EX-99.2 3 a6470732ex99_2.htm EXHIBIT 99.2 a6470732ex99_2.htm
Exhibit 99.2
MORGAN STANLEY
Financial Supplement - 3Q 2010
Table of Contents
 
Page #
      
         
 
1
  
…………….
Quarterly Financial Summary
 
2
  
…………….
Quarterly Consolidated Income Statement Information
 
3 - 4
  
…………….
Quarterly Consolidated Financial Information and Statistical Data
 
5
  
…………….
Quarterly Institutional Securities Income Statement Information
 
6 - 7
  
…………….
Quarterly Institutional Securities Financial Information and Statistical Data
 
8
  
…………….
Quarterly Global Wealth Management Group Income Statement Information
 
9
  
…………….
Quarterly Global Wealth Management Group Financial Information and Statistical Data
 
10
  
…………….
Quarterly Asset Management Income Statement Information
 
11
  
…………….
Quarterly Asset Management Financial Information and Statistical Data
 
12
  
…………….
Earnings Per Share Appendix I
 
13
  
…………….
Earnings Per Share Appendix II
 
14 - 15
  
…………….
End Notes
 
16
  
…………….
Legal Notice
 
 
 
 
 
MORGAN STANLEY
Quarterly Financial Summary
(unaudited, dollars in millions)
                                                 
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
  
Nine Months Ended
    
Percentage
   
Sept 30, 2010
    
June 30, 2010
    
Sept 30, 2009
    
June 30, 2010
  
Sept 30, 2009
  
Sept 30, 2010
    
Sept 30, 2009
    
Change
Net revenues
                                                
Institutional Securities
   $ 2,894     $ 4,505     $ 5,018       (36 %)     (42 %)   $ 12,738     $ 9,620       32 %
Global Wealth Management Group
     3,104       3,074       3,029       1 %     2 %     9,283       6,251       49 %
Asset Management
     802       410       447       96 %     79 %     1,865       827       126 %
Intersegment Eliminations
     (21 )     (36 )     (26 )     42 %     19 %     (81 )     (102 )     21 %
Consolidated net revenues
   $ 6,779     $ 7,953     $ 8,468       (15 %)     (20 %)   $ 23,805     $ 16,596       43 %
                                                                 
Income / (loss) from continuing operations before tax
                                                                
Institutional Securities
   $ 240     $ 1,587     $ 1,339       (85 %)     (82 %)   $ 3,894     $ 618       *  
Global Wealth Management Group
     281       207       280       36 %     --       766       328       134 %
Asset Management
     279       (86 )     (124 )     *       *       367       (616 )     *  
Intersegment Eliminations
     0       (13 )     (2 )     *       *       (15 )     (9 )     (67 %)
Consolidated income / (loss) from continuing operations before tax
   $ 800     $ 1,695     $ 1,493       (53 %)     (46 %)   $ 5,012     $ 321       *  
                                                                 
Income / (loss) applicable to Morgan Stanley
                                                                
Institutional Securities
   $ 98     $ 1,380     $ 898       (93 %)     (89 %)   $ 3,210     $ 969       *  
Global Wealth Management Group
     144       110       105       31 %     37 %     353       254       39 %
Asset Management
     71       (44 )     (66 )     *       *       42       (404 )     *  
Intersegment Eliminations
     0       (11 )     (1 )     *       *       (12 )     (5 )     (140 %)
Consolidated income / (loss) applicable to Morgan Stanley
   $ 313     $ 1,435     $ 936       (78 %)     (67 %)   $ 3,593     $ 814       *  
                                                                 
Earnings / (loss) applicable to Morgan Stanley common shareholders
   $ (91 )   $ 1,578     $ 498       *       *     $ 2,971     $ (1,301 )     *  
                                                                 
Earnings per basic share:
                                                                
Income from continuing operations
   $ 0.07     $ 0.84     $ 0.51       (92 %)     (86 %)   $ 2.04     $ (1.06 )     *  
Discontinued operations
   $ (0.14 )   $ 0.36     $ (0.12 )     *       (17 %)   $ 0.18     $ (0.07 )     *  
Earnings per basic share
   $ (0.07 )   $ 1.20     $ 0.39       *       *     $ 2.22     $ (1.13 )     *  
                                                                 
Earnings per diluted share:
                                                                
Income from continuing operations
   $ 0.05     $ 0.80     $ 0.50       (94 %)     (90 %)   $ 1.98     $ (1.06 )     *  
Discontinued operations
   $ (0.12 )   $ 0.29     $ (0.12 )     *       --     $ 0.17     $ (0.07 )     *  
Earnings per diluted share
   $ (0.07 )   $ 1.09     $ 0.38       *       *     $ 2.15     $ (1.13 )     *  
                                                                 
 
Notes:
 -
Results include Morgan Stanley Smith Barney (MSSB) effective from May 31, 2009.
  - 
Results for the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009 include positive / (negative) revenue of $(0.7) billion, $0.7 billion and $(0.8) billion, respectively, related to the movement in Morgan Stanley's credit spreads on certain long-term debt.
  - 
Income / (loss) applicable to Morgan Stanley represents consolidated income / (loss) from continuing operations applicable to Morgan Stanley before gain / (loss) from discontinued operations.
  - 
For the quarter ended September 30, 2010, discontinued operations included a loss of $229 million due to a write-down and related costs associated with the planned disposition of Revel Entertainment Group, LLC (Revel).  For the quarter ended June 30, 2010, discontinued operations primarily included the operating results of the retail asset management business including Van Kampen and an after-tax gain of approximately $514 million related to the sale of this business.  For the quarter ended March 31, 2010, discontinued operations included a loss of $932 million (reported in Institutional Securities) on the disposition of Revel, a gain of $775 million (not reported in a business segment) related to a legal settlement with Discover Financial Services and the operating results of the retail asset management business, including Van Kampen (reported in Asset Management).
  - 
Summation of the quarters' earnings per common share may not equal the year-to-date amounts due to the averaging effect of the number of shares and share equivalents throughout the year.
  - 
Refer to Legal Notice on page 16.
 
