a50030597.htm

0001157523-11-005775.txt : 20111019 0001157523-11-005775.hdr.sgml : 20111019 20111019071608 ACCESSION NUMBER: 0001157523-11-005775 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20111019 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20111019 DATE AS OF CHANGE: 20111019 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: 111146870 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 a50030597.htm MORGAN STANLEY 8-K a50030597.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): October 19, 2011

	Morgan Stanley
	(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
	(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 October 19, 2011, Morgan Stanley (the "Registrant") released financial information with respect to its quarter ended September 30, 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 September 30, 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 8.01.

Other Matters

Risk Weighted Assets and Capital Ratios

At December 31, 2010, March 31, 2011 and June 30, 2011, Morgan Stanley (the “Company”) applied a capital treatment for OTC derivatives collateral that reduced the Company’s overall Risk Weighted Assets (“RWAs”) based on regulatory reporting guidance received from the Federal Reserve. In October 2011, the Company was advised by the Federal Reserve that, based on their further review concerning the application of pre-existing regulatory policy, the Company should adjust its capital treatment for OTC derivatives collateral. In all circumstances, the Company’s calculations have been done consistent with Federal Reserve guidance.

The following table provides adjusted RWA amounts and capital ratios, under Basel I, on the basis of the further clarification from the Federal Reserve at December 31, 2010, March 31, 2011 and June 30, 2011:

	December 31, 2010						March 31, 2011						June 30, 2011
(Dollars in Millions)	Reported			Revised			Reported			Revised			Reported			Revised
(Dollars in Millions)
RWAs		$329,560			$340,884			$301,482			$345,491			$304,759			$352,301
Tier 1 common ratio (1)		10.5	%		10.2	%		11.7	%		10.2	%		14.6	%		12.6	%
Tier 1 capital ratio		16.1	%		15.5	%		16.5	%		14.4	%		16.7	%		14.5	%
Total capital ratio		16.5	%		16.0	%		18.4	%		16.1	%		18.3	%		15.8	%

On October 18, 2011, the Company filed updated Consolidated Financial Statements for Bank Holding Companies – FR Y-9C reports for the three periods noted above reflecting the revised RWAs and capital ratios.

Neither the original capital treatment, nor the revision, carry through to Basel III, and as such, the Company’s previously provided estimates of its Tier 1 common ratio under Basel III, currently and by the end of 2012, are not impacted.

(1) Tier 1 common ratio is a non-GAAP financial measure that the Company considers to be a useful measure that the Company and investors use to assess capital adequacy. For a discussion of Tier 1 common ratio, see “Liquidity and Capital Resources – The Balance Sheet” in the Company’s Form 10-K and Form 10-Q filings. For a discussion of RWAs, Tier 1 capital ratio and total capital ratio, see “Liquidity and Capital Resources–Regulatory Requirements” in the Company’s Form 10-K and Form 10-Q filings.

Forward-Looking Statements

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, the Company’s Quarterly Reports on Form 10-Q, including “Risk Factors” in Part II, Item 1A therein, and the Company’s Current Reports on Form 8-K, including any amendments thereto.

Item 9.01.

Financial Statements and Exhibits

	99.1	Press release of the Registrant, dated October 19, 2011, containing financial information for the quarter ended September 30, 2011.

	99.2	Financial Data Supplement of the Registrant for the quarter ended September 30, 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: October 19, 2011

EX-99.1 2 a50030597_ex991.htm EXHIBIT 99.1 a50030597_ex991.htm

Exhibit 99.1


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

Morgan Stanley Reports Third Quarter 2011:

●	Net Revenues of $9.9 Billion; Income from Continuing Operations of $1.14 per Diluted Share

●	Results Included Revenues of $3.4 Billion, or $1.12 per Diluted Share, from the Widening of Morgan Stanley’s Debt-Related Credit Spreads

●	Strong Performance in Equity Sales & Trading, Interest Rates and Commodities; Ranked #1 in Global Completed M&A; Net New Assets of $15.5 Billion in Global Wealth Management

NEW YORK, October 19, 2011 – Morgan Stanley (NYSE: MS) today reported income of $2.2 billion, or $1.14 per diluted share,1 from continuing operations applicable to Morgan Stanley for the third quarter ended September 30, 2011 compared with income of $314 million, or $0.05 per diluted share, for the same period a year ago. Net revenues were $9.9 billion for the current quarter compared with $6.8 billion a year ago. Results for the current quarter included positive revenue of $3.4 billion, or $1.12 per diluted share, compared with negative revenue of $731 million a year ago related to changes in Morgan Stanley’s debt-related credit spreads and other credit factors (Debt Valuation Adjustment, DVA).2, 3

The Firm’s compensation expense for the current quarter was $3.7 billion with a compensation to net revenue ratio of 37%. This ratio was affected by DVA which increased net revenues in the current period. Non-compensation expenses of $2.5 billion reflected higher levels of business activity and costs associated with the U.K. bank levy.

For the current quarter, net income applicable to Morgan Stanley, including discontinued operations, was $1.15 per diluted share, compared with a net loss of $0.07 per diluted share in the third quarter of 2010.4

Business Highlights

●	Investment Banking revenues were $864 million. The Firm ranked #1 in global completed M&A and #2 in global announced M&A, global IPOs and global Equity.5

●

Sales and trading net revenues were $5.4 billion and included positive revenue of $3.4 billion related to DVA.3 Equity sales and trading net revenues reflected strength in derivatives. Fixed Income and Commodities sales and trading net revenues included strong results in interest rate products and commodities.

●

Global Wealth Management Group delivered net revenues of $3.3 billion, with net new assets for the quarter of $15.5 billion, a record since the inception of the Morgan Stanley Smith Barney joint venture (MSSB), and net flows in fee-based accounts of $10.1 billion. The quarter’s pre-tax margin improved to 11% from 9% a year ago.6

●

Asset Management reported net revenues of $215 million and assets under management or supervision of $268 billion. Asset Management also has continued to deliver solid investment performance with over 76% of its long-term strategies outperforming their respective benchmark on a 3, 5 and 10-year basis (as of August 2011).

●	Morgan Stanley successfully completed its inaugural offering of JPY 46.5 billion (approximately $600 million) Uridashi bonds leveraging the strength of our partnership with Mitsubishi UFJ Financial Group, Inc. (MUFG).

James P. Gorman, President and Chief Executive Officer, said, "Morgan Stanley effectively navigated turbulent markets while consolidating our market share gains with Institutional clients and demonstrating resilience across the Global Wealth Management business as evidenced by record net new assets flows since the formation of MSSB. The Firm delivered progress across many of our key initiatives, increasing client penetration in equity derivatives and interest rate products as well as achieving a significant milestone in the integration of MSSB with the initial roll out of our new technology platform. With our robust liquidity, diverse funding, strong capital and unique strategic partnership with MUFG, Morgan Stanley is well positioned to deliver for clients in the long term.”

Summary of Business Segment Results
(dollars in 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
3Q 2011	$6,448	$3,433	$3,260	$362	$215	($117)
2Q 2011	$5,189	$1,457	$3,476	$322	$645	$165
3Q 2010	$2,895	$241	$3,104	$281	$802	$279

(1) Net revenues for 3Q 2011, 2Q 2011 and 3Q 2010 include positive (negative) revenue from DVA of $3.4 billion, $244 million and ($731) million, respectively.

INSTITUTIONAL SECURITIES

Institutional Securities reported pre-tax income from continuing operations of $3.4 billion compared with $241 million in the third quarter of last year. Net revenues for the current quarter were $6.4 billion compared with $2.9 billion a year ago. DVA resulted in positive revenue of $3.4 billion in the current quarter compared with negative revenue of $731 million a year ago.3 The quarter’s pre-tax margin was 53%.6 Due to the impact of DVA in the comparative periods, the following discussion for sales and trading focuses on current period results.

●	Advisory revenues of $413 million increased 11% from a year ago reflecting higher levels of completed activity.

