Media Relations: Jeanmarie McFadden 212-761-2433

Investor Relations: Celeste Mellet Brown 212-761-3896

Morgan Stanley Reports Second Quarter 2012:


Net Revenues of $7.0 Billion and Income from Continuing Operations of $0.28 per
Diluted Share

Excluding DVA,1 Net Revenues were $6.6 Billion and Income from Continuing
Operations was $0.16 per Diluted Share2, 3Ranked #1 in Global IPOs and #2 in Global Announced M&A; Improved
Profitability in Global Wealth Management

NEW YORK, July 19, 2012 – Morgan Stanley (NYSE: MS) today reported net revenues of $7.0 billion for thesecond quarter ended June 30, 2012 compared with $9.2 billion a year ago. For the current quarter, income
from continuing operations applicable to Morgan Stanley was $563 million, or $0.28 per diluted share,4compared with income of $1.2 billion, or a loss of $0.36 per diluted share,4 for the same period a year ago. The
earnings per share calculation for the prior year second quarter included a negative adjustment of approximately$1.7 billion, or $1.02 per diluted share, related to the conversion of the Firm’s Series B Preferred Stock held by
Mitsubishi UFJ Financial Group, Inc. (MUFG) into common stock.
Results for the quarter included positive revenue of $350 million compared with $244 million a year ago related
to changes in Morgan Stanley’s debt-related credit spreads and other credit factors (Debt Valuation Adjustment,
DVA).1
Excluding DVA, net revenues for the current quarter were $6.6 billion compared with $9.0 billion a year ago
and income from continuing operations applicable to Morgan Stanley was $338 million, or $0.16 per diluted, ,share, compared with income of $1.1 billion, or a loss of $0.46 a year ago.2 4 5Compensation expense of $3.6 billion declined from $4.6 billion a year ago. Non-compensation expenses of $2.4
billion decreased from $2.6 billion a year ago.
For the current quarter, net income applicable to Morgan Stanley, including discontinued operations, was $0.29
per diluted share, compared with a net loss of $0.38 per diluted share in the second quarter of 2011.6

1

Summary of Firm Results(dollars in millions)Excluding DVA (2), (3)As Reported

Net
Revenues

MS Earnings
Cont. Ops (1)Net
Revenues

MS Earnings
Cont. Ops (1)2Q 2012$6,953$536$6,603$312

1Q 2012$6,935($103)$8,913$1,344

2Q 2011$9,207($530)$8,963($679)(1)

Represents income (loss) from continuing operations applicable to Morgan Stanley common shareholders less preferred dividends.
Net revenues for 2Q 2012, 1Q 2012 and 2Q 2011 exclude positive (negative) revenue from DVA of $350 million, ($1,978) million and$244 million, respectively.
(3)
Earnings / (loss) from continuing operations applicable to Morgan Stanley common shareholders for 2Q 2012, 1Q 2012 and 2Q 2011
excludes after tax DVA impact of $225 million, ($1,454) million and $149 million, respectively.
(2)

Business Overview
Global Wealth Management Group net revenues were $3.3 billion despite the challenging markets. The
pre-tax margin for the current quarter was 12% compared with 9% a year ago. Discontinued operations
included a pre-tax gain of $108 million from the previously announced sale of Quilter & Co. Ltd. (Quilter)in the U.K. Global fee based asset flows were $4.1 billion. On June 1, 2012, the Firm advised Citigroup
Inc. of its intention to exercise its right to purchase an additional 14% of Morgan Stanley Smith Barney(MSSB).

Investment Banking revenues were $884 million. The Firm ranked #1 in global IPOs, #2 in global
announced M&A and #3 in global Equity.7



Sales and trading net revenues were $2.3 billion, or $1.9 billion excluding DVA.8 Fixed Income andCommodities and Equity sales and trading net revenues reflected the challenging global market
environment with reduced levels of client activity.



Asset Management reported net revenues of $456 million and assets under management or supervision of$311 billion and positive net flows of $13.1 billion.