 
1
 
 
MORGAN STANLEY
Quarterly Consolidated Income Statement Information
(unaudited, dollars in millions)
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
  
Nine Months Ended
    
Percentage
   
Sept 30, 2010
    
June 30, 2010
    
Sept 30, 2009
    
June 30, 2010
  
Sept 30, 2009
  
Sept 30, 2010
    
Sept 30, 2009
    
Change
Revenues:
                                                
Investment banking
   $ 1,221     $ 1,080     $ 1,208       13 %     1 %   $ 3,361     $ 3,347       --  
Principal transactions:
                                                                
Trading
     1,439       3,353       3,399       (57 %)     (58 %)     8,552       6,536       31 %
Investments
     820       (52 )     95       *       *       1,137       (1,180 )     *  
Commissions
     1,068       1,307       1,244       (18 %)     (14 %)     3,636       2,986       22 %
Asset management, distribution and admin. fees
     1,940       1,974       1,886       (2 %)     3 %     5,877       3,910       50 %
Other
     186       151       139       23 %     34 %     630       775       (19 %)
Total non-interest revenues
     6,674       7,813       7,971       (15 %)     (16 %)     23,193       16,374       42 %
                                                                 
Interest income
     1,859       1,742       1,851       7 %     --       5,334       5,722       (7 %)
Interest expense
     1,754       1,602       1,354       9 %     30 %     4,722       5,500       (14 %)
Net interest
     105       140       497       (25 %)     (79 %)     612       222       176 %
Net revenues
     6,779       7,953       8,468       (15 %)     (20 %)     23,805       16,596       43 %
                                                                 
Non-interest expenses:
                                                                
Compensation and benefits
     3,686       3,885       4,896       (5 %)     (25 %)     11,987       10,673       12 %
                                                                 
Non-compensation expenses:
                                                                
Occupancy and equipment
     401       400       419       --       (4 %)     1,190       1,126       6 %
Brokerage, clearing and exchange fees
     332       371       285       (11 %)     16 %     1,051       800       31 %
Information processing and communications
     412       416       356       (1 %)     16 %     1,223       951       29 %
Marketing and business development
     134       153       118       (12 %)     14 %     421       348       21 %
Professional services
     460       496       381       (7 %)     21 %     1,351       1,068       26 %
Other
     554       537       520       3 %     7 %     1,570       1,309       20 %
Total non-compensation expenses 
     2,293       2,373       2,079       (3 %)     10 %     6,806       5,602       21 %
                                                                 
Total non-interest expenses
     5,979       6,258       6,975       (4 %)     (14 %)     18,793       16,275       15 %
                                                                 
Income / (loss) from continuing operations before taxes
     800       1,695       1,493       (53 %)     (46 %)     5,012       321       *  
Income tax provision / (benefit) from continuing operations
     (23 )     236       521       *       *       650       (384 )     *  
Income / (loss) from continuing operations
     823       1,459       972       (44 %)     (15 %)     4,362       705       *  
Gain / (loss) from discontinued operations after tax
     (182 )     525       (179 )     *       (2 %)     274       (69 )     *  
Net income / (loss)
   $ 641     $ 1,984     $ 793       (68 %)     (19 %)   $ 4,636     $ 636       *  
Net income / (loss) applicable to non-controlling interests
     510       24       36       *       *       769       (93 )     *  
Net income / (loss) applicable to Morgan Stanley
     131       1,960       757       (93 %)     (83 %)     3,867       729       *  
Earnings / (loss) applicable to Morgan Stanley common shareholders
   $ (91 )   $ 1,578     $ 498       *       *     $ 2,971     $ (1,301 )     *  
 
                                                                
Amounts applicable to Morgan Stanley:
                                                                
Income / (loss) from continuing operations
     313       1,435       936       (78 %)     (67 %)     3,593       814       *  
Gain / (loss) from discontinued operations after tax
     (182 )     525       (179 )     *       (2 %)     274       (85 )     *  
Net income / (loss) applicable to Morgan Stanley
   $ 131     $ 1,960     $ 757       (93 %)     (83 %)   $ 3,867     $ 729       *  
                                                                 
Pre-tax profit margin
     12 %     21 %     18 %                     21 %     2 %        
Compensation and benefits as a % of net revenues
     54 %     49 %     58 %                     50 %     64 %        
Non-compensation expenses as a % of net revenues
     34 %     30 %     25 %                     29 %     34 %        
Effective tax rate from continuing operations
     *       13.9 %     34.9 %                     13.0 %     *          
                                                                 
 
Notes:
 - 
Results include MSSB effective from May 31, 2009.
  - 
Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance.  Percentages represent income from continuing operations before income taxes as a percentage of net revenues.
  - 
The quarter ended September 30, 2010 included a tax gain of $176 million associated with the repatriation of non-U.S. earnings at a cost lower than originally estimated. Excluding the discrete tax gain, the effective tax rate for the quarter would have been 19.1%.
  - 
The quarter ended June 30, 2010 included a discrete tax benefit of $345 million related to the remeasurement of tax reserves based on the status of federal and state tax examinations. Excluding this benefit, the effective tax rate for the quarter would have been 34.3%.
  - 
Refer to Legal Notice on page 16.
 
 
2
 
MORGAN STANLEY
  
Quarterly Consolidated Financial Information and Statistical Data
  
(unaudited)
  
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
  
Nine Months Ended
     Percentage
   
Sept 30, 2010
  
June 30, 2010
    
Sept 30, 2009
    
June 30, 2010
  
Sept 30, 2009
  
Sept 30, 2010
    
Sept 30, 2009
    
Change
Morgan Stanley
                                                
                                                 
Regional revenue (1)
                                                
Americas
   $ 4,777     $ 5,663     $ 6,142       (16 %)     (22 %)   $ 16,639     $ 13,254       26 %
EMEA (Europe, Middle East, Africa)
     1,001       1,720       1,660       (42 %)     (40 %)     4,729       1,760       169 %
Asia
     1,001       570       666       76 %     50 %     2,437       1,582       54 %
Consolidated net revenues
   $ 6,779     $ 7,953     $ 8,468       (15 %)     (20 %)   $ 23,805     $ 16,596       43 %
                                                                 
Worldwide employees
     62,864       61,958       60,800       1 %     3 %                        
Total assets
   $ 841,398     $ 809,456     $ 769,503       4 %     9 %                        
Firmwide Deposits
     61,202       61,368       62,415       --       (2 %)                        
                                                                 
Consolidated assets under management or supervision (billions):
                                                  
Asset Management
     273       251       250       9 %     9 %                        
Global Wealth Management
     449       403       363       11 %     24 %                        
Total
     722       654       613       10 %     18 %                        
                                                                 
Common equity
     47,279       41,415       36,752       14 %     29 %                        
Preferred equity
     9,597       9,597       9,597       --       --                          
Morgan Stanley shareholders' equity
     56,876       51,012       46,349       11 %     23 %                        
Junior subordinated debt issued to capital trusts
     4,822       10,508       10,701       (54 %)     (55 %)                        
Less: Goodwill and intangible assets (2)
     (7,091 )     (7,148 )     (7,902 )     1 %     10 %                        
Tangible Morgan Stanley shareholders' equity
   $ 54,607     $ 54,372     $ 49,148       --       11 %                        
Tangible common equity
   $ 40,188     $ 34,267     $ 28,850       17 %     39 %                        
                                                                 
Leverage Ratio
     15.4 x     14.9 x     15.7 x                                        
Aggregate trading and non-trading Value-at-Risk (pre-tax) (3)
   $ 189     $ 164     $ 168                                          
                                                                 
Average common shares outstanding (000's)
                                                                
