Media Relations: Michele Davis 212-761-9621

Investor Relations: Celeste Mellet Brown 212-761-3896

Subsequent to the release of Morgan Stanley's second quarter earnings on
July 17, 2014, the Firm reported updated results in the Firm's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2014, filed on
August 5, 2014. For updated information refer to the Firm's 2Q 2014
financial supplement and Form 10-Q.

Morgan Stanley Reports Second Quarter 2014:


Net Revenues of $8.6 Billion and Earnings per Diluted Share from Continuing
Operations of $0.94

Excluding DVA,1 Net Revenues were $8.5 Billion and Earnings per Diluted Sharefrom Continuing Operations of $0.912,3

Excluding DVA and Net Discrete Tax Benefit, Net Income Applicable to Morgan
Stanley Increased 46% from the Prior Year Period4

Wealth Management Record Client Assets of $2 Trillion; Pre-Tax Margin of 21%5Investment Banking Ranked #2 in Global Announced M&A and #3 in Global
IPOs6; Continued Strength in Equity Sales & Trading

NEW YORK, July 17, 2014 – Morgan Stanley (NYSE: MS) today reported net revenues of $8.6 billion for thesecond quarter ended June 30, 2014 compared with $8.5 billion a year ago. For the current quarter, income
from continuing operations applicable to Morgan Stanley was $1.9 billion, or $0.94 per diluted share7,
compared with income of $1.0 billion, or $0.43 per diluted share7, for the same period a year ago. Results forthe quarter included a net discrete tax benefit of $609 million or $0.31 per diluted share, principally related to
the remeasurement of reserves and related interest.8 The earnings per share calculation for the prior year second
quarter included a negative adjustment of approximately $151 million, or $0.08 per diluted share, related to thepurchase of the final remaining interest in the Morgan Stanley Smith Barney Joint Venture (Joint Venture).9
Results for the current quarter included positive revenue related to the change in the fair value of certain of the
Firm’s long-term and short-term borrowings resulting from the fluctuation in the firm’s credit spreads and othercredit factors (Debt Valuation Adjustment, DVA) of $87 million, compared with $175 million a year ago.
Excluding DVA, net revenues for the current quarter were $8.5 billion compared with $8.3 billion a year ago.10
Income from continuing operations applicable to Morgan Stanley was $1.9 billion, or $0.91 per diluted share,2 3 10compared with income of $900 million, or $0.37 per diluted share, a year ago. , ,Compensation expense was $4.2 billion compared with $4.1 billion a year ago. Non-compensation expenses of$2.4 billion decreased from $2.6 billion a year ago reflecting lower litigation expenses.
For the current quarter, net income applicable to Morgan Stanley, including discontinued operations, was $1.9
7billion or $0.94 per diluted share, compared with net income of $980 million or $0.41 per diluted share in the7second quarter of 2013. Excluding DVA and the net discrete tax benefit of $609 million, net income applicableto Morgan Stanley for the current quarter was $1.3 billion, which represents an increase of 46% from the prior
4year quarter.

1

Summary of Firm Results(dollars in millions)Excluding DVA

As Reported

10

Net
Revenues

MS IncomeCont. Ops.

Net
Revenues

MS IncomeCont. Ops.

2Q 2014$8,608$1,936$8,521$1,875

1Q 2014$8,947$1,466$8,821$1,391

2Q 2013$8,515$1,011$8,340$900

Business Overview
Institutional Securities net revenues excluding DVA were $4.2 billion11 reflecting continued strength inInvestment Banking and Equity sales and trading, and lower performance in Fixed Income & Commodities
sales and trading due to lower market activity.



Wealth Management net revenues were $3.7 billion and pre-tax margin was 21%. Fee based asset flows
for the quarter were $12.5 billion. Total client assets were a record $2.0 trillion at quarter end.



Investment Management reported net revenues of $692 million with assets under management or
supervision of $396 billion.

