Morgan Stanley (MS) Risk Factors

The statistical technique known as VaR is one of the tools we use to measure, monitor and review the market risk exposures of our trading portfolios. The Market Risk Department calculates and distributes daily VaR-based risk measures to various levels of management. We estimate VaR using a model based on a one-year equal-weighted historical simulation for general market risk factors and name-specific risk in corporate equities and related derivatives, and Monte Carlo simulation for name-specific risk in bonds, loans and related derivatives. The model constructs a distribution of hypothetical daily changes in the value of trading portfolios based on historical observation of daily changes in key market indices or other market risk factors, and information on the sensitivity of the portfolio values to these market risk factor changes. VaR for risk management purposes ("Management VaR") is computed at a 95% level of confidence over a one-day time horizon, which is a useful indicator of possible trading losses resulting from adverse daily market moves. The 95%/one-day VaR corresponds to the unrealized loss in portfolio value that, based on historically observed market risk factor movements, would have been exceeded with a frequency of 5%, or five times in every 100 trading days, if the portfolio were held constant for one day. Our VaR model generally takes into account linear and non-linear exposures to equity and commodity price risk, interest rate risk, credit spread risk and foreign exchange rates. The model also takes into account linear exposures to implied volatility risks for all asset classes and non-linear exposures to implied volatility risks for equity, commodity and foreign exchange referenced products. The VaR model also captures certain implied correlation risks associated with portfolio credit derivatives, as well as certain basis risks (e.g., corporate debt and related credit derivatives). We use VaR as one of a range of risk management tools. Among their benefits, VaR models permit estimation of a portfolio's aggregate market risk exposure, incorporating a range of varied market risks and portfolio assets. One key element of the VaR model is that it reflects risk reduction due to portfolio diversification or hedging activities. However, VaR has various limitations, which include, but are not limited to: use of historical changes in market risk factors, which may not be accurate predictors of future market conditions and may not fully incorporate the risk of extreme market events that are outsized relative to observed historical market behavior or reflect the historical distribution of results beyond the 95% confidence interval; and reporting of losses in a single day, which does not reflect the risk of positions that cannot be liquidated or hedged in one day. A small proportion of market risk generated by trading positions is not included in VaR. The modeling of the risk characteristics of some positions relies on approximations that, under certain circumstances, could produce significantly different results from those produced using more precise measures. VaR is most appropriate as a risk measure for trading positions in liquid financial markets and will understate the risk associated with severe events, such as periods of extreme illiquidity. We are aware of these and other limitations and, therefore, use VaR as only one component in our risk management oversight process. This process also incorporates stress testing and scenario analyses and extensive risk monitoring, analysis and control at the trading desk, division and Firm levels. We update our VaR model in response to changes in the composition of trading portfolios and to improvements in modeling techniques and systems capabilities. We are committed to continuous review and enhancement of VaR methodologies and assumptions in order to capture evolving risks associated with changes in market structure and dynamics. As part of our regular process improvements, additional systematic and name-specific risk factors may be added to improve the VaR model's ability to more accurately estimate risks to specific asset classes or industry sectors. Since the reported VaR statistics are estimates based on historical data, VaR should not be viewed as predictive of our future revenues or financial performance or of our ability to monitor and manage risk. There can be no assurance that our actual losses on a particular day will not exceed the VaR amounts indicated in the following tables or that such losses will not occur more than five times in 100 trading days for a 95%/one-day VaR. VaR does not predict the magnitude of losses that, should they occur, may be significantly greater than the VaR amount. VaR statistics are not readily comparable across firms because of differences in the firms' portfolios, modeling assumptions and methodologies. These differences can result in materially different VaR estimates across firms for similar portfolios. The impact of such differences varies depending on the factor history assumptions, the frequency with which the factor history is updated and the confidence level. As a result, VaR statistics are more useful when interpreted as indicators of trends in a firm's risk profile rather than as an absolute measure of risk to be compared across firms. Our regulators have approved the same VaR model we use for risk management purposes for use in regulatory calculations. The portfolio of positions used for Management VaR differs from that used for Regulatory VaR. Management VaR contains certain positions that are excluded from Regulatory VaR. 95%/One-Day Management VaR 2023$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$29 $34 $43 $27 Equity price19 24 38 15 Foreign exchange rate6 9 18 5 Commodity price11 17 35 10 Less: Diversification benefit2(27)(40)N/AN/APrimary Risk Categories$38 $44 $60 $33 Credit Portfolio25 21 25 18 Less: Diversification benefit2(22)(15)N/AN/ATotal Management VaR$41 $50 $72 $41 2022$ in millionsPeriodEndAverageHigh1Low1Interest rate and credit spread$37 $31 $43 $21 Equity price16 23 41 16 Foreign exchange rate10 8 19 3 Commodity price26 27 41 15 Less: Diversification benefit2(36)(40)N/AN/APrimary Risk Categories$53 $49 $65 $31 Credit Portfolio19 15 19 12 Less: Diversification benefit2(9)(11)N/AN/ATotal Management VaR$63 $53 $74 $32 1.The high and low VaR values for the Total Management VaR and each of the component VaRs might have occurred on different days during the quarter, and, therefore, the diversification benefit is not an applicable measure. 2.Diversification benefit equals the difference between the total VaR and the sum of the component VaRs. This benefit arises because the simulated one-day losses for each of the components occur on different days; similar diversification benefits also are taken into account within each component. Average Total Management VaR and Average Management VaR for the Primary Risk Categories decreased in 2023 from 2022 primarily due to reduced exposure in the Commodity price risk category and lower market volatility.

We evaluate the reasonableness of our VaR model by comparing the potential declines in portfolio values generated by the model with corresponding actual trading results for the Firm, as well as individual business units. For days where losses exceed the VaR statistic, we examine the drivers of trading losses to evaluate the VaR model's accuracy. There were 16 trading loss days in 2023, one of which exceeded 95% Total Management VaR, compared to 15 trading loss days in 2022, none of which exceeded 95% Total Management VaR. Daily 95%/One-Day Total Management VaR for 2023 Daily Net Trading Revenues for 2023 Daily net trading revenues include profits and losses from Interest rate and credit spread, Equity price, Foreign exchange rate, Commodity price, and Credit Portfolio positions and intraday trading activities for our trading businesses. Certain items such as fees, commissions, net interest income and counterparty default risk are excluded from daily net trading revenues and the VaR model. Revenues required for Regulatory VaR backtesting further exclude intraday trading. Non-Trading Risks We believe that sensitivity analysis is an appropriate representation of our non-trading risks. The following sensitivity analyses cover substantially all of the non-trading risk in our portfolio. Credit Spread Risk Sensitivity1 $ in millionsAtDecember 31,2023 AtDecember 31,2022 Derivatives$6 $7 Borrowings carried at fair value48 39 1.Amounts represent the potential gain for each 1 bps widening of our credit spread. Credit spread risk sensitivity for borrowings carried at fair value at December 31, 2023 increased from December 31, 2022, primarily driven by debt issuances and credit spread tightening. The Wealth Management business segment reflects a substantial portion of our non-trading interest rate risk. Net interest income in the Wealth Management business segment primarily consists of interest income earned on non-trading assets held, including loans and investment securities, as well as margin and other lending on non-bank entities and interest expense incurred on non-trading liabilities, primarily deposits. Wealth Management Net Interest Income Sensitivity Analysis $ in millionsAtDecember 31,2023 AtDecember 31,2022 Basis point change+100$585 $643 -100(609)(745) The previous table presents an analysis of selected instantaneous upward and downward parallel interest rate shocks (subject to a floor of zero percent in the downward scenario) on net interest income over the next 12 months for our Wealth Management business segment. These shocks are applied to our 12-month forecast for our Wealth Management business segment, which incorporates market expectations of interest rates and our forecasted business activity, including deposit forecasts as a key assumption. We do not manage to any single rate scenario but rather manage net interest income in our Wealth Management business segment across a range of possible outcomes, including non-parallel rate change scenarios. The sensitivity analysis assumes that we take no action in response to these scenarios, assumes there are no changes in other macroeconomic variables normally correlated with changes in interest rates and includes subjective assumptions regarding customer and market re-pricing behavior and other factors. Our Wealth Management business segment balance sheet is asset sensitive, given assets reprice faster than liabilities, resulting in higher net interest income in increasing interest rate scenarios. The level of interest rates may impact the amount of deposits held at the Firm, given competition for deposits from other institutions and alternative cash-equivalent products available to depositors. Further, rising interest rates could also impact client demand for loans. Net interest income sensitivity to interest rates at December 31, 2023 decreased from December 31, 2022, primarily driven by the effects of changes in the mix of our assets and liabilities. Investments Sensitivity, Including Related Carried Interest Loss from 10% Decline$ in millionsAtDecember 31,2023 AtDecember 31,2022 Investments related to Investment Management activities$481 $431 Other investments:MUMSS134 143 Other Firm investments399 378 We have exposure to public and private companies through direct investments, as well as through funds that invest in these assets. These investments are predominantly equity positions with long investment horizons, a portion of which is for business facilitation purposes. The market risk related to these investments is measured by estimating the potential reduction in net revenues associated with a reasonably possible 10% decline in investment values and related impact on performance-based income, as applicable.

Certain asset management revenues in the Wealth Management and Investment Management business segments are derived from management fees, which are based on fee-based client assets in Wealth Management or AUM in Investment Management (together, "client holdings"). The assets underlying client holdings are primarily composed of equity, fixed income and alternative investments and are sensitive to changes in related markets. These revenues depend on multiple factors including, but not limited to, the level and duration of a market increase or decline, price volatility, the geographic and industry mix of client assets, and client behavior such as the rate and magnitude of client investments and redemptions. Therefore, overall revenues may not correlate completely with changes in the related markets. Credit Risk Credit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. We are primarily exposed to credit risk from institutions and individuals through our Institutional Securities and Wealth Management business segments. We incur credit risk in our Institutional Securities business segment through a variety of activities, including, but not limited to, the following: - extending credit to clients through loans and lending commitments;- entering into swap or other derivative contracts under which counterparties may have obligations to make payments to us;- acting as clearing broker for listed and over-the-counter derivatives whereby we guarantee client performance to clearinghouses;- providing short- or long-term funding that is secured by physical or financial collateral, including, but not limited to, real estate and marketable securities, whose value may at times be insufficient to fully cover the repayment amount;- posting margin and/or collateral to clearinghouses, clearing agencies, exchanges, banks, securities firms and other financial counterparties;- placing funds on deposit at other financial institutions to support our clearing and settlement obligations; and - investing or trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans. We incur credit risk in our Wealth Management business segment, primarily through lending to individuals and entities, including, but not limited to, the following: - margin loans collateralized by securities;- securities-based lending and other forms of secured loans, including tailored lending to ultra-high net worth clients, that are in most cases secured by various types of collateral, including marketable securities, private investments, commercial real estate and other financial assets;- single-family residential mortgage loans in conforming, non-conforming or HELOC form, primarily to existing Wealth Management clients; and - employee loans granted primarily to recruit certain Wealth Management representatives. Monitoring and Control The Credit Risk Management Department ("CRM") establishes Firmwide practices to evaluate, monitor and control credit risk at the transaction, obligor and portfolio levels. The CRM approves extensions of credit, evaluates the creditworthiness of the counterparties and borrowers on a regular basis, and helps ensure that credit exposure is actively monitored and managed. The evaluation of counterparties and borrowers includes an assessment of the probability that an obligor will default on its financial obligations and any losses that may occur when an obligor defaults. In addition, credit risk exposure is actively managed by credit professionals and committees within the CRM and through various risk committees, whose membership includes individuals from the CRM. A comprehensive and global Credit Limits Framework is utilized to manage credit risk levels across the Firm. The Credit Limits Framework is calibrated within our risk tolerance and includes single-name limits and portfolio concentration limits by country, industry and product type. The CRM helps ensure timely and transparent communication of material credit risks, compliance with established limits and escalation of risk concentrations to appropriate senior management. The CRM also works closely with the Market Risk Department and applicable business units to monitor risk exposures and to perform stress tests to identify, analyze and control credit risk concentrations arising from lending and trading activities. The stress tests shock market factors (e.g., interest rates, commodity prices, credit spreads), risk parameters (e.g., probability of default and loss given default), recovery rates and expected losses in order to assess the impact of stresses on exposures, profit and loss, and our capital position. Stress tests are conducted in accordance with our established policies and procedures. Credit Evaluation The evaluation of corporate and institutional counterparties and borrowers includes assigning credit ratings, which reflect an assessment of an obligor's probability of default and loss given default. Credit evaluations typically involve the assessment of financial statements; leverage; liquidity; capital strength; asset composition and quality; market capitalization; access to capital markets; adequacy of collateral, if applicable; and, in the case of certain loans, cash flow projections and debt service requirements. The CRM also evaluates strategy, market position, industry dynamics, management and other factors such as country risks and legal and contingent risks that could affect the obligor's risk profile. Additionally, the CRM evaluates the relative position of our exposure in the borrower's capital structure and relative recovery prospects, as well as other structural elements of the particular transaction. The underwriting of commercial real estate loans includes, but is not limited to, review of the property type, LTV ratio, occupancy levels, debt service ratio, prevailing capitalization rates and market dynamics. The evaluation of consumer borrowers is tailored to the specific type of lending. Securities-based loans are evaluated based on factors that include, but are not limited to, the amount of the loan and the amount, quality, diversification, price volatility and liquidity of the collateral. The underwriting of residential real estate loans includes, but is not limited to, review of the obligor's debt-to-income ratio, net worth, liquidity, collateral, LTV ratio and industry standard credit-scoring models (e.g., FICO scores). Subsequent credit monitoring for individual loans is performed at the portfolio level, and collateral values are monitored on an ongoing basis. Credit risk metrics assigned to our borrowers during the evaluation process are incorporated into the CRM maintenance of the allowance for credit losses. Such allowance serves as a reserve for expected inherent losses, as well as expected losses related to loans identified as impaired. For more information on the allowance for credit losses, see Notes 2 and 9 to the financial statements. Risk Mitigation We may seek to mitigate credit risk from our lending and trading activities in multiple ways, including collateral provisions, guarantees and hedges. At the transaction level, we seek to mitigate risk through management of key risk elements such as size, tenor, financial covenants, seniority and collateral. We actively hedge our lending and derivatives exposures. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures,forwards, swaps and options). Additionally, we may sell, assign or syndicate loans and lending commitments to other financial institutions in the primary and secondary loan markets. In connection with our derivatives trading activities, we generally enter into master netting agreements and collateral arrangements with counterparties. These agreements provide us with the ability to demand collateral, as well as to liquidate collateral and offset receivables and payables covered under the same master agreement in the event of a counterparty default. A collateral management group monitors collateral levels against requirements and oversees the administration of the collateral function. See Note 8 to the financial statements for additional information about our collateralized transactions. Loans and Lending Commitments At December 31, 2023$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,758 $11,862 $- $18,620 Secured lending facilities39,498 3,161 - 42,659 Commercial and Residential real estate8,678 209 3,331 12,218 Securities-based lending and Other2,818 - 4,402 7,220 Total Institutional Securities57,752 15,232 7,733 80,717 Wealth Management:Residential real estate60,375 22 - 60,397 Securities-based lending and Other86,423 1 - 86,424 Total Wealth Management146,798 23 - 146,821 Total Investment Management24 - 455 459 Total loans204,554 15,255 8,188 227,997 ACL(1,169)(1,169)Total loans, net of ACL$203,385 $15,255 $8,188 $226,828 Lending commitments3$149,973 Total exposure$376,801 At December 31, 2022$ in millionsHFIHFSFVO1TotalInstitutional Securities:Corporate$6,589 $10,634 $- $17,223 Secured lending facilities35,606 3,176 6 38,788 Commercial and Residential real estate8,515 926 2,548 11,989 Securities-based lending and Other2,865 39 5,625 8,529 Total Institutional Securities53,575 14,775 8,179 76,529 Wealth Management:Residential real estate54,460 4 - 54,464 Securities-based lending and Other91,797 9 - 91,806 Total Wealth Management146,257 13 - 146,270 Total Investment Management24 - 218 222 Total loans199,836 14,788 8,397 223,021 ACL(839)(839)Total loans, net of ACL$198,997 $14,788 $8,397 $222,182 Lending commitments3$136,960 Total exposure$359,142 Total exposure-consists of Total loans, net of ACL, and Lending commitments 1.FVO includes the fair value of certain unfunded lending commitments. 2.Investment Management business segment loans are related to certain of our activities as an investment adviser and manager. Loans held at fair value are the result of the consolidation of investment vehicles (including CLOs) managed by Investment Management, composed primarily of senior secured loans to corporations. 3.Lending commitments represent the notional amount of legally binding obligations to provide funding to clients for lending transactions. Since commitments associated with these business activities may expire unused or may not be utilized to full capacity, they do not necessarily reflect the actual future cash funding requirements. We provide loans and lending commitments to a variety of customers, including large corporate and institutional clients, as well as high to ultra-high net worth individuals. In addition, we purchase loans in the secondary market. Loans and lending commitments are either held for investment, held for sale or carried at fair value. For more information on these loan classifications, see Note 2 to the financial statements. In 2023, total loans and lending commitments increased by approximately $18 billion, primarily due to an increase in Corporate lending and Secured lending facilities within the Institutional Securities business segment. See Notes 4, 5, 9 and 14 to the financial statements for further information. Allowance for Credit Losses-Loans and Lending Commitments $ in millions2023ACL-LoansBeginning balance$839 Gross charge-offs(167)Recoveries2 Net (charge-offs) recoveries(165)Provision for credit losses488 Other7 Ending balance$1,169 ACL-Lending commitmentsBeginning balance$504 Provision for credit losses44 Other3 Ending balance$551 Total ending balance$1,720 Provision for Credit Losses by Business Segment Year Ended December 31, 2023$ in millionsISWMTotalLoans$356 $132 $488 Lending commitments45 (1)44 Total$401 $131 $532 Credit exposure arising from our loans and lending commitments is measured in accordance with our internal risk management standards. Risk factors considered in determining the allowance for credit losses for loans and lending commitments include the borrower's financial strength, industry, facility structure, LTV ratio, debt service ratio, collateral and covenants. Qualitative and environmental factors such as economic and business conditions, nature and volume of the portfolio and lending terms, and volume and severity of past due loans may also be considered. The allowance for credit losses for loans and lending commitments increased in 2023, primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. Charge-offs in 2023 were primarily related to Commercial real estate and Corporate loans. The base scenario used in our ACL models as of December 31, 2023 was generated using a combination of consensus economic forecasts, forward rates, and internally developed and validated models, and assumes slow economic growth in 2024, followed by a gradual improvement in 2025. Given the nature of our lending portfolio, the most sensitive model input is U.S. gross domestic product ("GDP"). Forecasted U.S. Real GDP Growth Rates in Base Scenario 4Q 20244Q 2025Year-over-year growth rate0.9 %2.0 % See Note 2 to the financial statements for a discussion of the Firm's ACL methodology under CECL. Status of Loans Held for Investment At December 31, 2023At December 31, 2022ISWMISWMAccrual98.9 %99.8 %99.3 %99.9 %Nonaccrual11.1 %0.2 %0.7 %0.1 %1.Nonaccrual loans are loans where principal or interest is not expected when contractually due or are past due 90 days or more. Net Charge-off Ratios for Loans Held for Investment$ in millionsCorporate Secured Lending FacilitiesCREResidential Real EstateSBL and OtherTotal2023Net charge-off ratio10.47 %- %1.50 %- %- %0.08 %Average loans$7,062 $37,702 $8,590 $57,177 $91,126 $201,657 2022Net charge-off ratio1(0.09)%0.01 %0.09 %- %0.02 %0.01 %Average loans$6,544 $33,172 $8,234 $49,937 $93,427 $191,314 2021Net charge-off ratio10.44 %0.24 %0.38 %- %0.01 %0.08 %Average loans$5,184 $27,833 $7,089 $39,111 $75,230 $154,447 CRE-Commercial real estate SBL-Securities-based lending 1.Net charge-off ratio represents gross charge-offs net of recoveries divided by total average loans held for investment before ACL. Institutional Securities Loans and Lending Commitments1 At December 31, 2023 Contractual Years to Maturity $ in millions< 11-55-15>15TotalLoansAA$3 $11 $216 $- $230 A1,054 950 182 - 2,186 BBB7,117 10,076 346 - 17,539 BB11,723 16,367 1,775 277 30,142 Other NIG9,586 12,961 2,924 156 25,627 Unrated2111 1,036 62 2,910 4,119 Total loans, net of ACL29,594 41,401 5,505 3,343 79,843 Lending commitmentsAAA- 50 - - 50 AA2,610 3,064 154 - 5,828 A7,704 21,256 593 - 29,553 BBB9,161 46,304 106 - 55,571 BB4,069 16,431 1,594 414 22,508 Other NIG1,916 13,842 1,077 3 16,838 Unrated26 7 - - 13 Total lendingcommitments25,466 100,954 3,524 417 130,361 Total exposure$55,060 $142,355 $9,029 $3,760 $210,204 At December 31, 2022 Contractual Years to Maturity$ in millions< 11-55-15>15TotalLoansAA$66 $- $139 $- $205 A1,331 787 185 - 2,303 BBB5,632 10,712 465 - 16,809 BB11,045 19,219 796 162 31,222 Other NIG7,274 10,249 3,945 139 21,607 Unrated295 924 624 2,066 3,709 Total loans, net of ACL25,443 41,891 6,154 2,367 75,855 Lending commitmentsAAA- 50 - - 50 AA2,515 2,935 11 - 5,461 A5,030 19,717 202 330 25,279 BBB10,263 39,615 566 - 50,444 BB3,691 17,656 1,416 96 22,859 Other NIG1,173 13,872 530 - 15,575 Unrated2- 20 - 3 23 Total lendingcommitments22,672 93,865 2,725 429 119,691 Total exposure$48,115 $135,756 $8,879 $2,796 $195,546 NIG–Non-investment grade 1.Counterparty credit ratings are internally determined by the CRM. 2.Unrated loans and lending commitments are primarily trading positions that are measured at fair value and risk-managed as a component of market risk. For a further discussion of our market risk, see "Quantitative and Qualitative Disclosures about Risk-Market Risk" herein. Institutional Securities Loans and Lending Commitments by Industry $ in millionsAtDecember 31,2023AtDecember 31,2022Financials$57,804 $54,222 Real estate35,342 32,358 Industrials18,056 14,557 Communications services15,301 15,336 Healthcare14,274 12,353 Information technology12,430 13,790 Consumer discretionary12,190 11,592 Utilities11,522 10,542 Consumer staples9,305 7,823 Energy9,156 9,115 Materials6,503 6,102 Insurance6,486 5,925 Other1,835 1,831 Total exposure$210,204 $195,546

