1946 MS Finance LLC 2024 Year End Financials

MORGAN STANLEY FINANCE LLC

DIRECTORS’ REPORT

Year ended December 31, 2024

The Directors present their report and financial Statements

(which comprise the Statements of Financial Condition, the

Statements of Comprehensive Loss, the Statements of Cash

Flows, the Statements of Changes in Member’s Deficit and the

related notes as well as a glossary of common terms and

acronyms for Morgan Stanley Finance LLC (the “Company”) for

the year ended December 31, 2024.

RESULTS AND DIVIDENDS

The comprehensive Loss for the twelve months was

$393,000,000 (December 31, 2023: $547,000,000).

During the period, no dividends were paid or proposed.

PRINCIPAL ACTIVITY

The Company is wholly owned by Morgan Stanley (the

“Parent”), which together with its consolidated subsidiaries, form

“the Firm”.

The principal activity of the Company is the issuance of

Borrowings (“Structured Notes”), the cash proceeds being lent to

its Parent and the hedging of the obligations arising pursuant to

such issuances.

The Company was established under Delaware law on March 27,

2002. The business office of the Company is at 1585 Broadway,

New York, NY 10036, U.S.A.

FUTURE OUTLOOK

There have not been any significant changes in the Company’s

principal activity during the year and no significant change is

expected.

BUSINESS REVIEW

The Company is a “finance subsidiary” of the Parent, as defined

in SEC Regulation S-X. The Company issues Structured Notes to

the marketplace that are fully and unconditionally guaranteed by

the Parent. Proceeds from issuances are lent to the Parent in the

form of Intercompany notes.

The Company has a rating of A- from S&P.

The issuance of Structured Notes exposes the Company to

various types of risk including foreign exchange, equity, interest

rate, and commodities risk. The Company hedges these risks

through the use of derivative instruments.

The Statements of Comprehensive Loss for the twelve months is

set out on page 8 of the audited financial statements. The

Company made profits of $6,000,000 during the year which is

driven by interest income from other Morgan Stanley entities.

In the year, Structured Notes that are measured at fair value

pursuant to the fair value option election requires presenting

unrealized DVA of $399,000,000 as ‘Other comprehensive loss’

in the Statements of Comprehensive Loss.

The Statements of Financial Condition for the Company is set

out on page 7 of the audited financial statements. At

December 31, 2024 the Company’s total assets were

$47,947,000,000, an increase of $7,543,000,000 or 19%

compared to December 31, 2023 and total liabilities were

$48,623,000,000 an increase of $7,936,000,000 or 20%,

compared to December 31, 2023.

The changes to the Statements of Comprehensive Loss and

Financial Condition are in line with the Company’s primary

activity during the period due to growth of the business.

The performance of the Company is included in the results of the

Firm, which are disclosed in the Firm’s Annual Report on Form

10-K and quarterly on Form 10Q to the SEC. The Firm manages

its key performance indicators on a global basis but in

consideration of individual legal entities. For this reason, the

Company’s Directors believe that providing further performance

indicators for the Company itself would not enhance an

understanding of the development, performance or position of

the business of the Company.

The risk management section below sets out the Firm's policies

for the management of significant business risks.

Risk Management

The Company’s risk management practices are aligned with

those of the Firm. These practices are administered on a

coordinated global and legal entity basis with consideration

given to the Company’s specific internal capital requirements.

Risk is an inherent part of the Firm’s business and activities.

Management believes effective risk management is vital to the

success of the Firm’s business activities. Accordingly, the Firm

has policies and procedures in place to identify, assess, monitor

and manage the significant risks involved in the activities of its

business and support functions. The principal risks involved in

the Company’s business activities include market, credit,

operational, model and liquidity risk.

The cornerstone of the Firm’s risk management philosophy is the

pursuit of risk-adjusted returns through prudent risk-taking that

protects the Firm’s capital base and franchise. This philosophy is

implemented utilizing five key principles: integrity,

comprehensiveness, independence, accountability, and

transparency. To help ensure the efficacy of risk management,

which is an essential component of the Firm’s reputation, senior

management requires thorough and frequent communication and

the appropriate escalation of risk matters. The fast-paced,

complex, and constantly-evolving nature of global financial

markets requires the Firm to maintain a risk management culture

MORGAN STANLEY FINANCE LLC

DIRECTORS’ REPORT

Year ended December 31, 2024

that is incisive, knowledgeable about specialized products and

markets, and subject to ongoing review and enhancement.

Market Risk

Market risk refers to the risk that a change in the level of one or

more market prices, rates, spreads, indices, volatilities,

correlations or other market factors, such as market liquidity,

will result in losses for a position or portfolio. Generally, the

Company incurs market risk as a result of trading, investing and

client facilitation activities, principally within the Institutional

Securities business segment where the substantial majority of the

Company’s market risk exposure is generated.

The Company has exposures to a wide range of risks relating to

interest rates, equity prices, commodities and foreign exchange

rates as well as the associated implied volatilities and spreads of

the global markets in which the Company conducts its trading

activities.

Sound market risk management is an integral part of the Firm’s

culture. The various business units and trading desks are

responsible for ensuring that market risk exposures are well-

managed and prudent. The control groups help ensure that these

risks are measured and closely monitored and are made

transparent to senior management. The Market Risk Department

(“MRD”) is responsible for ensuring transparency of material

market risks, monitoring compliance with established limits and

escalating risk concentrations to appropriate senior management.

To execute these responsibilities, MRD monitors the Company’s

risk against limits on aggregate risk exposures, performs a

variety of risk analyses, routinely reports risk summaries, and

maintains VaR and scenario analysis systems. Market risk is also

monitored through various measures: by use of statistics

(including VaR); by measures of position size and sensitivity;

and through routine stress testing, which measures the impact on

the value of existing portfolios of specified changes in market

factors, and scenarios designed by MRD in collaboration with

business units.

Credit Risk

Credit risk refers to the risk of loss arising when a borrower,

counterparty or issuer does not meet its financial obligations to

the Company. The Company primarily incurs credit risk

exposure to institutions and individuals. This risk may arise from

a variety of business activities, including, but not limited to,

entering into swap or other derivative contracts under which

counterparties have obligations to make payments to the

Company; and providing short- or long-term funding that is

secured by financial collateral whose value may at times be

insufficient to fully cover the repayment amount. This type of

risk requires credit analysis of specific counterparties, both

initially and on an ongoing basis. The Company also incurs

credit risk in traded securities and whereby the value of these

assets may fluctuate based on realized or expected defaults on

the underlying obligations or loans.