5

James P. Gorman, Chairman and Chief Executive Officer, said, “Our quarterly results demonstrated solid
performance, despite a muted operating environment. We are seeing momentum across our businesses, withparticular strength in Investment Banking, Equity Sales & Trading and Wealth Management – where profit
margins hit 21% for the first time since the founding of the JV and assets entrusted to us by clients reached $2
trillion. We also continued to be disciplined on expenses, while focusing on delivering higher returns.”2

Summary of Institutional Securities Results(dollars in millions)11

Excluding DVA

As Reported
Net
Pre-Tax
Revenues
IncomeNet
Revenues

Pre-Tax
Income2Q 2014$4,248$1,014$4,161$927

1Q 2014$4,627$1,371$4,501$1,245

2Q 2013$4,358$981$4,183$806

INSTITUTIONAL SECURITIESInstitutional Securities reported pre-tax income from continuing operations of $1.0 billion compared with $981
5 11
million in the second quarter of last year. The quarter’s pre-tax margin was 24% (excluding DVA, 22%). ,12
Income after the noncontrolling interest allocation and before taxes was $1.0 billion. Net revenues for thecurrent quarter were $4.2 billion compared with $4.4 billion a year ago. DVA resulted in positive revenue of $87
million in the current quarter compared with $175 million a year ago. Excluding DVA, net revenues for the11
current quarter of $4.2 billion were relatively unchanged from a year ago. The following discussion for sales
and trading excludes DVA.


Advisory revenues of $418 million increased from $333 million a year ago reflecting higher levels of M&A
activity. Equity underwriting revenues of $489 million increased from $327 million a year ago reflecting afavorable equity market environment. Fixed income underwriting revenues of $525 million increased from$418 million a year ago reflecting a favorable debt underwriting environment.



Equity sales and trading net revenues of $1.8 billion were relatively unchanged from the prior year quarter,with ongoing strength in prime brokerage offset by lower revenues in derivatives due to declines in client
volumes and volatility.13



Fixed Income & Commodities sales and trading net revenues of $1.0 billion decreased from $1.2 billion ayear ago.13 Results reflected revenue declines in foreign exchange on lower levels of volatility, partly offset
by higher results in securitized and credit products.



Other sales and trading net losses of $241 million compared with a net loss of $54 million a year ago,reflecting losses on economic hedges and other costs related to the Firm’s long-term debt.



Other Revenues were $108 million compared with $152 million a year ago primarily reflecting lower gains in
our Japanese joint venture, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.



Compensation expense of $1.7 billion decreased from $1.8 billion a year ago on lower revenues. Noncompensation expenses of $1.5 billion for the current quarter decreased from $1.6 billion driven primarily bylower litigation costs.

Morgan Stanley’s average trading Value-at-Risk (VaR) measured at the 95% confidence level was $48
million compared with $50 million in the first quarter of 2014 and $61 million in the second quarter of theprior year.14

3

Summary of Wealth Management Results(dollars in millions)
Net
Revenues

Pre-Tax
Income2Q 2014$3,715$767

1Q 2014$3,622$691

2Q 2013$3,531$655

WEALTH MANAGEMENT
Wealth Management reported pre-tax income from continuing operations of $767 million compared with $655
5
million in the second quarter of last year. The quarter’s pre-tax margin was 21%. Net revenues for the current
quarter were $3.7 billion compared with $3.5 billion a year ago.


Asset management fee revenues of $2.1 billion increased from $1.9 billion a year ago primarily reflecting an
increase in fee based assets and positive flows.

Transactional revenues 15 of $991 million decreased from $1.0 billion a year ago reflecting lower
commissions and fees and investment banking revenues due to lower underwriting activity in closed-end
funds.

Net interest income of $578 million increased from $446 million a year ago on higher deposit and loanbalances.

Compensation expense for the current quarter of $2.2 billion increased from $2.0 billion a year ago on higher
revenues. Non-compensation expenses of $762 million decreased from $834 million a year ago, due
principally to the absence of costs in the prior year period incurred in conjunction with the purchase of theremaining interest in the Joint Venture.16

Total client assets exceeded $2.0 trillion at quarter end. Client assets in fee based accounts of $762 billion
increased 21% compared with the prior year quarter. Fee based asset flows for the quarter were $12.5 billion.



Wealth Management representatives of 16,316 were relatively unchanged compared with the prior year
period. Average annualized revenue per representative of $908,000 and total client assets per representativeof $123 million increased 5% and 13%, respectively, compared with the prior year quarter.

Subsequent to the second quarter of 2013, net income no longer includes a noncontrolling interest allocation to
Citigroup Inc. (Citi) following the completed acquisition of the Joint Venture. The prior year quarter included anoncontrolling interest allocation to Citi of $100 million.17

4

Summary of Investment Management Results(dollars in millions)
Net
Revenues

Pre-Tax
Income2Q 2014

$692

$205

1Q 2014

$740

$263

2Q 2013

$673

$160

INVESTMENT MANAGEMENT
Investment Management reported pre-tax income from continuing operations of $205 million compared with pre5
tax income of $160 million in the second quarter of last year.18 The quarter’s pre-tax margin was 30%. Income
after the noncontrolling interest allocation and before taxes was $198 million.