●

Underwriting revenues of $451 million declined 29% from last year’s third quarter on lower levels of market activity. Equity underwriting revenues of $239 million declined 8% from a year ago. Fixed income underwriting revenues of $212 million declined 44% from last year’s third quarter primarily reflecting lower high yield and investment grade bond issuance volumes.

●

Fixed Income and Commodities sales and trading net revenues were $3.9 billion and included positive revenue of $2.8 billion related to DVA.3 Net revenues for the current quarter reflected market volatility and high levels of client activity in interest rate and currency products as well as commodities, partly offset by losses in credit products due to the stressed credit environment.

●	Equity sales and trading net revenues were $2.0 billion and included positive revenue of $620 million related to DVA.3 Results in the cash and derivatives businesses reflected high levels of client activity and market volumes.

●	Other sales and trading net losses of $443 million, primarily reflected writedowns associated with corporate lending activity.

●

Compensation expense for the current quarter was $1.6 billion with compensation to net revenue ratio of 24%. This ratio was affected by DVA which increased net revenues in the current period. Non-compensation expenses of $1.5 billion increased from $1.2 billion a year ago primarily reflecting higher levels of business activity and costs associated with the U.K. bank levy.

●	Morgan Stanley’s average trading Value-at-Risk measured at the 95% confidence level was $130 million compared with $145 million in the second quarter of 2011 and $142 million in the third quarter of the prior year.

GLOBAL WEALTH MANAGEMENT GROUP

Global Wealth Management Group reported pre-tax income from continuing operations of $362 million compared with $281 million in the third quarter of last year. The quarter’s pre-tax margin was 11%.6 Income after the non controlling interest allocation to Citigroup Inc. and before taxes was $310 million.7

●	Net revenues of $3.3 billion increased from $3.1 billion a year ago primarily reflecting higher asset management revenues and commissions partly offset by net losses from investments associated with the Firm’s deferred compensation and co-investment plans.

●	The compensation to net revenue ratio for the current quarter was 61% with compensation expense of $2.0 billion. Non-compensation expenses were $896 million compared with $913 million a year ago.

●	Total client assets were $1.6 trillion at quarter-end. Client assets in fee-based accounts were $465 billion and represented 30% of total client assets. Net new assets for the quarter were $15.5 billion and net new flows in fee-based accounts were $10.1 billion.

●	The 17,291 global representatives at quarter-end achieved average annualized revenue per global representative of $747,000 and total client assets per global representative of $90 million.

ASSET MANAGEMENT

Asset Management reported a pre-tax loss from continuing operations of $117 million compared with pre-tax income from continuing operations of $279 million in last year’s third quarter.8

●	Net revenues of $215 million decreased from $802 million a year ago as solid results in the Traditional Asset Management business were meaningfully offset by losses on principal investments in the Merchant Banking and Real Estate Investing business compared with gains in the prior year quarter.9

●	The compensation to net revenue ratio for the current quarter was 62% with compensation expense of $133 million. Non-compensation expenses of $199 million decreased from $238 million a year ago.

●

Assets under management or supervision at September 30, 2011 of $268 billion increased from $266 billion a year ago. The increase primarily reflected net customer inflows in Morgan Stanley’s liquidity funds, partly offset by lower market levels. The business recorded net outflows of $5.8 billion in the current quarter compared with net inflows of $2.9 billion in the third quarter of last year.

CAPITAL

Morgan Stanley’s Tier 1 capital ratio, under Basel I, was approximately 15.1% and Tier 1 common ratio was approximately 13.1% at September 30, 2011.6, 10 The annualized return on average common equity from continuing operations was 14.5% in the current quarter.

At September 30, 2011, it is expected that Risk Weighted Assets (RWAs) that are utilized in the Company’s calculations of its regulatory capital ratios under Basel I (i.e., Total capital, Tier 1 capital and Tier 1 common) will increase by an approximate net $44 billion from the $305 billion reported at June 30, 2011. Previously, Morgan Stanley applied a capital treatment for OTC derivatives collateral that reduced the Company’s overall RWAs based on regulatory reporting guidance received from the Federal Reserve. In October 2011, the Company was advised by the Federal Reserve that, based on their further review concerning the application of pre-existing regulatory policy, the Company should adjust its capital treatment for OTC derivatives collateral. In all circumstances, the Company’s calculations have been done consistent with Federal Reserve guidance. Neither the original capital treatment, nor the revision, carry through to Basel III, and as such, the Company’s previously provided estimates of its Tier 1 common ratio under Basel III, currently and by the end of 2012, are not impacted.

At September 30, 2011, book value and tangible book value per common share were $31.29 and $27.79,11 respectively, based on approximately 1.9 billion shares outstanding.

OTHER MATTERS

The effective tax rate from continuing operations for the current quarter was 38.3% compared with 19.1% in the prior year third quarter.12 The increase in the tax rate from the prior year primarily reflected the change in the geographic mix of earnings.

Morgan Stanley’s Board of Directors declared a $0.05 quarterly dividend per common share. The dividend is payable on November 15, 2011 to common shareholders of record on October 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 1,300 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)

1 Includes preferred dividends and other adjustments related to the calculation of earnings per share of approximately $46 million for the quarter ended September 30, 2011 and $222 million for the quarter ended September 30, 2010. Refer to page 3 of Morgan Stanley’s Financial Supplement accompanying this release for the calculation of earnings per share.

2 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 and other credit factors (commonly referred to as “DVA”).

3 Due to DVA, sales and trading net revenue for the quarter ended September 30, 2011 included positive revenue of $3.4 billion (fixed income: $2.8 billion; equity: $0.6 billion) and sales and trading net revenue for the quarter ended September 30, 2010 included negative revenue of $731 million (fixed income: $464 million; equity: $196 million; other: $71 million).

4 Discontinued operations for the current quarter primarily reflected additional tax benefits associated with the sale of the retail asset management business to Invesco Ltd.

5 Source: Thomson Reuters – for the period of January 1, 2011 to September 30, 2011 as of October 3, 2011.

6 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 10) 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 MSSB non controlling interests divided by risk-weighted assets.

7 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 Results for the third quarter of 2011 and 2010 included a pre-tax loss of $17 million and pre-tax income of $195 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.

9 Results for the current quarter included losses of $13 million compared with gains of $203 million in the prior year quarter related to principal investments held by certain consolidated real estate funds.

10 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. The definition of Tier 1 common equity may evolve in the future as regulatory rules may be implemented based on a final proposal regarding non controlling interest as initially presented by the Basel Committee. These computations are preliminary estimates as of October 19, 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 September 30, 2011.

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

12 The quarter ended September 30, 2010 included a tax gain of $176 million associated with the repatriation of non-U.S. earnings at a cost lower than originally estimated. Excluding the discrete tax gain, the effective tax rate for the quarter would have been 19.1%.

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



	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011			Sept 30, 2010			Change
Net revenues
Institutional Securities	$	6,448		$	5,189		$	2,895			24	%		123	%	$	15,229		$	12,748			19	%
Global Wealth Management Group		3,260			3,476			3,104			(6	%)		5	%		10,173			9,283			10	%
Asset Management		215			645			802			(67	%)		(73	%)		1,486			1,865			(20	%)
Intersegment Eliminations		(31	)		(28	)		(21	)		(11	%)		(48	%)		(79	)		(81	)		2	%
Consolidated net revenues	$	9,892		$	9,282		$	6,780			7	%		46	%	$	26,809		$	23,815			13	%

Income (loss) from continuing operations before tax
Institutional Securities	$	3,433		$	1,457		$	241			136	%		*		$	5,287		$	3,901			36	%
Global Wealth Management Group		362			322			281			12	%		29	%		1,032			766			35	%
Asset Management		(117	)		165			279			*			*			175			367			(52	%)
Intersegment Eliminations		0			0			0			--			--			0			(15	)		*
Consolidated income (loss) from continuing operations before tax	$	3,678		$	1,944		$	801			89	%		*		$	6,494		$	5,019			29	%

