MORGAN STANLEY

Table of Contents

Management’s Discussion and Analysis

Other Matters

Deferred Cash-Based Compensation

The Firm sponsors a number of deferred cash-based compensation programs and stock-based compensation programs for current and former employees, including financial advisors in the Wealth Management business segment, which generally contain vesting, clawback and cancellation provisions. Deferred compensation for financial advisors in the Wealth Management business segment is generally composed of 75% cash-based awards and 25% stock-based awards. The following discussion relates only to deferred cash-based compensation.

Employees are permitted to allocate the value of their deferred cash-based awards among a menu of notional investments, whereby the value of their awards will track the performance of the referenced notional investments. The menu of investments, which is selected by the Firm, includes fixed income, equity, commodity and money market funds.

Compensation expense for DCP awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards.

Beginning in the current quarter, hedges for Wealth Management DCP awards were primarily transitioned to derivative instruments. Additionally, in the current quarter, the Firm reduced the amount of deferred compensation as a proportion of total compensation for Wealth Management representatives. For further information see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Matters” in the 2025 Form 10-K and “Selected Non-GAAP Financial Information” and Note 2 to the financial statements herein.