8-K 1 a51021611.htm MORGAN STANLEY 8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 20, 2015

Morgan Stanley

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)

1-11758 (Commission File Number)

36-3145972 (I.R.S. Employer Identification No.)

1585 Broadway, New York, New York 10036

(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (212) 761-4000

(Former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ſΙ

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) Γl

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) $\Box$

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) $\Box$

Item 2.02. Results of Operations and Financial Condition

On January 20, 2015, Morgan Stanley (the "Registrant") released financial information with respect to its quarter and year ended December 31, 2014. A copy of the press release containing this information is annexed as Exhibit 99.1 to this Report and by this reference incorporated herein and made a part hereof. In addition, a copy of the Registrant's Financial Data Supplement for its quarter and year ended December 31, 2014 is annexed as Exhibit 99.2 to this Report and by this reference incorporated herein and made a part hereof.

The information furnished under Item 2.02 of this Report, including Exhibit 99.1 and Exhibit 99.2, shall be deemed to be "filed" for purposes of the Securities Exchange Act of 1934, as amended.

Item 7.01. Regulation FD disclosure

On January 20, 2015, Morgan Stanley (the "Registrant") released financial information with respect to its quarter and year ended December 31, 2014 and held an investor conference call. Exhibit 99.3 is a copy of a presentation (the "Presentation") presented on the conference call, furnished for, and posted on the Registrant's website.

The Presentation is being furnished pursuant to Item 7.01, and the information contained therein shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section. Furthermore, the information contained in Exhibit 99.3 shall not be deemed to be incorporated by reference into the filings of the Registrant under the Securities Act of 1933, as amended.

Item 7.01 of this Current Report on Form 8-K (including Exhibit 99.3 hereto) contains forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management's current plans, estimates, projections, expectations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of additional risks and uncertainties that may affect the future results of Morgan Stanley, please see "Forward-Looking Statements" immediately preceding Part I, Item I, "Competition" and "Supervision and Regulation" in Part I, Item 1, "Risk Factors" in Part I, Item 1A, "Legal Proceedings" in Part I, Item 3, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part I, Item 7 and "Quantitative and Qualitative Disclosures about Market Risk" in Part I, Item 7A, each of Morgan Stanley's Annual Report on Form 10-K for the year ended December 31, 2013 and other items throughout the Form 10-K, Morgan Stanley's Quarterly Reports on Form 10-Q, including "Risk Factors" in Part II, Item 1A therein, and Morgan Stanley's Current Reports on Form 8-K, including any amendments thereto, which have been filed with the Securities and Exchange Commission and are available on Morgan Stanley's website at www.morganstanley.com and on the Securities and Exchange Commission's website at www.sec.gov. Morgan Stanley does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Item 9.01. Financial Statements and Exhibits

Press release of the Registrant, dated January 20, 2015, containing financial information for the quarter 99.1 and year ended December 31, 2014.

99.2 Financial Data Supplement of the Registrant for the quarter and year ended December 31, 2014.

99.3 Morgan Stanley Presentation, dated January 20, 2015.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

MORGAN STANLEY (Registrant) By: /s/ Paul C. Wirth

Paul C. Wirth Deputy Chief Financial Officer

Dated: January 20, 2015

Media Relations: Michele Davis 212-761-9621

EX-99.1 2 a51021611ex99 1.htm EXHIBIT 99.1

Morgan Stanley

Morgan Stanley Reports Fourth Ouarter and Full Year 2014:

Fourth Quarter Net Revenues of \$7.8 Billion and Earnings per Diluted Share from Continuing Operations of \$0.47
Results for the Ouarter Included the following Significant Items: Ċ
Discrete Tax Benefit¹ of \$1.4 Billion (\$0.70 per Diluted Share)² $\Omega$
Elevated Compensation Expense Due to Deferral Adjustments³ of \$1.1 Billion (\$0.40 per Diluted Share)²
Negative Revenues from FVA⁴ of \$468 Million (\$0.17 per Diluted Share)² $\mathbf{o}$
Legal Expenses Include \$284 Million for Legacy Residential Mortgage Related Matters (\$0.12 per Diluted Share)² $\alpha$
Excluding DVA,⁵ Net Revenues were \$7.5 Billion (Inclusive of the Negative \$468 Million from FVA) and Earnings per Diluted Share from Continuing Operations of \$0.406.7.8
Investment Banking Ranked #1 in Global IPOs and #2 in Global Announced M&A;⁹ Continued Strength in Equity Sales & Trading
Record Ouarterly Wealth Management Revenues of \$3.8 Billion and Record Fee-Based Asset Flows of \$21 Billion
Full Year Net Revenues of \$34.3 Billion and Earnings per Diluted Share from Continuing Operations of \$2.96; Excluding DVA, Net Revenues were \$33.6 Billion and Earnings per Diluted Share from Continuing Operations of \$2.756.7.8

NEW YORK, January 20, 2015 - Morgan Stanley (NYSE: MS) today reported net revenues of \$7.8 billion for the fourth quarter ended December 31, 2014 compared with \$7.8 billion a year ago. For the current quarter, income from continuing operations applicable to Morgan Stanley was \$1.0 billion, or \$0.47 per diluted share,¹⁰ compared with income of \$95 million, or \$0.02 per diluted share, for the same period a year ago.¹⁰

Results for the current quarter included several significant items: a net discrete tax benefit of approximately \$1.4 billion or \$0.70 per diluted share principally related to the restructuring of a legal entity;^1,2 compensation expense adjustments of approximately \$1.1 billion or a loss of \$0.40 per diluted share related to changes in discretionary incentive compensation deferrals;^2,3 a charge of \$468 million or a loss of \$0.17 per diluted share related to the initial incorporation of funding valuation adjustments (FVA) into the fair value measurements for certain over-the-counter derivatives and legal expenses of \$284 million or a loss of \$0.12 per diluted share associated with several residential mortgage and credit crisis related matters.^2,4 The prior year fourth quarter included legal expenses of \$1.4 billion or a loss of \$0.45 per diluted share and a discrete tax benefit of \$192 million or \$0.10 per diluted share.²

$\mathbf{1}$

Results for the current quarter included positive revenues related to the change in the fair value of certain of the Firm's long-term and short-term borrowings resulting from the fluctuation in the Firm's credit spreads and other credit factors (Debt Valuation Adjustment, DVA) of \$223 million, compared with negative revenues of \$368 million a year ago.

Excluding DVA, net revenues for the current quarter were \$7.5 billion, which were inclusive of negative revenues from FVA of \$468 million, compared with \$8.2 billion a year ago. Income from continuing operations applicable to Morgan Stanley was \$903 million, or \$0.40 per diluted share, compared with income of \$336 million, or \$0.15 per diluted share, a year ago.^6,7,8

Compensation expense of \$5.1 billion increased from \$4.0 billion a year ago primarily driven by compensation expense adjustments of approximately \$1.1 billion, representing approximately \$756 million related to the reduction in the average deferral of discretionary incentive compensation awards for the 2014 performance year and \$381 million for the acceleration of vesting for certain outstanding deferred cash-based incentive compensation awards.³ Non-compensation expenses of \$2.8 billion decreased from \$4.1 billion a year ago, primarily reflecting lower legal expenses.

For the current quarter, net income applicable to Morgan Stanley, including discontinued operations, was \$1.0 billion or \$0.47 per diluted share,¹⁰ compared with net income of \$84 million or \$0.02 per diluted share in the fourth quarter of 2013.¹⁰

		Summary of Firm Results (dollars in millions)
	As Reported		Excluding DVA⁶
	Net	MS Income	Net	MS Income
	Revenues ^(a)	Cont. Ops.	Revenues ^(a)	Cont. Ops.
4Q 2014	\$7.764	\$1,048	\$7.541	\$903
30 2014	\$8,907	\$1,698	\$8,692	\$1.561
4Q 2013	\$7,845	\$95	\$8,213	\$336

a) Revenues for the fourth quarter of 2014 included a pre-tax charge of \$468 million related to the initial implementation of funding valuation adjustments (FVA).

Fourth Quarter Business Overview

Institutional Securities net revenues excluding DVA were \$3.2 billion¹¹ reflecting challenging market conditions in Fixed Income & Commodities sales and trading and the impact of implementing FVA, with continued strength in Equity sales and trading and Investment Banking.
Wealth Management net revenues were \$3.8 billion. The pre-tax margin was 19%, which included the impact of compensation expense deferral adjustments.^3,12 Fee based asset flows for the quarter were a record \$20.8 billion, with total client assets above \$2.0 trillion at quarter end.
Investment Management reported net revenues of \$588 million with assets under management or supervision of \$403 billion.

$\overline{2}$

James P. Gorman, Chairman and Chief Executive Officer, said, "We finished 2014 in substantially better shape than we entered the year. We delivered strong results across several of our businesses, although overall performance was affected by the choppy market conditions of the fourth quarter. We also addressed a number of items that, while affecting our results in the short term, position us well in the years ahead. Entering 2015, we remain confident about our business mix, market position and the opportunities ahead of us."

FOURTH QUARTER RESULTS

Summary of Institutional Securities Results (dollars in millions)
	As Reported		Excluding DVA ¹¹
	Net	Pre-Tax	Net	Pre-Tax
	Revenues ^(a)	Income	Revenues ^(a)	Income
4Q 2014	\$3,430	$$$ (863)	\$3,207	\$(1,086)
3Q 2014	\$4,516	\$1,227	\$4,301	\$1,012
2013	\$3,343	\$(1,248)	\$3,711	$$^{(880)}$

a) Revenues for the fourth quarter of 2014 included a pre-tax charge of \$468 million related to the initial implementation of funding valuation adjustments (FVA).

INSTITUTIONAL SECURITIES

Institutional Securities reported a pre-tax loss from continuing operations of \$863 million compared with a pre-tax loss of \$1.2 billion in the fourth quarter of last year. Results for the current quarter include the compensation expense deferral adjustments,³ initial implementation of FVA and the legacy residential mortgage legal expenses noted previously.⁴ Income after the noncontrolling interest allocation and before taxes was a loss of \$895 million.¹³ Net revenues for the current quarter were \$3.4 billion compared with \$3.3 billion a year ago. DVA resulted in positive revenues of \$223 million in the current quarter compared with negative revenues of \$368 million a year ago. Excluding DVA, net revenues for the current quarter of \$3.2 billion, inclusive of negative revenues from FVA of \$468 million, compared with \$3.7 billion a year ago.^4,11 The following discussion for sales and trading excludes DVA.

Advisory revenues of \$488 million increased from \$451 million a year ago on higher levels of M&A activity. Equity underwriting ٠ revenues of \$345 million decreased from \$416 million a year ago reflecting lower market volumes. Fixed income underwriting revenues of \$462 million decreased from \$495 million in the prior year quarter reflecting lower loan fees.
Equity sales and trading net revenues of \$1.6 billion increased from \$1.5 billion a year ago reflecting continued strength in prime brokerage, partly offset by lower revenues in derivatives and cash equities.¹⁴
Fixed Income & Commodities sales and trading net revenues of \$133 million include a pre-tax charge of approximately \$466 million related to the initial incorporation of funding valuation adjustments (FVA) into the fair value measurements of certain over-the-counter derivatives.⁴ Exclusive of this change in accounting estimate, Fixed Income & Commodities net revenues of \$599 million decreased from \$694 million a year ago reflecting lower revenues in credit products and commodities, partly offset by higher results in rates and foreign exchange and an out of period collateral optimization valuation gain of \$59 million.^4,14
Other sales and trading net losses of \$37 million compared with losses of \$231 million a year ago primarily reflecting higher revenues on economic hedges related to the Firm's long-term debt and higher corporate lending and commitment revenues.
Investment revenues were \$30 million compared with \$177 million in the fourth quarter of last year reflecting lower gains on principal investments in real estate and losses from investments associated with the Firm's deferred compensation plans.
Compensation expense of \$2.4 billion increased from \$1.6 billion a year ago driven by a reduction in the average deferral of discretionary incentive compensation awards for the 2014 performance year and the acceleration of vesting for certain outstanding deferred cash-based incentive compensation awards.³ Non-compensation expenses of \$1.9 billion for the current quarter decreased from \$3.0 billion a year ago driven primarily by \$1.1 billion of lower legal expenses. Legal expenses in the current quarter included approximately \$284 million associated with several legacy residential mortgage and credit crisis related matters.
Morgan Stanley's average trading Value-at-Risk (VaR) measured at the 95% confidence level was \$47 million compared with \$42 million in the third quarter of 2014 and \$51 million in the fourth quarter of the prior year.¹⁵

Summary of Wealth Management Results (dollars in millions)
	Net Revenues	Pre-Tax Income
4Q 2014	\$3,804	\$736
3Q 2014	\$3,773	\$800
40 2013	\$3,716	3715

WEALTH MANAGEMENT

Wealth Management reported pre-tax income from continuing operations of \$736 million compared with \$715 million in the fourth quarter of last year. The quarter's pre-tax margin was 19%, which included the impact of compensation expense deferral adjustments.^3,12 Net revenues for the current quarter were \$3.8 billion compared with \$3.7 billion a year ago.

Asset management fee revenues of \$2.1 billion increased from \$2.0 billion a year ago primarily reflecting market appreciation and positive flows.
Transactional revenues¹⁶ of \$976 million decreased from \$1.1 billion a year ago reflecting lower revenues related to the Firm's deferred compensation plans and lower levels of new issue activity.
Net interest income of \$625 million increased from \$526 million a year ago on higher deposits and loan balances.
Compensation expense for the current quarter of \$2.3 billion increased from \$2.1 billion a year ago driven by a reduction in the average deferral of discretionary incentive compensation awards for the 2014 performance year and the acceleration of vesting of certain outstanding deferred cash-based incentive compensation awards.³ Non-compensation expenses of \$777 million decreased from \$855 million a year ago due to the absence of an impairment charge of \$36 million related to certain intangibles which impacted results in the quarter a year ago, as well as operating efficiencies resulting from the prior year's completion of the joint venture acquisition.
Total client assets exceeded \$2.0 trillion at quarter end. Client assets in fee based accounts of \$785 billion increased 13% compared with the prior year quarter. Fee based asset flows for the quarter were a record \$20.8 billion.
Wealth Management representatives of 16,076 decreased from 16,456 compared with the prior year quarter. Average annualized revenue per representative of \$944,000 and total client assets per representative of \$126 million, increased 5% and 9%, respectively, compared with the prior year quarter.

Summary of Investment Management Results (dollars in millions)
	Net Revenues	Pre-Tax Income
4O 2014	\$588	$\sqrt{5(6)}$
3Q 2014	\$667	\$193
4O 2013	\$858	\$331

INVESTMENT MANAGEMENT

Investment Management reported pre-tax losses from continuing operations of \$6 million, inclusive of the compensation expense deferral adjustments³ compared with pre-tax income of \$331 million in the fourth quarter of last year.¹⁷ Income after the noncontrolling interest allocation and before taxes was a loss of \$18 million.

Net revenues of \$588 million decreased from \$858 million in the prior year. Results reflect lower investment gains and carried interest in the Merchant Banking and Real Estate businesses, and lower results in Traditional Asset Management.¹⁸ The current quarter also reflects lower revenues in the Real Estate Investing business driven by the deconsolidation of certain legal entities during the quarter ended June 30, 2014 associated with a real estate fund sponsored by the Firm.¹⁹
Compensation expense for the current quarter of \$381 million increased from \$296 million a year ago, principally driven by a reduction in the average deferral of discretionary incentive compensation awards for the 2014 performance year and the acceleration of vesting of certain outstanding deferred cash-based incentive compensation awards.³ Non-compensation expenses of \$213 million decreased from \$231 million a year ago.
Assets under management or supervision at December 31, 2014 of \$403 billion increased from \$377 billion a year ago primarily due to market appreciation and positive flows. The business recorded net flows of \$3.5 billion in the current quarter.

