MORGAN STANLEY

Table of Contents

Management’s Discussion and Analysis

Investment Management

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

Asset Management and Related Fees

Asset management and related fees of $1,434 million in the current quarter and $2,885 million in the current year period increased 7% in both periods, compared with the prior year periods, primarily driven by higher average AUM on higher market levels from the prior year periods and the cumulative impact of positive long-term net flows.

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, there were continued net outflows in the Equity asset class, offset by higher net inflows in the Alternatives and Solutions and Fixed Income asset classes reflecting client

preferences. Although the net outflows in Equity asset class have started to slow in the current year period, outflows may nonetheless be influenced by the structure and performance of our investment strategies and products relative to their benchmarks. 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 $118 million in the current quarter increased from the prior year quarter, primarily due to higher accrued carried interest in infrastructure funds and gains on DCP investments compared with losses in the prior year quarter, partially offset by lower accrued carried interest in certain private funds.

Performance-based income and other revenues of $269 million in the current year period increased from the prior year period, primarily due to higher accrued carried interest in infrastructure and real estate funds, partially offset by lower accrued carried interest in certain private funds.

Non-interest expenses of $1,229 million in the current quarter increased 6% from the prior year quarter, as a result of higher Compensation and benefits expenses and Non-compensation expenses.

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

•Non-compensation expenses increased in the current quarter, primarily due to higher distribution expenses on higher AUM, partially offset by lower occupancy expenses.

Non-interest expenses of $2,508 million in the current year period increased 9% from the prior year period, as a result of higher Compensation and benefits expenses and Non-compensation expenses.

•Compensation and benefits expenses increased in the current year period, primarily due to higher compensation associated with carried interest.

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

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 denominated funds.

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 Rollforwards” in the 2024 Form 10-K.