Basic
     1,377,230       1,317,686       1,294,298       5 %     6 %                        
Diluted
     1,443,101       1,748,209       1,300,070       (17 %)     11 %                        
Period end common shares outstanding (000's)
     1,512,990       1,397,007       1,358,901       8 %     11 %                        
                                                                 
Return on average common equity
                                                                
from continuing operations
     0.8 %     12.1 %     7.8 %                                        
Return on average common equity
     *       17.4 %     5.8 %                                        
                                                                 
Book value per common share (4)
   $ 31.25     $ 29.65     $ 27.05       5 %     16 %                        
Tangible book value per common share
   $ 26.56     $ 24.53     $ 21.23       8 %     25 %                        
                                                                 
 
Notes:
 - 
All data presented in millions except ratios, book values and number of employees.
  - 
Results include MSSB effective from May 31, 2009.
  - 
The number of worldwide employees for all periods has been recast to exclude employees of the retail asset management business, including Van Kampen.
  - 
Goodwill and intangible assets exclude non-controlling interests and reflect the Firm's share of MSSB's goodwill and intangible assets.
  - 
Tangible common equity is a non-GAAP measure that the Firm considers to be a useful measure that the Firm and investors use to assess capital adequacy.  Tangible common equity equals common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.
  - 
Leverage ratio is a non-GAAP measure that the Firm considers to be a useful measure that the Firm and investors use to assess capital adequacy.  Leverage ratio equals total assets divided by tangible Morgan Stanley shareholders' equity.
  - 
Book value per common share equals common equity divided by period end common shares outstanding.
  - 
Tangible book value per common share is a non-GAAP measure that the Firm considers to be a useful measure that the Firm and investors use to assess capital adequacy.  Tangible book value per common share equals tangible common equity divided by period end common shares outstanding.
  - 
Tangible MS shareholders' equity is a non-GAAP measure that the Firm considers to be a useful measure that the Firm and investors use to assess capital adequacy.
  - 
Refer to page 12 for the components of average diluted common shares outstanding.
  - 
Refer to End Notes on pages 14-15 and Legal Notice on page 16.
 
 
3
 
MORGAN STANLEY
  
Quarterly Consolidated Financial Information and Statistical Data
  
(unaudited)
  
                                                       
                                                       
                                                       
   
Quarter Ended (Billions)
  
   
Sept 30, 2010
    
June 30, 2010
    
Mar 31, 2010
  
   
Average tier 1
capital (1)
 
  
Average common
equity (1)
 
  
Return on
average
common equity
    
Average tier 1
capital (1)
    
Average common
equity (1)
    
Return on
average
common equity
    
Average tier 1
capital (1)
    
Average common
equity (1)
    
Return on
average
common equity
  
Institutional Securities
   $ 26.2     $ 17.2       *     $ 26.3     $ 17.5       30%     $ 24.9     $ 17.3       39%  
Global Wealth Management Group
     2.5       6.6       8%       3.0       6.8       6%       3.0       6.9       5%  
Asset Management
     2.4       1.9       13%       2.0       1.7       *       2.2       2.1       2%  
Parent capital
     22.6       18.4               20.2       13.6               18.4       11.3          
Total - continuing operations
     53.7       44.1       1%       51.5       39.6       12%       48.5       37.6       17%  
Discontinued operations
     0.1       0.1               0.2       0.4               0.2       0.5          
Firm
   $ 53.8     $ 44.2       *     $ 51.7     $ 40.0       17%     $ 48.7     $ 38.1       16%  
                                                                         
                                                                         
   
Nine Months Ended (Billions)
                                                  
   
Sept 30, 2010
                                                  
   
Average tier 1
capital (1)
 
  
Average common
equity (1)
 
  
Return on
average
common equity
                                                  
Institutional Securities
   $ 25.8     $ 17.3       23%                                                  
Global Wealth Management Group
     2.8       6.8       6%                                                  
Asset Management
     2.2       1.9       1%                                                  
Parent capital
     20.2       14.4                                                          
Total - continuing operations
     51.0       40.4       10%                                                  
Discontinued operations
     0.2       0.3                                                          
Firm
   $ 51.2     $ 40.7       10%                                                  
                                                                         
 
Notes: - 
Excluding the effect of the discrete tax benefits in the quarters ended June 30, 2010 and March 31, 2010, the return on average common equity for Institutional Securities would have been 22% and 30%, respectively.
  - 
Beginning with the quarter ended June 30, 2010, the Firm's capital estimate is based on the Required Capital framework, an internal capital adequacy measure.  The quarter ended March 31, 2010 has been recast to conform to the current framework.  Quarterly data for 2009 has not been recast.
  - 
Refer to End Notes on pages 14-15 and Legal Notice on page 16.
 
 
4
 
MORGAN STANLEY
  
Quarterly Institutional Securities Income Statement Information
  
(unaudited, dollars in millions)
  
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
  
Nine Months Ended
    
Percentage
   
Sept 30, 2010
    
June 30, 2010
    
Sept 30, 2009
    
June 30, 2010
  
Sept 30, 2009
  
Sept 30, 2010
    
Sept 30, 2009
    
Change
Revenues:
                                                
Investment banking
   $ 1,008     $ 885     $ 1,038       14 %     (3 %)   $ 2,780     $ 2,975       (7 %)
Principal transactions:
                                                                
Trading
     1,088       3,116       3,076       (65 %)     (65 %)     7,624       5,752       33 %
Investments
     387       (68 )     41       *       *       493       (933 )     *  
Commissions
     504       616       533       (18 %)     (5 %)     1,701       1,609       6 %
Asset management, distribution and admin. fees
     15       39       29       (62 %)     (48 %)     80       74       8 %
Other
     69       43       76       60 %     (9 %)     253       572       (56 %)
Total non-interest revenues
     3,071       4,631       4,793       (34 %)     (36 %)     12,931       10,049       29 %
                                                                 
Interest income
     1,546       1,354       1,525       14 %     1 %     4,293       4,910       (13 %)
Interest expense
     1,723       1,480       1,300       16 %     33 %     4,486       5,339       (16 %)
Net interest
     (177 )     (126 )     225       (40 %)     *       (193 )     (429 )     55 %
Net revenues
     2,894       4,505       5,018       (36 %)     (42 %)     12,738       9,620       32 %
                                                                 
Compensation and benefits 
     1,491       1,636       2,582       (9 %)     (42 %)     5,296       5,727       (8 %)
Non-compensation expenses
     1,163       1,282       1,097       (9 %)     6 %     3,548       3,275       8 %
Total non-interest expenses
     2,654       2,918       3,679       (9 %)     (28 %)     8,844       9,002       (2 %)
                                                                 
