Good morning. This is Celeste Brown, Head of Investor Relations. Welcome to our fourth quarter earnings call. Today's presentation may include forward-looking statements, which reflect management's current estimates or beliefs and are subject to risks and uncertainties that may cause actual results to differ materially. This presentation may also include certain non-GAAP financial measures. Please see our SEC filings at morganstanley.com for a reconciliation of such non-GAAP measures to the comparable GAAP figures and for a discussion of additional risks and uncertainties that may affect the future results of Morgan Stanley. This presentation, which is copyrighted by Morgan Stanley and may not be duplicated or reproduced without our consent, is not an offer to buy or sell any security or instrument. I will now turn the call over to Chairman and Chief Executive Officer, James Gorman, who will speak to the slides available on our website and filed with our current report on Form 8-K this morning.

Good morning, and thank you, Celeste. As we close the door on 2012 and open one on 2013, I want to share my thoughts with you on the state of Morgan Stanley and where we're headed. To do so, we're going to have a different kind of earnings call. I'll give you a strategic update, and we'll have a dozen or so slides, which we've prepared for you to follow along with, and they're on the website, as Celeste said. Then Ruth is going to take you through the normal quarterly review, and we'll both take questions at the end. Why are we doing it this way today? It's because we believe Morgan Stanley is at a turning point. Importantly, we see a clear path to meeting and then exceeding our cost of equity, and we want to lay it out for you. While we live in a world of continued regulatory uncertainty as we wait final rules on derivatives reform, Volcker and resolution authority, which will bring significant changes to the markets, we are controlling what we can control. We have strong and leading capital ratios, we have a clear path for wealth management and we're being aggressive with our cost base. We have reduced fixed income risk-weighted assets even faster than we had initially planned and have a clear path to what we consider to be the end state in that business. We've been carefully trying to balance being aggressive where we can, and you can see this in our expense cuts and RWA reductions, but not making decisions that might seem wise in the very short term but may in fact be harmful to medium- and long-term shareholder value. I will outline the 5 strategic initiatives that led us to meeting and -- that will lead us…

Good morning. I will provide both GAAP results and results excluding the effect of DVA. We have provided reconciliations in the footnotes to the earnings release to reconcile these non-GAAP measures. DVA in the quarter was a loss of $511 million, with $330 million in fixed income sales and trading and $181 million in equity sales and trading. Excluding the impact of DVA, firm-wide revenues were $7.5 billion, essentially flat to the third quarter. Non-interest expense was $6.1 billion, down 10% versus the third quarter. Compensation expense was $3.6 billion this quarter, down 8% versus Q3. Non-compensation expense was $2.5 billion, down 13% from last quarter. The effective tax rate from continuing operations for the fourth quarter was 11.1%. In our tax line this quarter, we reversed certain tax reserves as a result of new information from IRS exams that resulted in a benefit of $299 million. In addition, we recorded an out-of-period net tax provision of $144 million to adjust previously recorded deferred tax assets principally associated with partnership investments in the Asset Management segment. We are also reviewing the firm's deferred tax accounts. Earnings from continuing operations applicable to Morgan Stanley common shareholders were approximately $867 million. Earnings from continuing operations per diluted share were $0.45 after preferred dividends. On a reported or GAAP basis, firm-wide revenues for the quarter were $7 billion. Earnings from continuing operations applicable to Morgan Stanley common shareholders were $547 million. Reported earnings from continuing operations per diluted share were $0.28 after preferred dividends. Book value at the end of the quarter was $30.65 per share. Tangible book value was $26.81 per share. Included in the discontinued operations is $115 million associated with the Saxon settlement. Turning to the balance sheet, our total assets were $782 billion at December 31, up from $765…

[Operator Instructions] The first question will come from Howard Chen with Crédit Suisse. Howard Chen - Crédit Suisse AG, Research Division: With respect to expenses, the cost reduction targets in a flattish revenue environment is a really strong statement and a helpful benchmark for us. I'm curious, James, how do you broadly think about the incremental margins or returns in a potentially better revenue environment? For example, if revenues were up 10% with a similar business mix, how much do you think would drop to the bottom line?