FULL YEAR RESULTS

Full year net revenues were \$34.3 billion compared with \$32.5 billion a year ago. Income from continuing operations applicable to Morgan Stanley for the current year was \$6.2 billion, or \$2.96 per diluted share,¹⁰ compared with income of \$3.0 billion, or \$1.38 per diluted share,¹⁰ a year ago. The current year included approximately \$2.2 billion, or \$1.13 per diluted share, of net discrete tax benefits compared with approximately \$400 million, or \$0.21 per diluted share, of net discrete tax benefits in the prior year.²

Results for the year included positive revenue related to DVA of \$651 million, compared with negative revenues of \$681 million a year ago. Excluding DVA, net revenues for the current year were \$33.6 billion compared with \$33.2 billion a year ago and income from continuing operations applicable to Morgan Stanley was \$5.7 billion, or \$2.75 per diluted share, compared with income of \$3.4 billion, or \$1.61 per diluted share, a year ago.6,7,8

The Firm's compensation expense of \$17.8 billion for the current year increased from \$16.3 billion a year ago primarily driven by the fourth quarter compensation expense adjustments of approximately \$1.1 billion related to the changes in discretionary incentive compensation deferrals.³ Non-compensation expenses of \$10.1 billion decreased from \$11.7 billion a year ago driven by lower legal expenses.

For the current year, net income applicable to Morgan Stanley, including discontinued operations, was \$2.95 per diluted share,¹⁰ compared with \$1.36 per diluted share a year ago. $10$

Summary of Firm Results (dollars in millions)
		As Reported		Excluding DVA⁶
	Net	MS Income	Net	MS Income
	Revenues	Cont. Ops.	Revenues	Cont. Ops.
FY 2014	\$34,275	\$6,151	\$33,624	\$5,733
FY 2013	\$32,493	\$2,975	\$33,174	\$3,427

Summary of Segments Results (dollars in millions)
			As Reported		Excluding DVA¹¹
	Net		Pre-Tax		Net		Pre-Tax
	Revenues ^(a)		Income		Revenues ^(a)		Income
	FY 2014	FY 2013	FY 2014	FY 2013	FY 2014	FY 2013	FY 2014	FY 2013
Institutional Securities	\$16,871	\$15,519	\$2,740	\$946	\$16,220	\$16,200	\$2,089	\$1,627
Wealth Management	\$14,888	\$14,143	\$2,985	\$2,604	\$14,888	\$14,143	\$2,985	\$2,604
Investment Management	\$2,712	\$3,059	\$664	\$1,008	\$2.712	\$3,059	\$664	\$1,008

2014 Institutional Securities revenues included a pre-tax charge of \$468 million related to the initial implementation of funding a) valuation adjustments (FVA).

INSTITUTIONAL SECURITIES

Institutional Securities reported pre-tax income from continuing operations of \$2.7 billion compared with \$946 million a year ago. Net revenues for the current year were \$16.9 billion compared with \$15.5 billion a year ago. Net revenues for the current year included the impact of a pre-tax charge of approximately \$468 million related to the initial incorporation of FVA into the fair value measurements of certain over-the-counter derivatives.⁴ DVA resulted in positive revenue of \$651 million in the current year compared with negative revenue of \$681 million a year ago. Excluding DVA, net revenues for the current year were \$16.2 billion, which were inclusive of FVA, compared with \$16.2 billion a year ago.^4,11 The year's pre-tax margin was 16% (excluding DVA, 13%).^11,12 Income after the noncontrolling interest allocation and before taxes was \$2.6 billion.¹³ Compensation expense of \$7.8 billion increased from \$6.8 billion a year ago primarily driven by compensation expense adjustments related to the changes in discretionary incentive compensation deferrals.³ Non-compensation expenses of \$6.3 billion decreased from \$7.8 billion a year ago primarily due to lower legal expenses.

WEALTH MANAGEMENT

Wealth Management reported pre-tax income from continuing operations of \$3.0 billion compared with \$2.6 billion a year ago. Net revenues for the current year were \$14.9 billion compared with \$14.1 billion a year ago. The year's pre-tax margin was 20%.¹² Compensation expense was \$8.8 billion compared with \$8.3 billion a year ago, primarily driven by higher revenues. Noncompensation expenses of \$3.1 billion decreased from \$3.3 billion a year ago.

INVESTMENT MANAGEMENT

Investment Management reported pre-tax income from continuing operations of \$664 million compared with \$1.0 billion a year ago.¹⁷ The year's pre-tax margin was 24%.¹² Income after the noncontrolling interest allocation and before taxes was \$573 million. Net revenues of \$2.7 billion decreased from \$3.1 billion a year ago primarily driven by lower gains on investments in the Merchant Banking and Real Estate businesses and the absence of carried interest.¹⁸ Compensation expense was \$1.2 billion, which remained unchanged from a year ago. Noncompensation expenses of \$835 million compared with \$862 million a year ago.

CAPITAL

As of December 31, 2014, the Firm's Common Equity Tier 1 risk-based capital ratio was approximately 14.2% and its Tier 1 risk-based capital ratio was approximately 15.9%. The Firm is subject to a "capital floor" such that these regulatory capital ratios currently reflect the U.S. Basel III Advanced Approaches ("Advanced Approach") under transitional provisions, which represent the lower of the Firm's capital ratios calculated under the Advanced Approach and U.S. Basel I and Basel 2.5 capital rules, taking into consideration applicable transitional provisions under U.S. Basel III.²⁰

At December 31, 2014, book value and tangible book value per common share were \$34.62 and \$29.63,²¹ respectively, based on approximately 2.0 billion shares outstanding.

$\overline{7}$

OTHER MATTERS

In the current quarter the Firm reported an overall tax benefit of \$1.2 billion, which reflected a net discrete tax benefit of approximately \$1.4 billion primarily related to a legal entity restructuring that included a change in tax status of MSSBH from a partnership to a corporation.¹ The effective tax rate from continuing operations for the full year was 0.6%, inclusive of net discrete tax benefits of \$2.2 billion.

During the quarter ended December 31, 2014, the Firm repurchased approximately \$271 million of its common stock or approximately 8 million shares.

The Firm declared a \$0.10 quarterly dividend per common share, payable on February 13, 2015 to common shareholders of record on January 30, 2015.

Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. With offices in more than 43 countries, the Firm's employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com.

A financial summary follows. Financial, statistical and business-related information, as well as information regarding business and segment trends, is included in the Financial Supplement. Both the earnings release and the Financial Supplement are available online in the Investor Relations section at www.morganstanley.com.

(See Attached Schedules)

This earnings release contains forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management's current estimates, projections, expectations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of additional risks and uncertainties that may affect the future results of the Company, please see "Forward-Looking Statements" immediately preceding Part I, Item 1, "Competition" and "Supervision and Regulation" in Part I, Item 1, "Risk Factors" in Part I, Item 1A, "Legal Proceedings" in Part I, Item 3, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7 and "Quantitative and Qualitative Disclosures about Market Annual Report on Form 10-K for the year ended December 31, 2013 and other items throughout the Form 10-K, the Company's Quarterly Reports on Form 10-Q and the Company's Current Reports on Form 8-K, including any amendments thereto.

¹ On October 31, 2014, the Firm completed a legal entity restructuring that included a change in tax status of Morgan Stanley Smith Barney Holdings LLC (MSSBH) from a partnership to a corporation. MSSBH is the holding company for the former Wealth Management JV. As a result of this change in tax status, the Firm's effective tax rate from continuing operations for the three month period ending December 31. 2014 includes a discrete net tax benefit of approximately \$1.4 billion primarily due to the release of a deferred tax liability which was previously established.

² The impact to earnings per diluted share from continuing operations is calculated by dividing the net discrete tax benefits and the net of tax compensation adjustments, FVA negative revenues and legal expenses, respectively by the average number of diluted shares outstanding.

³ On December 1, 2014, the Firm's Compensation, Management Development and Succession (CMDS) Committee of the Board of Directors approved an approach for awards of discretionary incentive compensation for the 2014 performance year to be granted in 2015 that would reduce the average deferral of such awards to an approximate baseline of 50%. Additionally, the CMDS Committee approved the acceleration of vesting for certain outstanding deferred cash-based incentive compensation awards. With its business strategy in place and greater financial stability, the Firm was in a position to change the level of deferrals, making the Firm's practice more consistent with deferral levels at the Firm's global competitors. The impact of these actions on compensation and benefits expense for the Firm and each business segment are as follows (amounts presented in millions):

	ISG	wм	ΙM	Total Firm
Pro-forma 2014 compensation and benefits expense (a)	\$6,882	\$8.737	\$1,068	\$16,687
Fourth quarter actions: change in 2014 level of deferrals (b) acceleration of prior year cash-based deferred awards (c)	\$610 \$294	566 \$22	\$80 \$65	\$756 \$381
	S904	\$88	\$145	\$1,137
Actual 2014 compensation and benefits expense	\$7,786	\$8,825	\$1,213	\$17,824

Pro-forma 2014 represents compensation and benefit expense at pre-adjustment accrual levels (i.e., at an approximate a) average baseline 74% deferral rate and with no acceleration of cash-based award vesting that was utilized for the first three quarters of 2014)

$_b$ Reflects reduction in deferral level from an approximate average baseline of 74% to an approximate average baseline of 50% $\mathbf{c}$

Represents acceleration of vesting for certain cash-based awards

4 During the fourth quarter of 2014, Morgan Stanley incorporated funding valuation adjustments (FVA) into the fair value measurements of over-the-counter uncollateralized or partially collateralized derivatives, and in collateralized derivatives where the terms of the agreement do not permit the reuse of the collateral received. The Firm's implementation of FVA reflects the inclusion of FVA in the pricing and valuations by the majority of market participants involved in the Firm's principal exit market for these instruments. In general, FVA reflects a market funding risk premium inherent in the noted derivative instruments. In connection with its implementation of FVA, Morgan Stanley incurred a pre-tax charge of approximately \$468 million, representing a change in accounting estimate, of which \$466 million was reflected as a reduction to Institutional Securities Fixed Income & Commodities sales and trading net revenues.

⁵ Represents the change in the fair value of certain of the Firm's long-term and short-term borrowings resulting from the fluctuation in the Firm's credit spreads and other credit factors (Debt Valuation Adjustment, DVA).

⁶ Net revenues and income (loss) from continuing operations applicable to Morgan Stanley, excluding DVA, are non-GAAP financial measures that the Firm considers useful for investors to allow for better comparability of period-to-period operating performance. The reconciliation of net revenues and income (loss) from continuing operations applicable to Morgan Stanley from a non-GAAP to GAAP basis is as follows (amounts are presented in millions):

Firm net revenues – Non-GAAP DVA impact Firm net revenues – GAAP	40 2014 \$7.541 \$223 \$7.764	30 2014 \$8.692 \$215 \$8.907	40 2013 \$8.213 $$$ (368) \$7.845	FY 2014 \$33.624 \$651 \$34.275	FY 2013 \$33,174 \$(681) \$32,493
Income (loss) applicable to MS - Non-GAAP	\$903	\$1.561	\$336	\$5.733	\$3,427
DVA after-tax impact	\$145	\$137	\$(241)	\$418	\$(452)
Income (loss) applicable to $MS - GAAP$	\$1.048	\$1,698	\$95	\$6.151	\$2.975

7 From time to time, Morgan Stanley may disclose certain "non-GAAP financial measures" in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. For these purposes, "GAAP" refers to generally accepted accounting principles in the United States. The Securities and Exchange Commission (SEC) defines a "non-GAAP financial measure" as a numerical measure of historical or future financial performance, financial positions, or cash flows that is subject to adjustments that effectively exclude, or include amounts from the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures disclosed by Morgan Stanley are provided as additional information to investors in order to provide them with greater transparency about, or an alternative method for assessing, our financial condition and operating results. These measures are not in accordance with, or a substitute for GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally present the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable GAAP financial measure.

8 Earnings (loss) per diluted share amounts, excluding DVA, are non-GAAP financial measures that the Firm considers useful for investors to allow better comparability of period-to-period operating performance. Such exclusions are provided to differentiate revenues associated with Morgan Stanley borrowings, regardless of whether the impact is either positive, or negative, that result solely from fluctuations in credit spreads and other credit factors. The reconciliation of earnings (loss) per diluted share from continuing operations applicable to Morgan Stanley common shareholders and average diluted shares from a non-GAAP to GAAP basis is as follows (number of shares, and DVA impact thereon, are presented in millions).

Earnings (loss) per diluted share from cont. ops. - Non-GAAP DVA impact Earnings (loss) per diluted share from cont. ops. - GAAP	4O 2014 \$0.40 \$0.07 \$0.47	4O 2013 \$0.15 \$(0.13) \$0.02	FY 2014 \$2.75 \$0.21 \$2.96	FY 2013 \$1.61 \$(0.23) \$1.38
Average diluted shares - Non-GAAP DVA impact Average diluted shares – GAAP	1.972 1.972	1.970 I.970	1.971 0 1.971	1.957 -0 1.957

⁹ Source: Thomson Reuters – for the period of January 1, 2014 to December 31, 2014 as of January 2, 2015.

¹⁰ Includes preferred dividends and other adjustments related to the calculation of earnings per share for the fourth quarter of 2014 and 2013 of approximately \$120 million and \$48 million, respectively. Includes preferred dividends and other adjustments related to the calculation of earnings per share for the years ended 2014 and 2013 of approximately \$319 million and \$277 million, respectively. Refer to page 3 of Morgan Stanley's Financial Supplement accompanying this release for the calculation of earnings per share.

¹¹ Institutional Securities net revenues and pre-tax income (loss), excluding DVA, are non-GAAP financial measures that the Firm considers useful for investors to allow for better comparability of period-to-period operating performance. The reconciliation of net revenues and pretax income (loss) from a non-GAAP to GAAP basis is as follows (amounts are presented in millions):

	40 20 14	30 2014	40 2013	FY 2014	FY 2013
Net revenues – Non-GAAP	\$3,207	\$4,301	\$3.711	\$16,220	\$16.200
DVA impact	\$223	\$215	\$(368)	\$651	\$(681)
Net revenues $-$ GAAP	\$3,430	\$4.516	\$3,343	\$16,871	\$15,519
Pre-tax income (loss) – Non-GAAP	\$(1,086)	\$1,012	S(880)	\$2,089	\$1,627
DVA impact	\$223	\$215	$$$ $(368)$	\$651	S(681)
Pre-tax income $(loss) - GAAP$	\$(863)	\$1,227	\$(1,248)	\$2,740	\$946

¹² Pre-tax margin is a non-GAAP financial measure that the Firm considers useful for investors to assess operating performance. Pre-tax margin represents income (loss) from continuing operations before taxes divided by net revenues.

¹³ Noncontrolling interests reported in the Institutional Securities business segment includes the allocation to Mitsubishi UFJ Financial Group, Inc. of Morgan Stanley MUFG Securities Co., Ltd., which the Firm consolidates.