                                                                 
Income / (loss) from continuing operations before taxes
     240       1,587       1,339       (85 %)     (82 %)     3,894       618       *  
Income tax provision / (benefit) from continuing operations
     (131 )     216       426       *       *       416       (340 )     *  
Income / (loss) from continuing operations
     371       1,371       913       (73 %)     (59 %)     3,478       958       *  
Gain / (loss) from discontinued operations after tax
     (201 )     (23 )     (41 )     *       *       (1,161 )     253       *  
Net income / (loss)
     170       1,348       872       (87 %)     (81 %)     2,317       1,211       91 %
Net income / (loss) applicable to non-controlling interests
     273       (9 )     15       *       *       268       5       *  
Net income / (loss) applicable to Morgan Stanley
   $ (103 )   $ 1,357     $ 857       *       *     $ 2,049     $ 1,206       70 %
                                                                 
Amounts applicable to Morgan Stanley:
                                                                
Income / (loss) from continuing operations
     98       1,380       898       (93 %)     (89 %)     3,210       969       *  
Gain / (loss) from discontinued operations after tax
     (201 )     (23 )     (41 )     *       *       (1,161 )     237       *  
Net income / (loss) applicable to Morgan Stanley
   $ (103 )   $ 1,357     $ 857       *       *     $ 2,049     $ 1,206       70 %
                                                                 
Return on average common equity
                                                                
from continuing operations
     *       30 %     N/ A                      23 %     N/ A         
Pre-tax profit margin
     8 %     35 %     27 %                     31 %     6 %        
Compensation and benefits as a % of net revenues
     52 %     36 %     52 %                     42 %     60 %        
                                                                 
 
Notes:
 - 
Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance. Percentages represent income from continuing operations before income taxes as a percentage of net revenues.
  - 
For the quarter ended September 30, 2010, discontinued operations included a loss of $229 million due to a write-down and related costs associated with the planned disposition of Revel.
  - 
Beginning with the quarter ended June 30, 2010, the Firm's estimation of segment capital is based on the Required Capital framework, an internal capital adequacy measure.  Segment capital for the quarter ended March 31, 2010 has been recast to conform to this framework.  Quarterly segment capital for 2009, however, has not been recast under this framework.  As a result, the business segment's return on average common equity from continuing operations for the quarter and nine months ended September 30, 2009 is not available.
  - 
Refer to Legal Notice on page 16.
 
 
5
 
MORGAN STANLEY  
Quarterly Financial Information and Statistical Data  
Institutional Securities  
(unaudited, dollars in millions)  
                                                 
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
  
Nine Months Ended
     Percentage
   
Sept 30, 2010
    
June 30, 2010
    
Sept 30, 2009
    
June 30, 2010
  
Sept 30, 2009
  
Sept 30, 2010
    
Sept 30, 2009
    
Change
                                                 
Investment Banking
                                                
Advisory revenue
   $ 371     $ 288     $ 279       29 %     33 %   $ 986     $ 958       3 %
Underwriting revenue
                                                                
Equity
     260       269       457       (3 %)     (43 %)     793       1,068       (26 %)
Fixed income
     377       328       302       15 %     25 %     1,001       949       5 %
Total underwriting revenue
   $ 637     $ 597     $ 759       7 %     (16 %)   $ 1,794     $ 2,017       (11 %)
                                                                 
Total investment banking revenue
   $ 1,008     $ 885     $ 1,038       14 %     (3 %)   $ 2,780     $ 2,975       (7 %)
                                                                 
Sales & Trading
                                                                
Equity
   $ 925     $ 1,415     $ 1,186       (35 %)     (22 %)   $ 3,759     $ 2,916       29 %
Fixed income
     846       2,332       2,009       (64 %)     (58 %)     5,896       4,190       41 %
Other
     (341 )     (102 )     668       *       *       (443 )     (100 )     *  
Total sales & trading net revenue
   $ 1,430     $ 3,645     $ 3,863       (61 %)     (63 %)   $ 9,212     $ 7,006       31 %
                                                                 
                                                                 
Average Daily 95% / One-Day Value-at-Risk ("VaR") (1)
                                                                
Primary Market Risk Category ($ millions, pre-tax)
                                                                
Interest rate and credit spread
   $ 137     $ 132     $ 124                                          
Equity price
   $ 28     $ 29     $ 19                                          
Foreign exchange rate
   $ 18     $ 26     $ 23                                          
Commodity price
   $ 32     $ 29     $ 25                                          
                                                                 
Trading VaR
   $ 142     $ 139     $ 137                                          
                                                                 
 
Note:
Refer to End Notes on pages 14-15 and Legal Notice on page 16.
 
 
6
 
MORGAN STANLEY
  
Quarterly Financial Information and Statistical Data
  
Institutional Securities - Corporate Lending
  
(unaudited, dollars in billions)
  
             
   
Quarter Ended
    
Percentage Change From:
   
Sept 30, 2010
    
June 30, 2010
    
Sept 30, 2009
    
June 30, 2010
  
Sept 30, 2009
                               
                               
Corporate funded loans
                              
Investment grade
   $ 4.6     $ 5.1     $ 6.7       (10 %)     (31 %)
Non-investment grade
     6.8       6.8       10.5       --       (35 %)
Total corporate funded loans
   $ 11.4     $ 11.9     $ 17.2       (4 %)     (34 %)
                                         
Corporate lending commitments
                                        
Investment grade
   $ 47.7     $ 43.6     $ 36.9       9 %     29 %
Non-investment grade
     12.5       11.6       8.0       8 %     56 %
Total corporate lending commitments
   $ 60.2     $ 55.2     $ 44.9       9 %     34 %
                                         
Corporate funded loans plus lending commitments
                                        
Investment grade
   $ 52.3     $ 48.7     $ 43.6       7 %     20 %
Non-investment grade
   $ 19.3     $ 18.4     $ 18.5       5 %     4 %
                                         
% investment grade
     73 %     73 %     70 %                
% non-investment grade
     27 %     27 %     30 %                
                                         
Total corporate funded loans and lending commitments
   $ 71.6     $ 67.1     $ 62.1       7 %     15 %
Hedges
   $ 21.3     $ 20.1     $ 29.1       6 %     (27 %)
                                         
 
Notes:
 - 
In connection with certain of its Institutional Securities business activities, the Firm provides loans or lending commitments to select clients related to its leveraged acquisition finance or relationship lending activities.  For a further discussion of this activity, see the Firm's Annual Report on Form 10-K for the year ended December 31, 2009.
  - 
For the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009, the leveraged acquisition finance portfolio of pipeline commitments and closed deals were $4.0 billion, $4.9 billion and $5.1 billion, respectively.
  - 
The hedge balance reflects the notional amount utilized by the lending business.
  - 
Refer to Legal Notice on page 16.
 