James P. Gorman, Chairman and Chief Executive Officer, said, “Although global economic uncertainty remains aheadwind, we are proactively positioning the Firm for success. Our businesses showed resilience in key areas
during the quarter, and we made progress against strategic goals. Despite muted volumes, Investment Banking
maintained its industry-leading rankings. In Global Wealth Management, we increased our pre-tax margin to 12
percent in an environment marked by investor caution, and we integrated substantially all of our technology
systems, which should bring additional value to our clients. We continue to be focused on taking the necessary
steps to deliver strong returns for our shareholders.”2

Summary of Institutional Securities Results(dollars in millions)Excluding DVA (1)As Reported

2Q 2012

Net
Revenues

Pre-Tax
IncomeNet
Revenues

Pre-Tax
Income$3,234$508$2,884$158

1Q 2012$3,023($312)$5,001$1,666

2Q 2011$5,159

$1,485$4,915$1,241(1)

Net revenues and pre-tax income for 2Q 2012, 1Q 2012 and 2Q 2011 exclude positive (negative) revenue from DVA of $350 million,($1,978) million and $244 million, respectively.

INSTITUTIONAL SECURITIESInstitutional Securities reported pre-tax income from continuing operations of $508 million compared with pretax income of $1.5 billion in the second quarter of last year. Net revenues for the current quarter were $3.2
billion compared with $5.2 billion a year ago. DVA resulted in positive revenue of $350 million in the current
quarter compared with $244 million a year ago. The following discussion for sales and trading excludes DVA.


Advisory revenues were $263 million compared with $533 million a year ago on lower levels of market
activity. Fixed income and equity underwriting revenues were $621 million compared with $940 million ayear ago primarily reflecting lower market volume.



Fixed income and commodities sales and trading net revenues were $770 million compared with $1.9 billion
a year ago. The decrease in net revenues from last year’s second quarter reflected reduced levels of client
activity across geographies and most products.8



Equity sales and trading net revenues were $1.1 billion compared with $1.8 billion in the prior year quarter
primarily reflecting lower results in the derivatives and cash businesses.8



Other sales and trading net losses were $11 million compared with losses of $507 million in last year’s
second quarter reflecting gains on hedges associated with corporate lending activity and the net positive
impact of $76 million representing an out of period gain of $300 million on the incorrect application of hedge
accounting on certain derivative contracts previously designated as net investment hedges of certain foreign,
non-U.S. dollar denominated subsidiaries, partially offset by a loss of $224 million resulting from fair valuechanges within the quarter of the related derivative positions not qualifying for net investment hedge
accounting.9

Compensation expense was $1.4 billion compared with $2.2 billion a year ago. The current quarter reflects
an adjustment of approximately $160 million to reduce previously accrued discretionary above basecompensation due to an updated 2012 financial outlook. The reported compensation to net revenue ratio was
44%; excluding DVA, this ratio was 49%.10 Non-compensation expenses were $1.3 billion compared with
$1.5 billion a year ago.

Morgan Stanley’s average trading Value-at-Risk measured at the 95% confidence level was $91 million
compared with $84 million in the first quarter of 2012 and $145 million in the second quarter of the prior
year.

3

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

Pre-Tax
Income2Q 2012$3,305$393

1Q 2012$3,414$387

2Q 2011$3,440$317

GLOBAL WEALTH MANAGEMENT GROUP
Global Wealth Management Group reported pre-tax income from continuing operations of $393 million
compared with $317 million in the second quarter of last year. Net revenues for the current quarter were $3.3
billion compared to $3.4 billion a year ago. The quarter’s pre-tax margin was 12%.11 Aggregate pre-tax income,which included pre-tax income from continuing operations and the pre-tax gain in discontinued operations related
to the sale of Quilter, was $420 million after the noncontrolling interest allocation to Citigroup Inc.12, 13
Asset management fee revenues of $1.9 billion increased from $1.8 billion a year ago primarily reflecting an
increase in fee based assets.

Transactional revenues14 of $976 million declined from $1.2 billion a year ago primarily reflecting reduced
commissions and fees from lower levels of client activity.

Compensation expense for the current quarter was $2.0 billion with a compensation to net revenue ratio of60%. Non-compensation expenses of $918 million decreased from $991 million a year ago.



