%

European as a % ofTotal: 8.4% 3.4% 27.8% 31.4% 52.5% 66.4% 90.3%

Non-USDIssues as a% of Total: 67.1%

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Equity Secondary Trading VolumesMorgan Stanley

14

5,447

6,836

9,691

8,470

6,201

0

2,000

4,000

6,000

8,000

10,000

1998 1999 2000 2001 2002 YTD

0.0%

4.0%

8.0%

Total Market Treated Volume Morgan Stanley Traded Volume %

(1)

European Equity Traded Volumes$ Bn

Source Data provided directly from exchanges and Morgan Stanley estimates



Efficiency Gains in Securities ProcessingMorgan Stanley

15

0

100

200

300

400

500

600

1997 1998 1999 2000 2001 2002

Gross Volumes Operations Expenses Cost per Trade Agent Bank/Clearing

Morgan Stanley Institutional Securities Trading Volume and CostsIndexed, Europe

Source Morgan Stanley

(1)

Note1. External costs include Clearing and Agent Bank expenses but exclude brokerage and exchange fees

YTD


European Asset ManagementThe European Market Opportunity

Morgan Stanley

16

56

15

25

0

5

10

15

20

25

30

US Europe Japan Other

2001 Global Assets Under Management $ Trillion

Source “The Future of Asset Management in Europe”, Sept. 2002, Oliver Wyman & Co. / UBS

0

1

2

3

4

5

UK & Ir

eland

Ger

man

y & A

ustri

a

Franc

e

Benelu

x

Switzer

land

Nordic

Reg

ion

Italy

Spain

& Por

tuga

l

Institutional Private banking

Retail: Life & Pensions Retail: Mutual Funds

2001 Asset Ownership by Source$ Trillion

Source “The Future of Asset Management in Europe”, Sept. 2002, Oliver Wyman & Co. / UBS


Morgan Stanley Investment Management

Tokyo

Mumbai

Amsterdam

London

New York

Philadelphia

Houston

Chicago

Singapore

San Francisco

• 6th largest fixed income manager in the US

• Top 20 institutional manager in the US

• Top 10 foreign asset manager in Japan

• 1st foreign manager to be awarded Enhanced Fund Manager status

• Largest foreign mutual fund manager in Italy

• 3rd largest foreign fund company in Spain

17

• Morgan Stanley SICAV (Societe d'Investissement a Capital Variable) receives 26 prestigious investment performance awards from Standard & Poor’s in 2002

• 2nd Place European Funds – larger managers over 5 years category by Standard & Poor’s

Morgan Stanley

Source Morgan Stanley Investment Management, Pensions & Investments, InvestorForce, Nelson Marketplace


European Private Wealth ManagementMorgan Stanley

18

Source The Boston Consulting Group, Global Wealth 2001

2217

43

27

23

13

88

57

0

10

20

30

40

50

60

70

80

90

100

2000 2005E

< $250,000 $250,000 - 5 MM > $5 MM

Global Net Investible Assets€ Trillion CAGR ’00-’05E

12%

10%

5%

PWM target segments

Nordic6%

Italy16%

Spain9%

UK22%

Germany30%

France17%

European High Net Worth Individuals(1)


Number of European High Net Worth Individuals:Total: 5,187,000

Note1. HNW individuals defined as having $3 MM of liquid assets


Four Key trends are crystallizing and changing the factors of success on the market

European Private Wealth Management Key Market Trends

Morgan Stanley

19

Evolution of the nature of wealth

Customer expectations

Rules of the game

Globalisation



European Credit Cards BusinessA Large and Highly Competitive Market

Morgan Stanley

20

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1993

1994

1995

1996

1997

1998

1999

2000

2001

Cards Loans

UK Overall Market GrowthCards MM/Loans £ Bn

Source British Bankers’ Association


The Competitive Landscape - Europe 1997 - 2002 YTD (1) Market Share

Morgan Stanley

21

19.823.423.7

35.236.6

0

5

10

15

20

25

30

35

40

GoldmanSachs

MorganStanley

J P Morgan Merrill Lynch UBS W

Announced European M&A% of US$ Volume


7.67.88.09.49.9

0

2

4

6

8

10

12

GoldmanSachs

UBS W MorganStanley

Deutsche Bank Merrill Lynch

European Equity Issues(2)

% of US$ Volume

Source Thomson Financial/IFR

6.88.18.18.7

10.5

0

2

4

6

8

10

12

Deutsche Bank J P Morgan MorganStanley

Citi/SSB UBS W

International Bond Issuance(3)

% of US$ Volume

Source Bondware

6.7

8.18.48.88.9

0

1

2

3

4

5

6

7

8

9

10

Deutsche Bank MorganStanley

ABN AMRO Citi/SSB BNP Paribas

European Securitization% of US$ Volume

Source Euroweek and Morgan Stanley

Notes1. October 31, 20022. Includes Equity and Equity Linked issues3. Includes European debt issuance excluding US market. Excludes national banks


Vision and ValuesOur Culture is Our Competitive Advantage

Morgan Stanley

22

Connecting people, ideas and capital, we will be the world’s First Choice for

achieving financial aspirations

First Choice

CoreValues

6. Client Centricity1. Integrity

3. EntrepreneurialSpirit

5. Team Work2. Excellence

4. Respectfor Individualsand Cultures


Requirements for SuccessImportance of Culture

Morgan Stanley

“By general consensus in the investment banking community, there is something special about Morgan Stanley's London office”

“…what keeps them here is a team culture, a sense that this is a meritocracy…”

Fortune, Best Companies to Work for – 10 Great Companies in Europe (February 4, 2002)

23

“…[Morgan Stanley’s] recent success has been nothing short of sensational.”

“Several employees in our survey praise Morgan Stanley for being a meritocracy.”

The Sunday Times, 50 Best Companies to Work for 2001 (February, 2001)

“Despite leaner times, Morgan Stanley has been one of the most successful European banks and was the first major tenant at Canary Wharf, helping to build the area’s success.”

“After September 11, hotlines and counselling sessions were used heavily. As one employee wrote: “Morgan Stanley showed its true character and strength during the tragedy.”

The Sunday Times, 100 Best Companies to Work for 2002 (March, 2002)


Morgan Stanley

Awards: July 2001 - October 2002

Recognised as one of “Europe’s Top 10 Companies to Work For” – Fortune, Europe Edition (March 2002)

Ranked 21st in the Sunday Times “100 Best Companies to Work For in the UK” – (March 2002)

Best High Grade Research Team – Credit Magazine (May 2002) and Euromoney (2002)

Best Overall Bank for Online Equities and Best Site for Equity New Issues, Equity Trading, Prime Brokerage, Analytics and Commodities – Euromoney Internet Awards (2002)

Eurobond House of the Year – IFR (Dec 2001) Financial Bond (Senior Debt) House of the Year – IFR (Dec 2001) European MTN House of the Year - IFR (Dec 2001) Best Lead Manager of Supranational Bonds – Euroweek (2001) Most Aggressive House on Bond Pricing (as voted by borrowers) –

Euroweek (2001) Most Innovative House for New Ideas, Structures & Opportunities

(as voted by borrowers) – Euroweek (2001) Best French M&A House – Euromoney (July 2002)

24

Documents

Morgan Stanley International: European Overview Update