 
7
 
MORGAN STANLEY
Quarterly Global Wealth Management Group Income Statement Information
(unaudited, dollars in millions)
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
  
Nine Months Ended
     Percentage
   
Sept 30, 2010
    
June 30, 2010
    
Sept 30, 2009
    
June 30, 2010
  
Sept 30, 2009
  
Sept 30, 2010
    
Sept 30, 2009
    
Change
Revenues:
                                                
Investment banking
   $ 211     $ 201     $ 168       5 %     26 %   $ 585     $ 394       48 %
Principal transactions:
                                                                
Trading
     386       249       346       55 %     12 %     977       895       9 %
Investments
     5       0       10       *       (50 %)     11       (3 )     *  
Commissions
     564       692       709       (18 %)     (20 %)     1,938       1,383       40 %
Asset management, distribution and admin. fees
     1,529       1,572       1,574       (3 %)     (3 %)     4,729       2,901       63 %
Other
     107       72       54       49 %     98 %     262       166       58 %
Total non-interest revenues
     2,802       2,786       2,861       1 %     (2 %)     8,502       5,736       48 %
                                                                 
Interest income
     311       387       327       (20 %)     (5 %)     1,037       818       27 %
Interest expense
     9       99       159       (91 %)     (94 %)     256       303       (16 %)
Net interest
     302       288       168       5 %     80 %     781       515       52 %
Net revenues
     3,104       3,074       3,029       1 %     2 %     9,283       6,251       49 %
                                                                 
Compensation and benefits 
     1,910       1,966       1,943       (3 %)     (2 %)     5,848       4,149       41 %
Non-compensation expenses 
     913       901       806       1 %     13 %     2,669       1,774       50 %
Total non-interest expenses
     2,823       2,867       2,749       (2 %)     3 %     8,517       5,923       44 %
                                                                 
Income / (loss) from continuing operations before taxes
     281       207       280       36 %     --       766       328       134 %
Income tax provision / (benefit) from continuing operations
     93       61       92       52 %     1 %     218       109       100 %
Income / (loss) from continuing operations
     188       146       188       29 %     --       548       219       150 %
Gain / (loss) from discontinued operations after tax
     0       0       0       --       --       0       0       --  
Net income / (loss)
     188       146       188       29 %     --       548       219       150 %
Net income / (loss) applicable to non-controlling interests
     44       36       83       22 %     (47 %)     195       (35 )     *  
Net income / (loss) applicable to Morgan Stanley
   $ 144     $ 110     $ 105       31 %     37 %   $ 353     $ 254       39 %
                                                                 
Amounts applicable to Morgan Stanley:
                                                                
Income / (loss) from continuing operations
     144       110       105       31 %     37 %     353       254       39 %
Gain / (loss) from discontinued operations after tax
     0       0       0       --       --       0       0       --  
Net income / (loss) applicable to Morgan Stanley
   $ 144     $ 110     $ 105       31 %     37 %   $ 353     $ 254       39 %
                                                                 
Return on average common equity
                                                                
from continuing operations
     8 %     6 %     N/ A                      6 %     N/ A         
Pre-tax profit margin
     9 %     7 %     9 %                     8 %     5 %        
Compensation and benefits as a % of net revenues
     62 %     64 %     64 %                     63 %     66 %        
                                                                 
 
Notes:
 - 
Results include MSSB effective from May 31, 2009.
  - 
The tax provision / (benefit) for all periods includes the Firm's interest in MSSB.
  - 
Net income / (loss) applicable to non-controlling interests reflects the 49% allocation of MSSB's pre-tax results to Citigroup.
  -  Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance. Percentages represent income from continuing operations before income taxes as a percentage of net revenues.
  - 
Beginning with the quarter ended June 30, 2010, the Firm's estimation of segment capital is based on the Required Capital framework, an internal capital adequacy measure.  Segment capital for the quarter ended March 31, 2010 has been recast to conform to this framework.  Quarterly segment capital for 2009, however, has not been recast under this framework.  As a result, the business segment's return on average common equity from continuing operations for the quarter and nine months ended September 30, 2009 is not available.
  - 
Refer to Legal Notice on page 16.
 
 
8
 
 
MORGAN STANLEY
 
Quarterly Financial Information and Statistical Data
 
Global Wealth Management Group
 
(unaudited)
                                   
                                   
                                   
       
Quarter Ended
    
Percentage Change From:
       
Sept 30, 2010
    
June 30, 2010
    
Sept 30, 2009
    
June 30, 2010
  
Sept 30, 2009
                                   
                                   
Global representatives
       18,119       18,087       18,160       --       --  
                                             
Annualized revenue per global
                                          
 
representative (000's)
     $ 686     $ 679     $ 662       1 %     4 %
                                             
Assets by client segment (billions)
                                          
 
$10m or more
       485       440       438       10 %     11 %
  $1m - $10m       678       627       620       8 %     9 %
Subtotal - > $1m
       1,163       1,067       1,058       9 %     10 %
  $100k - $1m       397       389       420       2 %     (5 %)
 
< $100k
       43       44       54       (2 %)     (20 %)
Total client assets (billions)
     $ 1,603     $ 1,500     $ 1,532       7 %     5 %
                                               
% of assets by client segment > $1m
       73 %     71 %     69 %                
                                               
Fee-based client account assets (billions)
     $ 437     $ 396     $ 365       10 %     20 %
Fee-based assets as a % of client assets
       27 %     26 %     24 %                
                                               
                                               
Bank deposit program (millions)
     $ 108,701     $ 109,518     $ 110,420       (1 %)     (2 %)
                                               
Client assets per global
                                          
 
representative (millions)
     $ 88     $ 83     $ 84       6 %     5 %
                                               
Global retail net new assets (billions)
                                          
 
Domestic
     $ 2.4     $ (7.9 )   $ (11.9 )     *       *  
 
International
     $ 2.6     $ 2.4     $ 0.0       8 %     *  
Total retail net new assets (1)
     $ 5.0     $ (5.5 )   $ (11.9 )     *       *  
                                               
Global retail locations (1)
       867       881       930       (2 %)     (7 %)
                                           
 
Notes:
 - 
Results include MSSB effective from May 31, 2009.
  - 
Annualized revenue per global representative is defined as annualized revenue divided by average global representative headcount.
  - 
Fee-based client account assets represents the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
  - 
For each of the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009, approximately $52 billion of the assets in the bank deposit program are attributed to Morgan Stanley.
  - 
Client assets per global representative represents total client assets divided by period end global representative headcount.
  - 
Refer to End Notes on pages 14-15 and Legal Notice on page 16.
 
