Morgan Stanley 2009 Annual Report Download - page 60

Principal Transactions—Trading. Principal transactions—trading include revenues from customers’
purchases and sales of financial instruments in which the Company acts as principal and gains and losses on the
Company’s inventory positions held, primarily to facilitate customer transactions.
Principal transactions trading revenues increased 97% in 2009 from fiscal 2008, primarily due to the
consolidation of the operating revenues of MSSB, and higher revenues from municipal and corporate fixed
income securities, partially offset by lower revenues from government securities. The results in 2009 also
reflected net gains associated with investments that benefit certain employee deferred compensation plans.
Principal Transactions—Investments. Principal transactions net investment gains were $3 million in 2009
compared with net investment losses of $54 million in fiscal 2008. The results in 2009 primarily reflected net
gains associated with investments that benefit certain employee deferred compensation plans compared with
losses on such plans in fiscal 2008.
Commissions. Commission revenues primarily arise from agency transactions in listed and OTC equity
securities and sales of mutual funds, futures, insurance products and options. Commission revenues increased
48% in 2009 compared with fiscal 2008, reflecting the operating results of MSSB, partially offset by lower client
activity.
Asset Management, Distribution and Administration Fees. Asset management, distribution and administration
fees include revenues from individual investors electing a fee-based pricing arrangement and fees for investment
management, account services and administration. The Company also receives shareholder servicing fees and
fees for services it provides in distributing certain open-ended mutual funds and other products. Mutual fund
distribution fees are based on either the average daily fund net asset balances or average daily aggregate net fund
sales and are affected by changes in the overall level and mix of assets under management or supervision.
Asset management, distribution and administration fees increased 68% in 2009 compared with fiscal 2008,
primarily due to consolidating the operating revenues of MSSB and fees associated with customer account
balances in the bank deposit program. Beginning in June 2009, revenues in the bank deposit program are
primarily included in Asset management, distribution and administration fees prospectively. These revenues were
previously reported in Interest and dividends revenues. This change is the result of agreements that were entered
into in connection with the MSSB transaction.
Balances in the bank deposit program rose to $112.5 billion as of December 31, 2009 from $38.8 billion as of
December 31, 2008, primarily due to MSSB, which include balances held at Citi’s depository institutions.
Deposits held by certain of the Company’s FDIC-insured depository institutions were $54 billion of the $112.5
billion deposits at December 31, 2009.
Client assets in fee-based accounts increased 175% to $379 billion as of December 31, 2009 and represented
24% of total client assets compared with 25% as of December 31, 2008. Total client asset balances increased to
$1,560 billion as of December 31, 2009 from $550 billion as of December 31, 2008, primarily due to
MSSB. Client asset balances in households greater than $1 million increased to $1,090 billion as of
December 31, 2009 from $354 billion as of December 31, 2008.
Other. Other revenues primarily include customer account service fees and other miscellaneous revenues.
Other revenues decreased 74% in 2009 compared with fiscal 2008. The results in 2009 included the operating
revenues of MSSB. Fiscal 2008 results included $743 million related to the sale of MSWM S.V., the Spanish
onshore mass affluent wealth management business, and Global Wealth Management Group’s share ($43
million) of the Company’s repurchase of debt (see “Certain Factors Affecting Results of Operations—Morgan
Stanley Debt” herein for further discussion).
Net Interest. Interest and dividend revenues and interest expense are a function of the level and mix of total
assets and liabilities, including customer bank deposits and margin loans and securities borrowed and securities
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