EX-99.2 3 a50133733ex99_2.htm EXHIBIT 99.2 a50133733ex99_2.htm
Exhibit 99.2
 
 
MORGAN STANLEY
Financial Supplement - 4Q 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
  
…………….
Earnings Per Share Appendix III
16 - 17
  
…………….
End Notes
18
  
…………….
Legal Notice
 
 
 
 
 
MORGAN STANLEY
  
Quarterly Financial Summary
  
(unaudited, dollars in millions)
  
                                                   
     
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
     
Dec 31, 2011
    
Sept 30, 2011
    
Dec 31, 2010
    
Sept 30, 2011
    
Dec 31, 2010
    
Dec 31, 2011
    
Dec 31, 2010
    
Change
  
Net revenues
                                                
 
Institutional Securities
   $ 2,071     $ 6,411     $ 3,566       (68 %)     (42 %)   $ 17,208     $ 16,169       6 %
 
Global Wealth Management Group
     3,250       3,260       3,353       --       (3 %)     13,423       12,636       6 %
 
Asset Management
     424       205       846       107 %     (50 %)     1,887       2,685       (30 %)
 
Intersegment Eliminations
     (36 )     (31 )     (22 )     (16 %)     (64 %)     (115 )     (103 )     (12 %)
 
Consolidated net revenues
   $ 5,709     $ 9,845     $ 7,743       (42 %)     (26 %)   $ 32,403     $ 31,387       3 %
                                                                   
Income (loss) from continuing operations before tax
                                                                
 
Institutional Securities
   $ (779 )   $ 3,447     $ 448       *       *     $ 4,585     $ 4,372       5 %
 
Global Wealth Management Group
     244       362       390       (33 %)     (37 %)     1,276       1,156       10 %
 
Asset Management
     78       (118 )     353       *       (78 %)     253       718       (65 %)
 
Intersegment Eliminations
     0       0       0       --       --       0       (15 )     *  
 
Consolidated income (loss) from continuing operations before tax
   $ (457 )   $ 3,691     $ 1,191       *       *     $ 6,114     $ 6,231       (2 %)
                                                                   
Income (loss) applicable to Morgan Stanley
                                                                
 
Institutional Securities
   $ (366 )   $ 2,073     $ 539       *       *     $ 3,461     $ 3,766       (8 %)
 
Global Wealth Management Group
     133       169       166       (21 %)     (20 %)     665       519       28 %
 
Asset Management
     6       (61 )     166       *       (96 %)     35       205       (83 %)
 
Intersegment Eliminations
     0       0       0       --       --       0       (12 )     *  
 
Consolidated income (loss) applicable to Morgan Stanley
   $ (227 )   $ 2,181     $ 871       *       *     $ 4,161     $ 4,478       (7 %)
                                                                   
 
Notes:
 -
Results for the quarters ended December 31, 2011, September 30, 2011 and December 31, 2010 include positive (negative) revenue of $216 million, $3,410 million and $(945) million, respectively, related to the movement in Morgan Stanley's credit spreads and other credit factors on certain long-term and short-term debt. The twelve months ended December 31, 2011 and December 31, 2010 include positive (negative) revenue of $3,681 million and $(873) 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 18.
 
 
1
 
 
MORGAN STANLEY
  
Quarterly Consolidated Income Statement Information
  
(unaudited, dollars in millions)
  
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2011
    
Sept 30, 2011
    
Dec 31, 2010
    
Sept 30, 2011
    
Dec 31, 2010
    
Dec 31, 2011
    
Dec 31, 2010
    
Change
  
Revenues:
                                                
Investment banking
   $ 1,051     $ 1,031     $ 1,761       2 %     (40 %)   $ 4,991     $ 5,122       (3 %)
Principal transactions:
                                                                
Trading
     969       4,961       854       (80 %)     13 %     12,392       9,406       32 %
Investments
     140       (298 )     688       *       (80 %)     573       1,825       (69 %)
Commissions and fees
     1,155       1,484       1,311       (22 %)     (12 %)     5,379       4,947       9 %
Asset management, distribution and admin. fees
     2,027       2,172       2,068       (7 %)     (2 %)     8,502       7,919       7 %
Other
     97       349       802       (72 %)     (88 %)     209       1,271       (84 %)
Total non-interest revenues
     5,439       9,699       7,484       (44 %)     (27 %)     32,046       30,490       5 %
                                                                 
Interest income
     1,686       1,755       1,951       (4 %)     (14 %)     7,264       7,311       (1 %)
Interest expense
     1,416       1,609       1,692       (12 %)     (16 %)     6,907       6,414       8 %
Net interest
     270       146       259       85 %     4 %     357       897       (60 %)
Net revenues
     5,709       9,845       7,743       (42 %)     (26 %)     32,403       31,387       3 %
Non-interest expenses:
                                                                
Compensation and benefits
     3,808       3,654       4,030       4 %     (6 %)     16,403       15,923       3 %
                                                                 
Non-compensation expenses:
                                                                
Occupancy and equipment
     385       383       377       1 %     2 %     1,564       1,560       --  
Brokerage, clearing and exchange fees
     384       447       380       (14 %)     1 %     1,652       1,431       15 %
Information processing and communications
     472       457       437       3 %     8 %     1,815       1,648       10 %
Marketing and business development
     161       143       159       13 %     1 %     602       576       5 %
Professional services
     489       441       533       11 %     (8 %)     1,803       1,818       (1 %)
Other
     467       629       636       (26 %)     (27 %)     2,450       2,200       11 %
Total non-compensation expenses 
     2,358       2,500       2,522       (6 %)     (7 %)     9,886       9,233       7 %
                                                                 
Total non-interest expenses
     6,166       6,154       6,552       --       (6 %)     26,289       25,156       5 %
                                                                 
Income (loss) from continuing operations before taxes
     (457 )     3,691       1,191       *       *       6,114       6,231       (2 %)
Income tax provision / (benefit) from continuing operations
     (296 )     1,416       90       *       *       1,418       754       88 %
Income (loss) from continuing operations
     (161 )     2,275       1,101       *       *       4,696       5,477       (14 %)
Gain (loss) from discontinued operations after tax
     (23 )     18       (35 )     *       34 %     (51 )     225       *  
Net income (loss)
   $ (184 )   $ 2,293     $ 1,066       *       *     $ 4,645     $ 5,702       (19 %)
Net income (loss) applicable to noncontrolling interests
     66       94       230       (30 %)     (71 %)     535       999       (46 %)
Net income (loss) applicable to Morgan Stanley
     (250 )     2,199       836       *       *       4,110       4,703       (13 %)
Preferred stock dividend / Other
     25       46       236       (46 %)     (89 %)     2,043       1,109       84 %
Earnings (loss) applicable to Morgan Stanley common shareholders
   $ (275 )   $ 2,153     $ 600       *       *     $ 2,067     $ 3,594       (42 %)
                                                                 
