8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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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, 2011

Morgan Stanley

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(Exact name of Registrant as specified

in its charter)

Delaware	1-11758	36-3145972
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1585 Broadway, New York, New York 10036

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(Address of principal executive offices, including zip code)

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

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(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)
[  ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.	Results of Operations and Financial Condition
On January 20, 2011, Morgan Stanley (the "Registrant") released financial information with respect to its quarter and year ended December 31, 2010. 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, 2010 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 9.01.	Financial Statements and Exhibits
	99.1	Press release of the Registrant, dated January 20, 2011, containing financial information for the quarter and year ended December 31, 2010.
	99.2	Financial Data Supplement of the Registrant for the quarter and year ended December 31, 2010.

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

Finance Director and Controller

Dated: January 20, 2011

EX-99.1

Exhibit 99.1

Media Relations:  Jeanmarie McFadden   212-761-2433 Investor Relations:  Celeste Mellet Brown   212-761-3896

 

Morgan Stanley Reports Full-Year and Fourth Quarter 2010:

· Full-Year Net Revenues of $31.6 Billion and Income from Continuing Operations of $2.44 per Diluted Share

· Fourth Quarter Net Revenues of $7.8 Billion and Income from Continuing Operations of $0.43 per Diluted Share

· Net Revenues for Full-Year and Fourth Quarter Include Negative Impact of $873 Million and $945 Million, Respectively for Tightening of Morgan Stanley’s Debt-Related Credit Spreads

· Firm Delivered Strong Full-Year Results in Investment Banking, Ranked #1 in Global IPOs, #1 in Global Equity and #2 in Global M&A, and Improved Performance in Global Wealth Management and Asset Management

· Book Value per Common Share Increased 16% During the Year to $31.49

NEW YORK, January 20, 2011 – Morgan Stanley (NYSE: MS) today reported income of $4.5 billion, or $2.44 per diluted share,1 from continuing operations applicable to Morgan Stanley for the year ended December 31, 2010 compared with income of $1.3 billion, or a loss of $0.82 per diluted share, a year ago.  Net revenues were $31.6 billion for the year compared with $23.4 billion a year ago.  Net revenues in the current year included negative revenue of $873 million, or $0.30 per diluted share, related to Morgan Stanley’s debt-related credit spreads (DVA)2,3 compared with negative revenue from DVA of $5.5 billion in the prior year.  Comparisons of current year results with the prior year were affected by the results of Morgan Stanley Smith Barney joint venture (MSSB),4 which closed on May 31, 2009.  The results for the year also included approximately $1.0 billion, or $0.65 per diluted share, associated with discrete tax gains.

Compensation expenses of $16.0 billion increased from $14.4 billion a year ago.  The increase primarily reflected higher compensation costs related to MSSB4 and a charge of $272 million related to the U.K. government’s payroll tax on 2009 discretionary bonuses.5  The Firm’s compensation to net revenue ratio for the current year was 51% compared with 62% a year ago.  These ratios were adversely affected by DVA, which reduced net revenues in both periods.  Non-compensation expenses of $9.4 billion increased from $8.0 billion a year ago primarily due to the inclusion of MSSB.4

Income from continuing operations applicable to Morgan Stanley for the current quarter was $867 million, or $0.43 per diluted share,1 compared with income of $460 million, or $0.18 per diluted share, for the same period a year ago.  Net revenues were $7.8 billion for the current quarter compared with $6.8 billion a year ago.  Net revenues in the current quarter included negative revenue of $945 million, or $0.36 per diluted share, related to DVA6compared with negative revenue from DVA of $589 million in the prior year’s fourth quarter.  In addition , results for the current quarter included a pre-tax gain of $668 million, or $0.17 per diluted share, from the sale of the Firm’s investment in China International Capital Corporation Limited (CICC).

1

Compensation expenses were $4.1 billion compared with $3.8 billion in last year’s fourth quarter.  The Firm’s compensation to net revenue ratio for the current quarter was 52% compared with 55% a year ago.  These ratios were adversely affected by DVA, which reduced net revenues in both periods.  Non-compensation expenses of $2.6 billion increased 6% from a year ago.

For the year, the net income applicable to Morgan Stanley, including discontinued operations, was $2.63 per diluted share, compared with a net loss of $0.77 per diluted share in 2009.7  For the current quarter, net income applicable to Morgan Stanley, including discontinued operations, was $0.41 per diluted share, compared with net income of $0.29 per diluted share a year ago.

Full Year Business Highlights

· The Firm delivered strong Investment Banking results across our advisory and underwriting businesses in 2010, with net revenues of $4.3 billion for the year.  The Firm ranked #1 in global IPOs, #1 in global Equity and #2 in global announced and completed M&A8 – advising on eight of the top 10 announced transactions of 2010.  Equity capital markets achieved the highest market share in a decade.

· Equity sales and trading results reflected solid customer flows in the cash and derivatives businesses and improved results in prime brokerage.  Fixed income results reflected the difficult environment while we continue to make progress building out our Interest Rate, Credit & Currency (IRCC) business.

· Global Wealth Management Group delivered improved performance this year – with net revenues of $12.6 billion.  Despite a challenging retail environment for much of the year, net new client assets were $22.9 billion, including $14.1 billion in the fourth quarter.  Turnover of top revenue-producing global representatives for the year was near historic lows.

· Asset Management delivered significantly improved performance this year – with net revenues of $2.7 billion and improved profitability.  Asset Management also has continued to deliver solid investment performance, with over 70% of its long-term strategies outperforming their respective benchmarks on a 3, 5 and 10-year basis (as of December 2010).

· The Firm continued to build its international business this year – including the launch of its Japanese joint venture. The Firm also completed the sale of its investment in CICC, which allowed the Firm to proceed with a new joint venture with China Fortune Securities Co., Ltd.

James P. Gorman, President and Chief Executive Officer, said, "Morgan Stanley delivered improved performance across most of our businesses during the fourth quarter, and the strength of our premier client franchise was evidenced by participation in virtually every major transaction that helped raise capital for governments and leading corporations across the globe.  Despite this year’s challenging markets, we delivered strong results in Investment Banking enhancing our leadership positions in M&A, global equity and IPOs based on the strength of our banking, capital markets and equities teams.  While we made progress in building out our Fixed income business through investments in both people and technology, there is more to be done to drive revenue and market share growth.  In Global Wealth Management, the strong performance we delivered in the fourth quarter – and the strong net new asset growth we achieved during 2010 – are the clearest signs yet of the important progress we have made in integrating Morgan Stanley Smith Barney.  Our Asset Management business also delivered significantly improved performance this year, as we refocused the business around our core strengths, hired key talent and addressed legacy issues. 

“Throughout 2010, we continued driving forward a wide range of important strategic initiatives – from the launch of our Japanese joint venture with Mitsubishi and the sale of our CICC stake to the planned separation of our Process Driven Trading business and the sale of our Invesco shares.  I am pleased with the progress we made this year, but there is a great deal of work to do across Morgan Stanley’s global franchise as we look to deliver first-class service to our clients and long-term value to our shareholders and employees," Gorman added.

2

Summary of Business Segment Results
($ millions)
	Institutional Securities		Global Wealth Management		Asset Management
	Net	Pre-Tax	Net	Pre-Tax	Net	Pre-Tax
	Revenues (1)	Income	Revenues	Income	Revenues	Income
FY 2010	$16,366	$4,338	$12,636	$1,156	$2,723	$723
FY 2009	$12,853	$1,088	$9,390	$559	$1,337	($653)
4Q 2010	$3,618	$437	$3,353	$390	$858	$356
3Q 2010	$2,895	$241	$3,104	$281	$802	$279
4Q 2009	$3,231	$461	$3,139	$231	$510	($37)

(1) Net revenues for FY 2010, FY 2009, 4Q 2010, 3Q 2010 and 4Q 2009 include negative revenue from DVA of $873 million, $5,510 million, $945 million, $731 million and $589 million, respectively.

INSTITUTIONAL SECURITIES

FULL YEAR

Institutional Securities reported pre-tax income from continuing operations of $4.3 billion compared with pre-tax income from continuing operations of $1.1 billion in 2009.  Net revenues were $16.4 billion compared with $12.9 billion a year ago.  DVA resulted in negative revenue of $873 million in the current year compared with negative revenue of $5.5 billion a year ago.3  Due to the significant difference in the amount of DVA in the comparative periods, the following discussion for fixed income and equity sales and trading focuses on current year results.  The year’s pre-tax margin was 27%.9

· Advisory revenues of $1.5 billion were essentially unchanged from a year ago.

· Underwriting revenues of $2.8 billion declined 5% from last year.  Equity underwriting revenues of $1.5 billion declined from $1.7 billion last year on lower market volume.  Fixed income underwriting revenues increased 8% to $1.4 billion from last year primarily due to increased high yield issuance volumes and higher loan syndication fees.

· Fixed income sales and trading net revenues were $5.9 billion for the year and reflected negative revenue of $703 million related to DVA.3  Results for the current year primarily reflected solid customer flows in IRCC, which were partly offset by a challenging environment.  Commodities results reflected low levels of client activity and market volatility.