Income (loss) applicable to Morgan Stanley
Institutional Securities	$	2,064		$	990		$	99			108	%		*		$	3,768		$	3,214			17	%
Global Wealth Management Group		169			180			144			(6	%)		17	%		532			353			51	%
Asset Management		(59	)		19			71			*			*			29			42			(31	%)
Intersegment Eliminations		0			0			0			--			--			0			(12	)		*
Consolidated income (loss) applicable to Morgan Stanley	$	2,174		$	1,189		$	314			83	%		*		$	4,329		$	3,597			20	%

Earnings (loss) applicable to Morgan Stanley common shareholders	$	2,153		$	(558	)	$	(91	)		*			*		$	2,335		$	2,971			(21	%)

Earnings per basic share:
Income from continuing operations	$	1.15		$	(0.38	)	$	0.07			*			*		$	1.45		$	2.04			(29	%)
Discontinued operations	$	0.01		$	-		$	(0.14	)		*			*		$	0.02		$	0.18			(89	%)
Earnings per basic share	$	1.16		$	(0.38	)	$	(0.07	)		*			*		$	1.47		$	2.22			(34	%)

Earnings per diluted share:
Income from continuing operations	$	1.14		$	(0.38	)	$	0.05			*			*		$	1.43		$	1.98			(28	%)
Discontinued operations	$	0.01		$	-		$	(0.12	)		*			*		$	0.02		$	0.17			(88	%)
Earnings per diluted share	$	1.15		$	(0.38	)	$	(0.07	)		*			*		$	1.45		$	2.15			(33	%)

Notes:	-	Results for the quarters ended September 30, 2011, June 30, 2011 and September 30, 2010 include positive (negative) revenue of $3,410 million, $244 million and $(731) million, respectively, related to the movement in Morgan Stanley's credit spreads and other credit factors 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:						Nine Months Ended						Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011			Sept 30, 2010			Change
Revenues:
Investment banking	$	1,031		$	1,695		$	1,221			(39	%)		(16	%)	$	3,940		$	3,361			17	%
Principal transactions:
Trading		4,961			3,485			1,441			42	%		*			11,423			8,552			34	%
Investments		(298	)		402			820			*			*			433			1,137			(62	%)
Commissions and fees		1,484			1,291			1,068			15	%		39	%		4,224			3,636			16	%
Asset management, distribution and admin. fees		2,184			2,206			1,940			(1	%)		13	%		6,499			5,877			11	%
Other		390			275			187			42	%		109	%		221			640			(65	%)
Total non-interest revenues		9,752			9,354			6,677			4	%		46	%		26,740			23,203			15	%

Interest income		1,749			1,957			1,851			(11	%)		(6	%)		5,560			5,334			4	%
Interest expense		1,609			2,029			1,748			(21	%)		(8	%)		5,491			4,722			16	%
Net interest		140			(72	)		103			*			36	%		69			612			(89	%)
Net revenues		9,892			9,282			6,780			7	%		46	%		26,809			23,815			13	%

Non-interest expenses:
Compensation and benefits		3,685			4,675			3,685			(21	%)		--			12,693			11,987			6	%

Non-compensation expenses:
Occupancy and equipment		386			401			399			(4	%)		(3	%)		1,189			1,190			--
Brokerage, clearing and exchange fees		447			416			332			7	%		35	%		1,268			1,051			21	%
Information processing and communications		460			448			412			3	%		12	%		1,353			1,223			11	%
Marketing and business development		145			154			134			(6	%)		8	%		446			421			6	%
Professional services		462			494			460			(6	%)		--			1,384			1,351			2	%
Other		629			750			557			(16	%)		13	%		1,982			1,573			26	%
Total non-compensation expenses		2,529			2,663			2,294			(5	%)		10	%		7,622			6,809			12	%

Total non-interest expenses		6,214			7,338			5,979			(15	%)		4	%		20,315			18,796			8	%

Income (loss) from continuing operations before taxes		3,678			1,944			801			89	%		*			6,494			5,019			29	%
Income tax provision / (benefit) from continuing operations		1,410			542			(23	)		160	%		*			1,696			653			160	%
Income (loss) from continuing operations		2,268			1,402			824			62	%		175	%		4,798			4,366			10	%
Gain (loss) from discontinued operations after tax		25			4			(183	)		*			*			31			270			(89	%)
Net income (loss)	$	2,293		$	1,406		$	641			63	%		*		$	4,829		$	4,636			4	%
Net income (loss) applicable to noncontrolling interests		94			213			510			(56	%)		(82	%)		469			769			(39	%)
Net income (loss) applicable to Morgan Stanley		2,199			1,193			131			84	%		*			4,360			3,867			13	%
Preferred stock dividend / Other		46			1,751			222			(97	%)		(79	%)		2,025			896			126	%
Earnings (loss) applicable to Morgan Stanley common shareholders	$	2,153		$	(558	)	$	(91	)		*			*		$	2,335		$	2,971			(21	%)

Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		2,174			1,189			314			83	%		*			4,329			3,597			20	%
Gain (loss) from discontinued operations after tax		25			4			(183	)		*			*			31			270			(89	%)
Net income (loss) applicable to Morgan Stanley	$	2,199		$	1,193		$	131			84	%		*		$	4,360		$	3,867			13	%

Pre-tax profit margin		37	%		21	%		12	%								24	%		21	%
Compensation and benefits as a % of net revenues		37	%		50	%		54	%								47	%		50	%
Non-compensation expenses as a % of net revenues		26	%		29	%		34	%								28	%		29	%

Effective tax rate from continuing operations		38.3	%		27.9	%		*									26.1	%		13.0	%

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.
	-	The quarter ended June 30, 2011, preferred stock dividend/other included a one-time negative adjustment of approximately $1.7 billion related to the conversion of Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock held by Mitsubishi UFJ Financial Group, Inc. (MUFG), into Morgan Stanley common stock.
	-	The quarter ended September 30, 2010 included a tax gain of $176 million associated with the repatriation of non-U.S. earnings at a cost lower than originally estimated. Excluding the discrete tax gain, the effective tax rate for the quarter ended would have been 19.1%.
	-	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, dollars in millions, except for per share data)


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011			Sept 30, 2010			Change


Income (loss) from continuing operations	$	2,268		$	1,402		$	824			62	%		175	%	$	4,798		$	4,366			10	%
Net income (loss) from continuing operations applicable to noncontrolling interest		94			213			510			(56	%)		(82	%)		469			769			(39	%)
Income from continuing operations applicable to Morgan Stanley		2,174			1,189			314			83	%		*			4,329			3,597			20	%
Less: Preferred Dividends		(24	)		(24	)		(220	)		--			89	%		(268	)		(660	)		59	%
Less: MUFG preferred stock conversion		-			(1,726	)		-			*			--			(1,726	)		-			*
Income from continuing operations applicable to Morgan Stanley, prior to allocation of income to CIC Equity Units and Participating Restricted Stock Units		2,150			(561	)		94			*			*			2,335			2,937			(20	%)

Basic EPS Adjustments:
Less: Allocation of undistributed earnings to CIC Equity Units		0			0			0			--			--			0			(118	)		*
Less: Allocation of earnings to Participating Restricted Stock Units		(22	)		(1	)		(3	)		*			*			(31	)		(92	)		66	%
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	2,128		$	(562	)	$	91			*			*		$	2,304		$	2,727			(16	%)

Gain (loss) from discontinued operations after tax		25			4			(183	)		*			*			31			270			(89	%)
Gain (loss) from discontinued operations after tax applicable to noncontrolling interests		0			0			0			--			--			0			0			--
Gain (loss) from discontinued operations after tax applicable to Morgan Stanley		25			4			(183	)		*			*			31			270			(89	%)
Less: Allocation of undistributed earnings to CIC Equity Units		0			0			0			--			--			0			(18	)		*
Less: Allocation of earnings to Participating Restricted Stock Units		0			0			1			--			*			0			(8	)		*
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		25			4			(182	)		*			*			31			244			(87	%)

Earnings (loss) applicable to Morgan Stanley common shareholders	$	2,153		$	(558	)	$	(91	)		*			*		$	2,335		$	2,971			(21	%)

Average basic common shares outstanding (millions)		1,848			1,464			1,377			26	%		34	%		1,590			1,337			19	%