Total client assets were $1.7 trillion at quarter end. Client assets in fee-based accounts were $526 billion, or
31% of total client assets. Global fee based asset flows for the quarter were $4.1 billion.



The 16,934 global representatives at quarter end achieved average annualized revenue per global
representative of $775,000. Total client assets per global representative were $101 million.

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

Pre-Tax
Income2Q 2012$456$43

1Q 2012

$533

$128

2Q 2011

$636

$168

ASSET MANAGEMENT
Asset Management reported pre-tax income from continuing operations of $43 million compared with $168
million in last year’s second quarter.15 Income after the noncontrolling interest allocation and before taxes was$20 million.


Net revenues of $456 million decreased from $636 million a year ago as results in the Traditional AssetManagement business were primarily offset by losses on principal investments in the Merchant Banking

4business compared with gains in the prior year quarter and lower gains on principal investments in the Real
Estate Investing business.16
Compensation expense for the current quarter was $214 million with a compensation to net revenue ratio of
47%. Non-compensation expenses of $199 million increased from $188 million a year ago.



Assets under management or supervision at June 30, 2012 of $311 billion increased from $296 billion a year
ago. The increase primarily reflected net customer inflows in Morgan Stanley’s liquidity and alternatives
funds, partly offset by market depreciation. The business recorded strong net flows of $13.1 billion in thecurrent quarter, including approximately $4.5 billion related to the conversion of MSSB client balances into
liquidity funds.

CAPITAL
Morgan Stanley’s Tier 1 capital ratio under Basel I was approximately 17.1% and Tier 1 common ratio wasapproximately 13.5% at June 30, 2012.17
At June 30, 2012, book value and tangible book value per common share were $31.02 and $27.70,18 respectively,
based on approximately 2.0 billion shares outstanding.

OTHER MATTERS
As a result of a rating agency downgrade of the Firm’s long-term credit rating in June, the amount of additional
collateral requirements or other payments that could be called by counterparties, exchanges or clearingorganizations under the terms of certain OTC trading agreements and certain other agreements was approximately$6.3 billion, of which $2.9 billion was called and posted at June 30, 2012.
The effective tax rate from continuing operations for the current quarter was 24.0%.
The Firm declared a $0.05 quarterly dividend per common share. The dividend is payable on August 15, 2012 tocommon shareholders of record on July 31, 2012.
Morgan Stanley is a leading global financial services firm providing a wide range of investment banking,securities, investment management and wealth management services. The Firm's employees serve clientsworldwide including corporations, governments, institutions and individuals from more than 1,200 offices in 43
countries. For further information about Morgan Stanley, please visit www.morganstanley.com.
A financial summary follows. Financial, statistical and business-related information, as well as information
regarding business and segment trends, is included in the Financial Supplement. Both the earnings release andthe Financial Supplement are available online in the Investor Relations section at www.morganstanley.com.

###(See Attached Schedules)
The information above contains forward-looking statements. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date on which they are made and whichreflect 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 and5uncertainties that may affect the future results of the Company, please see "Forward-Looking Statements"
immediately preceding Part I, Item 1, "Competition" and "Supervision and Regulation" in Part I, Item 1,"Risk Factors" in Part I, Item 1A, "Legal Proceedings" in Part I, Item 3, "Management’s Discussion 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, each of the Company's Annual Report on
Form 10-K for the year ended December 31, 2011 and other items throughout the Form 10-K, theCompany’s Quarterly Reports on Form 10-Q, including “Risk Factors” in Part II, Item 1A therein, and theCompany’s Current Reports on Form 8-K, including any amendments thereto.