· Equity sales and trading net revenues were $4.8 billion for the year and reflected negative revenue of $121 million related to DVA.3  Results in the cash and derivatives businesses reflected solid customer flows in a challenging environment.  Prime brokerage results for the year reflected higher client balances.

· Other sales and trading net losses of $441 million for the year included net mark-to-market losses on loans and lending commitments and funding costs, including costs related to the amount of liquidity held by the Firm’s U.S. subsidiary banks.

· Investment gains were $809 million compared with losses of $864 million last year.  The results for the current year primarily reflected a realized gain of $313 million on a principal investment and gains on principal investments in real estate and investments for the benefit of employee deferred compensation and co-investment plans, compared with losses in the prior year.10

· Other revenues of $1.0 billion for the year included the gain from the sale of the Firm’s investment in CICC noted above.

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· Compensation expenses were $7.1 billion compared with $7.2 billion for the prior year.  Compensation expense for the current year included a charge of $269 million related to the U.K. government’s payroll tax on 2009 discretionary bonuses.  The compensation to net revenue ratio for the current year, including the U.K. bonus tax, was 43% compared with 56% in the prior year.  Non-compensation expenses of $4.9 billion increased 9% from a year ago and primarily reflected higher levels of business activity and ongoing investments in technology.

FOURTH QUARTER

Institutional Securities reported pre-tax income from continuing operations of $437 million compared with pre-tax income from continuing operations of $461 million in the fourth quarter of last year.  Net revenues were $3.6 billion compared with $3.2 billion a year ago.  DVA resulted in negative revenue of $945 million in the current quarter compared with negative revenue of $589 million a year ago.6  The quarter’s pre-tax margin was 12%.9

· Advisory revenues of $484 million decreased 9% from a year ago and reflected lower completed market volumes.

· Underwriting revenues of $1.0 billion increased 9% from last year’s fourth quarter.  Equity underwriting revenues of $661 million increased from $627 million in last year’s fourth quarter on higher market volume.  Fixed income underwriting revenues increased 15% to $370 million from last year’s fourth quarter primarily due to increased high yield issuance volumes and higher loan syndication fees.

· Fixed income sales and trading losses were $29 million compared with net revenues of $663 million in last year’s fourth quarter.  DVA resulted in negative revenue of $842 million in the current quarter compared with negative revenue of $453 million a year ago.  Results reflected lower levels of activity.

· Equity sales and trading net revenues were $1.1 billion compared with net revenues of $774 million in last year’s fourth quarter.  DVA resulted in negative revenue of $103 million in the current quarter compared with negative revenue of $221 million a year ago.  Net revenues increased from a year ago primarily reflecting higher results in the cash and derivatives businesses driven by improved levels of client activity.

· Other sales and trading revenues were $2 million compared with net revenues of $272 million in the fourth quarter of last year.6  Results in the current quarter included net losses on loans and commitments compared with net revenues in the prior year quarter which also included gains from other hedging activities.

· Investment gains were $316 million compared with gains of $69 million in the fourth quarter of last year.  Results for the current quarter primarily reflected higher equity valuations, and gains on principal investments in real estate and investments for the benefit of employee deferred compensation and co-investment plans.

· Other revenues of $733 million for the current quarter primarily included the gain from the sale of the Firm’s investment in CICC noted above.

· Compensation expenses of $1.8 billion increased from $1.5 billion a year ago and primarily reflected higher net revenues and an increase in headcount.  The compensation to net revenue ratio for the current quarter was 49% compared with 46% in the fourth quarter of the prior year.  Non-compensation expenses of $1.4 billion increased 9% from a year ago.

· Morgan Stanley’s average aggregate trading and non-trading Value-at-Risk (VaR) measured at the 95% confidence level was $171 million compared with $189 million in the third quarter of 2010.  Average trading VaR was $132 million compared with $142 million in the third quarter of 2010.

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GLOBAL WEALTH MANAGEMENT GROUP

FULL YEAR

Global Wealth Management Group reported pre-tax income from continuing operations of $1.2 billion compared with a pre-tax income from continuing operations of $559 million in 2009.  Comparisons of current year results with prior periods were affected by the results of MSSB,4 which closed on May 31, 2009.  The year’s pre-tax margin was 9%.9  Income after the non-controlling interest allocation to Citigroup Inc. and before taxes was $855 million.11

· Net revenues were $12.6 billion compared with $9.4 billion a year ago.  The increase primarily reflected incremental net revenues following the closing of MSSB.

· Compensation expenses of $7.8 billion increased from $6.1 billion a year ago primarily due to the inclusion of MSSB for the full year.  The compensation to net revenue ratio for the current year was 62% compared with 65% a year ago.  Non-compensation expenses of $3.6 billion increased from $2.7 billion a year ago primarily due to the inclusion of MSSB.

· Total client assets were $1.7 trillion at year-end.  Client assets in fee-based accounts were $470 billion and represented 28% of total client assets.  Net new assets for the year were $22.9 billion.

· The 18,043 global representatives at year-end achieved average annualized revenue per global representative of $742,000 and total client assets per global representative of $93 million.

FOURTH QUARTER

Global Wealth Management Group reported pre-tax income from continuing operations of $390 million compared with pre-tax income from continuing operations of $231 million in the fourth quarter of last year.  The quarter’s pre-tax margin was 12%.9  Income after the non-controlling interest allocation to Citigroup Inc. and before taxes was $284 million.11

· Net revenues were $3.4 billion compared with $3.1 billion a year ago and primarily reflected higher net interest and commission revenues.

· Compensation expenses of $2.0 billion increased 2% from a year ago.  The compensation to net revenue ratio for the current quarter was 59% compared with 63% a year ago.  Non-compensation expenses of $968 million increased from $943 million a year ago.

· Net new assets for the quarter were $14.1 billion.

ASSET MANAGEMENT

FULL YEAR

Asset Management reported pre-tax income from continuing operations of $723 million compared with a pre-tax loss from continuing operations of $653 million in 2009.  The year’s pre-tax margin was 27%.9  Income after the non-controlling interest allocation and before taxes was $315 million.

· Net revenues were $2.7 billion compared with $1.3 billion a year ago.  Results for the current year included gains of $431 million in Merchant Banking related to principal investments held by certain consolidated real estate funds.12  Current year results in the Core business13 included impairment charges of $126 million related to FrontPoint Partners LLC (FrontPoint),14 which were partly offset by a pre-tax gain of $96 million from the sale of the Firm’s shares of Invesco Ltd. (Invesco gain).

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· Net revenues in the Core business13 of $1.5 billion declined 2% from the prior year.  The decrease in net revenues primarily reflected the FrontPoint impairment charges noted above,14 partly offset by higher management and administration fees and the Invesco gain noted above.  In addition, the prior year included gains of $164 million related to the disposition of the remaining securities issued by structured investment vehicles previously held on the Firm’s balance sheet.

· Net revenues in the Merchant Banking business were $1.2 billion compared with losses of $194 million in 2009.  The increase in net revenues primarily reflected the gains on principal investments noted above12 and higher gains on principal investments in the private equity business compared with prior year losses primarily from principal investments in the real estate business.

· Compensation expenses of $1.1 billion increased 2% from a year ago.  The compensation to net revenue ratio for the current year was 41% compared with 83% in 2009.  Non-compensation expenses were $877 million compared with $886 million a year ago.14

· Assets under management or supervision at December 31, 2010 of $279 billion increased from $266 billion a year ago.  The increase reflected market appreciation, partly offset by net customer outflows primarily in Morgan Stanley’s money market funds.

FOURTH QUARTER

Asset Management reported pre-tax income from continuing operations of $356 million compared with a pre-tax loss from continuing operations of $37 million in last year’s fourth quarter.  The quarter’s pre-tax margin was 41%.9  Income after the non-controlling interest allocation and before taxes was $254 million.

· Net revenues were $858 million compared with $510 million a year ago.  Results for the quarter included FrontPoint impairment charges which were partly offset by the Invesco gain noted above.14

· Net revenues in the Core business13 were $410 million compared with $357 million in last year’s fourth quarter.  Results for the current quarter reflected the Invesco gain and FrontPoint impairment charges noted above.14

· Net revenues in the Merchant Banking business were $448 million compared with $153 million in last year’s fourth quarter.  The increase in net revenues was primarily driven by principal investment gains in the private equity business and gains of $109 million related to principal investments held by certain consolidated real estate funds.12

· Compensation expenses of $281 million declined from $310 million a year ago.  The compensation to net revenue ratio for the quarter was 33% compared with 61% a year ago.  Non-compensation expenses of $221 million declined 7% from a year ago.14

YEAR-END COMPENSATION

In recent years, Morgan Stanley has fundamentally restructured the way it compensates employees – becoming the first major U.S. bank to institute a clawback provision for a portion of year-end compensation, creating performance units tied to three-year performance for senior executives, increasing deferred compensation and reducing cash bonuses, among other changes.  For 2010, Morgan Stanley again significantly increased the portion of year-end compensation that is deferred and subject to clawback, while reducing the portion paid in cash.  For year-end compensation, the average amount subject to deferral increased to 60% in 2010 from 40% in 2009.  For members of the Operating Committee, the average amount subject to deferral increased to more than 80% in 2010 from 75% in 2009.