Net revenues of $692 million increased from $673 million in the prior year. Results reflect higher gains on
investments in Merchant Banking and higher results in Traditional Asset Management, partly offset by lower
revenues in the Real Estate Investing business driven by the deconsolidation of certain legal entities
associated with a real estate fund sponsored by the Firm.19,20

Compensation expense for the current quarter of $291 million compared with $297 a year ago. Noncompensation expenses of $196 million decreased from $216 million a year ago.



Assets under management or supervision at June 30, 2014 of $396 billion increased from $347 billion a year
ago primarily reflecting market appreciation and positive flows. The business recorded net flows of $7.6
billion in the current quarter.

CAPITALIn February 2014, the Federal Reserve Board approved the Firm’s use of the U.S. Basel III Advanced Approaches(“Advanced Approach”) to calculate and publicly disclose its regulatory capital requirements beginning in thesecond quarter of 2014. The Firm is subject to a “capital floor” such that its regulatory capital ratios currently
reflect the lower of its ratios calculated under the Advanced Approach and under transitional U.S. Basel I andBasel 2.5 capital rules. As of June 30, 2014, under the Advanced Approach transitional rules, which represent the
Firm’s regulatory capital ratios due to the capital floor, the Firm’s Common Equity Tier 1 risk-based capital ratio
was approximately 13.8% and its Tier 1 risk-based capital ratio was approximately 15.2%.21
At June 30, 2014, book value and tangible book value per common share were $33.48 and $28.53,22 respectively,
based on approximately 2.0 billion shares outstanding.

OTHER MATTERS
The effective tax rate from continuing operations for the current quarter was 1.6%. The quarter included a net
discrete tax benefit of $609 million principally related to the remeasurement of reserves and related interest due to
new information regarding the status of a multi-year tax authority examination.
The previously announced sale of the Firm’s ownership stake in TransMontaigne Inc. to NGL Energy Partners LP
was completed on July 1, 2014.

5During the quarter ended June 30, 2014, the Firm repurchased approximately $284 million of its common stock orapproximately 9.3 million shares. The Firm announced a share repurchase of up to $1.0 billion of common stock
beginning in the second quarter of 2014 through the end of the first quarter of 2015.
The Firm declared a $0.10 quarterly dividend per common share, payable on August 15, 2014 to commonshareholders of record on July 31, 2014.
Morgan Stanley is a leading global financial services firm providing a wide range of investment banking,securities, investment management and wealth management services. With offices in more than 43 countries, theFirm’s employees serve clients worldwide including corporations, governments, institutions and individuals. 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 andthe Financial Supplement are available online in the Investor Relations section at www.morganstanley.com.

###(See Attached Schedules)
This earnings release contains forward-looking statements. Readers are cautioned not to place undue relianceon 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 anduncertainties that may cause actual results to differ materially. For a discussion of additional risks anduncertainties 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 andAnalysis of Financial Condition and Results of Operations” in Part II, Item 7 and “Quantitative andQualitative Disclosures about Market Risk” in Part II, Item 7A in the Company's Annual Report on Form 10K for the year ended December 31, 2013 and other items throughout the Form 10-K, the Company’s
Quarterly Report on Form 10-Q and the Company’s Current Reports on Form 8-K, including any
amendments thereto.

6

1

Represents the change in the fair value of certain of the Firm’s long-term and short-term borrowings resulting from thefluctuation in the firm’s credit spreads and other credit factors (Debt Valuation Adjustment, DVA).
2

From time to time, Morgan Stanley may disclose certain “non-GAAP financial measures” in the course of its earnings
releases, earnings conference calls, financial presentations and otherwise. For these purposes, “GAAP” refers to generally
accepted accounting principles in the United States. The Securities and Exchange Commission (SEC) defines a “non-GAAP
financial measure” as a numerical measure of historical or future financial performance, financial positions, or cash flowsthat is subject to adjustments that effectively exclude, or include amounts from the most directly comparable measurecalculated and presented in accordance with GAAP. Non-GAAP financial measures disclosed by Morgan Stanley areprovided as additional information to investors in order to provide them with greater transparency about, or an alternative
method for assessing, our financial condition and operating results. These measures are not in accordance with, or asubstitute for GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies.
Whenever we refer to a non-GAAP financial measure, we will also generally present the most directly comparable financial
measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the nonGAAP financial measure we reference and such comparable GAAP financial measure.
3

