guide to reading your morgan stanley smith barney … · guide to reading your morgan stanley smith...

Guide to Reading Your Morgan Stanley Smith Barney StatementYour Morgan Stanley Smith Barney (“MSSB”) account statement is a valuable – and, powerful – resource that provides you with the information you need to partner with your Financial Advisor as you work toward realizing your financial objectives. By carefully reading your statement, you can remain up-to-date on your account(s). The goal of this guide is to provide suggestions on how to read and understand your statement.

We encourage you to support our “go green” efforts by reviewing your statements online via MSSB Online and eliminating paper statements. By enrolling in eDelivery, you reduce the volume of paper you have to manage, while retaining online access to seven years of statements on MSSB Online. As an added benefit, you need not wait for the mail: when your statement is available to view online, you receive an email notification. To enroll in eDelivery, log in to MSSB Online, click on the Records tab and select “Sign-up for eDelivery.” If you are not already enrolled in MSSB Online, go to: www.mssb.com

Regardless of the delivery method you choose, we are committed to providing statements that keep you informed as you work towards reaching your financial goals.

Table of Contents

1 Introduction

3 Cover Page

4 Consolidated Summary

5 Account Summary

10 Holdings

13 Activity

14 Additional Account Sections

16 Annual & Fiscal Reviews

17 Frequently Asked Questions

morganstanleysmithbarney 2

key Statement ComponentS • Cover Page: Provides a snapshot of the beginning, ending and change in value of

your account(s). • Consolidated Summary: Provides key summary information for all the accounts

included in your mailing envelope (i.e., statement package). For single statement packages, this section would not appear.

• Account Summary: Provides summary information at an account level. The sections in the Account Summary are similar to the Consolidated Summary. Depending upon the type of account, there may be additional details (e.g., Retirement contributions, Active Assets Account spending).

MSSB statements are dynamic, showing the relevant additional summaries and detailed sections for each account in a given statement period. These sections include:

• Holdings: Presents the holdings grouped by product, with information unique to the security.

• Activity: Presents all activity up through the last business day of the statement period.

• Messages: Alerts you to timely account-specific information. • Research Ratings Definitions: Provides a definition of the ratings you may see in

the Holdings component. Note, that for Advisory Accounts, the definitions are for Consulting Group Investment Advisory Research Status Definitions instead.

• Disclosures: Provides important information about your accounts and how we conduct business.

The following pages contain examples of statement sections for illustrative purposes only and do not represent a complete account statement.

The Morgan Stanley Smith Barney statement is organized into eight main components and is designed with a top-down approach, moving from summary level information to the more granular details of account holdings and activity.

The statement gives you a snapshot of your account and when appropriate, provides a perspective on growth and the change in value of your account(s) over time. Our goal is to give you the information that enables you to be an informed participant in the financial management of your account.


Cover PageThe Cover Page provides an overview of your account(s).

a

b

c

d

a You will fi nd the statement reporting period on every page of the statement.Statement frequency is based upon the type of account and activity. Generally,

• Active Assets (AAA) and Advisory accounts receive statements every month.

• Individual Retirement Accounts (IRA) and Basic Securities Accounts (BSA) receive statements on a quarterly basis (unless there has been qualifying activity).

• Education accounts receive quarterly statements only detailing activity for that period.

b The value of your account(s) is provided: • Total Value Last Period and Total Value of

Your Accounts. • Net Contributions / Withdrawals represents

cash and / or securities that have moved into or out of any of your account(s).

• Change in Value of your accounts represents the difference between the Total Ending Value as of the end of the statement period minus the Total Beginning Value, Net Contributions / Withdrawals and Security Transfers. For a more detailed breakdown of Change in Value, refer to the Account Summary component.