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CAPITAL

Morgan Stanley’s Tier 1 capital ratio, under Basel I, was approximately 16.0% and Tier 1 common ratio was approximately 10.5%.9, 15  The return on average common equity from continuing operations for the full year was 8.5%.

As of December 31, 2010, Morgan Stanley had not repurchased any shares of its common stock as part of its capital management share repurchase program.

Book value per common share was $31.49, based on 1.5 billion shares outstanding.

OTHER MATTERS

Excluding the discrete tax gains noted above, the effective tax rate from continuing operations for the full year was 28.0%.

Morgan Stanley announced that its Board of Directors declared a $0.05 quarterly dividend per common share. The dividend is payable on February 15, 2011 to common shareholders of record on January 31, 2011.

Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services.  The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 1,200 offices in 42 countries.  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)

The information above 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 Quali tative Disclosures about Market Risk" in Part II, Item 7A of the Company's Annual Report on Form 10-­K for the year ended December 31, 2009 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.

7

 

1 Includes preferred dividends and other adjustments, related to the calculation of earnings per share, of approximately $1.1 billion for the year ended December 31, 2010 and $2.3 billion for the year ended December 31, 2009.  Includes preferred dividends and other adjustments, related to the calculation of earnings per share, of approximately $236 million for the quarter ended December 31, 2010 and $241 million for the quarter ended December 31, 2009.  Refer to page 3 of Morgan Stanley’s Financial Supplement accompanying this release for the calculation of earnings per share.

 

2 Represents the changes in Morgan Stanley’s credit spreads resulting from fluctuation in the fair value of certain of its long-term and short-term borrowings (commonly referred to as “DVA”).

3 Due to DVA, sales and trading net revenue for the year ended December 31, 2010 included negative revenue of $873 million (fixed income: $703 million; equity: $121 million; other: $49 million) and sales and trading net revenue for the year ended December 31, 2009 included negative revenue of $5.5 billion (fixed income: $3.3 billion; equity: $1.7 billion; other: $451 million).

4 MSSB results included revenues and expenses (compensation and non-compensation), related to legacy Smith Barney operations, that were incremental to the Firm’s financial results subsequent to the closing on May 31, 2009.

5 The charge is included in the business segments as follows: Institutional Securities: $269 million, Global Wealth Management Group: $2 million and Asset Management: $1 million.

6 Due to DVA, sales and trading net revenue for the quarter ended December 31, 2010 included negative revenue of $945 million (fixed income: $842 million; equity: $103 million) and sales and trading net revenue for the quarter ended December 31, 2009 included positive (negative) revenue of ($589) million (fixed income: ($453) million; equity: ($221) million; other: $85 million).

7 Net income for the current year included the following activities reported in discontinued operations: a gain of $775 million related to a legal settlement with Discover Financial Services, the results and losses associated with the planned disposition of Revel Entertainment Group, LLC (Revel) of ($1.2) billion, and the results and an after-tax gain of approximately $570 million related to the sale of substantially all of the retail asset management business, including Van Kampen Investments, Inc.  For the quarter ended December 31, 2010, discontinued operations primarily included operating results of Revel and a reduction in the carrying value of the Firm’s investment in Revel from approximately $40 million to $28 million.

8 Source: Thomson Reuters – for the period of January 1, 2010 to December 31, 2010 as of January 6, 2011.

9 Pre-tax margin and Tier 1 common ratios are non-GAAP financial measures that the Firm considers to be useful measures that the Firm and investors use to assess operating performance and capital adequacy.  Pre-tax margin represents income (loss) from continuing operations before taxes, divided by net revenues.  The Tier 1 common ratio equals Tier 1 capital (see note 15) less qualifying perpetual preferred stock, qualifying trust preferred securities and qualifying restricted core capital elements, adjusted for the portion of goodwill and non-servicing intangible assets associated with MSSB non-controlling interests divided by risk-weighted assets.

10 Results for the current year included a realized gain of $313 million on a principal investment previously held by a consolidated investment partnership.  Approximately $180 million of this gain related to third-party investors was recorded in the net income (loss) applicable to non-controlling interests on page 6 of Morgan Stanley’s Financial Supplement accompanying this release.

11 Morgan Stanley owns 51% of MSSB, which is consolidated.  The results related to the 49% interest retained by Citigroup Inc. are reported in net income (loss) applicable to non-controlling interests on page 9 of Morgan Stanley’s Financial Supplement accompanying this release.

8

 

12 Results for the current quarter and year included pre-tax income of $103 million and $410 million, respectively, related to principal investments held by certain consolidated real estate funds.  The limited partnership interests in these funds are reported in net income (loss) applicable to non-controlling interests on page 11 of Morgan Stanley’s Financial Supplement accompanying this release.

13 The Core business includes traditional, hedge funds and fund of funds asset management.

14 The terms of the restructuring of FrontPoint have been amended and the restructuring is now expected to close in the first quarter of 2011, subject to closing conditions.  For the current year, the impairment charges related to FrontPoint are reported as follows: net revenues: $126 million and non-compensation expenses: $67 million.  For the current quarter, the impairment charges related to FrontPoint are reported as follows: net revenues: $126 million and non-compensation expenses: $9 million.

15 The Firm calculates its Tier 1 capital ratio and risk-weighted assets in accordance with the capital adequacy standards for financial holding companies adopted by the Federal Reserve Board.  These standards are based upon a framework described in the International Convergence of Capital Measurement and Capital Standards, July 1988, as amended, also referred to as Basel I.  These computations are preliminary estimates as of January 20, 2011 (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, 2010.

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MORGAN STANLEY
Quarterly Financial Summary
(unaudited, dollars in millions)
	Quarter Ended									Percentage Change From:				Twelve Months Ended						Percentage
	Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010		Dec 31, 2009		Dec 31, 2010			Dec 31, 2009			Change
Net revenues
Institutional Securities	$	3,618		$	2,895		$	3,231		25	%	12	%	$	16,366		$	12,853		27	%
Global Wealth Management Group		3,353			3,104			3,139		8	%	7	%		12,636			9,390		35	%
Asset Management		858			802			510		7	%	68	%		2,723			1,337		104	%
Intersegment Eliminations		(22	)		(21	)		(44	)	(5	%)	50	%		(103	)		(146	)	29	%
Consolidated net revenues	$	7,807		$	6,780		$	6,836		15	%	14	%	$	31,622		$	23,434		35	%
Income (loss) from continuing operations before tax
Institutional Securities	$	437		$	241		$	461		81	%	(5	%)	$	4,338		$	1,088		*
Global Wealth Management Group		390			281			231		39	%	69	%		1,156			559		107	%
Asset Management		356			279			(37	)	28	%	*			723			(653	)	*
Intersegment Eliminations		0			0			(2	)	--		*			(15	)		(11	)	(36	%)
Consolidated income (loss) from continuing operations before tax	$	1,183		$	801		$	653		48	%	81	%	$	6,202		$	983		*
Income (loss) applicable to Morgan Stanley
Institutional Securities	$	533		$	99		$	418		*		28	%	$	3,747		$	1,393		169	%
Global Wealth Management Group		166			144			29		15	%	*			519			283		83	%
Asset Management		168			71			16		137	%	*			210			(388	)	*
Intersegment Eliminations		0			0			(3	)	--		*			(12	)		(8	)	(50	%)
Consolidated income (loss) applicable to Morgan Stanley	$	867		$	314		$	460		176	%	88	%	$	4,464		$	1,280		*
Earnings (loss) applicable to Morgan Stanley common shareholders	$	600		$	(91	)	$	376		*		60	%	$	3,594		$	(907	)	*
Earnings per basic share:
Income from continuing operations	$	0.44		$	0.07		$	0.18		*		144	%	$	2.48		$	(0.82	)	*
Discontinued operations	$	(0.02	)	$	(0.14	)	$	0.11		86	%	*		$	0.16		$	0.05		*
Earnings per basic share	$	0.42		$	(0.07	)	$	0.29		*		45	%	$	2.64		$	(0.77	)	*
Earnings per diluted share:
Income from continuing operations	$	0.43		$	0.05		$	0.18		*		139	%	$	2.44		$	(0.82	)	*
Discontinued operations	$	(0.02	)	$	(0.12	)	$	0.11		83	%	*		$	0.19		$	0.05		*
Earnings per diluted share	$	0.41		$	(0.07	)	$	0.29		*		41	%	$	2.63		$	(0.77	)	*

Notes:	-	Results include Morgan Stanley Smith Barney (MSSB) effective from May 31, 2009.
	-	Results for the quarters ended Dec 31, 2010, Sept 30, 2010 and Dec 31, 2009 include positive (negative) revenue of $(0.9) billion, $(0.7) billion and $(0.6) billion, respectively, related to the movement in Morgan Stanley's credit spreads on certain long-term debt.  The twelve months ended Dec 31, 2010 and Dec 31, 2009 include positive (negative) revenue of $(0.9) billion and $(5.5) 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.

