Philip J. Purcell
Chairman & Chief Executive Officer,
Morgan Stanley

In 2003, as the securities markets ended a three-year slide, your company delivered strong business results and established positive momentum for the future. I believe we performed very well in each of the key areas set out as priorities in last year's annual report: profitability, market share, brand and the quality of our people.

Net income increased 27% to $3.8 billion, and return on equity increased from 14.1% to 16.5% — both excellent given the weak first-half business environment. Your stock price increased 45%, and dividends were raised 9% to an annual rate of $1.00 per share.

Our market share performance was very strong in our securities business, with rankings higher or equal to last year's in almost every major category. I believe this performance indicates our client-focused strategy is working.

Brand strength changes little year over year, but, as in the case of our market share performance, I believe there was discernible improvement. This past year, our awards for being "best in class" included: Best Global Investment Bank — Euromoney magazine; U.S. Equity House of the Year — International Financing Review; Derivatives House of the Year — Risk magazine; 100 Best Companies to Work For — Sunday Times (U.K.); and Top 50 Companies for Diversity — DiversityInc magazine.

The continued innovation and intellectual leadership of the people of Morgan Stanley were high points for the year. To cite just three of many possible examples, we led General Motors' $17 billion global debt and equity offering in June, reopened the IPO markets for Chinese financial companies and led the offering for PICC in October, and closed the year by advising FleetBoston Financial in its $47 billion merger with Bank of America.

In each of these transactions, as in the successes in all our businesses, we were able to build on a close and trusted relationship with our clients. Client focus has become the foundation of everything we do, and that's why we have chosen to highlight that strategy in this year's report.

Let me begin, however, by discussing our financial and market share performance, both of which are the result of that strategy.