¹⁴ Sales and trading net revenues, including Fixed Income & Commodities (FIC) and Equity sales and trading net revenues excluding DVA, are non-GAAP financial measures that the Firm considers useful for investors to allow better comparability of period-to-period operating performance. The reconciliation of sales and trading, including FIC and Equity sales and trading net revenues from a non-GAAP to GAAP basis is as follows (amounts are presented in millions):

Sales & Trading $-$ Non-GAAP DVA impact Sales & Trading $-$ GAAP	40 2014 \$1.721 \$223 \$1,944	40 2013 \$1,966 $$$ (368) \$1,598	FY 2014 \$10,093 \$651 \$10,744	FY 2013 \$10,432 \$(681) \$9,751
FIC Sales & Trading - Non-GAAP	\$133	\$694	\$3,795	\$4,197
DVA impact	\$161	\$(285)	\$419	$\frac{6(603)}{2}$
FIC Sales & Trading – GAAP	\$294	\$409	\$4,214	\$3,594
Equity Sales & Trading - Non-GAAP	\$1,625	\$1.503	\$6,903	\$6,607
DVA impact	\$62	$$^{(83)}$	\$232	\$(78)
Equity Sales & Trading $-$ GAAP	\$1,687	\$1,420	\$7,135	\$6,529

¹⁵ VaR represents the loss amount that one would not expect to exceed, on average, more than five times every one hundred trading days in the Firm's trading positions if the portfolio were held constant for a one-day period. Further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology is disclosed in Part II, Item 7A "Quantitative and Qualitative Disclosures about Market Risk" included in Morgan Stanley's Annual Report on Form 10-K for the year ended December 31, 2013. Refer to page 7 of Morgan Stanley's Financial Supplement accompanying this release for the VaR disclosure.

¹⁶ Transactional revenues include investment banking, trading, and commissions and fee revenues.

¹⁷ Results for the fourth quarter of 2014 and 2013 included pre-tax income of \$11 million and \$46 million, respectively, related to investments held by certain consolidated real estate funds. Results for the full year 2014 and 2013 included pre-tax income of \$88 million and \$181 million, respectively, related to investments held by certain consolidated real estate funds. The limited partnership interests in these funds are reported in net income (loss) applicable to nonredeemable noncontrolling interests on page 10 of Morgan Stanley's Financial Supplement accompanying this release.

¹⁸ Net revenues for the current quarter included gains of \$11 million compared with gains of \$48 million in the prior year fourth quarter related to investments held by certain consolidated real estate funds. Net revenues for the current year included gains of \$89 million compared with gains of \$188 million in the prior year related to investments held by certain consolidated real estate funds.

¹⁹ On April 1, 2014, the Firm deconsolidated approximately \$2 billion in total assets related to a real estate fund sponsored by the Firm.

²⁰ As an Advanced Approach banking organization, the Firm is required to compute risk-based capital ratios using both (i) standardized approaches for calculating credit risk weighted assets ("RWAs") and market risk RWAs (the "Standardized Approach"); and (ii) an advanced internal ratings-based approach for calculating credit risk RWAs, an advanced measurement approach for calculating operational risk RWAs, and an advanced approach for market risk RWAs calculated under Basel III (the "Advanced Approach"). To implement a provision of the Dodd-Frank Act, U.S. Basel III subjects Advanced Approach banking organizations which have been approved by their regulators to exit the parallel run, such as the Firm, to a permanent "capital floor". In calendar year 2014, the capital floor results in the Firm's capital ratios being the lower of the capital ratios computed under the Advanced Approach or the U.S. Basel I-based rules as supplemented by the existing market risk rules known as "Basel 2.5". For the current quarter, the Firm's capital floor is represented by the Advanced Approach. Beginning on January 1, 2015, the capital floor will result in the Firm's capital ratios being the lower of the capital ratios computed under the Advanced Approach or the Standardized Approach under U.S. Basel III. These computations are preliminary estimates as of January 20, 2015 (the date of this release) and could be subject to revision in Morgan Stanley's Annual Report on Form 10-K for the year ended December 31, 2014. The methods for calculating the Firm's risk-based capital ratios will change through 2022 as aspects of the U.S. Basel III final rule are phased in. The Firm's capital takes into consideration regulatory capital requirements as well as capital required for organic growth, acquisitions and other business needs.

²¹ Tangible common equity and tangible book value per common share are non-GAAP financial measures that the Firm considers to be useful measures of capital adequacy. Tangible common equity equals common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction. Tangible book value per common share equals tangible common equity divided by period end common shares outstanding.

Notes:

MORGAN STANLEY Quarterly Financial Summary
(unaudited, dollars in millions, except for per share data)

	Quarter Ended			Percentage Change From:			Twelve Months Ended	Percentage
				Sept 30,		Sept 30,
Net revenues		Dec 31, 2014		2014		Dec 31, 2013	2014	Dec 31, 2013		Dec 31, 2014		Dec 31, 2013	Change
Institutional Securities Wealth Management Investment Management Intersegment Eliminations Consolidated net revenues	\$	3.430 3,804 588 (58) 7,764	s s	4,516 3,773 667 (49) 8,907	\$	3.343 3,716 858 (72) 7,845	(24%) 1% (12%) (18%) (13%)	3% 2% (31%) 19% (1%)	- 5	16,871 14,888 2,712 (196) 34,275	s	15.519 14.143 3,059 (228) 32,493	9% 5% (11%) 14% 5%
Income (loss) from continuing operations before tax
Institutional Securities Wealth Management Investment Management Intersegment Eliminations	\$	(863) 736 (6) 0	-5	1,227 800 193 0	s	(1,248) 715 331 0	(8%)	31% 3% ٠	-S	2,740 2,985 664 0	s	946 2,604 1,008 0	190% 15% (34%) ⊷
Consolidated income (loss) from continuing operations before tax	s	(133)	s	2,220		(202)	٠	34%		6,389	\$	4,558	40%
Income (loss) applicable to Morgan Stanley Institutional Securities Wealth Management Investment Management Intersegment Eliminations Consolidated income (loss) applicable to	s	(762) 1.825 (15) 0	\$	1,097 479 122 0	\$	(565) 480 180 0	٠	$(35%)$ \$		2,593 3,192 366 0	s	983 1,473 519 0	164% 117% (29%) $\overline{\phantom{a}}$
Morgan Stanley		1,048		.698		95	(38%)			6,151	s	2,975	% 107
Earnings (loss) applicable to Morgan Stanley common sharcholders		920	\$	1,629	Ś	36	(44%)			5,818	s	2,655	119%
Earnings per basic share: Income from continuing operations Discontinued operations Earnings per basic share	\$ S s	0.48 0.48	\$ 2 s	0.85 0.85	\$ s s	0,02 0.02	(44% (44%)	-- $\bullet$	\$ s s	3.03 (0.01) 3.02	\$ s s	1.42 (0.03) 1.39	113% 67% 117%
Earnings per diluted share:
Income from continuing operations Discontinued operations Earnings per diluted share	s s s	0.47 0.47	s s s	0.83 0.83	s s s	0.02 0.02	(43%) (43%)	۰ -- ٠	2 \$ s	2.96 (0.01) 2.95	s s £	1.38 (0.02) 1.36	114% 50% 117%
Financial Metrics:
Return on average common equity from continuing operations Return on average common equity		5.5% 5.4%		9.9% 9.9%		0.3% 0.2%				8.9% 8.9%		4.4% 4.3%
Return on average common equity from continuing operations excluding DVA Return on average common equity excluding DVA.		4.6% 4.5%		8.9% 8.9%		1.8%				8.1%		5.0%
Common Equity Tier 1 capital ratio Advanced						1.7%				8.1%		4.9%
(Transitional) Tier 1 capital ratio Advanced (Transitional)		14.2% 15.9%		14.4% 16,2%		12.8% 15.6%
Book value per common share Tangible book value per common share	\$ s	34.62 29,63	S \$	34.16 29.24	S S	32.24 27.16

See page 2 of the Financial Supplement and related End Notes for significant items affecting results for the quarter ended December 31, 2014,
- Results for the quarters ended December 31, 2014, September 30, 2014 and Dece

Notes:

MORGAN STANLEY Quarterly Consolidated Income Statement Information
(unaudited, dollars in millions)

			Quarter Ended		Percentage Change From:		Twelve Months Ended		Percentage
			Sept 30,		Sept 30.
	Dec 31, 2014		2014	Dec 31, 2013	2014	Dec 31, 2013	Dec 31, 2014	Dec 31, 2013	Change
Revenues:
Investment banking Trading	1.456 S	S	1.551	s 1.559	(6%)	(7%)	ŝ. 5.948	s 5,246	13%
	1,451		2.448	1,512	(41%)	(4%)	9.377	9.359	$\ddot{\phantom{a}}$
Investments Commissions and fees	112		138	523	(19%)	(79%)	836	1.777	(53%
	1 235		1.124	1.166	10%	6%	4,713	4,629	2%
Asset management, distribution and admin fees Other	2,684		2,716	2,499	(1%)	$7\%$	10,570	9,638	10%
	223		373	304	(40%)	(27%)	1,096	1,066	3%
Total non-interest revenues	7,161		8,350	7.563	(14%)	(5%)	32.540	31,715	3%
Interest income	1,436		1,384	1,336	4%	7%	5.413	5,209	4%
Interest expense	833		827	1,054	1%	(21%)	3,578	4.431	(17%
Net interest	603		557	282	8%	114%	1.735	778	123%
Net revenues	7,764		8,907	7,845	(13%)	(1%)	34,275	32,493	5%
Non-interest expenses:
Compensation and benefits	5,104		4,214	3,993	21%	28%	17,324	16,277	10%
Non-compensation expenses:
Occupancy and equipment	364		350	370	4%	(2%)	1,433	1,499	(4%
Brokerage, clearing and exchange fees	468		437	411	7%	14%	1,806	1.711	6%
Information processing and communications	404		396	446	2%	(9%)	1.635	1,768	(8%)
Marketing and business development	186		160	190	16%	(2%)	658	638	3%
Professional services	611		522	548	17%	11%	2,117	1,894	12%
Other	760		608	2,089	25%	(64%)	2,413	4,148	(42%)
Total non-compensation expenses	2, 93		2,473	4,054	13%	(31%)	10,062	11,658	(14%)
Total non-interest expenses	7,897		6,687	8,047	18%	(2%)	27,886	27,935
Income (loss) from continuing operations before taxes Income tax provision / (benefit) from continuing	(133)		2,220	(202)	٠	34%	6,389	4,558	40%
operations	(1,225)		463	(386)			38	902	(96%)
Income (loss) from continuing operations	1,092		1.757	184	(38%)		6,351	3,656	74%
Gain (loss) from discontinued operations after tax	(8)		(5)	(11)	(60%)	27%	(14)	(43)	67%
Net income (loss) Net income applicable to redeemable noncontrolling	Ŧ 1,084	S	1.752	s 173	(38%)		6,337 ¢	$\overline{\mathbf{s}}$ 3.613	75%
interests Net income applicable to nonredeemable	0		0	0			0	222	۰
noncontrolling interests	44		59	89.
Net income (loss) applicable to Morgan Stanley	1,040		1,693		(25%)	(51%)	200	459	(56%)
Preferred stock dividend / Other	120		64	84	(39%)		6.137	2,932	109%
Earnings (loss) applicable to Morgan Stanley common				48	88%	150%	319	277	15%
sharcholders	920	S	1,629	\$ 36	(44%)		5,818	2,655 s	119%

Amounts applicable to Morgan Stanley: Income (loss) from continuing operations
Gain (loss) from discontinued operations after tax	1,048 (8)		1,698	95	(38%)		6,151	2.975	107%
Net income (loss) applicable to Morgan Stanley			(5)	(11)	(60%	27%	(14)	(43)	67%
	1,040		1,693	84	(39%)	٠	6,137	\$ 2,932	109%
Pre-tax profit margin	٠		25%				19%	14%
Compensation and benefits as a % of net revenues	66%		47%	51%			52%	50%
Non-compensation expenses as a % of net revenues	36%		28%	52%			29%	36%
Effective tax rate from continuing operations	٠		20.9%	٠			0.6%	19.8%

Pre-tax profit margin is a non-GAAP financial measures that the Firm considers to be a useful measure to assess operating performance.
- The quarter ended December 31, 2014 included a pre-tax charge of \$468 million, refl

Supplement for additional information.
Supplement for additional information.
In the quarter ended December 31, 2014, income tax provision / (benefit) from continuing operations included a discrete tax benefit of approxima

The square sites of the extracts of the Universe of the processes of the state of the sale of a retail property space (allocated to the business segments as follows:
- Other revenues for the quarter ended September 30, 201 Institutional Securities business segment.

Preferred stock dividend / other includes allocation of earnings to Participating Restricted Stock Units (RSUs).

MORGAN STANLEY Quarterly Earnings Per Share
Quarterly Earnings Per Share
(unaudited, dollars in millions, except for per share data)

				Quarter Ended			Percentage Change From:			Twelve Months Ended			Percentage
		Dec 31. 2014		Sept 30, 2014		Dec 31, 2013	Sept 30. 2014	Dec 31, 2013		Dec 31. 2014		Dec 31, 2013	Change
Income (loss) from continuing operations	s	1,092	\$	1.757	s	184	(38%)		£	6.351	s	3.656	74%
Net income applicable to redeemable noncontrolling interests Net income applicable to nonredeemable noncontrolling interests Net income (loss) from continuing operations applicable to		0 44		0 59		$\mathbf 0$ 89	(25%)	(51%)		0 200		222 459	(56%)
noncontrolling interests Income (loss) from continuing operations applicable to Morgan		44		59		89	(25%)	(51%)		200		681	(71%)
Stanley Less: Preferred Dividends		1,048 119		1,698 62		95 48	(38%) 92%	148%		6.151 311		2.975 120	107% 159%
Less: Morgan Stanley Smith Barney Joint Venture Redemption Adjustment												151	$\bullet$
Income (loss) from continuing operations applicable to Morgan Stanley, prior to allocation of income to Participating Restricted Stock Units		929		1,636		47	(43%)			5,840		2,704
Basic EPS Adjustments:													116%
Less: Allocation of earnings to Participating Restricted Stock Units Earnings (loss) from continuing operations applicable to Morgan				,		0	(50%)			8		6	33%
Stanley common shareholders	s	928	s	1,634	-5	47	(43%)			5,832	s	2,698	116%
Gain (loss) from discontinued operations after tax Less: Gain (loss) from discontinued operations after tax applicable to noncontrolling interests		(8) 0		(5) $\mathbf{o}$		(11) $\mathbf{0}$	(60%)	27%		(14) 0		(43) 0	67%
Gain (loss) from discontinued operations after tax applicable to Morgan Stanley		(3)		(5)		(11)	(60%)	27%		(14)		(43)	67%
Less: Allocation of earnings to Participating Restricted Stock Units Earnings (loss) from discontinued operations applicable to Morgan		٥		0		0				٥		0	ш.
Stanley common shareholders		(3)		(5)		(11)	(60%)	27%		(14)		(43)	67%
Earnings (loss) applicable to Morgan Stanley common shareholders \$		920	s	1,629	S.	36	(44%)		s	5,818	s	2,655	119%
Average basic common shares outstanding (millions)		1,920		1,923		1,905	$\frac{1}{2}$	1%		1,924		1,906	1%
Earnings per basic share: Income from continuing operations Discontinued operations	s s	0.48	s s	0.85	s	0.02	(44%)		s	3.03	s	1.42	113%
Earnings per basic share	s	0.48	s	٠ 0.85	s s	0.02	(44%)		s S	(0.01) 3.02	s s	(0.03) 1.39	67% 117%
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	s	928	S	1.634	s	47	(43%)		S	5,832	5	2,698	116%
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		(8)		(5)		(II)	(60%)	27%		(14)		(43)	67%
Earnings (loss) applicable to Morgan Stanley common shareholders \$		920	s	1,629	s	36	(44% )		s	5,818	s	2,655	119%
Average diluted common shares outstanding and common stock equivalents (millions)		1.972		1,971		1,970	۵.			1,971		1,957	$1\%$
Earnings per diluted share: Income from continuing operations Discontinued operations	s s	0.47	s S	0.83	s s	0,02	(43%)		s S	2.96 (0.01)	s s	1.38 (0.02)	114% 50%
Earnings per diluted share	s	0.47	s	0.83	s	0.02	(43%)	٠	s	2.95	s	1.36	117%

