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1.0.0.3 false Total Equity. false 1 $ false false iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 iso4217_USD_per_shares Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 shares Standard http://www.xbrl.org/2003/instance shares 0 5 Total Equity. 3 us-gaap_StockholdersEquityNoteDisclosureTextBlock us-gaap true na duration string No definition available. false false false false false false false false false 1 false false 0 0 <div> 13.    Total Equity.   Morgan Stanley Shareholders’ Equity.   Common Stock.    Changes in shares of common stock outstanding for 2009, fiscal 2008 and the one month ended December 31, 2008 were as follows (share data in millions):   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="76%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"> 2009</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Fiscal 2008</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">One Month Ended December 31, 2008</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Shares outstanding at beginning of period </td> <td valign="bottom">  </td> <td valign="bottom" align="right">1,074</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,056</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,048</td> </tr> <tr> <td valign="top"> Public offerings of common stock </td> <td valign="bottom">  </td> <td valign="bottom" align="right">276</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Net impact of stock option exercises and other share issuances </td> <td valign="bottom">  </td> <td valign="bottom" align="right">13</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">57</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">26</td> </tr> <tr> <td valign="top"> Treasury stock purchases(1) </td> <td valign="bottom">  </td> <td valign="bottom" align="right">(2</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(65</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Shares outstanding at end of period </td> <td valign="bottom">  </td> <td valign="bottom" align="right">1,361</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,048</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,074</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="3%" align="left">(1)</td> <td valign="top" align="left">Treasury stock purchases includes repurchases of common stock for employee tax withholding.</td> </tr> </table>   Treasury Shares.    In December 2006, the Company announced that its Board of Directors had authorized the repurchase of up to $6 billion of the Company’s outstanding common stock. The share repurchase program considers, among other things, business segment capital needs, as well as equity-based compensation and benefit plan requirements. During 2009 and the one month ended December 31, 2008, the Company did not purchase any of its common stock as part of its share repurchase program. During fiscal 2008, the Company repurchased $711 million of the common stock as part of the share repurchase program at an average cost of $18.14 per share. As of December 31, 2009, the Company had approximately $1.6 billion remaining under its current share repurchase authorization. Share repurchases by the Company are subject to regulatory approval.   CIC Investment.    In December 2007, the Company sold Equity Units that included contracts to purchase Company common stock (see “Stock Purchase Contracts” herein) to a wholly owned subsidiary of CIC for approximately $5,579 million. As a result of the transaction with Mitsubishi UFJ Financial Group, Inc. (“MUFG”) described under “Stock Purchase Contracts” below, upon settlement of the Equity Units, CIC will be entitled to receive 116,062,911 shares of the Company’s common stock, subject to anti-dilution adjustments. In June 2009, to maintain its pro rata share in the Company’s share capital, CIC participated in the Company’s registered public offering of 85,890,277 shares by purchasing 45,290,576 shares of the Company’s common stock. CIC is a passive financial investor and has no special rights of ownership nor a role in the management of the Company. A substantial portion of the investment proceeds from the offering of the Equity Units was treated as Tier 1 capital for regulatory capital purposes.   As described below, the Equity Units consist of interests in trust preferred securities issued by Morgan Stanley Capital Trust A (“Series A Trust”), Morgan Stanley Capital Trust B (“Series B Trust”) or Morgan Stanley Capital Trust C (“Series C Trust”) (each a “Morgan Stanley Capital Trust” and, collectively, the “Trusts”) and stock purchase contracts issued by the Company. The only assets held by the Trusts are junior subordinated debentures issued by the parent company.   Equity Units.   Each Equity Unit has a stated amount of $1,000 per unit consisting of:   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="4%" align="left">(i)</td> <td valign="top" align="left">an undivided beneficial ownership interest in a trust preferred security of Series A Trust, Series B Trust or Series C Trust with an initial liquidation amount of $1,000; and</td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="4%" align="left">(ii)</td> <td valign="top" align="left">a stock purchase contract relating to the common stock, par value of $0.01 per share, of the Company.</td> </tr> </table>   Junior Subordinated Debentures Issued to Support Trust Common and Trust Preferred Securities.   In the first quarter of fiscal 2008, the Company issued junior subordinated debt securities due no later than February 17, 2042 for a total of $5,579,173,000 in exchange for $5,579,143,000 in aggregate proceeds from the sale of the trust preferred securities by the Trusts and $30,000 in trust common securities issued equally by the Trusts. The Company elected to fair value the junior subordinated debentures pursuant to the fair value option accounting guidance. The common and trust preferred securities of the Trusts, totaling approximately $5,579 million, represent undivided beneficial ownership interests in the assets of the Trusts, have no stated maturity and must be redeemed upon the redemption or maturity of the corresponding series of junior subordinated debt securities—the sole assets of the respective Trusts. The Trusts will make quarterly distributions on the trust common and trust preferred securities at an annual rate of 6%.   