Media Relations: Jeanmarie McFadden 212-761-2433

Investor Relations: Suzanne Charnas 212-761-3043

Morgan Stanley Reports Third Quarter 2010:


Net Revenues of $6.8 Billion, Including Negative Impact of $731 Million fromTightening of Morgan Stanley’s Debt-Related Credit Spreads

Income from Continuing Operations of $0.05 per Diluted Share (Includes $0.30
Loss from Changes in Morgan Stanley’s Debt-Related Credit Spreads and $0.12
Gain from a Discrete Tax Item)Book Value per Common Share Increased 5% During the Quarter to $31.25

NEW YORK, October 20, 2010 – Morgan Stanley (NYSE: MS) today reported income of $313 million, or$0.05 per diluted share,1 from continuing operations applicable to Morgan Stanley for the quarter ended
September 30, 2010 compared with income of $936 million, or $0.50 per diluted share, for the same period ayear ago. Net revenues were $6.8 billion for the current quarter compared with $8.5 billion a year ago. Net
revenues in the current quarter included negative revenue of $731 million related to Morgan Stanley’s debtrelated credit spreads (DVA)2, 3 compared with negative revenue from DVA of $878 million in the prior year’s
third quarter. The results for the quarter also included $176 million, or $0.12 per diluted share, associated withthe repatriation of non-U.S. earnings at a cost lower than originally estimated.
For the quarter, the net loss applicable to Morgan Stanley, including discontinued operations, was $0.07 perdiluted share, compared with net income of $0.38 per diluted share in the third quarter of 2009, reflecting a lossof $229 million due to a write-down and related costs associated with the planned disposition of RevelEntertainment Group, LLC.4
Compensation expenses of $3.7 billion decreased from $4.9 billion a year ago. The decline primarily reflected
lower compensation costs in Institutional Securities. The Firm’s compensation to net revenue ratio for the current
quarter was 54% compared with 58% a year ago. These ratios were higher as a result of negative DVA, which
reduced net revenues in both periods. Non-compensation expenses of $2.3 billion increased from $2.1 billion ayear ago, primarily due to ongoing investments in technology.
Separately, the Firm announced today a restructuring of its ownership of FrontPoint Partners LLC (FrontPoint)whereby FrontPoint senior management and portfolio managers will own a majority equity stake in FrontPoint
and Morgan Stanley will retain a minority stake. FrontPoint will replace Morgan Stanley affiliates as theinvestment advisor and general partner of the FrontPoint funds. The restructuring is expected to close in the
fourth quarter of 2010.
Third Quarter Business Highlights


Investment banking revenues were $1.0 billion. Morgan Stanley ranked #1 in global IPOs, #2 in global
completed M&A, #3 in global announced M&A and #3 in global Equity.5

Sales and trading net revenues were $1.4 billion and included negative revenue of $731 million related to
DVA3 in the current quarter.

1



Global Wealth Management delivered net revenues of $3.1 billion, with client assets of $1.6 trillion and18,119 global representatives. Net new assets for the quarter were $5.0 billion.



Asset Management reported net revenues of $802 million, which included gains of $203 million related toprincipal investments held by certain consolidated real estate funds.6

James P. Gorman, President and Chief Executive Officer, said, "Although we continued to make progress acrosssome key businesses this quarter, our results in aggregate clearly do not reflect the true potential of Morgan
Stanley's global client franchise and I am not satisfied with our overall performance. Our Sales and Tradingbusiness was clearly muted; however, we delivered broad-based strength in Investment Banking and improved
performance - and positive flows - in both Wealth Management and Asset Management. We continue to invest in
our people and our platform, and we are executing our client-focused strategy, including the plans we announced
today regarding our FrontPoint business. While we still have considerable work to do across the Firm, Morgan
Stanley's client franchise remains well positioned to benefit as the environment stabilizes and investors return tothe market."

