a6686841.htm

0001157523-11-002156.txt : 20110421 0001157523-11-002156.hdr.sgml : 20110421 20110421071527 ACCESSION NUMBER: 0001157523-11-002156 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20110421 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20110421 DATE AS OF CHANGE: 20110421 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY CENTRAL INDEX KEY: 0000895421 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 363145972 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11758 FILM NUMBER: 11771969 BUSINESS ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 212-761-4000 MAIL ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY DEAN WITTER & CO DATE OF NAME CHANGE: 19980326 FORMER COMPANY: FORMER CONFORMED NAME: DEAN WITTER DISCOVER & CO DATE OF NAME CHANGE: 19960315 8-K 1 a6686841.htm MORGAN STANLEY 8-K a6686841.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 21, 2011

Morgan Stanley

(Exact name of Registrant as specified

in its charter)

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

1585 Broadway, New York, New York 10036

(Address of principal executive offices, including zip code)

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

(Former address, if changed since last report)

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

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

[ ]	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 April 21, 2011, Morgan Stanley (the "Registrant") released financial information with respect to its quarter ended March 31, 2011. 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 ended March 31, 2011 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 April 21, 2011, containing financial information for the quarter ended March 31, 2011.

	99.2	Financial Data Supplement of the Registrant for the quarter ended March 31, 2011.

SIGNATURE

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

	MORGAN STANLEY
	(Registrant)

	By: /s/ Paul C. Wirth
	Paul C. Wirth
	Deputy Chief Financial Officer and Controller

Dated: April 21, 2011

EX-99.1 2 a6686841ex99-1.htm EXHIBIT 99.1 a6686841ex99-1.htm

Exhibit 99.1

Media Relations: Jeanmarie McFadden 212-761-2433

Investor Relations: Celeste Mellet Brown 212-761-3896

Morgan Stanley Reports First Quarter 2011:

●

Net Revenues of $7.6 Billion, Including Loss of $655 Million in Japanese Securities Joint Venture

●

Income from Continuing Operations of $0.50 per Diluted Share, Including Gain of $0.30 from a Discrete Tax Item and Loss of $0.26 in Japanese Securities Joint Venture

●

Strong Performance in Equity Sales and Trading, Solid Results in Fixed Income, Positive Net Flows in Global Wealth Management and Asset Management, and Robust M&A Activity

NEW YORK, April 21, 2011 – Morgan Stanley (NYSE: MS) today reported income of $966 million, or $0.50 per diluted share,1 from continuing operations applicable to Morgan Stanley for the first quarter ended March 31, 2011 compared with income of $1.8 billion, or $1.03 per diluted share, for the same period a year ago. Net revenues were $7.6 billion for the current quarter compared with $9.1 billion a year ago. Results for the current quarter included a pre-tax loss of $655 million (after-tax loss of $425 million or $0.26 per diluted share) arising from the Firm’s 40% stake in a Japanese securities joint venture (Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. or MUMSS) controlled and managed by our partner, Mitsubishi UFJ Financial Group, Inc. (MUFG). The current quarter also included a net tax benefit of $447 million, or $0.30 per diluted share, from the remeasurement of a deferred tax asset and the reversal of a related valuation allowance that are both associated with the sale of Revel Entertainment Group, LLC (Revel).2

Compensation expenses of $4.3 billion decreased from $4.4 billion a year ago. The Firm’s current quarter compensation to net revenue ratio was adversely affected by the aforementioned MUMSS loss, which reduced net revenues by $655 million. This ratio for the current quarter was 57% (or 52% excluding the MUMSS loss) compared with 49% a year ago.3 Non-compensation expenses were $2.4 billion compared with $2.1 billion a year ago reflecting higher levels of business activity and increased legal and technology-related expenses.

For the current quarter, net income applicable to Morgan Stanley, including discontinued operations, was $0.50 per diluted share, compared with net income of $0.99 per diluted share in the first quarter of 2010.

Business Highlights

●

Sales and trading net revenues were $3.0 billion and included negative revenue of $189 million related to Morgan Stanley’s debt-related credit spreads (DVA)4, 5 in the current quarter. Equity sales and trading reported net revenues of $1.7 billion, the highest reported quarter since 2008, reflecting higher levels of client activity. Fixed income and commodities sales and trading results improved significantly from the fourth quarter of 2010.

●	Investment Banking revenues were $1.0 billion and reflected an increase in both advisory and underwriting activity from a year ago. The Firm ranked #1 in global announced and completed M&A and #3 in global Equity.6

●	Global Wealth Management Group delivered net revenues of $3.4 billion, with client assets of $1.7 trillion and 17,800 global representatives. Net new assets for the quarter were $11.4 billion.

●	Asset Management reported net revenues of $626 million and positive net flows of $1.4 billion. During the quarter, Morgan Stanley also completed the restructuring of its ownership of FrontPoint Partners LLC (FrontPoint).

James P. Gorman, President and Chief Executive Officer, said, "We continued to strengthen our client franchise and delivered solid results across many of our businesses. Our premier investment banking franchise remains a clear industry leader – maintaining our #1 ranking in global M&A in a robust deal market. We also made gains in key areas of focus – with our best results in equities since the financial crisis; significant improvement in fixed income and commodities from last quarter; and positive flows across wealth management and asset management. While the loss at our joint venture with MUFG is disappointing, we remain strongly committed to the Japanese market and our strategic partners at MUFG. Further, this loss does not impact the progress we are making in pursuing our own strategic priorities. I am confident that Morgan Stanley is well-positioned to seize the opportunities presented by today’s market environment and deliver long-term value to our clients, shareholders and employees."

Summary of Business Segment Results
($ millions)
	Institutional Securities		Global Wealth Management Group		Asset Management
	Net	Pre-Tax	Net	Pre-Tax	Net	Pre-Tax
	Revenues (1)	Income	Revenues	Income	Revenues	Income
1Q 2011	$3,592	$397	$3,437	$348	$626	$127
4Q 2010	$3,618	$437	$3,353	$390	$858	$356
1Q 2010	$5,338	$2,065	$3,105	$278	$653	$174

(1) Net revenues for 1Q 2011, 4Q 2010 and 1Q 2010 include positive (negative) revenue from DVA of ($189) million, ($945) million and $54 million, respectively.

INSTITUTIONAL SECURITIES

Institutional Securities reported pre-tax income from continuing operations of $397 million compared with pre-tax income from continuing operations of $2.1 billion in the first quarter of last year. Net revenues for the current quarter were $3.6 billion, inclusive of the MUMSS loss of $655 million, compared with $5.3 billion a year ago. DVA resulted in negative revenue of $189 million in the current quarter compared with positive revenue of $54 million a year ago.5 The quarter’s pre-tax margin was 11%.7

●	Advisory revenues of $385 million increased 18% from a year ago and reflected higher levels of completed activity.

●

Underwriting revenues of $623 million increased 11% from last year’s first quarter on higher levels of market activity. Equity underwriting revenues increased 8% from the prior year to $285 million. Fixed income underwriting revenues increased 14% to $338 million from last year’s first quarter primarily due to higher loan syndication fees.