10

MORGAN STANLEY
Quarterly Consolidated Income Statement Information
(unaudited, dollars in millions)
	Quarter Ended									Percentage Change From:				Twelve Months Ended						Percentage
	Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010		Dec 31, 2009		Dec 31, 2010			Dec 31, 2009			Change
Revenues:
Investment banking	$	1,761		$	1,221		$	1,673		44	%	5	%	$	5,122		$	5,020		2	%
Principal transactions:
Trading		854			1,441			1,173		(41	%)	(27	%)		9,406			7,722		22	%
Investments		688			820			146		(16	%)	*			1,825			(1,034	)	*
Commissions		1,311			1,068			1,247		23	%	5	%		4,947			4,233		17	%
Asset management, distribution and admin. fees		2,080			1,940			1,974		7	%	5	%		7,957			5,884		35	%
Other		861			187			62		*		*			1,501			837		79	%
Total non-interest revenues		7,555			6,677			6,275		13	%	20	%		30,758			22,662		36	%
Interest income		1,944			1,851			1,754		5	%	11	%		7,278			7,477		(3	%)
Interest expense		1,692			1,748			1,193		(3	%)	42	%		6,414			6,705		(4	%)
Net interest		252			103			561		145	%	(55	%)		864			772		12	%
Net revenues		7,807			6,780			6,836		15	%	14	%		31,622			23,434		35	%
Non-interest expenses:
Compensation and benefits		4,061			3,685			3,760		10	%	8	%		16,048			14,434		11	%
Non-compensation expenses:
Occupancy and equipment		380			399			416		(5	%)	(9	%)		1,570			1,542		2	%
Brokerage, clearing and exchange fees		380			332			390		14	%	(3	%)		1,431			1,190		20	%
Information processing and communications		442			412			421		7	%	5	%		1,665			1,372		21	%
Marketing and business development		161			134			153		20	%	5	%		582			501		16	%
Professional services		560			460			531		22	%	5	%		1,911			1,597		20	%
Other		640			557			512		15	%	25	%		2,213			1,815		22	%
Total non-compensation expenses		2,563			2,294			2,423		12	%	6	%		9,372			8,017		17	%
Total non-interest expenses		6,624			5,979			6,183		11	%	7	%		25,420			22,451		13	%
Income (loss) from continuing operations before taxes		1,183			801			653		48	%	81	%		6,202			983		*
Income tax provision / (benefit) from continuing operations		86			(23	)		40		*		115	%		739			(341	)	*
Income (loss) from continuing operations		1,097			824			613		33	%	79	%		5,463			1,324		*
Gain (loss) from discontinued operations after tax		(31	)		(183	)		157		83	%	*			239			82		191	%
Net income (loss)	$	1,066		$	641		$	770		66	%	38	%	$	5,702		$	1,406		*
Net income (loss) applicable to non-controlling interests		230			510			153		(55	%)	50	%		999			60		*
Net income (loss) applicable to Morgan Stanley		836			131			617		*		35	%		4,703			1,346		*
Preferred stock dividend / Other	$	236		$	222		$	241		6	%	(2	%)	$	1,109		$	2,253		(51	%)
Earnings (loss) applicable to Morgan Stanley common shareholders	$	600		$	(91	)	$	376		*		60	%	$	3,594		$	(907	)	*
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		867			314			460		176	%	88	%		4,464			1,280		*
Gain (loss) from discontinued operations after tax		(31	)		(183	)		157		83	%	*			239			66		*
Net income (loss) applicable to Morgan Stanley	$	836		$	131		$	617		*		35	%	$	4,703		$	1,346		*
Pre-tax profit margin		15	%		12	%		10	%						20	%		4	%
Compensation and benefits as a % of net revenues		52	%		54	%		55	%						51	%		62	%
Non-compensation expenses as a % of net revenues		33	%		34	%		35	%						30	%		34	%
Effective tax rate from continuing operations		7.3	%		*			6.1	%						11.9	%		*

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.
	-	For the quarter ended December 31, 2010, discontinued operations primarily included charges related to the Firm's investment in Revel Entertainment Group, LLC (Revel).  For the twelve months ended December 31, 2010, discontinued operations primarily included a gain of $775 million related to a legal settlement with Discover Financial Services and a net gain of approximately $570 million related to the sale and charges related to the Firm's investment in the retail asset management business, including Van Kampen, partly offset by a loss of $1.2 billion related to a reduction in the carrying value of the Firm's investment in Revel and ot her related costs, including operating expenses.
	-	The quarter ended December 31, 2010 included a discrete tax gain of approximately $95 million associated with the repatriation of non-U.S. earnings at a cost lower than originally estimated.  Excluding this discrete tax gain, the effective tax rate for the quarter would have been 15.3%.  The full year ended December 31, 2010 included discrete tax gains of approximately $1.0 billion.  Excluding these gains, the effective tax rate for the full year would have been 28.0%.
	-	Preferred stock dividend / Other includes allocation of earnings to Participating Restricted Stock Units and China Investment Corporation equity units.

11

EX-99.2

Exhibit 99.2

MORGAN STANLEY

Financial Supplement - 4Q 2010

Table of Contents

Page #
1	…………….	Quarterly Financial Summary
2	…………….	Quarterly Consolidated Income Statement Information
3	…………….	Quarterly Earnings Per Share Summary
4 - 5	…………….	Quarterly Consolidated Financial Information and Statistical Data
6	…………….	Quarterly Institutional Securities Income Statement Information
7 - 8	…………….	Quarterly Institutional Securities Financial Information and Statistical Data
9	…………….	Quarterly Global Wealth Management Group Income Statement Information
10	…………….	Quarterly Global Wealth Management Group Financial Information and Statistical Data
11	…………….	Quarterly Asset Management Income Statement Information
12	…………….	Quarterly Asset Management Financial Information and Statistical Data
13	…………….	Earnings Per Share Appendix I
14	…………….	Earnings Per Share Appendix II
15 - 17	…………….	End Notes
18	…………….	Legal Notice

MORGAN STANLEY
Quarterly Financial Summary
(unaudited, dollars in millions)
	Quarter Ended									Percentage Change From:					Twelve Months Ended						Percentage
	Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010			Dec 31, 2009		Dec 31, 2010			Dec 31, 2009			Change
Net revenues
Institutional Securities	$	3,618		$	2,895		$	3,231			25	%	12	%	$	16,366		$	12,853		27	%
Global Wealth Management Group		3,353			3,104			3,139			8	%	7	%		12,636			9,390		35	%
Asset Management		858			802			510			7	%	68	%		2,723			1,337		104	%
Intersegment Eliminations		(22	)		(21	)		(44	)		(5	%)	50	%		(103	)		(146	)	29	%
Consolidated net revenues	$	7,807		$	6,780		$	6,836			15	%	14	%	$	31,622		$	23,434		35	%
Income (loss) from continuing operations before tax
Institutional Securities	$	437		$	241		$	461			81	%	(5	%)	$	4,338		$	1,088		*
Global Wealth Management Group		390			281			231			39	%	69	%		1,156			559		107	%
Asset Management		356			279			(37	)		28		*			723			(653	)	*
Intersegment Eliminations		0			0			(2	)		--		*			(15	)		(11	)	(36	%)
Consolidated income (loss) from continuing operations before tax	$	1,183		$	801		$	653			48	%	81	%	$	6,202		$	983		*
Income (loss) applicable to Morgan Stanley
Institutional Securities	$	533		$	99		$	418			*		28	%	$	3,747		$	1,393		169	%
Global Wealth Management Group		166			144			29			15	%	*			519			283		83	%
Asset Management		168			71			16			137	%	*			210			(388	)	*
Intersegment Eliminations		0			0			(3	)		--		*			(12	)		(8	)	(50	%)
Consolidated income (loss) applicable to Morgan Stanley	$	867		$	314		$	460			176	%	88	%	$	4,464		$	1,280		*

Notes:	-	Results include Morgan Stanley Smith Barney (MSSB) effective from May 31, 2009.
	-	Results for the quarters ended Dec 31, 2010, Sept 30, 2010 and Dec 31, 2009 include positive (negative) revenue of $(0.9) billion, $(0.7) billion and $(0.6) billion, respectively, related to the  movement in Morgan Stanley's credit spreads on certain long-term debt. The twelve months ended Dec. 31, 2010 and Dec. 31, 2009 include positive (negative) revenue of  $(0.9) billion and $(5.5) 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.
	-	Refer to Legal Notice on page 18.