The Credit Risk Management Department (“CRM”) establishes

practices to evaluate, monitor and control credit risk exposure

both within and across its business activities. The Company’s

credit risk exposure is actively managed by CRM, which

monitors risk exposures, including margin loans and credit

sensitive, higher-risk transactions. CRM is responsible for

ensuring timely and transparent communication of material

credit risks, compliance with established limits, and escalation of

risk concentrations to appropriate senior management.

Operational Risk

Operational risk refers to the risk of loss, or of damage to the

Firm’s reputation, resulting from inadequate or failed processes

or systems, human factors or external events (e.g. cyber attacks

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. The

Company may incur operational risk across the full scope of its

business activities, including revenue-generating activities (e.g.

sales and trading) and control groups (e.g. information

technology and trade processing).

The Firm’s operational risk framework is established to identify,

measure, monitor and control risk. 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.

Cybersecurity

The Firm’s cybersecurity and information security policies,

procedures, and technologies are designed to protect the

Company’s own client and employee data against unauthorized

disclosure, modification or misuse and are also designed to

address regulatory requirements. These policies and procedures

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.

Model Risk

Model risk is 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 the Company’s or the Firm’s

reputation. The risk inherent in a model is a function of the

materiality, complexity and uncertainty around inputs and

assumptions.

MORGAN STANLEY FINANCE LLC

DIRECTORS’ REPORT

Year ended December 31, 2024

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 (“MRM”) is an integral part of

the Firm’s Risk Management Framework. The MRM is a distinct

department in Risk Management responsible for the oversight of

model risk.

MRM establishes a model risk tolerance in line with the Firm’s

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 the Company will be unable

to finance its operations due to a loss of access to the capital

markets or difficulty in liquidating its assets. Liquidity risk also

encompasses the Company’s ability (or perceived ability) to

meet its financial obligations in a timely manner without

experiencing significant business disruption or reputational

damage that may threaten its viability as a going concern.

Generally, the Company incurs liquidity and funding risk as a

result of its trading, lending and client facilitation activities.

The Firm’s Liquidity Risk Management Framework is critical to

help ensure that the Firm maintains sufficient liquidity reserves

and durable funding sources to meet the Firm’s daily obligations

and to withstand unanticipated stress events.The Liquidity Risk

Department (“LRD”) 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 the Firm’s risk appetite, identifies

and analyses 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 its Liquidity Stress

Tests to ensure sufficient liquidity and funding under a range of

adverse scenarios.

Going Concern

Retaining sufficient liquidity and capital to withstand market

pressures remains central to the Firm’s strategy. The Company

issues structured notes to the marketplace that are fully and

unconditionally guaranteed by the Parent. Proceeds from

issuances are lent to the Parent in the form of Intercompany

notes. Due to the risk neutral nature of the business, the

Company does not maintain significant liquidity or capital.

Additionally, the Company has access to Firm capital and

liquidity as required.

Taking all of these factors into consideration, the Directors

believe it is reasonable to assume that the Company will have

access to adequate resources to continue in operational existence

for the foreseeable future. Accordingly, they continue to adopt

the going concern basis in preparing the audited financial

statements.

DIRECTORS

The following Directors held office throughout the year and to

the date of approval of this report (except where otherwise

shown):

Kevin Woodruff

Joshua Schanzer

Naml Lewis (appointed on 24 May 2024)

EVENTS AFTER THE REPORTING DATE

There have been no significant events since the reporting date.

AUDIT COMMITTEE

The Company is not required to have an audit committee

separate from that of its Parent.

AUDITOR

Deloitte & Touche LLP will continue as auditor of the Company.

Approved and signed on behalf of the Board by:

/s/ Kevin Woodruff

_______________________________

Kevin Woodruff, President

MORGAN STANLEY FINANCE LLC

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors, Kevin Woodruff, Joshua Schanzer and Naml

Lewis, confirm to the best of their knowledge:

• the financial statements have been prepared in

accordance with accounting principles generally

accepted in the United States of America (“U.S.

GAAP”) and give a true and fair view of the

assets, liabilities, financial position and profit or

loss of the Company; and

• the financial statements are prepared in compliance

with the European Single Electronic Format

Regulatory Technical Standard (“ESEF RTS”). In

preparing the Company’s financial statements in

compliance with ESEF RTS, the Directors are

required to file the financial statements in a valid

xHTML format; and

• the management report represented by the

Directors’ report includes a fair review of the

development and performance of the business that

have occurred during the twelve months ended

December 31, 2024 and the position of the

Company together with a description of the

principal risks and uncertainties that the Company

faces.

Approved by the Board and signed on its behalf by:

/s/ Kevin Woodruff

_________________________________________

Name: Kevin Woodruff

Title: President and Director

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors of

Morgan Stanley Finance, LLC

Opinion

We have audited the financial statements of Morgan Stanley Finance, LLC (the “Company”), a wholly owned subsidiary of Morgan

Stanley (the “Parent”), which comprise the Statements of Financial Condition as of December 31, 2024 and December 31, 2023, and

the related Statements of Comprehensive Loss, Cash Flows, and Changes in Member’s Deficit for the years then ended, and the

related notes to the financial statements (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as

of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in accordance with

accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our

responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements

section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance

with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting

principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control

relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud

or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the

aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the

financial statements are available to be issued.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and issue an auditor’s report that includes our opinion. Reasonable assurance is a high

level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will

always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher

than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of

internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they

would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and

perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the

amounts and disclosures in the financial statements.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the

circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

Accordingly, no such opinion is expressed.

• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by

management, as well as evaluate the overall presentation of the financial statements.

• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about

the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing

of the audit, significant audit findings, and certain internal control-related matters that we identified during the audits.

Emphasis of Matter

We draw attention to Note 3 of the financial statements, which describes the fact that the activities of the Company include significant

transactions with affiliates and may not necessarily be indicative of the conditions that would have existed or the results of operations

if the Company had operated as an unaffiliated business. Our opinion is not modified with respect to this matter.