Intangible assets are initially recorded at cost, or in the situation where acquired as part of a business combination, at the fair value determined as part of the acquisition method of accounting. Subsequently, amortizable intangible assets are carried in the balance sheet at amortized cost, where amortization is recognized over their estimated useful lives. Indefinite lived intangible assets are not amortized but are tested for impairment on an annual basis as of July 1 and on an interim basis when certain events or circumstances exist. On a quarterly basis: - All intangible assets are assessed for the presence of impairment indicators. Where such indicators are present, an evaluation for impairment is conducted. - For amortizable intangible assets, an impairment loss exists if the carrying amount of the intangible asset is not recoverable and exceeds its fair value. The carrying amount of the intangible asset is not recoverable if it exceeds the sum of the expected undiscounted cash flows. - For indefinite-lived intangible assets, an impairment exists if the carrying amount of the intangible asset exceeds its fair value. - Amortizable intangible assets are assessed for any indication that the remaining useful life or the finite life classification should be revised. In such cases, the remaining carrying amount is amortized prospectively over the revised useful life, unless it is determined that the life of the intangible asset is indefinite, in which case the intangible asset is not amortized. - Indefinite-lived intangible assets are assessed for any indication that the life of the intangible asset is no longer indefinite; in such cases, the carrying amount of the intangible asset is amortized prospectively over its remaining useful life. The initial valuation of an intangible asset as part of the acquisition method of accounting and the subsequent valuation of intangible assets as part of an impairment assessment are subjective and based, in part, on inputs that are unobservable and can be subject to uncertainty. These inputs include, but are not limited to, forecasted cash flows, revenue growth rates, customer attrition rates and discount rates. For both goodwill and intangible assets, to the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. For amortizable intangible assets, the new cost basis is amortized over the remaining useful life of that asset. Unanticipated declines in our revenue generating capability, adverse market or economic events, and regulatory actions, could result in material impairment charges in future periods. See Notes 2 and 10 to the financial statements for additional information about goodwill and intangible assets. Legal and Regulatory Contingencies In the normal course of business, we have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the third-party entities that are, or would otherwise be, the primary defendants in such cases are bankrupt, in financial distress, or may not honor applicable indemnification obligations. These actions have included, but are not limited to, antitrust claims, claims under various false claims act statutes, and matters arising from our sales and trading businesses and our activities in the capital markets. We are also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding our business, and involving, among other matters, sales, trading, financing, prime brokerage, market-making activities, investment banking advisory services, capital markets activities, financial products or offerings sponsored, underwritten or sold by us, wealth and investment management services, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, disgorgement, restitution, forfeiture, injunctions, limitations on our ability to conduct certain business, or other relief. We contest liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the financial statements and we can reasonably estimate the amount of that loss or the range of loss, we accrue an estimated loss by a charge to income. In many legal proceedings and investigations, it is inherently difficult to determine whether any loss is probable or reasonably possible, or to estimate the amount of any loss. In addition, even where we have determined that a loss is probable or reasonably possible or an exposure to loss or range of loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, we are often unable to reasonably estimate the amount of the loss or range of loss. It is particularly difficult to determine if a loss is probable or reasonably possible, or to estimate the amount of loss, where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, forfeiture, disgorgement or penalties. Numerous issues may need to be resolved in an investigation or proceeding before a determination can be made that a loss or additional loss (or range of loss or range of additional loss) is probable or reasonably possible, or to estimate the amount of loss, including through potentially lengthy discovery or determination of important factual matters, determination of issues related to class certification, the calculation of damages or other relief, and consideration of novel or unsettled legal questions relevant to the proceedings or investigations in question. Significant judgment is required in deciding when and if to make these accruals, and the actual cost of a legal claim or regulatory fine/penalty may ultimately be materially different from the recorded accruals. See Note 14 to the financial statements for additional information on legal contingencies. Income Taxes We are subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which we have business operations. These tax laws are complex and subject to interpretation by the taxpayer and the relevant governmental taxing authorities. We must make judgments and interpretations about the application of these inherently complex tax laws and make estimates about certain items affecting taxable income when determining the provision for income taxes in the various tax jurisdictions. Disputes over interpretations of the tax laws may be settled with the taxing authority upon examination or audit. We periodically evaluate the likelihood of assessments in each taxing jurisdiction resulting from current and subsequent years' examinations, and unrecognized tax benefits related to potential losses that may arise from tax audits are established in accordance with the relevant accounting guidance. Once established, unrecognized tax benefits are adjusted when there is more information available or when an event occurs requiring a change. Our provision for income taxes is composed of current and deferred taxes. Current income taxes approximate taxes to be paid or refunded for the current period. Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the applicable enacted tax rates and laws that will be in effect when such differences are expected to reverse. Our deferred tax balances may also include deferred assets related to tax attribute carryforwards, such as net operating losses and tax credits that will be realized through reduction of future tax liabilities and, in some cases, are subject to expiration if not utilized within certain periods. We perform regular reviews to ascertain whether deferred tax assets are realizable. These reviews include management's estimates and assumptions regarding future taxable income and incorporate various tax planning strategies, including strategies that may be available to tax attribute carryforwards before they expire. Once the deferred tax asset balances have been determined, we may record a valuation allowance against the deferred tax asset balances to reflect the amount we estimate is more likely than not to be realized at a future date. Both current and deferred income taxes may reflect adjustments related to our unrecognized tax benefits. Significant judgment is required in estimating the consolidated provision for (benefit from) income taxes, current and deferred tax balances (including valuation allowance, if any), accrued interest or penalties and uncertain tax positions. Revisions in estimates and/or the actual costs of a tax assessment may ultimately be materially different from the recorded accruals and unrecognized tax benefits, if any. See Note 2 to the financial statements for additional information on our significant assumptions, judgments and interpretations associated with the accounting for income taxes and Note 21 to the financial statements for additional information on our tax examinations. Liquidity and Capital Resources Our liquidity and capital policies are established and maintained by senior management, with oversight by the Asset/Liability Management Committee and the Board. Through various risk and control committees, senior management reviews business performance relative to these policies, monitors the availability of alternative sources of financing, and oversees the liquidity, interest rate and currency sensitivity of our asset and liability position. Our Corporate Treasury department ("Treasury"), Firm Risk Committee, Asset/Liability Management Committee, and other committees and control groups assist in evaluating, monitoring and managing the impact that our business activities have on our balance sheet, liquidity and capital structure. Liquidity and capital matters are reported regularly to the Board and the BRC. Balance Sheet We monitor and evaluate the composition and size of our balance sheet on a regular basis. Our balance sheet management process includes quarterly planning, business-specific thresholds, monitoring of business-specific usage versus key performance metrics and new business impact assessments. We establish balance sheet thresholds at the consolidated and business segment levels. We monitor balance sheet utilization and review variances resulting from business activity and market fluctuations. On a regular basis, we review current performance versus established thresholds and assess the need to re-allocate our balance sheet based on business segment needs. We also monitor key metrics, including asset and liability size and capital usage. Total Assets by Business Segment At December 31, 2023$ in millionsISWMIMTotalAssetsCash and cash equivalents$72,928 $16,172 $132 $89,232 Trading assets at fair value353,841 7,962 5,271 367,074 Investment securities39,212 115,595 - 154,807 Securities purchased under agreements to resell90,701 20,039 - 110,740 Securities borrowed119,823 1,268 - 121,091 Customer and other receivables47,333 31,237 1,535 80,105 Loans172,110 146,526 4 218,640 Goodwill424 10,199 6,084 16,707 Intangible assets26 3,427 3,602 7,055 Other assets214,108 12,743 1,391 28,242 Total assets$810,506 $365,168 $18,019 $1,193,693 At December 31, 2022$ in millionsISWMIMTotalAssetsCash and cash equivalents$88,362 $39,539 $226 $128,127 Trading assets at fair value294,884 1,971 4,460 301,315 Investment securities40,481 119,450 - 159,931 Securities purchased under agreements to resell102,511 11,396 - 113,907 Securities borrowed132,619 755 - 133,374 Customer and other receivables47,515 29,620 1,405 78,540 Loans167,676 146,105 4 213,785 Goodwill429 10,202 6,021 16,652 Intangible assets36 3,911 3,671 7,618 Other assets215,324 10,356 1,302 26,982 Total assets$789,837 $373,305 $17,089 $1,180,231 1.Amounts include loans held for investment, net of ACL, and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheet (see Note 9 to the financial statements). 2.Other assets primarily includes premises, equipment and software, ROU assets related to leases, other investments and deferred tax assets. A substantial portion of total assets consists of cash and cash equivalents, liquid marketable securities and short-term receivables. In the Institutional Securities business segment, these arise from market-making, financing and prime brokerage activities, and in the Wealth Management business segment, these arise from banking activities, including management of the investment portfolio. Total assets of $1,194 billion at December 31, 2023 were relatively unchanged from $1,180 billion at December 31, 2022. Liquidity Risk Management Framework The primary goal of our Liquidity Risk Management Framework is to ensure that we have access to adequate funding across a wide range of market conditions and time horizons. The framework is designed to enable us to fulfill our financial obligations and support the execution of our business strategies. The following principles guide our Liquidity Risk Management Framework: - Sufficient liquidity resources, which consist of HQLA and cash deposits with banks ("Liquidity Resources") should be maintained to cover maturing liabilities and other planned and contingent outflows;- Maturity profile of assets and liabilities should be aligned, with limited reliance on short-term funding;- Source, counterparty, currency, region and term of funding should be diversified; and - Liquidity Stress Tests should anticipate, and account for, periods of limited access to funding. The core components of our Liquidity Risk Management Framework are the Required Liquidity Framework, Liquidity Stress Tests and Liquidity Resources, which support our target liquidity profile.

We test goodwill for impairment on an annual basis as of July 1 and on an interim basis when certain events or circumstances exist. Evaluating goodwill for impairment requires management to make significant judgments, including, in part, the use of unobservable inputs that are subject to uncertainty. Goodwill impairment tests are performed at the reporting unit level, which is generally at the level of or one level below our business segments. Goodwill no longer retains its association with a particular acquisition once it has been assigned to a reporting unit. As such, all the activities of a reporting unit, whether acquired or organically developed, are available to support the value of the goodwill. For both the annual and interim tests, we have the option to either (i) perform a quantitative impairment test or (ii) first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, in which case, the quantitative test would be performed. When performing a quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying amount, the goodwill impairment loss is equal to the excess of the carrying value over the fair value,limited by the carrying amount of goodwill allocated to that reporting unit. The carrying value of each reporting unit is determined based on the capital allocated to the reporting unit. The estimated fair value of the reporting units is derived based on valuation techniques we believe market participants would use for each of the reporting units. The estimated fair value is generally determined by utilizing a discounted cash flow methodology. In certain instances, we may also utilize methodologies that incorporate price-to-book and price-to-earnings multiples of comparable companies. The discounted cash flow methodology uses projected future cash flows based on the reporting units' earnings forecast. The discount rate used represents an estimate of the cost of equity for that reporting unit based on the Capital Asset Pricing Model. At each annual goodwill impairment testing date, each of our reporting units with goodwill had a fair value that was substantially in excess of its carrying value.

Transactional revenues of $3,556 million in 2023 increased 44% compared with the prior year, primarily due to $282 million of gains on DCP investments compared with $858 million of losses in the prior year, partially offset by lower client activity. For further information on the impact of DCP, see "Selected Non-GAAP Financial Information" herein.

NNA represent client asset inflows, inclusive of interest, dividends and asset acquisitions, less client asset outflows, and exclude the impact of business combinations/divestitures and the impact of fees and commissions. The level of NNA in a given period is influenced by a variety of factors, including macroeconomic factors that impact client investment and spending behaviors, our ability to attract and retain financial advisors and clients, and timing of large idiosyncratic flows. Macroeconomic factors have had an impact on our NNA in recent periods. Should these factors continue, the growth rate of our NNA may be impacted. Advisor-Led Channel $ in billionsAt December 31,2023At December 31,2022Advisor-led client assets1$3,979$3,392Fee-based client assets2$1,983$1,678Fee-based client assets as apercentage of advisor-led clientassets50%49%202320222021Fee-based asset flows3$109.2$162.8$179.3 1.Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned. 2.Fee-based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets. 3.Fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets herein. Self-Directed Channel At December 31,2023At December 31,2022Self-directed assets (in billions)1$1,150$795Self-directed households (in millions)28.18.0 202320222021Daily average revenue trades ("DARTs") (in thousands)37598641,161 1.Self-directed client assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets. 2.Self-directed households represent the total number of households that include at least one active account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels are included in each of the respective channel counts. 3.DARTs represent the total self-directed trades in a period divided by the number of trading days during that period. Workplace Channel1 At December 31,2023At December 31,2022Workplace unvested assets (in billions)2$416$302Number of participants (in millions)36.66.3 1.The workplace channel includes equity compensation solutions for companies, their executives and employees. 2.Stock plan unvested assets represent the market value of public company securities at the end of the period. The stock plan vested asset retention rate within the workplace channel, which represents the percentage of stock plan assets retained in either the self-directed or advisor-led channels following vesting, is 29%, 34% and 24% for 2023, 2022 and 2021, respectively. The rate is derived using the stock plan inflows for the previous year, less related outflows for the previous year and reported year, and dividing the result by the previous year inflows. 3.Stock plan participants represent total accounts with vested and/or unvested stock plan assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.

Other net revenues were $823 million in 2023 compared with losses of $633 million in the prior year, primarily due to lower mark-to-market losses on corporate loans held for sale, inclusive of hedges, and higher net interest income and fees on corporate loans, mark-to-market gains compared with losses in the prior year on DCP investments and impacts from liquidity and funding costs. Provision for Credit Losses In 2023, the Provision for credit losses on loans and lending commitments of $401 million was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. The Provision for credit losses on loans and lending commitments of $211 million in 2022 was primarily driven by portfolio growth and deterioration in the macroeconomic outlook. For further information on the Provision for credit losses, see "Credit Risk" herein. Non-interest expenses of $18,183 million in 2023 increased 4% compared with the prior year due to higher Non-compensation expenses and Compensation and benefits expenses. - Compensation and benefits expenses increased primarily due to higher expenses related to DCP and higher stock-based compensation expenses driven by the Firm's share price movement in the prior year, partially offset by lower expenses related to outstanding deferred equity compensation. - Non-compensation expenses increased primarily due to increased spend on technology, an FDIC special assessment of $121 million, higher legal expenses, including $249 million related to a specific matter, higher execution-related and marketing and business development expenses. Wealth Management Income Statement Information % Change$ in millions20232022202120232022RevenuesAsset management$14,019 $13,872 $13,966 1 %(1)%Transactional13,556 2,473 4,259 44 %(42)%Net interest8,118 7,429 5,393 9 %38 %Other1575 643 625 (11)%3 %Net revenues26,268 24,417 24,243 8 %1 %Provision for credit losses131 69 11 90 %N/MCompensation and benefits13,972 12,534 13,090 11 %(4)%Non-compensation expenses5,635 5,231 4,961 8 %5 %Total non-interest expenses19,607 17,765 18,051 10 %(2)%Income before provision for income taxes6,530 6,583 6,181 (1)%7 %Provision for income taxes1,508 1,444 1,447 4 %- %Net income applicable to Morgan Stanley$5,022 $5,139 $4,734 (2)%9 %1.Transactional includes Investment banking, Trading, and Commissions and fees revenues. Other includes Investments and Other revenues. Wealth Management Metrics $ in billionsAt December 31,2023At December 31,2022Total client assets1$5,129$4,187U.S. Bank Subsidiary loans$147$146Margin and other lending2$21$22Deposits3$346$351Annualized weighted average cost of deposits4Period end2.92%1.59%Period average2.43%0.53%202320222021Net new assets$282.3$311.3$437.7 1.Client assets represent those for which Wealth Management is providing services including financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage and investment advisory services; financial and wealth planning services; workplace services, including stock plan administration, and retirement plan services. See "Advisor-Led Channel" and "Self-Directed Channel" herein for additional information. 2.Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non-purpose securities-based lending on non-bank entities. 3.Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on our U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits. As of December 31, 2023, there were no off-balance sheet amounts excluded from deposits. As of December 31, 2022, approximately $6 billion off-balance sheet amounts were excluded from deposits. 4.Annualized weighted average represents the total annualized weighted average cost of the various deposit products, excluding the effect of related hedging derivatives. The period end cost of deposits is based upon balances and rates as of December 31, 2023 and December 31, 2022. The period average is based on daily balances and rates for the year.

