Morgan Stanley 2010 Annual Report Download - page 78

Principal transactions net investment losses of $173 million were recognized in 2009 compared with losses of
$1,373 million in fiscal 2008. The results in 2009 were primarily related to net investment losses associated with
the Company’s real estate investments and losses related to certain investments associated with the Company’s
employee deferred compensation and co-investment plans. Losses in 2009 were partially offset by net investment
gains associated with the Company’s alternatives business. The results in fiscal 2008 were primarily related to
net investment losses associated with the Company’s merchant banking business, including real estate and
private equity investments, and losses related to certain investments associated with the Company’s employee
deferred compensation and co-investment plans. Included in the net investment losses in fiscal 2008 were
writedowns of approximately $250 million on Crescent prior to its consolidation.
Asset management, distribution and administration fees decreased 25% in 2009 compared with fiscal 2008. The
decrease in 2009 primarily reflected lower fund management and administration fees, reflecting a decrease in
average assets under management. Net flows in 2009 consisted of negative outflows across all asset classes. The
Company’s decline in assets under management from December 31, 2008 to December 31, 2009 included net
customer outflows of $41.1 billion, primarily in the Company’s money market, long-term fixed income and
equity funds.
Other revenues decreased 71% in 2009 compared with fiscal 2008. The results in 2009 reflected lower revenues
associated with Lansdowne and lower revenues associated with the Company’s repurchase of debt.
Non-interest expenses increased 1% in 2009 compared with fiscal 2008. The results in 2009 primarily reflected
an increase in compensation and benefits expense. Compensation and benefits expense increased 17% in 2009,
primarily reflecting higher net revenues. Non-compensation expenses decreased 13% in 2009. Brokerage,
clearing and exchange fees decreased 44% in 2009, primarily due to lower fee sharing expenses. Marketing and
business development expense decreased 40% in 2009, primarily due to lower levels of business activity.
Professional services expense decreased 20% in 2009, primarily due to lower consulting and legal fees.
One Month Ended December 31, 2008 Compared with the One Month Ended December 31, 2007.
Asset Management recorded losses from continuing operations before income taxes of $114 million in the one
month ended December 31, 2008 compared with losses before income taxes of $103 million in the one month
ended December 31, 2007. Net revenues decreased 112% from the prior period. The decrease in the one month
ended December 31, 2008 reflected asset management, distribution and administration fees of $112 million
compared with $210 million in the prior-year period. This decrease was partially offset by lower losses related to
securities issued by SIVs of $84 million compared with $119 million in the one month ended December 31,
2007. Assets under management or supervision within Asset Management of $290 billion were down $106
billion, or 27%, from $396 billion at December 31, 2007, primarily reflecting decreases in equity and fixed
income products resulting from market depreciation and net outflows. Non-interest expenses decreased $76
million to $105 million, primarily due to lower Compensation and benefits expense. Compensation and benefits
expense decreased 53%, primarily reflecting lower revenues and reduced headcount.
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