Earnings (loss) per diluted share amounts, excluding DVA, are non-GAAP financial measures that the Firm considers
useful for investors to allow better comparability of period-to-period operating performance. Such exclusions are provided todifferentiate revenues associated with Morgan Stanley borrowings, regardless of whether the impact is either positive, or
negative, that result solely from fluctuations in credit spreads and other credit factors. The reconciliation of earnings (loss)
per diluted share from continuing operations applicable to Morgan Stanley common shareholders and average diluted sharesfrom a non-GAAP to GAAP basis is as follows (shares and DVA are presented in millions):

Earnings (loss) per diluted share from cont. ops. – Non-GAAP
DVA impact
Earnings (loss) per diluted share from cont. ops. – GAAP
Average diluted shares – Non-GAAP
DVA impact
Average diluted shares – GAAP

2Q 2014
$0.91
$0.03
$0.94

2Q 2013
$0.37
$0.06
$0.43

1,969
0
1,969

1,951
0
1,951

4

Net income (loss) applicable to Morgan Stanley, excluding DVA and the net discrete tax benefit is a non-GAAP financial
measure that the Firm considers useful for investors to allow for better comparability of period-to-period operating
performance. The reconciliation of net income (loss) applicable to Morgan Stanley from a non-GAAP to GAAP basis is asfollows (amounts are presented in millions):

Net income (loss) Applicable to MS – Non-GAAP
DVA after-tax impact
Net discrete tax benefit
Net income (loss) Applicable to MS – GAAP

2Q 2014$1,265$61$609$1,935

2Q 2013
$869
$111
$0
$980

5

Pre-tax margin is a non-GAAP financial measure that the Firm considers useful for investors to assess operating
performance. Pre-tax margin represents income (loss) from continuing operations before taxes divided by net revenues.
6

Source: Thomson Reuters – for the period of March 31, 2014 to June 30, 2014 as of July 1, 2014.

7

Includes preferred dividends and other adjustments related to the calculation of earnings per share for the second quarter of2014 and 2013 of approximately $79 million and $177 million, respectively. The second quarter of last year included a7

negative adjustment of approximately $151 million related to the purchase of the remaining 35% interest in the Morgan
Stanley Smith Barney Joint Venture. Refer to page 3 of Morgan Stanley’s Financial Supplement accompanying this release
for the calculation of earnings per share.
8

The impact to earnings per diluted share from continuing operations is calculated by dividing the net discrete tax benefit by
the average number of diluted shares outstanding.
9

The Firm completed the purchase of the remaining 35% interest in the Morgan Stanley Smith Barney Joint Venture from
Citigroup Inc. (Citi) on June 28, 2013 for the previously established price of $4.7 billion. The Firm recorded a negative
adjustment of approximately $151 million (net of tax) to reflect the difference between the purchase price for the 35%
redeemable noncontrolling interest in the joint venture and its carrying value. The impact to earnings per diluted share fromcontinuing operations is calculated by dividing the negative adjustment by the average number of diluted shares outstanding.
10

Net revenues and income (loss) from continuing operations applicable to Morgan Stanley, excluding DVA, are non-GAAP
financial measures that the Firm considers useful for investors to allow for better comparability of period-to-period operating
performance. The reconciliation of net revenues and income (loss) from continuing operations applicable to Morgan Stanleyfrom a non-GAAP to GAAP basis is as follows (amounts are presented in millions):

Firm net revenues – Non-GAAP
DVA impact
Firm net revenues – GAAP
Income (loss) applicable to MS – Non-GAAP
DVA after-tax impact
Income (loss) applicable to MS – GAAP

2Q 2014$8,521$87$8,608

1Q 2014$8,821$126$8,947

2Q 2013$8,340$175$8,515$1,875$61$1,936$1,391$75$1,466$900$111$1,01111

Institutional Securities net revenues and pre-tax income (loss), excluding DVA, are non-GAAP financial measures that the
Firm considers useful for investors to allow for better comparability of period-to-period operating performance. The
reconciliation of net revenues and pre-tax income (loss) from a non-GAAP to GAAP basis is as follows (amounts arepresented in millions):

Net revenues – Non-GAAP
DVA impact
Net revenues – GAAP
Pre-tax income (loss) – Non-GAAP
DVA impact
Pre-tax income (loss) – GAAP12

2Q 2014$4,161$87$4,248

1Q 2014$4,501$126$4,627

2Q 2013$4,183$175$4,358$927$87$1,014$1,245$126$1,371

$806
$175
$981

Noncontrolling interests reported in the Institutional Securities business segment includes the allocation to Mitsubishi UFJ
Financial Group, Inc. of Morgan Stanley MUFG Securities Co., Ltd., which the Firm consolidates.