1

MORGAN STANLEY
Quarterly Consolidated Income Statement Information
(unaudited, dollars in millions)
	Quarter Ended									Percentage Change From:				Twelve Months Ended						Percentage
	Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010		Dec 31, 2009		Dec 31, 2010			Dec 31, 2009			Change
Revenues:
Investment banking	$	1,761		$	1,221		$	1,673		44	%	5	%	$	5,122		$	5,020		2	%
Principal transactions:
Trading		854			1,441			1,173		(41	%)	(27	%)		9,406			7,722		22	%
Investments		688			820			146		(16	%)	*			1,825			(1,034	)	*
Commissions		1,311			1,068			1,247		23	%	5	%		4,947			4,233		17	%
Asset management, distribution and admin. fees		2,080			1,940			1,974		7	%	5	%		7,957			5,884		35	%
Other		861			187			62		*		*			1,501			837		79	%
Total non-interest revenues		7,555			6,677			6,275		13	%	20	%		30,758			22,662		36	%
Interest income		1,944			1,851			1,754		5	%	11	%		7,278			7,477		(3	%)
Interest expense		1,692			1,748			1,193		(3	%)	42	%		6,414			6,705		(4	%)
Net interest		252			103			561		145	%	(55	%)		864			772		12	%
Net revenues		7,807			6,780			6,836		15	%	14	%		31,622			23,434		35	%
Non-interest expenses:
Compensation and benefits		4,061			3,685			3,760		10	%	8	%		16,048			14,434		11	%
Non-compensation expenses:
Occupancy and equipment		380			399			416		(5	%)	(9	%)		1,570			1,542		2	%
Brokerage, clearing and exchange fees		380			332			390		14	%	(3	%)		1,431			1,190		20	%
Information processing and communications		442			412			421		7	%	5	%		1,665			1,372		21	%
Marketing and business development		161			134			153		20	%	5	%		582			501		16	%
Professional services		560			460			531		22	%	5	%		1,911			1,597		20	%
Other		640			557			512		15	%	25	%		2,213			1,815		22	%
Total non-compensation expenses		2,563			2,294			2,423		12	%	6	%		9,372			8,017		17	%
Total non-interest expenses		6,624			5,979			6,183		11	%	7	%		25,420			22,451		13	%
Income (loss) from continuing operations before taxes		1,183			801			653		48	%	81	%		6,202			983		*
Income tax provision / (benefit) from continuing operations		86			(23	)		40		*		115	%		739			(341	)	*
Income (loss) from continuing operations		1,097			824			613		33	%	79	%		5,463			1,324		*
Gain (loss) from discontinued operations after tax		(31	)		(183	)		157		83	%	*			239			82		191	%
Net income (loss)	$	1,066		$	641		$	770		66	%	38	%	$	5,702		$	1,406		*
Net income (loss) applicable to non-controlling interests		230			510			153		(55	%)	50	%		999			60		*
Net income (loss) applicable to Morgan Stanley		836			131			617		*		35	%		4,703			1,346		*
Preferred stock dividend / Other	$	236		$	222		$	241		6	%	(2	%)	$	1,109		$	2,253		(51	%)
Earnings (loss) applicable to Morgan Stanley common shareholders	$	600		$	(91	)	$	376		*		60	%	$	3,594		$	(907	)	*
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		867			314			460		176	%	88	%		4,464			1,280		*
Gain (loss) from discontinued operations after tax		(31	)		(183	)		157		83	%	*			239			66		*
Net income (loss) applicable to Morgan Stanley	$	836		$	131		$	617		*		35	%	$	4,703		$	1,346		*
Pre-tax profit margin		15	%		12	%		10	%						20	%		4	%
Compensation and benefits as a % of net revenues		52	%		54	%		55	%						51	%		62	%
Non-compensation expenses as a % of net revenues		33	%		34	%		35	%						30	%		34	%
Effective tax rate from continuing operations		7.3	%		*			6.1	%						11.9	%		*

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.
	-	For the quarter ended December 31, 2010, discontinued operations primarily included charges related to the Firm's investment in Revel Entertainment Group, LLC (Revel).  For the twelve months ended December 31, 2010, discontinued operations primarily included a gain of $775 million related to a legal settlement with Discover Financial Services and a net gain of approximately $570 million related to the sale and charges related to the Firm's investment in the retail asset management business, including Van Kampen, partly offset by a loss of $1.2 billion related to a reduction in the carrying value of the Firm's investment in Revel and other related costs, including operati ng expenses.
	-	The quarter ended December 31, 2010 included a discrete tax gain of approximately $95 million associated with the repatriation of non-U.S. earnings at a cost lower than originally estimated.  Excluding this discrete tax gain, the effective tax rate for the quarter would have been 15.3%.  The full year ended December 31, 2010 included discrete tax gains of approximately $1.0 billion.  Excluding these gains, the effective tax rate for the full year would have been 28.0%.
	-	Preferred stock dividend / Other includes allocation of earnings to Participating Restricted Stock Units (RSUs) and China Investment Corporation (CIC) equity units.
	-	Refer to Legal Notice on page 18.

2

MORGAN STANLEY
Earnings Per Share
(unaudited, in millions, except for per share data)
	Quarter Ended									Twelve Months Ended
	Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Dec 31, 2010			Dec 31, 2009
Income (loss) from continuing operations		1,097			824			613			5,463			1,324
Net income (loss) from continuing operations applicable to non-controlling interest		230			510			153			999			44
Income from continuing operations applicable to Morgan Stanley		867			314			460			4,464			1,280
Less: Preferred Dividends		(221	)		(220	)		(221	)		(881	)		(2,243	)
Income from continuing operations applicable to Morgan Stanley, prior to allocation of income to CIC Equity Units and Participating Restricted Stock Units		646			94			239			3,583			(963	)
Basic EPS Adjustments:
Less: Allocation of  undistributed earnings to CIC Equity Units		0			0			0			(101	)		0
Less: Allocation of  earnings to Participating Restricted Stock Units		(16	)		(3	)		(11	)		(108	)		(10	)
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	630		$	91		$	228		$	3,374		$	(973	)
Gain (loss) from discontinued operations after tax		(31	)		(183	)		157			239			82
Gain (loss) from discontinued operations after tax applicable to non-controlling interests		0			0			0			0			(16	)
Gain (loss) from discontinued operations after tax applicable to Morgan Stanley		(31	)		(183	)		157			239			66
Less: Allocation of  undistributed earnings to CIC Equity Units		0			0			(2	)		(12	)		0
Less: Allocation of  earnings to Participating Restricted Stock Units		1			1			(7	)		(7	)		0
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		(30	)		(182	)		148			220			66
Earnings (loss) applicable to Morgan Stanley common shareholders	$	600		$	(91	)	$	376		$	3,594		$	(907	)
Average basic common shares outstanding (millions)		1,437			1,377			1,297			1,362			1,185
Earnings per basic share:
Income from continuing operations	$	0.44		$	0.07		$	0.18		$	2.48		$	(0.82	)
Discontinued operations	$	(0.02	)	$	(0.14	)	$	0.11		$	0.16		$	0.05
Earnings per basic share	$	0.42		$	(0.07	)	$	0.29		$	2.64		$	(0.77	)
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	630		$	91		$	228		$	3,374		$	(973	)
Diluted EPS Adjustments:
Income impact of assumed conversions:
Preferred stock dividends (Series B - Mitsubishi)		0			0			0			0			0
Assumed conversion of CIC (1)		0			(16	)		0			75			0
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	630		$	75		$	228		$	3,449		$	(973	)
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		(30	)		(182	)		148			220			66
Assumed conversion of CIC (1)		0			0			0			41			0
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		(30	)		(182	)		148			261			66
Earnings (loss) applicable to common shareholders plus assumed conversions	$	600		$	(107	)	$	376		$	3,710		$	(907	)
Average diluted common shares outstanding and common stock equivalents (millions) (1)		1,448			1,443			1,297			1,411			1,185
Earnings per diluted share:
Income from continuing operations	$	0.43		$	0.05		$	0.18		$	2.44		$	(0.82	)
Discontinued operations	$	(0.02	)	$	(0.12	)	$	0.11		$	0.19		$	0.05
Earnings per diluted share	$	0.41		$	(0.07	)	$	0.29		$	2.63		$	(0.77	)

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 15-17 and Legal Notice on page 18.