Amounts applicable to Morgan Stanley:
                                                                
Income (loss) from continuing operations
     (227 )     2,181       871       *       *       4,161       4,478       (7 %)
Gain (loss) from discontinued operations after tax
     (23 )     18       (35 )     *       34 %     (51 )     225       *  
Net income (loss) applicable to Morgan Stanley
   $ (250 )   $ 2,199     $ 836       *       *     $ 4,110     $ 4,703       (13 %)
                                                                 
Pre-tax profit margin
     *       38 %     15 %                     19 %     20 %        
Compensation and benefits as a % of net revenues
     67 %     37 %     52 %                     51 %     51 %        
Non-compensation expenses as a % of net revenues
     41 %     25 %     33 %                     31 %     29 %        
Effective tax rate from continuing operations
     64.8 %     38.4 %     7.6 %                     23.2 %     12.1 %        
                                                                 
 
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 and full year ended December 31, 2011, Principal Transactions - Trading included a loss of $1,742 million related to the MBIA settlement (MBIA).
  -
Other revenues for the full year ended December 31, 2011, included a loss of approximately $783 million related to the 40% stake in a Japanese securities joint venture, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.  ("MUMSS").
   -
Other revenues for the full year 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).
  -
For the full year ended December 31, 2011, discontinued operations primarily included charges of approximately $90 million related to the results and losses with the planned disposition of Saxon Mortgage Services Inc. (Saxon). For the full year ended December 31, 2010, discontinued operations primarily included charges related to the Firm's investment in Revel Entertainment Group, LLC (Revel), a gain of $775 million related to a legal settlement with Discover Financial Services and a net gain of approximately $570 million related to the sale and charges related to the Firm's investment in the retail asset management business, partly offset by a loss of $1.2 billion related to a reduction in the carrying value of the Firm's investment in Revel and other related costs, including operating expenses.
  -
For the full year ended December 31, 2011, income tax provision / (benefit) from continuing operations primarily included a discrete tax benefit of $447 million associated with the sale of Revel.
   
The full year ended December 31, 2010 included discrete tax gains / benefits of approximately $1.0 billion related to the repatriation of non-U.S. earnings at a cost lower than estimated.
   
Excluding discrete gains / benefits, the effective tax rate would have been 31.5% and 28.1% for full year ended December 31, 2011 and full year ended December 31, 2010, respectively.
  -
For the full year ended December 31, 2011, preferred stock dividend / other included a one-time negative adjustment of approximately $1.7 billion related to the conversion of the 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).
  -
Preferred stock dividend / other includes allocation of earnings to Participating Restricted Stock Units (RSUs) and China Investment Corporation (CIC) equity units.
  -
Refer to Legal Notice on page 18.
 
 
2
 
 
MORGAN STANLEY
  
Quarterly Earnings Per Share
  
(unaudited, dollars in millions, except for per share data)
  
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2011
    
Sept 30, 2011
    
Dec 31, 2010
    
Sept 30, 2011
    
Dec 31, 2010
    
Dec 31, 2011
    
Dec 31, 2010
    
Change
  
                                                 
                                                 
Income (loss) from continuing operations
   $ (161 )   $ 2,275     $ 1,101       *       *     $ 4,696     $ 5,477       (14 %)
Net income (loss) from continuing operations applicable to noncontrolling interest
     66       94       230       (30 %)     (71 %)     535       999       (46 %)
Income from continuing operations applicable to Morgan Stanley
     (227 )     2,181       871       *       *       4,161       4,478       (7 %)
Less: Preferred Dividends
     (24 )     (24 )     (221 )     --       89 %     (292 )     (881 )     67 %
Less: MUFG preferred stock conversion
     -       -       -       --       --       (1,726 )     -       *  
Income from continuing operations applicable to Morgan Stanley, prior to allocation
of income to CIC Equity Units and Participating Restricted Stock Units
     (251 )     2,157       650       *       *       2,143       3,597       (40 %)
                                                                 
Basic EPS Adjustments:
                                                                
Less: Allocation of undistributed earnings to CIC Equity Units
     0       0       0       --       --       0       (102 )     *  
Less: Allocation of earnings to Participating Restricted Stock Units
     (1 )     (22 )     (16 )     95 %     94 %     (26 )     (108 )     76 %
Earnings (loss) from continuing operations applicable to Morgan Stanley
common shareholders
   $ (252 )   $ 2,135     $ 634       *       *     $ 2,117     $ 3,387       (37 %)
                                                                 
Gain (loss) from discontinued operations after tax
     (23 )     18       (35 )     *       34 %     (51 )     225       *  
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
     (23 )     18       (35 )     *       34 %     (51 )     225       *  
Less: Allocation of undistributed earnings to CIC Equity Units
     0       0       0       --       --       0       (11 )     *  
Less: Allocation of earnings to Participating Restricted Stock Units
     0       0       1       --       *       1       (7 )     *  
Earnings (loss) from discontinued operations applicable to Morgan Stanley
common shareholders
     (23 )     18       (34 )     *       32 %     (50 )     207       *  
                                                                 
Earnings (loss) applicable to Morgan Stanley common shareholders
   $ (275 )   $ 2,153     $ 600       *       *     $ 2,067     $ 3,594       (42 %)
                                                                 
Average basic common shares outstanding (millions)
     1,850       1,848       1,437       --       29 %     1,655       1,362       22 %
                                                                 
Earnings per basic share:
                                                                
      Income from continuing operations
   $ (0.14 )   $ 1.15     $ 0.44       *       *     $ 1.28     $ 2.49       (49 %)
      Discontinued operations
   $ (0.01 )   $ 0.01     $ (0.02 )     *       50 %   $ (0.03 )   $ 0.15       *  
Earnings per basic share
   $ (0.15 )   $ 1.16     $ 0.42       *       *     $ 1.25     $ 2.64       (53 %)
                                                                 
Earnings (loss) from continuing operations applicable to Morgan Stanley
common shareholders
   $ (252 )   $ 2,135     $ 634       *       *     $ 2,117     $ 3,387       (37 %)
                                                                 
Diluted EPS Adjustments:
                                                                
Income impact of assumed conversions:
                                                                
