Morgan Stanley 1585 Broadway Now York, NY 10036 Phone: (212) 761-4000 Fax: (212) 762.0575 ‘wwew.morganstanloy.com BUSINESSES Institutional Securities Investment Management Global Weakh Management THE STATS Employer Type: Public Company Ticker Symbol: MS (NYSE) CChalman & CEO: John J. Mack ‘Net Revenue: $5.49 billion (FYE 11/07) Income: $1.47 billon (FYE 11/07) No. of Employees: 45,508, No. of Offices: 661 -S Woes Cran nse need ‘Great reputation, consistently rated among the best’ + "Very strong franchise but very stiff culture” ‘Classic investment bank; old institution based on traditional values™ Had a couple of tough years so no longer in ine with Goldman, but right up there" [rata cit Goldman Sachs 4. Morgan lehman Brothers UBS Investment Bank Wane + Hard to beat the prestige + "Very motivated” and “professional” staff DOWNERS + "Sic-and-achalf days a wook in the office is normal” + Stil abit of an “old boy's club” EMPLOYMENT CONTACT 1slindex. html ‘wwvw morganstanley.com/abouticar 52 VAULT fi ITHE SCOOP Strong second ‘Ove of the leading investment banking fms in the world, Morgan Stanley's business i# divided into tee practice areas investment management, wealth manegement and institutional securities, Morgan Stenley Investment Management (MSIM) provides global asset management product and services, inchuding equity, fixed incom altemative investments and a direct investing business, The firm's global wealth management wnit caters fo individuals and small. to medium-sized businesses and institutions, offering retirement plan services, brokerage and investment services, financial and wealth planaing, annuity and insurance, credit ust and banking, and cash management, And the institutional securities unit covers Morgan Stanley's world- renowned investment banking, sales, trading, financing, research and risk management analytics operations. An M&A powerhouse, Morgan Stanley again ranked No.2 in both announced worldwide and announced US. M&A deal volume, tailing its arch advisory nemesis Goldman Sachs. In Europe, though, Morgan nabbed the top spot in announced als, Overall, 2007, “Morgaa Stanley advised on 431 M&A deals workovide worth a total of S13 tillion The Morgan Stanley story began in 1935 with ust two partners: Herold Stanley and Harry Morgan, who left their jobs with JP ‘Morgan in New York to open aselftiled securities fem. In 1997, the firm became Morgan Stanley Dean Witter aera merger ‘with Dean Witter, Discover & Co, which had launched in San Francisco in 1924. In 2007, the Discover unit was spun off, which ‘was hailed a smart step for Morgan Stanley: The bank had managed to inctease the units revenue in 2006 after disappointing results in 2005, but sill, many investors and analysts felt the bank should concentrate on ite core investment banking and institutional trading businesses. And so Discover became independent again. Under the terms of the divestiture deal, shareholders received one shate of Discover stock for every two shares of Morgan Stanley, Morgan Stanley Kept no Discover shares fr itself, nd the new stand-alone Discover began trading in July 2007 on the New York Stock Exchange under the symbol DFS. Morgan Stanley, meanwhile, trades under the ticker symbol MS (which replaced its former symbol, MWD), Credit losses ‘The exuberance ofa healthy market came to a screeching halt for many of the big investment banks in 2007, with losses inthe credit crunch dampening the enthusiasm of those who thought the party might never end. Morgan Stanley’ third quarter 2007 ceamings reflected the realities ofthese losses, with profite dropping t0 $1.54 billion, a 17 percent versus the firm's 2006 third quarter earnings. ‘The diving factor in Morgan Stanley's losses was a write-down of $940 million in leveraged loans, but i also ‘reported $480 million in losses om ite quantitative equity funds. “There was a silver lining in the numbers: the performance of the brokerage and asset management division, Brokerage reported profil increases of 9 perceat while asset management posted an impressive increase of 62 percent. Revenue from commissions also increased from $880 billion o $1.3 billion. At the time the third quarter earnings were reported, Chief Financial Officer avid Sidwell said that the losses would not deter Morgan Stanley going forwat stating that “Risk is erucal to our survival" 10 Berkeley On Changes afoot In November 2007, Morgan Stanley CEO John Mack made some management changes inthe wake of the billions in losses ted to subprime loan trading. The most notable (and surprising) departure was that of co-president Zoe Cruz, who had overseen rhaloy ody ‘Morgaa Stanley's trading and sk operations, Cruz (the 16th most powerful woman in the world, according to Forbes magazine) ‘was widely seen as Mack's mos likely successor in the CEO's office, and earlier, Mack had insisted