8

13

Sales and trading net revenues, including Fixed Income & Commodities (FIC) and Equity sales and trading net revenues
excluding DVA, are non-GAAP financial measures that the Firm considers useful for investors to allow better comparabilityof period-to-period operating performance. The reconciliation of sales and trading, including FIC and Equity sales andtrading net revenues from a non-GAAP to GAAP basis is as follows (amounts are presented in millions):

2Q 2014

2Q 2013

Sales & Trading – Non-GAAP
DVA impact
Sales & Trading – GAAP

$2,559$87$2,646$2,902$175$3,077

FIC Sales & Trading – Non-GAAP
DVA impact
FIC Sales & Trading – GAAP

$1,011$50$1,061$1,153$61$1,214Equity Sales & Trading – Non-GAAP
DVA impact
Equity Sales & Trading – GAAP

$1,789$37$1,826$1,803$114$1,917

14

VaR 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. Further discussion of thecalculation of VaR and the limitations of the Firm’s VaR methodology is disclosed in Part II, Item 7A “Quantitative andQualitative Disclosures about Market Risk” included in Morgan Stanley’s Annual Report on Form 10-K for the year ended
December 31, 2013. Refer to page 7 of Morgan Stanley’s Financial Supplement accompanying this release for the VaR
disclosure.
15

Transactional revenues include investment banking, trading, and commissions and fee revenues.

16

Results for the current quarter included a $14 million benefit related to an insurance recovery.

17

On June 28, 2013, the Firm completed the purchase of the remaining 35% interest in the Morgan Stanley Smith Barney
Joint Venture from Citi, increasing the Firm’s interest from 65% to 100%. In the quarter ended June 30, 2013, Citi’s results
related to its 35% interest were reported in net income (loss) applicable to redeemable noncontrolling interests on page 8 ofMorgan Stanley’s Financial Supplement accompanying this release.

18

Results for the second quarter of 2014 and 2013 included pre-tax income of $6 million and $20 million, respectively,
related to investments held by certain consolidated real estate funds. The limited partnership interests in these funds arereported in net income (loss) applicable to nonredeemable noncontrolling interests on page 10 of Morgan Stanley’s Financial
Supplement accompanying this release.
19

On April 1, 2014, the Firm deconsolidated approximately $2 billion in total assets related to a real estate fund sponsored by
the Firm.

20

Net revenues for the current quarter included gains of $6 million compared with gains of $21 million in the prior year
second quarter related to investments held by certain consolidated real estate funds.

21

As an Advanced Approach banking organization, the Firm is required to compute risk-based capital ratios using both (i) astandardized approach for calculating credit risk weighted assets (“RWAs”) as supplemented by standardized market RWAs
calculated under U.S. Basel III (the “Standardized Approach”); and (ii) after completing the parallel run process on April 1,
2014, an advanced internal ratings-based approach for calculating credit RWAs and advanced measurement approaches for9calculating operational RWAs, as supplemented by advanced market RWAs calculated under Basel III (the “Advanced
Approach”). To implement a provision of the Dodd-Frank Act, U.S. Basel III subjects Advanced Approach banking
organizations, such as the Firm, to a permanent “capital floor.” In calendar year 2014, the capital floor framework utilizes the
U.S. Basel I-based rules as supplemented by the existing market risk rules known as “Basel 2.5”. Beginning on January 1,
2015, the capital floor framework will replace the U.S. Basel I/2.5 component with the U.S. Basel III Standardized
Approach. In the first quarter of 2014, the Firm calculated the denominator of its risk-based capital ratios using credit RWAs
determined under the Basel I-based rules and market RWAs determined under Basel 2.5. In the second quarter of 2014, theFirm calculated the denominator of its risk-based capital ratios using the Advanced Approach. These computations are
preliminary estimates as of July 17, 2014 (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 June 30, 2014. The methods for calculating the Firm’s risk-based
capital ratios will change through 2022 as aspects of the U.S. Basel III final rule are phased in. The Firm’s capital takes into
consideration regulatory capital requirements as well as capital required for organic growth, acquisitions and other businessneeds.
22