Report on Other Legal and Regulatory Requirements — European Single Electronic Format

In connection with the Company’s listing requirements with the Luxembourg Stock Exchange, management is responsible for

preparing the financial statements in compliance with the requirements set forth in Article 3 of the Delegated Regulation 2019/815 on

European Single Electronic Format (ESEF Regulation). The requirements set forth in the ESEF Regulation that are relevant to the

Company relate to the financial statements being prepared using a valid eXtensible HyperText Markup Language (XHTML) format.

As part of our assessment as to whether the financial statements are prepared, in all material respects, in accordance with the

requirements set forth in the ESEF Regulation that are relevant to the Company, we have performed tests of the Company’s

compliance with the requirement to prepare the financial statements using a valid XHTML format. In our opinion, the financial

statements, identified as “MSF-2024-en.xhtml”, have been prepared, in all material respects, in accordance with the requirements set

forth in the ESEF Regulation that are relevant to the Company insofar as it relates to the preparation of the financial statements in a

valid XHTML format

Other Information Included in the Annual Directors’ Report

Management is responsible for the other information included in the Annual Directors’ report. The other information comprises the

information included in the Annual Directors’ report but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information, and we do not express an opinion or any form of

assurance thereon.

In connection with our audits of the financial statements, our responsibility is to read the other information and consider whether a

material inconsistency exists between the other information and the financial statements, or the other information otherwise appears to

be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other

information exists, we are required to describe it in our report.

/s/ Deloitte & Touche LLP

_________________________________________

New York, New York

April 29, 2025

MORGAN STANLEY FINANCE LLC

STATEMENTS OF FINANCIAL CONDITION

(In millions of dollars, except where noted)


	At December 31, 2024	At December 31, 2023
Assets
Cash	$4	$5
Receivables:
Broker dealers	3	3
Notes receivable from Parent	47,890	40,290
Intercompany from Parent	50	106
Total Assets	$47,947	$40,404

Liabilities
Trading liabilities at fair value	$151	$528
Payables:
Broker dealers	45	80
Interest	110	80
Borrowings (includes $48,124 and $39,800 at fair value)	48,317	39,999
Total Liabilities	$48,623	$40,687
Commitments and contingent liabilities (See Note 8)
Member’s deficit:
Additional paid-in capital	40	40
Retained earnings	13	7
Accumulated other comprehensive loss	(729)	(330)
Total Member’s deficit	(676)	(283)
Total Liabilities and Member’s deficit	$47,947	$40,404

MORGAN STANLEY FINANCE LLC

STATEMENTS OF COMPREHENSIVE LOSS

(In millions of dollars, except where noted)


	2024	2023
Revenues
Trading(1)	$(2,106)	$(1,840)
Interest income	2,459	2,080
Total Revenues	353	240
Expenses
Interest expense	347	237
Total Expenses	347	237
Income before taxes	6	3
Net income	6	3
Other comprehensive loss	(399)	(550)
Comprehensive loss	$(393)	$(547)

(1) Trading revenues comprise related party and non-related party components. For further information see notes 3 and 5

MORGAN STANLEY FINANCE LLC

STATEMENTS OF CASH FLOWS

(In millions of dollars, except where noted)


	2024	2023
Cash flows from operating activities:
Net income	$6	$3
Adjustments to reconcile net income to net cash provided by operating activities:
Net changes in asset and liabilities:
Trading liabilities, net of Trading assets	2,680	769
Broker dealers	(35)	25
Intercompany (Parent)	56	5
Interest	30	43
Net cash provided by operating activities	2,737	845

Cash flows from investing activities:
Net payments for:
Notes receivable from Parent	(8,544)	(3,529)
Net cash used for investing activities	(8,544)	(3,529)

Cash flows from financing activities:
Proceeds from:
Borrowings	29,742	17,377
Payments for:
Borrowings	(23,936)	(14,689)
Net cash provided by financing activities	5,806	2,688
Net (decrease) / increase in cash	(1)	4
Cash at beginning of the period	5	1
Cash at end of the period	$4	$5

Supplemental Disclosure of Cash Flow Information:
Cash payments for interest	$311	$189

MORGAN STANLEY FINANCE LLC

STATEMENTS OF CHANGES IN MEMBER’S DEFICIT

(In millions of dollars, except where noted)


	Additional paid- in capital	Retained earnings	Accumulated other comprehensive loss	Total member's deficit
Balance, December 31, 2022	$40	$4	$220	$264
Net change in member's deficit	—	3	(550)	(547)
Balance, December 31, 2023	$40	$7	$(330)	$(283)
Net change in member's deficit	—	6	(399)	(393)
Balance, December 31, 2024	$40	$13	$(729)	$(676)

MORGAN STANLEY FINANCE LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2024 AND 2023

(In millions of dollars, except where noted)

1. Introduction and Basis of Presentation

The Company

Morgan Stanley Finance LLC (the “Company”), a single

member limited liability corporation, is a wholly owned

subsidiary of Morgan Stanley (the “Parent”).

The Company is a “finance subsidiary” of the Parent, as defined

in SEC Regulation S-X. The Company issues structured notes to

the marketplace that are fully and unconditionally guaranteed by

the Parent. Proceeds from issuances are lent to the Parent in the

form of Intercompany notes.

In 2024, the Company received a rating of A- from S&P. See the

“Glossary of Common Terms and Acronyms” for the definition

of certain terms and acronyms used throughout the notes to the

financial statements.

Basis of Financial Information

The audited financial statements are prepared in accordance with

U.S. GAAP, which requires the Company to make estimates and

assumptions regarding the valuations of certain financial

instruments, the outcome of legal matters, and other matters that

affect the financial statements and related disclosures. The

Company believes that the estimates utilized in the preparation

of its financial statements are prudent and reasonable. Actual

results could differ materially from these estimates. The notes are

an integral part of the Company’s financial statements.

The Company has evaluated subsequent events for adjustment to

or disclosure in the financial statements through April 29, 2025,

the date on which the financial statements are available to be

issued, and the Company has not identified any recordable or

disclosable events, not otherwise reported in the financial

statements or the notes thereto.

2. Significant Accounting Policies

Revenue Recognition

Trading

See “Fair Value of Financial Instruments” below for Trading

revenue recognition discussions.

Fair Value of Financial Instruments

Instruments within Trading assets and Trading liabilities are

measured at fair value, either as required or allowed by

accounting guidance. These financial instruments represent

derivatives the Company enters into with Parent to economically

hedge its Borrowings, which are primarily structured notes.

Gains and losses on instruments carried at fair value are reflected

in Trading revenues in the Company’s Statements of

Comprehensive Loss.