Also displayed are c the contact details for your Financial Advisor or Team, d the direct phone number for the Client InteractionCenter and e the fi rm’s Web site.

e


Consolidated SummaryThe Consolidated Summary is a good place to start assessing your total investment picture and provides a concise, at-a-glance snapshot of all accounts included in your linked statement package. The Consolidated Summary and the Account Summary are similar components, with the Consolidated Summary providing an aggregate view of all of the accounts included in your statement package. Clients with a single account will receive only the Account Summary.

a The OVERVIEW OF YOuR ACCOuNTS section within the Consolidated Summary provides key information for each account, with totals by account category (i.e., Personal, Retirement, Education, Trust, and Business).b The starting page number for each

account is displayed in the last column on the right of the statement page — Begins on Page.

a

b


Account Summary

b

c

a

c The CHANGE IN VALuE OF YOuR ACCOuNTS SECTION was designed as a quick and easy way to see your account’s change in value for the current period and year-to-date; and answer the simple question: “How am I doing?”

• Starting with the Total Beginning Value, we add all net Contributions (credits) and Withdrawals (debits), as well as Security Transfers that fl owed into or out of your account.

• This results in the Change in Value fi gure which represents the diff erence between the Total Ending Value as of the end of the statement period minus the Total Beginning Value, Net Contributions / Withdrawals and Security Transfers.

a For your convenience, you will find the Account Number and Account Name at the top of every page in the blue bar.b Account Type and Investment

Objectives are displayed for your reference. If you have asked your Financial Advisor to nickname your account, the nickname will appear here, as well as in the OVERVIEW OF YOuR ACCOuNTS section.

d The CHANGE IN VALuE OVER TIME graph provides an historical view of the impact of any deposits and withdrawals on the changing market value of your account.

The Account Summary provides an overview for each of your accounts.

d


a

Account Summary (continued)

a In most cases, the ALLOCATION OF HOLDINGS is displayed as a pie chart. However, if the account has either a short position, or a debit balance, the information is displayed as a bar chart.

b Accounts are organized in the statement package into categories (i.e., Personal, Retirements, Education, Trust, Business) and within category by account number. The Wayfi nding tabs on the bottom of the page signals where you are within the statement package.

b


a b


b We know that many of our clients like to “balance” the movement of cash in their accounts from opening to closing balances, and therefore a CASH FLOW summary table has been included. The categories are aligned with the way our clients have told us they view the movement of their funds.

• The table begins with an opening balance, which is the combined opening balance of your cash, deposits and money market funds.

• It then lists a variety of deposit and withdrawal line items, grouped into three major categories: Investment Related Activity, Cash Related Activity and Debit Card / Check Activity.

Since our statements present a trade date view of activity, you may see trades that were executed during the last days of the month. In this case you will also see a line for Net Unsettled Purchases / Sales in the BALANCE SHEET and CASH FLOW sections which would represent the net amount of all unsettled securities transactions. In the subsequent month, this amount will be refl ected in a line called Prior Unsettled Purchases / Sales in the CASH FLOW section.

a To help you understand both sides of your fi nancial ledger, we display a BALANCE SHEET view of your assets, as well as liabilities (which may include short positions, debits, and other liabilities).

When relevant, line items for fi xed income securities include interest accruals as indicated by the “ ^ ”. For more details on Accrued Interest, see the Holdings component.


c


a The INCOME SuMMARY presents both Taxable Income and Tax-Exempt Income credited to your account for this year and this pe-riod, and is categorized by type of distribution including Qualified Dividends, Other Dividends, Long Term Capital Gains Distributions, Interest, and Other Income. For accounts not subject to IRS tax reporting by MSSB, taxable and tax-exempt income is not broken out separately.

b GAIN / (LOSS) SuMMARYpresents the Net Realized Gain /(Loss) for this period and this year. Net Unrealized Gain /(Loss) is calculated based upon the acquisition date of the holding through the last business day of the current statement period.

When security positions are sold, the details of each transaction are displayed at a tax lot level in a separate REALIZED GAIN / (LOSS) section within Activity.

b

c When relevant, the ADDITIONAL ACCOuNT INFORMATION provides Accrued Interest Paid and Accrued Interest Received on purchases and sales of fi xed income securities, as well as Foreign Tax Paid, Return of Capital and Municipal Interest.

ba b


b

c


b HISTORICAL CONTRIBuTIONS & DISTRIBuTIONS is an at-a-glance view of contributions and distributions for the most recent fi ve years, with a summary line capturing all prior contributions and distributions. This section is displayed on each quarterly statement for Coverdell ESAs and IRAs.c The Primary and Contingent benefi ciaries that you have identifi ed

are listed on your IRA statement. It is important to review your IRA benefi ciaries and contact your Financial Advisor regarding any necessary changes.