Preferred stock dividends (Series B - Mitsubishi)
     0       0       0       --       --       0       0       --  
Assumed conversion of CIC
     0       0       0       --       --       0       76       *  
Earnings (loss) from continuing operations applicable to Morgan Stanley
common shareholders
   $ (252 )   $ 2,135     $ 634       *       *     $ 2,117     $ 3,463       (39 %)
                                                                 
Earnings (loss) from discontinued operations applicable to Morgan Stanley
common shareholders
     (23 )     18       (34 )     *       32 %     (50 )     207       *  
Assumed conversion of CIC
     0       0       0       --       --       0       40       *  
                                                                 
Earnings (loss) applicable to common shareholders plus assumed conversions
   $ (275 )   $ 2,153     $ 600       *       *     $ 2,067     $ 3,710       (44 %)
                                                                 
Average diluted common shares outstanding and common stock equivalents (millions)
     1,850       1,869       1,448       (1 %)     28 %     1,675       1,411       19 %
                                                                 
Earnings per diluted share:
                                                                
      Income from continuing operations
   $ (0.14 )   $ 1.14     $ 0.44       *       *     $ 1.26     $ 2.45       (49 %)
      Discontinued operations
   $ (0.01 )   $ 0.01     $ (0.03 )     *       67 %   $ (0.03 )   $ 0.18       *  
Earnings per diluted share
   $ (0.15 )   $ 1.15     $ 0.41       *       *     $ 1.23     $ 2.63       (53 %)
 
 
                                                                
 
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 and 15 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 18.
 
 
3
 
 
MORGAN STANLEY
  
Quarterly Consolidated Financial Information and Statistical Data
  
(unaudited)
  
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2011
    
Sept 30, 2011
    
Dec 31, 2010
    
Sept 30, 2011
    
Dec 31, 2010
    
Dec 31, 2011
    
Dec 31, 2010
    
Change
  
                                                 
                                                 
Regional revenue (1)
                                                
Americas
   $ 3,722     $ 6,545     $ 4,972       (43 %)     (25 %)   $ 22,331     $ 21,477       4 %
EMEA (Europe, Middle East, Africa)
     1,265       2,233       888       (43 %)     42 %     6,761       5,590       21 %
Asia
     722       1,067       1,883       (32 %)     (62 %)     3,311       4,320       (23 %)
Consolidated net revenues
   $ 5,709     $ 9,845     $ 7,743       (42 %)     (26 %)   $ 32,403     $ 31,387       3 %
                                                                 
Worldwide employees
     61,899       62,648       62,542       (1 %)     (1 %)                        
Total assets
   $ 749,898     $ 794,939     $ 807,698       (6 %)     (7 %)                        
Firmwide deposits
     65,662       66,184       63,812       (1 %)     3 %                        
Consolidated assets under management or supervision (billions):
                                                                
Asset Management
     287       268       272       7 %     6 %                        
Global Wealth Management
     494       472       477       5 %     4 %                        
Total
     781       740       749       6 %     4 %                        
                                                                 
Common equity
     60,541       60,320       47,614       --       27 %                        
Preferred equity
     1,508       1,508       9,597       --       (84 %)                        
Morgan Stanley shareholders' equity
     62,049       61,828       57,211       --       8 %                        
Junior subordinated debt issued to capital trusts
     4,853       4,836       4,817       --       1 %                        
Less: Goodwill and intangible assets (2)
     (6,691 )     (6,761 )     (6,947 )     1 %     4 %                        
Tangible Morgan Stanley shareholders' equity
   $ 60,211     $ 59,903     $ 55,081       1 %     9 %                        
Tangible common equity
   $ 53,850     $ 53,559     $ 40,667       1 %     32 %                        
                                                                 
Leverage Ratio
     12.5 x     13.3 x     14.7 x                                        
                                                                 
Return on average common equity
                                                                
        from continuing operations
     *       14.6 %     5.5 %                                        
Return on average common equity
     *       14.7 %     5.2 %                                        
                                                                 
Period end common shares outstanding (000's)
     1,926,986       1,927,540       1,512,022       --       27 %                        
                                                                 
Book value per common share
   $ 31.42     $ 31.29     $ 31.49       --       --                          
Tangible book value per common share
   $ 27.95     $ 27.79     $ 26.90       1 %     4 %                        
                                                                 
 
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.
  -
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 16-17 and Legal Notice on page 18.
 
 
4
 
 
MORGAN STANLEY
  
Quarterly Consolidated Financial Information and Statistical Data
  
(unaudited, dollars in billions)
  
                                                       
                                                       
                                                       
   
Quarter Ended
  
   
December 31, 2011
    
September 30, 2011
    
December 31, 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
   $ 25.2     $ 27.5       *     $ 26.0     $ 29.3       28 %   $ 25.9     $ 18.6       9 %
Global Wealth Management Group
     3.2       7.8       7 %     3.6       8.3       8 %     2.9       6.8       9 %
Asset Management
     1.3       2.2       1 %     1.6       2.5       *       2.0       2.2       29 %
Parent capital
     23.4       23.1               20.6       19.0               22.3       19.8          
Total - continuing operations
     53.1       60.6       *       51.8       59.1       15 %     53.1       47.4       5 %
Discontinued operations
     0.0       0.0               0.0       0.0               0.0       0.0          
Firm
   $ 53.1     $ 60.6       *     $ 51.8     $ 59.1       15 %   $ 53.1     $ 47.4       5 %
                                                                         
                                                                         
   
Twelve Months Ended
                            
Twelve Months Ended
  
   
December 31, 2011
                            
December 31, 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
   $ 26.2     $ 26.2       7 %                           $ 26.0     $ 17.7       19 %
Global Wealth Management Group
     3.3       7.6       6 %                             2.9       6.8       7 %
Asset Management
     1.4       2.2       *                               1.9       2.1       8 %
Parent capital
     20.3       18.4                                       20.7       15.5          
Total - continuing operations
     51.2       54.4       4 %                             51.5       42.1       8 %
Discontinued operations
     0.0       0.0                                       0.1       0.3          
Firm
   $ 51.2     $ 54.4       4 %                           $ 51.6     $ 42.4       9 %
                                                                         
 
Notes:
 -
For the full year ended December 31, 2011, the negative adjustment of $1.7 billion related to the MUFG conversion 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 would have been: Firm: 7%, Institutional Securities: 12%, Global Wealth Management: 8% 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 16-17 and Legal Notice on page 18.
 