Net Revenues by Segment1 Net Income Applicable to Morgan Stanley by Segment1 1.The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 22 to the financial statements for details of intersegment eliminations. - Institutional Securities net revenues of $23,060 million in 2023 decreased 5% from the prior year, primarily reflecting lower results across businesses. - Wealth Management net revenues of $26,268 million in 2023 increased 8% from the prior year, primarily reflecting gains on DCP investments compared with losses in the prior year and higher Net interest revenues. - Investment Management net revenues of $5,370 million in 2023 were relatively unchanged from the prior year, reflecting a decrease in Asset management and related fees revenues offset by an increase in Performance based income and other revenues. Net Revenues by Region1 1.For a discussion of how the geographic breakdown of net revenues is determined, see Note 22 to the financial statements. - Americas net revenues in 2023 increased 4%, primarily driven by results within the Wealth Management business segment and Other net revenues within the Institutional Securities business segment, partially offset by lower results across businesses within the Institutional Securities business segment. - EMEA net revenues in 2023 decreased 11%, primarily driven by lower results across businesses within the Institutional Securities business segment. - Asia net revenues in 2023 decreased 5%, primarily driven by lower results across businesses within the Institutional Securities business segment. Selected Financial Information and Other Statistical Data $ in millions, except per share data202320222021Consolidated resultsNet revenues$54,143 $53,668 $59,755 Earnings applicable to Morgan Stanley common shareholders$8,530 $10,540 $14,566 Earnings per diluted common share$5.18 $6.15 $8.03 Consolidated financial measuresExpense efficiency ratio177 %73 %67 %ROE29.4 %11.2 %15.0 %ROTCE2,312.8 %15.3 %19.8 %Pre-tax margin422 %26 %33 %Effective tax rate 21.9 %20.7 %23.1 %Pre-tax margin by segment4Institutional Securities19 %28 %40 %Wealth Management25 %27 %25 %Investment Management16 %15 %27 %$ in millions, except per share data, worldwide employees and client assetsAtDecember 31,2023AtDecember 31,2022Average liquidity resources for three months ended5$314,504 $312,250 Loans6$226,828 $222,182 Total assets$1,193,693 $1,180,231 Deposits$351,804 $356,646 Borrowings$263,732 $238,058 Common shareholders' equity$90,288 $91,391 Tangible common shareholders' equity3$66,527 $67,123 Common shares outstanding1,627 1,675 Book value per common share7$55.50 $54.55 Tangible book value per common share3,7$40.89 $40.06 Worldwide employees (in thousands)80 82 Client assets8 (in billions)$6,588 $5,492 Capital ratios9Common Equity Tier 1 capital-Standardized15.2 %15.3 %Tier 1 capital-Standardized17.1 %17.2 %Common Equity Tier 1 capital-Advanced15.5 %15.6 %Tier 1 capital-Advanced17.4 %17.6 %Tier 1 leverage6.7 %6.7 %SLR5.5 %5.5 %1.The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues. 2.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively. 3.Represents a non-GAAP financial measure. See "Selected Non-GAAP Financial Information" herein. 4.Pre-tax margin represents income before provision for income taxes as a percentage of net revenues. 5.For a discussion of Liquidity resources, see "Liquidity and Capital Resources- Balance Sheet-Liquidity Risk Management Framework-Liquidity Resources" herein. 6.Includes loans held for investment, net of ACL, loans held for sale and also includes loans at fair value, which are included in Trading assets in the balance sheet. 7.Book value per common share and tangible book value per common share equal common shareholders' equity and tangible common shareholders' equity, respectively, divided by common shares outstanding. 8.Client assets represents Wealth Management client assets and Investment Management AUM. Certain Wealth Management client assets are invested in Investment Management products and are also included in Investment Management's AUM. 9.For a discussion of our capital ratios, see "Liquidity and Capital Resources-Regulatory Requirements" herein. Economic and Market Conditions The market environment in 2023 remained mixed, characterized by inflationary pressures and uncertainty regarding the future path of interest rates, which remained persistently high. Towards the end of the year, the market environment improved from prior quarters with the expectation of lower interest rates going into 2024. However, there is continued uncertainty regarding the timing and pace of these rate reductions along with concerns regarding heightened geopolitical risks that could impact the capital markets in 2024. The market environment impacted our businesses in 2023, as discussed further in "Business Segments" herein, and, to the extent that it continues to remain uncertain, could adversely impact client confidence and related activity. For more information on economic and market conditions, and the potential effects of geopolitical events and acts of war or aggression on our future results, refer to "Risk Factors" and "Forward-Looking Statements." Selected Non-GAAP Financial Information We prepare our financial statements using U.S. GAAP. From time to time, we may disclose certain "non-GAAP financial measures" in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statements and other public disclosures. A "non-GAAP financial measure" excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider the non-GAAP financial measures we disclose to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results and capital adequacy. These measures are not in accordance with, or a substitute for, U.S. GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the U.S. GAAP financial measure and the non-GAAP financial measure. We present certain non-GAAP financial measures that exclude the impact of mark-to-market gains and losses on DCP investments from net revenues and compensation expenses. The impact of DCP is primarily reflected in our Wealth Management business segment results. These measures allow for better comparability of period-to-period underlying operating performance and revenue trends, especially in our Wealth Management business segment. By excluding the impact of these items, we are better able to describe the business drivers and resulting impact to net revenues and corresponding change to the associated compensation expenses. 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. We invest directly, as principal, in financial instruments and other investments to economically hedge certain of our obligations under these DCP awards. Changes in the fair value of such investments, net of financing costs, are recorded in net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and losses on our investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference may not be material to our Income before provision for income taxes in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially significant impacts to net revenues and compensation expenses. For additional information on DCP, refer to "Other Matters" herein. The principal non-GAAP financial measures presented in this document are set forth in the following tables. Reconciliations from U.S. GAAP to Non-GAAP Consolidated Financial Measures $ in millions202320222021Net revenues$54,143 $53,668 $59,755 Adjustment for mark-to-market losses (gains) on DCP1(434)1,198 (389)Adjusted Net revenues-non-GAAP$53,709 $54,866 $59,366 Compensation expense$24,558 $23,053 $24,628 Adjustment for mark-to-market losses (gains) on DCP1(668)716 (526)Adjusted Compensation expense-non-GAAP$23,890 $23,769 $24,102 Wealth Management Net revenues$26,268 $24,417 $24,243 Adjustment for mark-to-market losses (gains) on DCP1(282)858 (210)Adjusted Wealth Management Net revenues-non-GAAP$25,986 $25,275 $24,033 Wealth Management Compensation expense$13,972 $12,534 $13,090 Adjustment for mark-to-market losses (gains) on DCP1(412)530 (293)Adjusted Wealth Management Compensation expense-non-GAAP$13,560 $13,064 $12,797 At December 31,$ in millions202320222021Tangible equityCommon shareholders' equity$90,288 $91,391 $97,691 Less: Goodwill and net intangible assets(23,761)(24,268)(25,192)Tangible common shareholders' equity-non-GAAP$66,527 $67,123 $72,499 Average Monthly Balance$ in millions202320222021Tangible equityCommon shareholders' equity$90,819 $93,873 $97,094 Less: Goodwill and net intangible assets(24,013)(24,789)(23,392)Tangible common shareholders' equity-non-GAAP$66,806 $69,084 $73,702 Non-GAAP Financial Measures by Business Segment $ in billions202320222021Average common equity2Institutional Securities$45.6 $48.8 $43.5 Wealth Management28.8 31.0 28.6 Investment Management10.4 10.6 8.8 ROE3Institutional Securities7 %10 %20 %Wealth Management17 %16 %16 %Investment Management6 %6 %15 %Average tangible common equity2Institutional Securities$45.2 $48.3 $42.9 Wealth Management14.8 16.3 13.4 Investment Management0.7 0.8 0.9 ROTCE3Institutional Securities7 %10 %20 %Wealth Management33 %31 %34 %Investment Management88 %86 %144 %1.Net revenues and compensation expense are adjusted for DCP for both Firm and Wealth Management business segment. See "Other Matters" herein for more information. 2.Average common equity and average tangible common equity for each business segment is determined using our Required Capital framework (see "Liquidity and Capital Resources-Regulatory Requirements-Attribution of Average Common Equity According to the Required Capital Framework" herein). The sums of the segments' Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent Company equity. 3.The calculation of ROE and ROTCE by segment uses net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment. Return on Tangible Common Equity Goal We have an ROTCE goal of 20%. Our ROTCE goal is a forward-looking statement that is based on a normal market environment and may be materially affected by many factors. See "Risk Factors" and "Forward-Looking Statements" herein for further information on market and economic conditions and their potential effects on our future operating results. ROTCE represents a non-GAAP financial measure. For further information on non-GAAP measures, see "Selected Non-GAAP Financial Information" herein. Business Segments Substantially all of our operating revenues and operating expenses are directly attributable to our business segments. Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective net revenues, non-interest expenses or other relevant measures. See Note 22 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.

- The Firm reported net revenues of $54.1 billion and net income of $9.1 billion against a mixed market backdrop and a number of headwinds. - The Firm delivered ROE of 9.4% and ROTCE of 12.8% (see "Selected Non-GAAP Financial Information" herein). - The Firm expense efficiency ratio was 77%. The ratio was negatively impacted by severance costs of $353 million, an FDIC special assessment of $286 million, higher legal expenses relating to a specific matter of $249 million and integration-related expenses of $293 million. - At December 31, 2023, the Firm's Standardized Common Equity Tier 1 capital ratio was 15.2%. - Institutional Securities reported net revenues of $23.1 billion reflecting lower completed activity in Investment Banking and lower results in Equity and Fixed Income on reduced client activity and a less favorable market environment compared to a year ago. - Wealth Management delivered net revenues of $26.3 billion, reflecting mark-to-market gains on investments associated with certain employee deferred cash-based compensation plans ("DCP investments") compared with losses in the prior year and higher Net interest revenues. The pre-tax margin was 24.9%. The business added net new assets of $282.3 billion, representing a 6.7% annualized growth rate from beginning period assets. - Investment Management reported net revenues of $5.4 billion and AUM increased to $1.5 trillion. Net Income Applicable to Morgan Stanley Earnings per Diluted Common Share

We are subject to comprehensive consolidated supervision, regulation and examination by the Federal Reserve, including with respect to regulatory capital requirements, stress testing and capital planning. We submit, on at least an annual basis, a capital plan to the Federal Reserve describing proposed dividend payments to shareholders, proposed repurchases of our outstanding securities and other proposed capital actions that we intend to take. Our ability to take capital actions described in the capital plan is dependent on, among other factors, the results of supervisory stress tests conducted by the Federal Reserve and our compliance with regulatory capital requirements imposed by the Federal Reserve. In addition, the Federal Reserve may change regulatory capital requirements to impose higher requirements that restrict our ability to take capital actions or may modify or impose other regulatory standards or restrictions that increase our operating expenses or constrain our ability to take capital actions. For additional information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources."

The commercial soundness of many financial institutions and certain other large financial services firms may be closely interrelated as a result of credit, trading, clearing or other relationships among such entities. Increased centralization of trading activities through particular clearinghouses, central agents or exchanges may increase our concentration of risk with respect to these entities. As a result, concerns about, or a default or threatened default by, one or more such entities could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions, or require financial commitments to multi-lateral actions intended to support market stability. This is sometimes referred to as systemic risk and may adversely affect financial intermediaries, such as clearinghouses, clearing agencies, exchanges, banks and securities firms, with which we interact on a daily basis and, therefore, could adversely affect us. See also "Systemic Risk Regime" under "Business-Supervision and Regulation-Financial Holding Company." Operational Risk Operational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors (e.g., inappropriate or unlawful conduct) or from external events (e.g., cyberattacks or third-party vulnerabilities) that may manifest as, for example, loss of information, business disruption, theft and fraud, legal, regulatory and compliance risks, or damage to physical assets. We may incur operational risk across the full scope of our business activities, including revenue-generating activities and support and control groups (e.g., information technology ("IT") and trade processing). Legal, regulatory and compliance risk is included in the scope of operational risk and is discussed below under "Legal, Regulatory and Compliance Risk." For more information on how we monitor and manage operational risk, see "Quantitative and Qualitative Disclosures about Risk-Operational Risk."

We incur significant credit risk exposure through our Institutional Securities business segment. This risk may arise from a variety of business activities, including, but not limited to: extending credit to clients through various lending commitments; entering into swap or other derivative contracts under which counterparties have obligations to make payments to us; acting as clearing broker for listed and over-the-counter derivatives whereby we guarantee client performance to clearinghouses; providing short- or long-term funding that is secured by physical or financial collateral, including, but not limited to, real estate and marketable securities, whose value may at times be insufficient to fully cover the loan repayment amount; posting margin and/or collateral and other commitments to clearinghouses, clearing agencies, exchanges, banks, securities firms and other financial counterparties; and investing and trading in securities and loan pools, whereby the value of these assets may fluctuate based on realized or expected defaults on the underlying obligations or loans. We also incur credit risk in our Wealth Management business segment lending to mainly individual investors, including, but not limited to, margin- and securities-based loans collateralized by securities, residential mortgage loans, including home equity lines of credit ("HELOCs"), and structured loans to ultra-high net worth clients, that are in most cases secured by various types of collateral whose value may at times be insufficient to fully cover the loan repayment amount, including marketable securities, private investments, commercial real estate and other financial assets. Our valuations related to, and reserves for losses on, credit exposures rely on complex models, estimates and subjective judgments about the future. While we believe current valuations and reserves adequately address our perceived levels of risk, future economic conditions, including inflation and changes in real estate and other asset values, that differ from or are more severe than forecast, inaccurate models or assumptions, or external factors such as global pandemics, natural disasters, or geopolitical events, could lead to inaccurate measurement of or deterioration of credit quality of our borrowers and counterparties or the value of collateral and result in unexpected losses. We may also incur higher-than-anticipated credit losses as a result of (i) disputes with counterparties over the valuation of collateral or (ii) actions taken by other lenders that may negatively impact the valuation of collateral. In cases where we foreclose on collateral, sudden declines in the value or liquidity of collateral may result in significant losses to us despite our (i) credit monitoring, (ii) over-collateralization, (iii) ability to call for additional collateral or (iv) ability to force repayment of the underlying obligation, especially where there is a single type of collateral supporting the obligation. In addition, in the longer term, climate change may have a negative impact on the financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Certain of our credit exposures may be concentrated by counterparty, product, sector, portfolio, industry or geographic region. Although our models and estimates account for correlations among related types of exposures, a change in the market or economic environment for a concentrated product or an external factor impacting a concentrated counterparty, sector, portfolio, industry or geographic region may result in credit losses in excess of amounts forecast. For further information regarding our country risk exposure, see also "Quantitative and Qualitative Disclosures about Risk-Country Risks." In addition, as a clearing member of several central counterparties, we are responsible for the defaults or misconduct of our customers and could incur financial losses in the event of default by other clearing members. Although we regularly review our credit exposures, default risk may arise from events or circumstances that are difficult to detect or foresee.

We originate loans secured by commercial and residential properties. Further, we securitize and trade in a wide range of commercial and residential real estate and real estate-related assets and products. In connection with these activities, we have provided, or otherwise agreed to be responsible for, certain representations and warranties. Under certain circumstances, we may be required to repurchase such assets or make other payments related to such assets if such representations and warranties were breached, and may incur losses as a result. We have also made representations and warranties in connection with our role as an originator of certain loans that we securitized in CMBS and RMBS. For additional information, see Note 14 to the financial statements.

Central banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the "IBORs"). A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms has been underway for a number of years. These reforms have caused and may in the future cause such rates to perform differently than in the past, or to cease entirely, or have other consequences that are contrary to market expectations. The ongoing market transition away from these interest rate benchmarks to alternative reference rates is complex and could have a range of adverse impacts on our business, securities, financial condition and results of operations, including: - Adversely impacting the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any securities, loans and derivatives that are included in our financial assets and liabilities that are linked to these interest rate benchmarks;- Inquiries, reviews or other actions from regulators in respect of our (or the market's) preparation, readiness, transition plans and actions regarding the replacement of a legacy interest rate benchmark with one or more alternative reference rates;- Disputes, litigation or other actions with clients, counterparties and investors in various scenarios, such as regarding the interpretation and enforceability of provisions in IBOR-based products such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between the IBORs and the various alternative reference rates or regarding the interpretation of applicable legislation, regulations or rules; and - Causing us to incur additional costs in relation to any of the above factors. Other factors include the pace of the transition to the alternative reference rates, timing mismatches between cash and derivative markets, the specific terms and parameters for and market acceptance of any alternative reference rate, market conventions for the use of any alternative reference rate in connection with a particular product (including the timing and market adoption of any conventions proposed or recommended by any industry or other group), prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to further transition and develop appropriate systems and analytics for one or more alternative reference rates. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations-Regulatory Requirements-Regulatory Developments and Other Matters." Competitive Environment

The Provision for credit losses on loans and lending commitments of $532 million in 2023 was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. The Provision for credit losses on loans and lending commitments of $280 million in 2022 was due to portfolio growth and deterioration in the macroeconomic outlook. For further information on the Provision for credit losses, see "Credit Risk" herein.

Investment banking revenues are derived from client engagements in which we act as an advisor, underwriter or distributor of capital. Within the Institutional Securities business segment, these revenues are primarily composed of fees earned from underwriting equity and fixed income securities, syndicating loans and advisory services in relation to mergers and acquisitions, divestitures and corporate restructurings. Within the Wealth Management business segment, these revenues are derived from the distribution of newly issued securities.

Interest income and Interest expense are functions of the level and mix of total assets and liabilities, including Trading assets and Trading liabilities, Investment securities, Securities borrowed or purchased under agreements to resell, Securities loaned or sold under agreements to repurchase, Loans, Deposits and Borrowings. Within the Institutional Securities business segment, Net interest is a function of market-making strategies, client activity, and the prevailing level, term structure and volatility of interest rates. Net interest is impacted by market-making, lending and financing activities as we generally earn interest on securities held by the Firm, Securities borrowed, Securities purchased under agreements to resell, Loans and margin loans, while Borrowings, Securities loaned and Securities sold under agreements to repurchase generally incur interest expense. Within the Wealth Management business segment, Interest income is driven by assets held including Investment securities, Loans and margin loans. Interest expense is driven by Deposits and other funding.

Investments revenues are composed of realized and unrealized gains and losses derived from investments, including those associated with employee deferred compensation and co-investment plans. Estimates of the fair value of the investments that produce these revenues may involve significant judgment and may fluctuate significantly over time in light of business, market, economic and financial conditions, generally or in relation to specific transactions. Within the Institutional Securities segment, gains and losses are primarily from business-related investments. Certain investments are subject to sale restrictions. Within the Investment Management business segment, Investments revenues are primarily from performance-based fees in the form of carried interest, a portion of which is subject to reversal, and gains and losses from investments. The business is entitled to receive carried interest when the return in certain funds exceeds specified performance targets. Additionally, we consolidate certain sponsored Investment Management funds where revenues are primarily attributable to holders of noncontrolling interests.

Net revenues of $4,578 million in 2023 decreased 13% compared with the prior year, primarily reflecting lower Advisory revenues. - Advisory revenues decreased primarily due to fewer completed M&A transactions on lower market volumes. - Equity underwriting revenues increased on higher volumes, primarily in secondary offerings and convertible issuances, partially offset by lower revenues from initial public offerings. - Fixed income underwriting revenues were relatively unchanged from the prior year, primarily reflecting higher investment-grade loan and bond issuances, offset by lower non-investment grade loan issuances. Investment Banking continues to operate in a market environment characterized by lower completed M&A and underwriting activity amid market uncertainty, including the future path of interest rates. See "Investment Banking Volumes" herein. Equity, Fixed Income and Other Net Revenues Equity and Fixed Income Net Revenues 2023$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$7,206 $524 $(2,886)$66 $4,910 Execution services2,919 2,235 (190)112 5,076 Total Equity$10,125 $2,759 $(3,076)$178 $9,986 Total Fixed income$7,848 $375 $(975)$425 $7,673 2022$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$5,223 $535 $(257)$36 $5,537 Execution services2,947 2,462 (81)(96)5,232 Total Equity$8,170 $2,997 $(338)$(60)$10,769 Total Fixed income$7,711 $341 $922 $48 $9,022 2021$ in millionsTradingFees1NetInterest2All Other3TotalFinancing$4,110 $508 $520 $8 $5,146 Execution services3,327 2,648 (226)540 6,289 Total Equity$7,437 $3,156 $294 $548 $11,435 Total Fixed income$5,098 $307 $1,835 $276 $7,516 1.Includes Commissions and fees and Asset management revenues. 2.Includes funding costs, which are allocated to the businesses based on funding usage. 3.Includes Investments and Other revenues.

We and our U.S. Bank Subsidiaries are required to maintain a minimum LCR and NSFR of 100%. The LCR rule requires large banking organizations to have sufficient Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. In determining Eligible HQLA for LCR purposes, weightings (or asset haircuts) are applied to HQLA, and certain HQLA held in subsidiaries is excluded. The NSFR rule requires large banking organizations to maintain an amount of available stable funding, which is their regulatory capital and liabilities subject to standardized weightings, equal to or greater than their required stable funding, which is their projected minimum funding needs, over a one-year time horizon. As of December 31, 2023, we and our U.S. Bank Subsidiaries are compliant with the minimum LCR and NSFR requirements of 100%. Liquidity Coverage Ratio Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Eligible HQLA1  Cash deposits with central banks$58,047 $60,163 Securities2194,970 181,010 Total Eligible HQLA1$253,017 $241,173 Net cash outflows$196,488 $190,336 LCR129 %127 %1.Under the LCR rule, Eligible HQLA is calculated using weightings and excluding certain HQLA held in subsidiaries. 2.Primarily includes U.S. Treasuries, U.S. agency mortgage-backed securities, sovereign bonds and investment grade corporate bonds. Net Stable Funding Ratio Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023September 30, 2023Available stable funding$555,884 $553,413 Required stable funding465,226 468,290 NSFR120 %118 % Funding Management We manage our funding in a manner that reduces the risk of disruption to our operations. We pursue a strategy of diversification of secured and unsecured funding sources (by product, investor and region) and attempt to ensure that the tenor of our liabilities equals or exceeds the expected holding period of the assets being financed. Our goal is to achieve an optimal mix of durable secured and unsecured financing. We fund our balance sheet on a global basis through diverse sources. These sources include our equity capital, borrowings, bank notes, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit. We have active financing programs for both standard and structured products targeting global investors and currencies. Treasury allocates interest expense to our businesses based on the tenor and interest rate profile of the assets being funded. Treasury similarly allocates interest income to businesses carrying deposit products and other liabilities across the businesses based on the characteristics of those deposits and other liabilities.

The liquid nature of the marketable securities and short-term receivables arising principally from sales and trading activities in the Institutional Securities business segment provides us with flexibility in managing the composition of our balance sheet. Secured financing investors principally focus on the quality of the eligible collateral posted. Accordingly, we actively manage our secured financings based on the quality of the assets being funded. We have established longer-tenor secured funding requirements for less liquid asset classes, for which funding may be at risk in the event of a market disruption. We define highly liquid assets as government-issued or government-guaranteed securities with a high degree of fundability and less liquid assets as those that do not meet these criteria. To further minimize the refinancing risk of secured financing for less liquid assets, we have established concentration limits to diversify our investor base and reduce the amount of monthly maturities for secured financing of less liquid assets. As a component of the Liquidity Risk Management Framework, we hold a portion of our Liquidity Resources against the potential disruption to our secured financing capabilities. In general, we maintain a pool of liquid and easily fundable securities, which takes into account HQLA classifications consistent with LCR definitions, and other regulatory requirements, and provides a valuable future source of liquidity. Collateralized Financing Transactions $ in millionsAtDecember 31,2023 AtDecember 31,2022 Securities purchased under agreements to resell and Securities borrowed$231,831 $247,281 Securities sold under agreements to repurchase and Securities loaned$77,708 $78,213 Securities received as collateral1$6,219 $9,954 Average Daily BalanceThree Months Ended$ in millionsDecember 31, 2023December 31, 2022Securities purchased under agreements to resell and Securities borrowed$235,928 $261,627 Securities sold under agreements to repurchase and Securities loaned$87,285 $77,268 1.Included within Trading assets in the balance sheet. See "Total Assets by Business Segment" herein for additional information on the assets shown in the previous table and Notes 2 and 8 to the financial statements for additional information on collateralized financing transactions. In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. Receivables under these financing transactions, primarily margin loans, are included in Customer and other receivables in the balance sheet, and payables under these financing transactions, primarily to prime brokerage customers, are included in Customer and other payables in the balance sheet. Our risk exposure on these transactions is mitigated by collateral maintenance policies and the elements of our Liquidity Risk Management Framework.