For annuities displayed in IRA accounts where MSSB is not the custodian, contact the carrier for the current annuity benefi ciary.

For eligible IRA clients, we calculate your annual Required Minimum Distribution (RMD) and display this amount on each quarterly statement, making it easy to track your year-to-date distributions, and to compare those withdrawals to the required annual amount. The RMD calculations are valuable for clients age 70½ and older, who must withdraw the RMD.

For clients who have elected to pay their IRA fees by check, your IRA Invoice will be included with the quarterly statement prior to the anniversary of your account’s open date.

a

a The RETIREMENT RECAP section tracks contributions and distributions for Coverdell ESA, IRA and VIP Basic accounts. The section also includes:

• Fair Market Value of the account which is reported to the IRS annually for IRAs. If you have had Rollovers, Conversions, Contributions or Recharacterizations deposited to these accounts, you will receive a separate IRS Form 5498.

• Max. Individual Contributions Allowed is based on your age and the maximum IRA contribution allowed under current regulations. If you are over age 70 ½, this section only appears if you have a Roth IRA.

Any unspecifi ed contributions will be included with deductible contributions. Rollovers, Roth Conversions and Roth Recharacterizations are aggregated.


HoldingsThe Holdings component presents a comprehensive list of the account’s positions as of the last business day of the statement period and is organized by product type. For certain products such as Alternative Investments and Insurance and Annuities, other relevant detail is provided.

a In Holdings, most securities are listed alphabetically by name; though fi xed income securities are displayed by maturity date. The type of information listed for each holding varies depending upon the security.

• Generally, you’ll fi nd the Quantity, Total Cost, Market Value, Unrealized Gain / (Loss), Estimated Annual Income, and Yield % to the right of the Security Description.

• Trade Date and Unit Cost are displayed for accounts which refl ect tax-lot level gain /(loss) details.

Additional information is displayed beneath the security and may vary depending on the type of security. For example, for Common Stocks, items such as Current Share Price, Research Rating and Next Dividend Payable Date are displayed; for Fixed Income Securities, Coupon Rate, as well as maturity and ratings are displayed; for Mutual Funds, Mutual Fund Reinvestment Options are displayed.

As a convenience, for eligible accounts, the value of some outside investments may be shown on the statement.

a


Holdings (continued)

a

a For Fixed Income securities, Original Unit Cost and Adjusted Unit Cost as well as Accrued Interest are displayed.

• Both the realized and unrealized gain / (loss) information may have been adjusted for a variety of reasons; including return of principal, accretion of original issue discount (OID), market discount and the amortization of bond premiums.

• Accrued Interest is the estimated amount that would be received upon a sale of fi xed income securities. It is calculated from the date of the last coupon payment (or dated date) through the closing date of the statement, based on information provided by the issuer.


Holdings (continued)

b For Mutual Funds, several unique pieces of information are presented which, when taken together, provide a comprehensive snapshot of your mutual funds.

• Unrealized Gain / (Loss) compares the Total Cost of all fund purchases (including shares acquired through reinvestment of distributions) with the current Market Value.

• Total Purchases vs Market Value is provided to assist you in comparing your total purchases, excluding reinvested distributions, with the current value of the mutual fund positions in your account.

• For mutual funds for which you choose not to reinvest distributions, Cumulative Cash Distributions (including income and capital gains distributions) refl ects amounts received for each fund. It may not refl ect all such distributions, including those on investments made prior to the addition of this information on statements.