The Firm calculates earnings per share using the two-class method as described under the accounting guidance for earnings per share. For further discussion of the Firm's earnings per share calculations, see pages 13 and 14 Notes: -

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MORGAN STANLEY Financial Supplement - 4Q 2014 Table of Contents

Page $#$

		Quarterly Financial Summary
2
3		Quarterly Earnings Per Share Summary
$4 - 5$		Quarterly Consolidated Financial Information and Statistical Data
6		Quarterly Institutional Securities Income Statement Information
	.	Quarterly Institutional Securities Financial Information and Statistical Data
8		Quarterly Wealth Management Income Statement Information
9		Quarterly Wealth Management Financial Information and Statistical Data
10		Quarterly Investment Management Income Statement Information
11	.	Quarterly Investment Management Financial Information and Statistical Data
12	.	Quarterly Firm Loans and Lending Commitments Financial Information
13		Earnings Per Share Appendix I
14	.	Earnings Per Share Appendix II
$15 - 17$	.	End Notes
18	.	Legal Notice

http://www.sec.gov/Archives/edgar/data/895421/000115752315000138/a51021611ex99_2... 1/20/2015

MORGAN STANLEY Quarterly Financial Summary⁽¹⁾ (unaudited, dollars in millions)

				Ouarter Ended			Percentage Change From:		Twelve Months Ended			Percentage
		Dec 31. 2014		Sept 30, 2014		Dec 31. 2013	Sept 30. 2014	Dec 31. 2013	Dec 31. 2014		Dec 31. 2013	Change
Net revenues Institutional Securities Wealth Management Investment Management Intersegment Eliminations Consolidated net revenues	S	3,430 3,804 588 (58) 7,764	s s	4,516 3,773 667 (49) 8,907	\$ s	3,343 3,716 858 (72) 7,845	(24%) 1% (12%) (18%) (13%)	3%S 2% (31%) 19% (1%)	16,871 14,888 2,712 (196) 34,275	\$	15,519 14,143 3,059 (228)	9% 5% (11% 14% 5%
Income (loss) from continuing operations											32,493
before tax Institutional Securities Wealth Management Investment Management Intersegment Eliminations Consolidated income (loss) from continuing operations before tax	S	(863) 736 (6) 0 (133)	s s	1,227 800 193 0 2,220	\$ \$	(1,248) 715 331 $\mathbf 0$ (202)	* (8%) ٠ -- $\bullet$	$31\%$ \$ 3% ٠ 34%	2,740 2,985 664 0 6,389	£. S	946 2,604 1,008 0 4,558	190% 15% (34% 40%
Income (loss) applicable to Morgan Stanley Institutional Securities Wealth Management Investment Management Intersegment Eliminations Consolidated income (loss) applicable to Morgan Stanley	\$	(762) 1,825 (15) 0 1,048	S s	1,097 479 122 0 1,698	s s	(565) 430 180 0 95	۰ ٠ $\bullet$ %) (38)	$(35%)$ \$ ٠ ۰	2,593 3,192 366 $\Omega$ 6,151	s \$	983 1,473 519 0 2,975	164% 117% (29%) - % 107
Financial Metrics:
Return on average common equity from continuing operations ⁽²⁾ Return on average common equity $(2)$		5.5% 5.4%		9.9% 9.9%		0.3% 0.2%			8.9% 8.9%		4.4% 4.3%
Return on average common equity from continuing operations excluding DVA ⁽²⁾ Return on average common equity excluding DVA ⁽²⁾		4.6% 4.5%		8.9% 8.9%		1.8% 1.7%			8.1% 8.1%		5.0% 4.9%
Common Equity Tier I capital ratio Advanced (Transitional) (3) Tier 1 capital ratio Advanced (Transitional) (3)		14.2% 15.9%		144% 16.2%		12.8% 15.6%
Book value per common share (4) Tangible book value per common share (5)	\$ s	34.62 29.63	\$ \$	34.16 29.24	\$ \$	32,24 27.16

Notes: - See page 2 of the Financial Supplement and related End Notes for significant items affecting results for the quarter ended December 31, 2014.
Results for the quarters ended December 31, 2014, September 30, 2014 an \$(368) million, respectively, related to the change in the fair value of certain of the Firm's long-term and short-term borrowings resulting from the fluctuation in the firm's credit spreads and other credit factors (Debt (negative) revenue of \$651 million and \$(681) million, respectively, related to the movement in DVA.

The return on average common equity metrics, return on average common equity excluding DVA metrics, and tangible book value per common share are non-GAAP

The second of the Firm considers to be useful measures to assess operating performance and capital adequacy.
- In the quarter ended June 30, 2014, the Firm began using the U.S. Basel III Advanced Approaches (Advanced Appro

requirements. Prior periods have not been recent to reflect the new requirements.
- See page 4 of the Financial Supplement and End Notes for additional information related to the calculation of the financial metrics.

Refer to End Notes on pages 15-17 and Legal Notice on page 18.

MORGAN STANLEY Quarterly Consolidated Income Statement Information (unaudited, dollars in millions)

		Quarter Ended		Percentage Change From:			Twelve Months Ended	Percentage
	Dec 31, 2014	Sept 30, 2014	Dec 31, 2013	Sept 30, 2014	Dec 31, 2013	Dec 31, 2014	Dec 31, 2013	Change
Revenues:
Investment banking	S 1,456	s 1.551	s 1,559	(6%)	$(7%)$ \$	5.948	S 5.246	13%
Trading	1,451	2.448	1,512	(41%)	(4%)	9,377	9.359
Investments	112	138	523	(19%)	(79%)	836	1.777	(53%)
Commissions and fees	1,235	1,124	1.166	10%	6%	4.713	4,629	2%
Asset management, distribution and admin.
fees	2,684	2.716	2.499	(1%)	7%	10,570	9.638	10%
Other	223	373	304	(40%)	(27%)	1.096	1,066	3%
Total non-interest revenues	7.161	8.350	7,563	(14%)	(5%)	32,540	31715	3%
Interest income	1.436	1,384	1.336	4%	7%	5.413	5,209	4%
Interest expense	833	827	1,054	1%	(21%)	3,678	4.431	(17%)
Net interest	603	557	282	8%	114%	1.735	778	123%
Net revenues ⁽¹⁾	7,764	8.907	7,345	(13%)	(1%)	34,275	32,493	5%
Non-interest expenses:
Compensation and benefits (2)	5,104	4,214	3,993	21%	28%	17,824	16,277	10%
Non-compensation expenses:
Occupancy and equipment	364	350	370	4%	(2%)	1433	1,499	(4%)
Brokerage, clearing and exchange fees	468	437	411	7%	14%	1.806	1.711	6%
Information processing and
communications	404	396	446	2 ₀	(9%)	1,635	1,768	(8%)
Marketing and business development Professional services	186	160 522	190	16%	(2%)	658	638	3%
Other	611 760	608	548 2,089	17% 25%	11% (64%)	2.117 2.413	1.394	12%
Total non-compensation expenses	2.793	2,473	4,054	13%			4,148	(42%)
					(31%)	10,062	11,658	(14%)
Total non-interest expenses	7897	6,687	8,047	18%	(2%)	27,886	27,935
Income (loss) from continuing operations before
taxes	(133)	2,220	(202)	٠	34%	6389	4,558	40%
Income tax provision / (benefit) from
continuing operations $(3)$	(1,225)	463	(386)			38	902	(96%)
Income (loss) from continuing operations	1.092	1,757	184	(38%)	$\bullet$	6.351	3,656	74%
Gain (loss) from discontinued operations after tax	(8)	$\left(5\right)$	ŒТ	(60%)	27%	(14)	(43)	67%
Net income (loss)	\$. 1,084	1,752 \$	Ś 173	(38%)	$\ddot{\bullet}$	6,337 S	\$ 3,613	75%
Net income applicable to redeemable
noncontrolling interests (4)	0	0	0			0	222	ŧ
Net income applicable to nonredeemable				%)	%
noncontrolling interests	44	59	89	(25)	(51	200	459	(56%)
Net income (loss) applicable to Morgan Stanley	1.040	1,693	$\overline{34}$	(39%)		6,137	2.932	109%
Preferred stock dividend / Other (5)	120	64	48	88%	150%	319	277	15%
Earnings (loss) applicable to Morgan Stanley
common shareholders	\$ 920	1,629	36	(44%)		5,818	2,655	119%
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations	1,048	1,698	95	(38%)	\$	6.151	2,975	107%
Gain (loss) from discontinued operations after tax	(8)	(5)	(11)	(60%)	27%	(14)	(43)	67%
Net income (loss) applicable to Morgan Stanley	1,040	1,693	84 S	(39%)	\$	6,137	2.932	109%
Pre-tax profit margin (6)		25%	Ń.			19%	14%
Compensation and benefits as a % of net
revenues Non-compensation expenses as a % of net	66%	47%	51%			52%	50%
revenues	36%	28%	52%			29%	36%
Effective tax rate from continuing operations		20.9%				0.6%	19.8%

Notes: - Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure to assess operating performance.
- The quarter ended December 31, 2014 included a pre-tax charge of \$468 million

adjustments (FVA) into the fair value measurements of certain over-the-counter derivatives: see End Notes for further details.

In the quarter ended December 31, 2014, compensation and benefits included compensation expense deferral adjustments of approximately \$1.1 billion: see End Notes for further details.
In the quarter ended December 31, 2014, income tax provision / (benefit) from continuing operations included a discrete tax benefit of approximately \$1.4 billion related to the restructuring of a legal entity
Other revenues for the quarter ended September 30, 2014 included a gain of \$141 million related to the sale of a retail property space (allocated to the business segments as follows: Institutional Securities: \$84 million, Wealth Management: \$40 million and Investment Management: \$17 million), and a gain related to the sale of TransMontaigne Inc. reported in the Initiational Securities business segment.
TransMontaigne Inc. reported in the Initiational Securities business segment.
- Preferred stock dividend / other includes allocation of earnings
Refer to End Notes on pages 15-17 and Legal Notice on page 18.

a51021611ex99_2.htm

$\sim 10^{11}$ km s $^{-1}$

$\overline{2}$

$\hat{\mathcal{L}}$

MORGAN STANLEY
Quarterly Earnings Per Share
(unaudited, dollars in millions, except for per share data)

				Quarter Ended			Percentage Change From:			Twelve Months Ended			Percentage
		Dec 31. 2014		Sent 30, 2014		Dec 31, 2013	Sept 30. 2014	Dec 31, 2013		Dec 31, 2014		Dec 31, 2013	Change
Income (loss) from continuing operations	\$	1,092	s	1,757	\$	184	(38%)		S	6,351	S	3,656	74%
Net income applicable to redeemable noncontrolling interests		0		0		0				0		222	٠
Net income applicable to nonredeemable noncontrolling interests		44		59		89	(25%)	(51%)		200		459	(56%)
Net income (loss) from continuing operations applicable to noncontrolling interests		44		59		89	(25%)	(51%)		200		681	(71%)
Income (loss) from continuing operations applicable to Morgan Stanley Less: Preferred Dividends Less: Morgan Stanley Smith Barney Joint		1,048 119		1.698 62		95 48	(38%) 92%	٠ 148%		6,151 311		2.975 120	107% 159%
Venture Redemption Adjustment Income (loss) from continuing operations applicable to Morgan Stanley, prior to allocation of income to Participating												151	$\star$
Restricted Stock Units		929		1,636		47	(43%)			5,840		2,704	116%
Basic EPS Adjustments: Less: Allocation of earnings to Participating Restricted Stock Units				$\overline{2}$		0	(50%)			8		6	33%
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	s	928	s	1,634	s	47	(43%)			5.832	s	2,698	116%
Gain (loss) from discontinued operations after tax		(3)		(5)		(11)	(60%)	27%		(14)		(43)	67%
Less: Gain (loss) from discontinued operations after tax applicable to noncontrolling interests		0		0		0				0		0
Gain (loss) from discontinued operations after tax applicable to Morgan Stanley Less: Allocation of earnings to Participating		(8)		(5)		(11)	(60%)	27%		(14)		(43)	67%
Restricted Stock Units		0		0		0				0		0
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		(8)		(5)		(11)	(60%)	27%		(14)		(43)	67%
Earnings (loss) applicable to Morgan Stanley common shareholders	\$	920	5	1,629	\$	36	(44%)		\$	5,818	S	2,655	119%
Average basic common shares outstanding (millions)		1,920		1,923		1,905		1%		1,924		1,906	$1\%$
Earnings per basic share: Income from continuing operations	s	0.48	s	0.85	\$	0.02	(44%)		\$	3.03	S	1.42	113%
Discontinued operations	\$		s		S			$\bullet$	S	(0.01)	S	(0.03)	67%
Earnings per basic share	\$	0.48	s	0.85	\$	0.02	(44%)		\$	3.02	s	1.39	117%
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	х	928					(43%)					2,698	116%
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		(8)		(5)		(11)	(60%)	27%		(14)		(43)	67%
Earnings (loss) applicable to Morgan Stanley common shareholders	s	920	s	1,629	$\mathbf{s}$	36	(44%)		s	5,818	- \$	2,655	119%
Average diluted common shares outstanding and common stock equivalents (millions)		1,972		1,971		1,970				1,971		1,957	1%
Earnings per diluted share: Income from continuing operations Discontinued operations Earnings per diluted share	s s \$	0.47 0.47	s s s	0.83 0.83	s s s	0.02 0.02	(43%) (43%)		s s З	296 $(0.01)$ S 2.95	S s	1.38 (0.02)	114% 50% 117%
												1.36

Notes: - The Firm calculates earnings per share using the two-class method as described under the accounting guidance for earnings per share. For further discussion of the Firm's earnings per share calculations, see pages

MORGAN STANLEY Quarterly Consolidated Financial Information and Statistical Data
(unaudited)

				Quarter Ended			Percentage Change From:			Twelve Months Ended			Percentage
		Dec 31, 2014		Scpt 30. 2014		Dec 31, 2013	Sept 30, 2014	Dec 31. 2013		Dec 31. 2014		Dec 31. 2013	Change
Regional revenues ⁽¹⁾ Americas EMEA (Europe, Middle East, Africa) Asia Consolidated net revenues	s τ	6,118 581 1,065 7,764	s Ŝ	6,308 1,271 1,323 8,907	S $\overline{\mathbf{s}}$	5.662 1.196 987 7,845	(3%) (54%) (20%) (13%)	8% \$ (51%) $8\%$ (1%)	s	25,140 4,772 4.363 34,275	s -5	23,358 4,542 4,593 32,493	8% 5% (5%) 5%
Worldwide employees		55,802		55.977		55 794	u.	œ.
Firmwide: Deposits Assets $U.S.$ bank assets $(2)$ Risk-weighted assets (3)	S \$ \$ s	133,544 807,539 151,157 422,867	s s \$ s	124.382 814,511 140,277 412.374	s S \$ s	112,379 832.702 125,341 390 366	7% (1%) 8% 3%	19% (3%) 21% 8%
Global liquidity reserve (billions) ⁽⁴⁾ Long-term debt outstanding Maturities of long-term debt outstanding (next 12 months)	\$ S \$	193 152,772 20,792	S \$ \$	190 152.357 17,613	\$ s s	202 153,575 24.193	2% ⊷ 18%	(4%) (1%) (14%)
Common equity Preferred equity Morgan Stanley shareholders' equity Junior subordinated debt issued to capital trusts Less: Goodwill and intangible assets (5) Tangible Morgan Stanley shareholders' equity Tangible common equity (6)	S	67,550 6.020 73,570 4,868 (9, 736) 68,702 57,814	\$	66,898 6,020 72,918 4,870 (9,637) 68,151 57,261	s 5	62,701 3.220 65,921 4,349 (9, 873) 60,897 52,828	1% — 1% - (1%) 1% 1%	8% 87% 12% $\overline{\phantom{0}}$ 1% 13% 9%
Common Equity Tier I capital Advanced (Transitional) ⁽³⁾ Tier 1 capital Advanced (Transitional) ⁽³⁾	\$ \$	60.155 67,182	S S	59,409 66,663	\$ S	49.917 61,007	$1\%$ 1%	21% 10%
Common Equity Tier I capital ratio Advanced (Transitional) (3) Tier 1 capital ratio Advanced (Transitional) (3) Tier I leverage ratio Advanced (Transitional) ⁽⁷⁾		14.2% 15.9% 8.3%		14.4% 16.2% 8.2%		12.8% 15.6% 7.6%
Period end common shares outstanding (000's)		1,950,980		1,958,386		1,944,869
Book value per common share Tangible book value per common share	s S	34 62 29.63	\$ \$	34.16 29 24	\$ \$	32 24 27.16