6

1

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

2

Income (loss) per diluted share amounts, excluding DVA, are non-GAAP financial measures that the Firm considers usefulfor 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 income (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):

Income (loss) per diluted share applicable to MS – Non-GAAP
DVA impact - 2Q12 DVA of $350, net of tax of $125
Income (loss) per diluted share applicable to MS – GAAP

2Q 2012
$0.16
$0.12
$0.28

2Q 2011$(0.46)$0.10$(0.36)

1,912
0
1,912

1,464
0
1,464

Average diluted shares – Non-GAAP
DVA impact
Average diluted shares – GAAP
3

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 othercompanies. Whenever we refer to a non-GAAP financial measure, we will also generally present the most directlycomparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of thedifferences between the non-GAAP financial measure we reference with such comparable GAAP financial measure.
4

Includes preferred dividends and other adjustments related to the calculation of earnings per share of approximately $27
million for the quarter ended June 30, 2012 and $1.8 billion for the quarter ended June 30, 2011. Refer to page 3 of Morgan
Stanley’s Financial Supplement accompanying this release for the calculation of earnings per share.
5

Income (loss) applicable to Morgan Stanley, excluding DVA, 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 income(loss) from continuing operations applicable to Morgan Stanley from a non-GAAP to GAAP basis is as follows (amounts arepresented in millions):

Income (loss) applicable to MS – Non-GAAP
DVA impact - 2Q12 DVA of $350, net of tax of $125
Income (loss) applicable to MS – GAAP

2Q 2012
$338
$225
$563

1Q 2012$1,376$(1,454)$(78)

6

2Q 2011$1,072$149$1,221

Discontinued operations for the current quarter reflected a pre-tax gain of $108 million ($73 million after tax) and otheroperating income related to Quilter (reported in the Global Wealth Management business segment) and operating results
related to Saxon (reported in the Institutional Securities business segment).
7

Source: Thomson Reuters – for the period of January 1, 2012 to June 30, 2012 as of July 3, 2012.

7

8

Sales & Trading net revenues, including Fixed Income and Commodities (FIC) and Equity Sales & 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 & Trading, including FIC and Equity Sales & Trading
net revenues from a non-GAAP to GAAP basis is as follows (amounts are presented in millions):
2Q 2012$1,903$350$2,253

2Q 2011$3,200$244$3,444FIC Sales & Trading – Non-GAAP
DVA impact
FIC Sales & Trading – GAAP

$770
$276
$1,046$1,906$192$2,098Equity Sales & Trading – Non-GAAP
DVA impact
Equity Sales & Trading – GAAP

$1,144$74$1,218$1,801$52$1,853

Sales & Trading – Non-GAAP
DVA impact
Sales & Trading – GAAP9The Firm recognized an out of period pre-tax gain of approximately $300 million in Institutional Securities’ Other Sales
and Trading net revenues for the quarter ended June 30, 2012, related to the reversal of amounts recorded in cumulative othercomprehensive income due to the incorrect application of hedge accounting on certain derivative contracts previously
designated as net investment hedges of certain foreign, non-U.S. dollar denominated subsidiaries. This amount included a
pre-tax gain of approximately $191 million related to the quarter ended March 31, 2012, with the remainder impacting priorperiods. The Firm has evaluated the effects of the incorrect application of hedge accounting, both qualitatively andquantitatively, and concluded that it did not have a material impact on any prior annual or quarterly consolidated results. In
addition, the Firm has recognized a partially offsetting pre-tax loss of approximately $224 million for the quarter ended June30, 2012, resulting from fair value changes within the quarter of the related derivative positions not qualifying for net
investment hedge accounting.
10

The compensation to net revenue ratio is calculated as compensation expense of $1,425 million divided by net revenues of$3,234 million. Excluding DVA, the denominator is decreased by $350 million. The compensation to net revenue ratio
excluding DVA 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.
11

Pre-tax 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. Pre-tax margin represents income (loss) from continuing operations before taxes,
divided by net revenues.

12

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

13

The aggregate pre-tax income from continuing operations, including the pre-tax gain from the sale of Quilter indiscontinued operations, after the noncontrolling interest allocation to Citigroup Inc., is a non-GAAP measure that the Firm
considers useful for investors to better understand the components of net income applicable to Morgan Stanley.

14

Transactional revenues include investment banking, principal transactions - trading and commissions and fee revenues.

15

Results for the second quarter of 2012 and 2011 included pre-tax income of $22 million and $91 million, respectively,
related to principal investments held by certain consolidated real estate funds. The limited partnership interests in thesefunds are reported in net income (loss) applicable to noncontrolling interests on page 11 of Morgan Stanley’s Financial
Supplement accompanying this release.