We view deposits and borrowings as stable sources of funding for unencumbered securities and non-security assets. Our unsecured financings include borrowings and certificates of deposit carried at fair value, which are primarily composed of: instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures; and instruments with various interest rate-related features, including step-ups, step-downs and zero coupons. Also included are unsecured contracts that are not classified as OTC derivatives because they fail initial net investment criteria. As part of our asset/liability management strategy, when appropriate, we use derivatives to make adjustments to the interest rate risk profile of our borrowings (see Notes 6 and 13 to the financial statements). Deposits $ in millionsAtDecember 31,2023 AtDecember 31,2022 Savings and demand deposits:Brokerage sweep deposits1$148,274 $202,592 Savings and other139,978 117,356 Total Savings and demand deposits288,252 319,948 Time deposits63,552 36,698 Total2$351,804 $356,646 1.Amounts represent balances swept from client brokerage accounts. 2.As of December 31, 2023, there were no off-balance sheet amounts excluded from deposits. As of December 31, 2022, approximately $6 billion of off-balance sheet amounts were excluded from deposits at unaffiliated financial institutions. Deposits are primarily sourced from our Wealth Management clients and are considered to have stable, low-cost funding characteristics relative to other sources of funding. Each category of deposits presented above has a different cost profile and clients may respond differently to changes in interest rates and other macroeconomic conditions. The decrease in total deposits in 2023 was primarily driven by a continued reduction in Brokerage sweep deposits, largely due to net outflows to alternative cash equivalent and other products, partially offset by an increase in Time deposits and Savings. Borrowings by Remaining Maturity at December 31, 20231 $ in millionsParentCompanySubsidiariesTotalOriginal maturities of one year or less$- $3,188 $3,188 Original maturities greater than one year2024$8,915 $11,236 $20,151 202522,030 13,493 35,523 202624,516 10,907 35,423 202719,282 6,056 25,338 202811,432 9,807 21,239 Thereafter90,635 32,235 122,870 Total greater than one year$176,810 $83,734 $260,544 Total$176,810 $86,922 $263,732 1.Original maturity in the table is generally based on contractual final maturity. For borrowings with put options, remaining maturity represents the earliest put date. Borrowings of $264 billion at December 31, 2023 increased from $238 billion at December 31, 2022, primarily due to issuances net of maturities and redemptions and mark-to-market adjustments on equity-linked borrowings driven by market factors. We believe that accessing debt investors through multiple distribution channels helps provide consistent access to the unsecured markets. In addition, the issuance of borrowings with original maturities greater than one year allows us to reduce reliance on short-term credit-sensitive instruments. Borrowings with original maturities greater than one year are generally managed to achieve staggered maturities, thereby mitigating refinancing risk, and to maximize investor diversification through sales to global institutional and retail clients across regions, currencies and product types. The availability and cost of financing to us can vary depending on market conditions, the volume of certain trading and lending activities, our credit ratings and the overall availability of credit. We also engage in, and may continue to engage in, repurchases of our borrowings as part of our market-making activities. For further information on Borrowings, see Note 13 to the financial statements. Credit Ratings We rely on external sources to finance a significant portion of our daily operations. Our credit ratings are one of the factors in the cost and availability of financing and can have an impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, such as certain OTC derivative transactions. When determining credit ratings, rating agencies consider both company-specific and industry-wide factors. See also "Risk Factors-Liquidity Risk." Parent Company and U.S. Bank Subsidiaries Issuer Ratings at February 16, 2024 Parent CompanyShort-Term DebtLong-Term DebtRating OutlookDBRS, Inc.R-1 (middle)A (high)StableFitch Ratings, Inc.F1A+StableMoody's Investors Service, Inc.P-1A1StableRating and Investment Information, Inc.a-1A+StableS&P Global RatingsA-2A-Stable MSBNAShort-Term DebtLong-Term DebtRating OutlookFitch Ratings, Inc.F1+AA-StableMoody's Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+StableMSPBNAShort-Term DebtLong-Term DebtRating OutlookMoody's Investors Service, Inc.P-1Aa3StableS&P Global RatingsA-1A+Stable

Asset management and related fees of $5,231 million in 2023 decreased 2% compared with the prior year, primarily due to a shift in the mix of average AUM, driven by the cumulative effect of net flows. Asset management revenues are influenced by the level, relative mix of AUM and related fee rates. The market environment and client preferences in recent quarters have impacted the mix of our average Long-Term AUM level across certain asset classes. To the extent these conditions continue, we would expect our Asset management revenue to continue to be negatively impacted. See "Assets Under Management or Supervision" herein.

Central banks around the world, including the Federal Reserve, have sponsored initiatives in recent years to replace LIBOR and replace or reform certain other interest rate benchmarks (collectively, the "IBORs"). With the cessation of publication of U.S. dollar LIBOR rates on a representative basis as of June 30, 2023, all LIBOR publications have ceased on a representative basis. However, the one-, three- and six-month U.S. dollar LIBOR and three-month sterling LIBOR rates are being published for a limited period for use in legacy transactions on the basis of a synthetic methodology (known as "synthetic LIBOR"). Publication of the three-month synthetic sterling LIBOR will cease at the end of March 2024 and publication of the one-, three- and six-month synthetic U.S. dollar LIBOR will cease at the end of September 2024. As of December 31, 2023, a significant majority of our U.S. dollar LIBOR-referenced contracts contained fallback provisions or otherwise had a path that allowed for the transition to an alternative reference rate following the cessation of the applicable U.S. dollar LIBOR rate. We continue to execute against our Firmwide IBOR transition plan to complete the transition in all relevant markets to alternative reference rates. See also "Risk Factors-Risk Management" for a further discussion of risks related to the planned replacement of the IBORs and/or reform of other interest rate benchmarks and related risks.