Notes: - All data presented in millions except number of employees, liquidity, ratios and book values.
- In the quarter ended June 30, 2014, the Firm began using the U.S. Basel III Advanced Approaches (Advanced Approach) t

MORGAN STANLEY Quarterly Consolidated Financial Information and Statistical Data (unaudited, dollars in billions)

	Ouarter Ended Dec 31,			Percentage Change From:			Twelve Months Ended	Percentage
		2014		Sept 30, 2014		Dec 31. 2013	Sept 30. 2014	Dec 31. 2013		Dec 31. 2014		Dec 31. 2013	Change
Average Common Equity Tier I capital (1) Institutional Securities Wealth Management Investment Management Parent capital	S.	31.3 5.0 2.0 22.2	-S	31.9 5.2 2.2 19.4	S	31.4 4.5 $\overline{1.8}$ 11.9	(2%) (4%) (9%) 14%	11% 11% 87%	S	31.3 5.2 1.9 19.5	s	32.7 4.3 1.7 9.0	(4%) 21% 12% 117%
Total - continuing operations Discontinued operations Firm		60.5 0.0 60.5		58.7 0.0 58.7	s.	49.6 0.0 49.6	3% - 3%	22% -- 22%		57.9 0.0 57.9	£	47.7 0.0 47.7	21% $\overline{\phantom{0}}$ 21%
Average Common Equity Institutional Securities Wealth Management Investment Management Parent capital Total - continuing operations Discontinued operations Firm	s	32.1 10.9 2.9 22.0 67.9 0.0 67.9	\$ s.	32.6 11.2 3.1 19.3 66.2 0.0 66.2	£. s	36.2 13.2 2.9 10.7 63.0 0.0 63.0	(2%) (3%) (6%) 14% 3% - 3%	$(11%)$ \$ (17%) 106% 8% 8%		32.1 11.2 2.9 19.3 65.5 0.0 65.5	\$	37.9 13.2 2.8 8.0 61.9 0.0 61.9	(15%) (15%) 4% 141% 6% 6%
Return on average Common Equity Tier 1 capital Institutional Securities Wealth Management Investment Management Total - continuing operations Firm		۰ 143% * 6% 6%		13% 35% 22% 11% 11%		$\star$ 43% 40% $0\%$ 0%				8% 59% 19% 10% 10%		3% 30% 30% 6% 6%
Return on average Common Equity Institutional Securities Wealth Management Investment Management Total - continuing operations Firm		۰ 65% * 5% 5%		13% 16% 16% 10% 10%		٠ 14% 25% 0% 0%				7% 27% 13% 9% 9%		2% 10% 18% 4% 4%

Notes: - In the quarter ended June 30, 2014, the Firm began using the U.S. Basel III Advanced Approaches (Advanced Approach) to calculate its regulatory capital
requirements. Prior periods have not been recast to reflect t operating performance.

operating pertormance.
In the quarter and full year ended December 31, 2014, returns on average Common Equity and average Common Equity Tier 1 Capital from continuing operations for
Wealth Management reflect the impact of have been as follows:

Return on average Common Equity Tier 1 capital:
December 31, 2013 YTD:

Firm: 6%, Wealth Management: 34%

Return on average Common Equity:
Return on average Common Equity:
Refer to End Notes on pages 15-17 and Legal Notice on page 18. Firm: 5%, Wealth Management: 11%

MORGAN STANLEY Quarterly Institutional Securities Income Statement Information
(unaudited, dollars in millions)

			Ouarter Ended			Percentage Change From:		Twelve Months Ended			Percentage
	Dec 31.		Sept 30,		Dec 31.	Sept 30,	Dec 31,	Dec 31,		Dec 31,
	2014		2014		2013	2014	2013	2014		2013	Change
Revenues: Investment banking	s	1,295	\$	S
Trading		1,219	1.340 2.262		1 3 6 2 1,176	(3%)	$(5%)$ \$	5,203	s	4 3 7 7	19%
Investments		30	39		177	(46%) (23%)	4% (83%)	8,445 240		8 147 707	4%
Commissions and fees		674	629		596	7%	13%	2,610		2,425	(66% 8%
Asset management, distribution and admin.
fees		68	66		73	3%	(7%)	281		280
Other		161	224		206	(28%)	(22%)	684		684
Total non-interest revenues		3,447	4,560		3,590	(24%)	(4% )	17,463		16.620	5%
Interest income		891	859		880	4%	1%	3,389		3.572	(5%
Interest expense		908	903		1,127	1%	(19%)	3,981		4.673	(15%
Net interest		(17)	(44)		(247)	61%	93%	(592)		(1.101)	46%
Net revenues (1)		3.430	4,516		3.343	(24%)	3%	16,871		15,519	9%
Compensation and benefits (2)		2.432	1,779		1,551	37%	57%	7,786		6.823	14%
Non-compensation expenses		1,861	1,510		3,040	23%	(39%)	6,345		7,750	(18%)
Total non-interest expenses		4.293	3,289		4,591	31%	(6%)	14,131		14,573	(3%)

Income (loss) from continuing operations before taxes
Income tax provision / (benefit) from		(863)	1,227		(1,248)		31%	2,740		946	190%
continuing operations		(133)	89		(726)		82%	38		(315)	۰
Income (loss) from continuing operations		(730)	1,138		(522)		(40%)	2,702		1.261	114%
Gain (loss) from discontinued operations after tax		(8)	(6)		$\overline{a}$	(33%)	27%	(19)		(52)	63%
Net income (loss)		(738)	1,132		(533)		(38%)	2.683		1,209	122%
Net income applicable to redeemable
noncontrolling interests							۰.			1	۰
Net income applicable to nonredeemable
noncontrolling interests (3)		32	41		43	(22%)	(26%)	109		277	(61%)
Net income (loss) applicable to Morgan Stanley		(770)	1.091	\$	(576)	$\bullet$	(34%)	2.574	ŝ	931	176%
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		(762)	1,097		(565)		(35%)	2,593		983	164%
Gain (loss) from discontinued operations after tax		(8)	(6)		(11)	(33%)	27%	(19)		(52)	63%
Net income (loss) applicable to Morgan Stanley		(770)	1,091		(576)	٠	(34%)	2,574		931	176%
Return on average common equity from
continuing operations		۰	13%		٠			7%		$2\%$
Pre-tax profit margin (4)			27%		×			16%		6%
Compensation and benefits as a % of net revenues
		71%	39%		46%			46%		44%

Notes: - Pre-tax profit margin and return on average common equity are non-GAAP financial measures that the Firm considers to be a useful measure to assess operating

reformance.
- The quarter ended December 31, 2014 included a pre-tax charge of \$468 million, reflected as negative revenue, related to the incorporation of funding valuation
- The quarter ended December 31, 2014 included a

adjustments (FVA) into the fair value measurements of certain over-the-counter derivatives: see End Notes for further details.
In the quarter ended December 31, 2014, compensation and benefits included compensation expense for further details.

In the quarter ended September 30, 2014, income tax provision / (benefit) from continuing operations included a net discrete tax benefit of \$237 million primarily associated with the repatriation of non-U.S. earnings at

consisting of \$100 million related to the remeasurement of reserves and related interest based on new information regarding the status of certain tax authority
examinations and \$92 million related to the establishment of r

MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Institutional Securities (unaudited, dollars in millions)

				Quarter Ended			Percentage Change From:			Twelve Months Ended			Percentage
		Dec 31, 2014		Sept 30, 2014		Dec 31. 2013	Sept 30. 2014	Dec 31. 2013		Dec 31, 2014		Dec 31, 2013	Change
Investment Banking Advisory revenues Underwriting revenues	\$	488	\$	392	S	451	24%	8% S		1,634	\$	1,310	25%
Equity Fixed income		345 462		464 484		416 495	(26%) (5%)	(17%) (7%)		1,613 1,956		1,262 1,805	28% 8%
Total underwriting revenues		807		948		911	(15%)	(11%)		3,569		3,067	16%
Total investment banking revenues	S.	1,295	\$	1,340	\$	1,362	(3%)	$(5%)$ \$		5,203	-5	4,377	19%
Sales & Trading (1) Equity Fixed Income & Commodities (2) Other Total sales & trading net revenues	s. S.	1,687 294 (37) 1,944	\$ $\overline{\mathbf{s}}$	1,867 1,129 (83) 2,913	\$ $\overline{\mathbf{s}}$	1,420 409 (231) 1,598	(10%) (74%) 55% (33%)	19% S (28%) 84% 22%	3	7,135 4,214 (605) 10,744	-5 ΞŢ	6.529 3,594 (372) 9,751	9% 17% (63%) 10%
Investments & Other Investments Other	s.	30 161	s	39 224	\$	177 206	(23%) (28%)	$(83%)$ \$		240	S	707	(66%)
Total investments & other revenues	s.	191	$\mathfrak{F}$	263	\$	383	(27%)	(22%) $(50%)$ \$		684 924	S.	684 1,391	(34%)
Total Institutional Securities net revenues		3,430	Ŝ	4,516	\$	3,343	(24%)	3%		16,871	S	15,519	9%
Institutional Securities U.S. Bank Data (billions) ⁽³⁾
Total corporate funded loans Total other funded loans (4)	\$ £.	9.6 16.6	S s	9.4 12.6	s $\mathbf{s}$	8.8 4.1	2% 32%	9%
Average Daily 95% / One-Day Value-at-Risk $("VaR")^{(5)}$ Primary Market Risk Category (\$ millions, pre- tax).
Interest rate and credit spread Equity price	S 3	34 18	\$ \$	28 16	s Ŝ.	35 20
Foreign exchange rate Commodity price	\$ S	u 14	\$ \$	9 15	\$ S	17 18
Aggregation of Primary Risk Categories	\$	43	s	38	s.	46
Credit Portfolio VaR	s	12	s	10	s	13
Trading VaR	\$	47	\$	42	s	51

Notes: - See page 16 of the Financial Supplement for additional details on DVA amounts reported in the Institutional Securities business.
- in the quarter ended December 31, 2014, Fixed Income and Commodities included nega

$\boldsymbol{7}$

		Quarter Ended		Percentage Change From:		Twelve Months Ended		Percentage
	Dec 31, 2014	Sept 30, 2014	Dec 31, 2013	Sept 30, 2014	Dec 31. 2013	Dec 31. 2014	Dec 31, 2013	Change
Revenues:
Investment banking Trading	173 \$ 230	s 224 185	s 206 323	(23%) 24%	$(16%)$ \$ (29%)	791 957	S 923 1,161	(14%) (18%)
Investments Commissions and fees Asset management, distribution and admin.	573	$\overline{2}$ 503	5 576	(50%) 14%	(80%) (1%)	9 2,127	14 2,209	(36%) (4%)
fees Other	2,135 67	2,148 112	1.970 110	(1%)	8%	8.345	7.571	10%
Total non-interest revenues	3,179	3,174	3,190	(40%) --	(39%) ۰.	320 12,549	390 12,268	(18%) 2%
Interest income Interest expense	670 45	649 50	569 43	3% (10%)	18% 5%	2,516 177	2,100 225	20% (21%)
Net interest	625	599	326	4%	19%	2,339	1,875	25%
Net revenues	3,804	3,773	3,716	1%	2%	14,888	14,143	5%
Compensation and benefits (1) Non-compensation expenses	2,291	2.182	2,146	5%	7%	8.825	8,265	7%
	777	791	855	(2%)	(9%)	3,078	3,274	(6%)
Total non-interest expenses	3,068	2,973	3,001	3%	2%	11,903	11,539	3%
Income (loss) from continuing operations before taxes	736	800	715	(8%)	3%	2.985	2,604	15%
Income tax provision / (benefit) from continuing operations ⁽²⁾
	(1,089)	321	235			(207)	910	۰.
Income (loss) from continuing operations	1,825	479	480			3.192	1,694	88%
Gain (loss) from discontinued operations after tax	$\mathbf 0$	$\bf{0}$	$\mathbf 0$			$\mathbf{0}$	(1)	$\bullet$
Net income (loss) Net income applicable to redeemable	1,825	479	480			3,192	1,693	89%
noncontrolling interests (3) Net income applicable to nonredeemable	$\bf{0}$	0	0				221	鱼
noncontrolling interests Net income (loss) applicable to Morgan Stanley	0 1,825	0 479 s	0 480 \$	$\bullet$		3.192	0 1,472	117%
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations	1,825	479	480			3.192	1.473	117%
Gain (loss) from discontinued operations after tax	0	0	0			0	(1)	۰
Net income (loss) applicable to Morgan Stanley	1,825	£. 479	S 430	۰	$\bullet$	3,192	1,472	117%
Return on average common equity from continuing operations	65%	16%	14%
Pre-tax profit margin (4)	19%	21%	19%			27% 20%	10% 18%
Compensation and benefits as a % of net
revenues	60%	58%	58%			59%	58%

MORGAN STANLEY Quarterly Wealth Management Income Statement Information
(unaudited, dollars in millions)

Notes: - Pre-tax profit margin and return on average common equity are non-GAAP financial measures that the Firm considers to be a useful measure to assess operating performance.
- During the quarter ended December 31, 2014, the Managed Futures business was transferred from the Wealth Management business segment to the Investment

In the quarter ended December 31, 2014, compensation and benefits included compensation expense deferral adjustments of approximately \$88 million: see End Notes for further details.
In the quarter ended December 31, 2014, income tax provision / (benefit) from continuing operations included a discrete tax benefit of approximately \$1.4 billion related
In the quarter ended December 31, 2014, income is provided a content commanded a negative adjustment of \$151 million related to the purchase of the MoSSBH restructuring.
To the MSSBH restructuring.
The fact the Morgan S
Refer to End Notes on pages 15-17 and Legal Notice on page 18.

MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Wealth Management (unaudited)

				Quarter Ended			Percentage Change From:
	Dec 31, 2014			Sept 30, 2014		Dec 31, 2013	Sept 30, 2014	Dec 31, 2013
Wealth Management representatives		16,076		16,162		16,456	(1%)	(2%)
Annualized revenue per representative (000's)(1)	s	944	s	929	\$	902	$2\%$	5%
Client assets (billions) Client liabilities (billions)	\$ S	2,025 51	s S	2,003 48	\$ s	1.909 39	$1\%$ 6%	6% 31%
Fee-based client account assets (billions) (2) Fee-based assets as a % of client assets	s	785 39%	s	768 38%	- \$	697 37%	2%	13%
Bank deposit program (millions)	s	137.307	\$	129,450	S	133,675	6%	3%
Client assets per representative (millions) (3)	2	126	s	124	5	116	2%	9%
Fee based asset flows (billions) ⁽⁴⁾	\$	20.8	S	6.5	- \$	11.6	٠	79%
Retail locations		622		631		649	(1%)	(4%)
Wealth Management U.S. Bank Data (billions) (5) Securities-based lending and other loans Residential real estate loans Available for Sale Securities Portfolio ۴	\$ \$	21.9 15.8 57.3	S S \$	20.3 14.3 52.5	\$ s S	14.7 10.1 53,4	8% 10% 9%	49% 56% 7%

Notes: - During the quarter ended December 31, 2014, the Managed Futures business was transferred from the Wealth Management business segment to the Investment - During the quarter ended December 31, 2014, the trianaged rutures ousness was transferred from the weatth rvanagement business segment to the control and specified and the control and the control and the control and the

MORGAN STANLEY Quarterly Investment Management Income Statement Information
(unaudited, dollars in millions)

	Ouarter Ended			Percentage Change From:		Twelve Months Ended	Percentage
	Dec 31,	Sept 30.	Dec 31.	Sept 30,	$\overline{Dec 31}$ ,	Dec 31.	Dec 31.
	2014	2014	2013	2014	2013	2014	2013	Change
Revenues: Investment banking		S
Trading	S 3	4	S 4 15			s 5	s п	(55%
Investments(1)	81	97	341	(25%) (16%)	(80%) (76%)	(19) 587	41 1,056	(44%
Commissions and fees	0	0	0	--	--	0	0
Asset management, distribution and admin.
fees	506	529	489	(4% )	3%	2,049	1,920	7%
Other	2	38	9	(95%)	(78%)	106	32	٠
Total non-interest revenues	592	668	858	(11%)	(31%)	2,728	3,060	(11%)
Interest income	0	0	2		۰	2	9	(78%)
Interest expense	4		$\overline{z}$	$\ast$	100%	18	10	80%
Net interest	(4)	(1)	$\overline{0}$	$\bullet$	٠	(16)	$\overline{(\mathbf{D})}$	٠
Net revenues	588	667	858	(12%)	(31%)	2,712	3,059	(11%)
Compensation and benefits (2)	381	253	296	51%	29%	1.213	1,189	2%
Non-compensation expenses	213	221	231	(4%)	(8%)	835	862	(3%)
Total non-interest expenses	594	474	527	25%	13%	2,048	2,051
Income (loss) from continuing operations before
taxes	(6)	193	331		٠	664	1,008	(34%)
Income tax provision / (benefit) from
continuing operations	(3)	53	105			207	307	(33%)
Income (loss) from continuing operations	(3)	140	226			457	701	(35%)
Gain (loss) from discontinued operations after tax	$\overline{\mathbf{0}}$	-1	$\mathbf 0$			5	9	(44%)
Net income (loss)	(3)	141	226			462	710	(35%)
Net income applicable to redeemable
noncontrolling interests	$\mathbf 0$	0	$\mathbf 0$
Net income applicable to nonredeemable
noncontrolling interests (1)	12	18	46	(33%)	(74%)	91	182	(50%)
Net income (loss) applicable to Morgan Stanley	(15)	$\overline{123}$	180 \$.		٠	371	528 s	(30%)
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations Gain (loss) from discontinued operations after tax	(15) 0	122	180			366	519	(29%)
			0			5	9	(44%)
Net income (loss) applicable to Morgan Stanley	(15)	123 \$	180			371	528 S	(30%)
Return on average common equity from
continuing operations Pre-tax profit margin (3)		16%	25%			13%	18%
Compensation and benefits as a % of net		29%	39%			24%	33%
revenues	65%	38%	35%			45%
							39%

Notes: - Pre-tax profit margin and return on average common equity are non-GAAP financial measures that the Firm considers to be a useful measure to assess operating performance.

During the quarter ended December 31, 2014, the Managed Futures business was transferred from the Wealth Management business segment to the Investment Management business segment.
In the quarter ended December 31, 2014, compensation and benefits included compensation expense deferral adjustments of approximately \$145 million: see End Notes for further details.
- Refer to End Notes on pages 15-17 a

MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Investment Management (unaudited)

				Quarter Ended			Percentage Change From:		Twelve Months Ended			Percentage
		Dec 31. 2014		Sept 30. 2014		Dec 31, 2013	Sept 30, 2014	Dec 31. 2013	Dec 31, 2014		Dec 31. 2013	Change
Net Revenues (millions) Traditional Asset Management Merchant Banking Real Estate Investing ⁽¹⁾	s	432 53 103	s	468 36 113	\$	446 252 160	(3%) (38%) (9%)	$(3%)$ \$ (79%) (36%)	1,798 456 458	s	1,690 679 690	6% (33%) (34%)
Total Investment Management		588	S	667	s	858	(12%)	(31%)	2,712	$\overline{\mathbf{s}}$	3,059	(11%)
Assets under management or supervision (billions)
Net flows by asset class ⁽²⁾ Traditional Asset Management Equity Fixed Income Liquidity Alternatives Managed Futures Total Traditional Asset Management	s	(2.9) 1.4 33 0.6 (0.2) 2.2	-5	$(2.9)$ \$ 4.5 49 0.3 (0.2) 6.6		(1.1) 2.2 1.8 1.1 (0.3) 3.7	(69%) (33%) 100% -- (67%)	$(164%)$ \$ (36%) 83% (45%) 33% (41%)	(1.9) S 5.2 17.4 3,5 (0.9) 23.3		(1.1) (0.3) 11.9 26 (0.9) 12.2	(73%) $\bullet$ 46% 35% ter and a 91%
Real Estate Investing Merchant Banking Total net flows		(0.4) 1.7 $\overline{3.5}$	S	0.3 0.5 7.4	s	0.4 (0.2) 3.9	$\star$ $\bullet$ (53%)	* ٠ $(10%)$ S	(2.5) 3.2 24.0	5	(0.6) 0.8 12.4	۰ ٠ 94%
Assets under management or supervision by asset class ⁽³⁾ Traditional Asset Management
Equity Fixed Income Liquidity Alternatives Managed Futures Total Traditional Asset Management	s.	141 65 128 36 3 373	s	143 65 126 35 3 372	£.	140 60 112 31 4 347	(1%) 2% 3% --	$1\%$ 8% 14% 16% (25%) 7%
Real Estate Investing Merchant Banking Total Assets Under Management or		20 10		20 9		21 9	11%	(5%) 11% %
Supervision		403	s	401	s	377		7
Share of minority stake assets		$\tau$		7		6		17%

Notes: - The alternatives asset class includes a range of investment products such as funds of hedge funds, funds of private equity funds and funds of real estate funds.
- During the quarter ended December 31, 2014, the Ma Management business segment. All prior period amounts have been recast to conform to the current year's presentation.
- The share of minority stake assets represents Investment Management's proportional share of assets man

Page 14 of 24

MORGAN STANLEY
Quarterly Financial Information
Loans and Lending Commitments
(unaudited, dollars in billions)

				Quarter Ended			Percentage Change From:
		Dec 31, 2014		Sept 30, 2014		Dec 31, 2013	Sept 30, 2014	Dec 31, 2013
Institutional Securities
Corporate Funded Loans
Loans held for investment, net of allowance	\$	8,0	s	8.2	S	7,8	(2%)	3%
Loans held for sale		7.8		5.9		6.2	32%	26%
Loans held at fair value ⁽¹⁾	ŝ	0,5		0.7		2.9	(29%)	(83%)
Total corporate funded loans		16.3	-37	14.8	$\overline{s}$	169	10%	(4%)
Corporate Lending Commitments
Loans held for investment	\$	62.3	S	62.2	\$	61.4		1%
Loans held for sale		15.7		16.3		8.1	(4%)	94%
Loans held at fair value ⁽²⁾		3.3		4.1		9.1	(20%)	(64%)
Total corporate lending commitments	\$	813	$\bar{s}$	82.6	\$	78.6	(2%)	3%
Corporate Loans and Lending Commitments ⁽³⁾	\$	97.6	-S	97.4	$\overline{\mathbf{s}}$	95.5	$\overline{\phantom{0}}$	2%
Other Funded Loans
Loans held for investment, net of allowance	\$	11.4	£.	8.7	\$	3.8	31%	200%
Loans held for sale		1.6		0.7		0.1	129%
Loans held at fair value		11,5		13.3		9,7	(14%)	19%
Total other funded loans	\$	24.5	S	22.7 S		13.6	8%	80%
Other Lending Commitments
Loans held for investment	\$	23	s	1.9	\$	1.3	21%	77%
Loans held for sale		0.8		0.1		0.0	٠
Loans held at fair value		2.1		2.1		08	ш,	163%
Total other lending commitments	Ŝ	5.2	s	4.1	Ŝ.	$\overline{2.1}$	27%	148%
Total Other Loans and Lending Commitments (4)	š	29.7	$\overline{s}$	26.8	$\overline{s}$	15.7	11%	89%
Institutional Securities Loans and Lending Commitments (5)		127.3		124.2	\$	111.2	2%	14%
Wealth Management

Funded Loans Loans held for investment, net of allowance	\$	377	s	34.6 ⁵		24.9
Loans held for sale		0.1		0.1		0.1	9%	51%
Total funded loans	\$	37.8	s	34.7	- \$	25.0	9%	51%
Lending Commitments
Loans held for investment Loans held for sale	\$	4.9	S	4.6	-S	4.5	7%	9%
Total lending commitments	Ŧ	00 49	ŝ	0.0 4.6	$\overline{s}$	0.0 4.5	-- 7%	9%

Wealth Management Loans and Lending Commitments (6)		42.7	S	39.3	\$	29.S	9%	45%
Firm Loans and Lending Commitments	s	170.0	\$	163.5	-5	140.7	4%	21%

Note: - Refer to End Notes on pages 15-17 and Legal Notice on page 18.

This page represents an addendum to the 4Q 2014 Financial Supplement, Appendix I

MORGAN STANLEY
Earnings Per Share Calculation Under Two-Class Method
Three Months Ended December 31, 2014
(unaudited, in millions, except for per share data)

		Allocation of net income from continuing operations
	(A)	(B)	(C)	(D)	(E)	(F)		(G)
						$(D)+(E)$		$(\Gamma)/(A)$
	Weighted Average # of Shares	% Allocation ⁽²⁾	Net income from continuing operations applicable to Morgan Stanley ⁽³⁾	Distributed Earnings ⁽⁴⁾	Undistributed Earnings ⁽⁵⁾	Total Earnings Allocated		Basic EPS (8)
Basic Common Shares Participating Restricted	1.920	100%		\$192	5736	\$928	$\overline{6}$	\$0.48
Stock Units ⁽¹⁾	$\overline{2}$	$0\%$		\$0	\$1	SI.	(7)	N/A
	1.922	100%	\$929	$\overline{$192}$	\$737	\$929
			Allocation of gain (loss) from discontinued operations
	(A)	(B)	$\overline{\mathbb{C}}$	(D)	(E)	(F)		$\overline{(\mathbf{G})}$
						$(D)+(E)$		(F)/(A)
	Weighted Average # of Shares	% Allocation (2)	Gain (loss) from Discontinued Operations Applicable to Common Shareholders, after Tax(3)	Distributed Earnings ⁽⁴⁾	Undistributed Earnings ⁽⁵⁾	Total Earnings Allocated		Basic EPS (8)
Basic Common Shares	1,920	100%		50	S(3)	5(8)	$\overline{6}$	\$0.00
Participating Restricted Stock Units (1)	$\overline{2}$	0%
	1,922	100%	S(8)	\$0 $\overline{50}$	\$0 S(8)	\$0 S(8)	(7)	N/A
			Allocation of net income applicable to common shareholders
	(A)	(B)	(C)	(D)	(E)	(F)		(G)
	Weighted					$(D)+(E)$		(F)/(A)
	Average # of Shares	% Allocation (2)	Net income applicable to Morgan Stanley (3)	Distributed Earnings ⁽⁴⁾	Undistributed Earnings ⁽⁵⁾	Total Earnings Allocated		Basic EPS(8)
Basic Common Shares Participating Restricted	1,920	100%		\$192	\$728	\$920	(6)	\$0.48
Stock Units ⁽¹⁾	2	0%		\$O	\$1	\$1	(7)	N/A
	1,922	100%	\$921	\$192	\$729	5921

Note: - Refer to End Notes on pages 15-17 and Legal Notice on page 18.

This page represents an addendum to the 4Q 2014 Financial Supplement, Appendix II

MORGAN STANLEY
Earnings Per Share Calculation Under Two-Class Method
Twelve Months Ended December 31, 2014
unaudited, in millions, except for per share data)

		Allocation of net income from continuing operations
	(A)	(B)	$\overline{C}$	$\overline{(\mathsf{D})}$	(E)	(F)		$\overline{(G)}$
						$(D)+(E)$		(FV(A))
	Weighted Average # of Shares	% Allocation (2)	Net income from continuing operations applicable to Morgan Stanley (3)	Distributed Earnings ⁽⁴⁾	Undistributed Earnings ⁽⁵⁾	Total Earnings Allocated		Basic EPS (8)
Basic Common Shares	1.924	100%		\$674	\$5.158	\$5,832	$\overline{6}$	\$3.03
Participating Restricted Stock Units (1)	$\overline{2}$	0%		\$1	\$7	\$8	(7)	NA
	1,926	100%	\$5,840	\$675	\$5,165	\$5,840
		Allocation of gain (loss) from discontinued operations
	(A)	(B)	(C)	(D)	(E)	(F)		(G)
			Gain (loss) from			$(D)+(E)$		(F)/(A)
	Weighted Average # of Shares	% Allocation (2)	Discontinued Operations Applicable to Common Shareholders, after Tax(3)	Distributed Earnings ⁽⁴⁾	Undistributed Earnings ⁽⁵⁾	Total Earnings Allocated		Basic EPS (8)
Basic Common Shares Participating Restricted	1,924	100%		\$0	\$(14)	\$(14)	(6)	\$(0.01)
Stock Units (1)	2	0 ₀		\$0	\$0	SO.	(7)	NA
	1,926	100%	S(14)	\$0	5(14)	\$(14)
			Allocation of net income applicable to common shareholders
	(A)	$\overline{(B)}$	$\overline{C}$	(D)	$\overline{(\mathbb{D})}$	(F)		(G)
						$(D)+(E)$		(F)/(A)
	Weighted Average # of Shares	% Allocation (2)	Net income applicable to Morgan Stanley (3)	Distributed Eamings ⁽⁴⁾	Undistributed Earnings ⁽⁵⁾	Total Earnings Allocated		Basic EPS ⁽⁸⁾
Basic Common Shares Participating Restricted	1,924	100%		\$674	\$5,144	\$5,818	(6)	\$3.02
Stock Units ⁽¹⁾	$\overline{\mathbf{c}}$	$0\%$		\$1	\$7	\$8	(7)	N/A
	1,926	100%	\$5,826	\$675	\$5,151	\$5,826

Note: - Refer to End Notes on pages 15-17 and Legal Notice on page 18.