The fair value of OTC financial instruments, including derivative

contracts related to financial instruments is presented in the

accompanying Statements of Financial Condition on a net-by-

counterparty basis, when appropriate.

Fair Value Option

The Company has elected the fair value option for certain

Borrowings (structured notes) 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.

Fair Value Measurement – Definition and Hierarchy

Fair value is defined as the price that would be received to sell an

asset or paid to transfer a liability (i.e., the “exit price”) in an

orderly transaction between market participants at the

measurement date.

Fair value is a market-based measure considered from the

perspective of a market participant rather than an entity-specific

measure. Therefore, even when market assumptions are not

readily available, assumptions are set to reflect those that the

Company believes market participants would use in pricing the

asset or liability at the measurement date. Where the Company

manages a group of financial assets, financial liabilities and non

financial items accounted for as derivatives on the basis of its net

exposure to either market risk or credit risk, the Company

measures the fair value of that group of financial instruments

consistently with how market participants would price the net

risk exposure at the measurement date.

In determining fair value, the Company uses various valuation

approaches and establishes a hierarchy for inputs used in

measuring fair value that requires the most observable inputs be

used when available.

Observable inputs are inputs that market participants would use

in pricing the asset or liability that were developed based on

market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect assumptions the

Company believes other market participants would use in pricing

the asset or liability that are developed based on the best

information available in the circumstances. The fair value

hierarchy is broken down into three levels based on the

observability of inputs as follows, with Level 1 being the highest

and Level 3 being the lowest:

Level 1. Valuations based on quoted prices in active markets that

the Company has the ability to access for identical assets or

liabilities. Valuation adjustments, block discounts and discounts

for entity-specific and contractual restrictions that would not

transfer to market participants are not applied to Level 1

instruments. Since valuations are based on quoted prices that are

readily and regularly available in an active market, valuation of

these products does not entail a significant degree of judgment.

Level 2. Valuations based on quoted prices for similar assets or

liabilities in active markets, quoted prices for identical or similar

assets or liabilities in inactive markets, significant market inputs

other than quoted prices that are observable for the asset or

liability, or market-corroborated inputs.

Level 3. Valuations based on inputs that are unobservable and

significant to the overall fair value measurement.

The availability of observable inputs can vary from product to

product and is affected by a wide variety of factors, including,

the type of product, whether the product is new and not yet

established in the marketplace, the liquidity of markets and other

characteristics particular to the product. To the extent that

valuation is based on models or inputs that are less observable or

unobservable in the market, the determination of fair value

requires more judgment. Accordingly, the degree of judgment

exercised by the Company in determining fair value is greatest

for instruments categorized in Level 3 of the fair value hierarchy.

The Company considers prices and inputs that are current as of

the measurement date, including during periods of market

dislocation. In periods of market dislocation, the observability of

prices and inputs may be reduced for many instruments. This

condition could cause an instrument to be reclassified from Level

1 to Level 2 or from Level 2 to Level 3 of the fair value

hierarchy. For additional information, see Note 4.

In certain cases, the inputs used to measure fair value may fall

into different levels of the fair value hierarchy. In such cases, the

total fair value amount is disclosed in the level appropriate for

the lowest level input that is significant to the total fair value of

the asset or liability.

Valuation Techniques

OTC derivative contracts have bid and ask prices that can be

observed in the marketplace. Bid prices reflect the highest price

that a party is willing to pay for an asset. Ask prices represent the

lowest price that a party is willing to accept for an asset. The

Company carries positions at the point within the bid-ask range

that meets its best estimate of fair value. For offsetting positions

in the same financial instrument, the same price within the bid-

ask spread is used to measure both the long and short positions.

Fair value for OTC derivative contracts is derived using pricing

models. Pricing models take into account the contract terms, as

well as multiple inputs, including, where applicable, commodity

prices, equity prices, interest rate yield curves, credit curves,

correlation, creditworthiness of the counterparty,

creditworthiness of the Firm, option volatility and currency rates.

Where appropriate, valuation adjustments are made to account

for various factors such as liquidity risk (bid-ask adjustments),

credit quality, model uncertainty and concentration risk and

funding in order to arrive at fair value. Adjustments for liquidity

risk adjust model-derived mid-market amounts of Level 2 and

Level 3 financial instruments for the bid-mid or mid-ask spread

required to properly reflect the exit price of a risk position. Bid-

mid and mid-ask spreads are marked to levels observed in trade

activity, broker quotes or other external third-party data. Where

these spreads are unobservable for the particular position in

question, spreads are derived from observable levels of similar

positions.

The Company applies credit-related valuation adjustments to its

Borrowings (structured notes) for which the fair value option

was elected. The Company considers the impact of changes in its

own credit spreads based upon observations of the secondary

bond market spreads when measuring the fair value for

Borrowings. Such credit risk considerations do not impact the

valuation of derivative transactions with the Parent as credit risk

would not impact the exit price.

Adjustments for model uncertainty are taken for positions whose

underlying models are reliant on significant inputs that are

neither directly nor indirectly observable, hence requiring

reliance on established theoretical concepts in their derivation.

These adjustments are derived by making assessments of the

possible degree of variability using statistical approaches and

market-based information where possible.

See Note 4 for a description of valuation techniques applied to

the major categories of financial instruments measured at fair

value.

Interest Income and Expense

Interest income and Interest expense are accrued for interest-

earning assets and interest-bearing liabilities, including Notes

receivable, Receivables and Payables with the Parent, and

Borrowings.

Interest income and Interest expense are recorded within the

Company’s Statements of Comprehensive Loss depending on the

nature of the instrument and related market conventions. When

interest is included as a component of the instrument’s fair value,

interest is included within Trading revenues. Otherwise, it is

included within Interest income or Interest expense.

Offsetting of Derivative Instruments

In connection with its derivative activities with the Parent, the

Company enters into a master netting agreement with the Parent.

This agreement provides the Company with the right, in the

event of a default by the Parent, to net Parent’s rights and

obligations under the agreement and to liquidate and set off cash

collateral against any net amount owed by the Parent.

For further information related to offsetting of derivatives, see

Note 6.

Income Taxes

The Company is a single-member limited liability company that

is treated as a disregarded entity for federal income tax purposes.

All current and deferred taxes have been accrued by the Parent.