 
5
 
 
 
MORGAN STANLEY
  
Quarterly Institutional Securities Income Statement Information
  
(unaudited, dollars in millions)
  
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2011
    
Sept 30, 2011
    
Dec 31, 2010
    
Sept 30, 2011
    
Dec 31, 2010
    
Dec 31, 2011
    
Dec 31, 2010
    
Change
  
Revenues:
                                                
Investment banking
   $ 883     $ 864     $ 1,515       2 %     (42 %)   $ 4,228     $ 4,295       (2 %)
Principal transactions:
                                                                
Trading
     663       4,781       530       (86 %)     25 %     11,299       8,154       39 %
Investments
     65       (119 )     316       *       (79 %)     239       809       (70 %)
Commissions and fees
     523       814       573       (36 %)     (9 %)     2,610       2,274       15 %
Asset management, distribution and admin. fees
     29       31       24       (6 %)     21 %     124       104       19 %
Other
     43       259       674       (83 %)     (94 %)     (207 )     766       *  
Total non-interest revenues
     2,206       6,630       3,632       (67 %)     (39 %)     18,293       16,402       12 %
                                                                 
Interest income
     1,300       1,375       1,591       (5 %)     (18 %)     5,740       5,910       (3 %)
Interest expense
     1,435       1,594       1,657       (10 %)     (13 %)     6,825       6,143       11 %
Net interest
     (135 )     (219 )     (66 )     38 %     (105 %)     (1,085 )     (233 )     *  
Net revenues
     2,071       6,411       3,566       (68 %)     (42 %)     17,208       16,169       6 %
                                                                 
Compensation and benefits 
     1,551       1,520       1,758       2 %     (12 %)     7,204       6,971       3 %
Non-compensation expenses
     1,299       1,444       1,360       (10 %)     (4 %)     5,419       4,826       12 %
      Total non-interest expenses
     2,850       2,964       3,118       (4 %)     (9 %)     12,623       11,797       7 %
                                                                 
                                                                 
Income (loss) from continuing operations before taxes
     (779 )     3,447       448       *       *       4,585       4,372       5 %
Income tax provision / (benefit) from continuing operations
     (419 )     1,314       (113 )     *       *       880       316       178 %
Income (loss) from continuing operations
     (360 )     2,133       561       *       *       3,705       4,056       (9 %)
Gain (loss) from discontinued operations after tax
     (28 )     (12 )     (42 )     (133 %)     33 %     (92 )     (1,220 )     92 %
Net income (loss)
     (388 )     2,121       519       *       *       3,613       2,836       27 %
Net income (loss) applicable to noncontrolling interests
     6       60       22       (90 %)     (73 %)     244       290       (16 %)
Net income (loss) applicable to Morgan Stanley
   $ (394 )   $ 2,061     $ 497       *       *     $ 3,369     $ 2,546       32 %
                                                                 
Amounts applicable to Morgan Stanley:
                                                                
Income (loss) from continuing operations
     (366 )     2,073       539       *       *       3,461       3,766       (8 %)
Gain (loss) from discontinued operations after tax
     (28 )     (12 )     (42 )     (133 %)     33 %     (92 )     (1,220 )     92 %
Net income (loss) applicable to Morgan Stanley
   $ (394 )   $ 2,061     $ 497       *       *     $ 3,369     $ 2,546       32 %
                                                                 
Return on average common equity
                                                                
from continuing operations
     *       28 %     9 %                      7 %     19 %        
Pre-tax profit margin
     *       54 %     13 %                     27 %     27 %        
Compensation and benefits as a % of net revenues
     75 %     24 %     49 %                     42 %     43 %        
                                                                 
 
Notes:
 -
Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance. Percentages represent income from continuing operations before income taxes as a percentage of net revenues.
  -
For the quarter and full year ended December 31, 2011, Principal Transactions - Trading included a loss of $1,742 million related to MBIA.
  -
The negative adjustment related to the MUFG conversion was included in the numerator in the calculation of the return on average common equity. Excluding this adjustment, the return on average common equity for Institutional Securities would have been 12% for the full year ended December 31, 2011.
  -
Other revenues for the full year ended December 31, 2011, included a loss of approximately $783 million related to MUMSS.  Other revenues for the full year ended December 31, 2010 included a gain of $668 million related to CICC.
  -
For the full year ended December 31, 2011, discontinued operations included charges of approximately $90 million related to the results and losses with the planned disposition of Saxon.
  -
For the full year ended December 31, 2010, discontinued operations primarily included the charges related to Revel.
  -
Refer to Legal Notice on page 18.
 
 
6
 
 
  MORGAN STANLEY  
  Quarterly Financial Information and Statistical Data  
  Institutional Securities  
  (unaudited, dollars in millions)  
                                                 
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2011
    
Sept 30, 2011
    
Dec 31, 2010
    
Sept 30, 2011
    
Dec 31, 2010
    
Dec 31, 2011
    
Dec 31, 2010
    
Change
  
                                                 
Investment Banking
                                                
Advisory revenues
   $ 406     $ 413     $ 484       (2 %)     (16 %)   $ 1,737     $ 1,470       18 %
Underwriting revenues
                                                                
               Equity     189       239       661       (21 %)     (71 %)     1,132       1,454       (22 %)
               Fixed income     288       212       370       36 %     (22 %)     1,359       1,371       (1 %)
Total underwriting revenues
     477       451       1,031       6 %     (54 %)     2,491       2,825       (12 %)
                                                                 
Total investment banking revenues
   $ 883     $ 864     $ 1,515       2 %     (42 %)   $ 4,228     $ 4,295       (2 %)
                                                                 
Sales & Trading
                                                                
               Equity   $ 1,254     $ 1,961     $ 1,081       (36 %)     16 %   $ 6,770     $ 4,840       40 %
               Fixed Income and Commodities     (257 )     3,889       (22 )     *       *       7,507       5,900       27 %
               Other     83       (443 )     2       *       *       (1,329 )     (441 )     *  
Total sales & trading net revenues
   $ 1,080     $ 5,407     $ 1,061       (80 %)     2 %   $ 12,948     $ 10,299       26 %
                                                                 
Investments & Other
                                                                
               Investments   $ 65     $ (119 )   $ 316       *       (79 %)   $ 239     $ 809       (70 %)
               Other     43       259       674       (83 %)     (94 %)     (207 )     766       *  
Total investments & other revenues
   $ 108     $ 140     $ 990       (23 %)     (89 %)   $ 32     $ 1,575       (98 %)
                                                                 
Total Institutional Securities net revenues
   $ 2,071     $ 6,411     $ 3,566       (68 %)     (42 %)   $ 17,208     $ 16,169       6 %
                                                                 
                                                                 
Average Daily 95% / One-Day Value-at-Risk ("VaR") (1)
                                                          
Primary Market Risk Category ($ millions, pre-tax)
                                                                
               Interest rate and credit spread   $ 57     $ 77     $ 102                                          
               Equity price   $ 29     $ 35     $ 30                                          
               Foreign exchange rate   $ 12     $ 19     $ 22                                          
               Commodity price   $ 28     $ 32     $ 26                                          
                                                                 
    Aggregation of Primary Risk Categories
   $ 66     $ 93     $ 122                                          
                                                                 
    Credit Portfolio VaR
   $ 103     $ 104     $ 73                                          
                                                                 
Trading VaR
   $ 123     $ 130     $ 132                                          
                                                                 
                                                                 
                                                                 
Notes:      - For the quarter and full year ended December 31, 2011, Fixed Income and Commodities sales and trading net revenues includes a loss of $1,742 million related to MBIA.
- Refer to End Notes on pages 16-17 and Legal Notice on page 18.
 