Boy, that's not one I'm going to wing. Look, maybe put pencil to paper. We've been operating so much under the basis that there won't be increased revenues. Obviously, the world is going to evolve, so at some point, that's not true. But our approach is being what can we control? How do we drive up margins in a flat revenue environment? And obviously, through the expense line is how we're doing that. By definition, if we hold the line on our fixed costs, which I think we've been very disciplined about on a go-forward basis, one would assume the incremental dollar revenue would throw off a higher incremental margin than the previous dollar revenue. But I got to go on -- we'd have to go and look at it business by business. Howard Chen - Crédit Suisse AG, Research Division: And we saw some really nice expense control within Global Wealth Management. Specific to compensation, you've noted in the past the limited flexibility you might have due to the grid-like comp structure. So I'm curious, what's driving that comp accrual lower in 2012? And how sustainable should we think of that?

The main driver of the reduction in the comp ratio is the fact that we are done with integration. As we've talked about on so many calls over the years, the integration expense was running ballpark $80 million to $100 million a quarter until we completed the integration at the end of the second quarter then dropped down in the third and fourth quarter, taper down. That's one major benefit. The second is that as a result of being on one platform, we're able to consolidate a number of back offices and management layers, the items that we outlined really on the third quarter call. And so that's sustainable as well. I think the fourth quarter compensation benefited a bit by what is typical year-end true up, true down. Sometimes it benefits the comp ratio, other times, it doesn't. I think it's fair to say near term, the ratio is likely to be in the 60% range. But very much to your point, there really -- there are a couple of drivers that will reduce that comp ratio more. One is as we're continuing to build out the lending product, the lending product is a non-compensable revenue. It does provide a lift to the margin and drives -- that alone drives the margin into the 50s. And then, again, a better operating environment. In particular, any kind of rate increase has a meaningful benefit to the margin in the business, and that helps as well. So we're good at where we are here, holds you kind of in the first quarter near term to that 15% margin for the reasons I described, with upside. Howard Chen - Crédit Suisse AG, Research Division: And then just finally for me, can you discuss your wholesale funding plans over the next 2 years? I think you have maybe $45 billion-ish maturing through 2014. How much would you like rolled off, and how do you think that funding schedule potentially change as you buy in the rest of the JV this year?

Sure. There are a couple of variables to that. We're obviously sitting here, as I noted, with liquidity at higher levels, about $189 billion. So there's some flex in there. We have reduced outstanding indebtedness, outstanding debt this year, unsecured debt by about $19 billion, very much to your point about the changing composition of the balance sheet. And then as we buy in the balance of the wealth management business, the deposits, as I think you know, come on, we'll get about $15 billion when we complete the 35%, but the balance of it comes on ratably over a 2-year period of time. The total size of those deposits is ballpark $140 billion, part of which will be used to support growth in the institutional business. So the 3 components of it will be wealth management lending, institutional lending and other bank-appropriate businesses moving into the bank. As we do that, we get dollar-for-dollar substitution, reducing unsecured debt requirements and replacing them with deposit funding. So all of those provides a bit of flexibility with respect to the magnitude of unsecured debt or wholesale funding that will be required on a go-forward basis.

The next question will come from Glenn Schorr with Nomura.

So I appreciate the further detail on the RWA wind-down. I guess a 2-part question is I'm assuming that it's all passive, but if you look at it, what it does imply, and you guys are by no means alone here, there's $80 billion of RWA that are clogging up the system that have no real revenue impact. So the 2-parter is, one, can anything in the market conditions change that to make there be a positive or a negative revenue impact? Or are we kind of locked and loaded and just waiting for wind-down? And part 2 is what does that RWA wind-down plan imply at all? Does it have revenue implications for fixed income as that plays out?