Earnings per basic share:
Income from continuing operations	$	1.15	$	(0.38	)	$	0.07		*	*	$	1.45	$	2.04	(29	%)
Discontinued operations	$	0.01	$	-		$	(0.14	)	*	*	$	0.02	$	0.18	(89	%)
Earnings per basic share	$	1.16	$	(0.38	)	$	(0.07	)	*	*	$	1.47	$	2.22	(34	%)

Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	2,128	$	(562	)	$	91		*		*		$	2,304	$	2,727	(16	%)

Diluted EPS Adjustments:
Income impact of assumed conversions:
Preferred stock dividends (Series B - Mitsubishi)		0		0			0		--		--			0		588	*
Assumed conversion of CIC		0		0			(16	)	--		*			0		75	*

Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	2,128	$	(562	)	$	75		*		*		$	2,304	$	3,390	(32	%)

Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		25		4			(182	)	*		*			31		244	(87	%)
Assumed conversion of CIC		0		0			0		--		--			0		41	*

Earnings (loss) applicable to common shareholders plus assumed conversions	$	2,153	$	(558	)	$	(107	)	*		*		$	2,335	$	3,675	(36	%)

Average diluted common shares outstanding and common stock equivalents (millions)		1,869		1,464			1,443		28	%	30	%		1,608		1,710	(6	%)

Earnings per diluted share:
Income from continuing operations	$	1.14	$	(0.38	)	$	0.05		*	*	$	1.43	$	1.98	(28	%)
Discontinued operations	$	0.01	$	-		$	(0.12	)	*	*	$	0.02	$	0.17	(88	%)
Earnings per diluted share	$	1.15	$	(0.38	)	$	(0.07	)	*	*	$	1.45	$	2.15	(33	%)

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 14 of the 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.

EX-99.2 3 a50030597_ex992.htm EXHIBIT 99.2 a50030597_ex992.htm

Exhibit 99.2

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



	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011			Sept 30, 2010			Change
Net revenues
Institutional Securities	$	6,448		$	5,189		$	2,895			24	%		123	%	$	15,229		$	12,748			19	%
Global Wealth Management Group		3,260			3,476			3,104			(6	%)		5	%		10,173			9,283			10	%
Asset Management		215			645			802			(67	%)		(73	%)		1,486			1,865			(20	%)
Intersegment Eliminations		(31	)		(28	)		(21	)		(11	%)		(48	%)		(79	)		(81	)		2	%
Consolidated net revenues	$	9,892		$	9,282		$	6,780			7	%		46	%	$	26,809		$	23,815			13	%

Income (loss) from continuing operations before tax
Institutional Securities	$	3,433		$	1,457		$	241			136	%		*		$	5,287		$	3,901			36	%
Global Wealth Management Group		362			322			281			12	%		29	%		1,032			766			35	%
Asset Management		(117	)		165			279			*			*			175			367			(52	%)
Intersegment Eliminations		0			0			0			--			--			0			(15	)		*
Consolidated income (loss) from continuing operations before tax	$	3,678		$	1,944		$	801			89	%		*		$	6,494		$	5,019			29	%

Income (loss) applicable to Morgan Stanley
Institutional Securities	$	2,064		$	990		$	99			108	%		*		$	3,768		$	3,214			17	%
Global Wealth Management Group		169			180			144			(6	%)		17	%		532			353			51	%
Asset Management		(59	)		19			71			*			*			29			42			(31	%)
Intersegment Eliminations		0			0			0			--			--			0			(12	)		*
Consolidated income (loss) applicable to Morgan Stanley	$	2,174		$	1,189		$	314			83	%		*		$	4,329		$	3,597			20	%

Notes:	-	Results for the quarters ended September 30, 2011, June 30, 2011 and September 30, 2010 include positive (negative) revenue of $3,410 million, $244 million and $(731) million, respectively, related to the movement in Morgan Stanley's credit spreads and other credit factors 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 17.

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


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011			Sept 30, 2010			Change
Revenues:
Investment banking	$	1,031		$	1,695		$	1,221			(39	%)		(16	%)	$	3,940		$	3,361			17	%
Principal transactions:
Trading		4,961			3,485			1,441			42	%		*			11,423			8,552			34	%
Investments		(298	)		402			820			*			*			433			1,137			(62	%)
Commissions and fees		1,484			1,291			1,068			15	%		39	%		4,224			3,636			16	%
Asset management, distribution and admin. fees		2,184			2,206			1,940			(1	%)		13	%		6,499			5,877			11	%
Other		390			275			187			42	%		109	%		221			640			(65	%)
Total non-interest revenues		9,752			9,354			6,677			4	%		46	%		26,740			23,203			15	%

Interest income		1,749			1,957			1,851			(11	%)		(6	%)		5,560			5,334			4	%
Interest expense		1,609			2,029			1,748			(21	%)		(8	%)		5,491			4,722			16	%
Net interest		140			(72	)		103			*			36	%		69			612			(89	%)
Net revenues		9,892			9,282			6,780			7	%		46	%		26,809			23,815			13	%

Non-interest expenses:
Compensation and benefits		3,685			4,675			3,685			(21	%)		--			12,693			11,987			6	%

Non-compensation expenses:
Occupancy and equipment		386			401			399			(4	%)		(3	%)		1,189			1,190			--
Brokerage, clearing and exchange fees		447			416			332			7	%		35	%		1,268			1,051			21	%
Information processing and communications		460			448			412			3	%		12	%		1,353			1,223			11	%
Marketing and business development		145			154			134			(6	%)		8	%		446			421			6	%
Professional services		462			494			460			(6	%)		--			1,384			1,351			2	%
Other		629			750			557			(16	%)		13	%		1,982			1,573			26	%
Total non-compensation expenses		2,529			2,663			2,294			(5	%)		10	%		7,622			6,809			12	%

Total non-interest expenses		6,214			7,338			5,979			(15	%)		4	%		20,315			18,796			8	%

Income (loss) from continuing operations before taxes		3,678			1,944			801			89	%		*			6,494			5,019			29	%
Income tax provision / (benefit) from continuing operations		1,410			542			(23	)		160	%		*			1,696			653			160	%
Income (loss) from continuing operations		2,268			1,402			824			62	%		175	%		4,798			4,366			10	%
Gain (loss) from discontinued operations after tax		25			4			(183	)		*			*			31			270			(89	%)
Net income (loss)	$	2,293		$	1,406		$	641			63	%		*		$	4,829		$	4,636			4	%
Net income (loss) applicable to noncontrolling interests		94			213			510			(56	%)		(82	%)		469			769			(39	%)
Net income (loss) applicable to Morgan Stanley		2,199			1,193			131			84	%		*			4,360			3,867			13	%
Preferred stock dividend / Other		46			1,751			222			(97	%)		(79	%)		2,025			896			126	%
Earnings (loss) applicable to Morgan Stanley common shareholders	$	2,153		$	(558	)	$	(91	)		*			*		$	2,335		$	2,971			(21	%)

Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		2,174			1,189			314			83	%		*			4,329			3,597			20	%
Gain (loss) from discontinued operations after tax		25			4			(183	)		*			*			31			270			(89	%)
Net income (loss) applicable to Morgan Stanley	$	2,199		$	1,193		$	131			84	%		*		$	4,360		$	3,867			13	%

Pre-tax profit margin		37	%		21	%		12	%								24	%		21	%
Compensation and benefits as a % of net revenues		37	%		50	%		54	%								47	%		50	%
Non-compensation expenses as a % of net revenues		26	%		29	%		34	%								28	%		29	%

Effective tax rate from continuing operations		38.3	%		27.9	%		*									26.1	%		13.0	%

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.
	-	The quarter ended June 30, 2011, preferred stock dividend/other included a one-time negative adjustment of approximately $1.7 billion related to the conversion of Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock held by Mitsubishi UFJ Financial Group, Inc. (MUFG), into Morgan Stanley common stock (MUFG conversion).
	-	The quarter ended September 30, 2010 included a tax gain of $176 million associated with the repatriation of non-U.S. earnings at a cost lower than originally estimated. Excluding the discrete tax gain, the effective tax rate for the quarter would have been 19.1%.
	-	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 17.