 
 
7
 
 
MORGAN STANLEY
  
Quarterly Financial Information and Statistical Data
  
Institutional Securities - Corporate Lending
  
(unaudited, dollars in billions)
  
                               
   
Quarter Ended
    
Percentage Change From:
  
   
Dec 31, 2011
    
Sept 30, 2011
    
Dec 31, 2010
    
Sept 30, 2011
    
Dec 31, 2010
  
                               
                               
Corporate funded loans
                              
Investment grade
   $ 7.8     $ 6.0     $ 3.9       30 %     100 %
Non-investment grade
     7.8       7.7       6.8       1 %     15 %
Total corporate funded loans
   $ 15.6     $ 13.7     $ 10.7       14 %     46 %
                                         
Corporate lending commitments
                                        
Investment grade
   $ 51.6     $ 55.1     $ 44.5       (6 %)     16 %
Non-investment grade
     15.7       17.9       13.9       (12 %)     13 %
Total corporate lending commitments
   $ 67.3     $ 73.0     $ 58.4       (8 %)     15 %
                                         
Corporate funded loans plus lending commitments
                                        
Investment grade
   $ 59.4     $ 61.1     $ 48.4       (3 %)     23 %
Non-investment grade
   $ 23.5     $ 25.6     $ 20.7       (8 %)     14 %
                                         
% investment grade
     72 %     70 %     70 %                
% non-investment grade
     28 %     30 %     30 %                
                                         
Total corporate funded loans and lending commitments
   $ 82.9     $ 86.7     $ 69.1       (4 %)     20 %
Hedges
   $ 35.8     $ 41.4     $ 21.0       (14 %)     70 %
                                         
                                         
                                         
                                         
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.
  -
At December 31, 2011, September 30, 2011 and December 31, 2010 the event driven lending portfolio of pipeline commitments and closed deals to non-investment grade borrowers were $3.8 billion, $7.0 billion and $4.9 billion, respectively.
  - For the quarters ended December 31, 2011, September 30, 2011 and December 31, 2010 corporate funded loans and lending commitments include $9.7 billion, $3.9 billion and $0.8 billion of loans and lending commitments accounted for as held for investment.  All other loans and lending commitments are accounted for at fair value.
  -
The hedge balance reflects the notional amount utilized by the lending business.
  -
Refer to Legal Notice on page 18.
 
 
 
8
 
 
MORGAN STANLEY
  
Quarterly Global Wealth Management Group Income Statement Information
  
(unaudited, dollars in millions)
  
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2011
    
Sept 30, 2011
    
Dec 31, 2010
    
Sept 30, 2011
    
Dec 31, 2010
    
Dec 31, 2011
    
Dec 31, 2010
    
Change
  
Revenues:
                                                
Investment banking
   $ 165     $ 162     $ 242       2 %     (32 %)   $ 750     $ 827       (9 %)
Principal transactions:
                                                                
Trading
     314       185       329       70 %     (5 %)     1,122       1,306       (14 %)
Investments
     (2 )     (3 )     8       33 %     *       4       19       (79 %)
Commissions and fees
     632       670       738       (6 %)     (14 %)     2,770       2,676       4 %
Asset management, distribution and admin. fees
     1,645       1,775       1,620       (7 %)     2 %     6,884       6,349       8 %
Other
     77       97       75       (21 %)     3 %     410       337       22 %
Total non-interest revenues
     2,831       2,886       3,012       (2 %)     (6 %)     11,940       11,514       4 %
                                                                 
Interest income
     482       467       457       3 %     5 %     1,869       1,587       18 %
Interest expense
     63       93       116       (32 %)     (46 %)     386       465       (17 %)
Net interest
     419       374       341       12 %     23 %     1,483       1,122       32 %
Net revenues
     3,250       3,260       3,353       --       (3 %)     13,423       12,636       6 %
                                                                 
Compensation and benefits 
     2,074       2,002       1,995       4 %     4 %     8,351       7,843       6 %
Non-compensation expenses 
     932       896       968       4 %     (4 %)     3,796       3,637       4 %
Total non-interest expenses
     3,006       2,898       2,963       4 %     1 %     12,147       11,480       6 %
                                                                 
Income (loss) from continuing operations before taxes
     244       362       390       (33 %)     (37 %)     1,276       1,156       10 %
Income tax provision / (benefit) from continuing operations
     95       141       118       (33 %)     (19 %)     465       336       38 %
Income (loss) from continuing operations
     149       221       272       (33 %)     (45 %)     811       820       (1 %)
Gain (loss) from discontinued operations after tax
     0       0       0       --       --       0       0       --  
Net income (loss)
     149       221       272       (33 %)     (45 %)     811       820       (1 %)
Net income (loss) applicable to noncontrolling interests
     16       52       106       (69 %)     (85 %)     146       301       (51 %)
Net income (loss) applicable to Morgan Stanley
   $ 133     $ 169     $ 166       (21 %)     (20 %)   $ 665     $ 519       28 %
                                                                 
Amounts applicable to Morgan Stanley:
                                                                
Income (loss) from continuing operations
     133       169       166       (21 %)     (20 %)     665       519       28 %
Gain (loss) from discontinued operations after tax
     0       0       0       --       --       0       0       --  
Net income (loss) applicable to Morgan Stanley
   $ 133     $ 169     $ 166       (21 %)     (20 %)   $ 665     $ 519       28 %
                                                                 
Return on average common equity
                                                                
from continuing operations
     7 %     8 %     9 %                     6 %     7 %        
Pre-tax profit margin
     8 %     11 %     12 %                     10 %     9 %        
Compensation and benefits as a % of net revenues
     64 %     61 %     60 %                     62 %     62 %        
                                                                 
                                                                 
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 was included in the numerator in the calculation of the return on average common equity. For the full year ended December 31, 2011 excluding this negative adjustment, the return on average common equity for Global Wealth Management would have been 8%.
  -
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 18.
 