• Net Value Increase / (Decrease) compares the diff erence between : — Your total purchases (excluding reinvestments) plus the cash distributions and, — The current value of the fund’s shares (including reinvestments).

b


a

ActivityAs a partner with your Financial Advisor, a review of the Activity on your statement is an important practice. All activity for the month is included in this component.

a The CASH FLOW ACTIVITY BY DATE section is a chronological display of the activities aff ecting your overall cash balances; including purchases and sales, dividends and interest payments. In addition, DEBIT CARD & CHECKING ACTIVITY are also discretely broken out in their own section.

Because the statement presents all trades executed in the current statement period, you may see trades in this section that have not settled by the end of the month.

Items not aff ecting your cash balance, such as Options Activity, Corporate Actions, Open Orders, and Security Transfers, are displayed separately by category.

An alternative presentation of activity by category is available, with activity displayed in discrete categories (e.g., Purchases & Sales, Income & Distributions, Deposits & Withdrawals). Please speak to your Financial Advisor for more details.


Each month, your Active Assets Account statement will provide detailed information on your checking activity; including Payee Name, Check Number, Dollar Amount, Date Written and Date Cleared. Using the Expense Analyzer codes in the back of your check register, you can annotate your checks and categorize your personal, business and tax-deductible expenses, making budgeting and tax preparation easier. You will also receive a summary of payments by category, and at year-end you'll receive details for the entire year's checks, grouped and summarized by expense category.

Additional Account Sections

a With the Morgan Stanley Smith Barney Debit Card, you gain access to the funds in your Active Assets Account when you need them, and wherever the card is accepted. All of your Debit Card activity including purchases, cash withdrawals and ATM transactions are detailed on your monthly statement and recapped at year-end. A graph of TOTAL SPENDING YEAR-TO-DATE and REWARDS SuMMARY are also provided in the Account Summary.

a


Additional Account Sections (continued)

a The uNSETTLED PuRCHASE /SALES ACTIVITY is displayed for trades that were executed during the current statement period, but have not settled (including trades with extended settlements). When the trades are purchases, the positions are also refl ected in the Holdings component; and when the trades are sales, the positions are no longer displayed in the Holdings component.

a

b If you have asked us to send copies of your statement to additional parties, the names of the Interested Parties are listed here. (Fees may apply. Ask your Financial Advisor for more details).

b


Annual & Fiscal ReviewsFor eligible accounts, a year-end review component is produced

a For Active Assets Accounts, the Annual Review is a summary of the account activity for the preceding 12 months, and, for eligible accounts accompanies the December statement. This additional component is also available for Managed Basic Securities Accounts. It is not available for Retirement accounts.

As part of the Annual Review, Debit Card activity is organized by spending category; and checks are organized by expense code, with subtotals for Deductible and Non-Deductible.

Business Accounts with a fi scal year-end other than December are eligible for a Fiscal Review, which will accompany the last statement of their fiscal year. Business accounts whose fi scal year end is December will get an Annual Review with their December statement.

a


Frequently Asked Questions

Q. I don’t want to wait to get my statement in the mail. Do I have any other options?A. Yes! Clients enrolled in eDelivery can access documents electronically. In most cases, enrollment in eDelivery replaces the paper mailing. As statements and other documents become available, an email is sent to enrolled clients with a link to log on and access the document. Enroll an account in eDelivery via MSSB Online or Online Business Services. To enroll all accounts in your Account Link Group for statement eDelivery, enroll the Primary account.

Q. What does trade date activity presentation mean?A. Historically there have been two approaches to displaying security transactions, and the impact on your account:

• Settlement Date — Displaying only those transactions that have “settled” within the current statement period; or

• Trade Date — Displaying all trades executed within the current statement period, regardless of whether or not they have settled.

In the past, when clients purchased or sold a position at the end of the month, they had to wait until the next statement to see the impact of the trade. MSSB uses a trade date activity presentation in order to reflect the impact of all trades executed through the last business day of the month and, to align with both performance and cost basis reporting.

Q. How are unsettled trades represented on my statement? A. Any position bought or sold, regardless of whether or not it has settled, will appear in (or, be removed from) the Holdings component of your statement. Since neither monies nor securities are due to the contra side until settlement date — there is no impact to cash, deposits or money market funds until the trades settle. As a result, when an unsettled trade is included on your statement, you will see Net Unsettled Purchases / Sales in the BALANCE SHEET and CASH FLOW summary sections so that the Total Value is not over (or under) stated.