●

Fixed income and commodities sales and trading net revenues were $1.8 billion compared with net revenues of $2.7 billion in last year’s first quarter.8 DVA resulted in negative revenue of $159 million in the current quarter compared with positive revenue of $2 million a year ago.5 The decrease in net revenues from last year’s strong first quarter primarily reflected lower results in credit products, partly offset by higher net revenues in interest rates. Commodities results were higher than the prior year quarter.

●

Equity sales and trading net revenues were $1.7 billion compared with net revenues of $1.4 billion in last year’s first quarter.5 Net revenues increased from a year ago primarily reflecting higher results in the derivatives and cash businesses driven by increased levels of both client activity and market volatility.

●

Other sales and trading net losses were $458 million compared with net losses of $1 million in the first quarter of last year.5 Results for the current quarter included losses on economic hedges related to the Firm’s long-term debt, and funding costs related to higher levels of liquidity held by the Firm’s U.S. subsidiary banks.

●	Investment gains were $143 million compared with gains of $174 million in the first quarter of last year.

●	Other revenues were negative $573 million for the quarter compared with positive revenues of $142 million a year ago. Results for the current quarter reflected the MUMSS loss noted above.

●

Compensation expenses of $2.0 billion decreased from $2.2 billion a year ago and primarily reflected lower net revenues. The compensation to net revenue ratio for the current quarter was 54% compared with 41% a year ago (this ratio was adversely affected by the MUMSS loss and DVA which reduced net revenues in the current period). Non-compensation expenses of $1.2 billion increased 13% from a year ago, resulting from higher levels of business activity and increased legal and technology-related expenses.

●	Morgan Stanley’s average trading Value-at-Risk measured at the 95% confidence level was $121 million compared with $132 million in the fourth quarter of 2010.

GLOBAL WEALTH MANAGEMENT GROUP

Global Wealth Management Group reported pre-tax income from continuing operations of $348 million compared with pre-tax income from continuing operations of $278 million in the first quarter of last year. The quarter’s pre-tax margin was 10%.7 Income after the non-controlling interest allocation to Citigroup Inc. and before taxes was $274 million.9

●	Net revenues were $3.4 billion compared with $3.1 billion a year ago and primarily reflected higher commissions and asset management revenues.

●	Compensation expenses of $2.1 billion increased 8% from a year ago. The compensation to net revenue ratio for the current quarter was 62% compared with 64% a year ago. Non-compensation expenses of $964 million increased from $855 million a year ago.

●	Total client assets were $1.7 trillion at quarter-end. Client assets in fee-based accounts were $501 billion and represented 29% of total client assets. Net new assets for the quarter were $11.4 billion and net new flows in fee-based accounts were $17.8 billion.

●	The 17,800 global representatives at quarter-end achieved average annualized revenue per global representative of $767,000 and total client assets per global representative of $97 million.

ASSET MANAGEMENT

Asset Management reported pre-tax income from continuing operations of $127 million compared with a pre-tax income from continuing operations of $174 million in last year’s first quarter. Results for the current quarter included gains of $42 million compared with gains of $119 million in the prior year related to principal investments held by certain consolidated real estate funds.10 The quarter’s pre-tax margin was 20%.7 Income after the non-controlling interest allocation and before taxes was $100 million.

●	Net revenues of $626 million declined from $653 million a year ago as higher results in the Traditional Asset Management business were offset by lower gains on principal investments in the Real Estate Investing business.11

●	Compensation expenses of $255 million declined from $275 million a year ago. The compensation to net revenue ratio for the quarter was 41% compared with 42% a year ago. Non-compensation expenses of $244 million increased 20% from a year ago.

●

Assets under management or supervision at March 31, 2011 of $284 billion increased from $262 billion a year ago. The increase reflected market appreciation and net customer inflows primarily in Morgan Stanley’s liquidity funds. In addition, the business recorded positive net flows of $1.4 billion in the current quarter compared with net outflows of $6.8 billion in the first quarter of the prior year.

CAPITAL

Morgan Stanley’s Tier 1 capital ratio, under Basel I, was approximately 16.7% and Tier 1 common ratio was approximately 11.8%.7, 12 The annualized return on average common equity from continuing operations was 6.2% in the current quarter.

As of March 31, 2011, Morgan Stanley had not repurchased any shares of its common stock as part of its capital management share repurchase program.

Pursuant to the Shareholder Agreement between MUFG and Morgan Stanley, MUFG is responsible for ensuring that MUMSS remains adequately capitalized, and Morgan Stanley is not obligated to contribute additional capital to MUMSS. As a result of the losses incurred by MUMSS, MUFG announced that it is intending to contribute in April approximately $370 million of capital to MUMSS. The MUFG capital injection will improve the capital base and restore the capital adequacy ratio of MUMSS, and will partially mitigate, to the extent of approximately $145 million, the reduction in Morgan Stanley’s book value that results from the MUMSS losses.

At March 31, 2011, book value per common share was $31.45, based on 1.5 billion shares outstanding.

OTHER MATTERS

Excluding the discrete tax gain related to Revel and the effect of the MUMSS loss, the effective tax rate from continuing operations for the current quarter was 27.6%.13

Morgan Stanley announced that its Board of Directors declared a $0.05 quarterly dividend per common share. The dividend is payable on May 13, 2011 to common shareholders of record on April 29, 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 1,300 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 Qualitative 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, 2010 and other items throughout the Form 10-K and the Company’s Current Reports on Form 8-K.

1 Includes preferred dividends and other adjustments, related to the calculation of earnings per share, of approximately $232 million for the quarter ended March 31, 2011 and $365 million for the quarter ended March 31, 2010. Refer to page 3 of Morgan Stanley’s Financial Supplement accompanying this release for the calculation of earnings per share.

2 The income tax benefit associated with this deferred tax asset and related valuation allowance was originally recognized in income from discontinued operations in 2010 in connection with the recognition of a $1.2 billion loss due to write-downs and related costs following the Firm's commitment to a plan to dispose of Revel. Morgan Stanley recorded the valuation allowance because the Firm did not believe it was more likely than not that it would have sufficient future net capital gain to realize the benefit of the expected capital loss to be recognized upon the disposal of Revel. During the quarter ended March 31, 2011, the disposal of Revel was restructured as a tax-free like kind exchange and the disposal was completed. The restructured transaction changed the character of the future taxable loss to ordinary. Morgan Stanley reversed the valuation allowance because the Firm believes it is more likely than not that it will have sufficient future ordinary taxable income to recognize the recorded deferred tax asset. In accordance with the applicable accounting literature, this reversal of a previously established valuation allowance due to a change in circumstances was recognized in income from continuing operations.

3 The Firm’s compensation to net revenue ratio, excluding the MUMSS loss, is a non-GAAP financial measure that the Firm considers a useful measure for the Firm and investors to assess operating performance. The 52% ratio is computed as compensation and benefits costs divided by net revenues, less the MUMSS loss of $655 million.