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


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011			Sept 30, 2010			Change


Income (loss) from continuing operations	$	2,268		$	1,402		$	824			62	%		175	%	$	4,798		$	4,366			10	%
Net income (loss) from continuing operations applicable to noncontrolling interest		94			213			510			(56	%)		(82	%)		469			769			(39	%)
Income from continuing operations applicable to Morgan Stanley		2,174			1,189			314			83	%		*			4,329			3,597			20	%
Less: Preferred Dividends		(24	)		(24	)		(220	)		--			89	%		(268	)		(660	)		59	%
Less: MUFG preferred stock conversion		-			(1,726	)		-			*			--			(1,726	)		-			*
Income from continuing operations applicable to Morgan Stanley, prior to allocation of income to CIC Equity Units and Participating Restricted Stock Units		2,150			(561	)		94			*			*			2,335			2,937			(20	%)

Basic EPS Adjustments:
Less: Allocation of undistributed earnings to CIC Equity Units		0			0			0			--			--			0			(118	)		*
Less: Allocation of earnings to Participating Restricted Stock Units		(22	)		(1	)		(3	)		*			*			(31	)		(92	)		66	%
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	2,128		$	(562	)	$	91			*			*		$	2,304		$	2,727			(16	%)

Gain (loss) from discontinued operations after tax		25			4			(183	)		*			*			31			270			(89	%)
Gain (loss) from discontinued operations after tax applicable to noncontrolling interests		0			0			0			--			--			0			0			--
Gain (loss) from discontinued operations after tax applicable to Morgan Stanley		25			4			(183	)		*			*			31			270			(89	%)
Less: Allocation of undistributed earnings to CIC Equity Units		0			0			0			--			--			0			(18	)		*
Less: Allocation of earnings to Participating Restricted Stock Units		0			0			1			--			*			0			(8	)		*
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		25			4			(182	)		*			*			31			244			(87	%)

Earnings (loss) applicable to Morgan Stanley common shareholders	$	2,153		$	(558	)	$	(91	)		*			*		$	2,335		$	2,971			(21	%)

Average basic common shares outstanding (millions)		1,848			1,464			1,377			26	%		34	%		1,590			1,337			19	%

Earnings per basic share:
Income from continuing operations	$	1.15	$	(0.38	)	$	0.07		*	*	$	1.45	$	2.04	(29	%)
Discontinued operations	$	0.01	$	-		$	(0.14	)	*	*	$	0.02	$	0.18	(89	%)
Earnings per basic share	$	1.16	$	(0.38	)	$	(0.07	)	*	*	$	1.47	$	2.22	(34	%)

Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	2,128	$	(562	)	$	91		*		*		$	2,304	$	2,727	(16	%)

Diluted EPS Adjustments:
Income impact of assumed conversions:
Preferred stock dividends (Series B - Mitsubishi)		0		0			0		--		--			0		588	*
Assumed conversion of CIC		0		0			(16	)	--		*			0		75	*
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders	$	2,128	$	(562	)	$	75		*		*		$	2,304	$	3,390	(32	%)

Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders		25		4			(182	)	*		*			31		244	(87	%)
Assumed conversion of CIC		0		0			0		--		--			0		41	*

Earnings (loss) applicable to common shareholders plus assumed conversions	$	2,153	$	(558	)	$	(107	)	*		*		$	2,335	$	3,675	(36	%)

Average diluted common shares outstanding and common stock equivalents (millions)		1,869		1,464			1,443		28	%	30	%		1,608		1,710	(6	%)

Earnings per diluted share:
Income from continuing operations	$	1.14	$	(0.38	)	$	0.05		*	*	$	1.43	$	1.98	(28	%)
Discontinued operations	$	0.01	$	-		$	(0.12	)	*	*	$	0.02	$	0.17	(88	%)
Earnings per diluted share	$	1.15	$	(0.38	)	$	(0.07	)	*	*	$	1.45	$	2.15	(33	%)

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 14 of the 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 17.

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


	Quarter Ended									Percentage Change From:						Nine Months Ended				Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011		Sept 30, 2010		Change


Regional revenue (1)
Americas	$	6,582		$	6,629		$	4,777			(1	%)		38	%	$	18,701	$	16,650		12	%
EMEA (Europe, Middle East, Africa)		2,243			1,572			1,002			43	%		124	%		5,519		4,728		17	%
Asia		1,067			1,081			1,001			(1	%)		7	%		2,589		2,437		6	%
Consolidated net revenues	$	9,892		$	9,282		$	6,780			7	%		46	%	$	26,809	$	23,815		13	%


Worldwide employees		62,648			62,964			62,864			(1	%)		--
Total assets	$	794,939		$	830,747		$	841,372			(4	%)		(6	%)
Firmwide deposits		66,184			65,525			61,202			1	%		8	%
Consolidated assets under management or supervision (billions):
Asset Management		268			296			266			(9	%)		1	%
Global Wealth Management		472			516			449			(9	%)		5	%
Total		740			812			715			(9	%)		3	%


Common equity (2)		60,320			58,199			47,279			4	%		28	%
Preferred equity (2)		1,508			1,508			9,597			--			(84	%)
Morgan Stanley shareholders' equity		61,828			59,707			56,876			4	%		9	%
Junior subordinated debt issued to capital trusts		4,836			4,826			4,822			--			--
Less: Goodwill and intangible assets (3)		(6,761	)		(6,860	)		(7,091	)		1	%		5	%
Tangible Morgan Stanley shareholders' equity	$	59,903		$	57,673		$	54,607			4	%		10	%
Tangible common equity	$	53,559		$	51,339		$	40,188			4	%		33	%

Leverage Ratio		13.3	x		14.4	x		15.4	x

Return on average common equity
from continuing operations		14.5	%		*			0.9	%
Return on average common equity		14.7	%		*			*

Period end common shares outstanding (000's)		1,927,540			1,929,033			1,512,990			--			27	%

Book value per common share (4)	$	31.29		$	30.17		$	31.25			4	%		--
Tangible book value per common share (4)	$	27.79		$	26.61		$	26.56			4	%		5	%

Notes:	-	All data presented in millions except ratios, book values and number of employees.
	-	Consolidated assets under management has been recast to exclude the share of minority stake assets which represents Asset Management's proportional share of assets managed by entities in which it owns a minority stake.
	-	Goodwill and intangible assets exclude noncontrolling interests and reflect the Firm's share of Morgan Stanley Smith Barney (MSSB) 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.
	-	For the quarter ended June 30, 2011, the negative adjustment related to the MUFG conversion was included in the numerator in the calculation of the return on average common 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 Morgan Stanley 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 15-16 and Legal Notice on page 17.

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



	Quarter Ended
	September 30, 2011							June 30, 2011						September 30, 2010
	Average							Average						Average
	Tier 1 capital (1)		Common equity (1)		Return on average common equity			Tier 1 capital (1)		Common equity (1)		Return on average common equity		Tier 1 capital (1)		Common equity (1)		Return on average common equity
Institutional Securities	$	26.0	$	29.3		28	%	$	25.1	$	22.1		*	$	26.3	$	17.3		*
Global Wealth Management Group		3.6		8.3		8	%		3.4		7.1		*		2.5		6.6		8	%
Asset Management		1.6		2.5		*			1.4		2.0		*		2.0		2.2		12	%
Parent capital		20.6		19.0					20.7		18.4				22.8		18.0
Total - continuing operations		51.8		59.1		15	%		50.6		49.6		*		53.6		44.1		1	%
Discontinued operations		0.0		0.0					0.0		0.0				0.1		0.1
Firm	$	51.8	$	59.1		15	%	$	50.6	$	49.6		*	$	53.7	$	44.2		*


	Nine Months Ended													Nine Months Ended
	September 30, 2011													September 30, 2010
	Average													Average