Q. What are the Estimated Annual Income and Estimated Yield that are displayed in the Holdings component of my statement and how are they different from the information in the Income SummAry?A. Estimated Annual Income is a projection of future income and the INCOME SuMMARY section is a recap of the income actually creditedto your account during the current statement period year-to-date.

The Estimated Annual Income which appears in the Holdings is based upon the dividend or interest expected to be received over the next twelve months. Generally, for equities, it is the most recent dividend (per-share) times the payment frequency, times the number of shares or units held. Estimated Yield is then calculated by dividing the total estimatedannual income by the current market value of the entire position.

For example:

Numberof Shares

Current Share Price

Most Recent Dividend Amount

Dividend Payment Frequency (Quarterly)

Estimated Annual Income

Current Market Value of the Entire Position

Estimated Yield

100 $15.00 .25 4 $100.00 $1500.00 6.7%

Mutual fund Estimated Annual Income is based upon historical distributions over the preceding 12 month period, rather than on the most recent dividend. The Annual Percentage Yield (APY) for Bank Deposits represents the applicable rate in effect for your deposits at the state-ment ending date. This APY may be different than the APY that was in effect during the statement period. For Money Mark Funds (MMF), the Current Yield refers to a simple annualized yield (net of fees) for an identified seven calendar day period.


Q. What’s the difference between Unrealized Gain / (Loss) and Realized Gain / (Loss)?A. Unrealized Gain / (Loss) presents the potential gain or loss if you were to have sold a security at the price displayed on your month-end statement. Unrealized Gain / (Loss) does not include commissions or fees that may apply to proceeds upon the final sale of the security.

Gains or losses are considered realized when the position is actually sold, and the details (which would include the impact of all commissions and /or fees) are presented in a separate section on your statement.

Q. In my summary sections, why do I only see one number for Unrealized Gain / (Loss), but I see “This Period”/ ”This year” for Realized Gain / (Loss)?A. Generally speaking, Realized Gain / (Loss) is reportable in the year the trade is made. Since you have the option to see your realized Gain / (Loss) details for the current statement period, or for year-to-date, we provide summary totals for each. For the positions that you currently own and for which there has been no reportable event (i.e., a sale), we display unrealized Gain / (Loss) information from acquisition date to the present, in the Consolidated Summary, Account Summary and the Holdings components.

Frequently Asked Questions (continued)

Q. What is the relationship between Share Price and Market Value?A. Share Price of the securities displayed on the statement is obtained from various sources. For securities that are listed on an exchange or trade continually in an active marketplace, the Share Price reflects the closing price as of the last business day of your statement period. For securities that trade less frequently, the price generally reflects the bid price if it is available. Fixed income prices are provided by outside pricing services and / or computerized pricing models, which do not always give us actual market values and may be based on recent transactions or bids, or estimates. For Mutual Funds, the Share Price is represented by the fund’s Net Asset Value (NAV) at the end of the day. Depending upon the security type, the share price label may vary, e.g., contract price for options, unit price for bonds. Your statement Disclosures contain more detail on pricing and account valuations.

Market Value is generally derived by multiplying the Share Price times the Quantity. For certain securities (such as Collateralized Mortgage Obligations), there is another component, the Factor, which is also part of the equation. The factor reflects the remaining principal balance of a mortgage security and it changes after each principal payment.

Q. What's the difference between Capital Gains and Capital Gains Distributions?A. A Capital Gain is a profit between the security's adjusted cost basis and the price at which it is sold. A Capital Gains Distribution is a mutual fund's distribution to shareholders of the profits on the sale from one or more of fund's underlying securities.


Q. What is the difference between all of the cost terms?A. Total Cost (also known as Cost Basis) represents the amount paid for the security, including commissions and fees if applicable, and excluding accrued interest on fixed income purchases. Total Cost may differ from the net amount on the trade confirmation (e.g., for fixed income trades), as the net amount paid could include accrued interest paid to the seller (or received from the buyer).