The trust common securities, which are held by the Company, represent an interest in the Trusts and are recorded as an equity method investment in the Company’s consolidated statement of financial condition. The Trusts are VIEs in accordance with current accounting guidance, and the Company does not consolidate its interests in the Trusts as it is not the primary beneficiary of any of the Trusts.   The Company has directly guaranteed the repayment of the trust preferred securities to the holders thereof to the extent that there are funds available in the Trusts. If the Company does not make payments on the junior subordinated debentures owned by a Morgan Stanley Capital Trust, such Morgan Stanley Capital Trust will not be able to pay any amounts payable in respect of the trust preferred securities issued by it and will not have funds legally available for that purpose. In that event, holders of such series of trust preferred securities would not be able to rely upon the guarantee for payment of those amounts. The guarantee will remain in place until the redemption price of all of the trust preferred securities is paid, the amounts payable with respect to the trust preferred securities upon liquidation of the Morgan Stanley Capital Trusts are paid or the junior subordinated debentures are distributed to the holders of all the trust preferred securities. The trust preferred securities held by the Equity Unit holders are pledged to the Company to collateralize the obligations of the Equity Unit holders under the related stock purchase contracts. The Equity Unit holders may substitute certain zero-coupon treasury securities in place of the trust preferred securities as collateral under the stock purchase contracts.   Stock Purchase Contracts.   Each stock purchase contract requires the holder to purchase, and the Company to sell, on the stock purchase date a number of newly issued or treasury shares of the Company’s common stock, par value $0.01 per share, equal to the settlement rate.   On October 13, 2008, the Company sold to MUFG certain preferred stock for an aggregate purchase price of $9 billion (see below for further discussion). As a result of this transaction, and as contractually required by the terms of the securities purchase agreement for the sale of Equity Units to CIC, the threshold appreciation price of $57.6840 was reduced to the reference price of $48.07. As a result, the Company will issue 116,062,911 shares of common stock (subject to adjustment for certain anti-dilution provisions and participation in certain dividends as described below) upon settlement of the stock purchase contracts on August 17, 2010.   The initial quarterly distributions on the Series A, Series B and Series C trust preferred securities of 6%, combined with the contract adjustment payments on the stock purchase contracts of 3%, result in a 9% yield on the Equity Units. If the Company defers any of the contract adjustment payments on the stock purchase contracts, then it will accrue additional amounts on the deferred amounts at the annual rate of 9% until paid, to the extent permitted by law.   The present value of the future contract adjustment payments due under the stock purchase contracts was approximately $400 million and was recorded in Other liabilities and accrued expenses with a corresponding decrease recorded in Paid-in capital, a component of Morgan Stanley shareholders’ equity in the Company’s consolidated statement of financial condition in the first quarter of fiscal 2008. The other liability balance related to the stock purchase contracts accretes over the term of the stock purchase contract using the effective yield method with a corresponding charge to Interest expense. When the contract adjustment payments are made under the stock purchase contracts, they will reduce the other liability balance.   Earnings per Share.   Prior to October 13, 2008, the impact of the Equity Units was reflected in the Company’s earnings per diluted common share using the treasury stock method. Under the treasury stock method, the number of shares of common stock included in the calculation of earnings per diluted common share was calculated as the excess, if any, of the number of shares expected to be issued upon settlement of the stock purchase contract based on the average market price for the last 20 days of the reporting period, less the number of shares that could be purchased by the Company with the proceeds to be received upon settlement of the contract at the average closing price for the reporting period.   Dilution of net income per share occurred (i) in reporting periods when the average closing price of common shares was over $57.6840 per share or (ii) in reporting periods when the average closing price of common shares for a reporting period was between $48.0700 and $57.6840 and was greater than the average market price for the last 20 days ending three days prior to the end of such reporting period.   Effective October 13, 2008, as a result of the adjustment to the Equity Units as described above, the Equity Units are deemed to be “participating securities” in that the Equity Units have the ability to participate in any dividends the Company declares on common shares above $0.27 per share during any quarterly reporting period via an increase in the number of common shares to be delivered upon settlement of the stock purchase contracts. The Equity Units are reflected, prospectively from October 13, 2008, in the Company’s earnings per share calculation using the two-class method. During 2009, the one month ended December 31, 2008 and fiscal 2008, no dividends above $0.27 per share were declared during any quarterly reporting period.   The Equity Units do not share in any losses of the Company for purposes of calculating EPS. Therefore, if the Company incurs a loss in any reporting period, losses will not be allocated to the Equity Units in the EPS calculation.   