3

MORGAN STANLEY
Quarterly Consolidated Financial Information and Statistical Data
(unaudited)
	Quarter Ended									Percentage Change From:				Twelve Months Ended				Percentage
	Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010		Dec 31, 2009		Dec 31, 2010		Dec 31, 2009		Change
Morgan Stanley
Regional revenue (1)
Americas	$	5,024		$	4,777		$	5,654		5	%	(11	%)	$	21,674	$	18,909	15	%
EMEA (Europe, Middle East, Africa)		900			1,002			768		(10	%)	17	%		5,628		2,529	123	%
Asia		1,883			1,001			414		88	%	*			4,320		1,996	116	%
Consolidated net revenues	$	7,807		$	6,780		$	6,836		15	%	14	%	$	31,622	$	23,434	35	%
Worldwide employees		62,542			62,864			60,494		(1	%)	3	%
Total assets	$	807,698		$	841,372		$	771,462		(4	%)	5	%
Firmwide Deposits		63,812			61,202			62,215		4	%	3	%
Consolidated assets under management or supervision (billions):
Asset Management		279			273			266		2	%	5	%
Global Wealth Management		477			449			379		6	%	26	%
Total		756			722			645		5	%	17	%
Common equity		47,614			47,279			37,091		1	%	28	%
Preferred equity		9,597			9,597			9,597		--		--
Morgan Stanley shareholders' equity		57,211			56,876			46,688		1	%	23	%
Junior subordinated debt issued to capital trusts		4,817			4,822			10,594		--		(55	%)
Less: Goodwill and intangible assets (2)		(6,947	)		(7,091	)		(7,612	)	2	%	9	%
Tangible Morgan Stanley shareholders' equity	$	55,081		$	54,607		$	49,670		1	%	11	%
Tangible common equity	$	40,667		$	40,188		$	29,479		1	%	38	%
Leverage Ratio		14.7	x		15.4	x		15.5	x
Aggregate trading and non-trading Value-at-Risk (pre-tax) (3)	$	171		$	189		$	187
Return on average common equity
from continuing operations		5.4	%		0.9	%		2.6	%
Return on average common equity		5.2	%		*			4.3	%
Period end common shares outstanding (000's)		1,512,022			1,512,990			1,360,595		--		11	%
Book value per common share (4)	$	31.49		$	31.25		$	27.26		1	%	16	%
Tangible book value per common share	$	26.90		$	26.56		$	21.67		1	%	24	%

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

4

MORGAN STANLEY

Quarterly Consolidated Financial Information and Statistical Data

(unaudited)

	Quarter Ended (Billions)
	Dec 31, 2010							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			Average tier 1 capital (1)		Average common equity (1)		Return on average common equity
Institutional Securities	$	25.9	$	18.6		9	%	$	26.3	$	17.3		*		$	26.8	$	17.8		29	%	$	24.9	$	17.3		38	%
Global Wealth Management Group		2.9		6.8		9	%		2.5		6.6		8	%		3.0		6.8		6	%		3.0		6.9		5	%
Asset Management		2.0		2.2		29	%		2.0		2.2		12	%		1.6		2.0		*			1.9		2.2		2	%
Parent capital		22.3		19.8					22.8		18.0					20.0		13.0					18.7		11.2
Total - continuing operations		53.1		47.4		5	%		53.6		44.1		1	%		51.4		39.6		12	%		48.5		37.6		17	%
Discontinued operations		0.0		0.0					0.1		0.1					0.2		0.4					0.2		0.5
Firm	$	53.1	$	47.4		5	%	$	53.7	$	44.2		*		$	51.6	$	40.0		17	%	$	48.7	$	38.1		16	%
	Twelve Months Ended (Billions)
	Dec 31, 2010
	Average tier 1 capital (1)		Average common equity (1)		Return on average common equity
Institutional Securities	$	26.0	$	17.7		19	%
Global Wealth Management Group		2.9		6.8		7	%
Asset Management		1.9		2.1		9	%
Parent capital		20.7		15.5
Total - continuing operations		51.5		42.1		8	%
Discontinued operations		0.1		0.3
Firm	$	51.6	$	42.4		9	%

Notes:	-	Excluding the effect of the discrete tax benefits in the quarters ended December 31, 2010, June 30, 2010 and March 31, 2010, the return on average common equity for Institutional Securities would have been 7%, 22% and 30%, respectively.
	-	The Firm's estimation of 2010 quarterly segment capital is based on the Required Capital framework, an internal capital adequacy measure.  Quarterly segment capital for 2009, however, has not been recast under this framework. As a result, the 2009 quarterly and full year business segment return on average common equity from continuing operations is not available.
	-	Refer to End Notes on pages 15-17 and Legal Notice on page 18.

5

MORGAN STANLEY

Quarterly Institutional Securities Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:				Twelve Months Ended						Percentage
	Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010		Dec 31, 2009		Dec 31, 2010			Dec 31, 2009			Change
Revenues:
Investment banking	$	1,515		$	1,008		$	1,480		50	%	2	%	$	4,295		$	4,455		(4	%)
Principal transactions:
Trading		530			1,090			826		(51	%)	(36	%)		8,154			6,591		24	%
Investments		316			387			69		(18	%)	*			809			(864	)	*
Commissions		573			504			543		14	%	6	%		2,274			2,152		6	%
Asset management, distribution and admin. fees		24			15			24		60	%	--			104			98		6	%
Other		733			70			(27	)	*		*			996			545		83	%
Total non-interest revenues		3,691			3,074			2,915		20	%	27	%		16,632			12,977		28	%
Interest income		1,584			1,538			1,462		3	%	8	%		5,877			6,373		(8	%)
Interest expense		1,657			1,717			1,146		(3	%)	45	%		6,143			6,497		(5	%)
Net interest		(73	)		(179	)		316		59	%	*			(266	)		(124	)	(115	%)
Net revenues		3,618			2,895			3,231		25	%	12	%		16,366			12,853		27	%
Compensation and benefits		1,785			1,490			1,484		20	%	20	%		7,081			7,212		(2	%)
Non-compensation expenses		1,396			1,164			1,286		20	%	9	%		4,947			4,553		9	%
Total non-interest expenses		3,181			2,654			2,770		20	%	15	%		12,028			11,765		2	%
Income (loss) from continuing operations before taxes		437			241			461		81	%	(5	%)		4,338			1,088		*
Income tax provision / (benefit) from continuing operations		(118	)		(131	)		36		10	%	*			301			(301	)	*
Income (loss) from continuing operations		555			372			425		49	%	31	%		4,037			1,389		191	%
Gain (loss) from discontinued operations after tax		(36	)		(202	)		(80	)	82	%	55	%		(1,201	)		167		*
Net income (loss)		519			170			345		*		50	%		2,836			1,556		82	%
Net income (loss) applicable to non-controlling interests		22			273			7		(92	%)	*			290			12		*
Net income (loss) applicable to Morgan Stanley	$	497		$	(103	)	$	338		*		47	%	$	2,546		$	1,544		65	%
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		533			99			418		*		28	%		3,747			1,393		169	%
Gain (loss) from discontinued operations after tax		(36	)		(202	)		(80	)	82	%	55	%		(1,201	)		151		*
Net income (loss) applicable to Morgan Stanley	$	497		$	(103	)	$	338		*		47	%	$	2,546		$	1,544		65	%
Return on average common equity
from continuing operations		9	%		*			N/A							19	%		N/A
Pre-tax profit margin		12	%		8	%		14	%						27	%		9	%
Compensation and benefits as a % of net revenues		49	%		52	%		46	%						43	%		56	%

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 December 31, 2010, discontinued operations primarily included the charges related to the Firm's investment in Revel.  For the twelve months ended December 31, 2010, discontinued operations primarily included a loss of $1.2 billion related to a reduction in the carrying value of the Firm's investment in Revel and other related costs, including operating expenses.
	-	The Firm's estimation of 2010 quarterly segment capital is based on the Required Capital framework, an internal capital adequacy measure.  Quarterly segment capital for 2009, however, has not been recast under this framework.  As a result, the 2009 quarterly and full year business segment return on average common equity from continuing operations is not available.
	-	Refer to Legal Notice on page 18.

6

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, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010		Dec 31, 2009		Dec 31, 2010			Dec 31, 2009			Change
Investment Banking
Advisory revenue	$	484		$	371		$	530		30	%	(9	%)	$	1,470		$	1,488		(1	%)
Underwriting revenue
Equity		661			260			627		154	%	5	%		1,454			1,695		(14	%)
Fixed income		370			377			323		(2	%)	15	%		1,371			1,272		8	%
Total underwriting revenue	$	1,031		$	637		$	950		62	%	9	%	$	2,825		$	2,967		(5	%)
Total investment banking revenue	$	1,515		$	1,008		$	1,480		50	%	2	%	$	4,295		$	4,455		(4	%)
Sales & Trading
Equity	$	1,081		$	925		$	774		17	%	40	%	$	4,840		$	3,690		31	%
Fixed income		(29	)		847			663		*		*			5,867			4,854		21	%
Other		2			(342	)		272		*		(99	%)		(441	)		173		*
Total sales & trading net revenue	$	1,054		$	1,430		$	1,709		(26	%)	(38	%)	$	10,266		$	8,717		18	%
Investments & Other
Investments	$	316		$	387		$	69		(18	%)	*		$	809		$	(864	)	*
Other		733			70			(27	)	*		*			996			545		83	%
Total investments & other revenue	$	1,049		$	457		$	42		130	%	*		$	1,805		$	(319	)	*
Total Institutional Securities net revenues	$	3,618		$	2,895		$	3,231		25	%	12	%	$	16,366		$	12,853		27	%
Average Daily 95% / One-Day Value-at-Risk ("VaR") (1)
Primary Market Risk Category ($ millions, pre-tax)
Interest rate and credit spread	$	120		$	137		$	136
Equity price	$	31		$	28		$	25
Foreign exchange rate	$	22		$	18		$	28
Commodity price	$	26		$	32		$	23
Trading VaR	$	132		$	142		$	152

Note:	-	Other revenue for the quarter ended December 31, 2010 includes a gain of $668 million on the sale of the Firm's investment in China International Capital Corporation Limited (CICC).
	-	Refer to End Notes on pages 15-17 and Legal Notice on page 18.