Summary of Business Segment Results($ millions)
Institutional Securities
Net
Pre-Tax
Revenues
IncomeGlobal Wealth Management
Net
Pre-Tax
Revenues
IncomeAsset Management
Net
Pre-Tax
Revenues
Income3Q 2010$2,894$240$3,104

$281

$802

$279

2Q 2010$4,505$1,587$3,074

$207

$410

($86)

3Q 2009$5,018$1,339$3,029$280$447($124)INSTITUTIONAL SECURITIESInstitutional Securities reported pre-tax income from continuing operations of $240 million compared with pretax income from continuing operations of $1.3 billion in the third quarter of last year. Net revenues were $2.9
billion compared with $5.0 billion a year ago.3
Advisory revenues of $371 million increased 33% from a year ago and reflected higher results in each region.



Underwriting revenues of $637 million declined 16% from last year’s third quarter. Equity underwriting
revenues of $260 million declined from $457 million in last year’s strong third quarter on lower market
volume. Fixed income underwriting revenues increased 25% to $377 million from last year’s third quarter
primarily due to increased high yield issuance volumes and higher loan syndication fees.

Fixed income sales and trading net revenues were $846 million compared with net revenues of $2.0 billion inlast year’s third quarter. DVA resulted in negative revenue of $464 million in the current quarter comparedwith negative revenue of $546 million a year ago. The decrease in net revenues from last year’s strong third
quarter reflected lower trading results across our businesses.

Equity sales and trading net revenues were $925 million compared with net revenues of $1.2 billion in lastyear’s third quarter. DVA resulted in negative revenue of $196 million in the current quarter compared withnegative revenue of $206 million a year ago. Net revenues declined from a year ago primarily reflecting
lower results in the cash and derivatives businesses driven by reduced levels of both client activity and2volatility.


Other sales and trading losses were $341 million compared with net revenues of $668 million in the third
quarter of last year.3 Results for the current quarter primarily reflected funding costs, including costs related
to the amount of liquidity held by the Firm’s U.S. subsidiary banks, while net revenues in the prior year
primarily reflected net gains on loans and lending commitments and other hedging activities.



Investment gains were $387 million compared with gains of $41 million in the third quarter of last year. The
results for the quarter reflected a mark-up on a principal investment of $313 million.7

Compensation expenses of $1.5 billion decreased from $2.6 billion a year ago and primarily reflected lower
net revenues. The compensation to net revenue ratio for the current quarter was 52%, consistent with thethird quarter of the prior year. These ratios were higher as a result of negative DVA, which reduced net
revenues in both periods.3 Non-compensation expenses of $1.2 billion increased 6% from a year ago andprimarily reflected ongoing investments in technology.

Morgan Stanley’s average aggregate trading and non-trading Value-at-Risk (VaR) measured at the 95%
confidence level was $189 million compared with $164 million in the second quarter of 2010. Average
trading VaR was $142 million compared with $139 million in the second quarter of 2010.

GLOBAL WEALTH MANAGEMENT
Global Wealth Management Group reported pre-tax income from continuing operations of $281 million
compared with pre-tax income from continuing operations of $280 million in the third quarter of last year. The
quarter’s pre-tax margin was 9%.8 Income after the non-controlling interest allocation to Citigroup Inc. andbefore taxes was $237 million.9
Net revenues were $3.1 billion compared with $3.0 billion a year ago and primarily reflected higher net
interest revenues offset by a decline in commissions reflecting lower levels of client activity.

Compensation expenses of $1.9 billion decreased slightly from a year ago. The compensation to net revenue
ratio for the current quarter was 62% compared with 64% a year ago. Non-compensation expenses of $913
million increased from $806 million a year ago.



Total client assets were $1.6 trillion at quarter-end. Client assets in fee-based accounts were $437 billion andrepresented 27% of total client assets. Net new assets for the quarter were $5.0 billion.



The 18,119 global representatives at quarter-end achieved average annualized revenue per global
representative of $686,000 and total client assets per global representative of $88 million.