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

10

MORGAN STANLEY
Quarterly Financial Summary(unaudited, dollars in millions, except for per share data)

June 30, 2014
Net revenues
Institutional Securities
Wealth Management
Investment Management
Intersegment Eliminations
Consolidated net revenues
Income (loss) from continuing operations before tax
Institutional Securities
Wealth Management
Investment Management
Intersegment Eliminations
Consolidated income (loss) from continuing operations before tax

$

$

$

$

Quarter Ended
Mar 31, 2014

4,248
3,715
692
(47)
8,608

$

1,014
767
205
0
1,986

$

$

June 30, 2013

4,627
3,622
740
(42)
8,947

$

1,371
691
263
0
2,325

$

$

$

925
423
118
0
1,466

$

$

Percentage Change From:Mar 31, 2014
June 30, 2013

Six Months Ended
June 30, 2014
June 30, 2013

4,358
3,531
673
(47)
8,515

(8%)
3%
(6%)
(12%)
(4%)

(3%)
5%
3%
-1%

$

981
655
160
0
1,796

(26%)
11%
(22%)
-(15%)

3%
17%
28%
-11%

$

44%
11%
14%
-32%

128%
44%
34%
-91%

$

$

584
326
101
0
1,011

$

$

8,875
7,337
1,432
(89)
17,555

$

2,385
1,458
468
0
4,311

$

$

$

2,255
894
253
0
3,402

$

$

Percentage
Change

8,457
7,001
1,318
(93)
16,683

5%
5%
9%
4%
5%

1,798
1,252
347
0
3,397

33%
16%
35%
-27%

$

1,225
582
185
0
1,992

84%
54%
37%
-71%

$

$

Income (loss) applicable to Morgan Stanley
Institutional Securities
Wealth Management
Investment Management
Intersegment Eliminations
Consolidated income (loss) applicable to Morgan Stanley

$

1,330
471
135
0
1,936

Earnings (loss) applicable to Morgan Stanley common shareholders

$

1,856

$

1,449

$

803

28%

131%

$

3,305

$

1,739

90%

Earnings per basic share:
Income from continuing operations
Discontinued operations
Earnings per basic share

$
$
$

0.96
0.96

$
$
$

0.73
0.02
0.75

$
$
$

0.44
(0.02)
0.42

32%
*
28%

118%
*
129%

$
$
$

1.70
0.02
1.72

$
$
$

0.94
(0.03)
0.91

81%
*
89%

Earnings per diluted share:
Income from continuing operations
Discontinued operations
Earnings per diluted share

$
$
$

0.94
0.94

$
$
$

0.72
0.02
0.74

$
$
$

0.43
(0.02)
0.41

31%
*
27%

119%
*
129%

$
$
$

1.66
0.02
1.68

$
$
$

0.92
(0.03)
0.89

80%
*
89%

$

Financial Metrics:
Return on average common equity from continuing operations
Return on average common equity

11.5%
11.5%

8.9%
9.2%

5.4%
5.2%

10.2%
10.4%

5.9%
5.7%

Return on average common equity from continuing operations excluding DVA
Return on average common equity excluding DVA

10.9%
10.9%

8.3%
8.5%

4.6%
4.4%

9.6%
9.7%

6.1%
5.9%

Common Equity Tier 1 capital ratio Advanced (Transitional)
Tier 1 capital ratio Advanced (Transitional)

13.8%
15.2%

14.1%
15.6%

11.8%
14.1%

Book value per common share
Tangible book value per common share

$
$

33.48
28.53

$
$

32.38
27.41

$
$

31.48
26.27

Notes: - Results for the quarters ended June 30, 2014, March 31, 2014 and June 30, 2013, include positive (negative) revenue of $87 million, $126 million and $175 million, respectively, related to the change in the fair value of certain of the
Firm's long-term and short-term borrowings resulting from the fluctuation in the Firm's credit spreads and other credit factors (Debt Valuation Adjustment, DVA).
- The return on average common equity metrics, return on average common equity excluding DVA metrics, and tangible book value per common share are non-GAAP measures that the Firm considers to be useful measures to assess
operating performance and capital adequacy.
- In the quarter ended June 30, 2014, the Firm began using the U.S. Basel III Advanced Approaches (Advanced Approach) to calculate its regulatory capital requirements. Prior periods have not been recast to reflect the new requirements.
- Common Equity Tier 1 capital ratio Advanced (Transitional) and the Tier 1 capital ratio Advanced (Transitional) equals Common Equity Tier 1 capital divided by risk-weighted assets (RWAs) and Tier 1 capital divided by RWAs, respectively.
- Book value per common share equals common equity divided by period end common shares outstanding.
- Tangible book value per common share equals tangible common equity divided by period end common shares outstanding.
- See page 4 and related End Notes of the Financial Supplement for additional information related to the calculation of the financial metrics.
11