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

5 Due to DVA, sales and trading net revenue for the quarter ended March 31, 2011 included negative revenue of $189 million (fixed income: $159 million; equity: $30 million) and sales and trading net revenue for the quarter ended March 31, 2010 included positive revenue of $54 million (fixed income: $2 million; equity: $48 million; other: $4 million).

6 Source: Thomson Reuters – for the period of January 1, 2011 to March 31, 2011 as of April 4, 2011.

7 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 12) less qualifying perpetual preferred stock and qualifying restricted core capital elements, such as qualifying trust preferred securities and qualifying non-controlling interests, adjusted for the portion of goodwill and non-servicing intangible assets associated with Morgan Stanley Smith Barney (MSSB) non-controlling interests divided by risk-weighted assets.

8 Effective for the quarter ended March 31, 2011, the Institutional Securities “fixed income” business has been renamed the “fixed income and commodities” business. The “interest rates credit and currency” (IRCC) business has been renamed the “fixed income” business. These name changes did not affect current or previously reported results for these businesses.

9 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.

10 Results for the first quarter of 2011 and 2010 included pre-tax income of $28 million and $116 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.

11 Beginning this quarter, the Asset Management business segment was organized into three businesses, including Traditional Asset Management, Real Estate Investing and Merchant Banking. Traditional Asset Management includes Long-Only, Liquidity and Alternative Investment Partners fund of funds businesses. Real Estate Investing was previously reported as part of Merchant Banking. Merchant Banking includes Private Equity and Infrastructure businesses and hedge fund investments. The Firm’s equity investment in FrontPoint, subsequent to the restructuring of that business, on March 1, 2011, is included in Merchant Banking. The results of FrontPoint for all periods prior to the restructuring are also included in Merchant Banking.

12 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 April 21, 2011 (the date of this release) and could be subject to revision in Morgan Stanley’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011. On March 31, 2011, the Federal Reserve implemented a limit on the amount of the restricted core capital elements (trust preferred securities and certain non-controlling interests) to 15% of the sum of all core capital elements, including restricted core capital elements, net of goodwill less any associated deferred tax liability. This restriction resulted in approximately $3.9 billion of restricted capital being reclassed from Tier 1 capital to Tier 2 capital for March 31, 2011.

13 Reflects the Firm’s effective tax rate from continuing operations exclusive of the discrete tax benefit of $447 million related to Revel and a tax benefit of $230 million related to the MUMSS loss.

MORGAN STANLEY

Quarterly Financial Summary

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010
Net revenues
Institutional Securities	$	3,592		$	3,618		$	5,338			(1	%)		(33	%)
Global Wealth Management Group		3,437			3,353			3,105			3	%		11	%
Asset Management		626			858			653			(27	%)		(4	%)
Intersegment Eliminations		(20	)		(22	)		(24	)		9	%		17	%
Consolidated net revenues	$	7,635		$	7,807		$	9,072			(2	%)		(16	%)

Income (loss) from continuing operations before tax
Institutional Securities	$	397		$	437		$	2,065			(9	%)		(81	%)
Global Wealth Management Group		348			390			278			(11	%)		25	%
Asset Management		127			356			174			(64	%)		(27	%)
Intersegment Eliminations		0			0			(2	)		--			*
Consolidated income (loss) from continuing operations before tax	$	872		$	1,183		$	2,515			(26	%)		(65	%)

Income (loss) applicable to Morgan Stanley
Institutional Securities	$	714		$	533		$	1,731			34	%		(59	%)
Global Wealth Management Group		183			166			99			10	%		85	%
Asset Management		69			168			15			(59	%)		*
Intersegment Eliminations		0			0			(1	)		--			*
Consolidated income (loss) applicable to Morgan Stanley	$	966		$	867		$	1,844			11	%		(48	%)

Earnings (loss) applicable to Morgan Stanley common shareholders	$	736		$	600		$	1,411			23	%		(48	%)

Earnings per basic share:
Income from continuing operations	$	0.50		$	0.44		$	1.12			14	%		(55	%)
Discontinued operations	$	0.01		$	(0.02	)	$	(0.05	)		*			*
Earnings per basic share	$	0.51		$	0.42		$	1.07			21	%		(52	%)

Earnings per diluted share:
Income from continuing operations	$	0.50		$	0.43		$	1.03			16	%		(51	%)
Discontinued operations	$	-		$	(0.02	)	$	(0.04	)		*			*
Earnings per diluted share	$	0.50		$	0.41		$	0.99			22	%		(49	%)

Notes:	-	Results for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010 include positive (negative) revenue of $(189) million, $(945) million and $54 million, respectively, related to the movement in Morgan Stanley's credit spreads on certain long-term and short-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.

MORGAN STANLEY

Quarterly Consolidated Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010
Revenues:
Investment banking	$	1,214		$	1,761		$	1,060			(31	%)		15	%
Principal transactions:
Trading		2,977			854			3,758			*			(21	%)
Investments		329			688			369			(52	%)		(11	%)
Commissions		1,449			1,311			1,260			11	%		15	%
Asset management, distribution and admin. fees		2,109			2,080			1,963			1	%		7	%
Other		(444	)		861			294			*			*
Total non-interest revenues		7,634			7,555			8,704			1	%		(12	%)

Interest income		1,854			1,944			1,736			(5	%)		7	%
Interest expense		1,853			1,692			1,368			10	%		35	%
Net interest		1			252			368			(100	%)		(100	%)
Net revenues		7,635			7,807			9,072			(2	%)		(16	%)

Non-interest expenses:
Compensation and benefits		4,333			4,061			4,416			7	%		(2	%)

Non-compensation expenses:
Occupancy and equipment		402			380			390			6	%		3	%
Brokerage, clearing and exchange fees		405			380			348			7	%		16	%
Information processing and communications		445			442			395			1	%		13	%
Marketing and business development		147			161			134			(9	%)		10	%
Professional services		428			560			395			(24	%)		8	%
Other		603			640			479			(6	%)		26	%
Total non-compensation expenses		2,430			2,563			2,141			(5	%)		13	%

Total non-interest expenses		6,763			6,624			6,557			2	%		3	%


Income (loss) from continuing operations before taxes		872			1,183			2,515			(26	%)		(65	%)
Income tax provision / (benefit) from continuing operations		(256	)		86			436			*			*
Income (loss) from continuing operations		1,128			1,097			2,079			3	%		(46	%)
Gain (loss) from discontinued operations after tax		2			(31	)		(68	)		*			*
Net income (loss)	$	1,130		$	1,066		$	2,011			6	%		(44	%)
Net income (loss) applicable to non-controlling interests		162			230			235			(30	%)		(31	%)
Net income (loss) applicable to Morgan Stanley		968			836			1,776			16	%		(45	%)
Preferred stock dividend / Other	$	232		$	236		$	365			(2	%)		(36	%)
Earnings (loss) applicable to Morgan Stanley common shareholders	$	736		$	600		$	1,411			23	%		(48	%)

Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		966			867			1,844			11	%		(48	%)
Gain (loss) from discontinued operations after tax		2			(31	)		(68	)		*			*
Net income (loss) applicable to Morgan Stanley	$	968		$	836		$	1,776			16	%		(45	%)

Pre-tax profit margin		11	%		15	%		28	%
Compensation and benefits as a % of net revenues		57	%		52	%		49	%
Non-compensation expenses as a % of net revenues		32	%		33	%		24	%
Effective tax rate from continuing operations		*			7.3	%		17.3	%

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.
	-	Other revenue for the quarter ended March 31, 2011 included a loss of $655 million related to the Firm's 40% stake in a securities joint venture, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., controlled and managed by our partner Mitsubishi UFJ Financial Group, Inc.
	-	Other revenue for the quarter ended December 31, 2010 included a gain of $668 million on the sale of the Firm's investment in China International Capital Corporation Limited.
	-	The quarter ended March 31, 2011 included a discrete net tax benefit of $447 million from the remeasurement of a deferred tax asset and the reversal of a related valuation allowance that are both associated with the sale of Revel Entertainment Group, LLC. Excluding this discrete tax gain and tax benefit of $230 million related to the MUMSS loss, the effective tax rate for the quarter was 27.6%.
	-	The quarters ended December 31, 2010 and March 31, 2010 included a discrete tax gain of approximately $95 million and $382 million, respectively. Excluding these tax gains, the effective tax rates for the quarters would have been 15.3% and 32.5%, respectively.
	-	Preferred stock dividend / Other includes allocation of earnings to Participating Restricted Stock Units and China Investment Corporation equity units.

MORGAN STANLEY

Quarterly Earnings Per Share

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

	Quarter Ended
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010


Income (loss) from continuing operations		1,128			1,097			2,079
Net income (loss) from continuing operations applicable to non-controlling interest		162			230			235
Income from continuing operations applicable to Morgan Stanley		966			867			1,844
Less: Preferred Dividends		(220	)		(221	)		(220	)
Income from continuing operations applicable to Morgan Stanley, prior to allocation of income to CIC Equity Units and Participating Restricted Stock Units		746			646			1,624

Basic EPS Adjustments:
Less: Allocation of undistributed earnings to CIC Equity Units		0			0			(99	)
Less: Allocation of earnings to Participating Restricted Stock Units		(12	)		(16	)		(54	)
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	734		$	630		$	1,471

Gain (loss) from discontinued operations after tax		2			(31	)		(68	)
Gain (loss) from discontinued operations after tax applicable to non-controlling interests		0			0			0
Gain (loss) from discontinued operations after tax applicable to Morgan Stanley		2			(31	)		(68	)
Less: Allocation of undistributed earnings to CIC Equity Units		0			0			6
Less: Allocation of earnings to Participating Restricted Stock Units		0			1			2
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		2			(30	)		(60	)

Earnings (loss) applicable to Morgan Stanley common shareholders	$	736		$	600		$	1,411

Average basic common shares outstanding (millions)		1,456			1,437			1,315

Earnings per basic share:
Income from continuing operations	$	0.50		$	0.44		$	1.12
Discontinued operations	$	0.01		$	(0.02	)	$	(0.05	)
Earnings per basic share	$	0.51		$	0.42		$	1.07

Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	734		$	630		$	1,471

Diluted EPS Adjustments:
Income impact of assumed conversions:
Preferred stock dividends (Series B - Mitsubishi)		0			0			196
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	734		$	630		$	1,667

Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		2			(30	)		(60	)

Earnings (loss) applicable to common shareholders plus assumed conversions	$	736		$	600		$	1,607

Average diluted common shares outstanding and common stock equivalents (millions)		1,472			1,448			1,626

Earnings per diluted share:
Income from continuing operations	$	0.50		$	0.43		$	1.03
Discontinued operations	$	-		$	(0.02	)	$	(0.04	)
Earnings per diluted share	$	0.50		$	0.41		$	0.99

Note:

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 page 13 of Morgan Stanley's Financial Supplement accompanying this release.

EX-99.2 3 a6686841ex99-2.htm EXHIBIT 99.2 a6686841ex99-2.htm

Exhibit 99.2

MORGAN STANLEY
Financial Supplement - 1Q 2011
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 - 15	…………….	End Notes
	16	…………….	Legal Notice

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

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010
Net revenues
Institutional Securities	$	3,592		$	3,618		$	5,338			(1	%)		(33	%)
Global Wealth Management Group		3,437			3,353			3,105			3	%		11	%
Asset Management		626			858			653			(27	%)		(4	%)
Intersegment Eliminations		(20	)		(22	)		(24	)		9	%		17	%
Consolidated net revenues	$	7,635		$	7,807		$	9,072			(2	%)		(16	%)

Income (loss) from continuing operations before tax
Institutional Securities	$	397		$	437		$	2,065			(9	%)		(81	%)
Global Wealth Management Group		348			390			278			(11	%)		25	%
Asset Management		127			356			174			(64	%)		(27	%)
Intersegment Eliminations		0			0			(2	)		--			*
Consolidated income (loss) from continuing operations before tax	$	872		$	1,183		$	2,515			(26	%)		(65	%)

Income (loss) applicable to Morgan Stanley
Institutional Securities	$	714		$	533		$	1,731			34	%		(59	%)
Global Wealth Management Group		183			166			99			10	%		85	%
Asset Management		69			168			15			(59	%)		*
Intersegment Eliminations		0			0			(1	)		--			*
Consolidated income (loss) applicable to Morgan Stanley	$	966		$	867		$	1,844			11	%		(48	%)


Notes:	-	Results for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010 include positive (negative) revenue of $(189) million, $(945) million and $54 million, respectively, related to the movement in Morgan Stanley's credit spreads on certain long-term and short-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 16.

MORGAN STANLEY

Quarterly Consolidated Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010
Revenues:
Investment banking	$	1,214		$	1,761		$	1,060			(31	%)		15	%
Principal transactions:
Trading		2,977			854			3,758			*			(21	%)
Investments		329			688			369			(52	%)		(11	%)
Commissions		1,449			1,311			1,260			11	%		15	%
Asset management, distribution and admin. fees		2,109			2,080			1,963			1	%		7	%
Other		(444	)		861			294			*			*
Total non-interest revenues		7,634			7,555			8,704			1	%		(12	%)

Interest income		1,854			1,944			1,736			(5	%)		7	%
Interest expense		1,853			1,692			1,368			10	%		35	%
Net interest		1			252			368			(100	%)		(100	%)
Net revenues		7,635			7,807			9,072			(2	%)		(16	%)
Non-interest expenses:
Compensation and benefits		4,333			4,061			4,416			7	%		(2	%)

Non-compensation expenses:
Occupancy and equipment		402			380			390			6	%		3	%
Brokerage, clearing and exchange fees		405			380			348			7	%		16	%
Information processing and communications		445			442			395			1	%		13	%
Marketing and business development		147			161			134			(9	%)		10	%
Professional services		428			560			395			(24	%)		8	%
Other		603			640			479			(6	%)		26	%
Total non-compensation expenses		2,430			2,563			2,141			(5	%)		13	%