 
 
9
 
 
MORGAN STANLEY
    
Quarterly Financial Information and Statistical Data
    
Global Wealth Management Group
    
(unaudited)
    
                                   
                                   
                                   
     
Quarter Ended
    
Percentage Change From:
    
     
Dec 31, 2011
     Sept 30, 2011    
Dec 31, 2010
    
Sept 30, 2011
    
Dec 31, 2010
    
                                   
                                   
Global representatives
       17,156       17,291       18,043       (1 %)     (5 %)  
Global representatives - Adjusted       17,649       17,796       18,440       (1 %)      (4 %)   
                                             
Annualized revenue per global
                                            
representative (000's)
     $ 755     $ 747     $ 742       1 %     2 %  
Annualized revenue per global                                            
representative (000's) - Adjusted     $ 734     $ 726     $ 726       1 %      1 %   
                                             
Assets by client segment (billions)
                                            
$10m or more
       510       482       522       6 %     (2 %)  
$1m - $10m       709       665       707       7 %     --    
Subtotal - > $1m
       1,219       1,147       1,229       6 %     (1 %)  
$100k - $1m       388       379       399       2 %     (3 %)  
< $100k
       42       38       41       11 %     2 %  
Total client assets (billions)
     $ 1,649     $ 1,564     $ 1,669       5 %     (1 %)  
                                             
% of assets by client segment > $1m
       74 %     73 %     74 %                  
                                             
Fee-based client account assets (billions)
     $ 496     $ 465     $ 470       7 %     6 %  
Fee-based assets as a % of client assets
       30 %     30 %     28 %                  
                                             
                                             
Bank deposit program (millions)
     $ 110,559     $ 109,049     $ 113,325       1 %     (2 %)  
                                             
Client assets per global
                                            
representative (millions)
     $ 96     $ 90     $ 93       7 %     3 %  
Client assets per global
                                            
representative (millions) - Adjusted
     $ 93     $ 88     $ 91       6 %      2 %   
                                             
Global retail net new assets (billions)
     $ 6.0     $ 15.5     $ 14.1       (61 %)     (57 %)  
                                             
Global fee based asset flows (billions)
     $ 4.9     $ 10.1     $ 12.5       (51 %)     (61 %)  
                                             
Global retail locations
       765       772       851       (1 %)     (10 %)  
                                             
                                             
                                             
Notes: - As the business finalizes the integration of its legacy Morgan Stanley and Smith Barney channels in 2012, it is harmonizing what were previously different job descriptions for various licensed roles involved in serving our clients.  This adjustment will be reflected in the prospective reporting of global representatives headcount as role definition differences are eliminated in the combined sales organization.
 
 -
Annualized revenue per global representative is defined as annualized revenue divided by average global representative headcount.
  -
Full year average annualized revenue per global representative is $763 million and $698 million for 2011 and 2010, respectively.
  -
Fee-based client account assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
  -
For the quarters ended December 31, 2011, September 30, 2011, and December 31, 2010, approximately $56 billion, $56 billion and $55 billion, respectively, of the assets in the bank deposit program are attributable to Morgan Stanley.
  -
Global fee based asset flows represent 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 18.
 
 
 
10
 
 
MORGAN STANLEY
  
Quarterly Asset Management Income Statement Information
  
(unaudited, dollars in millions)
  
                                                 
                                                 
   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2011
    
Sept 30, 2011
    
Dec 31, 2010
    
Sept 30, 2011
    
Dec 31, 2010
    
Dec 31, 2011
    
Dec 31, 2010
    
Change
  
Revenues:
                                                
Investment banking
   $ 3     $ 5     $ 11       (40 %)     (73 %)   $ 13     $ 20       (35 %)
Principal transactions:
                                                                
Trading
     (7 )     (3 )     (4 )     (133 %)     (75 %)     (22 )     (49 )     55 %
Investments (1)
     77       (176 )     364       *       (79 %)     330       996       (67 %)
Commissions and fees
     0       0       0       --       --       0       0       --  
Asset management, distribution and admin. fees
     379       392       444       (3 %)     (15 %)     1,582       1,630       (3 %)
Other
     (14 )     (4 )     46       *       *       25       164       (85 %)
Total non-interest revenues
     438       214       861       105 %     (49 %)     1,928       2,761       (30 %)
                                                                 
Interest income
     0       3       4       *       *       10       22       (55 %)
Interest expense
     14       12       19       17 %     (26 %)     51       98       (48 %)
Net interest
     (14 )     (9 )     (15 )     (56 %)     7 %     (41 )     (76 )     46 %
Net revenues
     424       205       846       107 %     (50 %)     1,887       2,685       (30 %)
                                                                 
Compensation and benefits 
     183       132       277       39 %     (34 %)     848       1,108       (23 %)
Non-compensation expenses 
     163       191       216       (15 %)     (25 %)     786       859       (8 %)
Total non-interest expenses
     346       323       493       7 %     (30 %)     1,634       1,967       (17 %)
                                                                 
Income (loss) from continuing operations before taxes
     78       (118 )     353       *       (78 %)     253       718       (65 %)
Income tax provision / (benefit) from continuing operations
     28       (39 )     85       *       (67 %)     73       105       (30 %)
Income (loss) from continuing operations
     50       (79 )     268       *       (81 %)     180       613       (71 %)
Gain (loss) from discontinued operations after tax
     5       30       7       (83 %)     (29 %)     41       664       (94 %)
Net income (loss)
     55       (49 )     275       *       (80 %)     221       1,277       (83 %)
Net income (loss) applicable to noncontrolling interests (1)
     44       (18 )     102       *       (57 %)     145       408       (64 %)
Net income (loss) applicable to Morgan Stanley
   $ 11     $ (31 )   $ 173       *       (94 %)   $ 76     $ 869       (91 %)
                                                                 
Amounts applicable to Morgan Stanley:
                                                                
Income (loss) from continuing operations
     6       (61 )     166       *       (96 %)     35       205       (83 %)
Gain (loss) from discontinued operations after tax
     5       30       7       (83 %)     (29 %)     41       664       (94 %)
Net income (loss) applicable to Morgan Stanley
   $ 11     $ (31 )   $ 173       *       (94 %)   $ 76     $ 869       (91 %)
                                                                 