	Tier 1 capital (1)		Common equity (1)		Return on average common equity									Tier 1 capital (1)		Common equity (1)		Return on average common equity
Institutional Securities	$	24.7	$	23.9		11	%							$	26.0	$	17.5		23	%
Global Wealth Management Group		3.4		7.4		5	%								2.8		6.8		6	%
Asset Management		1.5		2.2		*									1.8		2.1		2	%
Parent capital		21.0		18.8											20.4		14.0
Total - continuing operations		50.6		52.3		6	%								51.0		40.4		10	%
Discontinued operations		0.0		0.0											0.2		0.3
Firm	$	50.6	$	52.3		6	%							$	51.2	$	40.7		10	%

Notes:	-	The negative adjustment of $1.7 billion related to the MUFG conversion in the quarter ended June 30, 2011 was allocated to the business segments and included in the numerator for the purpose of calculating the return on average common equity as follows: Institutional Securities $1.4 billion, Global Wealth Management $0.2 billion and Asset Management $0.1 billion.
		Excluding this negative adjustment, the return on average common equity for the quarter ended June 30, 2011 and nine months ended September 30, 2011 would have been:
		Quarter: Firm: 9%, Institutional Securities: 18%, Global Wealth Management: 10% and Asset Management: 4%
		Nine Months: Firm: 10%, Institutional Securities: 20%, Global Wealth Management: 9% and Asset Management: 1%
	-	The return on average common equity is a non-GAAP measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance.
	-	Refer to End Notes on pages 15-16 and Legal Notice on page 17.

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


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011			Sept 30, 2010			Change
Revenues:
Investment banking	$	864		$	1,473		$	1,008			(41	%)		(14	%)	$	3,345		$	2,780			20	%
Principal transactions:
Trading		4,781			3,209			1,090			49	%		*			10,636			7,624			40	%
Investments		(119	)		150			387			*			*			174			493			(65	%)
Commissions and fees		814			603			504			35	%		62	%		2,087			1,701			23	%
Asset management, distribution and admin. fees		31			34			15			(9	%)		107	%		96			80			20	%
Other		302			130			70			132	%		*			(141	)		263			*
Total non-interest revenues		6,673			5,599			3,074			19	%		117	%		16,197			12,941			25	%

Interest income		1,369			1,573			1,538			(13	%)		(11	%)		4,422			4,293			3	%
Interest expense		1,594			1,983			1,717			(20	%)		(7	%)		5,390			4,486			20	%
Net interest		(225	)		(410	)		(179	)		45	%		(26	%)		(968	)		(193	)		*
Net revenues		6,448			5,189			2,895			24	%		123	%		15,229			12,748			19	%

Compensation and benefits		1,550			2,240			1,490			(31	%)		4	%		5,743			5,296			8	%
Non-compensation expenses		1,465			1,492			1,164			(2	%)		26	%		4,199			3,551			18	%
Total non-interest expenses		3,015			3,732			2,654			(19	%)		14	%		9,942			8,847			12	%


Income (loss) from continuing operations before taxes		3,433			1,457			241			136	%		*			5,287			3,901			36	%
Income tax provision / (benefit) from continuing operations		1,309			350			(131	)		*			*			1,281			419			*
Income (loss) from continuing operations		2,124			1,107			372			92	%		*			4,006			3,482			15	%
Gain (loss) from discontinued operations after tax		(3	)		1			(202	)		*			99	%		(5	)		(1,165	)		100	%
Net income (loss)		2,121			1,108			170			91	%		*			4,001			2,317			73	%
Net income (loss) applicable to noncontrolling interests		60			117			273			(49	%)		(78	%)		238			268			(11	%)
Net income (loss) applicable to Morgan Stanley	$	2,061		$	991		$	(103	)		108	%		*		$	3,763		$	2,049			84	%

Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		2,064			990			99			108	%		*			3,768			3,214			17	%
Gain (loss) from discontinued operations after tax		(3	)		1			(202	)		*			99	%		(5	)		(1,165	)		100	%
Net income (loss) applicable to Morgan Stanley	$	2,061		$	991		$	(103	)		108	%		*		$	3,763		$	2,049			84	%

Return on average common equity
from continuing operations		28	%		*			*									11	%		23	%
Pre-tax profit margin		53	%		28	%		8	%								35	%		31	%
Compensation and benefits as a % of net revenues		24	%		43	%		52	%								38	%		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.
	-	The negative adjustment related to the MUFG conversion in the quarter ended June 30, 2011 was included in the numerator in the calculation of the return on average common equity. Excluding this negative adjustment, the return on average common equity for Institutional Securities would have been 18% and 20%, respectively, for the quarter ended June 30, 2011 and the nine months ended September 30, 2011.
	-	For the quarter ended September 30, 2010, discontinued operations included a loss of $229 million due to a write-down and related costs associated with the planned disposition of Revel.
	-	Refer to Legal Notice on page 17.

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



	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011			Sept 30, 2010			Change

Investment Banking
Advisory revenues	$	413		$	533		$	371			(23	%)		11	%	$	1,331		$	986			35	%
Underwriting revenues
Equity		239			419			260			(43	%)		(8	%)		943			793			19	%
Fixed income		212			521			377			(59	%)		(44	%)		1,071			1,001			7	%
Total underwriting revenues		451			940			637			(52	%)		(29	%)		2,014			1,794			12	%

Total investment banking revenues	$	864		$	1,473		$	1,008			(41	%)		(14	%)	$	3,345		$	2,780			20	%

Sales & Trading
Equity	$	1,961		$	1,853		$	925			6	%		112	%	$	5,516		$	3,759			47	%
Fixed income and Commodities		3,883			2,093			847			86	%		*			7,746			5,896			31	%
Other		(443	)		(510	)		(342	)		13	%		(30	%)		(1,411	)		(443	)		*
Total sales & trading net revenues	$	5,401		$	3,436		$	1,430			57	%		*		$	11,851		$	9,212			29	%

Investments & Other
Investments	$	(119	)	$	150		$	387			*			*		$	174		$	493			(65	%)
Other		302			130			70			132	%		*			(141	)		263			*
Total investments & other revenues	$	183		$	280		$	457			(35	%)		(60	%)	$	33		$	756			(96	%)

Total Institutional Securities net revenues	$	6,448		$	5,189		$	2,895			24	%		123	%	$	15,229		$	12,748			19	%


Average Daily 95% / One-Day Value-at-Risk ("VaR") (1)
Primary Market Risk Category ($ millions, pre-tax)
Interest rate and credit spread	$	77		$	117		$	117
Equity price	$	35		$	31		$	28
Foreign exchange rate	$	19		$	20		$	17
Commodity price	$	32		$	29		$	30

Aggregation of Primary Risk Categories	$	93		$	135		$	123

Credit Portfolio VaR	$	104		$	97		$	70

Trading VaR	$	130		$	145		$	142

Notes:

Refer to End Notes on pages 15-16 and Legal Notice on page 17.

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

	Quarter Ended									Percentage Change From:
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010


Corporate funded loans
Investment grade	$	6.0		$	7.2		$	4.6			(17	%)		30	%
Non-investment grade		7.7			7.1			6.8			8	%		13	%
Total corporate funded loans	$	13.7		$	14.3		$	11.4			(4	%)		20	%

Corporate lending commitments
Investment grade	$	55.1		$	53.2		$	47.7			4	%		16	%
Non-investment grade		17.9			18.5			12.6			(3	%)		42	%
Total corporate lending commitments	$	73.0		$	71.7		$	60.3			2	%		21	%

Corporate funded loans plus lending commitments
Investment grade	$	61.1		$	60.4		$	52.3			1	%		17	%
Non-investment grade	$	25.6		$	25.6		$	19.4			--			32	%

% investment grade		70	%		70	%		73	%
% non-investment grade		30	%		30	%		27	%

Total corporate funded loans and lending commitments	$	86.7		$	86.0		$	71.7			1	%		21	%
Hedges	$	41.4		$	34.0		$	21.3			22	%		94	%

Notes:	-	In connection with certain of its Institutional Securities business activities, the Firm provides loans or lending commitments to select clients related to its event driven 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 September 30, 2011, June 30, 2011, and September 30, 2010 the leveraged acquisition finance portfolio of pipeline commitments and closed deals to non-investment grade borrowers were $7.0 billion, $7.2 billion and $4.0 billion, respectively.
	-	The hedge balance reflects the notional amount utilized by the lending business.
	-	Refer to Legal Notice on page 17.