$\alpha$

MORGAN STANLEY End Notes

Page 1:

(1) From time to time, Morgan Stanley may disclose certain "non-GAAP financial measures" in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. For these purposes, "GAAP" refers to generally accepted accounting principles in the United States. The Securities and Exchange Commission (SEC) defines a "non-GAAP financial measure" as a numerical measure of historical or future financial performance, financial positions, or cash flows that is subject to adjustments that effectively exclude, or include amounts from the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures disclosed by Morgan Stanley are provided as additional information to investors in order to provide them with greater transparency about, or an alternative method for assessing, our financial condition and operating results. These measures are not in accordance with, or a substitute for GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally present the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable GAAP financial measure.
(2) The return on average common equity and the return on average common equity from continuing operations equal income applicable to Morgan Stanley in each case less preferred dividends as a percentage of average common equity. The return on average common equity and the return on average common equity from continuing operations excluding DVA are adjusted for DVA in each case in the numerator and denominator.
(3) As an Advanced Approach banking organization, the Firm is required to compute risk-based capital ratios using both (i) standardized approaches for calculating credit risk weighted assets ("RWAs") and market risk RWAs (the "Standardized Approach"); and (ii) an advanced internal ratings-based approach for calculating credit risk RWAs, an advanced measurement approach for calculating operational risk RWAs, and an advanced approach for market risk RWAs calculated under Basel III (the "Advanced Approach"). To implement a provision of the Dodd-Frank Act, U.S. Basel III subjects Advanced Approach banking organizations which have been approved by their regulators to exit the parallel run, such as the Firm, to a permanent "capital floor". In calendar year 2014, the capital floor results in the Firm's capital ratios being the lower of the capital ratios computed under the Advanced Approach or the U.S. Basel I-based rules as supplemented by the existing market risk rules known as "Basel 2.5". For the current quarter, the Firm's capital floor is represented by the Advanced Approach. Beginning on January 1, 2015, the capital floor will result in the Firm's ratios being the lower of the capital ratios computed under the Advanced Approach or the Standardized Approach under Basel III. These computations are preliminary estimates as of January 20, 2015 (the date of this release) and could be subject to revision in Morgan Stanley's Annual Report on Form 10-K for the year ended December 31, 2014. The methods for calculating the Firm's risk-based capital ratios will change through 2022 as aspects of the U.S. Basel III final rule are phased in. For information on the calculation of regulatory capital and ratios for prior periods, please refer to Part 2, Item 7 "Regulatory Requirements" in Morgan Stanley's Annual Report on Form 10-K for the year ended December 31, 2013 and Part 1, Item 2 "Regulatory Requirements" in Morgan Stanley's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.
Book value per common share equals common equity divided by period end common shares outstanding.
(5) Tangible book value per common share equals tangible common equity divided by period end common shares outstanding.

Page 2:

(1) During the fourth quarter of 2014, Morgan Stanley incorporated funding valuation adjustments (FVA) into the fair value measurements of over-thecounter uncollateralized or partially collateralized derivatives, and in collateralized derivatives where the terms of the agreement do not permit the reuse of the collateral received. The Firm's implementation of FVA reflects the inclusion of FVA in the pricing and valuations by the majority of market participants involved in the Firm's principal exit market for these instruments. In general, FVA reflects a market funding risk premium inherent in the noted derivative instruments. In connection with its implementation of FVA, Morgan Stanley incurred a pre-tax charge of approximately \$468 million, representing a change in accounting estimate, of which \$466 million was reflected as a reduction to Institutional Securities Fixed Income & Commodities sales and trading net revenues.
On December 1, 2014, the Firm's Compensation, Management Development and Succession (CMDS) Committee of the Board of Directors approved an approach for awards of discretionary incentive compensation for the 2014 performance year to be granted in 2015 that would reduce the average deferral of such awards to an approximate baseline of 50%. Additionally, the CMDS Committee approved the acceleration of vesting for certain outstanding deferred cash-based incentive compensation awards. The impact of these actions on compensation and benefits expenses for the Firm and each business segment are as follows: change in 2014 level of deferrals: Firm: \$756 million, ISG: \$610 million, WM: \$66 million, IM: \$80 million and acceleration of prior year cash-based deferred awards: Firm: \$381 million
$(3)$ For the year ended December 31, 2014, the income tax provision / (benefit) from continuing operations included discrete tax benefits of approximately \$2.2 billion. On October 31, 2014, the Firm completed a legal entity restructuring that included a change in tax status of Morgan Stanley Smith Barney Holdings LLC (MSSBH) from a partnership to a corporation. MSSBH is the holding company for the former Wealth Management JV. As a result of this change in tax status, the Firm's effective tax rate from continuing operations for the quarter and full year ended December 31, 2014, include a discrete net tax benefit of approximately \$1.4 billion primarily due to the release of a deferred tax liability which was previously established. The quarter ended September 30, 2014 included a net discrete benefit of \$237 anticipated. Also included in the full year ended December 31, 2014, were discrete tax benefits of approximately \$609 million related to the remeasurement of reserves and related interest based on new information regarding the status of a multi-year tax authority examination. For the year ended December 31, 2013, the income tax provision / (benefit) from continuing operations included discrete tax benefits of \$407 million consisting of \$161 million related to the remeasurement of reserves and related interest based on new information regarding the status of certain tax authority examinations, \$92 million related to the establishment of a deferred tax asset associated with the reorganization of certain non-U.S. legal entities, \$73 million attributable to tax planning strategies to optimize foreign tax credit utilization in anticipation of the repatriation of earnings from certain non-U.S. subsidiaries and \$81 million resulting from a retroactive change in U.S. tax law.
On June 28, 2013, the Firm completed the purchase of the remaining 35% interest in the Morgan Stanley Smith Barney Joint Venture from Citi, $(4)$ increasing the Firm's interest from 65% to 100%. $(5)$
Preferred stock dividend / other includes allocation of earnings to Participating Restricted Stock Units (RSUs). For the twelve months ended December 31, 2013, the Firm recorded a negative adjustment of approximately \$151 million related to the purchase of the remaining interest in the Morgan Stanley Smith Barney Joint Venture. This adjustment negatively impacted the calculation of basic and fully diluted earnings per share.
(6) Pre-tax profit margin percentages represent income from continuing operations before income taxes as a percentage of net revenues.

Page 4:

(1) Reflects the regional view of the Firm's consolidated net revenues, on a managed basis. Further discussion regarding the geographic methodology for net revenues is disclosed in Note 21 to the consolidated financial statements included in the Firm's Annual Report on Form 10-K for the year ended December 31, 2013.
(2) U.S. Bank refers to the Firm's U.S. bank operating subsidiaries Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association and excludes transactions with affiliated entities.
(3) As an Advanced Approach banking organization, the Firm is required to compute risk-based capital ratios using both (i) standardized approaches for calculating credit risk weighted assets ("RWAs") and market risk RWAs (the "Standardized Approach"); and (ii) an advanced internal ratings-based approach for calculating credit risk RWAs, an advanced measurement approach f market risk RWAs calculated under Basel III (the "Advanced Approach"). To implement a provision of the Dodd-Frank Act, U.S. Basel III subjects Advanced Approach banking organizations which have been approved by their regulators to exit the parallel run, such as the Firm, to a permanent "capital floor". In calendar year 2014, the capital floor results in the Firm's capital ratios being the lower of the capital ratios computed under the
Advanced Approach or the U.S. Basel I-based rules as supplemented by t Firm's capital floor is represented by the Advanced Approach. Beginning on January 1, 2015, the capital floor will result in the Firm's ratios being the lower of the capital ratios computed under the Advanced Approach or the Standardized Approach under Basel III. These computations are preliminary estimates as of January 20, 2015 (the date of this release) and could be subject to revision in Morgan Stanley's Annual Report on Form 10-K for the year ended December 31, 2014. The methods for calculating the Firm's risk-based capital ratios will change through 2022 as aspects of the U.S. Basel III final rule are phased in. For information on the calculation of regulatory capital and ratios for prior periods, please refer to Part 2, Item 7 "Regulatory Requirements" in Morgan Stanley's Annual Report on Form 10-K f in Morgan Stanley's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.
(4) The global liquidity reserve, which is held within the bank and non-bank operating subsidiaries, is comprised of highly liquid and diversified cash and cash equivalents and unencumbered securities. Eligible unencumbered securities include U.S. government securities, U.S. agency securities, U.S. agency mortgage-backed securities, non-U.S. government securities and other highly liquid investment grade securities.
The Firm's goodwill and intangible balances are net of allowable mortgage servicing rights deduction. $(5)$
(6) Tangible common equity equals common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.
(7) Beginning in the first quarter of 2014, Tier 1 leverage ratio equals Tier 1 capital divided by adjusted average total assets (which reflects adjustments for disallowed goodwill, transitional intangible assets, certain deferred tax assets, certain financial equity investments, and other adjustments). For more information on the calculation of the Tier 1 leverage ratio for prior periods, please refer to Part 1, Item 2 "Regulatory Requirements" in Morgan Stanley's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.

MORGAN STANLEY End Notes

Page 5:

(1) The Firm's capital estimation and attribution to the business segments are based on the Required Capital framework, an internal capital adequacy measure which considers risk, leverage, potential losses from extreme stress events, and diversification under a going concern capital concept at a point in time. The framework also takes into consideration regulatory capital requirements as well as capital required for organic growth, acquisitions and other business needs. For further discussion of the framework, refer to Part 1, Item 2 "Regulatory Requirements" in Morgan Stanley's Quarterly Report on Form 10-O for the quarter ended September 30, 2014.

Page 6:

(1) During the fourth quarter of 2014, Morgan Stanley incorporated funding valuation adjustments (FVA) into the fair value measurements of over-thecounter uncollateralized or partially collateralized derivatives, and in collateralized derivatives where the terms of the agreement do not permit the reuse of the collateral received. The Firm's implementation of FVA reflects the inclusion of FVA in the pricing and valuations by the majority of market participants involved in the Firm's principal exit market for these instruments. In general, FVA reflects a market funding risk premium inherent in the noted derivative instruments. In connection with its implementation of FVA, Morgan Stanley incurred a pre-tax charge of approximately \$468 million, representing a change in accounting estimate, of which \$466 million was reflected as a reduction to Institutional Securities Fixed Income & Commodities sales and trading net revenues.
(2) In the quarter ended December 31, 2014, the impact of the compensation expense deferral adjustments for the Institutional Securities business segment are as follows: a) change in 2014 level of deferrals: \$610 million and b) acceleration of prior year cash-based deferred awards: \$294 million.
(3) Net income applicable to noncontrolling interests primarily represents the allocation to Mitsubishi UFJ Financial Group, Inc. of Morgan Stanley MUFG Securities Co., Ltd. which the Firm consolidates.
(4) Pre-tax profit margin percentages represent income from continuing operations before income taxes as a percentage of net revenues.

Page 7:

(1) For the periods noted below, sales and trading net revenues included positive (negative) revenue related to DVA as follows: December 31, 2014: Total QTD: \$223 million; Fixed Income & Commodities: \$161 million; Equity: \$62 million
September 30, 2014: Total QTD: \$215 million; Fixed Income & Commodities: \$132 million; Equity: \$83 million December 31, 2013: Total QTD: \$(368) million; Fixed Income & Commodities: \$(285) million; Equity: \$(83) million December 31, 2014: Total YTD: \$651 million; Fixed Income & Commodities: \$419 million; Equity: \$232 million December 31, 2013: Total YTD: \$(681) million; Fixed Income & Commodities: \$(603) million; Equity: \$(78) million
(2) During the fourth quarter of 2014, Morgan Stanley incorporated funding valuation adjustments (FVA) into the fair value measurements of over-thecounter uncollateralized or partially collateralized derivatives, and in collateralized derivatives where the terms of the agreement do not permit the reuse
of the collateral received. The Firm's implementation of FVA refl participants involved in the Firm's principal exit market for these instruments. In general, FVA reflects a market funding risk premium inherent in the noted derivative instruments. In connection with its implementation of FVA, Morgan Stanley incurred a pre-tax charge of approximately \$468 million, representing a change in accounting estimate, of which \$466 million was reflected as a reduction to Institutional Securities Fixed Income & Commodities sales and trading net revenues.
Institutional Securities U.S. Bank refers to the Firm's U.S. bank operating subsidiary Morgan Stanley Bank, N.A.
(4) In addition to primary corporate lending activity, the Institutional Securities business segment engages in other lending activity. These loans include corporate loans purchased in the secondary market, commercial mortgage loans, asset-backed loans and financing extended to equities customers.
$(5)$ VaR represents the loss amount that one would not expect to exceed, on average, more than five times every one hundred trading days in the Firm's trading positions if the portfolio were held constant for a one-day period. Further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology, is disclosed in Part II, Item 7A "Quantitative and K.

Page 8:

(1) In the quarter ended December 31, 2014, the impact of the compensation expense deferral adjustments for the Wealth Management business segment are as follows: a) change in 2014 level of deferrals: \$66 million and b) acceleration of prior year cash-based deferred awards: \$22 million.
$(2)$ On October 31, 2014, the Firm completed a legal entity restructuring that included a change in tax status of Morgan Stanley Smith Barney Holdings LLC (MSSBH) from a partnership to a corporation. MSSBH is the holding company for the former Wealth Management JV. As a result of this change in tax status, the Firm's effective tax rate from continuing operations for the quarter and full year ended December 31, 2014, include a discrete net tax benefit of approximately \$1.4 billion primarily due to the release of a deferred tax liability which was previously established.
$(3)$ On June 28, 2013, the Firm completed the purchase of the remaining 35% interest in the Morgan Stanley Smith Barney Joint Venture from Citi. increasing the Firm's interest from 65% to 100%. For the twelve months ended December 31, 2013, Citi's results related to its interest through June 28, 2013 were reported in net income (loss) applicable to redeemable noncontrolling interests.
(4) Pre-tax profit margin percentages represent income from continuing operations before income taxes as a percentage of net revenues.

Page 9:

(1) Annualized revenue per representative is defined as annualized revenue divided by average representative headcount.
(2) Fee-based client account assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets
Client assets per representative represents total client assets divided by period end representative headcount. $(3)$
(4) Fee-based asset flows include net new fee-based assets, net account transfers, dividends, interest, and client fees and exclude cash management related activity
Wealth Management U.S. Bank refers to the Firm's U.S. bank operating subsidiaries Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, $(5)$ National Association.

Page 10:

(1) The quarters ended December 31, 2014, September 30, 2014 and December 31, 2013 include investment gains (losses) for certain funds included in the

Firm's consolidated financial statements. The limited partnership interests in these gains were reported in net income (loss) applicable to noncontrolling interests. Beginning in the quarter ended June 30, 2014, net revenu fund sponsored by the Firm.

2) In the quarter ended December 31, 2014, the impact of the compensation expense deferral adjustments for the Investment Management business
segment are as follows: a) change in 2014 level of deferrals: \$80 million and b)
(3) Pre-tax profit margin percentages represent income from continuing operations before income taxes as a percentage of net revenues.

MORGAN STANLEY End Notes

Page 11:
(1) Real Estate Investing revenues include gains or losses related to investments held by certain consolidated real estate funds. These gains or losses are offset in net income (loss) applicable to noncontrolling interest. The investment gains (losses) for the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013 are \$11 million, \$17 million and \$48 million, respectively. Beginning in the quarter ended June 30, 2014, net revenues reflect the deconsolidation of certain legal entities associated with a real estate fund sponsored by the Firm.
(2) Net Flows by region [inflow / (outflow)] for the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013 were:
North America: \$3.7 billion, \$1.8 billion and \$(3.2) billion International: \$(0.2) billion, \$5.6 billion and \$7.1 billion
Assets under management or supervision by region for the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013 were: $(3)$ North America: \$250 billion, \$246 billion and \$236 billion International: \$153 billion, \$155 billion and \$141 billion

Page 12:

(1) For the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013, the percentage of Institutional Securities corporate funded loans held at fair value by credit rating was as follows:
% investment grade: 7%, 11% and 50%
% non-investment grade: 93%, 89% and 50%
(2) For the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013, the percentage of Institutional Securities corporate lending commitments held at fair value by credit rating was as follows: - % investment grade: 69%, 67% and 71%
% non-investment grade: 31%, 33% and 29%
$(3)$ On December 31, 2014, September 30, 2014 and December 31, 2013, the "event-driven" portfolio of pipeline commitments and closed deals to noninvestment grade borrowers were \$10.5 billion, \$10.7 billion and \$7.3 billion, respectively.
(4) In addition to primary corporate lending activity, the Institutional Securities business segment engages in other lending activity. These loans include corporate loans purchased in the secondary market, commercial and residential mortgage loans, asset-backed loans and financing extended to equities and commodities customers.
(5) For the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013, Institutional Securities recorded a provision for credit losses (release) of \$12.3 million, \$1.2 million and \$(10.8) million, respectively, related to funded loans and \$8.7 million, \$(15.7) million and \$4.3 million related to unfunded commitments, respectively.
For the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013, Wealth Management recorded a provision for credit losses of \$1.0 million, \$1.0 million and \$1.2, respectively, related to funded loans and there was no material provision recorded related to the unfunded commitments for each of the quarterly periods presented.