Unit Cost represents the per-share amount paid for the security, includingcommissions and fees if applicable and excluding accrued interest on fixed income purchases.For example:

100 shares at $50 per share $5,000.00

Commission $55.00

Transaction Fee $6.00

Total Cost $5,061.00

Unit Cost (Total Cost / # of Shares) $50.61

Adjusted Cost: Your Total Cost (or, Cost Basis) may be adjusted for a variety of reasons. For fixed-income securities, the majority of adjustments to cost basis are either amortization of the premium (the amount you paid for a bond in excess of its face value) at purchase, or the accretion of original issue discount (OID) or market discount. Whether you choose to amortize the premium on non-municipal bonds or not, the pertinent information is readily available.

• Amortization is an accounting procedure that reduces the cost basis of a bond by the amount of any premium (the amount in excess of par) paid for the bond. Cost basis of the bond will be decreased daily until it is equal to its face value at maturity date (or earlier call date). MSSB amortizes premiums paid on both tax-exempt and taxable bonds. And, although the premium on a tax-exempt bond must be amortized, clients may use this information or elect not to do so for taxable bonds.

• Accretion refers to the daily process of increasing your original cost basis by the Original Issue Discount (OID) that accrues on the bond until the sale or redemption of the bond. IRS regulations require the holder to report OID as it accrues over the term of the debt instrument whether or not you receive any payments from the issuer. If you purchase the bond at original issue and hold it to maturity, the basis upon maturity will have increased to the face amount. We use the constant yield method, also referred to as the economic accrual method, for both municipal and taxable fixed-income securities.

Cost basis may also be adjusted for other securities. For equities, the basis must be adjusted for certain events that occur after purchase. For example, if you receive additional stock from non-taxable stock dividends or stock splits, the basis of your original shares is reduced. Similarly, basis is reduced when you receive non-dividend distributions, such as a non-taxable return of capital (up to the amount of your basis).



Q. What do you mean when you say “accounts subject to tax reporting?”A. Accounts subject to tax reporting are those accounts for which Morgan Stanley Smith Barney is required to provide an IRS Form 1099 for uS accounts and form 1042-S for foreign accounts. Certain accounts are exempt from MSSB’s reporting requirements (though these accounts may have reporting requirements of their own). These include, among others, corporate, tax-exempt organizations, IRA and retirement accounts.

Q. What is Accrued Interest, and how does it impact my account?A. Accrued Interest is the estimated amount of interest that would be included in the total amount received upon the sale of a fixed income position; and is calculated from the date of the last coupon payment (or dated date) through the closing date of the statement. Since the value of your fixed income positions includes the interest that accrues every day, this provides a comprehensive valuation of your account. The Accrued Interest is shown in Holdings for each fixed income security, as well as on the BALANCE SHEET (where it is included in the overall value of each fixed income product type).


Morgan Stanley Smith Barney does not render advice on tax and tax accounting matters to clients. This material was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws.

© 2012 Morgan Stanley Smith Barney LLC. Member SIPC. CRC423608 12/11 7065387 02/12

Q. What is Accrued Interest You Paid and Accrued Interest Received?A. Accrued Interest You Paid is that portion of a bond purchase that represents the interest which will be given to the seller of the bond on next coupon payable date. As the new owner of the bond, the purchaser will receive the entire coupon payment even if it has not been owned for the full period. This amount is part of the total transaction cost but not part of the bond’s cost basis.

On the other hand, when a client sells a bond, Accrued Interest Received represents the interest that has accrued since the last coupon payable date and to which the client is entitled. And, although part of the total transaction proceeds, Accrued Interest You Paid is not a part of the proceeds for the purposes of gain / (loss) calculation.

Q. my bonds seem to be in a random order. Are they in any order?A. Bonds are presented by maturity and / or pre-refunding date, and then alphabetical within date.

guide to reading your morgan stanley smith barney … · guide to reading your morgan stanley smith...

Documents