8

16

Results for the current quarter included gains of $24 million compared with gains of $95 million in the prior year second
quarter related to principal investments held by certain consolidated real estate funds.

17

The Firm calculates its Tier 1 capital ratio and risk-weighted assets in accordance with the capital adequacy standards forfinancial holding companies adopted by the Federal Reserve Board. These standards are based upon a framework describedin the International Convergence of Capital Measurement and Capital Standards, July 1988, as amended, also referred to as
Basel I. In accordance with the Federal Reserve Board’s definition, Tier 1 common capital is defined as Tier 1 capital lessnon-common elements in Tier 1 capital, including perpetual preferred stock and related surplus, minority interest in
subsidiaries, trust preferred securities and mandatory convertible preferred securities. These computations are preliminary
estimates as of July 19, 2012 (the date of this release) and could be subject to revision in Morgan Stanley’s Quarterly Reporton Form 10-Q for the quarter ended June 30, 2012.

18

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 and includes only the Firm’s share of MSSB’s
goodwill and intangible assets. Tangible book value per common share equals tangible common equity divided by period
end common shares outstanding.

9

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

June 30, 2012
Net revenues
Institutional Securities
Global Wealth Management Group
Asset Management
Intersegment Eliminations
Consolidated net revenues
Income (loss) from continuing operations before tax
Institutional Securities
Global Wealth Management Group
Asset Management
Intersegment Eliminations
Consolidated income (loss) from continuing operations before tax
Income (loss) applicable to Morgan Stanley
Institutional Securities
Global Wealth Management Group
Asset Management
Intersegment Eliminations
Consolidated income (loss) applicable to Morgan Stanley

$

$

$

$

$

Quarter Ended
Mar 31, 2012

3,234
3,305
456
(42)
6,953

$

3,023
3,414
533
(35)
6,935

$

508
393
43
(4)
940

$

(312)
387
128
0
203

$

$

$

$
$

(296)
193
25
0
(78)
(119)

$

$

Percentage Change From:
June 30, 2011
Mar 31, 2012

June 30, 2011

Six Months Ended
June 30, 2012
June 30, 2011

5,159
3,440
636
(28)
9,207

7%
(3%)
(14%)
(20%)
--

(37%)
(4%)
(28%)
(50%)
(24%)

$

1,485
317
168
0
1,970

*
2%
(66%)
*
*

(66%)
24%
(74%)
*
(52%)

$

*
(11%)
(44%)
*
*
*

(63%)
(3%)
(36%)
*
(54%)
*

$

$
$

1,021
178
22
0
1,221
(558)

$

$

6,257
6,719
989
(77)
13,888

$

196
780
171
(4)
1,143

$

$

$
$

85
365
39
(4)
485
446

$

$

Percentage
Change

8,727
6,844
1,258
(48)
16,781

(28%)
(2%)
(21%)
(60%)
(17%)

1,917
661
293
0
2,871

(90%)
18%
(42%)
*
(60%)

$
$

1,755
360
90
0
2,205
188

(95%)
1%
(57%)
*
(78%)
137%

$

$

Earnings (loss) applicable to Morgan Stanley common shareholders

$
$

381
172
14
(4)
563
564

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

$
$
$

0.28
0.02
0.30

$
$
$

(0.05)(0.01)(0.06)$$$(0.36)(0.02)(0.38)

*
*
*

*
*
*

$
$
$

0.23
0.01
0.24

$
$
$

0.16
(0.03)
0.13

44%
*
85%

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

$
$
$

0.28
0.01
0.29

$
$
$

(0.05)(0.01)(0.06)$$$(0.36)(0.02)(0.38)