Return on average common equity
                                                                
from continuing operations
     1 %     *       29 %                     *       8 %        
Pre-tax profit margin
     18 %     *       42 %                     13 %     27 %        
Compensation and benefits as a % of net revenues
     43 %     64 %     33 %                     45 %     41 %        
                                                                 
                                                                 
Notes:
 -
The negative adjustment related to the MUFG conversion was included in the numerator in the calculation of the return on average common equity. For the year ended December 31, 2011 excluding this negative adjustment, the return on average common equity for Asset Management would have been 1%.
  -
For the quarter ended December 31, 2011, discontinued operations primarily reflected a reduction in the carrying amount of certain guarantees related to Crescent Real Estate Equities Limited Partnership.
  -
For the full year ended December 31, 2010, the gain (loss) from discontinued operations primarily included the operating results and gain on sale of substantially all of the retail asset management business, including Van Kampen.
  -
Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance.  Percentages represent income from continuing operations before income taxes as a percentage of net revenues.
  -
Refer to End Notes on pages 16-17 and Legal Notice on page 18.
 
 
 
11
 
 
MORGAN STANLEY
  
Quarterly Financial Information and Statistical Data
  
Asset Management
  
(unaudited, dollars in billions)
  
                                                 
   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2011
    
Sept 30, 2011
    
Dec 31, 2010
    
Sept 30, 2011
    
Dec 31, 2010
    
Dec 31, 2011
    
Dec 31, 2010
    
Change
  
                                                 
Net Revenues
                                                
      Traditional Asset Management
   $ 290     $ 291     $ 347       --       (16 %)   $ 1,273     $ 1,198       6 %
      Real Estate Investing (1)
     111       52       253       113 %     (56 %)     442       769       (43 %)
      Merchant Banking (2)
     23       (138 )     246       *       (91 %)     172       718       (76 %)
Total Asset Management
   $ 424     $ 205     $ 846       107 %     (50 %)   $ 1,887     $ 2,685       (30 %)
                                                                 
Assets under management or supervision
                                                                
                                                                 
Net flows by asset class (3)
                                                                
     Traditional Asset Management
                                                                
      Equity
   $ 1.0     $ (0.7 )   $ 0.4       *       150 %   $ 3.7     $ (0.2 )     *  
      Fixed Income
     (1.5 )     (1.0 )     (0.6 )     (50 %)     (150 %)     (5.5 )     (0.4 )     *  
      Liquidity
     6.7       (4.7 )     1.3       *       *       20.1       (5.5 )     *  
      Alternatives
     7.8       0.0       0.0       *       *       7.9       (0.2 )     *  
             Total Traditional Asset Management
     14.0       (6.4 )     1.1       *       *       26.2       (6.3 )     *  
                                                                 
Real Estate Investing
     0.3       0.6       (0.2 )     (50 %)     *       1.0       1.7       (41 %)
Merchant Banking
     0.2       0.0       (1.5 )     *       *       (1.4 )     (1.1 )     (27 %)
             Total net flows
   $ 14.5     $ (5.8 )   $ (0.6 )     *       *     $ 25.8     $ (5.7 )     *  
                                                                 
Assets under management or supervision by asset class (4)
                                                                
      Traditional Asset Management
                                                                
      Equity
   $ 104     $ 98     $ 110       6 %     (5 %)                        
      Fixed Income
     57       58       61       (2 %)     (7 %)                        
      Liquidity
     74       67       53       10 %     40 %                        
      Alternatives
     25       18       18       39 %     39 %                        
             Total Traditional Asset Management
     260       241       242       8 %     7 %                        
                                                                 
Real Estate Investing
     18       18       16       --       13 %                        
Merchant Banking (5)
     9       9       14       --       (36 %)                        
             Total Assets Under Management or Supervision
   $ 287     $ 268     $ 272       7 %     6 %                        
             Share of minority stake assets
     6       6       7       --       (14 %)                        
                                                                 
                                                                 
Notes:
 -
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 16-17 and Legal Notice on page 18.
     
 
 
 
12
 
 
This page represents an addendum to the 4Q 2011 Financial Supplement, Appendix I
 
 
MORGAN STANLEY
  
Country Risk Exposure (1) - European Peripherals and France
  
Three Months Ended December 31, 2011
  
(unaudited, dollars in millions)
  
                                                 
                                                 
                                                 
                                                 
         
Net
                       Exposure              
   
Net
    
Counterparty
    
Funded
    
Unfunded
    
CDS
     Before              
   
Inventory (2)
    
Exposure (3)
    
Lending
    
Lending
    
Adjustment (4)
    
Hedges
    
Hedges (5)
    
Net Exposure
  
   Sovereigns
   $ (8 )   $  20     $  -     $  -     $  23     $  35     $  1     $  36  
   Non-sovereigns
     53       7       142       -       -       202       (78 )     124  
Greece
     45       27       142       -       23       237       (77 )     160  
                                                                 
   Sovereigns
     78       1       -       -       4       83       (2 )     81  
   Non-sovereigns
     102       41       -       -       15       158       (16 )     142  
Ireland
     180       42       -       -       19       241       (18 )     223  
                                                                 
   Sovereigns
     (29 )     4,202       -       -       412       4,585       (786 )     3,799  
   Non-sovereigns
     197       689       255       363       179       1,683       (581 )     1,102  
Italy (7)
     168       4,891       255       363       591       6,268       (1,367 )     4,901  
                                                                 
   Sovereigns
     (366 )     11       -       -       504       149       (37 )     112  
   Non-sovereigns
     225       397       311       424       218       1,575       (297 )     1,278  
Spain
     (141 )     408       311       424       722       1,724       (334 )     1,390  
                                                                 
   Sovereigns
     (435 )     97       -       -       23       (315 )     (96 )     (411 )
   Non-sovereigns
     7       90       126       -       47       270       (98 )     172  
Portugal
     (428 )     187       126       -       70       (45 )     (194 )     (239 )
                                                                 
   Sovereigns
     (760 )     4,331       -       -       966       4,537       (920 )     3,617  
   Non-sovereigns
     584       1,224       834       787       459       3,888       (1,070 )     2,818  
Total Peripherals (6) (7)
     (176 )     5,555       834       787       1,425       8,425       (1,990 )     6,435  
                                                                 
   Sovereigns
     (1,796 )     234       -       -       100       (1,462 )     (228 )     (1,690 )
   Non-sovereigns
     85       2,246       416       1,657       390       4,794       (1,390 )     3,404  
France (6)
   $ (1,711 )   $ 2,480     $ 416     $ 1,657     $ 490     $ 3,332     $ (1,618 )   $ 1,714  
                                                                 
