Morgan Stanley

Few firms can match Morgan Stanley's financial strength and resources. The impressive growth in our earnings over the past three years has been a key source of this strength, enabling us to generate substantial capital internally and serving as a powerful platform for further expansion.

Our firm has one of the largest capital bases in the financial services industry. Our total capital at fiscal year-end was $39.7 billion, including shareholders' equity of $17.4 billion. While our capital base has grown to support our expanding business, we also were able to return capital to shareholders this past year by increasing our quarterly dividend by 67 percent and by repurchasing approximately 50 million shares of our common stock. We expect to continue to utilize stock repurchases as a means of managing our capital base. In December, our Board of Directors authorized the repurchase of an additional $1 billion of common stock.

Further confirmation of our financial strength is the fact that during the past year, four rating agencies upgraded our credit rating, all in the double-A category. Because of our solid capital base, we were able to strongly encourage our clients to turn to us for assistance in meeting their liquidity needs, both during the year and over the millennial year-end.

In April, Dan Burke and Allen Murray will be leaving our Board of Directors. We would like to thank them for their important contributions to the success of our firm. Both Dan and Allen can be described as being "wiser than a tree full of owls," and we will miss their counsel.

In closing, we would like to thank our employees for their hard work and dedication to our clients. We also thank you, our fellow shareholders, for your support of our great enterprise. As we look to the future with the clear purpose of further expanding our business and pursuing opportunities for growth, we obviously are in a very strong position. We will continue to strive to create shareholder value and to manage the business for your benefit. We are confident that Morgan Stanley Dean Witter will continue to prosper and grow.