ASSET MANAGEMENT
Asset Management reported pre-tax income from continuing operations of $279 million compared with a pre-tax
loss from continuing operations of $124 million in last year’s third quarter. Results for the current quarter
included gains of $203 million and pre-tax income of $195 million in Merchant Banking related to principal
investments held by certain consolidated real estate funds.6 The quarter’s pre-tax margin was 35%.8 Income after
the non-controlling interest allocation and before taxes was $86 million.


Net revenues were $802 million compared with $447 million a year ago. Results for the current quarter
included the gains related to principal investments noted above.6

Net revenues in the Core business10 were $380 million compared with $422 million in last year’s third
quarter. The decrease in net revenues primarily reflected lower performance fees and lower principal

3

investment gains in the current quarter.
Net revenues in the Merchant Banking business were $422 million compared with $25 million in last year’s
third quarter. The increase in net revenues primarily reflected the gains on principal investments noted
above,6 compared with losses in the prior year and gains of $83 million on principal investments in the private
equity business.

Compensation expenses of $285 million declined from $370 million a year ago primarily reflecting a
reduction in the number of employees. The compensation to net revenue ratio for the quarter was 36%
compared with 83% a year ago. Non-compensation expenses of $238 million increased 18% from a year ago.



Assets under management or supervision at September 30, 2010 of $273 billion increased from $250 billion ayear ago. The increase reflected market appreciation and net customer inflows primarily in Morgan Stanley’s
long-term fixed income funds. In addition, the business recorded positive flows of $2.9 billion in the current
quarter compared with net outflows of $7.4 billion in the third quarter of the prior year.

CAPITAL
Morgan Stanley’s Tier 1 capital ratio, under Basel I, was approximately 16.5% and Tier 1 common ratio wasapproximately 10.8%.8, 11
As of September 30, 2010, Morgan Stanley had not repurchased any shares of its common stock as part of its
capital management share repurchase program.
Book value per common share was $31.25, based on 1.5 billion shares outstanding. Book value included abenefit of $1.40 per share due to the mandatory conversion of $5.6 billion of equity units into 116 million sharesof common stock during the quarter.

OTHER MATTERS
As noted above, the results for the quarter included a discrete tax gain of $176 million. Excluding this discrete
tax gain, the effective tax rate from continuing operations for the quarter was 19.1%.
Morgan Stanley announced that its Board of Directors declared a $0.05 quarterly dividend per common share.
The dividend is payable on November 15, 2010 to common shareholders of record on October 29, 2010.
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 1,300 offices in 42
countries. For further information about Morgan Stanley, please visit www.morganstanley.com.
A financial summary follows. Financial, statistical and business-related information, as well as information
regarding business and segment trends, is included in the Financial Supplement. Both the earnings release andthe Financial Supplement are available online in the Investor Relations section at www.morganstanley.com.

###(See Attached Schedules)

4

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 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 of the Company's Annual Report on Form 10K for the year ended December 31, 2009 and other items throughout the Form 10-K, the Company’s
Quarterly Reports on Form 10-Q and the Company’s Current Reports on Form 8-K.

5

1Includes preferred dividends and related adjustments of approximately $239 million for the quarter ended September 30,
2010 and $281 million for the quarter ended September 30, 2009.
2

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

3

Due to DVA, sales and trading net revenue for the quarter ended September 30, 2010 included negative revenue of $731
million (fixed income: $464 million; equity: $196 million; other: $71 million) and sales and trading net revenue for thequarter ended September 30, 2009 included negative revenue of $878 million (fixed income: $546 million; equity: $206
million; other: $126 million).
4

The charge of $229 million in the current quarter includes a reduction in the carrying value in the Firm’s investment in
Revel Entertainment Group, LLC from approximately $240 million to $40 million.
5

Source: Thomson Reuters – for the period of January 1, 2010 to September 30, 2010 as of October 4, 2010.

6

The limited partnership interests in these funds are reported in net income / (loss) applicable to non-controlling interests on
page 10 of Morgan Stanley’s Financial Supplement accompanying this release.

