MORGAN STANLEY & CO

1 MORGAN STANLEY & CO. LLC. consolidated STATEMENT OF financial CONDITION. AS OF DECEMBER 31, 2019. AND. REPORT OF INDEPENDENT REGISTERED. PUBLIC ACCOUNTING FIRM. **. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. To the Board of Directors and Sole Member of MORGAN STANLEY & Co. LLC. Opinion on the financial Statements We have audited the accompanying consolidated statement of financial condition of MORGAN STANLEY & Co. LLC and subsidiaries (the "Company") as of December 31, 2019, and the related notes (collectively referred to as the " financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion The financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit.

2 We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the 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 the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, 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 statement.

3 Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit of the financial statement provides a reasonable basis for our opinion. /s/ Deloitte & Touche LLP. New York, NY. March 2, 2020. We have served as the Company's auditor since 1997. MORGAN STANLEY & CO. LLC. consolidated STATEMENT OF financial CONDITION. As of December 31, 2019. (In millions of dollars). ASSETS. Cash $ 1,833. Cash deposited with clearing organizations or segregated under federal and other regulations or requirements 8,605. financial instruments owned, at fair value (approximately $63,569 were pledged to various parties; $13 related to consolidated variable interest entities generally not available to the Company) 101,051. Securities received as collateral, at fair value (approximately $14,945 were pledged to various parties) 22,874.

4 Securities purchased under agreements to resell 60,118. Securities borrowed 106,112. Receivables: Customers 19,571. Brokers, dealers and clearing organizations 3,493. Interest and dividends 544. Fees and other 325. Affiliates 50. Other assets 1,220. Total assets $ 325,796. LIABILITIES AND MEMBER'S EQUITY. financial instruments sold, not yet purchased, at fair value $ 23,235. Obligation to return securities received as collateral, at fair value 23,859. Securities sold under agreements to repurchase (includes $733 at fair value) 62,142. Securities loaned 19,460. Other secured financings (includes $1,176 at fair value; $4 related to consolidated variable interest entities generally non-recourse to the Company) 5,151. Payables: Customers 145,527. Brokers, dealers and clearing organizations 5,950. Interest and dividends 402. Affiliates 889. Other liabilities and accrued expenses 3,846. Borrowings (includes $374 at fair value) 13,836.

5 Total liabilities 304,297. Commitments and contingent liabilities (See Note 10). Subordinated liabilities 13,300. Member's equity: Member's equity 8,759. Accumulated other comprehensive loss (560). Total member's equity 8,199. Total liabilities and member's equity $ 325,796. See Notes to consolidated Statement of financial Condition. -2- MORGAN STANLEY & CO. LLC. NOTES TO consolidated STATEMENT OF financial CONDITION. As of December 31, 2019. (In millions of dollars, except where noted). 1. Introduction and Basis of Presentation The Company Consolidation MS&Co., together with its subsidiary (the Company ), The consolidated statement of financial condition includes the provides a wide variety of products and services to a large and accounts of MS&Co., its wholly owned subsidiary and other diversified group of clients and customers, including entities in which MS&Co. has a controlling financial interest, corporations, governments, and financial institutions.

6 Its including certain VIEs (see Note 11). businesses include securities underwriting and distribution;. financial advisory services, including advice on mergers and At December 31, 2019, the Company's consolidated acquisitions, restructurings, real estate and project finance; subsidiaries reported $24,210 of assets, $24,151 of liabilities sales, trading, financing and market-making activities in equity and $59 of equity on a stand-alone basis. and fixed income securities and related products, and other instruments including foreign exchange and commodities All material intercompany balances with its subsidiaries have futures; and prime brokerage services. See the Glossary of been eliminated in consolidation. Common Terms and Acronyms for the definition of certain For entities where the total equity investment at risk is sufficient terms and acronyms used throughout the notes to the to enable the entity to finance its activities without additional consolidated statement of financial condition.

7 Subordinated financial support and the equity holders bear the MS&Co. and its wholly owned subsidiary, PDS, are registered economic residual risks and returns of the entity and have the with the SEC as institutional securities broker-dealers. MS&Co. power to direct the activities of the entity that most significantly is also registered as a futures commission merchant and affect its economic performance, MS&Co. consolidates those provisionally registered as a swap dealer with the CFTC. entities it controls either through a majority voting interest or MS&Co is also a member of FINRA, SIPC and various otherwise. For VIEs ( , entities that do not meet these securities exchanges. criteria), MS&Co. consolidates those entities where it has the power to make the decisions that most significantly affect the MS&Co. is a wholly owned subsidiary of MSDHI (the economic performance of the VIE and has the obligation to Parent ).

8 MSDHI is a wholly owned subsidiary of MSCM, absorb losses or the right to receive benefits that could which is a wholly owned subsidiary of MORGAN STANLEY (the potentially be significant to the VIE. Ultimate Parent ). 2. Significant Accounting Policies Basis of financial Information Contracts with Customers The consolidated statement of financial condition is prepared in accordance with GAAP, which requires the Company to Receivables from contracts with customers are recognized make estimates and assumptions regarding the valuations of across the various types of Receivables balances in the certain financial instruments, compensation, deferred tax assets, consolidated statement of financial condition when the the outcome of legal and tax matters, and other matters that underlying performance obligations have been satisfied and the affect the consolidated statement of financial condition and Company has the right per the contract to bill the customer.

9 Related disclosures. The Company believes that the estimates Contracts with customers are recognized in Other assets when utilized in the preparation of its consolidated statement of the Company has satisfied its performance obligations but financial condition are prudent and reasonable. Actual results customer payment is conditional, and Other liabilities and could differ materially from these estimates. accrued expenses when the Company has collected payment from a customer based on the terms of the contract, but the The Company has evaluated subsequent events for adjustment underlying performance obligations are not yet satisfied. to or disclosure in the consolidated statement of financial condition and has not identified any recordable or disclosable Fair Value of financial Instruments events not otherwise reported in the consolidated statement of Instruments within financial instruments owned and financial financial condition or the notes thereto.

10 Instruments sold, not yet purchased, are measured at fair value, either as required by or allowed by accounting guidance. These financial instruments primarily represent the Company's trading and investment positions and include both cash and derivative products. In addition, Securities received as collateral and Obligation to return securities received as collateral are measured at fair value. -3- The fair value of OTC financial instruments, including Level 1. Valuations based on quoted prices in active markets derivative contracts related to financial instruments, is presented that the Company has the ability to access for identical assets or in the accompanying consolidated statement of financial liabilities. Valuation adjustments and block discounts are not condition on a net-by-counterparty basis, when appropriate. applied to Level 1 instruments. Since valuations are based on Additionally, the Company nets the fair value of cash collateral quoted prices that are readily and regularly available in an active paid or received against the fair value amounts recognized for market, valuation of these products does not entail a significant net derivative positions executed with the same counterparty degree of judgment.