 
9
 
MORGAN STANLEY
  
Quarterly Asset Management Income Statement Information
  
(unaudited, dollars in millions)
  
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
  
Nine Months Ended
     Percentage
   
Sept 30, 2010
    
June 30, 2010
    
Sept 30, 2009
    
June 30, 2010
  
Sept 30, 2009
  
Sept 30, 2010
    
Sept 30, 2009
    
Change
Revenues:
                                                
Investment banking
   $ 2     $ 7     $ 2       (71 %)     --     $ 9     $ 8       13 %
Principal transactions:
                                                                
Trading
     (34 )     (10 )     (22 )     *       (55 %)     (45 )     (109 )     59 %
Investments (1)
     427       16       44       *       *       632       (244 )     *  
Commissions
     0       0       0       --       --       0       0       --  
Asset management, distribution and admin. fees
     415       383       429       8 %     (3 %)     1,212       1,194       2 %
Other
     12       36       10       (67 %)     20 %     118       38       *  
Total non-interest revenues
     822       432       463       90 %     78 %     1,926       887       117 %
                                                                 
Interest income
     9       3       6       200 %     50 %     18       16       13 %
Interest expense
     29       25       22       16 %     32 %     79       76       4 %
Net interest
     (20 )     (22 )     (16 )     9 %     (25 %)     (61 )     (60 )     (2 %)
Net revenues
     802       410       447       96 %     79 %     1,865       827       126 %
                                                                 
Compensation and benefits 
     285       282       370       1 %     (23 %)     842       794       6 %
Non-compensation expenses 
     238       214       201       11 %     18 %     656       649       1 %
Total non-interest expenses
     523       496       571       5 %     (8 %)     1,498       1,443       4 %
                                                                 
Income / (loss) from continuing operations before taxes
     279       (86 )     (124 )     *       *       367       (616 )     *  
Income tax provision / (benefit) from continuing operations
     15       (39 )     4       *       *       19       (149 )     *  
Income / (loss) from continuing operations
     264       (47 )     (128 )     *       *       348       (467 )     *  
Gain / (loss) from discontinued operations after tax
     19       541       (140 )     (96 %)     *       654       (328 )     *  
Net income / (loss)
     283       494       (268 )     (43 %)     *       1,002       (795 )     *  
Net income / (loss) applicable to non-controlling interests (1)
     193       (3 )     (62 )     *       *       306       (63 )     *  
Net income / (loss) applicable to Morgan Stanley
   $ 90     $ 497     $ (206 )     (82 %)     *     $ 696     $ (732 )     *  
                                                                 
Amounts applicable to Morgan Stanley:
                                                                
Income / (loss) from continuing operations
     71       (44 )     (66 )     *       *       42       (404 )     *  
Gain / (loss) from discontinued operations after tax
     19       541       (140 )     (96 %)     *       654       (328 )     *  
Net income / (loss) applicable to Morgan Stanley
   $ 90     $ 497     $ (206 )     (82 %)     *     $ 696     $ (732 )     *  
                                                                 
Return on average common equity
                                                                
from continuing operations
     13 %      *       N/A                       1 %      N/A          
Pre-tax profit margin
     35 %     *       *                       20 %     *          
Compensation and benefits as a % of net revenues
     36 %     69 %     83 %                     45 %     96 %        
                                                                 
 
Notes:
 - 
Gain / (loss) from discontinued operations primarily includes the results of substantially all of the retail asset management business, including Van Kampen.  The quarter ended June 30, 2010 also included an after-tax gain of approximately $514 million related to the sale of this business.
  - 
Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance.  Percentages represent income from continuing operations before income taxes as a percentage of net revenues.
  - 
Beginning with the quarter ended June 30, 2010, the Firm's estimation of segment capital is based on the Required Capital framework, an internal capital adequacy measure.  Segment capital for the quarter ended March 31, 2010 has been recast to conform to this framework.  Quarterly segment capital for 2009, however, has not been recast under this framework.  As a result, the business segment's return on average common equity from continuing operations for the quarter and nine months ended September 30, 2009 is not available.
  - 
Refer to End Notes on pages 14-15 and Legal Notice on page 16.
 
 
10
 
MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Asset Management
(unaudited, dollars in billions)
                         
   
Quarter Ended
    
Percentage Change From:
  
Nine Months Ended
     Percentage
   
Sept 30, 2010
    
June 30, 2010
    
Sept 30, 2009
    
June 30, 2010
  
Sept 30, 2009
  
Sept 30, 2010
    
Sept 30, 2009
    
Change
Assets under management or supervision
                                                
                                                 
Net flows by asset class
                                                
Core Asset Management
                                                
Equity
   $ 0.9     $ (0.8 )   $ (1.4 )     *       *     $ (1.2 )   $ (7.0 )     83 %
Fixed income - Long Term
     (0.3 )     (0.1 )     1.0       (200 %)     *       1.2       (7.9 )     *  
Money Market
     1.5       0.1       (6.6 )     *       *       (6.8 )     (28.9 )     76 %
Alternatives
     (0.5 )     (0.7 )     (0.2 )     29 %     (150 %)     (0.7 )     (4.8 )     85 %
Total Core Asset Management
     1.6       (1.5 )     (7.2 )     *       *       (7.5 )     (48.6 )     85 %
                                                                 
Merchant Banking
                                                                
Private Equity
     0.1       0.1       (0.1 )     --       *       0.5       (0.4 )     *  
Infrastructure
     0.0       0.0       0.0       --       --       0.0       0.0       --  
Real Estate
     1.2       0.2       (0.1 )     *       *       1.9       (2.4 )     *  
Total Merchant Banking
     1.3       0.3       (0.2 )     *       *       2.4       (2.8 )     *  
Total net flows
   $ 2.9     $ (1.2 )   $ (7.4 )     *       *     $ (5.1 )   $ (51.4 )     90 %
                                                                 
Assets under management or supervision by asset class
                                                                
Core Asset Management
                                                                
Equity
   $ 86     $ 73     $ 77       18 %     12 %                        
Fixed income - Long Term
     61       56       53       9 %     15 %                        
Money Market
     52       50       52       4 %     --                          
Alternatives
     43       41       40       5 %     8 %                        
Total Core Asset Management
     242       220       222       10 %     9 %                        
                                                                 
Merchant Banking
                                                                
Private Equity
     5       5       4       --       25 %                        
Infrastructure
     4       4       4       --       --                          
Real Estate
     15       15       14       --       7 %                        
Total Merchant Banking
     24       24       22       --       9 %                        
Total Assets Under Management or Supervision
   $ 266     $ 244     $ 244       9 %     9 %                        
Share of minority stake assets
     7       7       6       --       17 %                        
Total
   $ 273     $ 251     $ 250       9 %     9 %                        
                                                                 
 
Notes:
 - 
Data excludes substantially all of the retail asset management business, including Van Kampen.
  - 
Alternatives include a range of alternative investment products such as hedge funds, funds of hedge funds and funds of private equity funds.
  - 
Net Flows by region [inflow / (outflow)] for the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009 are:
    U.S.: $(0.5) billion, $(0.7) billion and $(7.5) billion
    Non-U.S.: $3.4 billion, $(0.5) billion and $0.1 billion
  - 
Assets under management or supervision by region for the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009 are:
   
U.S.: $174 billion, $164 billion and $166 billion
   
Non-U.S.: $92 billion, $80 billion and $78 billion
  - 
The share of minority stake assets represents Asset Management's proportional share of assets managed by entities in which it owns a minority stake.
  - 
Refer to Legal Notice on page 16.
 