So Glenn, when we put out the initial forecast for risk-weighted assets and RWA reduction, we were looking at -- there are obviously 3 levels -- levers. There's passive mitigation, active mitigation and model approval. And the guidance last summer was primarily based on passive mitigation, just scheduled roll-offs to maturity sub-positions [ph]. I've had some active, but it was primarily passive. What we've done through the back half of 2012 was accomplished through active mitigation. In other words, we pulled forward some of the passive mitigation that was embedded in that earlier forecast, but it was through active mitigation that we ended the year at $280 billion of risk-weighted assets and were able to pull forward our forecast by a year. And the way we've been accomplishing the active mitigation is, really, with minimal P&L impact, and that's the way we're continuing to look at it. We're really reducing capital behind positions that are -- in areas that are not revenue-accretive longer term.

So just making sure I got it right, any way you slice it, as the RWA runoff, good or bad market conditions, it's going to have no revenue impact.

I said it's minimal revenue impact. That's the way we've been looking at it. And I think you had one other part of your question I didn't quite address. The reason we've been able to accomplish this pull-forward is this is, as you know, a real priority for us. We have strict governance around it. Our senior leadership team is very committed to it, and that's enabled us to pull forward, through active mitigation, more reduction in 2012 and set us up for this decline as we're looking at in '13 and beyond, at minimal P&L impact.

Got it. Ruth, you've mentioned the 43% true comp ratio at ISG. I'm assuming that was the year, not the quarter, correct?

Correct.

Okay. And that's come down and I think the shareholders be cool with that. We've seen some stuff in the press about changes on the deferral. Not something normally I'd ask you to comment on, but I'm just curious on the impact on future periods. So the change in deferred, I've seen this happen in the past at some other companies. How much of a contingent liability does that create on the go-forward? Or is it not material to the overall story?

Well, a couple of things in terms of the compensation structure. So we did change the comp structure again this year. We raised the total compensation level at which deferrals start, so over 82% of people don't have deferrals, and it's really -- think of it as those who are in the earlier parts of their careers. So it's really for the more senior people that we have deferrals. The vesting schedule is still over 3 years, and it's the combination of cash and equity, which we think further enhances alignments of interest. But as we talked about on calls last year, we said the absolute amount of deferrals would be going down. It is continuing to go down. The actual amount of deferrals in 2013 is lower than 2012, and the aggregate amount continues to decline. And I think as important, as James noted in his comments, when you combine that with the actions we've taken reducing headcount, base and benefits are also meaningfully lower. We're paying 6,000 fewer people in 2013. And then you add that to things like location sourcing. So kind of that fixed element of it, if that's where you framed it, is declining.

Now that's super helpful. And then last one for me, commodities, specifically, and I appreciate the environment has been a soft one, and I've seen it everywhere. Is the business actually changed such that maybe it doesn't fit inside a broker-dealer anymore? In other words, would private equity be a better owner? It seems -- curious if you would allocate, I'm sure you won't, but I'll try, the risk-weighted assets associated with it? It feels like, wow, 3 out of 4 quarters this year were pretty soft. In other words, in your mind, is it cyclical versus something changed?

Yes, there were some quite specific issues in the environment that affected commodities this quarter, in particular. I mean, as you know well, our business is both physical and trading, and it's also primarily oil and power. And when you combine storm-related dislocation, continued backwardation with lower prices affecting our storage business and then the lower volatility, we had a series of things that resulted in, basically, de minimis revenues in commodities this quarter, very unusual one over time. So we do think there's quite a cyclical element to it, storm-related element to it, however you want to frame it.

Yes, I'd just add firstly, to put the quarter in context, and I know the second quarter was also challenging, you have to go back to 1995, I think, to find quarters like that. So it was fairly aberrant. These businesses don't turn that quickly on a dime, good or bad. We have a tremendous Commodities business, tremendous team. They had an aberrant environment, difficult environment, difficult quarter, and we moved on past that. On the broader strategic things, I mean, if we could find a structure that was more advantageous for everybody, we'd do that, and obviously, as we've said publicly, we're open to that. But this is not because we don't think it's a great business. We're just constantly looking at the combination of capital, liquidity, funding and the mix of those 3 things and trying to figure out the best way to move forward.

The next question will come from Mike Mayo with CLSA.

I think this goes in the category of good progress but could it be better. So starting with Slide 12, you identify targets for return on tangible equity at 11%, going to 12% at some point, but you don't put a time frame around that. Can you give us any better sense of timing when you expect to achieve that?