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

Revenues:
Investment banking
Trading
Investments
Commissions and fees
Asset management, distribution and admin. fees
Other
Total non-interest revenues

June 30, 2014

Quarter Ended
Mar 31, 2014

June 30, 2013

$

$

$

Interest income
Interest expense
Net interest
Net revenues

Notes:

25%
(15%)
(37%)
(6%)
3%
(16%)
(3%)

25%
(13%)
21%
(6%)
9%
(32%)
--

$

2,941
5,478
586
2,354
5,170
451
16,980

$

2,527
5,588
526
2,384
4,750
522
16,297

16%
(2%)
11%
(1%)
9%
(14%)
4%

1,415
1,211
204
8,515

(7%)
(5%)
(13%)
(4%)

(12%)
(19%)
31%
1%

2,593
2,018
575
17,555

2,803
2,417
386
16,683

(7%)
(17%)
49%
5%

4,200

4,305

4,103

(2%)

2%

8,505

8,317

2%

359
458
411
165
532
497
2,422

359
443
424
147
452
492
2,317

374
456
470
163
458
695
2,616

-3%
(3%)
12%
18%
1%
5%

(4%)
-(13%)
1%
16%
(28%)
(7%)

718
901
835
312
984
989
4,739

751
884
918
297
898
1,221
4,969

(4%)
2%
(9%)
5%
10%
(19%)
(5%)

6,622

6,622

6,719

--

(1%)

13,244

13,286

--

$

1,986
32
1,954
(1)
1,953
0
18
1,935
79
1,856

$

2,325
780
1,545
39
1,584
0
79
1,505
56
1,449

$

1,796
574
1,222
(31)
1,191
100
111
980
177
803

(15%)
(96%)
26%
*
23%
-(77%)
29%
41%
28%

11%
(94%)
60%
97%
64%
*
(84%)
97%
(55%)
131%

$

4,311
812
3,499
38
3,537
0
97
3,440
135
3,305

$

3,397
925
2,472
(50)
2,422
222
258
1,942
203
1,739

27%
(12%)
42%
*
46%
*
(62%)
77%
(33%)
90%

$

1,936
(1)
1,935

$

1,466
39
1,505

$

1,011
(31)
980

32%
*
29%

91%
97%
97%

$

3,402
38
3,440

$

1,992
(50)
1,942

71%
*
77%

Total non-interest expenses

Pre-tax profit margin
Compensation and benefits as a % of net revenues
Non-compensation expenses as a % of net revenues
Effective tax rate from continuing operations

1,303
2,894
188
1,217
2,404
305
8,311

Percentage
Change

1,343
1,035
308
8,947

Non-compensation expenses:
Occupancy and equipment
Brokerage, clearing and exchange fees
Information processing and communications
Marketing and business development
Professional services
Other
Total non-compensation expenses

Amounts applicable to Morgan Stanley:
Income (loss) from continuing operations
Gain (loss) from discontinued operations after tax
Net income (loss) applicable to Morgan Stanley

1,308
2,962
359
1,216
2,549
245
8,639

Six Months Ended
June 30, 2014
June 30, 2013

1,250
983
267
8,608

Non-interest expenses:
Compensation and benefits

Income (loss) from continuing operations before taxes
Income tax provision / (benefit) from continuing operations
Income (loss) from continuing operations
Gain (loss) from discontinued operations after tax
Net income (loss)
Net income applicable to redeemable noncontrolling interests
Net income applicable to nonredeemable noncontrolling interests
Net income (loss) applicable to Morgan Stanley
Preferred stock dividend / Other
Earnings (loss) applicable to Morgan Stanley common shareholders