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


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011			Sept 30, 2010			Change
Revenues:
Investment banking	$	162		$	219		$	211			(26	%)		(23	%)	$	585		$	585			--
Principal transactions:
Trading		185			289			386			(36	%)		(52	%)		808			977			(17	%)
Investments		(3	)		5			5			*			*			6			11			(45	%)
Commissions and fees		670			689			564			(3	%)		19	%		2,138			1,938			10	%
Asset management, distribution and admin. fees		1,775			1,781			1,529			--			16	%		5,239			4,729			11	%
Other		97			145			107			(33	%)		(9	%)		333			262			27	%
Total non-interest revenues		2,886			3,128			2,802			(8	%)		3	%		9,109			8,502			7	%

Interest income		467			466			404			--			16	%		1,387			1,130			23	%
Interest expense		93			118			102			(21	%)		(9	%)		323			349			(7	%)
Net interest		374			348			302			7	%		24	%		1,064			781			36	%
Net revenues		3,260			3,476			3,104			(6	%)		5	%		10,173			9,283			10	%

Compensation and benefits		2,002			2,150			1,910			(7	%)		5	%		6,277			5,848			7	%
Non-compensation expenses		896			1,004			913			(11	%)		(2	%)		2,864			2,669			7	%
Total non-interest expenses		2,898			3,154			2,823			(8	%)		3	%		9,141			8,517			7	%

Income (loss) from continuing operations before taxes		362			322			281			12	%		29	%		1,032			766			35	%
Income tax provision / (benefit) from continuing operations		141			138			93			2	%		52	%		370			218			70	%
Income (loss) from continuing operations		221			184			188			20	%		18	%		662			548			21	%
Gain (loss) from discontinued operations after tax		0			0			0			--			--			0			0			--
Net income (loss)		221			184			188			20	%		18	%		662			548			21	%
Net income (loss) applicable to noncontrolling interests		52			4			44			*			18	%		130			195			(33	%)
Net income (loss) applicable to Morgan Stanley	$	169		$	180		$	144			(6	%)		17	%	$	532		$	353			51	%

Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		169			180			144			(6	%)		17	%		532			353			51	%
Gain (loss) from discontinued operations after tax		0			0			0			--			--			0			0			--
Net income (loss) applicable to Morgan Stanley	$	169		$	180		$	144			(6	%)		17	%	$	532		$	353			51	%

Return on average common equity
from continuing operations		8	%		*			8	%								5	%		6	%
Pre-tax profit margin		11	%		9	%		9	%								10	%		8	%
Compensation and benefits as a % of net revenues		61	%		62	%		62	%								62	%		63	%

Notes:	-	The tax provision / (benefit) for all periods includes the Firm's interest in MSSB.
	-	Net income (loss) applicable to noncontrolling interests reflects the 49% allocation of MSSB's pre-tax results to Citigroup.
	-	The negative adjustment related to the MUFG conversion in the quarter ended June 30, 2011 was included in the numerator in the calculation of the return on average common equity. Excluding this negative adjustment, the return on average common equity for Global Wealth Management would have been 10% and 9%, respectively, for the quarter ended June 30, 2011 and nine months ended September 30, 2011.
	-	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 17.

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



	Quarter Ended									Percentage Change From:
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010


Global representatives		17,291			17,638			18,119			(2	%)		(5	%)

Annualized revenue per global
representative (000's)	$	747		$	785		$	686			(5	%)		9	%

Assets by client segment (billions)
$10m or more		482			539			485			(11	%)		(1	%)
$1m - $10m		665			735			678			(10	%)		(2	%)
Subtotal - > $1m		1,147			1,274			1,163			(10	%)		(1	%)
$100k - $1m		379			397			397			(5	%)		(5	%)
< $100k		38			38			43			--			(12	%)
Total client assets (billions)	$	1,564		$	1,709		$	1,603			(8	%)		(2	%)

% of assets by client segment > $1m		73	%		75	%		73	%

Fee-based client account assets (billions)	$	465		$	509		$	437			(9	%)		6	%
Fee-based assets as a % of client assets		30	%		30	%		27	%


Bank deposit program (millions)	$	109,049		$	110,354		$	108,701			(1	%)		--

Client assets per global
representative (millions)	$	90		$	97		$	88			(7	%)		2	%

Global retail net new assets (billions)	$	15.5		$	2.9		$	5.0			*			*

Global fee based asset flows (billions)	$	10.1		$	9.7		$	4.8			4	%		110	%

Global retail locations		772			804			867			(4	%)		(11	%)

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 September 30, 2011, June 30, 2011, and September 30, 2010, approximately $56 billion, $56 billion and $52 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 17.

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


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011			Sept 30, 2010			Change
Revenues:
Investment banking	$	5		$	3		$	2			67	%		150	%	$	10		$	9			11	%
Principal transactions:
Trading		(3	)		(11	)		(34	)		73	%		91	%		(15	)		(45	)		67	%
Investments (1)		(176	)		247			427			*			*			253			632			(60	%)
Commissions and fees		0			0			0			--			--			0			0			--
Asset management, distribution and admin. fees		404			413			415			(2	%)		(3	%)		1,226			1,212			1	%
Other		(6	)		3			12			*			*			39			118			(67	%)
Total non-interest revenues		224			655			822			(66	%)		(73	%)		1,513			1,926			(21	%)

Interest income		3			3			9			--			(67	%)		10			18			(44	%)
Interest expense		12			13			29			(8	%)		(59	%)		37			79			(53	%)
Net interest		(9	)		(10	)		(20	)		10	%		55	%		(27	)		(61	)		56	%
Net revenues		215			645			802			(67	%)		(73	%)		1,486			1,865			(20	%)

Compensation and benefits		133			285			285			(53	%)		(53	%)		673			842			(20	%)
Non-compensation expenses		199			195			238			2	%		(16	%)		638			656			(3	%)
Total non-interest expenses		332			480			523			(31	%)		(37	%)		1,311			1,498			(12	%)

Income (loss) from continuing operations before taxes		(117	)		165			279			*			*			175			367			(52	%)
Income tax provision / (benefit) from continuing operations		(40	)		54			15			*			*			45			19			137	%
Income (loss) from continuing operations		(77	)		111			264			*			*			130			348			(63	%)
Gain (loss) from discontinued operations after tax		28			3			19			*			47	%		36			654			(94	%)
Net income (loss)		(49	)		114			283			*			*			166			1,002			(83	%)
Net income (loss) applicable to noncontrolling interests (1)		(18	)		92			193			*			*			101			306			(67	%)
Net income (loss) applicable to Morgan Stanley	$	(31	)	$	22		$	90			*			*		$	65		$	696			(91	%)

Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations		(59	)		19			71			*			*			29			42			(31	%)
Gain (loss) from discontinued operations after tax		28			3			19			*			47	%		36			654			(94	%)
Net income (loss) applicable to Morgan Stanley	$	(31	)	$	22		$	90			*			*		$	65		$	696			(91	%)

Return on average common equity
from continuing operations		*			*			12	%								*			2	%
Pre-tax profit margin		*			26	%		35	%								12	%		20	%
Compensation and benefits as a % of net revenues		62	%		44	%		36	%								45	%		45	%

Notes:	-	The negative adjustment related to the MUFG conversion for the quarter ended June 30, 2011 was included in the numerator in the calculation of the return on average common equity. Excluding this negative adjustment, the return on average common equity for Asset Management would have been 4% and 1%, respectively, for the quarter ended June 30, 2011 and nine months ended September 30, 2011.
	-	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 15-16 and Legal Notice on page 17.