What we tried to do, Mike, was lay out in the deck the key components that are embedded in that 9%, so the expense initiatives, the capital efficiency, the drivers in wealth management and Institutional Securities. So just focusing on the expense -- well, let's start from the top. Wealth initiative and the buy-in there, as James said, that's one item that we put into CCAR. That's with a focus to accomplish as soon as possible, subject to regulatory approval. And the benefit, to be clear, of the wealth management buy-in is not just the incremental 35% earnings but the contractual upside once we own 100% results in earnings that are about the same as that which we get from retaining the NCI. And then on top of that, when you're talking about ROE, clearly, as I've been talking about for many quarters, we've been holding capital against the stake. So that's deadweight capital. We'll finally get not just the NCI but that contractual earnings against it. That's helpful and that's submitted within our CCAR now. The expense initiatives, as we outlined on the chart, are over the next 2 years. And so you can see the $1.6 billion reduction in the 2-year period of time. I think the RWA reductions, we're continuing to focus on that near term and the growth initiatives as well. So we're not putting a specific timeline on it, but try to guide you there with the way we laid out the other key drivers of the upside.

And for the expense reduction, now that is a big number, $1.6 billion, but you've made such good progress here recently that if you annualize fourth quarter results, I guess that's just $400 million incremental per year. Am I doing the math correctly, or how should I think about that?

Well, the reason we pulled it all together in $1.6 billion, as we've been talking to you over the last year or 2 about a number of different initiatives, the Office of Re-engineering, the wealth management efforts, the headcount reduction, so the goal was to pull everything together with a holistic view of it. As it relates to reengineering, which is both comp and non-comp, we targeted a $1.4 billion run rate reduction by 2014 and a $500 million run rate reduction by the end of 2012. Our expenses in aggregate are down $500 million between 2011 and 2012, a little different mix there but down by that $500 million. So now when you layer on top of it the integration in wealth management, the benefit from the consolidation steps, the headcount reduction, line by line buildup takes you to that $1.6 billion over the 2-year period of time. So I wouldn't say annualize the 2011 over 2012 reduction. This is really by initiative, takes you to the $1.6 billion over that period of time based on our best estimates, what we know now and, as we said, assuming a flat revenue environment.

And the wealth management margin, great, you're 17%, but I guess your target is still mid-teens. So why not increase the targets?

We're keeping it for now at the mid-teens target, and we're pleased with the 17% and all that we had to do with the franchise completing the integration that set us up to achieve the 17% margin. But as I said previously, we wouldn't guide you to hold that 17% in the first quarter for a couple of reasons. One, there are fewer trading days, and it is seasonally slightly higher comp ratio. So holding the comp ratio, at least near term, in that 60% range, implying sort of a 15-ish percent margin near term, we think, is prudent, appropriate. But again, for the reasons we've talked about, namely the expense savings through consolidation, coupled with the upside we see with our growth in lending, that should take you to higher levels. And if you have any lift at all from the environment, in particular, on the rate side, it does as well. But we're going to hold for now to the mid-teens and wait to see those play out over time.

And then lastly, backlogs, you said equity underwriting is higher. Is that link quarter, year-over-year or both? And can you also give those -- that information for total investment banking?

So the equity pipeline is up going into the year, so quarter-over-quarter, and as I said, it's driven by greater activity in Europe and Asia, in particular. Those were pretty muted throughout 2012. So with the healthier backdrop, in particular, in Europe, we're looking for more activity. And then -- I'm sorry, the second part of your question was...

Just backlogs, any other color you can give. So that's equity. What about fixed income?

Fixed income tends to have a slightly shorter pipeline. It has been a very constructive environment for refinancing. I think there have been some debate as to was activity pulled into the fourth quarter from the first quarter. Our view very much is it was not. This was just good refinancing effort and corporate clients being opportunistic because of low rates, and so there is more to come. We think that although you never want to forecast an extension off of a record quarter, the offset to any kind of declines there. In fact, the M&A market remains as constructive as it appears we could see some more event lending activity, in particular, non investment-grade activity. So I don't want to suggest that you should extrapolate off of the fourth quarter, given it was a record, but we feel good about the ongoing interest by clients in financing activity.