Total non-interest expenses		6,763			6,624			6,557			2	%		3	%

Income (loss) from continuing operations before taxes		872			1,183			2,515			(26	%)		(65	%)
Income tax provision / (benefit) from continuing operations		(256	)		86			436			*			*
Income (loss) from continuing operations		1,128			1,097			2,079			3	%		(46	%)
Gain (loss) from discontinued operations after tax		2			(31	)		(68	)		*			*
Net income (loss)	$	1,130		$	1,066		$	2,011			6	%		(44	%)
Net income (loss) applicable to non-controlling interests		162			230			235			(30	%)		(31	%)
Net income (loss) applicable to Morgan Stanley		968			836			1,776			16	%		(45	%)
Preferred stock dividend / Other	$	232		$	236		$	365			(2	%)		(36	%)
Earnings (loss) applicable to Morgan Stanley common shareholders	$	736		$	600		$	1,411			23	%		(48	%)

Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		966			867			1,844			11	%		(48	%)
Gain (loss) from discontinued operations after tax		2			(31	)		(68	)		*			*
Net income (loss) applicable to Morgan Stanley	$	968		$	836		$	1,776			16	%		(45	%)

Pre-tax profit margin		11	%		15	%		28	%
Compensation and benefits as a % of net revenues		57	%		52	%		49	%
Non-compensation expenses as a % of net revenues		32	%		33	%		24	%
Effective tax rate from continuing operations		*			7.3	%		17.3	%

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.
	-	Other revenue for the quarter ended March 31, 2011 included a loss of $655 million related to the Firm's 40% stake in a securities joint venture, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (“MUMSS”), controlled and managed by our partner Mitsubishi UFJ Financial Group, Inc.
	-	Other revenue for the quarter ended December 31, 2010 included a gain of $668 million on the sale of the Firm's investment in China International Capital Corporation Limited (CICC).
	-	The quarter ended March 31, 2011 included a discrete net tax benefit of $447 million from the remeasurement of a deferred tax asset and the reversal of a related valuation allowance that are both associated with the sale of Revel Entertainment Group, LLC (Revel). Excluding this discrete tax gain and tax benefit of $230 million related to the MUMSS loss, the effective tax rate for the quarter was 27.6%.
	-	The quarters ended December 31, 2010 and March 31, 2010 included a discrete tax gain of approximately $95 million and $382 million, respectively. Excluding these tax gains, the effective tax rates for the quarters would have been 15.3% and 32.5%, respectively.
	-	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 16.

MORGAN STANLEY

Quarterly Earnings Per Share

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

	Quarter Ended
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010


Income (loss) from continuing operations		1,128			1,097			2,079
Net income (loss) from continuing operations applicable to non-controlling interest		162			230			235
Income from continuing operations applicable to Morgan Stanley		966			867			1,844
Less: Preferred Dividends		(220	)		(221	)		(220	)
Income from continuing operations applicable to Morgan Stanley, prior to allocation of income to CIC Equity Units and Participating Restricted Stock Units		746			646			1,624

Basic EPS Adjustments:
Less: Allocation of undistributed earnings to CIC Equity Units		0			0			(99	)
Less: Allocation of earnings to Participating Restricted Stock Units		(12	)		(16	)		(54	)
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	734		$	630		$	1,471

Gain (loss) from discontinued operations after tax		2			(31	)		(68	)
Gain (loss) from discontinued operations after tax applicable to non-controlling interests		0			0			0
Gain (loss) from discontinued operations after tax applicable to Morgan Stanley		2			(31	)		(68	)
Less: Allocation of undistributed earnings to CIC Equity Units		0			0			6
Less: Allocation of earnings to Participating Restricted Stock Units		0			1			2
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		2			(30	)		(60	)

Earnings (loss) applicable to Morgan Stanley common shareholders	$	736		$	600		$	1,411

Average basic common shares outstanding (millions)		1,456			1,437			1,315

Earnings per basic share:
Income from continuing operations	$	0.50		$	0.44		$	1.12
Discontinued operations	$	0.01		$	(0.02	)	$	(0.05	)
Earnings per basic share	$	0.51		$	0.42		$	1.07

Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	734		$	630		$	1,471

Diluted EPS Adjustments:
Income impact of assumed conversions:
Preferred stock dividends (Series B - Mitsubishi)		0			0			196
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	734		$	630		$	1,667

Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		2			(30	)		(60	)

Earnings (loss) applicable to common shareholders plus assumed conversions	$	736		$	600		$	1,607

Average diluted common shares outstanding and common stock equivalents (millions)		1,472			1,448			1,626

Earnings per diluted share:
Income from continuing operations	$	0.50		$	0.43		$	1.03
Discontinued operations	$	-		$	(0.02	)	$	(0.04	)
Earnings per diluted share	$	0.50		$	0.41		$	0.99

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 page 13 of this financial supplement and Note 2 to the consolidated financial statements in the Firm's Annual Report on Form 10-K for the year ended December 31, 2010.
	-	Refer to Legal Notice on page 16.

MORGAN STANLEY

Quarterly Consolidated Financial Information and Statistical Data

(unaudited)

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010

Regional revenue (1)
Americas	$	5,490		$	5,024		$	6,200			9	%		(11	%)
EMEA (Europe, Middle East, Africa)		1,704			900			2,006			89	%		(15	%)
Asia		441			1,883			866			(77	%)		(49	%)
Consolidated net revenues	$	7,635		$	7,807		$	9,072			(2	%)		(16	%)

Worldwide employees		62,494			62,542			61,335			--			2	%
Total assets	$	836,185		$	807,698		$	819,719			4	%		2	%
Firmwide Deposits		63,495			63,812			63,926			--			(1	%)

Consolidated assets under management or supervision (billions):
Asset Management		284			279			262			2	%		8	%
Global Wealth Management		510			477			413			7	%		23	%
Total		794			756			675			5	%		18	%

Common equity		48,589			47,614			38,667			2	%		26	%
Preferred equity		9,597			9,597			9,597			--			--
Morgan Stanley shareholders' equity		58,186			57,211			48,264			2	%		21	%
Junior subordinated debt issued to capital trusts		4,845			4,817			10,554			1	%		(54	%)
Less: Goodwill and intangible assets (2)		(6,916	)		(6,947	)		(7,570	)		--			9	%
Tangible Morgan Stanley shareholders' equity	$	56,115		$	55,081		$	51,248			2	%		9	%
Tangible common equity	$	41,673		$	40,667		$	31,097			2	%		34	%

Leverage Ratio		14.9	x		14.7	x		16.0	x

Return on average common equity
from continuing operations		6.2	%		5.4	%		17.0	%
Return on average common equity		6.2	%		5.2	%		16.3	%

Period end common shares outstanding (000's)		1,545,064			1,512,022			1,398,470			2	%		10	%

Book value per common share	$	31.45		$	31.49		$	27.65			--			14	%
Tangible book value per common share	$	26.97		$	26.90		$	22.24			--			21	%

Notes:	-	All data presented in millions except ratios, book values and number of employees.
	-	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 14-15 and Legal Notice on page 16.