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

	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sept 30, 2011			June 30, 2011			Sept 30, 2010			June 30, 2011			Sept 30, 2010			Sept 30, 2011			Sept 30, 2010			Change

Net Revenues
Traditional Asset Management	$	292		$	366		$	310			(20	%)		(6	%)	$	983		$	851			16	%
Real Estate Investing (1)		61			175			280			(65	%)		(78	%)		354			542			(35	%)
Merchant Banking (2)		(138	)		104			212			*			*			149			472			(68	%)
Total Asset Management	$	215		$	645		$	802			(67	%)		(73	%)	$	1,486		$	1,865			(20	%)

Assets under management or supervision

Net flows by asset class (3)
Traditional Asset Management
Equity	$	(0.7	)	$	1.4		$	0.8			*			*		$	2.7		$	(0.6	)		*
Fixed income		(1.0	)		(2.4	)		(0.3	)		58	%		*			(4.0	)		0.2			*
Liquidity		(4.7	)		16.5			1.5			*			*			13.4			(6.8	)		*
Alternatives		0.0			0.2			0.0			*			--			0.1			(0.2	)		*
Total Traditional Asset Management		(6.4	)		15.7			2.0			*			*			12.2			(7.4	)		*

Real Estate Investing		0.6			(0.1	)		1.2			*			(50	%)		0.7			1.9			(63	%)

Merchant Banking
Private Equity		0.0			0.1			0.1			*			*			0.1			0.5			(80	%)
FrontPoint		0.0			0.0			(0.4	)		--			*			(1.7	)		(0.1	)		*
Total Merchant Banking		0.0			0.1			(0.3	)		*			*			(1.6	)		0.4			*

Total net flows	$	(5.8	)	$	15.7		$	2.9			*			*		$	11.3		$	(5.1	)		*

Assets under management or supervision by asset class (4)
Traditional Asset Management
Equity	$	98		$	119		$	103			(18	%)		(5	%)
Fixed income		58			61			63			(5	%)		(8	%)
Liquidity		67			72			52			(7	%)		29	%
Alternatives		18			18			17			--			6	%
Total Traditional Asset Management		241			270			235			(11	%)		3	%

Real Estate Investing		18			17			15			6	%		20	%

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

Total Assets Under Management or Supervision	$	268		$	296		$	266			(9	%)		1	%

Share of minority stake assets		6			7			7			(14	%)		(14	%)

Notes:	-	Fixed income outflows for the quarter ended June 30, 2011 include $1.3 billion due to the revised treatment of assets under management (AUM) previously reported as net flows.
	-	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 15-16 and Legal Notice on page 17.

This page represents an addendum to the 3Q 2011 Financial Supplement, Appendix I

MORGAN STANLEY
Country Risk Exposure (1) - European Peripherals and France
(unaudited, dollars in millions)

				Net												Net
	Net			Counterparty		Funded		CDS								Funded
	Inventory (2)			Exposure (3)		Lending		Adjustment (4)		Subtotal			Hedges (5)			Exposure
Greece	$	153		$	32	$	138	$	29	$	352		$	(65	)	$	287
Ireland		(67	)		38		-		4		(25	)		(23	)		(48	)
Italy		290			3,660		128		499		4,577			(2,784	)		1,793
Spain		(479	)		439		367		660		987			(488	)		499
Portugal		(583	)		157		127		94		(205	)		(217	)		(422	)

Total Peripherals (6)	$	(686	)	$	4,326	$	760	$	1,286	$	5,686		$	(3,577	)	$	2,109

France (6)	$	(2,331	)	$	2,898	$	377	$	585	$	1,529		$	(1,815	)	$	(286	)

(1)	Country Risk Exposure, measured in accordance with the Company’s internal risk management standards, includes obligations from sovereign governments, corporations, clearinghouses and financial institutions.
(2)	Inventory, both long and short single name positions (i.e., bonds, CDS, equities).
(3)	Net counterparty exposure (i.e., repurchase transactions, securities lending and OTC derivatives), less collateral.
(4)	CDS adjustment represents credit protection purchased from European peripheral banks on European peripheral sovereign and financial institution risk, or French banks on French sovereign and financial institution risk and applies to both short inventory positions and hedges.
(5)	Hedges on net counterparty exposure and lending.
(6)	In addition, at September 30, 2011, the Company had European peripheral country exposure for overnight deposits with banks of approximately $386 million and unfunded loans to corporations in the European peripheral countries and France of $904 million and $1,774 million, respectively.
	- Refer to Legal Notice on page 17.

This page represents an addendum to the 3Q 2011 Financial Supplement, Appendix II

MORGAN STANLEY

Earnings Per Share Calculation Under Two-Class Method

Three Months Ended September 30, 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		1,848		99%				$92		$2,036		$2,128	(6)		$1.15
Participating Restricted Stock Units (1)		20		1%				$1		$21		$22	(7)		N/A
		1,868		100%		$2,150		$93		$2,057		$2,150

	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		1,848		99%				$0		$25		$25	(6)		$0.01
Participating Restricted Stock Units (1)		20		1%				$0		$0		$0	(7)		N/A
		1,868		100%		$25		$0		$25		$25

	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		1,848	99%			$92		$2,061		$2,153	(6)		$1.16
Participating Restricted Stock Units (1)		20	1%			$1		$21		$22	(7)		N/A
		1,868	100%	$2,175		$93		$2,082		$2,175

Note:

Refer to End Notes on pages 15-16 and Legal Notice on page 17.


	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.
(2)	Beginning in the quarter ended June 30, 2011, the increase in common equity and decrease in preferred equity reflect the MUFG conversion.
(3)	Goodwill and intangible balances net of allowable mortgage servicing rights deduction for quarters ended September 30, 2011, June 30, 2011
	and September 30, 2010 of $120 million, $120 million and $125 million, respectively.
(4)	For the quarter ended June 30, 2011 book value and tangible book value decreased by $2.29 and $1.41 per share, respectively, related
	to the conversion of Firm convertible preferred stock held by MUFG into approximately 385 million shares of common stock.

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, Tier 1 common equity 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 or Tier 1 common equity.
	The Required Capital framework will continue to 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 primary market risk categories
	has been recast for all periods to exclude credit portfolio VaR which includes mark-to-market relationship lending exposures and associated
	hedges as well as counterparty credit risk valuation adjustments including its related hedges. Credit portfolio VaR is disclosed as a separate
	category. The Firm considers this new allocation method to be a more transparent view of the Firm's traded market risk. 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" included in the Firm's 10-K for the year ended December 31, 2010.

Page 11:
(1)	The quarters ended September 30, 2011, June 30, 2011 and September 30, 2010 include investment gains (losses) for certain funds included in
	the Firm's consolidated financial statements. The limited partnership interests in these gains were reported in net income (loss) applicable to
	noncontrolling interests.

Page 12:
(1)	Real Estate Investing revenues include 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 noncontrolling interest. The investment gains (losses) for the
	quarters ended September 30, 2011, June 30, 2011 and September 30, 2010 are $(13) million, $95 million and $203 million, respectively.
(2)	Merchant Banking revenues include 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.


	MORGAN STANLEY
	End Notes

(3)	Net Flows by region [inflow / (outflow)] for the quarters ended September 30, 2011, June 30, 2011 and September 30, 2010 are:
	North America: $(4.2) billion, $14.5 billion and $(0.5) billion
	International: $(1.6) billion, $1.2 billion and $3.4 billion
(4)	Assets under management or supervision by region for the quarters ended September 30, 2011, June 30, 2011 and September 30, 2010 are:
	North America: $176 billion, $193 billion and $172 billion
	International: $92 billion, $103 billion and $94 billion
(5)	Assets under management or supervision for the quarter ended September 30, 2011 exclude FrontPoint whereas the quarter
	ended September 30, 2010 include assets under management or supervision of $7.0 billion related to FrontPoint.

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)	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 for the quarter ended September 30, 2011 prior to allocations to participating RSUs.
(4)	Distributed earnings represent the dividends declared on common shares and participating RSUs for the quarter ended September 30, 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 September 30, 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 third quarter earnings press release issued October 19, 2011.

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MORGAN STANLEY
Financial Supplement - 3Q 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	…………….	Country Risk Exposure - European Peripherals and France Appendix I
14	…………….	Earnings Per Share Appendix II
15 - 16	…………….	End Notes
17	…………….	Legal Notice