See Note 2 for further discussion on the two-class method and Note 14 for the dilutive impact for 2009, fiscal 2008 and the one month ended December 31, 2008.   Common Equity Offerings.    During 2009, the Company issued common stock for approximately $6.9 billion in two registered public offerings. MUFG elected to participate in both offerings, and in one of the offerings, MUFG received $0.7 billion of common stock in exchange for 640,909 shares of the Company’s Series C Non-Cumulative Non-Voting Perpetual Preferred Stock (“Series C Preferred Stock”).   Rabbi Trusts.    The Company has established rabbi trusts (the “Rabbi Trusts”) to provide common stock voting rights to certain employees who hold outstanding restricted stock units. The assets of the Rabbi Trusts are consolidated with those of the Company, and the value of the Company’s stock held in the Rabbi Trusts is classified in Morgan Stanley shareholders’ equity and generally accounted for in a manner similar to treasury stock.   Preferred Stock and Warrant.   The Company’s preferred stock outstanding consisted of the following:   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="37%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom" rowspan="2" nowrap="nowrap"> Series </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" rowspan="2" align="center">Dividend Rate (Annual)</td> <td valign="bottom" rowspan="2"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" rowspan="2" align="center">Shares Outstanding at December 31, 2009</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" rowspan="2" colspan="2" align="center">Liquidation Preference per Share</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" rowspan="2" align="center">Convertible to Morgan Stanley Shares</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="5" align="center">Carrying Value</td> </tr> <tr> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">At December 31, 2009</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">At December 31, 2008</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="2"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="5" align="center">(dollars in millions)</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> A </td> <td valign="bottom">  </td> <td valign="bottom" align="right">N/A</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">44,000</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">25,000</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,100</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,100</td> </tr> <tr> <td valign="top"> B </td> <td valign="bottom">  </td> <td valign="bottom" align="right">10.00</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom" align="right">7,839,209</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,000</td> <td valign="bottom">  </td> <td valign="bottom" align="right">310,464,033</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8,089</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8,089</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> C </td> <td valign="bottom">  </td> <td valign="bottom" align="right">10.00</td> <td valign="bottom" nowrap="nowrap">%(1) </td> <td valign="bottom"> </td> <td valign="bottom" align="right">519,882</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,000</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">408</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">911</td> </tr> <tr> <td valign="top"> D </td> <td valign="bottom">  </td> <td valign="bottom" align="right">5.00</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">9,068</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Total </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,597</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">19,168</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="3%" align="left">(1)</td> <td valign="top" align="left">During 2009, 640,909 shares were redeemed with an aggregate price equal to the aggregate price exchanged by MUFG for approximately $0.7 billion of common stock resulting in a negative adjustment of approximately $202 million in calculating earnings per basic and diluted share (see Note 14).</td> </tr> </table>   Series A Preferred Stock.    In July 2006, the Company issued 44,000,000 Depositary Shares, in an aggregate of $1,100 million. Each Depositary Share represents 1/1,000th of a Share of Floating Rate Non-Cumulative Preferred Stock, Series A, $0.01 par value (“Series A Preferred Stock”). The Series A Preferred Stock is redeemable at the Company’s option, in whole or in part, on or after July 15, 2011 at a redemption price of $25,000 per share (equivalent to $25 per Depositary Share). The Series A Preferred Stock also has a preference over the Company’s common stock upon liquidation. Subsequent to December 31, 2009, the Company declared a quarterly dividend of $255.56 per share of Series A Preferred Stock that was paid on January 15, 2010 to preferred shareholders of record on December 31, 2009.   Series B and Series C Preferred Stock.    On October 13, 2008, the Company issued to MUFG 7,839,209 shares of Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock (“Series B Preferred Stock”) and 1,160,791 shares of Series C Preferred Stock for an aggregate purchase price of $9 billion. The Series B Preferred Stock is convertible at MUFG’s option (at a conversion price of $25.25) into 310,464,033 shares of the Company’s common shares, subject to certain anti-dilution adjustments. Subject to any applicable New York Stock Exchange stockholder approval requirements, one-half of the Series B Preferred Stock will mandatorily convert into the Company’s common shares when, at any time on or after October 13, 2009, the market price of the Company’s common shares exceeds 150% of the then-applicable conversion price (initially $25.25) for twenty trading days within any period of thirty consecutive trading days beginning after October 13, 2009 (subject to certain ownership limits on MUFG and its affiliates). The remainder of the Series B Preferred Stock will mandatorily convert on the same basis on or after October 13, 2010.   