MORGAN STANLEY

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Management’s Discussion and Analysis

Investment Management

1. Includes Investments, Trading, Commissions and fees, Net interest, and Other revenues.

Asset Management and Related Fees

Asset management and related fees of $1,346 million in the current quarter increased 8% from the prior year quarter, primarily driven by higher average AUM on higher market levels. Additionally, there were positive long-term net flows during the current quarter.

Asset management revenues are influenced by the level, relative mix of AUM and related fee rates. While the market environment improved in the current quarter, client preferences in previous quarters have resulted in net outflows in the Equity asset class. To the extent these conditions continue, we would expect our Asset management revenue to continue to be impacted.

See “Assets under Management or Supervision” herein.

Performance-based Income and Other

Performance-based income and other revenues of $31 million in the current quarter decreased from the prior year quarter, primarily due to lower accrued carried interest in certain private funds.

Non-interest expenses of $1,136 million in the current quarter increased 1% from the prior year quarter, primarily due to higher Non-compensation expenses.

•Compensation and benefits expenses were relatively unchanged from the prior year quarter.

•Non-compensation expenses increased in the current quarter primarily due to higher distribution expenses on higher AUM.

Assets under Management or Supervision Rollforwards

1. Inflows represent investments or commitments from new and existing clients in new or existing investment products, including reinvestments of client dividends and increases in invested capital. Inflows exclude the impact of exchanges, whereby a client changes positions within the same asset class.

2. Outflows represent redemptions from clients’ funds, transition of funds from the committed capital period to the invested capital period and decreases in invested capital. Outflows exclude the impact of exchanges, whereby a client changes positions within the same asset class.

3. Market impact includes realized and unrealized gains and losses on portfolio investments. This excludes any funds where market impact does not impact management fees.

4. Other contains both distributions and foreign currency impact for all periods. Distributions represent decreases in invested capital due to returns of capital after the investment period of a fund. It also includes fund dividends that the client has not reinvested. Foreign currency impact reflects foreign currency changes for non-U.S. dollar dominated funds.

Average AUM

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Management’s Discussion and Analysis

Average Fee Rates 1

1. Based on Asset management revenues, net of waivers, excluding performance-based fees and other non-management fees. For certain non-U.S. funds, it includes the portion of advisory fees that the advisor collects on behalf of third-party distributors. The payment of those fees to the distributor is included in Non-compensation expenses in the income statement.

For a description of the asset classes in the previous tables, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Investment Management—Assets Under Management or Supervision” in the 2023 Form 10-K.