7

Results for the current quarter included gains of $313 million on a principal investment held by a consolidated investment
partnership. Approximately $180 million of this gain related to third party investors was recorded in the net income / (loss)
applicable to non-controlling interests on page 5 of Morgan Stanley’s Financial Supplement accompanying this release.
8

Pre-tax margin and Tier 1 common ratios are non-GAAP financial measures that the Firm considers to be useful measuresthat the Firm and investors use to assess operating performance and capital adequacy, respectively. Pre-tax margin
represents income or loss from continuing operations before taxes, divided by net revenues. The Tier 1 common ratio equals
Tier 1 capital (see note 11) less qualifying perpetual preferred stock, qualifying trust preferred securities and qualifying
restricted core capital elements, adjusted for the portion of goodwill and non-servicing intangible assets associated with
Morgan Stanley Smith Barney’s (MSSB) non-controlling interests divided by risk-weighted assets.
9

Morgan Stanley owns 51% of MSSB, which is consolidated. The results related to the 49% interest retained by Citigroup
Inc. are reported in net income / (loss) applicable to non-controlling interests on page 8 of Morgan Stanley’s Financial
Supplement accompanying this release.
10

The Core business includes traditional, hedge funds and fund of funds asset management.

11

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. These computations are preliminary estimates as of October 20, 2010 (the date of this release) and could be subject
to revision in Morgan Stanley’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.

6

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

Sept 30, 2010
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
June 30, 2010

2,894
3,104
802
(21)
6,779

$

240
281
279
0
800

$

$

98
144
71
0
313

Earnings / (loss) applicable to Morgan Stanley common shareholders$

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

$

$

$

Sept 30, 2009

4,505
3,074
410
(36)
7,953

$

1,587
207
(86)
(13)
1,695

$

$

$

$

Percentage Change From:
June 30, 2010
Sept 30, 2009

Nine Months Ended
Sept 30, 2010
Sept 30, 2009

5,018
3,029
447
(26)
8,468

(36%)
1%
96%
42%
(15%)

(42%)
2%
79%
19%
(20%)

$

1,339
280
(124)
(2)
1,493

(85%)
36%
*
*
(53%)

(82%)
-*
*
(46%)

$

(93%)
31%
*
*
(78%)

(89%)
37%
*
*
(67%)

$

1,380
110
(44)
(11)
1,435

$

898
105
(66)
(1)
936

(91)

$

1,578

$

498

*

$
$
$

0.07
(0.14)(0.07)

$
$
$

0.84
0.36
1.20

$
$
$

0.51
(0.12)
0.39

$
$
$

0.05
(0.12)(0.07)

$
$
$

0.80
0.29
1.09

$
$
$

0.50
(0.12)
0.38

$

$

$

12,738
9,283
1,865
(81)
23,805

3,894
766
367
(15)
5,012

$

$

$

$

$

9,620
6,251
827
(102)
16,596

32%
49%
126%
21%
43%

618
328
(616)
(9)
321

*
134%
*
(67%)
*

*
39%
*
(140%)
*

$

3,210
353
42
(12)
3,593

$

969
254
(404)
(5)
814

*

$

2,971

$

(1,301)

*

(92%)
*
*

(86%)
(17%)
*

$
$
$

2.04
0.18
2.22

$
$
$

(1.06)(0.07)(1.13)

*
*
*

(94%)
*
*

(90%)
-*

$
$
$

1.98
0.17
2.15

$
$
$

(1.06)(0.07)(1.13)***

Notes: - Results include Morgan Stanley Smith Barney (MSSB) effective from May 31, 2009.
- Results for the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009 include positive / (negative) revenue of $(0.7) billion, $0.7 billion and $(0.8) billion, respectively, related to the movement in Morgan Stanley's
credit spreads on certain long-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.
- For the quarter ended September 30, 2010, discontinued operations included a loss of $229 million due to a write-down and related costs associated with the planned disposition of Revel Entertainment Group, LLC (Revel).
For the quarter ended June 30, 2010, discontinued operations primarily included the operating results of the retail asset management business including Van Kampen and an after-tax gain of approximately $514 million
related to the sale of this business. For the quarter ended March 31, 2010, discontinued operations included a loss of $932 million (reported in Institutional Securities) on the disposition of Revel, a gain of $775 million(not reported in a business segment) related to a legal settlement with Discover Financial Services and the operating results of the retail asset management business, including Van Kampen (reported in Asset Management).
- Summation of the quarters' earnings per common share may not equal the year-to-date amounts due to the averaging effect of the number of shares and share equivalents throughout the year.
7