The Series B Preferred Stock pays a non-cumulative dividend, as and if declared by the Board of Directors of the Company, in cash, at the rate of 10% per annum of the liquidation preference of $1,000 per share, except under certain circumstances (as set forth in the securities purchase agreement for the sale of the Series B Preferred Stock and the Series C Preferred Stock to MUFG). Subsequent to December 31, 2009, the Company declared a quarterly dividend of $25.00 per share of Series B Preferred Stock that was paid on January 15, 2010 to preferred shareholders of record on December 31, 2009.   The Series C Preferred Stock is redeemable by the Company, in whole or in part, on or after October 15, 2011 at a redemption price of $1,100 per share. Dividends on the Series C Preferred Stock are payable, on a non-cumulative basis, as and if declared by the Board of Directors of the Company, in cash, at the rate of 10% per annum of the liquidation preference of $1,000 per share. Subsequent to December 31, 2009, the Company declared a quarterly dividend of $25.00 per share of Series C Preferred Stock that was paid on January 15, 2010 to preferred shareholders of record on December 31, 2009.   The $9 billion in proceeds was allocated to the Series B Preferred Stock and the Series C Preferred Stock based on their relative fair values at issuance (approximately $8.1 billion was allocated to the Series B Preferred Stock and approximately $0.9 billion to the Series C Preferred Stock). Upon redemption by the Company, the excess of the redemption value of $1,100 per share over the carrying value of the Series C Preferred Stock ($0.9 billion allocated at inception or approximately $784 per share) will be charged to Retained earnings (i.e., treated in a manner similar to the treatment of dividends paid). The amount charged to Retained earnings will be deducted from the numerator in calculating basic and diluted earnings per share during the related reporting period in which the Series C Preferred Stock is redeemed by the Company (See Note 14 for additional details).   Series D Preferred Stock and Warrant.    On October 3, 2008, the Emergency Economic Stabilization Act of 2008 (initially introduced as TARP) was enacted. On October 14, 2008, the U.S. Treasury announced its intention to inject capital into nine large U.S. financial institutions, including the Company, under the Capital Purchase Program (“CPP”). The Company was part of the initial group of financial institutions participating in the CPP, and on October 26, 2008 entered into a Securities Purchase Agreement—Standard Terms with the U.S. Treasury pursuant to which, among other things, the Company sold to the U.S. Treasury for an aggregate purchase price of $10 billion, 10 million shares of Series D Fixed Rate Cumulative Perpetual Preferred Stock, par value $0.01 per share, of the Company (“Series D Preferred Stock”) and warrant to purchase 65,245,759 shares of the Company’s common stock, par value $0.01 per share (the “Warrant”), of the Company.   The $10 billion in proceeds was allocated to the Series D Preferred Stock and the Warrant based on their relative fair values at issuance (approximately $9 billion was allocated to the Series D Preferred Stock and approximately $1 billion to the Warrant). The difference between the initial value allocated to the Series D Preferred Stock of approximately $9 billion and the liquidation value of $10 billion was to be charged to Retained earnings over the first five years of the contract as an adjustment to the dividend yield using the effective yield method. The amount charged to Retained earnings was deducted from the numerator in calculating basic and diluted earnings per share during the related reporting period (see Note 14).   In June 2009, the Company repurchased the 10,000,000 shares of the Series D Preferred Stock from the U.S. Treasury, at the liquidation preference amount plus accrued and unpaid dividends, for an aggregate repurchase price of $10,086 million.   As a result of the Company’s repurchase of the Series D Preferred Stock, the Company incurred a negative adjustment of $850 million in its calculation of basic and diluted EPS (reduction to earnings (losses) applicable to the Company’s common shareholders) for 2009 due to the accelerated amortization of the issuance discount on the Series D Preferred Stock.   In August 2009, under the terms of the CPP securities purchase agreement, the Company repurchased the Warrant from the U.S. Treasury in the amount of $950 million. The repurchase of the Series D Preferred Stock, in the amount of $10.0 billion and the Warrant in the amount of $950 million, reduced the Company’s total equity by $10,950 million in 2009.   The Company’s preferred stock qualifies as Tier 1 capital in accordance with regulatory capital requirements (see Note 12).   Accumulated Other Comprehensive Loss.    As of December 31, 2009 and December 31, 2008, the components of the Company’s Accumulated other comprehensive loss are as follows (dollars in millions):   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="78%"></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">At December 31, 2009</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">At December 31, 2008</td> <td valign="bottom"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Foreign currency translation adjustments, net of tax </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(26</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(142</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr> <td valign="top"> Amortization expense related to terminated cash flow hedges, net of tax </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(27</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(40</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Pension adjustment, net of tax </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(507</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(238</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr> <td valign="top"> Accumulated other comprehensive loss, net of tax </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(560</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(420</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> </table>   Cumulative Foreign Currency Translation Adjustments.    