1,633
2,516
227
1,138
2,621
206
8,341

Percentage Change From:Mar 31, 2014
June 30, 2013

$

23%
49%
28%
1.6%

$

26%
48%
26%
33.5%

$

21%
48%
31%
32.0%

$

25%
48%
27%
18.8%

$

20%
50%
30%
27.2%

- In the quarter ended June 30, 2014, income tax provision / (benefit) from continuing operations included a net discrete tax benefit of $609 million (primarily reported in the Institutional Securities business segment)
principally related to the remeasurement of reserves and related interest due to new information regarding the status of a multi-year tax authority examination.
- Preferred stock dividend / other includes allocation of earnings to Participating Restricted Stock Units (RSUs). For the quarter and six months ended June 30, 2013, the Firm recorded a negative adjustment ofapproximately $151 million (net of tax) related to the purchase of the remaining interest in the Morgan Stanley Smith Barney Joint Venture. This adjustment negatively impacted the calculation of basic and fully diluted
earnings per share.
- Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure to assess operating performance. Pre-tax profit margin percentages represent income from continuing
operations before income taxes as a percentage of net revenues.
12

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

Quarter Ended
Mar 31, 2014

June 30, 2014

Income (loss) from continuing operations
Net income applicable to redeemable noncontrolling interests
Net income applicable to nonredeemable noncontrolling interests
Net income (loss) from continuing operations applicable to noncontrolling interests
Income (loss) from continuing operations applicable to Morgan Stanley
Less: Preferred Dividends
Less: Morgan Stanley Smith Barney Joint Venture Redemption Adjustment
Income (loss) from continuing operations applicable to Morgan Stanley, prior to allocation of income toParticipating Restricted Stock Units
Basic EPS Adjustments:
Less: Allocation of earnings to Participating Restricted Stock Units
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders

$

1,954
0
18
18
1,936
76
1,860

$

3
1,857

Gain (loss) from discontinued operations after tax
Less: Gain (loss) from discontinued operations after tax applicable to noncontrolling interests
Gain (loss) from discontinued operations after tax applicable to Morgan Stanley
Less: Allocation of earnings to Participating Restricted Stock Units
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders
Earnings (loss) applicable to Morgan Stanley common shareholders$

Average basic common shares outstanding (millions)

1,856

$

1,412

$

(1)
0
(1)
0
(1)
$

1,545
0
79
79
1,466
54
-

June 30, 2013

2
1,410

1,928

1,449

26%
-(77%)
(77%)
32%
41%
--

60%
*
(84%)
(91%)
91%
*
*

32%

122%

2
834

50%
32%

50%
123%

(31)
0
(31)
0
(31)

*
-*
-*

97%
-97%
-97%

803

28%

131%

1,908

--

1%

836

$

39
0
39
0
39
$

1,222
100
111
211
1,011
24
151

$

1,924

Percentage Change From:Mar 31, 2014
June 30, 2013

Six Months Ended
June 30, 2014
June 30, 2013

$

3,499
0
97
97
3,402
130
-

$

3,272

$

5
3,267

1,793

$

38
0
38
0
38
$

3,305

2,472
222
258
480
1,992
48
151

$

1,926

Percentage
Change

42%
*
(62%)
(80%)
71%
171%
*
82%

4
1,789

25%
83%

(50)
0
(50)
0
(50)

*
-*
-*

1,739

90%

1,904

1%

Earnings per basic share:
Income from continuing operations
Discontinued operations
Earnings per basic share

$
$
$

0.96
0.96

$
$
$

0.73
0.02
0.75

$
$
$

0.44
(0.02)
0.42

32%
*
28%

118%
*
129%

$
$
$

1.70
0.02
1.72

$
$
$

0.94
(0.03)
0.91

81%
*
89%

Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders

$

1,857

$

1,410

$

834

32%

123%

$

3,267

$

1,789

83%

(31)

*

97%

(50)

*

803

28%

131%

1,739

90%

1,951

--

1%

1,946

1%

0.43
(0.02)
0.41

31%
*
27%

119%
*
129%

0.92
(0.03)
0.89

80%
*
89%

Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders
Earnings (loss) applicable to Morgan Stanley common shareholders(1)$

Average diluted common shares outstanding and common stock equivalents (millions)
Earnings per diluted share:
Income from continuing operations
Discontinued operations
Earnings per diluted share

1,856

39
$

1,969

$
$
$

0.94
0.94

1,449

$

1,969

$
$
$

0.72
0.02
0.74

$
$
$

38
$

3,305

$

1,969

$
$
$

1.66
0.02
1.68

$
$
$

Notes: - The Firm calculates earnings per share using the two-class method as described under the accounting guidance for earnings per share. For further discussion of the Firm's earnings per share calculations, see page 13 of the Financial Supplement and Note 15 to theconsolidated financial statements in the Firm's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.

13