                                                                 
(1)
Country Risk Exposure, measured in accordance with the Company’s internal risk management standards, includes obligations from sovereigns and non-sovereigns, which include governments, corporations, clearinghouses and financial  institutions.
(2)
Net Inventory represents the fair value of 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) taking into consideration legally enforceable master netting agreements and collateral.
(4)
CDS adjustment represents the fair value of 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.
(5)
Fair value of hedges on net counterparty exposure and funded lending.
(6)
In addition, at December 31, 2011, the Company had European peripheral country and French exposure for overnight deposits with banks of approximately $448 million and $15 million, respectively.
(7)
On December 22, 2011, the Company executed certain derivative restructuring amendments which settled on January 3, 2012.  Upon settlement of the amendments, the exposure before hedges and net exposure for Italy decreased to $2,887 million and $1,522 million, respectively, and the exposure before hedges and net exposure for Peripherals decreased to $5,044 million and $3,056 million, respectively.
 
- Refer to Legal Notice on page 18.
 
 
 
13
 
 
 
This page represents an addendum to the 4Q 2011 Financial Supplement, Appendix II
 
 
MORGAN STANLEY
Earnings Per Share Calculation Under Two-Class Method
Three Months Ended December 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
   1,850   99%       $93   ($345)   ($252)   (6)   ($0.14)
Participating Restricted Stock Units (1)
   18   1%       $1   $0   $1   (7)   N/A
    1,868   100%   ($251)   $94   ($345)   ($251)        
                                 
                                 
   
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
   1,850   99%       $0   ($23)   ($23)   (6)   ($0.01)
Participating Restricted Stock Units (1)
   18   1%       $0   $0   $0   (7)   N/A
    1,868   100%   ($23)   $0   ($23)   ($23)        
                                 
                                 
   
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
   1,850   99%       $93   ($368)   ($275)   (6)   ($0.15)
Participating Restricted Stock Units (1)
   18   1%       $1   $0   $1   (7)   N/A
    1,868   100%   ($274)   $94   ($368)   ($274)        
                                 
                                 
                                 
Note:
 - Refer to End Notes on pages 16-17 and Legal Notice on page 18.
 
 
 
14
 
 
 
This page represents an addendum to the 4Q 2011 Financial Supplement, Appendix III
 
 
MORGAN STANLEY
Earnings Per Share Calculation Under Two-Class Method
Twelve Months Ended December 31, 2011
(unaudited, in millions, except for per share data)
                                 
                                 
                                 
                                 
   
Allocation of net income from continuing operations
                    
   
(A)
  
(B)
  
(C)
  
(D)
  
(E)
  
(F)
      
(F)
                       
(D)+(E)
      
(G)
   
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
   1,655   99%       $331   $1,786   $2,117   (6)   $1.28
Participating Restricted Stock Units (1)
   20   1%       $4   $22   $26   (7)   N/A
    1,675   100%   $2,143   $335   $1,808   $2,143        
                                 
                                 
   
Allocation of gain (loss) from discontinued operations
                    
   
(A)
  
(B)
  
(C)
  
(D)
  
(E)
  
(F)
      
(F)
                       
(D)+(E)
      
(G)
   
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
   1,655   99%       $0   ($50)   ($50)   (6)   ($0.03)
Participating Restricted Stock Units (1)
   20   1%       $0   ($1)   ($1)   (7)   N/A
    1,675   100%   ($51)   $0   ($51)   ($51)        
                                 
                                 
   
Allocation of net income available to common shareholders
                    
   
(A)
  
(B)
  
(C)
  
(D)
  
(E)
  
(F)
      
(F)
                       
(D)+(E)
      
(G)
   
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
   1,655   99%       $331   $1,736   $2,067   (6)   $1.25
Participating Restricted Stock Units (1)
   20   1%       $4   $21   $25   (7)   N/A
    1,675  
100%
   $2,092   $335   $1,757   $2,092        
                                 
                                 
                                 
Note:
 - Refer to End Notes on pages 16-17 and Legal Notice on page 18.
 
 
 
15
 
 
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)
Goodwill and intangible balances net of allowable mortgage servicing rights deduction for quarters ended December 31, 2011, September 30, 2011 and December 31, 2010 of $120 million, $120 million and $141 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, 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 December 31, 2011, September 30, 2011 and December 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 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 December 31, 2011, September 30, 2011 and December 31, 2010 are $45 million, $(13) million and $109 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.
 
 
 
16
 
 
MORGAN STANLEY
End Notes
 
 
(3)
Net Flows by region [inflow / (outflow)] for the quarters ended December 31, 2011, September 30, 2011 and December 31, 2010 are:
 
North America: $8.6 billion, $(4.2) billion and $(2.0) billion
 
International: $5.9 billion, $(1.6) billion and $1.4 billion
(4)
Assets under management or supervision by region for the quarters ended December 31, 2011, September 30, 2011 and December 31, 2010 are:
 
North America: $187 billion, $176 billion and $175 billion
 
International: $100 billion, $92 billion and $97 billion
(5)
Assets under management or supervision for the quarter ended December 31, 2011 exclude FrontPoint whereas the quarter ended December 31, 2010 include assets under management or supervision of $5.0 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 December 31, 2011 prior to allocations to participating RSUs.
(4)
Distributed earnings represent the dividends declared on common shares and participating RSUs for the quarter ended December 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 December 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.
   
Page 15:
 
(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 year ended December 31, 2011 prior to allocations to participating RSUs.
(4)
Distributed earnings represent the dividends declared on common shares and participating RSUs for the year ended December 31, 2011.  The amount of dividends declared is based upon the number of common shares outstanding as of the dividend record date.  During the twelve months ended December 31, 2011, a total of $0.20 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 on what they would be entitled to based on the contractual rights and obligations of the participating security.
(6)
Total income applicable to common shareholders to be allocated to the common shares in calculating basic and diluted EPS for common shares.
(7)
Total income applicable to common shareholders to be allocated to the participating RSUs reflected as a deduction to the numerator in determining basic and diluted EPS for common shares.
(8)
Basic and diluted EPS data are required to be presented only for classes of common stock, as described under the accounting guidance for earnings per share.

 
17
 
 
MORGAN STANLEY
Legal Notice
 
 
 
 
 
 
 
 
 
 
This Financial Supplement contains financial, statistical and business-related information, as well as business and segment trends.
The information should be read in conjunction with the Firm's fourth quarter earnings press release issued January 19, 2012.
 
 
 
18