MORGAN STANLEY

Quarterly Consolidated Financial Information and Statistical Data

(unaudited, dollars in billions)

	Quarter Ended
	Mar 31, 2011							Dec 31, 2010							Mar 31, 2010
	Average tier 1 capital (1)		Average common equity (1)		Return on average common equity			Average tier 1 capital (1)		Average common equity (1)		Return on average common equity			Average tier 1 capital (1)		Average common equity (1)		Return on average common equity
Institutional Securities	$	23.0	$	20.7		10	%	$	25.9	$	18.6		9	%	$	24.9	$	17.3		38	%
Global Wealth Management Group		3.1		6.7		9	%		2.9		6.8		9	%		3.0		6.9		5	%
Asset Management		1.4		1.9		12	%		2.0		2.2		29	%		1.9		2.2		2	%
Parent capital		21.8		18.8					22.3		19.8					18.7		11.2
Total - continuing operations		49.3		48.1		6	%		53.1		47.4		5	%		48.5		37.6		17	%
Discontinued operations		0.0		0.0					0.0		0.0					0.2		0.5
Firm	$	49.3	$	48.1		6	%	$	53.1	$	47.4		5	%	$	48.7	$	38.1		16	%

Notes:	-	Excluding the discrete tax benefits in the quarters ended March 31, 2011, December 31, 2010, and March 31, 2010, the return on average common equity for Institutional Securities would have been 1%, 7% and 30%, respectively.
	-	Refer to End Notes on pages 14-15 and Legal Notice on page 16.

MORGAN STANLEY

Quarterly Institutional Securities Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010
Revenues:
Investment banking	$	1,008		$	1,515		$	887			(33	%)		14	%
Principal transactions:
Trading		2,646			530			3,418			*			(23	%)
Investments		143			316			174			(55	%)		(18	%)
Commissions		670			573			580			17	%		16	%
Asset management, distribution and admin. fees		31			24			26			29	%		19	%
Other		(573	)		733			142			*			*
Total non-interest revenues		3,925			3,691			5,227			6	%		(25	%)

Interest income		1,480			1,584			1,396			(7	%)		6	%
Interest expense		1,813			1,657			1,285			9	%		41	%
Net interest		(333	)		(73	)		111			*			*
Net revenues		3,592			3,618			5,338			(1	%)		(33	%)

Compensation and benefits		1,953			1,785			2,169			9	%		(10	%)
Non-compensation expenses		1,242			1,396			1,104			(11	%)		13	%
Total non-interest expenses		3,195			3,181			3,273			--			(2	%)

Income (loss) from continuing operations before taxes		397			437			2,065			(9	%)		(81	%)
Income tax provision / (benefit) from continuing operations		(378	)		(118	)		330			*			*
Income (loss) from continuing operations		775			555			1,735			40	%		(55	%)
Gain (loss) from discontinued operations after tax		(3	)		(36	)		(936	)		92	%		100	%
Net income (loss)		772			519			799			49	%		(3	%)
Net income (loss) applicable to non-controlling interests		61			22			4			177	%		*
Net income (loss) applicable to Morgan Stanley	$	711		$	497		$	795			43	%		(11	%)

Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		714			533			1,731			34	%		(59	%)
Gain (loss) from discontinued operations after tax		(3	)		(36	)		(936	)		92	%		100	%
Net income (loss) applicable to Morgan Stanley	$	711		$	497		$	795			43	%		(11	%)

Return on average common equity
from continuing operations		10	%		9	%		38	%
Pre-tax profit margin		11	%		12	%		39	%
Compensation and benefits as a % of net revenues		54	%		49	%		41	%

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.
	-	Other revenue for the quarter ended March 31, 2011 included a loss of $655 million related to MUMSS. Other revenue for the quarter ended December 31, 2010 included the gain of $668 million related to CICC.
	-	The quarter ended March 31, 2011 included a discrete net tax benefit of $447 million from the remeasurement of a deferred tax asset and the reversal of a related valuation allowance that are both associated with the sale of Revel and the tax benefit of $230 million related to the MUMSS loss.
	-	Refer to Legal Notice on page 16.

MORGAN STANLEY

Quarterly Financial Information and Statistical Data

Institutional Securities

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010
Investment Banking
Advisory revenue	$	385		$	484		$	327			(20	%)		18	%
Underwriting revenue
Equity		285			661			264			(57	%)		8	%
Fixed income		338			370			296			(9	%)		14	%
Total underwriting revenue		623			1,031			560			(40	%)		11	%

Total investment banking revenue	$	1,008		$	1,515		$	887			(33	%)		14	%

Sales & Trading
Equity	$	1,702		$	1,081		$	1,419			57	%		20	%
Fixed income and Commodities		1,770			(29	)		2,717			*			(35	%)
Other		(458	)		2			(1	)		*			*
Total sales & trading net revenue	$	3,014		$	1,054		$	4,135			186	%		(27	%)

Investments & Other
Investments	$	143		$	316		$	174			(55	%)		(18	%)
Other		(573	)		733			142			*			*
Total investments & other revenue	$	(430	)	$	1,049		$	316			*			*

Total Institutional Securities net revenues	$	3,592		$	3,618		$	5,338			(1	%)		(33	%)

Average Daily 95% / One-Day Value-at-Risk ("VaR") (1)
Primary Market Risk Category ($ millions, pre-tax)
Interest rate and credit spread	$	105		$	120		$	127
Equity price	$	28		$	31		$	26
Foreign exchange rate	$	18		$	22		$	32
Commodity price	$	33		$	26		$	27

Trading VaR	$	121		$	132		$	143


Notes:	-	Other revenue for the quarter ended March 31, 2011 includes a loss of $655 million related to MUMSS.
	-	Other revenue for the quarter ended December 31, 2010 includes a gain of $668 million related to CICC.
	-	Refer to End Notes on pages 14-15 and Legal Notice on page 16.

MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Institutional Securities - Corporate Lending
(unaudited, dollars in billions)

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010

Corporate funded loans
Investment grade	$	5.3		$	3.9		$	5.7			36	%		(7	%)
Non-investment grade		6.5			6.8			7.7			(4	%)		(16	%)
Total corporate funded loans	$	11.8		$	10.7		$	13.4			10	%		(12	%)

Corporate lending commitments
Investment grade	$	48.7		$	44.5		$	42.0			9	%		16	%
Non-investment grade		14.8			13.9			11.6			6	%		28	%
Total corporate lending commitments	$	63.5		$	58.4		$	53.6			9	%		18	%

Corporate funded loans plus lending commitments
Investment grade	$	54.0		$	48.4		$	47.7			12	%		13	%
Non-investment grade	$	21.3		$	20.7		$	19.3			3	%		10	%

% investment grade		72	%		70	%		71	%
% non-investment grade		28	%		30	%		29	%

Total corporate funded loans and lending commitments	$	75.3		$	69.1		$	67.0			9	%		12	%
Hedges	$	23.9		$	21.0		$	22.3			14	%		7	%

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, 2010.
	-	For the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010, the leveraged acquisition finance portfolio of pipeline commitments and closed deals to non-investment grade borrowers were $3.7 billion, $4.9 billion and $5.7 billion, respectively.
	-	The hedge balance reflects the notional amount utilized by the lending business.
	-	Refer to Legal Notice on page 16.