*
*
*

*
*
*

$
$
$

0.23
0.23

$
$
$

0.16
(0.03)
0.13

44%
*
77%

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

3.5%
3.7%

*
*

*
*

Tier 1 common capital ratio
Tier 1 capital ratio

13.5%
17.1%

13.3%
16.8%

11.4%
14.5%

Book value per common share
Tangible book value per common share

$
$

31.02
27.70

$
$

30.74
27.37

$
$

1.4%
1.5%

1.0%
0.8%

30.17
26.61

Notes: - Results for the quarters ended June 30, 2012, March 31, 2012 and June 30, 2011, include positive (negative) revenue of $350 million, $(1,978) million and $244 million, respectively, related to the movement in Morgan Stanley's credit
spreads and other credit factors on certain long-term and short-term debt (Debt Valuation Adjustment, DVA).
- Income (loss) applicable to Morgan Stanley represents income (loss) from continuing operations, adjusted for the portion of net income (loss) applicable to noncontrolling interests related to continuing operations.
For the quarter ended June 30, 2012, net income (loss) applicable to noncontrolling interests includes $8 million reported as a gain in discontinued operations.
- The return on average common equity and tangible book value per common share are non-GAAP measures that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance and capital adequacy.
- Tier 1 common capital ratio equals Tier 1 common equity divided by Risk Weighted Assets (RWA).
- Tier 1 capital ratio equals Tier 1 capital divided by RWA.
- 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 of the financial supplement for additional information related to the calculation of the financial metrics.

10

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

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

June 30, 2012

Quarter Ended
Mar 31, 2012

June 30, 2011

$

$

$

1,104

4%

(35%)

$

2,167

$

Percentage
Change

2,909

(26%)

2,407
85
1,177
2,152
110
6,994

3,484
402
1,283
2,174
237
9,275

3%
(26%)
(12%)
5%
55%
2%

(29%)
(84%)
(19%)
4%
(28%)
(23%)

4,876
148
2,217
4,420
280
14,108

6,461
731
2,722
4,257
(237)
16,843

(25%)
(80%)
(19%)
4%
*
(16%)

1,323
1,484
(161)
6,953

1,542
1,601
(59)
6,935

1,961
2,029
(68)
9,207

(14%)
(7%)
(173%)
--

(33%)
(27%)
(137%)
(24%)

2,865
3,085
(220)
13,888

3,820
3,882
(62)
16,781

(25%)
(21%)
*
(17%)

3,633

4,431

4,622

(18%)

(21%)

8,064

8,907

(9%)

380
405
487
156
478
474
2,380

392
403
459
146
412
489
2,301

395
410
444
151
467
748
2,615

(3%)
-6%
7%
16%
(3%)
3%

(4%)
(1%)
10%
3%
2%
(37%)
(9%)

772
808
946
302
890
963
4,681

792
811
884
293
870
1,353
5,003

(3%)
-7%
3%
2%
(29%)
(6%)

6,013

6,732

7,237

(11%)

(17%)

12,745

13,910

(8%)

$

940
226
714
36
750
159
591
27
564

$

203
54
149
(15)
134
228
(94)
25
(119)

$

1,970
538
1,432
(26)
1,406
213
1,193
1,751
(558)

*
*
*
*
*
(30%)
*
8%
*

(52%)
(58%)
(50%)
*
(47%)
(25%)
(50%)
(98%)
*

$

1,143
280
863
21
884
387
497
51
446

$

2,871
294
2,577
(41)
2,536
375
2,161
1,973
188

(60%)
(5%)
(67%)
*
(65%)
3%
(77%)
(97%)
137%

$

563
28
591

$

(78)
(16)
(94)

$

1,221
(28)
1,193

*
*
*

(54%)
*
(50%)

$

485
12
497

$

2,205
(44)
2,161

(78%)
*
(77%)

Total non-interest 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

1,695

Six Months Ended
June 30, 2012
June 30, 2011

2,469
63
1,040
2,268
170
7,114

Interest income
Interest expense
Net interest
Net revenues
Non-interest expenses:
Compensation and benefits
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

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 (loss) applicable to noncontrolling interests
Net income (loss) applicable to Morgan Stanley
Preferred stock dividend / Other
Earnings (loss) applicable to Morgan Stanley common shareholders