A credit derivative is a contract between a seller and buyer of protection against the risk of a credit event occurring on one or more debt obligations issued by a specified reference entity. The buyer typically pays a periodic premium over the life of the contract and is protected for the period. If a credit event occurs, the seller is required to make payment to the beneficiary based on the terms of the credit derivative contract. Credit events, as defined in the contract, may be one or more of the following defined events: bankruptcy, dissolution or insolvency of the referenced entity, failure to pay, obligation acceleration, repudiation, payment moratorium and restructuring. We trade in a variety of credit derivatives and may either purchase or write protection on a single name or portfolio of referenced entities. In transactions referencing a portfolio of entities or securities, protection may be limited to a tranche of exposure or a single name within the portfolio. We are an active market maker in the credit derivatives markets. As a market maker, we work to earn a bid-offer spread on client flow business and manage any residual credit or correlation risk on a portfolio basis. Further, we use credit derivatives to manage our exposure to residential and commercial mortgage loans and corporate lending exposures. The effectiveness of our CDS protection as a hedge of our exposures may vary depending upon a number of factors, including the contractual terms of the CDS. We actively monitor our counterparty credit risk related to credit derivatives. A majority of our counterparties are composed of banks, broker-dealers, insurance and other financial institutions. Contracts with these counterparties may include provisions related to counterparty rating downgrades, which may result in the counterparty posting additional collateral to us. As with all derivative contracts, we consider counterparty credit risk in the valuation of our positions and recognize CVAs as appropriate within Trading revenues in the income statement. For additional credit exposure information on our credit derivative portfolio, see Note 6 to the financial statements. Country Risk Country risk exposure is the risk that events in, or that affect, a foreign country (any country other than the U.S.) might adversely affect us. We actively manage country risk exposure through a comprehensive risk management framework that combines credit and other market fundamentals and allows us to effectively identify, monitor and limit country risk. Our obligor credit evaluation process defines country of risk as the country that has the largest economic impact on the obligor and may be different from the obligor's country of jurisdiction. Examples where this applies may include corporations that are incorporated in one country but that derive the bulk of their revenue from another and mutual funds incorporated in one jurisdiction but with a concentration of investments in a different country. In addition to the direct country risk reflected in the "Top 10 Non-U.S. Country Exposures" table below, we also have indirect country exposure, for example, from collateral received in secured financing transactions or from providing client clearing services. These indirect exposures are managed through the credit and market risk frameworks. We conduct periodic stress testing that seeks to measure the impact on our credit and market exposures of shocks stemming from negative economic or political scenarios. When deemed appropriate by our risk managers, the stress test scenarios include possible contagion effects and second order risks. This analysis, and results of the stress tests, may result in the amendment of limits or exposure mitigation. Our sovereign exposures consist of financial contracts and obligations entered into with sovereign and local governments. Our non-sovereign exposures consist of financial contracts and obligations entered into primarily with corporations and financial institutions. Index credit derivatives are included in the following "Top 10 Non-U.S. Country Exposures" table. Each reference entity within an index is allocated to that reference entity's country of risk. Index exposures are allocated to the underlying reference entities in proportion to the notional weighting of each reference entity in the index, adjusted for any fair value receivable or payable for that reference entity. Where credit risk crosses multiple jurisdictions, for example, a CDS purchased from an issuer in a specific country that references bonds issued by an entity in a different country, the fair value of the CDS is reflected in the Net counterparty exposure row based on the country of the CDS issuer. Further, the notional amount of the CDS adjusted for the fair value of the receivable or payable is reflected in the Net inventory row based on the country of the underlying reference entity. Top 10 Non-U.S. Country Exposures At December 31, 2023$ in millionsUnited KingdomKoreaFranceBrazilChinaSovereignNet inventory1$(407)$6,475 $419 $3,630 $754 Net counterparty exposure29 338 - 2 141 Exposure before hedges(398)6,813 419 3,632 895 Hedges3(55)- (6)(164)- Net exposure$(453)$6,813 $413 $3,468 $895 Non-sovereignNet inventory1$1,335 $65 $1,524 $127 $2,022 Net counterparty exposure26,566 643 2,670 428 136 Loans8,035 14 858 424 455 Lending commitments7,966 49 3,166 310 637 Exposure before hedges23,902 771 8,218 1,289 3,250 Hedges3(1,952)- (1,984)(18)(1)Net exposure$21,950 $771 $6,234 $1,271 $3,249 Total net exposure$21,497 $7,584 $6,647 $4,739 $4,144 $ in millionsAustraliaCanadaSpainIndiaGermanySovereignNet inventory1$286 $264 $197 $1,563 $(3,745)Net counterparty exposure279 62 - - 77 Exposure before hedges365 326 197 1,563 (3,668)Hedges3- - (8)- (262)Net exposure$365 $326 $189 $1,563 $(3,930)Non-sovereignNet inventory1$201 $407 $330 $925 $872 Net counterparty exposure2575 1,058 332 950 2,696 Loans1,696 402 1,952 118 896 Lending commitments1,093 1,592 1,135 - 4,618 Exposure before hedges3,565 3,459 3,749 1,993 9,082 Hedges3(14)(91)(340)- (1,937)Net exposure$3,551 $3,368 $3,409 $1,993 $7,145 Total net exposure$3,916 $3,694 $3,598 $3,556 $3,215 1.Net inventory represents exposure to both long and short single-name and index positions (i.e., bonds and equities at fair value and CDS based on a notional amount assuming zero recovery adjusted for the fair value of any receivable or payable). 2.Net counterparty exposure (e.g, repurchase transactions, securities lending and OTC derivatives) is net of the benefit of collateral received and also is net by counterparty when legally enforceable master netting agreements are in place. For more information, see "Additional Information-Top 10 Non-U.S. Country Exposures" herein. 3. Amounts represent net CDS hedges (purchased and sold) on net counterparty exposure and lending executed by trading desks responsible for hedging counterparty and lending credit risk exposures. Amounts are based on the CDS notional amount assuming zero recovery adjusted for the fair value of any receivable or payable. For further description of the contractual terms for purchased credit protection and whether they may limit the effectiveness of our hedges, see "Quantitative and Qualitative Disclosures about Risk-Credit Risk-Derivatives" herein. Additional Information-Top 10 Non-U.S. Country Exposures Collateral Held Against Net Counterparty Exposure1 $ in millionsAtDecember 31,2023 Country of RiskCollateral2 United KingdomU.K., U.S., and France$7,828 GermanyFrance, Romania, and Switzerland4,616 OtherU.S., Spain, and Italy14,592 1.The benefit of collateral received is reflected in the Top 10 Non-U.S. Country Exposures at December 31, 2023. 2.Primarily consists of cash and government obligations of the countries listed. Operational Risk Operational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors or from external events (e.g., cyberattacks or third-party vulnerabilities) that may manifest as, for example, loss of information, business disruption, theft and fraud, legal and compliance risks, or damage to physical assets. We may incur operational risk across the full scope of our business activities, including revenue-generating activities and support and control groups (e.g., IT and trade processing). We have established an operational risk framework to identify, measure, monitor and control risk across the Firm. Effective operational risk management is essential to reducing the impact of operational risk incidents and mitigating legal, regulatory and reputational risks. The framework is continually evolving to account for changes in the Firm and to respond to the changing regulatory and business environment. We have implemented operational risk data and assessment systems to monitor and analyze internal and external operational risk events, to assess business environment and internal control factors, and to perform scenario analysis. The collected data elements are incorporated in the operational risk capital model. The model encompasses both quantitative and qualitative elements. Internal loss data and scenario analysis results are direct inputs to the capital model, while external operational incidents, business environment and internal control factors are evaluated as part of the scenario analysis process. In addition, we employ a variety of risk processes and mitigants to manage our operational risk exposures. These include a governance framework, a comprehensive risk management program and insurance. Operational risks and associated risk exposures are assessed relative to the risk appetite reviewed and confirmed by the Board and are prioritized accordingly. The breadth and range of operational risk are such that the types of mitigating activities are wide-ranging. Examples of activities include: continuous enhancement of defenses against cyberattacks, use of legal agreements and contracts to transfer and/or limit operational risk exposures, due diligence,implementation of enhanced policies and procedures, technology change management controls, exception management processing controls, and segregation of duties. Primary responsibility for the management of operational risk is with the business segments, the control groups and the business managers therein. The business managers maintain processes and controls designed to identify, assess, manage, mitigate and report operational risk. Each of the business segments has a designated operational risk coordinator. The operational risk coordinator regularly reviews operational risk issues and reports to our senior management within each business. Each control group also has a designated operational risk coordinator and a forum for discussing operational risk matters with our senior management. Oversight of operational risk is provided by the Non-Financial Risk Committee, legal entity risk committees, regional risk committees and senior management. In the event of a merger, joint venture, divestiture, reorganization, or creation of a new legal entity, a new product, or a business activity, operational risks are considered, and any necessary changes in processes or controls are implemented. The Operational Risk Department provides independent oversight of operational risk and assesses, measures and monitors operational risk against appetite. The Operational Risk Department works with the divisions and control groups to embed a transparent, consistent and comprehensive framework for managing operational risk within each area and across the Firm. The Operational Risk Department scope includes oversight of technology risk, cybersecurity risk, information security risk, the fraud risk management and prevention program, and third-party risk management (supplier and affiliate risk oversight and assessment), among others. Cybersecurity For a discussion of our Cybersecurity Program, see "Cybersecurity." Firm Resilience The Firm's critical processes and businesses could be disrupted by events including cyberattacks, failure or loss of access to technology and/or associated data, military conflicts, acts of terror, natural disasters, severe weather events and infectious disease. The Firm maintains a resilience program designed to provide for operational resilience and enable it to respond to and recover critical processes and supporting assets in the event of a disruption impacting our people, technology, facilities and third parties. The key elements of the Firm's resilience program include business continuity management, technology disaster recovery, third party resilience and key business service resilience. Resilience testing is performed both internally and with critical third parties to validate recovery capability in accordance with business requirements. The Firm's resilience program is applied consistently Firmwide and is aligned with regulatory requirements. Third-Party Risk Management In connection with our ongoing operations, we utilize the services of third-party suppliers, which we anticipate will continue and may increase in the future. These services include, for example, outsourced processing and support functions and other professional services. Our risk-based approach to managing exposure to these services includes the performance of due diligence, implementation of service-level and other contractual agreements, consideration of operational risks and ongoing monitoring of third-party suppliers' performance. We maintain and continue to enhance our third-party risk management program, which is designed to align with our risk tolerance and meet regulatory requirements. The program includes appropriate governance, policies, procedures and enabling technology. The third-party risk management program includes the adoption of appropriate risk management controls and practices throughout the third-party management life cycle to manage risk of service failure, risk of data loss and reputational risk, among others. Model Risk Model risk refers to the potential for adverse consequences from decisions based on incorrect or misused model outputs. Model risk can lead to financial loss, poor business and strategic decision-making or damage to our reputation. The risk inherent in a model is a function of the materiality, complexity and uncertainty around inputs and assumptions. Model risk is generated from the use of models impacting financial statements, regulatory filings, capital adequacy assessments and the formulation of strategy. Sound model risk management is an integral part of our Risk Management Framework. The Model Risk Management Department ("MRM") is a distinct department in Risk Management responsible for the oversight of model risk. The MRM establishes a model risk tolerance in line with our risk appetite. The tolerance is based on an assessment of the materiality of the risk of financial loss or reputational damage due to errors in design, implementation and/or inappropriate use of models. The tolerance is monitored through model-specific and aggregate business-level assessments, which are based upon qualitative and quantitative factors. The effective challenge of models consists of critical analysis by objective, informed parties who can identify model limitations and assumptions and drive appropriate changes. The MRM provides effective challenge of models, independently validates and approves models for use, annually recertifies models, periodically revalidates, identifies and tracks remediation plans for model limitations and reports on model risk metrics. The department also oversees the development of controls to support a complete and accurate Firmwide model inventory. Liquidity Risk Liquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets. Liquidity risk also encompasses our ability (or perceived ability) to meet our financial obligations without experiencing significant business disruption or reputational damage that may threaten our viability as a going concern. Liquidity risk also encompasses the associated funding risks triggered by the market or idiosyncratic stress events that may negatively affect our liquidity and may impact our ability to raise new funding. Generally, we incur liquidity and funding risk as a result of our trading, lending, investing and client facilitation activities. Our Liquidity Risk Management Framework is critical to helping ensure that we maintain sufficient liquidity reserves and durable funding sources to meet our daily obligations and to withstand unanticipated stress events. The Liquidity Risk Department is a distinct area in Risk Management responsible for the oversight and monitoring of liquidity risk. The Liquidity Risk Department ensures transparency of material liquidity and funding risks, compliance with established risk limits and escalation of risk concentrations to appropriate senior management. To execute these responsibilities, the Liquidity Risk Department establishes limits in line with our risk appetite, identifies and analyzes emerging liquidity and funding risks to ensure such risks are appropriately mitigated, monitors and reports risk exposures against metrics and limits, and reviews the methodologies and assumptions underpinning our Liquidity Stress Tests to ensure sufficient liquidity and funding under a range of adverse scenarios. The Treasury Department and applicable business units have primary responsibility for evaluating, monitoring and controlling the liquidity and funding risks arising from our business activities and for maintaining processes and controls to manage the key risks inherent in their respective areas. The Liquidity Risk Department coordinates with the Treasury Department and these business units to help ensure a consistent and comprehensive framework for managing liquidity and funding risk across the Firm. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" herein. Legal, Regulatory and Compliance Risk Legal, regulatory and compliance risk includes the risk of legal or regulatory sanctions, material financial loss, including fines, penalties, judgments, damages and/or settlements, limitations on our business, or loss to reputation that we may suffer as a result of failure to comply with laws, regulations,rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. This risk also includes contractual and commercial risk, such as the risk that a counterparty's performance obligations will be unenforceable. It also includes compliance with AML, terrorist financing, and anti-corruption rules and regulations. We are generally subject to extensive regulation in the different jurisdictions in which we conduct our business (see also "Business-Supervision and Regulation" and "Risk Factors"). We have established procedures based on legal and regulatory requirements on a worldwide basis that are designed to facilitate compliance with applicable statutory and regulatory requirements and to require that our policies relating to business conduct, ethics and practices are followed globally. In addition, we have established procedures to mitigate the risk that a counterparty's performance obligations will be unenforceable, including consideration of counterparty legal authority and capacity, adequacy of legal documentation, the permissibility of a transaction under applicable law and whether applicable bankruptcy or insolvency laws limit or alter contractual remedies. The heightened legal and regulatory focus on the financial services and banking industries globally presents a continuing business challenge for us. Climate Risk Climate change manifests as physical and transition risks. The physical risks of climate change include harm to people and property arising from acute climate-related events, such as floods, hurricanes, heatwaves, droughts and wildfires, and chronic, longer-term shifts in climate patterns, such as higher global average temperatures, rising sea levels and long-term droughts. The transition risk of climate change include policy, legal, technology and market changes. Examples of these transition risks include changes in consumer behavior and business sentiment, related technologies, shareholder preferences and any additional regulatory and legislative requirements, including increased disclosure or carbon taxes. Climate risk, which is not expected to have a significant effect on our consolidated results of operations or financial condition in the near term, is an overarching risk that can impact other categories of risk. Physical risk may lead to increased credit risk by diminishing borrowers' repayment capacity or impacting the value of collateral. In addition, physical risk could pose increased operational risk to our facilities and people. The impacts of transition risk may lead to and amplify credit, market or liquidity risk by reducing our customers' operating income or the value of their assets as well as exposing us to reputational, compliance and/or litigation risk due to increased legal and regulatory scrutiny or negative public sentiment. As climate risk is interconnected with other risk types, we have developed and continue to enhance processes to embed climate risk considerations into our risk management practices and governance structures. The BRC oversees Firmwide risks, which include climate risk, and, as part of its oversight, receives updates on our risk management approach to climate risk, including our approaches toward scenario analysis and integration of climate risk into our existing risk management processes. Our climate risk management efforts are overseen by the Climate Risk Committee, which is co-chaired by our Chief Risk Officer and Chief Sustainability Officer and shapes our approach to managing climate-related risks in line with our overall risk framework. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Morgan Stanley and subsidiaries (the "Firm") as of December 31, 2023 and 2022, the related consolidated income statements, comprehensive income statements, cash flow statements and statements of changes in total equity for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Firm as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Firm's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2024, expressed an unqualified opinion on the Firm's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Firm's management. Our responsibility is to express an opinion on the Firm's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Firm in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Level 3 Financial Assets and Liabilities Carried at Fair Value on a Recurring Basis and Level 3 Loans Held for Sale - Refer to Note 4 to the financial statements Critical Audit Matter Description The Firm's trading and financing activities result in the Firm carrying material financial instruments having limited price transparency. These financial instruments can span a broad array of product types and generally include derivatives, securities, loans, and borrowings. As described in Note 4, these Level 3 financial assets and liabilities carried at fair value on a recurring basis approximate $9.3 billion and $6.2 billion, respectively, and the Level 3 loans held for sale approximate $6.7 billion at December 31, 2023. Unlike financial instruments whose inputs are readily observable and, therefore, more easily independently corroborated, the valuation of these financial instruments is inherently subjective and often involves the use of unobservable inputs and proprietary valuation models whose underlying algorithms and valuation methodologies are complex. We identified the valuation of Level 3 financial assets and liabilities carried at fair value on a recurring basis and Level 3 loans held for sale as a critical audit matter given the Firm uses complex valuation models and/or valuation inputs that are not observable in the marketplace to determine the respective carrying values. Performing our audit procedures to evaluate the appropriateness of these models and inputs involved a high degree of auditor judgment, professionals with specialized skills and knowledge, and an increased extent of testing. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the valuation of Level 3 financial assets and liabilities carried at fair value on a recurring basis and Level 3 loans held for sale included the following, among others: - We tested the design and operating effectiveness of the Firm's model review and price verification controls. The Firm maintains these internal controls to assess the appropriateness of its valuation methodologies and the relevant inputs and assumptions. - We independently evaluated the appropriateness of management's valuation methodologies, for selected financial instruments, including the input assumptions, considering the expected assumptions of other market participants and external data when available. - We developed independent estimates for selected financial instruments, using externally sourced inputs and independent valuation models, and used such estimates to further evaluate management's estimates. For certain of our selected financial instruments, this included a comparison to the Firm's estimates for similar transactions and an evaluation of the Firm's assumptions inclusive of the inputs, as applicable. - We tested the revenues arising from the trade date fair value estimates for selected structured transactions for which we developed independent fair value estimates to test the valuation inputs and assumptions used by the Firm and evaluated whether these methods were consistent with the Firm's relevant valuation policies. - We assessed the consistency by which management has applied significant and unobservable valuation assumptions used in developing the Firm's estimates. - We performed a retrospective assessment of management's fair value estimates for certain of our selected financial instruments, for which there were events or transactions occurring after the valuation date. We did so by comparing management's estimates to the relevant evidence provided by such events or transactions, as applicable. /s/ Deloitte & Touche LLP New York, New York February 22, 2024 We have served as the Firm's auditor since 1997. December 2023 Form 10-K82See Notes to Consolidated Financial Statements See Notes to Consolidated Financial Statements83December 2023 Form 10-K December 2023 Form 10-K84See Notes to Consolidated Financial Statements See Notes to Consolidated Financial Statements85December 2023 Form 10-K 1. Introduction and Basis of Presentation The FirmMorgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments-Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms "Morgan Stanley" or the "Firm" mean Morgan Stanley (the "Parent Company") together with its consolidated subsidiaries. See the "Glossary of Common Terms and Acronyms" for the definition of certain terms and acronyms used throughout this Form 10-K.A description of the clients and principal products and services of each of the Firm's business segments is as follows:Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity securities and other products, as well as advice on mergers and acquisitions, restructurings and project finance. Our Equity and Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to customers. Other activities include research.Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions covering: financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services.Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and revenues (see Note 11) unless the Firm has elected to measure the investment at fair value, in which case net gains and losses are recorded within Investments revenues (see Note 5).Equity and partnership interests held by entities qualifying for accounting purposes as investment companies are carried at fair value.The Firm's significant regulated U.S. and international subsidiaries include:- Morgan Stanley & Co. LLC ("MS&Co."),- Morgan Stanley Smith Barney LLC ("MSSB"),- Morgan Stanley Europe SE ("MSESE"), - Morgan Stanley & Co. International plc ("MSIP"),- Morgan Stanley Capital Services LLC ("MSCS"),- Morgan Stanley Capital Group Inc. ("MSCG"),- Morgan Stanley MUFG Securities Co., Ltd. ("MSMS"),- Morgan Stanley Bank, N.A. ("MSBNA") and- Morgan Stanley Private Bank, National Association ("MSPBNA").For further information on the Firm's significant regulated U.S. and international subsidiaries, see Note 16. 2. Significant Accounting Policies Revenue RecognitionRevenues are recognized when the promised goods or services are delivered to our customers in an amount that is based on the consideration the Firm expects to receive in exchange for those goods or services when such amounts are not probable of significant reversal. Investment BankingRevenues from investment banking activities consist of revenues earned from underwriting, primarily equity and fixed income securities and loan syndications, and advisory fees, primarily for mergers, acquisitions and restructurings. Underwriting revenues are generally recognized on trade date if there is no uncertainty or contingency related to the amount to be paid. Underwriting costs are deferred and recognized in the relevant non-interest expenses line items when the related underwriting revenues are recorded.Advisory fees are recognized as advice is provided to the client, based on the estimated progress of work and when revenues are not probable of a significant reversal. Advisory costs are recognized as incurred in the relevant non-interest expenses line items, including those reimbursed.Commissions and FeesCommission and fee revenues generally result from transaction-based arrangements in which the client is charged a fee for the execution of transactions. Such revenues primarily arise from transactions in equity securities; services expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions that reference LIBOR or other interest rate benchmarks for which the referenced rate is expected to be discontinued or replaced. The Firm is applying the accounting relief as relevant contract and hedge accounting relationship modifications are made during the course of the reference rate reform transition period. There was no impact to the Firm's financial statements upon issuance of this accounting standard update. 3. Cash and Cash Equivalents $ in millionsAtDecember 31,2023 AtDecember 31,2022 Cash and due from banks$7,323 $5,409 Interest bearing deposits with banks81,909 122,718 Total Cash and cash equivalents$89,232 $128,127 Restricted cash$30,571 $35,380 For additional information on cash and cash equivalents, including restricted cash, see Note 2. 4. Fair Values Recurring Fair Value Measurements     Assets and Liabilities Measured at Fair Value on a Recurring Basis At December 31, 2023$ in millionsLevel 1Level 2Level 3Netting1TotalAssets at fair valueTrading assets:U.S. Treasury and agency securities$56,459 $53,741 $- $- $110,200 Other sovereign government obligations22,580 9,946 94 - 32,620 State and municipal securities- 2,148 34 - 2,182 MABS- 1,540 489 - 2,029 Loans and lending commitments2- 6,122 2,066 - 8,188 Corporate and other debt- 35,833 1,983 - 37,816 Corporate equities3,5126,772 929 199 - 127,900 Derivative and other contracts:Interest rate7,284 140,139 784 - 148,207 Credit- 10,244 393 - 10,637 Foreign exchange12 93,218 20 - 93,250 Equity2,169 55,319 587 - 58,075 Commodity and other1,608 11,862 2,811 - 16,281 Netting1(7,643)(237,497)(1,082)(42,915)(289,137)Total derivative and other contracts3,430 73,285 3,513 (42,915)37,313 Investments4,5781 836 949 - 2,566 Physical commodities- 736 - - 736 Total trading assets4210,022 185,116 9,327 (42,915)361,550 Investment securities -AFS57,405 30,708 - - 88,113 Securities purchased under agreements to resell- 7 - - 7 Total assets at fair value$267,427 $215,831 $9,327 $(42,915)$449,670 The previous tables exclude all non-financial assets and liabilities, such as Goodwill and Intangible assets, and certain financial instruments, such as equity method investments and certain receivables. 5. Fair Value Option The Firm has elected the fair value option for certain eligible instruments that are risk managed on a fair value basis to mitigate income statement volatility caused by measurement basis differences between the elected instruments and their associated risk management transactions or to eliminate complexities of applying certain accounting models. Borrowings Measured at Fair Value on a Recurring Basis $ in millionsAtDecember 31, 2023AtDecember 31, 2022Business Unit Responsible for Risk ManagementEquity$46,073 $38,945 Interest rates31,055 26,077 Commodities12,798 10,717 Credit2,400 1,564 Foreign exchange1,574 1,417 Total$93,900 $78,720 Net Revenues from Borrowings under the Fair Value Option $ in millions202320222021Trading revenues$(7,991)$12,370 $899 Interest expense503 293 305 Net revenues1$(8,494)$12,077 $594 1.Amounts do not reflect any gains or losses from related economic hedges. Gains (losses) from changes in fair value are recorded in Trading revenues and are mainly attributable to movements in the reference price or index, interest rates or foreign exchange rates. Gains (Losses) Due to Changes in Instrument-Specific Credit Risk $ in millionsTradingRevenuesOCI2023Loans and other receivables1$(123)$- Lending commitments14 - Deposits- 17 Borrowings(19)(1,726)2022Loans and other receivables1$(108)$- Lending commitments(12)- Deposits- (24)Borrowings- 2,006 2021Loans and other receivables1$278 $- Lending commitments2 - Deposits- 17 Borrowings(36)901 $ in millionsAtDecember 31, 2023AtDecember 31, 2022Cumulative pre-tax DVA gain (loss) recognized in AOCI$(2,166)$(457)1.Loans and other receivables-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses. Difference between Contractual Principal and Fair Value1 $ in millionsAtDecember 31, 2023AtDecember 31, 2022Loans and other receivables2$11,086 $11,916 Nonaccrual loans2 8,566 9,128 Borrowings33,030 5,203 1.Amounts indicate contractual principal greater than or (less than) fair value. 2.The majority of the difference between principal and fair value amounts for loans and other receivables relates to distressed debt positions purchased at amounts well below par. 3.Excludes borrowings where the repayment of the initial principal amount fluctuates based on changes in a reference price or index. The previous tables exclude non-recourse debt from consolidated VIEs, liabilities related to transfers of financial assets treated as collateralized financings, pledged commodities and other liabilities that have specified assets attributable to them. Fair Value Loans on Nonaccrual Status$ in millionsAtDecember 31, 2023AtDecember 31, 2022Nonaccrual loans$440 $585 Nonaccrual loans 90 or more days past due$75 $116 6. Derivative Instruments and Hedging Activities The Firm trades and makes markets globally in listed futures, OTC swaps, forwards, options and other derivatives referencing, among other things, interest rates, equities, currencies, investment grade and non-investment grade corporate credits, loans, bonds, U.S. and other sovereign securities, emerging market bonds and loans, credit indices, ABS indices, property indices, mortgage-related and other ABS, and real estate loan products. The Firm uses these instruments for market-making, managing foreign currency and credit exposure, and asset/liability management.The Firm manages its market-making positions by employing a variety of risk mitigation strategies. These strategies include diversification of risk exposures and hedging. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). The Firm manages the market risk associated with its market-making activities on a Firmwide basis, on a worldwide trading division level and on an individual product basis. tranche, they are passed on to the next most senior tranche in the capital structure.Other Credit Contracts.  The Firm has invested in CLNs and CDOs, which are hybrid instruments containing embedded derivatives, in which credit protection has been sold to the issuer of the note. If there is a credit event of a reference entity underlying the instrument, the principal balance of the note may not be repaid in full to the Firm. 7. Investment Securities AFS and HTM SecuritiesAt December 31, 2023$ in millionsAmortizedCost1GrossUnrealizedGainsGrossUnrealizedLossesFairValueAFS securitiesU.S. Treasury securities$58,484 $24 $1,103 57,405 U.S. agency securities225,852 4 2,528 23,328 Agency CMBS5,871 - 456 5,415 State and municipal securities1,132 46 5 1,173 FFELP student loan ABS3810 - 18 792 Total AFS securities92,149 74 4,110 88,113 HTM securitiesU.S. Treasury securities23,222 - 1,285 21,937 U.S. agency securities240,894 - 7,699 33,195 Agency CMBS1,337 - 121 1,216 Non-agency CMBS1,241 2 138 1,105 Total HTM securities66,694 2 9,243 57,453 Total investment securities$158,843 $76 $13,353 $145,566 At December 31, 2022$ in millionsAmortizedCost1GrossUnrealizedGainsGrossUnrealizedLossesFairValueAFS securitiesU.S. Treasury securities$56,103 $17 $2,254 $53,866 U.S. agency securities223,926 1 2,753 21,174 Agency CMBS5,998 - 470 5,528 State and municipal securities 2,598 71 42 2,627 FFELP student loan ABS31,147 - 45 1,102 Total AFS securities89,772 89 5,564 84,297 HTM securitiesU.S. Treasury securities28,599 - 1,845 26,754 U.S. agency securities244,038 - 8,487 35,551 Agency CMBS1,819 - 152 1,667 Non-agency CMBS1,178 - 144 1,034 Total HTM securities75,634 - 10,628 65,006 Total investment securities$165,406 $89 $16,192 $149,303 1.Amounts are net of any ACL.2.U.S. agency securities consist mainly of agency mortgage pass-through pool securities, CMOs and agency-issued debt.3.Underlying loans are backed by a guarantee, ultimately from the U.S. Department of Education, of at least 95% of the principal balance and interest outstanding. At December 31, 2023$ in millionsAmortizedCost1FairValueAnnualized Average Yield2HTM securitiesU.S. Treasury securities:Due within 1 year$6,403 $6,317 2.1 %After 1 year through 5 years12,059 11,497 1.8 %After 5 years through 10 years3,202 2,965 2.4 %After 10 years1,558 1,158 2.3 %Total23,222 21,937 U.S. agency securities:After 1 year through 5 years6 6 1.8 %After 5 years through 10 years294 276 2.1 %After 10 years40,594 32,913 1.8 %Total40,894 33,195 Agency CMBS:Due within 1 year30 30 2.5 %After 1 year through 5 years1,063 985 1.4 %After 5 years through 10 years117 99 1.4 %After 10 years127 102 1.6 %Total1,337 1,216 Non-agency CMBS:Due within 1 year208 185 4.0 %After 1 year through 5 years343 321 4.6 %After 5 years through 10 years641 551 3.7 %After 10 years49 48 5.7 %Total1,241 1,105 Total HTM securities66,694 57,453 1.9 %Total investment securities$158,843 $145,566 2.3 %1.Amounts are net of any ACL.2.Annualized average yield is computed using the effective yield, weighted based on the amortized cost of each security. The effective yield is shown pre-tax and excludes the effect of related hedging derivatives. 3.At December 31, 2023, the annualized average yield, including the interest rate swap accrual of related hedges, was 1.6% for AFS securities contractually maturing within 1 year and 3.6% for all AFS securities.Gross Realized Gains (Losses) on Sales of AFS Securities$ in millions202320222021Gross realized gains$70 $164 $237 Gross realized (losses)(21)(94)(27)Total1$49 $70 $210 1.Realized gains and losses are recognized in Other revenues in the income statement. 8. Collateralized Transactions The Firm enters into securities purchased under agreements to resell, securities sold under agreements to repurchase, securities borrowed and securities loaned transactions to, among other things, acquire securities to cover short positions and settle other securities obligations, to accommodate customers' needs and to finance its inventory positions. The Firm monitors the fair value of the underlying securities as compared with the related receivable or payable, including accrued interest, and, as necessary, requests additional collateral, as provided under the applicable agreement to ensure such transactions are adequately collateralized, or returns excess collateral. 9. Loans, Lending Commitments and Related Allowance for Credit Losses The Firm's held-for-investment and held-for-sale loan portfolios consist of the following types of loans:- Corporate. Corporate includes revolving lines of credit, term loans and bridge loans made to corporate entities for a variety of purposes.- Secured Lending Facilities. Secured lending facilities include loans provided to clients, which are collateralized by various assets, including residential and commercial real estate mortgage loans, investor commitments for capital calls, corporate loans and other assets.- Commercial Real Estate.  Commercial real estate loans include owner-occupied loans and income-producing loans.- Residential Real Estate. Residential real estate loans mainly include non-conforming loans and HELOC.- Securities-based Lending and Other.  Securities-based lending includes loans that allow clients to borrow money against the value of qualifying securities, generally for any suitable purpose other than purchasing, trading, or carrying securities or refinancing margin debt. The majority of these loans are structured as revolving lines of credit. Other primarily includes certain loans originated in the tailored lending business within the Wealth Management business segment.Loans by Type At December 31, 2023$ in millionsHFI LoansHFS LoansTotal LoansCorporate$6,758 $11,862 $18,620 Secured lending facilities39,498 3,161 42,659 Commercial real estate8,678 209 8,887 Residential real estate60,375 22 60,397 Securities-based lending and Other loans89,245 1 89,246 Total loans204,554 15,255 219,809 ACL(1,169)(1,169)Total loans, net$203,385 $15,255 $218,640 Loans to non-U.S. borrowers, net$21,152 $5,043 $26,195  At December 31, 2022$ in millionsHFI LoansHFS LoansTotal LoansCorporate$6,589 $10,634 $17,223 Secured lending facilities35,606 3,176 38,782 Commercial real estate8,515 926 9,441 Residential real estate54,460 4 54,464 Securities-based lending and Other loans94,666 48 94,714 Total loans199,836 14,788 214,624 ACL(839)(839)Total loans, net$198,997 $14,788 $213,785 Loans to non-U.S. borrowers, net$17,979 $5,672 $23,651 Employee loans are granted in conjunction with a program established primarily to recruit certain Wealth Management financial advisors, are full recourse and generally require periodic repayments, and are due in full upon termination of employment with the Firm. These loans are recorded in Customer and other receivables in the balance sheet. See Note 2 for a description of the CECL allowance methodology, including credit quality indicators, for employee loans. 10. Goodwill and Intangible Assets Goodwill Rollforward$ in millionsISWMIMTotalAt December 31, 2021¹$475 $10,325 $6,033 $16,833 Foreign currency(39)(7)(12)(58)Disposals(7)(116)- (123)At December 31, 2022¹$429 $10,202 $6,021 $16,652 Foreign currency(5)2 7 4 Acquired- - 56 56 Disposals- (5)- (5)At December 31, 2023¹$424 $10,199 $6,084 $16,707 Accumulated impairments2$673 $- $27 $700 1.Balances represent the amount of the Firm's goodwill after accumulated impairments.2.There were no impairments recorded in 2023, 2022 or 2021.Intangible Assets Rollforward$ in millionsISWMIM TotalAt December 31, 2021$104 $4,463 $3,793 $8,360 Acquired23 41 - 64 Disposals(75)(106)- (181)Amortization expense(16)(483)(111)(610)Other- (4)(11)(15)At December 31, 2022$36 $3,911 $3,671 $7,618 Acquired- 9 37 46 Disposals- (13)- (13)Amortization expense(10)(481)(110)(601)Other- 1 4 5 At December 31, 2023$26 $3,427 $3,602 $7,055 Intangible Assets by TypeNon-amortizableAmortizable$ in millionsGrossCarryingAmountGrossCarryingAmountAccumulatedAmortizationAt December 31, 2023Management contracts$2,113 $245 $72 Customer relationships- 8,763 4,582 Trade names- 767 187 Other- 14 6 Total$2,113 $9,789 $4,847 At December 31, 2022Management contracts2,110 245 51 Customer relationships- 8,766 4,046 Trade names- 736 151 Other- 14 5 Total$2,110 $9,761 $4,253 Intangible Assets Estimated Future Amortization Expense$ in millionsAtDecember 31, 20232024$600 2025455 2026348 2027343 2028337 The Firm's annual goodwill and non-amortizable intangible asset impairment testing as of July 1, 2023 did not indicate any impairment. For more information, see Note 2. 