Craig Siegenthaler (Credit Suisse): There are a few unusual items you''ve pointed out concerning compensation expense. What is the add-back to expenses we should think about in terms of if there''s any deferred compensation? Could you also define the SIV number and any unusually low bonus accruals?
Barry Bilson: The comp that you''re looking at is an appropriate level to be viewing on this revenue base, that while there was some restructured costs, there was also some recovery of prior quarters'' bonus net-net-net, probably a plus of a few $5 million.
Relative to the SIV side, there is levels of compensation adjust that is in this quarter, was in last quarter and will be in the foreseeable quarters. Hence you really don''t need to be modifying anything there. The deferred compensation piece is one that you do need to factor through. It does move and can move substantially this quarter; remember, you''ve got the income or expense in non-operating with an identical amount in comp and benefits. That number this quarter was $40 million. That number last quarter was $23 million and so depending on what you would presume, assumes environments for gain or loss would alter your comp line but it has no impact on your pre-tax.
Hojoon Lee (Morgan Stanley): What are your plans with re-organizing mutual funds and how do you see this either driving growth or leading the cost saves?
Mark Fetting: When we first did the Citi transaction, we made considerable progress taking in aggregate something that was in excess of 200 numbers down to about 160. Since that time, and in these market conditions, where certain asset levels could take a long time to recover, regardless of the firm. We''re taking another look and it''s really an opportunity to put best managers against best mandates on as efficient a platform as possible.
We do see some opportunities of repositioning and going out in the market with something that''s bigger and better. It will take sometime because you''ve got to go through the fund boards to do that. However, we are very encouraged and our team that is leading that initiative has made some good progress.
You should also keep open to us launching some new products on a very selective basis and this all-weather fund with Permal and some of our other Managers, as well as potentially other investments. We think this has some very encouraging possibilities.
Hojoon Lee (Morgan Stanley): Was the 95 day notice period introduced in November or December?
Mark Fetting: It was essentially introduced some time late early November, both with clients meetings and distribution partner notifications.
Matt Snowling (FBR): Last quarter, you reported having about a billion dollars of CSA''s expiring in March. Is that still the case?
Mark Fetting: Yes they are. They do expire. It''s the same. We are working with the Commission to get those extended, as at least one other in the industry has done and at this point, we''re relatively confident that we can accomplish that.
Robert Lee (KBW): The revenue share has worked to your benefit with making so much of your expense base variable. However, as some of the affiliates have come under pressure and understanding that they''ve taken steps to reduce their own expenses, are you starting to get to the point where the revenue sharing has to alter more of the margin compression or reduce revenue?
Mark Fetting: Most of the firms were not at that level or near it. In a couple of situations I mentioned last time, private capital management, we certainly made some adjustments but they continue to be a profitable entity. That shouldn''t be a big issue but to the extent there''s further erosion in our smaller affiliates, it could be. However, we''re going to continue to work together to keep it minimal.
Cynthia Mayer (Bank of America) What impact do you think combining the Smith Barney and Morgan Stanley brokerage forces might have given you still have distribution agreements with Smith Barney yet Morgan Stanley has its own product?
Mark Fetting: We''ve been fortunate to work closely on the Smith Barney side and also have a developing relationship on the Morgan Stanley side, actually because of some pre-existing work that had been done by the Citi team. We look forward to working with the combined entity and because with Charlie Johnston effectively being the Operating President and his team and their systems at the moment seeming like they''re going to be embraced. We think there is a good opportunity for us to continue to have a good relationship. To be clear and fair to them, they are still sorting out some other issues and so we''re going to get more clarity on that as we go along.
Roger Smith (Fox-Pitt Kelton): Can you give us an idea of what''s going on with the fee waivers that might be happening in the industry and how you might be handling those?
Mark Fetting: There''s a lot going on in the liquidity business. What we have done, like most of the firms, is so long as the inflows to treasury funds continue at a strong rate; we''ve essentially started to rationalize access so that we don''t get too exposed to that situation. Most of the other firms have been doing that as well and then in terms of our current fee waiver, I would not call what we''re doing now all that different than what we''ve done from time to time and we just have to play it through.
You should expect that to the extent investors become less concerned because the credit markets start to turn back, etc., and recognition of getting virtually zero or very low interest rates isn''t going to help anybody.
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