Cumulative foreign currency translation adjustments include gains or losses resulting from translating foreign currency financial statements from their respective functional currencies to U.S. dollars, net of hedge gains or losses and related tax effects. The Company uses foreign currency contracts and designates certain non-U.S. dollar currency debt as hedges to manage the currency exposure relating to its net monetary investments in non-U.S. dollar functional currency subsidiaries. Increases or decreases in the value of the Company’s net foreign investments generally are tax deferred for U.S. purposes, but the related hedge gains and losses are taxable currently. The Company attempts to protect its net book value from the effects of fluctuations in currency exchange rates on its net monetary investments in non-U.S. dollar subsidiaries by selling the appropriate non-U.S. dollar currency in the forward market. Under some circumstances, however, the Company may elect not to hedge its net monetary investments in certain foreign operations due to market conditions, including the availability of various currency contracts at acceptable costs. Information as of December 31, 2009 and December 31, 2008 relating to the hedging of the Company’s net monetary investments in non-U.S. dollar functional currency subsidiaries and their effects on cumulative foreign currency translation adjustments is summarized below:   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="78%"></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">At December 31, 2009</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">At December 31, 2008</td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="6" align="center">(dollars in millions)</td> <td valign="bottom"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Net monetary investments in non-U.S. dollar functional currency subsidiaries </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,325</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">7,903</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> <tr> <td valign="top"> Cumulative foreign currency translation adjustments resulting from net investments in subsidiaries with a non-U.S. dollar functional currency </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">254</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(339</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Cumulative foreign currency translation adjustments resulting from realized or unrealized losses on hedges, net of tax </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(280</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">197</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr> <td valign="top"> Total cumulative foreign currency translation adjustments, net of tax </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(26</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(142</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> </table>   Non-controlling Interests.   Deconsolidation of Subsidiaries.   During 2009, the Company deconsolidated MSCI in connection with the Company’s disposition of its remaining ownership interest in MSCI and recognized an after-tax gain of approximately $279 million. The Company did not retain any investments in MSCI upon deconsolidation. See Note 23 for further information on discontinued operations.   During fiscal 2008, the Company deconsolidated certain subsidiaries and recognized gains of approximately $70 million, included in Other revenues on the consolidated statements of income.   Changes in the Company’s Ownership Interest in Subsidiaries.   The following table presents the effect on the Company’s shareholders’ equity from changes in ownership of subsidiaries resulting from transactions with non-controlling interests.   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="84%"></td> <td valign="bottom" width="12%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">2009</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="2" align="center">(dollars in millions)</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Net income applicable to Morgan Stanley </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,346</td> </tr> <tr> <td valign="top"> Transfers from non-controlling interests: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Increase in paid-in capital in connection with MSSB </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,711</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="top"> Net transfers from non-controlling interests </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,711</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Change from net income attributable to Morgan Stanley and transfers from non-controlling interests </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,057</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> </tr> </table>   The increase in paid-in capital results from Citi’s equity interest in MSSB, to which the Company had contributed certain businesses associated with the Company’s Global Wealth Management Group. The excess of the preliminary net fair value received by the Company over the increase in non-controlling interest associated with Smith Barney is reflected as an increase in paid-in capital. See Note 3 for further information regarding the MSSB transaction.   The impact on the Company’s shareholders’ equity from transactions with non-controlling interests was not material for fiscal 2008, fiscal 2007 and the one month ended December 31, 2008.   During fiscal 2008, the Company recorded pre-tax gains of approximately $1.5 billion, in connection with sales of its shares in MSCI as part of secondary offerings. Such gains are included in discontinued operations (see Note 23). During fiscal 2007, the Company recorded $239 million as an addition to paid-in capital associated with the initial public offering (“IPO”) of MSCI. </div> 13.    Total Equity.   Morgan Stanley Shareholders’ Equity.   Common Stock.    Changes in shares of false false No definition available. 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