11. Other Assets-Equity Method Investments and Leases Equity Method Investments $ in millionsAtDecember 31, 2023AtDecember 31, 2022Investments$1,915 $1,927 $ in millions202320222021Income (loss)$124 $39 $104 Equity method investments, other than investments in certain fund interests, are summarized above and are included in Other assets in the balance sheet with related income or loss included in Other revenues in the income statement. See "Net Asset Value Measurements-Fund Interests" in Note 4 for the carrying value of certain of the Firm's fund interests, which are composed of general and limited partnership interests, as well as any related carried interest. Japanese Securities Joint Venture$ in millions202320222021Income (loss) from investment in MUMSS$129 $35 $168 The Firm and Mitsubishi UFJ Financial Group, Inc. ("MUFG") formed a joint venture in Japan comprising their respective investment banking and securities businesses by forming two joint venture companies, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. ("MUMSS") and Morgan Stanley MUFG Securities Co., Ltd. ("MSMS") (collectively, the "Joint Venture"). The Firm owns a 40% economic interest in the Joint Venture, and MUFG owns the other 60%.The Firm's 40% voting interest in MUMSS is accounted for under the equity method within the Institutional Securities business segment and is included in the equity method investment balances above. The Firm consolidates MSMS into the Institutional Securities business segment, based on its 51% voting interest.The Firm engages in transactions in the ordinary course of business with MUFG and its affiliates; for example, investment banking, financial advisory, sales and trading, derivatives, investment management, lending, securitization and other financial services transactions. Such transactions are on substantially the same terms as those that would be 12. Deposits Deposits$ in millionsAtDecember 31,2023 AtDecember 31,2022 Savings and demand deposits$288,252 $319,948 Time deposits63,552 36,698 Total deposits$351,804 $356,646 Deposits subject to FDIC insurance$276,598 $260,420 Deposits not subject to FDIC insurance$75,206 $96,226 Time Deposit Maturities$ in millionsAtDecember 31, 20232024$33,649 202516,220 20265,726 20273,757 20283,708 Thereafter492 Total$63,552 Uninsured Non-U.S. Time Deposit Maturities$ in millionsAtDecember 31, 2023Less than 3 months$1,602 3 - 6 months540 6 - 12 months381 Over 12 months48 Total$2,571 Deposits in U.S. Bank Subsidiaries from Non-U.S. Depositors$ in millionsAt December 31, 2023At December 31, 2022Deposits in U.S. bank subsidiaries from non-U.S. depositors$880 $1,220 13. Borrowings and Other Secured Financings Maturities and Terms of BorrowingsParent CompanySubsidiariesAtDecember 31, 2023AtDecember 31, 2022$ in millionsFixed Rate1Variable Rate2Fixed Rate1Variable Rate2Original maturities of one year or less:Next 12 months$- $- $84 $3,104 $3,188 $4,191 Original maturities greater than one year:2023$18,910 2024$8,526 $389 $607 $10,629 $20,151 29,842 202518,994 3,036 2,655 10,838 35,523 30,235 202623,038 1,478 3,764 7,143 35,423 28,998 202718,935 347 973 5,083 25,338 23,561 202811,058 374 622 9,185 21,239 15,698 Thereafter87,841 2,794 9,392 22,843 122,870 86,623 Total greater than one year$168,392 $8,418 $18,013 $65,721 $260,544 $233,867 Total$168,392 $8,418 $18,097 $68,825 $263,732 $238,058 Weighted average coupon at period end33.5 %6.1 %5.2 %N/M3.6 %3.2 %1.Fixed rate borrowings include instruments with step-up, step-down and zero coupon features.2.Variable rate borrowings include those that bear interest based on a variety of indices, including SOFR and federal funds rates, in addition to certain notes carried at fair value with various payment provisions, including notes linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures. 3.Only includes borrowings with original maturities greater than one year. Weighted average coupon is calculated utilizing U.S. and non-U.S. dollar interest rates and excludes financial instruments for which the fair value option was elected. Virtually all of the variable rate notes issued by subsidiaries are carried at fair value so a weighted average coupon is not meaningful.Borrowings with Original Maturities Greater than One Year$ in millionsAtDecember 31, 2023AtDecember 31, 2022Senior$248,174 $221,667 Subordinated12,370 12,200 Total$260,544 $233,867 Weighted average stated maturity, in years6.66.7Certain senior debt securities are denominated in various non-U.S. dollar currencies and may be structured to provide a return that is linked to equity, credit, commodity or other indices (e.g., the consumer price index). Senior debt also may be structured to be callable by the Firm or extendible at the option of holders of the senior debt securities.The Firm's Borrowings include notes carried and managed on a fair value basis. These include instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific equity security, a commodity, a credit exposure or basket of credit exposures; and instruments with various interest rate-related features, including step-ups, step-downs and zero coupons. Also included are unsecured contracts that are not classified as OTC derivatives because they fail initial net investment criteria. To minimize the exposure from such instruments, the Firm has entered into various swap contracts and purchased options that effectively convert the borrowing costs into floating rates. The swaps and purchased options used to economically hedge the embedded features are derivatives and also are carried at fair value. Changes in fair value related to the notes and economic hedges are reported in Trading Maturities and Terms of Other Secured Financings1 At December 31, 2023AtDecember 31,2022 $ in millionsFixedRateVariableRate2TotalOriginal maturities of one year or less:Next 12 months$8 $- $8 $501 Original maturities greater than one year:2023$5,200 2024$- $5,085 $5,085 343 2025- 95 95 131 20265 87 92 2 2027- - - - 2028- 434 434 - Thereafter7 1,086 1,093 862 Total$12 $6,787 $6,799 $6,538 Weighted average coupon at period-end3N/M5.6 %5.6 %4.9 %1.Excludes transfers of assets accounted for as secured financings. See subsequent table.2.Variable rate other secured financings bear interest based on a variety of indices, including SOFR and federal funds rates. Amounts include notes carried at fair value with various payment provisions, including notes linked to equity, credit, commodity or other indices.3.Includes only other secured financings with original maturities greater than one year. Weighted average coupon is calculated utilizing U.S. and non-U.S. dollar interest rates and excludes other secured financings that are linked to non-interest indices and for which the fair value option was elected.Other secured financings include the liabilities related to collateralized notes, transfers of financial assets that are accounted for as financings rather than sales and consolidated VIEs where the Firm is deemed to be the primary beneficiary. These liabilities are generally payable from the cash flows of the related assets accounted for as Trading assets. See Note 15 for further information on other secured financings related to VIEs and securitization activities. Maturities of Transfers of Assets Accounted for as Secured Financings1$ in millionsAtDecember 31, 2023AtDecember 31, 20222023$987 2024$5,749 4 20259 60 202636 35 202721 21 202811 - Thereafter22 12 Total$5,848 $1,119 1.Excludes Securities sold under agreements to repurchase and Securities loaned. For transfers of assets that fail to meet accounting criteria for a sale, the Firm continues to record the assets and recognizes the associated liabilities in the balance sheet. 14. Commitments, Guarantees and Contingencies CommitmentsYears to Maturity at December 31, 2023$ in millionsLess than 11-33-5Over 5TotalLending:Corporate$17,036 $36,214 $54,411 $1,134 $108,795 Secured lending facilities8,043 5,936 3,466 2,424 19,869 Commercial and Residential real estate217 28 28 352 625 Securities-based lending and Other16,483 3,488 319 394 20,684 Forward-starting secured financing receivables160,261 - - - 60,261 Central counterparty300 - - 14,910 15,210 Investment activities1,659 119 80 551 2,409 Letters of credit and other financial guarantees51 17 - 6 74 Total$104,050 $45,802 $58,304 $19,771 $227,927 Lending commitments participated to third parties$7,213 1.Forward-starting secured financing receivables are generally settled within three business days.Since commitments associated with these instruments may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.Types of CommitmentsLending Commitments.  Lending commitments primarily represent the notional amount of legally binding obligations to provide funding to clients for different types of loan transactions. For syndications that are led by the Firm, the lending commitments accepted by the borrower but not yet closed are net of the amounts agreed to by counterparties that will participate in the syndication. For syndications that the Firm participates in and does not lead, lending commitments accepted by the borrower but not yet closed include only the amount that the Firm expects it will be allocated from the lead syndicate bank. Due to the nature of the Firm's obligations under the commitments, these amounts include certain commitments participated to third parties.Forward-Starting Secured Financing Receivables.  This amount includes securities purchased under agreements to resell and securities borrowed that the Firm has entered into prior to the balance sheet date that will settle after the balance sheet date. These transactions are primarily secured by collateral from U.S. government agency securities and other sovereign government obligations when they are funded.Central Counterparty.  These commitments relate to the Firm's membership in certain clearinghouses and are contingent upon the default of a clearinghouse member or other stress events. Firm and the other underwriters, but granted the motion to dismiss as to Viacom and the Viacom individual defendants. On February 15, 2023, the underwriters, including the Firm, filed their notices of appeal of the denial of their motions to dismiss. On March 10, 2023, the plaintiff appealed the dismissal of Viacom and the individual Viacom defendants. On January 4, 2024, the court granted the plaintiff's motion for class certification. On February 14, 2024, the defendants filed their notice of appeal.On May 17, 2013, the plaintiff in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Firm and certain affiliates in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Firm to plaintiffs was approximately $133 million. The complaint alleges causes of action against the Firm for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Firm's motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by the Firm or sold to plaintiffs by the Firm was approximately $116 million. On August 11, 2016, the Appellate Division, First Department affirmed the trial court's order denying in part the Firm's motion to dismiss the complaint. On July 15, 2022, the Firm filed a motion for summary judgment on all remaining claims. On March 1, 2023, the court granted in part and denied in part the Firm's motion for summary judgment, narrowing the alleged misrepresentations at issue in the case. On March 14, 2023, the Firm filed its notice of appeal, and on March 21, 2023, plaintiffs filed their notice of cross appeal. 15. Variable Interest Entities and Securitization Activities OverviewThe Firm is involved with various SPEs in the normal course of business. In most cases, these entities are deemed to be VIEs.The Firm's variable interests in VIEs include debt and equity interests, commitments, guarantees, derivative instruments and certain fees. The Firm's involvement with VIEs arises primarily from:- Interests purchased in connection with market-making activities, securities held in its Investment securities portfolio and retained interests held as a result of securitization activities, including re-securitization transactions. continuing involvement and received sales treatment. The transferred assets are carried at fair value prior to securitization, and any changes in fair value are recognized in the income statement. The Firm may act as underwriter of the beneficial interests issued by these securitization vehicles, for which Investment banking revenues are recognized. The Firm may retain interests in the securitized financial assets as one or more tranches of the securitization. Certain retained interests are carried at fair value in the balance sheet with changes in fair value recognized in the income statement. Fair value for these interests is measured using techniques that are consistent with the valuation techniques applied to the Firm's major categories of assets and liabilities as described in Notes 2 and 4. Further, as permitted by applicable guidance, certain transfers of assets where the Firm's only continuing involvement is a derivative are only reported in the following Assets Sold with Retained Exposure table.Proceeds from New Securitization Transactions and Sales of Loans$ in millions202320222021New transactions1$21,051 $22,136 $57,528 Retained interests4,311 4,862 8,822 Sales of corporate loans to CLO SPEs1, 224 62 169 1.Net gains on new transactions and sales of corporate loans to CLO entities at the time of the sale were not material for all periods presented.2.Sponsored by non-affiliates.The Firm has provided, or otherwise agreed to be responsible for, representations and warranties regarding certain assets transferred in securitization transactions sponsored by the Firm (see Note 14).Assets Sold with Retained Exposure$ in millionsAtDecember 31,2023 AtDecember 31,2022 Gross cash proceeds from sale of assets1$60,766 $49,059 Fair valueAssets sold$62,221 $47,281 Derivative assets recognized in the balance sheet1,546 116 Derivative liabilities recognized in the balance sheet93 1,893 1.The carrying value of assets derecognized at the time of sale approximates gross cash proceeds.The Firm enters into transactions in which it sells securities, primarily equities, and contemporaneously enters into bilateral OTC derivatives with the purchasers of the securities, through which it retains exposure to the sold securities. 16. Regulatory Requirements Regulatory Capital FrameworkThe Firm is an FHC under the Bank Holding Company Act of 1956, as amended, and is subject to the regulation and oversight of the Board of Governors of the Federal Reserve System ("Federal Reserve"). The Federal Reserve establishes capital requirements for the Firm, including "well-capitalized" standards, and evaluates the Firm's compliance with such capital requirements. The OCC establishes similar capital requirements and standards for the Firm's U.S. bank subsidiaries, including, among others, MSBNA and MSPBNA (together, "U.S. Bank Subsidiaries"). The regulatory capital requirements are largely based on the Basel III capital standards established by the Basel Committee on Banking Supervision and also implement certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In addition, many of the Firm's regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants.Regulatory Capital RequirementsThe Firm is required to maintain minimum risk-based and leverage-based capital ratios under regulatory capital requirements. A summary of the calculations of regulatory capital and RWA follows.Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus the Firm's capital buffer requirement. Capital requirements require certain adjustments to, and deductions from, capital for purposes of determining these ratios.CECL Deferral. Beginning on January 1, 2020, the Firm elected to defer the effect of the adoption of CECL on its risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure calculations, over a five-year transition period. The deferral impacts began to phase in at 25% per year from January 1, 2022 and are phased-in at 50% from January 1, 2023. The deferral impacts will become fully phased-in beginning on January 1, 2025. Agency. MSMS is also registered with the CFTC as a swap dealer but is currently complying with home-country capital requirements in lieu of CFTC capital requirements pursuant to interim no-action relief. - MSCS, a U.S. entity and the Firm's primary non-bank security-based swap dealer, is conditionally registered with the SEC as a security-based swap dealer, registered with the SEC as an OTC derivatives dealer and registered with the CFTC as a swap dealer. MSCS is subject to the capital requirements of both regulators.- MSCG, a U.S. entity, is registered with the CFTC as a swap dealer and is subject to its capital requirements.Certain other U.S. and non-U.S. subsidiaries of the Firm are subject to various securities, commodities and banking regulations, and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. These subsidiaries have also consistently operated with capital in excess of their local capital adequacy requirements.Restrictions on PaymentsThe regulatory capital requirements referred to above, and certain covenants contained in various agreements governing indebtedness of the Firm, may restrict the Firm's ability to withdraw capital from its subsidiaries. The following table represents net assets of consolidated subsidiaries that may be restricted as to the payment of cash dividends and advances to the Parent Company.$ in millionsAtDecember 31,2023 AtDecember 31,2022 Restricted net assets$49,008 $45,896 17. Total Equity Morgan Stanley Shareholders' EquityPreferred Stock SharesOutstanding Carrying Value$ in millions, except per share dataAtDecember 31,2023 LiquidationPreferenceper ShareAtDecember 31,2023 AtDecember 31,2022 SeriesA44,000 $25,000 $1,100 $1,100 C1519,882 1,000 408 408 E34,500 25,000 862 862 F34,000 25,000 850 850 I40,000 25,000 1,000 1,000 K40,000 25,000 1,000 1,000 L20,000 25,000 500 500 M400,000 1,000 430 430 N3,000 100,000 300 300 O52,000 25,000 1,300 1,300 P40,000 25,000 1,000 1,000 Total$8,750 $8,750 Shares authorized30,000,000 1.Series C preferred stock is held by MUFG.The Firm's preferred stock has a preference over its common stock upon liquidation. The Firm's preferred stock qualifies as and is included in Tier 1 capital in accordance with regulatory capital requirements (see Note 16).Description of Preferred Stock as of December 31, 2023  DepositarySharesper ShareRedemptionSeries1, 2SharesIssuedPriceper Share3Date4A44,000 1,000 $25,000 Currently redeemableC51,160,791 N/A1,100 Currently redeemableE34,500 1,000 25,000 Currently redeemableF34,000 1,000 25,000 January 15, 2024I40,000 1,000 25,000 October 15, 2024K40,000 1,000 25,000 April 15, 2027L20,000 1,000 25,000 January 15, 2025M400,000 N/A1,000 September 15, 2026N3,000 100 100,000 October 2, 2025O652,000 1,000 25,000 January 15, 2027P740,000 1,000 25,000 October 15, 20271.All shares issued are non-cumulative. Each share has a par value of $0.01, except Series C.2.Dividends on Series A are based on a floating rate, and dividends on Series C, L and O are based on a fixed rate. Dividends on all other Series are based on a fixed-to-floating rate.3.Series A and C are redeemable at the redemption price plus accrued and unpaid dividends, regardless of whether dividends are actually declared, up to but excluding the date of redemption. All other Series are redeemable at the redemption price plus any declared and unpaid dividends, up to but excluding the date fixed for redemption.4.Series A and C are currently redeemable at the Firm's option, in whole or in part, from time to time. Series E is currently redeemable, and all other Series are redeemable, at the Firm's option (i) in whole or in part, from time to time, on any dividend payment date on or after the redemption date or (ii) in whole but not in part at any time within 90 days following a regulatory capital treatment event (as described in the terms of that series).5.Series C is non-voting perpetual preferred stock. Dividends on the Series C preferred stock are payable, on a non-cumulative basis, as and if declared by the Board of Directors, in cash, at the rate of 10% per annum of the liquidation preference of $1,000 per share.6.The Firm issued Series O Preferred Stock on October 25, 2021.7.The Firm issued Series P Preferred Stock on August 2, 2022. 18. Interest Income and Interest Expense $ in millions202320222021Interest incomeCash and cash equivalents1$3,408 $914 $7 Investment securities3,992 3,066 2,759 Loans12,424 6,988 4,209 Securities purchased under agreements to resell27,762 2,188 (181)Securities borrowed35,191 1,020 (1,017)Trading assets, net of Trading liabilities4,488 2,484 2,038 Customer receivables and Other113,016 4,935 1,596 Total interest income$50,281 $21,595 $9,411 Interest expenseDeposits$8,216 $1,825 $409 Borrowings11,437 5,054 2,725 Securities sold under agreements to repurchase46,737 1,760 93 Securities loaned5784 503 401 Customer payables and Other614,877 3,126 (2,262)Total interest expense$42,051 $12,268 $1,366 Net interest$8,230 $9,327 $8,045 1.In the fourth quarter of 2023, interest bearing Cash and cash equivalents and related interest were presented separately for the first time. The prior period amounts for Customer receivables and Other have been disaggregated to exclude Cash and cash equivalents to align with the current presentation.2.Includes interest paid on Securities purchased under agreements to resell.3.Includes fees paid on Securities borrowed.4.Includes interest received on Securities sold under agreements to repurchase.5.Includes fees received on Securities loaned. 6.Includes fees received from Equity Financing customers related to their short transactions, which can be under either margin or securities lending arrangements.Interest income and Interest expense are classified in the income statement based on the nature of the instrument and related market conventions. When included as a component of the instrument's fair value, interest is included within Trading revenues or Investments revenues. Otherwise, it is included within Interest income or Interest expense.Accrued Interest$ in millionsAtDecember 31,2023 AtDecember 31,2022 Customer and other receivables$4,206 $4,139 Customer and other payables4,360 4,273 19. Deferred Compensation Plans and Carried Interest Compensation Stock-Based Compensation PlansCertain current and former employees of the Firm participate in the Firm's stock-based compensation plans. These plans include RSUs, PSUs and an ESPP. 20. Employee Benefit Plans Pension PlansNet Periodic Benefit Expense (Income) Pension Plans$ in millions202320222021Service cost, benefits earned during the period$20 $19 $19 Interest cost on projected benefit obligation140 111 104 Expected return on plan assets(99)(56)(48)Net amortization of prior service cost1 1 1 Amortization of net gains and losses(9)25 34 Plan settlements$2 $- $- Net periodic benefit expense$55 $100 $110 Certain current and former U.S. employees of the Firm and its U.S. affiliates who were hired before July 1, 2007 are covered by the U.S. pension plan, a non-contributory defined benefit pension plan that is qualified under Section 401(a) of the Internal Revenue Code ("U.S. Qualified Plan"). The U.S. Qualified Plan has ceased future benefit accruals.Unfunded supplementary plans ("Supplemental Plans") cover certain executives. Liabilities for benefits payable under the Supplemental Plans are accrued by the Firm and are funded when paid. The Morgan Stanley Supplemental Executive Retirement and Excess Plan ("SEREP"), a non-contributory defined benefit plan that is not qualified under Section 401(a) of the Internal Revenue Code, has ceased future benefit accruals.Certain of the Firm's non-U.S. subsidiaries also have defined benefit pension plans covering their eligible current and former employees.The Firm's pension plans generally provide pension benefits that are based on each employee's years of credited service and on compensation levels specified in the plans.Rollforward of Pre-tax AOCI Pension Plans$ in millions202320222021Beginning balance$(716)$(768)$(691)Net gain (loss)(100)26 (112)Amortization of prior service cost1 1 1 Amortization of net gains and losses (9)25 34 Plan settlements and curtailments3 - - Changes recognized in OCI(105)52 (77)Ending balance$(821)$(716)$(768)The Firm generally amortizes into net periodic benefit expense (income) the unrecognized net gains and losses exceeding 10% of the greater of the projected benefit obligation or the market-related value of plan assets. The U.S. pension plans amortize the unrecognized net gains and losses over the average life expectancy of participants. The remaining plans generally amortize the unrecognized net 21. Income Taxes Components of Provision for Income Taxes$ in millions202320222021CurrentU.S.:Federal$1,190 $2,518 $2,554 State and local542 442 475 Non-U.S.:Brazil1437 24 197 U.K.267 405 551 Japan139 105 105 Hong Kong39 29 192 Other2432 236 470 Total$3,046 $3,759 $4,544 DeferredU.S.:Federal$(295)$(803)$(11)State and local(59)(142)33 Non-U.S.:Brazil1(43)25 38 U.K.12 55 (37)Japan(13)20 4 Hong Kong(2)(1)(9)Other2(63)(3)(14)Total$(463)$(849)$4 Provision for income taxes$2,583 $2,910 $4,548 1.In 2023, Brazil was presented separately for the first time. The prior period amounts for Other have been disaggregated to exclude Brazil to align with the current presentation.2.Other Non-U.S. tax provisions for 2023, 2022 and 2021 primarily include, Singapore and Germany.Reconciliation of the U.S. Federal Statutory Income Tax Rate to the Effective Income Tax Rate202320222021U.S. federal statutory income tax rate21.0 %21.0 %21.0 %U.S. state and local income taxes, net of U.S. federal income tax benefits3.4 1.8 2.1 Domestic tax credits and tax exempt income(1.3)(0.9)(0.6)Non-U.S. earnings1.9 0.6 1.3 Employee share-based awards(1.5)(1.7)(0.6)Non-taxable income1(2.3)(0.8)(0.4)Other0.7 0.7 0.3 Effective income tax rate21.9 %20.7 %23.1 %1.In 2023, Non-taxable income was presented separately for the first time. The prior period amounts for Non-U.S. earnings and Other have been disaggregated to exclude Non-taxable income to align with the current presentation. of unrecognized tax benefits and the impact on the Firm's effective tax rate over the next 12 months.Interest Expense (Benefit) Associated with Unrecognized Tax Benefits, Net of Federal and State Income Tax Benefits$ in millions202320222021Recognized in income statement$65 $39 $14 Accrued at end of period237 175 142 Interest and penalties related to unrecognized tax benefits are recognized as a component of the provision for income taxes. Penalties related to unrecognized tax benefits for the years mentioned above were immaterial.Earliest Tax Year Subject to Examination in Major Tax JurisdictionsJurisdictionTax YearU.S.2017New York State and New York City2010U.K.2014Japan2019Hong Kong2017The Firm is routinely under examination by the IRS and other tax authorities in certain countries, such as Japan and the U.K., and in states and localities in which it has significant business operations, such as New York.The Firm believes that the resolution of these tax examinations will not have a material effect on the annual financial statements, although a resolution could have a material impact in the income statement and on the effective tax rate for any period in which such resolutions occur. 22. Segment, Geographic and Revenue Information The Firm structures its segments primarily based upon the nature of the financial products and services provided to customers and its management organization. The Firm provides a wide range of financial products and services to its customers in each of its business segments: Institutional Securities, Wealth Management and Investment Management. For a further discussion of the business segments, see Note 1.Revenues and expenses directly associated with each respective business segment are included in determining its operating results. Other revenues and expenses that are not directly attributable to a particular business segment are generally allocated based on each business segment's respective net revenues, non-interest expenses or other relevant measures.As a result of revenues and expenses from transactions with other operating segments being treated as transactions with external parties for purposes of segment disclosures, the Firm includes an Intersegment Eliminations category to reconcile the business segment results to the consolidated results. Assets by Business Segment$ in millionsAtDecember 31,2023 AtDecember 31,2022 Institutional Securities$810,506 $789,837 Wealth Management365,168 373,305 Investment Management18,019 17,089 Total1$1,193,693 $1,180,231 1. Parent assets have been fully allocated to the business segments.Total Assets by Region$ in millionsAtDecember 31,2023 AtDecember 31,2022 Americas$832,714 $853,228 EMEA218,923 197,397 Asia142,056 129,606 Total$1,193,693 $1,180,231 23. Parent Company Parent Company Only-Condensed Income Statement and Comprehensive Income Statement$ in millions202320222021RevenuesDividends from bank subsidiaries$5,770 $2,875 $- Dividends from BHC and non-bank subsidiaries6,812 8,661 8,898 Total dividends from subsidiaries12,582 11,536 8,898 Trading(775)(1,143)229 Other(31)170 4 Total non-interest revenues11,776 10,563 9,131 Interest income13,596 5,805 2,648 Interest expense13,618 6,162 2,822 Net interest(22)(357)(174)Net revenues11,754 10,206 8,957 Non-interest expenses287 252 443 Income before income taxes11,467 9,954 8,514 Provision for (benefit from) income taxes(520)(456)(203)Net income before undistributed gain of subsidiaries11,987 10,410 8,717 Undistributed (loss) gain of subsidiaries(2,900)619 6,317 Net income9,087 11,029 15,034 Other comprehensive income (loss), net of tax:Foreign currency translation adjustments51 (202)(207)Change in net unrealized gains (losses) on available-for-sale securities1,098 (4,437)(1,542)Pensions and other(87)43 (53)Change in net debt valuation adjustment(1,250)1,449 662 Net change in cash flow hedges20 (4)- Comprehensive income$8,919 $7,878 $13,894 Net income$9,087 $11,029 $15,034 Preferred stock dividends and other557 489 468 Earnings applicable to Morgan Stanley common shareholders$8,530 $10,540 $14,566 Average Balances and Interest Rates and Net Interest Income 20232022$ in millionsAverageDailyBalanceInterestAverageRateAverageDailyBalanceInterestAverageRateInterest earning assetsCash and cash equivalents1:U.S.$56,920 $2,386 4.2 %$57,889 $692 1.2 %Non-U.S.48,373 1,022 2.1 %58,052 222 0.4 %Investment securities2153,307 3,992 2.6 %167,494 3,066 1.8 %Loans2215,628 12,424 5.8 %205,069 6,988 3.4 %Securities purchased under agreements to resell3:U.S.47,604 4,714 9.9 %57,565 1,643 2.9 %Non-U.S.61,766 3,048 4.9 %62,585 545 0.9 %Securities borrowed4:U.S.115,279 4,794 4.2 %123,288 1,039 0.8 %Non-U.S.18,514 397 2.1 %19,345 (19)(0.1)%Trading assets, net of Trading liabilities5:U.S.93,409 3,792 4.1 %74,932 2,068 2.8 %Non-U.S.12,788 696 5.4 %14,748 416 2.8 %Customer receivables and Other1:U.S.45,815 9,585 20.9 %56,040 3,798 6.8 %Non-U.S.14,485 3,431 23.7 %15,891 1,137 7.2 %Total$883,888 $50,281 5.7 %$912,898 $21,595 2.4 %Interest bearing liabilitiesDeposits2$342,583 $8,216 2.4 %$340,741 $1,825 0.5 %Borrowings2, 6238,164 11,437 4.8 %229,255 5,054 2.2 %Securities sold under agreements to repurchase7,9:U.S.22,718 3,591 15.8 %21,481 1,086 5.1 %Non-U.S.46,392 3,146 6.8 %39,631 674 1.7 %Securities loaned8,9:U.S.4,244 67 1.6 %6,277 37 0.6 %Non-U.S.9,470 717 7.6 %7,669 466 6.1 %Customer payables and Other10:U.S.133,069 10,225 7.7 %143,448 1,991 1.4 %Non-U.S.63,916 4,652 7.3 %73,291 1,135 1.5 %Total$860,556 $42,051 4.9 %$861,793 $12,268 1.4 %Net interest income and net interest rate spread$8,230 0.8 %$9,327 1.0 % Effect of Volume and Rate Changes on Net Interest Income 2023 versus 2022 Increase (Decrease)Due to Change in: $ in millionsVolumeRateNet ChangeInterest earning assetsCash and cash equivalents1:U.S.$(12)$1,706 $1,694 Non-U.S.(37)837 800 Investmentsecurities2(260)1,186 926 Loans2360 5,076 5,436 Securities purchased under agreements to resell3:U.S.(284)3,355 3,071 Non-U.S.(7)2,510 2,503 Securities borrowed4:U.S.(67)3,822 3,755 Non-U.S.1 415 416 Trading assets, net of Trading liabilities5:U.S.510 1,214 1,724 Non-U.S.(55)335 280 Customer receivables and Other1:U.S.(693)6,480 5,787 Non-U.S.(101)2,395 2,294 Change in interest income$(645)$29,331 $28,686 Interest bearing liabilitiesDeposits2$10 $6,381 $6,391 Borrowings2,6196 6,187 6,383 Securities sold under agreements to repurchase7,9:U.S.63 2,442 2,505 Non-U.S.115 2,357 2,472 Securities loaned8,9:U.S.(12)42 30 Non-U.S.109 142 251 Customer payables and Other10:U.S.(144)8,378 8,234 Non-U.S.(145)3,662 3,517 Change in interest expense$192 $29,591 $29,783 Change in net interest income$(837)$(260)$(1,097) Average Balances and Interest Rates and Net Interest Income 2021$ in millionsAverageDailyBalanceInterestAverageRateInterest earning assetsCash and cash equivalents1:U.S.$62,340 $44 0.1 %Non-U.S.52,106 (37)(0.1)%Investment securities2182,896 2,759 1.5 %Loans2166,675 4,209 2.5 %Securities purchased under agreements to resell3:U.S.55,274 86 0.2 %Non-U.S.53,323 (267)(0.5)%Securities borrowed4:U.S.99,667 (825)(0.8)%Non-U.S.17,387 (192)(1.1)%Trading assets, net of Trading liabilities5:U.S.77,916 1,644 2.1 %Non-U.S.19,559 394 2.0 %Customer receivables and Other1:U.S.72,665 1,365 1.9 %Non-U.S.21,962 231 1.1 %Total$881,770 $9,411 1.1 %Interest bearing liabilitiesDeposits2$325,500 $409 0.1 %Borrowings2,6224,657 2,725 1.2 %Securities sold under agreements to repurchase7,9:U.S.29,383 157 0.5 %Non-U.S.27,374 (64)(0.2)%Securities loaned8,9:U.S.4,816 29 0.6 %Non-U.S.5,514 372 6.7 %Customer payables and Other10:U.S.132,899 (1,825)(1.4)%Non-U.S.76,185 (437)(0.6)%Total$826,328 $1,366 0.2 %Net interest income and net interest rate spread$8,045 0.9 % Effect of Volume and Rate Changes on Net Interest Income 2022 versus 2021 Increase (Decrease)Due to Change in: $ in millionsVolumeRateNet ChangeInterest earning assetsCash and cash equivalents1:U.S.$(3)$651 $648 Non-U.S.(4)263 259 Investment securities2(232)539 307 Loans2970 1,809 2,779 Securities purchased under agreements to resell3:U.S.4 1,553 1,557 Non-U.S.(46)858 812 Securities borrowed4:U.S.(196)2,060 1,864 Non-U.S.(22)195 173 Trading assets, net of Trading liabilities5:U.S.(63)487 424 Non-U.S.(97)119 22 Customer receivables and Other1:U.S.(312)2,745 2,433 Non-U.S.(64)970 906 Change in interest income$(65)$12,249 $12,184 Interest bearing liabilitiesDeposits2$19 $1,397 $1,416 Borrowings2,656 2,273 2,329 Securities sold under agreements to repurchase7,9:U.S.(42)971 929 Non-U.S.(29)767 738 Securities loaned8,9:U.S.9 (1)8 Non-U.S.145 (51)94 Customer payables and Other10:U.S.(145)3,961 3,816 Non-U.S.17 1,555 1,572 Change in interest expense$30 $10,872 $10,902 Change in net interest income$(95)$1,377 $1,282 1.In the fourth quarter of 2023, interest bearing Cash and cash equivalents and related interest were presented separately for the first time. The prior period amounts for Customer receivables and Other have been disaggregated to exclude Cash and cash equivalents to align with the current presentation. 2.Amounts include primarily U.S. balances. 3.Includes interest paid on Securities purchased under agreements to resell. 4.Includes fees paid on Securities borrowed. 5.Excludes non-interest earning assets and non-interest bearing liabilities, such as equity securities. 6.Average daily balance includes borrowings carried at fair value, but for certain borrowings, interest expense is considered part of fair value and is recorded in Trading revenues. 7.Includes interest received on Securities sold under agreements to repurchase. 8.Includes fees received on Securities loaned. 9.The annualized average rate was calculated using (a) interest expense incurred on all securities sold under agreements to repurchase and securities loaned transactions, whether or not such transactions were reported in the balance sheet and (b) net average on-balance sheet balances, which exclude certain securities-for-securities transactions. 10.Includes fees received from Equity Financing customers related to their short transactions, which can be under either margin or securities lending arrangements. Deposits Average Daily Deposits 202320222021$ in millionsAverageAmountAverageRateAverageAmountAverageRateAverageAmountAverageRateDeposits1:Savings and demand$286,513 2.0 %$321,316 0.4 %$304,664 - %Time56,070 4.3 %19,425 2.7 %20,836 1.7 %Total$342,583 2.4 %$340,741 0.5 %$325,500 0.1 %1.The Firm's deposits were primarily held in U.S. offices. ABSAsset-backed securitiesACLAllowance for credit lossesAFSAvailable-for-saleAMLAnti-money launderingAOCIAccumulated other comprehensive income (loss)AUMAssets under management or supervisionBalance sheetConsolidated balance sheetBHCBank holding companybpsBasis points; one basis point equals 1/100th of 1%Cash flow statementConsolidated cash flow statementCCARComprehensive Capital Analysis and ReviewCCyBCountercyclical capital bufferCDOCollateralized debt obligation(s), including Collateralized loan obligation(s)CDSCredit default swapsCECLCurrent Expected Credit Losses, as calculated under the Financial Instruments-Credit Losses accounting updateCFTCU.S. Commodity Futures Trading CommissionCLNCredit-linked note(s)CLOCollateralized loan obligation(s)CMBSCommercial mortgage-backed securitiesCMOCollateralized mortgage obligation(s)CRMCredit Risk Management DepartmentCTACumulative foreign currency translation adjustmentsDCPEmployee deferred cash-based compensation plans linked to investment performanceDCP investmentsInvestments associated with certain DCPDVADebt valuation adjustmentEBITDAEarnings before interest, taxes, depreciation and amortizationELNEquity-linked note(s)EMEAEurope, Middle East and AfricaEPSEarnings per common shareE.U.European UnionFDICFederal Deposit Insurance CorporationFFELPFederal Family Education Loan ProgramFHCFinancial holding companyFICCFixed Income Clearing CorporationFICOFair Isaac CorporationFinancial statementsConsolidated financial statementsFVAFunding valuation adjustmentFVOFair value optionG-SIBGlobal systemically important banksHELOCHome Equity Line of CreditHFIHeld-for-investmentHFSHeld-for-saleHQLAHigh-quality liquid assetsHTMHeld-to-maturityI/EIntersegment eliminationsIHCIntermediate holding companyIMInvestment ManagementIncome statementConsolidated income statementIRSInternal Revenue Service ISInstitutional SecuritiesLCRLiquidity coverage ratio, as adopted by the U.S. banking agenciesLIBORLondon Interbank Offered RateLTVLoan-to-valueM&AMerger, acquisition and restructuring transactionMSBNAMorgan Stanley Bank, N.A.MS&Co.Morgan Stanley & Co. LLCMSCGMorgan Stanley Capital Group Inc.MSCSMorgan Stanley Capital Services LLCMSEHSEMorgan Stanley Europe Holdings SEMSESEMorgan Stanley Europe SEMSIPMorgan Stanley & Co. International plcMSMSMorgan Stanley MUFG Securities Co., Ltd.MSPBNAMorgan Stanley Private Bank, National AssociationMSSBMorgan Stanley Smith Barney LLCMUFGMitsubishi UFJ Financial Group, Inc.MUMSSMitsubishi UFJ Morgan Stanley Securities Co., Ltd.MWhMegawatt hourN/ANot ApplicableN/MNot MeaningfulNAVNet asset valueNon-GAAPNon-generally accepted accounting principlesNSFRNet stable funding ratio, as adopted by the U.S. banking agenciesOCCOffice of the Comptroller of the CurrencyOCIOther comprehensive income (loss)OISOvernight index swapOTCOver-the-counterPRAPrudential Regulation AuthorityPSUPerformance-based stock unitRMBSResidential mortgage-backed securitiesROEReturn on average common equityROTCEReturn on average tangible common equityROURight-of-useRSURestricted stock unitRWARisk-weighted assetsSCBStress capital bufferSECU.S. Securities and Exchange CommissionSLRSupplementary leverage ratioSOFRSecured Overnight Financing RateS&PStandard & Poor'sSPESpecial purpose entitySPOESingle point of entryTLACTotal loss-absorbing capacityU.K.United KingdomUPBUnpaid principal balanceU.S.United States of AmericaU.S. Bank SubsidiariesMorgan Stanley Bank, N.A. ("MSBNA") and Morgan Stanley Private Bank, National Association ("MSPBNA")U.S. GAAPAccounting principles generally accepted in the United States of AmericaVaRValue-at-RiskVIEVariable interest entityWACCImplied weighted average cost of capitalWMWealth Management Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Controls and Procedures Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures Under the supervision and with the participation of the Firm's management, including the Chief Executive Officer and Chief Financial Officer, the Firm conducted an evaluation of the effectiveness of the Firm's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Firm's disclosure controls and procedures were effective as of the end of the period covered by this annual report. Management's Report on Internal Control Over Financial Reporting The Firm's management is responsible for establishing and maintaining adequate internal control over financial reporting. The Firm's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). The internal control over financial reporting includes those policies and procedures that: - Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Firm;- Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that receipts and expenditures are being made only in accordance with authorizations of the Firm's management and directors; and - Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Firm assets that could have a material effect on the Firm's financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Firm's internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework (2013). Based on management's assessment and those criteria, management believes that the Firm maintained effective internal control over financial reporting as of December 31, 2023. The Firm's independent registered public accounting firm has audited and issued a report on the Firm's internal control over financial reporting, which appears below. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Morgan Stanley and subsidiaries (the "Firm") as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Firm maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the financial statements of the Firm as of and for the year ended December 31, 2023 and our report dated February 22, 2024 expressed an unqualified opinion on those financial statements. Basis for Opinion The Firm's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Firm's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Firm in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP New York, New York February 22, 2024 Changes in Internal Control Over Financial Reporting No change in the Firm's internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the quarter ended December 31, 2023 that materially affected, or is reasonably likely to materially affect, the Firm's internal control over financial reporting. Other Information On February 20, 2024 the Compensation, Management Development and Succession Committee of the Board of Directors ("CMDS Committee") of Morgan Stanley approved amendments to each of the award certificates ("Award Certificates") covering all outstanding performance stock units granted under the Morgan Stanley Equity Incentive Compensation Plan, including to executive officers of the Firm. Under the original terms of the Award Certificates, upon termination of employment due to death or disability, the participant vests in a prorated portion of the shares earned by applying the performance multiplier based on service during the performance period. The CMDS Committee amended each Award Certificate to provide that, upon termination of employment due to death or disability, the participant vests in the full number of shares earned by applying the performance multiplier. Providing for full vesting of performance stock units upon termination of employment due to death or disability is consistent with the provisions of Morgan Stanley's restricted stock units. This description of the Award Certificates is qualified in its entirety by reference to the full text of the Award Certificates, a form of which is filed hereto as Exhibit 10.22. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections Not applicable.