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

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

Sept 30, 2010

Quarter Ended
June 30, 2010

Sept 30, 2009

$

$

$

Notes:

1%

$

3,361

$

3,347

--

(57%)
*
(18%)
(2%)
23%
(15%)

(58%)
*
(14%)
3%
34%
(16%)

8,552
1,137
3,636
5,877
630
23,193

6,536(1,180)
2,986
3,910
775
16,374

31%
*
22%
50%
(19%)
42%

1,859
1,754
105
6,779

1,742
1,602
140
7,953

1,851
1,354
497
8,468

7%
9%
(25%)
(15%)

-30%
(79%)
(20%)

5,334
4,722
612
23,805

5,722
5,500
222
16,596

(7%)
(14%)
176%
43%

3,686

3,885

4,896

(5%)

(25%)

11,987

10,673

12%

401
332
412
134
460
554
2,293

400
371
416
153
496
537
2,373

419
285
356
118
381
520
2,079

-(11%)
(1%)
(12%)
(7%)
3%
(3%)

(4%)
16%
16%
14%
21%
7%
10%

1,190
1,051
1,223
421
1,351
1,570
6,806

1,126
800
951
348
1,068
1,309
5,602

6%
31%
29%
21%
26%
20%
21%

5,979

6,258

6,975

(4%)

(14%)

18,793

16,275

15%

$

800
(23)
823
(182)
641
510
131
(91)

$

1,695
236
1,459
525
1,984
24
1,960
1,578

$

1,493
521
972
(179)
793
36
757
498

(53%)
*
(44%)
*
(68%)
*
(93%)
*

(46%)
*
(15%)
(2%)
(19%)
*
(83%)
*

$

5,012
650
4,362
274
4,636
769
3,867
2,971

$

321
(384)
705
(69)
636
(93)
729
(1,301)

*
*
*
*
*
*
*
*

$

313
(182)
131

$

1,435
525
1,960

$

936
(179)
757

(78%)
*
(93%)

(67%)
(2%)
(83%)

$

3,593
274
3,867

$

814
(85)
729

*
*
*

Total non-interest expenses

Effective tax rate from continuing operations

13%

3,399
95
1,244
1,886
139
7,971

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

Pre-tax profit margin
Compensation and benefits as a % of net revenues
Non-compensation expenses as a % of net revenues

1,208

Percentage
Change

3,353
(52)
1,307
1,974
151
7,813

Non-interest expenses:
Compensation and benefits

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

1,080

Nine Months Ended
Sept 30, 2010
Sept 30, 2009

1,439
820
1,068
1,940
186
6,674

Interest income
Interest expense
Net interest
Net revenues

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 non-controlling interests
Net income / (loss) applicable to Morgan Stanley
Earnings / (loss) applicable to Morgan Stanley common shareholders

1,221

Percentage Change From:
June 30, 2010
Sept 30, 2009

$

$

$

$

$

12%
54%
34%

21%
49%
30%

18%
58%
25%

21%
50%
29%

2%
64%
34%

*

13.9%

34.9%

13.0%

*

- Results include MSSB effective from May 31, 2009.
- Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance. Percentages represent income
from continuing operations before income taxes as a percentage of net revenues.
- The quarter ended September 30, 2010 included a tax gain of $176 million associated with the repatriation of non-U.S. earnings at a cost lower than originally estimated. Excluding the discrete tax gain,
the effective tax rate for the quarter would have been 19.1%.
- The quarter ended June 30, 2010 included a discrete tax benefit of $345 million related to the remeasurement of tax reserves based on the status of federal and state tax examinations. Excluding this benefit,
the effective tax rate for the quarter would have been 34.3%.

8