Receivables from and Payables to Broker Dealers

Receivables from and Payables to Broker Dealers include

unsettled amounts related to Borrowings (structured notes) as

well as amounts for securities failed to deliver, through its broker

dealer affiliates, by the Company to the purchaser or failed to

receive by the Company from the seller by the settlement date.

Foreign Currencies

Gains or losses resulting from remeasurement of foreign

currency transactions are included in Trading revenues.

Segment Reporting

The Company represents a single operating and reportable

segment based upon the nature of the financial products and

services provided to customers and its management structure,

which is consistent with the approach used by the Company’s

chief operating decision maker (“CODM”) to assess the

Company’s financial performance and make key operating

decisions as a whole. The Company’s CODM is its President,

who evaluates the Company’s performance primarily based on

the profit measure, Income before taxes. The segment

performance measure is consistent with the amount presented in

the Company’s Statements of Comprehensive Loss.

Accounting Development Updates

The FASB has issued certain accounting updates that apply to

the Company. Accounting updates not listed below were

assessed and determined to be either not applicable or to not

have a material impact on the Company’s financial statements.

Segment Reporting: The Company adopted the Segment

Reporting - Improvements to Reportable Segment Disclosures in

2024. This accounting update requires additional reportable

segment disclosure on an annual and interim basis, primarily

about significant items that are regularly provided to the chief

operating decision maker and included with the reported measure

of segment profit or loss. This update does not change how

operating segments are identified or aggregated, or how

quantitative thresholds are applied to determine the reportable

segments.

3. Related Party Transactions

Notes receivable from Parent represents the proceeds from

Borrowings (structured notes) which are lent to the Parent and

accrue interest income at rates established by the treasury

function of the Parent and its consolidated subsidiaries (the

“Firm”).

Intercompany receivables from Parent represents additional

funding provided to the Parent which is unsecured and bears

interest at the rate of interest that the firm incurs in funding its

business (the “Firm proxy rate”).

Receivables from and payables to Broker dealers represent

unsettled amounts related to Borrowings (structured notes) that

broker dealer affiliates distribute for the Company. These

receivables are unsecured and payable on demand.

Trading liabilities and the associated Trading revenues mainly

represent OTC derivative transactions the Company enters into

with the Parent to economically hedge its Borrowings (structured

notes) as well as any mark to market movements on those OTC

derivative transactions.

Interest income and expense are calculated daily based on the

Notes receivable and Intercompany receivables from and

payables to the Parent.

The activities of the Company include significant transactions

with affiliates and may not necessarily be indicative of the

conditions that would have existed or the results of operations if

the Company had operated as an unaffiliated business.


	At December 31, 2024	At December 31, 2023
Assets and receivables from affiliated companies
Receivables – Broker dealers	3	3
Receivables – Notes receivable from Parent	47,890	40,290
Receivables – Intercompany from Parent	50	106
Liabilities and payables to affiliated companies
Derivatives	147	525
Payables - Broker dealers	42	12

	2024	2023
Net Revenues from affiliated companies:
Trading	$1,050	$3,359
Interest income	2,459	2,080

4. Fair Values

Assets and Liabilities Measured at Fair Value on a Recurring Basis


	At December 31, 2024
	Level 1	Level 2	Level 3	Netting(1)	Total
Assets at Fair Value
Trading assets:
OTC Derivative contracts:
Equity contracts	$—	$3,608	$133	$—	$3,741
Interest rate contracts	—	70	10	—	80
Foreign exchange contracts	—	9	10	—	19
Commodity contracts	—	11	—	—	11
Credit contracts	—	20	6	—	26
Netting (1)	—	(3,718)	(159)	—	(3,877)
Total OTC derivative contracts	—	—	—	—	—
Total trading assets	$—	$—	$—	$—	$—
Total assets at fair value	$—	$—	$—	$—	$—

Liabilities at Fair Value
Trading liabilities:
OTC Derivative contracts:
Equity contracts	$—	$588	$92	$—	$680
Interest rate contracts	—	2,403	276	—	2,679
Foreign exchange contracts	—	643	21	—	664
Commodity contracts	—	4	—	—	4
Credit contracts	—	1	—	—	1
Netting (1)	—	(3,639)	(159)	(79)	(3,877)
Total OTC derivative contracts	—	—	230	(79)	151
Total trading liabilities	$—	$—	$230	$(79)	$151
Borrowings - Structured Notes	—	47,588	536	—	48,124
Total liabilities at fair value	$—	$47,588	$766	$(79)	$48,275

1. For Positions with the same counterparty that cross over the levels of the fair value hierarchy, counterparty netting is included in the column titled “Netting”.

Positions classified within the same level that are the same counterparty are netted within that level. For further information on derivative instruments, see Note 6.


	At December 31, 2023
	Level 1	Level 2	Level 3	Netting(1)	Total
Assets at Fair Value
Trading assets:
OTC Derivative contracts:
Equity contracts	$—	$2,311	$123	$—	$2,434
Interest rate contracts	—	106	5	—	111
Foreign exchange contracts	—	55	6	—	61
Commodity contracts	—	10	1	—	11
Credit contracts	—	—	17	—	17
Netting (1)	—	(2,482)	(152)	—	(2,634)
Total OTC derivative contracts	$—	$—	$—	$—	$—
Total trading assets	$—	$—	$—	$—	$—
Total assets at fair value	$—	$—	$—	$—

Liabilities at Fair Value
Trading liabilities:
OTC Derivative contracts:
Equity contracts	—	463	260	—	$723
Interest rate contracts	—	1,966	46	—	$2,012
Foreign exchange contracts	—	394	17	—	$411
Commodity contracts	—	15	1	—	$16
Netting (1)	—	(2,482)	(152)	—	(2,634)
Total OTC derivative contracts	$—	$356	$172	$—	$528
Total trading liabilities	—	356	172	—	528
Borrowings - Structured Notes	$—	$38,890	$910	$—	$39,800
Total liabilities at fair value	$—	$39,246	$1,082	$—	$40,328

1. Positions classified within the same level that are with the same counterparty are netted within the column for that level. As of December 31, 2023, there were no

positions with the same counterparty classified in different levels of the fair value hierarchy. For further information on derivative instruments, see Note 6.