The Institutional Securities business segment lending activities include Corporate, Secured lending facilities, Commercial and Residential real estate, and Securities-based lending and Other. As of December 31, 2023 and December 31, 2022, over 90% of our total lending exposure, which consists of loans and lending commitments, is investment grade and/or secured by collateral. Corporate comprises relationship and event-driven loans and lending commitments supporting general and event-driven financing needs for our institutional clients, which typically consist of revolving lines of credit, term loans and bridge loans; may have varying terms; may be senior or subordinated; may be secured or unsecured; are generally contingent upon representations, warranties and contractual conditions applicable to the borrower; and may be syndicated, traded or hedged. Relationship loans and lending commitments are extended to select institutional clients, primarily for general corporate purposes and generally with the intent to hold for the foreseeable future. Event-driven loans and lending commitments are extended in connection with specific client transactions and are explained in further detail in "Institutional Securities Event-Driven Loans and Lending Commitments" herein. Secured lending facilities include loans provided to clients, which are collateralized by various assets, including residential and commercial real estate mortgage loans, investor commitments for capital calls, corporate loans and other assets. These facilities generally provide for overcollateralization. Credit risk with respect to these loans and lending commitments arises from the failure of a borrower to perform according to the terms of the loan agreement and/or a decline in the underlying collateral value. The Firm monitors collateral levels against the requirements of lending agreements. See Note 15 to the financial statements for information about our securitization activities. Commercial real estate loans are primarily senior, secured by underlying real estate and are typically in term loan form. In addition, as part of certain of its trading and securitization activities, Institutional Securities may also hold residential real estate loans. Securities-based lending and Other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market. Institutional Securities Event-Driven Loans and Lending Commitments At December 31, 2023 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$1,974 $2,564 $2,580 $7,118 Lending commitments3,564 685 549 4,798 Total exposure$5,538 $3,249 $3,129 $11,916 At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15TotalLoans, net of ACL$2,385 $1,441 $2,771 $6,597 Lending commitments3,079 861 603 4,543 Total exposure$5,464 $2,302 $3,374 $11,140 Event-driven loans and lending commitments are associated with certain underwritings and/or syndications to finance a specific transaction, such as merger, acquisition, recapitalization or project finance activities. Balances may fluctuate as such lending is related to transactions that vary in timing and size from period to period. Institutional Securities Loans and Lending Commitments Held for Investment At December 31, 2023$ in millionsLoansLending CommitmentsTotalCorporate$6,758 $91,752 $98,510 Secured lending facilities39,498 15,589 55,087 Commercial real estate8,678 266 8,944 Other2,818 915 3,733 Total, before ACL$57,752 $108,522 $166,274 ACL$(874)$(533)$(1,407)At December 31, 2022$ in millionsLoansLending CommitmentsTotalCorporate$6,589 $79,882 $86,471 Secured lending facilities35,606 12,803 48,409 Commercial real estate8,515 374 8,889 Other2,865 985 3,850 Total, before ACL$53,575 $94,044 $147,619 ACL$(674)$(484)$(1,158) Institutional Securities Commercial Real Estate Loans and Lending Commitments By Region At December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalAmericas$5,410 $289 $5,699 $6,320 $378 $6,698 EMEA3,127 56 3,183 3,040 79 3,119 Asia485 - 485 445 5 450 Total$9,022 $345 $9,367 $9,805 $462 $10,267 By Property Type At December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalOffice$3,310 $186 $3,496 $3,861 $301 $4,162 Industrial2,435 5 2,440 2,561 25 2,586 Multifamily1,715 74 1,789 1,889 85 1,974 Retail842 7 849 659 6 665 Hotel718 73 791 780 45 825 Other2 - 2 55 - 55 Total$9,022 $345 $9,367 $9,805 $462 $10,267 LC–Lending Commitments 1. Amounts include HFI, HFS and FVO loans and lending commitments. HFI loans are presented net of ACL. The current economic environment and changes in business and consumer behavior have adversely impacted commercial real estate borrowers due to pressure from higher interest rates, tenant lease renewals, and elevated refinancing risks for loans with near-term maturities, among other issues. While we continue to actively monitor all our loan portfolios, the commercial real estate sector remains under heightened focus given the sector's sensitivity to economic and secular factors, credit conditions, and difficulties specific to certain property types, most notably office. As of December 31, 2023 and December 31, 2022, our lending against commercial real estate ("CRE") properties totaled $9.4 billion and $10.3 billion within the Institutional Securities business segment, which represents 4.5% and 5.3% of total exposure reflected in the Institutional Securities Loans and Lending Commitments table above. Those CRE loans are originated for experienced sponsors and are generally secured by specific institutional CRE properties. In many cases, loans are subsequently syndicated or securitized on a full or partial basis, reducing our ongoing exposure. In addition to the amounts included in the table above, we provide certain secured lending facilities which are typically collateralized by pooled CRE mortgage loans and are included in Secured lending facilities in the Institutional Securities Loans and Lending Commitments Held for Investment table above. These secured lending facilities benefit from structural protections including cross-collateralization and diversification across property types. Institutional Securities Allowance for Credit Losses-Loans and Lending Commitments Year Ended December 31, 2023$ in millionsCorporate Secured Lending FacilitiesCREOtherTotalACL-LoansBeginning balance$235 $153 $275 $11 $674 Gross charge-offs(34)- (129)(1)(164)Recoveries1 - - - 1 Net (charge-offs) recoveries(33)- (129)(1)(163)Provision (release)37 - 314 5 356 Other2 - 3 2 7 Ending balance$241 $153 $463 $17 $874 ACL-Lending commitmentsBeginning balance$411 $51 $15 $7 $484 Provision (release)16 18 11 - 45 Other4 1 - (1)4 Ending balance$431 $70 $26 $6 $533 Total ending balance$672 $223 $489 $23 $1,407 CRE-Commercial real estate Institutional Securities HFI Loans-Ratios of Allowance for Credit Losses to Balance before AllowanceAtDecember 31,2023 AtDecember 31,2022 Corporate3.6 %3.6 %Secured lending facilities0.4 %0.4 %Commercial real estate5.3 %3.2 %Securities-based lending and Other0.6 %0.4 %Total Institutional Securities loans1.5 %1.3 % Wealth Management Loans and Lending Commitments At December 31, 2023 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$76,923 $7,679 $1,494 $133 $86,229 Residential real estateloans1 91 1,255 58,950 60,297 Total loans, net of ACL$76,924 $7,770 $2,749 $59,083 $146,526 Lending commitments16,312 2,937 19 344 19,612 Total exposure$93,236 $10,707 $2,768 $59,427 $166,138 At December 31, 2022 Contractual Years to Maturity $ in millions<11-55-15>15TotalSecurities-based lending and Other loans$80,526 $9,371 $1,692 $140 $91,729 Residential real estate loans1 32 1,375 52,968 54,376 Total loans, net of ACL$80,527 $9,403 $3,067 $53,108 $146,105 Lending commitments12,408 4,501 37 323 17,269 Total exposure$92,935 $13,904 $3,104 $53,431 $163,374 The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans. Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities or refinancing margin debt. We establish approved credit lines against qualifying securities and monitor limits daily and, pursuant to such guidelines, require customers to deposit additional collateral, or reduce debt positions, when necessary. These credit lines are primarily uncommitted loan facilities, as we reserve the right not to make any advances or may terminate these credit lines at any time. Factors considered in the review of these loans include, but are not limited to, the loan amount, the client's credit profile, the degree of leverage, collateral diversification, price volatility and liquidity of the collateral. Other loans primarily include tailored lending, which typically consist of bespoke lending arrangements provided to ultra-high net worth clients. Securities-based lending and Other loans are generally secured by various types of eligible collateral, including marketable securities, private investments, commercial real estate and other financial assets. Residential real estate loans consist of first- and second-lien mortgages, including HELOCs. Our underwriting policy is designed to ensure that all borrowers pass an assessment of capacity and willingness to pay, which includes an analysis utilizing industry standard credit scoring models (e.g., FICO scores), debt-to-income ratios and assets of the borrower. LTV ratios are determined based on independent third-party property appraisals and valuations, and security lien positions are established through title and ownership reports. The vast majority of mortgage loans, including HELOCs, are held for investment in the Wealth Management business segment's loan portfolio. Wealth Management Commercial Real Estate Loans and Lending Commitments by Property Type At December 31, 2023At December 31, 2022$ in millionsLoans1LC1TotalLoans1LC1TotalRetail$2,180 $3 $2,183 $2,135 $6 $2,141 Multifamily1,891 159 2,050 1,661 142 1,803 Office1,736 16 1,752 1,675 1 1,676 Industrial454 - 454 330 - 330 Hotel400 - 400 419 - 419 Other253 - 253 183 10 193 Total$6,914 $178 $7,092 $6,403 $159 $6,562 LC–Lending Commitments 1.Amounts include HFI loans and lending commitments. HFI loans are presented net of ACL. As of December 31, 2023 and December 31, 2022, our direct lending against CRE totaled $7.1 billion and $6.6 billion within the Wealth Management business segment, which represents 4.3% and 4.0% of total exposure reflected in the Wealth Management Loans and Lending Commitments table above, primarily included within Securities-based lending and Other loans. Such loans are originated through our private banking platform, are both secured and generally benefiting from full or partial guarantees from high or ultra-high net worth clients, which partially reduce associated credit risk. At both December 31, 2023 and December 31, 2022, greater than 95% of the CRE loans balance in the Wealth Management business segment received guarantees. All of our lending against CRE properties within Wealth Management are in the Americas region. Wealth Management Allowance for Credit Losses-Loans and Lending Commitments Year Ended December 31, 2023$ in millionsResidential Real EstateSBL and OtherTotalACL-LoansBeginning balance$87 $78 $165 Gross charge-offs- (3)(3)Recoveries1 - 1 Net (charge-offs) recoveries1 (3)(2)Provision (release)13 119 132 Other(1)1 - Ending balance$100 $195 $295 ACL-Lending commitmentsBeginning balance$4 $16 $20 Provision (release)- (1)(1)Other- (1)(1)Ending balance$4 $14 $18 Total ending balance$104 $209 $313 As of December 31, 2023 and December 31, 2022, more than 75% of Wealth Management residential real estate loans were to borrowers with "Exceptional" or "Very Good" FICO scores (i.e., exceeding 740). Additionally, Wealth Management's securities-based lending portfolio remains well-collateralized and subject to daily client margining, which includes requiring customers to deposit additional collateral or reduce debt positions, when necessary. Customer and Other Receivables Margin and Other Lending $ in millionsAtDecember 31,2023AtDecember 31,2022 Institutional Securities$24,208 $16,591 Wealth Management21,436 21,933 Total$45,644 $38,524 The Institutional Securities and Wealth Management business segments provide margin lending arrangements that allow customers to borrow against the value of qualifying securities, primarily for the purpose of purchasing additional securities, as well as to collateralize short positions. Institutional Securities primarily includes margin loans in the Equity Financing business. Wealth Management includes margin loans as well as non-purpose securities-based lending on non-bank entities. Amounts may fluctuate from period to period as overall client balances change as a result of market levels, client positioning and leverage. Credit exposures arising from margin lending activities are generally mitigated by their short-term nature, the value of collateral held and our right to call for additional margin when collateral values decline. However, we could incur losses in the event that the customer fails to meet margin calls and collateral values decline below the loan amount. This risk is elevated in loans backed by collateral pools with significant concentrations in individual issuers or securities with similar risk characteristics. For a further discussion, see "Risk Factors-Credit Risk" herein. Employee Loans For information on employee loans and related ACL, see Note 9 to the financial statements. Derivatives Fair Value of OTC Derivative Assets Counterparty Credit Rating1 $ in millionsAAAAAABBBNIGTotalAt December 31, 2023Less than 1 year$2,013 $16,885 $37,517 $25,529 $10,084 $92,028 1-3 years1,013 7,274 18,451 12,757 7,360 46,855 3-5 years504 8,897 8,814 5,989 3,825 28,029 Over 5 years3,955 29,511 50,512 28,003 6,597 118,578 Total, gross$7,485 $62,567 $115,294 $72,278 $27,866 $285,490 Counterparty netting(3,691)(48,821)(86,826)(53,178)(15,888)(208,404)Cash and securities collateral(2,709)(10,704)(25,921)(13,025)(5,554)(57,913)Total, net$1,085 $3,042 $2,547 $6,075 $6,424 $19,173 Counterparty Credit Rating1 $ in millionsAAAAAABBBNIGTotalAt December 31, 2022Less than 1 year$2,903 $18,166 $40,825 $32,373 $10,730 $104,997 1-3 years1,818 8,648 17,113 19,365 6,974 53,918 3-5 years655 6,834 8,632 9,105 4,049 29,275 Over 5 years4,206 42,613 45,488 46,660 8,244 147,211 Total, gross$9,582 $76,261 $112,058 $107,503 $29,997 $335,401 Counterparty netting(4,037)(60,451)(79,334)(85,786)(17,415)(247,023)Cash and securities collateral(3,632)(13,402)(28,776)(14,457)(5,198)(65,465)Total, net$1,913 $2,408 $3,948 $7,260 $7,384 $22,913 $ in millionsAtDecember 31,2023AtDecember 31,2022IndustryFinancials$7,215 $6,294 Utilities4,267 5,656 Regional governments1,319 2,052 Industrials937 1,433 Communications services841 1,051 Consumer discretionary684 290 Information technology677 480 Energy533 2,851 Consumer staples515 687 Healthcare468 565 Materials383 317 Sovereign governments262 410 Real estate167 95 Not-for-profit organizations166 204 Insurance156 185 Other583 343 Total$19,173 $22,913 1.Counterparty credit ratings are determined internally by the CRM. We are exposed to credit risk as a dealer in OTC derivatives. Credit risk with respect to derivative instruments arises from the possibility that a counterparty may fail to perform according to the terms of the contract. For a description of our risk mitigation strategies, see "Credit Risk-Risk Mitigation" herein.

