Morgan Stanley 2009 Annual Report Download - page 47

Non-interest expenses decreased 11% to $11,795 million, primarily due to lower non-compensation costs.
Non-compensation expenses decreased 26%, resulting from the Company’s initiatives to reduce costs and a
charge of approximately $694 million for the impairment of goodwill and intangible assets related to certain
fixed income businesses recorded in fiscal 2008.
Global Wealth Management Group. Global Wealth Management Group recorded income from continuing
operations before income taxes of $559 million compared with $1,154 million in fiscal 2008. The current year
included seven months of operating results for MSSB, which closed on May 31, 2009. Fiscal 2008 included a
pre-tax gain of $687 million related to the sale of MSWM S.V. Fiscal 2008 also included a charge of $532
million associated with the Auction Rate Securities (“ARS”) repurchase program and $108 million associated
with subsequent writedowns of some of these securities that were repurchased (see Note 11 to the consolidated
financial statements).
Net revenues were $9,390 million, a 34% increase over fiscal 2008, primarily related to higher revenues from
asset management, distribution and administration fees, higher commission revenues, higher revenues from
principal transactions trading activities, higher investment banking revenues and the consolidation of MSSB,
partially offset by lower net interest. Client assets in fee-based accounts increased 175% to $379 billion and
decreased as a percentage of total client assets to 24% compared with 25% as of December 31, 2008. In addition,
total client assets rose to $1,560 billion from $550 billion as of December 31, 2008, primarily due to the
consolidation of MSSB.
Total non-interest expenses were $8,831 million, a 51% increase from fiscal 2008. Compensation and benefits
expense increased 60% in 2009, primarily due to the consolidation of MSSB. Non-compensation costs increased
32%, primarily due to the operating costs of MSSB, the amortization of MSSB’s intangible assets and integration
costs for MSSB. As a result of the MSSB transaction, the number of global representatives increased 117% to
18,135 at December 31, 2009 from 8,356 at December 31, 2008.
Asset Management.Asset Management recorded a loss from continuing operations before income taxes of
$673 million in 2009 compared with a loss from continuing operations before income taxes of $1,423 million in
fiscal 2008. Net revenues of $1,337 million in 2009 increased 144% from fiscal 2008 due to higher revenues in
the core businesses, which include traditional equity and fixed income funds, hedge funds and fund of funds, in
addition to lower losses in the merchant banking business. The increase in 2009 primarily reflected lower
principal investment losses, partially offset by lower asset management, distribution and administrative fees,
primarily reflecting lower average assets under management. The results in 2009 also reflected losses related to
certain real estate funds sponsored and consolidated by the Company. Assets under management or supervision
within Asset Management were $266 billion at December 31, 2009, down from $290 billion at December 31,
2008, a decrease of 8%, reflecting net customer outflows of $41.1 billion, primarily in the Company’s money
market, long-term fixed income and equity funds. Non-interest expenses increased 2% from fiscal 2008 to $2,010
million. Compensation and benefits expense increased 17%, primarily due to higher net revenues.
Overview of the one month ended December 31, 2008 Financial Results.
The Company recorded a net loss applicable to Morgan Stanley of $1,288 million in the one month ended
December 31, 2008 compared with net income of $626 million in the one month ended December 31, 2007. Net
revenues (total revenues less interest expense) decreased to $(968) million, primarily due to sales and trading
losses in the Institutional Securities business segment. Non-interest expenses decreased 47% to $1,059 million,
primarily due to lower compensation costs. Compensation and benefits expense decreased 59%, primarily
reflecting lower incentive-based compensation accruals due to lower net revenues in the Institutional Securities
business segment. Diluted earnings (loss) per share in the one month ended December 31, 2008 were $(1.62)
compared with $0.57 in the one month ended December 31, 2007.
The Company’s effective tax rate from continuing operations was 36% in the one month ended December 31,
2008.
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