David Sidwell: They are up substantially, both from this time last year and from the first quarter.

Mike Mayo (Deutsche Bank): Your non-U.S. was 42%. What was the growth rate of the U.S. versus non-U.S.?

David Sidwell: The growth rate was higher in Europe than in the U.S. Europe is about 30% of Morgan Stanley’s business, the U.S. 58%. By definition the growth rate is higher in Europe than in the U.S.

Mike Mayo (Deutsche Bank): Your revenues were up about 5% linked quarter. What were they up linked quarter right outside the U.S.?

David Sidwell: The trends were stronger in the first three months in the second half in terms of the growth in Europe. Given the nature of the business and where the company bought trading revenues, it preferred to use it for the longest time series it can. The company feels better with the year-to-date data than single quarters.

Mike Mayo (Deutsche Bank): Do you have any target of where you think non-U.S. might go, especially with the spin of Discover?

David Sidwell: Over time, the company believes that the market opportunities in the emerging markets are significant and the pace of growth in those markets can be and are likely to be higher than they are in the U.S. and developed Europe. In the near-term, the profit pulls in the U.S. and developed Europe by definition are much larger. The company will continue to invest in both the developed markets and the emerging markets. How this mix will change overtime is going to be a balance of the opportunities. The company is intent on investing outside of U.S. and developed Europe. It is making investments in China, in India as it got out of its joint venture arrangements; it is making investment in East Europe and continues to stay focused on Latin America. Russia has been a significant area where Morgan Stanley and Russia is a full service firm and feels and looks like a full service firm.

Mike Mayo (Deutsche Bank): How is the environment in the brokerage business?

David Sidwell: The environment in Wealth Management has three perspectives. One is, ad business and that business is stabilized. The term over that the firm went through, resulted in attrition of some good people and difficulty to recruit talent as Morgan Stanley increased its FA count to H-100, and that was an increase over the first quarter. That reflects both the company’s success in retaining people and in recruiting people. The second aspect is that it continues to focus on developing the products that are of interest to its clients for the fact that when it launched this emerging market's debt product in the quarter, it was successful with its Wealth Management clients, a massive demonstration of the types of things it is trying to do. As the company targets this $1 million plus household range it is going to be important to offer them product they want. The third aspect of the environment is the market at whole. The company has been pleased with the level of investor activity. In terms of the mix of the company’s business on fee the amount of fee-based business is a proportion to total is also higher than it has ever been and those are important metrics going forward.

Douglas Sipkin (Wachovia Securities): Could you expand on prime brokerage?

David Sidwell: On prime brokerage the company had record results this quarter on the growth in both balances and new clients. Prime brokerage is something that it views as a strategically important business. It thinks that it has a leadership position in the market, and is going to continue to invest in prime brokerage to support its clients.

Douglas Sipkin (Wachovia Securities): What are your targets for the retail segment?

David Sidwell: The company is pleased with getting the margins to 16%. it was 15% in the first quarter, and the company feels that it has reached a level of stabilization, which is important. It continues to develop the products array to support its clients and that includes new products offerings by the emerging markets. Morgan Stanley continues to be focused on extending into products where it has not had large balances like banking products, lending products. It continues to stay focused on additionally penetrating the million plus household range, both with new clients and increasing share of its existing clients. To some degree that would depend on further growth in people, and so the company is optimistic with the headcount increases that it saw this quarter.
It is going to be combination of those factors which is going to enable Morgan Stanley to increase its margins overtime. It has had an extraordinary pace of improvement over the last 15 months.

Douglas Sipkin (Wachovia Securities): Are you in a position that you would start considering growing inorganically in that segment?

David Sidwell: The company will continue to consider those opportunities. It is focused on developing international, private wealth management business and would love to have a larger private bank for instance in Europe.

Douglas Sipkin (Wachovia Securities): What do you think about the potential change in the SEC role or a lack thereof around fee-based accounts?

David Sidwell: The company does not believe it will have a significant impact. The major reason is that, the clients that it has using this product will move their assets in to different products. Secondly it is a relatively small percentage of Morgan Stanley’s assets, 5% would be an upward number for that.

Michael Hecht (Banc of America): On overall basis this quarter you had 27.5%, 34% for the non-Discover businesses. What was the ROE, excluding Discover, including the excess capital you have?

David Sidwell: The 27.5% would move to 29.5%.

Michael Hecht (Banc of America): The retail margin this quarter is 16% this quarter versus 15% last quarter. Are you thinking about the first half margins as more of a run rate?