that she would not be fred because ofthe Inge trading los, But asthe bank fed additional maltibillon-doar write-downs, the larget losses in Morgan ‘Stanley's history, he changed his mind. According to New York magazine, in ite cover story entitled “Only the Men Survive,” the 52-year-old Cruz was called into John Mack's office one day in November 2007 and promptly fred. Ten minutes later, she left Morgan Stanley's headquarters, and never retuned 1e¥an Zhat 5310 Berkeley On rhaloy ody Customized fr: Vault Guide to the Top 50 Banking Employers + 2008 Ealtion Morgan Stanley 54 ‘On December 1, 2007, Walid Chammah and James Gorman were installed as new co-presidens of the frm, Chammah, whe had been serving as global head of investment banking and CEO of Morgan Sianleys inlerational operations, now oversees the ‘nsitutional securities division. Gorman, who had been chief operating officer ofthe global wealth management group, oversee® ‘wealth management and asset management ‘At the same time, Mack created a new office ofthe chairman, installing Robert Scully as its head, Scully's tsk isto build relationships with key clients, especially global sovereign investors. Michael “Mitch” Petrick, head of Morgan Stanley Principal Thvestments, was appointed to oversee the firm's teading business and serve as co-head of institutional securities sales and trading Not a happy holiday for Morgan Stanley “The reasons for Mack's shakeups beceme apparent when Morgan Stanley released its 2007 fourth quarter earings reports for ‘he fret time since 1986, the frm posted a quarterly loss, The $3.7 billion write-down from the fall had been just the begining of the bad news. The firm added more than $55 billion more in U.S. subprime and other mortgage-related expenses atthe end of the year, fora total write-down of $9.4 billion—one of the worst on Wall Sweet. Many jobs in Morgan Stanley's global mortgage divisions were cut, too. Ina statement about the cerning report, Mack called the write-down “deeply disappointing,” and added that he would not take bonus for 2007. “Uimatel time, he tried to reassure investors that Morgan Stanley's troubles were both isolated and contained, “Across the frm, we have accountability for our results rests with me, and I Believe in pay for performance.” At the same moved aggressively to make the necessary changes, and these isolated losses by a small trading team in one part ofthe firm should not overshadow the momentum we see in virtually all of our other businesses Indeed, Morgan Stanley's non-mortgage businesses hada furl strong year, Investment banking revenve was up 31 percent over 2006, climibng toa record $5.5 billion. This result was driven by gains in advisory revenue, which was up 45 percent from the previous year. Underwriting revenue also increased 21 percent. Global wealth management and asset management both Aelivere record resuls, thanks to both increased productivity and increased client business. Fixed income sales and trading posted 62 percent gaine in interest ate and currency products, mortgage woes notwithstanding, and fixed income undervting revenue of $14 billion set anew frm record, Equity sales and trading saw revenue rie 38 percent from 2006, with much of the growth coming from the prime brokerage and derivatives businesses Less hare, more tortoise In December 2007, the other major US. banks, Morgan Staley tumed to foreign investment groups for capital after recording losses fiom the home Joan market. ‘The China Investment Corporation, tha country’s sovereign wealth fund, gave Morgan Stanley $5 billion in exchange for 299 percent stake in the fem. (Citi's cash infusion came fiom investors in Abu Dhabi, while UBS got its funds ‘rom Singapore and the Middle Fast) red Morgan Stanley followed Citigroup and UBS down a familiar road—to overseas investors, Like Morgan Stanley assured its other shareholders that Chin's siake was “passive,” andthe CIC would have no influence on the ‘bank’ directors. CEO Mack added that the move was strategic, not just necessary, He called it“an important step in increasing the low of capital between our countries and across these increasingly ritieal markets.” Stl, in conversations with reporter ‘Mack signaled that a more conservative ea may be on the rise at Morgan Stanley. “We had heen sprinting,” he told The New York Times. “Now we wil be jogging, But we are ina risk business, and we will bein the make trading tsk,” Out of the woods? Despite the setbacks, Morgan Stanley ended up ahead of expectations when the first quarter of 2008 rolled aroun. While the ‘company’s overall profits were daven 42 percent from the year before and revenue decreased 17 percent rom the ist quarter of 2007, Morgan Staley sill managed to surpass analysts’ predictions. But the frm was hardy inthe clear, The firm's equity VAULT foe + 2008 Vault.com Ine.