The BRC assists the Board in its oversight of the ERM framework; oversees significant financial risk exposures of the Firm, including market, credit, model and liquidity risk, against established risk measurement methodologies and the steps management has taken to monitor and control such exposures; oversees our risk appetite statement, including risk tolerance levels and limits; reviews capital, liquidity and funding strategy and planning and related guidelines and policies; reviews the contingency funding plan and capital planning process; oversees our significant risk governance, risk management and risk assessment guidelines and policies; oversees the performance of the Chief Risk Officer; reviews reports from our Strategic Transactions Committee, CCAR Committee and RRP Committee; reviews significant new product risk, emerging risks, regulatory matters and climate risk; and reviews reports from the Chief Audit Officer regarding the results of reviews and assessments of the risk management, liquidity and capital functions. The BRC reports to the Board on a regular basis and coordinates with the Board and other Board committees with respect to oversight of risk management and risk assessment guidelines.

The BOTC oversees our operations and technology strategy and significant investments in support of such strategy; oversees operational risk, including information technology, information security, fraud, third-party oversight, business disruption and resilience and cybersecurity risks and the steps management has taken to monitor and control such exposures. The BOTC reviews and approves significant operations and technology policies. The BOTC also reviews risk management and risk assessment guidelines in coordination with the Board and other Board committees, and policies regarding operational risk. The BOTC reports to the Board on a regular basis.

The Financial Risk Management functions (Market Risk, Credit Risk, Model Risk and Liquidity Risk Management Departments) and Non-Financial Risk Management functions (Compliance, Global Financial Crimes, and Operational Risk Departments) are independent of our business units and report to the Chief Risk Officer and Head of Non-Financial Risk, respectively. These functions assist senior management and the FRC in monitoring and controlling our risk through a number of control processes. Each function maintains its own risk governance structure with specified individuals and committees responsible for aspects of managing risk. Further discussion about the responsibilities of the risk management functions may be found under "Market Risk," "Credit Risk," "Operational Risk," "Model Risk" and "Liquidity Risk" and "Legal, Regulatory and Compliance Risk" herein.

Our support and control groups include, but are not limited to, Legal, the Finance Division, Technology, the Operations Division, the Human Capital Management & Global Services Division ("HCMGS"), Firm Strategy and Execution. Our support and control groups coordinate with the business segment control groups to review the risk monitoring and risk management policies and procedures relating to, among other things, controls over financial reporting and disclosure; each business segment's market, credit and operational risk profile; liquidity risks; model risks; sales practices; reputational, legal enforceability, compliance and regulatory risks; and technological risks. Participation by the senior officers of the Firm and business segment control groups helps ensure that risk policies and procedures, exceptions to risk limits, new products and business ventures, and transactions with risk elements undergo thorough review.

Asset management revenues include fees associated with the management and supervision of assets and the distribution of funds and similar products. Within the Wealth Management business segment, Asset management revenues are related to advisory services associated with fee-based assets, account service and administration, as well as distribution of products. These revenues are generally based on the net asset value of the account in which a client is invested. Within the Investment Management business segment, Asset management revenues are primarily composed of fees received from investment vehicles on the basis of assets under management. Performance-based fees, not in the form of carried interest, are earned on certain products and separately managed accounts as a percentage of appreciation in value and, in certain cases, are based upon the achievement of performance criteria. These performance fees are generally recognized on a quarterly or annual basis.

- We reported net revenues of $54.1 billion in 2023 compared with $53.7 billion in 2022. For 2023, net income applicable to Morgan Stanley was $9.1 billion, or $5.18 per diluted common share, compared with $11.0 billion, or $6.15 per diluted common share in 2022. - Compensation and benefits expenses of $24,558 million in 2023 increased 7% from the prior year, primarily due to higher expenses related to certain employee deferred cash-based compensation plans linked to investment performance ("DCP") and higher salary expenses, partially offset by lower expenses related to outstanding deferred equity compensation. 2023 Compensation and benefits expenses included $353 million of severance costs, primarily associated with the employee action recorded in the second quarter of 2023. - Non-compensation expenses of $17,240 million in 2023 increased 6% from the prior year, primarily driven by an FDIC special assessment of $286 million, increased spend on technology, higher costs related to exits of real estate and higher legal expenses, including $249 million related to a specific matter.

In connection with past or future acquisitions, divestitures, joint ventures, partnerships, minority stakes or strategic alliances (including with Mitsubishi UFJ Financial Group, Inc. ("MUFG")), we face numerous risks and uncertainties in combining, transferring, separating or integrating the relevant businesses and systems that may present operational and other risks, including the need to combine or separate accounting, data processing and other systems, management controls and legal entities, and to integrate relationships with clients, trading counterparties and business partners. Certain of these strategic initiatives, and integration thereof, may cause us to incur incremental expenses and may also require incremental financial, management and other resources. In the case of joint ventures, partnerships and minority stakes, we are subject to additional risks and uncertainties because we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control, and conflicts or disagreements between us and any of our joint venture partners or partners may negatively impact the benefits to be achieved by the relevant joint venture or partnership, respectively. There is no assurance that any of our acquisitions, divestitures or investments will be successfully integrated or disaggregated or yield all of the positive benefits and synergies anticipated. If we are not able to integrate or disaggregate successfully our past and future acquisitions or dispositions, including aligning the processes, policies and procedures of the acquired entities with our standards, there is a risk that our results of operations, financial condition and cash flows may be materially and adversely affected. Certain of our business initiatives, including expansions of existing businesses, may change our client or account profile or bring us into contact, directly or indirectly, with individuals and entities that are not within our traditional client and counterparty base and may expose us to new asset classes, services, competitors and new markets. These business activities expose us to new and enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, sovereign, compliance and operational risks, as well as franchise and reputational concerns regarding the manner in which these assets are being operated or held, or services are being delivered. For more information regarding the regulatory environment in which we operate, see also "Business-Supervision and Regulation." Cybersecurity Risk management and strategy We, our businesses, and the broader financial services industry face an increasingly complex and evolving threat environment. We have made and continue to make substantial investments in cybersecurity and fraud prevention technology, and employ experienced talent to lead our Cybersecurity and Information Security organizations and program under the oversight of our Board of Directors ("Board") and the Operations and Technology Committee of the Board ("BOTC"). See "Risk Factors-Operational Risk" for information on risks to the Firm from cybersecurity threats. As part of our enterprise risk management ("ERM") framework, we have implemented and maintain a program to assess, identify and manage risks arising from the cybersecurity threats confronting the Firm ("Cybersecurity Program"). Our Cybersecurity Program helps protect our clients, customers, employees, property, products, services and reputation by seeking to preserve the confidentiality, integrity and availability of information, enable the secure delivery of financial services, and protect the business and the safe operation of our technology systems. We continually adjust our Cybersecurity Program to address the evolving cybersecurity threat landscape and comply with extensive legal and regulatory expectations. Processes for assessing, identifying and managing material risks from cybersecurity threats Our Cybersecurity Program takes into account industry best practices and addresses risks from cybersecurity threats to our network, infrastructure, computing environment and the third parties that we rely on. We periodically assess the design of our cybersecurity controls against the Cyber Risk Institute Cyber Profile, which is based on the National Institute of Standards and Technology ("NIST") Cybersecurity Framework for Improving Critical Infrastructure Cybersecurity, as well as global cybersecurity regulations, and develop improvements to those controls in response to that assessment. Our Cybersecurity Program also includes cybersecurity and information security policies, procedures and technologies that are designed to address regulatory requirements and protect our clients', employees' and own data against unauthorized disclosure, modification and misuse. These policies, procedures and technologies cover a broad range of areas, including: identification of internal and external threats, access control, data security, protective controls, detection of malicious or unauthorized activity, incident response, and recovery planning. Our threat intelligence function within the Cybersecurity Program actively engages in private and public information sharing communities and leverages both commercial and proprietary products to collect a wide variety of industry and governmental information regarding the latest cybersecurity threats, which informs our cybersecurity risk assessments and strategy. This information is also provided to an internal forensics team, which develops and implements technologies designed to help detect these cybersecurity threats across our environment. Where a potential threat is identified in our environment, our incident response team evaluates the potential impact to the Firm and coordinates remediation where required. These groups, as well as the Operational Risk Department, review external cybersecurity incidents that may be relevant to the Firm, and the outcomes of these incidents further inform the design of our Cybersecurity Program. In addition, we maintain a robust global training program on cybersecurity risks and requirements and conduct regular phishing email simulations for our employees and consultants. Our processes are designed to help oversee, identify and mitigate cybersecurity risks associated with our use of third-party vendors. We maintain a third-party risk management program that includes evaluation of, and response to, cybersecurity risks at our third-party vendors. Prior to engaging third-party vendors to provide services to the Firm, we conduct assessments of the third-party vendors' cybersecurity programs to identify the impact of their services on the cybersecurity risks to the Firm. Once on-boarded, third-party vendors' cybersecurity programs are subject to risk-based oversight, which may include security questionnaires, submission of independent security audit reports or a Firm audit of the third-party vendor's security program, and, with limited exceptions, third-party vendors are required to meet our cybersecurity standards. Where a third-party vendor cannot meet those standards, its services, and the residual risk to the Firm, are subject to review, challenge and escalation through our risk management processes and ERM committees, which may ultimately result in requesting increased security measures or ceasing engagement with such third-party vendor. Our Cybersecurity Program is regularly assessed by the Internal Audit Department ("IAD") through various assurance activities, with the results reported to the Audit Committee of the Board ("BAC") and the BOTC. Annually, certain elements of the Cybersecurity Program are subject to an audit by an independent consultant, as well as an assessment by a separate, independent third party, the results of which, including opportunities identified for improvement and related remediation plans, are reviewed with the BOTC. Our Cybersecurity Program is also examined regularly by the Firm's prudential and conduct regulators within the scope of their jurisdiction. Governance