 
11
 
 
This page represents an addendum to the 3Q 2010 Financial Supplement, Appendix I
 
MORGAN STANLEY
Earnings Per Share
(unaudited, in millions, except for per share data)
 
     
Quarter Ended
    
Nine Months Ended
  
     
Sept 30, 2010
    
June 30, 2010
    
Mar 31, 2010
    
Sept 30, 2010
  
                           
 
Basic Earnings Per Share
                        
 
Income from continuing operations applicable to Morgan Stanley
   $ 313     $ 1,435     $ 1,845     $ 3,593  
 
Gain / (loss) from discontinued operations applicable to Morgan Stanley after tax
     (182 )     525       (69 )     274  
 
Net income / (loss) applicable to Morgan Stanley
   $ 131     $ 1,960     $ 1,776     $ 3,867  
 
Less: Preferred Dividends (Series A)
     (11 )     (11 )     (11 )     (33 )
 
Less: Preferred Dividends (Series B – Mitsubishi)
     (196 )     (196 )     (196 )     (588 )
 
Less: Preferred Dividends (Series C – Mitsubishi)
     (13 )     (13 )     (13 )     (39 )
 
Income applicable to Morgan Stanley, prior to allocation of income to CIC Equity Units and Participating Restricted Stock Units
     (89 )     1,740       1,556       3,207  
 
Less: Allocation of income / (loss) to CIC Equity Units:
                                
 
From continuing operations
     0       (67 )     (99 )     (118 )
 
From discontinued operations
     0       (41 )     6       (18 )
 
Total allocation of income to CIC Equity Units
     0       (108 )     (93 )     (136 )
 
Less: Allocation of income / (loss) to Participating Restricted Stock Units:
                                
 
From continuing operations
     (3 )     (38 )     (54 )     (92 )
 
From discontinued operations
     1       (16 )     2       (8 )
 
Total allocation of income to Participating Restricted Stock Units
     (2 )     (54 )     (52 )     (100 )
 
Earnings / (loss) applicable to Morgan Stanley common shareholders
   $ (91 )   $ 1,578     $ 1,411     $ 2,971  
 
Weighted average common shares outstanding
     1,377       1,318       1,315       1,337  
                                   
 
Earnings per basic common share
                                
 
Income / (loss) from continuing operations applicable to Morgan Stanley common shareholders
   $ 0.07     $ 0.84     $ 1.12     $ 2.04  
 
Gain / (loss) on discontinued operations applicable to Morgan Stanley common shareholders
   $ (0.14 )   $ 0.36     $ (0.05 )   $ 0.18  
 
Earnings / (loss) per basic common share
   $ (0.07 )   $ 1.20     $ 1.07     $ 2.22  
                                   
 
Diluted Earnings Per Share
                                
 
Earnings / (loss) applicable to Morgan Stanley common shareholders
   $ (91 )   $ 1,578     $ 1,411     $ 2,971  
 
Income impact of assumed conversions:
                                
 
Preferred stock dividends (Series B - Mitsubishi)
     0       196       196       588  
 
Assumed Conversion of CIC (1)
                                
 
From continuing operations
     (16 )     91       0       75  
 
From discontinued operations
     0       41       0       41  
 
Income / (loss) available to common shareholders plus assumed conversions
   $ (107 )   $ 1,906     $ 1,607     $ 3,675  
                                   
 
Weighted average common shares outstanding
     1,377       1,318       1,315       1,337  
 
Effect of dilutive securities:
                                
 
Stock options, Restricted Stock Units
     7       4       1       4  
 
Series B Preferred Stock
     0       310       310       310  
 
CIC Equity Units
     59       116       0       59  
 
Weighted average common shares outstanding and common stock equivalents
     1,443       1,748       1,626       1,710  
                                   
 
Earnings per diluted common share
                                
 
Income / (loss) from continuing operations applicable to Morgan Stanley common shareholders
   $ 0.05     $ 0.80     $ 1.03     $ 1.98  
 
Gain / (loss) on discontinued operations applicable to Morgan Stanley common shareholders
   $ (0.12 )   $ 0.29     $ (0.04 )   $ 0.17  
 
Earnings / (loss) per diluted common share
   $ (0.07 )   $ 1.09     $ 0.99     $ 2.15  
                                   
 
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 Note 2 to the consolidated financial statements in the Firm's Annual Report on Form 10-K for the year ended December 31, 2009.
  - 
Refer to End Notes on pages 14-15 and Legal Notice on page 16.
 
 
12
 
 
This page represents an addendum to the 3Q 2010 Financial Supplement, Appendix II
 
MORGAN STANLEY
Earnings Per Share Calculation Under Two-Class Method
Three Months Ended Sept 30, 2010
(unaudited, in millions, except for per share data)
                   
                   
                   
                   
 
Allocation of net income from continuing operations
            
 
(A)
(B)
(C)
(D)
(E)
(F)
(G)
  
(H)
             
(D)+(E)+(F)
  
(G)/(A)
 
Weighted Average #
of Shares
% Allocation (3)
Net income from
continuing operations
applicable to Morgan
Stanley (4)
Distributed Earnings (5)
Undistributed Earnings Not
in Excess of Reference
Dividend (6)
Undistributed Earnings in
Excess of Reference
Dividend (6)
Total Earnings Allocated
  
Basic EPS (10)
Basic Common Shares
1,377
93%
  
$68
$22
$0
$90
 (7)
$0.07
Participating Restricted Stock Units (1)
41
3%
  
$2
$1
$0
$3
 (8)
N/A
CIC Equity Units (2)
59
4%
  
$0
$0
$0
$0
 (9)
N/A
 
1,477
100%
$93
$70
$23
$0
$93
    
                   
                   
 
Allocation of gain from discontinued operations
            
 
(A)
(B)
(C)
(D)
(E)
(F)
(G)
  
(H)
             
(D)+(E)+(F)
  
(G)/(A)
 
Weighted Average #
of Shares
% Allocation (3)
Gain from Discontinued
Operations Applicable to
Common Shareholders,
after Tax (4)
Distributed Earnings (5)
Undistributed Earnings Not
in Excess of Reference
Dividend (6)
Undistributed Earnings in
Excess of Reference
Dividend (6)
Total Earnings Allocated
  
Basic EPS (10)
Basic Common Shares
1,377
93%
  
$0
($181)
$0
($181)
 (7)
($0.14)
Participating Restricted Stock Units (1)
41
3%
  
$0
($1)
$0
($1)
 (8)
N/A
CIC Equity Units (2)
59
4%
  
$0
$0
$0
$0
 (9)
N/A
 
1,477
100%
$(182)
$0
($182)
$0
($182)
    
                   
                   
 
Allocation of net income available to common shareholders
            
 
(A)
(B)
(C)
(D)
(E)
(F)
(G)
  
(H)
             
(D)+(E)+(F)
  
(G)/(A)
 
Weighted Average #
of Shares
% Allocation (3)
Net income applicable to
Morgan Stanley (4)
Distributed Earnings (5)
Undistributed Earnings Not
in Excess of Reference
Dividend (6)
Undistributed Earnings in
Excess of Reference
Dividend (6)
Total Earnings Allocated
  
Basic EPS (10)
Basic Common Shares
1,377
93%
  
$68
($159)
$0
($91)
 (7)
($0.07)
Participating Restricted Stock Units (1)
41
3%
  
$2
$0
$0
$2
 (8)
N/A
CIC Equity Units (2)
59
4%
  
$0
$0
$0
$0
 (9)
N/A
 
1,477
100%
($89)
$70
($159)
$0
($89)
    
                   
 
Note:
Refer to End Notes on pages 14-15 and Legal Notice on page 16.
 