7

MORGAN STANLEY

Quarterly Financial Information and Statistical Data

Institutional Securities - Corporate Lending

(unaudited, dollars in billions)

	Quarter Ended									Percentage Change From:
	Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010		Dec 31, 2009
Corporate funded loans
Investment grade	$	3.9		$	4.6		$	6.5		(15	%)	(40	%)
Non-investment grade		6.8			6.8			9.6		--		(29	%)
Total corporate funded loans	$	10.7		$	11.4		$	16.1		(6	%)	(34	%)
Corporate lending commitments
Investment grade	$	44.5		$	47.7		$	40.7		(7	%)	9	%
Non-investment grade		13.9			12.6			7.2		10	%	93	%
Total corporate lending commitments	$	58.4		$	60.3		$	47.9		(3	%)	22	%
Corporate funded loans plus lending commitments
Investment grade	$	48.4		$	52.3		$	47.2		(7	%)	3	%
Non-investment grade	$	20.7		$	19.4		$	16.8		7	%	23	%
% investment grade		70	%		73	%		74	%
% non-investment grade		30	%		27	%		26	%
Total corporate funded loans and lending commitments	$	69.1		$	71.7		$	64.0		(4	%)	8	%
Hedges	$	21.0		$	21.3		$	25.8		(1	%)	(19	%)

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 Dec 31, 2010, Sept 30, 2010 and Dec 31, 2009, the leveraged acquisition finance portfolio of pipeline commitments and closed deals to non-investment grade borrowers were $4.9 billion, $4.0 billion and $3.7 billion, respectively.
	-	The hedge balance reflects the notional amount utilized by the lending business.
	-	Refer to Legal Notice on page 18.

8

MORGAN STANLEY

Quarterly Global Wealth Management Group Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:				Twelve Months Ended						Percentage
	Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010		Dec 31, 2009		Dec 31, 2010			Dec 31, 2009			Change
Revenues:
Investment banking	$	242		$	211		$	202		15	%	20	%	$	827		$	596		39	%
Principal transactions:
Trading		329			386			313		(15	%)	5	%		1,306			1,208		8	%
Investments		8			5			6		60	%	33	%		19			3		*
Commissions		738			564			707		31	%	4	%		2,676			2,090		28	%
Asset management, distribution and admin. fees		1,620			1,529			1,682		6	%	(4	%)		6,349			4,583		39	%
Other		75			107			83		(30	%)	(10	%)		337			249		35	%
Total non-interest revenues		3,012			2,802			2,993		7	%	1	%		11,514			8,729		32	%
Interest income		457			404			296		13	%	54	%		1,587			1,114		42	%
Interest expense		116			102			150		14	%	(23	%)		465			453		3	%
Net interest		341			302			146		13	%	134	%		1,122			661		70	%
Net revenues		3,353			3,104			3,139		8	%	7	%		12,636			9,390		35	%
Compensation and benefits		1,995			1,910			1,965		4	%	2	%		7,843			6,114		28	%
Non-compensation expenses		968			913			943		6	%	3	%		3,637			2,717		34	%
Total non-interest expenses		2,963			2,823			2,908		5	%	2	%		11,480			8,831		30	%
Income (loss) from continuing operations before taxes		390			281			231		39	%	69	%		1,156			559		107	%
Income tax provision / (benefit) from continuing operations		118			93			69		27	%	71	%		336			178		89	%
Income (loss) from continuing operations		272			188			162		45	%	68	%		820			381		115	%
Gain (loss) from discontinued operations after tax		0			0			0		--		--			0			0		--
Net income (loss)		272			188			162		45	%	68	%		820			381		115	%
Net income (loss) applicable to non-controlling interests		106			44			133		141	%	(20	%)		301			98		*
Net income (loss) applicable to Morgan Stanley	$	166		$	144		$	29		15	%	*		$	519		$	283		83	%
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		166			144			29		15	%	*			519			283		83	%
Gain (loss) from discontinued operations after tax		0			0			0		--		--			0			0		--
Net income (loss) applicable to Morgan Stanley	$	166		$	144		$	29		15	%	*		$	519		$	283		83	%
Return on average common equity
from continuing operations		9	%		8	%		N/A							7	%		N/A
Pre-tax profit margin		12	%		9	%		7	%						9	%		6	%
Compensation and benefits as a % of net revenues		59	%		62	%		63	%						62	%		65	%

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.
	-	The Firm's estimation of 2010 quarterly segment capital is based on the Required Capital framework, an internal capital adequacy measure.  Quarterly segment capital for 2009, however, has not been recast under this framework.  As a result, the 2009 quarterly and full year business segment return on average common equity from continuing operations is not available.
	-	Refer to Legal Notice on page 18.

9

MORGAN STANLEY

Quarterly Financial Information and Statistical Data

Global Wealth Management Group

(unaudited)

		Quarter Ended									Percentage Change From:
		Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010		Dec 31, 2009
Global representatives			18,043			18,119			18,135		--		(1	%)
Annualized revenue per global
	representative (000's)	$	742		$	686		$	692		8	%	7	%
Assets by client segment (billions)
	$10m or more		522			485			453		8	%	15	%
	$1m - $10m		707			678			637		4	%	11	%
Subtotal - > $1m			1,229			1,163			1,090		6	%	13	%
	$100k - $1m		399			397			418		1	%	(5	%)
	< $100k		41			43			52		(5	%)	(21	%)
Total client assets (billions)		$	1,669		$	1,603		$	1,560		4	%	7	%
% of assets by client segment > $1m			74	%		73	%		70	%
Fee-based client account assets (billions)		$	470		$	437		$	379		8	%	24	%
Fee-based assets as a % of client assets			28	%		27	%		24	%
Bank deposit program (millions)		$	113,325		$	108,701		$	112,490		4	%	1	%
Client assets per global
	representative (millions)	$	93		$	88		$	86		6	%	8	%
Global retail net new assets (billions)
	Domestic	$	11.5		$	2.4		$	(6.8	)	*		*
	International	$	2.6		$	2.6			N/A		--		*
Total retail net new assets (1)		$	14.1		$	5.0		$	(6.8	)	181	%	*
Global fee based asset flows (billions)		$	12.5		$	4.8		$	5.1		160	%	145	%
Global retail locations (1)			851			867			895		(2	%)	(5	%)

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 the quarters ended Dec 31, 2010, Sept 30, 2010 and Dec 31, 2009, approximately $55 billion, $52 billion, and $54 billion, respectively, of the assets in the bank deposit program are attributable to Morgan Stanley.
	-	Global fee-based asset flows represents the net asset flows, excluding interest and dividends, in client accounts where the basis of payment for services is a fee calculated on those assets.
	-	Client assets per global representative represents total client assets divided by period end global representative headcount.
	-	Refer to End Notes on pages 15-17 and Legal Notice on page 18.

10

MORGAN STANLEY

Quarterly Asset Management Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Twelve Months Ended						Percentage
	Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010			Dec 31, 2009			Dec 31, 2010			Dec 31, 2009			Change
Revenues:
Investment banking	$	11		$	2		$	2			*			*		$	20		$	10			100	%
Principal transactions:
Trading		(4	)		(34	)		41			88	%		*			(49	)		(68	)		28	%
Investments (1)		364			427			71			(15	%)		*			996			(173	)		*
Commissions		0			0			0			--			--			0			0			--
Asset management, distribution and admin. fees		456			415			411			10	%		11	%		1,668			1,605			4	%
Other		46			12			8			*			*			164			46			*
Total non-interest revenues		873			822			533			6	%		64	%		2,799			1,420			97	%
Interest income		4			9			1			(56	%)		*			22			17			29	%
Interest expense		19			29			24			(34	%)		(21	%)		98			100			(2	%)
Net interest		(15	)		(20	)		(23	)		25	%		35	%		(76	)		(83	)		8	%
Net revenues		858			802			510			7	%		68	%		2,723			1,337			104	%
Compensation and benefits		281			285			310			(1	%)		(9	%)		1,123			1,104			2	%
Non-compensation expenses		221			238			237			(7	%)		(7	%)		877			886			(1	%)
Total non-interest expenses		502			523			547			(4	%)		(8	%)		2,000			1,990			1	%
Income (loss) from continuing operations before taxes		356			279			(37	)		28	%		*			723			(653	)		*
Income tax provision / (benefit) from continuing operations		86			15			(66	)		*			*			105			(215	)		*
Income (loss) from continuing operations		270			264			29			2	%		*			618			(438	)		*
Gain (loss) from discontinued operations after tax		5			19			229			(74	%)		(98	%)		659			(99	)		*
Net income (loss)		275			283			258			(3	%)		7	%		1,277			(537	)		*
Net income (loss) applicable to non-controlling interests (1)		102			193			13			(47	%)		*			408			(50	)		*
Net income (loss) applicable to Morgan Stanley	$	173		$	90		$	245			92	%		(29	%)	$	869		$	(487	)		*
Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		168			71			16			137	%		*			210			(388	)		*
Gain (loss) from discontinued operations after tax		5			19			229			(74	%)		(98	%)		659			(99	)		*
Net income (loss) applicable to Morgan Stanley	$	173		$	90		$	245			92	%		(29	%)	$	869		$	(487	)		*
Return on average common equity
from continuing operations		29	%		12	%		N/A									9	%		N/A
Pre-tax profit margin		41	%		35	%		*									27	%		*
Compensation and benefits as a % of net revenues		33	%		36	%		61	%								41	%		83	%

Notes:	-	For the twelve months ended December 31, 2010, the gain (loss) from discontinued operations primarily included the operating results and gain on sale of substantially all of the retail asset management business, including Van Kampen.
	-	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 Firm's estimation of 2010 quarterly segment capital is based on the Required Capital framework, an internal capital adequacy measure.  Quarterly segment capital for 2009, however, has not been recast under this framework.  As a result, the 2009 quarterly and full year business segment return on average common equity from continuing operations is not available.
	-	Refer to End Notes on pages 15-17 and Legal Notice on page 18.

