Morgan Stanley 2010 Annual Report Download - page 71

Principal Transactions—Investments. Principal transaction net investment gains were $19 million in 2010
compared with $3 million in 2009. The increase primarily reflected gains related to investments associated with
certain employee deferred compensation plans compared with such investments in the prior-year period.
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
28% in 2010, primarily benefiting from a full year of MSSB revenues and higher 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 39% in 2010, primarily benefiting from a full
year of MSSB revenues and improved market conditions. From June 2009 until April 1, 2010, revenues in the
bank deposit program were primarily included in Asset management, distribution and administration fees. Prior
to June 2009, these revenues were reported in Interest income. The change was the result of agreements that were
entered into in connection with the MSSB transaction. Beginning on April 1, 2010, revenues in the bank deposit
program held at the Company’s U.S. depository institutions were recorded as Interest income due to
renegotiations of the revenue sharing agreement as part of the Global Wealth Management Group business
segment’s retail banking strategy. The Global Wealth Management Group business segment will continue to earn
referral fees for deposits placed with Citi depository institutions, and these fees will continue to be recorded in
Asset management, distribution and administration fees until the legacy Smith Barney deposits are migrated to
the Company’s U.S. depository institutions. The referral fees for deposits were $381.7 million in 2010 and
$659.5 million in 2009.
Balances in the bank deposit program increased to $113.3 billion at December 31, 2010 from $112.5 billion at
December 31, 2009. The unlimited FDIC program expired on December 31, 2009 for deposits held by Citi
depository institutions and June 30, 2010 for deposits held by the Company’s depository institutions. Deposits
held by Company-affiliated FDIC-insured depository institutions were $55 billion of the $113.3 billion deposits
at December 31, 2010.
Client assets in fee-based accounts increased to $470 billion and represented 28% of total client assets at
December 31, 2010 compared with $379 billion and 24% at December 31, 2009, respectively. Total client asset
balances increased to $1,669 billion at December 31, 2010 from $1,560 billion at December 31, 2009, primarily
due to improved market conditions and an increase in net new assets. Net new assets for 2010 were $22.9 billion.
Client asset balances in households with assets greater than $1 million increased to $1,229 billion at
December 31, 2010 from $1,090 billion at December 31, 2009. Global fee-based asset flows increased to $32.7
billion at December 31, 2010 from $13.4 billion at December 31, 2009.
Other. Other revenues primarily include customer account service fees and other miscellaneous revenues.
Other revenues were $337 million in 2010, an increase of 35% from $249 million in 2009. Other revenues in
2010 primarily benefited from a full year of MSSB revenues and increases in proxy and other fee services.
Net Interest. Interest income 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 loaned
transactions. Net interest increased 70% in 2010, primarily resulting from an increase in Interest income due to a
full year of MSSB net interest, the securities available for sale portfolio (see “Other Matters—Securities
Available for Sale” herein) and the change in classification of the bank deposit program noted above, partially
offset by increased funding costs.
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