 
13
 
MORGAN STANLEY
End Notes
 
Page 3:
    
(1)
  
Reflects the regional view of the Firm's consolidated net revenues, on a managed basis, based on the following methodology: Institutional Securities: investment banking - client location, equity capital markets - client location, debt capital markets - revenue recording location, sales & trading - trading desk location. Global Wealth Management: financial advisor location. Asset Management: client location except for the merchant banking business which is based on asset location.  All periods exclude net revenues related to substantially all of the retail asset management business, including Van Kampen.
(2)
  
Goodwill and intangible balances net of allowable mortgage servicing rights deduction for quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009 of $125 million, $125 million and $130 million, respectively.
(3)
  
Represents average daily 95% / one-day value-at-risk ("VaR").  Includes non-trading VaR for the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009 of $103 million, $67 million and $70 million, respectively.  Counterparty portfolio VaR which reflects adjustments, net of hedges, related to counterparty credit risk and other market risks is included in trading VaR for all periods.  See page 6 for total trading VaR.  For further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology, see Part II, Item 7A "Quantitative and Qualitative Disclosures about Market Risk" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2009.
(4)
  
For the quarter ended September 30, 2010, book value per share included a benefit of $1.40 due to the mandatory conversion of $5.6 billion of equity units into 116 million shares of common stock in August 2010.
     
Page 4:
    
(1)
  
The Firm’s capital management approach includes an estimation of an amount of capital the Firm and its businesses require over a wide range of market environments.  Beginning with the quarter ended June 30, 2010, the Firm's capital estimation is based on the Required Capital framework, an internal capital adequacy measure.  Tier 1 capital and common equity are designated to segments based on the capital usage calculated by the Required Capital framework which considers a combination of a base amount of capital and an amount of economic capital reserved to absorb extreme stress events.  The Firm defines parent capital as capital not specifically designated to a particular business segment.  The Firm generally holds parent capital for prospective regulatory requirements, organic growth, acquisitions and other capital needs.  The Firm's Required Capital is met by regulatory Tier 1 capital.  The framework will evolve over time in response to changes in the business and regulatory environment and to incorporate enhancements in modeling techniques.
     
Page 6:
    
(1)
  
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.  Trading VaR for all periods includes counterparty portfolio VaR which reflects adjustments, net of hedges, related to counterparty credit risk and other market risks.  For further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology, see Part II, Item 7A "Quantitative and Qualitative Disclosures about Market Risk" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2009.
     
Page 9:
    
(1)
  
Beginning in 2010, the retail net new assets and retail locations metrics have been expanded to include the non-US businesses.  The quarter ended September 30, 2010 includes $2.6 billion of net new money inflows and 29 retail locations, respectively related to non-US businesses.  The quarter ended June 30, 2010 includes $2.4 billion of net new money inflows and 29 retail locations, respectively related to non-US businesses.  Certain legacy Smith Barney middle market activities, which are primarily institutional client focused, are required under the MSSB joint venture agreement to be transitioned from Citigroup to Morgan Stanley.  As this transition progresses, commencing with the quarter ended June 30, 2010, these legacy activities have been excluded from the retail net new assets metrics. The quarter ended September 30, 2009 has been recast to exclude $2.3 billion of these legacy net new money inflows.
 
 
14
 
MORGAN STANLEY
End Notes
 
Page 10:
    
(1)
  
The quarter and nine months ended Sept 30, 2010 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 non-controlling interests.
     
Page 12:
    
(1)
  
On August 17, 2010, approximately 116 million shares were issued to CIC in settlement of the CIC Equity Units.  The shares issued in settlement of the CIC Equity Units are included in basic and diluted shares outstanding on a weighted average basis effective with the issuance.  Prior to the quarter ended June 30, 2010, Morgan Stanley included the CIC Equity Units in diluted EPS using the more dilutive of the two-class method or treasury stock method. Beginning in the quarter ended June 30, 2010 and through the issuance date, Morgan Stanley included the CIC Equity Units in diluted EPS on a weighted average basis using the more dilutive of the two-class method or the if-converted method.
     
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(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.
(2)
  
For further information on the CIC Equity Units, see Note 13 to the consolidated financial statements in the Firm's Annual Report on Form 10-K for the year ended December 31, 2009.
(3)
  
The percentage of weighted basic common shares, participating RSUs and weighted CIC Equity Units to the total weighted average of basic common shares, participating RSUs and CIC Equity Units.
(4)
  
Represents net income from continuing operations, gain / (loss) from discontinued operations (after tax), and net income applicable to Morgan Stanley, respectively, for the quarter ended Sept 30, 2010 prior to allocations to participating RSUs and CIC Equity Units.
(5)
  
Distributed earnings represent the dividends declared on common shares and participating RSUs, respectively, for the quarter ended Sept 30, 2010.  The amount of dividends declared is based upon the number of common shares outstanding as of the dividend record date.  During the quarter ended Sept 30, 2010, a $0.05 dividend was declared on common shares outstanding and participating RSUs.  Under the terms of the securities purchase agreement for the sale of Equity Units to CIC, if a quarterly dividend is declared above $0.27 (the "reference dividend"), the CIC Equity Units will participate via an increase in the number of shares the Firm will be required to deliver upon settlement of the contract.  No cash dividends will be paid to the CIC Equity Units prior to settlement of the contract.  Therefore, no distributed earnings will be allocated to the CIC Equity Units in the calculation of earnings per share under the two-class method.
(6)
  
The two-class method assumes all of the earnings for the reporting period are distributed and allocates to the participating RSUs and CIC Equity Units what they would be entitled to based on the contractual rights and obligations of the participating security.  With respect to the CIC Equity Units, the amount allocated is representative of the value of the increase in the number of shares that the Firm would be required to deliver upon settlement of the contract. No actual cash dividends will be paid to the CIC Equity Units. Assuming the reference dividend of $0.27 has been paid to the basic common shareholders, CIC Equity Units would receive a pro-rata allocation of the remaining undistributed earnings.
(7)
  
Total income applicable to common shareholders to be allocated to the common shares in calculating basic and diluted EPS for common shares (see Appendix I).
(8)
  
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 (see Appendix I).
(9)
  
Total income applicable to common shareholders to be allocated to the CIC Equity Units reflected as a deduction to the numerator in determining basic EPS for common shares (see Appendix I).
(10)
  
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.
 
 
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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 third quarter earnings press release issued October 20, 2010.
 
 
 
 
 
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