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

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010
Revenues:
Investment banking	$	204		$	242		$	173			(16	%)		18	%
Principal transactions:
Trading		334			329			342			2	%		(2	%)
Investments		4			8			6			(50	%)		(33	%)
Commissions		779			738			682			6	%		14	%
Asset management, distribution and admin. fees		1,683			1,620			1,628			4	%		3	%
Other		91			75			83			21	%		10	%
Total non-interest revenues		3,095			3,012			2,914			3	%		6	%

Interest income		454			457			339			(1	%)		34	%
Interest expense		112			116			148			(3	%)		(24	%)
Net interest		342			341			191			--			79	%
Net revenues		3,437			3,353			3,105			3	%		11	%

Compensation and benefits		2,125			1,995			1,972			7	%		8	%
Non-compensation expenses		964			968			855			--			13	%
Total non-interest expenses		3,089			2,963			2,827			4	%		9	%

Income (loss) from continuing operations before taxes		348			390			278			(11	%)		25	%
Income tax provision / (benefit) from continuing operations		91			118			64			(23	%)		42	%
Income (loss) from continuing operations		257			272			214			(6	%)		20	%
Gain (loss) from discontinued operations after tax		0			0			0			--			--
Net income (loss)		257			272			214			(6	%)		20	%
Net income (loss) applicable to non-controlling interests		74			106			115			(30	%)		(36	%)
Net income (loss) applicable to Morgan Stanley	$	183		$	166		$	99			10	%		85	%

Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		183			166			99			10	%		85	%
Gain (loss) from discontinued operations after tax		0			0			0			--			--
Net income (loss) applicable to Morgan Stanley	$	183		$	166		$	99			10	%		85	%

Return on average common equity
from continuing operations		9	%		9	%		5	%
Pre-tax profit margin		10	%		12	%		9	%
Compensation and benefits as a % of net revenues		62	%		59	%		64	%

Notes:	-	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.
	-	Refer to Legal Notice on page 16.

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

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010


Global representatives		17,800			18,043			18,140			(1	%)		(2	%)

Annualized revenue per global
representative (000's)	$	767		$	742		$	685			3	%		12	%

Assets by client segment (billions)
$10m or more		545			522			481			4	%		13	%
$1m - $10m		733			707			670			4	%		9	%
Subtotal - > $1m		1,278			1,229			1,151			4	%		11	%
$100k - $1m		401			399			408			1	%		(2	%)
< $100k		39			41			45			(5	%)		(13	%)
Total client assets (billions)	$	1,718		$	1,669		$	1,604			3	%		7	%

% of assets by client segment > $1m		74	%		74	%		72	%

Fee-based client account assets (billions)	$	501		$	470		$	413			7	%		21	%
Fee-based assets as a % of client assets		29	%		28	%		26	%

Bank deposit program (millions)	$	111,502		$	113,325		$	113,545			(2	%)		(2	%)

Client assets per global
representative (millions)	$	97		$	93		$	88			4	%		10	%

Global retail net new assets (billions)
Domestic	$	9.2		$	11.5		$	6.9			(20	%)		33	%
International	$	2.2		$	2.6		$	2.4			(15	%)		(8	%)
Total retail net new assets	$	11.4		$	14.1		$	9.3			(19	%)		23	%

Global fee based asset flows (billions)	$	17.8		$	12.5		$	9.1			42	%		96	%

Global retail locations		832			851			905			(2	%)		(8	%)

Notes:	-	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 March 31, 2011, December 31, 2010 and March 31, 2010, approximately $54 billion, $55 billion, and $56 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 Legal Notice on page 16.

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

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010
Revenues:
Investment banking	$	2		$	11		$	-			(82	%)		*
Principal transactions:
Trading		(1	)		(4	)		(1	)		75	%		--
Investments (1)		182			364			189			(50	%)		(4	%)
Commissions		0			0			0			--			--
Asset management, distribution and admin. fees		409			456			414			(10	%)		(1	%)
Other		42			46			70			(9	%)		(40	%)
Total non-interest revenues		634			873			672			(27	%)		(6	%)

Interest income		4			4			6			--			(33	%)
Interest expense		12			19			25			(37	%)		(52	%)
Net interest		(8	)		(15	)		(19	)		47	%		58	%
Net revenues		626			858			653			(27	%)		(4	%)

Compensation and benefits		255			281			275			(9	%)		(7	%)
Non-compensation expenses		244			221			204			10	%		20	%
Total non-interest expenses		499			502			479			(1	%)		4	%

Income (loss) from continuing operations before taxes		127			356			174			(64	%)		(27	%)
Income tax provision / (benefit) from continuing operations		31			86			43			(64	%)		(28	%)
Income (loss) from continuing operations		96			270			131			(64	%)		(27	%)
Gain (loss) from discontinued operations after tax		5			5			94			--			(95	%)
Net income (loss)		101			275			225			(63	%)		(55	%)
Net income (loss) applicable to non-controlling interests (1)		27			102			116			(74	%)		(77	%)
Net income (loss) applicable to Morgan Stanley	$	74		$	173		$	109			(57	%)		(32	%)

Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		69			168			15			(59	%)		*
Gain (loss) from discontinued operations after tax		5			5			94			--			(95	%)
Net income (loss) applicable to Morgan Stanley	$	74		$	173		$	109			(57	%)		(32	%)

Return on average common equity
from continuing operations		12	%		29	%		2	%
Pre-tax profit margin		20	%		41	%		27	%
Compensation and benefits as a % of net revenues		41	%		33	%		42	%

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.
	-	Refer to End Notes on pages 14-15 and Legal Notice on page 16.

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

	Quarter Ended									Percentage Change From:
	Mar 31, 2011			Dec 31, 2010			Mar 31, 2010			Dec 31, 2010			Mar 31, 2010

Net Revenues
Traditional	$	325		$	347		$	286			(6	%)		14	%
Real Estate Investing (1)		118			265			201			(55	%)		(41	%)
Merchant Banking (2)		183			246			166			(26	%)		10	%
Total Asset Management	$	626		$	858		$	653			(27	%)		(4	%)

Assets under management or supervision

Net flows by asset class (4)
Traditional Asset Management
Equity	$	2.0		$	0.4		$	(0.5	)		*			*
Fixed income		(0.6	)		(0.6	)		1.8			--			*
Liquidity		1.6			1.3			(8.4	)		23	%		*
Alternatives		(0.1	)		0.0			(0.6	)		*			83	%
Total Traditional Asset Management		2.9			1.1			(7.7	)		164	%		*

Real Estate Investing		0.2			(0.2	)		0.5			*			(60	%)

