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 $1,342 million in the current quarter and $2,688 million in the current year period increased 6% and 7%, respectively, from the prior year periods, primarily driven by higher average AUM on higher market levels from the prior year periods.

Asset management revenues are influenced by the level, relative mix of AUM and related fee rates. While higher market levels drove increases in average AUM in the current quarter, we have continued to see net outflows in the Equity asset class, which may be influenced by the performance of our products relative to their benchmarks, partially offset by

net inflows in the Alternatives and Solutions asset class reflecting client preferences. 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 $44 million in the current quarter and $75 million in the current year period increased, from the prior year periods, primarily due to higher accrued carried interest in certain private funds, partially offset by lower revenues from DCP investments.

Non-interest expenses of $1,164 million in the current quarter increased 5% from the prior year quarter, as a result of higher Non-compensation expenses and Compensation expenses.

•Compensation and benefits expenses increased in the current quarter, primarily due to higher expenses related to compensation associated with carried interest, partially offset by lower expenses related to DCP.

•Non-compensation expenses increased in the current quarter, primarily due to increased technology and infrastructure spend.

Non-interest expenses of $2,300 million in the current year period increased 3% from the prior year period, as a result of higher Non-compensation expenses and Compensation expenses.

•Compensation and benefits expenses increased in the current year period, primarily due to higher expenses related to compensation associated with carried interest, partially offset by lower expenses related to DCP.

•Non-compensation expenses increased in the current year period, primarily due to higher distribution expenses on higher AUM and increased technology and infrastructure spend.

Table of Contents

Management’s Discussion and Analysis

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.

5. In 2023, our Retail Municipal and Corporate Fixed Income business (“FIMS”) was combined with our Parametric retail customized solutions business. The impact of the change was a $6 billion movement in AUM from Fixed Income to the Alternatives and Solutions asset class included in Other.

Average AUM

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.