Valuation Techniques for Assets and Liabilities Measured at Fair Value on a Recurring Basis


Asset and Liability / Valuation Technique	Valuation Hierarchy Classification
OTC Derivative Contracts • OTC derivative contracts include forward, swap and option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices or commodity prices. • Depending on the product and the terms of the transaction, the fair value of OTC derivative products can be modeled using a series of techniques, including closed-form analytic formulas, such as the Black-Scholes option-pricing model, simulation models or a combination thereof. Many pricing models do not entail material subjectivity as the methodologies employed do not necessitate significant judgment, since model inputs may be observed from actively quoted markets, as is the case for generic interest rate swaps, and many equity, commodity and foreign currency option contracts. In the case of more established derivative products, the pricing models used by the Company are widely accepted by the financial services industry. • More complex OTC derivative products are typically less liquid and require more judgment in the implementation of the valuation technique since direct trading activity or quotes are unobservable. This includes certain types of interest rate derivatives with volatility and correlation exposure, equity, and commodity or foreign currency derivatives that are either longer-dated or include exposure to multiple underlyings. Where required inputs are unobservable, relationships to observable data points, based on historical and/or implied observations, may be employed as a technique to estimate the model input values. For further information on derivative instruments, see Note 2.	• Level 2 - when valued using observable inputs supported by market liquidity or where the unobservable input is not deemed significant • Level 3 - when valued using observable inputs with limited market liquidity or if an unobservable input is deemed significant
Borrowings - Structured Notes • The Company issues structured notes 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 which are not classified as OTC derivatives because they fail net investment criteria. • Fair value is determined using valuation models for the derivative and debt portions of the notes. These models incorporate observable inputs referencing identical or comparable securities, including prices to which the notes are linked, interest rate yield curves, option volatility and currency rates, and commodity or equity prices. • Independent, external and traded prices for the notes are considered as well as the impact of the Company’s own credit spreads, which are based on observed secondary bond market spreads.	• Level 2 - when valued using observable inputs, or where the unobservable input is not deemed significant • Level 3 - in instances where the unobservable inputs are deemed significant

Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2024


	Ending Balance at December 31, 2023	Total Realized and Unrealized Gains (Losses)	Purchases	Sales and Issuances	Settlements	Net Transfers(1)	Ending Balance at December 31, 2024	Unrealized Gains (Losses)
Net Liabilities at Fair Value
Net OTC derivative contracts(2):
Equity contracts	$137	$5	$—	$—	$(103)	$(70)	$(41)	$5
Interest rate contracts	41	(184)	(6)	—	(40)	87	266	(184)
Foreign exchange contracts	11	(23)	—	3	(25)	(1)	11	(24)
Credit contracts	(17)	—	—	—	(2)	13	(6)	—
Total net OTC derivative contracts	172	(202)	(6)	3	(170)	29	230	(203)
Borrowings – Structured Notes	$910	$12	$—	$56	$(55)	$(363)	$536	$19
Net Liabilities at Fair Value	$1,082	$(190)	$(6)	$59	$(225)	$(334)	$766	$(184)

(1) During the year ended December 31, 2024, the Company transferred $363 of Borrowings (structured notes) from Level 3 to Level 2 due to a reduction in the

significance of the unobservable inputs relating to volatility.

(2) Net OTC derivative contracts represent Trading liabilities, net of Trading assets. Amounts are presented before counterparty netting.

Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2023


	Ending Balance at December 31, 2022	Total Realized and Unrealized Gains (Losses)	Purchases	Sales and Issuances	Settlements	Net Transfers(1)	Ending Balance at December 31, 2023	Unrealized Gains (Losses)
Net Liabilities at Fair Value
Net OTC derivative contracts(2):
Equity contracts	$443	$250	$(4)	$—	$(48)	$(4)	$137	$(146)
Interest rate contracts	156	20	—	—	26	(121)	41	(19)
Commodity contracts	1	—	—	—	(1)	—	—	—
Foreign exchange contracts	13	(32)	—	—	(20)	(14)	11	31
Credit contracts	—	—	—	—	(17)	—	(17)	—
Total net OTC derivative contracts	613	238	(4)	—	(60)	(139)	172	(134)
Borrowings – Structured Notes	$1,079	$(93)	$—	$427	$(233)	$(456)	$910	$61
Net Liabilities at Fair Value	$1,692	$145	$(4)	$427	$(293)	$(595)	1,082	$(73)

(1) During the year ended December 31, 2023, the Company transferred from Level 3 to Level 2 $456 of Borrowings (structured notes) due to a reduction in the

significance of the unobservable inputs relating to volatility.

(2) Net OTC derivative contracts represent Trading liabilities, net of Trading assets. Amounts are presented before counterparty netting.

The unrealized gains (losses) during the period for assets and

liabilities within the Level 3 category may include changes in

fair value during the period that were attributable to both

observable and unobservable inputs. Total realized and

unrealized gains (losses) are primarily included in Trading

revenues in the Statements of Comprehensive Loss.

Significant Unobservable Inputs Used in Recurring Level 3

Fair Value Measurements

Valuation Techniques and Unobservable Inputs


	Balance/Range (Average)(1)
$ in millions, except inputs	December 31, 2024	December 31, 2023
Net Liabilities at Fair Value
Net OTC derivative contracts:
Equity contracts (2)	$(41)	$137
Option Model:
Equity Volatility	5% to 70% (17%)	4% to 69% (18%)
Equity Volatility skew	-3% to 0% (-1%)	-2% to 0% (0%)
Equity - correlation	21% to 99% (64%)	17% to 98% (84%)
Equity – Foreign exchange correlation	-55% to 17% (-20%)	-53% to 21% (-24%)
Interest rate contracts	$266	$41
Option Model:
Interest Rate - Foreign Exchange correlation	n/m	28% to 57% (39% / 33%)
Interest Rate Curve Correlation	52% to 88% (74% / 76%)	80% to 83% (81% / 81%)
Interest Rate Volatility Skew	74% to 94% (81% / 78%)	85% to 106% (92% / 105%)
Foreign exchange contracts	$11	$11
Option Model:
Interest Rate Volatility Skew	97% to 127% (109% / 110%)	60% to 72% (64% / 66%)
Credit rate contracts	$(6)	$(17)
Credit default swap Model:
Credit spread	247bps to 433bps (340bps)	55bps to 129bps (108bps)
Credit spread	n/m	82bps to 82bps (82bps)
Borrowings - Structured Notes	$536	$910
Option Model:
Equity Volatility	7% to 75% (15%)	5% to 69% (14%)
Equity Volatility skew	-2% to 0% (0%)	-1% to 0% (0%)
Equity - correlation	42% to 92% (71%)	17% to 94% (71%)
Equity - Foreign exchange correlation	NA	-60% to 20% (-30%)
Comparable Pricing:
Comparable bond price	89 to 103 points (99 points / 95 points)	71 to 101 points (96 points / 80 points)

Points - Percentage of par

(1) A single amount is disclosed for range and average when there is no

significant difference between the minimum, maximum and average.