Merchant Banking
Private Equity		0.0			0.0			0.3			--			*
FrontPoint (3)		(1.7	)		(1.5	)		0.1			(13	%)		*
Total Merchant Banking		(1.7	)		(1.5	)		0.4			(13	%)		*

Total net flows	$	1.4		$	(0.6	)	$	(6.8	)		*			*

Assets under management or supervision by asset class (5)
Traditional Asset Management
Equity	$	116		$	110		$	96			5	%		21	%
Fixed income		61			61			60			--			2	%
Liquidity		55			53			51			4	%		8	%
Alternatives		18			18			17			--			6	%
Total Traditional Asset Management		250			242			224			3	%		12	%

Real Estate Investing		17			16			15			6	%		13	%

Merchant Banking
Private Equity		9			9			9			--			--
FrontPoint (3)		0			5			7			*			*
Total Merchant Banking		9			14			16			(36	%)		(44	%)

Total Assets Under Management or Supervision	$	276		$	272		$	255			1	%		8	%
Share of minority stake assets		8			7			7			14	%		14	%
Total	$	284		$	279		$	262			2	%		8	%

Notes:	-	Beginning this quarter the Asset Management segment was organized into three businesses including Traditional Asset Management, Real Estate Investing and Merchant Banking. Traditional Asset Management includes Long-Only, Liquidity and Alternative Investment Partners fund of funds businesses. Real Estate Investing was previously reported as part of Merchant Banking. Merchant Banking includes Private Equity and Infrastructure businesses and hedge fund investments. The Firm's equity investment in FrontPoint Partners LLC (FrontPoint), subsequent to the restructuring of that business, is included in Merchant Banking. The results of the FrontPoint business for all periods prior to the restructuring are also included in Merchant Banking.
	-	Alternatives include a range of alternative investment products such as hedge funds, funds of hedge funds and funds of private equity funds.
	-	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 End Notes on pages 14-15 and Legal Notice on page 16.

This page represents an addendum to the 1Q 2011 Financial Supplement, Appendix I

MORGAN STANLEY
Earnings Per Share Calculation Under Two-Class Method
Three Months Ended March 31, 2011
(unaudited, in millions, except for per share data)

	Allocation of net income from continuing operations
	(A)	(B)	(C)	(D)	(E)	(F)		(G)
						(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	1,456	98%		$73	$661	$734	(6)	$0.50
Participating Restricted Stock Units (1)	23	2%		$1	$11	$12	(7)	N/A
	1,479	100%	$746	$74	$672	$746


	Allocation of gain (loss) from discontinued operations
	(A)	(B)	(C)	(D)	(E)	(F)		(G)
						(D)+(E)		(F)/(A)
	Weighted Average # of Shares	% Allocation (2)	Gain (loss) from Discontinued Operations Applicable to Common Shareholders, after Tax (3)	Distributed Earnings (4)	Undistributed Earnings (5)	Total Earnings Allocated		Basic EPS (8)
Basic Common Shares	1,456	98%		$0	$2	$2	(6)	$0.01
Participating Restricted Stock Units (1)	23	2%		$0	$0	$0	(7)	N/A
	1,479	100%	$2	$0	$2	$2


	Allocation of net income applicable to common shareholders
	(A)	(B)	(C)	(D)	(E)	(F)		(G)
						(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	1,456	98%		$73	$663	$736	(6)	$0.51
Participating Restricted Stock Units (1)	23	2%		$1	$11	$12	(7)	N/A
	1,479	100%	$748	$74	$674	$748

Note:

Refer to End Notes on pages 14-15 and Legal Notice on page 16.

MORGAN STANLEY

End Notes

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. Both the CICC related gain of $668 million in the quarter ended December 31, 2010 and the MUMSS related loss of $655 million in the quarter ended March 31, 2011 were reported in the Asia region within Institutional Securities.
(2)	Goodwill and intangible balances net of allowable mortgage servicing rights deduction for quarters ended March 31, 2011, December 31, 2010 and March 31, 2010 of $130 million, $141 million and $157 million, respectively.

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. Tier 1 capital and common equity are designated to segments based on the capital usage calculated by the Firm’s Required Capital framework, an internal adequacy measure, which considers a combination of a base amount of capital and an amount of economic capital reserved to absorb extreme stress events. The Firm defines parent capital as capital not specifically designated to a particular business segment. The Firm generally holds parent capital for prospective regulatory requirements, organic growth, acquisitions and other capital needs. The Firm's Required Capital is met by regulatory Tier 1 capital. The framework will continue to evolve over time in response to changes in the business and regulatory environment and to incorporate enhancements in modeling techniques. On March 31, 2011, the Federal Reserve implemented a limit on the amount of the restricted core capital elements (trust preferred securities and certain non-controlling interests) to 15% of the sum of all core capital elements, including restricted core capital elements, net of goodwill less any associated deferred tax liability. This restriction resulted in approximately $3.9 billion of restricted capital being reclassed from Tier 1 capital to Tier 2 capital for March 31, 2011. To enhance the comparability of the current quarter’s average Tier 1 capital and average common equity by segment to subsequent quarterly averages, the Firm applied this limitation to the full quarter average, as if the rule were in place from January 1, 2011.

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, 2010.

Page 11:
(1)	The quarters ended March 31, 2011, December 31, 2010 and March 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 12:
(1)	Real Estate Investing revenues includes gains or losses related to principal investments held by certain consolidated real estate funds. These gains or losses are offset in the net income / (loss) applicable to non-controlling interest. The investment gains (losses) for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010 are $42 million, $109 million and $119 million, respectively.
(2)	Merchant Banking revenue includes gains or losses related to entities in which Asset Management owns a minority stake, including FrontPoint subsequent to the Firm's restructuring of its ownership of that business during the quarter ended March 31, 2011.
(3)	On March 1, 2011, Morgan Stanley completed the restructuring of its ownership of FrontPoint. The quarter ended March 31, 2011 includes two months of net flows related to FrontPoint whereas the quarters ended December 31, 2010 and March 31, 2010 include three months of net flows related to FrontPoint. Assets under management or supervision for the quarter ended March 31, 2011 excludes FrontPoint whereas the quarters ended December 31, 2010 and March 31, 2010 include assets under management or supervision of $5.4 billion and $7.1 billion, respectively, related to FrontPoint.

MORGAN STANLEY

End Notes

(4)	Net Flows by region [inflow / (outflow)] for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010 are:
	North America: $0.1 billion, $(2.0) billion and $(7.8) billion
	International: $1.3 billion, $1.4 billion and $1.0 billion
(5)	Assets under management or supervision by region for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010 are:
	North America: $176 billion, $175 billion and $169 billion
	International: $100 billion, $97 billion and $86 billion

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 March 31, 2011 prior to allocations to participating RSUs.
(4)	Distributed earnings represent the dividends declared on common shares and participating RSUs, respectively, for the quarter ended March 31, 2011. The amount of dividends declared is based upon the number of common shares outstanding as of the dividend record date. During the quarter ended March 31, 2011, 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 their 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.

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 first quarter earnings press release issued April 21, 2011.

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