The next question will come from Brennan Hawken with UBS.

Quick question here. The roughly $50 billion of RWA reduction that we're going from current to year-end '14, have you guys provided the risk weights for those assets? And if not, would you do so?

We have not. We thought we were actually being quite expansive breaking out the risk weights by category. We've given you some of the product areas, but we have not broken it out more than that.

Okay. And then I assume in the run-off that you guys had, even though you had some opportunistic active runoff here this quarter, that the forward look is still all passive. Is that right?

It's overwhelmingly passive, just as we built up the first forecast. And I think one of the potentially obvious points is given the focus in governance around RWA reduction, we were able to pull forward and execute. And again, there's only so many times you can pull things forward. But this is primarily passive mitigation at this point with a focus on trying to continue to accelerate some of the active.

Okay. And I'm sorry if I missed this, but can you or have you quantified the revenue opportunity that's in the order flow capture once you guys own all of MSSB?

We haven't broken out the order flow agreement separately, but when you take the order flow agreement, the return on higher deposits, very importantly, assuming that those additional deposits, near term, merely fund the AFS portfolio and the reduction of the expenses associated with running a joint venture like extra reporting and other items like that, those 3 items in the aggregate are about comparable to the earnings from the 35%. And again, a couple of items. One, that's, again, assuming that if we're just putting that into an AFS portfolio, clearly, as we're lending it out there, it's greater returns. And that's the key point.

Sure. So as we're modeling this, a check figure would be maybe to watch the -- take a look at the NCI and double it effectively. And then as along as we're getting that kind of upside, then we're in the right ballpark.

Yes. I think one thing you probably want to look at is the slide that James walked you through. We indicated that the incremental capital, ballpark $400 million, and that the earnings in the first year, ballpark the same number. So we're kind of helping you triangulate right back to those -- how much that will bring.

Okay. Yes, I appreciate that. And then just last one for me. On the wealth management business, can you give some color around risk appetite and what you guys are seeing around all this noise out of D.C.? Is it impacting risk appetites there? Are you starting to see a little relief now that we've moved past some of it or at least people might realize that noise and all that out of D.C. are just a permanent part of the landscape at this point?

Let me take a cut at that because I've been pretty involved with some of the stuff going on in the fiscal side and trying to get the temperature of the retail investor. I would say that somewhere around early December, there was a shift in tone and a pickup in activity and by definition, a pickup in risk appetite. So investors were re-engaging. Businesses of this size and this geographic dispersity don't move dramatically month to month, but there was definitely a tonal shift. I think it's too early, obviously, in this quarter to say much about that. But it feels similar, and the more progress that we have on the fiscal front, the more confidence investors will have to get out there and invest. The other thing you have to look at, Brennan, is that the 401(k) plans are up materially last year, so the wealth impact of people is up materially. They get to the end of the year, they see their 401(k) holding is up, on average, equity side, up 15%. That has a real driving factor around investment behavior. So I think we -- my personal view is that absent a reversal in the U.S. economy, which I don't anticipate, or a complete mess up in Washington, which I don't anticipate because they're making progress, I think we've passed the bottom.

Well, you can never not count on a complete mess up out of Washington.

The next question will come from Guy Moszkowski with Autonomous Research.

On the lending in Global Wealth Management, do you have a target loan-to-deposit ratio that you'd like to move towards?

At this point, we don't. I think the main point to note is we do have the largest retail distribution system. And as James noted, we think there's real upside because only 5% of our clients are currently using our lending suite. It's ballpark 10% for our peers, and that's just because historically, this hasn't been a strategic focus for us. So our deposits will be growing to about $140 billion post-acquisition. We think we have real meaningful upside there. It wouldn't be fully utilized just on the wealth management side, at least in the very near term. We're continuing to be quite prudent about the way we're growing that portfolio. And that's why when we talk about deposit growth, it's not just with respect to wealth management, but it's also what we're doing on the institutional side with relationship lending and event lending and with additional products moving into the bank, bank-appropriate products such as things like commercial real estate lending or asset-based lending with our existing corporate clients.