Amounts represent weighted averages except where simple averages and

the median of the inputs when more relevant.

(2) Includes OTC derivative contracts with multiple risks (i.e., hybrid

products).

The previous table provides information on the valuation

techniques, significant unobservable inputs, and the ranges and

averages for each major category of assets and liabilities

measured at fair value on a recurring basis with a significant

Level 3 balance. The level of aggregation and breadth of

products cause the range of inputs to be wide and not evenly

distributed across the inventory of financial instruments. Further,

the range of unobservable inputs may differ across firms in the

financial services industry because of diversity in the types of

products included in each firm’s inventory. Generally, there are

no predictable relationships between multiple significant

unobservable inputs attributable to a given valuation technique.

During 2024, there were no significant revisions made to the

descriptions of the Firm’s significant unobservable inputs.

An increase (decrease) to the following significant unobservable

inputs would generally result in an impact to the fair value, but

the magnitude and direction of the impact would depend on

whether the exposure of the Firm is long or short.

• Correlation: A pricing input where the payoff is driven by

more than one underlying risk. Correlation is a measure of

the relationship between the movement of two variables (i.e.,

how the change in one variable influences a change in the

other variable).

• Interest rate curve: The term structure of interest rates

(relationship between interest rates and the time to maturity)

and a market’s measure of future interest rates at the time of

observation. An interest rate curve is used to set interest rate

and foreign exchange derivative cash flows and is a pricing

input used in the discounting of any OTC derivative cash

flow.

• Volatility: The measure of variability in possible returns for

an instrument given how much that instrument changes in

value over time. Volatility is a pricing input for options and,

generally, the lower the volatility, the less risky the option.

The level of volatility used in the valuation of a particular

option depends on a number of factors, including the nature

of the risk underlying that option, the tenor and the strike

price of the option.

• Volatility skew: The measure of the difference in implied

volatility for options with identical underliers and expiry

dates but with different strikes.

• Credit Spread: The credit spread reflects the additional net

yield an investor can earn from a security with more credit

risk relative to one with less credit risk. The credit spread of a

particular security is often quoted in relation to the yield on a

credit risk-free benchmark security or reference rate.

Financial Instruments Not Measured at Fair Value


	At December 31, 2024
		Fair Value Level
	Carrying Value	Level 1	Level 2	Level 3	Total
Financial Assets
Cash	$4	$4	$—	$—	$4
Receivables:
Broker dealers	$3	$—	$3	$—	$3
Notes receivable from Parent	$47,890	$—	$47,890	$—	$47,890
Intercompany from Parent	$50	$—	$50	$—	$50
Financial Liabilities
Payables: (1)
Broker dealers	$45	$—	$45	$—	$45
Borrowings	$193	$—	$193	$—	$193


	At December 31, 2023
		Fair Value Level
	Carrying Value	Level 1	Level 2	Level 3	Total
Financial Assets
Cash	$5	$5	$—	$—	$5
Receivables:
Broker dealers	$3	$—	$3	$—	$3
Notes receivable from Parent	$40,290	$—	$40,290	$—	$40,290
Intercompany from Parent	$106	$—	$106	$—	$106
Financial Liabilities
Payables: (1)
Broker dealers	$80	$—	$80	$—	$80
Borrowings	$199	$—	$199	$—	$199

(1) Accrued interest payables have been excluded. Carrying value approximates fair value for these payables.

5. Fair Value Option

The Company elected the fair value option for Borrowings

(structured notes) 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.


Net Revenues from Borrowings under the Fair Value Option

	Trading Revenues	Interest Expense	Net Revenues(2)
2024
Borrowings(1)	$(2,171)	$338	$(2,509)
2023
Borrowings(1)	$(4,939)	$226	$(5,165)

(1) Unrealized DVA gains (losses) are recorded in OCI and, when realized, in

Trading revenues. For additional information, see Notes 2 and 9.

(2) 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

	Trading Revenues	OCI
2024
Borrowings(1)	$(10)	$(399)
2023
Borrowings(1)	$(2)	$(550)

(1) Unrealized DVA gains (losses) are recorded in OCI and, when realized, in

Trading revenues. For additional information, see Notes 2 and 9.


Borrowings Measured at Fair Value on a Recurring Basis

	At December 31, 2024	At December 31, 2023
Business Unit Responsible for Risk Management
Equity	$30,157	$26,381
Interest rates	16,964	12,288
Foreign exchange	805	759
Commodities	198	372
Total	$48,124	$39,800


Difference between Contractual Principal and Fair Value (1)

	At December 31, 2024	At December 31, 2023
Borrowings (2)	$1,238	$1,430

(1) Amounts indicate contractual principal greater than or (less than) fair

value.

(2) Excludes borrowings (structured notes) where the repayment of the initial

principal amount fluctuates based on changes in a reference price or index.

6. Derivative Instruments

The Company uses OTC swaps, options and other derivatives referencing, among other things, interest rates, currencies, commodity

products, credit and equity securities as part of the hedging strategy for structured notes. The Company does not apply hedge

accounting.

Fair Values and Notionals Derivative Contracts


	Bilateral OTC
	At December 31, 2024
	Assets		Liabilities
	Fair Value	Notional (1)	Fair Value	Notional (1)
OTC Derivative contracts
Equity	$3,741	$16,120	$680	$11,501
Interest rate	80	5,636	2,679	12,483
Foreign exchange	19	961	664	3,578
Commodity	11	93	4	98
Credit	26	558	1	96
Total gross OTC derivative contracts	3,877	23,368	4,028	27,756
Amounts offset
Counterparty netting	(3,877)		(3,877)
Total net Trading liabilities	$—		$151


	Bilateral OTC
	At December 31, 2023
	Assets		Liabilities
	Fair Value	Notional (1)	Fair Value	Notional (1)
OTC Derivative contracts
Equity	$2,434	$16,032	$723	$9,397
Interest rate	111	2,004	2,012	9,967
Foreign exchange	61	2,059	411	4,653
Commodity	11	92	16	283
Credit	17	678	—	27
Total gross OTC derivative contracts	2,634	20,865	3,162	24,327
Amounts offset
Counterparty netting	(2,634)		(2,634)
Total net Trading liabilities	$—		$528

1. The Company believes that the notional amounts of derivative contracts generally overstate its exposure. In most circumstances notional amounts are only used as

a reference point from which to calculate amounts owed between the parties to the contract. Furthermore, notional amounts do not reflect the benefit of legally

enforceable netting arrangements or risk mitigating transactions.