11

MORGAN STANLEY

Quarterly Financial Information and Statistical Data

Asset Management

(unaudited, dollars in billions)

	Quarter Ended									Percentage Change From:				Twelve Months Ended						Percentage
	Dec 31, 2010			Sept 30, 2010			Dec 31, 2009			Sept 30, 2010		Dec 31, 2009		Dec 31, 2010			Dec 31, 2009			Change
Assets under management or supervision
Net flows by asset class
Core Asset Management
Equity	$	(0.1	)	$	0.9		$	(0.7	)	*		86	%	$	(1.3	)	$	(7.7	)	83	%
Fixed income - Long Term		(0.6	)		(0.3	)		1.4		(100	%)	*			0.6			(6.5	)	*
Money Market		1.3			1.5			7.3		(13	%)	(82	%)		(5.5	)		(21.6	)	75	%
Alternatives		(1.0	)		(0.5	)		1.3		(100	%)	*			(1.7	)		(3.5	)	51	%
Total Core Asset Management		(0.4	)		1.6			9.3		*		*			(7.9	)		(39.3	)	80	%
Merchant Banking
Private Equity		0.0			0.1			0.8		*		*			0.5			0.4		25	%
Infrastructure		0.0			0.0			0.0		--		--			0.0			0.0		--
Real Estate		(0.2	)		1.2			0.2		*		*			1.7			(2.2	)	*
Total Merchant Banking		(0.2	)		1.3			1.0		*		*			2.2			(1.8	)	*
Total net flows	$	(0.6	)	$	2.9		$	10.3		*		*		$	(5.7	)	$	(41.1	)	86	%
Assets under management or supervision by asset class
Core Asset Management
Equity	$	92		$	86		$	81		7	%	14	%
Fixed income - Long Term		59			61			54		(3	%)	9	%
Money Market		53			52			59		2	%	(10	%)
Alternatives		43			43			42		--		2	%
Total Core Asset Management		247			242			236		2	%	5	%
Merchant Banking
Private Equity		5			5			4		--		25	%
Infrastructure		4			4			4		--		--
Real Estate		16			15			15		7	%	7	%
Total Merchant Banking		25			24			23		4	%	9	%
Total Assets Under Management or Supervision	$	272		$	266		$	259		2	%	5	%
Share of minority stake assets		7			7			7		--		--
Total	$	279		$	273		$	266		2	%	5	%

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 Dec 31, 2010, Sept 30, 2010 and Dec 31, 2009 are:
		U.S.: $(1.8) billion, $(0.5) billion and $6.7 billion
		Non-U.S.: $1.2 billion, $3.4 billion and $3.6 billion
	-	Assets under management or supervision by region for the quarters ended Dec 31, 2010, Sept 30, 2010 and Dec 31, 2009 are:
		U.S.: $178 billion, $174 billion and $176 billion
		Non-U.S.: $94 billion, $92 billion and $83 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 18.

12

This page represents an addendum to the 4Q 2010 Financial Supplement, Appendix I

MORGAN STANLEY

Earnings Per Share Calculation Under Two-Class Method

Three Months Ended Dec 31, 2010

(unaudited, in millions, except for per share data)

	Allocation of net income from continuing operations
	(A)	(B)	(C)	(D)	(E)	(F)	(H)
						(D)+(E)	(F)/(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	1,437	97%		$72	$558	$630(6)	$0.44
Participating Restricted Stock Units (1)	39	3%		$2	$14	$16(7)	N/A
	1,476	100%	$646	$74	$572	$646
	Allocation of gain (loss) from discontinued operations
	(A)	(B)	(C)	(D)	(E)	(F)	(H)
						(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	1,437	97%		$0	($30)	($30)(6)	($0.02)
Participating Restricted Stock Units (1)	39	3%		$0	($1)	($1)(7)	N/A
	1,476	100%	($31)	$0	($31)	($31)
	Allocation of net income applicable to common shareholders
	(A)	(B)	(C)	(D)	(E)	(F)	(H)
						(D)+(E)	(F)/(A)
	Weighted 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	1,437	97%		$72	$528	$600(6)	$0.42
Participating Restricted Stock Units (1)	39	3%		$2	$13	$15(7)	N/A
	1,476	100%	$615	$74	$541	$615

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

13

This page represents an addendum to the 4Q 2010 Financial Supplement, Appendix II

MORGAN STANLEY

Earnings Per Share Calculation Under Two-Class Method

Twelve Months Ended Dec 31, 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	1,362	92%		$270	$1,201	$1,903	$3,374(7)	$2.48
Participating Restricted Stock Units (1)	43	3%		$9	$38	$61	$108(8)	N/A
CIC Equity Units (2)	72	5%		$0	$0	$101	$101(9)	N/A
	1,477	100%	$3,583	$279	$1,239	$2,065	$3,583
	Allocation of gain (loss) from discontinued operations
	(A)	(B)	(C)	(D)	(E)	(F)	(G)	(H)
							(D)+(E)+(F)	(G)/(A)
	Weighted Average # of Shares	% Allocation (3)	Gain (loss) 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	1,362	92%		$0	$0	$220	$220(7)	$0.16
Participating Restricted Stock Units (1)	43	3%		$0	$0	$7	$7(8)	N/A
CIC Equity Units (2)	72	5%		$0	$0	$12	$12(9)	N/A
	1,477	100%	$239	$0	$0	$239	$239
	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	1,362	92%		$270	$1,201	$2,123	$3,594(7)	$2.64
Participating Restricted Stock Units (1)	43	3%		$9	$38	$68	$115(8)	N/A
CIC Equity Units (2)	72	5%		$0	$0	$113	$113(9)	N/A
	1,477	100%	$3,822	$279	$1,239	$2,304	$3,822

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

14

MORGAN STANLEY

End Notes

Page 3:
(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 for the quarter ended December 31, 2010. 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.
Page 4:
(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 sub stantially 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 Dec 31, 2010, Sept 30, 2010 and Dec 31, 2009 of $141 million, $125 million and $123 million, respectively.
(3)	Represents average daily 95% / one-day value-at-risk ("VaR").  Includes non-trading VaR for the quarters ended Dec 31, 2010, Sept 30, 2010 and Dec 31, 2009 of $95 million, $103 million and $72 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 7 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 CIC equity units into 116 million shares of common stock in August 2010.
Page 5:
(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 a n 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 7:
(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.

15

MORGAN STANLEY

End Notes

Page 10:
(1)	Beginning in 2010, the retail net new assets and retail locations metrics have been expanded to include the non-U.S. businesses.  The quarter ended Dec 31, 2010 includes $2.6 billion of net new money inflows and 29 retail locations, respectively related to non-U.S. businesses.  The quarter ended Sept 30, 2010 includes $2.6 billion of net new money inflows and 29 retail locations, respectively related to non-U.S. 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 December 31, 2009 has been recast to exclude $2.1 billion of these legacy net new money inflows.
Page 11:
(1)	The quarter and twelve months ended Dec 31, 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 13:
(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)	The percentage of weighted basic common shares and participating RSUs to the total weighted average of basic common shares and participating RSUs.
(3)	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 Dec 31, 2010 prior to allocations to participating RSUs and CIC Equity Units.
(4)	Distributed earnings represent the dividends declared on common shares and participating RSUs, respectively, for the quarter ended Dec 31, 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 Dec 31, 2010, a $0.05 dividend was declared on common shares outstanding and participating RSUs.
(5)	The two-class method assumes all of the earnings for the reporting period are distributed and allocates to the participating RSUs what they would be entitled to based on the contractual rights and obligations of the participating security.
(6)	Total income applicable to common shareholders to be allocated to the common shares in calculating basic and diluted EPS for common shares.
(7)	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.
(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.

16

MORGAN STANLEY

End Notes

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.
(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 year ended Dec 31, 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 year ended Dec 31, 2010.  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 participate via an increase in the number of shares the Firm will be required to deliver upon settlement of the contract.  No cash dividends were paid to the CIC Equity Units prior to settlement of the contract.  Therefore, no distributed earnings were 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. Assumi ng the reference dividend of $0.27 per quarter 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.
(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.
(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.
(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.

17

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 press release issued January 20, 2011.

18