1,063

Percentage Change From:Mar 31, 2012
June 30, 2011$

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

14%
52%
34%
24.0%

$

3%
64%
33%
26.5%

$

21%
50%
28%
27.3%

$

8%
58%
34%
24.5%

$

17%
53%
30%
10.2%

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 fromcontinuing operations before income taxes as a percentage of net revenues.
- For the quarter ended June 30, 2012, discontinued operations included operating results related to Saxon (reported in Institutional Securities segment) and a pre-tax gain of $108 million ($73 million
after-tax) and other operating income related to the sale of Quilter & Co. Ltd. (Quilter) (reported in the Global Wealth Management business segment).
- For the quarter ended March 31, 2012, discontinued operations primarily reflected an after-tax loss related to the first phase of the previously announced disposition of Saxon and the operating
results of Quilter.
- The quarter ended June 30, 2011, preferred stock dividend/other included a one-time negative adjustment of approximately $1.7 billion related to the conversion of Series B Non-Cumulative
Non-Voting Perpetual Convertible Preferred Stock held by Mitsubishi UFJ Financial Group, Inc. (MUFG), into Morgan Stanley common stock (MUFG conversion).
- Preferred stock dividend / other includes allocation of earnings to Participating Restricted Stock Units (RSUs).

11

MORGAN STANLEY
Quarterly Earnings Per Share(unaudited, dollars in millions, except for per share data)
01/00/00 00:00
Quarter Ended
Mar 31, 2012

June 30, 2012

Income (loss) from continuing operations
Net income (loss) from continuing operations applicable to noncontrolling interest
Income from continuing operations applicable to Morgan Stanley
Less: Preferred Dividends
Less: MUFG preferred stock conversion
Income from continuing operations applicable to Morgan Stanley, prior to allocation of income to Participating
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

$

714
151
563
(24)
539

3
536

$

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

$

$

564

$

(102)

$

36
8
28
0
28

Average basic common shares outstanding (millions)

149
227
(78)
(24)
-

June 30, 2011

1
(103)

$

(119)

*
(33%)
*
---

(50%)
(28%)
(54%)
-*

*

*

1
(530)

200%
*

200%
*

(26)
2
(28)
0
(28)

*
*
*
-*

*
*
*
-*

(529)

$

(15)
1
(16)
0
(16)

1,885

1,432
211
1,221
(24)
(1,726)$

1,877

Percentage Change From:Mar 31, 2012
June 30, 2011

(558)

*

*

1,464

--

29%

Six Months Ended
June 30, 2012
June 30, 2011

$

863
378
485
(48)
-

$

437

$

3
434

235

$

21
9
12
0
12
$

446

2,577
372
2,205
(244)
(1,726)$

1,881

Percentage
Change

(67%)
2%
(78%)
80%
*
86%

4
231

(25%)
88%

(41)
3
(44)
1
(43)

*
200%
*
*
*

188

137%

1,460

29%

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

$
$
$

0.28
0.02
0.30

$
$
$

(0.05)(0.01)(0.06)$$$(0.36)(0.02)(0.38)

*
*
*

*
*
*

$
$
$

0.23
0.01
0.24

$
$
$

0.16
(0.03)
0.13

44%
*
85%

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

$

536

$

(103)

$

(530)

*

*

$

434

$

231

88%

Diluted EPS Adjustments:
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders

$

536

$

(103)

$

(530)

*

*

$

434

$

231

88%

(28)

*

*

(43)

*

$

564

$

(119)

$

(558)

*

*

$

446

$

188

137%

1,464

2%

31%

1,477

29%

(0.36)(0.02)(0.38)

*
*
*

*
*
*

0.16
(0.03)
0.13

44%
*
77%

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

28

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

(16)

1,912

$
$
$

0.28
0.01
0.29

1,877

$
$
$

(0.05)(0.01)(0.06)

$
$
$

12

1,907

$
$
$

0.23
0.23

Notes: - The Firm calculates earnings per share using the two-class method as described under the accounting guidance for earnings per share. For further discussion of the Firm's earnings per share calculations, see page 14 of the financial supplement
and Note 2 to the consolidated financial statements in the Firm's Annual Report on Form 10-K for the year ended December 31, 2011.

12$$$