The table below summarizes realized and unrealized gains and

losses, from derivative and non-derivative financial instruments,

included in Trading revenues in the Statements of

Comprehensive Loss.


Trading Revenues by Product Type

	2024	2023
Equity contracts	$(1,478)	$(1,364)
Interest rate contracts	(622)	(474)
Foreign exchange contracts	13	20
Commodity contracts	(19)	(22)
Total Loss	$(2,106)	$(1,840)

7. Borrowings

Maturities and Terms of Borrowings


	Fixed Rate (1)	Variable Rate (2)	At December 31, 2024	At December 31, 2023
Original maturities of one year or less
Next 12 months	$34	110	144	76
Original maturities greater than one year
Due in 2024	$—	$—	$—	$6,720
Due in 2025	241	6,168	6,409	5,944
Due in 2026	318	6,799	7,117	4,964
Due in 2027	1,086	7,338	8,424	4,340
Due in 2028	336	3,894	4,230	4,123
Due in 2029	822	3,790	4,612	1,324
Thereafter	7,759	9,622	17,381	12,508
Total	$10,562	$37,611	$48,173	$39,923
Total Borrowings	$10,596	$37,721	$48,317	$39,999
Weighted average coupon rate at period-end (3)	4.25%	N/M

(1) Fixed rate borrowings include instruments with step-up, step-down and zero

coupon features.

(2) Variable rate borrowings bear interest based on a variety of indices. Amounts

include borrowings linked to equity, credit or other indices.

(3) For the fixed rate borrowing, the weighted average coupon rate represents

one issuance. Other issuances by the Company are primarily carried at fair

value so weighted average coupon is not meaningful.

All of the Company’s Borrowings are considered Senior Debt.

For the year ended December 31, 2024 and December 31, 2023,

the Company issued notes with a fair value of approximately

$29,742 and $17,377 respectively.

Certain senior debt securities are denominated in various non-

U.S. dollar currencies and primarily structured to provide a

return that is linked to equity, credit, interest rates, foreign

exchange, commodity or other indices (e.g., the consumer price

index). Senior debt also may be structured to be callable by the

Company or extendible at the option of holders of the senior debt

securities.

Senior Debt – Borrowings (structured notes). The Company’s

Borrowings primarily 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 net investment criteria. To minimize the

exposure from such instruments, the Company 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 also carried at fair value. Changes in fair value

related to the notes and economic hedges are reported in Trading

revenues. See Notes 2 and 4 for further information on

Borrowings carried at fair value.

8. Contingencies

Legal

In the normal course of business, the Company may be named,

from time to time, as a defendant in various legal actions,

including arbitrations, class actions and other litigation, arising in

connection with its activities as a global 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.

The Company may also be involved, from time to time, in other

reviews, investigations and proceedings (both formal and

informal) by governmental or other regulatory agencies

regarding the Company's business, and involving, among other

matters, sales, trading, financial products or offerings sold by the

Company, 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.

The Company contests 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 the Company can reasonably

estimate the amount of that loss or the range of loss, the

Company accrues an estimated loss by a charge to income.

The Company’s legal expenses can, and may in the future,

fluctuate from period to period, given the current environment

regarding government or regulatory agency investigations and

private litigation affecting global financial services firms,

including the Company.

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 the Company has 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, the Company may be

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.

The Company identifies any individual proceedings or

investigations where the Company believes a material loss to be

reasonably possible. In certain legal proceedings in which the

Company has determined that a material loss is reasonably

possible, the Company is unable to reasonably estimate the loss

or range of loss. There are other matters in which the Company

has determined a loss or range of loss to be reasonably possible,

but the Company does not believe, based on current knowledge

and after consultation with counsel, that such losses could have a

material adverse effect on the Company’s financial statements as

a whole, although the outcome of such proceedings or

investigations may significantly impact the Company’s business

or results of operations for any particular reporting period, or

cause significant reputational harm. Notwithstanding the

foregoing, the Company has not identified any proceedings or

investigations this reporting period for which it believes a

material loss is reasonably possible.

While the Company identifies certain proceedings or

investigations that the Company believes to be material,

individually or collectively, there can be no assurance that

material losses will not be incurred from claims that have not yet

been asserted or those where potential losses have not yet been

determined to be probable or reasonably possible.

9. Accumulated Other Comprehensive Loss


Changes in AOCI

	Debt Valuation
Balance at December 31, 2023	$(330)
Change in net DVA(1)	(399)
Balance at December 31, 2024	$(729)

Balance at December 31, 2022	$220
Change in net DVA(1)	(550)
Balance at December 31, 2023	$(330)

(1) DVA represents the change in the fair value resulting from fluctuations in

the Company’s credit spreads and other credit factors related to liabilities

carried at fair value.

10. Income Taxes

The Company is a single-member limited liability company that

is treated as a disregarded entity for federal income tax purposes.

The Company is included in the consolidated federal income tax

return filed by the Parent. The Company is included in the

combined state and local income tax returns with the Parent and

certain other subsidiaries of the Parent. All current and deferred

taxes have been accrued by the Parent.

11. Subsequent Events

The Company has evaluated subsequent events for adjustment to

or disclosure in the financial statements through April 29, 2025,

the date on which the financial statements are available to be

issued, and the Company has not identified any recordable or

disclosable events, not otherwise reported in the financial

statements or the notes thereto.

********


AOCI	Accumulated other Comprehensive (Loss) Income

The Company	Morgan Stanley Finance LLC

DVA	Debt Valuation Adjustment

FASB	Financial Accounting Standards Board

MRM	Model Risk Management Department

N/M	Not Meaningful

OCI	Other comprehensive (Loss) Income

OTC	Over-the-counter

The Parent	Morgan Stanley

S&P	Standard & Poor’s

SEC	U.S. Securities and Exchange Commission

U.S.	United States of America

U.S. GAAP	Accounting principles generally accepted in the United States of America