Fair enough. On your Slide 7, James, on the FICC discussion, the RWA net reduction of $30 billion through sort of the net of strategic reductions and growth, is there any way that we can get under that just to see how you're thinking about how you would shift emphasis on the business within FICC?

The focus within FICC is very consistent with what we've been talking about for quite some time. And so there are areas of growth within those core product areas we're continuing to be active in rates and have invested in it at foreign exchange. Similarly, we're continuing to benefit from the electronic trading platform. In fact, we set new records internally for trade volumes last quarter. Credit remains important to us. We're very active in mortgages. So it continues to be in the areas that we've spoken about, and we just wanted to leave some cushion for ongoing growth there, which is part of the plan.

Sure, that's helpful. On Page 12 of the slides, can you give us a sense for how much of getting to that 9% ROE with no change in market conditions would be contingent on getting to the FICC market share targets that you've laid out in the past?

We've tried to give as many levers as we can. We are still committed to the market share gains, the 2% market share gains that we've talked about. We're also very focused on the returns in the business, and you can see that with what we've done on RWA reduction, but I haven't broken that out.

Yes, but it sounds like fundamentally, you did assume in that analysis that you did gain those couple of points of share.

No, because what we have here as first bullet is -- no change in market conditions, is essentially just a flat revenue environment and then layer in the actions that we've put into this slide deck here.

Okay. So you don't assume that you have any meaningful share gain within the context of the flat market? I just want to make sure I understand what your assumptions are.

Yes. We have 2 -- let me be very clear here. For purposes of the slide and the 9%, we've delineated the steps that we're taking, assuming no change in market condition. For purposes of the way we're running the business and the way our business leaders think about the business, of course, we're continuing to pursue the market share gains for all the reasons that we've talked about. I was answering 2 questions, I apologize.

No, but now it's clear. That helps a lot. And then finally, just not to harp on this margin target on GWM, but it almost sounds like you want to raise the target there, except that you don't want to do that in the face of some seasonality in the first quarter on the expense base, and I understand that. But should we be thinking that it goes up, that the target goes up beyond the first quarter?

Let me have a go at this. I mean, listen. Firstly, one quarter is 13 weeks. So let's not get too wound up about precisely where we are. As Ruth said, there's some seasonality. We were criticized in the past for laying out a 20% margin 4 years ago for this business. We didn't anticipate a very difficult market. We didn't anticipate 0 interest rates, and we're guilty as charged. So we said we would deliver in this business mid-teen margins by the middle of next year, and that's what we're focused on. So let's revisit it, Guy, when we get to the mid-teen margins in the middle of next year.

The final question will come from Fiona Swaffield with RBC Bank of Canada.

I just wanted to ask on your Basel III capital ratio and what you think your target is now post -- do you think -- I noticed somewhere there was a 9% yield to investment bank in the capital allocation on the risk-weighted assets side. And then secondly, just within your Slide 12, when you talked about 1% accretion from returning excess capital, I mean, that seems quite low. Is that just in 1 year, or could you just talk a bit more about that?

Certainly. So we're assuming that we'll run at a buffer above the requirements. So with our GCP buffer, that would put us at about 8.5%, run at a buffer above that. We're obviously looking to continue to accrete capital which will take those ratios up, in particular, with what we're doing on the RWA reduction side. And then the question really becomes over what time do we -- are we returning capital, and that's a function of earnings in the regulatory environment. And it's also how do we look to reinvest some of that capital in our business. I mean, there's some pretty obvious areas with $140 billion of deposits coming on and the opportunity to grow the suite of lending products, as I've talked about, both wealth management and institutional. Some of it goes behind that. But we have not laid out a timeline for the return of capital, and we'll leave it to you to model in how much upside, incremental upside there is over what period of time returning excess capital. Well, with that, we thank you very much for joining our fourth quarter call and look forward to speaking to you in 13 weeks.

Ladies and gentlemen, thank you for participating in today's conference call. You may now disconnect.