Page 13:

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating $(1)$ securities and are included in the computation of EPS pursuant to the two-class method. Restricted Stock Units ("RSUs") that pay dividend equivalents subject to vesting are not deemed participating securities and are included in diluted shares outstanding (if dilutive) under the treasury stock method.
The percentage of weighted basic common shares and participating RSUs to the total weighted average of basic common shares and participating RSUs.
Represents net income from continuing operations, gain (loss) from discontinued operations (after-tax), and net income applicable to Morgan Stanley for the quarter ended December 31, 2014 prior to allocations to participating RSUs. $(4)$
Distributed earnings represent the dividends paid for the quarter ended December 31, 2014. The amount of dividends paid is based upon the number of common shares and participating RSUs outstanding as of the dividend record date. $(5)$
The two-class method assumes all of the earnings for the reporting period are distributed and allocated to the participating RSUs what they would be entitled to based on their contractual rights and obligations of the participating security.
Total income applicable to common shareholders to be allocated to the common shares in calculating basic and diluted EPS for common shares. $(6)$
Total income applicable to common shareholders to be allocated to the participating RSUs reflected as a deduction to the numerator in determining $(7)$ basic and diluted EPS for common shares.
$(8)$ Basic and diluted EPS data are required to be presented only for classes of common stock, as described under the accounting guidance for earnings per share

Page 14:

(1) Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of EPS pursuant to the two-class method. Restricted Stock Units ("RSUs") that pay dividend equivalents subject to vesting are not deemed participating securities and are included in diluted shares outstanding (if dilutive) under the treasury stock method.
The percentage of weighted basic common shares and participating RSUs to the total weighted average of basic common shares and participating RSUs. $(2)$
(3) Represents net income from continuing operations, gain (loss) from discontinued operations (after-tax), and net income applicable to Morgan Stanley for the full year ended December 31, 2014 prior to allocations to participating RSUs.
(4) Distributed earnings represent the dividends paid for the year ended December 31, 2014. The amount of dividends paid is based upon the number of common shares and participating RSUs outstanding as of the dividend record date.
The two-class method assumes all of the earnings for the reporting period are distributed and allocated to the participating RSUs what they would be $(5)$ entitled to based on their contractual rights and obligations of the participating security.
Total income applicable to common shareholders to be allocated to the common shares in calculating basic and diluted EPS for common shares.
Total income applicable to common shareholders to be allocated to the participating RSUs reflected as a deduction to the numerator in determining basic and diluted EPS for common shares.
Basic and diluted EPS data are required to be presented only for classes of common stock, as described under the accounting guidance for earnings per $(8)$ share

$\sim$

MORGAN STANLEY Legal Notice

This Financial Supplement contains financial, statistical and business-related information, as well as business and segment trends.
The information should be read in conjunction with the Firm's fourth quarter earnings pres

and an announced

EX-99.3 4 a51021611ex99_3.htm EXHIBIT 99.3

Exhibit 99.3

Morgan Stanley

Strategic Update

James P. Gorman, Chairman and Chief Executive Officer January 20, 2015

$\overline{2}$

Notice

The information provided herein may include certain non-GAAP financial measures. The reconciliation of such measures to the comparable GAAP figures are included in this presentation or in the Company's most recent Annual Report on Form 10-K, Definitive Proxy Statement, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as applicable, which are available on www.morganstanley.com.

This presentation may contain forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management's current estimates, projections, expectations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. The Company does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of forward-looking statements. For a discussion of risks and uncertainties that may affect the future results of the Company, please see the Company's most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as applicable, which are available on www.morganstanley.com. This presentation is not an offer to buy or sell any security.

Please note this presentation is available at www.morganstanley.com.

Morgan Stanley

Morgan Stanley: Looking Forward

. Multi-year transformation of business mix has led to earnings consistency and balance sheet strength
. Beyond core businesses, Morgan Stanley benefitting from U.S. Bank(1) upside, lower funding costs and returning incremental capital

2014 Checklist: Mark to Market (1)

2015 Roll-Forward: Realizing Benefit of Strategic Initiatives

Morgan Stanley

$\overline{1}$

Ongoing Wealth Management Upside Through
Additional Margin Improvement

Pre-tax Margin Target	Wealth Management Pre-tax Margin ^(1),(2)
Includes: • Revenue and operating	30%
leverage from deposit deployment	25%					$22 - 25%$
• Continued investments in	20%			1896	2000
leading technology platform	15%		110 ₀
Upside Beyond Target: • Higher interest rates	10%	1000
· Greater equity market levels . Secular trend toward fee-based	$5\%$
managed accounts	$0\%$	2011	2012	2013	2014	4Q15

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Morgan Stanley

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$\overline{7}$

Additional Drivers of Wealth Management Returns

· Benefitting from focus on high net worth and ultra-high net worth client segments
. These segments have the broadest, most complex financial planning and investing requirements - consistent with Morgan Stanley's strengths

Morgan Stanley Natrative institutions

NII Upside Driven by Ongoing Execution of U.S. Bank $\overline{2}$ Strategy In Wealth Management & Institutional Securities

Institutional Securities Positive Outlook, Benefitting From Leading Advisory and Equity Sales & Trading Franchises

3 Drive ROE > 10% in Fixed Income & Commodities

Fixed Income	Commodities
· Implemented centralized management of resources across Fixed Income - Reduced balance sheet - Reduced risk-weighted assets - Reduced non-compensation expenses · Maintained normalized ⁽¹⁾ ROEs of >10% in our areas of strength in 2014 - Securitized Products - Credit Corporates . In progress: Optimization of Interest Rates returns and roll-down of Structured Credit RWAs	• Sold / Divested - TransMontaigne Inc. - CanTerm Canadian Terminals Inc. . Committed to selling - Global Oil Merchanting · Integrating remaining businesses into Sales and Trading - North American Power & Gas - EMEA & Asia-Pacific Power & Gas - Oil Facilitation - Metals
Canital ^(2),(3)
. Capital efficiency with ongoing RWA reductions: \$210Bn at YE 2013, \$188Bn at YE 2014, \$180Bn target for YE 2015 . Additional capital opportunity through passive roll-down of \$25Bn of RWAs by year-end 2018
#ESPERATOR AMERICAN ARRESTS AND ARRESTS AND ARRESTS OF A RESIDENCE OF A RESIDENCE OF A RESIDENCE OF A 931113 11 159639 Line 3 (5) visa lexicenses and all costopicour yiel, segment and cusiness show, "donntalized RC Biller and result value of iteraery arive contracts are clude and movements, three Schroany elokalities aurea de spressos se rerambeland legal sprograda mi egady resident a lingi paga ang arabis brasa related matreta . Pikedi nodhre norma loes RC Bel Morgan Stanley ravenuas in crista extains y recortes in investment akkinegotet saaatsiunderime üliği Baser (HiAdvianded Agotbach Kina) vilesi This edilmiste sixe kif 4014 and Hos Torande 10 The arts nimetics these rangess in 2015 and 2012 how be modated by external rapport rails to be a pressure than the modern than a start for modern and may et consituing and future requisitions

Reduction and Optimization of Risk-Weighted Assets in $\overline{3}$ Fixed Income and Commodities

. On track to achieve year end 2015 target of <\$180Bn
. Optimize ~\$25Bn of RWAs beyond \$180Bn target, primarily passive roll-down
. RWAs to be redeployed to maximize returns, either within Fixed Income or across the broader Institutional Securities franchise

Morgan Stanley

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Tailwind from Lower Funding Costs $\overline{\mathbf{4}}$

. Meaningful reduction in funding costs due to spread tightening and roll-off of older more expensive debt

$\overline{5}$

Ongoing Focus on Expense Management, Resulting in Greater Efficiency

Returning Capital - Our Philosophy $6\phantom{a}$

Systematic Progress to Achieving Return on Equity of 10% and Higher

Targeted Return on Average Common Equity (ROE) excl. DVA⁽¹⁾

Morgan Stanley 1. See side 18 for socional information leated to the calculation of the Changial methos cresented on this cage

End Notes

These cores refer to the financial metrics presented on Stide 15

(1). The attainment of these results may be impacted by external factors that cannot be predicted at this time, incruding macroecenomic and market conditions and future regularities
(2) Improved interest rate environment reters to a future environment usere interest rates are migher than incorporated by the forward durve as of vear-end 2014
a3) Based on current expectations, crianges in tegal results or regulation could materially impact expenses. Expense reductions (3) and the street reductions (3) and the distinctional Securities and Wealth, Materials are r management partially offset by relinvestment in certain areas.
1. Cormalized legal expenses are calculated by excluding elevated legal expenses versus 2012 (evels from non-compensation)
  Excenses (Ibrovalized legal expenses represent a non-GAAP financial measure that the company consi
in cases of every cooperative productions and person specifically excluding the impact of CVA both the numerator and the determine the restor on consolidated average common aguity excluding the impact of CVA both the numer applicable to Morgan. Stanler, less preferred dividends and DVA as a percentage of average common equity excluding DVA.
(6) Capital actions are subject to regulatory approval.

Morgan Stanley

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Morgan Stanley

Strategic Update

James P. Gorman, Chairman and Chief Executive Officer January 20, 2015

$\sim$ $\epsilon$

AI assistant

MORGAN STANLEY — Earnings Release 2014

29766_10-k_2014-12-31_43b605bd-49c3-422d-91eb-32a43489a0fb.pdf

8-K 1 a51021611.htm MORGAN STANLEY 8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Morgan Stanley

Item 2.02. Results of Operations and Financial Condition

Item 7.01. Regulation FD disclosure

Item 9.01. Financial Statements and Exhibits

SIGNATURE

Morgan Stanley

Fourth Quarter Business Overview

FOURTH QUARTER RESULTS

INSTITUTIONAL SECURITIES

WEALTH MANAGEMENT

INVESTMENT MANAGEMENT

FULL YEAR RESULTS

INSTITUTIONAL SECURITIES

WEALTH MANAGEMENT

INVESTMENT MANAGEMENT

CAPITAL

OTHER MATTERS

(See Attached Schedules)

MORGAN STANLEY Quarterly Financial Summary(unaudited, dollars in millions, except for per share data)

MORGAN STANLEY Quarterly Consolidated Income Statement Information(unaudited, dollars in millions)

MORGAN STANLEY Quarterly Earnings Per ShareQuarterly Earnings Per Share(unaudited, dollars in millions, except for per share data)

MORGAN STANLEY Financial Supplement - 4Q 2014 Table of Contents

Page $#$

MORGAN STANLEY Quarterly Financial Summary(1) (unaudited, dollars in millions)

MORGAN STANLEY Quarterly Consolidated Income Statement Information (unaudited, dollars in millions)

MORGAN STANLEYQuarterly Earnings Per Share(unaudited, dollars in millions, except for per share data)

MORGAN STANLEY Quarterly Consolidated Financial Information and Statistical Data(unaudited)

MORGAN STANLEY Quarterly Consolidated Financial Information and Statistical Data (unaudited, dollars in billions)

MORGAN STANLEY Quarterly Institutional Securities Income Statement Information(unaudited, dollars in millions)

MORGAN STANLEYQuarterly Financial Information and Statistical DataInstitutional Securities (unaudited, dollars in millions)

MORGAN STANLEY Quarterly Wealth Management Income Statement Information(unaudited, dollars in millions)

MORGAN STANLEYQuarterly Financial Information and Statistical DataWealth Management (unaudited)

MORGAN STANLEY Quarterly Investment Management Income Statement Information(unaudited, dollars in millions)

MORGAN STANLEYQuarterly Financial Information and Statistical DataInvestment Management (unaudited)

MORGAN STANLEYQuarterly Financial InformationLoans and Lending Commitments(unaudited, dollars in billions)

MORGAN STANLEYEarnings Per Share Calculation Under Two-Class MethodThree Months Ended December 31, 2014(unaudited, in millions, except for per share data)

This page represents an addendum to the 4Q 2014 Financial Supplement, Appendix II

MORGAN STANLEYEarnings Per Share Calculation Under Two-Class MethodTwelve Months Ended December 31, 2014unaudited, in millions, except for per share data)

MORGAN STANLEY End Notes

Page 1:

Page 2:

MORGAN STANLEY End Notes

Page 5:

Page 6:

Page 7:

Page 8:

Page 9:

Page 10:

MORGAN STANLEY End Notes

Page 12:

Page 13:

Page 14:

Strategic Update

Notice

Morgan Stanley: Looking Forward

2014 Checklist: Mark to Market (1)

2015 Roll-Forward: Realizing Benefit of Strategic Initiatives

Ongoing Wealth Management Upside ThroughAdditional Margin Improvement

Morgan Stanley

Additional Drivers of Wealth Management Returns

NII Upside Driven by Ongoing Execution of U.S. Bank $\overline{2}$ Strategy In Wealth Management & Institutional Securities

Institutional Securities Positive Outlook, Benefitting From Leading Advisory and Equity Sales & Trading Franchises

3 Drive ROE > 10% in Fixed Income & Commodities

Reduction and Optimization of Risk-Weighted Assets in $\overline{3}$ Fixed Income and Commodities

Morgan Stanley

Tailwind from Lower Funding Costs $\overline{\mathbf{4}}$

Ongoing Focus on Expense Management, Resulting in Greater Efficiency

Returning Capital - Our Philosophy $6\phantom{a}$

Systematic Progress to Achieving Return on Equity of 10% and Higher

Targeted Return on Average Common Equity (ROE) excl. DVA(1)

End Notes

Morgan Stanley

MORGAN STANLEY Earnings Release 2014

MORGAN STANLEY Quarterly Financial Summary
(unaudited, dollars in millions, except for per share data)

MORGAN STANLEY Quarterly Consolidated Income Statement Information
(unaudited, dollars in millions)

MORGAN STANLEY Quarterly Earnings Per Share
Quarterly Earnings Per Share
(unaudited, dollars in millions, except for per share data)

MORGAN STANLEY Quarterly Financial Summary⁽¹⁾ (unaudited, dollars in millions)

MORGAN STANLEY
Quarterly Earnings Per Share
(unaudited, dollars in millions, except for per share data)

MORGAN STANLEY Quarterly Consolidated Financial Information and Statistical Data
(unaudited)

MORGAN STANLEY Quarterly Institutional Securities Income Statement Information
(unaudited, dollars in millions)

MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Institutional Securities (unaudited, dollars in millions)

MORGAN STANLEY Quarterly Wealth Management Income Statement Information
(unaudited, dollars in millions)

MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Wealth Management (unaudited)

MORGAN STANLEY Quarterly Investment Management Income Statement Information
(unaudited, dollars in millions)

MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Investment Management (unaudited)

MORGAN STANLEY
Quarterly Financial Information
Loans and Lending Commitments
(unaudited, dollars in billions)

MORGAN STANLEY
Earnings Per Share Calculation Under Two-Class Method
Three Months Ended December 31, 2014
(unaudited, in millions, except for per share data)

MORGAN STANLEY
Earnings Per Share Calculation Under Two-Class Method
Twelve Months Ended December 31, 2014
unaudited, in millions, except for per share data)

Ongoing Wealth Management Upside Through
Additional Margin Improvement

Targeted Return on Average Common Equity (ROE) excl. DVA⁽¹⁾